<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, 1997
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.)
1007 Laurel Oak Road, Voorhees, N.J. 08043
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code (609)627-6100
--------------
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, 1997, 12,132,330 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, 1997 and
November 30, 1996 ............................. 3
Statements of Operations - Three Months and
Six Months Ended May 31, 1997 and 1996 ........ 4
Statements of Cash Flows - Six Months Ended
May 31, 1997 and 1996 ......................... 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 .............. 10
2
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RF POWER PRODUCTS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
May 31, November 30,
Assets 1997 1996
(Unaudited) (Audited)
----------- -----------
<S> <C> <C>
Cash $ 746,996 $ 546,984
Accounts receivable 5,720,568 4,815,182
Inventories 4,485,020 3,474,689
Prepaid expenses and other 175,291 370,461
Deferred income taxes 435,040 410,395
----------- -----------
11,562,915 9,617,711
------------ -----------
Property and equipment, net 3,419,940 2,221,312
Other assets 132,342 208,501
----------- -----------
$15,115,197 $12,047,524
=========== ===========
Liabilities
Current liabilities
Note payable $ - $ 434,663
Current portion long-term debt 700,000 350,000
Accounts payable 2,992,475 1,163,698
Accrued expenses 658,706 512,323
Accrued payroll 268,520 250,921
----------- -----------
4,619,701 2,711,605
----------- -----------
Long-term debt,less current
portion 1,833,842 904,167
----------- -----------
Shareholders' equity
Common stock - $.01 par value
Authorized - 19,000,000
Issued and outstanding:
1997-12,132,330; 1996-12,104,909 121,323 121,231
Additional paid-in capital 6,394,393 6,372,235
Retained Earnings 2,222,938 2,015,286
Notes receivable from shareholders (77,000) (77,000)
----------- -----------
8,661,654 8,431,752
----------- -----------
$15,115,197 $12,047,524
=========== ===========
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
RF POWER PRODUCTS, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
May 31, May 31,
------- -------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Sales $8,218,622 $9,484,006 $13,653,607 $17,742,870
---------- ---------- ----------- -----------
Costs and expenses
Cost of products sold 4,980,505 5,775,577 8,611,317 10,809,002
Research and development 1,106,497 924,569 1,861,744 1,710,536
Selling and administrative 1,480,730 1,308,753 2,788,737 2,633,537
Interest expense 30,699 11,634 51,396 37,017
---------- ---------- ----------- -----------
$7,598,431 $8,020,533 $13,313,194 $15,190,092
---------- ---------- ----------- -----------
Income before income taxes 620,191 1,463,473 340,413 2,552,778
Income tax expense 239,077 566,011 132,761 977,986
---------- ---------- ----------- -----------
Net Income 381,114 897,462 207,652 1,574,792
========== ========== =========== ===========
Per Share Data:
Earnings Per Share $ .03 $ .07 $ .02 $ .13
========== ========== =========== ===========
Weighted average number of
shares outstanding 12,264,463 12,283,794 12,242,718 12,264,246
========== ========== =========== ===========
</TABLE>
See accompanying notes to financial statements
4
<PAGE>
RF POWER PRODUCTS, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
----------------
May 31, 1997 May 31, 1996
------------ ------------
<S> <C> <C>
Cash flows from operating activities
Net income $ 207,652 $ 1,574,792
Adjustments to reconcile net income to
net cash used in operating activities:
Depreciation and amortization 495,999 229,266
Deferred income taxes (benefit) (24,645) 234,919
Changes in assets and liabilities
Increase in accounts receivable (905,386) (566,525)
Increase in inventories (1,010,331) (88,062)
Decrease in prepaid expenses
and other 195,170 60,542
Increase (Decrease) in a/p & accr. 1,992,759 (2,112,733)
liabilities
Other 14,169 37,299
----------- -----------
Net cash generated (used) from
operating activities 965,387 (630,502)
----------- -----------
Cash flows from investing activities
Capital expenditures (1,632,636) (911,960)
----------- -----------
Net cash used in investing activities (1,632,636) (911,960)
----------- -----------
Cash flows from financing activities
Short term (repayments) borrowing (434,663) 234,663
Payments of long-term debt (220,326) (1,445,383)
Borrowing against term loan 1,500,000 2,386,005
Proceeds from issuance of common stock
under stock option plan 22,250 80,499
----------- -----------
Net cash provided by
financing activities 867,261 1,255,784
----------- -----------
Net increase (decrease) in cash 200,012 (286,678)
Cash at beginning of period 546,984 689,757
----------- -----------
Cash at end of period $ 746,996 $ 403,079
=========== ===========
</TABLE>
See accompanying notes to financial statements.
