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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: January 31, 1998 Commission File Number 0-26714
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)
80 Wilson Way, Westwood, Massachusetts 02090
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(Address of principal executive offices, including area code)
(781) 467-3500
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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 11,104,762 shares
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Class Outstanding at March 9, 1998
Page 1 of 18 pages
Exhibit Index on page 17
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ADE CORPORATION
INDEX
<TABLE>
<CAPTION>
PAGE
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PART I.--FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements (unaudited)
Condensed Consolidated Balance Sheet-January 31, 1998 and April 30, 1997......................... 3
Condensed Consolidated Statement of Income-Three and Nine Months Ended January 31, 1998 and 1997. 4
Condensed Consolidated Statement of Cash Flows -Nine Months Ended January 31, 1998 and 1997...... 5
Notes to Unaudited Condensed Consolidated Financial Statements................................... 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.............. 10
PART II.--OTHER INFORMATION................................................................................ 15
SIGNATURES................................................................................................. 16
EXHIBIT INDEX.............................................................................................. 17
</TABLE>
<PAGE>
ADE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(in thousands)
<TABLE>
<CAPTION>
JANUARY 31, APRIL 30,
1998 1997
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(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents....................................... $ 69,296 $ 19,374
Accounts receivable, net........................................ 23,947 20,331
Inventories..................................................... 28,546 22,160
Prepaid expenses and other current assets....................... 1,259 310
Deferred income taxes........................................... 6,584 5,348
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Total current assets.......................................... 129,632 67,523
Fixed assets, net................................................. 22,315 15,735
Deferred income taxes............................................. 2,423 234
Investments....................................................... 3,604 3,162
Intangible assets, net............................................ 5,277 1,500
Restricted cash................................................... 3,914 --
Other assets...................................................... 312 263
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$ 167,477 $ 88,417
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt............................... $ 447 $ 899
Accounts payable................................................ 4,994 5,535
Accrued expenses................................................ 10,971 10,744
Deferred income on sales to affiliate........................... 1,742 2,661
Income taxes payable............................................ -- 1,915
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Total current liabilities..................................... 18,154 21,754
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Long-term debt.................................................... 8,707 5,091
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Excess of net assets acquired over cost........................... -- 184
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Stockholders' equity:
Common stock.................................................... 111 86
Capital in excess of par value.................................. 98,987 28,660
Retained earnings............................................... 41,676 32,846
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140,774 61,592
Deferred compensation............................................. (158) (204)
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140,616 61,388
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$ 167,477 $ 88,417
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</TABLE>
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
<PAGE>
ADE CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(in thousands, except per share amounts; unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
JANUARY 31, JANUARY 31,
-------------------- --------------------
1998 1997 1998 1997
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<S> <C> <C> <C> <C>
Revenue......................................................... $ 34,339 $ 26,193 $ 99,386 $ 69,066
Cost of revenue................................................. 15,977 11,898 44,080 30,465
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Gross profit.................................................. 18,362 14,295 55,306 38,601
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Operating expenses:
Research and development...................................... 6,624 3,757 17,897 10,761
Purchased in-process research and development................. -- -- 6,100 --
Marketing and sales........................................... 3,117 3,272 11,232 9,117
General and administrative.................................... 3,263 1,801 8,795 5,024
Amortization of excess of net assets acquired over cost....... (58) (63) (184) (189)
--------- --------- --------- ---------
Total operating expenses........................................ 12,946 8,767 43,840 24,713
--------- --------- --------- ---------
Income from operations........................................ 5,416 5,528 11,466 13,888
Interest income (expense), net.................................. 696 (14) 1,447 216
--------- --------- --------- ---------
Income before provision for income taxes and equity in net
earnings of affiliated companies............................ 6,112 5,514 12,913 14,104
Provision for income taxes...................................... 2,011 1,851 4,391 4,791
--------- --------- --------- ---------
Income before equity in net earnings of affiliated
companies................................................... 4,101 3,663 8,522 9,313
