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 MARCH 31, 1995.
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .
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Commission File No. 0-121
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KULICKE AND SOFFA INDUSTRIES, INC.
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(Exact name of registrant as specified in its charter)
PENNSYLVANIA 23-1498399
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(State or other jurisdiction (IRS Employer
of incorporation) Identification No.)
2101 BLAIR MILL ROAD, WILLOW GROVE, PENNSYLVANIA 19090
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(Address of principal executive offices) (Zip code)
(215) 784-6000
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(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
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As of April 28, 1995, there were 8,924,701 shares of the Registrant's
Common Stock, Without Par Value outstanding.
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KULICKE AND SOFFA INDUSTRIES, INC.
FORM 10 - Q MARCH 31, 1995
INDEX
Page No.
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PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS.
Consolidated Balance Sheet -
March 31, 1995 and September 30, 1994 3
Consolidated Statement of Operations -
Three and Six Months Ended March 31, 1995
and 1994 4
Consolidated Condensed Statement of Cash Flows -
Six Months Ended March 31, 1995 and 1994 5
Notes to Consolidated Financial Statements 6
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS. 7 - 10
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS. 11
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. 11
Item 6. EXHIBITS AND REPORTS ON FORM 8 - K. 12
Signatures. 12
3
KULICKE AND SOFFA INDUSTRIES, INC. and Subsidiaries
CONSOLIDATED BALANCE SHEET
(in thousands)
(unaudited)
March 31, September 30,
1995 1994
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ASSETS
CURRENT ASSETS:
Cash and cash equivalents $16,021 $ 8,754
Short-term investments 5,243 12,933
Accounts and notes receivable, net 52,183 40,258
Inventories, net 37,248 27,218
Prepaid expenses and other current assets 3,066 2,427
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TOTAL CURRENT ASSETS 113,761 91,590
Investments in debt securities held-to-maturity 4,272 5,310
Property, plant and equipment, net 21,490 20,562
Other assets, including goodwill 3,720 3,736
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TOTAL ASSETS $143,243 $121,198
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Debt due within one year $ 60 $ 60
Accounts payable to suppliers and others 23,404 19,956
Accrued expenses 10,664 8,300
Estimated income taxes payable 4,142 1,815
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TOTAL CURRENT LIABILITIES 38,270 30,131
Long-term debt, less current portion 26,304 26,474
Deferred income taxes 692 642
Other liabilities 903 717
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TOTAL LIABILITIES 66,169 57,964
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Commitments and contingencies -- --
SHAREHOLDERS' EQUITY:
Common stock, without par value 19,067 17,839
Retained earnings 58,394 46,416
Cumulative translation adjustment (300) (841)
Unrealized loss on investments, net of tax (87) (180)
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TOTAL SHAREHOLDERS' EQUITY 77,074 63,234
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $143,243 $121,198
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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
CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except per share data)
(unaudited)
Three months Six months
ended March 31, ended March 31,
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1995 1994 1995 1994
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Net sales $64,785 $43,766 $116,244 $82,025
Costs and expenses:
Cost of goods sold 35,628 25,435 65,042 47,223
Selling, general and
administrative 11,668 9,154 22,323 17,611
Research and development, net 6,546 4,992 12,706 10,052
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Total costs and expenses 53,842 39,581 100,071 74,886
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Income from operations 10,943 4,185 16,173 7,139
Interest income 318 306 660 612
Interest expense (541) (548) (1,080) (1,094)
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Income before income taxes 10,720 3,943 15,753 6,657
Provision for income taxes 2,466 749 3,775 1,156
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Net income $ 8,254 $ 3,194 $ 11,978 $ 5,501
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Net income per share:
Primary $0.97 $0.38 $1.42 $0.66
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Fully diluted $0.88 $0.38 $1.30 $0.66
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Weighted average shares
outstanding:
Primary 8,481 8,309 8,440 8,305
Fully diluted 9,741 8,309 9,713 8,305
The accompanying notes are an integral part of these consolidated financial
statements.