5
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RF POWER PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1997 AND NOVEMBER 30, 1996
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, 1997 and November 30, 1996, the results of operations for the
three and six months ended May 31, 1997 and May 31, 1996 and the
statement of cash flows for the six months ended May 31, 1997 and
1996.
The results of operations for the three and six months ended May 31,
1997 and 1996 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,
1997 1996
---------- ------------
<S> <C> <C>
Raw materials, net $1,977,858 $1,668,762
Work in process 1,082,527 265,232
Finished goods, net 1,424,635 1,540,695
---------- ----------
$4,485,020 $3,474,689
========== ==========
</TABLE>
6
<PAGE>
Note 3 Property and Equipment
Property and Equipment consists of the following:
<TABLE>
<CAPTION>
May 31, November 30,
1997 1996
----------- ------------
<S> <C> <C>
Property and equipment,
at cost
Machinery and Equipment $4,586,682 $3,524,535
Transportation Equipment 54,641 54,641
Leasehold Improvements 1,007,690 437,201
---------- ----------
5,649,013 4,016,377
Less accumulated depreciation
and amortization 2,229,073 1,795,065
---------- ----------
$3,419,940 $2,221,312
========== ==========
</TABLE>
Note 4 Income Taxes
The provision (benefit)for income taxes for the six months ended May
31, 1997 and 1996, consists of the following:
<TABLE>
<CAPTION>
May 31, May 31,
1997 1996
---------- ---------
<S> <C> <C>
Current-federal and state $157,406 $743,067
Deferred-federal & state (24,645) 234,919
-------- --------
$132,761 $977,986
======== ========
</TABLE>
Note 5 Earnings Per Share
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.
There is no material difference in earnings per share as computed
under SFAS 128 from the amounts reported in the accompanying financial
statements.
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 funded primarily through
operations coupled with the proceeds of bank financing.
In December 1996, the Company entered into a $500,000 loan agreement with the
New Jersey Economic Development Authority to finance certain purchases of
equipment for its new facility, which it had moved into in December 1996. The
loan is for a five year term at an interest rate of 5% with interest and
principal paid monthly. The loan is secured by the equipment purchased with the
proceeds of the loan. As of May 31, 1997, all of the $500,000 loan has been
drawn down.
The Company has the option to term out a portion of the line of credit with a
local commercial bank, which if exercised, reduces the line of credit by the
amount termed out. In February 1997, the Company exercised this option for a
$1,000,000 term loan. As of May 31, 1997, all of the $1,000,000 loan has been
drawn down.
Operating activities provided $965,000 in cash for the six month period ending
May 31, 1997 versus a utilization of $631,000 in cash flows for the comparable
period in 1996. Approximately $679,000 was generated from net income plus non-
cash depreciation and amortization and deferred taxes during the fiscal 1997
period. An increase in accounts receivable of $905,000 and inventories of
$1,010,000 was more than offset by an increase in accounts payable of $1,993,000
and decrease in prepaid expenses of $195,000.
Net cash used in investing activities for the six month period ending May 31,
1997 was $1,633,000, which was used primarily for capital expenditures for the
Company's new facility, engineering design software, hardware and test
equipment.
