-----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, MNe6ZFHvrde4B7swzWZmlecUumJ7xyzFkGGZxhJh8OHnjAcOBkk/n2C0g5yBw8Gb s+l+9tHmDax1nvIfeDjLHg== 0000950150-98-001413.txt : 19980817 0000950150-98-001413.hdr.sgml : 19980817 ACCESSION NUMBER: 0000950150-98-001413 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980814 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALIGN RITE INTERNATIONAL INC CENTRAL INDEX KEY: 0000945122 STANDARD INDUSTRIAL CLASSIFICATION: GLASS, GLASSWARE, PRESSED OR BLOWN [3220] IRS NUMBER: 954528353 STATE OF INCORPORATION: CA FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-26240 FILM NUMBER: 98691155 BUSINESS ADDRESS: STREET 1: 2428 ONTARIO ST CITY: BURBANK STATE: CA ZIP: 91504 BUSINESS PHONE: 8188437720 MAIL ADDRESS: STREET 1: 2428 ONTARIO ST CITY: BURBANK STATE: CA ZIP: 91504 10-Q 1 FORM 10-Q FOR THE PERIOD JUNE 30,1998 1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 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 JUNE 30, 1998 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 0-26240 ALIGN-RITE INTERNATIONAL, INC (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) CALIFORNIA 95-4528353 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 2428 ONTARIO ST. BURBANK, CA 91504 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(818) 843-7220 (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE) 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. Class Outstanding at July 15, 1998 Common Stock, $.01 par value 4,482,947 Shares
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PAGE ---- PART I. FINANCIAL INFORMATION Item 1. Financial Statements (unaudited) Consolidated Balance Sheets at June 30, 1998 and March 31, 1998...................................................... 3 Consolidated Statements of Operations for the Three Months ended June 30, 1998 and 1997.............................. 4 Consolidated Statements of Comprehensive Income for the Three Months ended June 30, 1998 and 1997.................................... 5 Consolidated Statements of Cash Flows for the Three Months ended June 30, 1998 and 1997.............................. 6 Notes to Consolidated Financial Statements.................. 7 Management's Discussion and Analysis of Results of Item 2. Operations and Financial Condition........................ 7 PART II. FINANCIAL INFORMATION Item 6. Exhibits and Reports on Form 8-K............................ 11 Signatures.................................................. 12 Statement Regarding Computation of Earnings Per Share....... 13
2 3 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS ALIGN-RITE INTERNATIONAL, INC. CONSOLIDATED BALANCE SHEETS (000'S OMITTED) ASSETS
AT JUNE 30, AT MARCH 31, 1998 1998 ----------- ------------ (UNAUDITED) (AUDITED) Current assets: Cash and cash equivalents................................. $ 3,859 $ 5,523 Accounts receivable, net.................................. 7,960 7,395 Inventories, primarily raw materials...................... 2,806 2,783 Prepaid and other current assets.......................... 813 835 ------- ------- Total current assets.............................. 15,438 16,536 Property and equipment, net............................... 38,785 33,575 Other assets.............................................. 908 1,047 ------- ------- Total assets...................................... $55,131 $51,158 ======= ======= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Trade accounts payable.................................... $ 7,764 $ 5,572 Accrued expenses and other................................ 2,506 2,927 Taxes payable............................................. 1,763 1,402 ------- ------- Total current liabilities......................... 12,033 9,901 Deferred taxes............................................ 2,792 2,792 Other liabilities......................................... 683 699 Shareholders' equity: Common stock: Authorized -- 35,000 shares $.01 par value; Issued -- 4,482 and 4,463 shares, respectively......... 45 45 Additional paid-in capital................................ 18,635 18,589 Retained earnings......................................... 20,580 18,794 Accumulated other comprehensive income.................... 363 338 ------- ------- Total shareholders' equity........................ 39,623 37,766 ------- ------- Total liabilities and shareholders' equity........ $55,131 $51,158 ======= =======
The accompanying notes are an integral part of these consolidated financial statements. 3 4 ALIGN-RITE INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, (UNAUDITED -- 000'S OMITTED, EXCEPT PER SHARE DATA)
1998 1997 ------- ------- Net sales................................................... $13,690 $10,616 Cost of sales............................................... 8,552 6,486 ------- ------- Gross profit........................................... 5,138 4,130 Selling, general and administrative......................... 2,102 1,694 Research and development.................................... 202 112 ------- ------- Income from operations................................. 2,834 2,324 Interest income............................................. 36 16 ------- ------- Income before provison for income taxes..................... 2,870 2,340 Provison for income taxes................................... 1,085 892 ------- ------- Net income............................................. $ 1,785 $ 1,448 ======= ======= Per share information: Basic earnings per share.................................. .40 .33 Shares used in per share computation...................... 4,468 4,422 Diluted earnings per share................................ .36 .33 Shares used in per share computation...................... 4,893 4,841
