-----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, FYMK9Le0cp58zb6xCQqvbJJHbqywV72nrE/ai4EzrnGrkeFqm73dNik+W3gA2GDR cbm5TabVZhdGeu5ClMjmCQ== 0001157523-06-002908.txt : 20060322 0001157523-06-002908.hdr.sgml : 20060322 20060322162759 ACCESSION NUMBER: 0001157523-06-002908 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20060322 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20060322 DATE AS OF CHANGE: 20060322 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: 06704034 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 a5108206.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): March 22, 2006 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 March 22, 2006, Electro Scientific Industries, Inc. (the "Company") announced its financial results for the third quarter of fiscal 2006. 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. (d) Exhibits ------------ 99.1 Press release dated March 22, 2006 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: March 22, 2006 Electro Scientific Industries, Inc. By /s/ Kerry Mustoe ----------------------------------------------- Kerry Mustoe Corporate Controller, Chief Accounting Officer and Interim Chief Financial Officer 3 EXHIBIT INDEX Exhibit Description - ------- ----------- 99.1 Press release dated March 22, 2006. EX-99.1 2 a5108206ex99_1.txt EXHIBIT 99.1 EXHIBIT 99.1 ESI Announces Fiscal 2006 Third Quarter Results PORTLAND, Ore.--(BUSINESS WIRE)--March 22, 2006--Electro Scientific Industries, Inc. (Nasdaq:ESIO) today announced results for its fiscal 2006 third quarter ended February 25, 2006. Third quarter sales were $55.9 million, up 15% compared to second quarter sales of $48.6 million and up 14% compared to prior year third quarter sales of $49.1 million. Operating income for the quarter was $4.9 million, compared with operating income of $1.8 million in the second quarter and operating income of $2.7 million in the third quarter a year ago. Net income for the quarter was $10.4 million, or $0.36 per basic and $0.35 per diluted share, compared with net income of $3.2 million, or $0.11 per basic and diluted share, in the second quarter and net income of $2.0 million, or $0.07 per basic and diluted share, in the third quarter a year ago. Included in the third quarter 2006 results was a $5.3 million tax benefit as described below. Net orders for the third quarter were $53.0 million, a decrease of 18% compared with $64.9 million in the second quarter and an increase of 33% compared with $39.8 million in the third quarter of 2005. Deferred revenue increased $2.3 million from the second quarter, ending the third quarter at $15.6 million. "The industry environment during the quarter was generally favorable and indicative of steady growth," noted Nick Konidaris, ESI's president and chief executive officer. "This quarter's financial performance reflects stable growth trends across each of our market segments. Financially, we met our revenue and profit targets, recorded the strongest 6-month order book since the summer of 2004, grew revenue 15% sequentially, delivered a ninth consecutive quarterly operating profit -- the highest in over a year, and maintained a strong balance sheet." Konidaris continued, "With the incremental investment in R&D over the past year, ESI has one of the strongest product portfolios in the market segments we serve. As we progress through a year with improving market conditions, we plan to leverage our leading technology to grow in both existing and new markets." Gross margin of 45 percent during the quarter was up from 44 percent in the prior quarter. The gross margin improvement was primarily the result of favorable overhead absorption on increased production levels. Operating expenses were $20 million, up $0.6 million from the prior quarter. The increase in operating expense was the result of a planned increase in research and development expense to develop next-generation products. Other income of $1.8 million was down from $2.3 million in the second quarter. Other income in the second quarter included $700 thousand in interest income from an IRS refund. Excluding the impact from the IRS refund, other income was up $200 thousand in the third quarter due to higher interest income on investments. The income tax benefit for the third quarter of fiscal 2006 was $3.7 million on pre-tax income of $6.7 million, compared to income tax expense of $0.9 million for the second quarter of fiscal 2006. The effective tax rate in the third quarter of fiscal 2006 was a benefit of 55% compared to an expense of 22% in the second quarter of fiscal 2006. The third quarter tax benefit resulted from a $5.3 million reduction in accrued income taxes due to the statutory closure of various tax years. Cash and investments were $226 million, down from $231 million at the end of the prior quarter. Cash decreased during the quarter primarily due to an increase in accounts receivable and capital expenditures related to the ERP implementation, and was partially offset by net income for the quarter. Third quarter expenditures totaled approximately $4 million for the project to implement a new ERP system. Konidaris added, "In an environment of steady growth, yet cautious optimism, we believe fourth quarter shipments and revenue will continue to be in the range of $50 million to $60 million. We expect the gross margin percentage in the fourth quarter to be slightly lower than the third quarter due to a change in product mix. We expect operating expense to increase slightly to the range of $20 million to $21 million in the fourth quarter as we incur expenses related to the launch of our new ERP system. We expect non-operating income to be approximately $2 million. We expect the tax rate for the fourth quarter to be approximately 21%." 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). A live audio webcast can be accessed at www.esi.com. Upon completion of the call, an audio replay will be accessible through March 29, 2006, at 800-642-1687 (domestic participants) or 706-645-9291 (international participants), with conference ID number 6715077. 