Exhibit 99.1
ESI Announces Fiscal 2005 Third Quarter Results
PORTLAND, Ore.--(BUSINESS WIRE)--March 22, 2005--Electro
Scientific Industries, Inc. (Nasdaq:ESIO) today announced results for
its fiscal 2005 third quarter ended February 26, 2005.
Third quarter sales were $49.1 million, down 26% compared to
second quarter sales of $66.0 million and down 16% compared to prior
year third quarter sales of $58.8 million. Operating income for the
quarter was $2.7 million, compared with operating income of $9.8
million in the second quarter and operating income of $4.4 million in
the third quarter a year ago. Net income for the quarter was $2.0
million, or $0.07 per basic and diluted share, compared with net
income of $7.9 million, or $0.28 per basic and diluted share, in the
second quarter and net income of $10.0 million, or $0.36 per basic
share and $0.34 per diluted share, in the third quarter a year ago.
Included in the third quarter 2005 operating results was a $1.2
million charge, primarily related to severance costs, resulting from
the reorganization announced in December 2004. Included in the second
quarter 2005 operating results was a $2.2 million charge resulting
from the settlement and related legal costs for a patent infringement
lawsuit.
Net orders for the third quarter were $39.8 million, unchanged
from the second quarter and a decrease of 35% compared with $61.2
million in the third quarter of 2004. Backlog decreased $8.5 million
to $41.4 million at February 26, 2005 from $49.9 million at November
27, 2004. Deferred revenue decreased this quarter to $8.6 million
compared to $9.4 million at November 27, 2004.
"With third quarter order volumes remaining flat with the second
quarter, the decline in business we have experienced during the past
few quarters seems to have stabilized," noted Nick Konidaris, ESI's
president and chief executive officer. "Orders increased in both the
Semiconductor business and the Electronic Interconnect business as
capacity needs drove additional capital expenditures. The increase was
offset by a decline in the Passive Components business as factory
utilization in that market remained low."
Konidaris continued, "Despite the ongoing softness in the
industry, the company continues to perform capably. During the third
quarter, the company reduced operating expenses significantly, drove
positive cash flow of $17 million, reorganized to streamline
technology development efforts and enhance our customer-centric focus,
and delivered a fifth consecutive profitable quarter."
Mike Dodson, ESI's chief financial officer added, "Gross margin of
44 percent during the quarter was down 6 percentage points from 50
percent in the second quarter. The decrease in gross margin was
primarily due to lower overhead absorption on reduced production
levels as well as a change in sales mix. The lower production levels
were due to a reduction in finished goods and work-in-process
inventories of $6 million during the quarter as well as lower shipment
levels. The unfavorable sales mix was due to more sales of older
technology tools."
"Operating expenses were $19 million in the third quarter and $23
million in the second quarter. Excluding the $1 million charge in the
third quarter and the $2 million charge in the second quarter,
operating expenses were $18 million in the third quarter, down from
$21 million in the second quarter. The decrease in operating expense
during the third quarter was due to lower employee related expense as
a result of the reorganization and holiday shutdown, lower variable
selling expenses related to the decrease in revenues, lower research
and development expenses resulting from the timing of project
expenses, and lower professional fees," added Dodson.
"Our balance sheet remained strong during the quarter. Cash and
investments were $356 million at the end of the quarter, up $17
million from the prior quarter. Cash increased primarily due to a
decrease in accounts receivable," concluded Dodson.
As previously announced, during March the company redeemed all of
its outstanding 4 1/4% Convertible Notes, eliminating its long-term
debt. As a result of this transaction, the company will record
one-time charges of approximately $4.2 million on a pre-tax basis
during the fourth quarter, which includes the costs of redemption and
non-cash charges of approximately $1.6 million. Excluding the one-time
charge in the fourth quarter, net interest income is expected to
increase by approximately $1 million per quarter.
