UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTER ENDED MARCH 31, 1999 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File No. 0-26274 INTEGRATED MEASUREMENT SYSTEMS, INC. (Exact name of registrant as specified in its charter) OREGON 93-0840631 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 9525 S.W. GEMINI DRIVE, BEAVERTON, OR 97008 (Address of principal executive offices) (zip code) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (503) 626-7117 NO CHANGE 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 --- --- At April 27, 1999, there were 7,460,241 shares of Integrated Measurement Systems, Inc. common stock, $0.01 par value, outstanding. (Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.) INTEGRATED MEASUREMENT SYSTEMS, INC. INDEX TO FORM 10-Q PAGE NUMBER ----------- PART 1 FINANCIAL INFORMATION Item 1. Financial Statements Statements of Income for the three months ended March 31, 1999 and 1998 3 Balance Sheets as of March 31, 1999 and December 31, 1998 4 Statements of Cash Flows for the three months ended March 31, 1999 and 1998 5 Notes to the Financial Statements 6-7 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition 8-11 PART II OTHER INFORMATION Item 2. Changes in Securities. 12 Item 6. Exhibits and Reports on Form 8-K. 12 SIGNATURES 13 2 PART 1. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS INTEGRATED MEASUREMENTS SYSTEMS, INC. AND SUBSIDIARIES STATEMENTS OF INCOME (In thousands, except net income per share) (Unaudited) Three Months Ended March 31, 1999 1998 ---- ---- SALES: Systems $ 7,548 $ 4,958 Software 1,363 1,295 Service 2,311 2,239 --------- -------- NET SALES 11,222 8,492 --------- -------- COST OF SALES: Systems 3,274 1,729 Software 152 145 Service 1,005 971 --------- -------- Total cost of sales 4,431 2,845 --------- -------- GROSS MARGIN 6,791 5,647 OPERATING EXPENSES: Research, development and engineering 1,928 1,744 Selling, general and administrative 4,333 4,049 --------- -------- Total operating expenses 6,261 5,793 --------- -------- OPERATING INCOME (LOSS) 530 (146) Other income, net 128 218 --------- -------- Income before income taxes 658 72 Provision for income taxes 224 24 --------- -------- NET INCOME $ 434 $ 48 --------- -------- --------- -------- BASIC EARNINGS PER SHARE $ 0.06 $ 0.01 --------- -------- --------- -------- DILUTED EARNINGS PER SHARE $ 0.06 $ 0.01 --------- -------- --------- -------- Weighted average number of common shares outstanding for basic earnings per share 7,448 7,535 Incremental shares from assumed conversion of employee stock options 290 187 --------- -------- Adjusted weighted average shares for diluted earnings per share 7,738 7,722 --------- -------- --------- -------- SEE ACCOMPANYING NOTES TO UNAUDITED FINANCIAL STATEMENTS 3 INTEGRATED MEASUREMENT SYSTEMS, INC. AND SUBSIDIARIES BALANCE SHEETS (In thousands, except per share data) As of As of March 31, December 31, 1999 1998 ---- ---- (Unaudited) ASSETS CURRENT ASSETS: Cash and cash equivalents $ 6,596 $ 3,379 Short-term investments 5,508 7,630 Trade receivables, less allowance for doubtful accounts of $413 and $413 13,159 13,977 Inventories, net 15,414 14,943 Deferred income taxes 1,453 1,453 Prepaid expenses and other current assets 2,678 2,381 --------- -------- Total current assets 44,808 43,763 PROPERTY, PLANT AND EQUIPMENT, NET 11,006 11,063 SERVICE SPARE PARTS, NET 3,478 3,692 SOFTWARE DEVELOPMENT COSTS, NET 3,545 3,457 DEFERRED INCOME TAXES 219 219 OTHER ASSETS, NET 1,123 1,220 --------- -------- Total assets $ 64,179 $ 63,414 --------- -------- --------- -------- LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 1,466 $ 1,828 Payable to Cadence, net 415 506 Accrued compensation 1,549 1,718 Accrued warranty 450 296 Deferred revenue 2,924 2,008 Other current liabilities 818 1,408 Income taxes payable 531 197 Capital lease obligations - current 336 394 --------- -------- Total current liabilities 8,489 8,355 CAPITAL LEASE OBLIGATIONS, NET OF CURRENT PORTION 325 363 DEFERRED COMPENSATION 1,161 1,154 SHAREHOLDERS' EQUITY: Preferred stock, $.01 par value, authorized 10,000,000 shares; none issued and outstanding - - Common stock, $.01 par value, authorized 15,000,000 shares; issued and outstanding 7,460,116 and 7,425,951 75 74 Additional paid-in capital 39,705 39,478 Retained earnings 14,424 13,990 --------- -------- Total shareholders' equity 54,204 53,542 --------- -------- Total liabilities and shareholders' equity $ 64,179 $ 63,414 --------- -------- --------- -------- SEE ACCOMPANYING NOTES TO UNAUDITED FINANCIAL STATEMENTS. 