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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended: December 31, 2019

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: 0-11412

 

AMTECH SYSTEMS, INC.

 

(Exact name of registrant as specified in its charter)

 

Arizona

 

86-0411215

(State or other jurisdiction of

 

(I.R.S. Employer

incorporation or organization)

 

Identification No.)

 

 

 

131 South Clark Drive, Tempe, Arizona

 

85281

(Address of principal executive offices)

 

(Zip Code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Common Stock, par value $0.01 per share

 

ASYS

 

NASDAQ.Global Select Market

Registrant’s telephone number, including area code: 480-967-5146

Indicate by a 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 No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.:

 

Large accelerated filer

 

 

Accelerated filer

Non-accelerated filer

  (Do not check if a smaller reporting company)

 

Smaller Reporting Company

 

 

 

 

Emerging Growth Company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

Shares of Common Stock outstanding as of January 31, 2020: 14,394,072

 

 


AMTECH SYSTEMS, INC. AND SUBSIDIARIES

TABLE OF CONTENTS

 

 

Page

Cautionary Statement Regarding Forward-Looking Statements

3

PART I. FINANCIAL INFORMATION

4

Item 1. Condensed Consolidated Financial Statements

4

Condensed Consolidated Balance Sheets December 31, 2019 (Unaudited) and September 30, 2019

4

Condensed Consolidated Statements of Operations (Unaudited) Three Months Ended December 31, 2019 and 2018

5

Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) Three Months Ended December 31, 2019 and 2018

6

Condensed Consolidated Statements of Shareholders’ Equity (Unaudited) Three Months Ended December 31, 2019 and 2018

7

Condensed Consolidated Statements of Cash Flows (Unaudited) Three Months Ended December 31, 2019 and 2018

8

Notes to Condensed Consolidated Financial Statements (Unaudited)

9

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

20

Overview

20

Results of Operations

22

Liquidity and Capital Resources

25

Off-Balance Sheet Arrangements

26

Contractual Obligations

26

Critical Accounting Policies

26

Impact of Recently Issued Accounting Pronouncements

27

Item 3. Quantitative and Qualitative Disclosures About Market Risk

27

Item 4. Controls and Procedures

27

PART II. OTHER INFORMATION

28

Item 1. Legal Proceedings

28

Item 1A. Risk Factors

28

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

28

Item 3. Defaults Upon Senior Securities

28

Item 4. Mine Safety Disclosures

29

Item 5. Other Information

29

Item 6. Exhibits

29

SIGNATURES

30

 

2


 

Cautionary Statement Regarding Forward-Looking Statements

Unless otherwise indicated, the terms “Amtech,” the “Company,” “we,” “us” and “our” refer to Amtech Systems, Inc. together with its subsidiaries.

Our discussion and analysis in this Quarterly Report on Form 10-Q, our Annual Report on Form 10-K, our other reports that we file with the Securities and Exchange Commission (the “SEC”), our press releases and in public statements of our officers and corporate spokespersons contain “forward-looking” statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Private Securities Litigation Reform Act of 1995. Forward-looking statements give our current expectations or forecasts of future events. You can identify these statements by the fact that they do not relate strictly to historical or current events. We have tried, wherever possible, to identify such statements by using words such as “may,” “plan,” “anticipate,” “seek,” “will,” “expect,” “intend,” “estimate,” “believe,” “continue,” “predict,” “potential,” “project,” “should,” “would,” “likely,” “future,” “target,” “forecast,” “goal,” “observe,” and “strategy” or the negative thereof or variations thereon or similar terminology. Some factors that could cause actual results to differ materially from those anticipated include, among others, future economic conditions, including changes in the markets in which we operate; changes in demand for our services and products; whether continued technological advances and emerging industries will sustain on our long-term performance; difficulties arising out of our divestiture of our solar operations; difficulties in successfully executing our growth initiatives; our ability to take part in the growth of the SiC industry through investments in capacity, product development and people; our ability to expand our customer base and realize future revenue growth from our 300 mm silicon horizontal thermal reaction product solution; our ability to realize further growth within BTU by making investments in product innovation; our ability to identify strong acquisition targets in the semi and SiC growth environment and successfully execute transactions and integrate such targets; the effects of semiconductor trends on our annual goodwill impairment analysis; the effects of competition in the markets in which we operate, including the adverse impact of competitive product announcements or new entrants into our markets and transfers of resources by competitors into our markets; control of costs and expenses; risks associated with new technologies and the impact on our business; legislative, regulatory, and competitive developments in markets in which we operate; possible future claims, litigation or enforcement actions and the results of any such claim, litigation proceeding, or enforcement action; and other circumstances and risks identified in this Quarterly Report or referenced from time to time in our filings with the SEC. These and many other factors could affect Amtech’s future operating results and financial condition and could cause actual results to differ materially from expectations based on forward-looking statements made in this document or elsewhere by Amtech or on its behalf.

