ESI Announces Second Quarter Fiscal 2019 Results and Agreement to be Acquired by MKS Instruments, Inc.

Notice Regarding Forward-Looking Statements

This communication, and any documents to which ESI refers you in this communication, contains not only historical information, but also forward-looking statements made pursuant to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements represent ESI’s current expectations or beliefs concerning future events, including but not limited to the expected completion and timing of the proposed transaction, expected benefits and costs of the proposed transaction, management plans relating to the proposed transaction, strategies and objectives of ESI for future operations and other information relating to the proposed transaction. Without limiting the foregoing, the words “believes,” “anticipates,” “plans,” “expects,” “intends,” “forecasts,” “should,” “estimates,” “contemplate,” “future,” “goal,” “potential,” “predict,” “project,” “projection,” “target,” “seek,” “may,” “will,” “could,” “should,” “would,” “assuming,” and similar expressions are intended to identify forward-looking statements. You should read any such forward-looking statements carefully, as they involve a number of risks, uncertainties and assumptions that may cause actual results to differ significantly from those projected or contemplated in any such forward-looking statement. Those risks, uncertainties and assumptions include, (i) the risk that the proposed transaction may not be completed in a timely manner or at all, which may adversely affect ESI’s business and the price of the common stock of ESI, (ii) the failure to satisfy any of the conditions to the consummation of the proposed transaction, including the adoption of the merger agreement by the stockholders of ESI and the receipt of certain regulatory approvals, (iii) the occurrence of any event, change or other circumstance that could give rise to the termination of the merger agreement, (iv) the effect of the announcement or pendency of the proposed transaction on ESI’s business relationships, operating results and business generally, (v) risks that the proposed transaction disrupts current plans and operations and the potential difficulties in employee retention as a result of the proposed transaction, (vi) risks related to diverting management’s attention from ESI’s ongoing business operations, (vii) the outcome of any legal proceedings that may be instituted against us related to the merger agreement or the proposed transaction, (viii) unexpected costs, charges or expenses resulting from the proposed transaction, and (ix) other risks described in ESI’s filings with the SEC, such as its Quarterly Reports on Form 10-Q and Annual Reports on Form 10-K.

The forward-looking statements also 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 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.

Forward-looking statements speak only as of the date of this communication or the date of any document incorporated by reference in this document. Except as required by applicable law or regulation, ESI does not assume any obligation to update any such forward-looking statements whether as the result of new developments or otherwise.

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

ELECTRO SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES

Second Quarter Fiscal 2019 Results

Condensed Consolidated Statements of Operations
(Unaudited)

  Fiscal quarter ended  Two fiscal quarters ended
(In thousands, except per share data) Sep 29, 2018  Jun 30, 2018  Sep 30, 2017  Sep 29, 2018  Sep 30, 2017
Net sales:         
Systems$71,263  $96,857  $60,316  $168,120  $122,409 
Services14,654  13,767  10,651  28,421   21,242  
Total net sales 85,917     110,624     70,967     196,541     143,651  
Cost of sales:                  
Systems 40,539     50,094     38,179     90,633     79,605  
Services 6,311     7,332     6,256     13,643     11,094  
Total cost of sales 46,850     57,426     44,435     104,276     90,699  
Gross profit 39,067     53,198     26,532     92,265     52,952  
Gross margin 45.5 %   48.1 %   37.4 %   46.9 %   36.9 %
Operating expenses:                  
Selling, general and administrative 10,838     10,130     11,648     20,968     24,456  
Research, development and engineering 9,154     10,059     8,274     19,213     17,208  
Restructuring costs         2,162         3,373  
Total operating expenses 19,992     20,189     22,084     40,181     45,037  
Operating income 19,075     33,009     4,448     52,084     7,915  
Non-operating income (expense):                  
Interest and other income (expense), net 383     452     (229 )   835     (413 )
Total non-operating income (loss) 383     452     (229 )   835     (413 )
Income before income taxes 19,458     33,461     4,219     52,919     7,502  
Provision for (benefit from) income taxes 2,623     2,318     (41 )   4,941     340  
Net income $ 16,835     $ 31,143     $ 4,260     $ 47,978     $ 7,162  
Net income per share - basic $ 0.49     $ 0.90     $ 0.13     $ 1.39     $ 0.21  
Net income per share - diluted $ 0.47     $ 0.87     $ 0.12     $ 1.34     $ 0.21  



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