The accompanying notes are an integral part of these consolidated financial statements. 4 5 ALIGN-RITE INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE THREE MONTHS ENDED JUNE 30, (UNAUDITED -- 000'S OMITTED)
1998 1997 ------ ------ Net income.................................................. $1,785 $1,448 Other comprehensive income: Foreign currency translation adjustments.................. 25 (5) ------ ------ Comprehensive income........................................ $1,810 $1,443 ====== ======
The accompanying notes are an integral part of these consolidated financial statements. 5 6 ALIGN-RITE INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED JUNE 30, (UNAUDITED -- 000'S OMITTED)
1998 1997 ------- ------- Cash flows from operating activities: Net income................................................ $ 1,785 $ 1,448 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization.......................... 1,368 887 Bad debt expense....................................... -- 31 Compensation related to stock options granted.......... 27 27 Changes in assets and liabilities: Accounts receivable, net.................................. (560) (694) Inventories............................................... (21) (63) Prepaids and other assets................................. 104 500 Trade accounts payable.................................... 2,202 828 Accrued expenses and other liabilities.................... (83) 1,027 ------- ------- Net cash provided by operating activities.............. 4,822 3,991 ------- ------- Cash flows from investing activities: Purchase of property and equipment........................ (6,503) (2,585) Payments for business acquisition, net of cash received... -- (2,467) ------- ------- Net cash used in investing activities.................. (6,503) (5,052) Cash flows from financing activities: Stock options exercised................................... 9 17 ------- ------- Net cash provided by financing activities.............. 9 17 ------- ------- Effect of exchange rate on cash............................. 8 6 Net decrease in cash........................................ (1,664) (1,038) ------- ------- Cash and cash equivalents, beginning of year................ 5,523 6,734 ------- ------- Cash and cash equivalents, end of year...................... $ 3,859 $ 5,696 ======= ======= Supplemental disclosure of cash flow information: Cash paid during the three months ended June 30 for: Income taxes........................................... $ 275 $ 0
The accompanying notes are an integral part of these consolidated financial statements. 6 7 ALIGN-RITE INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED JUNE 30, 1998 (UNAUDITED) ITEM 1. BUSINESS AND BASIS OF CONSOLIDATION The consolidated financial statements include the accounts of Align-Rite International, Inc. ("ARII"), a California corporation, incorporated on April 27, 1995, and its wholly-owned subsidiaries, Align-Rite International Limited ("ARI"), Align-Rite Corporation ("ARC"), Align-Rite Limited ("ARL"), Align-Rite BV ("ARBV"), and Align-Rite GmbH ("ARGMBH"). ARII and its subsidiaries are collectively referred to as the "Company". All significant intercompany accounts and transactions have been eliminated. The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statement presentation. In the opinion of management, the accompanying consolidated balance sheets and related interim consolidated statements of operations and cash flows include all adjustments (consisting only of normal recurring items) considered necessary for their fair presentation. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Actual results could differ from those estimates. The consolidated results of operations for the period ended June 30, 1998 are not necessarily indicative of results to be expected for the year ended March 31, 1999. The information included in this Form 10-Q should be read in conjunction with the Company's audited consolidated financial statements and notes thereto as of March 31, 1998 and 1997 and for the three years in the period ended March 31, 1998 as filed on Form 10-K. Effective April 1, 1998, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting Comprehensive Income," and accordingly has included a separate statement of comprehensive income following the Company's Consolidated Statements of Operations. Comprehensive income generally represents all changes in shareholders' equity during the period except those resulting from investments by, or distributions to, shareholders. The balance of accumulated other comprehensive income at June 30, 1998 and March 31, 1998 consists of accumulated foreign currency translation adjustments. The principal activity of ARII, ARI and