FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended: March 31, 1998
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[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number: 0-11412
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AMTECH SYSTEMS, INC.
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(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)
Registrant's telephone number, including area code (602) 967-5146
-----------------------------------------------------------------
Indicate by check mark whether the Registrant (i) 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 (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.
Common Stock, $.01 Par Value
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(Title of Class)
4,202,556 Shares
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Outstanding as of March 31, 1998
<PAGE>
AMTECH SYSTEMS, INC.
AND SUBSIDIARIES
TABLE OF CONTENTS
Page
PART I. FINANCIAL INFORMATION.
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
March 31, 1998 and September 30, 1997............................. 3
Condensed Consolidated Statements of Operations -
Three and Six Months Ended March 31, 1998 and 1997................ 4
Condensed Consolidated Statements of Cash Flows
Six Months Ended March 31, 1998 and 1997.......................... 5
Notes to Condensed Consolidated Financial Statements................ 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations................................ 9
Results of Operations........................................ 9
Financial Condition and Working Capital ..................... 11
Liquidity and Capital Resources.............................. 11
FORWARD-LOOKING STATEMENTS................................... 13
PART II. OTHER INFORMATION.
Item 1. Legal Proceedings........................................... 14
Item 4. Submission of Matters to a Vote of Security Holders......... 14
Item 6. Exhibits and Reports on Form 8-K............................ 14
SIGNATURES................................................................... 15
2
<PAGE>
AMTECH SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, September 30,
1998 1997
----------- -------------
(Unaudited)
ASSETS
------
CURRENT ASSETS:
Cash and cash equivalents $ 1,979,754 $ 1,395,849
Short-term investments -- 579,191
Accounts receivable, net 3,211,789 2,983,573
Inventories 2,215,365 2,062,052
Deferred income taxes 318,000 273,000
Prepaid expenses 120,589 85,820
----------- -----------
Total current assets 7,845,497 7,379,485
----------- -----------
PROPERTY, PLANT AND EQUIPMENT
Land, building and leasehold improvements 623,971 629,604
Equipment and machinery 901,507 785,142
Furniture and fixtures 741,818 726,365
----------- -----------
2,267,296 2,141,111
Less: accumulated depreciation and amortization 883,907 781,078
----------- -----------
1,383,389 1,360,033
----------- -----------
PURCHASE PRICE IN EXCESS OF NET ASSETS
ACQUIRED, at amortized cost 545,235 561,238
----------- -----------
OTHER ASSETS 100,605 54,336
----------- -----------
$ 9,874,726 $ 9,355,092
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 1,226,952 $ 935,338
Accrued liabilities:
Compensation and related taxes 526,358 471,604
Warranty and installation expenses 309,021 369,868
Other accrued liabilities 171,346 208,355
Income taxes payable 172,000 123,000
----------- -----------
Total current liabilities 2,405,677 2,108,165
----------- -----------
LONG-TERM OBLIGATIONS 303,320 318,721
----------- -----------
STOCKHOLDERS' EQUITY
Preferred stock; no specified terms;
100,000,000 shares authorized; none issued -- --
Common stock; $.01 par value; 100,000,000 shares
authorized; 4,202,556 shares issued and
outstanding (4,185,106 at September 30, 1997) 42,026 41,850
Additional paid-in capital 7,345,730 7,345,187
Cumulative foreign currency translation adjustment (348,934) (284,453)
Retained Earnings (Accumulated deficit) 126,907 (174,378)
----------- -----------
Total stockholders' equity 7,165,729 6,928,206
----------- -----------
$ 9,874,726 $ 9,355,092
=========== ===========
See accompanying notes to Condensed Financial Statements.
