-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, Njb1mHBfesULx9YAyqdZgB7nWIgSpLZUhOHMf4QRreXa2INF35eaVcBnGZ1mkXXa E/hC/P4Hs5l7BPnoVy40RQ== 0000912057-95-002457.txt : 19950420 0000912057-95-002457.hdr.sgml : 19950420 ACCESSION NUMBER: 0000912057-95-002457 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950228 FILED AS OF DATE: 19950414 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ELECTRO SCIENTIFIC INDUSTRIES INC CENTRAL INDEX KEY: 0000726514 STANDARD INDUSTRIAL CLASSIFICATION: 3690 IRS NUMBER: 930370304 STATE OF INCORPORATION: OR FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-12853 FILM NUMBER: 95528919 BUSINESS ADDRESS: STREET 1: 13900 NW SCIENCE PARK DR CITY: PORTLAND STATE: OR ZIP: 97229 BUSINESS PHONE: 5036414141 MAIL ADDRESS: STREET 1: 13900 NW SCIENCE PARK DRIVE CITY: PORTLAND STATE: OR ZIP: 97229-5497 10-Q 1 10-Q Page 1 of 12 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-Q [ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED FEBRUARY 28, 1995 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ______________________ TO ______________________ COMMISSION FILE NUMBER 0-12853 ELECTRO SCIENTIFIC INDUSTRIES, INC. OREGON 93-0370304 13900 N.W. SCIENCE PARK DRIVE, PORTLAND, OREGON 97229 (503) 641-4141 INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES X NO ----- ----- AS OF FEBRUARY 28, 1995 THERE WERE 8,226,991 SHARES OF COMMON STOCK OF ELECTRO SCIENTIFIC INDUSTRIES, INC. OUTSTANDING. Page 2 of 12 ELECTRO SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES EXHIBIT INDEX PART I. FINANCIAL INFORMATION PAGE NO. -------- ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED BALANCE SHEETS 3-4 FEBRUARY 28, 1995 AND MAY 31, 1994 CONSOLIDATED STATEMENTS OF INCOME 5 THREE MONTHS AND NINE MONTHS ENDED FEBRUARY 28, 1995 AND FEBRUARY 28, 1994 CONSOLIDATED STATEMENTS OF CASH FLOWS 6-7 NINE MONTHS ENDED FEBRUARY 28, 1995 AND FEBRUARY 28, 1994 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 8-9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL 10-11 CONDITION AND RESULTS OF OPERATIONS SIGNATURE 12 Page 3 of 12 ELECTRO SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (THOUSANDS OF DOLLARS)
ASSETS February 28, 1995* May 31, 1994 ------------------ ------------ CURRENT ASSETS: Cash and cash equivalents $ 25,145 $ 8,221 Trade receivables, net 30,714 16,062 Inventories 24,874 19,665 Deferred tax assets 2,728 -- Prepaid expenses 452 373 -------- ------- Total current assets 83,913 44,321 -------- ------- PROPERTY AND EQUIPMENT, AT COST 34,579 32,976 Less - accumulated depreciation (19,660) (18,384) -------- ------- Net property and equipment 14,919 14,592 -------- ------- OTHER ASSETS 3,695 3,453 -------- ------- $102,527 $62,366 -------- ------- -------- ------- THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS. * UNAUDITED
Page 4 of 12 ELECTRO SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (THOUSANDS OF DOLLARS)
LIABILITIES AND SHAREHOLDERS' EQUITY February 28, 1995* May 31, 1994 ------------------ ------------ CURRENT LIABILITIES: Accounts payable $ 6,357 $ 3,149 Accrued liabilities 5,890 4,119 Income taxes payable 1,842 38 Current portion of long-term debt -- 768 -------- ------- Total current liabilities 14,089 8,074 OTHER LONG-TERM LIABILITIES 920 745 -------- ------- Total liabilities 15,009 8,819 -------- ------- SHAREHOLDERS' EQUITY: Preferred stock, without par value; 1,000,000 shares authorized, no shares issued -- -- Common stock, without par value; 40,000,000 shares authorized, 8,226,991 and 6,420,517 shares outstanding at February 28,1995 and May 31, 1994, respectively 47,375 22,097 Retained earnings 40,143 31,450 -------- ------- Total shareholders' equity 87,518 53,547 -------- ------- $102,527 $62,366 -------- ------- -------- ------- THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS. * UNAUDITED
Page 5 of 12 ELECTRO SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (THOUSANDS EXCEPT PER SHARE)
