<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. 1-12940
February 28, 1998
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
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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.
As of February 28, 1998, 12,147,661 shares of Common Stock, $.01 par value, were
outstanding.
1
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INDEX
PAGE
NUMBER
------
Part I. Financial Information
Item 1. Consolidated Financial Statements
Balance Sheets February 28, 1998 and
November 30, 1997 ............................. 3
Statements of Operations - Three Months Ended
February 28, 1998 and 1997 ................ 4
Statements of Cash Flows - Three Months Ended
February 28, 1998 and 1997 .................... 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>
February 28, November 30,
Assets 1998 1997
(Unaudited) (Audited)
------------ -------------
<S> <C> <C>
Cash $ 488,098 $ 570,453
Accounts receivable 5,636,901 7,669,713
Inventories 6,665,034 5,417,012
Prepaid expenses and other 101,998 89,337
Deferred income taxes 490,694 483,847
----------- -----------
13,382,725 14,230,362
----------- -----------
Property and equipment, net 3,599,758 3,520,411
Other assets 47,357 70,256
----------- -----------
$17,029,840 $17,821,029
=========== ===========
Liabilities
Current liabilities
Note payable $ 500,000 $ 999,721
Current portion long-term debt 700,000 700,000
Accounts payable 3,017,289 3,066,048
Accrued expenses 896,754 1,083,048
Accrued payroll 438,988 295,223
----------- -----------
5,553,031 6,144,040
----------- -----------
Long-term debt,less current
portion 1,325,275 1,498,610
----------- -----------
Shareholders' equity
Common stock - $.01 par value
Authorized - 19,000,000
Issued and outstanding:
1998-12,147,661; 1997-12,147,661 121,477 121,477
Additional paid-in capital 6,414,029 6,414,029
Retained earnings 3,683,217 3,710,062
Notes receivable from shareholders (67,189) (67,189)
----------- -----------
10,151,534 10,178,379
----------- -----------
$17,029,840 $17,821,029
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
3
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RF POWER PRODUCTS, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
February 28, February 28,
------------ ------------
1998 1997
---- ----
<S> <C> <C>
Net Sales $ 7,198,231 $ 5,434,985
----------- -----------
Costs and expenses
Cost of products sold 4,477,036 3,630,812
Research and development 1,124,572 755,247
Selling and administrative 1,606,958 1,308,007
Interest expense 29,142 20,697
----------- -----------
$ 7,237,708 $ 5,714,763
----------- -----------
Loss before
income taxes (39,477) (279,778)
Income tax expense (benefit) (12,632) (106,316)
----------- -----------
Net loss $ (26,845) $ (173,462)
=========== ===========
Per Share Data:
Earnings (loss) per Share:
Basic $.00 ($ .01)
Diluted $.00 ($ .01)
Weighted average number of
shares outstanding:
Basic 12,147,661 12,124,078
Diluted 12,312,302 12,224,892
</TABLE>
See accompanying notes to consolidated financial statements.
4
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RF POWER PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
------------------
February 28,1998 February 28,1997
---------------- ----------------
Cash flows from operating activities
<S> <C> <C>
Net loss $ (26,845) $ (173,462)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 244,005 226,381
Deferred income taxes (benefit) (6,847) (20,293)
Changes in assets and liabilities
Decrease in accounts receivable 2,032,812 177,685
(Increase) in inventories (1,248,022) (708,535)
(Increase) decrease in prepaid
expenses and other (12,661) 41,591
Increase (decrease) in accounts
payable and accrued liabilities (91,288) 1,552,894
Increase (decrease) Other 22,899 (2,251)
----------- -----------
Net cash generated (used) in
operating activities 914,053 1,094,010
----------- -----------
Cash flows from investing activities
Capital expenditures (323,352) (1,214,818)
----------- -----------
Net cash used in investing activities (323,352) (1,214,818)
----------- -----------
Cash flows from financing activities
Short term loan repayments (499,721) (434,663)
Payments of long-term debt (173,335) (87,500)
Borrowing against term loan - 960,800
Proceeds from issuance of common stock
under stock option plan - 1,157
----------- -----------
Net cash provided by (used in)
financing activities (673,056) 439,794
----------- -----------
Net increase (decrease) in cash (82,355) 318,986
Cash at beginning of period 570,453 546,984
----------- -----------
Cash at end of period $ 488,098 $ 865,970
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
5
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RF POWER PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 28, 1998 AND NOVEMBER 30, 1997
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
February 28, 1998 and November 30, 1997, the results of operations for
the three months ended February 28, 1998 and February 28, 1997 and the
statement of cash flows for the three months ended February 28, 1998
and 1997.
The results of operations for the three months ended February 28, 1998
and 1997 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 annual
report on Form 10K.
