<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) DECEMBER 1, 1997
COMMISSION FILE NUMBER 0-12853
ELECTRO SCIENTIFIC INDUSTRIES, INC.
OREGON 93-0370304
(STATE OR OTHER JURISDICTION (IRS EMPLOYER IDENTIFICATION NO.)
OF INCORPORATION)
13900 N.W. SCIENCE PARK DRIVE, PORTLAND, OREGON 97229
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (503) 641-4141
1
<PAGE>
Item 2. Acquisition or Disposition of Assets
On December 1, 1997, Electro Scientific Industries, Inc. (the "Company")
acquired Applied Intelligent Systems, Inc. ( "AISI") by means of a merger (the
"Merger") of Asteroid Merger Corp., a wholly owned subsidiary of the Company,
with and into AISI. AISI, a privately held Michigan corporation, provides
machine vision solutions for automated process control and visual inspection for
the assembly of computer chips and electronic printed circuit boards. The
Company issued 1,125,681 shares of its Common Stock to the shareholders of AISI,
as merger consideration in the transaction. The Company also assumed options
held by certain AISI employees, providing for the issuance of up to 274,319
shares of Company Common Stock. AISI will operate as a wholly owned subsidiary
of the Company.
Item 7. Financial Statements and Exhibits
(a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED. Financial
statements of AISI are not filed because none of the conditions
specified in Rule 1-02 (w) of Regulation S-X exceeds 20 percent.
(b) RESTATED FINANCIAL STATEMENTS OF THE COMPANY. Pages 3 - 7 of
this Form 8-K/A Amendment No. 1 contain Consolidated Financial
Statements of the Company that have been restated to give
retroactive effect to the Merger which has been accounted for as
a pooling of interests.
(c) EXHIBITS
2.1 Agreement of Reorganization and Merger, dated December 1,
1997, by and among the Company, AISI, and Asteroid Merger
Corp. Included as an exhibit to the original Current
Report on Form 8-K dated December 1, 1997, as filed on
December 12, 1997.
23.1 Consent of Independent Public Accountants.
2
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ELECTRO SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATED BALANCE SHEETS
ASSETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
MAY 31
------------------------
NOVEMBER 30, 1997* 1997 1996
------------------ --------- ----------
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . $ 15,685 $ 20,315 $ 20,372
Securities available for sale . . . . . . . . . . . . . . . . . . . . 29,231 27,860 18,363
---------- ---------- ---------
Total cash and securities. . . . . . . . . . . . . . . . . . 44,916 48,175 38,735
Trade receivables, less allowance for doubtful accounts of $584,
$377 and $489 at November 30, 1997 and May 31, 1997 and 1996 56,391 54,321 45,094
Inventories -
Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . 8,297 5,726 3,911
Work-in-process. . . . . . . . . . . . . . . . . . . . . . . . . 12,168 6,952 7,211
Raw materials and purchased parts. . . . . . . . . . . . . . . . 24,994 22,345 23,218
---------- ---------- ---------
Total inventories. . . . . . . . . . . . . . . . . . . . . . 45,459 35,023 34,340
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . 3,966 3,966 4,347
Other current assets. . . . . . . . . . . . . . . . . . . . . . . . . 2,123 675 866
---------- ---------- ---------
Total current assets . . . . . . . . . . . . . . . . . . . . 152,855 142,160 123,382
PROPERTY AND EQUIPMENT, AT COST. . . . . . . . . . . . . . . . . . . . . . 53,699 46,236 44,308
Less-Accumulated depreciation . . . . . . . . . . . . . . . . . . . . (29,364) (27,203) (24,897)
---------- ---------- ---------
Net property and equipment . . . . . . . . . . . . . . . . . 24,335 19,033 19,411
DEFERRED INCOME TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . 4,042 1,042 1,137
OTHER ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,028 5,115 4,602
---------- ---------- ---------
$ 190,260 $ 167,350 $148,532
---------- ---------- ---------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 10,880 $ 8,269 $ 7,022
Accrued liabilities -
Payroll related. . . . . . . . . . . . . . . . . . . . . . . . . 4,394 4,749 4,090
Commissions. . . . . . . . . . . . . . . . . . . . . . . . . . . 3,511 2,241 2,001
Warranty reserve . . . . . . . . . . . . . . . . . . . . . . . . 2,282 1,870 1,405
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . (876) 1,215 3,150
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,067 1,645 4,210
---------- ---------- ---------
Total accrued liabilities. . . . . . . . . . . . . . . . . . 11,378 11,720 14,856
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,370 666 488
---------- ---------- ---------
Total current liabilities . . . . . . . . . . . . . . . . . 23,628 20,655 22,366
---------- ---------- ---------
SHAREHOLDERS' EQUITY:
Preferred stock, without par value; 1,000 shares authorized;
no shares issued . . . . . . . . . . . . . . . . . . . . . . . . . -- -- --
Common stock, without par value; 40,000 shares authorized;
11,081, 10,560 and 10,419 shares issued and outstanding
at November 30, 1997 and May 31, 1997 and 1996. . . . . . . . . . . 96,567 81,423 79,576
Retained earnings. . . . . . . . . . . . . . . . . . . . . . . . . . 70,065 65,272 46,590
---------- ---------- ---------
Total shareholders' equity. . . . . . . . . . . . . . . . . . . . 166,632 146,695 126,166
---------- ---------- ---------
$190,260 $167,350 $148,532
---------- ---------- ---------
</TABLE>
The accompanying notes are an integral part of these statements.
