(Mark one)
Semitool, Inc.
(Exact Name of Registrant as Specified in Its Charter)
| Montana | 81-0384392 |
| (State or Other Jurisdiction of Incorporation or Organization) |
I.R.S. Employer Identification No.) |
655 West Reserve Drive
Kalispell, Montana 59901
(406) 752-2107
(Address of principal executive offices and telephone number)
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 __
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). YES __ NO X
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practical date:
| Title | Outstanding as of May 9, 2003 |
| Common Stock | 28,438,277 |
Part I. Financial Information
Item I. Condensed Consolidated Financial Statements
Consolidated Balance Sheets as of March 31, 2003 and September 30, 2002.
Consolidated Statements of Cash Flows for the six months ended March 31, 2003 and March 31, 2002.
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Critical Accounting Policies and Estimates
Liquidity and Capital Resources
Item 3. Quantitative and Qualitative Disclosures About Market Risks
Part II. Other Information
March 31, September 30,
ASSETS 2003 2002
--------------- ---------------
Current assets:
Cash and cash equivalents $ 21,531 $ 34,265
Marketable securities 5,538 6,575
Trade receivables, less allowance for doubtful accounts of $510 and $394 25,931 33,908
Inventories 48,947 47,085
Income tax refund receivable 15,483 12,650
Prepaid expenses and other current assets 2,471 1,804
Deferred income taxes 11,720 11,713
--------------- ---------------
Total current assets 131,621 148,000
Property, plant and equipment, net 26,766 29,310
Intangibles, less accumulated amortization of $907 and $753 6,653 6,067
Other assets, net 520 286
--------------- ---------------
Total assets $ 165,560 $ 183,663
=============== ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Note payable to bank and other short-term debt $ -- $ 51
Accounts payable 13,799 15,894
Accrued commissions 2,621 3,323
Accrued warranty and installation 5,568 6,186
Accrued payroll and related benefits 5,115 5,944
Customer advances 2,484 3,037
Deferred profit 12,498 20,387
Income taxes payable -- 179
Other accrued liabilities 1,742 1,618
Long-term debt and capital leases, due within one year 243 384
--------------- ---------------
Total current liabilities 44,070 57,003
Long-term debt and capital leases, due after one year 2,449 2,912
Deferred income taxes 2,326 2,326
--------------- ---------------
Total liabilities 48,845 62,241
--------------- ---------------
Shareholders' equity:
Preferred stock, no par value, 5,000,000 shares authorized,
no shares issued and outstanding -- --
Common stock, no par value, 75,000,000 shares authorized,
28,435,677 and 28,427,677 shares issued and outstanding 47,402 47,376
Retained earnings 69,887 74,810
Accumulated other comprehensive loss (574) (764)
--------------- ---------------
Total shareholders' equity 116,715 121,422
--------------- ---------------
Total liabilities and shareholders' equity $ 165,560 $ 183,663
=============== ===============
The accompanying notes are an integral part of the consolidated financial statements.
Three Months Ended Six Months Ended
March 31, March 31,
--------------------------- ---------------------------
2003 2002 2003 2002
----------- ----------- ----------- -----------
Net sales $ 35,621 $ 31,323 $ 65,912 $ 58,077
Cost of sales 19,345 16,361 36,562 30,670
----------- ----------- ----------- -----------
Gross profit 16,276 14,962 29,350 27,407
----------- ----------- ----------- -----------
Operating expenses:
Selling, general and administrative 15,265 15,730 27,690 28,647
Research and development 4,945 6,199 9,885 11,960
----------- ----------- ----------- -----------
Total operating expenses 20,210 21,929 37,575 40,607
----------- ----------- ----------- -----------
Loss from operations (3,934) (6,967) (8,225) (13,200)
Other income (expense), net (135) 353 285 615
----------- ----------- ----------- -----------
Loss before income taxes (4,069) (6,614) (7,940) (12,585)
Benefit from income taxes (1,546) (2,513) (3,017) (4,782)
----------- ----------- ----------- -----------
Net loss $ (2,523) $ (4,101) $ (4,923) $ (7,803)
=========== =========== =========== ===========
Loss per share:
Basic $ (0.09) $ (0.14) $ (0.17) $ (0.27)
=========== =========== =========== ===========
Diluted $ (0.09) $ (0.14) $ (0.17) $ (0.27)
=========== =========== =========== ===========
Average common shares outstanding:
Basic 28,435 28,407 28,431 28,396
=========== =========== =========== ===========
Diluted 28,435 28,407 28,431 28,396
=========== =========== =========== ===========
The accompanying notes are an integral part of the consolidated financial statements.
Six Months Ended
March 31,
--------------------------------
2003 2002
--------------- ---------------
Operating activities:
Net loss $ (4,923) $ (7,803)
Adjustments to reconcile net loss to net cash provided
by (used in) operating activities:
Gain on sale of securities -- (316)
Depreciation and amortization 4,236 4,381
(Gain) loss on disposition of assets (3) 1,274
Change in:
Trade receivables 8,071 18,809
Inventories (3,103) 3,024
Income tax refund receivable (2,833) (6,809)
Prepaid expenses and other current assets (663) (189)
Other assets, net (232) 106
Accounts payable (2,126) 1,016
Accrued commissions (702) (666)
Accrued warranty and installation (623) (2,140)
Accrued payroll and related benefits (843) 131
Customer advances (553) (613)
Deferred profit (7,898) (578)
Income taxes payable (179) (555)
Other accrued liabilities 114 (746)
--------------- ---------------
Net cash provided by (used in) operating activities (12,260) 8,326
--------------- ---------------
Investing activities:
Purchases of marketable securities (10,306) (6,906)
Proceeds from sale and maturities of marketable securities 11,334 8,840
Purchases of property, plant and equipment (508) (4,608)
Increases in intangible assets (753) (762)
Proceeds from sale of property, plant and equipment 207 186
--------------- ---------------
Net cash used in investing activities (26) (3,250)
--------------- ---------------
Financing activities:
Proceeds from exercise of stock options 26 156
Borrowings under line of credit and short-term debt -- 321
Repayments under line of credit and short-term debt (52) (1,115)
Repayments of long-term debt and capital leases (504) (173)
--------------- ---------------
Net cash used in financing activities (530) (811)
--------------- ---------------
Effect of exchange rate changes on cash and cash equivalents 82 (248)
--------------- ---------------
Net increase (decrease) in cash and cash equivalents (12,734) 4,017
Cash and cash equivalents at beginning of period 34,265 39,890
--------------- ---------------
Cash and cash equivalents at end of period $ 21,531 $ 43,907
=============== ===============
The accompanying notes are an integral part of the consolidated financial statements.
Three Months Ended Six Months Ended
March 31, March 31,
-------------------------- --------------------------
2003 2002 2003 2002
----------- ----------- ----------- -----------
Net loss $ (2,523) $ (4,101) $ (4,923) $ (7,803)
Net gain (loss) on cash flow hedges 2 39 (6) 262
Unrealized gain (loss) on available-for-
sale securities, net of tax (9) (72) (7) 568
Foreign currency translation adjustment (1) (94) 203 (887)
----------- ----------- ----------- -----------
Total comprehensive loss $ (2,531) $ (4,228) $ (4,733) $ (7,860)
=========== =========== =========== ===========
The accompanying notes are an integral part of the consolidated financial statements.