Equity in net earnings of affiliated companies.................. 216 156 308 171
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Net income.................................................... $ 4,317 $ 3,819 $ 8,830 $ 9,484
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Net income per share
Basic......................................................... $ 0.39 $ 0.45 $ 0.87 $ 1.12
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Diluted....................................................... $ 0.38 $ 0.43 $ 0.83 $ 1.07
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Weighted average common and common share equivalents
Basic......................................................... 11,096 8,516 10,184 8,470
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Diluted....................................................... 11,447 8,871 10,629 8,836
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</TABLE>
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
<PAGE>
ADE CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands; unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
JANUARY 31,
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1998 1997
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<S> <C> <C>
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Net income.............................................................................. $ 8,830 $ 9,484
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization......................................................... 2,357 1,196
Equity in net earnings of affiliated companies, net of dividends received............. (252) (171)
In-process research and development from business acquisition......................... 6,100 --
Deferred income taxes................................................................. (3,425) --
Changes in assets and liabilities:
Accounts receivable, net............................................................ (3,616) (5,710)
Inventories......................................................................... (6,386) (9,634)
Prepaid expenses and other current assets........................................... (949) (58)
Accounts payable.................................................................... (541) 347
Accrued expenses.................................................................... (142) (718)
Deferred income on sales to affiliate............................................... (919) 3,662
Income taxes payable................................................................ (1,906) 99
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Net cash used in operating activities................................................... (849) (1,503)
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CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES:
Purchases of fixed assets............................................................... (8,545) (9,892)
Change in restricted cash............................................................... (3,914) --
Equity investments and advances......................................................... (190) (2,563)
Acquisition of business................................................................. (10,048) --
Change in other assets.................................................................. (49) (19)
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Net cash used in investing activities..................................................... (22,746) (12,474)
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CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES:
Repayment of long-term debt............................................................. (836) (191)
Proceeds from long-term debt............................................................ 4,000 5,542
Proceeds from common stock issuance, net of issuance costs.............................. 68,974 728
Tax benefit related to the exercise of common stock options............................. 1,379 --
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Net cash provided by financing activities............................................... 73,517 6,079
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Net increase (decrease) in cash and cash equivalents...................................... 49,922 (7,898)
Cash and cash equivalents, beginning of period............................................ 19,374 21,513
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Cash and cash equivalents, end of period.................................................. $ 69,296 $ 13,615
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</TABLE>
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
<PAGE>
ADE CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE DATA AND PER SHARE DATA; UNAUDITED)
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 January 31, 1998 and
the results of operations for the three and nine month periods ended January 31,
1998 and 1997. 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 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:
<TABLE>
<CAPTION>
JANUARY 31, APRIL 30,
1998 1997
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(UNAUDITED)
<S> <C> <C>
Raw materials and purchased parts..................................... $ 13,359 $ 9,867
Work-in-process....................................................... 13,340 11,464
Finished goods........................................................ 1,847 829
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$ 28,546 $ 22,160
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</TABLE>
3. ACQUISITION
On September 17, 1997, the Company acquired substantially all of assets of
the Semiconductor Solutions Division ("SSD") of LPA Software, Inc. in exchange
for $10,000 in cash and the assumption of certain liabilities. The Company also
incurred $48 in transaction costs related to the acquisition. SSD, which has
been integrated into the Company as ADE Yield Enhancement Solutions, provides
yield management and defect analysis software applications to the semiconductor
industry.
The acquisition has been accounted for under the purchase method.
Accordingly, the results of operations of SSD and the estimated fair market
values of the acquired assets and assumed liabilities have been included in
the Company's financial statements as of the date of the acquisition.
