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, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-10938
SEMICONDUCTOR PACKAGING MATERIALS CO., INC.
(Name of Business Issuer in its charter)
Delaware 13-3584740
(State of other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1 LABRIOLA COURT, ARMONK, NEW YORK 10504
(Address of principal executive offices, including zip code)
(914) 273-5500
(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 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.
(1) Yes [X] No [ ]
(2) Yes [X] No [ ]
The number of shares outstanding of the Registrant's sole class of
common stock, as of March 31, 1997 was 6,068,516 shares.
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
INDEX TO FINANCIAL STATEMENTS PAGE
Consolidated Balance Sheet at
March 31, 1997 and December 31, 1996. 3
Consolidated Statement of Income
for the three months ended
March 31, 1997 and 1996. 4
Consolidated Statement of Cash Flows
for the three months ended
March 31, 1997 and 1996. 5
Consolidated Statement of Shareholders' Equity
for the three months ended March 31, 1997 6
Notes to Consolidated Financial Statements 7
Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-11
ITEM 2. PRO FORMA INFORMATION 12
Pro Forma Consolidated Statement of
Income for the three months ended
March 31, 1996 (Unaudited) 13
Notes to Unaudited Pro Forma Consolidated
Statement of Income for the three months
ended March 31, 1996 14
PART II OTHER INFORMATION 15
SIGNATURE PAGE 16
EXHIBITS 17
|_| Transition Report on Form N-SAR
2
<PAGE>
SEMICONDUCTOR PACKAGING MATERIALS CO., INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
March 31, DECEMBER 31,
ASSETS 1997 1996
(UNAUDITED)
Current Assets: ------------ -----------
<S> <C> <C>
Cash and cash equivalents $ 1,962,099 $ 3,531,099
Accounts receivable, less allowance for doubtful
accounts of $169,000 and $143,000, respectively 7,380,250 5,637,158
Inventories 10,898,341 9,078,471
Prepaid expenses and other current assets 1,017,141 885,644
------------ -----------
Total current assets 21,257,831 19,132,372
------------ -----------
Property and Equipment-at cost, net of accumulated
depreciation and amortization of $7,410,376
and $6,444,253, respectively 37,012,471 20,700,573
------------ -----------
Other Assets-net of accumulated amortization:
Technology rights and intellectual property 735,557 749,523
Goodwill 16,829,752 14,816,454
Other 1,359,464 1,090,403
------------ -----------
Total other assets 18,924,773 16,656,380
------------ -----------
Total Assets $ 77,195,075 $56,489,325
============ ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 5,095,315 $ 3,462,227
Accrued expenses 2,823,318 856,810
Income taxes payable 42,824 1,143,518
Current portion of obligations under capital leases 1,350,526 1,306,763
Current portion of long-term debt 6,052,621 1,416,000
------------ -----------
Total current liabilities 15,364,604 8,185,318
------------ -----------
Deferred income taxes 1,470,460 1,470,460
Long-term debt 20,310,406 6,719,333
Obligations under capital leases 3,854,975 4,242,415
------------ -----------
Total Liabilities 41,000,445 20,617,526
------------ -----------
Minority Interest in subsidiary 1,817,196 1,932,171
------------ -----------
Shareholders' Equity:
Preferred stock-$.10 par value; authorized 1,000,000
shares, none issued 0 0
Common stock-$.10 par value; authorized 10,000,000
shares, issued 6,368,516 and 6,355,516 shares, respectively 636,852 635,552
Additional paid-in-capital 28,157,213 28,070,464
Cumulative Translation Adjustment (131,485)
Retained Earnings 5,714,854 5,233,612
------------ -----------
34,377,434 33,939,628
Less: Treasury stock: 300,000 shares, at cost 0 0
------------ -----------
Shareholders' Equity 34,377,434 33,939,628
------------ -----------
Total Liabilities And Shareholders' Equity $ 77,195,075 $56,489,325
============ ===========
</TABLE>
See Notes to Consolidated Financial Statements
3
<PAGE>
Semiconductor Packaging Materials Co., Inc. and Subsidiaries
Consolidated Statement of Income
(Unaudited)
<TABLE>
<CAPTION>
For The Three Months
Ended March 31,
1997 1996
----------- ----------
<S> <C> <C>
Net Sales $ 9,038,374 $ 7,922,007
Service Revenue 4,868,491 3,326,256
----------- -----------
Total Revenue 13,906,865 11,248,263
Cost of Goods Sold 6,553,663 5,825,969
Cost of Services Performed 3,439,919 1,692,901
----------- -----------
Cost of Goods Sold and
Services Performed 9,993,582 7,518,870
----------- -----------
Gross Profit 3,913,283 3,729,393
Selling, General and
Administrative Expenses 2,711,051 1,876,210
----------- -----------
Operating Income 1,202,232 1,853,183
Interest Expense (Net) 516,250 203,100
----------- -----------
Income Before Provision for Income Taxes and