The Company prepared the consolidated financial statements included herein, without audit, pursuant to the rules and regulations of the United States of America Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures, normally included in financial statements prepared in accordance with generally accepted accounting principles, have been condensed or omitted as permitted by such rules and regulations. We believe the disclosures included herein are adequate; however, these consolidated statements should be read in conjunction with the consolidated financial statements and the notes thereto for the year ended September 30, 2002 previously filed with the SEC on Form 10-K.
The financial information presented as of any date other than September 30, 2002 has been prepared from the books and records without audit. Financial information as of September 30, 2002 has been derived from the audited financial statements of the Company, but does not include all disclosures required by accounting principles generally accepted in the United States of America. In our opinion these unaudited financial statements contain all of the adjustments (normal and recurring in nature) necessary to present fairly our consolidated financial position as of March 31, 2003, the consolidated results of operations for the three and six month periods ended March 31, 2003 and 2002, and the consolidated cash flows for the six month periods ended March 31, 2003 and 2002. The results of operations for the periods presented may not be indicative of those you may expect for the full year.
In June of 2001, the FASB issued SFAS No. 143, “Accounting for Asset Retirement Obligations.” The statement provides accounting and reporting standards for recognizing obligations related to asset retirement costs associated with the retirement of tangible long-lived assets. Under this statement, obligations associated with the retirement of long-lived assets are to be recognized at their fair value in the period in which they are incurred if a reasonable estimate of fair value can be made. The fair value of the asset retirement costs is capitalized as part of the carrying amount of the long-lived asset and subsequently allocated to expense using a systematic and rational method over the assets’ useful life. Any subsequent changes to the fair value of the liability due to passage of time or changes in the amount or timing of estimated cash flows is recognized as an accretion expense. The Company will be required to adopt this statement on October 1, 2003. The Company does not expect the adoption of this statement to have a significant impact on its results of operations, financial position and cash flows.
In January 2003, the FASB issued Interpretation Number 46, “Consolidation of Variable Interest Entities” (FIN 46). This interpretation addresses consolidation by business enterprises of variable interest entities. We do not have variable interest entities, therefore, the interpretation is not expected to have a material effect on the Company’s consolidated financial statements.
Certain reclassifications have been made to prior periods to conform to current presentations.
The Company’s consolidated financial statements include the accounts of Semitool, Inc. and its wholly-owned subsidiaries. All significant intercompany accounts and transactions are eliminated in consolidation.
The Company’s inventories are summarized as follows (in thousands):
March 31, 2003 September 30, 2002
------------------ --------------------
Parts and raw materials $ 25,658 $ 22,740
Work-in-process 14,532 20,213
Finished goods 8,757 4,132
------------- -------------
$ 48,947 $ 47,085
============= =============
During the three and six months ended March 31, 2003, $1,331,000 and $1,486,000 of finished goods inventory was transferred to property, plant and equipment.
The components of the Company’s income tax benefit are as follows, (in thousands):
Three Months Ended Six Months Ended
March 31, March 31,
-------------------------- --------------------------
2003 2002 2003 2002
----------- ----------- ----------- -----------
Federal $ (1,522) $ (2,600) $ (3,055) $ (4,902)
State (127) (168) (258) (377)
Foreign 103 255 296 497
----------- ----------- ----------- -----------
Total $ (1,546) $ (2,513) $ (3,017) $ (4,782)
=========== =========== =========== ===========
On January 16, 2002, we filed suit against Tokyo Electron, Ltd. and its subsidiaries, Tokyo Electron Kyushu Ltd. and Tokyo Electron America, Inc., referred to collectively as TEL, in the United States District Court for the Northern District of California (Case No. C-02-0288 EMC). The suit alleges infringement of our U.S. Patent 5,784,797 entitled “Carrierless Centrifugal Semiconductor Processing System (‘797 Patent), relating to the centrifugal cleaning and processing of semiconductor wafers. The suit seeks injunctive relief, damages for past infringement and increased damages for willful infringement. The defendants answered the complaint denying the claim and seeking to have the patent declared invalid. In addition, on April 16, 2002 the defendants asserted counterclaims alleging our infringement of three patents: U.S. Patent 4,985,722 entitled “Apparatus for Coating a Photo-Resist Film and/or Developing it After Being Exposed”; U.S. Patent 5,446,416 entitled “Resist Processing Method”; and U.S. Patent 5,740,053 entitled “Method of Controlling Monitor Used in Cleaning Machine and Object Processing Machine and Monitor Apparatus”. On July 12, 2002, the defendants withdrew with prejudice their counterclaim alleging infringement of U.S. Patent 5,740,053. The remaining counterclaims seek injunctive relief, damages for past infringement, increased damages for willful infringement and attorneys’ fees. We believe that the counterclaims are without merit and we are contesting the action vigorously. However, given the inherent uncertainty of litigation, there can be no assurance that the ultimate outcome will be in our favor. If TEL were to prevail in its counterclaims, it could have a material adverse effect on our business, financial condition, results of operations and cash flows. Further, regardless of the ultimate outcome, there can be no assurance that the diversion of management’s attention, and any costs associated with any of the lawsuits, will not have a material adverse effect on our business, financial condition, results of operations and cash flows. Trial is scheduled for July 2004.
In June 2001, we filed separate suits against Applied Materials, Inc., (Case No. CV-01-1066 AS), Novellus Systems, Inc. Case No. (CV-01-874 KI) and Ebara Corporation and Ebara Technologies, Inc. (Case No. CV-01-873 BR). The suits against all three parties are in the United States District Court for the District of Oregon. The suits allege infringement of Semitool’s U.S. Patent 6,197,181 (Chen) “Apparatus and Method for Electrolytically Depositing a Metal on a Microelectronic Workpiece” (‘181 Patent) and seek injunctive relief, damages for past infringement and increased damages for willful infringement. Each defendant has answered our complaints denying the claims and seeking to have the patent declared invalid. In addition, Novellus has counterclaimed for infringement of four of their patents: viz., U.S. Patent 6,179,983 “Method and Apparatus for Treating Surface Including Virtual Anode”; U.S. Patent 6,074,544 “Method of Electroplating Semiconductor Wafer Using Variable Currents and Mass Transfer to Obtain Uniform Plated Layer”; U.S. Patent 6,110,346 “Method of Electroplating Semiconductor Wafer Using Variable Currents and Mass Transfer to Obtain Uniform Plated Layer”; and U.S. Patent 6,162,344 “Method of Electroplating Semiconductor Wafer Using Variable Currents and Mass Transfer to Obtain Uniform Plated Layer”. On July 22, 2002, the District Court dismissed with prejudice Novellus’ counterclaim for infringement of U.S. Patent 6,179,983. The remaining counterclaims seek injunctive relief, damages for past infringement, increased damages for willful infringement and attorneys’ fees. We believe that the remaining counterclaims are without merit and we are contesting the actions vigorously. Trial dates in February 2004 have been set for the claims and counterclaims. Given the inherent uncertainty of litigation, there can be no assurance that the ultimate outcome will be in our favor. If Novellus were to prevail in its counterclaims, it could have a material adverse effect on our business, financial condition, results of operations and cash flows. Further, regardless of the ultimate outcome, there can be no assurance that the diversion of management’s attention, and any costs associated with any of the lawsuits, will not have a material adverse effect on our business, financial condition, results of operations and cash flows.
We are subject to other legal proceedings and claims, which have arisen in the ordinary course of our business and have not been finally adjudicated. Although there can be no assurance as to the ultimate disposition of these matters, it is the opinion of our management, based upon the information available at this time, that the currently expected outcome of these matters, individually or in the aggregate, will not have a material adverse effect on our business, financial condition, results of operations and cash flows.
