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Kulicke & Soffa Industries Inc., a provider of semiconductor packaging and electronic assembly solutions supporting the global automotive, consumer, communications, computing and industrial segments, recently announced updates to its third quarter business outlook and provided revenue guidance for its fourth quarter outlook.
As part of its annual strategic planning process, the company proceeded with tactical and strategic initiatives to better execute on its collective long-term core, advanced packaging and electronics assembly related opportunities. Largely triggered by this annual process, the company anticipates several unique charges and credits during the June quarter relating to a favorable foreign tax credit, non-cash goodwill impairment expenses and restructuring related charges.
These collective items are anticipated to result in a non-cash expense of $35.2 million and a cash gain of $18.9 million.
In alignment with its tax planning process, K&S has elected to adopt a foreign tax credit for its U.S. tax filings, which will be effective during the third fiscal quarter 2017. As a result of this exercise, the company has amended its U.S. tax returns from 2007 through 2015 and also recently filed its 2016 return on this same basis. Due to this tax position, the Company expects a favorable tax credit of approximately $21.5 million to be booked in its third fiscal quarter. Excluding this favorable impact, the company is maintaining its long-term effective tax rate of 18%.
Separately, K&S has determined a portion of the goodwill associated with the January 2015 acquisition of Assembléon BV to be impaired. Specifically, this impairment is due to a softer near-term outlook for the Hybrid Series (Hybrid) offerings. Due to the asset-light nature of this specific business, the entire purchase price of Assembléon was allocated to goodwill and other intangible assets at time of acquisition. During the third fiscal quarter, the company expects to record a non-cash charge for this impairment of approximately $35.2 million.
During fiscal year 2016, the company experienced a large multi-quarter Hybrid order, concentrated with one main customer towards a premium smartphone application. Capacity digestion related to this order has limited the Hybrid's current and near-term levels of demand. In the long-term, the company believes Hybrid's one-pass advanced-packaging solution is well positioned for high-volume system-in-package (SIP) and fan-out wafer level packaging (FOWLP) applications of the future. In the near-term, however, adoption has been slow due to line-balancing requirements of these relatively lower-volume production lines.
As K&S executes to drive long-term success of its broader advanced packaging program, Hybrid continues to be a strategically relevant component. The company plans to maintain all Hybrid Series platforms and will continue to invest in next generation Hybrid equipment and features as well as in its other advanced packaging offerings including the APAMA C2S, APAMA C2W and AT Premier Plus. K&S remains committed to ongoing research and development supporting the growing Advanced Packaging business in addition to its four other business lines to enhance competitiveness, expand served market opportunities and create meaningful and ongoing shareholder value. The company continues to make progress within its Advanced Packaging offerings and will provide additional commentary during its upcoming earnings call.
Considering Hybrid's specific near-term business outlook, K&S has driven a restructuring program to reallocate resources to enhance product line success and long-term corporate level profitability. During the June Quarter, the company will accrue approximately $2.6 million of restructuring related charges, which are anticipated to reduce annual spending by approximately $7 to $8 million going forward.
Fusen Chen, Kulicke & Soffa's president and CEO, stated, "While all forms of restructuring are challenging, we continue to evolve and remain focused and committed to long-term execution within our Core, Advanced Packaging and Electronics Assembly opportunities. We look forward to sharing our progress and new initiatives over the coming quarters."
Fiscal Year 2017 Outlook
Kulicke & Soffa anticipates revenue for its full fiscal year 2017 to be approximately $790 million, plus or minus $25 million. This revenue expectation, if met, would be 26%, 47% and 39% higher than in the preceding three fiscal years, respectively. The company's ongoing strength continues to be driven by higher levels of semiconductor unit growth, dominant share positions and a diversified exposure to end applications.
Full financial results and additional details will be discussed during the company's third fiscal quarter earnings call scheduled for August 2, 2017.