-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HrVpm7s7fik7ENOCkq19dDMysoO3Fe7rPixlWnUT2ortxbk3WEnjhxzKKlsdWOis o9o0ebIoAIKi9GSrfePr2Q== 0000950147-97-000318.txt : 19970520 0000950147-97-000318.hdr.sgml : 19970520 ACCESSION NUMBER: 0000950147-97-000318 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970515 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CERPROBE CORP CENTRAL INDEX KEY: 0000725259 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC COMPONENTS, NEC [3679] IRS NUMBER: 860312814 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-11370 FILM NUMBER: 97607573 BUSINESS ADDRESS: STREET 1: 600 S ROCKFORD DR CITY: TEMPE STATE: AZ ZIP: 85281 BUSINESS PHONE: 6029677885 MAIL ADDRESS: STREET 1: 600 S ROCKFORD DR CITY: TEMPE STATE: AZ ZIP: 85281 10-Q 1 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 --------------- FORM 10-Q (Mark One) X Quarterly Report pursuant to Section 13 or 15(d) of the Securities - - Exchange Act of 1934 For the Quarter Ended March 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 0-11370 ------- CERPROBE CORPORATION (Exact name of registrant as specified in its charter) Delaware 86-0312814 ------------------------------- ---------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 600 South Rockford Drive, Tempe, Arizona 85281 - ---------------------------------------- ---------- (Address of principal executive offices) (Zip Code) (602) 967-7885 ---------------------------------------------------- (Registrant's telephone number, including area code) 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 and 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 ------- ------- As of May 5, 1997, there were 6,353,047 shares of the Registrant's common stock outstanding. CERPROBE CORPORATION QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1997 TABLE OF CONTENTS PART I - FINANCIAL INFORMATION Page ---- Item 1. Financial Statements: Condensed Consolidated Balance Sheets March 31, 1997 and December 31, 1996.......................3 Condensed Consolidated Statements of Operations - Three Months Ended March 31, 1997 and 1996.................4 Condensed Consolidated Statements of Cash Flows - Three Months Ended March 31, 1997 and 1996.................5 Notes to Condensed Consolidated Financial Statements.......7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.......................13 PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K..........................17 Signatures ..........................................................18 2 CERPROBE CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, December 31, ASSETS 1997 1996 ------------- -------------- (unaudited) Current assets: Cash and cash equivalents $ 1,840,106 $ 5,564,557 Accounts receivable, net of allowance of $238,883 in 1997 and $223,000 in 1996 8,212,331 5,564,203 Inventories, net 6,912,631 3,862,753 Note receivable - 250,000 Prepaid expenses 280,857 377,003 Income taxes receivable - 214,097 Deferred tax asset 216,776 202,476 ------------- -------------- Total current assets 17,462,701 16,035,089 ------------- -------------- Property, plant and equipment, net 12,834,862 11,446,291 Intangibles, net 2,582,009 2,602,812 Other assets 1,444,563 1,326,592 ------------- -------------- Total assets $ 34,324,135 $ 31,410,784 ============= ============== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 2,812,106 $ 2,739,064 Accrued expenses 3,601,024 1,600,120 Demand note payable 1,015,000 1,030,000 Current portion of notes payable 2,225,240 128,180 Current portion of capital leases 640,121 634,755 ------------- -------------- Total current liabilities 10,293,491 6,132,119 Notes payable, less current portion 1,077,670 278,645 Capital leases, less current portion 1,305,654 1,462,799 Deferred tax liability 15,422 - Other liabilities 421,858 394,011 ------------- -------------- Total liabilities 13,114,095 8,267,574 ------------- -------------- Minority interest - 12,851 ------------- -------------- Commitments and contingencies Stockholders' equity: Preferred stock, $.05 par value; authorized 10,000,000 shares; issued and outstanding 330 shares of Series A Convertible Preferred Stock, liquidation preference of $10,724 per share 16 16 Common stock, $.05 par value; authorized, 10,000,000 shares; issued and outstanding 6,353,047 shares at March 31, 1997 and 6,027,714 at December 31, 1996 317,652 301,386 Additional paid-in capital 23,654,606 20,652,290 Retained earnings (accumulated deficit) (2,788,959) 2,105,674 Foreign currency translation adjustment 26,725 70,993 ------------- -------------- Total stockholders' equity 21,210,040 23,130,359 ------------- -------------- Total liabilities and stockholders' equity $ 34,324,135 $ 31,410,784 ============= ==============
