1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended DECEMBER 31, 1994.
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 No. 0-121
KULICKE AND SOFFA INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
PENNSYLVANIA 23-1498399
(State or other jurisdiction (IRS Employer
of incorporation) Identification No.)
2101 BLAIR MILL ROAD, WILLOW GROVE, PENNSYLVANIA 19090
(Address of principal executive offices) (Zip code)
(215) 784-6000
(Registrant's telephone number, including area code)
Indicate by check mark whether 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
----- -----
As of February 6, 1995, there were 8,282,948 shares of the
Registrant's Common Stock, Without Par Value outstanding.
2
KULICKE AND SOFFA INDUSTRIES, INC.
FORM 10 - Q DECEMBER 31, 1994
INDEX
Page No.
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PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
Consolidated Balance Sheet -
December 31, 1994 and September 30, 1994 3
Consolidated Statement of Operations -
Three Months Ended December 31, 1994 and 1993 4
Consolidated Condensed Statement of Cash Flows -
Three Months Ended December 31, 1994 and 1993 5
Notes to Consolidated Financial Statements 6
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 7 - 9
PART II. OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8 - K 10
Signatures 11
3
KULICKE AND SOFFA INDUSTRIES, INC. and Subsidiaries
CONSOLIDATED BALANCE SHEET
(in thousands)
(unaudited)
December 31, September 30,
1994 1994
--------- ---------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 13,407 $ 8,754
Short-term investments 7,724 12,933
Accounts and notes receivable, net 42,808 40,258
Inventories, net 32,174 27,218
Prepaid expenses and other current assets 2,477 2,427
------- ------
TOTAL CURRENT ASSETS 98,590 91,590
Investments in debt securities held-to-maturity 4,772 5,310
Property, plant and equipment, net 21,035 20,562
Other assets, including goodwill 3,700 3,736
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TOTAL ASSETS $128,097 $121,198
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Debt due within one year $ 60 $ 60
Accounts payable to suppliers and others 20,458 19,956
Accrued expenses 10,082 8,300
Estimated income taxes payable 2,365 1,815
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TOTAL CURRENT LIABILITIES 32,965 30,131
Long-term debt, less current portion 26,459 26,474
Deferred income taxes 667 642
Other liabilities 817 717
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TOTAL LIABILITIES 60,908 57,964
Commitments and contingencies -- --
SHAREHOLDERS' EQUITY:
Common stock, without par value 18,032 17,839
Retained earnings 50,140 46,416
Cumulative translation adjustment (870) (841)
Unrealized loss on investments, net of tax (113) (180)
------- -------
TOTAL SHAREHOLDERS' EQUITY 67,189 63,234
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $128,097 $121,198
======= =======
The accompanying notes are an integral part of these consolidated financial
statements.
4
KULICKE AND SOFFA INDUSTRIES, INC. and Subsidiaries
CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands except per share amounts)
(unaudited)
Three months ended December 31,
1994 1993
-------- --------
Net sales $51,459 $38,259
Costs and expenses:
Cost of goods sold 29,414 21,788
Selling, general and
administrative 10,655 8,457
Research and development, net 6,160 5,060
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Total costs and expenses 46,229 35,305
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Income from operations 5,230 2,954
Interest income 342 306
Interest expense (539) (546)
------ ------
Income before income taxes 5,033 2,714
Provision for income taxes 1,309 407
------ ------
Net income $ 3,724 $ 2,307
====== ======
Net income per share:
Primary $0.44 $0.28
==== ====
Fully diluted $0.42 $0.28
==== ====
Weighted average shares outstanding:
Primary 8,414 8,301
Fully diluted 9,671 8,301
The accompanying notes are an integral part of these consolidated financial
statements.
5
KULICKE AND SOFFA INDUSTRIES, INC. and Subsidiaries
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
(in thousands)
(unaudited)
Three months ended December 31,
1994 1993
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 3,724 $2,307
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 1,141 902
Deferred income taxes 25 (146)
Changes in other components of working
capital excluding short-term investments (4,639) (109)
Other changes, net (153) (21)
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Net cash provided by operating activities 98 2,933
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment, net (1,538) (1,436)
Proceeds from sales (purchases) of
short-term investments, net 5,915 (3,193)
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Net cash provided (used) by
investing activities 4,377 (4,629)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options 193 451
Payments on borrowings (15) (15)
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Net cash provided by financing activities 178 436
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Effect of exchange rate changes on cash 0 (23)
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Change in cash and cash equivalents 4,653 (1,283)
Cash and cash equivalents at beginning of
period 8,754 7,413
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Cash and cash equivalents at end of period $13,407 $6,130
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The accompanying notes are an integral part of these consolidated financial
statements.
