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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended: December 31, 2020

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________________ to ________________

Commission File Number: 0-11412

 

AMTECH SYSTEMS, INC.

 

(Exact name of registrant as specified in its charter)

 

Arizona

 

86-0411215

(State or other jurisdiction of

 

(I.R.S. Employer

incorporation or organization)

 

Identification No.)

 

 

 

131 South Clark Drive, Tempe, Arizona

 

85281

(Address of principal executive offices)

 

(Zip Code)

 

Registrant’s telephone number, including area code: 480-967-5146

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Common Stock, par value $0.01 per share

 

ASYS

 

NASDAQ.Global Select Market

Indicate by a check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.:

 

Large Accelerated Filer

 

 

Accelerated Filer

Non-Accelerated Filer

 

 

Smaller Reporting Company

 

 

 

 

Emerging Growth Company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

At February 5, 2021, there were outstanding 14,141,122 shares of Common Stock.

 

 


 

AMTECH SYSTEMS, INC. AND SUBSIDIARIES

TABLE OF CONTENTS

 

 

Page

Cautionary Statement Regarding Forward-Looking Statements

3

PART I. FINANCIAL INFORMATION

4

Item 1. Condensed Consolidated Financial Statements

4

Condensed Consolidated Balance Sheets December 31, 2020 (Unaudited) and September 30, 2020

4

Condensed Consolidated Statements of Operations (Unaudited) Three Months Ended December 31, 2020 and 2019

5

Condensed Consolidated Statements of Comprehensive Income (Unaudited) Three Months Ended December 31, 2020 and 2019

6

Condensed Consolidated Statements of Shareholders’ Equity (Unaudited) Three Months Ended December 31, 2020 and 2019

7

Condensed Consolidated Statements of Cash Flows (Unaudited) Three Months Ended December 31, 2020 and 2019

8

Notes to Condensed Consolidated Financial Statements (Unaudited)

9

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

19

Overview

19

Results of Operations

21

Liquidity and Capital Resources

24

Off-Balance Sheet Arrangements

25

Contractual Obligations

25

Critical Accounting Policies

25

Impact of Recently Issued Accounting Pronouncements

26

Item 3. Quantitative and Qualitative Disclosures About Market Risk

26

Item 4. Controls and Procedures

26

PART II. OTHER INFORMATION

27

Item 1. Legal Proceedings

27

Item 1A. Risk Factors

27

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

27

Item 3. Defaults Upon Senior Securities

27

Item 4. Mine Safety Disclosures

27

Item 5. Other Information

27

Item 6. Exhibits

28

SIGNATURES

29

 

2


 

 

Cautionary Statement Regarding Forward-Looking Statements

 

Unless otherwise indicated, the terms “Amtech,” the “Company,” “we,” “us” and “our” refer to Amtech Systems, Inc. together with its subsidiaries.

 

Our discussion and analysis in this Quarterly Report on Form 10-Q, our 2020 Annual Report on Form 10-K, our other reports that we file with the Securities and Exchange Commission (the “SEC”), our press releases and in public statements of our officers and corporate spokespersons contain “forward-looking” statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Private Securities Litigation Reform Act of 1995. Forward-looking statements give our or our officers’ current expectations or forecasts of future events. You can identify these statements by the fact that they do not relate strictly to historical or current events. We have tried, wherever possible, to identify such statements by using words such as “may,” “plan,” “anticipate,” “seek,” “will,” “expect,” “intend,” “estimate,” “believe,” “continue,” “predict,” “potential,” “project,” “should,” “would,” “could,” “likely,” “future,” “target,” “forecast,” “goal,” “observe,” and “strategy” or the negative thereof or variations thereon or similar terminology relating to uncertainty of future events or outcomes. Some factors that could cause actual results to differ materially from those anticipated include, among others, future economic conditions, including changes in the markets in which we operate; changes in demand for our services and products; our revenue and operating performance; difficulties in successfully executing our growth initiatives; difficulties in executing on our strategic efforts with respect to our silicon carbide/polishing business segment; the effects of competition in the markets in which we operate, including the adverse impact of competitive product announcements or new entrants into our markets and transfers of resources by competitors into our markets; the cyclical nature of the semiconductor industry; pricing and gross profit pressures; control of costs and expenses; risks associated with new technologies and the impact on our business; legislative, regulatory, and competitive developments in markets in which we operate; possible future claims, litigation or enforcement actions and the results of any such claim, litigation proceeding, or enforcement action; business interruptions, including those related to the COVID-19 pandemic; the potential impacts of the COVID-19 pandemic and any future pandemic on our business operations, financial results and financial position; the severity, magnitude and duration of the COVID-19 pandemic, including impacts of the pandemic and of businesses’ and governments’ responses to the pandemic on our operations and personnel; and other circumstances and risks identified in this Quarterly Report or referenced from time to time in our filings with the SEC. These and many other factors could affect Amtech’s future operating results and financial condition and could cause actual results to differ materially from expectations based on forward-looking statements made in this document or elsewhere by Amtech or on its behalf.

