SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K/A
Amendment No. 1
Current Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): June 7, 2000
Photronics, Inc.
(Exact name of registrant as specified in its charter)
Connecticut 0-15451 06-0854886
(State or other (Commission (IRS Employer
jurisdiction File Number) Identification No.)
of Incorporation)
1061 East Indiantown Road, Jupiter, FL 33477
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (561) 745-1222
______________________________________________________________
(Former name or former address, if changed since last report.)
On June 21, 2000, Photronics, Inc. ("Photronics") filed a Current Report
on Form 8-K to report that on June 7, 2000, Photronics consummated its
merger acquisition of Align-Rite International, Inc. This Form 8-K/A
amends Item 7 of such previously filed Form 8-K in order to file the
financial statements required thereby.
Item 7. Financial Statements and Exhibits
(a) Financial statements of business acquired;
(b) Supplementary Consolidated Financial Statements
The financial statements required by this Item 7(a), (b)
are filed herewith as Exhibits 99.1 and 99.2
(c) Exhibits
See Exhibits Index
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 hereunto duly authorized.
PHOTRONICS, INC.
/s/ Jeffrey P. Moonan
---------------------
June 30, 2000 By: Jeffrey P. Moonan
Title: Executive Vice President
Finance & Administration
EXHIBITS INDEX
Exhibit No. Description
- ----------- -----------
99.1 Supplementary Consolidated Financial Statements
of Photronics, Inc.
99.2 Consolidated Financial Statements
of Align-Rite International, Inc.
Exhibit 99.1
PHOTRONICS, INC. AND SUBSIDIARIES
SUPPLEMENTARY CONSOLIDATED FINANCIAL STATEMENTS
TABLE OF CONTENTS
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Independent Auditors' Report
Report of Independent Accountants
Supplementary Consolidated Balance Sheets at
April 30, 2000 (unaudited), October 31, 1999
and November 1, 1998
Supplementary Consolidated Statements of
Operations for the six months ended
April 30, 2000 and May 2, 1999 (unaudited)
and for the years ended October 31, 1999,
November 1, 1998 and November 2, 1997
Supplementary Consolidated Statements of
Shareholders' Equity for the six months
ended April 30, 2000 (unaudited)
and for the years ended October 31, 1999,
November 1, 1998 and November 2, 1997
Supplementary Consolidated Statements of
Cash Flows for the six months ended
April 30, 2000 and May 2, 1999 (unaudited)
and for the years ended October 31, 1999,
November 1, 1998 and November 2, 1997
Notes to Supplementary Consolidated
Financial Statements
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations for the Six Months Ended April 30, 2000
and May 2, 1999 and for the Years Ended October 31, 1999,
November 1, 1998 and November 2, 1997
OVERVIEW
On June 7, 2000, Photronics, Inc. ("Photronics" or the "Company"),
completed its merger with Align-Rite International, Inc. ("Align-Rite"), an
independent publicly traded manufacturer of photomasks in the United States
and Europe. Under the terms of the merger agreement, each of the 4,731,232
shares of common stock of Align-Rite issued and outstanding as of June 7,
2000 was converted into .85 shares of common stock of Photronics. Cash will
be paid in lieu of the issuance of any fractional shares of Photronics that
would otherwise be issued. Any stock options to acquire Align-Rite common
stock that had not been exercised as of June 7, 2000 became fully vested
options to acquire Photronics common stock in accordance with the Merger
Agreement. The transaction was accounted for as a pooling-of-interests.
The supplementary consolidated financial statements do not include
estimated expenses of approximately $5.5 million relating to costs incurred
in connection with this transaction. Such costs consisted primarily of fees
for investment bankers, attorneys, accountants, financial printing and other
related charges. These costs will be charged to income in the third quarter
of fiscal 2000.
The supplementary consolidated financial statements, the accompanying notes
and this management discussion and analysis have been restated to reflect the
Company's financial position, results of operations and cash flows as if Align-
Rite was a consolidated, wholly-owned subsidiary of the Company for all periods
presented.
A significant portion of the changes in Photronics' results of operations
over the course of the three years ended October 31, 1999 are attributable to
expansion of the Company's international operations in Europe and Asia. In
fiscal 1996, Photronics established its first operations outside of the United
States by acquiring operations in the U.K., and in Switzerland, opening a new
manufacturing facility in Singapore and acquiring a minority interest in an
independent photomask manufacturer in Korea. In addition, during fiscal 1997
the Company acquired an independent photomask manufacturer in Germany. These
facilities, together with the Company's U.S. facilities, comprise a global
manufacturing network supporting semiconductor fabricators in the Asian,
European and North American markets. As a result of the Company's
globalization, revenues from foreign operations have grown to approximately
22.0% in 1999 compared to 20.8% in 1998 and 15.1% in 1997. Management believes
that this trend will continue. Substantially all of the Company's consolidated
Asian sales have been denominated in U.S. Dollars resulting in minimal foreign
currency exchange risk on transactions in that region.
In addition to its international expansion, on December 31, 1997, the
Company acquired the internal photomask manufacturing operations of Motorola,
Inc. in Mesa, Arizona, and in February 1998, commenced operations in its newly
constructed Austin, Texas facility. The Company also acquired Harris
Corporation's Imaging Technology Group (ITG) semiconductor business unit, a
photomask manufacturer located in Melbourne, Florida on July 2, 1999. The
Company's growth has also been affected by the rapid technological changes
taking place in the semiconductor industry resulting in a greater mix of high-
end photomask requirements for more complex integrated circuit designs.
A cyclical slow-down experienced by the semiconductor industry began
impacting the release of new integrated circuit designs to photomask
manufacturers in the middle of fiscal 1998. As a result, the Company
experienced weakness in photomask demand and accentuated competitive pressures,
especially for more mature technologies, during the second half of fiscal 1998.
During fiscal 1999, the Company continued to see a weakness in selling prices
for more mature technologies, but began experiencing an increase in unit volumes
and a better mix of orders for high-end technology products. The Company cannot
predict the duration of such cyclical industry conditions or their impact on its
future operating results.
Both revenues and costs have been affected by the increased demand for
higher technology photomasks which require more advanced manufacturing
capabilities but generally command higher average selling prices. To meet the
technological demands of its customers and position the Company for future
growth, the Company continues to make substantial investments in high-end
manufacturing capability both at existing and new facilities. The Company's
capital expenditures for new facilities and equipment to support its customers'
requirements for high technology products exceeded $275 million for the three
years ended October 31, 1999, resulting in significant increases in operating
expenses. Based on the anticipated technological changes in the industry, the
Company expects these trends to continue.
RESULTS OF OPERATIONS
Net Sales
Net sales for the six months ended April 30, 2000 increased 17.6% to $148.6
million, compared to $126.4 million for the six months ended May 2, 1999. The
increase resulted primarily from an increase in new design releases, principally
in the United States, coupled with an improved sales mix of high-end technology
products. The first six months of 1999 reflected a downturn in the global
semiconductor industry that resulted in a slow-down in new design releases and
price reductions for mature products. The Company continues to see weakness in
selling prices for mature technologies but has continued to benefit from its
investment in high-end manufacturing capability through a mix shift towards
high-end products.
Net sales for the fiscal year ended October 31, 1999 increased 3.0% to
$277.4 million, compared to $269.3 million in 1998. The increase was due to an
increase in sales from Photronics' European operations, partially offset by a
decrease in sales domestically and in Asia. European sales increased as a
result of higher unit volume. Sales in Asia decreased primarily as a result of
certain orders for Asian customers being manufactured in the United States. The
domestic decrease was primarily attributable to a decrease in average selling
prices on mature technologies, offset by higher unit volumes and a better mix
of high-end products.
Net sales for the fiscal year ended November 1, 1998 increased 14.4% to
$269.3 million, compared with $235.5 million in the prior year. Sales from
Photronics' international manufacturing operations accounted for approximately
61% of the increase. The remaining portion of the growth resulted from the new
Mesa and Austin operations and increased volume from the Company's other U.S.
operations during the first six months of 1998. These increases were partially
offset by pricing pressures and lower volumes in the second half of the year
precipitated generally by the cyclical slow-down in the semiconductor industry.
Gross Margin
Gross margins for the six month period ended April 30, 2000 increased to
31.9% from 28.3% for the corresponding prior year period. The gross margin
increase in 2000 was attributable to a greater mix of high-end revenues,
increased capacity utilization, and efficiencies realized from the Company's
recent restructuring.
Gross margins for the year ended October 31, 1999 decreased to 30.3% of
sales compared to 36.6% in 1998 principally because of higher depreciation and
other fixed costs incurred in anticipation of the industry's rapid move to
higher-end technologies. Depreciation and amortization increased 25.9% in 1999
to $45.0 million from $35.7 million in 1998. In addition, the Company
experienced higher equipment maintenance, materials and labor costs in fiscal
1999.
Gross margins for the year ended November 1, 1998 decreased to 36.6% of
sales compared to 38.4% in 1997 because of the lower sales in the second half
of 1998 and higher fixed costs resulting from the strategic investments in new
facilities and capital equipment. Depreciation and amortization increased 58.2%
in 1998 to $35.7 million from $22.6 million in 1997. In addition, the Company
experienced lower margins in the formerly captive Mesa, Arizona operation that
was acquired earlier in the year.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased 10.6% to $21.2
million for the six months ended April 30, 2000, compared with $19.2 million for
the six months ended May 2, 1999. As a percentage of net sales, selling,
general and administrative expenses decreased to 14.3% for the six months ended
April 30, 2000 compared to 15.2% for the same period in the prior fiscal year.
