-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, C0UdY+MwOQPfG6RJLQhSLbj0RJbcNU9eCh+iQIgv9/L/ysI+yn8sc30lXMPA1K/Y 3pUBRpdQgE8Jr95KlQGEWQ== 0000891618-00-002827.txt : 20000516 0000891618-00-002827.hdr.sgml : 20000516 ACCESSION NUMBER: 0000891618-00-002827 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN XTAL TECHNOLOGY CENTRAL INDEX KEY: 0001051627 STANDARD INDUSTRIAL CLASSIFICATION: SEMICONDUCTORS & RELATED DEVICES [3674] IRS NUMBER: 943031310 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-24085 FILM NUMBER: 631886 BUSINESS ADDRESS: STREET 1: 4821 TECHNOLOGY DRIVE CITY: FREMONT STATE: CA ZIP: 94538 BUSINESS PHONE: 5106835900 MAIL ADDRESS: STREET 1: 4311 SOLAR WAY CITY: FREMONT STATE: CA ZIP: 94538 10-Q 1 FORM 10-Q 1 ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC. 20549 ---------------------------- FORM 10-Q (Mark One) [X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended March 31, 2000 or [ ] 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 0-24085 -------------------- AMERICAN XTAL TECHNOLOGY, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 94-3031310 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 4281 TECHNOLOGY DRIVE, FREMONT, CALIFORNIA 94538 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) (510) 683-5900 (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE) ----------------------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities 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 the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at March 31, 2000 ----- ----------------------------- Common Stock, $.001 par value 18,906,558 ================================================================================ 1 2 AMERICAN XTAL TECHNOLOGY, INC. TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION Item 1. Financial Statements. Condensed Consolidated Balance Sheets at March 31, 2000 and December 31, 1999 Condensed Consolidated Income Statements for the three months ended March 31, 2000 and 1999 Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2000 and 1999 Notes To Condensed Consolidated Financial Statements Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Item 3. Quantitative and Qualitative Disclosures About Market Risk PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K Signatures
2 3 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS AMERICAN XTAL TECHNOLOGY, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands)
March 31, December 31, 2000 1999 ------------- ------------- (Unaudited) Assets: Current assets Cash and cash equivalents $ 4,597 $ 6,062 Accounts receivable, net of allowance for doubtful accounts of $1,031 and $778 20,081 17,561 Inventories 40,471 35,470 Prepaid expenses and other current assets 6,589 4,932 Income tax receivable 4,621 4,013 Deferred income taxes 3,210 3,210 ------------- ------------- Total current assets 79,569 71,248 Property, plant and equipment 43,831 40,865 Receivable from officers and stockholders 624 596 Other assets 1,810 809 Goodwill 2,095 2,244 ------------- ------------- Total assets $ 127,929 $ 115,762 ============= ============= Liabilities and Stockholders' Equity: Current liabilities Short-term bank borrowing $ 10,328 $ 8,798 Accounts payable 16,467 10,794 Accrued liabilities 9,557 7,464 Current portion of long-term debt 1,913 2,550 Current portion of capital lease obligation 1,060 1,180 ------------- ------------- Total current liabilities 39,325 30,786 Long-term debt, net of current portion 18,680 18,501 Long-term capital lease, net of current portion 3,737 3,606 Note payable to officers and stockholders 501 410 ------------- ------------- Total liabilities 62,243 53,303 ------------- ------------- Stockholders' equity: Preferred stock $.001 par value per share; 1,000,000 shares authorized; 980,655 shares issued and outstanding 1 1 Additional paid-in capital 3,989 3,989 Common stock $.001 par value per share; 100,000,000 shares authorized; 18,906,558 and 18,658,919 shares issued and outstanding respectively 19 19 Additional paid-in capital 47,515 46,321 Deferred compensation (189) (217) Retained earnings 14,342 12,370 Cumulative translation adjustments 9 (24) ------------- ------------- Total stockholders' equity 65,686 62,459 ------------- ------------- Total liabilities and stockholders' equity $ 127,929 $ 115,762 ============= =============
The accompanying notes are an integral part of these condensed consolidated financial statements. 3 4 AMERICAN XTAL TECHNOLOGY, INC. CONDENSED CONSOLIDATED INCOME STATEMENTS (Unaudited) (In thousands, except per share data)
Three Months Ended March 31, 2000 1999 -------- -------- Revenue $ 23,934 $ 18,897 Cost of revenue 14,339 16,240 -------- -------- Gross profit 9,595 2,657 Operating expenses: Selling, general and administrative 3,853 3,647 Research and development 1,988 662 -------- -------- Total operating expenses 5,841 4,309 -------- -------- Income (loss) from operations 3,754 (1,652) Interest expense (769) (630) Interest and other income 196 693 -------- -------- Income (loss) before provision for income taxes 3,181 (1,589) Provision for income taxes 1,209 (604) -------- -------- Net Income (loss) $ 1,972 $ (985) ======== ======== Net income (loss) per common and common equivalent share: Basic $ 0.11 $ (0.05) Diluted $ 0.10 $ (0.05) Weighted average common and common equivalent shares outstanding: Basic 18,596 18,582 Diluted 20,074 18,582
The accompanying notes are an integral part of these condensed consolidated financial statements. 4 5 AMERICAN XTAL TECHNOLOGY, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In thousands)
Three Months Ended March 31, 2000 1999 -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income: $ 1,972 $ (985) Adjustments to reconcile net income to cash used in operations: Depreciation and amortization 1,503 1,162 Amortization of goodwill 149 150 Stock compensation 28 28 Changes in assets and liabilities: Accounts receivable (2,520) 678 Inventories (5,001) (2,186) Prepaid expenses and other current assets (1,657) (1,115) Income tax receivable (608) (1,735) Other assets (1,001) 663 Accounts payable 5,673 456 Accrued liabilities 2,093 3,642 -------- -------- Net cash provided by operating activities 631 758 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property, plant and equipment (4,204) (4,175) -------- -------- Net cash used in investing activities (4,204) (4,175) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from (payments of): Issuance of common stock 1,194 667 Capital leases (254) (156) Long term debt borrowings (458) (166) Short-term bank borrowings 1,530 789 Notes payable to officers and shareholders 63 287 -------- -------- Net cash provided by financing activities 2,075 1,421 -------- -------- Effect of exchange rate changes 33 (78) -------- -------- Net increase (decrease) in cash and cash equivalents (1,465) (2,074) Cash and cash equivalents at the beginning of the period 6,062 16,438 -------- -------- Cash and cash equivalents at the end of the period $ 4,597 $ 14,364 ======== ======== Non cash activity: Purchase of PP&E through capital leases $ 265 $ 39 ======== ========