Unaudited pro forma results of operations presenting the acquisition as
though it had been made at the beginning of fiscal 1998 and fiscal 1997,
respectively, including the write-off of purchased in-
6
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ADE CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA AND PER SHARE DATA; UNAUDITED)
3. ACQUISITION (CONTINUED)
process research and development, amortization of acquired intangible assets
and elimination of intercompany transactions, are as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
JANUARY 31, JANUARY 31,
-------------------- --------------------
1998 1997 1998 1997
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<S> <C> <C> <C> <C>
Revenue...................................................... $ 34,339 $ 26,851 $ 99,978 $ 70,846
Net income................................................... $ 4,317 $ 3,622 $ 8,271 $ 4,920
Basic net income per share................................... $ 0.39 $ 0.43 $ 0.81 $ 0.58
Diluted net income per share................................. $ 0.38 $ 0.41 $ 0.78 $ 0.56
</TABLE>
The purchase price has been allocated to the acquired assets and assumed
liabilities as follows:
<TABLE>
<S> <C>
Property and equipment............................................. $ 354
In-process research and development................................ 6,100
Acquired software.................................................. 1,100
Assembled workforce................................................ 450
Goodwill........................................................... 2,403
Current liabilities................................................ (359)
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$ 10,048
</TABLE>
The amount allocated to in-process research and development was determined
by an independent appraiser and represented technology which had not reached
technological feasibility and had no alternative future use. Accordingly, this
amount of $6,100 was charged to operations at the acquisition date. The $2,403
allocated to goodwill and $450 allocated to assembled workforce are being
amortized on a straight line basis over their estimated useful lives of ten and
six years, respectively. The $1,100 allocated to acquired software is being
amortized based upon the ratio that current gross revenue for the related
products bear to the total anticipated gross revenue for those products.
4. LONG TERM DEBT
In December 1997, the Company issued a $4,000 tax-exempt Industrial
Development Bond through the Massachusetts Industrial Finance Agency. The bond
carries an interest rate of 5.79% per year, and provides for 50% of the
principal to be paid over 10 years from the date of issuance, with the remaining
50% due in December, 2007. Monthly payments of principal and accrued interest
for the bond commence at $36 and decrease to $27 over the 10 year payment
period. The proceeds of the bond were used to fund the purchase and renovation
of a manufacturing facility at the Company's former headquarters site. The
Company secured the payments to be made under this bond with a cash deposit,
which is classified as restricted cash on the balance sheet.
In December 1997, the Company entered into an unsecured revolving line of
credit facility (the "Credit Facility") with a bank, which provides the Company
the option of borrowing at either the
7
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ADE CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA AND PER SHARE DATA; UNAUDITED)
4. LONG TERM DEBT (CONTINUED)
bank's prime rate or the bank's LIBOR rate plus 2%. The maximum borrowing
under the Credit Facility is $8,000 and is limited to a portion of the
Company's accounts receivable as defined in the agreement governing the
Credit Facility. The Credit Facility expires and all outstanding amounts
thereunder are due on December 21, 1999. Interest on outstanding borrowings
is payable monthly in arrears. Under the Credit Facility agreement, the
Company is obligated to comply with certain financial covenants. There were
no borrowings outstanding at January 31, 1998.
5. CAPITAL STOCK
In August 1997, the Company completed a public offering of 2,300,000 shares
of its common stock. The proceeds to the Company from the offering, net of
offering expenses, were $67,843.
6. NET INCOME PER SHARE
On November 1, 1997, the Company adopted Statement of Financial Accounting
Standards No. 128, "Earnings per Share" ("SFAS 128"), which establishes
standards for computing and presenting earnings per share. The new standard
replaces the presentation of earnings per share as prescribed in Accounting
Principles Board Opinion No. 15, "Earnings per Share", with a presentation of
basic and diluted earnings per share on the face of the statement of operations.
Basic earnings per share is computed by dividing income available to common
stockholders by the weighted average number of common shares outstanding for the
period. Diluted earnings per share is computed using the weighted average number
of common shares outstanding and gives effect to all dilutive potential common
shares outstanding during the period. Potential common shares outstanding
include shares issuable upon the assumed exercise of dilutive stock options
reflected under the treasury stock method.
