Exhibit 99.1
ESI Announces Fiscal 2005 Fourth Quarter and Year-End Results
PORTLAND, Ore.--(BUSINESS WIRE)--June 28, 2005--Electro Scientific
Industries, Inc. (Nasdaq:ESIO) today announced results for its fiscal
2005 fourth quarter and fiscal year ended May 28, 2005.
Fourth quarter sales were $45.7 million, down 7% compared to third
quarter sales of $49.1 million and down 44% compared to prior year
fourth quarter sales of $81.8 million. Operating income for the
quarter was $2.0 million, compared with operating income of $2.7
million in the third quarter and operating income of $16.8 million in
the fourth quarter a year ago. The net loss for the quarter was $0.8
million, or $0.03 per basic and diluted share, compared with net
income of $2.0 million, or $0.07 per basic and diluted share, in the
third quarter and net income of $16.2 million, or $0.57 per basic
share and $0.54 per diluted share, in the fourth quarter a year ago.
Included in the fourth quarter 2005 results was a $4.1 million
charge resulting from the redemption of all of the outstanding 4 1/4%
Convertible Notes, which eliminated all of ESI's long-term debt.
Included in the third quarter 2005 results was a $1.2 million charge,
primarily related to severance costs, resulting from the
reorganization announced in December 2004.
Net orders for the fourth quarter were $52.0 million, an increase
of 31% compared with $39.8 million in the third quarter and a decrease
of 50% compared with $104.7 million in the fourth quarter of 2004.
Backlog increased $1.8 million to $43.2 million at May 28, 2005 from
$41.4 million at February 26, 2005. Deferred revenue increased this
quarter to $13.0 million from $8.6 million at February 26, 2005.
Fiscal year 2005 sales were $233.4 million, up 13% compared to
fiscal year 2004 sales of $207.2 million. Operating income for the
year was $29.9 million, compared with operating income of $2.6 million
in the prior year. Net income for the year was $19.8 million, or $0.69
per diluted share, compared with net income of $11.9 million, or $0.42
per diluted share in the prior year. The prior year's net income
included a tax benefit of $9.3 million.
Net orders for fiscal year 2005 were $199.2 million, a decrease of
27% compared with $273.5 million in fiscal year 2004.
"We were pleased with the 31% sequential increase in orders during
the quarter, which was driven primarily by the Semiconductor
business," noted Nick Konidaris, ESI's president and chief executive
officer. "As we exit our fiscal year, the company has continued to
perform well despite experiencing an uncertain business climate. The
fourth quarter represented the company's sixth consecutive quarterly
operating profit and concluded the best annual operating performance
in 4 years. Operating cash flow was strong with $27 million generated
during the year. We also redeemed our convertible debt, ending the
year free of long-term debt."
Mike Dodson, ESI's chief financial officer added, "Gross margin of
45 percent during the quarter was up over 1 percentage point from 44
percent in the prior quarter. The increase in gross margin was
primarily due to an improvement in sales mix, and was partially offset
by lower overhead absorption on reduced production levels."
"Operating expenses were $19 million in the fourth quarter, flat
with the prior quarter. The prior quarter operating expenses included
a $1.2 million charge related to the reorganization announced in
December. Excluding the charge, fourth quarter operating expenses were
up $1 million from the prior quarter. The increase in operating
expense was due primarily to an increase in research and development
expenses to fund the development of next-generation products," added
Dodson.
"Our balance sheet continued to strengthen during the quarter.
Cash and investments at the end of the quarter were $219 million as
compared to $356 million at the end of the prior quarter. After
accounting for the $147 million used to redeem the convertible notes
during the quarter, cash and investments increased $10 million from
the prior quarter. Cash increased primarily due to a decrease in
inventory from the prior quarter," 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 recorded one-time
charges of $4.1 million on a pre-tax basis during the fourth quarter,
which included the costs of redemption and non-cash charges of
approximately $1.6 million.
