SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark one)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the fiscal year ended SEPTEMBER 30, 1996
------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from _______ to _______
Commission file number 0-121
KULICKE AND SOFFA INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
PENNSYLVANIA 23-1498399
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
2101 BLAIR MILL ROAD, WILLOW GROVE, PA 19090
(Address of principal executive offices) (zip code)
(215) 784-6000
Registrant's telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, WITHOUT PAR VALUE
[Title of Class]
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
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ X ]
The aggregate market value of the Registrant's Common Stock (its only voting
stock) held by non-affiliates of the Registrant as of December 2, 1996 was
approximately $387,804,000. (Reference is made to the final paragraph of Part
II, Item 5 herein for a statement of assumptions upon which this calculation
is based.)
As of December 2, 1996, there were 19,460,659 shares of the Registrant's
Common Stock, Without Par Value, outstanding.
Documents Incorporated by Reference
Portions of the Registrant's Proxy Statement for the Annual Shareholders'
Meeting to be filed prior to January 10, 1997, are incorporated by reference
into Part III, Items 10, 11, 12 and 13 of this Report. Such Proxy Statement,
except for the parts therein which have been specifically incorporated by
reference, shall not be deemed "filed" for the purposes of this Report on
Form 10-K.
<PAGE>
PART I
ITEM 1. BUSINESS
Kulicke and Soffa Industries, Inc. (the "Company" or "K&S") was founded in
1951 to design equipment for industrial use. During the 1970's, the Company
began to focus its efforts on the semiconductor assembly equipment market.
Prior to its October 2, 1995 acquisition of American Fine Wire Corporation
("AFW"), the Company operated predominantly in one industry segment, the
manufacture and sale of assembly equipment to the semiconductor industry. As
a result of the AFW acquisition, the portion of the Company's operations
attributable to sales of packaging materials exceeded 10% of total revenues.
The packaging materials products have different manufacturing processes,
distribution channels and a less volatile revenue pattern than the Company's
capital equipment business. Accordingly, in fiscal 1996 the Company commenced
reporting its operations in two business segments, its equipment segment
(sales of capital equipment, related spare parts and services) and its
packaging materials segment (which includes the Micro-Swiss and AFW
operations). See Note 10 to the Company's fiscal 1996 consolidated financial
statements, included herein, for financial results by business segment.
Today, K&S is the world's largest supplier of semiconductor assembly
equipment, according to VLSI Research, Inc. ("VLSI"). Through its AFW and
Micro-Swiss subsidiaries, the Company also supplies packaging materials used
in the semiconductor assembly process. The Company's primary assembly
equipment products include wire bonders, dicing saws, and die, TAB and
flip-chip bonders, while its packaging materials offerings include bonding
wire, capillaries, wedges, saw blades and die collets. The Company's
customers consist of leading semiconductor manufacturers and subcontract
assemblers of semiconductors, including Advanced Semiconductor Engineering,
Anam Electronics, Hyundai, IBM, Intel, Matsushita Electronics, Motorola,
Philips, Samsung, and Texas Instruments.
INDUSTRY BACKGROUND
The worldwide market for semiconductors has experienced significant growth in
recent years and is estimated to have exceeded $150 billion in 1995. VLSI
projects this market to reach approximately $230 billion by 1999. This growth
reflects the increasing demand for a wide variety of electronic devices, such
as personal computers, cellular telephones, multimedia systems and other
electronic devices for business and consumer use, as well as the increasing
semiconductor content within these electronic devices and other products,
such as automobiles, consumer appliances and factory automation and control
systems. This demand has been driven in large part by continuing increases in
semiconductor performance as measured by functionality, speed and memory
density at declining costs per function.
In response to the growing demand for semiconductor devices, semiconductor
manufacturers are increasing capacity by expanding and upgrading existing
facilities and constructing new semiconductor fabrication facilities. As new
fabrication facilities come on line and existing facilities are expanded and
upgraded, the Company anticipates that the semiconductor industry will need
to add capacity to assemble the increased output of processed wafers.
SEMICONDUCTOR MANUFACTURING PROCESS
The manufacture of semiconductor devices ("semiconductors" or "IC's")
requires complex and precise steps which can be broadly grouped into wafer
fabrication, assembly and test. Wafer fabrication, the first step in the
semiconductor manufacturing process, starts with raw silicon wafers and ends
with finished devices in the form of die on wafers. After fabricated wafers
are tested, they typically are shipped to assembly facilities located
primarily in the Asia/Pacific region.
Semiconductor devices are small and fragile and must be packaged to protect
them and facilitate their connection to electronic systems. "Assembly" refers
to those process steps required to package semiconductor devices. The
packages are typically based on a stamped metal leadframe, which is
subsequently molded with plastic, or on ceramic, depending on the device and
the application in which it will be used.
<PAGE>
The semiconductor assembly process begins with the mounting of a finished,
tested wafer onto a carrier, after which a dicing saw cuts the wafer into
individual die. The cut wafer is then moved to a die bonder which picks each
good die off the wafer and bonds it to a package. Next, the device is wire
bonded. Very fine gold or aluminum wire (typically 0.001 inches in diameter)
is bonded between specific locations called bond pads on the die and
corresponding leads on the package in order to create the electrical
connections necessary for the device to function. After wire bonding, the
package is encapsulated. For leadframe-based packages, plastic is molded
around the package and the leads are then trimmed and formed. For ceramic
packages, encapsulation is accomplished by mounting a lid over the die. After
encapsulation, devices are re-tested and are then marked and prepared for
shipment.
SEMICONDUCTOR ASSEMBLY MARKET
According to VLSI, sales of semiconductor assembly equipment totaled
approximately $2.4 billion in 1995 and are projected to grow to approximately
$3.6 billion by 1999. Sales of semiconductor packaging materials were
approximately $7.3 billion in 1995 and are expected to grow to approximately
$9.4 billion by 1998 according to Rose Associates. The market for
semiconductor assembly equipment is expected to continue to be driven by the
demand for IC's, as well as the proliferation of different device types and
technological advances in IC packages. Different types of devices such as
microprocessors, logic devices and memory devices require different assembly
and packaging solutions. In addition, current-generation semiconductors are
more complex, more densely fabricated and more highly integrated than those
of prior generations. To package these newer devices, assembly equipment must
be able to handle smaller, more complex packages with higher pin counts. In
addition, device manufacturers and assemblers continue to demand equipment
with faster throughput, greater reliability, more automated manufacturing
support and lower cost of ownership. The market for the expendable tools and
materials used in the semiconductor assembly process is similarly driven by
IC unit volume, cost and increased technological demands. These demands
typically include package size reduction and greater consistency or
uniformity of materials.
ACQUISITION OF AFW
On October 2, 1995, the Company acquired AFW (the "AFW Acquisition") through
the merger of a subsidiary of the Company into Circle "S" Industries, Inc.
("Circle ""S"), the parent corporation of AFW. AFW is a manufacturer of fine
gold and aluminum wire for use in the wire bonding process and has facilities
in Singapore; Selma, Alabama; and Thalwil, Switzerland. The purchase price
for the AFW Acquisition totaled $54.7 million, including transaction related
costs. See Notes 2 and 6 to the Company's fiscal 1996 consolidated financial
statements, included herein, for further discussion of the AFW acquisition
and related financing.
INVESTMENT IN FLIP CHIP TECHNOLOGIES, INC.
In February 1996, the Company entered into a joint venture agreement with
Delco Electronics Corporation providing for the formation and management of
Flip Chip Technologies, L.L.C. ("FCT" or "the Joint Venture"). FCT was formed
to provide wafer bumping services. During the fiscal year ended September 30,
1996, the Company contributed $2.6 million to FCT, and recognized $1.0
million as its proportionate share of the Joint Venture's operating loss.
ACQUISITION OF SEMITEC, INC.
On October 1, 1996, the Company acquired the common stock of Semitec, Inc.
("Semitec") for a purchase price of approximately $4.9 million, including
transaction related costs. Of the total purchase price, $4.7 million must be
paid to the former Semitec shareholders in registered shares of Company
common stock or in cash by June 1997. Semitec manufactures and sells
semiconductor dicing saw blades. The acquired assets and results of
operations of the Semitec business will be included in the Company's
consolidated financial statements commencing in fiscal 1997.
<PAGE>
PRODUCTS
K&S offers a broad range of semiconductor assembly equipment, packaging
materials and complementary services and spare parts used in the
semiconductor assembly process. Set forth below is a table listing the
approximate percentage of the Company's net sales by principal product areas
for its fiscal years ended September 30, 1996 and
1995.
Fiscal Year Ended
September 30,
__________________
1996 1995
Wire bonders 57% 74%
Additional assembly equipment 10% 9%
Packaging materials 25% 7%
Services and spare parts 8% 10%
100% 100%
WIRE BONDERS
The Company's principal product line is its family of wire bonders, which are
used to connect extremely fine wires, typically made of gold or aluminum,
between the bonding pads on the die and the leads on the package to which the
die has been bonded. The Company offers both ball and wedge bonders in
automatic and manual configurations. Ball bonders typically are used for
plastic packages (i.e., leadframe-based packages) while wedge bonders
typically are used for ceramic packages. The Company's principal wire bonders
are its Model 1488 turbo ball bonder and Model 1474fp wedge bonder. The
Company believes that its wire bonders offer competitive advantages based on
high throughput and superior process control enabling fine pitch bonding and
long, low wire loops, which are needed to assemble advanced IC packages. The
selling prices for the Company's automatic wire bonders range from $60,000 to
over $200,000 and from $8,000 to $40,000 for manual wire bonders, in each
case depending upon system configuration and purchase volume.
The Company is in the process of developing a new generation of wire bonder,
the 8000 family, which will be based on an entirely new platform and has
required the development of new software and many subassemblies not part of
the Company's current wire bonders. The Company experienced delays in the
development of the Model 1488 turbo wire bonder and has experienced delays in
the development of the first product in the 8000 family, the Model 8020. The
delays in the development of the Model 8020 have been due to a variety of
reasons typical to the development of new technological products, including
hardware and software related issues and changes in functional specifications
based on input from customers. While development and technical risks exist
which have the potential to further affect the introduction of the Model
8020, the Company currently expects that the product will be released in the
second half of calendar 1997. However, no assurance can be given that its
scheduled introduction in the second half of 1997 will not be delayed. The
Company also may incur substantial costs during the customer evaluation and
qualification process to ensure the functionality and reliability of the
product. The Company's inability to complete the development of and introduce
the Model 8020 or other new products, or its inability to manufacture and
ship these products in volume and on a timely basis, could adversely affect
the Company's competitive position.
Furthermore, the Company's planned transition to the Model 8020 platform
involves numerous risks, including the possibility that customers will defer
purchases of Model 1488 turbo wire bonders in anticipation of the
availability of the Model 8020 or that the Model 8020 will fail to meet
customer needs or achieve market acceptance. To the extent that the Company
fails to accurately forecast demand in volume and configuration for both its
current and next-generation wire bonders and generally to manage product
transitions successfully, it could experience reduced orders, delays in
product shipments, and increased risk of inventory obsolescence. There can be
no assurance that the Company will successfully develop and manufacture new
products, including the Model 8020, that new products introduced by the
Company will be accepted in the marketplace or that the Company will manage
its product transitions successfully. The Company's failure to do any of the
foregoing could materially adversely affect the Company's business, financial
condition and operating results.
<PAGE>
ADDITIONAL SEMICONDUCTOR ASSEMBLY EQUIPMENT
In addition to wire bonders, the Company produces other types of
semiconductor assembly equipment, including dicing saws, die bonders, TAB
bonders and flip-chip bonders, which allows the Company to leverage its
significant investment in customer relationships by offering its customers a
broad range of assembly equipment. Principal products offered by the Company
consist of the following:
Dicing Saws. After precise automatic positioning of the wafer, a dicing saw
is used to cut it into individual die using diamond-embedded saw blades.
Dicing saws range in price from $60,000 to more than $230,000. On October 1,
1995, the Company entered into a Manufacturing License and Supply Agreement
with Tokyo Seimitsu Co. Ltd. ("TSK") for the right to manufacture, use and
distribute their Model 7500 automatic dicing saw. This saw is a recently
developed product providing improved accuracy and reliability. During 1996,
the Company supplied these machines both to TSK and its own customers. This
product is produced in the Company's Israeli machine manufacturing facility.
In connection with the signing of this agreement, the Company discontinued
the manufacture of its own Model 918 saw.
Die Bonders. Die bonders are used to attach a semiconductor die to a
leadframe or other package before wire bonding. The Company's primary die
bonders are Models 4206 and 5408 automatic die attach machines. In addition,
the Company's product line includes the Model 6900, an automatic
multi-process assembly system which can be configured to support either
conventional die bonding applications or alternate semiconductor assembly
technologies. Die bonders range in price from $60,000 to more than $250,000.
Tape Automated Bonding (TAB). TAB is an alternate assembly method which uses
a thin, flexible film of laminated copper and polyamide in place of a
conventional package. In a TAB assembled device, the die is bonded directly
to copper leads, thereby eliminating the need for wire bonding. The Company's
principal TAB bonder is the Model SP2100. TAB bonders range in price from
$375,000 to over $400,000.
Flip-Chip Assembly Systems. Flip-chip is an alternate assembly technique in
which the die is mounted face down in a package or other electronic system
using conductive bumps, thereby eliminating the need for either conventional
die or wire bonding. The Company's Model 6900 is an automatic multi-process
assembly system which can be configured to support flip-chip applications.
Selling prices for flip-chip assembly systems exceed $300,000, depending upon
configuration.
The Company also offers different configurations of certain of its products
for non-semiconductor applications, including the Company's Model 980 saw
for use in cutting and grinding hard and brittle materials, such as ceramic,
glass and ferrite, for applications such as the fabrication of chip
capacitors or disk drive heads. A variant of the Model 2100 TAB bonder is
used to assemble ink jet printer cartridges.
PACKAGING MATERIALS
The Company currently offers a range of expendable tools and materials to
semiconductor device assemblers which it sells under the brand names
"American Fine Wire" and "Micro-Swiss." The Company intends to expand this
business in an effort to increase its revenues related to the manufacture of
IC's as opposed to the expansion of IC manufacturing capacity. The Company
sells its packaging materials for use with competitors' assembly equipment as
well as its own equipment. The Company's principal packaging materials
products consist of the following:
Bonding Wire. AFW is a manufacturer of very fine (typically 0.001 inches in
diameter) gold and aluminum wire used in the wire bonding process. AFW
produces wire to a wide range of specifications, which can satisfy most wire
bonding applications. Gold bonding wire is generally priced based on a
fabrication charge per 1,000 feet of wire, plus the value of the gold. The
fabrication charge varies based on a number of factors, such as total volume,
wire diameter and wire length per spool, and typically ranges from $7 to $14
per 1,000 feet of wire, depending upon specifications. To minimize AFW's
financial exposure to gold price fluctuations, AFW acquires gold for
fabrication pursuant to a contract with its gold supplier, Rothschild
Australia Limited ("RAL"), and only purchases the gold upon shipment and sale
of the finished product to the customer. Accordingly, fluctuations in the
price of gold are generally absorbed by RAL or passed on to AFW's customers.
<PAGE>
Expendable Tools. The Micro-Swiss family of expendable tools includes
capillaries, wedges and die collets. Capillaries and wedges are used to feed
out, attach and cut the wires used in wire bonding. Die collets are used to
pick up, place and bond die to packages. Capillaries sell for $6 to $15 and
wedges sell for $17 to $45, in each case depending upon specifications and
die collets sell for up to $150. In addition, Micro-Swiss manufactures a line
of saw blades used for cutting hard and brittle materials. These blades can
be used on the Company's Model 980 saws or other machines designed for
similar applications.
On October 1, 1996, the Company acquired Semitec, Inc., a manufacturer of hub
blades which are used to cut silicon wafers into semiconductor die. This
acquisition expands the Company's expendable tools product offering, and
complements the Company's line of automatic dicing saws. Typical prices for
hub blades range from $22 to $28.
SERVICES AND SPARE PARTS
The Company believes that its knowledge and experience have positioned it to
deliver innovative, customer-specific services that reduce the cost of
ownership associated with the Company's equipment. Historically, the
Company's offerings in this area were limited to spare parts, customer
training and extended warranty contracts. In response to customer trends in
outsourcing equipment-related services, the Company is focusing on providing
repair and maintenance services, a variety of equipment upgrades, machine and
component rebuild activities and expanded customer training. These services
are generally priced on a time and materials basis. The service and
maintenance arrangements are typically bound by annual or multi-year
contracts.
CUSTOMERS
The Company's customers include large semiconductor manufacturers and
subcontract assemblers worldwide, among which are the following:
Advanced Semiconductor Engineering Matsushita Electronics
Anam Micron Technology, Inc.
AT&T Motorola
Caesar Technology National Semiconductor
Fujitsu Orient Semiconductor Electronics Ltd.
GSS/ARRAY Philips Electronics NV
Hyundai Electronics
Industries Co., Ltd. Samsung Pacific, Inc.
IBM SGS-Thomson Microelectronics
Intel Corporation Siemens
Kyocera Silicon Systems
Lexmark International Texas Instruments
Lucent Microelectronics
The Company believes that developing long-term relationships with its
customers is critical to its success. By establishing these relationships
with semiconductor manufacturers and subcontract assemblers, the Company
gains insight to its customers' future IC packaging strategies. This
information assists the Company in its efforts to develop process and
equipment solutions that address its customers' future assembly requirements.
Sales to a relatively small number of customers have accounted for a
significant percentage of the Company's net sales. During fiscal 1996, sales
to Anam (a Korean-based customer) and Intel accounted for approximately 14.3%
and 11.2%, respectively, of the Company's net sales. In fiscal 1995, sales to
Intel and Anam accounted for 19.8% and 16.3%, respectively. In fiscal 1994,
sales to Anam, Intel and Motorola accounted for 14.2%, 11.5% and 10.8%,
respectively, of the Company's net sales. The Company expects that sales of
its products to a limited number of customers will continue to account for a
high percentage of net sales for the foreseeable future. The loss or
reduction of orders from a significant customer, including losses or
reductions due to manufacturing, reliability or other difficulties associated
with the Company's products, changes in customer buying patterns, market,
economic or competitive conditions in the semiconductor or subcontract
assembly industries, could adversely affect the Company's business, financial
condition and operating results.
<PAGE>
SALES AND CUSTOMER SUPPORT
The Company sells its products to semiconductor device manufacturers and
contract manufacturers, who are primarily located or have operations in the
Asia/Pacific region. Approximately 79% of the Company's fiscal 1996 sales and
78% of fiscal 1995 sales were to customers for delivery outside of the United
States.
The Company markets its semiconductor assembly equipment and its packaging
materials through separate sales organizations. With respect to semiconductor
assembly equipment, the Company's direct sales force, consisting of
approximately 90 individuals at September 30, 1996, is principally
responsible for sales of major product lines to customers in the United
States and the Asia/Pacific region, including Japan. Lower volume product
lines, as well as all equipment sales to customers in Europe, are sold
through a network of manufacturer's representatives. The Company sells its
AFW and Micro-Swiss product lines through an independent sales force
supporting customers primarily in the Asia/Pacific region and through
manufacturers' representatives supporting customers throughout the rest of
the world.
The Company believes that providing comprehensive worldwide sales, service
and customer support are important competitive factors in the semiconductor
equipment industry. In order to support its U.S. and foreign customers whose
semiconductor assembly operations are located in the Asia/Pacific region, the
Company maintains a significant presence in the region, with sales facilities
in Hong Kong, Japan, Korea, Taiwan, Malaysia and Singapore, a technology
center in Japan and an applications lab in Singapore. The Company supports
its assembly equipment customers worldwide with over 190 customer service and
support personnel at September 30, 1996, located in the United States, Hong
Kong, Japan, Korea, Malaysia, the Philippines, Singapore, Taiwan and
Thailand. The Company's local presence in these Asia/Pacific countries
enables it to provide more timely customer service and support as service
representatives and spare parts are positioned near customer facilities, and
affords customers the ability to place orders locally and to deal with
service and support personnel who speak the same language and are familiar
with local country practices.
BACKLOG
At September 30, 1996, the Company's backlog was approximately $69.0 million,
including approximately $6.7 million related to AFW, compared to
approximately $84.7 million at September 30, 1995 which excluded AFW. The
Company's backlog consists of product orders for which confirmed purchase
orders have been received and which are scheduled for shipment within 12
months. In addition, the Company may allocate production capacity to
customers for anticipated purchases for which a confirmed purchase order has
not yet been received. Virtually all orders are subject to cancellation,
deferral or rescheduling by the customer with limited or no penalties.
Because of the possibility of customer changes in delivery schedules or
cancellations and potential delays in product shipments, the Company's
backlog as of any particular date may not be indicative of revenues for any
succeeding quarterly period.
MANUFACTURING
The Company's assembly equipment manufacturing activities consist primarily
of integrating components and subassemblies to create finished systems
configured to customer specifications. The Company performs system design,
assembly and testing in-house but utilizes an outsourcing strategy for the
manufacture of many of its major subassemblies. K&S believes that outsourcing
enables it to minimize its fixed costs and capital expenditures and allows
the Company to focus on product differentiation through system design and
quality control. The Company's just-in-time inventory management strategy has
reduced manufacturing cycle times and has limited on-hand inventory. The
Company has obtained ISO 9001 registration for most operations in its Willow
Grove, Pennsylvania facility and for both of its Israeli manufacturing
facilities.
The Company manufactures its Micro-Swiss expendable tools at its facility in
Israel and its AFW product line, consisting of gold and aluminum bonding
wire, at facilities in Alabama, Singapore and Switzerland. The Company
currently is constructing a new facility in Israel for its Micro-Swiss
operations in Yokneam, Israel.
