Document


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): August 1, 2018
 
 
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)
Registrant’s 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))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐






Item 2.02    Results of Operations and Financial Condition
On August 1, 2018, Electro Scientific Industries, Inc. (the “Company”) announced its financial results for the first quarter of fiscal 2019. The Company’s 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 August 1, 2018





Exhibit Index

Exhibit No.
 
Description
99.1
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 






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: August 1, 2018
 
 
 
 
 
 
Electro Scientific Industries, Inc.
 
 
 
 
By:
 
/s/ Allen Muhich
 
Name:
 
Allen Muhich
 
Title:
 
Vice President, Chief Financial Officer and Corporate Secretary


Exhibit


ESI Announces Strong First Quarter Fiscal 2019 Results
 
PORTLAND, Ore., Aug. 1, 2018 -- Electro Scientific Industries, Inc. (NASDAQ:ESIO), an innovator of laser-based manufacturing solutions for the microtechnology industry, today announced results for its fiscal 2019 first quarter ended June 30, 2018. Financial measures are provided on both a GAAP and a non-GAAP basis. Non-GAAP results exclude the impact of purchase accounting, equity compensation, restructuring, and other items shown in the non-GAAP reconciliation table below.
First quarter revenue was $110.6 million, compared to $72.7 million in the first quarter of last fiscal year. GAAP net income was $31.1 million or $0.87 per diluted share, compared to net income of $2.9 million or $0.08 per diluted share one year ago. On a non-GAAP basis net income was $34.6 million or $0.96 per diluted share, compared to net income of $13.0 million or $0.38 per share in the prior fiscal year's first quarter.
Michael Burger, ESI's president and CEO, stated, "The technology trends toward the need for precision laser processing and component test within the consumer electronics and automotive markets have enabled us to post a strong start to our fiscal year with 52% year on year revenue growth and excellent overall financial performance."
Total orders for the quarter were $82.3 million, compared to $76.6 million one year ago and $111.8 million in the prior quarter. Burger continued, "We have seen a dramatic increase in demand for our MLCC testing tools as many MLCC producers have begun adding manufacturing and testing capacity that partially offset the expected cyclical softness in new demand for flexible circuit laser drills and resulted in an overall 7% year on year order growth."
GAAP gross margin was 48.1%, compared to 36.3% in the first quarter of last fiscal year. Operating expense was $20.2 million, down from $23.0 million last year. Operating income was $33.0 million, or 30% of revenue, compared to income of $3.5 million in last fiscal year's first quarter.
Non-GAAP gross margin was 48.3%, compared to 46.7% one year ago, primarily as a result of significantly higher revenues. Non-GAAP operating expense decreased year over year from $20.3 million to $18.7 million as a result of the completion of the Company's restructuring activities, and non-GAAP operating income was $34.8 million or 31% of sales.
Balance Sheet and Cash Flow
At quarter end, total cash, restricted cash and current investments increased to $131.0 million. The company generated $9.8 million of cash from operations during the quarter despite sequential increases in inventory and accounts receivable that resulted from the timing of customer shipments.
Second Quarter 2019 Outlook
Based on current market and backlog conditions, revenues for fiscal 2019 second quarter are expected to be between $80 and $90 million. Non-GAAP earnings per diluted share is expected to be $0.52 to $0.62.
Burger concluded, "I’m pleased to see the same technology trends toward connected devices, automotive and 5G that led to strong demand for flex products have now resulted in increased demand for our MLCC test tools, strengthening our belief that overall company demand will remain above historical levels for the foreseeable future."
The company will hold a conference call today at 5:00 p.m. ET. The call will include a review of the financial results, operational performance and business outlook, followed by a question and answer session. The conference call can be accessed by calling 888-419-5570 (domestic participants) or 617-896-9871 (international participants). The conference ID number is 93200917. A live audio webcast can be accessed at www.esi.com.

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,

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


ESI Announces First Quarter Fiscal 2019 Results

or adjusted, financial measures exclude the impact of purchase accounting, equity compensation, restructuring, and other items. We believe that this presentation of non-GAAP financial measures allows investors to assess the company's 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
ESI enables our customers to commercialize technology using precision laser processes. ESI's solutions produce the industry's highest quality and throughput, and target the lowest total cost of ownership. ESI is headquartered in Portland, Oregon, with global operations and subsidiaries in Asia, Europe and North America. More information is available at www.esi.com.

