UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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 March 31, 2004
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 0-26482
TRIKON TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
| Delaware | 95-4054321 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |
| Ringland Way, Newport, South Wales NP18 2TA, United Kingdom | ||
| (Address of principal executive offices) | (Zip Code) | |
Registrant’s telephone number, including area code 44-1633-414-000
Not Applicable
Former name, former address and former fiscal year, if changed since last report
Indicate by check whether the registrant (1) has filed all reports required to be filed by Sections 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 Act). Yes x No ¨
As of April 27, 2004, the total number of outstanding shares of the Registrant’s common stock was 15,745,764.
INDEX
Exhibits
| 10.17 | Letter agreement with John Macneil dated March 10, 2004 | |
| 10.18 | 2004 Stock Appreciation Rights Plan as adopted April 24, 2004 | |
| 31.1 | Certification of Chief Executive Officer required by Rule 13a-14(a) or Rule15d-14(a) of the Exchange Act | |
| 31.2 | Certification of Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act | |
| 32.1 | Certification of Chief Executive Officer furnished pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S. C. 1350) | |
| 32.2 | Certification of Chief Financial Officer furnished pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C 1350). | |
2
Trikon Technologies, Inc.
PART 1 - FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
| March 31 2004 |
December 31, 2003 |
|||||||
| (Unaudited) | (Note A) | |||||||
| Assets |
||||||||
| Current assets : |
||||||||
| Cash and cash equivalents |
$ | 29,024 | $ | 31,646 | ||||
| Accounts receivable, net |
3,804 | 11,287 | ||||||
| Inventories, net |
16,037 | 15,257 | ||||||
| Prepaid and other current assets |
3,503 | 4,855 | ||||||
| Total current assets |
52,368 | 63,045 | ||||||
| Property, equipment and leasehold improvements, net |
16,794 | 16,896 | ||||||
| Demonstration systems, net |
2,618 | 2,814 | ||||||
| Other assets |
393 | 374 | ||||||
| Total assets |
$ | 72,173 | $ | 83,129 | ||||
| Liabilities and shareholders’ equity |
||||||||
| Current liabilities: |
||||||||
| Short term borrowing |
$ | 9,200 | $ | — | ||||
| Current portion of long-term debt |
456 | 11,736 | ||||||
| Accounts payable and accrued expenses |
4,971 | 5,785 | ||||||
| Accrued expenses |
1,847 | 1,399 | ||||||
| Warranty and related expenses |
1,035 | 1,285 | ||||||
| Deferred revenue |
2,628 | 5,075 | ||||||
| Other current liabilities |
2,820 | 3,363 | ||||||
| Total current liabilities |
22,957 | 28,643 | ||||||
| Long-term debt less current portion |
128 | 188 | ||||||
| Other non-current liabilities. |
902 | 928 | ||||||
| $ | 23,987 | $ | 29,759 | |||||
| Shareholders’ equity: |
||||||||
| Preferred Stock: |
||||||||
| Authorized shares — 20,000,000 Issued and outstanding — Nil at March 31, 2004 and December 31, 2003 |
— | — | ||||||
| Common Stock, $0.001 par value: |
||||||||
| Authorized shares — 50,000,000 Issued and outstanding — 15,742,670 at March 31, 2004 and 15,635,888 at December 31, 2003 |
261,389 | 261,217 | ||||||
| Accumulated other comprehensive loss |
2,351 | 1,833 | ||||||
| Deferred compensation |
— | |||||||
| Accumulated deficit |
(215,554 | ) | (209,680 | ) | ||||
| Total shareholders’ equity |
48,186 | 53,370 | ||||||
| Total liabilities and shareholders’ equity |
$ | 72,173 | $ | 83,129 | ||||
See Notes to Unaudited Condensed Consolidated Financial Statements
3
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(In thousands, except share and per share data)
| Three Months Ended |
||||||||
| March 31, 2004 |
March 31, 2003 |
|||||||
| Revenues: |
||||||||
| Product revenues |
$ | 6,738 | $ | 5,104 | ||||
| License revenues |
43 | — | ||||||
| 6,781 | 5,104 | |||||||
| Costs and expenses: |
||||||||
| Cost of goods sold |
5,343 | 4,340 | ||||||
| Research and development |
2,541 | 2,318 | ||||||
| Selling, general and administrative |
5,395 | 4,800 | ||||||
| Settlement of pension liabilities and related expenses |
— | 706 | ||||||
| 13,279 | 12,164 | |||||||
| Loss from operations |
(6,498 | ) | (7,060 | ) | ||||
| Foreign currency gains (losses) |
623 | (278 | ) | |||||
| Interest income, net |
66 | 98 | ||||||
| Loss before income tax charge |
(5,809 | ) | (7,240 | ) | ||||
| Income tax charge |
65 | 24 | ||||||
| Net loss |
$ | (5,874 | ) | $ | (7,264 | ) | ||
| Loss per share data: |
||||||||
| Basic: |
$ | (0.37 | ) | $ | (0.56 | ) | ||
| Diluted: |
$ | (0.37 | ) | $ | (0.56 | ) | ||
| Weighted average common shares used in the calculation: |
||||||||
| Basic: |
15,702 | 12,880 | ||||||
| Diluted: |
15,702 | 12,880 | ||||||
See Notes to Unaudited Condensed Consolidated Financial Statements
4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands)
| Three Months Ended |
||||||||
| March 31, 2004 |
March 31, 2003 |
|||||||
| Operating Activities |
||||||||
| Net loss |
$ | (5,874 | ) | $ | (7,264 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: |
||||||||
| Depreciation and amortization of property plant and equipment |
1,392 | 1,160 | ||||||
| Amortization of deferred compensation |
— | 379 | ||||||
| Gain on disposal of property plant and equipment |
(10 | ) | — | |||||
| Provision for gain on accounts receivable |
9 | 20 | ||||||
| Changes in operating assets and liabilities: |
||||||||
| Accounts receivable |
7,474 | 3,421 | ||||||
| Inventories (including demonstration systems) |
(584 | ) | 1,734 | |||||
