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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended June 30, 1996
Commission File No. 0-21294
ASECO CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 04-2816806
(State or other jurisdiction of (I.R.S. Employer Indentification No.)
incorporation or organization)
500 Donald Lynch Boulevard, Marlboro, MA. 01752
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area (508) 481-8896
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 to
file such reports), and (2) has been subject to such filing requirements for the
past 90 days.
Yes X No
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Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of June 30, 1996.
Common Stock, $.01 par value 3,635,215
(Title of each class) (Number of shares)
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ASECO CORPORATION
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION Page
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Item 1. Consolidated Condensed Financial Statements
Consolidated Condensed Balance Sheets (unaudited)
at June 30, 1996 and March 31, 1996 3
Consolidated Condensed Statements of Income (unaudited)
for the three months ended June 30, 1996 and July 2, 1995 4
Consolidated Condensed Statements of Cash Flows (unaudited)
for the three months ended June 30, 1996 and July 2, 1995 5
Notes to Consolidated Condensed Financial Statements (unaudited) 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
7-9
PART II. OTHER INFORMATION
Item 1 Legal Proceedings 10
Item 2 Changes in Securities 10
Item 3 Defaults upon Senior Securities 10
Item 4 Submissions of Matters to a Vote of Security Holders 10
Item 5 Other Information 10
Item 6 Exhibits and Reports on Form 8-K 10
Signatures
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ASECO CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(unaudited)
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June 30, March 31,
1996 1996
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(in thousands)
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ASSETS
Current assets
Cash and cash equivalents $ 14,422 $ 14,083
Accounts receivable, less allowance
for doubtful accounts of $575,000
at June 30, 1996 and $397,000
at March 31, 1996 11,774 12,346
Inventories, net 8,274 7,059
Prepaid expenses and other current assets 1,185 864
--------- ---------
Total current assets 35,655 34,352
Plant and equipment, at cost
Machinery and equipment 2,197 2,082
Office furniture and equipment 1,507 1,446
Property under capital lease 578 578
Leasehold improvements 83 81
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4,365 4,187
Less accumulated depreciation and amortization 2,351 2,176
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2,014 2,011
Other assets 392 318
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$ 38,061 $ 36,681
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 3,518 $ 3,441
Accrued expenses 3,527 3,923
Income taxes payable 794 476
Current portion of capital lease
obligations 13 13
--------- ---------
Total current liabilities 7,852 7,853
Deferred taxes payable 370 370
Long-term capital lease obligations 39 42
Stockholders' equity
Preferred stock, $.01 par value, 1,000,000
shares authorized, none issued and outstanding - -
Common stock, $.01 par value:
Authorized 15,000,000 shares, issued and
outstanding 3,635,215 and 3,611,501 shares
at June 30, 1996 and March 31, 1996, respectively 36 36
Additional paid in capital 17,343 17,234
Retained earnings 12,421 11,146
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Total stockholders' equity 29,800 28,416
$ 38,061 $ 36,681
========= =========
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ASECO CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(unaudited)
Three months ended
------------------------------
June 30, July 2,
1996 1995
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(in thousands except share and per share amounts)
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Net sales $ 11,001 $ 9,136
Cost of sales 5,614 4,604
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Gross profit 5,387 4,532
Research and development costs 1,235 1,142
Selling, general and administrative expenses 2,406 2,061
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Income from operations 1,746 1,329
Other income (expense):
Interest expense (1) (8)
Interest income 158 103
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157 95
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Income before income taxes 1,903 1,424
Income tax expense 628 498
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Net income $ 1,275 $ 926
========== ==========
Earnings per share:
Earnings per share $ 0.34 $ 0.25
Weighted average common and common
equivalent shares outstanding 3,708,000 3,724,000
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ASECO CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(unaudited)
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Three months ended
--------------------------------
June 30, July 2,
1996 1995
($ in thousands)
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Operating activities
Net income $ 1,275 $ 926
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 222 133
Changes in assets and liabilities:
Accounts receivable 572 (939)
Inventories, net (1,215) (204)
Prepaid expenses and other current assets (321) 55
Accounts payable and accrued expenses (319) 257
Income taxes payable 318 130
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Total adjustments (743) (568)
Cash provided by
operating activities 532 358
Investing activities
Acquisition of plant and equipment (178) (81)
Increase in software development
costs and other assets (121) ---
-------- --------
Cash used in investing activities (299) (81)
Financing activities
Net proceeds from issuance of common stock 109 28
Reductions of long-term capital lease obligations (3) (3)
-------- --------
Cash provided by financing activities 106 25
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Net increase in cash and
cash equivalents 339 302
Cash and cash equivalents at beginning of period 14,083 9,301
-------- --------
Cash and cash equivalents at end of period $ 14,422 $ 9,603
======== ========
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ASECO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED JUNE 30, 1996
(Unaudited)
1. In the opinion of management, the accompanying unaudited financial statements
include all adjustments necessary for a fair presentation of the results for
this interim period and the comparable periods presented. The results of
operations for the interim periods are not necessarily indicative of results for
any future interim period or for the entire year. The accompanying financial
statements should be read in conjunction with the Company's Annual Report on
Form 10K for the year ended March 31, 1996.
