<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 June 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.
--------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
California 95-4054321
------------------------------- -----------------------------------
(State or other jurisdiction of (I.R.S. EmployerIdentification 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
--------------------------------------------------------------------------------
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 August 3, 2000 the total number of outstanding shares of the Registrant's
common stock was 11,668,730. .
<PAGE>
Trikon Technologies, Inc.
INDEX
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements:
Condensed Consolidated Balance Sheets at June 30, 2000 (unaudited) and
December 31, 1999....................................................................... 3
Unaudited Condensed Consolidated Statements of Operations for the Three
Months ended June 30, 2000, and 1999 and for the Six Months ended June 30,
2000 and 1999........................................................................... 5
Unaudited Condensed Consolidated Statements of Cash Flows for the Six
Months ended June 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... 9
Item 3. Quantitative and Qualitative Disclosure about Market Risk...............................12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.......................................................................13
Item 6. Exhibits and Reports on Form 8-K........................................................13
SIGNATURE PAGE...................................................................................14
EXHIBITS.........................................................................................15
</TABLE>
<PAGE>
Trikon Technologies, Inc.
PART 1 FINANCIAL INFORMATION
ITEM 1 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
June 30, December 31,
------- ------------
2000 1999(1)
---- ------------
(unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents...................................... $ 4,880 $ 3,927
Accounts receivable, net of reserves........................... 24,924 15,471
Inventories, net of reserves................................... 25,038 19,256
Other current assets........................................... 2,927 2,129
---------------------- --------------------
Total current assets........................................... 57,769 40,783
Property, equipment and leasehold improvements, net of 17,400 15,217
accumulated depreciation and amortization.....................
Demonstration systems, net of accumulated depreciation......... 1,236 860
Deferred bond financing costs.................................. 41 55
Other assets................................................... 242 363
---------------------- --------------------
Total assets................................................... $ 76,688 $ 57,278
====================== ====================
Liabilities and shareholders' equity
Current liabilities:
Accounts payable and accrued expenses.......................... 17,884 9,646
Sales returns payable.......................................... 1,064 3,664
Current portion of long-term debt.............................. 3,775 -
Other current liabilities...................................... 6,855 4,102
---------------------- --------------------
Total current liabilities...................................... 29,578 17,412
Convertible subordinated notes................................. 1,505 4,147
Long-term debt, less current portion........................... 3,775 -
Other non-current liabilities.................................. 3,871 4,115
---------------------- --------------------
38,729 25,674
</TABLE>
3
<PAGE>
ITEM 1 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)
(In thousands except share data)
<TABLE>
<CAPTION>
June 30, December 31,
-------- ------------
2000 1999 (1)
---- --------
(unaudited)
-----------
<S> <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 June 30, 2000 and
3,197,898 at December 31, 1999..........................
Common Stock, no par value: 230,634 199,019
Authorized shares -- 15,000,000
Issued and outstanding -- 11,659,965 at June 30, 2000 and
9,404,606 at December 31, 1999..........................
Cumulative translation adjustment.............................. (4,838) (2,177)
Deferred compensation.......................................... (4,361) (5,121)
Accumulated deficit............................................ (187,824) (192,096)
--------------------- --------------------
Total shareholders' equity..................................... 37,959 31,604
--------------------- --------------------
Total liabilities and shareholders' equity..................... $ 76,688 $ 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.
4
<PAGE>
Trikon Technologies, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(In thousands)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------------ ------------------------
June 30, June 30, June 30, June 30,
2000 1999 2000 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues:
Product sales $ 25,651 $ 10,813 $ 44,293 $ 19,529
License revenues................. 350 2,144 350 2,144
---------- ---------- ---------- ----------
26,001 12,957 44,643 21,673
Costs and expenses:
Cost of goods sold............... 14,113 6,625 23,931 12,398
Research and development......... 2,316 1,597 4,016 3,194
Selling, general and 5,802 2,767 10,743 6,630
administrative..................
---------- ---------- ---------- ----------
22,231 10,989 38,690 22,222
---------- ---------- ---------- ----------
Income (Loss) from operations 3,770 1,968 5,953 (549)
Interest (expense), net.......... (52) (48) (107) (114)
---------- ---------- ---------- ----------
Income (Loss) before income tax 3,718 1,920 5,846 (663)
provision........................
Income tax provision............. 48 38 277 84
---------- ---------- ---------- ----------
Net income (loss) $ 3,670 $ 1,882 $ 5,569 $ (747)
========== ========== ========== ==========
Net income (loss) applicable $ 3,398 $ 1,262 $ 4,743 $ (1,967)
to common shares
========== ========== ========== ==========
Earnings (loss) per common share
data:
Basic 0.35 0.15 0.52 (0.24)
---------- ---------- ---------- ----------
Diluted 0.33 0.15 0.49 (0.24)
---------- ---------- ---------- ----------
Average common shares used in the
calculation:
Basic 9,741 8,253 9,203 8,253
Diluted 10,327 8,405 9,779 8,253
</TABLE>
See Notes to Unaudited Condensed Consolidated Financial Statements.
