UNITED STATES
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒ | |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended:
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:
0-11412AMTECH SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
Arizona | 86-0411215 | |
(State or other jurisdiction of | (I.R.S. Employer | |
incorporation or organization) | Identification No.) | |
131 South Clark Drive, Tempe, Arizona | 85281 | |
(Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code:
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Common Stock, par value $0.01 per share | ASYS | NASDAQ.Global Select Market |
Indicate by a 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. [X]☒ Yes [ ]☐ 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). [ X ]☒ Yes [ ]☐ 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, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”filer,” “smaller reporting company,” and “smaller reporting“emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large Accelerated Filer | ☐ | Accelerated Filer | ☒ | ||
Non-Accelerated Filer | |||||
☐ | |||||
Smaller Reporting Company | ☒ | ||||
Emerging Growth Company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.[ ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ]☐ No [X]
At July 31, 2020, there were outstanding 14,048,172 shares of Common Stock outstanding as of February 2, 2018: 14,894,129
AMTECH SYSTEMS, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
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Cautionary Statement Regarding Forward-Looking Statements
Unless otherwise indicated, the terms “Amtech,” the “Company,” “we,” “us” and “our” refer to Amtech Systems, Inc. together with its subsidiaries.
Our discussion and analysis in this Quarterly Report on Form 10-Q, our Annual Report on Form 10-K, our other reports that we file with the Securities and Exchange Commission (the “SEC”), our press releases and in public statements of our officers and corporate spokespersons contain “forward-looking” statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Private Securities Litigation Reform Act of 1995. Forward-looking statements give our current expectations or forecasts of future events. You can identify these statements by the fact that they do not relate strictly to historical or current events. We have tried, wherever possible, to identify such statements by using words such as “may,” “plan,” “anticipate,” “seek,” “will,” “expect,” “intend,” “estimate,” “believe,” “continue,” “predict,” “potential,” “project,” “should,” “would,” “likely,” “future,” “target,” “forecast,” “goal,” “observe,” and “strategy” or the negative thereof or variations thereon or similar terminology. Some factors that could cause actual results to differ materially from those anticipated include, among others, future economic conditions, including changes in the markets in which we operate; changes in demand for our services and products; whether continued technological advances and emerging industries will sustain our long-term performance; business interruptions, including those related to the novel strain of coronavirus (COVID-19); the potential impacts of the COVID-19 pandemic on our business operations, financial results and financial position; the severity, magnitude and duration of the COVID-19 pandemic, including impacts of the pandemic and of businesses’ and governments’ responses to the pandemic on our operations and personnel, and on commercial activity and demand across our and our customers’ businesses; difficulties in successfully executing our growth initiatives; our ability to take part in the growth of the SiC industry through investments in capacity, product development and people; our ability to expand our customer base and realize future revenue growth from our 300 mm silicon horizontal thermal reaction product solution; our ability to realize further growth within BTU by making investments in product innovation; our ability to identify strong acquisition targets in the semiconductor and SiC growth environment and successfully execute transactions and integrate such targets; the effects of semiconductor trends on our annual goodwill impairment analysis; the effects of competition in the markets in which we operate, including the adverse impact of competitive product announcements or new entrants into our markets and transfers of resources by competitors into our markets; control of costs and expenses; risks associated with new technologies and the impact on our business; legislative, regulatory, and competitive developments in markets in which we operate; possible future claims, litigation or enforcement actions and the results of any such claim, litigation proceeding, or enforcement action; and other circumstances and risks identified in this Quarterly Report or referenced from time to time in our filings with the SEC. These and many other factors could affect Amtech’s future operating results and financial condition and could cause actual results to differ materially from expectations based on forward-looking statements made in this document or elsewhere by Amtech or on its behalf.
You should not place undue reliance on these forward-looking statements. We cannot guarantee that any forward-looking statement will be realized, although we believe that the expectations reflected in the forward-looking statements are reasonable as of the date of this Quarterly Report. Achievement of future results is subject to events out of our control, risks, uncertainties and potentially inaccurate assumptions. The Annual Report on Form 10-K that we filed with the SEC for the year ended September 30, 2019 listed various important factors that could affect Amtech’s future operating results and financial condition and could cause actual results to differ materially from historical results and expectations based on forward-looking statements made in this document or elsewhere by Amtech or on its behalf. These factors can be found under the heading “Item 1A. Risk Factors” in the Annual Report on Form 10-K and investors should refer to them as well as the additional risk factors identified in this Quarterly Report. Because it is not possible to predict or identify all such factors, any such list cannot be considered a complete set of all potential risks or uncertainties.
The Company undertakes no obligation to update or publicly revise any forward-looking statement whether as a result of new information, future developments or otherwise. All subsequent written or oral forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by this paragraph. You are advised, however, to consult any further disclosures we make on related subjects in our subsequently filed Form 10-Q and Form 8-K reports and our other filings with the SEC. As noted above, we provide a cautionary discussion of risks, uncertainties and possibly inaccurate assumptions relevant to our business under “Item 1A. Risk Factors” of our Annual Report on Form 10-K. We note these factors for investors as permitted by the Private Securities Litigation Reform Act of 1995. You should understand it is not possible to predict or identify all such factors.
PART I. FINANCIAL INFORMATION
Item 1. | Condensed Consolidated Financial Statements |
AMTECH SYSTEMS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(in thousands, except share data)
|
| June 30, 2020 |
|
| September 30, 2019 |
| ||
Assets |
| (Unaudited) |
|
|
|
|
| |
Current Assets |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ | 46,436 |
|
| $ | 52,982 |
|
Restricted cash |
|
| — |
|
|
| 101 |
|
Accounts receivable (less allowance for doubtful accounts of $138 and $172 at June 30, 2020, and September 30, 2019, respectively) |
|
| 10,297 |
|
|
| 12,873 |
|
Inventories |
|
| 19,385 |
|
|
| 17,532 |
|
Notes and other receivables |
|
| 1,250 |
|
|
| — |
|
Income taxes receivable |
|
| 150 |
|
|
| — |
|
Held-for-sale assets |
|
| — |
|
|
| 22,755 |
|
Other current assets |
|
| 3,066 |
|
|
| 2,027 |
|
Total current assets |
|
| 80,584 |
|
|
| 108,270 |
|
Property, Plant and Equipment - Net |
|
| 10,438 |
|
|
| 10,217 |
|
Right-of-Use Assets - Net |
|
| 5,162 |
|
|
| — |
|
Intangible Assets - Net |
|
| 674 |
|
|
| 870 |
|
Goodwill - Net |
|
| 6,633 |
|
|
| 6,633 |
|
Other Assets |
|
| 565 |
|
|
| 487 |
|
Total Assets |
| $ | 104,056 |
|
| $ | 126,477 |
|
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders’ Equity |
|
|
|
|
|
|
|
|
Current Liabilities |
|
|
|
|
|
|
|
|
Accounts payable |
| $ | 3,933 |
|
| $ | 4,371 |
|
Accrued compensation and related taxes |
|
| 1,983 |
|
|
| 2,717 |
|
Accrued warranty expense |
|
| 401 |
|
|
| 556 |
|
Other accrued liabilities |
|
| 1,478 |
|
|
| 1,274 |
|
Current maturities of long-term debt |
|
| 376 |
|
|
| 371 |
|
Contract liabilities |
|
| 1,645 |
|
|
| 1,378 |
|
Income taxes payable |
|
| — |
|
|
| 1,434 |
|
Held-for-sale liabilities |
|
| — |
|
|
| 18,547 |
|
Total current liabilities |
|
| 9,816 |
|
|
| 30,648 |
|
Long-Term Debt |
|
| 4,894 |
|
|
| 5,178 |
|
Long-Term Lease Liability |
|
| 5,088 |
|
|
| — |
|
Income Taxes Payable |
|
| 2,007 |
|
|
| 3,199 |
|
Total Liabilities |
|
| 21,805 |
|
|
| 39,025 |
|
Commitments and Contingencies |
|
|
|
|
|
|
|
|
Shareholders’ Equity |
|
|
|
|
|
|
|
|
Preferred stock; 100,000,000 shares authorized; NaN issued |
|
| — |
|
|
| — |
|
Common stock; $0.01 par value; 100,000,000 shares authorized; shares issued and outstanding: 14,048,172 and 14,268,797 at June 30, 2020 and September 30, 2019, respectively |
|
| 140 |
|
|
| 143 |
|
Additional paid-in capital |
|
| 124,289 |
|
|
| 125,098 |
|
Accumulated other comprehensive loss |
|
| (1,792 | ) |
|
| (11,233 | ) |
Retained deficit |
|
| (40,386 | ) |
|
| (26,556 | ) |
Total shareholders’ equity |
|
| 82,251 |
|
|
| 87,452 |
|
Total Liabilities and Shareholders’ Equity |
| $ | 104,056 |
|
| $ | 126,477 |
|
December 31, 2017 | September 30, 2017 | |||||||
Assets | (Unaudited) | |||||||
Current Assets | ||||||||
Cash and cash equivalents | $ | 52,696 | $ | 51,121 | ||||
Restricted cash | 9,913 | 24,640 | ||||||
Accounts receivable | ||||||||
Trade (less allowance for doubtful accounts of $1,473 and $866 at December 31, 2017, and September 30, 2017, respectively) | 24,365 | 22,519 | ||||||
Unbilled and other | 21,620 | 14,275 | ||||||
Inventories | 22,762 | 30,210 | ||||||
Vendor deposits | 5,180 | 11,806 | ||||||
Other | 2,310 | 2,542 | ||||||
Total current assets | 138,846 | 157,113 | ||||||
Property, Plant and Equipment - Net | 15,637 | 15,792 | ||||||
Intangible Assets - Net | 3,378 | 3,495 | ||||||
Goodwill - Net | 11,484 | 11,405 | ||||||
Investments | 2,588 | 2,615 | ||||||
Deferred Income Taxes - Long-Term | 200 | 200 | ||||||
Other Assets - Long-Term | 980 | 1,003 | ||||||
Total Assets | $ | 173,113 | $ | 191,623 | ||||
Liabilities and Stockholders’ Equity | ||||||||
Current Liabilities | ||||||||
Accounts payable | $ | 20,483 | $ | 21,555 | ||||
Accrued compensation and related taxes | 7,422 | 7,592 | ||||||
Accrued warranty expense | 1,401 | 1,254 | ||||||
Other accrued liabilities | 2,918 | 2,056 | ||||||
Customer deposits | 19,328 | 48,784 | ||||||
Current maturities of long-term debt | 365 | 361 | ||||||
Deferred profit | 5,632 | 4,081 | ||||||
Income taxes payable | 1,608 | 286 | ||||||
Total current liabilities | 59,157 | 85,969 | ||||||
Long-Term Debt | 8,225 | 8,134 | ||||||
Income Taxes Payable - Long-Term | 6,802 | 7,037 | ||||||
Total Liabilities | 74,184 | 101,140 | ||||||
Commitments and Contingencies | ||||||||
Stockholders’ Equity | ||||||||
Preferred stock; 100,000,000 shares authorized; none issued | — | — | ||||||
Common stock; $0.01 par value; 100,000,000 shares authorized; shares issued and outstanding: 14,876,430 and 14,710,591 at December 31, 2017 and September 30, 2017, respectively | 149 | 147 | ||||||
Additional paid-in capital | 127,015 | 125,564 | ||||||