See accompanying notes to condensed consolidated financial statements. 3 CERPROBE CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended March 31, ----------------------------------- 1997 1996 ------------- ------------- Net Sales $ 15,899,092 $ 9,699,939 Costs of goods sold 9,394,372 5,172,951 ------------- ------------- Gross margin 6,504,720 4,526,988 ------------- ------------ Expenses: Selling, general and administrative 4,172,449 2,607,938 Engineering and product development 453,319 102,684 Acquisition related costs 6,164,156 - ------------- ------------- Total expenses 10,789,924 2,710,622 ------------- ------------- Operating income (loss) (4,285,204) 1,816,366 ------------- ------------- Other income (expense): Interest income 35,160 59,492 Interest expense (134,611) (58,856) Other income, net 58,891 40,858 ------------- ------------- Total other income (expense) (40,560) 41,494 ------------- ------------- Income (loss) before income taxes and minority interest (4,325,764) 1,857,860 Minority interest share of (income) loss (12,569) 25,361 ------------- ------------- Income (loss) before income taxes (4,338,333) 1,883,221 Provision for income taxes (556,300) (877,000) ------------- ------------- Net income (loss) $ (4,894,633) $ 1,006,221 ============= ============= Net income (loss) per common and common equivalent share: Primary $ (0.78) $ 0.20 ============= ============= Weighted average number of common and common equivalent shares outstanding 6,292,662 5,063,196 ============= ============= Fully diluted $ (0.78) $ 0.18 ============= ============= Weighted average number of common and common equivalent shares outstanding 6,292,662 5,645,349 ============= ============= See accompanying notes to condensed consolidated financial statements. 4 CERPROBE CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Three months ended March 31, ------------------------------- 1997 1996 ------------- ------------- Cash flows from operating activities: Net income (loss) $ (4,894,633) $ 1,006,221 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 772,390 404,138 Purchased research and development 5,664,156 - Loss on sale of fixed assets 426 - Deferred income taxes 92,041 135,465 Provision for losses on accounts receivable 6,000 3,000 Provision for obsolete inventory, net (20,868) 10,000 Compensation expense - 32,753 Income (loss) applicable to minority interest in consolidated subsidiaries 12,569 (25,361) Changes in operating assets and liabilities, net of effects of acquisitions: Accounts receivable (1,769,688) (1,690,705) Inventories 329,738 (369,828) Prepaid expenses 125,138 89,452 Other assets 17,670 130,547 Income taxes receivable 539,904 - Accounts payable and accrued expenses (491,751) 437,666 Accrued income taxes 113,490 741,536 Other liabilities 52,400 (14,358) ------------- ------------- Net cash provided by operating activities 548,982 890,526 ------------- ------------- Cash flows from investing activities: Purchase of property, plant and equipment (1,405,273) (1,555,329) Investment in CRPB Investors, L.L.C. (607) - Supplemental acquisition costs for CompuRoute (80,102) - Purchase of SVTR, net of cash acquired (2,565,697) - Proceeds from sale of equipment 717 - Decrease in notes receivable 250,000 - ------------- ------------- Net cash used in investing activities (3,800,962) (1,555,329) ------------- ------------- Cash flows from financing activities: Principal payments on notes payable and capital leases (582,535) (92,677) Net proceeds from issuance of convertible preferred stock - 9,400,000 Net proceeds from stock options exercised 154,332 144,616 ------------- ------------- Net cash provided by (used in) financing activities (428,203) 9,451,939 ------------- ------------- Effect of exchange rates on cash and cash equivalents (44,268) (13,978) ------------- ------------- Net increase (decrease) in cash and cash equivalents (3,724,451) 8,773,158 Cash and cash equivalents, beginning of period 5,564,557 263,681 ------------- ------------- Cash and cash equivalents, end of period $ 1,840,106 $ 9,036,839 ============= =============