<PAGE>
Parts, materials and supplies for components used in the Company's equipment
products are, for the most part, readily available from a number of sources
at acceptable costs. Certain of the Company's products, however, require
components or assemblies of an exceptionally high degree of reliability,
accuracy and performance. Currently there are a number of such items for
which there are only a single or limited number of suppliers which have been
accepted by the Company as a qualified supplier. The Company generally does
not maintain long-term contracts with its subcontractors and suppliers, and
the Company does not believe that its business is substantially dependent on
any contract or arrangement with any of its subcontractors or suppliers.
However, the Company's reliance on subcontractors and single source suppliers
involves a number of significant risks, including the loss of control over
the manufacturing process, the potential absence of adequate capacity and the
reduced control over delivery schedules, manufacturing yields, quality and
costs. Further, certain of the Company's subcontractors and suppliers are
relatively small operations and have limited finances and manufacturing
resources. In the event that any significant subcontractor or single source
supplier were to become unable or unwilling to continue to manufacture or
sell subassemblies, components or parts to the Company in required volumes
and of acceptable quality, the Company would have to identify and qualify
acceptable replacements. The process of qualifying subcontractors and
suppliers could be lengthy, and no assurance can be given that any additional
sources would be available to the Company on a timely basis.
The Company has experienced and continues to experience reliability and
quality problems with certain key subassemblies provided by single source
suppliers. The Company also has experienced delays in the delivery of
subassemblies from these and other subcontractors in the past, which caused
delays in Company shipments. If supplies of such items were not available
from any such source and a relationship with an alternative supplier could
not be developed, shipments of the Company's products could be interrupted
and re-engineering of the affected product could be required. In addition,
from time to time, the Company has experienced manufacturing difficulties and
problems in its own operations which have caused delays and have required
remedial measures. Such delays, interruption and re-engineering could damage
the Company's relationships with its customers and have a material adverse
effect on the Company's business, financial condition and operating results.
RESEARCH AND PRODUCT DEVELOPMENT
Because technological change occurs rapidly in the semiconductor industry,
the Company devotes substantial resources to its research and development
programs to maintain its competitiveness. The Company employed approximately
350 individuals in research and development at September 30, 1996. The
Company pursues the continuous improvement and enhancement of existing
products while simultaneously developing next generation products. For
example, while the performance of current generations of gold ball wire
bonders is being enhanced in accordance with a specific continuous
improvement plan, the Company is simultaneously developing the series 8000
family of next generation wire bonders, the first models of which are
expected to be introduced in the second half of 1997. Most of the next
generation equipment presently being developed by the Company is expected to
be based on modular, interchangeable subsystems, including the 8000 control
platform, which management believes will promote more efficient and
cost-effective manufacturing operations, lower inventory levels, improved
field service capabilities and shorter product development cycles, which will
allow the Company to introduce new products more quickly.
The Company's net expenditures for research and development totaled
approximately $52.4 million, $30.9 million and $21.3 million during the
fiscal years ended September 30, 1996, 1995 and 1994, respectively. The
Company has received funding from certain customers and government agencies
pursuant to contracts or other arrangements for the performance of specified
research and development activities. Such amounts are recognized as a
reduction of research and development expense when specified activities have
been performed. During the fiscal years ended September 30, 1996, 1995 and
1994, such funding totaled approximately $2.5 million, $2.8 million and $2.0
million, respectively.
<PAGE>
COMPETITION
The semiconductor equipment and packaging materials industries are intensely
competitive. Significant competitive factors in the semiconductor equipment
market include process capability and repeatability, quality and flexibility,
and cost of ownership, including throughput, reliability and automation,
customer support and price. The Company's major equipment competitors include
Shinkawa, Kaijo and ESEC in wire bonders; ESEC, Nichiden, ASM Pacific
Technology and Alphasem in die bonders; and Disco Corporation in dicing saws.
Competitive factors in the semiconductor packaging materials industry include
price, delivery and quality. Significant competitors in the packaging
materials line include Gaiser Tool Co. and Small Precision Tools, Inc. with
respect to expendable tools and Tanaka Electronic Industries and Sumitomo
Metal Mining in the bonding wire market.
In each of the markets it serves, the Company faces competition and the
threat of competition from established competitors and potential new
entrants, some of which may have greater financial, engineering,
manufacturing and marketing resources than the Company. Some of these
competitors are Japanese companies that have had and may continue to have an
advantage over the Company in supplying products to Japan-based companies due
to their preferences to purchase equipment from Japanese suppliers. The
Company expects its competitors to continue to improve the performance of
their current products and to introduce new products with improved price and
performance characteristics. New product introductions by the Company's
competitors or by new market entrants could cause a decline in sales or loss
of market acceptance of the Company's existing products. If a particular
semiconductor manufacturer or subcontract assembler selects a competitor's
product for a particular assembly operation, the Company may experience
difficulty in selling a product to that company for a significant period of
time. Increased competitive pressure could also lead to intensified
price-based competition, resulting in lower prices which could adversely
affect the Company's business, financial condition and operating results. The
Company believes that to remain competitive it must invest significant
financial resources in new product development and expand its customer
service and support worldwide. There can be no assurance that the Company
will be able to compete successfully in the future.
Intellectual Property
Where circumstances warrant, the Company seeks to obtain patents on
inventions governing new products and processes developed as part of its
ongoing research, engineering and manufacturing activities. The Company
currently holds a number of United States patents some of which have foreign
counterparts. The Company believes that the duration of its patents generally
exceeds the life cycles of the technologies disclosed and claimed therein.
Although the patents it holds and may obtain in the future may be of value,
the Company believes that its success will depend primarily on its
engineering, manufacturing, marketing and service skills.
The Company also believes that much of its important technology resides in
its proprietary software and trade secrets. Insofar as the Company relies on
trade secrets and unpatented knowledge, including software, to maintain its
competitive position, there is no assurance that others may not independently
develop similar technologies. In addition, although the Company executes
non-disclosure and non-competition agreements with certain of its employees,
customers, consultants, selected vendors and others, there is no assurance
that such secrecy obligations will not be breached.
Certain of the Company's customers have received notices of infringement from
two separate parties, Harold S. Hemstreet and Jerome H. Lemelson, alleging
that equipment supplied by the Company, and processes performed by such
equipment, infringe on patents held by them. Under and subject to the terms
of its agreements with customers, the Company could be required to reimburse
customers for certain damages resulting from these matters and to defend its
customers in patent infringement suits. Certain customers have requested that
the Company defend and indemnify them against the claims of Mr. Hemstreet or
Mr. Lemelson, but, to date, no customer who has settled with either Mr.
Hemstreet or Mr. Lemelson has sought contribution from the Company. A number
of the Company's customers have actually been sued by Mr. Lemelson, but no
customers were sued by Mr. Hemstreet prior to expiration of the time period
in which he could bring suit. Based in part on opinions from the Company's
outside patent counsel, the Company believes that no equipment marketed by
the Company, and no process performed by such equipment, infringe on the
patents in question and does not believe that such matters will have a
material adverse effect on its business, financial condition, operating
results or liquidity. However, the ultimate outcome of any infringement claim
affecting the Company is uncertain and there can be no assurances that the
resolution of these matters will not have a material adverse effect on the
Company's business, financial condition, operating results or liquidity.
<PAGE>
EMPLOYEES
At September 30, 1996, K&S had approximately 1,900 permanent employees, 25
temporary employees and 75 contract personnel worldwide. The only Company
employees represented by a labor union are AFW's employees in Singapore. K&S
considers its employee relations to be good. Competition in the recruiting of
personnel in the semiconductor and semiconductor equipment industry is
intense, particularly with respect to certain engineering disciplines. The
Company believes that its future success will depend in part on its continued
ability to hire and retain qualified management, marketing and technical
employees.
EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth information regarding the executive officers
of the Company.
First Became
an Officer
Name Age (calendar year) Position
__________________ ___ _______________ ______________________________
C. Scott Kulicke 47 1976 Chairman of the Board of Directors
and Chief Executive Officer
Morton K. Perchick 59 1982 Executive Vice President
Clifford G. Sprague 53 1989 Senior Vice President and Chief
Financial Officer
Moshe Jacobi 54 1992 Senior Vice President and President
Packaging Materials Group
Asuri Raghavan 43 1991 Senior Vice President and President
Equipment Group
Walter Von Seggern 56 1992 Vice President, Engineering and
Technology
C. Scott Kulicke has been Chief Executive Officer since 1979 and Chairman of
the Board since 1984. Prior to that he held a number of executive positions
with the Company. Mr. Kulicke is the son of Frederick W. Kulicke, Jr., a
member of the Board of Directors.
Morton K. Perchick joined the Company in 1980 and has served in various
executive positions, most recently as Senior Vice President, prior to his
being appointed Executive Vice President in July 1995.
Clifford G. Sprague joined the Company in March 1989 as Vice President and
Chief Financial Officer and was promoted to Senior Vice President in 1990.
Prior to joining the Company, he served for more than five years as Vice
President and Controller of the Oilfield Equipment Group of NL Industries,
Inc., an oilfield equipment and service company.
Moshe Jacobi has served as the Company's Senior Vice President and President,
Packaging Materials Group since July 1995. Prior to that, he had served as
Vice President of the Company and Managing Director of Micro-Swiss Ltd., a
wholly-owned subsidiary of the Company since November 1992. He was Division
Director and General Manager of the Micro-Swiss Division from July to
November 1992, and, from August 1986 to July 1992, he was Deputy Managing
Director of Kulicke and Soffa (Israel) Ltd., a wholly-owned subsidiary of the
Company.
Asuri Raghavan was promoted to Senior Vice President and President, Equipment
Group in November, 1996 having served as Vice President, Marketing since July
1995, Vice President of the Wire Bonder Business since December 1993. Prior
to that, he served as Vice President, Strategic Development from June 1991 to
1993, and in various other management capacities since joining the Company in
1980, except for the period from December 1985 until November 1987 when he
was Director, Research and Technology of American Optical.
<PAGE>
Walter Von Seggern joined the Company in September 1992 as Vice President of
Engineering and Technology. From April 1988 to April 1992, he worked for
M/A-Com, Inc. He was General Manager of M/A-Com's ANZAC, RGH and Eurotec
Divisions from 1990 to 1992 and from 1988 to 1990, he was General Manager of
M/A-Com's Radar Products Division.
ITEM 2. PROPERTIES
The Company's major facilities are described in the table below:
Lease
Products Expiration
Facility Approximate Size Function Manufactured Date
- -------- --------------- -------- ------------ ----------
Willow Grove, 214,000 sq.ft.(1) Corporate Wire bonders, N/A
Pennsylvania headquarters, die bonders
manufacturing, and TAB bonders
technology center,
sales and service
Haifa, Israel 46,100 sq.ft.(2) Manufacturing, Manual wire April 2002
technology bonders,
center, assembly dicing saws and
systems automatic multi-
process assembly
systems
Haifa, Israel 39,200 sq. ft.(2) Manufacturing, Capillaries, March 1999
Micro-Swiss wedges and
operations die collets
Hong Kong 19,600 sq. ft.(2) Sales and service November 1998
Tokyo, Japan 10,700 sq. ft.(2) Technology center, November 1998
sales and service
Singapore 22,900 sq. ft.(2) Manufacturing, Bonding wire November 1997
AFW operations
Selma, 25,600 sq. ft.(2) Manufacturing, Bonding wire October 2017
Alabama AFW operations
Thalwil, 15,100 sq. ft.(2) Manufacturing, Bonding wire (3)
Switzerland AFW operations
Santa Clara, 13,600 sq. ft.2) Manufacturing Dicing Saw October 2003
California Blades
(1) Owned.
(2) Leased.
(3) Cancelable semi-annually upon six months' notice.
The Company is constructing a 48,400 sq. ft. manufacturing facility in
Yokneam, Israel for its Micro-Swiss operations. Construction of this facility
is expected to be completed in the winter of 1996. Upon completion, the
Company will relocate its Micro-Swiss operations to the new facility. In
addition, the Company rents space for sales and service offices in Santa
Clara, California; Mesa, Arizona; Zug, Switzerland; Korea; Taiwan; and
Singapore. The Company believes that its facilities are generally in good
condition.
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
The Company is not aware of any material pending legal matters involving the
Company or its subsidiaries. See the discussion of certain legal
contingencies in Note 12 to the Company's fiscal 1996 consolidated financial
statements included herein.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
The Company's Common Stock trades on the Nasdaq National Market under the
symbol KLIC. The following table sets forth for the periods indicated the
high and low sale prices for the Common Stock (adjusted to reflect the July
1995 two-for-one stock split), as reported on the Nasdaq National Market.
High Low
------- -------
Fiscal 1996:
First Quarter $36 3/4 $22
Second Quarter 25 1/2 15 1/8
Third Quarter 20 1/2 13 1/4
Fourth Quarter 14 5/8 8 3/4
Fiscal 1995:
First Quarter $10 31/32 $ 7 1/2
Second Quarter 14 7/8 9 1/8
Third Quarter 33 3/8 13 1/4
Fourth Quarter 45 3/8 32 7/8
On December 2, 1996, there were 1,025 holders of record of the shares of
outstanding Common Stock.
The Company currently does not pay cash dividends on its Common Stock. The
Company presently intends to retain any future earnings for use in its
business and does not anticipate paying any cash dividends on the Common
Stock in the foreseeable future.
The amended Gold Supply Agreement dated October 2, 1995 between AFW and its
subsidiaries (collectively, the "AFW Companies") and their gold supplier
contains certain financial covenants and prohibits the AFW Companies from
paying any dividends or making any distributions without the consent of the
supplier if following any such dividend or distribution the net worth of the
AFW Companies would be less than $7.0 million.
During fiscal 1996, the Company contributed 84,000 shares of unregistered
common stock, valued at its fair market value, as its matching contribution
to its Section 401(k) Employee Incentive Savings Plan. Registration for such
shares was not required because the transaction did not constitute a "sale"
under Section 2(3) of the Securities Act of 1933, or, alternatively, the
transaction was exempt pursuant to the private offering provisions of that
Act and the rules thereunder.
For the purposes of calculating the aggregate market value of the shares of
common stock of the Company held by nonaffiliates, as shown on the cover page
of this report, it has been assumed that all the outstanding shares were held
by nonaffiliates except for the shares held by directors and officers of the
Company. However, this should not be deemed to constitute an admission that
<PAGE>
all directors and officers of the Company are, in fact, affiliates of the
Company, or that there are not other persons who may be deemed to be
affiliates of the Company. Further information concerning shareholdings of
officers, directors and principal shareholders is included in the Company's
definitive proxy statement filed or to be filed with the Securities and
Exchange Commission.
ITEM 6. SELECTED FINANCIAL DATA
The selected financial data presented below should be read in conjunction
with the Company's Consolidated Financial Statements and notes thereto, which
are included elsewhere herein.
Income Statement Data: Fiscal Year Ended September 30,
---------------------------------------------
1996(a) 1995 1994 1993 1992
------ ------- ------- ------- ------
(in thousands, except per share amounts)
Net sales $381,176 $304,509 $173,302 $140,880 $ 94,959
Gross profit 141,685 137,052 71,968 61,675 40,401
Income (loss) from
operations 17,418 55,440 13,930 14,280 (12,040)
Net income (loss) (b) (c) 11,847 42,822 10,418 10,831 (12,123)
Net income (loss)
per share (b):
Primary $0.60 $2.38 $0.63 $0.66 $(0.77)
Fully diluted $0.60 $2.22 $0.63 $0.66 $(0.77)
Weighted average shares
outstanding:
Primary 19,773 18,028 16,665 16,342 15,823
Fully diluted 19,773 19,693 16,665 16,342 15,823
Balance Sheet Data: September 30,
-----------------------------------------------
1996(a) 1995 1994 1993 1992
------- ------- -------- ------- -------
(in thousands)
Working capital $113,804 $103,833 $ 61,459 $ 58,190 $45,937
Total assets 249,554 191,029 121,198 105,278 83,941
Long-term debt, less
current portion 50,712 156 26,474 26,708 26,778
Shareholders' equity 147,489 133,647 63,234 51,481 38,988
(a) See Part I, Item 1 and footnote 2 of the Notes to the Consolidated
Financial Statements for a detailed discussion of the October 2, 1995
AFW acquisition.
(b) In fiscal 1989, the Company began a program of selectively
repurchasing its 8% Convertible Subordinated Debentures at such times
as market prices were favorable. The effect of such repurchases was
to reduce interest expense. During fiscal 1995, all of the Company's
remaining 8% Convertible Subordinated Debentures were converted into
Common Stock or redeemed. See Note 6 to the Company's Consolidated
Financial Statements included elsewhere herein.
(c) In fiscal 1996, other expenses include $994 representing the
Company's proportionate share of the loss from its equity investment
in Flip Chip Technologies, LLC, and the write-off of $630 of costs
incurred in connection with a proposed but withdrawn public offering
of common stock. In fiscal 1993, the Company incurred $1.1 million in
costs associated with a failed acquisition.
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
INTRODUCTION
The Company's operating results primarily depend upon the capital
expenditures of semiconductor manufacturers and subcontract assemblers
worldwide which, in turn, depend on the current and anticipated market demand
for semiconductors. The semiconductor industry has historically been highly
volatile and experienced periodic downturns and slowdowns which have had a
severe negative effect on the semiconductor industry's demand for capital
equipment, including assembly equipment manufactured and marketed by the
Company and, to a lesser extent, packaging materials such as those sold by
the Company. These downturns and slowdowns have also adversely affected the
Company's operating results. The Company does not consider its business to be
seasonal in nature.
A significant portion of the Company's revenue is derived from sales of a
relatively small number of machines, most with selling prices ranging from
$60,000 to over $400,000. A delay in the shipment in a limited quantity of
machines, either due to manufacturing delays or to rescheduling or
cancellations of customer orders, could have a material adverse effect on the
results of the operations for any particular quarter. The Company believes
that such volatility will continue to characterize the industry and the
Company's operations in the future.
The Company acquired American Fine Wire Corporation ("AFW") in October 1995,
to help mitigate the effect of volatile demand for capital equipment on the
Company's financial performance. This acquisition significantly increased the
portion of the Company's total sales attributable to packaging materials
which grew from 7% in fiscal 1995 to 25% in fiscal 1996. Packaging materials
products have different manufacturing processes, distribution channels and a
less volatile revenue pattern than historically experienced by the Company's
equipment business.
RESULTS OF OPERATIONS
FISCAL YEARS ENDED SEPTEMBER 30, 1996 AND SEPTEMBER 30, 1995
During the fiscal year ended September 30, 1996, the Company recorded
bookings totaling $358.4 million, including approximately $66.0 million
related to AFW, compared to $342.4 million during fiscal 1995 which excluded
AFW's operating results. The decline in fiscal 1996 equipment bookings
primarily reflects a significant reduction in demand for semiconductor
assembly equipment, principally gold ball and aluminum wedge bonders, in the
latter half of fiscal 1996 compared to the record levels experienced
throughout fiscal 1995 and the first several months of fiscal 1996.
At September 30, 1996 total backlog of customer orders approximated $69.0
million, including $6.7 million relating to AFW, compared to $84.7 million at
September 30, 1995. Since the timing of deliveries may vary and orders are
generally subject to cancellation, the Company's backlog as of any date may
not be indicative of net sales for any succeeding period.
Net sales for the fiscal year ended September 30, 1996 increased by $76.7
million to $381.2 million compared to $304.5 million in fiscal 1995. The
acquisition of AFW contributed $66.9 million to fiscal 1996 net sales, with
approximately $6.4 million of the increase attributable to sales of
expendable tools and the remainder due to the Company's equipment segment. On
a quarterly basis, net sales declined sharply throughout fiscal 1996,
primarily in the equipment segment. The decline generally reflected an
industry-wide slowdown in capital equipment purchases during 1996 as compared
to the record levels experienced during 1995.
International sales (shipments of the Company's products with ultimate
foreign destinations) comprised 79% and 78% of the Company's total sales
during fiscal 1996 and 1995, respectively. Sales to customers in the
Asia/Pacific region (including Korea, Taiwan, Malaysia, Philippines, Japan,
Singapore, Thailand and Hong Kong) accounted for approximately 72% of the
Company's total sales in both fiscal 1996 and 1995. In fiscal 1996, sales to
customers located in Malaysia, Korea and Philippines increased compared to
fiscal 1995 levels, while sales to Taiwan-based customers declined
significantly in fiscal 1996. The decline in Taiwan in part reflected the
impact of geopolitical uncertainty concerning China's reaction to the 1996
elections in Taiwan.
<PAGE>
Equipment segment net sales increased to $287.2 million in fiscal 1996
compared to $283.8 million in fiscal 1995. Total unit sales in fiscal 1996
were essentially flat compared to unit sales for fiscal 1995. However, sales
of gold ball wire bonders, non-semiconductor dicing saws and wire bonder
upgrade kits increased in fiscal 1996, while sales of aluminum wedge bonders
declined in relation to the amounts sold in fiscal 1995. During fiscal 1996,
slightly improved selling prices were realized on the Model 1488 gold ball
bonder line compared to the average selling prices realized on gold ball
bonders during fiscal 1995.
Packaging materials segment net sales increased to $93.9 million in fiscal
1996 from $20.7 million in fiscal 1995. The increase is due to $66.9 million
of sales of wire products following the AFW acquisition and $6.4 million due
to increased sales volumes of expendable tools totaling $6.4 million.
