-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GuzOmEvUlSqGrNby7MKY0+hOvyZ8PHkuGDryenU3QnUcWloRTek4qqRC5mPfI3GY RqzJ2OKnrPcpWmlBV9ki/Q== 0001157523-04-011697.txt : 20041222 0001157523-04-011697.hdr.sgml : 20041222 20041222083013 ACCESSION NUMBER: 0001157523-04-011697 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20041221 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20041222 DATE AS OF CHANGE: 20041222 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ELECTRO SCIENTIFIC INDUSTRIES INC CENTRAL INDEX KEY: 0000726514 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS ELECTRICAL MACHINERY, EQUIPMENT & SUPPLIES [3690] IRS NUMBER: 930370304 STATE OF INCORPORATION: OR FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-12853 FILM NUMBER: 041219101 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 8-K 1 a4789215.txt ELECTRO SCIENTIFIC INDUSTRIES, INC. 8-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): December 22, 2004 ELECTRO SCIENTIFIC INDUSTRIES, INC. (Exact name of registrant as specified in its charter) OREGON 0-12853 93-0370304 (State or other jurisdiction (Commission (IRS Employer of incorporation) File Number) Identification No.) 13900 NW Science Park Drive, Portland, Oregon 97229 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (503) 641-4141 No Change (Former name or former address, if changed since last report) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: [ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Item 2.02. Results of Operations and Financial Condition. On December 22, 2004, Electro Scientific Industries, Inc. (the "Company") announced its financial results for the second quarter of fiscal 2005. The Company's press release announcing this event is attached hereto as Exhibit 99.1 and incorporated herein by reference. Item 9.01. Financial Statements and Exhibits (c) Exhibits ------------ 99.1 Press release dated December 22, 2004 2 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Date: December 22, 2004. Electro Scientific Industries, Inc. By /s/ J. Michael Dodson ----------------------------------------- J. Michael Dodson Senior Vice President of Administration, Chief Financial Officer and Secretary 3 EXHIBIT INDEX Exhibit Description - ------- ----------- 99.1 Press release dated December 22, 2004. EX-99.1 2 a4789215-ex991.txt ELECTRO SCIENTIFIC INDUSTRIES, INC. PRESS RELEASE EXHIBIT 99.1 ESI Announces Fiscal 2005 Second Quarter Results PORTLAND, Ore.--(BUSINESS WIRE)--Dec. 22, 2004--Electro Scientific Industries, Inc. (Nasdaq:ESIO) today announced results for its fiscal 2005 second quarter ended November 27, 2004. Second quarter sales were $66.0 million, down 9% compared to first quarter sales of $72.6 million and up 44% compared to prior year second quarter sales of $45.8 million. Operating income for the quarter was $9.8 million, compared with operating income of $15.4 million in the first quarter and an operating loss of $3.0 million in the second quarter a year ago. Net income for the quarter was $7.9 million, or $0.28 per basic and diluted share, compared with net income of $10.6 million, or $0.38 per basic share and $0.36 per diluted share in the first quarter and a net loss of $4.9 million, or $0.17 per basic and diluted share in the second quarter a year ago. Included in the second quarter 2005 operating results were charges of $2.2 million resulting from the settlement and related legal costs for a patent infringement lawsuit. Net orders for the second quarter were $39.8 million, a decrease of 41% compared with $67.6 million in the first quarter and a decrease of 39% compared with $64.8 million in the second quarter of 2004. Backlog decreased $18.3 million to $49.9 million at November 27, 2004 from $68.2 million at August 28, 2004. Deferred revenue decreased this quarter to $9.4 million compared to $17.2 million at August 28, 2004. "We continued to experience a decline in business reflecting the industry-wide inventory correction," noted Nick Konidaris, ESI's president and chief executive officer. "The sequential order rate decreased, with customers in each of our three businesses delaying equipment purchases during the quarter. Product shipments were substantially higher than orders as prior backlog shipped during the quarter." Konidaris continued, "Despite ongoing adverse market conditions, the company performed capably in difficult times. We maintained 50% gross margins and delivered a fourth consecutive quarter of solid profitability while increasing our investment in R&D." Mike Dodson, ESI's chief financial officer added, "Gross margins of 50% during the quarter were comparable to 51% in the first quarter. The slight decrease in gross margins was due to lower overhead absorption on declining revenues as well as a change in sales mix, but these factors were largely offset by material cost reductions. Operating expenses were $23.1 