UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] Quarterly Report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the quarterly period
ended January 31, 1997.
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 No. 0-27498
CFM Technologies, Inc.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 22-2298698
------------------------------ -----------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1336 Enterprise Drive, West Chester, Pennsylvania 19380
--------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (610) 696-8300
___________________N/A____________________
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the Registrant (1) has
filed all reports 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
The number of outstanding shares of the Registrant's
Common Stock, no par value per share, on March 6, 1997 was
7,811,642.
CFM TECHNOLOGIES, INC. AND SUBSIDIARIES
INDEX
PART 1. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements:
Consolidated Balance Sheets (unaudited)
January 31, 1997 and October 31, 1996 ............. 3
Consolidated Statements of Income (unaudited)
Three months ended January 31, 1997 and 1996 ...... 5
Consolidated Statements of Cash Flows (unaudited)
Three months ended January 31, 1997 and 1996 ...... 6
Notes to Consolidated Financial Statements ........ 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations .............. 8
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K ................. 12
Signatures ........................................ 13
Exhibit Index ..................................... 14
Statement re: computation of per share earnings ... 15
Financial Data Schedule ........................... 16
<TABLE>
PART 1. FINANACIAL INFORMATION
Item 1. Consolidated Financial Statements
CFM TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
(unaudited)
<CAPTION>
January 31, October 31,
1997 1996
ASSETS -------- ---------
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents .................................. $ 8,415 $ 9,308
Short-term investments ..................................... 3,424 2,946
Accounts receivable ........................................ 17,294 15,090
Inventories ................................................ 8,240 8,047
Prepaid expenses and other ................................. 250 362
Deferred income taxes ...................................... 819 641
-------- ---------
Total current assets .................................... 38,442 36,394
-------- ---------
PROPERTY, PLANT AND EQUIPMENT:
Land ....................................................... 540 540
Building and improvements .................................. 3,268 3,180
Machinery and equipment .................................... 5,041 4,075
Furniture and fixtures ..................................... 956 934
-------- --------
9,805 8,729
Less - Accumulated depreciation and amortization ........... (1,685) (1,268)
-------- --------
Net property, plant and equipment ....................... 8,120 7,461
-------- --------
OTHER ASSETS:
Patents, net of accumulated amortization of $81 and $76 .... 271 266
Other ...................................................... 168 130
------- -------
Total other assets .................................... 439 396
------- -------
$ 47,001 $ 44,251
======= =======
The accompanying notes are an integral part of these statements.
</TABLE>
<TABLE>
CFM TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(unaudited)
January 31, October 31,
1997 1996
LIABILITIES AND SHAREHOLDERS' EQUITY ------- -------
CURRENT LIABIlTIES:
<S> <C> <C>
Current portion of long-term debt ................................... $ 639 $ 489
Accounts payable .................................................... 4,615 4,211
Accrued expenses .................................................... 4,419 4,147
Customer deposits ................................................... 54 22
------- -------
Total current liabilities ........................................ 9,727 8,869
------- -------
LONG-TERM DEBT ......................................................... 2,992 2,525
------- -------
DEFERRED INCOME TAXES .................................................. 194 146
------- -------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Preferred stock, no par value; 1,000,000 authorized shares; no shares
issued or outstanding ...........................................
Common stock, no par value; 10,000,000 authorized shares; 6,053,340
and 6,052,924 shares issued and outstanding ...................... 29,595 29,592
Retained earnings ................................................... 4,493 3,119
------- --------
Total shareholders' equity ....................................... 34,088 32,711
------- --------
$ 47,001 $ 44,251
======= ========
The accompanying notes are an integral part of these statements.
