<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended November 30, 1996
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
Commission File Number 0-12353
PLASMA-THERM, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Florida 04-2554632
-------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10050 16th Street North, St. Petersburg, Florida 33716
------------------------------------------------------
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code (813) 577-4999
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
----------------------------
(Title of Class)
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
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<PAGE> 2
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K.
As of January 22, 1997, the aggregate market value of the voting stock held by
non-affiliates of the Registrant was approximately $44,782,496.*
As of January 22, 1997, 10,396,061 shares of Common Stock, $.01 par value, were
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Part III -- The Registrant's definitive Proxy Statement for its
Annual Meeting of Stockholders presently scheduled to be held on
May 6, 1997.
*Calculated by using the applicable closing trade price and by
excluding all shares that may be deemed to be beneficially owned by
executive officers and directors of the Registrant, without conceding
that all such persons are "affiliates" of the Registrant for purposes
of the Federal securities laws.
ii
<PAGE> 3
PART I
ITEM 1. BUSINESS
GENERAL
Plasma-Therm, Inc., together with its subsidiary, (the "Company")
is engaged in the design and production of thin film etching and deposition
manufacturing equipment. The Company sells this equipment directly to
manufacturers in the semiconductor, compound semiconductor, thin film head,
photomask, microeletectromechanical systems (MEMS) and flat panel display
industries. The Company's products are marketed, together with service and
technical support, by the Company's direct sales force, its Japanese
distributor and independent domestic and foreign manufacturer's
representatives. The Company's business was founded in 1975.
RECENT DEVELOPMENTS
In June of 1996 Plasma-Therm's common stock, which traded
on the Nasdaq SmallCap Market, began trading on the Nasdaq National Market.
The move to the Nasdaq National Market is part of the Company's plan to
increase awareness of its stock to the analyst and broker investment
communities. Additionally, the National Market listing affords the Company
increased visibility and credibility due to its more stringent listing
requirements.
In June the Company entered into a patent license agreement
with Robert Bosch GmbH, a German company. The license embodies advanced plasma
process technology for the etching of silicon and is an enabling technology for
the microelectromechanical systems (MEMS) market. This technology was developed
by the Robert Bosch Corporate Research center. Plasma-Therm intends to offer
this technology in conjunction with its proprietary Inductively Coupled Plasma
source (ICP). This technology will be available on the Company's Versalock(R)
700 and Shuttlelock(R) 700 plasma processing systems.
During 1996 the Company began volume shipments of its newest
product, the Versalock(R) 700 thin film etching and deposition system. The
Versalock(R) 700 is a natural extension of its Shuttlelock(R) Series of plasma
processing systems. All processes developed on the Company's Shuttlelock(R)
chamber platform can be transferred directly to the Versalock(R) 700 system.
The Versalock(R) 700 is the Company's second cluster tool style system and its
first where multiple product generations will be developed on the same
substrate handling platform. The Versalock(R) 700 is perceived by management to
be a potential source of growth in revenue and income, although such growth
cannot be assured. See "Product Lines".
Additionally, during 1996 the Company completed the integration
of its proprietary Inductively Coupled Plasma (ICP) source to its 790,
Shuttlelock(R) 700 and Versalock(R) 700 plasma processing systems. This ICP
source provides high density, high performance plasma processing. The ICP
source increases the technical performance of the Company's products and allows
the Company to offer the affected products at favorable
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margins and competitive prices. The development of this source represents
innovation in basic technology brought to market in a compressed time frame.
In July of 1996, the Company completed its move into its
new state of the art manufacturing facility. The Company's operations are now
housed under one roof in a 60,000 sq. ft. facility. The entire assembly and
test area is contained in a class 10,000 to class 1,000 clean room.
Additionally, the Company's demonstration and applications laboratories are
housed in a class 100 clean room. These clean room manufacturing and
demonstration areas are necessary to address the cleanliness requirements of
the Company's customer base. The design of the new building accommodates
increased production capacity and is expected to improve efficiencies due to
enhanced manufacturing flow. The land and the building design will also
accommodate a 30,000 sq. ft. expansion for future growth. The Company's
subsidiary, Magnetran, Inc., continues to operate in one facility located in
New Jersey.
The Company secured financing for the construction of the
facility in August 1995 (see Note 4 to the Consolidated Financial Statements
for further detail).
PLASMA-THERM PRODUCT LINES
The Company manufactures various product lines that perform
thin film etching and deposition. Several products utilize batch processing in
which wafers or substrates are placed into the plasma chamber and processed
simultaneously. Also, the Company's products permit single wafer or substrate
processing.
The Company's thin film etching systems provide a combination
of Reactive Ion Etching (RIE), Plasma-Etching (PE), Electron Cyclotron
Resonance (ECR), and Inductively Coupled Plasma (ICP) capability, which permits
advanced process applications for Gallium Arsenide, Indium Phosphide, Chrome,
Quartz, Silicon Dioxide, Amorphous Silicon, Silicon, Indium Tin Oxide,
Molybdenum, Aluminum, Aluminum Oxide and various other materials.
The Company also offers Plasma Enhanced Chemical Vapor Deposition
(PECVD) systems for depositing Amorphous Silicon, Silicon Nitride, Silicon
Dioxide, diamond-like carbon and other materials.
The Company's plasma systems are divided into two groups. The core
(batch) group consists of three products lines: (1) 790 Series, (2)
Shuttlelock(R) Series, and (3) the 7000 Series. The second or automated group
of products consists of the Versalock(R) 700 and Clusterlock(R) 7000 Series.
These groups of products permit our customers to go from research and
development to pilot production and then on to high volume manufacturing,
utilizing the Company as their primary supplier.
The three core product lines are marketed as related products
to a wide range of industries (see Item 1, Business, General). They are
modular in design with components that are largely interchangeable. The
automated group of products are targeted specifically to high volume
manufacturers of thin film heads, compound semiconductors and flat panel
displays.
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In addition to plasma systems, the Company produces specialty power
subsystems and devices.
790 Series
The 790 Series RIE, PECVD and ICP plasma system are the most
widely accepted research and development plasma processing systems. The 790
Series has been extremely successful in the marketplace as the successor to the
System VII 70 and 700 Series. The 790's advanced 80486 control system coupled
with increased flexibility has significantly improved its marketability. The
790 Series is primarily used for advanced research and development and pilot
production of compound semiconductor devices.
Shuttlelock(R) Series
The Shuttlelock(R) Series RIE, PECVD, ECR and ICP plasma systems
continue to be the Company's most successful products. The Shuttlelock(R)
Series enhanced 80486 control system and other unique features, continues to
provide excellent marketability. The Shuttlelock(R) is a loadlocked single or
dual chamber plasma processing system. The loadlock allows the processing
chambers to remain under vacuum, thus permitting increased process integrity.
The Shuttlelock(R) is used for pilot production and production of compound
semiconductor devices, opto-electronics, photomasks, MEMS systems and thin film
head manufacturing.
7000 Series
The 7000 Series RIE and PECVD systems were originally introduced
in 1987 and received a complete redesign in 1995. This series of manually
loaded plasma systems are unique because of their 24 inch diameter electrode
areas. This makes the product attractive for use on either large area
substrates or large load batches of medium or small substrates. The 7000
Series is primarily used for high volume manufacturers of thin film heads and
compound semiconductor devices.
Versalock(R) 700 Series
The Versalock(R) 700 Series RIE, PECVD, and ICP plasma systems
are among the Company's newest products and are a natural extension of the
Shuttlelock(R) Series. All processes developed using the Company's
Shuttlelock(R) chamber platform can be transferred directly to the Versalock(R)
700 system. The Versalock(R) 700 is the Company's first plasma system platform
where multiple product generations will be developed using the same substrate
handling mechanisms. The Versalock(R) 700 has a central handler (square
loadlock) that permits up to three processing modules. The Versalock(R) 700 is
available with manual or cassette-to-cassette capability allowing it to meet
advanced research and development and or volume production requirements of the
compound semiconductor, thin film head, photomask, MEMS system markets.
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Clusterlock(R) 7000 Series
The Clusterlock(R) 7000 (CLR-7000) Series flat panel display
plasma processing system was introduced in late 1993. The CLR-7000 system was
designed to penetrate the flat panel display manufacturing industry. The
CLR-7000 is used by manufacturers of flat panel displays during the micro-
structure formation process. This formation process is essential in the
production of flat panel displays for notebook computers, personal computers,
work stations, avionics and marine navigation equipment. The potential exists
for flat panel displays to be used for televisions in the future.
The CLR-7000 offers a multi-chamber system configuration that
combines cassette-to-cassette vacuum transfer and "Class One" cleanliness with
reduced contamination, high throughput (yield) and ultimately lower costs of
ownership.
Specialty Power Subsystems and Devices
The Company's wholly-owned subsidiary, Magnetran, Inc., is in the
business of manufacturing transformers, reactors, power centers and related
components. These products are used by manufacturers of induction melting
furnaces, RF power supplies and AM/FM broadcast transmitters.
MANUFACTURING AND SUPPLIES
The Company designs and develops a substantial portion of
its systems' components. The Company has multiple potential commercial sources
for all of its components and sub-assemblies that it acquires from outside
vendors, although it often uses a single vendor for a given item to achieve
consistency, favorable pricing and dependable close relationships. The Company
maintains a significant inventory due to lengthy lead times of certain
components, aggressive customer delivery requirements and the need to provide
quality parts and service to its customers.
PATENTS AND TRADEMARKS
The Company believes that its success is generally less dependent
upon patent protection than on the scientific and engineering skills which are
applied to its products. The Company believes that licenses for products or
processes that are developed in the future could be valuable components of its
business strategy and intends to grant or seek such licenses and agreements and
seek possible patent protection, wherever it deems appropriate.
RESEARCH AND DEVELOPMENT
The market served by the Company is characterized by rapid
and constant technological change. There is no assurance that the Company's
current products will be
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viable for extended time periods. Accordingly, the Company spends substantial
resources for research and product development directed toward improving
existing products and developing new products.
During fiscal years ended November 30, 1996, 1995 and 1994, the
Company spent approximately $2,880,000, $2,570,000 and $2,266,000,
respectively, for research and product development.
No assurance can be given that the Company will be
technologically or commercially successful in these or in any other research
and product development efforts. As of November 30, 1996, 30 employees were
engaged primarily in research and product development activities.
MARKETING, SALES AND SERVICE
In the United States, the Company sells its products through
a combination of direct sales (West Coast, Southwest, Mid-Atlantic, Northeast)
and one manufacturer's representative. Service is provided directly with
locations in Vermont, New Jersey, Michigan, Minnesota, Texas, Florida,
California, Arizona and Idaho.
A substantial portion of the Company's markets is outside
of the United States. In Japan, the Company distributes its products
exclusively through its distributor, Hakuto Co., Ltd., located in Tokyo.
Hakuto purchases the Company's products for resale for its own account and
provides sales and service through several locations in Japan.
Sales of the Company's products in Europe are handled through a
network of manufacturer's representatives managed by the Company's direct sales
office located in Somerset, England. Service is provided by locations in
England and Ireland.
In the Far East (other than in Japan), sales are handled
exclusively by manufacturer's representatives. Far Eastern service is
supported by the manufacturer's representatives and the Company directly.
The Company's marketing efforts include the operation of a
process demonstration laboratory in Florida. The Company's exclusive Japanese
distributor, Hakuto Co., Ltd. operates a system demonstration facility.
Process and demonstration laboratories are used to demonstrate system
performance on customer wafers and substrates as part of the sales process, as
well as in research and development.
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The following table sets forth the estimated percentages of
revenues represented by the Company's principal areas of activity for the
periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
-----------------------------------------------------
1996 1995 1994
--------- -------- -------
<S> <C> <C> <C>
Area Revenues
-------------
Domestic .................................. 61% 69% 69%
Foreign .................................. 39% 31% 31%
----- ----- -----
Total 100% 100% 100%
Product Revenues
----------------
Plasma systems (1)................... 94% 94% 94%
Other (2) ........................... 6% 6% 6%
----- ----- ------
Total 100% 100% 100%
</TABLE>
See Note 8 to the Financial Statements under Item 8 for additional foreign and
domestic operations and export sales information.
__________________________
(1) Includes core products and automated products.
(2) Includes transformers and other systems.
A substantial amount of equipment is sold by the Company with
applications support and warranties of the systems' ability to perform the
desired process within specified limits. In substantiating those warranties,
the Company offers customers the opportunity to perform tests on the customers'
sample wafers and substrates in the Company's process laboratories. The
warranty period is approximately one year from date of shipment.
Sales to Hakuto Co., Ltd., the Company's current Japanese
distributor (since September 1995), amounted to 8% of total revenues in 1996.
Sales to Nissin Hi-Tech, Inc./Nissin Electric Co., Ltd., the Company's Japanese
distributor until August 1995, amounted to 7% and 13% of total revenues in 1995
and 1994, respectively.
Backlog
The Company's backlog, as of November 30, 1996 and 1995 was
approximately $12,000,000. Backlog orders consist solely of those items for
which a delivery schedule has been specified and to which the customer has
assigned a purchase order number. Orders generally are subject to cancellation
by the customer upon payment of charges which vary depending on the nature of
the order and the timing of the cancellation. It is expected that substantially
all of the November 30, 1996 backlog will be shipped during fiscal year 1997.
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COMPETITION
Core Products
The Company experiences substantial competition in marketing all
of its core products. Competition comes mainly from Oxford Plasma Technology
and Surface Technology Systems (STS) based in Europe and SamCo Corporation
located in Japan. Due to the Company's locally available Applications
Laboratory and substantially larger service organization and installed base, it
maintains competitive advantages in selling its products in the United States.
Conversely, the Company experiences significantly greater competition in Europe
and Japan because of its competitors' locations.
Automated Products
The competition for the Versalock(R) 700 system is Surface
Technology Systems (STS), Electrotech, Anelva and Ulvac. The Company experiences
global competition for the CLR-7000 flat panel display manufacturing system.
Several competitors include Tokyo Electron LTD (TEL), ULVAC, Lam Research and
Applied Komatsu Technology.
Principal competitive factors include system performance, cost of
ownership, size of installed base, diversity of product line and overall
customer support. The Company's competitors have more experience with complex
high-volume manufacturing, broader name recognition, substantially larger
customer bases and greater financial, technical, and marketing resources.
Therefore, there can be no assurance that the Company's competitors will not
develop systems and features that are superior to the Company's.
EMPLOYEES
As of November 30, 1996, the Company had 151 full-time employees,
119 of whom are employed in Florida, 16 in New Jersey, 6 in Europe, with the
remaining 10 located in its sales and service offices throughout the United
States. Of such employees, 25 are executive or administrative, 29 are sales and
service, 67 are manufacturing and 30 are research and development personnel.
Management believes, that in general, its employee relations are good. The
Company currently does not have any collective bargaining agreements.
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EXECUTIVE OFFICERS OF THE COMPANY AND KEY EMPLOYEES
Executive Officers
The executive officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Ronald H. Deferrari 56 Chairman of the Board,
Chief Executive Officer, Treasurer,
Ronald S. Deferrari 33 President, Chief Operating Officer
Diana M. DeFerrari 34 Senior Vice President, Secretary
Edmond A. Richards 46 Vice President of Engineering
Stacy L. Wagner 33 Vice President of Finance, Controller
</TABLE>
- -----------------------
Ronald H. Deferrari is the founder of the Company and the
father of Ronald S. Deferrari and Diana M. DeFerrari. Mr. Deferrari served as
President of the Company since its formation in 1975 until Ronald S. Deferrari
became President in 1995.
Ronald S. Deferrari was named President in June 1995 and
has been employed with the Company in various capacities since 1983. Mr.
Deferrari was appointed Chief Operating Officer in 1993. Prior to his current
position, he was Executive Vice President and Director of Sales and Marketing.
Diana M. DeFerrari was named Senior Vice President in
September 1996 and has been employed with the Company for seven years. Ms.
DeFerrari was appointed Secretary of the Corporation in May 1994. Prior to her
current position, she was Vice President of Administration and has worked for
the Company in related administrative capacities since 1990. Ms. DeFerrari
holds a Masters Degree in Business Administration.
Edmond A. Richards, PE, was appointed Vice President of
Engineering in October 1996. Mr. Richards has been Director of Engineering
since 1994 and has been employed with the Company for twenty years. Since 1991
Mr. Richards has held various engineering management positions and prior to
this, he served as General Manager of the Company for 11 years. Mr. Richards
holds a BS in Electrical Engineering.
Stacy L. Wagner, CPA, was named Vice President of Finance
in June 1995 and has been with the Company as Controller since July 1993. Prior
to joining Plasma-Therm, Ms. Wagner was Audit Supervisor/Manager for Grant
Thornton for over two years.
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<PAGE> 11
Other Key Employees
Dr. David J. Johnson, Process Scientist, has sixteen years
experience in the plasma processing field and has been employed with
Plasma-Therm since 1979. Dr. Johnson was recently named Director of Research
and Development with responsibility for overall Company's research and
development. He is a widely acknowledged expert in the area of metal etching
for the manufacture of silicon integrated circuits and complements this with
knowledge and publications in virtually every aspect of plasma processing.
Dr. Christopher Constantine, Applications Manager, has been
employed with the Company since 1984. He has acquired considerable experience
working in the ECR and ICP plasma processes after an extensive career in
traditional parallel plate plasmas, and is widely acknowledged for his
expertise.
ITEM 2. PROPERTIES
The Company constructed a 60,000 square foot building in
St. Petersburg, Florida where its operations are conducted. The building was
completed in June 1996. In August, 1995 the Company executed a promissory note
for $3,375,000 with its bank for the construction of the facility. In June
1996, the completion of the construction phase, the note converted to a five
year term loan, amortized over a fifteen year period. The loan is payable in
monthly installments of $33,235, including interest at 8.5% beginning in July
1996. The loan is collateralized by the land, the building and its contents.
The Company's subsidiary, Magnetran, Inc., continues to operate in one facility
located in New Jersey.
Prior to the completion of the construction of the new
manufacturing facility in June 1996, the Company conducted a majority of its
operations from leased facilities. Since October 1995, when the lease term of
its Florida corporate and manufacturing facilities expired, the Company began
leasing the facilities on a month-to-month basis and continued do so until the
completion of the construction of the new facility. The monthly rental amount
was approximately $43,000.
In August 1996 the Company executed a lease with its bank
for furniture for its new manufacturing facility. Total minimum lease payments
are $466,080 to be paid in 60 monthly installments beginning in August 1996. At
the end of the initial term the Company has the option to extend the lease for
an additional twelve months or purchase the furniture at the then fair market
value.
In addition, the Company leased approximately 48,360 square
feet in New Jersey where the Company's subsidiary, Magnetran, Inc. resides. The
leases expired October 31, 1994. The premises were leased from the CEO of the
Company at an aggregate base rental of $135,207 for 1994. In addition to the
minimum base rent, the Company paid taxes, insurance and maintenance relating to
the leased properties. Magnetran, Inc. entered into a 5 year gross lease, with
the Company's CEO, commencing November 1, 1994 for approximately 17,750 square
feet in New Jersey. The premises are leased at an aggregate annual base rental
of
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$86,841, which escalates 3% annually. After the initial term of the lease,
Magnetran has an option to renew for five years with a 3% increase each year.
The aggregate rentals paid to the CEO for all leases for the years ended
November 30, 1996, 1995 and 1994, were approximately $90,000, $87,000 and
$225,500, respectively.
ITEM 3. LEGAL PROCEEDINGS
No material litigation is pending.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Company's Common Stock is traded on the NASDAQ National
Market under the symbol PTIS. The following table sets forth the
range of high and low trade prices for the Common Stock for fiscal
1995 and fiscal 1996 as reported by NASDAQ. The Company began trading
on the NASDAQ National Market on June 6, 1996 and previously traded on
the NASDAQ SmallCap Market. As of January 22, 1997, the closing price
of the Company's Common Stock was $5.50.
<TABLE>
<CAPTION>
FISCAL 1995 HIGH LOW
----------- --------- ----------
<S> <C> <C>
First quarter $ 9-1/16 $ 4-1/2
Second quarter 5-5/8 3-1/4
Third quarter 4-15/16 3-1/2
Fourth quarter 4-5/16 2-9/16
<CAPTION>
FISCAL 1996 HIGH LOW
----------- ----------- -----------
<S> <C> <C>
First quarter $ 3-1/4 $ 2
Second quarter 4-11/16 2-1/8
Third quarter 5-11/16 3-1/4
Fourth quarter 4-3/4 2-13/16
</TABLE>
As of January 22, 1997, there were 696 record holders of
the shares of Common Stock.
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There have been no dividends declared during 1996. The
Company entered into a new loan agreement with NationsBank of Florida, N.A.
(NationsBank) in November 1995. That agreement contains covenants which relate
to the Company's operating performance and financial condition. In addition,
the loan agreement requires prior consent from the lender before declaring any
cash dividends. Under the most restrictive covenant, none of the Company's
retained earnings at November 30, 1996 are free of limitations on payment of
cash dividends. For the foreseeable future, the Company anticipates that any
net earnings will continue to be retained by the Company as working capital.
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
YEARS ENDED NOVEMBER 30,
--------------------------------------------------------------------
1996 1995 1994 1993 1992
------ ------ ------ ------ ------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
Statement of Operations:
Revenues $37,862 $29,612 $23,318 $16,401 $17,497
Net Income 2,994 1,089 1,963 233 55
Net Income per
common share .28 .10 .22(1) .03 .01
</TABLE>
(1) Includes .04 increase (from .18 to .22) as a result of the
cumulative effect of adopting SFAS 109 (see Note 1 to the Consolidated
Financial Statements).
<TABLE>
<CAPTION>
YEARS ENDED NOVEMBER 30,
--------------------------------------------------------------------
1996 1995 1994 1993 1992
----- ----- ----- ----- -----
(In thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
Balance Sheet at end
of period:
Working Capital $16,319 $15,102 $10,114 $ 7,647 $ 6,953
Total assets 31,475 26,909 16,583 10,824 11,539
Total long-term
obligations 3,589 1,147 811 66 332
Shareholders' Equity 22,219 18,972 11,105 8,623 8,266
</TABLE>
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The dollar amounts referenced throughout this section are
approximations, rounded to the nearest ten thousand ($10,000). References to
years are to the Company's fiscal years ended November 30 of the year referred
to.
RESULTS OF OPERATIONS
Comparison of Fiscal 1996 and Fiscal 1995
For fiscal 1996 the Company reported net sales of $37,860,000,
28% higher than sales of $29,610,000 for fiscal 1995. The increase in sales was
attributable to higher product demand and sales of the Company's newest
products, the Versalock(R) 700 Series and the Shuttlelock(R) 770 ICP Series.
Sales of the Versalock(R) 700 Series began in the fourth quarter of 1995 while
sales of the Shuttlelock (R) 770 ICP Series began in fiscal 1996. Total sales
related to Versalock(R) 700 Series in 1996 and 1995 was $16,210,000 and
$2,560,000, respectively. Total sales related to the Shuttlelock(R) 770 ICP
Series was $2,390,000 in 1996.
Cost of products sold of $23,480,000 for fiscal 1996 is 62% of
net sales, compared to $20,240,000 for fiscal 1995 which is 68% of net sales.
The decrease is primarily due to a combination of higher margins related to the
sales of the Versalock(R) 700 Series in 1996 and lower margins on the
Clusterlock(R) 7000 sales in 1995.
For comparative purposes and to be consistent with the Company's
peer groups, in 1995 and 1994 field service costs, including warranty, have been
reclassified entirely from selling and administrative to cost of products sold.