Konidaris added, "While we were pleased with the up-tick in
bookings during the fourth quarter, it is unclear whether it was
indicative of the beginning of an upturn or the result of the timing
of large semiconductor orders. Based on our limited visibility and the
best information available to us at this time, we believe first
quarter shipments and revenue will once again be in the range of $40
million to $50 million. As the result of a temporary mix shift away
from higher margin products and the impact of lower margin sales
resulting from a product transition in the Interconnect business, we
expect margins in the first quarter to be around 40%. In addition, we
plan to further reduce inventory levels which will also put downward
pressure on margins. We expect operating expense to increase slightly
to the range of $19 million to $20 million as we ramp our investment
in R&D to drive future revenue growth. The tax rate for fiscal year
2006 is expected to be approximately 25%."
"While the market picture remains unclear, what is clear is our
commitment to serve our customers, grow revenue profitably, and create
shareholder value. The achievements we have had this past year -- new
product and market introductions, market share gains in key markets,
consistent profitability despite industry softness, a market-focused
corporate reorganization -- all bode well for strong performance going
forward," 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 through July 6, 2005
at 800-642-1687 (domestic participants) or 706-645-9291 (international
participants), with conference ID number 7307983. 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, 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 Year ended
--------------------------------------
May 28, May 29, May 28, May 29,
2005 2004 2005 2004
--------- -------- --------- ---------
Net sales $45,663 $81,843 $233,371 $207,242
Cost of sales 24,983 38,192 121,541 119,762
--------- -------- --------- ---------
Gross profit 20,680 43,651 111,830 87,480
Operating expenses:
Selling, service
and administrative 11,364 15,833 51,618 57,241
Research,
engineering and
development 7,321 7,241 28,027 23,834
Patent infringement
settlement and
related legal fees - - 2,240 -
Settlement of class
action and
derivative lawsuit - 3,800 - 3,800
--------- -------- --------- ---------
Total operating
expenses 18,685 26,874 81,885 84,875
--------- -------- --------- ---------
Operating income 1,995 16,777 29,945 2,605
Net interest and other income
(expense) 1,129 120 478 (26)
Debt redemption charges (4,149) - (4,149) -
--------- -------- --------- ---------
Income (loss) before income
taxes (1,025) 16,897 26,274 2,579
Provision for (benefit from)
income taxes (272) 742 6,437 (9,308)
--------- -------- --------- ---------
Net income (loss) $(753) $16,155 $19,837 $11,887
========= ======== ========= =========
Net income (loss) per share -
basic $(0.03) $0.57 $0.70 $0.42
========= ======== ========= =========
Net income (loss) per share -
diluted $(0.03) $0.54 $0.69 $0.42
========= ======== ========= =========
Electro Scientific Industries, Inc.
Analysis of FY 2005 Results
(in thousands)
(Unaudited)
Three months Year ended
ended
------------------ -------------------
May 28, May 29, May 28, May 29,
2005 2004 2005 2004
--------- -------- --------- ---------
Sales detail:
Semiconductor
Group $29,191 $54,077 $138,574 $125,018
Electronic
Interconnect
Group 6,532 8,124 33,796 31,465
Passive Components
Group 9,940 19,642 61,001 50,759
--------- -------- --------- ---------
Total $45,663 $81,843 $233,371 $207,242
========= ======== ========= =========
Gross margin % 45% 53% 48% 42%
Selling, service and
administrative expense % 25% 19% 22% 28%
Research, engineering and
development expense % 16% 9% 12% 12%
Operating income % 4% 20% 13% 1%
Effective tax rate % 27% 4% 24% -361%
Average shares outstanding -
basic 28,585 28,131 28,434 27,983
Average shares outstanding -
diluted 28,585 32,203 28,572 28,233
End of period employees
(actual) 563 623 563 623
Electro Scientific Industries, Inc.