3
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AMTECH SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For The Six Months Ended March 31, 1998 and 1997
Three Months Ended March 31 Six Months Ended March 31,
--------------------------- --------------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Net revenue $ 4,738,521 $ 2,582,807 $ 8,799,347 $ 4,590,327
Cost of product sales 3,166,680 1,881,913 5,898,494 3,220,516
----------- ----------- ----------- -----------
Gross profit 1,571,841 700,894 2,900,853 1,369,811
Selling and general 1,143,276 629,402 2,232,570 1,207,802
Gain on disposition of
Korean joint venture -- -- -- (115,487)
Research and development 98,215 55,323 166,709 130,894
----------- ----------- ----------- -----------
Operating profit 330,350 16,169 501,574 146,602
Interest income-net 17,595 47,124 35,711 94,149
----------- ----------- ----------- -----------
Net income before income
taxes 347,945 63,293 537,285 240,751
Income tax provision 156,000 18,000 236,000 75,000
----------- ----------- ----------- -----------
NET INCOME $ 191,945 $ 45,293 $ 301,285 $ 165,751
=========== =========== =========== ===========
EARNINGS PER SHARE
(Note 4):
Basic $ .05 $ .01 $ .07 $ .04
Diluted $ .05 $ .01 $ .07 $ .03
Weighted average
outstanding shares 4,206,308 4,151,718 4,206,370 4,142,291
Weighted average common
and common equivalent
shares outstanding 4,236,077 4,221,577 4,291,997 4,851,997
See accompanying notes to Condensed Financial Statements.
4
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AMTECH SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For The Six Months Ended March 31, 1998 and 1997
Six Months Ended
--------------------------
1998 1997
----------- -----------
(Unaduited) (Unaduited)
OPERATING ACTIVITIES:
Net income $ 301,285 $ 165,751
Adjustments to reconcile net income to net
cash provided (used) by operating activities:
Depreciation and amortization 166,793 103,340
Inventory and accounts receivable write-offs 24,038 33,324
Gain on disposition of Korean joint venture -- (115,487)
Gain on sale of assets (2,241) --
Deferred tax expense (benefit) (45,000) (45,000)
Decreases (increases) in operating assets:
Accounts receivable (297,820) (2,018,875)
Inventories, prepaids and other assets (301,343) (29,529)
Increases (decreases) in operating liabilities:
Accounts payable 308,529 609,503
Accrued liabilities (24,809) 137,853
Income taxes payable 48,916 60,000
----------- -----------
Net cash Provided by (Used In) Operating
Activities 178,348 (1,099,120)
----------- -----------
INVESTING ACTIVITIES:
Maturities of short-term investments - net 579,191 224,766
Proceeds from disposition of
unconsolidated Korean joint venture -- 475,047
Proceeds from sale of assets 2,241 --
Purchases of property, plant and equipment (177,023) (155,617)
----------- -----------
Net Cash Provided by Investing Activities 404,409 544,196
----------- -----------
FINANCING ACTIVITIES:
Proceeds from stock options exercised 719 32,201
Payments on mortgage loan (6,018) (7,909)
----------- -----------
Net Cash Provided by (Used in) Financing
Activities (5,299) 24,292
----------- -----------
EFFECT OF EXCHANGE RATE CHANGES 6,447 (23,665)
----------- -----------
CASH AND EQUIVALENTS
Net increase (decrease) 583,905 (554,297)
Beginning of year 1,395,849 1,994,217
----------- -----------
END OF QUARTER CASH AND EQUIVALENTS $ 1,979,754 $ 1,439,920
=========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ 7,958 $ 9,435
Income taxes, net of refunds 232,000 60,000
See accompanying notes to Condensed Financial Statements.
5
<PAGE>
AMTECH SYSTEMS, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED FINANCIAL STATEMENTS
THREE AND SIX MONTHS ENDED MARCH 31, 1998
(1) BASIS OF PRESENTATION
---------------------
The accompanying consolidated financial statements include the accounts
of Amtech Systems, Inc. and its wholly-owned subsidiaries, Tempress Systems,
Inc., based in Heerde, The Netherlands, and P. R. Hoffman Machine Products,
Inc., formed July 1, 1997 (collectively, the "Company"). All significant
intercompany balances and transactions have been eliminated in consolidation.
