Exhibit 99.1
ESI Announces Fiscal 2004 Fourth Quarter and Year-End Results
PORTLAND, Ore.--(BUSINESS WIRE)--June 29, 2004--Electro Scientific
Industries, Inc. (Nasdaq:ESIO), a leading provider of world-class production
laser systems for micro-engineering applications, today announced results for
its fiscal 2004 fourth quarter and fiscal year ended May 29, 2004.
Fourth quarter sales were $81.8 million, up 39% compared to third quarter
sales of $58.8 million and up 264% compared to prior year fourth quarter sales
of $22.5 million. Operating income for the quarter was $16.8 million, compared
with operating income of $4.4 million in the third quarter and an operating loss
of $32.3 million in the fourth quarter a year ago. Net income for the quarter
was $16.2 million, or $0.57 per basic share and $0.54 per diluted share,
compared with net income of $10.0 million, or $0.36 per basic share and $0.34
per diluted share in the third quarter and a net loss of $20.8 million, or $0.75
per basic and diluted share in the fourth quarter a year ago.
Included in the fourth quarter 2004 operating results was a $3.8 million
charge relating to the settlement of the class action and derivative lawsuits,
which remains subject to court approval. Included in the fourth quarter 2003
operating results was a $10.1 million impairment charge relating to certain
long-term fixed assets.
Net orders for the fourth quarter were $104.7 million, an increase of 71%
compared with $61.2 million in the third quarter and an increase of 310%
compared with $25.5 million in the fourth quarter of 2003. Backlog increased to
$78.5 million at May 29, 2004 compared to $50.8 million at February 28, 2004.
Deferred revenue decreased to $12.0 million at May 29, 2004 compared to $16.6
million at February 28, 2004.
Fiscal year 2004 sales were $207.2 million, up 51% compared to fiscal year
2003 sales of $136.9 million. Operating income for the year was $2.6 million,
compared with an operating loss of $81.9 million in the prior year. Net income
for the year was $11.9 million, or $0.42 per basic and diluted share, compared
with a net loss of $50.1 million, or $1.81 per basic and diluted share in the
prior year.
Net orders for fiscal year 2004 were $273.5 million, an increase of 106%
compared with $133.0 million in fiscal year 2003.
"We are very pleased with the company's performance during the fourth
quarter," said Nick Konidaris, ESI's president and chief executive officer. "The
business was strong, with orders growing at a 71% rate from the third quarter.
Sequential order growth exceeded 50% in each of our three businesses, indicative
of the continued strength of the current cycle. In addition to the sizeable
order growth, both sequential shipments and sequential revenues grew 39%. Gross
margins were 53%, driving operating income of 21%, including the $4 million
legal settlement."
Konidaris continued, "While orders were quite strong in each of our
businesses, the overall order volume of $105 million included a benefit from the
timing of DRAM and passive components customer orders during the quarter. This
was the highest quarterly order rate in three and a half years."
Mike Dodson, ESI's chief financial officer added, "Gross margins of 53%
during the quarter were up from 40% in the third quarter. Margins benefited from
high shipment levels and a favorable sales mix. In addition, gross margins
benefited approximately 3% from the sale of inventory that had been previously
reserved. Operating expenses were $27 million in the quarter, up $8 million from
the third quarter. Excluding the $4 million settlement of the class action
lawsuit, operating expenses were $23 million, up $4 million from the third
quarter. The primary drivers of the increase were higher variable selling and
administrative expenses related to the significant expansion in business levels
as well as an increase in research and development expenses to fund the
development of next-generation products."
Dodson continued, "We recorded income tax expense of $1 million during the
quarter, a rate of 4.4%. The low tax rate resulted primarily from resolution of
various state and federal tax matters during the quarter and the benefit of
research and foreign tax credits. Going forward, we believe the effective tax
rate for fiscal 2005 will be approximately 29%."
"Our balance sheet remains strong. Cash and investments were $333 million
at the end of the quarter, up $38 million from the third quarter. The increase
was due to tax refunds of $24 million, the sale of a building in Escondido,
California for $7 million and the remainder of the increase is due to the strong
operating performance. Operating cash flow was positive for both the fourth
quarter and the full fiscal year," concluded Dodson.
