EXHIBIT 99.1
ESI Announces Fiscal 2005 Second Quarter Results
PORTLAND, Ore.--(BUSINESS WIRE)--Dec. 22, 2004--Electro Scientific
Industries, Inc. (Nasdaq:ESIO) today announced results for its fiscal
2005 second quarter ended November 27, 2004.
Second quarter sales were $66.0 million, down 9% compared to first
quarter sales of $72.6 million and up 44% compared to prior year
second quarter sales of $45.8 million. Operating income for the
quarter was $9.8 million, compared with operating income of $15.4
million in the first quarter and an operating loss of $3.0 million in
the second quarter a year ago. Net income for the quarter was $7.9
million, or $0.28 per basic and diluted share, compared with net
income of $10.6 million, or $0.38 per basic share and $0.36 per
diluted share in the first quarter and a net loss of $4.9 million, or
$0.17 per basic and diluted share in the second quarter a year ago.
Included in the second quarter 2005 operating results were charges
of $2.2 million resulting from the settlement and related legal costs
for a patent infringement lawsuit.
Net orders for the second quarter were $39.8 million, a decrease
of 41% compared with $67.6 million in the first quarter and a decrease
of 39% compared with $64.8 million in the second quarter of 2004.
Backlog decreased $18.3 million to $49.9 million at November 27, 2004
from $68.2 million at August 28, 2004. Deferred revenue decreased this
quarter to $9.4 million compared to $17.2 million at August 28, 2004.
"We continued to experience a decline in business reflecting the
industry-wide inventory correction," noted Nick Konidaris, ESI's
president and chief executive officer. "The sequential order rate
decreased, with customers in each of our three businesses delaying
equipment purchases during the quarter. Product shipments were
substantially higher than orders as prior backlog shipped during the
quarter."
Konidaris continued, "Despite ongoing adverse market conditions,
the company performed capably in difficult times. We maintained 50%
gross margins and delivered a fourth consecutive quarter of solid
profitability while increasing our investment in R&D."
Mike Dodson, ESI's chief financial officer added, "Gross margins
of 50% during the quarter were comparable to 51% in the first quarter.
The slight decrease in gross margins was due to lower overhead
absorption on declining revenues as well as a change in sales mix, but
these factors were largely offset by material cost reductions.
Operating expenses were $23.1 million in the quarter, up from $21.4
million in the first quarter. Excluding the $2.2 million settlement
for patent litigation and related costs charged in the second quarter,
operating expenses were down slightly from the first quarter. The
decrease was primarily due to lower variable selling expenses related
to the decrease in revenues and was partially offset by higher
research and development expenses resulting from additional funding
for new capabilities and initiatives and the timing of project
expenses."
"Our balance sheet remains strong. Cash and investments were
$338.1 million at the end of the quarter, up $0.9 million from the
first quarter. Cash increased due to operating profits, but was
largely offset by changes in working capital and litigation settlement
payments," concluded Dodson.
Konidaris added, "Although visibility is limited, the current
industry slowdown could persist for several quarters. Given the high
degree of uncertainty going forward, we have decided to take action
proactively to streamline our infrastructure to increase agility,
scalability and market innovation, while decreasing our break-even
point. As a result, we will be reducing our workforce by approximately
9%. In addition to the restructuring, we have also initiated several
new actions designed to improve the operating efficiency of the
company. These efforts are focused on cycle time reductions, supplier
quality engineering, design for manufacturability, as well as overall
cost control measures throughout the organization. We believe these
actions will make ESI a more nimble company that is better able to
perform well in the months and years ahead."
Charges relating to the restructuring will approximate $1.3
million and are expected to be incurred in the third quarter. Ongoing
annual savings from these actions are currently estimated to be
approximately $6 million.
"Now I'd like to turn to Q3 guidance. As a result of the
uncertainty in the industry, our visibility is limited. Based on the
best information available to us at this time, we believe third
quarter shipments and revenues will be in the range of $40 million to
$55 million. Given the expected decrease in revenues, we expect
margins to decrease accordingly as manufacturing costs will not
decrease at the same rate as revenues. As a result, we expect margins
to be in the mid 40% range. Excluding the $1.3 million of
restructuring charges, we expect third quarter operating expenses to
decline to approximately $19 to $20 million due to the previously
mentioned restructuring actions and cost containment measures,"
concluded Konidaris.
