United States
Securities and Exchange Commission
Washington, D.C. 20549
Form 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the period ended June 30, 2000
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Commission file number 000-30941
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Axcelis Technologies, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 34-1818596
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(State of incorporation) (I.R.S. Employer
Identification No.)
55 Cherry Hill Drive, Beverly, MA 01915
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(Address of principal executive offices) (Zip Code)
(978) 232-4000
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(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 twelve 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 ninety days.
(1) Yes X No
(2) Yes No X
As of August 21, 2000, there were 97,050,000 shares of the registrant's
common stock outstanding.
Page 2
PART I. - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AXCELIS TECHNOLOGIES, INC.
COMBINED BALANCE SHEETS
(in thousands)
(unaudited)
June 30, December 31,
2000 1999
---- ----
ASSETS
Current assets
Cash & short-term investments $ 41,914 $ 3,530
Accounts receivable 117,719 101,335
Receivable from Eaton Corporation 21,748 11,241
Inventories 109,875 83,326
Deferred income taxes 37,586 33,036
Prepaid expenses 2,943 3,024
-------- --------
Total current assets 331,785 235,492
Property, plant & equipment 62,560 73,809
Investment in Sumitomo Eaton Nova Corporation 32,126 22,210
Goodwill 44,341 47,006
Intangible assets 23,303 26,190
Other assets 18,515 18,128
-------- --------
Total assets $512,630 $422,835
======== ========
LIABILITIES & STOCKHOLDER'S NET INVESTMENT
Current liabilities
Accounts payable $ 32,689 $ 24,579
Dividend payable to Eaton Corporation 300,000
Accrued compensation 10,601 8,984
Warranty reserve 27,199 18,568
Other current liabilities 14,934 13,602
-------- --------
Total current liabilities 385,423 65,733
Deferred income taxes 10,666 10,238
Pension & other employee benefit liabilities 3,452 4,568
Stockholder's net investment
Parent Company investment 115,636 347,825
Accumulated other comprehensive income
(loss) (2,547) (5,529)
-------- --------
Total stockholder's net investment 113,089 342,296
-------- --------
Total liabilities & stockholder's net
investment $512,630 $422,835
======== ========
See accompanying notes to combined financial statements.
Page 3
AXCELIS TECHNOLOGIES, INC.
STATEMENTS OF COMBINED OPERATIONS
(in thousands, except for per share amounts)
(unaudited)
Three Months Ended Six Months Ended
June 30 June 30
------------------ ----------------
2000 1999 2000 1999
---- ---- ---- ----
Net sales $165,844 $ 98,814 $308,895 $157,938
Cost of products sold 92,576 57,302 174,153 95,658
-------- -------- -------- --------
Gross profit 73,268 41,512 134,742 62,280
Other costs & expenses
Selling 13,420 8,485 25,018 17,572
General & administrative 14,595 9,751 27,625 19,363
Research & development 17,377 12,549 33,502 24,732
Amortization of goodwill &
intangible assets 2,320 2,320 4,640 4,640
-------- -------- -------- --------
Income (loss) from operations 25,556 8,407 43,957 (4,027)
Other income (expense)
Royalty income 3,949 1,760 7,772 2,725
Equity income (loss) of Sumitomo
Eaton Nova Corporation 3,316 (1,302) 6,656 (3,749)
Other income (expense) - net (1,334) (447) 215 (592)
-------- -------- -------- --------
Total other income (expense) 5,931 11 14,643 (1,616)
-------- -------- -------- --------
Income (loss) before income taxes 31,487 8,418 58,600 (5,643)
Income taxes (credit) 9,916 2,206 18,167 (1,480)
-------- -------- -------- --------
Net income (loss) $ 21,571 $ 6,212 $ 40,433 $ (4,163)
======== ======== ======== ========
Basic & diluted net income (loss)
per share $ .27 $ .08 $ .51 $ (.05)
Shares used in computing basic &
diluted net income (loss) per
share 80,000 80,000 80,000 80,000
Unaudited pro forma basic & diluted
net income per share $ .22 $ .42
Shares used in computing unaudited
pro forma basic & diluted net
income per share 97,050 97,050
See accompanying notes to combined financial statements.
Page 4
AXCELIS TECHNOLOGIES, INC.
