<PAGE> 1
UNITED STATES
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, 1996
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: 0-25862
AG ASSOCIATES, INC.
(Exact name of registrant as specified in its charter)
California 94-2776181
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4425 Fortran Drive, San Jose, California 95134-2300
(Address of principal executive offices and zip code)
Registrant's telephone number: (408) 935-2000
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
--- ---
The number of shares outstanding of the Registrant's Common Stock, no par value,
was 5,896,044 at July 31, 1996.
This document consists of 14 pages, of which this is page number 1. The index to
exhibits is located at page 12.
<PAGE> 2
AG ASSOCIATES, INC.
INDEX
<TABLE>
<CAPTION>
Description Page Number
- - --------------------------------------------------------------------------------------- -----------
<S> <C>
Part I: Financial Information
Item 1: Financial Statements
Condensed Consolidated Statements of Income for the Three and Nine Month
Periods Ended June 30, 1996 and 1995 3
Condensed Consolidated Balance Sheets as of June 30, 1996 and September
30, 1995 4
Condensed Consolidated Statements of Cash Flows for the Nine Month Periods
Ended June 30, 1996 and 1995 5
Notes to Condensed Consolidated Financial Statements 6
Item 2: Management's Discussion and Analysis of Financial Condition and Results
of Operations 7
Part II: Other Information
Item 1: Legal Proceedings 12
Item 2: Changes in Securities 12
Item 3: Defaults Upon Senior Securities 12
Item 4: Submission of Matters to a Vote of Security Holders 12
Item 5: Other Information 12
Item 6: Exhibits and Reports on Form 8-K 12
Signature 13
</TABLE>
2
<PAGE> 3
AG ASSOCIATES, INC.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended June 30, Nine Months Ended June 30,
--------------------------- --------------------------
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales $ 17,196 $ 16,780 $ 62,256 $ 42,994
Cost of sales 9,961 8,827 33,337 23,314
-------- -------- -------- --------
Gross profit 7,235 7,953 28,919 19,680
Operating expenses:
Research and development 4,322 2,373 12,075 5,909
Selling, general and administrative 2,539 3,135 8,415 7,685
-------- -------- -------- --------
Total operating expenses 6,861 5,508 20,490 13,594
-------- -------- -------- --------
Income from operations 374 2,445 8,429 6,086
Interest income (expense), net 146 16 526 (248)
Other income, net 46 40 78 46
Equity interest in loss of unconsolidated subsidiary (500) (57) (1,152) (57)
-------- -------- -------- --------
Income before income taxes 66 2,444 7,881 5,827
Provision (credit) for income taxes 27 (1,225) 3,231 (1,052)
-------- -------- -------- --------
Net income $ 39 $ 3,669 $ 4,650 $ 6,879
======== ======== ======== ========
Net income per share $ 0.01 $ 0.75 $ 0.76 $ 1.64
======== ======== ======== ========
Shares used in per share computations 6,027 4,898 6,142 4,208
======== ======== ======== ========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
3
<PAGE> 4
AG ASSOCIATES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
June 30, September 30,
1996 1995
-------- -------------
(unaudited) (*)
<S> <C> <C>
ASSETS
Current assets:
Cash and equivalents $ 5,690 $ 8,258
Short-term investments 6,710 10,600
Accounts receivable, net 14,506 13,508
Inventories 11,402 8,394
Deferred tax assets 4,336 3,665
Prepaid expenses and other current assets 454 556
-------- --------
Total current assets 43,098 44,981
Property and equipment, net 7,623 3,453
Deferred tax assets 239 239
Other assets -- 152
-------- --------
Total assets $ 50,960 $ 48,825
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 4,382 $ 7,041
Accrued liabilities 4,228 4,519
Warranty reserve 3,286 2,651
Current portion of long-term obligations 260 321
Income taxes payable 977 650
Customer advances and deferred revenue 410 1,150
-------- --------
Total current liabilities 13,543 16,332
Long-term obligations 38 193
Shareholders' equity
Common stock 35,421 35,135
Notes receivable from shareholders -- (92)
Deferred stock compensation (30) (81)
Retained earnings (Accumulated deficit) 1,988 (2,662)
-------- --------
Total shareholders' equity 37,379 32,300
-------- --------
Total liabilities and shareholders' equity $ 50,960 $ 48,825
======== ========
</TABLE>
(*) Derived from audited financial statements.
