-----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, JNKrX/aWH6Q9Lv1z6feFq2gVO5hShSnjscrBtXwzFA9cb5zw0VSbxDFL+kSDjMG2 vg3PK0XFaffvGzJPAUCCig== 0000950153-99-001412.txt : 19991117 0000950153-99-001412.hdr.sgml : 19991117 ACCESSION NUMBER: 0000950153-99-001412 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991115 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: 99753240 BUSINESS ADDRESS: STREET 1: 1150 NORTH FIESTA BLVD CITY: GILBERT STATE: AZ ZIP: 85233-2237 BUSINESS PHONE: 6029677885 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 September, 30 1999 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 November 12, 1999, there were 7,897,995 shares of the registrant's Common Stock outstanding. 2 CERPROBE CORPORATION QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1999 TABLE OF CONTENTS
Page ---- PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS Condensed Consolidated Balance Sheets - September 30, 1999 and December 31, 1998......................... 3 Condensed Consolidated Statements of Operations - Three and Nine Months Ended September 30, 1999 and 1998.......... 4 Condensed Consolidated Statements of Cash Flows - Nine Months Ended September 30, 1999 and 1998.................... 5 Notes to Condensed Consolidated Financial Statements............. 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS............................. 11 ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK...... 17 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS............................................... 18 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K................................ 18 SIGNATURE ................................................................ 19
2 3 CERPROBE CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, DECEMBER 31, ASSETS 1999 1998 ------------ ------------ (UNAUDITED) Current assets: Cash $ 6,875,144 $ 4,753,696 Short-term investment securities 8,833,859 14,305,400 Accounts receivable, net of allowance of $336,645 in 1999 and $333,364 in 1998 9,122,115 8,951,680 Inventories, net 6,717,686 5,303,631 Accrued interest receivable 26,749 102,093 Prepaid expenses 1,207,405 869,382 Income taxes receivable 4,487,104 714,811 Deferred tax asset 428,685 446,092 Net assets of discontinued operations -- 1,481,903 ------------ ------------ Total current assets 37,698,747 36,928,688 Property, plant, and equipment, net 23,301,099 22,698,509 Intangible assets, net 2,905,121 3,050,460 Other assets 894,217 1,007,917 ------------ ------------ Total assets $ 64,799,184 $ 63,685,574 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 3,016,796 $ 2,534,997 Accrued expenses 3,156,825 3,075,894 Current portion of notes payable 1,026,090 138,985 Current portion of capital lease obligations 624,575 660,192 Net liabilities of discontinued operations 428,859 -- ------------ ------------ Total current liabilities 8,253,145 6,410,068 Notes payable, less current portion 2,157,730 731,555 Capital lease obligations, less current portion 1,780,355 2,472,563 Other liabilities -- 7,073 ------------ ------------ Total liabilities 12,191,230 9,621,259 ------------ ------------ Minority interest 846,160 590,465 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 8,363,245 and outstanding 7,897,995 shares at September 30, 1999 and issued 8,131,279 and outstanding 7,645,126 shares at December 31, 1998 418,162 406,564 Additional paid-in capital 56,659,487 55,271,200 Retained earnings 1,113,664 3,505,734 Accumulated other comprehensive loss: Foreign currency translation (313,991) (188,131) ------------ ------------ 57,877,322 58,995,367 Treasury stock, at cost, 465,250 shares at September 30, 1999 and 486,153 shares at December 31, 1998 (5,274,063) (5,521,517) Notes receivable from officers and directors (841,465) -- ------------ ------------ Total stockholders' equity 51,761,794 53,473,850 ------------ ------------ Total liabilities and stockholders' equity $ 64,799,184 $ 63,685,574 ============ ============
See accompanying notes to condensed consolidated financial statements. 3 4 CERPROBE CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30, -------------------------------- ------------------------------- 1999 1998 1999 1998 ------------ ------------ ------------ ------------ Net sales $ 14,932,031 $ 20,107,096 $ 44,640,667 $ 61,199,104 Costs of goods sold 9,742,588 11,513,959 29,644,646 35,473,693 ------------ ------------ ------------ ------------ Gross profit 5,189,443 8,593,137 14,996,021 25,725,411 ------------ ------------ ------------ ------------ Expenses: Selling, general, and administrative 5,073,263 4,714,758 15,038,943 14,370,299 Engineering and product development 1,186,108 955,978 3,248,051 2,301,671 Acquisition related expenses -- 1,568,000 -- 1,568,000 ------------ ------------ ------------ ------------ Total expenses 6,259,371 7,238,736 18,286,994 18,239,970 ------------ ------------ ------------ ------------ Operating income (loss) (1,069,928) 1,354,401 (3,290,973) 7,485,441 ------------ ------------ ------------ ------------ Other income (expense): Interest income 192,831 328,161 623,670 1,063,877 Interest expense (105,286) (59,546) (309,268) (182,133) Other, net (80,087) 219,379 (81,163) 258,195 ------------ ------------ ------------ ------------ Total other income 7,458 487,994 233,239 1,139,939 ------------ ------------ ------------ ------------ Income (loss) from continuing operations before minority interest and income taxes (1,062,470) 1,842,395 (3,057,734) 8,625,380 Minority interest (84,978) (86,147) (273,494) (111,540) ------------ ------------ ------------ ------------ Income (loss) from continuing operations before income taxes (1,147,448) 1,756,248 (3,331,228) 8,513,840 Income tax (expense) benefit 269,310 (720,613) 944,480 (3,528,637) ------------ ------------ ------------ ------------ Income (loss) from continuing operations (878,138) 1,035,635 (2,386,748) 4,985,203 Discontinued operations: Loss from operations of SVTR, Inc., net of taxes -- (785,097) (5,322) (1,922,457) Loss on disposal of SVTR, Inc., net of taxes -- (3,807,740) -- (3,807,740) ------------ ------------ ------------ ------------ Loss from discontinued operations -- (4,592,837) (5,322) (5,730,197) ------------ ------------ ------------ ------------ Net loss $ (878,138) $ (3,557,202) $ (2,392,070) $ (744,994) ============ ============ ============ ============ Net income (loss) per common share: Basic: From continuing operations $ (0.11) $ 0.13 $ (0.31) 0.62 From discontinued operations 0.00 (0.59) (0.00) (0.71) ------------ ------------ ------------ ------------ Net loss per common share $ (0.11) $ (0.46) $ (0.31) $ (0.09) ============ ============ ============ ============ Weighted average number of common shares outstanding 7,836,237 7,768,874 7,740,136 8,058,011 ============ ============ ============ ============ Diluted: From continuing operations $ (0.11) $ 0.13 $ (0.31) 0.62 From discontinued operations 0.00 (0.59) (0.00) (0.71) ------------ ------------ ------------ ------------ Net loss per common share $ (0.11) $ (0.46) $ (0.31) $ (0.09) ============ ============ ============ ============ Weighted average number of common and common equivalent shares outstanding 7,836,237 7,768,874 7,740,136 8,058,011 ============ ============ ============ ============
