Notes to Consolidated Financial Statements
For the Years Ended September 30, 2016, 2015 and 2014
1. Summary of Significant Accounting Policies
Nature of Operations and Basis of Presentation
– Amtech Systems, Inc. (the “Company”) is a global manufacturer of capital equipment, including thermal processing, silicon wafer handling automation, and related consumables used in fabricating solar cells, LED and semiconductor devices. The Company sells these products to solar cell and semiconductor manufacturers worldwide, particularly in Asia, United States and Europe.
The Company serves niche markets in industries that are experiencing rapid technological advances and which historically have been very cyclical. Therefore, future profitability and growth depend on the Company’s ability to develop or acquire and market profitable new products and on its ability to adapt to cyclical trends.
Principles of Consolidation –
The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries and subsidiaries in which it has a controlling interest. The Company reports noncontrolling interests in consolidated entities as a component of equity separate from the Company’s equity. The equity method of accounting is used for i
nvestments over which the Company has a significant influence but not a controlling financial interest.
All material intercompany accounts and transactions have been eliminated in consolidation.
Use of Estimates
– The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
Revenue Recognition
– We review product and service sales contracts with multiple deliverables to determine if separate units of accounting 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 arrangement or the portion of the selling price that is not contingent upon performance of the service.
We recognize revenue when persuasive evidence of an arrangement exists; the product has been delivered and title has transferred, or services have been rendered; and the seller’s price to the buyer is fixed or determinable and collectability is reasonably assured. For us, this policy generally results in revenue recognition at the following points:
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|
1.
|
For our equipment business, transactions where legal title passes to the customer upon shipment, we recognize revenue upon shipment for those products where the customer’s defined specifications have been met with at least
two
similarly configured systems and processes for a comparably situated customer. Our selling prices may include both equipment and services, i.e., installation and start-up services performed by our service technicians. The equipment and services are multiple deliverables. Certain equipment that has a positive track record of successful installation and customer acceptance are considered to be routine systems. Our recognition of revenue upon delivery of such equipment that has been routinely installed and accepted is equal to the total selling price minus the relative selling price of the undelivered services.
|
Where the installation and acceptance of more than
two
similarly configured items of equipment have not become routine, recognition of revenue upon delivery of equipment is limited to the lesser of (i) the total selling price minus the relative selling price of the undelivered services or (ii) the non-contingent amount. Since we defer only those costs directly related to installation, or other unit of accounting not yet delivered, and the portion of the contract price is often considerably greater than the relative selling price of those items, our policy at times will result in deferral of profit that is disproportionate in relation to the deferred revenue. When this is the case, the gross margin recognized in
one
period will be lower and the gross margin reported in a subsequent period will improve.
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|
2.
|
For products where the customer’s defined specifications have not been met with at least
two
similarly configured systems and processes, the revenue and directly related costs are deferred at the time of shipment and later recognized at the time of customer acceptance or when this criterion has been met. We have, on occasion, experienced longer than expected delays in receiving cash from certain customers pending final installation or system acceptance. If some of our customers refuse to pay the final payment, or otherwise delay
|
final acceptance or installation, the deferred revenue would not be recognized, adversely affecting our future cash flows and operating results.
|
|
3.
|
Sales of certain equipment, spare parts and consumables are recognized upon shipment, as there are no post shipment obligations other than standard warranties.
|
|
|
4.
|
Service revenue is recognized upon performance of the services requested by the customer. Revenue related to service contracts is recognized ratably over the period of the contract or in accordance with the terms of the contract, which generally coincides with the performance of the services requested by the customer.
|
Deferred Profit –
Revenue deferred pursuant to our revenue policy, net of the related deferred costs, if any, is recorded as deferred profit in current liabilities. The components of deferred profit are as follows:
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|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
2016
|
|
2015
|
|
2014
|
|
(dollars in thousands)
|
Deferred revenue
|
$
|
7,029
|
|
|
$
|
7,280
|
|
|
$
|
8,118
|
|
Deferred costs
|
2,320
|
|
|
2,407
|
|
|
1,210
|
|
Deferred profit
|
$
|
4,709
|
|
|
$
|
4,873
|
|
|
$
|
6,908
|
|
Cash Equivalents –
We consider all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Our cash and cash equivalents consist of amounts invested in U.S. money market funds and various U.S. and foreign bank operating and time deposit accounts.
Restricted Cash –
Restricted cash of
$0.9 million
and
$0.6 million
as of September 30, 2016 and 2015, respectively, includes collateral for bank guarantees required by certain customers from whom deposits have been received in advance of shipment. Restricted cash as of September 30, 2016 and 2015 includes
$0.2 million
relating to the Company's proportional responsibility, assumed in connection with the BTU acquisition, for clean-up costs at a Superfund site.
Accounts Receivable and Allowance for Doubtful Accounts –
Accounts receivable are recorded at the gross sales price of products sold to customers on trade credit terms. Accounts receivable are considered past due when payment has not been received from the customer within the normal credit terms extended to that customer. A valuation allowance is established for accounts when collection is no longer probable. Accounts are written off against the allowance when the probability of collection is remote.
The following is a summary of the activity in the Company’s allowance for doubtful accounts:
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|
|
|
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Years Ended September 30,
|
|
2016
|
|
2015
|
|
2014
|
|
(dollars in thousands)
|
Balance at beginning of year
|
$
|
5,009
|
|
|
$
|
2,846
|
|
|
$
|
638
|
|
Provision / (Reversal)
|
1,698
|
|
|
(194
|
)
|
|
1,304
|
|
Write offs
|
(1,942
|
)
|
|
(130
|
)
|
|
(13
|
)
|
Acquired through business acquisitions
|
—
|
|
|
1,397
|
|
|
—
|
|
Adjustment
(1) (2) (3)
|
(1,035
|
)
|
|
1,090
|
|
|
917
|
|
Balance at end of year
|
$
|
3,730
|
|
|
$
|
5,009
|
|
|
$
|
2,846
|
|
(1) 2014 relates to an unbilled accounts receivable that was legally owed to the Company but was deemed uncollectible when the customer entered into bankruptcy proceedings. To allow for submission of billings to the courts, amounts were invoiced and fully reserved.
(2) 2015 amount primarily relates to cancellation fees that were legally owed to the Company but for which collectability was not assured. A portion of these fees were collected in 2016, and the remainder were written off.
(3) Includes foreign currency translation adjustments.
Accounts Receivable - Unbilled and Other
– Unbilled and other accounts receivable consist mainly of the contingent portion of the sales price that is not collectible until successful installation of the product. These amounts are generally billed upon final customer acceptance.
Concentrations of Credit Risk –
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and trade accounts receivable. The Company’s customers consist of solar cell and semiconductor manufacturers worldwide, as well as the lapping and polishing marketplace. Credit risk is managed by performing ongoing credit evaluations of the customers’ financial condition, by requiring significant deposits where appropriate, and by actively monitoring collections. Letters of credit are required of certain customers depending on the size of the order, type of customer or its creditworthiness, and country of domicile. Reserves for potentially uncollectible receivables are maintained based on an assessment of collectability.
The Company maintains its cash, cash equivalents and restricted cash in multiple financial institutions. Balances in the United States (approximately
70%
and
62%
of total cash balances as of September 30, 2016 and 2015, respectively) are primarily invested in US Treasuries or are in financial institutions insured by the Federal Deposit Insurance Corporation (FDIC). The remainder of the Company’s cash is maintained with financial institutions with reputable credit in The Netherlands, France and China.
As of September 30, 2016,
one
customer individually represented
11%
of accounts receivable. As of September 30, 2015,
no
customer individually represented greater than
10%
of accounts receivable.
Refer to Note 8, Geographic Regions, for information regarding revenue and assets in other countries subject to fluctuation in foreign currency exchange rates.
Inventories –
We value our inventory at the lower of cost or net realizable value. Costs for approximately
50%
and
60%
of inventory as of September 30, 2016 and 2015, respectively, are determined on an average cost basis with the remainder determined on a first-in, first-out (FIFO) basis. The components of inventories are as follows:
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|
|
|
|
|
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|
September 30, 2016
|
|
September 30, 2015
|
|
(dollars in thousands)
|
Purchased parts and raw materials
|
$
|
12,435
|
|
|
$
|
11,587
|
|
Work-in-process
|
7,044
|
|
|
5,089
|
|
Finished goods
|
3,744
|
|
|
6,653
|
|
|
$
|
23,223
|
|
|
$
|
23,329
|
|
Notes and Other Receivables
– Notes and other Receivable consists of amounts due to the Company for the sale of Kingstone shares and repayment of a loan (see Note 14 "Deconsolidation"). The carrying amount of the notes receivable approximated fair value due to its short-term nature.
Property, Plant and Equipment
– Property plant, and equipment are recorded at cost. Maintenance and repairs are charged to expense as incurred. The cost of property retired or sold and the related accumulated depreciation and amortization are removed from the applicable accounts when disposition occurs and any gain or loss is recognized. Depreciation and amortization is computed using the straight-line method. Depreciation and capital lease amortization expense was
$2.1 million
,
$2.2 million
and
$1.7 million
in fiscal years 2016, 2015 and 2014, respectively. Useful lives for equipment, machinery and leasehold improvements range from
three
to
seven
years; for furniture and fixtures from
five
to
ten
years; and for buildings
20
to
30
years.
