UNITED STATES
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:
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 | 85288 | |
(Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area 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 |
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. [X] ☒ Yes [ ] ☐ No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). [ X ] ☒ Yes [ ] ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”filer,” “smaller reporting company,” and “smaller reporting“emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large | ☐ | Accelerated | ☐ | ||
Non-Accelerated Filer | ☒ | 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 [X]
At August 4, 2023, there were outstanding 14,167,351 shares of Common Stock outstanding as of February 2, 2018: 14,894,129
AMTECH SYSTEMS, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
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2
Cautionary Statement Regarding Forward-Looking Statements
Our discussion and analysis in this Quarterly Report on Form 10-Q ("Quarterly Report"), our Annual Report on Form 10-K for the fiscal year ended September 30, 2022 (the “2022 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 or our officers’ 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. You can also identify forward-looking statements by discussions of strategy, plans or intentions of management. 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,” “could,” “likely,” “future,” “target,” “forecast,” “goal,” “observe,” and “strategy” or the negative thereof or variations thereon or similar terminology relating to the uncertainty of future events or outcomes. Any expectations based on these forward-looking statements are subject to risks and uncertainties and other important factors. 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; our revenue and operating performance; difficulties in successfully executing our growth initiatives; difficulties in executing on our strategic initiatives with respect to our material and substrate business segment; our ability to effectively integrate our acquisition of Entrepix, Inc., which we acquired in January 2023; 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; the cyclical nature of the semiconductor industry; pricing and gross profit pressures; 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; business interruptions, including those related to the COVID-19 pandemic, the potential impacts of the COVID-19 pandemic, including ongoing logistical and supply chain challenges, and any future pandemic on our business operations, financial results and financial position; the severity, magnitude and duration of the COVID-19 pandemic, including impacts of the pandemic and of businesses’ and governments’ responses to the pandemic on our operations and personnel, including any future Chinese government mandated shutdown in Shanghai; risks of future cybersecurity incidents; adverse developments affecting financial institutions, including bank failures; and other circumstances and risks identified in this Quarterly Report or referenced from time to time in our filings with the SEC. The occurrence of the events described, and the achievement of expected results, depend on many events, some or all of which are not predictable or within our control. 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 2022 Form 10-K 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 our 2022 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 our 2022 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.
Unless the context indicates otherwise, the terms “Amtech,” the “Company,” “we,” “us” and “our” refer to Amtech Systems, Inc., an Arizona corporation, together with its subsidiaries.
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, 2017 | September 30, 2017 | |||||||
Assets | (Unaudited) | |||||||
Current Assets | ||||||||
Cash and cash equivalents | $ | 52,696 | $ | 51,121 | ||||
Restricted cash | 9,913 | 24,640 | ||||||
Accounts receivable | ||||||||
Trade (less allowance for doubtful accounts of $1,473 and $866 at December 31, 2017, and September 30, 2017, respectively) | 24,365 | 22,519 | ||||||
Unbilled and other | 21,620 | 14,275 | ||||||
Inventories | 22,762 | 30,210 | ||||||
Vendor deposits | 5,180 | 11,806 | ||||||
Other | 2,310 | 2,542 | ||||||
Total current assets | 138,846 | 157,113 | ||||||
Property, Plant and Equipment - Net | 15,637 | 15,792 | ||||||
Intangible Assets - Net | 3,378 | 3,495 | ||||||
Goodwill - Net | 11,484 | 11,405 | ||||||
Investments | 2,588 | 2,615 | ||||||
Deferred Income Taxes - Long-Term | 200 | 200 | ||||||
Other Assets - Long-Term | 980 | 1,003 | ||||||
Total Assets | $ | 173,113 | $ | 191,623 | ||||
Liabilities and Stockholders’ Equity | ||||||||
Current Liabilities | ||||||||
Accounts payable | $ | 20,483 | $ | 21,555 | ||||
Accrued compensation and related taxes | 7,422 | 7,592 | ||||||
Accrued warranty expense | 1,401 | 1,254 | ||||||
Other accrued liabilities | 2,918 | 2,056 | ||||||
Customer deposits | 19,328 | 48,784 | ||||||
Current maturities of long-term debt | 365 | 361 | ||||||
Deferred profit | 5,632 | 4,081 | ||||||
Income taxes payable | 1,608 | 286 | ||||||
Total current liabilities | 59,157 | 85,969 | ||||||
Long-Term Debt | 8,225 | 8,134 | ||||||
Income Taxes Payable - Long-Term | 6,802 | 7,037 | ||||||
Total Liabilities | 74,184 | 101,140 | ||||||
Commitments and Contingencies | ||||||||
Stockholders’ 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: 14,876,430 and 14,710,591 at December 31, 2017 and September 30, 2017, respectively | 149 | 147 | ||||||
Additional paid-in capital | 127,015 | 125,564 | ||||||
Accumulated other comprehensive loss | (7,988 | ) | (8,529 | ) | ||||
Retained deficit | (20,247 | ) | (26,699 | ) | ||||
Total stockholders’ equity | 98,929 | 90,483 | ||||||
Total Liabilities and Stockholders’ Equity | $ | 173,113 | $ | 191,623 |
|
| June 30, |
|
| September 30, |
| ||
Assets |
| (Unaudited) |
|
|
|
| ||
Current Assets |
|
|
|
|
|
| ||
Cash and cash equivalents |
| $ | 14,305 |
|
| $ | 46,874 |
|
Accounts receivable (less allowance for doubtful accounts of $357 and $114 at |
|
| 28,398 |
|
|
| 25,013 |
|
Inventories |
|
| 34,661 |
|
|
| 25,488 |
|
Other current assets |
|
| 5,600 |
|
|
| 5,561 |
|
Total current assets |
|
| 82,964 |
|
|
| 102,936 |
|
Property, Plant and Equipment - Net |
|
| 9,146 |
|
|
| 6,552 |
|
Right-of-Use Assets - Net |
|
| 11,643 |
|
|
| 11,258 |
|
Intangible Assets - Net |
|
| 12,313 |
|
|
| 758 |
|
Goodwill |
|
| 29,022 |
|
|
| 11,168 |
|
Deferred Income Taxes - Net |
|
| 162 |
|
|
| 79 |
|
Other Assets |
|
| 1,112 |
|
|
| 783 |
|
Total Assets |
| $ | 146,362 |
|
| $ | 133,534 |
|
|
|
|
|
|
| |||
Liabilities and Shareholders’ Equity |
|
|
|
|
|
| ||
Current Liabilities |
|
|
|
|
|
| ||
Accounts payable |
| $ | 7,466 |
|
| $ | 7,301 |
|
Accrued compensation and related taxes |
|
| 3,491 |
|
|
| 4,109 |
|
Other accrued liabilities |
|
| 3,120 |
|
|
| 1,771 |
|
Current maturities of finance lease liabilities and long-term debt |
|
| 2,244 |
|
|
| 107 |
|
Current portion of long-term operating lease liabilities |
|
| 2,800 |
|
|
| 2,101 |
|
Contract liabilities |
|
| 7,807 |
|
|
| 7,231 |
|
Income taxes payable |
|
| 34 |
|
|
| 6 |
|
Total current liabilities |
|
| 26,962 |
|
|
| 22,626 |
|
Finance Lease Liabilities and Long-Term Debt |
|
| 8,987 |
|
|
| 220 |
|
Long-Term Operating Lease Liabilities |
|
| 9,120 |
|
|
| 9,395 |
|
Income Taxes Payable |
|
| 2,462 |
|
|
| 2,849 |
|
Other Long-Term Liabilities |
|
| 124 |
|
|
| 76 |
|
Total Liabilities |
|
| 47,655 |
|
|
| 35,166 |
|
Commitments and Contingencies (Note 11) |
|
|
|
|
|
| ||
Shareholders’ Equity |
|
|
|
|
|
| ||
Preferred stock; 100,000,000 shares authorized; none issued |
|
| — |
|
|
| — |
|
Common stock; $0.01 par value; 100,000,000 shares authorized; shares |
|
| 141 |
|
|
| 140 |
|
Additional paid-in capital |
|
| 125,525 |
|
|
| 124,458 |
|
Accumulated other comprehensive loss |
|
| (1,929 | ) |
|
| (1,767 | ) |
Retained deficit |
|
| (25,030 | ) |
|
| (24,463 | ) |
Total Shareholders’ Equity |
|
| 98,707 |
|
|
| 98,368 |
|
Total Liabilities and Shareholders’ Equity |
| $ | 146,362 |
|
| $ | 133,534 |
|
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, | ||||||||
2017 | 2016 | |||||||
Revenues, net of returns and allowances | $ | 73,611 | $ | 29,135 | ||||
Cost of sales | 53,274 | 20,692 | ||||||
Gross profit | 20,337 | 8,443 | ||||||
Selling, general and administrative | 10,580 | 6,996 | ||||||
Research, development and engineering | 1,991 | 1,627 | ||||||
Operating income (loss) | 7,766 | (180 | ) | |||||
Loss from equity method investment | (26 | ) | (143 | ) | ||||
Interest expense and other income, net | (48 | ) | 81 | |||||
Income (loss) before income taxes | 7,692 | (242 | ) | |||||
Income tax provision | 1,240 | 90 | ||||||
Net income (loss) | 6,452 | (332 | ) | |||||
Add: net loss attributable to noncontrolling interest | — | 279 | ||||||
Net income (loss) attributable to Amtech Systems, Inc. | $ | 6,452 | $ | (53 | ) | |||
Income (Loss) Per Share: | ||||||||
Basic income (loss) per share attributable to Amtech shareholders | $ | 0.44 | $(0.00) | |||||
Weighted average shares outstanding | 14,781 | 13,179 | ||||||
Diluted income (loss) per share attributable to Amtech shareholders | $ | 0.42 | $(0.00) | |||||
Weighted average shares outstanding | 15,298 | 13,179 |
|
| Three Months Ended June 30, |
|
| Nine Months Ended June 30, |
| ||||||||||
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||
Revenues, net |
| $ | 30,740 |
|
| $ | 19,964 |
|
| $ | 85,608 |
|
| $ | 73,983 |
|
Cost of sales |
|
| 19,755 |
|
|
| 14,064 |
|
|
| 52,850 |
|
|
| 47,025 |
|
Gross profit |
|
| 10,985 |
|
|
| 5,900 |
|
|
| 32,758 |
|
|
| 26,958 |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Selling, general and administrative |
|
| 10,300 |
|
|
| 7,157 |
|
|
| 30,924 |
|
|
| 21,008 |
|
Research, development and engineering |
|
| 1,804 |
|
|
| 1,646 |
|
|
| 4,714 |
|
|
| 5,018 |
|
Gain on sale of fixed assets |
|
| — |
|
|
| (12,465 | ) |
|
| — |
|
|
| (12,465 | ) |
Severance expense |
|
| — |
|
|
| — |
|
|
| 400 |
|
|
| — |
|
Operating (loss) income |
|
| (1,119 | ) |
|
| 9,562 |
|
|
| (3,280 | ) |
|
| 13,397 |
|
Interest income (expense) and other, net |
|
| 303 |
|
|
| 680 |
|
|
| (26 | ) |
|
| 627 |
|
(Loss) income before income tax provision |
|
| (816 | ) |
|
| 10,242 |
|
|
| (3,306 | ) |
|
| 14,024 |
|
Income tax provision (benefit) |
|
| 211 |
|
|
| 20 |
|
|
| (2,739 | ) |
|
| 840 |
|
Net (loss) income |
| $ | (1,027 | ) |
| $ | 10,222 |
|
| $ | (567 | ) |
| $ | 13,184 |
|
(Loss) Income Per Share: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net (loss) income per basic share |
| $ | (0.07 | ) |
| $ | 0.74 |
|
| $ | (0.04 | ) |
| $ | 0.94 |
|
Net (loss) income per diluted share |
| $ | (0.07 | ) |
| $ | 0.73 |
|
| $ | (0.04 | ) |
| $ | 0.93 |
|
Weighted average shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Basic |
|
| 14,058 |
|
|
| 13,889 |
|
|
| 14,031 |
|
|
| 14,042 |
|
Diluted |
|
| 14,058 |
|
|
| 14,026 |
|
|
| 14,031 |
|
|
| 14,220 |
|
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, | ||||||||
2017 | 2016 | |||||||
Net income (loss) | $ | 6,452 | $ | (332 | ) | |||
Foreign currency translation adjustment | 541 | (941 | ) | |||||
Comprehensive income (loss) | 6,993 | (1,273 | ) | |||||
Comprehensive loss attributable to noncontrolling interest | — | 375 | ||||||
Comprehensive income (loss) attributable to Amtech Systems, Inc. | $ | 6,993 | $ | (898 | ) |
|
| Three Months Ended June 30, |
|
| Nine Months Ended June 30, |
| ||||||||||
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||
Net (loss) income |
| $ | (1,027 | ) |
| $ | 10,222 |
|
| $ | (567 | ) |
| $ | 13,184 |
|
Foreign currency translation adjustment |
|
| (962 | ) |
|
| (916 | ) |
|
| (162 | ) |
|
| (577 | ) |
Comprehensive (loss) income |
| $ | (1,989 | ) |
| $ | 9,306 |
|
| $ | (729 | ) |
| $ | 12,607 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
6
AMTECH SYSTEMS, INC. AND SUBSIDIARIES
(Unaudited)
(in thousands)
Three Months Ended December 31, | |||||||