2. The computations of earnings per share are based on the weighted average
number of outstanding shares of common stock and common equivalent shares (using
the treasury stock method). Fully diluted earnings per share have not been
separately presented as the amount does not differ significantly from primary
earnings per share.
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3. Inventories
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Inventories consisted of: June 30, March 31,
1996 1996
Raw Material $ 3,918,000 $ 3,491,000
Work In Process 1,377,000 2,218,000
Finished Goods 2,979,000 1,350,000
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$ 8,274,000 $ 7,059,000
========= =========
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4. On April 1, 1996, the Company adopted Financial Accounting Standard No. 121
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of" which establishes criteria for the recognition and measurement
of impairment loss associated with long lived assets. Adoption of this standard
did not have a material impact on the Company's financial position or results of
operations.
6
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Item 2
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Three months ended June 30,1996
Results of Operations
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Net sales for the first quarter of fiscal 1997 increased 20% to $11.0 million
compared to first quarter fiscal 1996 net sales of $9.1 million. Sales of newer
products (i.e., S-170, S-200 and S-450 models) accounted for 72% of the machine
sales growth from the first quarter in fiscal 1996. The overall increase in net
sales between the two first quarter periods resulted from both an increase in
total units shipped as well as higher average selling prices due to a shift in
the mix of models shipped.
International sales represented approximately 62% of net sales in the first
quarter of fiscal 1997 versus 35% in the first quarter of fiscal 1996.
Approximately 80% of all international sales were to customers located in the
Pacific Rim region.
Gross margin for the first quarter of fiscal 1997 was 49.0% compared to 49.6% in
the first quarter of fiscal 1996, a .6% decrease in the gross margin percentage.
The lower margin percentage resulted from increasing sales volumes of the
Company's newer models which carry lower margin percentages.
Research and development expenses increased 8% to $1.2 million in the first
quarter of fiscal 1997 from $1.1 million in the first quarter of fiscal 1996.
Engineering programs during the past quarter focused primarily on the
development of new products to augment the Company's broad product offerings,
particularly by addressing segments of the market not currently served, and
enhancement of current products primarily through additional automation and
product versatility through additional conversion kits.
Selling, general and administrative expenses were $2.4 million for the first
quarter of fiscal 1997, up 17% from $2.1 million in the first quarter of fiscal
1996. An increase in sales commission expense accounted for the majority of the
7
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increase in selling, general and administrative expenses for the comparable
periods. Commissions as a percentage of sales rose as the Company's
international sales, which earn a higher commission rate, increased and
commissions also grew as a result of the increased sales volumes. Additionally,
the Company incurred higher costs of information technology and administration
necessary to support the past year's substantial growth and increasing
headcount. However, despite the increase in actual spending in these areas,
growth in selling, general and administrative expenses during the first quarter
of fiscal 1997 did not outpace sales growth.
Operating income in the first quarter of fiscal 1997 grew approximately 31% to
$1.7 million, or 16% of net sales, from $1.3 million, or 15% of net sales, in
the comparable quarter last year.
The tax rate for the first quarter of fiscal 1997 was 33% versus 35% in the
first quarter of fiscal 1996. The lower first quarter 1997 tax rate was
principally a result of anticipated tax benefits to be achieved from a greater
component of international sales during the year as compared to last year.
