EX-99.1 3 a4610227ex99.txt PRESS RELEASE Exhibit 99.1 ESI Announces Fiscal 2004 Third Quarter Results PORTLAND, Ore.--(BUSINESS WIRE)--April 6, 2004--Electro Scientific Industries, Inc. (Nasdaq:ESIO) announced results for its fiscal 2004 third quarter ended February 28, 2004. Third quarter sales were $58.8 million, up 28% compared to second quarter sales of $45.8 million and up 86% compared to prior year third quarter sales of $31.6 million. Operating income for the quarter was $4.4 million, compared with an operating loss of $3.0 million in the second quarter and an operating loss of $22.4 million in the third quarter a year ago. Net income for the quarter was $10.0 million, or $0.36 per basic share and $0.34 per diluted share, compared with a net loss of $4.9 million, or $0.17 per basic and diluted share in the second quarter and a net loss of $13.0 million, or $0.47 per basic and diluted share in the third quarter a year ago. Net orders for the third quarter were $61.2 million, a decrease of 6% compared with $64.8 million in the second quarter and an increase of 96% compared with $31.2 million in the third quarter of 2003. Backlog increased to $50.8 million at February 28, 2004 compared to $45.1 million at November 29, 2003. Deferred revenue decreased this quarter to $16.6 million compared to $19.9 million at November 29, 2003. "We continue to experience a widespread recovery in the markets we serve," said Nick Konidaris, ESI's president and chief executive officer. "Orders remained healthy in the third quarter, revenues and shipments were up significantly, margins continued to steadily improve, and quarterly operating income was positive for the first time since the 2001 fiscal year. After experiencing a particularly robust growth rate in orders during our first and second quarters, due to the timing of DRAM customer orders, overall order activity declined slightly in the third quarter." Konidaris continued, "Gross margins of 40% continued to improve during the quarter, up from 34% in the second quarter. As manufacturing activity has steadily increased during the past few quarters, material costs and overhead allocations have decreased, driving improvement in margins. Improved gross margins during the quarter were offset by higher overhead on older inventory. We expect margins to continue to improve." Mike Dodson, ESI's chief financial officer noted, "We continue to focus on cost containment while growing the business. Despite a 28% revenue increase, operating expenses of $18.9 million were up only $0.2 million from the second quarter. Severance costs and incremental legal fees were $1.0 million, flat with the second quarter. Our balance sheet remained strong ending the quarter with cash and investments of $295 million. Working capital management strengthened as both days sales outstanding and inventory turns improved for the second consecutive quarter." Dodson continued, "The income tax benefit recorded in the quarter is once again unusual. When pre-tax results move between loss and profit positions, the income tax rate can change significantly depending on the relationship between permanent income tax deductions and tax credits to estimated pre-tax earnings. Despite recording pre-tax income of $4.2 million for the quarter, the company recorded a $5.8 million tax benefit during the quarter. The year-to-date tax benefit for the current fiscal year is $10.1 million on a loss before tax of $14.3 million. The year-to-date tax benefit includes an estimate of the total annual permanent income tax deductions and tax credits that the company will be entitled to claim on its FY04 tax return. Based on the income tax benefit recorded during the quarter, we expect to record tax expense in the fourth quarter at the 38% statutory rate." Konidaris added, "While we are pleased with the return to profitability in the quarter, there is much work yet to do to realize our company's potential. Specifically, we are working to further develop strong and lasting relationships with our customers by integrating our roadmap with theirs, allowing us to meet both their current needs as well as their future needs. We are also evaluating our internal operations to drive efficiencies, improve customer satisfaction, and reduce costs. Finally, we are aligning our core competencies with our market opportunities to prioritize our development efforts and identify and target new, growth businesses. I believe there is great opportunity ahead, and we will do our best to take advantage of it." The company will hold a conference call today at 4:30 p.m. Eastern time. The session will include a review of the financial results, 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 April 14 at 800-642-1687 (domestic participants) or 706-645-9291 (international participants), with conference ID number 6325191. The audio replay will also be available on the ESI website. In conjunction with the filing of a current report on Form 8-K, which includes this press release, ESI also filed with the Securities and Exchange Commission a Form 10-Q for the third quarter of fiscal 2004. Forward-Looking Statements This press release includes forward-looking statements concerning the markets we serve, gross margins, customer relations, internal operations, cost containment 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 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 company's need to continue investing in research and development; and the company's ability to create and sustain intellectual property protection around its products. 