<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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Form 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended: July 31, 1996 Commission File Number 0-26714
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ADE CORPORATION
(Exact name of registrant as specified in its charter)
Massachusetts 04-2441829
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
77 Rowe Street, Newton, Massachusetts 02166
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(Address of principal executive offices, including area code)
(617) 969-0600
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(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.
YES X NO
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Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Common Stock, par value $.01 per share 7,623,316 shares
- --------------------------------------- --------------------------------
Class Outstanding at September 9, 1996
Page 1 of 14 pages
Exhibit Index on page 13
<PAGE>
ADE CORPORATION
INDEX
<TABLE>
<CAPTION>
Page
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<S> <C>
Part I. - Financial Information
Item 1. Condensed Consolidated Financial Statements (unaudited)-
Condensed Consolidated Balance Sheet
July 31, 1996 and April 30, 1996 3
Condensed Consolidated Statement of Income-
Three Months Ended July 31, 1996 and 1995 4
Condensed Consolidated Statement of Cash Flows -
Three Months Ended July 31, 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 8
Part II. - Other Information 11
Signatures 12
Exhibit Index 13
</TABLE>
<PAGE>
ADE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(unaudited)
<TABLE>
<CAPTION>
July 31, April
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1996 1996
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<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $16,436,000 $20,997,000
Restricted cash 3,500,000 --
Accounts receivable, net 13,877,000 15,760,000
Inventories 16,340,000 12,981,000
Prepaid expenses and other current assets 400,000 325,000
Deferred income taxes 2,874,000 2,874,000
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Total current assets 53,427,000 52,937,000
Fixed assets, net 7,476,000 6,538,000
Restricted cash 3,620,000 --
Deferred income taxes 329,000 329,000
Investments 2,156,000 --
Other assets 248,000 198,000
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$67,256,000 $60,002,000
=========== ===========
Liabilities and Stockholders' equity
Current liabilities:
Current portion of long-term debt $ 230,000 $ 38,000
Accounts payable 4,006,000 4,618,000
Accrued expenses 7,796,000 8,536,000
Income taxes payable 968,000 289,000
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Total current liabilities 13,000,000 13,481,000
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Long-term debt 5,346,000 38,000
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Excess of net assets acquired over cost 373,000 436,000
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Stockholders' equity:
Common stock 76,000 76,000
Capital in excess of par value 27,055,000 27,032,000
Retained earnings 21,652,000 19,198,000
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48,783,000 46,306,000
Deferred compensation (246,000) (259,000)
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48,537,000 46,047,000
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$67,256,000 $60,002,000
=========== ===========
</TABLE>
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
3
<PAGE>
ADE CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(unaudited)
<TABLE>
<CAPTION>
Three months ended
July 31,
---------------------------
1996 1995
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<S> <C> <C>
Revenues $19,194,000 $13,542,000
Cost of sales 8,362,000 6,223,000
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Gross profit 10,832,000 7,319,000
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Operating expenses:
Research and development 3,045,000 1,666,000
Marketing and sales 2,922,000 2,206,000
General and administrative 1,444,000 1,405,000
Amortization of excess of net assets
acquired over cost (63,000) (63,000)
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Total operating expenses 7,348,000 5,214,000
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Income from operations 3,484,000 2,105,000
Interest income (expense), net 179,000 (34,000)
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Income before provision
for income taxes 3,663,000 2,071,000
Provision for income taxes 1,209,000 741,000
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Net income $ 2,454,000 $ 1,330,000
=========== ===========
Net income per share $0.31 $0.22
=========== ===========
Weighted average common and common
equivalent shares outstanding 8,043,000 5,989,000
=========== ===========
</TABLE>
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
4
<PAGE>
ADE CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Three months ended
July 31,
---------------------------------
1996 1995
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<S> <C> <C>
Cash flows provided by (used in) operating activities:
Net income $ 2,454,000 $ 1,330,000
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization 400,000 368,000
Deferred profits on sales to affiliates 407,000 --
Change in assets and liabilities:
Accounts receivable 1,883,000 1,784,000
Inventories (3,359,000) (980,000)
Prepaid expenses and other current assets (75,000) (24,000)
Accounts payable (612,000) (762,000)
Accrued expenses (740,000) 255,000
Income taxes payable 679,000 (1,327,000)
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Net cash provided by operating activities 1,037,000 644,000
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Cash flows provided by (used in) investing activities:
Purchases of fixed assets (1,388,000) (70,000)
Change in restricted cash (7,120,000) --
Equity investments (2,563,000) --
Change in other assets (50,000) 95,000
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Net cash provided by (used in) investing activities (11,121,000) 25,000
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Cash flows provided by (used in) financing activities:
Repayment of long-term debt -- (63,000)
Proceeds from long-term debt 5,500,000 --
Proceeds from common stock issuance 23,000 --
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Net cash provided by (used in) financing activities 5,523,000 (63,000)
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Net increase (decrease) in cash and cash equivalents (4,561,000) 606,000
Cash and cash equivalents, beginning of period 20,997,000 2,767,000
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Cash and cash equivalents, end of period $ 16,436,000 $ 3,373,000
============ ===========
</TABLE>
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
5
<PAGE>
ADE CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
1. Basis of Preparation
The accompanying unaudited condensed consolidated financial statements of ADE
Corporation (the "Company") include, in the opinion of management, all
adjustments (consisting only of normal and recurring adjustments) necessary for
a fair statement of the Company's financial position as of July 31, 1996 and the
results of operations for the three month periods ended July 31, 1996 and 1995.
