-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DYMVbqDQ+zEYs4GxkNIvWY6RmsFR7rlIiBzhMkXR2RKyoeGDnlqz1HpG0WLByyvT QmakLgshH8gTo1ruG+755w== 0000920029-98-000005.txt : 19980817 0000920029-98-000005.hdr.sgml : 19980817 ACCESSION NUMBER: 0000920029-98-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980814 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: FUSION SYSTEMS CORP CENTRAL INDEX KEY: 0000920029 STANDARD INDUSTRIAL CLASSIFICATION: SPECIAL INDUSTRY MACHINERY, NEC [3559] IRS NUMBER: 520915080 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 033-84194 FILM NUMBER: 98689652 BUSINESS ADDRESS: STREET 1: 7600 STANDISH PL CITY: ROCKVILLE STATE: MD ZIP: 20855 BUSINESS PHONE: 3012510300 10-Q 1 JUNE 30, 1998 FORM 10-Q Page 1 United States Securities and Exchange Commission Washington, D.C. 20549 Form 10-Q Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the period ended June 30, 1998 ------------- Commission file number 0-23628 ------- Fusion Systems Corporation - -------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 52-0915080 - -------------------------------------------------------- (State of incorporation) (I.R.S. Employer Identification No.) 7600 Standish Place, Rockville, MD 20855 - -------------------------------------------------------- (Address of principal executive offices) (Zip Code) (301) 251-0300 - -------------------------------------------------------- (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months and (2) has been subject to such filing requirements for the past ninety days. Yes X ----- The registrant meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing this form with the reduced disclosure format. There were 10 Common Shares outstanding as of June 30, 1998 which were held by Eaton Corporation. Page 2 Part I - FINANCIAL INFORMATION Item 1. Financial Statements Fusion Systems Corporation and Subsidiaries (wholly-owned subsidiaries of Eaton Corporation) Condensed Consolidated Balance Sheets
June 30, December 31, (Thousands) 1998 1997 ---- ---- ASSETS Current assets Cash and cash equivalents $ 1,420 Short-term marketable securities 1,104 $ 16,329 Accounts receivable 10,231 17,296 Note receivable from Eaton Corporation 82,620 72,784 Due from Eaton Corporation 12,931 4,269 Inventories 18,737 16,012 Deferred income taxes and other current assets 4,950 3,391 -------- -------- 131,993 130,081 Property, plant and equipment 14,694 14,998 Intangible assets 34,762 37,619 Excess of cost over net assets of business acquired 49,540 51,351 Deferred income taxes and other assets 6,427 3,750 -------- -------- $237,416 $237,799 ======== ======== LIABILITIES AND SHAREHOLDER'S EQUITY Current liabilities Short-term debt $ 333 Accounts payable and other current liabilities 14,633 $ 9,943 --------- -------- 14,966 9,943 Deferred income taxes 13,691 13,166 Shareholder's equity 208,759 214,690 -------- -------- $237,416 $237,799 ======== ========
See accompanying notes. Page 3 Fusion Systems Corporation and Subsidiaries (wholly-owned subsidiaries of Eaton Corporation) Statements of Consolidated Operations
Three Months Ended Six Months Ended ------------------- ------------------- June 30, June 27, June 30, June 27, (Thousands) 1998 1997 1998 1997 ---- ---- ---- ---- Net sales $ 12,351 $ 21,660 $ 25,519 $ 41,089 Costs and expenses Cost of products sold 8,783 10,393 18,277 19,810 Selling, general & administrative 4,020 4,325 7,658 8,213 Research, development & engineering 5,237 4,474 10,561 8,297 -------- -------- -------- -------- 18,040 19,192 36,496 36,320 -------- -------- -------- -------- (Loss) income from operations (5,689) 2,468 (10,977) 4,769 Other income (expense) Interest income, net 1,238 1,490 2,519 2,982 Other--net (347) 52 (393) (16) -------- -------- -------- -------- 891 1,542 2,126 2,966 (Loss) income before income taxes (4,798) 4,010 (8,851) 7,735 Income taxes (benefit) (1,468) 1,444 (2,746) 2,785 -------- -------- -------- -------- Net (loss) income $ (3,330) $ 2,566 $ (6,105) $ 4,950 ======== ======== ======== ========
See accompanying notes. Page 4 Fusion Systems Corporation and Subsidiaries (wholly-owned subsidiaries of Eaton Corporation) Condensed Statements of Consolidated Cash Flows