Accumulated other comprehensive loss | (7,988 | ) | (8,529 | ) | ||||
Retained deficit | (20,247 | ) | (26,699 | ) | ||||
Total stockholders’ equity | 98,929 | 90,483 | ||||||
Total Liabilities and Stockholders’ Equity | $ | 173,113 | $ | 191,623 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
AMTECH SYSTEMS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)
(in thousands, except per share data)
|
| Three Months Ended June 30, |
|
| Nine Months Ended June 30, |
| ||||||||||
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| ||||
Revenues, net of returns and allowances |
| $ | 15,227 |
|
| $ | 21,003 |
|
| $ | 50,379 |
|
| $ | 64,861 |
|
Cost of sales |
|
| 9,276 |
|
|
| 13,153 |
|
|
| 30,896 |
|
|
| 40,064 |
|
Gross profit |
|
| 5,951 |
|
|
| 7,850 |
|
|
| 19,483 |
|
|
| 24,797 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative |
|
| 4,804 |
|
|
| 5,718 |
|
|
| 16,134 |
|
|
| 18,137 |
|
Research, development and engineering |
|
| 899 |
|
|
| 746 |
|
|
| 2,436 |
|
|
| 2,325 |
|
Restructuring charges |
|
| 217 |
|
|
| 35 |
|
|
| 217 |
|
|
| 1,072 |
|
Operating income |
|
| 31 |
|
|
| 1,351 |
|
|
| 696 |
|
|
| 3,263 |
|
Loss on sale of subsidiary |
|
| — |
|
|
| — |
|
|
| (2,793 | ) |
|
| — |
|
Interest (expense) income and other, net |
|
| (13 | ) |
|
| 249 |
|
|
| 512 |
|
|
| 511 |
|
Income (loss) from continuing operations before income taxes |
|
| 18 |
|
|
| 1,600 |
|
|
| (1,585 | ) |
|
| 3,774 |
|
Income tax provision |
|
| 90 |
|
|
| 707 |
|
|
| 297 |
|
|
| 1,621 |
|
(Loss) income from continuing operations, net of tax |
|
| (72 | ) |
|
| 893 |
|
|
| (1,882 | ) |
|
| 2,153 |
|
Income (loss) from discontinued operations, net of tax |
|
| — |
|
|
| 1,154 |
|
|
| (11,816 | ) |
|
| (8,113 | ) |
Net (loss) income |
| $ | (72 | ) |
| $ | 2,047 |
|
| $ | (13,698 | ) |
| $ | (5,960 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) Income Per Basic Share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic (loss) income per share from continuing operations |
| $ | (0.01 | ) |
| $ | 0.06 |
|
| $ | (0.13 | ) |
| $ | 0.15 |
|
Basic income (loss) per share from discontinued operations |
| $ | — |
|
| $ | 0.08 |
|
| $ | (0.83 | ) |
| $ | (0.57 | ) |
Net (loss) income per basic share |
| $ | (0.01 | ) |
| $ | 0.14 |
|
| $ | (0.96 | ) |
| $ | (0.42 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) Income Per Diluted Share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted (loss) income per share from continuing operations |
| $ | (0.01 | ) |
| $ | 0.06 |
|
| $ | (0.13 | ) |
| $ | 0.15 |
|
Diluted income (loss) per share from discontinued operations |
| $ | — |
|
| $ | 0.08 |
|
| $ | (0.83 | ) |
| $ | (0.57 | ) |
Net (loss) income per diluted share |
| $ | (0.01 | ) |
| $ | 0.14 |
|
| $ | (0.96 | ) |
| $ | (0.42 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding - basic |
|
| 14,155 |
|
|
| 14,245 |
|
|
| 14,195 |
|
|
| 14,231 |
|
Weighted average shares outstanding - diluted |
|
| 14,155 |
|
|
| 14,316 |
|
|
| 14,195 |
|
|
| 14,267 |
|
Three Months Ended December 31, | ||||||||
2017 | 2016 | |||||||
Revenues, net of returns and allowances | $ | 73,611 | $ | 29,135 | ||||
Cost of sales | 53,274 | 20,692 | ||||||
Gross profit | 20,337 | 8,443 | ||||||
Selling, general and administrative | 10,580 | 6,996 | ||||||
Research, development and engineering | 1,991 | 1,627 | ||||||
Operating income (loss) | 7,766 | (180 | ) | |||||
Loss from equity method investment | (26 | ) | (143 | ) | ||||
Interest expense and other income, net | (48 | ) | 81 | |||||
Income (loss) before income taxes | 7,692 | (242 | ) | |||||
Income tax provision | 1,240 | 90 | ||||||
Net income (loss) | 6,452 | (332 | ) | |||||
Add: net loss attributable to noncontrolling interest | — | 279 | ||||||
Net income (loss) attributable to Amtech Systems, Inc. | $ | 6,452 | $ | (53 | ) | |||
Income (Loss) Per Share: | ||||||||
Basic income (loss) per share attributable to Amtech shareholders | $ | 0.44 | $(0.00) | |||||
Weighted average shares outstanding | 14,781 | 13,179 | ||||||
Diluted income (loss) per share attributable to Amtech shareholders | $ | 0.42 | $(0.00) | |||||
Weighted average shares outstanding | 15,298 | 13,179 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
AMTECH SYSTEMS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Income (Loss)
(Unaudited)
(in thousands)
|
| Three Months Ended June 30, |
|
| Nine Months Ended June 30, |
| ||||||||||
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| ||||
Net (loss) income |
| $ | (72 | ) |
| $ | 2,047 |
|
| $ | (13,698 | ) |
| $ | (5,960 | ) |
Foreign currency translation adjustment |
|
| 22 |
|
|
| (904 | ) |
|
| 644 |
|
|
| (1,690 | ) |
Reclassification adjustment for net foreign currency translation losses included in net (loss) income |
|
| — |
|
|
| 487 |
|
|
| 8,797 |
|
|
| 487 |
|
Comprehensive (loss) income |
| $ | (50 | ) |
| $ | 1,630 |
|
| $ | (4,257 | ) |
| $ | (7,163 | ) |
Three Months Ended December 31, | ||||||||
2017 | 2016 | |||||||
Net income (loss) | $ | 6,452 | $ | (332 | ) | |||
Foreign currency translation adjustment | 541 | (941 | ) | |||||
Comprehensive income (loss) | 6,993 | (1,273 | ) | |||||
Comprehensive loss attributable to noncontrolling interest | — | 375 | ||||||
Comprehensive income (loss) attributable to Amtech Systems, Inc. | $ | 6,993 | $ | (898 | ) |
The accompanying notes are an integral part of these condensed consolidated financial statements.
AMTECH SYSTEMS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
|
| Common Stock |
|
| Treasury Stock |
|
|
|
|
|
| Accumulated Other |
|
| Retained Earnings |
|
| Total |
| |||||||||||||
|
| Shares |
|
| Par Value |
|
| Shares |
|
| Par Value |
|
| Additional Paid- In Capital |
|
| Comprehensive Income (Loss) |
|
| (Accumulated Deficit) |
|
| Shareholders' Equity |
| ||||||||
Balance at September 30, 2018 |
|
| 14,217 |
|
| $ | 142 |
|
|
| — |
|
| $ | — |
|
| $ | 124,316 |
|
| $ | (9,974 | ) |
| $ | (21,394 | ) |
| $ | 93,090 |
|
Net loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (2,372 | ) |
|
| (2,372 | ) |
Translation adjustment |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (576 | ) |
|
| — |
|
|
| (576 | ) |
Stock compensation expense |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 169 |
|
|
| — |
|
|
| — |
|
|
| 169 |
|
Stock options exercised |
|
| 11 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 37 |
|
|
| — |
|
|
| — |
|
|
| 37 |
|
Balance at December 31, 2018 |
|
| 14,228 |
|
|
| 142 |
|
|
| — |
|
|
| — |
|
|
| 124,522 |
|
|
| (10,550 | ) |
|
| (23,766 | ) |
|
| 90,348 |
|
Net loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (5,635 | ) |
|
| (5,635 | ) |
Translation adjustment |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (210 | ) |
|
| — |
|
|
| (210 | ) |
Stock compensation expense |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 194 |
|
|
| — |
|
|
| — |
|
|
| 194 |
|
Stock options exercised |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Balance at March 31, 2019 |
|
| 14,228 |
|
|
| 142 |
|
|
| — |
|
|
| — |
|
|
| 124,716 |
|
|
| (10,760 | ) |
|
| (29,401 | ) |
|
| 84,697 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 2,047 |
|
|
| 2,047 |
|
Translation adjustment |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (417 | ) |
|
| — |
|
|
| (417 | ) |
Stock compensation expense |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 111 |
|
|
| — |
|
|
| — |
|
|
| 111 |
|
Stock options exercised |
|
| 30 |
|
|
| 1 |
|
|
| — |
|
|
| — |
|
|
| 137 |
|
|
| — |
|
|
| — |
|
|
| 138 |
|
Balance at June 30, 2019 |
|
| 14,258 |
|
| $ | 143 |
|
|
| — |
|
| $ | — |
|
| $ | 124,964 |
|
| $ | (11,177 | ) |
| $ | (27,354 | ) |
| $ | 86,576 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2019 |
|
| 14,269 |
|
| $ | 143 |
|
|
| — |
|
| $ | — |
|
| $ | 125,098 |
|
| $ | (11,233 | ) |
| $ | (26,556 | ) |
| $ | 87,452 |
|
Net loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (1,932 | ) |
|
| (1,932 | ) |
Translation adjustment |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 2,673 |
|
|
| — |
|
|
| 2,673 |
|
Stock compensation expense |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 68 |
|
|
| — |
|
|
| — |
|
|
| 68 |
|
Stock options exercised |
|
| 117 |
|
|
| 1 |
|
|
| — |
|
|
| — |
|
|
| 700 |
|
|
| — |
|
|
| — |
|
|
| 701 |
|
Balance at December 31, 2019 |
|
| 14,386 |
|
|
| 144 |
|
|
| — |
|
|
| — |
|
|
| 125,866 |
|
|
| (8,560 | ) |
|
| (28,488 | ) |
|
| 88,962 |
|
Net loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (11,694 | ) |
|
| (11,694 | ) |
Translation adjustment |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 6,746 |
|
|
| — |
|
|
| 6,746 |
|
Stock compensation expense |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 65 |
|
|
| — |
|
|
| — |
|
|
| 65 |
|
Stock repurchases |
|
| — |
|
|
| — |
|
|
| (366 | ) |
|
| (2,000 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (2,000 | ) |
Retirement of stock repurchases |
|
| (366 | ) |
|
| (4 | ) |
|
| 366 |
|
|
| 2,000 |
|
|
| (1,864 | ) |
|
| — |
|
|
| (132 | ) |
|
| — |
|
Stock options exercised |
|
| 21 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 78 |
|
|
| — |
|
|
| — |
|
|
| 78 |
|
Balance at March 31, 2020 |
|
| 14,041 |
|
|
| 140 |
|
|
| — |
|
|
| — |
|
|
| 124,145 |
|
|
| (1,814 | ) |
|
| (40,314 | ) |
|
| 82,157 |
|
Net loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (72 | ) |
|
| (72 | ) |
Translation adjustment |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 22 |
|
|
| — |
|
|
| 22 |
|
Stock compensation expense |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 124 |
|
|
| — |
|
|
| — |
|
|
| 124 |
|
Stock options exercised |
|
| 7 |
|
|
| — |
|
|
| — |
|
|
| — |
|
| �� | 20 |
|
|
| — |
|
|
| — |
|
|
| 20 |
|
Balance at June 30, 2020 |
|
| 14,048 |
|
| $ | 140 |
|
|
| — |
|
| $ | — |
|
| $ | 124,289 |
|
| $ | (1,792 | ) |
| $ | (40,386 | ) |
| $ | 82,251 |
|
Three Months Ended December 31, | |||||||
2017 | 2016 | ||||||
Operating Activities | |||||||
Net income (loss) | $ | 6,452 | $ | (332 | ) | ||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | |||||||
Depreciation and amortization | 471 | 654 | |||||
Write-down of inventory | 41 | 33 | |||||
Capitalized interest | 143 | 190 | |||||
Deferred income taxes | (7 | ) | 31 | ||||
Non-cash share based compensation expense | 253 | 319 | |||||
Loss from equity method investment | 26 | 143 | |||||
Provision for (reversal of) allowance for doubtful accounts, net | 48 | (1,178 | ) | ||||
Changes in operating assets and liabilities: | |||||||
Restricted cash | 14,885 | (2,425 | ) | ||||
Accounts receivable | (8,869 | ) | (3,600 | ) | |||
Inventories | 7,558 | 1,621 | |||||
Accrued income taxes | 1,087 | 239 | |||||
Vendor deposits and other assets | 6,974 | 725 | |||||
Accounts payable | (1,255 | ) | 78 | ||||
Customer deposits and accrued liabilities | (29,023 | ) | 584 | ||||
Deferred profit | 1,479 | (619 | ) | ||||
Net cash provided by (used in) operating activities | 263 | (3,537 | ) | ||||
Investing Activities | |||||||
Purchases of property, plant and equipment | (93 | ) | (86 | ) | |||
Proceeds from sale of property, plant and equipment | — | 1 | |||||
Net cash used in investing activities | (93 | ) | (85 | ) | |||
Financing Activities | |||||||
Proceeds from the exercise of stock options | 1,199 | 1 | |||||
Payments on long-term debt | (89 | ) | (160 | ) | |||
Borrowings on long-term debt | — | 21 | |||||
Net cash provided by (used in) financing activities | 1,110 | (138 | ) | ||||
Effect of Exchange Rate Changes on Cash and Cash Equivalents | 295 | (257 | ) | ||||
Net Increase (Decrease) in Cash and Cash Equivalents | 1,575 | (4,017 | ) | ||||
Cash and Cash Equivalents, Beginning of Period | 51,121 | 27,655 | |||||
Cash and Cash Equivalents, End of Period | $ | 52,696 | $ | 23,638 | |||
The accompanying notes are an integral part of these condensed consolidated financial statements.