See Notes to Condensed Consolidated Financial Statements.
4
<PAGE> 5
AG ASSOCIATES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS - UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended June 30,
--------------------------
1996 1995
-------- --------
<S> <C> <C>
Cash flows from operating activities
Net income $ 4,650 $ 6,879
Reconciliation to net cash provided by
operating activities:
Depreciation and amortization 1,471 763
Equity interest in loss of unconsolidated subsidiary 1,152 --
Deferred stock compensation 51 47
Deferred income taxes (671) (1,340)
Changes in assets and liabilities:
Accounts receivable (998) (3,824)
Inventories (3,008) (2,540)
Prepaid expenses and other current assets 102 (1,426)
Accounts payable (2,659) 1,559
Accrued liabilities 344 1,291
Customer advances and deferred revenue (740) (21)
Income taxes payable 327 288
-------- --------
Net cash provided by operating activities 21 1,676
Cash flows from investing activities:
Purchases of short-term investments (28,363) (3,800)
Sales/maturities of short-term investments 32,253 --
Capital expenditures (5,641) (758)
Investment in unconsolidated subsidiary (1,000) (1,000)
Other assets -- 592
-------- --------
Net cash used for investing activities (2,751) (4,966)
Cash flows from financing activities:
Net decrease in short-term borrowings -- (2,400)
Interest payment for convertible subordinated debentures -- (107)
Reductions in long-term debt -- (135)
Reductions in obligations under capital leases (216) (699)
Proceeds from initial public offering -- 20,417
Proceeds from repayment of shareholder notes 92 --
Proceeds from issuance of common stock 286 200
Proceeds from exercise of warrant -- 1,529
Preferred stock dividend -- (2)
-------- --------
Net cash provided by financing activities 162 18,803
-------- --------
Net (decrease) increase in cash and equivalents (2,568) 15,513
Cash and cash equivalents at beginning of period 8,258 1,598
-------- --------
Cash and cash equivalents at end of period $ 5,690 $ 17,111
======== ========
Supplemental schedule of noncash financing activities:
Assets acquired under capital leases -- $ 280
======== ========
Conversion of subordinated debentures -- $ 2,000
======== ========
Conversion of preferred stock -- $ 50
======== ========
Issuance of notes receivable for common stock -- $ 92
======== ========
Conversion of minority equity interest -- $ 1,979
======== ========
Supplemental disclosure of cash flow information
Cash paid during the period for:
Interest $ 48 $ 455
======== ========
Income taxes $ 3,574 $ 1,311
======== ========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
5
<PAGE> 6
AG ASSOCIATES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1996
(Unaudited)
NOTE 1 - Basis of Presentation
The financial statements have been prepared by AG Associates, Inc. (the
"Company"), pursuant to the rules and regulations of the Securities and Exchange
Commission ("SEC"). While the quarterly financial information contained in this
filing is unaudited, the financial statements presented reflect all normal
recurring adjustments which the Company considers necessary for a fair
presentation of the financial position, results of operations and cash flows for
all interim periods presented. The results for interim periods are not
necessarily indicative of the results to be expected for the entire year. The
information included in this report should be read in conjunction with the
Consolidated Financial Statements and notes thereto included in the Company's
1995 Annual Report on Form 10-K.
NOTE 2 - Per Share Information
Net income per share information for the periods presented is computed using the
weighted average number of common and dilutive common-equivalent shares
attributable to stock options outstanding.
