SECURITIES AND EXCHANGE COMMISSION
                             Washington, DC 20549

                                   FORM 10-Q

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

                   For the quarter ended June 29,September 28, 1997


                        Commission file number 0-21294

                               Aseco Corporation
            (Exact name of registrant as specified in its charter)


              Delaware                              04-2816806
    (State or other jurisdiction of      (I.R.S. Employer Identification No.)
    incorporation or organization)


           500 Donald Lynch Boulevard, Marlboro, Massachusetts 01752
                   (Address of principal executive offices)


                                 (508)481-8896
             (Registrant's telephone number, including area code)



Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

                                           Yes   X         No
                                               -----          -----

Indicate the number of shares outstanding of each of the issuer's classes of
common stock,as of June 29,September 28, 1997.


                Common Stock, $.01 par value             3,672,0173,711,681
                     (Title of each class)          (Number of shares)


                                       1

 
                               ASECO CORPORATION

                               TABLE OF CONTENTS


Page

PART I.	FINANCIAL INFORMATION

Item 1.	 Condensed Consolidated Financial Statements

	Condensed Consolidated Balance Sheets (unaudited)
	at June 
                                                                            Page
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PART I.  FINANCIAL INFORMATION

Item 1.  Condensed Consolidated Financial Statements

     Condensed Consolidated Balance Sheets (unaudited)
     at September 28, 1997 and March 30, 1997                                3

     Condensed Consolidated Statements of Operations (unaudited)
     for the three and six months ended September 28, 1997
     and September 29, 1996                                                  4

     Condensed Consolidated Statements of Cash Flows (unaudited)
     for the six months ended September 28, 1997 and
     September 29, 1997 and March 30, 1997	                               3

	Condensed Consolidated Statements of Operations (unaudited)
	for the three months ended June 29, 1997
 	and June 30, 1996                                                 4

	Condensed Consolidated Statements of Cash Flows (unaudited)
	for the three months ended June 29, 1997 and 
	June 30, 1996                                                      5
      
     Notes to Condensed Consolidated Financial Statements                    6-7

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations                                 8-9

