<PAGE>
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 September 28, 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 September 28, 1997.
Common Stock, $.01 par value 3,711,681
(Title of each class) (Number of shares)
1
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ASECO CORPORATION
TABLE OF CONTENTS
<TABLE>
Page
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<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets (unaudited)
at September 28, 1997 and March 30, 1997 3
Condensed Consolidated Statements of Operations (unaudited)
for the three and six months ended September 28, 1997
and September 29, 1996 4
Condensed Consolidated Statements of Cash Flows (unaudited)
for the six months ended September 28, 1997 and
September 29, 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
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2
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PART 1. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
ASECO CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
<TABLE>
<CAPTION>
September 28, March 30,
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) 1997 1997
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 6,324 $ 14,082
Accounts receivable, less allowance
for doubtful accounts of $498,780 at
September 28, 1997 and $407,000 at March 30, 1997 12,428 9,153
Inventories, net 13,294 9,238
Prepaid expenses and other current assets 1,880 1,414
------------- -------------
Total current assets 33,926 33,887
Plant and equipment, at cost 7,728 5,179
Less accumulated depreciation and amortization 4,144 2,952
------------- -------------
3,584 2,227
Other assets, net 3,595 526
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$ 41,105 $ 36,640
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Line of credit $ 2,350 $ --
Accounts payable 6,001 2,091
Accrued expenses 4,573 2,608
Income taxes payable 443 321
Current portion of capital lease obligations 13 13
------------- -------------
Total current liabilities 13,380 5,033
Deferred taxes payable 465 465
Long-term capital lease obligations 32 29
Stockholders' equity
Preferred stock, $.01 par value, 1,000,000
shares authorized, none issued and outstanding -- --
Common stock, $.01 par value: Authorized 15,000,000
shares, issued and outstanding 3,711,681 and 3,664,519
shares at September 28, 1997 and March 30, 1997,
respectively 37 37
Additional paid in capital 18,059 17,642
Retained earnings 9,112 13,434
Foreign currency translation adjustment 20 --
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Total stockholders' equity 27,228 31,113
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$ 41,105 $ 36,640
============= =============
</TABLE>
See notes to condensed consolidated financial statements
3
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ASECO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
(in thousands, except share and per share data)
Three months ended Six months ended
September 28, September 29, September 28, September 29,
1997 1996 1997 1996
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ 11,557 $ 8,989 $ 20,422 $ 19,990
Cost of sales 6,253 4,805 11,073 10,418
----------- ----------- ----------- -----------
Gross profit 5,304 4,184 9,349 9,572
Research and development costs 1,565 1,275 2,921 2,511
Selling, general and
administrative expense 2,985 2,260 5,458 4,668
Acquired in-process research
and development -- -- 4,900 --
----------- ----------- ----------- -----------
Income (loss) from operations 754 649 (3,930) 2,393
Other income (expense):
Interest income 84 164 253 323
Interest expense (33) (2) (39) (4)
Other expense (11) -- (11) --
----------- ----------- ----------- -----------
40 162 203 319
----------- ----------- ----------- -----------
Income (loss) before income taxes 794 811 (3,727) 2,712
Income tax expense 376 273 595 901
----------- ----------- ----------- -----------
Net income (loss) $ 418 $ 538 $ (4,322) $ 1,811
=========== =========== =========== ===========
Earnings (loss) per share $ .11 $ .15 $ (1.18) $ .49
=========== =========== =========== ===========
Shares used in computing
earnings (loss) per share 3,979,000 3,705,000 3,676,000 3,707,000
</TABLE>
See notes to condensed consolidated financial statements
4
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ASECO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)
<TABLE>
<CAPTION>
Six months ended
---------------------------------
September 28, September 29,
1997 1996
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<S> <C> <C>
Operating activities:
Net income (loss) $ (4,322) $ 1,811
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization 621 446
Acquired in-process research and development 4,900 --
Changes in assets and liabilities:
Accounts receivable (2,547) 1,868
Inventories, net (3,868) (1,812)
Prepaid expenses and other current assets (236) (212)
Accounts payable and accrued expenses 2,671 (930)
Income taxes payable 235 (207)
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Total adjustments 1,776 (847)
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Cash provided by (used in) operating activities (2,546) 964
Investing activities:
Acquisitions net of cash acquired (6,079) --
Acquisition of plant and equipment (913) (447)
Increase in other assets (392) (156)
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Cash used in investing activities (7,384) (603)
Financing activities:
Net proceeds from issuance of common stock 307 108
Net increase in borrowings on working capital lines of
credit 1,875 --
Payments of long-term capital lease obligations (7) (7)
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Cash provided by financing activities 2,175 101
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Net increase(decrease) in cash and cash equivalents (7,755) 462
Effect of exchange rate changes on cash (3) --
Cash and cash equivalents at the beginning of period 14,082 14,083
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Cash and cash equivalents at the end of period $ 6,324 $ 14,545
============ ===========
</TABLE>
See notes to condensed consolidated financial statements
