<PAGE>
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 SEPTEMBER 30, 1996
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
---------- ----------
Commission File Number: 0-26482
PLASMA & MATERIALS TECHNOLOGIES, INC.
----------------------------------------
(Exact name of registrant as specified in its charter)
California 95-4054321
- ------------------------------- ----------------------------
(State or other jurisdiction of (IRS Employer Identification
incorporation or organization) number)
9255 Deering Avenue, Chatsworth, California 91311
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(Address of principle executive offices) (Zip Code)
(818) 886-8000
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(Registrant's telephone number, including area code)
Not Applicable
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(Former name, former address and former fiscal year,
if changed since last report)
Indicated by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter periods that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
As of September 30, 1996, the total number of outstanding shares of the
Registrant's common stock was 8,692,264.
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Plasma & Materials Technologies, Inc.
<TABLE>
<CAPTION>
INDEX Page
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<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements:
Condensed Consolidated Balance Sheets at
September 30,1996 (unaudited)
and December 31, 1995 3
Unaudited Condensed Consolidated Statements of
Operations for the Three Months ended
September 30, 1996 and 1995 and for the
Nine Months ended September 30, 1996 and 1995 4
Unaudited Condensed Consolidated Statements of
Cash Flows for the Nine Months ended
September 30, 1996 and 1995 5
Notes to Unaudited Condensed Consolidated Financial
Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
PART II. OTHER INFORMATION 13
SIGNATURE PAGE 14
EXHIBITS 15
</TABLE>
2
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Plasma & Materials Technologies, Inc.
ITEM 1 - CONDENSED CONSOLIDATED BALANCE SHEETS
----------------------------------------------
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995 (1)
-------------- -------------
(UNAUDITED)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents...................... $ 7,449,643 $24,770,363
Short-term investments......................... 12,559,216 13,992,109
Accounts receivable............................ 16,519,423 8,423,272
Inventories.................................... 15,765,795 5,453,835
Demonstration inventory........................ 4,478,208 1,367,233
Prepaid expenses............................... 494,919 223,970
----------- -----------
Total current assets.................... 57,267,204 54,230,782
Property, equipment and leasehold
improvements, net of accumulated
depreciation and amortization................... 9,924,486 4,576,043
Other assets..................................... 2,962,917 486,182
----------- -----------
Total assets..................................... $70,154,607 $59,293,007
=========== ===========
Liabilities and shareholders' equity
Current liabilities:
Accounts payable and accrued expenses.......... $11,565,613 $ 4,023,705
Warranty expense............................... 814,306 449,295
Accrued salaries and related liabilities....... 287,244 228,998
Current portion of capital lease obligations... 482,384 491,561
----------- -----------
Total current liabilities............... 13,149,547 5,193,559
Capital lease obligations, less current portion.. 336,430 686,230
Commitments and contingencies
Shareholders' equity:
Preferred Stock undesignated:
Authorized shares -- 20,000,000
Issued and outstanding -- None
Convertible Preferred Stock (Series A and B), no
par value
Authorized shares -- None
Issued and outstanding -- None
Common Stock, no par value:
Authorized shares -- 16,666,666
Issued and outstanding -- 8,692,264 at
September 30, 1996 and 8,659,843
at December 31, 1995...................... 61,108,385 60,975,483
Accumulated deficit............................ (4,439,755) (7,562,265)
----------- -----------
Total shareholders' equity....................... 56,668,630 53,413,218
----------- -----------
Total liabilities and shareholders' equity....... $70,154,607 $59,293,007
=========== ===========
</TABLE>
(1) The Balance Sheet at December 31, 1995 has been derived from the audited
financial statements at that date but does not include all of the
information and footnotes required by Generally Accepted Accounting
Principles for complete financial statements.
See notes to condensed consolidated financial statements.