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 2004 Results (In thousands, except per share data) (Unaudited) Operating Results: Three Months Ended Nine Months Ended -------------------------------------- Feb. 28, Mar. 1, Feb. 28, Mar. 1, 2004 2003 2004 2003 -------- --------- --------- --------- Net sales $58,770 $ 31,631 $125,399 $114,407 Cost of sales 35,444 32,175 81,570 96,134 ------- -------- -------- -------- Gross profit 23,326 (544) 43,829 18,273 Operating expenses: Selling, service and administrative 13,502 16,140 41,408 47,261 Research, engineering and development 5,429 5,706 16,593 20,618 ------- --------- -------- --------- Total operating expenses 18,931 21,846 58,001 67,879 ------- -------- -------- -------- Operating income (loss) 4,395 (22,390) (14,172) (49,606) Net interest income (expense) (22) 548 61 2,089 Other income (expense) (197) 147 (207) 842 ------- -------- -------- -------- Income (loss) before income taxes 4,176 (21,695) (14,318) (46,675) Benefit for income taxes (5,798) (8,706) (10,050) (17,384) ------- -------- -------- -------- Net income (loss) $ 9,974 $(12,989) $ (4,268) $(29,291) ======= ======== ======== ======== Net income (loss) per share - basic $ 0.36 $ (0.47) $ (0.15) $ (1.06) ======= ======== ======== ======== Net income (loss) per share - diluted $ 0.34 $ (0.47) $ (0.15) $ (1.06) ======= ======== ======== ======== Electro Scientific Industries, Inc. Analysis of FY 2004 Results (Dollars in thousands) (Unaudited) Three Months Ended Nine Months Ended -------------------------------------- Feb. 28, Mar. 1, Feb. 28, Mar. 1, 2004 2003 2004 2003 -------- -------- --------- --------- Sales detail: Electronic Interconnect Group $ 9,140 $ 6,293 $ 23,341 $ 19,268 Semiconductor Group 37,068 15,218 70,941 56,893 Passive Components Group 12,562 10,120 31,117 38,246 ------- ------- -------- -------- Total $58,770 $31,631 $125,399 $114,407 ======= ======= ======== ======== Gross margin % 39.7% -1.7% 35.0% 16.0% Selling, service and administrative expense % 23.0% 51.0% 33.0% 41.3% Research, engineering and development expense % 9.2% 18.0% 13.2% 18.0% Operating income (loss) % 7.5% -70.8% -11.3% -43.4% Effective tax rate % -138.8% 40.1% 70.2% 37.2% Average shares outstanding - basic 28,030 27,782 27,933 27,715 Average shares outstanding - diluted 32,187 27,782 27,933 27,715 Electro Scientific Industries, Inc. FY 2004 Results (Amounts in thousands) (Unaudited) Financial Position As Of: Feb. 28, Nov. 29, May 31, 2004 2003 2003 -------- -------- -------- Assets Current assets: Cash and cash equivalents $ 41,874 $ 31,731 31,017 Marketable securities 221,455 224,104 211,343 Restricted securities 6,196 9,329 9,422 -------- -------- -------- Total cash and securities 269,525 265,164 251,782 Trade receivables 44,255 36,999 37,160 Income tax refund receivable 32,274 26,343 16,499 Inventories,net 51,536 49,053 42,067 Shipped systems pending acceptance 5,443 10,014 7,058 Deferred income taxes 14,794 14,794 14,794 Assets held for sale 8,842 8,842 6,451 Other current assets 3,238 2,852 3,445 -------- -------- -------- Total current assets 429,907 414,061 379,256 Long-term marketable securities 25,388 29,128 53,452 Long-term restricted securities - - 3,018 -------- -------- -------- Total long-term securities 25,388 29,128 56,470 Property and equipment, net 34,657 35,033 36,592 Deferred income taxes 5,820 6,115 5,188 Other assets 8,623 8,824 13,796 -------- -------- -------- Total assets $504,395 $493,161 491,302 ======== ======== ======== Liabilities and shareholders' equity Current liabilities: Accounts payable $ 14,567 $ 11,457 4,395 Accrued liabilities 20,110 22,375 21,477 Deferred revenue 16,620 19,877 13,222 -------- -------- -------- Total current liabilities 51,297 53,709 39,094 Convertible subordinated notes 142,542 142,325 141,891 -------- -------- -------- Total liabilities 193,839 196,034 180,985 Shareholders' equity: Preferred and common stock 145,774 142,800 140,231 Retained earnings 165,207 155,233 169,475 Accumulated other comprehensive income (loss) (425) (906) 611 -------- -------- -------- Total shareholders' equity 310,556 297,127 310,317 -------- -------- -------- Total liabilities and shareholders' equity $504,395 $493,161 491,302 ======== ======== ======== End of period shares outstanding 28,091 27,954 27,843 ======== ======== ======== Total cash and investments $294,913 $294,292 308,252 ======== ======== ======== Electro Scientific Industries, Inc. FY2004 Results (Amounts in thousands) (Unaudited) Consolidated Statements of Cash Flows: Nine Months Ended ------------------- Feb. 28, Mar. 1, 2004 2003 ------------------- CASH FLOWS FROM OPERATING ACTIVITIES Net loss $ (4,268) $(29,291) Adjustments to reconcile net loss to cash used in operating activities: Depreciation and amortization 6,942 7,752 Provision for doubtful accounts 101 275 (Gain) loss on disposal of property and equipment 57 (269) Gain on debt extinguishment - (218) Deferred income taxes (694) 322 Tax benefit of stock options exercised 703 108 Changes in operating accounts: (Increase) decrease in trade receivables (6,336) 7,463 Increase in income tax receivable (15,775) (12,616) (Increase) decrease in inventories (7,381) 23,717 (Increase) decrease in shipped systems pending acceptance 1,615 (4,712) (Increase) decrease in other current assets 262 (223) Increase in other current liabilities 7,960 252 Increase in deferred revenue 3,398 7,292 -------- -------- Net cash used in operating activities (13,416) (148) -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property, plant and equipment (3,328) (8,040) Proceeds from the sale of property, plant and equipment 9 1,074 Change in investments, net 23,061 4,493 (Increase) decrease in other assets (309) 3,438 -------- -------- Net cash provided by investing activities 19,433 965 -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES Purchase of ESI-issued convertible notes - (4,676) Proceeds from exercise of stock options and stock plans 4,840 3,263 -------- -------- Net cash provided by (used in) financing activities 4,840 (1,413) -------- -------- NET CHANGE IN CASH AND CASH EQUIVALENTS $ 10,857 $ (596) CASH AND CASH EQUIV. AT BEGINNING OF PERIOD $ 31,017 $ 29,435 -------- -------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 41,874 $ 28,839 ======== ======== CONTACT: Electro Scientific Industries, Inc. Mike Dodson, 503-671-7028 or Craig Stoehr, 503-671-7061