You should not place undue reliance on these forward-looking statements. We cannot guarantee that any forward-looking statement will be realized, although we believe that the expectations reflected in the forward-looking statements are reasonable as of the date of this Quarterly Report. Achievement of future results is subject to events out of our control, risks, uncertainties and potentially inaccurate assumptions. The Annual Report on Form 10-K that we filed with the SEC for the year ended September 30, 2019 listed various important factors that could affect Amtech’s future operating results and financial condition and could cause actual results to differ materially from historical results and expectations based on forward-looking statements made in this document or elsewhere by Amtech or on its behalf. These factors can be found under the heading “Item 1A. Risk Factors” in the Annual Report on Form 10-K and investors should refer to them as well as the additional risk factors identified in this Quarterly Report. Because it is not possible to predict or identify all such factors, any such list cannot be considered a complete set of all potential risks or uncertainties.

The Company undertakes no obligation to update or publicly revise any forward-looking statement whether as a result of new information, future developments or otherwise. All subsequent written or oral forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by this paragraph. You are advised, however, to consult any further disclosures we make on related subjects in our subsequently filed Form 10-Q and Form 8-K reports and our other filings with the SEC. As noted above, we provide a cautionary discussion of risks, uncertainties and possibly inaccurate assumptions relevant to our business under “Item 1A. Risk Factors” of the Annual Report on Form 10-K. We note these factors for investors as permitted by the Private Securities Litigation Reform Act of 1995. You should understand it is not possible to predict or identify all such factors.

3


 

PART I. FINANCIAL INFORMATION

Item  1.

Condensed Consolidated Financial Statements

AMTECH SYSTEMS, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(in thousands, except share data)

 

 

 

December 31,

2019

 

 

September 30,

2019

 

Assets

 

(Unaudited)

 

 

 

 

 

Current Assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

52,742

 

 

$

52,982

 

Restricted cash

 

 

 

 

 

101

 

Accounts receivable (less allowance for doubtful accounts of $134 and $172 at

   December 31, 2019, and September 30, 2019, respectively)

 

 

14,205

 

 

 

12,873

 

Inventories

 

 

15,580

 

 

 

17,532

 

Income taxes receivable

 

 

662

 

 

 

 

Held-for-sale assets

 

 

18,752

 

 

 

22,755

 

Other current assets

 

 

2,156

 

 

 

2,027

 

Total current assets

 

 

104,097

 

 

 

108,270

 

Property, Plant and Equipment - Net

 

 

10,100

 

 

 

10,217

 

Intangible Assets - Net

 

 

804

 

 

 

870

 

Goodwill - Net

 

 

6,633

 

 

 

6,633

 

Other Assets

 

 

651

 

 

 

487

 

Total Assets

 

$

122,285

 

 

$

126,477

 

 

 

 

 

 

 

 

 

 

Liabilities and Shareholders’ Equity

 

 

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

 

 

Accounts payable

 

$

5,097

 

 

