<PAGE>
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________________________
Form 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended: July 31, 1997 Commission File Number 0-26714
------------- -------
ADE CORPORATION
(Exact name of registrant as specified in its charter)
Massachusetts 04-2441829
------------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
80 Wilson Way, Westwood, Massachusetts 02090
---------------------------------------------
(Address of principal executive offices, including area code)
(617) 467-3500
--------------
(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
----- -----
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 11,080,335 shares
- -------------------------------------- --------------------------------
Class Outstanding at August 29, 1997
Page 1 of 14 pages
Exhibit Index on page 13
<PAGE>
ADE CORPORATION
INDEX
Page
----
Part I. - Financial Information
Item 1. Condensed Consolidated Financial Statements (unaudited)-
Condensed Consolidated Balance Sheet
July 31, 1997 and April 30, 1997 3
Condensed Consolidated Statement of Income-
Three Months Ended July 31, 1997 and 1996 4
Condensed Consolidated Statement of Cash Flows -
Three Months Ended July 31, 1997 and 1996 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
<PAGE>
ADE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(In thousands)
<TABLE>
<CAPTION>
July 31, April 30,
------- --------
1997 1997
(Unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $17,289 $19,374
Accounts receivable, net 22,401 20,331
Inventories 25,558 22,160
Prepaid expenses and other current assets 582 310
Deferred income taxes 5,348 5,348
-------- --------
Total current assets 71,178 67,523
Fixed assets, net 16,377 15,735
Deferred income taxes 234 234
Investments 3,196 3,162
Other assets 1,777 1,763
-------- --------
$92,762 $88,417
======== ========
Liabilities and Stockholders' Equity
Current liabilities:
Current portion of long-term debt $ 266 $ 899
Accounts payable 7,053 5,535
Accrued expenses 11,307 10,744
Deferred income on sale to affiliate 2,030 2,661
Income taxes payable 1,397 1,915
-------- --------
Total current liabilities 22,053 21,754
-------- --------
Long-term debt 5,032 5,091
-------- --------
Excess of net assets acquired over cost 121 184
-------- --------
Stockholders' equity:
Common stock 86 86
Capital in excess of par value 28,929 28,660
Retained earnings 36,729 32,846
-------- --------
65,744 61,592
Deferred compensation (188) (204)
-------- --------
65,556 61,388
-------- --------
$92,762 $88,417
======== =======
</TABLE>
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
3
<PAGE>
ADE CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(In thousands, except per share data, unaudited)
<TABLE>
<CAPTION>
Three months ended
July 31,
--------------------
1997 1996
---- ----
<S> <C> <C>
Revenue $31,446 $19,991
Cost of revenue 14,151 8,685
------- -------
Gross profit 17,295 11,306
Operating expenses:
Research and development 5,252 3,221
Marketing and sales 3,669 2,977
General and administrative 2,672 1,484
Amortization of excess of net assets
acquired over cost (63) (63)
------- -------
Total operating expenses 11,530 7,619
------- -------
Income from operations 5,765 3,687
Interest income, net 156 151
------- -------
Income before provision for income taxes and equity in
net earnings of affiliated companies 5,921 3,838
Provision for income taxes 2,072 1,290
------- -------
Income before equity in net earnings of
affiliated companies 3,849 2,548
------- -------
Equity in net earnings of affiliated companies 34 --
Net income $ 3,883 $ 2,548
======= =======
Net income per share $0.43 $0.29
======= =======
Weighted average common and common
equivalent shares outstanding 9,124 8,864
======= =======
</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
(In thousands, unaudited)
<TABLE>
<CAPTION>
Three months ended
July 31,
------------------
1997 1996
---- ----
<S> <C> <C>
Cash flows provided by (used in) operating activities:
Net income $ 3,883 $ 2,548
Adjustments to reconcile net income to
net cash provided by (used in) operating
activities:
Depreciation and amortization 554 404
Equity in net earnings of affiliated companies (34) --
Change in assets and liabilities:
Accounts receivable (2,070) 1,707
Inventories (3,398) (3,457)
Prepaid expenses and other current assets (272) (75)
Accounts payable 1,518 (586)
Accrued expenses 563 (468)
Deferred income on sales to affiliate (631) 407
Income taxes payable (518) 752
------ ------
Net cash provided by (used in) operating activities (405) 1,232
Cash flows provided by (used in) investing activities:
Purchases of fixed assets (1,243) (1,423)
Change in restricted cash -- (7,120)
Equity investments -- (2,563)
Change in other assets (14) (50)
------ ------
Net cash used in investing activities (1,257) (11,156)
------ ------
Cash flows provided by (used in) financing activities:
Repayment of long-term debt (692) --
Proceeds from long-term debt -- 5,520
Proceeds from common stock issuance 195 23
Tax benefit related to the exercise of common stock options 74 --
------ ------
Net cash provided by (used in) financing activities (423) 5,543
------ ------
Net decrease in cash and cash equivalents (2,085) (4,381)
Cash and cash equivalents, beginning of period 19,374 21,513
------ ------
Cash and cash equivalents, end of period $17,289 $ 17,132
====== ======
</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
(In thousands, except share data)
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, 1997 and the
results of operations for the three month periods ended July 31, 1997 and 1996.