The following table sets forth the computation of basic and diluted loss per share (in thousands):
Three Months Ended Six Months Ended
March 31, March 31,
-------------------------- --------------------------
2003 2002 2003 2002
----------- ----------- ----------- -----------
Numerator:
Net loss used for basic and diluted
loss per share $ (2,523) $ (4,101) $ (4,923) $ (7,803)
=========== =========== =========== ===========
Denominator:
Average common shares used for basic
loss per share 28,435 28,407 28,431 28,396
Effect of dilutive stock options -- -- -- --
----------- ----------- ----------- -----------
Denominator for diluted loss per share 28,435 28,407 28,431 28,396
=========== =========== =========== ===========
Diluted loss per share excludes the effects of 1,286,520 and 1,406,920 antidilutive stock options at March 31, 2003 and 2002.
With the exception of product warranties we have not issued any guarantees or any indirect guarantee for the indebtedness of others.
Our obligations for warranty are accrued concurrently with the revenue recognized. We make provisions for our warranty obligations based upon historical costs incurred for such obligations adjusted, as necessary, for current conditions and factors. Due to the significant uncertainties and judgments involved in estimating our warranty obligations, including changing product designs and specifications, the ultimate amount incurred for warranty costs could change in the near term from our current estimate.
The following table shows the fiscal 2003 first half activity for our warranty accrual (in thousands):
Accrued warranty balance as of September 30, 2002 $ 6,186
Accruals for new warranties issued during the first half 3,749
Accruals related to pre-existing warranties (including changes in estimates) (335)
Warranty labor and materials provided during the first half (4,032)
-----------
Accrued warranty balance as of March 31, 2003 $ 5,568
===========
In 1994, the Company adopted the “Semitool, Inc. 1994 Stock Option Plan”: The Company accounts for this plan under the recognition and measurement principles of APB Opinion No. 25, Accounting for Stock Issued to Employees, and related Interpretations. No stock-based employee compensation cost is reflected in net loss, as all options granted under these plans had an exercise price equal to the market value of the underlying common stock on the date of grant. The following table illustrates the effect on net loss and loss per share if the Company had applied the fair value recognition provisions of FASB Statement No. 123, Accounting for Stock-Based Compensation, to stock-based employee compensation.
Three Months Ended Six Months Ended
March 31, March 31,
-------------------------- --------------------------
(in thousands, except per share amounts) 2003 2002 2003 2002
----------- ----------- ----------- -----------
Net Loss, as reported $ (2,523) $ (4,101) $ (4,923) $ (7,803)
Deduct: Total stock-based employee
compensation expense determined
under fair value based method for all
awards, net of tax related effects (191) (215) (402) (419)
----------- ----------- ----------- -----------
Pro forma loss $ (2,714) $ (4,316) $ (5,325) $ (8,222)
=========== =========== =========== ===========
Loss per share:
Basic and diluted - as reported $ (0.09) $ (0.14) $ (0.17) $ (0.27)
Basic and diluted - pro forma $ (0.10) $ (0.15) $ (0.19) $ (0.29)
Statements contained in this Quarterly Report on Form 10-Q which are not purely historical facts are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934. In some cases, you can identify forward-looking statements by the use of terminology such as “may,” “will,” “expects,” “plans,” “anticipates,” “estimates,” “potential,” “believes,” “can impact,” “continue,” or the negative thereof or other comparable terminology.
These forward-looking statements include without limitation, statements regarding:
° net sales,
° gross margins,
° research and development,
° operating and planned capital requirements for the next 12 months,
° investments in, or acquisition of, complementary businesses, products or technologies,
° the adoption of SFAS No. 143,
° the impact of FASB Interpretation Number 46,
° the impact from a 10% change in long-term interest rates,
° the impact from a 10% change in foreign exchange rates on hedged transactions involving Japanese Yen forward exchange contracts,
° the ability to finance activities,
° cost of manufacturing,
° interest expense,
° tax rates,
° future balances,
° the sufficiency of funds, and
° effects of new accounting standards.
Management cautions that forward-looking statements are subject to risks and uncertainties that could cause our actual results to differ materially from those projected in such forward-looking statements. These risks and uncertainties include, but are not limited to, the cyclical nature of the semiconductor industry in general, lack of market acceptance for new products, decreasing demand for our existing products, impact of competitive products and pricing, product development, commercialization and technological difficulties, capacity and supply constraint difficulties and other risks.
Our future results will, in part, depend on our ability to continue to enhance our existing products, to develop and manufacture new products and to finance such activities. There can be no assurance that we will be successful in the introduction, marketing and cost-effective manufacture of any new products or that we will be able to develop and introduce in a timely manner new products or enhancements to our existing products and processes which satisfy customer needs or achieve widespread market acceptance. Further, backlog is not necessarily indicative of future revenue. All forward-looking statements included in this document are made as of the date hereof, based on information available to us as of the date hereof and we undertake no obligation to update forward-looking statements to reflect subsequent events, changed circumstances, or the occurrence of unanticipated events. The reader should also consult the cautionary statements and risk factors listed from time to time in our Reports on Form 10-K, 10-Q, 8-K and other reports filed from time to time with the Securities and Exchange Commission.
Our discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to revenue recognition, bad debts, inventories, investments, intangible assets, income taxes, financing operations, warranty obligations, contingencies and litigation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements.
Revenue Recognition. Our revenue recognition policy is significant because revenue is a key component of our results of operations. In addition, revenue recognition determines the timing of certain expenses, such as cost of sales, commissions, warranty and installation expenses. We follow specific and detailed guidelines in measuring revenue; however, certain judgments may be required in the application of our revenue policy.
Warranty.We provide materials and labor warranty coverage on our products for a defined time period. The estimated cost of warranty is recorded concurrent with the recognition of revenue on the specific product. The estimated cost of warranty is based upon the warranty term, historical labor and material costs for each product group. The basis for our estimates is periodically reviewed. Should actual product failure rates, material usage or service delivery costs differ from our estimates, revisions to the estimated warranty liability would be required. These revisions could either positively or negatively impact our results of operations.
Allowance for Doubtful Accounts. We maintain allowances for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. If the financial condition of our customers were to deteriorate, due to the cyclicallity of the industries we serve or for other reasons, resulting in an impairment of their ability to make payments, additional allowances may be required.
Inventory Valuation. We write down the carrying value of inventories for estimated obsolescence and marketability based upon assumptions about future demand and market conditions. If actual market conditions are less favorable than those projected by us, additional inventory valuation write-downs may be required.
Investments.We record an investment impairment charge when we believe an investment has experienced a decline in value that is other than temporary. Future adverse changes in market conditions or poor operating results of underlying investments could result in losses or an inability to recover the carrying value of the investments that may not be reflected in an investment’s current carrying value, thereby possibly requiring an impairment charge in the future.
Deferred Tax Assets. We make estimates to determine our deferred tax assets in the amount that we believe is more likely than not to be realized. While we consider future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for the valuation allowance, in the event we were to determine that we were able to realize deferred tax assets in the future in excess of the net recorded amount, an increase in the deferred tax asset would increase net income in the period such determination was made. Likewise, should we determine that we will not be able to realize all or part of our net deferred tax asset in the future, a decrease in the deferred tax asset would decrease net income in the period such determination was made.