See accompanying notes to condensed consolidated financial statements. 5 CERPROBE CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Supplemental schedule of noncash investing and financing activities: Conversion of subordinated debentures to common stock $ - $ 110,000 ------------- ------------- Conversion of preferred stock to common stock $ - $ 11,000 ------------- ------------- Equipment acquired under capital leases and issuances of notes payable $ 4,144 $ - ------------- ------------- Supplemental disclosures of cash flow information: Interest paid $ 134,611 $ 33,617 ------------- ------------- Income taxes paid $ 18,096 $ - ------------- ------------- Supplemental disclosures of noncash investing activities: The Company acquired Silicon Valley Test & Repair, Inc. for $5.7 million in the period ended March 31, 1997. The purchase price was allocated to the assets acquired and the liabilities assumed based on their fair values as indicated in the notes to the condensed consolidated financial statements. A summary of the acquisition is as follows: Purchase price $ 5,715,263 Less cash acquired (285,316) Common stock issued (2,864,250) ============= Cash invested $ 2,565,697 =============
See accompanying notes to condensed consolidated financial statements. 6 CERPROBE CORPORATION Notes to Condensed Consolidated Financial Statements (Unaudited) (1) Basis of Preparation The accompanying condensed consolidated financial statements as of March 31, 1997 and for the three months ended March 31, 1997 and March 31, 1996 are unaudited and reflect all adjustments (consisting only of normal recurring adjustments) which are, in the opinion of management, necessary for a fair presentation of financial position and operating results for the interim periods. The condensed consolidated balance sheet as of December 31, 1996 was derived from the audited consolidated financial statements at such date. Pursuant to accounting requirements of the Securities and Exchange Commission applicable to quarterly reports on Form 10-Q, the accompanying condensed consolidated financial statements and notes do not include all disclosures required by generally accepted accounting principles for complete financial statements. Accordingly, these statements should be read in conjunction with Cerprobe Corporation's (the "Company") annual financial statements and notes thereto included in the Company's Annual Report on Form 10-KSB for the year ended December 31, 1996. Results of operations for interim periods are not necessarily indicative of those to be achieved for full fiscal years. Principles of Consolidation The consolidated financial statements include the accounts of Cerprobe and its wholly-owned subsidiaries: CompuRoute, Inc. ("CompuRoute"), Cerprobe Europe Limited, and Cerprobe Asia Holdings PTE LTD. Cerprobe Asia Holdings PTE LTD together with Asian investors, formed Cerprobe Asia PTE LTD in 1995. Cerprobe Asia Holdings PTE LTD is a 70% owner of Cerprobe Asia PTE LTD. Cerprobe Asia PTE LTD created wholly-owned subsidiaries, Cerprobe Singapore PTE LTD and Cerprobe Taiwan Co. LTD, to operate full service sales and manufacturing plants. Singapore became operational in April of 1996 and Taiwan in January of 1997. All significant intercompany transactions have been eliminated in consolidation. On January 15, 1997, the Company acquired all of the outstanding stock of Silicon Valley Test & Repair, Inc. ("SVTR"), a company that refurbishes, reconfigures, and services wafer probing equipment. Accordingly, the condensed consolidated financial statements as of March 31, 1997 and for the three months ended March 31, 1997 include SVTR's activities since the date of acquisition. 7 CERPROBE CORPORATION Notes to Condensed Consolidated Financial Statements, Continued (2) Inventories Inventories consist of the following: March 31, December 31, 1997 1996 ------------ ------------ Raw materials $ 5,911,167 $ 3,328,422 Work-in-process 1,143,625 615,360 Finished goods 47,971 47,971 Reserve for obsolete inventory (190,132) (129,000) ------------ ------------ Total $ 6,912,631 $ 3,862,753 ============ ============ (3) Property, Plant and Equipment Property, plant and equipment consist of the following: March 31, December 31, 1997 1996 ------------ ------------ Land $ 364,017 $ 359,253 Building 1,973,704 1,947,877 Manufacturing tools and equipment 9,671,529 8,789,140 Office furniture and equipment 1,194,744 1,063,547 Leasehold improvements 1,307,230 l,112,576 Construction in progress 1,094,066 483,591 Computer hardware and software 2,609,851 2,402,551 Accumulated depreciation and amortization (5,380,279) (4,712,244) ------------ ------------ Total $ 12,834,862 $ 11,446,291 ============ ============ (4) Intangibles Goodwill from the acquisition of Fresh Test Technology and CompuRoute, is $2,120,505 and $969,235, respectively. 