</TABLE>
<TABLE>
CFM TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(unaudited)
<CAPTION>
Three Months Ended
January 31,
--------------------
1997 1996
------ -------
<S> <C> <C>
NET SALES ............................................ $ 14,792 $ 9,611
COST OF SALES ........................................ 7,968 5,555
------- -------
Gross profit ................................... 6,824 4,056
------- -------
OPERATING EXPENSES:
Research, development and engineering ............. 1,981 1,046
Seling, general and administrative ................ 2,856 1,821
------- -------
Total operating expenses ....................... 4,837 2,867
------- -------
Operating income ............................... 1,987 1,189
INTEREST (INCOME) EXPENSE, NET ....................... (95) 72
------- -------
Income before income taxes ..................... 2,082 1,117
INCOME TAXES ......................................... 708 391
------- -------
NET INCOME ........................................... $ 1,374 $ 726
======= =======
NET INCOME PER SHARE ................................. $ 0.21 $ 0.18
======= =======
WEIGHTED AVERAGE COMMON AND COMMON
EQUIVALENT SHARES ................................. 6,416 3,994
======= =======
The accompanying notes are an integral part of these statements.
</TABLE>
<TABLE>
CFM TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
Three Months Ended
January 31,
----------------------
1997 1996
-------- --------
OPERATING ACTIVITIES:
<S> <C> <C>
Net income $ 1,374 $ 726
Adjustments to reconcile net income to net cash
provided by (used in) operating activities -
Depreciation and amortization .............................. 422 92
Deferred income tax benefit ................................ (130) (31)
(Increase) decrease in -
Accounts receivable ..................................... (2,204) (1,253)
Inventories ............................................. (193) (310)
Prepaid expenses and other current assets ............... 112
Other assets ............................................ (48) (200)
Increase (decrease) in -
Accounts payable ........................................ 404 413
Accrued expenses ........................................ 272 (324)
Customer deposits ....................................... 32 19
-------- --------
Net cash provided by (used in) operating activities . 41 (868)
-------- -------
INVESTING ACTIVITIES:
Purchases of short-term investments ........................... (1,957) -
Net proceeds on line of credit ............................... 1,607
Proceeds from short-term investments .......................... 1,479 -
Purchases of property, plant and equipment .................... (326) (802)
-------- -------
Net cash (used in) provided by investing activities . (804) 805
-------- --------
FINANCING ACTIVITIES:
Payments on long-term debt .................................... (133) (157)
Proceeds from exercise of stock options ....................... 3 -
-------- --------
Net cash used in financing activities ............... (130) (157)
-------- --------
NET DECREASE IN CASH AND CASH EQUIVALENTS ........................ (893) (220)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD ................... 9,308 408
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD ......................... $ 8,415 $ 188
======== =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest expense ................................ $ 58 $ 55
Cash received for interest income ............................. 119 10
Cash paid for income taxes .................................... - 1
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND
FINANCING ACTIVITIES:
Machinery acquired under capital leases ....................... $ 750 $ 337
The accompanying notes are an integral part of these statements.
</TABLE>
CFM TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Basis of Presentation:
The condensed financial statements included herein
have been prepared by CFM Technologies, Inc. without
audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain
information and footnote disclosures normally included
in financial statements prepared in accordance with
generally accepted accounting principles have been
condensed or omitted pursuant to such rules and
regulations. These statements include all adjustments
that, in the opinion of management, are necessary to
provide a fair statement of the results for the periods
covered. These financial statements should be read in
conjunction with the audited financial statements and
the notes thereto included in the Company's Form 10-K
for the fiscal year ended October 31, 1996. The
results of operations for the interim periods presented
are not necessarily indicative of the results for the
full year.
(2) Follow-on Public Offering of Common Stock:
The Company consummated a follow-on public offering
on February 19, 1997. The net proceeds from the
offering of 1,750,500 shares of common stock were
approximately $49,000,000.
(3) Accounts Receivable:
January 31, October 31,
1997 1996
---------- -----------
Billed ..................... $10,894,000 $10,558,000
Unbilled ................... 6,400,000 4,532,000
----------- ----------
$17,294,000 $15,090,000
=========== ===========
Unbilled receivables represent final retainage amounts to
be billed upon completion of the installation process.
