SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM 10-QSB/A
Quarterly Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Quarter Ended September 30, 1996
------------------
Commission File Number 0-11370
CERPROBE CORPORATION
--------------------
(Name of Issuer Specified in Its Charter)
Delaware 86-0312814
------------------------------- ----------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
600 South Rockford Drive, Tempe, Arizona 85281
- ---------------------------------------- ----------
(Address of Principal Executive Offices) (Zip Code)
(602) 967-7885
--------------
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Exchange Act during the past 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
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, at the latest practical date.
CLASS OUTSTANDING AS OF NOVEMBER 1, 1996
- ----- ----------------------------------
Common 5,037,821
Par value $.05 per share
Traditional Small Business Disclosure Format (check one):
Yes No X
----- -----
1
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CERPROBE CORPORATION
QUARTERLY REPORT ON FORM 10-QSB
FOR THE QUARTER ENDED SEPTEMBER 30, 1996
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
ITEM 1.
Condensed Consolidated Balance Sheets -
September 30, 1996 and December 31, 1995 ......................... 3
Condensed Consolidated Statements of Income -
Three and Nine Months Ended September 30, 1996 and 1995 .......... 4
Condensed Consolidated Statements of Cash Flows -
Nine Months Ended September 30, 1996 and 1995 .................... 5
Notes to Condensed Consolidated Financial Statements ............. 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS .................... 11
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS ................ 16
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K ................................. 17
SIGNATURES ................................................................ 18
2
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CERPROBE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
ASSETS 1996 1995
------ ------------ ------------
(unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 7,232,995 $ 263,681
Marketable securities (Note B) 2,260,063 0
Accounts receivable, net (Note C) 5,169,219 4,377,041
Inventories (Note D) 3,811,354 2,802,081
Prepaid expenses 138,245 111,673
Income taxes receivable 364,116 163,464
Deferred income taxes 336,598 270,599
------------ ------------
TOTAL CURRENT ASSETS 19,312,590 7,988,539
------------ ------------
PROPERTY AND EQUIPMENT, net (Notes E & I) 6,681,928 4,667,786
GOODWILL & INTANGIBLES, net 1,734,424 1,923,396
PATENTS AND TECHNOLOGY, net 59,854 74,013
OTHER ASSETS (Note F) 1,348,924 313,716
------------ ------------
TOTAL ASSETS $ 29,137,720 $ 14,967,450
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 1,849,836 $ 1,499,853
Accrued expenses (Note G) 1,307,981 788,599
Convertible subordinated debentures 485,000 595,000
Current portion of notes payable (Note H) 124,770 123,743
Current portion of capital leases (Note I) 225,165 209,885
------------ ------------
TOTAL CURRENT LIABILITIES 3,992,752 3,217,080
------------ ------------
Notes payable, less current portion 312,584 408,376
Capital leases, less current portion 644,693 572,830
Deferred income taxes 66,123 66,123
Other liabilities 339,159 46,801
------------ ------------
TOTAL LIABILITIES 5,355,311 4,311,210
------------ ------------
MINORITY INTEREST 29,211 0
------------ ------------
STOCKHOLDERS' EQUITY:
Preferred stock, par value $.05 per share:
Authorized, 10,000,000 shares;
Issued and outstanding 523 shares at September 30, 1996 26 0
Common stock, par value $.05 per share:
Authorized, 10,000,000 shares;
Issued and outstanding 4,909,279 and 4,095,851
shares at September 30, 1996 and December 31, 1995 245,464 204,792
Additional paid-in-capital 17,488,202 7,239,410
Retained earnings 5,997,348 3,466,464
Unearned compensation 0 (241,872)
Foreign currency translation adjustment 22,158 (12,554)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 23,753,198 10,656,240
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 29,137,720 $ 14,967,450
============ ============
</TABLE>
3
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<TABLE>
<CAPTION>
CERPROBE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended September 30, Nine Months Ended September 30,
-------------------------------- -------------------------------
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
NET SALES $ 8,799,247 $ 6,834,260 $ 28,159,069 $ 17,968,454
COST OF GOODS SOLD 4,937,571 3,551,627 15,285,366 9,390,742
------------ ------------ ------------ ------------
GROSS MARGIN 3,861,676 3,282,633 12,873,703 8,577,712
------------ ------------ ------------ ------------
EXPENSES:
Engineering and product development 345,963 199,745 724,230 529,068
Selling, general and administrative 2,595,559 2,197,764 7,870,390 5,110,197
------------ ------------ ------------ ------------
2,941,522 2,397,509 8,594,620 5,639,265
------------ ------------ ------------ ------------
