Electro Scientific Industries (ESIO) 8-K Esi Announces First Quarter Fiscal 2010 Results

Exhibit 99.1

Brian Smith

ESI

503-672-5760

ESI ANNOUNCES FIRST QUARTER FISCAL 2010 RESULTS

Orders and Revenues Increase Sequentially

PORTLAND, ORE.—July 23, 2009—Electro Scientific Industries, Inc. (NASDAQ:ESIO), a leading provider of world-class photonic and laser microengineering systems, today announced results for its fiscal 2010 first quarter, ended June 27, 2009. Financial measures are provided on both a GAAP and non-GAAP basis, which excludes the impact of purchase accounting, equity compensation, restructuring costs, and non-recurring items.

Revenues in the first quarter were $22.6 million, a 25% increase from the fourth quarter of fiscal 2009. On a GAAP basis, net loss was $5.5 million or $0.20 per share, compared to a net loss of $14.9 million or $0.55 per share in the prior quarter. Excluding the impact of purchase accounting, equity compensation, and a one-time net benefit of $4.5 million related to a merger termination fee, non-GAAP net loss was $6.2 million or $0.23 per share, compared to a non-GAAP net loss of $7.1 million or $0.26 per share in the fourth quarter.

Orders in the first quarter were $28.7 million, up 79% from $16.1 million in the prior quarter, with improvement seen in all business divisions. “Order activity exceeded our expectations, with virtually all our end markets showing some signs of improvement,” noted Nick Konidaris, ESI president and CEO.

First quarter operating expenses on a non-GAAP basis declined sequentially, marking five consecutive quarters of sequential declines. Konidaris added, “We continue to realize the benefits of our cost containment programs, reflecting our continued commitment to manage our cost structure and preserve cash through the bottom of this cycle.”

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

ESI Announces First Quarter Fiscal 2010 Results

Balance Sheet and Cash Flow

At quarter end, cash and investments totaled $155.2 million, roughly flat with last quarter. Cash used in operations was $0.9 million for the first quarter, including the $4.5 million net proceeds from the merger termination fee. Continued Konidaris, “Our efforts in improving working capital performance are paying off, as both days sales outstanding and inventory turns showed improvement in the quarter.”

Q2 2010 Outlook

Looking forward, we are encouraged by the recent increased activity in our markets. As a result, we are targeting revenues for the second quarter of fiscal 2010 to be between $25 and $30 million and a non-GAAP loss per share of $0.15 to $0.20 excluding the impact of purchase accounting, equity compensation, restructuring costs, and non-recurring items.

Konidaris concluded, “Although we are cautiously optimistic that business conditions are improving, the timing and trajectory of recovery remain uncertain. We will continue to partner with our customers to ensure we are ready to meet their needs as they resume capital spending. At the same time, we will manage our expenses carefully in order to generate profit leverage as our top line grows.”

The company will hold a conference call today at 5:00 p.m. EDT. 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 888-419-5570 (domestic participants) or 617-896-9871 (international participants). The conference ID number is 43469685. A live audio webcast can be accessed atwww.esi.com. Upon completion of the call, an audio replay will be accessible through August 2, 2009 at 888-286-8010 (domestic participants) or 617-801-6888 (international participants), passcode 97621479. The audio replay will also be available on the ESI Web site.

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

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

ESI Announces First Quarter Fiscal 2010 Results

financial measures. Non-GAAP financial measures exclude the impact of purchase accounting, equity compensation, restructuring costs, and non-recurring items. We believe that this presentation of non-GAAP financial measures allows investors to better 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 is a pioneer and leading supplier of world-class production laser systems that help its microelectronics customers achieve compelling yield and productivity gains. The company’s industry-leading, application-specific products enhance electronic-device performance in three key sectors—semiconductors, passive components and electronic interconnect—by enabling precision fine-tuning of device micro-features in high-volume manufacturing environments. Founded in 1944, ESI is headquartered in Portland, Ore. More information is available atwww.esi.com.

