<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
------ ------
COMMISSION FILE NUMBER: 0-17995
AMTECH CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
TEXAS 75-2216818
(STATE OF INCORPORATION) (I.R.S. EMPLOYER
IDENTIFICATION NUMBER)
17304 PRESTON ROAD
BUILDING E-100
DALLAS, TEXAS 75252
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(972) 733-6600
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED
TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING
THE PRECEDING 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 THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES OF
COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE.
CLASS OUTSTANDING AT APRIL 30, 1997
- -------------------------------------- -----------------------------
COMMON STOCK, PAR VALUE $.01 PER SHARE 14,722,663
<PAGE>
INDEX
PART I-FINANCIAL INFORMATION Page
Number
------
ITEM 1. FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets at March 31, 1997
and December 31, 1996 3
Condensed Consolidated Statements of Operations for the
three months ended March 31, 1997 and 1996 4
Condensed Consolidated Statements of Cash Flows for the
three months ended March 31, 1997 and 1996 5
Notes to Condensed Consolidated Financial Statements 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS 7
PART II-OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 8
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 9
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 9
2
<PAGE>
AMTECH CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
March 31, 1997 December 31, 1996
-------------- -----------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 2,885 $ 5,296
Short-term marketable securities 9,007 11,852
Accounts receivable, net of allowance for
doubtful accounts of $976,000 in 1997 and
$1,006,000 in 1996 26,423 28,030
Inventories (Note 2) 13,662 13,497
Deferred income taxes 2,025 2,401
Prepaid expenses 742 1,256
-------- --------
Total current assets 54,744 62,332
Property and equipment, at cost 28,255 27,638
Accumulated depreciation (13,789) (12,994)
-------- --------
14,466 14,644
Deferred income taxes 2,084 1,003
Intangible assets, net 8,026 8,214
Other assets 5,243 4,848
-------- --------
$ 84,563 $ 91,041
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 5,549 $ 6,815
Note payable -- 1,839
Accrued expenses 9,164 8,391
Deferred revenues 1,669 2,240
-------- --------
Total current liabilities 16,382 19,285
Contingencies (Note 3)
Stockholders' equity:
Preferred stock, $1 par value, 10,000,000 shares
authorized; none issued -- --
Common stock, $.01 par value, 30,000,000 shares
authorized; 14,802,663 issued, 14,722,663
outstanding in 1997 and 1996 148 148
Additional paid-in capital 76,135 76,510
Treasury stock, at cost (393) (393)
Accumulated deficit (7,709) (4,509)
-------- --------
Total stockholders' equity 68,181 71,756
-------- --------
$ 84,563 $ 91,041
======== ========
</TABLE>
See accompanying notes.
3
<PAGE>
AMTECH CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months
Ended March 31
-------------------
1997 1996
------- -------
<S> <C> <C>
Sales $24,153 $28,276
Operating costs and expenses:
Cost of sales 15,358 17,279
Research and development 2,818 2,564
Marketing, general and administrative 10,289 9,607
------- -------
28,465 29,450
------- -------
Operating loss (4,312) (1,174)
Investment income 297 2,078
Interest expense (65) (109)
------- -------
Income (loss) before income taxes (4,080) 795
Provision (benefit) for income taxes (880) 442
------- -------
Net income (loss) $(3,200) $ 353
======= =======
Earnings (loss) per share (Note 1) $ (0.22) $ 0.02
======= =======
Shares used in computing earnings (loss) per share 14,723 14,740
======= =======
</TABLE>
See accompanying notes.
