SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM 10-QSB
Quarterly Report Under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the Quarter Ended June 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 AUGUST 12, 1996
- ----- ---------------------------------
Common 4,544,922
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 JUNE 30, 1996
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
ITEM 1.
Condensed Consolidated Balance Sheets -
June 30, 1996 and December 31, 1995............................3
Condensed Consolidated Statements of Income -
Three and Six Months Ended June 30, 1996 and 1995..............4
Condensed Consolidated Statements of Cash Flows -
Six Months Ended June 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.................10
PART II - OTHER INFORMATION
ITEM 5. OTHER INFORMATION.............................................15
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K..............................15
SIGNATURES...................................................................16
2
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CERPROBE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
----------------- -----------------
(unaudited)
<S> <C> <C>
ASSETS
------
CURRENT ASSETS:
Cash and cash equivalents $6,868,236 $263,681
Marketable Securities (Note B) 2,279,188 0
Accounts receivable, net of allowances for
doubtful accounts (Note C ) 5,847,963 4,377,041
Inventories (Note D) 3,401,210 2,802,081
Prepaid expenses (39,568) 111,673
Income taxes receivable 163,464 163,464
Deferred income taxes 159,134 270,599
----------------- -----------------
TOTAL CURRENT ASSETS 18,679,627 7,988,539
----------------- -----------------
PROPERTY AND EQUIPMENT, net (Notes E & H) 6,046,711 4,667,786
GOODWILL, net of amortization 1,790,748 1,923,396
PATENTS AND TECHNOLOGY, net of amortization 64,129 74,013
OTHER ASSETS 277,350 313,716
----------------- -----------------
TOTAL ASSETS $26,858,565 $14,967,450
================= =================
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable $962,888 $1,499,853
Accrued expenses (Note F) 1,393,923 788,599
Convertible subordinated debentures 485,000 595,000
Current portion of notes payable (Note G) 121,330 123,743
Current portion of capital leases (Note H) 188,526 209,885
----------------- -----------------
TOTAL CURRENT LIABILITIES 3,151,667 3,217,080
----------------- -----------------
Notes payable, less current portion 345,660 408,376
Capital leases, less current portion 480,996 572,830
Deferred income taxes 66,123 66,123
Other liabilities 53,797 46,801
----------------- -----------------
TOTAL LIABILITIES 4,098,243 4,311,210
----------------- -----------------
STOCKHOLDERS' EQUITY:
Preferred stock, par value $.05 per share:
Authorized, 10,000,000 shares;
Issued and outstanding 8,720,000 shares at June 30, 1996 436,000 0
Common stock, par value $.05 per share:
Authorized, 10,000,000 shares;
Issued and outstanding 4,420,008 and 4,095,851
shares at June 30, 1996 and December 31, 1995 221,002 204,792
Additional paid-in-capital 16,958,396 7,239,410
Retained earnings 5,271,661 3,466,464
Unearned compensation (141,096) (241,872)
Foreign currency translation adjustment 14,359 (12,554)
----------------- -----------------
TOTAL STOCKHOLDERS' EQUITY 22,760,322 10,656,240
----------------- -----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $26,858,565 $14,967,450
================= =================
</TABLE>
3
<PAGE>
CERPROBE CORPORTATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
-----------------------------------------------------------------------
1996 1995 1996 1995
--------------- --------------- ---------------- ---------------
<S> <C> <C> <C> <C>
NET SALES $9,659,883 $6,171,529 $19,359,822 $11,134,194
COST OF GOODS SOLD 5,174,844 3,148,314 10,347,795 5,839,115
--------------- --------------- ---------------- ---------------
GROSS MARGIN 4,485,039 3,023,215 9,012,027 5,295,079
--------------- --------------- ---------------- ---------------
EXPENSES:
Engineering and product development 275,583 208,186 378,267 329,323
Selling, general and administrative 2,666,893 1,763,010 5,274,831 2,912,433
--------------- --------------- ---------------- ---------------
2,942,476 1,971,196 5,653,098 3,241,756
--------------- --------------- ---------------- ---------------
OPERATING INCOME 1,542,563 1,052,019 3,358,929 2,053,323
--------------- --------------- ---------------- ---------------
OTHER REVENUE AND (EXPENSES):
Interest expense (57,601) (47,466) (116,457) (83,934)
Interest income 108,751 13,369 168,243 25,626
Other income 46,624 38,727 87,482 89,369
--------------- --------------- ---------------- ---------------
INCOME BEFORE INCOME TAXES