See accompanying notes to condensed consolidated financial statements. 4 5 CERPROBE CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30, --------------------------------- 1999 1998 ------------ ------------ Cash flows from operating activities: Income (loss) from continuing operations $ (2,386,748) $ 4,985,203 Adjustments to reconcile net income (loss) from continuing operations to net cash provided by (used in) continuing operations: Depreciation and amortization 4,279,538 3,378,441 Acquisition related expenses -- 1,568,000 (Gain) loss on sale of equipment (3,176) 435,996 Loss on disposal of discontinued operations, net of taxes -- 3,807,740 Tax benefit from exercise of nonqualified stock options 71,000 106,000 Deferred income taxes (17,168) (717,555) Provision for losses on accounts receivable 4,000 19,920 Provision for obsolete inventory 180,000 315,000 Income applicable to minority interest 273,494 111,540 Changes in working capital of continuing operations Accounts receivable (174,435) (1,323,031) Inventories (1,594,055) (730,671) Prepaid expenses and other assets (293,052) (175,710) Income taxes receivable (1,963,188) 157,955 Accounts payable and accrued expenses 562,730 (317,706) Accrued income taxes -- (108,648) Other liabilities (7,073) (7,100) ------------ ------------ Net cash provided by (used in) continuing operations (1,068,133) 11,505,374 ------------ ------------ Net cash provided by (used in) discontinued operations 96,335 (5,293,953) ------------ ------------ Net cash provided by (used in) operating activities (971,798) 6,211,421 ------------ ------------ Cash flows from investing activities: Purchase of property, plant, and equipment (4,745,100) (7,128,764) Redemption of investment securities 5,471,541 11,399,209 Distribution from CRPB Investors, L.L.C 178,649 -- Investment in CRPB Investors, L.L.C -- 47,656 Purchase of Upsys-Cerprobe, L.L.C -- (376,366) Purchase of Cerprobe Europe S.A.S., net of cash acquired -- (3,230,230) Proceeds from sale of equipment 11,487 -- ------------ ------------ Net cash provided by investing activities 916,577 711,505 ------------ ------------ Cash flows from financing activities: Issuance of notes payable 3,000,000 1,661,310 Payments on notes payable (1,414,546) (701,247) Issuance of notes receivable (841,465) -- Expenses from issuance of common stock -- (245,093) Purchase of treasury stock -- (4,781,107) Net proceeds from employee stock purchase plan 177,674 238,164 Net proceeds from exercise of stock options 1,398,665 184,763 ------------ ------------ Net cash provided by (used in) financing activities 2,320,328 (3,643,210) ------------ ------------ Effect of exchange rates on cash (143,659) (147,228) ------------ ------------ Net increase in cash 2,121,448 3,132,488 Cash, beginning of period 4,753,696 2,715,490 ------------ ------------ Cash, end of period $ 6,875,144 $ 5,847,978 ============ ============
5 6 CERPROBE CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
----------- ----------- Supplemental disclosures of cash flow information from continuing operations: Interest paid $ 309,268 $ 182,133 =========== =========== Income taxes paid $ 371,619 $ 2,049,282 =========== =========== Supplemental disclosures of non-cash investing activities: The Company made acquisitions for $3.6 million in the nine months ended September 30, 1998 The purchase prices were allocated to the assets acquired and liabilities assumed based on their fair values as indicated in the notes to the consolidated financial statements. A summary of the acquisitions is as follows: Purchase price $ -- $ 3,626,366 Less cash acquired -- (19,770) Common stock issued -- -- ----------- ----------- Cash invested $ -- $ 3,606,596 =========== ===========
See accompanying notes to condensed consolidated financial statements. 6 7 CERPROBE CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (1) BASIS OF PREPARATION The accompanying condensed consolidated financial statements as of September 30, 1999 and for the three and nine months ended September 30, 1999 and 1998 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, 1998 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, 1998. 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 Interconnect Solutions, Inc. ("CIS"), SVTR, Inc. ("SVTR"), Cerprobe Europe Limited, Cerprobe Europe S.A.S., Cerprobe Asia Holdings Pte Ltd, and Cerprobe Japan Co., Ltd. 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 September 1998, the Company acquired France-based Cerprobe Europe S.A.S. The Company designs, manufactures, and distributes probe cards at its manufacturing plant near Marseilles. In March 1999, the Company formed Cerprobe Japan Co., Ltd. to operate a sales and distribution facility in Yokohama, Japan. (2) COMMITMENTS AND CONTINGENCIES In October 1998, the Company filed an action against the former President, Director, and shareholders of Silicon Valley Test & Repair, Inc. (renamed SVTR, Inc.), which was acquired by the Company, 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 7 8 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 through its claims for rescission. In March 1999, the Company and SVTR filed an amended complaint. The defendants filed a motion to dismiss the amended complaint, which was denied. At present the parties are engaging in discovery. It is not anticipated that the suit will have a material adverse impact on the Company's financial condition or results of operations. In April 1999, the Company received a Notice Letter from the United States Environmental Protection Agency ("EPA") indicating that the EPA considered the Company to be potentially responsible for costs associated with the remediation of the Indian Bend Wash Superfund Site ("Superfund Site") in Tempe, Arizona. The EPA claimed that such liability arose out of the Company's operations at its former facility located at 600 S. Rockford Drive, Tempe, Arizona. The Company had been named with four other potentially responsible parties. In May 1999, the Company was informed by the EPA that it had decided not to pursue the Company for clean-up costs at this time. There is no guarantee the EPA will not change its position. 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 Comprehensive income encompasses net income (loss) and "other comprehensive income (loss)", which includes all other non-owner transactions and events which change stockholders' equity. The Company recognized comprehensive loss for the nine months ended September 30, 1999 and 1998 as follows:
Nine Months Ended September 30, ------------------------------- 1999 1998 ----------- ----------- Net loss $(2,392,070) $ (744,994) Other comprehensive loss, net of tax: Foreign currency translation adjustment (209,767) (17,489) Tax benefit from foreign currency translation 83,907 6,996 ----------- ----------- Net other comprehensive loss (125,860) (10,493) ----------- ----------- Comprehensive loss $(2,517,930) $ (755,487) =========== ===========
(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. 8 9 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:
Nine Months Ended September 30, ------------------------------- 1999 1998 ----------- ----------- Net sales $ -- $ 3,070,479 ----------- ----------- Loss from operations $ (8,869) $(3,204,095) Income tax benefit 3,547 1,281,638 ----------- ----------- Loss from operations, net $ (5,322) $(1,922,457) =========== =========== Loss on disposal $(6,346,233) Income tax benefit 2,538,493 =========== Loss on disposal, net $(3,807,740) ===========
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 assets (liabilities) of SVTR, as reclassified in the accompanying consolidated balance sheets, include the following:
September 30, 1999 December 31, 1998 ----------- ----------- Current assets $ 854,383 $ 3,445,737 Other assets 63,011 46,865 Current liabilities (1,337,878) (1,990,852) Long-term debt (8,375) (19,847) ----------- ----------- $ (428,859) $ 1,481,903 =========== ===========
