-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LivvTntcCM+P6y7TC06I3HwTmXemffs2iIPtAqPkHD4GBmXYjR6mcTb8ra4Oa9Nw VidgsyTDCebgleSMOOYJNw== 0000861289-96-000024.txt : 19960517 0000861289-96-000024.hdr.sgml : 19960517 ACCESSION NUMBER: 0000861289-96-000024 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960515 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ADVANCED LOGIC RESEARCH INC CENTRAL INDEX KEY: 0000861289 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC COMPUTERS [3571] IRS NUMBER: 330084573 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-18753 FILM NUMBER: 96566659 BUSINESS ADDRESS: STREET 1: 9401 JERONIMO ROAD CITY: IRVINE STATE: CA ZIP: 92718 BUSINESS PHONE: 7145816770 MAIL ADDRESS: STREET 1: ADVANCED LOGIC RESEARCH INC STREET 2: 9401 JERONIMO CITY: IRVINE STATE: CA ZIP: 92718 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ____________________ FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1996 Commission File Number 0-18753 - ------------------------------ ADVANCED LOGIC RESEARCH, INC. A Delaware Corporation Employer ID No. 33-0084573 9401 Jeronimo Road Irvine, California 92718 (714) 581-6770 __________________________ Indicate by check mark whether the Registrant (l) 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 ___. There were 11,979,466 shares of the Registrant's Common Stock, par value $.01 per share, outstanding on April 30, 1996. PART I. FINANCIAL INFORMATION Item 1. Financial Statements ADVANCED LOGIC RESEARCH, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands, except share data)
(unaudited) March 31, September 30, ASSETS 1996 1995 Current assets: Cash and cash equivalents $44,790 $46,580 Trade accounts receivable, less allowance for doubtful accounts of $2,098 and $1,999 at March 31, 1996 and September 30, 1995, respectively 31,493 26,524 Inventories 27,946 27,088 Prepaid expenses and other assets 1,427 1,692 Deferred income taxes 2,484 1,858 Total current assets 108,140 103,742 Equipment, furniture and fixtures, net 2,820 2,764 Other assets 475 714 $111,435 $107,220 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $9,128 $11,607 Accrued expenses 11,974 10,528 Payable to affiliates 215 330 Income taxes 1,187 1,506 Total current liabilities 22,504 23,971 Stockholders' equity: Preferred stock, $.01 par value; 2,500,000 shares authorized; none issued Common stock, $.01 par value; 25,000,000 shares authorized; 11,949,966 and 11,668,871 issued and outstanding at March 31, 1996 and September 30, 1995, respectively 119 117 Additional paid-in capital 56,164 54,675 Retained earnings 31,177 26,803 Adjustments for foreign currency translation 1,471 1,654 Total stockholders' equity 88,931 83,249 $111,435 $107,220 See accompanying notes to consolidated financial statements.
ADVANCED LOGIC RESEARCH, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except share data) (unaudited)
Three Months Ended Six Months Ended March 31, March 31, 1996 1995 1996 1995 Net sales $55,047 $47,359 $112,186 $93,077 Cost of sales 43,489 38,930 88,707 76,595 Gross profit 11,558 8,429 23,479 16,482 Operating expenses: Selling, general and administrative 6,228 5,174 12,940 10,492 Engineering, research and development 1,373 1,128 2,643 2,244 Royalty expense, net 1,902 1,354 3,331 2,664 Total operating expenses 9,503 7,656 18,914 15,400 Operating income 2,055 773 4,565 1,082 Interest income 652 641 1,302 1,198 Interest expense (22) (3) (35) (3) Income before taxes 2,685 1,411 5,832 2,277 Provision for income taxes 671 353 1,458 570 Net income $2,014 $1,058 $4,374 $1,707 Net income per common and common equivalent share $0.17 $0.09 $0.36 $0.15 Common and common equivalent shares used in per share calculation 12,107 11,609 12,066 11,580 See accompanying notes to consolidated financial statements.