The higher expenses were due principally to staffing and other costs associated
with the Company's expansion, both domestically and internationally, including
increases in information technology and communications costs.
Selling, general and administrative expenses increased 10.7% during 1999
to $40.1 million, or 14.5% of sales, from $36.2 million, or 13.5% of sales in
1998. The increase was primarily due to growth related expenses including
information systems and communications costs which were expended to ensure an
infrastructure commensurate with Photronics' expansion. Other growth-related
costs, including compensation and travel, also increased in 1999.
Selling, general and administrative expenses increased 16.8% during 1998
to $36.2 million or 13.5% of sales, from $31.0 million, or 13.2% of sales in
1997 due to higher staffing costs associated with the Company's growth,
including the expansion into Austin, Texas and Mesa, Arizona, as well as the
full year impact of additions made in 1997, especially in Europe and Asia.
Such increases were partially offset by lower incentive compensation expenses
in fiscal 1998, and reduction in discretionary spending, especially in the
second half of the year in response to the semiconductor industry slow-down.
Research and Development
Research and development expenses for the six months ended April 30, 2000,
increased 26.6% to $9.7 million compared with $7.7 million for the corresponding
prior year period. This increase reflects the continuing development efforts
on high-end, more complex photomasks such as phase shift, optical proximity
correction and Next Generation Lithography (NGL) applications. As a percentage
of net sales, research and development was 6.6% of net sales for the six months
ended April 30, 2000, compared to 6.1% for the corresponding prior year period.
Research and development expenses for the year ended October 31, 1999,
increased by 23.9% to $16.6 million, or 6.0% of sales, from $13.4 million or
5.0% of sales in 1998. The increase reflects continued work on advanced
photomasks utilizing optical enhancement features, as well as expenses incurred
in connection with our Next Generation Lithography Mask Center of Competency,
a joint effort with IBM which was established in July 1999.
Research and development expenses for 1998 increased by 22.5% to $13.4
million, or 5.0% of sales from $10.9 million in 1997, or 4.6% of sales. The
increase is the result of the continued work on advanced photomask engineering
projects including phase shift, optical proximity correction and deep ultra-
violet applications.
Restructuring and Related Charges
During March, 2000, the Company implemented a plan to consolidate its
mature products group in order to increase capacity utilization, manufacturing
efficiencies and customer service activities worldwide. Total restructuring and
related charges associated with this consolidation plan of $17.5 million were
recorded in the second quarter of fiscal 2000. Of the total charge, $9.1
million related to restructuring and $8.4 million related to the impairment of
intangible assets.
The significant components of the consolidation plan included the closing
of the Company's Sunnyvale, California and Neuchatel, Switzerland manufacturing
facilities and the consolidation and regionalization of sales and customer
service functions. The Company anticipates that the closing of the Sunnyvale
and Neuchatel facilities will maximize capacity utilization at its remaining
mature products facilities. As part of the plan, the Company reduced its work
force by approximately 125 employees. The restructuring charge of $9.1 million
includes $1.5 million of cash charges for severance benefits paid to terminated
employees which was disbursed over their entitlement periods and $2.3 million
for facilities closings and lease termination costs to be expended over the next
twelve months. Additionally, non-cash charges of $5.3 million approximated the
carrying value primarily of fixed assets associated with the manufacturing
consolidation based upon their expected disposition. Such assets, consisting
principally of specialized manufacturing tools and equipment, were subsequently
taken out of service.
The charges also included $8.4 million related to the impairment in value
of associated intangible assets. It was determined during the period that such
assets no longer had future economic benefit to the Company because the
anticipated undiscounted cumulative cash flows from these assets were
insufficient to support their carrying value.
The Company recorded a restructuring charge of $3.8 million in the second
quarter of fiscal 1998 in connection with the optimization of its North American
operations. The Company reorganized its two California operations, dedicating
its Milpitas facility to the production of high-end technology photomasks and
its Sunnyvale facility to the production of mature technology photomasks. In
addition, it consolidated its Colorado Springs, Colorado photomask manufacturing
operations into its other North American manufacturing facilities. The Company
determined that its Large Area Mask (LAM) Division, which was also located in
Colorado Springs, did not represent a long-term strategic fit with its core
photomask business, and, accordingly, announced plans to sell the LAM Division.
The major component of the non-recurring charge related to a reduction in the
value of equipment. After tax, the charge amounted to $2.4 million, or $0.07
per share on a diluted basis. The LAM division was sold in 1999 without any
additional effect on results of operations.
Other Income and Expense
Net other expenses of $1.7 million for the six months ended April 30, 2000
are comprised principally of interest expense on both the convertible notes and
borrowings under the revolving credit facility, offset by income earned on
investments. This compares to $1.9 million in net other expenses in the
corresponding period in fiscal 1999, which had lower interest expense.
Net other expenses increased $2.3 million to a net expense of $4.4 million
in 1999 as a result of higher interest expense, due primarily to utilization of
the Company's unsecured revolving line of credit, as well as lower investment
income due to a decrease in short-term investment balances throughout the year.
Interest income in 1998 increased as a result of higher average short-term
investment balances. Interest expense increased to $6.1 million in 1998 from
$2.5 million in 1997, primarily due to the effect of a full year of interest
expense on the convertible notes in 1998 compared to only five months of
interest expense on the convertible notes, which were issued in fiscal 1997.
Foreign currency transaction gains or losses were not significant for the
first six months of fiscal 2000, and fiscal years 1999, 1998 and 1997.
Income Taxes
The Company provided federal, state and foreign income taxes at a combined
effective annual tax rate of 36.6% in 1999 as compared to 38.0% in 1998 and
37.9% in 1997. The lower rate in 1999 was primarily due to higher available
research and development expense credits.
Net Income (Loss)
Net income (loss) for the six months ended April 30, 2000, decreased to
$(1.7) million, or $(0.06) per basic and diluted share. These amounts compare
to $4.4 million, or $0.16 per basic and diluted share, for the corresponding
prior year period. Fiscal year 2000 includes the effect of the restructuring
and related charges amounting to $11.1 million after tax, or $0.39 per diluted
share.
Net income for the year ended October 31, 1999 decreased 45.6% to $14.4
million, or $0.51 per diluted share, compared to $26.6 million, or $0.92 per
diluted share in the prior year. Net income for the year ended November 1, 1998
decreased 14.1% to $26.6 million, or $0.92 per diluted share, compared with
$31.0 million or $1.07 per diluted share in the prior year.
Fiscal 1998 included an after tax restructuring charge of $2.4 million,
$0.07 per diluted share. All share and earnings per share amounts reflect a
two-for-one stock split effected in November 1997.
LIQUIDITY AND CAPITAL RESOURCES
Photronics' cash and cash equivalents decreased $7.3 million during the six
months ended April 30, 2000. Approximately $50 million was used for the
Company's investment in Precision Semiconductor Mask Corporation (PSMC) and
capital expenditures for equipment. These decreases were offset by cash
provided by operations of $8.5 million, proceeds from borrowings under our
credit lines of $33.0 million, and sales of stock through option exercises of
$5.0 million.
Accounts receivable increased $0.4 million from October 31, 1999 as a
result of increased order activity in the second quarter of 2000 compared with
the fourth quarter of 1999. Inventories decreased by $1.9 million from October
31, 1999 due in part to a strategic decision at the end of last year to increase
quantities of certain critical raw materials in anticipation of any potential
Y2K issues. Most of this inventory was consumed during the first four months
of calendar 2000.
Property, plant and equipment decreased to $335.0 million at April 30,
2000, from $348.1 million at October 31, 1999, principally as a result of
depreciation expense and asset revaluation associated with the restructuring,
partially offset by capital spending of $19.6 million.
Accounts payable and other accrued liabilities decreased 33.9%, or $22.2
million, from October 31, 1999, principally due to the timing of progress
payments for capital equipment coming due during the period.
The Company's cash, cash equivalents and short-term investments decreased
$13.8 million during fiscal 1999 to $23.1 million. The decrease is attributable
to capital expenditures for facilities and equipment of $83.7 million and the
$13.5 million acquisition of ITG semiconductor business unit. In addition, $6.9
million of cash was utilized to repurchase 500,000 shares of the Company's
common stock. The decrease was partially offset by positive cash flows
generated by operations of $ 65.0 million and borrowings of $31.0 million.
Accounts receivable increased 30.8% to $50.9 million because of stronger
sales in the fourth quarter of 1999 compared to the fourth quarter of 1998.
Other current assets increased to $10.8 million in 1999 from $3.7 million
in 1998, primarily due to refundable income taxes.
Property, plant and equipment increased to $348.1 million at October 31,
1999 from $283.0 million at November 1, 1998. Deposits on and purchases of
equipment aggregated $83.7 million during the year ended October 31, 1999.
These increases were reduced by depreciation expense totalling $45.0 million
in fiscal 1999. The increase in intangible assets to $36.9 million at October
31, 1999 from $25.4 million at November 1, 1998, was primarily due to the costs
incurred to develop our manufacturing and financial software systems.
Investments and other non-current assets increased to $14.3 million at
October 31, 1999 from $10.5 million at November 1, 1998 due to the increase in
the market value of investments available for sale.
