EX-99.1 2 a5446567ex991.txt EXHIBIT 99.1 Exhibit 99.1 ESI Announces Fiscal 2007 Fourth Quarter and Year-End Results with Strongest Fiscal Year since 2001 PORTLAND, Ore.--(BUSINESS WIRE)--July 12, 2007--Electro Scientific Industries, Inc. (NASDAQ:ESIO), a leading provider of world-class photonic and laser micro-engineering systems, today announced results for its fiscal 2007 fourth quarter ended June 2, 2007. Fourth quarter sales were $71.7 million, up 21% compared to third quarter sales of $59.4 million and up 24% compared to prior year fourth quarter sales of $57.9 million. Operating income for the quarter was $10.5 million, compared with operating income of $4.0 million in the third quarter and operating income of $4.2 million in the fourth quarter a year ago. Net income for the quarter was $7.9 million, or $0.27 per diluted share, compared with net income of $5.6 million, or $0.19 per diluted share, in the third quarter and $5.9 million, or $0.20 per diluted share, in the fourth quarter a year ago. Fourth quarter orders were $72.3 million, up 18% compared with $61.1 million in the fourth quarter of 2006. Although approximately flat compared to the third quarter, orders exceeded $70 million for two consecutive quarters for the first time since 2001. Orders for the fourth quarter reflected an increase from the prior quarter in the components and interconnect market segments. Semiconductor orders were down sequentially due to the timing of large capacity purchases in the third quarter; however, fourth quarter order activity in this segment was the second highest level in the last six quarters. Deferred revenue decreased slightly from the third quarter, ending the fourth quarter at $12.3 million. Fiscal year 2007 revenue was $250.8 million, up 21% compared to $207.0 million in fiscal 2006. Operating income for the year was $24.2 million, more than double the $11.7 million from the prior year. Net income for the year was $23.5 million, or $0.80 per diluted share, compared with net income of $20.8 million, or $0.72 per diluted share in the prior year. Net orders for fiscal year 2007 were $275.3 million, an increase of 29% compared with $213.8 million in fiscal year 2006. "Continued strong performance through the fourth quarter resulted in our best overall fiscal year since 2001," noted Nick Konidaris, ESI president and CEO. "As a result of strong demand and the successful introduction of key new products during 2007, we delivered significant year-over-year gains in orders, sales and profitability to our shareholders. The 29% growth in annual orders, coupled with 21% growth in annual shipments, allowed us to finish the year with approximately $57 million in backlog, an increase of 14% compared to fiscal year-end 2006." Gross margin of 46% in the fourth quarter increased from 42% in the third quarter. The increase in margins was due to a favorable shift in sales mix combined with volume-related efficiencies. Operating expenses were $22.8 million in the fourth quarter, up $1.8 million from the prior quarter. The increase was primarily the result of variable expenses related to the growth in business for the fourth quarter. As a percent of revenue, operating expenses improved four percentage points to 32%. Other income of $2.6 million was down slightly from the third quarter. Income tax expense for the fourth quarter was $5.2 million, an effective tax rate of 40%. The increase in the quarter's tax rate over prior projections was primarily due to new technical guidance issued by the IRS in June 2007. Consideration of this new guidance resulted in an increase of $1 million in tax expense, or approximately 8% of the fourth quarter's income before taxes. The effective annual tax rate for fiscal year 2007 was approximately 32%. Cash and investments were $229 million, up $3 million from the third quarter of fiscal 2007. The increase was primarily the result of cash provided by operating activities of $14 million, offset by ESI share repurchases of $10 million. The company purchased approximately 500 thousand shares in the fourth quarter as part of its on-going stock repurchase program, which began mid-quarter. Accounts receivable for the quarter were $56 million, up slightly compared to third quarter levels. Inventories of $81 million increased $5 million from the prior quarter, primarily in raw materials and work-in-process, due to the expected ramp in activity over the next several months. Due to the