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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 

 
FORM 10-Q
 
(Mark One)
x
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended July 31, 2002
 
OR
 
¨
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from                      to                     
 
Commission file number 0-22366
 

 
CREDENCE SYSTEMS CORPORATION
(Exact name of registrant as specified in its charter)
 
Delaware
 
94-2878499
(State or other jurisdiction
of incorporation or organization)
 
(IRS Employer
Identification No.)
 
215 Fourier Ave., Fremont, California
 
94539
(Address of principal executive offices)
 
(Zip Code)
 
Registrant’s telephone number, including area code (510) 657-7400
 
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 Sections 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  ¨
 
APPLICABLE ONLY TO CORPORATE ISSUERS:
 
At September 4, 2002, there were approximately 60,879,897 shares of the Registrant’s common stock, $0.001 par value per share, outstanding.


Table of Contents
 
CREDENCE SYSTEMS CORPORATION
 
INDEX
 
      
Page No.

PART I.    FINANCIAL INFORMATION
 
      
Item 1.    
       
3
         
3
         
4
         
5
         
6
Item 2.
       
11
Item 3.
       
28
Item 4.    
       
28
PART I.    FINANCIAL INFORMATION
 
      
Item 1.    
       
28
Item 2.
       
29
Item 3.    
       
29
Item 4.    
       
29
Item 5.    
       
29
Item 6.
       
29

2


Table of Contents
 
PART I—FINANCIAL INFORMATION
 
Item 1.     Financial Statements
 
CREDENCE SYSTEMS CORPORATION
 
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
 
    
July 31, 2002

    
October 31, 2001(a)

    
(unaudited)
      
ASSETS
               
Current assets:
               
Cash and cash equivalents
  
$
68,973
    
$
44,309
Short-term investments
  
 
99,290
    
 
96,497
Accounts receivable, net
  
 
39,127
    
 
39,831
Inventories
  
 
122,959
    
 
123,219
Income tax receivable
  
 
20,602
    
 
41,031
Deferred income taxes and other current assets
  
 
48,660
    
 
49,457
    

    

Total current assets
  
 
399,611
    
 
394,344
Long-term investments
  
 
106,669
    
 
161,889
Property and equipment, net
  
 
100,843
    
 
109,528
Goodwill from acquisitions, net
  
 
39,928
    
 
47,124
Other intangible assets, net
  
 
28,763
    
 
34,450
Other assets
  
 
13,085
    
 
10,084
    

    

Total assets
  
$
688,899
    
$
757,419
    

    

LIABILITIES AND STOCKHOLDERS’ EQUITY
               
Current liabilities:
               
Accounts payable
  
$
17,182
    
$
17,510
Deferred expenses and other liabilities
  
 
35,582
    
 
41,181
Deferred profit
  
 
4,720
    
 
11,707
    

    

Total current liabilities
  
 
57,484
    
 
70,398
Other liabilities
  
 
3,174
    
 
5,761
Minority interest
  
 
58
    
 
320
Stockholders’ equity
  
 
628,183
    
 
680,940
    

    

Total liabilities and stockholders’ equity
  
$
688,899
    
$
757,419
    

    


(a)
 
Derived from the audited consolidated balance sheet included in our Form 10-K for the year ended October 31, 2001.
 
 
See accompanying notes.

3


Table of Contents
 
CREDENCE SYSTEMS CORPORATION
 
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
 
    
Three Months Ended
July 31,

    
Nine Months Ended
July 31,

 
    
2002

    
2001

    
2002

    
2001

 
Net sales
  
$
47,722
 
  
$
52,781
 
  
$
121,024
 
  
$
264,731
 
Cost of goods sold—on net sales
  
 
28,510
 
  
 
29,260
 
  
 
73,771
 
  
 
122,532
 
Cost of goods sold—special charges
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
45,020
 
    


  


  


  


Gross margin
  
 
19,212
 
  
 
23,521
 
  
 
47,253
 
  
 
97,179
 
Operating expenses:
                                   
Research and development
  
 
22,179
 
  
 
21,888
 
  
 
62,709
 
  
 
65,506
 
Selling, general and administrative
  
 
23,544
 
  
 
22,798
 
  
 
