SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
=================================================================
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarter Ended: Commission File number:
- --------------------- ----------------------
December 31, 1995 0-11412
AMTECH SYSTEMS, INC.
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Arizona 86-0411215
- ------------------------------- --------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
131 South Clark Drive Tempe, Arizona 85281
- -----------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(602) 967-5146
(Registrant's telephone number,
including area code)
N/A
--------------------------------------
Former name, former address and former
fiscal year, if changed since last report
Indicate by check mark whether the Registrant (i) has filed all reports
required 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 (ii) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes
of common stock as of the close of the period covered by this report.
2,054,834 Shares
----------------
<PAGE>
PART I. FINANCIAL INFORMATION
AMTECH SYSTEMS, INC.
AND SUBSIDIARIES
- --------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS - ASSETS
- --------------------------------------------------------------------------------
December 31, September 30,
1995 1995
----------- -------------
(Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 563,529 $ 833,820
Short-term investments 3,772,996 3,671,569
Accounts receivable - net 1,715,281 2,286,743
Inventories 566,815 524,071
Deferred income taxes 180,000 165,000
Prepaid expenses 42,815 45,392
------------- -------------
Total current assets 6,841,436 7,526,595
------------- -------------
PROPERTY AND EQUIPMENT,
AT COST:
Leasehold improvements 161,723 162,404
Machinery and equipment 384,491 333,971
Furniture and fixtures 582,962 652,607
------------- -------------
1,129,176 1,148,982
Less: accumulated
depreciation and
amortization (494,671) (499,184)
-------------- --------------
Property and equipment - net 634,505 649,798
-------------- --------------
PURCHASE PRICE IN EXCESS
OF NET ASSETS ACQUIRED -- 85,315
------------- -------------
OTHER ASSETS 362,585 103,811
------------- -------------
$ 7,838,526 $ 8,365,519
============= =============
See accompanying Notes to Condensed Financial Statements.
2
<PAGE>
AMTECH SYSTEMS, INC.
AND SUBSIDIARIES
- --------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' INVESTMENT
- --------------------------------------------------------------------------------
December 31, September 30,
1995 1995
----------- -------------
(Unaudited)
CURRENT LIABILITIES:
Accounts payable $ 646,687 $ 528,322
Accrued liabilities:
Compensation and related taxes 285,892 373,383
Warranty and installation expenses 145,376 116,347
Other accrued liabilities 153,068 120,239
Income taxes payable 140,000 225,000
------------- -------------
Total current liabilities 1,371,023 1,363,291
------------- -------------
STOCKHOLDERS' INVESTMENT:
Preferred stock, no specified
terms; 100,000,000 shares
authorized; none issued -- --
Common stock, $.01 par value;
100,000,000 shares authorized;
2,054,834 shares outstanding at
December 31, 1995 and 2,152,851
shares at September 30, 1995 20,549 21,529
Additional paid-in capital 7,064,352 7,872,010
Cumulative foreign currency
translation adjustment 7,334 29,459
Accumulated deficit (624,732) (920,770)
------------- -------------
Total stockholders' investment 6,467,503 7,002,228
------------- -------------
$ 7,838,526 $ 8,365,519
============= =============
See accompanying Notes to Condensed Financial Statements.
3
<PAGE>
AMTECH SYSTEMS, INC.
