<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
- --------------------------------------------------------------------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED SEPTEMBER 30, 1996
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File No. 0-26274
- --------------------------------------------------------------------------------
INTEGRATED MEASUREMENT SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
OREGON 93-0840631
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
9525 S.W. GEMINI DRIVE, BEAVERTON, OR 97008
(Address of principal executive offices) (zip code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (503) 626-7117
- --------------------------------------------------------------------------------
NO CHANGE
Former name, former address and former
fiscal year, if changed since last report
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
------- -------
At October 31, 1996, there were 6,720,801 shares of Integrated Measurement
Systems, Inc. common stock, $0.01 par value, outstanding.
(Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.)
<PAGE>
INTEGRATED MEASUREMENT SYSTEMS, INC.
INDEX TO FORM 10-Q
PART I FINANCIAL INFORMATION PAGE NUMBER
- ------------------------------- -----------
Item 1. Financial Statements
Statements of Income for the three months and the nine
months ended September 30, 1996 and 1995
Balance Sheets as of September 30, 1996 and
December 31, 1995
Statements of Cash Flows for the nine months ended
September 30, 1996 and 1995
Notes to the Financial Statements
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition
PART II OTHER INFORMATION
- ---------------------------
Item 6. Exhibits and Reports on Form 8-K.
SIGNATURES
- ----------
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
INTEGRATED MEASUREMENT SYSTEMS, INC.
STATEMENTS OF INCOME
(In thousands, except net income per share)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Product sales $10,183 $ 8,642 $29,425 $24,024
Service and other sales 2,554 1,854 7,839 5,405
------- ------- ------- -------
Net sales 12,737 10,496 37,264 29,429
------- ------- ------- -------
Cost of product sales 3,515 3,197 10,360 9,382
Cost of service and other sales 932 729 3,003 2,045
------- ------- ------- -------
Total cost of sales 4,447 3,926 13,363 11,427
------- ------- ------- -------
Gross margin 8,290 6,570 23,901 18,002
Operating expenses:
Research, development and engineering 1,750 1,557 5,667 4,275
Selling, general and administrative 4,158 3,621 11,462 10,181
------- ------- ------- -------
Total operating expenses 5,908 5,178 17,129 14,456
------- ------- ------- -------
Operating income 2,382 1,392 6,772 3,546
------- ------- ------- -------
Other income (expense), net 98 135 135 248
------- ------- ------- -------
Income before income taxes 2,480 1,527 6,907 3,794
Provision for income taxes 843 586 2,526 1,455
------- ------- ------- -------
Net income $ 1,637 $ 941 $ 4,381 $ 2,339
------- ------- ------- -------
------- ------- ------- -------
Net income per share $ 0.23 $ 0.14 $ 0.63 $ 0.36
------- ------- ------- -------
------- ------- ------- -------
Weighted average number of common and common equivalent
shares outstanding 6,975 6,768 6,972 6,587
------- ------- ------- -------
------- ------- ------- -------
</TABLE>
SEE ACCOMPANYING NOTES TO UNAUDITED FINANCIAL STATEMENTS
3
<PAGE>
INTEGRATED MEASUREMENT SYSTEMS, INC.
BALANCE SHEETS
(In thousands, except per share data)
<TABLE>
<CAPTION>
As of As of
September 30, December 31,
1996 1995
---- ----
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 8,532 $ 8,930
Trade receivables, less allowance for doubtful accounts
of $339 and $338 11,874 8,117
Receivable from affiliate, net 132 1,094
Inventories, net 7,830 5,830
Deferred income taxes 1,976 1,237
Prepaid expenses and other current assets 1,232 735
------- -------
Total current assets 31,576 25,943
Property, plant and equipment, net 5,825 5,178
Service spare parts, net 2,464 2,223
Software development costs, net 1,603 1,573
Other assets, net 411 84
------- -------
$41,879 $35,001
------- -------
------- -------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,401 $ 2,660
Accrued compensation 1,886 1,629
Accrued warranty 741 801
Deferred revenue 1,473 2,291
Accrued income taxes 937 -
Other current liabilities 939 810
Capital lease obligations - current 221 164
------- -------
Total current liabilities 8,598 8,355
Deferred income taxes 374 108
Capital lease obligations, net of current portion 91 54
Deferred compensation 122 -
Shareholders' equity:
Preferred stock, $.01 par value, authorized 10,000,000 shares;
none issued and outstanding - -
Common stock, $.01 par value, authorized 15,000,000 shares;
issued and outstanding 6,720,685 and 6,699,803 67 67
Additional paid-in capital 22,296 20,467
Retained earnings 10,331 5,950
------- -------
Total shareholders' equity 32,694 26,484
------- -------
$41,879 $35,001
------- -------
------- -------
</TABLE>
SEE ACCOMPANYING NOTES TO UNAUDITED FINANCIAL STATEMENTS.
4
<PAGE>
INTEGRATED MEASUREMENT SYSTEMS, INC.
STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1996 1995
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers $ 34,631 $ 26,774
Payments to suppliers (16,728) (13,603)
Payments to employees (12,874) (10,033)
Income taxes paid (315) --
Other taxes paid (887) (481)
Interest received 318 246
Interest paid (24) (24)
-------- --------
Net cash provided by operating activities 4,121 2,879
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of equipment and software (2,922) (909)
Purchases of long-term investments (123) --
Additions to service spare parts (870) (450)
Software development costs (629) (842)
-------- --------
Net cash used in investing activities (4,544) (2,201)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments under capital leases (208) (181)
Net proceeds from initial public offering -- 3,257
Proceeds from stock issued to employees 233 --
-------- --------
Net cash provided by in financing activities 25 3,076
-------- --------
Net increase (decrease) in cash and cash equivalents (398) 3,754
Beginning cash and cash equivalents balance 8,930 4,384
-------- --------
Ending cash and cash equivalents balance $ 8,532 $ 8,138
-------- --------
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 4,381 $ 2,339
Adjustments to reconcile net income to
cash provided by operating activities:
Depreciation and amortization 2,600 2,409
Contributed capital -- 177
Provision for deferred income taxes (473) (101)
Net change in payable to or receivable from affiliate 962 (526)
Increase in trade receivables (3,757) (3,343)
Increase in inventories (2,000) (2,164)
Increase in prepaid expenses and other current assets (497) (408)
Increase in current income tax liability 2,533 1,175
Increase in accounts payable and accrued liabilities 1,068 2,484
Increase in deferred compensation 122 --
(Decrease) increase in deferred revenue (818) 837
-------- --------
Net cash provided by operating activities $ 4,121 $ 2,879
-------- --------
-------- --------
SUPPLEMENTAL SCHEDULE OF NON-CASH FINANCING ACTIVITIES:
Purchase of assets through capital lease $ 302 $ 174
-------- --------
-------- --------
Tax benefit from stock option transactions $ 1,596 $ --
-------- --------
-------- --------
Noncash dividend to Cadence $ -- $ 1,027
-------- --------
-------- --------
</TABLE>
SEE ACCOMPANYING NOTES TO UNAUDITED FINANCIAL STATEMENTS.