The accompanying consolidated financial statements have been prepared
in accordance with generally accepted accounting principles, pursuant to the
rules and regulations of the Securities and Exchange Commission, and are
unaudited. In the opinion of management these financial statements include all
adjustments which are necessary for a fair presentation of the consolidated
financial position of the Company as of March 31, 1998 and September 30, 1997
and the consolidated results of its operations for the three and six months
ended March 31, 1998 and 1997, and its consolidated cash flows for the six
months ended March 31, 1998 and 1997.
Certain information and footnote disclosures normally included in
financial statements have been condensed or omitted pursuant to such rules and
regulations. It is suggested that these consolidated financial statements be
read in conjunction with the consolidated financial statements and notes thereto
included in the Company's Annual Report on Form 10-K for the year ended
September 30, 1997, which are incorporated herein by reference.
The consolidated results of operations for the three and six months
ended March 31, 1998, are not necessarily indicative of the results to be
expected for the full year.
(2) Inventories
-----------
The components of inventories are as follows:
March 31, September 30,
1998 1997
---------- ----------
Purchased parts and
raw material $1,145,996 $ 995,850
Work-in-process 568,685 618,295
Finished goods 500,684 447,907
---------- ----------
Totals $2,215,365 $2,062,052
========== ==========
6
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(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. 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 Company's 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 joint venture and recovered
its equity in the first year start-up losses and certain expenses related to
that venture incurred during fiscal 1996, a $115,000 gain was recorded in the
first quarter of fiscal 1997.
(4) EARNINGS PER SHARE
------------------
The Company adopted the provisions of Statement of Financial Accounting
Standards ("SFAS") No. 128 in the quarter ended December 31, 1997. Statement No.
128 establishes new standards for computing and presenting earnings per share
("EPS") and supersedes APB Opinion No. 15. Statement 128 replaces primary EPS
with basic EPS and fully diluted EPS with diluted EPS and requires dual
presentation of basic and diluted EPS. Statement No. 128 is effective for annual
and interim periods ending after December 15, 1997. Earlier adoption was not
permitted. All prior period EPS data have been restated to conform to Statement
No. 128. Basic EPS was the same as primary EPS for the second quarter and the
first six months of fiscal 1997. Diluted EPS was the same as fully diluted EPS
reported for the second quarter of fiscal 1997. This accounting change reduced
EPS reported on a diluted basis for the six months ended March 31, 1997 to $.03
per share, from the $.04 fully diluted EPS previously reported. EPS were
calculated as follows:
Three Months Ended Six Months Ended
March 31, March 31,
-------------------------- --------------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
Net income $ 191,945 $ 45,293 $ 301,285 $ 165,751
After-tax amortization
of contingent goodwill (7,667) -- (15,780) --
----------- ----------- ----------- -----------
Income used in
the calculations $ 184,278 $ 45,293 $ 285,505 $ 165,751
=========== =========== =========== ===========
7
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Weighted average
Shares outstanding:
- -------------------
Common shares 4,206,308 4,151,718 4,206,370 4,141,331
Common equivalents
issuable upon
exercise of warrants
and stock options(1) 29,769 69,859 85,627 710,666
----------- ----------- ----------- -----------
4,236,077 4,221,577 4,291,997 4,851,997
=========== =========== =========== ===========
Earnings Per Share:
- -------------------
Basic $ .05 $ .01 $ .07 $ .04
=========== =========== =========== ===========
Diluted $ .05 $ .01 $ .07 $ .03
=========== =========== =========== ===========
- -------------
(1) Number of shares calculated using the treasury stock method and the
average market price during the period. Options and warrants with an
exercise price greater than the average market price during the quarter
did not enter into the calculation.
