-----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, D0Q8EuQHA+gROHSQaRCWRYkGHmPtRc8yX7jEjYCNhZEoPZFLfzJJUNf9knhCHEL3 jU6R2dk1bjGvN7iDUziwdg== 0000950150-97-001199.txt : 19970815 0000950150-97-001199.hdr.sgml : 19970815 ACCESSION NUMBER: 0000950150-97-001199 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970814 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: 1934 Act SEC FILE NUMBER: 000-26240 FILM NUMBER: 97663134 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 ENDED JUNE 30, 1997 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, 1997 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 31, 1997 Common Stock, $.01 par value 4,432,350 Shares 2 ALIGN-RITE INTERNATIONAL, INC. INDEX
Page ---- PART I. FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Balance Sheets at June 30, 1997 and March 31, 1997 3 Condensed Consolidated Statements of Operations for the Three Months ended June 30, 1997 and 1996 4 Condensed Consolidated Statements of Cash Flows for the Three Months ended June 30, 1997 and 1996 5 Notes to Condensed Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition 7 PART II. FINANCIAL INFORMATION Item 6. Exhibits and Reports on Form 8-K 11 Signatures 12
2 3 Part I. Financial Information Item 1. Financial Statements Align-Rite International, Inc. Consolidated Condensed Balance Sheets (Unaudited - 000's omitted, except per share data.)
At June 30 At Mar 31, Assets 1997 1997 ---------- ---------- Current assets: Cash and cash equivalents .............................................. $ 5,696 $ 6,734 Accounts receivable, net ............................................... 6,932 6,120 Inventories, primarily raw materials ................................... 2,243 2,180 Prepaid and other current assets ....................................... 1,226 1,233 ------- ------- Total current assets ............................................. 16,097 16,267 Property and equipment, net ........................................... 25,150 22,089 Other assets ........................................................... 948 425 ------- ------- Total assets ..................................................... $42,195 $38,781 ======= ======= Liabilities and Shareholders' Equity Current liabilities: Trade accounts payable ................................................. $ 3,831 $ 3,670 Accrued expenses and other ............................................. 2,653 1,543 Taxes payable .......................................................... 1,010 327 ------- ------- Total current liabilities ........................................ 7,494 5,540 Deferred taxes ............................................................ 1,398 1,398 Other liabilities ......................................................... 443 470 Shareholders' equity: Common stock: Authorized - 35,000 shares $.01 par value; Issued 4,427 shares and 4,416 shares at June 30, 1997 and March 31, 1997, respectively ............... 44 44 Additional paid-in capital ................................................ 18,331 18,287 Retained earnings ......................................................... 14,142 12,694 Foreign currency translation adjustment ................................... 343 348 ------- ------- Total shareholders' equity ....................................... 32,860 31,373 ------- ------- Total liabilities and shareholders' equity .................... $42,195 $38,781 ======= =======
The accompanying notes are an integral part of these consolidated condensed financial statements. 3 4 Align-Rite International, Inc. Consolidated Condensed Statements of Operations For the Three Months Ended June 30, 1997 and 1996 (Unaudited - 000's omitted, except per share data)
Three Months Ended June 30 -------------------- 1997 1996 ------- ------- Net sales .............................. $10,616 $ 9,513 Cost of sales .......................... 6,598 5,918 ------- ------- Gross profit ......................... 4,018 3,595 Selling, general and administrative .... 1,694 1,554 ------- ------- Income from operations ............... 2,324 2,041 Interest income ........................ 16 122 ------- ------- Income before provision for income taxes 2,340 2,163 Provision for income taxes ............. 892 823 ------- ------- Net income ............................. $ 1,448 $ 1,340 ======= ======= Per share information: Shares used - per share computation .... 4,841 4,803 Earnings per share ................... $ .30 $ .28
The accompanying notes are an integral part of these consolidated condensed financial statements. 4 5 Align-Rite International, Inc. Consolidated Condensed Statements of Cash Flows For the Three Months Ended June 30, 1997 and 1996 (Unaudited - 000's omitted)
