-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, qKZup2REjFYiipsP6O1NPNXTRNXjYKoPOjztr18ZMeN7+DqmJorQcB4JyH5KMcdx u6bx582i57WMw7moNvUlbA== 0000891618-95-000048.txt : 19950517 0000891618-95-000048.hdr.sgml : 19950517 ACCESSION NUMBER: 0000891618-95-000048 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19941231 FILED AS OF DATE: 19950210 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: SILICON VALLEY GROUP INC CENTRAL INDEX KEY: 0000712752 STANDARD INDUSTRIAL CLASSIFICATION: 3559 IRS NUMBER: 942264681 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-11348 FILM NUMBER: 95508169 BUSINESS ADDRESS: STREET 1: 2240 RINGWOOD AVE CITY: SAN JOSE STATE: CA ZIP: 95131 BUSINESS PHONE: 4084340500 MAIL ADDRESS: STREET 1: 2240 RINGWOOD AVENUE CITY: SAN JOSE STATE: CA ZIP: 95131 10-Q 1 QUARTERLY REPORT FOR PERIOD ENDED 12/31/94 1 =============================================================================== UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------- FORM 10-Q /X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the quarterly period ended December 31, 1994 / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the period from ________ to ________. Commission File Number 0-11348 SILICON VALLEY GROUP, INC. (Exact name of registrant as specified in its charter) DELAWARE 94-2264681 (State of incorporation) (IRS Employer Identification No.) 2240 RINGWOOD AVENUE, SAN JOSE, CALIFORNIA 95131 (Address of principal executive offices) (Zip Code) (408) 434-0500 (Registrant's telephone number, including area code) NONE (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- The number of shares outstanding of the Registrant's Common Stock as of January 31, 1995 was 19,185,009. =============================================================================== 2 SILICON VALLEY GROUP, INC. INDEX PART I. FINANCIAL INFORMATION
PAGE NO. ------- Consolidated Condensed Balance Sheets as of December 31, 1994 and September 30, 1994 3 Consolidated Condensed Income Statements for the Quarters Ended December 31, 1994 and 1993. 4 Consolidated Condensed Statements of Cash Flows for the Quarters Ended December 31, 1994 and 1993. 5 Notes to Consolidated Condensed Financial Statements 6 Management's Discussion and Analysis of Financial Condition and Results of Operations 7 PART II. OTHER INFORMATION 12 SIGNATURES 13
2 3 PART I. FINANCIAL INFORMATION SILICON VALLEY GROUP, INC. CONSOLIDATED CONDENSED BALANCE SHEETS (DOLLARS IN THOUSANDS)
December 31, September 30, ------------ ------------- 1994 1994 ---- ---- (Unaudited) ASSETS CURRENT ASSETS: Cash and equivalents $ 76,502 $ 87,829 Accounts receivable (net of allowance for doubtful accounts of $2,435 and $2,630, respectively) 92,782 66,809 Receivable from sale of stock warrants -- 8,204 Inventories 100,918 86,829 Prepaid expenses 2,816 3,632 Deferred taxes 300 169 -------- -------- Total current assets 273,318 253,472 PROPERTY AND EQUIPMENT - NET 14,709 13,313 DEPOSITS AND OTHER ASSETS 1,662 1,784 INTANGIBLE ASSETS - NET 2,936 3,105 -------- -------- TOTAL $292,625 $271,674 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Short-term debt and current portion of long-term debt $ 846 $ 828 Accounts payable 27,325 20,254 Accrued liabilities 60,671 53,644 Income taxes payable 5,674 5,443 -------- -------- Total current liabilities 94,516 80,169 LONG TERM DEBT AND CAPITAL LEASES 1,299 1,510 DEFERRED LIABILITIES 1,020 998 MINORITY INTEREST 3,799 3,782 STOCKHOLDERS' EQUITY: Convertible Redeemable Preferred Stock 17,000 17,000 Common Stock - Shares outstanding: December 31, 1994: 19,173,809 September 30, 1994: 18,967,276 107,722 105,978 Retained earnings 67,269 62,237 -------- -------- Stockholders' equity 191,991 182,215 -------- -------- TOTAL $292,625 $271,674 ======== ========
See Notes to Consolidated Condensed Financial Statements. 3 4 SILICON VALLEY GROUP, INC. CONSOLIDATED CONDENSED INCOME STATEMENTS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED)
Quarters Ended December 31, --------------------------- 1994 1993 ---- ---- NET SALES $85,971 $70,917 COSTS AND EXPENSES: Cost of sales 52,769 43,859 Research, development and related engineering 8,278 6,546 Marketing, general and administrative 17,622 15,836 ------- ------- Total costs and expenses 78,669 66,241 ------- ------- OPERATING INCOME 7,302 4,676 INTEREST AND OTHER INCOME 1,198 102 INTEREST EXPENSE (145) (354) ------- ------- INCOME BEFORE INCOME TAXES AND MINORITY INTEREST 8,355 4,424 PROVISION FOR INCOME TAXES 3,008 1,770 MINORITY INTEREST 17 (65) ------- ------- NET INCOME $ 5,330 $ 2,719 ======= ======= Preferred Stock Dividend $ 298 $ 298 ======= ======= Net Income Applicable to Common Stock $ 5,032 $ 2,421 ======= ======= NET INCOME PER SHARE $ 0.25 $ 0.15 ======= ======= Weighted Average Common and Common Equivalent Shares 20,322 16,400 ======= =======