Results of operations for interim periods are not necessarily indicative of
those to be achieved for full fiscal years.
Pursuant to accounting requirements of the Securities and Exchange Commission
(the "SEC") applicable to quarterly reports on Form 10-Q, the accompanying
unaudited condensed consolidated financial statements and these notes do not
include all disclosures required by generally accepted accounting principles for
complete financial statements. Accordingly, these statements should be read in
conjunction with the financial statements included in the Company's Annual
Report on Form 10-K for the fiscal year ended April 30, 1996.
2. Inventories
Inventories consist of the following:
<TABLE>
<CAPTION>
July 31, April 30,
1996 1996
(unaudited)
<S> <C> <C>
Raw materials and purchased parts $10,712,000 $ 6,099,000
Work-in-process 5,570,000 6,728,000
Finished goods 58,000 154,000
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$16,340,000 $12,981,000
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</TABLE>
3. Equity Investments (unaudited)
The Company's investments in affiliated companies which are not majority owned
or controlled are accounted for using the equity method. Investments carried at
equity and the percentage interest owned consist of Japan ADE Ltd (50%) and
Microspec Technologies Ltd (25.1%). Profits resulting from sales to the
affiliates subsequent to the respective acquisition dates in July 1996 have been
eliminated, have been charged against the investment account and will be
recognized upon the sale to unrelated third parties.
6
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ADE CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
Pro forma results of operations as though the investments were made at the
beginning of the periods presented, including the effect of eliminating the
profit on affiliated sales in beginning and ending inventory for the period, are
as follows:
<TABLE>
<CAPTION>
Three months ended
July 31,
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1996 1995
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<S> <C> <C>
Revenue $19,334,000 $13,680,000
Net income 2,516,000 1,114,000
Earnings per share $0.31 $0.19
</TABLE>
4. Long Term Debt (unaudited)
In June 1996, the Company issued a $5.5 million tax exempt Industrial
Development Bond through the Massachusetts Industrial Finance Agency. The bond
carries a 5.74% interest rate for 10 years with level amortization of 50% of the
principal with the remaining 50% due in June 2006. The proceeds of the bond will
be used to fund the acquisition and renovation of the manufacturing facility in
the Company's new headquarters site. The Company secured the issuance of the
bond with a standby letter of credit from a financial institution. The standby
letter of credit, bearing a fee of 1.25% of the outstanding bond balance, is
secured by a mortgage on the building and land and by a cash amount equal to the
difference between the amount of the bond and 75% of the appraised value of the
land and building. Under the terms of the letter of credit, the Company is
required to comply with certain financial covenants, including a limitation on
the payment of dividends. The cash currently used to secure the letter of credit
is carried as restricted cash. The proceeds of the Industrial Development Bond
that have not yet been disbursed are carried as long-term restricted cash.
