-----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, AxwdzS6+ZyWXYzjyWpXXZH0P19pkwBUx7gBE34Faz1vDIvcYfDnMsOnmWOhi1SpR s8deYPlusUO0CNyOwbW36w== 0001157523-07-000072.txt : 20070104 0001157523-07-000072.hdr.sgml : 20070104 20070104161456 ACCESSION NUMBER: 0001157523-07-000072 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20070104 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20070104 DATE AS OF CHANGE: 20070104 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: 07509583 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 a5303866.txt ELECTRO SCIENTIFIC INDUSTRIES 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): January 4, 2007 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 January 4, 2007, Electro Scientific Industries, Inc. (the "Company") announced its financial results for the second quarter of fiscal year 2007. 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 January 4, 2007 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: January 4, 2007 Electro Scientific Industries, Inc. By: /s/ John Metcalf -------------------------------------------- John Metcalf Senior Vice President of Administration, Chief Financial Officer and Corporate Secretary 3 EXHIBIT INDEX Exhibit Description - ------- ----------- 99.1 Press release dated January 4, 2007. EX-99.1 2 a5303866ex991.txt ELECTRO SCIENTIFIC INDUSTRIES EXHIBIT 99.1 Exhibit 99.1 ESI Announces Fiscal 2007 Second Quarter Results PORTLAND, Ore.--(BUSINESS WIRE)--Jan. 4, 2007--Electro Scientific Industries, Inc. (Nasdaq:ESIO), a leading provider of world-class production laser systems for microengineering applications, today announced results for its fiscal 2007 second quarter ended December 2, 2006. Second quarter sales were $59.3 million, down 1% compared to first quarter sales of $60.2 million and up 22% compared to prior year second quarter sales of $48.6 million. Operating income for the quarter was $3.6 million, compared with operating income of $7.1 million in the first quarter and operating income of $1.8 million in the second quarter a year ago. Net income for the quarter was $3.8 million, or $0.13 per basic and diluted share, compared with net income of $6.8 million, or $0.23 per basic and diluted share, in the first quarter and net income of $3.2 million, or $0.11 per basic and diluted share, in the second quarter a year ago. Included in the second quarter 2007 operating results was $0.9 million of stock-based compensation expense, up from $0.6 million in the first quarter. Additionally, the second quarter included a $1.0 million recovery relating to insurance coverage for the shareholder and derivative litigation of 2004, which reduced operating expense in the quarter. Included in the first quarter 2007 results was a $1.3 million insurance recovery which also reduced operating expense. The company anticipates no further recoveries from these matters. Orders for the second quarter were $62.4 million, a decrease of 8% compared with $67.6 million in the first quarter and a decrease of 4% compared with $64.9 million in the second quarter of fiscal 2006. Backlog of $42 million at the end of the second quarter was down from $58 million at the end of the prior quarter. Backlog was adjusted downward $18 million during the quarter as the result of a customer's request to convert part of a previous order for UV-based semiconductor systems to IR-based systems and to postpone delivery of additional UV-based systems. Because the postponement extended the shipment date for the systems beyond the 12-month internal requirement to be classified as backlog, the company decided to remove the systems from backlog. This request was a decision by a single customer to extend IR-based technology on current fuse designs in the near-term, with the intention of utilizing UV-based technology over the longer term. Deferred revenue increased $1.1 million from the first quarter, ending the second quarter at $13.3 million. Deferred revenue increased less than expected as several late quarter shipments of new products were accepted prior to the end of the quarter. "Industry demand remained healthy in each of our markets during the quarter," noted Nick Konidaris, ESI's president and chief executive officer. "Despite the sequential decline in orders which was the result of fluctuations in the order timing of major customers, we believe a pattern of steady growth continued as orders grew on a two-quarter rolling average basis. The semiconductor business remained strong as the capacity ramp continued in the DRAM manufacturing market as end-market drivers, including Microsoft's Windows Vista(TM) operating system, drove accelerated bit rate growth. Further, adoption of our UV-based DRAM link-processing tool is proceeding well, as customers representing over half of the industry are now utilizing this technology in production. In addition, orders for both the components and interconnect businesses remained strong as broad-based end-market demand continued to drive demand." Konidaris continued, "While the revenue level for the quarter was