Kulicke & Soffa Industries Inc 10-Q for FY2020 Q3

Kulicke & Soffa Industries Inc (KLIC)

10-Q 2020-07-30 For: 2020-06-27

Added on April 09, 2026

About this 10-Q

Kulicke & Soffa Industries Inc filed this 10-Q on July 30, 2020, covering the quarter ended June 27, 2020 (FY2020 Q3).

Headline figures

Quarter ended June 27, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $150.45M; up 18.4% from $127.11M a year earlier
Net income: $11.15M; up 766.4% from net income of $1.29M a year earlier
Diluted EPS: $0.18; up 800.0% from $0.02 a year earlier

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Pennsylvania	23-1498399
(State or other jurisdiction of incorporation)	(IRS Employer
	Identification No.)



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, Without Par Value	KLIC	The Nasdaq Global Market



Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐



		Page Number

PART I - FINANCIAL INFORMATION

Item 1.	FINANCIAL STATEMENTS (Unaudited)

	Consolidated Condensed Balance Sheets as of June 27, 2020 and September 28, 2019	1

	Consolidated Condensed Statements of Operations for the three and nine months ended June 27, 2020 and June 29, 2019	2

	Consolidated Condensed Statements of Comprehensive Income for the three and nine months ended June 27, 2020 and June 29, 2019	3

	Consolidated Condensed Statements of Changes in Shareholders' Equity for the three and nine months ended June 27, 2020 and June 29, 2019	4

	Consolidated Condensed Statements of Cash Flows for the nine months ended June 27, 2020 and June 29, 2019	6

	Notes to Consolidated Condensed Financial Statements	7

Item 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	28

Item 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	38

Item 4.	CONTROLS AND PROCEDURES	39

PART II - OTHER INFORMATION

Item 1.	LEGAL PROCEEDINGS	40

Item 1A.	RISK FACTORS	40

Item 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	41

Item 6.	EXHIBITS	42

	SIGNATURES	43



	As of
	June 27, 2020			September 28, 2019
ASSETS
Current assets:
Cash and cash equivalents	$	321,775		$	364,184
Short-term investments	194,000			229,000
Accounts and other receivable, net of allowance for doubtful accounts of $1,306 and $597, respectively	195,489			195,830
Inventories, net	114,194			89,308
Prepaid expenses and other current assets	13,735			15,429
Total current assets	839,193			893,751
Property, plant and equipment, net	55,826			72,370
Operating right-of-use assets	22,192			—
Goodwill	56,053			55,691
Intangible assets, net	38,207			42,651
Deferred tax assets	8,515			6,409
Equity investments	7,367			6,250
Other assets	2,112			2,494
TOTAL ASSETS	$	1,029,465		$	1,079,616

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term debt	$	—		$	60,904
Accounts payable	49,659			36,711
Operating lease liabilities	5,471			—
Income tax payable	13,050			12,494
Accrued expenses and other current liabilities	74,624			64,533
Total current liabilities	142,804			174,642
Financing obligation	—			14,207
Deferred tax liabilities	34,508			32,054
Income tax payable	74,307			80,290
Operating lease liabilities	18,124			—
Other liabilities	10,078			9,360
TOTAL LIABILITIES	$	279,821		$	310,553

Commitments and contingent liabilities (Note 15)

Shareholders' equity:
Preferred stock, without par value: Authorized 5,000 shares; issued - none	$	—		$	—
Common stock, without par value: Authorized 200,000 shares; issued 85,364 and 85,364, respectively; outstanding 61,925 and 63,172 shares, respectively	536,487			533,590
Treasury stock, at cost, 23,439 and 22,192 shares, respectively	(387,302		)	(349,212		)
Retained earnings	607,733			594,625
Accumulated other comprehensive loss	(7,274		)	(9,940		)
TOTAL SHAREHOLDERS' EQUITY	$	749,644		$	769,063
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	1,029,465		$	1,079,616



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



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



	Three months ended						Nine months ended
	June 27, 2020			June 29, 2019			June 27, 2020			June 29, 2019
Net revenue	$	150,450		$	127,109		$	445,488		$	400,225
Cost of sales	81,027			68,329			236,398			211,073
Gross profit	69,423			58,780			209,090			189,152
Selling, general and administrative	27,905			28,724			85,723			87,626
Research and development	30,547			28,229			87,906			87,609
Operating expenses	58,452			56,953			173,629			175,235
Income from operations	10,971			1,827			35,461			13,917
Interest income	1,374			3,956			6,888			11,647
Interest expense	(446		)	(632		)	(1,690		)	(1,137		)
Income before income taxes	11,899			5,151			40,659			24,427
Provision for income taxes	690			3,864			3,985			19,106
Share of results of equity-method investee, net of tax	58			—			158			72
Net income	$	11,151		$	1,287		$	36,516		$	5,249