Gross profit as a percentage of net sales declined to 37.2% in fiscal 1996
compared to 45.0% in fiscal 1995. Equipment segment gross profit as a
percentage of net sales decreased to 42.5% for fiscal 1996 compared to 45.3%
for fiscal 1995. As a result of the rapid and substantial decline in customer
demand for the Company's equipment in the second half of fiscal 1996, the
Company experienced unfavorable overhead absorption during the third and
fourth quarters of fiscal 1996. Provisions for excess and obsolete inventory
totaled $4.5 million in fiscal 1996 compared to $2.8 million in the prior
year. The rapid decline in customer demand in fiscal 1996, particularly for
the Model 1488 turbo gold ball bonders, and the anticipated transition to the
new generation Model 8020 gold ball bonders in the second half of 1997,
caused the Company to recognize approximately $2.8 million of the 1996
provision for excess and obsolete inventory in the fourth quarter for
inventory which was not expected to be used or sold with the transition to
the new generation of wire bonders.
Gross profit as a percentage of net sales in the packaging materials segment
decreased to 19.6% for fiscal 1996 compared to 40.7% for fiscal 1995. The
decrease principally reflects the effect of the AFW acquisition as sales of
wire products have historically had a substantially lower gross profit margin
than the Company's other products.
Selling, general and administrative expenses ("SG&A") increased to $71.9
million in fiscal 1996 compared to $50.7 million in fiscal 1995. The increase
of $21.2 million consisted of approximately $9.4 million related to the
equipment segment, $10.6 million related to the packaging materials segment,
and $1.1 million of incremental corporate costs. In the equipment segment,
higher employment and travel related costs, primarily in connection with the
Company's worldwide customer support activities during the first half of
fiscal 1996, contributed to the increase. Incremental goodwill amortization
of $2.1 million and other SG&A costs of $5.8 million associated with the AFW
operation accounted for the majority of the increase in the Packaging
Materials segment. Higher sales commissions related to increased sales of
expendable tools, increased travel costs related to AFW integration
activities and increased administrative costs to support the expanded
worldwide activities of the Packaging Materials segment also contributed to
the fiscal 1996 increase. Corporate costs grew principally as a result of
implementation activities related to a new worldwide computer system.
In response to the rapid decline in customer demand for the Company's
products during the latter half of fiscal 1996, the Company reduced its
world-wide work force, primarily in the equipment segment, discontinued the
planned expansion of its Willow Grove, Pa. facility, and deferred the
implementation of a new worldwide integrated computer system. As a result of
these actions, in the fourth quarter of fiscal 1996, the Company incurred
severance costs totaling $1.2 million and a $1.8 million charge to write-off
costs incurred in connection with the discontinued Willow Grove facility
expansion.
Research and development costs ("R&D") increased to $52.4 million for the
fiscal year ended September 30, 1996, compared to $30.9 million for the same
period in the prior fiscal year. The majority of the R&D costs incurred were
in the equipment segment. Approximately $13.0 million of the increase was due
to engineering activities associated with the 8000 family of products,
principally the Model 8020 development program. The fiscal 1996 increase also
included approximately $1.0 million related to the write-down of certain
engineering prototype machines to their net realizable value. The remaining
R&D spending increases related to development activities for other products
and continuous improvements of existing products. The Company continues to
invest heavily in the development of the 8000 Series wire bonders and the
enhancement of many of its existing products, including, but not limited to,
the Model 1488 turbo gold ball bonder and Model 1474fp wedge bonder, to
enable them to meet customer requirements for higher lead count devices with
finer pitch requirements at faster bonding speeds than earlier models. The
<PAGE>
Company also continues to invest in new technologies which may eventually
lead to improved and alternative semiconductor assembly technologies.
Packaging materials segment R&D costs increased to $1.0 million as compared
to fiscal 1995 levels. Substantially all of the R&D spending in the packaging
materials segment related to continuous improvement activities for existing
products.
Operating income declined to $17.4 million in fiscal 1996 compared to $55.4
million in fiscal 1995. The decline largely resulted from higher fiscal 1996
SG&A and R&D costs in the equipment segment and to the decline in equipment
segment gross profits during the latter half of fiscal 1996. Most of the
decline in operating income was realized in the U.S. as the U.S. operation
incurred the majority of the Company's R&D expenses and corporate costs, and
recognized the majority of the fiscal 1996 fourth quarter charges.
In connection with the October 1995 AFW acquisition, the Company borrowed
$15.0 million under its Bank Credit Facility and $34.4 million pursuant to
promissory notes issued to certain former Circle "S" shareholders. The
promissory notes were repaid in January 1996 through additional borrowings
under the Company's bank credit facility. During fiscal 1996, the Company
incurred $3.2 million of incremental interest expense associated with these
borrowings. During fiscal 1995, a portion of the Company's 8% Convertible
Subordinated Debentures were outstanding. All of the remaining 8% debentures
were converted into the Company's common stock or redeemed in fiscal 1995.
In February 1996, the Company entered into a joint venture agreement with
Delco Electronics Corporation providing for the formation and management of
Flip Chip Technologies, L.L.C. ("FCT" or "the Joint Venture"). FCT was formed
to provide wafer bumping services. During fiscal 1996, the Company
contributed $2.6 million of capital to FCT, and recognized $1.0 million as
its proportionate share of the Joint Venture's operating loss. The Joint
Venture is still in the early stages of developing its business and is
expected to incur increased losses in fiscal 1997.
The Company's effective tax rate increased to 24% for fiscal 1996 compared to
23% in fiscal 1995. The increase was due primarily to the amount and
geographic distribution of taxable income in fiscal 1996. In connection with
the AFW acquisition, the Company acquired a $7.1 million U.S federal net
operating loss ("NOL") carryforward. During fiscal 1996, AFW's U.S.
manufacturing operation experienced a small loss. Since the Company cannot
reasonably forecast sufficient future U.S. earnings by this subsidiary to
fully utilize the acquired NOL during the carryforward period, a valuation
allowance was established for the full amount of this potential tax benefit.
If realized, such tax benefits would reduce the recorded amount of AFW
goodwill.
Net income declined to $11.8 in fiscal 1996 as compared to fiscal 1995 of
$42.8 million due to the factors previously enumerated.
In October 1995, Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-based Compensation" ("SFAS 123"), was issued. The
statement requires the recognition of the fair value of stock options and
other stock-based compensation to be reflected as compensation expense in the
income statement, or disclosure of the pro-forma effect on net income and
earnings per share of such compensation expense in the footnotes to the
Company's financial statements commencing with the 1997 fiscal year. The
Company expects to adopt SFAS 123 on a disclosure basis only. Accordingly,
implementation of SFAS 123 is not expected to impact the Company's
consolidated balance sheet or income statement.
FISCAL YEARS ENDED SEPTEMBER 30, 1995 AND SEPTEMBER 30, 1994
The Company recorded bookings totaling $342.4 million during the fiscal year
ended September 30, 1995 compared to $178.0 million during fiscal 1994. The
increase in customer orders was primarily attributable to the following
factors. First, growing end-user demand for semiconductor devices resulted in
industry-wide expansion both in wafer fabrication capacity and semiconductor
assembly capacity in 1995. In addition, certain semiconductor manufacturers
replaced older assembly capital equipment with newer, higher throughput
machines capable of handling more complex semiconductor devices for a wider
variety of applications. Finally, enhanced versions of the Company's gold
<PAGE>
ball wire bonder (Model 1488 turbo - introduced in late fiscal 1994) and
aluminum wedge bonder (Model 1474fp - introduced in the second quarter of
fiscal 1995) offered significant performance advantages compared to the
Company's earlier models, including greater throughput, finer pitch
capabilities and improved programmability to handle a wider variety of
applications. Favorable customer acceptance of these enhanced models
contributed to the Company's increased volume of orders during fiscal 1995.
At September 30, 1995, the backlog of customer orders totaled approximately
$84.7 million compared to $46.8 million at September 30, 1994.
Net sales for the fiscal year ended September 30, 1995 increased 76% to
$304.5 million compared to $173.3 million during fiscal 1994. Approximately
$123.6 million of this increase was due to higher unit volume, primarily of
the Company's Model 1488 Turbo gold ball wire bonders and 1474fp aluminum
wedge bonders, and, to a lesser extent, to increased sales of consumable
tools and spare parts. Higher selling prices for the Model 1488 Turbo ball
bonder and Model 1474fp wedge bonder contributed approximately $7.6 million
to net sales in fiscal 1995, over the amounts reported in fiscal 1994. In
addition, approximately $6.1 million of the volume increase was attributable
to sales of products added from the July 1994 acquisition of Assembly
Technologies ("AT"). By geographic region, increases in net sales in fiscal
1995 as compared to fiscal 1994 were primarily attributable to customers
located in the Asia/Pacific region, and, to a lesser extent, to customers
located in the United States. Sales to customers in the Asia/Pacific region
and the United States accounted for more than 90% of the Company's net sales
in fiscal 1995.
Gross profit as a percentage of net sales increased to 45.0% for fiscal 1995
compared to 41.5% for fiscal 1994. The increase in the gross profit
percentage resulted principally from improved manufacturing overhead
absorption associated with higher sales volumes, the improved gross profit
margin on the gold ball and wedge bonder products largely due to the higher
selling prices realized on the new, enhanced models, and to a shift in sales
mix toward higher margin wedge bonders. During fiscal 1994, the wedge bonder
product line comprised 14% of net revenues; in fiscal 1995, wedge bonder
products accounted for 20% of net revenues. Partially offsetting the above
factors were additional inventory reserves established for slower moving
products during fiscal 1995.
SG&A totaled $50.7 million during fiscal 1995, compared to $36.8 million
during fiscal 1994. This increase was primarily attributable to higher
employment levels required to support the higher volume of business,
increased sales incentives and commissions resulting from the higher sales
levels, increased management incentives associated with improved earnings and
higher outside contractor costs associated with ongoing internal management
information systems development efforts. Of the total increase in SG&A costs,
$1.5 million was related to the incremental costs incurred by the Company to
market and support die bonder products added through the July 1994
acquisition of AT.
Net R&D costs increased to $30.9 million for the fiscal year ended September
30, 1995, compared to $21.3 million for the same period last year. Of the
$9.6 million increase in fiscal 1995, $2.0 million resulted from incremental
expenditures related to development of the Company's next generation of die
bonders and enhancements to die bonder products added through the AT
acquisition. The remainder consisted primarily of personnel related costs,
outside contractor costs and prototype materials related to new product
development. Gross R&D expenses were partially offset by funding received
from customers and governmental subsidies totaling $2.8 million in fiscal
1995 and $2.0 million in fiscal 1994.
The Company continued to invest heavily in the development of the 8000 Series
wire bonders and in enhancements of existing products, including the Model
1488 turbo ball bonder and Model 1474fp wedge bonder to enable them to handle
higher lead-count devices with finer pitch requirements at faster bonding
speeds than the earlier Models. In addition, the Company continued to invest
in new technologies which may eventually lead to improved or alternate
semiconductor assembly technologies.
Operating income totaled $55.4 million for fiscal 1995 compared to $13.9
million for the same period in fiscal 1994. This improvement resulted
principally from the higher revenue levels and improved gross profit margins,
offset in part by the increased SG&A and R&D expenses noted above. The
majority of the increase in operating profit was realized in the United
States, where the Company maintains its principal manufacturing operations,
and in Hong Kong where the Company's Asia/Pacific sales activities are
centered.
<PAGE>
During fiscal 1995, all of the Company's remaining 8% Convertible
Subordinated Debentures were converted into Common Stock or redeemed. As a
result, interest expense during fiscal 1995 was lower than the amount
reported in fiscal 1994.
The increase in the effective tax rate to 23% in fiscal 1995 compared to the
fiscal 1994 rate of 20% was due primarily to utilization of remaining net
operating loss carryforwards in fiscal 1994, utilization in the United States
of R&D tax credits not previously used due to the effects of net operating
losses, and to the amount and geographic distribution of taxable income in
fiscal 1995.
COMPANY OUTLOOK
Certain of the information set forth below and elsewhere in this report
contains forward looking statements that are subject to certain risks and
uncertainties that could cause actual results to materially differ from those
set forth in the forward looking statements. These risks and uncertainties
include, but are not limited to the following: the risk of volatile demand in
the semiconductor industry; the deferral or possible cancellation of existing
customer orders; the timing, development, introduction and acceptance of new
products and enhancements to existing products; the Company's ability to
manufacture and ship its products on a timely basis; competitive pricing
pressures; the risk that certain customers may adopt alternate semiconductor
assembly processes; and international political and other developments which
could impact foreign operations.
While semiconductor consumption continues to grow, the Company's equipment
segment was adversely affected in fiscal 1996 by industry wide overinvestment
in assembly capacity in fiscal 1995 and early fiscal 1996. During the third
and fourth quarters of fiscal 1996, the rate of new customer orders booked
into backlog was lower than each of the previous four quarters. This
declining order rate resulted in the equipment segment's sharply lower net
sales during the third and fourth quarters of fiscal 1996, led to the
Company's August 1996 resizing efforts which reduced anticipated annualized
operating costs by approximately $25 million, and contributed significantly
to the $12.7 million net loss in the fourth quarter of fiscal 1996.
Subsequent to the fiscal 1996 year end, the order rate has improved and the
Company currently anticipates significant improvements in revenues and
operating results in the first half of fiscal 1997 as compared to the last
half of fiscal 1996. Moreover, the Company continues to believe that long-
term growth prospects for the semiconductor industry and for the Company's
products remain positive.
The Company is in the process of developing a new generation of wire bonder,
the 8000 family, which is based on an entirely new platform and requires the
development of new software and many subassemblies not part of the Company's
current wire bonders. The first prequalification Model 8020 ball bonder (the
first production model of the 8000 family) was shipped to a customer in March
1996 and is presently being field tested. The Company currently expects that
the product will be released in the second half of calendar 1997. Development
and technical risks exist in all of the Company's R&D projects and have the
potential to delay the introduction of new products. No assurance can be
given that the introduction of the Model 8020 will not be further delayed due
to technical or other difficulties. The Company's inability to complete the
development of and introduce the Model 8020 or other new products, or its
inability to manufacture and ship these products in volume and on a timely
basis, could adversely affect the Company's competitive position.
The Company's planned transition to the Model 8020 platform also involves
numerous other risks, including the possibility that customers will defer
purchases of the current model of gold ball wire bonders in anticipation of
the availability of the Model 8020, or that the Model 8020 will fail to meet
customer needs or achieve market acceptance. To the extent that the Company
fails to accurately forecast demand in volume and configuration for both its
current and next generation wire bonders and generally to manage product
transitions successfully, it could experience reduced orders, delays in
product shipments, and increased risk of inventory obsolescence. There can be
no assurance that the Company will successfully develop and manufacture new
products, including the Model 8020, that new products introduced by the
Company will be accepted in the marketplace, or that the Company will manage
its product transitions successfully. The Company's failure to do any of the
foregoing could materially adversely affect the Company's business, financial
condition and operating results.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
During the past three fiscal years, the Company has financed its operations
principally through cash flows from operating activities. Cash generated by
operating activities totaled $38.9 million during fiscal 1996 compared to
$22.0 million during fiscal 1995. Cash and total investments increased to
$58.9 million at September 30, 1996 from $40.9 million at September 30, 1995.
At September 30, 1996, working capital increased to $113.8 million compared
to $103.8 million at September 30, 1995. The accounts receivable balance
decreased by $30.0 million during fiscal 1996 reflecting the significantly
reduced sales volumes in the latter half of fiscal 1996 and collection of a
$15.0 million note receivable outstanding at September 30, 1995.
Approximately $13.0 million of this reduction resulted from lower sales
levels by the Company's Hong Kong subsidiary. Partially offsetting this
reduction was an increase of $9.0 million due to the AFW acquisition. Gross
inventory increased $7.7 million at September 30, 1996. Of this increase,
$1.9 million resulted from the AFW acquisition. The remainder of the increase
was due to increased levels of raw materials and finished goods on hand as
customers either delayed or canceled orders. This increase was partially
offset by additional inventory reserves, of which $2.8 million was recorded
in the fourth quarter of fiscal 1996, as a result of the significant decline
in customer orders for Company products.
Trade accounts payable and accrued expenses at September 30, 1996 decreased
by $7.7 million to $41.4 million compared to the balance at the end of fiscal
1995. The decrease in trade accounts payable of $10.1 million is directly
attributable to the decreased level of inventory purchases during the latter
half of fiscal 1996. The decrease in accrued expenses at September 30, 1996
primarily relates to reductions in accrued expenses related to the AFW
acquisition.
As described in Notes 2 and 6 to the Company's consolidated financial
statements, the Company acquired AFW on October 2, 1995. Of the total
purchase price, $50.0 million was financed by borrowings under the Company's
bank credit facility. In October 1996, the Company acquired Semitec, Inc.
("Semitec") for approximately $4.9 million, including transaction costs. Of
the total purchase price, $4.7 million must be paid to the former Semitec
shareholders in cash or in registered shares of Company common stock by June
1997.
During fiscal 1996, the Company invested approximately $18.0 million in
property and equipment, primarily to expand Company facilities, upgrade
equipment used in the Company's manufacturing activities, including tooling
used in the manufacturing process, and for R&D test equipment suitable for
the Company's new products. The Company presently expects fiscal 1997 capital
spending will not exceed $15 million. The principal capital projects planned
for fiscal 1997 include completion of the new Micro-Swiss manufacturing
facility in Yokneam, Israel, relocation of AFW's Singapore based
manufacturing and administrative facilities into a single new leased facility
and the purchase of new tooling equipment necessary to commence manufacture
of the 8000 series of machines. Relocations of the Micro-Swiss operations in
the first quarter of fiscal 1997 and the AFW Singapore operations in late
fiscal 1997 are not expected to have a material adverse effect on the
Company's results of operations, cash flows or liquidity.
Through September 30, 1996, the Company contributed $2.6 million in capital
to the newly formed FCT. The Company expects its fiscal 1997 capital
contributions to the joint venture will not exceed $17 million.
In April 1996, the Company renegotiated the terms of its bank credit facility
resulting in a Restated Loan Agreement providing for a $10.0 million
revolving credit facility, expiring in February 1997 and a $50.0 million
revolving credit facility expiring in March 2001. As of September 30, 1996,
the $50.0 million borrowed under the revolving credit facility was classified
as long-term debt as the Company presently does not expect any principal
payments under this loan during fiscal 1997. There were no borrowings under
the $10.0 million credit line during fiscal 1996.
A significant portion of the Company's consolidated earnings are attributable
to undistributed earnings of certain of its foreign subsidiaries. Deferred
income taxes have not been provided on that portion of undistributed foreign
earnings which is expected to be indefinitely reinvested in foreign
operations. If funds were required to be repatriated to fund the Company's
operations or other financial obligations, additional U.S. Federal income tax
expense could be required to be recognized.
<PAGE>
The amended Gold Supply Agreement dated October 2, 1995 between AFW and its
subsidiaries (collectively, the "AFW Companies") and their gold supplier
contains certain financial covenants and prohibits the AFW Companies from
paying any dividends or making any distributions without the consent of the
supplier if, following any such dividend or distribution, the net worth of
the AFW Companies would be less than $7.0 million.
The Company believes that anticipated cash flows from operations, its working
capital and amounts available under its revolving credit facility will be
sufficient to meet the Company's liquidity and capital requirements for at
least the next fiscal year, including any debt service requirements under its
bank credit facility. The Company may, however, seek equity or debt financing
to provide capital for corporate purposes and/or to fund strategic business
opportunities, including possible acquisitions, joint ventures, alliances or
other business arrangements which could require substantial capital outlays.
The timing and amount of such potential capital requirements cannot be
determined at this time and will depend on a number of factors, including
demand for the Company's products, semiconductor and semiconductor capital
equipment industry conditions and competitive factors and the nature and size
of strategic business opportunities which the Company may elect to pursue.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated Financial Statements of Kulicke and Soffa Industries, Inc.
and its subsidiaries, listed in the index appearing under Item 14 (a) (1) and
(2) are filed as part of the Annual Report on Form 10-K.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders
Kulicke and Soffa Industries, Inc.
In our opinion, based upon our audits and the report of other auditors, the
consolidated financial statements listed in the index appearing under Item
14(a)(1) and (2) on page 41 of this Annual Report on Form 10-K present
fairly, in all material respects, the financial position of Kulicke and Soffa
Industries, Inc. and its subsidiaries at September 30, 1996 and 1995, and the
results of their operations and their cash flows for each of the three years
in the period ended September 30, 1996, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of
the Company's management; our responsibility is to express an opinion on
these financial statements based on our audits. We did not audit the
consolidated financial statements of Kulicke and Soffa (Israel) Ltd., a
wholly-owned subsidiary, for the year ended September 30, 1994 which
consolidated statements reflect, before adjustments to eliminate intercompany
activity, net sales of $27,864,000 for the year ended September 30, 1994.
Those statements were audited by other auditors whose report thereon has been
furnished to us, and our opinion expressed herein, insofar as it relates to
the amounts included for Kulicke and Soffa (Israel) Ltd., is based solely on
the report of the other auditors. We conducted our audits of these statements
in accordance with generally accepted auditing standards which require that
we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits and the report
of other auditors provide a reasonable basis for the opinion expressed above.
/s/ PRICE WATERHOUSE LLP
Philadelphia, Pennsylvania
November 15, 1996
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Directors and Shareholders of
Kulicke and Soffa (Israel) Ltd.
We have audited the consolidated statements of operations and retained
earnings and of cash flows of Kulicke and Soffa Industries (Israel) Ltd. and
subsidiary for the year ended September 30, 1994, all expressed in U.S.
dollars. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audit in accordance with generally accepted auditing
standards in Israel and the United States. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements (not separately
presented herein) expressed in U.S. dollars, present fairly, in all material
respects, the consolidated results of operations and retained earnings and of
cash flows of Kulicke and Soffa (Israel) Ltd. and subsidiary for the year
ended September 30, 1994, in conformity with generally accepted accounting
principles in the United States.
