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 March 31, 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 0-18753
ADVANCED LOGIC RESEARCH, INC.
A Delaware Corporation IRS Employer ID No. 33-0084573
9401 Jeronimo Road
Irvine, California 92618
(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 12,542,337 shares of the Registrant's Common Stock, par value $.01
per share, outstanding on May 2, 1997.
<PAGE>
Advanced Logic Research, Inc.
Index
Page
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets at March 31, 1997
and September 30, 1996 3
Consolidated Statements of Operations for the three
and six months ended March 31, 1997 and 1996 4
Consolidated Statements of Cash Flows for the
six months ended March 31, 1997 and 1996 5
Notes to Unaudited Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Consolidated
Financial Condition and Results of Operations 8
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 6. Exhibits and Reports on Form 8-K 16
Signatures 17
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ADVANCED LOGIC RESEARCH, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<CAPTION>
(unaudited)
March 31, September 30,
ASSETS 1997 1996
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $58,147 $60,272
Trade accounts receivable, less allowance for doubtful accounts
of $2,121 and $2,177 at March 31, 1997 and
September 30, 1996, respectively 29,504 25,849
Inventories 29,357 23,437
Prepaid expenses and other assets 1,436 1,868
Deferred income taxes 4,163 3,989
-----------------------------
Total current assets 122,607 115,415
Equipment, furniture and fixtures, net 3,229 2,760
Other assets 2,650 465
-----------------------------
$128,486 $118,640
=============================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $10,345 $7,198
Payable to affiliates 196 237
Accrued expenses 12,496 11,558
Income taxes 963 2,869
-----------------------------
Total current liabilities 24,000 21,862
-----------------------------
Stockholders' equity:
Preferred stock, $.01 par value; 2,500,000
shares authorized; none issued - -
Common stock, $.01 par value; 25,000,000 shares
authorized; 12,502,976 and 12,250,480 issued and outstanding
at March 31, 1997 and September 30, 1996, respectively 125 123
Additional paid-in capital 59,884 57,924
Retained earnings 43,786 37,406
Adjustments for foreign currency translation 691 1,325
-----------------------------
Total stockholders' equity 104,486 96,778
-----------------------------
$128,486 $118,640
=============================
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
ADVANCED LOGIC RESEARCH, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share data)
(unaudited)
<CAPTION>
Three Months Ended Six Months Ended
March 31, March 31,
---------------------------- --------------------------
1997 1996 1997 1996
---------------------------- --------------------------
<S> <C> <C> <C> <C>
Net sales $55,387 $55,047 $111,803 $112,186
Cost of sales 42,276 43,489 85,404 88,707
---------------------------- ----------------------------
Gross profit 13,111 11,558 26,399 23,479
Operating expenses:
Selling, general and administrative 6,253 6,228 12,875 12,940
Engineering, research and development 1,453 1,373 2,956 2,643
Royalty expense, net 1,280 1,902 2,571 3,331
---------------------------- ----------------------------
Total operating expenses 8,986 9,503 18,402 18,914
---------------------------- ----------------------------
Operating income 4,125 2,055 7,997 4,565
Interest income 767 652 1,626 1,302
Interest expense (11) (22) (26) (35)
---------------------------- ----------------------------
Income before taxes 4,881 2,685 9,597 5,832
Provision for income taxes 1,708 671 3,217 1,458
---------------------------- ----------------------------
Net income $3,173 $2,014 $6,380 $4,374
============================ ============================
Net income per common and
common equivalent share $0.25 $0.17 $0.50 $0.36
============================ ============================
Common and common equivalent shares
used in per share calculation 12,831 12,107 12,798 12,066
============================ ============================
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
ADVANCED LOGIC RESEARCH, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
<CAPTION>
Six Months Ended
March 31,
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net income $6,380 $4,374
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization 612 744
Loss on disposal of equipment - 108
Provision for losses on accounts receivables 249 111
Deferred income tax benefit (174) (626)
Change in assets and liabilities:
Trade accounts receivable (4,287) (5,172)
Inventories (6,289) (951)