Net income per share:
Basic	$	0.18		$	0.02		$	0.58		$	0.08
Diluted	$	0.18		$	0.02		$	0.57		$	0.08

Weighted average shares outstanding:
Basic	62,313			64,683			63,200			65,914
Diluted	62,833			65,431			63,755			66,597



	Common Stock					Treasury Stock			Retained Earnings			Accumulated Other Comprehensive Loss			Shareholders' Equity
	Shares		Amount			Treasury Stock			Retained Earnings			Accumulated Other Comprehensive Loss			Shareholders' Equity
Balances as of September 28, 2019	63,173		$	533,590		$	(349,212	)	$	594,625		$	(9,940	)	$	769,063
Issuance of stock for services rendered	9		131			91			—			—			222
Repurchase of common stock	(224	)	—			(5,369		)	—			—			(5,369		)
Issuance of shares for equity-based compensation	800		(7,653		)	7,653			—			—			—
Equity-based compensation	—		3,387			—			—			—			3,387
Cumulative effect of accounting changes	—		—			—			(769		)	—			(769		)
Cash dividend declared	—		—			—			(7,651		)	—			(7,651		)
Components of comprehensive income:
Net income	—		—			—			13,477			—			13,477
Other comprehensive income	—		—			—			—			3,293			3,293
Total comprehensive income	—		—			—			13,477			3,293			16,770
Balances as of December 28, 2019	63,758		$	529,455		$	(346,837	)	$	599,682		$	(6,647	)	$	775,653
Issuance of stock for services rendered	8		142			79			—			—			221
Repurchase of common stock	(872	)	—			(18,522		)	—			—			(18,522		)
Issuance of shares for equity-based compensation	19		(185		)	185			—			—			—
Equity-based compensation	—		3,500			—			—			—			3,500
Cash dividend declared	—		—			—			(7,557		)	—			(7,557		)
Components of comprehensive income/(loss):
Net income	—		—			—			11,888			—			11,888
Other comprehensive loss	—		—			—			—			(2,785		)	(2,785		)
Total comprehensive income/(loss)	—		—			—			11,888			(2,785		)	9,103
Balances as of March 28, 2020	62,913		$	532,912		$	(365,095	)	$	604,013		$	(9,432	)	$	762,398
Issuance of stock for services rendered	9		102			84			—			—			186
Repurchase of common stock	(1,004	)	—			(22,358		)	—			—			(22,358		)
Issuance of shares for equity-based compensation	7		(67		)	67			—			—			—
Equity-based compensation	—		3,540			—			—			—			3,540
Cash dividend declared	—		—			—			(7,431		)	—			(7,431		)
Components of comprehensive income:
Net income	—		—			—			11,151			—			11,151
Other comprehensive income	—		—			—			—			2,158			2,158
Total comprehensive income	—		—			—			11,151			2,158			13,309
Balances as of June 27, 2020	61,925		$	536,487		$	(387,302	)	$	607,733		$	(7,274	)	$	749,644


•	Equity method investments are equity securities in investees that provide the Company with the ability to exercise significant influence in which it lacks a controlling financial interest. Our proportionate share of the income or loss is recognized on a one-quarter lag and is recorded as share of results of equity-method investee, net of tax.


•	Non-marketable equity securities are equity securities without readily determinable fair value that are measured and recorded using a measurement alternative that measures the securities at cost minus impairment, if any, plus or minus changes resulting from qualifying observable price changes.


•	Right of Return: A large portion of our revenue comes from the sale of equipment used in the semiconductor assembly process. Other product sales relate to consumable products, which are sold in high-volume quantities, and are generally



	As of
(in thousands)	June 27, 2020			September 28, 2019

Short-term investments, available-for-sale⁽¹⁾	$	194,000		$	229,000

Inventories, net:
Raw materials and supplies	$	63,878		$	52,853
Work in process	41,757			32,026
Finished goods	39,663			33,742
	145,298			118,621
Inventory reserves	(31,104		)	(29,313		)
	$	114,194		$	89,308
Property, plant and equipment, net:
Land	$	2,182		$	2,182
Buildings and building improvements	22,542			41,961
Leasehold improvements	22,812			24,441
Data processing equipment and software	37,760			36,302
Machinery, equipment, furniture and fixtures	76,589			71,465
Construction in progress	6,578			6,512
	168,463			182,863
Accumulated depreciation	(112,637		)	(110,493		)
	$	55,826		$	72,370
Accrued expenses and other current liabilities:
Accrued customer obligations ⁽²⁾	$	25,322		$	26,292
Wages and benefits	31,074			18,188
Dividend payable	7,431			7,582
Commissions and professional fees	2,486			2,024
Deferred rent	—			1,721
Severance	494			1,500
Other	7,817			7,226
	$	74,624		$	64,533


(1)	All short-term investments were classified as available-for-sale and were measured at fair value based on level one measurement, or quoted market prices, as defined by ASC 820. The Company did not recognize any realized gains or losses on the sale of investments during the three and nine months ended June 27, 2020 and June 29, 2019.