*Unaudited
3
<PAGE>
ELECTRO SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
-----------------------
NOVEMBER 30, YEAR ENDED MAY 31,
----------------------- ---------------------------------------
1997* 1996* 1997 1996 1995
--------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net sales . . . . . . . . . . . . . . . . . . . . $116,991 $80,078 $180,035 $189,439 $130,736
Cost of sales. . . . . . . . . . . . . . . . . . . 52,150 36,903 83,926 86,065 60,422
--------- --------- --------- --------- ---------
Gross margin. . . . . . . . . . . . . . . . . 64,841 43,175 96,109 103,374 70,314
Operating expenses:
Selling, service and administrative . . . . . 28,272 20,486 43,359 46,230 33,522
Research, development and engineering . . . . 13,818 11,080 22,675 21,517 17,862
Acquired in-process research and development
and merger related expenses . . . . . . . . . . 11,124 0 0 6,000 0
--------- --------- --------- --------- ---------
Total operating expenses. . . . . . . . . . . 53,214 31,566 66,034 73,747 51,384
--------- --------- --------- --------- ---------
Operating income . . . . . . . . . . . . . . . . . 11,627 11,609 30,075 29,627 18,930
Interest income .. . . . . . . . . . . . . . . . . 910 737 1,516 1,280 510
Other income (expense), net. . . . . . . . . . . . 324 (867) (664) (789) 107
--------- --------- --------- --------- ---------
Income before income taxes . . . . . . . . . . . . 12,861 11,479 30,927 30,118 19,547
Provision for income taxes . . . . . . . . . . . . 6,804 5,391 11,468 9,711 4,766
--------- --------- --------- --------- ---------
Net income . . . . . . . . . . . . . . . . . . . . $ 6,057 $ 6,088 $ 19,459 $20,407 $14,781
--------- --------- --------- --------- ---------
Net income per share. . . . . . . . . . . . . . . $ 0.55 $ 0.58 $ 1.85 $ 1.96 $ 1.58
--------- --------- --------- --------- ---------
Weighted average number of shares
used in computing per share amounts . . . . . 11,022 10,488 10,499 10,432 9,336
</TABLE>
The accompanying notes are an integral part of these statements.
*Unaudited
4
<PAGE>
ELECTRO SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK
----------------------
NUMBER OF RETAINED
SHARES AMOUNT EARNINGS TOTAL
--------- ---------- --------- --------
<S> <C> <C> <C> <C>
BALANCE AT MAY 31, 1994, as previously reported. . . . . . . . . 7,120 $22,247 $ 31,312 $53,559
Adjustments for AISI, Inc. Pooling-of-Interests . . . . . . . 1,023 23,343 (19,987) 3,356
-------- --------- --------- ---------
BALANCE AT MAY 31, 1994, adjusted. . . . . . . . . . . . . . . . 8,143 $45,590 $11,325 $56,915
Net income. . . . . . . . . . . . . . . . . . . . . . . . . . -- -- 14,781 14,781
Non-employee directors stock incentive plan . . . . . . . . . -- 19 -- 19
Stock plans:
Employee stock plans. . . . . . . . . . . . . . . . . . . 268 2,233 -- 2,233
Tax benefit of stock options exercised. . . . . . . . . . -- 1,068 -- 1,068
Shares issued for acquisitions. . . . . . . . . . . . . . . . 333 1,939 -- 1,939
Shares issued in stock offering . . . . . . . . . . . . . . . 1,380 22,535 -- 22,535
Unrealized gain on securities . . . . . . . . . . . . . . . . -- -- 60 60
Cumulative translation adjustment . . . . . . . . . . . . . . -- -- 1,655 1,655
-------- --------- --------- ---------
BALANCE AT MAY 31, 1995. . . . . . . . . . . . . . . . . . . . . 10,124 73,384 27,821 101,205
Net income. . . . . . . . . . . . . . . . . . . . . . . . . . -- -- 20,407 20,407
Stock plans:
Employee stock plans. . . . . . . . . . . . . . . . . . . 99 870 -- 870
Tax benefit of stock options exercised. . . . . . . . . . -- 540 -- 540
Shares issued for acquisitions. . . . . . . . . . . . . . . . 196 4,782 -- 4,782
Unrealized loss on securities . . . . . . . . . . . . . . . . -- -- (42) (42)
Cumulative translation adjustment . . . . . . . . . . . . . . -- -- (1,596) (1,596)
-------- --------- --------- ---------
BALANCE AT MAY 31, 1996. . . . . . . . . . . . . . . . . . . . . 10,419 79,576 46,590 126,166
Net income. . . . . . . . . . . . . . . . . . . . . . . . . . -- -- 19,459 19,459
Adjustment to align Chip Star, Inc. fiscal year with May 31 . -- -- (325) (325)
Stock plans:
Employee stock plans. . . . . . . . . . . . . . . . . . . 141 1,286 -- 1,286
Tax benefit of stock options exercised. . . . . . . . . . -- 561 -- 561
Unrealized loss on securities . . . . . . . . . . . . . . . . -- -- (19) (19)
Cumulative translation adjustment . . . . . . . . . . . . . . -- -- (433) (433)
-------- --------- --------- ---------
BALANCE AT MAY 31, 1997. . . . . . . . . . . . . . . . . . . . . 10,560 81,423 65,272 146,695
Net income. . . . . . . . . . . . . . . . . . . . . . . . . . -- -- 6,057 6,057
Adjustment to align AISI. fiscal year with May 31 . . . . . . -- -- (565) (565)
Stock plans:
Employee stock plans. . . . . . . . . . . . . . . . . . . 174 3,280 -- 3,280
Shares issued for acquisitions. . . . . . . . . . . . . . . . 347 11,864 -- 11,864
Cumulative translation adjustment . . . . . . . . . . . . . . -- -- (699) (699)
-------- --------- --------- ---------
BALANCE AT NOVEMBER 30, 1997*. . . . . . . . . . . . . . . . . . 11,081 96,567 $70,065 $166,632
-------- --------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these statements.