2017 | 2016 | ||||||
Operating Activities | |||||||
Net income (loss) | $ | 6,452 | $ | (332 | ) | ||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | |||||||
Depreciation and amortization | 471 | 654 | |||||
Write-down of inventory | 41 | 33 | |||||
Capitalized interest | 143 | 190 | |||||
Deferred income taxes | (7 | ) | 31 | ||||
Non-cash share based compensation expense | 253 | 319 | |||||
Loss from equity method investment | 26 | 143 | |||||
Provision for (reversal of) allowance for doubtful accounts, net | 48 | (1,178 | ) | ||||
Changes in operating assets and liabilities: | |||||||
Restricted cash | 14,885 | (2,425 | ) | ||||
Accounts receivable | (8,869 | ) | (3,600 | ) | |||
Inventories | 7,558 | 1,621 | |||||
Accrued income taxes | 1,087 | 239 | |||||
Vendor deposits and other assets | 6,974 | 725 | |||||
Accounts payable | (1,255 | ) | 78 | ||||
Customer deposits and accrued liabilities | (29,023 | ) | 584 | ||||
Deferred profit | 1,479 | (619 | ) | ||||
Net cash provided by (used in) operating activities | 263 | (3,537 | ) | ||||
Investing Activities | |||||||
Purchases of property, plant and equipment | (93 | ) | (86 | ) | |||
Proceeds from sale of property, plant and equipment | — | 1 | |||||
Net cash used in investing activities | (93 | ) | (85 | ) | |||
Financing Activities | |||||||
Proceeds from the exercise of stock options | 1,199 | 1 | |||||
Payments on long-term debt | (89 | ) | (160 | ) | |||
Borrowings on long-term debt | — | 21 | |||||
Net cash provided by (used in) financing activities | 1,110 | (138 | ) | ||||
Effect of Exchange Rate Changes on Cash and Cash Equivalents | 295 | (257 | ) | ||||
Net Increase (Decrease) in Cash and Cash Equivalents | 1,575 | (4,017 | ) | ||||
Cash and Cash Equivalents, Beginning of Period | 51,121 | 27,655 | |||||
Cash and Cash Equivalents, End of Period | $ | 52,696 | $ | 23,638 | |||
|
| Common Stock |
|
| Treasury Stock |
|
|
|
|
| Accumulated |
|
|
|
|
| Total |
| ||||||||||||||
|
| Shares |
|
| Par Value |
|
| Shares |
|
| Cost |
|
| Additional Paid- |
|
| Comprehensive |
|
| Retained |
|
| Shareholders' |
| ||||||||
Balance at September 30, 2021 |
|
| 14,304 |
|
| $ | 143 |
|
|
| — |
|
| $ | — |
|
| $ | 126,380 |
|
| $ | 14 |
|
| $ | (40,903 | ) |
| $ | 85,634 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 997 |
|
|
| 997 |
|
Translation adjustment |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 237 |
|
|
| — |
|
|
| 237 |
|
Stock compensation expense |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 103 |
|
|
| — |
|
|
| — |
|
|
| 103 |
|
Repurchase of treasury stock |
|
| — |
|
|
| — |
|
|
| (291 | ) |
|
| (2,713 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (2,713 | ) |
Retirement of treasury stock |
|
| (291 | ) |
|
| (3 | ) |
|
| 291 |
|
|
| 2,713 |
|
|
| (2,122 | ) |
|
| — |
|
|
| (588 | ) |
|
| — |
|
Stock options exercised |
|
| 12 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 69 |
|
|
| — |
|
|
| — |
|
|
| 69 |
|
Balance at December 31, 2021 |
|
| 14,025 |
|
|
| 140 |
|
|
| — |
|
|
| — |
|
|
| 124,430 |
|
|
| 251 |
|
|
| (40,494 | ) |
|
| 84,327 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,965 |
|
|
| 1,965 |
|
Translation adjustment |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 102 |
|
|
| — |
|
|
| 102 |
|
Stock compensation expense |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 137 |
|
|
| — |
|
|
| — |
|
|
| 137 |
|
Repurchase of treasury stock |
|
| — |
|
|
| — |
|
|
| (143 | ) |
|
| (1,402 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (1,402 | ) |
Retirement of treasury stock |
|
| (143 | ) |
|
| (1 | ) |
|
| 143 |
|
|
| 1,402 |
|
|
| (1,062 | ) |
|
| — |
|
|
| (339 | ) |
|
| — |
|
Stock options exercised |
|
| 5 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 29 |
|
|
| — |
|
|
| — |
|
|
| 29 |
|
Balance at March 31, 2022 |
|
| 13,887 |
|
|
| 139 |
|
|
| — |
|
|
| — |
|
|
| 123,534 |
|
|
| 353 |
|
|
| (38,868 | ) |
|
| 85,158 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 10,222 |
|
|
| 10,222 |
|
Translation adjustment |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (916 | ) |
|
| — |
|
|
| (916 | ) |
Stock compensation expense |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 146 |
|
|
| — |
|
|
| — |
|
|
| 146 |
|
Stock options exercised |
|
| 3 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 13 |
|
|
| — |
|
|
| — |
|
|
| 13 |
|
Balance at June 30, 2022 |
|
| 13,890 |
|
| $ | 139 |
|
|
| — |
|
| $ | — |
|
| $ | 123,693 |
|
| $ | (563 | ) |
| $ | (28,646 | ) |
| $ | 94,623 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Balance at September 30, 2022 |
|
| 13,994 |
|
| $ | 140 |
|
|
| — |
|
| $ | — |
|
| $ | 124,458 |
|
| $ | (1,767 | ) |
| $ | (24,463 | ) |
| $ | 98,368 |
|
Net loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (2,744 | ) |
|
| (2,744 | ) |
Translation adjustment |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 416 |
|
|
| — |
|
|
| 416 |
|
Stock compensation expense |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 164 |
|
|
| — |
|
|
| — |
|
|
| 164 |
|
Stock options exercised |
|
| 9 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 34 |
|
|
| — |
|
|
| — |
|
|
| 34 |
|
Balance at December 31, 2022 |
|
| 14,003 |
|
|
| 140 |
|
|
| — |
|
|
| — |
|
|
| 124,656 |
|
|
| (1,351 | ) |
|
| (27,207 | ) |
|
| 96,238 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 3,204 |
|
|
| 3,204 |
|
Translation adjustment |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 384 |
|
|
| — |
|
|
| 384 |
|
Stock compensation expense |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 174 |
|
|
| — |
|
|
| — |
|
|
| 174 |
|
Stock options exercised |
|
| 36 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 297 |
|
|
| — |
|
|
| — |
|
|
| 297 |
|
Balance at March 31, 2023 |
|
| 14,039 |
|
|
| 140 |
|
|
| — |
|
|
| — |
|
|
| 125,127 |
|
|
| (967 | ) |
|
| (24,003 | ) |
|
| 100,297 |
|
Net loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (1,027 | ) |
|
| (1,027 | ) |
Translation adjustment |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (962 | ) |
|
| — |
|
|
| (962 | ) |
Stock compensation expense |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 190 |
|
|
| — |
|
|
| — |
|
|
| 190 |
|
Stock options exercised |
|
| 37 |
|
|
| 1 |
|
|
| — |
|
|
| — |
|
|
| 208 |
|
|
| — |
|
|
| — |
|
|
| 209 |
|
Balance at June 30, 2023 |
|
| 14,076 |
|
| $ | 141 |
|
|
| — |
|
| $ | — |
|
| $ | 125,525 |
|
| $ | (1,929 | ) |
| $ | (25,030 | ) |
| $ | 98,707 |
|
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)
|
| Nine Months Ended June 30, |
| |||||
|
| 2023 |
|
| 2022 |
| ||
Operating Activities |
|
|
|
|
|
| ||
Net (loss) income |
| $ | (567 | ) |
| $ | 13,184 |
|
Adjustments to reconcile net income to net cash used in |
|
|
|
|
|
| ||
Depreciation and amortization |
|
| 3,435 |
|
|
| 1,330 |
|
Write-down of inventory |
|
| 1,233 |
|
|
| 235 |
|
Deferred income taxes |
|
| (3,430 | ) |
|
| — |
|
Non-cash share-based compensation expense |
|
| 528 |
|
|
| 386 |
|
Gain on sale of property, plant and equipment |
|
| — |
|
|
| (12,465 | ) |
Provision for allowance for doubtful accounts |
|
| 109 |
|
|
| 10 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
| ||
Accounts receivable |
|
| 2,391 |
|
|
| 1,714 |
|
Inventories |
|
| (4,724 | ) |
|
| (5,617 | ) |
Other assets |
|
| 1,775 |
|
|
| (1,298 | ) |
Accounts payable |
|
| (1,586 | ) |
|
| 1,603 |
|
Accrued income taxes |
|
| (1,947 | ) |
|
| 713 |
|
Accrued and other liabilities |
|
| (2,993 | ) |
|
| 1,031 |
|
Contract liabilities |
|
| (1,374 | ) |
|
| 4,264 |
|
Net cash (used in) provided by operating activities |
|
| (7,150 | ) |
|
| 5,090 |
|
Investing Activities |
|
|
|
|
|
| ||
Purchases of property, plant and equipment |
|
| (1,922 | ) |
|
| (325 | ) |
Proceeds from the sale of property, plant and equipment |
|
| 6 |
|
|
| 19,908 |
|
Acquisition, net of cash and cash equivalents acquired |
|
| (34,938 | ) |
|
| — |
|
Net cash (used in) provided by investing activities |
|
| (36,854 | ) |
|
| 19,583 |
|
Financing Activities |
|
|
|
|
|
| ||
Proceeds from the exercise of stock options |
|
| 539 |
|
|
| 111 |
|
Repurchase of common stock |
|
| — |
|
|
| (4,115 | ) |
Payments on long-term debt |
|
| (949 | ) |
|
| (4,851 | ) |
Borrowings on long-term debt |
|
| 12,000 |
|
|
| — |
|
Net cash provided by (used in) financing activities |
|
| 11,590 |
|
|
| (8,855 | ) |
Effect of Exchange Rate Changes on Cash, Cash Equivalents and |
|
| (155 | ) |
|
| (441 | ) |
Net (Decrease) Increase in Cash, Cash Equivalents and Restricted Cash |
|
| (32,569 | ) |
|
| 15,377 |
|
Cash and Cash Equivalents, Beginning of Period |
|
| 46,874 |
|
|
| 32,836 |
|
Cash, Cash Equivalents and Restricted Cash, End of Period |
| $ | 14,305 |
|
| $ | 48,213 |
|
Supplemental Cash Flow Information: |
|
|
|
|
|
| ||
Income tax payments, net |
| $ | 2,559 |
|
| $ | 30 |
|
Interest paid |
| $ | 283 |
|
| $ | 166 |
|
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 AND NINE MONTHS ENDED DECEMBER 31, 2017JUNE 30, 2023 AND 2016
(UNAUDITED)
1. Basis of Presentation and Significant Accounting Policies
Nature of Operations and Basis of Presentation
– Amtech Systems, Inc. (theWe serve niche markets in industries that are experiencing rapid technological advances, and which historically have been very cyclical. Therefore, our 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.
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.America (“GAAP”). 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 consolidated balance sheet at September 30, 2022, has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by GAAP 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 as amended, for the fiscal year ended September 30, 2017.
Our fiscal year is from October 1 to September 30. Unless otherwise stated, references to particular years, quarters, months or periods refer to our fiscal years ending or ended September 30, and the associated quarters, months, and periods of those fiscal years.
The consolidated results of operations for the three and nine months ended December 31, 2017,June 30, 2023, are not necessarily indicative of the results to be expected for the full fiscal year.
In March 2020, the outbreak of COVID-19 was recognized as a pandemic by the World Health Organization, and the outbreak became increasingly widespread, including in all of the markets in which we operate. We continue to monitor the impact of COVID-19 on all aspects of our business. We are a company operating in a critical infrastructure industry, as defined by the U.S. Department of Homeland Security. Consistent with federal guidelines and with foreign government, state and local orders to date, we have continued to operate across our footprint throughout the COVID-19 pandemic. There remain many unknowns and we continue to monitor the expected trends and related demand for our products and services and have and will continue to adjust our operations accordingly.
On March 28, 2022, the Chinese government issued a mandatory shutdown in Shanghai, the location of one of our manufacturing facilities. The factory was allowed to partially reopen in May 2022 and was fully reopened on June 1, 2022. Upon reopening on June 1, 2022, the factory was able to operate at near full capacity for the entire month of June. We were able to make up the shipments missed in the fourth quarter of fiscal 2022 and are now operating at normal capacity levels. Additionally, given the uncertainty surrounding the COVID-19 pandemic and the emergence of variations thereof, there can be no assurance that this facility will be allowed to remain open on a consistent basis in the future.
9
Principles of Consolidation
– The consolidated financial statements include the accounts of the Company and our wholly-ownedUse of Estimates
– The preparation of consolidated financial statements in conformity withRestricted Cash – Restricted cash includes collateral for bank guarantees required by certain customers from whom deposits have been received in advance of shipment. Our restricted cash at June 30, 2022 was $0.5 million. There was no restricted cash as of June 30, 2023.