AMTECH SYSTEMS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
|
| Nine Months Ended June 30, |
| |||||
|
| 2020 |
|
| 2019 |
| ||
Operating Activities |
|
|
|
|
|
|
|
|
Net loss |
| $ | (13,698 | ) |
| $ | (5,960 | ) |
Adjustments to reconcile net loss to net cash (used in) provided by operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
| 932 |
|
|
| 1,280 |
|
Write-down of inventory |
|
| 540 |
|
|
| 2,991 |
|
Deferred income taxes |
|
| 784 |
|
|
| 192 |
|
Non-cash share-based compensation expense |
|
| 257 |
|
|
| 474 |
|
Loss (gain) on sales of subsidiaries |
|
| 13,708 |
|
|
| (1,614 | ) |
(Reversal of) provision for allowance for doubtful accounts, net |
|
| (26 | ) |
|
| 1,104 |
|
Other, net |
|
| 13 |
|
|
| 107 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
| 2,356 |
|
|
| 630 |
|
Inventories |
|
| (2,791 | ) |
|
| 284 |
|
Other assets |
|
| (2,376 | ) |
|
| 12,675 |
|
Accounts payable |
|
| (2,363 | ) |
|
| (3,843 | ) |
Accrued income taxes |
|
| (2,722 | ) |
|
| (1,359 | ) |
Accrued and other liabilities |
|
| 5,346 |
|
|
| (5,726 | ) |
Contract liabilities |
|
| (950 | ) |
|
| (814 | ) |
Net cash (used in) provided by operating activities |
|
| (990 | ) |
|
| 421 |
|
Investing Activities |
|
|
|
|
|
|
|
|
Purchases of property, plant and equipment |
|
| (860 | ) |
|
| (552 | ) |
Net cash disposed of in sales of subsidiaries |
|
| (9,940 | ) |
|
| (1,112 | ) |
Net cash used in investing activities |
|
| (10,800 | ) |
|
| (1,664 | ) |
Financing Activities |
|
|
|
|
|
|
|
|
Proceeds from the exercise of stock options |
|
| 799 |
|
|
| 175 |
|
Repurchase of common stock |
|
| (2,000 | ) |
|
| — |
|
Payments on long-term debt |
|
| (285 | ) |
|
| (280 | ) |
Borrowings on long-term debt |
|
| — |
|
|
| 9 |
|
Net cash used in financing activities |
|
| (1,486 | ) |
|
| (96 | ) |
Effect of Exchange Rate Changes on Cash, Cash Equivalents and Restricted Cash |
|
| 578 |
|
|
| (1,450 | ) |
Net Decrease in Cash, Cash Equivalents and Restricted Cash |
|
| (12,698 | ) |
|
| (2,789 | ) |
Cash, Cash Equivalents and Restricted Cash, Beginning of Period* |
|
| 59,134 |
|
|
| 62,496 |
|
Cash, Cash Equivalents and Restricted Cash, End of Period* |
| $ | 46,436 |
|
| $ | 59,707 |
|
* | Includes Cash, Cash Equivalents and Restricted Cash that are included in Held-For-Sale Assets on the Condensed Consolidated Balance Sheets for periods prior to January 22, 2020. |
The accompanying notes are an integral part of these condensed consolidated financial statements.
AMTECH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE AND NINE MONTHS ENDED DECEMBER 31, 2017JUNE 30, 2020 AND 2016
(UNAUDITED)
1. Basis of Presentation and Significant Accounting Policies
Nature of Operations and Basis of Presentation
– Amtech Systems, Inc. (theWe serve niche markets in industries that are experiencing rapid technological advances and which historically have been very cyclical. Therefore, our future profitability and growth depend on our ability to develop or acquire and market profitable new products and on our ability to adapt to cyclical trends.
In the second quarter of fiscal 2019, we began the process to divest our solar business. As such, we have classified substantially all of the Solar segment as held for sale in our Condensed Consolidated Balance Sheets and reported its results as discontinued operations in our Condensed Consolidated Statements of Operations. These divestitures were completed in the second quarter of fiscal 2020. For additional information on the divestitures, see Note 4. For additional information on our segments, see Note 10.
The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”), and consequently do not include all disclosures normally required by accounting principles generally accepted in the United States of America. In the opinion of management, the accompanying unaudited interim condensed consolidated financial statements contain all adjustments necessary, all of which are of a normal and recurring nature, to present fairly our financial position, results of operations and cash flows. Certain information and note disclosures normally included in financial statements have been condensed or omitted pursuant to the rules and regulations of the SEC. The condensed balance sheet at September 30, 2019, has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K as amended, for the fiscal year ended September 30, 2017.
Our fiscal year is from October 1 to September 30. Unless otherwise stated, references to the years 2020 and 2019 relate to the fiscal years ended September 30, 2020 and 2019, respectively.
The consolidated results of operations for the three and nine months ended December 31, 2017,June 30, 2020, are not necessarily indicative of the results to be expected for the full fiscal year.
Principles of Consolidation
– The consolidated financial statements include the accounts of the Company and our wholly-ownedUse of Estimates
– The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.Reclassifications – We review productCertain reclassifications have been made to prior year financial statements to conform to the current year presentation. Results for all periods presented in this report have been reclassified for changes to our reportable segments (Note 10). These reclassifications had no effect on the previously reported consolidated financial statements for any period.
Divestitures – Significant accounting policies associated with a decision to dispose of a business are discussed below:
Discontinued Operations– A business is classified as discontinued operations if the disposal represents a strategic shift that will have a major effect on operations or financial results and service sales contracts with multiple deliverablesmeets the criteria to determine ifbe classified as held for sale or is disposed of by sale or otherwise. Significant judgments are involved in determining whether a business meets the criteria for discontinued operations reporting and the period in which these criteria are met. If a business is reported as a discontinued operation, the results of operations through the date of sale, including any gain or loss recognized on the disposition, are presented on a separate unitsline of accounting are present. Where separate unitsthe Condensed Consolidated Statements of accounting exist, revenueOperations. Interest on debt directly attributable to the discontinued operation is allocated to delivered itemsdiscontinued operations.
Assets Held for Sale– An asset or business is classified as held for sale when (i) management commits to a plan to sell and it is actively marketed; (ii) it is available for immediate sale and the lowersale is expected to be completed within one year; and (iii) it is unlikely significant changes to the plan will be made or that the plan will be withdrawn. In isolated instances, assets held for sale may exceed one year due to events or circumstances beyond our control. The assets and related liabilities are aggregated and reported on separate lines of the relative selling price of the delivered items in the sales arrangement or the portion of the selling price that is not contingent upon performance of the service.
December 31, 2017 | September 30, 2017 | ||||||
Deferred revenues | $ | 8,370 | $ | 6,822 | |||
Deferred costs | 2,738 | 2,741 | |||||
Deferred profit | $ | 5,632 | $ | 4,081 |
Shipping Expense
– Shipping expenses ofResearch, Development and Engineering Expense
– The table below shows gross research and development expenses and grants earned, in thousands:
|
| Three Months Ended June 30, |
|
| Nine Months Ended June 30, |
| ||||||||||
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| ||||
Research, development and engineering |
| $ | 982 |
|
| $ | 790 |
|
| $ | 2,762 |
|
| $ | 2,369 |
|
Grants earned |
|
| (83 | ) |
|
| (44 | ) |
|
| (326 | ) |
|
| (44 | ) |
Net research, development and engineering |
| $ | 899 |
|
| $ | 746 |
|
| $ | 2,436 |
|
| $ | 2,325 |
|
Three Months Ended | ||||||||
December 31, 2017 | December 31, 2016 | |||||||
Research, development and engineering | $ | 2,290 | $ | 1,830 | ||||
Grants earned | (299 | ) | (203 | ) | ||||
Net research, development and engineering | $ | 1,991 | $ | 1,627 |
Concentrations of Credit Risk
– Our customers consist primarily ofAs of December 31, 2017, two customersJune 30, 2020, one Semiconductor segment customer individually represented 36% and 12% of accounts receivable. As of September 30, 2017, two customers2019, one Semiconductor customer individually represented 24% and 11%15% of accounts receivable.
We maintain our cash, cash equivalents and restricted cash in multiple financial institutions. Balances in the United States, which account for approximately 56%89% and 45%79% of total cash balances at our continuing operations as of December 31, 2017June 30, 2020 and September 30, 2017,2019, respectively, are primarily invested in U.S. Treasuries or are in financial institutions insured by the Federal Deposit Insurance Corporation (“FDIC”). The remainder of our cash is maintained with financial institutions with reputable credit ratings in The Netherlands, France, China, the United Kingdom, Singapore and Malaysia.
Refer to Note 911 to Condensed Consolidated Financial Statements for information regarding major customers, foreign sales and revenue in other countries subject to fluctuation in foreign currency exchange rates.
Impact of Recently Issued Accounting Pronouncements
Effective October 1, 2019, we adopted the Financial Accounting Standards Board (the “FASB”Board’s (“FASB”) issued Accounting StandardsStandard Update (“ASU”) 2016-09, “Compensation - Stock CompensationNo. 2016-02—Leases (Topic 718).” ASU 2016-09 identifies areas for simplification involving several aspects842), using the retrospective cumulative effect adjustment transition method. We elected the package of accounting for share-based payment transactions, includingpractical expedients permitted under the income tax consequences, classification of awards as either equity or liabilities, an option to recognize gross stock compensation expense with actual forfeitures recognized as they occur, as well as certain classifications on the statement of cash flows. The amendments in this ASU are effective for annual periods beginning after December 15, 2016 and for the interim periods therein. This new standard increases volatility in the statement of operations by requiring all excess tax benefits and deficiencies to be recognized as discrete income tax benefits or expenses in the statement of operations in the period in which they occur. We adoptedtransition guidance within the new standard, as of October 1, 2017, and prospectively appliedwhich among other things, allowed us to carry forward the provisions in this guidance requiring recognition of excess tax benefits and deficits in the statement of operations. Also, as a result of the adoption of the new standard,historical lease classification. In addition, we made an accounting policy election not to recognize forfeitures as they occurseparate non-lease components from lease components for all existing classes of underlying assets with the exception of land and no longer estimate expected forfeitures. The provisionsbuildings. We also made an accounting policy election to not record right of use (“ROU”) assets and lease liabilities for leases with an initial term of twelve months or less on our condensed consolidated balance sheet.
Adoption of the new standard resulted in this guidance requiring the userecording of a modified retrospective transition method would have required us to record a cumulative-effect adjustment in retained earningslease ROU assets and lease liabilities of approximately $195,000 and $163,000, respectively, as of October 1, 2017. On the basis of immateriality, we recorded such cumulative-effect adjustment as stock-based compensation in the first quarter of 2018 rather than adjusting retained earnings. Lastly, we applied the provisions of this guidance relating to classification on the statement of cash flows retrospectively with2019. The standard did not materially impact our consolidated results from operations and had no material effectimpact on our cash flows.
There have been no other material changes or additions to the recently issued accounting standards asother than those previously reported in Note 1 to our Consolidated Financial Statements in Part II, Item 8 of our Annual Report on Form 10-K as amended, for the year ended September 30, 20172019 that affect or may affect our consolidated financial statements.
2. Contracts with Customers
The components of contract assets, which are included in other current assets in our condensed consolidated balance sheets, are as follows, in thousands:
|
| June 30, 2020 |
|
| September 30, 2019 |
| ||
Unbilled accounts receivable |
| $ | — |
|
| $ | 36 |
|
Contract assets |
| $ | — |
|
| $ | 36 |
|
The components of contract liabilities are as follows, in thousands:
|
| June 30, 2020 |
|
| September 30, 2019 |
| ||
Customer deposits |
| $ | 1,645 |
|
| $ | 1,378 |
|
Contract liabilities |
| $ | 1,645 |
|
| $ | 1,378 |
|
3. Leases
We lease office space, buildings, land, vehicles and equipment. Lease agreements with an initial term of 12 months or less are not recorded on the balance sheet. Instead, we recognize the lease expense as incurred over the lease term.
Certain lease agreements include one or more options to renew, with renewal terms that can extend the lease term from one to five years. The exercise of lease renewal options is at our sole discretion. Some agreements also include options to purchase the leased property. The estimated life of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise.
Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.
Significant Accounting Policy
We determine if a contract or arrangement is, or contains, a lease at inception. Balances related to operating leases are included in Right-of-Use assets in our condensed consolidated balance sheet. Balances related to financing leases are immaterial and are included in property and equipment, other current liabilities, and long-term lease liability in our condensed consolidated balance sheet. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease.
ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As none of our leases provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The ROU asset includes any prepaid lease payments and additional direct costs and excludes lease incentives. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option.
The following table provides information about the financial statement classification of our lease balances reported within the condensed consolidated balance sheets as of June 30, 2020 and October 1, 2019, in thousands:
|
| June 30, 2020 |
|
| October 1, 2019 |
| ||
Assets |
|
|
|
|
|
|
|
|
Operating lease assets |
| $ | 5,162 |
|
| $ | 146 |
|
Finance lease assets |
|
| 29 |
|
|
| 49 |
|
Total lease assets |
| $ | 5,191 |
|
| $ | 195 |
|
Liabilities |
|
|
|
|
|
|
|
|
Current |
|
|
|
|
|
|
|
|
Operating lease liabilities |
| $ | 115 |
|
| $ | 99 |
|
Finance lease liabilities |
|
| 12 |
|
|
| 22 |
|
Non-current |
|
|
|
|
|
|
|
|
Operating lease liabilities |
|
| 5,069 |
|
|
| 15 |
|
Finance lease liabilities |
|
| 19 |
|
|
| 27 |
|
Total lease liabilities |
| $ | 5,215 |
|
| $ | 163 |
|
The following table provides information about the financial statement classification of our lease expenses reported in the condensed consolidated statements of operations for the three and nine months ended June 30, 2020, in thousands:
Lease cost |
| Classification |
| Three Months Ended June 30, 2020 |
|
| Nine Months Ended June 30, 2020 |
| ||
Operating lease cost |
| Selling, general and administrative expenses |
| $ | 72 |
|
| $ | 187 |
|
Finance lease cost |
| Selling, general and administrative expenses |
|
| 5 |
|
|
| 20 |
|
Total lease cost |
|
|
| $ | 77 |
|
| $ | 207 |
|
Future minimum lease payments under non-cancelable leases as of June 30, 2020 are as follows, in thousands:
|
| Operating leases |
|
| Finance Leases |
|
| Total |
| |||
Remainder of 2020 |
| $ | 85 |
|
| $ | 4 |
|
| $ | 89 |
|
2021 |
|
| 323 |
|
|
| 12 |
|
|
| 335 |
|
2022 |
|
| 317 |
|
|
| 8 |
|
|
| 325 |
|
2023 |
|
| 312 |
|
|
| 7 |
|
|
| 319 |
|
2024 |
|
| 311 |
|
|
| 2 |
|
|
| 313 |
|
2025 |
|
| 297 |
|
|
| — |
|
|
| 297 |
|
Thereafter |
|
| 6,944 |
|
|
| — |
|
|
| 6,944 |
|
Total lease payments |
|
| 8,589 |
|
|
| 33 |
|
|
| 8,622 |
|
Less: Interest |
|
| 3,405 |
|
|
| 2 |
|
|
| 3,407 |
|
Present value of lease liabilities |
|
| 5,184 |
|
|
| 31 |
|
| $ | 5,215 |
|
Operating lease payments include $3.9 million related to options to extend lease terms that are reasonably certain of being exercised.