AND SUBSIDIARIES
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED DECEMBER 31, 1995 AND 1994
- --------------------------------------------------------------------------------
Three Months Ended
December 31,
1995 1994
---------- -----------
(Unaudited) (Unaudited)
SEMICONDUCTOR EQUIPMENT:
Net product sales $ 1,670,888 $ 1,112,338
Cost of product sales 1,163,302 816,318
----------- -----------
Gross margin 507,586 296,020
Selling and general 460,972 350,211
Research and development 42,811 99,639
----------- -----------
Operating profit (loss) 3,803 (153,830)
GENERAL CORPORATE EXPENSES 69,033 87,755
INTEREST INCOME - NET 65,815 13,541
----------- -----------
INCOME (LOSS) FROM CONTINUING
OPERATIONS BEFORE INCOME TAXES 585 (228,044)
INCOME TAX BENEFIT -- (78,000)
----------- -----------
INCOME (LOSS) FROM CONTINUING OPERATIONS 585 (150,044)
----------- -----------
DISCONTINUED TECHNICAL CONTRACT PERSONNEL:
Net revenues 1,234,621 1,363,886
Cost of revenue 1,074,283 1,187,866
----------- -----------
Gross margin 160,338 176,020
Selling and general 108,581 123,988
----------- -----------
INCOME FROM DISCONTINUED OPERATIONS
BEFORE INCOME TAXES 51,757 52,032
INCOME TAX PROVISION 30,000 23,000
----------- -----------
INCOME FROM DISCONTINUED OPERATIONS 21,757 29,032
----------- -----------
GAIN ON DISPOSAL OF TECHNICAL CONTRACT
PERSONNEL SEGMENT 273,696 --
----------- ----------
NET INCOME (LOSS) $ 296,038 $ (121,012)
=========== ===========
INCOME (LOSS) FROM CONTINUING OPERATIONS $ .00 $ (.15)
NET INCOME (LOSS) PER SHARE $ .14 $ (.12)
WEIGHTED AVERAGE
SHARES OUTSTANDING 2,152,851 993,792
See accompanying Notes to Condensed Financial Statements.
4
<PAGE>
AMTECH SYSTEMS, INC.
AND SUBSIDIARIES
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED DECEMBER 31, 1995 AND 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended
December 31,
1995 1994
----------- ----------
(Unaudited) (Unaudited)
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $ 296,038 $ (121,012)
Adjustments to reconcile net income
(loss) to net cash used by operating
activities:
Depreciation and amortization 44,567 20,936
Inventory write-downs 6,000 5,707
Less gain on disposal of assets (273,696) (426)
Deferred tax provision (benefit) (25,000) --
Changes in operating assets and liabilities:
Decrease (Increase) in accounts receivable 147,832 (457,477)
Increase in inventories and prepaid expenses (54,429) (328,471)
Decrease (Increase) in other assets (32,997) 168,059
Increase in accounts payable 151,748 588,158
Decrease in income taxes payable (85,000) (55,000)
Increase in accrued liabilities 53,364 33,922
----------- -----------
Net cash provided (used)
by operating activities 228,427 (145,604)
----------- -----------
INVESTING ACTIVITIES:
Maturities (purchases) of short-term
investments - net (101,427) 99,908
Investment in unconsolidated subsidiary (250,000) --
Proceeds from asset sale -- 10,000
Purchase of property and equipment (37,742) (44,164)
Cash distributed in disposal of Echelon (96,401) --
----------- --------
Net cash provided (used) by
investing activities (485,570) 65,744
----------- -----------
FINANCING ACTIVITIES:
Net proceeds from secondary public offering -- 3,623,382
----------- -----------
Net cash provided by financing activities -- 3,623,382
----------- -----------
EFFECT OF EXCHANGE RATE CHANGES (13,148) --
----------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (270,291) 3,543,522
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 833,820 736,984
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 563,529 $ 4,280,506
=========== ===========
</TABLE>
See accompanying Notes to Condensed Financial Statements.
5
<PAGE>
AMTECH SYSTEMS, INC.
AND SUBSIDIARIES
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED DECEMBER 31, 1995 AND 1994
- --------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
1995 1994
----------- --------
Cash paid during the period for:
Income taxes $ 140,000 $ --
SUPPLEMENTAL INFORMATION OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
Value received in the form of the
Company's stock in exchange for
the net assets of Echelon Service Co. $ 808,638 $ --
See accompanying Notes to Condensed Financial Statements.