*Unaudited
5
<PAGE>
ELECTRO SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF
SHAREHOLDERS' EQUITY SUPPLEMENTAL CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
---------------------
NOVEMBER 30, YEAR ENDED MAY 31,
--------------------- ----------------------------
1997* 1996* 1997 1996 1995
-------- -------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,057 $ 6,088 $19,459 $20,407 $14,781
Adjustment to align Chip Star, Inc. fiscal year with May 31 . . . . . . -- -- (325) -- --
Adjustment to align AISI, Inc. fiscal year with May 31. . . . . . . . . (565) -- -- -- --
Adjustments to reconcile net income to cash provided by (used in)
operating activities:
Acquired in-process research and development and merger
related expenses . . . . . . . . . . . . . . . . . . . . . . 11,124 -- -- 6,000 --
Depreciation and amortization . . . . . . . . . . . . . . . . . 2,803 2,077 4,043 3,830 3,193
Other non-cash charges (credits). . . . . . . . . . . . . . . . -- 157 156 52 (643)
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . -- -- 476 (1,470) (2,326)
Changes in operating accounts:
Increase in trade receivables . . . . . . . . . . . . . . . . . (640) (6,296) (11,862) (4,347) (17,379)
(Increase) decrease in inventories. . . . . . . . . . . . . . . (5,453) (1,725) 83 (3,682) (4,787)
(Increase) decrease in other current assets . . . . . . . . . . (1,348) 1,560 1,846 (1,851) (232)
Decrease in current liabilities . . . . . . . . . . . . . . . . (4,661) (3,270) (1,031) (3,470) 7,380
--------- --------- -------- --------- --------
Net cash provided (used in) by operating activities . . . . . . . . . . 7,317 (1,409) 12,845 15,469 (13)
--------- --------- -------- --------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of XRL subsidiary, net of cash acquired (1). . . . . . . . . . -- -- -- (492) --
Purchase of CLS subsidiary, net of cash acquired (2). . . . . . . . . . -- -- -- -- (707)
Purchase of property and equipment. . . . . . . . . . . . . . . . . . . (6,766) (2,221) (4,599) (5,263) (3,998)
Proceeds from the sale of property and equipment. . . . . . . . . . . . -- -- -- -- 648
Purchase of securities. . . . . . . . . . . . . . . . . . . . . . . . . (12,871) (25,191) (42,316) (30,986) (20,950)
Proceeds from sales of securities and maturing securities . . . . . . . 11,500 20,800 32,800 29,850 4,000
(Increase) decrease in other assets . . . . . . . . . . . . . . . . . . (37) (662) (840) 37 (1,499)
--------- --------- -------- --------- --------
Net cash used in investing activities . . . . . . . . . . . . . . . . . (8,174) (7,274) (14,955) (6,854) (22,506)
--------- --------- -------- --------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Repayments of Dynamotion subsidiary debt (3). . . . . . . . . . . . . . (6,979) -- -- -- --
Net (repayments) borrowings of AISI subsidiary. . . . . . . . . . . . . (74) (42) 206 (1,210) 1,364
Payments to retire other debt . . . . . . . . . . . . . . . . . . . . . -- -- -- -- (1,383)
Proceeds from secondary stock offering. . . . . . . . . . . . . . . . . -- -- -- -- 22,535
Proceeds from exercise of stock options and stock plans and
related tax benefits. . . . . . . . . . . . . . . . . . . . . . . . . . 3,280 269 1,847 1,410 3,301
--------- --------- -------- --------- --------
Net cash (used in) provided by financing activities . . . . . . . . . . (3,773) 227 2,053 200 25,817
--------- --------- -------- --------- --------
NET CHANGE IN CASH AND CASH EQUIVALENTS. . . . . . . . . . . . . . . . . . (4,630) (8,456) (57) 8,815 3,298
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD . . . . . . . . . . . . . 20,315 20,372 20,372 11,557 8,259
--------- --------- -------- --------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD . . . . . . . . . . . . . . . . $15,685 $11,916 $20,315 $20,372 $11,557
--------- --------- -------- --------- --------
--------- --------- -------- --------- --------
</TABLE>
The accompanying notes are an integral part of these statements.
*Unaudited
6
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
(1) Acquisition of XRL subsidiary:
Assets less liabilities acquired, net of cash acquired . . . . . . . $(5,073)
Issuance of common stock . . . . . . . . . . . . . . . . . . . . . . 4,581
---------
Net cash used to acquire business. . . . . . . . . . . . . . . . . . $ (492)
---------
(2) Acquisition of Chicago Laser subsidiary:
Assets less liabilities acquired, net of cash acquired . . . . . . . $(2,646)
Issuance of common stock . . . . . . . . . . . . . . . . . . . . . . 1,939
---------
Net cash used to acquire business. . . . . . . . . . . . . . . . . . $ (707)
---------
(3) Acquisition of Dynamotion subsidiary:
Assets less liabilities acquired, net of cash. . . . . . . . . . . . $(11,950)
Issuance of common stock and common stock options. . . . . . . . . . 11,950
---------
Net cash used to acquire business. . . . . . . . . . . . . . . . . . $ 0
---------
---------
</TABLE>
Cash payments for interest were not significant for the six months ended
November 30, 1997 and 1996, or the years ended May 31, 1997, 1996 and 1995.
7
<PAGE>
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
BUSINESS ENVIRONMENT
The accompanying supplemental consolidated financial statements include the
accounts of Electro Scientific Industries, Inc. and its subsidiaries (the
Company), all of which are wholly owned. The Company designs and manufactures
sophisticated products used around the world in electronics manufacturing
including: laser manufacturing systems for semiconductor yield improvement,
production and test equipment for the manufacture of surface mount ceramic
capacitors, circuit fine tuning systems, precision laser and mechanical
electronic packaging production systems and machine vision systems. The Company
serves the global electronics market from its headquarters in Portland, Oregon
and through subsidiaries located in the United States, Europe and Asia.