Prepaid expenses and other assets 475 483
Accounts payable 3,205 (2,488)
Accrued expenses 1,039 1,435
Payable to affiliates (41) (115)
Income taxes (1,906) (319)
-----------------------------
Net cash used in operating activities (737) (2,416)
-----------------------------
Cash flows from investing activities:
Minority investment in RouterWare, Inc. (2,250) -
Purchase of equipment, furniture and fixtures (1,114) (908)
-----------------------------
Net cash used in investing activities (3,364) (908)
-----------------------------
Cash flows from financing activities -
Issuance of stock under stock option plan 1,962 1,491
-----------------------------
Effect of foreign exchange rate change on cash 14 43
-----------------------------
Net decrease in cash and cash equivalents (2,125) (1,790)
Cash and cash equivalents at beginning of period 60,272 46,580
-----------------------------
Cash and cash equivalents at end of period $58,147 $44,790
=============================
Supplemental disclosure of cash flow information: Cash paid during the period
for:
Interest $26 $36
Income taxes $4,735 $1,887
- --------------------------------------------------------------------------------------------------------------
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
Advanced Logic Research, Inc. and Subsidiaries
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 1996 Form 10-K as filed with the
Securities and Exchange Commission on December 26, 1996.
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.
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share" which,
when adopted, will replace the current methodology for calculating and
presenting earnings per share. Under SFAS No. 128, primary earnings per share
will be replaced with a presentation of basic earnings per share and fully
diluted earnings per share will be replaced with diluted earnings per share.
Basic earnings per share excludes dilution and is computed by dividing income
available to common stockholders by the weighted average number of common shares
outstanding for the period. Diluted earnings per share is computed similarly to
fully diluted earnings per share. The statement will be effective beginning in
the Company's first quarter ended December 31, 1997, and accordingly, the
financial statements for such quarter will include a restatement of historical
earnings per share to conform to the requirements of SFAS No. 128. The Company
has not yet determined the impact of implementation of SFAS No. 128.
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.
<PAGE>
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):
<TABLE>
<CAPTION>
March 31, September 30,
1997 1996
<S> <C> <C>
Raw materials and component parts $10,402 $6,281
Work in process 6,450 5,745
Finished goods 12,505 11,411
-------- --------
$29,357 $23,437
======= =======
</TABLE>
<PAGE>
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.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31, March 31,
---------------------------- ---------------------------
1997 1996 1997 1996
---------------------------- ---------------------------
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 76.3% 79.0% 76.4% 79.1%
---------------------------- ----------------------------
Gross profit 23.7% 21.0% 23.6% 20.9%
Operating expenses:
Selling, general and administrative 11.3% 11.3% 11.5% 11.4%
Engineering, research and development 2.6% 2.5% 2.6% 2.4%
Royalty expense, net 2.3% 3.5% 2.3% 3.0%
---------------------------- ----------------------------
Total operating expenses 16.2% 17.3% 16.4% 16.8%
---------------------------- ----------------------------
Operating income 7.5% 3.7% 7.2% 4.1%
Interest income, net 1.3% 1.1% 1.4% 1.1%
---------------------------- ----------------------------
Income before taxes 8.8% 4.8% 8.6% 5.2%
Provision for income taxes 3.1% 1.1% 2.9% 1.3%
---------------------------- ----------------------------
Net income 5.7% 3.7% 5.7% 3.9%
============================ ============================
</TABLE>
<PAGE>
Management's Discussion and Analysis of
Consolidated Financial Condition and Results of Operations
This report contains forward-looking statements which involve risks and
uncertainties. The Company's actual results may differ significantly from the
results discussed in the forward-looking statements. Factors that might cause
such differences include, but are not limited to, those discussed under "Item 2.
Management's Discussion and Analysis of Consolidated Financial Condition and
Results of Operations -- Factors That May Affect Future Results."
Net Sales
<TABLE>
<CAPTION>
Three Months Ended March 31, Six Months Ended March 31,
% Inc./ % Inc./
1997 1996 (Dec.) 1997 1996 (Dec.)