 

You should not place undue reliance on these forward-looking statements. We cannot guarantee that any forward-looking statement will be realized, although we believe that the expectations reflected in the forward-looking statements are reasonable as of the date of this Quarterly Report. Achievement of future results is subject to events out of our control, risks, uncertainties and potentially inaccurate assumptions. The Annual Report on Form 10-K that we filed with the SEC for the year ended September 30, 2020 listed various important factors that could affect Amtech’s future operating results and financial condition and could cause actual results to differ materially from historical results and expectations based on forward-looking statements made in this document or elsewhere by Amtech or on its behalf. These factors can be found under the heading “Item 1A. Risk Factors” in the Annual Report on Form 10-K and investors should refer to them as well as the additional risk factors identified in this Quarterly Report. Because it is not possible to predict or identify all such factors, any such list cannot be considered a complete set of all potential risks or uncertainties.

 

The Company undertakes no obligation to update or publicly revise any forward-looking statement whether as a result of new information, future developments or otherwise. All subsequent written or oral forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by this paragraph. You are advised, however, to consult any further disclosures we make on related subjects in our subsequently filed Form 10-Q and Form 8-K reports and our other filings with the SEC. As noted above, we provide a cautionary discussion of risks, uncertainties and possibly inaccurate assumptions relevant to our business under “Item 1A. Risk Factors” of our Annual Report on Form 10-K. We note these factors for investors as permitted by the Private Securities Litigation Reform Act of 1995. You should understand it is not possible to predict or identify all such factors.

3


 

PART I. FINANCIAL INFORMATION

Item  1.

Condensed Consolidated Financial Statements

AMTECH SYSTEMS, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(in thousands, except share data)

 

 

 

December 31,

2020

 

 

September 30,

2020

 

Assets

 

(Unaudited)

 

 

 

 

 

Current Assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

45,614

 

 

$

45,070

 

Accounts receivable (less allowance for doubtful accounts of $169 and $159 at

   December 31, 2020, and September 30, 2020, respectively)

 

 

13,940

 

 

 

11,243

 

Inventories

 

 

16,616

 

 

 

17,277

 

Income taxes receivable

 

 

1,362

 

 

 

1,362

 

Other current assets

 

 

1,501

 

 

 

1,617

 

Total current assets

 

 

79,033

 

 

 

76,569

 

Property, Plant and Equipment - Net

 

 

11,952

 

 

 

11,995

 

Right-of-Use Assets - Net

 

 

5,155

 

 

 

5,124

 

Intangible Assets - Net

 

 

543

 

 

 

609

 

Goodwill - Net

 

 

6,633

 

 

 

6,633

 

Deferred Income Taxes - Net

 

 

566

 

 

 

566

 

Other Assets

 

 

645

 

 

 

602

 

Total Assets

 

$

104,527

 

 

$

102,098

 

 

 

 

 

 

 

 

 

 

Liabilities and Shareholders’ Equity

 

 

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

 

 

Accounts payable

 

$

3,414

 

 

$

2,676

 

Accrued compensation and related taxes

 

 

2,406

 

 

 

2,066

 

Accrued warranty expense

 

 

350

 

 

 

380

 

Other accrued liabilities

 

 

719

 

 

 

751

 

Current maturities of long-term debt

 

 

384

 

 

 

380

 

Contract liabilities

 

 

1,156

 

 

 

1,224

 

Total current liabilities

 

 

8,429

 

 

 

7,477

 

Long-Term Debt

 

 

4,701

 

 

 

4,798

 

Long-Term Lease Liability

 

 

5,090

 

 

 

5,064

 

Income Taxes Payable

 

 

3,274

 

 

 

3,240

 

Total Liabilities

 

 

21,494

 

 

 

20,579

 

Commitments and Contingencies

 

 

 

 

 

 

 

 

Shareholders’ Equity

 

 

 

 

 

 

 

 

Preferred stock; 100,000,000 shares authorized; none issued

 

 

 

 

 

 

Common stock; $0.01 par value; 100,000,000 shares authorized; shares

   issued and outstanding: 14,091,422 and 14,063,172 at December 31, 2020

   and September 30, 2020, respectively

 

 

141

 

 

 

141

 

Additional paid-in capital

 

 

124,635

 

 

 

124,435

 

