SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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 29, 1997
Commission file number 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 Identification No.)
incorporation or organization)
500 Donald Lynch Boulevard, Marlboro, Massachusetts 01752
(Address of principal executive offices)
(508)481-8896
(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 June 29, 1997.
Common Stock, $.01 par value 3,672,017
(Title of each class) (Number of shares)
<PAGE>
ASECO CORPORATION
TABLE OF CONTENTS
Page
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets (unaudited)
at June 29, 1997 and March 30, 1997 3
Condensed Consolidated Statements of Operations (unaudited)
for the three months ended June 29, 1997
and June 30, 1996 4
Condensed Consolidated Statements of Cash Flows (unaudited)
for the three months ended June 29, 1997 and
June 30, 1996 5
Notes to Condensed Consolidated Financial Statements 6-7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 10
Item 2. Changes in Securities 10
Item 3. Defaults upon Senior Securities 10
Item 4. Submission 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
PART I. FINANCIAL INFORMATION
<PAGE>
Item 1. Condensed Consolidated Financial Statements
ASECO CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT SHARE DATA) June 29, 1997 March 30, 1997
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $7,532 $14,082
Accounts receivable, less allowance
For doubtful accounts of $526,000 at
June 29, 1997 and $407,000 at
March 30, 1997 9,847 9,153
Inventories, net 12,002 9,238
Prepaid expenses and other current
assets 1,953 1,414
------- -------
Total current assets 31,334 33,887
Plant and equipment, at cost 6,092 5,179
Less accumulated depreciation and
amortization 3,156 2,952
------- -------
2,936 2,227
Other assets, net 2,566 526
------- -------
$36,836 $36,640
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Line of credit $81 $--
Accounts payable 5,494 2,091
Accrued expenses 3,907 2,608
Income taxes payable 453 321
Current portion of capital lease
obligations 13 13
------- -------
Total current liabilities 9,948 5,033
Deferred taxes payable 465 465
Long-term capital lease obligations 35 29
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 3,672,017 and 3,664,519
shares at June 29, 1997 and
March 30, 1997, respectively 37 37
Translation adjustment 12
Additional paid in capital 17,645 17,642
Retained earnings 8,694 13,434
------- -------
Total stockholders' equity 26,388 31,113
------- -------
$36,836 $36,640
======= =======
</TABLE>
See notes to condensed consolidated financial statements
<PAGE>
ASECO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
Three months ended
June 29,1997 June 30, 1996
<S> <C> <C>
Net sales $8,865 $11,001
Cost of sales 4,820 5,614
------- -------
Gross profit 4,045 5,387
Research and development 1,356 1,235
Selling, general and administrative
expense 2,473 2,406
Acquired in-process research
and development 4,900 ---
------- -------
Income (loss) from operations (4,684) 1,746
Other income (expense):
Interest income 169 158
Interest expense (6) (1)
------- -------
163 157
------- -------
Income (loss) before income taxes (4,521) 1,903
Income tax expense 219 628
------- -------
Net income (loss) $(4,740) $1,275
======== =======
Earnings (loss) per share ($1.29) $.34
======== =======
Shares used in computing
earnings (loss) per share 3,665,000 3,708,000
</TABLE>
See notes to condensed consolidated financial statements
<PAGE>
ASECO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
(in thousands) Three months ended
June 29,1997 June 30, 1996
<S> <C> <C>
Operating activities:
Net income (loss) $(4,740) $1,275
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 269 222
Acquired in-process research
and development 4,900
Changes in assets and liabilities:
Accounts receivable 64 572
Inventories, net (1,990) (1,215)
Prepaid expenses and other current assets (327) (321)
Accounts payable and accrued expenses 2,123 (319)
Income taxes payable 132 318
------- -------
Total adjustments 5,171 (743)
------- -------
Cash provided by operating activities 431 532
Investing activities:
Acquisitions net of cash acquired (6,079) --
Acquisition of plant and equipment (457) (178)
Increase in software development costs
and other assets (50) (121)
------- -------
Cash used in investing activities (6,586) (299)
Financing activities:
Net proceeds from issuance of common
stock 3 109
Payments on working capital line of
credit (395)
Payments of long-term capital lease
obligations (4) (3)
------- -------
Cash used/provided by financing
activities (396) 106
------- -------
Net increase (decrease)
in cash and cash equivalents (6,551) 339
Effect of exchange rate changes on cash 1 --
Cash and cash equivalents at the beginning
of period 14,082 14,083
------- -------
Cash and cash equivalents at the end of
Period $7,532 $14,422
======= =======
</TABLE>
See notes to condensed consolidated financial statements
<PAGE>
ASECO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED JUNE 29, 1997
1. 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. Operating results for the three-
month period ended June 29, 1997 are not necessarily indicative of the results
that may be expected for the year ended March 29, 1998. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Company's annual report on Form 10-K for the year
ended March 30, 1997.