$

4,371

 

Accrued compensation and related taxes

 

 

1,743

 

 

 

2,717

 

Accrued warranty expense

 

 

461

 

 

 

556

 

Other accrued liabilities

 

 

1,148

 

 

 

1,274

 

Current maturities of long-term debt

 

 

368

 

 

 

371

 

Contract liabilities

 

 

565

 

 

 

1,378

 

Income taxes payable

 

 

 

 

 

1,434

 

Held-for-sale liabilities

 

 

15,168

 

 

 

18,547

 

Total current liabilities

 

 

24,550

 

 

 

30,648

 

Long-Term Debt

 

 

5,085

 

 

 

5,178

 

Long-Term Lease Liability

 

 

34

 

 

 

 

Income Taxes Payable

 

 

3,654

 

 

 

3,199

 

Total Liabilities

 

 

33,323

 

 

 

39,025

 

Commitments and Contingencies

 

 

 

 

 

 

 

 

Shareholders’ Equity

 

 

 

 

 

 

 

 

Preferred stock; 100,000,000 shares authorized; none issued

 

 

 

 

 

 

Common stock; $0.01 par value; 100,000,000 shares authorized; shares

   issued and outstanding: 14,386,422 and 14,268,797 at December 31, 2019

   and September 30, 2019, respectively

 

 

144

 

 

 

143

 

Additional paid-in capital

 

 

125,866

 

 

 

125,098

 

Accumulated other comprehensive loss

 

 

(8,560

)

 

 

(11,233

)

Retained deficit

 

 

(28,488

)

 

 

(26,556

)

Total shareholders’ equity

 

 

88,962

 

 

 

87,452

 

Total Liabilities and Shareholders’ Equity

 

$

122,285

 

 

$

126,477

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

4


 

AMTECH SYSTEMS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(Unaudited)

(in thousands, except per share data)

 

 

 

Three Months Ended December 31,

 

 

 

2019

 

 

2018

 

Revenues, net of returns and allowances

 

$

20,692

 

 

$

23,225

 

Cost of sales

 

 

12,518

 

 

 

14,205

 

Gross profit

 

 

8,174

 

 

 

9,020

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

 

5,915

 

 

 

6,626

 

Research, development and engineering

 

 

622

 

 

 

866

 

Restructuring charges

 

 

 

 

 

864

 

Operating income

 

 

1,637

 

 

 

664

 

Loss on sale of subsidiary

 

 

(2,793

)

 

 

 

Interest income and other, net

 

 

(70

)

 

 

166

 

(Loss) income from continuing operations before income taxes

 

 

(1,226

)

 

 

830

 

Income tax provision

 

 

41

 

 

 

582

 

(Loss) income from continuing operations, net of tax

 

 

(1,267

)

 

 

248

 

Loss from discontinued operations, net of tax

 

 

(665

)

 

 

(2,620

)

Net loss

 

$

(1,932

)

 

$

(2,372

)

 

 

 

 

 

 

 

 

 

(Loss) Income Per Basic Share:

 

 

 

 

 

 

 

 

Basic (loss) income per share from continuing operations

 

$

(0.09

)

 

$

0.02

 

Basic loss per share from discontinued

   operations

 

$

(0.05

)

 

$

(0.18

)

Net loss per basic share

 

$

(0.14

)

 

$

(0.16

)

 

 

 

 

 

 

 

 

 

(Loss) Income Per Diluted Share:

 

 

 

 

 

 

 

 

Diluted (loss) income per share from continuing

   operations

 

$

(0.09

)

 

$

0.02

 

Diluted loss per share from discontinued

   operations

 

$

(0.05

)

 

$

(0.18

)

Net loss per diluted share

 

$

(0.14

)

 

$

(0.16

)

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding - basic

 

 

14,290

 

 

 

14,220

 

Weighted average shares outstanding - diluted

 

 

14,290

 

 

 

14,252

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

5


 

AMTECH SYSTEMS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)