OPERATING INCOME 920,154 885,124 4,279,083 2,938,447
OTHER INCOME AND (EXPENSE):
Interest expense (50,737) (50,273) (167,194) (134,207)
Interest income 177,113 8,950 345,356 34,576
Other income 64,348 30,357 151,830 119,726
------------ ------------ ------------ ------------
INCOME BEFORE INCOME TAXES
AND MINORITY INTEREST 1,110,878 874,158 4,609,075 2,958,542
MINORITY INTEREST 21,521 0 83,809 0
PROVISION FOR INCOME TAXES 469,000 362,000 2,162,000 1,267,000
------------ ------------ ------------ ------------
NET INCOME $ 663,399 $ 512,158 $ 2,530,884 $ 1,691,542
============ ============ ============ ============
INCOME PER COMMON AND COMMON EQUIVALENT SHARE:
PRIMARY NET INCOME PER SHARE $ 0.13 $ 0.12 $ 0.49 $ 0.42
============ ============ ============ ============
WEIGHTED AVERAGE NUMBER OF
COMMON AND COMMON EQUIVALENT
SHARES OUTSTANDING 5,297,528 4,405,372 5,125,943 4,022,993
============ ============ ============ ============
FULLY DILUTED NET INCOME PER SHARE $ 0.11 $ 0.10 $ 0.45 $ 0.36
============ ============ ============ ============
WEIGHTED AVERAGE NUMBER OF
COMMON AND COMMON EQUIVALENT
SHARES OUTSTANDING 5,782,576 4,992,874 5,647,789 4,708,352
============ ============ ============ ============
</TABLE>
4
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<TABLE>
<CAPTION>
CERPROBE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine months ended September 30,
------------------------------
1996 1995
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 2,530,884 $ 1,691,542
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 1,339,227 485,502
Gain on sale of fixed assets 0 6,444
Tax benefit from stock options exercised 407,000 0
Deferred income taxes (65,999) (8,901)
Provision for losses on accounts receivable 5,000 51,000
Provision for obsolete inventory 46,000 95,000
Compensation expense 49,383 0
Loss applicable to minority interest (83,809) 0
Changes in operating assets and liabilities:
Accounts receivable (797,178) (859,701)
Inventories (1,055,273) (935,603)
Prepaid expenses and other assets (461,780) (322,438)
Accounts payable and accrued expenses 869,365 168,549
Income taxes receivable (200,652) 0
Other liabilities 292,358 424,133
----------- -----------
Net cash provided by operating activities 2,874,526 795,527
----------- -----------
INVESTING ACTIVITIES:
Capital expenditures (2,896,861) (1,187,269)
Purchase of marketable securities (2,260,063) 0
Investment in CRPB Investors, L.L.C (600,000) 0
Cost incurred in Fresh Test Technology acquisition 0 (402,865)
Cash acquired in purchase of Fresh Test Technology 0 321,167
Proceeds from sale of fixed assets 0 43,613
----------- -----------
Net cash used in investing activities (5,756,924) (1,225,354)
----------- -----------
FINANCING ACTIVITIES:
Principal payments on notes payable and capital leases (261,000) (253,692)
Net proceeds from issuance of convertible preferred stock 9,400,000 0
Net proceeds from issuance of common stock 564,980 207,464
Capital contribution by minority interest partner 113,020 0
----------- -----------
Net cash provided by (used in) financing activities 9,817,000 (46,228)
----------- -----------
EFFECT OF EXCHANGE RATES ON CASH 34,712 (18,479)
----------- -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 6,969,314 (494,534)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 263,681 738,319
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 7,232,995 $ 243,785
=========== ===========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
Conversion of subordinated debentures to common stock $ 110,000 0
----------- -----------
Property acquired under capital leases and notes payable $ 253,378 $ 547,613
----------- -----------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION :
Interest paid $ 118,685 $ 110,263
----------- -----------
Income taxes paid $ 1,812,000 $ 1,679,876
----------- -----------
Issuance of stock for purchase of Fresh Test Technology $ 0 $ 2,662,969
----------- -----------
</TABLE>
5
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CERPROBE CORPORATION
--------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
SEPTEMBER 30, 1996
------------------
A. INTERIM FINANCIAL REPORTING
---------------------------
The balance sheet as of September 30, 1996, the statements of
operations for the three and nine months ended September 30, 1996 and
September 30, 1995, and the statements of cash flows for the nine
months ended September 30, 1996 and September 30, 1995 have been
prepared by Cerprobe Corporation (the "Company") without audit. In the
opinion of management, all adjustments (which include only normal
recurring adjustments) necessary to present fairly the financial
position, results of operations and cash flows for all periods
presented have been made.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. It is suggested
that these financial statements be read in conjunction with the
financial statements and notes thereto included in the Company's 1995
Form 10-KSB. The results of operations of the interim periods are not
necessarily indicative of the results to be obtained for the entire
year.
