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Axcelis Technologies 10-K 2008

Table of Contents

 

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K/A

 

AMENDMENT NO. 1 TO FORM 10-K

 

(Mark one)

 

x

 

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

 

For the fiscal year ended December 31, 2007

 

 

 

o

 

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

 

For the transition period from                 to

 

Commission file number   000-30941

 

AXCELIS TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)

 

Delaware

 

34-1818596

(State or other jurisdiction of incorporation or
organization)

 

(IRS Employer Identification No.)

 

108 Cherry Hill Drive
Beverly, Massachusetts 01915

(Address of principal executive offices, including zip code)

 

(978) 787-4000

(Registrant’s telephone number, including area code)

 

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

 

Title of class

 

Name of each exchange on which registered

None

 

None

 

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

 

Common Stock, $0.001 par value

Preferred Share Purchase Rights

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes o  No  x

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes o  No  x

 

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  o

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer o

 

Accelerated filer x

 

 

 

Non-accelerated filer o

 

Smaller reporting company o

(Do not check if a smaller reporting company)

 

 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes o  No x

 

Aggregate market value of the voting stock held by non-affiliates of the registrant as of June 29, 2007: $565,349,066.

 

Number of shares outstanding of the registrant’s Common Stock, $0.001 par value, as of March 13, 2008: 102,448,670.

 

Documents incorporated by reference:

 

Portions of the definitive Proxy Statement for Axcelis Technologies, Inc.’s Annual Meeting of Stockholders held on May 1, 2008 are incorporated by reference into Part III of this Form 10-K.

 

 

 



Table of Contents

 

AMENDMENT NO. 1

 

EXPLANATORY NOTE

 

We are filing this amendment to our Annual Report on Form 10-K for the fiscal year ended December 31, 2007, originally filed with the Securities and Exchange Commission on March 17, 2008, solely for the purpose of complying with Regulation S-X, Rule 3-09. Rule 3-09 requires that Form 10-K, but not the annual shareholders’ report, contain separate financial statements for unconsolidated subsidiaries and investees accounted for by the equity method when such entities are individually significant.

 

We have determined that our 50% owned joint venture with Sumitomo Heavy Industries, Ltd., known as SEN Corporation, an SHI and Axcelis Company (“SEN”), which is not consolidated in the Axcelis Technologies, Inc. financial statements (and is accounted for under the equity method) was significant under Rule 3-09 in relationship to the Axcelis Technologies, Inc. financial results for the year ended December 31, 2007. Since SEN’s fiscal year ended after the date of the filing of our Form 10-K, Rule 3-09 provides that the SEN financial statements may be filed as an amendment to our Form 10-K within 180 days after the end of SEN’s fiscal year ended March 31, 2008. Certain portions of the notes to the SEN financial statements included in this amendment reflect the conclusions and opinions of SEN management and do not necessarily reflect the conclusions and opinions of Axcelis management.

 

Since 1983, we have exclusively licensed our Japanese joint venture, SEN Corporation, an SHI and Axcelis Company to manufacture and sell specific ion implanter systems using our technology in Japan. As of year end 2007, SEN had 541 employees and 238 temporary staff based in Tokyo and Saijo, Japan. We own 50% of the equity of SEN and our senior managers serve as half of the members of SEN’s Board of Directors. Sumitomo Heavy Industries, Ltd., a Japanese corporation (“SHI”), holds the other 50% of the equity of SEN.

 

SEN has granted us a royalty-free worldwide (except for Japan) license to use any technology SEN develops that is an improvement to our technology. Axcelis has not licensed SEN to sell the Optima MD, Optima HD and Optima HE, which are available in Japan directly from Axcelis. SEN pays royalties on its net sales of licensed ion implantation products in accordance with the rates set forth in the license agreement between SEN and Axcelis. The royalty rates vary depending on the type of implanter sold. These royalty amounts were $6.1 million, $9.2 million and $8.7 million in 2007, 2006 and 2005, respectively. The current license agreement between SEN and Axcelis will continue in effect until terminated. The license agreement may be terminated by Axcelis or by SEN, with the approval of the Axcelis representatives on the SEN Board, on twelve months’ notice.

 

We have in the past allowed, and may in the future allow, SEN to sell implanters outside of Japan. We have allowed these sales when we believe that a SEN product, rather than an Axcelis product, is more likely to be successful at a particular customer. When these sales are allowed, we receive commissions in addition to royalties from SEN on these extra-territorial sales and assume most of the post-installation warranty responsibility. The financial benefit to Axcelis from the sale of a SEN implanter is less than the financial benefit of a sale of an Axcelis implanter, so such extra-territorial sales may have an adverse effect on our revenues. For this reason, Axcelis has, on occasion, denied permission to SEN to sell products to particular customers outside of Japan. In several instances, SEN has engaged in selling activities outside of Japan that have not been authorized by Axcelis. To date, these unauthorized sales by SEN have not had a material negative impact on Axcelis’ results of operations. See our Form 10-K filed on March 17, 2008, Item 1A. Risk Factors—“Our inability to control our Japanese joint venture may adversely affect our results” for a discussion of a pending arbitration with SEN.

 

In January 2007, SEN made a dividend of 40% of its net earnings for the year ended March 31, 2006. In this dividend Axcelis received payment of approximately $5.7 million, representing its 50% share. In June 2007, Axcelis and Sumitomo Heavy Industries, Ltd., the other shareholder of SEN, entered into a Memorandum of Understanding (the “MOU”) that provided that SEN would also dividend to its shareholders 40% of SEN’s net earnings for SEN’s fiscal years ended March 31, 2007 and ending March 31, 2008. In July 2007, Axcelis received a dividend of approximately $6.7 million for SEN’s fiscal year ended March 31, 2007. In accordance with the MOU, Axcelis received a dividend of $1.9 million in July 2008 for SEN’s fiscal year ending March 31, 2008. The MOU provides that the two SEN shareholders will seek to re-negotiate the dividend rate for years after 2008 but, absent a new agreement, the MOU provides for continuing annual dividends at the level of 40% of SEN’s net earnings.

 

Therefore, this Form 10-K/A amends the following portions of the Axcelis Technologies Form 10-K filed on March 17, 2008:

 

·              Item 8 is being amended by submitting the financial statements of SEN for the fiscal years ended March 31, 2006, 2007 and 2008 (the “SEN financial statements”) as a separate section of this report immediately following Item 15;

 

·              Item 15 is being amended to:

 

·                                               include the list of the SEN financial statements being filed herewith as required by Item 15(a); and

 

·                                               add to the list of exhibits and exhibits filed in accordance with Item 601 of Regulation S-K an Exhibit 23.2, Consent of Ernst & Young - Independent Auditors relating to the SEN Financial Statements, as required by Item 15(c).

 

As required by Rule 3-09, we will determine with respect to each future fiscal year, whether SEN has been significant with respect to Axcelis’ financial results for such year, and file SEN financial statements as necessary to comply with Rule 3-09.

 



Table of Contents

 

Item 15. Exhibits, Financial Statement Schedules

 

(a) The following documents are filed as part of the Company’s Form 10-K, as originally filed on March 17, 2008, and as amended by this form 10-K/A:

 

(1)(A) Financial Statements of Axcelis Technologies, Inc.:

 

Report of Independent Registered Public Accounting Firm

 

 

 

Consolidated Statements of Operations — For the years ended December 31, 2007, 2006 and 2005

 

Consolidated Balance Sheets — December 31, 2007 and 2006

 

Consolidated Statements of Stockholders’ Equity — For the years ended December 31, 2007, 2006 and 2005

 

Consolidated Statements of Cash Flows — For the years ended December 31, 2007, 2006 and 2005

 

 

 

Notes to Consolidated Financial Statements

 

 

 

(1)(B) Financial Statements of SEN Corporation, an SHI and Axcelis Company:

 

 

Report of Independent Auditors

 

 

 

Consolidated Statements of Operations — For the years ended March 31, 2006, 2007 and 2008

 

Consolidated Balance Sheets — March 31, 2007 and 2008

 

Consolidated Statements of Stockholders’ Equity — For the years ended March 31, 2006, 2007 and 2008

 

Consolidated Statements of Cash Flows — For the years ended March 31, 2006, 2007 and 2008

 

 

(2) Financial Statement Schedules:

 

Schedule II — Valuation and Qualifying Accounts for the years ended December 31, 2007, 2006 and 2005

 

All other schedules for which provision is made in the applicable regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable, and therefore have been omitted.