(2)	Represents customer advance payments, customer credit program, accrued warranty expense and accrued retrofit obligations.



	Three months ended						Nine months ended
	June 27, 2020			June 29, 2019			June 27, 2020			June 29, 2019
Net income	$	11,151		$	1,287		$	36,516		$	5,249
Other comprehensive income/(loss):
Foreign currency translation adjustment	745			(42		)	2,424			(1,430		)
Unrecognized actuarial loss on pension plan, net of tax	(5		)	(31		)	(71		)	(9		)
	740			(73		)	2,353			(1,439		)

Derivatives designated as hedging instruments:
Unrealized gain/(loss) on derivative instruments, net of tax	1,034			(49		)	(340		)	39
Reclassification adjustment for gain on derivative instruments recognized, net of tax	384			33			653			1,165
Net increase/(decrease) from derivatives designated as hedging instruments, net of tax	1,418			(16		)	313			1,204

Total other comprehensive gain/(loss)	2,158			(89		)	2,666			(235		)

Comprehensive income	$	13,309		$	1,198		$	39,182		$	5,014



	Nine months ended
	June 27, 2020			June 29, 2019
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	36,516		$	5,249
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	14,597			15,001
Equity-based compensation and employee benefits	11,056			10,772
Adjustment for doubtful accounts	709			(385		)
Adjustment for inventory valuation	3,197			2,059
Deferred income taxes	360			2,450
Loss/(gain) on disposal of property, plant and equipment	860			(19		)
Unrealized foreign currency translation	909			117
Share of results of equity-method investee	158			72
Changes in operating assets and liabilities:
Accounts and other receivable	(122		)	92,696
Inventories	(28,013		)	15,960
Prepaid expenses and other current assets	1,697			(10,623		)
Accounts payable, accrued expenses and other current liabilities	25,903			(48,148		)
Income tax payable	(5,428		)	(3,655		)
Other, net	282			1,635
Net cash provided by operating activities	62,681			83,181

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment	(7,849		)	(9,665		)
Proceeds from sales of property, plant and equipment	—			39
Purchase of equity investments	(1,288		)	(5,000		)
Purchase of short-term investments	(234,000		)	(489,000		)
Maturity of short-term investments	269,000			534,000
Net cash provided by investing activities	25,863			30,374

CASH FLOWS FROM FINANCING ACTIVITIES:
Payment on debts	(147,143		)	(574		)
Payment for finance lease	(67		)	—
Repurchase of common stock	(46,851		)	(85,469		)
Common stock cash dividends paid	(22,796		)	(23,902		)
Proceeds from short-term debt	86,239			71,194
Net cash used in financing activities	(130,618		)	(38,751		)
Effect of exchange rate changes on cash and cash equivalents	(335		)	60



	As of						Average estimated
(dollar amounts in thousands)	June 27, 2020			September 28, 2019			useful lives (in years)
Developed technology	$	88,591		$	87,209		7.0 to 15.0
Accumulated amortization	(52,327		)	(48,718		)
Net developed technology	$	36,264		$	38,491

Customer relationships	$	35,586		$	35,180		5.0 to 6.0
Accumulated amortization	(34,218		)	(31,862		)
Net customer relationships	$	1,368		$	3,318

Trade and brand names	$	7,285		$	7,219		7.0 to 8.0
Accumulated amortization	(6,710		)	(6,377		)
Net trade and brand names	$	575		$	842

Other intangible assets	$	2,500		$	2,500		1.9
Accumulated amortization	(2,500		)	(2,500		)
Net other intangible assets	$	—		$	—

Net intangible assets	$	38,207		$	42,651



	As of
(in thousands)	June 27, 2020
Remaining fiscal 2020	$	1,845
Fiscal 2021	5,346
Fiscal 2022	4,380
Fiscal 2023	4,284
Fiscal 2024	4,284
Thereafter	18,068
Total amortization expense	$	38,207