ARBV is that of holding companies into which their respective subsidiaries are consolidated. ARC, ARL and ARGMBH manufacture and market quality photomasks in the United States and Europe. Photomasks, which are precision photographic quartz or glass plates, contain microscopic images of integrated circuits. These are used primarily by semiconductor manufacturers as master images to transfer circuit patterns onto silicon wafers during the fabrication of integrated circuits. The Company maintains a policy and practice of restricting ARC from paying dividends or making certain other distributions in order to minimize tax consequences resulting from its current corporate structure. ITEM 2. MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Net sales for the three months ended June 30, 1998, increased 29% to $13,690,000, compared with $10,616,000 in the same period in the prior fiscal year. The increase in net sales is attributable to increased unit demand for photomasks from the Company's customers and the Company's acquisition in June 1997 of the photomask business unit of Temic. Additionally, the increase resulted from an overall increase in unit volume from each manufacturing site in Europe and the United States (U.S.). European net sales for the three months ended June 30, 1998 increased 59% to $6,187,000, compared with $3,893,000 in the same period in the prior year. United States net sales for the three months ended June 30, 1998 increased to $7,502,000, compared with $6,723,000 in the same period of the prior fiscal year. 7 8 Gross profit as a percentage of net sales for the three months ended June 30, 1998 decreased to 37.5%, compared to 38.9% in the same period in the prior year. The decrease in gross profit as a percentage of net sales for the three months ended June 30, 1998 is primarily attributable to an increase in depreciation expense due to recent installations of equipment and the acquisition of the photomask business unit of Temic, which increased the Company's asset base. Depreciation expense for the three months ended June 30, 1998 increased 54% to $1,368,000, compared to $887,000 in the prior fiscal year. As the Company continues to invest in capital equipment to keep pace with increased demand, the Company anticipates that its gross profit will fluctuate slightly based on the timing of equipment purchases and related increases in depreciation expense. Selling, general and administrative expenses include salaries of sales personnel, marketing expense, general and administrative expense and product distribution expense. Selling, general and administration expenses for the three months ended June 30, 1998 increased 24% to $2,102,000, compared with $1,694,000, in the prior fiscal year. Selling general and administrative expenses as a percentage of net sales decreased to 15.4%, compared with 16.0% in the same period in the prior year. The overall increase in selling, general and administrative expenses is attributable to higher sales levels and the Company's purchase of the photomask business unit of Temic, which has a ratio of selling, general and administrative expenses to net sales comparable to that of the Company. The Company believes selling, general and administrative, as a percentage of sales will remain consistent between 15% - 16%. Research and development ("R&D") expense is comprised primarily of personnel costs, material consumption, depreciation and engineering costs. The Company spent $202,000 for the three months ended June 30, 1998, compared to $112,000 in the related prior period. The Company believes it will continue to spend between 1% - 2% of sales on R&D related projects. The Company anticipates that R&D expense will continue to increase in absolute terms in the future reflecting its strategy of advancing their technology. Interest income for the three months ended June 30, 1998 increased compared to the same period in the prior year due to the maintenance of cash balances in U.S. dollars earning higher interest than in previous years when the Company held more money in Yen, which earned the Company significantly less interest income. For the three months ended June 30, 1998 and 1997, the Company provided for Federal and State income taxes at an estimated combined effective rate of approximately 38 percent. This is in-line with the prior year and management's expectations. LIQUIDITY AND CAPITAL RESOURCES The Company's cash and cash equivalents were $3,859,000 at June 30, 1998. Net cash provided by operating activities amounted to $4,822,000 for the three months ended June 30, 1998, compared to $3,991,000 for the same period in the prior year. Additions to operating cash flows for the three months ended June 30, 1998 reflect a higher net income, increased non-cash charges related to depreciation and amortization expenses and an increase in accounts payable primarily related to approximately $2,000,000 of fixed assets purchased in the quarter that had not been paid as of June 30, 1998. These additions to operating cash flows were partially offset by increases in accounts receivable. Accounts receivable increased $565,000 or 7% during the three months ended June 30, 1998, due largely to an increase in net sales. Inventory levels