at the upper-end of our expectations, we were disappointed with the company's gross margin performance. Going forward, as recently launched and soon-to-be launched new products assume a larger percentage of sales, we believe gross margins should revert back to levels consistent with our target operating model." Gross margin of 41 percent was down from 45 percent in the first quarter. The decrease in gross margin was in equal part due to incremental manufacturing related expenses and a change in sales mix. Sales mix was impacted by both a revenue mix shift away from semiconductors, ESI's highest margin business, and a mix shift to lower margin sales within the business units. The incremental manufacturing related expenses are not expected to recur in the third quarter. Operating expenses were $20.6 million, up $0.4 million from $20.2 million in the prior quarter. Excluding the impact of insurance-related recoveries in both quarters and stock compensation expense, operating expense was approximately flat. Interest and other income of $2.3 million was down from $2.9 million in the first quarter due to interest received on tax refunds in the first quarter as well as lower average invested balances. The decrease was partially offset by higher investment returns. Cash and investments were $217 million, up $4 million from the end of the first quarter. The increase in cash was primarily due to a decrease in accounts receivable and the net income earned during the quarter. The increase was partially offset by an equity investment made during the quarter and an increase in inventory. Accounts receivable decreased $7 million during the quarter to $54 million. The decrease was primarily due to cash collections of several shipments that occurred late in the prior quarter. Inventories of $72 million increased $5 million from the prior quarter. The increase was primarily due to mid-quarter sales mix changes as well as additional engineering systems required prior to new product launch. Konidaris added, "In an environment of healthy industry fundamentals, we expect to continue to see a growth pattern on a two-quarter rolling average basis, while we also continue to experience fluctuations in quarterly order timing. Given existing backlog and order expectations, we believe third quarter shipments and revenue will be in the range of $55 million to $65 million. We expect the gross margin percentage in the third quarter to increase by approximately 2 to 3 percentage points from the second quarter. While the incremental manufacturing-related expenses incurred in the second quarter are not expected to recur, the sales mix is not expected to improve substantially until after the third quarter. We anticipate operating expenses to be approximately flat compared to the second quarter, excluding the impact of the $1.0 million insurance recovery in the second quarter. Included in the margin and operating expense guidance is expected pre-tax stock compensation expense of approximately $0.9 million. We believe net interest and other income in the third quarter will be approximately $2.4 million. And lastly, we expect the tax rate for the third quarter to be approximately 20%, given the recent reinstatement of the R&D tax credit. We now expect our normalized tax rate to be approximately 32%." 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) with conference ID number 4428999. A live audio webcast can be accessed at www.esi.com. Upon completion of the call, an audio replay will be accessible through January 11, 2007 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, Inc. ESI is a pioneer and leading supplier of world-class production laser systems that help its microelectronics customers achieve compelling yield and productivity gains. The company's industry-leading, application-specific products enhance electronic-device performance in three key sectors -- semiconductors, components and electronic interconnect -- by enabling precision fine-tuning of device microfeatures in high-volume manufacturing environments. Founded in 1944, ESI is headquartered in Portland, Ore. More information is available at www.esi.com. Electro Scientific Industries, Inc. FY 2007 Results (In thousands, except per share data) (Unaudited) Operating Results: Three Months Ended Six Months Ended ------------------ ------------------ Dec. 2, Nov. 26, Dec. 2, Nov. 26, 2006 2005 2006 2005 ------------------------------------- Net sales $59,301 $48,643 $119,465 $93,151 Cost of sales 35,027 27,475 67,910 52,336 --------- -------- --------- -------- Gross profit 24,274 21,168 51,555 40,815 Operating expenses: Selling, service and administration 12,023 11,365 24,181 22,442 Research, development and engineering 9,617 7,983 18,921 15,812 Insurance recoveries (1,000) - (2,287) - --------- -------- --------- -------- Total operating expenses 20,640 19,348 40,815 38,254 --------- -------- --------- -------- Operating income 3,634 1,820 10,740 2,561 Interest and other income, net 2,278 2,270 5,188 3,511 --------- -------- --------- -------- Income before income taxes 