Accounts payable and other accrued liabilities increased at October 31,
1999 to $65.5 million compared to $52.0 million at November 1, 1998 primarily
due to the timing of payments related to capital equipment. Accrued salaries and
wages decreased to $2.5 million as of October 31, 1999 from $4.2 million as of
November 1, 1998, largely as a result of lower incentive compensation accruals
in 1999.
Total amounts due on borrowings of $149.9 million at October 31, 1999
increased from $107.5 million as of November 1, 1998 principally due to
increased borrowings in 1999 under the Company's revolving credit facility.
Deferred income taxes and other liabilities increased to $35.1 million at
October 31, 1999 compared to $19.8 million at November 1, 1998, largely due to
increases in deferred income taxes resulting from the differences between the
carrying amounts of assets and liabilities for financial reporting and the
amounts used for income tax purposes.
Photronics' commitments represent investments in additional manufacturing
capacity as well as advanced equipment for the production of high-end, more
complex photomasks. At April 30, 2000, Photronics had commitments outstanding
for capital expenditures of approximately $38 million. Additional commitments
for capital requirements are expected to be incurred during fiscal 2000.
Photronics will continue to use its working capital and bank lines of credit to
finance its capital expenditures. Photronics believes that its currently
available resources, together with its capacity for substantial growth and its
access to other debt and equity financing sources, are sufficient to satisfy its
currently planned capital expenditures, as well as its anticipated working
capital requirements for the foreseeable future.
The Company maintains an unsecured $125 million committed revolving credit
facility available at any time through the end of fiscal year 2003. The
Company's $125 million unsecured revolving credit facility was amended as of
April 28, 2000, in order to obtain the lenders' consent to the Align-Rite and
PSMC acquisitions, and to modify certain covenants and definitions in connection
with the restructuring. The Company is subject to compliance with and
maintenance of certain financial covenants and ratios set forth in the credit
facility, as amended. The Company had $69.3 million of outstanding borrowings
under the revolving credit facility at April 30, 2000. The Company believes
that its currently available resources, together with its capacity for
substantial growth and its accessibility to other debt and equity financing
sources, are sufficient to satisfy its cash requirements for the foreseeable
future.
EFFECT OF NEW ACCOUNTING STANDARDS
In April 1998, the American Institute of Certified Public Accountants
(AICPA) issued Statement of Position 98-5, "Reporting on the Costs of Start-Up
Activities." In June 1998, the FASB issued SFAS No. 133 "Accounting for
Derivative Instruments and Hedging Activities." In September 1999, the AICPA
issued Statement of Position 99-3, "Accounting and Reporting of Certain Defined
Contribution Plan Investments and Other Disclosure Matters." Each of these
statements establish new standards for financial statement reporting and
disclosure of certain information effective for the Company in future fiscal
years. The Company does not expect these new standards to have a material
impact on its financial position, results of operations or cash flows.
OTHER
The Company expects to increase its ownership of Precision Semiconductor
Mask Corporation (PSMC) from its current equity interest of 33% to 51% during
the third quarter of fiscal 2000, and, accordingly, will change its accounting
for its investment in PSMC from the equity method currently used to the
consolidation method at that time.
On June 1, 2000, the Company sold one million of its unregistered common
shares in a private placement to accredited institutional investors. The
proceeds of the sale, net of fees and expenses, amounted to $22 million.
YEAR 2000
As of the date of this filing, the Company has not experienced any Year
2000 problems that have affected its operations, the realization of financial
assets, or the Company's results of operations. The Company will continue to
monitor its 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 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.
"SAFE HARBOR" STATEMENT UNDER THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995:
Except for historical information, the matters discussed above may be
considered forward-looking statements and may be subject to certain risks and
uncertainties that could cause the actual results to differ materially from
those projected, including uncertainties in the market, pricing, competition,
procurement and manufacturing efficiencies, and other risks.
REPORT OF DELOITTE & TOUCHE LLP
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders
Photronics, Inc.
Jupiter, Florida
We have audited the supplementary consolidated balance sheets of
Photronics, Inc. and its subsidiaries as of October 31, 1999 and November 1,
1998, and the related supplementary consolidated statements of operations,
shareholders' equity and cash flows for each of the three years in the period
ended October 31, 1999. These supplementary consolidated financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on the supplementary consolidated financial statements based
on our audits. The supplementary consolidated financial statements give
retroactive effect to the merger of Photronics, Inc. and Align-Rite
International, Inc., which has been accounted for as a pooling of interests as
described in Note 2 to the supplementary consolidated financial statements. We
did not audit the balance sheet of Align-Rite International, Inc. as of March
31, 1998, or the related statements of operations, shareholders' equity and cash
flows of Align-Rite International, Inc. for the years ended March 31, 1998 and
March 31, 1997. Those statements, which are consolidated as described in Note
2, reflect total revenues and net income of 17% and 23% for the year ended
November 1, 1998 and 16% and 17% for the year ended November 2, 1997,
respectively, and 12% of total assets as of November 1, 1998 of the consolidated
totals. Those statements were audited by other auditors whose report has been
furnished to us, and our opinion, insofar as it relates to amounts included for
Align-Rite International Inc. for 1998 and 1997, is based solely on the report
of such other auditors.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits and the report of
the other auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits and the report of the other auditors,
the supplementary consolidated financial statements referred to above present
fairly, in all material respects, the supplementary consolidated financial
position of Photronics, Inc. and its subsidiaries as of October 31, 1999 and
November 1, 1998, and the results of their operations and their cash flows for
each of the three years in the period ended October 31, 1999 in conformity with
accounting principles generally accepted in the United States of America.
Hartford, Connecticut
June 19, 2000
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders
Align-Rite International, Inc. principally
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, shareholders' equity, and cash flows
present fairly, in all material respects, the financial position of Align-Rite
International, Inc. and its subsidiaries (not presented separately herein) at
March 31, 1998, and the results of their operations and their cash flows for
each of the two years in the period ended March 31, 1998, in conformity with
accounting principles generally accepted in the United States. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these statements in accordance with
auditing standards generally accepted in the United States which require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for the opinion expressed above. We have not audited the consolidated
financial statements of Align-Rite International, Inc. for any period
subsequent to March 31, 1999.
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Los Angeles, California
May 28, 1998
PHOTRONICS, INC. AND SUBSIDIARIES
Supplementary Consolidated Balance Sheets
(dollars in thousands)
April 30, October 31, November 1,
Assets 2000 1999 1998
- ------ ----------- ----------- -----------
(unaudited)
Current assets:
Cash and cash equivalents $ 15,774 $ 23,115 $ 29,364
Short-term investments - - 7,532
Accounts receivable (less allowance
for doubtful accounts of $636
in 2000, $692 in 1999
and $513 in 1998) 51,314 50,899 38,910
Inventories 15,555 17,444 16,840
Deferred income taxes 5,018 5,458 6,545
Other current assets 16,326 10,798 3,715
--------- --------- ---------
Total current assets 103,987 107,714 102,906
Property, plant and equipment, net 335,005 348,144 282,964
Intangible assets, (less accumulated
amortization of $7,572 in 2000,
$8,384 in 1999 and $6,059 in 1998) 30,369 36,875 25,365
Investments 13,105 8,594 6,705
Investment in unconsolidated
subsidiary 31,300 - -
Other assets 6,623 5,682 3,762
--------- --------- ---------
$ 520,389 $ 507,009 $ 421,702
========= ========= =========
See accompanying notes to supplementary consolidated financial statements.
PHOTRONICS, INC. AND SUBSIDIARIES
Supplementary Consolidated Balance Sheets
(dollars in thousands)
Liabilities and April 30, October 31, November 1,
Shareholders' Equity 2000 1999 1998
- ---------------------- ----------- ----------- ----------
(unaudited)
Current liabilities:
Current portion of long-term debt $ 1,112 $ 1,574 $ 3,276
Accounts payable 31,949 51,724 35,803
Accrued salaries and wages 2,164 2,490 4,170
Other accrued liabilities 11,295 13,742 16,151
--------- --------- ---------
Total current liabilities 46,520 69,530 59,400
Long-term debt 178,067 148,281 104,261
Deferred income taxes 28,945 25,297 14,015
Other liabilities 4,809 9,771 5,830
--------- --------- ---------
Total liabilities 258,341 252,879 183,506
--------- --------- ---------
Commitments and contingencies
Shareholders' equity:
Preferred stock, $0.01 par value,
2,000,000 shares authorized,
none issued and outstanding - - -
Common stock, $0.01 par value,
75,000,000 shares authorized,
28,427,000 shares issued and outstanding
at April 30, 2000, 27,925,000 shares issued
and outstanding at October 31, 1999
and 27,958,000 shares issued and outstanding
at November 1, 1998 284 279 280
Additional paid-in capital 109,506 99,544 100,973
Retained earnings 155,248 156,929 138,885
Accumulated other comprehensive
loss (2,722) (2,571) (1,803)
Deferred compensation on
restricted stock (268) (51) (139)
--------- --------- ---------
Total shareholders' equity 262,048 254,130 238,196
--------- --------- ---------
$ 520,389 $ 507,009 $ 421,702
========= ========= =========
See accompanying notes to supplementary consolidated financial statements.