AND MINORITY INTEREST 1,640,337 1,056,649 3,498,197 2,084,384
MINORITY INTEREST 36,927 0 62,288 0
PROVISION FOR INCOME TAXES 816,000 442,000 1,693,000 905,000
--------------- --------------- ---------------- ---------------
NET INCOME $861,264 $614,649 $1,867,485 $1,179,384
=============== =============== ================ ===============
NET INCOME PER COMMON EQUIVALENT SHARE
PRIMARY:
NET INCOME PER SHARE $0.18 $0.15 $0.41 $0.31
=============== =============== ================ ===============
WEIGHTED AVERAGE NUMBER OF
COMMON AND COMMON EQUIVALENT
SHARES OUTSTANDING 4,697,664 4,194,089 4,536,889 3,815,297
=============== =============== ================ ===============
FULLY DILUTED:
NET INCOME PER SHARE $0.15 $0.13 $0.32 $0.26
=============== =============== ================ ===============
WEIGHTED AVERAGE NUMBER OF
COMMON AND COMMON EQUIVALENT
SHARES OUTSTANDING 5,878,399 4,858,662 5,797,680 4,499,737
=============== =============== ================ ===============
</TABLE>
4
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CERPROBE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six months ended June 30,
-------------------------------------
1996 1995
---------------- ----------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $1,867,485 $1,179,384
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 854,628 167,230
Gain on sale of fixed assets 0 6,444
Tax benefit from stock options exercised 182,000 0
Deferred income taxes 111,465 48,095
Provision for losses on accounts receivable 2,000 46,000
Provision for obsolete inventory 31,000 50,000
Compensation expense 51,398 0
Loss applicable to minority interest (62,288) 0
Changes in operating assets and liabilities:
Accounts receivable (1,472,922) (322,105)
Inventories (630,129) (452,893)
Prepaid expenses and other assets 187,607 (62,671)
Accounts payable and other accrued expenses (204,403) 167,028
Accrued income taxes 272,762 (156,741)
Other liabilities 6,996 333,052
---------------- ----------------
Net cash provided by operating activities 1,197,599 1,002,823
---------------- ----------------
INVESTING ACTIVITIES:
Capital expenditures (2,091,021) (573,015)
Purchase of marketable securities (2,279,188) 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 (4,370,209) (611,100)
---------------- ----------------
FINANCING ACTIVITIES:
Principal payments on notes payable and capital leases (178,322) (95,582)
Net proceeds from issuance of convertible preferred stock 9,400,000 0
Net proceeds from issuance of common stock 528,574 77,438
---------------- ----------------
Net cash provided by (used in) financing activities 9,750,252 (18,144)
---------------- ----------------
EFFECT OF EXCHANGE RATES ON CASH 26,913 (11,079)
NET INCREASE IN CASH AND CASH EQUIVALENTS 6,604,555 362,500
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 263,681 738,319
---------------- ----------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $6,868,236 $1,100,819
================ ================
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
Conversion of subordinated debentures to common stock $110,000 0
================ ================
Conversion of convertible preferred stock to common stock $64,000 0
================ ================
Property acquired under capital leases and issuance of notes payable $0 $266,455
================ ================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION :
Interest paid $93,833 $69,311
================ ================
Income taxes paid $1,128,016 $1,060,476
================ ================
Issuance of stock for purchase of assets and assumption of
liabilities of Fresh Test Technology $0 $2,662,969
================ ================
</TABLE>
5
<PAGE>
CERPROBE CORPORATION
--------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
JUNE 30, 1996
-------------
A. INTERIM FINANCIAL REPORTING
---------------------------
The balance sheets as of June 30, 1996 and December 31, 1995, the
statements of operations for the three and six months ended June 30,
1996 and June 30, 1995, and the statements of cash flows for the six
months ended June 30, 1996 and June 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, together with Asian investors, formed a joint venture named
Cerprobe Asia PTE. LTD. Cerprobe Asia Holdings is a 70% owner of
Cerprobe Asia PTE. LTD. Subsequently, Cerprobe Asia PTE. LTD created a
wholly owned subsidiary to develop and operate a full service sales and
manufacturing plant, which operates under the name Cerprobe Singapore
PTE. LTD. 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 US Treasury Note for $2,279,188 at 6
3/8%, maturing on July 15, 1999. This balance is stated at cost, which
approximates fair market value.
