What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2020-11-19 compared with 2019-11-21 · 315 added, 338 removed, 709 unchanged (48% of the section changed)

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Notes to Consolidated Financial Statements

REPORT OF INDEPENDENT REGIST ERED PUBLIC ACCOUNTING FIRM

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and

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and Subsidiaries (the “Company”) as of September 30, 2020 and 2019, and the related consolidated statements of operations, comprehensive income (loss), shareholders’ equity, and cash flows for each of the three years in the period ended September 30, 2020, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 2019 and 2018, and the results of its operations and its cash flows for each of the three years in the period ended September 30, 2019, in conformity with accounting principles generally accepted in the United States of America.

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 2020 and 2019, and the results of their operations and their cash flows for each of the three years in the period ended September 30, 2020, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of September 30, 2020, based on criteria established in the 2013 Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated November 19, 2020 expressed an unqualified opinion.

Adoption of New Accounting Standard

As discussed in Note 2 to the financial statements, the Company changed its method of accounting for revenue from contracts with customers as a result of the adoption of Accounting Standards Codification Topic 606, Revenue from Contracts with Customers effective October 1, 2018, under the modified retrospective method.

As discussed in Note 1 to the financial statements, the Company changed its method of accounting for leases as a result of the adoption of Accounting Standards Codification Topic 842, Leases, effective October 1, 2019, under the retrospective method.

Basis for Opinion

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We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

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In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of September 30, 2020, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheets of the Company as of September 30, 2019 and 2018, and the related consolidated statements of operations, comprehensive income (loss), shareholders’ equity, and cash flows for each of the years in the three-year period ended September 30, 2019 and the related notes (collectively referred to as the “financial statements”) of the Company and our report dated November 21, 2019 expressed an unqualified opinion that included an explanatory paragraph regarding the Company’s change in method of accounting for revenue from contracts with customers as a result of the adoption of Accounting Standards Codification Topic 606, Revenue from Contracts with Customers, effective October 1, 2018.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheets of the Company as of September 30, 2020 and 2019, and the related consolidated statements of operations, comprehensive income (loss), shareholders’ equity, and cash flows for each of the years in the three year period ended September 30, 2020 and the related notes (collectively referred to as the “financial statements”) of the Company and our report dated November 19, 2020 expressed an unqualified opinion that included an explanatory paragraph regarding the Company’s change in method of accounting for leases as a result of the adoption of Accounting Standards Codification Topic 842, Leases, effective October 1, 2019.

Basis for Opinion

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Restricted cash

Accounts receivable

Trade (less allowance for doubtful accounts of $172 and $454 at

Accounts receivable (less allowance for doubtful accounts of $ 159 and $ 172 at

September 30, 2020 and September 30, 2019, respectively)

Unbilled and other

Contract assets

Income taxes receivable

Held-for-sale assets

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Property, Plant and Equipment - Net

Right-of-Use Assets - Net

Intangible Assets - Net

Goodwill - Net

Deferred Income Taxes - Net

Liabilities and Shareholders’ Equity

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Long-Term Debt

Long-Term Lease Liability

Income Taxes Payable

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Restructuring charges

Operating income

Operating (loss) income

Loss on sale of subsidiary

Gain on sale of other assets

Income (loss) from equity method investment

Interest and other income, net

Income from continuing operations before income taxes

Income from equity method investment

Interest income and other, net

(Loss) income from continuing operations before income taxes

Income tax provision

Income from continuing operations, net of tax

(Loss) income from discontinued operations, net of tax

(Loss) income from continuing operations, net of tax

Loss from discontinued operations, net of tax

Net (loss) income

Net loss attributable to non-controlling interest - discontinued

Net (loss) income attributable to Amtech Systems, Inc.

Income (Loss) Per Basic Share:

Basic income per share from continuing operations

Basic (loss) income per share from discontinued operations

(Loss) Income Per Basic Share:

Basic (loss) income per share from continuing operations

Basic loss per share from discontinued operations

Net (loss) income per basic share

Income (Loss) Per Diluted Share:

Diluted income per share from continuing operations

Diluted (loss) income per share from discontinued operations

(Loss) Income Per Diluted Share:

Diluted (loss) income per share from continuing operations

Diluted loss per share from discontinued operations

Net (loss) income per diluted share

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Reclassification adjustment for net foreign currency translation

losses included in net income

losses included in net (loss) income

Comprehensive (loss) income

Comprehensive loss attributable to non-controlling interest

Comprehensive (loss) income attributable to Amtech Systems, Inc.

The accompanying notes are an integral part of these consolidated financial statements.

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Shareholders’

Non-controlling

Income (Loss)

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Translation adjustment

Acquisition of non-controlling

Tax benefit of stock

Proceeds from stock offering

Repurchase of treasury stock

Retirement of treasury stock

Stock compensation expense

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Translation adjustment

Repurchase of treasury stock

Retirement of treasury stock

Stock compensation expense

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Stock compensation expense

Repurchase of treasury stock

Retirement of treasury stock

Stock options exercised

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Net (loss) income

Adjustments to reconcile net income (loss) to net cash provided by

(used in) operating activities:

Adjustments to reconcile net (loss) income to net cash (used in) provided by

operating activities:

Depreciation and amortization

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Write-down of inventory

Capitalized interest

Provision for (reversal of) allowance for doubtful accounts

Provision for allowance for doubtful accounts

Deferred income taxes

Non-cash share based compensation expense

(Gain) loss on sale of property, plant and equipment

Gain on sale of subsidiary

Loss (gain) on sales of subsidiaries

Gain on sale of other assets

(Income) loss from equity method investment

Changes in operating assets and liabilities:

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Contract liabilities

Net cash provided by (used in) operating activities

Net cash (used in) provided by operating activities

Investing Activities

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Proceeds from sale of property, plant and equipment

Net cash disposed of in sale of subsidiary

Net cash disposed of in sales of subsidiaries

Proceeds from sale of other assets

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Financing Activities

Proceeds from issuance of common stock, net

Proceeds from the exercise of stock options

Repurchase of common stock

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Borrowings on long-term debt

Excess tax benefit of stock compensation

Net cash (used in) provided by financing activities

Net cash used in financing activities

Effect of Exchange Rate Changes on Cash, Cash Equivalents and

Restricted Cash

Net (Decrease) Increase in Cash, Cash Equivalents and Restricted Cash

Net Decrease in Cash, Cash Equivalents and Restricted Cash

Cash, Cash Equivalents and Restricted Cash, Beginning of Year*

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Supplemental Non-cash Financing and Investing Activities:

Transfer inventory to property, plant, and equipment

Transfer of property, plant, and equipment to inventory

Net of acquired non-controlling interest over debt forgiveness

(See Note 16)

Includes Cash, Cash Equivalents and Restricted Cash that are included in Held-For-Sale Assets on the Consolidated Balance Sheets.

Transfer of inventory to property, plant, and equipment

Leased assets obtained in exchange for new operating lease liabilities

Includes Cash, Cash Equivalents and Restricted Cash that are included in Held-For-Sale Assets on the Consolidated Balance Sheets for periods prior to January 22, 2020.

The accompanying notes are an integral part of these consolidated financial statements.

Notes to Consolidated Financial Statem ents

Notes to Consolidated Financial Statements

For the Years Ended September 30, 2020, 2019 and 2018

Summary of Operations and Significant Accounting Policies

Description of Business – Amtech is a leading, global manufacturer of capital equipment, including thermal processing and wafer polishing, and related consumables used in fabricating semiconductor devices, such as silicon carbide (SiC) and silicon power chips, electronic assemblies and light-emitting diodes (LEDs).

We sell these products to semiconductor and automotive component manufacturers worldwide, particularly in Asia, North America and Europe.

Description of Business – Amtech is a leading, global manufacturer of capital equipment, including thermal processing and wafer polishing, and related consumables used in fabricating semiconductor devices, such as silicon carbide (SiC) and silicon power devices, analog and discrete devices, electronic assemblies and light-emitting diodes (LEDs).

We sell these products to semiconductor device and module manufacturers worldwide, particularly in Asia, North America and Europe.

We serve niche markets in industries that are experiencing technological advances, and which historically have been very cyclical.

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In the second quarter of fiscal 2019, we began the process to divest our solar business.

As such, we have classified substantially all of the Solar segment as held for sale in our Consolidated Balance Sheets and reported its results as discontinued operations in our Consolidated Statements of Operations.

As such, we classified substantially all of the Solar segment as held for sale in our Consolidated Balance Sheets and reported its results as discontinued operations in our Consolidated Statements of Operations.

These divestitures were completed in the second quarter of fiscal 2020.

For additional information on the divestiture, see Note 2.

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Unless otherwise stated, references to the years 2020, 2019 and 2018 relate to the fiscal years ended September 30, 2020, 2019 and 2018, respectively.

