-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, bB3z7am/oxwFsYNigb4Io83ssN5O232mhI2OKIFbnAUQ3KZzCGvxo5XcYpGJPPx+ UaqtPgifJBWQalKpsu81Og== 0000074697-95-000002.txt : 19950608 0000074697-95-000002.hdr.sgml : 19950608 ACCESSION NUMBER: 0000074697-95-000002 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19941031 FILED AS OF DATE: 19950127 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: OPTICAL COATING LABORATORY INC CENTRAL INDEX KEY: 0000074697 STANDARD INDUSTRIAL CLASSIFICATION: OPTICAL INSTRUMENTS & LENSES [3827] IRS NUMBER: 680164244 STATE OF INCORPORATION: DE FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-02537 FILM NUMBER: 95503243 BUSINESS ADDRESS: STREET 1: 2789 NORTHPOINT PKWY CITY: SANTA ROSA STATE: CA ZIP: 95407 BUSINESS PHONE: 7075456440 MAIL ADDRESS: STREET 1: 2789 NORTHPOINT PARKWAY CITY: SANTA ROSA STATE: CA ZIP: 95407-7397 10-K 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K Mark one [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended OCTOBERE31, 1994 [ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to OPTICAL COATING LABORATORY, INC. (Exact name of registrant as specified in its charter) COMMISSION FILE NUMBER 0-2537 DELAWARE 68-0164244 (State or other jurisdiction of (IRS Identification No.) incorporation or organization) 2789 NORTHPOINT PARKWAY, SANTA ROSA CALIFORNIA 95407-7397 (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code (707) 545-6440 SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: Title of each class Name of each exchange on which registered None None SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: Common Stock, $.01 par value NASDAQ 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. [X] Yes [ ] No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] At December 31, 1994, the aggregate market value of the registrant's common stock (based upon the closing price of these shares on the NASDAQ National Market System) held by non- affiliates, which excludes shares held by officers and directors and the Employee Stock Ownership Plan of the registrant (not all of whom claim to be affiliates), was approximately $53.4 million. At December 31, 1994, there were 8,978,152 shares of the registrant's common stock, $.01 par value, issued and outstanding. DOCUMENTS INCORPORATED BY REFERENCE Portions of Optical Coating Laboratory, Inc.'s Annual Report to Stockholders for the year ended October 31, 1994 are incorporated by reference into Parts I, II and IV of this Form 10-K. Portions of the definitive Proxy Statement for the Company's Annual Meeting of Stockholders to be held March 30, 1995 are incorporated by reference into Part III of this Form 10-K. The Exhibit index appears on Pages 17-20. OPTICAL COATING LABORATORY, INC. FORM 10-K TABLE OF CONTENTS PART I PAGES Item 1. Business 3-10 Item 2. Properties 10-11 Item 3. Legal Proceedings 11-12 Item 4. Submission of Matters to a Vote of Security Holders 12 Executive Officers of the Registrant 12-14 PART II 14-15 Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters Item 6. Selected Financial Data Item 7. Management's Discussion and Analysis of Results of Operations and Financial Condition Item 8. Financial Statements and Supplementary Data Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure PART III 15 Item 10. Directors and Executive Officers of the Registrant Item 11. Executive Compensation Item 12. Security Ownership of Certain Beneficial Owners and Management Item 13. Certain Relationships and Related Transactions PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K (a) Index 17-20 (b) Reports on Form 8-K 20 (c) Financial Statement Schedules 21 (d) Exhibits 23-56 SIGNATURES 22 PART I ITEM 1. BUSINESS GENERAL DESCRIPTION OF BUSINESS Optical Coating Laboratory, Inc., together with its consolidated subsidiaries ("OCLI" or the "Company"), was originally incorporated in Delaware in 1948. Subsequently, the Company was reincorporated in California in 1963 and again reincorporated in Delaware in 1987. The Company is engaged primarily in the design, development, manufacture and marketing of multi-layer optical thin film coated products and, through its German subsidiary acquired in December 1992, fabricated glass products. Optical thin film coatings control and enhance light energy by altering the transmission, reflection and absorption of the various wavelengths of light to achieve a desired optical effect. The Company's products are used principally as components in products and systems manufactured by original equipment manufacturers (OEMs) and defense/aerospace contractors. The Company also manufactures and sells as a finished product Glare/Guard(R) anti-glare and anti-static filters for computer display terminals. The Company believes that it is the world's leading independent manufacturer of optical thin film coated products. The Company's initial growth came from the development of high precision coated products for use primarily in defense and aerospace applications and in sophisticated analytical equipment. These types of coated products are produced by relatively costly batch processes and continue to represent a portion of the Company's revenues. From this base, the Company has expanded into commercial markets by designing and fabricating continuous coating equipment capable of producing a high volume of relatively less complex products at lower unit costs. This equipment has enabled the Company to serve large scale commercial markets with many of its products. The Company has manufacturing facilities in Santa Rosa, California, Hillend, Scotland and Goslar, Germany. The Company has developed many of its thin film coating processes and has designed and fabricated most of the coating equipment used to produce its products. The Company believes its ability to design and build this specialized equipment has been an important factor in enabling it to compete successfully. Consequently, OCLI maintains an extensive array of thin film coating equipment, glass fabrication equipment and metrology equipment to meet customer requirements for coated products and fabricated glass components. The Company has established strong, long-term customer relationships and serves a wide range of markets, including leading manufacturers of computers, photographic equipment, copier products, medical instrumentation, home entertainment products, and space and defense products. SANTA ROSA OPERATIONS The Company's corporate headquarters and its Santa Rosa and Glare/Guard(R) Divisions are located in Santa Rosa, California. The Santa Rosa Division manufactures a wide array of generally high volume thin film coated products for application in commercial markets. These products are manufactured in high volume, single chamber coaters and in the Company's proprietary multi-chamber, multi-layer automatic coater (MAC). The division is a major supplier of coated front surface mirrors (FSM) for applications in copier and projection television optics systems. This division also supplies optical coatings for computer displays to OEM's and coated products for CRT and flat panel displays, photographic and scanning systems applications and specialty products for medical, scientific and analytical instruments and lighting applications. The Santa Rosa Division also manufactures sophisticated, high precision coated products and optical components that are designed to meet the specific performance standards required for advanced scientific, space and defense systems. In this area, the division has unique thin film engineering and precision manufacturing capabilities to supply highly specialized, advanced optical coated products. The division has supplied coated solar cell covers for the solar power modules of all US space missions and many types of coated infrared optics used in space satellites and weapons guidance systems. The Company's Glare/Guard(R) Division produces ergonomic enhancement products sold in the computer end-user market. Glare/Guard(R) filters provide viewing comfort and health and safety protection for computer users by improving the visibility of the information displayed on computer display monitors. Several models are also capable of minimizing electrical field radiation and static charge buildup of display devices. These products are generally sold through distributors, computer accessory dealers and computer supply catalogs. EUROPEAN OPERATIONS The Company's operations in Hillend, Scotland, consist of a fully integrated coating facility and Glare/Guard(R) assembly operation. The Hillend operation has independent thin film coating technology and, in several areas, is pursuing research and development independent of the parent company's technical programs. The Company's subsidiary in Goslar, Germany, acquired December 31, 1992, is a fully integrated glass fabrication operation with capability for sawing, machining, heat treating, chemical treating and etching of glass products to its customers' requirements. This operation, for example, supplies fabricated glass elements for use as components in copiers, cameras and other electro-optical devices and instruments. The manufacturing facilities and equipment of the Company's Scottish and German operations are modern and up-to-date, and the technology of the subsidiaries has been independently established over many years. The Company has subsidiaries in Reinheim, Germany, Paris, France, Milan, Italy, and Madrid, Spain, primarily for distribution of its products in Europe. The headquarters for the Company's sales force in Europe is located in Reinheim, Germany. RAW MATERIALS AND SUPPLIERS The primary raw materials used by the Company in its coating operations are various forms of glass, germanium, fused silica and several types of plastic and inorganic coating materials, such as magnesium fluoride, silicon dioxide, aluminum or germanium. The Company has more than one supplier for each of its raw materials and maintains adequate inventories and close working relationships with its suppliers to assure a continuous and adequate supply for production. The Company purchases special grade flat glass under long-term allocation arrangements from one major US glass supplier and cannot routinely increase its supply of such special grade flat glass. The Company has not experienced any significant interruptions in production due to a shortage of raw material. Substrate materials are purchased by the Company or supplied by customers, while coating materials and their composition are generally supplied by the Company, as they are often considered a proprietary element of the manufacturing process. RESEARCH AND DEVELOPMENT The Company has devoted significant resources over time to the research and development of improved thin film products, processes and manufacturing equipment. As a result of these investments, the Company has been recognized as a leader in the development of many advanced thin film coating technologies. In certain cases, when particularly suited to customer mass production applications, the Company licenses these coating technologies to other companies for integrated mass production applications that the Company otherwise would not serve as part of its normal business. In conjunction with these licensing arrangements, the Company sometimes builds coating equipment. The Company's most significant research and development effort over the past several years has been focused on metal mode reactive sputtering, which has been patented as MetaMode(R). Using its patented MetaMode(R) technology, the Company has developed a new process named DirectCoatTM. The DirectCoatTM process was developed at the request of one of the Company's long- time customers who desired a more cost effective method of coating CRTs than the Company's existing coating process which required that the glass panels be shipped to the Company for coating, then