STATEMENTS OF COMBINED CASH FLOWS
(in thousands)
(unaudited)
Six Months Ended
June 30
----------------
2000 1999
---- ----
Operating activities
Net income (loss) $ 40,433 $ (4,163)
Adjustments to reconcile to net cash provided
by (used in) operating activities
Depreciation 4,469 4,434
Amortization of goodwill & intangible assets 4,640 4,640
Deferred income taxes (4,122) 4,746
Undistributed (income) loss of Sumitomo
Eaton Nova Corporation (6,656) 3,749
Deferred royalty income from Sumitomo Eaton
Nova Corporation (2,286)
Restructuring charges (4,739)
Changes in operating assets & liabilities,
excluding non-cash restructuring charges
Accounts receivable (27,571) (47,784)
Inventories (26,572) (7,612)
Accounts payable & other current
liabilities 20,143 31,489
Other assets (388) 5,387
Other - net (223) 2,960
--------- ---------
Net cash provided by (used in) operating
activities 4,153 (9,179)
Investing activities
Expenditures for property, plant & equipment (2,683) (8,776)
Sale of Austin, Texas facility 10,967
Other - net (1,431) (901)
--------- ---------
Net cash provided by (used in) investing
activities 6,853 (9,677)
Financing activities
Transfers from (to) Parent Company relating to
Accounts receivable (263,837) (111,865)
Inventories & operating expenses 266,942 137,974
Expenditures for property, plant & equipment 2,683 8,776
Other - net 21,590 (14,347)
--------- ---------
Net cash provided by financing activities 27,378 20,538
--------- ---------
Net increase in cash & short-term investments 38,384 1,682
Cash & short-term investments at beginning
of period 3,530 3,338
--------- ---------
Cash & short-term investments at end of period $ 41,914 $ 5,020
========= =========
See accompanying notes to combined financial statements.
Page 5
AXCELIS TECHNOLOGIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
(unaudited)
Nature of Business and Basis of Presentation
- --------------------------------------------
Axcelis Technologies, Inc. ("Axcelis" or the "Company"), a wholly
owned subsidiary of Eaton Corporation ("Eaton" or "Parent Company") as
of June 30, 2000, is a leading producer of ion implantation equipment
used in the fabrication of semiconductors. The Company also produces
dry strip, photostabilization and rapid thermal processing equipment,
which is used in semiconductor manufacturing primarily before and after
the ion implantation process. In addition, it provides extensive
aftermarket service and support, including spare parts, equipment
upgrades, maintenance services and customer training. The Company has
a 50-50 joint venture in Japan with Sumitomo Heavy Industries, Ltd.
This joint venture, which is known as Sumitomo Eaton Nova Corporation,
or SEN, licenses technology from Axcelis for ion implantation, has exclusive
rights to the territory of Japan and is the leading producer of ion
implantation equipment in Japan.
On April 26, 2000, Eaton announced its plan to reorganize its
semiconductor equipment operations into an independent, publicly-held
company, Axcelis Technologies, Inc. On June 30, 2000 Eaton
substantially completed the transfer of all the assets and related
liabilities of its semiconductor equipment operations to the Company.
The accompanying combined financial statements include the assets,
liabilities, revenues and expenses of Axcelis based on Eaton's
historical amounts. The financial statements include normal recurring
adjustments which are, in the opinion of management, necessary for the
fair presentation of the results of these periods. However, Eaton did not
account for or operate the Company as a separate, stand-alone entity
for the periods presented and, as a result, the financial information
included herein may not reflect the combined financial position,
operating results and cash flows of the Company if it had been a
separate, stand-alone entity during the periods presented or in the
future. Parent Company investment represents Eaton's investment in
Axcelis. All significant intercompany balances and transactions have
been eliminated in the accompanying financial statements. The equity
method is used to account for the 50% investment in SEN.
The accompanying combined financial statements for the three and
six months ended June 30, 2000 and 1999 are unaudited and have been
prepared on a basis consistent with the audited financial statements
included in the Company's Registration Statement (Registration No.333-
36330) on Form S-1 filed with the Securities and Exchange Commission
on May 5, 2000, as amended ("Registration Statement"). The combined
financial statements should be read in conjunction with the combined
financial statements and related notes included in the Registration
Statement. The results of operations for the three and six months
ended June 30, 2000 are not necessarily indicative of results to be
expected for the entire year or any other period.