Minority Interest in Loss of Consolidated Subsidiary 685,982 1,650,083
Provision for Income Taxes 280,572 660,481
----------- -----------
Income Before Minority Interest in Loss
of Consolidated Subsidiary 405,410 989,602
Minority Interest in Loss of Consolidated Subsidiary 75,832
----------- -----------
Net Income $ 481,242 $ 989,602
=========== ===========
Income per Common Share $ .08 $ .16
=========== ===========
Weighted Average Number of
Common Shares Outstanding 6,206,817 6,093,932
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements
4
<PAGE>
SEMICONDUCTOR PACKAGING MATERIALS CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
For The Three Months
Ended March 31,
1997 1996
Cash Flows From Operating Activities: -------- --------
<S> <C> <C>
Net Income $ 481,242 $ 989,602
Adjustments To Reconcile Net Income To Net
Cash Provided By Operating Activities:
Gain on Sale of Property and Equipment (45,657)
Depreciation And Amortization Of Property And Equipment 997,341 512,606
Other Amortization 183,563 169,746
Deferred Income Taxes 0 50,000
Minority Interest in Subsidiary Loss (114,975)
Changes In Operating Assets And Liabilities:
Increase In Accounts Receivable (374,047) (1,174,675)
Increase In Inventories (516,838) (663,308)
Decrease (Increase) In Prepaid Expenses And
Other Current Assets 541,440 (154,242)
Increase In Accounts Payable 1,102,990 156,787
Increase (Decrease) In Accrued Expenses 70,009 (171,495)
(Decrease) Increase in Income Taxes Payable (1,336,955) 443,402
------------ -----------
Net Cash Provided By Operating Activities 988,113 158,423
------------ -----------
Cash Flows From Investing Activities:
Purchase Of Property And Equipment (7,047,773) (369,237)
Proceeds From Sales of Property and Equipment 260,105
Increase In Other Assets (661,270) (352,487)
Acquisition of Subsidiary (13,023,013) (6,213,906)
------------ -----------
Net Cash Used In Investing Activities (20,471,951) (6,935,630)
------------ -----------
Cash Flows From Financing Activities:
Proceeds From Exercise Of Stock Options 88,049 184,155
Proceeds From Long-Term Debt 17,381,694 6,000,000
Borrowing Under Revolving Credit 1,300,000
Payments Under Capital Leases (343,677) (177,050)
Payment Under Term Loan Agreements (454,000) (496,166)
Decrease In Amounts Due Related Parties 0 (625,000)
------------ -----------
Cash Provided By Financing Activities 17,972,066 4,885,939
------------ -----------
Effect of Exchange Rate Changes on Cash (57,228)
------------ -----------
Net Decrease In Cash (1,569,000) (1,891,268)
Cash At Beginning Of Period 3,531,099 4,244,075
------------ -----------
Cash At End Of Period $ 1,962,099 $ 2,352,807
============ ===========
Supplemental schedule of noncash investing and
financing activity:
Machinery and equipment acquired under capital leases $ 0 $ 752,370
</TABLE>
See Notes To Consolidated Financial Statements
5
<PAGE>
SEMICONDUCTOR PACKAGING MATERIALS CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
For the three months ended March 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TREASURY STOCK CUMULATIVE TOTAL
------------------- PAID-IN RETAINED ----------------- TRANSLATION SHAREHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS SHARES AMOUNT ADJUSTMENT EQUITY
--------- -------- ---------- ---------- -------- ------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
January 1, 1997 6,055,516 $635,552 $28,070,464 $5,233,612 300,000 $0 $ 0 $33,939,628
Issuance Of
Common Stock
Through The
Exercise Of Stock
Options 13,000 1,300 86,749 88,049
Net Income 481,242 481,242
Cumulative
Translation
Adjustment (131,485) (131,485)
--------- --------- ---------- ---------- -------- ------- ----------- ------------
Balance at
March 31, 1997 6,068,516 $636,852 $28,157,213 $5,714,854 300,000 $0 $(131,485) $34,377,434
========= ======== =========== ========== ======== ======= =========== ============
</TABLE>
See Notes To Consolidated Financial Statements
6
<PAGE>
SEMICONDUCTOR PACKAGING MATERIALS CO., INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. The consolidated financial statements include the accounts of the Company,
its wholly owned subsidiaries and its majority owned subsidiary. The
consolidated balance sheet as of March 31, 1997, the consolidated statement
of income for the three months ended March 31, 1997 and 1996, the
consolidated statement of cash flows for the three months ended March 31,
1997 and 1996 and the consolidated statement of shareholders' equity for
three months ended March 31, 1997, have been prepared by the Company and
are unaudited. In the opinion of management, all adjustments necessary to
present fairly the financial position, results of operations and cash flows
at March 31, 1997 and for all periods presented have been made.