PHOTRONICS, INC. AND SUBSIDIARIES
Supplementary Consolidated Statement of Operations
(in thousands, except per share amounts)
Six Months Ended Years Ended
------------------------ --------------------------------------------------
April 30, May 2, October 31, November 1, November 2,
2000 1999 1999 1998 1997
--------- ------ ----------- ----------- -----------
(unaudited)
Net sales $ 148,595 $ 126,400 $ 277,395 $ 269,293 $ 235,452
Costs and expenses:
Cost of sales 101,204 90,664 193,467 170,864 145,032
Selling, general
and administrative 21,216 19,182 40,119 36,235 31,012
Research and development 9,746 7,698 16,611 13,402 10,938
Restructuring and related charges 17,500 - - 3,800 -
------ ----- ------ ------ ------
Operating income (loss) (1,071) 8,856 27,198 44,992 48,470
Other income and expense:
Interest income 195 776 1,289 2,843 2,732
Interest expense (4,841) (3,258) (7,120) (6,143) (2,466)
Other income, net 2,920 607 1,435 1,178 1,081
---------- --------- -------- -------- --------
Income (loss) before income taxes (2,797) 6,981 22,802 42,870 49,817
Provision (benefit) for income taxes (1,116) 2,588 8,354 16,288 18,856
---------- --------- -------- -------- --------
Net income (loss) $ (1,681) $ 4,393 $ 14,448 $ 26,582 $ 30,961
========== ========= ======== ======== ========
Earnings (loss) per share:
Basic $ (0.06) $ 0.16 $ 0.52 $0.95 $ 1.12
======= ======= ====== ===== ======
Diluted $ (0.06) $ 0.16 $ 0.51 $ 0.92 $ 1.07
======= ======= ====== ====== ======
Weighted average number of
common shares outstanding:
Basic 28,062 27,832 27,800 28,123 27,638
====== ====== ====== ====== ======
Diluted 28,326 28,160 28,105 33,093 30,707
====== ====== ====== ====== ======
See accompanying notes to supplementary consolidated financial statements.
PHOTRONICS, INC. AND SUBSIDIARIES
Supplementary Consolidated Statement of Shareholders' Equity
Six Months Ended April 30, 2000 (unaudited) and the Years Ended October 31, 1999, November 1, 1998 and November 2, 1997
(dollars in thousands)
Accumulated Other Comprehensive
Income (Loss)
-------------------------- Deferred
Unreal- Compen-
ized Foreign sation Total
Common Stock Add'l Invest- Currency on Re- Share
-------------- Paid-In Retained ment Trans- Treasury stricted holders'
Shares Amount Capital Earnings Gains lation Total Stock Stock Equity
------ ------ ------- -------- ------ ------- ------ ------ -------- --------
Balance at
October 31, 1996 16,319 $163 $ 95,662 $ 81,342 $4,678 $ 101 $4,779 $(245) $ - $181,701
Comprehensive Income:
Net income - - - 30,961 - - - - - 30,961
Change in unrealized
gains on investments - - - - (1,427) - (1,427) - - (1,427)
Foreign currency
translation adjustment - - - - - (1,761) (1,761) - - (1,761)
------ ------ ------ ------ ------
Total comprehensive income 30,961 (1,427) (1,761) (3,188) 27,773
Issuance of common stock
related to acquisition 50 - 1,337 - - - - - - 1,337
Sale of common stock
through employee stock
option and purchase plans 328 4 6,518 - - - - - - 6,522
Restricted stock awards,
net 6 - 264 - - - - - (249) 15
Retirement of treasury
stock (136) (1) (244) - - - - 245 - -
Two-for-one stock split 12,150 121 (121) - - - - - - -
Conversion for merger
with Align-Rite (663) (7) 7 - - - - - - -
------ ---- -------- -------- ------ ------- ------ --- ----- --------
Balance at
November 2, 1997 28,054 $280 $103,423 $112,303 $3,251 $(1,660) $1,591 $ - $(249) $217,348
Comprehensive Income:
Net income - - - 26,582 - - - - - 26,582
Change in unrealized
gains on investments - - - - (2,084) - (2,084) - - (2,084)
Foreign currency
translation adjustment - - - - - (1,310) (1,310) - - (1,310)
------ ------ ------ ------ ------
Total comprehensive income 26,582 (2,084) (1,310) (3,394) 23,188
Sale of common stock
through employee stock
option and purchase plans 404 5 4,295 - - - - - - 4,300
Amortization of re-
stricted stock to
compensation expense - - - - - - - - 110 110
Common stock repurchases (500) (5) (6,745) - - - - - - (6,750)
------ ---- -------- -------- ------ ------- ------- ---- ----- --------
Balance at
November 1, 1998 27,958 $280 $100,973 $138,885 $1,167 $(2,970) $(1,803) $ - $(139) $238,196
(continued)
Accumulated Other Comprehensive
Income (Loss)
-------------------------- Deferred
Unreal- Compen-
ized Foreign sation Total
Common Stock Add'l Invest- Currency on Re- Share
--------------- Paid-In Retained ment Trans- Treasury stricted holders'
Shares Amount Capital Earnings Gains lation Total Stock Stock Equity
------ ------ ------- -------- ------ ------- ------- ------- -------- --------
Comprehensive Income:
Net income - - - 14 448 - - - - - 14,448
Adjustment to reflect
Align-Rite's results for
the period from April 1, 1998
to September 30, 1998 - - - 3,596 - - - - - 3,596
Change in unrealized
gains on investments - - - - 1,357 - 1,357 - - 1,357
Foreign currency
translation adjustment - - - - - (2,125) (2,125) - - (2,125)
------ ----- ------ ------ ------
Total comprehensive income 18,044 1,357 (2,125) (768) 17,276
Sale of common stock
through employee stock
option and purchase plans 467 4 5,466 - - - - - - 5,470
Amortization of re-
stricted stock to
compensation expense - - - - - - - - 88 88
Common stock repurchases (500) (5) (6,895) - - - - - - (6,900)
------ ---- ------- -------- ------ ------- ------- ----- ---- --------
Balance at
October 31, 1999 27,925 $279 $99,544 $156,929 $2,524 $(5,095) $(2,571) $ - $(51) $254,130
Comprehensive Income:
Net loss - - - (1,681) - - - - - (1,681)
Change in unrealized
gains on investments - - - - 2,953 - 2,953 - - 2,953
Foreign currency
translation adjustment - - - - - (3,104) (3,104) - - (3,104)
------ ----- ------ ------ ------
Total comprehensive loss - - - (1,681) 2,953 (3,104) (151) - - (1,832)
Sale of common stock
through employee stock
option and purchase plans 502 5 9,701 - - - - - - 9,706
Restricted stock awards,
net - - 261 - - - - - (217) 44
------ ---- -------- -------- ------ ------- ------- --- ----- --------
Balance at
April 30, 2000 28,427 $284 $109,506 $155,248 $5,477 $(8,199) $(2,722) $ - $(268) $262,048
====== ==== ======== ======== ====== ======= ======= === ===== ========
See accompanying notes to supplementary consolidated financial statements.
(concluded)
PHOTRONICS, INC. AND SUBSIDIARIES
Supplementary Consolidated Statement of Cash Flows
(dollars in thousands)
Six Months Ended Years Ended
-------------------- ---------------------------------------
April 30, May 2, October 31, November 1, November 2,
2000 1999 1999 1998 1997
--------- ------- ----------- ----------- -----------
(unaudited)
Cash flows from operating activities:
Net income (loss) $ (1,681) $ 4,393 $ 14,448 $ 26,582 $ 30,961
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization of
property, plant and equipment 24,070 21,241 45,015 35,742 22,591
Amortization of intangible assets 1,271 1,392 2,783 2,529 1,322
Gain on sale of investments (5,305) (331) (1,479) (838) (1,562)
Deferred income taxes 91 1,978 8,104 1,467 1,849
Restructuring and related charges 17,500 - - 3,800 -
Other 222 288 387 342 199
Changes in assets and liabilities,
net of effects of acquisitions:
Accounts receivable (1,072) (1,292) (12,084) 1,670 (9,426)
Inventories 1,689 1,160 (109) (2,978) (3,469)
Other current assets (5,714) 3,723 (1,910) (2,435) (929)
Accounts payable and accrued liabilities (22,530) 15,511 9,852 (5,523) 15,104
------- ------ ------ ------ ------
Net cash provided by operating activities 8,541 48,063 65,007 60,358 56,640
------- ------ ------ ------ ------
Cash flows from investing activities:
Acquisitions of and investments in
photomask operations (31,500) - (13,525) (34,922) (1,065)
Deposits on and purchases of property,
plant and equipment (19,612) (52,777) (83,719) (80,748) (112,321)
Net change in short-term investments - 7,420 7,532 20,657 (20,271)
Proceeds from sale of investments 5,557 371 1,578 932 1,939
Other (6,495) (2,122) (7,817) 2,218 2,163
------- ------- ------- ------- --------
Net cash used in investing activities (52,050) (47,108) (95,951) (91,863) (129,555)
------- ------- ------- ------- --------
Cash flows from financing activities:
Issuance of subordinated convertible notes,
net of deferred issuance costs - - - - 99,697
Borrowings (repayments) under
revolving credit facility 33,011 - 31,039 - -
Repayment of long-term debt (122) (2,934) (3,068) (266) (151)
Proceeds from issuance of common stock 4,998 2,428 5,084 4,148 6,195
Purchase and retirement of common stock - (6,900) (6,900) (6,750) -
Other (5) (150) (201) 120 -
------ ------ ------ ------ -------
Net cash provided (used) by financing activities 37,882 (7,556) 25,954 (2,748) 105,741
------ ------ ------ ------ -------
Effect of exchange rate changes on cash (1,714) (415) 101 (962) 280
------ ------ ------ ------ -------
Net increase (decrease) in cash and cash equivalents (7,341) (7,016) (4,889) (35,215) 33,106
Cash and cash equivalents at beginning of period 23,115 28,004 29,364 64,579 31,473
Adjustment related to Align-Rite's net cash flows
from April 1, 1998 through September 30, 1998 (1,360)
-------- -------- -------- -------- --------
Cash and cash equivalents at end of period $ 15,774 $ 20,988 $ 23,115 $ 29,364 $ 64,579
======== ======== ======== ======== ========
See accompanying notes to supplementary consolidated financial statements.