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ASECO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED SEPTEMBER 28, 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 and six month periods ended
September 28, 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 three and six month periods ending September 28, 1997 and September
29, 1996, earnings (loss) per share pursuant to Statement 128 would have been:
<TABLE>
<CAPTION>
Three months ended Six months ended
------------------------------------------ ------------------------------------------
September 28, September 29, September 28, September 29,
1997 1996 1997 1996
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<S> <C> <C> <C> <C>
Basic earnings (loss) per share $ .11 $ .15 ($1.18) $ .50
Weighted average shares outstanding 3,685,000 3,632,000 3,676,000 3,625,000
Diluted earnings (loss) per share $ .11 $ .15 ($1.18) $ .49
Weighted average common and common
equivalent shares 3,979,000 3,705,000 3,676,000 3,707,000
3. Inventories consisted of:
</TABLE>
(in thousands)
<TABLE>
<CAPTION>
September 28, March 30,
1997 1997
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<S> <C> <C>
Raw Material $ 7,001 $ 4,996
Work in Process 4,270 1,612
Finished Goods 2,023 2,630
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$ 13,294 $ 9,238
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</TABLE>
6
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4. On May 23, 1997, the Company acquired 100% of the outstanding stock of
Western Equipment Developments (Holdings) Ltd. ("WED"), located in Plymouth,
England, 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 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>
Six months ended
----------------------------------------
September 28, September 29,
1997 1996
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<S> <C> <C>
Net sales $21,451 $22,776
Net loss (5,711) (3,663)
Loss per share ($1.56) ($1.01)
</TABLE>
5. In July 1997, the Financial Accounting Standards Board (FASB) issued
Statement No. 130 "Reporting Comprehensive Income" which is required to be
adopted in the first quarter of fiscal 1999. 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 in the first quarter of fiscal
1999. The adoption of this standard is not expected to have a material impact on
the Company's financial position or results of operations.
7
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Item 2.
Management's Discussion and Analysis of Financial Condition and
Results of Operations
Three and six months ended September 28, 1997
Results of Operations
- ---------------------
Net sales for the second quarter of fiscal 1998 increased 29% to $11.6 million
versus $9 million for the same quarter last year. Net sales for the first six
months of fiscal 1998 increased 2% to $20.4 million compared to $20.0 million
for the first six months of fiscal 1997. The increase in second quarter net
sales resulted primarily from an increase in unit shipments during the second
quarter of fiscal 1998 compared to the second quarter of fiscal 1997.
International sales represented approximately 50% of net sales for the second
quarter of fiscal 1998 versus 44% in the second quarter of fiscal 1997.
Approximately 79% of all international sales were to customers located in the
Pacific Rim region.
Gross margin in the second quarter of fiscal 1998 was 46% compared to 47% in the
same quarter last year. Gross margin for the first six months of fiscal 1998 was
46% compared to 48% in the same period last year. The decline in gross margin
resulted from volume discounts associated with several large quantity orders
shipped during fiscal 1998 and from increased shipments of newer product models
which generally have lower gross margin percentages.
Research and development expenses increased 23% in the second quarter of fiscal
1998 to $1.6 million from $1.3 million in the second quarter of fiscal 1997.
Research and development expenses remained consistent as a percentage of sales
at approximately 14% in both the second quarter of fiscal 1998 and the second
quarter of fiscal 1997. Research and development expenses increased 16% to $2.9
million in the first six months of fiscal 1998 from $2.5 million in the first
six months of fiscal 1997. Increased spending on research and development in the
second quarter of fiscal 1998 was a result of increased spending on the
development of the Company's newest test handler model, the VT8000, and to a
lesser extent, spending associated with the development of Western Equipment
Developments (Holdings) LTD ("WED") newest product a high speed wafer sorter.
Selling, general, and administrative expenses for the second quarter of fiscal
1998 were $3.0 million versus $2.3 million in the second quarter of fiscal 1997.
Selling, general and administrative expenses for the first six months of fiscal
1998 were $5.5 million versus $4.7 million for the first six months of fiscal
1997. Selling, general and administrative expenses also increased as a
percentage of sales to 27% in the first six months of fiscal 1998 from 23% in
the first six months of fiscal 1997. The increase in selling, general and
administrative expenses was due to the inclusion of a complete quarter of
WED expenses in the second quarter operating results and increased spending in
the second quarter on trade shows and marketing related to the introduction of
the Company's newest test handler and WED's new high speed wafer sorter.
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 WED (See Note 4 to the
Condensed Consolidated Financial Statements included herein).
Operating income in the second quarter of fiscal 1998 was $754,000 versus
operating income of $649,000 in the second quarter of fiscal 1997. Operating
loss in the first six months of fiscal 1998 was $3.9 million versus operating
income of $2.4 million in the first six months of fiscal 1997. The year to date
operating
8
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loss of $3.9 million is attributable to the one-time charge to earnings of $4.9
million recorded in the first quarter of fiscal 1998 relating to the acquired
in-process research and development associated with the acquisition of WED.