3
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Plasma & Materials Technologies, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
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<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
---------------------------------- ----------------------------------
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1996 1995 1996 1995
------------- ------------- ------------- --------------
<S> <C> <C> <C> <C>
Revenues:
Product sales.............................. $ 7,904,906 $ 6,505,429 $25,851,165 $13,597,325
License revenues........................... - - - 400,000
Contract revenues.......................... 918,449 - 1,767,127 -
----------- ----------- ----------- -----------
8,823,355 6,505,429 27,618,292 13,997,325
Costs and expenses:
Cost of goods sold......................... 3,863,568 3,554,446 12,991,004 7,301,202
Research and development................... 1,992,661 1,152,237 5,449,346 3,195,472
Selling, general and
administrative............................ 2,755,340 1,537,396 7,125,153 4,272,689
----------- ----------- ----------- -----------
8,611,569 6,244,079 25,565,503 14,769,363
----------- ----------- ----------- -----------
Income (loss) from operations................ 211,786 261,350 2,052,789 (772,038)
Other:
Interest income (expense), net............. 293,880 115,144 1,086,698 (32,774)
----------- ----------- ----------- -----------
Income (loss) before income tax
provision.................................. 505,666 376,494 3,139,487 (804,812)
Income tax provision......................... 4,495 - 16,977 800
----------- ----------- ----------- -----------
Net income (loss)............................ $ 501,171 $ 376,494 $ 3,122,510 $ (805,612)
=========== =========== =========== ===========
Net income (loss) per share:
Primary.................................... $ 0.06 $ 0.06 $ 0.34 $ (0.15)
=========== =========== =========== ===========
Average common shares and
equivalents................................ 9,103,103 6,845,824 9,120,709 5,495,391
=========== =========== =========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
4
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Plasma & Materials Technologies, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
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<TABLE>
<CAPTION>
NINE MONTHS ENDED
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SEPTEMBER 30, 1996 SEPTEMBER 30, 1995
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss)........................................... $ 3,122,510 $ (805,612)
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Depreciation and amortization............................. 1,199,912 867,333
Changes in operating assets and liabilities:
Accounts receivable...................................... (8,096,151) (5,090,037)
Inventories.............................................. (10,311,960) 1,059,378
Demonstration inventory.................................. (3,110,975)
Other current assets..................................... - (202,550)
Prepaid expenses......................................... (270,949) (77,921)
Accounts payable and other accrued expenses.............. 7,965,165 (477,224)
Other current liabilities................................ - 80,918
------------ -----------
Net cash used in operating activities....................... (9,502,448) (4,645,715)
INVESTING ACTIVITIES
Purchases of property, equipment and leasehold
improvements............................................... (6,548,355) (444,433)
Proceeds from sales of short-term investments............... 19,914,800 -
Purchases of short-term investments......................... (18,481,907) -
Other assets................................................ (2,476,735) -
------------ -----------
Net cash used in investing activities....................... (7,592,197) (444,433)
FINANCING ACTIVITIES
Borrowings under line of credit............................. - 1,810,708
Repayments of line of credit................................ - (3,810,708)
Proceeds from sale of Preferred Stock....................... - 3,366,204
Proceeds from Inital Public Offering (Common
Stock), (before deducting $1,000,000 for related
expenses during the nine months
ended September 30, 1995).................................. - 41,175,750
Proceeds from sale of Common Stock.......................... 132,902 41,719
Payments on capital lease obligations....................... (358,977) (452,526)
------------ -----------
Net cash used in financing activities....................... (226,075) 42,131,147
------------ -----------
Net increase (decrease) in cash and cash
equivalents................................................ (17,320,720) 37,040,999
Cash and cash equivalents at beginning of
period.................................................... 24,770,363 3,563,753
------------ -----------
Cash and cash equivalents at end of period.................. $ 7,449,643 $40,604,752
============ ===========
</TABLE>
See notes to condensed consolidated financial statements.
5
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Plasma & Materials Technologies, Inc.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------
SEPTEMBER 30, 1996
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. The operating results for the nine months ended September 30,
1996 are not necessarily indicative of the results that may be expected for the
year ended December 31, 1996. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1995.
NOTE B - INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out method) or
market. The components of inventory consist of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
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<S> <C> <C>
Components................. $10,186,046 $3,774,458
Work in process............ 3,943,618 1,611,382
Finished goods............. 1,636,131 67,995
----------- ----------
15,765,795 5,453,835
Demonstration inventory.... 4,478,208 1,367,233
----------- ----------
$20,244,003 $6,821,068
=========== ==========
</TABLE>
Demonstration inventory or evaluation units represent completed systems located
at certain strategic customer sites or at the Company's facilities. The Company
provides these demonstration systems at no charge for a specified evaluation
period. All operating costs incurred during the evaluation period are paid by
the customer. At the conclusion of the agreed upon evaluation period, provided
that the equipment performs to required specifications, management expects that
the customer, while not obligated to do so, will purchase the system.