/s/ LUBOSHITZ, KASIERER & CO.
Certified Public Accountants (Israel)
Haifa, Israel
November 3, 1994
<PAGE>
KULICKE AND SOFFA INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEET
(in thousands)
September 30,
----------------
1996 1995
------- -------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents
(including time deposits:
1996 - $2,925; 1995 - $7,877) $ 45,344 $ 28,624
Short-term investments 13,078 9,590
Accounts and notes receivable (less allowance
for doubtful accounts:
1996 - $1,227; 1995 - $1,094) 47,456 77,427
Inventories, net 44,519 40,850
Prepaid expenses and other current assets 4,277 3,534
Refundable income taxes 6,212 --
Deferred income taxes 1,765 76
------- -------
TOTAL CURRENT ASSETS 162,651 160,101
Property, plant and equipment, net 41,143 25,519
Intangible assets, primarily goodwill, net 42,049 1,183
Long-term investments 449 2,732
Investment in joint venture 1,556 --
Other assets 1,706 1,494
------- -------
TOTAL ASSETS $249,554 $191,029
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 491 $ 60
Accounts payable 23,032 33,145
Accrued expenses 18,389 16,014
Income taxes payable 6,935 6,973
------- -------
TOTAL CURRENT LIABILITIES 48,847 56,192
Long-term debt 50,712 156
Other liabilities 2,506 1,034
------- -------
TOTAL LIABILITIES 102,065 57,382
------- -------
Commitments and contingencies
(Notes 5, 6, 8 and 12) -- --
SHAREHOLDERS' EQUITY:
Preferred stock, without par value:
Authorized - 5,000 shares;
issued - none -- --
Common stock, without par value:
Authorized - 50,000 shares; issued and
outstanding: 1996 - 19,433;
1995 - 19,310 48,733 45,757
Retained earnings 101,085 89,238
Cumulative translation adjustment (2,329) (1,348)
------- -------
TOTAL SHAREHOLDERS' EQUITY 147,489 133,647
------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $249,554 $191,029
======= =======
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
KULICKE AND SOFFA INDUSTRIES, INC.
CONSOLIDATED INCOME STATEMENT
(in thousands, except per share amounts)
Fiscal Year Ended September 30,
------------------------------
1996 1995 1994
-------- -------- --------
Net sales $381,176 $304,509 $173,302
Cost of goods sold 239,491 167,457 101,334
------- ------- -------
Gross profit 141,685 137,052 71,968
Selling, general and administrative 71,863 50,728 36,752
Research and development, net 52,404 30,884 21,286
------- ------- -------
Income from operations 17,418 55,440 13,930
Interest income 3,124 1,580 1,264
Interest expense (3,288) (1,407) (2,171)
Equity in loss of joint venture (994) -- --
Other expense (630) -- --
------- ------- -------
Income before income taxes 15,630 55,613 13,023
Income tax expense 3,783 12,791 2,605
------- ------- -------
Net income $ 11,847 $ 42,822 $ 10,418
======= ======= =======
Net income per share:
Primary $0.60 $2.38 $0.63
Fully diluted $0.60 $2.22 $0.63
Weighted average number of
shares outstanding:
Primary 19,773 18,028 16,665
Fully diluted 19,773 19,693 16,665
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
KULICKE AND SOFFA INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
Fiscal Year Ended September 30,
-------------------------------
1996 1995 1994
--------- --------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 11,847 $ 42,822 $ 10,418
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and amortization 9,658 4,947 3,940
Provision for doubtful accounts 178 826 103
Deferred taxes on income (2,125) (718) 234
Provision for inventory reserves 4,547 2,758 677
Equity in loss of joint venture 994 -- --
Changes in components of working
capital, excluding effects of
business acquisitions:
Decrease (increase)
in accounts receivable 38,959 (37,995) (11,023)
Decrease (increase) in inventories (6,358) (16,390) 3,258
Decrease (increase) in prepaid
expenses other current assets (483) (1,107) 677
Increase (decrease) in accounts
payable and accrued expenses (11,632) 20,903 2,523
Increase (decrease) in net
taxes payable (8,076) 5,158 1,287
Other, net 1,364 844 676
------- ------- -------
Net cash provided by operating activities 38,873 22,048 12,770
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of businesses, including
transaction costs, net of cash acquired (43,020) -- (3,296)
Purchases of investments classified
as available-for-sale (28,512) (12,612) (25,891)
Proceeds from sales or maturities
of investments:
Classified as available-for-sale 26,802 16,631 22,825
Classified as held-to-maturity 505 2,082 --
Purchases of plant and equipment (18,028) (10,777) (6,202)
Proceeds from sale of property
and equipment 781 1,067 123
Investment in joint venture (2,550) -- --
------- ------- -------
Net cash used by investing activities (64,022) (3,609) (12,441)
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on borrowings including
capitalized leases (8,537) (60) (60)
Proceeds from borrowings 50,000 -- --
Proceeds from issuances of common stock 394 1,484 1,084
------- ------- -------
Net cash provided by financing activities 41,857 1,424 1,024
------- ------- -------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 12 7 (12)
------- ------- -------
CHANGE IN CASH AND CASH EQUIVALENTS 16,720 19,870 1,341
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR 28,624 8,754 7,413
------- ------- -------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 45,344 $ 28,624 $ 8,754
======= ======= ========
The accompanying notes are an integral part of these consolidated financial
statements. See Note 6 for disclosure of non-cash financing activities.
<PAGE>
KULICKE AND SOFFA INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(in thousands)
Unrealized
Cumulative Gain Total
Common Stock Retained Translation (Loss) on Shareholders'
Shares Amount Earnings Adjustment Investments Equity
------------- -------- ---------- ----------- ----------
Balances at
September 30,
1993 16,244 $16,336 $35,998 $ (853) $ 51,481
Purchases under
the employee stock
purchase plan 79 369 -- -- 369
Employer
contribution to
the 401(k) plan 16 112 -- -- 112
Exercise of stock
options 144 603 -- -- 603
Tax benefit from
exercise of
stock options -- 245 -- -- 245
Shares issued upon
conversion of
subordinated debt 16 174 -- -- 174
Translation
adjustment -- -- -- 12 12
Unrealized loss
on investments -- -- -- -- $ (180) (180)
Net income -- -- 10,418 -- -- 10,418
------ ------ ------ ------ ------ --------
Balances at
September 30,
1994 16,499 17,839 46,416 (841) (180) 63,234
Purchases under
the employee
stock purchase
plan 119 556 -- -- -- 556
Employer
contribution to
the 401(k) plan 12 118 -- -- -- 118
Exercise of
stock options 217 928 -- -- -- 928
Tax benefit from
exercise of
stock options -- 154 -- -- -- 154
Shares issued upon
conversion of
subordinated debt 2,463 26,162 -- -- -- 26,162
Translation
adjustment -- -- -- (507) -- (507)
Unrealized gain
on investments -- -- -- -- 180 180
Net income -- -- 42,822 -- -- 42,822
------ ------ ------ ------ ------ --------
Balances at
September 30,
1995 19,310 45,757 89,238 (1,348) -- 133,647
Employer
contribution to
the 401(k) plan 84 1,580 -- -- -- 1,580
Exercise of
stock options 39 394 -- -- -- 394
Tax benefit from
exercise of
stock options -- 1,002 -- -- -- 1,002
Translation
adjustment -- -- -- (981) -- (981)
Net income -- -- 11,847 -- -- 11,847
------ ------ ------ ------ ------ --------
Balances at
September 30,
1996 19,433 $48,733 $101,085 $(2,329) $ -- $147,489
====== ====== ======= ====== ====== =======
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
KULICKE AND SOFFA INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share data)
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
These consolidated financial statements include the accounts of Kulicke and
Soffa Industries, Inc. and its subsidiaries (the "Company"), with appropriate
elimination of intercompany balances and transactions.
Nature of Business - The Company manufactures capital equipment and packaging
materials used in the assembly of semiconductors. The Company's operating
results primarily depend upon the capital expenditures of semiconductor
manufacturers and subcontract assemblers worldwide which, in turn, depend on
the current and anticipated market demand for semiconductors and products
utilizing semiconductors. The semiconductor industry historically has been
highly volatile and experienced periodic downturns and slowdowns which have
had a severe negative effect on the semiconductor industry's demand for
semiconductor capital equipment, including assembly equipment manufactured
and marketed by the Company and, to a lesser extent, packaging materials such
as those sold by the Company. These downturns and slowdowns have also
adversely affected the Company's operating results. The Company believes that
such volatility will continue to characterize the industry and the Company's
operations in the future.
The semiconductor and semiconductor equipment industries are subject to rapid
technological change and frequent new product introductions and enhancements.
The Company invests substantial amounts in research and development to
continuously develop and manufacture new products and product enhancements in
response to demands for higher performance assembly equipment. The Company's
inability to successfully develop new products and product enhancements or to
effectively manage the introduction of new products into the marketplace
could have a material adverse effect on the Company's results of operations,
financial condition and liquidity.
Cash Equivalents - The Company considers all highly liquid investments with
original maturities of three months or less when purchased to be cash
equivalents.
Investments - The Company's investments other than cash equivalents are
classified as "trading," "available-for-sale" or "held-to-maturity,"
depending upon the nature of the investment, its ultimate maturity date in
the case of debt securities, and management's intentions with respect to
holding the securities. Investments classified in "trading" are reported at
fair market value, with unrealized gains or losses included in earnings.
Investments classified as available-for-sale are reported at fair market
value, with net unrealized gains or losses reflected as a separate component
of shareholders' equity. Investments classified as held-to-maturity are
reported at amortized cost. Realized gains and losses are determined on the
basis of specific identification of the securities sold.
Vulnerability to Certain Concentrations - Financial instruments which may
subject the Company to concentration of credit risk at September 30, 1996 and
1995 consist primarily of investments and trade receivables. The Company
manages credit risk associated with investments by investing its excess cash
in investment grade debt instruments of the U.S. Government, financial
institutions and corporations. The Company has established investment
guidelines relative to diversification and maturities designed to maintain
safety and liquidity. These guidelines are periodically reviewed and modified
to take advantage of trends in yields and interest rates. The Company's trade
receivables result primarily from the sale of semiconductor equipment,
related accessories and replacement parts and packaging materials to a
relatively small number of large manufacturers in a highly concentrated
industry. The Company continually assesses the financial strength of its
customers to reduce the risk of loss. Accounts receivable at September 30,
1996 and 1995 include notes receivable of $1,120 and $15,164, respectively.
Write-offs of uncollectible accounts have historically been insignificant.
Sales to a relatively small number of customers account for a significant
percentage of the Company's net sales. During fiscal 1996, sales to Anam and
Intel accounted for approximately 14.3% and 11.2%, respectively, of the
Company's net sales. In fiscal 1995, sales to Intel and Anam accounted for
19.8% and 16.3%, respectively. In fiscal 1994, sales to Anam, Intel and
Motorola accounted for 14.2%, 11.5% and 10.8% respectively, of the Company's
net sales. The Company expects that sales of its products to a limited number
of customers will continue to account for a high percentage of net sales for
<PAGE>
the foreseeable future. The loss of or reduction of orders from a significant
customer could adversely affect the Company's business, financial condition
and operating results.
The Company relies on subcontractors to manufacture to the Company's
specifications many of the components or subassemblies used in its products.
Certain of the Company's products require components or parts of an
exceptionally high degree of reliability, accuracy and performance for which
there are only a limited number of suppliers or for which a single supplier
has been accepted by the Company as a qualified supplier. If supplies of such
components or subassemblies were not available from any such source and a
relationship with an alternative supplier could not be promptly developed,
shipments of the Company's products could be interrupted and re-engineering
of the affected product could be required. Such disruptions could have a
material adverse effect on the Company's results of operations.
Inventories - Inventories are stated at the lower of cost (determined on the
basis of first-in, first-out for certain inventories and average cost for
others) or market. Due to the volatility of demand for capital equipment and
the rapid technological change in the semiconductor industry, the Company is
vulnerable to risks of excess and obsolete inventory. The Company generally
provides reserves for inventory considered to be in excess of 18 months of
forecasted future demand.
Property, Plant and Equipment - Property, plant and equipment are carried at
cost. The cost of additions and those improvements which increase the
capacity or lengthen the useful lives of assets are capitalized while repair
and maintenance costs are expensed as incurred. Depreciation and amortization
is provided on a straight-line basis over the estimated useful lives as
follows: buildings 25 to 40 years; machinery and equipment 3 to 8 years;
leasehold improvements are based on the life of lease or life of asset.
Purchased computer software costs related to business and financial systems
are amortized over a five year period on a straight-line basis.
Intangible Assets - Goodwill resulting from acquisitions accounted for using
the purchase method is amortized on a straight-line basis over the estimated
period to be benefited by the acquisitions ranging from fifteen to twenty
years (see Note 2). The Company has adopted SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,"
effective October 1, 1994. The carrying value of long-lived assets, including
goodwill, is evaluated whenever changes in circumstances indicate the
carrying amount of such assets may not be recoverable. In performing such
review for recoverability, the Company compares the expected future cash
flows to the carrying value of long-lived assets and identifiable
intangibles. If the anticipated undiscounted future cash flows are less than
the carrying amount of such assets, the Company recognizes an impairment loss
for the difference between the carrying amount of the assets and their
estimated fair value. If an asset being tested for recoverability was
acquired in a business combination accounted for using the purchase method,
the excess of cost over fair value of net assets that arose in that
transaction is allocated to the assets being tested for recoverability on a
pro rata basis using the relative fair values of the long-lived assets and
identifiable intangibles acquired at the acquisition date.
Postemployment Benefits - In fiscal 1995, the Company adopted SFAS No. 112,
"Employers' Accounting for Postemployment Benefits." This Statement requires
that post employment benefits be recognized over the employees' periods of
service if such benefits vest ratably, or upon termination in certain
instances. Adoption of this new statement did not materially impact the
Company's financial position or results of operations.
Foreign Currency Translation - The U.S. dollar is the functional currency for
all subsidiaries except the Company's operations in Japan, Switzerland and
Singapore. Unrealized translation gains and losses resulting from the
translation of functional currency financial statement amounts into U.S.
dollars in accordance with SFAS No. 52 are not included in determining net
income but are accumulated in the cumulative translation adjustment account
as a separate component of shareholders' equity. Gain and losses resulting
from foreign currency transactions are included in the determination of net
income. Net exchange and transaction gains (losses) were $57, ($281) and $267
for the years ended September 30, 1996, 1995 and 1994, respectively.
Revenue Recognition - Sales are recorded upon shipment of products or
performance of services. Expenses for estimated product returns and warranty
costs are accrued in the period of sale recognition.
<PAGE>
Research and Development Arrangements - The Company receives funding from
certain customers and government agencies pursuant to contracts or other
arrangements for the performance of specified research and development
activities. Such amounts are recognized as a reduction of research and
development expense when specified activities have been performed. During
fiscal 1996, 1995 and 1994, reductions to research and development expense
related to such funding totaled $2,473, $2,843 and $2,022, respectively.
Income Taxes - Deferred income taxes are determined using the liability
method in accordance with SFAS No. 109, "Accounting for Income Taxes." No
provision is made for U.S. income taxes on undistributed earnings of foreign
subsidiaries which are indefinitely reinvested in foreign operations.
Earnings Per Share - Primary earnings per share are computed using the
weighted average number of common shares outstanding. Recognition is given to
the assumed exercise of stock options, if dilutive. Fully diluted earnings
per share are computed based on the weighted average number of shares
outstanding plus those shares assumed to be issued upon the exercise of stock
options and, in fiscal 1995, the conversion of the subordinated debentures,
after giving effect to the elimination of interest expense, net of income
taxes, applicable to the debentures. All share related data reflects the
effect of the Company's July 1995 two-for-one stock split.
Management Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles 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 reporting period. The more significant areas involving the use of
estimates in these financial statements include reserves for excess and
obsolete inventory and valuation allowances for deferred tax assets. Actual
results could differ from those estimates.
Accounting for Stock-based Compensation - In October 1995, SFAS No. 123,
"Accounting for Stock-based Compensation" ("SFAS 123"), was issued.
Commencing with the Company's 1997 fiscal year, this statement will require
the fair value of stock options and other stock-based compensation issued to
employees to either be recognized as compensation expense in the income
statement, or be disclosed as a pro forma effect on net income and earnings
per share in the footnotes to the Company's financial statements. The Company
expects to adopt SFAS 123 on a disclosure basis only. Accordingly,
implementation of SFAS 123 is not expected to impact the Company's
consolidated balance sheet or income statement.
Reclassifications - Certain amounts in the Company's prior year financial
statements have been reclassified to conform to their presentation in the
current fiscal year.
NOTE 2: ACQUISITIONS
In July 1994, the Company acquired the business and certain assets of
Assembly Technologies, an operating division of General Signal Corporation
("AT"), for a cash purchase price approximating $3,296, including
transaction-related costs. AT manufactured and sold semiconductor assembly
equipment, including automatic die attach machines, automatic dicing saws and
related spare parts. The transaction was accounted for as a purchase.
Accordingly, the acquired assets and results of operations of the AT business
are included in the Company's consolidated financial statements from the date
of the acquisition. The excess of the purchase price and transaction-related
costs over the fair value of net assets acquired of $1,287 was charged to
goodwill and is being amortized over a fifteen year period.
On October 2, 1995, the Company acquired American Fine Wire Corporation
("AFW") through the acquisition of all of the common stock of Circle "S"
Industries, Inc., ("Circle S") the parent corporation of AFW. AFW is a
manufacturer of fine gold and aluminum wire used in the wire bonding process,
and has manufacturing facilities in Singapore; Selma, Alabama; and Thalwil,
Switzerland. The acquisition was accounted for using the purchase method.
Accordingly, AFW's operating results are included in the Company's
consolidated financial statements commencing October 2, 1995. The purchase
price was initially financed by borrowings under a new bank credit facility
and by issuance of promissory notes to the former Circle "S" shareholders
(see Note 6).
The AFW purchase price, including transaction related costs, totaled $54.7
million, and was allocated to the assets acquired and liabilities assumed
based upon their estimated fair market value, as follows:
Cash and cash equivalents $ 10,944
Accounts receivable, net 9,166
Inventories 1,858
Property, plant and equipment, net 3,648
Intangible assets, primarily goodwill 43,099
Other assets 284
Short-term debt (8,000)
Accounts payable (1,918)
Accrued expenses (3,219)
Income taxes payable (704)
Deferred income taxes (436)
-------
Total purchase price $54,722
======
The excess of the total purchase price over the estimated fair value of
acquired tangible net assets was $43.1 million, consisting primarily of
goodwill and a favorable operating lease, both of which are being amortized
over a twenty-year period.
Revenues of AFW include a fabrication charge per thousand feet of wire and
the value of precious metals (primarily gold) which is sold to the customer.
Gross revenues could vary significantly based on market fluctuations in the
value of gold. To minimize financial exposure to gold price fluctuations, the
Company obtains gold from its gold supplier on a consignment basis during the
fabrication process and purchases the gold upon shipment and sale of the
finished product to the customer.
Unaudited pro forma income statement data reflecting the combined operating
results of the Company and AFW for the fiscal year ended September 30, 1995,
as if the acquisition had occurred on October 1, 1994, after giving effect to
certain pro forma adjustments, are as follows:
Pro forma
-----------
(unaudited)
Revenue $ 376,956
Net income 40,994
Net income per share $2.13
<PAGE>
NOTE 3: INVESTMENTS
At September 30, 1996 and 1995, no short-term investments were classified as
trading. Investments, excluding cash equivalents, consisted of the following
at September 30, 1996 and 1995:
September 30, 1996 September 30, 1995
------------------------ -----------------------
Unrealized Unrealized
Fair Gains/ Cost Fair Gains/ Cost
Value (Losses) Basis Value (Losses) Basis
----- -------- ------ ------ -------- -----
Available-for-sale:
U.S. Treasury bills
maturing in less
than one year $ 5,969 $ -- $ 5,969 $5,455 $ -- $5,455
Adjustable rate notes 4,808 -- 4,808 2,122 -- 2,122
------ ---- ------ ----- --- -----
Short-term investments
classified as
available for sale $10,777 $ -- $10,777 $7,577 $ -- $7,577
====== ==== ====== ===== === =====
Held-to-maturity:
Corporate bonds with
weighted average
maturity less than
three years $ 2,690 $ (60) $ 2,750 $4,448 $(42) $4,490
U.S. Treasury notes
with maturity less
than three years -- -- -- 256 1 255
------ --- ----- ----- --- ----
$ 2,690 $ (60) 2,750 $4,704 $(41) 4,745
====== ==== ===== ===
Short-term investments
classified as held-to
maturity 2,301 2,013
Held-to-maturity
investments maturing
after one year,
within five years $ 449 $2,732
====== =====
NOTE 4: INVENTORIES
September 30,
-----------------
1996 1995
------- -------
Raw materials and supplies $ 29,985 $22,190
Work in process 9,862 15,740
Finished goods 16,427 10,673
------- ------
56,274 48,603
Inventory reserves (11,755) (7,753)
------- ------
$ 44,519 $40,850
======= ======
NOTE 5: PROPERTY, PLANT AND EQUIPMENT
September 30,
----------------
1996 1995
------- -------
Land $ 1,442 $ 1,026
Buildings and building improvements 16,457 14,879
Machinery and equipment 56,524 38,705
Leasehold improvements 2,767 2,137
------- ------
77,190 56,747
Accumulated depreciation (36,047) (31,228)
------- ------
$ 41,143 $25,519
======= ======
<PAGE>
The Company has obligations under various operating leases, primarily for
manufacturing and office facilities, which expire periodically through 2107.