PART II. OTHER INFORMATION

Item 1.  Legal Proceedings                                                   10

Item 2.  Changes in Securities                                               10

Item 3.  Defaults upon Senior Securities                                     10

Item 4.  Submission of Matters to a Vote of Security Holders                 10

Item 5.  Other Information                                                   10

Item 6.  Exhibits and Reports on Form 8-K                                    10

      Signatures

2 PART I.1. FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements ASECO CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
September 28, March 30, (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) June 29, 1997 March 30, 1997 - -------------------------------------------------------------------------------------------------------- ASSETS Current Assetsassets Cash and cash equivalents $7,532 $14,082$ 6,324 $ 14,082 Accounts receivable, less allowance Forfor doubtful accounts of $526,000$498,780 at June 29,September 28, 1997 and $407,000 at March 30, 1997 9,84712,428 9,153 Inventories, net 12,00213,294 9,238 Prepaid expenses and other current assets 1,9531,880 1,414 ------- -------------------- ------------- Total current assets 31,33433,926 33,887 Plant and equipment, at cost 6,0927,728 5,179 Less accumulated depreciation and amortization 3,1564,144 2,952 ------- ------- 2,936------------- ------------- 3,584 2,227 Other assets, net 2,5663,595 526 ------- ------- $36,836 $36,640 ======= =======------------- ------------- $ 41,105 $ 36,640 ============= ============= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Line of credit $81 $--$ 2,350 $ -- Accounts payable 5,4946,001 2,091 Accrued expenses 3,9074,573 2,608 Income taxes payable 453443 321 Current portion of capital lease obligations 13 13 ------- -------------------- ------------- Total current liabilities 9,94813,380 5,033 Deferred taxes payable 465 465 Long-term capital lease obligations 3532 29 Stockholders' equity Preferred stock, $.01 par value, 1,000,000 Sharesshares authorized, none issued and outstanding --- ----- -- Common stock, $.01 par value: Authorized 15,000,000 Shares,shares, issued and outstanding 3,672,0173,711,681 and 3,664,519 shares at June 29,September 28, 1997 and March 30, 1997, respectively 37 37 Translation adjustment 12 Additional paid in capital 17,64518,059 17,642 Retained earnings 8,6949,112 13,434 ------- -------Foreign currency translation adjustment 20 -- ------------- ------------- Total stockholders' equity 26,38827,228 31,113 ------- ------- $36,836 $36,640 ======= =======------------- ------------- $ 41,105 $ 36,640 ============= =============
See notes to condensed consolidated financial statements 3 ASECO CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)(in thousands, except share and per share data) Three months ended June 29,1997 June 30,Six months ended September 28, September 29, September 28, September 29, 1997 1996 1997 1996 - ----------------------------------------------------------------------------------------------------------------------------- Net sales $8,865 $11,001$ 11,557 $ 8,989 $ 20,422 $ 19,990 Cost of sales 4,820 5,614 ------- -------6,253 4,805 11,073 10,418 ----------- ----------- ----------- ----------- Gross profit 4,045 5,3875,304 4,184 9,349 9,572 Research and development 1,356 1,235costs 1,565 1,275 2,921 2,511 Selling, general and administrative expense 2,473 2,4062,985 2,260 5,458 4,668 Acquired in-process research and development -- -- 4,900 --- ------- --------- ----------- ----------- ----------- ----------- Income (loss) from operations (4,684) 1,746754 649 (3,930) 2,393 Other income (expense): Interest income 169 15884 164 253 323 Interest expense (6) (1) ------- ------- 163 157 ------- -------(33) (2) (39) (4) Other expense (11) -- (11) -- ----------- ----------- ----------- ----------- 40 162 203 319 ----------- ----------- ----------- ----------- Income (loss) before income taxes (4,521) 1,903794 811 (3,727) 2,712 Income tax expense 219 628 ------- -------376 273 595 901 ----------- ----------- ----------- ----------- Net income (loss) $(4,740) $1,275 ======== =======$ 418 $ 538 $ (4,322) $ 1,811 =========== =========== =========== =========== Earnings (loss) per share ($1.29) $.34 ======== =======$ .11 $ .15 $ (1.18) $ .49 =========== =========== =========== =========== Shares used in computing earnings (loss) per share 3,665,000 3,708,0003,979,000 3,705,000 3,676,000 3,707,000
See notes to condensed consolidated financial statements 4 ASECO CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (in thousands)
(in thousands) ThreeSix months ended June 29,1997 June 30,--------------------------------- September 28, September 29, 1997 1996 - -------------------------------------------------------------------------------------------------- Operating activities: Net income (loss) $(4,740) $1,275$ (4,322) $ 1,811 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 269 222621 446 Acquired in-process research and development 4,900 -- Changes in assets and liabilities: Accounts receivable 64 572(2,547) 1,868 Inventories, net (1,990) (1,215)(3,868) (1,812) Prepaid expenses and other current assets (327) (321)(236) (212) Accounts payable and accrued expenses 2,123 (319)2,671 (930) Income taxes payable 132 318 ------- -------235 (207) ------------ ----------- Total adjustments 5,171 (743) ------- -------1,776 (847) ------------ ----------- Cash provided by (used in) operating activities 431 532(2,546) 964 Investing activities: Acquisitions net of cash acquired (6,079) -- Acquisition of plant and equipment (457) (178)(913) (447) Increase in software development costs and other assets (50) (121) ------- -------(392) (156) ------------ ----------- Cash used in investing activities (6,586) (299)(7,384) (603) Financing activities: Net proceeds from issuance of common stock 3 109 Payments307 108 Net increase in borrowings on working capital linelines of credit (395)1,875 -- Payments of long-term capital lease obligations (4) (3) ------- -------(7) (7) ------------ ----------- Cash used/provided by financing activities (396) 106 ------- -------2,175 101 ------------ ----------- Net increase (decrease)increase(decrease) in cash and cash equivalents (6,551) 339(7,755) 462 Effect of exchange rate changes on cash 1(3) -- Cash and cash equivalents at the beginning of period 14,082 14,083 ------- ------------------- ----------- Cash and cash equivalents at the end of Period $7,532 $14,422 ======= =======period $ 6,324 $ 14,545 ============ ===========