Warranty expense in 1996 was $660,000 as compared to $1,200,000
in 1995. A large component of the $540,000 difference between the years relates
to a provision established in 1995 for Clusterlock(R) 7000 systems sold. In
1996 the Clusterlock(R) 7000 sales were substantially lower. The Company's
increase in net sales in 1996 did not result in a corresponding increase in
warranty provision because the increase in sales related primarily to the
Versalock(R) 700 series which has lower warranty costs compared to the
Clusterlock(R) 7000 and certain other of the Company's products. On an ongoing
basis management analyzes the Company's actual warranty experience, along with
its industry's experience and other factors, and will accordingly adjust its
warranty reserves as deemed necessary.
Also included in cost of products sold in 1996 and 1995 is
a provision for inventory obsolescence of $390,000 and $340,000, respectively.
The Company's inventory provisions are determined by management considering,
among other factors, the results of an ongoing review of inventory and analysis
of product lines.
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<PAGE> 15
Research and development expenses for fiscal 1996 were
$2,880,000 compared to $2,570,000 in fiscal 1995, which are 8% and 9% of net
sales, respectively. Although the percentage of research and development
expense to net sales has decreased slightly, total dollars spent has increased
by $310,000. A portion of research and development expenses are fixed costs;
therefore the percentage as it relates to net sales is lower in fiscal 1996 as
compared to fiscal 1995 since net sales increased significantly by 28% from 1995
to 1996. As new products continue to be introduced, total dollars expended on
research and development are expected to increase.
Selling and administrative expense for the year ended
November 30, 1996 was $6,540,000 up from $5,090,000 for the year ended November
30, 1995 which is 17% of net sales for both years. A portion of the dollar
increase relates to increased sales volume and costs associated with the move to
the Company's new manufacturing facility in June, 1996. In addition, $270,000
relates to termination payments which will be paid in 1997 and 1998, to a former
officer of the Company under his employment agreement. Also, in 1996 commissions
paid to international sales representatives amounted to $950,000, a $550,000
increase over 1995 commissions of $400,000. The increase in international sales
representative commissions directly relates to a 60% increase international
sales from $9,190,000 to $14,760,000 in 1996. In addition, foreign sales as a
percentage of total sales increased 8% from 31% in 1995 to 39% in 1996.
Income before income taxes for fiscal 1996 was $4,850,000,
an increase of approximately $3,050,000 from $1,800,000 earned in fiscal 1995.
Net income per share was $.28 for 1996, an increase of $.18 from $.10 for the
year ended November 30, 1995. The components of this increase are described
above.
Statement of Financial Accounting Standards (SFAS) No. 123
"Accounting for Stock-Based Compensation" was issued by the Financial Accounting
Standards Board in October 1995. Management has the option to continue using
the accounting method promulgated by the Accounting Principals Board No. 25
"Accounting for Stock Issued to Employees" to measure compensation as it relates
to employee stock options granted or to adopt the method prescribed by SFAS No.
123. Management has made the determination not to adopt SFAS No. 123's
accounting recognition provisions for employee stock options. Therefore, only
proforma disclosures under SFAS No. 123 are required after December 1, 1996.
Comparison of Fiscal 1995 and Fiscal 1994
For fiscal 1995, the Company reported sales of $29,610,000,
27% higher than sales of $23,320,000 for fiscal 1994. The increase in sales was
attributable to higher product demand, increase in Clusterlock(R) 7000 sales and
sales of the newly introduced Versalock(R) product line.
Cost of products sold of $20,240,000 for fiscal 1995 was 68% of
net sales, compared to 66% in the prior year. The increase related primarily to
lower margins on Clusterlock(R) 7000 orders. The initial Clusterlock(R) 7000
sales were taken at lower margins
- 13 -
<PAGE> 16
to enable the Company to gain market share. In addition, the planned
recognition of $550,000 for field service costs (principally warranty costs for
both the Clusterlock(R) 7000 sales and the Company's other product lines) and a
write-off of slow-moving inventory of $340,000 contributed to higher cost of
products sold.
Research and development expense for fiscal 1995 was
$2,570,000 compared to $2,270,000 in fiscal 1994, which were 9% and 10% of net
sales, respectively. Although the percentage of research and development
expense to net sales decreased slightly, total dollars spent increased.
Selling and administrative expense for the year ended
November 30, 1995 was $5,090,000, up from $3,660,000 for the year ended November
30, 1994 which was 17% and 16% of net sales, respectively. In 1995 additional
expenditures were incurred related to the evaluation, initial purchase and
implementation of new manufacturing and financial computer software.
Income before income taxes for fiscal 1995 was $1,800,000 ,
a slight decrease of approximately $150,000 from $1,950,000 earned in fiscal
1994. The decrease was due primarily to a 2% increase in cost of products sold,
as discussed above.
Net income per share was $.10 and $.22 for the years ended
November 30, 1995 and 1994, respectively. Net income per share, before the
cumulative effect of change in accounting principle in 1994 was $.18.
Furthermore, the reduction of the income tax valuation allowance of $330,000,
which reduced income tax expense for 1994, had the effect of increasing income
before the cumulative effect from $.14 to $.18 per share. The remaining $.04
decrease from fiscal 1994 to fiscal 1995 was primarily the result of a slight
decrease in income before income taxes discussed above and an increase of shares
of common stock outstanding as a result of the private placement offering in
December 1994 for the sale of 1,500,000 shares.
FINANCIAL POSITION, LIQUIDITY AND CAPITAL REQUIREMENTS
Working capital at November 30, 1996 was $16,320,000, which is an
increase of $1,220,000 over $15,100,000 at November 30, 1995. Working capital
in 1996 benefited from, among other things, funds provided by the Company's
increased earnings from its operations in 1996 which also allowed the Company to
pay down short term borrowings by $1,000,000. See the following discussion of
the Company's cash position which also supplements this commentary on working
capital.
- 14 -
<PAGE> 17
Cash at November 30, 1996 was $5,270,000 which is an increase
of $210,000 over $5,060,000 at November 30, 1995. The primary components of
this increase are described herein. The following discussion highlights
certain aspects of the Company's cashflow activities impacting cash along with
certain related balance sheet line items. The activities to be discussed are as
follows:
<TABLE>
<CAPTION>
NET CASH PROVIDED BY
(USED IN)
------------------------------
1996 1995 INC(DEC)
--------- ------------ -----------
<S> <C> <C> <C>
Operating Activities $ 4,010,000 $ (840,000) $ 4,850,000
Investing Activities (5,560,000) (4,150,000) (1,410,000)
Financing Activities 1,760,000 7,430,000 (5,670,000)
</TABLE>
Net cash provided by operating activities in 1996 was $4,010,000
compared to net cash used in operating activities of ($840,000) in 1995. This
$4,850,000 change, which is an increase, consists of various components
including the increase in net income in 1996 compared to 1995 of almost $2
million and approximately a $3 million decrease in the change in accounts
receivable between the years. Accounts receivable only increased $160,000 in
1996. The explanation for this small increase in accounts receivable includes,
among other things, enhanced collection policies in 1996 and timing of sales and
related payments. While net sales increased approximately 28% between fiscal
year 1995 and 1996, the Company's accounts receivable and inventory at November
30, 1996 do not reflect a corresponding increase of a similar magnitude. The
reason accounts receivable did not noticeably increase has been discussed above.
Inventory actually decreased by $100,000 which is primarily due to refined
material requirements planning and enhanced inventory management as it relates
to the implementation of the Company's new manufacturing software in 1996.
Net cash used in investing activities for 1996 was $5,560,000
compared to $4,150,000 in 1995. This $1,410,000 change, which is an increase,
relates primarily to additional costs in 1996 of $770,000 for the construction
of the Company's new facility and $500,000 for additional software and hardware
purchases of its new manufacturing system. In 1996 the Company incurred
$5,380,000 in capital expenditures of which $2,980,000 consist of the costs
relating to the construction of the new facility discussed elsewhere herein (See
Item 1, Recent Developments), $1,180,000 relates to outlays for manufacturing
software, computer hardware, telephone system and inventory storage system, and
$1,220,000 relates to lab systems used for research and development.
Net cash provided by financing activities for 1996 was $1,760,000
compared to $7,430,000 in 1995. This $5,670,000 change, which is a decrease,
relates primarily to the receipt of proceeds of $5,760,000 from a private
placement in 1995. In 1996 cash used for financing activities included the
principal repayment of $570,000 of notes payable and capital lease obligations
and the reduction of the line of credit by $1,000,000.
- 15 -
<PAGE> 18
In 1996 the Company incurred $2,600,000 of debt related to
the construction of the new building. On June 14, 1996, the completion of the
construction phase, the construction loan, which totaled $3,375,000 at the date
of completion, converted to a five year term loan, amortized over fifteen years.
The loan is payable in monthly installments of $33,235, including interest at
8.5% beginning July 15, 1996. The loan is collateralized by the land, the
building and its contents and includes covenants which relate to the Company's
operating performance and financial condition loan (See Note 3 to the
Consolidated Financial Statements). At November 30, 1996 the Company is in
compliance with the financial covenants contained in the loan. The Company also
incurred $500,000 of debt related to the purchase of software and hardware.
The Company has extensive ongoing capital requirements for
research and development, the repayment of debt, capital equipment and
inventory. The Company believes that its current cash reserves, working capital
expected to be generated by operations and additional funds available under its
line of credit, should be sufficient to meet its capital requirements for the
immediate future. Should order input exceed projected 1997 levels, additional
working capital may be required.
FORWARD LOOKING INFORMATION
From time to time, the Company may publish forward-looking
statements relating to such matters as anticipated financial performance,
business prospects, technological developments, new products, research and
development activities and similar matters. The Private Securities Litigation
Reform Act of 1995 provides a safe harbor for forward-looking statements. In
order to comply with the terms of the safe harbor, the Company notes that a
variety of factors could cause the Company's actual results and experience to
differ materially from the anticipated results or other expectations expressed
in the Company's forward-looking statements. The risks and uncertainties that
may affect the operations, performance, development and results of the Company's
business include but is not limited to the following:
The Company sells relatively expensive capital equipment,
and in any given quarter or financial period, any one customer or any individual
shipment may represent a significant portion of revenue in that period.
Therefore a delay or cancellation of that shipment could cause the Company to
experience a revenue or earnings shortfall for a given financial period.
The Company relies on distributors and representatives,
which complement its direct sales and service staff, to sell and service its
products in various geographic locations. Should these sales and service
channels be rendered ineffective, it could materially impact the Company's
business. Some of the Company's competitors have more extensive direct sales
and service locations in the Company's distributor's and representatives'
channels, which could provide these competitors with a competitive advantage in
certain geographic areas.
- 16 -
<PAGE> 19
Plasma-Therm depends heavily on the success and growth of
the high technology marketplace. In particular, a slowdown in personal computer
consumption could cause a slowdown of disk drive production, resulting in lower
output of thin film heads, which could materially effect the Company's business.
The Company also relies on the health of the general
semiconductor equipment marketplace. A slowdown in the semiconductor capital
equipment purchases could also affect the Company's business from time to time.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Accountants' Report 18
Consolidated Financial Statements
Balance Sheets - November 30, 1996, and 1995 19
Statements of Income - Years Ended 21
November 30, 1996, 1995, and 1994
Statements of Shareholders' Equity - Years Ended 22
November 30, 1996, 1995, and 1994
Statements of Cash Flows - Years Ended 23
November 30, 1996, 1995, and 1994
Notes to the Financial Statements 25
</TABLE>
- 17 -
<PAGE> 20
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Shareholders and Board of Directors
Plasma-Therm, Inc.
We have audited the accompanying consolidated balance sheets of Plasma-Therm,
Inc. and Subsidiary as of November 30, 1996 and 1995, and the related
consolidated statements of income, shareholders' equity and cash flows for each
of the three years in the period ended November 30, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Plasma-Therm, Inc.
and Subsidiary as of November 30, 1996 and 1995, and the consolidated results of
their operations and their consolidated cash flows for each of the three years
in the period ended November 30, 1996 in conformity with generally accepted
accounting principles.
