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 May 31, 1997 Commission File Number 0-12353
PLASMA-THERM, INC.
-------------------
(Exact name of registrant as specified in its charter)
FLORIDA 04-2554632
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State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
10050 16TH STREET NORTH, ST. PETERSBURG, FLORIDA 33716
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(Address of principal executive offices and zip code)
Registrant's telephone number, including area code (813) 577-4999
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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 11,003,061
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Class Outstanding at June 12, 1997
Page 1 of 17 Pages
2
INDEX
PAGE
NUMBER
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PART 1. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Balance Sheets - May 31, 1997 and
November 30, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Statements of Income - Three Months and Six Months Ended
May 31, 1997 and May 31, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Statements of Cash Flows - Six Months Ended
May 31, 1997 and May 31, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
PART II. OTHER INFORMATION
Item 4 Submission of Matters to a Vote of Security-Holders . . . . . . . . . . . . . . . . . . . . . . . . . 14
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
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PLASMA-THERM, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
MAY 31, NOVEMBER 30,
ASSETS 1997 1996
----------- -----------
(UNAUDITED)
Current assets
Cash and cash equivalents $ 6,063,010 $ 5,266,279
Accounts receivable 9,463,705 8,046,130
Prepaid income taxes 159,073 94,233
Inventories 9,474,902 7,958,620
Prepaid expenses and other 387,379 232,650
Deferred tax asset 388,222 388,313
----------- -----------
Total current assets 25,936,291 21,986,225
----------- -----------
Property, plant and equipment
Building 4,444,649 4,394,649
Machinery and equipment 6,521,880 6,026,387
Leasehold improvements 144,815 142,915
----------- -----------
11,111,344 10,563,951
Less accumulated depreciation and
amortization 3,000,091 2,155,143
----------- -----------
8,111,253 8,408,808
Land 786,017 786,017
----------- -----------
8,897,270 9,194,825
----------- -----------
Other assets 287,927 294,126
----------- -----------
$35,121,488 $31,475,176
=========== ===========
See accompanying notes to these consolidated financial statements.
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PLASMA-THERM, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
MAY 31, NOVEMBER 30,
LIABILITIES 1997 1996
---------- -----------
Current liabilities
Short-term borrowings $ - $ 1,000,000
Current portion of notes payable 622,154 443,946
Current maturities of obligations under
capital leases 85,192 80,955
Accounts payable 3,100,433 2,223,826
Accrued payroll and related 641,756 676,674
Accrued expenses 361,010 414,094
Accrued warranty reserve 640,000 610,000
Income taxes payable - -
Customer deposits 225,840 218,000
----------- -----------
Total current liabilities 5,676,385 5,667,495
----------- -----------
Long-term obligations
Notes payable 3,949,647 3,431,475
Obligations under capital leases 113,786 157,519
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4,063,433 3,588,994
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SHAREHOLDERS' EQUITY
Shareholders' equity
Common stock
$.01 par value
Authorized - 25,000,000 shares
Issued and outstanding - 11,003,061
shares - 1997 and 10,396,061 shares -
1996 110,032 103,962
Additional paid-in capital 16,057,223 14,897,446
Retained earnings 9,214,415 7,217,279
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25,381,670 22,218,687
----------- -----------
$35,121,488 $31,475,176
=========== ===========
See accompanying notes to these consolidated financial statements.
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PLASMA-THERM, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
MAY 31, MAY 31,
------------------------- -------------------------
1997 1996 1997 1996
------------ ---------- ----------- ------------
Net sales $10,241,534 $9,491,798 $19,722,114 $17,781,800
----------- ---------- ----------- -----------
Costs and expenses
Cost of products sold 5,826,751 5,836,730 11,539,714 11,125,035
Research and development 903,086 716,253 1,695,635 1,335,576
Selling and administrative 1,684,742 1,451,217 3,250,706 2,789,653
Interest expense 82,063 49,933 184,737 108,150
Interest and capital gain income (100,680) (63,598) (182,223) (135,204)
Other expense, net 19,960 23,681 29,050 24,359
----------- ---------- ----------- -----------
8,415,922 8,014,216 16,517,619 15,247,569
----------- ---------- ----------- -----------
Income before income taxes 1,825,612 1,477,582 3,204,495 2,534,231
Income taxes 660,136 584,716 1,207,359 995,806
----------- ---------- ----------- -----------
Net income $ 1,165,476 $ 892,866 $ 1,997,136 $ 1,538,425
============ ========== =========== ===========
Income per share
(primary and fully diluted) $ 0.10 $ 0.08 $ 0.18 $ 0.14
============ ========== =========== ===========
See accompanying notes to these consolidated financial statements.