1997 1996 -------- -------- Cash flows from operating activities: Net income: ................................................ $ 1,448 $ 1,340 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and Amortization ....................... 887 633 Bad Debt Expense .................................... 31 -- Compensation related to stock options granted ....... 27 -- Changes in assets and liabilities: Accounts receivable, net ........................... (694) (366) Inventories ........................................ (63) 30 Prepaids and other assets .......................... 500 (55) Trade accounts payable ............................. 828 1,763 Accrued expenses and other liabilities ............. 1,027 514 -------- -------- Net cash provided by operating activities ......... 3,991 3,859 -------- -------- Cash flows from investing activities Purchase of property and equipment ..................... (2,585) (4,755) Payments for business acquisition, net of cash received (2,467) -- -------- -------- Net cash used in investing activities ............. (5,052) (4,755) Cash flows from financing activities: Stock options exercised ................................. 17 28 -------- -------- Net cash provided by financing activities ......... 17 28 -------- -------- Effect of exchange rate on cash ............................ 6 6 Net decrease in cash ....................................... (1,038) (862) -------- -------- Cash and cash equivalents, beginning of year ............... 6,734 12,707 -------- -------- Cash and cash equivalents, end of year ..................... $ 5,696 $ 11,845 ======== ======== Supplemental disclosures of cash flow information: Cash paid during the three months ended June 30, for; Income taxes ........................................... $ -- $ 50
The accompanying notes are an integral part of these consolidated condensed financial statements. 5 6 Align-Rite International, Inc. Notes to Consolidated Condensed Financial Statements Three Months Ended June 30, 1997 (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 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. During fiscal year 1996 the Company completed an initial public offering of Common Stock, as part of which all of the outstanding Ordinary Shares of ARI were exchanged for the Common Stock of ARII. Effective June 1, 1997, the Company completed its first business acquisition. The Company purchased the photomask business unit of TEMIC, a division of Daimler-Benz, located in Heilbronn, Germany. The purchased division operates within the Company's German subsidiary, ARGMBH. The acquisition was accounted for using the purchase method of accounting. The purchase price allocation is premilinary pending appraisals, evaluations, and other studies regarding the fair value of the assets acquired. The acquisition was not material to the financial position or results of operations of the Company. 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. 6 7 Item 2. Management's Discussions and Analysis of Results of Operations and Financial Condition. Net sales for the three months ended June 30, 1997, increased 11.6% to $10,616,000 compared with $9,513,000 for the same period in the prior fiscal year. The increase resulted from an overall increase in the demand for photomasks, which management believes will continue and as a result of one month's revenue contribution from the Company's newly acquired manufacturing unit, ARGMBH, located in Heilbronn, Germany. This new manufacturing site, which began operations under the Company's control beginning June 1, 1997, accounted for approximately 4.3% or $456,000 of total first quarter revenue and is anticipated to generate approximately $5,000,000 in sales in fiscal year 1998. In addition, both the Company's United Kingdom ("U.K.") and United States ("U.S.") operations increased their net sales throughout the quarter. U.K. net sales for the three months ended June 30, 1997 increased 4.1% to $3,437,000 compared with $3,303,000 for the same period in the prior fiscal year. U.S. net sales for the three months ended June 30, 1997 increased 8.3% to $6,723,000, compared with $6,210,000 for the same period in the prior fiscal year. Gross profit as a percentage of net sales for the three months ended June 30, 1997 increased slightly to 37.85%, compared with 37.79%, in the prior period. The slight increase in gross profit as a percentage of net sales for the three months ended June 30, 1997 is primarily attributable to better yields on certain products which were offset, in part, by lower profit margins at the German facility and by an overall increase in depreciation expense. Depreciation expense for the three months ended June 30, 1997 increased 40.1% to $887,000, compared to $633,000 for the same period in the prior fiscal year. The increase was due to the Company's recent purchases of equipment and cleanrooms at the Company's U.S. and U.K facilities which resulted in an increase to the Company's asset base. Selling, general and administrative expenses for the three months ended June 30, 1997 increased 9.0% to $1,694,000 compared with $1,554,000 for the same period in the prior fiscal year. While the absolute dollars increased for the period, the selling, general and administrative expenses as a percentage of net sales