Demonstration inventory is stated at lower of cost or estimated net realizable
value. Demonstration inventory is not amortized.
NOTE C - PMT CVD PARTNERS, L.P.
On March 29, 1996, the Company entered into a number of agreements with PMT CVD
Partners, L.P. (the "Limited Partnership") and the limited partners thereof (the
"Limited Partners"). The Limited Partnership was formed to fund research and
development costs and expenses relating to chemical vapor deposition ("CVD")
technology and applications. An aggregate of approximately $5,350,000 was
invested in the Limited Partnership to fund such research and development
efforts. The Limited Partnership owns the rights to the technology developed.
PMT has entered into a license agreement with the Limited
6
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Plasma & Materials Technologies, Inc.
NOTE C - PMT CVD PARTNERS, L.P. (CONTINUED)
Partnership whereby PMT is obligated to pay stated royalties to the Limited
Partnership on sales of related products, and the royalty percentage will vary
based on the geographic location of the sale. There is no provision for royalty
payments to the Limited Partners in fiscal 1996. PMT has been granted an
exclusive option to purchase all of the Limited Partners' interest in the
Limited Partnership, based on an established purchase price formula which
terminates PMT's obligation under the license agreement. PMT may exercise such
option at its sole discretion.
PMT has agreed to provide certain personnel to the Limited Partnership to
perform such research and development activities. PMT will be paid for such
services at an amount equal to its actual direct costs, as defined, plus a
stated percentage of such costs. During the quarter and nine months ended
September 30, 1996, the amount of research and development costs incurred,
including the stated percentage of 250% of direct costs, with respect to CVD
technology and applications was $918,449 and $1,767,127, respectively and is
reflected in contract revenue in the accompanying statement of operations.
NOTE D - IMPACT ON FINANCIAL STATEMENTS OF RECENTLY ISSUED ACCOUNTING STANDARDS
In March 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of
("SFAS No. 121"), which will be effective for the Company's fiscal year ending
December 31, 1996. SFAS No. 121 requires impairment losses to be recorded on
long-lived assets used in operations when indicators of impairment are presented
and the undiscounted cash flows estimated to be generated by those assets are
less than the assets' carrying amount. SFAS No. 121 also addresses the
accounting for long-lived assets that are expected to be disposed of. The
Company adopted SFAS No. 121 for the annual reporting period of fiscal 1996,
during the first quarter ended March 31, 1996. No adjustments are required with
respect to such action.
In October 1995, the FASB issued Statement of Financial Accounting Standards No.
123, Accounting for Awards of Stock-Based Compensation to Employees ("SFAS No.
123"), which will be effective for the Company's fiscal year ending December 31,
1996. SFAS No. 123 provides alternative accounting treatment to APB No. 25 with
respect to stock-based compensation and requires certain additional disclosures,
including disclosures if the Company elects not to adopt the accounting
requirements of SFAS No. 123. The Company intends to make additional disclosure
requirements of SFAS No. 123 for the annual reporting period of fiscal 1996, but
will elect to continue to measure compensation costs following present
accounting rules under APB No. 25. Consequently, the Company will provide pro
forma disclosures of what net income and earnings per share would have been had
the fair market value method of SFAS No. 123 been used for the relevant periods.
NOTE E - INCOME TAXES
The provision for income taxes at September 30, 1996 differs from the statutory
federal rate of 35% due to the reduction of the valuation allowance attributed
to the utilization of the net operating loss carryforwards.
NOTE F - NET INCOME (LOSS) PER SHARE
Net income (loss) per share is computed using the weighted average number of
shares of Common Stock outstanding. Common equivalent shares from stock options
and warrants (using the treasury stock method) have been included in the
computation when dilutive, and common equivalent shares from the redeemable
convertible Preferred Stock and convertible Preferred Stock which converted into
Common Stock in connection with the Company's Initial Public Offering are
included as if converted at the original date of issuance, even though inclusion
is anti-dilutive, for the three and nine months ended
7
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Plasma & Materials Technologies, Inc.
NOTE F - NET INCOME (LOSS) PER SHARE
September 30, 1995. Pursuant to the Securities and Exchange Commission (SEC)
Staff Accounting Bulletins, all common and common equivalent shares issued by
the Company at an exercise price below the Initial Public Offering price of
$14.00 per share during the twelve-month period prior to the offering (cheap
stock) have been included in the calculation as if they were outstanding for the
three and nine months ended September 30, 1995 (using the treasury stock method
at the Initial Public Offering price of $14.00 per share and the if-converted
method for redeemable convertible Preferred Stock and convertible Preferred
Stock). For the nine months ended September 30, 1996, such cheap stock shares
were not included in the calculation.