In addition, in connection with the October 2, 1995 acquisition of AFW, the
Company assumed certain leases associated with AFW's facilities. Minimum
rental commitments under these leases (excluding taxes, insurance,
maintenance and repairs, which are also paid by the Company), are as follows:
$3,544 in 1997; $2,627 in 1998; $1,316 in 1999; $731 in 2000 and $6,321
thereafter.
Rent expense for fiscal 1996, 1995 and 1994 was $2,540, $2,355 and $1,663,
respectively.
NOTE 6: DEBT OBLIGATIONS
Debt obligations include the following:
September 30,
-----------------
1996 1995
------- ------
United States:
Revolving credit facility $50,000 $ --
Capital lease obligations 1,203 --
Asia:
Term loan -- 216
------ -----
Total debt obligations 51,203 216
Less - current portion 491 60
------ -----
Debt due after one year $50,712 $ 156
====== =====
The Company borrowed $15.0 million under its bank credit facility on October
2, 1995 to fund the cash portion of the AFW purchase price and issued
promissory notes totaling $34.4 million to certain selling shareholders of
Circle "S." The promissory notes were repaid in full on January 5, 1996,
together with accrued interest thereon. To finance the repayment of the
promissory notes, on January 5, 1996, the Company borrowed the remaining
$35.0 million available under a term credit facility. Borrowings under the
$50.0 million term credit facility bore interest at the LIBOR rate plus 50
basis points.
On April 10, 1996, the Company renegotiated the terms of its bank credit
facilities resulting in a new Restated Loan Agreement providing for a $10.0
million revolving credit facility expiring February 28, 1997, and a $50.0
million revolving credit facility expiring March 30, 2001. The $10.0 million
revolving loan bears interest at the prime rate less 1/4%. The $50.0 million
revolving loan bears interest at the Company's option, either at a Base Rate
(defined as the lesser of the prime rate minus 1/2% or the Federal Funds rate
plus 1/2%) or, at a LIBOR Rate (defined as LIBOR plus .4% to .6%, depending
on maintenance of certain financial covenants). In May 1996 the Company
elected the 180 day LIBOR rate plus forty basis points resulting in an
effective rate of 6.025% as of September 30, 1996.
The Restated Loan Agreement is unsecured and requires that the Company
maintain certain covenants including a leverage ratio, an interest ratio and
working capital of not less than $50.0 million. Additionally, the Restated
Loan Agreement also limits the Company's ability to mortgage, pledge, or
dispose of material assets, engage in certain transactions with affiliates
and imposes restrictions as to the type and quality of the Company's
investments. The Company was in compliance with all covenants of the Restated
Loan Agreement during fiscal 1996.
The term loan of the Asian subsidiary was repaid in March 1996. Interest was
calculated at the Hong Kong prime rate plus 1/2% (9.5% at September 30,
1995).
During fiscal 1995, a portion of the Company's 8% Convertible Subordinated
Debentures (the "Debentures") were outstanding. The Debentures were
convertible at any time prior to maturity into shares of the Company's common
stock at a conversion rate of $10.66 per share. The Debentures were called
for redemption in fiscal 1995 at a redemption price of 101.60% of the
<PAGE>
principal amount of the Debentures, plus accrued interest thereon. All but
$11 of such Debentures were converted into the Company's common stock by July
10, 1995. The remaining $11 in Debentures were redeemed.
Maturities of long-term debt subsequent to September 30, 1996, are $491 in
1997, $528 in 1998, $184 in 1999, $0 in 2000 and $50.0 million in 2001.
Interest paid on the Company's debt obligations totaled $3,288, $1,407 and
$2,171 in fiscal 1996, 1995 and 1994, respectively.
NOTE 7: SHAREHOLDERS' EQUITY
Stock Option Plans
The Company has four employee stock option plans for officers and key
employees (the "Employee Plans") pursuant to which options may be granted at
100% of the market price of the Company's Common Stock on the date of grant.
Options may no longer be granted under two of the plans. Options granted
under the Employee Plans are exercisable at such dates as are determined in
connection with their issuance, but not later than ten years after the date
of grant.
The following summarizes all employee stock option activity for the three
years ended September 30, 1996:
September 30,
---------------------------------------------------
1996 1995 1994
--------------- -------------- --------------
Average Average Average
Exercise Exercise Exercise
Options Price Options Price Options Price
------- ------- ------- ------- ------- -------
(Share amounts in thousands)
Options outstanding at
beginning of period 618 $ 6.93 472 $5.30 538 $ 3.74
Granted or reissued 259 32.84 350 8.06 105 11.46
Exercised (37) 6.24 (130) 4.21 (118) 4.17
Terminated or canceled (25) 10.60 (74) 6.66 (53) 4.07
------- ------- -------
Options outstanding at
end of period 815 $15.08 618 $6.93 472 $ 5.30
======= ======= =======
Options exercisable at
end of period 223 $ 6.47 147 $4.52 200 $ 4.10
======= ======= =======
The Company also maintains a stock option plan for non-officer directors (the
"Director Plan") pursuant to which options to purchase 5,000 shares of the
Company's Common Stock at an exercise price of 100% of the market price on
the date of grant are issued to each non-officer director each year. Options
to purchase 136,000 shares at an average exercise price of $10.73 were
outstanding at September 30, 1996. Options to purchase 43,000 shares are
currently exercisable. Options to purchase 2,000 shares granted under the
Director Plan were exercised during 1996.
At September 30, 1996, 2,578,440 shares of the Company's Common Stock were
reserved for issuance in connection with the stock option plans.
Employee Stock Purchase Plan
Through March 31, 1995, the Company maintained an Employee Stock Purchase
Plan which allowed employees to purchase the Company's Common Stock at 85% of
the market value on the first or last day of the offering period, whichever
was lower. On March 31, 1995, 119,016 shares were sold to employees at a
price of $4.675 per share, pursuant to this plan. Effective April 1, 1995
this Plan was discontinued.
<PAGE>
NOTE 8: EMPLOYEE BENEFIT PLANS
The Company has a non-contributory defined benefit pension plan covering
substantially all U.S. employees. The benefits for this plan were based on
the employees' years of service and the employees' compensation during the
three years before retirement. The Company's funding policy is consistent
with the funding requirements of Federal law and regulations. Effective
December 31, 1995, the benefits under the Company's pension plan were frozen.
As a consequence, accrued benefits will no longer change as a result of an
employee's length of service or compensation. The benefit freeze resulted in
the recognition of a $1,050 net curtailment gain in fiscal 1996, which was
offset by recognition of a $1,050 prior unrecognized loss.
Net pension cost for the U.S. plan comprises the following:
Fiscal Year Ended September 30,
-------------------------------
1996 1995 1994
------- ------- -------
Service cost-benefits earned
during the period $ 151 $ 563 $ 564
Interest cost on projected
benefit obligations 760 797 670
Recognition of prior unrecognized loss 1,050 -- --
Recognition of net curtailment gain (1,050) -- --
Actual return on plan assets (570) (859) (153)
Net amortization and deferral (250) (226) (878)
Recognition of past service costs 75 -- --
------- ------- -------
Net pension expense of U.S. plan $ 166 $ 275 $ 203
======= ======= =======
Weighted average discount rate 7.50% 7.75% 7.75%
Rate of increase in future compensation * 4.00% 4.00%
Expected long-term return on assets 7.00% 9.00% 9.00%
* Not applicable due to the December 31, 1995 benefit freeze.
The funded status of the U.S. plan follows:
September 30,
------------------
1996 1995
------ ------
Accumulated benefit obligation, including
vested benefits of $10,002 and $9,040,
respectively $10,340 $ 9,347
====== ======
Projected benefit obligation for service
rendered to date $10,340 $11,090
Plan assets at fair value, primarily mutual
fund investments and U.S. Treasury bills 9,770 9,540
------ ------
Excess of projected benefit obligation
over plan assets (570) (1,550)
Unrecognized net implementation asset -- (126)
Unrecognized net loss 1,025 2,215
Unrecognized prior service cost -- 81
------ ------
Prepaid pension cost $ 455 $ 620
====== ======
The Company's foreign subsidiaries have retirement plans that are integrated
with and supplement the benefits provided by laws of the various countries.
They are not required to report nor do they determine the actuarial present
value of accumulated benefits or net assets available for plan benefits. The
Company believes that these plans are substantially fully funded as to vested
benefits. On a consolidated basis, pension expense was $629, $618 and $465 in
fiscal 1996, 1995 and 1994, respectively.
<PAGE>
The Company has a 401(k) Employee Incentive Savings Plan. This plan allows
for employee contributions and matching Company contributions in varying
percentages depending on employee age and years of service, ranging from 30%
to 175% of the employees' contributions. The Company's contributions under
this plan totaled $1,580, $118 and $112 in fiscal 1996, 1995 and 1994,
respectively, and were satisfied by contribution of shares of Company common
stock, valued at the market price on the date of the matching contribution.
NOTE 9: INCOME TAXES
Income before income taxes consisted of the following:
Fiscal Year Ended September 30,
-------------------------------
1996 1995 1994
------- ------- -------
United States operations $ (361) $ 31,249 $ 3,213
Foreign operations 15,991 24,364 9,810
------ ------- -------
$15,630 $ 55,613 $ 13,023
====== ======= =======
The provision for income taxes included the following:
Fiscal Year Ended September 30,
-------------------------------
1996 1995 1994
------- ------- --------
Current:
Federal $ 2,523 $ 9,470 $ 1,353
State 25 600 100
Foreign 3,360 3,439 918
Deferred:
Federal (2,625) (898) 113
Foreign 500 180 121
------ ------- --------
$ 3,783 $ 12,791 $ 2,605
====== ======= =======
The provision for income taxes differed from the amount computed by applying
the statutory federal income tax rate as follows:
Fiscal Year Ended September 30,
-------------------------------
1996 1995 1994
------ ------- -------
Computed income tax expense based on
U.S. statutory rate $ 5,471 $ 19,465 $ 4,558
Effect of earnings of foreign
subsidiaries subject to
different tax rates (1,017) (811) (1,021)
Benefits from Israeli Approved
Enterprise Zones (1,660) (1,470) (822)
Benefits of net operating
loss and tax credit carryforwards
and change in valuation allowance -- (3,493) (532)
Non-deductible goodwill amortization 735 -- --
Provision for repatriation of
certain foreign earnings, including
foreign withholding taxes 500 180 121
Effect of revisions of prior year's
estimated taxes 562 (505) --
Benefits of Foreign Sales Corporation (1,027) (533) --
Other, net 219 (42) 301
------ ------- -------
$ 3,783 $ 12,791 $ 2,605
====== ======= =======
Undistributed earnings of certain foreign subsidiaries for which taxes have
not been provided approximate $58,950 at September 30, 1996. Such
undistributed earnings are intended to be indefinitely reinvested in foreign
operations.
<PAGE>
The Company's Japanese subsidiary has approximately $2,220 in net operating
loss ("NOL") carryforwards expiring through fiscal 1998, which may be used to
offset future taxable income in Japan.
Deferred taxes are determined based on the differences between the financial
reporting and tax bases of assets and liabilities as measured by the current
tax rates. The net deferred tax balance is comprised of the tax effects of
cumulative temporary differences, as follows:
September 30,
----------------
1996 1995
------- ------
Repatriation of foreign earnings,
including foreign withholding taxes $ 3,711 $3,211
Depreciable assets 1,870 1,329
Prepaid expenses and other 226 405
------ -----
Total deferred tax liability 5,807 4,945
------ -----
Inventory reserves 2,755 1,619
Accruals and other reserves 2,808 1,829
Acquired domestic NOL carryforwards 2,512 --
Foreign NOL carryforwards 1,519 607
Domestic tax credit carryforward 1,084 --
Deferred intercompany profit 2,009 1,573
------ -----
12,687 5,628
Valuation allowance (5,115) (607)
------ -----
Total deferred tax asset 7,572 5,021
------ -----
Net deferred tax asset $ 1,765 $ 76
====== =====
Realization of deferred tax assets associated with the NOL and tax credit
carryforwards is dependent upon generating sufficient taxable income prior to
their expiration. The Company believes that there is a risk that certain of
these NOL and credit carryforwards may expire unused and, accordingly, has
established a valuation allowance against them. The valuation allowance at
September 30, 1996 relates to acquired domestic net operating loss
carryforwards expiring through the year 2010 whose realization is limited to
the U.S. earnings of the acquired company; domestic tax credit carryforwards
which expire in varying amounts through the year 2011; and foreign net
operating loss carryforwards which are scheduled to expire through the 1998
fiscal year. Although realization is not assured for the remaining deferred
tax assets, the Company believes it is more likely than not that they will be
realized through future taxable earnings or alternative tax strategies.
However, the net deferred tax assets could be reduced in the near term if the
Company's estimates of taxable income during the carryforward period are
significantly reduced or alternative tax strategies are no longer viable. In
the event that the tax benefits relating to acquired NOL carryforwards are
realized, such benefits would reduce the recorded amount of goodwill.
The Company paid income taxes of $11,699, $8,109 and $1,019 in fiscal 1996,
1995 and 1994, respectively.
NOTE 10 - OPERATIONS BY GEOGRAPHIC AREA AND BUSINESS SEGMENT
The Company's market for its products is worldwide. Export sales (sales from
U.S. based operations directly to foreign based customers and sales to
foreign locations of U.S. based customers) totaled $93,318, $78,435 and
$48,082 for the fiscal years ended September 30, 1996, 1995 and 1994,
respectively. Export sales to Korean based customers accounted for
approximately 11.5% of total sales during fiscal 1996. In addition, a
substantial portion of the Company's products are sold to the Company's
foreign subsidiaries which, in turn, sell to foreign based customers. Total
shipments of the Company's products with ultimate foreign destinations
(including export sales) comprised 79%, 78% and 74% of consolidated sales
during the fiscal years ended September 30, 1996, 1995 and 1994,
<PAGE>
respectively. During fiscal 1996, total shipments (including export sales) to
customers in Korea, Taiwan and Malaysia represented approximately 16%, 14%
and 14%, respectively, of consolidated sales.
Additional information by geographic area for the fiscal years ended
September 30, 1996, 1995 and 1994 is as follows:
Fiscal Year Ended September 30,
-------------------------------
1996 1995 1994
------- ------- ------
Sales to unaffiliated customers:
United States $ 173,110 $ 146,577 $ 93,643
Hong Kong 138,859 143,429 71,985
Israel 1,312 773 858
Singapore 48,600 572 94
Rest of world 19,295 13,158 6,722
-------- -------- --------
Consolidated $ 381,176 $ 304,509 $ 173,302
======== ======== ========
Intercompany sales:
United States $ 167,933 $ 158,543 $ 81,119
Hong Kong 327 51 219
Israel 51,603 38,646 27,006
Singapore 76 -- --
Rest of world 392 24 304
Adjustments and eliminations (220,331) (197,264) (108,648)
-------- -------- --------
Consolidated $ -- $ -- $ --
======== ======== ========
Total net sales:
United States $ 341,043 $ 305,120 $ 174,762
Hong Kong 139,186 143,480 72,204
Israel 52,915 39,419 27,864
Singapore 48,676 572 94
Rest of world 19,687 13,182 7,026
Adjustments and eliminations (220,331) (197,264) (108,648)
-------- -------- --------
Consolidated $ 381,176 $ 304,509 $ 173,302
======== ======== ========
Operating income:
United States $ 7,704 $ 37,530 $ 8,698
Hong Kong 11,672 14,841 5,784
Israel 10,531 9,004 3,332
Singapore (789) (261) (85)
Rest of world (1,048) 3,125 775
Adjustments and eliminations (3,086) (2,345) 4
-------- -------- --------
Consolidated operating income 24,984 61,894 18,508
General corporate expenses (7,566) (6,454) (4,578)
Interest income expenses, net (164) 173 (907)
Other expenses (1,624) -- --
-------- -------- --------
Income before taxes $ 15,630 $ 55,613 $ 13,023
======== ======== ========
Identifiable assets:
United States $ 94,842 $ 95,989 $ 63,991
Hong Kong 21,855 42,653 22,108
Israel 37,059 15,289 9,652
Singapore 32,467 238 120
Rest of world 10,489 11,991 6,785
Adjustments and eliminations (7,585) (4,499) (2,154)
-------- -------- --------
189,127 161,661 100,502
Corporate assets 60,427 29,368 20,696
-------- -------- --------
$ 249,554 $ 191,029 $ 121,198
======== ======== ========
Transfers between geographic areas were primarily sales of finished products
and spare parts and generally were priced at end customer selling prices,
with intercompany commissions paid to the selling subsidiary in the case of
machines, and at a discount off list price in the case of spare parts. Such
sales were primarily from the United States to the Company's sales and
service operations in Hong Kong and Japan, and from Israel to the United
States, and were eliminated in consolidation. Operating income (loss) by
geographic area did not include an allocation of general corporate expenses.
Corporate expenses consisted primarily of general and administrative expenses
which were not attributable to geographic regions. Identifiable assets were
those that could be directly associated with a particular geographic area.
Corporate assets consisted principally of cash and investments.
<PAGE>
Prior to its October 2, 1995 acquisition of AFW, the Company operated
primarily in one industry segment, the manufacture and sale of production
equipment to the semiconductor industry. As a result of the AFW acquisition,
the portion of the Company's operations attributable to the packaging
materials segment exceeded 10% of total revenues. The packaging materials
products have different manufacturing processes, distribution channels and a
less volatile revenue pattern than the Company's capital equipment.
Accordingly, in fiscal 1996 the Company commenced reporting its operations in
two business segments, its equipment segment (sales of capital equipment,
related spare parts and services) and its packaging materials segment (which
includes the Micro-Swiss and AFW operations).
Operating results by business segment for the fiscal years ended September
,30, 1996, 1995 and 1994 were as follows:
Packaging Corporate
Equipment Materials and
Segment Segment Eliminations Total
--------- --------- ------------ --------
September 30, 1996:
Fiscal Year Ended
- -------------------
Net sales $ 287,234 $ 93,942 $381,176
Cost of goods sold 164,221 75,270 239,491
-------- ------- -------
Gross profit 123,013 18,672 141,685
Operating expenses 102,138 14,563 $ 7,566 124,267
-------- ------- ----------- -------
Operating profit (loss) $ 20,875 $ 4,109 $ (7,566) $ 17,418
======== ======== =========== =======
Identifiable assets $ 112,762 $ 76,365 $ 60,427 $249,554
Capital expenditures 9,669 8,359 -- 18,028
Depreciation expense 5,379 1,800 -- 7,179
Packaging Corporate
Equipment Materials and
Segment Segment Eliminations Total
--------- --------- ------------ --------
September 30, 1995:
Fiscal Year Ended
- -------------------
Net sales $ 283,835 $ 20,674 $304,509
Cost of goods sold 155,195 12,262 167,457
-------- -------- -------
Gross profit 128,640 8,412 137,052
Operating expenses 71,880 3,278 $ 6,454 81,612
-------- -------- ---------- -------
Operating profit (loss) $ 56,760 $ 5,134 $ (6,454) $ 55,440
======== ======== ========== =======
Identifiable assets $ 155,962 $ 5,699 $ 29,368 $191,029
Capital expenditures 7,294 3,483 -- 10,777
Depreciation expense 4,265 465 -- 4,730
Packaging Corporate
Equipment Materials and
Segment Segment Eliminations Total
--------- --------- ------------ --------
September 30, 1994:
Fiscal Year Ended
- -------------------
Net sales $ 159,703 $ 13,599 $173,302
Cost of goods sold 92,725 8,609 101,334
-------- -------- -------
Gross profit 66,978 4,990 71,968
Operating expenses 52,122 1,338 $ 4,578 58,038
-------- -------- ---------- -------
Operating profit (loss) $ 14,856 $ 3,652 $ (4,578) $ 13,930
======== ======== ========== =======
Identifiable assets $ 98,329 $ 2,173 $ 20,696 $121,198
Capital expenditures 5,267 935 -- 6,202
Depreciation expense 3,467 290 -- 3,757
Intersegment sales are immaterial. Corporate assets principally comprised
cash and investments. Capital expenditures and depreciation expense for the
corporate segment were immaterial.
<PAGE>
NOTE 11: OTHER FINANCIAL DATA
In February 1996, the Company entered into a joint venture agreement with
Delco Electronics Corporation providing for the formation and management of
Flip Chip Technologies, L.L.C. ("FCT" or "the Joint Venture"). FCT was formed
to provide wafer bumping services. The Company accounts for its investment in
the joint venture using the equity method. As of September 1996, the Company
contributed $2.6 million to FCT, and recognized its proportionate share of
the Joint Venture's operating loss.
Accrued expenses at September 30, 1996 and 1995 include $8,990 and $7,242,
respectively, for accrued wages, incentives and vacations.
Maintenance and repairs expense totaled $5,185, $3,737 and $3,027 for fiscal
1996, 1995 and 1994, respectively. Warranty and retrofit expense was $2,326,
$5,085 and $1,354 for fiscal 1996, 1995 and 1994, respectively.
NOTE 12: CONTINGENCIES
The Company is the subject of various claims which arise in the normal course
of business. In addition, certain of the Company's customers have received
notices of infringement from two separate parties, Harold S. Hemstreet and
Jerome H. Lemelson, alleging that equipment supplied by the Company, and
processes performed by such equipment, infringe on patents held by them.
Under and subject to the terms of its agreements with customers, the Company
could be required to reimburse customers for certain damages resulting from
these matters and to defend its customers in patent infringement suits.
Certain customers have requested that the Company defend and indemnify them
against the claims of Mr. Hemstreet or Mr. Lemelson, but, to date, no
customer who has settled with either Mr. Hemstreet or Mr. Lemelson has sought
contribution from the Company. A number of the Company's customers have
actually been sued by Mr. Lemelson, but no customers were sued by Mr.
