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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended August 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________________ to __________________
Commission File Number 0-12353
PLASMA-THERM, INC.
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(Exact name of registrant as specified in its charter)
Florida 04-2554632
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(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
10050 16th Street North, St. Petersburg, Florida 33716
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(Address of principal executive offices and zip code)
(813) 577-4999
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Registrant's telephone number, including area code
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(Former name, former address and former fiscal year, if changed since last
report)
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
----- -----
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Sections 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes No
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS:
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
Outstanding at September 10, 1997:
11,100,061
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Page 1 OF 16 Pages
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INDEX
PAGE
NUMBER
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PART 1. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Balance Sheets - August 31, 1997 and
November 30, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Statements of Income - Three Months and Nine Months Ended
August 31, 1997 and August 31, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Statements of Cash Flows - Nine Months Ended
August 31, 1997 and August 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 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
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PLASMA-THERM, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
AUGUST 31, NOVEMBER 30,
ASSETS 1997 1996
------------ -----------
(UNAUDITED)
Current assets
Cash and cash equivalents $ 7,485,960 $ 5,266,279
Accounts receivable 12,698,691 8,046,130
Prepaid income taxes 234,906 94,233
Inventories 9,769,489 7,958,620
Prepaid expenses and other 291,174 232,650
Deferred tax asset 313,489 388,313
------------ ------------
Total current assets 30,793,709 21,986,225
------------ ------------
Property, plant and equipment
Building 4,444,649 4,394,649
Machinery and equipment 6,939,275 6,026,387
Leasehold improvements 148,055 142,915
------------ ------------
11,531,979 10,563,951
Less accumulated depreciation and
amortization 3,000,086 2,155,143
------------ ------------
8,531,893 8,408,808
Land 786,017 786,017
------------ ------------
9,317,910 9,194,825
------------ ------------
Other assets 255,083 294,126
------------ ------------
$ 40,366,702 $ 31,475,176
============ ============
See accompanying notes to these consolidated financial statements.
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PLASMA-THERM, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
AUGUST 31, NOVEMBER 30,
LIABILITIES 1997 1996
------------ -------------
Current liabilities
Short-term borrowings $ 3,000,000 $ 1,000,000
Current portion of notes payable 628,150 443,946
Current maturities of obligations under
capital leases 87,417 80,955
Accounts payable 3,584,384 2,223,826
Accrued payroll and related 818,996 676,674
Accrued expenses 507,710 414,094
Accrued warranty reserve 655,000 610,000
Customer deposits 150,000 218,000
------------ ------------
Total current liabilities 9,431,657 5,667,495
------------ ------------
Long-term obligations
Notes payable 3,763,096 3,431,475
Obligations under capital leases 91,099 157,519
------------ ------------
3,854,195 3,588,994
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SHAREHOLDERS' EQUITY
Shareholders' equity
Common stock
$.01 par value
Authorized - 25,000,000 shares
Issued and outstanding - 11,100,061
shares - 1997 and 10,396,061 shares -
1996 111,002 103,962
Additional paid-in capital 16,513,381 14,897,446
Retained earnings 10,456,467 7,217,279
------------ ------------
27,080,850 22,218,687
------------ ------------
$ 40,366,702 $ 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 NINE MONTHS ENDED
AUGUST 31, AUGUST 31,
------------------------- -------------------------
1997 1996 1997 1996
----------- ---------- ----------- -----------
Net sales $12,423,261 $9,622,781 $32,145,375 $27,404,581
----------- ---------- ----------- -----------
Costs and expenses
Cost of products sold 7,255,530 5,732,189 18,795,244 16,857,224
Research and development 1,020,622 744,113 2,716,257 2,079,689
Selling and administrative 2,023,988 1,769,385 5,274,694 4,559,038
Interest expense 141,890 113,312 326,627 221,462
Interest and capital gain income (85,826) (66,490) (268,049) (201,694)
Other expense, net (1,928) (9,909) 27,122 14,450
----------- ---------- ----------- -----------
10,354,276 8,282,600 26,871,895 23,530,169
----------- ---------- ----------- -----------
Income before income taxes 2,068,985 1,340,181 5,273,480 3,874,412
Income taxes 826,933 490,368 2,034,292 1,486,174
----------- ---------- ----------- -----------
Net income $ 1,242,052 $ 849,813 $ 3,239,188 $ 2,388,238
=========== ========== =========== ===========
Income per share
(primary and fully diluted) $ 0.11 $ 0.08 $ 0.29 $ 0.22
=========== ========== =========== ===========
See accompanying notes to these consolidated financial statements.