4 INTEGRATED MEASUREMENT SYSTEMS, INC. AND SUBSIDIARIES STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) Three Months Ended March 31, 1999 1998 ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 434 $ 48 Adjustments to reconcile net income to cash provided by (used in) operating activities: Depreciation and amortization 1,410 961 Provision for deferred income taxes -- 82 Deferred compensation 7 102 Decrease (increase) in trade receivables 818 (1,446) Increase in inventories (471) (1,713) (Increase) decrease in other current assets (274) 186 Increase in deferred revenue 916 817 Decrease in accounts payable and accrued liabilities (724) (13) ---------- --------- Net cash provided by (used in) operating activities 2,116 (976) ---------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Sale of short-term investments 2,122 -- Purchases of short-term investments -- (5,729) Purchases of equipment & service spare parts (699) (1,245) Software development costs (454) (527) ---------- --------- Net cash provided by (used in) investing activities 969 (7,501) ---------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Principal payments under capital leases (96) (33) Proceeds from employee stock plans 228 236 ---------- --------- Net cash provided by financing activities 132 203 ---------- --------- Net increase (decrease) in cash and cash equivalents 3,217 (8,274) Beginning cash and cash equivalents balance 3,379 17,464 ---------- --------- Ending cash and cash equivalents balance $ 6,596 $ 9,190 ---------- --------- ---------- --------- SUPPLEMENTAL SCHEDULE OF NON-CASH FINANCING ACTIVITIES: Tax benefit from Cadence and IMS stock options $ -- $ 510 ---------- --------- ---------- --------- OTHER SUPPLEMENTAL CASH FLOW DISCLOSURES: Income taxes refunded (paid) $ 103 $ (56) ---------- --------- ---------- --------- Interest paid $ (14) $ (6) ---------- --------- ---------- --------- SEE ACCOMPANYING NOTES TO UNAUDITED FINANCIAL STATEMENTS. 5 INTEGRATED MEASUREMENT SYSTEMS, INC. NOTES TO THE FINANCIAL STATEMENTS (In thousands, except share data) (Unaudited) (1) BASIS OF PRESENTATION The interim financial statements included herein have been prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the management of the Company believes that the disclosures are adequate to make the information presented not misleading. Interim financial statements are by necessity somewhat tentative; judgments are used to estimate interim amounts for items that are normally determinable only on an annual basis. The financial information as of December 31, 1998 is derived from the Company's audited financial statements. The interim period information presented herein includes normally recurring adjustments, which are, in the opinion of the management of the Company, only necessary for a fair statement of the results of the respective interim periods. Results of operations for interim periods are not necessarily indicative of results to be expected for an entire year. (2) INVENTORIES Inventories, consisting principally of computer hardware, electronic sub-assemblies and test equipment, are valued at the lower of cost (first-in, first-out) or market. Costs used for inventory valuation purposes include material, labor and manufacturing overhead. March 31, December 31, 1999 1998 --------- ------------ Raw materials. . . . . . . . . . . . . $ 9,562 $ 9,265 Work-in-progress . . . . . . . . . . . 2,143 2,608 Finished goods . . . . . . . . . . . . 3,709 3070 --------- --------- $ 15,414 $ 14,943 --------- --------- --------- --------- (3 ) EARNINGS PER SHARE Earnings per share amounts presented in the accompanying Statements of Income have been calculated in accordance with Statement of Accounting Standards No. 128, "Earnings per Share." For the three month periods ended March 31, 1999 and 1998, 278,125 and 94,750 outstanding common stock options, respectively, were not included in the computation of diluted earnings per share because the options' exercise prices were greater than the average market price of the common stock. 