The following is a summary of property, plant and equipment:
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|
|
|
|
|
|
|
|
|
September 30, 2016
|
|
September 30, 2015
|
|
(dollars in thousands)
|
Land, building and leasehold improvements
|
$
|
18,255
|
|
|
$
|
18,095
|
|
Equipment and machinery
|
9,056
|
|
|
9,709
|
|
Furniture and fixtures
|
5,426
|
|
|
5,465
|
|
|
32,737
|
|
|
33,269
|
|
Accumulated depreciation and amortization
|
(16,777
|
)
|
|
(15,508
|
)
|
|
$
|
15,960
|
|
|
$
|
17,761
|
|
Goodwill
– Goodwill and intangible assets with indefinite lives are not subject to amortization, but are tested for impairment when it is determined that it is more likely than not that the fair value of a reporting unit or the indefinite-lived intangible asset is less than its carrying amount, typically at the end of the fiscal year, or more frequently if circumstances dictate. During the fourth quarter of fiscal 2015, the Company obtained additional information relating to the fair value of tangible and intangible assets acquired from SoLayTec and BTU, resulting in an increase to goodwill of
$0.9 million
and a decrease of
$0.2 million
, respectively. As detailed in Note 14 "Deconsolidation", the Company deconsolidated Kingstone as of September 16, 2015. The adjustment to goodwill as a result of the deconsolidation of Kingstone is shown in the table below.
The changes in the carrying amount of goodwill for the year ended
September 30, 2016
are as follows.
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|
|
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|
|
|
|
|
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|
|
|
|
|
|
Solar
|
|
Semiconductor
|
|
Polishing
|
|
Total
|
|
(dollars in thousands)
|
Goodwill
|
$
|
6,617
|
|
|
$
|
4,463
|
|
|
$
|
728
|
|
|
$
|
11,808
|
|
Accumulated impairment losses
|
(1,273
|
)
|
|
—
|
|
|
—
|
|
|
(1,273
|
)
|
Carrying value at September 30, 2015
|
5,344
|
|
|
4,463
|
|
|
728
|
|
|
10,535
|
|
Reallocation of goodwill
|
—
|
|
|
600
|
|
|
—
|
|
|
600
|
|
Net exchange differences
|
(16
|
)
|
|
—
|
|
|
—
|
|
|
(16
|
)
|
Carrying value at September 30, 2016
|
$
|
5,328
|
|
|
$
|
5,063
|
|
|
$
|
728
|
|
|
$
|
11,119
|
|
|
|
|
|
|
|
|
|
Goodwill
|
$
|
6,597
|
|
|
$
|
5,063
|
|
|
$
|
728
|
|
|
$
|
12,388
|
|
Accumulated impairment losses
|
(1,269
|
)
|
|
—
|
|
|
—
|
|
|
(1,269
|
)
|
Carrying value at September 30, 2016
|
$
|
5,328
|
|
|
$
|
5,063
|
|
|
$
|
728
|
|
|
$
|
11,119
|
|
Intangibles -
Intangible assets are capitalized and amortized on a straight-line basis over their useful life if the life is determinable. If the life is not determinable, amortization is not recorded. Amortization expense related to intangible assets was
$0.8 million
,
$1.2 million
and
$0.7 million
in fiscal years 2016, 2015 and 2014, respectively. The aggregate amortization expense for the intangible assets for each of the five succeeding fiscal years is estimated to be
$0.7 million
,
$0.6 million
,
$0.6 million
,
$0.6 million
and
$0.4 million
in 2017, 2018, 2019, 2020 and 2021.
On December 24, 2014, the Company acquired a
51%
controlling interest in SoLayTec. The intangible assets of SoLayTec total
$2.0 million
, of which
$1.8 million
is included in "Technology" and
$0.2 million
is included in "Trade names" in the table below. On January 30, 2015, the Company completed the merger with BTU. The intangible assets of BTU total
$2.9 million
, of which
$1.2 million
is included in "Trade names" and
$1.7 million
is included in "Customer lists" in the table below. See Note 13, “Acquisitions,” for more information regarding the acquisition of SoLayTec and the merger with BTU.
As a result of the sale of the Company's partial ownership in Kingstone in fiscal 2015, the Company derecognized
$3.2 million
of intangible assets and
$1.9 million
of accumulated amortization. See Note 14 "Deconsolidation" for additional details relating to the deconsolidation of Kingstone.
The following is a summary of intangibles:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Useful Life
|
|
Gross Carrying Amount
|
Accumulated Amortization
|
Net Carrying Amount
|
|
Gross Carrying Amount
|
Accumulated Amortization
|
Net Carrying Amount
|
|
|
|
Years Ended September 30,
|
|
|
|
2016
|
|
2015
|
|
|
|
(dollars in thousands)
|
Customer lists
|
6-10 years
|
|
$
|
2,432
|
|
$
|
(1,164
|
)
|
$
|
1,268
|
|
|
$
|
2,434
|
|
$
|
(808
|
)
|
$
|
1,626
|
|
Technology
|
5-10 years
|
|
3,214
|
|
(1,678
|
)
|
1,536
|
|
|
3,223
|
|
(1,368
|
)
|
1,855
|
|
Trade names
|
10-15 Years
|
|
1,455
|
|
(219
|
)
|
1,236
|
|
|
1,456
|
|
(72
|
)
|
1,384
|
|
Other
|
2-10 years
|
|
277
|
|
(217
|
)
|
60
|
|
|
278
|
|
(204
|
)
|
74
|
|
|
|
|
$
|
7,378
|
|
$
|
(3,278
|
)
|
$
|
4,100
|
|
|
$
|
7,391
|
|
$
|
(2,452
|
)
|
$
|
4,939
|
|
Warranty –
A limited warranty is provided free of charge, generally for periods of
12
to
24
months to all purchasers of the Company’s new products and systems. Accruals are recorded for estimated warranty costs at the time revenue is recognized. The following is a summary of activity in accrued warranty expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended September 30,
|
|
2016
|
|
2015
|
|
2014
|
|
(dollars in thousands)
|
Beginning balance
|
$
|
793
|
|
|
$
|
628
|
|
|
$
|
1,454
|
|
Warranty – BTU merger
|
—
|
|
|
806
|
|
|
—
|
|
Additions for warranties issued during the period
|
1,074
|
|
|
677
|
|
|
479
|
|
Reductions in the liability for payments made under the warranty
|
(832
|
)
|
|
(1,007
|
)
|
|
(390
|
)
|
Changes related to pre-existing warranties
|
(250
|
)
|
|
(215
|
)
|
|
(750
|
)
|
Currency translation adjustment
|
10
|
|
|
(96
|
)
|
|
(165
|
)
|
Ending balance
|
$
|
795
|
|
|
$
|
793
|
|
|
$
|
628
|
|
Research, Development and Engineering Expenses
– Research, development and engineering expenses consist of the cost of employees, consultants and contractors who design, engineer and develop new products and processes as well as materials, supplies and facilities used in producing prototypes. Payments received for research and development grants prior to the meeting of milestones are recorded as unearned research and development grant liabilities and included in other accrued liabilities on the balance sheet. When certain contract requirements are met, governmental research and development grants are netted against research and development expenses.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended September 30,
|
|
2016
|
|
2015
|
|
2014
|
|
(dollars in thousands)
|
Research, development and engineering
|
$
|
9,535
|
|
|
$
|
13,214
|
|
|
$
|
10,863
|
|
Grants earned
|
(1,531
|
)
|
|
(6,296
|
)
|
|
(4,572
|
)
|
Net research, development and engineering
|
$
|
8,004
|
|
|
$
|
6,918
|
|
|
$
|
6,291
|
|
Shipping Expense
– Shipping expenses of
$2.3 million
,
$2.5 million
and
$1.0 million
for fiscal
2016
,
2015
and
2014
are included in selling, general and administrative expenses.
Foreign Currency Transactions and Translation
– Our operations in Europe, China and other countries are primarily conducted in their functional currencies, the Euro, Renminbi, or the local country currency, respectively. Net income includes a pretax net loss from foreign currency transactions of less than
$0.1 million
in fiscal 2016 and pretax net gains of
$0.3 million
and less than
$0.1 million
in fiscal 2015 and 2014, respectively. The gains or losses resulting from the translation of foreign financial statements have been included in other comprehensive income (loss).
Income Taxes
– The Company files consolidated federal income tax returns in the United States for all subsidiaries except those in the Netherlands, France, Hong Kong and China, where separate returns are filed. The Company computes deferred income tax assets and liabilities based upon cumulative temporary differences between financial reporting and taxable income, carryforwards available and enacted tax laws. The Company also accrues a liability for uncertain tax positions when it is more likely than not that such tax will be incurred.
Deferred tax assets 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. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management and based on the weight of available evidence, it is more likely than not that a portion or all of the deferred tax asset will not be realized. Each quarter, the valuation allowance is re-evaluated.
Stock-Based Compensation
– The Company measures compensation costs relating to share-based payment transactions based upon the grant-date fair value of the award. Those costs are recognized as expense over the requisite service period, which is generally the vesting period. The benefits or deficiencies of tax deductions in excess of or less than recognized compensation cost are reported as cash flow from financing activities rather than as cash flow from operating activities.
Stock-based compensation expense for the fiscal years ended September 30, 2016, 2015 and 2014 reduced the Company’s results of operations as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended September 30,
|
|
2016
|
|
2015
|
|
2014
|
|
(dollars in thousands)
|
Effect on income before income taxes (1)
|
$
|
(1,390
|
)
|
|
$
|
(1,162
|
)
|
|
$
|
(795
|
)
|
Effect on income taxes
|
$
|
186
|
|
|
$
|
221
|
|
|
$
|
326
|
|
Effect on net income
|
$
|
(1,204
|
)
|
|
$
|
(941
|
)
|
|
$
|
(469
|
)
|
(1) Stock-based compensation expense is included in selling, general and administrative expense
The Company awards restricted shares under the existing share-based compensation plans. Our restricted share-awards vest in equal annual installments over
6 months
to
four
years. The total value of these awards is expensed on a ratable basis over the service period of the employees receiving the grants. The “service period” is the time during which the employees receiving grants must remain employed for the shares granted to fully vest.