ADVANCED LOGIC RESEARCH, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (unaudited)
Six Months Ended March 31, 1996 1995 Cash flows from operating activities: Net income $4,374 $1,707 Adjustments to reconcile net income to net cash (used in) provided by operating activities: Depreciation and amortization 744 953 Loss on disposal of equipment 108 4 Provision for losses on accounts receivables 111 158 Deferred income tax benefit (626) (202) Change in assets and liabilities: Trade accounts receivable (5,172) 727 Inventories (951) (3,050) Prepaid expenses and other assets 483 3,273 Accounts payable (2,488) 4,849 Accrued expenses 1,435 183 Payable to affiliates (115) (1,649) Income taxes (319) 1,463 Net cash (used in) provided by operating activities (2,416) 8,416 Cash flows from investing activities - Purchase of equipment, furniture and fixtures (908) (747) Cash flows from financing activities - Issuance of stock under stock option plan 1,491 7 Effect of foreign exchange rate change on cash 43 301 Net (decrease) increase in cash and cash equivalents (1,790) 7,977 Cash and cash equivalents at beginning of period 46,580 40,836 Cash and cash equivalents at end of period $44,790 $48,813 Supplemental disclosure of cash flow information: Cash paid (refunded) during the period for: Interest $ 36 $1 Income taxes $1,887 ($2,900) See accompanying notes to consolidated financial statements.
Advanced Logic Research, Inc. Notes to Unaudited Consolidated Financial Statements Basis of Presentation The accompanying unaudited consolidated financial statements have been prepared by Advanced Logic Research, Inc., (the "Company") pursuant to Securities and Exchange Commission regulations. In the opinion of management, the unaudited financial statements include all adjustments, consisting of only normal recurring accruals, necessary for a fair presentation. The results of operations for the interim period are not necessarily indicative of results to be expected for the full year. These consolidated financial statements should be read in conjunction with the financial statements included in the Company's 1995 Form 10-K as filed with the Securities and Exchange Commission on December 27, 1995. Net Income Per Share Information Net income per share is computed using the weighted average number of common shares and dilutive common stock options outstanding, at the average market price for the period, which are considered common stock equivalents. Fully diluted income per share amounts are not presented because they approximate primary net income per share. Cash Equivalents Cash equivalents are highly liquid investments with an original maturity of three months or less, consisting primarily of commercial paper, variable-rate demand notes, short-term government obligations and other money market instruments. Inventories Inventories are stated at the lower of cost (first-in, first-out) or market (net realizable value) and consist of the following (in thousands):
- ----------------------------------------------------------------------------- March 31, September 30, 1996 1995 - ----------------------------------------------------------------------------- Raw materials and component parts $ 9,233 $10,944 Work in process 3,761 3,647 Finished goods 14,952 12,497 -------- ---------- $ 27,946 $27,088 ======= ======
Item 2. Management's Discussion and Analysis of Consolidated Financial Condition and Results of Operations Results of Operations: The following table presents the results of operations for the Company for the period indicated as a percentage of net sales.