The effective tax rate used in the second quarter to calculate the
tax provision was 17% compared to 29% in the prior quarter. This
decrease results from the necessity to adjust on a quarterly basis the
year-to-date effective tax rate to the company's best estimate of the
annual effective tax rate which is now 25%.
The company will hold a conference call today at 8:30 a.m. Eastern
Time. The session will include a review of the financial results,
operational performance, 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 December 30 at
800-642-1687 (domestic participants) or 706-645-9291 (international
participants), with conference ID number 2897392. 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, shipments and revenues, gross margins, operating
expenses, customer relations, internal operations, cost containment
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 ability of the company to achieve anticipated cost
reductions and savings; 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 global supplier of
manufacturing equipment to increase productivity for customers in the
semiconductor, passive components and electronic equipment markets. As
an innovator in the electronics industry, ESI has a legacy of
technology firsts and customer recognition for product excellence. The
advanced electronic devices you see and use around the world today --
cell phones, personal computers, digital cameras, PDAs, even
automotive electronics -- contain components that were likely
manufactured with ESI equipment. The company was founded in 1944 and
is headquartered in Portland, Oregon. ESI's web site is
http://www.esi.com.
Electro Scientific Industries, Inc.
FY 2005 Results
(In thousands, except per share data)
(Unaudited)
Operating Results: Three Months Six Months Ended
Ended
-------------------------------------
Nov. 27, Nov. 29, Nov. 27, Nov. 29,
2004 2003 2004 2003
-------- -------- --------- ---------
Net sales $66,004 $45,753 $138,624 $ 66,629
Cost of sales 33,178 30,090 68,912 46,126
------- ------- -------- --------
Gross profit 32,826 15,663 69,712 20,503
Operating expenses:
Selling, service and
administrative 13,086 13,281 27,964 27,906
Research, engineering and
development 7,746 5,416 14,306 11,164
Patent infringement
settlement and related
legal fees 2,240 - 2,240 -
-------- -------- --------- ---------
Total operating expenses 23,072 18,697 44,510 39,070
------- ------- -------- --------
Operating income (loss) 9,754 (3,034) 25,202 (18,567)
Net interest income (expense) (13) 8 (249) 83
Other expense (191) (112) (324) (10)
------- ------- -------- --------
Income (loss) before income
taxes 9,550 (3,138) 24,629 (18,494)
Provision for (benefit from)
income taxes 1,604 1,737 6,037 (4,252)
------- ------- -------- --------
Net income (loss) $ 7,946 $(4,875) $ 18,592 $(14,242)
======= ======= ======== ========
Net income (loss) per share -
basic $ 0.28 $ (0.17) $ 0.66 $ (0.51)
======= ======= ======== ========
Net income (loss) per share -
diluted $ 0.28 $ (0.17) $ 0.64 $ (0.51)
======= ======= ======== ========
Electro Scientific Industries, Inc.
Analysis of FY 2005 Results
(Dollars in thousands)
(Unaudited)
Three Months Six Months Ended
Ended
----------------- ------------------
Nov. 27, Nov. 29, Nov. 27, Nov. 29,
2004 2003 2004 2003
-------- -------- --------- --------
Sales detail:
Semiconductor Group $35,658 $28,137 $ 79,671 $33,873
Electronic Interconnect Group 12,367 8,667 20,371 14,201
Passive Components Group 17,979 8,949 38,582 18,555
------- ------- -------- -------
Total $66,004 $45,753 $138,624 $66,629
======= ======= ======== =======
Gross margin % 50% 34% 50% 31%
Selling, service and
administrative expense % 20% 29% 20% 42%
Research, engineering and
development expense % 12% 12% 10% 17%
Operating income (loss) % 15% (7%) 18% (28%)
Effective tax rate % 17% (55%) 25% 23%
Average shares outstanding -
basic 28,443 27,931 28,329 27,885
Average shares outstanding -
diluted 28,541 27,931 32,315 27,885
End of period employees 630 592 630 592
Electro Scientific Industries, Inc.