As discussed in Note 1 to the financial statements, effective December 1, 1993
the Company changed its method of accounting for income taxes from the deferred
method to the liability method required by Statement of Financial Accounting
Standards No. 109 "Accounting for Income Taxes".
GRANT THORNTON LLP
Tampa, Florida
January 14, 1997
- 18 -
<PAGE> 21
PLASMA-THERM, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
November 30,
<TABLE>
<CAPTION>
ASSETS 1996 1995
---------- -----------
<S> <C> <C>
Current assets
Cash and cash equivalents $ 5,266,279 $ 5,058,718
Accounts receivable 8,046,130 7,882,427
Prepaid income taxes 94,233 18,048
Inventories 7,958,620 8,059,333
Prepaid expenses and other 232,650 269,875
Deferred tax asset 388,313 603,000
----------- -----------
Total current assets 21,986,225 21,891,401
----------- -----------
Property, plant and equipment
Building 4,394,649 -
Machinery and equipment 6,026,387 4,074,793
Leasehold improvements 142,915 419,263
----------- -----------
10,563,951 4,494,056
Less accumulated depreciation and
amortization 2,155,143 1,954,377
----------- -----------
8,408,808 2,539,679
Land 786,017 786,017
Construction in process - 1,417,353
----------- -----------
9,194,825 4,743,049
----------- -----------
Other assets
Deferred tax asset - 182,850
Other 294,126 91,720
----------- -----------
294,126 274,570
----------- -----------
$31,475,176 $26,909,020
=========== ===========
</TABLE>
See accompanying notes to these consolidated financial statements.
- 19 -
<PAGE> 22
PLASMA-THERM, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
November 30,
<TABLE>
<CAPTION>
LIABILITIES 1996 1995
----------- ------------
<S> <C> <C>
Current liabilities
Short-term borrowings $1,000,000 $2,000,000
Current portion of notes payable 443,946 343,647
Current maturities of obligations under
capital leases 80,955 73,010
Accounts payable 2,223,826 2,920,079
Accrued payroll and related 676,674 402,649
Accrued expenses 414,094 356,895
Accrued warranty reserve 610,000 693,515
Customer deposits 218,000 -
----------- -----------
Total current liabilities 5,667,495 6,789,795
----------- -----------
Long-term obligations
Notes payable 3,431,475 908,485
Obligations under capital leases 157,519 238,475
----------- -----------
3,588,994 1,146,960
----------- -----------
SHAREHOLDERS' EQUITY
Shareholders' equity
Common stock
$.01 par value
Authorized - 25,000,000 shares
Issued and outstanding - 10,396,061
shares - 1996 and 10,279,561 shares -
1995 103,962 102,797
Additional paid-in capital 14,897,446 14,645,775
Retained earnings 7,217,279 4,223,693
----------- -----------
22,218,687 18,972,265
----------- -----------
$31,475,176 $26,909,020
=========== ===========
</TABLE>
See accompanying notes to these consolidated financial statements.
- 20 -
<PAGE> 23
PLASMA-THERM, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
Year Ended November 30,
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Net sales $37,862,185 $29,611,625 $23,318,465
------------ ----------- -----------
Costs and expenses
Cost of products sold 23,480,636 20,236,670 15,434,128
Research and development 2,880,226 2,569,700 2,266,133
Selling and administrative 6,540,588 5,090,944 3,655,400
Interest expense 342,203 203,211 101,483
Interest income (269,791) (336,435) (94,839)
Other (income) expense, net 33,948 51,736 4,272
------------ ----------- -----------
33,007,810 27,815,826 21,366,577
------------ ----------- -----------
Income before income taxes and cumulative
effect of change in accounting principle 4,854,375 1,795,799 1,951,888
Income taxes (current and deferred) 1,860,789 706,857 338,869
------------ ----------- -----------
Income before cumulative effect of change
in accounting principle 2,993,586 1,088,942 1,613,019
Cumulative effect of change in
accounting for income taxes - - 350,000
------------ ----------- -----------
Net income $ 2,993,586 $ 1,088,942 $ 1,963,019
============ =========== ===========
Income per share (primary and fully dilutive)
Income before cumulative effect of
change in accounting principle $ 0.28 $ 0.10 $ 0.18
Cumulative effect of change
in accounting principle - - 0.04
------------ ----------- -----------
$ 0.28 $ 0.10 $ 0.22
============ =========== ===========
</TABLE>
See accompanying notes to these consolidated financial statements.
-21-
<PAGE> 24
PLASMA-THERM, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Three Years Ended November 30, 1996
<TABLE>
<CAPTION>
Additional
Paid-in Retained
Common Stock Capital Earnings
----------------------------- --------- ----------
Shares
Issued Amount Amount Amount
------------ ------- --------- ----------
<S> <C> <C> <C> <C>
Balance at November 30, 1993 8,225,561 82,257 7,368,679 1,171,732
Exercise of stock options
(inclusive of income tax benefits) 203,000 2,030 324,925 -
Compensation on unexercised
stock options - - 192,253 -
Net income - - - 1,963,019
---------- -------- ----------- ----------
Balance at November 30, 1994 8,428,561 84,287 7,885,857 3,134,751
Exercise of stock options
(inclusive of income tax benefits) 101,000 1,010 222,621 -
Exercise of warrants
(inclusive of income tax benefits) 250,000 2,500 524,939 -
Compensation on unexercised
stock options - - 183,908 -
Sale of 1,500,000 shares of
common stock, net of
offering costs 1,500,000 15,000 5,744,097 -
Repayment of obligations under
Section 16(b) of the Securities
Exchange Act of 1934 - - 84,353 -
Net income - - - 1,088,942
---------- -------- ----------- ----------
Balance at November 30, 1995 10,279,561 102,797 14,645,775 4,223,693
Exercise of stock options
(inclusive of income tax benefits) 116,500 1,165 240,466 -
Compensation on unexercised
stock options - - 11,205 -
Net income - - - 2,993,586
---------- -------- ----------- ----------
Balance at November 30, 1996 10,396,061 $103,962 $14,897,446 $7,217,279
========== ======== =========== ==========
</TABLE>
See accompanying notes to these consolidated financial statements.
-22-
<PAGE> 25
PLASMA-THERM, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended November 30,
<TABLE>
<CAPTION>
1996 1995 1994
----------- ---------- ----------
<S> <C> <C> <C>
Cash flows from operating activities
Net income $2,993,586 $1,088,942 $1,963,019
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation and amortization 934,464 692,944 424,018
(Gain) loss on disposal of assets 14,066 15,323 (16,097)
Deferred taxes 397,537 (79,470) (295,469)
Compensation - stock options 33,306 183,908 192,253
Cumulative effect of change in accounting for
' income taxes - - (350,000)
Changes in assets and liabilities
Increase in accounts receivable (163,703) (3,156,551) (1,191,771)
(Increase) decrease in prepaid income taxes
(exclusive of tax benefits derived from
exercise of options/warrants) (65,745) 416,748 231,965
(Increase) decrease in inventories 100,713 (1,277,135) (2,293,064)
Increase in prepaid expenses and other (7,775) (6,306) (35,694)
Increase (decrease) in accounts payable (696,253) 1,462,166 75,230
Increase (decrease) in billings in excess of costs and
estimated earnings on uncompleted contracts - (27,330) 27,330
Increase in accrued payroll and related 274,025 11,736 172,164
Increase (decrease) in accrued warranty reserve (83,515) 550,515 143,000
Increase (decrease) in accrued expenses 57,199 171,937 (24,547)
Increase (decrease) in income taxes payable 0 (151,962) 127,036
Increase (decrease) in customer deposits 218,000 (738,000) 738,000
---------- ---------- ---------
Net cash provided by (used in)
operating activities 4,005,905 (842,535) (112,627)
---------- ---------- ---------
Cash flows from investing activities
Capital expenditures (5,382,421) (4,154,073) (453,592)
Proceeds from sales of assets 12,115 - 63,300
Payments received on note receivable 45,000 60,000 60,000
License acquisition (297,462) - -
Other 65,056 (55,816) (24,887)
---------- ---------- ---------
Net cash used in
investing activities (5,557,712) (4,149,889) (355,179)
---------- ---------- ---------
</TABLE>
See accompanying notes to these consolidated financial statements.
-23-
<PAGE> 26
PLASMA-THERM, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
Year Ended November 30,
<TABLE>
<CAPTION>
1996 1995 1994
------------ ---------- ----------
<S> <C> <C> <C>
Cash flows from financing activities
Proceeds from issuance of notes payable 3,118,900 752,132 1,000,000
Principal payments on notes payable (495,611) (375,000) (426,897)
Principal payments under capital lease obligations (73,011) (111,564) (70,550)
Net proceeds (payments) under line of credit agreements (1,000,000) 1,000,000 1,000,000
Issuance of common stock and warrants 209,090 400,627 94,990
Issuance of common stock in private placement - 5,759,097 -
---------- ---------- ---------
Net cash provided by
financing activities 1,759,368 7,425,292 1,597,543
---------- ---------- ---------
Net increase in cash
and cash equivalents 207,561 2,432,868 1,129,737
---------- ---------- ---------
Cash and cash equivalents, beginning of year 5,058,718 2,625,850 1,496,113
---------- ---------- ---------
Cash and cash equivalents, end of year $5,266,279 $5,058,718 $2,625,850
========== ========== ===========
</TABLE>
SUPPLEMENTAL CASH FLOW INFORMATION
The following is supplemental cash flow information for the years ended
November 30:
<TABLE>
<CAPTION>
1996 1995 1994
--------- ------- --------
<S> <C> <C> <C>
Cash paid for:
Interest $ 347,956 $197,458 $101,483
Income Taxes 1,528,019 525,755 276,388
</TABLE>
See accompanying notes to these consolidated financial statements.
-24-
<PAGE> 27
PLASMA-THERM, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
THREE YEARS ENDED NOVEMBER 30, 1996
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Plasma-Therm, Inc., a Florida corporation, together with its
subsidiary (the "Company"), is engaged in the design and
production of semiconductor and flat panel display
manufacturing equipment. The Company sells this equipment
directly to manufacturers in the semiconductor, thin film
head, computer, flat panel display, telecommunications and
other industries. The Company's products are marketed,
together with service and technical support, by the Company's
domestic sales force, its Japanese distributor and independent
domestic and foreign manufacturer's representatives.
Principles of Consolidation
The consolidated financial statements include the accounts of
Plasma-Therm, Inc. and its wholly-owned subsidiary,
Magnetran, Inc.. All significant intercompany transactions
and balances have been eliminated.
Use of Estimates in Financial Statements
In preparing financial statements in conformity with generally
accepted accounting principles, management makes estimates and
assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and
liabilities at the date of the financial statements, as well
as the reported amounts of revenues and expenses during the
reporting period. While actual results could differ from
those estimates, management does not expect the variances, if
any, to have a material effect on the financial statements.
Cash Equivalents
For purposes of the consolidated statements of cash flows, the
Company considers all highly liquid investments purchased with
maturities of three months or less to be cash equivalents. The
Company utilizes an overnight automated investment account for
sweeping of funds. The overnight investment account is held
in repurchase agreements backed by U.S. government securities.
Accounts Receivable and Bad Debts
The Company considers accounts receivable to be fully
collectible; accordingly, no allowance for doubtful accounts
is required. If amounts become uncollectible, they will be
charged to operations when that determination is made. Bad
debts have not been material.
Inventories
Inventories are stated at the lower of cost or market. Cost
was determined using the first-in, first-out (FIFO) method for
substantially all inventories.
-25-
<PAGE> 28
PLASMA-THERM, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
THREE YEARS ENDED NOVEMBER 30, 1996
Property, Plant and Equipment
Property, plant and equipment are stated at cost.