Net Sales. Net sales consist of revenues from sales of semiconductor equipment, installation revenue, spare parts and service. Fiscal 2003 second quarter net sales were $35.6 million up 13.7% from $31.3 million in net sales for the same period of fiscal 2002. Net sales for the first half of fiscal 2003 were $65.9 million up 13.5% from $58.1 million in net sales for the same period in fiscal 2002. Year over year, second quarter and first half net sales were higher, primarily as a result of the timing of shipments and recognition of revenue from customer system acceptances. The semiconductor equipment industry continues to be depressed from its previous levels. Our fiscal 2003 third quarter and second half net sales are expected to be sequentially lower in comparison to the second quarter and first half of this fiscal year.
Gross Margin. Fiscal 2003‘s second quarter gross margin was 45.7% of net sales, compared to 47.8% for the same period in fiscal 2002. The first half of fiscal 2003 gross margin was 44.5% of net sales, compared to the first half of fiscal 2002 gross margin of 47.2%. In these periods, gross margin reflects the negative effect of unabsorbed overhead costs resulting from our reduced production and shipment levels. Additionally, our gross margin has been, and will continue to be, affected by a variety of factors, including geographical and product sales mix, average selling price of products sold, the cost of manufacturing, servicing and supporting new and enhanced products and inventory obsolescence.
Selling, General and Administrative. Selling, general and administrative (“SG&A”) expenses include employment costs for sales, marketing, customer support and administrative personnel, travel, communications, sales, service and administrative location expenses and professional fees. SG&A expenses were $15.3 million, or 42.9% of net sales, for the second quarter of fiscal 2003 down from $15.7 million, or 50.2% of net sales, for the second quarter of fiscal 2002. SG&A expenses for the first half of fiscal 2003 were $27.7 million, or 42.0% of net sales, down from $28.6 million, or 49.3% of net sales in the first half of fiscal 2002. Contributing to the year over year decline in SG&A expenses for both the second quarter and first half of fiscal 2003 were reduced employee headcount, wage reductions for most employees, and lower travel expenses. The effect of these and other cost reductions were partially offset in this year’s first quarter and first half by increased agent sales commissions associated with a higher mix of Asian regional sales. Legal expenses associated with ongoing litigation brought by us to protect our intellectual property were also higher in this year’s second quarter and first half. For the first half of fiscal 2003, these litigation costs totaled $3.1 million and were up $1.0 million year over year.
Research and Development. Research and development (“R&D”) expense consists of employment costs, project materials, laboratory costs, consulting fees, and other costs associated with our product development efforts. R&D expense was $4.9 million or 13.9% of net sales for the second quarter of fiscal 2003 compared to $6.2 million or 19.8% of net sales for the same period in fiscal 2002. For the first half of fiscal 2003, R&D expense was $9.9 million or 15.0% of net sales compared to $12.0 million or 20.6% of net sales for the first half of fiscal 2002. The first half year over year decrease is primarily attributable to reduced staffing levels and related costs.
In the past, our research and development expense has fluctuated from period to period. We expect such fluctuations to continue in the future, both in absolute dollars and as a percentage of net sales, primarily due to the timing of expenditures and fluctuations in the level of net sales in a given period. We expect to continue to fund R&D expenditures with a multi-year perspective and are committed to technology leadership in our sector of the semiconductor equipment industry.
Other Income (Expense), Net. Net other income (expense) was a net expense of approximately $135,000 in the second quarter of fiscal 2003 and included, among other items, interest income of approximately $91,000 from short-term investments and interest expense of $83,000. Net other income was $285,000 in the first half of fiscal 2003, which includes among other items, interest income of $246,000, interest expense of $128,000 and the settlement received from a patent infringement claim against a German manufacturer.
Income Taxes. The benefit from income taxes recorded for the second quarter of fiscal 2003 was $1.5 million compared to an income tax benefit of $2.5 million for the same period of fiscal 2002. For the first half of fiscal 2003, the income tax benefit was $3.0 million compared to $4.8 million in last year’s first half. Income tax benefits and provisions are made based on a blended estimate of federal, state and foreign effective income tax rates which was estimated to be 38.0% in both fiscal 2003 and fiscal 2002.
Backlog. Consolidated orders backlog decreased 65.9% to $11.4 million at March 31, 2003, from approximately $33.4 million at March 31, 2002.
We include in backlog those customer orders for which we have written customer authorization and for which shipment is scheduled within the next twelve months. Orders are generally subject to cancellation or rescheduling by customers with limited or no cancellation fees. As the result of systems ordered and shipped in the same quarter, possible changes in customer delivery dates, cancellations and shipment delays, the backlog at any particular date and the new orders bookings for any particular period are not necessarily indicative of actual revenue for any succeeding period. In particular, during periods of downturns in the semiconductor industry we have experienced cancellations and significant delays.
Deferred Revenue and Deferred Profit. Deferred revenue was $22.3 million at March 31, 2003 compared to $35.7 million at March 31, 2002. Deferred revenue reflects equipment shipped to customers, which has not been accepted by the customer and the revenue has not been recognized by Semitool. Deferred profit is derived from its associated deferred revenue and is included in our current liabilities. At March 31, 2003, deferred profit was $12.5 million compared to $20.4 million at March 31, 2002. If our equipment is not accepted by our customer and the order is cancelled, the deferred revenue and associated deferred profit will not be realized. Deferred revenue is not included in orders backlog.
As of March 31, 2003, our principal sources of liquidity consisted of approximately $21.5 million of cash and cash equivalents and $5.5 million in marketable securities.
Cash used in operating activities in the six months ended March 31, 2003 was $12.3 million. This included a net loss of $4.9 million, non-cash depreciation and amortization of $4.2 million and an increase in net operating assets of $11.6 million. The increase in net operating assets was primarily the result of a $3.1 million increase in inventories to support the introduction of our newest single-wafer platform; a $2.8 million increase in income taxes refund receivable, a $2.1 million reduction in accounts payable; a $2.2 million decrease in accrued expenses; and a $7.9 million decrease in deferred profit as a result of customer acceptances exceeding deferred revenue from shipments in the period and cancellations from one customer. The effect of these changes was partially offset by an $8.1 million decrease in accounts receivable. The decrease in accounts receivable, accounts payable and accrued expenses is primarily attributable to declining sales, production and shipments, which reflect the continuing depressed semiconductor equipment industry.
During the first six months of fiscal 2003, net sales and maturities of marketable securities provided cash of $1.0 million. Offsetting this cash generation were investments in intangible assets associated with our intellectual property and laboratory equipment.
Cash used in financing activities in the first six months of fiscal 2003 included long-term debt repayments of $504,000, which included the repayment of the commercial bank portion of the mortgage on our Coopersburg, Pennsylvania facility. The low interest rate mortgage loan provided by the Pennsylvania Industrial Development Authority remains in place.
The following commitments as of March 31, 2003 have been included in the consolidated financial statements, with the exception of purchase order commitments and operating lease obligations, which are properly excluded under accounting principles generally accepted in the United States of America. They are disclosed in the following table in order to provide a consolidated picture of our financial position and liquidity. We do not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities. We are not exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in such relationships.
Payments Due by Period (amounts in thousands)
----------------------------------------------------------------------
Less than 1 - 3 4 - 5 After
Total 1 year Years Years 5 Years
---------- ---------- ---------- ---------- ----------
Long-term debt $ 2,632 $ 208 $ 694 $ 504 $ 1,226
Capital lease obligations 62 37 25 -- --
Operating leases 1,372 886 418 68 --
Purchase order commitments 5,086 4,067 1,019 -- --
---------- ---------- ---------- ---------- ----------
Total commitments $ 9,152 $ 5,198 $ 2,156 $ 572 $ 1,226
========== ========== ========== ========== ==========
We do not have any other commercial commitments such as lines of credit, standby letters of credit, guarantees, standby repurchase obligations or other commercial commitments.
