UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
ý ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended: May 29, 2004
OR
o TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 0-12853
ELECTRO SCIENTIFIC INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
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Oregon |
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93-0370304 |
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(State or other jurisdiction of incorporation |
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(I.R.S. Employer Identification No.) |
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13900 N.W. Science Park Drive, Portland, Oregon |
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97229 |
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(Address of principal executive offices) |
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(Zip Code) |
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Registrant’s telephone number, including area code: 503-641-4141 |
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Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, without par value
Preferred Stock Purchase Rights
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 o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K, or any amendment to this Form 10-K. ý
Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).
Yes ý No o
The aggregate market value of the voting and non-voting common equity held by non-affiliates, computed by reference to the last sales price ($24.09) as reported by the Nasdaq National Market System, as of the last business day of the Registrant’s most recently completed second fiscal quarter (November 29, 2003), was $672,970,796.
The number of shares outstanding of the Registrant’s Common Stock as of July 26, 2004 was 28,242,356 shares.
Documents Incorporated by Reference
The Registrant has incorporated into Part III of this Form 10-K, by reference, portions of its Proxy Statement for its 2004 Annual Meeting of Shareholders.
ELECTRO
SCIENTIFIC INDUSTRIES, INC.
2004 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
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This annual report on Form 10-K contains forward-looking statements that are subject to risks and uncertainties. Actual results may differ materially from the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those set forth under the caption “Factors That May Affect Future Results” included within “Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
Where You Can Find More Information
We file annual, quarterly and current reports, proxy statements and other information with the Securities and Exchange Commission (SEC) under the Securities Exchange Act of 1934 as amended (Exchange Act). You can inspect and copy our reports, proxy statements, and other information filed with the SEC at the offices of the SEC’s Public Reference Room at 450 Fifth Street N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the Public Reference Room. The SEC maintains an Internet site at http://www.sec.gov/ where you can obtain most of our SEC filings. We also make available, free of charge on our website at www.esi.com, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after they are filed electronically with the SEC. The information found on our website is not part of this Form 10-K. You can also obtain copies of these reports by contacting Investor Relations at (503) 641-4141.
Fiscal Year
Our fiscal year consists of 52 or 53 weeks ending on the Saturday nearest May 31. Accordingly, fiscal 2004 ended on May 29, 2004, fiscal 2003 ended on May 31, 2003 and fiscal 2002 ended on June 1, 2002 and each fiscal year contained 52 weeks. All references to years relate to fiscal years unless otherwise noted.
Business Overview
Electro Scientific Industries, Inc. and its subsidiaries (ESI) provide high-technology manufacturing equipment to the global electronics market, including advanced laser systems that are used to microengineer electronic device features in high-volume production environments. Our customers are primarily manufacturers of semiconductors, passive components and electronic interconnect devices. Our equipment enables these manufacturers to achieve the yield and productivity gains in their manufacturing processes that can be critical to their profitability. The components and devices manufactured by our customers are used in a wide variety of end products in the computer, consumer electronics and communications industries.
We believe we are the leading supplier of advanced laser microengineering systems that allow electronics manufacturers to physically alter select device features during high-volume production in order to heighten performance and boost production yields of semiconductor devices, passive components and circuitry, high-density interconnect (HDI) circuit boards and advanced semiconductor packaging. Laser microengineering comprises a set of precise fine-tuning processes (laser trimming, link cutting and via drilling) that require application-specific laser systems able to meet semiconductor and microelectronics’ manufacturers exacting performance and productivity requirements.
Additionally, we produce high-speed test, inspection and termination equipment used in the high-volume production of multi-layer ceramic passives (MLCPs) and other passive components.
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Electronics Industry Overview
In the highly competitive, cost-sensitive environment of today’s electronics industry, microelectronics and semiconductor manufacturing are driven by ever-more complex processes that require every facet of the technology to be fully optimized in order to ensure the highest possible performance and yields. This encompasses everything from discrete passive components—the increasingly tiny capacitors and resistors essential to smooth flow of electrical current—to the complex memory and logic semiconductors and highly advanced device packaging solutions designed to address today’s most stringent functionality, performance and cost parameters.