See notes to condensed consolidated financial statements 5 ASECO CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS THREESIX MONTHS ENDED JUNE 29,SEPTEMBER 28, 1997 1. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three-three and six month periodperiods ended June 29,September 28, 1997 are not necessarily indicative of the results that may be expected for the year ended March 29, 1998. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the year ended March 30, 1997. 2. The computations of earnings per share are based on the weighted average number of outstanding shares of common stock and common equivalent shares (using the treasury stock method). Fully diluted earnings per share have not been separately presented as the amount does not differ significantly from primary earnings per share. In February 1997, the Financial Accounting Standards Board (FASB) issued Statement No. 128 "Earnings Per Share" which is required to be adopted for the quarter ending December 28, 1997. At that time, the Company will be required to change the method currently used to compute earnings per share and to restate all prior periods. Under the new requirements for calculating primary earnings per share, the dilutive effect of stock options will be excluded. For the comparative first quarters ended June 29,three and six month periods ending September 28, 1997 and June 30,September 29, 1996, earnings (loss) per share pursuant to Statement 128 would have been:
JuneThree months ended Six months ended ------------------------------------------ ------------------------------------------ September 28, September 29, September 28, September 29, 1997 June 30, 1996 1997 1996 ------------------- ------------------- ------------------- ------------------- Basic earnings (loss) per share $ .11 $ .15 ($ 1.29) $.351.18) $ .50 Weighted average shares outstanding 3,665,000 3,619,0003,685,000 3,632,000 3,676,000 3,625,000 Diluted earnings (loss) per share $ .11 $ .15 ($ 1.29) $.341.18) $ .49 Weighted average common and common equivalent shares 3,665,000 3,708,000
3,979,000 3,705,000 3,676,000 3,707,000 3. Inventories consisted of: (in thousands) June 29, 1997 March 30, 1997 Raw Material $7,308 $4,996 Work in Process 2,556 1,612 Finished Goods 2,138 2,630 ------- ------- $12,002 $9,238 ======= =======
September 28, March 30, 1997 1997 ------------------- ------------------- Raw Material $ 7,001 $ 4,996 Work in Process 4,270 1,612 Finished Goods 2,023 2,630 ------------------- ------------------- $ 13,294 $ 9,238 =================== ===================
6 4. On May 23, 1997, the Company acquired 100% of the outstanding stock of Western Equipment Developments (Holdings) Ltd. ("WED"), located in Plymouth, England, for approximately $6,000,000 in cash. WED designs, manufactures and markets integrated circuit wafer handling robot systems used to load, sort and transport wafers during the inspection stage of the semiconductor manufacturing process. The acquisition was accounted for as a purchase and accordingly, the results of operations of the acquired business have been included in the Company's consolidated financial statements commencing May 23, 1997. In connection with the acquisition, the Company allocated a portion of the purchase price to in-process research and development which resulted in a one-time charge to operations of approximately $4.9 million. The following table summarizes the unaudited pro-forma consolidated results of operations as if the acquisition had been made at the beginning of each of the periods presented:
Quarter Ended JuneSix months ended ---------------------------------------- September 28, September 29, 1997 June 30, 1996 ------------------ ------------------- Net sales $9,894 $11,970$21,451 $22,776 Net income (6,129) (4,181) Earningsloss (5,711) (3,663) Loss per share $(1.67) $(1.15)($1.56) ($1.01)
5. In July 1997, the Financial Accounting Standards Board (FASB) issued Statement No. 130 "Reporting Comprehensive Income" which is required to be adopted forin the first quarter ending June 28, 1998.of fiscal 1999. The adoption of this standard is not expected to have a material impact on the Company's financial position or results of operations. 6. In July 1997, the Financial Accounting Standards Board (FASB) issued Statement No. 131 "Disclosure About Segments of an Enterprise and Related Information" which is required to be adopted forin the first quarter ending June 28, 1998.of fiscal 1999. The adoption of this standard is not expected to have a material impact on the Company's financial position or results of operations. 