6
<PAGE>
AMTECH SYSTEMS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
December 31, 1995
(1) BASIS OF PRESENTATION
Effective December 31, 1995, the Company exchanged all of its ownership
in the technical contract personnel business represented by the stock of Echelon
Service Company for 98,017 shares of the Company's outstanding Common Stock
previously owned by Eugene R. Hartman, an officer and director of the Company.
The transaction was preceded by a dividend from Echelon to the Company in order
to equalize the values. The transaction was structured to be a tax-free
reorganization and, as such, no provision was made for income taxes. As a result
of the transaction, the Company recognized a gain of $274,000.
The accompanying consolidated financial statements include the accounts
of the Company and its wholly-owned subsidiaries, Tempress Systems, Inc. and
Echelon Service Company, the Baltimore based operation of the technical
personnel segment, through the date of disposition. All significant intercompany
accounts and transactions have been eliminated in consolidation.
(2) INTERIM REPORTING
The accompanying consolidated financial statements are unaudited;
however, these financial statements contain all adjustments which are, in the
opinion of management, necessary to a fair presentation of the financial
position of the Company as of December 31, 1995 and September 30, 1995 and the
results of its operations for the three months ended December 31, 1995 and 1994,
and its cash flows for the three months ended December 31, 1995 and 1994.
The accounting policies followed by the Company are set forth in Note 2
to the consolidated financial statements in the Company's 1995 Annual Report on
Form 10-K for the year ended September 30, 1995, which is incorporated herein by
reference.
The results of operations for the three months ended December
31, 1995 and 1994, are not necessarily indicative of the results to be expected
for the full year.
Continued on next page.....
7
<PAGE>
NOTES TO CONDENSED FINANCIAL STATEMENTS - continued
(3) INVESTMENT IN UNCONSOLIDATED SUBSIDIARY
During the first quarter of fiscal 1996, the Company entered into a
joint venture agreement pursuant to which it would have a 45% ownership interest
and a 50% voting interest in Seil Semicon, Inc. in return for a commitment to
invest $500,000 in cash. The first $250,000 of that commitment was met in
November 1995 and the remainder will be invested during the second quarter of
fiscal 1996. The join venturers plan to operate a silicon test wafer reclaiming
business through Seil Semicon, Inc., which is in the start-up phase. The
ultimate success of Seil Semicon, Inc. depends on a number of factors, including
securing adequate financing, of which there can be no assurance.
(4) RECLASSIFICATIONS
Certain reclassifications have been made to the amounts for fiscal 1995
to conform to the presentation of the fiscal 1996 amounts.
8
<PAGE>
AMTECH SYSTEMS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Financial Condition and Working Capital. During the three months ended
December 31, 1995, working capital decreased by $693,000, primarily as the
result of the $250,000 investment in Seil Semicon, Inc., an unconsolidated
subsidiary, and the disposition of Echelon Service Company in exchange for
Common Stock of the Company previously owned by Eugene R. Hartman. There is no
long or short-term debt and stockholders' investment is 82% of total
capitalization.
Liquidity and Capital Resources. During the three months ended December
31, 1995, the Company's cash position, including equivalents, decreased by
$270,000. The decrease in cash and cash equivalents primary reflects the use of
cash for the investment in Seil Semicon, Inc. Seil Semicon is a joint venture in
which the Company has a 45% ownership interest and a 50% voting interest. Seil
Semicon plans to develop and operate a silicon test wafer reclaiming facility.
The Company has an obligation to invest an additional $250,000 in the joint
venture. The current ratio was 5:1 as of December 31, 1995, down slightly from a
ratio of 5.5:1 as of September 30, 1995, and continues to reflect the Company's
strong financial condition.
Management believes the Company's liquidity is sufficient for its
current operations and those planned for approximately the next two years. See
the management's discussion and analysis included in the Company's 1995 annual
report on Form 10-K for further information regarding the Company's long-term
plans for future operations.
The semiconductor equipment order backlog was approximately $4,830,000,
as of December 31, 1995, as compared to $2,360,000 as of December 31, 1994.
