-----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, M27FjkjLbpSQGwEUa185QHs1TbrfX9cAQDIRHQwMASASyqD4qcAZolyc5gkELWQf YnROIsgggnZHH3S84Itohg== 0000950153-00-000738.txt : 20000515 0000950153-00-000738.hdr.sgml : 20000515 ACCESSION NUMBER: 0000950153-00-000738 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000512 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: SEC FILE NUMBER: 000-11370 FILM NUMBER: 629108 BUSINESS ADDRESS: STREET 1: 1150 NORTH FIESTA BLVD CITY: GILBERT STATE: AZ ZIP: 85233-2237 BUSINESS PHONE: 4803331500 MAIL ADDRESS: STREET 1: 600 S ROCKFORD DR CITY: TEMPE STATE: AZ ZIP: 85281 10-Q 1 10-Q 1 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 2000 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) 1150 NORTH FIESTA BOULEVARD, GILBERT, ARIZONA 85233 (Address of principal executive offices) (Zip Code) (480) 333-1500 (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 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, 2000, there were 9,426,353 shares of the registrant's Common Stock outstanding. 2 CERPROBE CORPORATION QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2000 TABLE OF CONTENTS
Page PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS Condensed Consolidated Balance Sheets - March 31, 2000 and December 31, 1999 ........................... 3 Condensed Consolidated Statements of Operations - Three Months Ended March 31, 2000 and 1999 ..................... 4 Condensed Consolidated Statements of Cash Flows - Three Months Ended March 31, 2000 and 1999 ..................... 5 Notes to Condensed Consolidated Financial Statements ........... 6 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ............................ 11 ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK ..... 15 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS .............................................. 16 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K ............................... 16 SIGNATURE .............................................................. 17
2 3 CERPROBE CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 31, DECEMBER 31, ASSETS 2000 1999 ------------ ------------ (unaudited) Current assets: Cash $ 3,878,332 $ 3,484,045 Accounts receivable, net of allowance of $411,642 in 2000 and $397,763 in 1999 16,478,219 12,313,053 Inventories, net 10,189,229 9,728,500 Accrued interest receivable 34,915 22,157 Prepaid expenses 1,088,662 1,107,378 Income taxes receivable 4,941,493 4,041,140 Deferred tax asset 786,339 2,123,609 ------------ ------------ Total current assets 37,397,189 32,819,882 Property, plant, and equipment, net 23,301,596 23,537,021 Intangible assets, net 25,358,709 26,334,157 Other assets 615,052 676,485 ------------ ------------ Total assets $ 86,672,546 $ 83,367,545 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 4,489,408 $ 3,687,143 Accrued expenses 5,169,717 5,584,724 Current portion of notes payable 12,555,792 10,334,878 Current portion of capital lease obligations 939,429 954,957 Net liabilities of discontinued operations 511,887 446,629 ------------ ------------ Total current liabilities 23,666,233 21,008,331 Notes payable, less current portion 5,090,293 5,200,034 Capital lease obligations, less current portion 2,431,545 2,454,637 Deferred tax and other liabilities 440,785 472,158 ------------ ------------ Total liabilities 31,628,856 29,135,160 ------------ ------------ Minority interest 1,302,748 1,115,545 Commitments and contingencies -- -- Stockholders' equity: Preferred stock, $.05 par value; authorized 10,000,000 shares; issued and outstanding none -- -- Common stock, $.05 par value; authorized 25,000,000 shares; issued 9,867,245 and outstanding 9,422,853 shares at March 31, 2000 and issued 9,863,245 and outstanding 9,419,052 shares at December 31, 1999 493,362 493,162 Additional paid-in capital 67,866,504 67,830,701 Retained deficit (8,559,116) (9,074,938) Accumulated other comprehensive loss: Foreign currency translation (248,255) (236,534) ------------ ------------ 59,552,495 59,012,391 Treasury stock, at cost, 444,393 shares at March 31, 2000 and 444,193 shares at December 31, 1999 (5,029,529) (5,027,278) Notes receivable from related parties (782,024) (868,273) ------------ ------------ Total stockholders' equity 53,740,942 53,116,840 ------------ ------------ Total liabilities and stockholders' equity $ 86,672,546 $ 83,367,545 ============ ============