Because electronic devices and components are produced in large volumes and their production and testing is highly automated, manufacturers are continually looking to reduce costs by improving the throughput, yield and quality of device and component production. These manufacturers are also developing new materials to improve device performance and costs, further challenging equipment suppliers to develop innovative manufacturing process equipment and solutions.
For example, semiconductor device manufacturers are continuing to transition from the use of 200mm and smaller silicon wafers to 300mm wafers. This enables manufacturers to fit significantly more electronic devices on a single silicon wafer. In addition, decreasing circuit densities enables more devices to be produced on a silicon wafer by reducing the size of each device on the wafer. The use of larger wafers and the design of smaller devices increase the effective throughput and capacity of semiconductor manufacturing facilities, or fabs. Increasing circuit densities, as the result of shrinking line widths and faster operating speeds, requires the use of newer materials, such as copper, to create these miniaturized and higher performance electronic circuits.
Our industry-leading, application-specific laser systems help customers achieve the compelling yield and productivity gains essential to their productivity by enabling fine-tuning of device microfeatures to enhance performance in three key electronic sectors: semiconductors, passive components, and electronic interconnect.
On the semiconductor side, to improve production yield, or the number of acceptable devices produced per silicon wafer, device manufacturers are utilizing our advanced laser memory-repair systems to boost final yields in the manufacture of devices. This includes dynamic random-access memory, or DRAM, and non-memory devices, such as logic with embedded memory, digital signal processors (DSPs) and high-end electronic game chips.
As semiconductor manufacturers move toward higher densities and more complex architectures, machine vision has also emerged as a critical technology. By allowing manufacturers to achieve greater precision, increased equipment speed and fewer errors, machine vision is enabling technology in the semiconductor manufacturing process, from wafer production through final assembly and packaging.
Variations of these advanced technologies and manufacturing processes that are routinely used in semiconductor fabs are increasingly being employed in the production of passive components, HDI circuit boards and advanced semiconductor packages. An example is the use of machine vision in passive component inspection. As device sizes are becoming ever smaller and the critical dimensions of the electrical contacts become more precise, machine vision, incorporated with high-speed handling and real-time software, allows for inspection. The previous technique utilized human inspection at a much slower rate with poorer inspection results.
In the case of HDI circuit boards, consumers’ desire for faster, lighter, ultimately less expensive products with longer battery life drives cell-phone producers and other consumer-product manufacturers to design products in which the discrete circuits are closer together. The same increased density concept used in semiconductor manufacturing is also pursued in printed circuit board production.
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Our Solution
We believe our products address the needs of electronics manufacturers by providing them with a high return on their investment. Our production systems are often designed to be upgraded to accommodate the next generation of technology, giving customers the flexibility to add capacity or improve product performance at a reasonable incremental cost.
Our technology centers on laser microengineering, which allows electronics manufacturers to physically alter select device features during high-volume production and heighten both device performance and final yields. This approach—comprising a set of precise fine-tuning processes (laser trimming, link cutting and via drilling) applied to today’s most advanced microfeatures—requires application-specific laser systems that can meet both the exacting performance and high productivity requirements of the semiconductor and microelectronics industries.
Our proven expertise in laser microengineering encompasses a deep understanding of laser technology, including how lasers interact with materials used in electronic production, high-speed optics, advanced real-time software systems, small parts-handling systems and machine vision. This technology expertise enables our customers to choose the laser solutions that best complement their technology strengths, while helping them achieve yield improvements. These solutions comprise memory repair; analog/mixed-signal device tuning; passive component test, termination and trimming; and microvia drilling—all critical functions that leverage our core competencies to greatest advantage.
Our largest end-market applications for electronic devices and circuits that are produced using our systems are:
• Computers
• Telecommunications
• Consumer electronics
Our Strategy
Focus on businesses where we are a market leader.
We intend to expand the application of our existing technologies to grow our overall market opportunity in those product markets in which we currently maintain a leadership position, including, but not limited to, those that involve advanced laser systems used to microengineer electronic device features in high-volume production environments. We also intend to maintain our market leadership by developing new products that have higher performance, greater throughput and enhanced reliability, thereby lowering the effective cost of ownership to our customers.
Develop new high-value businesses.
We plan to utilize our core competencies in laser technology innovation, multiple technology integration and customer collaboration to develop innovative solutions that will enable us to grow into attractive new markets where laser systems expertise provides an advantage. Our advanced electronic interconnect equipment is an example of a new business developed from these resources.
