dnelson@jwr.com
01-25-2008, 12:50 PM
PORTLAND, Ore.--(BUSINESS WIRE)--Jan. 24, 2008--Electro Scientific Industries Inc. (NASDAQ:ESIO), a leading provider of world-class photonic and laser micro-engineering systems, today announced results for its fiscal 2008 third quarter, representing the three-month period ended December 29, 2007.
Third quarter sales were $77.3 million, representing a 6% decrease from the second quarter primarily due to the timing of revenue recognition of new products. Operating income for the quarter was $8.2 million, including the impact of $1.0 million of purchase accounting charges related to the purchase of New Wave Research (NWR), which closed during the second quarter of fiscal 2008. Third quarter net income was $6.7 million, or $0.24 per diluted share, including the impact of purchase accounting.
Third quarter orders were $74.6 million, up slightly compared with $74.4 million in the second quarter of 2008. Orders for the third quarter reflected an increase from the prior quarter in the semiconductor group, driven by strong demand for new products in this segment. Passive component orders were down slightly from the prior quarter, although third quarter results were at the second highest quarterly level since 2004. Interconnect and micro-machining orders were down in the third quarter due to the timing of orders for micro-machining applications.
"The third quarter continued our pattern of strong financial results for the company," noted Nick Konidaris, ESI President and CEO. "ESI reported the highest level of order activity since the fourth quarter of 2004 and the fourth consecutive quarter of orders in excess of $70 million. Shipments and revenue continued strong for the company and included a healthy mix of new products, particularly in the semiconductor and passive component segments. For the third quarter, we recorded the second highest quarterly level of shipments for the company since 2001."
Gross margin for the third quarter was 46%, including the impact of $0.5 million in purchase accounting charges to cost of goods sold, compared to 45% in the prior quarter, which included $1.1 million in purchase accounting charges. Excluding the impact of purchase accounting, gross margin for the third quarter was 47%, slightly higher than the equivalent adjusted margin of 46% in the second quarter. Third quarter margin improvement was largely due to a favorable shift in product mix for the quarter.
Operating expenses were $27.5 million in the third quarter, including the impact of $0.5 million in purchase accounting charges, compared to $29.3 million in the prior quarter, which included $3.2 million in purchase accounting charges. Excluding the impact of purchase accounting, expenses were up approximately $0.9 million compared to the prior quarter. The sequential increase was due to the inclusion of a full quarter of results from NWR and related integration expenses. Compared to the second quarter of fiscal 2007, third quarter expenses were up $6.3 million, excluding purchase accounting, largely due to the impact of the NWR acquisition and expenses to support higher overall business activity.
Income tax expense for the second quarter was $3.4 million, an effective tax rate of 34%.
Third quarter net income was $6.7 million or $0.24 per diluted share, compared to $5.5 million or $0.19 per diluted share in the second quarter of fiscal 2008. Excluding the impact of purchase accounting, net income was $7.7 million or $0.27 per diluted share, compared to net income of $9.8 million, or $0.34 per diluted share in the prior quarter.
Cash and investments were $182 million, up $3 million from the second quarter. Cash provided from operations was $6 million for the third quarter, and $14 million for the six months ended December 29, 2007.
Accounts receivable were $60 million at the end of the third quarter up $4 million compared to $56 million in the prior quarter. The increase in accounts receivable is primarily the result of shipment timing and the revenue deferral of items shipped during the quarter.
Inventories of $89 million decreased $3 million from the second quarter.
Deferred revenue was $24.8 million, up $5.4 million compared to the second quarter. The increase in deferred revenue resulted primarily from shipments of new products in the semiconductor and passive component segments.
On January 22, 2008, our Board of Directors voted to resume the previous share repurchase program and authorized the repurchase of up to $12.7 million of our outstanding common stock over a six-month period beginning January 29, 2008. The share purchases will be made in either open market or private transactions. The size and timing of these purchases will depend on price, market, business conditions, and other factors.
Konidaris added, "As a result of the slowdown in capital spending in the semiconductor industry for calendar 2008, we expect our shipments and revenue to be approximately $65 to $75 million in the fourth quarter. The gross margin percentage is expected to be approximately 44 percent, reflecting less favorable product mix compared to the third quarter. Excluding the impact of purchase accounting of $0.3 million, margins are estimated at approximately 45 percent. Operating expenses are expected to be approximately flat with the third quarter, including purchase accounting. The effective tax rate is anticipated to be approximately 36% for the fourth quarter. Earnings per share are expected to be approximately $0.08 to $0.15 per diluted share.