Intangible Assets– Under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic No. 350, Intangibles - Goodwill and Other (“ASC 350”), finite-lived intangible assets are stated at acquisition-date fair value. Intangible assets are amortized using the straight-line method over their estimated useful life. We review product and service sales contracts with multiple deliverablesregularly perform reviews to determine if separate unitsfacts and circumstances exist which indicate that the useful lives of accountingour intangible assets are present. Where separate units of accounting exist, revenue allocated to delivered items is the lower of the relative selling price of the delivered items in the sales arrangementshorter than originally estimated or the portioncarrying amount of the selling price that isthese assets may not contingent upon performance of the service.
Goodwill – The Company accounts for goodwill under ASC 350. Goodwill represents the excess of the fair value of the consideration conveyed in an acquisition over the fair value of net assets acquired. Goodwill is not subject to amortization but is tested for impairment annually or when it is determined that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If it is concluded that there is a potential impairment, we would recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value (although the loss would not exceed the total amount of goodwill allocated to the reporting unit).
Long-lived assets – We review our long-lived assets for impairment at least annually in our fourth quarter or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Additional information on impairment testing of long-lived assets can be found in Notes 1 and 11 of our Annual Report on Form 10-K for the year ended September 30, 2022.
Contract Liabilities – Contract liabilities are reflected in current liabilities on the Condensed Consolidated Balance Sheets as all performance obligations are expected to be satisfied within the next 12 months. Contract liabilities relate to payments invoiced or received in advance of completion of performance obligations under a contract. Contract liabilities are recognized as revenue upon the fulfillment of performance obligations. Contract liabilities consist of customer deposits as of June 30, 2023 and September 30, 2022. Of the $7.2 million contract liabilities recorded at September 30, 2022, $1.0 million and $2.5 million was recorded as deferred profitrevenue for the three and nine months ended June 30, 2023, respectively. Of the $1.6 million contract liabilities recorded at September 30, 2021, $0 and $1.6 million was recorded as revenue for the three and nine months ended June 30, 2022, respectively.
Warranty – A limited warranty is provided free of charge, generally for periods of 12 to 36 months to all purchasers of our new products and systems. Accruals are recorded for estimated warranty costs at the time revenue is recognized, generally upon shipment or acceptance, as determined under our revenue recognition policy. On occasion, we have been required and may be required in current liabilities. Thethe future to provide additional warranty coverage to ensure that the systems are ultimately accepted or to maintain customer goodwill. While our warranty costs have historically been within our expectations and we believe that the amounts accrued for warranty expenditures are sufficient for all systems sold through June 30, 2023, we cannot guarantee that we will continue to experience a similar level of predictability regarding warranty costs. In addition, technological changes or previously unknown defects in raw materials or components of deferred profit are as follows,may result in thousands:more extensive and frequent warranty service than anticipated, which could result in an increase in our warranty expense. Our accrued warranty expense is $1.0 million at June 30, 2023 and $0.9 million at September 30, 2022. Our accrued warranty expense is included in other accrued liabilities on the Condensed Consolidated Balance Sheets.
10
December 31, 2017 | September 30, 2017 | ||||||
Deferred revenues | $ | 8,370 | $ | 6,822 | |||
Deferred costs | 2,738 | 2,741 | |||||
Deferred profit | $ | 5,632 | $ | 4,081 |
Shipping Expense
– ShippingThree Months Ended | ||||||||
December 31, 2017 | December 31, 2016 | |||||||
Research, development and engineering | $ | 2,290 | $ | 1,830 | ||||
Grants earned | (299 | ) | (203 | ) | ||||
Net research, development and engineering | $ | 1,991 | $ | 1,627 |
Concentrations of Credit Risk
– Our customers consist ofAs of December 31, 2017, two customersJune 30, 2023, one Semiconductor segment customer individually represented 36% and 12%20% of accounts receivable. As of September 30, 2017, two customers2022, one Semiconductor segment customer individually represented 24% and 11%12% of accounts receivable.
We maintain our cash and cash equivalents and restricted cash in multiple financial institutions. Balances in the United States, which account for approximately 56%64% and 45%84% of total cash balances as of December 31, 2017June 30, 2023 and September 30, 2017,2022, respectively, are primarily invested in U.S. Treasuries or are in financial institutions insured by the Federal Deposit Insurance Corporation (“FDIC”).FDIC as well as a money market account. The remainder of our cash is maintained with financial institutions with reputable credit ratings in The Netherlands, France, China, the United Kingdom, Singapore, and Malaysia.
Refer to Note 913 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.
Impact of Recently Issued Accounting Pronouncements
In March 2016,October 2021, the Financial Accounting Standards Board (the “FASB”issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU 2021-08”) issued, which requires an acquirer in a business combination to recognize and measure contract assets and contract liabilities in accordance with Accounting Standards Update (“ASU”) 2016-09, “Compensation - Stock Compensation (Topic 718).”Codification Topic 606. ASU 2016-09 identifies areas for simplification involving several aspects of accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, an option to recognize gross stock compensation expense with actual forfeitures recognized as they occur, as well as certain classifications on the statement of cash flows. The amendments in this ASU are2021-08 is effective for annual periodsfiscal years beginning after December 15, 20162022 and for the interim periods therein. This new standard increases volatility in the statement of operations by requiring all excess tax benefits and deficiencies to be recognized as discrete income tax benefits or expenses in the statement of operations in the period in which they occur.early adoption is permitted. We adopted the new standardamendments in ASU 2021-08 as of October 1, 2017,2022, without a material impact on our unaudited condensed consolidated financial statements.
There were no other new accounting pronouncements issued or effective as of June 30, 2023 that had or are expected to have a material impact on our consolidated financial statements.
2. Long-Term Debt
Our finance lease liabilities and prospectively appliedlong-term debt consists of the provisionsfollowing, in this guidance requiring recognition of excess tax benefitsthousands:
|
| June 30, |
|
| September 30, |
| ||
Senior revolving credit facility |
| $ | — |
|
| $ | — |
|
Term loan |
|
| 11,101 |
|
|
| — |
|
Finance leases |
|
| 130 |
|
|
| 147 |
|
Equipment finance |
|
| — |
|
|
| 180 |
|
Total |
|
| 11,231 |
|
|
| 327 |
|
Less: current portion of finance lease liabilities |
|
| (2,244 | ) |
|
| (107 | ) |
Finance Lease Liabilities and Long-Term Debt |
| $ | 8,987 |
|
| $ | 220 |
|
11
Interest expense on finance lease liabilities and deficitslong-term debt was $0.2 million and less than $0.1 million for the three months ended June 30, 2023 and 2022, respectively, and $0.3 million and $0.2 million for the nine months ended June 30, 2023 and 2022, respectively.
Loan and Security Agreement
On January 17, 2023, we entered into a Loan and Security Agreement (the “LSA”) by and among Amtech, its U.S. based wholly owned subsidiaries Bruce Technologies, Inc., a Massachusetts corporation, BTU International, Inc., a Delaware corporation, Intersurface Dynamics, Incorporated, a Connecticut corporation, P.R. Hoffman Machine Products, Inc., an Arizona corporation, and Entrepix, Inc., (collectively the “Borrowers”) and UMB Bank, N.A., national banking association (the “Lender”). The LSA provides for (i) a term loan (the “Term Loan”) in the statementamount of operations. Also, as$12.0 million maturing January 17, 2028, and (ii) a resultrevolving loan facility (the “Revolver”) with an availability of $8.0 million maturing January 17, 2024. The recorded amount of the adoptionTerm Loan has an interest rate of 6.38%. The Revolver has a floating per annum rate of interest equal to the Prime Rate, adjusted daily. Under the LSA, we are required to pay a non-utilization fee equal to 0.125% of any unused portion of the new standard, we madeRevolver in excess of any letter of credit obligations. As of June 30, 2023, no amounts were borrowed against the Revolver.
The Term Loan and Revolver are secured by a first priority lien on substantially all of the Borrowers’ assets (other than certain customary excluded assets) and the LSA contains customary events of default, representations and warranties, and covenants that restrict the Borrowers’ ability to, among other things, incur additional indebtedness, other than permitted indebtedness, enter into mergers or acquisitions, sell or otherwise dispose of assets, or pay dividends, subject to customary exceptions.
The LSA additionally contains financial covenants such that, as of the end of each of their fiscal quarters, beginning March 31, 2023, the Borrowers must maintain (i) a ratio of consolidated debt owed to Lender to consolidated EBITDA (as defined in the LSA) for such fiscal quarter, of not greater than 1.50 to 1.00, through December 31, 2024, based on a building four quarters (as described in the LSA), and then 1.00 to 1.00 each fiscal quarter thereafter, (ii) a ratio of (a) the total for such fiscal quarter of EBITDAR (as defined in the LSA) minus the sum of all income taxes paid in cash plus cash dividends/distributions plus maintenance Capital Expenditures (as defined in the LSA) plus management fees paid in cash, to (b) the sum for such fiscal quarter of (1) Interest Charges (as defined in the LSA) plus (2) required payments of principal on Debt (as defined in the LSA) (including the Term Loan, but excluding the Revolver) plus (3) operating lease/rent expense, of not less than 1.30 to 1.00 based on a building four quarters (as described in the LSA), and (iii) a consolidated working capital of current assets (excluding related party receivables and prepaid expenses) minus current liabilities of at least $35.0 million.
Finance Lease Obligations
Our finance lease obligations totaled $0.1 million as of June 30, 2023 and September 30, 2022.
The current and long-term portions of our finance leases are included in the current and long-term portions of finance lease liabilities and long-term debt in the table above and in our Condensed Consolidated Balance Sheets as of June 30, 2023 and September 30, 2022. Further, see Note 7 for additional information.
3. Acquisition
Entrepix Merger
On January 17, 2023 (the “Closing Date”), the Company acquired 100% of the issued and outstanding shares of capital stock of Entrepix, Inc., an Arizona corporation (“Entrepix”), which primarily manufactures chemical mechanical polishing (“CMP”) technology, through a reverse triangular merger. Entrepix’s CMP technology portfolio and water cleaning equipment will complement our existing substrate polishing and wet process chemical offerings. Pursuant to the terms and conditions of the Agreement and Plan of Merger dated January 17, 2023 (the “Merger Agreement”), Emerald Merger Sub, Inc., a wholly-owned subsidiary of the Company (“Merger Sub”), merged with and into Entrepix (the “Merger”), resulting in Entrepix surviving the Merger and becoming a wholly-owned subsidiary of the Company (the “Acquisition” or “Transaction”).
12
On the Closing Date, in connection with the Merger Agreement and in contemplation of the Transaction, the Company entered into a Loan and Security Agreement with UMB Bank, N.A., under which the Lender provided the Company with (i) a $12.0 million term loan maturing January 17, 2028, and (ii) an $8.0 million revolving loan facility maturing January 17, 2024 (see Note 2). The proceeds of the Term Loan were used to partially fund the Transaction.
The Acquisition is accounted for using the acquisition method of accounting policy electionfor business combinations under FASB Accounting Standard Codification Topic No. 805, Business Combinations (“ASC 805”), with Amtech representing the accounting acquirer under this guidance. The Company elected to recognize forfeituresapply pushdown accounting per ASC 805-50-50-5.
Summary of Consideration Transferred
The total consideration for the Acquisition was $39.2 million, consisting of $35.2 million cash consideration to the sellers and $4.0 million cash paid for debt and Entrepix transaction costs.