Semitool has agreements with Mr. Raymon F. Thompson, the Company’s chairman and Chief Executive Officer, to lease aircraft and an aircraft hangar. The rental rate for fiscal 2003 is approximately $175,000 per month for both the aircraft and the hangar. Since these operating lease commitments are month-to-month, they are not included in the table above.
We believe that at our current operating level, cash and cash equivalents and funds generated from the sale of marketable securities and from future operations including approximately $11 million in income tax refunds receivable from net operating loss carrybacks expected to be received in the second half of fiscal 2003 will be sufficient to meet our operating and planned capital requirements for the next twelve months including the spending of approximately $1 to $2 million to purchase property, plant and equipment. Since the semiconductor equipment industry is cyclical, our liquidity requirements need to be sufficient to meet not only our needs during an industry downturn, but also to handle our working capital needs in an upturn. We believe that success in our industry requires substantial capital in order to maintain flexibility and to take advantage of opportunities as they arise. We may, from time to time, as market and business conditions warrant, invest in or acquire complementary businesses, products or technologies. We may sell additional equity or incur debt to fund such activities or to fund greater than anticipated needs and currently have a common stock shelf registration statement in place with an aggregate public offering price of $75 million. The sale of additional equity securities or the issuance of equity securities in a business combination could result in dilution to our shareholders.
In June of 2001, the FASB issued SFAS No. 143, “Accounting for Asset Retirement Obligations.” The statement provides accounting and reporting standards for recognizing obligations related to asset retirement costs associated with the retirement of tangible long-lived assets. Under this statement, obligations associated with the retirement of long-lived assets are to be recognized at their fair value in the period in which they are incurred if a reasonable estimate of fair value can be made. The fair value of the asset retirement costs is capitalized as part of the carrying amount of the long-lived asset and subsequently allocated to expense using a systematic and rational method over the assets’ useful life. Any subsequent changes to the fair value of the liability due to passage of time or changes in the amount or timing of estimated cash flows is recognized as an accretion expense. The Company will be required to adopt this statement on October 1, 2003. The Company does not expect the adoption of this statement to have a significant impact on its results of operations, financial position and cash flows.
In January 2003, the FASB issued Interpretation Number 46, “Consolidation of Variable Interest Entities” (FIN 46). This interpretation addresses consolidation by business enterprises of variable interest entities. We do not have any variable interest entities. Therefore, the interpretation is not expected to have a material effect on the Company’s consolidated financial statements.
Market risks relating to our operations result primarily from changes in interest rates and changes in foreign currency exchange rates.
As of March 31, 2003, we had approximately $2.7 million in fixed-rate long-term debt. Changes in market interest rates would change the estimated fair value of our long-term debt. We believe that a 10% change in long-term interest rates would not have a material effect on our financial condition, results of operations or cash flows.
All of our international operations are subject to inherent risks in conducting business abroad, including fluctuation in the relative value of currencies. As the Yen is our functional currency in Japan, we use forward exchange contracts to reduce our foreign currency exchange risk related to forecasted sales. At March 31, 2003, we held forward contracts to sell Japanese Yen with a face value of $614,000, a market value of $613,000 and an unrealized gain of $1,000. Additionally, the impact of movements in currency exchange rates on forward contracts are offset to the extent of intercompany receivables denominated in Japanese Yen. We believe the effect of a 10% change in foreign exchange rates on hedged transactions involving Japanese Yen forward exchange contracts and the underlying transactions would not be material to our financial condition, results of operations or cash flows. We do not hold or issue derivative financial instruments for trading or speculative purposes.
Within 90 days prior to the filing date of this Quarterly Report on Form 10-Q, our Chief Executive Officer and Chief Financial Officer have conducted an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934). Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are effective in ensuring that all material information required to be filed in this quarterly report has been made known to them in a timely fashion. There have been no significant changes in our internal controls, or in other factors that could significantly affect our internal controls, subsequent to the date the Chief Executive Officer or Chief Financial Officer completed their evaluation.
On January 16, 2002, we filed suit against Tokyo Electron, Ltd. and its subsidiaries, Tokyo Electron Kyushu Ltd. and Tokyo Electron America, Inc., referred to collectively as TEL, in the United States District Court for the Northern District of California (Case No. C-02-0288 EMC). The suit alleges infringement of our U.S. Patent 5,784,797 entitled “Carrierless Centrifugal Semiconductor Processing System (‘797 Patent), relating to the centrifugal cleaning and processing of semiconductor wafers. The suit seeks injunctive relief, damages for past infringement and increased damages for willful infringement. The defendants answered the complaint denying the claim and seeking to have the patent declared invalid. In addition, on April 16, 2002 the defendants asserted counterclaims alleging our infringement of three patents: U.S. Patent 4,985,722 entitled “Apparatus for Coating a Photo-Resist Film and/or Developing it After Being Exposed”; U.S. Patent 5,446,416 entitled “Resist Processing Method”; and U.S. Patent 5,740,053 entitled “Method of Controlling Monitor Used in Cleaning Machine and Object Processing Machine and Monitor Apparatus”. On July 12, 2002, the defendants withdrew with prejudice their counterclaim alleging infringement of U.S. Patent 5,740,053. The remaining counterclaims seek injunctive relief, damages for past infringement, increased damages for willful infringement and attorneys’ fees. We believe that the counterclaims are without merit and we are contesting the action vigorously. However, given the inherent uncertainty of litigation, there can be no assurance that the ultimate outcome will be in our favor. If TEL were to prevail in its counterclaims, it could have a material adverse effect on our business, financial condition, results of operations and cash flows. Further, regardless of the ultimate outcome, there can be no assurance that the diversion of management’s attention, and any costs associated with any of the lawsuits, will not have a material adverse effect on our business, financial condition, results of operations and cash flows. Trial is scheduled for July 2004.
In June 2001, we filed separate suits against Applied Materials, Inc., (Case No. CV-01-1066 AS), Novellus Systems, Inc. Case No. (CV-01-874 KI) and Ebara Corporation and Ebara Technologies, Inc. (Case No. CV-01-873 BR). The suits against all three parties are in the United States District Court for the District of Oregon. The suits allege infringement of Semitool’s U.S. Patent 6,197,181 (Chen) “Apparatus and Method for Electrolytically Depositing a Metal on a Microelectronic Workpiece” (‘181 Patent) and seek injunctive relief, damages for past infringement and increased damages for willful infringement. Each defendant has answered our complaints denying the claims and seeking to have the patent declared invalid. In addition, Novellus has counterclaimed for infringement of four of their patents: viz., U.S. Patent 6,179,983 “Method and Apparatus for Treating Surface Including Virtual Anode”; U.S. Patent 6,074,544 “Method of Electroplating Semiconductor Wafer Using Variable Currents and Mass Transfer to Obtain Uniform Plated Layer”; U.S. Patent 6,110,346 “Method of Electroplating Semiconductor Wafer Using Variable Currents and Mass Transfer to Obtain Uniform Plated Layer”; and U.S. Patent 6,162,344 “Method of Electroplating Semiconductor Wafer Using Variable Currents and Mass Transfer to Obtain Uniform Plated Layer”. On July 22, 2002, the District Court dismissed with prejudice Novellus’ counterclaim for infringement of U.S. Patent 6,179,983. The remaining counterclaims seek injunctive relief, damages for past infringement, increased damages for willful infringement and attorneys’ fees. We believe that the remaining counterclaims are without merit and we are contesting the actions vigorously. Trial dates in February 2004 have been set for the claims and counterclaims. Given the inherent uncertainty of litigation, there can be no assurance that the ultimate outcome will be in our favor. If Novellus were to prevail in its counterclaims, it could have a material adverse effect on our business, financial condition, results of operations and cash flows. Further, regardless of the ultimate outcome, there can be no assurance that the diversion of management’s attention, and any costs associated with any of the lawsuits, will not have a material adverse effect on our business, financial condition, results of operations and cash flows.