Konidaris added, "Although our visibility continues to remain
limited, our goal is to remain profitable on an operating income
basis. Based on the best information available to us at this time, we
believe fourth quarter shipments and revenues will be in the range of
$40 million to $50 million. We expect margins to remain in the mid-40%
range and operating expenses to be approximately $18 to $19 million.
The tax rate is estimated to remain at 25%."
"Despite the current softness in the industry, we feel confident
that ESI is in a strong position as the global leader in the markets
we serve. We have the number one market share position in each of our
businesses, a continuing stream of best-in-class products, a strong
cash position and balance sheet, and a talented employee base. While
we have managed expenses to align our cost structure to profitably
meet current demand, we have also continued to invest in engineering,
infrastructure, and the world-class talent base necessary to emerge
from the current softness even stronger. We remain excited about the
long-term prospects of this company within the growing laser
micro-engineering industry," concluded Konidaris.
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,
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 for thirty days
following at 800-642-1687 (domestic participants) or 706-645-9291
(international participants), with conference ID number 4667274. 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, non-operating income, operating income, 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; the company's ability to hire and retain key employees;
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 ended Nine months ended
------------------- -------------------
Feb. 26, Feb. 28, Feb. 26, Feb. 28,
2005 2004 2005 2004
---------- -------- --------- --------
Net sales $ 49,084 $58,770 $187,708 $125,399
Cost of sales 27,646 35,444 96,558 81,570
-------- ------- -------- --------
Gross profit 21,438 23,326 91,150 43,829
Operating expenses:
Selling, service and
administrative 12,290 13,502 40,254 41,408
Research, engineering and
development 6,400 5,429 20,706 16,593
Patent infringement
settlement and related legal
fees - - 2,240 -
-------- ------- -------- --------
Total operating expenses 18,690 18,931 63,200 58,001
-------- ------- -------- --------
Operating income (loss) 2,748 4,395 27,950 (14,172)
Net interest income (expense) 83 (22) (166) 61
Other expense (161) (197) (485) (207)
-------- ------- -------- --------
Income (loss) before income
taxes 2,670 4,176 27,299 (14,318)
Provision for (benefit from)
income taxes 672 (5,798) 6,709 (10,050)
-------- ------- -------- --------
Net income (loss) $ 1,998 $ 9,974 $ 20,590 $ (4,268)
======== ======= ======== ========
Net income (loss) per share -
basic $ 0.07 $ 0.36 $ 0.73 $ (0.15)
======== ======= ======== ========
Net income (loss) per share -
diluted $ 0.07 $ 0.34 $ 0.72 $ (0.15)
======== ======= ======== ========
Electro Scientific Industries, Inc.
Analysis of FY 2005 Results
(Dollars in thousands)
(Unaudited)
Three months ended Nine months ended
------------------- -------------------
Feb. 26, Feb. 28, Feb. 26, Feb. 28,
2005 2004 2005 2004
---------- -------- --------- --------
Sales detail:
Semiconductor Group $ 29,712 $37,068 $109,383 $ 70,941
Electronic Interconnect Group 6,893 9,140 27,264 23,341
Passive Components Group 12,479 12,562 51,061 31,117
--------- ------- -------- --------
Total $ 49,084 $58,770 $187,708 $125,399
========= ======= ======== ========
Gross margin % 44% 40% 49% 35%
Selling, service and
administrative expense % 25% 23% 21% 33%
Research, engineering and
development expense % 13% 9% 11% 13%
Operating income (loss) % 6% 7% 15% (11%)
Effective tax rate % 25% (139%) 25% 70%
Average shares outstanding -
basic 28,492 28,030 28,383 27,933
Average shares outstanding -
diluted 28,600 32,187 28,533 27,933
End of period employees 571 607 571 607
Electro Scientific Industries, Inc.