In late 1995, Cerprobe Corporation formed a wholly owned Singapore
subsidiary called Cerprobe Asia Holdings PTE. LTD. Cerprobe Asia
Holdings PTE. LTD., together with Asian investors, formed a joint
venture named Cerprobe Asia PTE. LTD. Cerprobe Asia Holdings PTE. LTD.
is a 70% owner of Cerprobe Asia PTE. LTD. Subsequently, Cerprobe Asia
PTE. LTD created wholly owned subsidiaries, Cerprobe Singapore PTE. LTD
and Cerprobe Taiwan Co. LTD, to operate full service sales and
manufacturing plants. At present, Cerprobe Taiwan Co. LTD is not fully
operational. All activities that are related to the above Asian
Companies will, henceforth, be referred to as "Asian Operations."
B. MARKETABLE SECURITIES
---------------------
Marketable securities consist of a U.S. Treasury Note for $2,225,000 at
6 3/8%, maturing on July 15, 1999. This balance is stated at cost plus
accrued interest, which approximates fair market value.
C. ALLOWANCE FOR DOUBTFUL ACCOUNTS
-------------------------------
The allowance for doubtful accounts at September 30, 1996 and December
31, 1995 were $178,000 and $173,000, respectively.
6
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D. INVENTORIES
-----------
Inventories are stated at the lower of cost (determined on the
first-in, first-out method) or market and consist of the following:
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
-------------- ------------
<S> <C> <C>
Raw materials $ 2,250,649 $ 1,655,974
Work-in-process 1,689,705 1,229,107
Reserve for obsolete inventory (129,000) (83,000)
-------------- ------------
Total $ 3,811,354 $ 2,802,081
============== ============
</TABLE>
E. PROPERTY AND EQUIPMENT
----------------------
Property and equipment consist of the following:
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
-------------- ------------
<S> <C> <C>
Manufacturing tools and equipment $ 6,671,614 $ 4,825,724
Office furniture and equipment 2,783,528 1,722,312
Leasehold improvements 881,554 759,843
Construction in progress 507,185 398,838
Computer software 39,775 39,775
Accumulated depreciation and amortization (4,201,728) (3,078,706)
-------------- ------------
$ 6,681,928 $ 4,667,786
============== ============
</TABLE>
F. OTHER ASSETS
------------
In September 1996, the Company acquired a 36% interest in CRPB
Investors, L.L.C., for $600,000. CRPB Investors, L.L.C., an Arizona
limited liability company, was formed for the purpose of owning and
operating the 83,000 square foot facility being built to serve as
Cerprobe's worldwide headquarters. The investment will be accounted for
by the equity method of accounting. A holder of $460,000 of Cerprobe's
convertible subordinated debentures is a 24% owner of CRPB Investors,
L.L.C..
G. ACCRUED EXPENSES
----------------
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
--------------- -------------
<S> <C> <C>
Accrued payroll and related taxes $ 910,957 $ 482,866
Other accrued expenses 397,024 305,733
--------------- -------------
$ 1,307,981 $ 788,599
=============== =============
</TABLE>
7
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H. NOTES PAYABLE
-------------
On April 30, 1996, the Company entered into an unsecured $3,000,000
revolving line of credit with First Interstate Bank (now Wells Fargo
Bank), which expires on April 28, 1997. The non-use fee under the line
of credit is .125% of the unused portion, calculated per annum. The
interest rate on any amounts borrowed under the revolving credit
agreement is the lower of Prime Rate, which was 8.25% at September 30,
1996, or LIBOR (London Interbank Rate), plus 2.25%, which was 7.684% at
September 30, 1996. There was no amount outstanding under this
agreement at September 30, 1996.
On April 3, 1995, due to the acquisition of Fresh Test Technology
Corporation ("Fresh Test"), the Company acquired a note related to an
exclusive license for probe card technology, which provided for monthly
payments of $2,500. This note was paid in full on March 14, 1996.