2. Earnings per share - Earnings per share are computed using the weighted
average number of common shares actually outstanding plus the shares that
would be outstanding assuming the exercise of employee stock options and
stock warrants during the periods presented.
3. See the Company's Annual Report on Form 10-KSB for the year ended December
31, 1996 for additional disclosures relating to the Company's financial
statements.
4. On January 23, 1997, American Silicon Products, Inc. ("ASP") a wholly owned
subsidiary of the Company acquired all of the assets of Silicon Materials
Service and acquired 100% of the outstanding stock of Silicon Materials
Service, B.V. (collectively "SMS"), a company which polishes and reclaims
silicon wafers for a purchase price of approximately $12,972,000 in cash.
This business combination was accounted for as a purchase. In addition, the
Company incurred approximately $500,000 in estimated closing expenses and
$1,500,000 of costs associated with the integration and relocation of
certain acquired activities of SMS. The fair value of the assets acquired,
including approximately $2,183,000 allocated to goodwill, which is being
amortized over 25 years, amounted to $12,247,000 and liabilities assumed
amounted to $638,000.
5. Effective August 28, 1996, the Company entered into a joint venture
agreement to develop a silicon wafer polishing and reclaiming facility in
Singapore. The jointly owned Singapore corporation, International
Semiconductor Products Pte Ltd ("ISP"), is 50.1% owned by the Company and
49.9% owned by a holding company, Semiconductor Alliance Pte Ltd.
Accordingly, the Company's consolidated balance sheet at March 31, 1997
reflects a $1,817,000 minority interest contribution made by the Company's
joint venture partner. ISP did not generate any revenues in the period
ended March 31, 1997.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD LOOKING INFORMATION
Portions of the narrative set forth in this 10-Q that are not
historical in nature are forward looking statements. The Company's actual
performance may differ materially from that contemplated by the forward looking
statements as a result of a variety of factors that include but are not limited
to, the general economic or business climate, business conditions of the
microelectronic and semiconductor markets which the Company serves, the timely
and successful completion of the Company's capital and plant expansion programs,
the success of the Company in implementing its strategic and operational plans
and the ability of the Company to obtain necessary financing when required.
RESULTS OF OPERATIONS (for the three month period ended March 31, 1997 compared
to the three month period ended March 31, 1996)
Total revenue for the three month period ended March 31, 1997
increased $2,659,000, or 24%, over the comparable 1996 period. Sales from the
Company's Microelectronic Materials Group increased $1,116,000, or 14% due to an
increase in demand for its products by the communication and computer
industries. Revenue derived from the Company's Semiconductor Services Group
increased $1,543,000, or 46% primarily as the result of the inclusion of revenue
from SMS, which was acquired by the Company on January 23, 1997. Demand for the
Company's silicon wafer reclaim services by semiconductor fabricators appears to
be improving, while demand by silicon wafer brokers and semiconductor equipment
manufacturers is below that of the first quarter of 1996. The Company believes
that as various segments of the semiconductor industry recover, it will
experience an increase in demand for its services. For the three months ended
March 31, 1997 and 1996, direct sales of the Company's products into foreign
markets accounted for 14.8% and 9.6%, respectively, of consolidated revenue. The
Company currently maintains foreign manufacturing operations in Singapore and in
the Netherlands. In the three month period ended March 31, 1997, the Company
derived $674,000 of revenue from its Netherlands operation, while in the three
month period ended March 31, 1996, the Company did not derive any revenue from
its foreign manufacturing operations. Foreign sales made through the Company's
domestic operations are made through foreign manufacturer's representatives and
are primarily priced and paid for in U.S. dollars. The Company believes that its
revenue has been, and will be, affected by the cyclical nature of the industries
it serves. The SMS acquisition, and the Company's joint venture in Singapore,
will further increase the Company's reliance on the semiconductor industry and
its future revenue could be impacted by the cyclical nature of the semiconductor
industry.