(in thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses		Estimated Fair Value
Current assets:
Cash	$	165,213	$	—	$	—	$	165,213
Cash equivalents:
Money market funds ⁽¹⁾	126,555		—		—		126,555
Time deposits ⁽²⁾	30,007		—		—		30,007
Total cash and cash equivalents	$	321,775	$	—	$	—	$	321,775
Short-term investments ⁽²⁾:
Time deposits	95,000		—		—		95,000
Deposits ⁽³⁾	99,000		—		—		99,000
Total short-term investments	$	194,000	$	—	$	—	$	194,000
Total cash, cash equivalents and short-term investments	$	515,775	$	—	$	—	$	515,775


(1)	The fair value was determined using unadjusted prices in active, accessible markets for identical assets, and as such they were classified as Level 1 assets in the fair value hierarchy.


(3)	Represents deposits that require a notice period of three months for withdrawal.


(1)	On January 30, 2019, the Company made a $5.0 million investment in one of our collaborative partners, over which the Company does not have significant influence. During the three and nine months ended June 27, 2020, there was no impairment or adjustment to the observable price.


(1)	The fair value of derivative liabilities is measured using level 2 fair value inputs and is included in accrued expenses and other current liabilities on our Consolidated Condensed Balance Sheet.


(2)	Hedged amounts expected to be recognized to income within the next twelve months.


(1)	Net change in the fair value of the effective portion classified in OCI.


(2)	Effective portion classified as selling, general and administrative expense.


(1)	Operating lease expense includes short-term lease expense, which is immaterial for the three and nine months ended June 27, 2020.



	As of
	June 27, 2020
Operating leases:
Weighted-average remaining lease term (in years):	4.7
Weighted-average discount rate:	4.6	%



(in thousands)	Operating leases
Remainder of 2020	$	1,658
2021	6,288
2022	5,635
2023	5,420
2024	2,985
Thereafter	4,385
Total minimum lease payments	26,371
Less: Interest	2,776
Present value of lease obligations	23,595
Less: Current portion	5,471
Long-term portion of lease obligations	$	18,124



			Payments due by fiscal year
(in thousands)	Total		2020		2021		2022		2023		2024		Thereafter
Operating lease obligations ⁽¹⁾	$	16,273	$	4,089	$	2,576	$	2,182	$	1,967	$	1,822	$	3,637



	Three months ended		Nine months ended
(shares in thousands)	June 27, 2020	June 29, 2019	June 27, 2020	June 29, 2019
Time-based RSUs	13	2	490	521
Relative TSR PSUs	5	1	163	166
Special/Growth PSUs	2	1	75	56
Common stock	9	10	26	28
Equity-based compensation in shares	29	14	754	771



	Three months ended
(in thousands, except per share data)	June 27, 2020				June 29, 2019
	Basic		Diluted		Basic		Diluted
NUMERATOR:
Net income	$	11,151	$	11,151	$	1,287	$	1,287
DENOMINATOR:
Weighted average shares outstanding - Basic	62,313		62,313		64,683		64,683
Dilutive effect of Equity Plans			520				748
Weighted average shares outstanding - Diluted			62,833				65,431
EPS:
Net income per share - Basic	$	0.18	$	0.18	$	0.02	$	0.02
Effect of dilutive shares			—				—
Net income per share - Diluted			$	0.18			$	0.02


(1)	The Company orders inventory components in the normal course of its business. A portion of these orders are non-cancellable, however, some orders impose varying penalties and charges in the event of cancellation.


•	our expectations regarding the potential impacts on our business of the COVID-19 pandemic, including the economic and public health effects, and of governmental and other responses to these impacts;


•	projected growth rates in the overall semiconductor industry, the semiconductor assembly equipment market, and the market for semiconductor packaging materials; and


•	projected demand for ball bonder, wedge bonder, advanced packaging and electronic assembly equipment and for tools, spare parts and services.



	Three months ended				Basis Point
	June 27, 2020		June 29, 2019		Change
Capital Equipment	41.8	%	42.4	%	(60	)
APS	58.6	%	55.4	%	320
Total gross profit margin	46.1	%	46.2	%	(10	)



			Payments due in
(in thousands)	Total		Less than 1 year		1 - 3 years		3 - 5 years		More than 5 years
Inventory purchase obligations ⁽¹⁾	$	125,803	$	125,803	$	—	$	—	$	—
U.S. one-time transition tax payable ⁽²⁾ (reflected on our Consolidated Condensed Balance Sheets)	67,161		5,676		12,944		28,316		20,225
Asset retirement obligations ⁽³⁾ (reflected on our Consolidated Condensed Balance Sheets)	1,728		291		159		1,143		135
Total	$	194,692	$	131,770	$	13,103	$	29,459	$	20,360