4
<PAGE>
AMTECH CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months
Ended March 31
---------------------------
1997 1996
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $(3,200) $ 353
Adjustments to reconcile net income (loss) to net cash
from operating activities:
Depreciation and amortization 1,168 1,082
Realized gain on sale of marketable securities -- (2,150)
Deferred income taxes (705) 38
Change in assets and liabilities:
(Increase) decrease in accounts receivable 1,191 (4,203)
Increase in inventories (165) (2,095)
(Increase) decrease in prepaid expenses 514 (121)
Increase in other assets (128) (31)
Increase (decrease) in accounts payable
and accrued expenses (493) 1,973
Increase (decrease) in deferred revenues (571) 613
------- -------
Net cash used by operating activities (2,389) (4,541)
Cash flows from investing activities:
Purchases of property and equipment (745) (829)
Purchase of Cardkey Systems (1,868) (952)
Purchases of marketable securities (4,916) --
Sales and maturities of marketable securities 7,761 5,204
Increase in other assets (295) (49)
Other (27) (256)
------- -------
Net cash provided (used) by investing activities (90) 3,118
Cash flows from financing activities:
Other 23 --
------- -------
Net cash provided by financing activities 23 --
Effect of exchange rate changes on cash and cash equivalents 45 ( 32)
------- -------
Decrease in cash and cash equivalents (2,411) (1,455)
Cash and cash equivalents, beginning of period 5,296 17,669
------- -------
Cash and cash equivalents, end of period $ 2,885 $16,214
======= =======
</TABLE>
See accompanying notes.
5
<PAGE>
AMTECH CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying financial statements, which should be read in conjunction
with the audited consolidated financial statements included in the Company's
1996 Annual Report to Shareholders and Form 10-K, are unaudited but have been
prepared in the ordinary course of business for the purpose of providing
information with respect to the interim periods. The Condensed Consolidated
Balance Sheet at December 31, 1996 was derived from the audited Consolidated
Balance Sheet at that date which is not presented herein. Management of the
Company believes that all adjustments necessary for a fair presentation for such
periods have been included and are of a normal recurring nature. The results of
operations for the three-month period ended March 31, 1997 are not necessarily
indicative of the results to be expected for the full year.
Earnings per share is computed based on the weighted average number of
shares of common stock and dilutive common equivalent shares outstanding.
2. INVENTORIES
Inventories consist of the following:
March 31, 1997 December 31, 1996
-------------- -----------------
Raw materials $ 7,101,000 $ 7,355,000
Work in process 2,565,000 2,307,000
Finished goods 3,996,000 3,835,000
----------- -----------
$13,662,000 $13,497,000
=========== ===========
3. CONTINGENCIES
WaveNet International Inc. and certain of its employees are the subject of
a Canadian $11,000,000 (approximately U.S. $8,000,000) suit brought by Teklogix,
Inc., their former employer. The suit alleges improper use of confidential
information in WaveNet International, Inc.'s products, theft of technology,
misappropriation of business opportunities and similar improprieties. In
addition to the damages requested, Teklogix seeks to enjoin the defendants from
soliciting customers of Teklogix and from making or selling any products that
use intellectual property of Teklogix. Teklogix also seeks a declaration that
it owns any WaveNet International, Inc. products that use intellectual property
of Teklogix. WaveNet International, Inc. has denied any wrongdoing by it or its
employees and intends to vigorously defend the litigation. While the final
outcome of this matter cannot be predicted with certainty, the Company believes
that the final resolution of this matter will not have a material adverse effect
on the consolidated financial position or results of operations of the Company.
6
<PAGE>
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company is organized into three market-oriented groups. The
Transportation Systems Group ("TSG"), which includes Amtech Systems Corporation,
Amtech World Corporation and Amtech International S.A., develops and provides
high-frequency radio frequency identification (RFID) solutions to the
transportation markets. These markets include electronic toll and traffic
management (ETTM), rail, airport, parking and access control, intermodal, and
motor freight. The Electronic Security Group ("ESG"), which focuses on products
and services for electronic access control applications, includes Amtech Europe
Limited and Cardkey Systems, Inc. The Interactive Data Group ("IDG"),
consisting of WaveNet, Inc. and WaveNet International, Inc. (collectively,
"WaveNet"), is a start-up enterprise that is developing a line of products
targeted to the interactive data marketplace consisting of mobile radio
frequency data communications terminals using wireless local area networks for
use in portable computing, logistics, warehousing, transportation, and medical
applications. The IDG faces the risks and uncertainties inherent in any start-
up enterprise.
