Exhibit 99.1
ESI Announces Second Quarter Results,
Reports Strongest Shipments and Revenue Since 2001
PORTLAND, Ore.--(BUSINESS WIRE)--Oct. 24, 2007--Electro Scientific
Industries, Inc. (NASDAQ:ESIO), a leading provider of world-class
photonic and laser micro-engineering systems, today announced results
for its fiscal 2008 second quarter, representing the three-month
period of July 1, 2007 through September 29, 2007. Due to the change
in the fiscal year, comparisons are made to the fourth quarter of
fiscal 2007, which was the last full three-month fiscal period for the
company. All results include the impact of the acquisition of New Wave
Research, Inc. (NWR) on July 20, 2007.
Q2 2008 to Q4 2007 Comparisons
Second quarter sales were $82.3 million, representing a 15%
increase from the fourth quarter and the highest quarterly revenue
level since fiscal 2001. Operating income for the quarter was $7.5
million, including the impact of $4.3 million of purchase accounting
adjustments related to the purchase of NWR. Excluding the impact of
purchase accounting adjustments, operating income was $11.8 million,
compared to $10.5 million for the fourth quarter of fiscal 2007.
Second quarter net income was $5.5 million, or $0.19 per diluted
share. Without the impact of purchase accounting, net income was $9.8
million, or $0.34 per diluted share, compared with net income of $7.9
million, or $0.27 per diluted share, in the fourth quarter.
Second quarter orders were $74.4 million, up 3% compared with
$72.3 million in the fourth quarter of 2007. Orders exceeded $70
million for the third consecutive quarter and represented the highest
amount booked since the fourth quarter of 2004. Orders for the second
quarter reflected an increase from the fourth quarter in the passive
component and interconnect market segments. Semiconductor orders were
down from the fourth quarter due to the timing of customer purchases
in June.
"The second quarter of 2008 represented another successful period
for ESI," noted Nick Konidaris, ESI president and CEO. "In addition to
achieving the highest quarterly shipment and revenue results since
2001, we recorded the highest order level since the fourth quarter of
2004. Our interconnect segment reported the second consecutive record
breaking quarter for orders and the passive component group achieved
the highest order levels since 2001. In our semiconductor segment, we
received multiple orders for our newest memory repair system, the 9850
UV. In late July, we concluded the purchase of NWR and the partial
quarter results from this acquisition contributed to the strong
success of the quarter."
Gross margin for the second quarter was 45%, including the impact
of $1.1 million in purchase accounting charges to cost of goods sold.
Excluding the impact of purchase accounting, gross margin for the
second quarter was 46%, consistent with the fourth quarter of fiscal
2007.
Operating expenses were $29.3 million including the impact of $3.2
million in purchase accounting charges. Approximately $2.8 million of
the purchase accounting charges consisted of the write-off of
in-process research and development. Excluding the impact of purchase
accounting, operating expenses for the quarter were $26.1 million,
compared to $22.8 million in the fourth quarter of fiscal 2007. The
increase in expense levels compared to the fourth quarter was due to
the addition of NWR.
Second quarter interest and other income of $2.1 million was down
compared to the fourth quarter. The decline was primarily due to lower
average cash balances resulting from the purchase of NWR and the
impact of our stock repurchase program.
Income tax expense for the second quarter was $4.1 million, an
effective tax rate of 42%. The increase in tax rate over fiscal 2007
was due to the impact of non-deductible purchase accounting charges.
YTD Results
Year to date results, which represent the period June 3, 2007 to
September 29, 2007, were as follows: orders totaled $99 million;
shipments were $104 million; and revenue was $99 million. Net income,
including purchase accounting adjustments, was approximately $7
million, or $0.24 per diluted share. These results include NWR
activity from the date of acquisition on July 20, 2007 through
September 29, 2007 as follows: orders of $6 million; shipments of $6
million; and revenue of $5 million.
Financial Position Overview
Cash and investments were $179 million, down $49 million from the
fourth quarter of fiscal 2007. The decrease was primarily the result
of the $36 million net cash investment for the acquisition of NWR and
$25 million in stock repurchases for the four month period. Cash
generated from operations was $8 million for the second quarter and
$12 million year-to-date.
Accounts receivable were $56 million, including $5 million from
NWR, down slightly compared to the end of the fourth quarter.
Inventories of $92 million increased $11 million from the fourth
quarter. Approximately half of the increase was due to the acquisition
of NWR inventory. The remaining increases were primarily due to the
ramp in activity surrounding demand for passive component and
interconnect products.
Deferred revenue increased from the fourth quarter to $19 million
due to customer-specific acceptance criteria on orders that shipped
late in the quarter.
