Kulicke & Soffa Industries Inc 10-Q for FY2020 Q1

Kulicke & Soffa Industries Inc (KLIC)

10-Q 2020-01-31 For: 2019-12-28

Added on April 09, 2026

About this 10-Q

Kulicke & Soffa Industries Inc filed this 10-Q on January 31, 2020, covering the quarter ended December 28, 2019 (FY2020 Q1).

Headline figures

Quarter ended December 28, 2019, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $144.3M; down 8.2% from $157.21M a year earlier
Net income: $13.48M; up 79.3% from net income of $7.52M a year earlier
Diluted EPS: $0.21; up 90.9% from $0.11 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 December 28, 2019 and September 28, 2019	1

	Consolidated Condensed Statements of Operations for the three months ended December 28, 2019 and December 29, 2018	2

	Consolidated Condensed Statements of Comprehensive Income (Loss) for the three months ended December 28, 2019 and December 29, 2018	3

	Consolidated Condensed Statements of Shareholders' Equity for the three months ended December 28, 2019 and December 29, 2018	4

	Consolidated Condensed Statements of Cash Flows for the three months ended December 28, 2019 and December 29, 2018	5

	Notes to Consolidated Condensed Financial Statements	6

Item 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	26

Item 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	35

Item 4.	CONTROLS AND PROCEDURES	36

PART II - OTHER INFORMATION

Item 1A.	RISK FACTORS	37

Item 2.	UNREGISTERED SALES OF EQUITY SECURITIES	37

Item 6.	EXHIBITS	38

	SIGNATURES	39



	As of
	December 28, 2019			September 28, 2019
ASSETS
Current assets:
Cash and cash equivalents	$	497,374		$	364,184
Short-term investments	119,000			229,000
Accounts and other receivable, net of allowance for doubtful accounts of $614 and $597, respectively	198,842			195,830
Inventories, net	95,209			89,308
Prepaid expenses and other current assets	16,182			15,429
Total current assets	926,607			893,751
Property, plant and equipment, net	56,826			72,370
Operating right-of-use assets	20,830			—
Goodwill	55,995			55,691
Intangible assets, net	41,728			42,651
Deferred tax assets	6,549			6,409
Equity investments	7,477			6,250
Other assets	2,070			2,494
TOTAL ASSETS	$	1,118,082		$	1,079,616

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short term debt	$	75,967		$	60,904
Accounts payable	44,903			36,711
Operating lease liabilities	5,427			—
Income tax payable	13,384			12,494
Accrued expenses and other current liabilities	62,522			64,533
Total current liabilities	202,203			174,642
Financing obligation	—			14,207
Deferred tax liabilities	33,169			32,054
Income tax payable	80,415			80,290
Operating lease liabilities	17,205			—
Other liabilities	9,437			9,360
TOTAL LIABILITIES	$	342,429		$	310,553

Commitments and contingent liabilities (Note 15)

SHAREHOLDERS' EQUITY:
Preferred stock, without par value: Authorized 5,000 shares; issued - none	$	—		$	—
Common stock, no par value: Authorized 200,000 shares; issued 85,364 and 85,364, respectively; outstanding 63,758 and 63,172 shares, respectively	529,487			533,590
Treasury stock, at cost, 21,606 and 22,192 shares, respectively	(346,869		)	(349,212		)
Retained earnings	599,682			594,625
Accumulated other comprehensive loss	(6,647		)	(9,940		)
TOTAL SHAREHOLDERS' EQUITY	$	775,653		$	769,063
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	1,118,082		$	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
	December 28, 2019			December 29, 2018
Net revenue	$	144,297		$	157,208
Cost of sales	73,933			82,409
Gross profit	70,364			74,799
Selling, general and administrative	28,658			30,441
Research and development	28,292			29,803
Operating expenses	56,950			60,244
Income from operations	13,414			14,555
Interest income	2,839			3,826
Interest expense	(583		)	(251		)
Income before income taxes	15,670			18,130
Provision for income taxes	2,133			10,570
Share of results of equity-method investee, net of tax	60			43
Net income	$	13,477		$	7,517

Net income per share:
Basic	$	0.21		$	0.11
Diluted	$	0.21		$	0.11

Weighted average shares outstanding:
Basic	63,557			67,176
Diluted	64,139			67,851



	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		—			222			—			—			222
Repurchase of common stock	(224	)	—			(5,369		)	—			—			(5,369		)
Issuance of shares for equity-based compensation	800		(7,490		)	7,490			—			—			—
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		$	529,487		$	(346,869	)	$	599,682		$	(6,647	)	$	775,653


•	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 maintained at low stock levels at customer's facility. Customer returns have historically represented a very small percentage of customer sales on an annual basis.