NOTE G - REVOLVING AND EQUIPMENT LINE OF CREDIT
On June 5, 1996, the Company renewed its line of credit agreement (the
"Agreement") with a commercial bank which provides for borrowing up to the
lesser of 80% of eligible accounts receivable or $3,000,000. Interest on the
line of credit is payable monthly at prime (8.25% at September 30, 1996) plus
0.5%. The Agreement also provides for equipment loans which allows the Company
to borrow up to the lesser of 80% of eligible equipment purchases or $3,000,000,
subject to certain limits. Interest on borrowings under the equipment line is
payable monthly at prime plus 1.5%. At September 30, 1996, there were no
balances outstanding on either of these two loans.
NOTE H - SUBSEQUENT EVENTS
Acquisition
On July 17, 1996 the Company executed a definitive agreement to purchase
Electrotech Limited and Electrotech Equipments Limited, United Kingdom
corporations for $75,000,000 cash and the issuance of 5,600,000 shares of the
Company's common stock. The agreement, which has received shareholder approval,
is subject to certain conditions including obtaining appropriate financing.
Included in other assets are approximately $2,280,695 of direct costs, incurred
to date, of the acquisition through September 30, 1996. If the agreement is
terminated, except in certain circumstances, the Company will be required to pay
a $1,000,000 termination fee which along with all direct acquisition and
financing costs incurred through the termination will be charged to operations
in the period the contract is terminated.
8
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Plasma & Materials Technologies, Inc.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
This Management's Discussion and Analysis of Financial Condition and Results of
Operations set forth below contains forward looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. These statements are subject to certain risks
and uncertainties, including slowing growth in the demand for semiconductors and
challenges from the Company's competition that could cause actual results to
differ materially from those projected. Additional risks and uncertainties are
discussed in the Company's Form 10-K filed with the Securities and Exchange
Commission on March 30, 1996 and the Proxy Statement filed with the Securities
and Exchange Commission on September 11, 1996.
OVERVIEW
During the third quarter of fiscal 1996, Plasma & Materials Technologies, Inc.
("PMT" or the "Company") reported product sales and net income of $7.9 million
and $0.5 million, respectively.
RESULTS OF OPERATIONS
The following table sets forth the statement of operations data of the Company
expressed as a percentage of revenues for the period indicated.
<TABLE>
<CAPTION>
Three months ended Nine months ended
------------------------------- --------------------------------
September 30, September 30, September 30, September 30,
1996 1995 1996 1995
-------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C>
Revenues.................................. 100.0% 100.0% 100.0% 100.0%
Cost of sales............................. 43.8% 54.6% 47.0% 52.2%
------ ------ ------ ------
Gross profit............................. 56.2% 45.4% 53.0% 47.8%
Operating expenses:
Research and development................. 22.6% 17.7% 19.7% 22.8%
Selling, general and administrative...... 31.2% 23.6% 25.8% 30.5%
------ ------ ------ ------
Total operating expenses................. 53.8% 41.3% 45.5% 53.3%
------ ------ ------ ------
Income (loss) from operations............. 2.4% 4.1% 7.5% (5.5%)
Interest income (expense), net............ 3.3% 1.7% 3.9% (0.2%)
------ ------ ------ ------
Income (loss) before income tax provision. 5.7% 5.8% 11.4% (5.7%)
Income tax provision...................... -% -% 0.1% -%
------ ------ ------ ------
Net income (loss)......................... 5.7% 5.8% 11.3% (5.7%)
====== ====== ====== ======
</TABLE>
Revenues
Product Sales. Product sales for the third quarter of fiscal 1996 increased 22%
to $7.9 million compared to $6.5 million for the third quarter of fiscal 1995.