Gross profit for the three month period ended March 31, 1997
increased $184,000, or 5%, from the comparable 1996 period. Gross profit from
the Company's Microelectronic Materials Group increased $389,000, or 19% from
1996 levels primarily due to increased sales and improved margins for the
Company's heat dissipation products. Gross profit from the Company's
Semiconductor Services Group decreased $205,000, or 13% from 1996 levels, as the
result of a decrease in the processing of high margin large diameter silicon
wafers and higher depreciation expenses associated with capacity expansion at
ASP's Rhode Island operation. While gross margin improved 1% in the Company's
Microelectronic Materials Group, gross margin in the Company's Semiconductor
Services Group decreased 20% from 1996 levels. As a result of the foregoing,
gross margin decreased to 28% in the three month period ended March 31, 1997
from 33% in the comparable 1996 period.
Selling, general and administrative ("SG&A") expenses in the three
month period ended March 31, 1997 increased $835,000, or 44% over the comparable
1996 period. The increase was primarily due to the inclusion of SMS, the
initiation of the Company's operation in Singapore and the building of
organizational infrastructures in
8
<PAGE>
the Company's Microelectronic Materials Group. SG&A expenses as a percentage of
revenue increased to 19% in the three month period ended March 31, 1997 as
compared to 17% in the comparable 1996 period.
Net interest expense for the three month period ended March 31, 1997
increased $313,000 from the comparable 1996 period primarily due to increased
interest costs associated with term debt incurred in conjunction with the SMS
acquisition described below.
A provision of $281,000 for income taxes has been made for the three
month period ended March 31, 1997 as compared to a $660,000 provision in
the comparable 1996 period, yielding an effective tax rate of 41% and 40%
respectively.
In the three month period ended March 31, 1997, the Company has
included a loss associated with its Singapore joint venture in its income before
minority interest in loss of consolidated subsidiary. The Company has a 50.1%
interest in the joint venture and has accordingly, excluded 49.9% of such loss
from its consolidated net income.
As a result of the foregoing, net income decreased $508,000, or 52%
in the three month period ended March 31, 1997 from the comparable 1996 period.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its capital needs through the proceeds of
its public offerings, its revolving credit facility and term loans from First
Union Bank (the "Bank") and cash flow from operations.
At March 31, 1997, the Company had cash and cash equivalents of
$1,962,000 and had an available balance on its revolving credit facility of
$10,100,000.
Net cash provided by operating activities in the three month period
ended March 31, 1997 amounted to $988,113 as compared to $158,000 in the
comparable 1996 period. Cash provided by operating activities in the 1997 period
increased over the comparable 1996 period primarily as the result of changes in
the Company's operating assets and liabilities; the Company's net income plus
depreciation and amortization, other amortization, deferred income taxes and
minority interest in subsidiary loss amounted to $1,547,000 in the three month
period ended March 31, 1997 as compared to $1,722,000 in the comparable 1996
period. In the three month periods ended March 31, 1997 and 1996, the Company
used $891,000 and $1,838,000, respectively, of cash derived from operations to
fund increases in accounts receivable and inventories . The increases in the
Company's accounts receivable and inventories were made to support increased
revenues. Prepaid expenses and other current assets increased $541,000 in the
three month period ended March 31, 1997 as compared to deceasing $154,000 in the
comparable 1996 period. The increase in the 1997 period resulted primarily from
an increase in refundable deposits associated with equipment to be put under
capitalized lease obligations. Accounts payable increased $1,103,000 in the
three month period ended March 31, 1997 period as compared to increasing
$157,000 in the comparable 1996 period. In the 1996 period, accounts payable
increased primarily due to increases in inventory purchases. As a result of the
Company's payment of 1996 tax obligations, the Company made approximately
$1,300,000 in tax payments in the three month period ended March 31, 1997 which
resulted in a corresponding decrease in its income taxes payable.
