Form 8-K ELECTRO SCIENTIFIC INDUS For: Jan 28

January 28, 2015 4:19 PM EST


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section�13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 28, 2015
ELECTRO SCIENTIFIC INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)

OREGON
0-12853
93-0370304
(State or other jurisdiction
of incorporation)
(Commission
File Number)
(IRS Employer
Identification No.)
13900 NW Science Park Drive, Portland, Oregon
97229
(Address of principal executive offices)
(Zip Code)
Registrants telephone number, including area code: (503)�641-4141
No Change
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))





Item 2.02����Results of Operations and Financial Condition
On January 28, 2015, Electro Scientific Industries, Inc. (the Company) announced its financial results for the third quarter of fiscal 2015. The Companys press release announcing this event is attached hereto as Exhibit 99.1 and incorporated herein by reference.

Item 9.01����Financial Statements and Exhibits
(d)Exhibits
99.1����Press release dated January 28, 2015





SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Date: January 28, 2015
Electro Scientific Industries, Inc.
By:
/s/ Paul Oldham
Name:
Paul Oldham
Title:
Vice President of Administration, Chief Financial Officer and Corporate Secretary






Brian Smith
ESI
503-672-5760

ESI Announces Third Quarter Fiscal 2015 Results
PORTLAND, Ore.  January 28, 2015  Electro Scientific Industries, Inc. (NASDAQ: ESIO), an innovator of laser-based manufacturing solutions for the microtechnology industry, today announced results for its fiscal 2015 third quarter ended December�27, 2014. Financial measures are provided on both a GAAP and non-GAAP basis, which excludes the impact of purchase accounting, equity compensation, and other items.
Revenue in the third quarter was $43.7 million, compared to $42.9 million in the second quarter of 2015 and $38.3 million in the third quarter of last fiscal year. GAAP net loss was $6.4 million or $0.21 per share. Non-GAAP third quarter net loss was $4.7 million or $0.15 per share.
We capitalized on all our revenue opportunities to deliver both top and bottom line results that exceeded our expectations, stated Ed Grady, president and CEO of ESI. In addition, we made good progress on our initiatives to introduce new products, expand into adjacent markets and increase our presence in China.
Bookings for the third quarter were $40.6 million, compared to $43.0 million in the prior quarter. Grady continued, Demand was strong for our flex via drilling products, which saw their highest bookings in six quarters. Our Semiconductor business also had a good quarter, with bookings growth in our trim products and our first order for the model 9970 semiconductor thin film scribing tool. This was offset by seasonal weakness in our Components group and a sequential decline in Service bookings from a record level last quarter.

13900 NW Science Park Drive | Portland, Oregon 97229 | 503.641.4141 | www.esi.com

ESI Announces Third Quarter Fiscal 2015 Results

GAAP gross margin was 36.1%. Non-GAAP gross margin was 36.9% compared to 37.7% in the prior quarter. Operating expenses were $21.8 million, compared to $21.3 million in the prior quarter. On a non-GAAP basis operating expenses were approximately flat at $20.5 million. Non-GAAP operating loss was $4.4 million compared to $4.2 million in the second quarter.
Balance Sheet and Cash Flow
At quarter end, cash and investments were $80 million. The company used $13.4 million in cash from operations during the quarter and paid $2.4 million for the quarterly dividend of $0.08 per share. Inventories increased $3.7 million, trade receivables increased by $1.1 million, and current liabilities decreased by $8.7 million, impacted by reductions in deferred margin and retirement payouts.
Credit Facility
ESI also announced that it has agreed to a term sheet for a three year revolving line of credit for up to $30 million with Silicon Valley Bank.�We believe this facility and relationship with Silicon Valley Bank will give us more financial flexibility as we transition the company and execute our growth initiatives, stated Mr. Grady.�It is expected that the facility will close within the next two weeks.
Fourth Quarter 2015 Outlook
Grady continued, "I'm pleased with the progress we have made toward each of our growth initiatives. Our China initiative advanced through the acquisition of Topwin Optoelectronics, which we announced last quarter and closed last week. We entered the mid-range segment of the laser systems market with the introduction of the new LumenesiTM micromachining platform. Earlier this month we expanded our addressable market by entering the adjacent IC package drilling market with the introduction of our new Cornerstone ICP series. Lastly, a second internally-developed laser was qualified and shipped inside an ESI system during the third quarter. These initiatives are ongoing and their impact on our top line results will not be immediate or linear. Further, seasonality, capacity absorption and continued softness in the Korean supply chain will impact demand in the near term. While there are other large opportunities in the pipeline, we believe it is too early to count on these in our current projections. As such, we expect revenues for the fourth quarter of fiscal 2015 to be between $32 million and $40