C. ALLOWANCE FOR DOUBTFUL ACCOUNTS
-------------------------------
The allowance for doubtful accounts at June 30, 1996 and December 31,
1995 were $175,000 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:
June 30, December 31,
1996 1995
-------------- ------------
Raw materials $ 2,343,608 $ 1,655,974
Work-in-process 1,171,602 1,229,107
Reserve for obsolete inventory (114,000) (83,000)
-------------- ------------
Total $ 3,401,210 $ 2,802,081
============== ============
E. PROPERTY AND EQUIPMENT
----------------------
Property and equipment consist of the following:
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
------------------ --------------
<S> <C> <C>
Manufacturing tools and equipment $ 5,958,304 $ 4,825,724
Office furniture and equipment 2,254,961 1,722,312
Leasehold improvements 859,604 759,843
Construction in progress 711,794 398,838
Computer software 39,775 39,775
Accumulated depreciation and amortization (3,777,727) (3,078,706)
------------------ ------------
$ 6,046,711 $ 4,667,786
================== ============
</TABLE>
F. ACCRUED EXPENSES
----------------
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
----------------- -------------
<S> <C> <C>
Accrued payroll and related taxes $ 827,605 $ 482,866
Accrued income taxes 272,762 -
Other accrued expenses 293,556 305,733
------------------ --------------
$ 1,393,923 $ 788,599
================== ==============
</TABLE>
G. 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 June 30, 1996,
or LIBOR (London Interbank Rate), plus 2.25%, which was 7.75% at June
30, 1996. There was no amount outstanding under this agreement at June
30, 1996.
7
<PAGE>
On April 3, 1995, due to the acquisition of Fresh Test Technology
Corporation ("Fresh Test"), the Company acquired three notes payable.
One note was 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. The other notes were payable to a former
officer and director of Fresh Test. These two notes were paid in full
on July 17, 1995.
H. LONG-TERM DEBT AND COMMITMENTS
------------------------------
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 June 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 June
30, 1996, all of which is due in December 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).
Convertible Preferred Stock
On January 18, 1996, the Company issued 10,000,000 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 beginning July 18, 1996
or upon a merger, buyout or acquisition.
Additionally, the Company issued 52,000 common stock warrants on
January 18, 1996, which are exercisable at the fixed strike price of
$16.55 and expire in four years.
During the first quarter ended March 31, 1996, 220,000 shares of
Convertible Preferred Stock were converted into 17,655 shares of Common
Stock. During the second quarter ended June 30, 1996, 1,060,000 shares
of Convertible Preferred Stock were converted into 83,300 shares of
Common Stock. Accordingly, 8,720,000 shares of Convertible Preferred
Stock were outstanding at June 30, 1996.
Acquisition
On January 23, 1996, the Company signed a letter of intent to acquire
the Stock of CompuRoute, Inc. and its affiliates, a manufacturer of
printed circuit boards. This letter of intent contemplated that the
Company would issue 995,000 shares of Common Stock to effect the
transaction, which, at the time of the letter of intent, was valued at
approximately $13,000,000. In May 1996, the President, Founder and
Principal Shareholder of CompuRoute, with whom the Company had been
negotiating the terms of the proposed acquisition, passed away
unexpectedly. Thereafter, the Company and representatives of CompuRoute
have continued to discuss the terms of the proposed aquisition, which
may differ materially from the terms contemplated by the original
letter of intent. This transaction is subject to a number of
conditions, including agreement between the Company and CompuRoute on
the terms of a proposed acquisition and approval by the shareholders of
CompuRoute. There can be no assurance that the Company and CompuRoute
will be able to agree on the terms of the proposed acquisition, or that
if an agreement is reached, that the agreement will be consummated.