CONCENTRATIONS OF CREDIT RISK
The Company uses financial instruments that potentially subject it to
concentrations of credit risk. Such instruments include cash equivalents,
securities held for sale, trade receivables and financial instruments used in
hedging activities. The Company invests its cash in cash deposits, money
market funds, commercial paper, certificates of deposit and readily
marketable debt securities. The Company places its investments with high
credit quality financial institutions and limits the credit exposure from any
one institution or instrument. To date, the Company has not experienced
losses on any of these investments. The Company sells a significant portion
of its products to a small number of electronics manufacturers: 45.0% of
fiscal 1997 revenues were derived from ten customers. The Company's
operating results could be adversely affected if the financial condition and
operations of these key customers decline.
CONCENTRATIONS OF OTHER RISKS
The Company's operations involve a number of other risks and uncertainties
including but not limited to the cyclicality of the electronics market, rapidly
changing technology, international operations and hedging exposures.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
All material intercompany accounts and transactions have been eliminated.
8
<PAGE>
INTERIM FINANCIAL INFORMATION
The interim consolidated financial statements included herein have been
prepared, without audit, pursuant to the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations, although the management of the Company believes that the
disclosures are adequate to make the information presented not misleading.
Interim financial statements are by necessity somewhat tentative; judgments are
used to estimate interim amounts for items that are normally determinable only
on an annual basis. For example, the effective income tax rate is based on
estimates of annual amounts of taxable income, tax credits and other factors.
The interim period information included herein reflects all adjustments
which are, in the opinion of the management of the Company, necessary for a fair
statement of the results of the respective interim periods. Results of
operations for interim periods are not necessarily indicative of results to be
expected for an entire year.
BASIS OF PRESENTATION
In June, 1997, ESI merged with Chip Star, Inc. (Chip Star), a
privately-held company based in San Marcos, California. Chip Star produces
capital equipment for producers of surface mount ceramic capacitors.
Consideration paid to Chip Star was 700 shares of ESI stock. The merger was
accounted for as a pooling-of-interests. Accordingly, all financial
statements and footnote data have been restated.
In December 1997, ESI merged with AISI, a privately-held company based in
Ann Arbor, Michigan. AISI provides machine vision solutions for the
semiconductor and electronics industries. Consideration paid to AISI was
1,400 shares of ESI stock, of which 1,126 have been issued and the
remaining have been reserved for stock options assumed in the acquisition. The
merger was accounted for as a pooling-of-interests. Accordingly, all financial
statements and footnote data have been restated. The following is a
reconciliation of certain restated amounts with amounts previously reported.
<TABLE>
<CAPTION>
SIX MONTHS ENDED NOVEMBER 30, YEAR ENDED MAY 31,
------------------------------- --------------------------------------
1997 1996 1997 1996 1995
---------- --------- -------- --------- ---------
<S> <C> <C> <C> <C> <C>
Sales:
ESI. . . . . . . . . . . . . . . . . . $ 99,746 $ 69,957 $150,159 $159,705 $108,215
Chip Star. . . . . . . . . . . . . . . -- 3,657 9,990 6.605 4,685
AISI . . . . . . . . . . . . . . . . . 17,245 6,464 19,886 23,129 17,836
---------- --------- -------- --------- ---------
As restated . . . . . . . . . . . . $116,991 $ 80,078 $180,035 $189,439 $130,736
Net income:
ESI. . . . . . . . . . . . . . . . . . $ 2,309 $ 8,966 $ 18,952 $ 16,082 $ 11,517
Chip Star. . . . . . . . . . . . . . . -- 730 2,298 1,217 700
AISI . . . . . . . . . . . . . . . . . 3,748 (3,608) (1,791) 3,108 2,564
---------- --------- -------- --------- ---------
As restated. . . . . . . . . . . . . $ 6,057 $ 6,088 $ 19,459 $ 20,407 $ 14,781
</TABLE>
9
<PAGE>
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results may differ from those estimates and such
differences could be material to the financial statements.
RECLASSIFICATIONS
Certain reclassifications have been made in the accompanying supplemental
consolidated financial statements for 1996 to conform with the 1997
presentation.
REVENUE RECOGNITION
The Company generally recognizes revenue at the time of shipment.
PRODUCT WARRANTY
The Company generally warrants its systems for a period of up to 12 months
for material and labor to repair and service the system. A provision for the
estimated cost related to warranty is recorded upon shipment.
RESEARCH AND DEVELOPMENT
Research and development costs are expensed as incurred.
TAXES ON INCOME
Deferred income taxes have not been provided on unremitted earnings of
foreign subsidiaries as the Company believes any U.S. tax on such earnings would
be substantially offset by associated foreign tax credits.
NET INCOME PER SHARE
Net income per share is computed using the weighted average number of
common shares and common stock equivalents (stock options) outstanding, if
significant.
CASH EQUIVALENTS
The Company considers all highly liquid investments with a maturity of
three months or less at date of purchase to be cash equivalents.
10
<PAGE>
INVENTORIES
Inventories are principally valued at standard costs which approximate the
lower of cost (first-in, first-out) or market. Costs utilized for inventory
valuation purposes include material, labor and manufacturing overhead.
DEPRECIATION AND CAPITALIZATION POLICIES
Depreciation is determined on the declining balance and straight-line
methods based on the following useful lives: buildings: 25 to 40 years; building
improvements: 5 to 15 years; and machinery and equipment: 3 to 10 years.
Expenditures for maintenance, repairs and minor improvements are charged to
expense. Major improvements and additions are capitalized. When property is sold
or retired, the cost and related accumulated depreciation are removed from the
accounts and the resulting gain or loss is included in other expense.
FOREIGN CURRENCY TRANSLATION
The Company accounts for foreign currency translation in accordance with
Statement of Financial Accounting Standards No. 52. The total cumulative
translation adjustment included in retained earnings is $(4), $429 and $2,025 at
May 31, 1997, 1996 and 1995, respectively. Foreign currency transaction losses
were $176 and $227 for the years ended May 31, 1997 and 1995, and a gain of
$380 for the year ended May 31, 1996. These amounts are included in other
expense in the accompanying Supplemental Consolidated Statements of Income.