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PLASMA-THERM, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
SIX MONTHS ENDED MAY 31,
-----------------------------
1997 1996
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Cash flows from operating activities
Net income $1,997,136 $1,538,425
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation and amortization 859,948 334,230
Loss on disposal of assets - 23,681
Deferred taxes 91 337,698
Compensation - stock options 4,550 28,890
Changes in assets and liabilities
(Increase) decrease in accounts receivable (1,417,575) 751,264
Increase in income tax deposits (64,840) (40,039)
Increase in inventories (1,516,282) (1,666,950)
Increase in prepaid expenses and other (154,729) (517,320)
Increase (decrease) in accounts payable 876,607 (613,092)
Increase (decrease) in accrued payroll and
related (34,918) 38,012
Increase in accrued expenses (53,084) (162,800)
Increase in accrued warranty reserve 30,000 -
Increase (decrease) in income taxes payable
(exclusive of tax benefits derived from
exercise of options/warrants) 198,427 (5,152)
Increase in customer deposits 7,840 -
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Net cash provided by
operating activities 733,171 46,847
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Cash flows from investing activities
Capital expenditures (547,393) (2,848,536)
Payments received on note receivable - 30,000
Proceeds from sale of assets - 2,500
Other (8,801) 31,359
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Net cash used in investing
activities (556,194) (2,784,677)
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See accompanying notes to these consolidated financial statements.
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PLASMA-THERM, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
(UNAUDITED)
SIX MONTHS ENDED MAY 31,
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1997 1996
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Cash flows from financing activities
Proceeds from issuance of notes payable 1,000,000 2,922,981
Principal payments on notes payable (303,620) (203,357)
Principal payments under capital lease
obligations (39,496) (35,620)
Net issuances under line of credit agreements (1,000,000) -
Proceeds from exercise of stock options and
warrants 962,870 36,920
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Net cash provided by
financing activities 619,754 2,720,924
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Net increase (decrease) in cash and
cash equivalents 796,731 (16,906)
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Cash and cash equivalents, beginning of period 5,266,279 5,058,718
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Cash and cash equivalents, end of period $6,063,010 $5,041,812
========== ==========
See accompanying notes to these consolidated financial statements.
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PLASMA-THERM, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 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 May 31, 1997 and
November 30, 1996 and the results of operations and cash flows
for the six months ended May 31, 1997 and 1996.
The results of operations for the six months ended May 31,
1997 and 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.
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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 May 31,
1997 1996
--------------- ---------------
Primary 11,172,167 10,707,415
Fully Diluted 11,263,204 10,799,427
Six Months Ended May 31,
1997 1996
--------------- ---------------
Primary 11,061,669 10,660,692
Fully Diluted 11,156,499 10,796,479
NOTE 4 SHORT-TERM AND LONG-TERM BORROWINGS
In April, 1997 the Company increased its existing line of credit with
its bank from $3,000,000 to $7,000,000. The term of the line of
credit agreement is through April, 1998. Interest is payable monthly
at the one month LIBOR rate plus 2% (7.69% at May 31, 1997). The line
is collateralized by accounts receivable.
In April, 1997 the Company executed a $1,000,000 term loan with its
bank. The loan is payable in monthly installments of $27,778 plus
interest at the one month LIBOR rate plus 2.25% (7.94% at May 31,
1997) through April 2000. The note is secured by various research and
development equipment.
The line of credit and term loan are cross-collateralized, and the
bank has a security interest in the proceeds for the collection of
accounts receivable and the Company's depository accounts. The
agreements include financial covenants relating to the Company's
operating performance and financial condition. In addition, a
negative pledge agreement was executed which does not permit the
Company to hold a lien or encumbrance on its inventory.
NOTE 5 1995 STOCK INCENTIVE PLAN
In May 1997 the Company's shareholders approved amendments to its 1995
Stock Incentive Plan, increasing the available shares of Common Stock
for issuance under the plan by 1,500,000 shares; increasing the maximum
number of shares or Common Stock for which options may be granted under
the plan during any fiscal year to each optionee to 500,000 shares; and
permitting members
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of the stock option committee to receive discretionary, as well as
formula, option grants and awards under the plan.