Three Months Ended Six Months Ended March 31, March 31, 1996 1995 1996 1995 Net sales 100.0% 100.0% 100.0% 100.0% Cost of sales 79.0% 82.2% 79.1% 82.3% Gross profit 21.0% 17.8% 20.9% 17.7% Operating expenses: Selling, general and administrative 11.3% 10.9% 11.4% 11.2% Engineering, research and development 2.5% 2.4% 2.4% 2.4% Royalty expense, net 3.5% 2.9% 3.0% 2.9% Total operating expenses 17.3% 16.2% 16.8% 16.5% Operating income 3.7% 1.6% 4.1% 1.2% Interest income, net 1.1% 1.3% 1.1% 1.2% Income before taxes 4.8% 2.9% 5.2% 2.4% Provision for income taxes 1.1% 0.7% 1.3% 0.6% Net income 3.7% 2.2% 3.9% 1.8%
Management's Discussion and Analysis of Financial Condition and Results of Operations Net Sales Three Months Ended Six Months Ended March 31, March 31, 1996 1995 % Inc. 1996 1995 % Inc. (In thousands) Net sales by distribution channel VARs and dealers $34,397 $30,656 12% $70,379 $62,686 12% Direct 11,654 8,854 32% 22,332 15,551 44% OEM 5,075 4,221 20% 10,731 7,946 35% Distributors and other 3,921 3,628 8% 8,744 6,894 27% Total 55,047 $47,359 16% $112,186 $93,077 21% Net sales by geographic location U.S. $33,880 $27,679 22% $69,177 $51,428 35% International 21,167 19,680 8% 43,009 41,649 3% Total $55,047 $47,359 16% $112,186 $93,077 21% Net sales for the six months ended March 31, 1996 increased by 21% to $112.2 million from $93.1 million for the six months ended March 31, 1995. For this period, sales to U.S. customers increased by 35% to $69.2 million while sales to international customers increased by 3% to $43.0 million compared to the first half of fiscal 1995. The growth in sales to U.S. customers for the first six months of fiscal 1996 compared to the corresponding period of fiscal 1995 was led by a 44% and 42% increase in sales made through the direct and U.S. value added resellers ("VARs") channels, respectively. Sales through the direct channel consists of sales made directly to government, corporate customers and end-users. The growth in this channel was principally driven by the addition of new government and corporate accounts. The increase in sales to VARs and dealers was generated through the addition of new VARs and dealers during this period and the growth of existing customers. Also during this period sales to distributors and other customers increased by 27% compared to the corresponding prior year period principally due to increased sales to Tech Data. Partially mitigating the growth in these sales channels was a 5% decline in sales to U.S. OEM customers compared to the six months ended March 31, 1995. During the first six months of fiscal 1996, the 3% growth in sales to international customers compared to the corresponding period of fiscal 1995 was led by a 188% increase in sales to international OEM customers. The growth in this channel was due to increased sales of the Company's server products to Siemens Europe and the addition of Trigem, a large Korean company, as an OEM customer in March 1996. Also contributing to the growth in sales to international customers was a 14% increase in sales to Asia-Pacific region customers through the Company's subsidiary in Singapore. Mitigating the growth in OEM channel sales and sales to the Asia-Pacific region was a 16% decline in sales to European customers through the Company's subsidiaries in Germany and the United Kingdom and a 21% decrease in export sales to Canadian and Latin American customers. For the first half of fiscal 1996, system unit sales increased by only 1% to approximately 43,000 systems compared to the first half of fiscal 1995. However, due to the Company's continued focus on servers and high-end desktop systems and the demand for system configurations which include more memory, larger disk drives and additional peripherals in general, the average system selling price increased by 15% to $2,168 per system for the six months ended March 31, 1996 from $1,892 per system for the six months ended March 31, 1995. Gross Profit Three Months Ended Six Months Ended March 31, March 31, 1996 1995 1996 1995 (In thousands) Net sales $55,047 $47,359 $112,186 $93,077 Gross profit 11,558 8,429 23,479 16,482 Percentage of net sales 21.0% 17.8% 20.9% 17.7% Gross profit margins for the six months ended March 31, 1996 improved to 20.9% from 17.7% for the corresponding period in fiscal 1995. Contributing to the improvement was the continuation of the Company's client/server and high-end product strategy, lower vendor component costs and the continuing effects of engineering design improvements implemented by the Company. For the three months ended March 31, 1996, gross