(5) 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. (6) SEGMENT INFORMATION The Company operates principally in one industry segment: the design, development, manufacture, and market of semiconductor integrated circuit test products and services. The Company's principal customers are North American, European, and Asian semiconductor manufacturing companies. Two of the Company's customers exceeded 10% of net sales. The first customer accounted for 15.5% and 18.3% of net sales for the nine months ended September 30, 1999 and 1998, respectively. The accounts receivable from that customer were $893,638 and $1,112,152 at 9 10 September 30, 1999 and 1998, respectively. The second customer accounted for 12.1% and 11.6% of net sales for the nine months ended September 30, 1999 and 1998, respectively, with accounts receivable of $169,771 and $31,622 at September 30, 1999 and 1998, respectively. International sales represented 21.7% and 18.5% of the Company's net sales for the nine months ended September 30, 1999 and 1998, respectively. The following is a summary of the Company's geographic operations for the nine months ended September 30:
NORTH AMERICA EUROPE & ASIA ELIMINATIONS CONSOLIDATED ----------- ----------- ----------- ----------- 1999 Customer sales $34,948,903 $ 9,691,764 $ -- $44,640,667 Intercompany sales 362,944 2,093,333 (2,456,277) -- ----------- ----------- ----------- ----------- Total sales $35,311,847 $11,785,097 $(2,456,277) $44,640,667 =========== =========== =========== =========== Long-lived assets $30,232,886 $ 3,644,668 $(6,199,326) $27,678,228 =========== =========== =========== =========== 1998 Customer sales $51,606,927 $ 9,592,177 $ -- $61,199,104 Intercompany sales 392,403 2,329,829 (2,722,232) -- ----------- ----------- ----------- ----------- Total sales $51,999,330 $11,922,006 $(2,722,232) $61,199,104 =========== =========== =========== =========== Long-lived assets $25,187,992 $ 3,995,069 $(6,101,651) $23,081,410 =========== =========== =========== ===========
(7) SUBSEQUENT EVENT In October 1999, the Company entered into a $1,500,000 lease line of credit agreement, which matures on February 29, 2000, with Banc One Arizona Leasing Corporation. The maximum term for each lease schedule may not exceed 60 months. Pricing is indexed to the Bank's internal cost of funds. Advances are collateralized by the underlying leased manufacturing equipment, furniture, and fixtures. 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, 1998. OVERVIEW Cerprobe offers comprehensive solutions for semiconductor test integration and is a leading manufacturer of probe cards, ATE interface assemblies, and ATE test boards. The Company's products address critical functions to assure integrated circuit ("IC") quality, reduce manufacturing costs, improve the accuracy of manufacturing yield data, and identify repairable memory ICs. The Company has historically grown from worldwide market share gains and strategic acquisitions. Net sales increased from $14.3 million for 1994 to $76.2 million for 1998, representing an average annualized growth rate of approximately 52%. Similarly, the Company's net income increased from $1.2 million for 1994 to $6.2 million for 1998 (before a one-time charge for purchased research and development of $1.6 million, resulting in a tax benefit of $627,000 and the loss from discontinued operations of SVTR of $5.7 million, net of taxes, which together reduced net income by $6.7 million). Until 1995, substantially all of the Company's growth was from its existing probe card product line. Beginning with the April 1995 acquisition of Fresh Test Technology Corporation ("Fresh Test"), acquisitions, joint ventures, and technology licensing have contributed to the Company's growth. Fresh Test expanded the Company's product line to include ATE interface assemblies. The Company acquired Cerprobe Interconnect Solutions ("CIS") in December 1996, which enabled the Company to offer ATE test boards. In May 1997, the Company established an international joint development agreement with Mitsubishi Materials Corporation to develop next generation probe card products based upon the Company's proprietary P4(TM) technology. In September 1998, the Company acquired France-based Cerprobe Europe S.A.S. which expanded the Company's presence in the European market. In November 1998, the Company acquired an exclusive license to design, manufacture, and distribute Vertical integrated Probe (ViProbe(R)) products worldwide, except Europe. The Company participates in the semiconductor industry, which is characterized as cyclical, with capacity boom cycles followed by bust cycles that lead to significantly reduced demand for products and substantial pricing pressures throughout the supply chain. From 1996 through 1998, the semiconductor industry has been in the worst recession in its history. The IC test segment of the semiconductor industry generally lags the 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 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 operations before income taxes of $2.5 million in the second quarter of 1999. This was the first such quarterly loss by the Company (excluding acquisition related costs) in 29 consecutive quarters. In the third quarter of 1999, the Company began to experience some positive signs of a gradual recovery. Sales for the third quarter were $14.9 million, a 6% increase over the second quarter of 1999. The net loss for the third quarter of 1999 was $781,000 less than the net loss for the second quarter of 1999 or a 47% improvement. The Company's order backlog was $8.2 million, the highest level since mid-1998. 11 12 Additionally, the Company's newly licensed ViProbe(R), (a vertical probing product) is currently being evaluated by several of the Company's customers, and it is progressing on schedule to begin ramping to volume production during the first quarter of next year. The Company believes that it is positioned to recover from the recent downturn 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 North America, Europe, and Asia. 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 continues to expand into international markets, including Europe and Asia. 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, and a sales and distribution facility in Japan. Each of the Company's facilities is located in proximity to semiconductor manufacturing centers. RESULTS OF OPERATIONS Three Months Ended September 30, 1999 Compared to Three Months Ended September 30, 1998. Net Sales. Net sales for the three months ended September 30, 1999 were $14.9 million, a decrease of 25.7% over net sales of $20.1 million for the three months ended September 30, 1998. The decrease was primarily a result of effects of the semiconductor industry's downturn, including reduced unit production, pricing pressures, and excess probe card capacity. Additionally, some of the Company's customers have begun using vertical probing products to test some of their more complex ICs and to test memory ICs in parallel. The Company's ViProbe(R) (vertical probing product) is currently not in production. However, ViProbe(R) is being evaluated by several of the Company's customers and it is progressing on schedule to begin ramping to volume production during the first quarter of next year. In addition, the Company's P4(TM) product is positioned to address emerging requirements for fine pitch and high frequency probing. Gross Profit. The gross profit for the three months ended September 30, 1999 was $5.2 million, a decrease of 39.6% from the gross profit of $8.6 million for the three months ended September 30, 1998. The decrease in gross profit is primarily a result of reduced sales. Gross margin decreased from 42.7% of net sales in the three months ended September 30, 1998 to 34.8% in 1999. The decrease in gross margin is a result of the Company's production infrastructure capable of higher production run rates, resulting in over capacity and under-absorption of overhead and efforts to increase or at least maintain market share resulting in aggressive pricing, particularly to the Company's largest customers. Selling, General, and Administrative. Selling, general, and administrative expenses were $5.1 million, or 34.0% of net sales, for the three months ended September 30, 1999, compared to $4.7 million, or 23.4% of net sales, for the three months ended September 30, 1998. This represents an increase of $358,505, or 7.6%, primarily