7. RECENTLY ISSUED ACCOUNTING STANDARDS
In October, 1997, the Accounting Standards Executive Committee of the
American Institute of Certified Public Accountants issued Statement of Position
("SOP") 97-2, "Software Revenue Recognition." SOP 97-2 provides guidance on the
timing and amount of revenue recognition when licensing, selling, leasing or
otherwise marketing computer software. SOP 97-2 supersedes SOP 91-1 (also
entitled "Software Revenue Recognition") and is effective for transactions
entered into during fiscal years beginning after December 15, 1997. The Company
will be required to adopt SOP 97-2 for its fiscal year ending April 30, 1999.
The adoption of SOP 97-2 will not have a material effect on the Company's
financial position or it's results of operations.
8
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ADE CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA AND PER SHARE DATA; UNAUDITED)
8. SUBSEQUENT EVENT
In March 1998, the Company entered into a merger agreement with Phase Shift
Technology, Inc. ("PST"). Under the terms of the agreement, the Company will
acquire all of the outstanding shares of PST stock in exchange for 2,000,000
shares of ADE common stock. PST is a privately held manufacturer of high
performance, non-contact surface metrology equipment located in Tucson, Arizona.
PST products utilize interferometric technology to monitor product yield and
improve product design and are currently used in the data storage, optics and
related research industries It is intended that the transaction be accounted for
as a pooling-of-interests and qualify as a tax-free reorganization. The merger
is expected to be completed by May 1, 1998.
9
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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.
On September 17, 1997 the Company acquired substantially all of the assets,
and assumed certain liabilities of the Semiconductor Solutions Division of LPA
Software, Inc. ("SSD"), in exchange for $10 million in cash. The Company
incurred $48,000 in transaction costs related to the acquisition. SSD, located
in Burlington, Vermont, provides yield enhancement and defect analysis software
applications to the semiconductor industry and has been integrated into the
Company as ADE Yield Enhancement Solutions. A portion of the purchase price was
allocated to in-process research and development, which resulted in a charge to
the Company's operations of $6.1 million. In addition, $1.1 million was
allocated to existing software technology, which is being amortized based upon
the ratio that current gross revenue for the related products bear to the total
anticipated gross revenue for those products. The excess of the purchase price
over the estimated fair value of net assets acquired (goodwill) of approximately
$2.4 million is being amortized on a straight-line basis over a period of ten
years. The operating results of SSD have been included in the Company's results
from the date of acquisition.
In March 1998, the Company entered into a merger agreement with Phase Shift
Technology, Inc. ("PST"). Under the terms of the agreement, the Company will
acquire all of the outstanding shares of PST stock in exchange for 2,000,000
shares of ADE common stock. PST is a privately held manufacturer of high
performance, non-contact surface metrology equipment located in Tucson, Arizona.
PST products utilize interferometric technology to monitor product yield and
improve product design and are currently used in the data storage, optics and
related research industries. It is intended that the transaction be accounted
for as a pooling-of-interests and a tax-free reorganization. The merger is
expected to be completed by May 1, 1998.
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.
10
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RESULTS OF OPERATIONS
THREE MONTHS ENDED JANUARY 31, 1998 COMPARED TO THREE MONTHS ENDED JANUARY 31,
1997
Revenue increased 31.1% to $34.3 million in the third quarter of fiscal 1998
from $26.2 million in the third quarter of 1997. The increase was due to
increased unit sales of the Company's products. The increase in unit sales
resulted primarily from increased throughput in the Company's manufacturing
operations.
Gross margin decreased to 53.5% in the third quarter of fiscal 1998 from
54.6% in the third quarter of 1997. This decrease resulted primarily from a
higher proportion of sales made through distributors in certain foreign
markets. These sales typically carry a lower unit selling price than domestic
sales or sales through external sales representatives. This decrease in
selling price was offset by lower commissions paid to sales representatives
that resulted in reduced sales and marketing expense. Additionally, the
Company has increased its worldwide customer service organization to support
its higher levels of system sales, with the related costs contributing to a
lower overall gross margin.