PHOTRONICS, INC. AND SUBSIDIARIES
Notes to Supplementary Consolidated Financial Statements
(dollars in thousands, except per share amounts)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consolidation
The accompanying consolidated financial statements include the accounts
of Photronics, Inc. and its subsidiaries,("Photronics" or "Company").
Historical financial statements and notes thereto have been restated to
reflect the merger with Align-Rite International, Inc. (see Note 2) which
was accounted for as a pooling-of-interests. All significant intercompany
balances and transactions have been eliminated.
Foreign Currency Translation
The Company's foreign subsidiaries maintain their accounts in their
respective local currencies. Assets and liabilities of such subsidiaries
are translated to U.S. dollars at year-end exchange rates. Income and
expenses are translated at average rates of exchange prevailing during the
year. Foreign currency translation adjustments are accumulated and reported
as other comprehensive income (loss) as a separate component of
shareholders' equity. The effects of changes in exchange rates on foreign
currency transactions are included in income.
Cash and Cash Equivalents
Cash and cash equivalents include cash and highly liquid investments
purchased with an original maturity of three months or less. The carrying
values approximate fair value based on the short maturity of the
instruments.
Investments
The Company's debt and equity investments are classified as available-
for-sale, non-current assets and carried at fair value. Unrealized gains
and losses, net of tax, are reported as other comprehensive income (loss) as
a separate component of shareholders' equity. Gains and losses are included
in income when realized, determined based on the disposition of specifically
identified investments.
Inventories
Inventories, principally raw materials, are stated at the lower of
cost, determined under the first-in, first-out (FIFO) method, or market.
Long-Lived Assets
Property, plant and equipment are recorded at cost less accumulated
depreciation. Repairs and maintenance as well as renewals and replacements
of a routine nature are charged to operations as incurred, while those which
improve or extend the lives of existing assets are capitalized. Upon sale
or other disposition, the cost of the asset and accumulated depreciation are
eliminated from the accounts, and any resulting gain or loss is reflected in
income.
For financial reporting purposes, depreciation and amortization are
computed on the straight-line method over the estimated useful lives of the
related assets. Buildings and improvements are depreciated over 15 to 40
years, machinery and equipment over 3 to 10 years and furniture, fixtures
and office equipment over 3 to 5 years. Leasehold improvements are
amortized over the life of the lease or the estimated useful life of the
improvement, whichever is less. For income tax purposes, depreciation is
computed using various accelerated methods and, in some cases, different
useful lives than those used for financial reporting.
Goodwill and other intangibles are amortized on a straight-line basis
over periods estimated to be benefited, generally 5 to 20 years. The future
economic benefit of the carrying value of all long-lived assets is reviewed
periodically and any diminution in useful life or impairment in value based
on future anticipated undiscounted cash flows would be recorded in the
period so determined.
Income Taxes
The provision for income taxes is computed on the basis of consolidated
financial statement income. Deferred income taxes reflect the tax effects
of differences between the carrying amounts of assets and liabilities for
financial reporting and the amounts used for income tax purposes.
Net Income Per Common Share
Net income per common share is computed in accordance with the
provisions of Statement of Financial Accounting Standards No. 128, "Earnings
Per Share."
Stock Based Compensation
The Company records stock option awards in accordance with the
provisions of Accounting Principles Board Opinion 25, "Accounting for Stock
Issued to Employees". The Company estimates the fair value of stock option
awards in accordance with Statement of Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation," and discloses the resulting
estimated compensation effect on net income (loss) on a pro forma basis.
Interim Financial Statements
The accompanying financial statements as of April 30, 2000
and for the six months ended April 30, 2000 and May 2, 1999 are unaudited
and in the opinion of management, include all adjustments, consisting of
only normal recurring accruals, necessary to present fairly the financial
positions, results of operations and cash flows of the Company. The results
of operations for the six months ended April 30, 2000 and May 2, 1999 are
not necessarily indicative of the results that may be expected for
the entire year.
NOTE 2 - ALIGN-RITE MERGER
On June 7, 2000, Photronics completed its merger with Align-Rite
International, Inc. ("Align-Rite"), herein after collectively referred to as
the Company. Under the terms of the merger agreement, each of the 4,731,232
shares of common stock of Align-Rite issued and outstanding as of June 7,
2000 was converted into .85 shares of common stock of Photronics. Cash will
be paid in lieu of the issuance of any fractional shares of Photronics that
would otherwise be issued. Any stock options to acquire Align-Rite common
stock that had not been exercised as of June 7, 2000 became fully vested
options to acquire Photronics common stock in accordance with the Merger
Agreement. The merger constituted a tax free reorganization and has been
accounted for as a pooling-of-interests. The supplementary consolidated
financial statements for the six months ended April 30, 2000 and May 2, 1999
(unaudited), and each of the three years ended October 31, 1999, November 1,
1998 and November 2, 1997 and the accompanying notes thereto reflect the
Company's financial position, results of operations and cash flows as if
Align-Rite had been a wholly-owned subsidiary of Photronics for all periods
presented. Prior to the merger, Align-Rite's fiscal year ended on March 31.
For purposes of the Supplementary Consolidated Financial Statements, Align-
Rite's prior period financial statements have been combined with Photronics'
as follows:
Photronics Period Ended Align-Rite Period Ended
- ----------------------- -----------------------
Year ended October 31, 1999 Year ended September 30, 1999
Year ended November 1, 1998 Year ended March 31, 1998
Year ended November 2, 1997 Year ended March 31, 1997
Six months ended April 30, 2000 (unaudited) Six months ended March 31, 2000
(unaudited)
Six months ended May 2, 1999 (unaudited) Six months ended March 31, 1999
(unaudited)
The financial statement balances of Align-Rite have been reclassified
to conform with Photronics' presentation.
To conform the reporting periods to within 93 days of Photronics'
fiscal year end, Align-Rite's operating results for the period from April 1,
1998 to September 30, 1998 have been excluded from the combined results for
the year ended November 1, 1998. Sales and net income of $27,683 and
$3,596, respectively, have been excluded.
Components of the consolidated results of operations of Photronics and
Align Rite prior to their combination were as follows:
Six Months Ended Years Ended
------------------------- ------------------------------------------
April 30, May 2, October 31, November 1, November 2,
2000 1999 1999 1998 1997
----------- ----------- ----------- ----------- -----------
(unaudited) (unaudited)
Net sales
- ---------
Photronics $ 119,062 $ 101,641 $ 223,702 $ 222,572 $ 197,451
Align-Rite 29,533 24,759 53,693 46,721 38,001
--------- --------- --------- --------- ---------
Combined $ 148,595 $ 126,400 $ 277,395 $ 269,293 $ 235,452
========= ========= ========= ========= =========
Net income (loss)
- -----------------
Photronics $ (3,045) $ 2,685 $ 10,668 $ 20,482 $ 25,636
Align-Rite 1,364 1,708 3,780 6,100 5,325
-------- --------- --------- --------- ---------
Combined $ (1,681) $ 4,393 $ 14,448 $ 26,582 $ 30,961
======== ========= ========= ========= =========
In the third quarter of 2000, the Company will record a pre-tax charge
of approximately $5.5 million for transaction costs incurred in connection
with the merger. Such costs consisted primarily of fees for investment
bankers, attorneys, accountants, financial printing and other related
charges.
NOTE 3 - INVESTMENTS
Short-term investments consist of:
November 1,
1998
-----------
Government agency securities $ 2,268
Corporate bonds 3,010
Certificates of deposit 2,254
-------
$ 7,532
=======
There were no short-term investments as of October 31, 1999.
