10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended January 2, 2016

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 0-12853

ELECTRO SCIENTIFIC INDUSTRIES, INC.

Oregon	93-0370304
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
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

Registrant’s web address: www.esi.com

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ý    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ý    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	¨	Accelerated  filer	ý
Non-accelerated filer	¨	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  ý

The number of shares outstanding of the Registrant’s Common Stock as of February 5, 2016 was 31,127,287 shares.

ELECTRO SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES

2016 FORM 10-Q QUARTERLY REPORT

TABLE OF CONTENTS

Part I	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets - at January 2, 2016 and March 28, 2015	3
	Condensed Consolidated Statements of Operations - for the fiscal quarter and three fiscal quarters ended January 2, 2016 and December 27, 2014	4
	Condensed Consolidated Statements of Comprehensive Loss - for the fiscal quarter and three fiscal quarters ended January 2, 2016 and December 27, 2014	5
	Condensed Consolidated Statements of Cash Flows - for the three fiscal quarters ended January 2, 2016 and December 27, 2014	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	25
Item 4.	Controls and Procedures	25
Part II	OTHER INFORMATION
Item 1.	Legal Proceedings	25
Item 1A.	Risk Factors	25
Item 4.	Mine Safety Disclosures	34
Item 6.	Exhibits and Financial Statement Schedules	35
SIGNATURES		36

ELECTRO SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands)	Jan 2, 2016			Mar 28, 2015
ASSETS
Current assets:
Cash and cash equivalents	$	42,071		$	50,994
Short-term investments	20,771			6,612
Trade receivables, net of allowances of $827 and $712	37,012			42,295
Inventories, net	60,881			56,637
Shipped systems pending acceptance	1,470			2,516
Deferred income taxes, net	134			178
Other current assets	4,371			6,090
Total current assets	166,710			165,322
Non-current assets:
Property, plant and equipment, net of accumulated depreciation of $106,352 and $102,901	23,507			25,858
Non-current deferred income taxes, net	98			174
Goodwill	7,445			7,717
Acquired intangible assets, net of accumulated amortization of $20,927 and $19,880	7,909			8,958
Other assets	11,064			13,211
Total assets	$	216,733		$	221,240
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	16,344		$	9,514
Accrued liabilities	20,980			18,666
Deferred income tax liability, net	174			173
Deferred revenue	7,708			12,376
Total current liabilities	45,206			40,729
Non-current liabilities:
Income taxes payable	1,384			1,176
Deferred income tax liability, net	232			443
Other liabilities	3,166			1,571
Total liabilities	$	49,988		$	43,919
Commitments and contingencies (See Note 13 "Commitments & Contingencies")
Shareholders’ equity:
Preferred stock, without par value; 1,000 shares authorized; no shares issued	—			—
Common stock, without par value; 100,000 shares authorized; 31,537 and 30,704 issued and outstanding	193,547			189,134
Accumulated deficit	(25,950		)	(11,741		)
Accumulated other comprehensive loss	(852		)	(72		)
Total shareholders’ equity	166,745			177,321
Total liabilities and shareholders’ equity	$	216,733		$	221,240

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

3

ELECTRO SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Fiscal quarter ended						Three fiscal quarters ended
(In thousands, except per share amounts)	Jan 2, 2016			Dec 27, 2014			Jan 2, 2016			Dec 27, 2014
Net sales:
Systems	$	31,282		$	31,750		$	98,914		$	85,447
Services	12,060			11,911			33,991			36,100
Total net sales	43,342			43,661			132,905			121,547
Cost of sales:
Systems	20,292			22,031			63,922			59,707
Services	5,329			6,917			17,464			20,074
Total cost of sales	25,621			28,948			81,386			79,781
Gross profit	17,721			14,713			51,519			41,766
Operating expenses:
Selling, general and administrative	12,468			12,332			37,619			36,384
Research, development and engineering	7,778			8,384			24,706			25,953
Acquisition and integration costs	—			—			194			—
Restructuring costs	1,944			—			2,597			—
Net operating expenses	22,190			20,716			65,116			62,337
Operating loss	(4,469		)	(6,003		)	(13,597		)	(20,571		)
Non-operating income (expense):
Interest and other income (expense), net	67			64			68			(134		)
Total non-operating income (expense)	67			64			68			(134		)
Loss before income taxes	(4,402		)	(5,939		)	(13,529		)	(20,705		)
Provision for income taxes	184			437			681			165
Net loss	$	(4,586	)	$	(6,376	)	$	(14,210	)	$	(20,870	)
Net loss per share—basic	$	(0.15	)	$	(0.21	)	$	(0.45	)	$	(0.68	)
Net loss per share—diluted	$	(0.15	)	$	(0.21	)	$	(0.45	)	$	(0.68	)
Weighted average number of shares—basic	31,495			30,617			31,355			30,507
Weighted average number of shares—diluted	31,495			30,617			31,355			30,507
Cash dividends paid per outstanding common share	$	—		$	0.08		$	—		$	0.24

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

4

ELECTRO SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Unaudited)

	Fiscal quarter ended						Three fiscal quarters ended
(In thousands)	Jan 2, 2016			Dec 27, 2014			Jan 2, 2016			Dec 27, 2014
Net loss	$	(4,586	)	$	(6,376	)	$	(14,210	)	$	(20,870	)
Other comprehensive (loss) income:
Foreign currency translation adjustment, net of taxes of $0, $179, $0 and $0	(68		)	(359		)	(793		)	(41		)
Accumulated other comprehensive income related to benefit plan obligation, net of taxes of $(2), $(2), $(7) and $(6)	4			3			12			10
Net unrealized gain (loss) on available-for-sale securities, net of taxes of $0, $0, $0 and $5	2			(5		)	1			(12		)
Comprehensive loss	$	(4,648	)	$	(6,737	)	$	(14,990	)	$	(20,913	)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

5

ELECTRO SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Three fiscal quarters ended
(In thousands)	Jan 2, 2016			Dec 27, 2014
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(14,210	)	$	(20,870	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization	5,659			5,880
Amortization of acquired intangible assets	1,047			1,112
Share-based compensation expense	3,939			3,402
Loss (gain) on disposition of property and equipment, net	788			(8		)
Provision for doubtful accounts	127			—
(Increase) decrease in deferred income taxes	(71		)	2
Changes in operating accounts, net of acquisitions:
Decrease (increase) in trade receivables, net	8,593			(3,284		)
Increase in inventories	(7,046		)	(2,169		)
Decrease in shipped systems pending acceptance	1,342			1,106
Decrease in other current assets	1,967			783
Increase in accounts payable and accrued liabilities	10,531			217
Decrease in deferred revenue	(4,668		)	(2,692		)
Net cash provided by (used in) operating activities	7,998			(16,521		)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of investments	(320,581		)	(357,046		)
Proceeds from sales and maturities of investments	306,423			389,900
Purchase of property, plant and equipment	(2,740		)	(3,608		)
Proceeds from sale of property, plant and equipment	2			154
Increase in other assets	(133		)	(980		)
Net cash (used in) provided by investing activities	(17,029		)	28,420
CASH FLOWS FROM FINANCING ACTIVITIES
Cash dividends paid to shareholders	—			(7,266		)
Payment of withholding taxes on stock-based compensation	(645		)	(1,850		)
Proceeds from issuance of common stock	1,056			1,407
Share repurchases	—			(1,456		)
Net cash provided by (used in) financing activities	411			(9,165		)
Effect of exchange rate changes on cash	(303		)	(1,129		)
NET CHANGE IN CASH AND CASH EQUIVALENTS	(8,923		)	1,605
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	50,994			68,461
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	42,071		$	70,066
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest	$	(57	)	$	(2	)
Cash paid for income taxes	(799		)	(863		)
Income tax refunds received	140			564
Net increase in property, plant and equip. & other assets related to transfers from inventory	2,988			1,474
Non-cash additions to property, plant and equipment	160			945

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

6

ELECTRO SCIENTIFIC INDUSTRIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Basis of Presentation

These unaudited interim condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted in these interim statements. Accordingly, these condensed consolidated financial statements are to be read in conjunction with the financial statements and notes included in the Company's Annual Report on Form 10-K for its fiscal year ended March 28, 2015. These interim statements include all adjustments (consisting of only normal recurring adjustments and accruals) necessary for a fair presentation of results for the interim periods presented. The results for interim periods are not necessarily indicative of the results of operations for the entire year.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of commitments and contingencies at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results may differ from those estimates.

Management believes that the estimates used are reasonable. Significant estimates made by management include: revenue recognition; inventory valuation; product warranty reserves; allowance for doubtful accounts; accrued restructuring costs; share-based compensation; income taxes including the valuation of deferred tax assets; fair value measurements; valuation of cost method equity investments; valuation of long-lived assets; valuation of goodwill; and valuation of acquired technology.

There have been no significant changes to the Company's significant accounting policies from those presented in Note 2 “Summary of Significant Accounting Policies” to the consolidated financial statements included in the Company's Annual Report on Form 10-K for its fiscal year ended March 28, 2015. All references to years or quarters relate to fiscal years or fiscal quarters unless otherwise noted. The three quarters ended January 2, 2016 consisted of a 40-week period as compared to a 39-week period for the three quarters ended December 27, 2014. Similarly, the third quarter of 2016 ended January 2, 2016 was a 14-week period as compared to a 13-week period for the second quarter of 2016 ended September 26, 2015 and the third quarter of 2015 ended December 27, 2014.

In the first quarter of 2016, certain prior period amounts were revised to conform to current year presentation. Please see Note 7 "Trade Accounts Receivable" and Note 10 "Accrued Current Liabilities & Other Liabilities".

2. Recent Accounting Pronouncements

In January 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-01, "Financial Instruments - Overall (Subtopic 825-10)." ASU 2016-01 enhances the reporting model for financial instruments to provide users of financial statements with more decision-useful information by addressing certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. The amendments simplify certain requirements and also reduce diversity in current practice for other requirements. ASU 2016-01 is effective for public companies' fiscal years beginning after December 15, 2017, which would be the Company's fiscal year ending March 30, 2019, including interim periods within those fiscal years. Except for the early application guidance specifically allowed in ASU 2016-01, early adoption is not permitted. We do not expect the adoption of ASU 2016-01 to have a material effect on our financial position, results of operations or cash flows.

In November 2015, the FASB issued ASU 2015-17, "Income Taxes (Topic 740) - Balance Sheet Classification of Deferred Taxes." ASU 2015-17 simplifies the presentation of deferred income taxes, and requires that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. The amendments apply to all entities that present a classified statement of financial position, and aligns the presentation of deferred income tax assets and liabilities with International Financial Reporting Standards ("IFRS") IAS 1. ASU 2015-17 is effective for public companies' financial statements issued for annual periods beginning after December 15, 2016, which would be the Company's fiscal year ending March 31, 2018, and interim periods within those annual periods. Early application is permitted and may be applied either prospectively to all deferred tax liabilities and assets or retrospectively to all periods presented. The Company is currently

7

evaluating the impact of adopting this guidance on its Consolidated Financial Statements and disclosures included within Notes to Consolidated Financial Statements.

In August 2015, the FASB issued ASU No. 2015-14, which defers the effective date of ASU No. 2014-09 "Revenue from Contracts with Customers" one year to interim and annual reporting periods beginning after December 15, 2017, which would be the Company's fiscal year ending March 30, 2019. This guidance may be adopted retrospectively or under a modified retrospective method where the cumulative effect is recognized at the date of initial application. The Company is currently evaluating the impact of adopting this guidance on its Consolidated Financial Statements and disclosures included within Notes to Consolidated Financial Statements.

In July 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2015-11, “Simplifying the Measurement of Inventory (Topic 330).” ASU 2015-11 simplifies the accounting for the valuation of all inventory not accounted for using the last-in, first-out (“LIFO”) method by prescribing inventory be valued at the lower of cost and net realizable value. ASU 2015-11 is effective for public companies' annual periods, including interim periods within those fiscal years, beginning after December 15, 2016, which would be the Company's fiscal year ending March 31, 2018, on a prospective basis. Early adoption is permitted. We do not expect the adoption of ASU 2015-11 to have a material effect on our financial position, results of operations or cash flows.

In April 2015, the FASB issued ASU 2015-05, “Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40).” ASU 2015-05 provides guidance regarding the accounting for a customer's fees paid in a cloud computing arrangement, specifically about whether a cloud computing arrangement includes a software license, and if so, how to account for the software license. ASU 2015-05 is effective for public companies' annual periods, including interim periods, beginning after December 15, 2015, which would be the Company's fiscal year ending April 1, 2017. Early adoption is permitted. We do not expect the adoption of ASU 2015-05 to have a material effect on our financial position, results of operations or cash flows.

In June 2014, the FASB issued ASU No. 2014-12, "Compensation - Stock Compensation (Topic 718)." ASU No. 2014-12 addresses accounting for share-based payments when the terms of an award provide that a performance target could be achieved after the requisite service period. ASU 2014-12 indicates that, in such situations, the performance target should be treated as a performance condition and, accordingly, the performance target should not be reflected in estimating the grant-date fair value of the award. Instead, compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved. ASU 2014-12 is effective for annual periods and interim periods within those annual periods beginning after December 15, 2015, which would be the Company's fiscal year ending April 1, 2017. We do not expect the adoption of ASU 2014-12 to have a material effect on our financial position, results of operations or cash flows.

3. Share-Based Compensation

The Company recognizes expense related to the fair value of its share-based compensation awards using the Black-Scholes model to estimate the fair value of awards on the date of grant, except for unvested restricted stock unit awards (RSUs) which are valued at the fair value of the Company's stock on the date of award. The Company recognizes compensation expense for all share-based compensation awards on a straight-line basis over the requisite service period of the award.

Stock-settled stock appreciation rights (SARs) grant the right to receive shares of the Company's stock equivalent to the increase in stock value of a specified number of shares over a specified period of time, divided by the stock price at the time of exercise. The Company uses the Black-Scholes model to estimate the fair value of SARs. Similar to options, SARs are measured at the fair value of the award on the grant date and the expense is recognized on a straight-line basis over the requisite service period of the award.

The Company granted a total of 705,700 RSUs and 467,000 SARs during the first three quarters of 2016, but did not grant any stock options. The Company granted 827,700 RSUs and 634,523 SARs, and zero stock options during the first three quarters of 2015.

Share-based compensation expense was included in the Company’s Condensed Consolidated Statements of Operations as follows:

8

	Fiscal quarter ended				Three fiscal quarters ended
(In thousands)	Jan 2, 2016		Dec 27, 2014		Jan 2, 2016		Dec 27, 2014
Cost of sales	$	103	$	154	$	347	$	474
Selling, general and administrative	832		629		2,291		2,096
Research, development and engineering	188		256		613		832
Total share-based compensation expense	$	1,123	$	1,039	$	3,251	$	3,402

The Company does not capitalize share-based compensation costs. As of January 2, 2016, the Company had $8.1 million of total unrecognized share-based compensation costs, net of estimated forfeitures, which are expected to be recognized over a weighted average period of 2.0 years. The amounts shown in the table above for the fiscal quarter ended January 2, 2016 and three fiscal quarters ended January 2, 2016, do not include $191 thousand and $688 thousand, respectively, in share-based compensation expense related to acquisitions. Refer to Note 5 "Business Acquisition" for discussion of stock amounts considered compensation related to acquisitions.

4. Fair Value Measurements

Financial Assets and Liabilities Measured at Fair Value

ASC Topic 820 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include the following:

• Level 1, defined as observable inputs such as quoted prices in active markets for identical assets or liabilities;

• Level 2, defined as inputs that are observable either directly or indirectly such as quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active and other inputs that can be corroborated by observable market data; and

• Level 3, defined as unobservable inputs for which little or no market data exists, therefore requiring an entity to develop its own assumptions.

The Company’s fair value hierarchy for its financial assets and liabilities measured at fair value on a recurring basis as of January 2, 2016 and March 28, 2015 was as follows (in thousands):

January 2, 2016	Level 1		Level 2			Level 3		Total
Cash equivalents:
Money market securities	$	3,004	$	—		$	—	$	3,004
Commercial paper	—		8,948			—		8,948
Government agencies	—		1,604			—		1,604
Total cash equivalents	$	3,004	$	10,552		$	—	$	13,556
Short term investments - available for sale:
Government agencies	$	—	$	18,836		$	—	$	18,836
Total short-term investments - available for sale	$	—	$	18,836		$	—	$	18,836
Forward purchase or (sale) contracts:
Japanese Yen	$	—	$	(58	)	$	—	$	(58	)
New Taiwan Dollar	—		(10		)	—		(10		)
Korean Won	—		(68		)	—		(68		)
Euro	—		(261		)	—		(261		)
British Pound	—		(60		)	—		(60		)
Chinese Renminbi	—		(17		)	—		(17		)
Total forward contracts	$	—	$	(474	)	$	—	$	(474	)
Deferred compensation plan assets:*
Mutual funds and exchange traded funds	$	1,906	$	—		$	—	$	1,906
Money market securities	543		—			—		543
Total deferred compensation plan assets	$	2,449	$	—		$	—	$	2,449

9

March 28, 2015	Level 1		Level 2			Level 3		Total
Cash equivalents:
Money market securities	$	14,280	$	—		$	—	$	14,280
Commercial paper	—		15,537			—		15,537
Government agencies	—		2,702			—		2,702
Total cash equivalents	$	14,280	$	18,239		$	—	$	32,519
Short term investments - available for sale:
Corporate bonds	$	—	$	853		$	—	$	853
Municipal bonds	—		3,872			—		3,872
Total short-term investments - available for sale	$	—	$	4,725		$	—	$	4,725
Forward purchase or (sale) contracts:
Japanese Yen	$	—	$	(7	)	$	—	$	(7	)
New Taiwan Dollar	—		17			—		17
Korean Won	—		(44		)	—		(44		)
Euro	—		277			—		277
British Pound	—		(133		)	—		(133		)
Chinese Renminbi	—		(34		)	—		(34		)
Total forward contracts	$	—	$	76		$	—	$	76
Deferred compensation plan assets:* :
Mutual funds and exchange traded funds	$	1,885	$	—		$	—	$	1,885
Money market securities	190		—			—		190
Total deferred compensation plan assets	$	2,075	$	—		$	—	$	2,075

*These investments represent assets held in trust for our deferred compensation plan

For Level 1 assets, the Company utilized quoted prices in active markets for identical assets.

For Level 2 assets, exclusive of forward contracts, the Company utilized quoted prices in active markets for similar assets. For forward contracts, spot prices at January 2, 2016 and March 28, 2015 were utilized to calculate fair values.

During the first three quarters of 2016 and 2015, there were no transfers between Level 1, 2 or 3 assets.

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Investments

The Company’s investments at January 2, 2016 and March 28, 2015 were as follows (in thousands):

			Unrealized
January 2, 2016	Cost		Gain		Loss			Fair Value
Available-for-sale securities (current):
Government agencies	20,437		3		—			20,440
Commercial paper	8,948		—		—			8,948
Mutual funds and exchange traded funds*	2,454		—		(5		)	2,449
Total Investments	$	31,839	$	3	$	(5	)	$	31,837
			Unrealized
March 28, 2015	Cost		Gain		Loss			Fair Value
Available-for-sale securities (current):
Commercial paper	$	15,537	$	—	$	—		$	15,537
Municipal bonds	3,870		2		—			3,872
Government agencies	2,702		—		—			2,702
Corporate bonds	853		—		—			853
Mutual funds and exchange traded funds*	1,950		125		—			2,075
Total Investments	$	24,912	$	127	$	—		$	25,039

*These investments represent assets held in trust for our deferred compensation plan

For purposes of determining gross realized gains and losses and reclassification out of accumulated other comprehensive income (loss), the cost of securities sold is based on specific identification. Net unrealized holding gains and losses on current available-for-sale securities included in accumulated other comprehensive income (loss) were insignificant as of January 2, 2016 and March 28, 2015.

Investments with underlying maturities within one year at January 2, 2016, including cash equivalents, totaled $31.8 million.