recently announced change in our fiscal year-end, the following outlook is for the four-month period ending September 29, 2007. Konidaris added, "Excluding the impact from the acquisition of New Wave Research (NWR), for the upcoming four-month reporting period we expect shipments and revenue to be approximately $85 to $95 million. The gross margin percentage is expected to be approximately flat with the fourth quarter. Operating expenses are expected to range from $30 to $31 million for the four-month period. We estimate net interest and other income will be slightly less than $3 million. The effective tax rate is anticipated to be approximately 36%." "We believe the addition of NWR will contribute an additional $7 to $8 million in revenue from the anticipated closing date in the third week of July through the period ending September 29, 2007," Konidaris continued. "Associated gross margin for NWR is expected to be in the range of 45-50% before the impact of purchase-accounting adjustments. Operating expenses are expected to be approximately 40% of revenue, excluding integration costs. The impact of purchase-accounting adjustments to our consolidated financial results will not be finalized until after the transaction closes." "Moving forward, we are positioned to grow in new and exciting markets as well as our existing markets. We look forward to another successful year in 2008." 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 5182159. A live audio Web cast can be accessed at www.esi.com. Upon completion of the call, an audio replay will be accessible through July 26, 2007 at 800-642-1687 (domestic participants) or 706-645-9291 (international participants). The audio replay will also be available on the ESI Web site. About ESI 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. Forward-Looking Statements This press release includes forward-looking statements concerning the markets we serve, shipments and revenue, gross margins, operating expenses, the impact of the NWR acquisition, 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 timing of the closing of the NWR acquisition; the company's ability to successfully integrate NWR; the risk of disruptions to the business of NWR resulting from the acquisition; 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. Electro Scientific Industries, Inc. FY 2007 Results (In thousands, except per share data) (Unaudited) Operating Results: Three Months Ended Twelve Months Ended ------------------------- ------------------------- Jun. 2, 2007 Jun. 3, 2006 Jun. 2, 2007 Jun. 3, 2006 ------------ ------------ ------------ ------------ Net sales $ 71,744 $ 57,918 $ 250,824 $ 207,006 Cost of sales 38,468 32,142 142,054 115,518 ------------ ------------ ------------ ------------ Gross profit 33,276 25,776 108,770 91,488 Operating expenses: Selling, service and administration 13,163 12,226 49,119 45,955 Research, development and engineering 9,660 9,317 37,703 33,837 Insurance recoveries - - (2,287) - ------------ ------------ ------------ ------------ Total operating expenses 22,823 21,543 84,535 79,792 ------------ ------------ ------------ ------------ Operating income 10,453 4,233 24,235 11,696 Interest and other income, net 2,607 2,281 10,392 7,591 ------------ ------------ ------------ ------------ Income before income taxes 13,060 6,514 34,627 19,287 Provision for (benefit from) income taxes 5,161 583 11,103 (1,536) ------------ ------------ ------------ ------------ Net income $ 7,899 $ 5,931 $ 23,524 $ 20,823 ============ ============ ============ ============ Net income per share - basic $ 0.27 $ 0.20 $ 0.81 $ 0.72 ============ ============ ============ ============ Net income per share - diluted $ 0.27 $ 0.20 $ 0.80 $ 0.72 ============ ============ ============ ============ Electro Scientific Industries, Inc. Analysis of FY 2007 Results (Dollars and shares in thousands) (Unaudited) Three Months Ended Twelve Months Ended ------------------------- ------------------------- Jun. 2, 2007 Jun. 3, 2006 Jun. 2, 2007 Jun. 3, 2006 ------------ ------------ ------------ ------------ Sales detail: Semiconductor Group $ 50,166 $ 33,029 $ 145,381 $ 126,682 Passive Components Group 12,784 14,044 63,093 46,305 Electronic Interconnect Group 8,794 10,845 42,350 34,019 ------------ ------------ ------------ ------------ Total $ 71,744 $ 57,918 $ 250,824 $ 207,006 ============ ============ ============ ============ Gross margin % 46% 45% 43% 44% Selling, service