Page 6
Initial Public Offering
- -----------------------
On July 10, 2000, the Company commenced its initial public
offering (IPO) of 15,500,000 shares of common stock. On July 20, 2000,
the IPO was completed when the underwriters of the IPO exercised their
over-allotment option to purchase an additional 1,550,000 shares. At
the offering price of $22.00 per share, the Company received $352.6
million from these transactions, net of underwriting discounts and
commissions. The net proceeds, together with cash from other sources,
were used to pay a previously declared $300 million dividend to Eaton.
Remaining proceeds will be used for general corporate purposes. Prior
to the IPO, Eaton owned 100% of the 80,000,000 shares of the
outstanding Axcelis common stock. As a result of the IPO, Eaton now
owns 82.4% of the Company's 97,050,000 outstanding shares of common stock.
Eaton currently plans to consummate its divestiture of the Axcelis
common stock to Eaton's shareholders approximately six months following
the IPO by distributing all of its shares of Axcelis common stock in a
tax-free transaction to Eaton shareholders. Eaton may accomplish this
divestiture through a split-off, a spin-off or some combination of both
transactions. Eaton will, in its sole discretion, determine the
timing, structure and terms of the divestiture of the remaining shares
of Axcelis common stock that it owns. This planned divestiture by
Eaton is subject to receiving a private letter ruling from the Internal
Revenue Service that the divestiture will be tax-free to Eaton and its
shareholders and that Eaton's contribution of assets to the Company in
connection with the separation from Eaton will qualify as a tax-free
reorganization for U.S. federal income tax purposes. Eaton filed a
private letter ruling request during the second quarter of 2000.
Net Income (Loss) Per Share
- ---------------------------
Basic and diluted net income (loss) per share amounts are
calculated based on 80,000,000 shares of common stock that were
outstanding prior to the IPO, as described above.
In future periods, basic net income (loss) per share will be
calculated based on the weighted average number of shares of common
stock outstanding during the period. This average will include the
15,500,000 shares of common stock sold in the IPO and the additional
1,550,000 shares of common stock sold upon exercise of the
underwriters' over-allotment option. Diluted net income (loss) per
share will be calculated based on the weighted average number of shares
of common stock outstanding as described previously, plus the dilutive
effect of stock options, calculated using the treasury stock method.
Page 7
Unaudited pro forma basic and diluted net income per share amounts
are calculated based on 80,000,000 shares of common stock outstanding
that are owned by Eaton, plus the additional 17,050,000 shares that were
sold in the IPO in July 2000.
Comprehensive Income (Loss)
- --------------------------
The components of comprehensive income are as follows (in thousands):
Three months ended Six months ended
June 30 June 30
------------------ ----------------
2000 1999 2000 1999
---- ---- ---- ----
Net income (loss) $21,571 $ 6,212 $40,433 $(4,163)
Foreign currency translation
adjustments 3,460 171 2,982 (1,691)
------- ------- ------- -------
Comprehensive income (loss) $25,031 $ 6,383 $43,415 $(5,854)
======= ======= ======= =======
Inventories
- -----------
Inventories are carried at lower of cost, determined using the first-
in, first-out (FIFO) method, or market. The components of inventory follow
(in thousands):
June 30, December 31,
2000 1999
---- ----
Raw materials $ 69,413 $ 54,146
Work-in-process 27,974 19,229
Finished goods 24,162 20,800
-------- --------
121,549 94,175
Inventory allowances (11,674) (10,849)
-------- --------
$109,875 $ 83,326
======== ========
Recent Accounting Pronouncements
- --------------------------------
In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standard (SFAS) No. 133, "Accounting
for Derivative Instruments and Hedging Activities". This statement
revises accounting and reporting standards for derivative
instruments, including derivative instruments embedded in other
contracts, and for hedging activities. SFAS No. 133, as amended by
SFAS No. 137, is effective for fiscal quarters of fiscal years
beginning after June 15, 2000. The Company must adopt the standard by
the first quarter of 2001. SFAS No. 133 is not expected to have a
material impact on the Company's combined financial statements.