The accompanying notes are an integral part of these condensed consolidated financial statements. 5 6 AMERICAN XTAL TECHNOLOGY, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Note 1. Basis of Presentation The accompanying condensed consolidated financial statements for the three-month periods ended March 31, 2000 and 1999 are unaudited. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, the unaudited condensed consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments, considered necessary to present fairly the financial position, results of operations and cash flows of American Xtal Technology, Inc. (the "Company") and its subsidiaries for all periods presented. Certain prior period reclassifications have been made to conform to the current period presentation. Management of the Company has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these condensed consolidated financial statements in conformity with generally accepted accounting principles. Actual results could differ from those estimates. The results of operations are not necessarily indicative of the results to be expected in the future or for the full fiscal year. It is recommended that these unaudited condensed consolidated financial statements be read in conjunction with the Company's consolidated financial statements and the notes thereto included in its 1999 Annual Report on Form 10-K filed with the Securities and Exchange Commission. Note 2. Earnings Per Common and Common Equivalent Share Basic earnings per common share is calculated by dividing net earnings by the weighted average number of common shares outstanding during the period. Diluted earnings per common and common equivalent share include the dilutive effect of common stock equivalents outstanding during the period. Common stock equivalents consists of the shares issuable upon the exercise of stock options (using the treasury stock method). Common equivalent shares of approximately 1.0 million are excluded from the computation for the three month period ended March 31, 1999, as their effect is antidilutive. Note 3. Inventories The components of inventory are summarized below (in thousands):
Inventory Details: March 31, December 31, 2000 1999 ------------- ------------- Inventories: Raw materials $ 16,154 $ 13,603 Work in process 19,565 16,163 Finished goods 4,752 5,704 ------------- ------------- $ 40,471 $ 35,470 ============= =============
6 7 Note 4. Comprehensive Income The components of comprehensive income are summarized below (in thousands):
Three Months Ended March 31, -------------------------------- 2000 1999 ------------- ------------- Net Income (loss) $ 1,972 $ (985) Foreign currency translation gain (loss) 33 (78) ------------- ------------- Comprehensive income $ 2,005 $ (1,063) ============= =============
Note 7. Segment Information Selected industry segment information is summarized below (in thousands):
Three months ended March 31, -------------------------------- 2000 1999 ------------- ------------- Substrates Net revenues from external customers $ 19,125 $ 11,731 Gross profit 8,682 4,831 Operating income 5,636 2,858 Identifiable assets 96,132 80,944 Visible emitters Net revenues from external customers 3,140 4,600 Gross profit (loss) 289 (1,731) Operating income (loss) (1,781) (2,994) Identifiable assets 25,516 19,821 Consumer products Net revenues from external customers 1,669 2,566 Gross profit (loss) 624 (443) Operating loss (101) (1,516) Identifiable assets 6,281 5,749 Total Net revenues from external customers 23,934 18,897 Gross profit 9,595 2,657 Operating income (loss) 3,754 (1,652) Identifiable assets 127,929 106,514
7 8 The Company sells its products in the United States and in other parts of the world. Also, the Company has operations in China and Japan. Revenues by geographic location based on the country of the customer are summarized below (in thousands):
Three months ended March 31, -------------------------------- 2000 1999 ------------- ------------- Net revenues: United States $ 12,407 $ 9,183 Europe 2,691 1,805 Canada 8 77 Japan 2,125 1,454 Asia Pacific and other 6,703 6,378 ------------- ------------- Consolidated $ 23,934 $ 18,897 ============= =============
8 9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This Management's Discussion and Analysis of Financial Condition and Results of Operations includes a number of forward-looking statements which reflect current views with respect to future events and financial performance. These forward-looking statements are subject to certain risks and uncertainties, including those discussed in the "Factors Affecting Future Results" and elsewhere in this report that could cause actual results to differ materially from historical results or those anticipated. In this report, the words "anticipates," "believes," "expects," "future," "intends," and similar expressions identify forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Results of Operations The following table sets forth certain information relating to the operations of the Company expressed as a percentage of total revenues for the periods indicated:
Three Months Ended March 31, 2000 1999 ------------ ------------ Revenues 100.0% 100.0% Cost of revenues 59.9 85.9 ------------ ------------ Gross profit 40.1 14.1 Operating expenses: Selling, general and administrative 16.1 19.3 Research and development 8.3 3.5 ------------ ------------ Total operating expenses 24.4 22.8 ------------ ------------ Income (loss) from operations 15.7 (8.7) Interest expense (3.2) (3.3) Interest and other income 0.8 3.6 ------------ ------------ Income (loss) before provision for income taxes 13.3 (8.4) Provision for income taxes 5.1 (3.2) ------------ ------------ Net Income (loss) 8.2 (5.2) ============ ============
Revenues. Revenues increased $5.0 million, or 26.7%, to $23.9 million during the three months ended March 31, 2000 compared to $18.9 million during the three months ended March 31, 1999. The increase in revenues was primarily due to a $10.2 million, or 118% increase in sales of GaAs and InP substrates offset by a $2.9 million decrease in Ge sales and contract revenues at the substrate division. The increase in GaAs and InP substrate sales was due to increased demand by existing domestic, foreign, and new customers due in part to strong growth in the wireless handset market. The decrease in Ge sales is the result of a cancellation of a contract by a major customer due to weakness in the satellite market. Additionally, sales at our visible emitter division decreased $1.5 million and sales at our consumer products division decreased $897,000 due to declining sales prices and lower demand for laser pointer products. 9 10 International revenues decreased to 48.2% of total revenues for the three months ended March 31, 2000 from 51.4% of total revenues for the three months ended March 31, 1999. The decrease in percentage of international revenue to total revenue decreased primarily as a result of increased substrate sales to domestic customers. Gross margin. Gross margin increased to 40.1% of revenues for the three months ended March 31, 2000 compared to 14.1% of revenues for the three months ended March 31, 1999. We achieved gross margin improvement at each of our divisions during this period. The gross margin at the substrate division increased to 45.4% of revenues for the three months ended March 31, 2000 compared to 41.2% of revenues for the period ended March 31, 1999. The increase was due to the realization of lower costs as a result of expanding our wafer production capacity in China and the effective utilization of GaAs material that was previously written down. We expect to continue to realize long-term cost reductions as a result of increasing capacity in our China facilities. The benefit from utilizing previously written down materials will continue for the short-term but will diminish over the next few quarters as these materials are depleted. These increases were offset in part by the relatively lower sales prices for LED wafers compared to our prime wafers, which has increased as a percentage of total wafer sales during the period. We do not expect this trend to continue. The gross margin at the visible emitter division increased to 9.2% for the three months ended March 31, 2000 compared to negative 37.6% for the period ended March 31, 1999. During the period ended March 31, 1999, the gross margin at the visible emitter division was negatively impacted by the write-down of inventory in the amount of $1.1 million and a $1.5 million reserve for a patent infringement suit. Gross margin improvements for the