(5) ACQUISITION OF P. R. HOFFMAN
----------------------------
On July 1, 1997, the Company purchased substantially all of the assets
of P. R. Hoffman Machine Products Corporation, an "S" corporation based in
Carlisle, Pennsylvania. In addition to the purchase price paid in fiscal 1997,
the Company will pay in either cash or stock an earn-out equal to 50% of the
pre-tax income of P. R. Hoffman, before amortization of goodwill, other expense
arising from the application of purchase accounting and allocations of corporate
expense ("Adjusted Income"), in excess of $800,000 per year, during the five (5)
fiscal years ending September 30, 2002. The maximum earn-out payable under the
purchase agreement is $2 million. This additional purchase price will be treated
as part of the purchase price to the extent earned and amortized over the
remainder of the period ending June 30, 2012. During the first six months of
fiscal 1998, the annualized Adjusted Income of this operation has exceeded
$800,000 by approximately $338,000. If Adjusted Income for fiscal 1998 equals
the annualized Adjusted Income for the period ending March 31, 1998, the
contingent purchase price to be paid for the first year of the earn-out will be
$169,000. One-half of that amount, $85,000, has been recorded as additional
goodwill during the first six months of fiscal 1998. All earnings per share
amounts for fiscal 1998 include the estimated after-tax amortization of the
total projected contingent consideration of $845,000 (five times the $169,000
projected for fiscal 1998).
8
<PAGE>
AMTECH SYSTEMS, INC.
AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth certain operational data as a
percentage of net revenue for the periods indicated:
Three Months Ended Six Months Ended
March 31, March 31,
------------------ ------------------
1998 1997 1998 1997
------ ------ ------ ------
Net revenue 100.0% 100.0% 100.0% 100.0%
Cost of product sales (66.8) (72.9) (67.0) (70.2)
------ ------ ------ ------
Gross profit 33.2 27.1 33.0 29.8
Selling, general and (24.1) (24.4) (25.4) (26.3)
administrative expenses
Research and development (2.1) (2.1) (1.9) (2.8)
Gain on joint venture -- -- -- 2.5
------ ------ ------ ------
Operating profit 7.0% .6% 5.7% 3.2%
====== ====== ====== ======
Net Revenue. The Company's net revenue for the quarter ended March 31,
1998 was $4,739,000, an increase of 83% over net revenue of $2,583,000 for the
corresponding quarter of the previous fiscal year, and a 17% increase from the
first quarter's revenue of $4,061,000. The Company's revenue for the six months
ended March 31, 1998 was $8,799,000, an increase of 92% over revenue of
$4,590,000 for the corresponding period of the previous fiscal year. Diffusion
products, which accounted for 100% of the sales during the first two quarters of
last fiscal year, accounted for 60% and 57% of the revenue for the three and six
months ended March 31, 1998, respectively. Sales of diffusion products for the
three and six months ended March 31, 1998, increased by 10% and 8%,
respectively, over the comparable periods of the previous fiscal year.
Manufacturing support services, which began operations in the fourth quarter of
fiscal 1997, produced $233,000 of revenue during the second quarter of fiscal
1998 and $458,000 during the six months ended March 31, 1998. P. R. Hoffman,
which was acquired in the fourth quarter of fiscal 1997, accounted for 78% and
80%, respectively, of the increase in consolidated revenue during the three and
six months ended March 31, 1998.
9
<PAGE>
Gross Profit. The Company's gross profit increased 124% to $1,572,000
for the three months ended March 31, 1998, from $701,000 during the comparable
period of the previous fiscal year. Approximately 22% of that increase was
attributable to an increase in sales of the existing diffusion products, while
new products and services, primarily P. R. Hoffman, accounted for 78% of the
increase. Gross profit as a percentage of revenue was 33% in each of the first
two quarters of fiscal 1998, compared to 27% in the second quarter of fiscal
1997. The year to year improvement in gross profits as a percentage of revenue
is due to the improved product mix within the diffusion business and the
addition of the P. R. Hoffman products, which have a higher gross margin than
the average of the Company's diffusion products. Gross profit for the six months
ended March 31, 1998 increased 112% to $2,901,000, from $1,370,000 in the first
six months of fiscal 1997. The gross profit on diffusion products for the first
six months of this fiscal year was $1,551,000, or 53% of the consolidated gross
profit, 31% of diffusion product sales and an increase of 13%, or $181,000,
compared to the first six months of fiscal 1997. Wafer fabrication products
contributed $1,074,000 of the gross profit for the six months ended March 31,
1998 and are the primary source of the year-to-date increase in gross profit.