Invest in research and development (R&D) to strengthen customer relationships.
We intend to maintain a significant level of investment in research and development—not just to increase our product capabilities but to deepen our understanding of customers’ challenges and requirements. Our key technological capabilities include laser/material interaction, image processing and
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optical character recognition, motion control capabilities and small parts handling. We also consider our continuing ability to develop intellectual property to be an important component of our future success.
Increase the value of our products.
We are focused on improving the yield, throughput and productivity of our customers by utilizing our technology, global infrastructure, customer service and ability to integrate multiple technologies. We supply equipment to a wide range of market-leading customers, and we work closely with these customers to create high-level and multi-disciplinary management and employee teams to define and produce the next generation of laser microengineering systems. This requires confidential interaction between us and our customer, sharing technology, products and production roadmaps.
Our Products
We operate within the high technology manufacturing equipment segment, which is comprised of three product groups: the semiconductor group, the passive components group and the electronic interconnect group. Net sales, as a percentage of total sales, by group were as follows:
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2004 |
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2003 |
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2002 |
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Semiconductor |
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$ |
125,018 |
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60.3 |
% |
$ |
64,266 |
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47.0 |
% |
$ |
80,929 |
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49.7 |
% |
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Passive Components |
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50,302 |
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24.3 |
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47,670 |
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34.8 |
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67,510 |
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41.4 |
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Electronic Interconnect |
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31,922 |
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15.4 |
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24,949 |
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18.2 |
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14,446 |
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8.9 |
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|||
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$ |
207,242 |
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100.0 |
% |
$ |
136,885 |
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100.0 |
% |
$ |
162,885 |
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100.0 |
% |
Semiconductor Group
Semiconductor Yield-Improvement Systems
Our yield-improvement product line is designed to provide the most cost-effective chip repair process to meet the production challenges faced by semiconductor manufacturers, including shrinking circuit sizes, material changes and increased wafer sizes. As circuit densities in semiconductor memory devices such as DRAM have increased, manufacturers have built redundant cells into their memory designs and connected them with small electrical links on the device surface. During the manufacturing process, wafers with millions of individual memory cells on each chip are tested, identifying defective cells. Our laser systems are then used to cut links to disconnect the defective portions and to utilize the redundant cells.
These high-performance systems deliver better up-time and increased throughput to maximize manufacturing productivity and minimize capital requirements.
• Our 9800 Series systems are designed specifically for the 200mm and 300mm wafer market. The 9830 takes advantage of our patented 1.3 micron wavelength process which allows manufacturers to remove links without damaging the surrounding silicon. Our 9825 utilizes a 1.0 micron wavelength and is targeted towards the stack capacitor market.
• Our UV9835 laser semiconductor processing system, an ultraviolet (UV) laser fuse processing tool, delivers the industry’s smallest spot size, specifically designed to boost memory yields of DRAM, SRAM and embedded memory devices and other laser-fuse applications at 90mm or less, the state-of-the-art design rules. The system was introduced in June 2004.
Thin Film Trimming
During fiscal 2003 we began shipment of the Model 2100 thin-film-on-silicon (TFOS) trimming system. We designed the Model 2100 to be the fastest and most flexible laser processing solution on the market. The design includes the latest solid-state laser technology, allowing manufacturers to optimize their process for today’s linear, mixed-signal and sensor trimming requirements. The Model 2100 features wavelength options, including a patented 1.3-micron wavelength diode-pumped laser process, which reduces or eliminates laser-induced optoelectric response and improves “trimmability” of most analog circuits. The elimination of optoelectric effects increases system yield and throughput. It also allows trimming to tighter tolerances without compromise. The net result is a high return on investment for manufacturers.
OEM Vision Systems
We are an OEM manufacturer of machine vision systems for use in a broad range of semiconductor and electronic manufacturing equipment. Machine vision is a strategic core competency supporting all platforms manufactured by ESI. Lighting optics, hardware and software vision solutions are critical key
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subsystems designed into our manufacturing tools. Our vision products also support customer-specific applications, characterizing ESI as a world-class provider of OEM vision for alignment, accuracy, versatile lighting and optics, and sensor technology for integration into customer specific applications.