 

(b) Exhibits

 

The exhibits filed as part of this Form 10-K are listed on the Exhibit Index immediately preceding such Exhibits, which Exhibit Index is incorporated herein by reference.

 

(c) Financial Statement Schedules

 

The response to this portion of Item 15 is submitted as a separate section of this report.

 



Table of Contents

 

Consolidated Financial Statements

 

As of March 31, 2007 and 2008 and
for the years ended March 31, 2006, 2007 and 2008

 

Contents

 

Report of Independent Auditors

1

 

 

Audited Consolidated Financial Statements

 

 

 

Consolidated Statements of Income

2

Consolidated Balance Sheets

3

Consolidated Statements of Shareholders’ Equity

4

Consolidated Statements of Cash Flows

5

Notes to Consolidated Financial Statements

6

 



Table of Contents

 

Report of Independent Auditors

 

The Board of Directors

SEN Corporation, an SHI and Axcelis Company

 

We have audited the accompanying consolidated balance sheets of SEN Corporation, an SHI and Axcelis Company (the “Company”) as of March 31, 2008 and 2007, and the related consolidated statements of income, shareholders’ equity, and cash flows for each of the three years in the period ended March 31, 2008, all expressed in Japanese yen.  These financial statements are the responsibility of the Company’s management.  Our responsibility is to express an opinion on these financial statements based on our audits.

 

We conducted our audits in accordance with auditing standards generally accepted in the United States.  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  We were not engaged to perform an audit of the Company’s internal control over financial reporting.  Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.  Accordingly, we express no such opinion.  An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion the financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company, at March 31, 2008 and 2007, and the consolidated results of its operations and cash flows for each of the three years in the period ended March 31, 2008, in conformity with generally accepted accounting principles in the United States.

 

As discussed in Note 10 to the consolidated financial statements, the Company adopted the recognition provisions of Statement of Financial Accounting Standards No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans - An Amendment of FASB Statements No. 87, 88, 106 and 132(R) effective on March 31, 2008.

 

We also have recomputed the translation of the consolidated financial statements as of and for the year ended March 31, 2008 into United States dollars.  In our opinion, the consolidated financial statements expressed in Japanese yen have been translated into United States dollars on the basis described in Note 2.

 

Tokyo, Japan

 

/s/ Ernst & Young ShinNihon LLP

September 19, 2008

 

 

 

1



Table of Contents

 

SEN Corporation, an SHI and Axcelis Company

 

Consolidated Statements of Income

 

 

 

Years ended March 31,

 

Year ended
March 31,

 

 

 

2006

 

2007

 

2008

 

2008

 

 

 

(Thousands of yen)

 

(U.S. dollars in

 

 

 

 

 

thousands)

 

Net sales:

 

 

 

 

 

 

 

 

 

Systems

 

¥

20,026,152

 

¥

24,261,306

 

¥

14,273,320

 

$

142,462

 

Services

 

7,831,507

 

8,336,320

 

7,914,660

 

78,997

 

Total sales

 

27,857,659

 

32,597,626

 

22,187,980

 

221,459

 

Cost of sales

 

15,660,181

 

18,787,848

 

14,346,690

 

143,195

 

Gross profit

 

12,197,478

 

13,809,778

 

7,841,290

 

78,264

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

2,271,112

 

2,683,775

 

2,548,820

 

25,440

 

Selling, general and administrative expenses

 

3,851,467

 

4,037,048

 

3,739,777

 

37,327

 

 

 

 

 

 

 

 

 

 

 

Income from operations

 

6,074,899

 

7,088,955

 

1,552,693

 

15,497

 

 

 

 

 

 

 

 

 

 

 

Non-operating income

 

 

21,690

 

52,521

 

524

 

 

 

 

 

 

 

 

 

 

 

Non-operating expenses

 

11,002

 

10,391

 

2,869

 

28

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

6,063,897

 

7,100,254

 

1,602,345

 

15,993

 

 

 

 

 

 

 

 

 

 

 

Income taxes (benefit):

 

 

 

 

 

 

 

 

 

Current

 

2,023,686

 

2,764,273

 

556,082

 

5,551

 

Deferred

 

184,847

 

(85,646

)

(64,584

)

(645

)

 

 

2,208,533

 

2,678,627

 

491,498

 

4,906

 

Net income

 

¥

3,855,364

 

¥

4,421,627

 

¥

1,110,847

 

$

11,087

 

 

See accompanying notes to consolidated financial statements.

 

2



Table of Contents

 

SEN Corporation, an SHI and Axcelis Company

 

Consolidated Balance Sheets

 

 

 

March 31,

 

March 31,

 

 

 

2007

 

2008

 

2008

 

 

 

(Thousands of yen)

 

(U.S. dollars in

 

 

 

 

 

 

 

thousands)

 

Assets

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

 

¥

6,136,016

 

¥

13,754,739

 

$

137,287

 

Trade receivables, net

 

22,552,485

 

9,928,011

 

99,092

 

Due from SHI and affiliates

 

1,456

 

7,675

 

77

 

Due from Axcelis and affiliates

 

60,575

 

97,130

 

969

 

Inventories

 

8,186,374

 

8,633,492

 

86,171

 

Deferred tax assets

 

426,223

 

479,823

 

4,789

 

Other current assets

 

46,022

 

36,773

 

367

 

Total current assets

 

37,409,151

 

32,937,643

 

328,752

 

 

 

 

 

 

 

 

 

Property, plant and equipment, net

 

2,642,516

 

2,341,199

 

23,368

 

Deferred tax assets

 

275,988

 

377,023

 

3,763

 

Other assets

 

366,350

 

272,594

 

2,720

 

Total assets

 

¥

40,694,005

 

¥

35,928,459

 

$

358,603

 

 

 

 

 

 

 

 

 

Liabilities and shareholders’ equity

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Trade payables:

 

 

 

 

 

 

 

Notes

 

¥

2,398,831

 

¥

1,613,993

 

$

16,109

 

Accounts

 

3,232,634

 

2,484,181

 

24,795

 

Total trade payables

 

5,631,465

 

4,098,174

 

40,904

 

Due to SHI and affiliates

 

1,403,727

 

601,265

 

6,002

 

Due to Axcelis and affiliates

 

527,713

 

278,662

 

2,781

 

Income taxes payable

 

1,816,063

 

281,863

 

2,813

 

Accrued bonuses

 

480,918

 

458,234

 

4,574

 

Other current liabilities

 

285,397

 

149,879

 

1,496

 

Total current liabilities

 

10,145,283

 

5,868,077

 

58,570

 

 

 

 

 

 

 

 

 

Accrued retirement benefits

 

 

178,286

 

1,779

 

Total liabilities

 

10,145,283

 

6,046,363

 

60,349

 

 

 

 

 

 

 

 

 

Shareholders’ equity:

 

 

 

 

 

 

 

Capital stock:

 

 

 

 

 

 

 

Authorized – 20,000 shares

 

 

 

 

 

 

 

Issued and outstanding – 12,000 shares

 

600,000

 

600,000

 

5,989

 

Legal reserve

 

150,000

 

150,000

 

1,497

 

Retained earnings

 

29,798,722

 

29,264,722

 

292,091

 

Accumulated other comprehensive loss

 

 

(132,626

)

(1,323

)

Total shareholders’ equity

 

30,548,722

 

29,882,096

 

298,254

 

Total liabilities and shareholders’ equity

 

¥

40,694,005

 

¥

35,928,459

 

$

358,603

 

 

See accompanying notes to consolidated financial statements.