5. Business Acquisitions

Fiscal 2015

On January 15, 2015, the Company acquired all of the outstanding shares of Wuhan Topwin Optoelectronics Technology Co., Ltd. (Topwin), a Chinese manufacturer of laser-based systems and as of March 28, 2015 the company performed a preliminary determination and allocation of purchase price to the identifiable acquired assets and liabilities. In the first quarter of 2016, the Company finalized the determination of purchase price, including the valuation of total consideration and the related contractual adjustments to working capital, and valuation of acquired assets and assumed liabilities. Analysis supporting the purchase price allocation included a valuation of assets and liabilities as of the closing date, an analysis of intangible assets and a detailed review of the opening balance sheet to determine other significant adjustments required to recognize assets and liabilities at fair value. Consideration was comprised of $7.6 million in cash and 748,944 shares of ESI common stock issuable over a three year period, valued at approximately $2.9 million as of the acquisition date. Of the $2.9 million in equity, one-half, or 374,472 shares, is contingent-based consideration and one-half, or 374,472 shares, is non-contingent and will be issued over a three year period beginning June 30, 2015. The contingent consideration is based on future performance of Topwin, as evaluated against targets for net income for each year over a three year period. One-third of the contingent shares will be issued after each year if the target is met for that year; however failing to meet stated targets will result in none of the contingent shares being issued for that year. As of the acquisition date, the fair value of the contingent consideration was estimated to be $0.4 million and the fair value of the 374,472 shares of non-contingent consideration was estimated to be $2.5 million. The fair value of the non-contingent and contingent shares was determined based on the estimated share price as of the issuance date derived through Monte Carlo simulation, discounted back to the acquisition date. The value of the contingent shares included consideration of the estimated probability of attainment of the net income targets. Additionally, the Company will issue, on the same terms described above, approximately 513,328 shares valued at $2.0 million, which, together with cash of $0.2 million, is treated as compensation to a Principal in the Company who was also a former shareholder of Topwin. Compensation expense will be recognized over the Principal's term of employment or related service period required by the purchase agreement through December 31, 2017. In the first three quarters of fiscal 2016, we have

11

recognized approximately $0.7 million in compensation expense related to this agreement, comprised primarily of share-based compensation.

The total purchase price of approximately $10.5 million, net of cash acquired, was allocated to the underlying assets acquired and liabilities assumed based on their fair values, as shown in the following table:

(In thousands)
Accounts receivable	$	454
Inventory	544
Prepaid expense and other current assets	295
Property, plant and equipment	23
Acquired intangibles	3,618
Goodwill	7,445
Accounts payable and other accrued liabilities	(1,859		)
Total purchase price, net of cash acquired	$	10,520

The acquisition is expected to enable the Company to gain entry into the low total-cost-of-ownership solutions market in China and the goodwill of approximately $7.4 million recognized as a result of the acquisition was assigned to the Topwin reporting unit. The premium paid over the fair value of the individual assets acquired and liabilities assumed reflects the Company’s view that this acquisition was subject to competitive bidding and that it provided the Company with innovative design and manufacturing capabilities for laser-based manufacturing solutions across a variety of complementary applications, together with direct access to local China market, supply chain and opto-electronics knowledge center. None of the goodwill is expected to be deductible for tax purposes.

As a result of the acquisition, the Company recorded approximately $4.9 million of identifiable assets, including $3.6 million of identifiable intangible assets and $1.9 million of identifiable liabilities. The acquired intangible assets consist primarily of $3.5 million of developed technology and will be amortized over their useful lives, which range from one to ten years.

In the first three quarters of 2016, the Company incurred approximately $0.2 million in acquisition-related costs, which were included in Selling, general and administrative expenses in the Consolidated Statements of Operations. In 2015, the Company incurred approximately $0.8 million in acquisition-related costs, which were included in Selling, general and administrative expenses in the Consolidated Statements of Operations. The operating results of this acquisition are included in the Company’s results of operations since the date of acquisition. Pro forma financial information has not been provided for the acquisition of Topwin as it was not material to the Company’s operations and overall financial position.

6. Inventories

Inventories are principally valued at standard costs, which approximate the lower of cost or market on a first-in, first-out basis. Components of inventories were as follows:

(In thousands)	Jan 2, 2016		Mar 28, 2015
Raw materials and purchased parts	$	39,688	$	37,991
Work-in-process	14,874		14,834
Finished goods	6,319		3,812
	$	60,881	$	56,637

In the third quarter of 2016 and 2015, the Company recorded a charge against inventory for write-offs associated with discontinued products of $1.4 million and zero, respectively.

7. Trade Accounts Receivable

Trade accounts receivable consisted of the following:

(In thousands)	Jan 2, 2016		Mar 28, 2015
Current trade accounts receivable, net	$	37,012	$	42,295
Non-current trade accounts receivable	288		3,656
	$	37,300	$	45,951

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Non-current trade accounts receivable are included in Other assets in the Condensed Consolidated Balance Sheets. Presentation of $3.7 million of non-current trade accounts receivable previously shown as current at March 28, 2015 was revised to reflect these amounts as non-current, which conforms to current period presentation.

8. Other Current Assets

Other current assets consisted of the following:

(In thousands)	Jan 2, 2016		Mar 28, 2015
Prepaid expenses	$	2,542	$	2,595
Acquisition related receivable	—		1,180
Value added tax receivable	747		802
Other	1,082		1,513
	$	4,371	$	6,090

9. Other Assets

Other assets consisted of the following:

(In thousands)	Jan 2, 2016		Mar 28, 2015
Consignment and demo equipment, net	$	8,070	$	7,164
Non-current trade accounts receivable	288		3,656
Long term deposits and other	2,706		2,391
	$	11,064	$	13,211

10. Accrued Current Liabilities & Other Liabilities

Accrued liabilities consisted of the following:

(In thousands)	Jan 2, 2016		Mar 28, 2015
Payroll-related liabilities	$	7,654	$	6,723
Purchase order commitments and receipts	3,079		1,815
Product warranty accrual	3,046		3,342
Customer deposits	2,291		1,057
Professional fees payable	1,345		1,237
Restructuring costs payable	982		1,997
Other current liabilities	2,583		2,495
	$	20,980	$	18,666

Included in other current liabilities above are accrued amounts for customer deposits, value-added taxes, freight, income taxes, and other similar items.

Other liabilities (non-current) consisted of the following:

(In thousands)	Jan 2, 2016		Mar 28, 2015
Product warranty accrual	$	1,640	$	—
Other non-current liabilities	1,526		1,571
	$	3,166	$	1,571

Presentation of $1.6 million of Other non-current liabilities previously shown as current at March 28, 2015 was revised to reflect these amounts as non-current, which conforms to current period presentation.

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11. Product Warranty

The following is a reconciliation of the changes in the aggregate product warranty accrual:

	Fiscal quarter ended						Three fiscal quarters ended
(In thousands)	Jan 2, 2016			Dec 27, 2014			Jan 2, 2016			Dec 27, 2014
Product warranty accrual, beginning	$	4,451		$	3,152		$	3,342		$	4,215
Warranty charges incurred, net	(2,057		)	(1,240		)	(5,604		)	(4,960		)
Provision for warranty charges	2,292			1,581			6,948			4,238
Product warranty accrual, ending	$	4,686		$	3,493		$	4,686		$	3,493

Net warranty charges incurred include labor charges and costs of replacement parts for system repairs under warranty. These costs are recorded net of any estimated cost recoveries resulting from either successful repair of damaged parts or from warranties offered by the Company’s suppliers for defective components. The provision for warranty charges reflects the estimate of future anticipated net warranty costs to be incurred for all products under warranty at quarter end and is recorded to cost of sales. Of the total of $4.7 million in product warranty accrual at January 2, 2016, $1.6 million is non-current and is included in Other liabilities on the Condensed Consolidated Balance Sheets.

12. Deferred Revenue

Generally, revenue is recognized upon fulfillment of acceptance criteria at the Company's factory and transfer of risk and title. Revenue is deferred whenever title transfer is pending, risk has not transferred, and/or acceptance criteria have not yet been fulfilled. Deferred revenue occurrences include sales to Japanese customers, shipments of substantially new products and shipments with custom specifications and acceptance criteria. In sales involving multiple element arrangements, the relative selling price of any undelivered elements, including installation services, is deferred until the elements are delivered and acceptance criteria are met. Revenue related to maintenance and service contracts is deferred and recognized ratably over the duration of the contracts.

The following is a reconciliation of the changes in deferred revenue:

	Fiscal quarter ended						Three fiscal quarters ended
(In thousands)	Jan 2, 2016			Dec 27, 2014			Jan 2, 2016			Dec 27, 2014
Deferred revenue, beginning	$	12,662		$	16,440		$	12,376		$	10,515
Revenue deferred	13,868			6,509			47,459			33,458
Revenue recognized	(18,822		)	(15,126		)	(52,127		)	(36,150		)
Deferred revenue, ending	$	7,708		$	7,823		$	7,708		$	7,823

13. Commitments & Contingencies

On March 20, 2015, the Company entered into a loan and security agreement ("Loan Agreement") with Silicon Valley Bank, as lender. The Loan Agreement provides for a senior secured asset-based revolving credit facility (the “Credit Facility”) with up to $30 million available on a revolving basis, including a $15 million sublimit for letters of credit. The credit agreement expires March 20, 2018. At January 2, 2016, we had no revolving loans or letters of credit outstanding under our Credit Facility, we were in compliance with all covenants, and were not in default under the Loan Agreement. The commitment fee on the amount of unused credit was 0.3 percent.

We mitigate credit risk by transacting with highly rated counterparties for foreign exchange contracts, letters of credit and other transactions where counterparty risk is a factor. We have evaluated the non-performance risks associated with our lenders and other parties and believe them to be insignificant. From time to time we may be party to litigation arising in the normal course of business. Currently we are not party to any litigation we believe would have a material adverse effect on our financial position, results of operations, or cash flows.

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14. Earnings (Loss) Per Share

The following is a reconciliation of weighted average shares outstanding used in the calculation of basic and diluted earnings per share:

	Fiscal quarter ended						Three fiscal quarters ended
(In thousands, except per share data)	Jan 2, 2016			Dec 27, 2014			Jan 2, 2016			Dec 27, 2014
Net loss	$	(4,586	)	$	(6,376	)	$	(14,210	)	$	(20,870	)
Weighted average shares used for basic earnings per share	31,495			30,617			31,355			30,507
Incremental diluted shares	—			—			—			—
Weighted average shares used for diluted earnings per share	31,495			30,617			31,355			30,507
Net loss per share:
Basic	$	(0.15	)	$	(0.21	)	$	(0.45	)	$	(0.68	)
Diluted	$	(0.15	)	$	(0.21	)	$	(0.45	)	$	(0.68	)

Awards of options, SARs and RSUs representing an additional 2.9 million and 2.8 million shares of stock for the third quarter of 2016 and 2015, respectively, and 2.6 million and 2.8 million shares of stock for the three quarters endedJanuary 2, 2016 and December 27, 2014, respectively, were not included in the calculation of diluted net earnings per share because their effect would have been antidilutive.

15. Segment and Geographic Information

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision making group, in deciding how to allocate resources and in assessing performance. Our chief operating decision maker is our Chief Executive Officer. Prior to the fourth quarter of 2015, we operated in one segment, high-technology manufacturing equipment, which was comprised of products that were classified in three groups: interconnect and micromachining, semiconductor and component. As a result of changes in our go-to-market strategies, common customer characteristics, and information utilized to manage our business, we realigned our products into two segments. Since the fourth quarter 2015 the Company has operated in two segments, Component Processing and Micromachining.

Net sales by segment were as follows:

	Fiscal quarter ended				Three fiscal quarters ended
(In thousands)	Jan 2, 2016		Dec 27, 2014		Jan 2, 2016		Dec 27, 2014
Component Processing	$	37,511	$	31,830	$	108,549	$	94,486
Micromachining	5,831		11,831		24,356		27,061
	$	43,342	$	43,661	$	132,905	$	121,547

Gross profits by segment were as follows:

	Fiscal quarter ended						Three fiscal quarters ended
(In thousands)	Jan 2, 2016			Dec 27, 2014			Jan 2, 2016			Dec 27, 2014
Component Processing	$	17,969		$	10,993		$	45,466		$	36,666
Micromachining	1,482			4,038			8,617			6,411
Corporate and other	(1,730		)	(318		)	(2,564		)	(1,311		)
	$	17,721		$	14,713		$	51,519		$	41,766

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Net sales by geographic area, based on the location of the end user, were as follows:

	Fiscal quarter ended				Three fiscal quarters ended
(In thousands)	Jan 2, 2016		Dec 27, 2014		Jan 2, 2016		Dec 27, 2014
Asia	$	33,278	$	33,604	$	103,843	$	92,838
Americas	7,589		5,602		20,750		14,258
Europe	2,475		4,455		8,312		14,451
	$	43,342	$	43,661	$	132,905	$	121,547

16. Restructuring and Cost Management Plans

In March 2015, as a part of the plan to streamline manufacturing and development activities, the Company initiated a restructuring plan that included the closure of the assembly plant and development center located in Chelmsford, Massachusetts, which was part of our Component Processing segment. The original estimated completion date of the plan was the end of fiscal 2016 at a total estimated pre-tax cost of $5.5 million. See the Company's Form 10-K for the year ended March 28, 2015 for additional information related to restructuring and cost management plans.

Net restructuring costs related to the above mentioned restructuring plan were $2.6 million in the first three quarters of 2016 and $5.6 million from the inception of the plan.Included in these costs were write-offs of leasehold improvements associated with the abandoned manufacturing facility, employee severance and related payments, and other wind-down costs. As of January 2, 2016, most of the restructuring activities have been completed, and we expect to pay the remaining costs and accrued expenses primarily related to severance and employee benefits by the end of 2016.

At January 2, 2016 and March 28, 2015, the amount of unpaid restructuring costs included in accrued liabilities was $1.0 million and $2.0 million, respectively.

The following table presents the amounts related to restructuring costs payable (in thousands):

Restructuring & cost management amounts payable as of March 28, 2015	$	1,997
Employee severance and related benefits:
Cash payments	(3,612		)
Costs incurred and other adjustments	2,597
Restructuring & cost management amounts payable as of January 2, 2016	$	982

17. Shareholders’ Equity

Share Repurchase Program

In December 2011, the Board of Directors authorized a share repurchase program totaling $20.0 million to acquire shares of our outstanding common stock. The repurchases are to be made at management’s discretion in the open market or in privately negotiated transactions in compliance with applicable securities laws and other legal requirements and are subject to market conditions, share price and other factors.

The Company did not repurchase any shares during the first three quarters of 2016. In the first three quarters of 2015 the Company repurchased 207,738 shares for $1.5 million under this authorization at an average price of $7.01 per share, calculated inclusive of commissions and fees. There is no fixed completion date for the repurchase program.

Dividends

In February 2015, the Board of Directors suspended the quarterly dividend which was adopted by the Company in December 2011. The Company paid dividends in the first three quarters of 2015 under the 2011 dividend policy in the aggregate amount of $0.24 per share.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The statements contained in this report that are not statements of historical fact, including without limitation, statements containing the words “believes”, “expects”, “projects”, "anticipates" and similar words, constitute forward-looking statements that are subject to a number of risks and uncertainties. From time to time we may make other forward-looking statements. Investors are cautioned that such forward-looking statements are subject to an inherent risk that actual results may materially differ as a result of many factors, including the risks described in Part II, Item 1A “Risk Factors.”

Overview of Business

Electro Scientific Industries, Inc. and its subsidiaries (ESI) is a leading supplier of innovative laser-based manufacturing solutions for the microtechnology industry. ESI's integrated solutions allow industrial designers and process engineers to control the power of laser light to transform materials in ways that differentiate their consumer electronics, wearable devices, semiconductor circuits and high-precision components for market advantage. ESI’s laser-based manufacturing solutions feature the micro-machining industry’s highest precision and speed, and target the lowest total cost of ownership. Founded in 1944, ESI is headquartered in Portland, Oregon, with global operations from the Pacific Northwest to the Pacific Rim.

Laser microfabrication is comprised of a set of precise micron-level processes, including drilling, scribing, dicing, singulation, cutting, ablating, trimming, and precision marking on multiple types of materials. These processes require application-specific laser systems that are able to meet our customers’ exacting performance and productivity requirements. Our laser-based systems are utilized in the production of consumer electronics, flexible and rigid printed circuit boards, semiconductor devices, advanced semiconductor packaging, electronic sensors, touch-panel glass, flat panel liquid crystal displays (LCDs) and other high value components and devices to enable functionality, increase performance and improve production yields.

Additionally, we produce high-capacity test and inspection equipment that is critical to the quality control process during the production of multilayer ceramic capacitors (MLCCs). Our equipment ensures that each component meets the electrical and physical tolerances required to perform properly.

Historically and during much of fiscal 2015 we operated in one segment, high technology manufacturing equipment, which was comprised of products classified into three groups: interconnect and micromachining, semiconductor, and component test. As a result of changes in our go-to-market strategies, common customer characteristics, and information utilized to manage our business, during the fourth quarter of 2015 we realigned our products into two segments: Component Processing (CP) and Micromachining (MM). Included within Component Processing are Interconnect Products (IP), Semiconductor Products (SP), and Component Test Products (CTP), which are sold primarily to manufacturers of electronic components to drill, cut, trim, ablate, test and mark features that improve the yield or functionality of the component. Micromachining Products (MP) are sold primarily to manufacturers of end-user devices across multiple industries and are used to drill, cut, or mark features on a variety of materials, generally on the casing or external surfaces of the end-user device. ESI does not maintain or monitor operating expenses or assets at the segment level.

The three quarters ended January 2, 2016 consisted of a 40-week period as compared to a 39-week period for the three quarters ended December 27, 2014. Similarly, the third quarter of 2016 ended January 2, 2016 was a 14-week period as compared to a 13-week period for the second quarter of 2016 ended September 26, 2015 and the third quarter of 2015 ended December 27, 2014.

Summary of Sequential Quarterly Results

Third Quarter 2016 Ended January 2, 2016 Compared to Second Quarter 2016 Ended September 26, 2015.

The third quarter reflected sequential improvement in orders and gross margins from the second quarter of 2016. Total order volume for the third quarter of 2016 increased to $52.6 million from $51.6 million, with an increase in CP orders partially offset by a sequential decline in MM orders. CP orders grew approximately 6%, primarily due to a sequential increase in Interconnect Products as a result of increased sales of our Gemstone flex via drilling product, higher service activity, and the first order of our new Cornerstone Series 2 laser drilling system. Orders for Semiconductor Products were roughly flat with increased demand for wafer trim products and a follow-on order for memory repair systems. Component Test Product orders were up slightly on stronger system demand. Orders declined slightly in our MM segment and included a follow-on order for our Lumen series micromachining system.

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Total sales declined from $46.5 million in the second quarter of 2016 to $43.3 million. By segment, CP sales increased by $4.8 million from $32.8 million in the second quarter of 2016 to $37.5 million in third quarter of 2016. This was primarily driven by an increase in semiconductor sales on higher memory repair system sales and increased service revenue, partially offset by lower MLCC system sales due to cyclical demand. MM sales decreased to $5.8 million in the third quarter of 2016 from $13.7 million in the second quarter of 2016, primarily due to lower orders in the third quarter and the timing of shipments between quarters.

Total shipments were $38.8 million in the third quarter of 2016 compared to $44.0 million in the second quarter of 2016 with the decline primarily relating to the shipment timing referenced above.

Gross profit was $17.7 million in the third quarter of 2016 compared to $18.4 million in the second quarter of 2016. Gross margin was 40.9% on net sales of $43.3 million in the third quarter of 2016 compared to a gross margin of 39.6% on net sales of $46.5 million in the second quarter of 2016. The improvement in gross margin was primarily due to favorable product mix, higher service margins and lower manufacturing expenses due to restructuring activity in 2016. Total margin improvements were partially offset by a $1.4 million write-off of inventory associated with a discontinued large-format glass cutting product.

Net operating expenses of $22.2 million in the third quarter of 2016 represent an increase of $0.8 million from $21.4 million in the second quarter of 2016, primarily due to restructuring costs of $1.9 million and an additional week of operating expenses in the third quarter of 2016 as compared to the second quarter of 2016, mostly offset by substantial savings from efficiency and cost reduction initiatives. Selling, general and administrative (SG&A) expenses decreased$0.1 million due to lower commissions on reduced sales volume and lower consulting charges, partially offset by higher travel expenses related to marketing and sales activities. Research, development and engineering (RD&E) expenses decreased$0.5 million due to lower project materials and consulting costs. Restructuring costs increased$1.4 million from the previous quarter primarily due to the closure of the Chelmsford manufacturing facility in the third quarter of 2016.