6 (4) SEGMENT DISCLOSURES Disclosures about the Company's business segments, as required by SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information," are as follows: FOR THE THREE MONTHS ENDED MARCH 31, 1999 ----------------------------------------- TEST SYSTEMS VIRTUAL TEST CONSOLIDATED ------------ ------------ ------------ Segment net sales $ 10,259 $ 963 $ 11,222 Segment operating income (loss) $ 644 $ (114) $ 530 FOR THE THREE MONTHS ENDED MARCH 31, 1998 ----------------------------------------- TEST SYSTEMS VIRTUAL TEST CONSOLIDATED ------------ ------------ ------------ Segment net sales $ 7,336 $ 1,156 $ 8,492 Segment operating income (loss) $ (97) $ (49) $ (146) (5) NEW ACCOUNTING PRONOUNCEMENTS In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS 133 establishes accounting and reporting standards for all derivative instruments. SFAS 133 is effective for fiscal years beginning after June 15, 1999. The Company does not have any derivative instruments and, accordingly, the adoption of SFAS 133 is not expected to impact the Company's financial position or results of operations. 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (All numerical references are in thousands, except for percentages and per share data) THE FOLLOWING DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTION WITH THE COMPANY'S FINANCIAL STATEMENTS AND THE NOTES THERETO INCLUDED ELSEWHERE IN THIS QUARTERLY REPORT, AS WELL AS THE COMPANY'S FINANCIAL STATEMENTS AND THE NOTES THERETO, AND THE MANAGEMENT DISCUSSION AND ANALYSIS PRESENTED IN THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1998. THIS QUARTERLY REPORT, INCLUDING THE FOLLOWING DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONTAINS CERTAIN STATEMENTS, TREND ANALYSIS AND OTHER INFORMATION THAT CONSTITUTE "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995, AS AMENDED, WHICH MAY INVOLVE RISKS AND UNCERTAINTIES. SUCH FORWARD LOOKING STATEMENTS INCLUDE, BUT ARE NOT LIMITED TO, STATEMENTS INCLUDING THE WORDS "ANTICIPATE," "BELIEVE," "PLAN," "ESTIMATE," "EXPECT," "INTEND" AND OTHER SIMILAR EXPRESSIONS. THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE DISCUSSED HEREIN DUE TO NUMEROUS FACTORS INCLUDING, BUT NOT LIMITED TO, THOSE DISCUSSED IN THE FOLLOWING DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, AS WELL AS THOSE DISCUSSED ELSEWHERE HEREIN AND IN THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1998. RESULTS OF OPERATIONS NET SALES Net sales is comprised of systems sales (including sales of engineering Test Stations), software sales (including Test Station software and Virtual Test Software) and service sales, which consists primarily of revenue derived from maintenance and consulting contracts. Net sales of $11,222 for the three months ended March 31, 1999 reflected an increase of $2,730 or 32% from the first quarter of 1998. The improvement in net sales reflects increased capital spending by several of the Company's customers, particularly Intel. International sales increased to 20% versus 12% of net sales for the three months ended March 31, 1999 and 1998, respectively. In the first quarter of 1999 sales to customers in the Asia-Pacific region were slightly lower while European sales were significantly improved over the same period in 1998. Shipments of the new Vanguard Test Station accounted for 23% of net sales. Sales to Intel comprised 45% of first quarter 1999 sales compared to 11% of sales for the same quarter in 1998. Sales to National Semiconductor accounted for 24% of first quarter 1999 net sales. GROSS MARGIN The Company's gross margin of $6,791 in the first quarter of 1999 represents an increase of 20% from $5,647 for the same period of 1998, as a direct result of the increase in net sales discussed above. As a percentage of net sales, gross margin decreased to 61% for the three months ended March 31, 1999 from 66% for the three months ended March 31, 1998. The year-to-year decrease in gross margin percent is due to several factors. The Company experienced increased price pressure for its XTS/ATS Test Station products, resulting in higher discounts on these older products than in the past. Second, product warranty costs increased following an increase in the standard warranty period offered to customers from 90 days to one year, and in some instances two years. Third, the Company realized increased costs from inventory scrap and obsolescence resulting both from new product scrap that generally occurs at the beginning of a product's life cycle, and increased obsolescence exposure associated with last time buys of proprietary parts for older generation products. The Company expects the increased warranty, inventory scrap and obsolescence costs to continue to similarly impact gross margins during the remainder of 1999. Management believes that the higher margin new products, Vanguard, Orion and Digital Virtual Tester, will constitute a greater percentage of total revenues in future quarters, and therefore the gross margin percentage is expected to improve from first quarter levels during the remainder of 1999. 