from increases in depreciation related to the Company's Enterprise Resource Planning ("ERP") system and start-up costs associated with the Company's new facility in Japan. Engineering and Product Development. Engineering and product development expenses were $1.2 million or 7.9% of net sales, for the three months ended September 30, 1999, an increase of 24.1% over $955,978, or 4.8% of net sales, for the three months ended September 30, 1998. The Company has added substantial resources to its product development team to address emerging and next 12 13 generation probing requirements for grid array, multi-chip testing, very high frequency ICs, and those that have pad pitch architecture of less than 60 microns. Interest Income. Interest income was $192,831 for the three months ended September 30, 1999, compared to $328,161 for the three months ended September 30, 1998. This decrease is attributable to the investment of a lower average cash balance. Minority Interest. The minority interest share of income of $84,978 for the three months ended September 30, 1999 and $86,147 for the three months ended September 30, 1998 represented the Company's joint venture partners' share of income from the Company's Asian operations (40%). Income Taxes. Income taxes decreased to a benefit of $269,310, which represented an effective tax benefit rate of 23.5% for the three months ended September 30, 1999, as compared to an expense of $720,613, which represented an effective tax rate of 41.0% for the three months ended September 30, 1998. Discontinued Operations. The Company recorded $4.6 million in losses net of income taxes from discontinued operations from the disposal of its wafer prober refurbishing and upgrading subsidiary, SVTR, Inc. for the three months ended September 30, 1998. The Company disposed of the operations of SVTR through the sale of equipment, inventory, and technology in March 1999. Net Loss. Net loss for the three months ended September 30, 1999 was $878,138 or (5.9)% of sales, compared to the net loss of $3.6 million or (17.7)% of sales for the three months ended September 30, 1998. Prior to acquisition costs and discontinued operations, net income for the three months ended September 30, 1998 was $2.0 million. The net loss was primarily caused by the quarter's lower gross profit coupled with the Company's increased engineering and development expenses. The Company has maintained its operating cost structure during the down cycle in its business because it believes that its global infrastructure will be an important competitive advantage as the industry recovers. Nine Months Ended September 30, 1999, Compared to Nine Months Ended September 30, 1998. Net Sales. Net sales for the nine months ended September 30, 1999 were $44.6 million, a decrease of 27.1% over net sales of $61.2 million for the nine months ended September 30, 1998. The decrease was primarily a result of effects of the semiconductor industry's downturn, including reduced unit production, pricing pressures, and excess probe card capacity. Additionally, some of the Company's customers have begun using vertical probing products to test some of their more complex ICs and to test memory ICs in parallel. The Company's ViProbe(R) (vertical probing product) is currently not in production. However, ViProbe(R) is being evaluated by several of the Company's customers and it is progressing on schedule to begin ramping to volume production during the first quarter of next year. In addition, the Company's P4(TM) product is positioned to address emerging requirements for fine pitch and high frequency probing. Gross Profit. Gross profit for the nine months ended September 30, 1999 was $15.0 million, a decrease of 41.7% of net sales from the gross profit of $25.7 million for the same period in 1998. Gross margin decreased to 33.6% of sales for the nine months ended September 30, 1999, from 42.0% for the same period of 1998. The decrease in gross margin primarily resulted from the Company's production infrastructure capable of higher production run rates, resulting in over capacity and under- 13 14 absorption of overhead and efforts to increase or at least maintain market share resulting in aggressive pricing, particularly to the Company's largest customers. Selling, General, and Administrative. Selling, general, and administrative expenses were $15.0 million, or 33.7% of net sales, for the nine months ended September 30, 1999, as compared to $14.4 million, or 23.5% of net sales, for the same period of 1998. This represents an increase of $668,644 or 4.7% primarily from increases in depreciation related to the Company's Enterprise Resource Planning ("ERP") system and start-up costs associated with the Company's new facility in Japan. Engineering and Product Development. Engineering and product development expenses were $3.2 million for the nine months ended September 30, 1999, an increase of 41.1% over $2.3 million for the same period of 1998. The Company has added substantial resources to its product development team to address emerging and next generation probing requirements for gird array, multi-chip testing, very high frequency ICs, and those that have pad pitch architectures of less than 60 microns. Interest Income. Interest income was $623,670 for the nine months ended September 30, 1999, as compared to $1.1 million for the same period in 1998. The decrease is attributable to the investment of a lower average cash balance. Minority Interest. The minority interest share of income of $273,494 for the nine months ended September 30, 1999 and $111,540 for the nine months ended September 30, 1998, represented the Company's joint venture partners' share of the income from the Company's Asian operations (40.0%) and the Upsys Joint Venture which has been terminated. Income Taxes. Income tax benefit was $944,480, which represented an effective tax benefit rate of 28.4% for the nine months ended September 30, 1999, as compared to income taxes for the nine months ended September 30, 1998 of $3.5 million, which represented an effective tax rate of 41.4%. Discontinued operations. The Company recorded $5,322 and $5.7 million in losses net of taxes from discontinued operations from the disposal of its wafer prober refurbishing and upgrading subsidiary, SVTR, Inc. for the nine months ended September 30, 1999 and 1998, respectively. The Company disposed of the operations of SVTR, Inc. through the sale of equipment, inventory, and technology in March 1999. Net Loss. Net loss for the nine months ended September 30, 1999, was $2.4 million or (5.4)% of sales compared to net loss of $744,994 or (1.2)% of sales for the same period of 1998. The net loss was primarily caused by the quarter's lower gross profit coupled with the Company's increased engineering and development expenses. The Company has maintained its operating cost structure during the down cycle in its business because it believes that its global infrastructure will be an important competitive advantage as the industry recovers. 