(in thousands)

 

 

 

Three Months Ended December 31,

 

 

 

2019

 

 

2018

 

Net loss

 

$

(1,932

)

 

$

(2,372

)

Foreign currency translation adjustment

 

 

1,081

 

 

 

(576

)

Reclassification adjustment for net foreign currency translation losses

   included in net income

 

 

1,592

 

 

 

 

Comprehensive income (loss)

 

$

741

 

 

$

(2,948

)

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

6


 

AMTECH SYSTEMS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Shareholders’ Equity

(Unaudited)

(in thousands)

 

 

 

Common Stock

 

 

 

 

 

 

Accumulated

Other

 

 

Retained

Earnings

 

 

Total

 

 

 

Shares

 

 

Par Value

 

 

Additional Paid-

In Capital

 

 

Comprehensive

Income (Loss)

 

 

(Accumulated

Deficit)

 

 

Shareholders'

Equity

 

Balance at September 30, 2018

 

 

14,217

 

 

$

142

 

 

$

124,316

 

 

$

(9,974

)

 

$

(21,394

)

 

$

93,090

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,372

)

 

 

(2,372

)

Translation adjustment

 

 

 

 

 

 

 

 

 

 

 

(576

)

 

 

 

 

 

(576

)

Stock compensation expense

 

 

 

 

 

 

 

 

169

 

 

 

 

 

 

 

 

 

169

 

Stock options exercised

 

 

11

 

 

 

 

 

 

37

 

 

 

 

 

 

 

 

 

37

 

Balance at December 31, 2018

 

 

14,228

 

 

$

142

 

 

$

124,522

 

 

$

(10,550

)

 

$

(23,766

)

 

$

90,348

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at September 30, 2019

 

 

14,269

 

 

$

143

 

 

$

125,098

 

 

$

(11,233

)

 

$

(26,556

)

 

$

87,452

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,932

)

 

 

(1,932

)

Translation adjustment

 

 

 

 

 

 

 

 

 

 

 

2,673

 

 

 

 

 

 

2,673

 

Stock compensation expense

 

 

 

 

 

 

 

 

68

 

 

 

 

 

 

 

 

 

68

 

Stock options exercised

 

 

117

 

 

 

1

 

 

 

700

 

 

 

 

 

 

 

 

 

701

 

Balance at December 31, 2019

 

 

14,386

 

 

$

144

 

 

$

125,866

 

 

$

(8,560

)

 

$

(28,488

)

 

$

88,962

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

7


 

AMTECH SYSTEMS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)

 

 

 

Three Months Ended December 31,

 

 

 

2019

 

 

2018

 

Operating Activities

 

 

 

 

 

 

 

 

Net loss

 

$

(1,932

)

 

$

(2,372

)

Adjustments to reconcile net loss to net cash provided by

   (used in) operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

406

 

 

 

443

 

Write-down of inventory

 

 

311

 

 

 

557

 

Deferred income taxes

 

 

784

 

 

 

7

 

Non-cash share-based compensation expense

 

 

68

 

 

 

169

 

Loss on sale of subsidiary

 

 

2,793

 

 

 

 

(Reversal of) provision for allowance for doubtful accounts, net

 

 

(59

)

 

 

44

 

Other, net

 

 

13

 

 

 

106

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

3,296

 

 

 

(2,568

)

Inventories

 

 

1,025

 

 

 

228

 

Other assets

 

 

(1,458

)

 

 

7,939

 

Accounts payable

 

 

(1,983

)

 

 

520

 

Accrued income taxes

 

 

(1,616

)

 

 

831

 

Accrued and other liabilities

 

 

(486

)

 

 

(684

)

Contract liabilities

 

 

(1,330

)

 

 

(5,866

)

Net cash used in operating activities

 

 

(168

)

 

 

(646

)

Investing Activities

 

 

 

 

 

 

 

 

Purchases of property, plant and equipment

 

 

(173

)

 