 

3



Table of Contents

 

SEN Corporation, an SHI and Axcelis Company

 

Consolidated Statements of Shareholders’ Equity

 

 

 

Number of
issued
shares

 

Capital
stock

 

Legal
reserve

 

Retained
earnings

 

Accumulated
other
comprehensive
loss

 

Total
shareholders’
Equity

 

 

 

(Thousands of yen, except number of shares)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at March 31, 2005

 

12,000

 

¥

600,000

 

¥

150,000

 

¥

23,017,152

 

¥

 

¥

23,767,152

 

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

 

3,855,364

 

 

3,855,364

 

Comprehensive income

 

 

 

 

 

 

 

 

 

 

 

3,855,364

 

Cash dividends

 

 

 

 

(120,000

)

 

(120,000

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at March 31, 2006

 

12,000

 

¥

600,000

 

¥

150,000

 

¥

26,752,516

 

¥

 

¥

27,502,516

 

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

 

4,421,627

 

 

4,421,627

 

Comprehensive income

 

 

 

 

 

 

 

 

 

 

 

4,421,627

 

Cash dividends

 

 

 

 

(1,375,421

)

 

(1,375,421

)

Balance at March 31, 2007

 

12,000

 

¥

600,000

 

¥

150,000

 

¥

29,798,722

 

¥

 

¥

30,548,722

 

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

 

1,110,847

 

 

1,110,847

 

Adjustment to initially apply FASB Statement No. 158 (net of income tax of ¥ 90,050)

 

 

 

 

 

(132,626

)

 

Comprehensive income

 

 

 

 

 

 

 

 

 

 

 

1,110,847

 

Cash dividends

 

 

 

 

(1,644,847

)

 

(1,644,847

)

Balance at March 31, 2008

 

12,000

 

¥

600,000

 

¥

150,000

 

¥

29,264,722

 

¥

(132,626

)

¥

29,882,096

 

 

 

 

Number of
issued
shares

 

Capital
Stock

 

Legal
reserve

 

Retained
Earnings

 

Accumulated
other
comprehensive
loss

 

Total
shareholders’
equity

 

 

 

(U.S. dollars in thousands, except number of shares)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at March 31, 2007

 

12,000

 

$

5,989

 

$

1,497

 

$

297,421

 

$

 

$

304,907

 

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

 

11,087

 

 

11,087

 

Adjustment to initially apply FASB Statement No. 158  (net of income tax $899)

 

 

 

 

 

(1,323

)

 

Comprehensive income

 

 

 

 

 

 

 

 

 

 

 

11,087

 

Cash dividends

 

 

 

 

(16,417

)

 

(16,417

)

Balance at March 31, 2008

 

12,000

 

$

5,989

 

$

1,497

 

$

292,091

 

$

(1,323

)

$

298,254

 

 

See accompanying notes to consolidated financial statements.

 

4



Table of Contents

 

SEN Corporation, an SHI and Axcelis Company

 

Consolidated Statements of Cash Flows

 

 

 

Year ended March 31,

 

Year ended
March 31,

 

 

 

2006

 

2007

 

2008

 

2008

 

 

 

(Thousands of yen)

 

(U.S. dollars in

 

 

 

 

 

 

 

 

 

thousands)

 

Operating activities

 

 

 

 

 

 

 

 

 

Net income

 

¥

3,855,364

 

¥

4,421,627

 

¥

1,110,847

 

$

11,087

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

402,684

 

480,787

 

467,293

 

4,664

 

Loss on fixed asset disposal

 

6,699

 

10,391

 

2,869

 

29

 

Deferred income taxes (benefit) provision

 

184,847

 

(85,646

)

(64,585

)

(645

)

 

 

 

 

 

 

 

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

 

Trade receivables

 

(1,497,284

)

(6,144,355

)

12,624,474

 

126,005

 

Due from/ to SHI and affiliates

 

133,902

 

95,021

 

(808,681

)

(8,071

)

Due from/ to Axcelis and affiliates

 

(189,319

)

104,416

 

(285,606

)

(2,851

)

Inventories

 

(963,531

)

(1,172,145

)

(447,118

)

(4,463

)

Trade accounts and notes payables

 

276,339

 

579,623

 

(1,533,291

)

(15,304

)

Income taxes payable

 

(1,611,852

)

568,705

 

(1,534,200

)

(15,313

)

Other, net

 

(587,765

)

173,060

 

(151,827

)

(645

)

Net cash (used in) provided by operating activities

 

10,084

 

(968,516

)

9,380,175

 

93,624

 

 

 

 

 

 

 

 

 

 

 

Investing activities

 

 

 

 

 

 

 

 

 

Purchases of property, plant and equipment

 

(398,440

)

(356,881

)

(116,605

)

(1,164

)

Net cash used in investing activities

 

(398,440

)

(356,881

)

(116,605

)

(1,164

)

 

 

 

 

 

 

 

 

 

 

Financing activities

 

 

 

 

 

 

 

 

 

Cash dividends paid

 

(120,000

)

(1,375,421

)

(1,644,847

)

(16,417

)

Net cash used in financing activities

 

(120,000

)

(1,375,421

)

(1,644,847

)

(16,417

)

Net (decrease) increase in cash and cash equivalents

 

(508,356

)

(2,700,818

)

7,618,723

 

76,043

 

Cash and cash equivalents at beginning of the year

 

9,345,190

 

8,836,834

 

6,136,016

 

61,244

 

Cash and cash equivalents at end of the year

 

¥

8,836,834

 

¥

6,136,016

 

¥

13,754,739

 

$

137,287

 

 

 

 

 

 

 

 

 

 

 

Supplementary information

 

 

 

 

 

 

 

 

 

Income taxes paid during the year

 

¥

3,676,965

 

¥

 2,264,769

 

¥

2,090,734

 

$

20,868

 

 

See accompanying notes to consolidated financial statements.

 

5



Table of Contents

 

SEN Corporation, an SHI and Axcelis Company

 

Notes to Consolidated Financial Statements

 

Note 1.  Nature of Business and Significant Accounting Policies

 

General

 

SEN Corporation, an SHI and Axcelis Company (the “Company”), was established on April 1, 1983 under the Commercial Code of Japan.  The Company is owned equally by Sumitomo Heavy Industries, Ltd. (“SHI”), a Japanese corporation, and Axcelis Technologies, Inc. (“Axcelis”), a U.S. corporation.  The Company designs, manufactures, sells and repairs ion implantation equipment and semiconductor equipment primarily for semiconductor manufacturing customers.

 

On April 1, 2006, the Company changed its name from “Sumitomo Eaton Nova Corporation” to “SEN Corporation, an SHI and Axcelis Company.”

 

Basis of Presentation

 

The Company and its subsidiary maintain their books of account in conformity with the accounting principles generally accepted in Japan.  The consolidated financial statements of the Company and its subsidiary presented herein have been prepared in a manner and reflect the adjustments which are necessary to conform them with accounting principles generally accepted in the United States of America (“U.S.”).

 

Principle of Consolidation

 

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary located in Japan.  All significant intercompany balances and transactions are eliminated in consolidation.

 

Use of Estimates

 

The preparation of consolidated financial statements in conformity with generally accepted accounting principles in the U.S. requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  The actual results could differ from those estimates.

 

6



Table of Contents

 

SEN Corporation, an SHI and Axcelis Company

 

Notes to Consolidated Financial Statements (continued)

 

Note 1.  Nature of Business and Significant Accounting Policies (continued)

 

Foreign Currency

 

Transaction gains and losses, which arise from transactions denominated in a currency other than the Japanese yen, are included in non-operating income (expenses).  Transaction gains and losses in each of the years in the three year period ended March 31, 2008 were not material.