be returned to the customer to be bonded to the CRTs. In 1993, the Company signed a multi-year licensing agreement with this customer for the DirectCoatTM process and MetaMode(R) technology. The DirectCoatTM process has enabled the customer to integrate this highly reliable, fully automated process directly into its manufacturing line, allowing the customer to achieve a flexible, nearly zero lead time capability. The Company has also established a DirectCoatTM pilot line at its Santa Rosa facility and has made a general announcement regarding its DirectCoatTM capability, making this technology available to other CRT manufacturers. Over the last several years, the Company has also been in the process of developing solid state (as compared to liquid based) electrochromic products utilizing thin film coating technology. Electrochromic devices allow for variations in the transmission or reflectance of light through or off an optical component depending on the voltage applied to the device. The initial development effort was to produce an electrochromic truck mirror in conjuntion with Donnelly Corporation under a joint venture agreement. This effort reached the prototype production stage but was abandoned in favor of each company pursuing its own independent electrochromic development program. The Company has continued its efforts to develop electrochromic coatings for various specific market and product applications. Other areas receiving significant R&D focus include the development of techniques to improve coating uniformity on plastic substrates for flat panel display applications; the automation of the Company's coating equipment to improve product quality and increase equipment productivity; the development of new and improved product configurations for the Glare/Guard(R) market, and to eliminate coating and cleaning materials that are potentially harmful to the environment. Company funded research and development expenditures totaled $5.2 million, $5.9 million, and $8.2 million, or 4.0%, 4.8%, and 7.1% of revenues during fiscal years 1994, 1993, and 1992. Additionally, a significant portion of the Company's customer contracts are for state-of-the-art coating applications entailing substantial development efforts. Such customer related developments contribute to the broad technology base of the Company. MARKETING The Company's coated products are sold by its sales engineering teams headquartered in Santa Rosa, California and Reinheim, Germany, who communicate directly with customers' engineering, manufacturing and purchasing personnel in determining the design, performance and cost specifications for customer product requirements. The Company also has regional sales offices in several major cities throughout the United States and in Germany, France, Italy, Spain and the United Kingdom. In Japan and other Asian countries, the Company uses independent distributors and sales representatives for product marketing and sales. With the exception of its Glare/Guard(R) product line, the Company markets most of its standard high volume coated products and fabricated glass components to original equipment manufacturers (OEMs). Its customized, technically sophisticated products are also marketed to original equipment manufacturers in addition to defense and aerospace contractors. In the export market, the Company markets some of its products to major distributors who perform product conversion and other value-added process steps before resale. The Company's Glare/Guard(R) product line is marketed through distributors and dealers directly to end users. The Company's ten largest customers accounted for 30% of its sales in 1994 and its largest customer accounted for 7%, 7%, and 6% of its sales in fiscal years 1994, 1993, and 1992. Because relatively few customers account for a substantial portion of the Company's sales, the loss of their business could have a material adverse effect on the Company's operating results. However, the Company believes that it has the resources and capabilities to replace any lost business over time through the development of new products and new applications for its products. Foreign sales, primarily in Europe and Asia, represented 45%, 41% and 35% of net sales and other revenues for fiscal years 1994, 1993 and 1992. Sales by the Company's wholly-owned subsidiary in Scotland represented 16%, 18% and 21% of net sales and other revenues for fiscal years 1994, 1993 and 1992. Sales by the Company's wholly-owned subsidiary in Germany represented 15% and 11% of net sales and other revenues for fiscal years 1994 and 1993. Sales by these subsidiaries are primarily to customers in European countries. Export sales by US operations to Asian countries represented 11%, 9% and 8% and to European countries 3%, 2% and 6% of net sales and other revenues for fiscal years 1994, 1993 and 1992. Such export sales could be adversely affected by significant adverse currency alignments. However, since such sales are generally to customers in major US trading partner countries, the risk of sudden adverse currency realignments affecting such export sales is considered low. Furthermore, a major portion of such sales are to long-standing customers of the Company who have participated in the development of product specifications and standards for their use and who are, therefore, not relying on competitive pricing alone in their decision to buy from the Company. Accordingly, the Company considers its export sales portfolio well balanced and with little risk of substantial overall loss. Sales of products to the federal government, primarily under subcontracts, accounted for 11%, 7% and 8% of sales for the fiscal years 1994, 1993 and 1992. The Company's cost-plus-fixed fee (CPFF) government contracts for the years 1982 through 1994 are subject to pending governmental audit review. Such audit entails, primarily, a review of costs and expenses charged to government contracts with the focus on potential adjustments to general and administrative expense allocation to such contracts. For the period 1982 to 1994, general and administrative expenses allocated to government CPFF contracts have averaged approximately $930,000 per year, and for the most recent three years, such general and administrative expense allocations were $1,640,000 for 1994, $500,000 for 1993 and $220,000 for 1992. The Company has established a reserve for anticipated adjustments and disallowances that may result from such government audit reviews and does not expect any adjustments or disallowances to exceed amounts already reserved. SEASONALITY The Company's business is not seasonal in any material sense. However, the Company customarily shuts down a major portion of its operations between Christmas and New Year's Day. As a result, during the last five fiscal years, normally scheduled work days for the first fiscal quarter have averaged 56 compared to an average of 64 for the other three fiscal quarters. Nonetheless, the Company generally has sufficient manufacturing capacity and the ability to schedule additional production shifts to meet its customers' shipment requirements in any period of the year. The Company further believes that its revenues and costs are consistently matched in each fiscal quarter since labor costs during the holiday shutdown period are generally charged to vacation and holiday labor expense categories which are accounted for on a pro rata basis over the fiscal year. The Company's European subsidiaries customarily shut down their operations for a two-week summer vacation. The summer shutdown has historically reduced the Company's fiscal fourth quarter sales in Europe as compared to sales of the other three fiscal quarters. In 1994 and prior years, the decline in sales during the summer in Europe has not been significant to the consolidated operations of the Company. Such seasonality, however, could become significant in future periods depending upon the overall significance of European sales to total Company sales. BACKLOG The Company's backlog of orders at the end of each of the last three fiscal years was as follows: OCTOBER 31, 1994 1993 1992 (In Millions) $35.0 $30.7 $29.3 Backlog includes $4.7 million and $3.4 million for 1994 and 1993 for the Company's operation in Goslar, Germany which was acquired during fiscal 1993. There was no backlog included in 1992 for this operation. Substantially all orders in backlog at October 31, 1994 are scheduled for shipment during 1995. The amount of backlog at October 31, 1994 represents only a portion of anticipated sales in 1995, with new orders historically comprising the major portion of sales in a fiscal year. Backlog consists of new orders on which shipments have not yet started or unfilled portions of orders which are only partly completed. Some of these orders are completed within several days of receipt, while others are not completed for a number of months. Substantially all orders included in backlog are subject to cancellation without penalty; however, the Company generally has not experienced significant order cancellations. Contractually specified delivery dates on orders sometimes are adjusted at the request of either the customer or the Company. COMPETITION The Company believes that it is the world's leading independent manufacturer of multilayer optical thin film coated products, although it is not aware of any publicly available market studies indicating its market share position. Its competitors include several private companies whose sales of coated products are believed to be considerably less than the Company's, as well as coating operations that comprise only a portion of the total business of other companies. The Company's glass fabrication operation in Germany also has local and foreign competitors. In its commercial and technical markets, the Company competes primarily on the basis of the advanced technical characteristics and quality of its coated products, ability to meet individual customer specifications and dependability and capability as a supplier, the quality of technical assistance furnished to customers and product price. In its Glare/Guard(R) anti-reflective optical filters market, the Company competes primarily on the basis of price, design, performance features and product distribution as well as the dependability and capability of the Company as a supplier. There are a number of domestic and foreign competitors in the Glare/Guard(R) product market that purchase coated glass and assemble and sell filters in competition with the Company. Such competitors include 3M, Fellows, Polaroid and Hunts. The Company is the world's largest manufacturer of anti-reflective optical filters, as measured by total number of units produced, and manufactures filters for both Glare/Guard(R) products and other private label distributors. Glare/Guard(R) products are one of the largest brand names in their markets, both domestically and internationally. Generally, no other single competitor can offer the market the versatility of the Company in terms of technologies or manufacturing capacity. PATENTS AND LICENSES The Company has 49 patents and 39 patent applications in the United States which cover materials, processes, products and production equipment. The Company also has patents and patent applications pending in various foreign countries covering the same technology. In addition, the Company assigned 13 patents and 3 patent applications to Flex Products, Inc. in connection with the Flex Products joint venture (see "Joint Ventures, Investments and Acquisitions" below). The Company has a license to use such patents. Expiration dates for the Company's various patents range from 1995 to 2010. The Company considers its proprietary technology, its trade secrets and its patents to be of considerable value to its business. The Company's patent position is