period ended Mach 31, 2000 at the visible emitter division include the benefit of transferring certain assembly operations to China and reduced costs resulting from lower merchandise returns due to improvements in product quality. The gross margin at the consumer products division increased to 37% of revenues for the three months ended March 31, 2000 compared to negative 17% for the three months ended March 31, 1999. During the period ended March 31, 1999 the gross margin at the consumer products division was negatively impacted by the write-down of inventory of approximately $275,000 and additional costs associated with returned merchandise and quality problems. Selling, general and administrative expenses. Selling, general and administrative expenses increased $206,000, or 5.6%, to $3.9 million for the three months ended March 31, 2000 compared to $3.6 million for the three months ended March 31, 1999. Substrate division expenses increased $1.1 million, or 75.7%, primarily due to increases in personnel and related expenses required to support additional sales volume. This increase was offset by a decrease of $561,000 at the visible emitter division and a decrease of $321,000 at the consumer products division. During the period ending March 31, 1999, the visible emitter and consumer products divisions incurred a write-down of accounts receivable of $450,000 and approximately $100,000, respectively. Research and development expenses. Research and development expenses increased $1.3 million, or 200%, to $2.0 million for the three months ended March 31, 2000 from $662,000 for the three months ended March 31, 1999. The increase was primarily the result of increases in personnel and related expenses and materials to support LED research and development at the visible emitter division. Interest expense. Interest expense increased $139,000 to $769,000 for the three months ended March 31, 2000 from $630,000 for the three months ended March 31, 1999. This increase was primarily due to utilizing short-term debt to finance the short-term liquidity needs resulting from our increased sales volume. Interest and other income. Interest and other income decreased $497,000 to $196,000 for the three months ended March 31, 2000 from $693,000 for the three months ended March 31, 1999. The decrease was primarily the result of a reduction in foreign exchange gains on short-term forward contracts used to hedge against certain accounts receivable in Japanese yen. Provision for income taxes. Income tax expense remained at 38.0% of income (loss) before provision for income taxes for the three months ended March 31, 2000 and 1999. Liquidity and Capital Resources 10 11 We completed our initial public offering in May 1998, and raised approximately $25.8 million, net of offering expenses. In December 1998 we completed our taxable bond offering and raised approximately $11.6 million. As of March 31, 2000, we had working capital of $40.2 million, including cash and cash equivalents of $4.6 million, compared to working capital at December 31, 1999 of $40.5 million, including cash and cash equivalents of $6.1 million. During the three months ended March 31, 2000, net cash provided by operations of $631,000 was primarily due to net income of $2.0 million, depreciation and amortization of $1.5 million, increases in accounts payable of $5.7 million and accrued liabilities of $2.1 million offset in part by increases in inventories of $5.0 million, accounts receivable of $2.5 million, prepaid and other current assets of $2.3 million and other long-term assets of $1.0 million. The increases in accounts receivable, inventory, prepaid expenses and other current assets, accounts payable and accrued liabilities were primarily the result of the 10% increase in revenues for the three months ended March 31, 2000 compared to the three months ended December 31, 1999. In addition, raw materials inventories increased in anticipation of large orders for the upcoming quarters. Accordingly, the inventory turnover ratio declined to 1.5 turns at March 31, 2000 from 1.6 turns at December 31, 1999. The increase in prepaid and other current assets was primarily due to deposits for plant and equipment at the visible emitter division. The increase in other long-term assets was primarily due to investments made in China. Days sales outstanding decreased slightly to 72 days at March 31, 2000 compared to 73 days at December 31, 1999. Net cash used in investing activities was $4.2 million for the three months ended March 31, 2000, and was due to the purchase of property, plant and equipment. Net cash provided by financing activities was $2.1 million for the three months ended March 31, 2000, and was generated from the issuance of Common Stock in the amount of $1.2 million and short-term borrowings of $1.5 million, offset by net payments on long-term debt of $458,000 and capital lease payments of $254,000. The common stock was issued to employees exercising their stock options or purchasing stock through our employee stock purchase plan. We have generally financed our equipment purchases through secured equipment loans over five-year terms at interest rates ranging from 6.0% to 9.0% per annum. Our manufacturing facilities have been financed by long-term borrowings, which were repaid by the taxable variable rate revenue bonds in 1998. These bonds have a term of twenty-five years and mature in 2023 with an interest rate at 200 basis points below the prime rate and are traded in the public market. Repayment of principal and interest under the bonds is secured by a letter of credit from our bank and is paid on a quarterly basis. We have the option to redeem in whole or in part the bonds during their term. At March 31, 2000, $10.9 million was outstanding under the taxable variable rate revenue bonds. We currently have a $15.0 million line of credit with a commercial bank at an interest rate equal to the prime rate plus one-half percent. This line of credit is secured by all business assets, less equipment, and expires on June 30, 2000. We are currently negotiating an extension to this line of credit. This line of credit is subject to certain financial covenants regarding current financial ratios and cash flow requirements, which were met as of March 31, 2000. We must obtain the lender's approval to obtain additional borrowings or to further pledge our assets, except for borrowings obtained in the normal course of business or the pledging of equipment. At March 31, 2000, $10.3 million was outstanding under the $15 million line of credit. We anticipate that the combination of existing working capital and the borrowings available under current credit agreements will be sufficient to fund working capital and capital expenditure requirements for the next 12 months. Our future capital requirements will be dependent on many factors including the rate of revenue growth, our profitability, the timing and extent of spending to support research and development programs, the expansion of selling and marketing and administrative activities, and market acceptance of our products. We expect to raise additional equity and debt financing in the future. We are currently negotiating for additional debt financing that we expect will be completed on June 30, 2000. We cannot assure you that additional equity or debt financing, if 11 12 required, will be available on the acceptable terms or at all. If we are unable to obtain such additional capital, if needed, we may be required to reduce the scope of our planned product development and selling and marketing activities, which would have a material adverse effect on our business, financial condition and results of operations. In the event that we do raise additional equity financing, further dilution to our investors will result. RECENT ACCOUNTING PRONOUNCEMENTS In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard No 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133") that was subsequently amended by SFAS 137 to delay the effective date of implementing SFAS 133 for one year. SFAS 133 established a new model for accounting for derivatives and hedging activities and supersedes and amends a number of existing accounting standards. SFAS 133 requires that all derivatives be recognized in the balance sheet at their fair market value. In addition, corresponding derivative gains and losses should be either reported in the statement of operations or stockholders' equity, depending on the type of hedging relationship that exists with respect to such derivatives. Adopting the provisions of SFAS 133, which will be effective on June 15, 2000, is not expected to have a material effect on the Company's consolidated financial statements. In December 1999, the SEC issued Staff Accounting Bulletin No. 101 ("SAB 101") "Revenue Recognition in Financial Statements." SAB 101 summarizes certain of the SEC's views in applying generally accepted accounting principles to revenue recognition in financial statements. The Company is required to adopt SAB 101 in the second quarter of fiscal 2000. Management does not expect the adoption of SAB 101 to have a material effect on the Company's operations or financial position. FACTORS AFFECTING FUTURE RESULTS In addition to the other information in this report, the following factors should be considered carefully in evaluating our business before purchasing shares of our stock. Risks Relating To Our Acquisition of Lyte Optronics, Inc. Our success depends on our ability to assume and integrate the operations of Lyte Optronics with our operations. The success of our acquisition of Lyte Optronics depends in substantial part on our ability to assume and integrate the operations of Lyte Optronics in an efficient and effective manner. The assumption of a new business will require the dedication of management resources, which may temporarily distract attention from our day-to-day operations. We cannot assure you that we will be able to integrate the business operations of Lyte Optronics smoothly or successfully. Our inability to do so could hurt the performance of our business, which may cause the price of our stock to decline. The success of our acquisition of Lyte Optronics depends in part on our ability to retain Lyte Optronics' current customers. We cannot guarantee that the current customers of Lyte Optronics will continue to seek our services now that the acquisition is completed. If a substantial number of Lyte Optronics' customers elect not to seek our services, our operating results will suffer. We incurred substantial costs in connection with our acquisition of Lyte Optronics, including the assumption of approximately $11.0 million of debt, much of which has had to be repaid or renegotiated, resulting in a decline of cash available. We incurred one-time charges and merger-related expenses of $2.8 million and the extraordinary item of $508,000 in the quarter ended June 30,1999 as a result of the acquisition. We may incur additional unanticipated expenses related to our assumption of Lyte Optronics' business. If these expenses are substantial, they may adversely affect our operating results and cause our stock price to fall. Risks Relating to Our Operations 12 13 A number of factors could cause our quarterly financial results to be worse than expected, resulting in a decline in our stock price. Although we have been profitable on an annualized basis since 1990, we believe that period-to-period comparisons of our operating results cannot be relied upon as an indicator of our future performance. It is likely that in some future quarter, our operating results may be below the expectations of public market analysts or investors. If this occurs, the price of our common stock would likely decrease. For more information regarding our results, see "Management's Discussion and Analysis of Financial Condition and Results of Operations." Our quarterly and annual revenues and operating results have varied significantly in the past and may vary significantly in the future due to a number of factors, including: - our recent acquisition of Lyte Optronics and the integration of its business and separate operations and facilities with our operations; - fluctuations in demand for our substrates due to reduction in the value of Asian currencies and the turmoil in the Asian financial markets; - fluctuations in demand for laser pointing and alignment products and decreases in the prices of these products; - our expense levels and expected research and development requirements; - our ability to develop and bring to market new products on a timely basis; - the volume and timing of orders from our customers; - the availability of raw materials; - fluctuations in manufacturing yields; - our manufacturing expansion in Beijing, China and the assumption, integration and operation of the Chinese operations of Lyte Optronics; - introduction of products and technologies by our competitors; and - costs relating to possible acquisitions and integration of technologies or businesses. For more information regarding our results, see "Management's Discussion and Analysis of Financial Condition and Results of Operations." We acquired Lyte Optronics in May 1999, as part of our business strategy, and we may engage in future acquisitions. These acquisitions must be successfully integrated into our business and may dilute our stockholders and cause us to assume contingent liabilities. As part of our business strategy, we may in the future review acquisition prospects that would complement our current product offerings, augment our market coverage or enhance our technical capabilities, or that may otherwise offer growth opportunities. In the event of any future acquisitions, we could: - issue equity securities which would dilute current stockholders' percentage ownership; - incur substantial debt; or - assume contingent liabilities. Any of these actions could materially adversely affect our operating results and/or the price of our common stock. Any future acquisitions creates risks for us, including: - difficulties in the assimilation of acquired personnel, operations, technologies or products; - unanticipated costs associated with the acquisition could materially adversely affect our operating results; - diversion of management's attention from other business concerns; - adverse effects on existing business relationships with suppliers and customers; - risks of entering markets where we have no or limited prior experience; - potential loss of key employees of acquired organizations; and - loss of customers that, through product acquisition, now become competitors. 