See Notes to Consolidated Condensed Financial Statements. 4 5 SILICON VALLEY GROUP, INC. CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (UNAUDITED)
Quarters Ended ----------------------- December 31, ----------------------- 1994 1993 ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 5,330 $ 2,719 Reconciliation to net cash provided by (used for) operating activities: Depreciation and amortization 2,649 1,841 Amortization of intangibles 169 193 Minority interest 17 (65) Changes in assets and liabilities: Receivables (25,973) 5,494 Inventories (14,089) (2,414) Prepaid expenses 816 172 Deposits and other assets 122 (270) Accounts payable 7,071 (6,315) Accrued and deferred liabilities 6,998 (103) Income taxes 100 1,600 -------- -------- Net cash provided by (used for) operating activities (16,790) 2,852 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES - Disposal (purchase) of property and equipment (4,045) 300 -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Borrowings under credit agreements -- 8,000 Repayment of debt (193) (22,390) Sale of Common Stock 1,446 27,441 Collection of receivable from Sale of Common Stock warrants 8,204 -- -------- -------- Net cash provided by financing activities 9,457 13,051 -------- -------- EFFECT OF EXCHANGE RATE CHANGES ON CASH 51 43 -------- -------- INCREASE (DECREASE) IN CASH AND EQUIVALENTS (11,327) 16,246 CASH AND EQUIVALENTS: Beginning of period 87,829 17,617 -------- -------- End of period $ 76,502 $ 33,863 ======== ======== NON-CASH FINANCING ACTIVITIES: Preferred stock dividend paid in Common Stock $ 298 $ 298 ======== ========
See Notes to Consolidated Condensed Financial Statements. 5 6 SILICON VALLEY GROUP, INC. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS 1. CONSOLIDATED CONDENSED FINANCIAL STATEMENTS The accompanying consolidated condensed financial statements have been prepared by the Company without audit and reflect all adjustments which are, in the opinion of management, necessary to a fair statement of the financial position and the results of operations for the interim periods. The statements have been prepared in accordance with the regulations of the Securities and Exchange Commission, but omit certain information and footnote disclosures necessary to present the statements in accordance with generally accepted accounting principles. For further information, refer to the Consolidated Financial Statements and Notes thereto included in the Company's Annual Report on Form 10-K for the year ended September 30, 1994. 2. INVENTORIES Inventories are comprised of:
December 31, September 30, ------------ ------------- 1994 1994 ---- ---- (In thousands) Raw materials $ 41,479 $38,096 Work-in-process 56,723 44,558 Finished goods 2,716 4,175 -------- ------- $100,918 $86,829 ======== =======
6 7 SILICON VALLEY GROUP, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS The Company designs, manufactures, markets and services semiconductor processing equipment used in the fabrication of integrated circuits. The Company's products are used in photolithography for exposure and photoresist processing, and in deposition for oxidation/diffusion and low pressure chemical vapor deposition ("LPCVD"). The Company manufactures and markets its photolithography exposure products through its majority owned subsidiary, SVG Lithography Systems, Inc. ("SVGL"), its photoresist processing products through its Track Systems Division ("Track") and its oxidation/diffusion and LPCVD products through its Thermco Systems Division ("Thermco"). The semiconductor industry to which the Company sells its products is highly cyclic and has, historically, experienced periodic downturns. These downturns have had a severe effect on the semiconductor industry's demand for semiconductor processing equipment. Future weakness in demand in the semiconductor industry can be expected to have an adverse effect on the Company's business and results of operations. Further, the Company relies on a limited number of major customers for a substantial percentage of its net sales (three such customers accounted for 50% of the Company's sales in fiscal 1994 and this trend continued into the first quarter of fiscal 1995). The loss of or any substantial reduction in orders by any such customer could adversely affect the Company's business and results of operations. For the first quarter of fiscal 1995, the Company recorded net sales of $85,972,000, a 21% increase over net sales of $70,917,000 during the year-earlier quarter and 5% above fourth quarter fiscal 1994 net sales of $81,979,000. Increased shipments by Thermco, particularly of its VTR 7000 vertical thermal reactor and by SVGL, primarily its Micralign systems and after-market business, offset in part by lower shipments in the Track