(4) Inventories:
January 31, October 31,
1996 1996
---------- ----------
Raw materials .............. $5,023,000 $4,267,000
Work in Progress............ 3,217,000 3,780,000
---------- ----------
$8,240,000 $8,047,000
========== ==========
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
CFM designs, manufactures and markets advanced wet processing
equipment for sale to the worldwide semiconductor and flat panel
display manufacturing industries. The Company was founded in 1984
and began commercial operations in 1990 following a period of
technology and product development, during which time the Company's
patented Full-Flow enclosed processing and Direct-Displacement
drying technologies were developed.
The Company has derived substantially all of its revenues from
the sale of a relatively small number of its systems, which
typically range in price from $0.9 million to $2.7 million. The
Company sells its systems worldwide and records a significant
portion of its sales to customers outside the United States. The
Company's international sales have occurred in Europe, Korea,
Japan, Taiwan and Israel. The Company anticipates that
international sales will continue to account for a significant
portion of net sales, although the percentage of international
sales is expected to fluctuate from period to period.
Results of Operations
The following table sets forth certain financial data for the
periods indicated, expressed as a percentage of net sales.
Three Month Period Ended
January 31, January 31,
1997 1996
----------- ------------
Net sales 100.0% 100.0%
Gross profit 46.1% 42.2%
Research, development
and engineering 13.4% 10.9%
Selling, general and
administrative 19.3% 18.9%
Operating income 13.4% 12.4%
Income before income taxes 14.1% 11.6%
Net income 9.3% 7.6%
Net Sales. Net sales for the three month period ended January
31, 1997 of $14.8 million increased 53.9% from $9.6 million in the
first quarter of fiscal 1996. This increase resulted primarily from
increased acceptance of the Company's Full-Flow systems by the
semiconductor industry in the form of orders from customers
equipping new, expanded or improved facilities. International
sales represented 62.2% and 33.3% of total net sales in the three
months ended January 31, 1997 and 1996, respectively.
International sales during the first quarter of fiscal 1997
occurred at approximately the same rate as experienced during the
full 1996 fiscal year. Because of continuing expansion of its
international marketing efforts, the Company expects international
sales to continue to represent a significant portion of its net
sales. International orders accounted for 75% of the Company's
backlog at January 31, 1997.
Gross Profit. Gross profit as a percentage of net sales
increased from 42.2% in the three month period ended January 31,
1996 to 46.1% for the same period in fiscal 1997. This improvement
in gross reflects improved manufacturing productivity and labor
efficiency coupled with continuing material cost reductions and
higher sales volumes. The Company's gross margins have varied
significantly from quarter to quarter and will continue to be
affected by a variety of factors, including the mix and average
selling prices of systems, sales of OEM automation equipment which
yield relatively lower gross margins and costs associated with new
system introductions and enhancements.
Research, Development and Engineering. Research, development
and engineering expenses for the quarter ended January 31, 1997
increased by 89.4 % to $2.0 million from $1.0 million recorded in
the same period during fiscal 1996. Development support for the
production release of the Company's new Full-Flow 8100HT product
along with continued heavy investment in FPD tool development
accounted for a major portion of the fiscal 1997 costs. The
Company anticipates further increases in spending in support of
research, development and engineering as new, larger FPD platforms
are introduced, 300mm semiconductor platform development continues
and planned work on added process applications begins.
Selling, General and Administrative. Selling, general and
administrative expenses increased from $1.8 million or 18.9% of net
sales in the quarter ended January 31, 1996 to $2.9 million or
19.3% of net sales in the quarter ended January 31, 1997. Sales for
the first quarters of both 1996 and 1997 were predominantly into
Europe and the United States where commission expenses are
significantly lower than on sales into East Asia. The Company
believes that selling, general and administrative expenses,
including legal expenses related to certain patent litigation,
personnel and sales and support expenses in connection with the
Company's efforts to increase its net sales and commission expenses
due to increased sales to East Asia will continue to increase in
the remainder of fiscal 1997 and beyond.
