UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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 September 30, 2000
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 0-22114
ASYST TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
California 94-2942251
(State or other jurisdiction of incorporation (IRS Employer
or organization) identification No.)
48761 Kato Road, Fremont, California 94538
(Address of principal executive offices)
(510) 661-5000
(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 ____
---
The number of shares of the registrant's Common Stock, no par value, outstanding
as of October 31, 2000 was 32,857,577.
- --------------------------------------------------------------------------------
ASYST TECHNOLOGIES, INC.
INDEX
Part I. Financial Information Page No.
--------------------- --------
Item 1. Financial Statements
Condensed Consolidated Balance Sheets --
September 30, 2000 and March 31, 2000 2
Condensed Consolidated Statements of Operations -
Three Months Ended September 30, 2000 and
September 30, 1999 and Six Months Ended
September 30, 2000 and September 30, 1999 3
Condensed Consolidated Statements of Cash Flows --
Six Months Ended September 30, 2000 and
September 30, 1999 4
Notes to Condensed Consolidated Financial
Statements 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
Item 3. Quantitative and Qualitative Disclosures About Market Risk 16
Part II. Other Information
Item 1. Legal Proceedings 17
Item 4. Submission of Matters to a Vote of Security Holders 17
Item 6. Exhibits and Reports on Form 8-K 18
Signatures 19
- ----------
Exhibit Index 20
- -------------
1
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
ASYST TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
September 30, March 31,
2000 2000
-------------- -------------
(unaudited)
ASSETS
Current assets:
Cash $ 51,632 $ 12,638
Short-term investments 64,894 93,450
Accounts receivable, net 98,508 74,278
Inventories 73,263 49,482
Deferred tax asset 14,402 20,501
Prepaid expenses and other current assets 15,289 15,368
-------------- -------------
Total current assets 317,988 265,717
-------------- -------------
Property and equipment, net 31,086 27,312
Goodwill and other assets, net 39,308 36,171
-------------- -------------
$ 388,382 $ 329,200
============== =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 498 $ 5,285
Short-term loans 25,355 22,816
Accounts payable 47,894 38,638
Accrued liabilities and other current liabilities 18,796 14,294
Customer deposits 9,533 8,144
Income taxes payable 9,293 4,990
-------------- -------------
Total current liabilities 111,369 94,167
-------------- -------------
Long-term liabilities:
Long-term debt, net of current portion 819 910
Other long-term liabilities 2,357 1,017
-------------- -------------
Total long-term liabilities 3,176 1,927
-------------- -------------
Shareholders' equity:
Common stock 248,466 240,594
Retained earnings (accumulated deficit) 25,371 (7,488)
-------------- -------------
Total shareholders' equity 273,837 233,106
-------------- -------------
$ 388,382 $ 329,200
============== =============
The accompanying notes are an integral part of these condensed
consolidated financial statements.
2
ASYST TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited; in thousands, except per share amounts)
Three Months Ended Six Months Ended
September 30, September 30,
------------------------------- ----------------------------
2000 1999 2000 1999
------------- -------------- ----------- ------------
Net sales $ 126,922 $ 40,696 $ 250,593 $ 67,782
Cost of sales 67,458 22,327 135,062 38,167
----------- ----------- ----------- -----------
Gross profit 59,464 18,369 115,531 29,615
----------- ----------- ----------- -----------
Operating expenses:
Research and development 10,851 4,456 20,572 8,691
Selling, general & administrative 22,984 11,729 44,435 22,457
Non-recurring charges -- 4,000 -- 4,000
Goodwill amortization 1,366 614 3,068 1,228
----------- ----------- ----------- -----------
Total operating expenses 35,201 20,799 68,075 36,376
----------- ----------- ----------- -----------
Operating income (loss) 24,263 (2,430) 47,456 (6,761)
Other income, net 1,648 299 2,959 285
----------- ----------- ----------- -----------
Income (loss) before provision (benefit) for
Income taxes 25,911 (2,131) 50,415 (6,476)
Provision (benefit) for income taxes 8,937 635 17,556 (842)
----------- ----------- ----------- -----------
Net income (loss) $ 16,974 $ (2,766) $ 32,859 $ (5,634)
=========== =========== =========== ===========
Basic earnings (loss) per share $ 0.53 $ (0.11) $ 1.02 $ (0.22)
=========== =========== =========== ===========
Diluted earnings (loss) per share $ 0.49 $ (0.11) $ 0.94 $ (0.22)
=========== =========== =========== ===========
Shares used in the per share calculation:
Basic earnings (loss) per share 32,308 25,656 32,235 25,064
=========== =========== =========== ===========
Diluted earnings (loss) per share 34,840 25,656 35,109 25,064
=========== =========== =========== ===========
The accompanying notes are an integral part of these condensed
consolidated financial statements.
