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 December 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 December 28, 1997.
Common Stock, $.01 par value 3,714,419
(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 December 28, 1997 and March 30, 1997 3
Condensed Consolidated Statements of Operations
(unaudited)for the three and nine months ended
December 28, 1997 and December 29, 1996 4
Condensed Consolidated Statements of Cash Flows
(unaudited)for the nine months ended December 28, 1997
and December 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
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
ASECO CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
<TABLE>
<CAPTION>
(In thousands, except share and per share data)
<S> <C> <C>
December 28, March 30,
1997 1997
ASSETS
Current assets
Cash and cash equivalents $ 2,185 $ 14,082
Accounts receivable, less allowance for doubtful
accounts of $918,000 at December 28, 1997 and
$407,000 at March 30, 1997 14,059 9,153
Inventories, net 12,847 9,238
Prepaid expenses and other current assets 1,768 1,414
------ ------
Total current assets 30,859 33,887
Plant and equipment, at cost 8,225 5,179
Less accumulated depreciation and amortization 4,527 2,952
------ ------
3,698 2,227
Other assets, net 3,408 526
------- -------
$ 37,965 $ 36,640
======= =======
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current liabilities
Line of credit $ 250 $--
Accounts payable 4,682 2,091
Accrued expenses 4,317 2,608
Income taxes payable 436 321
Current portion of capital lease obligations 13 13
------- ------
Total current liabilities 9,698 5,033
Deferred taxes payable 465 465
Long-term capital lease obligations 28 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
3,714,419 and 3,664,519 shares at
December 28, 1997 and March 30, 1997, respectively 37 37
Additional paid in capital 18,089 17,642
Retained earnings 9,600 13,434
Foreign currency translation adjustment 48 --
------ ------
Total stockholders' equity 27,774 31,113
------ ------
$ 37,965 $ 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 Nine months ended
December 28, December 29, December 28, December 29,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Net sales $ 13,551 $ 6,722 $ 33,974 $ 26,712
Cost of sales 7,438 3,595 18,511 14,013
-------- -------- -------- --------
Gross profit 6,113 3,127 15,463 12,699
Research and
development costs 1,945 1,287 4,866 3,798
Selling, general
and administrative
expense 3,288 1,713 8,746 6,381
Acquired in-process
research and
development --- --- 4,900 ---
------- ------- ------- -------
Income (loss) from
operations 880 127 (3,049) 2,520
Other income (expense):
Interest income 42 166 295 489
Interest expense (64) (1) (103) (5)
Other expense, net (33) -- (44) --
------- ------- ------- -------
(55) 165 148 484
------- ------- ------- -------
Income (loss) before
income taxes 825 292 (2,901) 3,004
Income tax expense 337 58 933 959
------- ------- ------- -------
Net income (loss) $ 488 $ 234 $ (3,834) $ 2,045
======= ======= ======= =======
Earnings (loss) per
share, basic $.13 $.06 $(1.04) $.56
Shares used to
compute earnings
(loss) per
share, basic 3,714,000 3,645,000 3,688,000 3,632,000
Earnings (loss)
per share, diluted $.13 $.06 $(1.04) $.55
Shares used in
computing earnings
(loss) per
share, diluted 3,876,000 3,711,000 3,688,000 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)
Nine months ended
December 28, December 29,
1997 1996
<S> <C> <C>
Operating activities:
Net income (loss) $ (3,834) $ 2,045
Adjustments to reconcile net income (loss)
to net cash provided by (used in) operating
activities:
Depreciation and amortization 1,003 679
Deferred income taxes -- (162)
Acquired in-process research and development 4,900 --
Changes in assets and liabilities:
Accounts receivable (1,639) 3,872
Inventories, net (3,309) (1,940)
Prepaid expenses and other current assets (865) (400)
Accounts payable and accrued expenses (815) (3,097)
Income taxes payable 227 (137)
------- -------
Total adjustments (498) (1,185)
------- -------
Cash provided by (used in) operating
activities (4,332) 860
Investing activities:
Acquisitions net of cash acquired (6,079) --
Acquisition of plant and equipment (1,296) (638)
Increase in other assets (295) (207)
------- -------
Cash used in investing activities (7,670) (845)
Financing activities:
Net proceeds from issuance of common stock 337 157
Net decrease in borrowings on working
capital lines of credit (225) --
Payments of long-term capital lease
obligations (11) (10)
------- -------
Cash provided by financing activities 101 147
------- -------
Net increase(decrease) in cash and
cash equivalents (11,901) 162
Effect of exchange rate changes on cash 4 --
