<PAGE>
UNITED STATES
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 September 30, 2000
OR
[ ] 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 0-26482
TRIKON TECHNOLOGIES, INC.
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(Exact name of registrant as specified in its charter)
California 95-4054321
_______________________________ ___________________________________
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
Ringland Way, Newport,Gwent NP18 2TA, United Kingdom
_____________________________________________________ _________
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 44-1633-414-000
_______________
Not Applicable
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Former name, former address and former fiscal year, if changed since last report
Indicate by check whether the registrant (1) has filed all reports required to
be filed by Sections 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
--- __
As of October 31, 2000, the total number of outstanding shares of the
Registrant's common stock was 11,674,491.
<PAGE>
Trikon Technologies, Inc.
INDEX
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements:
Condensed Consolidated Balance Sheets at September 30, 2000 (unaudited) and December 31, 1999........... 3
Unaudited Condensed Consolidated Statements of Operations for the Three.................................
Months ended September 30, 2000, and 1999 and for the Nine Months ended
September 30, 2000 and 1999............................................................................. 5
Unaudited Condensed Consolidated Statements of Cash Flows for the Nine
Months ended September 30, 2000, and 1999............................................................... 6
Notes to Unaudited Condensed Consolidated Financial Statements.......................................... 7
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations................... 10
Item 3. Quantitative and Qualitative Disclosure about Market Risk............................................... 14
PART II. OTHER INFORMATION
Item 1. Legal Proceedings....................................................................................... 15
Item 6. Exhibits and Reports on Form 8-K........................................................................ 15
SIGNATURE PAGE..................................................................................................... 16
EXHIBITS........................................................................................................... 17
</TABLE>
<PAGE>
Trikon Technologies, Inc.
PART 1 FINANCIAL INFORMATION
ITEM 1 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999(1)
---------- ------------
(unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents...................................... $ 6,049 $ 3,927
Accounts receivable, net of reserves........................... 26,515 15,471
Inventories, net of reserves................................... 28,620 19,256
Other current assets........................................... 2,224 2,129
---------------------- --------------------
Total current assets........................................... 63,408 40,783
Property, equipment and leasehold improvements, net of 17,260 15,217
accumulated depreciation and amortization.....................
Demonstration systems, net of accumulated depreciation......... 563 860
Deferred bond financing costs.................................. 34 55
Other assets................................................... 206 363
---------------------- --------------------
Total assets................................................... $ 81,471 $ 57,278
====================== ====================
Liabilities and shareholders' equity
Current liabilities:
Accounts payable and accrued expenses.......................... 16,236 9,646
Sales returns payable.......................................... 564 3,664
Current portion of long-term debt.............................. 3,896 93
Other current liabilities...................................... 7,888 4,009
---------------------- --------------------
Total current liabilities...................................... 28,584 17,412
Convertible subordinated notes 1,505 4,147
Long-term debt less current portion 3,237 -
Other non-current liabilities . 3,664 4,115
---------------------- --------------------
36,990 25,674
</TABLE>
<PAGE>
ITEM 1 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)
(In thousands)
<TABLE>
<CAPTION>
September 30, 2000 December 31, 1999
2000 1999(1)
------------------- -------------------
(unaudited)
-----------
<S> <C> <C> <C> <C>
Shareholders' equity:
Preferred Stock: 4,348 31,979
Authorized shares -- 20,000,000
Series H Preferred Stock, no par value $10 per share
liquidation preference
Designated shares - 3,500,000
Issued and outstanding -- 434,793 at September 30, 2000
and 3,197,898 at December 31, 1999.....................
Common Stock, no par value: 230,663 199,019
Authorized shares -- 15,000,000
Issued and outstanding -- 11,674,291 at September 30, 2000 and
9,404,606 at December 31, 1999................................
