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, 1996 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.
4,141,668 Shares
----------------
<PAGE>
PART I. FINANCIAL INFORMATION
AMTECH SYSTEMS, INC.
AND SUBSIDIARIES
- --------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS - ASSETS
- --------------------------------------------------------------------------------
December 31, September 30,
1996 1996
------------- -------------
(Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 1,200,095 $ 1,994,217
Short-term investments 3,442,734 2,464,120
Accounts receivable - net 1,740,975 1,581,973
Inventories 639,286 739,201
Deferred income taxes 217,000 223,000
Prepaid expenses 92,496 46,935
------------- -------------
Total current assets 7,332,586 7,049,446
------------- -------------
PROPERTY AND EQUIPMENT,
AT COST:
Land 91,144 92,792
Building 344,014 280,588
Leasehold improvements 162,402 161,724
Machinery and equipment 439,686 432,435
Furniture and fixtures 630,142 608,972
------------- -------------
1,667,388 1,576,511
Less: accumulated
depreciation and
amortization (641,218) (600,180)
------------- -------------
Property and equipment - net 1,026,170 976,331
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OTHER ASSETS 65,197 432,837
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$ 8,423,953 $ 8,458,614
============= =============
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,
1996 1996
------------- -------------
(Unaudited)
CURRENT LIABILITIES:
Accounts payable $ 550,767 $ 652,771
Accrued liabilities:
Compensation and related taxes 383,140 442,785
Warranty and installation expenses 189,549 185,450
Other accrued liabilities 127,159 143,988
Income taxes payable 135,000 144,000
------------- -------------
Total current liabilities 1,385,615 1,568,994
------------- -------------
LONG-TERM DEBT 256,007 265,355
------------- -------------
STOCKHOLDERS' INVESTMENT:
Preferred stock, no specified
terms; 100,000,000 shares
authorized; none issued -- --
Common stock, $.01 par value;
100,000,000 shares authorized;
4,141,668 shares outstanding at
December 31, 1996 and 4,109,668
shares at September 30, 1996 41,417 41,097
Additional paid-in capital 7,107,507 7,043,803
Cumulative foreign currency
translation adjustment (74,964) (48,548)
Accumulated deficit (291,629) (412,087)
------------- -------------
Total stockholders' investment 6,782,331 6,624,265
------------- -------------
$ 8,423,953 $ 8,458,614
============= =============
See accompanying Notes to Condensed Financial Statements.
3
<PAGE>
AMTECH SYSTEMS, INC.
AND SUBSIDIARIES
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CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED DECEMBER 31, 1996 AND 1995
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Three Months Ended
December 31,
1996 1995
----------- -----------
(Unaudited) (Unaudited)
Net product sales $ 2,007,520 $ 1,670,888
Cost of product sales 1,338,603 1,163,302
----------- -----------
Gross margin 668,917 507,586
Selling and general 578,400 530,005
Research and development 75,571 42,811
Gain on disposition of assets (115,487) --
----------- -----------
Operating profit 130,433 (65,230)
Interest income - net 47,025 65,815
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Income from continuing
operations before income taxes 177,458 585
Income tax provision 57,000 --
----------- -----------
INCOME FROM CONTINUING OPERATIONS 120,458 585
----------- -----------
DISCONTINUED OPERATIONS:
Income from discontinued operations -- 21,757
Gain on disposal of discontinued segment -- 273,696
----------- -----------
-- 295,453
----------- -----------
NET INCOME $ 120,458 $ 296,038
=========== ===========
INCOME FROM CONTINUING OPERATIONS $ .03 $ .00
NET INCOME PER SHARE $ .03 $ .07
WEIGHTED AVERAGE
SHARES OUTSTANDING 4,141,668 4,305,702
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, 1996 AND 1995
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Three Months Ended
December 31,
1996 1995
----------- -----------
(Unaudited) (Unaudited)
OPERATING ACTIVITIES:
- ---------------------
Net income $ 120,458 $ 296,038
Adjustments to reconcile net income to net
cash provided (used) by operating activities:
Depreciation and amortization 49,910 44,567
Inventory and accounts receivable write offs 21,159 6,000
Less gain on disposition of assets (115,487) (273,696)
Deferred tax provision (benefit) 6,000 (25,000)
Changes in operating assets and liabilities:
Decrease (Increase) in accounts receivable (183,330) 147,832
Change in inventories and prepaid expenses 34,687 (54,429)
Decrease (Increase) in other assets 425 (32,997)
Increase (Decrease) in accounts payable (96,337) 151,748
Decrease in income taxes payable (9,000) (85,000)
Increase (Decrease) in accrued liabilities (24,567) 53,364
----------- -----------
Net cash provided (used)
by operating activities (196,082) 228,427
----------- -----------
INVESTING ACTIVITIES:
- ---------------------
Purchases of short-term investments - net (978,614) (101,427)
Investment in unconsolidated subsidiary -- (250,000)
Proceeds from disposition of joint venture 475,047 --
Purchase of property and equipment (102,883) (37,742)
Cash distributed in disposal of Echelon -- (96,401)
----------- -----------
Net cash used by investing activities (606,450) (485,570)
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FINANCING ACTIVITIES:
- ---------------------
Principal payments on mortgage loan (4,707)
Net proceeds from exercise of stock options 21,600 --
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Net cash provided by financing activities 16,893 --
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EFFECT OF EXCHANGE RATE CHANGES (8,483) (13,148)
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DECREASE IN CASH AND CASH EQUIVALENTS (794,122) (270,291)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 1,994,217 833,820
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 1,200,095 $ 563,529
=========== ===========
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, 1996 AND 1995
- --------------------------------------------------------------------------------
Three Months Ended
December 31,
1996 1995
----------- -----------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest expense $ 4,908 $ --
Income taxes $ 60,000 $ 140,000
SUPPLEMENTAL INFORMATION OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
Value of stock bonuses issued in exchange
for services rendered $ 42,424 $ --
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.