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PLASMA-THERM, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
NINE MONTHS ENDED AUGUST 31,
-------------------------------
1997 1996
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Cash flows from operating activities
Net income $3,239,188 $2,388,238
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation and amortization 1,314,768 554,156
Loss on disposal of assets 37,185 16,066
Deferred taxes 74,824 366,105
Compensation - stock options 7,311 31,032
Changes in assets and liabilities
(Increase) decrease in accounts receivable (4,652,561) 1,253,133
(Increase) decrease in income tax deposits 188,786 (24,516)
(inclusive of tax benefits derived from
exercise of options/warrants)
Increase in inventories (1,810,869) (1,923,353)
Increase in prepaid expenses and other (58,524) (584,911)
Increase (decrease) in accounts payable 1,360,558 (1,025,367)
Increase in accrued payroll and related 142,322 8,927
Increase (decrease) in accrued expenses 93,616 (148,368)
Increase in accrued warranty reserve 45,000 -
Increase in income taxes payable - 1,808
Decrease in customer deposits (68,000) -
----------- ----------
Net cash provided by (used in)
operating activities (86,396) 912,950
----------- ----------
Cash flows from investing activities
Capital expenditures (1,430,038) (3,573,030)
Payments received on note receivable - 45,000
Proceeds from sale of assets - 10,116
Other (5,957) (8,200)
----------- ----------
Net cash used in investing
activities (1,435,995) (3,526,114)
----------- ----------
See accompanying notes to these consolidated financial statements.
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PLASMA-THERM, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
(UNAUDITED)
NINE MONTHS ENDED AUGUST 31,
-----------------------------
1997 1996
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Cash flows from financing activities
Proceeds from issuance of notes payable 1,000,000 3,118,900
Principal payments on notes payable (484,175) (342,836)
Principal payments under capital lease obligations (59,958) (54,074)
Net issuances under line of credit agreements 2,000,000 -
Proceeds from exercise of stock options
and warrants 1,286,205 163,670
----------- -----------
Net cash provided by
financing activities 3,742,072 2,885,660
----------- -----------
Net increase in cash and
cash equivalents 2,219,681 272,496
----------- -----------
Cash and cash equivalents, beginning of period 5,266,279 5,058,718
----------- -----------
Cash and cash equivalents, end of period $ 7,485,960 $ 5,331,214
=========== ===========
See accompanying notes to these consolidated financial statements.
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PLASMA-THERM, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 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 August 31, 1997 and November 30, 1996 and the
results of operations and cash flows for the nine months ended August
31, 1997 and 1996.
The results of operations for the nine months ended August 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.
NOTE 3 INVENTORIES
Inventories consist of the following:
August 31, November 30,
------------- -------------
1997 1996
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Raw materials $ 6,897,398 $ 6,085,531
Work-in-process 2,292,337 1,835,722
Finished goods 579,754 37,367
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$ 9,769,489 $ 7,958,620
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NOTE 4 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 August 31,
--------------------------------------------
1997 1996
--------------- ---------------
Primary 11,155,358 10,828,856
Fully Diluted 11,325,636 10,850,732
Nine Months Ended August 31,
---------------------------------------------
1997 1996
--------------- ---------------
Primary 11,338,561 10,724,165
Fully Diluted 11,418,420 10,832,280
NOTE 5 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 August 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 August 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.
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NOTE 6 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 of the stock option committee
to receive discretionary, as well as formula, option grants and awards
under the plan.
NOTE 7 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 $12,423,261 for the third quarter of 1997 increased by 29%
from net sales of $9,622,781 for the third quarter of 1996. For the first nine
months of 1997, the Company reported net sales of $32,145,375, which was 17%
higher than net sales of $27,404,581 for the first nine months of 1996. The
increase in net sales for both the third quarter and first nine months 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 third quarter of 1997 and 1996 were $8,456,025 (68% of net
sales) and $5,473,875 (57% of net sales), respectively. Total sales related to
these products in the first nine months of 1997 and 1996 were $19,569,959 (61%
of net sales) and $12,849,197 (47% of net sales), respectively.
Cost of products sold of $7,255,530 for the third quarter of 1997 was
58% of net sales, compared to $5,732,189 for the third quarter of 1996 which was
60% of net sales. Cost of products sold of $18,795,244 for the first nine months
of 1997 was 58% of net sales, compared to $16,857,224 for the first nine months
of 1996 which was 62% of net sales. The decrease in cost of products sold as a
percentage of net sales for the third quarter and first nine months of 1997 was
due to increased sales of the new product lines described in the previous
paragraph which have higher margins than the Company's other product lines.