 

(152

)

Net cash disposed of in sale of subsidiary

 

 

(647

)

 

 

 

Net cash used in investing activities

 

 

(820

)

 

 

(152

)

Financing Activities

 

 

 

 

 

 

 

 

Proceeds from the exercise of stock options

 

 

701

 

 

 

37

 

Payments on long-term debt

 

 

(103

)

 

 

(95

)

Net cash provided by (used in) financing activities

 

 

598

 

 

 

(58

)

Effect of Exchange Rate Changes on Cash, Cash Equivalents and

   Restricted Cash

 

 

1,141

 

 

 

(662

)

Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash

 

 

751

 

 

 

(1,518

)

Cash, Cash Equivalents and Restricted Cash, Beginning of Period*

 

 

59,134

 

 

 

62,496

 

Cash, Cash Equivalents and Restricted Cash, End of Period*

 

$

59,885

 

 

$

60,978

 

 

*

Includes Cash, Cash Equivalents and Restricted Cash that are included in Held-For-Sale Assets on the Condensed Consolidated Balance Sheets.

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

 

8


 

AMTECH SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED DECEMBER 31, 2019 AND 2018

(UNAUDITED)

1.  Basis of Presentation and Significant Accounting Policies

Nature of Operations and Basis of Presentation – Amtech Systems, Inc. (the “Company,” “Amtech,” “we,” “our” or “us”) is a leading, global manufacturer of capital equipment, including thermal processing and wafer polishing, and related consumables used in fabricating semiconductor devices, such as silicon carbide (SiC) and silicon power chips, electronic assemblies and light-emitting diodes (LEDs). We sell these products to semiconductor and automotive component manufacturers worldwide, particularly in Asia, North America and Europe.

We serve niche markets in industries that are experiencing technological advances and which historically have been very cyclical. Therefore, future profitability and growth depend on our ability to develop or acquire and market profitable new products and on our ability to adapt to cyclical trends.

In the second quarter of fiscal 2019, we began the process to divest our solar business. As such, we have classified substantially all of the Solar segment as held for sale in our Condensed Consolidated Balance Sheets and reported its results as discontinued operations in our Condensed Consolidated Statements of Operations. For additional information on the divestiture, see Note 4 and Note 12. For additional information on our segments, see Note 10.

The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”), and consequently do not include all disclosures normally required by accounting principles generally accepted in the United States of America. In the opinion of management, the accompanying unaudited interim condensed consolidated financial statements contain all adjustments necessary, all of which are of a normal and recurring nature, to present fairly our financial position, results of operations and cash flows. Certain information and note disclosures normally included in financial statements have been condensed or omitted pursuant to the rules and regulations of the SEC. The condensed balance sheet at September 30, 2019, 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. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended September 30, 2019.

Our fiscal year is from October 1 to September 30. Unless otherwise stated, references to the years 2020 and 2019 relate to the fiscal years ended September 30, 2020 and 2019, respectively.

The consolidated results of operations for the three months ended December 31, 2019, are not necessarily indicative of the results to be expected for the full fiscal year.

Principles of Consolidation – The consolidated financial statements include the accounts of the Company and our wholly-owned subsidiaries.  All significant intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates – The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Reclassifications – Certain reclassifications have been made to prior year financial statements to conform to the current year presentation. Results for all periods presented in this report have been reclassified for discontinued operations (Note 4) and for changes to our reportable segments (Note 10).  These reclassifications had no effect on the previously reported consolidated financial statements for any period.

9


 

Divestitures – Significant accounting policies associated with a decision to dispose of a business are discussed below:

Discontinued Operations – A business is classified as discontinued operations if the disposal represents a strategic shift that will have a major effect on operations or financial results and meets the criteria to be classified as held for sale or is disposed of by sale or otherwise. Significant judgments are involved in determining whether a business meets the criteria for discontinued operations reporting and the period in which these criteria are met. If a business is reported as a discontinued operation, the results of operations through the date of sale, including any gain or loss recognized on the disposition, are presented on a separate line of the Condensed Consolidated Statements of Operations. Interest on debt directly attributable to the discontinued operation is allocated to discontinued operations.