Division, resulted in the increase over the first quarter of fiscal 1994. The increase in net sales over the preceding quarter was primarily the result of increased shipments of both Thermco's VTR 7000 and of Track's 90 Series systems, offset in part by lower SVGL shipments of Micrascan II systems. During the first quarter of fiscal 1995, the Company had bookings of $128,828,000 which represented a book to bill ratio of 1.5 to 1, approximately equal to the preceding two quarters. At December 31, 1994, the Company had a backlog of $251,976,000, up from $209,119,000 at September 30, 1994. The ending backlog continued to be relatively evenly divided among Track, Thermco and SVGL. Gross margin was 38.6% for the first quarter of fiscal 1994, an increase from 38.2% in the year-earlier quarter, but lower than the gross margin of 39.3% during the fourth quarter of fiscal 1994. The improvement over the year-earlier quarter was primarily due to Thermco's increased shipments of higher margin VTR 7000 systems and increased manufacturing volumes and product sales at SVGL, offset in part by lower shipments of Track systems. The gross 7 8 margin decrease from the fourth quarter of fiscal 1994 was primarily the result of lower Track and SVGL margins offset in part by improved Thermco margins. The lower Track gross margins were primarily the result of lower revenues from after-market business, while the decrease in SVGL margins was primarily due to lower shipping volumes. The improvement in Thermco's margins resulted from increased shipments of VTR 7000 systems and certain revenues from product upgrades to customer-owned Series 8000 Advanced Vertical Processor ("AVP") systems. First quarter fiscal 1995 research, development and related engineering ("R&D") expenditures were $8,278,000 (10% of net sales) compared to $6,546,000 (9% of net sales) during the first quarter of fiscal 1994 and $7,768,000 (10% of net sales) in the preceding quarter. The Company's R&D expenditures exclude funding received from outside parties under joint development agreements, the majority of which is received by SVGL from SEMATECH. During the first quarter of fiscal 1995 and the first and fourth quarters of fiscal 1994, the Company received outside funding of $2,082,000, $239,000 and $958,000, respectively. In comparing first quarter fiscal 1995 to the year-earlier quarter, the increased expenditures were primarily the result of new product development by all of the Company's product groups, as well as costs incurred by the Thermco engineering groups to support its increased level of product shipments and to further develop the AVP. The increase in first quarter fiscal 1995 R&D expenditures over the fourth quarter of fiscal 1994 was primarily due to the above-noted costs incurred by the Thermco engineering groups. Marketing, general and administrative ("MG&A") expenses were $17,622,000 (21% of net sales) in the first quarter of fiscal 1995 compared to $15,836,000 (22% of net sales) for the year-earlier first quarter and $17,214,000 (21% of net sales) in the preceding quarter. The increase in expenditures over the first quarter of fiscal 1994 was primarily the result of costs associated with the increased level of product shipments and amounts incurred in the general management of the Company. In comparing first quarter fiscal 1995 MG&A expenses to fourth quarter fiscal 1994, the increase was principally due to higher general management expenditures, offset in part by a reduction in certain costs directly related to sales. In contrast to the increased expenditures, the decrease in first quarter fiscal 1995 MG&A costs as a percentage of net sales compared to either the first or fourth quarters of fiscal 1994, was the result of the higher net sales during the quarter. Operating income was $7,302,000 for the first quarter of fiscal 1995, significantly above $4,676,000 for the year-earlier quarter and approximately equal to fourth quarter fiscal 1994 operating income of $7,213,000. The improvement in operating income from the year-earlier quarter resulted from increased gross margins on higher net sales, combined with increased operating expenses which were lower as a percentage of such net sales. Operating income increased over the preceding quarter due to higher net sales and gross margin dollars, although at a slightly lower percentage of net sales, offset in part by higher operating expenses. Interest and other income was $1,198,000 during the first quarter of fiscal 1995 compared to $102,000 during the year-earlier quarter and $519,000 during the preceding quarter. The increase over both the year-earlier and the preceding quarter was primarily the result of significantly higher average cash balances available for investment, at higher prevailing interest rates and certain foreign exchange gains. 