I. LONG-TERM DEBT AND COMMITMENTS
------------------------------
On August 21, 1996, Cerprobe entered into a long term commercial
operating lease to consolidate its Arizona operations into a single
facility on a 12 acre parcel in Gilbert, Arizona. The lease will
commence upon completion of the 83,000 square foot facility in May
1997. The facility will serve as Cerprobe's worldwide headquarters and
is being built for Cerprobe's use by CRPB Investors, L.L.C., a limited
liability company formed for the purpose of owning and operating the
property. Cerprobe is a minority shareholder in CRPB Investors, L.L.C.
The initial term of the lease is 15 years with 7 options to extend the
lease for successive 5 year terms. The initial lease rate is dependent
on final construction costs, but is currently expected to be about
$875,000 per year.
On September 9, 1996, the Company leased various equipment with an
aggregate cost of $253,378 from Wells Fargo Leasing Corporation. The
interest rate on this lease is 8.48%. On September 30, 1996, the long
term portion of this lease was $209,227.
On October 10, 1996, the Company leased various equipment with an
aggregate cost of $270,590 from Wells Fargo Leasing Corporation. The
interest rate on this lease is 8.08%.
Convertible Subordinated Debentures
In March and April 1991, the Company issued $1,000,000 in aggregate
principal amount of Convertible Subordinated Debentures (the
"Debentures"). The Debentures are convertible into shares of the
Company's Common Stock at a conversion price equal to $1.00 per share.
As of September 30, 1996, $515,000 in principal amount of the
Debentures had been converted into 515,000 shares of Common Stock.
Accordingly, $485,000 in principal amount of the Debentures was
outstanding at September 30, 1996, all of which is due on December 15,
1996 ($480,000 of which bears interest at 12 1/2% and $5,000 of which
bears interest at 25%, payable semi-annually in June and December of
each year).
8
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Convertible Preferred Stock
On January 18, 1996, the Company issued 1,000 shares of Convertible
Preferred Stock for $10,000,000. Net proceeds, after deducting
expenses, were $9,400,000. If a holder does not convert within the
first two years, then automatic conversion occurs at the end of the
second year. The Convertible Preferred Stock converts at the lesser of
110% of the fixed strike price of $16.55 or 90% of the average five day
closing price prior to the conversion date. The Company may call the
Convertible Preferred Stock at any time in minimum amounts of
$2,000,000 at a price of 125% of par, or upon a merger, buyout or
acquisition.
Additionally, the Company issued 39,275 common stock warrants on
January 18, 1996. These give the holder the right to purchase from
Cerprobe Corporation not more than 39,275 fully paid and non-assessable
shares of the Company's Common Stock, $.05 par value, at a price of
$16.55 per share on or after January 16, 1997, with expiration in four
years.
During the first quarter ended March 31, 1996, 22 shares of Convertible
Preferred Stock were converted into 17,655 shares of Common Stock.
During the second quarter ended June 30, 1996, 106 shares of
Convertible Preferred Stock were converted into 83,300 shares of Common
Stock. During the third quarter ended September 30, 1996, 349 shares of
Convertible Preferred Stock were converted into 437,771 shares of
Common Stock. Accordingly, 523 shares of Convertible Preferred Stock
were outstanding at September 30, 1996.
Acquisition
On October 25, 1996, the Company signed an Agreement of Merger and Plan
of Reorganization with CRoute, Inc., a Texas corporation, pursuant to
which Cerprobe will acquire CompuRoute, Incorporated, a manufacturer of
printed circuit boards, 89% of which is owned by CRoute, Inc., in
exchange for 400,000 shares of Cerprobe common stock and $4.6 million
in cash, subject to reduction. The transaction will be accounted for by
Cerprobe under the purchase method of accounting in accordance with
generally accepted accounting principles. In connection with this
transaction, Cerprobe will purchase the existing building leased by
CompuRoute for $1.2 million and the assumption of the remaining
principal balance against the building, which at September 30, 1996,
was approximately $1,040,000. This transaction is subject to a number
of conditions, as well as approval by the shareholders of CRoute and
CompuRoute.
9
<PAGE>
J. PRO FORMA DATA - FRESH TEST TECHNOLOGY ACQUISITION
--------------------------------------------------
The following summary, prepared on a pro forma basis, presents the
results of operations as if the acquisition had occurred January 1,
1995.
