acls_Current_Folio_10Q

Table of Contents

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

x

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

 

For the quarterly period ended March 31, 2019

 

Or

 

o

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 000-30941

 

AXCELIS TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)

 

 

 

 

Delaware

 

34-1818596

(State or other jurisdiction of
incorporation or organization)

 

(IRS Employer
Identification No.)

 

108 Cherry Hill Drive

Beverly, Massachusetts 01915

(Address of principal executive offices, including zip code)

 

(978) 787-4000

(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 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 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, 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 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 ☒

 

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

 

 

 

 

Title of each class

Trading symbol

Name of each exchange on which registered

Common Stock, $.001 par value

ACLS

Nasdaq Global Select Market

 

 

As of May 6, 2019 there were 32,942,184 shares of the registrant’s common stock outstanding.

 

 


 

Table of Contents

Table of Contents

 

 

 

 

PART I - FINANCIAL INFORMATION 

 

Item 1. 

Financial Statements (Unaudited)

 

 

Consolidated Statements of Operations for the three months ended March 31, 2019 and 2018

3

 

Consolidated Statements of Comprehensive Income for the three months ended March 31, 2019 and 2018

4

 

Consolidated Balance Sheets as of March 31, 2019 and December 31, 2018

5

 

Consolidated Statements of Stockholders’ Equity – For the three month periods ended March 31, 2019 and 2018

6

 

Consolidated Statements of Cash Flows for the three months ended March 31, 2019 and 2018

7

 

Notes to Consolidated Financial Statements (Unaudited)

8

Item 2. 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

17

 

Overview

17

 

Critical Accounting Estimates

17

 

Results of Operations

18

 

Liquidity and Capital Resources

23

Item 3. 

Quantitative and Qualitative Disclosures About Market Risk

24

Item 4. 

Controls and Procedures

24

PART II - OTHER INFORMATION 

25

Item 1. 

Legal Proceedings

25

Item 1A. 

Risk Factors

25

Item 2. 

Unregistered Sales of Equity Securities and Use of Proceeds

25

Item 3. 

Defaults Upon Senior Securities

25

Item 4. 

Mine Safety Disclosures

25

Item 5. 

Other Information

25

Item 6. 

Exhibits

26

 

 

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Table of Contents

 

   PART 1—FINANCIAL INFORMATION

 

Item 1.    Financial Statements.

 

Axcelis Technologies, Inc.

Consolidated Statements of Operations

(In thousands, except per share amounts)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

Three months ended

 

 

 

March 31,

 

 

    

2019

    

2018

    

Revenue:

 

 

 

 

 

 

 

Product

 

$

84,197

 

$

116,022

 

Services

 

 

7,280

 

 

6,163

 

Total revenue

 

 

91,477

 

 

122,185

 

Cost of revenue:

 

 

 

 

 

 

 

Product

 

 

47,338

 

 

68,374

 

Services

 

 

6,633

 

 

6,655

 

Total cost of revenue

 

 

53,971

 

 

75,029

 

Gross profit

 

 

37,506

 

 

47,156

 

Operating expenses:

 

 

 

 

 

 

 

Research and development

 

 

13,685

 

 

12,233

 

Sales and marketing

 

 

8,918

 

 

8,411

 

General and administrative

 

 

7,807

 

 

8,010

 

Total operating expenses

 

 

30,410

 

 

28,654

 

Income from operations

 

 

7,096

 

 

18,502

 

Other (expense) income:

 

 

 

 

 

 

 

Interest income

 

 

841

 

 

410

 

Interest expense

 

 

(1,230)

 

 

(1,337)

 

Other, net

 

 

(173)

 

 

(102)

 

Total other expense

 

 

(562)

 

 

(1,029)

 

Income before income taxes

 

 

6,534

 

 

17,473

 

Income tax provision

 

 

472

 

 

3,558

 

Net income

 

$

6,062

 

$

13,915

 

Net income per share:

 

 

 

 

 

 

 

Basic

 

$

0.19

 

$

0.43

 

Diluted

 

$

0.18

 

$

0.41

 

Shares used in computing net income per share:

 

 

 

 

 

 

 

Basic weighted average common shares

 

 

32,683

 

 

32,094

 

Diluted weighted average common shares

 

 

34,224

 

 

34,123

 

 

See accompanying Notes to these Consolidated Financial Statements

 

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Axcelis Technologies, Inc.