RESULTS OF OPERATIONS
Sales for the three months ended March 31, 1997 decreased $4,123,000 or 15%
from the comparable period in 1996. The first quarter 1997 sales were less than
expected due to a combination of overall softness in orders for the Company's
products and services, nominal revenue ramp-up of the IDG, delays in the roll-
out of certain new products from the ESG, and delays in timing of revenue
recognition of certain system integration contracts and European manufacturing
delays in the TSG. TSG sales to a single systems integration services contract
decreased from $4,580,000 in 1996 to $845,000 in 1997 as the project nears
completion.
Gross profit as a percentage of total sales decreased from 39% for the
first quarter of 1996 to 36% for the first quarter of 1997, primarily due to a
decrease in TSG's gross profit margin from 32% in 1996 to 24% in 1997. The TSG
decrease resulted in part from a reduction in the gross profit margin currently
estimated to be realized on a single systems integration services contract based
on the updated estimate of costs required to complete the contract. The ESG's
gross profit margin remained constant at 41% for both periods.
Research and development expenses for the three months ended March 31, 1997
increased $254,000 or 10% from the comparable period in 1996, primarily due to
an increase in new product development activities in the TSG as expenditures
increased from $1,261,000 in 1996 to $1,496,000 in 1997.
Marketing, general and administrative expenses for the three months ended
March 31, 1997 increased $682,000 or 7% from the comparable period in 1996. The
increase was primarily attributable to an increase in WaveNet expenditures from
$123,000 in 1996 to $758,000 in 1997. The building of a sales and
administrative infrastructure for WaveNet did not begin until the first quarter
of 1996.
As a result of the foregoing, the Company experienced an operating loss of
$4,312,000 for the three months ended March 31, 1997 as compared to a loss of
$1,174,000 for the comparable period in 1996. Each of the market-oriented
groups incurred operating losses in the 1997 quarter.
7
<PAGE>
Investment income decreased to $297,000 for the three months ended March
31, 1997 from $2,078,000 for the comparable period in 1996. The decrease is
primarily attributable to non-recurring gains of $2,150,000 realized in 1996
from the sale of remaining corporate equity securities in the Company's
investment portfolio.
Income taxes as a percentage of the income before taxes for the three
months ended March 31, 1997 and 1996 is different from the U.S. statutory rate
of 34%, primarily due to the effect of certain goodwill not being deductible for
tax purposes and unbenefitted foreign losses. The Company has deferred tax
assets of $4,109,000 at March 31, 1997. If it becomes apparent later this year
that the Company will not be profitable from its U.S. operations during 1997,
then under generally accepted accounting principles the Company may be required
to record a charge to earnings to increase the valuation allowance for a portion
of its deferred tax assets.
As a result of the foregoing, the Company experienced a net loss of
$3,200,000 for the three months ended March 31, 1997 as compared to net income
of $353,000 for the comparable period in 1996.
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, "Earnings per Share", which is required to be adopted on December 31,
1997. At that time, the Company will be required to change the method it
currently uses to compute earnings per share and to restate all prior periods.
Under the new requirements for calculating primary earnings per share, the
dilutive effect of stock options will be excluded. These new requirements are
not expected to materially change primary or fully diluted earnings per share
for the three months ended March 31, 1997 and 1996.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1997 the Company's principal source of liquidity is its net
working capital position of $38,362,000. For the three months ended March 31,
1997 the Company used cash of $2,389,000 for operating activities, which was
primarily to fund operating losses, and $2,217,000 for the final note payment
associated with the acquisition of Cardkey. During the quarter ended March 31,
1997 the Company pledged nearly $5,000,000 of the Company's short-term
marketable securities to support a TSG performance bond for a large systems
integration services contract and a letter of credit in favor of the European-
based manufacturer of the TSG's DYNICOM/TM/ European rail products. The Company
expects to invest up to an additional $3,700,000 in 1997 for property and
equipment and will be required to invest several million dollars in 1997 for
working capital to support a large systems integration services contract of the
TSG. Depending on the level of funding needed to support this systems
integration services contract and the Company's operating results, the Company
may need to obtain a working capital line of credit. Additional acquisitions,
if any, would be financed by the most attractive alternative available which
could be the issuance of debt or equity securities.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The information set forth under Part I, Notes to Condensed Consolidated
Financial Statements, Note 3 is incorporated herein by reference.