Konidaris added, "Given the very strong order volume in the fourth quarter,
we continue to believe the business cycle is in an upturn. Due to the
significant timing benefits we experienced in our order volume during the fourth
quarter, we expect orders in the first quarter to be in the range of $75 million
to $85 million. As we continue to ramp production to meet customer requirements,
we expect both shipments and revenues to be in the $80 million to $90 million
range. We expect gross margins to be approximately 50% in the first quarter. We
also expect operating expenses to be approximately flat compared with the fourth
quarter, excluding the class action settlement."
The company will hold a conference call today at 5:00 p.m. Eastern Time.
The session will include a review of the financial results, business outlook,
and a question and answer period.
The conference call can be accessed by calling 800-374-2470 (domestic
participants) or 706-634-5108 (international participants). A live audio webcast
can be accessed at www.esi.com. Upon completion of the call, an audio replay
will be accessible through April 14 at 800-642-1687 (domestic participants) or
706-645-9291 (international participants), with conference ID number 6325191.
The audio replay will also be available on the ESI website.
Forward-Looking Statements
This press release includes forward-looking statements concerning the
markets we serve, orders, shipments, revenues, gross margins, expenses and tax
rates. Actual results may differ materially from those in the forward-looking
statements. Risks and uncertainties that may affect the forward-looking
statements include: the relative strength and volatility of the electronics
industry - which is dependent on many factors including component prices, global
economic strength and political stability, and overall demand for electronic
devices (such as capacitors, semiconductor memory devices and advanced
electronic packages) used in wireless telecommunications equipment, computers
and consumer and automotive electronics; the ability of the company to respond
promptly to customer requirements; the ability of the company to develop,
manufacture and successfully deliver new products and enhancements; the
company's need to continue investing in research and development; and the
company's ability to create and sustain intellectual property protection around
its products.
About ESI
Electro Scientific Industries, Inc. (ESI) is a pioneer and leading supplier
of world-class production laser systems that help its microelectronics customers
achieve compelling yield and productivity gains. The company's industry-leading,
application-specific products enhance electronic-device performance in three key
sectors -- semiconductors, components and electronic interconnect. Founded in
1944, ESI is headquartered in Portland, Ore. More information is available at
www.esi.com.
Electro Scientific Industries, Inc.
FY 2004 Results
(In thousands, except per share data)
(Unaudited)
Operating Results: Three Months Ended Year Ended
--------------------------------------
May 29, May 31, May 29, May 31,
2004 2003 2004 2003
-------- --------- --------- ---------
Net sales $81,843 $ 22,478 $207,242 $136,885
Cost of sales 38,192 21,724 119,762 117,858
------- -------- -------- --------
Gross margin 43,651 754 87,480 19,027
Operating expenses:
Selling, service and
administrative 15,833 15,740 57,241 63,001
Research, engineering and
development 7,241 7,144 23,834 27,762
Special charges - Settlement
of class action and
derivative lawsuit 3,800 3,800
Special charges - Long lived
asset impairment 10,140 10,140
-------- --------- --------- ---------
Total operating expenses 26,874 33,024 84,875 100,903
------- -------- -------- --------
Operating income (loss) 16,777 (32,270) 2,605 (81,876)
Net interest income 322 86 383 2,175
Other income (expense) (202) (362) (409) 480
------- -------- -------- --------
Income (loss) before income
taxes 16,897 (32,546) 2,579 (79,221)
Provision (benefit) for
income taxes 742 (11,751) (9,308) (29,135)
------- -------- -------- --------
Net income (loss) $16,155 $(20,795) $ 11,887 $(50,086)
======= ======== ======== ========
Net income (loss) per share
- basic $ 0.57 $ (0.75) $ 0.42 $ (1.81)
======= ======== ======== ========
Net income (loss) per share
- diluted $ 0.54 $ (0.75) $ 0.42 $ (1.81)
======= ======== ======== ========
Certain amounts in prior periods have been reclassified to conform
with current period presentation.
Electro Scientific Industries, Inc.