Depreciation and amortization of property, plant and equipment
is provided by generally using the straight-line method over
the useful lives of the related assets (machinery and
equipment principally over three to five years and building
over 39 years). Machinery and equipment category includes
certain of the Company's current products which are used two
to three years on various research and development projects
and subsequently sold. The items are depreciated over three
years to reflect their use and correspondingly adjust the
items to their estimated net realizable value. At November
30, 1996 and 1995 the cost and accumulated depreciation
related to these items are approximately $2,997,000 and
$576,000, and $1,774,000 and $161,000, respectively.
Revenue and Cost Recognition
Sales of the Company's products are generally recognized upon
shipment, except for the first orders related to the
Clusterlock(R)7000 systems in 1994, which initially had a
longer manufacturing cycle than the other products. In order
to better match revenues and expenses, the Company used the
percentage of completion method of revenue recognition for
these initial Clusterlock(R)7000 orders. Sales related to
subsequent Clusterlock(R)7000 orders have shorter
manufacturing cycles similar to the Company's other products,
and therefore have been recognized upon shipment.
Revenue recognized on the percentage of completion is measured
by total costs incurred to date to estimated total cost for
each order. Costs include all direct material and labor costs
and those indirect costs related to performance, such as
indirect labor, supplies, tools, repairs and depreciation
costs. Selling and administrative costs are charged to
expense as incurred.
Field Service Costs (Principally Warranty)
Field service costs related principally to warranty are
accrued upon the shipment of the products. The warranty
expense recorded in 1996, 1995, and 1994 of approximately
$661,000, $1,211,000 and 367,000, respectively, was determined
by management, using current and historical experience,
industry experience and other factors.
Research and Development
Research and development costs are expensed as incurred.
Income Per Share
Earnings per share is computed based on the weighted average
number of shares of common stock adjusted for the conversion
of dilutive common stock equivalents. The primary and fully
-26-
<PAGE> 29
PLASMA-THERM, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
THREE YEARS ENDED NOVEMBER 30, 1996
dilutive income per share are the same for all periods
presented. The following is the weighted average outstanding
share information.
<TABLE>
<CAPTION>
NOVEMBER 30,
-----------------------------------------------------
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Primary 10,731,927 10,542,114 9,057,751
Fully Dilutive 10,762,945 10,571,995 9,092,991
</TABLE>
Reclassifications
Certain reclassifications have been made to the 1994 and 1995
financial statements to conform to the 1996 presentation. In
1995 and 1994 field service costs have been reclassified from
selling and administrative to cost of products sold to be
consistent with the Company's peer groups.
Accounting for Stock-Based Compensation
Statement of Financial Accounting Standards (SFAS) No. 123
"Accounting for Stock-Based Compensation" has been issued by
the Financial Accounting Standards Board in October, 1995. As
it relates to stock options granted to employees, SFAS No. 123
permits companies to continue using the accounting method
promulgated by the Accounting Principals Board (APB) No. 25
"Accounting for Stock Issued to Employees" to measure
compensation or to adopt the fair value based method
prescribed by SFAS No. 123. If APB No. 25's method is
continued, proforma disclosures are required as if SFAS No.
123 accounting provisions were followed. SFAS No. 123's
accounting recognition method can be adopted subsequent to the
issuance of the Statement in October 1995, with a mandatory
implementation date of December 1, 1996, and would pertain to
employee stock option awards granted or modified or settled
for cash after the date of adoption. Management has made the
determination not to adopt SFAS No. 123's accounting
recognition provisions for employee stock options. Therefore,
only proforma disclosures under SFAS No. 123 are required
after December 1, 1996.
Fair Value Presentation
The carrying amounts of cash, accounts receivable, prepaid
expenses, accounts payable, and accrued expenses approximate
fair value because of the short maturity of these items. The
carrying amounts of the short-term borrowings and certain
notes payable approximate fair value because the interest
rates on these instruments change with market interest rates.
Certain notes payable with fixed interest rates and
obligations under capital leases approximate fair value
because the interest rates on these instruments are
approximately comparable to market rates.
-27-
<PAGE> 30
PLASMA-THERM, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
THREE YEARS ENDED NOVEMBER 30, 1996
License Agreement
In June 1996, the Company entered into a license agreement
with a German company for the non-exclusive rights to its
patent on a new plasma process technology. In exchange for
the use of the patent, the Company paid an initial license fee
of 450,000 deutsche marks which is approximately $300,000 at
the then current exchange rates. The initial fee is being
amortized using the straight line method and a five year
useful life (unamortized license fee is classified in other
assets). In addition, during the first five years of the
agreement or the shipment of the first fifty plasma processing
chambers including the licensed technology, whichever comes
first, the Company will pay a royalty fee of 35,000 deutsche
marks per plasma processing chamber. Thereafter, the royalty
fee will be reduced to 25,000 deutsche marks per plasma
processing chamber. In 1996 approximately $20,000 in royalty
fees were paid by the Company.
Change in Accounting Principle for Income Taxes
The Company adopted, effective December 1, 1993, Statement of
Financial Accounting Standards (SFAS) No. 109, "Accounting for
Income Taxes". Under the liability method specified by SFAS
109, deferred tax assets and liabilities are determined based
on the difference between the financial statement and tax
basis of assets and liabilities as measured by the enacted tax
rates which will be in effect when these differences reverse.
The cumulative effect of adopting SFAS No. 109, as of December
1, 1993, was to increase net income by $350,000. This amount
represents the recording of additional deferred tax assets
related to tax credit carryforwards of approximately $750,000,
net of a valuation allowance for $400,000. Under the previous
accounting method of accounting for income taxes (APB No. 11),
the income tax provision for 1994 would have been
approximately $432,000 which differs from that determined
under SFAS No. 109 of approximately $93,000. The principal
difference in the accounting methods is that SFAS No. 109 has
provided an earlier recognition of the tax credit
carryforwards than provided by APB No. 11, as can be seen by
the deferred tax asset recorded when SFAS No. 109 was adopted.
NOTE 2 INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
NOVEMBER 30,
--------------------------------------
1996 1995
------------ ----------
<S> <C> <C>
Raw materials $ 6,085,531 $ 5,066,621
Work-in-process 1,835,722 2,583,040
Finished goods 37,367 409,672
------------- -----------
$ 7,958,620 $ 8,059,333
============ ===========
</TABLE>
-28-
<PAGE> 31
PLASMA-THERM, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
THREE YEARS ENDED NOVEMBER 30, 1996
NOTE 3 SHORT-TERM AND LONG-TERM BORROWINGS
Line of Credit
In November 1995, the Company increased its existing line of
credit with its bank from $2,000,000 to $3,000,000. The term
of the line of credit agreement is through May 19, 1997, and
for a period of sixty (60) consecutive days during the term of
the loan, the Company must repay the principal below $100
which will occur in fiscal year 1997. Interest is payable
monthly at the bank's prime rate (8.25% at November 30, 1996).
The line is collateralized by accounts receivable and the bank
has a security interest in the proceeds for the collection of
accounts receivable in the Company's depository accounts. The
unused balance on the line of credit at November 30, 1996 and
1995 was $2,000,000 and $1,000,000 respectively.
Notes Payable
Notes payable consist of the following:
<TABLE>
<CAPTION>
NOVEMBER 30,
-----------------------------
1996 1995
---------- ------------
<S> <C> <C>
Notes payable with a bank, payable in
monthly installments of $15,423 including
interest at 7.92% payable through February
1999. The notes are secured by various
machinery and equipment. $ 380,300 $ -
Note payable with a bank, payable in monthly
installments of $27,778 plus interest at
8.28% payable through May 1997. The note is
secured by accounts receivable and
inventory and includes financial covenants
relating to the Company's operating
performance and financial condition. 166,667 500,000
Note payable with a bank, payable in monthly
installments of $33,235 including interest at
8.5% payable through July 2001 (see below) 3,328,454 752,132
---------- ----------
3,875,421 1,252,132
Less current portion 443,946 343,647
---------- ----------
$3,431,475 $ 908,485
========== ===========
</TABLE>
- 29 -
<PAGE> 32
PLASMA-THERM, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
THREE YEARS ENDED NOVEMBER 30, 1996
The Company is subject to the bank agreement described above.
Under the most restrictive covenant, none of the Company's
consolidated retained earnings is free of limitation for
payment of cash dividends at November 30, 1996.
In August, 1995 the Company executed a promissory note for
$3,375,000 with its bank for the construction of its new
manufacturing facility. On June 14, 1996, the completion of
the construction phase, the note converted to a five year term
loan, amortized over a fifteen year period. The loan is
payable in monthly installments of $33,235, including interest
at 8.5% beginning July 15, 1996. The loan is collateralized
by the land, the building and its contents.
Aggregate maturities of notes payable for five years following
November 30, 1996 are as follows:
<TABLE>
<S> <C>
1997 $ 443,946
1998 300,933
1999 184,072
2000 150,087
2001 2,796,383
---------
$3,875,421
==========
</TABLE>
Capitalized Leases
The Company conducts a portion of its operations utilizing
leased equipment consisting of primarily computer equipment.
For financial statement purposes, minimum lease rentals
relating to the equipment have been capitalized.
The related assets and obligations have been recorded using
the Company's incremental borrowing rate at the inception of
the leases. The leases, which are non-cancelable, expire in
1999. The following is a schedule of leased property under
capital leases:
<TABLE>
<CAPTION>
NOVEMBER 30,
-----------------------------------
1996 1995
-------- ----------
<S> <C> <C>
Machinery and equipment $331,920 $331,920
Less accumulated depreciation 126,251 59,865
-------- --------
$205,669 $272,055
======== ========
</TABLE>
- 30 -
<PAGE> 33
PLASMA-THERM, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
THREE YEARS ENDED NOVEMBER 30, 1996
The following is a schedule by years of future minimum lease
payments under capital leases together with the present value
of the net minimum lease payments as of November 30, 1996:
<TABLE>
<S> <C>
Year ended November 30,
1997 $101,757
1998 101,757
1999 70,489
--------
Total minimum lease payments 274,003
Less amount representing interest 35,529
--------
Present value of net minimum lease payments $238,474
========
Current portion $ 80,955
Noncurrent portion 157,519
--------
$238,474
========
</TABLE>
NOTE 4 SHAREHOLDERS' EQUITY
Private Placement
The Company completed a private placement offering of its
Common Stock in December 1994, raising $6,375,000 from the
sale of 1,500,000 shares. Costs, including commissions,
associated with the offering were approximately $616,000.
1995 Stock Incentive Plan
In June 1995, the Company's shareholders approved the 1995
Stock Incentive Plan (the Plan). The Plan authorizes the
granting of both incentive stock options and non-qualified
stock options up to a total of 1,000,000 shares, increased
annually by an additional number of shares equal to 1% of the
number of shares outstanding on the last day of each fiscal
year, commencing November 30, 1995, provided that the maximum
aggregate number of shares to be issued shall not exceed
3,000,000 (1,010,397 authorized as of November 30, 1996). The
option price for non-qualified stock options may be less than,
equal to, or greater than the fair market value on the date
the option is granted, whereas for incentive stock options,
the price will be at least 100% of the fair market value.
