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 December 31, 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 January 31, 2004 was 46,962,494.
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 — December 31, 2003 and March 31, 2003 |
3 | |||||
Condensed Consolidated Statements of Operations — Three Months and Nine Months
Ended December 31, 2003 and December 31, 2002 |
4 | |||||
Condensed Consolidated Statements of Cash Flows — Nine Months Ended December
31, 2003 and December 31, 2002 |
5 | |||||
Notes to Condensed Consolidated Financial Statements |
6 | |||||
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of
Operations |
17 | |||||
Item 3. Quantitative and Qualitative Disclosures About Market Risk |
36 | |||||
Item 4. Controls and Procedures |
36 | |||||
Part II. Other Information |
||||||
Item 1. Legal Proceedings |
37 | |||||
Item 6. Exhibits and Reports on Form 8-K |
38 | |||||
Signatures |
40 | |||||
Exhibit Index |
41 | |||||
Exhibit 10.50 |
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Exhibit 31.1 |
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Exhibit 31.2 |
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Exhibit 32.1 |
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2
Part I — FINANCIAL INFORMATION
Item 1 — Financial Statements
ASYST TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited; in thousands)
| December 31, | March 31, | |||||||||||
| 2003 | 2003 | |||||||||||
ASSETS |
||||||||||||
CURRENT ASSETS: |
||||||||||||
Cash and cash equivalents |
$ | 122,406 | $ | 96,214 | ||||||||
Restricted cash |
2,341 | 3,088 | ||||||||||
Accounts receivable, net of allowance for doubtful accounts of $5,214
and $4,880 at December 31, 2003 and March 31, 2003, respectively |
122,699 | 74,878 | ||||||||||
Inventories |
20,577 | 22,204 | ||||||||||
Prepaid expenses and other |
10,613 | 10,317 | ||||||||||
Total current assets |
278,636 | 206,701 | ||||||||||
Property and equipment, net |
23,799 | 24,295 | ||||||||||
Goodwill |
71,503 | 65,505 | ||||||||||
Intangible assets, net |
70,210 | 76,862 | ||||||||||
Other assets |
2,573 | 21,862 | ||||||||||
Total assets |
$ | 446,721 | $ | 395,225 | ||||||||
LIABILITIES, MINORITY INTEREST AND SHAREHOLDERS’ EQUITY |
||||||||||||
CURRENT LIABILITIES: |
||||||||||||
Short-term loans and notes payable |
$ | 23,888 | $ | 17,976 | ||||||||
Current portion of long-term debt and finance leases |
2,544 | 1,273 | ||||||||||
Accounts payable |
53,286 | 36,527 | ||||||||||
Accounts payable-related party |
12,681 | 8,500 | ||||||||||
Accrued liabilities and other |
52,026 | 50,572 | ||||||||||
Deferred revenue |
2,779 | 2,130 | ||||||||||
Total current liabilities |
147,204 | 116,978 | ||||||||||
LONG-TERM LIABILITIES: |
||||||||||||
Long-term debt and finance leases, net of current portion |
91,993 | 114,812 | ||||||||||
Deferred tax liability |
24,181 | 23,754 | ||||||||||
Other long-term liabilities |
12,340 | 12,754 | ||||||||||
Total long-term liabilities |
128,514 | 151,320 | ||||||||||
MINORITY INTEREST |
63,310 | 58,893 | ||||||||||
SHAREHOLDERS’ EQUITY |
||||||||||||
Common stock |
444,247 | 332,569 | ||||||||||
Deferred stock-based compensation |
(3,215 | ) | (3,992 | ) | ||||||||
Accumulated deficit |
(340,996 | ) | (265,248 | ) | ||||||||
Accumulated other comprehensive income |
7,657 | 4,705 | ||||||||||
Total shareholders’ equity |
107,693 | 68,034 | ||||||||||
Total liabilities, minority interest and shareholders’ equity |
$ | 446,721 | $ | 395,225 | ||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
ASYST TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited; in thousands, except per share amounts)
| Three Months Ended | Nine Months Ended | ||||||||||||||||||
| December 31, | December 31, | ||||||||||||||||||
| 2003 | 2002 | 2003 | 2002 | ||||||||||||||||
NET SALES |
$ | 74,888 | $ | 75,624 | $ | 171,505 | $ | 199,807 | |||||||||||
COST OF SALES |
64,301 | 56,495 | 144,475 | 135,955 | |||||||||||||||
Gross profit |
10,587 | 19,129 | 27,030 | 63,852 | |||||||||||||||
OPERATING EXPENSES: |
|||||||||||||||||||
Research and development |
9,204 | 11,160 | 27,219 | 31,510 | |||||||||||||||
Selling, general and administrative |
18,755 | 20,462 | 51,274 | 54,346 | |||||||||||||||
Amortization of acquired intangible assets |
5,271 | 5,707 | 14,834 | 9,273 | |||||||||||||||
Restructuring and other charges |
1,743 | 2,519 | 6,593 | 7,019 | |||||||||||||||
Asset impairment charges |