Analysis of FY 2004 Results
(Dollars in thousands)
(Unaudited)
Three Months Ended Year Ended
------------------ -------------------
May 29, May 31, May 29, May 31,
2004 2003 2004 2003
-------- --------- --------- ---------
Sales detail:
Electronic Interconnect
Group $ 8,581 $ 5,681 $ 31,922 $ 24,949
Semiconductor Products Group 54,077 7,373 125,018 64,266
Passive Components Group 19,185 9,424 50,302 47,670
------- ------- -------- --------
Total $81,843 $22,478 $207,242 $136,885
======= ======= ======== ========
Gross margin % 53.3% 3.4% 42.2% 13.9%
Selling, service and
administrative expense % 19.3% 70.0% 27.6% 46.0%
Research, engineering and
development expense % 8.8% 31.8% 11.5% 20.3%
Operating income margin % 20.5% -143.6% 1.3% -59.8%
Effective tax rate % 4.4% 36.1% -360.9% 36.8%
Average shares outstanding -
basic 28,131 27,835 27,983 27,745
Average shares outstanding -
diluted 32,203 27,835 27,983 27,745
End of period employees 623 649 623 649
Certain amounts in prior periods have been reclassified to conform
with current period presentation.
Electro Scientific Industries, Inc.
FY 2004 Results
(Amounts in thousands)
Financial Position As Of: May 29, May 31,
2004 2003
--------- ---------
Cash and investments $332,754 $308,252
Trade receivables 51,696 37,160
Income tax refund receivable 7,466 27,795
Inventory 58,627 42,067
Shipped systems pending acceptance 4,391 7,058
Deferred tax assets 33,726 19,982
Property and equipment, net 33,531 36,592
Assets held for sale 2,391 6,451
Other assets 12,604 17,241
-------- --------
Total assets $537,186 $502,598
======== ========
Current liabilities $ 55,629 $ 37,168
Deferred revenue 11,985 13,222
Long term debt 142,759 141,891
Shareholders' equity 326,813 310,317
-------- --------
Total liabilities and equity $537,186 $502,598
======== ========
End of period shares outstanding 28,175 27,843
Certain amounts in prior periods have been reclassified to conform
with current period presentation.
Electro Scientific Industries, Inc.
FY2004 Results
(Amounts in thousands)
Consolidated Statements of Cash Flows: Twelve Months Ended
-------------------
May 29, May 31,
2004 2003
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 11,887 $(50,086)
Adjustments to reconcile net income (loss)
to cash provided by operating activities:
Depreciation and amortization 10,008 10,352
Provision for doubtful accounts 95 1,173
(Gain) loss on disposal of property and
equipment (1) 1,069
Impairment of long lived asset - 10,140
Gain on debt extinguishment - (218)
Deferred income taxes (13,774) (11,679)
Tax benefit of stock options exercised 859 259
Changes in operating accounts:
(Increase) decrease in trade receivables (14,020) 20,858
(Increase) decrease in inventories (15,128) 24,601
(Increase) decrease in shipped systems pending
acceptance 2,667 (5,051)
(Increase) decrease in income tax refund
receivable 20,329 (6,978)
Decrease in other current assets 70 1,617
Increase (decrease) in deferred revenue (1,237) 7,914
Increase in accounts payable and accrued
liabilities 17,863 8,070
-------- --------
Net cash provided by operating activities 19,618 12,041
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment (4,859) (9,270)
Proceeds from the sale of property, plant and
equipment 23 1,183
Proceeds from the sale of assets held for sale 6,562 -
Change in investments, net 22,583 (3,814)
Decrease in other assets 234 2,516
-------- --------
Net cash provided by (used in) investing
activities 24,543 (9,385)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Purchase of ESI-issued convertible notes - (4,676)
Proceeds from exercise of stock options and
stock plans 5,180 3,602
-------- --------
Net cash provided by (used in) financing
activities 5,180 (1,074)
-------- --------
NET CHANGE IN CASH AND CASH EQUIVALENTS $ 49,341 $ 1,582
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD $ 31,017 $ 29,435
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 80,358 $ 31,017
======== ========
Certain amounts in prior periods have been reclassified to conform
with current period presentation.
CONTACT: Electro Scientific Industries, Inc.
Mike Dodson, 503-671-7028
Craig Stoehr, 503-671-7061