Accumulated other comprehensive loss

 

 

(51

)

 

 

(646

)

Retained deficit

 

 

(41,692

)

 

 

(42,411

)

Total shareholders’ equity

 

 

83,033

 

 

 

81,519

 

Total Liabilities and Shareholders’ Equity

 

$

104,527

 

 

$

102,098

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

4


 

AMTECH SYSTEMS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(Unaudited)

(in thousands, except per share data)

 

 

 

Three Months Ended December 31,

 

 

 

2020

 

 

2019

 

Revenues, net of returns and allowances

 

$

17,975

 

 

$

20,692

 

Cost of sales

 

 

10,463

 

 

 

12,518

 

Gross profit

 

 

7,512

 

 

 

8,174

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

 

5,213

 

 

 

5,915

 

Research, development and engineering

 

 

1,245

 

 

 

622

 

Operating income

 

 

1,054

 

 

 

1,637

 

Loss on sale of subsidiary

 

 

 

 

 

(2,793

)

Interest expense and other, net

 

 

(255

)

 

 

(70

)

Income (loss) from continuing operations before

   income taxes

 

 

799

 

 

 

(1,226

)

Income tax provision

 

 

80

 

 

 

41

 

Income (loss) from continuing operations, net of tax

 

 

719

 

 

 

(1,267

)

Loss from discontinued operations, net of tax

 

 

 

 

 

(665

)

Net income (loss)

 

$

719

 

 

$

(1,932

)

 

 

 

 

 

 

 

 

 

Income (Loss) Per Basic Share:

 

 

 

 

 

 

 

 

Basic income (loss) per share from continuing

   operations

 

$

0.05

 

 

$

(0.09

)

Basic loss per share from discontinued

   operations

 

$

 

 

$

(0.05

)

Net income (loss) per basic share

 

$

0.05

 

 

$

(0.14

)

 

 

 

 

 

 

 

 

 

Income (Loss) Per Diluted Share:

 

 

 

 

 

 

 

 

Diluted income (loss) per share from continuing

   operations

 

$

0.05

 

 

$

(0.09

)

Diluted loss per share from discontinued

   operations

 

$

 

 

$

(0.05

)

Net income (loss) per diluted share

 

$

0.05

 

 

$

(0.14

)

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding - basic

 

 

14,072

 

 

 

14,290

 

Weighted average shares outstanding - diluted

 

 

14,117

 

 

 

14,290

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

5


 

AMTECH SYSTEMS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)

(in thousands)

 

 

 

Three Months Ended December 31,

 

 

 

2020

 

 

2019

 

Net income (loss)

 

$

719

 

 

$

(1,932

)

Foreign currency translation adjustment

 

 

595

 

 

 

1,081

 

Reclassification adjustment for net foreign currency

   translation losses included in net loss

 

 

 

 

 

1,592

 

Comprehensive income

 

$

1,314

 

 

$

741

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

6


 

AMTECH SYSTEMS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Shareholders’ Equity

(Unaudited)

(in thousands)

 

 

 

Common Stock

 

 

 

 

 

 

Accumulated

Other

 

 

Retained

Earnings

 

 

Total

 

 

 

Shares

 

 

Par Value

 

 

Additional Paid-

In Capital

 

 

Comprehensive

Income (Loss)

 

 

(Accumulated

Deficit)

 

 

Shareholders'

Equity

 

Balance at September 30, 2019

 

 

14,269

 

 

$

143

 

 

$

125,098

 

 

$

(11,233

)

 

$

(26,556

)

 

$

87,452

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,932

)

 

 

(1,932

)

Translation adjustment

 

 

 

 

 

 

 

 

 

 

 

2,673

 

 

 

 

 

 

2,673

 

Stock compensation expense

 

 

 

 

 

 

 

 

68

 

 

 

 

 

 

 

 

 

68

 

Stock options exercised

 

 

117

 

 

 

1

 

 

 

700

 

 

 

 

 

 

 

 

 

701

 

Balance at December 31, 2019

 

 

14,386

 

 

$

144

 

 

$

125,866

 

 

$

(8,560

)

 

$

(28,488

)

 

$

88,962

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at September 30, 2020

 

 

14,063

 

 

$

141

 

 

$

124,435

 

 

$

(646

)

 

$

(42,411

)

 

$

81,519

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

719

 

 

 

719

 

Translation adjustment

 

 

 

 

 

 

 

 

 

 

 

595

 

 

 

 

 

 

595

 

Stock compensation expense

 

 

 

 

 

 

 

 

65

 

 

 

 

 

 

 

 

 

65

 

Stock options exercised

 

 

28

 

 

 

 

 

 

135

 

 

 

 

 

 

 

 