8 9 During the first quarter of fiscal 1995 interest expense was $145,000 compared to $354,000 and $100,000 during the first and fourth quarters of fiscal 1994, respectively. The higher interest expense during the year-earlier quarter related to debt which was outstanding for most of that quarter and was retired subsequent to the completion of a public offering of the Company's Common Stock. The Company recorded a 36% provision for income taxes for the first quarter of fiscal 1995, compared to a 38% provision for all of fiscal 1994. Variations in the Company's effective tax rate relate primarily to changes in the geographic distribution of the Company's pretax income. The reduction for minority interest of $17,000 during the first quarter of fiscal 1995, the addition for minority interest of $65,000 during the first quarter of fiscal 1994 and the reduction for minority interest of $132,000 for the fourth quarter of fiscal 1994 represent that share of SVGL's operating results attributable to its minority shareholder. The Company had net income of $5,330,000 ($.25 per share) during the first quarter of fiscal 1995 compared to net income of $2,719,000 ($.15 per share) and $4,984,000 ($.24 per share) for the first and fourth quarters of fiscal 1994, respectively. Net income per share amounts are computed after deducting from income Preferred Stock dividends of $298,000 from each of the first quarters of fiscal years 1995 and 1994 and $297,000 from the fourth quarter of fiscal 1994. FLUCTUATIONS IN QUARTERLY RESULTS AND DEPENDENCE ON THE DEVELOPMENT AND SALES OF NEW PRODUCTS The Company has, at times during its existence, experienced quarterly fluctuations in its operating results. Due to the relatively small number of systems sold during each fiscal quarter and the relatively high revenues per system, production or shipping delays or customer order rescheduling can significantly affect quarterly revenues and profitability. The Company has, and may again, experience quarters during which a substantial portion of the Company's net sales are realized near the end of the quarter. Accordingly, delays in the shipments near the end of a quarter can cause quarterly net sales to fall significantly short of anticipated levels. Since most of the Company's expenses are fixed in the short term, such shortfalls in net sales could have a material adverse effect on the Company's business and results of operations. The Company's operating results may also vary from quarter to quarter based upon product mix, the relative proportions of domestic and international sales and competitive pricing pressures. In light of these factors and the nature of semiconductor industry cycles, the Company expects to continue to experience variability in quarterly operating results. Semiconductor manufacturing equipment and processes are subject to rapid technological change. The Company believes that its future success will depend in part upon its ability to continue to enhance its existing products and their process capabilities and to develop and manufacture new products with improved process capabilities that enable semiconductor manufacturers to fabricate semiconductors more efficiently. New product introductions could contribute to quarterly fluctuations in operating results as orders for new products commence and increase the potential for a decline in orders of existing products. 9 10 Failure to introduce new products successfully in a timely manner could result in loss of competitive position and reduced sales of existing products. Furthermore, the inability to produce such products or any failure to achieve market acceptance could have a material adverse effect on the Company's business and results of operations. The Company believes that the photolithography exposure equipment market is one of the largest segments of the semiconductor processing equipment industry and that its Micrascan II is currently the most technically advanced machine shipping to global semiconductor manufacturers. While the recent volume of orders for Micrascan II systems have been encouraging, they are not necessarily indicative of industry-wide acceptance of the Micrascan technology. Further, SVGL was not profitable for fiscal 1994, nor during the first quarter of fiscal 1995 and there can be no assurance that it will be able to operate profitably in the future. The Company believes that for SVGL to succeed in the long term, it must sell its Micrascan products on a global basis. The Japanese and Pacific Rim markets (including fabrication plants located in other parts of the world which are operated by Japanese and Pacific Rim semiconductor manufacturers) represent a substantial portion of the overall market for photolithography exposure equipment and to date neither SVGL or the Company has