Nine Months Ended
-----------------
September 30, 1995
------------------
Net sales $19,446,606
Net income 1,871,418
Primary earnings per share .46
Fully diluted earnings per share .40
10
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
---------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
General
Cerprobe designs, manufactures, and markets high-performance probing and
interface products for use in the testing of integrated circuits and hybrid
electronic circuits for the semiconductor industry. Its probe cards generally
range from $500 to $24,000, but may cost more depending upon the complexity and
performance specifications of the probe cards. Cerprobe's interface assemblies
range in price from $1,000 to $65,000. The Company has experienced significant
growth over the past few years with sales of $14 million in 1994, $26 million in
1995, and $28 million for the first nine months of 1996. Approximately $4
million of 1995 sales and $5.4 million of the first nine months of 1996 sales
were sales of interface products from the Company's 1995 acquisition of Fresh
Test Technology Corporation ("Fresh Test").
The Company operates domestic full service manufacturing and sales facilities in
Tempe and Chandler, Arizona; San Jose, California; Austin, Texas; and Westboro,
Massachusetts, and maintains sales offices in Beaverton, Oregon; Colorado
Springs, Colorado; and Boca Raton, Florida.
In Europe and Asia, Cerprobe markets its products and services its customers
through its full service manufacturing and sales facilities in Scotland and
Singapore. Cerprobe recently leased space for a Taiwan facility under the name
of Cerprobe Taiwan Co., LTD. This subsidiary is in the initial startup phase.
The Company intends to continue to expand in Southeast Asia as it believes that
area is the fastest growing region for the semiconductor industry.
Results of Operations
Three Months Ended September 30, 1996 Compared to Three Months Ended September
30, 1995
Net sales for the three months ended September 30, 1996 were $8,799,247 compared
to $6,834,260 for the three months ended September 30, 1995, an increase of 29%.
The increase in net sales reflects a continuation of higher order rates for the
Company's probe card products and the contribution of interface products from
the Company's 1995 acquisition of Fresh Test.
Gross margin for the three months ended September 30, 1996 was 44% of sales
compared to 48% of sales for the comparable period in 1995. The decrease in
gross margin was a result of the change in product mix, which includes a higher
ratio of interface product sales in the three months ended September 30, 1996,
as well as manufacturing variances due to decreased volume in relation to
capacity during the three months ended September 30, 1996.
Engineering and product development expenses for the three months ended
September 30, 1996 were $345,963 compared to $199,745 for the three months ended
September 30, 1995, an increase of 73%. This increase represents a controlled
expansion of research and development efforts to pursue the development of new
integrated circuit testing systems for the future.
11
<PAGE>
Selling, general and administrative expenses for the three months ended
September 30, 1996 were $2,595,559 compared to $2,197,764 for the three months
ended September 30, 1995, an increase of 18%. The increase in selling, general
and administrative expenses resulted primarily from increased sales and
marketing efforts, and increased fixed general and administrative costs due to
the Company's domestic facility expansion and the start-up of Asian operations.
Operating income for the three months ended September 30, 1996 was $920,154
compared to $885,124 for the three months ended September 30, 1995, an increase
of 4%. The increase in operating income resulted primarily from the increase in
net sales as a result of higher order rates.
Interest income for the three months ended September 30, 1996 was $177,113
compared with $8,950 for the three months ended September 30, 1995, an increase
of 1,879%. This increase was primarily due to the interest income earned on the
net proceeds from the issuance of Convertible Preferred Stock.
Income before income taxes and minority interest for the three months ended
September 30, 1996 was $1,110,878 as compared to $874,158 for the three months
ended September 30, 1995, an increase of 27%. The majority of the increase was
due to increased sales reflecting a continuation of higher order rates for the
Company's probe card and interface products.
The minority interest from Asian operations for the three months ended September
30, 1996 of $21,521 represents the Company's joint venture partner's share (30%)
of the loss from Asian operations. The initial start up phase for the Asian
operations, which includes training and build up of inventory, has been
occurring during 1996.
For the three months ended September 30, 1996, the Company's income tax rate
remained comparable to that of the same period in 1995.
Net income for the three months ended September 30, 1996 was $663,399 compared
to $512,158 for the three months ended September 30, 1995, an increase of 30%.
The increase was primarily due to the increase in net sales due to higher order
rates.
Nine Months Ended September 30, 1996 Compared to Nine Months Ended September 30,
1995
Revenues for the nine months ended September 30, 1996 were $28,159,069 compared
to $17,968,454 for the nine months ended September 30, 1995, an increase of 57%.
The increase in net sales reflects a continuation of higher order rates for the
Company's probe card products and the contribution of interface products from
the Company's 1995 acquisition of Fresh Test.
Gross margin for the nine months ended September 30, 1996 was 46% of sales
compared to 48% of sales for the comparable period in 1995. The decrease in
gross margin is a result of a change in product mix, which includes a higher
ratio of interface product sales, as well as manufacturing variances due to
decreased volume in relation to capacity during the three months ended September
30, 1996.
