FormFactor Announces Preliminary Third Quarter Results and Announces Intention to Restate Historical Financial Statements in Light of Revised Inventory Valuation Estimates
November 9, 2007
LIVERMORE, Calif. — November 9, 2007 — FormFactor, Inc. (NASDAQ: FORM), today announced its preliminary financial results for the third quarter of fiscal year 2007, ended September 29, 2007. Net income for the third quarter of fiscal 2007 is expected to be $22.2 million or $0.45 per share on a fully diluted basis, including $4.1 million or $0.08 per share of stock-based compensation, net of tax. These results are above the guidance range provided in the Company’s press release on October 24, 2007.
As previously announced, the Company posted quarterly revenue of $125.3 million in the third quarter. These results compare to revenue of $114.1 million, a 10% increase from the second quarter of fiscal 2007 and $96.8 million, a 29% increase from the third quarter of fiscal 2006. The Company had a cash and marketable securities balance of $537 million as of September 29, 2007.
The Company also announced that it has substantially completed its review of its historical practices with respect to inventory valuation. That review indicates that during fiscal 2006 and the first half of fiscal 2007 the Company did not consistently follow its accounting policies for determining inventory valuation. As a result the Board of Directors determined on November 8, 2007 that the Company will restate its financial statements for the fiscal year ended December 30, 2006, for each of the fiscal quarters for that year, and for the fiscal quarters ended March 31 and June 30, 2007.
Based on the work done to date, the Company estimates the effect of the restatement will be to change GAAP net income per share on a fully diluted basis from $1.29 to $1.21 for the fiscal year ended December 30, 2006, from $0.30 to $0.31 for the fiscal quarter ended March 31, 2007, and from $0.38 to $0.43 for the fiscal quarter ended June 30, 2007. The attached table provides additional detail with respect to the expected effect of the restatement.
The Company’s review indicates that the failure to adhere consistently to Company accounting policies in performing the inventory valuation computations was limited to a small number of employees. The Audit Committee of the Board of Directors has determined that senior management was not aware of the noncompliance. The Company is implementing revised procedures designed to prevent a recurrence of the problem.
The Company is evaluating management’s report on internal controls contained in the Company’s 2006 Form 10-K, and has determined that it is likely that it had a material weakness in internal controls over financial reporting as of December 30, 2006.
As a result of the restatement, the Company’s financial statements for the year ended December 30, 2006 contained in the Company’s 2006 Form 10-K, and the financial statements contained in its Forms 10-Q for the quarters ended March 31, 2007 and June 30, 2007, should no longer be relied upon. Because of the time necessary to complete the restatement, the Company did not file its third quarter Form 10-Q when due on November 8, 2007. The Company intends to file amendments to the reports indicated above together with its third quarter fiscal 2007 Form 10-Q later this month.
The Audit Committee of the Board of Directors has discussed these matters with the Company’s independent registered public accountants.
The information contained in this release reflects current estimates that are subject to change.