not been successful in securing an adequate share of these markets. In April, 1993, the Company entered into a letter of intent with Canon Inc. ("Canon") for the purpose of establishing a worldwide strategic alliance based on SVGL's Micrascan photolithography technology. The Company and Canon were unable to reach agreement, negotiations were terminated and the letter of intent expired on November 30, 1994. The Company is relatively new to the photolithography exposure business and does not share the same level of financial resources as its competitors. As a result, major customers may be unwilling to rely on SVGL to be the sole source of this advanced technology, which could have an adverse effect on the Company's business and results of operations. The Company is aggressively accelerating the development of and increasing its manufacturing capability to produce its advanced technology Micrascan photolithography equipment. Although plans are in place and resources are being dedicated to the task, there can be no assurance that existing resources and funding from outside parties will be sufficient or that the Company will be able to successfully expand its Micrascan manufacturing operations. SVG depends on external funding to assist in the high cost of development in its photolithography operation. On September 30, 1994, SEMATECH entered into an agreement with the Company to assist in funding both the development of the Micrascan technology and to increase SVGL's manufacturing capability and capacity. The agreement with SEMATECH included the sale of warrants to purchase the Company's Common Stock and established certain milestones upon which the funding is based. There are no assurances that the Company will be able to attain such milestones or that SEMATECH will be capable of providing the agreed upon funding, either of which could have an unfavorable impact on future photolithography development. 10 11 Under the agreement with SEMATECH, the Company is obligated, at some time over a three-year period, to fund, from its own resources, 120% of amounts received from SEMATECH, up to $36,000,000. The Company could be required to fund such amounts whether or not the Micrascan product is successful, further exacerbating the potential material adverse effects described above. LIQUIDITY AND CAPITAL RESOURCES At December 31, 1994 cash and cash equivalents were $76,502,000, a decrease of $11,327,000 from the September 30, 1994 balance of $87,829,000. The collection of $8,204,000 from the sale of Common Stock warrants subscribed during the preceding quarter was offset by $16,790,000 used for operating activities and $4,045,000 used to purchase property and equipment. The cash used for operating activities was required to finance increased accounts receivable resulting from significant shipments late in the quarter and extended terms granted to a large global customer and higher inventory levels required to satisfy the current backlog of customer orders. At February 10, 1995, the Company had no borrowings outstanding under its $50,000,000 bank revolving line of credit. The Company believes that it has sufficient working capital and available bank credit to sustain operations, fund research and development and provide for the future expansion of its business during the remainder of the fiscal year. 11 12 PART II. OTHER INFORMATION SILICON VALLEY GROUP, INC. ITEM 1. LEGAL PROCEEDINGS. None. ITEM 2. CHANGES IN SECURITIES. None. ITEM 3. DEFAULTS UPON SENIOR SECURITIES. None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None. ITEM 5. OTHER INFORMATION. None ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. None 12 13 SILICON VALLEY GROUP, INC. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. SILICON VALLEY GROUP, INC. -------------------------------- (Registrant) Date: February 10, 1995 By: /s/ Papken S.Der Torossian ------------------------------- Papken S. Der Torossian Chief Executive Officer and Chairman of the Board Date: February 10, 1995 By: /s/ Russell G. Weinstock ------------------------------- Russell G. Weinstock Vice President Finance and Chief Financial Officer 13 EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) THE FINANCIAL STATEMENTS FOR THE FIRST QUARTER OF FISCAL 1995 AS FILED IN THE COMPANY'S FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH (B) FORM 10-Q FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1994. 1,000 0 3-MOS SEP-30-1995 OCT-01-1994 DEC-31-1994 1 76,502 0 92,782 2,435 100,918 273,318 59,567 (44,858) 292,625 94,516 0 107,722 0 17,000 67,269 292,625 85,971 85,971 52,769 52,769 0 0 145 8,355 3,008 5,330 0 0 0 5,330 .25 0 MINORITY INTEREST OF $17,000 IS DEDUCTED ALONG WITH THE INCOME TAX EXPENSE OF 3,008,000 TO ARRIVE AT NET INCOME OF $5,330.000.
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