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KULICKE AND SOFFA INDUSTRIES, INC. and Subsidiaries
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
(in thousands)
(unaudited)
Six months ended March 31,
1995 1994
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $11,978 $ 5,501
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 2,323 1,830
Deferred income taxes 50 (162)
Changes in other components of working
capital excluding short-term investments (14,374) (2,558)
Other changes, net 462 217
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Net cash provided by operating activities 439 4,828
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment, net (3,040) (2,690)
Proceeds from sales/maturities of
short-term investments 11,867 3,979
Purchases of short-term investments (2,976) (12,054)
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Net cash provided (used) by investing activities 5,851 (10,765)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options and
sales of shares pursuant to the Employee
Stock Purchase Plan 975 1,032
Payments on borrowings (30) (21)
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Net cash provided by financing activities 945 1,011
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Effect of exchange rate changes on cash 32 26
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Change in cash and cash equivalents 7,267 (4,900)
Cash and cash equivalents at beginning of
period 8,754 7,413
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Cash and cash equivalents at end of period $16,021 $ 2,513
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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
(Unaudited)
NOTE 1. BASIS OF PRESENTATION
The consolidated financial statement information included herein is
unaudited but, in the opinion of management, reflects all adjustments
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
March 31, September 30,
1995 1994
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(in thousands)
Finished goods $10,160 $ 7,657
Work in process 16,809 8,664
Raw materials and supplies 18,823 17,533
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45,792 33,854
Inventory reserves (8,544) (6,636)
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$37,248 $27,218
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NOTE 3. SUBSEQUENT EVENT
During April 1995, $11,557,000 of the Company's 8% Subordinated
Convertible Debentures were presented for conversion into 542,253
shares of the Company's common stock. As a consequence, future
interest expense with respect to the Convertible Debentures will be
lower.
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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 amounts 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
Bookings of customer orders for the quarter ended March 31, 1995
totaled $77.0 million, representing a new Company record, compared to
bookings of $56.3 million for the first quarter of fiscal 1995. This
surge in demand in part reflects the broadening end user demand for
semiconductor devices which is fueling expansion both in "front-end"
fabrication capacity and "back-end" assembly capacity. In addition,
certain semiconductor manufacturers are replacing older assembly
capital equipment with newer, higher throughput machines capable of
handling more complex semiconductor devices for a wider variety of
applications. The increase in the Company's booking activity also
reflects favorable customer acceptance of the Model 1488 Turbo ball
bonder which was introduced late in fiscal 1994. The Company
anticipates this increased level of activity will continue through the
1995 fiscal year and is expanding its second shift to help meet
customer delivery requirements.
At March 31, 1995, ending backlog of customer orders totaled a record
$64.0 million compared to $51.6 million at December 31, 1994. 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.
The Company achieved a new record revenue level of $64.8 million for
the second quarter of fiscal 1995, up 26% from the $51.5 million
reported for the first quarter of fiscal 1995 and up 48% compared to
the $43.8 million reported for the same period last year. For the six
month period ended March 31, 1995, revenues totaled $116.2 million, up
42% from the $82.0 million for the comparable period last year. These
increases in revenues are largely attributable to higher unit volume
of machine sales, primarily of the Company's 1488 Turbo ball bonders
and the Model 1472 wedge bonders, and to increased demand for
consumable tools. In addition, sales of die bonder products added
through the AT acquisition accounted for approximately $1.8 million of
the increased revenues for the fiscal 1995 second quarter and $3.8
million of the increase for the six month period ended March 31, 1995.
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The cost of goods sold increased to $35.6 million and $65.0 million
for the three and six month periods ended March 31, 1995,
respectively, compared to $25.4 million and $47.2 million for the same
periods in fiscal 1994. These increases were principally due to the
higher unit volume noted above.
Gross profit as a percentage of sales increased to 45.0% and 44.0% for
the three and six month periods ended March 31, 1995, respectively,
compared to 41.9% and 42.4% during the same periods last year. The
favorable effects of higher volume on purchased materials prices and
on manufacturing overhead absorption contributed significantly to the
overall improvement in gross profit margins for the quarter and six
month period ended March 31, 1995, compared to the same periods in
fiscal 1994. Improved gross margins on the ball bonder product line
and a shift in the mix of machine sales to higher margin wedge and TAB
bonders also contributed to the improved fiscal 1995 gross profit
margins for the second quarter and the year to date period.