Consolidated Statements of Comprehensive Income

(In thousands)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

Three months ended

 

 

 

March 31,

 

 

    

2019

    

2018

    

Net income

 

$

6,062

 

$

13,915

 

Other comprehensive (loss) income:

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

(495)

 

 

1,021

 

Amortization of actuarial loss and other adjustments from pension plan

 

 

30

 

 

30

 

Total other comprehensive (loss) income

 

 

(465)

 

 

1,051

 

Comprehensive income

 

$

5,597

 

$

14,966

 

 

See accompanying Notes to these Consolidated Financial Statements

 

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Axcelis Technologies, Inc.

Consolidated Balance Sheets

(In thousands, except per share amounts)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

    

March 31,

    

December 31,

 

 

 

2019

 

2018

 

ASSETS

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

163,104

 

$

177,993

 

Short-term restricted cash

 

 

149

 

 

 —

 

Accounts receivable, net

 

 

70,947

 

 

78,727

 

Inventories, net

 

 

134,051

 

 

129,000

 

Prepaid expenses and other current assets

 

 

12,161

 

 

11,051

 

Total current assets

 

 

380,412

 

 

396,771

 

Property, plant and equipment, net

 

 

19,638

 

 

41,149

 

Operating lease assets

 

 

7,453

 

 

 —

 

Finance lease assets, net

 

 

22,895

 

 

 —

 

Long-term restricted cash

 

 

6,715

 

 

6,909

 

Deferred income taxes

 

 

71,357

 

 

71,939

 

Other assets

 

 

34,985

 

 

31,673

 

Total assets

 

$

543,455

 

$

548,441

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Accounts payable

 

$

29,641

 

$

35,955

 

Accrued compensation

 

 

6,153

 

 

19,218

 

Warranty

 

 

4,319

 

 

4,819

 

Income taxes

 

 

491

 

 

462

 

Deferred revenue

 

 

16,639

 

 

19,513

 

Other current liabilities

 

 

8,815

 

 

5,030

 

Total current liabilities

 

 

66,058

 

 

84,997

 

Finance lease obligation

 

 

48,549

 

 

47,757

 

Long-term deferred revenue

 

 

3,842

 

 

3,071

 

Other long-term liabilities

 

 

7,853

 

 

4,279

 

Total liabilities

 

 

126,302

 

 

140,104

 

Commitments and contingencies (Note 15)

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

Common stock, $0.001 par value, 75,000 shares authorized; 32,881 shares issued and outstanding at March 31, 2019; 32,558 shares issued and outstanding at December 31, 2018

 

 

33

 

 

33

 

Additional paid-in capital

 

 

568,335

 

 

565,116

 

Accumulated deficit

 

 

(151,198)

 

 

(157,260)

 

Accumulated other comprehensive income

 

 

(17)

 

 

448

 

Total stockholders’ equity

 

 

417,153

 

 

408,337

 

Total liabilities and stockholders’ equity

 

$

543,455

 

$

548,441

 

 

 

See accompanying Notes to these Consolidated Financial Statements

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Axcelis Technologies, Inc.