See accompanying notes to condensed consolidated financial statements. 3 4 CERPROBE CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, ------------------------------- 2000 1999 ------------ ------------ Net sales $ 26,777,418 $ 15,605,894 Costs of goods sold 15,883,166 10,045,546 ------------ ------------ Gross profit 10,894,252 5,560,348 ------------ ------------ Expenses: Selling, general, and administrative 7,077,101 4,300,210 Engineering and product development 1,055,097 798,264 Goodwill amortization 947,633 127,221 ------------ ------------ Total expenses 9,079,831 5,225,695 ------------ ------------ Operating income 1,814,421 334,653 ------------ ------------ Other income (expense): Interest income 91,883 229,410 Interest expense (546,219) (90,486) Other, net 166,248 (39,631) ------------ ------------ Total other income (expense) (288,088) 99,293 ------------ ------------ Income from continuing operations before minority interest and income taxes 1,526,333 433,946 Minority interest (206,581) (66,302) ------------ ------------ Income from continuing operations before income taxes 1,319,752 367,644 Income tax (803,930) (217,289) ------------ ------------ Income from continuing operations 515,822 150,355 Discontinued operations: Loss from operations of SVTR, Inc., net of taxes -- (5,322) ------------ ------------ Net income $ 515,822 $ 145,033 ============ ============ Net income per common share: Basic: Net income per common share $ 0.05 $ 0.02 ============ ============ Weighted average number of common shares outstanding 9,419,755 7,655,304 ============ ============ Diluted: Net income per common share $ 0.05 $ 0.02 ============ ============ Weighted average number of common and common equivalent shares outstanding 9,733,103 8,049,086 ============ ============
See accompanying notes to condensed consolidated financial statements. 4 5 CERPROBE CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
THREE MONTHS ENDED MARCH 31, ----------------------------- 2000 1999 ----------- ----------- Cash flows from operating activities: Income from continuing operations $ 515,822 $ 150,355 Adjustments to reconcile net income from continuing operations to net cash provided by (used in) continuing operations: Depreciation and amortization 2,537,798 1,355,681 Gain on sale of equipment (1,106) -- Deferred income taxes 1,305,897 (250,178) Provision for losses on accounts receivable 16,340 4,000 Provision for obsolete inventory 55,500 180,000 Income applicable to minority interest 206,581 66,302 Changes in working capital of continuing operations Accounts receivable (4,181,506) (148,374) Inventories (516,229) (73,133) Prepaid expenses and other assets 47,602 (340,741) Income taxes receivable (783,220) (430,060) Accounts payable and accrued expenses 387,258 104,151 Other liabilities -- (2,527) ----------- ----------- Net cash provided by (used in) continuing operations (409,263) 615,476 ----------- ----------- Net cash provided by (used in) discontinued operations (51,875) 568,603 ----------- ----------- Net cash provided by (used in) operating activities (461,138) 1,184,079 ----------- ----------- Cash flows from investing activities: Purchase of property, plant, and equipment (1,326,925) (2,798,676) Redemption of investment securities -- 1,273,247 Investment in CRPB Investors, L.L.C 19,789 8,584 Proceeds from sale of equipment 1,106 -- Payment of notes receivable 86,249 -- ----------- ----------- Net cash used in investing activities (1,219,781) (1,516,845) ----------- ----------- Cash flows from financing activities: Issuance of notes payable 3,226,945 3,000,000 Payments on notes payable (1,154,392) (429,502) Net proceeds from exercise of stock options 33,752 144,725 ----------- ----------- Net cash provided by financing activities 2,106,305 2,715,223 ----------- ----------- Effect of exchange rates on cash (31,099) (284,428) ----------- ----------- Net increase in cash 394,287 2,098,029 Cash, beginning of period 3,484,045 4,753,696 ----------- ----------- Cash, end of period $ 3,878,332 $ 6,851,725 =========== =========== Supplemental disclosures of cash flow information from continuing operations: Interest paid $ 546,219 $ 90,486 =========== =========== Income taxes paid $ 421,050 $ 99,000 =========== ===========
See accompanying notes to condensed consolidated financial statements. 5 6 CERPROBE CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (1) BASIS OF PREPARATION The accompanying condensed consolidated financial statements as of March 31, 2000 and for the three months ended March 31, 2000 and 1999 are unaudited, but reflect all adjustments (consisting only of normal recurring adjustments) that 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, 1999 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 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-K for the year ended December 31, 1999. Results of operations for interim periods are not necessarily indicative of those to be achieved for full fiscal years. PRINCIPLES OF CONSOLIDATION The condensed consolidated financial statements include the accounts of Cerprobe Corporation and its subsidiaries: Cerprobe Europe Limited, Cerprobe Europe S.A.S., Cerprobe Asia Holdings Pte Ltd, Cerprobe Interconnect Solutions, Inc. ("CIS"), SVTR, Inc. ("SVTR"), Cerprobe Japan Co., Ltd, and OZ Technologies, Inc. ("OZ"). All significant intercompany transactions have been eliminated in consolidation. Cerprobe Asia Holdings Pte Ltd is a 60% owner of Cerprobe Asia Pte Ltd; the balance is owned by Asian investors. Cerprobe Asia Pte Ltd's wholly owned subsidiaries, Cerprobe Singapore Pte Ltd and Cerprobe Taiwan Co., Ltd., operate full service sales and manufacturing plants. In the third quarter of 1998, the Company discontinued operations of SVTR, a company that refurbished, reconfigured, and serviced wafer probing equipment. See Note 4. In March 1999, the Company formed Cerprobe Japan Co., Ltd. to operate a sales and distribution facility in Yokohama, Japan. In December 1999, the Company acquired California-based OZ Technologies, Inc. Accordingly, the consolidated financial statements as of December 31, 1999 and for the year ended December 31, 1999 include OZ's activities since the date of acquisition. See Note 5. In March 2000, the Company merged OZ and CIS into Cerprobe Corporation. As a result, OZ and CIS are not considered separate legal entities. 6 7 RECLASSIFICATIONS Certain amounts in the 1999 financial statements have been reclassified to conform with the 2000 presentation. (2) COMMITMENTS AND CONTINGENCIES In October 1998, the Company filed an action against the former President, Director, and shareholder of Silicon Valley Test & Repair, Inc., which was acquired by the Company by way of merger into its wholly-owned subsidiary, SVTR, Inc., in January 1997. The suit seeks rescission of the acquisition and/or monetary damages arising from failure of the defendants to disclose material facts regarding the origins of certain software necessary for SVTR, Inc.'s business. In February 1999, the defendants filed a counter claim against the Company alleging conversion, interference with contractual relations, unfair business practices, breach of contract, and specific performance allegedly arising from the Company's actions to preclude the defendants from selling the Company stock received by defendants as part of the purchase price of Silicon Valley Test & Repair, Inc.; the Company seeks to recover this stock and the balance of the purchase price through its claims for rescission. In March 1999, the Company and SVTR filed an amended complaint. The defendants have responded and the action is proceeding to trial. While the Company intends to vigorously prosecute this action, it is impossible to predict the outcome of this or any other litigation. It is not anticipated that the suit will have a material adverse impact on the Company's financial condition or results of operations. The Company is involved in other legal actions arising in the ordinary course of business. In the opinion of management, the disposition of these actions would not have a material adverse effect on the Company. (3) COMPREHENSIVE INCOME (LOSS) Comprehensive income (loss) encompasses net income and "other comprehensive loss", which includes all other non-owner transactions and events which change stockholders' equity. The Company recognized comprehensive income (loss) for the three months ended March 31, 2000 and 1999 as follows:
Three Months Ended March 31, --------------------------- 2000 1999 ---------- ----------- Net income $ 515,822 $ 145,033 Other comprehensive loss, net of tax benefit: Foreign currency translation adjustment (19,535) (345,300) Tax benefit from foreign currency translation 7,814 138,120 ---------- ------------ Net other comprehensive loss (11,721) (207,180) ---------- ----------- Comprehensive income (loss) $ 504,101 $ (62,147) ========== ===========
7 8 (4) DISCONTINUED OPERATIONS In the third quarter of 1998, the Company discontinued operations of SVTR, a wafer prober refurbishing and upgrading subsidiary. The discontinuance resulted from questions regarding the origins of certain software necessary for SVTR's business. SVTR has been accounted for as a discontinued operation and, accordingly, its results of operations and financial position are segregated for all periods presented in the accompanying consolidated financial statements. Net sales, related losses, and income taxes associated with the discontinued operations are as follows:
Three Months Ended March 31, 1999 -------------- Net sales $ - -------------- Loss from operations $ (8,869) Income tax benefit 3,547 -------------- Loss from operations, net $ (5,322) ==============
The effective tax rate used in calculating the income tax benefit from discontinued operations is approximately the same as the Company's effective tax rate for continuing operations. The net liabilities of SVTR, as reclassified in the accompanying consolidated balance sheets, include the following:
March 31, 2000 December 31, 1999 -------------- ----------------- Current assets $ 381,396 $ 554,585 Other assets 41,855 63,011 Current liabilities (221,919) (289,358) Long-term debt (2,095) (5,286) Other long-term liabilities (711,124) (769,581) -------------- ----------------- $ (511,887) $ (446,629) ============== =================