Product sales increased as a result of the shipment of two of the Company's
PINNACLE 8000R(TM) plasma processing systems, five process modules and four MORI
sources. Product sales for the nine month period ending September 30, 1996
increased 90% to $25.9 million from $13.6 million for the nine month period
ending September 30, 1995. Product sales increased as a result of the shipment
of one PINNACLE 8000(R) and ten PINNACLE 8000R(TM) systems, six process modules
and eight MORI sources for the nine months ended September 30, 1996 as compared
to five PINNACLE 8000(R) systems, four process modules and sixteen MORI sources
shipped in the nine months ended September 30, 1995. Notwithstanding the
quarter-to-quarter and period-to-period increases
9
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Plasma & Materials Technologies, Inc.
noted above, product sales for the third quarter of 1996 decreased from $10.2
million, or 22.5%, as compared to product sales for the second quarter of 1996.
Management believes that this decrease in product sales is primarily
attributable to the current downturn in the semiconductor industry, which has
adversely affected the semiconductor equipment manufacturing industry. See "Item
5. Other Information--Industry Conditions," below.
International sales, which are predominately to customers based in Japan and
Korea, accounted for 94% and 91% of product sales for the third quarter of
fiscal years 1996 and 1995, respectively. International product sales accounted
for 82% and 54% for the nine months ending September 30, 1996 and 1995,
respectively.
License Revenue. The Company received no license revenues for the third quarter
and nine month period of fiscal 1996, compared to $0 and $400,000 for the third
quarter and the nine month period, respectively, of fiscal 1995, because all of
the past license agreements the Company had entered into were fully paid prior
to 1996. The Company does not anticipate the receipt of any additional license
revenues in the next twelve months. However, the Company may enter into
additional license agreements as it deems appropriate in order to broaden the
applications of its MRI technology, or to improve the Company's market
penetration.
Contract Revenue. The Company received contract revenues for the third quarter
and nine month period of fiscal 1996 of $918,449 and $1,767,127, respectively,
as compared to no contract revenue for the third quarter and nine month period
of fiscal 1995. This increase was due to the March 1996 agreement between PMT
and PMT CVD Partners, L.P. See Note C to Notes to Condensed Consolidated
Financial Statements.
Gross Margin on Product Sales
The Company's gross margin on product sales for the third quarter of fiscal 1996
increased to 51% as compared to 45% for the third quarter of fiscal 1995, and
for the nine months ended September 30, 1996 it increased to 50% in comparison
to 46% for the nine months ended September 30, 1995. The improved margin is
attributable to the higher sales volume which resulted in increased production
efficiencies and higher average selling prices. Notwithstanding the increases in
gross margins referenced above, management believes that pricing pressure
attendant to PMT's shipment of products in the current and future quarters could
result in lower gross and operating margins in such future periods. See "Item 5.
Other Information--Industry Conditions," below.
Research and Development
Research and development expenses for the third quarter of fiscal 1996 were $2.0
million, or 23% of net revenues, compared to $1.2 million, or 18% of net
revenues, for the third quarter of fiscal 1995. For the nine months ended
September 30, 1996, research and development expenses were $5.4 million, or 20%
of net revenues, as compared to $3.2 million, or 23% of net revenues, for the
nine months ended September 30, 1995. As the Company's revenues have increased,
these expenses became a smaller percentage of net revenues. The dollar increases
in expenses are attributable principally to the Company's continued investment
in the development of new processes in further advancing its proprietary plasma
source technology. In addition, expenses include costs incurred associated with
the contract revenue from PMT, CVD Partners, L.P., with respect to CVD
applications of the Company's technology. See Note C of Notes to Condensed
Consolidated Financial Statements.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the third quarter of fiscal
1996 were $2.8 million, or 31% of net revenues, compared to $1.5 million, or 24%
of net revenues, for the third quarter of fiscal 1995. For
10
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Plasma & Materials Technologies, Inc.
the nine months ended September 30, 1996, selling, general and administrative
expenses were $7.1 million, or 26% of net revenues, as compared to $4.3 million,
or 31% of net revenues, for the nine months ended September 30, 1995. The
increased expense was due primarily to the addition of employees in both the
sales and support departments to accommodate the increased sales volume.
Income Tax Provision
The Company paid a nominal amount of Federal and State income taxes for the
first nine months of fiscal 1996. In addition, a nominal amount of income tax
was paid by the Company's Korean subsidiary. The Company paid no income tax for
the first nine months of fiscal 1995 due to the Company's ability to utilize
prior net operating loss and credit carryforwards that can be applied against
future income but is subject to an annual limitation due to the ownership change
limitations provided by the Internal Revenue Code of 1986 and similar state
provisions. The provision for income taxes at September 30, 1996 differs from
the statutory federal rate of 35% due to the reduction of the valuation
allowance attributed to the utilization of the net operating loss carryforwards.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1996, PMT had $20.0 million in cash, cash equivalents and
short-term investments, compared to $38.8 million at December 31, 1995. This
$18.8 million decrease was primarily due to the increases in inventories and
accounts receivable related to the sales volume increase. In addition, $6.5
million was invested in capital equipment as the Company used funds to expand
its applications laboratory to support process development and customer
demonstrations. This was offset by net cash provided by the higher payables
activity related to the purchase of inventory and capital equipment.
