UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended: December 31, 2001
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: 0-11412
AMTECH 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: 480-967-5146
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
Shares of Common Stock outstanding as of December 31, 2001: 2,650,921
AMTECH SYSTEMS, INC.
AND SUBSIDIARIES
TABLE OF CONTENTS
Page
----
PART I. FINANCIAL INFORMATION.
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets -
December 31, 2001 and September 30, 2001.........................3
Condensed Consolidated Statements of Operations -
Three Months Ended December 31, 2001 and 2000....................4
Condensed Consolidated Statements of Stockholders' Equity -
Three Months Ended December 31, 2001 and 2000....................5
Condensed Consolidated Statements of Cash Flows -
Three Months Ended December 31, 2001 and 2000...................6
Notes to Condensed Consolidated Financial Statements.................7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations...............................................12
Liquidity and Capital Resources.....................................14
Item 3. Quantitative and Qualitative Disclosures about Market Risk..........15
Forward-Looking Statements..........................................15
PART II. OTHER INFORMATION.
Item 1. Legal Proceedings ..................................................16
Item 4. Submission of Matters to a Vote of Security Holders.................17
Item 6. Exhibits and Reports on Form 8-K. ..................................17
SIGNATURE.....................................................................17
2
AMTECH SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
December 31, September 30,
2001 2001
------------ ------------
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 6,766,018 $ 5,998,120
Accounts receivable - net 3,900,927 3,829,867
Inventories 3,939,077 4,804,457
Deferred income taxes 1,520,000 1,525,000
Prepaid expenses 124,424 85,643
------------ ------------
Total current assets 16,250,446 16,243,087
PROPERTY, PLANT AND EQUIPMENT - net 1,489,767 1,484,437
GOODWILL AND OTHER ASSETS - net 822,239 843,046
------------ ------------
Total assets $ 18,562,452 $ 18,570,570
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 712,958 $ 880,006
Accrued compensation and related taxes 743,385 671,075
Accrued warranty expense 439,540 304,228
Deferred Profit 1,404,769 1,777,173
Customer deposits 589,769 367,523
Income taxes payable 84,000 135,000
Other accrued liabilities 666,081 605,547
------------ ------------
Total current liabilities 4,640,502 4,740,552
------------ ------------
LONG-TERM OBLIGATIONS 240,989 246,184
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock; no specified terms;
100,000,000 shares authorized; none issued -- --
Common stock; $0.01 par value; 100,000,000 shares authorized;
2,650,921 and 2,649,171 shares issued and outstanding
as of December 31 and September 30, respectively 26,510 26,492
Additional paid-in capital 12,541,431 12,539,040
Accumulated other comprehensive loss -
Cumulative foreign currency translation adjustment (440,386) (368,242)
Retained earnings 1,553,406 1,386,544
------------ ------------
Total stockholders' equity 13,680,961 13,583,834
------------ ------------
Total liabilities and stockholders' equity $ 18,562,452 $ 18,570,570
============ ============
The accompanying notes are an integral part of these
condensed consolidated financial statements.
3
AMTECH SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended December 31, 2001 and 2000
(Unaudited)
Three Months Ended December 31,
-------------------------------
2001 2000
----------- -----------
Net product sales $ 5,456,916 $ 3,602,650
Cost of product sales 4,137,433 2,447,805
----------- -----------
Gross margin 1,319,483 1,154,845
Selling, general and administrative 1,016,503 1,195,030
Research and development 89,931 106,622
----------- -----------
Operating profit (loss) 213,049 (146,807)
Interest income - net 34,813 73,662
----------- -----------
Income (loss) before income taxes and cumulative
effect of change in accounting principle 247,862 (73,145)
Income tax provision (benefit) 81,000 (46,262)
----------- -----------
Income (loss) before cumulative effect of change
in accounting principle 166,862 (26,883)
Cumulative effect of change in accounting principle,
net of tax benefit of $410,000 -- (690,211)
----------- -----------
NET INCOME (LOSS) $ 166,862 $ (717,094)
=========== ===========
EARNINGS (LOSS) PER SHARE:
Earnings (loss) per share - basic:
Income (loss) before cumulative effect of change
in accounting principle $ .06 $ (.01)
Cumulative effect of change in accounting principle,
net of tax -- (.26)
----------- -----------
Basic earnings (loss) per share $ .06 $ (.27)
=========== ===========
Weighted average shares outstanding 2,680,891 2,604,964
Earnings (loss) per share - diluted:
Income (loss) before cumulative effect of change
in accounting principle $ .06 $ (.01)
Cumulative effect of change in accounting principle,
net of tax -- (.26)
----------- -----------
Diluted earnings (loss) per share $ .06 $ (.27)
=========== ===========
Weighted average shares outstanding 2,798,330 2,604,964
The accompanying notes are an integral part of these
condensed consolidated financial statements.