Three Months Ended Nine Months Ended ------------------ ----------------- Feb. 28, 1995 Feb. 28, 1994 Feb. 28, 1995 Feb. 28, 1994 ------------- ------------- ------------- ------------- Net Sales $29,398 $16,951 $75,207 $54,914 Cost of sales 13,792 8,070 35,412 27,082 ------- ------- ------- ------- Gross margin 15,606 8,881 39,795 27,832 Operating expenses: Selling, service and administrative 7,557 4,407 19,726 14,691 Research, development and engineering 3,588 2,077 8,773 6,420 ------- ------- ------- ------- Total operating expenses 11,145 6,484 28,499 21,111 ------- ------- ------- ------- Operating income 4,461 2,397 11,296 6,721 Interest income (expense) 334 (91) 393 (402) Other income (expense) (259) (82) (333) 1,876 ------- ------- ------- ------- Income before income taxes 4,536 2,224 11,356 8,195 Provision for income taxes 1,360 552 3,397 2,044 ------- ------- ------- ------- Net income $ 3,176 $ 1,672 $ 7,959 $ 6,151 ------- ------- ------- ------- ------- ------- ------- ------- Net income per share $ 0.39 $ 0.26 $ 1.10 $ 0.96 ------- ------- ------- ------- ------- ------- ------- ------- Weighted average number of shares used in computing per share amounts 8,205 6,489 7,238 6,401
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS. Page 6 of 12 ELECTRO SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (THOUSANDS OF DOLLARS)
Nine Months Ended ----------------- Feb. 28, 1995 Feb. 28, 1994 ------------- ------------- CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 7,959 $ 6,151 Adjustments to reconcile net income to cash provided from operating activities: Depreciation and amortization 1,807 1,511 Deferred income taxes (1,608) -- Gain on sale of product lines -- (2,098) Other 58 251 Changes in operating accounts: (Increase) decrease in trade receivables (12,958) 332 Increase in inventory (2,250) (2,841) Decrease (increase) in prepaid expenses 219 (534) Increase (decrease) in accounts payable, accrued liabilities and other long-term liabilities 2,378 (1,053) Increase in income taxes payable 1,804 887 -------- ------- Net cash (used in) provided by operating activities (2,591) 2,606 -------- ------- CASH FLOWS FROM INVESTING ACTIVITIES Purchase of Chicago Laser subsidiary, net of cash (1) (707) -- Purchase of property and equipment (2,432) (1,570) Proceeds from sale of product lines -- 4,043 Increase in other assets (217) (77) -------- ------- Net cash (used in) provided by investing activities (3,356) 2,396 -------- ------- CASH FLOWS FROM FINANCING ACTIVITIES Payments to retire long-term debt (768) (2,273) Reduction of notes payable to banks (2) (415) (459) Proceeds from secondary stock offering 22,509 -- Proceeds from exercise of stock options and stock plans 811 1,480 -------- ------- Net cash provided by (used in) financing activities 22,137 (1,252) -------- ------- EFFECT OF EXCHANGE RATES ON CASH AND CASH EQUIVALENTS 734 (256) NET CHANGE IN CASH AND CASH EQUIVALENTS 16,924 3,494 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 8,221 2,791 -------- ------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 25,145 $ 6,285 -------- ------- -------- -------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS. Page 7 of 12 ELECTRO SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) (UNAUDITED) (THOUSANDS OF DOLLARS) Notes: (1) Acquisition of Chicago Laser subsidiary: Assets less liabilities acquired, net of cash $(2,646) Issuance of common stock 1,939 ------- Net cash used to acquire Chicago Laser subsidiary $ (707) ------- ------- (2) For the nine months ended February 28, 1995, this includes debt acquired in August 1994, related to the Chicago Laser acquisition which was subsequently paid off in August 1994. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS. Page 8 of 12 ELECTRO SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (THOUSANDS OF DOLLARS) NOTE 1 - BASIS OF PRESENTATION The condensed consolidated financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted in these interim statements. Management believes that the condensed statements include all adjustments (consisting of only normal recurring accruals) necessary for a fair presentation of results for the interim periods. It is suggested that these condensed consolidated financial statements be read in conjunction with the financial statements and notes thereto included in the Company's 1994 Annual Report. Results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. NOTE 2 - ACCOUNTS RECEIVABLE Accounts receivable are net of an allowance for doubtful accounts of $225 at February 28, 1995 and $171 at May 31, 1994. NOTE 3 - INVENTORIES Inventories consist of the following: Feb. 28, 1995 May 31, 1994* ------------- ------------- Raw materials and purchased parts $15,517 $11,727 Work-in-process 6,060 5,852 Finished goods 3,297 2,086 ------- ------- $24,874 $19,665 ------- ------- ------- ------- NOTE 4 - NET INCOME PER SHARE Net income per share are computed using the weighted average number of common shares and common stock equivalents (stock options) outstanding. NOTE 5 - OTHER LONG-TERM