PROPERTY AND EQUIPMENT
Major classes of property and equipment consist of the following:
<TABLE>
<CAPTION>
MAY 31,
1997 1996
--------- ---------
<S> <C> <C>
Land. . . . . . . . . . . . . $ 3,419 $ 3,419
Buildings and improvements. . 13,803 13,342
Machinery and equipment . . . 28,652 26,925
Construction in progress. . . 362 622
--------- ---------
$46,236 $ 44,308
--------- ---------
</TABLE>
LINE OF CREDIT
The Company has a short-term revolving line of credit with a large
foreign bank totaling $7,000. This line expires in September 1998. Management
expects to renew the revolver under similar terms or secure alternate financing.
At the Company's option, the interest rate is either prime or LIBOR plus 1.25
percent. There were no borrowings outstanding under the line at anytime during
fiscal 1997.
11
<PAGE>
Also, AISI had a line of credit totaling $3,000 with an interest rate set
at prime. Additionally, they had a capital lease line totalling $2,000. There
were no borrowings outstanding under the line of credit at any time during
fiscal 1997 but the lease line had a $374 balance at May 31, 1997. Both the
additional line of credit and lease line were canceled as of December 1, 1997.
EMPLOYEE BENEFIT PLANS
The Company has an employee savings plan under the provisions of section
401(k) of the Internal Revenue Code. The Company contributed $406, $462 and $334
to the plan for the years ended May 31, 1997, 1996 and 1995, respectively.
INCOME TAXES
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS
109). Under the liability method specified by SFAS 109, the deferred tax assets
and liabilities are determined based on the temporary differences between the
financial statement and tax bases of assets and liabilities as measured by the
enacted tax rates for the years in which the taxes are expected to be paid.
The net deferred tax asset as of May 31, 1997 and May 31, 1996 consists of
the following tax effects relating to temporary differences and carryforwards:
<TABLE>
<CAPTION>
MAY 31,
------------------
1997 1996
------- -------
<S> <C> <C>
Deferred tax assets:
Inventory valuation. . . . . . . . $ 2,065 $ 1,629
Vacation pay . . . . . . . . . . . 695 606
Warranty costs . . . . . . . . . . 654 502
Other accrued expenses . . . . . . 1,114 795
------- -------
4,528 3,532
Tax loss and credit carryforwards. 6,847 7,111
------- -------
Total deferred tax assets. . . 11,375 10,643
Deferred tax liabilities . . . . . . (571) (313)
Valuation allowance. . . . . . . . . $(5,796) $(4,846)
------- --------
Net deferred tax asset . . . . . . . $ 5,008 $ 5,484
------- -------
</TABLE>
At May 31, 1997, there were net operating losses, general business and
AMT credit carryforwards of $18,162 available for U.S. federal income tax
purposes. These losses were acquired as part of the XRL and AISI
acquisitions and expire through 2011. These losses and carryforwards are
subject to certain limitations caused by the change in ownership of AISI.
Accordingly, their utilization in future periods may be severely restricted.
Given these limitations, some of these losses may not be realizable, and
accordingly, a valuation allowance has been recorded.
12
<PAGE>
The components of income before income taxes and the provision for income
taxes are as follows:
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
-------------------------------
1997 1996 1995
--------- -------- ---------
<S> <C> <C> <C>
Income before income taxes:
Domestic . . . . . . . . . . . . . . . . . . . . . $26,415 $28,481 $16,459
Foreign. . . . . . . . . . . . . . . . . . . . . . 4,512 1,637 3,088
--------- -------- ---------
$30,927 $30,118 19,547
--------- -------- ---------
Provision for income taxes:
Current:
U.S. Federal and State . . . . . . . . . . . . . $ 8,528 $ 9,754 $ 4,288
Foreign. . . . . . . . . . . . . . . . . . . . . 1,903 887 1,736
--------- -------- ---------
10,431 10,641 6,024
Deferred . . . . . . . . . . . . . . . . . . . . 476 (1,470) (2,326)
Income tax effect of stock options exercised . . 561 540 1,068
--------- -------- ---------
$11,468 $ 9,711 $4,766
--------- -------- ---------
</TABLE>
In accordance with SFAS 109, the tax benefit related to stock option
exercises has been recorded as an increase to Common Stock rather than a
reduction to the provision for income taxes.
A reconciliation of the provision for income taxes at the federal statutory
income tax rate to the provision for income taxes as reported is as follows:
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
-------------------------------
1997 1996 1995
--------- -------- ---------
<S> <C> <C> <C>
Provision computed at federal statutory rate . . . . . . . . $10,825 $10,541 $ 6,841
Higher than U.S. tax rates in foreign jurisdictions. . . . . 323 314 753
Impact of U.S. tax loss and credit carryforwards utilization 546 (1,411) (1,958)
Impact of state taxes. . . . . . . . . . . . . . . . . . . . 1,386 1,259 534
Benefit of foreign sales corporation (FSC) . . . . . . . . . (1,468) (137) (217)
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . (144) 545 213
--------- -------- ---------
$11,468 $ 9,711 $ 4,766
--------- -------- ---------
</TABLE>
Consolidated income tax payments amounted to $12,364, $9,042 and $4,800 for
the years ended May 31, 1997, 1996 and 1995, respectively.