and administration expense % (a) 18% 21% 19% 22% Research, development and engineering expense % 13% 16% 15% 16% Operating income % 15% 7% 10% 6% Effective tax rate % 40% 9% 32% -8% Average shares outstanding - basic 29,111 29,024 29,125 28,823 Average shares outstanding - diluted 29,457 29,236 29,379 29,078 End of period employees 585 603 585 603 (a) Includes insurance recoveries. Electro Scientific Industries, Inc. FY 2007 Results (Amounts in thousands) (Unaudited) Financial Position As Of: Jun. 2, 2007 Mar. 3, 2007 Jun. 3, 2006 ------------ ------------ ------------ Assets Current assets: Cash and cash equivalents $ 100,462 $ 93,589 $ 79,961 Marketable securities 124,607 125,599 140,106 ----------- ----------- ----------- Total cash and securities 225,069 219,188 220,067 Trade receivables, net 55,722 54,249 47,978 Income tax refund receivable 696 680 1,570 Inventories 80,981 76,252 63,834 Shipped systems pending acceptance 1,817 2,469 3,941 Deferred income taxes, net 9,504 9,240 9,682 Prepaid and other current assets 5,080 6,556 4,410 ----------- ----------- ----------- Total current assets 378,869 368,634 351,482 Long-term marketable securities 3,622 6,671 9,265 Property, plant and equipment, net 43,859 44,269 43,338 Deferred income taxes, net 11,246 13,916 15,618 Other assets 28,072 30,179 17,762 ----------- ----------- ----------- Total assets $ 465,668 $ 463,669 $ 437,465 =========== =========== =========== Liabilities and shareholders' equity Current liabilities: Accounts payable $ 13,826 $ 13,506 $ 11,272 Accrued liabilities 31,222 27,281 24,705 Deferred revenue 12,290 13,474 13,321 ----------- ----------- ----------- Total current liabilities 57,338 54,261 49,298 Shareholders' equity: Preferred and common stock 162,719 171,528 166,459 Retained earnings 245,546 237,647 222,022 Accumulated other comprehensive income (loss) 65 233 (314) ----------- ----------- ----------- Total shareholders' equity 408,330 409,408 388,167 ----------- ----------- ----------- Total liabilities and shareholders' equity $ 465,668 $ 463,669 $ 437,465 =========== =========== =========== End of period shares outstanding 28,766 29,216 29,051 =========== =========== =========== Total cash and investments $ 228,691 $ 225,859 $ 229,332 =========== =========== =========== Electro Scientific Industries, Inc. FY 2007 Results (Amounts in thousands) (Unaudited) Consolidated Statements of Cash Flows: Twelve Months Ended ------------------------- Jun. 2, 2007 Jun. 3, 2006 ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 23,524 $ 20,823 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 8,370 7,914 Stock-based compensation expense 2,884 1,353 Tax benefit of stock options exercised - 1,630 Provision for (recovery of) doubtful accounts 103 (153) Loss on disposal of property and equipment 2 79 Insurance recovery on damaged equipment (1,287) - Deferred income taxes 4,516 2,451 Changes in operating accounts: Increase in trade receivables, net (8,085) (11,329) Decrease in income tax refund receivable 874 7,657 Increase in inventories (16,343) (3,709) Decrease in shipped systems pending acceptance 2,124 73 Increase in prepaid and other current assets (792) (1,125) Increase in accounts payable and other current liabilities 8,884 2,506 Increase (decrease) in deferred revenue (1,031) 335 ------------ ------------ Net cash provided by operating activities 23,743 28,505 ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property, plant and equipment (8,407) (18,293) Proceeds from the sale of property, plant and equipment 6 - Minority equity investments (11,000) - Insurance recovery on damaged equipment 1,287 - Change in investments, net 21,522 8,076 Increase in other assets (652) (6,750) ------------ ------------ Net cash provided by (used in) investing activities 2,756 (16,967) ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from exercise of stock options and stock plans 3,318 7,109 Tax benefit realized from share options exercise 488 - Share repurchases (9,804) - ------------ ------------ Net cash provided by (used in) financing activities (5,998) 7,109 ------------ ------------ NET CHANGE IN CASH AND CASH EQUIVALENTS $ 20,501 $ 18,647 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD $ 79,961 $ 61,314 ------------ ------------ CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 100,462 $ 79,961 ============ ============ CONTACT: Electro Scientific Industries, Inc. Chris Butterfield, 503-672-5760