While orders are ordinarily filled within three to six months of receipt, the
current backlog includes approximately $1,640,000 of orders to one customer that
will not be shipped until fiscal 1997. Also, the Company has experienced long
lead-times in purchasing components from suppliers of quartz parts, which will
result in the Company taking more than six months to deliver equipment that
contains certain quartz parts during at least the next few quarters. While it is
difficult to estimate how much sales will be affected or how long these delays
might last, the short supply of quartz components is certain to depress sales
for at least the second quarter of fiscal 1996.
9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS - continued
Results of Operations.
THREE MONTHS ENDED December 31,
1995 vs. 1994
Semiconductor Equipment.
Revenues increased 50%, or $559,000, from $1,112,000 in the first
quarter of fiscal 1995 to $1,671,000 in the first quarter of the fiscal 1996
year. The sales of furnace and related parts by Tempress Systems, Inc.
("Tempress"), a wholly-owned subsidiary operating in the Netherlands, resulted
in the increased sales for the quarter.
Gross margin increased $212,000, or by 71%, from $296,000, or 27% of
sales, in the first quarter of fiscal 1995 to $508,000, or 30% of sales, in the
first quarter of fiscal 1996. The increase in gross margin is primarily
attributable to sales by the Netherlands operation, which had its first
significant shipments in the second quarter of fiscal 1995. Spreading the fixed
portion of manufacturing costs over the increased sales volume explains the
increase in gross margins a percentage of sales.
The selling and general expenses of the semiconductor equipment segment
for the first quarter of fiscal 1996 were $111,000 higher than in comparable
period of last fiscal year. The increased expenses primarily result from
expanded sales and marketing activities on a world-wide basis in order to
promote the entire product line, with the greatest emphasis on the horizonal
diffusion furnace developed in the Netherlands and a low-cost furnace model to
be manufactured in the United States. The increase in these expenses was
partially offset by the $57,000 decline in research and development costs, as
most of the development of the Tempress furnace was expensed in the first
quarter of last fiscal year.
For the three months ended December 31, 1995, the semiconductor
equipment segment had an operating profit of $4,000 as compared to an operating
loss of $154,000 for the first quarter of fiscal 1995. The Tempress operation
had sufficient sales of furnaces and related parts to achieve profitability in
the quarter, as compared to having significant start-up losses in the prior year
period. However, two factors are limiting sales and operating profits of both
the domestic operation and the one in the Netherlands. Suppliers for fabricated
quartz parts have increased their lead-times on most items to six months and
more, which causes delays in the shipments of ATMOSCANs and furnaces that
require those parts. In addition, the Company's delay in the shipment of just
one or two high-priced units can significantly depress its sales and operating
profit for such period. As a result of these two factors, sales are expected to
decline in the second quarter of the current fiscal year from the level of the
first quarter, causing such sales to be substantially below the same period of
fiscal 1995.
10
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS - continued
Income From Continuing Operations.
Income (loss) from continuing operations before income taxes includes
the operating profit of the semiconductor equipment segment, discussed above,
general corporate expenses and net interest income. During the first quarter of
the current fiscal year these items had the net effect of reducing income by
$3,000, compared to the $74,000 net reduction caused by these items in the
preceding year. This $71,000 improvement is due to a slight reduction in general
corporate expenses, but more importantly due to the $52,000 increase in net
interest income resulting from the investment of the proceeds from the secondary
offering that was effective December 15, 1994.
The income from continuing operations is approximately $1,000 for the
first quarter of fiscal 1996, an improvement of $151,000 from the loss for the
comparable period of last fiscal year, after taking into consideration the
income tax benefit of $78,000 in fiscal 1995. Because of the insignificant
amount of income in the fiscal 1996 period, no provision was made for income
taxes.
Discontinued Technical Contract Personnel Segment.
Net revenues of this segment were $1,235,000 for the quarter ended
December 31, 1995, compared to $1,364,000 for the first quarter of fiscal 1995.