FY 2005 Results
(In thousands)
(Unaudited)
Financial Position As Of: May 28, May 29,
2005 2004
--------- --------
Assets
Current assets:
Cash and cash
equivalents $ 61,314 $ 80,358
Marketable
securities 137,753 206,931
Restricted
securities 6,251
--------- --------
Total cash and
securities 199,067 293,540
Trade
receivables, net 36,163 51,696
Income tax refund
receivable 9,227 7,466
Inventories, net 59,533 58,627
Shipped systems
pending acceptance 4,014 4,391
Deferred income
taxes 10,930 16,096
Assets held for
sale - 2,391
Prepaid and other
current assets 3,169 3,348
--------- --------
Total current
assets 322,103 437,555
Long-term marketable
securities 19,834 39,214
Property and equipment, net 32,959 33,531
Deferred income taxes 16,955 17,630
Other assets 11,706 9,256
--------- --------
Total assets $ 403,557 $537,186
========= ========
Liabilities and shareholders' equity
Current liabilities:
Accounts payable $ 3,961 $ 13,248
Accrued
liabilities 29,455 42,381
Deferred revenue 12,986 11,985
--------- --------
Total current
liabilities 46,402 67,614
Long term debt - convertible
subordinated notes - 142,759
--------- --------
Total
liabilities 46,402 210,373
Shareholders' equity:
Preferred and common stock 156,367 147,054
Retained earnings 201,199 181,362
Accumulated other
comprehensive loss (411) (1,603)
--------- --------
Total
shareholders'
equity 357,155 326,813
--------- --------
Total
liabilities
and
shareholders'
equity $ 403,557 $537,186
========= ========
End of period shares
outstanding 28,615 28,175
========= ========
Total cash and investments $ 218,901 $332,754
========= ========
Electro Scientific Industries, Inc.
FY2005 Results
(In thousands)
(Unaudited)
Consolidated Statements of
Cash Flows: Year ended
------------------
May 28, May 29,
2005 2004
--------- --------
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income $19,837 $11,887
Adjustments to reconcile net
income to cash provided by
operating activities:
Depreciation and
amortization 9,977 10,008
Write-off of
unamortized debt
issuance costs 1,590 -
Provision for
doubtful accounts 211 95
Loss on disposal of
property and
equipment 430 -
Deferred income
taxes 5,841 (13,774)
Tax benefit of
stock options
exercised 172 859
Changes in operating accounts:
(Increase) decrease
in trade
receivables, net 16,895 (14,020)
(Increase) decrease
in income tax
receivable (1,761) 20,329
Increase in
inventories (5,279) (15,128)
Decrease in shipped
systems pending
acceptance 377 2,667
Decrease in prepaid
and other current
assets 284 70
Increase (decrease)
in accounts payable
and other current
liabilities (23,025) 17,862
Increase (decrease)
in deferred
revenue 1,001 (1,237)
--------- --------
Net cash provided by operating
activities 26,550 19,618
--------- --------
CASH FLOWS FROM INVESTING
ACTIVITIES
Purchase of property, plant
and equipment (4,710) (4,859)
Proceeds from sale of property
and equipment 95 23
Proceeds from sale of assets
held for sale 2,361 6,562
Change in investments, net 95,424 22,583
Increase (decrease) in other
assets (848) 234
--------- --------
Net cash provided by investing
activities 92,322 24,543
--------- --------
CASH FLOWS FROM FINANCING
ACTIVITIES
Redemption of ESI-issued
convertible subordinated notes(145,000) -
Proceeds from stock plans 7,084 5,180
--------- --------
Net cash provided by (used in)
financing activities (137,916) 5,180
--------- --------
NET CHANGE IN CASH AND CASH
EQUIVALENTS $(19,044) $49,341
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD $80,358 $31,017
--------- --------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $61,314 $80,358
========= ========
CONTACT: Electro Scientific Industries, Inc.
Mike Dodson, 503-671-7028
Craig Stoehr, 503-671-7061