NOTE 3 - Inventories
Inventories, valued at the lower of cost (first-in, first-out) or market,
consist of:
<TABLE>
<CAPTION>
(in thousands)
June 30, September 30,
1996 1995
------- -------------
<S> <C> <C>
Raw materials $ 9,618 $ 3,819
Work-in-progress 1,784 4,575
------- -------
Total $11,402 $ 8,394
======= =======
</TABLE>
NOTE 4 - Line of Credit
Subsequent to the end of the quarter, the Company negotiated a $5,000,000
revolving line of credit. The line is collateralized by all assets of the
Company except intellectual property. Borrowings bear interest at prime plus
1.25% per annum. There are no outstanding borrowings.
6
<PAGE> 7
AG ASSOCIATES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with the unaudited
Condensed Consolidated Financial Statements and notes thereto included in Part I
- - -- Item 1 of this Quarterly Report and the audited Consolidated Financial
Statements and notes thereto and Management's Discussion and Analysis of
Financial Condition and Results of Operations for the year ended September 30,
1995 contained in the Company's 1995 Annual Report on Form 10-K.
The Company's Common Stock price may be subject to significant volatility. For
any given quarter, a shortfall in the Company's announced revenue or earnings
from the levels expected by securities analysts could have an immediate and
adverse effect on the trading price of the Company's Common Stock. The Company
may not learn of, nor be able to confirm, revenue or earnings shortfalls until
late in the quarter or following the end of the quarter. In general, the Company
participates in a very dynamic high technology industry, which can result in
significant fluctuations in the Company's Common Stock price at any time.
Except for the historical information contained herein, the matters discussed in
this Form 10-Q are forward-looking statements written in the meaning of section
21E of the Securities Exchange Act of 1934, as amended, that involve risks and
uncertainties, including the timely availability and acceptance of new products,
the impact of competitive products and pricing, the management of growth and the
other risks detailed below and from time to time in the Company's other reports
filed with the Securities and Exchange Commission. The actual results that the
Company achieves may differ materially from any forward-looking projections due
to such risks and uncertainties. The Company has identified with a preceding
asterisk ("*") various sentences within this Form 10-Q which contain such
forward looking statements, and words such as "believes," "anticipates,"
"expects," "future," "intends" and similar expressions are intended to identify
forward-looking statements but are not the exclusive means of identifying such
statements. In addition, the section labeled "Factors That May Affect Future
Results," which has no asterisks for improved readability, consists primarily of
forward-looking statements. The Company undertakes no obligation to publicly
release the results of any revisions to these forward-looking statements which
may be made to reflect events or circumstances after the date hereof.
Factors That May Affect Future Results
AG Associates, Inc. operates in a rapidly changing environment that involves a
number of risks, some of which are beyond the Company's control. The following
discussion highlights some of these risks.
The Company's operating results are subject to quarterly and other fluctuations
due to a variety of factors, including the volume and timing of orders received,
potential cancellation or rescheduling of orders, competitive pricing pressures,
availability and cost of component parts and materials from the Company's
suppliers, the adequate forecasting of the mix of product demand due to
production lead times and capacity constraints, the timing of new product
announcements and introductions by the Company or its competitors, changes in
the mix of products sold, research and development expenses associated with new
product introductions, the timing and level of development costs, market
acceptance of new or enhanced versions of the Company's products, seasonal
customer demand, the cyclical nature of the semiconductor industry and economic
conditions generally or in various geographic areas. The Company's ability to
compete also depends upon the Company's ability to develop new product features
that enhance uniformity and repeatability, improve process capability and
flexibility and reduce cost of ownership. In addition, because of the relatively
high selling prices of the Company's products, a significant portion of the
Company's net sales in any given period is often derived from the sale of a
relatively small number of units, and a change, even though minor, in the number
of units sold during a quarter can result in a large fluctuation in net sales
for that quarter.
7
<PAGE> 8
AG ASSOCIATES, INC.