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, 1997.
2. Inventories
Inventories consist of the following:
July 31, April 30,
1997 1997
---- ----
(unaudited)
Raw materials and purchased parts $12,657 $ 9,867
Work-in-process 12,059 11,464
Finished goods 842 829
------- -------
$25,558 $22,160
======= =======
3. Earnings Per Share
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 using the treasury stock method.
6
<PAGE>
ADE CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(In thousands, except per share data)
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share". This
statement establishes and simplifies standards for computing and presenting
earnings per share. SFAS No. 128 will be effective beginning with the Company's
quarter ended January 31, 1998 and requires the restatement of all previously
reported earnings per share data that are presented. Early adoption of SFAS No.
128 is not permitted. SFAS 128 replaces primary and fully diluted earnings per
share with basic and diluted earnings per share. Pro forma earnings per share
under SFAS No. 128 would have been as follows:
Three months ended
July 31,
----------------------
1997 1996
---- ----
Pro forma basic net income per share $ 0.45 $ 0.30
Pro forma diluted net income per share $ 0.43 $ 0.29
4. Subsequent Events
Public Offering of Common Stock
In August 1997, the Company completed a public offering of 2,300,000 shares of
its common stock. The net proceeds to the Company were approximately $67.8
million.
7
<PAGE>
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 hard 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 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, 1997.
Results of Operations
Three Months Ended July 31, 1997 compared to Three Months Ended July 31, 1996
Revenues increased 57.3% to $31.4 million in the first quarter of fiscal 1998
from $20.0 million in the first quarter of 1997. 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 wafer manufacturing industry and the introduction of integrated
measurement systems for the computer hard disk industry. These integrated
systems are priced significantly higher than the gaging equipment that
previously has comprised the bulk of the Company's revenue from the computer
hard disk industry.
Gross margin decreased to 55.0% in the first quarter of fiscal 1998 from 56.6%
in the first quarter of 1997. The decrease resulted from increased overhead
costs associated with the opening of the new manufacturing facility in Westwood,
Massachusetts and changes in product and distribution channel mix, which affect
gross margins.
Research and development expense increased 63.1% to $5.3 million in the first
quarter of fiscal 1998 from $3.2 million in the first quarter of 1997 and
increased as a percentage of revenue to 16.7% from 16.1%. New product
development and product improvements have led to higher research and development
expenses. The Company is committed to increasing its investment in research and
development to continue its position as a technological leader in the rapidly
changing semiconductor and computer hard disk industries.
Marketing and sales expense increased 23.2% to $3.7 million in the first quarter
of fiscal 1998 from $3.0 million in the first quarter of 1997, but decreased as
a percentage of revenue to 11.7% in the first quarter of fiscal 1998 from 14.9%
in 1997. The decrease as a percentage of revenue is a result of marketing and
sales expense growing at a lower rate than revenue.
8
<PAGE>
General and administrative expenses increased to $2.7 million in the first
quarter of fiscal 1998 from $1.5 million in the first quarter of fiscal 1998.
This increase resulted from the need for additional personnel to support
increased revenue and the acquisition of Digital Measurement Systems, Inc.
Net interest income was $156,000 in the first quarter of fiscal 1998 compared to
$151,000 in the first quarter of 1997.
Net income from equity in affiliates was $34,000 in first quarter of fiscal
1998.
The tax rate used during the first quarter of fiscal 1998 for the provision for
income taxes was 35% versus 33.6% during the first quarter of fiscal 1997. The
Company does not expect to receive as much investment tax credit or research and
development credits during fisca1 1998 as it did during 1997.