million in the quarter, up from $21.4 million in the first quarter. Excluding the $2.2 million settlement for patent litigation and related costs charged in the second quarter, operating expenses were down slightly from the first quarter. The decrease was primarily due to lower variable selling expenses related to the decrease in revenues and was partially offset by higher research and development expenses resulting from additional funding for new capabilities and initiatives and the timing of project expenses." "Our balance sheet remains strong. Cash and investments were $338.1 million at the end of the quarter, up $0.9 million from the first quarter. Cash increased due to operating profits, but was largely offset by changes in working capital and litigation settlement payments," concluded Dodson. Konidaris added, "Although visibility is limited, the current industry slowdown could persist for several quarters. Given the high degree of uncertainty going forward, we have decided to take action proactively to streamline our infrastructure to increase agility, scalability and market innovation, while decreasing our break-even point. As a result, we will be reducing our workforce by approximately 9%. In addition to the restructuring, we have also initiated several new actions designed to improve the operating efficiency of the company. These efforts are focused on cycle time reductions, supplier quality engineering, design for manufacturability, as well as overall cost control measures throughout the organization. We believe these actions will make ESI a more nimble company that is better able to perform well in the months and years ahead." Charges relating to the restructuring will approximate $1.3 million and are expected to be incurred in the third quarter. Ongoing annual savings from these actions are currently estimated to be approximately $6 million. "Now I'd like to turn to Q3 guidance. As a result of the uncertainty in the industry, our visibility is limited. Based on the best information available to us at this time, we believe third quarter shipments and revenues will be in the range of $40 million to $55 million. Given the expected decrease in revenues, we expect margins to decrease accordingly as manufacturing costs will not decrease at the same rate as revenues. As a result, we expect margins to be in the mid 40% range. Excluding the $1.3 million of restructuring charges, we expect third quarter operating expenses to decline to approximately $19 to $20 million due to the previously mentioned restructuring actions and cost containment measures," concluded Konidaris. The effective tax rate used in the second quarter to calculate the tax provision was 17% compared to 29% in the prior quarter. This decrease results from the necessity to adjust on a quarterly basis the year-to-date effective tax rate to the company's best estimate of the annual effective tax rate which is now 25%. The company will hold a conference call today at 8:30 a.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 December 30 at 800-642-1687 (domestic participants) or 706-645-9291 (international participants), with conference ID number 2897392. 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 revenues, gross margins, operating expenses, 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 ability of the company to achieve anticipated cost reductions and savings; 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 2005 Results (In thousands, except per share data) (Unaudited) Operating Results: Three Months Six Months Ended Ended ------------------------------------- Nov. 27, Nov. 29, Nov. 27, Nov. 29, 2004 2003 2004 2003 -------- -------- --------- --------- Net sales $66,004 $45,753 $138,624 $ 66,629 Cost of sales 33,178 30,090 68,912 46,126 ------- ------- -------- -------- Gross profit 32,826 15,663 69,712 20,503 Operating expenses: Selling, service and administrative 13,086 13,281 27,964 27,906 Research, engineering and development 7,746 5,416 14,306 11,164 Patent infringement settlement and related legal fees 2,240 - 2,240 - -------- -------- --------- --------- Total operating expenses 23,072 18,697 44,510 39,070 ------- ------- -------- -------- Operating income (loss) 9,754 (3,034) 25,202 (18,567) Net interest income (expense) (13) 8 (249) 83 Other expense (191) (112) (324) (10) ------- ------- -------- -------- Income (loss) before income taxes 9,550 (3,138) 24,629 (18,494) Provision for (benefit from) income taxes 1,604 1,737 6,037 (4,252) ------- ------- -------- -------- Net income (loss) $ 7,946 $(4,875) $ 18,592 $(14,242) ======= ======= ======== ======== Net income (loss) per share - basic $ 0.28 $ (0.17) $ 0.66 $ (0.51) ======= ======= ======== ======== Net income (loss) per share - diluted $ 0.28 $ (0.17) $ 0.64 $ (0.51) ======= ======= ======== ======== Electro Scientific Industries, Inc. Analysis of FY 2005 