Konidaris added, "For the third quarter, we expect shipments and
revenue to be approximately $73 to $83 million. The gross margin
percentage is expected to be approximately 44 percent due to changes
in product mix in the third quarter and the impact of purchase
accounting adjustments. Purchase accounting amortization is expected
to impact third quarter margins by $500 thousand. Excluding the impact
of purchase accounting, margins are estimated at approximately 45
percent. Operating expenses are expected to range from $26 to $28
million for the quarter, including $1 million of integration costs and
$500 thousand in purchase accounting amortization. We estimate net
interest and other income will be approximately $1.7 million. The
effective tax rate is anticipated to be approximately 37%, or 32%
excluding the impact of purchase accounting.
"Although our business is cyclical in nature, our long-term focus
and investment in the development of new products and applications has
resulted in a more diversified business structure for ESI. We expect
demand for our new products in the semiconductor segment, particularly
from our dual beam IR and UV tools, will remain healthy in the
near-term. We expect demand for products in both our passive component
and interconnect & micro-machining groups to remain strong. In
addition, new product offerings from our New Wave division are
expected to further expand our growth potential going forward."
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 19636145. A live audio Web cast can be
accessed at www.esi.com. Upon completion of the call, an audio replay
will be accessible through November 7, 2007 at 800-642-1687 (domestic
participants) or 706-645-9291 (international participants). The audio
replay will also be available on the ESI Web site.
About ESI
ESI is a pioneer and leading supplier of world-class production
laser systems that help its microelectronics customers achieve
compelling yield and productivity gains. The company's
industry-leading, application-specific products enhance
electronic-device performance in three key sectors -- semiconductors,
components and electronic interconnect -- by enabling precision
fine-tuning of device microfeatures in high-volume manufacturing
environments. Founded in 1944, ESI is headquartered in Portland, Ore.
More information is available at www.esi.com.
Forward-Looking Statements
This press release includes forward-looking statements concerning
the markets we serve, shipments and revenue, gross margins, operating
expenses, the impact of the NWR acquisition, 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 successfully integrate NWR; the
risk of disruptions to the business of NWR resulting from the
acquisition; 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.
Electro Scientific Industries, Inc.
FY 2008 Results
(In thousands, except per share data)
(Unaudited)
Operating Results: Three Months Four Months
Ended Ended
--------------------- -----------
Sep. 29, Sep. 2, Sep. 29,
2007 2006 2007
--------------------- -----------
Net sales $ 82,318 $ 60,368 $ 99,279
Cost of sales 45,509 34,103 54,395
-------- -------- ---------
Gross profit 36,809 26,265 44,884
Operating expenses:
Selling, service and
administration 15,380 10,764 19,125
Research, development and
engineering 11,093 9,304 13,979
Write-off of acquired in-
process research &
development 2,800 - 2,800
-------- -------- ---------
Total operating expenses 29,273 20,068 35,904
-------- --------- ---------
Operating income 7,536 6,197 8,980
Interest and other income, net 2,060 2,812 2,876
-------- -------- ---------
Income before income taxes 9,596 9,009 11,856
Provision for income taxes 4,066 2,807 4,908
-------- -------- ---------
Net income $ 5,530 $ 6,202 $ 6,948
======== ========= =========
Net income per share - basic $ 0.20 $ 0.21 $ 0.25
======== ========= =========
Net income per share - diluted $ 0.19 $ 0.21 $ 0.24
======== ========= =========
Reconciliation of GAAP Net
Income to Non-GAAP Net
Income:
(Presented to aid comparison
of net income to periods
prior to the acquisition of
New Wave Research, Inc.)
GAAP net income $ 5,530 $ 6,948
Amortization of acquisition-
related FMV adjustments
included in cost of sales 888 888
Amortization of acquisition-
related intangibles included
in cost of sales 222 222
-------- ---------
Subtotal 1,110 1,110
Amortization of acquisition-
related intangibles included
in:
Selling, service and
administration 377 377
Research, development and
engineering 2,800 2,800
-------- ---------
Subtotal 3,177 3,177
-------- ---------
Non-GAAP net income $ 9,817 $ 11,235
======== =========
Basic non-GAAP net income per
share $ 0.35 $ 0.40
======== =========
Diluted non-GAAP net income
per share $ 0.34 $ 0.39
======== =========
Electro Scientific Industries, Inc.
Analysis of FY 2008 Results
(Dollars and shares in thousands)
(Unaudited)
Three Months Four Months
Ended Ended
----------------- -----------
Sep. 29, Sep. 2, Sep. 29,
2007 2006 2007
-----------------------------
Sales detail:
Semiconductor Group $38,176 $31,884 $45,742
Passive Components Group 23,791 18,661 28,209
Interconnect Micro-Machining Group 20,351 9,823 25,328
-------- -------- -----------
Total $82,318 $60,368 $99,279
======== ======== ===========
Gross margin % 45% 44% 45%
Selling, service and administration
expense % (a) 19% 18% 19%
Research, development and engineering
expense % 13% 15% 14%
Operating income % 9% 10% 9%
Effective tax rate % 42% 31% 41%
Average shares outstanding - basic 28,161 29,076 28,268
Average shares outstanding - diluted 28,647 29,243 28,743
End of period employees 796 636 796
(a) Includes insurance recoveries.