Note 2 Inventories
Inventories consist of the following:
February 28, November 30,
1998 1997
------------ ------------
Raw materials, net $3,498,211 $2,604,724
Work in process 975,541 1,051,065
Finished goods, net 2,191,282 1,761,223
---------- ----------
$6,665,034 $5,417,012
========== ==========
6
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Note 3 Property and Equipment
Property and equipment consists of the following:
February 28, November 30,
1998 1997
------------ ------------
Property and equipment,
at cost
Machinery and Equipment $5,575,963 $5,252,611
Transportation Equipment 54,641 54,641
Leasehold Improvements 863,525 863,525
---------- ----------
6,494,129 6,170,777
Less accumulated depreciation
and amortization 2,894,371 2,650,366
---------- ----------
$3,599,758 $3,520,411
========== ==========
Note 4 Income Taxes
The provision (benefit)for income taxes for the three months
ended February 28, 1998 and 1997, consists of the following:
February 28, February 28,
1998 1997
------------- -------------
Current-federal
and state $ (5,785) $ (86,023)
Deferred-federal
and state (6,847) (20,293)
--------- --------
$ (12,632) $(106,316)
========= =========
Note 5 Earnings Per Share
The Company adopted SFAS 128 in the first quarter of fiscal
year 1998. Basic per share data presented includes the weighted
average number of shares of common stock only. Diluted per share data
presented includes the weighted average number of shares of common
stock adjusted for the conversion of dilutive common stock
equivalents.
Prior year information has also been calculated in accordance with
SFAS 128.
7
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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.
In January 1998, the Company revised the credit facility with its commercial
bank. The new credit facility is for a $6,000,000 revolving line of credit.
The Company has the option to convert to a term loan up to $1,000,000 of the
line of credit for the purchase of capital equipment, which if exercised reduces
the line of credit by the amount converted. The rate of interest for both the
term loan option and revolving line of credit are based on current LIBOR rates
plus a variable percentage based on the Company's quarterly cash flow
performance. Under the terms of the credit facility, the Company is required to
maintain certain minimum financial ratios as defined in the credit facility
agreement and is prohibited from paying dividends.
Operating activities provided $914,053 in cash for the three month period ending
February 28, 1998 versus $1,094,010 in cash flows for the comparable period in
1997. Approximately $217,160 was generated from depreciation net of the loss
during the fiscal 1998 period. A decrease in accounts receivable of $2,032,812
was partially offset by an increase in inventories of $1,248,022, a decrease in
accounts payable and accrued liabilities of $91,288, and an increase in prepaid
expenses of $12,661.
For the three months ended February 28, 1998, the Company repaid $499,721 on its
line of credit and $173,335 of its long term debt.
The Company requires substantial capital for research and development and
inventories. Although there were significant capital expenditures of
$1,214,818 during the Company's 1997 first quarter for its new facility, 1998
first quarter capital expenditures decreased to $323,352. 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.
Year 2000 Exposure
Many information systems have been designed to function based on years that
begin with 19. The Company believes that it has taken the necessary steps to
ensure that the Company's business operations and systems will not be materially
adversely affected by the year 2000 problem and that no material expenditures
will be required with respect to such problem.
8
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RESULTS OF OPERATIONS
Net sales for the three months ended February 28, 1998 increased 32% as compared
to the same period in fiscal 1997. This is the result of an increase of sales to
the semiconductor capital equipment manufacturers for the first 3 months of
fiscal year 1998. During the corresponding period of fiscal 1997, the Company's
revenues were negatively affected by a downturn in the semiconductor industry
that began in 1996.
Cost of products sold amounted to 62% and 67% of sales for the three month
period ending February 28, 1998 and February 28, 1997, respectively. The
increase in gross profit is primarily the result of higher absorbed labor and
overhead costs due to the higher production volume.
Research and development expenses were 16% and 14% of sales for the three month
period ending February 28, 1998 and February 28, 1997, 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 22% and 24% of sales for the three
month period ending February 28, 1998 and February 28, 1997, 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 32% and 38% for the three month periods
ending February 28, 1998 and February 28, 1997, respectively. This decrease
was caused primarily by an increase in the R & D credit.
9
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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
first quarter of fiscal 1998.
10
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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: April 3, 1998 /s/ Joseph Stach
--------------------------
Joseph Stach, Chairman and
President
/s/ Paul Zaun
--------------------------
Paul Zaun, Controller
(Chief Accounting Officer)
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> NOV-30-1998
<PERIOD-START> DEC-01-1997
<PERIOD-END> FEB-28-1998
<CASH> 488,098
<SECURITIES> 0
<RECEIVABLES> 5,797,246
<ALLOWANCES> 160,345
<INVENTORY> 6,665,034
<CURRENT-ASSETS> 13,382,725
<PP&E> 6,494,129
<DEPRECIATION> 2,894,371
<TOTAL-ASSETS> 17,029,840
<CURRENT-LIABILITIES> 5,553,030
<BONDS> 0
0
0
<COMMON> 121,477
<OTHER-SE> 10,030,058
<TOTAL-LIABILITY-AND-EQUITY> 17,029,840
<SALES> 7,198,231
<TOTAL-REVENUES> 7,198,231
<CGS> 4,477,036
<TOTAL-COSTS> 7,190,565
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 18,000
<INTEREST-EXPENSE> 29,142
<INCOME-PRETAX> (39,476)
<INCOME-TAX> (12,632)
<INCOME-CONTINUING> (26,844)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (26,844)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