NOTE 6 NEW ACCOUNTING PRONOUNCEMENT
The FASB has issued Statement of Financial Accounting Standards No.
128, Earnings Per Share, which is effective for financial statements
issued after December 15, 1997. Early adoption of the new standard is
not permitted. The new standard eliminates primary and fully diluted
earnings per share and requires presentation of basic and diluted
earnings per share together with disclosure of how the per share
amounts were computed. The adoption of this new standard is not
expected to have a material impact on the disclosure of earnings per
share in the financial statements.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net sales of $10,241,534 for the second quarter of 1997 increased by 8%
from net sales of $9,491,798 for the second quarter of 1996. For the first
half of 1997, the Company reported net sales of $19,722,114, which was 11%
higher than net sales of $17,781,800 for the first half of 1996. The increase
in net sales for both the second quarter and first half was attributable to
higher product demand and sales of the Company's newest products, the
Versalock(R) 700 Series and the Shuttlelock(R) ICP Series. Sales of the
Versalock(R) 700 Series began in the fourth quarter of 1995 while sales of the
Shuttlelock(R) ICP Series began in fiscal 1996. Total sales related to these
products in the second quarter of 1997 and 1996 were $6,054,234 (59% of net
sales) and $3,763,750 (40% of net sales), respectively. Total sales related to
these products in the first half of 1997 and 1996 were $11,113,934 (56% of net
sales) and $7,375,322 (41% of net sales), respectively.
Cost of products sold of $5,826,751 for the second quarter of 1997 was
56.9% of net sales, compared to $5,836,730 for the second quarter of 1996 which
was 61.5% of net sales. Cost of products sold of $11,539,714 for the first
half of 1997 was 58.5% of net sales, compared to $11,125,035 for the first half
of 1996 which was 62.6% of net sales. The decrease in cost of products sold as
a percentage of net sales for the second quarter and first half of 1997 was due
to increased sales of the new product lnes described in the previous paragraph
which have higher margins than the Company's other product lines.
Research and development expense for the second quarter of 1997 and
1996 was $903,086 and $716,253, respectively, which was 8.8% and 7.5% of net
sales, respectively. Research and development expense for the first half of
1997 and 1996 was $1,695,635 and $1,335,576, respectively, which was 8.6% and
7.5% of net sales, respectively. In 1997 several research and development
programs have been implemented to enhance 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 was $1,684,742 for the second quarter
of 1997, up from $1,451,217 for the second quarter of 1996 which was 16.5% and
15.3% of net sales, respectively. Selling and administrative expense for the
first six months of 1997 was $3,250,706, up from $2,789,653 for the first six
months of 1996 which was 16.5% and 15.7% of net sales, respectively. The
increases in selling and administrative expense as a percentage of net sales for
the second quarter and first six months of 1997 relate primarily to the
marketing initiatives in the second quarter of 1997 which have resulted in
higher expenditures associated with payroll, travel, conventions, and
advertising.
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Income before income taxes for the second quarter of 1997 was
$1,825,612, an increase of $348,030 from $1,477,582 earned the second quarter of
1996. Net income per share was $.10 for the second quarter of 1997, an increase
of $.02 from $.08 for the second quarter of 1996. Income before income taxes
for the first half of 1997 was $3,204,495, an increase of $670,264 from
$2,534,231 earned the first half of 1996. Net income per share was $.18 for the
first half of 1997, an increase of $.04 from $.14 for the first half of 1996.
The primary reasons for the increase for both the second quarter and first half
of 1997 relates to increased net sales with higher margins as described in the
previous paragraphs.
FINANCIAL POSITION, LIQUIDITY AND CAPITAL REQUIREMENTS
Working capital at May 31, 1997 was $20,259,906 which is an increase of
$3,941,176 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 half 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 May 31, 1997 which further supplements this commentary on working
capital.
Net cash provided by operating activities in the first half of 1997 was
$733,171. The increase of $733,171 consisted of various components, including
net income in the first half of 1997 of $1,997,136 increased by depreciation and
amortization (which are noncash expenses) totaling $859,948, an increase in
accounts receivable of ($1,417,575), an increase in inventories of ($1,516,282),
and an increase in accounts payable of $876,607. The 17.6% increase in accounts
receivable was primarily related to the timing of sales and related payments.