13
<PAGE>
EARNINGS PER SHARE
In March 1997, the Financial Accounting Standards Board issued Statement
128, EARNINGS PER SHARE ("SFAS 128"), superseding APB Opinion 15. SFAS 128 is
required to be adopted for periods ending after December 15, 1997. When
adopted, all prior earnings per share ("EPS") calculations will be restated to
conform to SFAS 128. The pro forma effects of applying SFAS 128 to EPS are as
follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
NOVEMBER 30, YEAR ENDED MAY 31,
------------------- ------------------------------
1997 1996 1997 1996 1995
------ ------ ----- ------ ------
<S> <C> <C> <C> <C> <C>
Primary EPS as reported $0.55 $0.58 $1.85 $1.96 $1.58
Effect of SFAS 128 0.00 0.00 0.00 0.00 0.00
------ ------ ----- ------ ------
Basic EPS as restated $0.55 $0.58 $1.85 $1.96 $1.58
------ ------ ----- ------ ------
------ ------ ----- ------ ------
Fully diluted EPS as reported $0.55 $0.58 $1.85 $1.96 $1.58
Effect of SFAS 128 (0.02) (0.02) (0.05) (0.06) (0.04)
------ ------ ----- ------ ------
Diluted EPS as restated $0.53 $0.56 $1.80 $1.90 $1.54
------ ------ ----- ------ ------
------ ------ ----- ------ ------
</TABLE>
COMMITMENTS AND CONTINGENCIES
The Company has limited involvement with derivative financial instruments
and does not use them for trading purposes. Derivatives are used to manage well
defined foreign currency risks: the Company enters into forward exchange
contracts to hedge the value of accounts receivable denominated in a foreign
currency. Foreign exchange contracts have gains and losses that are recognized
at the settlement date. At May 31, 1997 and 1996, the Company had forward
exchange contracts totaling $5,470 and $7,460, respectively. These contracts
generally mature in less than one year and the counterparty is a large, widely
recognized international bank; therefore, risk of credit loss as a result of
nonperformance by the bank is minimal. The use of derivatives does not have a
significant effect on the Company's results of operations or its financial
position.
The Company leases equipment and office space under operating leases which
are non-cancelable and expire on various dates through 2002. The aggregate
minimum commitment for rentals under operating leases beyond May 31, 1997 is not
significant.
The Company is a party to various legal proceedings. Management believes
that the outcome of such proceedings will not have a material effect on the
business, financial position or results of operations of the Company.
14
<PAGE>
SECURITIES AVAILABLE FOR SALE
The Company accounts for securities in accordance with Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities" (SFAS 115). The Company classifies its marketable
debt securities as Securities Available for Sale in the accompanying
Consolidated Balance Sheets. The fair market value of these securities at May
31, 1997 and 1996 is $27,860 and $18,363, respectively. All of the Company's
marketable debt securities are invested in high-credit quality tax advantaged
securities with maturities of less than one year from the date of purchase; the
amortized cost of these securities approximates fair market value.
During fiscal 1997 and 1996, proceeds of $32,800 and $29,850, respectively,
resulted from the sales or maturities of securities; there were no realized
gains or losses associated with these sales or maturities.
SHAREHOLDER RIGHTS PLAN
In May 1989, the Company adopted a Shareholder Rights Plan and declared a
dividend distribution of one Right for each outstanding share of Common Stock,
payable to holders of record on June 23, 1989. Under certain conditions, each
Right may be exercised to purchase 1/100 of a share of Series A No Par Preferred
Stock at a purchase price of $55, subject to adjustment. The Rights are not
presently exercisable and will only become exercisable following the occurrence
of certain specified events. If these specified events occur, each Right will be
adjusted to entitle its holder to receive, upon exercise, Common Stock (or, in
certain circumstances, other assets of the Company) having a value equal to two
times the exercise price of the Right or each Right will be adjusted to entitle
its holder to receive, upon exercise, common stock of the acquiring company
having a value equal to two times the exercise price of the Right, depending on
the circumstances. The Rights expire on May 12, 1999 and may be redeemed by the
Company for $0.01 per Right. The Rights do not have voting or dividend rights,
and until they become exercisable, have no dilutive effect on the earnings of
the Company.
STOCK PLANS
The Company has stock option and restricted stock grant plans for officers
and employees. During fiscal 1997, ESI recorded $475 of compensation expense
related to stock grants earned in April 1997. Awards under these plans are
determined by the Compensation Committee of the Board of Directors. Stock
appreciation rights may be granted in connection with options, although no
options have been granted that include stock appreciation rights. Option prices
are at fair market value at the date of the grant and all expire ten years from
the date of grant.
The Company has an employee stock purchase plan which allows qualified
employees to direct up to 15% of base pay for purchases of stock. The purchase
price for shares purchased under the Plan is 85% of the fair market value of
stock.
15
<PAGE>
The Company accounts for its stock option plans and its employee stock
purchase plan in accordance with the provisions of the Accounting Principles
Board's Opinion No. 25 (APB 25), "Accounting For Stock Issued to Employees." In
1995, the Financial Accounting Standards Board released Statement of Financial
Accounting Standard No. 123 (SFAS 123), "Accounting For Stock Based
Compensation." SFAS 123 provides an alternative to APB 25 and was effective
beginning with the Company's 1996 fiscal year. The Company will continue to
account for its employee stock plans in accordance with the provisions of APB
25. Accordingly, the Company has elected to provide pro forma disclosures as
required by SFAS 123.