13900 NW Science Park Drive | Portland, Oregon 97229 | 503.641.4141 | www.esi.com

ESI Announces Third Quarter Fiscal 2015 Results

million. Non-GAAP loss per share is expected to be $0.22 to $0.32. Despite expected seasonal weakness in our fourth quarter, I am confident that we are taking the right steps to put the company on the path to growth and profitability."
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 39690622. A live audio webcast can be accessed at www.esi.com. Upon completion of the call, an audio replay will be accessible through February 7, 2015, at 888-286-8010 (domestic participants) or 617-801-6888 (international participants), passcode 84392697. The webcast will be available on ESIs 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 companys 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
ESIs integrated solutions allow industrial designers and process engineers to control the power of laser light to transform materials in ways that differentiate their consumer electronics, wearable devices,

13900 NW Science Park Drive | Portland, Oregon 97229 | 503.641.4141 | www.esi.com

ESI Announces Third Quarter Fiscal 2015 Results

semiconductor circuits and high-precision components for market advantage. ESIs laser-based manufacturing solutions feature the micro-machining industrys highest precision and speed, and target the lowest total cost of ownership. ESI is headquartered in Portland, Ore., with global operations from the�Pacific Northwest�to the�Pacific Rim. More information is available at www.esi.com.

Forward-Looking Statements
This press release includes forward-looking statements about the markets we serve, growth, revenue, profitability, earnings per share, and our proposed credit facility. 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 industrywhich is dependent on many factors, including component prices, global economic strength and political stability, timing of consumer product introductions and overall demand for electronic devices (such as semiconductors, printed circuit boards, displays, LEDs, capacitors and other components) 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 companys need to continue investing in research and development; the companys ability to hire and retain key employees; the companys ability to create and sustain intellectual property protection around its products; the risk that competing or alternative technologies could reduce demand for our products; the risk that we may not be successful in penetrating new or adjacent markets; the risk that we do not successfully integrate Topwin Optoelectronics; the risk that our new products may not gain acceptance in the marketplace; the risk that we may not agree to definitive documents related to our proposed new credit facility or that the facility does not close for any other reason; foreign currency fluctuations; the companys 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.


13900 NW Science Park Drive | Portland, Oregon 97229 | 503.641.4141 | www.esi.com

ESI Announces Third Quarter Fiscal 2015 Results

Electro Scientific Industries, Inc.
Third Quarter Fiscal 2015 Results
(In thousands, except per share data)
(Unaudited)

Operating Results:
Fiscal quarter ended
Three fiscal quarters ended
Dec 27, 2014
Sep 27, 2014
Dec 28, 2013
Dec 27, 2014
Dec 28, 2013
Net sales
$
43,661

$
42,856

$
38,267

$
121,547

$
144,086

Cost of sales
27,884

27,075

21,986

76,754

83,787

Gross profit
15,777

15,781

16,281

44,793

60,299

36
%
37
%
43
%
37
%
42
%
Operating expenses:
Selling, service and administration
13,397

12,915

12,408

39,412

41,206

Research, development and engineering
8,383

8,424

9,768

25,952

27,912

Gain on sale of property and equipment, net




(1,301
)


(1,301
)
Gain on acquisition of Semiconductor Systems business








(499
)
Net operating expenses
21,780

21,339

20,875

65,364

67,318

Operating loss
(6,003
)
(5,558
)
(4,594
)
(20,571
)
(7,019
)
Non-operating income (expense):
Other-than-temporary impairment of cost based investments








(3,588
)
Interest and other income (expense), net
64

(244
)
95

(134
)
115

Total non-operating income (expense)
64

(244
)
95

(134
)
(3,473
)
Loss before income taxes
(5,939
)
(5,802
)
(4,499
)
(20,705
)
(10,492
)
Provision for income taxes
437

441

141

165

209

Net loss
$
(6,376
)
$
(6,243
)
$
(4,640
)
$
(20,870
)
$
(10,701
)
Net loss per sharebasic
$
(0.21
)
$
(0.20
)
$
(0.15
)
$
(0.68
)
$
(0.36
)
Net loss per sharediluted
$
(0.21
)
$
(0.20
)
$
(0.15
)
$
(0.68
)
$
(0.36
)