4
AMTECH SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the Three Months Ended December 31, 2001 and 2000
(Unaudited)
Common Stock Accumulated Retained
--------------------------- Additional Other Earnings Total
Number Paid-In Comprehensive (Accumulated Stockholders'
of Shares Amount Capital Income (Loss) Deficit) Equity
------------ ------------ ------------ ------------ ------------ ------------
BALANCE AT SEPTEMBER 30, 2000 2,571,808 $ 25,718 $ 12,133,058 $ (502,356) $ 923,463 $ 12,579,883
------------
Net loss -- -- -- -- (717,094) (717,094)
Translation adjustment -- -- -- 110,273 -- 110,273
------------
Comprehensive loss -- -- -- -- -- (606,821)
------------
Warrants and stock options exercised 49,813 498 277,516 -- -- 278,014
------------ ------------ ------------ ------------ ------------ ------------
BALANCE AT DECEMBER 31, 2000 2,621,621 $ 26,216 $ 12,410,574 $ (392,083) $ 206,369 $ 12,251,076
============ ============ ============ ============ ============ ============
BALANCE AT SEPTEMBER 30, 2001 2,649,171 $ 26,492 $ 12,539,040 $ (368,242) $ 1,386,544 $ 13,583,834
------------
Net income -- -- -- -- 166,862 166,862
Translation adjustment -- -- -- (72,144) -- (72,144)
------------
Comprehensive income 94,718
------------
Stock options exercised 1,750 18 2,391 -- -- 2,409
------------ ------------ ------------ ------------ ------------ ------------
BALANCE AT DECEMBER 31, 2001 2,650,921 $ 26,510 $ 12,541,431 $ (440,386) $ 1,553,406 $ 13,680,961
============ ============ ============ ============ ============ ============
The accompanying notes are an integral part of these
condensed consolidated financial statements.
5
AMTECH SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended December 31, 2001 and 2000
(Unaudited)
2001 2000
----------- -----------
OPERATING ACTIVITIES:
Net income (loss) $ 166,862 $ (717,094)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Cumulative effect of change in accounting principle, net of tax -- 690,211
Depreciation and amortization 103,407 86,295
Provision for write-off of inventory and receivables 28,747 38,597
Deferred income taxes 5,000 (40,000)
Decrease (increase) in:
Accounts receivable (155,469) (738,216)
Inventories, prepaid expenses and other assets 752,140 (729,958)
Increase (decrease) in:
Accounts payable (148,601) 506,137
Accrued liabilities and customer deposits 340,544 431,161
Deferred Profit (175,998) 588,397
Income taxes payable (54,186) (121,000)
----------- -----------
Net Cash Provided By (Used In) Operating Activities 862,446 (5,470)
----------- -----------
INVESTING ACTIVITIES:
Purchases of property, plant and equipment (109,023) (236,638)
----------- -----------
Net Cash Used In Investing Activities (109,023) (236,638)
----------- -----------
FINANCING ACTIVITIES:
Proceeds from warrant and stock option exercises 2,409 278,014
Payments on mortgage loan -- (2,389)
----------- -----------
Net Cash Provided By Financing Activities 2,409 275,625
----------- -----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 12,066 12,198
----------- -----------
CASH AND CASH EQUIVALENTS:
Net increase 767,898 45,715
Beginning of period 5,998,120 5,784,500
----------- -----------
END OF PERIOD CASH AND CASH EQUIVALENTS $ 6,766,018 $ 5,830,215
=========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 3,409 $ 10,090
Income taxes paid 137,000 498,150
The accompanying notes are an integral part of these
condensed consolidated financial statements.
6
AMTECH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED DECEMBER 31, 2001
1. BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements include the
accounts of Amtech Systems, Inc. and its wholly-owned subsidiaries,
Tempress Systems, Inc., based in Heerde, The Netherlands, and P. R. Hoffman
Machine Products, Inc. (collectively, the "Company"). All significant
intercompany balances and transactions have been eliminated in
consolidation.