(5) ACQUISITIONS In December 1999, the Company acquired all of the outstanding stock of OZ a manufacturer of systems solutions for IC package testing and a leading designer and producer of high performance test sockets and contactors, for $36 million. OZ also designs and distributes ATE test boards and burn-in interfaces and systems. The purchase price consisted of $19 million in cash, notes payable of $5.6 million, and 1.5 million shares of the Company's Common Stock. The acquisition has been accounted for as a purchase and, accordingly, the purchase price has been allocated to the assets acquired and the liabilities assumed based upon the estimated fair values at the date of acquisition. As a result of the acquisition, $8.8 million of in-process research and development was charged to operations. Goodwill of $21.2 million is being amortized on a straight-line basis over seven years and $1.0 million of assembled workforce is being amortized over four years. The purchase price of $36 million plus acquisition costs of $1.9 million was allocated as follows: 8 9 Purchase price: Cash $ 19,000,000 Note payable 5,630,000 Common Stock and additional paid in capital 11,338,000 Costs of acquisition 1,900,000 ============= $ 37,868,000 ============= Assets acquired and liabilities assumed: Current assets $ 8,945,021 Property, plant, and equipment 1,822,749 Other assets 87,209 In-process research and development 8,815,000 Goodwill and assembled workforce 22,192,955 Current liabilities (3,994,934) ------------- $ 37,868,000 =============
At acquisition, the state of the research and development products was not yet at a technological or commercially viable state. 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 charge for the full value of the in-process research and development. The condensed consolidated balance sheets as of March 31, 2000 and December 31, 1999 include the accounts of OZ and results of operations since the date of acquisition. The following summary, prepared on a pro forma basis, excluding the charge for in-process research and development, present the results of operations as if the acquisition had occurred on January 1, 1999.
Three months ended March 31, 1999 ------------------ (unaudited) Net sales $22,035,000 Net loss (97,000) Basic net loss per share (0.01) Diluted net loss per share (0.01)
The pro forma results are not necessarily indicative of what the actual consolidated results of operations might have been if the acquisition had been effective at the beginning of 1999 or as a projection of future results. (6) RELATED PARTY TRANSACTIONS In August 1999, the Company and certain of its Directors and Officers entered into Secured Promissory Notes and Stock Pledge Agreements, which totaled $841,465. The purpose of the loans was to exercise stock options scheduled to expire. Interest on the notes is at 6% per annum with note maturities in August 2002. The notes are fully recourse to the borrowers and are also collateralized by Cerprobe Corporation Common Stock beneficially owned by the borrowers. As of March 31, 2000, the balance on the notes was $782,024. 9 10 (7) SEGMENT INFORMATION The Company operates principally in one industry segment: the design, development, manufacture, and marketing of semiconductor integrated circuit test products and services. The Company's principal customers are North American, European, and Asian semiconductor manufacturing companies. One of the Company's customers exceeded 10% of net sales. This customer accounted for 19.0% and 19.2% of net sales for the three months ended March 31, 2000 and 1999, respectively. The accounts receivable from the customer were $3,238,532 and $893,638 at March 31, 2000 and 1999, respectively. International sales represented 26.4% and 20.6% of the Company's net sales for the three months ended March 31, 2000 and 1999, respectively. The following is a summary of the Company's geographic operations for the three months ended March 31:
NORTH AMERICA EUROPE & ASIA ELIMINATIONS CONSOLIDATED ------------- ------------- -------------- ------------- 2000 Customer sales $ 19,706,514 $ 7,070,904 $ - $ 26,777,418 Intercompany sales 439,023 1,247,910 (1,686,933) - ------------- ------------- -------------- ------------- Total sales $ 20,145,537 $ 8,318,814 $ (1,686,933) $ 26,777,418 ============= ============= ============== ============= Long-lived assets $ 58,610,510 $ 3,318,690 $ (12,653,844) $ 49,275,356 ============= ============= ============== ============= 1999 Customer sales $ 12,394,182 $ 3,211,710 $ - $ 15,605,892 Intercompany sales 93,927 592,272 (686,199) - ------------- ------------- -------------- ------------- Total sales $ 12,488,109 $ 3,803,982 $ (686,199) $ 15,605,892 ============= ============= ============== ============= Long-lived assets $ 30,014,449 $ 3,797,314 $ (5,433,452) $ 28,378,311 ============= ============= ============== =============