Operating loss was $4.5 million in the third quarter of 2016 compared to $3.0 million in the second quarter of 2016.

Non-operating income was $67 thousand in the third quarter of 2016 compared to $6 thousand in the second quarter of 2016. The change was primarily due to interest income and market gains on our non-qualified deferred compensation plan, partially offset by higher bank charges related to the unused credit facility and foreign exchange losses.

Provision for income taxes was $0.2 million in both the third and second quarters of 2016.

Net loss was $4.6 million in the third quarter of 2016 compared to a net loss of $3.3 million in the second quarter of 2016.

Third Quarter 2016 Ended January 2, 2016 Compared to Third Quarter 2015 Ended December 27, 2014

Results of Operations

The following table presents results of operations data as a percentage of net sales:

	Fiscal quarter ended
	Jan 2, 2016		Dec 27, 2014
Net sales	100.0	%	100.0	%
Cost of sales	59.1		66.3
Gross profit	40.9		33.7
Selling, general and administrative	28.8		28.2
Research, development and engineering	17.9		19.2
Restructuring costs	4.5		—
Operating loss	(10.3	)	(13.7	)
Interest and other income (expense), net	0.1		0.1
Total non-operating income (expense)	0.1		0.1
Loss before income taxes	(10.2	)	(13.6	)
Provision for income taxes	0.4		1.0
Net loss	(10.6	)%	(14.6	)%

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Net Sales

The following table presents net sales information by product group:

	Fiscal quarter ended
	Jan 2, 2016				Dec 27, 2014
(In thousands, except percentages)	Net Sales		% of Net Sales		Net Sales		% of Net Sales
Component Processing
Interconnect Products (IP)	$	22,824	52.6	%	$	16,213	37.1	%
Component Test Products (CTP)	3,303		7.6		4,164		9.5
Semiconductor Products (SP)	11,384		26.3		11,453		26.3
	$	37,511	86.5		$	31,830	72.9
Micromachining
Micromachining Products (MP)	$	5,831	13.5		$	11,831	27.1
Net Sales	$	43,342	100.0	%	$	43,661	100.0	%

Net sales for the third quarter of 2016decreased$0.3 million or 0.7% from net sales for the third quarter of 2015. By segment, sales in the CP increased by 17.8% and MM decreased by 50.7%.

CP segment sales for the third quarter of 2016increased$5.7 million compared to the third quarter of 2015. The increase in CP segment sales was driven by demand for our flex via drilling products, including the new GemStone product, and increased sales of the legacy memory repair systems. This increase was partially offset by lower sales for circuit trim, wafer trim and MLCC systems due to the cyclical nature of demand for these products.

MM segment sales for the third quarter of 2016decreased$6.0 million compared to the third quarter of 2015. The decrease was primarily the result of timing of shipments of our Lumen series micromachining systems in the third quarter of 2016.

The following table presents net sales information by geographic region:

	Fiscal quarter ended
	Jan 2, 2016				Dec 27, 2014
(In thousands, except percentages)	Net Sales		% of Net Sales		Net Sales		% of Net Sales
Asia	$	33,278	76.8	%	$	33,604	77.0	%
Americas	7,589		17.5		5,602		12.8
Europe	2,475		5.7		4,455		10.2
Net Sales	$	43,342	100.0	%	$	43,661	100.0	%

Gross Profit

	Fiscal quarter ended
	Jan 2, 2016					Dec 27, 2014
(In thousands, except percentages)	Gross Profit			% of Net Sales		Gross Profit			% of Net Sales
Component Processing	$	17,969		47.9	%	$	10,993		34.5	%
Micromachining	1,482			25.4		4,038			34.1
Corporate and other	(1,730		)	(4.0	)	(318		)	(0.7	)
Gross Profit	$	17,721		40.9	%	$	14,713		33.7	%

Gross profit was $17.7 million for the third quarter of 2016, an increase of $3.0 million compared to the third quarter of 2015, on relatively flat sales. Gross margin was 40.9% and 33.7% for the third quarters of 2016 and 2015, respectively. The gross margin increase was primarily driven by favorable product mix in the memory repair and flex via drilling products, a reduction in inventory reserves related to the sale of memory repair systems, higher service margins and decreased manufacturing expenses due to restructuring activities, compared to unfavorable mix in the third quarter of 2015, driven by lower margin sales to our largest customer. These improvements in gross profit and margins were partially offset by inventory write-offs in the third quarter of 2016 related to the discontinuation of our large-format glass cutting product.

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Gross margin for the CP segment increased from 34.5% to 47.9% or an increase of $7.0 million, primarily due to increased sales volume and associated favorable absorption of fixed costs and improved product mix. MM segment gross margins decreased from 34.1% to 25.4% due principally to lower production and sales volumes.

Operating Expenses

	Fiscal quarter ended
	Jan 2, 2016				Dec 27, 2014
(In thousands, except percentages)	Expense		% of Net Sales		Expense		% of Net Sales
Selling, general and administrative	$	12,468	28.8	%	$	12,332	28.2	%
Research, development and engineering	7,778		17.9		8,384		19.2
Restructuring costs	1,944		4.5		—		—
Operating Expenses	$	22,190	51.2	%	$	20,716	47.4	%

Selling, general and administrative

Selling, general and administrative (SG&A) expenses primarily consist of labor and other employee-related expenses including share-based compensation expense, travel expenses, professional fees, sales commissions and facilities costs. SG&A expenses for the third quarter of 2016increased$0.1 million compared to the third quarter of 2015. This increase was primarily attributable to an additional week of expenses in the third quarter of 2016, and to a lesser extent increases in variable pay and travel expenses related to product marketing and sales activities. Offsetting these items were decreases in expenses due to savings from efficiency and cost reduction initiatives.

Research, Development and Engineering

Research, development and engineering (RD&E) expenses are primarily comprised of labor and other employee-related expenses including share-based compensation expense, professional fees, project materials costs, equipment costs and facilities costs. RD&E expenses for the third quarter of 2016decreased$0.6 million compared to the third quarter of 2015. This decrease was primarily due to lower project materials, patent legal, travel and share-based compensation expenses, partially offset by the additional week of expense in the third quarter of 2016.

Restructuring Costs

During the fourth quarter of 2015, we initiated restructuring plans to consolidate and shift our manufacturing activities to Asia and other cost reduction actions. The $1.9 million of restructuring costs in 2016 relate primarily to the facilities charges for the closure of the Chelmsford, Massachusetts manufacturing plant, as we ceased our use of that facility in the third quarter of 2016, and to a lesser extent employee severance and related benefits of other cost reduction actions.

Non-operating Income and Expense

	Fiscal quarter ended
	Jan 2, 2016				Dec 27, 2014
(In thousands, except percentages)	Interest and Other (Expense) Income, net		% of Net Sales		Interest and Other (Expense) Income, net		% of Net Sales
Interest and other income (expense), net	$	67	0.1	%	$	64	0.1	%
Total non-operating income (expense)	$	67	0.1	%	$	64	0.1	%

Non-operating income and expense consists of interest income and expense, market gains and losses on assets held in employees’ deferred compensation accounts, realized and unrealized foreign exchange gains and losses, bank charges, investment management fees, and other miscellaneous non-operating items. Net non-operating income was $0.1 million in the third quarters of 2016 and 2015.

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Income Taxes

	Fiscal quarter ended
	Jan 2, 2016				Dec 27, 2014
(In thousands, except percentages)	Income Tax Provision		Effective Tax Rate		Income Tax Provision		Effective Tax Rate
Provision for income taxes	$	184	(4.2	)%	$	437	(7.4	)%

The income tax provision for the third quarter of 2016 was $184 thousand on pretax loss of $4.4 million, an effective tax rate of (4.2)%. For the third quarter of 2015, the income tax provision was $437 thousand on pretax loss of $5.9 million, an effective rate of (7.4)%. The effective tax rate fluctuation was due to the overall decrease in income subject to tax in foreign jurisdictions and the extension of expired tax incentives resulting in benefits recorded in the third quarter of 2016 as compared to the third quarter of 2015.

Net Loss

	Fiscal quarter ended
	Jan 2, 2016					Dec 27, 2014
(In thousands, except percentages)	Net Loss			% of Net Sales		Net Loss			% of Net Sales
Net loss	$	(4,586	)	(10.6	)%	$	(6,376	)	(14.6	)%

Net loss for the third quarter of 2016 was $4.6 million, or $0.15 per basic and diluted share, compared to net loss of $6.4 million, or $0.21 per basic and diluted share, for the third quarter of 2015.

Three Quarters Ended January 2, 2016 Compared to Three Quarters Ended December 27, 2014

Results of Operations

The following table presents results of operations data as a percentage of net sales:

	Three fiscal quarters ended
	Jan 2, 2016		Dec 27, 2014
Net sales	100.0	%	100.0	%
Cost of sales	61.2		65.6
Gross profit	38.8		34.4
Selling, general and administrative	28.3		29.9
Research, development and engineering	18.6		21.4
Acquisition and integration costs	0.1		—
Restructuring costs	2.0		—
Operating loss	(10.2	)	(16.9	)
Interest and other income (expense), net	0.1		(0.1	)
Total non-operating income (expense)	0.1		(0.1	)
Loss before income taxes	(10.2	)	(17.0	)
Provision for income taxes	0.5		0.1
Net loss	(10.7	)%	(17.2	)%

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Net Sales

The following table presents net sales information by product group:

	Three fiscal quarters ended
	Jan 2, 2016				Dec 27, 2014
(In thousands, except percentages)	Net Sales		% of Net Sales		Net Sales		% of Net Sales
Component Processing
Interconnect Products (IP)	$	64,969	48.9	%	$	48,531	39.9	%
Component Test Products (CTP)	14,292		10.8		13,986		11.5
Semiconductor Products (SP)	29,288		22.0		31,969		26.3
	$	108,549	81.7		$	94,486	77.7
Micromachining
Micromachining Products (MP)	$	24,356	18.3		$	27,061	22.3
Net Sales	$	132,905	100.0	%	$	121,547	100.0	%

Net sales for the first three quarters of 2016increased$11.4 million or 9.3% from net sales for the first three quarters of 2015. Sales in CP increased by $14.1 million or 14.9% and MM decreased by $2.7 million or 10.0%.

The increase in CP sales for the first three quarters of 2016 compared to the first three quarters of 2015 was primarily due to higher demand for our flex via drilling products, in particular our new Gemstone system, and increased sales of the legacy memory repair systems. These increases were partially offset by lower sales of the circuit and wafer trim systems.

The decrease in MP sales for the first three quarters of 2016 compared to the first three quarters of 2015 was primarily driven by reduced demand for laser ablation systems as well as lower service sales, partially offset by increased sales of Lumen series micromachining systems.

The following table presents net sales information by geographic region:

	Three fiscal quarters ended
	Jan 2, 2016				Dec 27, 2014
(In thousands, except percentages)	Net Sales		% of Net Sales		Net Sales		% of Net Sales
Asia	$	103,843	78.1	%	$	92,838	76.4	%
Americas	20,750		15.6		14,258		11.7
Europe	8,312		6.3		14,451		11.9
Net Sales	$	132,905	100.0	%	$	121,547	100.0	%

Gross Profit

	Three fiscal quarters ended
	Jan 2, 2016					Dec 27, 2014
(In thousands, except percentages)	Gross Profit			% of Net Sales		Gross Profit			% of Net Sales
Component Processing	$	45,466		41.9	%	$	36,666		38.8	%
Micromachining	8,617			35.4		6,411			23.7
Corporate and other	(2,564		)	(1.9	)	(1,311		)	(1.1	)
Gross Profit	$	51,519		38.8	%	$	41,766		34.4	%

Gross profit was $51.5 million for the first three quarters of 2016, an increase of $9.8 million compared to the first three quarters of 2015. Gross profit increased primarily due to increased sales volume and lower manufacturing expenses as a result of restructuring activities. Gross margin was 38.8% and 34.4% for the first three quarters of 2016 and 2015, respectively. The improvement in gross margin was driven by higher absorption of fixed costs due to increased production volumes, decreased manufacturing expenses, favorable product mix, and a reduction in inventory reserves related to the sale of memory repair systems, all partially offset by an inventory write-off related to a discontinued large-format glass cutting product and intangible asset amortization.

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Operating Expenses

	Three fiscal quarters ended
	Jan 2, 2016				Dec 27, 2014
(In thousands, except percentages)	Expense		% of Net Sales		Expense		% of Net Sales
Selling, general and administrative	$	37,619	28.3	%	$	36,384	29.9	%
Research, development and engineering	24,706		18.6		25,953		21.4
Acquisition and integration costs	194		0.1		—		—
Restructuring costs	2,597		2.0		—		—
Operating Expenses	$	65,116	49.0	%	$	62,337	51.3	%

Selling, general and administrative

SG&A expenses primarily consist of labor and other employee-related expenses including share-based compensation expense, travel expenses, professional fees, sales commissions and facilities costs. SG&A expenses for the first three quarters of 2016increased$1.2 million compared to the first three quarters of 2015. This increase was primarily attributable to an additional week of expense in the third quarter of 2016, increases in variable pay, share-based compensation and commission expense due to higher sales volume. These were partially offset by reductions in other areas due to savings from efficiency and cost reduction initiatives.

Research, Development and Engineering

RD&E expenses are primarily comprised of labor and other employee-related expenses including share-based compensation expense, professional fees, project materials costs, equipment costs and facilities costs. RD&E expenses for the first three quarters of 2016decreased$1.2 million compared to the first three quarters of 2015. This decrease was driven by lower patent legal fees, labor cost reductions, decreased stock compensation and depreciation expenses. These were partially offset by increased project material expenses.

Acquisition and Integration Costs

Acquisition and integration costs consisted mainly of consulting, legal and travel expenses associated with the acquisition and integration of Topwin Optoelectronics, which was acquired in January 2015.

Restructuring Costs

During the fourth quarter of 2015, we initiated restructuring plans to consolidate and shift our manufacturing activities to Asia and other cost reduction actions. The $2.6 million of restructuring costs in 2016 relate primarily to the charges for the closure of the Chelmsford, Massachusetts manufacturing plant in the third quarter of 2016, and, to a lesser extent employee severance and related benefits of other cost reduction actions.

Non-operating Income and Expense

Non-operating income and expense, net, consists of interest income and expense, market gains and losses on assets held in employees’ deferred compensation accounts, realized and unrealized foreign exchange gains and losses, bank charges, investment management fees, and other miscellaneous non-operating items, such as investment impairment.

Non-operating income and expense were as follows:

	Three fiscal quarters ended
	Jan 2, 2016				Dec 27, 2014
(In thousands, except percentages)	Non-Operating Income (Expense)		% of Net Sales		Non-Operating Income (Expense)			% of Net Sales
Interest and other income (expense), net	$	68	0.1	%	$	(134	)	(0.1	)%
Total non-operating income (expense)	$	68	0.1	%	$	(134	)	(0.1	)%

Interest and other income (expense), net

Net interest and other income was $68 thousand in the first three quarters of 2016 compared to net interest and other expense of $134 thousand in the first three quarters of 2015. The change in net interest and other income (expense) was primarily due to foreign exchange losses in 2015 which did not repeat in 2016, partially offset by lower market gains on assets held in deferred compensation accounts in 2016.

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Income Taxes

	Three fiscal quarters ended
	Jan 2, 2016				Dec 27, 2014
(In thousands, except percentages)	Income Tax Provision		Effective Tax Rate		Income Tax Provision		Effective Tax Rate
Provision for income taxes	$	681	(5.0	)%	$	165	(0.8	)%

The income tax provision for the first three quarters of 2016 was $0.7 million on pretax loss of $13.5 million, an effective tax rate of (5.0)%. For the first three quarters of 2015, the income tax provision was $0.2 million on pretax loss of $20.7 million, an effective rate of (0.8)%. The effective tax rate fluctuation was due to the overall increase of income subject to tax in foreign jurisdictions and recognition of previously unrecognized tax benefits in 2015 relating to the deductibility of legal expense in Taiwan.

Net Loss

	Three fiscal quarters ended
	Jan 2, 2016					Dec 27, 2014
(In thousands, except percentages)	Net Loss			% of Net Sales		Net Loss			% of Net Sales
Net loss	$	(14,210	)	(10.7	)%	$	(20,870	)	(17.2	)%

Net loss for the first three quarters of 2016 was $14.2 million, or $0.45 per basic and diluted share, compared to net loss of $20.9 million, or $0.68 per basic and diluted share for the first three quarters of 2015.

Financial Condition and Liquidity

At January 2, 2016, our principal sources of liquidity were cash and cash equivalents of $42.1 million, short-term investments of $20.8 million and accounts receivable of $37.3 million. At January 2, 2016, we had a current ratio of 3.69 and had no long-term debt. Working capital of $121.5 million decreased $3.1 million compared to the March 28, 2015 balance of $124.6 million. Total cash, cash equivalents, and investments increased $5.2 million as compared to March 28, 2015, offset by a decrease in accounts receivable of $8.6 million.

In February 2015, the Board of Directors suspended the quarterly dividend which was adopted by the Company in December 2011. The Company paid dividends in the first three quarters of 2015 under the 2011 dividend policy in the aggregate amount of $0.24 per share. The Company has not paid any dividends in 2016.

Sources and Uses of Cash

Net cash provided by operating activities of $8.0 million for the three quarters endedJanuary 2, 2016 was a result of a $14.2 million net loss, or $2.7 million in losses after non-cash items of $11.5 million, more than offset by cash flow improvements related to changes in working capital. Working capital changes consisted primarily of a $8.6 million decrease in accounts receivables due to improved payment terms and timing of shipments and a $6.8 million increase in accounts payable driven by normalization of timing of inventory receipts and extension of payment terms with vendors, partially offset by a $7.0 million increase in inventory due to timing of shipments in the third quarter and investments in inventory for new product placements and projected shipments in the fourth quarter of 2016.

For the three quarters endedJanuary 2, 2016, net cash used in investing activities of $17.0 million was primarily due to $14.2 million of net purchases of investments and $2.7 million of capital expenditures for purchases of property, plant and equipment (PP&E). The accounts receivable balance at January 2, 2016 includes $0.2 million of proceeds receivable on sales of PP&E.

For the three quarters endedJanuary 2, 2016, net cash used in financing activities of $0.4 million related to issuances from employee stock plans, net of payments of associated withholding taxes.

We believe that our existing cash, cash equivalents and short-term investments are adequate to fund our operations and contractual obligations for at least the next twelve months.

Critical Accounting Policies and Estimates

We reaffirm the “Critical Accounting Policies and Estimates” in Part II Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations reported in our Form 10-K for the year ended March 28, 2015.

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Item 3. Quantitative and Qualitative Disclosures about Market Risk

There have been no material changes in the market risk disclosure contained in our Form 10-K for the year ended March 28, 2015.

Item 4. Controls and Procedures

Attached to this quarterly report as exhibits 31.1 and 31.2 are the certifications of our President and Chief Executive Officer (CEO) and our Chief Financial Officer (CFO) required by Section 302 of the Sarbanes-Oxley Act of 2002 (the Section 302 Certifications). This portion of our quarterly report on Form 10-Q is our disclosure of the conclusions of our management regarding the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report based on management’s evaluation of those disclosure controls and procedures. This disclosure should be read in conjunction with the Section 302 Certifications for a more complete understanding of the topics presented.

Disclosure Controls and Procedures

Our management has evaluated, under the supervision and with the participation of our CEO and CFO, the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended (Exchange Act). Based on the evaluation, our CEO and CFO have concluded that our disclosure controls and procedures were not effective as of January 2, 2016, because of the material weaknesses described in Management’s Report on Internal Control over Financial Reporting in our annual Form 10-K dated March 28, 2015. Management is in the process of remediating the related material weaknesses and significant deficiencies, has completed an assessment of the control weaknesses and has implemented several new controls. The associated controls have not yet been in place for a sufficient period of time for management to conclude that they are operating effectively and the material weaknesses and significant deficiencies have been remediated.

Changes in Internal Control Over Financial Reporting

Except for the items noted above, there has been no change in our internal control over financial reporting during the third quarter of 2016 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

In the ordinary course of business, we are involved in various legal matters, either asserted or unasserted, and investigations. In the opinion of management, ultimate resolution of these matters will not have a material effect on our consolidated financial position, results of operations or cash flows.