Consolidated Statements of Stockholders’ Equity

(In thousands)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

Other

 

Total

 

 

 

 

Common Stock

 

Paid-in

 

Accumulated

 

Comprehensive

 

Stockholders’

 

 

    

 

Shares

    

Amount

    

Capital

    

Deficit

    

Income (Loss)

    

Equity

 

Balance at December 31, 2017

 

 

32,048

 

$

32

 

$

556,147

 

$

(204,745)

 

$

2,176

 

$

353,610

 

Net income

 

 

 —

 

 

 —

 

 

 —

 

 

13,915

 

 

 —

 

 

13,915

 

Adjustment to Retained Earnings upon ASC 606 Adoption

 

 

 —

 

 

 —

 

 

 —

 

 

1,600

 

 

 —

 

 

1,600

 

Foreign currency translation adjustments

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

1,021

 

 

1,021

 

Change in pension obligation

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

30

 

 

30

 

Exercise of stock options

 

 

75

 

 

 —

 

 

446

 

 

 —

 

 

 —

 

 

446

 

Issuance of restricted common shares

 

 

19

 

 

 —

 

 

(227)

 

 

 —

 

 

 —

 

 

(227)

 

Stock-based compensation expense

 

 

 —

 

 

 —

 

 

1,132

 

 

 —

 

 

 —

 

 

1,132

 

Balance at March 31, 2018

 

 

32,142

 

$

32

 

$

557,498

 

$

(189,230)

 

$

3,227

 

$

371,527

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

Other

 

Total

 

 

 

 

Common Stock

 

Paid-in

 

Accumulated

 

Comprehensive

 

Stockholders’

 

 

    

 

Shares

    

Amount

    

Capital

    

Deficit

    

Income (Loss)

    

Equity

 

Balance at December 31, 2018

 

 

32,558

 

$

33

 

$

565,116

 

$

(157,260)

 

$

448

 

$

408,337

 

Net income

 

 

 —

 

 

 —

 

 

 —

 

 

6,062

 

 

 —

 

 

6,062

 

Foreign currency translation adjustments

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(495)

 

 

(495)

 

Change in pension obligation

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

30

 

 

30

 

Exercise of stock options

 

 

288

 

 

 —

 

 

1,828

 

 

 —

 

 

 —

 

 

1,828

 

Issuance of restricted common shares

 

 

35

 

 

 —

 

 

(281)

 

 

 —

 

 

 —

 

 

(281)

 

Stock-based compensation expense

 

 

 —

 

 

 —

 

 

1,672

 

 

 —

 

 

 —

 

 

1,672

 

Balance at March 31, 2019

 

 

32,881

 

$

33

 

$

568,335

 

$

(151,198)

 

$

(17)

 

$

417,153

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying Notes to these Consolidated Financial Statements

 

 

 

 

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Axcelis Technologies, Inc.

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

Three months ended

 

 

 

March 31,

 

 

    

2019

    

2018

    

Cash flows from operating activities

 

 

 

 

 

 

 

Net income

 

$

6,062

 

$

13,915

 

Adjustments to reconcile net income to net cash (used in) provided by operating activities:

 

 

 

 

 

 

 

Depreciation and amortization

 

 

1,615

 

 

1,448

 

Deferred income taxes

 

 

582

 

 

2,451

 

Stock-based compensation expense

 

 

1,672

 

 

1,132

 

Provision for excess and obsolete inventory

 

 

607

 

 

485

 

Changes in operating assets & liabilities:

 

 

 

 

 

 

 

Accounts receivable

 

 

7,642

 

 

16

 

Inventories

 

 

(6,171)

 

 

(11,462)

 

Prepaid expenses and other current assets

 

 

(1,174)

 

 

592

 

Accounts payable and other current liabilities

 

 

(16,911)

 

 

(1,836)

 

Deferred revenue

 

 

(2,098)

 

 

1,963

 

Income taxes

 

 

32

 

 

113

 

Other assets and liabilities

 

 

(4,207)

 

 

(317)

 

Net cash (used in) provided by operating activities

 

 

(12,349)

 

 

8,500

 

 

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

 

 

Expenditures for property, plant and equipment and capitalized software

 

 

(4,255)

 

 

(723)

 

Net cash used in investing activities

 

 

(4,255)

 

 

(723)

 

 

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

 

Net settlement on restricted stock grants

 

 

(281)

 

 

(226)

 

Proceeds from exercise of stock options

 

 

1,828

 

 

446

 

Net cash provided by financing activities

 

 

1,547

 

 

220

 