During the second quarter of fiscal 1995 the Company completed the
changeover from the older Model 1484 gold ball bonders to the Model
1488 Turbo bonder. In fiscal 1995, the Company is realizing
significantly higher average selling prices on the 1488 Turbo ball
bonders than realized on the older 1484 ball bonders during the latter
half of fiscal 1994.
Selling, general and administrative ("SG&A") expenses increased to
$11.7 million and $22.3 million for the three and six month periods
ended March 31, 1995, respectively, up 27.2% and 26.7%, respectively,
over the amounts reported for comparable periods last year. The
higher fiscal 1995 SG&A costs primarily reflect the effect of annual
salary increases, higher sales commissions and incentives associated
with the higher volume of business, increased costs of servicing the
larger worldwide installed base of customers and continued investments
to upgrade and enhance worldwide computerized information systems. In
addition, fiscal 1995 SG&A expenses included incremental costs
approximating $442,000 for the second quarter and $830,000 for the
year to date period ended March 31, 1995, to market and support die
bonder products added through the AT acquisition. 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 $6.5 million and $12.7
million for the quarter and six month period ended March 31, 1995,
respectively, compared to $5.0 million and $10.1 million for the same
periods last year. Of the $2.6 million increase for the year to date
period, $678,000 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 (salaries
and fringes) and outside contractor costs.
The Company continues to invest heavily in the development of the 8000
Series wire bonders and in enhancements of existing products,
including the recently introduced 1474fp wedge bonder which is capable
of handling higher lead-count devices at faster bonding speeds. In
addition, the Company, together with its major customers, is
increasing its emphasis on new technologies which may eventually lead
to improved or alternate semiconductor assembly technologies.
Operating income increased to $10.9 million for the three months ended
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March 31, 1995 compared to $4.2 million during the second quarter of
fiscal 1994. For the year to date periods, operating income totaled
$16.2 million in fiscal 1995 compared to $7.1 million in fiscal 1994.
The fiscal 1995 improvements are due primarily to the higher revenue
and gross profit margins, offset in part by the cost increases noted
above.
Interest expense, net of interest income, totaled $223,000 for the
quarter ended March 31, 1995 compared to $242,000 for the same period
last year. On a year to date basis, interest expense, net of interest
income, totaled $420,000 in fiscal 1995 compared to $482,000 in fiscal
1994. The reduction in net interest expense was primarily due to
increased investment income resulting from higher investment yields in
fiscal 1995.
The provision for income taxes for the six months ended March 31, 1995
is based on the Company's estimated effective tax rate of 24% for the
year. The increase in the effective rate in fiscal 1995 compared to
the fiscal 1994 rate of 20% 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 $439,000 for the six
months ended March 31, 1995 compared to $4.8 million for the same
period last year. Cash and total investments decreased to $25.5
million at March 31, 1995 from the $27.0 million reported at September
30, 1994. The decrease in cash flow from operating activities and the
overall reduction in cash and total investments in fiscal 1995
compared to fiscal 1994 generally reflects the impact of the rapid
increase in sales volume on other components of working capital.
At March 31, 1995, working capital increased to $75.5 million compared
to $61.5 million at September 30, 1994. The accounts receivable
balance at March 31, 1995 increased by $11.9 million compared to
September 30, 1994 due largely to increased sales volume in the fiscal
1995 second quarter compared to late fiscal 1994. The $10.0 million
increase in inventory at March 31, 1995 primarily reflects growth in
raw materials and work in process inventories as the Company continues
to ramp up manufacturing activities to satisfy increased customer
demand.
Trade accounts payable and accrued expenses increased by approximately
$6.0 million at March 31, 1995 compared to September 30, 1994. Trade
payables increased principally as a result of increased inventory
purchases during the second quarter of fiscal 1995. The increase in
accrued expenses primarily resulted from higher sales and management
incentives due to improved fiscal 1995 sales and profits and to
increased employment related accruals associated with higher level of
personnel compared to fiscal 1994.
