ESI Announces First Quarter Fiscal 2014 Results

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ESI Announces First Quarter Fiscal 2014 Results

PORTLAND, Ore.--(BUSINESS WIRE)-- Electro Scientific Industries, Inc. (NAS: ESIO) , a leading supplier of innovative laser-based manufacturing solutions for the microtechnology industry, today announced results for its fiscal 2014 first quarter ended June 29, 2013. Financial measures are provided on both a GAAP and non-GAAP basis, which excludes the impact of purchase accounting, equity compensation, restructuring and valuation allowance charges, and other items.

Revenue in the first quarter was $46.2 million, compared to $39.6 million in the fourth quarter of 2013 and $59.0 million in the first quarter of last fiscal year. On a GAAP basis, net loss was $3.3 million or $0.11 per share, compared to net loss of $65.8 million or $2.23 per share in the prior quarter. On a non-GAAP basis, first quarter net income was $0.4 million or $0.01 per diluted share, compared to net loss of $1.0 million or $0.03 per share in the fourth quarter of fiscal 2013 and net income of $1.9 million or $0.06 per diluted share in the first quarter of fiscal 2013. First quarter results include approximately two months of operation from our acquired Semiconductor Systems business, which closed on May 3.

"The first quarter was a busy and productive one for ESI," stated Nick Konidaris, president and CEO of ESI. "During the quarter we drove 17% revenue growth and returned to non-GAAP profitability. In addition, we acquired the GSI Semiconductor Systems business. More importantly, we made significant progress on several strategic growth initiatives."

Orders for the first quarter increased to $58.3 million, compared to $44.1 million in the prior quarter. Konidaris continued, "We grew orders by over 30% sequentially, fueled by several design wins in advanced microfabrication, excellent performance in component test, and the addition of Semiconductor Systems. The quarter was also important strategically as we received customer acceptance on the first DiamondBlaze™ glass singulation system, booked and shipped our first order for dicing of ceramic substrates used in LED packaging, and reached agreements to place our 9900 advanced singulation platform at two major semiconductor manufacturers for technology development in next-generation thin film scribing and interposer dicing."

GAAP gross margin was 42.0%. Non-GAAP gross margin was 43.9% compared to 42.2% in the prior quarter. Operating expenses were $22.5 million, down from $24.7 million in the prior quarter. On a non-GAAP basis operating expenses rose modestly to $19.8 million as cost reduction measures nearly offset the incremental expenses from the Semiconductor Systems acquisition. Non-GAAP operating income was $0.5 million compared to a loss of $2.7 million in the fourth quarter.

Balance Sheet and Cash Flow

At quarter end, cash and investments decreased to $136.3 million. The company used $8.7 million in operating cash during the quarter, paid $8.0 million in cash to acquire the Semiconductor Systems business, and $2.4 million for the quarterly dividend of $0.08 per share.

Second Quarter 2014 Outlook

Based on recent order levels, ESI expects revenues for the second quarter of fiscal 2014 to be $55 to $60 million. Non-GAAP earnings per share are expected to be $0.03-$0.08.

Konidaris concluded, "We expect the laser microfabrication market to grow significantly over the next several years. Key growth drivers over this time period include consumer electronics, glass cutting, PCB processing and 3D semiconductor packaging. ESI has developed key technologies to drive our success in all these new growth applications. Our ongoing commitment to technology innovation, customer partnering and operational excellence positions us well to capture our many growth opportunities."

The company will hold a conference call today at 5:00 p.m. ET. 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 888-339-2688 (domestic participants) or 617-847-3007 (international participants). The conference ID number is 64581753. A live audio webcast can be accessed at Upon completion of the call, an audio replay will be accessible through August 16, 2013, at 888-286-8010 (domestic participants) or 617-801-6888 (international participants), passcode 67128474. The webcast will be available on ESI's website for one year.

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 charges and other 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 leading supplier of innovative, laser-based manufacturing solutions for the microtechnology industry. Our systems enable precise structuring and testing of micron to submicron features in electronic devices, semiconductors, LEDs and other high-value components. We partner with our customers to make breakthrough technologies possible in the microelectronics, semiconductor and other emerging industries. Founded in 1944, ESI is headquartered in Portland, Ore., with global operations from the Pacific Northwest to the Pacific Rim. More information is available at