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Three and six months ended June 29,September 28, 1997 Results of Operations - --------------------- Net sales for the second quarter of fiscal 1998 increased 29% to $11.6 million versus $9 million for the same quarter last year. Net sales for the first quartersix months of fiscal 1998 decreased 19%increased 2% to $8.9$20.4 million compared to $11.0$20.0 million for the first quartersix months of fiscal 1997. The decreaseincrease in second quarter net sales resulted primarily from feweran increase in unit shipments during the firstsecond quarter of fiscal 1998 compared to the firstsecond quarter of fiscal 1997 as a result of an industry wide market downturn.1997. International sales represented approximately 35%50% of net sales for the firstsecond quarter of fiscal 1998 versus 62%44% in the first quarter of fiscal 1997. The decrease in international sales as a percentage of total sales resulted from several domestic customers, who had curtailed ordering activity over the past year as a result of unfavorable market conditions, placing orders in the first quarter of fiscal 1998. International sales for the first quarter of fiscal 1998 were $3.1 million versus $6.9 million for the firstsecond quarter of fiscal 1997. Approximately 59%79% of all international sales were to customers located in the Pacific Rim region. Gross margin forin the firstsecond quarter of fiscal 1998 was 46% compared to 49%47% in the same quarter last year. Gross margin for the first six months of fiscal 1998 was 46% compared to 48% in the same period last year. The decline in gross margin resulted from volume discounts associated with several large quantity orders shipped during the first quarter of fiscal 1998 and from a higher mixincreased shipments of newer product models which generally have lower gross margin product sales during such quarter.percentages. Research and development expenses increased 10% to $1.4 million23% in the firstsecond quarter of fiscal 1998 to $1.6 million from $1.2$1.3 million in the firstsecond quarter of fiscal 1997. Research and development expenses remained consistent as a percentage of sales at approximately 14% in both the second quarter of fiscal 1998 and the second quarter of fiscal 1997. Research and development expenses increased 16% to $2.9 million in the first six months of fiscal 1998 from $2.5 million in the first six months of fiscal 1997. Increased spending on research and development in the second quarter of fiscal 1998 was a result of increased spending on the development of the Company's newest test handler model, the VT8000, and to a lesser extent, spending associated with the development of Western Equipment Developments (Holdings) LTD ("WED") newest product a high speed wafer sorter. Selling, general, and administrative expenses for the second quarter of fiscal 1998 were $3.0 million versus $2.3 million in the second quarter of fiscal 1997. Selling, general and administrative expenses for the first six months of fiscal 1998 were $5.5 million versus $4.7 million for the first six months of fiscal 1997. Selling, general and administrative expenses also increased as a percentage of sales to 15%27% in the first quartersix months of fiscal 1998 from 11%23% in the first quartersix months of fiscal 1997 due to increased research and development spending and the decline in net sales.1997. The increase in researchselling, general and developmentadministrative expenses was due to the inclusion of a complete quarter of WED expenses in the second quarter operating results and increased spending resulted fromin the second quarter on trade shows and marketing related to the introduction of the Company's efforts to complete a newnewest test handler model for introduction in July 1997. Despite the decline in net sales, the Company is committed to maintaining its development spending at planned levels regardless of fluctuations in the market.and WED's new high speed wafer sorter. During the first quarter of fiscal 1998, the Company also recorded a one-time charge to earnings of $4.9 million for acquired in-process research and development related to the Company's acquisition of Western Equipment Developments Holdings ("WED")WED (See Note 4 to the Condensed Consolidated Financial Statements included herein). Selling, general and administrative expenses forOperating income in the firstsecond quarter of fiscal 1998 were $2.5 millionwas $754,000 versus $2.4 million foroperating income of $649,000 in the firstsecond quarter of fiscal 1997. Selling, general and administrative expenses also increased as a percentage of sales to 28% in the first quarter of fiscal 1998 from 22% in the first quarter of fiscal 1997. The increase in selling, general and administrative expenses was due primarily to the Company's establishment of an office in Singapore to provide spares and service support and technical assistance and training. Operating loss in the first quartersix months of fiscal 1998 was $4.7$3.9 million versus operating income of $1.7$2.4 million in the first quartersix months of fiscal 1997. The year to date operating 8 loss of $4.7$3.9 million wasis attributable to the one-time charge to earnings of $4.9 million recorded in the first quarter of fiscal 1998 relating to the acquired in-process research and development associated with the acquisition of WED. The effective tax rate increased from 33% infor the first quarter of fiscal 1997 to 35% in the firstsecond quarter of fiscal 1998 due primarilywas 47% versus 33% for the same quarter last year. The second quarter rate of 47% resulted as the Company's was not able to the decrease in international sales, which are generally taxed at a lower rate. The one-time charge of $4.9 millionoffset losses incurred by WED against income earned in the United States. The Company inrecorded a tax provision of $595,000 for the first six months of fiscal 1998 on a pretax loss of $3.7 million. The tax provision was recorded as a result of the combination of the first quarter one-time write-off of fiscal 1998 for acquired in-process research and development which is not deductible for tax purposes and therefore hadoperating losses of WED for which no impact on the Company's effective tax rate for the first quarter of fiscal 1998. benefit was