ESIO » Topics » Liquidity and Capital Resources

This excerpt taken from the ESIO 10-Q filed Apr 10, 2007.

Liquidity and Capital Resources

At March 3, 2007, our principal sources of liquidity consisted of existing cash, cash equivalents and marketable securities of $225.9 million and accounts receivable of $54.2 million. At March 3, 2007, we had a current ratio of 6.8 and no long-term debt. Working capital increased to $316.8 million at March 3, 2007 from $304.5 million at June 3, 2006.

On March 9, 2007, the Board of Directors authorized the repurchase of up to $50 million in shares of our outstanding common stock during the nine-month period following our announcement of financial results for the third quarter of fiscal 2007. The authority will be exercised from time to time as market conditions warrant through transactions in the open market or in negotiated transactions with brokers or shareholders. We believe that our existing cash, cash equivalents and marketable securities are adequate to fund our operations along with potential share repurchase transactions for at least the next twelve months.

 

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Cash flows from operating activities for the nine months ended March 3, 2007 totaled $10.0 million. Cash totaling $24.9 million was provided by net income adjusted for non-cash items. Other significant factors impacting cash flows from operations included increases in accounts receivable, inventories, and prepaid and other current assets, partially offset by increases in other current liabilities.

Net inventories increased $12.5 million to $76.3 million at March 3, 2007 compared to $63.8 million at June 2, 2006. The rise is primarily due to increases in raw materials and work-in-process (WIP) balances of $5.8 million and $8.4 million, respectively, offset by a $1.8 million decrease in finished goods. The increases in raw materials and WIP were driven by mid-period production changes to previously forecasted product sales mix. Additionally, WIP inventories at March 3, 2007 include $2.8 million of engineering inventory for new product development. Finished goods decreased by $1.8 million due to strong shipments just prior to the end of third quarter fiscal 2007. The change in inventory balances also includes non-cash transfers of $1.5 million from other non-current assets for previously capitalized demonstration systems.

Net accounts receivable were $54.2 million at March 3, 2007 compared to $48.0 million at June 3, 2006, an increase of $6.2 million. The increase is primarily due an increase in shipments of $4.3 million, from $55.4 million in the fourth quarter of fiscal 2006 to $59.7 million in the third quarter of fiscal 2007. Additionally, a higher percentage of shipments occurred late in the third quarter of fiscal 2007. Although days sales outstanding increased to 82 days at the end of the third quarter of fiscal 2007, compared to 76 days at the end of fiscal 2006, our aging of accounts receivable improved compared to the end of the prior fiscal year.

Prepaid and other current assets increased $2.2 million to $6.6 million at March 3, 2007 from $4.4 million at June 3, 2006. The increase is due primarily to an increase of $1.6 million in value-added tax (VAT) receivables pending the filing of returns with foreign taxing authorities and $0.7 million in higher prepaid insurance premiums and property taxes.

Cash flows from investing activities totaled $0.8 million for the nine months ended March 3, 2007. Capital expenditures totaled $7.1 million during this period and were principally comprised of costs related to a major refurbishment of research and development clean rooms and laboratories. We also generated $17.6 million, net, in cash and cash equivalents through the maturity and sale of investments in our portfolio of marketable securities offset by certain reinvestments. During the first two quarters of fiscal 2007, we invested $6.0 million in a Series D Preferred Stock financing of OmniGuide, Inc. and $5.0 million in a Series D Preferred Stock financing of Axsun Technologies, Inc. Included in cash flow from investing activities was a $1.3 million insurance recovery received during the first quarter of fiscal 2007 for damaged demonstration systems.

Cash flows from financing activities of $2.8 million were comprised of proceeds from the exercise of stock options and other employee stock plan purchases and the related realized income tax benefits for the nine months ended March 3, 2007.

This excerpt taken from the ESIO 10-Q filed Mar 22, 2006.

Liquidity and Capital Resources

At February 25, 2006, our principal sources of liquidity consisted of existing cash, cash equivalents and marketable securities of $225.5 million and accounts receivable of $47.4 million. At February 25, 2006, we had a current ratio of 7.3 and no long-term debt. Working capital increased to $306.7 million at February 25, 2006 from $275.7 million at May 28, 2005. We believe that our existing cash, cash equivalents and marketable securities are adequate to fund our operations for at least the next twelve months.

Cash flows from operating activities for the nine months ended February 25, 2006 totaled $22.4 million. Cash totaling $25.5 million was provided by net income adjusted for non-cash items. Other significant factors impacting cash flows from operations included increases in accounts receivable and a decrease in income tax refund receivable.