AND SUBSIDIARIES
NOTES TO CONDENSED FINANCIAL STATEMENTS
---------------------------------------
December 31, 1996
(1) BASIS OF PRESENTATION
---------------------
The accompanying consolidated financial statements include the accounts
of the Amtech Systems, Inc. and its wholly-owned subsidiary, Tempress Systems,
Inc., based in Heerde, The Netherlands, hereinafter referred to as the Company.
Echelon Service Company, which comprised the discontinued technical personnel
segment, is included in these financial statements through the date of
disposition. See Note 4 regarding discontinued operations. 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, 1996 and September 30, 1996 and the
results of its operations for the three months ended December 31, 1996 and 1995,
and its cash flows for the three months ended December 31, 1996 and 1995.
The accounting policies followed by the Company are set forth in Note 2
to the consolidated financial statements in the Company's 1996 Annual Report on
Form 10-K for the year ended September 30, 1996, which is incorporated herein by
reference.
Inventories as of December 31, 1996 and September 30, 1996 include
work-in-process of $203,112 and $211,880, respectively. The remaining inventory
consists of purchased parts and completed sub-assemblies.
The results of operations for the three months ended December 31, 1996
and 1995, 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 joint venturers' plan was to operate a silicon test
wafer reclaiming business through Seil Semicon, Inc., which is in the start-up
phase. During the fourth quarter of fiscal 1996, it was determined that the
joint venture required significantly more capital than originally anticipated.
In the first quarter of fiscal 1997, the Company disposed of its interest in the
joint venture because management believed that raising the commitment to $3
million, without obtaining majority control, was more risk than was appropriate
for the Company. The Company received $475,000 during December 1996, in exchange
for its interest in the joint venture, thereby recovering its investment and
related expenses. Because the Company disposed of its interest in the Korean
joint venture, Seil Semicon, Inc., and recovered its equity in the first year
start-up losses and certain expenses related to that venture incurred last year,
a $115,000 gain was recorded in the first quarter of fiscal 1997.
(4) DISCONTINUED OPERATIONS
-----------------------
Effective December 29, 1996, the Company exchanged all of its ownership
in the technical contract personnel business, represented by all of the stock of
Echelon Service Company, for 196,034 shares of the Company's outstanding $.01
par value Common Stock previously owned by Eugene R. Hartman, then 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.
The fiscal 1996 income from discontinued operations are those of
Echelon Service Company through the date of disposal and is net of applicable
income taxes of $25,000. Revenues of discontinued operations during that period
were $1,235,000.
(5) RECLASSIFICATIONS
-----------------
Certain reclassifications have been made to the amounts for fiscal 1996
to conform to the presentation of the fiscal 1997 amounts.
8
<PAGE>
AMTECH SYSTEMS, INC.
AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Financial Condition and Working Capital. As of December 31, 1996, the
Company has $4,643,000 of readily available liquidity in the form of cash and
cash equivalents and short-term investments, an increase of $184,000 since
September 30, 1996. During the three months ended December 31, 1996, working
capital increased by $467,000 to $5,947,000, primarily as the result of the
proceeds received upon disposition of the Company's interest in Seil Semicon,
Inc., an unconsolidated joint venture, which was owned until December 1996. Cash
and short-term investments comprise 55% of total assets and stockholders'
investment is 81% of total capitalization. The current ratio was 5.3:1 as of
December 31, 1996, a slight increase from a ratio of 4.5:1 as of September 30,
1996, which management believes is a reflection of the Company's strong
financial condition.
Liquidity and Capital Resources.
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 1996 annual
report on Form 10-K, which is hereby incorporated by reference, for further
information regarding the Company's plans for future operations.
The semiconductor equipment order backlog was approximately $2,480,000,
as of December 31, 1996, as compared to $4,830,000 as of December 31, 1995. The
decline in the order backlog reflects shipments of a multi-year order and a
slow-down in the semiconductor industry. While orders are ordinarily filled
within three to six months of receipt, the current backlog includes
approximately $1,000,000 of orders to one customer that will not be shipped
until fiscal 1998.
Results of Operations.
- ----------------------
THREE MONTHS ENDED December 31,
1996 vs. 1995
Semiconductor Equipment.