Interest Expense. Interest expense, net of interest income, of
$72,000 in the quarter ended January 31, 1996 was supplanted by
interest income, net of interest expense, of $95,000 in the quarter
ended January 31, 1997. The net interest income recorded during
the 1997 quarter was the result of interest income earned by the
Company from investment of funds not immediately needed to support
the Company's operations which funds had been raised in the
Company's initial public offering completed on June 18, 1996.
Income Taxes. The Company's effective tax rate was 34% during
the three months ended January 31, 1997, consistent with the
effective rate for fiscal 1996.
Backlog
As of January 31, 1997, the Company's backlog of orders was
$33.5 million, compared to $12.6 million as of January 31, 1996.
The majority of these orders were received during the preceding six
month period and are anticipated to ship within the coming six
month period. During fiscal 1996, the Company experienced two
order cancellation events and a general decrease in the lead times
following order placement by customers. During the first quarter of
fiscal 1997, orders from East Asia accounted for 85% of total
orders with the balance coming from the U.S. FPD systems
represented 61% of these orders. Ending order backlog at January
31, 1997 is relatively evenly divided between FPD and semiconductor
systems with 75% due to be shipped to East Asia and the balance to
the U.S. It has been the experience of the Company that neither
reported backlog at a particular date nor the pattern of receipt of
orders is necessarily indicative of shipments during any particular
future period.
Liquidity and Capital Resources
At January 31, 1997, the Company had $8.4 million in cash and
cash equivalents, $3.4 million in short-term investments and $28.7
million in working capital. At October 31, 1996 the Company had
$9.3 million in cash and cash equivalents, $2.9 million in short-
term investments and $27.5 million in working capital.
On February 19, 1997, the Company sold 1,750,500 shares of
common stock in a follow-on offering, raising $49.0 million, net of
expenses of $0.6 million.
While essentially no net cash was either provided by or used in
operating activities during the three months ended January 31,
1997, net cash of $0.9 million was used in operating activities
during the three months ended January 31, 1996. Accounts
receivable increased by $2.2 million during the first three months
of fiscal 1997 and inventories increased by $0.2 million.
Acquisitions of property, plant and equipment were $1.1 million,
including capital leased equipment of $.75 million, for the first
three months of fiscal 1997 and $0.3 million for the first three
months of fiscal 1996. Fiscal 1997 acquisitions included equipment
for use in customer and employee training and information systems
in support of improved engineering design infrastructure.
Expenditures during the first quarter of fiscal 1996 were primarily
related to facility improvements and the establishment of the
Company's applications laboratory.
The Company has a relationship with a commercial bank which
includes a mortgage on the Company's manufacturing facility in the
amount of $.9 million and a $7.5 million revolving demand line of
credit . The mortgage bears interest at an annual rate of 8.9%.
During the quarter ended January 31, 1997, the line of credit
became unsecured and interest on any outstanding balance was
reduced to an interest rate equal to the bank's overnight borrowing
rate plus 1/4 percent. As of January 31, 1997, no balance was
outstanding under the Company's line of credit.
The Company also has mortgage notes payable to the Pennsylvania
Industrial Development Authority in the amount of $0.6 million
bearing interest at 2.0% and to the Chester County Development
Council in the amount of $0.1 million bearing interest at 5.0%. In
addition, the Company has outstanding capital lease obligations in
the amount of $1.9 million bearing interest at rates ranging from
7% to 12% per annum.
The Company leased approximately 14,000 sq. ft. of additional
manufacturing space during the quarter ending January 31, 1997 and
will be relocating a portion of its manufacturing operations in
order to provide increased production capacity.