The following table provides information about the remaining lease terms and discount rates applied as of June 30, 2020:
June 30, 2020 | ||||
Weighted average remaining lease term | ||||
Operating leases | 24.33 years | |||
Finance leases | 2.89 years | |||
Weighted average discount rate | ||||
Operating leases | 4.17 | % | ||
Finance leases | 4.17 | % |
4. Assets Held for Sale, Discontinued Operations and Disposals
In April 2019, we announced that our Board of Directors (the “Board”) determined that it was in the long-term best interest of the Company to exit the solar business segment and focus our strategic efforts on our semiconductor and silicon carbide/polishing business segments in order to more fully realize the opportunities the Company believes are presented in those areas. The divestitures of our solar business included our Tempress and SoLayTec subsidiaries, which comprised substantially all of our Solar segment. We classified substantially all of the Solar segment as held for sale in our Condensed Consolidated Balance Sheets and reported its results as discontinued operations in our Condensed Consolidated Statements of Operations for periods reported subsequent to the announcement.
On June 7, 2019 (“SoLayTec Sale Date”), we completed the sale of our subsidiary, SoLayTec, to a third party located in the Netherlands. Upon the sale, we recognized a gain of approximately $1.6 million, which we reported as gain on sale of subsidiary in our Consolidated Statements of Operations for the three months ended June 30, 2019. Effective on the SoLayTec Sale Date, SoLayTec is no longer included in our consolidated financial statements. SoLayTec was not material to Amtech’s results of operations or financial position.
On December 13, 2019 (“R2D Sale Date”), we finalized the sale of our subsidiary, R2D Automation SAS (“R2D”), to certain members of R2D’s management team. Upon the sale, we recognized a loss of approximately $2.8 million, which we reported as loss on sale of subsidiary in our Condensed Consolidated Statements of Operations for the nine months ended June 30, 2020. Effective on the R2D Sale Date, R2D is no longer included in our consolidated financial statements. R2D does not meet the discontinued operations or held-for-sale criteria and is not material to Amtech’s results of operations or financial position.
Effective January 22, 2020 (“Tempress Sale Date”), we completed the sale of our subsidiary, Tempress Group Holding B.V. (“Tempress”) for nominal consideration to a third party located in the Netherlands. In connection with this sale transaction, we provided an unsecured term loan to Tempress in the principal sum of $2.25 million, to be used to fund Tempress’ working capital requirements and to facilitate the restructuring of Tempress’ operations. In July 2020, we received the final loan payment of $1.25 million. We forgave $0.5 million of the loan in accordance with the terms of the loan agreement. We recorded a pre-tax loss on deconsolidation of approximately $10.9 million, of which approximately $7.2 million was the recognition of previously recorded accumulated foreign currency translation losses. The total pre-tax loss does not have a material effect on our cash balances at our continuing operations. We also recognized a significant tax benefit relating to this loss, which can be carried over to future years. Effective on the Tempress Sale Date, Tempress is no longer included in our consolidated financial statements.
Operating results of our discontinued solar operations were as follows, in thousands:
|
| Three Months Ended June 30, |
|
| Nine Months Ended June 30, |
| ||||||||||
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| ||||
Revenues, net of returns and allowances |
| $ | — |
|
| $ | 5,268 |
|
| $ | 7,442 |
|
| $ | 19,649 |
|
Cost of sales |
|
| — |
|
|
| 4,374 |
|
|
| 5,969 |
|
|
| 19,726 |
|
Gross profit (loss) |
|
| — |
|
|
| 894 |
|
|
| 1,473 |
|
|
| (77 | ) |
Selling, general and administrative |
|
| — |
|
|
| 1,735 |
|
|
| 1,814 |
|
|
| 7,412 |
|
Research, development and engineering |
|
| — |
|
|
| 736 |
|
|
| 540 |
|
|
| 2,647 |
|
Restructuring charges |
|
| — |
|
|
| (3 | ) |
|
| 37 |
|
|
| 598 |
|
Operating loss |
|
| — |
|
|
| (1,574 | ) |
|
| (918 | ) |
|
| (10,734 | ) |
Gain (loss) on sale of subsidiary |
|
| — |
|
|
| 1,614 |
|
|
| (10,916 | ) |
|
| 1,614 |
|
Interest expense and other, net |
|
| — |
|
|
| (143 | ) |
|
| (29 | ) |
|
| (213 | ) |
Loss from discontinued operations before income taxes |
|
| — |
|
|
| (103 | ) |
|
| (11,863 | ) |
|
| (9,333 | ) |
Income tax benefit |
|
| — |
|
|
| (1,257 | ) |
|
| (47 | ) |
|
| (1,220 | ) |
Net income (loss) from discontinued operations, net of tax |
| $ | — |
|
| $ | 1,154 |
|
| $ | (11,816 | ) |
| $ | (8,113 | ) |
The following table presents a summary of the solar assets and liabilities held for sale included in our Condensed Consolidated Balance Sheets, in thousands:
Assets |
| September 30, 2019 |
| |
Total current assets |
| $ | 17,591 |
|
Property, plant and equipment - net |
|
| 5,164 |
|
Total assets included in the disposal group |
|
| 22,755 |
|
Total current liabilities |
|
| 18,272 |
|
Long-term debt |
|
| 275 |
|
Total liabilities included in the disposal group |
|
| 18,547 |
|
Net assets included in the disposal group |
| $ | 4,208 |
|
Amtech’s Condensed Consolidated Statements of Cash Flows combines cash flows from discontinued operations with cash flows from continuing operations within each cash flow statement category. The following table summarizes selected cash flow information for discontinued operations, in thousands:
|
| Nine Months Ended June 30, |
| |||||
|
| 2020 |
|
| 2019 |
| ||
Loss from discontinued operations, net of tax |
| $ | (11,816 | ) |
| $ | (8,113 | ) |
Depreciation and amortization |
| $ | 180 |
|
| $ | 426 |
|
(Reversal of) provision for allowance for doubtful accounts, net |
| $ | (66 | ) |
| $ | 887 |
|
(Loss) gain on sale of subsidiary |
| $ | (10,916 | ) |
| $ | 1,614 |
|
Purchases of property, plant and equipment |
| $ | 1 |
|
| $ | 118 |
|
5. Earnings Per Share
Basic earnings per share (“EPS”) is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the period. Diluted EPS is computed similarly to basic EPS except that the denominator is increased to include the number of additional common shares that would have been outstanding if potentially dilutive common shares had been issued. In the case of a net loss, diluted earnings per share is calculated in the same manner as basic EPS.
For the three and nine months ended
A reconciliation of the denominators of the basic and diluted EPS incalculations follows (in thousands, except per share amounts:amounts):
|
| Three Months Ended June 30, |
|
| Nine Months Ended June 30, |
| ||||||||||
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| ||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income from continuing operations |
| $ | (72 | ) |
| $ | 893 |
|
| $ | (1,882 | ) |
| $ | 2,153 |
|
Net income (loss) from discontinued operations |
| $ | — |
|
| $ | 1,154 |
|
| $ | (11,816 | ) |
| $ | (8,113 | ) |
Net (loss) income |
| $ | (72 | ) |
| $ | 2,047 |
|
| $ | (13,698 | ) |
| $ | (5,960 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares used to compute basic EPS |
|
| 14,155 |
|
|
| 14,245 |
|
|
| 14,195 |
|
|
| 14,231 |
|
Common stock equivalents (1) |
|
| — |
|
|
| 71 |
|
|
| — |
|
|
| 36 |
|
Weighted-average shares used to compute diluted EPS |
|
| 14,155 |
|
|
| 14,316 |
|
|
| 14,195 |
|
|
| 14,267 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic (loss) income per share from continuing operations |
| $ | (0.01 | ) |
| $ | 0.06 |
|
| $ | (0.13 | ) |
| $ | 0.15 |
|
Basic income (loss) per share from discontinued operations |
| $ | — |
|
| $ | 0.08 |
|
| $ | (0.83 | ) |
| $ | (0.57 | ) |
Net (loss) income per basic share |
| $ | (0.01 | ) |
| $ | 0.14 |
|
| $ | (0.96 | ) |
| $ | (0.42 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted (loss) income per share from continuing operations |
| $ | (0.01 | ) |
| $ | 0.06 |
|
| $ | (0.13 | ) |
| $ | 0.15 |
|
Diluted income (loss) per share from discontinued operations |
| $ | — |
|
| $ | 0.08 |
|
| $ | (0.83 | ) |
| $ | (0.57 | ) |
Net (loss) income per diluted share |
| $ | (0.01 | ) |
| $ | 0.14 |
|
| $ | (0.96 | ) |
| $ | (0.42 | ) |
(1) | The number of common stock equivalents is calculated using the treasury method and the average market price during the period. |
Three Months Ended December 31, | ||||||||
2017 | 2016 | |||||||
Basic Income (Loss) Per Share Computation | ||||||||
Net income (loss) attributable to Amtech Systems, Inc. | $ | 6,452 | $ | (53 | ) | |||
Weighted Average Shares Outstanding: | ||||||||
Common stock | 14,781 | 13,179 | ||||||
Basic income (loss) per share attributable to Amtech shareholders | $ | 0.44 | $(0.00) | |||||
Diluted Income (Loss) Per Share Computation | ||||||||
Net income (loss) attributable to Amtech Systems, Inc. | $ | 6,452 | $ | (53 | ) | |||
Weighted Average Shares Outstanding: | ||||||||
Common stock | 14,781 | 13,179 | ||||||
Common stock equivalents (1) | 517 | — | ||||||
Diluted shares | 15,298 | 13,179 | ||||||
Diluted income (loss) per share attributable to Amtech shareholders | $ | 0.42 | $(0.00) |
6. Inventory
The components of inventories are as follows, in thousands:
|
| June 30, 2020 |
|
| September 30, 2019 |
| ||
Purchased parts and raw materials |
| $ | 15,908 |
|
| $ | 15,192 |
|
Work-in-process |
|
| 4,004 |
|
|
| 4,215 |
|
Finished goods |
|
| 4,107 |
|
|
| 3,183 |
|
|
|
| 24,019 |
|
|
| 22,590 |
|
Excess and obsolete reserves |
|
| (4,634 | ) |
|
| (5,058 | ) |
|
| $ | 19,385 |
|
| $ | 17,532 |
|
December 31, 2017 | September 30, 2017 | ||||||
Purchased parts and raw materials | $ | 13,628 | $ | 14,789 | |||
Work-in-process | 5,806 | 11,078 | |||||
Finished goods | 3,328 | 4,343 | |||||
$ | 22,762 | $ | 30,210 |
7. Equity and Stock-Based Compensation
Stock-based compensation expense was $0.3$0.1 million in botheach of the three months ended December 31, 2017June 30, 2020 and 2016,2019, and was $0.3 million and $0.5 million in the nine months ended June 30, 2020 and 2019, respectively. Stock-based compensation expense is included in selling, general and administrative expenses.
The following table summarizes our stock option activity during the nine months ended June 30, 2020:
|
| Options |
|
| Weighted Average Exercise Price |
| ||
Outstanding at beginning of period |
|
| 1,068,665 |
|
| $ | 7.04 |
|
Granted |
|
| 32,500 |
|
|
| 5.34 |
|
Exercised |
|
| (145,375 | ) |
|
| 5.50 |
|
Forfeited |
|
| (215,894 | ) |
|
| 7.65 |
|
Outstanding at end of period |
|
| 739,896 |
|
| $ | 7.08 |
|
Exercisable at end of period |
|
| 630,773 |
|
| $ | 7.36 |
|
Weighted average fair value of options granted during the period |
| $ | 2.89 |
|
|
|
|
|
The fair value of options was estimated at the applicable grant date using the Black-Scholes option pricing model with the following assumptions:
Nine Months Ended June 30, 2020 | ||||
Risk free interest rate | 1 | % | ||
Expected life | 6 years | |||
Dividend rate | — | % | ||
Volatility | 58 | % |
On November 29, 2018, we announced that our Board approved a stock repurchase program, pursuant to which we may repurchase up to $4 million of our outstanding common stock, par value $0.01 per share (“Common Stock”), over a one-year period. Repurchases under the program were to be made in open market transactions at prevailing market prices, in privately negotiated transactions, or by other means in compliance with the rules and regulations of the SEC; however, we had no obligation to repurchase shares and the timing, actual number, and value of shares to be repurchased was subject to management’s discretion and depended on the Company’s stock price and other market conditions. Our Board could have terminated the repurchase program at any time while it was in effect. We intended to retire any repurchased shares. The term of our repurchase program expired as of the quarter ended December 31, 2019. There were 0 shares repurchased under this plan.
