1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended February 28, 1997 Commission File Number 0-12353
PLASMA-THERM, INC.
------------------
(Exact name of registrant as specified in its charter)
FLORIDA 04-2554632
------------------------------ -------------------
State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
10050 16TH STREET NORTH, ST. PETERSBURG, FLORIDA 33716
------------------------------------------------------
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code (813) 577-4999
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Common Stock, par value $.01 per share 10,595,061
-------------------------------------- -----------------------------
Class Outstanding at March 25, 1997
Page 1 of 14 Pages
2
INDEX
PAGE
NUMBER
------
PART 1. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Balance Sheets - February 28, 1997 and
November 30, 1996 .................................................................... 3
Statements of Income - Three Months Ended
February 28, 1997 and February 29, 1996 .............................................. 5
Statements of Cash Flows - Three Months Ended
February 28, 1997 and February 29, 1996 .............................................. 6
Notes to Consolidated Financial Statements ............................................ 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations .............................. 10
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K .................................................... 13
-2-
3
PLASMA-THERM, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
FEBRUARY 28, NOVEMBER 30,
1997 1996
------------ ------------
(UNAUDITED)
ASSETS
Current assets
Cash and cash equivalents $ 6,780,093 $ 5,266,279
Accounts receivable 8,463,851 8,046,130
Prepaid income taxes - 94,233
Inventories 7,266,649 7,958,620
Prepaid expenses and other 242,827 232,650
Deferred tax asset 353,702 388,313
----------- -----------
Total current assets 23,107,122 21,986,225
----------- -----------
Property, plant and equipment
Building 4,394,649 4,394,649
Machinery and equipment 6,299,134 6,026,387
Leasehold improvements 142,915 142,915
----------- -----------
10,836,698 10,563,951
Less accumulated depreciation and
amortization 2,551,862 2,155,143
----------- -----------
8,284,836 8,408,808
Land 786,017 786,017
----------- -----------
9,070,853 9,194,825
----------- -----------
Other assets 269,797 294,126
----------- -----------
$32,447,772 $31,475,176
=========== ===========
See accompanying notes to these consolidated financial statements.
-3-
4
PLASMA-THERM, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
FEBRUARY 28, NOVEMBER 30,
1997 1996
-------------- ------------
LIABILITIES
Current liabilities
Short-term borrowings $ - $1,000,000
Current portion of notes payable 366,366 443,946
Current maturities of obligations under
capital leases 83,070 80,955
Accounts payable 2,179,698 2,223,826
Accrued payroll and related 917,699 676,674
Accrued expenses 454,741 414,094
Accrued warranty reserve 625,000 610,000
Income taxes payable 131,195 -
Customer deposits - 218,000
----------- -----------
Total current liabilities 4,757,769 5,667,495
----------- -----------
Long-term obligations
Notes payable 3,359,114 3,431,475
Obligations under capital leases 135,972 157,519
----------- -----------
3,495,086 3,588,994
----------- -----------
SHAREHOLDERS' EQUITY
Shareholders' equity
Common stock
$.01 par value
Authorized - 25,000,000 shares
Issued and outstanding - 10,595,061
shares - 1997 and 10,396,061 shares -
1996 109,952 103,962
Additional paid-in capital 16,036,026 14,897,446
Retained earnings 8,048,939 7,217,279
----------- -----------
24,194,917 22,218,687
----------- -----------
$32,447,772 $31,475,176
=========== ============
See accompanying notes to these consolidated financial statements.
-4-
5
PLASMA-THERM, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
THREE MONTHS ENDED
------------------------------------------
FEBRUARY 28, FEBRUARY 29,
1997 1996
------------ -------------
Net sales $9,480,580 $8,290,002
---------- ----------
Costs and expenses
Cost of products sold 5,712,963 5,288,305
Research and development 792,549 619,323
Selling and administrative 1,565,964 1,338,436
Interest expense 102,674 58,217
Interest income (81,543) (71,606)
Other expense, net 9,090 678
---------- ----------
8,101,697 7,233,353
---------- ----------
Income before income taxes 1,378,883 1,056,649
Income taxes 547,223 411,090
---------- ----------
Net income $ 831,660 $ 645,559
========== ==========
Income per share (primary and fully diluted) $ 0.08 $ 0.06
========== ==========
See accompanying notes to these consolidated financial statements.