decreased to 15.96% for the three months ended June 30, 1997 compared with 16.34% for the same period in the prior year. The principal reason for the decrease in selling, general and administrative expenses is due to the Company's ability to spread its costs over a higher revenue base. For the three months ended June 30, 1997 and June 30, 1996, the Company provided for Federal and State income tax at an estimated combined effective rate of approximately 38.1%. Liquidity and Capital Resources The Company's cash and cash equivalents were $5,696,000 at June 30, 1997. Net cash provided by operating activities amounted to $3,991,000 for the three months ended June 30, 1997 compared to $3,859,000 for the same period in the prior year. Additions to operating cash flows for the three months ended June 30, 1997 reflect a higher net income, increased non-cash charges related to increased depreciation and amortization and increases in accounts payable and accrued expenses which were partially offset by increases in accounts receivable and inventory. 7 8 Accounts receivable increased $695,000 or 11.4% during the three months ended June 30, 1997, largely in part to the 11.6% increase in net sales and a longer than expected collection period at the German operation. Management believes that the Company's reserve for bad debts is adequate. Inventory levels during the three months ended June 30, 1997 were relatively consistent with those of March 31, 1997. The Company believes those inventory levels are reasonable in order to maintain the current level of business of the Company. Due to short turnaround times and the customized nature of photomasks, the Company does not maintain significant finished goods inventory. For the three months ended June 30, 1997, cash used in investing activities totaled $5,052,000 compared to $4,755,000 in the prior year. The Company's capital expenditures in the amount of $2,585,000 were primarily for equipment and cleanrooms which will support and complement new process development and high 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 $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 terms of the agreement, the Company leased the existing facility from TEMIC for a period of ten years with an option to renew. Management believes that funds generated from operations together with its cash, cash equivalents and established credit lines will be sufficient to meet the Company's normal operating requirements for the remainder of the year. 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 to seek additional financing 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. 8 9 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 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, 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 February 1997, the Financial Accounting Standards Board ("FASB") issued SFAS No. 128, "Earnings Per Share". This statement requires dual presentation of newly defined basic and diluted earnings per share on the face of the income statement for any entities with complex capital structures. The accounting standard is effective for fiscal years ending after December 15, 1997, including interim periods; the Company has not yet determined what, if any, impact SFAS No. 128 may have on the Company. In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income." SFAS No. 130, which requires companies to adopt its provisions for fiscal years ending after December 15, 1997, establishes standards for the reporting and display of comprehensive income and its components in a full set of general purpose financial statements. Comprehensive income is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from nonowner sources. The impact of adopting SFAS No. 130 has not been determined by the Company. 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 fiscal years 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 operating decision makers. Specific information to be reported for individual segments include profit or loss, certain revenue and expense items 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. 9 10 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) the adequacy of its reserve for bad debts, and (iii) 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. 10 11 Part II. Other Information Item 6. Exhibits and Reports of Form 8-K (a) Exhibits 27 Financial Data Schedule (b) Reports on Form 8-K. No reports on Form 8-K were filed during the quarter ended June 30, 1997. 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 7, 1997 Align-Rite International, Inc. James Mac Donald Chairman of the Board, President & Chief Executive Director Petar Katurich Vice President of Finance, Chief Financial Officer & Secretary 12 EX-27 2 FINANCIAL DATA SCHEDULE
5 6-MOS JUN-30-1997 JUN-30-1997 5,696 0 6,815 0 2,243 16,097 23,150 0 42,195 7,494 0 0 0 44 32,860 42,195 10,616 10,616 6,598 4,018 1,694 0 16 2,340 892 1,448 0 0 0 1,448 .30 .30
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