On February 4, 2020, the Board approved a new stock repurchase program, pursuant to which the Company may repurchase up to $4 million of its outstanding Common Stock over a one-year period, commencing on February 10, 2020. Repurchases under the program will be made in open market transactions at prevailing market prices, in privately negotiated transactions, or by other means in compliance with the rules and regulations of the SEC; however, the Company has no obligation to repurchase shares and the timing, actual number, and value of shares to be repurchased is subject to management’s discretion and will depend on the Company’s stock price and other market conditions. The Company may, in the sole discretion of the Board, terminate the repurchase program at any time while it is in effect. During the quarter ended March 31, 2020, we repurchased 366,000 shares of our Common Stock on the open market at a total cost of approximately $2.0 million (an average price of $5.46 per share).
8. Income Taxes
For the three months ended December 31, 2017:
Options | Weighted Average Exercise Price | ||||||
Outstanding at beginning of period | 1,560,441 | $ | 7.95 | ||||
Granted | — | — | |||||
Exercised | (165,839 | ) | 7.03 | ||||
Forfeited | (27,299 | ) | 20.04 | ||||
Outstanding at end of period | 1,367,303 | $ | 7.82 | ||||
Exercisable at end of period | 1,142,012 | $ | 8.06 | ||||
Weighted average fair value of options granted during the period | $ | — |
We are assessing the impact of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) which was signed into law on March 27, 2020, on our income tax positions. As the Company is still gathering information necessary to make decisions to apply the provisions in the CARES Act, including five-year carryback of net operating losses, the income tax provision as of and for the three months and nine months ended June 30, 2020, does not reflect such impact.
Deferred tax assets and liabilities reflect the tax effects of temporary differences between the carrying value of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. We record a valuation allowance if, based on the weight of available evidence, it is more likely than not that some portion or all of a deferred tax asset will not be realized. Our expectations regarding realization of our deferred tax assets is based upon the weight of all available evidence, including such factors as our recent earnings history, expected future taxable income and available tax planning strategies. In prior periods, weWe established valuation allowances on substantially all net deferred tax assets, after considering all of the available objective evidence, both positive and negative, historical and prospective, with greater weight given to historical evidence, and determined it is not more likely than not that these assets will be realized.
We classify all of our uncertain tax positions as income taxes payable long-term. At December 31, 2017June 30, 2020 and September 30, 2017,2019, the total amount of unrecognized tax benefits was approximately $4.3$1.2 million and $4.2$1.3 million, respectively. Income taxes payable long-term includes other items, primarily withholding taxes that are not due until the related intercompany service fees are paid.
We classify interest and penalties related to unrecognized tax benefits as income tax expense. As of December 31, 2017both June 30, 2020 and September 30, 2017,2019, we had an accrual for potential interest and penalties of approximately $2.7$0.8 million and $2.6 million, respectively, classified with income taxes payable long-term.
Amtech and one or more of our subsidiaries file income tax returns in The Netherlands, Germany, France, China and other foreign jurisdictions, as well as in the U.S. and various states in the U.S. We have not signed any agreements with the Internal Revenue Service, any state or foreign jurisdiction to the extend the statute of limitations for any fiscal year. As such, the number of open years is the number of years dictated by statute in each of the respective taxing jurisdictions, which generally is from 3 to 5 years.
9. Commitments and Contingencies
Purchase Obligations
– As ofLegal Proceedings and Other Claims – In fiscal 2014, our wholly owned subsidiary, Tempress Systems, Inc. (“Tempress”), entered into an agreement with the Energy Research Centre of the Netherlands (“ECN”), a Netherlands government-sponsored research institute, for a joint research and development project. Under the terms of the agreement, Tempress sold an ion implanter (“Equipment”) to ECN for $1.4 million. Both Tempress and ECN are performing research and development projects utilizing the Equipment at the ECN facilities. Each party to the agreement will have 100% rights to the results of the projects developed separately by the individual parties. Any results co-developed will be jointly owned. Tempress met its requirement to contribute $1.4 million to the project in the form of installation of the Equipment, acceptance testing, project meeting attendance, training, parts, and service, including keeping the Equipment in good condition and repair for the first two years of the agreement prior to fiscal 2017.
Employment Contracts
and Change in Control Agreements – We have employment contracts and change in control agreements with, and severance plans covering, certain officers and management employees under which severance payments would become payable in the event of specified terminations without cause or terminations under certain circumstances after a change in control. If severance payments under the current employment10. Business Segment Information
After announcing the terms governing the previously authorized shareholder rights (each a “Right”) to purchase fractional sharesplanned divestiture of our Series A Participating Preferred Stock (“Series A Preferred”) currently attached to eachSolar segment (see Note 4), we conducted an evaluation of our outstanding sharesorganizational structure. Beginning with the second quarter of common stock, par value $0.01 per share. As amended, each Right entitlesfiscal 2019, we made changes to our reportable segments. With the registered holder to purchase from us one one-thousandth of a share of Series A Preferred at an exercise price of $51.60 (the “Exercise Price”), subject to adjustment. The Rights will expire 10 years after issuance and will be exercisable if (a) a person or group becomes the beneficial owner of 15% or moredivesture of our common stock or (b) a person or group commences a tender or exchange offer that would resultAutomation segment in the offeror beneficially owning 15% or morefirst quarter of fiscal 2020, we further evaluated our common stock. The Final Expiration Date (as defined inorganizational structure and concluded that we have two reportable business segments following the Restated Rights Agreement) is December 14, 2018.
Semiconductor
–We design, manufacture, sell and service thermal processing equipment and related controls for use by leading semiconductor manufacturers, and in electronics, automotive and other industries.SiC/LED –
We produce consumables and machinery for lapping (fine abrading) and polishing of materials, such as silicon and silicon carbide substrates, sapphire substrates, optical components,Information concerning our business segments is as follows, in thousands:
|
| Three Months Ended June 30, |
|
| Nine Months Ended June 30, |
| ||||||||||
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| ||||
Net Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Semiconductor |
| $ | 12,357 |
|
| $ | 16,254 |
|
| $ | 41,581 |
|
| $ | 51,267 |
|
SiC/LED |
|
| 2,870 |
|
|
| 3,074 |
|
|
| 8,155 |
|
|
| 9,330 |
|
Non-segment related |
|
| — |
|
|
| 1,675 |
|
|
| 643 |
|
|
| 4,264 |
|
|
| $ | 15,227 |
|
| $ | 21,003 |
|
| $ | 50,379 |
|
| $ | 64,861 |
|
Operating income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Semiconductor |
| $ | 1,058 |
|
| $ | 1,951 |
|
| $ | 3,762 |
|
| $ | 6,428 |
|
SiC/LED |
|
| 241 |
|
|
| 607 |
|
|
| 1,196 |
|
|
| 2,253 |
|
Non-segment related |
|
| (1,268 | ) |
|
| (1,207 | ) |
|
| (4,262 | ) |
|
| (5,418 | ) |
|
| $ | 31 |
|
| $ | 1,351 |
|
| $ | 696 |
|
| $ | 3,263 |
|
|
| June 30, 2020 |
|
| September 30, 2019 |
| ||
Identifiable Assets: |
|
|
|
|
|
|
|
|
Semiconductor |
| $ | 55,374 |
|
| $ | 56,855 |
|
SiC/LED |
|
| 13,337 |
|
|
| 7,779 |
|
Non-segment related* |
|
| 35,345 |
|
|
| 39,088 |
|
Held-for-sale assets** |
|
| — |
|
|
| 22,755 |
|
|
| $ | 104,056 |
|
| $ | 126,477 |
|
* | Non-segment related assets include cash, property and other assets. |
Three Months Ended December 31, | ||||||||
2017 | 2016 | |||||||
Net Revenues: | ||||||||
Solar * | $ | 49,197 | $ | 11,424 | ||||
Semiconductor | 20,891 | 15,703 | ||||||
Polishing | 3,523 | 2,008 | ||||||
$ | 73,611 | $ | 29,135 | |||||
Operating income (loss): | ||||||||
Solar * | $ | 5,352 | $ | (1,023 | ) | |||
Semiconductor | 3,004 | 2,361 | ||||||
Polishing | 1,104 | 464 | ||||||
Non-segment related | (1,694 | ) | (1,982 | ) | ||||
$ | 7,766 | $ | (180 | ) |
** | See Note 4 for additional information on held-for-sale assets. |
December 31, 2017 | September 30, 2017 | ||||||
Identifiable Assets: | |||||||
Solar | $ | 76,794 | $ | 97,999 | |||
Semiconductor | 58,706 | 57,177 | |||||
Polishing | 5,912 | 5,078 | |||||
Non-segment related | 31,701 | 31,369 | |||||
$ | 173,113 | $ | 191,623 |
Goodwill and other assets. long-lived assets
We review our long-lived assets, including goodwill, for impairment at least annually in our fourth quarter or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Additional information on impairment testing of long-lived assets, intangible assets and goodwill can be found in NoteNotes 1 and 10 of our Annual Report on Form 10-K as amended, for the year ended September 30, 2017.
11. Major Customers and Foreign Sales
During the threenine months ended
Our net revenues were tofrom customers in the following geographic regions:
|
| Nine Months Ended June 30, |
| |||||
|
| 2020 |
|
| 2019 |
| ||
United States |
|
| 31 | % |
|
| 36 | % |
Other |
|
| 6 | % |
|
| 5 | % |
Total North America |
|
| 37 | % |
|
| 41 | % |
China |
|
| 25 | % |
|
| 18 | % |
Malaysia |
|
| 4 | % |
|
| 5 | % |
Taiwan |
|
| 15 | % |
|
| 10 | % |
Other |
|
| 7 | % |
|
| 6 | % |
Total Asia |
|
| 51 | % |
|
| 39 | % |
Germany |
|
| 3 | % |
|
| 9 | % |
Other |
|
| 9 | % |
|
| 11 | % |
Total Europe |
|
| 12 | % |
|
| 20 | % |
|
|
| 100 | % |
|
| 100 | % |
Three Months Ended December 31, | |||||
2017 | 2016 | ||||
United States | 7 | % | 18 | % | |
Other | 2 | % | 2 | % | |
Total North America | 9 | % | 20 | % | |
China | 71 | % | 26 | % | |
Malaysia | 3 | % | 17 | % | |
Taiwan | 2 | % | 12 | % | |
Other | 3 | % | 6 | % | |
Total Asia | 79 | % | 61 | % | |
Germany | 6 | % | 5 | % | |
Other | 6 | % | 14 | % | |
Total Europe | 12 | % | 19 | % | |
100 | % | 100 | % |
Item 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and the related notes included in Item 1, “Condensed Consolidated Financial Statements” in Item 1 of this Quarterly Report on Form 10-Q (“Quarterly Report”) and our consolidated financial statements and related notes included in Item 8, “Financial Statements and Supplementary Data” in our Annual Report on Form 10-K as amended, for the fiscal year ended September 30, 2017.
Overview
We cannot guarantee that any forward-looking statement will be realized, although we believe that the expectations reflected in the forward-looking statements are reasonable as of the date of this Quarterly Report. Achievement of future results is subject to events out of our control, risks, uncertainties and potentially inaccurate assumptions. The Annual Report on Form 10-K, as amended, that we filed with the Securities and Exchange Commission for the year-ended September 30, 2017 listed various important factors that could affect Amtech’s future operating results and financial condition and could cause actual results to differ materially from historical results and expectations based on forward-looking statements made in this document or elsewhere by Amtech or on its behalf. These factors can be found under the heading “Item 1A. Risk Factors” in the Annual Report on Form 10-K, as amended, and investors should refer to them as well as the additional risk factors identified in this Quarterly Report. Because it is not possible to predict or identify all such factors, any such list cannot be considered a complete set of all potential risks or uncertainties. Except as required by law, we undertake no obligation to publicly update forward-looking statements, whether as a result of new information, future events, or otherwise.
We operate in two reportable business segments, based primarily on the solar photovoltaic industry.industry they serve: (i) Semiconductor, and (ii) SiC/LED. In our Semiconductor segment, we supply thermal processing equipment, including solder reflow equipmentovens, diffusion furnaces, and related controls and diffusioncustom high-temp belt furnaces for use by leading semiconductor manufacturers, and in electronics assembly for automotive and other industries.manufacturers. In our PolishingSiC/LED segment, we produce substrate consumables and machinery for lapping (fine abrading) and polishing of materials, such as sapphire substrates, optical components, silicon wafers numerous types of crystalline materials, ceramicsfor semiconductor products, sapphire wafers for LED applications, and metal components.
Our semiconductor customers are primarily manufacturers of integrated circuits, optoelectronics, sensors and discrete (O-S-D) components used in analog, power and radio frequency (RF) devices and photovoltaic solar cells and integrated circuits.cells. The solar cell and semiconductor industries areindustry is cyclical and historically havehas experienced significant fluctuations. Our revenue is impacted by these broad industry trends. Although semiconductor demand for our products may have reached its cyclical peak in our fiscal year ended September 30, 2018, we believe that continued technological advances and emerging industries, such as silicon carbide power devices, will sustain our long-term performance.