Assets Held for Sale – An asset or business is classified as held for sale when (i) management commits to a plan to sell and it is actively marketed; (ii) it is available for immediate sale and the sale is expected to be completed within one year; and (iii) it is unlikely significant changes to the plan will be made or that the plan will be withdrawn. In isolated instances, assets held for sale may exceed one year due to events or circumstances beyond our control. The assets and related liabilities are aggregated and reported on separate lines of the Condensed Consolidated Balance Sheets.

Shipping Expense – Shipping expenses of $0.1 million and $0.2 million in each of the three months ended December 31, 2019 and 2018, respectively, are included in selling, general and administrative expenses.

Research, Development and Engineering ExpenseThe table below shows gross research and development expenses and grants earned, in thousands:

 

 

 

Three Months Ended December 31,

 

 

 

2019

 

 

2018

 

Research, development and engineering

 

$

763

 

 

$

866

 

Grants earned

 

 

(141

)

 

 

 

Net research, development and engineering

 

$

622

 

 

$

866

 

 

Concentrations of Credit Risk – Our customers consist primarily of semiconductor manufacturers worldwide, as well as the lapping and polishing marketplace. Financial instruments that potentially subject us to significant concentrations of credit risk consist principally of cash and trade accounts receivable. Credit risk is managed by performing ongoing credit evaluations of the customers’ financial condition, by requiring significant deposits where appropriate, and by actively monitoring collections. Letters of credit are required of certain customers depending on the size of the order, type of customer or its creditworthiness, and country of domicile.

As of December 31, 2019, one Semiconductor segment customer individually represented 11% of accounts receivable.  As of September 30, 2019, one Semiconductor customer individually represented 15% of accounts receivable.

We maintain our cash, cash equivalents and restricted cash in multiple financial institutions. Balances in the United States, which account for approximately 84% and 79% of total cash balances at our continuing operations as of December 31, 2019 and September 30, 2019, respectively, are primarily invested in U.S. Treasuries or are in financial institutions insured by the Federal Deposit Insurance Corporation (“FDIC”). The remainder of our cash is maintained with financial institutions with reputable credit ratings in the Netherlands, China, France, the United Kingdom, Singapore and Malaysia.  We maintain cash in bank accounts in amounts which at times may exceed federally insured limits. We have not experienced any losses on such accounts.

Refer to Note 11 to Condensed Consolidated Financial Statements for information regarding major customers, foreign sales and revenue in other countries subject to fluctuation in foreign currency exchange rates.

10


 

Impact of Recently Issued Accounting Pronouncements

 

Effective October 1, 2019, we adopted the Financial Accounting Standards Board’s (“FASB”) Accounting Standard Update (“ASU”) No. 2016-02—Leases (Topic 842), using the retrospective cumulative effect adjustment transition method. We elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allowed us to carry forward the historical lease classification.  In addition, we made an accounting policy election not to separate non-lease components from lease components for all existing classes of underlying assets with the exception of land and buildings.  We also made an accounting policy election to not record right of use (“ROU”) assets and lease liabilities for leases with an initial term of twelve months or less on our condensed consolidated balance sheet.

 

Adoption of the new standard resulted in the recording of lease ROU assets and lease liabilities of approximately $195,000 and $163,000, respectively, as of October 1, 2019. The standard did not materially impact our consolidated results from operations and had no impact on our cash flows.  However, within the second quarter of fiscal 2020, we expect to record an additional $5.0 million of ROU assets and lease liabilities upon the commencement of our new SiC/LED building lease. Refer to Note 3 to the Condensed Consolidated Financial Statements for further information regarding Topic 842.