Goodwill is calculated as they occurthe excess of the consideration transferred over the net assets recognized and no longer estimate expected forfeitures. represents the estimated future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. Such assets include synergies the Company expects to achieve, such as deeper penetration into an overlapping customer base, complementary product offerings, and cost redundancy reductions. In accordance with the measurement principles in FASB Accounting Standard Codification Topic No. 820, Fair Value Measurement, the purchase consideration for the Acquisition has been allocated under the acquisition method of accounting to the estimated fair market value of the net assets acquired, including a residual amount of goodwill, none of which is deductible for tax purposes. Amtech’s acquisition costs incurred were $2.5 million for the nine months ended June 30, 2023, and were recorded as “Selling, general and administrative expenses” in the accompanying Condensed Consolidated Statements of Operations. The provisionsfollowing table summarizes the provisional fair values assigned to identifiable assets acquired and liabilities assumed, in this guidance requiringthousands:
|
| March 31, 2023 |
| Measurement Period Adjustments |
| June 30, 2023 |
| |||
Fair value of total cash consideration transferred |
| $ | 39,787 |
| $ | (560 | ) | $ | 39,227 |
|
Estimated fair value of identifiable assets acquired and liabilities assumed: |
|
|
|
|
|
|
| |||
Cash and cash equivalents |
| $ | 4,289 |
| $ | — |
| $ | 4,289 |
|
Accounts receivable, net |
|
| 5,681 |
|
| 203 |
|
| 5,884 |
|
Inventories |
|
| 5,683 |
|
| — |
|
| 5,683 |
|
Other current assets |
|
| 179 |
|
| — |
|
| 179 |
|
Property, plant, and equipment |
|
| 2,051 |
|
| (11 | ) |
| 2,040 |
|
Right-of-use assets |
|
| 2,246 |
|
| — |
|
| 2,246 |
|
Intangible assets |
|
| 12,800 |
|
| 800 |
|
| 13,600 |
|
Goodwill |
|
| 18,089 |
|
| (235 | ) |
| 17,854 |
|
Other assets |
|
| 31 |
|
| 11 |
|
| 42 |
|
Total assets acquired |
|
| 51,049 |
|
| 768 |
|
| 51,817 |
|
Accounts payable |
|
| 1,574 |
|
| — |
|
| 1,574 |
|
Other accrued liabilities |
|
| 1,170 |
|
| 837 |
|
| 2,007 |
|
Contract liabilities |
|
| 1,662 |
|
| 167 |
|
| 1,829 |
|
Income taxes payable |
|
| 1,447 |
|
| 142 |
|
| 1,589 |
|
Current portion of long-term operating lease liabilities |
|
| 515 |
|
| — |
|
| 515 |
|
Long-term operating lease liabilities |
|
| 1,730 |
|
| — |
|
| 1,730 |
|
Deferred tax liability |
|
| 3,164 |
|
| 182 |
|
| 3,346 |
|
Total liabilities assumed |
|
| 11,262 |
|
| 1,328 |
|
| 12,590 |
|
Net assets acquired |
| $ | 39,787 |
| $ | (560 | ) | $ | 39,227 |
|
The establishment of the allocation to goodwill requires the extensive use of accounting estimates and management judgement. In accordance with ASC 805, the Company has up to one year from the acquisition date (referred to as the measurement period) to account for changes in the fair values of the identifiable assets acquired and the liabilities
13
assumed in the acquired entity. As of the issuance of the condensed consolidated financial statements for the period ended June 30, 2023, the Company has not finalized its calculation of deferred tax assets or liabilities, income taxes payable, and the resulting adjustments to goodwill. The tax-related items will be finalized pending a modified retrospective transition methodconsolidated analysis of the combined tax attributes of the Acquisition. If a change in any of these items is identified during the measurement period, the Company will record the cumulative impact of measurement period adjustments in the period the adjustment is identified. Certain measurement period adjustments were recorded during the quarter ended June 30, 2023, primarily arising from the Company's finalization of the valuation of acquired assets and updated assumptions underlying the tax provision. These adjustments were all offset against goodwill.
The fair value associated with acquired intangible assets and their associated weighted-average amortization periods consist of the following, in thousands:
|
| Classification of Amortization |
| Amount |
|
| Weighted-Average | |
Developed technology |
| Cost of sales |
| $ | 6,700 |
|
| 5.0 years |
Customer relationships |
| Selling, general and administrative |
|
| 2,800 |
|
| 10.0 years |
Backlog |
| Selling, general and administrative |
|
| 2,100 |
|
| 1.0 year |
Trade names |
| Selling, general and administrative |
|
| 1,800 |
|
| 10.0 years |
Noncompetition agreements |
| Selling, general and administrative |
|
| 200 |
|
| 5.0 years |
Total intangible assets |
|
|
| $ | 13,600 |
|
| 6.1 years |
Unaudited Pro Forma Financial Information
Entrepix is included in the Company’s consolidated results beginning January 17, 2023. Total revenues and net income attributable to Entrepix for the period from January 17, 2023 to June 30, 2023 were $13.6 million and $0.3 million, respectively.
The following unaudited pro forma financial information presents the combined results of operations of Amtech and Entrepix, in thousands, as if the acquisition occurred on October 1, 2021. The unaudited pro forma financial information is presented for informational purposes only and is not indicative of the results of operations that would have required us to record a cumulative-effect adjustment in retained earnings asbeen achieved if the acquisition had taken place on the date indicated or of October 1, 2017. On the basis of immateriality, we recorded such cumulative-effect adjustment as stock-based compensationresults that may occur in the first quarterfuture.
|
| Three Months Ended June 30, |
|
| Nine Months Ended June 30, |
| ||||||||||
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||
Revenues, Net |
| $ | 30,740 |
|
| $ | 25,496 |
|
| $ | 93,206 |
|
| $ | 91,321 |
|
Net (Loss) Income |
| $ | (580 | ) |
| $ | 9,694 |
|
| $ | 883 |
|
| $ | 9,670 |
|
The unaudited pro forma financial information presented above include the following adjustments:
3 Months Ended June 30, 2023 and June 30, 2022
9 Months Ended June 30, 2023 and June 30, 2022
14
The unaudited pro forma financial information includes adjustments to align accounting policies, which were materially similar to the Company’s accounting policies. Any differences in accounting policies were adjusted to reflect the accounting policies of the Company in the unaudited pro forma financial information presented.
4. Sale and Leaseback of Real Estate
On June 23, 2022, our financial statements.subsidiary, BTU International, Inc. (“BTU”), completed the sale and leaseback of BTU's building in Billerica, Massachusetts (the “Property”). The sale price was $20.6 million, of which $0.7 million was deducted at closing for commission and other closing expenses. Simultaneously with the closing, BTU entered into a two-year leaseback of the Property. The lease terms include annual base rent of $1.5 million in an absolute triple net lease. In connection with the sale, BTU recognized a pre-tax gain on sale of $12.5 million. This sale-leaseback transaction resulted in a net cash inflow of approximately $14.9 million, after repayment of the existing mortgage and settlement of related sale expenses.
5. Earnings Per Share
Basic earnings per share (“EPS”) is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the period. Diluted EPS is computed similarly to basic EPS except that the denominator is increased to include the number of additional common shares that would have been outstanding if potentially dilutive common shares had been issued. Dilutive potential common shares include outstanding restricted stock units (“RSUs”) and stock options. In the case of a net loss, diluted earnings per share is calculated in the same manner as basic EPS.
For the three and nine months ended
A reconciliation of the components of the basic and diluted EPS calculations follows, in thousands, except per share amounts:
|
| Three Months Ended June 30, |
|
| Nine Months Ended June 30, |
| ||||||||||
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net (loss) income |
| $ | (1,027 | ) |
| $ | 10,222 |
|
| $ | (567 | ) |
| $ | 13,184 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Weighted-average shares used to compute basic EPS |
|
| 14,058 |
|
|
| 13,889 |
|
|
| 14,031 |
|
|
| 14,042 |
|
Dilutive potential common shares due to stock |
|
| — |
|
|
| 137 |
|
|
| — |
|
|
| 178 |
|
Dilutive potential common shares due to RSUs (1) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Weighted-average shares used to compute diluted EPS |
|
| 14,058 |
|
|
| 14,026 |
|
|
| 14,031 |
|
|
| 14,220 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
(Loss) Income per share: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net (loss) income per basic share |
| $ | (0.07 | ) |
| $ | 0.74 |
|
| $ | (0.04 | ) |
| $ | 0.94 |
|
Net (loss) income per diluted share |
| $ | (0.07 | ) |
| $ | 0.73 |
|
| $ | (0.04 | ) |
| $ | 0.93 |
|
Three Months Ended December 31, | ||||||||
2017 | 2016 | |||||||
Basic Income (Loss) Per Share Computation | ||||||||
Net income (loss) attributable to Amtech Systems, Inc. | $ | 6,452 | $ | (53 | ) | |||
Weighted Average Shares Outstanding: | ||||||||
Common stock | 14,781 | 13,179 | ||||||
Basic income (loss) per share attributable to Amtech shareholders | $ | 0.44 | $(0.00) | |||||
Diluted Income (Loss) Per Share Computation | ||||||||
Net income (loss) attributable to Amtech Systems, Inc. | $ | 6,452 | $ | (53 | ) | |||
Weighted Average Shares Outstanding: | ||||||||
Common stock | 14,781 | 13,179 | ||||||
Common stock equivalents (1) | 517 | — | ||||||
Diluted shares | 15,298 | 13,179 | ||||||
Diluted income (loss) per share attributable to Amtech shareholders | $ | 0.42 | $(0.00) |
15
6. Inventories
The components of inventories are as follows, in thousands:
|
| June 30, |
|
| September 30, |
| ||
Purchased parts and raw materials |
| $ | 20,729 |
|
| $ | 15,377 |
|
Work-in-process |
|
| 7,948 |
|
|
| 6,146 |
|
Finished goods |
|
| 5,984 |
|
|
| 3,965 |
|
|
| $ | 34,661 |
|
| $ | 25,488 |
|
December 31, 2017 | September 30, 2017 | ||||||
Purchased parts and raw materials | $ | 13,628 | $ | 14,789 | |||
Work-in-process | 5,806 | 11,078 | |||||
Finished goods | 3,328 | 4,343 | |||||
$ | 22,762 | $ | 30,210 |
7. Leases
The following table summarizesprovides information about the financial statement classification of our stock option activitylease balances reported within the Condensed Consolidated Balance Sheets, in thousands:
|
| June 30, |
|
| September 30, |
| ||
Assets |
|
|
|
|
|
| ||
Right-of-use assets - operating |
| $ | 11,643 |
|
| $ | 11,258 |
|
Right-of-use assets - finance |
|
| 131 |
|
|
| 149 |
|
Total right-of-use assets |
| $ | 11,774 |
|
| $ | 11,407 |
|
Liabilities |
|
|
|
|
|
| ||
Current |
|
|
|
|
|
| ||
Operating lease liabilities |
| $ | 2,800 |
|
| $ | 2,101 |
|
Finance lease liabilities |
|
| 78 |
|
|
| 71 |
|
Total current portion of long-term lease liabilities |
|
| 2,878 |
|
|
| 2,172 |
|
Long-term |
|
|
|
|
|
| ||
Operating lease liabilities |
|
| 9,120 |
|
|
| 9,395 |
|
Finance lease liabilities |
|
| 52 |
|
|
| 76 |
|
Total long-term lease liabilities |
|
| 9,172 |
|
|
| 9,471 |
|
Total lease liabilities |
| $ | 12,050 |
|
| $ | 11,643 |
|
The following table provides information about the financial statement classification of our lease expenses reported in the Condensed Consolidated Statements of Operations, in thousands:
|
|
|
| Three Months Ended June 30, |
|
| Nine Months Ended June 30, |
| ||||||||||
Lease cost |
| Classification |
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||
Operating lease cost |
| Cost of sales |
| $ | 708 |
|
| $ | 292 |
|
| $ | 1,857 |
|
| $ | 687 |
|
Operating lease cost |
| Selling, general and administrative |
|
| 204 |
|
|
| 41 |
|
|
| 583 |
|
|
| 211 |
|
Operating lease cost |
| Research, development and engineering |
|
| 3 |
|
|
| 10 |
|
|
| 10 |
|
|
| 10 |
|
Finance lease cost |
| Cost of sales |
|
| 1 |
|
|
| 1 |
|
|
| 3 |
|
|
| 3 |
|
Finance lease cost |
| Selling, general and administrative |
|
| 20 |
|
|
| 18 |
|
|
| 56 |
|
|
| 53 |
|
Short-term lease cost |
| Cost of sales |
|
| 8 |
|
|
| — |
|
|
| 25 |
|
|
| — |
|
Total lease cost |
|
|
| $ | 944 |
|
| $ | 362 |
|
| $ | 2,534 |
|
| $ | 964 |
|
16
Future minimum lease payments under non-cancelable leases as of June 30, 2023 are as follows, in thousands:
|
| Operating Leases |
|
| Finance Leases |
|
| Total |
| |||
Remainder of 2023 |
| $ | 822 |
|
| $ | 21 |
|
| $ | 843 |
|
2024 |
|
| 2,895 |
|
|
| 67 |
|
|
| 2,962 |
|
2025 |
|
| 1,728 |
|
|
| 19 |
|
|
| 1,747 |
|
2026 |
|
| 1,380 |
|
|
| 19 |
|
|
| 1,399 |
|
2027 |
|
| 765 |
|
|
| 11 |
|
|
| 776 |
|
Thereafter |
|
| 7,828 |
|
|
| 1 |
|
|
| 7,829 |
|
Total lease payments |
|
| 15,418 |
|
|
| 138 |
|
|
| 15,556 |
|
Less: Interest |
|
| 3,498 |
|
|
| 8 |
|
|
| 3,506 |
|
Present value of lease liabilities |
| $ | 11,920 |
|
| $ | 130 |
|
| $ | 12,050 |
|
Operating lease payments include $6.2 million related to optional lease extension periods for multiple leases that are not yet exercisable but are reasonably certain of being exercised.
The following table provides information about the remaining lease terms and discount rates applied:
|
| June 30, |
|
| September 30, |
| ||
Weighted average remaining lease term |
|
|
|
|
|
| ||
Operating leases |
| 11.55 years |
|
| 12.65 years |
| ||
Finance leases |
| 2.53 years |
|
| 2.45 years |
| ||
Weighted average discount rate |
|
|
|
|
|
| ||
Operating leases |
|
| 4.54 | % |
|
| 4.17 | % |
Finance leases |
|
| 4.78 | % |
|
| 4.17 | % |
As of June 30, 2023, we have entered into a lease that has not yet commenced. We expect to record $2.5 million of ROU asset and lease liability upon the commencement of this new lease in the first quarter of fiscal 2024.
8. Goodwill and Intangible Assets
The Company accounts for goodwill at acquisition-date fair value and other intangible assets at acquisition-date fair value less accumulated amortization. See Note 1 for a summary of the Company’s policies relating to goodwill and intangible assets.