Results (Dollars in thousands) (Unaudited) Three Months Six Months Ended Ended ----------------- ------------------ Nov. 27, Nov. 29, Nov. 27, Nov. 29, 2004 2003 2004 2003 -------- -------- --------- -------- Sales detail: Semiconductor Group $35,658 $28,137 $ 79,671 $33,873 Electronic Interconnect Group 12,367 8,667 20,371 14,201 Passive Components Group 17,979 8,949 38,582 18,555 ------- ------- -------- ------- Total $66,004 $45,753 $138,624 $66,629 ======= ======= ======== ======= Gross margin % 50% 34% 50% 31% Selling, service and administrative expense % 20% 29% 20% 42% Research, engineering and development expense % 12% 12% 10% 17% Operating income (loss) % 15% (7%) 18% (28%) Effective tax rate % 17% (55%) 25% 23% Average shares outstanding - basic 28,443 27,931 28,329 27,885 Average shares outstanding - diluted 28,541 27,931 32,315 27,885 End of period employees 630 592 630 592 Electro Scientific Industries, Inc. FY 2005 Results (Amounts in thousands) (Unaudited) Financial Position As Of: Nov. 27, August 28, May 29, 2004 2004 2004 -------- ---------- -------- Assets Current assets: Cash and cash equivalents $ 91,309 $ 88,729 $ 80,358 Marketable securities 190,467 205,923 206,931 Restricted securities 3,296 3,194 6,251 -------- ---------- -------- Total cash and securities 285,072 297,846 293,540 Trade receivables, net 53,971 61,224 51,696 Income tax refund receivable 8,896 7,411 7,466 Inventories, net 68,321 65,574 58,627 Shipped systems pending acceptance 2,234 7,169 4,391 Deferred income taxes 12,548 17,336 16,096 Assets held for sale - - 2,391 Prepaid and other current assets 5,055 7,410 3,348 -------- ---------- -------- Total current assets 436,097 463,970 437,555 Long-term marketable securities 53,021 39,386 39,214 Property and equipment, net 33,085 33,822 33,531 Deferred income taxes 15,609 12,095 17,630 Other assets 12,464 8,619 9,256 -------- ---------- -------- Total assets $550,276 $ 557,892 $537,186 ======== ========== ======== Liabilities and shareholders' equity Current liabilities: Accounts payable $ 8,326 $ 14,620 $ 13,248 Accrued liabilities 36,662 39,918 42,381 Deferred revenue 9,375 17,187 11,985 -------- ---------- -------- Total current liabilities 54,363 71,725 67,614 Convertible subordinated notes 143,193 142,976 142,759 -------- ---------- -------- Total liabilities 197,556 214,701 210,373 Shareholders' equity: Preferred and common stock 153,290 152,153 147,054 Retained earnings 199,954 192,008 181,362 Accumulated other comprehensive loss (524) (970) (1,603) -------- ---------- -------- Total shareholders' equity 352,720 343,191 326,813 -------- ---------- -------- Total liabilities and shareholders' equity $550,276 $ 557,892 $537,186 ======== ========== ======== End of period shares outstanding 28,463 28,411 28,175 ======== ========== ======== Total cash and investments $338,093 $ 337,232 $332,754 ======== ========== ======== Electro Scientific Industries, Inc. FY2005 Results (Amounts in thousands) (Unaudited) Consolidated Statements of Cash Flows: Six Months Ended ------------------- Nov. 27, Nov. 29, 2004 2003 -------- ---------- CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $ 18,592 $(14,242) Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities: Depreciation and amortization 4,593 4,607 Provision for doubtful accounts 200 - Loss on disposal of property and equipment 253 4 Deferred income taxes 5,617 (183) Tax benefit of stock options exercised 543 218 Changes in operating accounts: (Increase) decrease in trade receivables, net (536) 440 Increase in income tax receivable (1,430) (22,140) Increase in inventories, net (13,523) (5,051) (Increase) decrease in shipped systems pending acceptance 2,157 (2,956) (Increase) decrease in prepaid and other current assets (1,617) 617 Increase (decrease) in accounts payable and other current liabilities (11,914) 19,112 Increase (decrease) in deferred revenue (2,611) 6,655 -------- -------- Net cash provided by (used in) operating activities 324 (12,919) -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property, plant and equipment (2,109) (1,912) Proceeds from sale of property and equipment 92 9 Proceeds from sale of assets held for sale 2,361 - Change in investments, net 6,141 13,176 (Increase) decrease in other assets (780) 9 -------- -------- Net cash provided by investing activities 5,705 11,282 -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from stock plans 4,922 2,351 -------- -------- Net cash provided by financing activities 4,922 2,351 -------- -------- NET CHANGE IN CASH AND CASH EQUIVALENTS $ 10,951 $ 714 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD $ 80,358 $ 31,017 -------- -------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 91,309 $ 31,731 ======== ======== CONTACT: Electro Scientific Industries, Inc. Mike Dodson, 503-671-7028 or Craig Stoehr, 503-671-7061 -----END PRIVACY-ENHANCED MESSAGE-----