We are subject to other legal proceedings and claims, which have arisen in the ordinary course of our business and have not been finally adjudicated. Although there can be no assurance as to the ultimate disposition of these matters, it is the opinion of our management, based upon the information available at this time, that the currently expected outcome of these matters, individually or in the aggregate, will not have a material adverse effect on our business, financial condition, results of operations and cash flows.
(a) Exhibits
3(ii) By-laws of Semitool, Inc. amended as of February 11, 2003.
Additional Exhibits
In accordance with the Securities and Exchange Commission, Exhibits 99.1 and 99.2 are to be treated as “accompanying” this report rather than “filed” as part of this report.
99.1 Certification of Raymon F. Thompson, Chief Executive Officer, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
99.2 Certification of William A. Freeman, Chief Financial Officer, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(b) Reports on Form 8-K
Current report on Form 8-K dated February 13, 2003, announcing the appointment of Donald P. Baumann to Semitool’s board of directors.
Current report on Form 8-K dated April 22, 2003, reporting second quarter 2003 financial results.
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.
SEMITOOL, INC.
(Registrant)
Date: May 12, 2003 By: /s/ WILLIAM A. FREEMAN
-------------------------------------------------
William A. Freeman
Senior Vice President and Chief Financial Officer
Date: May 12, 2003 By: /s/ LARRY A. VIANO
----------------------------
Larry A. Viano
Principal Accounting Officer
I, Raymon F. Thompson, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Semitool, Inc.
2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
| a) | designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; |
| b) | evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and |
| c) | presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; |
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
| a) | all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and |
| b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and |
6. The registrant’s other certifying officer and I have indicated in this quarterly report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
Dated: May 12, 2003 By: /s/ RAYMON F. THOMPSON
-----------------------------------------------
Raymon F. Thompson
Chairman, President and Chief Executive Officer
I, William A. Freeman, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Semitool, Inc.
2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
| a) | designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; |
| b) | evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and |
| c) | presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; |
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
| a) | all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and |
| b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and |
6. The registrant’s other certifying officer and I have indicated in this quarterly report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
Dated: May 12, 2003 By: /s/ WILLIAM A. FREEMAN
-------------------------------------------------
William A. Freeman
Senior Vice President and Chief Financial Officer
Exhibit 3(ii)
ARTICLE I.
Offices
The principal office of the corporation in the State of Montana shall be located in the City of Kalispell, County of Flathead. The corporation may have such other offices, either within or without the State of Montana as the Board of Directors may designate or as the business of the corporation may require from time to time.
The registered office of the corporation required by the Montana Business Corporation Act to be maintained in the State of Montana may be, but need not be, identical with the principal office in the State of Montana, and the registered agent and the address of the registered office may be changed from time to time by the Board of Directors.
ARTICLE II.
Shareholders
Section 1. Annual Meeting. The annual meeting of the shareholders shall be held in the month of February, beginning with the year 1996, and at such date, and at such hour, and at such place as shall be determined by the Board of Directors, and such meeting shall be held for the purpose of electing directors and for the transaction of such other business as may come before the meeting. If the election of directors shall not be held on the date designated by the action of the Board of Directors at the annual meeting of the shareholders, or at any adjournment thereof, the Board of Directors shall cause the election to be held at a special annual meeting of the shareholders as soon thereafter as conveniently may be and as determined by the Board of Directors in accordance with the statutes of the State of Montana.
Section 2. Special Meetings. Special meetings of the shareholders for any purpose or purposes, unless otherwise prescribed by statute, may be called by the Chairman of the Board, President, Vice President, Secretary, or by the Board of Directors, or by the holders of not less than one-fourth of all shares entitled to vote at the meeting.
Section 3. Place of Meeting. The Board of Directors may designate any place either within or without the State of Montana, as the place of meeting for any annual meeting or for any special meeting called by the Board of Directors. A Waiver of Notice signed by all shareholders entitled to vote at a meeting may designate any place, either within or without the State of Montana, as the place for the holding of such meeting. If no designation is made, or if a special meeting be otherwise called, the place of meeting shall be the registered office of the corporation in the State of Montana.
Section 4. Notice of Meeting. Written or printed notice stating the place, day and hour of the meeting and, in case of a special meeting the purpose or purposes for which the meeting is called, shall be delivered not less than ten (10) nor more than sixty (60) days before the date of the meeting, either personally or by mail, by or at the direction of the Chairman of the Board, President, or the Secretary, or the officer or persons calling the meeting, to each shareholder of record entitled to vote at such meeting. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail, addressed to the shareholder at his or her address as it appears on the stock transfer books of the corporation, with postage thereon prepaid.
Section 5. Closing of Transfer Books or Fixing of Record Date. For the purpose of determining shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof or shareholders entitled to receive payment of any dividend, or in order to make a determination of shareholders for any other proper purpose, the Board of Directors of the corporation may provide that the stock transfer books shall be closed for a stated period, but not to exceed, in any case, sixty (60) days. If the stock transfer books shall be closed for the purpose of determining shareholders entitled to notice of or to vote at a meeting of the shareholders, such books shall be closed for a period of at least ten (10) days immediately preceding such meeting and not to exceed sixty (60) days preceding such meeting. In lieu of closing the stock transfer books, the Board of Directors may fix in advance a date as the record date for any such determination of shareholders, such date in any case to be not more than sixty (60) days and, in case of a meeting of shareholders, not less than ten (10) days prior to the date on which the particular action requiring such determination of shareholders is to be taken. If the stock transfer books are not closed and no record date is fixed for the determination of shareholders entitled to receive payment of a dividend, the date on which the resolution of the Board of Directors declaring such dividend is adopted, as the case may be, shall be the record date for such determination of shareholders. When a determination of shareholders entitled to vote at any meeting of shareholders has been made as provided in this section, such determination shall apply to any adjournment thereof.
Section 6. Voting Right. The officer or agent having charge of the stock transfer books for shares of the corporation shall make, at least ten (10) days before each meeting of the stockholders, a complete list of the shareholders entitled to vote at such meeting, or any adjournment thereof, arranged in alphabetical order, with the address of and the number of shares held by each, which list, for a period of ten (10) days prior to such meeting, shall be kept on file at the registered office of the corporation and shall be subject to inspection by any shareholder at any time during usual business hours. Such list shall also be produced and kept open at the time and place of the meeting and shall be subject to the inspection of any shareholder during the whole time of the meeting. The original stock transfer book shall be prima facie evidence as to who are the shareholders entitled to examine such list or transfer books or to vote at any meeting of shareholders.
Section 7. Quorum. A majority of the outstanding shares of the corporation entitled to vote, represented in person or by proxy, shall constitute a quorum at a meeting of the shareholders, but in no event shall a quorum consist of less than one-third (1/3) of the shares entitled to vote at the meeting. If a meeting cannot be organized because a quorum has not attended, those present may adjourn the meeting from time to time until a quorum is present, at which time any business may be transacted that may have been transacted at the meeting as originally called. The shareholders present at a duly organized meeting may continue to transact business until adjournment, notwithstanding the withdrawal of enough shareholders to leave less than a quorum.