8 OPERATING EXPENSES Research, development and engineering (R&D) expenses increased to $1,928 for the three months ended March 31, 1999 from $1,744 for the first quarter of 1998. R&D expenses amounted to 17% of net sales in the three months ended March 31, 1999, compared to 21% in the three months ended March 31, 1998. The increase in R&D expenses in absolute dollar terms reflects spending on R&D activities related to the development of the orion memory test station products following the acquisition of performic in September, 1998. Also contributing to the increase was a reduction in the amount capitalized for software development costs in the first quarter of 1999 to $454 from $527 in the first quarter of 1998. The decrease in R&D expenses as a percentage of net sales was directly attributable to the increase in net sales discussed above. Selling, general and administrative (SG&A) expenses of $4,333 for the first quarter of 1999 were 7% higher than the same quarter in 1998. As a percentage of net sales, SG&A expenses decreased to 39% in the three months ended March 31, 1999 from 48% in the three months ended March 31, 1998. The increase in the dollar amount of SG&A expenses was the direct result of the Company's efforts to establish direct sales efforts in Japan and Europe, partially offset by expense reductions associated with the Company's restructuring implemented in the last half of 1998. The decrease in SG&A expenses as a percent of net sales resulted directly from the increase in net sales discussed above. OTHER INCOME, NET Other income, net, decreased to $128 in the three months ended March 31, 1999, from $218 in the quarter ended March 31, 1997. This decrease reflects less interest income earned as a result of lower average cash and short-term investment balances. INCOME TAXES The Company's effective tax rate was 34% for the three-month period ended March 31, 1999 and 35% for the three months ended March 31, 1998. The Company's income tax position combines the effects of available tax benefits in certain countries where the Company does business, benefits for available net operating loss carryforwards, and tax expense for subsidiaries with pre-tax income. The Company's effective tax rate is sensitive to the geographic and product mix of the Company's net sales, and therefore could be higher or lower in the future depending upon actual net sales realized. NET INCOME As a result of the various factors discussed above, net income for the first quarter of 1999 increased to $434 or $0.06 per share compared to $48 or $0.01 per share for the corresponding period in 1998. FUTURE OPERATING RESULTS Results of operations for the periods discussed above should not be considered indicative of the results to be expected in any future period, and fluctuations in operating results may also result in fluctuations in the market price of the Company's common stock. Like most high technology and high growth companies, the Company faces certain business risks that could have adverse effects on the Company's results of operations. Sales of the Company's products to Intel and a limited number of other customers are expected to continue to account for a high percentage of net sales over the foreseeable future. Any sudden reduction or loss of orders from Intel or any other major customer would have a material adverse effect on the Company's financial condition and results of operations. Like most high technology and high growth companies, the Company faces certain other business risks that could have adverse effects on the Company's results of operations, including, but not limited to the following. The Company is 9 dependent on high-dollar customer orders, deriving a substantial portion of its net sales from the sale of Test Stations which typically range in price from $0.5 million to $1.5 million per unit and may be priced as high as $2.0 million or more for a single unit. A substantial amount of the Company's net sales are typically realized in the last few days of each quarter. During 1997 and 1998, the Company's quarterly net sales were negatively impacted by customer decisions to delay or cancel plans to place orders for the Company's Test Station products in the last few days of the quarter. The timing and sales price of a single order can have a