 

 

 

 

 

 

 

 

Effect of exchange rate changes on cash and cash equivalents

 

 

123

 

 

(406)

 

Net (decrease) increase in cash, cash equivalents and restricted cash

 

 

(14,934)

 

 

7,591

 

 

 

 

 

 

 

 

 

Cash, cash equivalents and restricted cash at beginning of period

 

 

184,902

 

 

140,880

 

Cash, cash equivalents and restricted cash at end of period

 

$

169,968

 

$

148,471

 

 

 

 

 

 

 

 

 

 

See accompanying Notes to these Consolidated Financial Statements

 

 

 

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Axcelis Technologies, Inc.

Notes to Consolidated Financial Statements (Unaudited)

 

Note 1.  Nature of Business

 

Axcelis Technologies, Inc. (“Axcelis” or the “Company”) was incorporated in Delaware in 1995, and is a producer of ion implantation and other processing equipment used in the fabrication of semiconductor chips in the United States, Europe and Asia. In addition, we provide extensive worldwide aftermarket service and support, including spare parts, equipment upgrades, used equipment and maintenance services to the semiconductor industry. 

 

The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments which are of a normal recurring nature and considered necessary for a fair presentation of these financial statements have been included. Operating results for the interim periods presented are not necessarily indicative of the results that may be expected for other interim periods or for the year as a whole.

 

The balance sheet at December 31, 2018 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. For further information, refer to the consolidated financial statements and footnotes thereto included in Axcelis Technologies, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2018.

 

 

Note 2.  Stock-Based Compensation

 

We maintain the Axcelis Technologies, Inc. 2012 Equity Incentive Plan (the “2012 Equity Plan”), which became effective on May 2, 2012, and permits the issuance of options, restricted stock, restricted stock units and performance awards to selected employees, directors and consultants of the Company. Our 2000 Stock Plan (the “2000 Stock Plan”) expired on May 1, 2012 and no new grants may be made under that plan after that date.  However, unexpired awards granted under the 2000 Stock Plan remain outstanding and subject to the terms of the 2000 Stock Plan. We also maintain the Axcelis Technologies, Inc. Employee Stock Purchase Plan (the “ESPP”), an Internal Revenue Code Section 423 plan.

 

The 2012 Equity Plan and the ESPP are more fully described in Note 13 to the consolidated financial statements in our 2018 Annual Report on Form 10-K.

 

We recognized stock-based compensation expense of $1.7 million and $1.1 million for the three month periods ended March 31, 2019 and 2018, respectively. These amounts include compensation expense related to restricted stock units (“RSUs”) and non-qualified stock options.

 

In the three month periods ended March 31, 2019 and 2018,  we issued 0.3 million and 0.1 million shares of common stock, respectively, upon stock option exercises and vesting of RSUs. In the three month periods ended March 31, 2019 and 2018,  we received proceeds of $1.8 million and $0.4 million, respectively, upon the exercise of stock options.

 

 

Note 3.  Leases 

 

We have operating leases for office space, warehouse space, computer and office equipment and vehicles used in our business operations. We have a finance lease in relation to the 2015 sale-leaseback of our corporate headquarters in Beverly, Massachusetts. We review all contract agreements to determine if the agreement contains a lease component. An agreement contains a lease component if it provides the use of a specific physical space or a specific physical item. We recognize the lease obligation on a discounted basis using the explicit or implicit discount rate stated within the agreement. For those lease agreements that do not indicate the applicable discount rate, we use the corporate borrowing rate. The value of the right-of-use asset is initially determined based on the net present value of the associated liability, and is adjusted for deferred costs and possible impairments, if any. We have made certain policy elections. Operating leases with an initial term of 12 months or less are not recorded on the consolidated balance sheet. We recognize lease expense for operating 