The accompanying condensed consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States, pursuant to the rules and regulations of the Securities and
Exchange Commission (the "SEC"), and are unaudited. In the opinion of
management, all adjustments (which include only normal recurring
adjustments) necessary to present fairly the financial position, results of
operations, and cash flows for the periods presented have been made.
Certain information and footnote disclosures normally included in financial
statements have been condensed or omitted pursuant to the rules and
regulations of the SEC. These condensed consolidated financial statements
should be read in conjunction with the consolidated financial statements
and notes thereto included in the Company's Annual Report on Form 10-K for
the fiscal year ended September 30, 2001.
The consolidated results of operations for the three months ended December
31, 2001, are not necessarily indicative of the results to be expected for
the full year.
2. ADOPTION OF SAB 101 DURING FISCAL YEAR 2001
The fiscal 2001 amounts are adjusted to reflect the Company's adoption of
Securities and Exchange Commission Staff Accounting Bulletin No. 101 ("SAB
101"), "Revenue Recognition in Financial Statements," effective October 1,
2000, as discussed in the Company's Form 10-K for the year ended September
30, 2001.
3. REVENUE RECOGNITION
During the fourth quarter of fiscal 2001, the Company changed its revenue
recognition policy retroactive to October 1, 2000, based on guidance
provided in SAB 101. The Company recognizes revenue when persuasive
evidence of an arrangement exists; title transfers, generally upon shipment
or services have been rendered; the seller's price is fixed or determinable
and collectibility is reasonably assured. Certain of the Company's product
sales are accounted for as multiple-element arrangements. For the
semiconductor equipment segment, if the Company has met defined customer
specifications with similarly situated customers and the specific
7
equipment and process involved, the Company recognizes equipment revenue
upon shipment and transfer of title, and the portion of the revenue that is
contingent upon installation and acceptance, generally 10% - 20% of a
system's selling price, is deferred until those activities are completed.
Product sales that are shipped, but do not meet this criteria are deferred
and recognized upon customer acceptance.
Equipment sold by the polishing supplies segment does not involve process
guarantees or acceptance criteria, so the related revenue is recorded upon
shipment. For all segments, sales of spare parts and consumables are
recognized upon shipment, as there are no post shipment obligations other
than standard warranties. Service revenues are recognized as services are
performed. Revenue related to service contracts is recognized upon
performance of the services requested by the customer.
In accordance with guidance provided in SAB 101, the Company recorded a
non-cash charge of $690,211 (after reduction for income taxes of $410,000),
or $0.26 per basic share on October 1, 2000 to reflect the cumulative
effect of the accounting change.
During the three months ended December 31, 2000, the Company recognized
revenue of $662,362 and related gross profit of $213,052 that were included
in the cumulative effect adjustment as of October 1, 2000. During the three
months ended December 31, 2001, the Company recognized revenue of $499,707
and related gross profit of $88,000 that were included in the cumulative
effect adjustment as of October 1, 2000.
4. INVENTORIES
The components of inventories are as follows:
December 31, September 30,
2001 2000
---------- ----------
Purchased parts and raw materials $2,385,997 $2,487,470
Work-in-process 1,207,072 1,255,676
Finished goods 346,008 1,061,311
---------- ----------
Total inventory $3,939,077 $4,804,457
========== ==========
8
5. EARNINGS PER SHARE
Three Months Ended December 31,
-------------------------------
2001 2000
---------- -----------
Net income (loss) $ 166,862 $ (717,094)
Weighted average shares outstanding:
Common shares 2,680,891 2,604,964
Common equivalents 117,439 --
---------- -----------
2,798,330 2,604,964
========== ===========
Earnings Per Share:
Basic $ .06 $ (.27)
Diluted $ .06 $ (.27)
6. RECENT ACCOUNTING PRONOUNCEMENTS
In July 2001, the Financial Accounting Standards Board ("FASB") issued
Statements of Financial Accounting Standards No. 141, "Business
Combinations" ("SFAS No. 141"), and No. 142, "Goodwill and Other Intangible
Assets" ("SFAS No. 142"). SFAS No. 141 eliminates poolings of interest as a
method for accounting for business combinations. SFAS No. 142 requires the
discontinuance of the amortization of goodwill and intangible assets with
indefinite lives and at least an annual assessment of whether there has
been an impairment of such assets that needs to be recognized as an
impairment charge. SFAS Nos. 141 and 142 must be adopted by the Company no
later than October 1, 2002. Since amortization of goodwill is currently an
estimated $.1 million per year, the discontinuance of such amortization
will not have a material affect on the Company's net income or financial
condition. Management does not expect to incur an impairment charge related
to its recorded goodwill, approximately $.8 million as of December 31,
2001.