Item 1A. Risk Factors

The statements contained in this report that are not statements of historical fact, including without limitation statements containing the words “believes”, “expects”, “projects”, "anticipates" and similar words, constitute forward-looking statements that are subject to a number of risks and uncertainties. From time to time, we may make other forward-looking statements. Investors are cautioned that such forward-looking statements are subject to an inherent risk that actual results may differ materially. The following information highlights some of the factors that could cause actual results to differ materially from the results expressed or implied by our forward-looking statements. Forward-looking statements should be considered in light of these factors. Factors that may result in such variances include, but are not limited to, the following:

Risks Related to Our Competition and Customers

Volatility of Our Customers’ Industries

Our business is dependent upon the capital expenditures of manufacturers of microelectronics, semiconductors, computers, wireless communications and other electronic products. The capital equipment market for microelectronics, semiconductor, and consumer electronics manufacturers has historically been characterized by sudden and severe cyclical variations in product supply and demand due to a number of factors including capacity utilization, timing of customers’ new product introductions and demand for their products, inventory levels relative to demand and access to affordable capital. The timing, severity and duration of these market cycles are difficult or impossible to predict. As a result, business levels can vary significantly from quarter to quarter or year to year. Significant volatility in investment cycles in the market for microelectronics, PCB's and semiconductors used in electronic devices or in the market for consumer electronics reduce

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demand for our products and may materially and adversely affect our business, financial condition and results of operations. The degree of the impact of any downturn on our business depends on a number of factors, including: the strength of the global economies, particularly those of Asia and the United States; the overall level of demand for consumer electronics products; the stability of global financial systems; and the overall health of the microelectronics, semiconductor, and consumer electronics industries.

Expansion into New Markets

Our future success depends in large part on our successful penetration of new markets adjacent to our existing markets and of the Chinese market for lower cost systems. These markets are new to us and our success is dependent on our displacing entrenched competitors who are familiar with these markets and are known to customers. There is no assurance that we will be successful in penetrating these new markets significantly or at all. If we fail to successfully penetrate these markets our business, financial condition and results of operations could be materially and adversely affected.

Highly Competitive Markets

We face substantial competition from established competitors throughout the world, some of which have greater financial, engineering, manufacturing and marketing resources than we do. Those competitors with greater resources may, in addition to other things, be able to better withstand periodic downturns, compete more effectively on the basis of price and technology, or more quickly develop enhancements to, and new generations of, products that compete with the products we manufacture and market. New companies may enter the markets in which we compete, or industry consolidation may occur, further increasing competition in those markets. We have also experienced new entrants to our markets offering aggressive price and payments terms in an attempt to gain market share. Some competitors, particularly in China, also develop low cost products employing processes or technology developed by us. In addition, because we price our products in U.S. dollars, a strong U.S. dollar can make our products less price-competitive outside of the United States to products priced in other currencies. We believe that to be competitive we must continue to expend significant financial resources in order to, among other things, invest in new product development and enhancements. We may not be able to compete successfully in the future and increased competition may result in price reductions, reduced profit margins and loss of market share.

Revenues are Largely Dependent on Few Customers

We depend on a few significant customers for a large portion of our revenues. In 2015, our top ten customers accounted for approximately 40% of total net sales. We anticipate that sales of our products to a relatively small number of customers will continue to account for a significant portion of our revenues. Consolidation between customers, changes in technologies or solutions used by customers, changes in products manufactured by customers or in end-user demand for those products, selection of suppliers other than us, customer bankruptcies or customer departures from their respective industries all may result in even fewer customers accounting for a high percentage of our revenue and reduced demand from any single major customer. Also, business levels with several of our top customers are dependent on our winning new designs and features each product cycle, and there is no guarantee of future business based on past design wins. Furthermore, none of our customers have any long-term obligation to continue to buy our products or services and may therefore delay, reduce or cease ordering our products or services at any time. The cancellation, reduction or deferral of purchases of our products by even a single customer could significantly reduce our revenues in any particular quarter. For example, revenues from Apple, Inc. decreased from $27 million in 2014 to $15 million in 2015. If we were to lose any of our significant customers or suffer a material reduction in their purchase orders, revenue could decline and our business, financial condition and results of operations could be materially and adversely affected.

Increased Price Pressure

We have experienced and continue to experience pricing pressure in the sale of our products, from both competitors and customers. Pricing pressures typically have become more intense during cyclical downturns when competitors seek to maintain or increase market share, reduce inventory or introduce more technologically advanced products or lower cost products. In addition, we may agree to pricing concessions or extended payment terms with our customers in connection with volume orders or to improve cost of ownership in highly competitive applications. Our business, financial condition, margins or results of operations may be materially and adversely affected by competitive pressure and intense price-based competition.

Revenues are Largely Based on the Sale of a Small Number of Product Units

We derive a substantial portion of our revenue from the sale of a relatively small number of products. Accordingly, our revenues, margins and other operating results could fluctuate significantly from quarter to quarter depending upon a variety of factors in addition to those described above, including:

• changes in the timing of orders and terms or acceptance of product shipments by our customers;

• changes in the mix of products and services that we sell;

• timing and market acceptance of our new product introductions; and

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• delays or problems in the planned introduction of new products, or in the performance of any such products following delivery to customers.

As a result of these risks, we believe that quarter-to-quarter comparisons of our revenue and operating results may not be meaningful, and that these comparisons may not be an accurate indicator of our future performance.

Risks Related to Our Supply Chain and Production

Variability of Production Capacity

To meet rapidly changing demand in the industries we serve, we must effectively manage our resources and production capacity. During periods of decreasing demand for our products, we must be able to appropriately align our cost structure with prevailing market conditions and effectively manage our supply chain. Our ability to rapidly and effectively reduce our cost structure in response to such downturns is limited by the fixed nature of many of our expenses in the near term and by our need to continue our investment in next-generation product technology and to support and service our products. Conversely, when upturns occur in the markets we serve, we may have difficulty rapidly and effectively increasing our manufacturing capacity or procuring sufficient materials to meet sudden increases in customer demand that could result in the loss of business to our competitors and harm to our relationships with our customers. If we are not able to timely and appropriately adapt to changes in our business environment, our business, financial condition or results of operations may be materially and adversely affected.

Reliance on Critical Suppliers

We use a wide range of components from numerous suppliers in the manufacture of our products, including custom electronic, laser, optical and mechanical components. We generally do not have guaranteed supply arrangements with our suppliers. We seek to reduce the risk of production and service interruptions and shortages of key parts by selecting and qualifying alternative suppliers for key parts, monitoring the financial stability of key suppliers and maintaining appropriate inventories of key parts. Although we make reasonable efforts to ensure that parts are available from multiple suppliers, some key parts are available only from a single supplier or a limited group of suppliers in the short term. In addition, some of the lasers we use in our products are difficult to manufacture, and as a result we may not receive an adequate supply of lasers in a timely fashion to fill orders. Operations at our suppliers’ facilities are subject to disruption or discontinuation for a variety of reasons, including changes in business relationships, competitive factors, financial difficulties, work stoppages, fire, natural disasters or other causes. Any such disruption or discontinuation to our suppliers’ operations could interrupt or reduce our manufacturing activities and delay delivery of our products, any or all of which could materially and adversely affect our results of operations. In addition, when markets recover from economic downturns, there is a heightened risk that one or more of our suppliers may not be able to meet our increased demand requirements, adversely impacting our ability to fulfill orders and win business with our customers.

Utilization of Contract Manufacturers

We have arrangements with contract manufacturers to complete the manufacturing of certain of our product subcomponents. Any significant interruption in our contract manufacturers’ ability to provide manufacturing services to us as a result of contractual disputes with us or another party, labor disruptions, financial difficulties, natural disasters, delay or interruption in the receipt of inventory, customer prioritization or other causes could result in reduced manufacturing capabilities or delayed deliveries for certain of our products, any or all of which could materially and adversely affect our results of operations.

Charges for Excess or Obsolete Inventory

One factor on which we compete is the ability to ship products on schedules required by customers. In order to facilitate timely shipping, management forecasts demand, both in type and amount of products, and these forecasts are used to determine inventory to be purchased. We also order materials based on our technology roadmap, which represents management’s assessment of technology that will be utilized in new products that we develop. Certain types of inventory, including lasers and optical equipment, are particularly expensive and may only be used in the production of a single type of product. If actual demand is lower than forecast with respect to the type or amount of products actually ordered, or both, our inventory levels may increase. As a result, there is a risk that we may have to incur material accounting charges for excess and obsolete inventory if inventory cannot be used, which would negatively affect our financial results. Also, if we alter our technology or product development strategy, we may have inventory that may not be usable under the new strategy, which may also result in material accounting charges. For example, in the third quarter of 2016 we recorded approximately $1.4 million of charges in cost of sales for inventory written off associated with discontinued products.

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Uncertainties Resulting from Conflict Minerals Regulation

On August 22, 2012, the SEC adopted a rule requiring disclosures of specified minerals, known as conflict minerals, that are necessary to the functionality or production of products manufactured or contracted to be manufactured by companies filing public reports. The rule requires a disclosure report to be filed annually with the SEC and this report will require companies to perform due diligence, disclose, and report whether such minerals originate from the Democratic Republic of Congo or an adjoining country. The rule could affect sourcing at competitive prices and availability in sufficient quantities of certain minerals used in the manufacture of our products, including tantalum, tin, gold, and tungsten. The number of suppliers who provide conflict-free minerals may be limited. In addition, there may be material costs associated with complying with the disclosure requirements, such as costs related to determining the source of certain minerals used in our products, as well as costs of possible changes to products, processes, or sources of supply as a consequence of such verification activities. Since our supply chain is complex, we may not be able to sufficiently verify the origins of the relevant minerals used in our products through the due diligence procedures that we implement, which may harm our reputation. In addition, we may encounter challenges to satisfy those customers who require that all of the components of our products be certified as conflict-free, which could place us at a competitive disadvantage if we are unable to do so.

Risks Related to Our Organization

Operating a Global Business

International shipments accounted for 86% of net shipments in 2015, with 76% of our net shipments to customers in Asia. We expect that international shipments will continue to represent a significant percentage of net sales in the future. We also have significant foreign operations, including manufacturing facilities in Singapore and China, research and development facilities in Canada, France, Taiwan and Korea, and sales and service offices in various countries. Under our globalization strategy, we intend to increase our foreign operations in the future. Our non-U.S. sales, purchases and operations are subject to risks inherent in conducting business abroad, many of which are outside our control, including the following:

• periodic local or geographic economic downturns and unstable political conditions;

• price and currency exchange controls;

• fluctuation in the relative values of currencies;

• difficulty in repatriating money, whether as a result of tax laws or otherwise;

• difficulties protecting intellectual property;

• compliance with labor laws and other laws governing employees;

• local labor disputes;

• shipping delays and disruptions;

• unexpected changes in trading policies, regulatory requirements, tariffs and other barriers; and

• difficulties in managing a global enterprise, including staffing, collecting accounts receivable, and managing suppliers, distributors and representatives.

Our business and operating results could also be impacted, directly or indirectly, by natural disasters, outbreaks of infectious disease, military action, international conflicts, terrorist activities, civil unrest and associated political instability. Many of our facilities, including our Portland, Oregon headquarters, are in areas with known earthquake risk. Some of these events or circumstances may also result in heightened security concerns with respect to domestic and international travel and commerce, which may further affect our business and operating results. In particular, due to these uncertainties, we are subject to the following additional risks:

• future tightening of immigration controls may adversely affect the residence status of non-U.S. engineers and other key technical employees in our U.S. facilities or our ability to hire new non-U.S. employees in such facilities;

• more frequent instances of shipping delays;

• demand for our products may not increase or may decrease; and

• our customers or suppliers may experience financial difficulties or cease operations.

Implementation and Modification of Globalization Strategy

We are continuing to implement and expand our globalization strategy in which we are moving certain operational resources and capabilities to different countries in Asia to be closer to many of our significant customers to reduce costs and to develop low cost follow-on solutions to our products. As part of this strategy we acquired Topwin, a Chinese manufacturer of laser-based systems, in January 2015 to gain entry into the low-cost solutions market in China.

We believe this strategy will enhance customer relationships, improve our responsiveness, reduce our manufacturing costs for certain products and allow us to compete with low cost competitors who develop systems employing processes developed by us. We opened a manufacturing facility in Singapore in the fourth quarter of 2010, which manufactures certain IP, MP, SP and CTP products and is now our primary system manufacturing facility.

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Our globalization strategy is subject to a variety of complexities and risks, many of which may divert a substantial amount of management’s time. These risks include:

• challenges in designing facilities that can be scaled for future expansion, replicating current processes and bringing new facilities up to full operation;

• unpredictable costs, redundancy costs and cost overruns for developing facilities and acquiring equipment;

• building local management teams, technical personnel and other staff for functions that we have not previously conducted outside of the United States;

• technical obstacles such as poor production or process yield and loss of quality control during the ramp of a new facility;

• re-qualifications and other procedures that may be required by our customers;

• our ability to bring up local suppliers to meet our quality and cycle-time needs;

• our ability to reduce costs in the United States as we add costs elsewhere;

• rapidly changing business conditions that may require plans to be changed or abandoned before they are fully implemented; and

• challenges posed by distance and by differences in language and culture.

These and other factors could delay the continuing development, expansion and implementation of our strategy, as well as impair our gross margins, delay shipments and deliveries, cause us to lose sales, require us to write off investments already made, damage our reputation and harm our business, financial condition and results of operations. If we decide to change our globalization strategy, we may incur charges for certain costs incurred.

Acquisitions and Divestitures

We may make acquisitions of, or significant investments in, other businesses with complementary products, services or technologies, such as our June 2012 acquisition of Eolite Systems, our May 2013 acquisition of the Semiconductor Systems business from GSI Group, Inc. and our January 2015 acquisition of Topwin. Acquisitions involve numerous risks, many of which are unpredictable and beyond our control, including:

• difficulties and increased costs in connection with integration of personnel, operations, technologies and products of the acquired businesses;

• difficulties in implementation of our enterprise resource planning (ERP) system into the acquired company’s operations;

• diversion of management’s attention from other operational matters;

• the potential loss of key employees of the acquired company;

• lack of synergy or inability to realize expected synergies resulting from the acquisition;

• the inability to successfully enter new markets expected to result from the acquisition;

• acquired assets becoming impaired as a result of technological advancements, change in expected useful life, lower levels of revenue, profitability or cash flows of the acquired company;

• difficulties establishing satisfactory internal controls and accounting practices at the acquired company;

• risks related to the culture, language, and local practices of the acquired company;

• risks and uncertainties relating to the performance of the combined company following the transaction; and

• acquiring unanticipated liabilities for which we will not be indemnified.

Furthermore, the accounting for an acquisition could result in significant charges resulting from amortization or write-off of intangible assets and goodwill we acquire. Our inability to effectively manage these risks could result in our inability to realize the anticipated benefits of an acquisition on a timely basis, or at all, and materially and adversely affect our business, financial condition and results of operations. In addition, all acquisition transaction costs must be expensed as incurred rather than capitalized, which may have a material adverse effect on our results of operations.

The means by which we finance an acquisition may also significantly affect our business or the value of the shares of our common stock. If we issue common stock to pay for an acquisition, the ownership percentage of our existing shareholders will be diluted and the value of the shares held by our existing shareholders could be reduced. If we use cash on hand to pay for an acquisition, the payment could significantly reduce the cash that would be available to fund our operations or to use for other purposes. If we borrow funds in connection with an acquisition, we would be required to use cash to service the debt and to comply with financial and other covenants.

Hiring and Retention of Personnel

Our continued success depends in part upon the services of our key managerial, financial and technical personnel. The loss of key personnel, or our inability to attract, assimilate and retain qualified personnel, could result in the loss of customers, inhibit our ability to operate and grow our business and otherwise have a material adverse effect on our business and results of operations. We have previously had to, and may in the future have to, impose salary reductions on employees during economic

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downturns in an effort to maintain our financial position. On several occasions in recent years executives and other employees have received limited or no annual bonuses due to our financial performance relative to the performance parameters in our annual bonus plans. These events may have an adverse effect on employee loyalty and may make it more difficult for us to attract and retain key personnel. Competition for qualified personnel in the industries and locations in which we compete for talent is intense, and we may not be successful in attracting and retaining qualified personnel. We may incur significant costs in our efforts to recruit and retain key personnel, which could affect our financial position and results of operations.

Risks Related to Technology

Markets Characterized by Rapid Technological Change

The markets for our products are characterized by rapid technological change and innovation, frequent new product introductions, changes in customer requirements and evolving industry standards. Our future performance will depend on the successful development, introduction and market acceptance of new and enhanced products that address technological changes and the requirements of current and potential customers. The development of new, technologically advanced products is a complex and uncertain process, requiring high levels of innovation and highly skilled engineering and development personnel, as well as the accurate anticipation of technological and market trends. We cannot assure you that we will be able to identify, develop, manufacture, market or support new or enhanced products successfully, if at all, or on a timely basis. The introduction by us or by our competitors of new or enhanced products, or alternative technologies, may cause our customers to defer, change or cancel orders for our existing products or cease purchasing our products altogether. Further, we cannot assure that our new products will gain timely market acceptance or that we will be able to respond effectively to product announcements by competitors, technology changes or emerging industry standards. If we are unable to develop new or enhanced products to address product or technology changes or new industry standards on a timely basis or at all, or if our new or enhanced products are not accepted by the market, or if our customers adopt alternative technologies, our business, financial condition and results of operations may be adversely affected.

Need to Invest in Research and Development

Our industry is characterized by the need for continued investment in research and development. Because of intense competition in the industries in which we compete, if we were to fail to invest sufficiently in research and development, our products could become less attractive to our current and potential customers or obsolete, and our business and financial condition could be materially and adversely affected. As a result of our need to maintain our spending levels in this area, our operating results could be materially harmed if our net sales decline. In addition, as a result of our emphasis on research and development and technological innovation, our operating costs may increase in the future, and research and development expenses may increase as a percentage of total operating expenses and as a percentage of net sales.

Need to Broaden our Marketing and Channel Capability

The laser microfabrication industry is comprised of broad set of markets and applications and represents significant opportunities for growth. In order to access these opportunities, we are broadening our approach from customer centric to market based. This will require the hiring, development, and application of new marketing capability and channel access. Our ability to successfully access and compete in these broader markets will be partially dependent on our development of these new skills and capabilities. Our inability to do so would harm our business and adversely affect our revenues and profitability.

Products are Highly Complex

Our products are highly complex, and our extensive product development, manufacturing and testing processes may not be adequate to detect all defects, errors, failures and quality issues that could impact customer satisfaction or result in claims against us. As a result, we may have to replace certain components or provide remediation in response to the discovery of defects in products after they are shipped. The occurrence of any defects, errors, failures or quality issues could result in cancellation of orders, product returns, diversion of our resources, legal actions by our customers and other losses to us or to our customers. These occurrences could also result in the loss of, or delay in, market acceptance of our products, loss of sales and increased expenses and warranty costs, which would harm our business and adversely affect our revenues and profitability.

Risks Related to Legal Matters

Protection of Proprietary Rights – Generally

Our success depends significantly upon the protection of our proprietary rights. We attempt to protect our proprietary rights through patents, copyrights, trademarks, maintenance of trade secrets and other measures, including entering into confidentiality agreements. We incur substantial costs to obtain and maintain patents and to defend our intellectual property rights. We rely upon the laws of the United States and foreign countries where we develop, manufacture or sell our products to

30

protect our proprietary rights. We may not be successful in protecting these proprietary rights, these rights may not provide the competitive advantages that we expect, or other parties may challenge, invalidate or circumvent these rights.

Protection of Proprietary Rights – Foreign Jurisdictions

Our efforts to protect our intellectual property may be less effective in some foreign countries where intellectual property rights are not as well protected as in the United States. Many United States companies have encountered substantial problems in protecting their proprietary rights against infringement in foreign countries. If we fail to adequately protect our intellectual property in these countries, it could be easier for our competitors to sell competing products in foreign countries, which could result in reduced sales and gross margins.