 

Cash Equivalents

 

All highly liquid investments with a maturity of three months or less when purchased are considered to be cash equivalents.

 

Inventories

 

Inventories are stated at the lower of cost or market.  The cost of raw material inventories is determined on the average cost method.  The cost for work in process inventories are determined based on the specific identification method.

 

Property, Plant and Equipment

 

Property, plant and equipment is carried at cost less accumulated depreciation.  Depreciation is computed using the declining-balance method over the estimated useful lives of the respective assets (buildings – 6 to 40 years; machinery – 5 to 15 years; and furniture, fixtures and automobiles – 2 to 20 years) except for buildings purchased after April 1, 1998, which are depreciated on the straight-line basis over 31 years.

 

Impairment of Long-Lived Assets

 

Long-lived assets are reviewed for impairment losses whenever events or changes in circumstances indicate the carrying amount may not be recoverable.  Recoverability of assets to be held and used would be considered impaired when the net undiscounted future cash flows generated by the assets are less than their carrying value.  An impairment loss would be recognized based on the amount by which the carrying value of the asset exceeds its fair value. Assets to be disposed of by sale are reported at the lower of the carrying amount or fair value less costs to sell, and are no longer depreciated.

 

7



Table of Contents

 

SEN Corporation, an SHI and Axcelis Company

 

Notes to Consolidated Financial Statements (continued)

 

Note 1.  Nature of Business and Significant Accounting Policies (continued)

 

Income Taxes

 

Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates are recognized in the period in which they are enacted. The Company records a valuation allowance to reduce the deferred tax assets to the amount that is more likely than not realizable.

 

The Company adopted the provisions of Financial Accounting Standards Board (“FASB”) Interpretation No. 48, Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109 on April 1, 2007.  Upon adoption, the Company recognizes the financial statement effects of tax positions when it is more likely than not, based on the technical merits, that the tax positions will be sustained upon examination by the tax authorities. Benefits from tax positions that meet the more-likely-than-not recognition threshold are measured at the largest amount of benefit that is greater than 50 percent likely of being realized upon settlement. Interest and penalties accrued related to unrecognized tax benefits are included in income taxes in the consolidated statements of income.

 

Revenue Recognition

 

In general, the Company recognizes revenue when there is persuasive evidence of an arrangement, delivery has occurred or the services have been rendered, the sales price is fixed or determinable and collection of the related receivable is reasonably assured.

 

When a sales arrangement involves multiple elements, the items included in the arrangement (deliverables) are evaluated to determine whether they represent separate units of accounting.  The arrangement consideration is allocated to the individual items based on their relative fair values.  If there is objective and reliable evidence of fair value of the undelivered item in an arrangement, but no such evidence for the delivered item, the residual method to allocate the arrangement consideration is used.

 

Absent objective and reliable evidence of fair value for the undelivered item in a multiple-element arrangement, the Company combines all deliverables into a single unit of accounting, and recognizes revenue when the last item has been delivered and all revenue recognition criteria applicable to the last delivered item has been met.

 

8



Table of Contents

 

SEN Corporation, an SHI and Axcelis Company

 

Notes to Consolidated Financial Statements (continued)

 

Note 1.  Nature of Business and Significant Accounting Policies (continued)

 

Revenue Recognition (continued)

 

For domestic equipment sales that require installation services, the Company recognizes revenue upon customers’ acceptance.  For export equipment sales, revenue is recognized when title and risk of loss transfers to the customer, generally upon shipment.  When the final payment is subject to customer acceptance, a portion of revenue for the final payment is deferred until an enforceable claim has become effective.

 

Service revenue includes revenue from spare parts, maintenance services and equipment overhaul services.  Revenue related to maintenance service contracts is recognized ratably over the duration of the contracts.  Revenue related to services and equipment overhauls is recognized upon completion and acceptance of the service.  Revenue related to spare parts is recognized upon the later of shipment or when title and risk of loss passes to the customer.

 

Taxes collected from customers and remitted to governmental authorities are excluded from revenues in the consolidated statements of income.

 

Shipping and Handling Costs

 

Shipping and handling costs are included in cost of products sold.

 

Research and Development Costs

 

Research and development costs are expensed in the year in which such costs are incurred.

 

Reclassifications

 

Certain prior year amounts have been reclassified to conform to the current year presentation.

 

9



Table of Contents

 

SEN Corporation, an SHI and Axcelis Company

 

Notes to Consolidated Financial Statements (continued)

 

Note 1.  Nature of Business and Significant Accounting Policies (continued)

 

Recent Accounting Pronouncements

 

In September 2006, the FASB issued Statement of Financial Accounting Standard (“SFAS”) No. 157, Fair Value Measurements (“SFAS 157”). SFAS 157 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. SFAS 157 is effective for fiscal years beginning after November 15, 2007 and is required to be adopted by the Company in the fiscal year beginning after April 1, 2008. In February 2008, the FASB issued Staff Positions No. FAS 157-1, Application of FASB Statement No. 157 to FASB Statement No. 13 and Other Accounting Pronouncements That Address Fair Value Measurements for Purposes of Lease Classification or Measurement under Statement 13 and No. FAS 157-2, Effective Date of FASB Statement No. 157, which partially delay the effective date of SFAS 157 for one year for certain nonfinancial assets and liabilities and remove certain leasing transactions from its scope. The adoption of SFAS 157 will not have a material impact on the Company’s consolidated results of operations and financial condition.

 

In September 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standard No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans-An Amendment of FASB Statements No. 87, 88, 106, and 132R (“SFAS 158”).  SFAS 158 requires an employer to recognize the funded status of pension and other postretirement benefit plans on sponsoring employers’ balance sheets and to recognize changes in the funded status in comprehensive income in the year the changes occur. It also requires the measurement date of plan assets and obligations to be at the end of the employers’ fiscal year. The Company adopted the requirement to recognize the funded status of its benefit plan and the disclosure requirements in its financial statement as of and for the year ending March 31, 2008, as described in Note 10 Employees’ and Directors’ Retirement Benefits.  However, the requirement to measure plan assets and benefit obligations as of the date of the employer’s fiscal year-end statement of financial position shall be effective for the Company’s fiscal year ending March 31, 2009.  Adoption of the measurement date provisions of SFAS 158 will require the Company to record adjustments to retained earnings and accumulated other comprehensive income for the effect of net periodic benefit costs incurred in the period January 1, 2008 to March 31, 2008.  The Company is currently evaluating whether to re-measure plan assets and benefit obligations as or March 31, 2008 to determine the effects of the measurement date change at March 31, 2008 (re-measurement method) or to continue to use the measurements as of December 31, 2007 and report the estimated effects of the measurement date change by allocating three-fifteenths of the net periodic benefit cost determined for the period from December 31, 2007 to March 31, 2009 (alternative method).  As a result, the impact of applying the measurement date provisions has yet to be determined.

 

10



Table of Contents

 

SEN Corporation, an SHI and Axcelis Company

 

Notes to Consolidated Financial Statements (continued)

 

Note 2.  Basis of Financial Statement Translation

 

The accompanying consolidated financial statements expressed in yen, solely for the convenience of the reader, have been translated into United States dollars at the rate of ¥100.19 per US$ 1, the approximate exchange rate prevailing on the Tokyo Foreign Exchange Market as of March 31, 2008.  This translation should not be construed as a representation that all amounts shown could be converted into U.S. dollars.