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 September 30, 1999, cash and short-term investment securities were $15.7 million compared to $19.1 million at December 31, 1998. The Company used $1.1 million of cash to support its operating activities for the nine months ended September 30, 1999. Accounts receivable increased by $170,435, net of allowance, or 1.9%, to $9.1 million at September 30, 1999 compared to the balance at December 31, 1998. Inventories 14 15 increased $1.4 million, net of reserve, or 26.7%, over December 31, 1998, to $6.7 million at September 30, 1999. Income taxes receivable increased $3.8 million, or 527.7%, at September 30, 1999 over December 31, 1998. Approximately $1.7 million of the increase was due to the current recognition of previously recorded deferred losses associated with the sale of equipment and inventory from discontinued operations of SVTR. The remaining amount was a result of losses from current operations. Accounts payable and accrued expenses increased $562,730, or 10.0%, to $6.2 million at September 30, 1999. Working capital decreased $1.1 million, or 3.6%, to $29.4 million at September 30, 1999. The current ratio decreased from 5.8 at December 31, 1998, to 4.6, at September 30, 1999. This decrease was due primarily to the increase in current portion long-term obligations from financing the Company's recently implemented Oracle based ERP system and the use of cash for operating activities. Cerprobe increased its investment in property, plant, and equipment during the nine months ended September 30, 1999 by $602,590, or 2.7%, to $23.3 million. This increase was primarily attributable to facilitizing of the Company's new manufacturing space for interface products and for new probe card products expected to be ramped into production during the year 2000, and additional costs associated with the Company's recently implemented Oracle based ERP system. These capital expenditures were funded primarily with cash. Cerprobe believes that its working capital and anticipated cash flows 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 flows from operations, by borrowing from the Company's primary lender, by lease financing arrangements, or by sales of equity securities. There can be no assurance that any such financing will be available on acceptable terms and that any additional equity financing, if available, would not result in additional dilution to existing investors. YEAR 2000 COSTS The Company is in the process of performing a comprehensive review of its Year 2000 issues and has completed its review of internal systems (information technology ("IT") and non-IT). Most of the Company's application software programs have been replaced with Oracle applications which are Year 2000 compliant. The Oracle based ERP System , including software, hardware, and implementation, was approximately $3.5 million. The Company estimates the status of progress on these internal systems as of September 30, 1999 was as follows: IT Systems 100% Non-IT Systems 95% The Company presently believes that with modifications and updates to existing software and the recent implementation of the Oracle applications, the Year 2000 problem will not pose significant operational problems for the Company's internal systems. The Company also believes that additional remediation costs to become Year 2000 compliant are not material. The Company is also continuing to verify the Year 2000 readiness of third parties (vendors and customers) with whom the Company has material relationships. The Company is not able to determine the effect on its results of operations, liquidity, and financial condition in the event the Company's material vendors and customers are not Year 2000 compliant. The Company will continue to monitor the 15 16 progress of its material vendors and customers and formulate a contingency plan at the point in time when the Company believes a material vendor or customer will not be compliant. 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 third quarter of 1999 or for the same period in 1998. As a result of the Company's facilities in Europe and Asia, 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. The Company monitors its foreign currency exposure and from time to time enters hedging transactions to manage this exposure. There can be no assurance that fluctuations in the currency exchange rate in the future will not 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 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 16 17 from those anticipated for a number of reasons, including 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 1998 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, 1998, 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, 1998. 17 18 PART II - OTHER INFORMATION Item 1 Legal Proceedings In October 1998, the Company filed an action against the former President, Director, and shareholders of Silicon Valley Test & Repair, Inc. (renamed SVTR, Inc.), which was acquired by the Company, 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 through its claims for rescission. In March 1999, the Company and SVTR filed an amended complaint. The defendants filed a motion to dismiss the amended complaint, which was denied. At present the parties are engaging in discovery. It is not anticipated that the suit will have a material adverse impact on the Company's financial condition or results of operations. In April 1999, the Company received a Notice Letter from the United States Environmental Protection Agency ("EPA") indicating that the EPA considered the Company to be potentially responsible for costs associated with the remediation of the Indian Bend Wash Superfund Site ("Superfund Site") in Tempe, Arizona. The EPA claimed that such liability arose out of the Company's operations at its former facility located at 600 S. Rockford Drive, Tempe, Arizona. The Company had been named with four other potentially responsible parties. In May 1999, the Company was informed by the EPA that it had decided not to pursue the Company for clean-up costs at this time. There is no guarantee the EPA will not change its position. Item 6 Exhibits and Reports on Form 8-K a. Exhibits 10(ppp) Form of Secured Promissory Note and Stock Pledge Agreement entered into on August 16, 1999 between Cerprobe Corporation as Lender and Pledgee and each of the following as Borrower and Pledgor: Kenneth W. Miller ($115,000), Donald Walter ($86,250), C. Zane Close ($345,000), and Michael Bonham ($287,500). 11 Computation of Net Income Per Share. 27.1 Financial Data Schedule - September 30, 1999 27.2 Financial Data Schedule - September 30, 1998 b. Reports on Form 8-K No reports on Form 8-K were filed by the Company during the quarter ended September 30, 1999. 18 19 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 November 12, 1999 19 20 EXHIBIT INDEX 10(ppp) Form of Secured Promissory Note and Stock Pledge Agreement entered into on August 16, 1999 between Cerprobe Corporation as Lender and Pledgee and each of the following as Borrower and Pledgor: Kenneth W. Miller ($115,000), Donald Walter ($86,250), C. Zane Close ($345,000), and Michael Bonham ($287,500). 11 Computation of Net Income Per Share. 27.1 Financial Data Schedule - September 30, 1999 27.2 Financial Data Schedule - September 30, 1998
EX-10.(PPP) 2 EX-10.(PPP) 1 [CERPROBE LOGO (R)] Exhibit 10(ppp) STOCK PLEDGE AGREEMENT This Stock Pledge Agreement ("Agreement") is made and entered into effective as of August 24, 1999 by and between _____________________ as pledgor ("Pledgor"), and Cerprobe Corporation, a Delaware corporation ("Lender"), as pledgee. A. Lender intends to loan to Pledgor the sum of $_______________ ("Loan") pursuant to the terms of that certain Secured Promissory Note of this same date, between Lender and Pledgor ("Note"). Any defined term in this Agreement that is not specifically defined shall have the meaning given to it in the Note. B. Pursuant to the terms of the Note, in order to induce the Lender to make the Loan, the Pledgor must provide certain deliveries to the Lender, one of which is the delivery of this Agreement executed by Pledgor. C. Pledgor was granted an option to purchase _______ shares of Cerprobe Corporation Common Stock pursuant to the Cerprobe Corporation Nonqualified Stock Option Plan ("Option Shares"). In consideration for the purchase price for the exercise of the Option Shares, Pledgor executed the Note and grants the Lender a security interest in the Option Shares, subject to the terms in this Agreement. AGREEMENT In consideration of the mutual covenants contained in the Note, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: 1. PLEDGE. As security for the payment and performance of the Secured Obligations, Pledgor hereby grants