Hemstreet prior to expiration of the time period in which he could bring
suit. The Company believes, based in part on opinions from the Company's
outside patent counsel, that no equipment marketed by the Company, and no
process performed by such equipment, infringe on the patents in question.
The Company does not believe that the ultimate resolution of the matters
described above will have a material adverse effect on its business,
financial condition, operating results or liquidity.
<PAGE>
NOTE 13: SELECTED QUARTERLY FINANCIAL DATA (unaudited)
Financial information pertaining to quarterly results of operations follows:
Year ended First Second Third Fourth
September 30, 1996: Quarter Quarter Quarter Quarter(1) Total
- ------------------- ------- ------- ------- ------- -------
Net sales $127,189 $115,374 $76,912 $ 61,701 $381,176
Gross profit 52,076 45,497 27,801 16,311 141,685
Income (loss)
from operations (2) 23,812 15,086 (3,328) (18,152) 17,418
Income (loss)
before income taxes $ 23,010 $ 15,078 $(3,504) $(18,954) $ 15,630
Income tax expense
(benefit) 6,673 4,373 (1,016) (6,247) 3,783
------ ------ ------ ------ -------
Net income (loss) $ 16,337 $ 10,705 $(2,488) $(12,707) $ 11,847
======= ======= ====== ======= =======
Net income (loss)
per share $ 0.82 $ 0.54 $ (0.13) $ (0.65) $ 0.60
======= ======= ====== ======= =======
Year ended First Second Third Fourth
September 30, 1995: Quarter Quarter Quarter Quarter Total
- ------------------- ------- ------- ------- ------- --------
Net sales $ 51,459 $ 64,785 $87,296 $100,969 $304,509
Gross profit 22,045 29,157 39,840 46,010 137,052
Income from operations (2) 5,230 10,943 18,371 20,896 55,440
Income before
income taxes $ 5,033 $ 10,720 $18,464 $ 21,396 $ 55,613
Income tax expense 1,309 2,466 4,431 4,585 12,791
------- ------- ------ ------- -------
Net income $ 3,724 $ 8,254 $14,033 $ 16,811 $ 42,822
======= ======= ====== ======= =======
Net income per share $ 0.21 $ 0.44 $ 0.72 $ 0.85 $ 2.22
======= ======= ====== ======= =======
(1) Results for the fourth quarter of fiscal 1996 include charges of
approximately $6.9 million, including the write-off of approximately $2.8
million of excess and obsolete inventories, $1.2 million in severance and
benefit costs associated with the Company's August 1996 reduction in its
worldwide work force, the write-off of approximately $1.8 million of costs
incurred in connection with the discontinuation of the Willow Grove, PA
facility expansion project, and the $1.0 million write-down of the value of
certain engineering prototype machines to their net realizable value.
(2) Represents net sales less costs and expenses but before net interest
expense and other expense.
<PAGE>
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information required hereunder with respect to the directors will appear
under the heading "ELECTION OF DIRECTORS" in the Company's Proxy Statement
for the 1997 Annual Meeting, which information is incorporated herein by
reference.
The information required by Item 401(b) of Regulation S-K appears in Part I
hereof under the heading "Executive Officers of the Company."
Item 11. EXECUTIVE COMPENSATION
The information required hereunder will appear under the heading "ADDITIONAL
INFORMATION" in the Company's Proxy Statement for the 1997 Annual Meeting,
which information is incorporated herein by reference.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required hereunder will appear on page one and under the
heading "ELECTION OF DIRECTORS" in the Company's Proxy Statement for the 1997
Annual Meeting, which information is incorporated herein by reference.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required hereunder will appear under the heading "ADDITIONAL
INFORMATION" in the Company's Proxy Statement for the 1997 Annual Meeting,
which information is incorporated herein by reference.
<PAGE>
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
(1) Financial Statements:
Report of Independent Accountants 20
Report of Independent Accountants 21
Consolidated Balance Sheet at September 30, 1996 and 1995 22
Consolidated Income Statement for the fiscal years
ended September 30, 1996, 1995 and 1994 23
Consolidated Statement of Cash Flows for the fiscal years
ended September 30, 1996, 1995 and 1994 24
Consolidated Statement of Changes in Shareholders' Equity
for the fiscal years ended September 30, 1996,
1995 and 1994 25
Notes to Consolidated Financial Statements 26 - 39
(2) Financial Statement Schedules:
Report of Other Independent Accountants 44
VIII - Valuation and Qualifying Accounts 45
All other schedules are omitted because they are not applicable or the
required information is shown in the financial statements or notes
thereto.
(3) Exhibits:
EXHIBIT
NUMBER ITEM
- ------- -------------------------------------------------------------------
2.1(a) Agreement and Plan of Acquisition dated September 14, 1995, between
the Company, CSI and Certain Stockholders of CSI, filed as Exhibit
2.1(a) to the Company's Form 8-K dated October 2, 1995, is
incorporated herein by reference.
2.1(b) Agreement and Plan of Merger dated October 2, 1995, between the
Company, Kulicke and Soffa Acquisition Corporation and CSI, filed
as Exhibit 2.1(b) to the Company's Form 8-K dated October 2, 1995,
is incorporated herein by reference.
2.1(c) Escrow Agreement dated October 2, 1995, between the Company, Larry
D. Striplin, Jr. and Mellon Bank, N.A., filed as Exhibit 2.1(c) to
the Company's Form 8-K dated October 2, 1995, is incorporated
herein by reference.
3(i) The Company's Amended and Restated Articles of Incorporation, filed
as Exhibit 3(i) to the Company's Form 10-Q for the quarterly period
ended June 30, 1996, is incorporated herein by reference.
3(ii) The Company's By-Laws, as amended through June 26, 1990, filed as
Exhibit 2.2 to the Company's Form 8-A12G dated September 8, 1995,
is incorporated herein by reference.
4(i) Restated Loan Agreement between the Company and Midlantic Bank,
N.A. dated April 10, 1996, filed as Exhibit 4 to the Company's Form
10-Q for the quarterly period ended March 31, 1996, is incorporated
herein by reference.
<PAGE>
4(ii) Amendment dated December 16, 1996 to the Restated Loan Agreement
dated April 10, 1996 between the Company and PNC Bank, National
Association, successor by merger to Midlantic Bank, N.A.
10(i) Form of Officer's Loan Agreement, Note and Stock Pledge Agreement,
filed as Exhibit 13(a) to Registration Statement No. 2-65612 filed
September 28, 1979, is incorporated herein by reference.
10(ii) Form of Termination of Employment Agreement between the Company and
certain of its officers, filed as Exhibit 10(ii) to the Company's
Annual Report on Form 10-K for the fiscal year ended September 30,
1994, is incorporated herein by reference.*
10(iii) Agreement between the Company and Frederick W. Kulicke, Jr., filed
as Exhibit 10(iii) to Company's Annual Report on Form 10-K for the
year ended September 30, 1989, is incorporated herein by
reference.*
10(iv) The Company's 1980 Employee Incentive Stock Option Plan, filed as
Exhibit 10(iv) to the Company's Annual Report on Form 10-K for the
year ended September 30, 1989, is incorporated herein by
reference.*
10(v) The Company's 1983 Employee Incentive Stock Option Plan, filed as
Exhibit 10(v) to the Company's Annual Report on Form 10-K for the
year ended September 30, 1989, is incorporated herein by
reference.*
10(vi) The Company's 1988 Employee Incentive Stock Option and Non-
Qualified Stock Option Plan (as amended and restated effective
October 8, 1996).*
10(vii) The Company's 1988 Non-Qualified Stock Option Plan for Non-Officer
Directors, as amended, filed as Exhibit 10(vii) to the Company's
Annual Report on Form 10-K for the year ended September 30, 1989,
is incorporated herein by reference.*
10(viii) The Company's 1994 Employee Incentive Stock Option and Non-
Qualified Stock Option Plan (as amended and restated effective
October 8, 1996).*
10(ix) The Company's 1995 Executive Incentive Compensation Plan, filed as
Exhibit 10(ix) to the Company's Annual Report on Form 10-K for the
year ended September 30, 1994, is incorporated herein by
reference.*
10(x) Gold Supply Agreement, as amended October 2, 1995 between American
Fine Wire Corporation, et al, and Rothschild Australia Limited,
filed as Exhibit 10.1 to the Company's Form 8-K dated September 14,
1995 as amended by Form 8-K/A on October 26, 1995, is incorporated
by reference.
10(xi) Agreement of Employment between Circle "S" Industries, Inc. and
Larry D. Striplin, Jr. dated January 2, 1990, filed as Exhibit 10
(xiii) to the Company's Annual Report on Form 10-K for the year
ended September 30, 1995, is incorporated herein by reference.*
10(xii) Amendment No. 1 to Agreement of Employment between Circle "S"
Industries, Inc. and Larry D. Striplin, Jr. dated May 1, 1995,
filed as Exhibit 10 (xiv) to the Company's Annual Report on Form
10-K for the year ended September 30, 1995, is incorporated herein
by reference.*
10(xiii) Agreement between Circle "S" Industries, Inc. and Larry D.
Striplin, Jr. dated September 30, 1995, filed as Exhibit 10 (xv) to
the Company's Annual Report on Form 10-K for the year ended
September 30, 1995, is incorporated herein by reference.*
21 Subsidiaries of the Company.
23(i) Consent of Price Waterhouse LLP (Independent Accountants).
<PAGE>
23(ii) Consent of Luboshitz, Kasierer & Co. (Independent Accountants).
27 Financial Data Schedule.
* Indicates a Management Contract or Compensatory Plan.
(b) Reports on Form 8-K:
On August 21, 1996, the Company filed a Form 8-K reporting certain
actions taken in August 1996 in response to significant reduction in
customer orders.
NOTICE
Item 14(a)3 lists and describes the Exhibits filed as a part of the Company's
Annual Report on Form 10-K for the fiscal year ended September 30, 1996. The
Company will provide to any shareholder copies of any such Exhibits upon
payment of a fee of $.50 per page. Requests for copies of such Exhibits
should be made to: Director of Investor Relations, Kulicke and Soffa
Industries, Inc., 2101 Blair Mill Road, Willow Grove, PA 19090.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
Our audits of the consolidated financial statements of Kulicke and Soffa
(Israel) Ltd. and its subsidiary referred to in our report dated November 3,
1994 appearing on Page 21 of this Annual Report on Form 10-K also included an
audit of Financial Statement Schedules of Kulicke and Soffa (Israel) Ltd. and
its subsidiary (not presented separately herein). In our opinion, these
Financial Statement Schedules of Kulicke and Soffa (Israel) Ltd. and its
subsidiary present fairly, in all material respects, the information set
forth therein when read in conjunction with the related consolidated
financial statements.
/s/ LUBOSHITZ, KASIERER & CO.
Certified Public Accountants (Israel)
Haifa, Israel
November 3, 1994
<PAGE>
KULICKE AND SOFFA INDUSTRIES, INC.
Schedule VIII-Valuation and Qualifying Accounts
(in thousands)
Charged
Balance Charged to to other Balance
at beginning costs and accounts- Deductions- at end
Description of period expenses describe describe of period
- ----------------- ------------ ---------- --------- ---------- ---------
Year ended
September 30, 1994:
Allowance for
doubtful accounts $ 476 $ 103 $ -- $ 157(1) $ 422
======== ========= ===== ======= ======
Inventory reserve $ 6,218 $ 2,092(2) $ -- $ 1,674(3) $ 6,636
======== ========= ===== ====== ======
Valuation allowance
for deferred taxes $ 4,956 $ -- $ -- $ 1,102(4) $ 3,854
======= ========= ===== ====== ======
Year ended
September 30, 1995:
Allowance for
doubtful accounts $ 422 $ 826 $ -- $ 154(1) $ 1,094
======= ========= ===== ===== ======
Inventory reserve $ 6,636 $ 3,075(5) $ -- $ 1,958(3) $ 7,753
======= ========= ===== ====== ======
Valuation allowance
for deferred taxes $ 3,854 $ -- $ -- $ 3,247(4) $ 607
====== ========= ===== ====== ======
Year ended
September 30, 1996
Allowance for
doubtful accounts $ 1,094 $ 178 $ -- $ 45(1) $ 1,227
====== ========= ===== ====== ======
Inventory reserve $ 7,753 $ 6,058(6) $ -- $ 2,056(3) $11,755
====== ========= ===== ====== ======
Valuation allowance
for deferred taxes $ 607 $ 1,996 $2,512(7)$ -- $ 5,115
====== ========= ===== ===== ======
(1) Bad debts written off.
(2) Amount includes $677 provision for excess and obsolete inventory. The
remainder primarily reflects revaluation of inventory pursuant to
changed standard costs.
(3) Disposal of excess and obsolete equipment and sales of demonstration
and evaluation inventory.
(4) Net change in valuation allowance for deferred tax assets during
fiscal 1994 and 1995.
(5) Amount includes $2,758 provision for excess and obsolete inventory.
The remainder primarily reflects revaluation of inventory pursuant to
changed standard costs.
(6) Amount includes $4,547 provision for excess and obsolete inventory.
(7) Represents the valuation allowance established for U.S. net operating
loss carryforwards acquired in connection with the AFW acquisition.
<PAGE>
SIGNATURES
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.
KULICKE and SOFFA INDUSTRIES, INC.
By: /s/ C. SCOTT KULICKE
-------------------------------
C. Scott Kulicke
Chairman of the Board and
Chief Executive Officer
Dated: December 20, 1996
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, this Report has been signed by the following persons on
behalf of the Registrant and in the capacities and on the dates indicated.
Signature Title Date
- ----------------------- --------------------- ----------------
/s/ C. SCOTT KULICKE
- -----------------------------
C. Scott Kulicke Chairman of the Board December 20, 1996
(Principal Executive Officer) and Director
/s/ CLIFFORD G. SPRAGUE
- -----------------------------
Clifford G. Sprague Senior Vice President December 20, 1996
(Principal Financial and and Chief Financial
Accounting Officer) Officer
/s/ JAMES W. BAGLEY
- -----------------------------
James W. Bagley Director December 20, 1996
/s/ FREDERICK W. KULICKE, JR
- -----------------------------
Frederick W. Kulicke, Jr. Director December 20, 1996
/s/ JOHN A. O'STEEN
- -----------------------------
John A. O'Steen Director December 20, 1996
/s/ ALLISON F. PAGE
- -----------------------------
Allison F. Page Director December 20, 1996
/s/ MACDONELL ROEHM, JR.
- -----------------------------
MacDonell Roehm, Jr. Director December 20, 1996
/s/ LARRY D. STRIPLIN, JR.
- -----------------------------
Larry D. Striplin, Jr. Director December 20, 1996
/s/ C. WILLIAM ZADEL
- -----------------------------
C. William Zadel Director December 20, 1996
<PAGE>
EXHIBIT INDEX
EXHIBIT
NUMBER ITEM
- -------- -----------------------------------------------------------------
4(ii) Amendment dated December 16, 1996 to the Restated Loan Agreement
dated April 10, 1996 between the Company and PNC Bank, National
Association, successor by merger to Midlantic Bank, N.A.
10(vi) The Company's 1988 Employee Incentive Stock Option and Non-
Qualified Stock Option Plan (as amended and restated effective
October 8, 1996).*
10(viii) The Company's 1994 Employee Incentive Stock Option and Non-
Qualified Stock Option Plan (as amended and restated effective
October 8, 1996).*
21 Subsidiaries of the Company.
23(i) Consent of Price Waterhouse LLP (Independent Accountants).
23(ii) Consent of Luboshitz, Kasierer & Co. (Independent Accountants).
27 Financial Data Schedule.
Exhibit 4(ii)
AMENDMENT
THIS AMENDMENT dated December 16, 1996, between KULICKE AND
SOFFA INDUSTRIES, INC. ("Borrower") and PNC BANK, NATIONAL
ASSOCIATION, successor by merger to Midlantic Bank, N.A. ("Bank")
BACKGROUND
The parties have entered into a certain Restated Loan
Agreement dated as of April 10, 1996 ("Loan Agreement"), and desire
to amend the same in the manner hereinafter set forth. All
capitalized terms used but not defined herein shall have the
meaning given thereto in the Loan Agreement.
NOW, THEREFORE, the parties, INTENDING TO BE LEGALLY BOUND,
agree as follows:
1. Financial Covenant Amendment. In lieu of the Interest
Coverage Ratio covenant set forth in subpart (b) of Exhibit 6.01(L)
of the Loan Agreement, Borrower covenants that it will comply with
the following covenant effective as of December 31, 1996 and
thereafter:
(a) As of Borrower's fiscal quarter ending December 31,
1996, Borrower shall have, on a consolidated basis, either (i) an
Interest Coverage Ratio (calculated as set forth below) of not less
than 1.5 to 1.0 or (ii) a Liquidity Ratio (as hereinafter defined)
of not less than .90 to 1.0. For these purposes:
(A) The EBITA and Fixed Charge components of the
Interest Coverage Ratio shall, notwithstanding the period for which
the same are to be calculated as set forth in the definition of
Interest Coverage Ratio in the Loan Agreement, be calculated only
for the fiscal quarter ending December 31, 1996 and not on the
basis of the four fiscal quarters then ended, and
(B) "Liquidity Ratio" shall mean, as of any date,
the sum of cash, cash investments which constitute Permitted
Investments as defined in the Loan Agreement (including as amended
by Section 2 hereof) and accounts receivable as of such date,
divided by the sum of current liabilities and the outstanding
principal balance of all of Borrower's indebtedness to Bank as of
such date, and
(C) Cash investments shall be valued at the market
value thereof.
(b) As of Borrower's fiscal quarters ending March 31,
1997, June 30, 1997 and September 30, 1997, Borrower shall have, on
a consolidated basis, an Interest Coverage Ratio (calculated as set
forth below) of not less than 2.5 to 1.0. For these purposes, the
EBITA and Fixed Charge components of the Interest Coverage Ratio
shall, notwithstanding the period for which the same are to be
calculated as set forth in the definition of Interest Coverage
Ratio in the Loan Agreement, be calculated only for the then fiscal
year to date and not (except for the fiscal quarter ending
September 30, 1997) for the four fiscal quarters then ended.
(c) For all fiscal quarters ending after September 30,
1997, the Borrower shall be in compliance with the Interest
Coverage Ratio as set forth in and calculated in the manner
provided in the Loan Agreement.
2. Permitted Investments. The definition of "Permitted
Investments" as set forth in Section 1.01 of the Loan Agreement is
hereby modified in order to add an additional subpart (g) at the
end thereof, to read as follows:
"and/or (g) Asset Backed Securities having a credit
rating by Standard & Poors or Moody's of not less than
A."
3. Interest Rate. Effective as of the Quarterly Period for
which a Compliance Certificate for Borrower's fiscal quarter ending
December 31, 1996 is provided to Bank, the definition of
"Applicable Margin" as set forth in Section 2.07(A)(i) of the Loan
Agreement is hereby restated in its entirety to read as follows:
"(i) "Applicable Margin" means, with respect to
principal of the Revolving Loan II for which a LIBOR Rate election
is being made:
(1) .40 percentage points for any Quarterly Period
next following a fiscal quarter in which Borrower's Liquidity Ratio
equals or exceeds 1.2, as reflected in Borrower's Compliance
Certificate for such fiscal quarter:
(2) .70 percentage points for any Quarterly Period
next following a fiscal quarter in which neither subpart (1) or (3)
of this subsection (i) applies, as reflected in Borrower's
Compliance Certificate for such fiscal quarter;
(3) 1.0 percentage point for any Quarterly Period
next following a fiscal quarter in which Borrower's Liquidity Ratio
is less than .75, as reflected in Borrower's Compliance Certificate
for such fiscal quarter;
With respect to principal of Revolving Loan II for
which a LIBOR Rate election is made, the
Applicable Margin will remain fixed for the
applicable Rate Period regardless of any change in
Borrower's Liquidity Ratio during such Rate
Period."
For these purposes, (A) "Liquidity Ratio" shall have the meaning
given thereto in Section 1 hereof and (B) the "Applicable Margin"
as defined hereby shall not be effective as to principal for which
a LIBOR Rate election is presently in effect until the expiration
of the applicable Rate Period.
4. Reaffirmation. Except as specifically modified herein,
all of the terms of the Loan Agreement remain unchanged and in full
force and effect and Borrower confirms that it has no offset,
counterclaim or defense to any of its liabilities and obligations
thereunder.
IN WITNESS WHEREOF, the parties hereto have executed this
Amendment the date first above written.
KULICKE AND SOFFA INDUSTRIES, INC.
By:
------------------------------
PNC BANK, NATIONAL ASSOCIATION
By:
-------------------------------
Exhibit 10(vi)
KULICKE AND SOFFA INDUSTRIES, INC.
1988 EMPLOYEE INCENTIVE STOCK OPTION
AND NON-QUALIFIED STOCK OPTION PLAN
(As Amended and Restated Effective October 8, 1996)
Section 1. Purpose
The purpose of the 1988 Employee Stock Option and Non-qualified
Stock Option Plan (the "Plan") of Kulicke and Soffa Industries,
Inc. (the "Company") is to encourage stock ownership by officers
and employees of the Company by issuing options to purchase
shares of the Company's stock ("Options," and individually an
"Option"), enabling such employees to acquire or increase their
proprietary interest in the Company and thereby encouraging them
to remain in the employ of the Company. The Options issued
pursuant to the Plan are intended to constitute either incentive
stock options within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), or non-qualified
stock options, at the discretion of the Board of Directors at the
time of grant.