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leases on a straight-line basis over the lease term. We account for lease components and non-lease components that are fixed payments as one component. Some of our operating leases include one or more options to renew, with renewal terms that can extend the respective lease term 1 to 3 years. The exercise of lease renewal options are at our sole discretion. For lease extensions that are reasonably certain to occur, we have included these renewal periods in our calculation of the net present value of the lease obligation and related right-of-use asset. Certain leases also include options to purchase the leased property. The depreciable life of certain 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. The amounts of operating and finance lease right-of-use assets and related lease obligations recorded within our consolidated balance sheet are as follows:

 

 

 

 

 

 

 

 

 

 

 

 

March 31,

 

 

 

Leases

Classification

    

2019

    

    

 

Assets

 

 

(in thousands)

 

 

 

Operating lease

Operating lease assets

 

$

7,453

 

 

 

Finance lease

Finance lease assets *

 

 

22,895

 

 

 

Total leased assets

 

 

$

30,348

 

 

 

Liabilities

 

 

 

 

 

 

 

Current

 

 

 

 

 

 

 

Operating

Other current liabilities

 

$

3,646

 

 

 

Finance

Other current liabilities

 

 

 —

 

 

 

Noncurrent

 

 

 

 

 

 

 

Operating

Other long-term liabilities

 

 

3,805

 

 

 

Finance

Finance lease obligation

 

 

48,549

 

 

 

Total lease liabilities

 

 

$

56,000

 

 

 

 

 

 

 

 

 

 

 

* Finance lease assets are recorded net of accumulated depreciation of $46.7 million and include $0.8 million of prepaid financing costs as of March 31, 2019.

 

 

 

 

 

 

 

 

 

 

 

All of our office locations support selling and servicing functions. Lease expense, depreciation expense relating to finance leased assets and interest expense relating to our finance lease obligation recognized within our consolidated statement of operations for the three months ended March 31, 2019 are as follows:

 

 

 

 

 

 

 

Lease cost

Classification

 

Three months ended

 

 

 

 

March 31,

 

 

 

    

2019

    

Operating lease cost

 

 

(in thousands)

 

Service

Cost of revenue

 

$

597

 

Research & development

Operating expenses

 

 

66

 

Selling*

Operating expenses

 

 

355

 

General & administrative*

Operating expenses

 

 

208

 

Total operating lease cost

 

 

$

1,226

 

Finance lease cost

 

 

 

 

 

Depreciation of leased assets

COGS, R&D, Selling and G&A

 

$

333

 

Interest on lease liabilities

Interest expense

 

 

1,230

 

Total finance lease cost

 

 

$

1,563

 

 

 

 

 

 

 

Total lease cost

 

 

$

2,789

 

* Selling, general and administrative expense includes short-term lease and variable lease costs of approximately $0.2 million.

 

 

 

 

   

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Our corporate headquarters facility, shown below under finance leases, has an original lease term of 22 years. All other locations are treated as operating leases, with lease terms ranging from 1 to 10 years. The tables below reflect the minimum cash outflow regarding our current lease obligations as well as the weighted-average remaining lease term and weighted-average discount rates used on our calculation of our lease obligations and right-of-use assets: 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Finance

 

Operating

    

Total

 

Maturity of Lease Liabilities

 

Leases

 

Leases

 

Leases

 

 

 

(in thousands)

 

2019

 

$

4,203

 

$

2,859

 

$

7,062

 

2020

 

 

5,720

 

 

3,107

 

 

8,827

 

2021

 

 

5,848

 

 

1,447

 

 

7,295

 

2022

 

 

5,980

 

 

372

 

 

6,352

 

2023

 

 

6,114

 

 

43

 

 

6,157

 

Thereafter

 

 

85,905

 

 

21

 

 

85,926

 

Total lease payments

 

$

113,770

 

$

7,849

 

$

121,619

 

Less interest portion*

 

 

(65,221)

 

 

(398)

 

 

(65,619)

 

Finance lease and operating lease obligations

 

$

48,549

 

$

7,451

 

$

56,000

 

* Finance lease interest calculated using the implied interest rate; operating lease interest calculated using estimated corporate borrowing rate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31,

 

Lease term and discount rate

    

2019

 

Weighted-average remaining lease term (years)