Compensation expense, representing the difference between the
exercise price and the fair market value at date of grant, is
recognized over the vesting or service period. Stock option
activity under the 1995 Plan was as follows:
- 31 -
<PAGE> 34
PLASMA-THERM, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
THREE YEARS ENDED NOVEMBER 30, 1996
<TABLE>
<CAPTION>
NOVEMBER 30,
--------------------------
1996 1995
-------- ---------
<S> <C> <C>
Outstanding - beginning of year 223,000 -
Granted 817,500 223,000
Exercised 94,500 -
Canceled 137,000 -
-------- ----------
Outstanding - end of year 809,000 223,000
========= ==========
Options exercisable - end of year 732,000 27,000
========= ==========
</TABLE>
Option prices per share:
<TABLE>
<CAPTION>
NOVEMBER 30,
------------
1996
------------
<S> <C>
Exercised during the year $1.02 - 2.68
Exercisable end of year $1.02 - 4.31
</TABLE>
1988 Stock Option Plan
The 1988 Stock Option Plan authorized the granting of both
incentive stock options and non-qualified stock options up to
a total of 850,000 shares of the Company's common stock to
employees and directors. Upon adoption of the 1995 Stock
Incentive Plan, the Company determined that no additional
options were granted under the 1988 Plan. Under the 1988 Plan
non-qualified stock options were granted at less than the fair
market value of the Company's common stock. Compensation
expense, representing the difference between the exercise
price and the fair market value at date of grant, was
recognized over the vesting or service period (e.g. six months
to one year after the date of grant). In 1995 and 1994 income
taxes payable was reduced and paid-in-capital was increased
by approximately $151,000 and $232,000, respectively, related
to an incremental tax benefit associated with the stock
options exercised during the year. Stock option activity was
as follows under the 1988 Plan:
<TABLE>
<CAPTION>
NOVEMBER 30,
------------------------------------------
1996 1995 1994
------- -------- --------
<S> <C> <C> <C>
Outstanding - beginning of year 50,000 154,000 323,000
Granted - - 34,000
Exercised 22,000 101,000 203,000
Canceled 28,000 3,000 -
---------- ---------- ----------
Outstanding - end of year - 50,000 154,000
========== ========== ==========
Options exercisable - end of year - 50,000 149,000
========== ========== ==========
</TABLE>
- 32 -
<PAGE> 35
PLASMA-THERM, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
THREE YEARS ENDED NOVEMBER 30, 1996
Option prices per share:
<TABLE>
<CAPTION>
NOVEMBER 30,
--------------------------------------------
1996 1995 1994
-------- ---------- ----------
<S> <C> <C> <C>
Exercised during the year $1.41 - 2.50 $ .26 -1.90 $ .24- 1.90
Exercisable end of year - $ 1.41 -2.50 $ .26 -1.90
</TABLE>
Incentive Stock Option Plan
The Incentive Stock Option Plan authorized the granting of
options to purchase 200,000 shares of the Company's common
stock. The Plan expired on September 15, 1991, and therefore
no further options could be granted under this Plan. For the
three years ended November 30, 1996, the activity under the
Incentive Stock Plan was as follows:
<TABLE>
<CAPTION>
NOVEMBER 30,
-------------------------------------
1996 1995 1994
------- ------- ------
<S> <C> <C> <C>
Options outstanding - beginning of year 13,000 13,000 23,000
Options exercised
Options surrendered, unexercised 13,000 - 10,000
------ ------ ------
Options outstanding - end of year - 13,000 13,000
====== ====== ======
</TABLE>
Option prices were $1.50 a share, the equivalent of the market
price on the dates the options were granted and all options
were exercisable for each year presented.
Common Stock Warrants
In connection with the Company's borrowing from its former
primary bank, the Company's Chief Executive Officer (CEO)
executed a limited guarantee of the Company's indebtedness
which was subsequently released in 1989. The Company agreed
to compensate the Company's CEO for giving such guarantee by
issuing to him a warrant expiring in April 2002, for the
purchase of 500,000 shares of the Company's common stock at a
purchase price per share of $.875. In accordance with the
anti-dilution provisions contained in the above warrants, the
exercise price of the warrants was adjusted as a result of the
spin-off of the Company's subsidiary in 1992. The adjusted
conversion price of the warrants is $.7721 per share. Warrants
totaling 100,000 were exercised in April 1995 for $77,210
leaving a balance of 400,000 warrants outstanding at $.7721
per share at November 30, 1996 and 1995.
In conjunction with previous financing agreements, two
warrants expiring in 1995 were issued to an investment company
in November 1988 and June 1989 to purchase 50,000 and 100,000
shares of common stock, respectively, at a price of $1.25 per
share. In accordance with the
- 33 -
<PAGE> 36
PLASMA-THERM, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
THREE YEARS ENDED NOVEMBER 30, 1996
anti-dilution provisions contained in the above warrants, the
exercise price of the warrants was adjusted as a result of the
spin-off of the Company's subsidiary in 1992. The adjusted
conversion price of the warrants is $1.1029 per share. Both
warrants were exercised in February 1995 for $165,435. As a
result of the exercise of these warrants in 1995, income taxes
payable was reduced and paid-in capital was increased by
approximately $285,000 related to an incremental tax benefit
associated with the exercise of the warrants.
NOTE 5 INCOME TAXES
The provisions for income taxes consist of the following:
<TABLE>
<CAPTION>
NOVEMBER 30,
----------------------------------------------------------
1996 1995 1994
----------- ---------- -----------
<S> <C> <C> <C>
Current
Federal $1,279,668 $ 279,380 $ 342,308
State 181,951 63,455 60,000
---------- ---------- -----------
1,461,619 342,835 402,308
---------- ---------- -----------
Deferred (benefit)
Federal 154,818 (239,739) (187,060)
State 18,000 (30,327) (20,013)
----------- ---------- -----------
172,818 (270,066) (207,073)
----------- ---------- -----------
Investment tax credits 223,476 200,666 239,616
Tax benefit from the
exercise of employee
stock options 10,442 150,001 231,965
Tax benefit from the
exercise of warrants - 284,794 -
Adjustment to valuation
allowance - - (332,475)
Other (7,566) (1,373) 4,528
---------- ---------- ----------
$1,860,789 $ 706,857 $ 338,869
========== ========== ==========
</TABLE>
- 34 -
<PAGE> 37
PLASMA-THERM, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
THREE YEARS ENDED NOVEMBER 30, 1996
The income tax provision reconciled to the tax computed at the
statutory Federal rate of 34% is as follows:
<TABLE>
<CAPTION>
NOVEMBER 30,
--------------------------------------------------------
1996 1995 1994
---------- ---------- --------------
<S> <C> <C> <C>
Tax expense at statutory rate $1,650,488 $612,768 $663,642
State income taxes, net of federal
income tax benefit 139,175 60,379 49,358
Non-deductible charges 61,172 35,084 36,641
Adjustment to deferred tax credit
item (recorded in fourth quarter) - - (81,592)
Reduction of valuation allowance
(recorded in fourth quarter) - - (332,475)
Other 9,954 (1,374) 3,295
---------- ----------- -----------
$1,860,789 $706,857 $338,869
========== =========== ===========
</TABLE>
The deferred tax asset consists of the following:
<TABLE>
<CAPTION>
NOVEMBER 30,
-----------------------------------
1996 1995
----------- ----------
<S> <C> <C>
Vacation accrual $ 87,037 $100,929
Depreciation (14,378) 113,400
Stock options 2,393 86,326
Warranty reserve 231,513 265,623
Tax credit carryforwards - 219,572
Deferred compensation 81,748 -
Capital loss carryforward 42,208 66,402
-------- --------
$430,521 $852,252
Less: valuation allowance (42,208) (66,402)
-------- --------
$388,313 $785,850
======== ========
</TABLE>
Factors that management considered in deriving the additional
deferred tax asset and valuation allowance included the
Company's historical taxable income patterns and expected
future taxable income through the period that the tax credit
carryforwards expire. In this determination, greater weight
was given to the two most recent years' average taxable
income.
- 35 -
<PAGE> 38
PLASMA-THERM, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
THREE YEARS ENDED NOVEMBER 30, 1996
For income tax purposes at November 30, 1996, there were no
net operating loss carryforwards and approximately $211,040 of
capital loss carryforwards. These capital loss carryforwards
expire in 1997. At November 30, 1996, there are no
significant tax credit carryforwards.
NOTE 6 COMMITMENTS
Operating Leases
Prior to the completion of the construction of the new Florida
corporate and manufacturing facility in June 1996, the Company
conducted the majority of its operations from leased
facilities. Since October 1995, when the lease term of its
Florida corporate and manufacturing facilities expired, the
Company began leasing the facilities on a month-to-month basis
and continued do so until the completion of the construction
of the new facility. The monthly rental amount was
approximately $43,000.
In addition, the Company leased approximately 48,360 square
feet in New Jersey where the Company's subsidiary, Magnetran,
Inc. resides. The leases expired October 31, 1994. The
premises were leased from the CEO of the Company at an
aggregate base rental of $135,207 for 1994. In addition to
the minimum base rent, the Company paid taxes, insurance and
maintenance relating to the leased properties. Magnetran,
Inc. entered into a 5 year gross lease, with the Company's
CEO, commencing November 1, 1994 for approximately 17,750
square feet in New Jersey. The premises are leased at an
aggregate annual base rental of $86,841, which escalates 3%
annually. After the initial term of the lease, Magnetran has
an option to renew for five years with a 3% increase each
year. The aggregate rentals paid to the CEO for all leases
for the years ended November 30, 1996, 1995 and 1994, were
approximately $90,000, $87,000 and $225,500, respectively.
In August 1996 the Company executed a lease with its bank for
furniture for its new manufacturing facility. Total minimum
lease payments are $466,080 to be paid in 60 monthly
installments beginning in August 1996. At the end of the
initial term the Company has the option to extend the lease
for an additional twelve months or purchase the furniture at
the then fair market value. Also, the Company uses office
equipment under non-cancelable operating leases expiring
through 2001.
- 36 -
<PAGE> 39
PLASMA-THERM, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
THREE YEARS ENDED NOVEMBER 30, 1996
The future minimum rental payments required under operating
leases that have an initial or remaining non-cancelable lease
term in excess of one year are as follows:
<TABLE>
<S> <C>
Year ended November 30,
1997 $265,532
1998 248,534
1999 232,082
2000 142,487
2000 69,859
--------
Total minimum lease payments $958,494
========
</TABLE>
The total rental expense for all operating leases was
$553,188, $398,529, and $605,197 for the years ended November
30, 1996, 1995 and 1994, respectively.
Distributorship Agreement
The Company has an exclusive distributorship agreement with a
Japanese company. If the Company terminates the agreement for
reasons other than breach of contract, the Company is required
to repurchase the demonstration systems and spare parts
inventory sold to the distributor at a purchase price equal to
a percentage of the original sales price, discounted each year
the equipment is held by the distributor. Although there is
no intent at November 30, 1996 to terminate the agreement, the
obligation to repurchase the demonstration equipment held by
the distributor would be approximately $400,000 if terminated.
Contractual Obligations
The Company has employment agreements with its key executive
officers, the terms of which expire at various times through
February 28, 1998. The agreements provide for minimum annual
total compensation of approximately $560,000. In addition,
key officers receive an annual bonus as a percent of net
income up to a certain cap.
In accordance with an employment and subsequent termination
agreement with a former officer, during the fourth quarter of
1996 approximately $270,000 of termination payments due
1997-1998 to the former officer were recorded. This
obligation is outstanding at November 30, 1996 and the costs
are classified in selling and administration expense.
NOTE 7 AFFILIATE TRANSACTIONS
During 1992 the Company loaned RF Power Products (RFPP, a
former subsidiary which was spun off in 1992) $200,000 in a
secured, subordinated loan to be repaid in equal monthly
- 37 -
<PAGE> 40
PLASMA-THERM, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
THREE YEARS ENDED NOVEMBER 30, 1996
installments of $5,000 commencing May 1993 through August
1996. Interest at the prime rate plus 1% is to be paid
monthly. The remaining balance at November 30, 1996 and 1995
is $0 and $45,000, respectively, and included in prepaid
expenses and other in 1995. The Company's CEO currently owns
approximately 9.5% of RFPP shares which he received via the
spin-off.
During 1996, 1995 and 1994, the Company had sales to and
purchases from RFPP, respectively, as follows: $871,573 and
$1,490,559 in 1996, $844,000 and $942,000 in 1995 and $551,000
and $708,000 in 1994; respectively. At November 30, 1996,
1995, and 1994, the Company's accounts receivables and
payables included the following amounts related to RFPP,
respectively, as follows: $109,293 and $209,871 at 1996,
$197,000 and $247,000 at 1995 and $86,000 and $129,000 at
1994.
