Analysis of Consolidated Results
Third quarter 2013 revenues of $100.2 million declined by 7.9 percent compared
to the third quarter of 2012 driven by declines in Microelectronics primarily
due to lower sales of NowPak®, copper products, Safe Delivery Source® ("SDS®"),
and continued customer efficiency gains in our cleans chemistries. The third
quarter of 2012 included a one-time $2.6 million royalty. This Microelectronics
decline was softened by continued momentum in LifeSciences due to single-use
Revenues for the nine months ended 2013 were $301.6 million, a decline of 1.8
percent compared to the nine months ended 2012, driven by Microelectronics
segment weakness in copper products partially offset by SDS growth and growth in
our LifeSciences segment. Revenues in Microelectronics in the nine months ended
2012 included a one-time $2.6 million royalty. Our LifeSciences segment grew
15.9 percent primarily due to single-use sales and increased license revenues.
Consolidated gross profit margin in the third quarter of 2013 was 46.1 percent,
a decline of 3.9 percentage points compared to the same quarter of 2012. The
decline was driven by Microelectronics as a result of reduced contribution
margin due to a combination of lower sales volume and pricing declines.
Consolidated gross profit margin for the nine months ended 2013 was 46.9
percent, a decline of 2.6 percentage points from the same period in 2012, due to
volume declines and unfavorable product mix.
Research and development ("R&D") expense increased 4.1 percent to $12.8 million
in the third quarter of 2013 from $12.3 million in the third quarter of 2012.
The third quarter of 2012 results include the recognition of the successful
conclusion of a collaborative development agreement resulting in expense
reimbursements in that quarter of $1.9 million. Excluding this item, R&D expense
would have been down 10 percent from the comparable quarter in 2012. The third
quarter of 2013 results include reduced spending of $0.8 million related to
high-productivity development ("HPD") expenses and reduced consumables,
partially offset by increased depreciation.
R&D expense for the nine months ended 2013 decreased 3.7 percent to $39.1
million due to lower HPD related spending of $2.6 million, and reductions in
spending on consumables ($0.8 million), outside services ($0.7 million) and
prototypes ($0.6 million), partially offset by increased depreciation ($1.0
million) and by the prior year cost reimbursements of $2.4 million related to a
collaborative development agreement.
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Selling, general & administrative ("SG&A") expenses in the third quarter of 2013
were $22.4 million, an increase of 3.4 percent compared to the same period in
2012 driven by $1.0 million in severance costs, and increased outside services
and legal fees associated with business development activities, somewhat
mitigated by reduced salaries and employee incentives.
For the nine months ended September 30, 2013, SG&A expenses were $68.4 million a
slight increase as compared to the same period of 2012. During the nine months
ended September 30, 2013 increased employee severance of $1.6 million and legal
fees of $0.6 million were partially offset by reductions in employee salaries of
$0.9 million and reduced benefits costs of $0.8 million. The same period in 2012
included a $0.9 million benefit from a reduction in our Artelis contingent
Operating income for the third quarter of 2013 declined 46.0 percent to $11.0
million compared to $20.5 million in the third quarter of 2012, driven by the
factors noted above.
For the nine months ended September 30, 2013, operating income declined 21.7
percent to $34.1 million driven by revenue declines and lower gross profit.