Engineering and product development expenses for the nine months ended September
30, 1996 were $724,230 compared to $529,068 for the nine months ended September
30, 1995, an
12
<PAGE>
increase of 37%. This increase represents a controlled expansion of research and
development efforts to pursue the development of new integrated circuit testing
systems for the future.
Selling, general and administrative expenses for the nine months ended September
30, 1996 were $7,870,390 compared to $5,110,197 for the nine months ended
September 30, 1995, an increase of 54%. The increase in selling, general and
administrative expenses resulted primarily from increased sales and marketing
efforts, increased fixed general and administrative costs due to the Company's
domestic facility expansion and the start-up of Asian operations.
Operating income for the nine months ended September 30, 1996 was $4,279,083
compared to $2,938,447 for the nine months ended September 30, 1995, an increase
of 46%. The increase in operating income resulted primarily from the increase in
net sales as a result of higher order rates.
Interest expense for the nine months ended September 30, 1996 was $167,194
compared to $134,207 for the nine months ended September 30, 1995, an increase
of 25%. The increase in interest expense is primarily attributable to the
increase in lease equipment financing.
Interest income for the nine months ended September 30, 1996 was $345,356
compared to $34,576 for the nine months ended September 30, 1995, an increase of
899%. This increase was primarily due to the interest income earned on the net
proceeds from the issuance of Convertible Preferred Stock.
Income before income taxes and minority interest for the nine months ended
September 30, 1996 was $4,609,075 compared to $2,958,542 for the comparable
period in 1995, an increase of 56%. The majority of the increase was due to an
increase in sales which reflects a continuation of higher order rates for the
Company's probe card and interface products.
The minority interest from Asian operations for the nine months ended September
30, 1996 of $83,809 represents the Company's joint venture partner's share (30%)
of the loss from Asian operations. During the nine months ended September 30,
1996, the Asian operations were in the initial start up phase which includes
training and build up of inventory.
For the nine months ended September 30, 1996, the Company's income tax rate was
47% compared to 43% for the same period in 1995. The increase in income tax rate
was due to the non-deductibility of losses from the Company's European and Asian
subsidiaries.
Net income for the nine months ended September 30, 1996 was $2,530,884 compared
to $1,691,542 for the comparable period in 1995, an increase of 50%. The
increase was primarily due to the increase in net sales.
Liquidity and Capital Resources
The Company has financed its operations and capital requirements primarily
through cash flow from operations, equipment lease financing arrangements, and
sales of equity securities. In January 1996, the Company completed a private
placement of Convertible Preferred Stock which raised net proceeds of $9,400,000
to fund its domestic and international expansion as well as acquisitions of
other companies and/or technologies. At September 30, 1996, cash and marketable
securities were $9,493,058, compared to $263,681 as of December 31, 1995.
13
<PAGE>
During the nine months ended September 30, 1996, the Company generated
$2,874,526 in cash flow from operations. Accounts receivable increased $797,178,
or 18%, to $5,169,219, primarily due to the 8% increase in net revenues for the
three months ended September 30, 1996 compared to the three months ended
December 31, 1995, as well as the timing of the shipments during the respective
quarters. Inventories increased $1,055,273, or 36%, to $3,811,354 at September
30, 1996, to support the higher production levels related to the continuing
year-over-year increase in net sales. Both accounts receivable days sales
outstanding and inventory turns improved during the nine months ended September
30, 1996 compared to the fiscal year ended December 31, 1995.
Accounts payable and accrued expenses increased $869,365 from December 31, 1995,
or 38%, to $3,157,817 primarily due to increased activities with vendors.
Working capital increased $10,548,379, or 221%, to $15,319,838 from December 31,
1995 to September 30, 1996. The current ratio increased from 2.5 to 1 at
December 31, 1995 to 4.8 to 1 at September 30, 1996. These increases were
primarily as a result of the net proceeds from the private placement of the
Convertible Preferred Stock..
The Company increased its investment in property, plant, and equipment during
the nine months ended September 30, 1996 by $3,150,239 or 40%, to $10,883,656,
in order to expand capacity to meet customer demand for its products. These
capital expenditures were funded from cash flow from operations, proceeds from
the private placement of the Convertible Preferred Stock, and a capital lease of
$253,378 with Wells Fargo Leasing Corporation. Long term debt, comprised of
notes payable and capital leases, decreased $23,929, or 2%, to $957,277.