9
7. BUSINESS SEGMENT INFORMATION
The Company classifies its products into two core business segments: (1)
the semiconductor equipment segment which designs, manufactures and markets
semiconductor wafer processing equipment used in the fabrication of
integrated circuits, and (2) the polishing supplies segment, which designs,
manufactures and markets carriers, templates and equipment used in the
lapping and polishing of wafer thin materials, including silicon wafers
used in the production of semiconductors. Information concerning the
Company's business segments in fiscal years 2002 and 2001 is as follows:
Three Months Ended December 31,
-------------------------------
2001 2000
----------- -----------
Revenues
Semiconductor equipment $ 4,385,413 $ 1,433,607
Polishing supplies 1,071,503 2,169,043
----------- -----------
$ 5,456,916 $ 3,602,650
=========== ===========
Operating profit (loss)
Semiconductor equipment $ 316,887 $ (439,286)
Polishing supplies (103,838) 292,479
----------- -----------
Total operating profit (loss) 213,049 (146,807)
Interest income - net 34,813 73,662
----------- -----------
Income (loss) before income taxes and cumulative
effect of change in accounting principle $ 247,862 $ (73,145)
=========== ===========
8. LEGAL PROCEEDINGS
On or about August 31, 2000, a "P.R. Hoffman Machine Products" was one of
11 companies named in a legal action being brought by North Middleton
Township in Carlisle, Pennsylvania, the owner of a landfill allegedly found
to be contaminated. No detailed allegations have been filed as part of this
legal action, which the Company believes was filed to preserve the right to
file claims for contribution to the clean-up of the landfill at a later
date. The Company acquired the assets of P.R. Hoffman Machine Products
Corporation in an asset transaction consummated on July 1, 1997. The
landfill was closed and has not been used by P.R. Hoffman since sometime
prior to completion of the Company's acquisition. Therefore, the Company
believes that the named company is the prior owner of the acquired assets.
Under the terms of the Asset Purchase Agreement governing the acquisition,
the prior owner, P.R. Hoffman Machine Products Corporation, is obligated to
indemnify the Company for any breaches of P.R. Hoffman's representations
and warranties in the Asset Purchase Agreement, including representations
relating to environmental matters. In accordance with the terms of the
Asset Purchase Agreement, the Company has provided notice to the prior
owner of P.R. Hoffman Machine Products Corporation of the Company's intent
to seek indemnification from such owner for any liabilities resulting from
this legal action. Based on information available to the Company as of the
10
date of this report, management believes the Company's costs, if any, to
resolve this matter will not be material to the its results of operations
or financial position.
9. CONCENTRATION OF CREDIT RISK AND USE OF ESTIMATES
The preperation of financial statements in conformity with accounting
principles generally accepted in the United States 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 financial statements and the reported amounts of revenues and
expenses during the year. Actual results could differ from those estimates.
As of December 31, 2001, receivables from customers in the optical
component industry comprised 26% of total receivables, of which three
accounts comprised 25% of total receivables, representing a concentration
of credit risk as defined by SFAS No. 105, "Disclosure of Information about
Financial Instruments with Off-Balance Sheet Risk and Financial Instruments
with Concentration of Credit Risk." As of September 30, 2001, receivables
from customers in the optical component industry comprised 51% of total
receivables, of which three accounts comprised 39% of total receivables.
In July 2001, an optical component customer filed a petition for protection
from creditors under Chapter 11 of the U.S. Bankruptcy Code, while owing
the Company approximately $815,000, an example of possible problems caused
by concentrations of credit risk. The amount of the sale was $1,609,000.
The customer had made payments of $794,000 before filing, leaving an unpaid
balance of approximately $815,000. Through increased reserves the Company
has written down this receivable to an estimated net realizable value of
$225,000.