Electro Scientific Industries, Inc.
FY 2008 Results
(Amounts in thousands)
(Unaudited)
Financial Position As Of: Sep. 29, 2007 Jun. 2, 2007
------------- -------------
Assets
Current assets:
Cash and cash equivalents $ 102,795 $ 100,462
Marketable securities 53,166 124,607
------------- ------------
Total cash and securities 155,961 225,069
Trade receivables, net 56,489 55,722
Income tax refund receivable 1,085 696
Inventories 91,891 80,981
Shipped systems pending acceptance 6,714 1,817
Deferred income taxes, net 10,214 9,504
Prepaid and other current assets 8,314 5,080
------------- ------------
Total current assets 330,668 378,869
Long-term marketable securities 23,246 3,622
Property, plant and equipment, net 46,782 43,859
Acquired New Wave Research intangible
assets, net 11,744 -
Goodwill 12,866 1,442
Deferred income taxes, net 7,996 11,246
Other assets 33,307 26,630
------------- ------------
Total assets $ 466,609 $ 465,668
============= ============
Liabilities and shareholders' equity
Current liabilities:
Accounts payable $ 16,217 $ 13,826
Accrued liabilities 28,081 25,465
Deferred revenue 19,365 12,290
------------- ------------
Total current liabilities 63,663 51,581
Income tax liabilities 7,843 5,757
Shareholders' equity:
Preferred and common stock 142,160 162,719
Retained earnings 252,494 245,546
Accumulated other comprehensive income 449 65
------------- ------------
Total shareholders' equity 395,103 408,330
------------- ------------
Total liabilities and shareholders'
equity $ 466,609 $ 465,668
============= ============
End of period shares outstanding 27,844 28,766
============= ============
Total cash and investments $ 179,207 $ 228,691
============= ============
Electro Scientific Industries, Inc.
FY 2008 Results
(Amounts in thousands)
(Unaudited)
Consolidated Statements of Cash Three Months Four Months
Flows: Ended Ended
---------------------------------
Sep. 29, Sep. 2, Sep. 29,
2007 2006 2007
---------- ---------- -----------
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income $ 5,530 $ 6,202 $ 6,948
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation 2,353 1,969 3,034
Amortization of intangible assets 3,367 - 3,367
Stock-based compensation expense 1,044 577 1,239
Provision for doubtful accounts - 104 -
Loss on disposal of property and
equipment 2 - 3
Insurance recovery on damaged
equipment - (1,287) -
Deferred income taxes (73) 2,711 (73)
Changes in operating accounts:
(Increase) decrease in trade
receivables, net 1,210 (12,723) 6,120
(Increase) decrease in income tax
refund receivable (389) 592 (389)
(Increase) decrease in inventories 137 (6,744) (4,608)
(Increase) decrease in shipped
systems pending acceptance (4,588) 588 (4,897)
(Increase) decrease in prepaid and
other current assets 1,268 (1,716) 947
Increase (decrease) in accounts
payable and other liabilities (6,880) 1,539 (4,849)
Increase (decrease) in deferred
revenue 5,218 (1,162) 5,472
---------- ---------- -----------
Net cash provided by (used in)
operating activities 8,199 (9,350) 12,314
---------- ---------- -----------
CASH FLOWS FROM INVESTING
ACTIVITIES
Purchase of property, plant and
equipment (1,907) (4,285) (2,473)
Purchase of securities (134,041) (135,617) (167,482)
Proceeds from sale of securities
and maturing securities 163,156 147,195 219,210
Cash paid for acquisition of New
Wave Research, net of cash
acquired (36,159) - (36,159)
Minority equity investment - (6,000) -
Insurance recovery - 1,287 -
(Increase) decrease in other assets 1,123 1,430 (1,077)
---------- ---------- -----------
Net cash provided by (used in)
investing activities (7,828) 4,010 12,019
---------- ---------- -----------
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from exercise of stock
options and stock plans 2,037 665 2,184
Share repurchases (18,878) - (24,866)
Tax benefits realized from stock
options exercised 682 40 682
---------- ---------- -----------
Net cash provided by (used in)
financing activities (16,159) 705 (22,000)
---------- ---------- -----------
NET CHANGE IN CASH AND CASH
EQUIVALENTS $ (15,788) $ (4,635) $ 2,333
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD $ 118,583 $ 79,961 $ 100,462
---------- ---------- -----------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD $ 102,795 $ 75,326 $ 102,795
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CONTACT: ESI
Chris Butterfield, 503-672-5760