Intellectual Property Infringement Claims

Several of our competitors hold patents covering a variety of technologies, applications and methods of use similar to some of those used in our products. While we attempt in our designs to avoid patent infringement, from time to time we and our customers have received correspondence from our competitors claiming that some of our products, as used by our customers, may be infringing one or more of these patents. Competitors or others have in the past and may in the future assert infringement claims against our customers or us with respect to current or future products or uses, and these assertions may result in costly litigation or require us to obtain a license to use intellectual property rights of others. If claims of infringement are asserted against our customers, those customers may seek indemnification from us for damages or expenses they incur.

If we become subject to infringement claims, we will evaluate our position and consider the available alternatives, which may include seeking licenses to use the technology in question or defending our position. These licenses, however, may not be available on satisfactory terms or at all. If we are not able to negotiate the necessary licenses on commercially reasonable terms or successfully defend our position, our financial condition and results of operations could be materially and adversely affected.

We also defend our patent and intellectual property portfolio. For example, we initiated litigation in 2014 against Humo Laboratory, LTD. in Japan and against Eo Technics Co., Ltd., in South Korea for infringement of key patents. There is no assurance that this litigation will be successful, and we may incur significant legal fees to prosecute these claims.

Tax Audits and Changes in Tax Law

We are periodically under audit by United States and foreign tax authorities and may have exposure to additional tax liabilities as a result. Significant judgment is required in determining our provision for income and other tax liabilities. Although we believe our tax estimates are reasonable, the final outcome of tax audits and the impact of changes in tax laws or the interpretation of tax laws could result in material differences from what is reflected in historical income tax accruals. If additional taxes are assessed as a result of an examination, a material effect on our financial results, tax positions or cash flows could occur in the period or periods in which the determination is made.

We currently benefit from a tax incentive program in Singapore pursuant to which we pay no Singapore income tax with respect to our manufacturing income. The incentive commenced on July 1, 2006 and will continue through June 30, 2016 assuming we are able to satisfy applicable requirements. The Company has failed to meet certain of the associated requirements in the past, however it has obtained a waiver for certain periods. While the Company believes that it is more likely than not the Company will continue to receive the associated tax incentives and there is no indication that past benefits received would be rescinded, there is no assurance we will be able to satisfy these requirements, and failure to meet such requirements may lead to reduction in future or past tax benefits.

Legal Proceedings

From time to time we are subject to various legal proceedings, including breach of contract claims and claims that involve possible infringement of patent or other intellectual property rights of third parties or by third parties. It is inherently difficult to assess the outcome of litigation matters, and there can be no assurance that we will prevail in any litigation. Any litigation could result in substantial cost and diversion of management’s attention, which by itself could have a material adverse effect on our financial condition and results of operations. Further, adverse determinations in such litigation could result in loss of our property rights, subject us to significant liabilities, require us to seek licenses from others or prevent us from manufacturing or selling our products, any of which could materially adversely affect our business, financial condition, results of operations or cash flows.

Provisions Restricting Our Acquisition

Our articles of incorporation and bylaws contain provisions that could make it harder for a third party to acquire us without the consent of our Board of Directors. In addition, the Oregon Control Share Act and the Oregon Business

31

Combination Act limit the ability of parties who acquire a significant amount of voting stock to exercise control over us. These provisions may have the effect of lengthening the time required for a person to acquire control of us through a proxy contest or the election of a majority of our Board of Directors, may deter efforts to obtain control of us and may make it more difficult for a third party to acquire us without negotiation. These provisions may apply even if the offer may be considered beneficial by our shareholders.

Risks Related to Financial Matters

Liquidity

We may require greater working capital to operate than similar size businesses in many other industries. At January 2, 2016, we had working capital of $121.5 million, including $62.8 million in cash and short-term investments. Our operating cash flows were negative for most quarters from September 2013 through March 2015. In the quarter ended January 2, 2016 we had positive operating cash flows of $3.5 million. If revenues were to grow, we would expect increased working capital needs for receivables and inventory. While we have a credit facility in place, the level of availability and cost are based on maintaining certain levels of qualified receivables and domestic cash. As a result, if either of these balances decreases sufficiently, our ability to access the facility may be limited or costs may be higher. In addition, if we fail to meet the covenants in our credit facility, including the tangible net worth covenant, the facility may not be available to us. If we were to require additional financing, there is no assurance it would be available on terms that are acceptable to us or at all. In addition, if we were to obtain financing by selling stock or convertible securities, the ownership of existing shareholders would be diluted. Our ability to obtain financing by selling stock or convertible securities could be negatively affected by the fact that we are currently ineligible to use a Form S-3 Registration Statement. If we were to require additional financing and were unable to do so on acceptable terms or at all, our business and our ability to continue operations could be materially and adversely affected.

Unfavorable Currency Exchange Rate Fluctuations

Currency exchange rate fluctuations could have an adverse effect on our sales and results of operations and we could experience losses with respect to forward exchange contracts into which we may enter. Unfavorable currency fluctuations could require us to increase prices to foreign customers, which could result in lower net sales by us to those customers. Alternatively, if we do not adjust the prices for our products in response to unfavorable currency fluctuations, our results of operations could be materially and adversely affected. In addition, some of our foreign sales are denominated in the currency of the country in which these products are sold and the currency we receive in payment for such sales could be less valuable at the time of receipt as a result of exchange rate fluctuations. From time to time, we enter into forward exchange contracts to hedge the value of accounts receivable primarily denominated in euros and other currencies. However, we cannot be certain that our efforts will be adequate to protect us against significant currency fluctuations or that such efforts will not expose us to additional exchange rate risks, which could adversely affect our results of operations.

Fluctuations in Effective Tax Rate

As a global company, we are subject to taxation in the United States and numerous foreign jurisdictions. Our effective tax rate is subject to fluctuation from one period to the next because the income tax rates for each year are a function of many factors, including: (a) taxable income levels and the effects of a mix of profits (losses) earned by ESI and our subsidiaries in numerous tax jurisdictions with a broad range of income tax rates; (b) our ability to utilize deferred tax assets; (c) taxes, refunds, interest or penalties resulting from tax audits; (d) the magnitude of various credits and deductions as a percentage of total taxable income; (e) the ability to maintain our Pioneer Status in Singapore; and (f) changes in tax laws or the interpretation of such tax laws. In addition, we currently have a valuation allowance against domestic tax assets as a result of historic losses recorded in the United States. Changes in the mix of these items may cause our effective tax rate to fluctuate between periods, which could have a material adverse effect on our financial position and results of operations.

Impairment of Goodwill, Intangible and Long-Lived Assets

We held a net total of $7.9 million in acquired intangible assets and $7.4 million in goodwill at January 2, 2016. We review our acquired intangible assets for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. We test long-lived assets for impairment at least annually or between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value below the carrying value of the reporting unit.

In the fourth quarter of 2015 we realigned our products into two segments as a result of changes in our go-to-market strategies, common customer characteristics, and information utilized to manage our business. This reorganization required the Company to reassign its reported goodwill to the new reporting units based on the relative fair value of the respective reporting units. The carrying value of goodwill by reporting unit prior to March 28, 2015 was comprised of approximately $7.4 million for Topwin, $6.3 million for Component Processing and $1.6 million for Micromachining. In the fourth quarter of 2015, we

32

initiated our annual goodwill impairment analysis on the basis of the reorganized segments and associated reporting units. The carrying value of the reporting units was determined based on the Company's allocation of assets and liabilities to the reporting units using reasonable assumptions. Upon the conclusion of this analysis, we concluded that $7.9 million of goodwill was impaired as of March 28, 2015, and this impairment represented a full impairment of the goodwill associated with the Component Processing and Micromachining reporting units. Similarly, we performed a review of our acquired definite-lived intangible assets in the fourth quarter of 2015, including a review for impairment based on certain triggering events and no significant impairments of intangible assets were identified.

Our next annual impairment analysis will be performed in the fourth quarter of 2016. The remaining recorded goodwill and a portion of intangible assets relate to the acquisition of Topwin and the Topwin reporting unit. At the acquisition date, goodwill and intangibles for the Topwin reporting unit had a fair value of $7.4 million and $3.6 million, respectively. Should the levels or timing of revenues, profits or cashflows of the Topwin reporting unit not meet expectations, further impairment of goodwill or long-lived intangibles could be triggered.

In addition, certain of our long-lived assets such as machinery and equipment may experience impairment in their value as a result of such events as the introduction of new products, changes in technology or changes in customer demand patterns. We depreciate our machinery and equipment at levels we believe are adequate; however, there can be no assurance that there will not be a future impairment that may have a material impact on our business, financial condition and results of operations.

Stock Price Volatility

The market price of our common stock has fluctuated widely. During the third quarter of 2016, our stock price fluctuated between a high of $5.46 per share and a low of $4.36 per share. Consequently, the current market price of our common stock may not be indicative of future market prices, and we may be unable to sustain or increase the value of an investment in our common stock. Factors affecting our stock price, many of which are outside of our control, may include:

• variations in operating results from quarter to quarter;

• changes in earnings estimates by analysts or our failure to meet analysts’ expectations;

• changes in the market price per share of our public company customers;

• market conditions in the consumer electronics, semiconductor and other industries into which we sell products;

• general economic conditions;

• political changes, hostilities or natural disasters;

• low trading volume of our common stock;

• the number of analysts covering our common stock;

• being added or removed from market indices;

• policies of institutional investors restricting or prohibiting investments in stock with a market price below certain thresholds;

• stock price volatility based on one or a few investors buying or selling a large number of shares over days or weeks, due to relatively low volumes of trading in our stock; and

• the number of firms making a market in our common stock.

In addition, the stock market has experienced significant price and volume fluctuations in recent years. These fluctuations have particularly affected the market prices of the securities of high-technology companies like ours. These market fluctuations could adversely affect the market price of our common stock.

Impairment of Investments

Our investment portfolio is primarily comprised of commercial paper, debt securities issued by U.S. governmental agencies and municipal debt securities. These investments are intended to be highly liquid and low risk. If the markets for these securities were to deteriorate for any reason, including as a result of a downgrade in the credit rating of U.S. government securities, the liquidity and value of these investments could be negatively affected, which could result in impairment charges. Any such impairment charges may have a material impact on our financial condition and results of operations.

If we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results or prevent fraud and our stock price may be adversely affected.

Effective internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud. If we cannot provide reliable financial reports or prevent fraud, our operating results could be harmed.

In connection with our 2015 audit we identified material weaknesses in our internal control over financial reporting related to the accounting and disclosure of complex, judgmental accounting matters and non-routine transactions. The matters involving internal controls and procedures that our management considered to be material weaknesses included the risk

33

assessment and certain process and review level controls associated with complex and non-routine transactions affecting goodwill, disclosures related to the Topwin acquisition, disclosures related to operating segments, presentation of service revenue and associated cost of sales on the statements of operations.

The Company is in the process of identifying and implementing certain changes in our internal controls to address the material weaknesses. Specifically, the Company is documenting, implementing, and assessing necessary changes in the risk assessment process and in the design of the controls and identifying additional procedures and expertise required to ensure effective management and technical review of significant, complex, and non-routine transactions.

Management believes that it will identify and implement additional controls that will remediate the material weaknesses discussed above. However, no assurance can be given that these changes will remediate the material weaknesses until such time that the controls have operated for a sufficient period of time and their operating effectiveness has been tested.

The requirements of Section 404 of the Sarbanes-Oxley Act are ongoing and also apply to future years. We expect that our internal control over financial reporting will continue to evolve as our business develops. Although we are committed to continue to improve our internal control processes and we will continue to diligently and vigorously review our internal control over financial reporting in order to ensure compliance with the Section 404 requirements, any control system, regardless of how well designed, operated and evaluated, can provide only reasonable, not absolute, assurance that its objectives will be met. Therefore, we cannot be certain that in the future additional material weaknesses or significant deficiencies will not exist or otherwise be discovered. If our efforts to remediate the weaknesses identified are not successful or if other deficiencies occur, these weaknesses or deficiencies could result in misstatements of our results of operations, additional restatements of our consolidated financial statements, a decline in our stock price and investor confidence, or other material effects on our business, reputation, results of operations, financial condition or liquidity.

Item 4. Mine Safety Disclosures

Not Applicable.

34

Item 6. Exhibits

This list is intended to constitute the exhibit index.

3.1	Third Restated Articles of Incorporation, as amended. Incorporated by reference to Exhibit 3.1 of the Company's Annual Report on Form 10-K for the fiscal year ended April 3, 2010.
3.2	2009 Amended and Restated Bylaws, as amended. Incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed on November 9, 2012.
31.1	Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document *
101.SCH	XBRL Taxonomy Extension Schema Document *
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document *
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document *
101.LAB	XBRL Taxonomy Extension Label Linkbase Document *
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document *

* Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities and Exchange Act of 1934, and otherwise are not subject to liability under those sections.

35

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 9, 2016	ELECTRO SCIENTIFIC INDUSTRIES, INC.
		By:	/s/    Edward C. Grady
			Edward C. Grady
			President and Chief Executive Officer
			(Principal Executive Officer)
		By:	/s/    Paul Oldham
			Paul Oldham
			Vice President of Administration, Chief Financial Officer and Corporate Secretary
			(Principal Financial Officer)

36

EX-31.1

EXHIBIT 31.1

CERTIFICATION PURSUANT TO

SECTION 302(a) OF THE SARBANES-OXLEY ACT OF 2002

I, Edward C. Grady , certify that:

1. I have reviewed this quarterly report on Form 10-Q of Electro Scientific Industries, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: February 9, 2016

/s/ Edward C. Grady

Edward C. Grady

President and Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION PURSUANT TO

SECTION 302(a) OF THE SARBANES-OXLEY ACT OF 2002

I, Paul Oldham, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Electro Scientific Industries, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: February 9, 2016

/s/ Paul Oldham

Paul Oldham

Vice President of Administration,

Chief Financial Officer and Corporate Secretary

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with this quarterly report on Form 10-Q of Electro Scientific Industries, Inc. (the Company) for the quarterly period ended January 2, 2016 as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Edward C. Grady, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Edward C. Grady

Edward C. Grady

President and Chief Executive Officer

February 9, 2016

This certification is made solely for the purpose of 18 U.S.C. Section 1350, and not for any other purpose. A signed original of this written statement required by Section 906 has been provided to Electro Scientific Industries, Inc. and will be retained by Electro Scientific Industries, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with this quarterly report on Form 10-Q of Electro Scientific Industries, Inc. (the Company) for the quarterly period ended January 2, 2016 as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Paul Oldham, Vice President of Administration, Chief Financial Officer, and Corporate Secretary of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Paul Oldham

Paul Oldham

Vice President of Administration,

Chief Financial Officer and Corporate Secretary

February 9, 2016

This certification is made solely for the purpose of 18 U.S.C. Section 1350, and not for any other purpose. A signed original of this written statement required by Section 906 has been provided to Electro Scientific Industries, Inc. and will be retained by Electro Scientific Industries, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Document and Entity Information - shares	9 Months Ended
	Jan. 02, 2016	Feb. 05, 2016
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jan. 02, 2016
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q3
Entity Registrant Name	ELECTRO SCIENTIFIC INDUSTRIES INC
Entity Central Index Key	0000726514
Current Fiscal Year End Date	--04-02
Entity Well-know Seasoned Issuer	No
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		31,127,287

XML

CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Jan. 02, 2016	Mar. 28, 2015
Current assets:
Cash and cash equivalents	$ 42,071	$ 50,994
Short-term investments	20,771	6,612
Accounts Receivable, Net, Current	37,012	42,295
Inventories	60,881	56,637
Shipped systems pending acceptance	1,470	2,516
Deferred income taxes, net	134	178
Other current assets	4,371	6,090
Total current assets	166,710	165,322
Non-current assets:
Property, plant and equipment, net	23,507	25,858
Non-current deferred income taxes, net	98	174
Goodwill	7,445	7,717
Acquired intangible assets, net	7,909	8,958
Other assets	11,064	13,211
Total assets	216,733	221,240
Current liabilities:
Accounts payable	16,344	9,514
Accrued liabilities	20,980	18,666
Deferred Tax Liabilities, Tax Deferred Income	174	173
Deferred revenue	7,708	12,376
Total current liabilities	45,206	40,729
Non-current liabilities:
Non-current income taxes payable	1,384	1,176
Deferred Tax Liabilities, Net, Noncurrent	232	443
Liabilities, Other than Long-term Debt, Noncurrent	3,166	1,571
Liabilities	$ 49,988	$ 43,919
Commitments and Contingencies
Shareholders' equity:
Preferred stock, without par value	$ 0	$ 0
Common stock, without par value	193,547	189,134
Retained earnings	(25,950)	(11,741)
Accumulated other comprehensive income	(852)	(72)
Total shareholders' equity	166,745	177,321
Total liabilities and shareholders' equity	$ 216,733	$ 221,240

XML

CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands	Dec. 28, 2013	Mar. 30, 2013
Statement of Financial Position [Abstract]
Trade receivables, allowances	$ 827	$ 712
Accumulated Depreciation, Depletion and Amortization, Property, Plant, and Equipment	106,352	102,901
Finite-Lived Intangible Assets, Accumulated Amortization	$ 20,927	$ 19,880
Preferred stock, without par value	$ 0	$ 0
Preferred stock, shares authorized	1,000,000	1,000,000
Preferred stock, shares issued	0	0
Common stock, without par value	$ 0	$ 0
Common stock, shares authorized	100,000,000	100,000,000
Common stock, issued	31,537,000	30,704,000
Common stock, outstanding	31,537,000	30,704,000

XML

CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Jan. 02, 2016	Dec. 27, 2014	Jan. 02, 2016	Dec. 27, 2014
Sales Revenue, Goods, Net	$ 31,282	$ 31,750	$ 98,914	$ 85,447
Sales Revenue, Services, Net	12,060	11,911	33,991	36,100
Net sales	43,342	43,661	132,905	121,547
Cost of Goods Sold	20,292	22,031	63,922	59,707
Cost of Services	5,329	6,917	17,464	20,074
Cost of sales	25,621	28,948	81,386	79,781
Gross profit	17,721	14,713	51,519	41,766
Operating expenses:
Selling, service and administration	12,468	12,332	37,619	36,384
Research, development and engineering	7,778	8,384	24,706	25,953
Business Combination, Integration Related Costs	0	0	194	0
Restructuring Costs	1,944	0	2,597	0
Net operating expenses	22,190	20,716	65,116	62,337
Operating (loss) income	(4,469)	(6,003)	(13,597)	(20,571)
Non-operating (expense) income:
Interest and other (expense) income, net	67	64	68	(134)
Other Nonoperating Income (Expense)	67	64	68	(134)
Income (loss) before income taxes	(4,402)	(5,939)	(13,529)	(20,705)
Provision for (benefit from) income taxes	184	437	681	165
Net (loss) income	$ (4,586)	$ (6,376)	$ (14,210)	$ (20,870)
Net (loss) income per share - basic	$ (0.15)	$ (0.21)	$ (0.45)	$ (0.68)
Net (loss) income per share - diluted	$ (0.15)	$ (0.21)	$ (0.45)	$ (0.68)
Weighted average number of shares - basic	31,495	30,617	31,355	30,507
Weighted average number of shares - diluted	31,495	30,617	31,355	30,507
Cash dividends paid per common share	$ 0.00	$ 0.08	$ 0.00	$ 0.24

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS Statement - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Jan. 02, 2016	Dec. 27, 2014	Jan. 02, 2016	Dec. 27, 2014
Net (loss) income	$ (4,586)	$ (6,376)	$ (14,210)	$ (20,870)
Foreign currency translation adjustment, net of taxes	(68)	(359)	(793)	(41)
Accumulated other comprehensive loss related to benefit plan obligations, net of taxes	4	3	12	10
Net unrealized (loss) gain on available-for-sale securities, net of taxes	2	(5)	1	(12)
Comprehensive (loss) income	$ (4,648)	$ (6,737)	$ (14,990)	$ (20,913)

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (Parenthetical) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Jan. 02, 2016	Dec. 27, 2014	Jan. 02, 2016	Dec. 27, 2014
Foreign currency translation adjustment, taxes	$ 0	$ 179	$ 0	$ 0
Other Comprehensive Income (Loss), Pension and Other Postretirement Benefit Plans, Tax	(2)	(2)	(7)	(6)
Other Comprehensive Income (Loss), Unrealized Holding Gain (Loss) on Securities Arising During Period, Tax	$ 0	$ 0	$ 0	$ 5

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS $ in Thousands	9 Months Ended
	Jan. 02, 2016 USD ($)	Dec. 27, 2014 USD ($)
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income	$ (14,210)	$ (20,870)
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
Depreciation and amortization	5,659	5,880
Amortization of acquired intangible assets	1,047	1,112
Share-based compensation expense	3,939	3,402
Gain on sale of property and equipment, net	(788)	8
Provision for Doubtful Accounts	127	0
Decrease (increase) in deferred income taxes	(71)	2
Changes in operating accounts, net of acquisitions:
Decrease (increase) in trade receivables, net	8,593	(3,284)
Decrease (increase) in inventories	(7,046)	(2,169)
Decrease (increase) in shipped systems pending acceptance	1,342	1,106
Decrease (increase) in other current assets	1,967	783
Increase (decrease) in accounts payable and accrued liabilities	10,531	217
Increase (decrease) in deferred revenue	(4,668)	(2,692)
Net cash (used in) provided by operating activities	7,998	(16,521)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of investments	(320,581)	(357,046)
Proceeds from sales and maturities of investments	306,423	389,900
Purchase of property, plant and equipment	(2,740)	(3,608)
Proceeds from sale of property, plant, and equipment	2	154
Decrease (increase) in other assets	(133)	(980)
Net cash (used in) provided by investing activities	(17,029)	28,420
CASH FLOWS FROM FINANCING ACTIVITIES
Cash dividends paid to shareholders	0	(7,266)
Payments Related to Tax Withholding for Share-based Compensation	(645)	(1,850)
Proceeds from Issuance of Common Stock	1,056	1,407
Payments for Repurchase of Equity	0	(1,456)
Net cash (used in) provided by financing activities	411	(9,165)
Effect of exchange rate changes on cash	(303)	(1,129)
NET CHANGE IN CASH AND CASH EQUIVALENTS	(8,923)	1,605
Cash and Cash Equivalents, at Carrying Value	42,071
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest	57	2
Cash paid for income taxes	(799)	(863)
Income tax refunds received	140	564
Property, Plant and Equipment, Gross, Period Increase (Decrease)	2,988	1,474
Property, Plant and Equipment, Additions	$ 160	$ 945

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The Company

9 Months Ended

Dec. 28, 2013

Organization, Consolidation and Presentation of Financial Statements [Abstract]

The Company

Basis of Presentation

These unaudited interim condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted in these interim statements. Accordingly, these condensed consolidated financial statements are to be read in conjunction with the financial statements and notes included in the Company's Annual Report on Form 10-K for its fiscal year ended March 28, 2015. These interim statements include all adjustments (consisting of only normal recurring adjustments and accruals) necessary for a fair presentation of results for the interim periods presented. The results for interim periods are not necessarily indicative of the results of operations for the entire year.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of commitments and contingencies at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results may differ from those estimates.

