<PAGE> 1
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 March 31, 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: 0-19507
SUBMICRON SYSTEMS CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Delaware 13-3607944
- - -------------------------------------------------------------- ------------------------------------
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
</TABLE>
<TABLE>
<S> <C>
6330 Hedgewood Drive #150, Allentown, Pennsylvania 18106
- - -------------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
</TABLE>
Registrant's Telephone Number, Including Area Code (610) 391-9200
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
( X ) Yes ( ) No
APPLICABLE ONLY TO CORPORATE ISSUERS:
There were 16,573,141 shares of Common stock outstanding, $.0001 par value, as
of April 17, 1996.
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SUBMICRON SYSTEMS CORPORATION
INDEX
Part I - Financial Information
<TABLE>
<CAPTION>
Item 1: Financial Statements Page
<S> <C>
Consolidated Balance Sheets at
March 31, 1996 and December 31, 1995 3
Consolidated Statements of Operations
for the three months ended March 31, 1996
and March 31, 1995 4
Consolidated Statements of Cash Flows for the
three months ended March 31, 1996 and
March 31, 1995. 5
Notes to Consolidated Financial Statements 6-7
Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-9
Part II - Other Information N/A
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2
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SUBMICRON SYSTEMS CORPORATION
CONSOLIDATED BALANCE SHEETS (NOTE 2)
(unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
--------------- ---------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 8,859,048 $ 16,010,303
Accounts receivable, net 39,814,411 46,618,559
Inventories, net 42,811,138 34,132,007
Prepaids and other 4,035,344 2,735,961
Deferred income taxes 1,886,323 1,886,323
--------------- ---------------
Total current assets 97,406,264 101,383,153
Property and equipment, net 12,951,974 12,630,656
Goodwill, net 1,854,895 1,911,677
Intangibles and other, net 4,713,304 4,022,838
--------------- ---------------
$ 116,926,437 $ 119,948,324
=============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Lines of credit $ 15,900,000 $ 16,250,000
Current portion of long-term debt 1,089,720 1,183,413
Accounts payable 18,162,502 25,299,313
Accrued expenses and other 9,152,958 8,934,401
Deferred revenues 4,433,388 2,615,441
Income taxes payable 674,403 -
--------------- ---------------
Total current liabilities 49,412,971 54,282,568
--------------- ---------------
Deferred income taxes 628,073 628,073
--------------- ---------------
Deferred revenues 103,209 106,417
--------------- ---------------
Long-term debt 18,936,963 18,908,737
--------------- ---------------
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.0001 par value, 5,000 shares
authorized, none issued and outstanding - -
Common stock, $.0001 par value, 100,000,000
shares authorized, 16,572,894 and 16,562,796
shares issued and outstanding 1,658 1,657
Additional paid-in capital 39,490,949 39,222,625
Retained earnings 8,553,154 7,103,018
Deferred compensation (140,025) (224,034)
Notes receivable (60,515) (80,737)
--------------- ---------------
Total stockholders' equity 47,845,221 46,022,529
--------------- ---------------
$ 116,926,437 $ 119,948,324
=============== ===============
</TABLE>
See accompanying notes to consolidated financial statements
3
<PAGE> 4
SUBMICRON SYSTEMS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS (NOTE 2)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
1996 1995
---------------- ---------------
<S> <C> <C>
System sales, net $ 39,422,070 $ 19,493,205
Service and other sales 5,431,839 1,564,853
---------------- ---------------
Total net sales 44,853,909 21,058,058
---------------- ---------------
Cost of system sales 26,436,182 13,505,562
Cost of service and other sales 4,112,386 492,837
---------------- ---------------
Total cost of sales 30,548,568 13,998,399
---------------- ---------------
Gross profit 14,305,341 7,059,659
Selling, general and administrative 9,455,292 5,623,091
Research and development 1,844,963 819,574
---------------- ---------------
Operating income 3,005,086 616,994
---------------- ---------------
Other income (expense):
Interest income 168,200 124,327
Interest expense (1,022,968) (161,410)
Other, net 80,661 (8,370)
---------------- ---------------
Total other expense (774,107) (45,453)
---------------- --------------
Income before income taxes 2,230,979 571,541
Income tax provision 780,843 232,048
---------------- ----------------
Net income $ 1,450,136 $ 339,493
================ ================
Net income per Common share $ 0.09 $ 0.02
================ ===============
Weighted average number of
shares of Common stock outstanding 16,943,961 15,701,652
================ ===============
</TABLE>
See accompanying notes to consolidated financial statements
4
<PAGE> 5
SUBMICRON SYSTEMS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (NOTE 2)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
1996 1995
--------------- ---------------
<S> <C> <C>
Cash flows used in operating activities:
Net income $ 1,450,136 $ 339,493
Adjustments to reconcile net income to
net cash used in operating activities
Depreciation and amortization 1,070,961 673,214
Provision for valuation allowances and
loss contingency 336,363 -
Deferred tax provision (benefit) - 85,668
Amortization of deferred compensation 84,009 84,012