---- ---- ------ ---- ---- ------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Net sales by distribution channel
VARs and dealers $30,328 $34,397 (12%) $64,150 $70,379 (9%)
Direct 7,747 11,654 (34%) 17,892 22,332 (20%)
OEM 14,838 5,075 192% 23,992 10,731 124%
Distributors and others 2,474 3,921 (37%) 5,769 8,744 (34%)
--------- --------- ---------- -----------
Total $55,387 $55,047 1% $111,803 $112,186 -%
======= ======= ======== ========
Net sales by geographic location
U.S. $37,221 $33,880 10% $72,322 $69,177 5%
International 18,166 21,167 (14%) 39,481 43,009 (8%)
-------- -------- ---------- ----------
Total $55,387 $55,047 1% $111,803 $112,186 -%
======= ======= ======== ========
</TABLE>
Net sales for the six months ended March 31, 1997 decreased by 0.3% to $111.8
million compared to $112.2 million for the six months ended March 31, 1996. For
this period, sales to OEM customers increased to $24.0 million compared to $10.7
million for the similar prior year period. This growth was principally driven by
the addition of Data General in September 1996 as an OEM customer for the
Company's high-end servers complementing the Company's existing OEM relationship
with Unisys. Consequently, sales of the Company's servers increased to represent
51% of net sales for the six month period ended March 31, 1997 compared to 32%
of net sales for the comparable prior year period.
Despite the growth in sales of the Company's servers during the first half of
fiscal 1997 compared to fiscal 1996, this growth was slowed by an industry-wide
shortage of Intel's Pentium Pro 200/512K cache CPUs during late calendar 1996
and early 1997. This shortage caused delays in shipments to some customers and
cancellation of some time sensitive orders.
Fostering the slight decline in sales during this six month period were product
transitions in the Company's mid-range and high-end desk-top product lines to
include the latest CPU offerings and certain other features. Delays in the
release of these new products contributed to a decline in sales of the Company's
mid-range and high-end desk-top systems compared to the first half of fiscal
1996. Also contributing to the decline in sales was the strengthening of the
U.S. dollar against European currencies, principally the German DM, during the
first three months of calendar 1997.
Principally because of the growth in sales to OEM customers, sales to U.S.
customers grew by 5% to $72.3 million and represented 65% of net sales for the
first half of fiscal 1997 compared to 62% of net sales for the first half of
fiscal 1996. Sales to international customers during this period declined by 8%
to $39.5 million compared $43.0 million for the similar prior year period. The
8% decline in sales to international customers principally occurred due to the
termination of an OEM agreement with Siemens Nixdorf, Germany during fiscal 1996
and the strengthening of the U.S. dollar against European currencies.
For second quarter fiscal 1997, net sales increased by 1% to $55.4 million from
$55.0 million for second quarter fiscal 1996. For this period, sales to OEM
customers increased to $14.8 million compared to $5.1 million for the similar
prior year period driven by the addition of Data General as an OEM customer in
September 1996. Sales to the Company's other principal channels of distribution
decreased due to the above mentioned product transition which adversely affected
sales of the Company's mid-range and high-end desk-top systems and the
strengthening of the U.S. dollar against European currencies. The strengthening
of the U.S. dollar against European currencies accounted for approximately 2% of
the decline in international sales for the second quarter of fiscal 1997.
Gross Profit
<TABLE>
<CAPTION>
Three Months Six Months
Ended March 31, Ended March 31,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
(In thousands)
Net sales $55,387 $55,047 $111,803 $112,186
Gross profit 13,111 11,558 26,399 23,479
Percentage of net sales 23.7% 21.0% 23.6% 20.9%
</TABLE>
For the six months ended March 31, 1997, gross profit margins improved to 23.6%
from 20.9% for the six months ended March 31, 1996. The continued shift in sales
to the Company's servers, since these systems typically generate greater gross
profit margins than the Company's other systems, and lower component costs on
certain key components were the predominate reasons for the improvement in gross
profit margins. As stated previously servers represented 51% of net sales for
the first six months of fiscal 1997 compared to 32% of net sales for the first
six months of fiscal 1996.