| Other current assets |
1,352 | 52 | ||||||
| Accounts payable and other liabilities |
(1,170 | ) | (810 | ) | ||||
| Income tax payable |
11 | — | ||||||
| Pension obligations |
— | (542 | ) | |||||
| Deferred revenue |
(2,447 | ) | (188 | ) | ||||
| Net cash provided by (used in) operating activities |
153 | (2,038 | ) | |||||
| Investing Activities |
||||||||
| Purchases of property, equipment and leasehold improvements |
(1,085 | ) | (101 | ) | ||||
| Proceeds from sale of property, plant and equipment |
329 | — | ||||||
| Other assets and liabilities |
(45 | ) | (29 | ) | ||||
| Net cash used in investing activities |
(801 | ) | (130 | ) | ||||
| Financing Activities |
||||||||
| Issuance of common stock |
172 | 4 | ||||||
| Borrowings under short term loan |
9,200 | — | ||||||
| Repayments under bank credit lines |
(11,188 | ) | (1,975 | ) | ||||
| Payments on capital lease obligations |
(152 | ) | (166 | ) | ||||
| Net cash used in financing activities |
(1,968 | ) | (2,137 | ) | ||||
| Effect of exchange rate changes in cash |
(6 | ) | (523 | ) | ||||
| Net decrease in cash and cash equivalents |
(2,622 | ) | (4,828 | ) | ||||
| Cash and cash equivalents at beginning of period |
31,646 | 42,557 | ||||||
| Cash and cash equivalents at end of period |
$ | 29,024 | $ | 37,729 | ||||
See Notes to Unaudited Condensed Consolidated Financial Statements
5
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 2004
NOTE A BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements include the accounts of Trikon Technologies, Inc. (the “Company”) and its subsidiaries. All material intercompany balances and transactions have been eliminated.
The condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. The operating results for the three months ended March 31, 2004 are not necessarily indicative of the results that may be expected for the year ending December 31, 2004.
The balance sheet at December 31, 2003 has been derived from the audited consolidated financial statements at that date, but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2003.
NOTE B RECENT ACCOUNTING PRONOUNCEMENTS
In January 2003, the Financial Accounting Standards Board (“FASB”) issued interpretation No. 46 (“FIN 46”), “Consolidation of Variable Interest Entities, an interpretation of ARB 51.” The primary objectives of this interpretation are to provide guidance on the identification of entities for which control is achieved through means other than through voting rights (“variable interest entities or “VIEs”) and how to determine when and which business enterprise (the “primary beneficiary”) should consolidate the variable interest entity.
This new model for consolidation applies to an entity in which either (i) the equity investors (if any) do not have a controlling financial interest, or (ii) the equity investment at risk is insufficient to finance that entity’s activities without receiving additional subordinated financial support from other parties. In addition, FIN 46 requires that the primary beneficiary, as well as all other enterprises with a significant variable interest in a variable interest entity, make additional disclosures. Certain disclosure requirements of FIN 46 were effective for financial statements issued after January 31, 2003. In December 2003, the FASB issued FIN 46 (revised December 2003), “Consolidation of Variable Interest Entities” (“FIN 46-R”) to address certain FIN 46 implementation issues.
The provisions of FIN 46 were applicable for variable interests in entities obtained after January 31, 2003. Since the Company does not have any VIEs, the adoption of the provisions applicable to special purpose entities (“SPE”) and all other variable interests obtained after January 31, 2003 did not have an impact on the Company’s consolidated financial position, consolidated results of operations, or liquidity.
Effective from January 1, 2004, the Company adopted the provisions of FIN 46-R applicable to Non-SPEs created prior to February 1, 2003. Adoption of FIN 46-R had no impact on the Company’s consolidated financial position, consolidated results of operations, or liquidity.
6
NOTE C INVENTORIES
Inventories are stated at the lower of cost or net realizable value, using standard costs which approximate to actual cost. The components of inventory consist of the following:
| March 31, 2004 |
December 31, 2003 | |||||
| (In thousands) | ||||||
| Customer service spares |
$ | 3,068 | $ | 3,237 | ||
| Components |
6,636 | 5,646 | ||||
| Work in process |
6,333 | 6,374 | ||||
| Total |
$ | 16,037 | $ | 15,257 | ||
NOTE D LIABILITIES
The components of other current liabilities are as follows:
| March 31, 2004 |
December 31, 2003 | |||||
| (In thousands) | ||||||
| Customer deposits |
$ | 1,080 | $ | 1,095 | ||
| Payroll taxes |
774 | 1,326 | ||||
| Income taxes |
126 | 133 | ||||
| Other |
840 | 809 | ||||
| Total |
$ | 2,820 | $ | 3,363 | ||
Generally, the Company’s products are sold with a standard warranty, the period of which varies from 12 to 24 months, depending on a number of factors including the specific equipment purchased. The Company accounts for the estimated warranty cost as a charge to cost of sales at the time it recognizes revenue. The warranty cost is based upon historic product performance and is based on a rolling 12-month average of the historic cost per machine per warranty month outstanding.
Changes in the Company’s product warranty liability during the three months ended March 31, 2004 were as follows (in thousands):
| Balance, January 01, 2004 |
$ | 1,285 | ||
| Provisions for warranty |
40 | |||