The selling, general and administrative expenses for the second
quarter of fiscal 1998 were $514,000 higher than in the comparable period of
fiscal 1997. New operations (i.e. P. R. Hoffman and manufacturing support
services) accounted for approximately 50% of this increase. The selling, general
and administrative expenses of the existing businesses also increased
significantly due to increased staffing in sales and marketing, added personnel
to increase management depth and the costs associated with identifying and
reviewing potential acquisitions. Despite the significant increase in selling,
general and administrative expenses, they grew at approximately the same rate of
increase as revenue, and amounted to 24% of sales during the second quarter of
fiscal years 1998 and 1997, compared to 27% for the first quarter of the current
fiscal year. For the six months ended March 31, 1998, selling, general and
administrative expenses amounted to approximately 25% of revenue, compared to
26% in the comparable period in fiscal 1997.
Research and development. Research and development costs increased by
$43,000 during the second quarter of fiscal 1998 over the comparable quarter of
fiscal 1997, as work on the modified lamps for the Company's photo-assisted CVD
project began. For the same reason, such expenses increased $36,000 during the
six months ended March 31, 1998, over the comparable period in the preceding
fiscal year. The Company increased its photo-assisted CVD research expenditures
by $84,000 during the first six months of the current fiscal year in order to
prepare for and commence the study of the higher intensity lamps.
As a result of the above, operating profit for the second quarter of
fiscal 1998 was $330,000, or 7% of revenue, compared to $16,000, or 1% of
revenue for the second quarter of fiscal 1997. Operating profit for the first
six months of fiscal 1998 was $502,000, or 6% of revenue, compared to $147,000,
or 3% of revenue for the first six months of fiscal 1997. The operating profit
for the first six months of fiscal 1997 included a $115,000 gain from the
disposition of the Korean joint venture for which there is no comparable item in
the
10
<PAGE>
most recently completed period. Excluding that gain, operating profit for the
first six months of fiscal 1997 was $31,000, or 1% of revenue, compared to
$502,000, or 6% of revenue for the first six months of the current fiscal year.
Net income includes the operating profit discussed above, net interest
income and the provision for income taxes. During the second quarter of fiscal
1998, net interest income was $18,000, a decrease of $30,000 from the
corresponding quarter of the preceding year, due to the cash used in the
acquisition of P. R. Hoffman. As a result, income before income taxes for the
second quarter of fiscal 1998 was $348,000, compared to $63,000 in the second
quarter of fiscal 1997.
Income tax expense increased $138,000 and from 28% of pre-tax income
in fiscal 1997 to 45% of pre-tax income in fiscal 1998. The increase was
partially attributable to the state income taxes on the income of P. R. Hoffman,
as the Arizona diffusion business has operating loss carryforwards, which are
not available to P. R. Hoffman. For essentially the same reasons, income tax
expense increased to 44% of pre-tax income for the six months ended March 31,
1998, from 31% for the comparable period of fiscal 1997.
The three months ended March 31, 1998 resulted in a net income of
$192,000, or $.05 per share, compared to $45,000, or $.01 per share, in the
second quarter of fiscal 1997. As noted above, the operating profits from new
businesses combined with increased revenue and profit from the diffusion
business were the most significant factors contributing to the increase in net
income.
Financial Condition and Working Capital.
- ----------------------------------------
As of March 31, 1998, the Company has $1,980,000 of readily available
liquidity in the form of cash and cash equivalents, compared to cash, cash
equivalents and short-term investments of $1,975,000, as of the end of the
previous fiscal year. During the six months ended March 31, 1998, working
capital increased by $169,000 to $5,440,000, primarily due the positive results
of operations, described above. As in the past, the Company maintained a current
ratio in excess of 3:1 during the first six months of fiscal 1998. Cash and
short-term investments comprise 20% of total assets and stockholders' equity is
73% of total capitalization. Management continues to believe that the above are
all a reflection of the Company's strong financial condition.
Liquidity and Capital Resources.