to Lender a security interest in the Option Shares, together with any proceeds therefrom, and hereby pledges and assigns the Certificate(s) representing the Option Shares to Lender. Pledgor has delivered stock powers with respect to the Certificate(s) endorsed in blank ("Stock Powers") to Lender and hereby authorizes Lender, upon the occurrence and continuation of an Event of Default, to transfer the Certificates to Lender. Lender hereby acknowledges receipt of the Certificate(s) as security for the payment and performance of the Secured Obligations. Lender agrees not to transfer, sell, encumber, or otherwise dispose of the Option Shares, except in accordance with the provisions of this Agreement. For purposes of this Agreement, the "Secured Obligations" are the obligations of the Pledgor under the Note. 2 2. DIVIDENDS, VOTING RIGHTS, AND PROXY. The Pledgor, as record owner of the Option Shares, is entitled, prior to the occurrence of any Event of Default and the exercise of Lender's rights hereunder, to (i) retain all cash dividends paid on account of the Option Shares, (ii) exercise all voting rights of the Option Shares, and (iii) exercise all other shareholders' rights and privileges attributable to the Option Shares, except and unless as otherwise provided herein. The Pledgor grants to Lender an irrevocable proxy with respect to all of the Option Shares. This irrevocable proxy provides Lender with the right, upon an Event of Default, to exercise all rights, powers, and authority of the Pledgor with respect to the Stock for purposes of calling or convening meetings of Cerprobe Corporation, voting the Option Shares, and exercising any other rights with respect to the Option Shares. The rights being transferred from the Pledgor to Lender pursuant to this irrevocable proxy are acquired by Lender to the fullest extent permitted by the laws or regulations governing the rights and powers of stockholders of a Delaware corporation. Pledgor agrees that this irrevocable proxy is coupled with an interest. Pledgor irrevocably makes, constitutes, and appoints Lender, or any of its officers, the true and lawful attorney for Pledgor with full power of substitution, coupled with an interest, to execute in the name of Pledgor any documents necessary to effectuate this irrevocable proxy. This irrevocable proxy shall remain in full force and effect until satisfaction in full of the Secured Obligations. 3. ADJUSTMENTS. As additional security for the Secured Obligations, Pledgor grants to Lender a security interest in all securities, money, funds, or other property received by Pledgor on account of, or in exchange for, the Option Shares whether as a result of any share dividend, share split, reclassification, merger or consolidation, reorganization, or otherwise and agrees to promptly pledge and deliver such securities, together with the appropriate certificates and stock powers endorsed in blank to Lender. 4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PLEDGOR. Pledgor represents, warrants, and covenants to Lender, which representations, warranties, and covenants will survive the execution and delivery of this Agreement, as follows: (a) The execution, delivery, and performance of this Agreement will not conflict with any order, writ, injunction, or decree of any court or arbitrator presently in effect having applicability to Pledgor, or with any agreement to which Pledgor is a party that prohibits or would be violated by the execution and carrying out of this Agreement. (b) Pledgor owns the Option Shares free and clear of all liens and encumbrances (other than those granted to Lender) and there are no other restrictions on the transfer or sale of any of the Option Shares, except as disclosed on the Certificate(s). 5. RELEASE OF SECURITY INTEREST. Upon satisfaction in full of the Secured Obligations, Lender agrees to promptly cancel all Stock Powers with respect to the Certificate(s), release its security interest in the Option Shares, and deliver all of the Certificate(s) to Pledgor. 2 3 6. DEFAULT. The occurrence of an Event of Default (as defined in the Note), shall constitute an "Event of Default" hereunder. Upon the occurrence and continuation of such an Event of Default, the Lender shall have all rights and remedies provided by law, including without limitation, those under the Uniform Commercial Code as adopted in Arizona ("UCC"), and may sell the Option Shares in any manner that is not inconsistent with the provisions of the UCC. These rights shall be in addition to other remedies now or hereafter existing at law or in equity including, without limitation, Lender's right, at its discretion, to retain the Option Shares. Any failure or delay by Lender to exercise any right under this Agreement shall not be construed as a waiver of the right to exercise the same or any other right at any time. 7. SUCCESSORS AND ASSIGNS. The terms and provisions of this Agreement will bind and inure to the benefit of the respective heirs, successors, and assigns of the parties. 8. CONTROLLING LAW; SEVERABILITY. The various provisions of this Agreement will be construed under, and the respective rights and obligations of the parties will be determined with reference to, the laws of the State of Arizona (without giving effect to conflict of laws principles). If and to the extent that any court of competent jurisdiction holds any provision (or any part thereof) of this Agreement to be invalid, such holding will in no way affect the validity of the remainder of this Agreement. 9. WAIVER OF JURY TRIAL; CONSENT TO VENUE. Pledgor and Lender, after consulting, or having had the opportunity to consult, with counsel, knowingly, voluntarily, and intentionally waive any right either of them may have to a trial by jury in any litigation based upon or arising out of this Agreement or any related instrument or agreement, or any of the transactions contemplated by this Agreement, or any course of conduct, dealing, statements (whether oral or written), or actions of either of them. Neither Pledgor nor Lender shall seek to consolidate, by counterclaim or otherwise, any action in which a jury trial has been waived with any other action in which a jury trial cannot be or has not been waived. In the event of a dispute under this Agreement, the parties agree that exclusive jurisdiction and venue lies in a court of competent jurisdiction in Maricopa County, Arizona. These provisions shall not be deemed to have been modified in any respect or relinquished by either the Pledgor or Lender except by a written instrument executed by each of them. IN WITNESS WHEREOF, the parties have executed this Agreement on the date first set forth above. LENDER: PLEDGOR: CERPROBE Corporation, _______________________ a Delaware corporation By:____________________________ By:____________________ Randal L. Buness Secretary 3 4 SECURED PROMISSORY NOTE Phoenix, Arizona August 24, 1999 $____________ 1. FUNDAMENTAL PROVISIONS. The following terms will be used as defined terms in this Secured Promissory Note ("Note"): Lender: Cerprobe Corporation, a Delaware corporation. Borrower: ___________________ Principal Amount: _____________________ ($___________). Interest Rate: Six percent (6%) per annum. Default Interest Rate: Ten percent (10%) per annum above the Interest Rate. Maturity Date: August 24, 2002. Business Day: Any day of the year other than Saturdays, Sundays and legal holidays. Loan: The loan from Lender to Borrower in the Principal Amount and evidenced by this Note. Loan Documents: The Note, the Stock Pledge Agreement and any other documents securing the repayment of the Note. Option Shares: The shares of Cerprobe Corporation Common Stock held by the Lender as security for this Loan, as specified in the Stock Pledge Agreement. Stock Pledge Agreement: That certain Stock Pledge Agreement of this same date between Borrower, as pledgor, and Lender, as pledgee.