5
<PAGE>
INTEGRATED MEASUREMENT SYSTEMS, INC.
NOTES TO THE FINANCIAL STATEMENTS
(In thousands)
(Unaudited)
(1) BASIS OF PRESENTATION
The interim financial statements included herein have been prepared,
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to
such rules and regulations, although the management of the Company believes
that the disclosures are adequate to make the information presented not
misleading. Interim financial statements are by nature tentative to a
certain degree; judgments are used to estimate interim amounts for items
that are normally determinable only on an annual basis. The financial
information as of December 31, 1995 is derived from the Company's audited
financial statements.
The interim period information presented herein includes normally recurring
adjustments which are, in the opinion of the management of the Company,
only necessary for a fair statement of the results of the respective
interim periods. Results of operations for interim periods are not
necessarily indicative of results to be expected for an entire year.
Net income per common and common equivalent share is calculated by dividing
net income by the weighted average number of common stock and common stock
equivalents outstanding during the period. Common stock equivalents are
calculated using the treasury stock method, and consist of dilutive shares
issuable upon the exercise of outstanding common stock options.
(2) INVENTORIES
Inventories, consisting principally of computer hardware, electronic sub-
assemblies and test equipment, are valued at standard costs which
approximate the lower of cost (first-in, first-out) or market. Costs
utilized for inventory valuation purposes include material, labor and
manufacturing overhead. Inventories consists of the following:
September 30, December 31,
1996 1995
---- ----
Raw Materials. . . . . . . . . . . . . $ 4,210 $ 2,613
Work-in-progress . . . . . . . . . . . 2,446 2,945
Finished Goods . . . . . . . . . . . . 1,174 272
------- -------
$ 7,830 $ 5,830
------- -------
------- -------
(3) NON-QUALIFIED DEFERRED COMPENSATION PLAN
On July 1, 1996, the Company implemented an Executive Deferred Compensation
Plan (the "Plan") for the purpose of providing its eligible executives with
a program for deferring compensation that otherwise would be paid during
employment. The Plan is intended to constitute a deferred compensation
arrangement for the benefit of a select group of management or highly
compensated employees of the Company. Under the terms of the Plan,
eligible executives and employees of the Company may make voluntary
contributions to the Plan as a percentage of compensation, but not in
excess of limitations stated in the plan. The Company has invested these
voluntary contributions in a variety of investment funds for the intended
use of paying plan benefits when participating executives and employees
become eligible to receive such benefits under the terms of the Plan.
These investments have been included in Other Assets in the accompanying
balance sheets. The Company currently does not match executive or employee
contributions and does not intend to do so in the near future.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
NET SALES. Net sales of $12.7 million for the three months ended September
30, 1996 increased 21% from $10.5 million recorded during the three months
ended September 30, 1995. The increase in net sales included an increase of
18% in product sales from $8.6 million in the third quarter of 1995 to $10.2
million for third quarter of 1996. Service and other sales increased 38%
from $1.9 million during the three months ended September 30, 1995 to $2.6
million for the three months ended September 30, 1996. The increase in
product sales reflects increases in sales of the Company's ATS FT Test
Stations, which contributed 25% of net sales for the third quarter of 1996
compared to 17% of net sales for the third quarter of 1995, and a continued
significant contribution to net sales by the Company's ATS Blazer Test
Stations. The increase in service and other sales resulted primarily from
revenues generated by Virtual Test Software related services. During the
third quarter of 1996, sales of Virtual Test Software and related services
amounted to 8% of net sales, compared to 4% of net sales during the third
quarter of 1995.
Sales to Intel Corporation and Advanced Micro Devices, Inc., amounted to 28% and
18% of net sales, respectively, during the third quarter of 1996. Customers
individually providing less than 10% of net sales generated the remaining 54% of
the Company's net sales for the three months ended September 30, 1996.
COST OF SALES. Total cost of sales increased 13% from $3.9 million in the
third quarter of 1995 to $4.4 million for the third quarter of 1996. Product
cost of sales increased 10% from $3.2 million for the three months ended
September 30, 1995 to $3.5 million for the three months ended September 30,
1996, primarily due to higher sales volume, partially offset by benefits from
lower costs of materials and manufacturing efficiencies. Service and other cost
of sales increased 28% from $729,000 in the third quarter of 1995 to $932,000 in
the third quarter of 1996, reflecting costs associated with expanding Virtual
Test Software related services.
GROSS MARGIN. The Company's gross margin increased 26% from $6.6 million in
the three months ended September 30, 1995 to $8.3 million in the three months
ended September 30, 1996. As a percent of net sales, gross margin increased
from 62.6% for the third quarter of 1995 to 65.1% for the third quarter of
1996. Product gross margin, as a percent of product sales, increased from
63.0% for the three months ended September 30, 1995 to 65.5% for the three
months ended September 30, 1996. The increase in product gross margin
resulted primarily from increased sales of higher margin ATS FT Test Stations
and Virtual Test Software, combined with lower material costs during the
third quarter of 1996. Service and other gross margin, as a percent of
service and other sales, increased to 63.5% during the third quarter of 1996,
compared to 60.7% during the third quarter of 1995, due primarily to
increased sales of higher gross margin Virtual Test Software related services.