Passive Components Group
We design and manufacture products that combine high-speed, small parts handling technology with real-time control systems to provide highly automated, cost-effective solutions for manufacturers of MLCPs and other passive components such as capacitor arrays, inductors, resistors and varistors. These components, produced in quantities of hundreds of billions of units per year, are used in nearly all electronic products.
• Our 332, 328, and 752B termination systems apply a conductive material to the ends of ceramic capacitors, permitting connection of the device in a circuit on a high-density printed wiring board (PWB). Able to handle a wide range of part sizes, these highly flexible systems help manufacturers minimize their capital outlay.
• Our 33XX and 34XX Series products employ high-speed handling and positioning techniques to precisely load, test and sort MLCPs based on their electrical energy storage capacity (capacitance) and their electrical energy leakage (dissipation factor).
• Our 23XX and 43XX Series and Models 4410, 4700 and 4900 application-specific laser-trimming systems adjust the electrical performance of a circuit, hybrid circuit, embedded passive component, or electronic assembly containing many circuits by removing a precise amount of material from one or more circuit components.
• Our Model 6650A and 6670 visual test systems perform six-sided automated inspection of multi-layer ceramic capacitors (MLCCs) and arrays for dimensional criteria and defects at over 70,000 parts per hour.
• Consumable Products: We also produce consumables, such as carrier plates and termination belts, both of which are used to hold a wide variety of chip components in place during the termination process.
Electronic Interconnect Group
Our laser microvia engineering products are targeted at applications requiring the highest accuracy and smallest via (hole) dimensions, in order to create electrical connections between layers in high-density circuit boards, flexible circuits and electronic packages. We offer microvia drilling technology to address
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the rapidly changing applications in IC packages, multichip modules (MCMs) and flexible circuit HDI circuit boards. Our systems utilize UV laser technology available in single-head or dual-head configurations, depending on customer requirements. These systems are designed to be extendable, highly accurate and highly productive in order to lower overall cost of ownership.
• Our 53XX Series single-head laser drills utilize lasers to drill via holes as small as 25 microns (by comparison, a human hair is approximately 100 microns in diameter) in a wide variety of materials, including epoxy, resins and resin-coated copper.
• Our 54XX Series laser drills perform the same function as our 5300 Series, but operate at a significantly higher throughput rate due to the simultaneous operation of two drill heads.
• Specifically designed for the IC packaging market, our Model ICP5530 utilizes a high-repetition-rate laser and field-proven compound beam positioner to enable production of more than 50,000 high-quality microvias per minute.
Customers
Our top ten customers for fiscal 2004 and fiscal 2003 accounted for approximately 61% and 54%, respectively, of total net sales, with one customer, Samsung, accounting for approximately 26% and 16% of total net sales in fiscal 2004 and fiscal 2003, respectively. No other customer in fiscal 2004 or fiscal 2003 accounted for more than 10% of total net sales. No customers accounted for more than 10% of net sales in fiscal 2002. Samsung purchases products from all three of our product groups.
Geographic sales, based on the location of the end user, were as follows:
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2004 |
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2003 |
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2002 |
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Asia |
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$ |
146,389 |
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70.6 |
% |
$ |
91,549 |
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66.9 |
% |
$ |
95,463 |
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58.6 |
% |
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Americas |
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41,185 |
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19.9 |
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28,551 |
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20.9 |
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41,600 |
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25.5 |
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Europe |
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19,668 |
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9.5 |
|
16,785 |
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12.2 |
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25,822 |
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15.9 |
|
|||
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|
|
$ |
207,242 |
|
100.0 |
% |
$ |
136,885 |
|
100.0 |
% |
$ |
162,885 |
|
100.0 |
% |
Sales, Marketing and Service
We sell our products worldwide through direct ESI sales and service offices, a franchised distributor, value added resellers (VARs) and independent representatives located around the world. We have direct sales and service personnel in or near: Arizona, California, New York, Oregon and Texas; Tokyo, Oita and Nagoya, Japan; Seoul, Korea; Kao Hsiung and Hsin Chu, Taiwan; Singapore; Guangzhou and Shanghai, China; Munich, Germany; West Sussex, England; Kirkcaldy, Scotland; Maastricht, Holland; and Graz, Austria. We serve selected customers in the United States, South America, Europe, Israel and other countries through manufacturers’ representatives. Canon Sales is a distributor for our Semiconductor Group in Japan.