 

135

 

Balance at December 31, 2020

 

 

14,091

 

 

$

141

 

 

$

124,635

 

 

$

(51

)

 

$

(41,692

)

 

$

83,033

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

7


 

AMTECH SYSTEMS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)

 

 

 

Three Months Ended December 31,

 

 

 

2020

 

 

2019

 

Operating Activities

 

 

 

 

 

 

 

 

Net income (loss)

 

$

719

 

 

$

(1,932

)

Adjustments to reconcile net income (loss) to net cash provided by (used in)

   operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

325

 

 

 

406

 

Write-down of inventory

 

 

48

 

 

 

311

 

Deferred income taxes

 

 

 

 

 

784

 

Non-cash share-based compensation expense

 

 

65

 

 

 

68

 

Loss on sale of subsidiary

 

 

 

 

 

2,793

 

Provision for (reversal of) allowance for doubtful accounts, net

 

 

5

 

 

 

(59

)

Other, net

 

 

3

 

 

 

13

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(2,702

)

 

 

3,296

 

Inventories

 

 

613

 

 

 

1,025

 

Other assets

 

 

20

 

 

 

(1,458

)

Accounts payable

 

 

738

 

 

 

(1,983

)

Accrued income taxes

 

 

34

 

 

 

(1,616

)

Accrued and other liabilities

 

 

304

 

 

 

(486

)

Contract liabilities

 

 

(68

)

 

 

(1,330

)

Net cash provided by (used in) operating activities

 

 

104

 

 

 

(168

)

Investing Activities

 

 

 

 

 

 

 

 

Purchases of property, plant and equipment

 

 

(198

)

 

 

(173

)

Net cash disposed of in sale of subsidiary

 

 

 

 

 

(647

)

Net cash used in investing activities

 

 

(198

)

 

 

(820

)

Financing Activities

 

 

 

 

 

 

 

 

Proceeds from the exercise of stock options

 

 

135

 

 

 

701

 

Payments on long-term debt

 

 

(93

)

 

 

(103

)

Net cash provided by financing activities

 

 

42

 

 

 

598

 

Effect of Exchange Rate Changes on Cash, Cash Equivalents and

   Restricted Cash

 

 

596

 

 

 

1,141

 

Net Increase in Cash, Cash Equivalents and Restricted Cash

 

 

544

 

 

 

751

 

Cash, Cash Equivalents and Restricted Cash, Beginning of Period*

 

 

45,070

 

 

 

59,134

 

Cash, Cash Equivalents and Restricted Cash, End of Period*

 

$

45,614

 

 

$

59,885

 

 

*

Includes Cash, Cash Equivalents and Restricted Cash that are included in Held-For-Sale Assets on the Condensed Consolidated Balance Sheets for periods prior to January 22, 2020.

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

 

8


 

 

AMTECH SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED DECEMBER 31, 2020 AND 2019

(UNAUDITED)

 

1.  Basis of Presentation and Significant Accounting Policies

 

Nature of Operations and Basis of Presentation – Amtech Systems, Inc. (the “Company,” “Amtech,” “we,” “our” or “us”) is a leading, global manufacturer of capital equipment, including thermal processing and wafer polishing, and related consumables used in fabricating semiconductor devices, such as silicon carbide (SiC) and silicon power devices, analog and discrete devices, electronic assemblies and light-emitting diodes (LEDs). We sell these products to semiconductor device and module manufacturers worldwide, particularly in Asia, North America and Europe.

 

We serve niche markets in industries that are experiencing technological advances, and which historically have been very cyclical. Therefore, future profitability and growth depend on our ability to develop or acquire and market profitable new products and on our ability to adapt to cyclical trends.

 

In the second quarter of fiscal 2019, we began the process to divest our solar business. As such, we have reported the results of the Solar segment as discontinued operations in our Condensed Consolidated Statements of Operations. These divestitures were completed in the second quarter of fiscal 2020. For additional information on the divestitures, see Note 11. For additional information on our segments, see Note 9.

 

The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”), and consequently do not include all disclosures normally required by accounting principles generally accepted in the United States of America. In the opinion of management, the accompanying unaudited interim condensed consolidated financial statements contain all adjustments necessary, all of which are of a normal and recurring nature, to present fairly our financial position, results of operations and cash flows. Certain information and note disclosures normally included in financial statements have been condensed or omitted pursuant to the rules and regulations of the SEC. The condensed balance sheet at September 30, 2020, 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. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended September 30, 2020.

 

Our fiscal year is from October 1 to September 30. Unless otherwise stated, references to the years 2021 and 2020 relate to the fiscal year ending September 30, 2021 and the fiscal year ended September 30, 2020, respectively.