Management believes that the estimates used are reasonable. Significant estimates made by management include: revenue recognition; inventory valuation; product warranty reserves; allowance for doubtful accounts; accrued restructuring costs; share-based compensation; income taxes including the valuation of deferred tax assets; fair value measurements; valuation of cost method equity investments; valuation of long-lived assets; valuation of goodwill; and valuation of acquired technology.

There have been no significant changes to the Company's significant accounting policies from those presented in Note 2 “Summary of Significant Accounting Policies” to the consolidated financial statements included in the Company's Annual Report on Form 10-K for its fiscal year ended March 28, 2015. All references to years or quarters relate to fiscal years or fiscal quarters unless otherwise noted. The three quarters ended January 2, 2016 consisted of a 40-week period as compared to a 39-week period for the three quarters ended December 27, 2014. Similarly, the third quarter of 2016 ended January 2, 2016 was a 14-week period as compared to a 13-week period for the second quarter of 2016 ended September 26, 2015 and the third quarter of 2015 ended December 27, 2014.

In the first quarter of 2016, certain prior period amounts were revised to conform to current year presentation. Please see Note 7 "Trade Accounts Receivable" and Note 10 "Accrued Current Liabilities & Other Liabilities".

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Recent Accounting Pronouncements

9 Months Ended

Jan. 02, 2016

New Accounting Pronouncements and Changes in Accounting Principles [Abstract]

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In January 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-01, "Financial Instruments - Overall (Subtopic 825-10)." ASU 2016-01 enhances the reporting model for financial instruments to provide users of financial statements with more decision-useful information by addressing certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. The amendments simplify certain requirements and also reduce diversity in current practice for other requirements. ASU 2016-01 is effective for public companies' fiscal years beginning after December 15, 2017, which would be the Company's fiscal year ending March 30, 2019, including interim periods within those fiscal years. Except for the early application guidance specifically allowed in ASU 2016-01, early adoption is not permitted. We do not expect the adoption of ASU 2016-01 to have a material effect on our financial position, results of operations or cash flows.

In November 2015, the FASB issued ASU 2015-17, "Income Taxes (Topic 740) - Balance Sheet Classification of Deferred Taxes." ASU 2015-17 simplifies the presentation of deferred income taxes, and requires that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. The amendments apply to all entities that present a classified statement of financial position, and aligns the presentation of deferred income tax assets and liabilities with International Financial Reporting Standards ("IFRS") IAS 1. ASU 2015-17 is effective for public companies' financial statements issued for annual periods beginning after December 15, 2016, which would be the Company's fiscal year ending March 31, 2018, and interim periods within those annual periods. Early application is permitted and may be applied either prospectively to all deferred tax liabilities and assets or retrospectively to all periods presented. The Company is currently evaluating the impact of adopting this guidance on its Consolidated Financial Statements and disclosures included within Notes to Consolidated Financial Statements.

In August 2015, the FASB issued ASU No. 2015-14, which defers the effective date of ASU No. 2014-09 "Revenue from Contracts with Customers" one year to interim and annual reporting periods beginning after December 15, 2017, which would be the Company's fiscal year ending March 30, 2019. This guidance may be adopted retrospectively or under a modified retrospective method where the cumulative effect is recognized at the date of initial application. The Company is currently evaluating the impact of adopting this guidance on its Consolidated Financial Statements and disclosures included within Notes to Consolidated Financial Statements.

In July 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2015-11, “Simplifying the Measurement of Inventory (Topic 330).” ASU 2015-11 simplifies the accounting for the valuation of all inventory not accounted for using the last-in, first-out (“LIFO”) method by prescribing inventory be valued at the lower of cost and net realizable value. ASU 2015-11 is effective for public companies' annual periods, including interim periods within those fiscal years, beginning after December 15, 2016, which would be the Company's fiscal year ending March 31, 2018, on a prospective basis. Early adoption is permitted. We do not expect the adoption of ASU 2015-11 to have a material effect on our financial position, results of operations or cash flows.

In April 2015, the FASB issued ASU 2015-05, “Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40).” ASU 2015-05 provides guidance regarding the accounting for a customer's fees paid in a cloud computing arrangement, specifically about whether a cloud computing arrangement includes a software license, and if so, how to account for the software license. ASU 2015-05 is effective for public companies' annual periods, including interim periods, beginning after December 15, 2015, which would be the Company's fiscal year ending April 1, 2017. Early adoption is permitted. We do not expect the adoption of ASU 2015-05 to have a material effect on our financial position, results of operations or cash flows.

In June 2014, the FASB issued ASU No. 2014-12, "Compensation - Stock Compensation (Topic 718)." ASU No. 2014-12 addresses accounting for share-based payments when the terms of an award provide that a performance target could be achieved after the requisite service period. ASU 2014-12 indicates that, in such situations, the performance target should be treated as a performance condition and, accordingly, the performance target should not be reflected in estimating the grant-date fair value of the award. Instead, compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved. ASU 2014-12 is effective for annual periods and interim periods within those annual periods beginning after December 15, 2015, which would be the Company's fiscal year ending April 1, 2017. We do not expect the adoption of ASU 2014-12 to have a material effect on our financial position, results of operations or cash flows.

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Fair Value Measurements

9 Months Ended

Jan. 02, 2016

Fair Value Disclosures [Abstract]

Fair Value Measurements

Fair Value Measurements

Financial Assets and Liabilities Measured at Fair Value

ASC Topic 820 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include the following:

• Level 1, defined as observable inputs such as quoted prices in active markets for identical assets or liabilities;

• Level 2, defined as inputs that are observable either directly or indirectly such as quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active and other inputs that can be corroborated by observable market data; and

• Level 3, defined as unobservable inputs for which little or no market data exists, therefore requiring an entity to develop its own assumptions.

The Company’s fair value hierarchy for its financial assets and liabilities measured at fair value on a recurring basis as of January 2, 2016 and March 28, 2015 was as follows (in thousands):

January 2, 2016	Level 1		Level 2			Level 3		Total
Cash equivalents:
Money market securities	$	3,004	$	—		$	—	$	3,004
Commercial paper	—		8,948			—		8,948
Government agencies	—		1,604			—		1,604
Total cash equivalents	$	3,004	$	10,552		$	—	$	13,556
Short term investments - available for sale:
Government agencies	$	—	$	18,836		$	—	$	18,836
Total short-term investments - available for sale	$	—	$	18,836		$	—	$	18,836
Forward purchase or (sale) contracts:
Japanese Yen	$	—	$	(58	)	$	—	$	(58	)
New Taiwan Dollar	—		(10		)	—		(10		)
Korean Won	—		(68		)	—		(68		)
Euro	—		(261		)	—		(261		)
British Pound	—		(60		)	—		(60		)
Chinese Renminbi	—		(17		)	—		(17		)
Total forward contracts	$	—	$	(474	)	$	—	$	(474	)
Deferred compensation plan assets:*
Mutual funds and exchange traded funds	$	1,906	$	—		$	—	$	1,906
Money market securities	543		—			—		543
Total deferred compensation plan assets	$	2,449	$	—		$	—	$	2,449

March 28, 2015	Level 1		Level 2			Level 3		Total
Cash equivalents:
Money market securities	$	14,280	$	—		$	—	$	14,280
Commercial paper	—		15,537			—		15,537
Government agencies	—		2,702			—		2,702
Total cash equivalents	$	14,280	$	18,239		$	—	$	32,519
Short term investments - available for sale:
Corporate bonds	$	—	$	853		$	—	$	853
Municipal bonds	—		3,872			—		3,872
Total short-term investments - available for sale	$	—	$	4,725		$	—	$	4,725
Forward purchase or (sale) contracts:
Japanese Yen	$	—	$	(7	)	$	—	$	(7	)
New Taiwan Dollar	—		17			—		17
Korean Won	—		(44		)	—		(44		)
Euro	—		277			—		277
British Pound	—		(133		)	—		(133		)
Chinese Renminbi	—		(34		)	—		(34		)
Total forward contracts	$	—	$	76		$	—	$	76
Deferred compensation plan assets:* :
Mutual funds and exchange traded funds	$	1,885	$	—		$	—	$	1,885
Money market securities	190		—			—		190
Total deferred compensation plan assets	$	2,075	$	—		$	—	$	2,075

*These investments represent assets held in trust for our deferred compensation plan

For Level 1 assets, the Company utilized quoted prices in active markets for identical assets.

For Level 2 assets, exclusive of forward contracts, the Company utilized quoted prices in active markets for similar assets. For forward contracts, spot prices at January 2, 2016 and March 28, 2015 were utilized to calculate fair values.

During the first three quarters of 2016 and 2015, there were no transfers between Level 1, 2 or 3 assets.

Investments

The Company’s investments at January 2, 2016 and March 28, 2015 were as follows (in thousands):

			Unrealized
January 2, 2016	Cost		Gain		Loss			Fair Value
Available-for-sale securities (current):
Government agencies	20,437		3		—			20,440
Commercial paper	8,948		—		—			8,948
Mutual funds and exchange traded funds*	2,454		—		(5		)	2,449
Total Investments	$	31,839	$	3	$	(5	)	$	31,837
			Unrealized
March 28, 2015	Cost		Gain		Loss			Fair Value
Available-for-sale securities (current):
Commercial paper	$	15,537	$	—	$	—		$	15,537
Municipal bonds	3,870		2		—			3,872
Government agencies	2,702		—		—			2,702
Corporate bonds	853		—		—			853
Mutual funds and exchange traded funds*	1,950		125		—			2,075
Total Investments	$	24,912	$	127	$	—		$	25,039

*These investments represent assets held in trust for our deferred compensation plan

For purposes of determining gross realized gains and losses and reclassification out of accumulated other comprehensive income (loss), the cost of securities sold is based on specific identification. Net unrealized holding gains and losses on current available-for-sale securities included in accumulated other comprehensive income (loss) were insignificant as of January 2, 2016 and March 28, 2015.

Investments with underlying maturities within one year at January 2, 2016, including cash equivalents, totaled $31.8 million.

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Share-Based Compensation

9 Months Ended

Jan. 02, 2016

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Share-Based Compensation

Share-Based Compensation

The Company recognizes expense related to the fair value of its share-based compensation awards using the Black-Scholes model to estimate the fair value of awards on the date of grant, except for unvested restricted stock unit awards (RSUs) which are valued at the fair value of the Company's stock on the date of award. The Company recognizes compensation expense for all share-based compensation awards on a straight-line basis over the requisite service period of the award.

Stock-settled stock appreciation rights (SARs) grant the right to receive shares of the Company's stock equivalent to the increase in stock value of a specified number of shares over a specified period of time, divided by the stock price at the time of exercise. The Company uses the Black-Scholes model to estimate the fair value of SARs. Similar to options, SARs are measured at the fair value of the award on the grant date and the expense is recognized on a straight-line basis over the requisite service period of the award.

The Company granted a total of 705,700 RSUs and 467,000 SARs during the first three quarters of 2016, but did not grant any stock options. The Company granted 827,700 RSUs and 634,523 SARs, and zero stock options during the first three quarters of 2015.

Share-based compensation expense was included in the Company’s Condensed Consolidated Statements of Operations as follows:

	Fiscal quarter ended				Three fiscal quarters ended
(In thousands)	Jan 2, 2016		Dec 27, 2014		Jan 2, 2016		Dec 27, 2014
Cost of sales	$	103	$	154	$	347	$	474
Selling, general and administrative	832		629		2,291		2,096
Research, development and engineering	188		256		613		832
Total share-based compensation expense	$	1,123	$	1,039	$	3,251	$	3,402

The Company does not capitalize share-based compensation costs. As of January 2, 2016, the Company had $8.1 million of total unrecognized share-based compensation costs, net of estimated forfeitures, which are expected to be recognized over a weighted average period of 2.0 years. The amounts shown in the table above for the fiscal quarter ended January 2, 2016 and three fiscal quarters ended January 2, 2016, do not include $191 thousand and $688 thousand, respectively, in share-based compensation expense related to acquisitions. Refer to Note 5 "Business Acquisition" for discussion of stock amounts considered compensation related to acquisitions.

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Business Acquisitions

9 Months Ended

Jan. 02, 2016

Business Combinations [Abstract]

Business Acquisitions

Business Acquisitions

Fiscal 2015

On January 15, 2015, the Company acquired all of the outstanding shares of Wuhan Topwin Optoelectronics Technology Co., Ltd. (Topwin), a Chinese manufacturer of laser-based systems and as of March 28, 2015 the company performed a preliminary determination and allocation of purchase price to the identifiable acquired assets and liabilities. In the first quarter of 2016, the Company finalized the determination of purchase price, including the valuation of total consideration and the related contractual adjustments to working capital, and valuation of acquired assets and assumed liabilities. Analysis supporting the purchase price allocation included a valuation of assets and liabilities as of the closing date, an analysis of intangible assets and a detailed review of the opening balance sheet to determine other significant adjustments required to recognize assets and liabilities at fair value. Consideration was comprised of $7.6 million in cash and 748,944 shares of ESI common stock issuable over a three year period, valued at approximately $2.9 million as of the acquisition date. Of the $2.9 million in equity, one-half, or 374,472 shares, is contingent-based consideration and one-half, or 374,472 shares, is non-contingent and will be issued over a three year period beginning June 30, 2015. The contingent consideration is based on future performance of Topwin, as evaluated against targets for net income for each year over a three year period. One-third of the contingent shares will be issued after each year if the target is met for that year; however failing to meet stated targets will result in none of the contingent shares being issued for that year. As of the acquisition date, the fair value of the contingent consideration was estimated to be $0.4 million and the fair value of the 374,472 shares of non-contingent consideration was estimated to be $2.5 million. The fair value of the non-contingent and contingent shares was determined based on the estimated share price as of the issuance date derived through Monte Carlo simulation, discounted back to the acquisition date. The value of the contingent shares included consideration of the estimated probability of attainment of the net income targets. Additionally, the Company will issue, on the same terms described above, approximately 513,328 shares valued at $2.0 million, which, together with cash of $0.2 million, is treated as compensation to a Principal in the Company who was also a former shareholder of Topwin. Compensation expense will be recognized over the Principal's term of employment or related service period required by the purchase agreement through December 31, 2017. In the first three quarters of fiscal 2016, we have recognized approximately $0.7 million in compensation expense related to this agreement, comprised primarily of share-based compensation.

The total purchase price of approximately $10.5 million, net of cash acquired, was allocated to the underlying assets acquired and liabilities assumed based on their fair values, as shown in the following table:

(In thousands)
Accounts receivable	$	454
Inventory	544
Prepaid expense and other current assets	295
Property, plant and equipment	23
Acquired intangibles	3,618
Goodwill	7,445
Accounts payable and other accrued liabilities	(1,859		)
Total purchase price, net of cash acquired	$	10,520

The acquisition is expected to enable the Company to gain entry into the low total-cost-of-ownership solutions market in China and the goodwill of approximately $7.4 million recognized as a result of the acquisition was assigned to the Topwin reporting unit. The premium paid over the fair value of the individual assets acquired and liabilities assumed reflects the Company’s view that this acquisition was subject to competitive bidding and that it provided the Company with innovative design and manufacturing capabilities for laser-based manufacturing solutions across a variety of complementary applications, together with direct access to local China market, supply chain and opto-electronics knowledge center. None of the goodwill is expected to be deductible for tax purposes.

As a result of the acquisition, the Company recorded approximately $4.9 million of identifiable assets, including $3.6 million of identifiable intangible assets and $1.9 million of identifiable liabilities. The acquired intangible assets consist primarily of $3.5 million of developed technology and will be amortized over their useful lives, which range from one to ten years.

In the first three quarters of 2016, the Company incurred approximately $0.2 million in acquisition-related costs, which were included in Selling, general and administrative expenses in the Consolidated Statements of Operations. In 2015, the Company incurred approximately $0.8 million in acquisition-related costs, which were included in Selling, general and administrative expenses in the Consolidated Statements of Operations. The operating results of this acquisition are included in the Company’s results of operations since the date of acquisition. Pro forma financial information has not been provided for the acquisition of Topwin as it was not material to the Company’s operations and overall financial position.

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Inventories

9 Months Ended

Jan. 02, 2016

Inventory Disclosure [Abstract]

Inventories

Inventories

Inventories are principally valued at standard costs, which approximate the lower of cost or market on a first-in, first-out basis. Components of inventories were as follows:

(In thousands)	Jan 2, 2016		Mar 28, 2015
Raw materials and purchased parts	$	39,688	$	37,991
Work-in-process	14,874		14,834
Finished goods	6,319		3,812
	$	60,881	$	56,637

In the third quarter of 2016 and 2015, the Company recorded a charge against inventory for write-offs associated with discontinued products of $1.4 million and zero, respectively.

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Other Current Assets

9 Months Ended

Jan. 02, 2016

Disclosure Other Current Assets [Abstract]

Other Current Assets

Other Current Assets

Other current assets consisted of the following:

(In thousands)	Jan 2, 2016		Mar 28, 2015
Prepaid expenses	$	2,542	$	2,595
Acquisition related receivable	—		1,180
Value added tax receivable	747		802
Other	1,082		1,513
	$	4,371	$	6,090

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Other Assets

9 Months Ended

Jan. 02, 2016

Other Assets, Noncurrent Disclosure [Abstract]

Other Assets

Other Assets

Other assets consisted of the following:

(In thousands)	Jan 2, 2016		Mar 28, 2015
Consignment and demo equipment, net	$	8,070	$	7,164
Non-current trade accounts receivable	288		3,656
Long term deposits and other	2,706		2,391
	$	11,064	$	13,211

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Accrued Current Liabilities & Other Liabilities Other liabilities (Notes)

9 Months Ended

Jan. 02, 2016

Other Liabilities Disclosure [Abstract]

Accounts Payable and Accrued Liabilities Disclosure [Text Block]

Accrued Current Liabilities & Other Liabilities

Accrued liabilities consisted of the following:

(In thousands)	Jan 2, 2016		Mar 28, 2015
Payroll-related liabilities	$	7,654	$	6,723
Purchase order commitments and receipts	3,079		1,815
Product warranty accrual	3,046		3,342
Customer deposits	2,291		1,057
Professional fees payable	1,345		1,237
Restructuring costs payable	982		1,997
Other current liabilities	2,583		2,495
	$	20,980	$	18,666

Included in other current liabilities above are accrued amounts for customer deposits, value-added taxes, freight, income taxes, and other similar items.