The effective tax rate for the second quarter of fiscal 1998 was 47% versus 33%
for the same quarter last year. The second quarter rate of 47% resulted as the
Company's was not able to offset losses incurred by WED against income earned in
the United States. The Company recorded a tax provision of $595,000 for the
first six months of fiscal 1998 on a pretax loss of $3.7 million. The tax
provision was recorded as a result of the combination of the first quarter
one-time write-off of in-process research and development which is not
deductible for tax purposes and operating losses of WED for which no tax benefit
was recorded.
As a result of the foregoing, net income for the second quarter of fiscal 1998
was $418,000, or $.11 per share, as compared to net income of $538,000, or $.15
per share, for the second quarter of fiscal 1997. Net loss for the first six
months of fiscal 1998 was $4.3 million, or $1.18 per share, as compared to net
income of $1.8 million, or $.49 per share, for the first six months of fiscal
1997
Liquidity and Capital Resources
- -------------------------------
The Company ended the second quarter of fiscal 1998 with a cash position of
approximately $6.3 million. The Company has an unsecured line of credit with a
bank in the amount of $5.0 million against which there were borrowings of $2.4
million at the end of the second quarter of fiscal 1998. During the quarter, the
Company elected to utilize its working capital line of credit to cover short
term fluctuations in available cash.
The Company used approximately $2.5 million of cash from operations during the
first six months of fiscal 1998. Accounts receivable increased approximately
$3.3 million during the first six months of fiscal 1998 as a result of both the
increase in sales and the inclusion of WED's accounts receivable balance as a
result of the acquisition. Inventory increased approximately $4.0 million during
the first six months of fiscal 1998 as the result of the Company purchasing
inventory for the production of its first units of a newly introduced test
handler and high speed wafer sorter coupled with the inclusion of WED's
inventory as a result of the acquisition. Accounts payable and accrued expense
increased approximately $5.2 million as a result of both increases in material
receipts and the inclusion of WED's current liabilities in the fiscal 1998
balance sheet.
The Company used approximately $7.4 million in cash for investing activities
during the first six months of fiscal 1998, most of which was used to fund the
Company's acquisition of WED. Additionally, the Company spent approximately
$913,000 on capital equipment purchases and $213,000 to fund internal software
development costs.
The Company generated cash from financing activities in the first six months of
fiscal 1998 of approximately $2.2 million, primarily as the result of utilizing
its working capital 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
9
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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.
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:
On August 6, 1997, the Annual Meeting of Stockholders was held and
the following matters were voted upon:
1. Sebastian J. Sicari and Dr. Sheldon Weinig were re-elected as
Directors of the Company to serve for three year terms. For
Mr. Sicari, the vote was 3,276,287 in favor, 17,554 withheld.
For Dr. Weinig, the vote was 3,276,287 in favor, 17,554
withheld.
2. The Board of Directors' selection of Ernst & Young LLP as the
Company's independent auditors for the year ended March 29,
1998 was ratified with 3,275,287 in favor, 13,000 against, and
5,554 abstaining.
Item 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 September 28, 1997
10
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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.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ Carl S. Archer, Jr. President and Chief Executive November 12, 1997
- ------------------------------------ Officer (principal executive officer)
Carl S. Archer, Jr.
/s/ Sebastian J. Sicari Vice President, Finance and November 12, 1997
- ------------------------------------ Administration, Chief Financial
Sebastian J. Sicari Officer, Treasurer (principal financial
officer)
/s/ Mary R. Barletta Vice President, Corporate Controller November 12, 1997
- --------------------------- (principal accounting officer)
Mary R. Barletta
</TABLE>
11
<TABLE> <S> <C>
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ASECO
CORPORATION FINANCIAL STATEMENTS FOR QUARTER ENDED SEPTEMBER 28, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-29-1998
<PERIOD-START> MAR-31-1997
<PERIOD-END> SEP-28-1997
<CASH> 6,324
<SECURITIES> 0
<RECEIVABLES> 12,927
<ALLOWANCES> 499
<INVENTORY> 13,294
<CURRENT-ASSETS> 33,926
<PP&E> 7,728
<DEPRECIATION> 4,144
<TOTAL-ASSETS> 41,105
<CURRENT-LIABILITIES> 13,380
<BONDS> 0
0
0
<COMMON> 37
<OTHER-SE> 27,191
<TOTAL-LIABILITY-AND-EQUITY> 41,105
<SALES> 20,422
<TOTAL-REVENUES> 20,422
<CGS> 11,073
<TOTAL-COSTS> 11,073
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 39
<INCOME-PRETAX> (3,727)
<INCOME-TAX> 595
<INCOME-CONTINUING> (4,322)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,322)
<EPS-PRIMARY> (1.18)
<EPS-DILUTED> (1.18)
</TABLE>