Page 8
In December 1999, the Securities and Exchange Commission (SEC)
issued Staff Accounting Bulletin (SAB) No. 101, "Revenue Recognition in
Financial Statements". SAB No. 101, which was subsequently amended by
SAB No. 101A and SAB No. 101B (collectively referred to as SAB 101),
articulates certain of the SEC staff's views in applying generally
accepted accounting principles to revenue recognition in financial
statements. The Company has concluded that its revenue recognition
policy continues to be appropriate and in accordance with generally
accepted accounting principles and SAB 101.
Page 9
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Certain statements in "Management's Discussion and Analysis of
Financial Condition and Results of Operations" are forward-looking
statements that involve risks and uncertainties. Words such as may,
will, should, would, anticipates, expects, intends, plans, believes,
seeks, estimates and similar expressions identify such forward-looking
statements. The forward-looking statements contained herein are based
on current expectations and entail various risks and uncertainties that
could cause actual results to differ materially from these expressed in
such forward-looking statements. Factors that might cause such a
difference include, among other things, those set forth under "Liquidity
and Capital Resources" and "Risk Factors" included in these sections and
those appearing elsewhere in this Form 10-Q. Readers are cautioned not
to place undue reliance on these forward-looking statements, which reflect
management's analysis only as of the date hereof. The Company assumes
no obligation to update these forward-looking statements to reflect actual
results or changes in factors or assumptions affecting forward-looking
statements.
Overview
- --------
We are a leading producer of ion implantation equipment used in
the fabrication of semiconductors. We also produce dry strip,
photostabilization and rapid thermal processing equipment, which is
used in semiconductor manufacturing primarily before and after the ion
implantation process. In addition, we provide extensive aftermarket
service and support, including spare parts, equipment upgrades,
maintenance services and customer training. We have a 50-50 joint
venture with Sumitomo Heavy Industries, Ltd. in Japan.
Separation from Eaton Corporation
- ---------------------------------
Prior to the initial public offering on July 10, 2000, we were a
wholly owned subsidiary of Eaton Corporation (Eaton). On June 30,
2000, Eaton substantially completed the transfer to us of all of the
assets of its semiconductor equipment operations that were not owned by
us, and we assumed the related liabilities. We also entered into
various other agreements with Eaton which provide for transitional
services and support, including those associated with voice and data
transmissions and other data-related operations, accounts receivable,
accounts payable, fixed assets, payroll, general accounting, financial
accounting consolidation, cash management, human resources, tax, legal
and real estate. Under these agreements, we will reimburse Eaton for
its direct and indirect costs of providing these services until the
divestiture, and thereafter, for a limited time, we will reimburse
Eaton for its costs plus an additional fee. The transition periods
covered by these agreements vary, but are generally less than two years
from July 10, 2000. The agreements do not necessarily reflect the
costs of obtaining these services from unrelated third parties or of
providing the applicable services in-house. However, management
believes that purchasing these services from Eaton provides an
Page 10
efficient means of obtaining these services during the transition
period. We must also negotiate new agreements with various third
parties as a separate, standalone entity. There can be no assurance
that the terms we will be able to negotiate for these agreements will
be as favorable as those we have enjoyed as part of Eaton. See
"Arrangements with Eaton" included in our Registration Statement
for a more detailed discussion of the agreements entered into between
our company and Eaton.
Results of Operations
- ---------------------
During the second quarter of 2000, demand for our products and
services continued to grow as semiconductor manufacturers added
capacity and invested in new technology in response to strong demand
for communications and consumer electronics products and the resulting
increase in semiconductor use. As a result, our net sales and net
income for the second quarter of 2000 reached new quarterly records.
Historically, semiconductor and semiconductor manufacturing
equipment industries have been cyclical; therefore, our results of
operations for the three and six months ended June 30, 2000 may not
necessarily be indicative of future operating results.