Other liabilities (non-current) consisted of the following:

(In thousands)	Jan 2, 2016		Mar 28, 2015
Product warranty accrual	$	1,640	$	—
Other non-current liabilities	1,526		1,571
	$	3,166	$	1,571

Presentation of $1.6 million of Other non-current liabilities previously shown as current at March 28, 2015 was revised to reflect these amounts as non-current, which conforms to current period presentation.

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Product Warranty

9 Months Ended

Jan. 02, 2016

Product Warranties Disclosures [Abstract]

Product Warranty

Product Warranty

The following is a reconciliation of the changes in the aggregate product warranty accrual:

	Fiscal quarter ended						Three fiscal quarters ended
(In thousands)	Jan 2, 2016			Dec 27, 2014			Jan 2, 2016			Dec 27, 2014
Product warranty accrual, beginning	$	4,451		$	3,152		$	3,342		$	4,215
Warranty charges incurred, net	(2,057		)	(1,240		)	(5,604		)	(4,960		)
Provision for warranty charges	2,292			1,581			6,948			4,238
Product warranty accrual, ending	$	4,686		$	3,493		$	4,686		$	3,493

Net warranty charges incurred include labor charges and costs of replacement parts for system repairs under warranty. These costs are recorded net of any estimated cost recoveries resulting from either successful repair of damaged parts or from warranties offered by the Company’s suppliers for defective components. The provision for warranty charges reflects the estimate of future anticipated net warranty costs to be incurred for all products under warranty at quarter end and is recorded to cost of sales. Of the total of $4.7 million in product warranty accrual at January 2, 2016, $1.6 million is non-current and is included in Other liabilities on the Condensed Consolidated Balance Sheets.

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Deferred Revenue

9 Months Ended

Jan. 02, 2016

Deferred Revenue Disclosure [Abstract]

Deferred Revenue

Deferred Revenue

Generally, revenue is recognized upon fulfillment of acceptance criteria at the Company's factory and transfer of risk and title. Revenue is deferred whenever title transfer is pending, risk has not transferred, and/or acceptance criteria have not yet been fulfilled. Deferred revenue occurrences include sales to Japanese customers, shipments of substantially new products and shipments with custom specifications and acceptance criteria. In sales involving multiple element arrangements, the relative selling price of any undelivered elements, including installation services, is deferred until the elements are delivered and acceptance criteria are met. Revenue related to maintenance and service contracts is deferred and recognized ratably over the duration of the contracts.

The following is a reconciliation of the changes in deferred revenue:

	Fiscal quarter ended						Three fiscal quarters ended
(In thousands)	Jan 2, 2016			Dec 27, 2014			Jan 2, 2016			Dec 27, 2014
Deferred revenue, beginning	$	12,662		$	16,440		$	12,376		$	10,515
Revenue deferred	13,868			6,509			47,459			33,458
Revenue recognized	(18,822		)	(15,126		)	(52,127		)	(36,150		)
Deferred revenue, ending	$	7,708		$	7,823		$	7,708		$	7,823

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Commitments & Contingencies (Notes)

9 Months Ended

Jan. 02, 2016

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies Disclosure [Text Block]

Commitments & Contingencies

On March 20, 2015, the Company entered into a loan and security agreement ("Loan Agreement") with Silicon Valley Bank, as lender. The Loan Agreement provides for a senior secured asset-based revolving credit facility (the “Credit Facility”) with up to $30 million available on a revolving basis, including a $15 million sublimit for letters of credit. The credit agreement expires March 20, 2018. At January 2, 2016, we had no revolving loans or letters of credit outstanding under our Credit Facility, we were in compliance with all covenants, and were not in default under the Loan Agreement. The commitment fee on the amount of unused credit was 0.3 percent.

We mitigate credit risk by transacting with highly rated counterparties for foreign exchange contracts, letters of credit and other transactions where counterparty risk is a factor. We have evaluated the non-performance risks associated with our lenders and other parties and believe them to be insignificant. From time to time we may be party to litigation arising in the normal course of business. Currently we are not party to any litigation we believe would have a material adverse effect on our financial position, results of operations, or cash flows.

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(Loss) Earnings Per Share

9 Months Ended

Jan. 02, 2016

Earnings Per Share [Abstract]

(Loss) Earnings Per Share

14. Earnings (Loss) Per Share

The following is a reconciliation of weighted average shares outstanding used in the calculation of basic and diluted earnings per share:

	Fiscal quarter ended						Three fiscal quarters ended
(In thousands, except per share data)	Jan 2, 2016			Dec 27, 2014			Jan 2, 2016			Dec 27, 2014
Net loss	$	(4,586	)	$	(6,376	)	$	(14,210	)	$	(20,870	)
Weighted average shares used for basic earnings per share	31,495			30,617			31,355			30,507
Incremental diluted shares	—			—			—			—
Weighted average shares used for diluted earnings per share	31,495			30,617			31,355			30,507
Net loss per share:
Basic	$	(0.15	)	$	(0.21	)	$	(0.45	)	$	(0.68	)
Diluted	$	(0.15	)	$	(0.21	)	$	(0.45	)	$	(0.68	)

Awards of options, SARs and RSUs representing an additional 2.9 million and 2.8 million shares of stock for the third quarter of 2016 and 2015, respectively, and 2.6 million and 2.8 million shares of stock for the three quarters endedJanuary 2, 2016 and December 27, 2014, respectively, were not included in the calculation of diluted net earnings per share because their effect would have been antidilutive.

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Segment and Geographic Information (Notes)

9 Months Ended

Jan. 02, 2016

Segment and Geographic Information [Abstract]

Segment Reporting Disclosure [Text Block]

Segment and Geographic Information

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision making group, in deciding how to allocate resources and in assessing performance. Our chief operating decision maker is our Chief Executive Officer. Prior to the fourth quarter of 2015, we operated in one segment, high-technology manufacturing equipment, which was comprised of products that were classified in three groups: interconnect and micromachining, semiconductor and component. As a result of changes in our go-to-market strategies, common customer characteristics, and information utilized to manage our business, we realigned our products into two segments. Since the fourth quarter 2015 the Company has operated in two segments, Component Processing and Micromachining.

Net sales by segment were as follows:

	Fiscal quarter ended				Three fiscal quarters ended
(In thousands)	Jan 2, 2016		Dec 27, 2014		Jan 2, 2016		Dec 27, 2014
Component Processing	$	37,511	$	31,830	$	108,549	$	94,486
Micromachining	5,831		11,831		24,356		27,061
	$	43,342	$	43,661	$	132,905	$	121,547

Gross profits by segment were as follows:

	Fiscal quarter ended						Three fiscal quarters ended
(In thousands)	Jan 2, 2016			Dec 27, 2014			Jan 2, 2016			Dec 27, 2014
Component Processing	$	17,969		$	10,993		$	45,466		$	36,666
Micromachining	1,482			4,038			8,617			6,411
Corporate and other	(1,730		)	(318		)	(2,564		)	(1,311		)
	$	17,721		$	14,713		$	51,519		$	41,766

Net sales by geographic area, based on the location of the end user, were as follows:

	Fiscal quarter ended				Three fiscal quarters ended
(In thousands)	Jan 2, 2016		Dec 27, 2014		Jan 2, 2016		Dec 27, 2014
Asia	$	33,278	$	33,604	$	103,843	$	92,838
Americas	7,589		5,602		20,750		14,258
Europe	2,475		4,455		8,312		14,451
	$	43,342	$	43,661	$	132,905	$	121,547

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Restructuring and Cost Management Plans

9 Months Ended

Jan. 02, 2016

Restructuring and Related Activities [Abstract]

Restructuring and Cost Management Plans

Restructuring and Cost Management Plans

In March 2015, as a part of the plan to streamline manufacturing and development activities, the Company initiated a restructuring plan that included the closure of the assembly plant and development center located in Chelmsford, Massachusetts, which was part of our Component Processing segment. The original estimated completion date of the plan was the end of fiscal 2016 at a total estimated pre-tax cost of $5.5 million. See the Company's Form 10-K for the year ended March 28, 2015 for additional information related to restructuring and cost management plans.

Net restructuring costs related to the above mentioned restructuring plan were $2.6 million in the first three quarters of 2016 and $5.6 million from the inception of the plan.Included in these costs were write-offs of leasehold improvements associated with the abandoned manufacturing facility, employee severance and related payments, and other wind-down costs. As of January 2, 2016, most of the restructuring activities have been completed, and we expect to pay the remaining costs and accrued expenses primarily related to severance and employee benefits by the end of 2016.

At January 2, 2016 and March 28, 2015, the amount of unpaid restructuring costs included in accrued liabilities was $1.0 million and $2.0 million, respectively.

The following table presents the amounts related to restructuring costs payable (in thousands):

Restructuring & cost management amounts payable as of March 28, 2015	$	1,997
Employee severance and related benefits:
Cash payments	(3,612		)
Costs incurred and other adjustments	2,597
Restructuring & cost management amounts payable as of January 2, 2016	$	982

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Shareholders' Equity

9 Months Ended

Jan. 02, 2016

Stockholders' Equity Note [Abstract]

Shareholders' Equity

Shareholders’ Equity

Share Repurchase Program

In December 2011, the Board of Directors authorized a share repurchase program totaling $20.0 million to acquire shares of our outstanding common stock. The repurchases are to be made at management’s discretion in the open market or in privately negotiated transactions in compliance with applicable securities laws and other legal requirements and are subject to market conditions, share price and other factors.

The Company did not repurchase any shares during the first three quarters of 2016. In the first three quarters of 2015 the Company repurchased 207,738 shares for $1.5 million under this authorization at an average price of $7.01 per share, calculated inclusive of commissions and fees. There is no fixed completion date for the repurchase program.

Dividends

In February 2015, the Board of Directors suspended the quarterly dividend which was adopted by the Company in December 2011. The Company paid dividends in the first three quarters of 2015 under the 2011 dividend policy in the aggregate amount of $0.24 per share.

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Fair Value Measurements (Tables)

9 Months Ended

Jan. 02, 2016

Fair Value Disclosures [Abstract]

Fair Value Hierarchy for Financial Assets Measured at Fair Value on Recurring Basis

The Company’s fair value hierarchy for its financial assets and liabilities measured at fair value on a recurring basis as of January 2, 2016 and March 28, 2015 was as follows (in thousands):

January 2, 2016	Level 1		Level 2			Level 3		Total
Cash equivalents:
Money market securities	$	3,004	$	—		$	—	$	3,004
Commercial paper	—		8,948			—		8,948
Government agencies	—		1,604			—		1,604
Total cash equivalents	$	3,004	$	10,552		$	—	$	13,556
Short term investments - available for sale:
Government agencies	$	—	$	18,836		$	—	$	18,836
Total short-term investments - available for sale	$	—	$	18,836		$	—	$	18,836
Forward purchase or (sale) contracts:
Japanese Yen	$	—	$	(58	)	$	—	$	(58	)
New Taiwan Dollar	—		(10		)	—		(10		)
Korean Won	—		(68		)	—		(68		)
Euro	—		(261		)	—		(261		)
British Pound	—		(60		)	—		(60		)
Chinese Renminbi	—		(17		)	—		(17		)
Total forward contracts	$	—	$	(474	)	$	—	$	(474	)
Deferred compensation plan assets:*
Mutual funds and exchange traded funds	$	1,906	$	—		$	—	$	1,906
Money market securities	543		—			—		543
Total deferred compensation plan assets	$	2,449	$	—		$	—	$	2,449

March 28, 2015	Level 1		Level 2			Level 3		Total
Cash equivalents:
Money market securities	$	14,280	$	—		$	—	$	14,280
Commercial paper	—		15,537			—		15,537
Government agencies	—		2,702			—		2,702
Total cash equivalents	$	14,280	$	18,239		$	—	$	32,519
Short term investments - available for sale:
Corporate bonds	$	—	$	853		$	—	$	853
Municipal bonds	—		3,872			—		3,872
Total short-term investments - available for sale	$	—	$	4,725		$	—	$	4,725
Forward purchase or (sale) contracts:
Japanese Yen	$	—	$	(7	)	$	—	$	(7	)
New Taiwan Dollar	—		17			—		17
Korean Won	—		(44		)	—		(44		)
Euro	—		277			—		277
British Pound	—		(133		)	—		(133		)
Chinese Renminbi	—		(34		)	—		(34		)
Total forward contracts	$	—	$	76		$	—	$	76
Deferred compensation plan assets:* :
Mutual funds and exchange traded funds	$	1,885	$	—		$	—	$	1,885
Money market securities	190		—			—		190
Total deferred compensation plan assets	$	2,075	$	—		$	—	$	2,075

Investments

The Company’s investments at January 2, 2016 and March 28, 2015 were as follows (in thousands):

			Unrealized
January 2, 2016	Cost		Gain		Loss			Fair Value
Available-for-sale securities (current):
Government agencies	20,437		3		—			20,440
Commercial paper	8,948		—		—			8,948
Mutual funds and exchange traded funds*	2,454		—		(5		)	2,449
Total Investments	$	31,839	$	3	$	(5	)	$	31,837
			Unrealized
March 28, 2015	Cost		Gain		Loss			Fair Value
Available-for-sale securities (current):
Commercial paper	$	15,537	$	—	$	—		$	15,537
Municipal bonds	3,870		2		—			3,872
Government agencies	2,702		—		—			2,702
Corporate bonds	853		—		—			853
Mutual funds and exchange traded funds*	1,950		125		—			2,075
Total Investments	$	24,912	$	127	$	—		$	25,039

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Share-Based Compensation Expense (Tables)

9 Months Ended

Jan. 02, 2016

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Schedule of Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Table Text Block]

Share-based compensation expense was included in the Company’s Condensed Consolidated Statements of Operations as follows:

	Fiscal quarter ended				Three fiscal quarters ended
(In thousands)	Jan 2, 2016		Dec 27, 2014		Jan 2, 2016		Dec 27, 2014
Cost of sales	$	103	$	154	$	347	$	474
Selling, general and administrative	832		629		2,291		2,096
Research, development and engineering	188		256		613		832
Total share-based compensation expense	$	1,123	$	1,039	$	3,251	$	3,402

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Inventories (Tables)

9 Months Ended

Jan. 02, 2016

Inventory Disclosure [Abstract]

Components of Inventories

Components of inventories were as follows:

(In thousands)	Jan 2, 2016		Mar 28, 2015
Raw materials and purchased parts	$	39,688	$	37,991
Work-in-process	14,874		14,834
Finished goods	6,319		3,812
	$	60,881	$	56,637

In the third quarter of 2016 and 2015, the Company recorded a charge against inventory for write-offs associated with discontinued products of $1.4 million and zero, respectively.

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Other Current Assets (Tables)

9 Months Ended

Jan. 02, 2016

Disclosure Other Current Assets [Abstract]

Other Current Assets

Other current assets consisted of the following:

(In thousands)	Jan 2, 2016		Mar 28, 2015
Prepaid expenses	$	2,542	$	2,595
Acquisition related receivable	—		1,180
Value added tax receivable	747		802
Other	1,082		1,513
	$	4,371	$	6,090

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Other Assets (Tables)

9 Months Ended

Jan. 02, 2016

Other Assets, Noncurrent Disclosure [Abstract]

Other Assets

Other assets consisted of the following:

(In thousands)	Jan 2, 2016		Mar 28, 2015
Consignment and demo equipment, net	$	8,070	$	7,164
Non-current trade accounts receivable	288		3,656
Long term deposits and other	2,706		2,391
	$	11,064	$	13,211

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Accrued Current Liabilities & Other Liabilities Other Liabilities Disclosure (Tables)

9 Months Ended

Jan. 02, 2016

Other Liabilities Disclosure [Abstract]

Schedule of Accrued Liabilities [Table Text Block]

Accrued liabilities consisted of the following:

(In thousands)	Jan 2, 2016		Mar 28, 2015
Payroll-related liabilities	$	7,654	$	6,723
Purchase order commitments and receipts	3,079		1,815
Product warranty accrual	3,046		3,342
Customer deposits	2,291		1,057
Professional fees payable	1,345		1,237
Restructuring costs payable	982		1,997
Other current liabilities	2,583		2,495
	$	20,980	$	18,666

Other Noncurrent Liabilities [Table Text Block]

(In thousands)	Jan 2, 2016		Mar 28, 2015
Product warranty accrual	$	1,640	$	—
Other non-current liabilities	1,526		1,571
	$	3,166	$	1,571

Presentation of $1.6 million of Other non-current liabilities previously shown as current at March 28, 2015 was revised to reflect these amounts as non-current, which conforms to current period presentation.

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Product Warranty (Tables)

9 Months Ended

Jan. 02, 2016

Product Warranties Disclosures [Abstract]

Reconciliation of the Change in Aggregate Accrual for Product Warranty

The following is a reconciliation of the changes in the aggregate product warranty accrual:

	Fiscal quarter ended						Three fiscal quarters ended
(In thousands)	Jan 2, 2016			Dec 27, 2014			Jan 2, 2016			Dec 27, 2014
Product warranty accrual, beginning	$	4,451		$	3,152		$	3,342		$	4,215
Warranty charges incurred, net	(2,057		)	(1,240		)	(5,604		)	(4,960		)
Provision for warranty charges	2,292			1,581			6,948			4,238
Product warranty accrual, ending	$	4,686		$	3,493		$	4,686		$	3,493

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Deferred Revenue (Tables)

9 Months Ended

Jan. 02, 2016

Deferred Revenue Disclosure [Abstract]

Reconciliation of the Changes in Deferred Revenue

The following is a reconciliation of the changes in deferred revenue:

	Fiscal quarter ended						Three fiscal quarters ended
(In thousands)	Jan 2, 2016			Dec 27, 2014			Jan 2, 2016			Dec 27, 2014
Deferred revenue, beginning	$	12,662		$	16,440		$	12,376		$	10,515
Revenue deferred	13,868			6,509			47,459			33,458
Revenue recognized	(18,822		)	(15,126		)	(52,127		)	(36,150		)
Deferred revenue, ending	$	7,708		$	7,823		$	7,708		$	7,823

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Earnings (Loss) Per Share (Tables)

9 Months Ended

Jan. 02, 2016

Earnings Per Share [Abstract]

Reconciliation of Weighted Average Shares Outstanding Used in Calculation of Basic and Diluted Earnings Per Share

The following is a reconciliation of weighted average shares outstanding used in the calculation of basic and diluted earnings per share:

	Fiscal quarter ended						Three fiscal quarters ended
(In thousands, except per share data)	Jan 2, 2016			Dec 27, 2014			Jan 2, 2016			Dec 27, 2014
Net loss	$	(4,586	)	$	(6,376	)	$	(14,210	)	$	(20,870	)
Weighted average shares used for basic earnings per share	31,495			30,617			31,355			30,507
Incremental diluted shares	—			—			—			—
Weighted average shares used for diluted earnings per share	31,495			30,617			31,355			30,507
Net loss per share:
Basic	$	(0.15	)	$	(0.21	)	$	(0.45	)	$	(0.68	)
Diluted	$	(0.15	)	$	(0.21	)	$	(0.45	)	$	(0.68	)

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Segment and Geographic Information (Tables)

9 Months Ended

Jan. 02, 2016

Segment and Geographic Information [Abstract]

Net Sales by Segments [Table Text Block]

Net sales by segment were as follows:

	Fiscal quarter ended				Three fiscal quarters ended
(In thousands)	Jan 2, 2016		Dec 27, 2014		Jan 2, 2016		Dec 27, 2014
Component Processing	$	37,511	$	31,830	$	108,549	$	94,486
Micromachining	5,831		11,831		24,356		27,061
	$	43,342	$	43,661	$	132,905	$	121,547

Gross profit by Segments [Table Text Block]

Gross profits by segment were as follows:

	Fiscal quarter ended						Three fiscal quarters ended
(In thousands)	Jan 2, 2016			Dec 27, 2014			Jan 2, 2016			Dec 27, 2014
Component Processing	$	17,969		$	10,993		$	45,466		$	36,666
Micromachining	1,482			4,038			8,617			6,411
Corporate and other	(1,730		)	(318		)	(2,564		)	(1,311		)
	$	17,721		$	14,713		$	51,519		$	41,766

Net Sales by Geographic Areas [Table Text Block]

Net sales by geographic area, based on the location of the end user, were as follows:

	Fiscal quarter ended				Three fiscal quarters ended
(In thousands)	Jan 2, 2016		Dec 27, 2014		Jan 2, 2016		Dec 27, 2014
Asia	$	33,278	$	33,604	$	103,843	$	92,838
Americas	7,589		5,602		20,750		14,258
Europe	2,475		4,455		8,312		14,451
	$	43,342	$	43,661	$	132,905	$	121,547

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Restructuring and Cost Management Plans (Tables)

9 Months Ended

Jan. 02, 2016

Restructuring and Related Activities [Abstract]

Amounts Related to Restructuring Costs Payable

The following table presents the amounts related to restructuring costs payable (in thousands):

Restructuring & cost management amounts payable as of March 28, 2015	$	1,997
Employee severance and related benefits:
Cash payments	(3,612		)
Costs incurred and other adjustments	2,597
Restructuring & cost management amounts payable as of January 2, 2016	$	982

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Fair Value Measurements - Fair Value Hierarchy for Financial Assets Measured at Fair Value on Recurring Basis (Details) - USD ($) $ in Thousands		Jan. 02, 2016	Mar. 28, 2015
Cash Equivalents [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Fair value of financial assets		$ 13,556	$ 32,519
Short-term Investments [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Fair value of financial assets		18,836	4,725
Foreign Exchange Forward [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Fair value of financial assets		474	76
Deferred Compensation Plan Asset [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Deferred Compensation Plan Assets		2,449	2,075
Level 1 | Cash Equivalents [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Fair value of financial assets		3,004	14,280
Level 1 | Short-term Investments [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Fair value of financial assets		0	0
Level 1 | Foreign Exchange Forward [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Fair value of financial assets		0
Level 1 | Deferred Compensation Plan Asset [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Deferred Compensation Plan Assets		2,449	2,075
Level 2 | Cash Equivalents [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Fair value of financial assets		10,552	18,239
Level 2 | Short-term Investments [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Fair value of financial assets		18,836	4,725
Level 2 | Foreign Exchange Forward [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Fair value of financial assets		474
Level 2 | Deferred Compensation Plan Asset [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Deferred Compensation Plan Assets		0	0
Level 3 | Cash Equivalents [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Fair value of financial assets		0
Level 3 | Short-term Investments [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Fair value of financial assets		0
Level 3 | Foreign Exchange Forward [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Fair value of financial assets		0
Level 3 | Deferred Compensation Plan Asset [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Deferred Compensation Plan Assets		0	0
Money Market Instruments | Cash Equivalents [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Fair value of financial assets		3,004	14,280
Money Market Instruments | Level 1 | Cash Equivalents [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Fair value of financial assets		3,004	14,280
Commercial Paper | Cash Equivalents [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Fair value of financial assets		8,948	15,537
Commercial Paper | Level 1 | Cash Equivalents [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Fair value of financial assets			0
Commercial Paper | Level 2 | Cash Equivalents [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Fair value of financial assets		8,948	15,537
Corporate Bonds | Short-term Investments [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Fair value of financial assets			853
Corporate Bonds | Level 1 | Short-term Investments [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Fair value of financial assets			0
Corporate Bonds | Level 2 | Short-term Investments [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Fair value of financial assets			853
Government agencies | Cash Equivalents [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Fair value of financial assets		1,604	2,702
Government agencies | Short-term Investments [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Fair value of financial assets		18,836
Government agencies | Level 1 | Short-term Investments [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Fair value of financial assets		0
Government agencies | Level 2 | Cash Equivalents [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Fair value of financial assets		1,604	2,702
Government agencies | Level 2 | Short-term Investments [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Fair value of financial assets		18,836
Government agencies | Level 3 | Short-term Investments [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Fair value of financial assets		0
Municipal Bonds | Short-term Investments [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Fair value of financial assets			3,872
Municipal Bonds | Level 1 | Short-term Investments [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Fair value of financial assets			0
Municipal Bonds | Level 2 | Short-term Investments [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Fair value of financial assets			3,872
Forward purchase or (sale) contracts | Foreign Exchange Forward [Member] | Japanese Yen
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Fair value of financial assets		58	7
Forward purchase or (sale) contracts | Foreign Exchange Forward [Member] | New Taiwan Dollars
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Fair value of financial assets		10	17
Forward purchase or (sale) contracts | Foreign Exchange Forward [Member] | Korean Won
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Fair value of financial assets		68	44
Forward purchase or (sale) contracts | Foreign Exchange Forward [Member] | Euro
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Fair value of financial assets		261	277
Forward purchase or (sale) contracts | Foreign Exchange Forward [Member] | British Pound
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Fair value of financial assets		60	133
Forward purchase or (sale) contracts | Foreign Exchange Forward [Member] | Chinese Renminbi
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Fair value of financial assets		17	34
Forward purchase or (sale) contracts | Level 1 | Foreign Exchange Forward [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Fair value of financial assets			0
Forward purchase or (sale) contracts | Level 2 | Foreign Exchange Forward [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Fair value of financial assets			76
Forward purchase or (sale) contracts | Level 2 | Foreign Exchange Forward [Member] | Japanese Yen
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Fair value of financial assets		58	7
Forward purchase or (sale) contracts | Level 2 | Foreign Exchange Forward [Member] | New Taiwan Dollars
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Fair value of financial assets		10	17
Forward purchase or (sale) contracts | Level 2 | Foreign Exchange Forward [Member] | Korean Won
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Fair value of financial assets		68	44
Forward purchase or (sale) contracts | Level 2 | Foreign Exchange Forward [Member] | Euro
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Fair value of financial assets		261	277
Forward purchase or (sale) contracts | Level 2 | Foreign Exchange Forward [Member] | British Pound
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Fair value of financial assets		60	133
Forward purchase or (sale) contracts | Level 2 | Foreign Exchange Forward [Member] | Chinese Renminbi
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Fair value of financial assets		17	34
Money Market Funds [Member] | Deferred Compensation Plan Asset [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Deferred Compensation Plan Assets		543	190
Money Market Funds [Member] | Level 1 | Deferred Compensation Plan Asset [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Deferred Compensation Plan Assets		543	190
Money Market Funds [Member] | Level 2 | Deferred Compensation Plan Asset [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Deferred Compensation Plan Assets		0	0
Money Market Funds [Member] | Level 3 | Deferred Compensation Plan Asset [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Deferred Compensation Plan Assets		0	0
Exchange Traded Funds [Member] | Deferred Compensation Plan Asset [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Deferred Compensation Plan Assets	[1]	1,906	1,885
Exchange Traded Funds [Member] | Level 1 | Deferred Compensation Plan Asset [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Deferred Compensation Plan Assets	[1]	1,906	1,885
Exchange Traded Funds [Member] | Level 2 | Deferred Compensation Plan Asset [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Deferred Compensation Plan Assets	[1]	0	0
Exchange Traded Funds [Member] | Level 3 | Deferred Compensation Plan Asset [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Deferred Compensation Plan Assets	[1]	$ 0	$ 0

[1] *These investments represent assets held in trust for our deferred compensation plan

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Share-Based Compensation - Expense (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Jan. 02, 2016	Dec. 27, 2014	Jan. 02, 2016	Dec. 27, 2014
Employee Service Share-based Compensation, Allocation of Recognized Period Costs
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period			705,700	827,700
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross			467,000	634,523
Total share-based compensation expense	$ 1,123	$ 1,039	$ 3,251	$ 3,402
Employee Service Share-based Compensation, Nonvested Awards, Total Compensation Cost Not yet Recognized, Period for Recognition			2 years
Cost of Sales
Employee Service Share-based Compensation, Allocation of Recognized Period Costs
Total share-based compensation expense	103	154	$ 347	474
Selling, General and Administrative Expenses
Employee Service Share-based Compensation, Allocation of Recognized Period Costs
Total share-based compensation expense	832	629	2,291	2,096
Research and Development Expense
Employee Service Share-based Compensation, Allocation of Recognized Period Costs
Total share-based compensation expense	188	$ 256	613	$ 832
Stock Options
Employee Service Share-based Compensation, Allocation of Recognized Period Costs
Employee Service Share-based Compensation, Nonvested Awards, Total Compensation Cost Not yet Recognized	$ 8,100		$ 8,100

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Fair Value Measurements - Investments (Details) - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Jan. 02, 2016	Mar. 29, 2014		Mar. 28, 2015
Schedule of Available-for-sale Securities
Available-for-sale Securities, Debt Maturities, Next Twelve Months, Amortized Cost Basis	$ 31,800
Available for sale Securities Current
Schedule of Available-for-sale Securities
Cost	31,839			$ 24,912
Unrealized Gain	3	$ 127
Unrealized Loss	(5)	0
Available-for-sale Securities	31,837			25,039
Available for sale Securities Current | Commercial Paper
Schedule of Available-for-sale Securities
Cost	8,948			15,537
Unrealized Gain	0	0
Unrealized Loss	0	0
Available-for-sale Securities	8,948			15,537
Available for sale Securities Current | Government agencies
Schedule of Available-for-sale Securities
Cost	20,437			2,702
Unrealized Gain	3	0
Unrealized Loss	0	0
Available-for-sale Securities	20,440			2,702
Available for sale Securities Current | Corporate Bonds
Schedule of Available-for-sale Securities
Cost				853
Unrealized Gain		0
Unrealized Loss		0
Available-for-sale Securities				853
Available for sale Securities Current | Exchange Traded Funds [Member]
Schedule of Available-for-sale Securities
Cost	2,454			1,950	[1]
Unrealized Gain	0	125	[1]
Unrealized Loss	(5)	0	[1]
Available-for-sale Securities	$ 2,449			2,075	[1]
Available for sale Securities Current | Municipal Bonds
Schedule of Available-for-sale Securities
Cost				3,870
Unrealized Gain		2
Unrealized Loss		$ 0
Available-for-sale Securities				$ 3,872

[1] *These investments represent assets held in trust for our deferred compensation plan

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Business Acquisitions - Allocation of Purchase Price of Assets Acquired and Liabilities Assumed Based on the Fair Value (Details) - USD ($) $ in Thousands		3 Months Ended		9 Months Ended		12 Months Ended
	Jan. 15, 2015	Jan. 02, 2016	Dec. 27, 2014	Jan. 02, 2016	Dec. 27, 2014	Mar. 28, 2015
Business Acquisition [Line Items]
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Current Assets, Receivables	$ 454
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Inventory	$ 544
Business Combination, Contingent Consideration Arrangements, Shares Issued or Issuable	374,472
Shares grant as compensation	513,328
Value of shares grant as compensation	$ 2,000
Cash compensation	200
Allocated acquisition related compensation expenses				$ 700
Goodwill		$ 7,445		7,445		$ 7,717
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Intangible Assets, Other than Goodwill						4,900
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Liabilities	(1,859)
Business Combination, Integration Related Costs		$ 0	$ 0	$ 194	$ 0	800
Topwin [Member]
Business Acquisition [Line Items]
Payments to Acquire Businesses, Gross	$ 7,600
Business Acquisition, Equity Interest Issued or Issuable, Number of Shares	748,944
Business Acquisition, Equity Interest Issued or Issuable, Value Assigned	$ 2,900
Business Combination, Non-Contingent Consideration Arrangements, Shares Issued or Issuable	374,472
Business Combination, Non-Contingent Consideration, Liability	$ 2,500
Business Acquisition, Equity Interest Issued or Issuable, Number of Shares, Issuance Period	3 years
Business Combination, Contingent Consideration, Liability	$ 400
Acquired intangibles						$ 3,500
Acquisition-related Costs [Member]
Business Acquisition [Line Items]
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Net	10,520
Payments to Acquire Businesses, Gross	295
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Property, Plant, and Equipment	23
Business Combination, Bargain Purchase, Total Gain	3,618
Business Combination, Bargain Purchase, Tax	$ 7,445
Minimum [Member]
Business Acquisition [Line Items]
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life	1 year
Maximum [Member]
Business Acquisition [Line Items]
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life	10 years

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Inventories - Components of Inventories (Details) - USD ($) $ in Thousands	Jan. 02, 2016	Mar. 28, 2015
Inventory Disclosure [Abstract]
Raw materials and purchased parts	$ 39,688	$ 37,991
Work-in-process	14,874	14,834
Finished goods	6,319	3,812
Inventories	$ 60,881	$ 56,637

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Trade Accounts Receivable (Details) - USD ($) $ in Thousands	Jan. 02, 2016	Mar. 28, 2015
Trade Accounts Receivable [Abstract]
Accounts Receivable, Net, Noncurrent	$ 288	$ 3,656
Accounts Receivable, Net, Current	37,012	42,295
Accounts Receivable, Net	$ 37,300	$ 45,951

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Other Current Assets (Details) - USD ($) $ in Thousands	Jan. 02, 2016	Mar. 28, 2015
Disclosure Other Current Assets [Abstract]
Prepaid expenses	$ 2,542	$ 2,595
Business Combination, Contingent Consideration, Asset, Current	0	1,180
Value added tax receivable	747	802
Other	1,082	1,513
Other current assets	$ 4,371	$ 6,090

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Other Assets (Details) - USD ($) $ in Thousands	Jan. 02, 2016	Mar. 28, 2015
Other Assets, Noncurrent Disclosure [Abstract]
Consignment and demo equipment, net	$ 8,070	$ 7,164
Accounts Receivable, Net, Noncurrent	288	3,656
Accounts Receivable, Net	37,300	45,951
Other	2,706	2,391
Other assets	$ 11,064	$ 13,211

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Accrued Liabilities (Details) - USD ($) $ in Thousands	Jan. 02, 2016	Sep. 26, 2015	Mar. 28, 2015	Dec. 27, 2014	Sep. 27, 2014	Mar. 29, 2014
Disclosure Accrued Liabilities [Abstract]
Payroll-related liabilities	$ 7,654		$ 6,723
Product warranty accrual	4,686	$ 4,451	3,342	$ 3,493	$ 3,152	$ 4,215
Purchase order commitments and receipts	3,079		1,815
Product Warranty Accrual, Current	3,046		3,342
Customer Deposits, Current	2,291		1,057
Accrued Professional Fees, Current	1,345		1,237
Restructuring Reserve	982		1,997
Other	2,583		2,495
Accrued liabilities	20,980		18,666
Payables and Accruals [Abstract]
Product Warranty Accrual, Noncurrent	1,640		0
Other Sundry Liabilities, Noncurrent	1,526		1,571
Liabilities, Other than Long-term Debt, Noncurrent	$ 3,166		$ 1,571

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Product Warranty (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Jan. 02, 2016	Dec. 27, 2014	Jan. 02, 2016	Dec. 27, 2014	Mar. 28, 2015
Product Warranty
Document Period End Date			Jan. 02, 2016
Product warranty accrual, beginning	$ 4,451	$ 3,152	$ 3,342	$ 4,215
Warranty charges incurred, net	(2,057)	(1,240)	(5,604)	(4,960)
Provision for warranty charges	2,292	1,581	6,948	4,238
Product warranty accrual, ending	4,686	$ 3,493	4,686	$ 3,493
Product Warranty Accrual, Noncurrent	$ 1,640		$ 1,640		$ 0

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Deferred Revenue (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Jan. 02, 2016	Sep. 27, 2014	Jan. 02, 2016	Dec. 27, 2014
Deferred Revenue Disclosure [Abstract]
Deferred revenue, beginning	$ 12,662		$ 12,376	$ 10,515
Revenue deferred	13,868	$ 6,509	47,459	33,458
Revenue recognized	(18,822)	(15,126)	(52,127)	(36,150)
Deferred revenue, ending	$ 7,708	$ 16,440	$ 7,708	$ 7,823

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Earnings (Loss) Per Share - Reconciliation of Weighted Average Shares Outstanding Used in Calculation of Basic and Diluted Earnings Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Jan. 02, 2016	Dec. 27, 2014	Jan. 02, 2016	Dec. 27, 2014
Earnings Per Share [Abstract]
Net income (loss)	$ (4,586)	$ (6,376)	$ (14,210)	$ (20,870)
Weighted average number of shares - basic	31,495	30,617	31,355	30,507
Incremental diluted shares	0	0	0	0
Weighted average shares used for diluted earnings per share	31,495	30,617	31,355	30,507
Net (loss) income per share - basic	$ (0.15)	$ (0.21)	$ (0.45)	$ (0.68)
Net (loss) income per share - diluted	$ (0.15)	$ (0.21)	$ (0.45)	$ (0.68)

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Earnings (Loss) Per Share - Additional Information (Details) - shares shares in Millions	3 Months Ended		9 Months Ended
	Jan. 02, 2016	Dec. 27, 2014	Jan. 02, 2016	Dec. 27, 2014
Antidilutive Securities Excluded from Computation of Earnings Per Share
Number of shares that are not included in the calculation of diluted net earnings per share	2.9	2.8	2.6	2.8

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Segment and Geographic Information Net Sales by Segments (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Jan. 02, 2016	Dec. 27, 2014	Jan. 02, 2016	Dec. 27, 2014
Segment Reporting, Revenue Reconciling Item [Line Items]
Net sales	$ 43,342	$ 43,661	$ 132,905	$ 121,547
Component Processing [Member]
Segment Reporting, Revenue Reconciling Item [Line Items]
Net sales	37,511	31,830	108,549	94,486
Micromachining [Member]
Segment Reporting, Revenue Reconciling Item [Line Items]
Net sales	$ 5,831	$ 11,831	$ 24,356	$ 27,061

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Segment and Geographic Information Gross Profit by Segments (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Jan. 02, 2016	Dec. 27, 2014	Jan. 02, 2016	Dec. 27, 2014
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items]
Gross Profit	$ 17,721	$ 14,713	$ 51,519	$ 41,766
Component Processing [Member]
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items]
Gross Profit	17,969	10,993	45,466	36,666
Micromachining [Member]
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items]
Gross Profit	1,482	4,038	8,617	6,411
Corporate and Other [Member]
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items]
Gross Profit	$ (1,730)	$ (318)	$ (2,564)	$ (1,311)

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Segment and Geographic Information Net Sales by Geographic Area (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Jan. 02, 2016	Dec. 27, 2014	Jan. 02, 2016	Dec. 27, 2014
Revenues from External Customers and Long-Lived Assets [Line Items]
Net sales	$ 43,342	$ 43,661	$ 132,905	$ 121,547
Asia [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Net sales	33,278	33,604	103,843	92,838
Americas [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Net sales	7,589	5,602	20,750	14,258
Europe [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Net sales	$ 2,475	$ 4,455	$ 8,312	$ 14,451

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Restructuring and Cost Management Plans - Amounts Related to Restructuring Costs Payable (Details) $ in Thousands	9 Months Ended
	Jan. 02, 2016 USD ($)
Restructuring Cost and Reserve [Line Items]
Restructuring, Settlement and Impairment Provisions	$ 5,600
Restructuring Reserve [Roll Forward]
Beginning balance	1,997
Cash payments	(3,612)
Other Restructuring Costs	2,597
Ending balance	$ 982

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Shareholders' Equity - Share repurchase (Details) - USD ($) $ / shares in Units, $ in Millions	9 Months Ended
	Dec. 27, 2014	Dec. 09, 2011
Statement of Stockholders' Equity [Abstract]
Stock Repurchase Program, Authorized Amount		$ 20.0
Stock Repurchased During Period, Shares	207,738
Stock Repurchased During Period, Value	$ 1.5
Treasury Stock Acquired, Average Cost Per Share	$ 7.01

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Shareholders' Equity - Additional Information (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		9 Months Ended
	Jan. 02, 2016	Dec. 27, 2014	Jan. 02, 2016	Dec. 27, 2014
Equity, Class of Treasury Stock [Line Items]
Payments of Dividends			$ 0	$ 7,266
Common Stock, Dividends, Per Share, Cash Paid	$ 0.00	$ 0.08	$ 0.00	$ 0.24