 

 

 

 

Operating leases

 

 

2.4

 

Finance leases

 

 

17.8

 

Weighted-average discount rate

 

 

 

 

Operating leases

 

 

4.5%

 

Finance leases

 

 

10.5%

 

 

 

 

 

 

 

Our cash outflows from our operating leases include rent expense and other charges associated with these leases. These cash flows are included within the operating section of our statement of cash flows. Our cash flows from our finance lease currently include an interest only component and starting in April 2020, both an interest and payment of principal component. The table below shows our cash outflows, by lease type and related section of our statement of cash flows as well as the non-cash amount capitalized on our balance sheet in relation to our operating lease right-of-use assets:

 

 

 

 

 

 

 

 

Three months ended

 

 

 

March 31,

 

 

    

2019

 

Cash paid for amounts included in the measurement of lease liabilities

 

(in thousands)

 

Operating cash outflows from operating leases

 

$

1,226

 

Operating cash outflows from finance leases

 

 

1,391

 

Financing cash outflows from finance leases

 

 

 —

 

Operating lease assets obtained in exchange for new operating lease liabilities

 

 

7,453

 

Finance lease assets obtained in exchange for new finance lease liabilities

 

$

 —

 

 

 

 

 

 

 

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Note 4.  Revenue

 

 To reflect the organization of our business operations, we divide revenue into two categories: revenue from sales of ion implant and revenue arising from the sale of used systems, parts and labor to customers who own systems, which we refer to as Aftermarket.

 

Revenue by categories used by management are as follows:

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended

 

 

 

March 31,

 

 

 

2019

 

2018

 

 

 

(in thousands)

Ion Implant

 

 

$

57,092

 

$

85,475

Aftermarket

 

 

 

34,385

 

 

36,710

 

 

 

$

91,477

 

$

122,185

 

Revenue by geographic markets is determined based upon the location of where our products are shipped and our services are performed. Revenue in our principal geographic markets is as follows:

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended

 

 

 

March 31,

 

 

 

2019

 

2018

 

 

 

(in thousands)

North America

 

 

$

11,607

 

$

10,523

Asia Pacific

 

 

 

62,927

 

 

97,689

Europe

 

 

 

16,943

 

 

13,973

 

 

 

$

91,477

 

$

122,185

 

Contract assets and contract liabilities are as follows:

 

 

 

 

 

 

 

 

 

 

March 31,

 

December 31,

 

 

2019

 

2018

 

 

(in thousands)

Contract assets

 

$

 —

 

$

 —

 

 

 

 

 

 

 

Contract liabilities

 

$

20,481

 

$

22,584

 

Contract liabilities are reflected as deferred revenue on the consolidated balance sheet and relate to payments invoiced or received in advance of completion of performance obligations under a contract. Contract liabilities are recognized as revenue upon the fulfillment of performance obligations.

 

 

 

 

 

 

 

 

 

Three months ended

 

 

March 31,

 

 

2019

 

2018

 

 

(in thousands)

Revenue recognized in the period from:

 

 

 

 

 

 

   Amounts included in contract liability at the beginning of the period

 

$

6,181

 

$

6,342

   Performance obligations satisfied in previous periods

 

$

 —

 

$

 —

 

The majority of our system transactions have payment terms of 90% due upon shipment of the tool and 10% due upon installation. Aftermarket transaction payment terms are such that payment is due either within 30 or 60 days of service provided or delivery of parts.

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Note 5.  Computation of Net Earnings per Share

 

Basic earnings per share is computed by dividing income available to common stockholders (the numerator) by the weighted‑average number of common shares outstanding (the denominator) for the period. The computation of diluted earnings per share is similar to basic earnings per share, except that the denominator is increased by the number of additional common shares that would have been outstanding if the potentially dilutive common shares issuable for stock options and RSUs had been issued, calculated using the treasury stock method.

