Exhibit 99.1
ESI Announces Fiscal 2006 Fourth Quarter and Year-End Results
PORTLAND, Ore.--(BUSINESS WIRE)--July 13, 2006--Electro Scientific
Industries, Inc. (NASDAQ:ESIO) today announced results for its fiscal
2006 fourth quarter and fiscal year ended June 3, 2006.
Fourth quarter sales were $57.9 million, up 4% compared to third
quarter sales of $55.9 million and up 27% compared to prior year
fourth quarter sales of $45.7 million. Operating income for the
quarter was $4.2 million, compared with operating income of $4.9
million in the third quarter and operating income of $2.0 million in
the fourth quarter a year ago. Net income for the quarter was $5.9
million, or $0.20 per basic and diluted share, compared with net
income of $10.4 million, or $0.36 per basic and $0.35 per diluted
share, in the third quarter and a net loss of $0.8 million, or $0.03
per basic and diluted share, in the fourth quarter a year ago.
Included in the third quarter 2006 net income was a $5.3 million
tax benefit that resulted from a reduction in accrued income taxes due
to the statutory closure of various tax years. 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.
Net orders for the fourth quarter were $61.1 million, an increase
of 15% compared with $53.0 million in the third quarter and an
increase of 17% compared with $52.0 million in the fourth quarter of
2005. Net orders for the fourth quarter increased in each market
segment over the third quarter. Deferred revenue decreased $2.3
million from the third quarter, ending the fourth quarter at $13.3
million.
Fiscal year 2006 sales were $207.0 million, down 11% compared to
fiscal year 2005 sales of $233.4 million. Operating income for the
year was $11.7 million, compared with operating income of $29.9
million in the prior year. Net income for the year was $20.8 million,
or $0.72 per basic and diluted share, compared with net income of
$19.8 million, or $0.70 per basic and $0.69 per diluted share, in the
prior year.
Net orders for fiscal year 2006 were $213.8 million, an increase
of 7% compared with $199.2 million in fiscal year 2005.
"The industry environment during the quarter remained favorable,
as each of our market segments experienced either steady or
accelerated growth," noted Nick Konidaris, ESI's president and chief
executive officer. "The semiconductor business enjoyed a healthy rate
of DRAM orders and an increasing order rate in the mixed-signal
market. The long-dormant component business has re-emerged with orders
up approximately 30% each of the past two quarters, and our latest IC
packaging tool has reinvigorated the IC packaging segment of the
interconnect business."
Konidaris continued, "Financially, we once again met our quarterly
revenue and profit targets, increased orders 15% over the third
quarter, and consistently maintained our track record of operating
profitability -- now the tenth quarter in a row. We ended fiscal 2006
with operating cash flow of over $28 million, the fourth consecutive
year of strong operating cash flow performance."
Gross margin of 45 percent was flat compared with the third
quarter. Despite the lower percentage of semiconductor revenue, ESI's
highest margin business, overall margin rates were stable as product
mix improved within the company's business units.
Operating expenses were $21.5 million, up $1.5 million from the
prior quarter. The increase was primarily related to post-launch data
conversion and training expenses for the new ERP system, and an
increase in labor expense.
Other income of $2.3 million was up from $1.8 million in the third
quarter due to higher interest income on investments.
Income tax expense for the fourth quarter was $0.6 million for an
effective tax rate of 9%.
Cash and investments were $229 million, up approximately $4
million from the end of the third quarter. Cash increased primarily
due to net income earned during the quarter.
Konidaris added, "In an environment of continued growth, we
believe first quarter shipments and revenue will increase to be in the
range of $55 million to $65 million. We expect the gross margin
percentage in the first quarter to be approximately the same as the
fourth quarter. The first quarter of fiscal 2007 is the first quarter
that we are required to include stock compensation expense in our
results as required by SFAS123-R. Accordingly, we believe pre-tax
stock compensation expense will be approximately $700 thousand in the
first quarter. We expect operating expense, including the impact of
stock compensation expense, to decrease to between $20 million and $21
million as a result of lower ERP system expenses and a $1 million
insurance refund we received in June. We expect non-operating income
to be approximately flat with the fourth quarter. And lastly, we
expect the tax rate for the first quarter to be approximately 31%".
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).
The conference ID number is 2317924. A live audio webcast can be
accessed at www.esi.com. Upon completion of the call, an audio replay
will be accessible through July 20, 2006 at 800-642-1687 (domestic
participants) or 706-645-9291 (international participants). 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, stock compensation expense, 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 Year ended
--------------------------------------
June 3, May 28, June 3, May 28,
2006 2005 2006 2005
-------- --------- --------- ---------
Net sales $57,918 $45,663 $207,006 $233,371
Cost of sales 32,142 24,983 115,518 121,541
-------- --------- --------- ---------
Gross profit 25,776 20,680 91,488 111,830
Operating expenses:
Selling, service and
administration 12,226 11,364 45,955 51,618
Research, development
and engineering 9,317 7,321 33,837 28,027
Patent infringement
settlement and related
legal fees - - - 2,240
-------- --------- --------- ---------
Total operating
expenses 21,543 18,685 79,792 81,885
-------- --------- --------- ---------
Operating income 4,233 1,995 11,696 29,945
Net interest and other
income 2,281 1,129 7,591 478
Redemption charges -
convertible subordinated
notes - (4,149) - (4,149)
-------- --------- --------- ---------
Income (loss) before income
taxes 6,514 (1,025) 19,287 26,274
Provision for (benefit from)
income taxes 583 (272) (1,536) 6,437
-------- --------- --------- ---------
Net income (loss) $5,931 $(753) $20,823 $19,837
======== ========= ========= =========
Net income (loss) per share
- basic $0.20 $(0.03) $0.72 $0.70
======== ========= ========= =========
Net income (loss) per share
- diluted $0.20 $(0.03) $0.72 $0.69
======== ========= ========= =========
Electro Scientific Industries, Inc.