Section 2. Administration
The Plan will be administered by a Committee of the Board of
Directors (the "Committee"), appointed by the Board of Directors
(the "Board") of the Company. The Committee will consist of at
least three directors not employed by the Company who will serve
at the pleasure of the Board. The Committee will hold meetings
when a quorum is present at such times and places as it may
determine. A quorum shall consist of a majority of the
Committee. A majority of the Committee present and voting at a
meeting at which a quorum is present, or acts reduced to and
approved in writing by a majority of the members of the Committee
at any other time, will be valid acts of the Committee. The
Committee may, from time to time at its discretion, recommend to
the Board which, if any, officers and employees will be granted
Options, the type of Option to be granted, the amount of stock to
be subject to each such Option, and the option price of any non-
qualified stock option. Options shall be granted only by the
Board of Directors, provided that no member of the Board eligible
to receive options under the Plan shall participate in any action
of the Board with respect to the Plan.
The interpretation and construction by the Committee of any
provision of the Plan or of any Option granted under it will be
final unless otherwise determined by the Board. Anything herein
to the contrary notwithstanding, no member of the Board or the
Committee will be liable for any action or determination made in
good faith with respect to the Plan or any Option granted under
it.
Section 3. Eligibility
Officers and employees of the Company and its majority owned
subsidiaries (as defined in section 424(f) of the Code)
("Subsidiaries") who are expected to make significant
contributions to the long term success of the Company are
eligible to receive incentive stock options or non-qualified
stock options under the Plan, as the Board may select from time
to time either on its own motion or from among those nominated by
the Committee. An officer or employee who is granted an Option
is an Optionee (which term also includes the Optionee's legal
representative under Section 5(g) hereof). An Optionee may be
granted more than one Option.
Section 4. Stock
The stock subject to an Option will be shares of the Company's
authorized but unissued or reacquired Common Stock, without par
value (the "Shares"). Options shall not be issued with respect
to more than 500,000 Shares, subject, however, to adjustment as
provided in Section 5(h) hereof.
Section 5. Terms and Conditions of Options
Each Option granted pursuant to the Plan will be authorized by
the Board and will be evidenced by an Option Notice in such form
as the Committee or the Board may from time to time determine.
Each Option Notice will include the information required in
subparagraphs (a), (b) and (c) of this Section 5 and will be in
conformity with and will incorporate by reference all other terms
and conditions of the Plan, including the following terms and
conditions:
(a) Number of Shares. The number of Shares subject to the
Option will be stated in the Option Notice.
(b) Option Price. The price per Share payable on the
exercise of the Option will be stated in the Option Notice and
(i) with respect to non-qualified stock options, will be at such
price as the Board of Directors shall determine; and (ii) with
respect to incentive stock options, will be at a price not less
than 100% of the fair market value per share of the outstanding
shares of Common Stock of the Company on the date the Option is
granted, without regard to any restriction other than a
restriction which will never lapse. So long as the Company's
Common Stock is quoted on NASDAQ, the fair market value, for the
purpose of compliance with the foregoing sentence with respect to
incentive stock options, shall be the representative closing
price of the stock as obtained from NASDAQ on the date of the
grant of the Option.
(c) Form of Option. The Option Notice will state whether
the Option granted is to be treated as an incentive stock option
or a non-qualified stock option, and will constitute a binding
determination as to the form of Option granted.
(d) Payment. The price payable on the exercise of the
Option in whole or in part will be equal to the Option price
multiplied by the number of Shares as to which the Option is
exercisable, and shall be paid in full upon exercise of any
Option, either in cash or by delivering to the Company shares of
the Company's Common Stock having a fair market value, as of the
close of business on the day preceding such delivery, equal to
the aggregate exercise price of the Shares being purchased on
exercise of the Options, or by a combination of such cash and
shares.
(e) Notwithstanding any other provision of this Plan:
(i) No option shall be granted under this Plan after
December 13, 1998.
(ii) No Option granted under this Plan shall be
exercisable later than ten years from the date of grant.
(iii) No Option granted to any Optionee shall be
treated as an incentive stock option under the Code, to the
extent such Option would cause the aggregate fair market value
(determined as of the date of grant of each such option) of the
Shares with respect to which incentive stock options are
exercisable by such Optionee for the first time during any
calendar year to exceed $100,000. For purposes of determining
whether an incentive stock option would cause the optionee to
exceed the $100,000 limitation, such incentive stock options
shall be taken into account in the order granted. For purposes
of this subsection, incentive stock options include all incentive
stock options under all plans of the Company and its Subsidiaries
that are incentive stock option plans within the meaning of
Section 422 of the Code.
(iv) Options granted pursuant to this Plan may be
exercised in any order elected by the Optionee whether or not the
Optionee holds any unexercised Options under this Plan or any
other Plan of the Company, its parent or any of its subsidiaries.
(v) No incentive stock option shall be granted under
this Plan to any person who, at the time of the grant of such
Option, owns stock possessing more than 10% of the total combined
voting power of all classes of the Company's stock, unless the
option price at the time the Option is granted is at least 110
percent (110%) of the fair market value of the stock, and subject
to the condition that the Option expires five years from the
option grant date.
(f) Term and Exercise of Options. Subject to the
provisions of Section 5(c)(i), (ii) and (v) hereof, Options
granted hereunder may be exercisable in whole or in part at such
time or times as the Board shall designate when granting such
Options.
No Option may be exercised for less than 25 shares or for any
fractional shares, unless such Option is exhausted upon its
exercise.
Unless sooner terminated as provided in this Plan, each Option
shall expire no later than ten years from the date of grant, and
shall be void and unexercisable thereafter. No incentive stock
option and, except as otherwise provided by the Board or the
Committee, no non-qualified stock option shall be assignable or
transferrable by the Optionee otherwise than by will or by the
laws of decent and distribution, and, subject to the preceding
clause, an Option may be exercised only by the Optionee and may
not be exercised by any other person except as provided in
Section 5(g) hereof.
(g) Termination of Options. Except as provided herein,
Options shall terminate when the option holder ceases to be
employed either by the Company or one of its Subsidiaries.
Upon the death of an Optionee while in the employ of the Company
or a Subsidiary, Options held by such Optionee which are
exercisable on the date of his or her death shall be exercisable
by his or her executor(s) or administrator(s) for a period of one
year from the date of such Optionee's death. Notwithstanding the
foregoing, with respect to Options granted on and after October
8, 1996, if an Optionee shall die while in the employ of the
Company or a Subsidiary and prior to the expiration date fixed
for his or her Option, such Option shall accelerate and may be
exercised, to the extent it remains unexercised on the date of
his or her death, by the Optionee's estate, personal
representative or beneficiary who acquired the right to exercise
such Option by bequest or inheritance or by reason of the death
of the Optionee, at any time prior to the earlier of: (1) the
expiration date specified in such Option; or (2) one year after
the date of death.
Upon termination of an Optionee's employment with the Company or
a Subsidiary for any reason other than Cause, Options exercisable
by such Optionee on the date of termination of employment shall
be exercisable by the Optionee (or in the case of the Optionee's
death subsequent to termination of employment, by the Optionee's
executor(s) or administrator(s)), for a period of three months
from the date of such Optionee's termination of employment. With
respect to Options granted on or after October 8, 1996, the
preceding sentence shall apply in the event of termination of
employment for any reason other than death, disability,
Retirement or Cause.
Upon the termination of an Optionee's employment for Cause, all
Options held by such Optionee shall terminate concurrently with
receipt by the Optionee of oral or written notice that his or her
employment has been terminated. For the purposes of this Plan,
termination for Cause shall include termination by reason of any
dishonest or illegal act, or any willful refusal or failure to
perform duties properly assigned.
With respect to Options granted on or after October 8, 1996, if
an Optionee shall become disabled (within the meaning of section
22(e)(3) of the Code) during his or her employment and, prior to
the expiration date fixed for his or her Option, his or her
employment is terminated as a consequence of such disability,
such Option shall accelerate and may be exercised, to the extent
it remains unexercised on the date of such termination, by the
Optionee at any time prior to the earlier of: (1) the expiration
date specified in such Option; or (2) one year after the date of
such termination of employment. In the event of an Optionee's
legal disability, such Option may be so exercised by the
Optionee's legal representative.
With respect to Options granted on or after October 8, 1996, if
an Optionee's employment is terminated prior to the expiration
date fixed for his or her Option by reason of Retirement (as
hereinafter defined), such Option shall accelerate and may be
exercised, to the extent it remains unexercised on the date of
such Retirement, by the Optionee at any time prior to the earlier
of: (1) the expiration date specified in such Option; or (2)
three months after the date of such Retirement. For purposes of
this Plan, Retirement shall mean an Optionee's retirement from
the Company and its Subsidiaries at or after age 65, or before
age 65 if expressly agreed to by the Company.
Options may be terminated at any time by agreement between the
Company and the Optionee.
(h) Recapitalization. Subject to any required action by
the stockholders, if any, the number of Shares as to which
Options may be granted under this Plan and the number of Shares
subject to outstanding options and the option prices thereto will
be adjusted proportionately for any increase or decrease in the
number of outstanding shares of Common Stock of the Company
resulting from stock splits and reverse stock splits, but not for
stock dividends. The number of shares will be adjusted to the
nearest whole share. Any stock dividend resulting in an increase
of 20% or more in the outstanding Common Stock shall be deemed a
stock split.
If the Company is a party to any merger in which the Company is
not the surviving entity, any consolidation or dissolution (other
than the merger or consolidation of the Company with one or more
of its wholly-owned Subsidiaries), all Options outstanding
hereunder shall terminate (1) in the case of such a merger or
consolidation, on the date that such merger or consolidation
becomes effective, and (2) in the case of dissolution, on the
date that the Articles of Election to Dissolve are filed with the
Secretary of the Commonwealth of Pennsylvania. If Options are
terminated pursuant to the provisions of the foregoing sentence,
Optionees shall receive in cash from the Company an amount equal
to the fair market value of the Shares which are subject to then
exercisable Options, determined as of the close of business on
the day preceding the event cancelling all outstanding Options
under this Plan, less the amount which would be required to
exercise the then exercisable Options. Optionees shall have no
rights to compensation or other consideration with respect to the
cancellation of Options not subject to exercise on the date of
cancellation.
Except as expressly provided above in this Section 5(h), the
Optionee will have no rights by reason of (1) any subdivision or
consolidation of shares of stock of any class of the Company; (2)
payment of any stock dividend by the Company; (3) any other
increase or decrease in the number of shares of stock of any
class of the Company; or (4) by reason of any dissolution,
liquidation, merger, consolidation or spin-off of assets or stock
of another corporation.
The grant or existence of any Option shall not affect in any way
the right or power of the Company to make adjustments,
reclassifications, reorganizations, or changes of its capital or
business structure, or to merge, consolidate, dissolve,
liquidate, sell or transfer all or any part of its stock or
assets.
(i) Rights as a Stockholder. The Optionee will have no
rights as a stockholder of the Company with respect to any Shares
subject to an Option until such Option has been exercised and a
certificate with respect to the Shares purchased upon exercise
has been issued to him or her. No adjustment will be made for
dividends (ordinary or extraordinary, whether in cash, securities
or other property), distributions or other rights for which the
record date is prior to the date the Shares so purchased have
been issued.
(j) Modification, Extension and Renewal of Option.
Subject to the terms and conditions of the Plan, the Board may
modify, extend or renew an Option, or accept the surrender of an
Option (to the extent not theretofore exercised).
Notwithstanding the foregoing, no modification of an Option which
adversely affects the Optionee shall be made without the consent
of the Optionee.
(k) Purchase for Investment. The issuance of Shares on
exercise of the Option will be conditioned on obtaining
appropriate representations and warranties of the Optionee that
the purchase of Shares thereunder will be for investment, and not
with a view to the public resale or distribution thereof, unless
the Shares subject to the Option are registered under the
Securities Act of 1933, as amended (the "Act"), and comply with
any other law, regulation or rule applicable thereto. Unless the
Shares are registered under the Act, the Optionee shall
acknowledge that the Shares purchased on exercise of the Option
are not registered under the Act and may not be sold or otherwise
transferred unless the Shares have been registered under the Act
in connection with the sale or other transfer, or that counsel
satisfactory to the Company is of the opinion that the sale or
other transfer is exempt from registration under the Act, and
unless said sale or transfer is in compliance with any other
applicable law, including all applicable state securities laws.
(l) No Rights to Employment. Officers or employees
granted Options under this Plan shall not have any right to
continue in the employment of the Company or any Subsidiary by
nature of the existence of such Options. An Optionee whose
employment is terminated shall have no rights against the Company
by reason of the termination of such Option whether the
termination of the employment be with or without Cause.
(m) Other Provisions. The Option Notice may contain such
other provisions as the Board in its discretion deems advisable
and which are not inconsistent with the provisions of this Plan,
including, without limitation, restrictions upon the exercise of
the Option.
Section 6. Term of Plan
Options may be granted from time to time within a period of ten
years from the date the Plan is effective as described in Article
10 hereof.
Section 7. Amendment of the Plan
Insofar as permitted by law and the Plan, the Board may from time
to time suspend or discontinue the Plan or revise or amend it in
any respect whatsoever with respect to any Shares at the time not
subject to an Option; provided, however, that without approval of
the stockholders, no such revision or amendment may change the
aggregate number of Shares for which options may be granted
hereunder, change the designation of the class of employees
eligible to receive Options, decrease the price at which Options
may be granted, remove the administration of the Plan from the
Committee, or render any member of the Committee eligible to
receive an Option under the Plan while serving thereon.
Any other provision of this Section 7 notwithstanding, the Board
specifically is authorized to adopt any amendment to this Plan
deemed by the Board to be necessary or advisable to assure that
the incentive stock options or the non-qualified stock options
available under the Plan continue to be treated as such,
respectively, under the law.
Section 8. Application of Funds
The proceeds received by the Company from the sale of Shares
pursuant to the exercise of Options will be used for general
corporate purposes.
Section 9. No Obligation to Exercise Option
The granting of an Option will impose no obligation upon the
Optionee to exercise such Option.
Section 10. Approval of Stockholders
This Plan shall become effective on the date that it is adopted
by the Board, provided, however, that it shall become null and
void if it is not approved by a majority of the holders of the
Company's Common Stock present in person or by proxy at a meeting
held within one year (365 days) of its adoption by the Board.
The Board may grant Options hereunder prior to approval of the
Plan by the holders of such a majority of the Common Stock;
provided, however, that no Option so granted shall be exercisable
within 365 days of the date of the adoption of the Plan, and all
Options so granted shall terminate and become null and void if
the Plan is not approved by a majority of the holders of the
Company's Common Stock present in person or by proxy at a meeting
of the shareholders held within 365 days of its adoption by the
Board.
Date Plan adopted by Board of Directors: December 6, 1988
Exhibit 10(viii)
KULICKE AND SOFFA INDUSTRIES, INC.
1994 EMPLOYEE INCENTIVE STOCK OPTION AND
NON-QUALIFIED STOCK OPTION PLAN
(As Amended and Restated Effective October 8, 1996)
SECTION 1. Purpose
This KULICKE AND SOFFA INDUSTRIES, INC. 1994 EMPLOYEE STOCK
OPTION PLAN ("Plan") is intended to provide a means whereby
KULICKE AND SOFFA INDUSTRIES, INC. ("Company") and any Subsidiary
(as hereinafter defined) may, through the grant of incentive
stock options and non-qualified stock options (collectively,
"Options") to officers and other Key Employees (as defined in
Section 3), attract and retain such Key Employees and motivate
such Key Employees to exercise their best efforts on behalf of
the Company and of any Subsidiary.
As used in the Plan, the term "incentive stock options" ("ISOs")
means Options which qualify as incentive stock options within the
meaning of section 422 of the Internal Revenue Code of 1986, as
amended from time to time ("Code"), at the time they are granted
and which are either designated as ISOs in the Grant Letters (as
hereinafter defined) covering such Options or which are
designated as ISOs by the Committee (as defined in Section 2
hereof) at the time of grant. The term "non-qualified stock
options" ("NQSOs") means all other Options granted under the
Plan. The term "Subsidiary" means any corporation (whether or
not in existence at the time the Plan is adopted) which, at the
time an Option is granted, is a subsidiary of the Company under
the definition of "subsidiary corporation" contained in section
424(f) of the Code or any similar provision hereafter enacted.
SECTION 2. Administration
The Plan shall be administered by the Company's Compensation
Committee ("Committee"), which shall consist of not fewer than
two (2) "non-employee directors" (within the meaning of Rule 16b-
3(b)(3) under the Securities Exchange Act of 1934, or any
successor thereto) of the Company who are also "outside
directors" (within the meaning of Treas. Reg. Section 1.162-
27(e)(3), or any successor thereto), who shall be appointed by,
and shall serve at the pleasure of, the Company's Board of
Directors ("Board"). Each member of such Committee, while
serving as such, shall be deemed to be acting in his or her
capacity as a director of the Company.
The Committee shall have full and final authority in its absolute
discretion, subject to the terms of the Plan, to select the
persons to be granted ISOs and NQSOs under the Plan, to grant
Options on behalf of the Company, and to set the date of grant
and the other terms of such Options. The Committee may correct
any defect, supply any omission and reconcile any inconsistency
in the Plan and in any Option granted hereunder in the manner and
to the extent it shall deem desirable. The Committee also shall
have the authority to establish such rules and regulations, not
inconsistent with the provisions of the Plan, for the proper
administration of the Plan, and to amend, modify or rescind any
such rules and regulations, and to make such determinations and
interpretations under, or in connection with, the Plan, as it
deems necessary or advisable. All such rules, regulations,
determinations and interpretations shall be binding and
conclusive upon the Company, its shareholders and all officers
and employees and former officers and employees, and upon their
respective legal representatives, beneficiaries, successors and
assigns and upon all other persons claiming under or through any
of them.
No member of the Board or the Committee shall be liable for any
action or determination made in good faith with respect to the
Plan or any Option granted hereunder.
SECTION 3. Eligibility
The class of employees who shall be eligible to receive Options
under the Plan shall be the Key Employees (including any
directors who also are Key Employees) of the Company and/or of a
Subsidiary. A "Key Employee" is an officer or other employee who
occupies a responsible executive, professional, managerial or
administrative position and who the Committee believes has the
capacity to contribute to the long-term success of the Company
and its Subsidiaries. More than one Option may be granted to a
Key Employee under the Plan.
SECTION 4. Stock
The number of shares of common stock of the Company, no par value
("Common Shares"), that may be subject to Options under the Plan
shall be 850,000 shares, subject to adjustment as hereinafter
provided. Shares issuable under the Plan may be authorized but
unissued shares or reacquired shares, as the Company may
determine from time to time. Any Common Shares subject to an
Option which expires or otherwise terminates for any reason
whatever (including, without limitation, the Key Employee's
surrender thereof) without having been exercised shall continue
to be available for the granting of Options under the Plan.
Notwithstanding anything in this Plan to the contrary, no Key
Employee shall receive Options for more than 300,000 Common
Shares under the Plan. If an Option is cancelled, the Common
Shares covered by the cancelled Option shall be counted against
such maximum number of shares for which Options may be granted to
a single Key Employee. If the exercise price of an Option is
reduced after the date of grant, the transaction shall be treated
as a cancellation of the original Option and the grant of a new
Option for purposes of counting the maximum number of shares for
which Options may be granted to a single Key Employee.
SECTION 5. Annual Limit
(a) ISOs. The aggregate Fair Market Value (determined as
of the date the ISO is granted) of the Common Shares with respect
to which ISOs become exercisable for the first time by a Key
Employee during any calendar year (under this Plan and any other
ISO plan of the Company or any parent corporation (within the
meaning of section 424(e) of the Code ("Parent")) or Subsidiary)
shall not exceed $100,000. The term "Fair Market Value" shall
mean the value of the Common Shares arrived at by a good faith
determination of the Committee and shall be:
1. The quoted closing price, if there is a market for
and there are sales of Common Shares on a registered securities
exchange or in an over the counter market, on the date specified;
2. The weighted average of the quoted closing prices
on the nearest date before and the nearest date after the
specified date, if there are no sales of Common Shares on the
specified date but there are such sales on dates within a
reasonable period both before and after the specified date;
3. The mean between the bid and asked prices, as
reported by the National Quotation Bureau on the specified date,
if actual sales are not available during a reasonable period
beginning before and ending after the specified date; or
4. Such other method of determining Fair Market Value
as shall be authorized by the Code, or the rules or regulations
thereunder, and adopted by the Committee.
Where the Fair Market Value of Common Shares is determined under
(2) above, the average of the closing prices on the nearest sales
date before and the nearest date after the specified date shall
be weighted inversely by the respective numbers of trading days
between the dates of reported sales and the specified date (i.e.,
the valuation date), in accordance with Treasury Regulation
Section 20.2031-2(b)(1), or any successor thereto, under the
Code.
(b) Options Over Annual Limit. If an Option intended as an
ISO is granted to a Key Employee and such Option may not be
treated in whole or in part as an ISO pursuant to the limitation
in (a) above, such Option shall be treated as an ISO to the
extent it may be so treated under such limitation and as a NQSO
as to the remainder. For purposes of determining whether an ISO
would cause such limitation to be exceeded, ISOs shall be taken
into account in the order granted.
(c) NQSOs. The annual limit set forth above for ISOs shall
not apply to NQSOs.
SECTION 6. Options
(a) Granting of Options. From time to time until the
expiration or earlier suspension or discontinuance of the Plan,
the Committee may, on behalf of the Company, grant to Key
Employees under the Plan such Options as it determines are
warranted, subject to the limitations of the Plan; provided,
however, that grants of ISOs and NQSOs shall be separate and not
in tandem (i.e., a Key Employee's exercise of an ISO shall not
affect his or her right to exercise an NQSO, and vice versa).