Cumulative translation adjustment.............................. (5,839) (2,177)
Deferred compensation.......................................... (3,982) (5,121)
Accumulated deficit............................................ (180,709) (192,096)
--------------------- --------------------
Total shareholders' equity..................................... 44,481 31,604
--------------------- --------------------
Total liabilities and shareholders' equity..................... $ 81,471 $ 57,278
===================== ====================
</TABLE>
(1) The Balance Sheet at December 31, 1999, has been derived from the audited
consolidated financial statements at that date, but does not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements.
See Notes to Condensed Consolidated Financial Statements.
<PAGE>
Trikon Technologies, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(In thousands, except for share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
---------------------------------- ----------------------------------
September 30, September 30, September 30, September 30,
2000 1999 2000 1999
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Revenues:
Product revenues................. $ 31,465 $ 13,154 $ 75,758 $ 32,683
License revenues................. - - 350 2,144
--------------- --------------- --------------- ---------------
31,465 13,154 76,108 34,827
Costs and expenses:
Cost of goods sold............... 16,360 7,017 40,291 19,415
Research and development......... 2,181 1,612 6,197 4,806
Selling, general and 5,505 4,405 16,248 11,035
administrative..................
Release of sales returns payable - (4,054) - (4,054)
allowance.......................
--------------- --------------- --------------- ---------------
24,046 8,980 62,736 31,202
Income from operations 7,419 4,174 13,372 3,625
Interest (expense), net.......... (141) (42) (248) (156)
--------------- --------------- --------------- ---------------
Income before income tax charge 7,278 4,132 13,124 3,469
(benefit)........................
Income tax charge (benefit)...... 164 (31) 441 53
--------------- --------------- --------------- ---------------
Net income........................ $ 7,114 $ 4,163 $ 12,683 $ 3,416
=============== =============== =============== ===============
Preferred dividend................ 99 624 925 1,844
--------------- --------------- --------------- ---------------
Net income applicable to common
shares........................... $ 7,015 $ 3,539 $ 11,758 $ 1,572
=============== =============== =============== ===============
Earnings per common share data:
Basic: $ 0.67 $ 0.43 $ 1.22 $ 0.19
Diluted: $ 0.58 $ 0.41 $ 1.05 $ 0.19
=============== =============== =============== ===============
Average common shares used in the
calculation:
Basic: 10,525 8,255 9,647 8,254
Diluted: 12,134 8,647 11,156 8,452
=============== =============== =============== ===============
</TABLE>
See Notes to Unaudited Condensed Consolidated Financial Statements.
<PAGE>
Trikon Technologies, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands)
<TABLE>
<CAPTION>
Nine months ended
---------------------------------------------------------
September 30, September 30,
2000 1999
-------------------- ----------------------
<S> <C> <C> <C>
Net cash (used in) arising from operating activities............ $ (2,249) $ 991
INVESTING ACTIVITIES
Net purchases of property, equipment and leasehold (2,835) (125)
improvements.................................................
FINANCING ACTIVITIES
Issue of shares of common stock............................... 31 -
Proceeds of term bank loan.................................... 7,550 -
Repayment of term bank loan................................... (944) -
Receipts (payments) - capital lease obligations............... 569 (164)
-------------------- ----------------------
Net cash arising from (used in) financing activities.......... 7,206 (164)
-------------------- ----------------------
Net increase in cash and cash equivalents..................... 2,122 702
Cash and cash equivalents at beginning of period................ 3,927 7,891
-------------------- ----------------------
Cash and cash equivalents at end of period...................... $ 6,049 $ 8,593
==================== ======================
</TABLE>
See Notes to Unaudited Condensed Consolidated Financial Statements.
<PAGE>
Trikon Technologies, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 2000
NOTE A BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. The operating results for the nine months ended September 30,
2000, are not necessarily indicative of the results that may be expected for the
year ending December 31, 2000. For further information, refer to the
consolidated financial statements and footnotes thereto included in Trikon
Technologies, Inc.'s (the "Company") Annual Report on Form 10-K for the year
ended December 31, 1999.