Principles of Consolidation – The consolidated financial statements include the accounts of the Company and our wholly-owned subsidiaries and subsidiaries in which we have a controlling interest.

We report non-controlling interests in consolidated entities as a component of equity separate from our equity.

The equity method of accounting is used for i nvestments over which we have a significant influence but not a controlling financial interest.

All material intercompany accounts and transactions have been eliminated in consolidation.

Effective July 1, 2017, we purchased the non-controlling interest in SoLayTec, pursuant to which SoLayTec became a wholly-owned subsidiary of Amtech.

Beginning July 1, 2017 through the disposal date of SoLayTec (see Note 16), the non-controlling interest is no longer reported.

Prior amounts have not been restated.

The COVID-19 world-wide pandemic and the domestic and international impact of policy decisions being made in major countries around the world has had, and is expected to continue to have, an impact on various aspects of our business.

While we and many of our semiconductor customers continue to operate as essential businesses, in accordance with the government regulations in place at each of our facilities, we have taken various actions to augment our operating and human resource policies and procedures to guard against the potential health hazards of COVID-19.

These augmented procedures can have a negative impact on our operational efficiencies.

Given the uncertainty surrounding the continuation of economic slow-downs domestically and abroad, we cannot predict with any level of certainty at this time what the future impact of COVID-19 and resulting business and economic policies in the United States and abroad will be on our future financial operating results.

Principles of Consolidation – The consolidated financial statements include the accounts of the Company and our wholly-owned subsidiaries.

All significant intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates – The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period.

Actual results could differ from those estimates.

Reclassifications – Certain reclassifications have been made to prior year financial statements to conform to the current year presentation, including the addition of restricted cash to cash and cash equivalents on our consolidated statements of cash flows as a result of the adoption of new accounting guidance.

Results for all periods presented in this report have been reclassified for discontinued operations (Note 2) and for changes to our reportable segments (Note 18).

Reclassifications – Certain reclassifications have been made to prior year financial statements to conform to the current year presentation.

Results for all periods presented in this report have been reclassified for changes to our reportable segments (Note 18).

These reclassifications had no effect on the previously reported Consolidated Financial Statements for any period.

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Assets Held for Sale – An asset or business is classified as held for sale when (i) management commits to a plan to sell and it is actively marketed;

(ii) it is available for immediate sale and the sale is expect ed to be completed within one year ;

(ii) it is available for immediate sale and the sale is expected to be completed within one year;

and (iii) it is unlikely significant changes to the plan will be made or that the plan will be withdrawn.

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and foreign bank operating and time deposit accounts.

We maintain our cash, cash equivalents and restricted cash in multiple financial institutions.

Balances in the United States, which account for approximately 89 % and 79 % of total cash balances at our continuing operations as of September 30, 2020 and 2019, respectively, are primarily invested in U.S.

Treasuries or are in financial institutions insured by the FDIC.

The remainder of our cash is maintained with financial institutions with reputable credit in China, the United Kingdom, Singapore and Malaysia.

We maintain cash in bank accounts in amounts which at times may exceed federally insured limits.

We have not experienced any losses on such accounts.

Restricted Cash – Restricted cash includes collateral for bank guarantees required by certain customers from whom deposits have been received in advance of shipment.

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Depreciation and amortization are computed using the straight-line method over the estimated useful life of the asset.

Useful lives for equipment, machinery and leasehold improvements range from three to seven years;

Useful lives for equipment and machinery range from three to seven years ;

for leasehold improvements from three to fifteen years ;

for furniture and fixtures from five to ten years ;

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Impairment, if any, is based on the excess of the carrying amount over the estimated fair value of those assets.

Intangible Assets – Intangible assets are capitalized and amortized on a straight-line basis over their est imated useful life, if the life is determinable.

Intangible Assets – Intangible assets are capitalized and amortized on a straight-line basis over their estimated useful life, if the life is determinable.

If the life is not determinable, amortization is not recorded.

We regularly perform reviews to determine if facts and circumstances exist which indicate that the useful lives of our intangible assets are sho rter than originally estimated or the carrying amount of these assets may not be recoverable.

When an indication exists that the carrying amount of intangible assets may not be recoverable, we assess the recoverability of our assets by comparing the projec ted undiscounted net cash flows associated with the related asset or group of assets over their remaining lives against their respective carrying amounts.

Such impairment test is based on the lowest level for which identifiable cash flows are largely indep endent of the cash flows of other groups of assets and liabilities.

We regularly perform reviews to determine if facts and circumstances exist which indicate that the useful lives of our intangible assets are shorter than originally estimated or the carrying amount of these assets may not be recoverable.

When an indication exists that the carrying amount of intangible assets may not be recoverable, we assess the recoverability of our assets by comparing the projected undiscounted net cash flows associated with the related asset or group of assets over their remaining lives against their respective carrying amounts.

Such impairment test is based on the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities.

Impairment, if any, is based on the excess of the carrying amount over the estimated fair value of those assets.

Patent costs consist primarily of legal and filing fees incurred to file pa tents on proprietary methods and technology developed by the Company.

Patent costs consist primarily of legal and filing fees incurred to file patents on proprietary methods and technology developed by the Company.

Patent costs are expensed when incurred as they are insignificant.

In the fourth quarter of fiscal 2018, we recorded a charge for impairment of intangible assets in our former Solar segment.

In 2018, we recorded a charge for impairment of intangible assets in our former Solar segment.

See Note 9 for a description of the facts and circumstances leading to the intangible asset impairment charge.

Goodwill - Goodwill is recorded when the purchase price paid for an acquisition exceeds the estimated fair value of net identified tangible and intangible assets acquired.

Goodwill is not subject to amortization but are tested for impairment when it is determined that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, typically at the end of the fiscal year, or more frequently if circumstances dictate.

Goodwill is not subject to amortization but is tested for impairment when it is determined that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, typically at the end of the fiscal year, or more frequently if circumstances dictate.

If it is concluded that there is a potential impairment, we would recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value (although the loss would not exceed the total amount of goodwill allocated to the reporting unit).

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Changes in these estimates and assumptions could materially affect the determination of fair value or goodwill impairment, or both.

In the fourth quarter of fiscal 2018, we recorded a charge for impairment of goodwill in our former Solar segment.

In 2018, we recorded a charge for impairment of goodwill in our former Solar segment.

See Note 10 for a description of the facts and circumstances leading to the goodwill impairment charge.

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The transaction price of a contract is allocated to each distinct performance obligation based upon the relative standalone selling price for each performance obligation and is recognized as revenue upon satisfaction of the performance obligation.

We implemented ASC 606 using the modified retrospective approach with no cumulative effect adjustment recorded to the opening balance of retained deficit.

Prior period amounts have not been restated and continue to be reported under the accounting standards in effect for those periods.

Upon adoption of ASC 606, we changed our accounting policy for the installation performance obligation included in all solar system sales (now part of discontinued operations).

Previously under ASC 605, we deferred revenue for the fair value of the installation and recognized it when earned.

Under ASC 606, we no longer record a deferral but will continue to recognize the revenue when earned.

This change in policy does not result in a change in the amount of revenue recorded;

instead, it removes the installation liability from our balance sheet.

To achieve the core principle of the standard, we apply the following five steps:

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If these criteria are not met, the promised goods and services are accounted for as a combined performance obligation.

Our equipment sales consist of multiple performance obligations, including the system itself and obligations that are not delivered simultaneously with the system, primarily installation services.

Our equipment sales consist of multiple performance obligations, including the system itself and obligations that are not delivered simultaneously with the system, such as installation services and training.

Customers who purchase new systems are provided an assurance-type warranty, generally for periods of 12 to 36 months .

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The Company has determined that most contracts will be completed in less than one year .

For those transactions where all performance obligations will be satisfied within one year or less, the Company is applying the practical expedient outlined in ASC 606-10-32-18.

This practical expedient allows the Company not to adjust promised consideration for the effects of a significant financing component if the Company expects at contract inception the period between when the Company transfers the promised good or service to a customer and when the customer pays for that good or service will be one year or less.

The Company will not adjust promised consideration for the effects of a significant financing component if the Company expects at contract inception the period between when the Company transfers the promised good or service to a customer and when the customer pays for that good or service will be one year or less.

For those transactions that are expected to be completed after one year, the Company has assessed that there are no significant financing components because any difference between the promised consideration and the cash selling price of the good or service is for reasons other than the provision of financing.

The Company excludes from the transaction price all sales taxes that are assessed by a governmental authority and that are imposed on and concurrent with a specific revenue-producing transaction and collected from a customer (for example, sales, use, value added, and some excise taxes).

This employs the practical expedient under ASC 606-10-32-2A.

Sales taxes are presented on a net basis (excluded from revenues) in the Company's Consolidated Statements of Operations.