 

The consolidated results of operations for the three months ended December 31, 2020, are not necessarily indicative of the results to be expected for the full fiscal year.

 

Principles of Consolidation – The consolidated financial statements include the accounts of the Company and our wholly-owned subsidiaries.  All significant intercompany balances 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.

9


 

 

Reclassifications – Certain reclassifications have been made to prior year financial statements to conform to the current year presentation.  These reclassifications had no effect on the previously reported consolidated financial statements for any period.

 

Divestitures – Significant accounting policies associated with a decision to dispose of a business are discussed below:

 

Discontinued Operations – A business is classified as discontinued operations if the disposal represents a strategic shift that will have a major effect on operations or financial results and meets the criteria to be classified as held for sale or is disposed of by sale or otherwise. Significant judgments are involved in determining whether a business meets the criteria for discontinued operations reporting and the period in which these criteria are met. If a business is reported as a discontinued operation, the results of operations through the date of sale, including any gain or loss recognized on the disposition, are presented on a separate line of the Condensed Consolidated Statements of Operations. Interest on debt directly attributable to the discontinued operation is allocated to discontinued operations.

 

Assets Held for Sale – An asset or business is classified as held for sale when (i) management commits to a plan to sell and it is actively marketed; (ii) it is available for immediate sale and the sale is expected to be completed within one year; and (iii) it is unlikely significant changes to the plan will be made or that the plan will be withdrawn. In isolated instances, assets held for sale may exceed one year due to events or circumstances beyond our control. The assets and related liabilities are aggregated and reported on separate lines of the Condensed Consolidated Balance Sheets.

 

Shipping Expense – Shipping and handling fees associated with inbound and outbound freight are expensed as incurred and included in selling, general and administrative expenses. Shipping expense is immaterial in all periods presented.

 

Research, Development and Engineering Expense – The table below shows gross research and development expenses and grants earned, in thousands:

 

 

 

Three Months Ended December 31,

 

 

 

2020

 

 

2019

 

Research, development and engineering

 

$

1,245

 

 

$

763

 

Grants earned

 

 

 

 

 

(141

)

Net research, development and engineering

 

$

1,245

 

 

$

622

 

 

Concentrations of Credit Risk – Our customers consist of semiconductor manufacturers worldwide, as well as the lapping and polishing marketplace. Financial instruments that potentially subject us to significant concentrations of credit risk consist principally of cash and trade accounts receivable. 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.

 

As of December 31, 2020, three Semiconductor segment customers individually represented 16%, 14% and 13% of accounts receivable.  As of September 30, 2020, two Semiconductor customers individually represented 11% and 10% of accounts receivable.

 

We maintain our cash and cash equivalents in multiple financial institutions. Balances in the United States, which account for approximately 88% and 89% of total cash balances as of December 31, 2020 and September 30, 2020, respectively, are primarily invested in U.S. Treasuries or are in financial institutions insured by the Federal Deposit Insurance Corporation (“FDIC”). The remainder of our cash is maintained with financial institutions with reputable credit in China, the United Kingdom, Singapore and Malaysia.  We maintain cash in bank accounts in amounts which at times may exceed federally insured limits. We have not experienced any losses on such accounts.

 

10


 

 

Refer to Note 10 to Condensed Consolidated Financial Statements for information regarding major customers, foreign sales and revenue in other countries subject to fluctuation in foreign currency exchange rates.

 

Impact of Recently Issued Accounting Pronouncements

 

There have been no material changes or additions to the recently issued accounting standards other than those previously reported in Note 1 to our Consolidated Financial Statements in Part II, Item 8 of our Annual Report on Form 10-K for the year ended September 30, 2020 that affect or may affect our consolidated financial statements.

 

 

2.  Contracts with Customers

 

The components of contract liabilities are as follows, in thousands:

 

 

 

December 31,

2020

 

 

September 30,

2020

 

Customer deposits

 

$

1,156

 

 

$

1,224

 

Contract liabilities

 

$

1,156

 

 

$

1,224

 

 

 

3.  Leases

 

We lease office space, buildings, land, vehicles and equipment. Lease agreements with an initial term of 12 months or less are not recorded on the balance sheet.  Instead, we recognize the lease expense as incurred over the lease term.   

 

Certain lease agreements include one or more options to renew, with renewal terms that can extend the lease term from one to five years. The exercise of lease renewal options is at our sole discretion. Some agreements also include options to purchase the leased property. The estimated life of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise.  

 

Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

 

Significant Accounting Policy

 

We determine if a contract or arrangement is, or contains, a lease at inception.  Balances related to operating leases are included in right-of-use (“ROU”) assets in our Condensed Consolidated Balance Sheets.  Balances related to financing leases are immaterial and are included in property and equipment, other current liabilities, and long-term lease liability in our Condensed Consolidated Balance Sheets.  ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease.  