profit margins improved to 21.0% from 17.8% for the three months ended March 31, 1995 and the improvement was attributable to the factors previously discussed. Operating Expenses Selling, General and Administrative. Three Months Ended Six Months Ended March 31, March 31, 1996 1995 1996 1995 (In thousands) Net sales $55,047 $47,359 $112,186 $93,077 Selling, general and administrative expenses 6,228 5,174 12,940 10,492 Percentage of net sales 11.3% 10.9% 11.4% 11.2% Selling, general and administrative expenses increased by 23% to $12.9 million for the six months ended March 31, 1996 compared to $10.5 million for the corresponding prior fiscal period. Expanded product advertising related to new product introductions and specific channels of distribution, increased dealer co-operative promotional activities and special product promotional incentives principally accounted for the increase in expenses. Also contributing to the increase were higher payroll and payroll-related costs associated with the addition of sales personnel. For the three months ended March 31, 1996, selling, general and administrative expenses increased by 20% compared to the corresponding prior fiscal period. The growth was principally due to the factors previously discussed. Engineering, Research and Development. Three Months Ended Six Months Ended March 31, March 31, 1996 1995 1996 1995 (In thousands) Net sales $55,047 $47,359 $112,186 $93,077 Engineering, research and development expenses 1,373 1,128 2,643 2,244 Percentage of net sales 2.5% 2.4% 2.4% 2.4% Engineering, research and development expenses increased by 18% to $2.6 million for the six months ended March 31, 1996 from $2.2 million for the comparable prior fiscal period. Increases in payroll and payroll-related costs associated with increased headcount and higher engineering material and product certification expenses from ongoing product development principally accounted for the increase. However, because of the 21% growth in revenue, engineering and development costs as a percentage of sales remained unchanged at 2.4% for the six months ended March 31, 1996 from the comparable prior year period. For the three months ended March 31, 1996, engineering, research and development expenses increased by 22% to $1.4 million compared to the comparable prior fiscal period. The growth was principally due to increases in payroll, payroll-related costs and engineering material expenses associated with increased headcount and ongoing product development. Royalty Expense, Net Net royalty expense for the three months ended March 31, 1996 increased to 3.5% of net sales, compared to 2.9% for the corresponding period of fiscal 1995. This increase was principally related to an increase in the royalty rate to its maximum on the Company's products covered by the license agreement with IBM. For the six months ended March 31, 1996, net royalty expense increased to 3.0% of net sales compared to 2.9% for the corresponding period of fiscal 1995. Interest Income, Net For the six months ended March 31, 1996, the Company had net interest income of $1.3 million compared to $1.2 million in the corresponding fiscal 1995 period. An increase in the average cash and cash equivalent balance during the first six months of fiscal 1996 compared to the first six months of fiscal 1995 was partially offset by lower rates of return on short-term investments during the first half of fiscal 1996. Income Taxes The Company's tax expense for the first half of fiscal 1996 was based on estimated effective annual rates. The effective tax rate for the three and six months ended March 31, 1996 was 25% which was unchanged from the tax rate for the comparable prior year periods. Liquidity and Capital Resources March 31, 1996 Sept. 30, 1995 (In thousands) Cash and cash equivalents $44,790 $46,580 Working capital 85,636 79,771 Current ratio 4.8 4.3 Debt --- --- Stockholders' equity 88,931 83,249 The Company's cash and cash equivalents totalled $44.8 million at March 31, 1996 compared to $46.6 million at September 30, 1995. During the six months ended March 31, 1996, operating activities used $2.4 million despite the Company generating $4.4 million from net income. Increases in accounts receivables and inventories used $5.2 million and $1.0 million, respectively while a decrease in accounts payable used $2.5 million. The increase in accounts receivable was related to sales during the quarter ended March 31, 1996 which were skewed towards the last month of the quarter. This shift was principally due to customer order trends and product availability during the