Section 8. Voting of Shares. Subject to the provisions of Section 10 of this Article II, each outstanding share shall be entitled to one vote, and each fractional share shall be entitled to a corresponding fractional vote, on each matter submitted to a vote at a meeting of shareholders. Neither treasury shares nor shares of its own stock held by the corporation in a fiduciary capacity nor shares held by another corporation if a majority of the shares entitled to vote for the election of director of such other corporation is held by the corporation shall be voted at any meeting or counted in determining the total number of outstanding shares at any given time.
Shares held by an administrator, executor, guardian or conservator may be voted by him or her, either in person or by proxy, without a transfer of such shares into his or her name. Shares standing in the name of the trustee may be voted by him or her, either in person or by proxy, but no trustee shall be entitled to vote shares held by him or her without a transfer of such shares into his or her name.
Shares standing in the name of a receiver may be voted by such receiver, and shares held by or under the control of a receiver may be voted by such receiver without the transfer thereof into his or her name if authority so to do be contained in an appropriate order of the court by which such receiver was appointed.
A shareholder whose shares are pledged shall be entitled to vote such shares until the shares have been transferred into the name of the pledgee, and thereafter the pledgee shall be entitled to vote the shares so transferred.
Shares of its own stock belonging to the corporation or held by it in a fiduciary capacity shall not be voted, directly or indirectly, at any meeting, and shall not be counted in determining the total number of outstanding shares at any given time.
Section 9. Proxies. At all meetings of shareholders, a shareholder may vote by proxy executed in writing by the shareholder or by his or her duly authorized attorney in fact. Such proxy shall be filed with the Secretary of the corporation before or at the time of the meeting. No proxy shall be valid after eleven (11) months from the date of its execution, unless otherwise provided in the proxy.
Section 10. Cumulative Voting. At each election for directors every shareholder entitled to vote at such election shall have the right to vote, in person or by proxy, the number of shares and fractional shares owned by him or her for as many persons as there are directors to be elected and for whose election he or she has a right to vote, or to cumulate his or her votes by giving a candidate as many votes as the number of such directors multiplied by the number of his or her shares including fractional shares shall equal, or by distributing such votes and fractional votes on the same principal among any number of candidates.
ARTICLE III.
Board of Directors
Section 1.General Powers. The business and affairs of the corporation shall be managed by its Board of Directors.
Section 2. Number, Tenure and Qualifications. The number of directors of the corporation shall be eight (8). Each director shall hold office until the next annual meeting of shareholders and until his or her successor shall have been elected and qualified. Directors need not be residents of the State of Montana or shareholders of the corporation.
Section 3. Annual Meeting. The annual meeting of the Board of Directors shall be held without other notice than this Bylaw immediately after, and at the same place as, the annual meeting of shareholders.
Section 3a. Regular Meetings. Regular meetings of the Board of Directors shall be held at such time as shall be determined by the Chairman of the Board, President, or by resolution of the Board. No notice need be given of meetings held pursuant to the determination by the Chairman of the Board, President, or by resolution of the Board.
Section 4. Special Meetings. Special meetings of the Board of Directors may be called by or at the request of the Chairman of the Board, President, or any two directors. The person or persons authorized to call special meetings of the Board of Directors may fix any place, either within or without the State of Montana, as the place for holding any special meeting of the Board of Directors called by them.
Section 5. Notice. Notice of any Special Meeting shall be given at least two (2) days previously thereto by written notice delivered personally, mailed or faxed to each director at his or her business address, or by telegram. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail so addressed, with postage prepaid thereon. If notice is given by fax, the notice shall be deemed to be delivered when the fax is sent to the fax number maintained in the records of the corporation for each director. If notice be given by telegram, such notice shall be deemed to be delivered when the telegram is delivered to the telegraph company. Any director may waive notice of any meeting. The attendance of a director at a meeting shall constitute a waiver of notice of such meeting, except where a director attends a meeting for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened. The notice is not required to describe the purpose of the meeting.
Section 6. Quorum. A majority of the number of directors fixed by Section 2 of this Article III shall constitute a quorum for the transaction of business at any meeting of the Board of Directors, but if less than such majority is present at the meeting, a majority of the directors present may adjourn the meeting from time to time without further notice.
Section 7. Vacancies. Any vacancy occurring in the Board of Directors may be filled by the affirmative vote of a majority of the remaining directors though less than a quorum of the Board of Directors.
Section 8. Compensation. By resolution of the Board of Directors, directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors, and non-employee directors may be paid an annual retainer plus a fixed sum for attendance at each meeting of the Board of Directors. No such payment shall preclude any director from serving the corporation in any other capacity and receiving compensation therefor.
ARTICLE IV.
Officers
Section 1. Number. The officers of the corporation shall be the Chairman of the Board, a President, and such Vice Presidents (the number, qualification and titles thereof to be determined by the Board of Directors from time to time, and who may or may not be directors), as in the opinion of the Board the business of the corporation requires, a Secretary, and a Treasurer. Such other officers, assistant officers, and agents as may be necessary may be elected or appointed from time to time by the Board of Directors. Any two or more offices may be held by the same person, except for the offices of President and Secretary.
Section 2. Election and Term of Office. The officers of the corporation to be elected by the Board of Directors shall be elected annually by the Board of Directors at the first meeting of the Board of Directors held after each annual meeting of the shareholders. If the election of officers shall not be held at such meeting, such election shall be held as soon thereafter as conveniently may be. Each officer shall hold office until his or her successor shall have been duly elected and shall have qualified or until his or her death or until he or she shall resign or shall have been removed in the manner hereinafter provided.
Section 3. Removal. Any officer or agent elected or appointed by the Board of Directors may be removed by the Board of Directors whenever in its judgment the best interests of the corporation would be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. Election or appointment of an officer or agent shall not in itself create contract rights.
Section 4. Vacancies. A vacancy in any office because of death, resignation, removal, disqualification or otherwise, may be filled by the Board of Directors for the unexpired portion of the term.
Section 5. Chairman of the Board. If the Chairman of the Board is in office, he or she shall preside at all meetings of the shareholders and the Board of Directors. During the absence or disability of the Chairman of the Board, or during a vacancy in the office of the Chairman of the Board, the President shall preside at all meetings of the stockholders and the Board of Directors, and shall perform such other duties as may be prescribed from time to time by the Board of Directors or the Bylaws.
Section 6. President. The President shall be the principal executive officer of the corporation and, subject to the control of the Board of Directors shall, in general, supervise and control all of the business and affairs of the corporation. He or she shall, in the absence or disability of the Chairman of the Board, preside at all meetings of the shareholders and of the Board of Directors. He or she may sign, with the Secretary or any other proper officer of the corporation thereunto authorized by the Board of Directors, certificates for shares of the corporation, any deeds, mortgages, bonds, contracts, or other instruments which the Board of Directors has authorized to be executed, except in cases where the signing and execution thereof shall be expressly delegated by the Board of Directors or by these Bylaws to some other officer or agent of the corporation, or shall be required by law to be otherwise signed or executed; and, in general, shall perform all duties incident to the office of President and such other duties as may be prescribed by the Board of Directors from time to time.
Section 7. Vice President. In the absence of the President or in the event of his or her death, inability or refusal to act, the Vice President (or in the event there be more than one Vice President, the Vice Presidents in the order designated at the time of their election, or in the absence of any designation, then in the order of their election) shall perform the duties of the President, and when so acting, shall have all the powers of and be subject to all the restrictions upon the President.