5
<PAGE>
Trikon Technologies, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands)
<TABLE>
<CAPTION>
Six months ended
---------------------------------------------------
June 30, June 30,
2000 1999
-------------------- ----------------------
<S> <C> <C>
Net cash arising from (used in) operating activities............ $ (4,379) $ 471
INVESTING ACTIVITIES
Net purchases of property, equipment and leasehold (2,250) (35)
improvements.................................................
FINANCING ACTIVITIES
Proceeds of medium term bank loan............................. 7,550 -
Receipts (payments) - capital lease obligations.............. 32 (121)
-------------------- ----------------------
Net cash arising from (used in) financing activities.......... 7,582 (121)
-------------------- ----------------------
Net increase in cash and cash equivalents....................... 953 315
Cash and cash equivalents at beginning of period 3,927 7,891
-------------------- ----------------------
Cash and cash equivalents at end of period $ 4,880 $ 8,206
==================== ======================
</TABLE>
See Notes to Unaudited Condensed Consolidated Financial Statements.
6
<PAGE>
Trikon Technologies, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 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 six months ended June 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.
During December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements". SAB
101 provides guidance on the recognition, presentation and disclosure of revenue
in the financial statements. Implementation of guidance prescribed in SAB 101
and which all registrants are expected to apply, would result in a change in the
Company's revenue recognition policy as applied to system sales from the date of
shipment and transfer of title to the date of final acceptance which would
therefore have the effect of later revenue recognition. Because the Company has
complied with generally accepted accounting principles for its historical
revenue recognition, a change in its revenue recognition policy resulting from
SAB 101 would be accounted for in the fourth quarter of fiscal 2000 and reported
in the financial statements for the year ending December 31, 2000. Any
consequent deferral of revenue for shipments previously reported as revenue
which had not been accepted by customers would result in a cumulative adjustment
in the fourth quarter of fiscal 2000 in respect of shipments not accepted as of
December 31, 1999. This adjustment would have a material adverse effect on
reported net income for the year ending December 31, 2000. The Company is still
reviewing its assessment of the detailed impact of SAB 101 on its financial
statements. However, implementation of SAB 101 will not affect the fundamental
aspects of the Company's operations as measured by its shipments and cash flow.
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>
June 30, December 31,
2000 1999
------------------------ --------------------
<S> <C> <C>
Components.......................... $ 3,474 $ 3,614
Work in process..................... 19,884 13,840
Finished goods...................... 1,680 1,802
------------------------ --------------------
$ 25,038 $ 19,256
======================== ====================
</TABLE>
NOTE C NET INCOME (LOSS) APPLICABLE TO COMMON SHARES
Net income (loss) applicable to common shares is the net income (loss) for the
period less preferred stock dividend costs for the period. Preferred stock
dividend costs amounted to $ 272,000 for the quarter ended June 30, 2000 and
$826,000 for the six months ended June 30, 2000 compared with $620,000 for the
quarter ended June 30, 1999 and $1.22 million for the six months ended June 30,
1999.
NOTE D NET INCOME (LOSS) PER SHARE
Basic and diluted earnings (loss) 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. Basic earnings
(loss) per share for the three and six months ended June 30, 2000 and June 30,
1999 excludes the effect of 1,149,281 restricted shares of common stock which
are contingently issuable to the Company's Chairman of the
7
<PAGE>
Board. Diluted earnings (loss) per share for all periods excludes the effects of
the restricted common stock because under the treasury stock method these shares
are anti-dilutive. Diluted loss per share for the six months ended June 30, 1999
also excludes the effect of all outstanding stock options since they are anti-
dilutive for periods in which the Company incurs a net loss.
NOTE E COMPREHENSIVE INCOME (LOSS)
Comprehensive income (loss) comprises net income (loss) and currency translation
adjustment for the period. Translation adjustments were ($2.3 million) and ($2.7
million) for the three and six months ended June 30, 2000 respectively and
$(1.0 million) and $(2.1million) for the three and six months ended June 30,
1999 respectively. Total comprehensive income for the three and six months ended
June 30, 2000 were $1.4 million and $2.9 million respectively. Total
comprehensive income (loss) for the three and six months ended June 30, 1999
were $0.9 million and $(2.8 million) respectively.
NOTE F CONVERTIBLE SUBORDINATED NOTES
During the first half of fiscal 2000, Trikon exchanged $2,642,000 of 7 1/8%
Convertible Subordinated Notes due 2001 plus accrued interest for 204,493 shares
of Common Stock.