Qualified stock options issued under the terms of the plans have, or will have, an exercise price equal to, or greater than, the fair market value of the common stock at the date of the option grant, and expire no later than
ten
years from the date of grant, with the most recent grant expiring in 2026. Options vest over
6 months
to
4
years. The Company
estimates the fair value of stock option awards on the date of grant using the Black-Scholes option pricing model using the following assumptions:
|
|
|
|
|
|
|
|
Years Ended September 30,
|
|
2016
|
|
2015
|
|
2014
|
Risk free interest rate
|
2%
|
|
2%
|
|
2%
|
Expected life
|
6 years
|
|
6 years
|
|
6 years
|
Dividend rate
|
0%
|
|
0%
|
|
0%
|
Volatility
|
63%
|
|
67%
|
|
69%
|
To estimate expected lives for this valuation, it was assumed that options will be exercised at varying schedules after becoming fully vested. Forfeitures have been estimated at the time of grant and will be revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Forfeitures were estimated based upon historical experience. Fair value computations are highly sensitive to the volatility factor assumed; the greater the volatility, the higher the computed fair value of the options granted. The Company uses historical stock prices to determine the volatility factor.
Fair Value of Financial Instruments -
In accordance with the requirements of the Fair Value Measurements and Disclosures Topic of the Financial Accounting Standards Board ("FASB") Accounting Standards Codification (ASC), the Company groups its financial assets and liabilities measured at fair value on a recurring basis in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. These levels are:
Level 1 - Valuation is based upon quoted market price for identical instruments traded in active markets.
Level 2 - Valuation is based on quoted market prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.
Level 3 - Valuation is generated from model-based techniques that use significant assumptions not observable in the market. Valuation techniques include use of discounted cash flow models and similar techniques.
In accordance with the requirements of the Fair Value Measurements and Disclosures Topic of the FASB ASC, it is the Company's policy to use observable inputs whenever reasonably practicable in order to minimize the use of unobservable inputs when developing fair value measurements. When available, the Company uses quoted market prices to measure fair value. If market prices are not available, the fair value measurement is based on models that use primarily market based parameters including interest rate yield curves, option volatilities and currency rates. In certain cases, where market rate assumptions are not available, the Company is required to make judgments about assumptions market participants would use to estimate the fair value of a financial instrument. Changes in the underlying assumptions used, including discount rates and estimates of future cash flows, could significantly affect the results of current or future values.
Cash, Cash Equivalents and Restricted Cash
- Included in Cash and Cash Equivalents in the Consolidated Balance Sheets are money market funds invested in treasury bills, notes and other direct obligations of the U.S. Treasury and foreign bank operating and time deposit accounts. The fair value of this cash equivalent is based on Level 1 inputs in the fair value hierarchy.
Receivables and Payables
-The recorded amounts of these financial instruments, including accounts receivable and accounts payable, approximate their fair value because of the short maturities of these instruments. If measured at fair value in the financial statements, these financial instruments would be classified as Level 3 in the fair value hierarchy.
Pensions
– The Company has retirement plans covering substantially all employees. The principal plans are the multiemployer defined benefit pension plans of the Company’s operations in the Netherlands and France and the multiemployer plan for hourly union employees in Pennsylvania and the Company's defined contribution plan that covers substantially all of the employees in the United States. The multiemployer plans in the United States and France are insignificant.
The Company’s employees in The Netherlands, approximately
130
, participate in a multi-employer pension plan Pensioenfonds Metaal en Techniek (“PMT”), determined in accordance with the collective bargaining agreements effective for the industry in the Netherlands. This collective bargaining agreement has no expiration date. This multiemployer pension plan covers approximately
33,000
companies and
1.2 million
participants. Amtech's contribution to the multiemployer pension plan is less than
5.0%
of the total contributions to the plan. The plan monitors its risks on a global basis, not by company or employee, and is subject to regulation by Dutch governmental authorities. By law (the Dutch Pension Act), a multiemployer pension plan must be monitored against specific criteria, including the coverage ratio of the plan assets to its obligations. This coverage ratio must exceed
105%
for the total plan. Every company participating in a Dutch multiemployer union plan contributes a premium calculated as a percentage of its total pensionable salaries, with each company subject to the same percentage contribution rate. The premium can fluctuate yearly based on the coverage ratio of the multiemployer union plan. The pension rights of each employee are based upon the employee’s average salary during employment, the years of service, and the participant's age at the time of retirement.
The Company's net periodic pension cost for this multiemployer pension plan for any period is the amount of the required contribution for that period. A contingent liability may arise from, for example, possible actuarial losses relating to other participating entities because each entity that participates in a multiemployer union plan shares in the actuarial risks of every other participating entity or any responsibility under the terms of a plan to finance any shortfall in the plan if other entities cease to participate
The coverage ratio of the Dutch multiemployer union plan is
92.1%
as of September 30, 2016. In 2013, PMT prepared and executed a “Recovery Plan” which was approved by De Nederlandsche Bank, the Dutch central bank, which is the supervisor of all pension companies in the Netherlands. As a result of the Recovery Plan, the pension rights decreased
6.3%
in April 2013 and the employer's premium percentage increased to
16.6%
of pensionable wages. The coverage ratio is calculated by dividing the plan assets by the total sum of pension liabilities and is based on actual market interest. The coverage ratio of PMT fluctuates during a year due to the changes in the value of the assets and the present value of the liabilities. During the fiscal year 2016 the coverage ratio was as high as
99.2%
in the first quarter and as low as
89.6%
in the second quarter. The fluctuations are due to the reduction in the ultimate forward rate (which increases the present value of the liabilities) and a decrease in the value of global equities. As of September 30, 2016 PMT's total plan assets were
$76.7
billion and the actuarial present value of accumulated plan benefits was
$83.3
billion.
Below is a table of contributions made by the Company to multiemployer pension plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contributions
|
|
Years Ended September 30,
|
|
2016
|
|
2015
|
|
2014
|
|
(dollars in thousands)
|
Pensioenfonds Metaal en Techniek (PMT)
|
$
|
796
|
|
|
$
|
805
|
|
|
$
|
929
|
|
Other plans
|
187
|
|
|
158
|
|
|
158
|
|
Total
|
$
|
983
|
|
|
$
|
963
|
|
|
$
|
1,087
|
|
The Company matches employee funds to the Company's defined contribution plans on a discretionary basis. The match was insignificant in fiscal years 2016, 2015 and 2014.
Reclassifications
– Certain reclassifications have been made to prior year financial statements to conform to the current year presentation relating to segment disclosure (see Note 7). Specifically, allowance for doubtful accounts, and warranty have been modified to provide a greater level of detail. These reclassifications had no effect on the previously reported Consolidated Financial Statements for any period.
Impact of Recently Issued Accounting Pronouncements
In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments”. These amendments provide cash flow statement classification guidance for: 1. Debt Prepayment or Debt Extinguishment Costs; 2. Settlement of Zero-Coupon Debt Instruments or Other Debt Instruments with Coupon Interest Rates That Are Insignificant in Relation to the Effective Interest Rate of the Borrowing; 3. Contingent Consideration Payments Made after a Business Combination; 4. Proceeds from the Settlement of Insurance
Claims; 5. Proceeds from the Settlement of Corporate-Owned Life Insurance Policies, including Bank-Owned Life Insurance Policies; 6. Distributions Received from Equity Method Investees; 7. Beneficial Interests in Securitization Transactions; and 8. Separately Identifiable Cash Flows and Application of the Predominance Principle. The amendments in this ASU are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early application is permitted, including adoption in an interim period. The Company is currently in the process of evaluating the impact of the adoption on its consolidated financial statements.
In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments”. ASU 2016-13 amends the impairment model to utilize an expected loss methodology in place of the currently used incurred loss methodology, which will result in the more timely recognition of losses. The new standard applies to financial assets measured at amortized cost basis, including receivables that result from revenue transactions and held-to-maturity debt securities. The new guidance will be effective for the Company starting in the first quarter of fiscal 2021. Early adoption is permitted starting in the first quarter of fiscal 2020. The Company is in the process of determining the effects the adoption will have on its consolidated financial statements as well as whether to adopt the new guidance early.
In May 2014, the FASB issued Accounting Standards Update No. 2014-09 regarding ASC Topic 606, “Revenue from Contracts with Customers.” ASU 2014-09 provides principles for recognizing revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In August 2015, the FASB issued ASU 2015-14 to defer the effective date by one year with early adoption permitted as of the original effective date. ASU 2014-09 will be effective for Amtech’s fiscal year beginning October 1, 2018 unless we elect the earlier date of October 1, 2017. In addition, the FASB issued ASU 2016-08, ASU 2016-10, and ASU 2016-12 in March 2016, April 2016, and May 2016, respectively, to help provide interpretive clarifications on the new guidance in ASC Topic 606. The Company is currently assessing the impact that adopting this new accounting standard will have on its consolidated financial statements.
In March 2016, the FASB issued ASU No. 2016-09, Compensation - “Stock Compensation (Topic 718)”. 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 are effective for annual periods beginning after December 15, 2016 and for the interim periods therein. The Company is currently assessing the impact that adopting this new accounting standard will have on its consolidated financial statements.