8
<PAGE>
I. 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.
Six Months Ended
----------------
June 30, 1995
-------------
Net sales 12,637,352
Net income 1,256,310
Primary earnings per share .26
Fully diluted earnings per share .23
9
<PAGE>
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 used in electronic screening and verification of integrated
circuits (IC) and hybrid substrates (MCM) for the semiconductor industry. Its
probe cards generally range from $500 to $10,000, 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 $19 million for the first six
months of 1996. Approximately $4 million of 1995 sales and $3.7 million of the
first six months of 1996 sales, were sales of interface products from the
Company's 1995 acquisition of Fresh Test Technology.
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. 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 June 30, 1996 Compared to Three Months Ended June 30, 1995
- -----------------------------------------------------------------------------
Net sales for the three months ended June 30, 1996 were $9,659,883 compared to
$6,171,529 for the three months ended June 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 Technology.
Gross margin for the three months ended June 30, 1996 was 46% of sales compared
to 49% of sales for the comparable period in 1995. The decrease in gross margin
was primarily a result of the change in product mix which includes a higher
ratio of interface product sales in the three months ended June 30, 1996.
Engineering and product development expenses for the three months ended June 30,
1996 was $275,583 compared to $208,186 for the three months ended June 30, 1995,
an increase of 32%. 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 three months ended June 30,
1996 were $2,666,893 compared to $1,763,010 for the three months ended June 30,
1995, an increase of 51%. The increase in selling, general and administrative
expenses resulted primarily from
10
<PAGE>
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 June 30, 1996 was $1,542,563
compared to $1,052,019 for the three months ended June 30, 1995, an increase of
47%. The increase in operating income resulted primarily from the increase in
net sales as a result of higher order rates.
Interest expense for the three months ended June 30, 1996 was $57,601 compared
to $47,466 for the three months ended June 30, 1995, an increase of 21%. The
increase in interest expense was primarily attributable to the increase in lease
equipment financing.
Interest income for the three months ended June 30, 1996 was $108,751 compared
with $13,369 for the three months ended June 30, 1995, an increase of 713%. This
increase was primarily due to the interest income earned on the net proceeds
from the issuance of Convertible Preferred Stock on January 18, 1996.
Income before income taxes and minority interest for the three months ended June
30, 1996 was $1,640,337 as compared to $1,056,649 for the three months ended
June 30, 1995, an increase of 55%. 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 initial start up phase for the Asian Operations, which included training and
build up of inventory, occurred during the first three months of 1996. The
minority interest from Asian Operations for the three months ended June 30, 1996
of $36,927 represents the Company's joint venture partner's share (30%) of the
loss from Asian Operations.
Net income for the three months ended June 30, 1996 was $861,264 compared to
$614,649 for the three months ended June 30, 1995, an increase of 40%. The
increase was primarily due to the increase in net sales due to higher order
rates.
For the three months ended June 30, 1996, the Company's income tax rate was 49%
compared to 42% for the same period 1995. The increase in income tax rate was
due to the nondeductability of losses from the Company's European and Asian
subsidiaries.
Six Months Ended June 30, 1996 Compared to Six Months Ended June 30, 1995
- -------------------------------------------------------------------------
Revenues for the six months ended June 30, 1996 were $19,359,822 compared to
$11,134,194 for the six months ended June 30, 1995, an increase of 74%. 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 Technology.
Gross margin for the six months ended June 30, 1996 was 47% of sales compared to
48% of sales for the comparable period in 1995. The decrease in gross margin is
primarily a result of a change in product mix to include a higher ratio of
interface product sales.
Engineering and product development expenses for the six months ended June 30,
1996 were $378,267 compared to $329,323 for the six months ended June 30, 1995,
an increase of 15%.