 

Note 3.  Trade Receivables

 

The components of trade receivables at March 31, 2007 and 2008 were as follows:

 

 

 

2007

 

2008

 

2008

 

 

 

(Thousands of yen)

 

(U.S. dollars in

 

 

 

 

 

 

 

thousands)

 

Notes

 

¥

284,277

 

¥

188,038

 

$

1,877

 

Accounts

 

22,293,689

 

9,739,973

 

97,215

 

 

 

22,577,966

 

9,928,011

 

99,092

 

Allowance for doubtful accounts

 

(25,481

)

 

 

 

 

¥

22,552,485

 

¥

 9,928,011

 

$

99,092

 

 

Note 4.  Inventories

 

The components of inventories at March 31, 2007 and 2008 were as follows:

 

 

 

2007

 

2008

 

2008

 

 

 

(Thousands of yen)

 

(U.S. dollars in

 

 

 

 

 

 

 

thousands)

 

Work in process

 

¥

5,755,442

 

¥

6,301,577

 

$

62,896

 

Raw materials and parts

 

2,430,932

 

2,331,915

 

23,275

 

 

 

¥

8,186,374

 

¥

8,633,492

 

$

86,171

 

 

11



Table of Contents

 

SEN Corporation, an SHI and Axcelis Company

 

Notes to Consolidated Financial Statements (continued)

 

Note 5.  Property, Plant and Equipment

 

The components of property, plant and equipment at March 31, 2007 and 2008 were as follows:

 

 

 

2007

 

2008

 

2008

 

 

 

(Thousands of yen)

 

(U.S. dollars in
thousands)

 

Land

 

¥

299,485

 

¥

299,485

 

$

2,989

 

Building and land improvements

 

4,611,371

 

4,632,692

 

46,239

 

Machinery

 

932,455

 

945,379

 

9,436

 

Furniture, fixtures and automobiles

 

2,158,992

 

2,166,912

 

21,628

 

Construction in process

 

11,278

 

11,510

 

115

 

 

 

8,013,581

 

8,055,978

 

80,407

 

Accumulated depreciation

 

(5,371,065

)

(5,714,779

)

(57,039

)

 

 

¥

2,642,516

 

¥

2,341,199

 

$

23,368

 

 

Note 6.  Product Warranty

 

The Company offers a one year warranty for all its products, the terms and conditions of which vary depending upon the product sold.  The Company estimates the costs that may be incurred under its warranty and records a liability in the amount of such costs at the time product revenue is recognized.  Factors that affect the Company’s warranty include the number of installed units, historical and anticipated product failure rates, material usage and service labor costs.  The Company periodically assesses the adequacy of its recorded warranty and adjusts the amount as necessary.

 

Changes in the Company’s product warranty (included in other current liabilities on the consolidated balance sheets) for the years ended March 31, 2006, 2007 and 2008 are as follows:

 

 

 

2006

 

2007

 

2008

 

2008

 

 

 

(Thousands of yen)

 

(U.S. dollars in
thousands)

 

Balance at April 1 (beginning of year)

 

¥

54,900

 

¥

39,200

 

¥

51,000

 

$

509

 

Warranties issued during the period

 

49,896

 

93,464

 

66,276

 

661

 

Settlements made during the period

 

(65,596

)

(81,664

)

(87,476

)

(873

)

Balance at March 31 (end of year)

 

¥

39,200

 

¥

51,000

 

¥

29,800

 

$

297

 

 

12



Table of Contents

 

SEN Corporation, an SHI and Axcelis Company

 

Notes to Consolidated Financial Statements (continued)

 

Note 7.  Transactions with Affiliates

 

Transactions with affiliates for the years ended March 31, 2006, 2007 and 2008 were as follows:

 

 

 

2006

 

2007

 

2008

 

2008

 

 

 

(Thousands of yen)

 

(U.S. dollars in
thousands)

 

Revenues:

 

 

 

 

 

 

 

 

 

SHI and affiliates

 

¥

 

¥

2,400

 

¥

 

$

 

Axcelis and affiliates

 

375,464

 

512,490

 

343,824

 

3,432

 

 

 

¥

375,464

 

¥

514,890

 

¥

343,824

 

$

3,432

 

 

 

 

 

 

 

 

 

 

 

Inventories purchased:

 

 

 

 

 

 

 

 

 

SHI and affiliates

 

¥

1,923,477

 

¥

2,074,908

 

¥

1,386,874

 

$

13,842

 

Axcelis and affiliates

 

281,357

 

461,452

 

205,217

 

2,049

 

 

 

¥

2,204,834

 

¥

2,536,360

 

¥

1,592,091

 

$

15,891

 

 

 

 

 

 

 

 

 

 

 

Other income from affiliates, none of which have been eliminated:

 

 

 

 

 

 

 

 

 

Territory commission and sales assistance fees from Axcelis

 

¥

 

¥

8,185

 

¥

 

$

 

 

 

¥

 

¥

8,185

 

¥

 

$

 

 

 

 

 

 

 

 

 

 

 

Other expenses to affiliates, none of which have been eliminated:

 

 

 

 

 

 

 

 

 

Royalties to Axcelis

 

¥

706,531

 

¥

715,136

 

¥

454,849

 

$

4,540

 

Commissions to Axcelis and affiliates

 

218,390

 

327,039

 

126,449

 

1,262

 

Other expenses to Axcelis and affiliates

 

390

 

1,394

 

1,475

 

15

 

Management fees and royalties to SHI

 

164,301

 

174,295

 

112,591

 

1,124

 

Subcontract charges to SHI affiliates

 

3,594

 

4,977

 

4,344

 

43

 

Other expenses to SHI and affiliates

 

229,028

 

196,587

 

182,301

 

1,819

 

 

 

¥

1,322,234

 

¥

1,419,428

 

¥

 882,009

 

$

8,803

 

 

The sales and purchase transactions with SHI, Axcelis, and their affiliates have been conducted at cost plus a fixed rate of 12%-25%.

 

The royalties to Axcelis were charged to the Company at 3.5% - 5.5% of net sales. The sales commissions to Axcelis were charged to the Company at 10% of net sales. The rates for both royalty and sales commission are specified in the master license agreement entered into between the Company and Axcelis.

 

13



Table of Contents

 

SEN Corporation, an SHI and Axcelis Company

 

Notes to Consolidated Financial Statements (continued)

 

Note 7.  Transactions with Affiliates (continued)

 

The management fees and royalties to SHI were charged to the Company at 1% of net sales, which is specified in the management fee agreement.

 

The Company earned profits of ¥58,617 thousand, ¥80,009 thousand, and ¥53,677 thousand (US$ 535 thousand) in 2006, 2007 and 2008, respectively, on revenue recognized from sales to Axcelis and affiliates, none of which have been eliminated in consolidation.

 

Balances due from and to affiliates at March 31, 2007 and 2008 were as follows:

 

 

 

2007

 

2008

 

2008

 

 

 

(Thousands of yen)

 

(U.S. dollars in
thousands)

 

Due from affiliates:

 

 

 

 

 

 

 

SHI and affiliates

 

¥

1,456

 

¥

7,675

 

$

77

 

Axcelis and affiliates

 

60,575

 

97,130

 

969

 

 

 

¥

62,031

 

¥

104,805

 

$

1,046

 

Due to affiliates:

 

 

 

 

 

 

 

SHI and affiliates

 

¥

1,403,727

 

601,265

 

$

6,002

 

Axcelis and affiliates

 

527,713

 

278,662

 

2,781

 

 

 

¥

1,931,440

 

879,927

 

$

8,783

 

 

Pension funding for seconded employees (employees on temporary assignment) is provided through a plan administered by SHI.  Under this arrangement, the Company is billed monthly for the pension costs attributable to those individuals.  Under the terms of the pension agreement with SHI, no additional costs related to earned benefits are to be borne by the Company.  Pension contributions paid to SHI for the years ended March 31, 2006, 2007 and 2008 were ¥126,977 thousand, ¥91,026 thousand and ¥78,236 thousand (US$ 781 thousand), respectively.