At September 30, 1996, there were no borrowings outstanding under the revolving
credit line, and $3,000,000 was available for borrowings under that agreement
which runs through June 5, 1997. The agreement places certain restrictions on
PMT which, among other things, prohibit PMT from paying cash dividends or
repurchasing its stock, and requires PMT to comply with certain financial ratios
and covenants. PMT is currently in compliance with all covenants and
restrictions contained in the revolving line of credit. PMT also has a
$3,000,000 equipment leasing facility that runs through December 30, 1996. At
September 30, 1996 there were no borrowings under the equipment leasing
facility.
PMT anticipates that it will spend approximately $6.8 million for capital
expenditures during fiscal 1996, of which $6.5 million has been invested in
capital equipment during the first nine months of 1996. This is expected to
include investments in demonstration and test equipment, information systems,
and other capital items that should enable PMT to expand its ability to support
and develop new products and services. In addition, PMT expects to increase its
investment in inventory of evaluation systems at customer sites.
In March 1996, PMT sponsored a partnership with certain third-party investors to
fund research and development costs and expenses relating to CVD technology and
application. Third-party investors invested an aggregate of approximately
$5,350,000 in the partnership, which aggregate amount is available to fund such
costs and expenses. At September 30, 1996 approximately $3,148,868 is remaining
for future investment in such research and development. See Note C to Notes to
Condensed Consolidated Financial Statements.
While the Company's cash requirements will fluctuate based on the timing and
extent of the normal operation of the business, PMT believes that cash generated
from operations, together with the existing cash, cash equivalents, short-term
investments and borrowings under existing bank lines should be sufficient to
support its stand alone operations over the next 12 months, although there can
be no assurance in that regard.
11
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Plasma & Materials Technologies, Inc.
On July 17, 1996 the Company executed a definitive agreement to purchase
Electrotech Limited and Electrotech Equipments Limited, United Kingdom
corporations. Assuming consummation of the Acquisition, PMT anticipates that it
will issue approximately $86.0 million of Subordinated Notes in the Private
Financing. Additionally, to satisfy the Working Capital Condition, PMT
anticipates the establishment of the New Credit Facility which, among other
things, will provide to PMT approximately $35.0 million in available borrowings.
PMT believes that cash provided or available from the Subordinated Notes, the
New Credit Facility and other sources of capital available to PMT, including
cash on hand, will be sufficient to support PMT's liquidity needs over the next
12 months, including the cash payment requirements resulting from the
Acquisition. See Note H to Notes to Condensed Consolidated Financial Statements.
12
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Plasma & Materials Technologies, Inc.
PART II - OTHER INFORMATION
---------------------------
ITEM 5 OTHER INFORMATION
-----------------
Industry Conditions. The semiconductor industry is currently
experiencing a significant downturn, which PMT anticipates will result in
reduced demand for semiconductor processing equipment and increase pricing
pressure upon equipment manufacturers, including PMT. As noted above, PMT's
product sales for the third quarter ended September 30, 1996 declined to $7.9
million from product sales of $10.2 million for the second quarter ended June
30, 1996, a reduction of 22.5%. Reduced demand for semiconductor processing
equipment could continue to adversely affect PMT's product sales and margins for
subsequent periods. Additionally, the loss or delay of one or more system sales
during any quarter would significantly and adversely affect PMT's operating
results, including its gross and operating margins, for that quarter.
Recent Developments. On October 7, 1996, PMT issued $86.25 million of
its 7 1/8% Convertible Subordinated Notes due 2001 (the "Convertible Notes") in
a private offering. The net proceeds from the sale of the Convertible Notes will
be used to fund the purchase price to be paid by PMT in connection with its
previously announced acquisition of all of the outstanding capital stock of
Electrotech Limited and Electrotech Equipments Limited, pursuant to the terms of
that certain Share Purchase Agreement dated as of July 17, 1996, as amended (the
"Share Purchase Agreement"). In that regard, at PMT's annual meeting of
shareholders held on Thursday October 10, 1996, the shareholders of PMT
approved, among other things, the consummation of the transactions contemplated
by the Share Purchase Agreement.