The 19.1% increase in inventories was primarily due to an increase in purchases
to meet increased shipment schedules for the second half of 1997. The Company's
backlog at May 31, 1997 was approximately $16 million, which is a 33% increase
over the backlog at November 30, 1996 of approximately $12,000,000; therefore, a
further increase in inventory is expected. The 39.4% increase in accounts
payable related primarily to an increase in inventory purchases described in the
previous sentence.
Net cash used in investing activities for the first half of 1997 was
$556,194. The Company incurred $547,393 in capital expenditures, of which
approximately $385,000 was for the construction and purchase of various lab
equipment to be used in research and development. The remaining expenditures of
approximately $162,000 relate primarily to the purchase of various production
and computer equipment.
Net cash provided by financing activities for the first half of 1997 was
$619,754. Cash used for financing activities included the principal repayment
of $343,116 of notes payable and capital lease obligations and the pay off of
the line of credit of $1,000,000. Cash provided by financing activities
included a $1,000,000 term loan to be used to purchase research and development
equipment (See Note 4 to the Consolidated Financial Statements). Additionally,
the Company received $962,870 from the exercise of stock options and warrants.
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The Company has extensive ongoing capital requirements for research and
development, the repayment of debt, capital equipment and inventory. The
Company believes that its current cash reserves, together with the funds
available under its line of credit, should be sufficient to meet its capital
requirements for the immediate future.
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, inventory, research and
development activities and expenditures 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.
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PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
The Company held its Annual Meeting of Shareholders on May 6, 1997. At
the meeting, the shareholders voted on the election of directors and proposed
amendments to the Company's 1995 Stock Incentive Plan.
Three directors were elected to the Board of Directors of the Company,
to serve until the next annual meeting of shareholders and until their
successors are duly elected and qualified, for the terms of office expiring at
the next annual meeting of shareholders: Ronald H. Deferrari, Anastasios S.
Gianoplus and Lubek Jastrzebski. No other director's term of office continued
after the meeting. A total of 10,452,678 votes were cast for Mr. Deferrari; a
total of 10,452,578 votes were cast for Mr. Gianoplus, and a total of 10,448,778
votes were cast for Dr. Jastrzebski. A total of 42,663 votes were withheld with
respect to the election of Mr. Deferrari, a total of 42,763 votes were withheld
with respect to the election of Mr. Gianoplus, and a total of 46,563 votes were
withheld with respect to the election of Dr. Jastrzebski.
The amendments to the Company's 1995 Stock Incentive Plan, which were
submitted to a vote of shareholders, amended the plan to increase the available
shares of Common Stock for issuance under the plan by 1,500,000, to increase the
maximum number of shares of Common Stock for which options may be granted under
the plan during any fiscal year to each optionee to 500,000 shares and to permit
members of the Stock Option Committee to receive discretionary, as well as
formula, option grants and awards under the plan. The proposal to amend the
1995 Stock Incentive Plan was approved by a total of 4,652,893 votes in favor of
the proposal. There were a total of 1,002,028 votes against, 100,839
abstentions and 4,273,339 broker non-votes with respect to this vote.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
4.8 The Company's 1995 Stock Incentive Plan, Amended and
Restated.
10.45 Loan Agreement dated April 18, 1997 between the
Company and NationsBank, N.A. (South) including
Credit Agreement, Security Agreement, Negative
Pledge Agreement, Third Amendment (to Amended and
Restated Revolving Credit Agreement) and First
Amendment (to Amended and Restated Security
Agreement), Term Promissory Note and Line of Credit
Note.
27. Financial Data Schedule (for SEC use only).
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the second quarter of
fiscal 1997.
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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: June 12, 1997 By: /s/ STACY WAGNER
--------------------------
Stacy Wagner
V.P. of Finance
Date: June 12, 1997 By: /s/ RONALD S. DEFERRARI
--------------------------
Ronald S. Deferrari
President, Chief Operating
Officer
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EXHIBIT INDEX
EXHIBIT METHOD OF FILING
4.8 The Company's 1995 Stock Incentive Plan, as Amended *
and Restated
10.45 Loan Agreement dated April 18, 1997 between the *
Company and NationsBank, N.A. (South) including
Credit Agreement, Security Agreement, Negative
Pledge Agreement, Third Amendment (to Amended and
Restated Revolving Credit Agreement) and First
Amendment (to Amended and Restated Security
Agreement), Term Promissory Note and Line of Credit Note
27. Financial Data Schedule (for SEC use only) *
* Filed electronically herewith.
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