Forward-Looking Statements

This press release includes forward-looking statements about the markets we serve, revenue, growth, and loss per share. 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 industry—which is dependent on many factors including component prices, global economic strength and political stability, and overall demand for electronic devices (such as capacitors, semiconductor memory devices and advanced electronic packages) 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 semiconductor industry 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 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 ability of the company to achieve anticipated cost reductions and savings; the company’s need to continue investing in research and development; the company’s ability to hire and retain key employees; the company’s ability to create and sustain intellectual property protection around its products; foreign currency fluctuations; the company’s ability to utilize recorded deferred tax assets; taxes, interest or penalties resulting from tax audits; changes in tax laws or the interpretation of such tax laws; and future liquidity and valuation of auction rate securities.

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

ESI Announces First Quarter Fiscal 2010 Results

Electro Scientific Industries, Inc.

First Quarter Fiscal 2010 Results

(In thousands, except per share data)

(Unaudited)

Operating Results:

	Fiscal quarter ended
	June 27, 2009			June 28, 2008
Net sales	$	22,603		$	64,024
Cost of sales		16,642			38,733
Gross profit		5,961			25,291
Operating expenses:
Selling, service and administrative		11,971			15,100
Research, development and engineering		7,455			9,658
Restructuring costs		—			749
Merger termination proceeds, net		(4,516	)		—
Net operating expenses		14,910			25,507
Operating loss		(8,949	)		(216	)
Non-operating income (expense):
Other-than-temporary impairment of auction rate securities		—			(5,094	)
Interest and other income, net		342			860
Total non-operating income (expense)		342			(4,234	)
Loss before income taxes		(8,607	)		(4,450	)
Benefit from income taxes		(3,077	)		(1,692	)
Net loss	$	(5,530	)	$	(2,758	)
Net loss per share - basic	$	(0.20	)	$	(0.10	)
Net loss per share - diluted	$	(0.20	)	$	(0.10	)

13900 NW Science Park Drive  |  Portland, Oregon 97229  |  503.641.4141

ESI Announces First Quarter Fiscal 2010 Results

Electro Scientific Industries, Inc.

First Quarter Fiscal 2010 Results

(Amounts in thousands)

Financial Position As Of:

	June 27, 2009		March 28, 2009
Assets
Current assets:
Cash and cash equivalents	$	124,474	$	153,538
Short-term investments		30,688		2,380
Total cash and investments		155,162		155,918
Trade receivables, net		20,070		18,847
Inventories		78,744		84,882
Shipped systems pending acceptance		2,939		2,072
Deferred income taxes, net		6,206		6,298
Other current assets		10,307		10,594
Total current assets		273,428		278,611
Auction rate securities		7,134		6,007
Property, plant and equipment, net		42,234		43,005
Non-current deferred income taxes, net		25,823		22,620
Acquired intangible assets, net		7,418		7,929
Other assets		24,774		26,075
Total assets	$	380,811	$	384,247
Liabilities and shareholders’ equity
Current liabilities:
Accounts payable	$	6,233	$	7,492
Accrued liabilities		11,736		12,958
Deferred revenue		11,776		11,251
Total current liabilities		29,745		31,701
Non-current income taxes payable		9,401		9,023
Shareholders’ equity:
Preferred and common stock		135,566		133,808
Retained earnings		205,941		211,085
Accumulated other comprehensive income (loss)		158		(1,370	)
Total shareholders’ equity		341,665		343,523
Total liabilities and shareholders’ equity	$	380,811	$	384,247
End of period shares outstanding		27,266		27,184

13900 NW Science Park Drive  |  Portland, Oregon 97229  |  503.641.4141

ESI Announces First Quarter and Fiscal 2010 Results

Electro Scientific Industries, Inc.

