EXHIBIT 99.1
ESI Announces Fiscal 2006 Second Quarter Results
PORTLAND, Ore.--(BUSINESS WIRE)--Dec. 21, 2005--ESI (Nasdaq:ESIO) today
announced results for its fiscal 2006 second quarter ended November 26, 2005.
Second quarter sales were $48.6 million, up 9% compared to first quarter
sales of $44.5 million and down 26% compared to prior year second quarter sales
of $66.0 million. Operating income for the quarter was $1.8 million, compared
with operating income of $0.7 million in the first quarter and operating income
of $9.8 million in the second quarter a year ago. Net income for the quarter was
$3.2 million, or $0.11 per basic and diluted share, compared with net income of
$1.3 million, or $0.05 per basic and diluted share, in the first quarter and net
income of $7.9 million, or $0.28 per basic and diluted share, in the second
quarter a year ago.
Operating results in the second quarter of the prior fiscal year included
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 $64.9 million, an increase of 87%
compared with $34.8 million in the first quarter and an increase of 63% compared
with $39.8 million in the second quarter of 2005. Deferred revenue increased
$0.2 million from the first quarter, ending the second quarter at $13.3 million.
"We were pleased with the company's performance during the quarter," noted
Nick Konidaris, ESI's president and chief executive officer. "During the second
quarter, we strengthened our position in the memory repair market by winning a
major new account and delivering on the promise of our new UV laser based
platform by earning the largest single order in ESI history. Financially, we met
our revenue and earnings targets, grew backlog to $50 million, delivered an
eighth consecutive quarterly operating profit, and generated nearly $10 million
of cash."
Konidaris continued, "The increase in orders during the quarter was
positively influenced by the timing of semiconductor orders."
Gross margin of 44 percent during the quarter was flat from the prior
quarter. Gross margin remained flat, as the impact of the sale of
previous-generation Interconnect product was offset by favorable overhead
absorption on increased production levels.
Operating expenses were $19 million in the second quarter, flat with the
prior quarter.
Other income of $2 million increased $1 million from the prior quarter due
to the receipt of $700 thousand of interest income from an IRS refund as well as
higher interest income on investments.
The income tax provision recorded in the second quarter was $0.9 million,
resulting in an effective tax rate of 22%. Included in the rate this quarter is
a benefit for state tax refunds resulting from the settlement of our IRS
examinations as well as a benefit from an adjustment to our accrued taxes on
foreign earnings. These benefits were offset by an increase in the valuation
allowance on state tax operating loss carryforwards resulting from a change in
state tax laws during the quarter. Going forward, the company expects the
effective tax rate for the third quarter of fiscal 2006 to be approximately 20%.
Cash and investments at the end of the quarter were $231 million, up from
$221 million at the end of the prior quarter. Cash increased during the quarter
primarily due to net income and receipts of income tax refunds from the IRS, and
was partially offset by capital expenditures and a deposit relating to the
All-Ring patent infringement case filed by ESI.
Konidaris added, "In an environment of cautious optimism, but limited
visibility, we believe third quarter shipments and revenue will increase from
the second quarter and will be in the range of $50 million to $60 million. We
expect the gross margin percentage in the third quarter to be in the mid-40's.
We anticipate operating expense to increase in the third quarter by
approximately $1 million as we increase our investment in research and
development to develop next-generation products. In addition, we expect
non-operating income to be approximately $1 million."
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 January 6, 2006 at 800-642-1687 (domestic
participants) or 706-645-9291 (international participants), with conference ID
number 3403235. 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, 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 risk that customer orders
may be canceled or delayed; 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 risk that customer
acceptance of new or customized products may be delayed; 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; the company's ability to create and sustain
intellectual property protection around its products; the company's ability to
utilize recorded deferred tax assets; taxes, interest or penalties resulting
from tax audits; and changes in tax laws or the interpretation of such tax laws.
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 2006 Results
(In thousands, except per share data)
(Unaudited)
Operating Results: Three Months Ended Six Months Ended
------------------ ----------------
Nov. 26, Nov. 27, Nov. 26, Nov. 27,
2005 2004 2005 2004
-------- ------- ------- --------
Net sales $48,643 $66,004 $93,151 $138,624
Cost of sales 27,475 33,178 52,336 68,912
------- ------- ------- --------
Gross profit 21,168 32,826 40,815 69,712
Operating expenses:
Selling, service and
administration 11,365 13,086 22,442 27,964
Research, development and
engineering 7,983 7,746 15,812 14,306
Patent infringement settlement
and related legal fees - 2,240 - 2,240
------- ------- ------- --------
Total operating expenses 19,348 23,072 38,254 44,510
------- ------- ------- --------
Operating income 1,820 9,754 2,561 25,202
Net interest income (expense) 2,364 (13) 3,818 (249)
Other expense, net (94) (191) (307) (324)
------- ------- ------- --------
Total other income (expense) 2,270 (204) 3,511 (573)
------- ------- ------- --------
Income before income taxes 4,090 9,550 6,072 24,629
Provision for income taxes 902 1,604 1,537 6,037
------- ------- ------- --------
Net income $ 3,188 $ 7,946 $ 4,535 $ 18,592
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Net income per share - basic $ 0.11 $ 0.28 $ 0.16 $ 0.66
======= ======= ======= ========
Net income per share - fully
diluted $ 0.11 $ 0.28 $ 0.16 $ 0.64
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Electro Scientific Industries, Inc.