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.
In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement No. 128 "Earnings Per Share" which is required to be adopted for the
quarter ending December 28, 1997. At that time, the Company will be required
to change the method currently used 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.
For the comparative first quarters ended June 29, 1997 and June 30, 1996,
earnings (loss) per share pursuant to Statement 128 would have been:
<TABLE>
<CAPTION>
June 29, 1997 June 30, 1996
<S> <C> <C>
Basic earnings (loss) per share ($ 1.29) $.35
Weighted average shares outstanding 3,665,000 3,619,000
Diluted earnings (loss) per share ($ 1.29) $.34
Weighted average common and common
equivalent shares 3,665,000 3,708,000
</TABLE>
3. Inventories consisted of:
(in thousands)
June 29, 1997 March 30, 1997
Raw Material $7,308 $4,996
Work in Process 2,556 1,612
Finished Goods 2,138 2,630
------- -------
$12,002 $9,238
======= =======
4. On May 23, 1997, the Company acquired 100% of the outstanding stock of
Western Equipment Developments (Holdings) Ltd. ("WED") for approximately
$6,000,000 in cash. WED designs, manufactures and markets integrated circuit
wafer handling robot systems used to load, sort and transport wafers during
the inspection stage of the semiconductor manufacturing process. The
acquisition was accounted for as a purchase and accordingly, the results of
operations of the acquired business have been included in the Company's
consolidated financial
<PAGE>
statements commencing May 23, 1997. In connection with the acquisition, the
Company allocated a portion of the purchase price to in-process research and
development which resulted in a one-time charge to operations of approximately
$4.9 million. The following table summarizes the unaudited pro-forma
consolidated results of operations as if the acquisition had been made at the
beginning of each of the periods presented:
<TABLE>
<CAPTION>
Quarter Ended
June 29, 1997 June 30, 1996
<S> <C> <C>
Net sales $9,894 $11,970
Net income (6,129) (4,181)
Earnings per share $(1.67) $(1.15)
</TABLE>
5. In July 1997, the Financial Accounting Standards Board (FASB) issued
Statement No. 130 "Reporting Comprehensive Income" which is required to be
adopted for the quarter ending June 28, 1998. The adoption of this standard
is not expected to have a material impact on the Company's financial position
or results of operations.
6. In July 1997, the Financial Accounting Standards Board (FASB) issued
Statement No. 131 "Disclosure About Segments of an Enterprise and Related
Information" which is required to be adopted for the quarter ending June 28,
1998. The adoption of this standard is not expected to have a material impact
on the Company's financial position or results of operations.
<PAGE>
Item 2.
Management's Discussion and Analysis of Financial Condition and
Results of Operations
Three months ended June 29, 1997
Results of Operations
Net sales for the first quarter of fiscal 1998 decreased 19% to $8.9 million
compared to $11.0 million for the first quarter of fiscal 1997. The decrease
in net sales resulted from fewer unit shipments during the first quarter of
fiscal 1998 compared to the first quarter of fiscal 1997 as a result of an
industry wide market downturn.
International sales represented approximately 35% of net sales for the first
quarter of fiscal 1998 versus 62% in the first quarter of fiscal 1997. The
decrease in international sales as a percentage of total sales resulted from
several domestic customers, who had curtailed ordering activity over the past
year as a result of unfavorable market conditions, placing orders in the first
quarter of fiscal 1998. International sales for the first quarter of fiscal
1998 were $3.1 million versus $6.9 million for the first quarter of fiscal
1997. Approximately 59% of all international sales were to customers located
in the Pacific Rim region.
Gross margin for the first quarter of fiscal 1998 was 46% compared to 49% in
the same quarter last year. The decline resulted from volume discounts
associated with several large orders shipped during the first quarter of
fiscal 1998 and from a higher mix of lower margin product sales during such
quarter.
Research and development expenses increased 10% to $1.4 million in the first
quarter of fiscal 1998 from $1.2 million in the first quarter of fiscal 1997.
Research and development expenses also increased as a percentage of sales to
15% in the first quarter of fiscal 1998 from 11% in the first quarter of
fiscal 1997 due to increased research and development spending and the decline
in net sales. The increase in research and development spending resulted from
the Company's efforts to complete a new test handler model for introduction
in July 1997. Despite the decline in net sales, the Company is committed to
maintaining its development spending at planned levels regardless of
fluctuations in the market.
During the first quarter of fiscal 1998, the Company also recorded a one-time
charge to earnings of $4.9 million for acquired in-process research and
development related to the Company's acquisition of Western Equipment
Developments Holdings ("WED") (See Note 4 to the Condensed Consolidated
Financial Statements included herein).
