AMTECH SYSTEMS INC — Regulatory Filings 2009

Jul 1, 2009

CORRESP 1 filename1.htm

July 1, 2009

Brian Cascio, Branch Chief Division of Corporation Finance United States Securities and Exchange Commission 100 F Street, N.E. Washington, D.C. 20549

Re:
Form 10-K for the fiscal year ended
September 30, 2008
Filed December
10, 2008
File No.
000-11412
Form 8-K/A filed November 2,
2007
Form 10-Q for the quarter ended March
31, 2009
Filed May 11,
2009
Form 8-K/A filed June 5,
2009

Dear Mr. Cascio:

This letter sets forth the responses of Amtech Systems, Inc. (the "Company") to your comment letter, dated June 17, 2009, relating to (i) the Form 10-K for the fiscal year ended September 30, 2008 of the Company filed with the Securities and Exchange Commission (the "Commission") on December 10, 2008; (ii) the current report on Form 8-K/A filed with the Commission on November 2, 2007; (iii) Form 10-Q for the quarter ended March 31, 2009 filed with the Commission on May 11, 2009 and (iv) Form 8-K/A filed with the Commission on June 5, 2009.

The Company is filing, via EDGAR, this letter setting forth the Company's responses to comments of the Staff of the Commission (the "Staff"). Enclosed as well are two hard copies of the Company's response letter. We have included your original questions in addition to providing our responses.

Form 10-K for the fiscal year ended September 30, 2008

Item 11. Executive Compensation

Determining Executive Compensation, page 7

| 1. | We note your responses
to prior comments 2 and 3. Please disclose in future filings, if true,
that you do not know the names of the individual companies that comprise
of the American Electronics Association Salary Survey. |
| --- | --- |
| R. | We will make the
requested disclosure in future filings. |

Brian Cascio, Branch Chief Division of Corporation Finance United States Securities and Exchange Commission July 1, 2009 Page 2 of 7

| Elements of Our Executive
Compensation Program, page 8 | |
| --- | --- |
| 2. | With regard to your response to
prior comment 4, please note that we would expect to see discussion in
your future filing that addresses how individual performance and specific
contributions by each named executive officer are evaluated by the
compensation committee and how such appraisal translates into actual
compensation. With regard to the quantitative contributions that are
assessed by the committee in granting annual cash incentive bonuses,
please expand your discussion in future filings to disclose how the
performance objectives you cite on page 9 apply to each named executive
officer. For example, it is unclear from your current disclosure whether
these objectives are weighted equally and how your named executive
officers may achieve these goals. Accordingly, please expand your discussion of your named executive
officer’s responsibilities and objective and how your compensation levels
reflect those responsibilities and objectives. We refer you to Regulation
S-K item 402(b)(xii). |
| R. | In future filings, we will
discuss how individual performance and specific contribution by each named
executive officer are evaluated by the compensation committee and how such
appraisal translates into actual compensation. We will also expand the
discussion in future filings to disclose how the performance objectives we
cite are weighted and how our named executive officers may achieve these
goals. In future filings, we will generally expand the discussion of
the responsibilities and objectives of our named executive officers and
how their compensation levels reflect those responsibilities and
objectives. |

Item 13. Certain Relationships and Related Party Transactions

| 3. | Please note that you must include
disclosure regarding policies for the review, approval or ratification of
related person transactions under Item 404(b)(1) even when you do not have
any reportable transactions under Item 404(a). See Question 130.06 of our
Regulation S-K Compliance and Disclosure Interpretations, available on our
website at http://www.sec.gov/division/corpfin/guidance/regs-kinterp.htm . Accordingly, please include the discussion of your
policy regarding the review of related party transactions that you
provided in response to prior comment 7 in your future
filings. |
| --- | --- |
| R. | In future filings, we will
disclose our policies for the review, approval or ratification of related
person transactions, even when we do not have reportable
transactions. |

Brian Cascio, Branch Chief Division of Corporation Finance United States Securities and Exchange Commission July 1, 2009 Page 3 of 7