NOTE G 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 option of the Company, in cash or additional shares of
preferred stock or any combination thereof. 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 issue, 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 six months ended June 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.
8
<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 of Trikon should be read in conjunction with the
consolidated financial statements of Trikon 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. Such risks and uncertainties
include but are not limited to, availability of financial resources adequate for
the Company's short, medium- and long-term needs, product demand and market
acceptance, uncertainty about the effectiveness of the restructuring and the
adequacy of the provisions made in connection with the restructuring, 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 develops, manufactures, markets and services semiconductor equipment
for the worldwide semiconductor manufacturing industry.
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 Six months ended
--------------------------------------------------------------------------------
June 30, June 30, June 30, June 30,
2000 1999 2000 1999
----- ----- ----- -----
<S> <C> <C> <C> <C>
Product revenues........................... 98.7% 83.5% 99.2% 90.1%
License revenues........................... 1.3 16.5 0.8 9.9
--------------------------------------------------------------------------------
Total revenues............................. 100.0 100.0 100.0 100.0
Cost of goods sold 54.3 51.1 53.6 57.2
--------------------------------------------------------------------------------
Gross margin............................... 45.7 48.9 46.4 42.8
Operating expenses:
Research and development................. 8.9 12.3 9.0 14.7
Selling, general and administrative...... 22.3 21.4 24.1 30.6
--------------------------------------------------------------------------------
Total operating expenses................... 31.2 33.7 33.1 45.3
--------------------------------------------------------------------------------
Income (loss) from operations.............. 14.5 15.2 13.3 (2.5)
Interest expense, net...................... (0.2) (0.4) (0.2) (0.5)
--------------------------------------------------------------------------------
Income (loss) before income tax benefit.... 14.3 14.8 13.1 (3.0)
Income tax provision....................... 0.2 0.3 0.6 0.4
--------------------------------------------------------------------------------
Net income (loss).......................... 14.1% 14.5% 12.5% (3.4)%
================================================================================
</TABLE>
PRODUCT REVENUES. Product revenues for the second quarter of fiscal 2000
increased 137% to $25.6 million compared to $10.8 million for the second quarter
of fiscal 1999. Product revenues for the six months ended June 30, 2000
increased by 127% to $44.3 million compared with $19.5 million for the six
months ended June 30, 1999. The
9
<PAGE>
increases in the three and six month periods ended June 30, 2000 over the same
periods of 1999 are due to increased shipment of products.
Sales outside of the United States accounted for approximately 83% of total
revenues in the second quarter of 2000 and 63% of total revenues in the second
quarter of 1999. Sales outside the United States accounted for approximately
80% and 63% of total revenues in the six months ended June 30, 2000 and 1999,
respectively. Excluding license revenues, sales outside the United States
accounted for 76% of product revenues for the second quarter of 1999 and 70% of
product revenues for the six months ended June 30, 1999. 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.
During December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements". SAB
101 provides guidance on the recognition, presentation and disclosure of revenue
in the financial statements. Implementation of guidance prescribed in SAB 101
and which all registrants are expected to apply, would result in a change in the
Company's revenue recognition policy as applied to system sales from the date of
shipment and transfer of title to the date of final acceptance which would
therefore have the effect of later revenue recognition. Because the Company has
complied with generally accepted accounting principles for its historical
revenue recognition, a change in its revenue recognition policy resulting from
SAB 101 would be accounted for in the fourth quarter of fiscal 2000 and reported
in the financial statements for the year ending December 31, 2000. Any
consequent deferral of revenue for shipments previously reported as revenue,
which had not been accepted by customers would result in a cumulative adjustment
in the fourth quarter of fiscal 2000 in respect of shipments not accepted as of
December 31, 1999. This adjustment would have a material adverse effect on
reported net income for the year ending December 31, 2000. The Company is still
reviewing its assessment of the detailed impact of SAB 101 on its financial
statements. However, implementation of SAB 101 will not affect the fundamental
aspects of the Company's operations as measured by its shipments and cash flow.
LICENSE REVENUES. License revenues in the quarter ended June 30, 2000 relate to
power supply technology. The license provides for royalty income based upon
product sales using the technology over the next seven years with a minimum of
$500,000 over that period. The license income in the three and six month periods
ended June 30, 1999 was 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. Excluding license revenues, the Company's
gross margin on product revenues for the second quarter of fiscal 2000 was 45%
as compared to 39% for the second quarter of fiscal 1999. For the six months
ended June 30, 2000, the gross margin on product sales was 46% compared with 37%
for the six months ended June 30, 1999. The improvements in gross margins in the
current fiscal year reflect productivity gains resulting from increased
production volumes.
RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses for the
three and six months ended June 30, 2000 were $2.3 million and $4.0 million, or
8.9% and 9.0% of total revenues respectively. This compares with $1.6 million
and $3.2 million, or 12% and 15% of total revenues respectively, for the same
periods of fiscal 1999. The major focus of the Company's research and
development efforts continues to be the development of new processes in further
advancing its proprietary PVD, CVD and etch technologies as well as adding
enhancements to its existing products.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses for the second quarter of fiscal 2000 were $5.8 million,
or 22% of total revenues, compared to $2.8 million, or 21% of total revenues, in
the second quarter of fiscal 1999. Selling, general and administrative expenses
for the quarter ended June 30, 2000 included a non-recurring charge of $1.5
million in respect of a conditional bonus due to the Company's Chairman in
connection with the Company's restructuring and includes exchange gains of $0.7
million. Selling, general and administrative expenses in the three months ended
June 30, 1999 are stated after release of an allowance against accounts
receivable of $1.1 million. Excluding these items, selling, general and
administrative expenses were 19% of total revenues in the second quarter of
fiscal 2000 and 30% of total revenues in the second quarter of fiscal 1999.
Selling, general and administrative expenses for the first six months of 2000
were $10.7 million or 24% of total revenues compared with $6.6 million or 31% of
total revenues in the same period of 1999.
10
<PAGE>
INCOME (LOSS) FROM OPERATIONS. The Company realized income from operations of
$3.8 million in the second quarter of 2000 compared with $2.0 million in the
second quarter of fiscal 1999. The income from operations in second quarter of
fiscal 2000 is after a non-recurring charge of $1.5 million and exchange gains
of $0.7 million. The income from operations in the second quarter of fiscal 1999
was after release of an allowance against accounts receivable of $1.1 million.
During the first half of 2000, operating income was $6.0 million compared with
an operating loss of $0.5 million in the same period of 1999. The improvement in
operating result between the three and six month periods ended June 30, 1999 and
the same periods of the current fiscal year was due to increased revenues and
improved gross margins less increases in operating expenses.
INTEREST EXPENSE, NET. Interest expense, net was $52,000 in the second quarter
of fiscal 2000, compared with $48,000 in the second quarter of fiscal 1999, and
was $107,000 in the first half of 2000 compared with $114,000 in the first half
of 1999. The interest expense is primarily due to the accrual of interest
payable to the holders of the convertible debt. The reduction in interest
expense between the first quarter and half of 1999 and the same periods of 2000
arises from the elimination of interest due on 7 1/8% Convertible Subordinated
Notes due 2001 exchanged for shares of Common Stock during the six months ended
June 30, 2000. Interest expense for the half years ended June 30, 2000 and 1999
is net of interest income of $0.1 million.
INCOME TAXES. The income tax charges for the three and six months ended June
30, 2000 and 1999 represent overseas tax on income arising in certain foreign
subsidiaries in those periods.
The Company's ability to use its 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.
The Company has 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, the Company's 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.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 2000, the Company had $4.9 million in cash and cash equivalents,
compared to $3.9 million at December 31, 1999. During the quarter ended June 30,
2000, the Company drew down a term loan of 5 million British Pounds
(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
7.73% per annum. The company also has an overdraft (credit) facility with the
same bank of up to 7.5 million British Pounds ($11.3 million). No amount is
presently outstanding under this facility. The increase in cash and cash
equivalents for the second quarter, 2000 resulted from the drawn down of the
medium term loan less cash outflow from operating activities.
During the first half of fiscal 2000, Trikon has issued 2,255,359 shares of its
common stock in exchange for an aggregate of $2,642,000 face value of its
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, Trikon has
reduced its interest expense and dividend obligations.
The Company expects that its cash balance and anticipated cash flow will be
sufficient to meet its normal operating requirements over the medium term.
YEAR 2000
The Company has not incurred any material costs in connection with the year 2000
issue in the first half of fiscal 2000 and management are not aware of any
related issues that will result in material future costs.
11
<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.
The Company's earnings and cash flow are subject to fluctuations in foreign
currency exchange rates. Significant factors affecting this risk include the
Company's 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. The Company
constantly monitors currency exchange rates and matches currency availability
and requirements whenever possible. The Company 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 June 30, 2000 and December 31,
1999 the Company 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 third 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
$1.9 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 $2.6 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 than 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.
12
<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.
13
<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: August 8, 2000 /s/Nigel Wheeler
------------------------------
Nigel Wheeler
Chief Executive Officer, Chief
Operating Officer, President and
Director
/s/Jeremy Linnert
------------------------------
Jeremy Linnert
Chief Financial Officer
14
<PAGE>
Trikon Technologies, Inc.
EXHIBIT INDEX
Exhibit No. Page No. Description
----------- -------- -----------
27.1 Financial Statement Data
15