particularly important to its business in that its patents demonstrate and support its technological leadership position, safeguard its competitive position, and support existing and potential sales volume. EMPLOYEES At October 31, 1994, the Company had 1,162 employees of whom 834 were employed domestically, 123 were employed by the Company's operation in Scotland, 181 were employed by the Company's operation in Goslar, Germany, and 24 were employed in its sales offices in Europe. U.S. employees and employees in Scotland are not subject to collective bargaining agreements. Some of the employees of the Goslar operation are part of the national chemical, paper and ceramic union organization in Germany. There have been no work stoppages due to labor difficulties. The Company believes that its employee relations are satisfactory. In 1987, the Board of Directors approved increases in severance benefits for employees in the event of certain changes in control of the Company. These severance arrangements have been extended through November 1995. JOINT VENTURES, INVESTMENTS AND ACQUISITIONS Information regarding joint ventures, investments and acquisitions by the Company for the years ended October 31, 1994, 1993 and 1992, is included in Note 4 and 13 to the Consolidated Financial Statements of the Company's 1994 Annual Report, which notes are incorporated herein by reference. ITEM 2. PROPERTIES PROPERTY, PLANT AND EQUIPMENT The Company's principal facility is located in Santa Rosa, California. The facility site consists of approximately 75 acres of land of which approximately 50 acres are occupied by existing operations with the remaining 25 acres currently held available for sale or development. The total site is within an industrial development area and is served by well developed road access and utilities infrastructure. The facility is comprised of 11 buildings totaling approximately 370,000 square feet. The principal use of these facilities is for Company executive and administrative offices and for manufacturing operations and research activities of the Company. Approximately 36,000 square feet formerly utilized by the Company's Flex Products operation has been leased to Flex Products, Inc. in connection with the Flex Products joint venture. See "Acquisitions, Joint Ventures and Investments" above. The Company leases approximately 18,000 square feet for its Glare/Guard(R) operations in an industrial park area in Santa Rosa. The Company also leases approximately 30,000 square feet for warehousing in the same industrial park area. The Company's wholly-owned subsidiary in Hillend, Scotland, occupies a 56,000 square foot manufacturing and office building on a 16 acre site in an industrial park area. The facility was constructed for the subsidiary by the Scottish Development Agency (SDA). This property is owned by the Company subject to a mortgage that had a balance of $4.3 million as of October 31, 1994, with approximately 12 years left on the term of the mortgage. The subsidiary also leases approximately 9,000 additional square feet for warehousing. The Company's subsidiary operation in Goslar, Germany, acquired December 31, 1992, occupies approximately 87,000 square feet of manufacturing space and approximately 8,000 square feet of office space on two sites totaling approximately 8 acres in industrial park areas in Goslar, Germany. A portion of these facilities is occupied under lease with right to purchase and a portion of the industrial land is occupied under a long-term hereditary rights agreement. The Company leases approximately 5,000 square feet of office space for its subsidiary operation in Reinheim, Germany. Management believes that the Company's facilities, including the facilities in Scotland and Germany, are adequate for its current level of business and near-term growth requirements. ENVIRONMENTAL CONSIDERATIONS Since the discovery of groundwater contamination at its facilities in Santa Rosa, the Company has conducted extensive investigations to determine the lateral and vertical extent of the contamination. During 1990, the Company substantially completed its investigation and study and formulated a plan of remediation. The total cost of the investigation was approximately $5.0 million which has been charged to operations in prior periods. Based upon extensive tests conducted to date, it has not been demonstrated that contaminant levels pose a current public health hazard. The Company has established a program for reducing contaminant concentration levels to acceptable federal and state levels with the assistance of its environmental consultants and under the regulatory guidance of the California Regional Water Quality Control Board. The Company is continuing to evaluate the effectiveness of its monitoring, extraction and remediation systems. In addition, the Company anticipates drilling additional monitoring and extraction wells in connection with its final remediation plan. Based upon the extensive tests conducted and advice of environmental consultants, the Company believes that the annual cost of maintaining compliance with environmental standards related to the above matter will not have a material adverse effect on the Company's business, financial position or prospects. ITEM 3. LEGAL PROCEDURES No material legal proceedings are presently pending by or against the Company or its subsidiaries. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS There were no matters submitted to a vote of the Company's security holders during the three months ended October 31, 1994. EXECUTIVE OFFICERS OF THE REGISTRANT The following is a list of Company executive officers, their ages and positions as of January 15, 1995. NAME POSITION AGE Herbert M. Dwight , Jr. President, Chief Executive Officer and Chief Financial Officer 64 Frank J. Bufano Vice President and Managing Director, 55 OCLI Optical Coatings Limited William C. Burgess Vice President, Human Resources 48 Klaus F. Derge Vice President, International Operations 57 John McCullough Vice President 61 Laurence D. Parson Vice President and General Manager, 46 Glare/Guard(R) Division Kenneth D. Pietrelli Vice President, Corporate Services 46 James W. Seeser, Ph.D. Vice President and Chief Technical Officer 51 N.E. Rick Strandlund Vice President and General Manager, Santa Rosa Division 50 Josef Wally Vice President and Corporate Controller 55 Joseph C. Zils Vice President, General Counsel and Corporate Secretary 40
Mr. Herbert M. Dwight, Jr. joined the Company on August 19, 1991 as Chairman of the Board of Directors, President and Chief Executive Officer. On December 17, 1993, he also assumed the position of Chief Financial Officer. Mr. Dwight was a founder of Spectra Physics Inc., a leading manufacturer and developer of commercial lasers. He served as Chief Executive Officer of Spectra Physics from 1967 to 1988. Mr. Dwight was Chairman, President and Chief Executive Officer of Superconductor Technologies, Inc. from 1988 through August 1991 and continued to serve as Chairman from 1991 until his resignation in May 1994. Mr. Dwight also serves as director of Laserscope Surgical Systems, Applied Materials, Inc., Applied Magnetics Corp. and various privately held corporations and nonprofit agencies. Mr. Bufano has been employed by the Company since 1961 in various engineering and operations management positions. He was appointed General Manager, Advanced Products Division, in March 1989 and appointed Vice President in December 1989. With the formation of the Santa Rosa Division, effective November 1, 1992, he assumed the position of Vice President and Director of Operations of the Santa Rosa Division. On November 1, 1993, Mr. Bufano assumed the position of Vice President of the Company and Managing Director of the Company's operations in Scotland. Mr. Burgess joined the Company and was appointed Vice President, Human Resources, effective June 6, 1994. Prior to joining the Company, Mr. Burgess was employed as Vice President, Human Resources and Administration of Teknekron Communications Systems, Berkeley, California, from February 1991 and from 1985 to 1991 was employed by ABB Asea Brown Boveri, Ltd., Stamford, Connecticut, as Vice President, Human Resources. Mr. Derge has been employed by the Company as Vice President, International Operations since July 1992. Mr. Derge also serves as the Managing Director of OCLI Optical Coating Laboratory GmbH, the Company's subsidiary located in Reinheim, Germany. He is also Co-Managing Director of MMG Glastechnik in Goslar, Germany, and Managing Director of the Company's various European sales operations. Mr. Derge was previously employed by Spectra Physics, Sweden, as Vice President, International Marketing. Mr. McCullough was the Company's Vice President, Finance and Administration from 1958 to 1967. During 1976 and 1977, he was Vice President in charge of the Company's Commercial Products and Raytek Divisions. In January 1978, he was appointed Senior Vice President, and in December 1988, he was appointed Executive Vice President of the Company. In January 1992, he assumed a lesser involvement with the Company with the title of Vice President. Mr. Parson has been employed by the Company since 1973 in various manufacturing, marketing and sales positions. He was appointed General Manager, Glare/Guard(R) Division, in May 1992 and was appointed Vice President on June 22, 1993. Mr. Pietrelli has been employed by the Company since 1980. Mr. Pietrelli held the position of Corporate Materials Manager until May 1992 when he assumed the position of Manager, Corporate Services. He was appointed Vice President, Corporate Services effective June 22, 1993. Dr. Seeser has been employed by the Company since 1983. Dr. Seeser has held engineering and engineering management positions with the Company and was appointed Vice President in March 1986 and Chief Technical Officer effective November 1, 1993. From August 1987 through March 1989, he also held the position of General Manager, Advanced Products Division, in addition to his management responsibilities for the Corporate Technology Group of the Company. Mr. Strandlund has been employed by the Company since 1973 and has held various engineering and management positions in the Company. He was appointed Vice President and General Manager, Commercial Products Division in September 1986. Effective with the formation of the Santa Rosa Division on November 1, 1992, he became Vice President and General Manager, Santa Rosa Division. Mr. Wally has been employed by the Company since 1978 as Controller, and in December 1988, Mr. Wally was also appointed Vice President. Mr. Wally was designated as acting Corporate Secretary in July 1981 and Corporate Secretary in April 1983. Effective December 17, 1993, Mr. Wally relinquished the title of Corporate Secretary. Mr. Zils was employed by the Company in 1989 as Director of Contracts/Corporate Counsel. He was appointed Vice President on June 22, 1993 and Corporate Secretary on December 17, 1993. At that time, Mr. Zils also assumed the title of General Counsel. Information regarding compliance with Section 16(a) of the Securities Exchange Act of 1934 is set forth in the definitive Proxy Statement, which information is incorporated herein by reference. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS Information required by this item is included in the Company's 1994 Annual Report to Stockholders under Market for Registrant's Common Stock and Related Stockholder Matters and is herein incorporated by reference. The Company's Common Stock is traded over-the-counter and quoted on the NASDAQ/National Market System under the symbol OCLI. The number of stockholders of record at December 31, 1994 was 1,197. ITEM 6. SELECTED FINANCIAL DATA Information required by this item (Five-Year Summary) is included in the Company's 1994 Annual Report to Stockholders and is herein incorporated by reference. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Information required by this item is included in the Company's 1994 Annual Report to Stockholders under Management's Discussion and Analysis of Results of Operations and Financial Condition and is herein incorporated by reference. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Information required by this item is included in the Company's 1994 Annual Report to Stockholders under Consolidated Balance Sheets; Consolidated Statements of Operations; Consolidated Statements of Stockholders' Equity; Consolidated Statements of Cash Flows; Notes to Consolidated Financial Statements; and Independent Auditors' Report and is herein incorporated by reference. The consolidated financial schedules of Optical Coating Laboratory, Inc. and Subsidiaries are filed as part of Item 14 of this annual report on Form 10-K. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT ITEM 11. EXECUTIVE COMPENSATION ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Pursuant to Paragraph G(3) of the General Instructions to Form 10- K, the information called for in Part III, Items 10, 11, 12 and 13 of Form 10-K is omitted since the Company will file, not later than 120 days after the close of the fiscal year ended October 31, 1994, with the Securities and Exchange Commission, a definitive proxy statement pursuant to Regulation 14A in connection with its 1995 Annual Meeting of Stockholders. The information contained under the caption "Executive Officers of the Registrant" in Part I of this Form 10-K is incorporated by reference into Item 10. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (A) ITEMS FILED AS PART OF REPORT 1. FINANCIAL STATEMENTS Independent Auditors' Report Consolidated Balance Sheets Consolidated Statements of Operations Consolidated Statements of Stockholders' Equity Consolidated Statements of Cash Flows Notes to Consolidated Financial Statements The consolidated financial statements and notes to consolidated financial statements of Optical Coating Laboratory, Inc. and Subsidiaries are incorporated herein by reference to the Company's 1994 Annual Report to Stockholders. 2. FINANCIAL STATEMENT SCHEDULES Schedule VIII Valuation and Qualifying Accounts The financial statement schedule should be read in conjunction with the financial statements in the 1994 Annual Report to Stockholders. Schedules not included in these financial statement schedules have been omitted because they are not applicable or the required information is shown in the financial statements or notes thereto. (A)(3) EXHIBITS The following are filed as Exhibits to this Annual Report on Form 10-K. The numbers refer to the Exhibit Table of Item 601 of Regulation S-K. 3.1 Restated Certificate of Incorporation.Incorporated by reference to Exhibit (4)(a) of the Registrant's Form 10-Q for the quarter ended July 31, 1988. 3.2 By-Laws. Incorporated by reference to Exhibit (3)(b) of the Registrant's Form 8-K under Item 5 dated November 20, 1987. 4.1 Interest Rate Swap Agreement between Registrant and Bank of America, NT&SA, dated July 20, 1988. Incorporated by reference to Exhibit (4)(b) of the Registrant's Form 10-Q for the quarter ended July 31, 1988. 4.2 Rights Agreement between Registrant and First Interstate Bank of California dated November 25, 1987. Incorporated by reference to Exhibit (4) of the Registrant's Form 10-K for the year ended October 31, 1987. 4. 3 Confirmation of Interest Rate Swap between Registrant and Bank of America, NT&SA, dated August 2, 1991. Incorporated by reference to Exhibit (28)(c) of the Registrant's Form 10-Q for the quarter ended July 31, 1991. 4.4 Note Purchase Agreement(s) dated as of May 27, 1994 for the private placement of $18,000,000 of 8.71% Senior Notes due June 1, 2002 between the Registrant and Connecticut Mutual Life Insurance Company, Modern Woodman of America and American Life and Casualty Insurance Company. Incorporated by reference to Exhibit (4)(a) of the Registrant's Form 10-Q for the quarter ended July 31, 1994. 4.5 Amended and Restated Credit Agreement dated as of June 30, 1994 between the Registrant and Bank of America, NT&SA. Incorporated by reference to Exhibit (4)(b) of the Registrant's Form 10-Q for the quarter ended July 31, 1994. 9 Not applicable. 10.0* Registrant's Management Incentive Plan for 1995.(1) (See pages 23 through 24) 10.1 Registrant's Employee Stock Ownership Plan (OCLI ESOP+) as amended. Incorporated by reference to Exhibit (10)(c) of the Registrant's Form 10-K for the year ended October 31, 1988. 10.2 Registrant's 1993 Incentive Compensation Plan. Incorporated by reference to Exhibit A of the Registrant's Proxy Statement dated March 8, 1993.(1) 10.3 Registrant's 1992 Incentive Compensation Plan. Incorporated by reference to Exhibit A of the Registrant's Proxy Statement dated March 8, 1992.(1) 10.4 Registrant's 1991 Incentive Compensation Plan. Incorporated by reference to Exhibit A of the Registrant's Proxy Statement dated February 25, 1991.(1) 10.5 Registrant's 1987 Incentive Compensation Plan. Incorporated by reference to Exhibit A of the Registrant's Proxy Statement dated February 19, 1987.(1) 10.6 Registrant's 1984 Incentive Stock Option Plan. Incorporated by reference to Exhibit (10)(d) of the Registrant's Form 10-K for the year ended October 31, 1985.(1) 10.7 Registrant's 1983 Incentive Stock Option Plan. Incorporated by reference to Exhibit (10)(d) of the Registrant's Form 10-K for the year ended October 31, 1983.(1) 10.8 Registrant's 1982 Incentive Stock Option Plan. Incorporated by reference to Exhibit A of Proxy Statement of Registrant dated March 1, 1982.(1) 10.9 Form of Incentive Compensation Agreement between Registrant and its Executive Officers. Incorporated by reference to Exhibit (10)(h) of the Registrant's Form 10-K for the year ended October 31, 1987.(1) 10.10 Registrant's Directors' and Officers' Liability and Corporate Reimbursement Insurance Policy. Incorporated by reference to Exhibit (10)(i) of the Registrant's Form 10-K for the year ended October 31, 1987.(1) 10.11 Form of Directors' and Officers' Indemnification Agreement. Incorporated by reference to Exhibit (10)(j) of the Registrant's Form 10-K for the year ended October 31, 1987.(1) 10.12 Employment Agreements between Registrant and its Executive Officers. Incorporated by reference to Exhibit (10)(k) of the Registrant's Form 10-K for the year ended October 31, 1987. Second Amendment thereto incorporated by reference to Exhibit (28)(a) of the Registrant's Form 10-Q for the quarter ended January 31, 1992.(1) 10.13 Form of Third Amendment to Employment Agreements between Registrant and its Executive Officers dated November 20, 1993.(1) Incorporated by reference to Exhibit 10.13 of the Registrant's Form 10-K for the year ended October 31, 1993. (1) 10.14 Form of Employment Assurance Agreements between Registrant and its key technical and professional employees. Incorporated by reference to Exhibit (10)(l) of the Registrant's Form 10-K for the year ended October 31, 1987. Form of Amendment thereto incorporated by reference to Exhibit (28)(b) of the Registrant's Form 10-Q for the quarter ended January 31, 1992.(1) 10.15 Mortgage Agreement between the Scottish Development Agency and Registrant's Scottish Subsidiary. Incorporated by reference to Exhibit (10)(o) of the Registrant's Form 10-K for the year ended October 31, 1987. 10.16 Acquisition Agreement between Henning Von Birkhahn and Ingo Mertens and the Registrant's German subsidiary, OCLI Optical Coating Laboratory GmbH, dated December 31, 1992 for the acquisition by the Registrant of MMG MinnahYtte Maschinelle Glasbearbeitung GmbH. Incorporated by reference to Exhibit 2A of Registrant's Form 8-K dated December 31, 1992. 10.17 Joint Venture Agreement between Waldemar J. Milas and the Registrant's German subsidiary, OCLI Optical Coating Laboratory GmbH, dated March 12, 1993. Incorporated by reference to Exhibit 10.19 of the Registrant's Form 10-K for the year ended October 31, 1993. 10.18 Joint Venture Agreement between Nesa Informatica Srl, Italy, and the Registrant's Italian subsidiary, Optical Coating Laboratory Srl dated April 22, 1993. Incorporated by reference to Exhibit 10.20 of the Registrant's Form 10- K for the year ended October 31, 1993. 10.19 Joint Venture Agreement by and among ICI American Holdings Inc., Optical Coating Laboratory, Inc. and Flex Products, Inc., dated December 19, 1988. Incorporated by reference to Exhibit (10)(p) of the Registrant's Form 10-K for the year ended October 31, 1988. 10.20 Non-Qualified Stock Option Agreement dated August 26, 1988 under the Registrant's 1987 Incentive Compensation Plan between the Registrant and John McCullough. Incorporated by reference to Exhibit (10)(r) of the Registrant's Form 10-K for the year ended October 31, 1988. 10.21 Stock Purchase Agreement by and between Registrant and John McCullough dated August 19, 1991. Incorporated by reference to Exhibit (10)(v) of the Registrant's Form 10-K for the year ended October 31, 1991. 10.22 Employment Agreement by and between Registrant and Herbert M. Dwight dated August 19, 1991. Incorporated by reference to Exhibit (10)(w) of the Registrant's Form 10-K for the year ended October 31, 1991.(1) 10.23 Employment Agreement by and between John McCullough and Registrant dated August 19, 1991. Incorporated by reference to Exhibit (10)(x) of the Registrant's Form 10-K for the year ended October 31, 1991.(1) 10.24 Severance Agreement dated September 1, 1993 and Supplemental Release Agreement dated January 5, 1994 by and between Gilbert L. Whissen and Registrant.(1) Incorporated by reference to Exhibit 10.29 of the Registrant's Form 10-K for the year ended October 31, 1993. 11* Computation of earnings (loss) per share for the years ended October 31, 1994, 1993 and 1992. (See pages 25 through 26) 12 Not applicable. 13* Registrant's Annual Report to Stockholders for the fiscal year ended October 31, 1994. With the exception of the information incorporated by reference in Items 1, 5, 6, 7, 8 and 14 of this Form 10-K, the Annual Report to Stockholders for the fiscal year ended October 31, 1994 is not deemed filed as part of this report. (See pages 27 through 54) 16 Not applicable. 18 Not applicable. 21* Subsidiaries of the Registrant. (See page 55) 22 Not applicable. 23* Independent Auditors' Consent and Report on Schedules (See page 56) 24 Not applicable 99 Not applicable. * Items not previously filed are designated by an asterisk. (1) Designates management contracts or compensatory plan arrangements required to be filed as exhibits pursuant to Item 14(c) of Form 10-K. (B) REPORTS ON FORM 8-K None OPTICAL COATING LABORATORY, INC. AND SUBSIDIARIES SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS (S-X, RULE 12-09) (AMOUNTS IN THOUSANDS)
Column A Column B Column C Column D Column E Balance Additions Deductions at charged to Amounts Balance Beginning Costs & Other Charged at End Description of Period Expenses Accounts Off of Period ALLOWANCE FOR DOUBTFUL ACCOUNTS: Year ended October 31, 1994 $1,817 $667 $85(a) $759 $1,810 Year ended October 31, 1993 $728 $1,167 $102(a) $180 $1,817 Year ended October 31, 1992 $432 $408 $1(a) $113 $728 ALLOWANCE FOR INTERCOMPANY PROFIT IN INVENTORY: Year ended October 31, 1994 $1,130 $36 $-0- $-0- $1,166 Year ended October 31, 1993 $1,809 $-0- $-0- $679 $1,130 Year ended October 31, 1992 $948 $861 $-0- $-0- $1,809 VALUATION RESERVES FOR INVENTORY: Year ended October 31, 1994 $826 $-0- $-0- $61 $765 Year ended October 31, 1993 $248 $578 $-0- $-0- $826 Year ended October 31, 1992 $395 $-0- $-0- $147 $248 (a)The 1994 and 1992 balances consist of recoveries and foreign currency translation effects. The 1993 balances consist primarily of amounts recorded in connection with the acquition of MMG, net of recoveries.
SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. DATE: January 25, 1995 OPTICAL COATING LABORATORY, INC. By:/S/HERBERT M. DWIGHT, JR. Herbert M. Dwight, Jr. Chief Financial Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated: SIGNATURE TITLE DATE Chairman of the Board, President, Chief Executive Officer and Chief Financial Officer (Principal Executive, Operating and Financial /S/HERBERT M. DWIGHT, JR. Officer) January 25, 1995 Herbert M. Dwight, Jr. Vice President, General Counsel and Corporate Secretary /S/JOSEPH C. ZILS (Executive Officer) January 25, 1995 Joseph C. Zils Vice President and Corporate Controller /S/JOSEF WALLY (Principal Accounting Josef Wally Officer) January 25, 1995 /S/JOHN MCCULLOUGH Director John McCullough and Vice President January 25, 1995 /S/DOUGLAS C. CHANCE Director January 25, 1995 Douglas C. Chance /S/JULIAN SCHROEDER Director January 25, 1995 Julian Schroeder /S/RENN ZAPHIROPOULOS Director January 25, 1995 Renn Zaphiropoulos EX-10 2 OPTICAL COATING LABORATORY, INC. FY95 MANAGEMENT INCENTIVE PLAN OBJECTIVES The objectives of the Fiscal Year 1995 OCLI Management Incentive Plan (FY95 MIP) are: o to motivate key decision makers to achieve the goals set forth in the 1995 annual plan and budget; and o to reward those who are successful in doing so. In order to qualify for either a quarterly or year end payout from the FY95 MIP, a participant must achieve certain prescribed management objectives. Attainment of quantitative goals will be based on audited results. In no case will the aggregate of all payouts from the FY95 MIP be allowed to exceed 15% of the 1995 pre-tax profits as determined by the company's outside auditors before any adjustments for prior years. PLAN STRUCTURE The plan provides for 80% of a participant's potential payout to be based on his or her division and the company meeting certain prescribed quantitative targets and 20% upon the achievement of previously established individual qualitative objectives. Participants' "base bonuses" are the amounts that they would earn if their division (or company for participants in corporate departments) were to achieve budgeted profit levels for each quarter and for the entire year, the company were to achieve its budgeted profit level for the year and the participants were to achieve all of their qualitative objectives. A participant's "base bonus" is equal to a percent of his or her actual base salary paid during the measurement periods (quarter or year) as follows: PARTICIPANT LEVEL PERCENT Vice President 25% Salary Grades 13 & 14 15% Salary Grades 11 & 12 10% See Table 3 for a list of MIP participants. Division participants can earn up to 10% of their base bonus each quarter, depending on the profit performance of their division. The quarterly bonus will be prorated linearly between 0% and 10% of base bonus, depending on actual profit performance. Proration of the bonus will start at an amount equal to budgeted division operating profit (COM) less 3% of budgeted division sales and reach maximum (10%) at budgeted division COM. Corporate participants can earn up to 10% of their base bonus each quarter depending on the profit performance of the company. The quarterly bonus will be prorated linearly between 0% and 10% of base bonus, depending on actual profit performance. Proration of the bonus will start at an amount equal to budgeted company profit before taxes (PBT) less 3% of budgeted company sales and reach maximum (10%) at budgeted company PBT. FY 1995 Management Incentive Plan Page 2 Division participants can earn up to 40% of their base bonus for FY95 depending on the annual profit of their division and the company. The division component of the year end bonus will be prorated linearly between 0% and 20% starting at an amount equal to budgeted division COM less 3% of budgeted division sales and reaching 20% at budgeted division COM. The company component will be prorated linearly between 0% and 20% starting at an amount equal to company PBT less 3% of budgeted company sales and reaching 20% at budgeted company PBT. Corporate participants can earn up to 40% of their base bonus for FY95 depending on the annual company PBT. Proration of the bonus will start at an amount equal to budgeted company PBT less 3% of budgeted company sales and reach 40% at budgeted company PBT. All participants can earn up to 20% of their base bonus at year end depending upon their supervisor's rating of their performance against their qualitative objectives for the year. All amounts earned will be subject to a "multiplication factor" in the event that a division or the company exceeds its annual budgeted profit target. The multiplication factor will be prorated linearly between 1.0 and 2.0 starting at budgeted annual profit and reaching 2.0 at an amount equal to the sum of budgeted annual profit and 3% of budgeted sales. In the case of division participants, amounts earned for division performance plus the qualitative bonus will be leveraged by division performance above plan, and amounts earned for Company performance will be leveraged by company performance above plan. For corporate participants, all bonuses earned will be leveraged by company performance above plan. The level of COM (or PBT for corporate) at which payouts will commence for each quarter and the fiscal year, target COM and the COM at which participants will be eligible for maximum payout under the FY95 MIP are shown in Table 2. In addition to the above, a $25,000 discretionary pool will be created for use by the CEO to reward performance of plan participants that may not be recognized by the above measures. TIMING OF PAYMENT All quarterly bonuses (except for the fourth quarter) will be paid within 45 days of the close of the quarter. All other bonuses will be paid on the 15th of January of the following year. A participant must be employed full time at the end of a given measurement period in order to be eligible for any bonus attributable to that period. The decision of the Compensation Committee of the Board of Directors is final in determining payouts under this plan. EX-11 3 OPTICAL COATING LABORATORY, INC. AND SUBSIDIARIES EXHIBIT 11, PAGE 1: COMPUTATION OF EARNINGS (LOSS) PER SHARE (Amounts in thousands, except per share data) YEARS ENDED OCTOBER 31, 1994 1993 1992 Primary Shares: Average common shares outstanding 8,975 8,795 8,180 Common equivalent shares outstanding 48 456 9,023 8,795 8,636 Earnings (loss) before cumulative effect of change in accounting principle $ 4,604 $(5,737) $6,027 Cumulative effect of change in accounting for income taxes 510 Net earnings (loss) $ 4,604 $(5,737) $6,537 Earnings (loss) per common and common equivalent share: Earnings (loss) before cumulative effect of change in accounting principle $.51 $(.65) $.69 Cumulative effect of change in accounting for income taxes .06 Net earnings (loss), primary $.51 $(.65) $.75 OPTICAL COATING LABORATORY, INC. AND SUBSIDIARIES EXHIBIT 11, PAGE 2: COMPUTATION OF EARNINGS (LOSS) PER SHARE (Amounts in thousands, except per share data) YEARS ENDED OCTOBER 31, 1994 1993 1992 Fully Diluted Shares: Average common shares outstanding 8,975 8,795 8,180 Common equivalent shares outstanding 70 304 522 9,045 9,099 8,702 Earnings (loss) before cumulative effect of change in accounting principle $4,604 $(5,737) $6,027 Cumulative effect of change in accounting for income taxes 510 Net earnings (loss) $4,604 $(5,737) $6,537 Earnings (loss) per common and common equivalent share: Earnings (loss) before cumulative effect of change in accounting principle $.51 $(.63) $.69 Cumulative effect of change in accounting for income taxes .06 Net earnings (loss), fully diluted $.51 $(.63) $.75
NOTE:Fully diluted earnings (loss) per share do not result in dilution of three percent or more or are anti-dilutive and are, therefore, not applicable. EX-13 4 OPTICAL COATING LABORATORY, INC. AND SUBSIDIARIES EXHIBIT 13 TO FORM 10-K FOR THE YEAR ENDED OCTOBER 31, 1994 PART II, ITEM 5. Market For Registrant's Common Stock and Related Stockholder Matters PART II, ITEM 6. Seleected Financial Data PART II, ITEM 7. Management's Discussion and Analysis of Results of Operations and Financial Condition Independent Auditors' Report PART II, ITEM 8. Financial Statements and Supplementary Data - Consolidated Balance Sheets - Consolidated Statements of Operations - Consolidated Statements of Stockholders'Equity - Consolidated Statements of Cash Flows - Notes to Consolidated Financial Statements PART II Item 5. Market For Registrant's Common Stock And Related Stockholder Matters PRINCIPAL MARKET The Company's common stock is traded in the NASDAQ National Market System under the symbol OCLI. STOCK PRICE AND DIVIDEND INFORMATION The following table sets forth the range of high and low closing prices in the over-the-counter market as reported by the NASDAQ National Market System for 1994 and 1993. Year ended October 31, 1994 High Low First Quarter 7-3/8 5-7/8 Second Quarter 7-3/8 6-3/8 Third Quarter 7-1/8 5-1/8 Fourth Quarter 6-5/8 5-3/4 Year ended October 31, 1993 High Low First Quarter 11-1/4 9-1/2 Second Quarter 12-3/4 10 Third Quarter 10-1/4 6-5/8 Fourth Quarter 8-1/8 6-1/2 Beginning in June 1991, the Company has paid a semiannual cash dividend on common stock of $.06 per share. APPROXIMATE NUMBER OF HOLDERS OF COMMON STOCK The number of holders of record of the Company's common stock as of December 31, 1994 was 1,197. Item 6. Selected Financial Data Years Ended October 31, 1994 1993 1992 1991 1990 (Amounts in thousands, except per share data) Net sales and revenues $131,780 $123,013 $115,016 $103,711 $93,503 Earnings (loss) before cumulative effect of changes in accounting principles $4,604 $(5,737) $6,027 $1,530 $3,747 Earnings (loss) per common and common equivalent share before cumulative effect of changes in accounting principles $.51 $(.65) $.69 $.16 $.43 Cash dividend paid on common stock $1,075 $1,043 $967 $491 At October 31: Working capital $28,692 $16,251 $ 27,399 $ 21,913 $19,271 Total assets $118,879 $99,226 $ 91,313 $ 84,419 $85,255 Long-term debt $35,441 $23,110 $ 14,900 $ 20,935 $18,711 Redeemable convertible preferred stock $ 6,403 Stockholders' equity $52,037 $47,135 $52,254 $43,112 $39,707 Stockholders' equity per share $5.79 $5.25 $6.16 $5.41 $5.71 Number of employees 1,162 1,107 1,000 1,039 1,057
