EXHIBIT 99.1
ESI Announces Fiscal 2006 Third Quarter Results
PORTLAND, Ore.--(BUSINESS WIRE)--March 22, 2006--Electro Scientific
Industries, Inc. (Nasdaq:ESIO) today announced results for its fiscal 2006 third
quarter ended February 25, 2006.
Third quarter sales were $55.9 million, up 15% compared to second quarter
sales of $48.6 million and up 14% compared to prior year third quarter sales of
$49.1 million. Operating income for the quarter was $4.9 million, compared with
operating income of $1.8 million in the second quarter and operating income of
$2.7 million in the third quarter a year ago. Net income for the quarter was
$10.4 million, or $0.36 per basic and $0.35 per diluted share, compared with net
income of $3.2 million, or $0.11 per basic and diluted share, in the second
quarter and net income of $2.0 million, or $0.07 per basic and diluted share, in
the third quarter a year ago.
Included in the third quarter 2006 results was a $5.3 million tax benefit
as described below.
Net orders for the third quarter were $53.0 million, a decrease of 18%
compared with $64.9 million in the second quarter and an increase of 33%
compared with $39.8 million in the third quarter of 2005. Deferred revenue
increased $2.3 million from the second quarter, ending the third quarter at
$15.6 million.
"The industry environment during the quarter was generally favorable and
indicative of steady growth," noted Nick Konidaris, ESI's president and chief
executive officer. "This quarter's financial performance reflects stable growth
trends across each of our market segments. Financially, we met our revenue and
profit targets, recorded the strongest 6-month order book since the summer of
2004, grew revenue 15% sequentially, delivered a ninth consecutive quarterly
operating profit -- the highest in over a year, and maintained a strong balance
sheet."
Konidaris continued, "With the incremental investment in R&D over the past
year, ESI has one of the strongest product portfolios in the market segments we
serve. As we progress through a year with improving market conditions, we plan
to leverage our leading technology to grow in both existing and new markets."
Gross margin of 45 percent during the quarter was up from 44 percent in the
prior quarter. The gross margin improvement was primarily the result of
favorable overhead absorption on increased production levels.
Operating expenses were $20 million, up $0.6 million from the prior
quarter. The increase in operating expense was the result of a planned increase
in research and development expense to develop next-generation products.
Other income of $1.8 million was down from $2.3 million in the second
quarter. Other income in the second quarter included $700 thousand in interest
income from an IRS refund. Excluding the impact from the IRS refund, other
income was up $200 thousand in the third quarter due to higher interest income
on investments.
The income tax benefit for the third quarter of fiscal 2006 was $3.7
million on pre-tax income of $6.7 million, compared to income tax expense of
$0.9 million for the second quarter of fiscal 2006. The effective tax rate in
the third quarter of fiscal 2006 was a benefit of 55% compared to an expense of
22% in the second quarter of fiscal 2006. The third quarter tax benefit resulted
from a $5.3 million reduction in accrued income taxes due to the statutory
closure of various tax years.
Cash and investments were $226 million, down from $231 million at the end
of the prior quarter. Cash decreased during the quarter primarily due to an
increase in accounts receivable and capital expenditures related to the ERP
implementation, and was partially offset by net income for the quarter. Third
quarter expenditures totaled approximately $4 million for the project to
implement a new ERP system.
Konidaris added, "In an environment of steady growth, yet cautious
optimism, we believe fourth quarter shipments and revenue will continue to be in
the range of $50 million to $60 million. We expect the gross margin percentage
in the fourth quarter to be slightly lower than the third quarter due to a
change in product mix. We expect operating expense to increase slightly to the
range of $20 million to $21 million in the fourth quarter as we incur expenses
related to the launch of our new ERP system. We expect non-operating income to
be approximately $2 million. We expect the tax rate for the fourth quarter to be
approximately 21%."
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 March 29, 2006, at 800-642-1687 (domestic
participants) or 706-645-9291 (international participants), with conference ID
number 6715077. 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 revenue, 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 Nine months
ended ended
----------------- -------------------
Feb. 25, Feb. 26, Feb. 25, Feb. 26,
2006 2005 2006 2005
-------- -------- -------------------
Net sales $55,937 $49,084 $149,088 $187,708
Cost of sales 31,040 27,646 83,376 96,558
------- ------- -------- --------
Gross profit 24,897 21,438 65,712 91,150
Operating expenses:
Selling, service and
administration 11,287 12,290 33,729 40,254
Research, development and
engineering 8,708 6,400 24,520 20,706
Patent infringement settlement
and related legal fees - - - 2,240
------- ------- -------- --------
Total operating expenses 19,995 18,690 58,249 63,200
------- ------- -------- --------
Operating income 4,902 2,748 7,463 27,950
Net interest income (expense) 1,957 83 5,775 (166)
Other expense, net (158) (161) (465) (485)
------- ------- -------- --------
Total other income (expense) 1,799 (78) 5,310 (651)
------- ------- -------- --------
Income before income taxes 6,701 2,670 12,773 27,299
Provision for (benefit from)
income taxes (3,656) 672 (2,119) 6,709
------- ------- -------- --------
Net income $10,357 $ 1,998 $ 14,892 $ 20,590
======= ======= ======== ========
Net income per share - basic $ 0.36 $ 0.07 $ 0.52 $ 0.73
======= ======= ======== ========
Net income per share - fully
diluted $ 0.35 $ 0.07 $ 0.51 $ 0.72
======= ======= ======== ========
Electro Scientific Industries, Inc.