Results Of Operations
The following table sets forth for the periods indicated certain financial data
as a percentage of net sales:
<TABLE>
<CAPTION>
Three Months Ended June 30, Nine Months Ended June 30,
--------------------------- --------------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales 100% 100% 100% 100%
Cost of sales 58 53 54 54
---- ---- ---- ----
Gross profit 42 47 46 46
Operating expenses:
Research and development 25 14 19 14
Selling, general and administrative 15 18 13 18
---- ---- ---- ----
Total operating costs 40 32 32 32
---- ---- ---- ----
Income from operations 2 15 14 14
Interest income (expense), net 1 * 1 *
Other income, net * * * *
Equity interest in loss of
unconsolidated subsidiary (3) * (2) *
---- ---- ---- ----
Income before income taxes * 15 13 14
Provision (credit) for income taxes * (7) 5 (2)
---- ---- ---- ----
Net income *% 22% 8% 16%
==== ==== ==== ====
</TABLE>
--------------
* less than 1%
Net Sales
Net sales for the three and nine months ended June 30, 1996 increased $416,000
(2%) and $19.3 million (45%), respectively, when compared to the same periods in
fiscal 1995. The sales growth in the three and nine months ended June 30, 1996
was due primarily to the increase in unit sales of the Company's Heatpulse(R)
8108 product and to a lesser extent, an increase in sales volume of spare parts.
Unit sales of the Company's other products have remained relatively stable.
Sales in the three months ended June 30, 1996 declined $6.0 million (26%) from
the quarter ended March 31, 1996. *The Company anticipates that sales volume of
its products will continue to decline in the near future as a result of the
effects of the semiconductor industry's slowing order rate, as well as
competitive pressures. *Such a decline would have an immediate adverse effect on
the Company's business and results of operations.
The Company utilizes distributors in certain geographic regions. All of the
Company's sales in Japan are through Canon Sales Co., Inc. ("Canon"), and those
in Europe and Korea are through Metron Technology ("Metron"). Sales to
distributors generally result in a lower gross profit, caused by lower selling
prices, which are largely offset by reduced selling and marketing expenses. For
the three and nine months ended June 30, 1996, Canon represented 26% and 24% of
net sales, respectively, and Metron represented 17% and 11% of net sales,
respectively. For the same periods in the prior fiscal year, net sales to Canon
represented 16% and 17%, respectively, and Metron represented 7% and 4%,
respectively. This increase in sales by both distributors along with a decrease
in demand from domestic semiconductor manufacturers accounts primarily for the
increase in total international sales, which grew to 63% and 51% of net sales,
respectively, for the three and nine months ended June 30, 1996, from 28% and
32% of net sales, respectively, for the same periods of the prior fiscal year.
*Based upon the geographic locations of semiconductor manufacturers, the Company
anticipates that international sales in general will continue to account for a
significant portion of net sales in fiscal 1996 (the year ended September 30,
1996). *However, international sales as a percentage of net sales will vary on a
quarterly basis depending on the timing of orders and the relative strength of
domestic sales.
8
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AG ASSOCIATES, INC.
Two end-user customers represented 25% and 11% of net sales in the three months
ended June 30, 1996 compared to two different end-user customers representing
24% and 12% for the same period last fiscal year. For the nine months ended June
30, 1996, two end-user customers represented 21% and 19% of net sales compared
to two different end-user customers representing 31% and 10% of net sales for
the same period in the last fiscal year. *The Company expects a significant
portion of its future sales to remain concentrated within a limited number of
strategic customers. *The Company expects increasing competition from a
competitor who has substantially greater resources than the Company,
particularly in the sale of rapid thermal processing ("RTP") systems designed
for 0.25 micron applications. *In addition, the Company has experienced, and
continues to experience, competition from other RTP equipment suppliers. These
competitors' impact on future sales cannot be estimated. *For this and other
reasons, there can be no assurance that the Company will be able to retain its
strategic customers or that such customers will not cancel, reschedule or
significantly reduce the volume of orders or, in the event orders are canceled,
that such orders will be replaced by other sales.