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Contracts that contain multiple distinct performance obligations require an allocation of the transaction price to each distinct performance obligation on a relative standalone selling price basis unless the transaction price is variable and meets the criteria to be allocated entirely to each distinct performance obligation or to a distinct service that forms part of a single performance obligation.

Where required, t he Company determines the SSP for each performance obligation based on consideration of both market and Company specific factors, including the selling price and profit margin for similar products.

Where required, the Company determines the SSP for each performance obligation based on consideration of both market and Company specific factors, including the selling price and profit margin for similar products.

For those contracts that contain multiple performance obligations (primarily system sales requiring installation services), the Company must determine the SSP.

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For products where the customer’s defined specifications have not been met with at least two similarly configured systems and processes, the revenue and directly related costs are deferred at the time of shipment and later recognized at the time of customer acceptance or when this criterion has been met.

For installation services, revenue is recognized at a point in time, once the installation of the tool is complete.

The nature of the installation services are such that the customer does not simultaneously receive and consume the benefits provided by the entity’s performance, nor does performance of installation services create or enhance an asset that the customer controls.

Installation services do not create an asset with an alternative use to the entity, and the entity does not have an enforceable right to payment for performance completed to date.

For installation services, revenue is recognized at a point in time, when the equipment is shipped or delivered, depending on contractual terms.

The nature of the installation services requires minimal effort and are perfunctory in nature.

Therefore, equipment and any related installation are treated as one performance obligation.

Maintenance and service contracts are recognized over time.

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However, ASC 606 provides a practical expedient to allow for the recognition of commission expense when incurred if the amortization period of the asset that the entity otherwise would have recognized is one year or less.

Based on the nature of the Company’s contracts with customers, we have elected this practical expedient and expense all commissions as incurred based upon the expectation that the amortization period would be one year or less.

The Company has also elected to adopt the practical expedient related to shipping and handling fees which allows the Company to account for shipping and handling activities that occur after control of the related good transfers as fulfillment activities instead of assessing such activities as performance obligations.

Based on the nature of the Company’s contracts with customers, we expense all commissions as incurred based upon the expectation that the amortization period would be one year or less.

The Company accounts for shipping and handling activities that occur after control of the related good transfers as fulfillment activities instead of assessing such activities as performance obligations.

Revenue Categories used by Management

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These amounts generally arise from variances between the contractual payment terms and the transaction price assigned to the open performance obligations (e.g., the Company has recognized revenue in an amount greater than the amount that is billable under the contract).

Contract assets are reflected in current assets on the consolidated balance sheets.

Contract assets are reflected in other current assets on the Consolidated Balance Sheets.

Contract Liabilities – Contract liabilities are reflected in current liabilities on the Consolidated Balance Sheets as all performance obligations are expected to be satisfied within the next 12 months.

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Semiconductor system transactions have payment terms that generally require a payment due upon shipment of the system and a final payment due upon installation or acceptance.

Automation transactions have payment terms that generally require a payment due upon shipment of the system, with a final payment due upon acceptance of the installation.

Warranty – A limited warranty is provided free of charge, generally for periods of 12 to 36 months to all purchasers of our new products and systems.

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On occasion, we have been required and may be required in the future to provide additional warranty coverage to ensure that the systems are ultimately accepted or to maintain customer goodwill.

While our warranty costs have historically been within our expectations and we beli eve that the amounts accrued for warranty expenditures are sufficient for all systems sold through September 30, 2019 , we cannot guarantee that we will continue to experience a similar level of predictability with regard to warranty costs.

In addition, tec hnological changes or previously unknown defects in raw materials or components may result in more extensive and frequent warranty service than anticipated, which could result in an increase in our warranty expense.

While our warranty costs have historically been within our expectations and we believe that the amounts accrued for warranty expenditures are sufficient for all systems sold through September 30, 2020, we cannot guarantee that we will continue to experience a similar level of predictability with regard to warranty costs.

In addition, technological changes or previously unknown defects in raw materials or components may result in more extensive and frequent warranty service than anticipated, which could result in an increase in our warranty expense.

The following is a summary of activity in accrued warranty expense at our continuing operations (in thousands):

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Ending balance

Shipping Expense – Shipping expenses at our continuing operations of $0.7 million in each of the years 2019, 2018 and 2017 are included in selling, general and administrative expenses.

Shipping Expense – Shipping expenses at our continuing operations of $ 0.5 million in 2020 and $ 0.7 million in each of the years 2019 and 2018 are included in selling, general and administrative expenses.

Advertising Expense – Advertising costs are expensed as incurred.

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Those costs are recognized as expense over the requisite service period, which is generally the vesting period, with forfeitures recognized as they occur.

Prior to 2018, the expense recognized included an estimate for expected forfeitures, which was based upon historical experience.

We estimate the fair value of stock option awards on the date of grant using the Black-Scholes option-pricing model.

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dollars at the exchange rate in effect at the balance sheet dates.

Income and expense items are translated at the average exchang e rate for each month within the year.

Income and expense items are translated at the average exchange rate for each month within the year.

The resulting translation adjustments are recorded directly in accumulated other comprehensive income (loss), net of tax - foreign currency translation adjustments as a separate component of shareholders’ equity.

Net foreign currency transaction gains/losses, including transaction gains/losses on intercompany balances that are not of a long-term investment nature and non-functional currency cash balances, are reported as a separate component of non-operating (income) e xpense in our consolidated statements of operations.

Income Taxes – We file consolidated federal income tax returns in the United States for all subsidiaries except those in the Netherlands, France, Hong Kong and China, where separate returns are filed.

Net foreign currency transaction gains/losses, including transaction gains/losses on intercompany balances that are not of a long-term investment nature and non-functional currency cash balances, are reported as a separate component of non-operating (income) expense in our Consolidated Statements of Operations.

Income Taxes – We file consolidated federal income tax returns in the United States for all subsidiaries except those in China and the United Kingdom , where separate returns are filed.

We compute deferred income tax assets and liabilities based upon cumulative temporary differences between financial reporting and taxable income, carryforwards available and enacted tax laws.

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Each quarter, the valuation allowance is re-evaluated.

In 2019, 2018 and 2017 , we reversed a portion of the valuation allowance related to net operating loss carryforwards which we have determined will be utilized against net operating income in the current year.

In 2020, we reversed a portion of the valuation allowance related to foreign deferred tax assets which we have determined will be utilized against net operating income in future years.

In 2019 and 2018, we reversed a portion of the valuation allowance related to net operating loss carryforwards which we had determined would be utilized against net operating income in the respective years.

We will continue to monitor our cumulative income and loss positions in the U.S.

and foreign jurisdictions to determine whether full valuation allowances on net deferred tax assets are appropriate.

Concentrations of Credit Risk – Our customers consist of semiconductor and solar cell manufacturers worldwide, as well as the lapping and polishing marketplace.

and foreign jurisdictions to determine whether full or partial valuation allowances on net deferred tax assets are appropriate

Concentrations of Credit Risk – Our customers consist of semiconductor manufacturers worldwide, as well as the lapping and polishing marketplace.

Financial instruments that potentially subject us to significant concentrations of credit risk consist principally of cash and trade accounts receivable.

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Letters of credit are required of certain customers depending on the size of the order, type of customer or its creditworthiness, and country of domicile.

As of September 30, 2019, one Semiconductor customer individually represented 15% of accounts receivable.

As of September 30, 2020, two Semiconductor customers individually represented 11 % and 10 % of accounts receivable.

As of September 30, 2019, one Semiconductor customer individually represented 15 % of accounts receivable.

We maintain our cash, cash equivalents and restricted cash in multiple financial institutions.

Balances in the United States, which account for approximately 79% and 88% of total cash balances at our continuing operations as of September 30, 2019 and 2018, respectively, are primarily invested in U.S.

Treasuries or are in financial institutions insured by the FDIC.

The remainder of our cash is maintained with financial institutions with reputable credit in the Netherlands, China, France, the United Kingdom, Singapore and Malaysia.

We maintain cash in bank accounts in amounts which at times may exceed federally insured limits.

We have not experienced any losses on such accounts.

Refer to Note 20 for information regarding revenue and assets in other countries subject to fluctuation in foreign currency exchange rates.

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Valuation techniques include use of discounted cash flow models and similar techniques.

In accordance with the requirements of the Fair Value Measurements and Disclosures Topic of the FASB ASC, it is our policy to us e observable inputs whenever reasonably practicable in order to minimize the use of unobservable inputs when developing fair value measurements.

In accordance with the requirements of the Fair Value Measurements and Disclosures Topic of the FASB ASC, it is our policy to use observable inputs whenever reasonably practicable in order to minimize the use of unobservable inputs when developing fair value measurements.

When available, we use quoted market prices to measure fair value.