— | 8,398 | 6,853 | 15,519 | |||||||||||||||
In-process research and development of acquired business |
— | 5,750 | — | 7,834 | |||||||||||||||
Total operating expenses |
34,973 | 53,996 | 106,773 | 125,501 | |||||||||||||||
Operating loss |
(24,386 | ) | (34,867 | ) | (79,743 | ) | (61,649 | ) | |||||||||||
OTHER INCOME (EXPENSE): |
|||||||||||||||||||
Interest income and other income (expense) |
(407 | ) | (777 | ) | 705 | (520 | ) | ||||||||||||
Interest expense |
(1,798 | ) | (1,801 | ) | (5,298 | ) | (4,708 | ) | |||||||||||
Other income (expense), net |
(2,205 | ) | (2,578 | ) | (4,593 | ) | (5,228 | ) | |||||||||||
Loss before provision (benefit) from income taxes,
minority interest and discontinued operations |
(26,591 | ) | (37,445 | ) | (84,336 | ) | (66,877 | ) | |||||||||||
PROVISION (BENEFIT) FROM INCOME TAXES |
(2,117 | ) | — | (4,502 | ) | 58,628 | |||||||||||||
MINORITY INTEREST |
(2,417 | ) | (4,824 | ) | (4,086 | ) | (4,824 | ) | |||||||||||
LOSS FROM CONTINUING OPERATIONS |
(22,057 | ) | (32,621 | ) | (75,748 | ) | (120,681 | ) | |||||||||||
DISCONTINUED OPERATIONS, net of income tax |
— | (8,300 | ) | — | (11,753 | ) | |||||||||||||
NET LOSS |
$ | (22,057 | ) | $ | (40,921 | ) | $ | (75,748 | ) | $ | (132,434 | ) | |||||||
BASIC AND DILUTED LOSS PER SHARE: |
|||||||||||||||||||
Continuing operations |
$ | (0.52 | ) | $ | (0.86 | ) | $ | (1.89 | ) | $ | (3.23 | ) | |||||||
Discontinued operations, net of income tax |
— | (0.22 | ) | — | (0.32 | ) | |||||||||||||
Net loss |
$ | (0.52 | ) | $ | (1.08 | ) | $ | (1.89 | ) | $ | (3.55 | ) | |||||||
SHARES USED IN THE PER SHARE CALCULATION – basic and
diluted |
42,206 | 37,932 | 40,066 | 37,316 | |||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
ASYST TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; in thousands)
| Nine Months Ended | |||||||||||
| December 31, | December 31, | ||||||||||
| 2003 | 2002 | ||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: |
|||||||||||
Net loss |
$ | (75,748 | ) | $ | (132,434 | ) | |||||
Less: loss from discontinued operations |
— | 11,753 | |||||||||
Net loss from continuing operations |
(75,748 | ) | (120,681 | ) | |||||||
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities: |
|||||||||||
Depreciation and amortization |
21,732 | 19,928 | |||||||||
Minority interest in net loss in consolidated subsidiary |
(4,086 | ) | — | ||||||||
Stock-based compensation |
1,749 | 2,243 | |||||||||
Provision for doubtful accounts |
334 | (400 | ) | ||||||||
Provision for excess inventories |
2,566 | — | |||||||||
Non-cash charges for restructuring and write-down of land |
6,853 | 10,317 | |||||||||
In-process research and development of acquired business |
— | 7,834 | |||||||||
Deferred tax asset, net |
(3,849 | ) | 59,432 | ||||||||
Impairment of goodwill and other intangible assets |
— | 8,398 | |||||||||
Changes in assets and liabilities, net of acquisitions: |
|||||||||||
Accounts receivable |
(37,092 | ) | (17,473 | ) | |||||||
Inventories |
1,124 | 30,598 | |||||||||
Prepaid expenses and other assets |
4,182 | 362 | |||||||||
Accounts payable, accrued liabilities and deferred revenue |
12,040 | 23,210 | |||||||||
Net cash provided by (used in) operating activities |
(70,195 | ) | 23,768 | ||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: |
|||||||||||
Purchase of short-term investments |
— | (9,000 | ) | ||||||||
Sale (purchase) of restricted cash and cash equivalents and short-term
investments |
987 | (22,500 | ) | ||||||||
Sale or maturity of restricted cash and cash equivalents and short-term
investments |
— | 24,716 | |||||||||
Net proceeds from sale of land |
12,106 | — | |||||||||
Net cash used in acquisitions |
(1,179 | ) | (52,296 | ) | |||||||
Purchase of property and equipment |
(4,097 | ) | (7,271 | ) | |||||||
Net cash provided by (used in) investing activities |
7,817 | (66,351 | ) | ||||||||
CASH FLOW FROM FINANCING ACTIVITIES: |
|||||||||||
Net proceeds from short-term and long-term loans |
13,957 | 27,995 | |||||||||
Repayment of short-term debt, long-term debt and finance leases |
(32,837 | ) | (620 | ) | |||||||
Issuance of common stock |
110,704 | 1,922 | |||||||||
Net cash provided by financing activities |
91,824 | 29,297 | |||||||||
Effect of exchange rate changes on cash and cash equivalents |
(3,254 | ) | 3,880 | ||||||||
Net cash provided by (used in) continuing operations |
26,192 | (9,406 | ) | ||||||||