COVID-19
On January 30, 2020, the World Health Organization declared an outbreak of a highly contagious form of an upper respiratory infection caused by COVID-19, a novel coronavirus strain commonly referred to as “coronavirus”. In March 2020, the outbreak of COVID-19 was recognized as a pandemic by the World Health Organization, and the outbreak has become increasingly widespread, including in all of the markets in which we operate. The solar cell industryCOVID-19 outbreak has experiencedhad a structural imbalance betweennotable impact on general economic conditions, including but not limited to the temporary closures of many businesses; "shelter in place" and other governmental regulations; and reduced spending due to both job losses and other effects attributable to COVID-19. As noted below, as a key supplier to essential businesses, we have continued to supply our products and demand.services to those businesses deemed essential businesses in the states in which we operate. However, our business is subject to the general health of the economy and federal and local guidelines and restrictions have significantly curtailed the level of economic activity in affected areas, which include the areas in which we conduct our business.
As we navigate the challenges presented by COVID-19, our first priority is the safety and well-being of our employees. We began experiencing challenges relating to the COVID-19 virus early-on in calendar year 2020, when our Shanghai facility remained closed beyond the normal Chinese New Year holiday. This imbalance hasfacility reopened in early March and, in a safe and phased approach, we ramped up production while following the Chinese government’s requirements for personal protective equipment (PPE), cleaning of the facility, and social distancing, among other measures. As of the date of this Quarterly Report, our Shanghai production levels have returned to near-capacity. Additionally, we continue to closely monitor our supply chain and have increased competitive pressureour safety stock for certain key parts.
Our domestic manufacturing facilities are located in Billerica, Massachusetts and Carlisle, Pennsylvania. In early March, we began implementing work-from-home options for all of our U.S. office personnel, including our corporate staff in Tempe, Arizona. Later in March, the governors of Massachusetts, Pennsylvania and Arizona issued stay-at-home orders for employers that do not provide essential services. With the assistance of legal counsel, we determined that as key suppliers to essential businesses, we could stay open, however we balanced this result with the health and safety of our employees. In Massachusetts, which had a high number of COVID-19 infections, we continued to work on selling pricesa very limited basis and negatively impactedhave gradually increased factory personnel in a safe and phased approach. In Pennsylvania, our direct laborers are working in multiple shifts to decrease the number of employees in the building at any given time. In both facilities, we are providing masks, extra facility cleanings and practicing social distancing. We continue to closely monitor our supply chain for our U.S. operations.
Although we do not yet know the full duration and extent the impact of COVID-19 will have on our operations, we currently expect the negative impact to be a temporary trend. We have implemented procedures to maximize our ability to continue to provide products and services to our customers and to mitigate the effect of the downturn on our results of operations. Our high throughput equipment platforms, technologiesoperations, including minimizing costs where appropriate. There remain many unknowns and we continue to monitor the expected trends and related demand for higher cell efficiency, greater knowledge of the complete cell manufacturing processour products and advanced automationservices and have contributed significantly to our success in securing the large orders for the first two phases of a multi-phase turnkey project announced in January and April of 2017 from a new solar cell manufacturer in China. For equipment orders that are not part of turnkey projects, we compete with Chinese equipment manufacturers that offer lower prices coupled with liberal payment terms. We are finding it more difficult to participate in the capacity expansions of those Chinese companies that already have significant experience with all facets of producing solar cells and at least some prior experience working with the local equipment vendors. While we will continue to adjust our operations accordingly. Please see additional information in “Item 1a. Risk Factors”.
Amtech has a strong financial position with $46.4 million in cash and cash equivalents as of June 30, 2020 and $5.3 million of mortgage-related debt. In addition, while we did not utilize the Paycheck Protection Program (PPP) loan provision of the recently passed Coronavirus Aid, Relief, and Economic Security (CARES) Act, we are pursuing other relief options available to us, such as deferring social security tax payments, payroll tax credits, and utilizing certain changes in tax loss carryback rules to receive refunds for prior tax years. We are reviewing and implementing actions to reduce cash outlays and expenses. As a result of these efforts and our strong balance sheet, we believe we have enough cash to sustain us for at least the next twelve months. However, if the recovery takes longer than expected, we believe we have the ability to make additional adjustments as needed.
Solar and Automation Divestitures
On April 3, 2019, we announced that our Board of Directors (the “Board”) determined that it was in the long-term best interest of the Company to exit the solar business segment and focus our strategic efforts on developing advanced productsour semiconductor and technologies,silicon carbide/polishing business segments in order to more fully realize the opportunities the Company believes are presented in those areas. We completed the sale of our solar subsidiaries, SoLayTec and Tempress, on June 7, 2019, and January 22, 2020, respectively. Additionally, on December 13, 2019, we completed the sale of our automation division, R2D, to certain members of R2D’s management team.
Strategy
As we pivot from our solar business and refocus on our Semiconductor and SiC/LED businesses, we have focused on our plans to profitably grow our business and have developed a strategic growth plan and a capital allocation plan that we believe will support our growth objectives. Our strategic growth plan calls for profitable growth as the semi industry recovers, with the following areas of focus:
• | Emerging opportunities in the SiC industry – We believe we are well-positioned to take part in this significant growth area. We are working closely with our customers to understand their SiC growth plans and opportunities. We are investing in our capacity, next generation product development, and investing in our people. We believe these investments will help fuel our growth in the SiC industry. |
• | 300 mm Silicon Horizontal Thermal Reactor – We have a highly successful and proven 300 mm solution for growing power semiconductor applications. Moreover, we have a strong foundation with a key customer, and, in the second half of fiscal 2019, we announced an order to another industry-leading manufacturer. In February 2020, we announced an order for our fully automated SEMI compliant 300mm clustered HTR diffusion furnace from top-tier global power semiconductor customer in Asia. We believe we have a strong opportunity to expand our customer base and future revenue growth. |
• | As a major revenue contributor, our subsidiary, BTU International, Inc. (BTU), tracks semi industry growth for our semi-packaging and SMT products, and we expect this trend to continue. We believe that through investments in product innovation, BTU is also positioned for future growth. |
We project that the required investments to achieve our revenue growth targets will be in the range of $6.0 - $8.0 million in research and development and capital expenditures. We may also need to make investments in other areas of our business, such as IT systems and capacity expansions at our existing facilities. Additionally, as a capital equipment manufacturer, we will need working capital to support and fuel our future growth. We are and will continue to closely scrutinize these planned investments, in light of the COVID-19 challenges, and we may defer some of our projects. However, we intend to continue to invest in our business to support and fuel our future growth.
In addition to these investments in our organic growth, another key aspect of our capital allocation policy is our plan to seek further cost reductionsgrow through acquisitions. We have the skillset and track record to addressidentify strong acquisition targets in the competition from Chinese equipment vendors.
Segment Reporting Changes
After announcing the planned divestiture of our Solar segment, we conducted an evaluation of our organizational structure. Beginning with the second quarter of fiscal 2019, we made changes to our reportable segments. With the divestiture of our Automation segment in the first quarter of fiscal 2018. Our quarterly2020, we further evaluated our organization structure and annual operating resultsconcluded that we have two reportable business segments following the divestiture. Prior period amounts have been and will continuerevised to be impacted byconform to the timing of large system orders. Further, the solar and semiconductor equipment industries are highly cyclical and the conditions of the industries we operate in are volatile. Therefore, our order flow fluctuates quarter to quarter. For additional information regarding the risks related to our business and industry, please refer to Item 1A. Risk Factors in our Annual Report on Form 10-K, as amended, for the fiscal year ended September 30, 2017.
Results of Operations
The following table sets forth certain operational data as a percentage of net revenue for the periods indicated:
|
| Three Months Ended June 30, |
|
| Nine Months Ended June 30, |
| ||||||||||
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| ||||
Net revenue |
|
| 100 | % |
|
| 100 | % |
|
| 100 | % |
|
| 100 | % |
Cost of sales |
|
| 61 | % |
|
| 63 | % |
|
| 61 | % |
|
| 62 | % |
Gross margin |
|
| 39 | % |
|
| 37 | % |
|
| 39 | % |
|
| 38 | % |
Selling, general and administrative |
|
| 32 | % |
|
| 27 | % |
|
| 32 | % |
|
| 28 | % |
Research, development and engineering |
|
| 6 | % |
|
| 4 | % |
|
| 5 | % |
|
| 4 | % |
Restructuring charges |
|
| 1 | % |
|
| — | % |
|
| 1 | % |
|
| 1 | % |
Operating income |
|
| — | % |
|
| 6 | % |
|
| 1 | % |
|
| 5 | % |
Loss on sale of subsidiary |
|
| — | % |
|
| — | % |
|
| (5 | )% |
|
| — | % |
Interest income and other, net |
|
| — | % |
|
| 2 | % |
|
| 1 | % |
|
| 1 | % |
Income (loss) from continuing operations before income taxes |
|
| — | % |
|
| 8 | % |
|
| (3 | )% |
|
| 6 | % |
Income tax provision |
|
| 1 | % |
|
| 4 | % |
|
| 1 | % |
|
| 3 | % |
(Loss) income from continuing operations, net of tax |
|
| (1 | )% |
|
| 4 | % |
|
| (4 | )% |
|
| 3 | % |
Income (loss) from discontinued operations, net of tax |
|
| — | % |
|
| 6 | % |
|
| (23 | )% |
|
| (12 | )% |
Net (loss) income |
|
| (1 | )% |
|
| 10 | % |
|
| (27 | )% |
|
| (9 | )% |
Three Months Ended | ||||||
December 31, 2017 | December 31, 2016 | |||||
Net revenue | 100 | % | 100 | % | ||
Cost of sales | 72 | % | 71 | % | ||
Gross margin | 28 | % | 29 | % | ||
Selling, general and administrative | 14 | % | 24 | % | ||
Research, development and engineering | 3 | % | 6 | % | ||
Operating income (loss) | 11 | % | (1 | )% | ||
Gain on sale of other assets | 0 | % | 0 | % | ||
Income (loss) from equity method investment | 0 | % | 0 | % | ||
Interest expense and other income, net | 0 | % | 0 | % | ||
Income (loss) before income taxes | 11 | % | (1 | )% | ||
Income taxes provision | 2 | % | 0 | % | ||
Net income (loss) | 9 | % | (1 | )% | ||
Add: net loss attributable to noncontrolling interest | 0 | % | 1 | % | ||
Net income (loss) attributable to Amtech Systems, Inc. | 9 | % | 0 | % | ||
In the second quarter of 2019, we began the process to divest our solar business. As such, we have classified portions of the Solar segment as held for sale in our Condensed Consolidated Balance Sheets and reported its results as discontinued operations in our Condensed Consolidated Statements of Operations for all periods presented.
Net Revenue
Net revenue consists of revenue recognized upon shipment or installation of equipment, with the exception of products using new technology, for which revenue is recognized upon customer acceptance. Spare parts sales are recognized upon shipment and service revenue is recognized upon completion of the service activity, which is generally ratable over the term of the service contract. Since the majority of our revenue is generated from large system sales, revenue and operating income can be significantly impacted by the timing of system shipments and recognition of revenue based on customersystem acceptances. The revenue of business units included in the Solar segment include some sales of equipment and parts to the semiconductor, silicon wafer and microelectromechanical (“MEMS”) industries, comprising less than 25% of the Solar segment revenue.
Our net revenue by operating segment was as follows (dollars in thousands):
|
| Three Months Ended June 30, |
|
|
|
|
|
|
|
|
|
| Nine Months Ended June 30, |
|
|
|
|
|
|
|
|
| ||||||||||
Segment |
| 2020 |
|
| 2019 |
|
| Incr (Decr) |
|
| % Change |
|
| 2020 |
|
| 2019 |
|
| Incr (Decr) |
|
| % Change |
| ||||||||
Semiconductor |
| $ | 12,357 |
|
| $ | 16,254 |
|
| $ | (3,897 | ) |
|
| (24 | )% |
| $ | 41,581 |
|
| $ | 51,267 |
|
| $ | (9,686 | ) |
|
| (19 | )% |
SiC/LED |
|
| 2,870 |
|
|
| 3,074 |
|
| $ | (204 | ) |
|
| (7 | )% |
|
| 8,155 |
|
|
| 9,330 |
|
|
| (1,175 | ) |
|
| (13 | )% |
Non-segment related |
|
| — |
|
|
| 1,675 |
|
|
| (1,675 | ) |
|
| (100 | )% |
|
| 643 |
|
|
| 4,264 |
|
|
| (3,621 | ) |
|
| (85 | )% |
Total net revenue |
| $ | 15,227 |
|
| $ | 21,003 |
|
| $ | (5,776 | ) |
|
| (28 | )% |
| $ | 50,379 |
|
| $ | 64,861 |
|
| $ | (14,482 | ) |
|
| (22 | )% |
Three Months Ended December 31, | ||||||||||||||
Segment | 2017 | 2016 | Incr (Decr) | % Change | ||||||||||
Solar | $ | 49,197 | $ | 11,424 | $ | 37,773 | 331% | |||||||
Semiconductor | 20,891 | 15,703 | 5,188 | 33% | ||||||||||
Polishing | 3,523 | 2,008 | 1,515 | 75% | ||||||||||
Total net revenue | $ | 73,611 | $ | 29,135 | $ | 44,476 | 153% |
Total net revenue for the quarters ended December 31, 2017June 30, 2020 and 20162019 was $73.6$15.2 million and $29.1$21.0 million, respectively, an increasea decrease of $44.5approximately $5.8 million or 153%28%. Revenue fromOur semiconductor segment revenues are dependent on our customers’ expansions, and our results have been negatively impacted by the Solar segment increased 331%uncertainty in the global economy due primarily to the impact of the COVID-19 virus, as well as lingering trade tensions between the U.S. and China. Our SiC/LED revenues were less impacted in this fiscal quarter compared to the prior year quarter, due primarilyas our consumable sales remained stable. We believe the impact from the COVID-19 virus in both our China and U.S. locations are temporary trends, as we have experienced a return to near-capacity in our China factory during the third fiscal quarter of 2020, however we also believe that we will continue to experience some level of volatility in our bookings and shipments relating to Phase IIas various states and countries experience resurgences of the turnkey order, previously announcedvirus. We also believe that there remains significant potential in April 2017.the SiC industry and long-term growth in power semiconductor. Non-segment related revenues relate to R2D, the automation division that we divested in December 2019.