Our present revenue recognition policy is that revenues related to system,
component and spare parts sales are recognized upon shipment and transfer of
title, or upon customer acceptance and transfer of title in the case of
demonstration inventory unit sales. In 1999, the Staff of the Securities and
Exchange Commission issued Staff Accounting Bulletin No. 101, "Revenue
Recognition in Financial Statements" which provides guidance on the recognition,
presentation and disclosure of revenue in financial statements. SAB 101
clarifies that the point of shipment may not in all cases be the appropriate
point at which revenue should be recognized. In particular, SAB 101 indicates
that if customer acceptance provisions exist, revenue recognition is presumed to
be precluded until customer acceptance occurs or the acceptance provisions
lapse. As the majority of our system sales contracts do include customer
acceptance provisions, we sought further clarification along with other
correspondents in our industry on the circumstances in which this presumption
might be overcome. Pending such clarification by the SEC staff of the
circumstances in which this presumption might be overcome, we initially took the
view that it would be prudent to assume that the implementation of SAB 101 as
applied to system sales would have the effect of deferring revenue recognition
to the date of final acceptance. In October 2000, the SEC Staff issued a
Frequently Asked Questions and Answers document which addressed the question of
customer acceptance clauses. In the light of this further guidance, we have
concluded that the adoption of SAB 101, which is required in the fourth quarter
of fiscal 2000, will have no material impact on previously reported revenues or
on the application of our present revenue recognition policy.
NOTE B INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out method) or
market. The components of inventory consist of the following (in thousands):
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
------------------------ --------------------
<S> <C> <C>
Components.......................... $ 3,885 $ 3,614
Work in process..................... 22,956 13,840
Finished goods...................... 1,779 1,802
------------------------ --------------------
$ 28,620 $ $19,256
======================== ====================
</TABLE>
<PAGE>
NOTE C EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per
share:
<TABLE>
<CAPTION>
Three months ended Nine months ended
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September 30, September 30, September 30, September 30,
2000 1999 2000 1999
------- ------ ------- ------
<S> <C> <C> <C> <C>
Numerator ($'000):.........................
Net income applicable to common $ 7,015 $3,539 $11,758 $1,572
stockholders
------------------------------------------------------------------------------
Numerator for diluted earnings per $ 7,015 $3,539 $11,758 $1,572
common share
Denominator (thousands):
Denominator for basic earnings per share 10,525 8,255 9,647 8,254
- weighted-average shares
Effect of dilutive securities:
Employee stock options 651 392 603 198
Unvested common stock 958 - 906 -
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Dilutive potential common shares 1,609 392 1,509 198
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Denominator for diluted earnings per 12,134 8,647 11,156 8,452
share - adjusted weighted-average
shares and assumed conversions
Basic earnings per share $ 0.67 $ 0.43 $ 1.22 $ 0.19
==============================================================================
Diluted earnings per share $ 0.58 $ 0.41 $ 1.05 $ 0.19
==============================================================================
</TABLE>
Basic and diluted earnings per share is calculated in accordance with FASB
Statement No. 128, "Earnings Per Share," which specifies the computation,
presentation and disclosure requirements for earnings per share. The weighted-
average number of shares used to calculate basic earnings per share for each
period excludes 1,149,281 unvested shares of common stock which are contingently
issuable to the Company's Chairman of the Board.
NOTE D COMPREHENSIVE INCOME
Comprehensive income comprises net income and currency translation adjustment
for the period. Translation adjustments were $(1.0million) and $(3.7million) for
the three and nine months ended September 30, 2000 respectively and $1.4 million
and $(0.7million) for the three and nine months ended September 30, 1999
respectively. Total comprehensive income for the three and nine months ended
September 30, 2000 was $6.1 million and $9.0million respectively, and for the
three and nine months ended September 30, 1999 was $5.6 million and $2.7 million
respectively.
<PAGE>
NOTE E CONVERTIBLE SUBORDINATED NOTES
During the nine months ended September 30, 2000, the Company exchanged
$2,642,000 of its 7 1/8% Convertible Subordinated Notes due 2001 plus accrued
interest for 204,493 shares of Common Stock.