Research and development expense for the third quarter of 1997 and 1996
was $1,020,622 and $744,113, respectively, which was 8.2% and 7.7% of net sales,
respectively. Research and development expense for the first nine months of
1997 and 1996 was $2,716,257 and $2,079,689, respectively, which was 8.4% and
7.6% 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 $2,023,988 for the third quarter
of 1997, up from $1,769,385 for the third quarter of 1996 which was 16.3% and
18.4% of net sales, respectively. Selling and administrative expense for the
first nine months of 1997 was $5,274,694, up from $4,559,038 for the first nine
months of 1996 which was 16.4% and 16.6% of net sales, respectively. The total
dollar increase in selling and administrative expense for the third quarter and
first nine months of 1997 relate primarily to the marketing initiatives which
began in the second quarter of 1997 and have resulted in higher expenditures
associated with payroll, travel, conventions, and advertising. As a percentage
of net sales, total expenditures
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have decreased for the quarter and first nine months of 1997 over 1996. This is
the result of certain overhead expenditures increasing at a lower rate than the
increase in sales.
Income before income taxes for the third quarter of 1997 was $2,068,985,
an increase of $728,804 from $1,340,181 earned the third quarter of 1996. Net
income per share was $.11 for the third quarter of 1997, an increase of $.03
from $.08 for the third quarter of 1996. Income before income taxes for the
first nine months of 1997 was $5,273,480, an increase of $1,399,068 from
$3,874,412 earned the first nine months of 1996. Net income per share was $.29
for the first nine months of 1997, an increase of $.07 from $.22 for the first
nine months of 1996. The primary reasons for the increase for both the third
quarter and first nine months of 1997 relate to increased net sales with higher
margins as described in the previous paragraphs.
FINANCIAL POSITION, LIQUIDITY AND CAPITAL REQUIREMENTS
Working capital at August 31, 1997 was $21,362,052 which is an increase
of $5,043,322 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 nine months of 1997. See the
following discussion of material changes in assets and liabilities from November
30, 1996 to August 31, 1997 which further supplements this commentary on working
capital.
Net cash used in operating activities in the first nine months of 1997
was ($86,396). The net use of cash of ($86,396) consisted of various components,
including net income in the first nine months of 1997 of $3,239,188 which is a
source of cash, increased by depreciation and amortization (which are noncash
expenses) totaling $1,314,768, an increase in accounts receivable of
($4,652,561) which is a use of cash, an increase in inventories of ($1,810,869)
which is a use of cash, and an increase in accounts payable of $1,360,558 which
is a source of cash. The 58% increase in accounts receivable was primarily
related to the timing of sales and related payments, in addition to increased
revenue over the prior year discussed in a previous paragraph. The 23% increase
in inventories was primarily due to an increase in purchases to meet increased
shipment schedules for the remaining quarter of 1997 and first quarter of 1998.
The Company's backlog at August 31, 1997 was approximately $19,000,000 million,
which is a 58% increase over the backlog at November 30, 1996 of approximately
$12,000,000; therefore, a further increase in inventory is expected. The 61%
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 nine months of 1997
was $1,435,995. The Company incurred $1,430,038 in capital expenditures, of
which approximately $1,248,000 was for the construction and purchase of various
lab equipment to be used in research and development. The remaining
expenditures of approximately $182,000 relate primarily to the purchase of
various production and computer equipment.
Net cash provided by financing activities for the first nine months of
1997 was $3,742,072. Cash used for financing activities included the principal
repayment of $544,133 of notes payable and capital lease obligations. Cash
provided by financing activities included a
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$1,000,000 term loan to be used to purchase research and development equipment
(See Note 4 to the Consolidated Financial Statements) and net receipts on the
line of credit of $2,000,000. Additionally, the Company received $1,286,205 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. 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 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
10.46 License Agreement Amendment dated August 2, 1997
between the Registrant and Robert Bosch GmbH
27 Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the third 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: September 10, 1997 By: /s/ STACY WAGNER
------------------------------------
Stacy Wagner
V.P. of Finance and Administration,
Controller
Date: September 10, 1997 By: /s/ RONALD S. DEFERRARI
------------------------------------
Ronald S. Deferrari
President, Chief Operating Officer
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EXHIBIT INDEX
EXHIBIT METHOD OF FILING
10.46 License Agreement Amendment dated August 2, 1997
between the Registrant and Robert Bosch GmbH *
27. Financial Data Schedule (for SEC use only) *
* Filed electronically herewith.
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