3
ASYST TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; in thousands)
Six Months Ended
September 30,
---------------------------
2000 1999
----------- ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 32,857 $ (5,634)
Adjustments to reconcile net income (loss) to net cash provided
(used) by operating activities:
Depreciation and amortization 6,909 3,504
Adjustment to conform year end of pooled company -- (2,290)
Change in provision for doubtful accounts 606 43
Shares issued for Board of Director's compensation 129 --
Shares issued as awards 28 --
Tax benefit associated with employee option plans 4,616 --
Purchased in-process research and development of acquired
business -- 4,000
Changes in current assets and liabilities:
Accounts receivable (24,835) (15,146)
Inventories (23,781) (4,406)
Prepaid expenses and other current assets 79 198
Deferred tax asset 6,099 (342)
Other asset, net (3,160) 317
Accounts payable 9,255 9,235
Accrued liabilities and other current liabilities 6,093 476
Customer deposits 1,389 (764)
Income taxes payable 4,303 (34)
---------- ---------
Net cash provided (used) by operating activities 20,589 (10,843)
---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of short-term investments (57,500) (64,047)
Sale of short-term investments 86,056 75,398
Purchase of property and equipment (7,565) (3,401)
Increase in other assets -- (724)
Cash used in the acquisition of Palo Alto Technologies, Inc. -- (4,639)
Cash used to purchase additional interest in MECS Corporation (3,095) --
---------- ---------
Net cash provided by investing activities 17,896 2,587
---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Net principal payments on current and long-term debt (5,131) (10,066)
Net proceeds from short-term loans 2,541 --
Issuance of common stock 3,099 23,964
---------- ---------
Net cash provided by financing activities 509 13,898
---------- ---------
INCREASE IN CASH AND CASH EQUIVALENTS 38,994 5,642
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 12,638 6,382
---------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 51,632 $ 12,024
========== =========
The accompanying notes are an integral part of these condensed
consolidated financial statements.
4
ASYST TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
BASIS OF PRESENTATION:
The condensed consolidated financial statements include the accounts of
Asyst Technologies, Inc. (the "Company"), a California corporation (the
"Company"), and its wholly owned subsidiaries. Significant intercompany accounts
and transactions have been eliminated. On June 2, 1999 the Company acquired
Progressive System Technologies, Inc. ("PST") in a transaction accounted for
using the pooling of interests accounting method. Accordingly, the restated
condensed consolidated financial statements of the Company give retroactive
effect to the merger with PST. All material intercompany transactions have
been eliminated.
While the financial information furnished is unaudited, the condensed
consolidated financial statements included in this report reflect all
adjustments (consisting only of normal recurring adjustments) which the Company
considers necessary for the fair presentation of the results of operations for
the interim periods covered and of the financial condition of the Company at the
date of the interim balance sheet. The Company closes its books on the last
Saturday of each quarter and thus the actual date of the quarter-end is usually
different from the month-end dates used throughout this 10-Q report. The results
for interim periods are not necessarily indicative of the results for the entire
year. The condensed consolidated financial statements should be read in
connection with the Asyst Technologies, Inc. consolidated financial statements
for the year ended March 31, 2000 included in its Annual Report on Form 10-K.
Short-term Investments
As of September 30, 2000 and March 31, 2000, the Company's short-term
investments consisted of liquid debt investments with maturities, at the time of
purchase, of one year or less and will remain classified as such until such time
they are subsequently sold and converted to cash. All such investments have been
classified as "available-for-sale" and are carried at fair value, with
unrealized holding gains and losses (which have not been material to date), net
of taxes reported as a separate component of shareholders' equity. The cost of
the debt security is adjusted for amortization of premiums and accretion of
discounts to maturity. Such amortization, interest income, realized gains and
losses and declines in value that are considered to be other than temporary, are
included in other income (expense), net, on the accompanying condensed
consolidated statements of operations. There have been no declines in value that
are considered to be other than temporary for any of the three and six months in
the periods ended September 30, 2000. The cost of investments sold is based on
specific identification. The Company does not intend to hold any individual
securities for greater than one year.
Short-term investments by security type consist of the following (dollars
in thousands):
Cost / Fair Value
--------------------------------
September 30, March 31,
2000 2000
-------------- ----------
(unaudited)
Debt securities issued by states of the United States and political
subdivisions of the states $ 7,844 $ 25,650
Corporate debt securities 57,050 67,684
Foreign equity securities -- 116
------------ -----------
Total $ 64,894 $ 93,450
============ ===========
5
Supplemental Statements of Cash Flows Disclosure
Cash paid for interest and domestic and foreign income taxes was as follows
(dollars in thousands):
Six Months Ended
September 30,
----------------------------------
2000 1999
--------------- ---------------
Interest.............................................................. $ 279 $ 166
Income taxes.......................................................... $ 2,710 $ 34
Inventories
Inventories are stated at the lower of cost (first in, first out) or market
and include materials, labor and manufacturing overhead costs. Inventories
consist of the following (dollars in thousands):
September 30, March 31,
2000 2000
------------- ------------
(unaudited)
Raw materials......................................................... $ 43,766 $ 33,432
Work-in-process and finished goods.................................... 29,497 16,050
--------- ---------
Total $ 73,263 $ 49,482
========= =========
Goodwill and Other Assets
Goodwill and other assets, net consisted of the following (dollars in
thousands):
September 30, March 31,
2000 2000
------------- -----------
(unaudited)
Goodwill ............................................................. $ 34,619 $ 33,025
Other assets.......................................................... 4,689 3,146
--------- ---------
Total $ 39,308 $ 36,171
========= =========
Intangible Assets
The realizability of intangible assets, which are included in other assets,
net, in the accompanying condensed consolidated balance sheets, is evaluated
periodically as events or circumstances indicate a possible inability to recover
the net carrying amount. Such evaluation is based on various analyses, including
cash flow and profitability projections that incorporate, as applicable, the
impact on existing lines of business. The analyses involve a significant level
of management judgment in order to evaluate the ability of the Company to
perform within projections.
Provision (Benefit) for Income Taxes
The provision (benefit) for income taxes is attributable to federal, state
and foreign taxes. The annual effective income tax rate for the three and six
month periods ended September 30, 2000 reflect the benefits of tax free interest
income, net operating loss carryforwards, research and development tax credits
and a deduction related to the Company's foreign sales corporation.
Additionally, the current annual effective income tax rate reflects the benefit
of the release of a valuation allowance related to deferred benefits previously
reserved for, related to the utilization of net operating losses of PST, due to
uncertainty as to the ability of PST to generate future taxable income.