 

ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term.  As none of our leases provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.  The ROU asset includes any prepaid lease payments and additional direct costs and excludes lease incentives.  Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option.  

 

11


 

 

The following table provides information about the financial statement classification of our lease balances reported within the Condensed Consolidated Balance Sheets as of December 31, 2020 and September 30, 2020, in thousands:

 

 

 

December 31,

2020

 

 

September 30,

2020

 

Assets

 

 

 

 

 

 

 

 

Operating lease assets

 

$

5,155

 

 

$

5,124

 

Finance lease assets

 

 

23

 

 

 

26

 

Total lease assets

 

$

5,178

 

 

$

5,150

 

Liabilities

 

 

 

 

 

 

 

 

Current

 

 

 

 

 

 

 

 

Operating lease liabilities

 

$

131

 

 

$

113

 

Finance lease liabilities

 

 

10

 

 

 

11

 

Non-current

 

 

 

 

 

 

 

 

Operating lease liabilities

 

 

5,077

 

 

 

5,048

 

Finance lease liabilities

 

 

13

 

 

 

16

 

Total lease liabilities

 

$

5,231

 

 

$

5,188

 

 

The following table provides information about the financial statement classification of our lease expenses reported in the Condensed Consolidated Statements of Operations for the three months ended December 31, 2020 and 2019, in thousands:

 

 

 

 

 

Three Months Ended December 31,

 

Lease cost

 

Classification

 

2020

 

 

2019

 

Operating lease cost

 

Cost of sales

 

$

71

 

 

$

63

 

Operating lease cost

 

Selling, general and administrative expenses

 

 

48

 

 

 

13

 

Finance lease cost

 

Cost of sales

 

 

2

 

 

 

5

 

Finance lease cost

 

Selling, general and administrative expenses

 

 

2

 

 

 

2

 

Short-term lease cost

 

Cost of sales

 

 

27

 

 

 

 

Total lease cost

 

 

 

$

150

 

 

$

83

 

 

Future minimum lease payments under non-cancelable leases as of December 31, 2020 are as follows, in thousands:

 

 

 

Operating leases

 

 

Finance Leases

 

 

Total

 

Remainder of 2021

 

$

265

 

 

$

8

 

 

$

273

 

2022

 

 

349

 

 

 

8

 

 

 

357

 

2023

 

 

336

 

 

 

6

 

 

 

342

 

2024

 

 

315

 

 

 

2

 

 

 

317

 

2025

 

 

298

 

 

 

 

 

 

298

 

Thereafter

 

 

6,944

 

 

 

 

 

 

6,944

 

Total lease payments

 

 

8,507

 

 

 

24

 

 

 

8,531

 

Less:  Interest

 

 

3,299

 

 

 

1

 

 

 

3,300

 

Present value of lease liabilities

 

 

5,208

 

 

 

23

 

 

$

5,231

 

 

Operating lease payments include $3.9 million related to options to extend lease terms that are reasonably certain of being exercised.

 

12


 

 

The following table provides information about the remaining lease terms and discount rates applied as of December 31, 2020:

 

 

 

December 31,

2020

 

Weighted average remaining lease term

 

 

 

 

Operating leases

 

23.60 years

 

Finance leases

 

2.69 years

 

Weighted average discount rate

 

 

 

 

Operating leases

 

 

4.17

%

Finance leases

 

 

4.17

%

 

 

4.  Earnings Per Share

 

Basic earnings per share (“EPS”) is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the period. Diluted EPS is computed similarly to basic EPS except that the denominator is increased to include the number of additional common shares that would have been outstanding if potentially dilutive common shares had been issued. In the case of a net loss, diluted earnings per share is calculated in the same manner as basic EPS.

 

For the three months ended December 31, 2020 and 2019, options for 471,000 and 703,000 weighted average shares, respectively, were excluded from the diluted EPS calculations because they were anti-dilutive. These shares could become dilutive in the future.