10 11 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis should be read in conjunction with the Selected Consolidated Financial Data and the Consolidated Financial Statements and related Notes thereto of the Company appearing in the Company's Annual Report on Form 10-K for the year ended December 31, 1999. OVERVIEW The Company offers comprehensive solutions principally in one segment of the semiconductor industry-semiconductor test interconnect. The Company is a leading manufacturer of probe cards, ATE interface assemblies, ATE test boards, and test sockets/contactors. The Company believes it is the only company that designs, manufactures, and assembles each of the electromechanical components that assure the integrity of the electrical test signal that passes from the ATE to the IC DUT. The Company's products address critical functions to assure IC quality, reduce manufacturing costs, improve the accuracy of manufacturing yield data, and identify repairable memory ICs. The semiconductor industry is characterized as cyclical, with capacity boom cycles followed by bust cycles that create tremendous pricing pressures. Despite these cycles, the IC market has generally been a high volume, high growth commodity market characterized by rapid technological change. The Company has benefited from this and has grown substantially over the last five years as the Company has increased its market share. Net sales have increased from $26.1 million for 1995 to $62.7 million for 1999, representing a five year average annualized growth rate of approximately 35%. The Company has grown its business and expanded its product lines through internal product development, strategic acquisitions, joint development/ventures, and licensing of technologies. In 1990, the foundation for the growth of the Company's core probe card business was the development of the Company's CerCard(TM) technology. In April 1995, the Company acquired Fresh Test Technology Corporation ("Fresh Test"), which enabled the Company to expand its product line to include ATE interface assemblies. In December 1996, the Company acquired Cerprobe Interconnect Solutions, Inc. ("CIS"), formerly CompuRoute, Inc., which enabled the Company to offer ATE test boards, the Company's first packaged IC testing product. In May 1997, the Company established a joint development agreement with Japan-based Mitsubishi Materials Corporation. This joint development has resulted in the company's first probe card based upon the Company's proprietary P4(TM) (Photolithographic Pattern Plated Probe) technology. In September 1998, the Company acquired France-based Cerprobe Europe S.A.S., formerly SemiConducteur Services, S.A., a probe card company, which enabled the Company to further expand in and service the European market. Additionally, in November 1998, the Company signed an agreement with Feinmetall GmbH, a German contact technology company, which provided the Company with an exclusive license to design, manufacture, and distribute Vertical integrated Probe (ViProbe(R)) products worldwide, except Europe. Finally, in December 1999, the Company acquired OZ Technologies, Inc. ("OZ"), which enabled the Company to offer test sockets, test contactors, and test boards used for testing packaged ICs. From 1996 through 1998, the semiconductor industry was in the worst recession in its history. The IC test interconnect segment of the semiconductor industry generally lags the industry cycle by six months or more. Because of this lag and market share gains by the Company, its business was not significantly impacted by the recession in the semiconductor industry until the second quarter of 1998. During 1998, certain customers of the Company began processing a portion of their ICs in a manner that required vertical probing products that were not manufactured by the Company. This exacerbated the already difficult business conditions the Company was experiencing and the Company reported a loss from continuing 11 12 operations before income taxes in the second quarter of 1999, which was the first such quarterly loss by the Company (excluding acquisition related costs) in 29 consecutive quarters. In the third and fourth quarter of 1999, the Company began to experience some positive signs of a gradual recovery. In the first quarter of 2000, sales increased significantly over the fourth quarter of 1999. Due to implementation of several important operational initiatives and significantly increased demand from its customers, the Company also returned to profitability in the first quarter 2000. The Company maintains regional full service facilities in Arizona, California, and Texas as well as sales offices in