To support the Company's growth and enhance its profitability, in the
three month period ended March 31, 1997 and 1996, the Company invested
$7,048,000 and $369,000, respectively, in property and equipment to support its
growth and expand its facilities and production capabilities.. At March 31,
1997, the Company had capital commitments of approximately $2,100,000 for the
ongoing upgrade of the Company's manufacturing equipment and the expansion of
ASP's manufacturing capabilities, approximately $1,800,000 was committed to
expand ASP's facility and to procure additional equipment for ASP. The Company
believes that the lease financing available to it for certain
9
<PAGE>
equipment together with cash flow from operations will be sufficient to fund its
capital needs.
On January 23, 1997, ASP completed the acquisition of the assets of
Silicon Materials Service of Garland, Texas, and acquired 100% of the
outstanding stock of Silicon Materials Service, B.V. of Helmond Netherlands. The
purchase price of approximately $12,972,000 was paid in cash, $400,000 of which
was paid as a deposit prior to December 31, 1996. The Company also paid $481,000
in acquisition expenses in the three month period ended March 31, 1997 related
to the SMS acquisition.
Effective January 2, 1996, the Company acquired all of the common
stock of Retconn, a manufacturer of coaxial contacts and connectors, for
$5,933,000 in cash. In addition, the Company has paid approximately $986,000 in
costs associated with the Retconn acquisition. This business combination was
accounted for as a purchase. The Company also issued 15,000 of its common
shares, valued at $146,250, in conjunction with the acquisition. The fair value
of the assets acquired, including approximately $4,696,000 allocated to
goodwill, which is being amortized over 25 years, amounted to $8,033,000 and
liabilities assumed amounted to approximately $968,000.
In connection with the Retconn acquisition, on January 4, 1996, the
Company entered into a term loan with the Bank in the principal amount of
$6,000,000. The loan bore interest at the Bank's loan pricing rate (8.25% at
December 31, 1996) and the principal was to be payable commencing on February 1,
1997. Interest on the loan was payable monthly and commenced on February 1,
1996. The loan was subsequently refinanced in conjunction with the SMS
acquisition described below.
Effective August 28, 1996, the Company entered into a joint venture
agreement to develop a silicon wafer polishing and reclaiming facility in
Singapore. The jointly owned Singapore corporation, International Semiconductor
Products Pte Ltd ("ISP"), is 50.1% owned by the Company and 49.9% owned by a
holding company, Semiconductor Alliance Pte Ltd. In 1996, the Company and its
joint venture partner made a total of $4,000,000 in equity contributions into
ISP, which was contributed pro-ratably based on ownership. In addition, the
Company has paid approximately $250,000 in costs associated with the
establishment of the joint venture.
Primarily as a result of the foregoing, the Company used $20,472,000
and $6,936,000, respectively, in its investing activities in the three month
period ended March 31, 1997 and 1996 periods.
In the three month period ended March 31, 1997 and 1996, the Company
received $88,000 and $184,000, respectively, from the exercise of stock options.
Concurrent with the SMS acquisition, the Company entered into a
$21,000,000 five year term loan with First Union Bank (the "Bank"). Fleet
National Bank is also participating in the term loan facility and the line of
credit described below. The $21,000,000 term loan was principally used to
finance the SMS acquisition and to refinance the Retconn term loan. The
principal amount is payable in 60 consecutive installments of $350,000 which
commenced on March 1, 1997. The loan bears interest at a Eurodollar rate plus
2.25%. In conjunction with the term loan agreement, the Company also entered
into a $15,000,000 line of credit with the Bank which is described below.
Pursuant to the term loan and line of credit agreements, the Bank has a first
priority security interest in substantially all of the Company's assets. The
loan agreements provide, among other things, that the Company maintain certain
financial ratios. The Company is also subject to restrictions relating to
incurring additional indebtedness, additional liens and security interests,
capital expenditures and the payment of dividends.
On January 23, 1997, the Company entered into a $15,000,000 line of
credit with the Bank which expires in February 1999 which includes a standby
letter of credit for ISP in the amount of $3,600,000. Interest is payable
monthly at the lower of the Bank's loan pricing rate or a Eurodollar rate plus
2.25%. At March 31, 1997, the Company had Borrowed $1,300,000 under its line of
credit and did not have any drawings under its standby letter of credit.