remained consistent at approximately $2,800,000. For the three months ended June 30, 1998, cash used in investing activities totaled $6,503,000 compared to $5,052,000 in the prior year. The Company's investing activities during the three months ended June 30, 1998 primarily related to the construction of cleanrooms and the purchase of equipment which will support and complement new process development and further enhance the Company's capabilities for higher end products. Included in the investing activities for the three months ended June 30, 1997 was the purchase of the photomask business unit of Temic for a purchase price of $2,467,000. In April 1997, the Company entered into a long-term Strategic Alliance, Supply and Cooperation Agreement in connection with the purchase of the photomask business unit of Temic. Additionally, under the 8 9 terms of the agreement, the Company leased the existing facility from Temic for a period of ten years with a ten-year extension option. In June 1998, the Company increased its combined lines of credit from $10 million to $20 million. These lines of credit will allow the Company to borrow at an interest rate of 1.25% above LIBOR. As of June 30, 1998, no amounts have been drawn down on these lines of credit. However, the Company anticipates to draw on these lines during the second quarter of fiscal year 1999 to fund its capital equipment purchases. Management believes that funds generated from operations together with its cash and cash equivalents will be sufficient to meet the Company's normal operating requirements for the next 12 months. If these funds prove to be insufficient, or if new opportunities require the Company to supplement its financial resources, the Company may use established credit lines with its corporate banker or pursue other sources of financing; however, there can be no assurance other sources of financing will be available at commercially viable terms, if at all. Year 2000 Compliance. The Year 2000 Issue is the result of computer programs being written using two digits rather than four to define the applicable year. Any of the Company's computer programs that have date- sensitive software may recognize a date using "00" as the year 1900 rather than the year 2000. This could result in a system failure or miscalculations causing disruptions of operations, including among other things, a temporary inability to process transactions, operate equipment, and engage in similar normal business activities. The Company is in the process of assessing and modifying its computer software systems to ensure that they are Year 2000 compliant. The Company is currently developing a plan that would include initiating formal communications with all of its significant vendors, and large customers to determine the extent to which the Company is vulnerable to Year 2000 Issues. The estimated cost to complete the project is not expected to have a material effect on the financial position, results of operations and cash flows of the Company. The Company will utilize both internal and external resources for Year 2000 Issues. However, if the modifications are not made, or are not completed timely, the Year 2000 Issue could have a material adverse impact on the financial position, results of operations, and cash flows of the Company. Further, there can be no guarantee that the systems of other companies on which the Company's systems rely will be timely converted, or that a failure to convert by another company, or a conversion that is incompatible with the Company's systems, would not have a material adverse effect on the Company. FOREIGN OPERATIONS AND INFLATION Foreign operations are subject to certain risks inherent to conducting business abroad, including price and currency exchange controls, fluctuation in the relative value of currencies and restrictive governmental actions. Changes in the relative value of currencies occur from time to time and may, in certain instances, have a material adverse effect on the Company's financial position, results of operations. The Company does not hedge foreign currency risks, and the effects of these risks are difficult to predict. The risks associated with foreign operations have not, to date, had a material adverse effect on the Company's results of operations and cash flows. There can, however, be no assurance that such risks will not have a material adverse effect on the Company's financial position liquidity and results of operations and cash flows in the future. The effects of inflation are experienced by the Company through increases in cost of labor, services and raw materials. In general, these costs have been anticipated by periodic increases in the prices of its products. The Company does not believe, however, that inflation has had a material effect on its results of operations in the past. There can be no assurance that the Company's results will not be materially affected by inflation in the future. RECENTLY ISSUED ACCOUNTING STANDARDS In June 1997, the FASB also issued SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information." SFAS No. 131, which requires companies to adopt its provisions for the fiscal years 9 10 ending after December 15, 1997, requires publicly held companies to report financial and other information about key revenue producing segments of the entity for which such information is available and is utilized by the chief operation decision makers. Specific information to be reported for individual segments include profit or less, certain and expense and total assets. A reconciliation of segment financial information to amounts reported in the financial statements would be provided. The impact on the Company of adopting SFAS No. 131 has not been determined. 