Research and development expense increased 76.3% to $6.6 million in the
third quarter of fiscal 1998 from $3.8 million in the third quarter of 1997 and
increased as a percentage of revenue to 19.3% from 14.3% in the third quarter of
1997. New product development and product improvements have led to higher
research and development expenses through increased engineering resources and
higher project materials costs. A significant portion of the increase was
attributable to continuing efforts to complete development of the Company's
300mm surface inspection and wafer thickness measurement tools. The Company has
also continued development efforts to enhance its existing 200mm wafer and
advanced 200mm wafer systems. The Company is committed to increasing its
investment in research and development to maintain its position as a
technological leader.
Marketing and sales expense decreased 4.7% to $3.1million in the third
quarter of fiscal 1998 from $3.3 million in the third quarter of 1997 and
decreased as a percentage of revenue to 9.1% from 12.5% in the third quarter of
1997. This decrease occurred despite increases in the marketing and sales
organization required to support the Company's increased sales volume. The
reduced period expense resulted primarily from a lower proportion of sales and
related sales commissions made through external sales representatives in certain
foreign markets. The mix of sales channels through which the Company's products
are sold may have a significant impact on the Company's marketing and sales
expense and the results in any period may not be indicative of marketing and
sales expense for future periods.
General and administrative expenses increased 84.5% to $3.2 million in the
third quarter of fiscal 1998 versus $1.7 million in the third quarter of 1997
and increased as a percentage of revenue to 9.3% from 6.6% in the third quarter
of 1997. Expenses increased as the Company continued to develop management
infrastructure to support its rapid growth as well as amortization of the
11
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goodwill that resulted from the September 1997 SSD acquisition included in the
third quarter of 1998.
Net interest income was $696,000 in the third quarter of fiscal 1998
compared to net interest expense of $14,000 in the third quarter of 1997. The
increase in income resulted primarily from interest earned on the proceeds of a
public offering of the Company's common stock completed in August 1997 that
raised approximately $67.8 million in cash.
NINE MONTHS ENDED JANUARY 31, 1998 COMPARED TO NINE MONTHS ENDED JANUARY 31,
1997
Revenue increased 43.9% to $99.4 million for the first nine months of fiscal
1998 from $69.1 million for the first nine months 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 and computer disk drive industries.
Gross margin remained constant at 55.6% for the first nine months of fiscal
1998 versus 55.9% for the first nine months of 1997.
Research and development expense increased 66.3% to $17.9 million for the
first nine months of 1998 from $10.8 million for the first nine months of
1997, and increased as a percentage of revenue to 18.0% from 15.6% for the
first nine months of 1997. Higher expenses resulted from increased
engineering resources and project materials utilized in new product
development, including continuing efforts to complete development of the
Company's 300mm surface inspection and wafer thickness measurement tools and
improvements on current products aimed at maintaining the Company's
technological leadership.
Marketing and sales expense increased 23.2% to $11.2 million for the first
nine months of fiscal 1998 from $9.1 million for the first nine months of 1997,
and decreased as a percentage of revenue to 11.3% for the first nine months of
fiscal 1998 from 13.2% in 1997. The increase in expenses reflects the growth of
the marketing and sales organization to support the Company's increased sales
volume, with the decrease as a percentage of revenue reflecting growth in
expense at a slower rate than the overall increase in sales.
General and administrative expenses increased 78.1% to $8.6 million for the
first nine months of fiscal 1998 from $4.8 million for the first nine months of
1997 and increased as a percentage of revenue to 8.8% from 7.3% for the first
nine months of 1997. Expenses increased as the Company continued to develop
management infrastructure to support its rapid growth.
Net interest income was approximately $1.4 million for the first nine months
of fiscal 1998 compared to net interest income of $216,000 in the first nine
months of 1997. The increase in income resulted primarily from interest earned
on the proceeds of a public offering of the Company's common stock completed in
August 1997, that raised approximately $67.8 million in cash.