Forward-Looking Statements

This press release includes forward-looking statements about the markets we serve, revenue and earnings 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 industries we serve 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 risk that the company may not be able to ship products on the schedule required by customers, whether as a result of production delays, supply delays, or otherwise; 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 risk that large orders and related revenues may not be repeated; 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 risk that competing or alternative technologies could reduce demand for our products; risks related to the integration of the Semiconductor Systems business acquired from GSI Group, Inc.; foreign currency fluctuations; 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.
First Quarter Fiscal 2014 Results
(In thousands, except per share data)
Operating Results:          
Fiscal quarter ended
Jun 29, 2013 Mar 30, 2013 Jun 30, 2012
Net sales $ 46,172 $ 39,574 $ 58,969
Cost of sales 26,786   45,727   35,316  
Gross profit 19,386 (6,153 ) 23,653
42 % (16 )% 40 %
Operating expenses:
Selling, service and administration 14,547 13,578 15,663
Research, development and engineering 8,425 8,405 9,534
Gain on acquisition of Semiconductor Systems business (464 )
Restructuring costs 2,612
Legal settlement (proceeds) costs, net   103    
Net operating expenses 22,508   24,698   25,197  
Operating loss (3,122 ) (30,851 ) (1,544 )
Interest and other (expense) income, net (60 ) 317   (150 )
Loss before income taxes (3,182 ) (30,534 ) (1,694 )
Provision for (benefit from) income taxes 101   35,217   (750 )
Net loss $ (3,283 ) $ (65,751 ) $ (944 )
Net loss per share—basic $ (0.11 ) $ (2.23 ) $ (0.03 )
Net loss per share—diluted $ (0.11 ) $ (2.23 ) $ (0.03 )
Electro Scientific Industries, Inc.
First Quarter Fiscal 2014 Results
(Amounts in thousands)
Financial Position As Of:
Jun 29, 2013 Mar 30, 2013
Current assets:
Cash and cash equivalents $ 73,765 $ 88,913
Short-term investments 50,265 56,144
Trade receivables, net 38,199 31,779
Inventories 74,074 63,067
Shipped systems pending acceptance 1,857 1,007
Deferred income taxes, net 1,734 1,682
Other current assets 3,894   3,898
Total current assets 243,788 246,490
Non-current assets:
Non-current investments 12,299 12,329
Property, plant and equipment, net 28,091 27,894
Non-current deferred income taxes, net 3,708 3,766
Goodwill 7,889 7,889
Acquired intangible assets, net 9,108 9,088
Other assets 13,584   14,752
Total assets $ 318,467   $ 322,208
Liabilities and shareholders' equity
Current liabilities:
Accounts payable $ 16,721 $ 16,958
Accrued liabilities 24,891 24,930
Deferred revenue 10,766   10,196
Total current liabilities 52,378 52,084
Non-current income taxes payable 5,885 5,982
Shareholders' equity:
Preferred and common stock 178,469 176,631
Retained earnings 81,567 87,228
Accumulated other comprehensive income 168   283
Total shareholders' equity 260,204   264,142
Total liabilities and shareholders' equity $ 318,467   $ 322,208
End of period shares outstanding 29,915   29,583
Electro Scientific Industries, Inc.
Analysis of First Quarter Fiscal 2014 Results
(Dollars and shares in thousands)
Fiscal quarter ended
Jun 29, 2013   Mar 30, 2013   Jun 30, 2012
Sales detail:
Interconnect & Microfabrication Group $ 34,417 $ 22,988 $ 47,698
Components Group 6,142 7,904 7,705
Semiconductor Group 5,613   8,682   3,566  
Total $ 46,172 $ 39,574 $ 58,969
Gross margin % 42 % (16 %) 40 %
Selling, service and administration expense % 32 % 34 % 27 %
Research, development and engineering expense % 18 % 21 % 16 %
Operating loss % (7 %) (78 %) (3 %)
Effective tax rate % (3 %) (115 %) 44 %
Weighted average shares outstanding - basic 29,745 29,540 29,116
Weighted average shares outstanding - diluted 29,745 29,540 29,116
End of period employees 623 579 617

Electro Scientific Industries, Inc.

First Quarter Fiscal 2014 Results

(In thousands, except per share data)


Reconciliation of GAAP to Non-GAAP Financial Measures:
  Fiscal quarter ended
Jun 29, 2013 Mar 30, 2013   Jun 30, 2012
Net sales $ 46,172 $ 39,574 $ 58,969
Gross profit per GAAP $ 19,386 $ (6,153 ) $ 23,653
Add back:
Purchase accounting included in cost of sales 689 489 337
Equity compensation included in cost of sales 185 263 216
Charges for inventory write-off of discontinued product 19,765
Charges for intangibles write-off of discontinued product   2,347    
Total non-GAAP adjustments to gross profit 874   22,864   553  
Non-GAAP gross profit $ 20,260   $ 16,711   $ 24,206  
Non-GAAP gross margin 43.9 % 42.2 % 41.0 %
Operating expenses per GAAP $ 22,508 $ 24,698 $ 25,197
Purchase accounting included in operating expenses:
Selling, service and administration 219 76 73
Research, development and engineering 47   47   47  
Subtotal - purchase accounting included in operating expenses 266   123   120  
Equity compensation included in operating expenses:
Selling, service and administration 2,094 1,073 2,261
Research, development and engineering 355   393   500  
Subtotal - equity compensation included in operating expenses 2,449   1,466   2,761  
Acquisition and integration costs included in operating expenses:
Selling, service and administration 404     789  
Subtotal - acquisition and integration costs included in operating expenses 404     789  
Other items excluded from operating expenses:
Restructuring costs ?
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