Section 8. Secretary. The Secretary shall: (a) keep the minutes of the shareholders and the Board of Directors’ meetings in one or more books provided for that purpose; (b) see that all notices are duly given in accordance with the provisions of these Bylaws or as required by law; (c) be custodian of the corporate records and of the seal of the corporation and see that the seal of the corporation is affixed to all documents, the execution of which on behalf of the corporation under its seal is duly authorized; (d) keep a register of the post office address of each shareholder which shall be furnished to the Secretary by such shareholder; (e) sign with the President, or a Vice President, certificates for shares of the corporation, the issuance of which shall have been authorized by resolution of the Board of Directors; (f) have general charge of the stock transfer books of the corporation; and (g) in general, perform all duties incident to the office of Secretary and such other duties as from time to time may be assigned to him or her by the President or by the Board of Directors.
Section 9. Treasurer. The Treasurer shall have charge and supervision and be responsible for all funds and securities of the corporation and shall have charge and supervision of the deposits of all monies due and payable to the corporation from any source whatsoever in such banks or depositories as shall be selected by the Board of Directors, and shall, in general, perform all the duties incident to the office of Treasurer and such other duties as from time to time may be assigned to him or her by the President or by the Board of Directors.
Section 10. Assistant Secretaries and Assistant Treasurers. The Assistant Secretaries shall exercise the duties of the Secretary and those duties incident to the office of the Secretary when the Secretary is absent or not available and such other duties as shall be assigned by the President or by the Board of Directors. The Assistant Treasurers shall perform those duties incident to the office of Treasurer and those assigned to the Treasurer in the absence or unavailability of the Treasurer and such other duties as from time to time may be assigned to him or her by the President or by the Board of Directors.
Section 11. Exercise of Rights as Stockholders. Unless otherwise ordered by the Board of Directors, the President or a Vice President thereunto duly authorized by the President, shall have full power and authority on behalf of the corporation to attend and to vote at any meeting of stockholders of any corporation in which this corporation may hold stock, and may exercise on behalf of this corporation any and all of the rights and powers incident to the ownership of such stock at any such meeting, and shall have power and authority to execute and deliver proxies and consents on behalf of this corporation in connection with the exercise by this corporation of the rights and powers incident to the ownership of such stock. The Board of Directors, from time to time, may confer like powers upon any other person or persons.
ARTICLE V.
Certificates for Shares and Their Transfer
Section 1. Certificates for Shares. Certificates representing shares of the corporation shall be in such form as shall be determined by the Board of Directors. Such certificates shall be signed by the President or a Vice President and by the Secretary or an Assistant Secretary. The names and addresses of the persons to whom the shares represented thereby are issued, with the number of shares and dates of issue, shall be entered on the stock transfer books of the corporation. All certificates surrendered to the corporation for transfer shall be canceled and no new certificate shall be issued until the former certificate for a like number of shares shall have been surrendered and canceled, except that in case of a lost, destroyed or mutilated certificate, a new one may be issued therefor upon such terms and indemnity to the corporation as the Board of Directors may prescribe.
Section 2. Transfer of Shares. Transfer of shares of the corporation shall be made only on the stock transfer books of the corporation by the holder of record thereof or by his or her legal representative, who shall furnish proper evidence of authority to transfer, or by his or her attorney thereunto authorized by power of attorney duly executed and filed with the Secretary of the corporation, and on surrender for cancellation of the certificate for such shares. The person in whose name shares stand on the books of the corporation shall be deemed by the corporation to be the owner thereof for all purposes.
ARTICLE VI.
Fiscal Year
The fiscal year of the corporation shall begin on the 1st day of October and end on the 30th day of September in each year.
ARTICLE VII.
Dividends
The Board of Directors may from time to time declare, and the corporation may pay dividends on its outstanding shares in the manner and upon the terms and conditions provided by law.
ARTICLE VIII.
Seal
The Board of Directors shall provide a corporate seal which shall be circular in form and shall have inscribed thereon the name of the corporation and the state of incorporation and the words “Corporate Seal”.
ARTICLE IX.
Waiver of Notice
Whenever any notice is required to be given to any shareholder or director of the corporation under the provisions of these Bylaws or under the provisions of the Montana Business Corporation Act, a waiver therefor in writing, signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice.
ARTICLE X.
Action Without a Meeting
Any action required to be taken at a meeting of the shareholders or directors of the corporation or any action which may be taken at a meeting of the shareholders or directors, may be taken without a meeting if a consent, in writing, setting forth the action so taken, shall be signed by all the shareholders or directors entitled to vote with respect to the subject matter thereof. Such consent shall have the same effect as a unanimous vote and may be stated in any articles or documents filed with the Secretary of State under the Montana Business Corporation Act.
ARTICLE XI.
Amendments
These Amended Bylaws may be altered, amended or repealed and new Bylaws may be adopted by the Board of Directors at any regular or special meeting of the Board of Directors.
We, the undersigned, being all of the directors of SEMITOOL, INC., do hereby formally and regularly adopt, ratify and sign the foregoing Amended Bylaws as the Bylaws of this corporation for the guidance of the corporation and regulation of its business and as evidence of such adoption and ratification, we do hereby set our hands this 11th day of February, 2003.
/s/ R. Thompson /s/ L. Peter Larson - ----------------------------------- ----------------------------------- Raymon F. Thompson L. Peter Larson /s/ Daniel Eigeman /s/ Richard Dasen - ----------------------------------- ----------------------------------- Daniel Eigeman Richard Dasen /s/ Howard Bateman /s/ Timothy C. Dodkin - ----------------------------------- ----------------------------------- Howard Bateman Timothy C. Dodkin /s/ Robert Chamberlain - ----------------------------------- Robert Chamberlain
Exhibit 99.1
In connection with the quarterly report of Semitool, Inc. (the “Company”) on Form 10-Q for the fiscal quarter ended March 31, 2003 as filed with the Securities and Exchange Commission (the “Report”), I, Raymon F. Thompson, Chief Executive Officer of the Company, hereby certify as of the date hereof, solely for purposes of Title 18, Chapter 63, Section 1350 of the United States Code, that to my knowledge:
| 1. | the Report fully complies with the requirements of Section 13 (a) or 15(d), as applicable, of the Securities Exchange Act of 1934, and |
| 2. | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated. |
This Certification has not been, and shall not be deemed, “filed” with the Securities and Exchange Commission.
Dated: May 12, 2003 By: /s/ RAYMON F. THOMPSON
-----------------------------------------------
Raymon F. Thompson
Chairman, President and Chief Executive Officer
Exhibit 99.2
In connection with the quarterly report of Semitool, Inc. (the “Company”) on Form 10-Q for the fiscal quarter ended March 31, 2003 as filed with the Securities and Exchange Commission (the “Report”), I, William A. Freeman, Senior Vice President and Chief Financial Officer of the Company, hereby certify as of the date hereof, solely for purposes of Title 18, Chapter 63, Section 1350 of the United States Code, that to my knowledge:
| 1. | the Report fully complies with the requirements of Section 13 (a) or 15(d), as applicable, of the Securities Exchange Act of 1934, and |
| 2. | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated. |
This Certification has not been, and shall not be deemed, “filed” with the Securities and Exchange Commission.
Dated: May 12, 2003 By: /s/ WILLIAM A. FREEMAN
-------------------------------------------------
William A. Freeman
Senior Vice President and Chief Financial Officer