Cash and cash equivalents at the
beginning of period 14,082 14,083
------- -------
Cash and cash equivalents at the end of
period $ 2,185 $ 14,245
======= ========
</TABLE>
See notes to condensed consolidated financial statements
<PAGE>
ASECO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED DECEMBER 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 nine month periods ended December 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. In 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings per Share". Statement 128
replaced the previously reported primary and fully diluted earnings per share
with basic and diluted earnings per share. Unlike primary earnings per share,
basic earnings per share excludes any dilutive effects of options, warrants,
and convertible securities. Diluted earnings per share is very similar to the
previously reported fully diluted earnings per share. All earnings per share
amounts for all periods have been presented, and where necessary, restated to
conform to the Statement 128 requirements. The difference between the shares
used to compute basic and diluted earnings (loss) per share is comprised
wholly of the effect of employee stock options.
3. Inventories consisted of:
<TABLE>
<CAPTION>
(in thousands)
December 28, 1997 March 30, 1997
<S> <C> <C>
Raw Material $ 6,621 $ 4,996
Work in Process 3,886 1,612
Finished Goods 2,340 2,630
------- -------
$ 12,847 $ 9,238
======== ========
</TABLE>
<PAGE>
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>
<CAPTION>
Nine months ended
December 28, 1997 December 29, 1996
<S> <C> <C>
Net sales $ 35,002 $ 30,596
Net loss (5,223) (3,647)
Loss per share $ (1.43) $ (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.
<PAGE>
Item 2.
Management's Discussion and Analysis of Financial Condition and
Results of Operations
Three and nine months ended December 28, 1997
Results of Operations
Net sales for the third quarter of fiscal 1998 increased 102% to $13.6 million
versus $6.7 million for the same quarter last year. Net sales for the first
nine months of fiscal 1998 increased 27% to $34.0 million compared to $26.7
million for the first nine months of fiscal 1997. The increase in third
quarter net sales resulted primarily from an increase in unit shipments during
the third quarter of fiscal 1998 compared to the third quarter of fiscal 1997.
International sales represented approximately 34% of net sales for the third
quarter of fiscal 1998 versus 41% in the third quarter of fiscal 1997.
Approximately 88% of all international sales were to customers located in the
Pacific Rim region with the largest proportion of these sales shipped to
Taiwan.
Gross margin in the third quarter of fiscal 1998 was 45% compared to 47% in
the same quarter last year. Gross margin for the first nine months of fiscal
1998 was 46% compared to 48% in the same period last year. The decline in
gross margin resulted from increased shipments of newer product models which
generally have lower gross margin percentages and to a lesser extent volume
discounts associated with several large quantity orders shipped during fiscal
1998.
Research and development expenses increased 51% in the third quarter of fiscal
1998 to $1.9 million from $1.3 million in the third quarter of fiscal 1997.
Research and development expenses decreased as a percentage of sales to 14% in
the third quarter of fiscal 1998 compared with 19% in the third quarter of
fiscal 1997. Research and development expenses increased 28% to $4.9 million
in the first nine months of fiscal 1998 from $3.8 million in the first nine
months of fiscal 1997. The increase in research and development in fiscal
1998 was primarily the result of increased spending on the development of the
Company's newest test handler model, the VT8000.
Selling, general, and administrative expenses for the third quarter of fiscal
1998 were $3.3 million, or 24% of sales, versus $1.7 million, or 26% of sales,
in the third quarter of fiscal 1997. Selling, general and administrative
expenses for the first nine months of fiscal 1998 were $8.7 million, or 26% of
sales, versus $6.4 million, or 24% of sales for the first nine months of
fiscal 1997. The increase in selling, general and administrative expenses was
due to the inclusion of the expenses of WED in third quarter fiscal 1998
results, costs associated with the establishment of a new sales and service
office in Singapore, increased spending on trade shows and marketing related
to the introduction of the Company's newest test handler and WED's new high
speed wafer sorter, and an increase in coverage for potential exposure in
accounts receivable on shipments to Far East countries with higher than
tolerable financial risk.