67,641
 
  
 
83,446
 
Amortization of purchased intangibles
  
 
5,271
 
  
 
5,987
 
  
 
15,563
 
  
 
17,280
 
Special charges
  
 
—  
 
  
 
2,820
 
  
 
—  
 
  
 
6,163
 
    


  


  


  


Total operating expenses
  
 
50,994
 
  
 
53,493
 
  
 
145,913
 
  
 
172,395
 
    


  


  


  


Operating income (loss)
  
 
(31,782
)
  
 
(29,972
)
  
 
(98,660
)
  
 
(75,216
)
Interest and other income, net
  
 
2,585
 
  
 
4,463
 
  
 
8,317
 
  
 
14,187
 
    


  


  


  


Income (loss) before income tax provision
  
 
(29,197
)
  
 
(25,509
)
  
 
(90,343
)
  
 
(61,029
)
Income tax (benefit)
  
 
(10,219
)
  
 
(9,955
)
  
 
(31,621
)
  
 
(22,416
)
Minority interest (benefit)
  
 
(21
)
  
 
67
 
  
 
(243
)
  
 
(93
)
    


  


  


  


Net income (loss)
  
$
(18,957
)
  
$
(15,621
)
  
$
(58,479
)
  
$
(38,520
)
    


  


  


  


Net income (loss) per share
                                   
Basic
  
$
(0.31
)
  
$
(0.26
)
  
$
(0.97
)
  
$
(0.65
)
    


  


  


  


Diluted
  
$
(0.31
)
  
$
(0.26
)
  
$
(0.97
)
  
$
(0.65
)
    


  


  


  


Number of shares used in computing per share amount
                                   
Basic
  
 
60,650
 
  
 
59,865
 
  
 
60,470
 
  
 
59,665
 
    


  


  


  


Diluted
  
 
60,650
 
  
 
59,865
 
  
 
60,470
 
  
 
59,665
 
    


  


  


  


 
See accompanying notes.

4


Table of Contents
 
CREDENCE SYSTEMS CORPORATION
 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Increase (decrease) in cash and cash equivalents
(in thousands)
(unaudited)
 
    
Nine Months Ended
July 31,

 
    
2002

    
2001

 
Cash flows from operating activities:
                 
Net income (loss)
  
$
(58,479
)
  
$
(38,520
)
Adjustments to reconcile net income to net cash used in operating activity activities:
                 
Depreciation and amortization
  
 
37,160
 
  
 
43,507
 
(Gain) loss on disposal of property and equipment
  
 
2,819
 
  
 
1,410
 
Non cash special charges
  
 
—  
 
  
 
47,407
 
Minority interest
  
 
(262
)
  
 
(92
)
Changes in operating assets and liabilities:
                 
Accounts receivable, inventories and other current assets
  
 
16,373
 
  
 
22,724
 
Accounts payable, accrued liabilities and income taxes payable
  
 
(12,681
)
  
 
(104,202
)
    


  


Net cash used in operating activities
  
 
(15,070
)
  
 
(27,766
)
Cash flows from investing activities:
                 
Purchases of available-for-sale securities
  
 
(115,513
)
  
 
(177,588
)
Maturities of available-for-sale short-term securities
  
 
15,973
 
  
 
39,150
 
Sales of available-for-sale securities
  
 
148,240
 
  
 
130,215
 
Acquisition of property and equipment
  
 
(10,717
)
  
 
(32,876
)
Acquisition of other assets
  
 
(4,445
)
  
 
(23,617
)
Proceeds from the sale of assets
  
 
—  
 
  
 
315
 
    


  


Net cash provided by (used in) investing activities
  
 
33,538
 
  
 
(64,401
)
Cash flows from financing activities:
                 
Issuance of common & treasury stock
  
 
5,770
 
  
 
7,297
 
Repurchase of common stock
  
 
—  
 
  
 
(5,808
)
Other
  
 
11
 
  
 
—  
 
    


  


Net cash provided by (used in) financing activities
  
 
5,781
 
  
 
1,489
 
Net increase (decrease) in cash and cash equivalents
  
 
24,663
 
  
 
(90,678
)
Cash and cash equivalents at beginning of period
  
 
44,309
 
  
 
137,401