Net trade receivables were $47.4 million at February 25, 2006 compared to $36.2 million at May 28, 2005, an increase of $11.2 million. The increase is primarily due to higher shipments late in the third quarter of fiscal 2006. Days sales outstanding increased to 77 days at the end of the third quarter of fiscal 2006, compared to 72 days at the end of fiscal 2005.

Income tax refunds receivable decreased by $8.0 million at February 25, 2006 to $1.2 million, compared to $9.2 million at May 28, 2005. During the second quarter of fiscal 2006 we received $7.2 million in federal tax refunds resulting from a completed examination of our tax years 1996 through 2003 plus interest of $0.7 million.

Cash flows from investing activities totaled $4.7 million for the nine months ended February 25, 2006. Capital expenditures totaled $15.2 million during this period and were principally comprised of costs related to the implementation of a new enterprise resource planning system and a major refurbishment of research and development clean rooms and laboratories. We also generated $26.6 million, net, in cash and cash equivalents through the maturity and sale of investments in our portfolio of marketable securities offset by certain reinvestments.

Cash flows from investing activities for the nine months ended February 25, 2006 also included a $7.0 million increase in other assets for a Taiwan dollar deposit security bond posted with the Kaohsiung Court in Taiwan related to our filing of a patent infringement suit against All Ring Tech Co., Ltd. in that jurisdiction. This deposit will be held by the court pending final resolution of the matter.

 

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Cash flows from financing activities of $6.3 million were comprised of proceeds from the exercise of stock options and other employee stock plan purchases for the nine months ended February 25, 2006.

This excerpt taken from the ESIO 10-Q filed Dec 22, 2005.

Liquidity and Capital Resources

 

At November 26, 2005, our principal sources of liquidity consisted of existing cash, cash equivalents and marketable securities of $230.8 million and accounts receivable of $35.3 million.  At November 26, 2005, we had a current ratio of 6.4:1 and no long-term debt.  Working capital increased to $288.0 million at November 26, 2005 from $275.7 million at May 28, 2005.  We believe that our existing cash, cash equivalents and marketable securities are adequate to fund our operations for at least the next twelve months.

 

Cash flows from operating activities for the six months ended November 26, 2005 totaled $25.6 million.  Cash totaling $9.9 million was provided by net income adjusted for non-cash items. Other significant factors impacting cash flows from operations included increases in prepaid and other current assets, receipt of income tax refunds and increases in current liabilities.

 

Net inventories remained essentially unchanged at $59.9 million at the end of the second quarter compared to $59.5 million at May 28, 2005.  However, $1.6 million in capitalized systems included in other long-term assets at May 28, 2005 were sold during the six months ended November 26, 2005 resulting in an increase in cash flows from inventory transactions.

 

Payables and current liabilities were $40.0 million at November 26, 2005 compared to $33.4 million at May 28, 2005, an increase of $6.6 million. The increase is primarily due to increased inventory purchases in the second quarter of fiscal 2006 in anticipation of shipments in future quarters.

 

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Cash flows from investing activities totaled $4.7 million for the six months ended November 26, 2005. Capital expenditures totaled $9.5 million during this period and were principally comprised of costs related to the implementation of a new enterprise resource planning system and a major refurbishment of research and development clean rooms and laboratories. We also generated $20.6 million net in cash and cash equivalents through the maturity and sale of investments in our portfolio of marketable securities offset by certain reinvestments. We anticipate remaining capital expenditures related to the implementation of the new enterprise resource planning system in fiscal 2006 will total approximately $4 million.

 

Cash flows from investing activities also included a $6.8 million increase in other assets for a Taiwan dollar deposit security bond posted with the Kaohsiung Court in Taiwan related to our filing of a patent infringement suit against All Ring Tech Co., Ltd. in that jurisdiction.  This deposit will be held by the court pending final resolution of the matter.

 

Cash flows from financing activities of $2.3 million were comprised of proceeds from the exercise of stock options and ESSP purchases for the six months ended November 26, 2005.

 

This excerpt taken from the ESIO 10-Q filed Mar 23, 2005.