11
AMTECH SYSTEMS, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth certain operational data as a percentage of
net revenue for the periods indicated:
Three Months Ended December 31,
-------------------------------
2001 2000
----- -----
Net revenue 100.0% 100.0%
Cost of product sales (75.8) (67.9)
----- -----
Gross margin 24.2 32.1
Selling, general and
administrative expenses (18.6) (33.2)
Research and development (1.6) (3.0)
----- -----
Operating profit (loss) 4.0% (4.1)%
===== =====
NET REVENUE. The Company's net revenue for the three months ended December
31, 2001 was $5.4 million, an increase of $1.8 million, or 52%, compared to net
revenue of $3.6 million for the first quarter of fiscal 2001. Revenue for the
three months ended December 31, 2001 and 2000 included $.5 million and $.7
million, respectively, of revenue that was included in the cumulative effect
adjustment as of October 1, 2000, arising from the Company's adoption of SAB
101. During the quarter ended December 2000, a significant portion of the
systems sales were new products or otherwise had not yet been demonstrated to
meet the customers' specifications, leading to the net deferral of $3.3 million
of systems shipped during that quarter. Conversely, during the quarter ended
December 31, 2001, the value of systems that were demonstrated to meet the
customers' specifications exceeded the value of shipments by $1.1 million.
With the change in revenue recognition pursuant to the guidance provided in
Securities and Exchange Commission ("SEC") Staff Accounting Bulletin No. 101
("SAB 101") at least some portion of systems sales in the semiconductor
equipment segment is deferred generally until it has been installed,
demonstrated to meet the customer's specifications and accepted by the customer.
Some of the factors that can affect the length of time from shipment to full
revenue recognition are customer delays in site preparation, availability of our
technicians, and the time it takes for the customer to obtain local permits.
Because the selling price of systems can range from a low of $150,000 for
automation products to a high of $1.2 million on a fully automated diffusion
furnace, these factors significantly affect the timing of revenue recognition
from customer to customer and system to system, which will increase the
volatility in revenue.
12
Shipments in the first quarter of fiscal 2002 were $4.4 million, compared
to $3.7 million in the fourth quarter of fiscal 2001 and $6.8 million in the
first quarter of fiscal 2001, reflecting the continuation of the severe downturn
in the semiconductor industry.
GROSS MARGIN. The Company's gross margin increased by approximately $.1
million, or 14%, to $1.3 million for the three months ended December 31, 2001,
from $1.2 million during the comparable period of the previous fiscal year. The
increase in gross margin resulted from the 52% increase in revenue discussed
above, which was partially offset by the effect of a lower gross margin
percentage. Gross margin as a percentage of sales was 24% in the first quarter
of fiscal 2002, compared to 32% in the first quarter of fiscal 2001, with the
erosion resulting from competitive pricing pressure, a less favorable product
mix and increased warranty costs.
In the semiconductor segment, gross margin declined to 27% of revenues in
the first quarter of fiscal 2002, compared to 36% in the prior year, also as a
result of competitive pricing pressure, product mix and increased warranty
costs. The gross margin of the polishing supply segment declined to 13% of sales
in the first quarter of fiscal 2002, compared to 29% of sales in the first
quarter of fiscal 2001, as a result of fixed costs being spread over a lower
sales volume.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses for the first quarter of fiscal 2002 decreased by $.2
million, or 15%, to $1.0 million, compared to $1.2 million spent in the first
quarter of fiscal 2001. The decrease in selling, general and administrative
expenses is due primarily to cost reduction programs and a decline in
commissions due to decreased sales through sales representatives.
RESEARCH AND DEVELOPMENT. Research and development costs were essentially
the same, $.1 million, for the three months ended December 31, 2001 and 2000.
OPERATING PROFIT. Operating profit for the first quarter of fiscal 2002 was
$.2 million, an increase of $.3 million, or 245%, compared to an operating loss
of $.1 million in the same period of fiscal 2001. The increase in operating
profit is primarily attributable to the 52% increase in consolidated revenue and
continued cost control.
Operating profit for the polishing supplies segment declined by $.4
million, or 134%, to a loss of $.1 million, compared to a profit of $.3 million
in the first quarter of fiscal 2001, as a result of the $1.1 million decline in
that segment's sales. In the semiconductor equipment segment, operating profit
increased by $.8 million, or 170%, to $.3 million, compared to a loss of $.4
million in the first quarter of fiscal 2001. The increase in the first quarter
operating profit of the semiconductor equipment segment is primarily due to the
$3.0 million increase in net revenues. On a consolidated basis, operating
profits in the first quarter of fiscal 2002 represented approximately 4% of
revenue, while the operating loss in the first quarter of fiscal 2001
represented a loss of approximately 4% of revenue.