 

14



Table of Contents

 

SEN Corporation, an SHI and Axcelis Company

 

Notes to Consolidated Financial Statements (continued)

 

Note 8. Leases

 

Rental expenses for equipment, land and office space for the years ended March 31, 2006, 2007 and 2008 amounted to ¥266,976 thousand, ¥257,467 thousand and ¥253,515 thousand (US$ 2,530 thousand), respectively.  Future minimum non-cancelable rental commitments at March 31, 2008 under operating leases are as follows:

 

Year ended March 31

 

(Thousands of
yen)

 

(U.S. dollars in
thousands)

 

 

 

 

 

 

 

2009

 

¥

140,414

 

$

1,401

 

2010

 

59,176

 

591

 

2011

 

54,292

 

542

 

2012

 

49,504

 

494

 

2013

 

45,022

 

449

 

Thereafter

 

539,510

 

5,385

 

 

 

¥

887,918

 

$

8,862

 

 

Note 9.  Income Taxes

 

Income taxes include corporation, enterprise, and inhabitants’ taxes which, in the aggregate, resulted in a statutory tax rate of approximately 40.44% in 2006, 2007 and 2008.  The difference between the provision for income tax and the amount computed by applying the statutory income tax rate in effect for the year ended March 31, 2006, 2007 and 2008 resulted from nondeductible expenses, tax credits for costs of information technologies, research and development activities, and other miscellaneous items. The 2008 provision for income taxes also includes a credit related to the true up of 2007 income taxes.

 

15



Table of Contents

 

SEN Corporation, an SHI and Axcelis Company

 

Notes to Consolidated Financial Statements (continued)

 

Note 9.  Income Taxes (continued)

 

Deferred income taxes reflect the net tax effect of the temporary differences between the amounts of the assets and liabilities recorded for financial reporting and income tax purposes.  Net deferred income tax assets are included in the balance sheets under the following captions: ¥480 thousand in other current assets, and ¥377 thousand in other assets.  Significant components of the Company’s deferred tax assets as of March 31, 2007 and 2008 were as follows:

 

 

 

2007

 

2008

 

2008

 

 

 

(Thousands of yen)

 

(U.S. dollars in
thousands)

 

Deferred tax assets:

 

 

 

 

 

 

 

Accrued enterprise tax

 

¥

183,806

 

¥

26,469

 

$

264

 

Bonus payment reserve

 

194,939

 

185,799

 

1,854

 

Inventory valuation

 

1,359

 

138,766

 

1,385

 

Deferred revenue

 

 

57,471

 

574

 

 

 

 

 

 

 

 

 

Property, plant and equipment

 

285,742

 

302,482

 

3,019

 

Accrued pension and severance cost

 

8,980

 

98,567

 

984

 

Other

 

45,793

 

73,760

 

736

 

Total gross deferred tax assets

 

¥

720,619

 

¥

883,314

 

8,816

 

 

 

 

 

 

 

 

 

Deferred tax liabilities:

 

 

 

 

 

 

 

Pension asset

 

¥

(18,407

)

¥

(26,468

)

$

(264

)

Total gross deferred tax liabilities

 

(18,407

)

(26,468

)

(264

)

Net deferred tax asset

 

¥

702,212

 

¥

856,846

 

$

8,552

 

 

Realization of the Company’s net deferred tax assets is dependent on the Company generating sufficient taxable income or the Company executing certain available tax strategies. Although realization is not assured, management believes it is more likely than not that the net deferred tax assets will be realized.

 

The Company files income tax returns in Japan.  The Company is subject to regular income tax examinations by tax authorities. Japanese tax authorities have completed examinations of the Company through the year ended March 31, 2003.  Fiscal years subsequent to 2003 are open and subject to tax examination.  The Company believes that it has appropriate support for income tax positions taken on its returns based on an assessment of many factors including past experience and interpretations of tax law.

 

16



Table of Contents

 

SEN Corporation, an SHI and Axcelis Company

 

Notes to Consolidated Financial Statements (continued)

 

Note 10.  Employees’ and Directors’ Retirement Benefits

 

The Company has a defined benefit pension plan that covers substantially all employees, except for the seconded employees described in Note 7.  Benefits under the plan are based on the employees’ compensation as of the date of retirement and years of service.  The Company’s policy is to fund amounts which are actuarially determined to provide the plan with sufficient assets to meet future benefit payment requirements.  Assets of the plan are invested in equity securities, debt securities, money market instruments, and insured products.  The measurement date used to calculate the pension obligation for the benefit plan is December 31.

 

In September 2006, FASB issued SFAS No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans-An Amendment of FASB Statements No. 87, 88, 106, and 132R (“SFAS 158”).  SFAS 158 requires an employer to recognize the funded status of pension and other postretirement benefit plans on sponsoring employers’ balance sheets and to recognize changes in the funded status in comprehensive income in the year the changes occur. It also requires the measurement date of plan assets and obligations to be as of the date of the Company’s year-end, March 31.  The Company adopted the requirement to recognize the funded status of its benefit plan and the disclosure requirements in its financial statement as of and for the year ending March 31, 2008. Pursuant to the adoption of those requirements, the net after-tax adjustment to accumulated other comprehensive loss at March 31, 2008 was ¥132,626 thousand, which principally represents the impact of recognizing previously unrecognized actuarial losses and transition obligation. The incremental effects of adopting the provisions of SFAS 158 on the accompanying consolidated balance sheet at March 31, 2008 are presented in the following table.

 

 

 

(Thousands of yen)

 

 

 

Before Application of
SFAS 158

 

Adjustments

 

After Application
of SFAS 158

 

Other assets

 

¥

44,390

 

¥

(44,390

)

¥

 

 

 

 

 

 

 

 

 

Accrued retirement liabilities

 

 

(178,286

)

(178,286

)

Deferred tax liabilities

 

(17,951

)

17,951

 

 

Deferred tax assets

 

 

72,099

 

72,099

 

Accumulated other comprehensive loss

 

 

132,626

 

132,626

 

 

17



Table of Contents

 

SEN Corporation, an SHI and Axcelis Company

 

Notes to Consolidated Financial Statements (continued)

 

Note 10.  Employees’ and Directors’ Retirement Benefits (continued)

 

 

 

(U.S. dollars in thousands)

 

 

 

Before Application of
SFAS 158

 

Adjustments

 

After Application
of SFAS 158

 

Other assets

 

$

443

 

$

(443

)

$

 

Accrued retirement liabilities

 

 

(1,779

)

(1,779

)

Deferred tax liabilities

 

(179

)

179

 

 

Deferred tax assets

 

 

720

 

720

 

Accumulated other comprehensive loss

 

 

1,323

 

1,323

 

 

Benefit obligation, plan assets, the funded status and amounts recognized as of and for the years ended March 31, 2007 and 2008 (measured at December 31, 2006 and 2007) are as follows:

 

 

 

2007

 

2008

 

2008

 

 

 

(Thousands of yen)

 

(U.S. dollars in
thousands)

 

Benefit obligation at end of year

 

¥

1,085,430

 

¥

1,197,170

 

$

11,949

 

Fair value of plan assets at end of year

 

959,778

 

1,018,884

 

10,170

 

 

 

 

 

 

 

 

 

Funded status

 

¥

(125,652

)

¥

(178,286

)

$

(1,779

)

Contributions

 

¥

128,785

 

¥

104,915

 

$

1,047

 

Benefits paid

 

(7,954

)

(7,052

)

(70

)

 

Upon adoption of the recognition provision of SFAS 158, the Company recognized a net actuarial loss and transition obligation of ¥119,797 thousand (US$ 1,196 thousand) and ¥ 12,829 thousand (US$ 127 thousand), respectively.