Net cash used in discontinued operations |
— | (5,038 | ) | ||||||||
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS |
26,192 | (14,444 | ) | ||||||||
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD |
96,214 | 74,577 | |||||||||
CASH AND CASH EQUIVALENTS, END OF PERIOD |
$ | 122,406 | $ | 60,133 | |||||||
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., or 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, Co., Ltd. ASI renamed this subsidiary Asyst Shinko America, or ASAM.
In October 2002, we purchased a 51 percent interest in ASI, a Japanese 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 December 31, 2003 and December 31, 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. Certain information and footnote disclosures included in the financial statements prepared in accordance with generally accepted accounting principles have been omitted in these interim statements as allowed by such SEC rules and regulations. However, we believe that the disclosures are adequate to make the information presented not misleading. All significant inter-company 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, and our majority-owned subsidiary, Asyst Japan, Inc., or AJI. Certain prior year amounts in the condensed consolidated financial statements and the notes thereto have been reclassified where necessary to conform to the presentation for the quarter ended December 31, 2003. Also during the current quarter, we recorded a $2.1 million charge to selling, general and administrative expenses relating to prior quarters of fiscal 2004 and 2003 and 2002. The effect of this adjustment on any prior quarter or year was not material. We close our books on the last Saturday of each quarter and thus the actual date of the quarter-end, December 27, 2003, is different from the month-end dates used throughout this Form 10-Q report. This presentation is for convenience purposes. The results for interim periods are not necessarily indicative of the results for the entire year. The year-end condensed consolidated data was derived from audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America. As such, these 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 as amended. 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.
6
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 apply to revenue arrangements entered into in fiscal periods beginning after June 15, 2003. The adoption of EITF 00-21 to date did not have a significant impact on our consolidated financial statements.
In August 2003, the EITF reached a consensus on Issue No. 03-5, “Applicability of AICPA Statement of Position 97-2, Software Revenue Recognition, to Non-Software Deliverables”. This issue focuses solely on whether non-software deliverables included in arrangements that contain more-than-incidental software should be accounted for in accordance with SOP 97-2. The Task Force confirmed that in an arrangement that contains software that is more-than-incidental to the products or services as a whole, only the software and software-related elements are included within the scope of SOP 97-2. Software-related elements include software-related products and services such as those listed in paragraph 9 of SOP 97-2, as well as other deliverables for which the software is essential to their functionality. EITF Issue No. 03-5 is effective for revenue arrangements entered into in fiscal periods beginning after August 13, 2003. The adoption of EITF Issue No. 03-5 to date did not have a significant impact 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. In October 2003, the Financial Accounting Standards Board deferred the latest date by which all public entities must apply FIN No. 46, to the first reporting period ending after March 15, 2004. We believe that the adoption of this standard will have no material impact on our consolidated financial statements.
In May 2003, 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. The adoption of SFAS No. 150 to date has not had a significant impact on our consolidated financial statements.
Restricted Cash
Restricted cash represents amounts that are restricted as to their use in accordance with Japanese debt agreements.
7
Inventories
Inventories consist of the following (in thousands):
| December 31, | March 31, | ||||||||
| 2003 | 2003 | ||||||||
Raw materials |
$ | 8,622 | $ | 8,448 | |||||
Work-in-process and finished | |||||||||