RESEARCH, DEVELOPMENT AND ENGINEERING. Expenses associated with research,
development and engineering increased 12% from $1.6 million in the three months
ended September 30, 1995 to $1.8 million for the three months ended
September 30, 1996. As a percentage of net sales, research, development and
engineering expenses decreased from 14.8% in the third quarter of 1995 to
13.7% in the third quarter of 1996. This decrease was principally attributable
to lower non-recurring engineering costs during the third quarter of 1996, which
more than offset increased expenditures related to enhancements of the Company's
existing products and development of future generation hardware and software
products.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses increased 15% from $3.6 million for the quarter ended September 30,
1995 to $4.2 million for the quarter ended September 30, 1996. The increase was
principally attributable to higher commissions associated with increased net
sales and increased investment in the Company's selling and marketing functions.
As a percentage of net sales, selling, general and administrative expenses have
decreased from 34.5% of net sales in the three months ended September 30, 1995
to 32.6% of net sales in three months ended September 30, 1996, as a result of
control over increases in expenses as net sales increased.
7
<PAGE>
OTHER INCOME (EXPENSE), NET. Other income, net decreased to $98,000 for the
three months ended September 30, 1996, from $135,000 for the three months ended
September 30, 1995. The change from the third quarter of 1995 to the third
quarter of 1996 was due to changes in the investment mix for the Company's cash
and cash equivalent balances.
INCOME TAXES. The Company's effective rate for Federal and state income taxes
was 34.0% and 38.4% for the three months ended June 30, 1996 and 1995,
respectively. The decrease in the effective tax rate from 1995 to 1996 reflects
the benefits of research and development credits in 1996 which were not present
in 1995.
NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
NET SALES. Net sales of $37.3 million for the nine months ended September 30,
1996 increased 27% from $29.4 million recorded during the nine months ended
September 30, 1995. The increase in net sales included an increase of 22% in
product sales from $24.0 million in the first nine months of 1995 to $29.4
million for first nine months of 1996. Service and other sales increased 45%
from $5.4 million during the nine months ended September 30, 1995 to $7.8
million for the nine months ended September 30, 1996. The increase in product
sales was partially driven by the introduction of the Company's ATS FT Test
Stations, which contributed 33% of net sales for the first nine months of 1996,
and continued contribution by the Company's ATS Blazer Test Station products.
The increase in service and other sales resulted primarily from revenues
generated by refurbishment services and Virtual Test Software related services.
During the first nine months of 1996, sales of Virtual Test Software and related
services amounted to 8% of net sales, compared to 4% of net sales during the
first nine months of 1995.
Sales to the Company's largest customer, Intel Corporation, amounted to 39% of
net sales during the first nine months of 1996. Customers individually providing
less than 10% of net sales generated the remaining 61% of the Company's net
sales for the first nine months of 1996.
COST OF SALES. Total cost of sales increased 17% from $11.4 million in the
first nine months of 1995 to $13.4 million for the first nine months of 1996.
Product cost of sales increased 10% from $9.4 million for the nine months ended
September 30, 1995 to $10.4 million for the nine months ended September 30,
1996, primarily due to higher sales volume, partially offset by benefits from
lower costs of materials and manufacturing efficiencies. Service and other cost
of sales increased 47% from $2.1 million in the first nine months of 1995 to
$3.0 million in the first nine months of 1996, due to higher costs associated
with refurbishment services, increased labor costs associated with expanding
Virtual Test Software related services, and a one-time cumulative
depreciation adjustment of the Company's service parts during the first
quarter of 1996.
GROSS MARGIN. The Company's gross margin increased 33% from $18.0 million
in the nine months ended September 30, 1995 to $23.9 million in the nine
months ended September 30, 1996. As a percent of net sales, gross margin
increased from 61.2% for the first nine months of 1995 to 64.1% for the first
nine months of 1996. Product gross margin, as a percent of related sales,
increased from 60.9% for the nine months ended September 30, 1995 to 64.8%
for the nine months ended September 30, 1996. The increase in product gross
margin resulted primarily from increased sales of higher margin ATS FT Test
Stations and lower material costs during the first nine months of 1996.
Service and other gross margin, as a percent of related sales, decreased to
61.7% during the first nine months of 1996, compared to 62.2% during the
first nine months of 1995, due primarily to the impact of the cumulative
depreciation adjustment of the Company's service parts during the first
quarter of 1996, partially offset by improved cost efficiencies in the
Company's systems service business and higher gross margin associated with
increased sales of Virtual Test Software related services.
RESEARCH, DEVELOPMENT AND ENGINEERING. Research, development and engineering
expenses increased 33% from $4.3 million in the nine months ended September 30,
1995 to $5.7 million for the nine months ended September 30, 1996. As a
percentage of net sales, research, development and engineering expenses
increased from 14.5% in the first nine months of 1995 to 15.2% in the first nine
months of 1996. This increase resulted from increased spending related to
enhancements of the Company's existing products and development of future
generation hardware and software products.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses increased 13% from $10.2 million for the nine months ended
September 30, 1995 to $11.5 million for the nine months ended
September 30, 1996. The increase was principally attributable to higher
commissions driven by increased net sales and increased
8
<PAGE>
investment in the Company's selling and marketing infrastructure. As a
percentage of net sales, selling, general and administrative expenses have
decreased from 34.6% of net sales in the nine months ended September 30, 1995
to 30.8% of net sales in nine months ended September 30, 1996, as a result of
control over increases in expenses as net sales increased.
OTHER INCOME, NET. Other income, net decreased from $248,000 for the nine
months ended September 30, 1995 to $135,000 for the nine months ended
September 30, 1996. The decrease from the first nine months of 1995 to the
first nine months of 1996 was due principally to a non-recurring write-off of
expenses associated with the Company's withdrawn secondary public stock
offering during the second quarter of 1996 due to unfavorable stock market
conditions, partially offset by higher interest income generated on higher
average cash and cash equivalent balances.
INCOME TAXES. The Company's effective rate for Federal and state income taxes
was 36.6% and 38.4% for the nine months ended September 30, 1996 and 1995,
respectively. The rate decrease reflects the favorable impact of research and
development credits.