Conversely, the annual effective income tax rate for the three and six month
periods ended September 30, 2000 has adversely been effected due to the effects
of a non-deductible charge of approximately $1.8 million related to amortization
of certain intangible assets, primarily related to the acquisition of MECS in
March 2000 and foreign income and withholding taxes in excess of the statutory
rates. For the three and six month periods ended September 30, 1999, the
provision (benefit) for income taxes was impacted by foreign income and
withholding taxes in excess of the statutory rates and the lack of any foreign
sales corporation benefit due to net operating losses and limitations.
6
Earnings (Loss) Per Share
Earnings (loss) per share has been reported based upon Financial Accounting
Standards ("SFAS") No. 128, "Earnings Per Share", which requires presentation of
basic and diluted earnings per share. Basic earnings per share has been computed
using the weighted average number of actual common shares outstanding, while
diluted earnings per share has been computed using the weighted average number
of dilutive common equivalent shares outstanding. Dilutive common equivalent
shares used in the computation of diluted earnings per share result from the
assumed exercise of stock options, warrants and redeemable convertible preferred
stock, using the treasury stock method.
The following table sets forth the calculation of basic and diluted
earnings (loss) per share (unaudited; in thousands, except per share amounts):
Three months ended Six months Ended
September 30, September 30,
2000 1999 2000 1999
------------- ------------ ------------ ------------
Basic earnings (loss) per share:
Net income (loss).............................. $ 16,974 $ (2,766) $ 32,859 $ (5,634)
------------ ----------- ------------ -----------
Weighted average common shares................. 32,308 25,656 32,235 25,064
------------ ----------- ------------ -----------
Basic earnings (loss) per share........... $ 0.53 $ (0.11) $ 1.02 $ (0.23)
============ =========== ============ ===========
Diluted earnings (loss) per share:
Net income (loss).............................. $ 16,974 $ (2,766) $ 32,859 $ (5,634)
------------ ----------- ------------ -----------
Weighted average common shares................. 32,305 25,656 32,235 25,064
Weighted average common share equivalents:
Options ..................................... 2,532 -- 2,874 --
------------ ----------- ------------ -----------
Diluted weighted average common shares......... 34,840 25,656 35,109 25,064
------------ ----------- ------------ -----------
Diluted earnings (loss) per share......... $ 0.49 $ (0.11) $ 0.94 $ (0.23)
============ =========== ============ ===========
Comprehensive Income
In 1999, the Company adopted ("SFAS") No. 130 "Reporting Comprehensive
Income," which establishes standards for reporting and presentation of
comprehensive income. SFAS No. 130, which was adopted by the Company in the
first quarter of 1999, requires companies to report a new measure of income
(loss). Comprehensive income is defined as the change in equity of a company
during a period from transactions and other events and circumstances excluding
transactions resulting from investments by owners and distributions to owners
and is to include unrealized gains and losses that have historically been
excluded from net income (loss) and reflected instead in equity. The Company
has not had any such material transactions or events during the periods and
therefore comprehensive income (loss) is the same as the net income (loss)
reported in the condensed consolidated financial statements.
New Accounting Pronouncement
In June 1998, the Financial Accounting Standards Board issued ("SFAS")
No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS
No. 133 establishes accounting and reporting standards requiring that every
derivative instrument be recorded in the balance sheet as either an asset or
liability measured at its fair value. It requires that changes in the
derivative's fair value be recognized currently in earnings unless specific
hedge accounting criteria are met and that a company must formally document,
designate and assess the effectiveness of transactions that receive hedge
accounting. SFAS No. 133 is effective for fiscal years beginning after June
15, 2000 and cannot be applied retroactively. The Company has not yet
determined the effect SFAS No. 133 will have on its financial position,
results of operations or cash flows.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101("SAB 101"), Revenue Recognition in Financial
Statements. SAB 101 provides guidance on applying generally accepted accounting
principles to revenue recognition issues in financial statements. Among other
things, it is expected that SAB 101 would result in a change from the
established practice in many industries of recognizing revenue at the time of
shipment of a system, and instead delay revenue recognition until the time of
installation or customer acceptance. Because of the cyclical nature of the
semiconductor equipment industry, our obligation with certain customers to
install certain products and to receive acceptance from certain customers and
the amount of time required to complete product installation and receive
acceptance, all where applicable, a change in revenue recognition practices
could have a material affect on revenue in any particular reporting period. We
are currently evaluating the effect that such adoption will have on our
consolidated results of operations and financial position. We will be required
to adopt SAB 101 in the fourth quarter of 2001 with any impact being recorded as
a cumulative effect of a change in accounting in the first quarter of 2001 and
the interim periods of 2001 restated if necessary.
7
REPORTABLE SEGMENTS:
In 1999, the Company adopted SFAS 131, "Disclosures about Segments of an
Enterprise and Related Information. "SFAS 131" supersedes ("SFAS") 14,
"Financial Reporting for Segments of a Business Enterprise", replacing the
"industry segment" approach with the "management" approach. SFAS 131
designates the internal organization that is used by management for making
decisions, evaluating performance and allocating resources of the enterprise
as the source of the Company's reportable segments. SFAS 131 also requires
disclosures about products and services, geographic areas and major customers.
The adoption of SFAS 131 did not impact the results of operations or financial
position but did affect the disclosures of segment information.
The Company offers a family of products and related services to provide a
front-end automation and isolation system for wafer handling in semiconductor
manufacturing facilities. All of the Company's activities are aggregated into a
single operating segment. As a result, no operating segment information is
required.