The Company has outstanding accounts receivable of
approximately $15.1 million and $17.3 million as of October 31,
1996 and January 31, 1997, respectively. No allowance for doubtful
accounts receivable has been recorded because the Company believes
that all such accounts receivable are fully realizable.
The Company believes that existing cash balances, the proceeds
of its recently completed follow-on offering and its available line
of credit will be sufficient to meet the Company's cash
requirements during the next 12 months. However, depending upon
its rate of growth and profitability, the Company may require
additional equity or debt financing to meet its working capital
requirements or capital expenditure needs. There can be no
assurance that additional financing, if needed, will be available
when required or, if available, will be on terms satisfactory to
the Company.
Litigation
The Company has filed complaints alleging infringement and
contributory infringement of one or more of its patents in the
United States District Court for the District of Delaware, naming
two competitors and certain users of equipment manufactured and
sold by those parties. The complaints seek compensatory damages in
unspecified amounts and costs and expenses relating to the
complaints, including reasonable attorneys' fees. The Company has
been notified that an action was filed against it by another
competitor in the United States District Court for the Northern
District of California, San Jose Division, seeking declaratory
judgment of patent noninfringement and invalidity of one of the
Company's patents. The Company has been prosecuting these lawsuits
vigorously and intends to continue such actions with regard to
these litigants and any other parties whose actions may threaten to
expropriate the intellectual property of the Company.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
11 Statement re:computation of earnings per common share
27 Financial Data Schedule
(b) Reports on Form 8-K
None.
SIGNATURES
Pursuant to the requirements of the Securities
Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Dated: March 14, 1997
CFM Technologies, Inc.
(Registrant)
By: \s\ Roger A. Carolin
------------------------
Roger A. Carolin
Chief Executive Officer
By: : \s\ Lorin J.Randall
------------------------
Lorin J. Randall
Chief Financial Officer
<TABLE>
EXHIBIT 11
CFM TECHNOLOGIES, INC.
EARNINGS PER COMMON SHARE
<CAPTION>
FISCAL YEAR ENDED
January 31,
----------------------
1997 1996
-------- ---------
(Amounts in thousands,
except per share - unaudited)
<S> <C> <C>
Net income $ 1,374 $ 726
-------- ---------
Average number of common shares
outstanding 6,053 3,780
Adjustment for assumed conversion
of stock options 363 168
Adjustment for cheap stock
(treasury Method) - 46
-------- ---------
Average number of common shares 6,416 3,994
======== =========
Earnings per common share $ 0.21 $ 0.18
======== =========
</TABLE>
[ARTICLE] 5
[MULTIPLIER] 1000
<TABLE>
<S> <C>
[PERIOD-TYPE] 3-MOS
[FISCAL-YEAR-END] OCT-31-1997
[PERIOD-START] NOV-01-1996
[PERIOD-END] JAN-31-1997
[CASH] 8,415
[SECURITIES] 3,424
[RECEIVABLES] 17,294
[ALLOWANCES] 0
[INVENTORY] 8,240
[CURRENT-ASSETS] 38,442
[PP&E] 9,805
[DEPRECIATION] 1,685
[TOTAL-ASSETS] 8,120
[CURRENT-LIABILITIES] 9,727
[BONDS] 0
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[COMMON] 29,595
[OTHER-SE] 4,493
[TOTAL-LIABILITY-AND-EQUITY] 47,001
[SALES] 17,792
[TOTAL-REVENUES] 14,792
[CGS] 7,968
[TOTAL-COSTS] 4,837
[OTHER-EXPENSES] 0
[LOSS-PROVISION] 0
[INTEREST-EXPENSE] (95)
[INCOME-PRETAX] 2,082
[INCOME-TAX] 708
[INCOME-CONTINUING] 1,374
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] 1,374
[EPS-PRIMARY] .21
[EPS-DILUTED] .21
</TABLE>