Total net revenue for the nine months ended June 30, 2020 and 2019 was $50.4 million and $64.9 million, respectively, a decrease of approximately $14.5 million or 22%. Revenue from the Semiconductor segment increased 33%decreased $9.7 million compared to the prior year quarterperiod. This change is primarily due primarily to strong customer demand forCOVID-19 effects on our thermal processing systemscustomers and diffusion furnaces.the global economy, as discussed above. Revenue from the Polishingour SiC/LED segment increased 75%decreased $1.2 million compared to the prior year quarterperiod due primarily to strong customer demand leading to increased sales of polishing templateslower machine shipments resulting from COVID-19 effects discussed above and equipment.
Backlog and Orders
For comparison purposes, we have removed the Automation segment, which was sold effective December 13, 2019, from the tables below.
Our backlog as of December 31, 2017June 30, 2020 and 20162019 was $65.9 million and $51.5 million, respectively, an increase of $14.4 million or 28%. Our backlog as of December 31, 2017 includes approximately $39.3 million of orders and deferred revenue from our Solar segment customers compared to $35.8 million at December 31, 2016. follows (dollars in thousands):
|
| June 30, |
|
|
|
|
|
|
|
|
| |||||
Segment |
| 2020 |
|
| 2019 |
|
| Incr (Decr) |
|
| % Change |
| ||||
Semiconductor |
| $ | 13,798 |
|
| $ | 13,931 |
|
| $ | (133 | ) |
|
| (1 | )% |
SiC/LED |
|
| 1,423 |
|
|
| 2,934 |
|
|
| (1,511 | ) |
|
| (51 | )% |
Total backlog |
| $ | 15,221 |
|
| $ | 16,865 |
|
| $ | (1,644 | ) |
|
| (10 | )% |
New orders booked in the quarterthree and nine months ended December 31, 2017June 30, 2020 and 2019 were $37.3 million ($7.3 million Solar) compared to $34.7 million ($15.9 million Solar) of customer ordersas follows (dollars in the quarter ended December 31, 2016. The backlog of business units included in the Solar segment include some sales of equipment and parts to the semiconductor, silicon wafer and MEMS industries, comprising less than 25% of the Solar segment backlog.thousands):
|
| Three Months Ended June 30, |
|
|
|
|
|
|
|
|
|
| Nine Months Ended June 30, |
|
|
|
|
|
|
|
|
| ||||||||||
Segment |
| 2020 |
|
| 2019 |
|
| Incr (Decr) |
|
| % Change |
|
| 2020 |
|
| 2019 |
|
| Incr (Decr) |
|
| % Change |
| ||||||||
Semiconductor |
| $ | 8,356 |
|
| $ | 12,899 |
|
| $ | (4,543 | ) |
|
| (35 | )% |
| $ | 40,469 |
|
| $ | 44,462 |
|
| $ | (3,993 | ) |
|
| (9 | )% |
SiC/LED |
|
| 2,474 |
|
|
| 2,697 |
|
|
| (223 | ) |
|
| (8 | )% |
|
| 8,612 |
|
|
| 9,574 |
|
|
| (962 | ) |
|
| (10 | )% |
Total new orders |
| $ | 10,830 |
|
| $ | 15,596 |
|
| $ | (4,766 | ) |
|
| (31 | )% |
| $ | 49,081 |
|
| $ | 54,036 |
|
| $ | (4,955 | ) |
|
| (9 | )% |
As of December 31, 2017, two customersJune 30, 2020, one Semiconductor customer individually accounted for 19% andof our backlog. No other customer accounted for more than 10% of our backlog.backlog as of June 30, 2020. The orders included in our backlog are generally credit approved customer purchase orders believed to be firm and are generally expected to ship within the next twelve months. Because our orders are typically subject to cancellation or delay by the customer, our backlog at any particular point in time is not necessarily representative of actual sales for succeeding periods, nor is backlog any assurance that we will realize profit from completing these orders. Our backlog also includes revenue deferred pursuant to our revenue recognition policy, derived from orders that have already been shipped, but which have not met the criteria for revenue recognition.
Gross Profit and Gross Margin
Gross profit is the difference between net revenue and cost of goods sold. Cost of goods sold consists of purchased material, labor and overhead to manufacture equipment and spare parts and the cost of service and support to customers for installation, warranty and paid service calls. Gross margin is gross profit as a percent of net revenue. Our gross profit and gross margin by operating segment were as follows (dollars in thousands):
|
| Three Months Ended June 30, |
|
| Nine Months Ended June 30, |
| ||||||||||||||||||||||||||||||||||
Segment |
| 2020 |
|
| Gross Margin |
|
| 2019 |
|
| Gross Margin |
|
| Incr (Decr) |
|
| 2020 |
|
| Gross Margin |
|
| 2019 |
|
| Gross Margin |
|
| Incr (Decr) |
| ||||||||||
Semiconductor |
| $ | 4,953 |
|
|
| 40 | % |
| $ | 6,566 |
|
|
| 40 | % |
| $ | (1,613 | ) |
| $ | 16,552 |
|
|
| 40 | % |
| $ | 20,499 |
|
|
| 40 | % |
| $ | (3,947 | ) |
SiC/LED |
|
| 998 |
|
|
| 35 | % |
|
| 1,038 |
|
|
| 34 | % |
|
| (40 | ) |
|
| 2,922 |
|
|
| 36 | % |
|
| 3,524 |
|
|
| 38 | % |
|
| (602 | ) |
Non-segment related |
|
| — |
|
|
| — | % |
|
| 246 |
|
|
| 15 | % |
|
| (246 | ) |
|
| 9 |
|
|
| 1 | % |
|
| 774 |
|
|
| 18 | % |
|
| (765 | ) |
Total gross profit |
| $ | 5,951 |
|
|
| 39 | % |
| $ | 7,850 |
|
|
| 37 | % |
| $ | (1,899 | ) |
| $ | 19,483 |
|
|
| 39 | % |
| $ | 24,797 |
|
|
| 38 | % |
| $ | (5,314 | ) |
Three Months Ended December 31, | ||||||||||||||||
Segment | 2017 | Gross Margin | 2016 | Gross Margin | Incr (Decr) | |||||||||||
Solar | $ | 11,313 | 23% | $ | 1,611 | 14% | $ | 9,702 | ||||||||
Semiconductor | 7,488 | 36% | 6,095 | 39% | 1,393 | |||||||||||
Polishing | 1,536 | 44% | 737 | 37% | 799 | |||||||||||
Total gross profit | $ | 20,337 | 28% | $ | 8,443 | 29% | $ | 11,894 |
Gross profit for the three months ended December 31, 2017June 30, 2020 and 20162019 was $20.3$6.0 million (28%(39% of net revenue) and $8.4$7.9 million (29%(37% of net revenue), respectively, an increasea decrease of $11.9$1.9 million. Our gross margins can be affected by capacity utilization and the type and volume of machines and consumables sold each quarter. Gross margin on products from our Semiconductor segment was flat on lower revenues compared to the three months ended June 30, 2019, due primarily to favorable product mix. Gross margin on products from our SiC/LED segment increased slightly on less revenue compared to the three months ended June 30, 2019, due primarily to a mix of higher margin consumable sales and less machine sales.
Gross profit for the nine months ended June 30, 2020 and 2019 was $19.5 million (39% of net revenue) and $24.8 million (38% of net revenue), respectively, a decrease of $5.3 million. Gross margin on products from our SolarSemiconductor segment increasedwas flat on lower revenue compared to the threenine months ended December 31, 2016,June 30, 2019, due primarily to higher sales volumes of higher-margin products compared to the first quarter of fiscal 2017. Gross profit on products from our Semiconductor segment increased due to increased sales volume in the first quarter of 2018, with grossour higher margin decreasing due to product mix.products. Gross profit and gross margin on products from our PolishingSiC/LED segment increased fromdecreased slightly compared to the prior year period, primarily due to higher sales of new products with higher margins. For the threenine months ended December 31, 2017, we deferred gross profit of $2.1 million. For the three months ended December 31, 2016, we recognized previously-deferred gross profit of $0.3 million.
Selling, General and Administrative
Selling, general and administrative expenses (“SG&A”) consists of the cost of employees, consultants and contractors, facility costs, sales commissions, shipping costs, promotional marketing expenses, legal and accounting expenses and bad debt expense.
SG&A expenses for the three months ended December 31, 2017June 30, 2020 and 20162019 were $10.6$4.8 million and $7.0$5.7 million, respectively. SG&A increaseddecreased compared to the prior year quarter due primarily to $1.8payroll tax credits that were part of the CARES Act, no longer having R2D SG&A included in our results, and lower travel due to the COVID-19 pandemic.
SG&A expenses for the nine months ended June 30, 2020 and 2019 were $16.1 million and $18.1 million, respectively. SG&A decreased compared to the prior year period due primarily to lower commissions and freight on lower sales, no longer having R2D SG&A included in our results, lower commissions and freight on lower sales, payroll tax credits that were part of higher commissions, freightthe CARES Act, and other selling expenses relatedlower travel due to increased revenue. Also, forthe COVID-19 pandemic.
Restructuring Charges
We recorded restructuring charges of $217,000 in the three months ended December 31, 2016, SG&A expensesJune 30, 2020. These one-time charges were reduced by the collectionsresult of previously reserved accounts receivablestaff reductions at our Massachusetts operations as we evaluated staffing across our Semiconductor operations. We recorded restructuring charges of approximately $1.0 million.
Research, Development and Engineering
Research, development and engineering (“RD&E”) expenses consist of the cost of employees, consultants and contractors who design, engineer and develop new products and processes as well as materials and supplies used in producing prototypes. We receive reimbursements through governmental research and development grants which are netted against these expenses when certain conditions have been met.
RD&E expense, net of grants earned, for the three months ended December 31, 2017June 30, 2020 and 20162019 were $2.0$0.9 million and $1.6$0.7 million, respectively, an increase of $0.4and $2.4 million and $2.3 million in the nine months ended June 30, 2020 and 2019, respectively. These increases are due primarily to increased R&D spending in fiscal 2020 related to the development of new products at our SolarSiC/LED segment and product improvement projects at our Semiconductor segment.
Income Taxes
For the three months ended December 31, 2017June 30, 2020 and 2019, we recorded income tax expense at our continuing operations of $0.1 million and $0.7 million, respectively. For the nine months ended June 30, 2020 and 2019, we recorded income tax expense of $1.2$0.3 million resulting in an effective tax rate of 16.1%. Forand $1.6 million, respectively. In the three months ended December 31, 2016June 30, 2019, we recorded an income tax expensebenefit of $0.1$1.3 million a 37.5% effectivein our discontinued operations. In the nine months ended June 30, 2020 and 2019, we recorded an income tax rate.benefit of $47,000 and $1.2 million, respectively, in our discontinued operations. The tax benefit in the prior year is due to the tax treatment relating to the sale of SoLayTec. The income tax provisions are based upon estimates of annual income, annual permanent differences and statutory tax rates in the various jurisdictions in which we operate, except that certain loss jurisdictions and discrete items are treated separately.
Generally accepted accounting principles require that a valuation allowance be established when it is “more likely than not” that all or a portion of deferred tax assets will not be realized. A review of all available positive and negative evidence needs to be considered, including a company’s performance, the market environment in which the company operates and the length of carryback and carryforward periods. According to those principles, it is difficult to conclude that a valuation allowance is not needed when the negative evidence includes cumulative losses in recent years. Therefore, in fiscal 2017, cumulative losses weighed heavily in
Our future effective income tax rate depends on various factors, such as the amount of income (loss) in each tax jurisdiction, tax regulations governing each region, non-tax deductible expenses incurred as a discrete itempercent of pre-tax income and the effectiveness of our tax planning strategies.
Discontinued Operations
As disclosed previously in the quarter.