The following table sets forth combined statements of operations data
expressed as a percentage of net sales for the periods indicated:
Three Months Ended Six Months Ended
June 30 June 30
------------------ ----------------
2000 1999 2000 1999
---- ---- ---- ----
Net sales 100.0% 100.0% 100.0% 100.0%
Gross profit 44.2 42.0 43.6 39.4
Other costs & expenses
Selling 8.1 8.6 8.1 11.1
General & administrative 8.8 9.9 8.9 12.2
Research & development 10.5 12.7 10.9 15.7
Amortization of goodwill &
intangible assets 1.4 2.3 1.5 2.9
----- ----- ----- -----
Income (loss) from operations 15.4 8.5 14.2 (2.5)
Other income (expense)
Royalty income 2.4 1.8 2.5 1.7
Equity income (loss) of SEN 2.0 (1.3) 2.2 (2.4)
Other income (expense) - net (.8) (.5) .1 (.4)
----- ----- ----- -----
Income (loss) before income taxes 19.0 8.5 19.0 (3.6)
Income taxes (credit) 6.0 2.2 5.9 (1.0)
----- ----- ----- -----
Net income (loss) 13.0% 6.3% 13.1% (2.6)%
===== ===== ===== =====
Net Sales
- ---------
Net sales increased $67.0 million, or 67.8%, to a record $165.8
million in the second quarter of 2000 from $98.8 million in the second
quarter of 1999. Net sales increased $151.0 million, or 95.6%, to a
record $308.9 million in the first half of 2000 from $157.9 million in
the first half of 1999. The increases in net sales from comparable
Page 11
periods in 1999 were attributable to continued high levels of capital
spending by our semiconductor manufacturing customers, resulting in
increased demand for our products.
Gross Profit
- ------------
Gross profit increased $31.8 million, or 76.5%, to $73.3 million
in the second quarter of 2000 (44.2% of net sales) from $41.5 million
in the second quarter of 1999 (42.0% of net sales). Gross profit
increased $72.4 million, or 116.3%, to $134.7 million in the first
half of 2000 (43.6% of net sales) from $62.3 million in the first half
of 1999 (39.4% of net sales). Increases from prior year periods were
due primarily to improved capacity utilization as a result of higher sales
volume.
Selling
- -------
Selling expense increased $4.9 million, or 58.2%, to $13.4 million
in the second quarter of 2000 from $8.5 million in the second quarter
of 1999. Selling expense increased $7.4 million, or 42.4%, to $25.0
million in the first half of 2000 from $17.6 million in the first half
of 1999. The increases were primarily due to increased headcount and
commissions associated with the increase in net sales. As a percentage
of net sales, selling expense decreased to 8.1% in the second quarter
of 2000 and the first six months of 2000 compared to 8.6% and 11.1% for
the same periods in 1999, respectively, as costs were spread over a
higher revenue base.
General & Administrative
- ------------------------
General and administrative expense, including the allocation of
Eaton general corporate expenses to our business, increased $4.8
million, or 49.7%, to $14.6 million in the second quarter of 2000 from
$9.8 million in the second quarter of 1999. General and administrative
expense, including the allocation of Eaton general corporate expenses
to our business, increased $8.2 million, or 42.7%, to $27.6 million in
the first half of 2000 from $19.4 million in the first half of 1999.
The increases were primarily attributable to increased personnel costs
associated with an increase in headcount necessary to support our
increased business volume. As a percentage of net sales, general and
administrative expense decreased to 8.8% in the second quarter of 2000
and 8.9% in the first half of 2000 as compared to 9.9% and 12.2% for
the same periods in 1999, respectively, as these costs were spread over
a higher revenue base.
Research & Development
- ----------------------
Research and development expense increased $4.9 million, or 38.5%,
to $17.4 million in the second quarter of 2000 from $12.5 million in
the second quarter of 1999. Research and development expense increased
$8.8 million, or 35.5%, to $33.5 in the first half of 2000 from $24.7
million in the first half of 1999. The increases over comparable prior
year periods resulted from our continued investment in both current
product enhancements and new product development. As a percentage of
net sales, research and development expense decreased to 10.5% in the
second quarter of 2000 and 10.9% in the first half of 2000 as compared
to 12.7% and 15.7% for the same periods in 1999, respectively, as costs
were spread over a higher revenue base.
Page 12
Income (Loss) From Operations
- -----------------------------
Income from operations was $25.6 million in the second quarter of
2000 as compared to $8.4 million in the second quarter of 1999. Income
from operations was $44.0 million in the first half of 2000 compared to
a loss of $4.0 million in the first half of 1999. The increase was
primarily a result of the factors described above.
Other Income (Expense)
- ---------------------
Total other income-net increased to $5.9 million in the second
quarter of 2000 as compared to $11,000 in the second quarter of 1999.