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) The following exhibits are included herein:
Exhibit
Number Description
- ------- -----------
11.1 Computation of Per Share Earnings
27.1 Financial Statement Data
(b) Reports on Form 8-K:
None.
13
<PAGE>
Plasma & Materials Technologies, Inc.
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.
PLASMA & MATERIALS TECHNOLOGIES, INC.
Date November 14, 1996 /s/ John W. La Valle
------------------------- --------------------
John W. La Valle
Vice President, Chief Financial Officer
and Secretary
14
<PAGE>
Plasma & Materials Technologies, Inc.
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
Exhibit Page
Number Description Number
- ------- ----------- ------
<S> <C> <C>
11.1 Computation of Per Share Earnings..........
27.1 Financial Statement Data...................
</TABLE>
15
<PAGE>
EXHIBIT 11.1 - STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
--------------------------------------------------------------
<TABLE>
<CAPTION>
Three months ended Nine months ended
---------------------------------- ----------------------------------
September 30, September 30, September 30, September 30,
1996 1995 1996 1995
------------- ------------- ------------- --------------
<S> <C> <C> <C> <C>
Primary:
Average Common shares outstanding............. 8,691,862 4,026,199 8,681,339 1,980,084
Preferred Stock converted to common
shares....................................... --- 1,779,229 --- 2,609,343
Stock options and warrants issued
during the period prior to the initial
public offering using the treasury
method (offer price of $14 per
share)....................................... --- 617,749 --- 905,964
Net effect of dilutive stock options -
based on the treasury stock method
using average fair market price.............. 360,529 322,406 386,275 ---
Net effect of dilutive warrants - based
on the treasury stock method using
average fair market price.................... 50,712 100,242 53,095 -
----------- ----------- ----------- -----------
Total shares.................................. 9,103,103 6,845,824 9,120,709 5,495,391
=========== =========== =========== ===========
Net income (loss)............................. $ 501,171 $ 376,494 $ 3,122,510 $ (805,612)
=========== =========== =========== ===========
Per share amount.............................. $ 0.06 $ 0.06 $ 0.34 $ (0.15)
=========== =========== =========== ===========
Fully diluted:
Average Common shares outstanding............. 8,691,862 4,026,199 8,681,339 1,980,084
Preferred Stock converted to common
shares....................................... --- 1,779,229 --- 2,609,343
Stock options and warrants issued
during the period prior to the initial
public offering using the treasury
method (offer price of $14 per
share)....................................... --- 617,749 --- 905,964
Net effect of dilutive stock options -
based on the treasury stock method
using the greater of the average fair
market price during the period or the
fair market price at the end of the
period....................................... 403,091 324,006 407,745 ---
Net effect of dilutive warrants - based
on the treasury stock method using the
greater of the average fair market
price during the period or the fair
market price at the end of the period........ 55,385 100,685 55,385 ---
----------- ----------- ----------- -----------
Total shares.................................. 9,150,338 6,847,868 9,144,469 5,495,391
=========== =========== =========== ===========
Net income (loss)............................. $ 501,171 $ 376,494 $ 3,122,510 $ (805,612)
=========== =========== =========== ===========
Per share amount.............................. $ 0.05 $ 0.05 $ 0.34 $ (0.15)
=========== =========== =========== ===========
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 7,450
<SECURITIES> 12,559
<RECEIVABLES> 16,519
<ALLOWANCES> 0
<INVENTORY> 15,766
<CURRENT-ASSETS> 57,267
<PP&E> 14,282
<DEPRECIATION> (4,358)
<TOTAL-ASSETS> 70,154
<CURRENT-LIABILITIES> 13,150
<BONDS> 0
0
0
<COMMON> 61,108
<OTHER-SE> (4,440)
<TOTAL-LIABILITY-AND-EQUITY> 70,154
<SALES> 25,851
<TOTAL-REVENUES> 27,618
<CGS> 12,991
<TOTAL-COSTS> 25,566
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (28)
<INCOME-PRETAX> 3,139
<INCOME-TAX> 17
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,123
<EPS-PRIMARY> 0.34
<EPS-DILUTED> 0.34
</TABLE>
