UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Form 10-Q
(Mark One)
| [X] | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2003
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 000-22430
ASYST TECHNOLOGIES, INC.
| California | 94-2942251 | |
| (State or other jurisdiction | (IRS Employer identification No.) | |
| of incorporation or organization) |
48761 Kato Road, Fremont, California 94538
(Address of principal executive offices, including zip code)
(510) 661-5000
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
Yes [X] No [ ]
The number of shares of the registrant’s Common Stock, no par value, outstanding as of July 31, 2003 was 39,245,636.
ASYST TECHNOLOGIES, INC.
TABLE OF CONTENTS
| Page No. | ||||||
Part I. Financial Information |
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Item 1. Condensed Consolidated Financial Statements |
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Condensed Consolidated Balance Sheets — June 30, 2003 and March 31, 2003 |
3 | |||||
Condensed Consolidated Statements of Operations — Three Months Ended June 30,
2003 and June 30, 2002 |
4 | |||||
Condensed Consolidated Statements of Cash Flows — Three Months Ended June 30,
2003 and June 30, 2002 |
5 | |||||
Notes to Condensed Consolidated Financial Statements |
6 | |||||
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of
Operations |
16 | |||||
Item 3. Quantitative and Qualitative Disclosures About Market Risk |
33 | |||||
Item 4. Controls and Procedures |
34 | |||||
Part II. Other Information |
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Item 1. Legal Proceedings |
35 | |||||
Item 6. Exhibits and Reports on Form 8-K |
35 | |||||
Signatures |
37 | |||||
Exhibit 31.1 |
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Exhibit 31.2 |
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Exhibit 32.1 |
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Exhibit Index |
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2
Part I — FINANCIAL INFORMATION
Item 1 — Financial Statements
ASYST TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited; in thousands)
| June 30, | March 31, | ||||||||||
| 2003 | 2003 | ||||||||||
ASSETS |
|||||||||||
CURRENT ASSETS: |
|||||||||||
Cash and cash equivalents |
$ | 73,116 | $ | 96,214 | |||||||
Restricted cash |
3,178 | 3,088 | |||||||||
Accounts receivable, net of allowance for doubtful accounts of $4,976
and $4,880 at June 30, 2003 and March 31, 2003, respectively |
69,729 | 74,878 | |||||||||
Inventories |
17,671 | 22,204 | |||||||||
Prepaid expenses and other |
12,367 | 10,317 | |||||||||
Total current assets |
176,061 | 206,701 | |||||||||
Property and equipment, net |
23,381 | 24,295 | |||||||||
Goodwill |
65,876 | 65,505 | |||||||||
Intangible assets, net |
71,859 | 76,862 | |||||||||
Other assets |
17,111 | 21,862 | |||||||||
Total assets |
$ | 354,288 | $ | 395,225 | |||||||
LIABILITIES, MINORITY INTEREST AND SHAREHOLDERS’ EQUITY |
|||||||||||
CURRENT LIABILITIES: |
|||||||||||
Short-term loans and notes payable |
$ | 20,183 | $ | 17,976 | |||||||
Current portion of long-term debt and finance leases |
1,251 | 1,273 | |||||||||
Accounts payable |
29,877 | 36,527 | |||||||||
Accounts payable-related party |
5,115 | 8,500 | |||||||||
Accrued liabilities and other |
59,514 | 50,572 | |||||||||
Deferred revenue |
1,595 | 2,130 | |||||||||
Total current liabilities |
117,535 | 116,978 | |||||||||
LONG-TERM LIABILITIES: |
|||||||||||
Long-term debt and finance leases, net of current portion |
114,640 | 114,812 | |||||||||
Deferred tax liability |
22,080 | 23,754 | |||||||||
Other long-term liabilities |
12,257 | 12,754 | |||||||||
Total long-term liabilities |
148,977 | 151,320 | |||||||||
MINORITY INTEREST |
56,707 | 58,893 | |||||||||
SHAREHOLDERS’ EQUITY |
|||||||||||
Common stock |
334,027 | 332,569 | |||||||||
Deferred stock-based compensation |
(3,998 | ) | (3,992 | ) | |||||||
Accumulated deficit |
(302,624 | ) | (265,248 | ) | |||||||
Accumulated other comprehensive income |
3,664 | 4,705 | |||||||||
Total shareholders’ equity |
31,069 | 68,034 | |||||||||
Total liabilities, minority interest and shareholders’ equity |
$ | 354,288 | $ | 395,225 | |||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
ASYST TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited; in thousands, except per share amounts)