9
<PAGE>
Liquidity and Capital Resources
At July 31, 1997, the Company had $17.3 million in cash and cash equivalents and
$49.1 million in working capital.
In August, 1997, the Company completed a public offering of 2,300,000 shares of
its common stock, with net proceeds to the Company of approximately $67.8
million.
Net cash used in operating activities for the three months ended July 31, 1997
was $0.4 million. Cash generated from operations totaled $4.4 million prior to
investments in working capital of $4.8 million, which consisted primarily of
increased accounts receivable and inventory of $2.1 million and $3.4 million
respectively, offset in part by an increase in current liabilities of $0.9
million.
Cash used in investing activities consisted of $1.3 million to purchase fixed
assets, consisting primarily of computers, machinery and equipment used in
operations.
Cash used in financing activities was $0.4 million of which $0.6 million was
associated with the repayment of a mortgage on property purchased as part of the
acquisition of Digital Measurement Systems, Inc. offset by $0.2 million provided
by issuance of common stock associated with employee stock option and stock
purchase plans.
The Company expects to meet its near-term working capital and fixed assets needs
primarily with existing cash and cash equivalents and future cash generated from
operations.
The Company's business depends in large part upon the capital expenditures of
semiconductor wafer and device manufacturers. While the Company has experienced
a minor reduction in its backlog during the three months ended July 31, 1997,
the Company believes that this reduction was primarily due to customer order
patterns rather than any fundamental changes in the industry. However, there
can be no assurance that the Company's sales will not be affected adversely in
the future if there are slowdowns in the semiconductor industry.
Furthermore, the Company's success is dependent upon supplying technologically
superior products to the marketplace at appropriate times to satisfy customer
needs. Product development requires substantial investment and is subject to
technological risks. Delays or difficulties in product development could
adversely affect the performance of the Company.
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:
-----------------
Item 6. Exhibits and Reports on Form 8-K:
--------------------------------
a. See Exhibit Index, Page 14
b. Reports on Form 8-K
No reports on Form 8-K were filed during the quarter for which
this report is filed.
11
<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.
ADE CORPORATION
Date: September 11, 1997 /s/ Mark D. Shooman
------------------------------------------
Mark D. Shooman
Vice President and Chief Financial Officer
Date: September 11, 1997 /s/ Robert C. Abbe
------------------------------------------
Robert C. Abbe
President and Chief Executive Officer
12
<PAGE>
ADE CORPORATION
EXHIBIT INDEX
Exhibit Page
- ------- ----
4 Employee Stock Purchase Plan /1/
11 Statement Regarding Computation of Net Income per Share 14
(Filed herewith)
- ------------------------
1. Filed as an exhibit to the Registration Statement on Form S-8 (Registration
Number 333-4652) and incorporated by reference herein.
<PAGE>
Exhibit 11
ADE CORPORATION
Statements Regarding Computation of Net Income Per Share
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three months ended
July 31,
---------------------
1997 1996
(unaudited)
<S> <C> <C>
Net income $3,883 $2,548
====== ======
Weighted average common and common
equivalent shares outstanding:
a. Shares attributable to common stock outstanding 8,617 8,443
b. Shares attributable to common stock options
pursuant to APB 15 507 421
Weighted average common and common
equivalent shares outstanding 9,124 8,864
====== ======
Net income per share $ 0.43 $ 0.29
====== ======
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-30-1998
<PERIOD-START> MAY-01-1997
<PERIOD-END> JUL-31-1997
<CASH> 17,289
<SECURITIES> 0
<RECEIVABLES> 22,401
<ALLOWANCES> 0
<INVENTORY> 25,558
<CURRENT-ASSETS> 71,178
<PP&E> 16,377
<DEPRECIATION> 0
<TOTAL-ASSETS> 92,762
<CURRENT-LIABILITIES> 22,053
<BONDS> 0
0
0
<COMMON> 86
<OTHER-SE> 65,658
<TOTAL-LIABILITY-AND-EQUITY> 92,762
<SALES> 31,446
<TOTAL-REVENUES> 31,446
<CGS> 14,151
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 11,530
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 5,921
<INCOME-TAX> 2,072
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,883
<EPS-PRIMARY> 0.43
<EPS-DILUTED> 0.43
</TABLE>