Gross profit margins for the three months ended March 31, 1997 improved to 23.7%
from 21.0% for the corresponding period in fiscal 1996. The continued shift in
sales to servers favorably impacted gross profit margins. Lower component costs,
particularly on CPUs and engineering design changes also contributed to
improving gross profit margins.
Operating Expenses
Selling, General and Administrative.
<TABLE>
<CAPTION>
Three Months Six Months
Ended March 31, Ended March 31,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
(In thousands)
Net sales $55,387 $55,047 $111,803 $112,186
Selling, general and
administrative expenses 6,253 6,228 12,875 12,940
Percentage of net sales 11.3% 11.3% 11.5% 11.4%
</TABLE>
For the six months ended March 31, 1997, selling, general and administrative
expenses were unchanged at $12.9 million from the similar period of fiscal 1996.
Increases in payroll and other personnel-related expenditures associated with
the addition of sales personnel were offset by slight declines in co-operative
and product advertising expenditures. The decline in co-operative advertising
expense was related to the decline in sales to resellers, dealers and
distributors for the six months ended March 31, 1997 compared to the similar
prior year period while the decline in product advertising expenditures was
related to new product announcements and launches.
Selling, general and administrative expenses for second quarter fiscal 1997 were
unchanged compared to second quarter fiscal 1996. Again, greater payroll
expenses associated with the addition of sales staff were offset by slight
declines in co-operative and product advertising expenses.
Engineering, Research and Development.
<TABLE>
<CAPTION>
Three Months Six Months
Ended March 31, Ended March 31,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
(In thousands)
Net sales $55,387 $55,047 $111,803 $112,186
Engineering, research and
development expenses 1,453 1,373 2,956 2,643
Percentage of net sales 2.6% 2.5% 2.6% 2.4%
</TABLE>
For the six months ended March 31, 1997, engineering, research and development
expenses increased by 12% to $3.0 million from $2.6 million for the comparable
year-ago period. This growth was attributed to an increase in engineering
personnel and greater engineering material expense associated with continued
product development and enhancement. The 12% growth in engineering, research and
development expenses coupled with flat sales resulted in increasing engineering,
research and development expenses to 2.6% of net sales for the six months ended
March 31, 1997 from 2.4% of net sales for the six months ended March 31, 1996.
Engineering, research and development expenses increased by 6% to $1.5 million
for the three months ended March 31, 1997 from $1.4 million for the comparable
prior fiscal period. Again, increases in payroll and payroll-related costs
associated with an increase in personnel and greater engineering material
expense from ongoing product development and enhancement principally accounted
for the increase.
Royalty Expense, Net
For the six months ended March 31, 1997 net royalty expense was 2.3% of net
sales compared to 3.0% for the six months ended March 31, 1996. Net royalty
expense for the three months ended March 31, 1997 decreased to 2.3% of net sales
from 3.5% for the corresponding period of fiscal 1996. The decline in fiscal
1997 royalty rates for both the three and six month periods compared to the
similar periods of fiscal 1996 was principally the result of the modified three
year fixed fee agreement with IBM Corporation completed in 1996.
Interest Income, Net
For the three and six month periods ended March 31, 1997, the Company had net
interest income of $0.8 million and $1.6 million, respectively, compared to $0.6
million and $1.3 million for the three month and six month periods ended March
31, 1996. The increase in net interest income for fiscal 1997 was principally
the result of a higher cash and cash equivalent balance compared to fiscal 1996.
Income Taxes
For second quarter fiscal 1997, the Company recorded a provision for income
taxes at an effective income tax rate of 35.0% of pretax income compared to
25.0% for second quarter fiscal 1996. For the six months ended March 31, 1997,
the effective income tax rate was 33.5% of pretax income compared to 25.0% for
similar period of fiscal 1996. The change in the effective tax rates between
fiscal 1997 and 1996 was principally attributable to utilization of certain net
operating loss carryforwards in fiscal 1996 and changes in the earnings mix
among the Company's subsidiaries located in various taxing jurisdictions.