13 14 These risks and difficulties could disrupt our ongoing business, distract our management and employees and increase our expenses. We may not be able to successfully integrate any businesses, products, technologies or personnel that we might acquire in the future, and our failure to do so could materially adversely affect our operating results. The sales cycle for our GaAs substrates is long and we may incur substantial, non-recoverable expenses or devote significant resources to sales that do not occur as anticipated. Our GaAs substrates typically have a lengthy sales cycle, ranging from three months to a year or more. During this time, we may expend substantial funds and sales, marketing and management efforts while the potential customer evaluates our substrates. However, there is a significant risk that these expenditures may not result in sales. If sales forecasted from a specific customer for a particular quarter are not delivered in that quarter, we may be unable to compensate for the shortfall, which could materially adversely affect our operating results. In addition, if a customer decides at the design stage not to incorporate our substrates into its products, we may not have another opportunity to sell substrates for those products for many months or even years. We anticipate that sales of any future products under development will have similar lengthy sales cycles and will, therefore, be subject to risks substantially similar to those inherent in the lengthy sales cycle of our GaAs substrates. The loss of one or more of our key customers would significantly hurt our operating results. A small number of customers have historically accounted for a substantial portion of our revenues. We expect that a significant portion of our future sales will be due to a limited number of customers. Our top five customers accounted for approximately 22.9% and 20.6% of our revenues in the year ended December 31, 1999 and three months ended March 31, 2000, respectively. If any of these major customers reduces, delays or cancels its orders with us, our revenues will decline, which will likely cause our stock price to fall. Our customers are not obligated to purchase any specified quantity of products or to provide us with binding forecasts of product purchases. In addition, our customers may reduce, delay or cancel orders at any time without any significant penalty. For example, we recently announced the two month suspension of our Ge substrates from a major customer who had excess inventories and was experiencing a slow down in business. VGF is a new technique for producing substrates, which must achieve widespread acceptance if we are to succeed. We believe that our competitors principally utilize the traditional LEC or HB crystal growing processes for producing semi-insulating and semi-conducting GaAs substrates. We further believe that we are the only high-volume supplier of semi-insulating and semi-conducting GaAs substrates which utilize the VGF technique, a newer technology than either the LEC or HB techniques, however, we believe that one of our competitors has recently begun shipping, in low volume, GaAs substrates which utilize a similar technology. We cannot assure you that our current customers will continue to use our VGF-produced substrates or that additional companies will purchase our products manufactured from the VGF technique. Failure to gain increased market acceptance of our VGF technique by either current or prospective customers could materially adversely affect our operating results, which in turn could cause our stock price to fall. A significant portion of our prospective customers for our substrates are wireless communications manufacturers, fiber optic communications manufacturers and manufacturers of other high-speed semiconductor devices that are produced from GaAs substrates using either the LEC or HB techniques. To establish the VGF technique as a preferred process for producing substrates for these prospective customers, we must offer products with superior prices and performance on a timely basis and in sufficient volumes. We must also overcome the reluctance of these customers to purchase our GaAs substrates due to possible perceptions of risks relating to concerns about the quality and cost-effectiveness of our GaAs substrates when compared to substrates produced by the traditional LEC or HB techniques. In addition, potential GaAs substrate customers may be reluctant to rely on a relatively small company for critical materials used to manufacture their semiconductor devices. If we do not achieve acceptable yields of crystals and the successful and timely production of substrates, the shipment of our products will be delayed and our revenues will decline. The highly complex processes of growing crystals as well as other steps involved in manufacturing substrates that we engage in can be adversely affected by the following factors: 14 15 - chemical or physical defects in the crystals; - contamination of the manufacturing environment; - substrate breakage; - equipment failure; and - performance of personnel involved in the manufacturing process. Our operating results have been adversely affected in the past due to the occurrence of a combination of these factors, which resulted in product shipment delays and adversely affected our business. A significant portion of our manufacturing costs are fixed. As a result, we must increase the production volume of substrates and improve yields in order to reduce unit costs, increase margins and maintain and improve our results of operations. Any significant decrease in production volume and yields could materially harm our business. In the past, we have sometimes manufactured substrates that have not met the manufacturing process requirements of our customers. We have fixed these occurrences through minor changes to the substrates or the manufacturing process. Recurrence of these problems and our inability to solve them may materially hurt our performance. In 1997, we began producing and shipping Ge and InP substrates in commercial volume. We also understand that we must achieve the same manufacturing capability for six inch GaAs wafers. We cannot assure you that we will be able to manufacture the larger GaAs substrate in commercial volumes with acceptable yields. Our business and results of operations will be materially adversely affected if we experience low yields of these successfully developed substrates. Because substantially all of our revenues of our AXT substrate division are derived from sales of our GaAs substrates, we are dependent on widespread market acceptance of these products. We currently derive substantially all of our substrate revenues from sales of our GaAs substrates. If there is a decrease on demand for GaAs substrates by semiconductor device manufacturers or if our competitors introduce new substrates for electronics applications, such as wireless communications, fiber optic communications and other high-speed semiconductor devices, and opto-electronic applications, such as lasers and LEDs, our revenues may decline and our business will be materially adversely affected. We expect that revenues from GaAs substrates will account for a significant majority of our revenues for the next several years. Further, other companies, including IBM, are actively involved in developing other devices which could provide the same high-performance, low power capabilities as GaAs-based devices at competitive prices, such as silicon-germanium based devices for use in certain wireless applications. If these silicon-germanium based devices are successfully developed and semiconductor device manufacturers adopt them, demand for GaAs substrates could decrease. This development could cause our revenues to fall. To be successful, we must develop and introduce in a timely manner new substrates and continue to improve our current substrates to address customer requirements and compete effectively on the basis of price and performance. We must also continue to develop our light-emitting and laser diode products, and develop new markets for this technology, as well as for our laser pointing and alignment products. We cannot assure you that our product development efforts will be successful or that our new products will achieve market acceptance. To the extent that product improvements and new product introductions do not achieve market acceptance, our business will be materially adversely affected. In 1997, we began commercial shipments of Ge and InP substrates and are currently developing other substrates, including gallium phosphide, galliumnitride and silicon carbide. Factors that may affect the success of product improvements and product introductions include the development of markets for such improvements and substrates, achievement of acceptable yields, price and market acceptance. Many of these factors are beyond our control. 