-5-
6
PLASMA-THERM, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
THREE MONTHS ENDED
----------------------------------------
FEBRUARY 28, 1997 FEBRUARY 29, 1996
----------------- -----------------
Cash flows from operating activities
Net income $ 831,660 $ 645,559
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation and amortization 411,717 162,120
Deferred taxes 34,611 175,102
Compensation - stock options 2,280 27,015
Changes in assets and liabilities
(Increase) decrease in accounts receivable (417,721) 491,319
Decrease in income tax deposits 94,233 18,048
(Increase) decrease in inventories 691,971 (871,739)
Increase in prepaid expenses and other (10,177) (82,584)
Decrease in accounts payable (44,128) (1,224,182)
Increase (decrease) in accrued payroll and
related 241,025 (50,376)
Increase (decrease) in accrued expenses 40,647 (131,187)
Increase in accrued warranty reserve 15,000 -
Increase in income taxes payable
(exclusive of tax benefits derived from
exercise of options/warrants) 324,925 132,140
Decrease in customer deposits (218,000) -
----------- -----------
Net cash (used in) provided by
operating activities 1,998,043 (708,765)
----------- -----------
Cash flows from investing activities
Capital expenditures (272,745) (1,472,945)
Payments received on note receivable - 20,000
Other 9,329 (173,816)
----------- -----------
Net cash used in investing activities (263,416) (1,626,761)
----------- -----------
See accompanying notes to these consolidated financial statements.
-6-
7
PLASMA-THERM, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
(UNAUDITED)
THREE MONTHS ENDED
----------------------------------------
FEBRUARY 28, 1997 FEBRUARY 29, 1996
----------------- -----------------
Cash flows from financing activities
Proceeds from issuance of notes payable - 1,643,215
Principal payments on notes payable (149,941) (83,333)
Principal payments under capital lease obligations (19,432) (23,561)
Net issuances under line of credit agreements (1,000,000) -
Proceeds from exercise of stock options and warrants 948,560 26,420
------------ ------------
Net cash provided by (used in)
financing activities (220,813) 1,562,741
------------ ------------
Net increase (decrease) in cash and cash
equivalents 1,513,814 (772,785)
------------ ------------
Cash and cash equivalents beginning of period 5,266,279 5,058,718
------------ ------------
Cash and cash equivalents end of period $ 6,780,093 $ 4,285,933
============ ============
See accompanying notes to these consolidated financial statements.
-7-
8
PLASMA-THERM, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 28, 1997 AND NOVEMBER 30, 1996
(UNAUDITED)
NOTE 1 BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited
consolidated financial statements contain all adjustments
(consisting of only normal recurring adjustments) necessary to
present fairly the financial position as of February 28, 1997
and the results of operations and cash flows for the three
months ended February 28, 1997 and February 29, 1996.
The results of operations for the three months ended February
28, 1997 and February 29, 1996 are not necessarily indicative
of results for the full year.
The November 30, 1996 balance sheet amounts and disclosures
included herein have been derived from the November 30, 1996
audited financial statements of the Registrant. While the
Company believes that the disclosures presented are adequate
to make the information not misleading, it is suggested that
these consolidated financial statements be read in conjunction
with the consolidated financial statements and the notes
included in the Company's latest annual report on Form 10-K.
NOTE 2 PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of
Plasma-Therm, Inc. and its wholly-owned subsidiary, Magnetran
Inc.. All significant intercompany transactions and balances
have been eliminated.
NOTE 3 INCOME PER SHARE
Earnings per share is computed based on the weighted average
number of shares of common stock adjusted for the conversion of
dilutive common stock equivalents. The primary and fully diluted
income per share are the same for all periods presented. The
following is the weighted average outstanding share information.
Three Months Ended
----------------------------------------------
February 28, 1997 February 29, 1996
----------------- -----------------
Primary 10,960,820 10,611,434
Fully Diluted 11,012,717 10,611,017
-8-
9
NOTE 4 SHORT-TERM AND LONG-TERM BORROWINGS
In March, 1997 the Company signed a commitment letter with its bank
to increase its line of credit to $7,000,000 and renew the
$1,000,000 term loan upon payoff of the existing term loan. The
terms and conditions are more favorable than the terms and
conditions under the existing agreements. Among the revised terms
and conditions include a decrease in the interest rate from the
bank's prime rate (8.25% at February 28, 1997) to the one month
LIBOR plus 2% (7.44% at February 28, 1997) and LIBOR plus 2.25%
(7.69% at February 28, 1997) for the line of credit and term loan,
respectively. The Company anticipates finalizing the Loan Documents
in approximately 30 days from the date of this filing.