Intangible Assets
As of June 30, 2023, the Company’s intangible assets, net consists of the following, in thousands:
|
| Weighted Average Amortization Period |
| Gross Carrying Amount |
|
| Accumulated Amortization |
|
| Net Carrying Amount |
| |||
Noncompetition agreements |
| 5.0 years |
| $ | 200 |
|
| $ | (20 | ) |
| $ | 180 |
|
Backlog |
| 1.0 year |
|
| 2,100 |
|
|
| (1,050 | ) |
|
| 1,050 |
|
Trade names |
| 3.0-15.0 years |
|
| 2,679 |
|
|
| (585 | ) |
|
| 2,094 |
|
Developed technology |
| 5.0 years |
|
| 6,700 |
|
|
| (670 | ) |
|
| 6,030 |
|
Customer relationships |
| 6.0-10.0 years |
|
| 4,409 |
|
|
| (1,450 | ) |
|
| 2,959 |
|
Total intangible assets |
| 6.6 years |
| $ | 16,088 |
|
| $ | (3,775 | ) |
| $ | 12,313 |
|
As of September 30, 2022, the Company’s intangible assets, net consists of the following, in thousands:
|
| Weighted Average Amortization Period |
| Gross Carrying Amount |
|
| Accumulated Amortization |
|
| Net Carrying Amount |
| |||
Customer relationships |
| 6.0-10.0 years |
| $ | 1,609 |
|
| $ | (1,280 | ) |
| $ | 329 |
|
Trade names |
| 3.0-15.0 years |
|
| 879 |
|
|
| (450 | ) |
|
| 429 |
|
Total intangible assets |
| 9.8 years |
| $ | 2,488 |
|
| $ | (1,730 | ) |
| $ | 758 |
|
17
The estimated aggregate amortization expense for each of the five succeeding fiscal years as of June 30, 2023 is as follows, thousands:
Year ending September 30: |
| Amount |
| |
2023 |
| $ | 1,010 |
|
2024 |
|
| 2,463 |
|
2025 |
|
| 1,937 |
|
2026 |
|
| 1,937 |
|
2027 |
|
| 1,937 |
|
Thereafter |
|
| 3,029 |
|
Total |
| $ | 12,313 |
|
The aggregate amortization expense during the three months ended December 31, 2017:
Goodwill
The Company evaluates goodwill at the reporting unit level, which, for the Company, is at the level of the reportable segments, semiconductor, material and substrate. The changes in carrying amount of goodwill allocated to each of the reporting units for the nine months ended June 30, 2023 is as follows, in thousands:
|
| Semiconductor |
|
| Material and Substrate |
|
| Total Goodwill |
| |||
Goodwill |
| $ | 5,905 |
|
| $ | 5,263 |
|
| $ | 11,168 |
|
Accumulated impairment losses |
|
| — |
|
|
| — |
|
|
| — |
|
Balance at September 30, 2022 |
|
| 5,905 |
|
|
| 5,263 |
|
|
| 11,168 |
|
Goodwill acquired during 2023 |
|
| — |
|
|
| 17,854 |
|
|
| 17,854 |
|
Impairment of goodwill during 2023 |
|
| — |
|
|
| — |
|
|
| — |
|
Balance at June 30, 2023 |
| $ | 5,905 |
|
| $ | 23,117 |
|
| $ | 29,022 |
|
Goodwill |
| $ | 5,905 |
|
| $ | 23,117 |
|
| $ | 29,022 |
|
Accumulated impairment losses |
|
| — |
|
|
| — |
|
|
| — |
|
Balance at June 30, 2023 |
| $ | 5,905 |
|
| $ | 23,117 |
|
| $ | 29,022 |
|
Options | Weighted Average Exercise Price | ||||||
Outstanding at beginning of period | 1,560,441 | $ | 7.95 | ||||
Granted | — | — | |||||
Exercised | (165,839 | ) | 7.03 | ||||
Forfeited | (27,299 | ) | 20.04 | ||||
Outstanding at end of period | 1,367,303 | $ | 7.82 | ||||
Exercisable at end of period | 1,142,012 | $ | 8.06 | ||||
Weighted average fair value of options granted during the period | $ | — |
9. Income Taxes
Income Tax (Benefit) Provision
Our effective tax rate was 82.8% and 6.0% for the nine months ended June 30, 2023 and 2022, respectively. The effective tax rate for the nine months ended June 30, 2023 differs from the U.S. statutory tax rate of 21% primarily due to the release of a portion of our valuation allowance in connection with a deferred tax liability related to the Entrepix acquisition resulting in recognition of previously recorded deferred tax assets. For the three months ended June 30, 2023 and 2022, we recorded income tax expense of $0.2 million and $20,000, respectively. For the nine months ended June 30, 2023 and 2022, we recorded an income tax benefit of $2.7 million and income tax expense of $0.8 million, respectively. The quarterly income tax provision is calculated using an estimated annual effective tax rate, based upon expected annual income, permanent items, statutory rates and planned tax strategies in the various jurisdictions in which we operate. However, losses in certain jurisdictions and discrete items are treated separately.
18
Deferred tax assetsIncome Taxes and liabilities reflect the tax effects of temporary differences between the carrying value of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. We recordValuation Allowance
GAAP requires that a valuation allowance if, based on the weight of available evidence,be established when it is more“more likely than notnot” that someall or a portion or all of a deferred tax assetassets will not be realized. Our expectations regarding realizationA review of our deferred tax assetsall available positive and negative evidence needs to be considered, including a company’s performance, the market environment in which the company operates and the length of carryback and carryforward periods. According to those principles, it is based upondifficult to conclude that a valuation allowance is not needed when the weightnegative evidence includes cumulative losses in recent years. Based on the considerations of all available evidence, including such factors as our recent earnings history, expected future taxable income and available tax planning strategies. In prior periods, we establishedhave concluded that we will maintain a full valuation allowances on substantiallyallowance for all net deferred tax assets after considering allrelated to the carryforwards of the available objective evidence, both positiveU.S. net operating losses and negative, historicalforeign tax credits. We will continue to monitor our cumulative income and prospective, with greater weight given to historical evidence, and determined it is not more likely than not that these assets will be realized.
We expect to pay minimal net effect to our provisionU.S federal cash taxes for income taxes and effective tax rate. We have not made any other provisional adjustmentsthe foreseeable future as a result of the Act.
10. Equity and tax credits thatStock-Based Compensation
Stock-based compensation expense was $0.2 million and $0.1 million in the three months ended June 30, 2023 and 2022, respectively, and $0.5 million and $0.4 million in the nine months ended June 30, 2023 and 2022, respectively. Stock-based compensation expense is included in selling, general and administrative expenses.
The following table summarizes our stock option activity during the nine months ended June 30, 2023:
|
| Options |
|
| Weighted |
| ||
Outstanding at beginning of period |
|
| 589,341 |
|
| $ | 8.06 |
|
Granted |
|
| 166,500 |
|
|
| 9.12 |
|
Exercised |
|
| (58,813 | ) |
|
| 5.38 |
|
Forfeited |
|
| (43,850 | ) |
|
| 11.10 |
|
Outstanding at end of period |
|
| 653,178 |
|
| $ | 8.37 |
|
Exercisable at end of period |
|
| 412,192 |
|
| $ | 7.55 |
|
Weighted average fair value of options granted during the period |
| $ | 4.74 |
|
|
|
|
The fair value of options was estimated at the applicable grant date using the Black-Scholes option pricing model with the following assumptions:
|
| Nine Months Ended June 30, 2023 |
|
| Nine Months Ended June 30, 2022 |
| ||
Risk free interest rate |
|
| 4 | % |
|
| 2 | % |
Expected term |
| 5 years |
|
| 5 years |
| ||
Dividend rate |
|
| — | % |
|
| — | % |
Volatility |
|
| 56 | % |
|
| 57 | % |
The following table summarizes our RSU activity during the nine months ended June 30, 2023:
|
| Number |
|
| Weighted |
| ||
Nonvested at beginning of year |
|
| — |
|
| $ | — |
|
Granted |
|
| 23,421 |
|
|
| 9.56 |
|
Released |
|
| (3,000 | ) |
|
| 9.61 |
|
Forfeited |
|
| — |
|
|
| — |
|
Nonvested at end of period |
|
| 20,421 |
|
| $ | 9.55 |
|
19
2023 Stock Repurchase Plan
On February 7, 2023, our Board of Directors (the “Board”) approved a stock repurchase program, pursuant to which we may reducerepurchase up to $5 million of our outstanding Common Stock over a one-year period, commencing on February 10, 2023. Repurchases under the amount of related taxes payable. We expectprogram will be made in open market transactions at prevailing market prices, in privately negotiated transactions, or by other means in compliance with the accounting for this aspectrules and regulations of the ActSecurities and Exchange Commission; however, we have no obligation to repurchase shares and the timing, actual number, and value of shares to be complete byrepurchased is subject to management’s discretion and will depend on our stock price and other market conditions. We may, in the end of fiscal 2018. As of December 31, 2017, consistent with historical conclusions, our cash balances held in foreign locations are expected to be permanently reinvested outside the United States as the impactsole discretion of the Act on our current positionBoard, terminate the repurchase program at any time while it is not yet fully understood and is still under evaluation.
2022 Stock Repurchase Plan
On February 10, 2022, the Board approved a new stock repurchase program, pursuant to which we recorded income tax expensemay repurchase up to $5 million of $1.2 million. The differenceour outstanding Common Stock over a one-year period, commencing on February 16, 2022. Repurchases under the program will be made in our effective tax rate fromopen market transactions at prevailing market prices, in privately negotiated transactions, or by other means in compliance with the U.S. statutory rate primarily reflects the impactrules and regulations of the mix of domestic and international pre-tax income and valuation allowance. In 2017SEC; however, we have no obligation to repurchase shares and the first quartertiming, actual number, and value of 2018, we reversed a portionshares to be repurchased is subject to management’s discretion and will depend on our stock price and other market conditions. We may, in the sole discretion of the valuation allowance related to net operating loss carryforwards whichBoard, terminate the repurchase program at any time while it is in effect. Repurchased shares may be retired or kept in treasury for further issuance. During the quarter ended March 31, 2022, we have determined will be utilized against net operating income in the current year.
11. Commitments and Contingencies
Purchase Obligations
– As ofLegal Proceedings and Other Claims – In fiscal 2014, our wholly owned subsidiary, Tempress Systems, Inc. (“Tempress”), entered into an agreement with the Energy Research Centre of the Netherlands (“ECN”), a Netherlands government-sponsored research institute, for a joint research and development project. Under the terms of the agreement, Tempress sold an ion implanter (“Equipment”) to ECN for $1.4 million. Both Tempress and ECN are performing research and development projects utilizing the Equipment at the ECN facilities. Each party to the agreement will have 100% rights to the results of the projects developed separately by the individual parties. Any results co-developed will be jointly owned. Tempress met its requirement to contribute $1.4 million to the project in the form of installation of the Equipment, acceptance testing, project meeting attendance, training, parts, and service, including keeping the Equipment in good condition and repair for the first two years of the agreement prior to fiscal 2017.
Employment Contracts
– We have employment contracts and change in control agreements with, and severance plans covering, certain officers and management employees under which severance payments would become payable in the event of specified terminations without cause or terminations under certain circumstances after a change in control. If severance payments under the current employment20
12. Reportable Segments
Amtech has two operating segments that are structured around the types of product offerings provided to our customers. In December 2008, Amtech and Computershare Trust Company, N.A., as Rights Agent (the “Rights Agent”), entered into an Amended and Restated Rights Agreement (the “Restated Rights Agreement”) which amended and restatedaddition, the terms governing the previously authorized shareholder rights (each a “Right”) to purchase fractional shares of our Series A Participating Preferred Stock (“Series A Preferred”) currently attached to each of our outstanding shares of common stock, par value $0.01 per share. As amended, each Right entitles the registered holder to purchase from us one one-thousandth of a share of Series A Preferred at an exercise price of $51.60 (the “Exercise Price”), subject to adjustment. The Rights will expire 10 years after issuance and willoperating segments may be exercisable if (a) a person or group becomes the beneficial owner of 15% or more of our common stock or (b) a person or group commences a tender or exchange offer that would result in the offeror beneficially owning 15% or more of our common stock. The Final Expiration Date (as defined in the Restated Rights Agreement) is December 14, 2018.
