<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ending Commission File No. 0-20229
May 31, 1996
RF POWER PRODUCTS, INC.
(Exact name of registrant as specified in its charter)
NEW JERSEY 22-2361086
- ----------------------------- ----------------------------
State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
502 Gibbsboro-Marlton Road, Voorhees, N.J. 08043
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code (609) 751-0033
--------------
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
--- ---
As of May 31, 1996, 12,104,909 shares of Common Stock, $.01 par value, were
outstanding.
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
-----------------------
1
<PAGE>
INDEX
Page
Number
------
Part I. Financial Information
Item 1. Consolidated Financial Statements
Balance Sheets - May 31, 1996 and
November 30, 1995 ........................ 3
Statements of Operations - Three Months and
Six Months Ended May 31, 1996 and 1995 ... 4
Statements of Cash Flows - Six Months Ended
May 31, 1996 and 1995 .................... 5
Notes to Financial Statements ............ 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations ................................. 8
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K .......... 11
2
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RF POWER PRODUCTS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
May 31, November 30,
1996 1995
(Unaudited) (Audited)
-------------- --------------
<S> <C> <C>
Assets
Cash $ 403,079 $ 689,757
Accounts receivable 5,697,904 5,131,379
Inventories 4,528,437 4,440,375
Prepaid expenses and other 537,042 825,601
----------- -----------
11,166,462 11,087,112
----------- -----------
Property and equipment, at cost
Machinery and equipment 3,321,457 2,454,224
Transportation 54,641 18,196
Leasehold improvements 168,705 160,423
----------- -----------
3,544,803 2,632,843
Less accumulated depreciation
and amortization (1,359,360) (1,159,848)
----------- -----------
2,185,443 1,472,995
----------- -----------
Other assets 280,931 354,886
----------- -----------
$13,632,836 $12,914,993
=========== ===========
Liabilities
Current liabilities
Note Payable $ 734,663 $ 500,000
Current portion long-term debt 365,000 164,153
Accounts payable 2,084,788 2,573,716
Accrued expenses 440,029 1,959,107
Accrued payroll 255,974 437,701
----------- -----------
3,880,454 5,634,677
----------- -----------
Long-term debt, less current
portion 1,050,000 310,225
----------- -----------
Shareholders' equity
Common stock - $.01 par value
Authorized - 19,000,000
Issued and outstanding:
1996-12,104,909; 1995-12,050,243 121,049 120,502
Additional paid-in capital 6,295,223 6,215,271
Retained Earnings 2,363,110 788,318
Notes receivable from shareholders (77,000) (154,000)
----------- -----------
8,702,382 6,970,091
----------- -----------
$13,632,836 $12,914,993
=========== ===========
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
RF POWER PRODUCTS, INC.
STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
May 31, May 31,
------- -------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $ 9,484,006 $ 6,072,749 $17,742,870 $11,010,490
----------- ----------- ----------- -----------
Costs and expenses
Cost of products sold 5,775,577 3,558,594 10,809,002 6,664,385
Research and development 924,569 492,461 1,710,536 1,037,751
Selling and administrative 1,308,753 2,066,430 2,633,537 2,976,222
Interest expense 11,634 17,599 37,017 40,355
----------- ----------- ----------- -----------
$ 8,020,533 $ 6,135,084 $15,190,092 $10,718,713
----------- ----------- ----------- -----------
Income (loss) before
income taxes 1,463,473 (62,335) 2,552,778 291,777
Income tax expense 566,011 328,699 977,986 453,259
----------- ----------- ----------- -----------
Net income (loss) 897,462 (391,034) 1,574,792 (161,482)
=========== =========== =========== ===========
Per Share Data:
Earnings Per Share $ .07 $ (.03) $ .13 $ (.01)
=========== =========== =========== ===========
Weighted average number of
shares outstanding 12,283,794 12,178,226 12,264,226 12,184,029
=========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated condensed financial statements
4
<PAGE>
RF POWER PRODUCTS, INC.