- ------------------------
Revenues increased 20%, or $337,000, from $1,671,000 in the first
quarter of fiscal 1996 to $2,008,000 in the first quarter of fiscal 1997. The
sales of furnace and related parts by Tempress Systems, Inc. ("Tempress"), a
wholly-owned subsidiary operating in the Netherlands, and sales of the United
States based operations contributed nearly equally to the increase in sales for
the quarter. Management believes that the Tempress product line and the products
of the United States operations complement each other. It is further believed
that by offering a broader product line, the Company has succeeded in securing
orders that might not have
9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS - continued
otherwise been possible, thereby increasing sales.
Gross margin increased $161,000, or by 32%, from $508,000, or 30% of
sales, in the first quarter of fiscal 1996 to $669,000, or 33% of sales, in the
first quarter of fiscal 1997. Approximately $50,000 of the rise in gross margins
is derived the improved sales volume of the U.S. based operations and $71,000 is
due to increased productivity by the field service personnel. Certain cost
reductions added another $19,000 to gross margin. Other factors, including
increased margins from the Netherlands operation, contributed the rest of the
improvement in gross margin.
The selling and general expenses for the first quarter of fiscal 1997
were $48,000 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. The costs
associated with the larger facilities in The Netherlands, including the costs of
relocating the operations to Heerde also contributed to the increase. These
increases were partially offset by cost reductions achieved in the U.S. based
operations.
There was a $33,000 increase in expenses related to research and
development activities.
Because the Company disposed of its interest in the Korean joint
venture, Seil Semicon, Inc., and recovered its equity in the first year start-up
losses and certain expenses related to that venture incurred last year, a
$115,000 gain was recorded in the first quarter of fiscal 1997.
For the three months ended December 31, 1996, operating profit was
$130,000 compared to an operating loss of $65,000 for the first quarter of
fiscal 1996, an improvement of $195,000. The factors that contributed the
increased operating profit in the most recent quarter are discussed above. After
removing the effect of the gain on the disposition of the joint venture,
operating profit was $15,000, or $80,000 higher than in the first quarter of the
prior fiscal year.
Income From Continuing Operations.
- ----------------------------------
Income from continuing operations before income taxes includes
operating profit, discussed above, and net interest income. During the first
quarter of the current fiscal year net interest income was $19,000 lower than in
prior fiscal year, due to a reduction in interest rates. As a result of the
above, income from continuing operations is approximately $120,000 in the first
quarter of fiscal 1997, compared to a break-even situation in the first quarter
of last fiscal year, after taking into consideration the income tax provision of
$57,000 in the most recent period. Because of the insignificant amount of income
in the fiscal 1996 period, no provision was made for income taxes.
10
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS - continued
Discontinued Operations.
- ------------------------
Effective December 31, 1996, the Company exchanged all of its ownership
in the technical contract personnel business represented by the stock of Echelon
Service Company for 196,034 shares of the Company's outstanding Common Stock
previously owned by Eugene R. Hartman, then 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 in addition to the
first quarter fiscal 1996 income from those operations of $22,000, for a total
of $296,000.
Total Company.
- --------------
The three months ended December 31, 1996, resulted in net income of
$120,000 compared to net income of $296,000 in the first quarter of fiscal 1996,
a decline of $176,000. The total prior year income and gain from discontinued
operations of $296,000 exceeded the $78,000 after tax income recorded on the
disposition of the Company's interest in the joint venture during fiscal 1997,
discussed above, contributing $218,000 to the decline in net income. This
reveals that the underlying operations improved by $42,000, despite a slow- down
in the industry.
11
<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.
---------------------------------
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 December 30, 1996.
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, 1997
12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL
INFORMATION EXTRACTED FROM THE BALANCE SHEETS AS
OF DECEMBER 31, 1996 AND SEPTEMBER 30, 1996, AND
THE STATEMENTS OF OPERATION AND THE STATEMENTS OF
CASH FLOW FOR THE THREE MONTHS ENDED DECEMBER 31,
1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH QUARTERLY REPORT ON FORM 10-Q FOR THE
QUARTER ENDED DECEMBER 31, 1996.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<CASH> 1,200,095
<SECURITIES> 3,442,734
<RECEIVABLES> 1,840,975
<ALLOWANCES> 100,000
<INVENTORY> 639,286
<CURRENT-ASSETS> 7,332,586
<PP&E> 1,667,388
<DEPRECIATION> 641,218
<TOTAL-ASSETS> 8,423,953
<CURRENT-LIABILITIES> 1,385,615
<BONDS> 256,007
0
0
<COMMON> 41,417
<OTHER-SE> 6,740,914
<TOTAL-LIABILITY-AND-EQUITY> 8,423,953
<SALES> 2,007,520
<TOTAL-REVENUES> 2,007,520
<CGS> 1,338,603
<TOTAL-COSTS> 1,338,603
<OTHER-EXPENSES> 643,971
<LOSS-PROVISION> 10,000
<INTEREST-EXPENSE> 4,908
<INCOME-PRETAX> 177,458
<INCOME-TAX> 57,000
<INCOME-CONTINUING> 120,458
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 120,458
<EPS-PRIMARY> $.03
<EPS-DILUTED> $.03
</TABLE>