In March 2016, the FASB issued ASU 2016-07, “Equity Method and Joint Ventures” affecting all entities that have an investment that becomes qualified for the equity method of accounting as a result of an increase in the level of ownership or degree of influence. ASU 2016-07 is effective for the Company beginning on
January 1, 2017
, early adoption is permitted. The adoption of this guidance by the Company is not expected to have a material impact on its consolidated financial statements.
In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)”, which requires companies to generally recognize on the balance sheet operating and financing lease liabilities and corresponding right-of-use-assets. ASU 2016-02 also requires improved disclosures to help users of financial statements better understand the amount, timing and uncertainty of cash flows arising from leases. This ASU is effective for fiscal years beginning after December 15, 2018 and early application is permitted. The Company is currently in the process of evaluating the impact of this standard on its consolidated financial statements.
In January 2016, the FASB issued ASU No. 2016-01, “Financial Instruments - Overall (Subtopic 825-10), Recognition and Measurement of Financial Assets and Financial Liabilities”, which addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. This ASU is effective for fiscal years beginning after December 15, 2017 and early adoption is not permitted. The Company is currently evaluating the impact that the standard will have on its consolidated financial statements.
In November 2015, the FASB issued ASU No. 2015-17, “Balance Sheet Classification of Deferred Taxes”. This ASU requires entities to classify deferred tax liabilities and assets as noncurrent in a classified statement of financial position. This ASU is effective for fiscal years beginning after December 15, 2016, and interim periods within those annual periods. Early adoption is permitted for all entities as of the beginning of an interim or annual reporting period. The
adoption of this guidance by the Company is not expected to have a material impact on its consolidated financial statements.
In July 2015, the FASB issued ASU No. 2015-16, “Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments”, which simplifies the accounting for measurement-period adjustments to provisional amounts recognized in a business combination. ASU 2015-16 is effective for fiscal years (and interim reporting periods within those years) beginning after December 15, 2016. The provisions of ASU 2015-16 are not expected to have a material effect on the Company's financial condition, results of operations, or cash flows.
In July 2015, the FASB issued ASU No. 2015-11, “Simplifying the Measurement of Inventory”. This ASU simplifies the measurement of inventory by requiring certain inventory to be measured at the lower of cost or net realizable value. The amendments in this ASU are effective for fiscal years beginning after December 15, 2016 and for interim periods therein. The Company does not expect adoption of this ASU to have a material impact on the Company's consolidated financial position and results of operations.
2. Stock-Based Compensation
Stock-Based Plans
–The 2007 Employee Stock Incentive Plan (the “2007 Plan), under which
500,000
shares could be granted, was adopted by the Board of Directors in April 2007, and approved by the shareholders in May 2007. The 2007 Plan was amended in 2009, 2014, and 2015 to add
2,500,000
shares. The Non-Employee Directors Stock Option Plan was approved by the shareholders in 1996 for issuance of up to
100,000
shares of Common Stock to directors. The Non-Employee Directors Stock Option Plan was amended in 2005, 2009, and 2014 to add
400,000
shares.
Stock options issued under the terms of the plans have, or will have, an exercise price equal to or greater than the fair market value of the Common Stock at the date of the option grant and expire no later than
10
years from the date of grant, with the most recent grant expiring in 2026. Options issued by the Company vest over
6 months
to
4
years. The Company may also grant restricted stock awards under the 2007 Plan.
As of September 30, 2016 there was no unamortized expense related to restricted shares. As of September 30, 2015 the unamortized expense was less than
$0.1 million
.
Restricted stock transactions and outstanding awards are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended September 30,
|
|
2016
|
|
2015
|
|
2014
|
|
Awards
|
|
Weighted Average Grant Date Fair Value
|
|
Awards
|
|
Weighted Average Grant Date Fair Value
|
|
Awards
|
|
Weighted Average Grant Date Fair Value
|
Beginning Outstanding
|
13,540
|
|
|
$
|
7.98
|
|
|
35,203
|
|
|
$
|
10.13
|
|
|
69,154
|
|
|
$
|
10.13
|
|
Released
|
(13,540
|
)
|
|
7.98
|
|
|
(21,663
|
)
|
|
11.47
|
|
|
(33,951
|
)
|
|
10.13
|
|
Ending Outstanding
|
—
|
|
|
$
|
—
|
|
|
13,540
|
|
|
$
|
7.98
|
|
|
35,203
|
|
|
$
|
10.13
|
|
Stock-based compensation plans are summarized in the table below:
|
|
|
|
|
|
|
|
|
|
|
|
|
Name of Plan
|
|
Shares Authorized
|
|
Shares Available
|
|
Options Outstanding
|
|
Plan Expiration
|
2007 Employee Stock Incentive Plan
|
|
3,000,000
|
|
|
722,102
|
|
|
1,603,887
|
|
|
Mar. 2020
|
1998 Employee Stock Option Plan
|
|
500,000
|
|
|
—
|
|
|
23,210
|
|
|
Jan. 2008
|
Non-Employee Directors Stock Option Plan
|
|
500,000
|
|
|
131,600
|
|
|
214,470
|
|
|
Mar. 2020
|
|
|
|
|
|
853,702
|
|
|
1,841,567
|
|
|
|
Stock options were valued using the Black-Scholes option pricing model. See Note 1 for further discussion. Stock option transactions and the options outstanding are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended September 30,
|
|
2016
|
|
2015
|
|
2014
|
|
Options
|
|
Weighted
Average
Exercise
Price
|
|
Options
|
|
Weighted
Average
Exercise
Price
|
|
Options
|
|
Weighted
Average
Exercise
Price
|
Outstanding at beginning of period
|
1,627,477
|
|
|
$
|
9.11
|
|
|
1,063,324
|
|
|
$
|
7.37
|
|
|
1,059,567
|
|
|
$
|
6.71
|
|
Granted
|
360,075
|
|
|
5.25
|
|
|
327,500
|
|
|
9.74
|
|
|
272,906
|
|
|
7.01
|
|
Assumed - merger
|
—
|
|
|
—
|
|
|
367,229
|
|
|
14.19
|
|
|
—
|
|
|
—
|
|
Exercised
|
(15,346
|
)
|
|
3.28
|
|
|
(94,701
|
)
|
|
5.52
|
|
|
(263,643
|
)
|
|
4.31
|
|
Forfeited/canceled
|
(130,639
|
)
|
|
12.86
|
|
|
(35,875
|
)
|
|
24.71
|
|
|
(5,506
|
)
|
|
9.63
|
|
Outstanding at end of period
|
1,841,567
|
|
|
$
|
8.15
|
|
|
1,627,477
|
|
|
$
|
9.11
|
|
|
1,063,324
|
|
|
$
|
7.37
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at end of period
|
1,127,611
|
|
|
$
|
8.92
|
|
|
1,002,421
|
|
|
$
|
9.74
|
|
|
674,237
|
|
|
$
|
8.18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average grant-date fair value of options granted during the period
|
$
|
3.03
|
|
|
|
|
$
|
5.91
|
|
|
|
|
$
|
4.38
|
|
|
|
The following tables summarize information for stock options outstanding and exercisable as of September 30, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Outstanding
|
Range of Exercise
Prices
|
|
Number
Outstanding
|
|
Remaining
Contractual
Life
|
|
Average
Exercise
Price
|
|
Aggregate
Intrinsic
Value
|
|
|
|
|
(in years)
|
|
|
|
(in thousands)
|
2.95-4.85
|
|
192,954
|
|
|
5.69
|
|
$
|
3.19
|
|
|
|
5.01-5.20
|
|
5,010
|
|
|
2.78
|
|
5.05
|
|
|
|
5.25-5.25
|
|
337,600
|
|
|
9.13
|
|
5.25
|
|
|
|
5.40-7.00
|
|
107,261
|
|
|
2.85
|
|
6.26
|
|
|
|
7.01-7.01
|
|
266,106
|
|
|
7.20
|
|
7.01
|
|
|
|
7.15-7.87
|
|
54,390
|
|
|
4.53
|
|
7.59
|
|
|
|
7.98-7.98
|
|
239,873
|
|
|
5.21
|
|
7.98
|
|
|
|
8.20-9.94
|
|
91,888
|
|
|
5.72
|
|
8.87
|
|
|
|
9.98-9.98
|
|
281,750
|
|
|
8.14
|
|
9.98
|
|
|
|
10.50-27.47
|
|
264,735
|
|
|
2.70
|
|
15.52
|
|
|
|
|
|
1,841,567
|
|
|
6.21
|
|
$
|
8.15
|
|
|
$
|
342
|
|
|
|
|
|
|
|
|
|
|
Vested and expected
to vest as of
September 30, 2016
|
|
1,838,990
|
|
|
6.21
|
|
$
|
8.15
|
|
|
$
|
342
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Exercisable
|
Range of Exercise
Prices
|
|
Number
Exercisable
|
|
Weighted
Average
Exercise
Price
|
|
Aggregate
Intrinsic
Value
|
|
|
|
|
|
|
(in thousands)
|
2.95-4.85
|
|
152,595
|
|
|
$
|
3.12
|
|
|
|
5.01-5.20
|
|
5,010
|
|
|
5.05
|
|
|
|
5.25-5.25
|
|
24,000
|
|
|
5.25
|
|
|
|
5.40-7.00
|
|
107,261
|
|
|
6.26
|
|
|
|
7.01-7.01
|
|
157,654
|
|
|
7.01
|
|
|
|
7.15-7.87
|
|
32,342
|
|
|
7.40
|
|
|
|
7.98-7.98
|
|
239,873
|
|
|
7.98
|
|
|
|
8.20-9.94
|
|
60,638
|
|
|
9.21
|
|
|
|
9.98-9.98
|
|
87,503
|
|
|
9.98
|
|
|
|
10.50-27.47
|
|
260,735
|
|
|
15.60
|
|
|
|
|
|
1,127,611
|
|
|
8.92
|
|
|
$
|
280
|
|
The aggregate intrinsic value in the tables above represents the total pretax intrinsic value, based on the Company’s closing stock price of
$4.96
per share as of September 30, 2016, which would have been received by the option holders had all option holders exercised their options as of that date. The total intrinsic value of stock options exercised during the fiscal years ended September 30, 2016, 2015 and 2014 was less than
$0.1 million
,
$0.6 million
and $
1.8 million
, respectively.