Semiconductor
–We design, manufacture, sell and service thermal processing equipment and related controls for use by leading semiconductor manufacturers, and in electronics, automotive and other industries.Material and Substrate –
We produce consumables and machinery for lapping (fine abrading) and polishing of materials, such as sapphire substrates, optical components, silicon wafers, numerous types of crystal materials, ceramics and metal components.Information concerning our businessreportable segments is as follows, in thousands:
|
| Three Months Ended June 30, |
|
| Nine Months Ended June 30, |
| ||||||||||
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||
Net Revenues: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Semiconductor |
| $ | 19,841 |
|
| $ | 15,135 |
|
| $ | 58,775 |
|
| $ | 61,484 |
|
Material and Substrate |
|
| 10,899 |
|
|
| 4,829 |
|
|
| 26,833 |
|
|
| 12,499 |
|
| $ | 30,740 |
|
| $ | 19,964 |
|
| $ | 85,608 |
|
| $ | 73,983 |
| |
Operating income (loss): |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Semiconductor |
| $ | 1,042 |
|
| $ | 10,521 |
|
| $ | 4,861 |
|
| $ | 16,246 |
|
Material and Substrate |
|
| 481 |
|
|
| 1,156 |
|
|
| 1,411 |
|
|
| 1,991 |
|
Non-segment related |
|
| (2,642 | ) |
|
| (2,115 | ) |
|
| (9,552 | ) |
|
| (4,840 | ) |
|
| $ | (1,119 | ) |
| $ | 9,562 |
|
| $ | (3,280 | ) |
| $ | 13,397 |
|
|
| June 30, |
|
| September 30, |
| ||
Identifiable Assets: |
|
|
|
|
|
| ||
Semiconductor |
| $ | 71,853 |
|
| $ | 75,622 |
|
Material and Substrate |
|
| 70,687 |
|
|
| 22,032 |
|
Non-segment related* |
|
| 3,822 |
|
|
| 35,880 |
|
| $ | 146,362 |
|
| $ | 133,534 |
|
Three Months Ended December 31, | ||||||||
2017 | 2016 | |||||||
Net Revenues: | ||||||||
Solar * | $ | 49,197 | $ | 11,424 | ||||
Semiconductor | 20,891 | 15,703 | ||||||
Polishing | 3,523 | 2,008 | ||||||
$ | 73,611 | $ | 29,135 | |||||
Operating income (loss): | ||||||||
Solar * | $ | 5,352 | $ | (1,023 | ) | |||
Semiconductor | 3,004 | 2,361 | ||||||
Polishing | 1,104 | 464 | ||||||
Non-segment related | (1,694 | ) | (1,982 | ) | ||||
$ | 7,766 | $ | (180 | ) |
* The financial statement of business units included in the Solar segment include some sales of equipment and parts to the semiconductor, silicon wafer and MEMS industries, comprising less than 25% of the Solar segment revenue.
December 31, 2017 | September 30, 2017 | ||||||
Identifiable Assets: | |||||||
Solar | $ | 76,794 | $ | 97,999 | |||
Semiconductor | 58,706 | 57,177 | |||||
Polishing | 5,912 | 5,078 | |||||
Non-segment related | 31,701 | 31,369 | |||||
$ | 173,113 | $ | 191,623 |
Goodwill and other long-lived assets
We review our long-lived assets, including goodwill, for impairment at least annually in our fourth quarter or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Additional information on impairment testing of long-lived assets, intangible assets and goodwill can be found in NoteNotes 1 and 11 of our Annual Report on Form 10-K as amended, for the year ended September 30, 2017.2022.
21
13. Major Customers and Foreign Sales
During the threenine months ended
Our net revenues were tofrom customers in the following geographic regions:
|
| Nine Months Ended June 30, |
| |||||
|
| 2023 |
|
| 2022 |
| ||
United States |
|
| 34 | % |
|
| 24 | % |
Canada |
|
| 8 | % |
|
| 2 | % |
Other |
|
| 3 | % |
|
| 5 | % |
Total Americas |
|
| 45 | % |
|
| 31 | % |
China |
|
| 15 | % |
|
| 19 | % |
Malaysia |
|
| 7 | % |
|
| 8 | % |
Taiwan |
|
| 6 | % |
|
| 13 | % |
Other |
|
| 7 | % |
|
| 6 | % |
Total Asia |
|
| 35 | % |
|
| 46 | % |
Germany |
|
| 2 | % |
|
| 5 | % |
Austria |
|
| 5 | % |
|
| 11 | % |
Other |
|
| 13 | % |
|
| 7 | % |
Total Europe |
|
| 20 | % |
|
| 23 | % |
|
|
| 100 | % |
|
| 100 | % |
Three Months Ended December 31, | |||||
2017 | 2016 | ||||
United States | 7 | % | 18 | % | |
Other | 2 | % | 2 | % | |
Total North America | 9 | % | 20 | % | |
China | 71 | % | 26 | % | |
Malaysia | 3 | % | 17 | % | |
Taiwan | 2 | % | 12 | % | |
Other | 3 | % | 6 | % | |
Total Asia | 79 | % | 61 | % | |
Germany | 6 | % | 5 | % | |
Other | 6 | % | 14 | % | |
Total Europe | 12 | % | 19 | % | |
100 | % | 100 | % |
22
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and the related notes included in Item 1, “Condensed Consolidated Financial Statements” in Item 1 of this Quarterly Report on Form 10-Q (“Quarterly Report”) and our consolidated financial statements and related notes included in Item 8, “Financial“Item 8. Financial Statements and Supplementary Data” in our Annual Report on Form 10-K as amended, for the fiscal year ended September 30, 2017.
Overview
We operate in three reportable business segments: (i) Solar, (ii) Semiconductor and (iii) Polishing. In our Solar segment, we are a leading, global suppliermanufacturer of capital equipment, including thermal processing systems, including diffusion, plasma-enhanced chemical vapor deposition (“PECVD”), atomic layer deposition (“ALD”),and wafer polishing, and related automation, partsconsumables used in fabricating semiconductor devices, such as silicon carbide (“SiC”) and services,silicon power, analog and discrete devices, and electronic assemblies and modules focusing on enabling technologies for electric vehicles (EV) and clean technology (CleanTech) applications. We sell these products to semiconductor device and module manufacturers worldwide, particularly in Asia, North America and Europe.
We operate in two reportable segments, based primarily on the solar photovoltaic industry.industry they serve: (i) Semiconductor and (ii) Material and Substrate. In our Semiconductor segment, we supply thermal processing equipment, including solder reflow equipmentovens, horizontal diffusion furnaces and related controls and diffusioncustom high-temp belt furnaces for use by leading semiconductor, electronics and electro/mechanical assembly manufacturers. Our semiconductor customers are primarily manufacturers of integrated circuits and optoelectronic sensors and discrete (“O-S-D”) components used in electronics assembly for automotiveanalog, power and other industries.radio frequency (“RF”). In our PolishingMaterial and Substrate segment, we produce substrate consumables, chemicals and machinery for lapping (fine abrading) and polishing of materials, such as sapphire substrates, optical components, silicon wafers numerous types of crystalline materials, ceramicsfor semiconductor products, sapphire wafers for LED applications, and metal components.
The solar cell and semiconductor industries areindustry is cyclical, but not seasonal, and historically havehas experienced significant fluctuations. Our revenue is impacted by these broad industry trends. The solar cell
Strategy
We continue to focus on our plans to profitably grow our business and have developed a strategic growth plan and a capital allocation plan that we believe will support our growth objectives. Our power semiconductor strategic growth plan leverages our experience, products and capabilities in pursuit of growth, profitability and sustainability. Our core focus areas are:
23
We anticipate future investments will be required to meet the expected demand from the growing markets we serve to achieve our revenue growth targets, including investments in research and development as well as capital expenditures, which also includes additional investments in capacity expansion, talent, and management information systems. In June 2022, we completed the sale of the real property where our manufacturing facility in Massachusetts is located. In connection with this sale, we entered into a two-year leaseback of the facility. This sale-leaseback transaction resulted in a net cash inflow of approximately $14.9 million, after repayment of the existing mortgage and settlement of related sale expenses. During the two-year leaseback period, we are exploring various options, including negotiating with the landlord for an extension of the lease-back period and conducting a search for a new manufacturing facility more in line with the needs of our Semiconductor product lines. In addition, we are evaluating business continuity and resiliency within our operations, our management information systems, and our needs to allow for greater efficiencies and to ensure our infrastructure can support our future growth plans. As a capital equipment vendors. Whilemanufacturer, we will continue to focus on developing advanced products and technologies, weinvest in our business to drive future growth.
In addition to investments in our organic growth, another key aspect of our capital allocation policy is our plan to seek further cost reductionsgrow through acquisitions. We have the expertise and track record to addressidentify complimentary and synergistic acquisition targets in the competition fromSemiconductor and SiC growth environments and to execute transactions and integrations to provide for value creating, profitable growth in both the short-term and long-term. On March 3, 2021, we acquired Intersurface Dynamics, a Connecticut-based manufacturer of substrate process chemicals used in various manufacturing processes, including semiconductors, silicon and compound semiconductor wafers, and optics. On January 17, 2023, we acquired Entrepix, an Arizona-based expert in CMP and wafer cleaning. As of the date of the filing of this Quarterly Report, we do not have an agreement to acquire any additional acquisition target.
COVID-19 Update
On March 28, 2022, the Chinese equipment vendors.
Results of Operations
The following table sets forth certain operational data as a percentage of net revenue for the periods indicated:
Three Months Ended | ||||||
December 31, 2017 | December 31, 2016 | |||||
Net revenue | 100 | % | 100 | % | ||
Cost of sales | 72 | % | 71 | % | ||
Gross margin | 28 | % | 29 | % | ||
Selling, general and administrative | 14 | % | 24 | % | ||
Research, development and engineering | 3 | % | 6 | % | ||
Operating income (loss) | 11 | % | (1 | )% | ||
Gain on sale of other assets | 0 | % | 0 | % | ||
Income (loss) from equity method investment | 0 | % | 0 | % | ||
Interest expense and other income, net | 0 | % | 0 | % | ||
Income (loss) before income taxes | 11 | % | (1 | )% | ||
Income taxes provision | 2 | % | 0 | % | ||
Net income (loss) | 9 | % | (1 | )% | ||
Add: net loss attributable to noncontrolling interest | 0 | % | 1 | % | ||
Net income (loss) attributable to Amtech Systems, Inc. | 9 | % | 0 | % | ||
|
| Three Months Ended June 30, |
|
| Nine Months Ended June 30, |
| ||||||||||
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||
Net revenue |
|
| 100 | % |
|
| 100 | % |
|
| 100 | % |
|
| 100 | % |
Cost of sales |
|
| 64 | % |
|
| 70 | % |
|
| 62 | % |
|
| 64 | % |
Gross margin |
|
| 36 | % |
|
| 30 | % |
|
| 38 | % |
|
| 36 | % |
Selling, general and administrative |
|
| 34 | % |
|
| 36 | % |
|
| 36 | % |
|
| 28 | % |
Research, development and engineering |
|
| 6 | % |
|
| 8 | % |
|
| 6 | % |
|
| 7 | % |
Gain on sale of fixed assets |
|
| — | % |
|
| (62 | )% |
|
| — | % |
|
| (17 | )% |
Severance expense |
|
| — | % |
|
| — | % |
|
| — | % |
|
| — | % |
Operating (loss) income |
|
| (4 | )% |
|
| 48 | % |
|
| (4 | )% |
|
| 18 | % |
Interest income (expense) and other, net |
|
| 1 | % |
|
| 3 | % |
|
| — | % |
|
| 1 | % |
(Loss) income before income taxes |
|
| (3 | )% |
|
| 51 | % |
|
| (4 | )% |
|
| 19 | % |
Income tax provision (benefit) |
|
| — | % |
|
| — | % |
|
| (3 | )% |
|
| 1 | % |
Net (loss) income |
|
| (3 | )% |
|
| 51 | % |
|
| (1 | )% |
|
| 18 | % |
24
Net Revenue
Net revenue consists of revenue recognized upon shipment or installationdelivery of equipment, with the exception of products using new technology, for which revenue is recognized upon customer acceptance.equipment. Spare parts sales are recognized upon shipment and service revenue is recognized upon completion of the service activity, which is generally ratable over the term of the service contract. Since the majority of our revenue is generated from large system sales, revenue, gross profit and operating income can be significantly impacted by the timing of system shipments, and recognition of revenue based on customer acceptances. The revenue of business units included in the Solar segment include some sales of equipment and parts to the semiconductor, silicon wafer and microelectromechanical (“MEMS”) industries, comprising less than 25% of the Solar segment revenue. shipments.
Our net revenue by operatingreportable segment was as follows, (dollarsdollars in thousands):
Three Months Ended December 31, | ||||||||||||||
Segment | 2017 | 2016 | Incr (Decr) | % Change | ||||||||||
Solar | $ | 49,197 | $ | 11,424 | $ | 37,773 | 331% | |||||||
Semiconductor | 20,891 | 15,703 | 5,188 | 33% | ||||||||||
Polishing | 3,523 | 2,008 | 1,515 | 75% | ||||||||||
Total net revenue | $ | 73,611 | $ | 29,135 | $ | 44,476 | 153% |
|
| Three Months Ended June 30, |
|
|
|
|
|
|
|
| Nine Months Ended June 30, |
|
|
|
|
|
|
| ||||||||||||||
Segment |
| 2023 |
|
| 2022 |
|
| Change |
|
| % Change |
|
| 2023 |
|
| 2022 |
|
| Change |
|
| % Change |
| ||||||||
Semiconductor |
|
| 19,841 |
|
| $ | 15,135 |
|
| $ | 4,706 |
|
|
| 31 | % |
|
| 58,775 |
|
| $ | 61,484 |
|
| $ | (2,709 | ) |
|
| (4 | )% |
Material and Substrate |
|
| 10,899 |
|
|
| 4,829 |
|
|
| 6,070 |
|
|
| 126 | % |
|
| 26,833 |
|
|
| 12,499 |
|
|
| 14,334 |
|
|
| 115 | % |
Total net revenue |
| $ | 30,740 |
|
| $ | 19,964 |
|
| $ | 10,776 |
|
|
| 54 | % |
| $ | 85,608 |
|
| $ | 73,983 |
|
| $ | 11,625 |
|
|
| 16 | % |
Total net revenue for the quartersthree months ended December 31, 2017June 30, 2023 and 20162022 was $73.6$30.7 million and $29.1$20.0 million, respectively, an increase of $44.5approximately $10.8 million or 153%54%. Our Semiconductor results for the third quarter of fiscal 2023 reflect increases in our belt furnace, surface-mount technology (“SMT”), and packaging equipment production, partially offset by decreases in shipments of our horizontal diffusion furnaces. We continue to experience softness in shipments of our advanced packaging and SMT equipment, primarily related to a slowdown in global demand in the consumer markets. Our Semiconductor results for the third quarter of fiscal 2022 reflect the closure of our Shanghai manufacturing facility, which partially reopened in mid-May and fully reopened on June 1, 2022. Material and Substrate revenue increased due to the addition of Entrepix, effective January 17, 2023. Entrepix accounted for approximately $7.2 million of revenue in the Material and Substrate segment during the quarter ended June 30, 2023.