-9-
10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net sales of $9,480,580 for the first quarter of 1997 increased by 14%
from net sales of $8,290,002 for the first quarter of 1996. The increase in net
sales was attributable to higher product demand and sales of the Company's
newest products, the Versalock(R) 700 Series and the Shuttlelock(R) 770 ICP
Series. Sales of the Versalock(R) 700 Series began in the fourth quarter of
1995 while sales of the Shuttlelock(R) 770 ICP Series began in fiscal 1996.
Total sales related to these products in the first quarter of 1997 and 1996 were
$5,059,700 and $3,611,572, respectively.
Cost of products sold of $5,712,963 for the first quarter of 1997 was
60.3% of net sales, compared to $5,288,305 for the first quarter of 1996 which
was 63.8% of net sales. The decrease was due to a combination of slightly
higher margins on the new product lines described in the previous paragraph and
the fixed costs associated with cost of products sold. Fixed costs as a
percentage of net sales was lower for the first quarter of 1997 as compared to
the first quarter of 1996 because net sales increased by 14% the first quarter
of 1997 over the first quarter of 1996.
Research and development expenses for the first quarter of 1997 were
$792,549 compared to $619,323 for the first quarter of 1996, which was 8.4% and
7.5% of net sales, respectively. In 1997 several research and development
programs have been implemented to enhance the development efforts in the
Company's target markets. In addition, as new products and technology continue
to be introduced, total dollars expended on research and development are
expected to increase.
Selling and administrative expense for the quarter ended February 28,
1997 was $1,565,964, up from $1,338,436 for the quarter ended February 29, 1996,
which was 16.5% and 16.1% of net sales, respectively. The increase related to
increased expenditures associated with the higher sales volume, including
commissions paid to international manufacturer's representatives amounting to
$224,110, a $104,110 increase over the first quarter of 1996 commissions of
$120,000. The increase in international sales representative commissions
directly relates to a 35% increase in international sales from $2,094,097 to
$2,837,578 in the first quarter of 1997. In addition, foreign sales as a
percentage of total sales increased from 26.9% in the first quarter of 1996 to
31.3% in the first quarter of 1997.
Income before income taxes for the first quarter of 1997 was $1,378,883,
an increase of $322,234 from $1,056,649 earned for the first quarter of 1996.
Net income per share was $.08 for the first quarter of 1997, an increase of $.02
from $.06 for the first quarter of 1996. The components of this increase are
described above.
-10-
11
FINANCIAL POSITION, LIQUIDITY AND CAPITAL REQUIREMENTS
Working capital at February 28, 1997 was $18,349,353 which is an
increase of $2,030,623 over $16,318,730 at November 30, 1996. Working capital
in 1997 benefited from, among other things, funds provided by the Company's
increased earnings from its operations in the first quarter of 1997 which also
allowed the Company to completely pay off short term borrowings of $1,000,000.
See the following discussion of material changes in assets and liabilities from
November 30, 1996 to February 28, 1997 which further supplements this commentary
on working capital.
Net cash provided by operating activities in the first quarter of 1997
was $1,998,043. This increase consisted of various components, including net
income in the first quarter of 1997 of $831,660, increase in accounts receivable
of $417,721, decrease in inventories of $691,971, increase in accrued expenses
of $281,672, and increase in income taxes payable of $324,925. The 5.2%
increase in accounts receivable was primarily related to the timing of sales and
related payments. The 8.7% decrease in inventories was primarily due to
continued refined material requirements planning and enhanced inventory
management. In addition, timing of the shipment of orders in correlation to the
backlog affected the level of work in process inventory. The level of work in
process inventory at February 28, 1997 was approximately $322,000 lower than the
level at November 30, 1996. The backlog remained unchanged at approximately
$12,000,000 at February 28, 1997. The 25.8% increase in accrued expenses
related primarily to a timing difference for an accrual for payroll taxes
withheld at February 28, 1997 which were not paid until March 1997. This accrual
did not exist at November 30, 1996. Of the increase in income taxes payable of
$324,925, approximately $158,000 related primarily to taxes owed for federal
income tax for the quarter ended February 28, 1997, less tax deposits made
through that date. As of November 30, 1996, all federal and state income tax
payments had been previously made for the year ended November 30, 1996, leaving
a balance in the income tax deposits account in excess of actual tax due of
$94,233 (See accompanying Consolidated Balance Sheets). In addition,
approximately $194,000 of the increase in income taxes payable at February 28,
1997 related to the tax benefits derived from the exercise of stock options and
warrants which are recorded in additional paid in capital.
