<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
August 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 August 31, 1997, 12,141,311 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
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INDEX
PAGE
NUMBER
------
Part I. Financial Information
Item 1. Consolidated Financial Statements
Balance Sheets - August 31, 1997 and
November 30, 1996 ............................. 3
Statements of Operations - Three Months and
Nine Months Ended August 31, 1997 and 1996 .... 4
Statements of Cash Flows - Nine Months Ended
August 31, 1997 and 1996 ...................... 5
Notes to Consolidated 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.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
August 31, November 30,
Assets 1997 1996
(Unaudited) (Audited)
------------ -------------
<S> <C> <C>
Cash $ 808,640 $ 546,984
Accounts receivable 6,136,719 4,815,182
Inventories 5,987,406 3,474,689
Prepaid expenses and other 159,465 370,461
Deferred income taxes 505,627 410,395
----------- -----------
13,597,857 9,617,711
------------ -----------
Property and equipment, net 3,497,889 2,221,312
Other assets 76,299 208,501
----------- -----------
$17,172,045 $12,047,524
=========== ===========
Liabilities
Current liabilities
Note payable $ - $ 434,663
Current portion long-term debt 700,000 350,000
Accounts payable 3,445,934 1,163,698
Accrued expenses 1,475,345 512,323
Accrued payroll 418,526 250,921
----------- -----------
6,039,805 2,711,605
----------- -----------
Long-term debt,less current
portion 1,671,619 904,167
----------- -----------
Shareholders' equity
Common stock - $.01 par value
Authorized - 19,000,000
Issued and outstanding:
1997-12,141,311; 1996-12,123,140 121,413 121,231
Additional paid-in capital 6,408,558 6,372,235
Retained Earnings 2,997,838 2,015,286
Notes receivable from shareholders (67,188) (77,000)
----------- -----------
9,460,621 8,431,752
----------- -----------
$17,172,045 $12,047,524
============ ===========
</TABLE>
See accompanying notes to consolidated financial statements.
3
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RF POWER PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED THREE MONTHS ENDED
AUGUST 31, August 31,
---------- ----------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Sales $10,117,022 $7,979,403 $23,770,629 $25,722,273
----------- ---------- ----------- -----------
Costs and expenses
Cost of products sold 5,914,028 5,211,972 14,525,345 16,020,973
Research and development 1,411,883 910,536 3,273,627 2,621,072
Selling and administrative 1,581,089 1,394,770 4,369,826 4,028,308
Interest expense 38,817 29,492 90,213 66,509
----------- ---------- ----------- -----------
$ 8,945,817 $7,546,770 $22,259,011 $22,736,862
----------- ---------- ----------- -----------
Income before income taxes 1,171,205 432,633 1,511,618 2,985,411
Income tax expense 396,305 185,535 529,066 1,163,521
----------- ---------- ----------- -----------
Net Income 774,900 247,098 982,552 1,821,890
=========== ========== =========== ===========
Per Share Data:
Earnings Per Share $ .06 $ .02 $ .08 $ .15
========== ========== =========== ===========
Weighted average number of
shares outstanding 12,393,425 12,266,021 12,288,479 12,220,268
========== ========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements
4
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RF POWER PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
( UNAUDITED )
Nine Months Ended
-----------------
August 31,1997 August 31,1996
-------------- --------------
<TABLE>
<CAPTION>
<S> <C> <C>
Cash flows from operating activities
Net income $ 982,552 $ 1,821,890
Adjustments to reconcile net income to
net cash used in operating activities:
Depreciation and amortization 785,793 398,313
Deferred income taxes (benefit) (95,232) 405,775
Changes in assets and liabilities
Increase in accounts receivable (1,321,537) (692,321)
Increase in inventories (2,512,717) (410,466)
Decrease in prepaid expenses
and other 210,996 16,921
Increase (Decrease) in a/p & accr. 3,412,863 (2,110,217)
liabilities
Other 14,417 33,360
----------- -----------
Net cash generated (used) from
operating activities 1,477,135 (536,745)
----------- -----------
Cash flows from investing activities
Capital expenditures (1,944,585) (1,076,745)
----------- -----------
Net cash used in investing activities (1,944,585) (1,076,706)
----------- -----------
Cash flows from financing activities
Short term loan repayments (434,663) (65,337)
Payments of long-term debt (382,548) (1,547,883)
Borrowing against term loan 1,500,000 2,386,005
Repayment of Notes Receivable 9,812 -
Proceeds from issuance of common stock
under stock option plan 36,505 153,151
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Net cash provided by
financing activities 729,106 925,936
----------- -----------
Net increase (decrease) in cash 261,656 (687,515)
Cash at beginning of period 546,984 689,757
----------- -----------
Cash at end of period $ 808,640 $ 2,242
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
5
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RF POWER PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 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
August 31, 1997 and November 30, 1996, the results of operations for
the three and nine months ended August 31, 1997 and August 31, 1996
and the statement of cash flows for the nine months ended August 31,
1997 and 1996.