Analysis of First Quarter Fiscal 2010 Results

(Dollars and shares in thousands)

(Unaudited)

	Fiscal quarter ended
	June 27, 2009			June 28, 2008
Sales detail:
Semiconductor Group	$	5,260		$	21,728
Passive Components Group		5,150			13,275
Interconnect Micro-Machining Group		12,193			29,021
Total	$	22,603		$	64,024
Gross margin %		26	%		40	%
Selling, service and administration expense %		53	%		24	%
Research, development and engineering expense %		33	%		15	%
Operating loss %		(40	)%		(0	)%
Effective tax rate %		36	%		38	%
Average shares outstanding - basic		27,234			27,108
Average shares outstanding - diluted		27,234			27,108
End of period employees		565			701

13900 NW Science Park Drive  |  Portland, Oregon 97229  |  503.641.4141

ESI Announces First Quarter Fiscal 2010 Results

Electro Scientific Industries, Inc.

First Quarter Fiscal 2010 Results

(In thousands, except per share data)

(Unaudited)

Reconciliation of GAAP to Non-GAAP Financial Measures:

	Fiscal quarter ended
	June 27, 2009			June 28, 2008
Gross profit per GAAP	$	5,961		$	25,291
Add back:
Purchase accounting included in cost of sales		289			290
Equity compensation included in cost of sales		215			207
Total non-GAAP adjustments to gross profit		504			497
Non-GAAP gross profit	$	6,465		$	25,788
Non-GAAP gross margin		28.6	%		40.3	%
Operating expenses per GAAP	$	14,910		$	25,507
Less:
Purchase accounting included in operating expenses:
Selling, service and administration		443			453
Research, development and engineering		26			(19	)
Subtotal - purchase accounting included in operating expenses		469			434
Equity compensation included in operating expenses:
Selling, service and administration		1,778			889
Research, development and engineering		314			315
Subtotal - equity compensation included in operating expenses		2,092			1,204
Other items included in operating expenses:
Net merger termination proceeds		(4,516	)		—
Restructuring costs		—			749
Subtotal - other non-recurring items included in operating expenses		(4,516	)		749
Total non-GAAP adjustments to operating expenses		(1,955	)		2,387
Non-GAAP operating expenses	$	16,865		$	23,120
Operating loss per GAAP	$	(8,949	)	$	(216	)
Non-GAAP adjustments to gross profit		504			497
Non-GAAP adjustments to operating expenses		(1,955	)		2,387
Non-GAAP operating (loss) income	$	(10,400	)	$	2,668
Non-operating income (expense), net per GAAP	$	342		$	(4,234	)
Non-GAAP adjustment for other-than-temporary impairment of auction rate securities		—			5,094
Non-GAAP non-operating income	$	342		$	860
Net loss per GAAP	$	(5,530	)	$	(2,758	)
Non-GAAP adjustments to gross profit		504			497
Non-GAAP adjustments to operating expenses		(1,955	)		2,387
Non-GAAP adjustments to non-operating expense		—			5,094
Income tax effect of non-GAAP adjustments		783			(2,721	)
Non-GAAP net (loss) income	$	(6,198	)	$	2,499
Basic Non-GAAP net (loss) income per share	$	(0.23	)	$	0.09
Diluted Non-GAAP net (loss) income per share	$	(0.23	)	$	0.09

13900 NW Science Park Drive  |  Portland, Oregon 97229  |  503.641.4141

ESI Announces First Quarter Fiscal 2010 Results

Electro Scientific Industries, Inc.

First Quarter Fiscal 2010 Results

(Amounts in thousands)

(Unaudited)

Consolidated Condensed Statements of Cash Flows:

	Fiscal quarter ended
	June 27, 2009			June 28, 2008
Net loss	$	(5,530	)	$	(2,758	)
Non-cash adjustments and changes in operating activities		4,619			4,394
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES		(911	)		1,636
NET CASH USED IN INVESTING ACTIVITIES		(28,717	)		(4,525	)
NET CASH USED IN FINANCING ACTIVITIES		(213	)		(2,146	)
Effect of exchange rate changes on cash		777			(730	)
NET CHANGE IN CASH AND CASH EQUIVALENTS		(29,064	)		(5,765	)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		153,538			141,059
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	124,474		$	135,294

13900 NW Science Park Drive  |  Portland, Oregon 97229  |  503.641.4141