NOTE F PREFERRED STOCK
The Board of Directors has the authority to issue up to 20,000,000 shares of
Preferred Stock in one or more series with rights, preferences, privileges and
restrictions to be determined at the Board's discretion.
In May 1998, in conjunction with an exchange offer made to the holders of
Convertible Notes, the Company issued 2,855,754 new shares of Series H Preferred
Stock. The Series H Preferred Stock will be redeemable at the option of the
Company for cash on June 30, 2001 at a redemption price equal to the stated
amount, and the holders of the Series H Preferred Stock shall be entitled to
receive dividends at an annual rate of 8 1/8% of the stated amount payable
annually, at the Company's option, in cash or additional shares of preferred
stock or any combination thereof. The dividend rate has been increased to 9 1/8%
with effect from April 15, 2000 following the achievement of specified income
levels. The Series H Preferred Stock will be subject to automatic conversion if
the Company's Common Stock price reaches certain levels and accelerated
redemption if certain cash flow levels are achieved. Since the issuance of the
Series H Preferred Stock, dividends due to holders of Series H Preferred Stock
have been paid by the issue of additional shares of Series H Preferred Stock.
During the nine months ended September 30, 2000, the Company exchanged a total
of 2,828,169 shares of Series H Preferred Stock plus accrued dividend rights for
2,050,866 shares of Common stock.
NOTE G SUBSEQUENT EVENTS
The Company corrected a computational error resulting in its fully diluted
earnings per share being reduced by $0.02 for the quarter ended March 31, 2000
and $0.03 for the quarter ended June 30, 2000. Because the computational error
only affected fully diluted earnings per share, net income and basic earnings
per share remain unchanged.
After the revision the fully diluted earnings per share are $0.13 for the
quarter, ended March 31, 2000 and $0.30 for the quarter ended June 30, 2000.
Although Ernst & Young, the Company's external auditors, had reviewed and
approved the prior fully diluted earnings per share figures, it is now evident
that the computations of fully diluted earnings per share were not in accordance
with FASB 128.
<PAGE>
TRIKON TECHNOLOGIES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following Management's Discussion and Analysis of Financial Condition and
Results of Operations should be read in conjunction with our condensed
consolidated financial statements and notes thereto included elsewhere in this
Report. This discussion contains forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. These forward-looking statements are based on current
expectations, assumptions and projections and entail various risks and
uncertainties that could cause actual results to differ materially from those
projected in the forward-looking statements. These risks and uncertainties
include but are not limited to, availability of financial resources adequate for
the Company's medium- and long-term needs, product demand and market acceptance,
in particular, the Company's low k dielectric and other new technologies, as
well as those set forth under "Quantitative and Qualitative Disclosure about
Market Risk," and the other risks and uncertainties described from time to time
in the Company's public announcements and SEC filings, including without
limitation the Company's Quarterly and Annual Reports on Form 10-Q and 10-K,
respectively.
OVERVIEW
The Company designs, manufactures, markets and services a broad line of advanced
production equipment used to manufacture semiconductor devices. The Company's
customers use the Company's products to manufacture integrated circuits and
miniaturized optical components, such as semiconductor lasers and optical wave
guides.
RESULTS OF OPERATIONS
The following table sets forth certain operating data as a percentage of total
revenue for the periods indicated:
<TABLE>
<CAPTION>
Three months ended Nine months ended
-------------------------------------------------------------------------------
September 30, September 30, September 30, September 30,
2000 1999 2000 1999
----- ----- ----- -----
<S> <C> <C> <C> <C>
Product revenues........................... 100.0% 100.0% 99.6% 93.8%
License revenues........................... 0.0 0.0 0.4 6.2
-------------------------------------------------------------------------------
Total revenues............................. 100.0 100.0 100.0 100.0
Cost of goods sold......................... 52.0 53.3 52.9 55.7
-------------------------------------------------------------------------------
Gross margin............................... 48.0 46.7 47.1 44.3
Operating expenses:
Research and development.............. 6.9 12.3 8.1 13.8
Selling, general and administrative... 17.5 33.5 21.4 31.7
Release of sales returns payable - (30.8) - (11.6)
allowance..........................