Gross Profit
Gross profit for the three and nine months ended June 30, 1996 was $7.2 million
and $28.9 million, respectively, compared with gross profit of $8.0 million and
$19.7 million, respectively, for the same periods in fiscal 1995. Gross profit
as a percentage of net sales was 42% and 46%, respectively, for the three and
nine months ended June 30, 1996 compared to 47% and 46% for the same periods in
the prior fiscal year. The decrease in gross margin for the three months ended
June 30, 1996 compared to the same period in fiscal 1995 was primarily
attributable to a decline in systems margin as the number of systems sold to
distributors increased and, to a lesser extent, an increase in cost incurred on
systems sold in Europe that required additional customization to meet more
stringent European electronics regulatory standards. This decrease in systems
margin was partially offset by an improvement in spares margin. The gross margin
of 46% for the nine months ended June 30, 1996 was comparable to the same period
in the prior fiscal year even though more units have been sold for the nine
months ended June 30, 1996, primarily due to the increase in sales to
distributors. *The Company anticipates that its gross margin will continue to
decline in the near future as sales volume continues to decline as a result of
the effects of the semiconductor industry's slowing order rate on the Company as
well as competitive pressures. *This decline would have an immediate adverse
effect on the Company's business and results of operations.
Research and Development Expenses
Research and development ("R&D") expenses were $4.3 million and $12.1 million,
respectively, for the three and nine months ended June 30, 1996, representing an
increase of $1.9 million (82%) and $6.2 million (104%), respectively, when
compared with the same periods in fiscal 1995. As a percentage of net sales, R&D
spending increased to 25% and 19%, respectively, for the three and nine months
ended June 30, 1996 from 14% for the comparable periods in the prior fiscal
year. The increases in R&D expenses in absolute dollars and as a percentage of
net sales are primarily attributable to the Company's development of two new
products. The first product, introduced in July 1996, is a new Heatpulse RTP
system designed for volume production environments, where process repeatability,
productivity and cost are critical considerations. This tool was developed to
help semiconductor manufacturers improve performance in all three areas for the
full range of RTP process applications. The second product in development
features a new platform that is being designed to provide previously unavailable
RTP capabilities, both in terms of process results and manufacturing performance
for the 0.25 and 0.18 micron linewidths. *This product is scheduled for
introduction in early calendar year 1997. *The failure of the Company to timely
develop this new product, the failure of this new product to meet customer
expectations regarding performance and cost or the failure of this new product
to achieve market acceptance following introduction would have a material
adverse effect on the Company's business, results of operations and financial
condition. *The Company believes that significant investment in R&D is required
for the Company to maintain its competitive position in the market and
anticipates that R&D spending for the remainder of fiscal 1996 will
9
<PAGE> 10
AG ASSOCIATES, INC.
remain in line with current levels in absolute dollar terms. *As a percentage of
net sales, R&D spending may vary from quarter to quarter, depending on the
actual level of net sales among other things.
Selling, General and Administrative Expenses
Selling, general and administrative ("SG&A") expenses were $2.5 million and $8.4
million, respectively, for the three and nine months ended June 30, 1996,
representing a decrease of $596,000 (19%) and an increase of $730,000 (9%),
respectively, when compared with the same periods in fiscal 1995. The decrease
in absolute dollars for the three months ended June 30, 1996 was due primarily
to the Company's management of expenses in response to the decline in sales in
the most recent quarter as compared to the prior quarter. The increase in
absolute dollars for the nine months ended June 30, 1996 was primarily
attributable to the addition of personnel to support the Company's growth in the
first six months of the most recent fiscal year, partially offset by a decrease
in commission expenses as the Company transitioned to more indirect selling and
due to a change in the mix of the channels of distribution. As a percentage of
net sales, SG&A spending decreased to 15% and 13%, respectively, for the three
and nine months periods ended June 30, 1996 from 18% in the comparative periods
last year, primarily due to the result of greater sales in the most recent
fiscal year. *Through the remainder of the fiscal year, SG&A spending in
absolute dollars is expected to remain in line with current levels; however,
actual spending may fluctuate depending on, among other things, the level of net
sales. * As a percentage of net sales, SG&A spending may vary from quarter to
quarter.