| Three Months Ended | Three Months Ended | |||||||||||
| June 30, | June 30, | |||||||||||
| 2003 | 2002 | |||||||||||
NET SALES |
$ | 45,268 | $ | 51,865 | ||||||||
COST OF SALES |
40,824 | 35,310 | ||||||||||
Gross profit |
4,444 | 16,555 | ||||||||||
OPERATING EXPENSES: |
||||||||||||
Research and development |
9,624 | 10,292 | ||||||||||
Selling, general and administrative |
17,605 | 16,539 | ||||||||||
Amortization of acquired intangible assets |
4,785 | 1,650 | ||||||||||
Restructuring charges |
4,363 | — | ||||||||||
Asset impairment charges |
6,853 | — | ||||||||||
In-process research and development of acquired business |
— | 2,500 | ||||||||||
Total operating expenses |
43,230 | 30,981 | ||||||||||
Operating loss |
(38,786 | ) | (14,426 | ) | ||||||||
OTHER INCOME (EXPENSE): |
||||||||||||
Interest income and other income (expense) |
749 | (408 | ) | |||||||||
Interest expense |
(1,674 | ) | (1,297 | ) | ||||||||
Other income (expense), net |
(925 | ) | (1,705 | ) | ||||||||
Loss before benefit from income taxes,
minority interest and discontinued operations |
(39,711 | ) | (16,131 | ) | ||||||||
BENEFIT FROM INCOME TAXES |
(1,380 | ) | (4,033 | ) | ||||||||
MINORITY INTEREST |
(955 | ) | — | |||||||||
LOSS FROM CONTINUING OPERATIONS |
(37,376 | ) | (12,098 | ) | ||||||||
DISCONTINUED OPERATIONS, net of income tax |
— | (1,360 | ) | |||||||||
NET LOSS |
$ | (37,376 | ) | $ | (13,458 | ) | ||||||
BASIC AND DILUTED LOSS PER SHARE: |
||||||||||||
Continuing operations |
$ | (0.97 | ) | $ | (0.33 | ) | ||||||
Discontinued operations, net of income tax |
— | (0.04 | ) | |||||||||
Net loss |
$ | (0.97 | ) | $ | (0.37 | ) | ||||||
SHARES USED IN THE PER SHARE CALCULATION – basic and diluted |
38,475 | 36,565 | ||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
ASYST TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; in thousands)
| Three Months Ended | ||||||||||||
| June 30, | June 30, | |||||||||||
| 2003 | 2002 | |||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||||||
Net loss |
$ | (37,376 | ) | $ | (13,458 | ) | ||||||
Less: Loss from discontinued operations |
— | 1,360 | ||||||||||
Net loss from continuing operations |
(37,376 | ) | (12,098 | ) | ||||||||
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities: |
||||||||||||
Depreciation and amortization |
7,441 | 5,077 | ||||||||||
Asset impairment charges |
6,853 | — | ||||||||||
Minority interest in net loss in consolidated subsidiary |
(955 | ) | — | |||||||||
Stock-based compensation |
595 | 383 | ||||||||||
Provision for doubtful accounts |
— | (276 | ) | |||||||||
Provision for excess inventories |
2,098 | — | ||||||||||
In-process research and development of acquired business |
— | 2,500 | ||||||||||
Changes in assets and liabilities, net of acquisitions: |
||||||||||||
Accounts receivable |
5,969 | (9,637 | ) | |||||||||
Inventories |
2,750 | 4,912 | ||||||||||
Prepaid expenses and other assets |
(3,297 | ) | (5,006 | ) | ||||||||
Accounts payable, accrued liabilities and deferred revenue |
(5,281 | ) | 9,536 | |||||||||
Net cash used in operating activities |
(21,203 | ) | (4,609 | ) | ||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||||||||
Purchase of short-term investments |
— | (9,000 | ) | |||||||||
Sale or maturity of short-term investments |
— | — | ||||||||||
Purchase of restricted cash and cash equivalents and short-term investments |
(90 | ) | (12,500 | ) | ||||||||
Sale or maturity of restricted cash and cash equivalents and short-term investments |
— | 13,394 | ||||||||||
Purchase of property and equipment |
(1,239 | ) | (3,627 | ) | ||||||||
Net cash used in acquisitions |
(1,165 | ) | — | |||||||||
Net cash used in investing activities |
(2,494 | ) | (11,733 | ) | ||||||||
CASH FLOW FROM FINANCING ACTIVITIES: |
||||||||||||
Proceeds from line of credit |
— | 1,890 | ||||||||||
Net proceeds from short-term loans |
2,013 | — | ||||||||||
Net proceeds from long-term debt and finance leases |
— | 106 | ||||||||||
Issuance of common stock |
857 | 3,303 | ||||||||||
Net cash provided by financing activities |
2,870 | 5,299 | ||||||||||
Effect of exchange rate changes on cash and cash equivalents |
(2,271 | ) | 456 | |||||||||
Net cash used in continuing operations |
(23,098 | ) | (10,587 | ) | ||||||||
Net cash provided by discontinued operations |
— | 698 | ||||||||||
DECREASE IN CASH AND CASH EQUIVALENTS |