5. Earnings Per Share (unaudited)
Earnings per share are determined by dividing net income by the weighted average
number of common shares and common share equivalents outstanding during the
period. Common share equivalents consist of common stock which may be issuable
upon exercise of outstanding stock options and warrants using the treasury stock
method. Common stock, warrants and options issued or granted at prices below the
public offering price per share during the twelve-month period prior to the
initial filing of the Registration Statement have been included in the
calculation as if outstanding for all periods presented through July 31, 1995,
using the treasury stock method and an initial public offering price of $14.00
per share.
7
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ADE CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Introduction
ADE Corporation (the "Company") designs, manufactures, markets and services
highly precise, automated measurement, defect detection and handling equipment
with current applications in the production of semiconductor wafers,
semiconductor devices and computer disks.
The following information should be read in conjunction with the unaudited
condensed consolidated financial statements and notes thereto included in this
Quarterly Report and in the audited consolidated financial statements and
Management's Discussion and Analysis of Financial Condition and Results of
Operations contained in the Company's Annual Report on Form 10-K for the fiscal
year ended April 30, 1996.
Results of Operations
Three Months Ended July 31, 1996 compared to Three Months Ended July 31, 1995
Revenues increased 41.7% to $19.2 million in the first quarter of fiscal 1997
from $13.5 million in the first quarter of 1996. The increase was due to
increased unit sales of the Company's products. The increase in unit sales
resulted primarily from stronger demand for capital equipment in the
semiconductor industry and an increase in demand for gaging equipment in the
computer disk drive industry.
Gross margin increased to 56.4% in the first quarter of fiscal 1997 from 54.0%
in the first quarter of 1996. The increase resulted primarily from operating
manufacturing facilities close to their capacity.
Research and development expense increased 82.8% to $3.0 million in the first
quarter of fiscal 1997 from $1.7 million in the first quarter of 1996 and
increased as a percentage of revenue to 15.9% from 12.3% in the first quarter of
1996. The Company is committed to increasing its investment in research and
development to continue its position as a technological leader. New product
development and improvements have lead to higher research and development
expenses.
Marketing and sales expense increased 32.5% to $2.9 million in the first quarter
of fiscal 1997 from $2.2 million in the first quarter of 1996, but decreased as
a percentage of sales to 15.2% in the first quarter of fiscal 1997 from 16.3% in
1996. The increase in total marketing and sales expense is a result of
supporting higher sales volumes.
General and administrative expenses remained constant at $1.4 million in the
first quarter of fiscal 1997 versus 1996.
8
<PAGE>
Net interest income was $179,000 in the first quarter of fiscal 1997 compared to
a net interest expense of $34,000 in the first quarter of 1996. The increase in
income resulted from interest earned on the proceeds of the initial public
offering of the Company's common stock completed in October 1995, and the
cancellation of subordinated debt related to the exercise of warrants in
connection with the initial public offering, partially offset by interest
expense on the Industrial Development Bond.
Liquidity and Capital Resources
At July 31, 1996, the Company had $16.4 million in cash and cash equivalents and
$40.4 million in working capital. The undisbursed proceeds from a $5.5 million
sale of a tax-exempt Industrial Development Bond on June 7, 1996, amounting to
$3.6 million, are carried as long-term restricted cash. This cash may only be
used to finance the renovation of the Westwood, MA manufacturing facility that
the Company purchased in January 1996. These funds will continue to be disbursed
as construction is completed. Additionally, $3.5 million of restricted cash is
pledged to a bank to secure a standby letter of credit to securitize the
Industrial Development Bond. The Company is committed to pledge cash to make up
the difference between 75% of the appraised value of the building and the
outstanding amount of the Industrial Development Bond. Management anticipates
the restriction will be reduced or eliminated in the current fiscal year, when
the appraisal of the building is done upon completion of renovations.
Net cash provided by operating activities for the first quarter of fiscal 1997
was $1.0 million. Part of the cash provided was the result of increased
collections of accounts receivable during the quarter. The primary use of cash
was to increase inventory in anticipation of increasing manufacturing capacity
in Charlotte, to provide sufficient inventory to meet customer shipments during
the period of the move to the new facility in Westwood, MA, and to provide
service inventory in Europe, as the Company began direct service of customers in
Europe during the first quarter of 1997.
Cash used in investing activities consisted of approximately $7.1 million
reclassified as restricted cash as part of the financing of the Company's new
facility in Westwood, MA, $2.5 million used in equity investments and $1.3
million used to purchase fixed assets.