If market prices are not available, the fair value measurement is based on models that use primarily market-based parameters including interest rate yield curves, option volatilities and currency rates.

In certain cases, where market rate assumptions are not available, we are required to make judgme nts about assumptions market participants would use to estimate the fair value of a financial instrument.

Changes in the underlying assumptions used, including discount rates and estimates of future cash flows, could significantly affect the results of cur rent or future values.

Cash, Cash Equivalents and Restricted Cash – Included in Cash and Cash Equivalents and Restricted Cash in the Consolidated Balance Sheets are money market funds invested in treasury bills, notes and other direct obligations of the U.S.

In certain cases, where market rate assumptions are not available, we are required to make judgments about assumptions market participants would use to estimate the fair value of a financial instrument.

Changes in the underlying assumptions used, including discount rates and estimates of future cash flows, could significantly affect the results of current or future values.

Cash, Cash Equivalents and Restricted Cash – Included in c ash and c ash e quivalents and r estricted c ash in the Consolidated Balance Sheets are money market funds invested in treasury bills, notes and other direct obligations of the U.S.

Treasury and foreign bank operating and time deposit accounts.

The fair value of these accounts are based on Level 1 inputs in the fair value hierarchy.

The fair value of th e s e accounts are based on Level 1 inputs in the fair value hierarchy.

Receivables and Payables – The recorded amounts of these financial instruments, including accounts receivable and accounts payable, approximate their fair value because of the short maturities of these instruments.

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Recently Issued Accounting Pronouncements

See Note 4 for information on our adoption of ASC 606, which amends the existing accounting standards for revenue recognition.

The adoption of ASC 606 did not have a material effect on our results of operations.

In November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows:

Restricted Cash.” The amendments address diversity in practice that exists in the classification and presentation of changes in restricted cash and require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents and amounts generally described as restricted cash or restricted cash equivalents.

We adopted this standard retrospectively effective October 1, 2018, and, accordingly, to conform to the current period presentation, we reclassified our restricted cash to be included in the total of cash and cash equivalents presented at the bottom of our consolidated statements of cash flows for both the beginning and ending periods for fiscal years 2018 and 2017.

As a result, the amount of the change in our net cash provided by operating activities no longer separately shows the change in restricted cash for either period.

The following table summarizes the effects related to the adoption of ASU 2016-18 for the years ended September 30, 2018 and 2017:

September 30, 2018

September 30, 2017

Net cash provided by (used in) operating activities

Effect of Exchange Rate Changes on Cash, Cash

Equivalents and Restricted Cash

Net Increase (Decrease) in Cash, Cash Equivalents

and Restricted Cash

Cash, Cash Equivalents and Restricted Cash,

Beginning of Period

Cash, Cash Equivalents and Restricted Cash, End of

In February 2016, the FASB issued ASU 2016-02, “Leases,” which requires companies to generally recognize on the balance sheet operating and financing lease liabilities and corresponding right-of-use-assets (“ROU assets”).

ASU 2016-02 also requires improved disclosures to help users of financial statements better understand the amount, timing and uncertainty of cash flows arising from leases.

This ASU is effective for fiscal years beginning after December 15, 2018 and early adoption is permitted.

We will ad opt the standard as of October 1, 2019, the start of our fiscal 2020, and plan to utilize the retrospective cumulative effect adjustment transition method with a cumulative effect adjustment being recorded as of the adoption date.

We expect to elect certa in available practical expedients including the package of practical expedients permitted under the transition guidance within the new standard, which among other things, will allow us to carry forward the historical lease classification.

Additionally, we will make an accounting policy election to not record ROU assets and lease liabilities for leases with a term of twelve months or less on our consolidated balance sheet.

We are in the process of finalizing the scope of arrangements that will be subject to this standard as well as assessing the impact to our systems, processes, and internal controls over financial reporting.

While we are still evaluating the impact of adopting ASU 2016-02, we anticipate this standard will not have a material impact on our other assets and other liabilities balances until the effective date of our new lease at our SiC/LED segment.

The primary impact will be to record ROU assets and lease liabilities for existing operating leases on our consolidated balance sheets.

Currently, we estimate adoption of the standard will result in recognition of additional ROU assets and lease liabilities of approximately $0.3 million and $0.4 million, respectively, as of October 1, 2019.

However, within the first quarter of fiscal 2020, we will record an additional $5.0 million of ROU assets and lease liabilities due to the commencement of our new SiC/LED building lease.

We do not expect the adoption to have a material impact on our consolidated statements of operations or our consolidated statements of cash flows.

We do not believe the standard will have a notable impact on our liquidity.

The standard will have no impact on our debt-covenant compliance under our current agreements.

Our analysis and evaluation of the new standard will continue through its effective date in the first quarter of 2020, including continuing to monitor any potential changes in the standard proposed by the FASB.

Assets Held for Sale and Discontinued Operations

Effective October 1, 2019 , we adopted the FASB ASU No.

2016-02—Leases (Topic 842), using the retrospective cumulative effect adjustment transition method.

We elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allowed us to carry forward the historical lease classification.

In addition, we made an accounting policy election not to separate non-lease components from lease components for all existing classes of underlying assets with the exception of land and buildings.

We also made an accounting policy election to not record right of use (“ROU”) assets and lease liabilities for leases with an initial term of twelve months or less on our Consolidated Balance Sheet.

Adoption of the new standard resulted in the recording of lease ROU assets and lease liabilities of approximately $ 195,000 and $ 163,000 , respectively, as of October 1, 2019.

The standard did not materially impact our consolidated results from operations and had no impact on our cash flows upon adoption.

However, during the third quarter of fiscal 2020, we recorded an additional $ 5.0 million of ROU assets and lease liabilities upon the commencement of our new SiC/LED building lease.

Refer to Note 5 for further information regarding Topic 842.

Assets Held for Sale, Discontinued Operations and Disposals

Discontinued Operations

In April 2019, we announced that the Board determined that it was in the long-term best interest of the Company to exit the solar business segment and focus our strategic efforts on our semiconductor and silicon carbide/polishing business segments in order to more fully realize the opportunities the Company believes are presented in those areas.

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After further assessment, however (including input from management of the Solar segment and our external advisors), the Board determined that the investment required to return our solar business to profitability would be better utilized to pursue strategic opportunities in the Semiconductor and SiC/LED segments.

The anticipated divestiture of our solar business included our Tempress and SoLayTec subsidiaries, which comprised substantially all of our Solar segment.

The divestiture of our solar business included our Tempress and SoLayTec subsidiaries, which comprised substantially all of our Solar segment.

We adopted a plan to sell our Solar operations on or before March 31, 2020.

We expect to incur one-time costs to sell Tempress of approximately $750,000, which includes $500,000 in broker fees and $250,000 in legal fees, although the final amount could be greater if certain timing and/or price targets are met.

On June 7, 2019 (“Sale Date”), we completed the sale of our subsidiary, SoLayTec, to a third party located in the Netherlands.

Upon the S ale Date , we recognized a gain of approximately $1.6 million, which we included in loss from discontinued operations reported in our Consolidated Statements of Operations for the year ended September 30, 2019 .

Also, e ffective on th e Sale Date, SoLayTec is no longer included in our consolidated financial statements.

SoLayTec is not material to Amtech’s results of operations or financial position.

On June 7, 2019 (“SoLayTec Sale Date”), we completed the sale of SoLayTec to a third party located in the Netherlands.

Upon the SoLayTec Sale Date, we recognized a gain of approximately $ 1.6 million, which we included in loss from discontinued operations reported in our Consolidated Statements of Operations for the year

ended September 30, 2019 .

We recognized a tax benefit relating to this sale, which can be carried over to future years.

E ffective on the SoLayTec Sale Date, SoLayTec is no longer included in our consolidated financial statements.

Effective January 22, 2020 (“Tempress Sale Date”), we completed the sale of Tempress for nominal consideration to a third party located in the Netherlands.

In connection with this sale transaction, we provided an unsecured term loan to Tempress in the principal sum of $ 2.25 million, to be used to fund Tempress’ working capital requirements and to facilitate the restructuring of Tempress’ operations.

We forgave $ 0.5 million of the loan in accordance with the terms of the loan agreement.

The balance of the loan was paid in full during fiscal 2020.

We recorded a pre-tax loss on sale of approximately $ 10.9 million, of which approximately $ 7.2 million was the recognition of previously recorded accumulated foreign currency translation losses.

The total pre-tax loss did not have a material effect on our cash balances at our continuing operations.

We also recognized a significant tax benefit relating to this loss, which can be carried over to future years.

Effective on the Tempress Sale Date, Tempress is no longer included in our consolidated financial statements.