 

18



Table of Contents

 

SEN Corporation, an SHI and Axcelis Company

 

Notes to Consolidated Financial Statements (continued)

 

Note 10.  Employees’ and Directors’ Retirement Benefits (continued)

 

The estimated net actuarial loss and net transition obligation that will be amortized from accumulated other comprehensive income into net periodic benefit cost over the year ended March 31, 2009 are summarized as follows:

 

 

 

(Thousands of
yen)

 

(U.S. dollars in
thousands)

 

 

 

 

 

 

 

Net actuarial loss

 

¥

3,797

 

$

38

 

Net transition obligation

 

10,770

 

107

 

Accrued retirement liabilities

 

¥

14,567

 

$

145

 

 

The aggregate accumulated benefit obligation of this plan as of March 31 (measured at December 31) was as follows:

 

 

 

2007

 

2008

 

2008

 

 

 

(Thousands of yen)

 

(U.S. dollars in
thousands)

 

Aggregate accumulated benefit obligation

 

¥

768,665

 

¥

865,919

 

$

8,643

 

 

The discount rates and weighted average rates of increases in future salary levels used in determining the actuarial present value of the projected benefit obligation as of March 31, 2007 and 2008 (measured at December 31, 2006 and 2007) were as follows:

 

 

 

2007

 

2008

 

 

 

 

 

 

 

Discount rate

 

2.0

%

2.0

%

Weighted average rates of increases in future salary levels

 

3.4

%

3.5

%

 

The discount rates, weighted average rates of increases in future salary levels and the expected long-term rates of return on plan assets used in determining net pension expense for the years ended March 31, 2006, 2007 and 2008 (measured at December 31, 2005, 2006 and 2007) were as follows:

 

 

 

2006

 

2007

 

2008

 

 

 

 

 

 

 

 

 

Discount rate

 

1.5

%

2.0

%

2.0

%

Weighted average rates of increases in future salary levels

 

2.7

%

3.4

%

3.4

%

Expected long-term rates of return on plan assets

 

4.0

%

4.0

%

4.0

%

 

The expected long-term rate of return on plan assets assumption is determined from the plan’s asset allocation using forward-looking assumptions in the context of historical returns.

 

19



Table of Contents

 

SEN Corporation, an SHI and Axcelis Company

 

Notes to Consolidated Financial Statements (continued)

 

Note 10.  Employees’ and Directors’ Retirement Benefits (continued)

 

The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid:

 

Year ended March 31

 

(Thousands of
yen)

 

(U.S. dollars in
thousands)

 

 

 

 

 

 

 

 

 

2009

 

¥

4,712

 

$

47

 

2010

 

5,377

 

54

 

2011

 

6,672

 

67

 

2012

 

13,666

 

136

 

2013

 

41,605

 

415

 

2014 – 2018

 

245,822

 

2,454

 

 

The Company’s investment strategy is to manage the assets of the plan to meet its long-term obligations while maintaining sufficient liquidity to pay current benefits.  This is primarily achieved by holding equity-like investments while investing a portion of the assets in long duration bonds in order to match the long-term nature of the liabilities.  The Company will periodically undertake an asset and liability modeling study if a material shift in the plan’s liability profile or changes in the capital markets call for such a study.  The Company’s weighted-average asset allocations for its defined benefit plan at March 31, 2007 and 2008, by asset category, are as follows:

 

Asset Category

 

2007

 

2008

 

 

 

 

 

 

 

Equity securities

 

34.4

%

39.0

%

Debt securities

 

28.2

 

24.0

 

Foreign currency securities investment fund

 

30.6

 

33.7

 

Loan receivables

 

6.8

 

3.3

 

 

 

100.0

%

100.0

%

 

The Company expects to contribute ¥113,138 thousand (US$ 1,129 thousand) to its defined benefit plan for the year ending March 31, 2009.

 

The Company previously had provided certain defined benefits to its statutory auditors and directors who were not statutory auditors, directors or employees of SHI, Axcelis or one of their affiliates.  Such benefits were based on years of service, compensation at retirement and position.  This plan was unfunded.  In July 2005, the company terminated this plan.  The benefit relating to the service period through July 2005 will be paid when the director or statutory auditor terminates employment.  The Company has accrued ¥21,060 thousand (US$ 210 thousand) for payment of such benefits.

 

20



Table of Contents

 

SEN Corporation, an SHI and Axcelis Company

 

Notes to Consolidated Financial Statements (continued)

 

Note 11.  Shareholders’ Equity

 

The Commercial Code of Japan (“Code”) provides that an amount equal to at least 10% of the amount to be disbursed as a distribution of earnings be appropriated to the legal reserve until the total of such reserve and the additional paid-in capital account equals 25% of the common stock account.  The Code also provides to the extent that the sum of additional paid-in capital account and the legal reserve account exceed 25% of the common stock account then the amount of the excess (if any) is available for appropriations by resolution of the shareholders.

 

Retained earnings available for dividends under the Code are based on the amount presented in the Company’s non-consolidated financial statements, which are prepared in accordance with accounting principles and practices generally accepted in Japan.  Under the Code, the amount of retained earnings available for dividends as of March 31, 2008 amounted to ¥27,220,699 thousand (US$ 272 million).

 

Note 12.  Financial Instruments

 

The total carrying amount reported in the balance sheets for financial instruments, cash and cash equivalents, notes and accounts receivables, notes and accounts payables approximates their respective fair value.

 

Note 13.  Supplemental Balance Sheet Information

 

Changes in allowance for doubtful accounts:

 

 

 

2006

 

2007

 

2008

 

2008

 

 

 

(Thousands of yen)

 

(U.S. dollars in
thousands)

 

Balance at April 1

 

¥

18,260

 

¥

18,535

 

¥

 25,481

 

$

254

 

Addition

 

275

 

6,946

 

 

 

Deduction

 

 

 

(25,481

)

(254

)

Balance at March 31

 

¥

18,535

 

¥

25,481

 

¥

     —

 

$

 

 

Note 14.  Sales to Foreign Customers

 

The Company’s sales to foreign customers amounted to ¥3,407,516 thousand, ¥5,060,620 thousand and ¥2,111,803 thousand (US$ 21,078 thousand) for the years ended March 31, 2006, 2007 and 2008, respectively.

 

21



Table of Contents

 

SEN Corporation, an SHI and Axcelis Company

 

Notes to Consolidated Financial Statements (continued)

 

Note 15.  Concentration of Credit Risk

 

Financial instruments, which potentially expose the Company to concentrations of credit risk, consist primarily of trade notes and accounts receivable.  Substantially all of the Company’s notes and accounts receivable are due from companies in the semiconductor industry located in Japan.  The Company performs ongoing credit evaluations of its customers’ financial condition and provides an allowance for specific doubtful trade notes and accounts receivable and generally does not require collateral to secure the trade notes and accounts receivable.

 

For the year ended March 31, 2006, three customers accounted for net sales of 19%, 14% and 13%.  Three customers accounted for net sales of 22%, 13% and 13% for the year ended March 31, 2007.  For the year ended March 31, 2008, three customers accounted for net sales of 26%, 14%, and 9%, respectively.

 

At March 31, 2007 and 2008 accounts receivable from one customer accounted for approximated 26% and 29% of total consolidated Trade receivables, respectively.

 

Note 16.  Contingencies

 

Axcelis, one of the Company’s shareholders, filed for arbitration to the Japan Commercial Arbitration Association on September 8, 2006, seeking, among others, royalty payments from the Company for the sale of the Company’s single-wafer high-current ion implanter SHX (“SHX”).  The Company disputes the entirety of Axcelis’ claims, arguing that SHX is a product which was wholly developed by SEN based on its own technologies, and there is no reason for the Company to pay any royalties to Axcelis on the sales of SHX products.  In addition, the Company filed counter claims against Axcelis on October 30, 2006, seeking, among others, a remedy for damages, the refund of royalties paid to Axcelis and a permanent injunction prohibiting Axcelis from infringing the Company’s U.S. and Japanese patents.  The arbitration is scheduled in the first half of 2010. Management believes the ultimate resolution of this matter will not have a material adverse effect on the Company’s financial position, results of operations or cash flows.