"We continue to see tangible results from our strategy of investing in new products and applications for the company. Our diversified portfolio of products has allowed us to better absorb short-term fluctuations between our product segments and provide more consistent results for the company in recent quarters. Although capital spending in our semiconductor industry is likely to be lower in calendar 2008, we remain confident that our investments in new technology and new products will allow us to remain competitive and profitable going forward."
Third quarter sales were $77.3 million, representing a 6% decrease from the second quarter primarily due to the timing of revenue recognition of new products. Operating income for the quarter was $8.2 million, including the impact of $1.0 million of purchase accounting charges related to the purchase of New Wave Research (NWR), which closed during the second quarter of fiscal 2008. Third quarter net income was $6.7 million, or $0.24 per diluted share, including the impact of purchase accounting.
Third quarter orders were $74.6 million, up slightly compared with $74.4 million in the second quarter of 2008. Orders for the third quarter reflected an increase from the prior quarter in the semiconductor group, driven by strong demand for new products in this segment. Passive component orders were down slightly from the prior quarter, although third quarter results were at the second highest quarterly level since 2004. Interconnect and micro-machining orders were down in the third quarter due to the timing of orders for micro-machining applications.
"The third quarter continued our pattern of strong financial results for the company," noted Nick Konidaris, ESI President and CEO. "ESI reported the highest level of order activity since the fourth quarter of 2004 and the fourth consecutive quarter of orders in excess of $70 million. Shipments and revenue continued strong for the company and included a healthy mix of new products, particularly in the semiconductor and passive component segments. For the third quarter, we recorded the second highest quarterly level of shipments for the company since 2001."
Gross margin for the third quarter was 46%, including the impact of $0.5 million in purchase accounting charges to cost of goods sold, compared to 45% in the prior quarter, which included $1.1 million in purchase accounting charges. Excluding the impact of purchase accounting, gross margin for the third quarter was 47%, slightly higher than the equivalent adjusted margin of 46% in the second quarter. Third quarter margin improvement was largely due to a favorable shift in product mix for the quarter.
Operating expenses were $27.5 million in the third quarter, including the impact of $0.5 million in purchase accounting charges, compared to $29.3 million in the prior quarter, which included $3.2 million in purchase accounting charges. Excluding the impact of purchase accounting, expenses were up approximately $0.9 million compared to the prior quarter. The sequential increase was due to the inclusion of a full quarter of results from NWR and related integration expenses. Compared to the second quarter of fiscal 2007, third quarter expenses were up $6.3 million, excluding purchase accounting, largely due to the impact of the NWR acquisition and expenses to support higher overall business activity.
Income tax expense for the second quarter was $3.4 million, an effective tax rate of 34%.
Third quarter net income was $6.7 million or $0.24 per diluted share, compared to $5.5 million or $0.19 per diluted share in the second quarter of fiscal 2008. Excluding the impact of purchase accounting, net income was $7.7 million or $0.27 per diluted share, compared to net income of $9.8 million, or $0.34 per diluted share in the prior quarter.
Cash and investments were $182 million, up $3 million from the second quarter. Cash provided from operations was $6 million for the third quarter, and $14 million for the six months ended December 29, 2007.
Accounts receivable were $60 million at the end of the third quarter up $4 million compared to $56 million in the prior quarter. The increase in accounts receivable is primarily the result of shipment timing and the revenue deferral of items shipped during the quarter.
Inventories of $89 million decreased $3 million from the second quarter.
Deferred revenue was $24.8 million, up $5.4 million compared to the second quarter. The increase in deferred revenue resulted primarily from shipments of new products in the semiconductor and passive component segments.
On January 22, 2008, our Board of Directors voted to resume the previous share repurchase program and authorized the repurchase of up to $12.7 million of our outstanding common stock over a six-month period beginning January 29, 2008. The share purchases will be made in either open market or private transactions. The size and timing of these purchases will depend on price, market, business conditions, and other factors.
Konidaris added, "As a result of the slowdown in capital spending in the semiconductor industry for calendar 2008, we expect our shipments and revenue to be approximately $65 to $75 million in the fourth quarter. The gross margin percentage is expected to be approximately 44 percent, reflecting less favorable product mix compared to the third quarter. Excluding the impact of purchase accounting of $0.3 million, margins are estimated at approximately 45 percent. Operating expenses are expected to be approximately flat with the third quarter, including purchase accounting. The effective tax rate is anticipated to be approximately 36% for the fourth quarter. Earnings per share are expected to be approximately $0.08 to $0.15 per diluted share.
"We continue to see tangible results from our strategy of investing in new products and applications for the company. Our diversified portfolio of products has allowed us to better absorb short-term fluctuations between our product segments and provide more consistent results for the company in recent quarters. Although capital spending in our semiconductor industry is likely to be lower in calendar 2008, we remain confident that our investments in new technology and new products will allow us to remain competitive and profitable going forward."