Net cash used in investing activities for the quarter ended February
28, 1997 was $263,416. The Company incurred $272,745 in capital expenditures,
of which approximately $241,000 was for the construction and purchase of various
lab equipment to be used in research and development.
Net cash used in financing activities for the quarter ended February 28,
1997 was $220,813. Cash used for financing activities included the principal
repayment of $169,373 of notes payable and capital lease obligations and the pay
off of the line of credit of $1,000,000. Additionally, the Company received
$948,560 from the exercise of stock options and warrants.
The Company has extensive ongoing capital requirements for research and
development, the repayment of debt, capital equipment and inventory. To meet
these
-11-
12
requirements, in March, 1997 the Company signed a commitment letter with
its bank to increase its line of credit to $7,000,000 and renew the $1,000,000
term loan upon payoff of the existing term loan. The terms and conditions are
more favorable than the terms and conditions under the existing agreements.
Among the revised terms and conditions include a decrease in the interest rate
from the bank's prime rate (8.25% at February 28, 1997) to the one month LIBOR
plus 2% (7.44% at February 28, 1997) and LIBOR plus 2.25% (7.69% at February 28,
1997) for the line of credit and term loan, respectively. The Company
anticipates finalizing the Loan Documents in approximately 30 days from the date
of this filing.
FORWARD LOOKING INFORMATION
From time to time, the Company may publish forward-looking statements
relating to such matters as anticipated financial performance, business
prospects, technological developments, new products, research and development
activities and similar matters. The Private Securities Litigation Reform Act of
1995 provides a safe harbor for forward-looking statements. In order to comply
with the terms of the safe harbor, the Company notes that a variety of factors
could cause the Company's actual results and experience to differ materially
from the anticipated results or other expectations expressed in the Company's
forward-looking statements. The risks and uncertainties that may affect the
operations, performance, development and results of the Company's business
include, but are not limited to, the following:
The Company sells relatively expensive capital equipment, and, in any
given quarter or financial period, any one customer or any individual shipment
may represent a significant portion of revenue in that period. Therefore a
delay or cancellation of that shipment could cause the Company to experience a
revenue or earnings shortfall for a given financial period.
The Company relies on distributors and representatives, which
complement its direct sales and service staff, to sell and service its products
in various geographic locations. Should these sales and service channels be
rendered ineffective, it could materially impact the Company's business. Some
of the Company's competitors have more extensive direct sales and service
locations in the Company's distributor's and representatives' channels, which
could provide these competitors with a competitive advantage in certain
geographic areas.
The Company depends heavily on the success and growth of the high
technology marketplace. In particular, a slowdown in personal computer
consumption could cause a slowdown of disk drive production, resulting in lower
output of thin film heads, which could materially effect the Company's business.
The Company also relies on the health of the general semiconductor
equipment marketplace. A slowdown in semiconductor capital equipment purchases
could also affect the Company's business from time to time.
-12-
13
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
10.12 Employment Agreement between the Registrant
and Edmond A. Richards, dated January 22,
1997.
10.13 Employment Agreement between the Registrant
and Ronald S. Deferrari, dated January 22,
1997.
10.14 Employment Agreement between the Registrant
and Stacy L. Wagner, dated January 22,
1997.
11 Commitment Letter between Registrant and
NationsBank, N.A. (South), dated March 19,
1997.
27 Financial Data Schedule (for SEC use only).
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the first quarter of
fiscal 1996.
-13-
14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PLASMA-THERM, INC.
Date: March 27, 1997 By: /s/ STACY WAGNER
----------------------------
Stacy Wagner
V.P. of Finance
Date: March 27, 1997 By: /s/ RONALD S. DEFERRARI
----------------------------
Ronald S. Deferrari
President, Chief Operating Officer
-14-