3. Earnings Per Share & Diluted Earnings Per Share
Basic earnings per share is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings (loss) per share is computed similarly
to basic earnings per share 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, and the numerator is based on net income (loss). In the case of a net loss, diluted earnings per share is calculated in the same manner as basic earnings per share. Options and restricted stock of approximately
1,840,000
,
1,640,000
and
1,099,000
shares are excluded from the fiscal
2016
,
2015
and
2014
earnings per share calculations as they are anti-dilutive.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended September 30,
|
|
2016
|
|
2015
|
|
2014
|
|
(dollars in thousands, except per share amounts)
|
Basic Earnings Per Share Computation
|
|
|
Net loss attributable to Amtech Systems, Inc.
|
$
|
(7,008
|
)
|
|
$
|
(7,771
|
)
|
|
$
|
(13,047
|
)
|
Weighted Average Shares Outstanding:
|
|
|
|
|
|
Common stock
|
13,168
|
|
|
12,022
|
|
|
9,732
|
|
Basic loss per share attributable to Amtech shareholders
|
$
|
(0.53
|
)
|
|
$
|
(0.65
|
)
|
|
$
|
(1.34
|
)
|
Diluted Earnings Per Share Computation
|
|
|
|
|
|
Net loss attributable to Amtech Systems, Inc.
|
$
|
(7,008
|
)
|
|
$
|
(7,771
|
)
|
|
$
|
(13,047
|
)
|
Weighted Average Shares Outstanding:
|
|
|
|
|
|
Common stock
|
13,168
|
|
|
12,022
|
|
|
9,732
|
|
Common stock equivalents
(1)
|
—
|
|
|
—
|
|
|
—
|
|
Diluted shares
|
13,168
|
|
|
12,022
|
|
|
9,732
|
|
Diluted loss per share attributable to Amtech shareholders
|
$
|
(0.53
|
)
|
|
$
|
(0.65
|
)
|
|
$
|
(1.34
|
)
|
(1) The number of common stock equivalents is calculated using the treasury stock method and the average market price during the period.
4. Stockholders’ Equity
Shareholder Rights Plan
– On December 15, 2008, the Company 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 restated the terms governing the previously authorized shareholder rights (each a “Right”) to purchase fractional shares of the Company’s Series A Participating Preferred Stock (“Series A Preferred”) currently attached to each of the Company’s outstanding Common Shares, par value
$0.01
per share (“Common Shares”). As amended, each Right entitles the registered holder to purchase from the Company
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 will be exercisable if (a) a person or group becomes the beneficial owner of
15%
or more of the Company’s 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 the Company’s common stock. The Final Expiration Date (as defined in the Restated Rights Agreement) is December 14, 2018.
On October 1, 2015, the Company entered into a Second Amended and Restated Rights Agreement (the “Second Restated Rights Agreement”) with Computershare Trust Company, N.A., which expands the definition of Exempted Person to include any person that the Board, in its sole and absolute discretion, exempts from becoming an Acquiring Person under the Second Restated Rights Agreement. A Person deemed an Exempted Person under the Second Restated Rights Agreement cannot trigger any of the Rights provided therein so long as such Exempted Person complies with the terms and conditions by which the Board approved such exemption from the Restated Rights Agreement.
As previously disclosed, on October 8, 2015, the Company entered into a Letter Agreement (the “Agreement”) by and between the Company and certain shareholders of the Company who jointly file (the “Joint Filers”) under Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Agreement permits the Joint Filers, pursuant to the Restated Rights Agreement, to individually acquire shares of common stock of the Company that would, in the aggregate, bring the Joint Filers’ collective ownership to no more than
19.9%
of the Company’s issued and outstanding common stock at any time. In the event the Joint Filers’ collective ownership at any time exceeds
19.9%
of the Company’s issued and outstanding shares of common stock, the Company is entitled to specific performance and all other remedies entitled to the Company at law or equity, among others. The Company’s board of directors
approved the Agreement and transactions contemplated thereunder, and has the sole authority to terminate the Agreement at any time.
5. Commitments and Contingencies
Purchase Obligations
– As of September 30, 2016, the Company had unrecorded purchase obligations in the amount of
$11.3 million
. These purchase obligations consist of outstanding purchase orders for goods and services. While the amount represents purchase agreements, the actual amounts to be paid may be less in the event that any agreements are renegotiated, canceled or terminated.
Development Projects
– In fiscal 2014, 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. Over the
four
-year period of the agreement, Tempress is required 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. As of September 30, 2016, Tempress has contributed all of the required
$1.4
million to the project.
EPA Accrual
- As a result of the BTU acquisition, the Company assumed BTU’s proportional responsibility for clean-up costs at a Superfund site. As an equipment manufacturer, BTU generated and disposed of small quantities of solid waste that were considered hazardous under Environment Protection Agency (“EPA”) regulations. Because BTU historically used a waste disposal firm that disposed of the solid waste at a site that the EPA designated as a Superfund site, BTU was named by the EPA as one of the entities responsible for a portion of the expected clean-up costs. Based on the Company's proportional responsibility, as negotiated with and agreed to by the EPA, the Company's liability related to this matter is less than
$0.1
million, which is included in Other Accrued Liabilities on the Consolidated Balance Sheet as of September 30, 2016. In accordance with the agreement, the Company established a letter of credit for
$0.2
million to the benefit of the EPA for potential cash payments as settlements for the Company’s proportional liability.
Legal Proceedings –
The Company and its subsidiaries are defendants from time to time in actions for matters arising out of their business operations.The Company does not believe that any matters or proceedings presently pending will have a material adverse effect on its consolidated financial position, results of operations or liquidity.
As previously disclosed in the Company’s filings with the SEC, shortly after the Company entered into the merger agreement with BTU,
two
separate putative stockholder class action complaints (together, the "Stockholder Actions") were filed in the Court of Chancery of the State of Delaware (the "Delaware Court"). The first was filed on November 4, 2014 and the second on November 17, 2014, on behalf of BTU’s public stockholders, against BTU, members of the BTU board, Amtech and the special purpose merger subsidiary. The Stockholder Actions were consolidated on December 4, 2014. The complaints generally alleged that, in connection with entering into the merger agreement, the BTU board of directors breached certain fiduciary duties owed to BTU's stockholders. The complaints sought various forms of declaratory and injunctive relief, as well as compensatory damages.
On February 18, 2016, the Delaware Court entered the Order approving the Amended Stipulation of Settlement. As a result, the Released Claims were dismissed with prejudice and without any admission of wrongdoing by any of the parties to the Stockholder Actions. Pursuant to the Amended Stipulation of Settlement, BTU, its insurer(s), or its successor(s) in interest are responsible for payment of fees and expenses in the amount of
$325,000
which were paid in full on April 1, 2016.
As described above, the Released Claims are limited solely to claims related to any disclosures (or lack thereof) to BTU’s stockholders concerning the merger and any fiduciary claims concerning the decision to enter into the merger. While we are currently unaware of any other pending or threatened litigation related to additional claims arising from the Stockholder Actions, any future claims are uncertain, so additional harm could potentially result to the Company from this litigation, which may cause the Company to incur substantial costs and divert management’s attention from operational matters.
Operating Leases –
The Company leases buildings, vehicles and equipment under operating leases. Rental expense under such operating leases was
$1.4 million
,
$1.2 million
, and
$1.0 million
in fiscal 2016, 2015 and 2014, respectively. As of September 30, 2016, future minimum rental commitments under non-cancelable operating leases with initial or remaining terms of
one
year or more totaled $
2.6 million
, of which
$1.2 million
,
$0.7 million
,
$0.4 million
,
$0.2 million
and
$0.1 million
is payable in fiscal 2017, 2018, 2019, 2020 and 2021, respectively, and none thereafter.
6. Major Customers and Foreign Sales
In fiscal 2016,
one
customer accounted for
11%
of net revenues. In fiscal 2015,
two
customers individually accounted for
15%
and
11%
of net revenues. In fiscal 2014,
two
customers individually accounted for
18%
and
11%
of net revenues.