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, 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 Nine months ended ended ----------------- ------------------- Feb. 25, Feb. 26, Feb. 25, Feb. 26, 2006 2005 2006 2005 -------- -------- ------------------- Net sales $55,937 $49,084 $149,088 $187,708 Cost of sales 31,040 27,646 83,376 96,558 ------- ------- -------- -------- Gross profit 24,897 21,438 65,712 91,150 Operating expenses: Selling, service and administration 11,287 12,290 33,729 40,254 Research, development and engineering 8,708 6,400 24,520 20,706 Patent infringement settlement and related legal fees - - - 2,240 ------- ------- -------- -------- Total operating expenses 19,995 18,690 58,249 63,200 ------- ------- -------- -------- Operating income 4,902 2,748 7,463 27,950 Net interest income (expense) 1,957 83 5,775 (166) Other expense, net (158) (161) (465) (485) ------- ------- -------- -------- Total other income (expense) 1,799 (78) 5,310 (651) ------- ------- -------- -------- Income before income taxes 6,701 2,670 12,773 27,299 Provision for (benefit from) income taxes (3,656) 672 (2,119) 6,709 ------- ------- -------- -------- Net income $10,357 $ 1,998 $ 14,892 $ 20,590 ======= ======= ======== ======== Net income per share - basic $ 0.36 $ 0.07 $ 0.52 $ 0.73 ======= ======= ======== ======== Net income per share - fully diluted $ 0.35 $ 0.07 $ 0.51 $ 0.72 ======= ======= ======== ======== Electro Scientific Industries, Inc. Analysis of FY 2006 Results (Dollars and shares in thousands) (Unaudited) Three months Nine months ended ended ----------------- ------------------- Feb. 25, Feb. 26, Feb. 25, Feb. 26, 2006 2005 2006 2005 -------- -------- ------------------- Sales detail: Semiconductor Group $40,515 $29,712 $ 93,653 $109,383 Passive Components Group 9,179 12,479 32,261 51,061 Electronic Interconnect Group 6,243 6,893 23,174 27,264 ------- ------- -------- -------- Total $55,937 $49,084 $149,088 $187,708 ======= ======= ======== ======== Gross margin % 45% 44% 44% 49% Selling, service and administration expense % 20% 25% 23% 21% Research, development and engineering expense % 16% 13% 16% 11% Operating income % 9% 6% 5% 15% Effective tax rate % -55% 25% -17% 25% Average shares outstanding - basic 28,904 28,492 28,751 28,383 Average shares outstanding - fully diluted 29,256 28,600 29,022 28,533 End of period employees 601 571 601 571 Electro Scientific Industries, Inc. FY 2006 Results (Amounts in thousands) (Unaudited) Financial Position As Of: Feb. 25, Nov. 26, May 28, 2006 2005 2005 ------------------ -------- Assets Current assets: Cash and cash equivalents $ 94,764 $ 93,908 $ 61,314 Marketable securities 129,779 129,484 137,753 -------- -------- -------- Total cash and securities 224,543 223,392 199,067 Trade receivables, net 47,382 35,307 36,163 Income tax refund receivable 1,227 1,418 9,227 Inventories 61,031 59,908 59,533 Shipped systems pending acceptance 4,700 3,265 4,014 Deferred income taxes 12,442 13,107 10,930 Prepaid and other current assets 4,367 4,964 3,169 -------- -------- -------- Total current assets 355,692 341,361 322,103 Long-term marketable securities 960 7,380 19,834 Property, plant and equipment, net 42,273 38,310 32,959 Deferred income taxes, net 13,111 14,673 16,955 Other assets 17,420 16,213 11,706 -------- -------- -------- Total assets $429,456 $417,937 $403,557 ======== ======== ======== Liabilities and shareholders' equity Current liabilities: Accounts payable $ 9,080 $ 11,291 $ 3,961 Accrued liabilities 24,234 28,747 29,455 Deferred revenue 15,637 13,342 12,986 -------- -------- -------- Total current liabilities 48,951 53,380 46,402 Shareholders' equity: Preferred and common stock 165,248 159,943 156,367 Retained earnings 216,091 205,734 201,199 Accumulated other comprehensive loss (834) (1,120) (411) -------- -------- -------- Total shareholders' equity 380,505 364,557 357,155 -------- -------- -------- Total liabilities and shareholders' equity $429,456 $417,937 $403,557 ======== ======== ======== End of period shares outstanding 28,993 28,737 28,615 ======== ======== ======== Total cash and investments $225,503 $230,772 $218,901 ======== ======== ======== Electro Scientific Industries, Inc. FY2006 Results (Amounts in thousands) (Unaudited) Consolidated Statements of Cash Flows: Nine months ended ------------------- Feb. 25, Feb. 26, 2006 2005 --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 14,892 $ 20,590 Adjustments to reconcile net income to cash provided by operating activities: Depreciation and amortization 6,886 7,176 Tax benefit of stock options exercised 1,525 637 Provision for doubtful accounts (167) 199 Loss on disposal of property and equipment 56 281 Deferred income taxes 2,347 6,271 Changes in operating accounts: (Increase) decrease in trade receivables, net (11,796) 16,645 (Increase) decrease in income tax refund receivable 8,000 (1,642) Increase in inventories (685) (11,781) (Increase) decrease in shipped systems pending acceptance (686) 3,059 Increase in prepaid and other current assets (1,229) (1,346) Increase (decrease) in accounts payable and accrued liabilities 579 (18,407) Increase (decrease) in deferred revenue 2,651 (3,413) -------- -------- Net cash provided by operating activities 22,373 18,269 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property, plant and equipment (15,211) (3,397) Proceeds from sale of property and equipment - 92 Proceeds from sale of assets held for sale - 2,361 Change in investments, net 26,579 45,178 Increase in other assets (6,633) (827) -------- -------- Net cash provided by investing activities 4,735 43,407 -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from exercise of stock options and stock plans 6,342 5,690 -------- -------- Net cash provided by financing activities 6,342 5,690 -------- -------- NET CHANGE IN CASH AND CASH EQUIVALENTS $ 33,450 $ 67,366 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD $ 61,314 $ 80,358 -------- -------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 94,764 $147,724 ======== ======== CONTACT: Electro Scientific Industries, Inc. Craig Stoehr, 503-671-7061 -----END PRIVACY-ENHANCED MESSAGE-----