Net sales by geography were as follows (dollars in millions):
Three Months Ended Six Months Ended
September 30, September 30,
2000 1999 2000 1999
-------- --------- ------- ------
United States.......................... $ 46.2 $ 17.3 $ 93.1 $ 29.6
Taiwan................................. 26.0 10.9 59.1 20.9
Japan.................................. 25.2 8.2 42.4 10.8
Singapore.............................. 9.6 3.0 19.5 4.3
Europe................................. 11.7 1.3 19.2 2.2
Malaysia............................... 7.8 0.0 15.0 0.0
Korea.................................. 0.4 0.0 2.3 0.0
------ ------ ------ ------
Total.............................. $126.9 $ 40.7 $250.6 $ 67.8
====== ====== ====== ======
The net sales by product or service categories comprising the Company's net
sales were as follows (dollars in millions):
Three Months Ended Six Months Ended
September 30, September 30,
2000 1999 2000 1999
--------- --------- --------- ----------
SMIF Systems......................... $ 90.3 $ 28.1 $ 171.9 $ 46.6
Non-SMIF Systems..................... 6.8 3.5 11.6 5.7
SMART Traveler Systems............... 12.1 2.8 23.1 4.5
Robotics............................. 15.9 3.6 34.2 6.6
Services & other..................... 1.8 2.7 9.8 4.4
--------- --------- --------- ----------
Total............................ $ 126.9 $ 40.7 $ 250.6 $ 67.8
========= ========= ========= ==========
ACQUISITION OF MECS CORPORATION:
During the year end March 31, 2000, the Company acquired a 78.6 percent
ownership interest of MECS Corporation ("MECS"), a Japan based manufacturer of
robotic systems used to automate sophisticated semiconductor and flat panel
display manufacturing equipment. In the six-month period ended September 30,
2000, the Company purchased an additional 12.9 percent interest in MECS in
exchange for $3.1 million in cash. As a result, as of September 30, 2000, the
Company has acquired approximately 91.5 percent of the common stock of MECS in
exchange for a total of $16.3 million in cash (including $1.7 million of
transaction costs). The acquisition was accounted for using the purchase
method of accounting. Accordingly, results of MEC's operations have been
combined with those of the Company's since the date a majority interest was
acquired on March 23, 2000.
In connection with the acquistion, a portion of the purchase price was
allocated to the net assets acquired based on their estimated fair values. The
net fair values of the tangible assets acquired and liabilities assumed were
approximately $15.3 million and $25.3 million, respectively, at March 23,
2000. As a result of the purchase price allocation, approximately $19.7
million was assigned to intangible assets related to existing product
technology, the assembled workforce and the excess of purchase price over the
net assets acquired. These intangibles are being amortized over a seven year
period. As of September 30, 2000, charges for amortization of the intangible
asset have been approximately $1.8 million. Management believes that the
unamortized balance of these assets ($20.7 million at September 30, 2000)
which is included in other assets, net, in the accompanying consolidated
balance sheets, is recoverable. In addition, approximately $0.9 million of the
intangible assets acquired consisted of incomplete process research and
development. Because there was no assurance that the Company would be able to
successfully complete the development of MECS products or that the technology
had any alternative future use, such in-process research and development was
charged as an expense in fiscal 2000.
8
The following pro-forma consolidation results of operations are presented
as if the acquisition of MECS had been made at April 1, 1997 (dollars in
thousand, except per share amounts).
Six Months Ended
September 30,
------------------------
2000 1999
--------- ----------
Net sales........................................................................... $ 250,593 $90,818
Net income (loss) .................................................................. 32,859 (9,260)
Basic earnings (loss) per share..................................................... 1.02 (0.37)
Diluted earnings (loss) per share................................................... 0.94 (0.37)
RELATED PARTY TRANSACTIONS:
At September 30, 2000, the Company held four notes receivable, with
balances totaling $1,200,000 from one executive officer (two notes) and two
other employees of the Company. At March 31, 2000, the Company held four notes
receivable, with balances totaling $1,250,000, from one executive officer, one
former executive officer and one other employee of the Company. These loans have
resulted from advances made to these individuals to assist in their relocation
to California. The notes bear interest that ranges from 0.0 percent to 10.0
percent per annum and are fully secured by second deeds of trust on real
property, as well as, other pledged securities of the Company owned by the
individuals, respectively. On March 31, 2000, one of the notes receivable from
the former executive officer totaling $168,750 was forgiven by the Company in
accordance with provisions of the original note. In April 2000, that same former
executive officer repaid an additional $200,000 on a separate note and in July
2000, an employee repaid $250,000 on a note that was issued in February 2000.
The four remaining notes outstanding as of September 30, 2000 mature in May
2002, January 2004, March 2005 and May 2005, respectively.
9
Item 2 - Management's Discussion and Analysis of Results of Financial Condition
and Results of Operations
Forward Looking Statements
Except for the historical information contained herein, the following
discussion includes forward-looking statements within the meaning of Section 27A
of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of
1934 that involve risks and uncertainties. We intend such forward-looking
statements to be covered by the safe harbor provisions for forward-looking
statements contained in the Private Securities Litigation Reform Act of 1995,
and we are including this statement for purposes of complying with these safe
harbor provisions. We have based these forward-looking statements on our current
expectations and projections about future events. The Company's actual results
could differ materially. These forward-looking statements are not guarantees of
future performance and are subject to risks, uncertainties and assumptions,
including those set forth in this section as well as those under the caption,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Words such as "expect," "anticipate," "intend," "plan," "believe," "estimate"
and variations of such words and similar expressions are intended to identify
such forward-looking statements. Our actual results could differ materially from
those anticipated in the forward-looking statements as a result of certain
factors, including but not limited to those discussed in "Risk Factors" in our
Annual Report on Form 10-K. We undertake no obligation to publicly update or
revise any forward-looking statements, whether as a result of new information,
future events or otherwise. In light of these risks, uncertainties and
assumptions, the forward-looking events discussed in this document and in our
Annual Report on Form 10-K might not occur. The following discussion of our
financial condition and results of operations should be read in conjunction with
our consolidated financial statements and the related notes included elsewhere
in this report
Overview
Our sales are closely tied to capital expenditures at wafer fabrication
facilities, worldwide. The majority of our revenues in any single quarter are
typically derived from relatively few large customers, and our revenues will
therefore fluctuate based on a number of factors, including:
. the timing of significant customer orders;
. the timing of product shipments;
. variations in the mix of products sold;
. the introduction of new products;
. changes in customer buying patterns;
. fluctuations in the semiconductor equipment market;
. the availability of key components; and
. general trends in the economy.