15 16 Our limited ability to protect our intellectual property may adversely affect our ability to compete. We rely on a combination of patents, copyrights, trademarks and trade secret laws and contractual restrictions on employees, consultants and third parties from disclosure to protect our intellectual property rights. Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy or otherwise obtain and use our products or technology. Policing unauthorized use of our products is difficult, and we cannot be certain that the steps we have taken will prevent misappropriation of our technology, particularly in foreign countries where the laws may not protect our proprietary rights as fully as in the United States. We believe that, due to the rapid pace of technological innovation in the GaAs and other substrate markets, our ability to establish and maintain a position of technology leadership in the industry depends more on the skills of our development personnel than upon the legal protections afforded our existing technologies. To date, we have been issued one U.S. patent, which relates to the VGF technique, and have two U.S. patent applications pending, one that relates to the VGF technique. Additionally, we have one pending application for a Japanese patent but no issued foreign patents. We do not have any patents on our light-emitting or laser diode technology, although we do have six patents relating to our laser pointing and alignment products. We cannot assure you that: - the pending or any future U.S. or foreign patent applications will be approved; - any issued patents will protect our intellectual property; - third parties will not challenge the ownership rights of the patents or the validity of the patent applications; - the patents owned by others will not have an adverse effect on our ability to do business; or - others will not independently develop similar or competing technology or design around any patents issued to us. Moreover, the laws of certain foreign countries may not lend protection to our patents to the same extent as the laws of the United States. If we infringe the proprietary rights of others, we may be forced to enter costly royalty or licensing agreements. We could in the future receive a claim that we are infringing the patent, trademark, copyright or other proprietary rights of other third parties. If any claims were asserted against us for violation of patent, trademark, copyright or other similar laws as a result of the use by us, our customers or other third parties of our products, those claims would be costly and time-consuming to defend, would divert our attention and could cause product delays. In addition, if we discovered we violated other third party rights, we could be required to enter into costly royalty or licensing agreements as a result of those claims. These royalty or licensing agreements may adversely affect our operating results. If we fail to comply with stringent environmental regulations, we may be subject to significant fines or the cessation of our operations. We are subject to federal, state and local environmental laws and regulations. Any failure to comply with present or future environmental laws and regulations could result in the imposition of significant fines on us, the suspension of production or a cessation of operations. In addition, existing or future changes in laws or regulations may require us to incur further significant expenditures or liabilities, or additional restriction in our operations. We are cooperating with Cal-OSHA in an investigation regarding higher than permissible levels of potentially hazardous materials in certain areas of the manufacturing facility in Fremont, California. Although no accidents or injuries have resulted from this matter and the facility is in full operation, civil and criminal penalties could be imposed against us by Cal-OSHA. We purchase critical raw materials required to grow crystals from single or limited sources, and could lose sales if these sources fail to fill our needs. We do not have any long-term supply contracts, except for Ge, with any of our suppliers, and we currently purchase raw materials required to grow crystals from single or a limited number of suppliers. For example, we purchase a majority of the gallium we use from Rhone-Poulenc. 16 17 Due to our reliance on a limited group of suppliers, we are exposed to several risks including the potential inability to obtain adequate supply of materials, reduced control overpricing of our products and meeting customer delivery schedules. We have experienced delays receiving orders of certain materials due to shortages. We may continue to experience these delays due to shortages of materials and as a result be subject to higher costs. If we are unable to receive adequate and timely deliveries of critical raw materials, relationships with current and future customers could be harmed, which could cause our revenues to decline. We are subject to additional risks as a result of our recent acquisition of new manufacturing facilities. In connection with further expanding our manufacturing capacity, we purchased an additional 58,000 square foot facility in Fremont, California and a 31,000 square foot facility in Beijing, China, in 1998. These new facilities subject us to significant risks, including: - unavailability or late delivery of process equipment; - unforeseen engineering problems; - work stoppages; - unanticipated cost increases; and - unexpected changes or concessions required by local, state or federal regulatory agencies with respect to necessary licenses, land use permits and building permits. If any of the above occur, our operations at the new facilities would be adversely affected, which may cause our sales to decline and the price of our stock to fall. The additional fixed operating expenses associated with the new facilities may only be offset by sufficient increases in product revenues. We cannot assure you that the demand for our products will grow as we currently expect, and if this does not occur, we may not be able to offset the costs of operating the new facilities, which may materially adversely affect our results of operations. We currently only have two machines (MOCVD's) capable of producing light-emitting diodes wafers. Damage to or failure of these machines could cause production to stop or delay while repairs or replacements are being made. We do not keep substantial inventory of LED wafers to enable production to continue while the MOCVD machine is being repaired. Any delay in production of the LED wafers while the MOCVD is being repaired could result in loss of revenue. We must effectively respond to rapid technological changes by continually introducing new products that achieve broad market acceptance. We and our customers compete in a market that is characterized by rapid technological changes and continuous improvements in substrates. Accordingly, our future success depends upon whether we can apply our proprietary VGF technique to develop new substrates that meet the needs of customers and compete effectively on the basis of quality, price and performance. Our success in the light-emitting and laser diode markets depends in part upon our ability to further our development of this technology and develop additional markets and uses for the products. If we are unable to timely develop new, economically viable products that meet market demands, our revenues will decline, which could adversely affect our results of operation and cause the price of our stock to fall. It is difficult to predict accurately the time required and the costs involved in researching, developing and engineering new products. Thus, our actual development costs could exceed budgeted amounts and our product development schedules could require extension. We have experienced product development delays in the past and may experience similar delays in the future. Any significant delays could harm our business. For example, our introduction of InP substrates was delayed approximately six months as a result of delays in the finalization of the manufacturing process for these substrates. If we are unable to introduce reliable quality products, we could suffer from reduced orders, higher manufacturing costs, product returns and additional service expenses, all of which could result in lower revenues. 