Liquidity and Capital Resources

 

At February 26, 2005, our principal sources of liquidity consisted of existing cash, cash equivalents and marketable securities of $355.5 million and accounts receivable of $36.8 million.  At February 26, 2005, we had a current ratio of 2.3 and no long-term debt.  The principal value of our convertible subordinated notes is classified as a short-term liability at February 26, 2005 as the notes were redeemed on March 10, 2005.  As a result, working capital decreased to $247.8 million at February 26, 2005 from $369.9 million at May 29, 2004.  We believe that our existing cash, cash equivalents and marketable securities are adequate to fund the redemption of our notes and our operations for at least the next twelve months.

 

Cash flows from operating activities for the nine months ended February 26, 2005 totaled $18.3 million.  Factors impacting cash flows from operations included increases in inventories, decreases in trade receivables, estimated income tax payments and decreases in payables and current liabilities.

 

Net inventories increased 13.9% to $66.8 million at the end of the third quarter compared to $58.6 million at May 29, 2004.  The increase is comprised primarily of additions to finished goods due to delayed timing of shipments previously anticipated in the first three quarters of fiscal 2005 and increases in raw materials due to anticipated production requirements in the fourth quarter of fiscal 2005.

 

Net trade receivables were $36.8 million at February 26, 2005 compared to $51.7 million at May 29, 2004, a decrease of $14.9 million inclusive of an increase of $2.0 million due to non-cash currency translation adjustments resulting from the weakening of the U.S. dollar.  The increase due to currency translation is substantially offset by currency translation adjustments to current liabilities discussed below, with the difference included as a component of other comprehensive income.  The remaining decrease is due to lower revenue levels in the third quarter combined with strong collection activities.

 

Payables and current liabilities, exclusive of the convertible subordinated notes, were $38.4 million at February 26, 2005 compared to $55.6 million at May 29, 2004, decreasing by $17.2 million, inclusive of an increase of $1.1 million due to non-cash currency translation adjustments resulting from the weakening of the U.S. dollar.  Approximately $7.6 million of the decrease was due to a reduction in purchases in response to a softening of demand for our products.  The remaining decrease in other liabilities is due primarily to the litigation settlement and legal fee payments, reductions in estimated income taxes payable, decreased payroll liabilities and various other reductions in operating accruals.

 

Cash flows from investing activities totaled $43.4 million for the nine months ended February 26, 2005.  Capital expenditures totaled $3.4 million during this period and were comprised of computer equipment

 

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and systems upgrades, and investments in production and test equipment and facilities.  We generated $2.4 million in cash in June of 2004 from the sale of an undeveloped parcel of land in Taiwan classified as an asset held for sale at May 29, 2004.  We also generated $45.2 million in cash and cash equivalents through the liquidation of restricted investments and sales of investments in our portfolio of marketable securities.  These investment transactions were undertaken primarily to fund regularly scheduled semi-annual interest payments on the convertible subordinated notes and the redemption of the notes on March 10, 2005.

 

Cash flows from financing activities of $5.7 million were comprised of proceeds from the exercise of stock options for the nine months ended February 26, 2005.

 

At February 26, 2005 we had $143.4 million recorded on our balance sheet related to our 4¼% convertible subordinated notes due December 21, 2006 (the Convertible Notes).  The $1.6 million difference between the $145.0 million face value and the $143.4 million balance at February 26, 2005 relates to underwriting discounts, which originally totaled $4.5 million.  These discounts are being amortized as additional interest expense over the life of the Convertible Notes at a rate of $0.9 million per year, resulting in a corresponding accretion to the recorded amount of the notes.  During the first and third quarters of fiscal 2005, we made semi-annual interest payments of $3.1 million each which were fully funded by the liquidation of restricted securities.

 

Subsequent to the end of the third quarter, on March 10, 2005, we redeemed the $145.0 million aggregate principal value of the outstanding Convertible Notes.  In accordance with the terms of the Convertible Note indenture, the redemption price was 101.70% of the principal amount of the Convertible Notes, plus accrued and unpaid interest to the redemption date.  In connection with the redemption, we will record expenses of approximately $4.2 million in the fourth quarter of fiscal 2005, consisting of the redemption premium, a non-cash charge for unamortized debt issuance costs of approximately $1.6 million and other related costs.

 

Additionally, as a result of the Convertible Notes redemption, quarterly interest income is expected to decrease due to the related liquidation of marketable securities.  As a result of that impact combined with the $4.2 million in redemption expenses described above and the partial offset by the reduction in related interest expense, net other expense is expected to increase by approximately $3.2 million in the fourth quarter of fiscal 2005.  Beginning in fiscal year 2006, we expect the impact of the redemption will increase net other income by approximately $1 million per quarter.

 

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