Other investments consist of available-for-sale equity securities of
publicly traded technology companies and a minority interest in a photomask
manufacturer in Korea. The fair values of available-for-sale investments
are based upon quoted market prices. In the absence of quoted market
prices, the estimated fair value is based upon the financial condition and
the operating results and projections of the investee and is considered to
approximate cost. Unrealized gains on investments were determined as
follows:
October 31, November 1,
1999 1998
----------- -----------
Fair value $ 8,594 $ 6,705
Cost 4,523 4,700
------- -------
4,071 2,005
Less deferred income taxes 1,547 838
------- -------
Net unrealized gains $ 2,524 $ 1,167
======= =======
NOTE 4 - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
October 31, November 1,
1999 1998
---------- -----------
Land $ 3,937 $ 3,772
Buildings and improvements 38,800 33,943
Machinery and equipment 449,554 351,929
Leasehold improvements 9,443 8,832
Furniture, fixtures and office equipment 17,573 10,680
--------- ---------
519,307 409,156
Less accumulated depreciation
and amortization 171,163 126,192
--------- ---------
Property, plant and equipment $ 348,144 $ 282,964
========= =========
NOTE 5 - LONG-TERM DEBT
Long-term debt consists of the following:
October 31, November 1,
1999 1998
----------- -----------
Revolving credit facility,
effective interest rate of 6.21% $ 12,750 $ -
6% Convertible Subordinated Notes
due June 1, 2004 103,500 103,500
Align-Rite credit facility 23,489 -
Equipment notes payable 9,402 1,200
Acquisition indebtedness payable
December 1, 1998, net of interest of
$9 in 1998, imputed at 7.45% - 1,791
Installment note payable by foreign
subsidiary with interest at 4.75%
through June, 2001 376 665
Industrial development mortgage note,
secured by building, with interest at
6.58%, payable through November 2005 338 381
--------- ---------
149,855 107,537
Less current portion 1,574 3,276
--------- ---------
Long-term debt $ 148,281 $ 104,261
========= =========
Long-term debt matures as follows: 2001 - $31,789; 2002 - $53; 2003 -
$58; 2004 - $116,311; years after 2004 - $70. The fair value of long-term
debt not yet substantively extinguished is estimated based on the current
rates offered to the Company and is not significantly different from
carrying value, except that the fair value of the convertible subordinated
notes, based upon the most recently reported trade as of October 31, 1999,
amounted to $101.4 million.
The Company has an unsecured revolving credit facility to provide for
borrowings of up to $125 million at any time through November, 2003. The
Company is charged a commitment fee on the average unused amount of the
available credit and is subject to compliance with and maintenance of
certain financial covenants and ratios. The Company had $12.8 million of
outstanding borrowings under its revolving credit facility at October 31,
1999.
On May 29, 1997, the Company sold $103.5 million of convertible
subordinated notes, due in 2004, in a public offering. The notes bear
interest at 6% per annum and are convertible at any time by the holders into
3.7 million shares of the Company's common stock, at a conversion price of
$27.97 per share. The notes are redeemable at the Company's option, in
whole or in part, at any time after June 1, 2000 at certain premiums
decreasing through the maturity date. Interest is payable semi-annually.
Prior to the merger, Align-Rite maintained an aggregate $35 million
line of credit agreement ("credit agreement") with a bank at a variable
interest rate, equal to 1.50% above the bank's LIBOR rate ( 5.35% of
September 30, 1999). Equipment payables for which Align-Rite has the
ability and intent to refinance utilizing its credit agreement during fiscal
2000 and have been classified as long term. The credit agreement contained
various requirements and restrictions, as defined. On June 16, 2000, all
outstanding balances under this credit agreement aggregating $32 million,
were repaid.
The Company's $125 million unsecured revolving credit facility was
amended as of April 28, 2000, in order to obtain the lenders' consent to the
Align-Rite and PSMC acquisitions, and to modify certain covenants and
definitions in connection with the restructuring. The Company is subject to
compliance with and maintenance of certain financial covenants and ratios
set forth in the credit facility, as amended. The Company had $69.3 million
of outstanding borrowings under the revolving credit facility at April 30,
2000.
Cash paid for interest amounted to $7,123, $6,311 and $164 in 1999,
1998 and 1997 respectively.
NOTE 6 - EARNINGS PER SHARE
Earnings per share amounts are calculated in accordance with the
provisions of SFAS No. 128. Basic EPS is based on the weighted average
number of common shares outstanding for the period, excluding any dilutive
common share equivalents. Diluted EPS reflects the potential dilution that
could occur if securities or other contracts to issue common stock were
exercised or converted.
A reconciliation of basic and diluted EPS follows (in thousands, except
per share amounts):
Average Earnings
Net Shares Per
Income Outstanding Share
-------- ----------- --------
1999:
Basic $ 14,448 27,800 $ 0.52
Effect of potential dilution =======
from exercise of stock options
and conversion of notes (a) - 305
-------- --------
Diluted $ 14,448 28,105 $ 0.51
======== ======== =======
1998:
Basic $ 26,582 28,123 $ 0.95
Effect of potential dilution ======
from exercise of stock options
and conversion of notes 3,809 4,970
-------- --------
Diluted $ 30,391 33,093 $ 0.92
======== ======== =======
Average Earnings
Net Shares Per
Income Outstanding Share
-------- ----------- --------
1997:
Basic $ 30,961 27,638 $ 1.12
Effect of potential dilution =======
from exercise of stock options
and conversion of notes 1,841 3,069
-------- --------
Diluted $ 32,802 30,707 $ 1.07
======== ======== =======
(a) The effect of the conversion of notes for 1999 is anti-dilutive.
In September, 1997, the Company's Board of Directors authorized a
two-for-one stock split effected in the form of a stock dividend, which
was paid to shareholders of record on November 17, 1997. The stock split
resulted in the issuance of 12.2 million additional shares of common
stock. All applicable share and per share amounts reflect the stock
split.
NOTE 7 - BUSINESS COMBINATIONS
On July 2, 1999, the Company acquired certain assets that are used in
the manufacture of photomasks from Harris Corporation (Intersil) for
$13.5 million. The transaction was accounted for as a purchase and
accordingly, the excess of purchase price over the fair value of assets
acquired of approximately $7.9 million is being amortized over fifteen
years.
On December 31, 1997, the Company acquired the internal photomask
manufacturing operations of Motorola, Inc. ("Motorola") in Mesa, Arizona
for $29 million in cash. The assets acquired include modern
manufacturing systems, capable of supporting a wide range of photomask
technologies. Additionally, the Company entered into a multi-year supply
agreement whereby it will supply the photomask requirements previously
provided by Motorola's internal operations. The acquisition was
accounted for as a purchase and, accordingly, the acquisition price was
allocated to property, plant and equipment as well as certain intangible
assets based on relative fair value. The excess of purchase price over
the fair value of assets acquired is being amortized over fifteen years.
The Supplementary Consolidated Statement of Operations includes
the results of the former Motorola photomask operations from December 31,
1997, the effective date of the acquisition.
On June 26, 1997, the Company acquired all of the outstanding shares
of MZD Maskenzentrum fur Mikrostruktrierung Dresden GmbH (MZD), an
independent photomask manufacturer located in Dresden, Germany, for $3.1
million in cash and common shares of the Company. The acquisition was
accounted for as a purchase and, accordingly, the acquisition price was
allocated to assets and liabilities based on relative fair value.
NOTE 8 - INCOME TAXES
The provision for income taxes consists of the following:
1999 1998 1997
------ ------- -------
Current: Federal $ (774) $11,298 $13,460
State 205 1,612 2,619
Foreign 819 1,911 928
------ ------- -------
250 14,821 17,007
------ ------- -------
Deferred: Federal 6,935 1,389 1,720
State 786 (223) (160)
Foreign 383 301 289
------ ------- -------
8,104 1,467 1,849
------ ------- -------
$8,354 $16,288 $18,856
====== ======= =======
The provision for income taxes differs from the amount computed by
applying the statutory U.S. Federal income tax rate to income before
taxes as a result of the following:
1999 1998 1997
------ ------- -------
U.S. Federal income tax at
statutory rate $7,981 $15,005 $17,436
State income taxes, net of
Federal benefit 965 1,193 2,040
Other, net (592) 90 (620)
------ ------- -------
$8,354 $16,288 $18,856
====== ======= =======
The Company's net deferred tax liability consists of the following:
October 31, November 1,
1999 1998
----------- -----------
Deferred income tax liabilities:
Property, plant and equipment $ 22,442 $ 11,667
Investments 1,482 805
Other 1,373 1,543
-------- --------
Total deferred tax liability 25,297 14,015
-------- --------
Deferred income tax assets:
Reserves not currently deductible 1,177 3,412
Other 4,281 3,133
-------- --------
Total deferred tax asset 5,458 6,545
-------- --------
Net deferred tax liability $ 19,839 $ 7,470
======== ========
Cash paid for income taxes amounted to $2.9 million, $17.0 million
and $9.0 million in 1999, 1998 and 1997, respectively.
NOTE 9 - EMPLOYEE STOCK PURCHASE AND OPTION PLANS
In March 1998, the shareholders approved the adoption of the 1998
Stock Option Plan which includes provisions allowing for the award of
qualified and non-qualified stock options and the granting of restricted
stock awards. A total of 1.0 million shares of common stock may be
issued pursuant to options or restricted stock awards granted under the
Plan. Restricted stock awards do not require the payment of any cash
consideration by the recipient, but shares subject to an award may be
forfeited unless conditions specified in the grant are satisfied.
The Company has adopted a series of other stock option plans under
which incentive and non-qualified stock options and restricted stock
awards may be granted. All plans provide that the exercise price may not
be less than the fair market value of the common stock at the date the
options are granted and limit the maximum term of options granted to a
maximum of ten years.
Prior to the merger, Align-Rite adopted an Employee Share Option
Scheme in 1987 (the "1987 Plan"), in which share options were granted to
executives and key employees to purchase Align-Rite Ordinary Shares.
After giving effect to Align-Rite's initial public offering, 354,625
options were outstanding and exercisable. As of March 31, 1999, Align-
Rite had 166,165 shares outstanding under the 1987 Plan. Upon exercise,
these shares were exchangeable on a one-for-one basis with the Common
Stock of Align-Rite. No future grants of options under the 1987 Plan will
be made. Options granted prior to August 31, 1994 expire ten years from
the date of grant. Options granted subsequent to August 31, 1994 expire
five years from the date of grant. Options automatically expire thirty
days after termination of employment.
Prior to the merger, in April 1995, Align-Rite and its shareholders
adopted a Stock Option Plan (the "1995 Plan"). Under the 1995 Plan,
awards for any combination of incentive stock options, non-qualified
stock options, restricted stock, stock appreciation rights and
performance shares could have been granted to executives and key
employees to purchase 415,000 shares of the Align-Rite's Common Stock.
An additional 150,000 awards were authorized for grant in September
1998.
Incentive stock options shall be no less than 100% of the fair
market value of the Align-Rite Common Stock on the date of grant (110%
if granted to an employee who owns 10% or mote of the Common Stock). No
incentive stock option may be granted to anyone other than a full-time
employee for the Company. Options expire ten years after the date of
grant and automatically expire ninety days after termination of
employment.
The following table summarizes stock option activity under the
plans:
Stock Options Exercise Prices
------------- --------------------
Balance at November 1, 1996 2,890,569 $ 0.94 - $ 14.12
Granted 291,875 11.03 - 21.97
Exercised (508,660) 0.94 - 13.69
Cancelled (67,103) 3.04 16.38
---------
Balance at November 2, 1997 2,606,681 0.94 - 21.97
Granted 875,825 11.00 - 31.44
Exercised (329,389) 0.94 - 16.38
Cancelled (96,875) 0.94 - 31.44
---------
Balance at November 1, 1998 3,056,242 0.94 - 31.44
Granted 359,106 11.91 - 25.88
Exercised (430,660) 0.94 - 21.97
Cancelled (156,488) 0.94 - 31.44
---------
Balance at October 31, 1999 2,828,200 $ 0.94 - $ 31.44
=========
The following table summarizes information concerning currently
outstanding and exercisable options as of October 31, 1999:
Range of Exercise Prices
------------------------------------------------
$1.75-$10.00 $10.00-$20.00 $20.00-$31.44
------------ ------------- -------------
Outstanding:
Number of options 748,066 1,562,559 517,575
Weighted average
remaining years 4.2 7.7 8.5
Weighted average
exercise price $ 4.34 $ 12.85 $ 23.21
Exercisable:
Number of options 748,066 896,109 126,177
Weighted average
exercise price $ 4.34 $ 12.59 $ 22.87
At October 31, 1999, 410,766 shares were available for grant and
1,770,352 shares were exercisable at a weighted average exercise price of
$9.84.
The Company has not recognized compensation expense in connection
with stock option grants under the plans. However, had compensation
expense been determined based on the fair value of the options on the
grant dates, the Company's pro forma net income and earnings per share
for 1999 would have been reduced by approximately $2.7 million, or $0.10
per diluted share, for 1998 would have been reduced by approximately $2.3
million, or $0.07 per diluted share, and for 1997 would have been reduced
by approximately $1.7 million, or $0.06 per diluted share. The weighted
average fair value of options granted was $17.52 per share in 1999, $6.78
per share in 1998 and $7.26 per share in 1997. Fair value is estimated
based on the Black-Scholes option-pricing model with the following
weighted average assumptions: dividend yield of 0%; expected volatility
of 67.1% in 1999, 54.4% in 1998 and 51.6% in 1997; and risk-free interest
rates of 6.2% in 1999, 4.4% in 1998 and 6.4% in 1997.
The Company maintains an Employee Stock Purchase Plan ("Purchase
Plan"), under which 600,000 shares of common stock are reserved for
issuance. The Purchase Plan enables eligible employees to subscribe,
through payroll deductions, to purchase shares of the Company's common
stock at a purchase price equal to 85% of the lower of the fair market
value on the commencement date of the offering and the last day of the
payroll payment period. At October 31, 1999, 346,254 shares had been
issued and 71,413 shares were subject to outstanding subscriptions under
the Purchase Plan.
Prior to the merger, Align-Rite had an Employee Stock Purchase Plan
which enabled substantially all employees to purchase shares of Common
Stock on annual offering dates at a purchase price of 85% of the fair
market value of the shares on the grant date or, if lower, 85% of the
fair market value of the shares on the exercise date. A maximum of
75,000 shares are authorized for subscription, of which 7,007, 7,020 and
5,116 shares were purchased in 1999, 1998 and 1997 at $9.88, $9.67 and
$9.35 per share, respectively.
NOTE 10 - EMPLOYEE BENEFIT PLANS
The Company maintains a 401(k) Savings and Profit-Sharing Plan (the
"Plan") which covers all domestic employees who have completed six months
of service and are eighteen years of age or older. Under the terms of
the Plan, an employee may contribute up to 15% of their compensation
which will be matched by the Company at 50% of the employee's
contributions which are not in excess of 4% of the employee's
compensation. Employee and employer contributions vest fully upon
contribution. Employer contributions amounted to $0.6 million in 1999,
$0.3 million in 1998 and $0.5 million in 1997.
The Company maintains a cafeteria plan to provide eligible domestic
employees with the option to receive non-taxable medical, dental,
disability and life insurance benefits. The cafeteria plan is offered to
all active full-time domestic employees and their qualifying dependents.
The Company's contribution amounted to $4.5 million in 1999, $3.3 million
in 1998 and $3.0 million in 1997.
Prior to the merger, Align-Rite had a qualified 401(k) Profit
Sharing Plan (the "Profit Sharing Plan") available to all employees who
meet the Profit Sharing Plan's eligibility requirements. Employees can
elect to contribute from 1% to 15% of their earnings to the Profit
Sharing Plan. This Profit Sharing Plan, which is a defined contribution
plan, provided that Align-Rite will, at its discretion, make
contributions to the Profit Sharing Plan on a periodic basis.
Additionally, the employer will match 25% of the first 6% of the
employees contribution, which amounts vest over five years. Terminations
and forfeitures from the Profit Sharing Plan are used to reduce the
employer's contribution. Align-Rite made contributions to the Profit
Sharing Plan of approximately $78, $68 and $48 in 1999, 1998, and 1997
respectively.
The Company's foreign subsidiaries maintain benefit plans for their
employees which vary by country. The obligations and cost of these plans
are not significant to the Company.
NOTE 11 - LEASES
The Company leases various real estate and equipment under non-
cancelable operating leases. Rental expense under such leases amounted
to $4.9 million in 1999, $5.2 million in 1998 and $5.0 million in 1997.
Included in such amounts were $0.1 million in each year to affiliated
entities, which are owned, in part, by a significant shareholder of the
Company.
Future minimum lease payments under non-cancelable operating leases
with initial or remaining terms in excess of one year amounted to $12.8
million at October 31, 1999, as follows:
2000........$ 3,311 2003...........$ 1,372
2001..........2,032 2004.............1,351
2002..........1,490 Thereafter.......3,253
NOTE 12 - COMMITMENTS AND CONTINGENCIES
The Company and a significant shareholder have jointly guaranteed a
loan totaling approximately $0.3 million as of October 31, 1999, on
certain real estate which is being leased by the Company. The Company is
subject to certain financial covenants in connection with the guarantee.
As of October 31, 1999, the Company had capital expenditure purchase
commitments outstanding of approximately $20 million.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make certain
estimates and assumptions, including collectability of accounts
receivable, depreciable lives and recoverability of property, plant,
equipment, intangible assets and certain accrued liabilities. Actual
results may differ from such estimates.
Financial instruments that potentially subject the Company to credit
risk consist principally of trade receivables and temporary cash
investments. The Company sells its products primarily to manufacturers
in the semiconductor and computer industries in North America, Europe and
Asia. The Company believes that the concentration of credit risk in its
trade receivables is substantially mitigated by the Company's ongoing
credit evaluation process and relatively short collection terms. The
Company does not generally require collateral from customers. The
Company establishes an allowance for doubtful accounts based upon factors
surrounding the credit risk of specific customers, historical trends and
other information. Historically, the Company has not incurred any
significant credit-related losses.
NOTE 13 - SEGMENT INFORMATION
The Company operates in a single industry segment as a manufacturer
of photomasks, which are high precision quartz plates containing
microscopic images of electronic circuits for use in the fabrication of
semiconductors. In addition to its manufacturing facilities in the
United States, the Company has operations in the United Kingdom,
Switzerland, Germany and Singapore. The Company's 1999, 1998 and 1997
net sales, operating profit and identifiable assets by geographic area
were as follows:
Net Operating Identifiable
Sales Income (Loss) Assets
-------- ------------- ------------
1999:
United States $216,342 $ 25,237 $369,518
Europe 48,403 3,746 107,522
Asia 12,650 (1,785) 29,969
------- -------- --------
$277,395 $ 27,198 $507,009
======== ======== ========
1998:
United States $213,239 $ 36,821 $312,837
Europe 39,262 4,740 73,757
Asia 16,792 3,431 35,108
-------- -------- --------
$269,293 $ 44,992 $421,702
======== ======== ========
1997:
United States $199,911 $ 42,919 $313,838
Europe 25,071 3,316 60,499
Asia 10,470 2,235 29,656
-------- -------- --------
$235,452 $ 48,470 $403,993
======== ======== ========
Approximately 5% of net domestic sales in 1999 were for delivery
outside of the United States (8% in 1998 and 7% in 1997).
The Company had two customers who each represented approximately 10%
of total net sales in 1999, and one customer who represented 14% in 1998
and 20% in 1997.
