EX-99.1 2 a5187680ex991.txt EXHIBIT 99.1 Exhibit 99.1 ESI Announces Fiscal 2006 Fourth Quarter and Year-End Results PORTLAND, Ore.--(BUSINESS WIRE)--July 13, 2006--Electro Scientific Industries, Inc. (NASDAQ:ESIO) today announced results for its fiscal 2006 fourth quarter and fiscal year ended June 3, 2006. Fourth quarter sales were $57.9 million, up 4% compared to third quarter sales of $55.9 million and up 27% compared to prior year fourth quarter sales of $45.7 million. Operating income for the quarter was $4.2 million, compared with operating income of $4.9 million in the third quarter and operating income of $2.0 million in the fourth quarter a year ago. Net income for the quarter was $5.9 million, or $0.20 per basic and diluted share, compared with net income of $10.4 million, or $0.36 per basic and $0.35 per diluted share, in the third quarter and a net loss of $0.8 million, or $0.03 per basic and diluted share, in the fourth quarter a year ago. Included in the third quarter 2006 net income was a $5.3 million tax benefit that resulted from a reduction in accrued income taxes due to the statutory closure of various tax years. Included in the fourth quarter 2005 results was a $4.1 million charge resulting from the redemption of all of the outstanding 4 1/4% Convertible Notes, which eliminated all of ESI's long-term debt. Net orders for the fourth quarter were $61.1 million, an increase of 15% compared with $53.0 million in the third quarter and an increase of 17% compared with $52.0 million in the fourth quarter of 2005. Net orders for the fourth quarter increased in each market segment over the third quarter. Deferred revenue decreased $2.3 million from the third quarter, ending the fourth quarter at $13.3 million. Fiscal year 2006 sales were $207.0 million, down 11% compared to fiscal year 2005 sales of $233.4 million. Operating income for the year was $11.7 million, compared with operating income of $29.9 million in the prior year. Net income for the year was $20.8 million, or $0.72 per basic and diluted share, compared with net income of $19.8 million, or $0.70 per basic and $0.69 per diluted share, in the prior year. Net orders for fiscal year 2006 were $213.8 million, an increase of 7% compared with $199.2 million in fiscal year 2005. "The industry environment during the quarter remained favorable, as each of our market segments experienced either steady or accelerated growth," noted Nick Konidaris, ESI's president and chief executive officer. "The semiconductor business enjoyed a healthy rate of DRAM orders and an increasing order rate in the mixed-signal market. The long-dormant component business has re-emerged with orders up approximately 30% each of the past two quarters, and our latest IC packaging tool has reinvigorated the IC packaging segment of the interconnect business." Konidaris continued, "Financially, we once again met our quarterly revenue and profit targets, increased orders 15% over the third quarter, and consistently maintained our track record of operating profitability -- now the tenth quarter in a row. We ended fiscal 2006 with operating cash flow of over $28 million, the fourth consecutive year of strong operating cash flow performance." Gross margin of 45 percent was flat compared with the third quarter. Despite the lower percentage of semiconductor revenue, ESI's highest margin business, overall margin rates were stable as product mix improved within the company's business units. Operating expenses were $21.5 million, up $1.5 million from the prior quarter. The increase was primarily related to post-launch data conversion and training expenses for the new ERP system, and an increase in labor expense. Other income of $2.3 million was up from $1.8 million in the third quarter due to higher interest income on investments. Income tax expense for the fourth quarter was $0.6 million for an effective tax rate of 9%. Cash and investments were $229 million, up approximately $4 million from the end of the third quarter. Cash increased primarily due to net income earned during the quarter. Konidaris added, "In an environment of continued growth, we believe first quarter shipments and revenue will increase to be in the range of $55 million to $65 million. We expect the gross margin percentage in the first quarter to be approximately the same as the fourth quarter. The first quarter of fiscal 2007 is the first quarter that we are required to include stock compensation expense in our results as required by SFAS123-R. Accordingly, we believe pre-tax stock compensation expense will be approximately $700 thousand in the first quarter. We expect operating expense, including the impact of stock compensation expense, to decrease to between $20 million and $21 million as a result of lower ERP system expenses and a $1 million insurance refund we received in June. We expect non-operating income to be approximately flat with the fourth quarter. And lastly, we expect the tax rate for the first quarter to be approximately 31%". 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 2317924. A live audio webcast can be accessed at www.esi.com. Upon completion of the call, an audio replay will be accessible through July 20, 2006 at 800-642-1687 (domestic participants) or 706-645-9291 (international participants). 