Our net revenues for fiscal 2016, 2015 and 2014 were to customers in the following geographic regions:
|
|
|
|
|
|
|
|
|
|
|
Years Ended September 30,
|
|
2016
|
|
2015
|
|
2014
|
United States
|
17
|
%
|
|
24
|
%
|
|
21
|
%
|
Other
|
3
|
%
|
|
2
|
%
|
|
—
|
%
|
Total Americas
|
20
|
%
|
|
26
|
%
|
|
21
|
%
|
Taiwan
|
15
|
%
|
|
13
|
%
|
|
16
|
%
|
Malaysia
|
18
|
%
|
|
13
|
%
|
|
3
|
%
|
China
|
28
|
%
|
|
26
|
%
|
|
14
|
%
|
Other
|
7
|
%
|
|
8
|
%
|
|
12
|
%
|
Total Asia
|
68
|
%
|
|
60
|
%
|
|
45
|
%
|
Germany
|
3
|
%
|
|
5
|
%
|
|
16
|
%
|
Other
|
9
|
%
|
|
9
|
%
|
|
18
|
%
|
Total Europe
|
12
|
%
|
|
14
|
%
|
|
34
|
%
|
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
7. Business Segments
Following the Company's acquisition of BTU, an evaluation was conducted of the Company's organizational structure. Beginning with the second quarter of fiscal 2015, the Company made changes to its reportable segments. Prior period amounts have been revised to conform to the current period segment reporting structure. The Company’s
three
reportable segments are as follows:
Solar
- In the Company’s Solar segment, we are a leading supplier of thermal processing systems, including related automation, parts and services, to the solar/photovoltaic industry and also offer PECVD (plasma-enhanced chemical vapor deposition) equipment to the global solar market.
Semiconductor
- In the Company’s Semiconductor segment, 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.
Polishing
- In the Company's Polishing segment, the Company produces 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.
On December 24, 2014, the Company acquired a
51%
controlling interest in SoLayTec, and on January 30, 2015, the Company completed its acquisition of BTU. Beginning in the second quarter of 2015, SoLayTec’s business is included in the results for the solar segment, and BTU’s business is included in the results for the semiconductor segment. See Note 13, “Acquisitions”, for additional information with respect to the Company’s recent acquisitions.
Information concerning our business segments is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended September 30,
|
|
2016
|
|
2015
|
|
2014
|
|
(dollars in thousands)
|
Net revenue:
|
|
|
|
|
|
Solar*
|
$
|
60,946
|
|
|
$
|
56,689
|
|
|
$
|
36,069
|
|
Semiconductor
|
50,637
|
|
|
37,250
|
|
|
9,779
|
|
Polishing
|
8,725
|
|
|
10,944
|
|
|
10,653
|
|
|
$
|
120,308
|
|
|
$
|
104,883
|
|
|
$
|
56,501
|
|
Operating income (loss):
|
|
|
|
|
|
Solar*
|
$
|
(6,696
|
)
|
|
$
|
(5,056
|
)
|
|
$
|
(11,010
|
)
|
Semiconductor
|
3,904
|
|
|
(1,268
|
)
|
|
851
|
|
Polishing
|
1,588
|
|
|
2,250
|
|
|
2,805
|
|
Non-segment related
|
(6,704
|
)
|
|
(9,447
|
)
|
|
(5,735
|
)
|
|
$
|
(7,908
|
)
|
|
$
|
(13,521
|
)
|
|
$
|
(13,089
|
)
|
* 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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended September 30,
|
|
2016
|
|
2015
|
|
2014
|
|
(dollars in thousands)
|
Capital expenditures:
|
|
|
|
|
|
Solar
|
$
|
235
|
|
|
$
|
411
|
|
|
$
|
282
|
|
Semiconductor
|
692
|
|
|
136
|
|
|
110
|
|
Polishing
|
51
|
|
|
63
|
|
|
70
|
|
|
$
|
978
|
|
|
$
|
610
|
|
|
$
|
462
|
|
Depreciation and amortization expense:
|
|
|
|
|
|
Solar
|
$
|
2,014
|
|
|
$
|
2,940
|
|
|
$
|
2,236
|
|
Semiconductor
|
870
|
|
|
318
|
|
|
40
|
|
Polishing
|
90
|
|
|
99
|
|
|
134
|
|
|
$
|
2,974
|
|
|
$
|
3,357
|
|
|
$
|
2,410
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
2016
|
|
September 30,
2015
|
|
(dollars in thousands)
|
Identifiable assets:
|
|
|
|
Solar
|
$
|
42,962
|
|
|
$
|
45,717
|
|
Semiconductor
|
51,985
|
|
|
46,912
|
|
Polishing
|
4,819
|
|
|
5,793
|
|
Non-segment related
|
18,664
|
|
|
27,034
|
|
|
$
|
118,430
|
|
|
$
|
125,456
|
|
Goodwill:
|
|
|
|
Solar
|
$
|
5,328
|
|
|
$
|
5,344
|
|
Semiconductor
|
5,063
|
|
|
4,463
|
|
Polishing
|
728
|
|
|
728
|
|
|
$
|
11,119
|
|
|
$
|
10,535
|
|
8. Geographic Regions
The Company has operations in The Netherlands, United States, France and China. Revenues, operating income (loss) and identifiable assets by geographic region are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended September 30,
|
|
2016
|
|
2015
|
|
2014
|
|
(dollars in thousands)
|
Net revenue:
|
|
The Netherlands
|
$
|
52,189
|
|
|
$
|
46,982
|
|
|
$
|
31,779
|
|
United States
|
44,299
|
|
|
37,483
|
|
|
20,433
|
|
France
|
8,758
|
|
|
8,387
|
|
|
4,218
|
|
China
|
11,799
|
|
|
9,725
|
|
|
71
|
|
Other
|
3,263
|
|
|
2,306
|
|
|
—
|
|
|
$
|
120,308
|
|
|
$
|
104,883
|
|
|
$
|
56,501
|
|
|
|
|
|
|
|
Operating income (loss):
|
|
|
|
|
|
The Netherlands
|
$
|
(7,773
|
)
|
|
$
|
(9,069
|
)
|
|
$
|
(9,403
|
)
|
United States
|
(1,396
|
)
|
|
(5,541
|
)
|
|
(207
|
)
|
France
|
(783
|
)
|
|
(330
|
)
|
|
(611
|
)
|
China
|
1,530
|
|
|
986
|
|
|
(2,868
|
)
|
Other
|
514
|
|
|
433
|
|
|
—
|
|
|
$
|
(7,908
|
)
|
|
$
|
(13,521
|
)
|
|
$
|
(13,089
|
)
|
|
|
|
|
|
|
|
|
|
As of September 30,
|
|
|
|
2016
|
|
2015
|
Net long-lived assets
(excluding intangibles and goodwill)
|
|
|
|
|
|
The Netherlands
|
|
|
$
|
4,996
|
|
|
$
|
6,677
|
|
United States
|
|
|
10,171
|
|
|
10,162
|
|
France
|
|
|
241
|
|
|
346
|
|
China
|
|
|
552
|
|
|
576
|
|
|
|
|
$
|
15,960
|
|
|
$
|
17,761
|
|
9. Income Taxes
The components of income (loss) before provision for income taxes are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30,
|
|
2016
|
|
2015
|
|
2014
|
|
(dollars in thousands)
|
Domestic
|
$
|
2,100
|
|
|
$
|
94
|
|
|
$
|
278
|
|
Foreign
|
(7,550
|
)
|
|
(4,901
|
)
|
|
(13,327
|
)
|
|
$
|
(5,450
|
)
|
|
$
|
(4,807
|
)
|
|
$
|
(13,049
|
)
|
The components of the provision (benefit) for income taxes are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30,
|
|
2016
|
|
2015
|
|
2014
|
|
(dollars in thousands)
|
Current:
|
|
|
|
|
|
Domestic Federal
|
$
|
530
|
|
|
$
|
(320
|
)
|
|
$
|
370
|
|
Foreign
|
500
|
|
|
500
|
|
|
530
|
|
Foreign withholding taxes
|
280
|
|
|
1,240
|
|
|
—
|
|
Domestic state
|
110
|
|
|
—
|
|
|
80
|
|
Total current
|
1,420
|
|
|
1,420
|
|
|
980
|
|
|
|
|
|
|
|
Deferred:
|
|
|
|
|
|
Domestic Federal
|
1,680
|
|
|
720
|
|
|
(490
|
)
|
Foreign
|
—
|
|
|
(210
|
)
|
|
750
|
|
Domestic state
|
—
|
|
|
(20
|
)
|
|
—
|
|
Total deferred
|
1,680
|
|
|
490
|
|
|
260
|
|
Total provision
|
$
|
3,100
|
|
|
$
|
1,910
|
|
|
$
|
1,240
|
|
A reconciliation of actual income taxes to income taxes at the expected United States federal corporate income tax rate of
thirty-four percent
is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30,
|
|
2016
|
|
2015
|
|
2014
|
|
(dollars in thousands)
|
Tax benefit at the U.S. rate
|
$
|
(1,890
|
)
|
|
$
|
(1,630
|
)
|
|
$
|
(4,440
|
)
|
Effect of permanent book-tax differences
|
1,120
|
|
|
(1,570
|
)
|
|
30
|
|
State tax provision
|
110
|
|
|
(40
|
)
|
|
80
|
|
Valuation allowance for net deferred tax assets
|
2,690
|
|
|
2,490
|
|
|
3,900
|
|
Uncertain tax items
|
350
|
|
|
330
|
|
|
370
|
|
Foreign tax rate differential
|
1,050
|
|
|
1,890
|
|
|
1,000
|
|
Other items
|
(330
|
)
|
|
440
|
|
|
300
|
|
|
$
|
3,100
|
|
|
$
|
1,910
|
|
|
$
|
1,240
|
|
Deferred income taxes 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. The tax effects of temporary book-tax differences that give rise to significant portions of the deferred tax assets and deferred tax liability are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30,
|
|
2016
|
|
2015
|
|
2014
|
|
(dollars in thousands)
|
Deferred tax assets - current:
|
|
|
|
|
|
Capitalized inventory costs
|
$
|
270
|
|
|
$
|
340
|
|
|
$
|
230
|
|
Inventory write-downs
|
2,460
|
|
|
4,840
|
|
|
950
|
|
Accrued warranty
|
160
|
|
|
280
|
|
|
180
|
|
Deferred profits
|
1,180
|
|
|
1,180
|
|
|
1,460
|
|
Accruals and reserves not currently deductible
|
1,720
|
|
|
1,920
|
|
|
520
|
|
Deferred tax assets - current
|
$
|
5,790
|
|
|
$
|
8,560
|
|
|
$
|
3,340
|
|
Valuation allowance
|
(5,790
|
)
|
|
(6,510
|
)
|
|
(2,280
|
)
|
Deferred tax assets - current, net of valuation allowance
|
$
|
—
|
|
|
$
|
2,050
|
|
|
$
|
1,060
|
|
|
|
|
|
|
|
Deferred tax assets (liabilities)- non-current:
|
|
|
|
|
|
Stock option expense
|
$
|
890
|
|
|
$
|
680
|
|
|
$
|
670
|
|
Book vs. tax basis of acquired assets
|
(1,340
|
)
|
|
(1,350
|
)
|
|
(1,210
|
)
|
Federal net operating loss carryforwards
|
3,370
|
|
|
5,570
|
|
|
900
|
|
Foreign and state net operating losses
|
13,200
|
|
|
10,550
|
|
|
8,070
|
|
Book vs. tax depreciation and amortization
|
(2,200
|
)
|
|
(2,030
|
)
|
|
(10
|
)
|
Foreign tax credits
|
4,230
|
|
|
3,950
|
|
|