FY 2005 Results
(Amounts in thousands)
(Unaudited)
Financial Position As Of: February 26, November 27, May 29,
2005 2004 2004
------------ ------------- -----------
Assets
Current assets:
Cash and cash equivalents $ 147,724 $ 91,309 $ 80,358
Marketable securities 159,929 190,467 206,931
Restricted securities - 3,296 6,251
------------ ------------- -----------
Total cash and securities 307,653 285,072 293,540
Trade receivables, net 36,838 53,971 51,696
Income tax refund receivable 9,108 8,896 7,466
Inventories 66,788 68,321 58,627
Shipped systems pending
acceptance 1,332 2,234 4,391
Deferred income taxes 11,358 12,548 16,096
Assets held for sale - - 2,391
Prepaid and other current
assets 5,031 5,055 3,348
------------ ------------- -----------
Total current assets 438,108 436,097 437,555
Long-term marketable securities 47,853 53,021 39,214
Property and equipment, net 32,848 33,085 33,531
Deferred income taxes 16,138 15,609 17,630
Other assets 11,827 12,464 9,256
------------ ------------- -----------
Total assets $ 546,774 $ 550,276 $ 537,186
============ ============= ===========
Liabilities and shareholders'
equity
Current liabilities:
Accounts payable $ 5,681 $ 8,326 $ 13,248
Accrued liabilities 32,674 36,662 42,381
Deferred revenue 8,573 9,375 11,985
Convertible subordinated notes 143,410 - -
------------ ------------- -----------
Total current liabilities 190,338 54,363 67,614
Long term debt - convertible
subordinated notes - 143,193 142,759
------------ ------------- -----------
Total liabilities 190,338 197,556 210,373
Shareholders' equity:
Preferred and common stock 154,828 153,290 147,054
Retained earnings 201,952 199,954 181,362
Accumulated other comprehensive
loss (344) (524) (1,603)
------------ ------------- -----------
Total shareholders' equity 356,436 352,720 326,813
------------ ------------- -----------
Total liabilities and
shareholders' equity $ 546,774 $ 550,276 $ 537,186
============ ============= ===========
End of period shares
outstanding 28,534 28,463 28,175
============ ============= ===========
Total cash and investments $ 355,506 $ 338,093 $ 332,754
============ ============= ===========
Electro Scientific Industries, Inc.
FY2005 Results
(Amounts in thousands)
(Unaudited)
Consolidated Statements of Cash Flows: Nine months ended
-------------------
Feb. 26, Feb. 28,
2005 2004
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 20,590 $ (4,268)
Adjustments to reconcile net income (loss) to
cash provided by (used in) operating activities:
Depreciation and amortization 7,176 6,942
Provision for doubtful accounts 199 101
Loss on disposal of property and equipment 281 57
Deferred income taxes 6,271 461
Tax benefit of stock options exercised 637 703
Changes in operating accounts:
(Increase) decrease in trade receivables, net 16,645 (6,336)
Increase in income tax receivable (1,642) (28,490)
Increase in inventories, net (11,781) (7,381)
Decrease in shipped systems pending acceptance 3,059 1,615
(Increase) decrease in prepaid and other current
assets (1,346) 262
Increase (decrease) in accounts payable and other
current liabilities (18,407) 19,520
Increase (decrease) in deferred revenue (3,413) 3,398
-------- --------
Net cash provided by (used in) operating
activities 18,269 (13,416)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment (3,397) (3,328)
Proceeds from sale of property and equipment 92 9
Proceeds from sale of assets held for sale 2,361 -
Change in investments, net 45,178 23,061
Increase in other assets (827) (309)
-------- --------
Net cash provided by investing activities 43,407 19,433
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from stock plans 5,690 4,840
-------- --------
Net cash provided by financing activities 5,690 4,840
-------- --------
NET CHANGE IN CASH AND CASH EQUIVALENTS $ 67,366 $ 10,857
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD $ 80,358 $ 31,017
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $147,724 $ 41,874
======== ========
CONTACT: Electro Scientific Industries, Inc.
Mike Dodson, 503-671-7028
Craig Stoehr, 503-671-7061