Item 7. Management's Discussion And Analysis Of Results Of Operations And Financial Condition RESULTS OF OPERATIONS Net sales and revenues for the Company were $131.8 million in 1994, increasing $8.8 million, or 7%, over 1993 which had increased $8.0 million, or 7%, in 1993 over 1992. Net sales and other revenues for 1993 include $13.3 million of sales by MMG, a German precision glass fabrication company acquired effective December 31, 1992. Without the contribution of MMG sales, Company sales and revenues would have shown a decrease of $5.3 million, or 4.6%, in 1993 versus 1992. New orders and shipments in 1994 were particularly strong in the office automation market for fabricated coated glass products. Orders were also strong during this period for coated glass stock sheets exported from the US for custom fabrication by others and for projection television mirrors and for fabricated glass components manufactured by MMG in Germany. Orders and sales of the Company's Glare/Guard" anti-glare filters sold for use in the computer display aftermarket declined in 1994 and 1993 due to the emergence of increased competition and generally poor economic conditions in Europe. Sales in other commercial, industrial and government markets increased modestly in 1993 over 1992. During 1994, the Company experienced price declines of approximately 2-4% in OEM display product lines and approximately 8-10% in fabricated glass product lines. These price declines were substantially offset by the increase in orders and shipments discussed above. At the beginning of fiscal 1994, the Company also reduced prices by approximately 10% for Glare/Guard(R) products in the US to maintain its market position. Although the Company was able to partially offset these price decreases through the reduction of product cost, profit margins for the Glare/Guard" product line were negatively impacted. The Company continues to experience competitive price pressures in Glare/Guard" products in the US as well as in foreign markets and is responding to such price competition with continued product cost reductions and design enhancements. In 1993, the Company experienced price declines of approximately 4-6% in OEM display product lines and approximately 6-8% in fabricated glass product lines. There were no other significant price changes in the remainder of the CompanyOs product areas in 1993. Cost of sales as a percent of sales was 63.7% in 1994, 66.6% in 1993, and 60.8% in 1992. In 1994, the cost of sales percentage improved from 1993 as a result of higher utilization of available capacity, yield improvements as a result of the Company's continuous quality improvement program and cost savings resulting from of the 1993 restructuring program. Cost of sales in 1993 increased as a percentage of sales in most product areas of the Company as a result of price decreases the Company absorbed in order to maintain market share. This increase in the cost of sales as a percentage of sales was also impacted by the consolidation of MMG which generally has a higher cost of sales percentage than the Company average primarily due to an approximately 10% higher material cost content. However, not withstanding the increase in the cost of sales as a percentage of sales and revenues in 1993 as compared to 1992, the Company generally experienced a decrease in the absolute cost of sales when the actual cost of sales per unit of sales is considered. In 1993, under a plan to restructure the Company's approach to research and development, many of the personnel and resources that had traditionally been reported under the Company's research and development effort were transferred into the Santa Rosa operating division in an effort to focus on product development efforts and improve the quality of communications with customers. The traditional research and development group has continued to focus its efforts on advances in new and innovative processes including its work on active films. The product development group has been responsible for identifying new applications for existing processes. During 1994, the product development group was responsible for establishing the Company's innovative DirectCoat" pilot production line and linear polarizer facilities. As a result of this restructuring, reported research and development expenditures for 1994 decreased $697,000, or 12%, compared to 1993 which had decreased $2.3 million, or 28%, compared to 1992. As a percentage of sales, research and development expenditures were 4.0% in 1994, 4.8% in 1993 and 7.1% in 1992. Selling and administrative expenses increased $1.2 million, or 4%, in 1994 over 1993, and had increased $3.6 million, or 14%, in 1993 over 1992. The 1994 increase in this expense category was principally in selling expenses related to the establishment of seven new regional sales offices in the US. In 1993, the inclusion of MMG accounted for a $2.4 million increase in selling and administrative expenses. Without MMG, the increase would have been $1.2 million, or 5%, in 1993 over 1992. The increase in 1993 was principally in administrative expenses as a result of increasing the Company-wide allowance for potentially uncollectible accounts and increases in expenses for professional services. In 1993, the Company recorded restructuring charges and provisions for severance payments totaling $9.7 million. The Company took these actions to reduce costs to respond to price competition and a general weakness in some of its markets. Accordingly, the Company established reserves and took write-offs for severance payments for staff reductions and the reduction of the carrying value of certain equipment, inventory and other assets. Respectively, in 1994 and 1993, the Company recorded amortization of intangibles of $648,000 and $446,000, representing the amortization of goodwill relating to the acquisition of MMG. As a result of the foregoing changes in net sales and other revenues and in costs and expenses, the Company had earnings from operations of $10.6 million in 1994 versus a loss from operations of $5.1 million in 1993, including the $9.7 million of restructuring charges, and compared to earnings from operations of $10.3 million for 1992. Interest income increased $208,000, or 160%, in 1994 over 1993, and declined $165,000, or 56%, in 1993 from 1992. The increase in 1994 was because of the substantially larger short term investment balances on hand in the second half of the year that resulted from an $18 million senior note financing undertaken by the Company during this period. The decline in interest income in 1993 was the result of having significantly smaller cash balances available for short-term investment. Interest expense increased $217,000, or 7.2%, in 1994 over 1993, and had increased $775,000, or 35%, in 1993 over 1992. The increase in interest expense for 1994 resulted from the issuance of the $18 million senior notes partially offset by debt repayment of $11.3 million. Increased interest expense in 1993 resulted from approximately $9.0 million of additional long-term debt incurred with the purchase of MMG and approximately $5.4 million of MMG long-term debt assumed with the purchase. Such increase was partially offset by the repayment of other long-term debt of approximately $4.5 million during 1993. The provision (credit) for income taxes as a percent of earnings (loss) before income taxes was 40.1% in 1994, <28.4%> in 1993, and 37.2% in 1992. For 1994 and 1992, the effective tax rate was at the normal combined federal, state and applicable foreign tax rates for the Company. For 1993, the effective tax rate was a credit. The effective tax credit in 1993 was less than the combined federal, state and applicable foreign statutory rates because, under SFAS 109, the full tax benefit of losses incurred in European operations could not be recognized. As a result of the foregoing, the Company had net earnings of $4.6 million in 1994, compared to a net loss of $5.7 million in 1993, and net earnings of $6.5 million in 1992. Management does not believe that inflation has had a significant effect on operations in 1994, 1993 and 1992. As described above, the Company experienced price decreases in certain markets in 1994 and 1993. There were no material fluctuations in the results for the fourth quarter compared to prior quarters of 1994. FINANCIAL CONDITION AND LIQUIDITY In 1994, the Company's cash and short term investment position increased by $17.4 million for the year. Operations provided $16.6 million of cash, including $4.6 million from net earnings, $7.6 million from depreciation and amortization and $4.4 million from other operating activities. Financing activities provided $9.5 million, including $22.3 million from issuance of new debt, offset by $11.7 million of debt repayment and payment of $1.1 million of dividends on common stock. During the year, the Company spent $9.0 million for the purchase of new equipment. At year-end, October 31, 1994, the Company had cash and short term investments totaling $19.7 million. The Company's financial condition and liquidity at October 31, 1994, reflects various financing transactions during 1994, including the issuance of $18 million of unsecured senior notes in a private placement with three major insurance companies and the renegotiation of the Company's revolving credit arrangement with its bank. The private placement was completed during the third quarter of 1994. $6.5 million of the proceeds from this debt offering were used to pay back outstanding borrowings under the CompanyOs bank line