—
|
|
Other deferred tax assets
|
570
|
|
|
360
|
|
|
2,950
|
|
Total deferred tax assets - non-current
|
18,720
|
|
|
17,730
|
|
|
11,370
|
|
Valuation allowance
|
(18,520
|
)
|
|
(17,300
|
)
|
|
(10,070
|
)
|
Deferred tax assets (liabilities) - non-current, net of valuation allowance
|
$
|
200
|
|
|
$
|
430
|
|
|
$
|
1,300
|
|
Changes in the deferred tax valuation allowance are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30,
|
|
2016
|
|
2015
|
|
2014
|
|
(dollars in thousands)
|
Balance at the beginning of the year
|
$
|
23,810
|
|
|
$
|
12,350
|
|
|
$
|
8,450
|
|
Additions to valuation allowance
|
500
|
|
|
11,460
|
|
|
3,900
|
|
Balance at the end of the year
|
$
|
24,310
|
|
|
$
|
23,810
|
|
|
$
|
12,350
|
|
The deferred tax valuation allowance increased by
$0.5
million and
$11.5
million for the years ended September 30, 2016 and 2015, respectively. A significant portion of the 2015 increase is related to the acquisition of BTU. In assessing the realizability of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. The Company considers the scheduled reversal of deferred tax liabilities, projected future income, and tax planning strategies in making this assessment. We have established valuation allowances on substantially all net deferred tax assets, after considering all of the available objective evidence, both positive and negative, historical and prospective, with greater weight given to historical evidence, and determined it is not more likely than not that these assets will be realized.
The Company has federal net operating loss carryforwards of approximately
$14.0
million that expire at various times between 2024 and 2036. In addition, the Company has approximately
$3.6
million of foreign tax credits that expire at
various times through 2025. The utilization of those federal net operating losses and foreign tax carryforwards are limited to approximately
$0.8
million per year. The company also has foreign net operating loss carryforwards of approximately
$47.3
million which expire at various times through 2025. The Company also has approximately
$7.5
million of state net operating loss carryforwards.
The Company’s historical and continuing policy is that its undistributed foreign earnings are indefinitely reinvested and, accordingly, no related provision for U.S. federal and state income taxes has been provided on the undistributed foreign earnings at September 30, 2016. The amount of taxes attributable to these undistributed earnings is immaterial.
The Company applies the provisions of FASB Interpretation No. 48 (“FIN 48”), “Accounting for Uncertainty in Income Taxes”, (now codified as FASB ASC 740, “Income Tax”). In this regard, an uncertain tax position represents the Company's expected treatment of a tax position taken in a filed tax return, or planned to be taken in a future tax return, that has not been reflected in measuring income tax expense for financial reporting purposes. Approximately
$1.7
million of this total represents the amount that, if recognized, would favorably affect our effective income tax rate in future periods.
A reconciliation of the beginning and ending amount of our unrecognized tax benefits is summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30,
|
|
2016
|
|
2015
|
|
2014
|
|
(dollars in thousands)
|
Balance at beginning of the year
|
$
|
3,510
|
|
|
$
|
3,180
|
|
|
$
|
2,810
|
|
Additions related to tax positions taken in prior years
|
350
|
|
|
330
|
|
|
370
|
|
Reductions due to lapse of statute of limitations
|
—
|
|
|
—
|
|
|
—
|
|
Balance at the end of the year
|
$
|
3,860
|
|
|
$
|
3,510
|
|
|
$
|
3,180
|
|
We have classified all of our liabilities for uncertain tax positions as income taxes payable long-term. Income taxes long-term also includes other items, primarily withholding taxes that are not due until the related intercompany service fees are paid.
We report accrued interest and penalties related to unrecognized tax benefits in income tax expense. We recognized a net expense for interest and penalties of
$0.4 million
,
$0.3 million
, and
$0.4
million for fiscal years 2016, 2015 and 2014 respectively. Income taxes payable long-term on the Consolidated Balance Sheets includes a cumulative accrual for potential interest and penalties of
$2.3
million and
$1.8
million as of September 30, 2016 and 2015, respectively.
The Company does not expect that the amount of our tax reserves for uncertain tax positions will materially change in the next 12 months other than the continued accrual of interest and penalties.
The Company and one or more of its subsidiaries file income tax returns in The Netherlands, Germany, France, China and other foreign jurisdictions, as well as the U.S. and various states in the U.S. We have not signed any agreements with the Internal Revenue Service, any state or foreign jurisdiction to extend the statute of limitations for any fiscal year. As such, the number of open years is the number of years dictated by statute in each of the respective taxing jurisdictions, but generally is from
3
to
5
years.
These open years contain certain matters that could be subject to differing interpretations of applicable tax laws and regulations as they relate to the amount, timing, or inclusion of revenues and expenses, or the sustainability of income tax positions of the Company and its subsidiaries.
10. Restructuring Charges
The company recorded a net charge of
$0.6 million
for the year ended September 30, 2015, which is reported in restructuring and other charges in the consolidated statement of operations, for employee related costs, including costs for severance related to the BTU acquisition.
11. Selected Quarterly Data (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
Second Quarter
|
|
Third Quarter
|
|
Fourth Quarter
|
Fiscal Year 2016:
|
(in thousands, except per share amounts)
|
Revenue
|
$
|
22,074
|
|
|
$
|
22,483
|
|
|
$
|
33,342
|
|
|
$
|
42,409
|
|
Gross margin
|
$
|
5,955
|
|
|
$
|
6,001
|
|
|
$
|
9,631
|
|
|
$
|
12,476
|
|
Provision for income taxes
|
$
|
300
|
|
|
$
|
1,670
|
|
|
$
|
70
|
|
|
$
|
1,060
|
|
Net income (loss) attributable to Amtech Systems, Inc.
|
$
|
(4,015
|
)
|
|
$
|
(1,499
|
)
|
|
$
|
(1,209
|
)
|
|
$
|
(285
|
)
|
Comprehensive income (loss) attributable to Amtech Systems, Inc.
|
$
|
(4,550
|
)
|
|
$
|
(909
|
)
|
|
$
|
(1,483
|
)
|
|
$
|
(276
|
)
|
Net income (loss) per share attributable to Amtech Systems, Inc.:
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
$
|
(0.31
|
)
|
|
$
|
(0.11
|
)
|
|
$
|
(0.09
|
)
|
|
$
|
(0.02
|
)
|
Shares used in calculation
|
13,152
|
|
|
13,169
|
|
|
13,173
|
|
|
13,177
|
|
Diluted earnings per share
|
$
|
(0.31
|
)
|
|
$
|
(0.11
|
)
|
|
$
|
(0.09
|
)
|
|
$
|
(0.02
|
)
|
Shares used in calculation
|
13,152
|
|
|
13,169
|
|
|
13,173
|
|
|
13,177
|
|
|
|
|
|
|
|
|
|
Fiscal Year 2015:
|
(in thousands, except per share amounts)
|
Revenue
|
$
|
12,396
|
|
|
$
|
24,273
|
|
|
$
|
40,016
|
|
|
$
|
28,198
|
|
Gross margin
|
$
|
3,428
|
|
|
$
|
6,889
|
|
|
$
|
10,128
|
|
|
$
|
6,563
|
|
Provision for income taxes
|
$
|
180
|
|
|
$
|
170
|
|
|
$
|
290
|
|
|
$
|
1,270
|
|
Net income (loss) attributable to Amtech Systems, Inc.
|
$
|
(5,195
|
)
|
|
$
|
(2,321
|
)
|
|
$
|
(1,604
|
)
|
|
$
|
1,349
|
|
Comprehensive income (loss) attributable to Amtech Systems, Inc.
|
$
|
(6,247
|
)
|
|
$
|
(4,470
|
)
|
|
$
|
(1,344
|
)
|
|
$
|
1,414
|
|
Net income (loss) per share attributable to Amtech Systems, Inc.:
|
|
|
|
|
|
|
|
Basic earnings per share
|
$
|
(0.53
|
)
|
|
$
|
(0.19
|
)
|
|
$
|
(0.12
|
)
|
|
$
|
0.10
|
|
Shares used in calculation
|
9,854
|
|
|
11,997
|
|
|
13,103
|
|
|
13,150
|
|
Diluted earnings per share
|
$
|
(0.53
|
)
|
|
$
|
(0.19
|
)
|
|
$
|
(0.12
|
)
|
|
$
|
0.10
|
|
Shares used in calculation
|
9,854
|
|
|
11,997
|
|
|
13,103
|
|
|
13,259
|
|
|
|
|
|
|
|
|
|
12. Long-term Debt
In January 2015, the Company acquired
$7.2 million
of long-term debt as part of the BTU acquisition. The debt acquired is a mortgage note secured by its real property in Billerica, Massachusetts, and has a remaining balance of $
6.5 million
as of September 30, 2016. The debt was refinanced in September 2016 with an interest rate of
4.11%
through September 26, 2021, at which time the interest rate will be adjusted to a per annum fixed rate equal to the aggregate of the Federal Home Loan Board Five Year Classic Advance Rate plus
two hundred forty
basis points. The maturity date of the debt is September 26, 2023.
