ESI Announces Second Quarter Fiscal 2010 Results
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Revenues Increase 22% Sequentially
PORTLAND, Ore.--(BUSINESS WIRE)-- Electro Scientific Industries, Inc. (NASDAQ: ESIO), a leading provider of world-class photonic and laser microengineering systems, today announced results for its fiscal 2010 second quarter, ended September 26, 2009. Financial measures are provided on both a GAAP and non-GAAP basis, which excludes the impact of purchase accounting, equity compensation, restructuring costs, and non-recurring items.
Second quarter revenues were $27.6 million, a 22% increase from the first quarter. On a GAAP basis, net loss was $6.1 million or $0.22 per share, compared to a net loss of $5.5 million or $0.20 per share in the prior quarter. Excluding the impact of purchase accounting, equity compensation, and other non-recurring items, non-GAAP net loss was $3.9 million or $0.14 per share, compared to a non-GAAP net loss of $6.2 million or $0.23 per share in the first quarter.
"We continued to see improvement in our business, with sequential increases in revenue, gross margin, and non-GAAP operating income," noted Nick Konidaris, ESI president and CEO. Orders of $29.3 million were up from $28.7 million in the prior quarter as increased semiconductor activity was partially offset by lower orders in passive components.
Second quarter operating expenses on a non-GAAP basis declined sequentially and were down over 20% from the prior year. Konidaris added, "We are pleased with our ability to continue to manage discretionary spending and preserve cash in a difficult environment."
Balance Sheet and Cash Flow
At quarter end, cash and investments, including restricted cash, totaled $154.5 million, roughly flat with last quarter and up from one year ago. Restricted cash resulted from our substitution of a letter of credit for a portion of the bond associated with legal action in Taiwan to protect our intellectual property. Cash used in operations was $1.2 million as improvements within working capital nearly offset losses from operations.
Q3 2010 Outlook
ESI expects revenues for the third quarter of fiscal 2010 to be between $32 and $37 million and a non-GAAP loss per share of $0.08 to $0.13 excluding the impact of purchase accounting, equity compensation, restructuring costs, and non-recurring items.
Konidaris concluded, "We continue to be encouraged by the improvement in overall business activity. As our customers' utilization rates improve, we expect second half orders and revenues to be up sequentially from the first half. In addition, our investment in new products and applications should create additional opportunities for growth. Further, our business model should allow earnings to grow faster than sales as revenues increase."
The company will hold a conference call today at 5:00 p.m. EDT. The session will include a review of the financial results, operational performance and business outlook, and also a question and answer period.
The conference call can be accessed by calling 888-419-5570 (domestic participants) or 617-896-9871 (international participants). The conference ID number is 12639188. A live audio webcast can be accessed at www.esi.com. Upon completion of the call, an audio replay will be accessible through October 31, 2009 at 888-286-8010 (domestic participants) or 617-801-6888 (international participants), passcode 35092699. The audio replay will also be available on the ESI Web site.
Discussion of Non-GAAP Financial Measures
In this press release, we have presented financial measures which have not been determined in accordance with generally accepted accounting principles (GAAP) and are therefore non-GAAP financial measures. Non-GAAP financial measures exclude the impact of purchase accounting, equity compensation, restructuring costs, and non-recurring items. We believe that this presentation of non-GAAP financial measures allows investors to better assess the company's operating performance by comparing it to prior periods on a more consistent basis. We have included a reconciliation of various non-GAAP financial measures to those measures reported in accordance with GAAP. Because our calculation of non-GAAP financial measures may differ from similar measures used by other companies, investors should be careful when comparing our non-GAAP financial measures to those of other companies.
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, passive components and electronic interconnect -- by enabling precision fine-tuning of device micro-features 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 about the markets we serve, orders, revenue, growth, earnings growth, and loss per share. These forward-looking statements are based on information available to us on the date of this release and we assume no obligation to update these forward-looking statements for any reason. Actual results may differ materially from those in the forward-looking statements. Risks and uncertainties that may affect the forward-looking statements include: the risk that anticipated growth opportunities may be smaller than anticipated or may not be realized; risks related to 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 health of the financial markets and availability of credit for end customers and related effect on the global economy; the volatility associated with the semiconductor industry which includes the relative level of capacity and demand, and financial strength of the manufacturers; 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; foreign currency fluctuations; the company's ability to utilize recorded deferred tax assets; taxes, interest or penalties resulting from tax audits; changes in tax laws or the interpretation of such tax laws; and future liquidity and valuation of auction rate securities.
Electro Scientific Industries, Inc.