10 11 SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. In addition to historical information, this report includes certain forward-looking statements regarding events and financial and industry trends which may affect the Company's future operating results and financial position. Such statements include, but are not limited to, statements as to: (i) the Company's belief regarding the continuation of the increased demand for photomasks; (ii) dramatically further erode gross margins; (iii) the Company's belief that selling, general and administrative costs as a percentage of sales should remain consistent; (iv) the Company's belief regarding the adequacy of its reserve for bad debts, and (v) the sufficiency of funds to meet the Company's normal operating requirements over the next 12 months. Such statements represent the Company's reasonable judgment concerning the future and are subject to risks and uncertainties that could cause the Company's actual operating results and financial position to differ materially. Such risks and uncertainties include but are not limited to: adverse economic conditions in the Company's markets which could adversely affect the level of demand for the Company's products, failure of the Company to anticipate, respond to or utilize changing technologies used in production of photomasks; greater than anticipated levels of competition and competitive pricing, manufacturing difficulties or capacity limitations; shortage of raw materials; delays in delivery of recently purchased manufacturing equipment to the Company; greater than anticipated capital investment requirements; and currency fluctuations or changes in political conditions with respect to the Company's foreign operations. PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS None ITEM 2. CHANGES IN SECURITIES None ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None ITEM 5. OTHER INFORMATION The Company hereby advises stockholders that a stockholder proposal submitted pursuant to Rule 14a-8 under the Securities Exchange Act of 1934 for inclusion in the Company's proxy statement and form of proxy for the 1999 Annual Meeting of Stockholders must be received by the Company by March 26, 1999. Such a proposal must also comply with the requirements as to form and substance established by the Securities and Exchange Commission for such proposals. A stockholder otherwise desiring to bring discussion before an annual meeting of stockholders (including any proposal relating to the nomination of a director to be elected to the Board of Directors) must submit a proposal that is received at the principal executive offices of the Company on or before June 20, 1999. ITEM 6. EXHIBITS AND REPORTS OF FORM 8-K (a) Exhibits 11.1 Statement regarding computation of Net Income per common share. 27 Financial Data Schedule (b) Reports on Form 8-K. No reports on Form 8-K were filed during the quarter ended June 30, 1998. 11 12 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. Date: August 10, 1998 ALIGN-RITE INTERNATIONAL, INC. -------------------------------------- James Mac Donald Chairman of the Board, President and Chief Executive Director -------------------------------------- Petar Katurich Vice President of Finance, Chief Financial Officer & Secretary 12 EX-11.1 2 STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE 1 EXHIBIT 11.1 STATEMENT REGARDING COMPUTATION OF EARNINGS PER SHARE ALIGN-RITE INTERNATIONAL, INC. The following table provides a reconciliation of the numerator and denominators of the basic and diluted per-share computations for the three months ended June 30, 1998 and 1997:
INCOME SHARES PER SHARE (NUMERATOR) (DENOMINATOR) AMOUNT ----------- ------------- --------- For the Three Months Ended June 30, 1998: Basic EPS.................................... $1,785,000 4,468,000 $0.40 Effective of dilutive securities: Stock Options............................. -- 425,000 ---------- --------- Diluted EPS.................................. $1,785,000 4,893,000 $0.36 For the Three Months Ended March 31, 1997: Basic EPS.................................... $1,448,000 4,422,000 $0.33 Effective of dilutive securities: Stock Options............................. -- 419,000 ---------- --------- Diluted EPS.................................. $1,448,000 4,841,000 $0.30
13 EX-27 3 FINANCIAL DATA SCHEDULE
5 3-MOS MAR-31-1998 APR-01-1998 JUN-30-1998 3,859,000 0 7,960,000 0 2,806,000 15,438,000 38,785,000 0 55,131,000 12,033,000 0 0 0 45,000 39,578,000 55,131 13,690,000 13,690,000 8,552,000 10,820,000 0 0 0 2,870,000 1,085,000 1,785,000 0 0 0 1,785,000 0.40 0.36 For Purposes of This Exhibit, Primary means Basic.
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