In addition, due to production cycles and customer requirements, we often
ship significant quantities of products in the last month of the quarter. This
factor increases the risk of unplanned fluctuations in net sales since we have
limited opportunity to take corrective actions should a customer reschedule a
shipment or otherwise delay an order during the last month of the quarter.
In June 1999, we acquired all of the shares of Progressive System
Technologies, Inc. ("PST"), which manufactures wafer-sorting equipment used by
semiconductor manufacturers. The acquisition was accounted for as a pooling of
interests. Accordingly, our consolidated financial statements for all periods
presented have been restated to include the financial statements of PST.
In August 1999, we acquired all of the shares of Palo Alto Technologies, Inc.
("PAT"), which develops continuous flow transport systems for use in
semiconductor manufacturing facilities. The transaction was accounted for as a
purchase.
11
In October 1999, March 2000, June 2000 and September 2000, we purchased
approximately 9.9 percent, 68.7 percent 4.4 percent and 8.5 percent,
respectively, of the common stock of MECS Corporation ("MECS"), a Japanese
engineering and robotics manufacturing company. The transactions were accounted
for as a purchase.
Since the first quarter of our fiscal year ended March 31, 2000, we have
benefited from increased capital expenditures by semiconductor manufacturers
worldwide driven by current and anticipated growing demand for semiconductor
devices. During fiscal year ended March 31, 2000, we experienced over 40
percent sequential increases in net sales in each quarter. For the quarter
ended June 30, 2000, net sales grew approximately 18 percent over the quarter
ended March 31, 2000, excluding sales by MECS, which was acquired late in the
quarter ended March 30, 2000. During the quarter ended September 30, 2000, net
sales slowed to 3 percent sequential increase over the first quarter of fiscal
year 2001. In light of current industry conditions and slowing growth in
demand for semiconductor devices, we believe that capital expenditures by
semiconductor manufactures may be impacted as well. As a result, we believe
that sequential growth in net sales experienced during the past 12 months will
unlikely be replicated in the upcoming quarters.
We have seen a shift in the international geographical distribution of our
net sales during the last quarter compared to the quarter ended September 30,
1999, as the percent of net sales attributed to customers in Taiwan has
decreased but has been offset by growth in Europe, Singapore and Malaysia. This
can be partially explained by the fact that Taiwan led the rapid capacity
expansion during the past fiscal year, but also by strengthening of demand for
semiconductor devices by European manufacturers and new green-field
semiconductor foundries in Singapore and Malaysia. With the addition of MECS in
this fiscal year's net sales, Japan net sales have also grown as a percentage of
net sales for the three and six month periods ended September 30, 2000, compared
to the same periods last year.
Three and Six Months Ended September 30, 2000 and 1999
The following table sets forth the percentage of net sales represented by
consolidated statements of operations data for the periods indicated:
Three Months Ended Six Months Ended
September 30, September 30,
-----------------------------------------
2000 1999 2000 1999
------ ------ ------ ------
Net sales................................... 100.0% 100.0% 100.0% 100.0%
Cost of sales............................... 53.1 54.9 53.9 56.3
------ ----- ------ ------
Gross profit.......................... 46.9 45.1 46.1 43.7
------ ----- ------ ------
Operating expenses:
Research and development................... 8.5 11.0 8.2 12.8
Selling, general and administrative........ 18.1 28.8 17.7 33.1
Non-recurring charges...................... - 9.8 - 5.9
Goodwill amortization...................... 1.1 1.5 1.2 1.8
------ ----- ------ ------
Total operating expenses.............. 27.7 51.1 27.1 53.6
------ ----- ------ ------
Operating income (loss)............... 19.1 (6.0) 19.0 (9.9)
Other income, net........................... 1.3 0.7 1.2 0.4
------ ----- ------ ------
Income (loss) before provision (benefit)
for income taxes............................ 20.4 5.3 20.2 (9.5)
Provision (benefit) for income taxes........ 7.0 1.5 7.0 (1.2)
------ ----- ------ ------
Net Income (loss)........................... 13.4% (6.8)% 13.2% (8.3)%
====== ===== ====== ======
12
Results of Operations
Net Sales. Net sales increased 211.9 percent from $40.7 million for the
quarter ended September 30, 1999, to $126.9 million for the quarter ended
September 30, 2000. Net sales increased 269.7 percent from $67.8 million for the
six month period ended September 30, 1999, to $250.6 million for the six month
period ended September 30, 2000. Net sales have grown sequentially each quarter
since June 30, 1999 by greater than 30 percent, the sequential growth in net
sales for the quarter ended September 30, 2000 was 2.7 percent. This slowing
trend in net sales is the result of our customers absorbing the substantial new
capacity that they have added during the recent quarters and the anticipated
impact of the slowing rate of growth in the U.S. economy on demand for
semiconductor devices. Although the current sequential increase in net sales
activity is lower than that of recent periods, net sales have stabilized at
levels comparable to those of recent periods. It is unclear to us at this point,
whether concerns over the slow down in the growth rate in the U.S. economy and
its impact in the growth rate for demand of semiconductor devices will cause
some of our customers to delay scheduled capacity ramps in their recently added
facilities.