quarter. Average sales days outstanding increased to 51 days at March 31, 1996 compared to 45 days at September 30, 1995. The decline in accounts payable stemmed from the timing of inventory purchases during the quarter and the Company's payment cycle. Also during the six month period ended March 31, 1996, $0.9 million was used to purchase property, plant and equipment. The Company's primary credit facility continues to be a $15.0 million revolving line with Heller Financial, Inc. which expires in August 1998. The line is secured by the Company's assets and availability is subject to a borrowing base requirement. The facility contains certain net worth, profitability, financial ratio and other covenants with which the Company was in compliance during the first six months of fiscal 1996. The Company has not borrowed against this credit line. In addition, to meet short-term working capital needs ALR International, the Company's subsidiary in Singapore, has an uncommitted revolving credit line of approximately $4.4 million. At March 31, 1996, ALR International had no borrowings against this credit line. The Company believes that its existing cash resources, combined with anticipated cash flows from future operating activities, supplemented as necessary with funds available under existing credit agreements, will provide it with sufficient resources to meet present and reasonably foreseeable working capital requirements and other cash needs. Part II. Other Information Item 4. Submission of Matters to a Vote of Security Holders The Company's Annual Meeting of Stockholders was held on February 21, 1996 in Newport Beach, California. All matters submitted to a vote of the Company's stockholders were described in the Company's Proxy Statement dated January 12, 1996. Matters submitted to a vote of stockholders included: (1) The election of the following five directors to hold office until the next annual meeting or until their successors are elected and duly qualified. Total Vote Each Total Vote Withheld Broker Director From Each Director Non-Votes Gene Lu 11,451,698 88,523 182,147 Philip A. Harding 11,449,046 91,175 182,147 Therese E. Myers 11,450,446 89,775 182,147 Kenneth W. Simonds 11,449,746 90,475 182,147 Chun Win Wong 11,451,596 88,625 182,147 (2) The approval of the proposal to amend the Company's Directors' Nonqualified Stock Option Plan. For 10,633,496 Against 832,600 Abstain 66,625 No Vote 7,500 Broker Non-Vote 182,147 (3) The approval of the appointment of KPMG Peat Marwick LLP as independent auditors for the fiscal year ended September 30, 1996. For 11,484,733 Against 18,715 Abstain 36,773 No Vote 0 Broker Non-Vote 182,147 Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: 11. Statement Regarding Computation of Per Share Earnings. (b) Reports on Form 8-K: None SIGNATURES Pursuant to the requirements of section 13 or 15(d) 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. ADVANCED LOGIC RESEARCH, INC. (Registrant) Date: May 15, 1996 \s\ Gene Lu ------------------------------------- Gene Lu Chairman, President and Chief Executive Officer Date: May 15, 1996 \s\ Ron Sipkovich ------------------------------------- Ronald J. Sipkovich Vice President, Finance and Administration, Chief Financial Officer and Secretary (principal financial officer) Exhibit 11 Advanced Logic Research, Inc. and Subsidiaries Statement Regarding Computation of Per Share Earnings (Amounts in thousands, except per share amounts) Three Months Ended Six Months Ended March 31, March 31,
1996 1995 1996 1995 Primary earnings per share:- Shares used in computing earnings per share: Weighted average number of shares outstanding 11,830 11,480 11,761 11,478 Incremental shares attributed to outstanding options 277 129 305 102 12,107 11,609 12,066 11,580 Earnings: Net income $2,014 $1,058 $4,374 $1,707 Earnings per common and common equivalent share $0.17 $0.09 $0.36 $0.15 Earnings per share - assuming full dilution:- Shares used in computing earnings per share: Weighted average number of shares outstanding 11,830 11,480 11,761 11,478 Incremental shares attributed to outstanding options 280 129 308 127 12,110 11,609 12,069 11,605 Earnings: Net income $2,014 $1,058 $4,374 $1,707 Earnings per common and common equivalent share $0.17 $0.09 $0.36 $0.15
EX-27 2 ARTICLE 5 FDS FOR 2ND QTR 10-Q
5 1,000 Sep-30-1996 Oct-01-1995 Mar-31-1996 6-MOS 44,790 0 33,591 2,098 27,946 108,140 10,641 7,821 111,435 22,504 0 0 0 119 88,812 111,435 112,186 112,186 88,707 88,707 0 111 (1,267) 5,832 1,458 4,374 0 0 0 4,374 0.36 0.36
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