The granting of an Option under the Plan shall not be deemed
either to entitle the Key Employee to, or to disqualify the Key
Employee from, any participation in any other grant of Options
under the Plan. In making any determination as to whether a Key
Employee shall be granted an Option and as to the number of
shares to be covered by such Option, the Committee shall take
into account the duties of the Key Employee, the Committee's
views as to his or her present and potential contributions to the
success of the Company or a Subsidiary, and such other factors as
the Committee shall deem relevant in accomplishing the purposes
of the Plan. Moreover, the Committee may determine that the
Grant Letter (as defined below) shall provide that said Option
may be exercised only if certain conditions, as determined by the
Committee, are fulfilled.
(b) Terms and Conditions of Options. The Options granted
pursuant to the Plan shall specify whether they are ISOs or
NQSOs; however, if the Option is not designated in the Grant
Letter as an ISO or NQSO, the Option shall constitute an ISO if
it complies with the terms of section 422 of the Code, and
otherwise, it shall constitute an NQSO. In addition, the Options
granted pursuant to the Plan shall include expressly or by
reference the following terms and conditions, as well as such
other provisions not inconsistent with the provisions of this
Plan as the Committee shall deem desirable, and for ISOs granted
under this Plan, the provisions of section 422(b) of the Code:
(1) Number of Shares. A statement of the number of
Common Shares to which the Option pertains.
(2) Price. A statement of the Option exercise price,
which shall be determined and fixed by the Committee in its
discretion at the time of grant, but shall not be less than 100%
(110% in the case of an ISO granted to a more than 10%
shareholder as provided in Subsection (9) below) of the Fair
Market Value of the optioned Common Shares on the date the Option
is granted.
(3) Term.
(A) ISOs. Subject to earlier termination as
provided in Subsections (5), (6) and (7) below, the term of each
ISO shall be not more than 10 years (5 years in the case of a
more than 10% shareholder as provided in (9) below) from the date
of grant.
(B) NQSOs. Subject to earlier termination as
provided in Subsections (5), (6) and (7) below, the term of each
NQSO shall be not more than 10 years from the date of grant.
(4) Exercise.
(A) General. Options shall be exercisable in
such installments and on such dates, commencing not less than 12
months from the date of grant, as the Committee may specify,
provided that:
(i) In the case of new Options granted to a
Key Employee in replacement for options (whether granted under
this Plan or otherwise) held by the Key Employee, the new Options
may be made exercisable, if so determined by the Committee, in
its discretion, at the earliest date the replaced options were
exercisable; and
(ii) The Committee may accelerate the
exercise date of any outstanding Options in its discretion, if it
deems such acceleration to be desirable.
Any Common Shares the right to the purchase of which has accrued
under an Option may be purchased at any time up to the expiration
or termination of the Option. Exercisable Options may be
exercised, in whole or in part, from time to time by giving
written notice of exercise to the Company at its principal
office, specifying the number of Common Shares to be purchased
and accompanied by payment in full of the aggregate Option
exercise price for such shares. Options may not be exercised in
installments of less than 25 shares, unless such Option is
exhausted upon its exercise. Only full shares shall be issued
under the Plan, and any fractional share which might otherwise be
issuable upon the exercise of an Option granted hereunder shall
be forfeited.
(B) Manner of Payment. The Option price shall be
payable:
(i) In cash or its equivalent;
(ii) In the case of an ISO, if the
Committee, in its discretion, causes the Grant Letter so to
provide and in the case of an NQSO if the Committee, in its
discretion, so determines at or prior to the time of exercise, in
Common Shares previously acquired by the Key Employee, provided
that if such shares were acquired through the exercise of an ISO
granted under this Plan or any other plan of the Company and are
used to pay the Option exercise price of an ISO, such shares have
been held by the Key Employee for a period of not less than the
holding period described in section 422(a)(1) of the Code on the
date of exercise, or if such Common Shares were acquired through
exercise of an NQSO or ISO granted under this Plan or any other
plan of the Company and are used to pay the Option exercise price
of an NQSO, such shares have been held by the Key Employee for a
period of more than 12 months on the date of exercise; or
(iii) In the discretion of the Committee, in
any combination of (i) and (ii) above.
In the event such Option exercise price is paid, in whole or in
part, with Common Shares, the portion of the Option exercise
price so paid shall equal the Fair Market Value on the date of
exercise of the Option of the Common Shares surrendered in
payment of such Option exercise price.
(5) Termination of Employment. If a Key Employee's
employment by the Company (and Subsidiaries) is terminated by
either party prior to the expiration date fixed for his or her
Option for any reason other than death, disability, or Cause (as
hereinafter defined), such Option may be exercised, to the extent
of the number of shares with respect to which the Key Employee
could have exercised it on the date of such termination, or to
any greater extent permitted by the Committee, by the Key
Employee at any time prior to the earlier of:
(A) The expiration date specified in such Option;
or
(B) Three months after the date of such
termination of employment.
With respect to Options granted on or after October 8, 1996, the
foregoing provisions of this Subsection (5) shall apply in the
event of termination of employment for any reason other than
death, disability, Retirement, or Cause. If a Key Employee's
employment by the Company (and Subsidiaries) is terminated for
Cause, all Options held by the Key Employee shall terminate
concurrently with receipt by the Optionee of oral or written
notice that his or her employment has been terminated. For
purposes of this Plan, termination for Cause shall include
termination by reason of any dishonest or illegal act, or any
willful refusal or failure to perform duties properly assigned.
(5a) Exercise upon Retirement of Key Employee. With
respect to Options granted on or after October 8, 1996, if a Key
Employee's employment is terminated prior to the expiration date
fixed for his or her Option by reason of Retirement (as
hereinafter defined), such Option shall accelerate and may be
exercised, to the extent it remains unexercised on the date of
such Retirement, by the Key Employee at any time prior to the
earlier of:
(A) The expiration date specified in such Option;
or
(B) Three months after the date of such
Retirement.
For purposes of this Plan, Retirement shall mean a Key Employee's
retirement from the Company and its Subsidiaries at or after age
65, or before age 65 if expressly agreed to by the Company.
(6) Exercise upon Disability of Key Employee.
Effective with respect to Options outstanding on October 8, 1996
and Options granted on and after such date, if a Key Employee
shall become disabled (within the meaning of section 22(e)(3) of
the Code) during his or her employment and, prior to the
expiration date fixed for his or her Option, his or her
employment is terminated as a consequence of such disability,
such Option shall accelerate and may be exercised, to the extent
it remains unexercised on the date of such termination, by the
Key Employee at any time prior to the earlier of:
(A) The expiration date specified in such Option;
or
(B) One year after the date of such termination
of employment.
In the event of the Key Employee's legal disability, such Option
may be so exercised by the Key Employee's legal representative.
(7) Exercise upon Death of Key Employee. Effective
with respect to Options outstanding on October 8, 1996 and
Options granted on and after such date, if a Key Employee shall
die during his or her employment and prior to the expiration date
fixed for his or her Option, or if a Key Employee whose
employment is terminated for any reason shall die following his
or her termination of employment but prior to the earliest of:
(A) The expiration date fixed for his or her
Option;
(B) The expiration of the period determined under
Subsections (5), (5a) (if applicable), and (6) above; or
(C) In the case of an ISO which is to remain an
ISO, three months following termination of employment; his or her
Option shall accelerate and may be exercised, to the extent it
remains unexercised on the date of his or her death, by the Key
Employee's estate, personal representative or beneficiary who
acquired the right to exercise such Option by bequest or
inheritance or by reason of the death of the Key Employee, at any
time prior to the earlier of:
(i) The expiration date specified in such
Option; or
(ii) One year after the date of death.
(8) Rights as a Shareholder. A Key Employee shall
have no rights as a shareholder with respect to any shares
covered by his or her Option until the issuance of a stock
certificate to him or her for such shares.
(9) Ten Percent Shareholder. If the Key Employee owns
more than 10% of the total combined voting power of all shares of
stock of the Company or of a Subsidiary or Parent at the time an
ISO is granted to such Key Employee, the Option exercise price
for the ISO shall be not less than 110% of the Fair Market Value
of the optioned Common Shares on the date the ISO is granted, and
such ISO, by its terms, shall not be exercisable after the
expiration of five years after the date the ISO is granted. The
conditions set forth in this Subsection (9) shall not apply to
NQSOs.
(c) Grant Letters. Options granted under the Plan shall be
evidenced by written documents ("Grant Letters") in such form as
the Committee shall, from time to time, approve, which Grant
Letters shall contain such provisions, not inconsistent with the
provisions of the Plan, for NQSOs granted pursuant to the Plan,
and such conditions, not inconsistent with section 422(b) of the
Code or the provisions of the Plan, for ISOs granted pursuant to
the Plan, as the Committee shall deem advisable, and which Grant
Letters shall specify whether the Option is an ISO or NQSO;
provided, however, if the Option is not designated in the Grant
Letter as an ISO or NQSO, the Option shall constitute an ISO if
it complies with the terms of section 422 of the Code, and
otherwise, it shall constitute an NQSO. Each Key Employee shall
be bound by the terms of the Grant Letter.
SECTION 7. Capital Adjustments
The number of shares which may be issued under the Plan, the
maximum number of shares with respect to which Options may be
granted to any Key Employee under the Plan, both as stated in
Section 4 hereof, and the number of shares issuable upon exercise
of outstanding Options under the Plan (as well as the Option
exercise price per share under such outstanding Options) shall,
subject to the provisions of section 424(a) of the Code, be
adjusted, as may be deemed appropriate by the Committee, to
reflect any stock dividend, stock split, share combination, or
similar change in the capitalization of the Company.
In the event of a corporate transaction (as that term is
described in section 424(a) of the Code and the Treasury
Regulations issued thereunder as, for example, a merger,
consolidation, acquisition of property or stock, separation,
reorganization, or liquidation), each outstanding Option shall be
assumed by the surviving or successor corporation; provided,
however, that in the event of a proposed corporate transaction,
the Committee may terminate all or a portion of the outstanding
Options if it determines that such termination is in the best
interests of the Company. If the Committee decides to terminate
outstanding Options, the Committee shall give each Key Employee
holding an Option to be terminated not less than ten days' notice
prior to any such termination by reason of such a corporate
transaction, and any such Option which is to be so terminated
shall become fully exercisable and may be exercised up to, and
including the date immediately preceding such termination.
The Committee also may, in its discretion, change the terms of
any outstanding Option to reflect any such corporate transaction,
provided that, in the case of ISOs which are to remain ISOs, such
change is excluded from the definition of a "modification" under
section 424(h) of the Code unless the Option holder consents to
such change.
SECTION 8. Change in Control
All Options shall become fully vested and exercisable upon a
Change in Control of the Company. "Change in Control" shall mean
any of the following events:
(a) An acquisition (other than directly from the Company of
any voting securities of the Company ("Voting Securities") by any
"Person" (as such term is used for purposes of section 13(d) or
14(d) of the Securities Exchange Act of 1934, as amended (the
"1934 Act")) immediately after which such Person has "Beneficial
Ownership" (within the meaning of Rule 13d-3 promulgated under
the 1934 Act) of 50% or more of the combined voting power of all
then outstanding Voting Securities, provided, however, that any
such acquisition approved by two-thirds of the Incumbent Board
(as hereinafter defined) shall not be deemed to be a Change in
Control;
(b) The individuals who, as of December 13, 1994, are
members of the Company's Board of Directors (the "Incumbent
Board") cease for any reason to constitute at least two-thirds of
the Board of Directors; provided, however, that if the election,
or nomination for election by the shareholders, of any new
director was approved by a vote of at least two-thirds of the
members of the Board of Directors who constitute Incumbent Board
members, such new directors shall for all purposes be considered
as members of the Incumbent Board as of December 13, 1994;
provided further, however, that no individual shall be considered
a member of the Incumbent Board if such individual initially
assumed office as a result of either an actual or threatened
"Election Contest" (as described in Rule 14a-11 promulgated under
the 1934 Act) or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than the
Board of Directors (a "Proxy Contest") including by reason of any
agreement intended to avoid or settle any Election Contest or
Proxy Contest;
(c) Approval by shareholders of the Company of (1) a merger
or consolidation involving the Company if the shareholders of the
Company immediately before such merger or consolidation do not
own, directly or indirectly, immediately following such merger or
consolidation more than 50% of the combined voting power of the
outstanding Voting Securities of the corporation resulting from
such merger or consolidation in substantially the same proportion
as their ownership of the Voting Securities immediately before
such merger or consolidation or (2) a complete liquidation or
dissolution of the Company or an agreement for the sale or other
disposition of all or substantially all of the assets of the
Company; or
(d) Acceptance of shareholders of the Company of shares in
a share exchange if the shareholders of the Company immediately
before such share exchange do not own, directly or indirectly,
immediately following such share exchange more than 50% of the
combined voting power of the outstanding Voting Securities of the
corporation resulting from such share exchange in substantially
the same proportion as their ownership of the Voting Securities
outstanding immediately before such share exchange.
SECTION 9. Amendment or Discontinuance of the Plan
At any time and from time to time, the Board may suspend or
terminate the Plan or amend it, and the Committee may amend any
outstanding Options, in any respect whatsoever, except that the
following amendments shall require the approval by the
affirmative votes of holders of at least a majority of the shares
present, or represented, and entitled to vote at a duly held
meeting of shareholders of the Company:
(a) Any amendment which would:
(1) Materially increase the benefits accruing to
directors and officers, within the meaning of Rule 16a-1(f) under
the 1934 Act (hereinafter referred to as "Officers"), under the
Plan;
(2) Materially increase the number of Common Shares
which may be issued to directors and Officers under the Plan; or
(3) Materially modify the requirements as to
eligibility for directors and Officers to participate in the
Plan;
(b) With respect to ISOs, any amendment which would:
(1) Change the class of employees eligible to
participate in the Plan;
(2) Except as permitted under Section 7 hereof,
increase the maximum number of Common Shares with respect to
which ISOs may be granted under the Plan; or
(3) Extend the duration of the Plan under Section 10
hereof with respect to any ISOs granted hereunder; and
(c) Any amendment which would require shareholder approval
pursuant to Treasury Regulation No. 1.162-27(e)(4)(vi), or any
successor thereto.
Notwithstanding the foregoing, no such suspension, discontinuance
or amendment shall materially impair the rights of any holder of
an outstanding Option without the consent of such holder.
SECTION 10. Termination of Plan
Unless earlier terminated as provided in the Plan, the Plan and
all authority granted hereunder shall terminate absolutely at
12:00 midnight on December 12, 2004, which date is within ten
years after the date the Plan was adopted by the Board, and no
Options hereunder shall be granted thereafter. Nothing contained
in this Section 10, however, shall terminate or affect the
continued existence of rights created under Options issued
hereunder and outstanding on December 12, 2004 which by their
terms extend beyond such date.
SECTION 11. Effective Date
This Plan became effective on December 13, 1994 (the date the
Plan was adopted by the Board), and was approved by shareholders
on February 14, 1995. As amended and restated, the Plan shall be
effective October 8, 1996.
SECTION 12. Miscellaneous
Governing Law. The Plan and the Grant Letters entered into, and
the Options granted thereunder, shall be governed by the
applicable Code provisions to the maximum extent possible.
Otherwise, the operation of, and the rights of Key Employees
under, the Plan, the Grant Letters, and the Options shall be
governed by applicable federal law and otherwise by the laws of
the Commonwealth of Pennsylvania.
Rights. Neither the adoption of the Plan nor any action of the
Board or the Committee shall be deemed to give any individual any
right to be granted an Option, or any other right hereunder,
unless and until the Committee shall have granted such individual
an Option, and then his or her rights shall be only such as are
provided by this Plan and the Grant Letter.
Any Option under the Plan shall not entitle the holder thereof to
any rights as a shareholder of the Company prior to the exercise
of such Option and the issuance of the shares pursuant thereto.
Further, notwithstanding any provisions of the Plan or any Grant
Letter with a Key Employee, the Company shall have the right, in
its discretion, to retire a Key Employee at any time pursuant to
its retirement rules or otherwise to terminate his or her
employment at any time for any reason whatsoever.
No Obligation to Exercise Option. The granting of an Option
shall impose no obligation upon a Key Employee to exercise such
Option.
Non-Transferability. No Option which is to remain an ISO and,
except as otherwise provided by the Committee, no other Option
shall be assignable or transferable by the Key Employee otherwise
than by will or by the laws of descent and distribution, and
subject to the preceding clause, during the lifetime of the Key
Employee, any Options shall be exercisable only by him or her or
by his or her guardian or legal representative. If a Key
Employee is married at the time of exercise of an Option and if
the Key Employee so requests at the time of exercise, the
certificate or certificates issued shall be registered in the
name of the Key Employee and the Key Employee's spouse, jointly,
with right of survivorship.
Withholding and Use of Shares to Satisfy Tax Obligations. The
obligation of the Company to deliver Common Shares to a Key
Employee pursuant to any Option under the Plan shall be subject
to applicable federal, state and local tax withholding
requirements.
In order to satisfy the withholding requirements of applicable
federal tax laws, the Committee, in its discretion (and subject
to such withholding rules ("Withholding Rules") as shall be
adopted by the Committee), may permit the Key Employee to satisfy
the minimum required federal withholding tax, in whole or in
part, by electing to have the Company withhold (or by returning
to the Company) Common Shares, which shares shall be valued, for
this purpose, at their Fair Market Value on the date of exercise
of the Option (or if later, the date on which the Key Employee
recognizes ordinary income with respect to such exercise)
("Determination Date"). An election to use Common Shares to
satisfy tax withholding requirements must be made in compliance
with and subject to the Withholding Rules. The Company may not
withhold shares in excess of the number necessary to satisfy the
minimum required federal income tax withholding requirements. In
the event Common Shares acquired under the exercise of an ISO,
granted under this Plan or any other plan of the Company, are
used to satisfy such withholding requirement, such Common Shares
must have been held by the Key Employee for a period of not less
than the holding period described in section 422(a)(1) of the
Code on the Determination Date, or if such Common Shares were
acquired through exercise of an NQSO, granted under the Plan or
any other plan of the Company, such option must have been granted
to the Key Employee at least six (6) months prior to the
Determination Date.
Listing and Registration of Shares. Each Option shall be subject
to the requirement that, if at any time the Committee shall
determine, in its discretion, that the listing, registration or
qualification of the shares covered thereby upon any securities
exchange or under any state or federal law, or the consent or
approval of any governmental regulatory body, is necessary or
desirable as a condition of, or in connection with, the granting
of such Option or the purchase or vesting of shares thereunder,
or that action by the Company or by the Key Employee should be
taken in order to obtain an exemption from any such requirement,
no such Option may be exercised, in whole or in part, unless and
until such listing, registration, qualification, consent,
approval, or action shall have been effected, obtained, or taken
under conditions acceptable to the Committee. Without limiting
the generality of the foregoing, each Key Employee or his or her
legal representative or beneficiary may also be required to give
satisfactory assurance that shares purchased upon exercise of an
Option are being purchased for investment and not with a view to
distribution, and certificates representing such shares may be
legended accordingly.
EXHIBIT 21
SUBSIDIARIES OF THE COMPANY
Name Jurisdiction of Incorporation
- ----------------------------- -----------------------------
Kulicke and Soffa AG Switzerland
Kulicke and Soffa (Asia) Ltd. Hong Kong
Kulicke and Soffa (Japan) Ltd. Japan and Delaware
Kulicke and Soffa (Israel) Ltd. Israel
Kulicke and Soffa Investments, Inc. Delaware
Micro Swiss Ltd. Israel
Kulicke and Soffa Leasing, Inc. Delaware
Kulicke & Soffa Singapore Inc. Delaware
Kulicke & Soffa Export Inc. Barbados
Circle "S" Industries, Inc. Alabama
American Fine Wire Corporation Alabama
American Fine Wire Ltd. Cayman Islands
Mueller Feindraht, AG Switzerland
Certain subsidiaries are omitted; however, such subsidiaries, even
if combined into one subsidiary, would not constitute a
"significant subsidiary" within the meaning of Regulation S-X.
EXHIBIT 23(i)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectuses
constituting part of the Registration Statements on Form S-8 (Nos. 2-68488,
33-12453, 33-13577, 33-30884, 33-39265 and 333-0567) of Kulicke and Soffa
Industries, Inc. of our report dated November 15, 1996 appearing on page 20
of this Annual Report on Form 10-K.
/s/ PRICE WATERHOUSE LLP
Philadelphia, Pennsylvania
December 20, 1996
EXHIBIT 23(ii)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectuses
constituting part of the Registration Statements on Form S-8 (Nos. 2-68488,
33-12453, 33-13577, 33-30884, 33-39265 and 333-00567) of Kulicke and Soffa
Industries, Inc. of our report dated November 3, 1994 appearing on page 21 of
this Annual Report on Form 10-K. We also consent to the incorporation by
reference of our report on the Financial Statement Schedule.
/s/ LUBOSHITZ, KASIERER & CO.
Certified Public Accountants (Israel)
Haifa, Israel
December 20, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE COMPANY'S
AUDITED FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1996
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> SEP-30-1996
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<SECURITIES> 13,078
<RECEIVABLES> 48,683
<ALLOWANCES> 1,227
<INVENTORY> 44,519
<CURRENT-ASSETS> 162,651
<PP&E> 77,190
<DEPRECIATION> 36,047
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<CURRENT-LIABILITIES> 48,847
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0
0
<COMMON> 48,733
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<TOTAL-LIABILITY-AND-EQUITY> 249,554
<SALES> 381,176
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<CGS> 239,491
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<OTHER-EXPENSES> 124,267
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,288
<INCOME-PRETAX> 15,630
<INCOME-TAX> 3,783
<INCOME-CONTINUING> 11,847
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