Operating results of our discontinued solar operations were as follows, in thousands:

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Impairment charges

Operating (loss) income

Gain on sale of subsidiary

Operating loss

(Loss) gain on sale of subsidiary

Interest expense and other, net

(Loss) income from discontinued operations

Loss from discontinued operations

before income taxes

Income tax (benefit) provision

Net (loss) income

Net loss attributable to non-controlling interest

Net (loss) income attributable to discontinued

Income benefit

The following table presents a summary of the solar assets and liabilities held for sale included in our Consolidated Balance Sheets, in thousands:

September 30,

Total current assets

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Years Ended September 30,

(Loss) income from discontinued operations, net of

Loss from discontinued operations, net of

Non-cash impairment charges

Depreciation and amortization

Provision for (reversal of) allowance for doubtful

(Reversal of) provision for allowance for doubtful

accounts, net

Gain on sale of subsidiary

(Loss) gain on sale of subsidiary

Purchases of property, plant and equipment

Other Disposals

R2D – On December 13, 2019 (“R2D Sale Date”), we finalized the sale of R2D to certain members of R2D’s management team.

Upon the sale, we recognized a loss of approximately $ 2.8 million, which we reported as loss on sale of subsidiary in our Consolidated Statements of Operations for the year ended September 30, 2020.

Effective on the R2D Sale Date, R2D is no longer included in our consolidated financial statements.

R2D does not meet the discontinued operations or held-for-sale criteria.

Kingstone – On September 16, 2015, we reduced our ownership to 15 % in Kingstone Hong Kong.

Our investment in Kingstone Hong Kong was accounted for using the equity method for periods subsequent to the deconsolidation due to our ability to exert significant influence over the financial and operating policies of Kingstone Hong Kong, primarily through our representation on the board of directors.

The resulting equity method investment was initially recorded at fair value at $ 2.7 million using the value the third-party purchaser placed on their investment in Kingstone Shanghai.

The carrying value of the equity method investment in Kingstone Hong Kong was $ 2.6 million as of September 30, 2017.

Effective June 29, 2018, we sold our remaining ownership interest in Kingstone Hong Kong to the majority owner for approximately $ 5.7 million, which was received in August 2018.

We recognized a pre-tax gain of approximately $ 2.9 million, which is reported as gain on sale of other assets in our Consolidated Statements of Operations for the year ended September 30, 2018.

Earnings Per Share & Diluted Earnings Per Share

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Years Ended September 30,

Net income from continuing operations

Net (loss) income from discontinued operations

Net loss from non-controlling interest -

discontinued operations

Net (loss) income from continuing operations

Net loss from discontinued operations

Net (loss) income

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Weighted-average shares used to compute diluted

Basic income per share from continuing operations

Basic (loss) income per share from discontinued

Basic (loss) income per share from continuing

Basic loss per share from discontinued

Net (loss) income per basic share

Diluted income per share from continuing operations

Diluted (loss) income per share from discontinued

Diluted (loss) income per share from continuing

Diluted loss per share from discontinued

Net (loss) income per diluted share

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Contracts with Customers

We adopted ASC 606 with a date of initial application of October 1, 2018.

See Note 1 for additional detail on our revenue recognition policies.

The components of contract assets are as follows, in thousands:

The components of contract assets, which are included in other current assets in our Consolidated Balance Sheets, are as follows, in thousands:

September 30,

Unbilled accounts receivable

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Contract liabilities

We lease office space, buildings, land, vehicles and equipment.

Lease agreements with an initial term of 12 months or less are not recorded on the balance sheet.

Instead, we recognize the lease expense as incurred over the lease term.

Certain lease agreements include one or more options to renew, with renewal terms that can extend the lease term from one to five years .

The exercise of lease renewal options is at our sole discretion.

Some agreements also include options to purchase the leased property.

The estimated life of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise.

Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

Significant Accounting Policy

We determine if a contract or arrangement is, or contains, a lease at inception.

Balances related to operating leases are included in right-of-use assets in our Consolidated Balance Sheet.

Balances related to financing leases are immaterial and are included in property and equipment, other current liabilities, and long-term lease liability in our Consolidated Balance Sheet.

ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease.

ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term.

As none of our leases provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.

The ROU asset includes any prepaid lease payments and additional direct costs and excludes lease incentives.

Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option.

The following table provides information about the financial statement classification of our lease balances reported within the Consolidated Balance Sheets as of September 30, 2020 and October 1, 2019, in thousands:

September 30,

Operating lease assets

Finance lease assets

Total lease assets

Operating lease liabilities

Finance lease liabilities

Operating lease liabilities

Finance lease liabilities

Total lease liabilities

The following table provides information about the financial statement classification of our lease expenses reported in the Consolidated Statements of Operations for the year ended September 30, 2020, in thousands:

Classification

Year Ended September 30, 2020

Operating lease cost

Cost of sales

Operating lease cost

Selling, general and administrative expenses

Finance lease cost

Cost of sales

Finance lease cost

Selling, general and administrative expenses

Short-term lease cost

Cost of sales

Total lease cost

Future minimum lease payments under non-cancelable leases as of September 30, 2020 are as follows, in thousands:

Operating Leases

We have non-cancelable leases with third parties, primarily for administrative and manufacturing space, vehicles and equipment.

Our facilities leases generally provide for periodic rent increases and many contain renewal options.

We recognize rent expense on a straight-line basis over the lease term.

Rental expense under such operating leases at our continuing operations was $0.5 million, $0.6 million, and $0.8 million in 2019, 2018 and 2017, respectively, and is included in either selling, general and administrative expenses or cost of goods sold, depending on the nature of the item under lease.

As of September 30, 2019, future minimum rental commitments under non-cancelable operating leases with initial or remaining terms of one year or more at our continuing operations are as follows, in thousands:

Years Ending September 30,

Finance Leases

Total lease payments

Present value of lease liabilities

Operating lease payments include $ 3.9 million related to options to extend lease terms that are reasonably certain of being exercised.

The following table provides information about the remaining lease terms and discount rates applied as of September 30, 2020:

September 30,

Weighted average remaining lease term

Operating leases

Finance leases

Weighted average discount rate

Operating leases

Finance leases

Restructuring Plans

The Company and its former Chief Executive Officer and President, Fokko Pentinga, agreed on a transition of leadership, pursuant to which Mr.

During 2019, the Company and its former Chief Executive Officer and President, Fokko Pentinga, agreed on a transition of leadership, pursuant to which Mr.

Pentinga stepped down as the Chief Executive Officer, President and a director of the Company effective December 6, 2018 (the “Effective Date”).

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certain other benefits as set forth in the Separation Agreement.

The table below details the restructuring activity at our continuing operations for the year ended September 30, 2019.

This activity is primarily related to the departure of our former CEO as well as additional headcount reductions as we consolidated satellite offices in our Semiconductor segment.

The outstanding obligations as of September 30, 2019, are as follows, in thousands:

September 30,

Balance at September 30, 2018

The table below details the restructuring activity for the years ended September 30, 2020 and 2019 .

The activity during 2019 is primarily related to the departure of our former CEO as well as additional headcount reductions as we consolidated satellite offices in our Semiconductor segment .

The activity during 2020 is the result of staff reductions at our Massachusetts operations as we evaluated staffing across our Semiconductor operations.

The outstanding obligations as of September 30, 2020 and September 30, 2019 , are as follows, in thousands:

Years Ended September 30,

Balance at beginning of the year

Severance expense, net of adjustments

Cash payments

Balance at September 30, 2019

Balance at the end of the year

The components of inventory are as follows (in thousands):

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Accumulated depreciation and amortization

Depreciation and capital lease amortization expense was $0.9 million , $1.1 million and $0.8 million in 2019, 2018 and 2017, respectively.

Depreciation was $ 0.8 million , $ 0.9 million and $ 1.1 million in 2020, 2019 and 2018, respectively.

Intangible Assets

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As of each interim period end during the year, we concluded that a triggering event had not occurred that would more likely than not reduce the fair value of intangible assets below their carrying value.

Amortization expense related to intangible assets at our continuing operations was $0.3 million , $(20,000) and $0.6 million in 2019, 2018 and 2017, respectively.

Amortization expense related to intangible assets at our continuing operations was $ 0.3 million , $ 0.3 million and $( 20,000 ) in 2020, 2019 and 2018, respectively.

The credit in 2018 was due to a one-time correction of previously recorded amortization expense.

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Semiconductor

Non-Segment Related

Accumulated impairment losses

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Impairment of goodwill

Net exchange differences

Balance at September 30, 2020

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Balance at September 30, 2020

During 2019, we periodically assessed whether any indicators of impairment exist ed which would require us to perform an interim impairment review.

As of each interim period end during the year, we concluded that a triggering event had not occurred that would more likely than not reduce the fair value of our reporting units below thei r carrying values.

During 2020, we periodically assessed whether any indicators of impairment existed which would require us to perform an interim impairment review.