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, stock compensation expense, 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 ended Year ended -------------------------------------- June 3, May 28, June 3, May 28, 2006 2005 2006 2005 -------- --------- --------- --------- Net sales $57,918 $45,663 $207,006 $233,371 Cost of sales 32,142 24,983 115,518 121,541 -------- --------- --------- --------- Gross profit 25,776 20,680 91,488 111,830 Operating expenses: Selling, service and administration 12,226 11,364 45,955 51,618 Research, development and engineering 9,317 7,321 33,837 28,027 Patent infringement settlement and related legal fees - - - 2,240 -------- --------- --------- --------- Total operating expenses 21,543 18,685 79,792 81,885 -------- --------- --------- --------- Operating income 4,233 1,995 11,696 29,945 Net interest and other income 2,281 1,129 7,591 478 Redemption charges - convertible subordinated notes - (4,149) - (4,149) -------- --------- --------- --------- Income (loss) before income taxes 6,514 (1,025) 19,287 26,274 Provision for (benefit from) income taxes 583 (272) (1,536) 6,437 -------- --------- --------- --------- Net income (loss) $5,931 $(753) $20,823 $19,837 ======== ========= ========= ========= Net income (loss) per share - basic $0.20 $(0.03) $0.72 $0.70 ======== ========= ========= ========= Net income (loss) per share - diluted $0.20 $(0.03) $0.72 $0.69 ======== ========= ========= ========= Electro Scientific Industries, Inc. Analysis of FY 2006 Results (in thousands) (unaudited) Three months Year ended ended ------------------ ------------------- June 3, May 28, June 3, May 28, 2006 2005 2006 2005 -------- --------- --------- --------- Sales detail: Semiconductor Group $33,029 $29,191 $126,682 $138,574 Electronic Interconnect Group 10,845 6,532 34,019 33,796 Passive Components Group 14,044 9,940 46,305 61,001 -------- --------- --------- --------- Total $57,918 $45,663 $207,006 $233,371 ======== ========= ========= ========= Gross margin % 45% 45% 44% 48% Selling, service and administration expense % 21% 25% 22% 22% Research, development and engineering expense % 16% 16% 16% 12% Operating income % 7% 4% 6% 13% Effective tax rate % 9% 27% -8% 24% Average shares outstanding - basic 29,024 28,585 28,823 28,434 Average shares outstanding - diluted 29,236 28,585 29,078 28,572 End of period employees 603 563 603 563 Electro Scientific Industries, Inc. FY 2006 Results (In thousands) (Unaudited) Financial Position As Of: June 3, May 28, 2006 2005 -------- --------- Assets Current assets: Cash and cash equivalents $ 79,961 $ 61,314 Marketable securities 140,106 137,753 -------- --------- Total cash and securities 220,067 199,067 Trade receivables, net 47,978 36,163 Income tax refund receivable 1,570 9,227 Inventories 63,834 59,533 Shipped systems pending acceptance 3,941 4,014 Deferred income taxes 11,982 10,930 Prepaid and other current assets 4,410 3,169 -------- --------- Total current assets 353,782 322,103 Long-term marketable securities 9,265 19,834 Property, plant and equipment, net 43,338 32,959 Deferred income taxes, net 13,318 16,955 Other assets 17,762 11,706 -------- --------- Total assets $437,465 $ 403,557 ======== ========= Liabilities and shareholders' equity Current liabilities: Accounts payable $ 11,272 $ 3,961 Accrued liabilities 24,705 29,455 Deferred revenue 13,321 12,986 -------- --------- Total current liabilities 49,298 46,402 Shareholders' equity: Preferred and common stock 166,459 156,367 Retained earnings 222,022 201,199 Accumulated other comprehensive loss (314) (411) -------- --------- Total shareholders' equity 388,167 357,155 -------- --------- Total liabilities and shareholders' equity $437,465 $ 403,557 ======== ========= End of period shares outstanding 29,051 28,615 ======== ========= Total cash and investments $229,332 $ 218,901 ======== ========= Electro Scientific Industries, Inc. FY2006 Results (In thousands) (Unaudited) Consolidated Statements of Cash Flows: Year ended ------------------ June 3, May 28, 2006 2005 -------- --------- CASH FLOWS FROM OPERATING ACTIVITIES Net income $20,823 $19,837 Adjustments to reconcile net income to cash provided by operating activities: Depreciation and amortization 7,914 8,286 Stock based compensation 1,353 1,691 Write-off of unamortized debt issuance costs - 1,590 Provision for doubtful accounts (153) 211 Loss on disposal of property and equipment 79 430 Deferred income taxes 2,451 5,841 Tax benefit of stock options exercised 1,630 172 Changes in operating accounts: (Increase) decrease in trade receivables, net (11,329) 16,895 (Increase) decrease in income tax receivable 7,657 (1,761) Increase in inventories (3,709) (5,279) Decrease in shipped systems pending acceptance 73 377 (Increase) decrease in prepaid and other current assets (1,125) 284 Increase (decrease) in accounts payable and other current liabilities 2,506 (23,025) Increase in deferred revenue 335 1,001 -------- --------- Net cash provided by operating activities 28,505 26,550 -------- --------- CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property, plant and equipment (18,293) (4,710) Proceeds from sale of property, plant and equipment - 95 Proceeds from sale of assets held for sale - 2,361 Change in investments, net 8,076 95,424 Increase (decrease) in other assets (6,750) (848) -------- --------- Net cash provided by (used in) investing activities (16,967) 92,322 -------- --------- CASH FLOWS FROM FINANCING ACTIVITIES Redemption of ESI-issued convertible subordinated notes - (145,000) Proceeds from exercise of stock options and stock plans 7,109 7,084 -------- --------- Net cash provided by (used in) financing activities 7,109 (137,916) -------- --------- NET CHANGE IN CASH AND CASH EQUIVALENTS $18,647 $(19,044) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD $61,314 $80,358 -------- --------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $79,961 $61,314 ======== ========= CONTACT: Electro Scientific Industries, Inc. Craig Stoehr, 503-671-7061