Colorado, Florida, Massachusetts, and Oregon to service the U.S. market for its products and services. The Company maintains full service facilities in France and Scotland and a sales office in Germany to serve the European market. The Company also maintains full service facilities in Taiwan and Singapore to serve the Southeast Asian market, as well as sales and distribution offices in Japan and Malaysia, to serve the Asian market. Each of the Company's facilities is located in proximity to semiconductor manufacturing centers. RESULTS OF OPERATIONS Three Months Ended March 31, 2000 Compared to Three Months Ended March 31, 1999. Net Sales. Net sales for the three months ended March 31, 2000 were $26.8 million, an increase of 71.6% over net sales of $15.6 million for the three months ended March 31, 1999. Of the increase, 79% was a result of the acquisition of OZ and 21% was a result of increased demand for the Company's legacy products. Gross Profit. Gross profit for the three months ended March 31, 2000 was $10.9 million, an increase of 95.9% from gross profit of $5.6 million for the three months ended March 31, 1999. The increase in gross profit was a result of the acquisition of OZ and increased sales for the Company's legacy products. Gross margin increased from 35.6% of net sales in the three months ended March 31, 1999 to 40.7% in 2000. The increase in gross margin was a result of the Company's increased sales overcoming the fixed cost base associated with the production infrastructure. Selling, General, and Administrative. Selling, general, and administrative expenses were $7.1 million, or 26.4% of net sales, for the three months ended March 31, 2000, compared to $4.3 million, or 27.6% of net sales, for the three months ended March 31, 1999. Of this increase, $1.8 million was a result of the acquisition of OZ, $100,000 was due to increased marketing expenses, $115,000 was due to international expenses, and the remainder was due to the reversal of $500,000 incentive management programs in the three months ended March 31, 1999. Engineering and Product Development. Engineering and product development expenses were $1.1 million, or 3.9% of net sales, for the three months ended March 31, 2000, an increase of 32.2% over $798,264, or 5.1% of net sales, for the three months ended March 31, 1999. The increase was primarily due to the acquisition of OZ. Interest Income. Interest income was $91,883 for the three months ended March 31, 2000, compared to $229,410 for the three months ended March 31, 1999. This decrease was attributable to the investment of a lower average cash balance. 12 13 Minority Interest. The minority interest share of income of $206,581 for the three months ended March 31, 2000 and $66,302 for the three months ended March 31, 1999 represented the Company's joint venture partners' share of income from the Company's Asian operations (40%). Income Taxes. Income taxes increased from $217,289 for March 31, 1999 to $803,930 for March 31, 2000. This represented an effective tax rate of 35.5% and 43.9% for March 31, 2000 and 1999, respectively. The decrease in the effective tax rate for March 31, 2000 was due to state net operating loss carryforwards from 1999. Net Income. Net income for the three months ended March 31, 2000 was $515,822 or 1.9% of sales, compared to net income of $145,033 or 0.9% of sales for the three months ended March 31, 1999. The increase in net income was due to the acquisition of OZ and higher sales from the Company's legacy product. LIQUIDITY AND CAPITAL RESOURCES The Company has financed its operations and capital requirements primarily through cash flows from operations, equipment lease financing arrangements, and sales of equity securities. At March 31, 2000, cash was $3.9 million compared to $3.5 million at December 31, 1999. The Company used $461,138 of cash to support its operating activities for the three months ended March 31, 2000. Accounts receivable increased by $4.2 million, net of allowance, or 33.8%, to $16.5 million at March 31, 2000 compared to the balance at December 31, 1999. This increase was due primarily to increased customer demand for the Company's products. Inventories increased $460,729, net of reserve, or 4.7%, from $9.7 million at December 31, 1999 to $10.2 million at March 31, 2000. Approximately $1.3 million of equipment was purchased during the three months ended March 31, 2000, of which approximately $300,000 was financed; the remainder was acquired primarily through cash flow from operations and usage of the Company's revolving line of credit. Income taxes receivable increased $900,353, or 22.3%, from $4.0 million at December 31, 1999 to $4.9 million at March 31, 2000. The increase was due to the current recognition of previously recorded deferred tax assets. Accounts payable and accrued expenses increased $387,258, or 4.2%, to $9.7 million at March 31, 