We performed our annual test of goodwill for impairment during the fourth quarter of 2020.

The results of the first step of the goodwill impairment test indicated that the fair value of our Semiconductor reporting unit was in excess of its carrying value, and, thus, we did not require an impairment charge.

While the quantitative analysis indicated no impairment of Semiconductor segment goodwill existed as of September 30, 2019 , if the future performance of this reporting unit falls sho rt of our expectations or if there are significant changes in operations due to changes in market conditions, we could be required to recognize material impairment charges in future periods.

We performed a qualitative analysis of our SiC/LED segment, whic h indicted no impairment of SiC/LED segment goodwill existed as of September 30, 2019 .

The results of the first step of the goodwill impairment test indicated that the fair values of our Semiconductor and SiC/LED reporting units were in excess of the carrying values, and, thus, we did not require an impairment charge.

While the quantitative analysis indicated no impairment of Semiconductor and SiC/LED segment goodwill existed as of September 30, 2020, if the future performance of these reporting units fall short of our expectations or if there are significant changes in operations due to changes in market conditions, we could be required to recognize material impairment charges in future periods.

In 2018, we identified the need for a goodwill impairment charge in our former Solar segment of $ 5.7 million, due primarily to the decline in our expected performance of that segment.

In 2019, we realigned our segments (see Note 18).

In 2019 and in 2020, we realigned our segments (see Note 18).

The following note related to income taxes includes both continuing and discontinued operations.

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Total current

Domestic federal

Total deferred

Total provision

On June 7, 2019, we completed the sale of SoLayTec to a third party located in the Netherlands.

Due to the tax treatment relating to the sale, we realized an income tax benefit of $1.3 million in our discontinued operations for the year ended September 30, 2019.

The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), which was signed into law on March 27, 2020, included a provision for a five-year carryback of net operating losses.

The company has assessed the benefit of the provision and utilized a portion of the 2019 net operating loss carryback to offset income from 2018.

The income tax provision as of and for the year ended September 30, 2020 reflects such impact.

Due to the tax treatment relating to the sales of SoLayTec and Tempress, we realized income tax benefits of $ 1.3 million and $ 11.1 million.

We realized income tax expense of $ 0.2 million for the sale of R2D.

The income tax benefits for SoLayTec and Tempress are reflected in our discontinued operations in 2019 and 2020, respectively.

The income tax expense for R2D is reflected in our continuing operations in 2020.

The income tax expense (benefit) is fully offset by a valuation allowance.

The TCJA was enacted on December 22, 2017, and permanently reduces the U.S.

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As a result of the TCJA , the statutory rate applicable to our fiscal year ended September 30, 2018 was 24.3 %, based on a fiscal year blended rate calculation.

ASC 740 requires filers to record the effect of tax law changes in the

period enacted.

In the first quarter of fiscal 2018, we re-measured the applicable deferred tax assets based on the rates at which the y are expected to reverse.

We adjusted our gross deferred tax assets and liabilities and recorded a corresponding offset to our full valuation allowance against our net deferred tax assets, which resulted in minimal net effect to our provision for income t axes and effective tax rate.

ASC 740 requires filers to record the effect of tax law changes in the period enacted.

In the first quarter of fiscal 2018, we re-measured the applicable deferred tax assets based on the rates at which they are expected to reverse.

The TCJA includes a one-time mandatory repatriation transition tax on certain net accumulated earnings and profits of our foreign subsidiaries.

We have analyzed the earnings and profits of our foreign subsidiaries and determined that no transition taxes are due or expected.

The other provisions of TCJA are either immaterial or not applicable for the year ended September 30, 2018.

The other provisions of TCJA are either immaterial or not applicable.

A reconciliation of actual income taxes to income taxes at the expected United States federal corporate income tax rate is as follows (in thousands, except percentages):

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Balance at the beginning of the year

Additions to valuation allowance

(Reductions) additions to valuation allowance

Balance at the end of the year

The deferred tax valuation allowance increased by $0.1 million and $0.8 million for the years ended September 30, 2019 and 2018, respectively.

The deferred tax valuation allowance decreased by $ 2.2 million and increased by $ 0.1 million for the years ended September 30, 2020 and 2019, respectively.

In assessing the realizability of deferred tax assets, we consider whether it is more likely than not that some portion or all of the deferred tax assets will be realized.

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We consider the scheduled reversal of deferred tax liabilities, projected future income and tax planning strategies in making this assessment.

We have established valuation allowances on substantially all net deferred tax assets, after considering all of the available objective evidence, both positive and negative, historical and prospective, with greater weight given to historical evidence, and determined it is not more likely than not that these assets will be realized.

In 2017, 2018 and 2019, we reversed a portion of the valuation allowance related to net operating loss carryforwards which we have determined will be utilized against net operating income in the current year.

Additionally, as of September 30, 2017, the deferred tax assets related to acquired foreign tax credits and the related valuation allowance were reduced due to our inability to use them prior to expiration.

We have established valuation allowances on substantially all net U.S.

deferred tax assets, after considering all of the available objective evidence, both positive and negative, historical and prospective, with greater weight given to historical evidence, and determined it is not more likely than not that these assets will be realized.

In 2020, we reversed a portion of the valuation allowance related to foreign deferred tax assets which we have determined will be utilized against net

operating income in future years.

We will continue to monitor our cumulative income and loss positions in the U.S.

and foreign jurisdictions to determine whether full valuation allowances on net deferred tax assets are appropriate.

and foreign jurisdictions to determine whether full or partial valuation allowances on net deferred tax assets are appropriate .

As of September 30, 2020, we have federal net operating loss carryforwards of approximately $ 13.8 million that expire at various times between 2028 and 2035 .

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Additionally, we have federal net operating loss carryforwards of approximately $ 74.1 million that have an indefinite carryforward period.

The utilization of those federal net operating losses are limited to 80% of taxable income.

We have foreign net operating loss carryforwards of approximately $38.4 million which expire at various times through 2025 .

The utilization of those federal net operating losses are limited to 80 % of taxable income after 2021.

We have no foreign net operating loss carryforwards as of September 30, 2020.

We have approximately $ 21.6 million of state net operating loss carryforwards.

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We report accrued interest and penalties related to unrecognized tax benefits in income tax expense.

We recognized a net expense (benefit) for interest and penalties of $0.1 million , $(2.0) million and $0.4 million for 2019, 2018 and 2017, respectively.

Income taxes payable long-term on the Consolidated Balance Sheets includes a cumulative accrual for potential interest and penalties of $0.8 million and $0.7 million as of September 30, 2019 and 2018, respectively.

We recognized a net expense (benefit) for interest and penalties of $ 4,000 , $ 0.1 million and $( 2.0 ) million for 2020, 2019 and 2018, respectively.

Income taxes payable long-term on the Consolidated Balance Sheets includes a cumulative accrual for potential interest and penalties of $ 0.8 million as of September 30, 2020 and 2019.

We do not expect that the amount of our tax reserves for uncertain tax positions will materially change in the next 12 months other than the continued accrual of interest and penalties.

Amtech and one or more of our subsidiaries file income tax returns in the Netherlan ds, Germany, France, China and other foreign jurisdictions, as well as the U.S.

Amtech and one or more of our subsidiaries file income tax returns in China and other foreign jurisdictions, as well as the U.S.

and various states in the U.S.

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Long-Term Debt

Continuing Operations

We have a mortgage note secured by BTU’s real property in Billerica, Massachusetts.

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The debt was refinanced in September 2016 with an interest rate of 4.11 % through September 26, 2021, at which time the interest rate will be adjusted to a per annum fixed rate equal to the aggregate of the Federal Home Loan Board Five Year Classic Advance Rate plus two hundred forty basis points.

From time to time, we enter into capital leases for certain manufacturing or IT equipment.

Our obligations under capitalized leases are included in long-term debt in the accompanying Consolidated Balance Sheets as of September 30, 2019 and 2018.

The current and long-term portion of the obligations are included in the table below.

Annual maturities relating to our long-term debt at continuing operations as of September 30, 2019 are as follows (in thousands):

Discontinued Operations

In 2017, Tempress borrowed approximately $0.4 million as part of the construction of a large, bi-facial solar PV park at its headquarters in the Netherlands.

The debt is secured by Tempress’ real property in Vaassen, the Netherlands, and carries an interest rate equal to the 10-year interest rate swap rate plus a 2.4% premium, reduced by a 1% discount, which at September 30, 2019 was 2.23%.

The debt has a 15-year term.

As of September 30, 2019, Tempress’ remaining debt balance is $0.3 million.