12
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LIQUIDITY AND CAPITAL RESOURCES
At January 31, 1998, the Company had $69.3 million in cash and cash
equivalents and $111.5 million in working capital. In addition, the Company had
$3.9 million in restricted cash as security for the tax-exempt Industrial
Development Bond ("IDB") issued through the Massachusetts Industrial Finance
Agency ("MIFA") described below.
Net cash used by operating activities for the nine months ended January 31,
1998 was $849,000. Cash generated from operations, prior to increases in working
capital, was $9.1 million. This amount was comprised of net income of $8.8
million, non-cash charges for depreciation and amortization of $2.4 million and
purchased in-process research and development of $6.1 million. These amounts
were partially offset by a $3.4 million increase in deferred income tax
benefits, a $3.6 million increase in accounts receivable, a $919,000 decrease in
deferred income on sales to Japan ADE Ltd., the Company's 50% owned Japanese
distributor, and $252,000 of equity in earnings of affiliates, net of related
cash dividends received. The increase in deferred income tax benefits is
primarily due to the purchased in-process research and development charge of
$6.1 million, which is deductible over a fifteen year period for tax purposes.
Cash used for investments in working capital amounted to $9.9 million, which
consisted primarily of increased inventory and prepaid expenses of $6.9 million
and $949,000, respectively, and aggregate reductions in accounts payable and
accrued expenses of $683,000.
Cash used in investing activities consisted primarily of $8.5 million for
purchases of fixed assets, $10.0 million for the acquisition of the
Semiconductor Solutions Division of LPA Software, Inc. and $3.9 million in
restricted cash used to secure the December 1997 IDB described below. Included
in the fixed asset purchases was $4.5 million to purchase, refurbish and equip
the Company's former headquarters building in Newton, Massachusetts. This
facility will be used as headquarters for the Company's ADE Technologies, Inc.,
subsidiary, which manufactures equipment for the computer hard disk industry.
Cash provided by financing activities of $73.5 million consisted
primarily of $67.8 million received as the net proceeds of the public
offering of the Company's common stock completed in August 1997 and $4
million in proceeds from the IDB issued through MIFA in December 1997. The
bond carries an interest rate of 5.79%, with 50% of the outstanding principal
payable monthly on a ratable basis for 10 years with the remaining 50% due in
December 2007. The proceeds from the IDB have been used to finance the
purchase and renovation of a manufacturing facility, with the related debt
obligation secured by $3.9 million of cash pledged by the Company as
collateral. This cash is classified as restricted cash on the January 31,
1998 balance sheet. Under the terms of the bond agreement, the Company may
substitute a letter of credit in an amount equal to approximately 105% of the
outstanding principal balance as collateral for the Company's obligations
under the IDB, allowing the restricted cash balance to be used for general
corporate purposes.
In December 1997, the Company entered into an unsecured revolving line of
credit facility (the "Credit Facility") with a bank, with a maximum borrowing
amount of $8 million. The Credit
13
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Facility provides the Company the option of borrowing at either the bank's
prime rate or the bank's LIBOR rate plus 2%. The Credit Facility expires and
all outstanding amounts thereunder are due December 21, 1999. There were no
borrowings outstanding under the Credit Facility at January 31, 1998.
The Company expects to meet its near-term working capital needs and capital
expenditures primarily through cash generated from operations, its available
cash and cash equivalents and the above-referenced Credit Facility.
YEAR 2000
The Company has appointed a task force to assess the nature, extent and cost
of remediation of any Year 2000 compliance issues confronting the Company and
its suppliers. Such assessment has not yet been completed.
OTHER RISK FACTORS
In recent months there have been serious economic problems in the Far East.