As a result of the acquisition of MECS in March 2000, robotic product sales
by MECS contributed approximately $11.8 million to net sales for the quarter
ended September 30, 2000 and approximately $24.1 million to net sales for the
six month period ended September 30, 2000, respectively. Excluding the current
contribution of net sales by MECS, net sales for the three and six month periods
ended September 30, 2000 increased $74.4 million, or 182.8 percent and $158.7
million, or 234.1 percent over the three and six month periods ended September
30, 1999 and 3.1 percent sequentially from the first to the second fiscal
quarter of this fiscal year. These increases resulted from significant increases
in our net sales across all our operations and product families in the United
States, Asia Pacific and European geographic regions, as semiconductor
manufacturers have added manufacturing capacity.
International sales have increased by approximately $119.3 million for the
six month period ended September 30, 2000 compared to the six month period ended
September 30, 1999. Net sales in Japan have increased by approximately $31.6
million during the current six month period, of which $18.3 million is
attributed to robotic product sales by MECS. Absent MECS, net sales in Japan
increased by approximately $13.3 million during the six month period ended
September 30, 2000 compared to the six month period ended September 30, 1999.
Net sales in Taiwan have increased by approximately $38.2 million during the
current six month period, of which $2.6 million is attributed to robotic product
sales of MECS. Absent MECS, net sales in Taiwan increased by approximately $35.6
million during the six month period ended September 30, 2000 compared to the six
month period ended September 30, 1999. While net sales to Taiwan have increased
during the current six month period, net sales attributed to Taiwan have
decreased as a percentage of international sales during the same period, as a
result of even higher rates of growth that we have experienced in other
geographic areas. Net sales increased by approximately $15.2 million, $15.0
million and $17.0 million in Singapore, Malaysia and Europe, respectively,
during the six month period ended September 30, 2000, compared to the six month
period ended September 30, 1999. The increase in net sales during the six month
period ended September 30, 2000 have resulted from sales to several new
international customers, as well as continued product sales to our existing
international customer base. Our results of operations have not been adversely
affected by currency exchange rates because we have invoiced substantially all
of our international sales in United States dollars, except in Japan, where
exchange rates have been fairly consistent in recent periods. However, our
results of operations may not be adversely affected by such fluctuations in the
future.
13
International sales by region for the six months ended September 30, 2000 and
1999, are summarized as follows (unaudited; dollars in millions):
Six Months Ended Six Months Ended
September 30, 2000 September 30, 1999
-------------------------------------- -------------------------------------
Geographic Percentage Percentage
Region of of
Net Sales Net Sales Net Sales Net Sales
- ---------------------------- ------------------ --------------- ----------------- ---------------
Taiwan $ 59.1 23.6% $20.9 30.8%
Japan 42.4 16.9 10.8 15.9
Singapore 19.5 7.8 4.3 6.4
Europe 19.2 7.6 2.2 3.2
Malaysia 15.0 6.0 - -
Korea 2.3 0.9 - -
------ ----- ----- -----
$157.5 62.8 % $38.2 56.3 %
====== ===== ===== =====
We have experienced cancellations and delays of orders in the past,
particularly during fiscal year 1999, while the industry was undergoing a
significant downturn. During the three and six months ended September 30, 2000,
cancellation and delays were not significant. Given the cyclical nature of the
semiconductor industry, as well as current industry conditions, we can give no
assurance that there will not be future cancellations or delays in orders.
Gross Margin. Gross margin increased from 45.1 percent of net sales for the
three month period ended September 30, 1999, to 46.8 percent of net sales for
the three month period ended September 30, 2000. Gross margin increased from
43.7 percent of net sales for the six month period ended September 30, 1999, to
46.1 percent of net sales for the six month period ended September 30, 2000. The
growth of net sales has allowed us to achieve increases in gross margins even
after factoring in the generally lower net margins associated with robotic
products, particularly MECS robots and substrate management systems. However,
through the combination of improved absorption of the indirect manufacturing
costs due to increased volume and continued cost reduction efforts, to reduce
direct manufacturing costs, the negative impact on overall gross margin has been
minimized. We intend to attempt to improve gross margins as a percentage of net
sales in the future, through further reductions of direct manufacturing costs
and increased leverage of indirect manufacturing costs through higher volume.
But, continued customer demands for price reductions and other competitive
influences will most likely cause gross margins to remain similar, under similar
levels of business. However, if our net sales decrease from the current levels,
there can be no assurance that we can maintain these levels of gross margin.
Research and Development. Research and development expenses increased 143.5
percent from $4.5 million for the three month period ended September 30, 1999,
to $10.9 million for the three month period ended September 30, 2000. Research
and development expenses increased 136.7 percent from $8.7 million for the six
month period ended September 30, 1999, to $20.6 million for the six month period
ended September 30, 2000. Research and development expenses decreased as a
percentage of net sales from 11.0 percent for the three month period ended
September 30, 1999 to 8.5 percent for the three month period ended September 30,
2000. Research and development expenses decreased as a percentage of net sales
from 12.8 percent for the six month period ended September 30, 1999 to 8.2
percent for the six month period ended September 30, 2000. The increase in
research and development expense is the result of increased spending to support
our new SMIF-300 product series, Plus Portal and transport product technologies.
We increased spending for continuing product enhancements, additions to our
200mm product line, additional product development and enhancement activities
related to our acquisitions of Hine Design Incorporated, PST and MECS. The
decrease in research and development expenses as a percentage of net sales for
the comparative three and six month periods is due primarily to our net sales
increasing at a higher rate than the increase in spending for research and
development activities. We expect that our research and development expenses may
increase in future periods, but will fluctuate as a percentage of net sales.