of credit and the residual $11.5 million was added to the Company's general funds. The borrowing was undertaken primarily to restructure the Company's debt at a favorable interest rate and provide the Company with additional liquidity for general corporate purposes. The senior notes carry an interest rate of 8.71%, with interest payable semiannually beginning in December 1994, and principal repayment of $3.6 million per year from 1998 to 2002. The Company also renegotiated its bank credit line arrangement during the third quarter of 1994. The credit commitment under this new credit line is $10 million, of which $5.5 million was allocated to a term loan as of October 31, 1994, and will become available under the revolving credit segment as the term loan is repaid on a quarterly basis over the next three years. In addition to the $10 million revolving credit limit, the line of credit arrangement also provides approximately $4 million in a bank guarantee securing a portion of the MMG acquisition debt. The bank line of credit arrangement expires on June 30, 1997. In addition, the Company's subsidiaries in Germany and Scotland have additional credit arrangements in place for their operating requirements. In 1994, the Company's working capital, excluding cash and short-term investments, decreased by $4.9 million. Accounts receivable increased while inventories decreased, reflecting higher sales for 1994. Taxes receivable, which reflected the 1993 income tax credit, were collected, while in conjunction with profitable operations for 1994, current income taxes payable were recorded. Accounts payable and accrued expenses increased as a result of increased business activities for 1994. In 1993, Company working capital, excluding cash and short term investments, decreased by $3.4 million, primarily as a result of increases in accrued expenses and various reserves for severance payments in connection with the restructuring of operations during the year. Staff severances occurred at the beginning of 1994 and severance payments previously accrued in 1993 were made during 1994, as scheduled. There were no other significant changes in the restructuring program established in 1993 that would require modification of the accruals and reserves as then recorded. The Company conducts its export business from the United States mostly in US dollars and, therefore, does not experience foreign exchange transaction risks. Additionally, since the Company also manufactures in two European countries to serve local markets, the Company does not have significant exposure to fluctuations in foreign currencies. The assets and liabilities of the Company's foreign operations are not hedged against fluctuations in international currency rates. The Company has no other financial derivative arrangements in place except an interest rate swap to fix its interest rate on $5.5 million of bank debt at rates consistent with current market rates. There exists no significant financial exposure under this interest rate swap arrangement. Management believes that the cash on hand at October 31, 1994, cash anticipated to be generated from future operations and the available funds from revolving credit arrangements will be sufficient for the Company to meet its near-term working capital needs, normal capital expenditures, debt service requirements, and payment of dividends as declared. The Company has operated at capacity during the second half of 1994 in several business areas due to increased demand. Management is continuously assessing the potential requirement of having to add manufacturing capacity above planned levels in order to serve growing market demand in future years. In addition, management is currently reviewing several product line acquisitions to add to the overall capabilities of the Company. In conjunction therewith, the Company is exploring additional credit facilities and possible equity financing arrangements. Management believes that such additional debt or equity financing will be available to the Company as required. INDEPENDENT AUDITORS' REPORT Board of Directors Optical Coating Laboratories, Inc. Santa Rosa, California We have audited the accompanying consolidated balance sheets of Optical Coating Laboratory, Inc. and subsidiaries (the "Company") as of October 31, 1994 and 1993, and the related consolidated statements of operations, stockholders' equity and cash flows for each of the three years in the period ended October 31, 1994. 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 audits. We conducted our audits in accordance with generally accepted auditing standards. 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 provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Optical Coating Laboratory, Inc. and its subsidiaries at October 31, 1994 and 1993 and the results of their operations and their cash flows for each of the three years in the period ended October 31, 1994 in conformity with generally accepted accounting principles. As discussed in Note 1 to the consolidated financial statements, the Company changed its method of accounting for income taxes in 1992. DELOITTE & TOUCHE LLP San Francisco, California December 14, 1994 OPTICAL COATING LABORATORY, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Dollars in thousands) OCTOBER 31, ASSETS 1994 1993 Current Assets: Cash and short-term investments $19,663 $ 2,284 Accounts receivable, net of allowance for doubtful accounts of $1,810 and $1,817 22,007 19,850 Inventories 10,559 11,605 Income tax receivable 2,043 Deferred income tax assets 4,235 4,510 Other current assets 1,246 1,061 Total Current Assets 57,710 41,353 Other assets and investments 9,159 8,949 Property, Plant and Equipment: Land and improvements 8,623 8,380 Buildings and improvements 27,495 26,317 Machinery and equipment 80,206 72,429 Construction-in-progress 3,083 3,470 119,407 110,596 Less accumulated depreciation (67,397) (61,672) Property, Plant and Equipment-Net 52,010 48,924 $118,879 $ 99,226 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable $ 6,197 $ 4,243 Accrued expenses 8,423 7,694 Accrued compensation expenses 4,785 5,309 Income taxes payable 1,671 Current maturities on long-term debt 6,878 6,702 Notes payable 428 490 Deferred revenue 636 664 Total Current Liabilities 29,018 25,102 Accrued postretirement health benefits and pension liabilities 1,877 1,767 Deferred income tax liabilities 506 2,112 Long-term debt 35,441 23,110 Commitments and contingencies (Note 10) Stockholders' Equity: Common stock, $.01 par value; authorized 30,000,000 shares; issued and outstanding 8,978,000 and 8,972,000 shares 90 90 Paid-in capital 39,967 39,930 Retained earnings 12,055 8,526 Cumulative foreign currency translation adjustment (75) (1,411) Total Stockholders' Equity 52,037 47,135 $118,879 $ 99,226
See Notes to Consolidated Financial Statements OPTICAL COATING LABORATORY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Amounts in thousands, except per share data) YEAR ENDED OCTOBER 31, 1994 1993 1992 Net sales and other revenues $131,780 $123,013 $115,016 Costs and Expenses: Cost of sales 84,001 81,885 69,958 Research and development 5,229 5,926 8,178 Selling and administrative 31,341 30,153 26,532 Restructuring charges 9,746 Amortization of intangibles 648 446 Total Costs and Expenses 121,219 128,156 104,668 Earnings (loss) from operations 10,561 (5,143) 10,348 Other Income (Expense): Interest income 338 130 295 Interest expense (3,215) (2,998) (2,223) Insurance recovery 1,180 Earnings (loss) before income taxes 7,684 (8,011) 9,600 Income taxes (credit) 3,080 (2,274) 3,573 Earnings (loss) before cumulative effect of change in accounting principle 4,604 (5,737) 6,027 Cumulative effect of change in accounting for income taxes 510 Net earnings (loss) $ 4,604 $(5,737) $ 6,537 Net earnings (loss) per common and common equivalent share: Earnings (loss) before cumulative effect of change in accounting principle $ .51 $ (.65) $ .69 Cumulative effect of change in accounting for income taxes .06 Net earnings (loss) $ .51 $ (.65) $ .75 Average common and common equivalent shares used to compute earnings (loss) per share 9,023 8,795 8,636 See Notes to Consolidated Financial Statements
OPTICAL COATING LABORATORY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE YEARS ENDED OCTOBER 31, 1994, 1993 AND 1992 (Amounts in thousands) FOREIGN RETAINED COMMON STOCK PAID-IN CURRENCY SHARES AMOUNT CAPITAL EARNINGS TRANSLATION BALANCE AT NOVEMBER 1, 1991 7,964 $ 80 $32,950 $ 9,786 $ 296 Shares issued to Employee Stock Ownership Plan 43 1 415 Exercise of stock options, including tax benefit and shares issued to directors 474 4 3,314 Foreign currency translation adjustment for the year (162) Net earnings for the year 6,537 Dividend on common stock (967) BALANCE AT OCTOBER 31, 1992 8,481 85 36,679 15,356 134 Shares issued to Employee Stock Ownership Plan 47 1 474 Exercise of stock options and warrants, including tax benefit and shares issued to directors 438 4 2,716 Exercise of stock options through surrender of common stock, including tax benefit 6 61 (50) Foreign currency translation adjustment for the year (1,545) Net loss for the year (5,737) Dividend on common stock (1,043) BALANCE AT OCTOBER 31, 1993 8,972 90 39,930 8,526 (1,411) Exercise of stock options and warrants, including tax benefit and shares issued to Directors 6 37 Foreign currency translation adjustment for the year 1,336 Net earnings for the year 4,604 Dividend on common stock (1,075) BALANCE AT OCTOBER 31, 1994 8,978 $ 90 $39,967 $12,055 $ (75) See Notes to Consolidated Financial Statements