Selling, general and administrative expenses for the first quarter of fiscal
1998 were $2.5 million versus $2.4 million for the first quarter of fiscal
1997. Selling, general and administrative expenses also increased as a
percentage of sales to 28% in the first quarter of fiscal 1998 from 22% in the
first quarter of fiscal 1997. The increase in selling, general and
administrative expenses was due primarily to the Company's establishment of an
office in Singapore to provide spares and service support and technical
assistance and training.
Operating loss in the first quarter of fiscal 1998 was $4.7 million versus
operating income of $1.7 million in the first quarter of fiscal 1997. The
operating loss of $4.7 million was attributable to the one-time charge to
earnings of $4.9 million relating to the acquired in-process research and
development associated with the acquisition of WED.
The effective tax rate increased from 33% in the first quarter of fiscal 1997
to 35% in the first quarter of fiscal 1998 due primarily to the decrease
in international sales, which are generally taxed at a lower
rate. The one-time charge of $4.9 million incurred by the Company in the
first quarter of fiscal 1998 for acquired in-process research and development
is not deductible for tax purposes and therefore had no impact on the
Company's effective tax rate for the first quarter of fiscal 1998.
<PAGE>
As a result of the foregoing, net loss for the first quarter of fiscal 1998
was $4.7 million, or $1.29 per share, as compared to net income of $1.3
million, or $.34 per share, for the first quarter of fiscal 1997.
Liquidity and Capital Resources
The Company ended the first quarter of fiscal 1998 with a cash position of
approximately $7.5 million. Additionally, the Company had an unsecured line
of credit with a bank in the amount of $5.0 million against which there were
no borrowings at the end of the first quarter of fiscal 1998.
The Company generated $431,000 of cash from operations during the first
quarter of fiscal 1998. Accounts receivable increased approximately $700,000
in the first quarter of fiscal 1998 because of an increase in net sales from
the fourth quarter of fiscal 1997. Inventory increased approximately $2.8
million during the first quarter of fiscal 1998 as the result of the Company
beginning to purchase inventory for the production of its first units of a
newly introduced test handler coupled with the inclusion of WED's inventory as
a result of the acquisition. Accounts payable and accrued expense increased
approximately $4.9 million as a result of both increases in material receipts
and the inclusion of WED's current liabilities in the first quarter fiscal
1998 balance sheet.
The Company used approximately $6.6 million in cash during the first quarter
of fiscal 1998, most of which was used to fund the Company's acquisition of
WED. Additionally, the Company spent approximately $457,000 on capital
equipment purchases and $50,000 to fund internal software development costs.
The Company used cash from financing activities in the first quarter of fiscal
1998 of $396,000, primarily to pay down WED's outstanding working line of
credit.
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 for at least the next twelve months.
Cautionary Statement for Purposes of "Safe Harbor" Provisions of the Private
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 10K for the fiscal year ended
March 30, 1997. 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.
<PAGE>
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:
Item 5. Other Information:
None.
Item 6. Exhibits and reports on Form 8-K:
a. Exhibits - None
b. The Company filed a report on Form 8-K with the Securities and
Exchange Commission on May 30, 1997.
<PAGE>
ASECO CORPORATION
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.
Signature Title Date
/s/ Carl S. Archer, Jr. President and Chief Executive August 13, 1997
- ------------------------ Officer (principal executive
Carl S. Archer, Jr. officer)
/s/ Sebastian J. Sicari Vice President, Finance and August 13, 1997
- ------------------------ Administration, Chief Financial
Sebastian J. Sicari Officer, Treasurer (principal
financial and accounting officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ASECO
CORPORATION'S CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE QUARTER
ENDED JUNE 29, 1997 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-29-1998
<PERIOD-START> MAR-31-1997
<PERIOD-END> JUN-29-1997
<CASH> 7,532
<SECURITIES> 0
<RECEIVABLES> 9,847
<ALLOWANCES> 526
<INVENTORY> 12,002
<CURRENT-ASSETS> 31,334
<PP&E> 2,936
<DEPRECIATION> 3,156
<TOTAL-ASSETS> 36,836
<CURRENT-LIABILITIES> 9,948
<BONDS> 0
0
0
<COMMON> 37
<OTHER-SE> 26,351
<TOTAL-LIABILITY-AND-EQUITY> 36,836
<SALES> 8,865
<TOTAL-REVENUES> 8,865
<CGS> 4,820
<TOTAL-COSTS> 4,820
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (6)
<INCOME-PRETAX> (4,521)
<INCOME-TAX> 219
<INCOME-CONTINUING> (4,740)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,740)
<EPS-PRIMARY> (1.29)
<EPS-DILUTED> (1.29)
</TABLE>