 

There have been no other material changes or additions to the recently issued accounting standards other than those previously reported in Note 1 to our Condensed Consolidated Financial Statements in Part II, Item 8 of our Annual Report on Form 10-K for the year ended September 30, 2019 that affect or may affect our consolidated financial statements.

2.  Contracts with Customers

The components of contract assets, which are included in other current assets in our condensed consolidated balance sheets, are as follows, in thousands:

 

 

 

December 31,

2019

 

 

September 30,

2019

 

Unbilled accounts receivable

 

$

 

 

$

36

 

Contract assets

 

$

 

 

$

36

 

 

The components of contract liabilities are as follows, in thousands:

 

 

 

December 31,

2019

 

 

September 30,

2019

 

Customer deposits

 

$

565

 

 

$

1,378

 

Contract liabilities

 

$

565

 

 

$

1,378

 

 

3.  Leases

 

We lease office space, buildings, land, vehicles and equipment. Lease agreements with an initial term of 12 months or less are not recorded on the balance sheet.  Instead, we recognize the lease expense as incurred over the lease term.   

 

Certain lease agreements include one or more options to renew, with renewal terms that can extend the lease term from one to five years. The exercise of lease renewal options is at our sole discretion. Some agreements also include options to purchase the leased property. The estimated life of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise.  

 

Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

 

11


 

Significant Accounting Policy

 

We determine if a contract or arrangement is, or contains, a lease at inception.  Balances related to operating leases are included in other assets in our condensed consolidated balance sheet.  Balances related to financing leases are immaterial and are included in property and equipment, other current liabilities, and long-term lease liability in our condensed consolidated balance sheet.  ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease.  

 

ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term.  As none of our leases provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.  The ROU asset includes any prepaid lease payments and additional direct costs and excludes lease incentives.  Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option.  

 

The following table provides information about the financial statement classification of our lease balances reported within the condensed consolidated balances sheets as of December 31, 2019 and October 1, 2019, in thousands:

 

 

 

December 31,

2019

 

 

October 1,

2019

 

Assets

 

 

 

 

 

 

 

 

Operating lease assets

 

$

70

 

 

$

146

 

Finance lease assets

 

 

42

 

 

 

49

 

Total lease assets

 

$

112

 

 

$

195

 

Liabilities

 

 

 

 

 

 

 

 

Current

 

 

 

 

 

 

 

 

Operating lease liabilities

 

$

27

 

 

$

99

 

Finance lease liabilities

 

 

20

 

 

 

22

 

Non-current

 

 

 

 

 

 

 

 

Operating lease liabilities

 

 

11

 

 

 

15

 

Finance lease liabilities

 

 

23

 

 

 

27

 

Total lease liabilities

 

$

81

 

 

$

163

 

 

The following table provides information about the financial statement classification of our lease expenses reported in the condensed consolidated statement of operations for the three months ended December 31, 2019, in thousands:

 

Lease cost

 

Classification

 

Three Months Ended December 31, 2019

 

Operating lease cost

 

Selling, general and administrative expenses

 

$

76

 

Finance lease cost

 

Selling, general and administrative expenses

 

 

7

 

Total lease cost

 

 

 

$

83

 

 

12


 

Future minimum lease payments under non-cancelable leases as of December 31, 2019 are as follows, in thousands:

 

 

 

Operating leases

 

 

Finance Leases

 

 

Total

 

Remainder of 2020

 

$

162

 

 

$

18

 

 

$

180

 

2021

 

 

282

 

 

 

12

 

 

 

294

 

2022

 

 

281

 

 

 

7

 

 

 

288

 

2023

 

 

280

 

 

 

7

 

 

 

287

 

2024

 

 

280

 

 

 

2

 

 

 

282

 

Thereafter

 

 

7,160

 

 

 

 

 

 

7,160

 

Total lease payments

 

 

8,445

 

 

 

46

 

 

 

8,491

 

Less:  Interest

 

 

3,404

 

 

 

3

 

 

 

3,407

 

Present value of lease liabilities

 

 

5,041

 

 

 

43

 

 

$

5,084

 

 

 

Operating lease payments include $0 related to options to extend lease terms that are reasonably certain of being exercised.