 

The components of net earnings per share are as follows:

 

 

 

 

 

 

 

 

 

 

 

Three months ended 

 

 

 

March 31,

 

 

    

2019

    

2018

    

 

 

(in thousands, except per share amounts)

 

Net income available to common stockholders

 

$

6,062

 

$

13,915

 

Weighted average common shares outstanding used in computing basic income per share

 

 

32,683

 

 

32,094

 

Incremental options and RSUs

 

 

1,541

 

 

2,029

 

Weighted average common shares used in computing diluted net income per share

 

 

34,224

 

 

34,123

 

Net income per share

 

 

 

 

 

 

 

Basic

 

$

0.19

 

$

0.43

 

Diluted

 

$

0.18

 

$

0.41

 

 

Diluted weighted average common shares outstanding does not include options and RSUs outstanding to purchase ten thousand common equivalent shares for the three month periods ended March 31, 2019 and 2018, respectively, as their effect would have been anti-dilutive.

 

 

Note 6.  Accumulated Other Comprehensive Loss

 

The following table presents the changes in accumulated other comprehensive income, net of tax, by component, for the three months ended March 31, 2019:

 

 

 

 

 

 

 

 

 

 

 

 

 

    

Foreign

    

Defined benefit

    

 

 

 

 

 

currency

 

pension plan

 

Total

 

 

 

(in thousands)

 

Balance at December 31, 2018

 

$

962

 

$

(514)

 

$

448

 

Other comprehensive loss and pension reclassification

 

 

(495)

 

 

30

 

 

(465)

 

Balance at March 31, 2019

 

$

467

 

$

(484)

 

$

(17)

 

 

 

 

Note 7. Cash, cash equivalents and restricted cash

 

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the consolidated balance sheet that sum to the total of the amounts shown in the statement of cash flows.

 

 

 

 

 

 

 

 

 

March 31,

 

December 31,

 

 

2019

 

 

2018

 

 

(in thousands)

 

Cash and cash equivalents

$

163,104

 

$

177,993

 

Short-term and long-term restricted cash

 

6,864

 

 

6,909

 

Total cash, cash equivalents and restricted cash

$

169,968

 

$

184,902

 

 

As of March 31, 2019, we had $6.9 million in restricted cash which relates to a  $5.9 million letter of credit associated with a security deposit for the lease of our corporate headquarters in Beverly, Massachusetts, a $0.7 million letter

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of credit relating to workers’ compensation insurance, a bank guarantee of our performance relating to a  customer payment in the amount of $0.2 million and a $0.1 million deposit relating to customs activity. 

 

Note 8.  Inventories, net

 

The components of inventories are as follows:

 

 

 

 

 

 

 

 

 

 

 

March 31,

 

December 31,

 

 

    

2019

    

2018

    

 

 

(in thousands)

 

Raw materials

 

$

95,639

 

$

91,875

 

Work in process

 

 

19,078

 

 

23,857

 

Finished goods (completed systems)

 

 

19,334

 

 

13,268

 

     Inventories, net

 

$

134,051

 

$

129,000

 

 

When recorded, inventory reserves reduce the carrying value of inventories to their net realizable value. We establish inventory reserves when conditions exist that indicate inventory may be in excess of anticipated demand or is obsolete based upon assumptions about future demand for the Company’s products or market conditions. We regularly evaluate the ability to realize the value of inventories based on a combination of factors including the following: forecasted sales or usage, estimated product end of life dates, estimated current and future market value and new product introductions. Purchasing and usage alternatives are also explored to mitigate inventory exposure.

 

Note 9.  Product Warranty

 

We generally offer a one year warranty for all of our systems, the terms and conditions of which vary depending upon the product sold. For all systems sold, we accrue a liability for the estimated cost of standard warranty at the time of system shipment and defer the portion of systems revenue attributable to the fair value of non-standard warranty. Costs for non-standard warranty are expensed as incurred. Factors that affect our warranty liability include the number of installed units, historical and anticipated product failure rates, material usage and service labor costs. We periodically assess the adequacy of our recorded liability and adjust the amount as necessary.

 

The changes in our standard product warranty liability are as follows: