<PAGE> 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, 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. . . 0-26240 . . . .
. . .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, 1996
Common Stock, $.01 par value 4,374,588 Shares
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ALIGN-RITE INTERNATIONAL INC.
INDEX
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Page
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Condensed Consolidated Balance Sheet at June 30
1996 and March 31, 1996 3
Condensed Consolidated Statement of Earnings
for the three months ended June 30, 1996 4
Condensed Consolidated Statement of Cash Flows
for the three months ended June 30, 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. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 9
SIGNATURES 10
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Align-Rite International Inc.
Consolidated Condensed Balance Sheets
(Unaudited - 000's omitted, except per share data.)
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At June 30 At March 31
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ASSETS 1996 1996
---------- -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11,845 $ 12,707
Accounts receivable net . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,340 5,940
Inventories, primarily raw materials . . . . . . . . . . . . . . . . . . . . . 1,798 1,816
Prepaid and other current assets . . . . . . . . . . . . . . . . . . . . . . . 1,491 1,429
-------- --------
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . 21,474 21,892
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . 12,645 8,517
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 12
-------- --------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 34,131 $ 30,421
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Trade accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,533 $ 2,770
Accrued expenses and other . . . . . . . . . . . . . . . . . . . . . . . . . . 2,463 1,868
-------- --------
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . 6,996 4,638
Other liabilities and deferred taxes . . . . . . . . . . . . . . . . . . . . . . 471 499
Shareholders' equity:
Common Stock:
Authorized - 35,000 shares $.01 par value; Issued 4,314 shares and 4,346
shares at June 30, 1996 and March 31, 1996, respectively . . . . . . . . . . . 44 43
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . 17,857 17,829
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,709 7,369
Foreign currency translation adjustment . . . . . . . . . . . . . . . . . . 54 43
-------- --------
Total shareholders' equity . . . . . . . . . . . . . . . . . . . . . . . 26,664 25,284
-------- --------
Total liabilities and shareholders' equity . . . . . . . . . . . . . $ 34,131 $ 30,421
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated condensed
financial statements.
3
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Align-Rite International Inc.
Consolidated Condensed Statements of Operations
For the Three Months Ended June 30, 1996 and 1995
(Unaudited - 000's omitted, except per share data)
<TABLE>
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Three Months Ended
1996 1995
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<S> <C> <C>
Net sales . . . . . . . . . . . . . . . . . . . . . . $ 9,513 $ 7,647
Cost of Sales . . . . . . . . . . . . . . . . . . 5,918 4,769
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Gross profit . . . . . . . . . . . . . . . . . . . 3,595 2,878
Selling, general and administrative . . . . . . . . . 1,554 1,347
------- -------
Income from operations . . . . . . . . . . . . . . 2,041 1,531
Interest income (expense) and other income, net . . . 122 (63)
Income before provision for income taxes . . . . . . 2,163 1,468
------- -------
Provision for income taxes . . . . . . . . . . . . . 823 412
Net income . . . . . . . . . . . . . . . . . . . . . 1,340 1,056
======= =======
Per share information:
Shares used - per share computation: . . . . . . . . 4,803 3,514
Earnings per share . . . . . . . . . . . . . . . . .28 .30
</TABLE>
The accompanying notes are an integral part of these consolidated condensed
financial statements.
4
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ALIGN-RITE INTERNATIONAL INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED JUNE 30, 1996 AND 1995
(UNAUDITED - 000'S OMITTED)
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1996 1995
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Cash flows from operating activities:
Net income: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,340 $ 1,056
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . 633 462
Minority interest . . . . . . . . . . . . . . . . . . . . . . - 6
(Increase) in:
Accounts receivable net . . . . . . . . . . . . . . . . . . . (365) (82)
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . 30 (288)
Prepaids and other assets . . . . . . . . . . . . . . . . . . (55) (64)
Deferred initial public offering costs . . . . . . . . . . . - (1,168)
Increase (decrease) in:
Trade accounts payable . . . . . . . . . . . . . . . . . . . 1,763 879
Accrued expenses and other liabilities . . . . . . . . . . . 513 362
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Net cash provided by operating activities . . . . . . . . . 3,859 1,163
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Cash flows from investing activities
Purchase of property and equipment . . . . . . . . . . . . . . . (4,755) (433)
------- --------
Net cash used in investing activities . . . . . . . . . . . (4,755) (433)
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Cash flows from financing activities:
Principal payments on borrowings (notes) . . . . . . . . . . . . - (73)
Repayment of (obligation under) capital leases . . . . . . . . . - (271)
Stock options exercised . . . . . . . . . . . . . . . . . . . . . 28 -
------- --------
Net cash provided by (used in) financing activities . . . . 28 (344)
------- --------
Effect of exchange rate on cash . . . . . . . . . . . . . . . . . 6 24
Net increase (decrease) in cash . . . . . . . . . . . . . . . . . (862) 410
------- --------
Cash and cash equivalents, beginning of year . . . . . . . . . . . 12,707 3,751
------- --------
Cash and cash equivalents, end of year . . . . . . . . . . . . . . $11,845 $ 4,161
======= ========
</TABLE>
The accompanying notes are an integral part of these consolidated condensed
financial statements.
5
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ALIGN-RITE INTERNATIONAL INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
THREE AND SIX MONTHS ENDED JUNE 30, 1996
(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"), and Align-Rite Limited ("ARL"). 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 and ARI is that of holding companies into which
their respective subsidiaries are consolidated. ARC and ARL 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 underwent 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.
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
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Item 2. Management's Discussions and Analysis of Results of Operations and
Financial Condition.
Net sales for the three months ended June 30, 1996, increased 24.4% to
$9,513,000, as compared with $7,647,000 in the prior fiscal year. The increase
resulted from an increase in both the Company's United Kingdom ("U.K.") and
United States ("U.S.") operations. U.K. net sales for the three months ended
June 30, 1996 increased 32.2% to $3,303,000 compared with $2,499,000 in the
prior fiscal year. U.S. net sales for the three months ended June 30, 1996,
increased 20.6% to $6,210,000, compared with $5,148,000 in the prior fiscal
year. The increase in net sales is attributable to increased demand in
photomasks as well as additional capacity.
Gross profit as a percentage of net sales for the three months ended June 30,
1996 increased slightly to 37.8% compared with 37.6%. The slight increase in
gross profit as a percentage of net sales for the three months ended June 30,
1996 is primarily attributable to better utilization of assets, better yield on
certain product which were offset by an increase in depreciation relating to
capacity expansion in the U.S. Depreciation expense in the first quarter of
fiscal year 1997 was $633,000, compared with $462,000 for the same period in the
prior year.
Selling, general and administrative expenses increased 15.4% to $1,554,000 for
the three months ended June 30, 1996, compared with $1,347,000 in the prior
fiscal year. As a percentage of net sales, selling, general and administrative
expenses for the three months ended June 30, 1996 decreased to 16.4% as
compared to 17.7% for the same period in the prior fiscal year.
For the three months ended June 30, 1996, the Company provided for Federal and
State income tax at an estimated combined effective annual tax rate of
approximately 38.1%, as compared to approximately 28.1% for the same period for
the prior fiscal year. The prior quarter rate was lower due to the utilization
of net operating loss carryforwards in the United Kingdom which were fully
utilized in 1996.
7
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Liquidity and Capital Resources
The Company's cash and cash equivalents were $11,845,000 at June 30, 1996. Net
cash provided by operating activities contributed $3,859,000 for the three
months ended June 30,1996 compared to $1,163,000 in the prior fiscal year.
Operating cash flows for the three months ended June 30, 1996 reflect higher
net income and higher non cash charges related to increased depreciation, along
with increases in Accounts Payable offset by increases in Accounts Receivable
and prepaid and other assets from which deposits on equipment were transferred
to Property & Equipment.
Accounts Receivable increased $365,000 during the three months ended
June 30, 1996, primarily as a result of higher sales levels. Management
believes that the Company's reserve for bad debts is adequate. Inventory
levels slightly decreased during the three months ended June 30, 1996 but are
deemed to be at adequate levels for the short term. Due to short turnaround
times and the customized nature of photomasks, the Company does not maintain
any material amount of finished good inventory thereby keeping the Company's
inventory turnover low.
For the three months ended June 30, 1996, cash used in investing activities
totaled $14,755,000 compared to $433,000 in the prior year. The Company's
capital expenditures were primarily for equipment which will support and
complement new process development and higher end products.
Management believes that funds generated from operations together with its cash
and cash equivalents will be sufficient to meet its normal operating
requirements during the coming 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 which have increased from $1,000,000 to $7,500,000 under which no
amounts are currently outstanding, 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
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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,
1996.
9
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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 12, 1996 . . . . . Align-Rite International, Inc. . . . .
James Mac Donald
Chairman of the Board, President &
Chief Executive Director
Petar Katurich
Chief Financial Officer & Secretary
10
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 11,845
<SECURITIES> 0
<RECEIVABLES> 6,340
<ALLOWANCES> 0
<INVENTORY> 1,798
<CURRENT-ASSETS> 21,474
<PP&E> 12,645
<DEPRECIATION> 0
<TOTAL-ASSETS> 34,131
<CURRENT-LIABILITIES> 6,996
<BONDS> 0
0
0
<COMMON> 44
<OTHER-SE> 26,620
<TOTAL-LIABILITY-AND-EQUITY> 34,131
<SALES> 9,513
<TOTAL-REVENUES> 9,513
<CGS> 5,918
<TOTAL-COSTS> 5,918
<OTHER-EXPENSES> 1,554
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 122
<INCOME-PRETAX> 2,163
<INCOME-TAX> 823
<INCOME-CONTINUING> 1,340
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,340
<EPS-PRIMARY> .28
<EPS-DILUTED> .28
</TABLE>