The Company has computed, for pro forma disclosure purposes, the value of
all options granted under the stock option plan to be $14.16 and $11.99 for 1997
and 1996. The pro forma value of options granted under the employee stock
purchase plan is immaterial for 1997 and 1996. These computations were made
using the Black-Scholes option-pricing model, as prescribed by SFAS 123, with
the following weighted average assumptions for grants in 1997 and 1996:
<TABLE>
<CAPTION>
<S> <C>
Risk-free interest rate 7.5%
Expected dividend yield 0%
Expected life stock option plan 7 years
Expected volatility 48.5%
</TABLE>
The total value of options granted would be amortized on a pro rata basis
over the vesting period of the options. Options generally vest equally over
four years. If the Company had accounted for these plans in accordance with
SFAS 123, the Company's net income and net income per share would have decreased
as reflected in the following pro forma amounts:
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
---------------------
1997 1996
--------- ---------
<S> <C> <C>
NET INCOME:
As reported. . . . . . . . $19,459 $20,407
Pro forma. . . . . . . . . 18,693 20,020
NET INCOME PER SHARE:
As reported. . . . . . . . $ 1.85 $ 1.96
Pro forma. . . . . . . . . 1.80 1.93
</TABLE>
16
<PAGE>
The following table summarizes activity in stock plans for the years ended
May 31, 1997 and 1996:
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
-----------------
1997 1996
-------------------------------------------------
WEIGHTED- WEIGHTED-
AVERAGE AVERAGE
SHARES EXERCISE PRICE SHARES EXERCISE PRICE
------- -------------- ------ --------------
<S> <C> <C> <C> <C>
Options outstanding at beginning of year . . . . . 1,102 $17.53 892 $14.90
Granted . . . . . . . . . . . . . . . . . . . . 243 25.26 332 20.70
Exercised . . . . . . . . . . . . . . . . . . . 93 16.47 78 8.68
Canceled. . . . . . . . . . . . . . . . . . . . 55 20.93 44 20.35
------- --------- ------ ---------
Options outstanding at end of year . . . . . . . . 1,197 19.40 1,102 17.53
------- --------- ------ ---------
Exercisable at end of year . . . . . . . . . . . . 581 $13.89 465 $11.24
------- --------- ------ ---------
</TABLE>
The following table sets forth the exercise price range, number of shares
outstanding at May 31, 1997, weighted average remaining contractual life,
weighted average exercise price, number of exercisable shares and weighted
average exercise price of exercisable options by groups of similar price and
grant date:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- ---------------------------------------------------------------------- -------------------------------
WEIGHTED-
AVERAGE
OUTSTANDING REMAINING WEIGHTED- EXERCISABLE WEIGHTED-
RANGE OF AS OF CONTRACTUAL AVERAGE AS OF AVERAGE
EXERCISE PRICES MAY 31, 1997 LIFE (YEARS) EXERCISE PRICE MAY 31, 1997 EXERCISE PRICES
- ----------------- ---------------- -------------- ---------------- ------------- -----------------
<S> <C> <C> <C> <C> <C>
$ 2.63-$9.88 431 4.54 $ 7.29 381 $ 6.89
9.88-18.00 326 8.39 15.92 113 14.69
18.01-24.00 183 7.96 23.62 75 23.75
24.01-33.00 243 9.59 28.22 9 32.80
33.01-39.38 14 8.25 38.36 3 38.36
------ ------- -------- ------ ---------
1,197 7.39 $19.40 581 $ 13.89
------ ------- -------- ------ ---------
</TABLE>
17
<PAGE>
GEOGRAPHIC REPORTING
The Company operates in the capital equipment segment of the electronics
industry with geographic operations in the United States, Europe and Asia.
Transfers between geographic areas are made at prevailing market prices.
Operating income is total revenue less operating expenses. In computing
operating income, none of the following items have been added or deducted:
interest income, other expense or the provision for income taxes. Identifiable
assets are those assets of the Company that are identified with the operations
in each geographic location. Corporate assets are primarily cash and cash
equivalents and securities available for sale.
Export sales included in United States sales to unaffiliated customers for
the years ended May 31, 1997, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
EUROPE ASIA TOTAL
-------- ------- --------
<S> <C> <C> <C>
May 31, 1997 . . . . . . . . 5,208 60,411 65,619
May 31, 1996 . . . . . . . . 2,543 70,311 72,854
May 31, 1995 . . . . . . . . 4,065 40,349 44,414
</TABLE>
In fiscal 1997, 1996 and 1995, there were no sales to any one customer in
excess of 10% of consolidated net sales.
The following data represents segment information for the years ending
May 31:
<TABLE>
<CAPTION>
ADJUSTMENTS
UNITED AND
1997 STATES EUROPE ASIA ELIMINATIONS CONSOLIDATED
----------------------------------------- --------- -------- -------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Sales to unaffiliated customers . . . . . $130,204 $28,872 $ 20,959 $ -- $ 180,035
Transfers between geographic areas. . . . 35,986 -- 427 (36,413) --
--------- -------- -------- ---------- ----------
Total revenue . . . . . . . . . . . . . . $166,190 $28,872 $ 21,386 $(36,413) $ 180,035
--------- -------- -------- ---------- ----------
Operating income. . . . . . . . . . . . . $ 25,691 $ 2,899 $ 1,623 $ (138) $ 30,075
--------- -------- -------- ---------- ----------
Identifiable assets at May 31, 1997 . . . $106,322 $11,374 $ 9,480 $ (8,001) $119,175
--------- -------- -------- ----------
Corporate assets. . . . . . . . . . . . . 48,175
----------
Total assets at May 31, 1997. . . . . . . $167,350
----------
1996
-----------------------------------------
Sales to unaffiliated customers . . . . . $148,798 $18,329 $ 22,312 $ -- $189,439
Transfers between geographic areas. . . . 28,009 8 543 (28,560) --
--------- -------- -------- ---------- ----------
Total revenue . . . . . . . . . . . . . . $176,807 $18,337 $ 22,855 $(28,560) $189,439
--------- -------- -------- ---------- ----------
Operating income (1). . . . . . . . . . . $ 27,638 $ 260 $ 1,965 $ (236) $ 29,627
--------- -------- -------- ---------- ----------
Identifiable assets at May 31, 1996 . . . $113,699 $ 8,624 $ 8,049 $(20,575) $109,797
--------- -------- -------- ----------
Corporate assets. . . . . . . . . . . . . 38,735
----------
Total assets at May 31, 1996. . . . . . . $148,532
----------
18
<PAGE>
1995
-----------------------------------------
Sales to unaffiliated customers . . . . . $ 91,689 $15,869 $23,178 $ -- $130,736
Transfers between geographic areas. . . . 24,631 9 434 (25,074) --
--------- -------- -------- ---------- ----------
Total revenue . . . . . . . . . . . . . . $ 116,320 $15,878 $23,612 $(25,074) $130,736
--------- -------- -------- ---------- ----------
Operating income. . . . . . . . . . . . . $ 15,286 $ 791 $ 2,605 $ 248 $ 18,930
--------- -------- -------- ---------- ----------
Identifiable assets at May 31, 1995 . . . $ 95,312 $ 7,994 $10,922 $(19,746) $ 94,482
--------- -------- -------- ----------
Corporate assets. . . . . . . . . . . . . 28,826
----------
Total assets at May 31, 1995. . . . . . . $123,308
----------
</TABLE>
(1) Includes the $6,000 in-process research and development charge
associated with the acquisition of XRL, Inc.