8 CERPROBE CORPORATION Notes to Condensed Consolidated Financial Statements, Continued (5) Related Party Transactions Effective May 1, 1991, the Company entered into an agreement with a former director and officer of the Company, whereby this officer left the employ of the Company and agreed not to compete with the Company for a two-year period. The agreement required the Company to pay $3,125 per month from May 1, 1991 through April 30, 1993 and to provide certain other benefits to this individual. This agreement was extended for an additional year, through April 30, 1994, and is presently on a month-to-month basis. Beginning July 1, 1997 the monthly payment will be reduced to $1,563 and the agreement will terminate on December 31, 1997, except for certain life insurance and health care benefits which will continue under the terms of the original agreement. (6) Commitments and Contingencies Convertible Preferred Stock If the holders of all outstanding shares of convertible preferred stock had elected to convert their shares on April 25, 1997, Cerprobe estimates that it would have been required to pay approximately $3,800,000 to have redeemed all shares of convertible preferred stock that, if converted, would have resulted in the issuance of more than 800,000 shares of common stock. Automatic conversion of the stock or redemption must occur by January 18, 1998. Upsys Cerprobe Corporation has entered into a joint venture with Upsys Reseau Eurisys, a French Company owned by IBM and GAME, a French test and engineering company. The joint venture, to be managed by Cerprobe, will assemble and repair the Cobra Probe in Arizona for distribution by Cerprobe throughout the U.S. and Asia. Cerprobe will own 55% of the joint venture and Upsys will own 45%. It is expected that the joint venture will be operational by the end of the second quarter 1997. (7) Acquisitions CompuRoute, Inc. On December 27, 1996, the Company acquired all of the outstanding stock of CompuRoute, Inc., a manufacturer of printed circuit boards, for $7,037,797. The purchase price consisted of $4,437,797 in cash and 400,000 shares of common stock. 9 CERPROBE CORPORATION Notes to Condensed Consolidated Financial Statements, Continued The acquisition has been accounted for by the purchase method of accounting. Accordingly, the purchase price has been allocated to the assets acquired and the liabilities assumed based upon the fair value at the date of acquisition. The excess of the purchase price over the fair value of the net assets acquired was $969,235 and has been recorded as goodwill, which is being amortized on a straight-line basis over eight years. The results of operations of CompuRoute are included in the Company's financial statements since the date of acquisition. At acquisition, the state of the research and development products was not yet at a technologically or commercially viable stage. The Company did not believe that the research and development products had any future alternative use because if these products were not finished and brought to ultimate product completion, they would have no other value. Therefore, consistent with generally accepted accounting principles, the Company recorded a one-time charge of $4,584,000 on December 27, 1996 for the full value of the purchased in-process research and development. Silicon Valley Test & Repair, Inc. On January 15, 1997, the Company acquired all of the outstanding stock of SVTR. The purchase price paid by the Company consisted of $2,753,217 in cash and 300,000 shares of Cerprobe common stock. Under the terms of the acquisition, the Company has agreed to pay up to an additional $500,000 in cash and up to 50,000 additional shares of common stock if certain sales and operating profit targets for calendar year 1997 are achieved by SVTR. The acquisition has been accounted for using the purchase method. Accordingly, the purchase price has been allocated to assets acquired and liabilities assumed based upon their estimated fair values at the date of acquisition. The purchase price of $5,617,467 plus acquisition costs of $97,796 was allocated as follows. Purchase price: Cash $2,753,217 Common stock 2,864,250 Costs of acquisition 97,796 ---------- $5,715,263 ========== 10 CERPROBE CORPORATION Notes to Condensed Consolidated Financial Statements, Continued Assets acquired and liabilities assumed: Current assets $4,979,145 Property, plant and equipment 651,781 Other assets 185,007 Purchased research and development 5,664,156 Current liabilities (4,795,473) Noncurrent liabilities (969,353) ----------- $5,715,263 =========== At acquisition, the state of the research and development