2000. Working capital increased $1.9 million, or 16.3%, to $13.7 million at March 31, 2000. The current ratio remained at approximately 1.6 for March 31, 2000 and December, 31, 1999. The Company believes that its working capital, together with the available loan and lease commitments and anticipated cash flow from operations, will provide adequate sources to fund operations for at least the next 12 months. The Company anticipates that any additional cash requirements for operations or capital expenditures will be financed through cash flow from operations, by borrowing from the Company's primary lender, by lease financing arrangements, or by sales of equity securities. Any such financing may not be available on acceptable terms and any additional equity financing, if available, would result in additional dilution to existing investors. YEAR 2000 In prior periods, the Company discussed the nature and progress of its plans to become Year 2000 ready. In late 1999, the Company completed the remediation and testing of its critical dependent systems. Through April 14, 2000, the Company has experienced no disruptions in critical information technology and non-information technology systems and believes those systems successfully responded to 13 14 the Year 2000 date change. The Company is not aware of any material problems resulting from Year 2000 issues, either with its products, its internal systems, or the products and services of third parties. The Company will continue to monitor its mission critical computer applications and those of our suppliers and vendors throughout the year 2000. If significant yet to be identified Year 2000 issues arise, the Company may experience significant problems that could have an adverse affect on its financial condition and results of operations. Litigation regarding Year 2000 issues is possible. It is uncertain whether, or to what extent, the Company may be affected by such litigation. INFLATION AND CHANGING PRICES The Company is impacted by inflationary trends and business trends within the semiconductor industry and by the general condition of the worldwide semiconductor markets. Market price pressures are exerted on semiconductor manufacturers by the global marketplace and global competition. Such pressures mandate that semiconductor manufacturers closely scrutinize the prices they pay for goods and services purchased from the Company and other suppliers. Accordingly, the price structure for the Company's products must be competitive. Changes in the Company's supplier prices did not have a significant impact on cost of sales during the first quarter of 2000 or 1999. As a result of the Company's operation of manufacturing, repair, and sales facilities in Scotland, France, Singapore, and Taiwan, the Company's foreign transactions may be denominated in currencies other than the U.S. Dollar. Such transactions may expose the Company to exchange rate fluctuations for the period of time from inception of the transaction until it is settled. Fluctuations in the currency exchange rate in the future may have an adverse impact on the Company's foreign operations. In addition, the Company may purchase a substantial portion of its raw materials and equipment from foreign suppliers and will incur labor costs in a foreign currency. The foreign manufacture and sale of products and the purchase of raw material and equipment from foreign suppliers may be adversely affected by political and economic conditions abroad. Protective trade legislation in either the United States or foreign countries, such as a change in the current tariff structures, export compliance laws or other trade policies, could adversely affect the Company's ability to manufacture or sell its products in foreign markets and purchase materials or equipment from foreign suppliers. In countries in which the Company conducts business in local currency, currency exchange rate fluctuations could adversely affect the Company's net sales or costs. BUSINESS OUTLOOK The Company's business depends substantially on both the volume of IC production by semiconductor manufacturers as well as new IC designs, which in turn depend on the demand of ICs and products utilizing ICs. The semiconductor industry is highly cyclical and historically has experienced periods of oversupply, resulting in reduced demand for IC testing products, including the products manufactured by the Company. The Company continues to analyze its current cost structure to bring its production and overhead costs in line with the anticipated industry demand for its products for the rest of this year. However, the Company's need to invest in engineering and product 14 15 development, marketing, and customer service and support capabilities will limit its ability to reduce expenses in response to such downturns or slow downs. "SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 