-------------------------------------------------------------------------------
Total operating expenses................... 24.4 15.0 29.5 33.9
-------------------------------------------------------------------------------
Income from operations..................... 23.6 31.7 17.6 10.4
Interest income (expense), net............. (0.5) (0.3) (0.3) (0.4)
-------------------------------------------------------------------------------
Income before income tax charge (benefit).. 23.1 31.4 17.3 10.0
Income tax charge (benefit)................ 0.5 (0.2) 0.6 0.2
-------------------------------------------------------------------------------
Net income................................. 22.6% 31.6% 16.7% 9.8%
===============================================================================
</TABLE>
<PAGE>
PRODUCT REVENUES. Product revenues for the three months ended September 30,
2000 increased 139% to $31.5 million compared to $13.2 million for the three
months ended September 30, 1999. The increase was attributable primarily to
increased shipments of systems. Product revenues for the nine months ended
September 30, 2000 increased by 132% to $75.8 million compared with $32.7
million for the nine months ended September 30, 1999.
Sales outside of the United States accounted for approximately 63% of total
revenues in the three month periods ended September 30, 2000 and September 30,
1999. Sales outside the United States accounted for approximately 74% and 63%
of total revenues in the nine-month periods ended September 30, 2000 and 1999,
respectively. The quantity of product shipped will fluctuate significantly from
quarter to quarter and the individual customers to which these products are sold
can also change from quarter to quarter. Given the significance of each
individual sale, the percentage of sales made outside of the United States may
also fluctuate significantly from quarter to quarter.
Our present revenue recognition policy is that revenues related to system,
component and spare parts sales are recognized upon shipment and transfer of
title, or upon customer acceptance and transfer of title in the case of
demonstration inventory unit sales. In 1999, the Staff of the Securities and
Exchange Commission issued Staff Accounting Bulletin No. 101, "Revenue
Recognition in Financial Statements" which provides guidance on the recognition,
presentation and disclosure of revenue in financial statements. SAB 101
clarifies that the point of shipment may not in all cases be the appropriate
point at which revenue should be recognized. In particular, SAB 101 indicates
that if customer acceptance provisions exist, revenue recognition is presumed to
be precluded until customer acceptance occurs or the acceptance provisions
lapse. As the majority of our system sales contracts do include customer
acceptance provisions, we sought further clarification along with other
correspondents in our industry on the circumstances in which this presumption
might be overcome. Pending such clarification by the SEC staff of the
circumstances in which this presumption might be overcome, we initially took the
view that it would be prudent to assume that the implementation of SAB 101 as
applied to system sales would have the effect of deferring revenue recognition
to the date of final acceptance. In October 2000, the SEC Staff issued a
Frequently Asked Questions and Answers document which addressed the question of
customer acceptance clauses. In the light of this further guidance, we have
concluded that the adoption of SAB 101, which is required in the fourth quarter
of fiscal 2000, will have no material impact on previously reported revenues or
on the application of our present revenue recognition policy.
LICENSE REVENUES. License revenues in the nine months ended September 30, 2000
relate to power supply technology. License revenues in the nine months ended
September 30, 1999 are primarily in respect of a portion of the fee due on the
sale of a non-exclusive worldwide license of MORI(TM) source technology to Lam
Research Corporation.
GROSS MARGIN ON PRODUCT REVENUES. The gross margin on product revenues for the
three month period ended September 30, 2000 was 48% as compared to 47% for the
three month period ended September 30, 1999. Excluding license revenues, the
gross margin on product revenues was 47% for the nine months ended September 30,
2000 compared with 41% for the nine months ended September 30, 1999. The
improvements in gross margins in the nine months ended September 30, 2000
compared with the same period of 1999 results from productivity gains associated
with increased production volumes.
RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses for the
three and nine months ended September 30, 2000 were $2.2 million and $6.2
million, or 7% and 8% of total revenues, respectively. This compares with $1.6
million and $4.8 million, or 12% and 14% of total revenues, respectively for the
three and nine months ended September 30, 1999. The major focus of our research
and development efforts continues to be the development of new processes in
further advancing our proprietary PVD, CVD and etch technologies as well as
adding enhancements to its existing products.
<PAGE>
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses for the three months ended September 30, 2000 were $5.5
million, or 17% of total revenues, compared to $4.4 million, or 33% of total
revenues, in the three months ended September 30, 1999. Selling, general and
administrative expenses for the nine months ended September 30, 2000 were $16.2
million or 21% of total revenues compared with $11.0 million or 32% of total
revenues in the nine months ended September 30, 1999. Selling, general and
administrative expenses in the nine months ended September 30, 2000 include a
charge of $1.5 million in respect of a conditional bonus due to the Company's
Chairman and exchange gains of $0.9 million. Selling, general and administrative
expenses in the nine months ended September 30, 1999 are stated after release of
an allowance against accounts receivable of $1.1 million. Excluding these items,
selling, general and administrative expenses for the nine months ended September
30, 2000 would have been $15.6 million or 21% of total revenues compared with
$12.2 million or 35% of total revenues for the nine months ended September 30,
1999.
RELEASE OF SALES RETURNS PAYABLE ALLOWANCE
In the third quarter 1999, the Co,mpany completed negotiations concerning the
return by certain customers of etch equipment manufactured by our predecessor
company, Plasma & Materials Technologies, Inc. As a result, the allowance for
sales returns payable was reduced by $4.1 million.
INCOME FROM OPERATIONS. Income from operations was $7.4 million in the three
months ended September 30, 2000 compared with $4.2 million in the three months
ended September 30, 1999. The improvement in income from operations between the
two quarters was due to operating efficiencies resulting from increased
revenues. During the nine months ended September 30, 2000, income from
operations was $13.4 million compared with income from operations of $3.6
million in the nine months ended September 30, 1999. The operating income for
the first nine months of 2000 included a charge of $1.5 million in respect of a
conditional bonus due to our Chairman and exchange gains of $0.9 million. The
income from operations for the nine months ended September 30, 1999 are stated
after release of an allowance against accounts receivable of $1.1 million and
included license revenues of $2.1 million.
INTEREST EXPENSE, NET. Interest expense, net was $141,000 in the three months
ended September 30, 2000 compared with interest expense, net of $42,000 in the
three months ended September 30, 1999. The increase in interest expense, net in
the three months ended September 30, 2000 compared with the three months ended
September 30, 1999 is due to increased net borrowing in the three months ended
September 30, 2000. Interest expense, net was $248,000 for the nine months ended
September 30, 2000 compared with interest expense, net of $156,000 for the nine
months ended September 30, 1999. Interest expense is net of interest income of
$81,000 in the three months ended September 30, 2000 and $188,000 in the nine
months ended September 30, 2000, compared with $64,000 for the three months
ended September 30, 1999 and $154,000 for the nine months ended September 30,
1999.
INCOME TAXES. The income tax charges for the three and nine months ended
September 30, 2000 and the three months ended September 30, 1999 relate to
overseas tax on income arising in certain foreign subsidiaries. The tax benefit
in the nine months ended September 30, 1999 related to tax recovered on a
dividend distribution by an overseas subsidiary.
Our ability to use our domestic and foreign net operating losses and credit
carryforwards will depend upon future income and will be subject to an annual
limitation, required by the Internal Revenue Code of 1986, as amended and
similar state provisions.