Selling, General and Administrative. Selling, general and administrative
expenses increased 96.0 percent from $11.7 million for the three month period
ended September 30, 1999, to $23.0 million for the three month period ended
September 30, 2000. Selling, general and administrative expenses increased 97.9
percent from $22.5 million for the six month period ended September 30, 1999, to
$44.4 million for the six month period ended September 30, 2000. The inclusion
of selling, general and administrative activities of PAT and MECS, both acquired
after June 30, 1999, has increased selling, general and administrative expenses
by approximately $1.7 million for the quarter ended
14
September 30, 2000 and $3.7 million for the six month period ended September 30,
2000, over the comparable periods in 1999. Employee headcount in selling,
general and administrative activities since September 30, 1999 has increased
from 448 to 772 employees as of September 30, 2000. This increase was necessary
to support increased marketing efforts, expansions in sales and other functional
areas of our operations driven by the increase in our net sales. The increase in
our headcount has also resulted in increased facility costs to accommodate the
additions to our work force. Additionally, sales commission expense and
incentive based compensation and bonuses increased due to higher net sales and
improved profitability. Selling, general and administrative expenses decreased
as a percentage of net sales from 28.8 percent for the three month period ended
September 30, 1999 to 18.1 percent for the three month period ended September
30, 2000 and have decreased as a percentage of net sales from 33.1 percent for
the six month period ended September 30, 1999 to 17.7 percent for the six month
period ended September 30, 2000. The decrease in selling, general and
administrative expenses as a percentage of net sales is due primarily to net
sales growing at a much higher rate than the increase in spending in selling,
general and administrative activities. We expect that selling, general and
administrative expenses may increase in future periods, although the spending
may vary as a percentage of net sales.
Goodwill Amortization. The purchase price allocations associated with certain
of our acquisitions have resulted in the assignment of amounts to intangible
assets related to the existing product technology, the assembled workforce and
the excess purchase price over the net assets acquired. These amounts are being
amortized over periods ranging from three to fourteen years. Goodwill
amortization expense was $1.4 million and $3.1 million for the three and six
month periods ended September 30, 2000, respectively. Goodwill amortization
expense was $0.6 million and $1.2 million for the three and six month periods
ended September 30, 1999, respectively. During the three and six-month periods
ended September 30, 2000, goodwill amortization expense increased by
approximately $0.8 million and $1.8 million, respectively, over the same periods
last year due primarily to the amortization of the goodwill associated with the
acquisition of MECS in March 2000.
Other Income (expense), Net. Other income (expense), net, includes interest
income, interest expense, royalty income and foreign exchange gain and loss,
which has not been material. Other income (expense), net, increased from $0.3
million for the three months ended September 30, 1999 to $1.6 million for the
three months ended September 30, 2000. Other income (expense), net, increased
from $0.3 million for the six months ended September 30, 1999 to $3.0 million
for the six months ended September 30, 2000. Other income (expense), net
increased during both the three and six months ended September 30, 2000 due to
an increase in interest income earned on higher weighted average investment
balances. Our average cash, cash equivalents and short-term investments balance
for the six months ended September 30, 1999 was approximately $33.2 million,
compared to $111.3 million for the six months ended September 30, 2000. Interest
income increased from approximately $0.4 million and $0.7 million during the
three and six month periods ended September 30, 1999 to approximately $1.3
million and $2.8 million during the three and six month periods ended September
30, 2000. Our average short-term and long-term debt balance increased from $2.5
million for the six months ended September 30, 1999 to $27.8 million for the six
months ended September 30, 2000, due to debt assumed in our acquisition of MECS
in March 2000. Interest expense was approximately $0.2 million and $0.3 million
during the three and six month periods ended September 30, 2000, respectively.
Provision (Benefit) for Income Taxes. We reported a provision for income
taxes of $8.9 million and $17.6 million for the three and six month periods
ended September 30, 2000, respectively, representing an annual effective income
tax rate of approximately 35.0 percent. We reported a provision for income taxes
of $0.6 million and a (benefit) for income taxes of ($0.8) million, representing
an annual effective income tax rate of approximately 34.0 percent for the three
and six month periods ended September 30, 1999. The provision (benefit) for
income taxes is attributable to federal, state and foreign taxes. The annual
effective income tax rate for the three and six month periods ended September
30, 2000 reflects the benefits of tax free interest income, net operating loss
carryforwards, research and development tax credits and a deduction related to
our foreign sales corporation. Additionally, the current annual effective income
tax rate reflects the benefit of the release of a valuation allowance related to
deferred benefits previously reserved for, related to the utilization of net
operating losses of PST, due to uncertainty as to the ability of PST to generate
future taxable income. Conversely, the annual effective income tax rate for the
three and six month periods ended September 30, 2000 has adversely been effected
due to the effects of a non-deductible charge of approximately $1.8 million
related to the amortization of intangible assets primarily related to the
acquisition of MECS in March 2000, and foreign income and withholding taxes in
excess of the statutory rates. Absent the amortization charges, the annual
effective income tax rate would have been 33.6 percent. For the three
15
and six month periods ended September 30, 1999, the provision (benefit) for
income taxes was impacted by foreign income and withholding taxes in excess of
the statutory rates and the lack of any foreign sales corporation benefit due to
net operating losses and limitations.