STATEMENT OF CASH FLOWS
( UNAUDITED )
<TABLE>
<CAPTION>
Six Months Ended
----------------
May 31, 1996 May 31, 1995
------------ ------------
<S> <C> <C>
Cash flows from operating activities
Net income (loss) $ 1,574,792 $ (161,482)
Adjustments to reconcile net income to
net cash used in operating activities:
Compensation, Non-cash - 957,600
Depreciation and amortization 229,266 268,916
Deferred Income Taxes (Benefit) 234,919 (31,520)
Changes in assets and liabilities
(Increase) in accounts receivable (566,525) (729,790)
Decrease (increase) in inventories (88,062) (419,080)
Decrease (increase) in prepaid expenses
and other 60,542 (38,491)
(Decrease) increase in a/p & accr.
liabilities (2,122,733) 689,703
Other 37,299 -
----------- -----------
Net cash generated (used) in
operating activities (630,502) 535,856
----------- -----------
Cash flows from investing activities
Capital expenditures (911,960) (314,526)
Technology Purchase - (155,000)
Other - (2,863)
----------- -----------
Net cash used in investing activities (911,960) (472,389)
----------- -----------
Cash flows from financing activities
Short term borrowing, net 234,663 193,000
Payments of long-term debt (1,445,383) (278,109)
Proceeds from issuance of long-term
debt 2,386,005 -
Proceeds from sale of common stock under
stock option plan and stock subscription
agreement 80,499 57,406
----------- -----------
Net cash provided by (used in)
financing activities 1,255,784 (27,703)
----------- -----------
Net increase in cash (286,678) 35,764
Cash at beginning of period 689,757 168,250
----------- -----------
Cash at end of period $ 403,079 $ 204,014
=========== ===========
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
RF POWER PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1996 AND NOVEMBER 30, 1995
Note 1 In the opinion of management, the accompanying financial statements
contain all adjustments (consisting of only normal recurring
adjustments) necessary to present fairly the financial position as of
May 31, 1996 and November 30, 1995, the results of operations for the
three and six months ended May 31, 1996 and 1995 and the statement of
cash flows for the six months ended May 31, 1996 and 1995.
The results of operations for the three and six months ended May 31,
1996 and 1995 are unaudited and are not necessarily indicative of
results for the full year.
These financial statements should be read in conjunction with the
financial statements and the notes included in the Company's report
on Form 10K.
Note 2 Inventories
Inventories consist of the following:
<TABLE>
<CAPTION>
May 31, November 30,
1996 1995
---------- ------------
<S> <C> <C>
Raw materials $2,688,219 $3,195,340
Work in process 510,977 330,165
Finished goods 1,329,241 914,870
---------- ----------
$4,528,437 $4,440,375
========== ==========
</TABLE>
6
<PAGE>
Note 3 The provision for income taxes for the six months ended May 31, 1996
and 1995, consists of the following:
<TABLE>
<CAPTION>
May 31, May 31,
1996 1995
--------- ---------
<S> <C> <C>
Current-federal and state $ 743,067 $ 484,779
Deferred-federal & state 234,919 (31,520)
------- --------
$ 977,986 $ 453,259
========= ==========
</TABLE>
Note 4 Per share data is computed based upon the weighted average number of
shares of common stock, adjusted for the conversion of dilutive
common stock equivalents. The primary earnings per share and the
related common stock and equivalents are presented. The fully
dilutive earnings per share data is not shown since the dilution is
not material.
Note 5 On March 18, 1996 the Company entered into a ten year lease agreement
for a new Corporate Headquarters and Manufacturing facility. In June
1996 the lease was amended to increase the size of the new facility
from 60,000 square feet to 78,000 square feet. The minimum payments
are $5,927,940 over the ten year term. Management currently
anticipates moving into the new building by the end of 1996.
7
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
-------------------------------------------------
Condition and Results of Operations
-----------------------------------
Financial Position, Liquidity and Capital Requirements
- ------------------------------------------------------
The Company's cash requirements are currently being met through internal cash
flows and existing bank financing.
In May 1996, the Company established a new banking relationship with a local
commercial bank and terminated its relationship with its prior bank. The Company
repaid its prior bank's term loan and the outstanding balance on its line of
credit from a new credit facility provided by the Company's new bank. The new
credit facility is for a $1,400,000 term loan and a $4,000,000 revolving line of
credit. This increases the Company's lines of credit from $1,500,000 to
$4,000,000. The rate of interest for both the term loan and revolving line of
credit are based on current Libor rates. The term loan contains an option to
convert to a fixed rate.
Operating activities utilized $631,000 in cash flows for the six month period
ending May 31, 1996 while $536,000 was generated in the comparable period in
1995. Approximately $2,039,000 of net cash was generated from net income plus
non-cash depreciation and amortization and deferred taxes during the fiscal 1996
period. This was primarily offset by a $567,000 increase in accounts receivable,
and a $2,113,000 use of cash to decrease accounts payable, payment of accrued
bonuses and related taxes, and the legal settlement with its prior law firm
related to the unintended tax consequences to the Company's executive stock
purchase agreements.