On October 25, 1996, the Company signed an Agreement of Merger and Plan of
Reorganization with CRoute, Inc., a Texas corporation, pursuant to which
Cerprobe will acquire CompuRoute, Incorporated, a manufacturer of printed
circuit boards, 89% of which is owned by CRoute, Inc., in exchange for 400,000
shares of Cerprobe common stock and $4.6 million in cash, subject to reduction.
The transaction will be accounted for by Cerprobe under the purchase method of
accounting in accordance with generally accepted accounting principles. In
connection with this transaction, Cerprobe will purchase the existing building
leased by CompuRoute for $1.2 million and the assumption of the remaining
principal balance against the building, which at September 30, 1996, was
approximately $1,040,000. This transaction is subject to a number of conditions,
as well as approval by the shareholders of CRoute and CompuRoute.
The Company has signed a long-term lease for a corporate headquarters and
manufacturing facility in Arizona. Construction began in September 1996 and is
anticipated to continue over an eight month period. The Company would be the
sole tenant of the approximately 83,000 square foot facility, which will permit
the Company to consolidate all of its Arizona activities.
In April 1996, the Company entered into a $3,000,000 unsecured revolving line of
credit, which matures April 28, 1997, with its primary lender, First Interstate
Bank of Arizona (now Wells Fargo Bank). Advances under the revolving line may be
made as Prime Rate Advances, which accrue interest payable monthly, at the
Bank's prime lending rate, or as LIBOR Rate Advances which bear interest at 225
basis points in excess of the LIBOR Base Rate. At September 30, 1996, no
borrowings were outstanding under this credit facility.
14
<PAGE>
If the remaining holders of the Convertible Preferred Stock elect to convert
their shares into shares of Common Stock based on the current market price of
the Company's Common Stock, the Company would be required to issue more than
800,000 shares of Common Stock. To insure compliance with Nasdaq National Market
rules requiring shareholder approval of issuances of Common Stock representing
greater than 20% of all shares outstanding, the Company has the right to redeem
any shares of Convertible Preferred Stock that, if converted, would result in
the issuance of more than 800,000 shares of Common Stock. In such event, the
Company may redeem those shares of Convertible Preferred Stock for cash in an
amount determined by a formula based on the current market price of the
Company's Common Stock. If the holders of all outstanding shares of Convertible
Preferred Stock had elected to convert their shares on October 24, 1996, the
Company estimates that it would have been required to pay approximately
$3,300,000 to have redeemed all shares of Convertible Preferred Stock that, if
converted, would have resulted in the issuance of more than 800,000 shares of
Common Stock. Based on the formula referred to above, the amount of cash
required to redeem any shares of Convertible Preferred Stock will increase if
the price of the Company's Common Stock decreases, and will decrease if the
price of the Company's Common Stock increases.
The Company believes that its capital, together with loan commitments described
above and anticipated cash flow from operations, will provide adequate sources
to fund operations in the near term. The Company anticipates that any additional
cash requirements as the result of operations or capital expenditures will be
financed through cash flow from operations, by borrowing from the Company's
primary lender, or by lease financing arrangements.
"Safe Harbor" Statement Under the Private Securities Litigation Reform Act of
1995
Statements in this report regarding the expansion of the Company's operations in
Southeast Asia and adequacy of sources of capital are forward looking
statements. Words such as "expects", "intends", "believes", "anticipates" and
"will likely" also identify forward looking statements. Actual results, however,
could differ materially from those anticipated for a number of reasons,
including increased competition in Southeast Asia, a downturn in the market for
semiconductors, increases in interest rates, foreign currency fluctuations, and
other unanticipated factors. Risk factors, cautionary statements, and other
conditions that could cause actual results to differ are contained in the
Company's SEC filings, its press releases dated July 22, 1996 and October 17,
1996, and the Company's Annual Report on Form 10-KSB.
15
<PAGE>
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
<TABLE>
<S> <C> <C>
a. The annual meeting of stockholders of the Company was held on
July 23, 1996 in Tempe, Arizona. The table below
briefly describes the proposals and results from the
annual meeting of stockholders.
1. Election of Directors For Withheld
--- --------
Ross J. Mangano 3,718,932 14,256
C. Zane Close 3,718,932 14,256
Kenneth W. Miller 3,718,932 14,256
Donald F. Walter 3,622,734 110,454
William A. Fresh 3,718,932 14,256
2. Proposal to ratify the appointment of KPMG Peat Marwick LLP as
the independent auditors of the Company.