- --------------------------------
As in the past, management expects that internal growth of operations
will continue to require the use of liquidity to finance the related increases
in inventories and accounts receivable. Such growth is expected to require
additional investments to increase capacity and improve efficiencies. Management
believes that the Company's liquidity is sufficient to meet the requirements of
current operations. The Company is continuing to perform research on high
intensity lamps to be used in conjunction with its patented photo-assisted
11
<PAGE>
CVD technology prior to making a decision regarding development of a commercial
product incorporating that technology. See the discussion under the caption
"Management's Discussion and Analysis of Financial Position and Results of
Operations" included in the Company's 1997 annual report on Form 10-K for
further information regarding the Company's strategy for acquisitions and
development of a product based upon the Company's CVD technology and the related
potential requirements for additional liquidity and capital resources. The
Company continues to evaluate potential product or business acquisitions that
may complement its business, as well as the development of additional products
within its existing businesses. The potential requirements for additional
capital to fund acquisitions and or development projects are expected to be met
through one or more sources of financing, such as the possible exercise of the
Company's outstanding redeemable common stock warrants, working capital loans
from banks, a public offering of debt or equity securities, long-term debt or
equipment leasing. There can be no assurance of the sufficiency of existing
working capital or the availability of any other source of financing necessary
to permit the Company to fully pursue its acquisition or product development
strategies.
As of March 31, 1998, the order backlog was $6,908,000, compared to
$5,133,000 as of March 31, 1997, and $5,300,000 as of December 31, 1997. The
year to year increase in the order backlog reflects the $1,735,000 order backlog
of P. R. Hoffman. The $1,600,000 increase in the backlog since December 31, 1997
is due primarily to the continued growth in the horizontal diffusion business
that commenced in The Netherlands in fiscal 1995. While orders are ordinarily
filled within three to nine months of receipt, the current backlog includes a
multi-year order with four systems valued at approximately $900,000 remaining to
be shipped. Of that order, at least $380,000 and as much as $900,000 will be
shipped in fiscal 1999.
Several countries, predominantly in Asia, have recently experienced
economic difficulties including high rates of loan defaults, business failures
and currency devaluations. During fiscal 1997, the Company derived 27% of its
sales from these countries. The turmoil in the Asian financial markets is
expected to eliminate most, if not all, of the Company's sales of capital
equipment into that region for at least all of fiscal 1998. These adverse
conditions are expected to have the greatest impact on the high margin U.S.
based portion of the diffusion product line, as the ATMOSCAN(R) and IBAL
Automation products are believed to improve the customer's yields and
efficiencies, but may not be viewed as absolutely necessary, and therefore are
the first types of equipment to be eliminated from customers' capital budgets.
Indeed, prior to the intervention of the International Monetary Fund ("IMF"),
the Company was expecting to receive a $1 million order from that region, which
now will not be received during the foreseeable future. One domestic customer
has informed the Company that a $1 million planned order would not be placed
during the current fiscal year, as originally had been expected, due to reduced
demand for their products in the Pacific Rim. There could be other indirect,
adverse effects of the Asian financial crisis on the Company's results of
operations, as a number of the Company's domestic and European customers
consider Japan and Asia as very important markets. The Company's products are
sold on a worldwide basis. Accordingly, the
12
<PAGE>
Company will attempt to offset any sales declines caused by the above factors by
focusing more attention on other geographic regions.
Sales of diffusion products for the second quarter of fiscal 1998 and
the six months ended March 31, 1998 were 10% and 8% higher, respectively, than
the comparable periods of last fiscal year. The backlog of orders for diffusion
products as of March 31, 1998 was also slightly higher than at the point in last
fiscal year. These indicators show that management has been successful with its
strategy thus far. However, there can be no assurance that the Company's sales
of diffusion products and the related operating results will not be adversely
affected. The Company's wafer fabrication products, which were acquired during
fiscal 1997, have historically been less dependent on the Asian markets and
include a much higher percentage of consumable products. In any event, the
Company expects to be able to report higher sales in fiscal 1998 than in fiscal
1997 because the acquired business will be included for four quarters versus one
quarter last year.
