FEI Company (NASDAQ:FEIC) Q2 2015 Earnings Conference Call - Final Transcript
Jul 30, 2015 • 05:00 pm ET
in the quarter was 50% compared with 46.4% a year-ago. The primary drivers of the increase were foreign currency movements, improved margin in our service business and a favorable product mix within both our science and industry segments. We expect gross margin in the second half to be at similar levels to that of the first half of 2015.
Operating expenses for Q2 were $66 million, $13 million below last year. Operating expenses benefited from restructuring activity undertaken during 2014, the weaker euro and Czech koruna and continued focus on cost containment. We also saw some benefit in Q2 from lower stock compensation costs that will not recur.
Operating income was $46 million in Q2, up 50% from the second quarter of 2014. And operating margin of 20.5% was an all-time high and 750 basis points better than a year-ago. EBITDA for the quarter was $55 million, an increase of 30% from last year. Our tax rate for the quarter was 17.6%. In Q3, we see the potential for discrete tax benefits arising from the recognition of previously uncertain tax positions that may substantially reduce reported tax expense for the quarter. In the event this benefit is recognized we will provide additional details when we report our Q3 results. We have not included any impact from potential discrete tax benefit in our outlook for Q3 or for the full year.
Q2 cash flow from operations were $66 million and we ended the quarter with $513 million of cash and investment. During the quarter we paid dividends of $10 million and repurchased 275,000 shares of our common stock at an average price of $77.97 per share. Since the end of Q2, we have repurchased an additional 95,000 shares at an average price of $82.11 bringing our total 2015 share repurchases to 504,000 shares.
At our Investor Day in June we announced a 20% increase in our quarterly cash dividend to $0.30 per share and increased our share repurchase authorization to a total of 2 million shares over the next two years. 1.8 million shares remain available for repurchase under that program. At current valuations we anticipate continued repurchases at a rate similar to what was done in Q2.
Before passing the call on to Don I want to put our Q2 results in the context of the financial focus areas we outlined in our June Investor event. Revenue growth, earnings growth, operating margin and return on equity.
While Q3 will likely show limited year-over-year organic growth, our recent bookings activity reflects organic growth in many of our businesses and provides a clear path to significantly better growth in Q4 and for the year. Operating margin reached 20.5% in Q2 and we continue to see opportunities for improved operating leverage and margin expansion over time. Return on equity is trending up and we are well-positioned to deliver earnings growth at a rate above our revenue growth.
As part of our 2016 planning process, we will be refining our long-term objectives for operating