Six Months Ended -------------------- June 30, June 27, (Thousands) 1998 1997 ---- ---- Net cash used in operating activities Net (loss) income $ (6,105) $ 4,950 Adjustments to reconcile to net cash provided by operating activities Depreciation and amortization 6,583 1,995 Changes in operating assets and liabilities (13,179) (8,857) -------- ------- (12,701) (1,912) Net cash provided by investing activities Expenditures for property, plant and equipment (1,611) (2,015) Payments related to sale of discontinued operations (1,046) Sales of short-term investments--net 15,225 3,638 Foreign currency translation adjustment 174 (14) -------- ------- 13,788 563 Net cash provided by financing activities Borrowings with original maturities of less than three months--net 333 Proceeds from exercise of stock options and stock sale--net of income tax benefit 649 -------- ------- 333 649 -------- ------- Increase (decrease) in cash and cash equivalents 1,420 (700) Cash and cash equivalents at beginning of year 38,445 -------- ------- Cash and cash equivalents at end of period $ 1,420 $37,745 ======== =======
See accompanying notes. Page 5 The following notes are included in accordance with the requirements of Regulation S-X and Form 10-Q: (dollar amounts in thousands) Preparation of Financial Statements - ----------------------------------- The condensed consolidated financial statements of Fusion Systems Corporation (Fusion or the Company) are unaudited. However, in the opinion of management, all adjustments have been made which are necessary for a fair presentation of financial position, results of operations and cash flows for the stated periods. These adjustments are of a normal recurring nature. These finan- cial statements should be read in conjunction with the consolidated financial statements and related notes included in the Company's 1997 Annual Report on Form 10-K. Information relating to earnings per share is not presented because the registrant is a wholly-owned subsidiary of Eaton Corporation (Eaton). Inventories - ----------- June 30, December 31, 1998 1997 ---- ---- Raw materials and purchased parts $12,402 $ 5,528 Work-in-process and finished goods 6,335 10,484 ------- ------- Total inventories $18,737 $16,012 ======= ======= Comprehensive Income - -------------------- On January 1, 1998, the Company adopted Statement of Financial Accounting Standard (SFAS) No. 130, 'Reporting Comprehensive Income'. SFAS No. 130 establishes new standards for reporting comprehensive income and its components; however, the adoption of SFAS No. 130 has no impact on the Company's net income or shareholder's equity. For the Company, the principal difference between net income as historically reported in the statements of consolidated operations and comprehensive income is foreign currency translation recorded in shareholder's equity. Comprehen- sive income is as follows: Three months ended -------------------- June 30, June 27, 1998 1997 ---- ---- Net (loss) income $(3,330) $ 2,566 Foreign currency translation 154 16 ------- ------- Comprehensive (loss) income $(3,176) $ 2,582 ======= ======= Page 6 Six months ended --------------------- June 30, June 27, 1998 1997 ---- ---- Net (loss) income $(6,105) $ 4,950 Foreign currency translation 174 (14) ------- ------- Comprehensive (loss) income $(5,931) $ 4,936 ======= ======= Recently Issued Accounting Pronouncements - ----------------------------------------- In June 1998, SFAS No. 133, 'Accounting for Derivative Instruments and Hedging Activities', was issued. The Company must adopt the standard by the beginning of the first quarter of the year 2000. Because of the Company's minimal use of derivatives, management does not anticipate that the adoption of SFAS No. 133 will have a signifi- cant effect on earnings or the financial position of the Company. Information Concerning Geographic Regions - ----------------------------------------- Net Sales by Geographic Region The Company sells its products in several geographic regions. Net sales by the location of the Company's customers for the first six months of 1998 and 1997 are as follows: 1998 1997 ---- ---- North America $12,351 $22,021 Europe 7,368 8,975 Pacific Region 5,800 10,093 ------- ------- Total sales $25,519 $41,089 ======= ======= Operating Locations The Company manufactures its products in the United States. The