NOTE 8 SEGMENT INFORMATION
Geographic Sales
<TABLE>
<CAPTION>
NOVEMBER 30,
1996 1995 1994
<S> <C> <C> <C>
Export revenues from the
United States to unaffiliated
foreign customers $14,761,397 $9,190,317 $7,233,203
----------- ---------- ----------
</TABLE>
All foreign sales are denominated in U.S. dollars.
Customer Sales
In 1996 and 1994 approximately 24% and 18%, respectively, of
consolidated net sales were to one customer. No sales in
excess of 10% of revenue were made to a single customer in
1995. Additionally, in 1995 and 1994, 7% and 13%,
respectively, of net sales were to the Company's former
distributor in Japan. In 1996 and 1995 net sales to the
Company's new Japanese distributor were 8% and less than 1% of
revenue, respectively.
NOTE 9 DEFINED CONTRIBUTION PLAN
The Company has a defined contribution plan which is qualified
under Section 401(k) of the Internal Revenue Code. This plan
covers substantially all employees over the age of twenty-one.
The plan consists of an employee elective contribution and a
company matching contribution for each eligible participant.
The Company's matching contribution is specified by the
Company's Board of Directors, is discretionary and can change
from year to year.
- 38 -
<PAGE> 41
PLASMA-THERM, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
THREE YEARS ENDED NOVEMBER 30, 1996
Forfeitures resulting from a terminated participant's
failure to be fully vested in the Company's matching
contribution will be used to reduce future contributions of
the Company. The Company's contribution for this plan for
1996, 1995 and 1994 was $23,616, $18,459 and $11,596,
respectively.
- 39 -
<PAGE> 42
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not Applicable
PART III
Except for the information regarding executive officers
called for by Item 401 of Regulation S-K, which is included in Item 1,
"Executive Officers of the Company", and the information regarding security
ownership of certain beneficial owners and management called for by Item 403
of Regulation S-K, which is included in Item 12, "Security Ownership of
Certain Beneficial Owners and Management", Items 10, 11 and 13 are hereby
incorporated by reference to the Company's definitive proxy statement for its
Annual Meeting of Stockholders presently scheduled for May 6, 1997 (the
"1997 Annual Meeting") which proxy statement was filed pursuant to Regulation
14A not later than 120 days after the end of the Company's fiscal year, in
accordance with General Instruction G(3) to Form 10-K.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information
regarding beneficial ownership of the Company's Common Stock as of March 7,
1997, the record date for the 1997 Annual Meeting, based on 10,995,061
shares of the Company's Common Stock outstanding on that date, by (i) each
person who is known to beneficially own more than 5% of the Company's
Common Stock, computed in accordance with Rule 13d-3 of the Securities
Exchange Act of 1934, as amended; (ii) each of the Company's directors;
(iii) each of the Company's named executive officers; and (iv) all directors
and executive officers of the Company as a group. The shareholders listed
possess sole voting and investment power with respect to the shares listed.
- 40 -
<PAGE> 43
<TABLE>
<CAPTION>
AMOUNT APPROXIMATE
OF BENEFICIAL PERCENT OF
NAME OWNERSHIP CLASS
---- --------- -----
<S> <C> <C>
Ronald H. Deferrari 2,428,005 22.08%
10050 16th Street North
St. Petersburg, FL 33716
Anastasios S. Gianoplus 18,000(1) (2)
8007 Algarve St.
McLean, VA 22102
Lubek Jastrzebski 5,000(3) (2)
450 Gulfview Blvd.
Apartment 1705
Clearwater, FL 34630
Ronald S. Deferrari 165,592(4) 1.49%
10050 16th Street North
St. Petersburg, FL 33716
Diana M. DeFerrari 98,792(5) (2)
10050 16th Street North
St. Petersburg, FL 33716
Edmond A. Richards 31,000(6) (2)
10050 16th Street North
St. Petersburg, FL 33716
Curtis A. Barratt 100 (2)
2831 Quail Hollow
Clearwater, FL 34621
Executive officers 2,850,489 25.26%
and directors as a group
(8 persons)
</TABLE>
(1) Includes an option to purchase 5,000 shares at a price of $2.25
per share, which expires on June 30, 2000.
(2) Less than 1% of the outstanding Common Stock.
(3) Represents option to purchase 5,000 shares at a price of $3.87 per
share, which expires on April 30, 1999.
(4) Includes an option to purchase 30,000 shares at a price of $4.06
per share, which expires on June 26, 1998; and an option to
purchase 110,000 shares at a price of $3.87 per share, which
expires on April 30, 1999.
(5) Includes an option to purchase 20,000 shares at a price of $4.06
per share, which expires on June 26, 1998; and an option to
purchase 20,000 shares at a price of $5.25 per share, which
expires on June 26, 1999.
(6) Includes an option to purchase 3,000 shares at a price of $4.31
per share, which expires on July 20, 1998; and an option to
purchase 15,000 shares at a price of $3.87 per share, which
expires on April 30, 1999.
- 41 -
<PAGE> 44
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
A. The following documents are filed as part of
this Form 10-K:
(1) Consolidated Financial Statements
The index to the Consolidated Financial
Statements of the Company is included
on page 17 in Part II, Item 8.
(2) Financial Statement Schedules
(a) Schedule II - Valuation and
Qualifying Accounts
All other schedules are omitted either
because the schedule is inapplicable or
the required information is included
elsewhere in the Financial Statements.
(3) Reports on Form 8-K
No reports on Form 8-K were filed by the
Company during the quarter ended
November 30, 1996.
(4) Exhibits
- 42 -
<PAGE> 45
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibits
---------- -----------------------
<S> <C>
3.1* Articles of Incorporation of the Registrant, as amended May 6, 1994 (Exhibit 3.1 to
the Registrant's 1994 Form 10-K).
3.2* By-laws of the Registrant (Exhibit 3.2 to the Registrant's 1994 Form 10-K).
3.3* Amendment to the Registrant's Articles of Incorporation (Exhibit 3.1 to the
Registrant's May 31, 1995 Form 10-Q).
3.4* Amendment to the Registrant's Articles of Incorporation (Exhibit 3.4 to the
Registrant's May 31, 1996 Form 10Q).
4.1* Notes and Warrant Agreements dated July 1, 1980 and February 17, 1981, and
amendments thereto, between the Registrant and Atalanta Investment Company, Inc. and
related consents (Exhibits 3.3, 3.4 and 3.5 to the 1981 Registration Statement,
Exhibit 3.5.1 to Amendment No. 1 to the Registration Statement No. 2-73281-NY filed
on July 20, 1981 and Exhibit 4.3 to the Registration Statement No. 2-82980 filed on
April 11, 1983).
4.2* Amendment, dated November 1, 1988, to the Note and Warrant Agreements between the
Registrant and Atalanta Investment Company (Exhibit 4.2 to the Registrant's Annual
Report Form 10-K for the year ended November 30, 1988).
4.3* Amendment, dated July 21, 1989 to the Note and Warrant Agreements between the
Registrant and Atalanta Investment Company (Exhibit 4.3 to Registrant's Annual
Report on Form 10-K for the year ended November 30, 1989).
4.4* Warrant dated as of July 24, 1987 between the Registrant and Ronald H. Deferrari
(Exhibit 4.6 to the Registrant's Annual Report on Form 10-K for the year ended
November 30, 1987).
4.5* Stock Option Plan of the Registrant, dated December 1, 1988. (Exhibit 4.4 to the
Registrant's 1988 Form 10-K).
4.6* 1995 Stock Incentive Plan of the Registrant, dated June 14, 1995 (Exhibit 4 to the
Registrant's 1995 Form S-8).
4.7* Form of stock certificate (Exhibit 4.6 to the Registrant's 1994 Form 10-K).
10.1* Employment Agreement dated May 3, 1994 between the Registrant and Ronald H.
Deferrari (Exhibit 10.1 to the Registrant's 1994 Form 10-K).
</TABLE>
- 43 -
<PAGE> 46
<TABLE>
<S> <C>
10.2* Amendment to Employment Agreement between the Registrant and Ronald H. Deferrari,
dated June 26, 1995 (Exhibit 10.30 to the Registrant's August 31, 1995 Form 10-Q).
10.3* Amendment between the Registrant and Diana M. DeFerrari, dated September 18,
1996. (Exhibit 10.3 to the Registrant's Form 10-K for the fiscal year ended November 30, 1996.)
10.4* Employment Agreement between the Registrant and Diana M. DeFerrari, dated
February 9, 1995 (Exhibit 10.1 to the Registrant's May 31, 1995 Form 10-Q).
10.5* Employment Agreement dated May 18, 1994 between the Registrant and Ronald S.
Deferrari (Exhibit 10.3 to the Registrant's 1994 Form 10-K).
10.6* Amendment to Employment Agreement between the Registrant and Ronald S.
Deferrari, dated June 26, 1995 (Exhibit 10.31 to the August 31, 1995 Form 10-Q).
10.7* Lease dated as of November 1, 1994 between Magnetran, Inc., and Ronald H.
Deferrari for property located at 136 Route 73, Voorhees, New Jersey.
10.8* Amendment to Employment Agreement between the Registrant and Ronald S.
Deferrari, dated June 26, 1995. (Exhibit 10.8 to the Registrant's Form 10-K for the
fiscal year ended November 30, 1996.)
10.9* Employment Agreement dated December 1, 1992 between the Registrant
and Edmond A. Richards. (Exhibit 10.9 to the Registrant's Form 10-K for the
fiscal year ended November 30, 1996.)
10.10* Amendment to Employment Agreement between the Registrant and Curtis
A. Barratt, dated September 18, 1996. (Exhibit 10.10 to the Registrant's Form 10-K
for the fiscal year ended November 30, 1996.)
10.11* Amendment to Employment Agreement between the Registrant and
Edmond A. Richards, dated October 9, 1996. (Exhibit 10.11 to the Registrant's
Form 10-K for the fiscal year ended November 30, 1996.)
10.19* Loan Agreement dated January 19, 1995 between the Registrant and NationsBank
of Florida, N.A. (including Revolving Credit Agreement, Security Agreement,
Term Promissory Note and Line of Credit Note), (Exhibit 10.16 to the
Registrant's 1994 Form 10-K).
10.20* Promissory Note dated August 14, 1995 between the Registrant and NationsBank of
Florida, N.A. (Exhibit 10.23 to the Registrant's August 31, 1995 Form 10-Q).
10.21* Mortgage, Assignment of Rents and Security Agreement dated August 14, 1995 between
the Registrant and NationsBank of Florida, N.A. (Exhibit 10.24 to the Registrant's
August 31, 1995 Form 10-Q).
</TABLE>
- 44 -
<PAGE> 47
<TABLE>
<S> <C>
10.22* Environmental Indemnity Agreement dated August 14, 1995 between the Registrant and
NationsBank of Florida, N.A. (Exhibit 10.25 to the Registrant's August 31, 1995
Form 10-Q).
10.23* Amendment dated August 14, 1995 (to Amended and Restated Revolving Credit Agreement
between Plasma-Therm, Inc. and NationsBank of Florida, N.A., dated January 19,
1995) between the Registrant and NationsBank of Florida, N.A. (Exhibit 10.26 to the
Registrant's August 31, 1995 Form 10-Q).
10.24* Construction Loan Agreement dated August 14, 1995 between the Registrant and
NationsBank of Florida, N.A. (Exhibit 10.27 to the Registrant's August 31, 1995
Form 10-Q).
10.25* Collateral Assignment of General Construction Contract, Subcontracts, Plans and
Specifications and Permits dated August 14, 1995 between the Registrant and
NationsBank of Florida, N.A. (Exhibit 10.28 to the Registrant's August 31, 1995
Form 10-Q).
10.26* Collateral Assignment of Professional Agreements and Plans and Specifications dated
August 14, 1995 between the Registrant and NationsBank of Florida, N.A. (Exhibit
10.29 to the Registrant's August 31, 1995 Form 10-Q).