(23,098 | ) | (9,889 | ) | ||||||||
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD |
96,214 | 74,577 | ||||||||||
CASH AND CASH EQUIVALENTS, END OF PERIOD |
$ | 73,116 | $ | 64,688 | ||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
ASYST TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. ORGANIZATION OF THE COMPANY:
The accompanying condensed consolidated financial statements include the accounts of Asyst Technologies, Inc., Asyst, which was incorporated in California on May 31, 1984, our subsidiaries and our majority-owned joint venture. We develop, manufacture, sell and support integrated automation systems, primarily for the semiconductor and secondarily for the flat panel display, or FPD, manufacturing industries. Our systems are designed to enable semiconductor and FPD manufacturers to increase their manufacturing productivity and protect their investment in fragile materials and work-in-process.
In April 2003, our majority-owned joint venture, Asyst Shinko, Inc., or ASI, acquired the portion of Shinko Technologies, Inc. that provides ongoing support to ASI’s North American Automated Material Handling Systems, or AMHS, customers from Shinko Electric, Inc. ASI renamed this subsidiary Asyst Shinko America, or ASAM.
In October 2002, we purchased a 51 percent interest in ASI, a Japanese corporation.
In May 2002, Asyst Connectivity Technologies, Inc., or ACT, our wholly-owned subsidiary, purchased substantially all of the assets of domainLogix Corporation, or DLC, a Delaware corporation.
The above transactions were accounted for using the purchase method of accounting. Accordingly, our Condensed Consolidated Statements of Operations and of Cash Flows for the periods ended June 30, 2003 and June 30, 2002 include the results of these acquired entities for the periods subsequent to their respective acquisitions, as applicable. We consolidate fully the financial position and results of operations of ASI and account for the minority interest in the condensed consolidated financial statements.
2. SIGNIFICANT ACCOUNTING POLICIES:
Basis of Preparation
While the financial information furnished is unaudited, the condensed consolidated financial statements included in this report reflect all adjustments (consisting of normal recurring accruals) which we consider necessary for the fair presentation of the results of operations for the interim periods covered and of our financial condition at the date of the interim balance sheet. All significant intercompany accounts and transactions have been eliminated. Minority shareholder’s interest represents the minority shareholder’s proportionate share of the net assets and results of operations of our majority-owned joint venture, ASI. Certain prior year amounts in the condensed consolidated financial statements and the notes thereto have been reclassified where necessary to conform to the quarter ended June 30, 2003. We close our books on the last Saturday of each quarter and thus the actual date of the quarter-end, June 28, 2003, is different from the month-end dates used throughout this Form 10-Q report. The results for interim periods are not necessarily indicative of the results for the entire year. The condensed consolidated financial statements should be read in connection with our consolidated financial statements for the year ended March 31, 2003 included in our Annual Report on Form 10-K. The Advanced Machine Programming, Inc., or AMP, and SemiFab, Inc., or SemiFab, businesses were sold in March 2003 and were accounted for as discontinued operations and therefore, the results of operations and cash flows have been removed from our results of continuing operations for all periods presented.
New Accounting Standards
In November 2002 the Emerging Issues Task Force, or EITF, reached a consensus on EITF Issue No. 00-21, “Accounting for Revenue Arrangements with Multiple Deliverables” (EITF Issue No. 00-21). EITF Issue No. 00-21 provides guidance on how to account for arrangements that involve the delivery or performance of multiple products, services and/or rights to use assets. The provisions of EITF Issue No. 00-21 will apply to revenue arrangements entered into in fiscal periods beginning after June 15, 2003. We are currently assessing the impact of
6
EITF Issue No. 00-21 on our consolidated financial statements.