Second Quarter Fiscal 2010 Results
(In thousands, except per share data)
(Unaudited)
Fiscal quarter ended Two fiscal quarters ended
Operating Results: Sep 26, Jun 27, Sep 27, Sep 26, 2009 Sep 27,
2009 2009 2008 2008
Net sales $ 27,638 $ 22,603 $ 49,610 $ 50,241 $ 113,634
Cost of sales 18,212 16,642 28,538 34,854 67,271
Gross profit 9,426 5,961 21,072 15,387 46,363
Operating expenses:
Selling, service and 11,355 11,971 13,746 23,326 28,846
administration
Research,
development and 7,441 7,455 8,446 14,896 18,104
engineering
Restructuring costs - - 1,174 - 1,923
Merger termination - (4,516 ) - (4,516 ) -
proceeds, net
Net operating 18,796 14,910 23,366 33,706 48,873
expenses
Operating loss (9,370 ) (8,949 ) (2,294 ) (18,319 ) (2,510 )
Non-operating income
(expense):
Other-than-temporary
impairment of - - (5,381 ) - (10,475 )
auction rate
securities
Interest and other 357 342 1,117 699 1,977
income, net
Total non-operating 357 342 (4,264 ) 699 (8,498 )
income (expense)
Loss before income (9,013 ) (8,607 ) (6,558 ) (17,620 ) (11,008 )
taxes
Benefit from income (2,893 ) (3,077 ) (2,449 ) (5,970 ) (4,141 )
taxes
Net loss $ (6,120 ) $ (5,530 ) $ (4,109 ) $ (11,650 ) $ (6,867 )
Net loss per share - $ (0.22 ) $ (0.20 ) $ (0.15 ) $ (0.43 ) $ (0.25 )
basic
Net loss per share - $ (0.22 ) $ (0.20 ) $ (0.15 ) $ (0.43 ) $ (0.25 )
diluted
Electro Scientific Industries, Inc. Second Quarter Fiscal 2010 Results (Amounts in thousands) (Unaudited) Financial Position As Of: Sep 26, 2009 Jun 27, 2009 Mar 28, 2009 Assets Current assets: Cash and cash equivalents $ 85,291 $ 124,474 $ 153,538 Restricted cash 2,400 - - Short-term investments 66,760 30,688 2,380 Total cash, restricted cash and 154,451 155,162 155,918 investments Trade receivables, net 22,054 20,070 18,847 Inventories 77,215 78,744 84,882 Shipped systems pending acceptance 3,876 2,939 2,072 Deferred income taxes, net 6,497 6,206 6,298 Other current assets 11,246 10,307 10,594 Total current assets 275,339 273,428 278,611 Auction rate securities 8,555 7,134 6,007 Property, plant and equipment, net 41,108 42,234 43,005 Non-current deferred income taxes, 28,765 25,823 22,620 net Acquired intangible assets, net 8,883 9,420 9,972 Other assets 20,334 22,772 24,032 Total assets $ 382,984 $ 380,811 $ 384,247 Liabilities and shareholders' equity Current liabilities: Accounts payable $ 7,981 $ 6,233 $ 7,492 Accrued liabilities 13,216 11,736 12,958 Deferred revenue 12,490 11,776 11,251 Total current liabilities 33,687 29,745 31,701 Non-current income taxes payable 9,352 9,401 9,023 Shareholders' equity: Preferred and common stock 138,189 135,566 133,808 Retained earnings 199,821 205,941 211,085 Accumulated other comprehensive 1,935 158 (1,370 ) income (loss) Total shareholders' equity 339,945 341,665 343,523 Total liabilities and shareholders' $ 382,984 $ 380,811 $ 384,247 equity End of period shares outstanding 27,427 27,266 27,184
Electro Scientific Industries, Inc.
Analysis of Second Quarter Fiscal 2010 Results
(Dollars and shares in thousands)
(Unaudited)
Fiscal quarter ended Two fiscal quarters ended
Sep 26, Jun 27, Sep 27, 2008 Sep 26, Sep 27, 2008
2009 2009 2009
Sales detail:
Semiconductor $ 7,714 $ 5,260 $ 12,520 $ 12,974 $ 34,248
Group
Passive
Components 6,098 5,150 6,719 11,248 19,994
Group
Interconnect
Micro-Machining 13,826 12,193 30,371 26,019 59,392
Group
Total $ 27,638 $ 22,603 $ 49,610 $ 50,241 $ 113,634
Gross margin % 34 % 26 % 42 % 31 % 41 %
Selling, service
and 41 % 53 % 28 % 46 % 25 %
administration
expense %
Research,
development and 27 % 33 % 17 % 30 % 16 %
engineering
expense %
Operating loss % (34 %) (40 %) (5 %) (36 %) (2 %)
Effective tax 32 % 36 % 37 % 34 % 38 %
rate %
Average shares
outstanding - 27,356 27,234 27,035 27,295 27,072
basic
Average shares
outstanding - 27,356 27,234 27,035 27,295 27,072
diluted
End of period 569 565 686 569 686
employees
Electro Scientific Industries, Inc.