Cash provided by financing activities consisted primary of $5.5 million received
as the proceeds of an Industrial Development Bond issued by the Company through
the Massachusetts Industrial Development Agency. This bond carries a 5.74%
annual interest rate over its ten year life. Fifty percent of the bond principle
amortizes equally on a monthly basis over the life of the bond.
9
<PAGE>
The Company expects to meet its near-term working capital needs and purchases of
fixed assets primarily through its available cash and cash equivalents.
During the 1996 calendar year, the semiconductor industry experienced a well-
publicized slowdown. The Company's business depends in large part upon the
capital expenditures of semiconductor wafer and device manufacturers. While the
Company has not experienced any significant reduction in its backlog during the
three months ended July 31, 1996, there can be no assurance that the Company's
sales will not be affected adversely in the future as a result of this recent
slowdown in the semiconductor industry.
10
<PAGE>
PART II.
OTHER INFORMATION
Item 1. Legal Proceedings:
-----------------
None
Item 2. Changes in Securities:
---------------------
None
Item 3. Defaults Upon Senior Securities
-------------------------------
None
Item 4. Submission of Matters to a Vote of Security Holders:
---------------------------------------------------
None
Item 5. Other Information:
-----------------
In June 1996, the Company issued a tax-exempt Industrial Development
Bond through the Massachusetts Industrial Finance Authority to finance
the purchase and renovation of the Company's new manufacturing facility
in Westwood, Massachusetts. This bond carries a 5.74% interest rate for
a term of ten years. The bond is secured by a letter or credit from a
bank. The letter of credit is secured by a mortgage on the Westwood
property and cash.
In July 1996, the Company purchased 47% of the stock of Japan ADE
Ltd.(JAL), the distributor of most of the Company's equipment in Japan,
for approximately $1,300,000, bringing the Company's total investment
in JAL to 50%.
In July 1996, the Company purchased 25.1% of the outstanding stock of
Microspec Technologies Ltd., an Israeli company, for $1,250,000.
Item 6. Exhibits and Reports on Form 8-K:
--------------------------------
a. See Exhibit Index, Page 13
b. Reports on Form 8-K
No reports on Form 8-K were filed during the quarter for which
this report is filed.
11
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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.
ADE CORPORATION
Date: September 13, 1996 /s/ Michael J. Ellsworth
--------------------------------
Michael J. Ellsworth
Vice President and Chief Operating Officer
Date: September 13, 1996 /s/ Mark D. Shooman
------------------------------
Mark D. Shooman
Vice President and Chief Financial Officer
12
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ADE CORPORATION
EXHIBIT INDEX
Exhibit Page
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11 Statement Regarding Computation of Net Income per Share 14
27 Financial Data Schedule 15
13
<PAGE>
Exhibit 11
ADE CORPORATION
Statements Regarding Computation of Net Income Per Share
<TABLE>
<CAPTION>
Three months ended
July 31,
------------------------
1996 1995
---- ----
(unaudited)
<S> <C> <C>
Net income $2,454,000 $1,330,000
========== ==========
Weighted average common and
common equivalent shares outstanding
during the period 8,043,000 5,825,000
Shares issuable pursuant to Staff
Accounting Bulletin No. 83 (SAB 83)
using treasury stock method -- 164,000
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Shares used in computation 8,043,000 5,989,000
========== ==========
Net income per share $ 0.31 $ 0.22
========== ==========
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-30-1997
<PERIOD-START> MAY-01-1996
<PERIOD-END> JUL-31-1996
<CASH> 16,436
<SECURITIES> 0
<RECEIVABLES> 13,877
<ALLOWANCES> 0
<INVENTORY> 16,340
<CURRENT-ASSETS> 53,427
<PP&E> 7,476
<DEPRECIATION> 0
<TOTAL-ASSETS> 67,256
<CURRENT-LIABILITIES> 13,000
<BONDS> 5,346
0
0
<COMMON> 76
<OTHER-SE> 48,707
<TOTAL-LIABILITY-AND-EQUITY> 67,256
<SALES> 0
<TOTAL-REVENUES> 19,194
<CGS> 8,362
<TOTAL-COSTS> 7,348
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 3,663
<INCOME-TAX> 1,209
<INCOME-CONTINUING> 2,454
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,454
<EPS-PRIMARY> 0.31
<EPS-DILUTED> 0.31
</TABLE>