significant impact on the Company's net sales and results of operations for a particular period. The Company's net sales and results of operations may be negatively impacted if an order is received too late in a given period to permit product shipment and the recognition of revenue during that period. A significant portion of the Company's operating expenses are relatively fixed and planned expenditures are based, in part, on anticipated orders. In addition, the need for continued expenditures for research, development and engineering makes it difficult to reduce expenses in a particular quarter if the Company's sales goals for that quarter are not met. The inability to reduce the Company's expenses quickly enough to compensate for any revenue shortfall would magnify the adverse impact of any revenue shortfall on the Company's results of operations. The Company purchases some key components from sole or single source vendors, for which alternative sources are not readily available. A few of these suppliers are small independent companies and could expose the Company to increased risk of temporary shortages for certain key components. The Company's future operating results and financial condition are also subject to influences driven by rapid technological changes, a highly competitive industry, a lengthy sales cycle, and the cyclical nature of general economic conditions. Future operating results will depend on many factors, including demand for the Company's products, the introduction of new products by the Company and by its competitors, industry acceptance of Virtual Test software, the level and timing of available shippable orders and backlog, the duration and severity of the economic downturn in Asia, and the business risks discussed above. There can be no assurance that the Company's net sales will grow or that such growth will be sustained in future periods or that the Company will remain profitable in any future period. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS The Company's exposure to market risk for changes in interest rates relates primarily to its investment portfolio. The Company mitigates its risk by diversifying its investments among high credit quality securities in accordance with the Company's investment policy. Interest expense is affected by the general level of U.S. interest rates and/or LIBOR. Increases in interest expense resulting from an increase in interest rates would be offset by a corresponding increase in interest earned on the Company's investments. The Euro is the functional currency of the Company's subsidiaries in France, Germany and Switzerland. The Yen is the functional currency of the Company's subsidiary in Japan. The Company does not currently enter into foreign exchange forward contracts to hedge certain balance sheet exposures and intercompany balances against future movements in foreign exchange rates. The Company does maintain cash balances denominated in currencies other than the U.S. Dollar in order to meet minimum operating requirements of its foreign subsidiaries. If foreign exchange rates were to weaken against the U.S. Dollar, the Company believes that the fair value of these foreign currency amounts would decline by an immaterial amount. YEAR 2000 The Company has developed its Year 2000 Readiness Plan including steps to review, test and implement corrective measures for the Company's products and information systems. In addition, the Company has identified its most critical vendors and suppliers, and is collecting sufficient information from each of them to monitor their Year 2000 readiness. To-date, the Company has completed testing of its currently offered products. Based on these tests, the Company believes them to be free of any problems associated with the Year 2000. The Company has tested selected earlier-version products for Year 2000 readiness, and believes them to be free of any problems associated with the Year 2000. The Company will continue to selectively perform Year 2000 readiness testing on specific customer configurations as requested during the next several quarters. Based upon testing to-date, the Company does not believe additional product testing will result in the discovery of any materially adverse Year 2000 readiness issues. The Company has completed review of its Year 2000 readiness with respect to its information systems. The review has not identified any significant information systems Year 2000 issues beyond those that will be corrected through implementation