13900 NW Science Park Drive | Portland, Oregon 97229 | 503.641.4141 | www.esi.com

ESI Announces Third Quarter Fiscal 2015 Results

Electro Scientific Industries, Inc.
Third Quarter Fiscal 2015 Results
(Amounts in thousands)
(Unaudited)
Financial Position As Of:
Dec 27, 2014
Sep 27, 2014
Mar 29, 2014
Assets
Current assets:
Cash and cash equivalents
$
70,066

$
79,255

$
68,461

Short-term investments
9,565

18,548

38,444

Trade receivables, net
40,503

39,390

37,813

Inventories
59,424

55,749

58,902

Shipped systems pending acceptance
948

5,180

2,054

Deferred income taxes, net
145

145

161

Other current assets
3,812

4,019

4,674

Total current assets
184,463

202,286

210,509

Non-current assets:
Non-current investments




3,985

Property, plant and equipment, net
27,187

26,867

27,930

Non-current deferred income taxes, net
628

677

704

Goodwill
7,889

7,889

7,889

Acquired intangible assets, net
5,733

5,988

6,845

Other assets
13,200

12,309

12,347

Total assets
$
239,100

$
256,016

$
270,209

Liabilities and shareholders' equity
Current liabilities:
Accounts payable
$
14,175

$
12,659

$
14,465

Accrued liabilities
19,429

21,059

20,524

Deferred income tax liability, net
170

170

170

Deferred revenue
7,823

16,440

10,515

Total current liabilities
41,597

50,328

45,674

Non-current income taxes payable
1,298

1,177

1,654

Shareholders' equity:
Preferred and common stock
184,696

183,833

183,193

Retained earnings
11,200

20,008

39,336

Accumulated other comprehensive income
309

670

352

Total shareholders' equity
196,205

204,511

222,881

Total liabilities and shareholders' equity
$
239,100

$
256,016

$
270,209

End of period shares outstanding
30,606

30,610

30,155


13900 NW Science Park Drive | Portland, Oregon 97229 | 503.641.4141 | www.esi.com

ESI Announces Third Quarter Fiscal 2015 Results

Electro Scientific Industries, Inc.
Analysis of Third Quarter Fiscal 2015 Results
(Dollars and shares in thousands)
(Unaudited)
Fiscal quarter ended
Three fiscal quarters ended
Dec 27, 2014
Sep 27, 2014
Dec 28, 2013
Dec 27, 2014
Dec 28, 2013
Sales detail:
Interconnect�& Microfabrication Group
$
28,043

$
26,600

$
25,378

$
75,591

$
98,096

Semiconductor Group
11,453

9,767

8,535

31,969

25,083

Components Group
4,165

6,489

4,354

13,987

20,907

Total
$
43,661

$
42,856

$
38,267

$
121,547

$
144,086

Gross margin %
36
%
37
%
43
%
37
%
42
%
Selling, service and administration expense %
31
%
30
%
32
%
32
%
29
%
Research, development and engineering expense %
19
%
20
%
26
%
21
%
19
%
Operating loss %
(14
%)
(13
%)
(12
%)
(17
%)
(5
%)
Effective tax rate %
(7
%)
(8
%)
(3
%)
(1
%)
(2
%)
Weighted average shares outstanding - basic
30,617

30,552

30,054

30,507

29,922

Weighted average shares outstanding - diluted
30,617

30,552

30,054

30,507

29,922

End of period employees
652

634

631

652

631


13900 NW Science Park Drive | Portland, Oregon 97229 | 503.641.4141 | www.esi.com

ESI Announces Third Quarter Fiscal 2015 Results

Electro Scientific Industries, Inc.
Third Quarter Fiscal 2015 Results
(In thousands, except per share data)
(Unaudited)
Reconciliation of GAAP to Non-GAAP Financial Measures:
Fiscal quarter ended
Three fiscal quarters ended
Dec 27, 2014
Sep 27, 2014
Dec 28, 2013
Dec 27, 2014
Dec 28, 2013
Gross profit per GAAP
$
15,777