8
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its annual meeting of shareholders on April 24, 1997. At
this meeting, the shareholders elected as directors of the Company, David P.
Cook, Stuart M. Evans, Gary J. Fernandes, Elmer W. Johnson, Dr. Jeremy A. Landt,
Thomas W. Luce, III, James S. Marston, G. Russell Mortenson, and Antonio R.
Sanchez, Jr. The tabulation of the votes with respect to the election of
directors is as follows:
Nominee Shares For Shares Withheld
------------- ---------- ---------------
David P. Cook 12,913,821 288,689
Stuart M. Evans 12,910,624 291,886
Gary J. Fernandes 12,912,721 289,789
Elmer W. Johnson 12,913,811 288,699
Dr. Jeremy A. Landt 12,910,261 292,249
Thomas W. Luce, III 12,899,584 302,926
James S. Marston 12,876,021 326,489
G. Russell Mortenson 12,906,590 295,920
Antonio R. Sanchez, Jr. 12,912,521 289,989
The shareholders ratified the selection of Ernst and Young LLP as
independent auditors for the year ending December 31, 1997. The tabulation of
the votes with respect to the ratification is as follows:
For 13,068,756
Against 64,002
Abstain 69,752
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The following is a list of exhibits filed as part of this Quarterly
Report on Form 10-Q.
DESCRIPTION OF EXHIBITS
-----------------------
10.1* 1997 Executive Management Cash Bonus Plan
27.1* Financial Data Schedule.
(b) No reports of the registrant on Form 8-K have been filed with the
Securities and Exchange Commission during the three months ended March
31, 1997.
* Filed herewith.
- --------------------------------------------------------------------------------
9
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
AMTECH CORPORATION
(Registrant)
Date: May 15, 1997 By: /s/ Steve M. York
--------------------------------------
Steve M. York
Senior Vice President, Chief Financial
Officer, and Treasurer
(Principal Financial Officer and
Duly Authorized Officer)
10
<PAGE>
EXHIBIT 10.1
AMTECH CORPORATION 1997 EXECUTIVE MANAGEMENT CASH BONUS PLAN
The participants in this Plan are members of the senior management of
Amtech Corporation and its subsidiaries that have been selected by the Company's
Board of Directors for participation.
The philosophy of the Plan is to:
(1) reward on a successful efforts basis, creating the utmost incentive to
------------------
management to enhance shareholder value by creating increased profits;
---------
(2) maintain a lean management structure, while rewarding those who
successfully discharge major responsibilities;
(3) focus a significant portion of all individual bonus opportunities to
the common goal of meeting or exceeding the 1997 planned earnings per
share or pre-tax operating income, as applicable, whereby the senior
management team is "rewarded" or "goes without" as a team;
-----
(4) provide for individual bonus opportunities to reward individual
performance where appropriate;
(5) make time be of the essence by requiring an increasing amount of bonus
opportunity be forfeited for each quarter the year-to-date planned
earnings per share or operating income goal, as applicable, is not
achieved; and finally
(6) hold back a percentage of each quarterly bonus even though year-to-
date quarterly earnings per share or operating income goals, as
applicable, are met, whereby material bonuses are not paid in the
event the annual goals are not achieved.
------
Mechanics of Plan
- -----------------
The participants in the Plan and the extent of their bonus opportunity
(which varies from 10-30% of base salary) shall be established by the Board of
Directors. A description of how the bonus opportunity may actually be realized
is set forth below.
