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Electro Scientific Industries Inc. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: February 9, 2010 08:16PM
Electro Scientific Industries Inc. (ESIO) filed Quarterly Report for the period ended 2010-01-02. Electro Scientific Industries Inc. has a market cap of $297.1 million; its shares were traded at around $10.83 with and P/S ratio of 1.9.ESIO is in the portfolios of David Nierenberg, Third Avenue Management, Chuck Royce of ROYCE & ASSOCIATES.
Highlight of Business Operations:
Net sales increased $11.4 million for the third quarter to $39.0 million compared to $27.6 million for the prior quarter. This increase reflects improvements in each of our product groups.
Net operating expenses increased $1.9 million to $20.7 million in the third quarter compared to $18.8 million in the prior quarter. This increase was primarily attributable to the additional week included in the third quarter of fiscal 2010, the partial reinstatement of temporary pay reductions and increased project expenses for new products.
Net loss for the third quarter was $2.4 million or $0.09 per basic and diluted share, compared to a net loss of $6.1 million or $0.22 per basic and diluted share in the prior quarter.
Selling, service and administration (SS&A) primarily consists of labor and other employee-related expenses including share-based compensation expense, travel expense, professional fees, sales commissions and facilities costs. SS&A expenses were $11.9 million for the quarter ended January 2, 2010, a decrease of $0.2 million compared to $12.1 million in the quarter ended December 27, 2008. The decrease in SS&A expenses was primarily attributable to restructuring and cost management activities completed in fiscal 2009. These actions included company-wide reductions in force and related decreases in compensation and labor-related costs. Additionally, we implemented several temporary cost reduction measures in calendar 2009 including salary reductions, furloughs, and elimination of the Company match of 401(k) contributions. The impact of these activities was partially offset by the additional week included in the third quarter of fiscal 2010 and an increase of $0.4 million in SS&A share-based compensation expense. Share-based compensation expense increased primarily due to the incremental charge for our annual stock grant.
Research, development and engineering (RD&E) expenses are primarily comprised of labor and other employee-related expenses, professional fees, project materials, equipment costs and facilities costs. RD&E expenses totaled $8.8 million for the quarter ended January 2, 2010, an increase of $0.9 million compared to $7.9 million for the quarter ended December 27, 2008. This increase was primarily due to an increase of $0.4 million in R&D share-based compensation expense resulting from our annual stock grant, an additional week in the third quarter of 2010, and to lesser extents, increases in project expenses and depreciation. Engineering project expenses can fluctuate from quarter-to-quarter depending upon the various project timelines and content.
The income tax benefit for the quarter ended January 2, 2010 was $3.1 million on pretax loss of $5.5 million, an effective tax rate of 56.3%. This improved rate was primarily due to lower estimated annual losses and credits related to the completion of tax audits in the third quarter of fiscal 2010, which resulted in a reduction in income taxes payable. Comparatively, the income tax benefit was $1.8 million on a pretax loss of $31.1 million for the quarter ended December 27, 2008, an effective tax rate of 5.9%. The low effective tax rate was primarily related to the goodwill impairment charge recorded in the third quarter of fiscal 2009 that is not deductible for U.S. tax purposes, as well as a valuation allowance on deferred tax assets that was established in that quarter. The valuation allowance was required due to unrealized capital losses arising from the write-down of our auction rate securities.
Stocks Discussed: ESIO,