 

A reconciliation of the denominators of the basic and diluted EPS calculations follows (in thousands, except per share amounts):

 

 

 

Three Months Ended December 31,

 

 

 

2020

 

 

2019

 

Numerator:

 

 

 

 

 

 

 

 

Net income (loss) from continuing operations

 

$

719

 

 

$

(1,267

)

Net loss from discontinued operations

 

$

 

 

$

(665

)

Net income (loss)

 

$

719

 

 

$

(1,932

)

 

 

 

 

 

 

 

 

 

Denominator:

 

 

 

 

 

 

 

 

Weighted-average shares used to compute basic EPS

 

 

14,072

 

 

 

14,290

 

Common stock equivalents (1)

 

 

45

 

 

 

 

Weighted-average shares used to compute diluted EPS

 

 

14,117

 

 

 

14,290

 

 

 

 

 

 

 

 

 

 

Basic income (loss) per share from continuing operations

 

$

0.05

 

 

$

(0.09

)

Basic loss per share from discontinued operations

 

$

 

 

$

(0.05

)

Net income (loss) per basic share

 

$

0.05

 

 

$

(0.14

)

 

 

 

 

 

 

 

 

 

Diluted income (loss) per share from continuing operations

 

$

0.05

 

 

$

(0.09

)

Diluted loss per share from discontinued operations

 

$

 

 

$

(0.05

)

Net income (loss) per diluted share

 

$

0.05

 

 

$

(0.14

)

 

(1)

The number of common stock equivalents is calculated using the treasury method and the average market price during the period.

13


 

 

 

5.  Inventory

 

The components of inventories are as follows, in thousands:

 

 

 

December 31,

2020

 

 

September 30,

2020

 

Purchased parts and raw materials

 

$

12,824

 

 

$

14,530

 

Work-in-process

 

 

3,593

 

 

 

3,074

 

Finished goods

 

 

4,046

 

 

 

3,942

 

 

 

 

20,463

 

 

 

21,546

 

Excess and obsolete reserves

 

 

(3,847

)

 

 

(4,269

)

 

 

$

16,616

 

 

$

17,277

 

 

6.  Equity and Stock-Based Compensation

 

Stock-based compensation expense was $0.1 million in each of the three months ended December 31, 2020 and 2019.  Stock-based compensation expense is included in selling, general and administrative expenses.

 

The following table summarizes our stock option activity during the three months ended December 31, 2020:

 

 

 

Options

 

 

Weighted

Average

Exercise Price

 

Outstanding at beginning of period

 

 

696,665

 

 

$

7.00

 

Granted

 

 

180,000

 

 

 

5.60

 

Exercised

 

 

(28,250

)

 

 

4.79

 

Forfeited

 

 

(30,665

)

 

 

14.07

 

Outstanding at end of period

 

 

817,750

 

 

$

6.50

 

Exercisable at end of period

 

 

596,002

 

 

$

6.83

 

Weighted average fair value of options granted

   during the period

 

$

2.97

 

 

 

 

 

 

The fair value of options was estimated at the applicable grant date using the Black-Scholes option pricing model with the following assumptions:

 

 

 

Three Months Ended December 31, 2020

 

Risk free interest rate

 

 

1

%

Expected life

 

6 years

 

Dividend rate

 

 

%

Volatility

 

 

58

%

 

On November 29, 2018, we announced that our Board of Directors (the “Board”) approved a stock repurchase program, pursuant to which we were authorized to repurchase up to $4 million of our outstanding common stock, par value $0.01 per share (“Common Stock”), over a one-year period. Repurchases under the program were to be made in open market transactions at prevailing market prices, in privately negotiated transactions, or by other means in compliance with the rules and regulations of the SEC; however, we had no obligation to repurchase shares and the timing, actual number, and value of shares to be repurchased was subject to management’s discretion and depended on the Company’s stock price and other market conditions. Our Board could have terminated the repurchase program at any time while it was in effect.  The term of our repurchase program expired as of the quarter ended December 31, 2019.  There were no shares repurchased under this repurchase program.

 

On February 4, 2020, the Board approved a new stock repurchase program, pursuant to which we may repurchase up to $4 million of our outstanding Common Stock over a one-year period, commencing on February 10, 2020. Repurchases under the program will be made in open market transactions at prevailing market prices, in privately negotiated transactions, or by other means in compliance with the rules and regulations of the SEC;

14


 

however, we have no obligation to repurchase shares and the timing, actual number, and value of shares to be repurchased is subject to management’s discretion and will depend on our stock price and other market conditions. We may, in the sole discretion of the Board, terminate the repurchase program at any time while it is in effect. Repurchased shares may be retired or kept in treasury for further issuance. During the quarter ended March 31, 2020, we repurchased 366,000 shares of our Common Stock on the open market at a total cost of approximately $2.0 million (an average price of $5.46 per share). All shares repurchased during the year ended September 30, 2020 have been retired. There were no repurchases during the quarter ended December 31, 2020. Approximately $2 million remain available under the repurchase program as of December 31, 2020.