Amortization of note discount 238,750 -
Changes in assets and liabilities:
Decrease in accounts receivable 6,642,785 246,592
Increase in inventories (8,854,131) (5,306,566)
Increase in prepaid expenses and other (1,299,383) (523,280)
Decrease (Increase) in other assets (438,660) 48,932
(Decrease) Increase in accounts payable (7,136,811) 2,898,692
(Decrease) Increase in accrued expenses and other 218,557 (835,870)
Increase in deferred revenues 1,814,739 271,178
(Decrease) Increase in income taxes payable 674,403 (866,611)
--------------- ---------------
Net cash used in operating activities (5,198,282) (2,884,546)
--------------- ---------------
Cash flows used in investing activities:
Capital expenditures (1,241,410) (809,884)
Purchase of intangible assets (55,759) (34,419)
--------------- ---------------
Net cash used in investing activities (1,297,169) (844,303)
--------------- ---------------
Cash flows provided by (used in) financing activities:
Net borrowings (payments) under lines of credit (350,000) 2,556,672
Proceeds from exercise of options and warrants 48,324 6,611
Collection on notes receivable 20,222 -
Principal payments under capital lease obligations
and long-term debt (374,350) (307,966)
--------------- ---------------
Net cash provided by (used in) financing activities (655,804) 2,255,317
--------------- ---------------
Net decrease in cash and cash equivalents (7,151,255) (1,473,532)
Cash and cash equivalents at beginning of period 16,010,303 12,559,258
--------------- ---------------
Cash and cash equivalents at end of period $ 8,859,048 $ 11,085,726
=============== ===============
</TABLE>
See accompanying notes to consolidated financial statements
5
<PAGE> 6
SUBMICRON SYSTEMS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION:
The accompanying unaudited consolidated financial statements have been prepared
in conformity with generally accepted accounting principles. The interim
financial information, while unaudited, reflects all normal recurring
adjustments which are, in the opinion of management, necessary for a fair
presentation of the interim financial statements. The results for the three
months ended March 31, 1996 are not necessarily indicative of results expected
for the full year. These financial statements should be read in conjunction
with the audited financial statements and the notes thereto included in the
SubMicron Systems Corporation Annual Report on Form 10-K for the year ended
December 31, 1995.
2. ACQUISITION:
In March 1996, the Company acquired Imtec Acculine, Inc. (Imtec), a Sunnyvale,
California company. Imtec's principal business is designing, developing,
testing, manufacturing and marketing temperature regulated baths and high
resolution photo plates for the semiconductor market and related industries.
The Company acquired all the outstanding stock of Imtec in exchange for 575,000
shares of Common stock. The transaction was accounted for as a pooling of
interests and therefore, the consolidated results of operations for three
months ended March 31, 1996 include Imtec's results of operations for the
period then ended. Additionally, the consolidated balance sheets of SSC and
subsidiaries as of December 31, 1995 and the results of operations for the
three months ended March 31, 1995 have been restated to include Imtec
historical financial information.
3. INVENTORIES:
Inventories are stated at the lower of cost (specific identification) or market
and consist of the following:
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
----------------- ---------------
<S> <C> <C>
Raw materials $ 23,128,650 $ 20,230,903
Work-in-process 20,575,021 14,618,637
----------------- ---------------
43,703,671 34,849,540
Excess and obsolescence reserve (892,533) (717,533)
----------------- ---------------
$ 42,811,138 $ 34,132,007
================= ===============
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4. CUSTOMER INFORMATION:
Sales of the Company's products to three customers accounted for 42.5% of total
sales for the three months ended March 31, 1996, and sales to three different
customers accounted for 41% of total sales for the three months ended March 31,
1995. Accounts receivable for the two largest customers in 1996 represents 22%
of consolidated receivables as of March 31, 1996.
6
<PAGE> 7
5. LINES OF CREDIT:
In February 1996, the Company replaced it's $11,500,000 note with a $30,000,000
credit facility. The Company used the credit facility to refinance its
existing lines of credit and to provide working capital. Borrowings under the
line of credit bear interest at LIBOR or prime and are secured by substantially
all of the assets of the Company. This credit facility replaced all other
credit facilities of the Company and its subsidiaries. The credit facility is
subject to renewal in August 1997 and includes certain financial and other
covenant including a limitation on capital expenditures, restriction on payment
of dividends and the maintenance of certain financial ratios.
6. INCOME TAXES:
The Company accounts for income taxes under Financial Accounting Standards No.
109. As of March 31, 1996, the components of the Company's net deferred income
tax asset are approximately as follows:
<TABLE>
<S> <C>
Financial statement reserves $ 1,494,000
Uniform capitalization 154,000
Gain on litigation settlement (1,100,000)
Deferred compensation 314,000
Other 396,000
------------
$ 1,258,000
============
</TABLE>
No valuation allowance has been provided for deferred tax assets.