In December 2014, the Company acquired long term debt as part of the SoLayTec acquisition. During the year ended September 30, 2016, SoLayTec borrowed an additional
$1.1 million
. As of September 30, 2016 the debt has a remaining
balance of
$3.7
million. The debt has interest rates ranging from
4.50%
to
10%
and maturity dates ranging from fiscal 2017 to fiscal 2021.
Annual maturities relating to the Company's long-term debt as of September 30, 2016 are as follows:
|
|
|
|
|
|
Annual Maturities
|
|
(in thousands)
|
2017
|
$
|
1,134
|
|
2018
|
932
|
|
2019
|
1,065
|
|
2020
|
365
|
|
2021
|
382
|
|
Thereafter
|
6,353
|
|
Total
|
$
|
10,231
|
|
13. Acquisitions
Acquisition of BTU International, Inc.
On
January 30, 2015
, the Company completed its acquisition of BTU (the "Merger"). In connection with the Merger, each share of BTU common stock outstanding immediately prior to the effective time of the Merger, including BTU restricted stock units that vested immediately prior to the effective time of the Merger, was converted to
0.3291
shares of common stock of the Company. The Company issued
3,185,852
shares of Company common stock on the Merger date. Pursuant to the terms of the Merger Agreement, options to purchase BTU common stock held by BTU employees were assumed by the Company and converted into options to purchase shares of Company common stock on substantially the same terms and conditions as were applicable to such BTU stock options, with appropriate adjustments based upon the exchange ratio of
0.3291
to the exercise price and the number of shares of Company common stock subject to such stock option. As a result of the Merger, the company owns
100%
of the outstanding stock of BTU.
The following unaudited pro forma data has been prepared as if the acquisition of BTU occurred on October 1, 2013 and includes adjustments for depreciation expense, amortization of intangibles, and the effect of other purchase accounting adjustments. In addition, the unaudited pro forma consolidated results do not purport to project the future results of operations of the combined company nor do they reflect the expected realization of any cost savings associated with the acquisition.
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended (unaudited)
|
|
|
September 30, 2015
|
|
September 30, 2014
|
|
|
(dollars in thousands, except per share data)
|
Revenue, net
|
|
$
|
121,186
|
|
|
$
|
111,531
|
|
Net loss
|
|
$
|
(9,223
|
)
|
|
$
|
(15,586
|
)
|
Earnings per share available to Amtech stockholders:
|
|
|
|
|
Basic
|
|
$
|
(0.70
|
)
|
|
$
|
(1.21
|
)
|
Diluted
|
|
$
|
(0.70
|
)
|
|
$
|
(1.21
|
)
|
The Merger was an all-stock transaction. The following table summarizes the consideration transferred:
|
|
|
|
|
(In thousands, except per share amounts)
|
|
BTU common shares and restricted stock units exchanged
|
9,681
|
|
Exchange ratio
|
0.3291
|
|
Amtech common stock issued for consideration
|
3,186
|
|
Amtech common stock per share price on January 30, 2015
|
$
|
8.20
|
|
Consideration for BTU common shares and restricted stock units
|
$
|
26,125
|
|
Vested BTU stock options exchanged for Amtech stock options
|
$
|
500
|
|
Total fair value of consideration transferred
|
$
|
26,625
|
|
The following table summarizes the allocation of the consideration for the assets acquired and liabilities assumed on
January 30, 2015
, including the effects of measurement period adjustments recorded in fiscal 2016:
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
Initial Estimate
|
Adjustments
|
Final Allocation
|
Fair value of net tangible assets acquired
|
$
|
19,232
|
|
$
|
(600
|
)
|
$
|
18,632
|
|
Goodwill
|
4,463
|
|
600
|
|
5,063
|
|
Identifiable intangible assets
|
2,930
|
|
—
|
|
2,930
|
|
Total consideration allocated
|
$
|
26,625
|
|
$
|
—
|
|
$
|
26,625
|
|
Refer to Note 1 "Summary of Significant Accounting Policies" for additional information on Goodwill and Intangible Assets.
Under the guidance on accounting for business combinations, merger and integration costs are not included as components of consideration transferred but are accounted for as expenses in the period in which the costs are incurred. Transaction-related expenses of
$4.0
million and
$1.3
million for fiscal 2015 and 2014, respectively, are included in the Selling, General and Administrative line in the Consolidated Statements of Operations.
Acquisition of SoLayTec B.V.
On December 24, 2014, the Company expanded our participation in the solar market by acquiring a
51%
controlling interest in SoLayTec, which provides ALD systems used in high efficiency solar cells, for a total purchase price consideration of
$1.9 million
. The Company consolidated the results of operations for SoLayTec beginning on December 24, 2014, the effective date of the acquisition, which were not material to our consolidated statement of operations for fiscal 2015.
14. Deconsolidation
In fiscal 2015, the Company deconsolidated Kingstone, eliminating the assets, liabilities and non-controlling interests recorded for Kingstone from the Company's Consolidated Balance Sheet, thereby reducing its ownership to
15%
of the Hong Kong holding company. In fiscal 2015, the Company recorded a gain of
$8.8 million
as a result of the deconsolidation. The gain was computed as follows: the fair value of consideration received, plus the fair values of the retained non-controlling interest and the sales and service rights, less the carrying value of Kingstone's net assets. Based on the terms of the transaction agreements, in fiscal 2016, the Company received a payment of
$4.9 million
from Kingstone for its exclusive sale and service rights in the solar ion implant equipment. The Company recognized a gain on the sale of
$2.6 million
for the year ended September 30, 2016, which is included in our Consolidated Statement of Operations in Gain on sale of other assets.
The Company's remaining investment in Kingstone is accounted for using the equity method for periods subsequent to the deconsolidation due to the Company's ability to exert significant influence over the financial and operating policies of Kingstone, primarily through our representation on the board of directors. See Note 15 - Investment for additional details.
15. Investments
As discussed in Note 14 "Deconsolidation", on September 16, 2015, the Company deconsolidated Kingstone, reducing its ownership to
15%
of the Hong Kong holding company. The Company's investment in Kingstone is accounted for using the equity method for periods subsequent to the deconsolidation due to the Company's ability to exert significant influence over the financial and operating policies of Kingstone, primarily through our representation on the board of directors. The Company recognizes its portion of net income or losses on a one-quarter lag. The resulting equity method investment was initially recorded at fair value at
$2.7 million
using the value the third party purchaser placed on their investment in Kingstone Shanghai, a Level 2 input in the fair value hierarchy. The carrying value of the equity method investment in Kingstone was
$3.0 million
and
$2.7 million
as of September 30, 2016 and 2015, respectively.
As of September 30, 2016, the Company's carrying value of Kingstone exceeded its share of the underlying equity in the net assets by approximately
$2.7 million
. In accordance with ASC Topic 323,
Investments
-
Equity Method,
the difference
(the “ basis difference”) between the initial fair value of the Company’s investment and the proportional interest in the underlying net assets of Kingstone was accounted for using the acquisition method of accounting, which requires that the basis difference be allocated to the identifiable assets and liabilities of Kingstone at fair value and based upon the Company’s proportionate ownership. Determining the fair value of assets and liabilities is judgmental in nature and involves the use of significant estimates and assumptions. During the fourth quarter of 2016, the Company completed its valuation of the identifiable assets to which the basis is attributable and recorded amortization based on this valuation for the year ended September 30, 2016.
16. Related Party Transactions
Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Parties are also considered to be related if they are subject to common control or significant influence, such as a family member or relative, stockholder, or a related corporation.
In the fourth quarter of 2015, the Company deconsolidated Kingstone, reducing its ownership to
15%
of Kingstone Hong Kong , the Hong Kong holding company. Upon the deconsolidation, Kingstone became a related party of the Company. Based on the terms of the transaction agreements in the second quarter of 2016, the Company received a payment of
$4.9 million
from Kingstone for its exclusive sale and service rights in the solar ion implant equipment. The Company recognized a gain on the sale of
$2.6 million
for the year ended September 30, 2016, which is included in our Consolidated Statement of Operations in Gain on sale of other assets. At September 30, 2016, the Company's related accounts receivable due from Kingstone were
$0.3 million
, which are included in Accounts Receivable on the Consolidated Balance Sheet.
As of September 30, 2016, SoLayTec has borrowed approximately
$1.1 million
from its shareholder, TNO Technostarters B.V.. The loans have varying interest rates from
9.5%
to
12.5%
and matures in 2021.