The results of operations for the three and nine months ended August
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>
August 31, November 30,
1997 1996
---------- ------------
<S> <C> <C>
Raw materials, net $2,717,137 $1,668,762
Work in process 1,361,282 265,232
Finished goods, net 1,908,987 1,540,695
---------- ----------
$5,987,406 $3,474,689
========== ==========
</TABLE>
6
<PAGE>
Note 3 Property and Equipment
Property and Equipment consists of the following:
<TABLE>
<CAPTION>
August 31, November 30,
1997 1996
----------- ------------
<S> <C> <C>
Property and equipment,
at cost
Machinery and Equipment $4,888,538 $3,524,535
Transportation Equipment 54,641 54,641
Leasehold Improvements 1,017,783 437,201
---------- ----------
5,960,962 4,016,377
Less accumulated depreciation
and amortization 2,463,073 1,795,065
---------- ----------
$ 3,497,889 $2,221,312
========== ==========
</TABLE>
Note 4 Income Taxes
The provision (benefit)for income taxes for the nine months
ended August 31, 1997 and 1996, consists of the following:
<TABLE>
<CAPTION>
August 31, August 31,
1997 1996
----------- -----------
<S> <C> <C>
Current-federal and state $624,298 $ 757,746
Deferred-federal & state (95,232) 405,775
-------- ----------
$529,066 $1,163,521
======== ==========
</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 through operations
coupled with the proceeds of bank financing and stock options.
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. All of the $500,000 loan had been drawn down by the
second quarter of fiscal 1997.
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. All of the $1,000,000 loan had been drawn down by the
second quarter of fiscal 1997.
Operating activities provided $1,477,000 in cash for the nine month period
ending August 31, 1997 versus a utilization of $537,000 in cash flows for the
comparable period in 1996. Approximately $1,673,000 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 $1,322,000 and
inventories of $2,513,000 was partially offset by an increase in accounts
payable and accrued liabilities of $3,413,000 and an increase in prepaid
expenses of $211,000.
For the nine months ended August 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 $383,000 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 and third quarter
capital expenditures decreased to $418,000 and $312,000 respectively. 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 nine months ended August 31, 1997 decreased 8% as compared
to the same period in fiscal 1996. The decrease is the result of the slow down
of sales to the semiconductor capital equipment manufacturers for the first 6
months of fiscal year 1997. The Company's sales for the three month period ended
August 31, 1997 increased 27% over the comparable three month period last year.
This was primarily due to the recent upturn in the disc drive and semiconductor
markets.
Cost of products sold amounted to 61% and 62% of sales for the nine month period
ending August 31, 1997 and August 31, 1996, respectively. The increase in gross
profit is due to a change in product mix. Costs of products sold amounted to 58%
and 65% for the three month period ending August 31, 1997 and August 31, 1996
respectively. The increase in gross profit is primarily the resuslt of higher
absorbed labor and overhead costs due to the higher production volume and a
change in product mix which reduced material costs.
Research and development expenses were 14% and 10% of sales for the nine month
period and 14% and 11% for the three month period ending August 31, 1997 and
August 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 18% and 16% of sales for the nine month
period ending August 31, 1997 and August 31, 1996 respectively. This increase
was caused primarily by costs related to the move into a new facility and higher
depreciation costs. Selling and administrative expenses were 16% and 17% for
the three month period ending August 31, 1997 and August 31, 1996 respectively.
This decrease was caused primarily by a large portion of fixed selling and
administrative expenses related to a higher sales volume.
The Company's effective tax rate was 35% and 39% for the nine month period and
34% and 43% for the three month period ending August 31, 1997 and August 31,
1996 respectively. This decrease was caused primarily by an increase in the R
& D credit and a reduction of state taxes.
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
third 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: September 19, 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> 9-MOS
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-START> DEC-01-1996
<PERIOD-END> AUG-31-1997
<CASH> 808,640
<SECURITIES> 0
<RECEIVABLES> 6,286,797
<ALLOWANCES> 150,078
<INVENTORY> 5,987,406
<CURRENT-ASSETS> 13,597,857
<PP&E> 5,960,962
<DEPRECIATION> 2,463,073
<TOTAL-ASSETS> 17,172,045
<CURRENT-LIABILITIES> 6,039,805
<BONDS> 0
<COMMON> 121,413
0
0
<OTHER-SE> 9,339,208
<TOTAL-LIABILITY-AND-EQUITY> 17,172,045
<SALES> 23,770,629
<TOTAL-REVENUES> 23,770,629
<CGS> 14,525,345
<TOTAL-COSTS> 7,565,953
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 77,500
<INTEREST-EXPENSE> 90,213
<INCOME-PRETAX> 1,511,618
<INCOME-TAX> 529,066
<INCOME-CONTINUING> 982,552
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 982,552
<EPS-PRIMARY> .08
<EPS-DILUTED> .08
</TABLE>