Operating income in the third quarter of fiscal 1998 was $880,000 versus
operating income of $127,000 in the third quarter of fiscal 1997. Operating
loss in the first nine months of fiscal 1998 was $3.0 million versus operating
income of $2.5 million in the first nine months of fiscal 1997. The year to
date operating loss of $3.0 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 (See Note 4 to the Condensed Consolidated Financial
Statements included herein).
<PAGE>
The effective tax rate for the third quarter of fiscal 1998 was 41% versus 20%
for the same quarter last year. The increase was due to the Company's
inability to offset losses incurred by WED against income earned by the
Company in the United States and to the fact that the third quarter fiscal
1997 tax rate reflected a lower than usual tax provision, the intended effect
of which was to bring the year-to-date fiscal 1997 rate in line with the
projected annual rate of 31%. The Company recorded a tax provision of
$933,000 for the first nine months of fiscal 1998 on a pretax loss of $2.9
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 third quarter of fiscal 1998
was $488,000, or $.13 per share, as compared to net income of $234,000, or
$.06 per share, for the third quarter of fiscal 1997. Net loss for the first
nine months of fiscal 1998 was $3.8 million, or $1.04 per share, as compared
to net income of $2.0 million, or $.55 per share, for the first nine months of
fiscal 1997
Liquidity and Capital Resources
The Company ended the third quarter of fiscal 1998 with a cash position of
approximately $2.2 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
$250,000 at the end of the third quarter of fiscal 1998.
The Company used approximately $4.3 million of cash from operations during the
first nine months of fiscal 1998. Accounts receivable increased
approximately $4.9 million during the first nine 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 $3.6 million during the first nine months of fiscal 1998 as the
result of the Company purchasing inventory for the production of the first
units of its 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 expenses increased approximately $4.3 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 $7.7 million in cash for investing activities
during the first nine months of fiscal 1998, most of which was used to fund
the Company's acquisition of WED. Additionally, the Company spent
approximately $1.3 million on capital equipment purchases and $295,000 to
fund internal software development costs.
The Company generated cash from financing activities in the first nine months
of fiscal 1998 of approximately $101,000, primarily as the result of proceeds
from issuances of common stock.
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:
None.
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 December 28, 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.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ Carl S. Archer, Jr. President and Chief Executive February 11, 1998
- ------------------------ Officer (principal executive
Carl S. Archer, Jr. officer)
/s/ Sebastian J. Sicari Vice President, Finance and February 11, 1998
- ------------------------ Administration, Chief Financial
Sebastian J. Sicari Officer, Treasurer (principal
financial officer)
/s/ Mary R. Barletta Vice President, Corporate February 11, 1998
- ----------------------- Controller
Mary R. Barletta (principal accounting officer)
</TABLE>
<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 DECEMBER 28, 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> SEP-29-1997
<PERIOD-END> DEC-28-1997
<CASH> 2,815
<SECURITIES> 0
<RECEIVABLES> 14,059
<ALLOWANCES> 918
<INVENTORY> 12,847
<CURRENT-ASSETS> 30,859
<PP&E> 3,698
<DEPRECIATION> 4,527
<TOTAL-ASSETS> 37,965
<CURRENT-LIABILITIES> 9,698
<BONDS> 0
0
0
<COMMON> 37
<OTHER-SE> 27,737
<TOTAL-LIABILITY-AND-EQUITY> 37,965
<SALES> 13,551
<TOTAL-REVENUES> 13,551
<CGS> 7,438
<TOTAL-COSTS> 7,438
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (64)
<INCOME-PRETAX> 825
<INCOME-TAX> 337
<INCOME-CONTINUING> 488
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 488
<EPS-PRIMARY> .13
<EPS-DILUTED> .13
</TABLE>