NET INTEREST INCOME. During the first quarter of fiscal 2002, net interest
income decreased by approximately $39,000 to $35,000, compared to $74,000 in the
corresponding period of fiscal 2001, due to a decline in interest rates.
13
As a result of the foregoing factors, income before income taxes and the
cumulative effect of change in accounting principle for the first quarter of
fiscal 2002 was $.2 million, an increase of 338%, compared to a loss before
taxes of $.1 million in the first quarter of fiscal 2001.
PROVISION FOR INCOME TAXES. Income tax expense of $81,000, recorded at an
effective tax rate of 33%, resulted in net income for the first quarter of
fiscal 2002 of approximately $167,000. During the same quarter of fiscal 2001,
the Company recorded income tax benefit of approximately $46,000, reflecting a
38% effective tax rate and resulting in a net loss before cumulative effect of
change in accounting principle of approximately $27,000. The lower effective tax
rate in the most recent quarter is due to a decrease in the proportion of
taxable income arising in jurisdictions with higher tax rates.
NET INCOME. Net income for the first quarter of fiscal 2002 was $.2
million, or $.06 per diluted share, representing an increase of $.9 million or
124%, compared to a net loss as restated after the cumulative effect of change
in accounting principle of $.7 million, or $.27 per diluted share, in the first
quarter of fiscal 2001. The difference is primarily due to the cumulative effect
of a change in accounting principle (SAB 101) of $.7 million recorded in the
first quarter of fiscal 2001 and higher sales in the first quarter of fiscal
2002.
BACKLOG. At December 31, 2001, the order backlog was $7.3 million, a
decrease of $2.2 million, or 23%, from the $9.5 million backlog at September 30,
2001. In addition, pursuant to SAB 101, the Company has deferred $3.4 million of
revenue, which net of related deferred cost represents deferred profits of $1.4
million. During the first quarter of the current fiscal year the new orders for
both business segments were approximately $2.2 million, significantly lower than
any quarter since the quarter ended March 31, 1999, the end of the previous
industry slowdown. The Company cannot reasonably estimate the duration of the
industry slowdown or the extent to which it will adversely affect the Company's
future results of operations.
Due to the possibility of customer changes in delivery schedules, order
cancellations, potential delays in product shipments, delays in obtaining
inventory parts from suppliers, failure to satisfy customer acceptance
requirements and changes in product mix, our backlog as of any point in time may
not be representative of actual sales and profitability in any future period. A
reduction in backlog during any particular period could have a material adverse
affect on our business prospects, financial condition and results of operations.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 2001, the Company had $6.8 million of readily available
liquidity in the form of cash and cash equivalents, compared to cash and cash
equivalents of $6.0 at September 30, 2001, an increase of approximately $.8
million. The Company continues to believe that there is sufficient liquidity for
existing operations and its expansion plans.
CASH FLOW. The $.8 million net increase in cash during the three months
ended December 31, 2001 approximates the cash flow provided by the operations,
which was $.9 million. The cash flow from operations is comprised primarily of
$.2 million of net income and increases in cash from a $.8 million decrease in
inventories and a $.3 million increase in accrued liabilities and customer
14
deposits, which were offset by an increase in accounts receivable of $.2 million
and decreases in accounts payable and deferred profit of $.1 and $.2 million,
respectively. Investing activities consisted of $.1 million in purchases of
property, plant and equipment.
The large decrease in inventories occurred because a large system that was
finished in the fourth quarter of fiscal 2001 shipped in the first quarter of
fiscal 2002. However, inventory is at and may remain at higher than historical
levels for several more quarters. The Company believes that inventory will not
increase further and does not expect any significant losses to occur in the
disposing of excess inventory.
At December 31, 2001, working capital was $11.6 million, up $.1 million
from $11.5 million at September 30, 2001. The Company's current ratio increased
slightly to 3.5:1 at the end of the first quarter of fiscal 2002, from 3.4:1 at
September 30, 2001. The Company believes that its current ratio continues to
evidence the Company's a strong financial condition. At December 31, 2001, cash
and cash equivalents comprised 36% of total assets and stockholders' equity
accounted for 74% of total capitalization. The Company believes that it
continues to possess the financial strength necessary to achieve continued
growth.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
For financial market risks related to changes in interest rates and foreign
currency exchange rates, refer to Part II, Item 7A, Quantitative and Qualitative
Disclosures About Market Risk, in the Company's Annual Report on Form 10-K for
the fiscal year ended September 30, 2001. There are no material changes in
reported market risks from September 30, 2001.