Analysis of FY 2006 Results
(Dollars and shares in thousands)
(Unaudited)
Three months Nine months
ended ended
----------------- -------------------
Feb. 25, Feb. 26, Feb. 25, Feb. 26,
2006 2005 2006 2005
-------- -------- -------------------
Sales detail:
Semiconductor Group $40,515 $29,712 $ 93,653 $109,383
Passive Components Group 9,179 12,479 32,261 51,061
Electronic Interconnect Group 6,243 6,893 23,174 27,264
------- ------- -------- --------
Total $55,937 $49,084 $149,088 $187,708
======= ======= ======== ========
Gross margin % 45% 44% 44% 49%
Selling, service and
administration expense % 20% 25% 23% 21%
Research, development and
engineering expense % 16% 13% 16% 11%
Operating income % 9% 6% 5% 15%
Effective tax rate % -55% 25% -17% 25%
Average shares outstanding -
basic 28,904 28,492 28,751 28,383
Average shares outstanding -
fully diluted 29,256 28,600 29,022 28,533
End of period employees 601 571 601 571
Electro Scientific Industries, Inc.
FY 2006 Results
(Amounts in thousands)
(Unaudited)
Financial Position As Of: Feb. 25, Nov. 26, May 28,
2006 2005 2005
------------------ --------
Assets
Current assets:
Cash and cash equivalents $ 94,764 $ 93,908 $ 61,314
Marketable securities 129,779 129,484 137,753
-------- -------- --------
Total cash and securities 224,543 223,392 199,067
Trade receivables, net 47,382 35,307 36,163
Income tax refund receivable 1,227 1,418 9,227
Inventories 61,031 59,908 59,533
Shipped systems pending acceptance 4,700 3,265 4,014
Deferred income taxes 12,442 13,107 10,930
Prepaid and other current assets 4,367 4,964 3,169
-------- -------- --------
Total current assets 355,692 341,361 322,103
Long-term marketable securities 960 7,380 19,834
Property, plant and equipment, net 42,273 38,310 32,959
Deferred income taxes, net 13,111 14,673 16,955
Other assets 17,420 16,213 11,706
-------- -------- --------
Total assets $429,456 $417,937 $403,557
======== ======== ========
Liabilities and shareholders' equity
Current liabilities:
Accounts payable $ 9,080 $ 11,291 $ 3,961
Accrued liabilities 24,234 28,747 29,455
Deferred revenue 15,637 13,342 12,986
-------- -------- --------
Total current liabilities 48,951 53,380 46,402
Shareholders' equity:
Preferred and common stock 165,248 159,943 156,367
Retained earnings 216,091 205,734 201,199
Accumulated other comprehensive loss (834) (1,120) (411)
-------- -------- --------
Total shareholders' equity 380,505 364,557 357,155
-------- -------- --------
Total liabilities and
shareholders' equity $429,456 $417,937 $403,557
======== ======== ========
End of period shares outstanding 28,993 28,737 28,615
======== ======== ========
Total cash and investments $225,503 $230,772 $218,901
======== ======== ========
Electro Scientific Industries, Inc.
FY2006 Results
(Amounts in thousands)
(Unaudited)
Consolidated Statements of Cash Flows: Nine months ended
-------------------
Feb. 25, Feb. 26,
2006 2005
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 14,892 $ 20,590
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and amortization 6,886 7,176
Tax benefit of stock options exercised 1,525 637
Provision for doubtful accounts (167) 199
Loss on disposal of property and equipment 56 281
Deferred income taxes 2,347 6,271
Changes in operating accounts:
(Increase) decrease in trade receivables, net (11,796) 16,645
(Increase) decrease in income tax refund
receivable 8,000 (1,642)
Increase in inventories (685) (11,781)
(Increase) decrease in shipped systems pending
acceptance (686) 3,059
Increase in prepaid and other current assets (1,229) (1,346)
Increase (decrease) in accounts payable and
accrued liabilities 579 (18,407)
Increase (decrease) in deferred revenue 2,651 (3,413)
-------- --------
Net cash provided by operating activities 22,373 18,269
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment (15,211) (3,397)
Proceeds from sale of property and equipment - 92
Proceeds from sale of assets held for sale - 2,361
Change in investments, net 26,579 45,178
Increase in other assets (6,633) (827)
-------- --------
Net cash provided by investing activities 4,735 43,407
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from exercise of stock options and stock
plans 6,342 5,690
-------- --------
Net cash provided by financing activities 6,342 5,690
-------- --------
NET CHANGE IN CASH AND CASH EQUIVALENTS $ 33,450 $ 67,366
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD $ 61,314 $ 80,358
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 94,764 $147,724
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CONTACT: Electro Scientific Industries, Inc.
Craig Stoehr, 503-671-7061