	As of
(in thousands)	December 28, 2019			September 28, 2019

Short term investments, available-for-sale⁽¹⁾	$	119,000		$	229,000

Inventories, net:
Raw materials and supplies	$	51,651		$	52,853
Work in process	37,481			32,026
Finished goods	36,122			33,742
	125,254			118,621
Inventory reserves	(30,045		)	(29,313		)
	$	95,209		$	89,308
Property, plant and equipment, net:
Land	$	2,182		$	2,182
Buildings and building improvements	22,282			41,961
Leasehold improvements	24,542			24,441
Data processing equipment and software	36,626			36,302
Machinery, equipment, furniture and fixtures	73,018			71,465
Construction in progress	6,769			6,512
	165,419			182,863
Accumulated depreciation	(108,593		)	(110,493		)
	$	56,826		$	72,370
Accrued expenses and other current liabilities:
Accrued customer obligations ⁽²⁾	$	26,484		$	26,292
Wages and benefits	18,473			18,188
Dividend payable	7,651			7,582
Commissions and professional fees	2,432			2,024
Deferred rent	—			1,721
Severance	1,205			1,500
Other	6,277			7,226
	$	62,522		$	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 months ended December 28, 2019 and December 29, 2018.


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



	Three months ended
	December 28, 2019			December 29, 2018
Net income	$	13,477		$	7,517
Other comprehensive income/(loss):
Foreign currency translation adjustment	2,514			(979		)
Unrecognized actuarial (loss)/gain on pension plan, net of tax	(25		)	4
	2,489			(975		)

Derivatives designated as hedging instruments:
Unrealized gain/(loss) on derivative instruments, net of tax	607			(72		)
Reclassification adjustment for loss on derivative instruments recognized, net of tax	197			865
Net increase from derivatives designated as hedging instruments, net of tax	804			793

Total other comprehensive gain/(loss)	3,293			(182		)

Comprehensive income	$	16,770		$	7,335



	Three months ended
	December 28, 2019			December 29, 2018
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	13,477		$	7,517
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	4,759			4,769
Equity-based compensation and employee benefits	3,609			3,873
Adjustment for doubtful accounts	17			(369		)
Adjustment for inventory valuation	1,060			189
Deferred taxes	966			(648		)
Gain on disposal of property, plant and equipment	—			24
Unrealized foreign currency translation	1,471			(33		)
Share of results of equity-method investee	60			43
Changes in operating assets and liabilities:
Accounts and other receivable	(2,961		)	56,497
Inventory	(6,974		)	5,401
Prepaid expenses and other current assets	(746		)	855
Accounts payable, accrued expenses and other current liabilities	7,987			(32,943		)
Income tax payable	1,016			9,883
Other, net	1,287			943
Net cash provided by operating activities	25,028			56,001

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment	(2,225		)	(3,273		)
Purchase of equity investments	(1,288		)	—
Purchase of short-term investments	(20,000		)	(231,000		)
Maturity of short-term investments	130,000			169,000
Net cash provided by /(used in) investing activities	106,487			(65,273		)

CASH FLOWS FROM FINANCING ACTIVITIES:
Payment on debts	—			(183		)
Payment for finance lease	(10		)	—
Repurchase of common stock	(5,319		)	(25,676		)
Common stock cash dividends paid	(7,582		)	(8,057		)
Proceeds from short term debt	15,063			—
Net cash provided by/(used in) financing activities	2,152			(33,916		)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(477		)	(18		)
Changes in cash, cash equivalents and restricted cash	133,190			(43,206		)