7
<PAGE> 8
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Net Sales
Net sales increased 113% for the three month period ended March 31, 1996, as
compared to the same period in the prior year. Sales increased as a result of
continued demand for SubMicron's advanced wafer cleaning and chemical
management systems. Management believes that sales will continue to improve
over the remainder of the year as compared to the prior year.
Gross Profit
The gross margin was 32% for the three months ended March 31, 1996, as compared
to a gross margin of 34% for the comparable period in the prior year. First
quarter gross margin decreased primarily as the result of a low margin project
at one of the Company's California subsidiaries. Gross margins may vary
significantly from quarter to quarter based upon product mix.
Selling, General and Administrative
Selling, general and administrative expense was 21% of net sales for the three
month period ended March 31,1996, as compared to 27% for the comparable period
in the prior year. The decrease as a percentage of sales is the result of a
significant growth in sales coupled with a reduction of selling expenses
through the use of the Company's internal sales force as opposed to using
outside sales representatives.
Research and Development
Research and development expenses were 4% of net sales for the three month
period ended March 31, 1996 and March 31, 1995, respectively.
Other Income (Expense), Net
Other expense, net was approximately $774,000 for the three period ended March
31, 1996, as compared to other expense of approximately $45,000 for the prior
year comparable period. Other expense for the three months ended March 31,
1996, is due primarily to interest and other charges associated with the
Company's convertible debt issued in December 1995.
Future Operating Results
The Company's future results will depend on its ability to maintain sales
growth of its existing products and to successfully introduce new products to
its customers in the semiconductor industry. Due to the inherent risk in the
timing of the development and testing of new products, the Company's operating
results may fluctuate, especially when measured on a quarterly basis. The
Company's results will also be affected by the condition of the semiconductor
industry, as well as the general economy.
8
<PAGE> 9
LIQUIDITY AND CAPITAL RESOURCES
In February 1996, the Company replaced it's $11,500,000 note with a $30,000,000
credit facility. The Company used the credit facility to refinance its
existing lines of credit and to provide working capital. Borrowings under the
line of credit bear interest at LIBOR or prime and are secured by substantially
all of the assets of the Company. This credit facility replaced all other
credit facilities of the company and its subsidiaries. The credit facility is
subject to renewal in August 1997 and includes certain financial and other
covenants including a limitation on capital expenditures, restriction on
payment of dividends and the maintenance of certain financial ratios.
Cash provided by (or used in) operating activities varies significantly between
periods. Differences between periods are primarily due to timing of shipments,
cash receipts and inventory purchasing.
Cash and cash equivalents decreased by approximately $7,200,000 during the
three month period ended March 31, 1996, to approximately $8,900,000. Cash
used in operations totaled approximately $5,200,000 for the three months ended
March 31, 1996, which was largely due to an increase inventory. Inventory
balances of $42,800,000 at March 31, 1996 are up approximately $8,700,000 from
the December 31, 1995 balance of $34,100,000 due primarily to increased
material purchased to prepare for second and third quarter 1996 shipments.
Accounts receivable decreased approximately $6,800,000 from $46,600,000 at
December 31, 1995 to $39,800,000 at March 31, 1996. Accounts payable decreased
$7,100,000 from December 31, 1995 to approximately $18,200,000 at March 31,
1996.
SubMicron believes that with the funds available under its credit facility, it
will have sufficient funds to finance the Company's near term growth
activities.
9
<PAGE> 10
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, this
amendment has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date included.
SUBMICRON SYSTEMS CORPORATION
Dated: May 14, 1996 By: /s/ David F. Levy
-------------------------
David F. Levy
President & CEO
Dated: May 14, 1996 /s/ R. G. Holmes
-------------------------
R. G. Holme
Chief Financial Officer
10
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 8,859,048
<SECURITIES> 0
<RECEIVABLES> 40,421,344
<ALLOWANCES> 606,933
<INVENTORY> 42,811,138
<CURRENT-ASSETS> 97,406,264
<PP&E> 18,850,385
<DEPRECIATION> 5,898,411
<TOTAL-ASSETS> 116,926,437
<CURRENT-LIABILITIES> 49,412,971
<BONDS> 18,936,963
0
0
<COMMON> 1,658
<OTHER-SE> 47,843,563
<TOTAL-LIABILITY-AND-EQUITY> 116,926,437
<SALES> 44,853,909
<TOTAL-REVENUES> 44,853,909
<CGS> 30,548,568
<TOTAL-COSTS> 30,548,568
<OTHER-EXPENSES> 11,300,255
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,022,968
<INCOME-PRETAX> 2,230,979
<INCOME-TAX> 780,843
<INCOME-CONTINUING> 1,450,136
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,450,136
<EPS-PRIMARY> .09
<EPS-DILUTED> 0
</TABLE>