Forward-Looking Statements
The statements contained in this press release that are not statements of historical fact, including our expected financial results for the fiscal 2019 second quarter, our expectations regarding market and backlog conditions, anticipated technology trends, our belief that overall company demand will remain above historical levels for the foreseeable future, and other statements containing the words "believes", "expects", "anticipates," "continue," "will," "may," "should," and similar words, constitute forward-looking statements that are subject to a number of risks and uncertainties. These forward-looking statements are based on information available to us on the date of this release, and we undertake 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 those described in our Annual Report on Form 10-K and Quarterly Reports on Form 10-Q, as well as: 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 industry; 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, including as a result of any shipment delays; our ability to respond promptly to customer requirements; the risk, especially at heightened production levels, that we may not be able to ship products on the schedule required by customers, whether as a result of production delays, supply delays, or otherwise; our ability 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; our ability to create and sustain intellectual property protection around our 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 our new products may not gain acceptance in the marketplace; the risk that new products may not be introduced to the market in the anticipated time frame or at all; foreign currency fluctuations; the risk that duties or tariffs could be imposed or increased on goods imported or exported by us; the risk of timing of shipments or increased costs related to licenses for goods exported by us; the risk that changes to policies regarding immigration and visits to the United States could negatively impact our ability to hire or retain and train qualified personnel or our ability to operate internationally on an integrated basis; our 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.

Contact
Erica Mannion or Michael Funari
Sapphire Investor Relations, LLC
617-542-6180
investorrelations@esi.com


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


ESI Announces First Quarter Fiscal 2019 Results

http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12383176&doc=3

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


ESI Announces First Quarter Fiscal 2019 Results

ELECTRO SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES
First Quarter Fiscal 2019 Results
Condensed Consolidated Statements of Operations
(Unaudited)
 
 
 
 
 
 
 
Fiscal quarter ended
(In thousands, except per share data)
Jun 30, 2018
 
Mar 31, 2018
 
Jul 1, 2017
Net sales:
 
 
 
 
 
Systems
$
96,857

 
$
103,522

 
$
62,093

Services
13,767

 
9,871

 
10,591

Total net sales
110,624

 
113,393

 
72,684

Cost of sales:
 
 
 
 
 
Systems
50,094

 
53,247

 
41,426

Services
7,332

 
5,424

 
4,838

Total cost of sales
57,426

 
58,671

 
46,264

Gross profit
53,198

 
54,722

 
26,420

Gross margin
48.1
%
 
48.3
%
 
36.3
%
Operating expenses:
 
 
 
 
 
Selling, general and administrative
10,130

 
11,128

 
12,808

Research, development and engineering
10,059

 
9,038

 
8,934

Restructuring costs

 
(144
)
 
1,211

Total operating expenses
20,189

 
20,022

 
22,953

Operating income
33,009

 
34,700

 
3,467

Non-operating income (expense):
 
 
 
 
 
Interest and other income, net
452

 
(283
)
 
(184
)
Total non-operating income (loss)
452

 
(283
)
 
(184
)
Income before income taxes
33,461

 
34,417

 
3,283

Provision for (benefit from) income taxes
2,318

 
(40,671
)
 
381

Net income
$
31,143

 
$
75,088

 
$
2,902

Net income per share - basic
$
0.90

 
$
2.19

 
$
0.09

Net income per share - diluted
$
0.87

 
$
2.10

 
$
0.08


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


ESI Announces First Quarter Fiscal 2019 Results

Electro Scientific Industries, Inc.
First Quarter Fiscal 2019 Results
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands)
Jun 30, 2018
 
Mar 31, 2018
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
74,854

 
$
76,792

Short-term investments
55,026

 
47,121

Trade receivables, net
80,525

 
63,044

Inventories
94,265

 
87,686

Shipped systems pending acceptance
1,937

 
4,734

Other current assets (1)
5,041

 
5,493

Total current assets
311,648

 
284,870

Non-current assets:
 
 
 