The foregoing operating results yielded net income for the first quarter of
fiscal 1997 of $1.3 million, or $.34 per share, up 38% from $926,000, or $.25
per share, in the same quarter last year.
Liquidity and Capital Resources
- -------------------------------
The Company ended the first quarter of fiscal 1997 with a cash position of
approximately $14.4 million. Additionally, the Company has an unsecured line of
credit with a bank in the amount of $5.0 million against which there were no
borrowings in the first quarter of fiscal 1997.
The Company generated approximately $532,000 of cash from operating activities
during the first quarter of fiscal 1997. Accounts receivable decreased by
$572,000 during the first quarter of fiscal 1997 keeping days sales outstanding
at levels consistent with the fourth quarter of the prior fiscal year. The
increase in inventory during the first quarter resulted primarily from several
machines built for exhibition at Semicon West in July 1996 and remaining in
ending inventory, as well as from an increase in material receipts primarily due
to a mid-quarter shift in production mix in order to accommodate changes in
customer demand.
8
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The Company used $178,000 in cash during the first quarter of fiscal 1997 to
fund the acquisition of capital equipment and $121,000 to fund internal software
development costs. The Company expects that its investment in capital equipment
in 1997 will be greater than its fiscal 1996 investment because of several
planned capital acquisitions.
The Company generated cash from financing activities in the first quarter of
fiscal 1997 of $106,000, primarily from employee stock purchases under the
Company's employee stock option plan.
The Company believes that funds generated from operations, existing cash
balances and available borrowing capacity will be sufficient to meet the
Company's cash requirements at least for the next twelve months.
Cautionary Statement for Purposes of "Safe Harbor" Provisions of the Private
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Securities Litigation Reform Act of 1995
- ----------------------------------------
The Company's future results are difficult to predict and may be affected by a
number of important risk factors including, but not limited to, the factors
listed in the Company's Annual Report on Form 10-K for the fiscal year ended
March 31, 1996. The Company wishes to caution readers that those important
factors, in some cases, have affected, and in the future could affect, the
Company's actual consolidated quarterly or annual operating results and could
cause those actual consolidated quarterly or annual operating results to differ
materially from those expressed in any forward looking statements made by, or on
behalf of, the Company.
9
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ASECO CORPORATION
PART II - OTHER INFORMATION
Item 1. Legal Proceedings:
None.
Item 2. Changes in Securities:
None.
Item 3. Defaults upon Senior Securities:
None.
Item 4. Submissions of Matters to a Vote of Security Holders:
None
Items 5. Other Information:
None
Item 6. Exhibits and reports on Form 8-K:
a. Exhibits - None
b. There were no reports on Form 8-K filed for the three months ended
June 30, 1996.
10
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ASECO CORPORATION
SIGNATURES
Signature Title Date
/s/ Carl S. Archer, Jr. President, Chief August 14, 1996
----------------------- Executive Officer and
Carl S. Archer, Jr. Chairman of the Board
(principal executive
officer)
/s/ Sebastian J. Sicari Vice President, August 14, 1996
------------------------ Finance and Administration,
Sebastian J. Sicari Chief Financial Officer,
Treasurer and Director
(principal financial and
accounting officer)
11
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ASECO
CORPORATION FINANCIAL STATEMENTS FOR THE QUARTER ENDED JUNE 30, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-30-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 14,422
<SECURITIES> 0
<RECEIVABLES> 12,349
<ALLOWANCES> 575
<INVENTORY> 8,274
<CURRENT-ASSETS> 35,655
<PP&E> 4,365
<DEPRECIATION> 2,351
<TOTAL-ASSETS> 38,061
<CURRENT-LIABILITIES> 7,852
<BONDS> 0
0
0
<COMMON> 36
<OTHER-SE> 29,764
<TOTAL-LIABILITY-AND-EQUITY> 38,061
<SALES> 11,001
<TOTAL-REVENUES> 11,001
<CGS> 5,614
<TOTAL-COSTS> 5,614
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1
<INCOME-PRETAX> 1,903
<INCOME-TAX> 628
<INCOME-CONTINUING> 1,275
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,275
<EPS-PRIMARY> .34
<EPS-DILUTED> .34
</TABLE>