For Against Abstain
--- ------- -------
3,722,454 1,500 9,234
b. A special meeting of stockholders of the Company, which was a
continuation of the annual meeting of stockholders, was held on August
20, 1996 in Phoenix, Arizona.
1. Proposal to amend the Company's Certificate of Incorporation to
add a provision allowing the Board of Directors to consider certain
factors when evaluating certain matters such as tender offers.
For Against Withheld Abstain
--- ------- -------- -------
2,409,732 104,540 1,266,860 74,741
2. Proposal to amend the Company's Certificate of Incorporation so
that the Company will be subject to the provisions of Section 203
of the Delaware General Corporation Law.
For Against Withheld Abstain
--- ------- -------- -------
2,409,857 100,390 1,266,860 75,766
3. Proposal to amend the Company's Certificate of Incorporation to
eliminate actions by written consent of stockholders.
For Against Withheld Abstain
--- ------- -------- -------
2,416,769 119,228 1,296,860 20,016
4. Proposal to amend the Company's Certificate of Incorporation to
add certain minimum price and procedural requirements in
connection with certain transactions such as business
combinations.
For Against Withheld Abstain
--- ------- -------- -------
2,463,557 104,140 1,226,860 18,316
</TABLE>
16
<PAGE>
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
a. Exhibits required by Item 601 of Regulation S-K
1. Capital Lease Agreement between the Company
and Wells Fargo Leasing Corporation dated
October 10, 1996.*
2. Capital Lease Agreement between the Company
and Wells Fargo Leasing Corporation dated
September 9, 1996.*
3. Lease Agreement between the Company and CRPB
Investors L.L.C. dated August 21, 1996.*
4. Employment Agreement between the Company and
Randal L. Buness dated June 26, 1996.*
5. Operating Agreement between the Company and
CRPB Investors, L.L.C. dated September 18,
1996.*
b. Exhibit 11. Statement regarding computation of per
share earnings.
- ----------
* Previously filed.
17
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
CERPROBE CORPORATION
/s/ Randal L. Buness
-------------------------
Randal L. Buness
Vice President - Chief Financial Officer
November 22, 1996
18
Cerprobe Corporation
Computation of Per Share Earnings
Exhibit 11
(Unaudited)
(in thousands, except EPS data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------------- ----------------------------
1995 1996 1995 1996
------------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Net Income $ 512 $ 663 $ 1,692 $ 2,531
============ ============ =========== ============
Weighted average common shares outstanding 4,023 4,529 3,811 4,305
Common equivalent shares:
Shares issuable upon exercise
of stock options (1) 382 249 212 199
Convertible preferred stock 0 519 0 622
------------ ------------ ----------- ------------
Total weighted average shares - primary 4,405 5,297 4,023 5,126
------------ ------------ ----------- ------------
Fully diluted incremental shares:
Stock options (calculated using the higher
of end of periof or average market value) 0 1 90 5
Convertible subordinated debentures 588 485 595 517
------------ ------------ ----------- ------------
Total weighted average shares - fully diluted 4,993 5,783 4,708 5,648
------------ ------------ ----------- ------------
Primary net income per common and
common equivalent share 0.12 0.13 0.42 0.49
------------ ------------ ----------- ------------
Fully diluted net income per common and
common equivalent share 0.10 0.11 0.36 0.45
------------ ------------ ----------- ------------
(1) Amount calculated under the treasury stock method and fair market value for stock
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule contains summary financial information extracted from the
Condensed Consolidated Balance Sheet at September 30, 1996 and the Condensed
Consolidated Statements of Operations and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 7,232,995
<SECURITIES> 2,260,063
<RECEIVABLES> 5,347,219
<ALLOWANCES> 178,000
<INVENTORY> 3,811,354
<CURRENT-ASSETS> 19,312,590
<PP&E> 10,883,656
<DEPRECIATION> 4,201,728
<TOTAL-ASSETS> 29,137,720
<CURRENT-LIABILITIES> 3,992,752
<BONDS> 957,277
26
0
<COMMON> 245,464
<OTHER-SE> 23,507,708
<TOTAL-LIABILITY-AND-EQUITY> 29,137,720
<SALES> 28,159,069
<TOTAL-REVENUES> 28,159,069
<CGS> 15,285,366
<TOTAL-COSTS> 23,879,986
<OTHER-EXPENSES> 167,194
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 167,194
<INCOME-PRETAX> 4,609,075
<INCOME-TAX> 2,162,000
<INCOME-CONTINUING> 2,530,884
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,530,884
<EPS-PRIMARY> 0.49
<EPS-DILUTED> 0.45
</TABLE>