Total other income-net increased to $14.6 million in the first half of
2000 as compared to an expense of $1.6 million in the first half of
2000. Other income consists primarily of royalty income and equity
income from SEN. Royalty income, primarily from SEN, was $3.9 million
in the second quarter of 2000 as compared to $1.8 million in the second
quarter of 1999, and $7.8 million in the first half of 2000 as compared
to $2.7 million in the first half of 1999. Equity income attributable
to SEN was $3.3 million in the second quarter of 2000 compared to a
loss of $1.3 million in the second quarter of 1999, and $6.7 million in
the first half of 2000 as compared to an expense of $3.7 million in the
first half of 1999. The increases in 2000 were attributable to
increased SEN sales volume due primarily to the recovery in the
Japanese semiconductor market, which began in late 1999.
Income Taxes (Credit)
- --------------------
Income taxes were $9.9 million in the second quarter of 2000 as
compared to $2.2 million in the second quarter of 1999. Income taxes
were $18.2 million in the first half of 2000 as compared to an income
tax credit of $1.5 million in the first half of 1999. The effective
income tax rate was 31.5% in the second quarter of 2000 and 31.0% in
the first half of 2000, as compared to a 26.2% tax rate in the second
quarter and first half of 1999. The tax rate in all periods differs
from the U.S. statutory rate primarily due to nontaxable equity income
(losses) from SEN and credits from increased research activities.
These adjustments had a lesser impact on the current year's tax rate as
compared to the prior year's rate due to the significant increase in
pretax income in 2000.
Net Income (Loss)
- ----------------
Net income increased to $21.6 million in the second quarter of
2000 and $40.4 million in the first half of 2000 as compared to $6.2
million in the second quarter of 1999 and a loss of $4.2 million in the
first half of 1999. The increase was principally a result of the
factors discussed above. Earnings per share were $0.27 in the second
quarter of 2000 and $0.51 in the first half of 2000. Comparable
earnings per share were $0.08 and a loss of $0.05 in 1999,
respectively. In future periods, earnings per share will reflect the
17,050,000 additional shares outstanding resulting from the initial
public offering of our common stock and related exercise of the
underwriters over-allotment option which occurred in July 2000.
Page 13
Liquidity & Capital Resources
- ------------------------------
As of June 30, 2000, cash and short-term investments were $41.9
million, compared with $3.5 million as of December 31, 1999. The
increase in cash was due primarily to increased business volume in the
first half of 2000 and the sale of the Austin, Texas facility for $11.0
million. Net working capital, excluding the previously declared $300
million dividend payable to Eaton Corporation in conjunction with the
initial public offering, was $246.4 million at June 30, 2000 as compared
to net working capital of $169.8 million as of December 31, 1999. The
increases in cash, accounts receivable and inventory were the primary
causes of the increase in working capital, all of which increased
primarily as a result of higher business volume in the first half of 2000.
Net cash provided by operating activities was $4.2 million for the
six months ended June 30, 2000 as compared to net cash used of $9.2
million for the six months ended June 30, 1999. The cash provided by
operating activities in the first half of 2000 was primarily the result
of improved earnings performance.
Capital expenditures were $2.7 million in the first half of 2000
and $8.8 million in the first half of 1999. The amount of future
capital requirements will depend on a number of factors, including the
timing and rate of the expansion of our business. We anticipate
increased capital expenditures to support anticipated worldwide sales
growth including the expansion of our Beverly, Massachusetts and
Rockville, Maryland facilities.
On July 10, 2000, we completed our initial public offering of
15,500,000 shares of common stock. Additionally, on July 20, 2000, the
underwriters of the offering exercised their over-allotment option to
purchase an additional 1,550,000 shares. At the offering price of
$22.00 per share, the Company received $352.6 million, net of
underwriting discounts and commissions, $300 million of which was used
to pay a previously declared dividend to Eaton.
On July 19, 2000, we settled with Eaton substantially all of the
amounts classified as "Receivable from Eaton Corporation" that had resulted
from Eaton's processing of the majority of our cash receipts and
disbursements through June 30, 2000, resulting in a net cash payment
to us of $28.1 million. This $28.1 million receivable had been a payable
to Eaton of $.9 million at March 31, 2000 and a receivable from
Eaton of approximately $23.0 million at May 31, 2000, as discussed in
the Registration Statement. As of July 19, 2000, substantially all
of the remaining "Receivable from Eaton Corporation" not retained by
Eaton ($3.7 million as of March 31, 2000) had also been repaid.