11
<PAGE>
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 six months ended June 30,
1996 were $5,274,831 compared to $2,912,433 for the six months ended June 30,
1995, an increase of 81%. 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 six months ended June 30, 1996 was $3,358,929 compared
to $2,053,323 for the six months ended June 30, 1995, an increase of 64%. The
increase in operating income resulted primarily from the increase in net sales
as a result of higher order rates.
Interest expense for the six months ended June 30, 1996 was $116,457 compared to
$83,934 for the six months ended June 30, 1995, an increase of 39%. The increase
in interest expense is primarily attributable to the increase in lease equipment
financing.
Interest income for the six months ended June 30, 1996 was $168,243 compared to
$25,626 for the six months ended June 30, 1995, an increase of 557%. This
increase was primarily due to the interest income earned on the net proceeds
from the issuance of Convertible Preferred Stock on January 18, 1996.
Income before income taxes and minority interest for the six months ended June
30, 1996 was $3,498,197 compared to $2,084,384 for the comparable period in
1995, an increase of 68%. 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.
For the six months ended June 30, 1996, the Asian Operations was in its initial
start up phase which included training and build up of inventory. The minority
interest from Asian Operations for the six months ended June 30, 1996 of $62,288
represents the Company's joint venture partner's share (30%) of the loss from
Asian Operations.
Net income for the six months ended June 30, 1996 was $1,867,485 compared to
$1,179,384 for the comparable period in 1995, an increase of 58%. The increase
was primarily due to the increase in net sales.
For the six months ended June 30, 1996, the Company's income tax rate was 48%
compared to 43% for the same period in 1995. The increase in income tax rate was
due to the nondeductability of losses from the Company's European and Asian
subsidiaries.
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 June 30, 1996, cash and marketable
securities were $9,147,424, compared to $263,681 as of December 31, 1995.
12
<PAGE>
During the six months ended June 30, 1996, the Company generated $1,197,599 in
cash flow from operations. Accounts receivable increased $1,472,922, or 34%, to
$5,847,963 primarily due to the 19% increase in net revenues for the three
months ended June 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 $630,129, or 21%, to $3,401,210 at June 30, 1996, to
support the higher production levels related to the continuing year-over-year
increase in net revenues. Both accounts receivable days sales outstanding and
inventory turns improved during the six months ended June 30, 1996 compared to
the fiscal year ended December 31, 1995. Other current assets decreased
$262,706, or 48%, to $283,030 at June 30, 1996 compared to December 31, 1995,
primarily due to a decrease in prepaid insurance, various deposit balances, and
a $111,465 decrease in deferred income taxes.
Accounts payable and accrued expenses increased $68,359 from December 31, 1995,
or 3%, to $2,356,811. At June 30, 1996, other current liabilities decreased
$133,772, or 14%, to $794,856, reflecting a general reduction in Company debt.
Working capital increased $10,756,501, or 225%, to $15,527,960 from December 31,
1995 to June 30, 1996 primarily as a result of the net proceeds from the private
placement of the Convertible Preferred Stock. Similarly, the current ratio
increased from 2.5 to 1 at December 31, 1995 to 5.9 to 1 at June 30, 1996.
The Company increased its investment in property, plant, and equipment during
the six months ended June 30, 1996 by $2,091,021, or 27%, to $9,824,438, in
order to expand capacity to meet customer demand for its products. These capital
expenditures were funded from cash flow from operations and proceeds from the
private placement of the Convertible Preferred Stock. Long term debt, comprised
of notes payable and capital leases, decreased $154,550, or 16%, to $826,656.
On January 23, 1996, the Company signed a letter of intent to acquire the Stock
of CompuRoute, Inc. and its affiliates, a manufacturer of printed circuit
boards. This letter of intent contemplated that the Company would issue 995,000
shares of Common Stock to effect the transaction, which, at the time of the
letter of intent, was valued at approximately $13,000,000. In May 1996, the
President, Founder and Principal Shareholder of CompuRoute, with whom the
Company had been negotiating the terms of the proposed acquisition, passed away
unexpectedly. Thereafter, the Company and representatives of CompuRoute have
continued to discuss the terms of the proposed aquisition, which may differ
materially from the terms contemplated by the original letter of intent. This
transaction is subject to a number of conditions, including agreement between
the Company and CompuRoute on the terms of a proposed acquisition and approval
by the shareholders of CompuRoute. There can be no assurance that the Company
and CompuRoute will be able to agree on the terms of the proposed acquisition,
or that if an agreement is reached, that the agreement will be consummated.