Property, plant and equipment, net
22,870

 
22,025

Non-current deferred income taxes, net
43,637

 
43,518

Goodwill
2,626

 
2,626

Acquired intangible assets, net
4,812

 
5,169

Other assets(1)
11,110

 
14,780

Total assets
$
396,703

 
$
372,988

Liabilities and shareholders' equity
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
32,616

 
$
37,354

Accrued liabilities
32,193

 
34,533

Deferred revenue
9,026

 
9,818

Total current liabilities
73,835

 
81,705

Non-current liabilities
 
 
 
Long-term debt
12,659

 
12,766

Income taxes payable
2,345

 
1,901

Other liabilities
10,614

 
10,258

Total liabilities
99,453

 
106,630

Shareholders' equity:
 
 
 
Preferred and common stock
211,766

 
210,995

Retained earnings
86,000

 
54,816

Accumulated other comprehensive (loss) income
(516
)
 
547

Total shareholders' equity
297,250

 
266,358

Total liabilities and shareholders' equity
$
396,703

 
$
372,988

End of period shares outstanding
34,525

 
34,387

(1)
On June 30, 2018, $1.1 million of current restricted cash was included in Other current assets. Included in Other assets as of March 31, 2018, is long-term restricted cash of $1.1 million.

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


ESI Announces First Quarter Fiscal 2019 Results

Electro Scientific Industries, Inc.
Analysis of First Quarter Fiscal 2019 Results
(Unaudited)
 
Fiscal quarter ended
(Dollars and shares in thousands)
Jun 30, 2018
 
Mar 31, 2018
 
Dec 30, 2017
 
Oct 1, 2017
 
Jul 1, 2017
Sales detail:
 
 
 
 
 
 
 
 
 
Printed Circuit Board
$
66,337

 
$
70,896

 
$
76,933

 
$
38,187

 
$
46,185

Component Test
9,405

 
8,401

 
6,504

 
7,007

 
7,448

Semiconductor
18,777

 
22,362

 
10,664

 
9,641

 
5,181

Industrial Machining
2,338

 
1,863

 
5,317

 
5,481

 
3,279

Service
13,767

 
9,871

 
11,422

 
10,651

 
10,591

Net Sales
$
110,624

 
$
113,393

 
$
110,840

 
$
70,967

 
$
72,684

 
 
 
 
 
 
 
 
 
 
As % of Net Sales
 
 
 
 
Fiscal quarter ended
GAAP
 
 
 
 
Jun 30, 2018
 
Mar 31, 2018
 
Jul 1, 2017
Gross profit
 
 
 
 
48.1%
 
48.3%
 
36.3%
Selling, general and administrative expense
 
9%
 
10%
 
18%
Research, development and engineering expense
 
9%
 
8%
 
12%
Total operating expenses
 
 
 
 
18%
 
18%
 
32%
Operating income
 
 
 
 
30%
 
31%
 
5%
Non-GAAP
 
 
 
 
 
 
 
 
 
Gross profit
 
 
 
 
48.3%
 
49.2%
 
46.7%
Net operating expenses
 
 
 
 
17%
 
17%
 
28%
Operating income
 
 
 
 
31%
 
33%
 
19%
 
 
 
 
 
 
 
 
 
 
GAAP - Effective tax rate %
 
 
 
 
6.9%
 
(118.2%)
 
11.6%
Weighted average shares outstanding
 
 
 
 
 
 
 
 
 
Basic
 
 
 
 
34,459
 
34,350
 
33,432
Diluted GAAP
 
 
 
 
35,924
 
35,830
 
34,321
Diluted Non-GAAP
 
 
 
 
35,924
 
35,830
 
34,321
End of period employees
 
 
 
 
634
 
615
 
607
 
 
 
 
 
 
 
 
 
 
Reconciliation of Cash and Investments
 
 
 
 
Fiscal quarter ended
 
 
 
 
 
 
 
Jun 30, 2018
 
Mar 31, 2018
 
 
Cash
 
 
 
 
$
25,808

 
$
58,817

 
 
Cash equivalents
 
 
 
 
49,046

 
17,975

 
 
Current restricted cash
 
 
 
 
1,097

 

 
 
Long-term restricted cash
 
 
 
 

 
1,093

 
 
Cash, cash equivalents, and restricted cash at end of period
 
75,951

 
77,885

 
 
Short-term investments
 
 
 