FUTURE OPERATING RESULTS
Future operating results will depend on many factors, including demand for the
Company's products, introduction of new products by the Company and by its
competitors, and industry acceptance of Virtual Test Software and new Test
Station products. There can be no guarantee that the Company's net sales will
continue to grow or that such growth will be sustained in future periods or that
the Company will remain profitable in any future period.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1996, the Company's principal sources of liquidity consisted
of cash and cash equivalents of $8.5 million, and funds available under an
existing bank line of credit of $10.0 million.
OPERATING ACTIVITIES. The Company's net cash provided by operating activities
increased to $4.1 million during the first nine months of 1996 from $2.9 million
for the nine-month period ended September 30, 1995. Cash received from
customers increased 29% from $26.8 million during the first nine months of 1995
to $34.6 million during the first nine months of 1996. Combined payments to
suppliers and employees increased 25% from $23.7 million during the first nine
months of 1995 to $29.6 million for the first nine months of 1996. The
increases in cash received from customers and payments to suppliers and
employees are directly related to the increase in net sales and inventories and
expenses associated with those sales. The Company's trade receivables have
increased by $3.8 million during the first nine months of 1996 as a direct
result of timing of shipments late in the third quarter of 1996. Inventories
have increased by $2.0 million during the first nine months of 1996 reflecting
the increase in volume of the ATS FT Test Stations introduced late in 1995, and
the introduction of the MTS Test Stations during the second quarter of 1996.
Deferred revenue has decreased during the first nine months of 1996 by $818,000,
reflecting the recognition of revenue associated with FOB destination shipments
which had been deferred at the end of 1995. The effect of the increases in
trade receivables and inventories, and decreases in deferred revenue, has been
partially offset by an increase of $1.1 million in trade payables and accrued
liabilities during the first half of 1996, which has been primarily driven by
higher costs and expenses associated with the Company's increased sales volume.
INVESTING ACTIVITIES. During the first nine months of 1996, cash flows for
investments in equipment and software necessary to develop, maintain and
distribute new and existing Test Station and Virtual Test products amounted to
$2.9 million. Capitalization of software development costs of $629,000 during
the first nine months of 1996 was only slightly higher than related amortization
of $600,000. Additions to the Company's pool of service spare parts amounted to
$870,000 during the first three quarters of 1996, driven primarily by the need
to stock parts to support the Company's new ATS FT and MTS Test Stations
introduced in late 1995 and the first half of 1996. The Company occupied
additional leased facility space to meet the volume-driven demands for
manufacturing and engineering capacity during the second quarter of 1996. In
addition, the Company is continuing with the implementation of new information
systems for the manufacturing, service and finance functions during the final
quarter of 1996.
9
<PAGE>
FINANCING ACTIVITIES. During the first nine months of 1996, cash flows
provided by financing activities amounted to $25,000, compared to $3.1 million
during the first nine months of 1995. This decrease reflects the proceeds of
$3.3 million from the Company's initial public offering of common stock in July
1995, while proceeds from the sale of stock to employees during the first nine
months of 1996 have amounted to $233,000. Cash outflows for principal payments
on capital leases have increased slightly, from $181,000 for the first three
quarters of 1995 to $208,000 during the first three quarters of 1996.
NON-CASH FINANCING ACTIVITIES. During the first nine months of 1996, the
Company realized noncash reductions in current tax liabilities of $1.6 million
resulting from the benefit of tax deductions of employee gains from the exercise
of stock options of Cadence Design Systems, Inc. (Cadence), the Company's
majority shareholder. The benefit of the stock option deduction is reflected as
an increase to Additional Paid-in Capital in the accompanying Balance Sheets.
The employee gains are not expenses of the Company for financial reporting
purposes, and since these options are related to Cadence stock, the exercise of
these stock options does not increase the number of shares of the Company's
common stock outstanding. Additionally, the Company used non-cash capital lease
financing for equipment acquisitions totaling $302,000 during the first half of
1996.
The Company believes that cash on hand and cash generated from operations, as
well as cash available from the Company's existing $10.0 million short-term line
of credit, will be sufficient to meet the Company's working capital and other
cash requirements for at least the next twelve months. Company management is
continually evaluating opportunities to develop and introduce new products, and
to acquire complementary businesses or technologies. At present, the Company
has no understandings, commitments or agreements with respect to any such
opportunities. Any transactions resulting from such opportunities, if
consummated, may require the use of some of the Company's cash or necessitate
funding from other sources.
FORWARD LOOKING STATEMENTS
Results of operations for the periods discussed above should not be considered
indicative of the results to be expected for any future period, and fluctuations
in the operating results may also result in fluctuations in the market price of
the Company's common stock.
Like most high technology and high growth companies, the Company faces certain
business risks that could have adverse effects on the Company's results of
operations. Sales of the Company's products to a limited number of customers is
expected to continue to account for a significant percentage of net sales over
the foreseeable future. The Company purchases some key components from sole or
single source vendors for which alternative sources are not currently available.
The Company is dependent on high dollar customer orders, deriving a substantial
portion of its net sales from the sale of Test Stations which typically range in
price from $0.2 to $1.2 million per unit and may be priced as high as $1.8
million for a single unit. Significant delays of such orders, should they
occur, could have an adverse impact on the Company's results of operations. In
addition, the Company's future operating results and financial condition are
subject to influences driven by rapid technological changes, a highly
competitive industry, a lengthy sales cycle, and the cyclical nature of general
economic conditions.
The Company has thus far avoided any material adverse impact on its results of
operations resulting from such risks. However, no assurance can be given that
such risks will not affect the Company's financial position or results of
operations in future periods.
Additionally, all statements in this Quarterly Report (Form 10-Q) relative to
future levels of sales, gross margins, and expenses shall be considered to be
"forward looking statements" within the meaning of the Private Securities
Reform Act of 1995. These forward looking statements are subject to the above
business and economic risks the Company faces.
10
<PAGE>
PART II OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits (exhibit reference numbers refer to Item 601 of
Regulation S-K)
10. Integrated Measurement Systems, Inc. Executive Deferred
Compensation Plan
27. Financial Data Schedule
(b) Reports on Form 8-K:
One report on Form 8-K was filed on August 14, 1996 and is incorporated
herein by reference. The contents of the report are summarized below:
On July 16, 1996, Integrated Measurement Systems, Inc. and LTX announced
an OEM and joint R&D agreement. Under the non-exclusive distribution
agreement, IMS will distribute LTX's Synchro Models Toolbox and Device
Tool software products. Also, under this agreement, IMS will help
develop portions of the Synchro Models Toolbox. IMS and LTX will work
together to integrate IMS' Dantes-TM-, and Device Tool and Synchro
Models Toolbox products.