of previously planned systems upgrades. Vendors for the Company's information systems have represented those systems, with the planned upgrades, to be Year 2000 compliant. The Company plans to test those systems for Year 2000 Readiness as the upgrades are implemented and expects to complete such testing by June 30, 1999. The Company estimates the costs in 1998, including payments to third parties and estimates of internal costs, for developing and implementing its Year 2000 readiness plan were less than $200,000. The Company expects 10 additional implementation costs in 1999 to be less than $300,000. Costs incurred during the first quarter of 1999 were not significant. The Company has not developed a most reasonably likely worst case scenario. However, it is developing contingency plans in the event mission-critical third-party vendors or other significant third parties fail to adequately address Year 2000 issues. Such plans principally involve identifying alternative vendors or, in the extreme, adding inventory safety stocks. There can be no assurance that any such plans will fully mitigate any such failures or problems. In addition, there are mission-critical third parties, such as utilities, transportation and telecommunication companies where alternative arrangements or sources are limited or unavailable. LIQUIDITY AND CAPITAL RESOURCES As of March 31, 1999, the Company's principal sources of liquidity consisted of cash and short-term investments of approximately $12.1 million, and funds available under an existing bank line of credit of $10.0 million. The Company's operating activities generated cash during the three months ended March 31, 1999 of $2.1 million, compared to using cash of $976 for the same period last year. This improvement in operating cash flows was primarily attributable to increased collections of trade receivables, especially from customers granted extended payment terms during 1998. The Company's trade receivables decreased to $13.2 million at March 31,1999 from $14.0 million at December 31, 1998, in part as a result of collections from customers in accordance with extended payment terms granted during 1998. Inventories increased by 3% during the first quarter of 1999 to $15.4 million at March 31, 1999, compared to $14.9 million at December 31, 1998. The increase is due to the procurement of inventory materials for Vanguard and Orion Test Stations in anticipation of planned increases in shipment volumes later in 1999. Deferred revenue increased to $2.9 million at March 31, 1999 compared to $2.0 million at December 31, 1998. This increase reflects the normal seasonal increase in renewals of annual maintenance contracts by customers. During the first quarter of 1999, the Company continued to invest in equipment and capitalized software development costs. Payments for purchases of equipment amounted to $699, while capitalization of software development costs amounted to $454. The Company believes that cash on hand, short-term investments, and cash generated from operations, as well as cash available from the Company's existing $10.0 million short-term line of credit, will be sufficient to meet the Company's working capital and other cash requirements for at least the next twelve months. Management is continually evaluating opportunities to develop and introduce new products, and to acquire complementary businesses or technologies. At present, the Company has no understandings, commitments or agreements with respect to any such opportunities. Any transactions resulting from such opportunities, if consummated, may necessitate funding from other sources. There can be no assurance that such funding will be available or that, if available, such funding will be obtainable on terms favorable to the company. 11 PART II OTHER INFORMATION ITEM 2. CHANGES IN SECURITIES During the quarter ended March 31, 1999, the Company made no sales of securities that were not registered under the Securities Act of 1933. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits (exhibit reference numbers refer to Item 601 of Regulation S-K) 27. Financial Data Schedule (b) Reports on Form 8-K: No report on Form 8-K was filed during the quarter ended March 31, 1999. 12 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 on May 14, 1999. INTEGRATED MEASUREMENT SYSTEMS, INC. (Registrant) /s/ FRED HALL ------------------------------------- Fred Hall Chief Financial Officer (on behalf of the Registrant and as Principal Financial Officer) 13