In January 2003 the Financial Accounting Standards Board, or FASB, issued FIN No. 46, “Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51”, or FIN No. 46. FIN No. 46 requires certain variable interest entities to be consolidated by the primary beneficiary of the entity if the equity investors in the entity do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. FIN No. 46 is effective immediately for all new variable interest entities created or acquired after January 31, 2003. For variable interest entities created or acquired prior to February 1, 2003, the provisions of FIN No. 46 must be applied for the first interim or annual period beginning after June 15, 2003. The adoption of FIN No. 46 to date has not had a significant impact on our consolidated financial statements.
In May 2003, the FASB issued Statement of Financial Accounting Standards No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity”, or SFAS No. 150. SFAS No. 150 establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument that is within its scope as a liability (or an asset in some circumstances). Many of those instruments were previously classified as equity. SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first fiscal period beginning after June 15, 2003. SFAS No. 150 is to be implemented by reporting the cumulative effect of a change in an accounting principle for financial instruments created before the issuance date of SFAS No. 150 and still existing at the beginning of the interim period of adoption. Restatement is not permitted. We believe that the adoption of this standard will have no material impact on our consolidated financial statements.
Restricted Cash
Restricted cash represents amounts that are restricted as to its use in accordance with Japanese debt agreements.
Inventories
Inventories consist of the following (in thousands):
| June 30, | March 31, | ||||||||
| 2003 | 2003 | ||||||||
Raw materials |
$ | 12,129 | $ | 8,448 | |||||
Work-in-process and finished goods |
5,542 | 13,756 | |||||||
Total |
$ | 17,671 | $ | 22,204 | |||||
During the year ended March 31, 2003, we outsourced the majority of our remaining manufacturing to Solectron Corporation, or Solectron. As part of the arrangement, Solectron purchased $20 million of inventory from us. No revenue was recorded for the sale of this inventory to Solectron. In October 2003, we may be obligated to repurchase any of this inventory that is not used by Solectron in manufacturing our products. On an on-going basis, we may be obligated to acquire inventory purchased by Solectron based on our forecasts and not used timely under terms of the outsourcing agreement. As of June 30, 2003, our best estimate of the inventory expenses for our obligation to repurchase inventory at Solectron has been accrued.
7
Goodwill and Intangible Assets, net
Intangible assets subject to amortization are being amortized over the following estimated useful lives using the straight-line method: purchased technology, four to eight years; customer lists and other intangible assets, five to ten years; and licenses and patents, ten years. No changes were made to the useful lives of amortizable intangible assets in connection with the adoption of SFAS No. 142. For the ASI acquisition in October 2002, a goodwill of $62.6 million was recorded. In connection with the ASAM acquisition in April 2003, ASI recorded goodwill of $0.4 million.
We completed an annual goodwill impairment test in third quarter of fiscal 2003. The first step of the test identifies when impairment may have occurred, while the second step of the test measures the amount of the impairment, if any. As a result of the test, a goodwill impairment expense of $2.1 million was recognized. To determine the amount of the impairment, we estimated the fair value of our reporting segments that contained goodwill (based primarily on expected future cash flows), reduced the amount by the fair value of identifiable intangible assets other than goodwill (also based primarily on expected future cash flows), and then compared the unallocated fair value of the business to the carrying value of goodwill. To the extent goodwill exceeded the unallocated fair value of the business, an impairment expense was recognized. In connection with the annual impairment analysis for goodwill, we assessed the recoverability of the intangible assets subject to amortization in accordance with SFAS No. 144. During fiscal 2003, an impairment expense of $6.2 million was recognized for acquired technology and $0.1 million was recognized for customer base, based upon our projection of significantly reduced future cash flows of ACT.
Goodwill and intangible assets were as follows (in thousands):
| June 30, 2003 | March 31, 2003 | |||||||||||||||||||||||||
| Gross | Gross | |||||||||||||||||||||||||
| Carrying | Accumulated | Carrying | Accumulated | |||||||||||||||||||||||
| Amount | Amortization | Net | Amount | Amortization | Net | |||||||||||||||||||||
Amortizable intangible assets: |
||||||||||||||||||||||||||
Developed technology |
$ | 57,294 | $ | 12,740 | $ | 44,554 | $ | 57,294 | $ | 9,963 | $ | 47,331 | ||||||||||||||
Customer lists and other
intangible assets |
32,691 | 10,914 | 21,777 | 32,691 | 8,920 | 23,771 | ||||||||||||||||||||
Licenses and patents |
7,654 | 2,126 | 5,528 | 7,770 | 2,010 | 5,760 | ||||||||||||||||||||