Liquidity and Capital Resources
The increasefollowing table sets forth for the periods presented certain consolidated cash flow information (in thousands):
|
| Nine Months Ended June 30, |
| |||||
|
| 2020 |
|
| 2019 |
| ||
Net cash (used in) provided by operating activities |
| $ | (990 | ) |
| $ | 421 |
|
Net cash used in investing activities |
|
| (10,800 | ) |
|
| (1,664 | ) |
Net cash used in financing activities |
|
| (1,486 | ) |
|
| (96 | ) |
Effect of exchange rate changes on cash |
|
| 578 |
|
|
| (1,450 | ) |
Net decrease in cash, cash equivalents and restricted cash |
|
| (12,698 | ) |
|
| (2,789 | ) |
Cash, cash equivalents and restricted cash, beginning of period* |
|
| 59,134 |
|
|
| 62,496 |
|
Cash, cash equivalents and restricted cash, end of period* |
| $ | 46,436 |
|
| $ | 59,707 |
|
* | Includes Cash, Cash Equivalents and Restricted Cash that are included in Held-For-Sale Assets on the Condensed Consolidated Balance Sheets for periods prior to January 22, 2020. |
Cash and Cash Flow
The decrease in cash, cash equivalents and restricted cash during the first threenine months of fiscal 20182020 of $1.6$12.7 million was primarily due to proceeds from the exercisenet cash disposed of in divestitures and cash used for stock options.repurchases. We maintain a portion of our cash, and cash equivalents in Euros at our Dutch and French operations andrestricted cash in RMB inat our Chinese operations; therefore, changes in the exchange raterates have an impact on our cash balances. Restricted cash decreasedOur working capital was $70.8 million as of June 30, 2020 and $77.6 million as of September 30, 2019. The decrease in our working capital occurred primarily due to the shipmentsdivesture of Phase II of the Solar turnkey order, which released the restrictions on the downpayment.our held-for-sale assets and liabilities. Our ratio of current assets to current liabilities was 2.3:8.2:1 as of December 31, 2017,June 30, 2020, and 1.8:3.5:1 as of September 30, 2017.
The success of our growth strategy is dependent upon the availability of additional capital resources on terms satisfactory to management. Our sources of capital in the past have included the sale of equity securities, which includes common stock sold in private transactions and public offerings, long-term debt and customer deposits. There can be no assurance that we can raise such additional capital resources when needed or on satisfactory terms. We believe that our principal sources of liquidity discussed above are sufficient to support operations for at least the next twelve months. We have never paid dividends on our common stock.
Cash Flows from Operating Activities
Cash provided byused in our operating activities was $0.3approximately $1.0 million for the threenine months ended December 31, 2017,June 30, 2020, compared to $3.5cash provided by operating activities of $0.4 million used in operations for the threenine months ended December 31, 2016, an improvementJune 30, 2019, a decline of $3.8approximately $1.4 million. During the threenine months ended December 31, 2017, cash was primarily generated throughJune 30, 2020, net incomeloss adjusted for non-cash items of $7.4$2.5 million which was offset by other increases and decreases$3.5 million of cash used in operations as a result of changes in operating assets primarily related to the turnkey project. A significant portion of the revenue and related cash payments related to the turnkey project are deferred and restricted, respectively, until completion of the integration of the equipment and transfer of the technology.liabilities. During the threenine months ended December 31, 2016, cash was reduced by increasesJune 30, 2020, we increased our inventory balances to mitigate risks in accounts receivable and restricted cash, offset by decreasesour supply chain resulting from the COVID-19 pandemic, as well as in inventory.
Cash Flows from Investing Activities
For the nine months ended June 30, 2020 and 2019, cash used in investing activities was $10.8 million compared to $1.7 million in the prior year period. The fiscal 2020 amount reflects the divestiture of our solar business as well as approximately $0.9 million of capital expenditures. We expect capital expenditures to increase in the fourth quarter of fiscal 2020 as we complete the relocation of our SiC/LED business.
Cash Flows from Financing Activities
For the nine months ended June 30, 2020, $1.5 million of cash used in financing activities was comprised of $1.2approximately $0.8 million of proceeds received from the exercise of stock options, partiallywhich was fully offset by $2.0 million used for stock repurchases and payments on long-term debt of $0.1$0.3 million. For the threenine months ended December 31, 2016,June 30, 2019, $0.1 million of cash used in financing activities was primarily related tocomprised of $0.2 of proceeds received from the exercise of stock options, which was fully offset by payments on long-term debt of $0.2 million net of borrowings of less than $0.1$0.3 million.
Off-Balance Sheet Arrangements
As of December 31, 2017,June 30, 2020, we had no off-balance sheet arrangements as defined in Item 303(a)(4) of Regulation S-K promulgated by the Securities and Exchange CommissionSEC that have or are reasonably likely to have a current or future effect on financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.
Contractual Obligations
Unrecorded purchase obligations at our continuing operations were $26.4$4.8 million as of December 31, 2017,June 30, 2020, compared to $34.4$4.4 million as of September 30, 2017, a decrease2019, an increase of $8.0 million due primarily$0.4 million.
There were no other material changes to reduced vendor commitments as we complete the first two phases of the large solar project. Approximately $5.2 million of the December 31, 2017 and $11.8 million of the September 30, 2017 contractual obligations were prepaid as of those datesincluded in the form of advances to vendors.
Critical Accounting Policies
Part I, Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Quarterly Report discusses our condensed consolidated financial statements that have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amount of assets and liabilities at the date of the condensed consolidated financial statements, the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period.
On an ongoing basis, we evaluate our estimates and judgments, including those related to revenue recognition, inventory valuation, accounts and notes receivable collectability, warranty and impairment of long-lived assets. We base our estimates and judgments on historical experience and on various other factors that we believe to be reasonable under the circumstances. The results of these estimates and judgments form the basis for making conclusions about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
A critical accounting policy is one that is both important to the presentation of our financial position and results of operations, and requires management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. These uncertainties are discussed in Part I, Item 1A of our Annual Report on Form 10-K as amended, for the year ended September 30, 2017.2019. We believe our critical accounting policies relate to the more significant judgments and estimates used in the preparation of our consolidated financial statements.
We believe the critical accounting policies discussed in the section entitled “Item 7:7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies” in our Annual Report on Form 10-K as amended, for the fiscal year ended September 30, 20172019 represent the most significant judgments and estimates used in the preparation of our consolidated financial statements. ThereOther than the Leases policy change disclosed in Note 3 hereto, there have been no significant changes in our critical accounting policies during the threenine months ended December 31, 2017.
Impact of Recently Issued Accounting Pronouncements
For discussion of the impact of recently issued accounting pronouncements, see “Part I, Item 1:1. Financial Information” under “Impact of Recently Issued Accounting Pronouncements.”
Item 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
As a smaller reporting company, as defined by Rule 12b-2 of the Exchange Act and in our reported market risks, as described in “QuantitativeItem 10(f)(1) of Regulation S-K, we are electing scaled disclosure reporting obligations and, Qualitative Disclosures About Market Risk” in Part II, Item 7A of our Annual Report on Form 10-K, as amended, fortherefore, are not required to provide the year ended September 30, 2017.
Item 4. | CONTROLS AND PROCEDURES |
Disclosure Controls and Procedures
Our management, including theour Chief Executive Officer (“CEO”) and theour Chief Financial Officer (“CFO”), has carried out an evaluation of the effectiveness of our disclosure controls and procedures as of December 31, 2017,June 30, 2020, pursuant to Exchange Act Rules 13a-15(e) and 15(d)-15(e). Disclosure controls and procedures means controls and other procedures that are designed to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’sSEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to management, including the principal executive and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. Based upon that evaluation, our CEO and CFO have concluded that as of such date, our disclosure controls and procedures in place were effective.
Changes in Internal Control Over Financial Reporting
There were nohave not been any changes in Amtech’sthe Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the three months ended December 31, 2017third fiscal quarter to which this report relates that has materially affected, or isare reasonably likely to materially affect, itsthe internal control over financial reporting.
PART II. OTHER INFORMATION
Item 1. | Legal Proceedings |
For discussion of legal proceedings, see Note 9 to our condensed consolidated financial statements under “Part I, Item 1:1. Financial Information” under “Commitments and Contingencies.”
Item 1A. | Risk Factors |
We refer you to documents filed by us with the other information set forthSEC, specifically “Item 1A. Risk Factors” in this Quarterly Report, you should carefully consider the factors discussed in Part I, Item 1A “Risk Factors” of our Annual Report on Form 10-K as amended, for the fiscal year ended September 30, 2017. There2019 (the “2019 Form 10-K”), as updated by the information disclosed in “Part II, Item 1A. Risk Factors” in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 (the “Second Quarter Form 10-Q”), each of which identify important risk factors that could materially affect our business, financial condition and future results. We also refer you to the factors and cautionary language set forth in the section entitled “Cautionary Statements Regarding Forward-Looking Statements” immediately preceding “Item 1. Condensed Consolidated Financial Statements” of this Quarterly Report on Form 10-Q. This Quarterly Report on Form 10-Q, including the accompanying condensed consolidated financial statements and related notes, should be read in conjunction with such risks and other factors for a full understanding of our operations and financial condition. The risks described in our 2019 Form 10-K, the Second Quarter Form 10-Q and herein are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or operating results.
We have updated our existing risk factors to add the following risk factors related to recent developments. Except for the update set forth below, there have been no material changes to thein our risk factors previouslyfrom those disclosed in our 2019 Form 10-K, as amended,updated in our Second Quarter Form 10-Q.
Business interruptions, including those related to the novel strain of coronavirus (COVID-19), have had and continue to have an adverse impact on our operations, including among others, our manufacturing and supply chain, sales and product development and could have an adverse impact on our business, financial condition and results of operations in future quarterly periods.
In our Form 10-Q for the fiscal yearquarterly period ended September 30, 2017,December 31, 2019, we included a risk factor discussing the advent of the novel strain of coronavirus, COVID-19, identified in Wuhan, China in December 2019. This discussion focused primarily on the possible impact of COVID-19 on our operations in China, where this outbreak was initially centered. The spread of COVID-19 from China to other than as describedcountries has resulted in the Overview above, andWorld Health Organization declaring the supplemental risk factor set forth below:
While we continue to monitor and assess the impact on our business from the spread of COVID-19 and the ever evolving actions implemented by the governments across the globe, our operations in China have returned to near-capacity and we continue to experience an adverse impact of COVID-19 on our operations in the United States. The extent to which the coronavirus continues to impact our operations will depend on future periods. Others will primarily affect future periods. As discussed elsewhere in this Quarterly Report on Form 10-Q, we believe our analysisdevelopments, which are highly uncertain and computationscannot be predicted with confidence, including the duration of the tax effectsoutbreak, new information which may emerge concerning the severity of the Actcoronavirus and the actions to contain the coronavirus or treat its impact, among others. In particular, the continued spread and/or resurgence of the coronavirus globally could result in a widespread health crisis and/or change in consumer behavior that could adversely affect the global economy and financial markets, resulting in an economic downturn, and could also adversely impact our operations, including, without limitation, our manufacturing and supply chain, sales and product development operations, particularly our prospective sales if the Semiconductor and SiC/LED business segments we seek to serve suffer long-term damage. Such an economic downturn could have an adverse impact on us is partially, but not entirely, complete. For instance, we are still in the process of analyzing the earnings and profits and tax poolssuccessful implementation of our foreign subsidiaries to estimate the effectsstrategic growth plan and on our business, financial condition results of the one-time repatriation transaction tax on certain net accumulated earnings and profits of our foreign subsidiaries. Consistent with guidance from the Securities and Exchange Commission, our financial statements reflect our estimates of the tax effects of the Act on us as of December 31, 2017, to the extent we have been able to make such preliminary determinations. Although we believe these estimates are reasonable, they are provisional and may be adjusted prior to the end of fiscal 2018. We intend to complete accounting for the Act by the end of fiscal 2018. Any adjustments to our provisional estimates or the effects of currently unknown impacts of the Act on us could affect our current or future financial statements, or both.operations.
Item 2. | |
Unregistered Sales of Equity Securities and Use of Proceeds |
Issuer Purchases of Equity Securities
On November 29, 2018, we announced that our Board approved a stock repurchase program, pursuant to which we may repurchase up to $4 million of our outstanding common stock, par value $0.01 per share (“Common Stock”), over a one-year period, commencing immediately. Repurchases under the program were to be made in open market transactions at prevailing market prices, in privately negotiated transactions, or by other means in compliance with the rules and regulations of the SEC; however, we had no obligation to repurchase shares and the timing, actual number, and value of shares to be repurchased were subject to management’s discretion and depended on the Company’s stock price and other market conditions. We could have, in the sole discretion of the Board, terminated the repurchase program at any time while it was in effect. We intended to retire any repurchased shares. The term of our repurchase program expired as of the quarter ended December 31, 2019. There were no shares repurchased under this program.
On February 4, 2020, the Board approved a new stock repurchase program, pursuant to which the Company may repurchase up to $4 million of its outstanding Common Stock over a one-year period, commencing on February 10, 2020. Repurchases under the program will be made in open market transactions at prevailing market prices, in privately negotiated transactions, or by other means in compliance with the rules and regulations of the SEC; however, the Company has no obligation to repurchase shares and the timing, actual number, and value of shares to be repurchased is subject to management’s discretion and will depend on the Company’s stock price and other market conditions. The Company may, in the sole discretion of the Board, terminate the repurchase program at any time while it is in effect. During the quarter ended March 31, 2020, we repurchased 366,000 shares of our Common Stock on the open market at a total cost of approximately $2.0 million (an average price of $5.46 per share).
During the three months ended June 30, 2020, we did not repurchase any of our equity securities nor did we sell any equity securities that were not registered under the Securities Act of 1933, as amended.
Item 3. | Defaults Upon Senior Securities |
None.
Item 4. | Mine Safety Disclosures |
Not applicable.
Item 5. | Other Information |
None.
Item 6. | Exhibits |
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SIGNATURES
Pursuant to the requirements 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.
AMTECH SYSTEMS, INC.
By | ||||||
/s/ Lisa D. Gibbs | Dated: | August 6, 2020 | ||||
Lisa D. Gibbs | ||||||
Vice President | ||||||
(Principal |
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