Total net revenue for the nine months ended June 30, 2023 and 2022 was $85.6 million and $74.0 million, respectively, an increase of approximately $11.6 million or 16%. Revenue from the SolarSemiconductor segment increased 331%decreased $2.7 million compared to the prior year quarter dueperiod. This decrease is primarily attributable to lower shipments relating to Phase II of the turnkey order, previously announced in April 2017.our SMT, advanced packaging and horizontal diffusion furnace product lines, partially offset by increased shipments of high temperature belt furnaces and increased parts and services revenues. Revenue from the Semiconductorour Material and Substrate segment increased 33% compared$14.3 million due to the prior year quarter due primarily to strong customer demand foraddition of Entrepix, effective January 17, 2023, and increased shipments of consumables resulting from capacity expansion and production increases by our thermal processing systemscustomers.
Orders and diffusion furnaces. Revenue from the Polishing segment increased 75% compared to the prior year quarter due primarily to strong customer demand leading to increased sales of polishing templates and equipment.
New orders booked in the quarterthree and nine months ended December 31, 2017June 30, 2023 and 2022 were $37.3 million ($7.3 million Solar) compared to $34.7 million ($15.9 million Solar)as follows, dollars in thousands:
|
| Three Months Ended June 30, |
|
|
|
|
|
|
|
| Nine Months Ended June 30, |
|
|
|
|
|
|
| ||||||||||||||
Segment |
| 2023 |
|
| 2022 |
|
| Change |
|
| % Change |
|
| 2023 |
|
| 2022 |
|
| Change |
|
| % Change |
| ||||||||
Semiconductor |
| $ | 18,293 |
|
| $ | 24,144 |
|
| $ | (5,851 | ) |
|
| (24 | )% |
| $ | 63,983 |
|
| $ | 79,992 |
|
| $ | (16,009 | ) |
|
| (20 | )% |
Material and Substrate |
|
| 7,924 |
|
|
| 6,001 |
|
|
| 1,923 |
|
|
| 32 | % |
|
| 21,729 |
|
|
| 15,485 |
|
|
| 6,244 |
|
|
| 40 | % |
Total new orders |
| $ | 26,217 |
|
| $ | 30,145 |
|
| $ | (3,928 | ) |
|
| (13 | )% |
| $ | 85,712 |
|
| $ | 95,477 |
|
| $ | (9,765 | ) |
|
| (10 | )% |
Our backlog as of customer ordersJune 30, 2023 and 2022 was as follows, dollars in the quarter ended December 31, 2016. The backlog of business units included in the Solar segment include some sales of equipment and parts to the semiconductor, silicon wafer and MEMS industries, comprising less than 25% of the Solar segment backlog.
|
| June 30, |
|
|
|
|
|
|
| |||||||
Segment |
| 2023 |
|
| 2022 |
|
| Change |
|
| % Change |
| ||||
Semiconductor |
| $ | 53,219 |
|
| $ | 58,344 |
|
| $ | (5,125 | ) |
|
| (9 | )% |
Material and Substrate |
|
| 8,096 |
|
|
| 4,387 |
|
|
| 3,709 |
|
|
| 85 | % |
Total backlog |
| $ | 61,315 |
|
| $ | 62,731 |
|
| $ | (1,416 | ) |
|
| (2 | )% |
As of December 31, 2017, twoJune 30, 2023, one customer of both our Semiconductor and Material and Substrate segments accounted for 19% of our backlog. Additionally, three Semiconductor segment customers individually accounted for 19%20%, 17% and
25
13% of our backlog. No other customer accounted for more than 10% of our backlog.backlog as of June 30, 2023. The orders included in our backlog are generally credit approved customer purchase orders believed to be firm and are generally expected to ship within the next twelve months. Because our orders are typically subject to cancellation or delay by the customer, our backlog at any particular point in time is not necessarily representative of actual sales for succeedingfuture periods, nor is backlog any assurance that we will realize profit from completing these orders. Our backlog also includes revenue deferred pursuant to our revenue recognition policy, derived from orders that have already been shipped, but which have not met the criteria for revenue recognition.
Gross Profit and Gross Margin
Gross profit is the difference between net revenue and cost of goods sold. Cost of goods sold consists of purchased material, labor and overhead to manufacture equipment and spare parts and the cost of service and support to customers for installation, warranty and paid service calls. Gross margin is gross profit as a percent of net revenue. Our gross profit and gross margin by operatingbusiness segment were as follows, (dollarsdollars in thousands):
Three Months Ended December 31, | ||||||||||||||||
Segment | 2017 | Gross Margin | 2016 | Gross Margin | Incr (Decr) | |||||||||||
Solar | $ | 11,313 | 23% | $ | 1,611 | 14% | $ | 9,702 | ||||||||
Semiconductor | 7,488 | 36% | 6,095 | 39% | 1,393 | |||||||||||
Polishing | 1,536 | 44% | 737 | 37% | 799 | |||||||||||
Total gross profit | $ | 20,337 | 28% | $ | 8,443 | 29% | $ | 11,894 |
|
| Three Months Ended June 30, |
|
| Nine Months Ended June 30, |
| ||||||||||||||||||||||||||||||||||
Segment |
| 2023 |
|
| Gross |
|
| 2022 |
|
| Gross |
|
| Change |
|
| 2023 |
|
| Gross |
|
| 2022 |
|
| Gross |
|
| Change |
| ||||||||||
Semiconductor |
| $ | 6,707 |
|
|
| 34 | % |
| $ | 3,590 |
|
|
| 24 | % |
| $ | 3,117 |
|
| $ | 21,810 |
|
|
| 37 | % |
| $ | 21,507 |
|
|
| 35 | % |
| $ | 303 |
|
Material and Substrate |
|
| 4,278 |
|
|
| 39 | % |
|
| 2,310 |
|
|
| 48 | % |
|
| 1,968 |
|
|
| 10,948 |
|
|
| 41 | % |
|
| 5,451 |
|
|
| 44 | % |
|
| 5,497 |
|
Total gross profit |
| $ | 10,985 |
|
|
| 36 | % |
| $ | 5,900 |
|
|
| 30 | % |
| $ | 5,085 |
|
| $ | 32,758 |
|
|
| 38 | % |
| $ | 26,958 |
|
|
| 36 | % |
| $ | 5,800 |
|
Our gross margins can be affected by capacity utilization and the type and volume of machines and consumables sold each quarter. Gross profit for the three months ended December 31, 2017June 30, 2023 and 20162022 was $20.3$11.0 million (28%(36% of net revenue) and $8.4$5.9 million (29%(30% of net revenue), respectively, an increase of $11.9$5.1 million. Gross margin on products from our Solar segment increased compared to the three months ended December 31, 2016, due primarily to higher sales volumes of higher-margin products compared to the first quarter of fiscal 2017. Gross profit on products from our Semiconductor segment increased due to increased sales volumechanges in the first quarter of 2018, with gross margin decreasing due toour product mix.mix and improved capacity utilization in our Billerica and Shanghai facilities. Gross profit and gross margin on products from our PolishingSemiconductor segment increased fromwere lower in the prior year period primarily due to higher salesthe above-mentioned closure of newour Shanghai manufacturing facility. Gross margin on products with higher margins. Forfrom our Material and Substrate segment decreased compared to the three months ended December 31, 2017,June 30, 2022, due to higher equipment sales, primarily at Entrepix, which have lower margins than our consumables. We are experiencing increased material costs across all our segments. In response to such increased costs, we deferred grosscontinually review our pricing plans and supplier agreements, with the objective of passing these increased costs to our customers where possible; however, we continue to experience pricing pressure from our customers. We are also exploring partnerships with contract manufacturers, who can leverage their buying power on a larger scale. Additionally, we have experienced rising labor costs across our divisions, and we expect this trend to continue, as the labor markets in which we operate remain competitive.
Gross profit of $2.1 million. Forfor the threenine months ended December 31, 2016, we recognized previously-deferred gross profitJune 30, 2023 and 2022 was $32.8 million (38% of $0.3net revenue) and $27.0 million (36% of net revenue), respectively, an increase of $5.8 million.
Selling, General and Administrative
Selling, general and administrative expenses (“SG&A”) consists of the cost of employees, consultants and contractors, facility costs, sales commissions, shipping costs, promotional marketing expenses, legal and accounting expenses and bad debt expense.
SG&A expenses for the three months ended December 31, 2017June 30, 2023 and 20162022 were $10.6$10.3 million and $7.0$7.2 million, respectively. SG&A increased compared to the prior year quarter due primarily to $1.8$1.9 million of higher commissions, freightadded SG&A from our acquisition of Entrepix as well as increased consulting and other sellingERP project expenses.
SG&A expenses for the nine months ended June 30, 2023 and 2022 were $30.9 million and $21.0 million, respectively. SG&A increased compared to the prior year period due primarily to $3.8 million of added SG&A from our acquisition of Entrepix, $3.2 million of transaction expenses related to increased revenue. Also, for the three months ended December 31, 2016, SG&A expenses were reduced by the collectionsacquisition of previously reserved accounts receivableEntrepix and $2.0 million of approximately $1.0 million.
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Research, Development and Engineering
Research, development and engineering (“RD&E”) expenses consist of the cost of employees, consultants and contractors who design, engineer and develop new products and processes as well as materials and supplies used in producing prototypes. WeRD&E expenses may vary from period to period depending on the engineering projects in process. Expenses related to engineers working on strategic projects or sustaining engineering projects are recorded in RD&E. However, from time to time we add functionality to our products or develop new products during engineering and manufacturing to fulfill specifications in a customer’s order, in which case the cost of development, along with other costs of the order, are charged to cost of goods sold. Occasionally, we receive reimbursements through governmental research and development grants which are netted against these expenses when certain conditions have been met.
RD&E expense, net of grants earned, for the three months ended December 31, 2017June 30, 2023 and 20162022 were $2.0$1.8 million and $1.6 million, respectively, an increaseand $4.7 million and $5.0 million in the nine months ended June 30, 2023 and 2022, respectively. The decrease in RD&E in the nine-month period is due to the timing of purchases related to specific strategic-development projects at our Semiconductor segment. Grants earned are immaterial in all periods presented.
Severance Expense
We recorded severance expense of $0.4 million due primarilyin the nine months ended June 30, 2023. This one-time charge relates to increased R&D spendingthe retirement of our founder, Mr. J.S. Whang. There was no severance expense recorded in our Solar segment.
Income Taxes
Our effective tax rate was 82.8% and 6.0% for the nine months ended June 30, 2023 and 2022, respectively. The effective tax rate for the nine months ended June 30, 2023 differs from the U.S. statutory tax rate of 21% primarily due to the release of a portion of our valuation allowance in connection with a deferred tax liability related to the Entrepix acquisition resulting in recognition of previously recorded deferred tax assets. For the three months ended December 31, 2017June 30, 2023 and 2022, we recorded income tax expense of $1.2$0.2 million resulting in an effective tax rate of 16.1%.and $20,000, respectively. For the threenine months ended December 31, 2016June 30, 2023 and 2022, we recorded income tax benefit of $2.7 million and income tax expense of $0.1$0.8 million, a 37.5%respectively. The quarterly income tax provision is calculated using an estimated annual effective tax rate. The income tax provisions arerate, based upon estimates ofexpected annual income, annual permanent differencesitems, statutory rates and statutoryplanned tax ratesstrategies in the various jurisdictions in which we operate, except thatoperate. However, losses in certain loss jurisdictions and discrete items are treated separately.
Generally accepted accounting principles of the United States (“GAAP”) require that a valuation allowance be established when it is “more likely than not” that all or a portion of deferred tax assets will not be realized. A review of all available positive and negative evidence needs to be considered, including a company’s performance, the market environment in which the company operates and the length of carryback and carryforward periods. According to those principles, it is difficult to conclude that a valuation allowance is not needed when the negative evidence includes cumulative losses in recent years. Therefore, in fiscal 2017, cumulative losses weighed heavily in
We expect to pay minimal U.S federal cash taxes for the foreseeable future as a result of our U.S. net operating losses that are carried forward.
Our future effective income tax rate depends on various factors, such as the amount of income (loss) in Europe.