Net cash used in investing activities for the first half of fiscal year 1996 was
$912,000 for capital expenditures to sustain the Company's growth and expand its
Research and Development group. The increase is due to the purchase of capital
equipment for the manufacturing operations, field service and the engineering
new product group. Also, new computer equipment was needed due to the expansion
of the engineering new product development group.
For the first half of fiscal year 1996, approximately $1,175,000 of cash was
provided by the increase in net borrowing resulting from bank financing as noted
above. There was an $80,000 increase in capital resulting from the exercise of
employee stock options.
In March 1996, the Company signed a lease agreement for a new 60,000 square foot
Corporate Headquarters and manufacturing facility. In June 1996, the Company
agreed to increase the size of the new facility from 60,000 to 78,000 square
feet based on the signing of a major contract with a leading semiconductor
equipment manufacturer of plasma etch systems. The Company projects the building
will be completed by the end of 1996.
8
<PAGE>
The Company requires capital for research and development, inventories and
funding for capital expenditures related to the new facility. Management of the
Company believes that based on its current available bank credit facility,
coupled with working capital generated by operations, it has sufficient funding
to meet the Company's capital requirements for the immediate future.
9
<PAGE>
RESULTS OF OPERATIONS
Net revenues for the six months ended May 31, 1996 increased 61% as compared to
the same period in fiscal 1995. For the three months ending May 31, 1996, net
revenues increased by 56% over the comparable period of the prior year. The
increase is the result of continued growth to semiconductor capital equipment
manufacturers which represented 67% and 65% of the Company's sales in the first
half of fiscal 1996 and 1995, respectively. The Company's sales this year, in
the semiconductor market increased 67%, in absolute dollars, over the comparable
six month period last year. The Company has generated significant sales
increases from Lam Research, Applied Materials, Plasma Materials and Technology,
Alcatel and Mattson Technology.
Cost of products sold amounted to 61% of sales for both the six month periods
and 61% and 59% for the three month period ending May 31, 1996 and May 31, 1995,
respectively. Cost of products sold was affected by the change in product mix
and increased labor and overhead expenses associated with the second production
shift.
Research and development expenses were 10% and 9% of sales for the six month
periods and 10% and 8% for the three month periods ending May 31, 1996, and May
31, 1995 respectively. Research and development expenses increased 65% to
$1,711,000 compared to $1,038,000 last year. The increase is the result of
additional engineering new product development staff and their related costs.
Selling and administrative expenses rose approximately $615,000 for the six
month period and $200,000 for the three month period ending May 31, 1996,
respectively, as compared to the comparable period in 1995. However, as a
percent of sales, selling and administrative expenses decreased from 18% to 14%
for the three month period ending May 31, 1995 to 1996, respectively. This
decrease is the result of tight cost controls and the strong sales gains.
The Company's effective tax rate was 38% and 36% for the first half of fiscal
1996 and 1995 and 39% and 37% for the three month period ending May 31, 1996 and
1995, respectively. Fiscal year 1995's effective tax rate excludes the non cash
compensation charge to reflect comparable figures. The major difference is an
increase in state taxes.
10
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
---
(a) Exhibits...............................N/A
(b) No reports on Form 8-K were filed during the
second quarter of fiscal 1996.
<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.
RF POWER PRODUCTS, INC.
Dated: /s/ Joseph Stach
---------------------------
Joseph Stach, Chairman and
President
/s/ Domenic N. Golato
---------------------------
Domenic N. Golato, Chief Financial
Officer and Treasurer
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-START> DEC-01-1995
<PERIOD-END> MAY-31-1996
<CASH> 403,079
<SECURITIES> 0
<RECEIVABLES> 5,842,457
<ALLOWANCES> 144,553
<INVENTORY> 4,528,437
<CURRENT-ASSETS> 11,166,462
<PP&E> 3,544,803
<DEPRECIATION> 1,359,360
<TOTAL-ASSETS> 13,632,836
<CURRENT-LIABILITIES> 3,880,454
<BONDS> 0
0
0
<COMMON> 121,049
<OTHER-SE> 8,581,333
<TOTAL-LIABILITY-AND-EQUITY> 13,632,836
<SALES> 17,742,870
<TOTAL-REVENUES> 17,742,870
<CGS> 10,809,002
<TOTAL-COSTS> 15,152,592
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 37,500
<INTEREST-EXPENSE> 37,017
<INCOME-PRETAX> 2,552,778
<INCOME-TAX> 977,986
<INCOME-CONTINUING> 1,574,792
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,574,792
<EPS-PRIMARY> .13
<EPS-DILUTED> .13
</TABLE>