On July 15, 1996, Integrated Measurement Systems, Inc. announced the
introduction of their new multimedia mixed-signal, MTS-TM-Test Station
for verifying and characterizing high-speed components used in
multimedia applications.
On July 16, 1996, Integrated Measurement Systems, Inc. announced that,
for the fourth consecutive year, it has received the VLSI Research Inc.
10 BEST Award for Test and Material Handling Equipment award in customer
satisfaction.
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 on November 12, 1996.
INTEGRATED MEASUREMENT SYSTEMS, INC.
(Registrant)
/s/ Sar Ramadan
----------------------------------
Sar Ramadan
On behalf of the Registrant,
and as Principal Financial Officer
11
<PAGE>
Exhibit 10.
INTEGRATED MEASUREMENT SYSTEMS, INC.
EXECUTIVE DEFERRED COMPENSATION PLAN
Effective July 1, 1996
Integrated Measurement Systems, Inc. "Company"
9525 SW Gemini Drive
Beaverton, OR 97008
SECTION 1. PURPOSE.
1.1 Integrated Measurement Systems, Inc., an Oregon corporation (the
"Company"), hereby establishes this Integrated Measurement Systems, Inc.
Executive Deferred Compensation Plan (the "Plan") for the purpose of providing
its eligible executives with a program for deferring compensation that otherwise
would be earned during employment. It is intended that the Plan shall constitute
an unfunded deferred compensation arrangement for the benefit of a select group
of management or highly compensated employees of the Company and its designated
subsidiaries and affiliates for purposes of the federal income tax laws and the
Employee Retirement Income Security Act of 1974 ("ERISA") and all documents,
agreements or instruments made or given pursuant to the Plan shall be
interpreted so as to effect such intent.
SECTION 2. ELIGIBILITY.
2.1 ELIGIBLE EXECUTIVES. Each employee of the Company or member of the
board of directors, who is designated by the Compensation Committee of the board
of directors of the Company (the Compensation Committee) as an eligible
executive (the "Eligible Executive") shall participate in the Plan effective as
of the later of the following:
(a) The date determined by the Compensation Committee.
(b) The date the Eligible Executive is formally notified that the
Eligible Executive is a participant.
2.2 DESIGNATED SUBSIDIARIES AND AFFILIATES. For purposes of this Plan, the
term "Company" shall include any subsidiary or affiliate of the Company which is
designated by the Compensation Committee as an employer whose executives will be
eligible to participate in this Plan.
SECTION 3. ELECTION TO DEFER COMPENSATION.
3.1 DEFERRAL ELECTION. For each calendar year of participation, an Eligible
Executive employed by the Company may elect to defer receipt of a specified
whole percentage, from one (1) to 90 percent, or a specified dollar amount, of
the following:
(a) the Eligible Executive's salary for the calendar year,
(b) any bonus earned during the calendar year, and
(c) any commission amount earned during the calendar year.
For each calendar year of participation, an Eligible Executive other than
an employee may elect to defer receipt of a specified whole percentage, from
one (1) to 100 percent, or a specified dollar amount, of any board fees earned
during the calendar year.
Provided that, the Administrative Committee (as defined in Section 9) may
designate procedures reasonably designed to provide a minimum annual deferral
into this Plan of not less than $2,000 per calendar year.
3.2 TIMING OF DEFERRAL ELECTION. Except as provided in 3.3, each Eligible
Executive may elect to defer receipt of any such salary, bonus or board fees for
any calendar year by filing with the Company the Deferral Election Form provided
by the Administrative Committee by December 31 of the preceding year.
13
<PAGE>
3.3 MID-YEAR PARTICIPATION. If an Eligible Executive becomes a participant
during the year, the salary, bonus or board fees considered under the Plan shall
be limited to the salary, bonus or board fees earned on and after the date on
which the Deferral Election Form is filed. Unless the Administrative Committee
determines that a different allocation is appropriate, salary, bonus or board
fees shall be allocated evenly throughout the calendar year for purposes of
determining amounts earned on and after the effective date. The Eligible
Executive must file with the Company the elections described in 3.1 within 30
days after the effective date of their participation.
3.4 INTEGRATION WITH 401(K) ELECTION. If an Eligible Executive wishes to
integrate deferral elections under this Plan and the Company's IRC
Section 401(k) Profit Sharing Plan, a single combined Deferral Election Form may
be filed with the Company. The Company shall allocate amounts deferred into each
plan in accordance with procedures defined by the Administrative Committee,
provided however, that no amount may be retroactively allocated from the 401(k)
plan to this Plan after the time that such amount has been allocated to the
401(k) plan.
3.5 NO ELECTION TO DEFER. If an Eligible Executive fails to elect to defer
compensation under the Plan for any calendar or fiscal year by the dates
specified in 3.2 or 3.3, any salary, bonus or board fees which the Eligible
Executive is entitled to receive shall be paid to the Eligible Executive at such
time, in such manner and in such amounts as is consistent with the normal
practices of the Company or as provided in the applicable bonus plan.
3.5 MODIFICATION OF DEFERRAL ELECTION. An election to defer shall be
irrevocable except that the Administrative Committee may waive or reduce the
amount to be deferred upon a finding of severe financial hardship as specified
in 6.6.
SECTION 4. CREDITING OF DEFERRED COMPENSATION.
4.1 ACCOUNT FOR PARTICIPANT. All amounts of an Eligible Executive's
compensation deferred pursuant to Section 3 shall be credited to an account for
such Eligible Executive. Such accounts shall also be credited with earnings and
losses in accordance with Section 5. The amount to be paid to an Eligible
Executive from the Plan in accordance with Section 6 shall be based on an amount
equal to the balance of the Eligible Executive's account at the time of payment.