FORWARD-LOOKING STATEMENTS
This report contains certain forward-looking statements. The
forward-looking statements contained herein are based upon current expectations
that involve a number of risks and uncertainties. The forward-looking statements
are based upon a number of assumptions, including, without limitation, those
enumerated in the related section of the Management's Discussion and Analysis
included in the Company's 1997 annual report on Form 10-K, which are hereby
incorporated by reference. Assumptions related to the foregoing involve
judgments with respect to, among other things, future economic, competitive and
market conditions, and future business decisions, all of which are beyond the
control of the Company. Although the Company believes that the assumptions
underlying the forward-looking statements are reasonable, any of the assumptions
could prove inaccurate and, therefore, there can be no assurance that the
results contemplated in forward-looking statements will be realized. In
addition, the business and operations of the Company are subject to substantial
risks, which increase the uncertainty inherent in such forward-looking
statements. In light of the significant uncertainties inherent in such
forward-looking information included herein, the inclusion of such information
should not be regarded as a representation by the Company, or any other person,
that the objectives or plans for the Company will be achieved.
13
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
------------------
None.
Item 4. Submission of Matters to a Vote of Security Holders.
----------------------------------------------------
On March 20, 1998, the Company held its annual meeting of shareholders
at which 3,710,707, or 88.36% of the 4,199,706 shares outstanding were
represented by proxy or in person. The following persons where elected to the
board of directors with shares voted as follows:
Shares Votes
--------- --------
Board Members Elected Voted For Withheld
--------------------- --------- --------
Jong S. Whang 3,667,464 43,243
Robert T. Hass 3,670,028 40,679
Donald F. Johnston 3,663,530 47,177
Alvin Katz 3,656,940 53,767
Bruce R. Thaw 3,654,940 55,767
Shareholders also approved the proposed 1998 Incentive Stock Option
Plan which authorized the issuance of options for up to 100,000 shares of the
Company's $.01 par value common stock. Shareholders voted 3,375,952 shares for
approval of the plan, 213,108 shares against approval of the plan, and abstained
from voting 71,062 shares. Shareholders present or represented by proxy at the
meeting did not vote 50,585 shares on the proposed stock option plan.
Item 5. Other Matters.
--------------
None.
Item 6. Exhibits and Reports on Form 8-K.
---------------------------------
(a) Exhibits -
None.
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the three
months ended March 31, 1998.
14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMTECH SYSTEMS, INC.
by /s/ Robert T. Hass
----------------------------------
Robert T. Hass, Vice-President and
Chief Financial Officer
DATED: May 13, 1998
15
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL
INFORMATION EXTRACTED FROM THE BALANCE SHEET AS OF
MARCH 31, 1998, AND THE STATEMENT OF OPERATION AND
THE STATEMENT OF CASH FLOW FOR THE SIX MONTHS
ENDED MARCH 31, 1998 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH QUARTERLY REPORT ON
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1998.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> MAR-31-1998
<EXCHANGE-RATE> 1
<CASH> 1,979,754
<SECURITIES> 0
<RECEIVABLES> 3,345,789
<ALLOWANCES> 134,000
<INVENTORY> 2,215,365
<CURRENT-ASSETS> 7,845,497
<PP&E> 2,267,296
<DEPRECIATION> 883,907
<TOTAL-ASSETS> 9,874,726
<CURRENT-LIABILITIES> 2,405,677
<BONDS> 303,320
0
0
<COMMON> 42,026
<OTHER-SE> 7,123,703
<TOTAL-LIABILITY-AND-EQUITY> 9,874,726
<SALES> 8,799,347
<TOTAL-REVENUES> 8,799,347
<CGS> 5,898,494
<TOTAL-COSTS> 5,898,494
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 5,693
<INTEREST-EXPENSE> 7,958
<INCOME-PRETAX> 537,285
<INCOME-TAX> 236,000
<INCOME-CONTINUING> 301,285
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 301,285
<EPS-PRIMARY> .07
<EPS-DILUTED> .07
</TABLE>
