<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
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[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL QUARTER ENDED DECEMBER 31, 1999
[ ] 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 026240
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ALIGN-RITE INTERNATIONAL, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
CALIFORNIA 95-4528353
(STATE OF 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)
</TABLE>
(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.
<TABLE>
<S> <C>
CLASS OUTSTANDING AT FEBRUARY 1, 1999
Common Stock, $.01 par value 4,694,263 Shares
</TABLE>
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ALIGN-RITE INTERNATIONAL, INC.
INDEX
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
Item 1. Financial Statements (unaudited)
Consolidated Balance Sheets at December 31, 1999 and March
31, 1999.................................................... 3
Consolidated Statements of Operations for the Three and Nine
Months ended December 31, 1999 and 1998..................... 4
Consolidated Statements of Comprehensive Income for the
Three and Nine Months ended December 31, 1999 and 1998...... 5
Consolidated Statements of Cash Flows for the Three and Nine
Months ended December 31, 1999 and 1998..................... 6
Notes to Consolidated Financial Statements.................. 7
Management's Discussion and Analysis of Results of
Item 2. Operations and Financial Condition.......................... 10
Quantitative and Qualitative Disclosures about Market
Item 3. Risk........................................................ 12
PART II. FINANCIAL INFORMATION
Item 6. Exhibits and Reports on Form 8-K............................ 13
Signatures.................................................. 14
Statement Regarding Computation of Earnings Per Share....... 15
</TABLE>
2
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ALIGN-RITE INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED 000'S OMITTED)
ASSETS
<TABLE>
<CAPTION>
AT DECEMBER 31, AT MARCH 31,
1999 1999
--------------- ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 4,640 $ 6,328
Accounts receivable, net.................................. 8,612 7,171
Inventories, primarily raw materials...................... 4,363 2,882
Prepaid and other current assets.......................... 1,414 1,318
------- -------
Total current assets.............................. 19,029 17,699
Property and equipment, net................................. 71,113 61,332
Intangible assets, net...................................... 8,321 809
Other assets................................................ 987 451
------- -------
Total assets...................................... $99,450 $80,291
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Trade accounts payable.................................... $ 6,659 $ 4,182
Equipment payables, current portion....................... 2,403 7,636
Accrued expenses and other................................ 2,986 3,328
Taxes payable............................................. 592 423
------- -------
Total current liabilities......................... 12,640 15,569
Equipment payables, long-term portion....................... 4,500 10,008
Long-Term Debt.............................................. 30,000 5,200
Deferred taxes.............................................. 5,355 5,355
Other liabilities........................................... 699 857
Shareholders' equity:
Common stock:
Authorized -- 35,000 shares $.01 par value;
Issued -- 4,679 and 4,540 shares, respectively......... 47 45
Additional paid-in capital.................................. 19,323 19,045
Retained earnings........................................... 26,696 24,098
Accumulated other comprehensive income...................... 190 114
------- -------
Total shareholders' equity........................ 46,256 43,302
------- -------
Total liabilities and shareholders' equity........ $99,450 $80,291
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
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ALIGN-RITE INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31,
(UNAUDITED -- 000'S OMITTED, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED ENDED
----------------- -----------------
1999 1998 1999 1998
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net sales............................................... $14,306 $12,082 $43,241 $39,765
Cost of sales........................................... 10,381 8,470 30,345 25,654
------- ------- ------- -------
Gross profit.......................................... 3,925 3,612 12,896 14,111
Selling, general and administrative expenses............ 2,318 2,115 7,107 6,458
Research and development................................ 329 237 895 654
------- ------- ------- -------
Income from operations................................ 1,278 1,260 4,894 6,999
Interest and other income (expense), net................ (468) (75) (846) (37)
------- ------- ------- -------
Income before provision for income taxes................ 810 1,185 4,048 6,962
Provision for income taxes.............................. 284 380 1,450 2,561
------- ------- ------- -------
Net income.............................................. $ 526 $ 805 $ 2,598 $ 4,401
======= ======= ======= =======
Per share information:
Basic earnings per share.............................. $ .11 $ .18 $ .56 $ .98
Shares used in per share computation.................. 4,678 4,497 4,620 4,481
Diluted earnings per share............................ $ .11 $ .17 $ .53 $ .90
Shares used in per share computation.................. 4,971 4,860 4,925 4,866
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
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ALIGN-RITE INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31,
(UNAUDITED -- 000'S OMITTED)
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED ENDED
------------ ---------------
1999 1998 1999 1998
----- ---- ------ ------
<S> <C> <C> <C> <C>
Net income.................................................. $ 526 $805 $2,598 $4,401
Other comprehensive income:
Foreign currency translation adjustments.................. (727) 48 76 88
----- ---- ------ ------
Comprehensive income (loss)................................. $(201) $853 $2,674 $4,489
===== ==== ====== ======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
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ALIGN-RITE INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED DECEMBER 31,
(UNAUDITED -- 000'S OMITTED)
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income.................................................. $ 2,598 $ 4,401
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization.......................... 5,793 4,306
Compensation related to stock options granted.......... 83 83
Changes in assets and liabilities:
Accounts receivable.................................... (1,436) 1,154
Inventories............................................ (1,282) (193)
Prepaids and other assets.............................. (632) (1,625)
Trade accounts payable................................. 2,468 300
Equipment payables -- current portion.................. (5,233) 5,703
Accrued expenses and other liabilities................. (318) 695
-------- --------
Net cash provided by operating activities......... 2,041 14,824
-------- --------
Cash flows from investing activities:
Purchase of property and equipment..................... (15,188) (19,884)
Payments for business acquisition, net of cash
received.............................................. (13,525)
-------- --------
Net cash (used in) investing activities........... (28,713) (19,884)
-------- --------
Cash flows from financing activities:
Proceeds from line of credit........................... 24,800 5,200
Stock options exercised................................ 177 145
-------- --------
Net cash provided by financial activities......... 24,977 5,345
Effect of exchange rate on cash............................. 7 27
Net increase (decrease) in cash............................. (1,688) 312
-------- --------
Cash and cash equivalents, beginning of year................ 6,328 5,523
-------- --------
Cash and cash equivalents, end of year...................... $ 4,640 $ 5,835
======== ========
Supplemental disclosure of cash flow information:
Cash paid during the three months ended December 31
for:
Income taxes...................................... $ 671 $ 1,064
Interest paid..................................... 468 --
Non-cash activities:
Equipment purchases to be refinanced under available
lines of credit....................................... $ 4,500 $ --
Assets recognized in connection with business acquisition:
Property and equipment................................. 5,455 --
Goodwill............................................... 7,875 --
Other current assets................................... 195 --
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
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ALIGN-RITE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31, 1999
(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"), Align-Rite GmbH ("ARGMBH") and its newly acquired subsidiary,
Align-Rite Inc. ("ARF"). ARII and its subsidiaries are collectively referred to
as the "Company". All significant intercompany accounts and transactions have
been eliminated.
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statement presentation. In the opinion of management, the accompanying
consolidated balance sheets and related interim consolidated statements of
operations and cash flows include all adjustments (consisting only of normal
recurring items) considered necessary for their fair presentation. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets, liabilities, revenues and expenses.
Actual results could differ from those estimates. The consolidated results of
operations for the nine months ended December 31, 1999 are not necessarily
indicative of results to be expected for the year ended March 31, 2000. The
information included in this Form 10-Q should be read in conjunction with the
Company's audited consolidated financial statements and notes thereto as of
March 31, 1999 and 1998 and for the three years in the period ended March 31,
1999 as filed on Form 10-K. Certain items shown in the prior financial
statements have been reclassified to conform with the presentation of the
current period.
The principal activity of ARII, ARI and ARBV is that of holding companies
into which their respective subsidiaries are consolidated. ARC, ARL, ARGMBH and
ARF manufacture and market quality photomasks in the United States and Europe.
Photomasks, which are precision photographic quartz or glass plates, contain
microscopic images of integrated circuits. These are used primarily by
semiconductor manufacturers as master images to transfer circuit patterns onto
silicon wafers during the fabrication of integrated circuits.
The Company maintains a policy and practice of restricting ARC from paying
dividends or making certain other distributions in order to minimize tax
consequences resulting from its current corporate structure.
2. SEGMENT INFORMATION
The Company adopted SFAS No. 131 in fiscal year 1999. The Company has two
reportable business segments: The United States and Europe.
The Company conducts operations worldwide and is managed on a geographical
basis, with those geographic segments being the United States and Europe. The
United States segment, which is based in Burbank, California and Melbourne,
Florida, covers the U.S., Canada and Latin America. The European segment, which
is based in Bridgend, Wales and Heilbronn, Germany, covers all European
countries. Sales to Asia Pacific from both segments are immaterial to the group
and therefore, not deemed a separate segment. The Company's operations are
primarily concentrated in the United States and Europe.
The accounting policies of the geographic segments are the same as those
described in the summary of significant accounting policies. The Company
allocates resources to and evaluates performance of its geographic segments
based on operating income. Transfers between geographic areas have not been
significant and are recorded using internal transfer prices set by the Company.
7
<PAGE> 8
ALIGN-RITE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31, 1999
(UNAUDITED)
The following tables set forth, for the periods indicated, relevant profit
and loss indicators by geographic area. (Unaudited -- 000's Omitted)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED DECEMBER 31, 1999
---------------------------------------------
UNITED STATES EUROPE TOTAL
--------------- --------- ---------
<S> <C> <C> <C>
Net revenue from unaffiliated customers................ $26,007 $17,234 $43,241
======= ======= =======
Income from operations................................. $ 969 $ 3,925 $ 4,894
======= ======= =======
Depreciation and amortization.......................... $ 3,136 $ 2,657 $ 5,793
======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED DECEMBER 31, 1998
---------------------------------------------
UNITED STATES EUROPE TOTAL
--------------- --------- ---------
<S> <C> <C> <C>
Net revenue from unaffiliated customers................ $21,942 $17,823 $39,765
======= ======= =======
Income from operations................................. $ 2,853 $ 4,146 $ 6,999
======= ======= =======
Depreciation and amortization.......................... $ 2,200 $ 2,106 $ 4,306
======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED DECEMBER 31, 1999
----------------------------------------------
UNITED STATES EUROPE TOTAL
--------------- -------- ---------
<S> <C> <C> <C>
Net revenue from unaffiliated customers............... $8,815 $5,491 $14,306
====== ====== =======
Income from operations................................ $ (110) $1,388 $ 1,278
====== ====== =======
Depreciation and amortization......................... $1,157 $ 748 $ 1,905
====== ====== =======
</TABLE>
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED DECEMBER 31, 1998
----------------------------------------------
UNITED STATES EUROPE TOTAL
--------------- -------- ---------
<S> <C> <C> <C>
Net revenue from unaffiliated customers............... $6,879 $5,203 $12,082
====== ====== =======
Income from operations................................ $ 725 $ 535 $ 1,260
====== ====== =======
Depreciation and amortization......................... $ 610 $ 886 $ 1,496
====== ====== =======
</TABLE>
The following table sets forth, for the periods indicated, long-lived
assets by geographic areas. (Unaudited -- 000's Omitted)
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1999 1999
------------ ---------
<S> <C> <C>
United States............................................... $49,255 $33,239
Europe...................................................... 30,178 28,902
------- -------
Total............................................. $79,433 $62,141
======= =======
</TABLE>
The following table sets forth, for the periods indicated, identifiable
assets by geographic area. (Unaudited -- 000's Omitted)
<TABLE>
<CAPTION>
DECEMBER 31, 1999 MARCH 31, 1999
----------------- --------------
<S> <C> <C>
United States........................................... $61,403 $42,045
Europe.................................................. 38,047 38,246
------- -------
Total......................................... $99,450 $80,291
======= =======
</TABLE>
8
<PAGE> 9
ALIGN-RITE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31, 1999
(UNAUDITED)
3. ACQUISITION OF HARRIS CORPORATION (INTERSIL) PHOTOMASK BUSINESS UNIT
On July 2, 1999, the Company acquired certain assets that are used in the
manufacture of photomasks from Harris Corporation (Intersil). The transaction
has been accounted for under the purchase method of accounting and resulted in
goodwill of approximately $7.9 million, with an amortization period of fifteen
years. The total purchase price, including acquisition expenses of $275,000, was
allocated among the assets acquired based on their estimated fair values as
follows:
<TABLE>
<S> <C>
Property & Equipment........................................ $ 5,455
Goodwill.................................................... 7,875
Other Assets................................................ 195
-------
$13,525
=======
</TABLE>
4. OTHER EVENTS
On January 10, 2000, Align-Rite International, Inc. ("Align-Rite") and
Photronics, Inc. ("Photronics") announced that they entered into an amendment,
dated January 10, 2000 (the "Amendment") to the Agreement and Plan of Merger
dated September 15, 1999 among Photronics, AL Acquisition Corp., a wholly owned
subsidiary of Photronics, and Align-Rite (the "Original Merger Agreement")
pursuant to which Photronics would acquire Align-Rite in a merger transaction
(the "Merger"). As amended by the Amendment, the Original Merger Agreement is
referred to below as the "Merger Agreement".
The Amendment provides, among other things, that: (1) each outstanding
share of Align-Rite's common stock will be converted into .85 shares of
Photronics' common stock (the "Conversion Ratio"), (ii) the date by which either
party may terminate the Merger Agreement if the Merger has not occurred by March
31, 2000, and (iii) Align-Rite may terminate the Merger Agreement if the average
price per share of Photronics' common stock is less than $18.82 during a certain
twenty-day trading period prior to the Align-Rite shareholders meeting called to
vote upon the Merger.
The Merger remains subject to the approval of Align-Rite's shareholders,
and to various regulatory and closing conditions, including compliance with the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. However,
Photronics' shareholders will not be required to approve the Merger under rules
of the Nasdaq Stock market, as the maximum number of shares of Photronics common
stock to be issued in the Merger will not equal or exceed 20% of Photronics'
outstanding shares of common stock. In connection with the execution of the
Amendment, certain major shareholders of Align-Rite have entered into an
agreement with Photronics pursuant to which they reaffirmed, in light of the
Amendment, their prior agreement to, among other things, vote or cause to be
voted their shares of Align-Rite common stock in favor of the Merger.
9
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
Net sales for the three and nine months ended December 31, 1999, increased
18% to $14,306,000 and 9% to $43,241,000 respectively, compared to $12,082,000
and $39,765,000 in the same periods in the prior fiscal year. The increase in
net sales for the quarter of 9% is due to the Company's acquisition of certain
assets of Harris Corporation (Intersil) Photomask Business Unit on July 2, 1999.
Net sales reflect a decline in incremental orders from several of the Company's
existing customers and the postponement of product qualification programs with
new customers following the Company's September 15, 1999 announcement of its
agreement to merge with Photronics, Inc. During the quarter, the Company also
experienced a continued decline in photomask demand from its customers in the
thin film head industry. Despite the decline from the thin film head industry
and the recent postponement of production qualification programs, the Company
continues to believe the strategic investments in leading edge equipment and
infrastructure during the past year have positioned Align-Rite to capitalize on
the growing demand for 0.25 micron and below photomask applications.
European net sales for the three months ended December 31, 1999 increased
6% to $5,491,000, compared with $5,203,000 for the same period in the prior
year. United States net sales for the three months ended December 31, 1999
increased 28% to $8,815,000, compared with $6,879,000 in the same period of the
prior year. This increase in U.S. sales was entirely due to the acquisition of
Harris Corporation (Intersil). Absent the acquisition, U.S. sales would have
been down approximately 13% compared to the same period in the prior year.
Gross profit as a percentage of net sales for the three and nine months
ended December 31, 1999, decreased to 27.4% and 29.8%, compared to 29.9% and
35.5% in the same period in the prior year. The decrease in gross profit as a
percentage of net sales for the three and nine months ended December 31, 1999 is
primarily attributable to higher operating costs, lower capacity utilization and
product pricing pressures. The adverse impact on sales from the thin film head
industry and the postponement of product qualification programs with new
customers following the Company's September 15, 1999 announcement of its
agreement to merge coupled with the Company's commitment to increase its
capabilities, resulted in higher fixed costs primarily depreciation expense,
which for the nine months ended December 31, 1999 increased 32% to $5,692,000,
compared to $4,306,000 in the prior fiscal year. As the Company continues to
invest in capital equipment to keep pace with increased demand, the Company
anticipates that its gross profit will fluctuate slightly based on the timing of
equipment purchases and related increases in depreciation expense.
Selling, general and administrative expenses include salaries of sales
personnel, marketing expense, general and administrative expense and product
distribution expense. Selling, general and administration expenses for the three
and nine months ended December 31, 1999 increased slightly to $2,318,000 and
$7,107,000, compared with $2,115,000 and $6,458,000, in the prior fiscal year.
Selling general and administrative expenses as a percentage of net sales
increased for the quarter to 16.2%, compared to 17.5% in the same periods due to
decreased revenue leverage. The Company believes selling, general and
administrative, as a percentage of sales will remain at approximately 16%, as
the Company continues to expand.
Research and development ("R&D") expense is comprised primarily of
personnel costs, material consumption, depreciation and engineering costs. The
Company spent $329,000 for the three months ended December 31, 1999, compared to
$237,000 in the related prior period. The Company believes it will continue to
spend approximately 2% of sales on R&D related projects. The Company anticipates
that R&D expense will continue to increase in absolute terms and as a percentage
of sales in the future, reflecting its strategy of advancing their technology.
Net other expense of approximately $468,000 and $846,000 for the three and
nine months ended December 31, 1999 respectively, were principally the result of
interest expense associated with the Company's $30 million draw-down on its
available line-of-credit. As the Company draws down further on its available
line, interest expense will continue to increase in the future.
For the three and nine months ended December 31, 1999, the Company provided
for federal and state income tax at an estimated combined rate of 35% for the
quarter which is slightly lower than previous quarter,
10
<PAGE> 11
and the nine months decreased to 35.8% from 36.8% due to a geographic shift in
earnings to a region with less tax and also the effect of lower state taxes due
to application of available credits from capital expenditure purchases.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and cash equivalents were $4,640,000 at December 31,
1999. Net cash provided by operating activities amounted to $2,041,000 for the
nine months ended December 31, 1999, compared to $14,824,000 provided by
operations for the same period in the prior year. Operating cash flows for the
nine months ended December 31, 1999 reflect lower net income, increased non-cash
charges related to depreciation and amortization expenses and a significant
decrease in equipment payables primarily related to fixed assets purchased that
were paid down during the nine months ended December 31, 1999.
For the nine months ended December 31, 1999, cash used in investing
activities totaled $28,713,000 compared to $19,884,000 in the related prior year
period. The Company's investing activities during the nine months ended December
31, 1999 increased substantially during the quarter due to the acquisition of
Harris Corporation's photomask business unit. Cash from financing activities
included $24,800,000 draw down from its $35 million line-of-credit. As of
December 31, 1999, the Company had borrowed $30 million from its available line.
Equipment payables for which the Company has the ability and intent to refinance
utilizing its available line-of-credit during fiscal year 2000 have been
classified as long-term at December 31, 1999.
Management believes that funds generated from operations together with its
cash and cash equivalents will be sufficient to meet the Company's normal
operating requirements in the near term. 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 bankers 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.
On July 2, 1999, the Company completed the acquisition of Harris Imaging
Technology Group (ITG), a photomask manufacturer located in Melbourne, Florida.
Under the terms of the asset purchase agreement, the purchase price paid by the
Company was $13,250,000. The Company has borrowed $13,250,000 from its existing
line-of-credit and has increased its line-of-credit from $25 million to $35
million with $30 million drawn down as of December 31, 1999.
Readiness for Year 2000
As of the date of this filing, the Company has not experienced any Year
2000 problems that have affected its results of operations, its financial
position or its cash flows. The Company will continue to monitor its internal
operations for non-compliant components. The Company is also monitoring its open
transactions with customers and vendors to ensure that there are no undetected
problems that could have a material future impact.
As of the date of this filing, the Company believes there are no remaining
significant risks or exposure as a result of the Year 2000 issue.
Foreign Operations and Inflation
Foreign operations are subject to certain risks inherent to conducting
business abroad, including product prices 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 and cash flows. 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 impact 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.
11
<PAGE> 12
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 and were offset by some degree by periodic increases in the prices
of its products or higher manufacturing capacity utilization rates. 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
financial positions, results of operations and cash flows will not be materially
affected by inflationary trends in the future.
Euro Conversion. A single currency called the euro was introduced in Europe
on January 1, 1999. Eleven of the fifteen member countries of the European Union
("EU") adopted the euro as their common legal currently as of that date. Fixed
conversion rates between these participating countries' existing currencies (the
"legacy currencies") and the euro were established as of that date. The legacy
currencies will remain legal tender as denominations of the euro until at least
2002 (but not later than July 1, 2002). During this transition period, parties
may settle transactions using either the euro or the participating country's
legal currency.
The Company is still in the process of evaluating the effect, if any, of
the euro on its pricing of products in the eleven participating countries. The
Company does not expect a material impact on its results of operations from
foreign currency gains or losses as a result of its transition to the euro as
the functional currency for its subsidiaries based in EU countries.
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 that its gross profit will fluctuate based upon the timing of
equipment purchases; (ii) the Company's belief that selling, general and
administrative costs as a percentage of sales should remain consistent; (iii)
the Company's belief that R&D expenses will continue to increase as a percentage
of sales; (iv) the sufficiency of funds to meet the Company's normal operating
requirements over the next 12 months; and (v) the Company's belief regarding
year 2000 compliance of its internal business software and systems and its
current product offerings. 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.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Reference is made to "Quantitative and Qualitative Disclosures about Market
Risk" section of the Company's Annual Report on Form 10-K for the year ended
March 31, 1999.
12
<PAGE> 13
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 6. EXHIBITS AND REPORTS OF FORM 8-K
(a) Exhibits
11.1 Statement regarding computation of Net Income per common share.
27 Financial Data Schedule
(b) Reports on Form 8-K.
On November 29, 1999, Align-Rite International, Inc. filed a report on Form
8-K relating to certain filings the Company had made with the Federal Trade
Commission and the Department of Justice and the receipt of additional
information from the Department of Justice.
On January 13, 2000, Align-Rite International, Inc., filed a report on Form
8-K relating to the amendment to the Agreement and Plan of Merger with
Photronics, Inc., as presented in a press release dated January 10, 2000.
13
<PAGE> 14
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: ____________ 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
14
<PAGE> 15
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
11.1 Statement regarding computation of Net Income per common
share.
27 Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 11.1
STATEMENT REGARDING COMPUTATION OF EARNINGS PER SHARE
ALIGN-RITE INTERNATIONAL, INC.
The following table provides a reconciliation of the numerator and
denominators of the basic and diluted per-share computations for the three and
nine months ended December 31, 1999 and 1998:
<TABLE>
<CAPTION>
INCOME SHARES PER SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
----------- ------------- ---------
<S> <C> <C> <C>
For the Three Months Ended December 31, 1999:
Basic EPS............................................ $ 526,000 4,678,000 $0.11
Effect of dilutive securities:
Stock Options..................................... -- 293,000
---------- ---------
Diluted EPS.......................................... $ 526,000 4,971,000 $0.11
========== =========
For the Three Months Ended December 31, 1998:
Basic EPS............................................ $ 805,000 4,497,000 $0.18
Effect of dilutive securities:
Stock Options..................................... -- 363,000
---------- ---------
Diluted EPS.......................................... $ 805,000 4,860,000 $0.17
========== =========
</TABLE>
<TABLE>
<CAPTION>
INCOME SHARES PER SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
----------- ------------- ---------
<S> <C> <C> <C>
For the Nine Months Ended December 31, 1999:
Basic EPS............................................ $2,598,000 4,620,000 $0.56
Effective of dilutive securities:
Stock Options..................................... -- 305,000
---------- ---------
Diluted EPS.......................................... $2,598,000 4,925,000 $0.53
========== =========
For the Nine Months Ended December 31, 1998:
Basic EPS............................................ $4,401,000 4,481,000 $0.98
Effective of dilutive securities:
Stock Options..................................... -- 385,000
---------- ---------
Diluted EPS.......................................... $4,401,000 4,866,000 $0.90
========== =========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-END> DEC-31-1999
<CASH> 4,640
<SECURITIES> 0
<RECEIVABLES> 8,612
<ALLOWANCES> 0
<INVENTORY> 4,363
<CURRENT-ASSETS> 19,029
<PP&E> 71,113
<DEPRECIATION> 0
<TOTAL-ASSETS> 99,450
<CURRENT-LIABILITIES> 12,640
<BONDS> 0
0
0
<COMMON> 47
<OTHER-SE> 46,209
<TOTAL-LIABILITY-AND-EQUITY> 99,450
<SALES> 43,241
<TOTAL-REVENUES> 43,241
<CGS> 30,345
<TOTAL-COSTS> 30,345
<OTHER-EXPENSES> 8,002
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 846
<INCOME-PRETAX> 4,048
<INCOME-TAX> 1,450
<INCOME-CONTINUING> 2,598
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,598
<EPS-BASIC> .56
<EPS-DILUTED> .53
</TABLE>