The 9% decrease in revenues is primarily due to one customer having less demand
for the Company's services than it had it the preceding year.
The gross margins for this segment were $16,000 lower for the 1996
quarter, as a result of the decreased revenue. The average gross margin
percentage for this segment was 13% for both the first quarter of fiscal 1996
and 1995.
Selling and general expenses of this segment were $15,000 lower in the
most recently completed quarter as compared to the same time last year,
principally due to cost control measures implemented approximately one year ago.
As a result of the above nearly offsetting factors, the operating
profit of this segment was approximately the same, or $52,000, for the first
quarter of both fiscal 1995 and 1996. Income from discontinued operations
declined slightly in the fiscal 1996 period to $22,000, as compared to $29,000,
due to a higher provision for income taxes.
Effective December 31, 1995, the Company exchanged all of its ownership
in the technical contract personnel business represented by the stock of Echelon
Service Company for 98,017 shares of the Company's outstanding Common Stock
previously owned by Eugene R. Hartman, an officer and director of the Company.
The transaction was preceded by a dividend from Echelon to the Company in order
to equalize the values. The transaction was structured to be a tax-
11
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS - continued
free reorganization and, as such, no provision was made for income taxes. As a
result of the transaction, the Company recognized a gain of $274,000.
Total Company.
The three months ended December 31, 1995, resulted in net income of
$296,000 compared to the net loss of 121,000 in the first quarter of fiscal
1995. The most significant factors contributing to the improvement was the
$274,000 gain on the disposition of Echelon and the $151,000 improvement in
earnings from continuing operations resulting from the 50% increase in sales of
semiconductor equipment products.
12
<PAGE>
PART II
Item 1. Legal Proceedings.
None.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
None.
Item 6. Exhibits and Reports on Form 8-K.
---------------------------------
(a) Exhibits - All of the exhibits required by Item 601 of
Regulation S-K are hereby incorporated by reference to the
Company's Annual Report on Form 10-K dated January 16, 1996.
(b) Reports on Form 8-K - On February 9, 1996, the Company filed a
Form 8-K to report the disposition of the formerly
wholly-owned Echelon Service Company.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
AMTECH SYSTEMS INC.
by /s/ Robert T. Hass
--------------------------------------
Robert T. Hass, Vice-President and
Chief Financial Officer
DATED: February 14, 1996
13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY
FINANCIAL INFORMATION EXTRACTED FROM
THE BALANCE SHEETS AS OF DECEMBER
31, 1995 AND SEPTEMBER 30, 1995, AND
THE STATEMENTS OF OPERATION AND THE
STATEMENTS OF CASH FLOW FOR THE
THREE MONTHS ENDED DECEMBER 31, 1995
AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH QUARTERLY REPORT
ON FORM 10-Q FOR THE QUARTER ENDED
DECEMBER 31, 1995.
<MULTIPLIER> 1
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1995
<PERIOD-END> DEC-31-1995
<PERIOD-TYPE> 3-MOS
<CASH> 563,529
<SECURITIES> 3,772,996
<RECEIVABLES> 1,795,281
<ALLOWANCES> 80,000
<INVENTORY> 566,815
<CURRENT-ASSETS> 6,841,436
<PP&E> 1,129,176
<DEPRECIATION> 494,671
<TOTAL-ASSETS> 7,838,526
<CURRENT-LIABILITIES> 1,371,023
<BONDS> 0
<COMMON> 20,549
0
0
<OTHER-SE> 6,446,954
<TOTAL-LIABILITY-AND-EQUITY> 7,838,526
<SALES> 1,670,888
<TOTAL-REVENUES> 1,670,888
<CGS> 1,163,302
<TOTAL-COSTS> 1,163,302
<OTHER-EXPENSES> 572,816
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 585
<INCOME-TAX> 0
<INCOME-CONTINUING> 585
<DISCONTINUED> 295,453
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 296,038
<EPS-PRIMARY> $.14
<EPS-DILUTED> $.14
</TABLE>