During the six months ended March 31, 1995, the Company invested in
excess of $3 million in property and equipment, primarily to upgrade
equipment used in the Company's manufacturing and research and
development activities, and for tooling used in the manufacturing of
new machines.
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Stock option exercises and sales of shares of common stock to
employees pursuant to the Company's Employee Stock Purchase Plan
generated approximately $975,000 in cash during the six months ended
March 31, 1995.
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
have been no borrowings under this credit line during fiscal 1995.
The Company believes that, based on its presently forecasted operating
levels, its working capital, internally generated funds and amounts
available under its line of credit will be sufficient to meet its
anticipated cash requirements for operating expenses and budgeted
capital expenditures through the fiscal year.
The Company believes that its long-term success in this industry
requires not only technologically superior products and the successful
management of day to day operations, but also the proper strategic
selection of products and business practices which are responsive to
changes in its customers' requirements and changes in the
international marketplace in which the Company competes. To this end,
the Company continues to seek and evaluate strategic business
opportunities as they arise. Such opportunities include, but are not
limited to, acquisitions, joint ventures and alternative business
arrangements which could require substantial capital outlays.
Consummating any one or more of these strategic opportunities, could
necessitate additional financing by the Company.
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PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS.
The Company is party to various pending and threatened legal actions
involving patents and employment matters in the normal conduct of its
business. In addition, the Company was recently notified that it may
be sued by another company in connection with an environmental matter
related to a facility leased by the Company between 1962 and 1973.
The notification received by the Company does not quantify the
potential financial impact of this matter. Although certain of these
pending and threatened matters are in their early stages and facts are
still developing, the Company currently does not believe that the
ultimate resolution of these matters will have a material adverse
effect on the Company's financial position.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The 1995 Annual Meeting of Shareholders of the Company was held on
February 14, 1995.
At this meeting, Messrs. James W. Bagley and C. Scott Kulicke were re-
elected to the Board of Directors of the Company for terms expiring at
the 1999 Annual Meeting. In such election, 6,952,671 votes were cast
for Mr. Bagley and for Mr. Kulicke. Under Pennsylvania law, votes
cannot be cast against a candidate. Proxies filed by the holders of
291,989 shares at the 1995 Annual Meeting withheld authority to vote
for Mr. Bagley and Mr. Kulicke.
At the 1995 Annual Meeting 4,841,613 shares were voted in favor of
approval of the 1994 Employee Incentive Stock Option and Non-Qualified
Stock Option Plan. 1,155,912 votes were cast against adoption of the
plan. Proxies filed by the holders of 34,418 shares at the 1995
Annual Meeting instructed the proxy holders to abstain from voting on
such proposal. "Broker nonvotes" received at the 1995 Annual Meeting
totaled 1,212,717.
At the 1995 Annual Meeting, 7,210,317 shares were voted in favor of
the reappointment of Price Waterhouse as independent accountants of
the Company to serve until the 1996 Annual Meeting and 11,661 shares
were voted against such proposal. Proxies filed by the holders of
22,682 shares at the 1995 Annual Meeting instructed the proxy holders
to abstain from voting on such proposal.
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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.
On March 30, 1995, the Company dismissed Luboshitz,
Kasierer & Co., certifying accountant for the Company's wholly-owned
subsidiary, Kulicke and Soffa Industries (Israel) Ltd. ("KSL"). On
the same date, the Company appointed Price Waterhouse's Israeli
affiliate, Somekh Chaikin, as the certifying accountant for KSL. The
change in certifying accountants was made solely in order to
consolidate all audit and tax services with one worldwide accounting
firm. This event was reported as Item 4 on a Form 8-K dated March 30,
1995, and filed with the Securities and Exchange Commission on April
5, 1995.
SIGNATURES
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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: May 2, 1995 /s/ Clifford G. Sprague
______________________________________
Clifford G. Sprague
Senior Vice President,
Chief Financial Officer and
Chief Accounting Officer