Axcelis' liquidity is affected by many factors. Some of these
factors are based on normal operations of the business and others
relate to the uncertainties of global economies and the semiconductor
equipment industry. Although our cash requirements fluctuate based on
the timing and the extent of these factors, the Company's management
believes that the net proceeds from the IPO retained by us,
together with available cash and our cash flows from operations,
will provide sufficient working capital to satisfy commitments for capital
expenditures and other cash requirements for the business.
Risk Factors
- ------------
As defined under Safe Harbor provisions of The Private Securities
Litigation Reform Act of 1995, some of the matters discussed in this
filing contain forward-looking statements regarding future events that
are subject to risks and uncertainties. The following factors, among
Page 14
others, could cause actual results to differ materially from those
described by such statements. These factors include, but are not
limited to: the cyclical nature of the semiconductor industry, our
ability to keep pace with rapid technological changes in semiconductor
manufacturing processes, highly competitive semiconductor equipment
industry, quarterly fluctuations in operating results attributable to
the timing and amount of orders for our products and services,
dependency on SEN (our Japanese joint venture) for access to the
Japanese semiconductor equipment market, and those risk factors
contained in the section titled "Risk Factors" beginning on page 9 of
the Registration Statement. If any of those risks actually
occur, our business, financial condition or results of operations
could be seriously harmed and the trading price of our common stock
could decline.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
A discussion of market risk exposures is included in the
audited combined financial statements and related notes for the year
ended December 31, 1999 under Management's Discussion and Analysis -
Quantitative and Qualitative Disclosure about Market Risk as presented
in the Registration Statement. There were no material changes during
the six months ended June 30, 2000.
Page 15
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, a number of lawsuits, claims and proceedings
have been or may be asserted against us relating to the conduct of our
business, including those pertaining to patent validity or infringement,
commercial, employment and employee benefit matters. While the outcome
of litigation cannot be predicted with certainty, and some of these
lawsuits, claims or proceedings may be determined adversely to us, we do
not believe that the disposition of any such pending matters is likely
to materially affect us.
Item 2. Changes in Securities and Use of Proceeds
In connection with its initial public offering (IPO) in July 2000,
Axcelis filed its Registration Statement, which was declared effective
on July 10, 2000. The managing underwriters in the offering were
Goldman, Sachs & Co., Morgan Stanley Dean Witter, Lehman Brothers and
Salomon Smith Barney.
Pursuant to the Registration Statement, Axcelis registered
97,050,000 shares of its common stock, $.001 par value per share for
its own account. Eaton currently plans to divest of its 80,000,000
shares of Axcelis common stock approximately six months after the IPO
by distributing all of its shares of Axcelis common stock in a tax-free
transaction to Eaton shareholders. In the IPO (including the exercise
of the over-allotment option), Axcelis sold 17,050,000 shares of common
stock at $22.00 per share resulting in gross proceeds of $375.1
million, $22.5 million of which was applied toward the underwriting
discounts and commissions. Other expenses related to the IPO are
estimated to have been $3.0 million and have been paid or are payable
to unaffiliated parties. The company used a portion of the proceeds for
the payment of a previously declared dividend to Eaton of $300 million.
On July 20, 2000, Axcelis completed the IPO by selling an additional
1,550,000 shares of common stock upon exercise of the underwriters'
over-allotment option. Axcelis currently expects to use the remaining
net proceeds primarily for general corporate purposes.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - See Exhibit Index attached.
(b) Reports on Form 8-K.
Not applicable
Page 16
Signature
Pursuant to the requirements of Section 13 or 15(d) 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.
Axcelis Technologies, Inc.
----------------------------
Registrant
Date: August 24, 2000 /s/ Brian R. Bachman
----------------------------
Brian R. Bachman
Vice Chairman and Chief Executive Officer
/s/ Kevin M. Bisson
----------------------------
Kevin M. Bisson
Vice President - Controller
Principal Financial and Accounting Officer
Page 17
EATON CORPORATION
EXHIBIT INDEX
Regulation S-K,
Item 601 - Exhibit
Reference Number Exhibit
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27 Financial Data Schedule