ACQUISITIONS
XRL, INC.
In July 1995, the Company acquired all of the outstanding stock of XRL,
Inc., a privately held company based in Canton, Massachusetts. XRL provides
capital equipment for semiconductor yield improvement. The purchase
consideration consisted of 179 shares of ESI stock. The transaction was
accounted for as a purchase.
In connection with the purchase price allocation, the Company obtained an
appraisal of the intangible assets which indicated that substantially all of the
acquired intangible assets consisted of research and development projects in
process. The development of these projects had not reached technological
feasibility and the technology has no alternative future use. In accordance
with generally accepted accounting principles, acquired in-process research
and development of $6,000 was charged to expense during the quarter ended August
31, 1995 and is reflected in the accompanying Consolidated Statements of Income.
Pro forma combined income statement data for the years ended May 31, 1996
and 1995 was not materially different from results presented in the accompanying
Supplemental Consolidated Statements of Income.
DYNAMOTION CORP.
In June 1997, ESI acquired all of the equity of Dynamotion/ATI Corp.
(Dynamotion), a publicly-held company based in Santa Ana, California.
Dynamotion provides mechanical drilling equipment for printed circuit board
manufacturers. The preliminary purchase consideration was $11,950 (347 shares
of ESI stock) and assumption of $14,352 of liabilities. The purchase
consideration includes the fair market value of all Dynamotion stock options.
The purchase price allocation includes $2,229 of goodwill which will be
amortized over seven years. The Company is still obtaining certain data related
to the acquisition, and accordingly, the purchase price allocation remains open.
The transaction was accounted for as a purchase.
19
<PAGE>
In connection with the purchase price allocation, the Company obtained an
appraisal of the intangible assets which indicated that substantially all of the
acquired intangible assets consisted of research and development projects in
process. The development of these projects had not reached technological
feasibility and the technology has no alternative future use. In accordance
with generally accepted accounting principles, acquired in-process research and
development of $9,000 was charged to expense during the six months ended
November 30, 1997. The Company currently believes that the research and
development efforts will result in commercially feasible products in the next 24
months at an estimated additional cost of $2,000.
Pro forma combined income statement data for the years ended May 31, 1997
and 1996 are as follows:
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Sales. . . . . . . . . . . . . . . . . . . $192,673 $202,942
Income from continuing operations. . . . . $ 13,465 $ 17,021
Net income per share . . . . . . . . . . . $ 1.24 $ 1.58
</TABLE>
SUPPLEMENTAL QUARTERLY FINANCIAL INFORMATION
(UNAUDITED)
<TABLE>
<CAPTION>
1ST 2ND 3RD 4TH
YEAR ENDED MAY 31, 1997 QUARTER QUARTER QUARTER QUARTER TOTAL
-------------------------------- --------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
Net sales. . . . . . . . . . . . . $39,583 $40,495 $45,764 $54,193 $180,035
Gross margin . . . . . . . . . . . 22,263 20,912 25,011 27,923 96,109
Net income . . . . . . . . . . . . 3,861 2,227 6,020 7,341 19,459
Net income per share . . . . . . . $ 0.37 $ 0.21 $ 0.57 $ 0.70 $ 1.85
1ST 2ND 3RD 4TH
YEAR ENDED MAY 31, 1996 QUARTER QUARTER QUARTER QUARTER TOTAL
-------------------------------- --------- -------- -------- -------- ---------
Net sales. . . . . . . . . . . . . $44,439 $50,355 $48,082 $46,563 $189,439
Gross margin . . . . . . . . . . . 24,273 27,336 25,871 25,894 103,374
Net income . . . . . . . . . . . . 2,313(1) 6,628 5,992 5,474 20,407
Net income per share . . . . . . . $ 0.23 $ 0.64 $ 0.57 $ 0.52 $ 1.96
</TABLE>
(1) Includes the $6,000 in-process research and development charge
associated with the acquisition of XRL, Inc.
20
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of
Electro Scientific Industries, Inc.:
We have audited the accompanying supplemental consolidated balance sheets
of Electro Scientific Industries, Inc. (an Oregon corporation) and subsidiaries
as of May 31, 1997 and 1996, and the related supplemental consolidated
statements of income, shareholders' equity and cash flows for each of the three
years in the period ended May 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the supplemental consolidated financial statements referred
to above present fairly, in all material respects, the financial position of
Electro Scientific Industries, Inc. and subsidiaries as of May 31, 1997 and
1996, and the results of their operations and their cash flows for each of the
three years in the period ended May 31, 1997, in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
Portland, Oregon
January 9, 1998
21
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Date: February 13, 1998 ELECTRO SCIENTIFIC INDUSTRIES, INC.
By /s/ Donald R. VanLuvanee
------------------------------------
Donald R. VanLuvanee
President and Chief Executive Officer
22
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
inclusion of our report included in this Form 8-K/A Amendment No. 1, into
Electro Scientific Industries, Inc. and subsidiaries previously filed Form
S-8 and Form S-3 Registration Statements File Nos., 2-91731, 33-2623,
33-2624, 33-34098, 33-37148, 33-46970, 33-58292, 33-70584, 33-63705,
33-65477, 333-16485, 333-16487 and 333-29513.
ARTHUR ANDERSEN LLP
Portland, Oregon
February 13, 1998
23