LIABILITIES Other long-term liabilities represents a termination reserve for the employees of the Company's Japanese subsidiary as mandated by Japanese law. NOTE 6 - SECONDARY STOCK OFFERING On November 23, 1994, the Company completed a secondary stock offering of 1.38 million shares at $17.50 per share. The Company received proceeds of $22.5 million after consideration of brokers commissions and offering expenses. At February 28, 1995, the proceeds are reflected in cash and cash equivalents in the accompanying Consolidated Balance Sheets as the funds were invested in a money market fund. The weighted average number of shares used in computing per share amounts for the period ended February 28, 1995 reflect the offering. * Audited Page 9 of 12 ELECTRO SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (THOUSANDS OF DOLLARS) NOTE 7 - ACQUISITION OF CHICAGO LASER SYSTEMS, INC. On July 12, 1994, the Company announced the signing of an agreement to acquire the stock of Chicago Laser Systems, Inc. (Chicago Laser), a privately held company based in Des Plaines, Illinois. The transaction was completed on August 12, 1994. The purchased consideration consists of approximately $1,280 in cash, 333,000 shares of ESI stock and the assumption of liabilities. The ESI shares are restricted shares subject to Securities and Exchange Commission Rule 144. The transaction was accounted for as a purchase acquisition. The Company is still obtaining certain data related to the acquisition and accordingly the purchase price allocation remains open. The Company has recorded the acquisition at the estimated fair value of the assets acquired and liabilities assumed including the recognition of deferred tax assets of $1,120. The following unaudited pro forma combined income statement data for the nine months ended February 28, 1995 and 1994 and the three months ended February 28, 1994 was prepared as if the acquisition had occurred at the beginning of the respective periods: Pro Forma --------- Combined Income Statements Data ------------------------------- Nine months ended Three months ended ----------------- ------------------ February 28, 1995 February 28, 1994 February 28,1994 ----------------- ----------------- ---------------- Net Sales $78,268 $61,843 $19,844 Net Income $7,536 $5,713 $1,642 Net Income per share $1.04 $0.85 $0.24 Chicago Laser's fiscal year end was October 31. The above pro forma data has been prepared by adjusting Chicago Laser's income statement data so that it is within one month of ESI reported amounts for the respective periods. NOTE 8 - SALE OF PRODUCT LINES During the second quarter ended November 30, 1993, the Company sold the product lines and certain assets of the MSI Material Division of its wholly-owned subsidiary Palomar Systems, Inc., to Ferro Corporation of Cleveland, Ohio. The proceeds were received in cash and the funds were used to reduce the current portion of long-term debt and other short-term debt. A gain of $2.1 million from the sale of these product lines was reflected in other income in the accompanying Consolidated Statements of Income. Page 10 of 12 ELECTRO SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES MANAGEMENT DISCUSSION AND ANALYSIS Results of Operations Net sales for the quarter ended February 28, 1995 increased 73.4% or $12.4 million over the same period of the prior year. Excluding net sales related to product lines sold in fiscal 1994, net sales increased 83.1% or $13.3 million. This increase results from increased unit sales of memory repair systems and miniature capacitor test and production systems. The addition of Chicago Laser Systems, Inc. in August 1994 also increased unit sales of laser trimming equipment. Year-to-date net sales, excluding revenues of $3.5 million related to product lines sold in fiscal 1994, increased 46.4% over the same period of the prior year as a result of increased unit sales of all major product lines. Gross margin for the three months ended February 28, 1995 of 53.1% increased from the 52.4% reported for the quarter ended February 28, 1994; this results from increased sales volumes of ESI's laser based products as well as miniature capacitor test and production systems. Gross margin increased from 50.7% for the nine months ended February 28, 1994 to 52.9% for the nine months ended February 28, 1995 as a result of increased sales of higher margin memory repair and laser trimming products. In addition, the divestiture of lower gross margin product lines in fiscal 1994 also