Net sales for the second quarter of 2006 were € 49.8 million, representing an increase of 34.6% as compared to net sales of € 37.0 million in the second quarter of 2005 and an increase of 11.9% as compared to net sales of € 44.5 million in the first quarter of 2006. The year-over-year sales increase was principally due to increased shipments of Besi’s assembly equipment for both leadframe and array connect applications. The increase in net sales in the second quarter of 2006 as compared to the first quarter of 2006 was slightly below prior guidance due to delays in two customer shipments which are anticipated to be delivered in the third quarter of 2006. Besi’s net income for the second quarter of 2006 was € 4.9 million or € 0.15 and € 0.13 per basic and diluted share, respectively, compared to a net loss of € 4.5 million, or € 0.14 per basic and diluted share for the same period last year. Net income for the first quarter of 2006 was € 1.0 million or € 0.03 per basic and diluted share. The year-over-year improvement in net income reflects improved industry conditions as well as cost and manufacturing efficiencies realized from Besi’s operational restructuring in 2005. Net income for the second quarter of 2006 includes a € 1.2 million gain on the sale of certain non-core activities (€ 0.04 per basic share and € 0.03 per diluted share) and a net tax benefit of € 1.4 million relating to such transaction, partially offset by a reversal of certain tax assets (€ 0.04 per basic share and € 0.03 per diluted share). Net bookings for the second quarter of 2006 were € 46.5 million, an increase of 22.0% as compared to net bookings for the second quarter of 2005 of € 38.1 million primarily as a result of increased orders for array connect applications, particularly die bonding and packaging equipment. Consistent with prior guidance, bookings declined by 22.1% in the second quarter of 2006 as compared to net bookings of € 59.7 million in the first quarter of 2006 due primarily to a decline in orders for leadframe applications from the first quarter. On a customer basis, orders in the second quarter of 2006 as compared to the first quarter of 2006 reflected a 33% decrease by subcontractors and a 14% decrease by independent device manufacturers (“IDMs”).
Backlog at June 30, 2006 was € 68.7 million as compared to € 72.0 million at March 31, 2006, representing a decrease of 4.6%. Approximately 74% and 26%, respectively, of backlog at June 30, 2006 was for array connect and leadframe assembly applications as compared to 70% and 30%, respectively, of backlog at March 31, 2006. The book-to-bill ratio was 0.93 in the second quarter of 2006 as compared to 1.03 in the second quarter of 2005 and 1.34 in the first quarter of 2006. Besi’s gross margin for the second quarter of 2006 was 42.2% as compared to 33.6% for the second quarter of 2005 and 38.3% for the first quarter of 2006. Gross margin for the second quarter exceeded guidance primarily due to better than anticipated efficiencies realized in the sale of die bonding and packaging equipment. Besi’s operating expenses decreased to € 16.6 million, or 33.4% of net sales, in the second quarter of 2006, as compared to € 17.7 million, or 48.0% of net sales in the second quarter of 2005 due primarily to the benefits of restructuring efforts that occurred during 2005. Operating expenses during the quarter ended June 30, 2006 increased by € 1.7 million from € 14.9 million in the first quarter of 2006. At June 30, 2006, cash and cash equivalents declined to € 70.5 million as compared to € 74.5 million at March 31, 2006 principally as a result of increased working capital requirements related to higher sales and a net reduction in indebtedness of € 2.1 million. Total debt and capital leases at June 30, 2006 was € 84.1 million. Comments Richard W. Blickman, President and Chief Executive Officer of the Company, commented: "This was another successful quarter for the Company. We achieved further improvement in profitability as a result of our 2005 operating restructuring and our focus on the higher margin, more advanced process applications of the assembly equipment market. As a consequence, our operating margin has improved from –15% in the first quarter of 2005 to approximately 9% in the second quarter of 2006.” Outlook Based on current backlog and customer shipment schedules, Besi expects that net sales and order levels in the third quarter of 2006 will be in the range of a decrease of 5% to an increase of 5% as compared to the second quarter of 2006. The Company believes that sales and order trends currently reflect a cautious attitude toward new equipment purchases on the part of customers, particularly subcontractors, reflecting their careful monitoring of inventory and capacity levels. Besi anticipates that quarterly sales and order levels could continue to fluctuate this year based on customer capital spending trends. Besi expects that its gross margins will range between 39-41% in the third quarter of 2006 based on a lower forecasted proportion of array connect products in its overall sales as compared to the second quarter of 2006. In addition, operating expenses for the third quarter of 2006 are expected to decline by 0-5% as compared to the second quarter of 2006. Capital expenditures are forecast to be
approximately € 1.0 million in the third quarter of 2006 as compared to € 0.8 million in the second quarter of 2006.