4.2 CREDIT FOR AMOUNTS FROM PREDECESSOR PLAN. At the discretion of the
Company, an Eligible Executive shall be credited with an amount equal to the
Eligible Executive's credit (Predecessor Plan Credit) under the Cadence
Corporation Executive Deferred Compensation Plan (Predecessor Plan) as follows:
(a) The credit shall reflect assumption by the Company of the Cadence
Corporation obligation to the Eligible Executive under the Predecessor
Plan.
(b) The amount of the Prior Plan Credit shall be determined by the
Administrative Committee as of a date relating to the assumption. The date
shall not be required to be the effective date of the assumption.
(c) The assumption shall cover all of the Eligible Executive's
interest under the Predecessor Plan and the Eligible Executive shall look
solely to the Company under this Plan for the payment of the Prior Plan
Credit.
(d) The amount credited to an Eligible Executive under 4.2 and
subsequent earnings shall be paid to the Eligible Executive in accordance
with the Eligible Executive's deferral election under the Predecessor Plan.
The deferral election shall become part of this Plan. Subsequent earnings
on Predecessor Plan Credit shall be determined under procedures for
investment credit under this Plan.
4.3 COMPANY CONTRIBUTIONS TO THE PLAN. The Company may, in its sole
discretion and at any time, credit matching or other contributions to any
Eligible Executive's account. Such Company contributions shall be separately
accounted for, and may be subject to such payment restrictions and forfeiture
provisions as the Compensation Committee, in its sole discretion, shall
determine.
SECTION 5. INVESTMENT CREDIT.
5.1 CREDIT BASED ON INDEX FUNDS. Subject to 5.2, amounts deferred by the
Eligible Executive pursuant to Section 3 above and any Company contributions
pursuant to 4.3, shall be credited with earnings as if the amounts were invested
in specific investment funds selected by the Administrative Committee (index
funds). The
14
<PAGE>
Administrative Committee, in its sole discretion, may establish a procedure
allowing any Eligible Executive to request that earnings be credited for his
or her account with respect to the results of one or more of the index funds
selected by the Administrative Committee. The procedure may specify the
frequency with which Eligible Executives may change their investment index
requests.
5.2 COMPANY DISCRETION TO FOLLOW INSTRUCTIONS. The Administrative Committee
shall not be obligated to comply with, nor be liable for any failure to comply
with, the investment request of any Eligible Executive. The Administrative
Committee shall have sole discretion whether or not to credit earnings with
regard to the results of one or more of the index funds to the account of any
Eligible Executive in the manner requested by the Eligible Executive under this
Section 5.
5.3 INFORMAL FUNDING. The Company may informally fund its obligations under
the Plan in any manner that it chooses and shall not be required to invest any
amounts in any particular investment, including any index fund. The Company may,
without limitation, purchase life insurance or any security or other property to
fund its obligations under the Plan.
SECTION 6. PAYMENT OF DEFERRED COMPENSATION.
6.1 PAYOUT ELECTION. At the time an Eligible Executive first participates
in the Plan, such participant shall file a Payout Election Form designating the
form in which payment of benefits shall be made following termination of
employment. Such election shall apply to the Eligible Executive's entire account
balance, except for amounts payable under 6.2 prior to the date of termination
of employment. Payment shall be made in a lump sum unless the participant
requests one of the following forms, as specified in the Payout Election Form:
(a) Substantially equal annual installments for five years.
(b) Substantially equal annual installments for 10 years.
(c) Any other actuarially equivalent form of payment that the
Administrative Committee may approve.
6.2 ELECTION OF PAYOUT AT ALTERNATE PAYMENT DATE. The Deferral Election
Form for any year may specify alternate dates other than at termination of
employment ("alternate payment dates") for payment of amounts deferred and the
form in which these amounts deferred under the Plan shall be paid to the
Eligible Executive. If an Eligible Executive elects an alternate payment date,
the amount to be paid shall be limited to the amount of compensation deferred;
any earnings thereon or Company contributions related thereto shall be paid only
upon termination of employment in the form applicable to the remainder of the
Eligible Executive's account balance. The Deferral Election Form for each year
may specify an alternate payment date or form of payment different from any
other year's Deferral Election Form.
6.3 CHANGE IN FORM OF PAYMENT. An Eligible Executive may change the form of
payment specified in the Payout Election Form by submitting to the
Administrative Committee an amended Payout Election Form that adequately
identifies the Payout Election Form that is to be changed and specifies the form
of payment, as amended. To be effective, the amended Payout Election Form must
be received by the Administrative Committee at least twelve (12) months before
the date of termination of employment. Payment dates and payout forms for
amounts payable at an alternate payment date may not be changed.
6.4 PAYMENT TO EXECUTIVE. Except as provided in 6.2, 6.5, 6.6, 6.7 and
Section 7, the balance of an Eligible Executive's account under the Plan,
including any amounts scheduled to be paid at a subsequent alternate payment
date, shall be paid, starting as soon as practicable, following the Eligible
Executive's termination of employment with the Company.
6.5 CALL PROVISION. The balance of an Eligible Executive's account under
the Plan shall be paid in a lump sum as soon as practicable at the Eligible
Executive's election and the following shall apply:
(a) The amount paid shall be reduced by a forfeiture equal to 10
percent of the account balance.
(b) The Eligible Executive shall be permanently ineligible to
participate in this Plan after the distribution.
6.6 HARDSHIP WITHDRAWALS. The Administrative Committee may, in its sole
discretion, allow an Eligible Executive to be paid an amount equal to all or any
portion of the Eligible Executive's account in the event of an
15
<PAGE>
unforeseen emergency caused by an event beyond the control of the Eligible
Executive that would result in severe financial hardship to the Eligible
Executive, such as the following:
(a) Illness or accident of the Eligible Executive or a dependent under
Internal Revenue Code section 152(a).
(b) Loss of the Eligible Executive's property due to casualty.
(c) Other similar extraordinary and unforeseeable circumstances
arising as a result of events beyond the control of the Eligible Executive.
The payment will be limited to the amount necessary to meet such unforeseen
emergency. Financial hardship and the amount necessary to meet the emergency
will take into consideration all available assets of the Eligible Executive,
including but not limited to, assets that can be liquidated, available credit,
insurance and other reimbursements, and termination of deferral of compensation
to the extent allowable. Payments to the Eligible Executive under 6.6 shall
reduce the Eligible Executive's account balance under the Plan.