17 18 Our substrates are typically one of many components used in semiconductor devices that our customers produce. Demand for our products is therefore subject to many factors beyond our control, including: - demand for our customers' products; - competition faced by our customers in their particular industries; - the technical, sales and marketing and management capabilities of our customers; and - the financial and other resources of our customers. If, as a result of any of these factors, demand for our products declines, our business will suffer. Intense competition in the market for GaAs substrates could prevent us from increasing revenues and sustaining profitability. The market for GaAs substrates is intensely competitive. If we cannot successfully compete in this market, our operating results will be harmed. In the semi-insulating GaAs substrates market, our principal competitors include: - Freiberger Compound Materials; - Hitachi Cable; - Litton Airtron; and - Sumitomo Electric Industries. We also compete with manufacturers that produce GaAs substrates for their own use. In addition, we compete with companies, such as IBM, that are actively developing alternative materials to GaAs. As we enter new markets, such as the Ge and InP substrate markets, we expect to face competitive risks similar to those for our GaAs substrates. Many of our competitors and potential competitors have a number of significant advantages over us, including: - having been in the business longer than we have; - more manufacturing experience; - more established technologies than our VGF technique; - broader name recognition; and - significantly greater financial, technical and marketing resources. Our competitors could develop enhancements to the LEC, HB or VGF techniques that are superior to ours in terms of price and performance. Our competitors also could intensify price-based competition, which would result in lower prices and reduced margins. The market for laser-pointing and alignment devices is highly competitive and subject to pressure to decrease the price at which the devices are sold. Lyte Optronics has opened a manufacturing facility in China enabling production of components at reduced cost; however this facility has only recently begun operating and may not be able to handle the volume production that may be required to meet customer demand. In addition, while we continue to remain competitive in our pricing structure of laser pointing and alignment devices, if prices continue to fall, we may not be able to produce and sell these products at a profit. We derive a significant portion of our revenues from international sales and our ability to sustain and increase our international sales involves significant risks. Our ability to grow will depend in part on the expansion of international sales and operations, which have and are expected to constitute a significant portion of our revenues. Our failure to successfully expand our international operations may cause our revenues not to grow as much as we anticipate, which could cause our stock price to fall. International sales, excluding Canada, represented 45.1% and 48.1% of our total revenues in the year ended December 31, 1999 and three months ended March 31, 2000, respectively. Sales to customers located in 18 19 Japan and other Asian countries represented 34.9% and 36.9% of our total revenues in the year ended December 31, 1999 and three months ended March 31, 2000, respectively. We expect that sales to customers outside the United States, including device manufacturers located in Japan and other Asian countries that sell their products worldwide, will continue to represent a significant portion of our revenues. Our dependence on international sales involves a number of risks, including: - import restrictions and other trade barriers; - unexpected changes in regulatory requirements; - longer periods to collect accounts receivable; - export license requirements; - political and economic instability, in particular, the current instability of the economies of Japan and other Asian countries; and - unexpected changes in diplomatic and trade relationships. Our sales, except for sales to our Japanese and Taiwanese customers, are denominated in U.S. dollars. Thus, increases in the value of the dollar could increase the price of our products in non-U.S. markets and make our products more expensive than competitors' products in such markets. For example, doing business in Japan subjects us to fluctuations in the exchange rates between the U.S. dollar and the Japanese yen. In the year ended December 31 1999, we incurred foreign exchange gains of $652,000, and a foreign exchange gain of $33,000 in the three months ended March 31, 2000. If we do not effectively manage the risks associated with international sales, our business and financial condition could be materially adversely affected. To minimize our foreign exchange risk, we have purchased foreign exchange contracts to hedge against certain trade accounts receivable in Japanese yen. Because we currently denominate sales in U.S. dollars except in Japan and Taiwan, we do not anticipate that the adoption of the Euro as a functional legal currency of certain European countries will materially affect our business. If we lose key personnel or are unable to hire additional qualified personnel as necessary, we may not be able to successfully manage our business or achieve our objectives. Our success depends to a significant degree upon the continued service of Morris S. Young, Ph.D., AXT's President and Chief Executive Officer, as well as other key management and technical personnel. We neither have long-term employment contracts with, nor key person life insurance on, any of our key personnel, including any of the key personnel from our acquisition of Lyte Optronics. In addition, our management team has limited experience as executive officers of a public company. We believe our future success will also depend in large part upon our ability to attract and retain highly skilled managerial, engineering, sales and marketing, finance and manufacturing personnel. The competition for these employees is intense, especially in Silicon Valley, and we cannot assure you that we will be successful in attracting and retaining new personnel. The loss of the services of any of our key personnel, the inability to attract or retain qualified personnel in the future or delays in hiring required personnel, particularly engineers, could make it difficult for us to manage our business and meet key objectives, including the introduction of new products on time. Continued rapid growth may strain our operations. In addition to our recent acquisition of Lyte Optronics, we have recently experienced a period of rapid growth and expansion that has placed, and continues to place, a significant strain on our operations. To accommodate this anticipated growth, we will be required to: - improve existing and implement new operational and financial systems, procedures and controls; - hire, train and manage additional qualified personnel; - effectively manage multiple relationships with our customers, suppliers and other third parties; and - maintain effective cost controls. If we are not able to install adequate control systems in an efficient and timely manner, or if our current or planned personnel systems, procedures and controls are not adequate to