Annual maturities relating to our long-term debt as of September 30, 2020 are as follows (in thousands):

Equity and Stock-Based Compensation

2017 Equity Offering

On August 18, 2017, we entered into an Underwriting Agreement with Roth Capital Partners, LLC, as underwriter (the “Underwriter”), relating to a firm commitment underwritten offering (the “Offering”) of 1,055,000 shares of our common stock at a price of $9.50 per share, and granted the Underwriter an option to purchase up to 158,250 additional shares (the “Over-Allotment Option”) of our common stock to cover over-allotments, if any.

On August 23, 2017, we and the Underwriter closed the Offering and the Underwriter exercised its Over-Allotment Option at the closing.

As a result, we issued a total of 1,213,250 shares of our common stock at a price of $9.50 per share.

We received net proceeds of approximately $10.6 million from the Offering.

We plan to use the net proceeds of the Offering for general corporate purposes, which may include working capital, capital expenditures and potential acquisitions.

2018 Stock Repurchase Plan

On March 28, 2018, we announced that our Board approved a stock repurchase program, pursuant to which we may repurchase up to $4 million of our outstanding common stock, par value $0.01, over a one-year period, commencing on April 2, 2018.

On March 28, 2018, we announced that our Board approved a stock repurchase program, pursuant to which we were authorized to repurchase up to $ 4 million of our outstanding common stock, par value $ 0.01 , over a one-year period, commencing on April 2, 2018.

During the year ended September 30, 2018, we completed our repurchase program and repurchased 771,149 shares of our common stock on the open market at a total cost of approximately $ 4.0 million (an average price of $ 5.19 per share).

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2019 Stock Repurchase Plan

On November 29, 2018, we announced that our Board of Directors approved a stock repurchase program, pursuant to which we may repurchase up to $4 million of our outstanding common stock, par value $0.01 per share, over a one-year period.

On November 29, 2018, we announced that our Board of Directors approved a stock repurchase program, pursuant to which we were authorized to repurchase up to $ 4 million of our outstanding common stock, par value $ 0.01 per share, over a one-year period.

Repurchases under the program were to be made in open market transactions at prevailing market prices, in privately negotiated transactions, or by other means in compliance with the rules and regulations of the SEC;

however, we had no obligation to repurchase shares and the timing, actual number, and value of shares to be repurchased is subject to management’s discretion and depended on our stock price and other market conditions.

Our Board could have terminated the repurchase program at any time while it was in effect.

The term of our repurchase program expired as of the quarter ended December 31, 2019.

There were no shares repurchased under this plan.

2020 Stock Repurchase Plan

On February 4, 2020, the Board approved a new stock repurchase program, pursuant to which we may repurchase up to $ 4 million of our outstanding Common Stock over a one-year period, commencing on February 10, 2020.

Repurchases under the program will be made in open market transactions at prevailing market prices, in privately negotiated transactions, or by other means in compliance with the rules and regulations of the SEC;

however, we have no obligation to repurchase shares and the timing, actual number, and value of shares to be repurchased is subject to management’s discretion and will depend on the Company’s stock price and other market conditions.

Our Board may terminate the repurchase program at any time while it is in effect.

We intend to retire any repurchased shares.

As of September 30, 2019, there have been no shares repurchased under this repurchase plan.

however, we have no obligation to repurchase shares and the timing, actual number, and value of shares to be repurchased is subject to management’s discretion and will depend on our stock price and other market conditions.

We may, in the sole discretion of the Board, terminate the repurchase program at any time while it is in effect.

Repurchased shares may be retired or kept in treasury for further issuance.

During the quarter ended March 31, 2020, we repurchased 366,000 shares of our common stock on the open market at a total cost of approximately $ 2.0 million (an average price of $ 5.46 per share).

All shares repurchased during the year ended September 30, 2020 have been retired.

Approximately $ 2 million remain under the repurchase program as of September 30, 2020.

Stock-Based Compensation Expense

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The Non-Employee Directors Stock Option Plan was amended in 2005, 2009 and 2014 to add 400,000 shares.

The plan was also amended in 2020 to extend the term of the plan.

Equity compensation plans as of September 30, 2020 are summarized in the table below:

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Range of Exercise Prices

The aggregate intrinsic values of options outstanding and options exercisable as of September 30, 2019 were $ 182 ,000 and $ 164 ,000 , respecti vely, which represents the total pretax intrinsic value, based on our closing stock price of $5.3 0 per share as of September 30, 2019 , the last business day of our fiscal year, which would have been received by the option holders had all option holders exe rcised their options as of that date.

The total intrinsic value of stock options exercised during the fiscal years ended September 30, 2019, 2018 and 2017 was $ 0 .

1 million , $1.2 million and $1.1 million, respectively.

The aggregate intrinsic values of options outstanding and options exercisable as of September 30, 2020 were $ 65,000 and $ 63,000 , respectively, which represents the total pretax intrinsic value, based on our closing stock price of $ 4.89 per share as of September 30, 2020, the last business day of our fiscal year, which would have been received by the option holders had all option holders exercised their options as of that date.

The total intrinsic value of stock options exercised during the fiscal years ended September 30, 2020, 2019 and 2018 was $ 0.1 million , $ 0.1 million and $ 1.2 million, respectively.

Benefit Plans

We have retirement plans covering substantially all employees.

The principal plans are the multi-employer defined benefit pension plans of our operations in the Netherlands and France, the multi-employer plan for hourly union employees in Pennsylvania and our defined contribution plan that covers substantially all of our employees in the United States.

The multi-employer plans in the United States and France as well as the defined contribution plan are insignificant.

Pensions – Our employees in the Netherlands, 75 at September 30, 2019, participate in a multi-employer pension plan Pensioenfonds Metaal en Techniek (“PMT”), determined in accordance with the collective bargaining agreements effective for the industry in the Netherlands.

The collective bargaining agreement has no expiration date.

This multi-employer pension plan covers approximately 34,000 companies and 1.4 million participants.

Amtech’s contribution to the multi-employer pension plan is less than 5.0% of the total contributions to the plan.

The plan monitors its risks on a global basis, not by company or employee, and is subject to regulation by Dutch governmental authorities.

By law (the Dutch Pension Act), a multi-employer pension plan must be monitored against specific criteria, including the coverage ratio of the plan assets to its obligations.

This coverage ratio must exceed 104.3% for the total plan.

Every company participating in a Dutch multi-employer union plan contributes a premium calculated as a percentage of its total pensionable salaries, with each company subject to the same percentage contribution rate.

The premium can fluctuate yearly based on the coverage ratio of the multi-employer union plan.

The pension rights of each employee are based upon the employee’s average salary during employment, the years of service, and the participant’s age at the time of retirement.

Our net periodic pension cost for this multi-employer pension plan for any period is the amount of the required contribution for that period.

A contingent liability may arise from, for example, possible actuarial losses relating to other participating entities because each entity that participates in a multi-employer union plan shares in the actuarial risks of every other participating entity or any responsibility under the terms of a plan to finance any shortfall in the plan if other entities cease to participate

The coverage ratio of the Dutch multi-employer union plan is 94.6% as of September 30, 2019.

In 2013, PMT prepared and executed a “Recovery Plan” which was approved by De Nederlandsche Bank, the Dutch central bank, which is the supervisor of all pension companies in the Netherlands.

As a result of the Recovery Plan, the pension rights decreased 6.3% in April 2013 and the employer’s premium percentage increased to 16.6% of pensionable wages.

The coverage ratio is calculated by dividing the plan assets by the total sum of pension liabilities and is based on actual market interest.

The coverage ratio of PMT fluctuates during a year due to the changes in the value of the assets and the present value of the liabilities.

During the fiscal year 2019, the coverage ratio was as high as 101.9% in the first quarter and as low as 92.6% in the fourth quarter.

The fluctuations are due to the reduction in the ultimate forward rate (which increases the present value of the liabilities) and a decrease in the value of global equities.

As of September 30, 2019, PMT’s total plan assets were $94.2 billion and the actuarial present value of accumulated plan benefits was $99.7 billion .

Below is a table of our contributions to multi-employer pension plans (in thousands):

Years Ended September 30,

Pensioenfonds Metaal en Techniek

Defined Contribution Plans – We match employee contributions to our defined contribution plans on a discretionary basis.

The match was $0.

3 million , $0.4 million and $0.3 million in 2019, 2018 and 2017, respectively.

We have retirement plans covering substantially all our employees.

The principal plans are our defined contribution plan that covers substantially all of our employees in the United States and the multi-employer plan for hourly union employees in Pennsylvania.

Both plans are insignificant.

Defined Contribution Plan – Domestic employees of Amtech and its subsidiaries who meet certain eligibility requirements may participate, at the employee’s option, in the Amtech Systems, Inc.

401(k) Plan (the “401(k) Plan”).

The 401(k) Plan is a defined contribution plan subject to the provisions of ERISA.

We match employee contributions to the 401(k) Plan equal to 60 % of the employees’ elective deferrals, up to 3.6 % of the participants’ eligible compensation each payroll period.