products was not yet at a technologically or commercially viable stage. The Company does not believe that the research and development products have any future alternative use because if these products are not finished and brought to ultimate product completion, they have no other value. Therefore, consistent with generally accepted accounting principles, the Company recorded a one-time charge of $5,664,156 on January 15, 1997 for the full value of the purchased research and development. Pro forma Results The following summary, prepared on a pro forma basis, excluding the charges for purchased research and development, presents the results of operations as if the acquisitions of CompuRoute and SVTR had occurred January 1, 1996: Three months ended March 31, -------------------------- 1997 1996 -------------------------- (unaudited) Net sales $15,952,472 $17,057,166 Net income $ 629,456 $ 1,374,443 Primary net income per share $ .10 $ .24 Fully diluted net income per share $ .10 $ .22 The pro forma results are not necessarily indicative of what the actual consolidated results of operations might have been if the acquisitions had been effective at the beginning of 1996 or as a projection of future results. 11 CERPROBE CORPORATION Notes to Condensed Consolidated Financial Statements, Continued (8) Recent Accounting Pronouncements In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, "Earnings per Share" (statement 12B). This Statement establishes standards for computing and presenting earnings per share ("EPS"), and supersedes APB Opinion No. 15. The Statement replaces primary EPS with basic EPS and requires dual presentation of basic and diluted EPS. The Statement is effective for both interim and annual periods ending after December 15, 1997. Earlier application is not permitted. After adoption, all prior-period EPS data shall be restated to conform to statement 128. Basic and diluted EPS, as calculated under statement No. 128 would have been ($.78) and ($.78) for the fiscal three months ended March 31, 1997. 12 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Introduction and General Development of Business Cerprobe was incorporated in California in 1976 and reincorporated in Delaware in May 1987. The Company designs, manufactures, markets, and services high performance products and equipment for use in the testing of integrated circuits ("ICs") for the semiconductor industry. Cerprobe's products and services enable semiconductor manufacturers to test the integrity of their ICs during the batch fabrication stage of the manufacturing process used in manufacturing ICs in wafer form. The Company has grown substantially over the last three years as the Company has benefited from the substantial growth in the worldwide demand for ICs. Net sales have increased from $14.3 million for 1994, to $26.1 million for 1995, and to $37.3 million for 1996. Similarly, the Company's net income has increased from $1.2 million for 1994, to $2.4 million for 1995, and to $3.2 million for 1996 (before a one-time charge for purchased in-process research and development of $4.6 million, resulting in a net loss of $1.4 million). This growth resulted primarily from internal product development and strategies. However, the Company also benefited from its acquisition in April 1995 of Fresh Test Technology Corporation, whose complementary products contributed approximately $4.0 million to 1995 net sales, approximately $7.0 million to 1996 net sales, and approximately $1.7 million to net sales for the first three months of 1997. To further expand its semiconductor test product and service offerings, Cerprobe acquired CompuRoute, Inc. ("CompuRoute"), a company engaged in the design, manufacture, and marketing of complex, multilayer printed circuit boards ("PCBs") primarily for use in semiconductor testing applications, in December 1996 and Silicon Valley Test & Repair, Inc. ("SVTR"), a company that refurbishes, reconfigures, and services wafer probers, in January 1997. Together, these recent acquisitions contributed approximately $4.0 million to net sales for the first three months of 1997. The Company believes that it is positioned to continue its growth as a result of its strength in designing, producing, and delivering, on a timely and cost-efficient basis, a broad range of custom or customized, high quality test products and services for semiconductor manufacturers in the U.S., Europe, and Asia. The Company maintains regional full service facilities in Arizona, California, and Texas as well as sales offices in Oregon, Colorado, Florida, and Massachusetts to service the U.S. market for its products and services. The Company maintains a full service facility in Scotland to serve the European market, and opened full service facilities in Singapore and Taiwan in April 1996 and January 1997, respectively, to serve the Southeast Asia market. Each of the Company's facilities is located in proximity to semiconductor manufacturing centers. 