support our future operations, our sales may not grow and our business will suffer. We are in the process of installing a new management information system; however, the functionality of this new system has not been fully implemented. The difficulties associated with installing and implementing these new systems, procedures and controls has placed and will continue to place a 19 20 significant burden on our management and our internal resources. In addition, international growth will require expansion of our worldwide operations and enhance our communications infrastructure. Any delay in the implementation of these new or enhanced systems, products and controls, or any disruption in the transition to these new or enhanced systems, products and controls, could adversely affect our ability to accurately forecast sales demand, manage manufacturing, purchasing and inventory levels, and record and report financial and management information on a timely and accurate basis. Our inability to manage growth effectively could affect our revenues and adversely impact our profitability. In addition, Lyte Optronics maintains separate operational and financial systems, procedures and controls that must be integrated with or replaced by our systems. This integration will take time and divert management attention and resources. If we are unable to timely integrate or replace these systems, we maybe unable to accurately forecast sales demand, manage manufacturing, purchasing and inventory levels for the two divisions acquired with Lyte Optronics, nor record and report financial and management information on a timely basis for these divisions, which could adversely affect our ability to timely produce consolidated financial information. We may need additional capital to fund our future operations, which may not be available. We believe that our cash balances and cash available from credit facilities and future operations will enable us to meet our working capital requirements for at least the next 12 months. If cash from future operations is insufficient, or if cash is used for acquisitions or other currently unanticipated uses, we may need additional capital. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the issuance of such securities could result in dilution to existing stockholders. In December 1998, we raised approximately $11.6 million by issuing variable rate taxable demand revenue bonds series 1998 for: - the purchase of a commercial building and to finance tenant improvements at 4281 Technology Drive, Fremont, California; - the refinance an existing loan and to finance tenant improvements on our principal offices; and - the permanent financing for an existing bank construction loan. These debt securities have rights, preferences and privileges that are senior to holders of common stock. We cannot assure you that if we required additional capital, it will be available on acceptable terms, or at all. If we are unable to obtain additional capital, we may be required to reduce the scope of our planned product development and marketing efforts, which would materially adversely affect our business, financial condition and operating results. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." Our executive officers and directors control 19% of our common stock and are able to significantly influence matters requiring stockholder approval. At March 31, 2000, executive officers, directors and entities affiliated with them currently own approximately 19% of our outstanding common stock. These stockholders, if acting together, are able to significantly influence all matters requiring our stockholder approval, including the election of directors and the approval of mergers or other business combination transactions. This concentration of ownership could delay or prevent a change of control of AXT and could reduce the likelihood of an acquisition of AXT at a premium price. Provisions in our charter or agreements may delay or prevent a change of control. Provisions in our amended and restated certificate of incorporation and bylaws may have the effect of delaying or preventing a merger or acquisition or a change of control or changes in our management. These provisions include: - the division of the board of directors into three separate classes of three year terms; - the right of the board to elect the director to fill a space created by the expansion of the board; - the ability of the board to alter our bylaws; - authorizing the issuance of up to 2,000,000 shares of "blank check" preferred stock; and - the requirement that at least 10% of the outstanding shares are needed to call a special meeting of stockholders. 20 21 Furthermore, because we are incorporated in Delaware, we are subject to the provisions of section 203 of the Delaware General Corporation Law. These provisions prohibit large stockholders, in particular those owning 15% or more of the outstanding voting stock, from consummating a merger or combination with a corporation unless: - 66 2/3% of the shares of voting stock not owned by this large stockholder approve the merger or combination, or - the board of directors approves the merger or combination or the transaction which resulted in the large stockholder owning 15% or more of our outstanding voting stock. Our stock price has been and may continue to be volatile and is dependent on external and internal factors. Our stock has fluctuated significantly since we began trading on the Nasdaq National Market. For the three months ended March 31, 1999, our stock price closed as low as $14.50 and as high as $45.75. Various factors could cause the price of our common stock to continue to fluctuate substantially, including: - actual or anticipated fluctuations in our quarterly or annual operating results; - changes in expectations as to our future financial performance or changes in financial estimates of securities analysts; - announcements of technological innovations by us or our competitors; - new product introduction by us or our competitors; - large customer orders or order cancellations; and - the operating and stock price performance of other comparable companies. In addition, the stock market in general has experienced extreme volatility that often has been unrelated to the operating performance of particular companies. These broad market and industry fluctuations may adversely affect the trading price of our common stock, regardless of our actual operating performance. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Since many of our Japanese and Taiwanese invoices are denominated in yen, we have bought foreign exchange contracts to hedge against certain trade accounts receivable in Japanese yen. As of March 31, 2000, our outstanding commitments with respect to the foreign exchange contracts had a total value of approximately $2.0 million equivalent. Many of the contracts were entered six months prior to the due date and the dates coincide with the receivable terms we have on the invoices. By matching the receivable collection date and contract due date, we attempt to minimize the impact of foreign exchange fluctuation. PART II. OTHER INFORMATION ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K a. Exhibits. 27.1 Financial Data Schedule. 21 22 SIGNATURES 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. AMERICAN XTAL TECHNOLOGY, INC. Dated: May 12, 2000 By: /s/ Donald L. Tatzin ----------------------------------- Donald L. Tatzin Chief Financial Officer 22 23 EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION - ------- ----------- 27.1 Financial Data Schedule
EX-27.1 2 EXHIBIT 27.1
5 1,000 YEAR DEC-31-1999 JAN-01-2000 MAR-31-2000 4,597 0 21,112 1,031 40,471 79,569 43,831 1,503 127,929 39,325 0 0 3,990 19 0 127,929 0 23,934 0 14,339 0 0 769 3,181 1,209 1,972 0 0 0 1,972 11 .10
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