$
15,781

$
16,281

$
44,793

$
60,299

Purchase accounting
163

226

608

836

2,262

Equity compensation
154

152

184

474

558

Non-GAAP gross profit
$
16,094

$
16,159

$
17,073

$
46,103

$
63,119

Non-GAAP gross margin
36.9
%
37.7
%
44.6
%
37.9
%
43.8
%
Operating expenses per GAAP
$
21,780

$
21,339

$
20,875

$
65,364

$
67,318

Purchase accounting
(90
)
(90
)
(126
)
(270
)
(749
)
Equity compensation
(885
)
(881
)
(1,079
)
(2,928
)
(4,573
)
Acquisition and integration costs
(311
)


(310
)
(311
)
(1,304
)
Restructuring (costs) credits




(59
)


31

Legal settlement




(13
)


(68
)
Gain on purchase of acquisition of Semiconductor Systems business








499

Gain on sale of property and equipment, net




1,301



1,301

Non-GAAP operating expenses
$
20,494

$
20,368

$
20,589

$
61,855

$
62,455

% of Net sales
47
%
48
%
54
%
51
%
43
%
Operating loss per GAAP
$
(6,003
)
$
(5,558
)
$
(4,594
)
$
(20,571
)
$
(7,019
)
Non-GAAP adjustments to gross profit
317

378

792

1,310

2,820

Non-GAAP adjustments to operating expenses
1,286

971

286

3,509

4,863

Non-GAAP operating (loss) income
$
(4,400
)
$
(4,209
)
$
(3,516
)
$
(15,752
)
$
664

% of Net sales
(10
%)
(10
%)
(9
%)
(13
%)

%
Non-operating income (expense), net per GAAP
$
64

$
(244
)
$
95

$
(134
)
$
(3,473
)
Other-than-temporary impairment of cost based investments








3,588

Non-GAAP non-operating income (expense)
$
64

$
(244
)
$
95

$
(134
)
$
115

Net loss per GAAP
$
(6,376
)
$
(6,243
)
$
(4,640
)
$
(20,870
)
$
(10,701
)
Non-GAAP adjustments to gross profit
317

378

792

1,310

2,820

Non-GAAP adjustments to operating expenses
1,286

971

286

3,509

4,863

Non-GAAP adjustments to non-operating expense








3,588

Income tax effect of other non-GAAP adjustments
93

43

468

(830
)
(671
)
Non-GAAP net loss
$
(4,680
)
$
(4,851
)
$
(3,094
)
$
(16,881
)
$
(101
)
% of Net sales
(11
%)
(11
%)
(8
%)
(14
%)

%
Basic Non-GAAP net loss per share
$
(0.15
)
$
(0.16
)
$
(0.10
)
$
(0.55
)
$


Diluted Non-GAAP net loss per share
$
(0.15
)
$
(0.16
)
$
(0.10
)
$
(0.55
)
$





13900 NW Science Park Drive | Portland, Oregon 97229 | 503.641.4141 | www.esi.com

ESI Announces Third Quarter Fiscal 2015 Results

Electro Scientific Industries, Inc.
Third Quarter Fiscal 2015 Results
(Amounts in thousands)
(Unaudited)
Consolidated Condensed Statements of Cash Flows:
Fiscal quarter ended
Three fiscal quarters ended
Dec 27, 2014
Sep 27, 2014
Dec 28, 2013
Dec 27, 2014
Dec 28, 2013
Net loss
$
(6,376
)
$
(6,243
)
$
(4,640
)
$
(20,870
)
$
(10,701
)
Non-cash adjustments and changes in operating activities
(7,043
)
2,404

3,876

4,349

6,828

Net cash used in operating activities
(13,419
)
(3,839
)
(764
)
(16,521
)
(3,873
)
Net cash provided by (used in) investing activities
7,613

3,573

8,169

28,420

(714
)
Net cash used in financing activities
(2,613
)
(2,194
)
(1,880
)
(9,165
)
(7,075
)
Effect of exchange rate changes on cash
(770
)
(748
)
(326
)
(1,129
)
(77
)
NET CHANGE IN CASH AND CASH EQUIVALENTS
(9,189
)
(3,208
)
5,199

1,605

(11,739
)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
79,255

82,459

71,975

68,461

88,913

CASH AND CASH EQUIVALENTS AT END OF PERIOD
$
70,066

$
79,251

$
77,174

$
70,066

$
77,174



13900 NW Science Park Drive | Portland, Oregon 97229 | 503.641.4141 | www.esi.com


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