We have a substantial base of installed products in use by leading worldwide electronics manufacturers. We emphasize strong working relationships with these customers to meet their needs for additional systems and to facilitate the successful development and sale of new products to these customers.
We maintain service personnel wherever we have a significant installed base. We offer a variety of warranty, maintenance contracts and parts replacement programs.
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Backlog consists of purchase orders for products, spare parts and service which we expect to ship within twelve months. Backlog does not include deferred revenue. Backlog was $78.5 million at May 29, 2004 compared to $11.0 million at May 31, 2003. The stated backlog is not necessarily indicative of sales for any future period nor is a backlog any assurance that we will realize a profit from filling the orders.
Research, Development and Technology
We believe that our ability to compete effectively depends, in part, on our ability to maintain and expand our expertise in core technologies and product applications. The primary emphasis of our research and development is to advance our capabilities in:
• Lasers and laser/material interaction;
• High-speed, micron-level motion control systems;
• Precision optics;
• High-speed, small parts handling;
• Image processing and optical character recognition;
• Real-time production line electronic measurement;
• Real-time operating systems; and
• Systems integration.
Our research and development expenditures for fiscal years 2004, 2003 and 2002 were $23.8 million (11.5% of net sales), $27.8 million (20.3% of net sales) and $36.4 million (22.4% of net sales), respectively.
Our markets are dynamic, cyclical and highly competitive. The principal competitive factors in our markets are cost of ownership, service, technical support, a product improvement path and established relationships with customers. We believe that our products compete favorably with respect to these factors. Some of our competitors have greater financial, engineering and manufacturing resources and larger distribution networks than we do. Some of our customers develop, or have the ability to develop, similar manufacturing equipment. Competition in our markets may intensify, and our technological advantages may be reduced or lost as a result of technological advances by competitors or customers, or changes in electronic device processing technology.
The principal competitor for our semiconductor group is GSI Lumonics. For the passive component group, our competitors include Tokyo Weld, Kanebo, NEC and Humo in Japan and GSI Lumonics as well as manufacturers that develop systems for internal use. Our electronic interconnect group competes with laser systems provided by Hitachi Via Mechanics, Mitsubishi Electric and Sumitomo. Cognex is the principal competitor in the field of machine vision.
Our production facilities are located in Portland, Oregon and Klamath Falls, Oregon. The manufacturing operations located in Portland consist of subassembly and final assembly for all systems, except for passive component consumable products used in the termination process which are produced in our facility in Klamath Falls, Oregon.
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We use qualified manufacturers to supply many components and sub-system modules of our products. Our systems use high performance computers, peripherals, lasers and other components from various suppliers. Some of the components we use are obtained from a single source or a limited group of suppliers. An interruption in the supply of a particular component could require substitutions that would have a temporary adverse impact on us. We believe our relationships with our suppliers are good.
Patents and Other Intellectual Property
We have a policy of seeking patents, when appropriate, on inventions relating to new products and improvements that are discovered or developed as part of our ongoing research, development and manufacturing activities. We own 82 United States patents and 144 patents issued outside of the United States. During fiscal 2004 we applied for 14 new patents in the United States and 12 new patents outside of the United States. Additionally, as of May 29, 2004, we had 25 patent applications pending in the United States and 107 patent applications pending outside of the United States. Although our patents are important, we believe that the success of our business also depends on the technical competence and innovation of our employees.
We rely on copyright protection for our proprietary software. We also rely upon trade secret protection for our confidential and proprietary information. Others may independently develop substantially equivalent proprietary information and techniques, and we may be unable to meaningfully protect our trade secrets.
As of May 29, 2004, we employed 623 people. Many of our employees are highly skilled, and our success will depend in part upon our ability to attract and retain such employees, who are in great demand. We have never had a work stoppage or strike and no employees are represented by a labor union or covered by a collective bargaining agreement. We consider our employee relations to be good.
Item 2. Properties
Our executive and administrative offices, as well as our system manufacturing facilities, are located in a four-building complex with 258,500 square feet of space on 15 acres in Portland, Oregon. Our passive component consumable products are manufactured at a 53,000 square foot plant on 31 acres in Klamath Falls, Oregon. We own all of these buildings. We believe the productive capacity of these facilities to be adequate and suitable for the requirements of our business for the foreseeable future.