 

 

7.  Income Taxes

 

For the three months ended December 31, 2020 and 2019, we recorded income tax expense at our continuing operations of $0.1 million and $41,000, respectively. Tax expense for the three months ended December 31, 2020, includes a benefit of approximately $0.3 million related to the reversal of previously recorded uncertain tax positions. In the three months ended December 31, 2019, we recorded income tax expense of $19,000 in our discontinued operations. The quarterly income tax provision is calculated using an estimated annual effective tax rate, based upon expected annual income, permanent items, statutory rates and planned tax strategies in the various jurisdictions in which we operate. However, losses in certain jurisdictions and discrete items are treated separately.

 

The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), which was signed into law on March 27, 2020, included a provision for a five-year carryback of net operating losses. We have assessed the benefit of the provision and utilized a portion of the 2019 net operating loss carryback to offset income from 2018. The impacts of this provision were recognized during fiscal 2020.

 

Deferred tax assets and liabilities reflect the tax effects of temporary differences between the carrying value of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. We record a valuation allowance if, based on the weight of available evidence, it is more likely than not that some portion or all of a deferred tax asset will not be realized. Our expectations regarding realization of our deferred tax assets is based upon the weight of all available evidence, including such factors as our recent earnings history, expected future taxable income and available tax planning strategies.  We established valuation allowances on substantially all net U.S. 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. In 2020, we reversed a portion of the valuation allowance related to foreign deferred tax assets which we have determined will be utilized against net operating income in future years. We will continue to monitor our cumulative income and loss positions in the U.S. and foreign jurisdictions to determine whether full valuation allowances on net deferred tax assets are appropriate.

 

We classify all of our uncertain tax positions as income taxes payable long-term.  At December 31, 2020 and September 30, 2020, the total amount of unrecognized tax benefits was approximately $0.9 million and $1.2 million, respectively. Income taxes payable long-term includes other items, primarily withholding taxes that are not due until the related intercompany service fees are paid.

 

We classify interest and penalties related to unrecognized tax benefits as income tax expense. As of December 31, 2020 and September 30, 2020, we had an accrual for potential interest and penalties of approximately $0.6 million and $0.8 million, respectively, classified with income taxes payable long-term.

 

Amtech and one or more of its subsidiaries file income tax returns in China and other foreign jurisdictions, as well as in 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, which generally is from 3 to 5 years.

 

 

15


 

 

8.  Commitments and Contingencies

 

Purchase Obligations – As of December 31, 2020, we had unrecorded purchase obligations in the amount of $4.7 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.

 

Legal Proceedings and Other Claims – From time to time, we are a party to claims and actions for matters arising out of our business operations. We regularly evaluate the status of the legal proceedings and other claims in which we are involved to assess whether a loss is probable or there is a reasonable possibility that a loss, or an additional loss, may have been incurred and determine if accruals are appropriate. If accruals are not appropriate, we further evaluate each legal proceeding to assess whether an estimate of possible loss or range of possible loss can be made for disclosure. Although the outcome of claims and litigation is inherently unpredictable, we believe that we have adequate provisions for any probable and estimable losses. It is possible, nevertheless, that our consolidated financial position, results of operations or liquidity could be materially and adversely affected in any particular period by the resolution of a claim or legal proceeding. Legal expenses related to defense, negotiations, settlements, rulings and advice of outside legal counsel are expensed as incurred.

 

Employment Contracts – We have employment contracts and change in control agreements with, and severance plans covering, certain officers and management employees under which severance payments would become payable in the event of specified terminations without cause or terminations under certain circumstances after a change in control. If severance payments under the current employment contracts or severance plans were to become payable, the severance payments would generally range from twelve to thirty-six months of salary.

 

 

9.  Business Segment Information

 

With the divesture of our Automation segment in the first quarter of fiscal 2020, we evaluated our organizational structure and concluded that we have two reportable business segments following the divestiture. Our two reportable segments are as follows:

 

Semiconductor We design, manufacture, sell and service thermal processing equipment and related controls for use by leading semiconductor manufacturers, and in electronics, automotive and other industries.

 

SiC/LED We produce consumables and machinery for lapping (fine abrading) and polishing of materials, such as sapphire substrates, optical components, silicon wafers, numerous types of crystal materials, ceramics and metal components.

 

Information concerning our business segments is as follows, in thousands:

 

 

 

Three Months Ended December 31,

 

 

 

2020

 

 

2019

 

Net Revenues:

 

 

 

 

 

 

 

 

Semiconductor

 

$

15,575

 

 

$

17,232

 

SiC/LED

 

 

2,400

 

 

 

2,817

 

Non-segment related

 

 

 

 

 

643

 

 

 

$

17,975

 

 

$

20,692

 

Operating income (loss):

 

 

 

 

 

 

 

 

Semiconductor

 

$

2,197

 

 

$

2,722

 

SiC/LED