For the participants in the Plan, 65% of the Participant's bonus
opportunity is tied to the Company or the employing operating group, as
applicable, achieving its 1997 operating income or earnings per share goal, as
applicable, as approved by the Company's Board of Directors. The remaining
percentage is discretionary based upon individual performance as determined by
the Company's President/Chief Executive Officer and other applicable members of
senior management.
-1-
<PAGE>
The bonus opportunity that is tied to the Company meeting its 1997
operating income or earnings per share goals, as applicable, is administered as
set forth below:
(1) The Bonus opportunity is allocated evenly over four quarters
("Quarterly Bonus Pool").
(2) The quarterly distribution, if any, is based upon whether the
Company has achieved the year-to-date planned operating income or earnings
------------
per share goals, as applicable.
(3) Quarterly distributions earned, if any, will be paid at the end of
the month following the applicable quarter.
(4) If, at the end of the year, the yearly operating income or
earnings per share goal, as applicable, has been achieved, then the
forfeited amounts will be paid to employee.
(5) The Quarterly calculations, cash payments, amount of bonus
opportunities deferred to next quarter, and amount of bonus opportunity
forfeited are as set forth below:
Quarter Goal Met Goal Not Met
- ------- -------- ------------
First 50% of 1st Quarter Quarterly 25% of 1st Quarter Quarterly
Bonus Pool is paid to employee Bonus Pool is forfeited and
and remaining 50% is deferred remaining 75% is deferred
and added to 2nd Quarter and added to 2nd Quarter
Quarterly Bonus Pool Quarterly Bonus Pool
creating a 2nd Quarter YTD creating a 2nd Quarter YTD
Bonus Pool. Bonus Pool.
Second 70% of 2nd Quarter YTD Bonus 35% of 2nd Quarter YTD Bonus
Pool is paid to employee and Pool is forfeited and remaining
remaining 30% is deferred 65% is deferred and added to
and added to 3rd Quarter 3rd Quarter Quarterly Bonus
Quarterly Bonus Pool Pool creating a 3rd Quarter
creating a 3rd Quarter YTD YTD Bonus Pool.
Bonus Pool.
Third 80% of 3rd Quarter YTD Bonus 40% of 3rd Quarter YTD Bonus
Pool is paid to employee and Pool is forfeited and remaining
remaining 20% is deferred 60% is deferred and added to
and added to 4th Quarter 4th Quarter Quarterly Bonus
Quarterly Bonus Pool Pool creating a 4th Quarter
creating a 4th Quarter YTD YTD Bonus Pool.
Bonus Pool.
Fourth 100% of 4th Quarter YTD Bonus 100% of 4th Quarter YTD Bonus
Pool is paid to employee. Pool is forfeited.
-2-
<PAGE>
Furthermore, in the case of certain Plan participants selected by the Board
of Directors, if the Company or market oriented group, as applicable, does not
achieve its 1997 operating income or earnings per share goals, as applicable,
but achieves a specified percentage (as determined by the Board of Directors) of
the operating income or earnings per share goals, as applicable, then a
percentage (as determined by the Board of Directors) of the bonus amount that
would have been payable under the Plan if the goals had been met will be paid.
Also, additional bonus amounts will be paid if the goals are exceeded.
-3-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 2,885
<SECURITIES> 9,007
<RECEIVABLES> 27,399
<ALLOWANCES> 976
<INVENTORY> 13,662
<CURRENT-ASSETS> 54,744
<PP&E> 28,255
<DEPRECIATION> 13,789
<TOTAL-ASSETS> 84,563
<CURRENT-LIABILITIES> 16,382
<BONDS> 0
0
0
<COMMON> 148
<OTHER-SE> 68,033
<TOTAL-LIABILITY-AND-EQUITY> 84,563
<SALES> 18,783
<TOTAL-REVENUES> 24,153
<CGS> 8,514
<TOTAL-COSTS> 15,358
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 171
<INTEREST-EXPENSE> 65
<INCOME-PRETAX> (4,080)
<INCOME-TAX> (880)
<INCOME-CONTINUING> (3,200)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,200)
<EPS-PRIMARY> (0.22)
<EPS-DILUTED> (0.22)
</TABLE>