We have operating subsidiaries in several countries, and each subsidiary is
taxed based on the laws of the jurisdiction in which it operates. Because taxes
are incurred at the subsidiary level, and one subsidiary's tax losses cannot be
used to offset the taxable income of subsidiaries in other jurisdictions, our
consolidated effective tax rate may increase to the extent it reports tax losses
in some subsidiaries and taxable income in others. The subsidiaries are subject
to taxation in countries where they operate, and such operations generally are
taxed at rates similar to or higher than tax rates in the United States. The
payment of dividends or distributions by the subsidiaries to the United States
would be subject to withholding taxes in the country of domicile and may be
mitigated under the terms of relevant double tax treaties.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 2000, we had $6.0 million in cash and cash equivalents,
compared to $3.9 million at December 31, 1999. During the nine months ended
September 30, 2000, we drew down a term loan of (Pounds)5.0 million
(approximately $7.6 million) from a British bank. The term loan carries a
variable rate of interest and is repayable in quarterly installments over the
two years ended June 29, 2002. Interest is presently payable at the rate of
7.69% per annum. During the quarter ended September 30, 2000 we repaid
(Pounds)625,000 (approximately $944,000) in accordance with the terms of the
loan. We also have an overdraft (credit) facility with the same bank of up to
(Pounds)7.5 million (approximately $11.3 million). No amount is presently
outstanding under this facility. The increase in cash and cash equivalents for
the nine months ended September 30, 2000 primarily results from the net amount
drawn down of the medium term loan less cash outflow from operating and
investing activities.
During the nine month period ended September 30, 2000, we have issued 2,255,359
shares of our common stock in exchange for an aggregate of $2,642,000 face value
of our outstanding 7 1/8% Subordinated Convertible Notes due 2001 plus accrued
interest and 2,828,169 shares of its Series H Preferred Stock. As a result, we
have reduced our interest expense and dividend obligations.
We expect that our cash balance and anticipated cash flow will be sufficient to
meet our normal operating requirements over the near term.
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The following discussion and analysis about market risk disclosures may contain
"forward-looking statements" within the meaning of Section 27A of the Securities
Act and Section 21E of the Exchange Act. Such statements include declarations
regarding the intent, belief or current expectations of the Company and its
management and involve risks and uncertainties. Actual results could differ
materially from those projected in the forward-looking statements.
Our earnings and cash flow are subject to fluctuations in foreign currency
exchange rates. Significant factors affecting this risk include our
manufacturing and administrative cost base which is predominately in British
Pounds, and product sales outside the United States which may be expressed in
currencies other than the United States dollar. We constantly monitor currency
exchange rates and match currency availability and requirements whenever
possible. We may from time to time enter into forward foreign exchange
transactions in order to minimize risk from firm future positions arising from
trading. As at September 30, 2000 and December 31, 1999 we had no open forward
currency transactions.
Based upon budgeted income and expenditures, a hypothetical increase of 10% in
the value of the British Pound against all other currencies in the fourth
quarter of 2000 would have no material effect on revenues expressed in United
States dollars and would increase operating costs and reduce cash flow by
approximately $2.1 million. The same increase in the value of the British Pound
would increase the value of the net assets of the Company expressed in United
States dollars by approximately $1.8 million. The effect of the hypothetical
change in exchange rates ignores the affect this movement may have on other
variables including competitive risk. If it were possible to quantify this
impact, the results could well be different from the sensitivity effects shown
above. In addition, it is unlikely that all currencies would uniformly
strengthen or weaken relative to the British Pound. In reality, some currencies
may weaken while others may strengthen.
<PAGE>
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are included herein:
Number Description
------ ------------
27.1 Financial Statement Data
(b) Reports on Form 8-K:
None.
<PAGE>
TRIKON TECHNOLOGIES, INC.
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.
TRIKON TECHNOLOGIES, INC.
Date: November 13, 2000 /s/Nigel Wheeler
---------------
Nigel Wheeler
Chief Executive Officer, Chief
Operating Officer, President and
Director
/s/Jeremy Linnert
-----------------
Jeremy Linnert
Chief Financial Officer
<PAGE>
EXHIBIT INDEX
Exhibit No. Page No. Description
----------- -------- -----------
27.1 Financial Statement Data