Form 8-K/A dated November 2, 2007

1. We refer to your response to our prior comment number 15. Please tell us where you have presented the interim financial statements required by Rules 3-01, 3-02, 3-05 and Article 10 of Regulation S-X. In addition, tell us how the interim financial statement provided on pages 3 and 4 of the pro forma financial information meet these requirements.

| R. |
| --- |
| Rule 3-02(b) requires
us to present, for any interim period between the latest audited balance
sheet and the date of the most recent interim balance sheet being filed,
and for the corresponding period of the preceding year, statements of
income and cash flows of the acquired company. The statements of income
and cash flows of the acquired company for the six month period between
the December 31, 2006 audited balance sheet and the June 30, 2007 balance
sheet were inadvertently omitted . Within the next 30 days, we will review
the available information and prepare the inadvertently omitted interim
financial statements and file them with the further amended Form 8-K/A
referred to in our responses to comments number 6 and
7. |

Form 10-Q for the quarter ended March 31, 2009

Critical Accounting Policies, page 25

1. In the interest of providing readers with a better insight into management’s judgments into accounting for goodwill, please tell us and disclose the following in future filings:

How you perform the two-step impairment test discussed in SFAS 142, including the reporting unit level at which you test goodwill for impairment and your basis for that determination;

Brian Cascio, Branch Chief Division of Corporation Finance United States Securities and Exchange Commission July 1, 2009 Page 4 of 7

Each of the valuation methodologies used to value goodwill (if multiple approaches are used), including sufficient information to enable a reader to understand how each of the methods differ, the assumed benefits of a valuation prepared under each method, and why management selected these methods as being the most meaningful for the company in preparing the goodwill impairment analysis. How you weight each of the methods used including the basis for that weighting (if multiple approaches are used); A quantitative and qualitative description of the material assumptions used and a sensitivity analysis of those assumptions based upon reasonably likely changes; If applicable, how the assumptions and methodologies used for valuing goodwill in current year have changed since the prior year highlighting the impact of any changes.

R. In future filings, we will expand our critical accounting policy for impairment of long-lived assets to provide better insight into management’s judgments into accounting for goodwill, as follows:

We performed the two-step impairment test discussed in SFAS 142. In the first step, we estimated the fair value of the reporting unit and compared it to the carrying value of the reporting unit. Most of our reporting units are operating segments that are one level below the reportable segment into which they are aggregated. The one exception is P.R. Hoffman Machine Products, Inc. which is a reportable segment. When the carrying value exceeds the fair value of the reporting unit, the second step is performed to measure the amount of the impairment loss, if any. In the second step, the amount of the impairment loss was determined to be the excess of the carrying amount of the goodwill and other intangibles not subject to amortization over their implied fair value.

Brian Cascio, Branch Chief Division of Corporation Finance United States Securities and Exchange Commission July 1, 2009 Page 5 of 7