10
<PAGE>
In conjunction with the Company's acquisition of Polese Company in
1993, the Company entered into an agreement with Mr. Frank Polese, the former
sole shareholder of Polese Company whereby, for a period of ten years, Mr.
Polese has the right to receive 10% of (I) the pre-tax profit from the copper
tungsten product line, after allocating operating costs and (ii) the proceeds of
the sale, if any, by the Company of the powdered metal technology.
To date, no payments have been made pursuant to this agreement.
In May of 1993, the Company entered into a $1,200,000 five year term
loan agreement with the Bank. The term loan agreement calls for the repayment of
the loan in twenty equal installments which commenced on October 1, 1993. The
term loan bears interest at the Bank's loan pricing rate plus 1.5%. The term
loan is collateralized with a blanket lien on substantially all of the parent
company's assets, excluding the common stock and assets of its subsidiaries. As
of March 31, 1997, the Company had an outstanding balance of $330,000 due on the
term loan.
The Company has, and expects to be able to continue to, meet its
obligations to the Bank from cash generated from operations. As at March 31,
1997, the Company was in compliance with all of the covenants contained in its
loan agreements.
As a result of the above, in the three month period ended March 31,
1997 and 1996, $17,972,000 and $4,886,000, respectively, of cash was provided by
the Company's financing activities.
The Company continually seeks to broaden its product lines by various
means, including through acquisitions. The Company intends to pursue only those
acquisitions for which it will be able to arrange the necessary financing by
means of the issuance of additional equity, the use of its cash or, through bank
or other debt financing.
The Company believes that it has the capacity for growth and that its
working capital and internally generated funds, combined with its bank line of
credit, the proceeds it has received from its public offerings, and from other
sources of financing, will be sufficient to satisfy the Company's currently
anticipated cash requirements on both a short-term and long-term basis.
11
<PAGE>
Pro Forma Information
The following unaudited pro forma combined financial statements and
explanatory notes are presented to reflect the acquisition of the net assets of
Silicon Materials Service of Garland, Texas, and 100% of the outstanding stock
of Silicon Materials Service, B.V. of Helmond, Netherlands ( collectively "SMS")
by American Silicon Products, Inc, a subsidiary of Semiconductor Packaging
Materials Co., Inc. (the "Company") on January 23, 1997.
The pro forma statement of income gives effect to this transaction as if it
had occurred at the beginning of the period presented.
The pro forma information should be read in conjunction with (1) the
historical financial statements for the Company, including the related notes
thereto, included in the Company's Form 10-KSB for the fiscal year ended
December 31, 1996, (2) the historical financial statements of SMS, including the
related notes thereto and (3) the Company's Form 8-K and 8-K/A filed on February
4, 1997 and April 7, 1997, respectively.
The pro forma information is not necessarily indicative of the combined
results of operations or combined financial position that would have resulted
had the acquisition been consummated as of the date noted above, nor is it
necessarily indicative of the combined results of operations in any future
period or of the future combined financial position.
12
<PAGE>
SEMICONDUCTOR PACKAGING MATERIALS CO., INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
For The Three Months Ended March 31, 1996
--------------------------------------------------------------------
HISTORICAL
SEMICONDUCTOR
PACKAGING MATERIALS
CO., INC. AND PRO FORMA
SUBSIDIARIES SMS ADJUSTMENTS AS ADJUSTED
------------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales $ 7,922,007 $ $7,922,007
Service revenue 3,326,256 4,007,000 7,333,256
---------- ----------- ----------- ----------
Total revenue 11,248,263 4,007,000 15,255,263
Cost of goods sold 5,825,969 5,825,969
Cost of services performed 1,692,901 3,222,000 (208,767) (1) 4,706,134
---------- ----------- ----------- ----------
Total cost of goods sold and services performed 7,518,870 3,222,000 (208,767) 10,532,103
Gross profit 3,729,393 785,000 208,767 4,723,160
Selling, general and administrative expenses 1,876,210 472,000 21,829 (3) 2,370,039
---------- ----------- ----------- ----------
Operating income 1,853,183 313,000 186,938 2,353,121
Interest expense (net) 203,100 312,813 (2) 515,913
---------- ----------- ----------- ----------
Income before provision for
income taxes 1,650,083 313,000 (125,875) 1,837,208
Provision for income taxes 660,481 75,973 (4) 736,454
---------- ----------- ----------- ----------
Net income $ 989,602 $313,000 $ (201,848) $1,100,754
========== =========== =========== ==========
Net income per common share $ .16 $ .18
========== =========== =========== ==========
Weighted average number of common
shares outstanding 6,093,932 6,093,932
========== =========== =========== ==========
</TABLE>
13
<PAGE>
SEMICONDUCTOR PACKAGING MATERIALS CO., INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1996
(1) Adjustment which reflects three months of depreciation expense on SMS's
machinery and equipment and furniture and fixtures at appraised values
amounting to $10,209,314, assuming an estimated useful life of ten years on
a straight line basis adjusted by actual depreciation expense on machinery
and equipment and furniture and fixtures recorded by SMS for the three
month period ended March 31, 1996, amounting to $464,000.