Interest Income (Expense), Net
Interest income (expense), net increased to income of $146,000 and $526,000,
respectively, for the three and nine months ended June 30, 1996 from income of
$16,000 for the three months ended June 30, 1995 and expense of $248,000 for the
nine months ended June 30, 1995, primarily due to interest income earned on the
Company's cash and investments as well as lower interest expense on the then
outstanding bank line of credit, which was repaid in full with proceeds from the
IPO.
Equity Interest in Loss of Unconsolidated Subsidiary
Equity interest in loss of AG Associates (Israel) Ltd. ("AG Israel"), the
Company's unconsolidated subsidiary, was $500,000 and $1.2 million,
respectively, for the three and nine months ended June 30, 1996 compared to
$57,000 in each of the same periods of the prior fiscal year. The Company
invested an additional $500,000 in AG Israel in the third fiscal quarter of 1996
in addition to $500,000 invested in the second fiscal quarter of 1996. The value
of these additional investments, as well as the Company's remaining investment
at September 30, 1995 in AG Israel, was reduced to zero in 1996 by the Company's
equity interest in the losses of AG Israel.
Provision (Credit) for Income Taxes
The Company has a combined federal, state and foreign effective income tax rate
of 41% for the three months and nine months ended June 30, 1996, compared to a
tax benefit of 50% and 18%, respectively, for the same periods last fiscal year.
The tax benefit in fiscal 1995 is due to the realization of benefits recognized
related to the Company's operating loss carryforwards. *The Company anticipates
that the 41% effective tax rate will continue through the end of fiscal 1996.
Backlog
The Company's system backlog (consisting of product scheduled for delivery
within the next twelve months) as of June 30, 1996 was approximately $9.2
million as compared to $17.6 million at March 31, 1996 and $35.8 million at June
30, 1995. The decrease in backlog is a result of the effects of the
semiconductor industry's slowing order rates as customers drastically slow down
their expansion plans, as
10
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AG ASSOCIATES, INC.
well as competitive pressures. *As a result, the Company expects that revenues
for the three months ended September 30, 1996 will be lower than revenues for
the three months ended June 30, 1996, and despite a reduction in personnel
effected in July 1996, the results of operations are expected to yield a net
loss. *There can be no assurance that the Company's revenues will not continue
to decline following the three months ended September 30, 1996 or that the
Company will not incur further losses, and such a decline and/or such losses
would have a material adverse effect on the Company's business, results of
operations and financial condition. The Company includes in its backlog customer
purchase orders that have been accepted and to which shipment dates have been
assigned within the next twelve months. All orders are subject to cancellation
or delay with limited or no penalty. *Because of possible changes in delivery
schedules and additions and cancellations of orders, the Company's backlog at
any particular date is not necessarily indicative of actual sales for any
succeeding period.
Liquidity And Capital Resources
As of June 30, 1996, the Company had cash, cash equivalents and short-term
investments of $12.4 million, compared to $18.9 million as of September 30,
1995. The decrease of $6.5 million was primarily attributable to capital
expenditures relating to the Company's move to new facilities, an increase in
inventory levels and an additional investment in AG Israel. Working capital
increased to $29.6 million at June 30, 1996 from $28.6 million at September 30,
1995.
The Company's operating activities provided cash of $21,000 during the first
nine months of fiscal 1996. Net income before depreciation and amortization
charges and losses from an equity interest in AG Israel were offset by increases
in accounts receivable and inventory along with a decrease in accounts payable.
The increase in receivables was primarily due to slower than anticipated
collections during the most recent quarter; *however, the Company is
concentrating its efforts to reduce this outstanding balance. The increase in
inventory was primarily attributable to increased levels of raw materials as
well as the stocking of offsite spares inventories. The decrease in payables was
primarily due to a decrease in purchases during the end of the most recent
quarter.