The match expense was $ 0.3 million , $ 0.3 million and $ 0.4 million in 2020, 2019 and 2018, respectively.

Pension Plan – Our hourly union employees in Pennsylvania participate in a multi-employer pension plan, the NIGPP, determined in accordance with the union agreement between PR Hoffman and the United Automobile, Aerospace and Agriculture Implement Workers of America.

The agreement was renewed in 2019 for a three-year term that expires September 30, 2022 .

Every company participating in the plan pays a contribution per hour worked for each employee of the company that is eligible to participate in the NIGPP.

Our contribution rate is $ 2.48 per hour, per employee.

Our contributions to the NIGPP were $ 44,000 , $ 53,000 and $ 64,000 in 2020, 2019 and 2018, respectively.

Commitments and Contingencies

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Legal expenses related to defense, negotiations, settlements, rulings and advice of outside legal counsel are expensed as incurred.

In December 2018, we were notified by our customer that the turnkey contract for Phase II has been terminated.

As a result, we will not perform the final installation and integration of our equipment under such contract.

Negotiations did not result in a final settlement, and the customer has notified us of their intention to pursue arbitration.

We have removed the value of this remaining work from our backlog with no material effect on financial condition and results of operations.

Employment Contracts – We have employment contracts with, and severance plans covering, certain officers and management employees under which severance payments would become payable in the event of specified terminations without cause or terminations under certain circumstances after a change in control.

If severance payments under the current employment agreements or plan payments were to become payable, the severance payments would generally range from twelve to thirty-six months of salary.

On December 24, 2014, we acquired a 51% controlling interest in SoLayTec, which provides ALD systems used in high efficiency solar cells, for a total purchase price consideration of $1.9 million.

On July 31, 2017, Tempress entered into an Exit Agreement (the “Agreement”) with the two minority owners of SoLayTec (“Minority Owners”) to acquire their remaining shares of SoLayTec, resulting in Tempress becoming the sole owner of SoLayTec.

The terms of the Agreement, which was effective as of July 1, 2017, state that the Minority Owners will sell all of their SoLayTec shares to Tempress for a nominal fee and waive all right to future repayment of principal and interest on loans payable to the Minority Owners.

As a result of the effectiveness of the Agreement, SoLayTec has no further liability under the loans.

The amount of principal and interest forgiven was approximately $2.4 million, which was recorded as a capital contribution, with no impact on the Consolidated Statement of Operations.

The carrying value of the non-controlling interest at the date of the Agreement was $2.7 million.

Under our previously announced plan to exit our solar business (see Note 2), on June 7, 2019 (“Sale Date”), we completed the sale of SoLayTec to a third party located in the Netherlands.

Upon the Sale Date, we recognized a gain of approximately $1.6 million, which we included in loss from discontinued operations reported in our Consolidated Statements of Operations for the year ended September 30, 2019.

Effective on the Sale Date, SoLayTec is no longer included in our consolidated financial statements.

SoLayTec is not material to Amtech’s results of operations or financial position.

On September 16, 2015, we reduced our ownership to 15% in Kingstone Hong Kong.

The resulting equity method investment was initially recorded at fair value at $2.7 million using the value the third-party purchaser placed on their investment in Kingstone Shanghai.

The carrying value of the equity method investment in Kingstone Hong Kong was $2.6 million as of September 30, 2017.

Effective June 29, 2018, we sold our remaining ownership interest in Kingstone Hong Kong to the majority owner for approximately $5.7 million, which was received in August 2018.

We recognized a pre-tax gain of approximately $2.9 million, which is reported as gain on sale of other assets in our Consolidated Statements of Operations for the year ended September 30, 2018.

Related Party Transactions

Employment Contracts – We have employment contracts and change in control agreements with, and severance plans covering, certain officers and management employees under which severance payments would become payable in the event of specified terminations without cause or terminations under certain circumstances after a change in control.

If severance payments under the current employment contracts or severance plans were to become payable, the severance payments would generally range from twelve to thirty-six months of salary.

Related Party Transaction

Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions.

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Kingstone Hong Kong and its owners are no longer related parties of Amtech.

As of June 30, 2017, SoLayTec had borrowed approximately $2.4 million, including accrued interest, from its minority shareholders.

These loans were forgiven as part of the Exit Agreement entered into in July 2017.

See Note 16 for additional information.

SoLayTec and its owners are no longer related parties of Amtech.

Non-cash investing activities for 2020 included $ 80,000 of capital expenditures in accounts payable, representing additions purchased at period end but not yet paid for in cash.

Non-cash capital expenditures in accounts payable for the years ended September 30, 2019 and 2018 were immaterial.

Business Segments

After announcing the planned divestiture of our Solar segment (see Note 2), we conducted an evaluation of our organizational structure.

Beginning with the second quarter of fiscal 2019, we made changes to our reportable segments.

Beginning with the second quarter of fiscal 2019, we made changes to our reportable

With the divesture of our Automation segment in the first quarter of fiscal 2020, we further evaluated our organizational structure and concluded that we have two reportable business segments following the divestiture.

Prior period amounts have been revised to conform to the current period segment reporting structure.

Our three reportable segments are as follows:

Our two reportable segments are as follows:

Semiconductor –We design, manufacture, sell and service thermal processing equipment and related controls for use by leading semiconductor manufacturers, and in electronics, automotive and other industries.

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We formerly referred to our SiC/LED segment as “Polishing.”

Automation –We are a leading supplier of solar and semiconductor automation with in-house design and manufacturing capabilities and offer a full array of single wafer transfer tools as well as batch transfer tools and stocker options.

Information concerning our business segments is as follows (in thousands):

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Semiconductor

Non-segment related

Operating income (loss):

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Held-for-sale assets**

Non-segment related assets include cash, property and other assets.

Non-segment related assets include cash, accounts receivable, inventory, property and other assets.

See Note 2 for additional information on held-for-sale assets.

Major Customers and Sales by Country

In 2020, one Semiconductor customer accounted for 11 % of net revenues.

In 2019, no individual customer accounted for 10% or more of net revenues.

In 2018, one Semiconductor customer individually accounted for 14% of net revenues.

In 2018, one Semiconductor customer accounted for 14 % of net revenues.

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Geographic Regions

We have continuing operations in the United States, China and France, as well as satellite offices in Europe and Asia.

We have continuing operations in the United States and China, as well as satellite offices in Europe and Asia.

Revenues, operating income (loss) and identifiable assets by geographic region are as follows (in thousands):

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Selected Quarterly Data (Unaudited)

The following table sets forth selected unaudited consolidated quarterly financial information for the years ended September 30, 2019 and 2018 (in thousands, except percents and per share amounts):

The following table sets forth selected unaudited consolidated quarterly financial information for the years ended September 30, 2020 and 2019 (in thousands, except percentages and per share amounts):

Fiscal Year 2020

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Restructuring charges

Operating income (loss)

Loss on sale of subsidiary

Interest (expense) income and other, net

(Loss) income from continuing operations

before income taxes

Income tax provision

Loss from continuing operations, net of tax

Loss from discontinued operations, net of tax

Operating margin

Loss Per Basic Share:

Basic loss per share from continuing

Basic loss per share from

discontinued operations

Net loss per basic share

Loss Per Diluted Share:

Diluted loss per share from continuing

Diluted loss per share from

discontinued operations

Net loss per diluted share

Weighted average shares outstanding - basic

Weighted average shares outstanding - diluted

Fiscal Year 2019

Revenue, net of returns and allowances

Cost of sales

Selling, general and administrative

Research, development and engineering

Restructuring charges

Operating income

Interest and other income, net

Interest income and other, net

Income from continuing operations before

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Weighted average shares outstanding - diluted

Fiscal Year 2018

Revenue, net of returns and allowances

Cost of sales

Selling, general and administrative

Research, development and engineering

Impairment charges

Operating income (loss)

Gain on sale of other assets

(Loss) income from equity method investment

Interest and other income (expense), net

Income (loss) from continuing operations before

Income tax provision

Income (loss) from continuing operations,

Income (loss) from discontinued operations,

Net income (loss)

Operating margin

Income (Loss) Per Basic Share:

Basic income (loss) per share from

continuing operations

Basic income (loss) per share from

discontinued operations

Net income (loss) per basic share

Income (Loss) Per Diluted Share:

Diluted income (loss) per share from

continuing operations

Diluted income (loss) per share from

discontinued operations

Net income (loss) per diluted share

Weighted average shares outstanding - basic

Weighted average shares outstanding - diluted

Subsequent Events

In November 2019, we completed the sale of our subsidiary, R2D, to certain members of R2D’s management team.

We will recognize a loss of approximately $3.0 million in the first quarter of 2020 and R2D will no longer be included in our consolidated financial statements.

CHANGES IN AND DISAGREEMENTS WITH ACCO UNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data