For the six months ended May 31, 1997, approximately $1,500,000 of cash was
provided by bank and state financing, as noted above, to finance the capital
expenditures for the new facility. In addition, the Company repaid $435,000 on
its line of credit and $220,000 of its long term debt.
The Company requires substantial capital for research and development and
inventories. Although there were significant capital expenditures during the
Company's 1997 first quarter for its new facility, second quarter capital
expenditures decreased from $1,215,000 in the first quarter to $418,000 in the
second quarter. 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.
8
<PAGE>
RESULTS OF OPERATIONS
Net revenues for the six months ended May 31, 1997 decreased 23% as compared to
the same period in fiscal 1996. For the three months ending May 31, 1997, net
revenues decreased by 13% over the comparable period of the prior year although
there was a 51% increase in net revenue over the first quarter of the current
fiscal year. The decrease is the result of the slow down on shipments to
semiconductor capital equipment manufacturers which represented 58% and 66% of
the Company's sales for the comparable six month period of fiscal 1997 and 1996,
respectively. The Company's sales this year, in the semiconductor market
decreased 32% over the comparable six month period last year. However, orders
and shipments for the semiconductor market strengthened in the second quarter
1997. Also commercial coating net revenues increased by 65% for the six months
ending May 31, 1997, over the comparable period of the prior year.
Cost of products sold amounted to 63% and 61% of sales for the six month period
ending May 31, 1997 and May 31, 1996, respectively. The decrease in gross
profit is the result of the decline in sales in the semiconductor market which
resulted in under absorbed labor and overhead costs. Costs of products sold
amounted to 61% for both the three month periods ending May 31, 1997 and
May 31, 1996 reflecting a more positive trend in the absorption of labor and
overhead due to the higher net revenue level in the current fiscal quarter.
Research and development expenses were 14% and 10% of sales for the six month
period and 13% and 10% for the three month period ending May 31,1997 and May 31,
1996, respectively. The increase is due primarily to support the development of
new products, including the high power Hercules, Atlas RF generators and Mercury
series electronically tuned matching networks.
Selling and administrative expenses were 21% and 15% of sales for the six month
period and 18% and 14% for the three month period ending May 31, 1997 and
May 31, 1996, respectively. This increase was caused primarily by costs related
to the move into a new facility and higher depreciation costs.
The Company's effective tax rate has remained relatively constant at 39% and 38%
for the first half of fiscal 1997 and 1996 and 39% for both the three month
periods ending May 31, 1997 and 1996, respectively.
9
<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 1997.
10
<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: July 1, 1997 /s/ Joseph Stach
-------------------------------
Joseph Stach, Chairman and
President
/s/ Domenic N. Golato
-------------------------------
Domenic N. Golato, Chief Financial
Officer and Treasurer
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-START> DEC-01-1996
<PERIOD-END> MAY-31-1997
<CASH> 746,996
<SECURITIES> 0
<RECEIVABLES> 5,832,519
<ALLOWANCES> 111,951
<INVENTORY> 4,485,020
<CURRENT-ASSETS> 11,562,915
<PP&E> 5,649,013
<DEPRECIATION> 2,229,073
<TOTAL-ASSETS> 15,115,197
<CURRENT-LIABILITIES> 4,619,701
<BONDS> 0
0
0
<COMMON> 121,323
<OTHER-SE> 8,540,331
<TOTAL-LIABILITY-AND-EQUITY> 15,115,197
<SALES> 13,653,607
<TOTAL-REVENUES> 13,653,607
<CGS> 8,611,317
<TOTAL-COSTS> 4,605,481
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 45,000
<INTEREST-EXPENSE> 51,396
<INCOME-PRETAX> 340,413
<INCOME-TAX> 132,761
<INCOME-CONTINUING> 207,652
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 207,652
<EPS-PRIMARY> .02
<EPS-DILUTED> .02
</TABLE>