Second Quarter Fiscal 2010 Results
(In thousands, except per share data)
(Unaudited)
Reconciliation of GAAP to
Non-GAAP Financial Measures:
Fiscal quarter ended Two fiscal quarters
ended
Sep 26, Jun 27, 2009 Sep 27, Sep 26, 2009 Sep 27,
2009 2008 2008
Gross profit per $ 9,426 $ 5,961 $ 21,072 $ 15,387 $ 46,363
GAAP
Add back:
Purchase accounting
included in cost of 289 289 289 578 579
sales
Equity compensation
included in cost of 350 215 222 565 429
sales
Total non-GAAP
adjustments to 639 504 511 1,143 1,008
gross profit
Non-GAAP gross $ 10,065 $ 6,465 $ 21,583 $ 16,530 $ 47,371
profit
Non-GAAP gross 36.4 % 28.6 % 43.5 % 32.9 % 41.7 %
margin
Operating expenses $ 18,796 $ 14,910 $ 23,366 $ 33,706 $ 48,873
per GAAP
Less:
Purchase accounting included in
operating expenses:
Selling,
service and 198 443 276 641 729
administration
Research,
development and 36 26 - 62 (19 )
engineering
Subtotal -
purchase
accounting 234 469 276 703 710
included in
operating
expenses
Equity compensation included in
operating expenses:
Selling,
service and 1,460 1,778 662 3,238 1,551
administration
Research,
development and 337 314 285 651 600
engineering
Subtotal -
equity
compensation 1,797 2,092 947 3,889 2,151
included in
operating
expenses
Other items included
in operating
expenses:
Net merger
termination - (4,516 ) - (4,516 ) -
proceeds
Restructuring - - 1,174 - 1,923
costs
Subtotal -
other
non-recurring - (4,516 ) 1,174 (4,516 ) 1,923
items included
in operating
expenses
Total non-GAAP
adjustments to 2,031 (1,955 ) 2,397 76 4,784
operating
expenses
Non-GAAP operating $ 16,765 $ 16,865 $ 20,969 $ 33,630 $ 44,089
expenses
Operating loss per $ (9,370 ) $ (8,949 ) $ (2,294 ) $ (18,319 ) $ (2,510 )
GAAP
Non-GAAP
adjustments to 639 504 511 1,143 1,008
gross profit
Non-GAAP adjustments
to operating 2,031 (1,955 ) 2,397 76 4,784
expenses
Non-GAAP operating $ (6,700 ) $ (10,400 ) $ 614 $ (17,100 ) $ 3,282
(loss) income
Non-operating income
(expense), net per $ 357 $ 342 $ (4,264 ) $ 699 $ (8,498 )
GAAP
Non-GAAP adjustment
for impairment of - - 5,381 - 10,475
auction rate
securities
Non-GAAP $ 357 $ 342 $ 1,117 $ 699 $ 1,977
non-operating income
Net loss per GAAP $ (6,120 ) $ (5,530 ) $ (4,109 ) $ (11,650 ) $ (6,867 )
Non-GAAP
adjustments to 639 504 511 1,143 1,008
gross profit
Non-GAAP
adjustments to 2,031 (1,955 ) 2,397 76 4,784
operating
expenses
Non-GAAP
adjustments to - - 5,381 - 10,475
non-operating
expense
Income tax
effect of (406 ) 783 (2,920 ) 377 (5,641 )
non-GAAP
adjustments
Non-GAAP net (loss) $ (3,856 ) $ (6,198 ) $ 1,260 $ (10,054 ) $ 3,759
income
Basic Non-GAAP net
(loss) income per $ (0.14 ) $ (0.23 ) $ 0.05 $ (0.37 ) $ 0.14
share
Diluted Non-GAAP net
(loss) income per $ (0.14 ) $ (0.23 ) $ 0.05 $ (0.37 ) $ 0.14
share
Electro Scientific Industries, Inc.
Second Quarter Fiscal 2010 Results
(Amounts in thousands)
(Unaudited)
Consolidated
Condensed
Statements
of Cash
Flows:
Fiscal quarter ended Two fiscal quarters ended
Sep 26, 2009 Jun 27, 2009 Sep 27, 2008 Sep 26, 2009 Sep 27,
2008
Net loss $ (6,120 ) $ (5,530 ) $ (4,109 ) $ (11,650 ) $ (6,867 )
Non-cash
adjustments
and changes in 4,942 4,619 18,339 9,561 22,740
operating
activities
NET CASH (USED
IN) PROVIDED (1,178 ) (911 ) 14,230 (2,089 ) 15,873
BY OPERATING
ACTIVITIES
NET CASH
USED IN (38,477 ) (28,717 ) (196 ) (67,194 ) (4,721 )
INVESTING
ACTIVITIES
NET CASH
PROVIDED BY
(USED IN) 97 (213 ) (700 ) (116 ) (2,853 )
FINANCING
ACTIVITIES
Effect of
exchange 375 777 (1,585 ) 1,152 (2,315 )
rate changes
on cash
NET CHANGE
IN CASH AND (39,183 ) (29,064 ) 11,749 (68,247 ) 5,984
CASH
EQUIVALENTS
CASH AND CASH
EQUIVALENTS AT 124,474 153,538 135,294 153,538 141,059
BEGINNING OF
PERIOD
CASH AND
CASH
EQUIVALENTS $ 85,291 $ 124,474 $ 147,043 $ 85,291 $ 147,043
AT END OF
PERIOD
Source: Electro Scientific Industries, Inc.
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