5 2. PROMISE TO PAY. For value received, Borrower promises to pay to the order of Lender, at its office at 1150 North Fiesta Boulevard, Gilbert, Arizona, 85233, or at such other place as the Lender may from time to time designate in writing, the Principal Amount, together with accrued interest from the date of disbursement on the unpaid principal balance at the Interest Rate. 3. INTEREST; PAYMENTS. (a) Absent an Event of Default hereunder or under the Stock Pledge Agreement, the Principal Amount shall bear interest at the Interest Rate. Throughout the term of this Note, interest shall be computed by applying the ratio of the annual interest rate over a year of 365 days, multiplied by the outstanding principal balance, multiplied by the actual number of days the principal balance is outstanding. (b) All payments of principal and interest due hereunder shall be made (i) without deduction of any present and future taxes, levies, imposts, deductions, charges, or withholdings, which amounts shall be paid by Borrower, and (ii) without any other set off. Borrower will pay the amounts necessary such that the gross amount of the principal and interest received by the Lender is not less than that required by this Note. (c) The entire unpaid principal balance, all accrued interest and any other amounts payable hereunder shall be paid in full on or before the Maturity Date. 4. PREPAYMENT. Borrower may prepay the Loan, in whole or in part, at any time without penalty or premium. 5. LAWFUL MONEY. Principal and interest are payable in lawful money of the United States of America. 6. APPLICATION OF PAYMENTS/LATE CHARGE/DEFAULT INTEREST. (a) Unless otherwise agreed to, in writing, or otherwise required by applicable law, payments will be applied first to accrued, unpaid interest, then to principal, and any remaining amount to any unpaid collection costs, late charges, and other charges, provided, however, upon delinquency or other 2 6 default, Lender reserves the right to apply payments among principal, interest, late charges, collection costs, and other charges at its discretion. All prepayments shall be applied to the indebtedness owing hereunder in such order and manner as Lender may from time to time determine in its sole discretion. (b) If any payment of interest and/or principal is not received by the holder hereof when such payment is due, then in addition to the remedies conferred upon the holder hereof pursuant to this Note, a late charge of five percent of the amount of the regularly scheduled payment or $25.00, whichever is greater, up to the maximum amount of $1,500.00 per late charge will be added to the delinquent amount to compensate the holder hereof for the expense of handling the delinquency for any payment past due in excess of ten days, regardless of any notice and cure periods. (c) Upon the occurrence of an Event of Default, including the failure to pay upon final maturity, Lender, at its option, may also, if permitted under applicable law, do one or both of the following: (i) increase the applicable Interest Rate on this Note to the Default Interest Rate, and (ii) add any unpaid accrued interest to principal and such sum will bear interest therefrom until paid at the rate provided in this Note (including any increased rate). The interest rate will not exceed the maximum rate permitted by applicable law. 7. SECURITY. This Note is secured by the Stock Pledge Agreement, which creates a lien on that certain stock described therein. 8. EVENT OF DEFAULT. The occurrence of any of the following shall be deemed to be an event of default ("Event of Default") hereunder: (a) default in the payment of principal or interest when due pursuant to the terms hereof and the expiration of five days after written notice of such default from Lender to Borrower; (b) if the Borrower is an employee of the Lender, the Borrower's termination of employment with "Cause" or the Borrower's voluntary resignation without "Good Reason" as such terms are defined in Section 9 below; 3 7 (c) if the Borrower is a non-employee director of the Company, the Borrower's ceasing to provide services as a director to the Company; (d) if Borrower sells, gifts, transfers, or assigns the Option Shares in anyway; or (e) an event of default under the Stock Pledge Agreement. 9. DEFINITION OF CAUSE AND GOOD REASON (a) Cause. For purposes of this Loan, a termination of employment for "Cause" means a termination of employment resulting from a determination by the Lender that the Borrower has: (i) been convicted of a felony involving dishonesty, fraud, theft, or embezzlement; (ii) repeatedly failed or refused, in a material respect, to follow reasonable policies or directives established by the Lender and after written notice thereof from the Lender, and a reasonable opportunity by the Borrower to cure such failures or refusals after having been given reasonable written notice of such failures or refusals; (iii) willfully and persistently failed to attend to the material duties or obligations imposed upon Borrower after reasonable written notice from the Lender and a reasonable opportunity by the Borrower to cure such failure; (iv) performed an act or failed to act, which, if the Borrower were prosecuted and convicted, would constitute a felony involving $1,000 or more of money or property of the Lender, or (v) intentionally misrepresented or concealed a material fact for purposes of securing employment with the Lender. (b) Good Reason. For purposes of this Loan, a termination of employment for "Good Reason" means any of the following events: (i) the assignment to the Borrower of any duties that are inconsistent with, or the reduction of powers or functions associated with, the Borrower's position, duties, or responsibilities with the Lender, or an adverse change in the Borrower's titles, authority, or reporting responsibilities, or in conditions of the Borrower's employment, (ii) the Borrower's base salary is reduced or the potential incentive compensation (or bonus) to which the Borrower may become entitled to at any level of performance by the Borrower or the Lender is reduced, (iii) the failure of the Lender to cause any successor to expressly assume and agree to be bound by the terms of this Agreement, (iv) any purported termination by the Lender of the Borrower's employment for grounds other than for "Cause," (v) the Lender relieving the Borrower of the Borrower's duties other than for "Cause," (vi) the Borrower is required to relocate to an employment location that is more than fifty (50) miles from Gilbert, Arizona. 4 8 10. REMEDIES. Upon the occurrence of an Event of Default, then at the option of the holder hereof, the entire balance of principal together with all accrued interest thereon, and all other amounts payable by Borrower under the Loan Documents shall, without demand or notice, immediately become due and payable. Upon the occurrence of an Event of Default (and so long as such Event of Default shall continue), the entire balance of principal hereof, together with all accrued interest thereon, all other amounts due under the Loan Documents, and any judgment for such principal, interest, and other amounts shall bear interest at the Default Interest Rate, subject to the limitations contained in Section 15 hereof. No delay or omission on the part of the Lender in exercising any right under this Note or under any of the other Loan Documents hereof shall operate as a waiver of such right. 