5,912 4,090 15,928 6,072 Provision for income taxes 2,123 902 5,367 1,537 --------- -------- --------- -------- Net income $ 3,789 $ 3,188 $ 10,561 $ 4,535 ========= ======== ========= ======== Net income per share - basic and fully diluted $ 0.13 $ 0.11 $ 0.36 $ 0.16 ========= ======== ========= ======== Electro Scientific Industries, Inc. Analysis of FY 2007 Results (Dollars in thousands) (Unaudited) Three Months Ended Six Months Ended ------------------- ------------------- Dec. 2, Nov. 26, Dec. 2, Nov. 26, 2006 2005 2006 2005 --------------------------------------- Sales detail: Semiconductor Group $ 29,440 $ 25,237 $ 61,183 $ 53,138 Passive Components Group 15,892 12,033 34,524 23,082 Electronic Interconnect Group 13,969 11,373 23,758 16,931 --------- --------- --------- --------- Total $ 59,301 $ 48,643 $119,465 $ 93,151 ========= ========= ========= ========= Gross margin % 41% 44% 43% 44% Selling, service and administration expense % (a) 19% 23% 18% 24% Research, development and engineering expense % 16% 16% 16% 17% Operating income % 6% 4% 9% 3% Effective tax rate % 36% 22% 34% 25% Average shares outstanding - basic 29,128 28,705 29,102 28,674 Average shares outstanding - diluted 29,522 28,997 29,303 28,896 End of period employees 617 584 617 584 (a) Includes insurance recoveries. Electro Scientific Industries, Inc. FY 2007 Results (Amounts in thousands) (Unaudited) Financial Position As Of: Dec. 2, Sep. 2, Jun. 3, 2006 2006 2006 ---------------------------- Assets Current assets: Cash and cash equivalents $ 89,271 $ 75,326 $ 79,961 Marketable securities 125,184 135,552 140,106 -------- -------- -------- Total cash and securities 214,455 210,878 220,067 Trade receivables, net 53,582 60,112 47,978 Income tax refund receivable 691 978 1,570 Inventories 72,302 67,445 63,834 Shipped systems pending acceptance 3,221 3,382 3,941 Deferred income taxes 12,104 12,279 11,982 Prepaid and other current assets 8,250 6,033 4,410 -------- -------- -------- Total current assets 364,605 361,107 353,782 Long-term marketable securities 3,009 2,504 9,265 Property, plant and equipment, net 45,050 45,710 43,338 Deferred income taxes, net 10,128 10,399 13,318 Other assets 31,924 26,451 17,762 -------- -------- -------- Total assets $454,716 $446,171 $437,465 ======== ======== ======== Liabilities and shareholders' equity Current liabilities: Accounts payable $ 13,298 $ 14,848 $ 11,272 Accrued liabilities 25,608 22,760 24,705 Deferred revenue 13,344 12,259 13,321 -------- -------- -------- Total current liabilities 52,250 49,867 49,298 Shareholders' equity: Preferred and common stock 169,492 167,750 166,459 Retained earnings 232,583 228,794 222,022 Accumulated other comprehensive income (loss) 391 (240) (314) -------- -------- -------- Total shareholders' equity 402,466 396,304 388,167 -------- -------- -------- Total liabilities and shareholders' equity $454,716 $446,171 $437,465 ======== ======== ======== End of period shares outstanding 29,154 29,097 29,051 ======== ======== ======== Total cash and investments $217,464 $213,382 $229,332 ======== ======== ======== Electro Scientific Industries, Inc. FY 2007 Results (Amounts in thousands) (Unaudited) Consolidated Statements of Cash Flows: Six Months Ended ------------------ Dec. 2, Nov. 26, 2006 2005 ------------------ CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 10,561 $ 4,535 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 4,108 3,858 Stock-based compensation expense 1,488 936 Tax benefit of stock options exercised - 890 Provision for doubtful accounts 104 (144) Loss on disposal of property and equipment - 46 Insurance recovery on damaged equipment (1,287) - Deferred income taxes 2,947 320 Changes in operating accounts: Increase in trade receivables, net (5,344) (491) Decrease in income tax refund receivable 879 7,809 (Increase) decrease in inventories (12,142) 1,578 Decrease in shipped systems pending acceptance 720 749 Increase in prepaid and other current assets (3,722) (1,855) Increase in accounts payable and other current liabilities 2,927 7,533 Increase in deferred revenue 23 356 --------- -------- Net cash provided by operating activities 1,262 26,120 --------- -------- CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property, plant and equipment (5,718) (9,478) Minority equity investments (11,000) - Insurance recovery on damaged equipment 1,287 - Change in investments, net 21,672 20,575 (Increase) decrease in other assets 397 (6,373) --------- -------- Net cash provided by investing activities 6,638 4,724 --------- -------- CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from exercise of stock options and stock plans 1,410 1,750 --------- -------- Net cash provided by financing activities 1,410 1,750 --------- -------- NET CHANGE IN CASH AND CASH EQUIVALENTS $ 9,310 $32,594 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD $ 79,961 $61,314 --------- -------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 89,271 $93,908 ========= ======== CONTACT: ESI Craig Stoehr, 503-671-7061 -----END PRIVACY-ENHANCED MESSAGE-----