Analysis of FY 2006 Results
(Dollars in thousands)
(Unaudited)
Three Months Ended Six Months Ended
------------------ -----------------
Nov. 26, Nov. 27, Nov. 26, Nov. 27,
2005 2004 2005 2004
-------- ------- ------- --------
Sales detail:
Semiconductor Group $25,237 $35,658 $53,138 $ 79,671
Passive Components Group 12,033 17,979 23,082 38,582
Electronic Interconnect Group 11,373 12,367 16,931 20,371
------- ------- ------- --------
Total $48,643 $66,004 $93,151 $138,624
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Gross margin % 44% 50% 44% 50%
Selling, service and
administration expense % 23% 20% 24% 20%
Research, development and
engineering expense % 16% 12% 17% 10%
Operating income % 4% 15% 3% 18%
Effective tax rate % 22% 17% 25% 25%
Average shares outstanding -
basic 28,705 28,443 28,674 28,329
Average shares outstanding -
diluted 28,997 28,541 28,896 32,315
End of period employees 584 630 584 630
Electro Scientific Industries, Inc.
FY 2006 Results
(Amounts in thousands)
(Unaudited)
Financial Position As Of: Nov. 26, Aug. 27, May 28,
2005 2005 2005
-------- -------- --------
Assets
Current assets:
Cash and cash equivalents $ 93,908 $ 88,144 $ 61,314
Marketable securities 129,484 120,421 137,753
-------- -------- --------
Total cash and securities 223,392 208,565 199,067
Trade receivables, net 35,307 37,177 36,163
Income tax refund receivable 1,418 7,977 9,227
Inventories 59,908 53,728 59,533
Shipped systems pending acceptance 3,265 4,498 4,014
Deferred income taxes 13,107 13,439 10,930
Prepaid and other current assets 4,964 3,322 3,169
-------- -------- --------
Total current assets 341,361 328,706 322,103
Long-term marketable securities 7,380 12,830 19,834
Property, plant and equipment, net 38,310 35,658 32,959
Deferred income taxes, net 14,673 15,112 16,955
Other assets 16,213 12,827 11,706
-------- -------- --------
Total assets $417,937 $405,133 $403,557
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Liabilities and shareholders' equity
Current liabilities:
Accounts payable $ 11,291 $ 4,019 $ 3,961
Accrued liabilities 28,747 27,512 29,455
Deferred revenue 13,342 13,118 12,986
-------- -------- --------
Total current liabilities 53,380 44,649 46,402
Shareholders' equity:
Preferred and common stock 159,943 158,642 156,367
Retained earnings 205,734 202,546 201,199
Accumulated other comprehensive loss (1,120) (704) (411)
-------- -------- --------
Total shareholders' equity 364,557 360,484 357,155
-------- -------- --------
Total liabilities and shareholders'
equity $417,937 $405,133 $403,557
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End of period shares outstanding 28,737 28,672 28,615
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Total cash and investments $230,772 $221,395 $218,901
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Electro Scientific Industries, Inc.
FY 2006 Results
(Amounts in thousands)
(Unaudited)
Consolidated Statements of Cash Flows: Six Months Ended
------------------
Nov. 26, Nov. 27,
2005 2004
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 4,535 $ 18,592
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and amortization 4,261 4,593
Tax benefit of stock options exercised 890 543
Provision for doubtful accounts (144) 200
Loss on disposal of property and equipment 46 253
Deferred income taxes 320 5,617
Changes in operating accounts:
Increase in trade receivables, net (491) (536)
(Increase) decrease in income tax refund
receivable 7,809 (1,430)
(Increase) decrease in inventories 1,578 (13,523)
Decrease in shipped systems pending acceptance 749 2,157
Increase in prepaid and other current assets (1,855) (1,617)
Increase (decrease) in accounts payable and other
current liabilities 7,533 (11,914)
Increase (decrease) in deferred revenue 356 (2,611)
------- --------
Net cash provided by operating activities 25,587 324
------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment (9,478) (2,109)
Proceeds from sale of property and equipment - 92
Proceeds from sale of assets held for sale - 2,361
Change in investments, net 20,575 6,141
Increase in other assets (6,373) (780)
------- --------
Net cash provided by investing activities 4,724 5,705
------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from exercise of stock options and stock
plans 2,283 4,922
------- --------
Net cash provided by financing activities 2,283 4,922
------- --------
NET CHANGE IN CASH AND CASH EQUIVALENTS $32,594 $ 10,951
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD $61,314 $ 80,358
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $93,908 $ 91,309
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CONTACT: Electro Scientific Industries, Inc.
Craig Stoehr, 503-671-7061