11. WAIVER. Borrower, endorsers, guarantors, and sureties of this Note hereby waive diligence, demand for payment, presentment for payment, protest, notice of nonpayment, notice of protest, notice of intent to accelerate, notice of acceleration, notice of dishonor, and notice of nonpayment, and all other notices or demands of any kind (except notices specifically provided for in the Loan Documents) and expressly agree that, without in any way affecting the liability of Borrower, endorsers, guarantors, or sureties, the Lender may extend any maturity date or the time for payment of any installment due hereunder, otherwise modify the Loan Documents, accept additional security, release any person liable, and release any security or guaranty. Borrower, endorsers, guarantors, and sureties waive, to the full extent permitted by law, the right to plead any and all statutes of limitations as a defense. 12. CHANGE, DISCHARGE, TERMINATION, OR WAIVER. No provision of this Note may be changed, discharged, terminated, or waived except in a writing signed by the party against whom enforcement of the change, discharge, termination, or waiver is sought. No failure on the part of the Lender to exercise and no delay by the Lender in exercising any right or remedy under this Note or under the law shall operate as a waiver thereof. 13. ATTORNEYS' FEES. If this Note is not paid when due or if any Event of Default occurs, Borrower promises to pay all costs of enforcement and collection and preparation therefor, including but not limited to, reasonable attorneys' fees, whether or not any action or proceeding is brought to enforce the provisions hereof (including, without 5 9 limitation, all such costs incurred in connection with any bankruptcy, receivership, or other court proceedings (whether at the trial or appellate level)). 14. SEVERABILITY. If any provision of this Note is unenforceable, the enforceability of the other provisions shall not be affected and they shall remain in full force and effect. 15. INTEREST RATE LIMITATION. Borrower hereby agrees to pay an effective rate of interest that is the sum of the interest rate provided for herein, together with any additional rate of interest resulting from any other charges of interest or in the nature of interest paid or to be paid in connection with the Loan, including, without limitation, any other fees to be paid by Borrower pursuant to the provisions of the Loan Documents. Lender and Borrower agree that none of the terms and provisions contained herein or in any of the Loan Documents shall be construed to create a contract for the use, forbearance, or detention of money requiring payment of interest at a rate in excess of the maximum interest rate permitted to be charged by the laws of the State of Arizona. In such event, if any holder of this Note shall collect monies which are deemed to constitute interest which would otherwise increase the effective interest rate on this Note to a rate in excess of the maximum rate permitted to be charged by the laws of the State of Arizona, all such sums deemed to constitute interest in excess of such maximum rate shall, at the option of the Lender, be credited to the payment of other amounts payable under the Loan Documents or returned to Borrower. 16. HEADINGS. Headings at the beginning of each numbered section of this Note are intended solely for convenience and are not part of this Note. 17. CHOICE OF LAW. This Note shall be governed by and construed in accordance with the laws of the State of Arizona without giving effect to conflict of laws principles. 18. INTEGRATION. The Loan Documents contain the complete understanding and agreement of the Lender and Borrower and supersede all prior representations, warranties, agreements, arrangements, understandings, and negotiations. 6 10 19. BINDING EFFECT. The Loan Documents will be binding upon, and inure to the benefit of, the Lender, Borrower, and their respective successors and assigns. Borrower may not delegate its obligations under the Loan Documents. 20. TIME OF THE ESSENCE. Time is of the essence with regard to each provision of the Loan Documents as to which time is a factor. 21. SURVIVAL. The representations, warranties, and covenants of the Borrower in the Loan Documents shall survive the execution and delivery of the Loan Documents and the making of the Loan. BORROWER: By: __________________ Name: __________________ Title: __________________ 7 EX-11 3 EX-11 1 CERPROBE CORPORATION COMPUTATION OF NET INCOME (LOSS) PER SHARE EXHIBIT 11 (UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ------------------------------- ------------------------------- 1999 1998 1999 1998 ----------- ----------- ----------- ----------- Net loss $ (878,138) $(3,557,202) $(2,392,070) $ (744,994) =========== =========== =========== =========== Weighted average number of common shares outstanding 7,836,237 7,768,874 7,740,136 8,058,011 Common equivalent shares representing shares issuable upon exercise of stock options 12,059 157,694 89,430 286,833 Convertible preferred stock -- -- -- -- Subtraction of common equivalent shares due to antidilutive nature (12,059) (157,694) (89,430) (286,833) ----------- ----------- ----------- ----------- Dilutive adjusted weighted average shares and assumed conversions 7,836,237 7,768,874 7,740,136 8,058,011 =========== =========== =========== =========== Basic net loss per share $ (0.11) $ (0.46) $ (0.31) $ (0.09) =========== =========== =========== =========== Diluted net loss per share $ (0.11) $ (0.46) $ (0.31) $ (0.09) =========== =========== =========== ===========
EX-27.1 4 EX-27.1
5 This Schedule contains summary financial information extracted from the Condensed Consolidated Balance Sheet at September 30, 1999 and the Condensed Consolidated Statements of Operations for the nine months ended September 30, 1999 and is qualified in its entirety by reference to such financial statements. 9-MOS DEC-31-1999 SEP-30-1999 6,875,144 8,833,859 9,458,760 336,645 6,717,686 37,698,747 37,457,204 14,156,105 64,799,184 8,253,145 3,938,085 0 0 418,162 52,185,097 64,799,184 44,640,667 44,640,667 29,644,646 18,286,994 390,431 4,000 309,268 (3,057,734) 944,480 (2,386,748) (5,322) 0 0 (2,392,070) (0.31) (0.31)
EX-27.2 5 EX-27.2
5 This Schedule contains summary financial information extracted from the Condensed Consolidated Balance Sheet at September 30, 1998 and the Condensed Consolidated Statements of Operations for the nine months ended September 30, 1998 and is qualified in its entirety by reference to such financial statements. 9-MOS DEC-31-1998 SEP-30-1998 5,847,976 15,601,491 11,247,660 234,559 5,516,599 42,368,359 28,694,352 9,656,333 65,449,769 7,685,143 3,038,057 0 0 406,464 53,545,277 65,449,769 61,199,104 61,199,104 35,473,693 16,671,970 182,133 19,920 182,133 8,625,380 (3,528,637) 4,985,203 (5,730,197) 0 0 (744,994) (0.09) (0.09)
-----END PRIVACY-ENHANCED MESSAGE-----