FORWARD-LOOKING STATEMENTS
The statements contained in this quarterly report on Form 10-Q that are not
historical fact are forward-looking statements (as such term is defined in the
Private Securities Litigation Reform Act of 1995). These statements can be
identified by the use of forward looking terminology such as "believes,"
"expects," "may," "will," "should," "anticipates," or "possible," or the
negative thereof or other written variations thereof or comparable terminology.
The forward-looking statements contained herein are based on current
expectations that involve a number of risks and uncertainties. Among others,
these forward-looking statements are based on assumptions that (a) the Company
will not lose a significant customer or customers, (b) the Company will not
experience significant reductions in demand or rescheduling or cancellation of
customer purchase orders, (c) the Company's products will remain accepted within
their respective markets and will not be significantly further replaced by newer
technology equipment, (d) competitive conditions within the Company's markets
will not materially deteriorate, (e) the Company's efforts to improve its
products and maintain its competitiveness in the markets in which it competes
will continue to progress and that the savings associated with these
expenditures and/or the increased product demand resulting therefrom justifies
such development costs, (f) the Company will be able to retain, and when needed,
add key technical and management personnel, (g) business or product
acquisitions, if any, will be successfully integrated and the results of
operations therefrom will support the acquisition price, (h) the Company's
forecasts will accurately anticipate market demand, (i) there will be no
15
material adverse changes in the Company's existing operations, (j) the Company
will be able to obtain sufficient equity or debt funding to increase its capital
resources by the amount needed for new business or product acquisitions, if any,
(k) the semiconductor equipment industry will not experience a further slowdown
during fiscal 2002, (l) the condition in the Asian markets will continue to
improve, (m) the Company will be able to continue to control costs, (n) demand
for the Company's products will not be adversely and significantly influenced by
trends within the semiconductor industries, including consolidation of
semiconductor manufacturing operations through mergers and the subcontracting
out of the production of semiconductors to foundries, and (o) the effects of
adopting SAB No. 101 will largely be offset by increased sales. Assumptions
related to the foregoing involve judgments with respect to, among other things,
future economic, competitive and market conditions, all of which are beyond the
control of the Company. Although the Company believes that the assumptions
underlying the forward-looking statements are reasonable, any of the assumptions
could prove inaccurate and, therefore, there can be no assurance that the
results contemplated in forward-looking statements will be realized. In
addition, the business and operations of the Company are subject to substantial
risks, which increase the uncertainty inherent in such forward-looking
statements. In light of the significant uncertainties inherent in the
forward-looking information included herein, such information should not be
regarded as a representation by the Company, or any other person, that the
objectives or plans for the Company will be achieved.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
On or about August 31, 2000, a "P.R. Hoffman Machine Products" was one of
11 companies named in a legal action being brought by North Middleton Township
in Carlisle, Pennsylvania, the owner of a landfill allegedly found to be
contaminated. No detailed allegations have been filed as part of this legal
action, which the Company believes was filed to preserve the right to file
claims for contribution to the clean-up of the landfill at a later date. The
Company acquired the assets of P.R. Hoffman Machine Products Corporation in an
asset transaction consummated on July 1, 1997. The landfill was closed and has
not been used by P.R. Hoffman since sometime prior to completion of the
Company's acquisition. Therefore, the Company believes that the named company is
the prior owner of the acquired assets. Under the terms of the Asset Purchase
Agreement governing the acquisition, the prior owner, P.R. Hoffman Machine
Products Corporation, is obligated to indemnify the Company for any breaches of
P.R. Hoffman's representations and warranties in the Asset Purchase Agreement,
including representations relating to environmental matters. In accordance with
the terms of the Asset Purchase Agreement, the Company has provided notice to
the prior owner of P.R. Hoffman Machine Products Corporation of the Company's
intent to seek indemnification from such owner for any liabilities resulting
from this legal action. Based on information available to the Company as of the
date of this report, management believes the costs, if any, to resolve this
matter will not be material to the Company's results of operations or financial
position.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8K.
(a) Exhibits
None.
(b) Reports on Form 8-K
None.
SIGNATURE
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/ Robert T. Hass Dated: February 13, 2002
------------------------------------------ -----------------
Robert T. Hass, Vice-President-Finance and
(Chief Financial and Accounting Officer)
17