The Company's investing activities used cash of $2.8 million, primarily for
capital expenditures and an additional equity investment in AG Israel which were
offset by the net sale and maturity of short-term investments. Property and
equipment purchases were approximately $5.6 million for the nine months ended
June 30, 1996. *The Company currently anticipates that its capital expenditures
may be as much as $600,000 for the remainder of fiscal 1996, primarily to
support the development of new products. *However, the actual level of capital
spending will be dependent on a variety of factors, including the Company's
business requirements and general economic conditions.
Cash provided by financing activities was $162,000, consisting primarily of
proceeds from the repayment of shareholder notes and issuance of common stock,
offset by payments for capital lease obligations.
Subsequent to the end of the quarter, the Company negotiated a $5,000,000
revolving line of credit. The line is collateralized by all assets of the
Company except intellectual property. Borrowings bear interest at prime plus
1.25% per annum. There are no outstanding borrowings.
*The Company believes that current cash and short-term investment balances,
together with existing sources of liquidity, will satisfy the Company's
anticipated liquidity and working capital requirements through the next twelve
months. *However, due to the uncertain nature of the industry, competitive
market conditions and the successful development of the Company's
next-generation products, liquidity and working capital requirements are
difficult to anticipate beyond the next twelve months. *There can be no
assurance that additional financing, when required, will be available, or if
available, can be obtained on terms satisfactory to the Company.
11
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AG ASSOCIATES, INC.
PART II: OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable.
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
A) Exhibits
Exhibit 11.01 Statement re Computation of Earnings per
Share (see page 14)
Exhibit 27 Financial Data Schedule
B) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended June 30,
1996.
12
<PAGE> 13
AG ASSOCIATES, INC.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
AG Associates, Inc.
(Registrant)
Dated: August 12, 1996 By: /s/ Arnon Gat
--------------------------
Arnon Gat
Chief Executive Officer &
Acting Chief Financial
Officer, (Duly Authorized
and Principal Financial
Officer)
13
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AG ASSOCIATES, INC.
EXHIBIT 11.01
STATEMENT REGARDING COMPUTATION OF EARNINGS PER SHARE
(in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended June 30, Nine Months Ended June 30,
--------------------------- --------------------------
1996 1995 1996 1995
-------- --------- -------- -------
<S> <C> <C> <C> <C>
Weighted average common shares
outstanding during the period 5,894 2,984 5,869 2,940
Common share equivalents 133 1,914 273 1,268
------ ------ ------ ------
Total 6,027 4,898 6,142 4,208
====== ====== ====== ======
Net Income $ 39 $3,669 $4,650 $6,879
Interest on convertible debentures -- 5 -- 35
------ ------ ------ ------
Adjusted net income $ 39 $3,674 $4,650 $6,914
====== ====== ====== ======
Earnings per share $ 0.01 $ 0.75 $ 0.76 $ 1.64
====== ====== ====== ======
</TABLE>
14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements contained in the Company's Form 10Q for the period ending
June 30, 1996 and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> JUN-30-1996
<CASH> 5,690
<SECURITIES> 6,710
<RECEIVABLES> 14,506
<ALLOWANCES> 0
<INVENTORY> 11,402
<CURRENT-ASSETS> 43,098
<PP&E> 7,623
<DEPRECIATION> 0
<TOTAL-ASSETS> 50,960
<CURRENT-LIABILITIES> 13,543
<BONDS> 38
0
0
<COMMON> 35,421
<OTHER-SE> 1,958
<TOTAL-LIABILITY-AND-EQUITY> 50,960
<SALES> 62,256
<TOTAL-REVENUES> 62,256
<CGS> 33,337
<TOTAL-COSTS> 33,337
<OTHER-EXPENSES> 20,490
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 48
<INCOME-PRETAX> 7,881
<INCOME-TAX> 3,231
<INCOME-CONTINUING> 4,650
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,650
<EPS-PRIMARY> 0.76
<EPS-DILUTED> 0.76
</TABLE>