| The methods
used to estimate fair value of the reporting unit for the purpose of
determining the implied fair value of goodwill include the market
approach and discounted cash flows, as follows: | |
| --- | --- |
| i. | One valuation methodology used is
to determine the multiples of market value of invested capital (“MVIC”) of
similar public companies to their revenue for the last twelve months
(“LTM”) and next twelve months (“NTM”), and apply those multiples to the
revenue for the comparable periods of the reporting unit being tested for
impairment. One benefit of this approach is
it is the closest to quoted market prices that are readily available.
However, we generally give less weight to this method, because the market
value of the minority interest of public companies may not be that
relevant to the fair value of our wholly-owned reporting units, which are
not public companies. Also, MVIC to revenue for the LTM uses a historical
value in the denominator, while the market values tend to be forward
looking; and MVIC of revenue for the NTM involves the use of projections
for both the comparable companies and the reporting unit. |
| ii. | Another market approach that we
sometimes use is based upon prices paid in merger and acquisition
transactions for other companies in the same industry, again applying the
MVIC to revenue of those companies to the historical and projected revenue
of the reporting unit. When we use both market prices determined as
described in (i), above, and prices paid in merger and acquisition
transactions, we weight them to determine an indicated value under the
market approach. |
| iii. | As stated, we also use discounted
cash flows as an indication of what a third-party would pay for the
reporting unit in an arms-length transaction. This method requires
projections of EBITDA (earnings before interest, taxes, depreciation and
amortization) and applying an appropriate discount rate based on the
weighted average cost of capital for the reporting unit. |
| We generally give the greatest weight, often
75% or more, to the discounted cash flow method, due to difficulty in
identifying a sufficient number of companies that are truly comparable
to a given reporting unit. This is because two of our three reporting
units are relatively small businesses serving niche markets. The material estimates and assumptions used
in the discounted cash flows method of determining fair value include
(i) the appropriate discount rate, given the risk-free rate of return
and various risk premiums, (ii) projected revenues, (iii) projected
material cost as a percentage of revenue, and (iv) the rate of increase
in payroll and other expense. Quantitatively, the discount rate is the
assumption that has the most pervasive effect on the discounted cash
flows. We believe the discount rate used is appropriate, as we determine
the discount rate based on input from a valuation firm, which applies
various approaches taking into account the particular circumstances of
the reporting unit in arriving at a recommendation. For annual
valuations, we test the sensitivity of the assumptions used in our
discounted cash flow projection with the aid of a valuation firm, which
utilizes a Monte Carlo simulation model, wherein various probabilities
are assigned to the key
assumptions. | |

Brian Cascio, Branch Chief Division of Corporation Finance United States Securities and Exchange Commission July 1, 2009 Page 6 of 7

In the current year, we performed a mid-year test of the impairment of the goodwill and other intangibles due to changing circumstances regarding the Bruce Technologies reporting unit. Specifically, Bruce Technologies continued to incur losses after a restructuring and cost reductions put into place during the prior fiscal year and expectations that semiconductor customers served by this reporting unit would not in the future achieve the kinds of growth rates they had in the past due to increased maturity of that industry. We used the same discount rate as used in the prior annual impairment test of this reporting unit, but the other assumptions became more conservative due to the changing circumstances. It was primarily the lowered projections of future revenue that resulted in a lower estimate of fair value and the impairment loss. The payroll and certain expense assumptions, however, were lowered to take into account a second restructuring of the reporting unit, which involved a significant reduction in the number of employees. The material cost assumption was also lowered to take into account a change in product mix.

Form 8-K/A filed June 5, 2009

| 6. | We note that your amended Form
8-K only includes the revised audit report for the financial statements of
R2D. Please further amend the Form 8-K to include a complete Exhibit 99.3,
including the financial statements and the related audit
report. |
| --- | --- |
| R. | We will further amend the Form
8-K to include a complete Exhibit 99.3, including the financial statements
and the related audit report. We expect to file the further amended Form
8-K along with the additional interim financials statements referred to in
our response to comment number 4. |

| 7. | Please revise the audit report to
specifically state that the audit was conducted in accordance with
“generally accepted auditing standards in the United
States”. |
| --- | --- |
| R. | The auditor of the acquired
company has revised their audit report to specifically state that the
audit was conducted in accordance with generally accepted auditing
standards in the United States. See response to comment number 6,
above. |

The Company acknowledges that it is responsible for the adequacy of the disclosure in the filings, that staff comments or changes to disclosure in response to staff comments do not foreclose the Commission from taking any action with respect to the filings; and the

Brian Cascio, Branch Chief Division of Corporation Finance United States Securities and Exchange Commission July 1, 2009 Page 7 of 7

Company may not assert staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.

We trust that the foregoing is responsive to your comments. If you have any questions or comments, please contact the undersigned.

Best regards, Amtech Systems, Inc.

Robert T. Hass, CPA Chief Accounting Officer

CC:
Robert F. King, Chairman of the
Compensation and Stock Option Committee of the Board of Directors
Christopher Johnson, Squire,
Sanders & Dempsey L.L.P.