Item 3 - Quantitative and Qualitative Disclosures About Market Risk
Although we operate and sell products in various global markets,
substantially all sales are denominated in the U.S. dollar therefore reducing
the foreign currency risk. To date, the foreign currency transactions and
exposure to exchange rate volatility have not been significant. We cannot
anticipate with certainty the effect of inflation on our operations. To date,
inflation has not had a material impact on our net sales or results of
operations, however, with the industry's upturn currently underway; labor
markets are tightening thus putting upward pressure on current labor costs. Our
exposure to market risk for changes in interest rates relate primarily to the
investment portfolio. Our investment portfolio consists of short-term, fixed
income securities and by policy is limited by the amount of credit exposure to
any one issuer. Fixed rate securities have their fair market value adversely
affected due to rise in interest rates. To date, the change in interest rate
markets has not had a material impact on our results of operations or the market
value of our investments. Our foreign currency risk, inflation risk and/or
interest rate risk may have a material impact on our financial position, results
of operations or cash flow in the future.
16
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
In October 1996, we filed a lawsuit in the United States District Court
for the Northern District of California against Jenoptik A.G.
("Jenoptik"), Jenoptik-Infab, Inc. ("Infab"), Emtrak, Inc. ("Emtrak")
and Empak, Inc. ("Empak") alleging infringement of two patents related
to the Company's SMART Traveler System. We amended our Complaint in
April 1997 to allege causes of action for breach of fiduciary duty
against Jenoptik and Meissner & Wurst, GmbH, and misappropriation of
trade secrets and unfair business practices against all defendants. Our
Complaint seeks damages and injunctive relief against further
infringement. All defendants filed counter claims, seeking a judgment
declaring the patents invalid, unenforceable and not infringed.
Jenoptik, Infab, and Emtrak also alleged that we had violated federal
antitrust laws and engaged in unfair competition. We denied these
allegations. In May 1998, We and Empak stipulated to a dismissal,
without prejudice, of their respective claims and counter claims
against each other. In November 1998, the court granted defendants'
motion for partial summary judgment as to most of the patent
infringement claims and invited further briefing as to the remainder.
In January 1999, the court granted our motion for leave to seek
reconsideration of the November summary judgment order and also,
pursuant to a stipulation of the parties, dismissed without prejudice
two of the three antitrust counter claims brought by the defendants.
Since then, the parties stipulated to, and the court has ordered, the
dismissal with prejudice of the defendants' unfair competition and
remaining antitrust counterclaim, and the our breach of fiduciary duty,
misappropriation of trade secrets and unfair business practices claims.
On June 4, 1999, the court issued an order by which it granted us
motion for reconsideration in the sense that it considered the merits
of the our arguments, but decided that it would not change its prior
ruling on summary judgment and would also grant summary judgment for
defendants on the remaining patent infringement claim. On October 16,
2000, we filed an appeal with the United States Court of Appeals for
the Federal Circuit and are currently awaiting a ruling.
Item 4. Submission of Matters to a Vote of Security Holders
Our annual meeting of shareholders was held on September 1, 2000 for
the purpose of: (1) electing directors to the Company's Board of
Directors to serve a one-year term expiring on the date of the
Company's 2001 annual meeting of the shareholders and until his
successor is elected and qualified; (2) to approve an amendment to the
Company's Amended and Restated Articles of Incorporation to increase
the authorized number of shares of Common Stock from 50,000,000 to
300,000,000 shares; (3) to ratify the selection of Arthur Andersen LLP
as the independent auditors of the Company for the fiscal year ending
March 31, 2001 and (4) to transact such other business as may have
properly come before the meeting or any adjournment or postponement
thereof. Proxies for the meeting were solicited pursuant to Section
14(a) of the Securities Exchange Act of 1934, as amended, and there was
no solicitation in opposition of management's solicitations. The final
vote on the proposals were recorded as follows:
Proposal 1:
----------
Mihir Parikh was elected to the board of directors for a one-year term
with 28,512,676 votes for and 569,739 votes against.
P. Jackson Bell was elected to the board of directors for a one year term
with 28,516,832 votes for and 565,583 votes against.
Stanley Grubel was elected to the board of directors for a one-year term
with 28,549,332 votes for and 533,083 votes against.
Tsuyoshi Kawanishi was elected to the board of directors for a one-year
term with 28,550,531 votes for and 531,884 votes against.
17
Item 4. Submission of Matters to a Vote of Security Holders (continued)
Robert A. McNamara was elected to the board of directors for a one-year
term with 28,555,082 votes for and 527,333 votes against.
Ashok K. Sinha was elected to the board of directors for a one-year term
with 28,555,091 votes for and 527,324 votes against.
Walter K. Wilson was elected to the board of directors for a one-year term
with 28,553,744 votes for and 528,671 votes against.
Proposal 2:
----------
To approve an amendment to the Company's Amended and Restated Articles of
Incorporation to increase the authorized number of shares of Common Stock
from 50,000,000 to 300,000,000 shares
BROKERED
"FOR" "AGAINST" "ABSTAIN" "NON-VOTES"
----- --------- --------- -----------
16,130,563 12,919,233 32,619 -
Proposal 3:
----------
The selection of Arthur Andersen LLP as the Company's independent auditors
for the fiscal year ending March 31, 2000 was ratified by the following
vote:
BROKERED
"FOR" "AGAINST" "ABSTAIN" "NON-VOTES"
----- --------- --------- -----------
29,010,288 42,346 29,781 -
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27.1 Financial Data Schedule
(b) Form 8-K
A Form 8-K/A was filed on September 25, 2000, related to the
second phase of an acquisition of MECS Corporation by the
Company.
18
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.
ASYST TECHNOLOGIES, INC.
Date: November 14, 2000 By: /s/ Douglas J. McCutcheon
-------------------------- ----------------------------
Douglas J. McCutcheon
Senior Vice President
Chief Financial Officer
Signing on behalf of the
registrant and as the
principal accounting and
financial officer
19
EXHIBIT INDEX
Exhibit Number Description of Exhibit
- -------------- ----------------------
27.1 Financial Data Schedule
20