The Company is involved in negotiations related to a long-term lease of a
combined corporate headquarters and Arizona manufacturing facility which the
Company anticipates will be constructed over an eight month period beginning in
August or September 1996. The Company
13
<PAGE>
would be the sole tenant of the approximately 83,000 square foot facility, which
would 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 June 30, 1996, no borrowings
were outstanding under this credit facility.
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 August 12, 1996, the
Company estimates that it would have been required to pay approximately
$3,000,000 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, possibly
to zero, 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 release dated July 22, 1996 and the Company's
Annual Report on Form 10-KSB.
14
<PAGE>
PART II - OTHER INFORMATION
Item 5 Other Information
a. On June 17, 1996, Randal L. Buness assumed the responsibilities
of Chief Financial Officer.
Item 6 Exhibits and Reports on Form 8-K
a. Exhibit 11. Statement regarding computation of per share earnings.
b. Exhibit 27. Financial Data Schedule
15
<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/ C. Zane Close
------------------------
C. Zane Close
President and Chief Executive Officer
August 14, 1996
16
Cerprobe Corporation
Computation of Per Share Earnings
Exhibit 11
(Unaudited)
(in thousands, except EPS data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
---------------------------- ----------------------------
1996 1995 1996 1995
------------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Common shares outstanding beginning of period 4,299 3,223 4,096 3,223
Effect of Weighting Shares:
New shares issued 0 713 0 356
Exercised employee stock options 105 68 87 64
Outstanding employee stock options 251 191 259 172
Converted convertible preferred stock 42 0 32 0
Converted convertible subordinated debentures 0 0 63 0
------------- ------------- ------------ -------------
Primary 4,698 4,194 4,537 3,815
============= ============= ============ =============
Common shares outstanding beginning of period 4,299 3,223 4,096 3,223
Effect of Weighting Shares:
New shares issued 0 713 0 356
Exercised employee stock options 105 69 91 67
Outstanding employee stock options 251 259 259 259
Converted convertible preferred stock 42 0 32 0
Outstanding convertible preferred stock 696 0 725 0
Outstanding convertible subordinated debentures 485 595 485 595
Converted convertible subordinated debentures 0 0 110 0
------------- ------------- ------------ -------------
Fully diluted 5,878 4,859 5,798 4,500
============= ============= ============ =============
Net income $ 861 $ 615 $ 1,867 $ 1,179
============= ============= ============ =============
Net income per common and common
equivalent shares:
Net income per share
Primary 0.18 0.15 0.41 0.31
============= ============= ============ =============
Fully diluted 0.15 0.13 0.32 0.26
============= ============= ============ =============
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule contains summary financial
information extracted from the Condensed
Consolidated Balance Sheet at June 30, 1996 and
the Condensed Consolidated Statements of
Operations and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<CASH> 6,868,236
<SECURITIES> 2,279,188
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 3,401,210
<CURRENT-ASSETS> 18,679,627
<PP&E> 6,046,711
<DEPRECIATION> 3,777,727
<TOTAL-ASSETS> 26,858,565
<CURRENT-LIABILITIES> 3,151,667
<BONDS> 1,311,656
436,000
0
<COMMON> 221,002
<OTHER-SE> 22,103,320
<TOTAL-LIABILITY-AND-EQUITY> 26,858,565
<SALES> 19,359,822
<TOTAL-REVENUES> 19,359,822
<CGS> 10,347,795
<TOTAL-COSTS> 10,347,795
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 3,498,197
<INCOME-TAX> 1,693,000
<INCOME-CONTINUING> 1,867,485
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,867,485
<EPS-PRIMARY> 0.41
<EPS-DILUTED> 0.32
</TABLE>