6.7 DISABILITY. An Eligible Executive who becomes temporarily disabled
while employed or becomes eligible to receive long-term disability benefits
under a plan maintained by the Company shall be treated as employed, and no
payments will be made under this Plan under elections to receive benefits at
termination of employment. Amounts payable at alternate payment dates shall be
paid as scheduled. If disability benefits stop and disability continues the
Eligible Executive shall be treated as terminated.
6.8 DEFERMENT IN CASE OF NON-DEDUCTIBILITY. To the extent that the payment
of all or a portion of an Eligible Executive's account would not be deductible
by the Company for federal income tax purposes, the Company may defer payment of
all or a portion of the account to the earliest one or more subsequent calendar
years in which the payment of such amounts would be deductible by the Company.
Deductibility shall not be determined by whether or not the Company would
receive any benefit from the deduction.
6.9 INCAPACITY. If the Administrative Committee finds that any person to
whom any amount is payable hereunder is unable to care for his or her affairs
because of illness or accident, then the Administrative Committee, if it so
elects, may direct that any payment due him or her (unless a prior claim
therefore has been made by a duly appointed legal representative) or any part
thereof, be paid or applied for the benefit of such person (or such person's
spouse, children or other dependents), to an institution maintaining or having
custody of such person, or any other person deemed by the Administrative
Committee to be a proper recipient on behalf of such person otherwise entitled
to payment, or any of them, in such manner and proportion as the Administrative
Committee may deem proper. Any such payment shall be in complete discharge of
the Company's obligations under this Plan.
6.10 TERMINATION OF DIRECTORS. For Eligible Executives who participate in
the Plan as directors instead of as employees, references to termination of
employment shall mean termination as a director.
SECTION 7. CHANGE OF FINANCIAL CONDITION.
7.1 PAYMENT ON CHANGE OF FINANCIAL CONDITION. Notwithstanding anything in
this Plan to the contrary, but subject to 7.2, the aggregate amount credited to
the account of the Eligible Executive shall be paid to the Eligible Executive in
one lump sum ninety (90) days after the occurrence of any of the following:
(a) If the Company's Adjusted Tangible Net Worth falls below
$15,000,000. "Adjusted Tangible Net Worth" shall be defined as a sum equal
to (i) the net book value (after deducting related depreciation,
obsolescence, amortization, and other proper reserves) at which the
tangible assets of the Company would be shown on a balance sheet in
accordance with Generally Accepted Accounting Principles ("GAAP"), less
(ii) the amount by which the Company's liabilities (i.e., other than
capital stock and surplus) would be shown on the balance sheet in
accordance with GAAP, including as liabilities all reasonably estimable
reserves for contingencies and other probable potential liabilities.
(b) If the ratio of the Company's Current Assets to Current
Liabilities is less than one (1.0). "Current Assets" shall be defined as
the amount at which all the current assets of the Company would be shown on
a balance sheet in accordance with GAAP, and "Current Liabilities" shall be
defined as the amount at which all the current liabilities of the Company
would be shown on a balance sheet in accordance with GAAP.
(c) Any sale of all or substantially all of the assets of the Company.
(d) Any liquidation or dissolution of the Company.
16
<PAGE>
7.2 DEFERMENT IN CASE OF NON-DEDUCTIBILITY. To the extent that the payment
of all or a portion of an Eligible Executive's account would not be deductible
by the Company for federal income tax purposes, the Company may defer payment
under this Section 7 of all or a portion of such account to the earliest one or
more subsequent calendar years in which the payment of such amounts would be
deductible by the Company. Deductibility shall not be determined by whether or
not the Company would receive any benefit from the deduction.
SECTION 8. PAYMENT TO BENEFICIARY OR REPRESENTATIVE.
8.1 If the Eligible Executive dies before receiving all of his or her
account balance, the Company shall pay the remaining balance to the beneficiary
most recently designated by the Eligible Executive (or, if no such beneficiary
shall survive the Eligible Executive or if no beneficiary has been designated,
to the beneficiary designated by the Eligible Executive under the Company's
401(k) plan, or if no such beneficiary has been designated under the 401(k)
plan, to the Eligible Executive's estate) either by payment of one lump sum or
by continuing the schedule of payments in effect at death, as the Administrative
Committee in its sole discretion shall determine. The provisions of 6.9 shall
apply.
SECTION 9. ADMINISTRATION.
9.1 ADMINISTRATION OF THE PLAN. The Plan shall be administered by an
Administrative Committee (the "Administrative Committee") which shall be
appointed by the Compensation Committee. The Administrative Committee shall have
full power, discretion and authority to interpret, construe and administer this
Plan and any part hereof, and the Administrative Committee's interpretation and
construction thereof, and actions hereunder, shall be binding and conclusive on
all persons for all purposes. The Administrative Committee may employ legal
counsel, consultants, actuaries and agents as it may deem desirable in the
administration of the Plan and may rely on the opinion of such counsel or the
computations of such consultant or other agent. The Administrative Committee
shall provide for the keeping of written minutes of its actions hereunder.
9.2 PARTICIPANT STATEMENTS. The Administrative Committee shall provide to
each Eligible Executive, at least annually, a statement setting forth the
balance to the credit of the account of each Eligible Executive. Such statement
shall be provided no later than 60 days following the end of each calendar year.
SECTION 10. CLAIMS PROCEDURE.
10.1 REQUEST. Any person claiming a benefit, requesting an interpretation
or ruling under the Plan, or requesting information under the Plan shall present
the request in writing to the Administrative Committee. The Chair of the
Administrative Committee shall respond in writing as soon as practicable.
10.2 DENIAL. If the claim or request is denied, the written notice of
denial shall state:
(a) The reasons for denial, with specific reference to the Plan
provisions on which the denial is based.
(b) A description of any additional material or information required
and an explanation of why it is necessary.
(c) An explanation of the Plan's claim review procedure.
The initial notice of denial shall normally be given within 90 days after
receipt of the claim. If special circumstances require an extension of time, the
claimant shall be so notified and the time limit shall be 180 days.