 

22



Table of Contents

 

SIGNATURE

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

AXCELIS TECHNOLOGIES, INC.

 

 

 

 

 

 

 

By:

/s/ Mary G. Puma

DATED:  September 29, 2008

 

Mary G. Puma,

 

 

Chairman of the Board, Chief Executive Officer
and President

 



Table of Contents

 

Exhibit Index

 

Exhibit No.

 

Description

 

 

 

3.1

 

Amended and Restated Certificate of Incorporation of the Company. Incorporated by reference to Exhibit 3.1 of the Company’s Registration Statement on Form S-1 (Registration No. 333-36330).

 

 

 

3.2

 

Bylaws of the Company, as amended as of August 8, 2007. Incorporated by reference to Exhibit 3.2 of the Company’s Form 10-Q for the quarter ended June 30, 2007, filed with the Commission on August 9, 2007.

 

 

 

3.3

 

Certificate of Designation of Series A Participating Preferred Stock, filed with the Secretary of State of Delaware on July 5, 2000. Incorporated by reference to Exhibit 3.3 of the Company’s Form 10-K for the year ended December 31, 2000, filed with the Commission on March 30, 2001.

 

 

 

4.1

 

Specimen Stock Certificate. Incorporated by reference to Exhibit 4.1 of the Company’s Registration Statement on Form S-1 (Registration No. 333-36330).

 

 

 

4.2

 

Rights Agreement between the Company and EquiServe Trust Company, N.A. Incorporated by reference to Exhibit 4.1 of the Company’s Registration Statement on Form S-1 (Registration No. 333-36330).

 

 

 

4.3

 

Indenture between the Company and U.S. Bank National Association, as trustee, including the form of note, dated as of May 2, 2006. Incorporated by reference to Exhibit 4.12 of the Company’s Report on Form 8-K filed with the Commission on May 4, 2006.

 

 

 

10.1*

 

Axcelis Technologies, Inc. 2000 Stock Plan, as amended through June 23, 2005. Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the Commission on June 28, 2005.

 

 

 

10.2*

 

Axcelis Team Incentive Plan for executive officers, adopted by the Compensation Committee of the Board of Directors on January 20, 2005. Incorporated by reference to Exhibit 10.1 to the Company’s Report on Form 8-K filed with the Commission on January 31, 2005.

 

 

 

10.3

 

Form of Indemnification Agreement entered into by the Company with each of its directors and executive officers. Incorporated by reference to Exhibit 10.2 of the Company’s Registration Statement on Form S-1 (Registration No. 333-36330).

 

 

 

10.4*

 

Form of Change in Control Agreement, as approved by the Board of Directors on October 16, 2007 and first effective on November 6, 2007, between the Company and each of its executive officers. Incorporated by reference to Exhibit 10.4 of the Company’s report on Form 10-Q for the quarter ended September 30, 2007 filed with the Commission on November 8, 2007.

 

 

 

10.5*

 

Form of Employee non-qualified stock option grant under the 2000 Stock Plan, updated as of April 5, 2002. Incorporated by reference to Exhibit 10.1 of the Company’s report on Form 10-Q filed with the Commission on November 9, 2004.

 

 

 

10.6*

 

Form of Non-Employee Director stock non-qualified stock option grant under the 2000 Stock Plan, updated as of July 12, 2004. Incorporated by reference to Exhibit 10.2 of the Company’s report on Form 10-Q filed with the Commission on November 9, 2004.

 

 

 

10.7*

 

Form of Restricted Stock Agreement for use under the 2000 Stock Plan. Incorporated by reference to

 



Table of Contents

 

 

 

Exhibit 10.4 to the Company’s Current Report on Form 8-K filed with the Commission on June 28, 2005.

 

 

 

10.8*

 

Form of Restricted Stock Unit Award Agreement for use under the 2000 Stock Plan. Incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed with the Commission on June 28, 2005.

 

 

 

10.9*

 

Form of Lock-Up Agreement dated October 26, 2005 between the registrant and each of its executive officers. Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on October 26, 2005.

 

 

 

10.10*

 

Named Executive Officer Base Compensation at March 1, 2008. Filed with the Original Form 10-K on March 17, 2008.

 

 

 

10.11*

 

Non-Employee Director Cash Compensation at March 1, 2008. Filed with the Original Form 10-K on March 17, 2008.

 

 

 

10.12*

 

Amended and Restated Employment Agreement between the Company and Mary G. Puma dated November 6, 2007. Incorporated by reference to Exhibit 10.3 of the Company’s report on Form 10-Q for the quarter ended September 30, 2007 filed with the Commission on November 8, 2007.

 

 

 

10.13**

 

Organization Agreement dated December 3, 1982 between Eaton Corporation and Sumitomo Heavy Industries, Ltd. relating to SEN Corporation, an SHI and Axcelis Company formerly known as Sumitomo Eaton Nova Corporation, as amended. Incorporated by reference to Exhibit 10.6 of the Company’s Registration Statement on Form S-1 (Registration No. 333-36330).

 

 

 

10.14**

 

Master License Agreement dated January 16, 1996 between Eaton Corporation and SEN Corporation, an SHI and Axcelis Company formerly known as Sumitomo Eaton Nova Corporation. Incorporated by reference to Exhibit 10.7 of the Company’s Registration Statement on Form S-1 (Registration No. 333-36330).

 

 

 

10.15

 

Registration Rights Agreement between the Company and Quantum Partners LDC, dated as of May 2, 2006. Incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the Commission on May 4, 2006.

 

 

 

10.16*

 

Executive Separation Agreement between the Company and Marc S. Levine dated as of August 22, 2007. Incorporated by reference to Exhibit 10.1 of the Company’s report on Form 10-Q for the quarter ended September 30, 2007 filed with the Commission on November 8, 2007.

 

 

 

10.17*

 

Executive Separation Agreement between the Company and Mark Namaroff dated as of October 18, 2007. Filed with the Original Form 10-K on March 17, 2008.

 

 

 

14.1

 

Ethical Business Conduct at Axcelis, revised through January 2003. Incorporated by reference to Exhibit 14.1 of the Company’s report on Form 10-K filed with the Commission on March 28, 2003.

 

 

 

21.1

 

Subsidiaries of the Company. Filed with the Original Form 10-K on March 17, 2008.

 

 

 

23.1

 

Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm. Filed with the Original Form 10-K on March 17, 2008.

 

 

 

23.2

 

Consent of Ernst & Young LLP ShinNihon, Independent Auditors, relating to the financial statements of SEN Corporation, an SHI and Axcelis Company. Filed herewith.

 

 

 

31.1

 

Certification of the Chief Executive Officer under Exchange Act Rule 13a-14(a)/15d-14(a) (Section 302 of the Sarbanes-Oxley Act), dated September 29, 2008. Filed herewith.

 



Table of Contents

 

31.2

 

Certification of the Chief Financial Officer under Exchange Act Rule 13a-14(a)/15d-14(a) (Section 302 of the Sarbanes-Oxley Act), dated September 29, 2008. Filed herewith.

 

 

 

32.1

 

Certification of the Chief Executive Officer pursuant to Section 1350 of Chapter 63 of title 18 of the United States Code (Section 906 of the Sarbanes-Oxley Act), dated September 29, 2008. Filed herewith.

 

 

 

32.2

 

Certification of the Chief Financial Officer pursuant to Section 1350 of Chapter 63 of title 18 of the United States Code (Section 906 of the Sarbanes-Oxley Act), dated September 29, 2008. Filed herewith.

 


*              Indicates a management contract or compensatory plan.

 

**           Certain confidential information contained in the document has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended, or Rule 24b-2 promulgated under the Securities and Exchange Act of 1934, as amended.

 


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