NOTE 14 - COMPREHENSIVE INCOME
In June 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS) No. 130 "Reporting
Comprehensive Income." The Statement, which the Company adopted in the
first quarter of 1999, establishes standards for reporting comprehensive
income and its components in financial statements. Where applicable,
earlier periods have been restated to conform to the standards set forth
in SFAS No. 130. The Company's comprehensive income as reported in the
Supplementary Consolidated Statement of Shareholders' Equity, consists of
net earnings, and all changes in equity during a period except those
resulting from investments by owners and distributions to owners, which
are presented before tax. The Company does not provide for U.S. income
taxes on foreign currency translation adjustments because it does not
provide for such taxes on undistributed earnings of foreign subsidiaries.
Accumulated other comprehensive income (loss) consists of unrealized gains and
losses on certain investments in equity securities and foreign currency
translation adjustments. The related tax effects allocated to each
component of other comprehensive income (loss) were as follows for the
three years ended October 31, 1999:
Before-Tax Tax (Expense) Net-of-Tax
Amount or Benefit Amount
--------- ------------ ----------
1999:
Foreign currency translation
adjustment $ (2,125) $ - $ (2,125)
-------- ------ --------
Unrealized gains on investments:
Unrealized holding gains arising
during the period 4,574 (1,738) 2,836
Less: reclassification adjustment
for gains realized in
net income (2,385) 906 (1,479)
-------- ------ --------
Net unrealized gains 2,189 (832) 1,357
-------- ------ --------
Other comprehensive loss $ 64 $ (832) $ (768)
======== ====== ========
1998:
Foreign currency translation
adjustment $ (1,310) $ - $ (1,310)
-------- ------ --------
Unrealized losses on investments:
Unrealized holding losses arising
during the period (2,010) 764 (1,246)
Less: reclassification adjustment
for gains realized
in net income (1,351) 513 (838)
-------- ------ --------
Net unrealized losses (3,361) 1,277 (2,084)
-------- ------ --------
Other comprehensive loss $ (4,671) $1,277 $ (3,394)
======== ====== ========
1997:
Foreign currency translation
adjustment $ (1,761) $ - $ (1,761)
-------- ------ --------
Unrealized gains (losses) on investments:
Unrealized holding gains arising
during the period 218 (83) 135
Less: reclassification adjustment
for gains realized
in net income (2,519) 957 (1,562)
-------- ------ --------
Net unrealized losses (2,301) 874 (1,427)
-------- ------ --------
Other comprehensive loss $ (4,062) $ 874 $ (3,188)
======== ====== ========
NOTE 15- RESTRUCTURING AND RELATED CHARGES
In March, 1998, the Company initiated a plan to optimize its North
American manufacturing network. It re-organized its two California
operations, dedicating its Milpitas facility to the production of high-
end technology photomasks and its Sunnyvale facility to the production of
mature technology photomasks, and it consolidated its Colorado Springs,
Colorado photomask manufacturing operations into its other North American
manufacturing facilities. The Company determined that its Large Area
Mask (LAM) Division, which was also located in Colorado Springs, did not
represent a long-term strategic fit with its core photomask business, and
accordingly, announced its intention to sell the LAM Division. The
Company recorded a $3.8 million charge in the second quarter of 1998 for
the restructuring, including $3.3 million of non-cash charges to reduce
the carrying value of LAM Division property, plant and equipment to its
net realizable value based upon the estimated proceeds from the sale of
the LAM Division business taken as a whole. Such assets, consisting
principally of specialized manufacturing tools and equipment, had a
carrying value of $3.6 million (prior to the write-down), remained in use
and continued to be depreciated pending the disposition of the LAM
division. The LAM division was sold in January 1999 without any
additional effect on results of operations.
NOTE 16 - RESTRUCTURING AND RELATED CHARGES (UNAUDITED)
During March, 2000, the Company implemented a plan to consolidate
its mature products group in order to increase capacity utilization ,
manufacturing efficiencies and customer service activities worldwide.
Total restructuring and related charges associated with this
consolidation plan of $17.5 million were recorded in the second quarter
of 2000. Of the total charge, $9.1 million related to restructuring and
$8.4 million related to the impairment of intangible assets.
The significant components of the consolidation plan included the
closing of the Company's Sunnyvale, California and Neuchatel, Switzerland
manufacturing facilities and the consolidation and regionalization of
sales and customer service functions. The Company anticipates that the
closing of the Sunnyvale and Neuchatel facilities will maximize capacity
utilization at its remaining mature products facilities. As part of the
plan, the Company reduced its work force by approximately 125 employees.
The restructuring charge of $9.1 million includes $1.5 million of cash
charges for severance benefits paid to terminated employees which was
disbursed over their entitlement period and $2.3 million for facilities
closings and lease termination costs to be expended over the next twelve
months. Additionally, non-cash charges of $5.3 million approximated the
carrying value primarily of fixed assets associated with the
manufacturing consolidation based upon their expected disposition. Such
assets, consisting principally of specialized manufacturing tools and
equipment, were subsequently taken out of service.
The charge also included $8.4 million related to the impairment in
value of associated intangible assets. It was determined during the
period that such assets no longer had future economic benefit to the
Company because the anticipated undiscounted cumulative cash flows from
these assets were insufficient to support their carrying value.
NOTE 17 - INVESTMENT IN UNCONSOLIDATED SUBSIDIARY (UNAUDITED)
In March, 2000, the Company agreed to acquire an aggregate minimum
51% of the equity of Precision Semiconductor Mask Corporation (PSMC), an
independent photomask manufacturer based in Taiwan, for approximately $60
million. The Company currently owns 33% of PSMC's outstanding common
stock which it acquired during the second quarter of 2000 for
approximately $31.5 million. The results of PSMC for the second quarter
of 2000 are being accounted for under the equity method and were not
material to the Company's operating results.
NOTE 18 - PRIVATE PLACEMENT (UNAUDITED)
On June 1, 2000, the Company sold one million of its unregistered
common shares in a private placement to accredited institutional
investors. The proceeds of the sale, net of fees and expenses, amounted
to $22 million.
Exhibit 99.2
ALIGN-RITE INTERNATIONAL
CONSOLIDATED FINANCIAL STATEMENTS
TABLE OF CONTENTS
PAGE
----
Consolidated Balance Sheet
at March 31, 2000 (unaudited) 2
Consolidated Statement
of Income for the year ended March 31, 2000
(unaudited) 3
Consolidated Statement
of Cash Flows for the year ended March 31, 2000
(unaudited) 4
Align-Rite International and Subsidiaries
Consolidated Balance Sheet (unaudited)
(dollars in thousands)
March 31, 2000
Assets
- ------
Current Asset:
Cash and cash equivalents $ 5,278
Accounts receivable (less allowance
of $401 for doubtful accounts) 8,660
Inventories 3,853
Deferred income taxes 801
Other current assets 239
--------
Total current assets 18,831
Property, plant and equipment, net 69,793
Intangible assets, net 8,144
Other assets 1,659
--------
$ 98,427
========
Liabilities and Shareholders' Equity
- ------------------------------------
Current liabilities:
Accounts payable 6,589
Other accrued liabilities 2,607
--------
Total current liabilities 9,196
Long-term debt 30,000
Deferred income taxes 5,657
Other liabilities 5,718
--------
Total liabilities 50,571
--------
Commitments and contingencies
Shareholders' equity:
Common stock 47
Additional paid-in capital 20,229
Retained earnings 27,534
Accumulated other comprehensive gain 46
--------
Total shareholders' equity 47,856
--------
$ 98,427
========
Align-Rite International and Subsidiaries
Consolidated Statement of Earnings (unaudited)
(dollars in thousands)
For the Year Ended March 31, 2000
Net Sales
Costs and expenses: $ 58,467
Cost of sales 41,018
Selling, general and administrative 9,543
Research and development 1,190
--------
Operating income 6,716
Other income and expense:
Interest income 128
Interest expense (1,464)
Other income, net (94)
--------
Income before income taxes 5,286
Provision for income taxes 1,850
--------
Net income $ 3,436
========
Earnings per share:
Basic $ 0.74
========
Diluted $ 0.69
========
Weighted average number of
common shares outstanding:
Basic 4,641
========
Diluted 4,954
========
Align-Rite International and Subsidiaries
Consolidated Statement of Cash Flows (unaudited)
(dollars in thousands)
For the Year Ended March 31, 2000
Cash flows from operating activities:
Net income $ 3,436
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization of
property, plant & equipment 7,783
Deferred income taxes 91
Other 233
Changes in assets and liabilities, net of
effect of acquisitions:
Accounts receivable (1,618)
Inventories (779)
Other current assets (492)
Accounts payable and accrued liabilities (6,070)
-------
Net cash provided by operating activities 2,584
-------
Cash flows from investing activities:
Acquisitions of and investments in photomask
operations (13,525)
Deposits on and purchases of property,
plant and equipment (15,464)
-------
Net cash used in investing activities (28,989)
-------
Cash flows from financing activities:
Borrowings under revolving credit facility 24,800
Proceeds from issuance of common stock 563
-------
Net cash provided by financing activities 25,363
-------
Effect of exchange rate changes on cash flows (8)
-------
Net (decrease) in cash and cash equivalents (1,050)
Cash and cash equivalents at beginning of year 6,328
-------
Cash and cash equivalents at end of year $ 5,278
=======