27
Liquidity and Capital Resources
The following table sets forth for the periods presented certain consolidated cash flow information, in thousands:
|
| Nine Months Ended June 30, |
| |||||
|
| 2023 |
|
| 2022 |
| ||
Net cash (used in) provided by operating activities |
| $ | (7,150 | ) |
| $ | 5,090 |
|
Net cash (used in) provided by investing activities |
|
| (36,854 | ) |
|
| 19,583 |
|
Net cash provided by (used in) financing activities |
|
| 11,590 |
|
|
| (8,855 | ) |
Effect of exchange rate changes on cash, cash equivalents and restricted cash |
|
| (155 | ) |
|
| (441 | ) |
Net (decrease) increase in cash, cash equivalents and restricted cash |
|
| (32,569 | ) |
|
| 15,377 |
|
Cash and cash equivalents, beginning of period |
|
| 46,874 |
|
|
| 32,836 |
|
Cash, cash equivalents and restricted cash, end of period |
| $ | 14,305 |
|
| $ | 48,213 |
|
Cash and September 30, 2017,Cash Flow
The decrease in cash and cash equivalents were $52.7 million and $51.1 million, respectively, an increase of $1.6 million. Restricted cash decreased by $14.7 million to $9.9 million at December 31, 2017 from $24.6 million at September 30, 2017. Our working capital was $79.7 million as2022 of December 31, 2017 and $71.1 million as of September 30, 2017.
During periods of weakening demand, we typically generate cash from operating activities. Conversely, we are more likely to use operating cash flows for working capital requirements during periods of higher growth. The success of our growth strategy is dependent upon the availability of additional capital resources on terms satisfactory to management. Our sources of capital in the past have included the sale of equity securities, which includes common stock sold in private transactions and public offerings, the incurrence of long-term debt and customer deposits. Additionally, in January 2023, we entered into a credit facility, which includes a revolving line of credit with availability up to $8.0 million. There can be no assurance that we can raise such additional capital resources when needed or on satisfactory terms. We believe that our principal sources of liquidity discussed above are sufficient to support operations for at least the next twelve months. We have never paid dividends on our common stock.
Cash Flows from Operating Activities
Cash provided byused in our operating activities was $0.3approximately $7.2 million for the threenine months ended December 31, 2017,June 30, 2023, compared to $3.5$5.1 million used in operationsprovided by operating activities for the threenine months ended December 31, 2016, an improvement of $3.8 million.June 30, 2022. During the threefirst nine months of fiscal 2023, we used cash to increase our inventory balances in preparation for shipments scheduled over the next four quarters and to pay the related accounts payable. During the nine months ended December 31, 2017, cash was primarily generated through net income adjusted for non-cash items of $7.4 million, which was offset by other increases and decreases in operating assets,June 30, 2022, we received several large customer deposits, primarily related to orders of our horizontal diffusion and high temp furnaces, which were expected to ship over the turnkey project. A significant portion ofnext two quarters. During the revenue and related cash payments related2022 period, our accounts receivable collections exceeded new accounts receivable, primarily due to the turnkey project are deferred and restricted, respectively, until completionshutdown of our Shanghai facility.
Cash Flows from Investing Activities
Cash used in investing activities was $36.9 million in the integration of the equipment and transfer of the technology. During the threenine months ended December 31, 2016,June 30, 2023, and cash provided by investing activities was reduced by increases$19.6 million in accounts receivablethe nine months ended June 30, 2022. The fiscal 2023 amount consists primarily of cash paid for the acquisition of Entrepix. The fiscal 2022 amount consists of $19.9 million in proceeds from the sale of our real property in Billerica, Massachusetts as well as $0.3 million of capital expenditures. We expect capital expenditures to increase throughout fiscal 2023 as we make targeted investments in our IT systems and restricted cash, offset by decreases in inventory.
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Cash Flows from Financing Activities
For the threenine months ended December 31, 2017, $1.1 million ofJune 30, 2023, cash provided by financing activities was $11.6 million, comprised of $1.2$12.0 million in borrowings on our term loan and $0.5 million of proceeds received from the exercise of stock options partially offset by $0.9 million in payments on long-term debt of $0.1 million.debt. For the threenine months ended December 31, 2016, $0.1June 30, 2022, $8.9 million of cash used in financing activities was primarily related tocomprised of $4.1 million of cash used for the repurchase of common stock and payments on long-term debt of $0.2$4.9 million, netpartially offset by $0.1 million of borrowingsproceeds received from the exercise of less than $0.1 million.
Financing Facilities
Our debt balance as of June 30, 2023 was $11.2 million, including our finance lease obligations. Our credit facility contains various covenants customary for transactions of this type, including complying with a minimum Debt to EBITDA ratio, a Fixed Charge Coverage ratio and a Working Capital ratio (as defined in the agreements) and meeting quarterly and annual reporting requirements. The credit facility agreement contains customary affirmative and negative covenants and events of default for facilities of this type. At June 30, 2023, we were in compliance with all such covenants.
Off-Balance Sheet Arrangements
As of December 31, 2017,June 30, 2023, we had no off-balance sheet arrangements as defined in Item 303(a)(4) of Regulation S-K promulgated by the Securities and Exchange CommissionSEC that have or are reasonably likely to have a current or future effect on financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.
Contractual Obligations
Unrecorded purchase obligations were $26.4$26.1 million as of December 31, 2017,June 30, 2023, compared to $34.4$20.0 million as of September 30, 2017,2022, an increase of $6.1 million.
In January 2023, we entered into a decreaseLoan and Security Agreement with UMB Bank. See Note 2 “Long-Term Debt” of $8.0 million due primarilyour condensed consolidated financial statements for a description of this agreement. There were no other material changes to reduced vendor commitments as we complete the first two phases of the large solar project. Approximately $5.2 million of the December 31, 2017 and $11.8 million of the September 30, 2017 contractual obligations were prepaid as of those datesincluded in the form of advances to vendors.
Critical Accounting Estimates
"Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Quarterly Report discusses our condensed consolidated financial statements that have been prepared in accordance with accounting principles generally accepted in the United States of America.GAAP. The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amount of assets and liabilities at the date of the condensed consolidated financial statements, the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period.
On an ongoing basis, we evaluate our estimates and judgments, including those related to revenue recognition, income taxes, inventory valuation, accounts and notes receivable collectability, warranty and impairment of long-lived assets.goodwill. We base our estimates and judgments on historical experience, expectations regarding the future and on various other factors that we believe to be reasonable under the circumstances. The results of these estimates and judgments form the basis for making conclusions about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
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A critical accounting policyestimate is one that is both important to the presentation of our financial position and results of operations, and requires management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. These uncertainties are discussed in Part I, Item 1A of our Annual Report on2022 Form 10-K, as amended, for the year ended September 30, 2017.10-K. We believe our critical accounting policiesestimates relate to the more significant judgments and estimates used in the preparation of our consolidated financial statements.
We believe the critical accounting policiesestimates discussed in the section entitled “Item 7:7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies” in our Annual Report on2022 Form 10-K as amended, for the fiscal year ended September 30, 2017 represent the most significant judgments and estimates used in the preparation of our consolidated financial statements. There have been no significantmaterial changes in our critical accounting policiesestimates during the threenine months ended December 31, 2017.
Business Combinations
We follow the acquisition method of accounting to record identifiable assets acquired and liabilities assumed in connection with acquired businesses at their estimated fair value as of the date of acquisition.
Identifiable intangible assets from business combinations are recognized at their estimated fair values as of the date of acquisition and consist of non-compete agreements, backlog, customer relationships, developed technology and tradenames. Determination of the estimated fair value of identifiable intangible assets requires judgment. The fair value of acquired identifiable intangible assets were estimated using various valuation methodologies. The multi-period excess earnings method was used to value the acquired developed technology and the distributor method for the acquired customer relationships. Both approaches are income-based methods, which required judgment in estimating appropriate discount rates, obsolescence, customer attrition, and remaining useful lives. The acquired intangible assets all had finite lives, ranging from one to ten years. The fair value of identifiable intangible assets acquired in connection with the Acquisition was $13.6 million. Goodwill represents the excess of the fair value of the consideration conveyed in an acquisition over the fair value of net assets acquired. See Note 3 “Acquisition” for additional information.
Impact of Recently Issued Accounting Pronouncements
For discussion of the impact of recently issued accounting pronouncements, see “Part I, Item 1:1. Financial Information” under “Impact of Recently Issued Accounting Pronouncements.”
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a smaller reporting company, as defined by Rule 12b-2 of the Exchange Act and in our reported market risks, as described in “QuantitativeItem 10(f)(1) of Regulation S-K, we are electing scaled disclosure reporting obligations and, Qualitative Disclosures About Market Risk” in Part II, Item 7A of our Annual Report on Form 10-K, as amended, fortherefore, are not required to provide the year ended September information requested by this Item.
30 2017.
Item 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
Our management, including theour Chief Executive Officer (“CEO”) and theour Chief Financial Officer (“CFO”), has carried out an evaluation of the effectiveness of our disclosure controls and procedures as of December 31, 2017,June 30, 2023, pursuant to Exchange Act Rules 13a-15(e) and 15(d)-15(e). Disclosure controls and procedures means controls and other procedures that are designed to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’sSEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to management, including the principal executive and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. Based upon that evaluation, our CEO and CFO have concluded that as of such date, our disclosure controls and procedures in place were effective.
Changes in Internal Control Over Financial Reporting
Except as described below, there have not been any changes in Amtech’sthe Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the three months ended December 31, 2017third fiscal quarter to which this report relates that has materially affected, or isare reasonably likely to materially affect, itsthe internal control over financial reporting.
As noted above, on January 17, 2023 we completed the acquisition of Entrepix. We are currently integrating Entrepix into our control environment. In executing this integration, we are analyzing, evaluating, and where necessary, making changes in controls and procedures related to the Entrepix business, which is expected to be completed in the year ended September 30, 2024.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
For discussion of legal proceedings, see Note 11 to our condensed consolidated financial statements under “Part I, Item 1:1. Financial Information” under “Commitments and Contingencies.”
Item 1A. Risk Factors
We refer you to documents filed by us with the SEC, specifically “Item 1A. Risk Factors” in our 2022 Form 10-K and in our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2023 (the “March 2023 Quarterly Report”), which identify important risk factors that could materially affect our business, financial condition and future results. We also refer you to the other informationfactors and cautionary language set forth in the section entitled “Cautionary Statements Regarding Forward-Looking Statements” immediately preceding “Item 1. Condensed Consolidated Financial Statements” of this Quarterly Report. This Quarterly Report, youincluding the accompanying condensed consolidated financial statements and related notes, should carefully consider thebe read in conjunction with such risks and other factors discussed in Part I, Item 1A “Risk Factors”for a full understanding of our Annual Report onoperations and financial condition. The risks described in our 2022 Form 10-K as amended, forand March 2023 Quarterly Report and any described herein are not the fiscal year ended September 30, 2017.only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or operating results. There have been no material changes to the risk factors previously disclosed in our 2022 Form 10-K as amended, for the fiscal year ended September 30, 2017, other than as described in the Overview above, and the supplemental risk factor set forth below:
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Purchases of Equity Securities
On February 7, 2023, the Board approved a stock repurchase program, pursuant to which the Company may repurchase up to $5 million of its outstanding Common Stock over a one-year period, commencing on February 10, 2023. Repurchases under the program will be made in open market transactions at prevailing market prices, in privately negotiated transactions, or by other means in compliance with the rules and regulations of the Securities and Exchange Commission; however, the Company has no obligation to repurchase shares and the timing, actual number, and value of shares to be repurchased is subject to management’s discretion and will depend on the Company’s stock price and other market conditions. The Company may, in the sole discretion of the Board, terminate the repurchase program at any time while it is in effect. Repurchased shares may be retired or kept in treasury for further issuance.
During the three months ended June 30, 2023, we did not repurchase any of our equity securities nor did we sell any equity securities that were not registered under the Securities Act of 1933, as amended.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
During the three months ended June 30, 2023, none of our directors or officers (as defined in Rule 16a-1(f) promulgated under the Securities Exchange Act of 1934, as amended) adopted, terminated, or modified a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement (as such terms are defined in Item 408 of Regulation S-K).
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Item 6. Exhibits
EXHIBIT | INCORPORATED BY REFERENCE | FILED | ||||||||||
NO. | EXHIBIT DESCRIPTION | FORM | FILE NO. | EXHIBIT NO. | FILING DATE | HEREWITH | ||||||
31.1 | X | |||||||||||
31.2 | X | |||||||||||
32.1 | X | |||||||||||
32.2 | X | |||||||||||
101.INS | Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | X | ||||||||||
101.SCH | Inline XBRL Taxonomy Extension Schema Document | X | ||||||||||
101.PRE | Inline Taxonomy Presentation Linkbase Document | X | ||||||||||
101.CAL | Inline XBRL Taxonomy Calculation Linkbase Document | X | ||||||||||
101.LAB | Inline XBRL Taxonomy Label Linkbase Document | X | ||||||||||
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | X | ||||||||||
104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) | X |
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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.
AMTECH SYSTEMS, INC.
By | /s/ Lisa D. Gibbs | Dated: | August 9, 2023 | |||
Lisa D. Gibbs | ||||||
Vice President | ||||||
(Principal |
34