13 Results of Operations Three Months Ended March 31, 1997 Compared to Three Months Ended March 31, 1996. Net sales for the three months ended March 31, 1997 were $15,899,092 an increase of 64% over net sales of $9,699,939 for the three months ended March 31, 1996. This increase in net sales is a result of Cerprobe's two recent acquisitions, higher order rates for Cerprobe's probe card and interface products, and increased sales from Cerprobe's international operations. For the three months ended March 31, 1997, the gross margin was $6,504,720, an increase of 44% over the gross margin of $4,526,988 for the same period in 1996. Gross margin as a percentage of sales decreased from 47% for the three months ended March 31, 1996 to 41% for the same period in 1997. The decrease in gross margin, as a percentage of sales, is primarily a result of a change in product mix due to the recent acquisitions. Approximately 25% of net sales within the period were attributed to ATE test boards from the Company's CompuRoute subsidiary and wafer prober products and services from the Company's SVTR subsidiary. Both product lines currently have lower gross margins than the Company's core products of probe cards and ATE interfaces. Selling, general and administrative expenses were $4,172,449 for the three months ended March 31, 1997 as compared to $2,607,938 for the same period in 1996, an increase of 60%. The increase in selling, general and administrative expenses resulted primarily from the two recent acquisitions, and the continued domestic and international facilities expansion. Of the increase, $946,490, or 60%, was attributable to CompuRoute and SVTR. Engineering and product development expenses were $453,319 for the three months ended March 31, 1997, an increase of 341% over $102,684 for the same period in 1996. This increase resulted from Cerprobe's continued emphasis on engineering and product development in an effort to anticipate and address technological advances in semiconductor testing as well as Cerprobe's recent acquisitions. Of the increase approximately $189,457, or 54%, was attributable to CompuRoute and SVTR. Acquisition related costs totaled $6,164,156 and are related to the acquisition of SVTR on January 15, 1997. The acquisition was accounted for using the purchase method. Accordingly, the purchase price was allocated to the assets acquired and the liabilities assumed based upon their estimated fair values. The value of the purchased research and development in connection with the acquisition was $5,664,156. The current state of the research and development products/processes is not yet at a technologically feasible or commercially viable stage. Cerprobe does not believe that the research and development products/processes have any future alternative use because if they are not finished and brought to ultimate product or process completion they have no value. Therefore, consistent with generally accepted accounting principles, Cerprobe took a one-time charge for the full value of the purchased research and development. The remaining $500,000 of acquisition related costs is the estimated cost to move SVTR's manufacturing operations to Arizona during 1997. Interest income was $35,160 for the three months ended March 31, 1997 as compared to $59,492 for the same period in 1996. The decrease was a result of utilizing in the fourth quarter of 1996 14 and in the first quarter of 1997, the net proceeds of the Convertible Preferred Stock offering in the CompuRoute and SVTR acquisitions, respectively. Interest expense was $134,611 for the three months ended March 31, 1997 as compared to $58,856 for the same period in 1996, an increase of 129%. The majority of the 1997 increase in interest expense was due to the debt acquired in the acquisition of CompuRoute and SVTR. The minority interest from Asian operations of $12,569, as of March 31, 1997, represents the Company's joint venture partners' share (30%) of the income from Cerprobe Asia PTE LTD. The provision for income taxes was $556,300, which represents an effective tax rate of 42%, excluding the acquisition costs of $6,164,156, for the three months ended March 31, 1997, versus $877,000, which