 
55,026

 
47,121

 
 
Cash, restricted cash and current investments
 
$
130,977

 
$
125,006

 
 

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


ESI Announces First Quarter Fiscal 2019 Results

Electro Scientific Industries, Inc.
First Quarter Fiscal 2019 Results
Reconciliation of GAAP to Non-GAAP Financial Measures
(Unaudited)
 
Fiscal quarter ended
(In thousands, except per share data)
Jun 30, 2018
 
Mar 31, 2018
 
Jul 1, 2017
Gross profit per GAAP
$
53,198

 
$
54,722

 
$
26,420

Purchase accounting
243

 
242

 
251

Equity compensation
106

 
69

 
67

Charges for other asset and inventory impairment

 
277

 
7,194

Charges from VAT audit
(97
)
 
521

 

Non-GAAP gross profit
$
53,450

 
$
55,831

 
$
33,932

 
 
 
 
 
 
Operating expenses per GAAP
$
20,189

 
$
20,022

 
$
22,953

Purchase accounting
(114
)
 
(114
)
 
(219
)
Equity compensation
(1,393
)
 
(1,223
)
 
(1,211
)
Restructuring costs

 
144

 
(1,211
)
Non-GAAP operating expenses
$
18,682

 
$
18,829

 
$
20,312

 
 
 
 
 
 
Operating income per GAAP
$
33,009

 
$
34,700

 
$
3,467

Non-GAAP adjustments to gross profit
252

 
1,109

 
7,512

Non-GAAP adjustments to operating expenses
1,507

 
1,193

 
2,641

Non-GAAP operating income
$
34,768

 
$
37,002

 
$
13,620

 
 
 
 
 
 
Non-operating income (expense), net per GAAP
$
452

 
$
(283
)
 
$
(184
)
(Income) expense, on charges from VAT audit, Gain on asset sale, net of other non-operating expense (income)
(49
)
 
336

 

Non-GAAP non-operating income
(expense)
$
403

 
$
53

 
$
(184
)
Non-GAAP income before income taxes
$
35,171

 
$
37,055

 
$
13,436

 
 
 
 
 
 
Net income per GAAP
$
31,143

 
$
75,088

 
$
2,902

Non-GAAP adjustments to gross profit
252

 
1,109

 
7,512

Non-GAAP adjustments to operating expenses
1,507

 
1,193

 
2,641

Non-GAAP adjustments to non-operating expense
(49
)
 
336

 

Income tax effect of other non-GAAP adjustments
1,734

 
(41,225
)
 
(24
)
Non-GAAP net income
$
34,587

 
$
36,501

 
$
13,031

Basic Non-GAAP net income per share
$
1.00

 
$
1.06

 
$
0.39

Diluted Non-GAAP net income per share
$
0.96

 
$
1.02

 
$
0.38


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


ESI Announces First Quarter Fiscal 2019 Results

Electro Scientific Industries, Inc.
First Quarter Fiscal 2019 Results
Condensed Consolidated Statements of Cash Flows
(Unaudited)
 
Fiscal quarter ended
(In thousands)
Jun 30, 2018
 
Mar 31, 2018
 
Jul 1, 2017
Net income
$
31,143

 
$
75,088

 
$
2,902

Non-cash adjustments and changes in operating activities
(21,374
)
 
(48,457
)
 
4,529

Net cash provided by operating activities
9,769

 
26,631

 
7,431

Net cash (used in) investing activities
(9,916
)
 
(10,993
)
 
(4,789
)
Net cash used in financing activities
(840
)
 
(1,739
)
 
(506
)
Effect of exchange rate changes on cash
(947
)
 
648

 
135

NET CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH
(1,934
)
 
14,547

 
2,271

CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF PERIOD
77,885

 
63,338

 
57,732

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT END OF PERIOD
$
75,951

 
$
77,885

 
$
60,003




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


ESI Announces First Quarter Fiscal 2019 Results

Reconciliation of GAAP to Non-GAAP Financial Measures - Projected
Fiscal quarter ending September 29, 2018
 
 
Non-GAAP earnings per diluted share
0.52 - 0.62
Purchase accounting
(0.02)
Equity compensation
(0.05)
Other items
(0.10)
GAAP earnings per diluted share
0.35 - 0.45


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