Analysis of FY 2006 Results
(in thousands)
(unaudited)
Three months Year ended
ended
------------------ -------------------
June 3, May 28, June 3, May 28,
2006 2005 2006 2005
-------- --------- --------- ---------
Sales detail:
Semiconductor Group $33,029 $29,191 $126,682 $138,574
Electronic Interconnect
Group 10,845 6,532 34,019 33,796
Passive Components
Group 14,044 9,940 46,305 61,001
-------- --------- --------- ---------
Total $57,918 $45,663 $207,006 $233,371
======== ========= ========= =========
Gross margin % 45% 45% 44% 48%
Selling, service and
administration expense % 21% 25% 22% 22%
Research, development and
engineering expense % 16% 16% 16% 12%
Operating income % 7% 4% 6% 13%
Effective tax rate % 9% 27% -8% 24%
Average shares outstanding -
basic 29,024 28,585 28,823 28,434
Average shares outstanding -
diluted 29,236 28,585 29,078 28,572
End of period employees 603 563 603 563
Electro Scientific Industries, Inc.
FY 2006 Results
(In thousands)
(Unaudited)
Financial Position As Of: June 3, May 28,
2006 2005
-------- ---------
Assets
Current assets:
Cash and cash
equivalents $ 79,961 $ 61,314
Marketable securities 140,106 137,753
-------- ---------
Total cash and
securities 220,067 199,067
Trade receivables, net 47,978 36,163
Income tax refund
receivable 1,570 9,227
Inventories 63,834 59,533
Shipped systems pending
acceptance 3,941 4,014
Deferred income taxes 11,982 10,930
Prepaid and other
current assets 4,410 3,169
-------- ---------
Total current
assets 353,782 322,103
Long-term marketable
securities 9,265 19,834
Property, plant and
equipment, net 43,338 32,959
Deferred income taxes, net 13,318 16,955
Other assets 17,762 11,706
-------- ---------
Total assets $437,465 $ 403,557
======== =========
Liabilities and shareholders'
equity
Current liabilities:
Accounts payable $ 11,272 $ 3,961
Accrued liabilities 24,705 29,455
Deferred revenue 13,321 12,986
-------- ---------
Total current
liabilities 49,298 46,402
Shareholders' equity:
Preferred and common stock 166,459 156,367
Retained earnings 222,022 201,199
Accumulated other
comprehensive loss (314) (411)
-------- ---------
Total shareholders'
equity 388,167 357,155
-------- ---------
Total liabilities
and shareholders'
equity $437,465 $ 403,557
======== =========
End of period shares
outstanding 29,051 28,615
======== =========
Total cash and investments $229,332 $ 218,901
======== =========
Electro Scientific Industries, Inc.
FY2006 Results
(In thousands)
(Unaudited)
Consolidated Statements of
Cash Flows: Year ended
------------------
June 3, May 28,
2006 2005
-------- ---------
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income $20,823 $19,837
Adjustments to reconcile net
income to cash
provided by operating
activities:
Depreciation and
amortization 7,914 8,286
Stock based
compensation 1,353 1,691
Write-off of unamortized
debt issuance costs - 1,590
Provision for doubtful
accounts (153) 211
Loss on disposal of
property and equipment 79 430
Deferred income taxes 2,451 5,841
Tax benefit of stock
options exercised 1,630 172
Changes in operating
accounts:
(Increase) decrease in
trade receivables, net (11,329) 16,895
(Increase) decrease in
income tax receivable 7,657 (1,761)
Increase in
inventories (3,709) (5,279)
Decrease in shipped
systems pending
acceptance 73 377
(Increase) decrease in
prepaid and other
current assets (1,125) 284
Increase (decrease) in
accounts payable and
other current
liabilities 2,506 (23,025)
Increase in deferred
revenue 335 1,001
-------- ---------
Net cash provided by operating
activities 28,505 26,550
-------- ---------
CASH FLOWS FROM INVESTING
ACTIVITIES
Purchase of property, plant
and equipment (18,293) (4,710)
Proceeds from sale of
property, plant and equipment - 95
Proceeds from sale of assets
held for sale - 2,361
Change in investments, net 8,076 95,424
Increase (decrease) in other
assets (6,750) (848)
-------- ---------
Net cash provided by (used in)
investing activities (16,967) 92,322
-------- ---------
CASH FLOWS FROM FINANCING
ACTIVITIES
Redemption of ESI-issued
convertible subordinated
notes - (145,000)
Proceeds from exercise of
stock options and stock plans 7,109 7,084
-------- ---------
Net cash provided by (used in)
financing activities 7,109 (137,916)
-------- ---------
NET CHANGE IN CASH AND CASH
EQUIVALENTS $18,647 $(19,044)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD $61,314 $80,358
-------- ---------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $79,961 $61,314
======== =========
CONTACT: Electro Scientific Industries, Inc.
Craig Stoehr, 503-671-7061