 

The following table provides information about the remaining lease terms and discount rates applied as of December 31, 2019:

 

 

 

December 31,

2019

 

Weighted average remaining lease term (years)

 

 

 

 

Operating leases

 

 

24.83

 

Finance leases

 

 

2.89

 

Weighted average discount rate (%)

 

 

 

 

Operating leases

 

 

4.17

 

Finance leases

 

 

4.17

 

 

 

4.  Assets Held for Sale, Discontinued Operations and Disposals

In April 2019, we announced that our Board of Directors (the “Board”) determined that it was in the long-term best interest of the Company to exit the solar business segment and focus our strategic efforts on our semiconductor and silicon carbide/polishing business segments in order to more fully realize the opportunities the Company believes are presented in those areas.

The anticipated divestitures of our solar business included our Tempress and SoLayTec subsidiaries, which comprised substantially all of our Solar segment. We adopted a plan to sell our Solar operations on or before March 31, 2020.  As such, we classified substantially all of the Solar segment as held for sale in our Condensed Consolidated Balance Sheets and reported its results as discontinued operations in our Condensed Consolidated Statements of Operations.

On June 7, 2019 (“SoLayTec Sale Date”), we completed the sale of our subsidiary, SoLayTec, to a third party located in the Netherlands.  Upon the sale, we recognized a gain of approximately $1.6 million, which we reported as gain on sale of subsidiary in our Consolidated Statements of Operations for the three months ended June 30, 2019.  Effective on the SoLayTec Sale Date, SoLayTec is no longer included in our consolidated financial statements.  SoLayTec was not material to Amtech’s results of operations or financial position.

On December 13, 2019 (“R2D Sale Date”), we finalized the sale of our subsidiary, R2D Automation SAS (“R2D”), to certain members of R2D’s management team.  Upon the sale, we recognized a loss of approximately $2.8 million, which we reported as loss on sale of subsidiary in our Condensed Consolidated Statements of Operations for the three months ended December 31, 2019.  Effective on the R2D Sale Date, R2D will no longer be included in our consolidated financial statements.  R2D does not meet the discontinued operations or held-for-sale criteria and is not material to Amtech’s results of operations or financial position.

13


 

See Note 12 for subsequent event disclosure related to the sale of Tempress.

Operating results of our discontinued solar operations were as follows, in thousands:

 

 

 

Three Months Ended December 31,

 

 

 

2019

 

 

2018

 

Revenues, net of returns and allowances

 

$

5,287

 

 

$

6,228

 

Cost of sales

 

 

4,139

 

 

 

6,123

 

Gross profit

 

 

1,148

 

 

 

105

 

Selling, general and administrative

 

 

1,338

 

 

 

1,595

 

Research, development and engineering

 

 

449

 

 

 

1,080

 

Restructuring charges

 

 

 

 

 

10

 

Operating loss

 

 

(639

)

 

 

(2,580

)

Interest expense and other, net

 

 

(7

)

 

 

(22

)

Loss from discontinued operations

   before income taxes

 

 

(646

)

 

 

(2,602

)

Income tax provision

 

 

19

 

 

 

18

 

Net loss

 

$

(665

)

 

$

(2,620

)

 

The following table presents a summary of the solar assets and liabilities held for sale included in our Condensed Consolidated Balance Sheets, in thousands:

 

 

 

December 31,

2019

 

 

September 30,

2019

 

Assets

 

(Unaudited)

 

 

 

 

 

Total current assets

 

$

13,583

 

 

$

17,591

 

Property, plant and equipment - net

 

 

5,169

 

 

 

5,164

 

Total assets included in the disposal group

 

 

18,752

 

 

 

22,755

 

Total current liabilities

 

 

14,891

 

 

 

18,272

 

Long-term debt

 

 

277