	As of						Average estimated
(dollar amounts in thousands)	December 28, 2019			September 28, 2019			useful lives (in years)
Developed technology	$	88,368		$	87,209		7.0 to 15.0
Accumulated amortization	(50,117		)	(48,718		)
Net developed technology	$	38,251		$	38,491

Customer relationships	$	35,521		$	35,180		5.0 to 6.0
Accumulated amortization	(32,808		)	(31,862		)
Net customer relationships	$	2,713		$	3,318

Trade and brand names	$	7,274		$	7,219		7.0 to 8.0
Accumulated amortization	(6,510		)	(6,377		)
Net trade and brand names	$	764		$	842

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

Net intangible assets	$	41,728		$	42,651



	As of
(in thousands)	December 28, 2019
Remaining fiscal 2020	$	5,513
Fiscal 2021	5,324
Fiscal 2022	4,362
Fiscal 2023	4,267
Fiscal 2024	4,267
Thereafter	17,995
Total amortization expense	$	41,728



(in thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses		Estimated Fair Value
Current assets:
Cash	$	246,438	$	—	$	—	$	246,438
Cash equivalents:
Money market funds ⁽¹⁾	141,929		—		—		141,929
Time deposits ⁽²⁾	109,007		—		—		109,007
Total cash and cash equivalents	$	497,374	$	—	$	—	$	497,374
Short-term investments ⁽²⁾:
Time deposits	20,000		—		—		20,000
Deposits ⁽³⁾	99,000		—		—		99,000
Total short-term investments	$	119,000	$	—	$	—	$	119,000
Total cash, cash equivalents, and short-term investments	$	616,374	$	—	$	—	$	616,374


(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 months ended December 28, 2019, there was no impairment or adjustment to the observable price.


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


(2)	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.


(3)	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 other comprehensive income (“OCI”).


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



	As of
	December 28, 2019
Operating leases:
Weighted-average remaining lease term:	5.0		years
Weighted-average discount rate:	4.8	%



(in thousands)	Operating leases
Remainder of 2020	$	5,048
2021	5,265
2022	4,750
2023	4,639
2024	2,278
Thereafter	3,662
Total minimum lease payments	25,642
Less: Interest	3,010
Present value of lease obligations	22,632
Less: Current portion	5,427
Long-term portion of lease obligations	$	17,205



			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
(shares in thousands)	December 28, 2019	December 29, 2018
Time-based RSUs	475	507
Relative TSR PSUs	157	157
Special/Growth PSUs	73	52
Common stock	9	8
Equity-based compensation in shares	714	724



	Three months ended
(in thousands, except per share data)	December 28, 2019				December 29, 2018
	Basic		Diluted		Basic		Diluted
NUMERATOR:
Net income	$	13,477	$	13,477	$	7,517	$	7,517
DENOMINATOR:
Weighted average shares outstanding - Basic	63,557		63,557		67,176		67,176
Dilutive effect of Equity Plans			582				675
Weighted average shares outstanding - Diluted			64,139				67,851
EPS:
Net income per share - Basic	$	0.21	$	0.21	$	0.11	$	0.11
Effect of dilutive shares			—				—
Net income per share - Diluted			$	0.21			$	0.11


(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.


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



	December 28, 2019 vs. December 29, 2018
	Three months ended
(in thousands)	Price			Volume			$ Change
Capital Equipment	$	(5,014	)	$	(8,600	)	$	(13,614	)



	Three months ended				Basis Point
	December 28, 2019		December 29, 2018		Change
Capital Equipment	45.2	%	43.9	%	130
APS	57.4	%	57.8	%	(40	)
Total gross margin	48.8	%	47.6	%	120



			Payments due in
(in thousands)	Total		Less than 1 year		1 - 3 years		3 - 5 years		More than 5 years
Inventory purchase obligations ⁽¹⁾	$	115,841	$	115,841	$	—	$	—	$	—
U.S. one-time transition tax payable ⁽²⁾ (reflected on our Consolidated Condensed Balance Sheets)	72,401		5,175		12,213		18,607		36,406
Asset retirement obligations ⁽³⁾ (reflected on our Consolidated Condensed Balance Sheets)	1,663		126		322		1,087		128
Total	$	189,905	$	121,142	$	12,535	$	19,694	$	36,534