Statements in this section regarding the Company's prospects for growth, adequacy of sources of capital, and business out look are forward-looking statements. Words such as "believes," "expects," "anticipates," "intends," "may," "estimates," "should," "will likely," and similar expressions are intended to identify such forward-looking statements. Actual results, however, could differ materially from those anticipated for a number of reasons, including a decrease in demand or slower than anticipated growth in the semiconductor industry, product demand and development, ability to maintain customer diversity and relationships, technological advances, impact of competitive products and pricing, growth in targeted markets and other factors identified under "Special Considerations" of the Company's 1999 Form 10-K which has been filed with the Securities and Exchange Commission. Additional risk factors are identified from time to time in the Company's financial press releases. The cautionary statements made in this Report should be read as being applicable to all related forward-looking statements wherever they appear in this Report. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK There has been no change since the Form 10-K for the year ended December 31, 1999. See Part II Item 7A, Quantitative and Qualitative Disclosures About Market Risk, in the Company's Annual Report on Form 10-K for the year ended December 31, 1999. 15 16 PART II - OTHER INFORMATION Item 1. Legal Proceedings In October 1998, the Company filed an action against the former President, Director, and shareholder of Silicon Valley Test & Repair, Inc., which was acquired by the Company by way of merger into its wholly-owned subsidiary, SVTR, Inc., in January 1997. The suit seeks rescission of the acquisition and/or monetary damages arising from failure of the defendants to disclose material facts regarding the origins of certain software necessary for SVTR, Inc.'s business. In February 1999, the defendants filed a counter claim against the Company alleging conversion, interference with contractual relations, unfair business practices, breach of contract, and specific performance allegedly arising from the Company's actions to preclude the defendants from selling the Company stock received by defendants as part of the purchase price of Silicon Valley Test & Repair, Inc.; the Company seeks to recover this stock and the balance of the purchase price through its claims for rescission. In March 1999, the Company and SVTR filed an amended complaint. The defendants have responded and the action is proceeding to trial. While the company intends to vigorously prosecute this action, it is impossible to predict the outcome of this or any other litigation. It is not anticipated that this suit will have an adverse impact on the Company's financial condition or results of operations. Item 6. Exhibits and Reports on Form 8-K a. Exhibits None 11 Computation of Net Income Per Share. 27.1 Financial Data Schedule - March 31, 2000 b. Reports on Form 8-K Form 8-K, filed on March 7, 2000 to publish the Company's financial statements for the year ended December 31, 1999. 16 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 Senior Vice President - Chief Financial Officer May 11, 2000 17 18 EXHIBIT INDEX EXHIBIT NUMBER DESCRIPTION OF EXHIBITS - -------- --------------------------- 11 Cerprobe Corporation computation of net income per share 27 Financial Data Schedule EX-11 2 EX-11 1 CERPROBE CORPORATION COMPUTATION OF NET INCOME PER SHARE EXHIBIT 11 THREE MONTHS ENDED MARCH 31, ----------------------- 2000 1999 ---------- ---------- Net income $ 515,822 $ 145,033 ========== ========== Weighted average number of common shares outstanding 9,419,755 7,655,304 Common equivalent shares representing shares issuable upon exercise of stock options 313,348 393,782 Convertible preferred stock -- -- Subtraction of common equivalent shares due to antidilutive nature -- -- ---------- ---------- Dilutive adjusted weighted average shares and assumed conversions 9,733,103 8,049,086 ========== ========== Basic net income per share $ 0.05 $ 0.02 ========== ========== Diluted net income per share $ 0.05 $ 0.02 ========== ========== EX-27 3 EX-27
5 This Schedule contains summary financial information extracted from the Condensed Consolidated Balance Sheet at March 31, 2000 and the Condensed Consolidated Statements of Operations for the three months ended March 31, 2000 and is qualified in its entirety by reference to such financial statements. 3-MOS DEC-31-2000 MAR-31-2000 3,878,332 0 16,889,861 411,642 10,189,229 37,397,189 41,065,921 17,764,325 86,672,546 23,666,233 7,521,838 0 0 493,362 53,247,580 86,672,546 26,777,418 26,777,418 15,883,166 15,883,166 0 0 546,219 1,526,333 (803,930) 515,822 0 0 0 515,822 0.05 0.05
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