contributed to the percentage increase. Selling, service and administrative expenses for the three months ended February 28, 1995 increased $3.2 million over the same period of the prior year. Chicago Laser, acquired in August 1994, accounted for $1.0 million of the increase. Also, in conjunction with the increase in net sales, selling commissions increased; in addition, one time expenditures in the form of incentive compensation and relocation expenses were incurred. For the nine months ended February 28, 1995, selling, service and administrative expenses increased $5.0 million over the same period of the prior year, as a result of expenses associated with Chicago Laser, increased selling commissions associated with higher sales volumes as well as compensation related increases. As a percentage of sales, these expenses have decreased slightly from 26.8% for the nine months ended February 28, 1994 to 26.2% for the nine months ended February 28, 1995. Research, development and engineering expenses for the current quarter increased $1.5 million over the same period of the prior year as a result of $0.5 million of engineering expenses associated with Chicago Laser as well as compensation increases and salaries associated with new hires. In addition, prior year expenses include reimbursements of $0.3 million from the United States government's Advanced Research Project Agency which are reflected as an offset to expense. There were no such reimbursements in the current quarter. On a year-to-date basis, research, development and engineering expenses increased $2.4 million over the prior year for reasons consistent with the current quarter and as a percentage of sales remained constant at 11.7%. Interest income (expense) for the three and nine month periods ended February 28, 1995 increased over the comparable periods of the prior year as a result of interest earned on the proceeds from the secondary stock offering and repaying all bank and long-term debt. Page 11 of 12 ELECTRO SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES MANAGEMENT DISCUSSION AND ANALYSIS (CONT.) Other income and expense for the nine months ended February 28, 1994 includes a gain of $2.1 million related to the sale of product lines; there were no such gains in the current year. The effective tax rate of 30.0% for the three month and nine month periods ended February 28, 1995 increased from 25.0% for the comparable periods of the prior year as a result of higher earnings in the United States and Japan during the current year. Net income for the quarter ended February 28, 1995 was $3.2 million or $0.39 per share. This compares to net income for the three months ended February 28, 1994 of $1.7 million or $0.26 per share. Net income was $8.0 million or $1.10 per share for the nine months ended February 28, 1995 compared to $6.2 million or $0.96 per share for the nine months ended February 28, 1994. Year-to-date net income for the prior fiscal year includes a $1.6 million or $0.24 per share after tax gain on the sale of product lines. Orders for the three months ended February 28, 1995 were $36 million; for the same period last year, incoming orders were $16 million. Ending backlog on February 28, 1995 was $23 million. Liquidity and Capital Resources The Company's principal sources of liquidity are cash of $25.1 million at February 28, 1995 and a $7.0 million line of credit, none of which was outstanding at February 28, 1995. ESI has no debt and a current ratio of 6.0:1. Working capital increased to $69.8 million at February 28, 1995 from $36.2 million at May 31, 1994 as a result of a secondary stock offering in November 1994, the acquisition of Chicago Laser in August 1994 as well as the increased level of sales in the current year which has generated a higher level of receivables. The capital requirements for the Company's current businesses are satisfied by existing sources. Page 12 of 12 ELECTRO SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed by the undersigned thereunto duly authorized. ELECTRO SCIENTIFIC INDUSTRIES, INC. Dated: April 14, 1995 By /s/ Barry L. Harmon ------------------------------------------ Barry L. Harmon, Senior Vice President and Chief Financial Officer EX-27 2 EXHIBIT 27
5 1,000 9-MOS MAY-31-1995 JUN-01-1994 FEB-28-1995 25,145 0 30,399 225 24,874 83,913 34,579 19,660 102,527 14,089 0 47,375 0 0 40,143 102,527 75,207 75,207 35,412 35,412 28,499 (92) 2 11,356 3,397 0 0 0 0 7,959 1.10 1.10
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