Liquidity and Capital Resources
March 31, 1997 September 30, 1996
-------------- ------------------
(In thousands)
Cash and cash equivalents $58,147 $60,272
Working capital 98,607 93,553
Current ratio 5.1 5.3
Stockholders' equity 104,486 96,778
The Company's cash and cash equivalents decreased by $2.1 million to $58.1
million at March 31, 1997 compared to $60.2 million at September 30, 1996.
Operating activities used $0.7 million while the exercise of stock options
generated $2.0 million. Disbursements for the six month period included the
purchase of equipment, furniture and fixtures totaling $1.1 million and a $2.25
million cash investment for a minority interest in RouterWare, Inc.
Operating cash flows for the first six months of fiscal 1997 were negatively
impacted by an increase in inventories caused by an increase in safety stock of
key parts, components and certain finished systems along with the purchase of
components associated with new products. Consequently, inventory turns at March
31, 1997 decreased to 5.8 compared to 7.3 at September 30, 1996. An increase in
accounts receivables also adversely affected operating cash flows. Average sales
days outstanding increased to 48 days at March 31, 1997 from a record 43 days at
September 30, 1996. Partially offsetting these impacts was an increase in
accounts payable which was related to the timing of inventory purchases and
subsequent payments.
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 1997. The Company has not borrowed against this
credit line.
In addition, ALR International, the Company's subsidiary in Singapore, has
unsecured, uncommitted revolving credit lines of approximately $4.3 million
which are used to supplement its working capital requirements. At March 31,
1997, ALR International had no borrowings against these lines of credit.
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. Nonetheless, the Company may, at its
discretion, draw upon its credit facilities in any amount up to the credit limit
at any time.
Factors That May Affect Future Results
The personal computer industry is intensely competitive. The principal elements
of competition among personal computer manufacturers are pricing, product
quality and reliability, compatibility, price/performance characteristics,
marketing and distribution capability, service and support, reputation and the
capability to deliver products in large volumes. ALR competes with a large
number of manufacturers, most of which have significantly greater financial,
marketing and technological resources than ALR. There can be no assurance that
ALR will be able to continue to compete effectively.
The Company does business worldwide. Global and/or regional economic factors and
potential changes in laws and regulations affecting the Company's business,
including without limitation, currency fluctuations, changes in monetary policy
and tariffs, and federal, state and international laws regulating the
environment, could impact the Company's future results of operations.
The microcomputer market is characterized by rapid technological change and
product obsolescence, often resulting in short product life cycles and rapid
price declines. The Company's success will continue to depend primarily on its
ability to continue to reduce costs through manufacturing efficiencies, the
continued market acceptance of its existing products and its ability to develop
and introduce similarly acceptable new products. There can be no assurance that
ALR will successfully develop new products or that the new products it develops
will be introduced in a timely manner and receive substantial market acceptance.
There can also be no assurance that product transitions will be managed in such
a way to minimize inventory levels and product obsolescence of discontinued
products. The Company's operating results could be adversely affected if ALR is
unable to manage all aspects of product transitions successfully.
The Company generally utilizes standard parts and components available from
multiple vendors. However, certain parts and components used in the Company's
systems are available from a single source. If the Company is unable to obtain
sufficient quantities of any single-sourced components, it will experience
delays in product shipments.
Although vendor component costs have generally decreased over time, a change in
market conditions brought about by increased demand for these components could
result in price increases which would adversely affect the Company's gross
profit margins and profitability.
The Company offers its products directly and through indirect channels of
distribution. Changes in the financial condition of, or in the Company's
relationship with, OEM customers, distributors and other indirect channel
partners could cause actual operating results to vary from those expected. Also,
the Company's customers generally order products on an as-needed basis.