10.3 REVIEW OF DECISION. Any person whose claim or request is denied or who
has not received a response within 30 days may request review by notice in
writing to the full Administrative Committee. The original decision shall be
reviewed by the Administrative Committee. The Administrative Committee may, but
shall not be required to, grant the claimant a hearing. On review, whether or
not there is a hearing, the claimant may have representation, examine pertinent
documents and submit issues and comments in writing. The decision on review
ordinarily shall be made within 60 days. If an extension of time is required for
a hearing or other special circumstances, the claimant shall be so notified and
the time limit shall be 120 days. The decision shall be in writing and shall
state the reasons and the relevant Plan provisions. All decisions on review
shall be final and bind all parties concerned.
17
<PAGE>
SECTION 11. TRUST; UNSECURED GENERAL CREDITOR.
11.1 TRUST. The Company may establish a trust with a financial institution
for payment of benefits under this Plan. The trust shall be a grantor trust for
tax purposes. The trust shall provide that any assets contributed to the trustee
shall be used exclusively for payment of benefits under this Plan except in the
event the Company becomes insolvent. In the event of insolvency, the trust fund
shall be available for payment of obligations of the Company to its creditors.
11.2 PAYMENT OTHER THAN FROM TRUST. Except as provided in 11.1, any
amounts payable under this Plan shall be paid in cash from the general funds of
the Company. The Eligible Executive and any beneficiary shall have no right,
title or interest whatever in or to any investment which the Company may make to
aid it in meeting its obligation hereunder or to any assets of the Company.
Nothing contained in this Plan, and no action taken pursuant to the Plan
provisions, shall create or be construed to create a fiduciary relationship
between the Company and the Eligible Executive or a beneficiary.
11.3 UNSECURED CREDITOR. To the extent that any person acquires a right to
receive payments from the Company hereunder such right shall be no greater than
the right of an unsecured creditor of the Company. Rights to benefit payments
under the Plan are not subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance, attachment or garnishment by
creditors of the Eligible Executive or of the Eligible Executive's
beneficiaries. It is the intention of the Company that the Plan be unfunded for
tax purposes and for purposes of Title I of ERISA.
SECTION 12. WITHHOLDING.
12.1 WITHHOLDING ON PLAN BENEFITS. The Company shall withhold, or cause to
be withheld, from any benefits payable under this Plan all Federal, state, city
or other taxes as required pursuant to any law or governmental regulation or
ruling.
12.2 WITHHOLDING ON AMOUNTS CREDITED. The Company shall withhold from
current compensation to the Eligible Executive amounts required to be withheld
pursuant to applicable law in respect of amounts credited to the Eligible
Executive under this Plan.
SECTION 13. EMPLOYMENT AND BENEFITS RIGHTS.
13.1 EFFECT ON OTHER PLANS. Any benefit payable under this Plan shall not
be deemed salary or other compensation for the purpose of computing benefits
under any employee benefit plan or other arrangement of the Company for the
benefit of its employees or directors except to the extent otherwise provided in
such plan or arrangement or required to comply with laws applicable to such plan
or arrangement.
13.2 NOT A CONTRACT OF EMPLOYMENT. This Plan is not a contract of
employment and shall not affect any employment rights of the Eligible Executive
or the right or ability of the Company to terminate the Eligible Executive's
employment with or without cause.
13.3 OTHER BENEFITS. This Plan shall be in addition to any rights of the
Eligible Executive under any other agreement with the Company, if any, and shall
not affect or reduce any benefit or compensation inuring to the Eligible
Executive of a kind not expressly provided for in this Plan.
SECTION 14. BINDING EFFECT: NONASSIGNABILITY.
14.1 This Plan shall be binding upon and inure to the benefit of the
Company and its successors and assigns and the Eligible Executive and the
Eligible Executive's designees and estate. Neither the Eligible Executive nor
the Eligible Executive's designees or estate shall commute, encumber, sell or
other wise dispose of the right to receive the payments provided for in this
Plan, which payments and the rights thereto are expressly declared to be
nontransferable and nonassignable.
SECTION 15. AMENDMENT.
18
<PAGE>
15.1 This Plan may be amended, suspended or terminated, in whole or in
part, by the Board of Directors of the Company, but no such action shall
retroactively impair or otherwise adversely affect the rights of any person to
benefits under this Plan which have accrued prior to the date of such action, as
determined by the Administrative Committee. Any amendment which materially
impairs or otherwise adversely affects the prospective rights of any person to
benefits under this Plan shall be effective only for calendar years which follow
the year in which notice to Eligible Executives is given.
SECTION 16. GOVERNING LAW.
16.1 This Plan shall be governed by the laws of the State of Oregon from
time to time in effect.
SECTION 17. CAPTIONS; ENTIRE AGREEMENT.
17.1 The captions preceding the Sections hereof have been inserted solely
as a matter of convenience and in no way define or limit the scope or intent of
any provision hereof.
Executed on behalf of the Company, effective as of the date first written
above.
COMPANY INTEGRATED MEASUREMENT SYSTEMS, INC.
By: /s/ Gwyn Harvey
--------------------------------------
Title: Director, Human Resources
----------------------------------
Date: June 30, 1996
-----------------------------------
19
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE INCOME
STATEMENT FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 1996, AND THE BALANCE
SHEET AS OF SEPTEMBER 30, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 8,532
<SECURITIES> 0
<RECEIVABLES> 12,213
<ALLOWANCES> 339
<INVENTORY> 7,830
<CURRENT-ASSETS> 31,576
<PP&E> 14,550
<DEPRECIATION> 8,725
<TOTAL-ASSETS> 41,879
<CURRENT-LIABILITIES> 8,598
<BONDS> 91
0
0
<COMMON> 67
<OTHER-SE> 32,627
<TOTAL-LIABILITY-AND-EQUITY> 41,879
<SALES> 29,425
<TOTAL-REVENUES> 37,264
<CGS> 10,360
<TOTAL-COSTS> 13,363
<OTHER-EXPENSES> 17,129
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 24
<INCOME-PRETAX> 6,907
<INCOME-TAX> 2,526
<INCOME-CONTINUING> 4,381
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,381
<EPS-PRIMARY> .63
<EPS-DILUTED> .63
</TABLE>