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KULICKE AND SOFFA INDUSTRIES, INC. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands)
(unaudited)
NOTE 1 - BASIS OF PRESENTATION
The consolidated financial statement information included herein is
unaudited but, in the opinion of management, reflects all adjustments
which are necessary for a fair statement of the results for the
interim periods presented. Such adjustments are of a normal,
recurring nature. These financial statements should be read in
conjunction with the audited financial statements included in the
Company's Annual Report on Form 10-K for the fiscal year ended
September 30, 1994.
NOTE 2 - INVENTORY
December 31, September 30,
1994 1994
------ ------
Finished goods $10,249 $ 7,657
Work in process 11,653 8,664
Raw materials and supplies 16,418 17,533
------ ------
38,320 33,854
Inventory reserves (6,146) (6,636)
------ ------
$32,174 $27,218
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NOTE 3 - EARNINGS PER SHARE
For the three month period ended December 31, 1994, fully diluted
earnings per share include the dilutive effects of stock options and
of shares assumed to be issued upon conversion of the Company's 8%
convertible subordinated debentures and the adjustment to net income
for the related interest expense and associated tax effect.
7
KULICKE AND SOFFA INDUSTRIES, INC. and Subsidiaries
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
INTRODUCTION
The Company's sales largely depend on the capital expenditures of
semiconductor manufacturers, which in turn depend on the current and
anticipated market demand for semiconductors and products using
semiconductors. Historically, there have been substantial
fluctuations in the amount of capital which semiconductor
manufacturers have invested in capital equipment. The Company
believes that such fluctuations will continue to characterize the
industry in the future. In view of the historical fluctuations in the
semiconductor and semiconductor assembly equipment markets, it is
inherently difficult to predict demand for semiconductor assembly
equipment.
On July 13, 1994, the Company acquired the business and certain assets
of Assembly Technologies ("AT"). The acquired assets and results of
operations of the AT business are included in the Company's
consolidated financial statements from the date of the acquisition.
RESULTS OF OPERATIONS
The Company established a new record for incoming customer orders
booked into backlog totaling $56.3 million for the fiscal 1995 first
quarter ended December 31, 1994. This compares to $55.1 million of
bookings for the fourth quarter of fiscal 1994 and $30.0 million of
bookings for the first quarter of fiscal 1994. The record level of
activity during fiscal 1995 reflects a continuation of the vigorous
demand experienced in the semiconductor assembly equipment industry
since the latter half of fiscal 1993 and growing customer acceptance
of the 1488 Turbo gold ball wire bonders. In response to the higher
demand levels, the Company has added a partial second shift to its
wire bonder manufacturing line to meet customer delivery requirements.
At December 31, 1994, backlog totaled $51.6 million compared to $46.8
at September 30, 1994 and $34.0 million at December 31, 1993. Since
the timing of deliveries may vary, the Company's backlog as of any
date may not be indicative of sales for any succeeding period.
Revenues totaled $51.5 million for the first quarter of fiscal 1995,
up $1.1 million from the $50.4 million reported for the fourth quarter
of fiscal 1994 and up 35% compared to the $38.3 million reported for
the same period last year. The increase in revenues in the first
quarter of fiscal 1995 compared to the first quarter of 1994 is
attributable to higher unit volume of machine sales, primarily of the
Company's gold ball wire bonders and the Model 1472 wedge bonder. In
addition, sales of die bonder products added through the AT
acquisition accounted for approximately $2.0 million of the increase.
The volume increase in the first quarter of fiscal 1995 compared to
the same quarter last year was offset in part by lower average selling
prices on certain of the Company's machines, principally the older
Model 1484LXQ.
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The cost of goods sold increased to $29.4 million for the first
quarter of fiscal 1995 compared to $29.1 million for the fourth
quarter of fiscal 1994 and to $21.8 million for the first quarter of
fiscal 1994, primarily as a result of the volume increase noted above.
Gross profit margin was 42.8% for the first quarter of fiscal 1995
compared to 42.2% for the fourth quarter of fiscal 1994 and 43.1% for
the first quarter of fiscal 1994. The lower gross profit margin in
the first quarter of fiscal 1995 compared to the same period last year
primarily resulted from lower average selling prices during fiscal
1995 on sales of Model 1484LXQ machines. The gross profit margin
improvement over the fourth quarter of fiscal 1994 resulted from the
partial shift of ball bonder sales from the older Model 1484 to the
Model 1488 Turbo bonders and to more favorable product sales mix.