We lease other office and service space in various locations throughout the United States and in seven foreign countries.
We have 14,925 square feet of leased office and industrial space in Ann Arbor, Michigan. In June 2004, we entered a contract to sublet the property through the December 2006 termination date of our agreement as lessee.
We own an undeveloped parcel of land in Taiwan which is classified as assets held for sale on our consolidated balance sheet as of May 29, 2004. In May 2004, we entered into a cash sales contract with a buyer and completed the transaction in June 2005. At May 29, 2004, $0.7 million of cash deposits received pursuant to the sale contract were reflected in cash and other current liabilities.
We do not expect compliance with federal, state and local provisions which have been enacted or adopted related to the discharge of materials into the environment, or otherwise relating to protection of the environment, to have a material effect on our capital expenditures, earnings or competitive position.
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Item 3. Legal Proceedings
As a result of our March 2003 announcement that we were reviewing certain accounting matters and would be restating some of our financial statements, between March 26, 2003 and May 20, 2003, three purported class action lawsuits were filed in the United States District Court for the District of Oregon against ESI and David F. Bolender (former director, CEO and Chairman of the Board), James T. Dooley (former President and CEO), and Joseph L. Reinhart (former Acting CFO). The complaints were filed on behalf of a purported class of persons who purchased our common stock between September 17, 2002 and at the latest April 15, 2003, and alleged violations of Section 10(b) of the Securities Exchange Act of 1934 (the Act) and Rule 10b-5 promulgated thereunder, as well as Section 20(a) of the Act. The complaints have been consolidated under the name In re Electro Scientific Industries, Inc. Securities Litigation, Case No. CV 03-404-HA. Lead plaintiffs and lead counsel for plaintiffs have been appointed. The plaintiffs’ consolidated class action complaint (the Consolidated Complaint) was filed on October 10, 2003, which shortened the purported class to purchasers between September 17, 2002 and March 20, 2003, and added Donald R. VanLuvanee (ESI’s President and CEO from 1992 until April 2002), John R. Kurdock (ESI’s former VP Operations), and James Lorenz (ESI’s former Corporate Controller) as additional defendants. The Consolidated Complaint alleges that defendants made false and misleading statements during the purported class period about our financial condition and performance, business prospects, and operations, artificially inflating our stock price and leading to the restatement first announced on March 20, 2003. In March 2003, our Audit Committee commenced an investigation into certain accounting matters. As a result of the investigation, which was completed on July 11, 2003, we restated our financial statements for the fiscal year ended June 1, 2002 and for the quarters ended August 31, 2002 and November 30, 2002.
On March 31, 2003 and April 28, 2003, two separate purported shareholder derivative complaints were filed in the Circuit Court of Oregon in Washington County. The complaints were consolidated under the name In re Electro Scientific Industries, Inc. Derivative Litigation, Lead Case No. C 031067 CV. A consolidated complaint (Complaint) was filed on September 24, 2003, and names as defendants James Dooley (former President and CEO), David Bolender (former director, CEO and Chairman), Joseph Reinhart (former Acting CFO), Barry Harmon (director and former President and CEO), and current or former directors W. Arthur Porter, Gerald Taylor, Larry Hansen, Vernon Ryles, Keith Thomson and Jon Tompkins. We are named as a “nominal defendant.” The Complaint, which purports to be brought on behalf of ESI, alleges that all defendants breached fiduciary duties owed to ESI, abused their alleged control over ESI, wasted corporate assets, are liable for gross mismanagement, and were unjustly enriched by their conduct. The Complaint seeks an unspecified amount of monetary damages and seeks various equitable remedies, including a constructive trust on the proceeds received by the defendants from trading ESI common stock, and attorneys’ fees and costs. As filed, the Complaint is derivative in nature and does not seek monetary damages from ESI or the imposition of equitable remedies on ESI. A special litigation committee of our board of directors, with the assistance of independent legal counsel, was appointed to conduct an investigation relating to the allegations asserted in the Complaint.
On April 22, 2004, we announced an agreement in principle to settle both the class action and derivative actions. The s