represents an effective rate of 47% for 1996. The decreased effective tax rate, as adjusted for 1997, was from the benefit of CompuRoute's net operating loss carryforward of $140,000 and partial use of previous nondeductible losses from foreign subsidiaries. Net loss for the three months ended March 31, 1997 was $4,894,633, a decrease in net income of $5,900,854, or 586%, from the net income of $1,006,221 for the same period in 1996. This decrease is primarily due to the recording of approximately $500,000 of costs associated with the relocation of SVTR's manufacturing operations and the write-off of the purchased research and development of $5,664,156 from the SVTR acquisition. Excluding the acquisition related expenses, net income for the three months ended March 31, 1997 would have been $1,069,523 or 7% of net sales as compared to 10% of net sales for the three months ended March 31, 1996. Liquidity and Capital Resources Cerprobe has financed its operations and capital requirements primarily through cash flow from operations, equipment lease financing arrangements, and sales of equity securities. In January 1996, Cerprobe completed a private placement of Convertible Preferred Stock, which raised net proceeds of $9,400,000. The net proceeds have been used in domestic and international expansion and acquisition of companies and/or technologies. At March 31, 1997, cash and cash equivalents were $1,840,106, compared to $5,564,557 at December 31, 1996. Cerprobe generated $548,982 in cash flow from operating activities for the three months ended March 31, 1997. Accounts receivable increased by $2,648,128, or 48%, to $8,212,331 at March 31, 1997. Of this increase, $884,440 resulted from the acquisition of SVTR and $1,769,688 resulted from an increase in net sales. This was offset by a $6,000 increase in the provision for losses on accounts receivable. Inventories increased $3,049,878, or 79%, over December 31, 1996 to $6,912,631 at March 31, 1997. The increase resulted primarily from the acquisition of SVTR. Both accounts receivable days outstanding and inventory turns improved during the three months ended March 31, 1997 as compared to the same period in 1996. Accounts payable and accrued expenses increased $2,073,946, or 48%, to $6,413,130 at March 31, 1997. The increase resulted primarily from the acquisition of SVTR. The current portions of notes payable and capital leases increased to $2,865,361 at March 31, 1997 from $762,935 at December 31, 1996, primarily as a result of Cerprobe's recent acquisition of SVTR. 15 Working capital decreased $2,733,760, or 28%, to $7,169,210 at March 31, 1997 from December 31, 1996. The current ratio decreased from 2.6 to 1 at December 31, 1996 to 1.7 to 1 at March 31, 1997. These decreases were due to the use of the net proceeds from the private placement of the Convertible Preferred Stock in the two recent acquisitions. The acquisition of CompuRoute and SVTR used $4,437,797 and $2,753,217 respectively. Cerprobe increased its investment in property, plant, and equipment during the three months ended March 31, 1997 by $1,388,571, or 12%, to $12,834,862. This increase was attributable to the acquisition of SVTR and the Company's efforts to expand capacity to meet customer demand for its products. These capital expenditures were funded from cash flow from operations and proceeds from the private placement of the Convertible Preferred Stock. Long-term debt, comprised of the non-current portions of notes payable and capital leases, increased $641,880, or 37%, to $2,383,324, primarily as a result of the acquisition of SVTR. If the holders of all outstanding shares of Convertible Preferred Stock had elected to convert their shares on April 25, 1997, Cerprobe estimates that it would have been required to pay approximately $3.8 million to have redeemed all shares of Convertible Preferred Stock, that if converted, would have resulted in the issuance of more than 800,000 shares of Cerprobe common stock. Redemption or automatic conversion must occur on or before January 18, 1998. In February 1997, Cerprobe entered into a $10,000,000 unsecured revolving line of credit, which matures August 15, 1998, with its primary lender, Wells Fargo Bank. Advances under the revolving line may be made as prime rate advances, which accrue interest payable monthly, at the Bank's prime lending rate, or as LIBOR rate advances, which bear interest at 175 basis points in excess of the LIBOR base rate. Cerprobe believes that its working capital, together with the loan commitments described above and anticipated cash flow from