Therefore, virtually all product shipments in a given fiscal quarter result from
orders received in that quarter. The Company anticipates that the rate of new
orders will vary significantly from month to month. Because ALR operates with a
limited backlog, the Company's manufacturing plans and expenditure levels are
based primarily on sales forecasts. Consequently, if anticipated sales and
shipments in any quarter do not occur when expected, expenditure and inventory
levels could be disproportionately high and the Company's operating results for
that quarter, and potentially future quarters, would be adversely affected.
From time to time, certain companies have asserted exclusive patent, copyright
and other intellectual property rights to technologies that are important to the
microcomputer industry. ALR evaluates each claim relating to its products and,
if appropriate, seeks a license to use the protected technology. There can be no
assurance that the Company would be able to obtain licenses to use such
technology or that such licenses could be obtained on terms that would not have
a material adverse effect on the Company. If the Company or its suppliers are
unable to license protected technology used in ALR's products, ALR could be
prohibited from marketing such products. The Company could also incur
substantial costs to redesign its products or to defend any legal action taken
against it. If the Company's products should be found to infringe protected
technology, ALR could be required to pay damages to the infringed party.
The market price of the Company's common stock could be subject to fluctuations
in response to quarter to quarter variations in operating results, changes in
analysts' earnings estimates, market conditions in the information technology
industry, as well as general economic conditions and other factors external to
the Company.
<PAGE>
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 18, 1997 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 21,
1997. 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 11,302,810 626,623 -
Philip A. Harding 11,303,110 626,323 -
Therese E. Myers 11,299,910 629,523 -
Kenneth W. Simonds 11,299,123 630,310 -
Chun Win Wong 11,302,610 626,823 -
(2) The adoption of 1996 Stock Option/ Stock Issuance Plan.
For 7,130,239
Against 2,057,622
Abstain 22,858
Broker Non-Votes 2,718,714
(3) Ratification of KPMG Peat Marwick LLP as independent auditors for the fiscal
year ended September 30, 1997.
For 11,887,860
Against 27,315
Abstain 14,258
Broker Non-Votes -
(4) Stockholder proposal requiring all members of the Board of Directors and all
officers of the Company to own shares of Common Stock of the Company.
For 1,117,259
Against 7,987,601
Abstain 64,735
Broker Non-Votes 2,759,838
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
<PAGE>
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, 1997 \s\ Eugene Lu
--------------------------------------------
Eugene Lu
Chairman, President and Chief
Executive Officer
Date: May 15, 1997 \s\ Ron Sipkovich
-------------------------------------------
Ronald J. Sipkovich
Vice President, Finance and
Administration, Chief Financial
Officer and Secretary
(principal financial officer)
<PAGE>
Exhibit 11
Advanced Logic Research, Inc. and Subsidiaries
Statement Regarding Computation of Per Share Earnings
(Amounts in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31, March 31,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Primary income per share:-
Shares used in computing income per share:
Weighted average number of shares outstanding 12,486 11,830 12,423 11,761
Incremental shares attributed to outstanding options 345 277 375 305
--------------------- --------------------
12,831 12,107 12,798 12,066
-------------------- -------------------
Earnings:
Net income $3,173 $2,014 $6,380 $4,374
-------------------- -------------------
Income per common and common equivalent share $0.25 $0.17 $0.50 $0.36
Income per share - assuming full dilution:-
Shares used in computing income per share:
Weighted average number of shares outstanding 12,486 11,830 12,423 11,761
Incremental shares attributed to outstanding options 346 280 376 308
--------------------- --------------------
12,832 12,110 12,799 12,069
-------------------- -------------------
Earnings:
Net income $3,173 $2,014 $6,380 $4,374
-------------------- -------------------
Income per common and common equivalent share $0.25 $0.17 $0.50 $0.36
</TABLE>
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<S> <C>
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<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> MAR-31-1997
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0
0
<COMMON> 125
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<CGS> 85,404
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<OTHER-EXPENSES> 18,153
<LOSS-PROVISION> 249
<INTEREST-EXPENSE> (1,600)
<INCOME-PRETAX> 9,597
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<EPS-PRIMARY> 0.50
<EPS-DILUTED> 0.50
</TABLE>