10.27* Third Future Advance Promissory Note dated November 17, 1995 between the Registrant
and NationsBank of Florida, N.A. (Exhibit 10.27 to the Registrant's 1995 Form 10-
K).
10.28* Third Consolidation Line of Credit Promissory Note dated November 17, 1995
between the Registrant and NationsBank of Florida, N.A. (Exhibit 10.28 to the
Registrant's 1995 10-K).
10.29* Future Advance Consolidation and Modification Agreement dated November 17, 1995
between the Registrant and NationsBank of Florida, N.A. (Exhibit 10.29 to the
Registrant's 1995 10-K).
10.30* Second Amendment (to Amended and Restated Revolving Credit Agreement) dated
November 17, 1995 between the Registrant and NationsBank of Florida, N.A. (Exhibit
10.30 to the Registrant's 1995 10-K).
10.31* Amendment to Amended and Restated Security Agreement dated November 17, 1995
between the Registrant and NationsBank of Florida, N.A. (Exhibit 10.31 to the
Registrant's 1995 10-K).
10.36* Registrant's 401(k) Savings Plan Summary Plan Description dated July 1, 1992
(Exhibit 10.25 to the Registrant's 1992 Form 10-K).
</TABLE>
- 45 -
<PAGE> 48
<TABLE>
<S> <C>
10.37* Registrant's 401(k) Adoption and Trust Agreement dated January 1, 1995.
(Exhibit 10.37 to the Registrant's Form 10-K for the fiscal year ended November 30, 1996.)
10.38* Distributorship Agreement between the Registrant and Hakuto Co., Ltd., dated
August 1, 1995 (Exhibit 10.38 to the Registrant's 1995 Form 10-K).
10.39* Note and Security Agreement dated March 6, 1996 between the Registrant and
NationsBanc Leasing Corporation. (Exhibit 10.39 to the February 29, 1996 Form 10-
Q).
10.40* Employment Agreement between the Registrant and Curtis A. Barratt, dated February
28, 1996 (Exhibit 10.40 to the February 29, 1996 Form 10-Q).
10.41* Note and Security Agreement dated March 20, 1996 between the Registrant
and NationsBanc Leasing Corporation (Exhibit 10.41 to the May 31, 1996 Form 10-Q).
10.42* Extension Agreement dated June 14, 1996 and Addendum Letter to Extension Agreement
dated June 17, 1996 between the Registrant and NationsBank, N.A. (South) (Exhibit
10.42 to the May 31, 1996 Form 10-Q).
10.43* License Agreement dated June 19, 1996 between the Registrant and Robert Bosch GmbH
(Exhibit 10.43 to the May 31, 1996 form 10-Q).
10.44* Equipment Lease Agreement dated August 27, 1996 between the Registrant and
NationsBanc Leasing Corporation (Exhibit 10.44 to the August 31, 1996 Form 10-Q).
11. Statement RE: Computation of per share earnings.
21. Subsidiary of the Registrant.
23. Consent of Grant Thornton LLP.
</TABLE>
_______________________________________
* Incorporated by reference.
- 46 -
<PAGE> 49
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities and Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
PLASMA-THERM, INC.
/s/ RONALD H. DEFERRARI
---------------------------------
Ronald H. Deferrari, Chairman of the
Board, Chief Executive Officer
and Treasurer
Date: May 5, 1997
---------------------------
- 47 -
<PAGE> 50
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS ON THE SCHEDULE
Board of Directors
Plasma-Therm, Inc.
In connection with our audit of the consolidated financial statements
of Plasma-Therm, Inc. and Subsidiary referred to in our report dated
January 14, 1997, which is included in the Annual Report on Form 10-K
for the year ended November 30, 1996, we have also audited Schedule II
for each of the three years in the period ended November 30, 1996. In
our opinion, the schedules present fairly, in all material respects,
the information required to be set forth therein.
GRANT THORNTON LLP
Tampa, Florida
January 14, 1997
48
<PAGE> 51
PLASMA-THERM, INC. AND SUBSIDIARY
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
COL. A COL. B COL. C COL. D COL. E
------------------------------------------------------------------------------------------------------------------
ADDITIONS
-----------------------------
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING OF COSTS AND OTHER ACCOUNTS DEDUCTIONS - END OF
DESCRIPTION PERIOD EXPENSES - DESCRIBE DESCRIBE PERIOD
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year ended November 30, 1996:
Warranty Liability $693,515 $ 661,147 $ - $744,662 (1) $610,000
Deferred Tax Asset
Valuation Allowance $ 66,402 $ - $ - $ 24,194 (4) $ 42,208
Year ended November 30, 1995:
Warranty Liability $143,000 $1,211,289 $ - $660,774 (1) $693,515
Deferred Tax Asset
Valuation Allowance $ 67,525 $ - $ - $ 1,123 (4) $ 66,402
Year ended November 30, 1994:
Warranty Liability $ - $ 366,664 $ - $223,664 (1) $143,000
Deferred Tax Asset
Valuation Allowance $ - $ - $400,000 (2) $332,475 (3) $ 67,525
</TABLE>
(1) Costs incurred for warranty repair during the year.
(2) Consists of an addition to the valuation allowance which is a contra
account to the deferred tax asset account.
(3) Reduction of the valuation allowance based on expected future years'
utilization of tax credits.
(4) Reduction of the valuation allowance for capital loss carryforwards which
expired in 1995 and 1996.
- 49 -
<PAGE> 52
SCHEDULE IX - SHORT-TERM BORROWINGS
PLASMA-THERM, INC. AND SUBSIDIARY
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------
COL. A COL. B COL. C. COL. D. COL. E. COL. F.
--------------------------------------------------------------------------------------
MAXIMUM AVERAGE WEIGHTED
BALANCE WEIGHTED AMOUNT AMOUNT AVERAGE
CATEGORY OF AGGREGATE AT END OF AVERAGE OUTSTANDING OUTSTANDING INTEREST RATE
SHORT-TERM BORROWINGS PERIOD INTEREST DURING THE DURING THE DURING THE
RATE (2) PERIOD PERIOD (3) PERIOD (4)
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Year ended November 30, 19945
Short-term borrowings (1) $2,000,000 7.50% $1,000,000 $358,333 7.55%
Year ended November 30, 1994:
Short-term borrowings (1) $1,000,000 7.50% $1,000,000 $358,333 7.55%
- -----------------------------------------------------------------------------------------------
</TABLE>
NOTE: This schedule is not included in the financial statements
(1) Short-term borrowings represent a line of credit with a bank with
interest payable monthly at the bank's prime rate plus 1/2% (9% at
November 30, 1994) due May 19, 1995.
(2) The weighted average interest rate was computed by dividing the total
monthly interest rates by 12.
(3) The average amount outstanding during the period was computed by dividing
the total of month-end outstanding principal balances by 12.
(4) The weighted average interest rate during the period was computed by
dividing the actual interest expense by average short-term debt
outstanding.
- 50 -
<PAGE> 53
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
Year Ended November 30,
---------------------------------------------
1996 1995 1994
---------- -------- -----------
(Amounts in thousands, except per share data)
<S> <C> <C> <C>
PRIMARY
Average shares outstanding 10,329 10,093 8,382
Net effect of dilutive stock options and
warrants based on the treasury stock
method using average market price 403 449 676
------- ------- -------
TOTAL 10,732 10,542 9,058
======= ======= =======
Income before cumulative effect of change
in accounting principle $ 2,994 $ 1,089 $ 1,613
======= ======= =======
Net income $ 2,994 $ 1,089 $ 1,963
======= ======= =======
Income before cumulative effect of change
in accounting principle $ 0.28 $ 0.10 $ 0.18
Cumulative effect of change in
accounting principle - - 0.04
------- ------- -------
Net income per share $ 0.28 $ 0.10 $ 0.22
======= ======= =======
FULLY DILUTED
Average shares outstanding 10,329 10,093 8,382
Net effect of dilutive stock options and
warrants based on the treasury stock
method using the year-end market price,
if higher than average market price 434 479 711
------- ------- -------
TOTAL 10,763 10,572 9,093
======= ======= =======
Income before cumulative effect of change
in accounting principle $ 2,994 $ 1,089 $ 1,613
======= ======= =======
Net income $ 2,994 $ 1,089 $ 1,963
======= ======= =======
Income before cumulative effect of change
in accounting principle $ 0.28 $ 0.10 $ 0.18
Cumulative effect of change in
accounting principle - - 0.04
------- ------- -------
Net income per share $ 0.28 $ 0.10 $ 0.22
======= ======= =======
</TABLE>
- 51 -
<PAGE> 54
SUBSIDIARY OF THE REGISTRANT
<TABLE>
<CAPTION>
STATE OR OTHER JURISDICTION
NAME OF INCORPORATION
---- ----------------
<S> <C>
Magnetran, Inc. New Jersey
</TABLE>
- 52 -
<PAGE> 55
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our reports dated January 14, 1997, accompanying the
consolidated financial statements and the schedule of Plasma-Therm, Inc. and
Subsidiary included in the Annual Report on Form 10-K of Plasma-Therm, Inc. and
Subsidiary for the year ended November 30, 1996. We hereby consent to the
incorporation by reference of said reports in the Registration Statements of
Plasma-Therm, Inc. and Subsidiary on Form S-3 (File No. 33-88836, effective
February 1, 1995) and Forms S-8 (File No. 33-29104, effective June 22, 1989 and
File 33-60375, effective June 14, 1995).
GRANT THORNTON LLP
Tampa, Florida
January 14, 1997
- 53 -
<PAGE> 1
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
Year Ended November 30,
---------------------------------------------
1996 1995 1994
---------- -------- -----------
(Amounts in thousands, except per share data)
<S> <C> <C> <C>
PRIMARY
Average shares outstanding 10,329 10,093 8,382
Net effect of dilutive stock options and
warrants based on the treasury stock
method using average market price 403 449 676
------- ------- -------
TOTAL 10,732 10,542 9,058
======= ======= =======
Income before cumulative effect of change
in accounting principle $ 2,994 $ 1,089 $ 1,613
======= ======= =======
Net income $ 2,994 $ 1,089 $ 1,963
======= ======= =======
Income before cumulative effect of change
in accounting principle $ 0.28 $ 0.10 $ 0.18
Cumulative effect of change in
accounting principle - - 0.04
------- ------- -------
Net income per share $ 0.28 $ 0.10 $ 0.22
======= ======= =======
FULLY DILUTED
Average shares outstanding 10,329 10,093 8,382
Net effect of dilutive stock options and
warrants based on the treasury stock
method using the year-end market price,
if higher than average market price 434 479 711
------- ------- -------
TOTAL 10,763 10,572 9,093
======= ======= =======
Income before cumulative effect of change
in accounting principle $ 2,994 $ 1,089 $ 1,613
======= ======= =======
Net income $ 2,994 $ 1,089 $ 1,963
======= ======= =======
Income before cumulative effect of change
in accounting principle $ 0.28 $ 0.10 $ 0.18
Cumulative effect of change in
accounting principle - - 0.04
------- ------- -------
Net income per share $ 0.28 $ 0.10 $ 0.22
======= ======= =======
</TABLE>
- 51 -
<PAGE> 1
SUBSIDIARY OF THE REGISTRANT
<TABLE>
<CAPTION>
STATE OR OTHER JURISDICTION
NAME OF INCORPORATION
---- ----------------
<S> <C>
Magnetran, Inc. New Jersey
</TABLE>
- 52 -
<PAGE> 1
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS ON THE SCHEDULE
Board of Directors
Plasma-Therm, Inc.
In connection with our audit of the consolidated financial statements
of Plasma-Therm, Inc. and Subsidiary referred to in our report dated
January 14, 1997, which is included in the Annual Report on Form 10-K
for the year ended November 30, 1996, we have also audited Schedule II
for each of the three years in the period ended November 30, 1996. In
our opinion, the schedules present fairly, in all material respects,
the information required to be set forth therein.
GRANT THORNTON LLP
Tampa, Florida
January 14, 1997
48