Company's foreign operations consist primarily of sales and service activities. A significant portion of the Company's sales from its sales and service offices in Europe and the Pacific Region represent equipment sales shipped directly from U.S. facilities. A summary of net sales by operating location for the first six months of 1998 and 1997 is as follows: 1998 1997 ---- ---- North America $16,716 $31,647 Europe 8,106 8,656 Pacific Region 697 786 ------- ------- Total sales $25,519 $41,089 ======= ======= Page 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations - --------------------- Net sales, consisting of revenues from system sales, spare parts and service and royalty revenues, decreased 43% and 38%, respectively, in the second quarter and the first half of 1998 compared to the same periods in 1997. The decrease is primarily due to the relapse in the worldwide semiconductor equipment market which seriously affected the Company's results in the first half of 1998. The Company has made operating adjustments including a 30% reduction in headcount and a 50% reduction in budgeted 1998 capital spending. The Company's gross profit as a percentage of net sales decreased to 29% for the second quarter of 1998 and 28% for the first half of 1998 compared to 52% for the comparable periods in 1997. The decrease in gross profit was primarily due to amortization expense of $2,465 in the second quarter of 1998 and $4,668 in the first half of 1998 related to excess cost over the net assets of business acquired and related intangible assets resulting from Eaton's acquisition of Fusion in August 1997. This decrease also resulted from lower production volume which reduced the Company's ability to absorb overhead costs. Selling, general and administrative expenses decreased 7% in the second quarter and first half of 1998 compared to the same periods in 1997. The decrease was primarily due to operating adjustments made to offset the renewed collapse in the semiconductor equipment market which included a reduction in headcount. Research, development and engineering expenses increased 17% and 27%, respectively, in the second quarter and first half of 1998 compared to the same periods in 1997. The increase was primarily due to a substantial increase in the level of effort needed to develop advanced products including a new 300mm platform, and to support and improve existing products. In July 1998, the Company introduced the new 300mm product suite which includes the PS3 Photostabilizer and the ES3 Enhanced Strip Plasma Asher. The Company's effective tax rate was 31% for the second quarter and first half of 1998 compared to 36% for the same periods in 1997. The change in the rate, when compared to 1997, was primarily due to non-deductible amortization of excess cost over net assets of business acquired. Page 8 PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits - See Exhibit Index attached. (b) Reports on Form 8-K. There were no reports on Form 8-K filed during the three months ended June 30, 1998. Page 9 Signature Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, there- unto duly authorized. Fusion Systems Corporation -------------------------- Registrant Date: August 6, 1998 /s/ Adrian T. Dillon -------------------------- Adrian T. Dillon Vice President and Chief Financial Officer and Chief Accounting Officer Page 1 FUSION SYSTEMS CORPORATION AND SUBSIDIARIES EXHIBIT INDEX Regulation S-K, Item 601 - Exhibit Reference Number Exhibit - ------------------ ------- 10 Material Contracts The Agreement and Plan of Merger, together with the Exhibits thereto, dated June 30, 1997 included as Exhibit I to the Company's Schedule 14d-9 Statement filed on July 7, 1997 is incorporated herein by reference to such Schedule 14d-9. 27 Financial Data Schedule EX-27 2
5 This schedule contains summary financial information extracted from the Consolidated Balance Sheets and the Statements of Consolidated Operations and is qualified in its entirety by reference to such financial statements. 1,000 6-MOS DEC-31-1998 JUN-30-1998 1,420 1,104 10,487 256 18,737 131,993 17,115 2,421 237,416 14,966 0 0 0 0 208,759 237,416 25,519 25,519 18,277 36,496 2,126 0 0 (8,851) (2,746) (6,105) 0 0 0 (6,105) 0 0
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