During the second quarter of fiscal 1995, the Company will complete
the changeover from the older Model 1484 gold ball bonders to the
Model 1488 Turbo bonder. This change should reverse the trend of
declining average selling prices and gross profit margins experienced
by the ball bonder product line during fiscal 1994.
Selling, general and administrative ("SG&A") expenses increased to
$10.7 million for the first quarter of fiscal 1995 compared to $8.5
million in the same period last year. The higher costs in fiscal 1995
were primarily due to the effect of annual salary increases, higher
sales commissions and incentives associated with the higher volume of
business, incremental costs to market and support die bonder products
following the AT acquisition, increased costs of servicing the larger
installed base of customers worldwide and continued investments to
upgrade and enhance worldwide computerized information systems. The
Company anticipates additional increases in operating costs during
fiscal 1995 in order to support the higher volume of business.
Net research and development costs increased to $6.2 million for the
quarter ended December 31, 1994 compared to $5.1 million for the
quarter ended December 31, 1993. Of the $1.1 million increase,
$279,000 resulted from incremental expenditures related to die bonder
products added through the AT acquisition. The remainder of the
increase consisted primarily of personnel related costs, outside
contractors and prototype material costs attributable largely to the
Company's development of the next generation machines, including the
8000 Series wire bonders and the Model 6900 automatic die bonder, and
enhancements of existing products.
Operating income increased to $5.2 million for the first quarter of
fiscal 1995 compared to $3.0 million during the first quarter of
fiscal 1994. This improvement is due primarily to the higher revenue
level in fiscal 1995, offset in part by the cost increases noted
above.
Interest expense, net of interest income, totaled $197,000 for the
three months ended December 31, 1994 compared to $240,000 during the
same period last year. The change is due primarily to increased
investment income resulting from higher investment yields in fiscal
1995.
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The provision for income taxes for the three months ended December 31,
1994 is based on the Company's estimated effective tax rate for the
year. The increase in the effective rate in fiscal 1995 compared to
the fiscal 1994 rate is due primarily to utilization of remaining net
operating loss carryforwards in fiscal 1994 and to the estimated
amount and geographic distribution of taxable income in fiscal 1995.
LIQUIDITY AND CAPITAL RESOURCES
Cash generated by operating activities totaled $98,000 for the three
months ended December 31, 1994 compared to $2.9 million for the same
period last year. Cash and total investments decreased to $25.9
million at December 31, 1994 from the $27.0 million reported at
September 30, 1994. The decline in cash flow from operating
activities and the overall decline in cash and total investments was
offset by increases in other components of working capital.
At December 31, 1994, working capital totaled $65.6 million compared
to $61.5 million at September 30, 1994 and $59.1 million at December
31, 1993. Accounts receivable increased by $2.6 million at December
31, 1994 compared to September 30, 1994 due largely to the high volume
of sales in late December 1994. The $5.0 million increase in
inventory at December 31, 1994 primarily reflects growth in work in
process inventories as the Company ramps up manufacturing activities
to satisfy increased customer demand and the effect on finished goods
inventory of delayed shipments at the end of the first quarter of
fiscal 1995.
Trade accounts payable and accrued expenses increased by approximately
$2.3 million at December 31, 1994 compared to September 30, 1994
primarily as a result of increased inventory purchases during the
first quarter of fiscal 1995, the accrual of interest on the Company's
convertible debt, and increased payroll accruals.
During the quarter ended December 31, 1994, the Company invested
approximately $1.5 million in property and equipment, primarily to
upgrade capital equipment used in the Company's manufacturing and
research and development activities. Proceeds from stock option
exercises generated approximately $178,000 in cash during the quarter
ended December 31, 1994.
The Company has a $10.0 million unsecured line of credit at 1/4% below
the lender's prime rate, which was renewed in January 1995. There
were no borrowings under this credit line during the first quarter of
fiscal 1995.
The Company believes that, based on its present operating levels, its
working capital, internally generated funds and amounts available
under its line of credit will be sufficient to meet anticipated cash
requirements for operating expenses and capital expenditures
throughout the next year.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8 - K
(a) Exhibits
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8 - K
There were no reports on Form 8 - K filed for the three
month period ended December 31, 1994.
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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.
KULICKE AND SOFFA INDUSTRIES, INC.
Date: February 14, 1995 /s/ Clifford G. Sprague
______________________________________
Clifford G. Sprague
Senior Vice President,
Chief Financial Officer and
Chief Accounting Officer