operations, will provide adequate sources to fund operations for at least the next 12 months. Cerprobe anticipates that any additional cash requirements as the result of operations or capital expenditures will be financed through cash flow from operations, by borrowing from Cerprobe's primary lender, by lease financing arrangements, or by sales of equity securities. "Safe Harbor" Statement Under the Private Securities Litigation Reform Act of 1995 Statements in this section regarding the Company's prospects for continued growth and the adequacy of sources of capital are forward-looking statements. Words such as "adequate," "believes," and "anticipates," also identify forward-looking statements. Actual results, however, could differ materially from those anticipated for a number of reasons, including product demand and development, technological advancements, impact of competitive products and pricing, growth in targeted markets and other factors identified under "Special Considerations" of the Company's 1996 Form 10-KSB as filed with the Securities and Exchange Commission, as well as those reasons identified in the Company's 1997 press releases. 16 PART II - OTHER INFORMATION Item 2 Changes in Securities a. Not applicable. b. Not applicable. c. Pursuant to a private placement under Section 4(2) of the Securities Act of 1933, on January 15, 1997, the Company issued 300,000 shares of Cerprobe common stock to William E. Mayer and Carol Mayer, husband and wife, in connection with the merger of SVTR with and into a subsidiary of the Company. Item 6 Exhibits and Reports on Form 8-K a. Exhibits (27) Financial Data Schedule. (11) Statement regarding computation of net earnings (loss) per share. b. Reports on Form 8-K Form 8-K, filed on January 15, 1997, to report the acquisition of Silicon Valley Test & Repair, Inc. Form 8-K/A, filed on March 31, 1997, amends Form 8-K filed on January 15, 1997 reporting the acquisition of Silicon Valley Test & Repair. The following financial statements were filed with the Form 8-K/A: SVTR's Audited Financial Statements as of December 31, 1996 Unaudited Pro Forma Combined Condensed Balance Sheet as of December 31, 1996. Unaudited Pro Forma Combined Condensed Statement of Operations for the year ended December 31, 1996. Notes to Unaudited Pro Forma Combined Condensed Financial Statements. 17 Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has caused this report to be signed on its behalf by the undersigning thereunto duly authorized. CERPROBE CORPORATION /s/Randal L. Buness ---------------------------------------- Randal L. Buness Vice President - Chief Financial Officer May 15, 1997 18 EX-11 2 COMPUTATION OF NET EARNINGS (LOSS) PER SHARE Cerprobe Corporation Computation of Net Earnings (Loss) Per Share Exhibit 11 (Unaudited)
Three Months Ended March 31, ---------------------------------------- 1997 1996 ----------------- ----------------- Net income (loss) $ (4,894,633) $ 1,006,221 ================= ================= Weighted average common shares outstanding 6,292,662 4,152,588 Common equivalent shares: Shares issuable upon exercise of stock options (1) 0 309,145 Convertible preferred stock 0 601,463 ----------------- ----------------- Total weighted average shares-primary 6,292,662 5,063,196 ----------------- ----------------- Fully diluted incremental shares: Stock options (calculated using the higher of end of period or average market value) 0 2,374 Convertible subordinated debentures 0 579,779 ----------------- ----------------- Total weighted average shares-fully diluted 6,292,662 5,645,349 ----------------- ----------------- Primary net income per common and common equivalent share $ (0.78) $ 0.20 ----------------- ----------------- Fully diluted net income per common and common equivalent share $ (0.78) $ 0.18 ----------------- -----------------
(1) Amount calculated under the treasury stock method and fair market values for stock EX-27 3 FINANCIAL DATA SCHEDULE
5 This Schedule contains summary financial information extracted from the Condensed Consolidated Balance Sheet at March 31, 1997 and the Condensed Consolidated Statements of Operations and is qualified in its entirety by reference to such financial statements. 1 U.S. DOLLARS 3-MOS DEC-31-1997 JAN-01-1997 MAR-31-1997 1 1,840,106 0 8,451,214 238,883 6,912,631 17,462,701 18,218,100 5,383,238 34,324,135 10,293,491 2,383,324 16 0 317,652 20,892,372 34,324,135 15,899,092 15,899,092 9,394,372 14,020,140 6,298,767 0 134,611 (4,325,764) 556,300 (4,894,633) 0 0 0 (4,894,633) (0.78) (0.78)
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