The Company's business depends in large part upon the capital expenditures of
semiconductor wafer and device manufacturers, many of whom have operations in
the Far East. At January 31, 1998, the Company's backlog was $43.7 million,
which represents a reduction from fiscal year end 1997 and the first two
quarters of fiscal 1998. The Company anticipates that its revenue for the
current calendar year will be adversely affected by the conditions in the Asian
region, particularly Korea, which has historically accounted for a significant
portion of the Company's revenue base. Additionally, capital expenditures by
semiconductor wafer and device manufacturers historically have been cyclical as
they in turn depend upon the current and anticipated demand for integrated
circuits. Sustained periods of oversupply within the semiconductor industry
could adversely affect the performance of the Company.
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.
14
<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:
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K:
a. See Exhibit Index, Page 17
b. Reports on Form 8-K
The Company filed a Current Report on Form 8-K with the Securities and
Exchange Commission on November 4, 1997. The Form 8-K reported that the Company
had purchased, through its wholly-owned subsidiary ADE Software Corporation, the
assets and assumed certain liabilities of the Semiconductor Solutions Division
("SSD") of LPA Software, Inc., a New York corporation for a cash purchase price
of $10,000,000.
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.
ADE CORPORATION
<TABLE>
<CAPTION>
DATE: MARCH 16, 1998 /S/ MARK D. SHOOMAN
------------------------------------------
MARK D. SHOOMAN
VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
<S> <C>
DATE: MARCH 16, 1998 /S/ ROBERT C. ABBE
------------------------------------------
ROBERT C. ABBE
PRESIDENT AND CHIEF EXECUTIVE OFFICER
</TABLE>
16
<PAGE>
ADE CORPORATION
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
- ----------- -----
<C> <S> <C>
11 Statement Regarding Computation of Net Income per Share 18
27 Financial Data Schedule
</TABLE>
17
<PAGE>
EXHIBIT 11
ADE CORPORATION
STATEMENT REGARDING COMPUTATION OF NET INCOME PER SHARE
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
JANUARY 31, JANUARY 31,
-------------------- --------------------
1998 1997 1998 1997
--------- --------- --------- ---------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Net income................................................................ $ 4,317 $ 3,819 $ 8,830 $ 9,484
--------- --------- --------- ---------
--------- --------- --------- ---------
Shares used in computation:
a. Weighted average common stock outstanding used in computation of
basic net income per share............................................. 11,096 8,516 10,184 8,470
b. Dilutive effect of stock options outstanding:........................ 351 355 445 366
--------- --------- --------- ---------
c. Shares used in computation of diluted net income per share........... 11,447 8,871 8,629 8,836
--------- --------- --------- ---------
--------- --------- --------- ---------
Basic net income per share................................................ $ 0.39 $ 0.45 $ 0.87 $ 1.12
--------- --------- --------- ---------
--------- --------- --------- ---------
Diluted net income per share.............................................. $ 0.38 $ 0.43 $ 0.83 $ 1.07
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
18
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from The
Unaudited Consolidated Financial Statements of ADE Corporation for the nine
months ended January 31, 1998 and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> APR-30-1998
<PERIOD-START> MAY-01-1997
<PERIOD-END> JAN-31-1998
<CASH> 69,296
<SECURITIES> 0
<RECEIVABLES> 23,947
<ALLOWANCES> 0
<INVENTORY> 28,546
<CURRENT-ASSETS> 129,632
<PP&E> 22,315
<DEPRECIATION> 0
<TOTAL-ASSETS> 167,477
<CURRENT-LIABILITIES> 18,154
<BONDS> 8,707
111
0
<COMMON> 0
<OTHER-SE> 140,505
<TOTAL-LIABILITY-AND-EQUITY> 167,477
<SALES> 99,386
<TOTAL-REVENUES> 99,386
<CGS> 44,080
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 43,840
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,447
<INCOME-PRETAX> 12,913
<INCOME-TAX> 4,391
<INCOME-CONTINUING> 8,522
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,830
<EPS-PRIMARY> 0.87
<EPS-DILUTED> 0.83
</TABLE>