FY 2005 Results
(Amounts in thousands)
(Unaudited)
Financial Position As Of: Nov. 27, August 28, May 29,
2004 2004 2004
-------- ---------- --------
Assets
Current assets:
Cash and cash equivalents $ 91,309 $ 88,729 $ 80,358
Marketable securities 190,467 205,923 206,931
Restricted securities 3,296 3,194 6,251
-------- ---------- --------
Total cash and securities 285,072 297,846 293,540
Trade receivables, net 53,971 61,224 51,696
Income tax refund receivable 8,896 7,411 7,466
Inventories, net 68,321 65,574 58,627
Shipped systems pending acceptance 2,234 7,169 4,391
Deferred income taxes 12,548 17,336 16,096
Assets held for sale - - 2,391
Prepaid and other current assets 5,055 7,410 3,348
-------- ---------- --------
Total current assets 436,097 463,970 437,555
Long-term marketable securities 53,021 39,386 39,214
Property and equipment, net 33,085 33,822 33,531
Deferred income taxes 15,609 12,095 17,630
Other assets 12,464 8,619 9,256
-------- ---------- --------
Total assets $550,276 $ 557,892 $537,186
======== ========== ========
Liabilities and shareholders' equity
Current liabilities:
Accounts payable $ 8,326 $ 14,620 $ 13,248
Accrued liabilities 36,662 39,918 42,381
Deferred revenue 9,375 17,187 11,985
-------- ---------- --------
Total current liabilities 54,363 71,725 67,614
Convertible subordinated notes 143,193 142,976 142,759
-------- ---------- --------
Total liabilities 197,556 214,701 210,373
Shareholders' equity:
Preferred and common stock 153,290 152,153 147,054
Retained earnings 199,954 192,008 181,362
Accumulated other comprehensive loss (524) (970) (1,603)
-------- ---------- --------
Total shareholders' equity 352,720 343,191 326,813
-------- ---------- --------
Total liabilities and
shareholders' equity $550,276 $ 557,892 $537,186
======== ========== ========
End of period shares outstanding 28,463 28,411 28,175
======== ========== ========
Total cash and investments $338,093 $ 337,232 $332,754
======== ========== ========
Electro Scientific Industries, Inc.
FY2005 Results
(Amounts in thousands)
(Unaudited)
Consolidated Statements of Cash Flows: Six Months Ended
-------------------
Nov. 27, Nov. 29,
2004 2003
-------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 18,592 $(14,242)
Adjustments to reconcile net income (loss) to cash
provided by (used in) operating activities:
Depreciation and amortization 4,593 4,607
Provision for doubtful accounts 200 -
Loss on disposal of property and equipment 253 4
Deferred income taxes 5,617 (183)
Tax benefit of stock options exercised 543 218
Changes in operating accounts:
(Increase) decrease in trade receivables, net (536) 440
Increase in income tax receivable (1,430) (22,140)
Increase in inventories, net (13,523) (5,051)
(Increase) decrease in shipped systems pending
acceptance 2,157 (2,956)
(Increase) decrease in prepaid and other current
assets (1,617) 617
Increase (decrease) in accounts payable and
other current liabilities (11,914) 19,112
Increase (decrease) in deferred revenue (2,611) 6,655
-------- --------
Net cash provided by (used in) operating activities 324 (12,919)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment (2,109) (1,912)
Proceeds from sale of property and equipment 92 9
Proceeds from sale of assets held for sale 2,361 -
Change in investments, net 6,141 13,176
(Increase) decrease in other assets (780) 9
-------- --------
Net cash provided by investing activities 5,705 11,282
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from stock plans 4,922 2,351
-------- --------
Net cash provided by financing activities 4,922 2,351
-------- --------
NET CHANGE IN CASH AND CASH EQUIVALENTS $ 10,951 $ 714
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD $ 80,358 $ 31,017
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 91,309 $ 31,731
======== ========
CONTACT: Electro Scientific Industries, Inc.
Mike Dodson, 503-671-7028
or
Craig Stoehr, 503-671-7061