recorded. As a result of the foregoing, net lossincome for the firstsecond quarter of fiscal 1998 was $4.7 million,$418,000, or $1.29$.11 per share, as compared to net income of $1.3$538,000, or $.15 per share, for the second quarter of fiscal 1997. Net loss for the first six months of fiscal 1998 was $4.3 million, or $.34$1.18 per share, as compared to net income of $1.8 million, or $.49 per share, for the first quartersix months of fiscal 1997.1997 Liquidity and Capital Resources - ------------------------------- The Company ended the firstsecond quarter of fiscal 1998 with a cash position of approximately $7.5$6.3 million. Additionally, theThe Company hadhas an unsecured line of credit with a bank in the amount of $5.0 million against which there were no borrowings of $2.4 million at the end of the firstsecond quarter of fiscal 1998. During the quarter, the Company elected to utilize its working capital line of credit to cover short term fluctuations in available cash. The Company generated $431,000used approximately $2.5 million of cash from operations during the first quartersix months of fiscal 1998. Accounts receivable increased approximately $700,000 in the first quarter of fiscal 1998 because of an increase in net sales from the fourth quarter of fiscal 1997. Inventory increased approximately $2.8$3.3 million during the first quartersix months of fiscal 1998 as a result of both the increase in sales and the inclusion of WED's accounts receivable balance as a result of the acquisition. Inventory increased approximately $4.0 million during the first six months of fiscal 1998 as the result of the Company beginning to purchasepurchasing inventory for the production of its first units of a newly introduced test handler and high speed wafer sorter coupled with the inclusion of WED's inventory as a result of the acquisition. Accounts payable and accrued expense increased approximately $4.9$5.2 million as a result of both increases in material receipts and the inclusion of WED's current liabilities in the first quarter fiscal 1998 balance sheet. The Company used approximately $6.6$7.4 million in cash for investing activities during the first quartersix months of fiscal 1998, most of which was used to fund the Company's acquisition of WED. Additionally, the Company spent approximately $457,000$913,000 on capital equipment purchases and $50,000$213,000 to fund internal software development costs. The Company usedgenerated cash from financing activities in the first quartersix months of fiscal 1998 of $396,000,approximately $2.2 million, primarily to pay down WED's outstandingas the result of utilizing its working capital line of credit. The Company believes that funds generated from operations, existing cash balances and available borrowing capacity will be sufficient to meet the Company's cash requirements for at least the next twelve months. Cautionary Statement for Purposes of "Safe Harbor" Provisions of the Private - ---------------------------------------------------------------------------- Securities Litigation Reform Act of 1995 - ---------------------------------------- The Company's future results are difficult to predict and may be affected by a number of important risk factors including, but not limited to, the factors listed in the Company's Annual Report on Form 10K for the fiscal year ended March 30, 1997. The Company wishes to caution readers that those important factors, in some cases, have affected, and in the future could affect, the Company's actual consolidated quarterly 9 or annual operating results and could cause those actual consolidated quarterly or annual operating results to differ materially from those expressed in any forward looking statements made by, or on behalf of, the Company. ASECO CORPORATION PART II - OTHER INFORMATION Item 1. Legal Proceedings: None. Item 2. Changes in Securities: None. Item 3. Defaults upon Senior Securities: None. Item 4. Submissions of Matters to a Vote of Security Holders: On August 6, 1997, the Annual Meeting of Stockholders was held and the following matters were voted upon: 1. Sebastian J. Sicari and Dr. Sheldon Weinig were re-elected as Directors of the Company to serve for three year terms. For Mr. Sicari, the vote was 3,276,287 in favor, 17,554 withheld. For Dr. Weinig, the vote was 3,276,287 in favor, 17,554 withheld. 2. The Board of Directors' selection of Ernst & Young LLP as the Company's independent auditors for the year ended March 29, 1998 was ratified with 3,275,287 in favor, 13,000 against, and 5,554 abstaining. Item 5. Other Information: None. Item 6. Exhibits and reports on Form 8-K: a. Exhibits - None b. The Company filed a reportThere were no reports on Form 8-K withfiled for the Securities and Exchange Commission on May 30, 1997.three months ended September 28, 1997 10 ASECO CORPORATION 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. Signature Title Date /s/ Carl S. Archer, Jr. President and Chief Executive August 13, 1997 - ------------------------
Signature Title Date /s/ Carl S. Archer, Jr. President and Chief Executive November 12, 1997 - ------------------------------------ Officer (principal executive officer) Carl S. Archer, Jr. /s/ Sebastian J. Sicari Vice President, Finance and November 12, 1997 - ------------------------------------ Administration, Chief Financial Sebastian J. Sicari Officer, Treasurer (principal financial officer) /s/ Mary R. Barletta Vice President, Corporate Controller November 12, 1997 - --------------------------- (principal executive Carl S. Archer, Jr. officer) /s/ Sebastian J. Sicari Vice President, Finance and August 13, 1997 - ------------------------ Administration, Chief Financial Sebastian J. Sicari Officer, Treasurer (principal financial and accounting officer) Mary R. Barletta
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