(2) Adjustment which records interest expense on a $15,000,000 term note with
an effective interest rate of 8.25%.
(3) Adjustment which records the amortization of the excess of the purchase
price paid for the fair market value of all tangible and identifiable
intangible assets acquired less liabilities assumed, totaling $2,182,895,
amortized over an estimated useful life of twenty-five years.
(4) Federal income taxes have been provided for the fiscal year ended September
30, 1996 primarily because SMS prior to its acquisition by the Company, was
a division of Air Products and Chemicals, Inc. and therefore no provision
for federal income tax purposes has been made. The income tax provision of
$75,973 represents SMS's pre-tax income of $313,000 less total pre-tax pro
forma adjustments of $125,875 adjusted for state and foreign income taxes
of 10% and federal income taxes of 34%.
14
<PAGE>
PART II
Other Information
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
REPORTS ON FORM 8-K
(b) A Form 8-K and Form 8-K/A, reporting events under items 2 and 7 as
filed by the Company on February 4, 1997 and April 7, 1997.
FINANCIAL STATEMENTS AND EXHIBITS FILED WITH THE FORM 8-K AND FORM
8-K/A LISTED ABOVE, ARE HEREIN INCORPORATED BY REFERENCE
A. Combined Financial Statements of business acquired:
1) SMS Combined Financial Statements for the period
ended September 30, 1996:
a) Independent Auditor's Report;
b) Combined Statement of Assets Acquired and Liabilities
Assumed;
c) Combined Statement of Revenue and Direct Operating
Expenses;
d) Combined Statement of Cash Flows; and
e) Notes to Combined Financial Statements.
B. Pro Forma Financial Information for Semiconductor
Packaging Materials Co., Inc. and Subsidiaries and
SMS for the period ended December 31, 1996:
a) Pro Forma Information;
b) Unaudited Pro Forma Consolidated Balance Sheet;
c) Notes to Unaudited Pro Forma Consolidated Balance Sheet;
d) Unaudited Pro Forma Consolidated Statement of Income; and
e) Notes to Unaudited Pro Forma Consolidated Statement of
Income.
(C) - Exhibits
10.60 Purchase Agreement dated as of January 16, 1997 between American
Silicon Products, Inc. and Air Products & Chemicals, Inc.
15
<PAGE>
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.
SEMICONDUCTOR PACKAGING MATERIALS CO., INC.
DATE: May 15, 1997 By: /S/ GILBERT D. RAKER
-------------------------------
Name: Gilbert D. Raker
Title: Chairman of the Board
and Chief Executive Officer
DATE: May 15, 1997 By: /S/ ANDREW A. LOZYNIAK
-------------------------------
Name: Andrew A. Lozyniak
Title: Treasurer and Secretary
(Chief Accounting Officer)
16
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 1,962
<SECURITIES> 0
<RECEIVABLES> 7,549
<ALLOWANCES> 169
<INVENTORY> 10,898
<CURRENT-ASSETS> 21,258
<PP&E> 44,423
<DEPRECIATION> 7,410
<TOTAL-ASSETS> 77,195
<CURRENT-LIABILITIES> 15,365
<BONDS> 24,165
0
0
<COMMON> 637
<OTHER-SE> 33,740
<TOTAL-LIABILITY-AND-EQUITY> 77,195
<SALES> 9,038
<TOTAL-REVENUES> 13,907
<CGS> 6,554
<TOTAL-COSTS> 9,994
<OTHER-EXPENSES> 2,711
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 516
<INCOME-PRETAX> 686
<INCOME-TAX> 281
<INCOME-CONTINUING> 405
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 481
<EPS-PRIMARY> 0.08
<EPS-DILUTED> 0.08
</TABLE>