OPTICAL COATING LABORATORY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED OCTOBER 31, 1994, 1993 AND 1992 (Dollars in thousands) YEARS ENDED OCTOBER 31, 1994 1993 1992 Cash Flows from Operating Activities: Cash received from customers $133,125 $129,852 $113,905 Cash received from insurance companies 3,412 Interest received 268 109 232 Cash paid to suppliers and employees (112,341) (115,315) (100,925) Cash paid to ESOP+ (947) (205) (476) Interest paid (2,567) (2,740) (2,578) Income taxes paid, net of refundsEE (986) (3,437) (2,170) Net cash provided by operating activities 16,552 8,264 11,400 Cash Flows from Investing Activities: Purchase of plant and equipment (8,821) (9,338) (5,446) Cash portion of payment for purchase of MMG, net of cash acquired (3,443) Net cash used for investing activities (8,821) (12,781) (5,446) Cash Flows from Financing Activities: Proceeds from issuance of senior notes 18,000 Proceeds from long-term debt 4,005 4,388 Proceeds from notes payable 283 Proceeds from exercise of stock options 16 2,019 2,409 Repayment of long-term debt (11,327) (7,916) (2,841) Repayment of notes payable (400) (752) Payment of dividend on common stock (1,075) (1,043) (967) Other 33 Net cash provided by (used for) financing activities 9,502 (3,271) (1,399) Effect of exchange rate changes on cash 146 14 (39) Increase (decrease) in cash and short-term investments 17,379 (7,774) 4,516 Cash and short-term investments at beginning of year 2,284 10,058 5,542 Cash and short-term investments at end of year $ 19,663 $ 2,284 $ 10,058
OPTICAL COATING LABORATORY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) FOR THE YEARS ENDED OCTOBER 31, 1994, 1993 AND 1992 (Dollars in thousands) YEARS ENDED OCTOBER 31, 1994 1993 1992 Reconciliation of net earnings (loss) to cash flows from operating activities: Net earnings (loss) $4,604 $(5,737) $ 6,537 Adjustments to reconcile net earnings (loss) to net cash provided by operating activities: Depreciation and amortization 7,635 7,372 6,527 Loss on disposal or abandonment of equipment 634 5,229 1,313 Accrued postretirement health benefits 76143 80 Deferred income taxes (1,650) (2,038) (31) Other non-cash adjustments to net earnings (98) 323 436 Change in: Accounts receivable (973) 2,250 (3,935) Inventories 1,572 2,237 (945) Income tax receivable 2,045 (1,925) 1,192 Deferred income tax assets 275 (705) (1,646) Other current assets and other assets and investments (312) (631) 1,425 Accounts payable, accrued expenses and accrued compensation expenses 1,230 1,973 (624) Deferred revenue (28) 664 (303) Income taxes payable 1,542 (891) 1,374 Total adjustments 11,948 14,001 4,863 Net cash provided by operating activities $ 16,552 $ 8,264 $11,400
Supplemental Schedule of Non-Cash Investing and Financing Activities: Effective December 31, 1992, the Company acquired MMG Glastechnik GmbH (MMG) for approximately $3.4 million in cash and approximately $9.3 million of notes payable to the sellers. Cash and non-cash components of the acquisition were as follows: Fair value of assets acquired, including intangibles $ 22,865 Cash acquired (16) Liabilities assumed (10,141) Notes payable to sellers (9,265) Net cash paid $ 3,443 In 1994, 1993 and 1992, common stock, with an aggregate fair market value of $20,000, $42,000 and $15,000 was awarded to the Company's outside directors as remuneration. During 1993 and 1992, the Company issued 46,500 and 43,500 shares of common stock to its Employee Stock Ownership Plan (ESOP+) at fair market value to satisfy a portion of its Company contribution. See Notes to Consolidated Financial Statements OPTICAL COATING LABORATORY, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED OCTOBER 31, 1994, 1993 AND 1992 1. SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION. The consolidated financial statements include the accounts of the Company and its wholly and majority owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. INVESTMENTS. Cash and short-term investments are comprised of bank repurchase agreements and short-term commercial paper readily convertible to cash. Short-term investments are carried at cost which approximates market value. For purposes of the Statements of Cash Flows, all highly liquid short-term investments with a maturity of three months or less are considered cash equivalents. REVENUE RECOGNITION. Revenue from sales of manufactured products and from sales under fixed-price contracts is recorded at the time deliveries are made or work is performed. Revenue from cost reimbursement contracts is recorded as work is performed. INVENTORIES. Inventories are stated at the lower of cost, on a first-in, first-out basis, or market. Work-in-process inventories related to fixed-price contracts are stated at the accumulated cost of material, labor and manufacturing overhead, less the estimated cost of units delivered. To the extent total costs under fixed-price contracts are estimated to exceed the total sales price, charges are made to current operations to reduce inventoried costs to net realizable value. In addition, if future costs are estimated to exceed future revenues, an allowance for losses equal to such excess is provided by a charge to current operations. PROPERTY, PLANT AND EQUIPMENT. Property, plant and equipment are stated at cost. Estimated service lives range from 5 to 45 years for buildings and improvements and from 5 to 8 years for all other property, plant and equipment. Buildings and improvements and substantially all equipment are depreciated using accelerated methods. RESEARCH AND DEVELOPMENT. Research and development costs are charged to operations in the year incurred. The cost of equipment used in research and development activities which has alternative uses is capitalized as equipment and not treated as an expense of the period. Such equipment is depreciated over estimated lives of 5-8 years. INCOME TAXES. Income taxes include provisions for temporary differences between earnings for financial reporting purposes and earnings for income tax purposes. In 1992, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes." As a result of adoption of this Statement, the Company recorded a credit to earnings of $510,000, as the cumulative effect of a change in accounting principle resulting from differences which existed at October 31, 1991 in the method of calculating deferred taxes between the Statement the Company had previously adopted (SFAS No. 96) and SFAS No. 109. FOREIGN OPERATIONS. The financial position and operating results of substantially all foreign operations are consolidated using the local currency as the functional currency. Local currency assets and liabilities are translated at the rate of exchange on the balance sheet date, and the local currency revenues and expenses are translated at average rates of exchange during the period. Resulting translation gains or losses are included in stockholders' equity under cumulative foreign currency translation adjustment. Foreign currency transaction gains and losses, which have not been material, are reflected in operating results. EARNINGS PER SHARE. Earnings per common and common equivalent share assumes dilutive stock options outstanding (none in 1993) were exercised at the beginning of the year or the date of grant, whichever is later. Fully diluted earnings per share approximate primary earnings per share, or the effect is anti- dilutive, and are, therefore, not presented. RECLASSIFICATIONS. Certain amounts in the 1993 and 1992 consolidated financial statements have been reclassified to conform with the presentation in the 1994 consolidated financial statements. 2. LONG-TERM DEBT Long-term debt as of October 31 consisted of: 1994 1993 (Amounts in thousands) Unsecured Senior Notes. Interest at 8.71% payable semiannually. Principal payable in annual installments of $3.6 million from 1998 through 2002. $18,000 Unsecured bank term loan. Interest at approximately 9.7% payable quarterly. Principal payable in twelve equal quarterly installments commencing October 31, 1994 and ending July 31, 1997. 5,500 $ 6,000 Term loan. Balance paid in 1994. 2,750 Unsecured borrowings under bank line of credit. Balance paid in 1994. 2,500 Land improvement assessment, at an average rate of 6.75% interest. Principal and interest payable in semiannual installments of $77,000 through 1998. 517 627 Scottish Development Agency (SDA) building loan, at 12%, with semiannual payments of approximately $357,000, each comprising principal and interest through 2006. Collateralized by the land and building of the Company's Scottish subsidiary. 4,289 4,050 Notes payable to private parties in connection with the purchase of MMG. Principal and interest at 8% payable over ten years in quarterly installments of approximately $400,000 through 2003. 8,167 8,187 Bank loans of MMG with interest rates ranging from 4.5% to 9.75%. Payable in annual and semiannual installments through 2014. Partly collateralized by mortgages on MMG land and buildings and liens on equipment. 5,133 4,630 Present value of obligations under capital leases at an assumed interest rate of 7.5% payable in monthly installments through 2004. 713 789 European Coal and Steel Community loan to Scottish subsidiary. Balance paid in 1994. 279 42,319 29,812 Less current maturities (6,878) (6,702) $35,441 $23,110
Annual long-term debt maturities and capital lease payments for the years 1994 through 1998 are $6,878,000, $3,583,000, $3,079,000, $5,177,000 and $5,057,000, with the balance payable through 2014. It is anticipated that approximately $3,500,000 of the bank loans of MMG, included in the $6,878,000 current maturities of debt, will be refinanced in 1995. The Company has a $10 million credit facility with a bank carrying a commitment fee of 1/2% per annum. $5.5 million of the credit commitment is allocated to a term loan and becomes available under the revolving credit segment as the term loan is repaid on a quarterly basis over three years. The facility expires on June 30, 1997. Additionally, the credit facility covers a bank guarantee of approximately $4.0 million to secure 50% of the notes payable arising from the purchase of MMG. This guarantee facility carries a fee of 1.25% per annum. The Company's subsidiary in Scotland has a credit arrangement of up to approximately $440,000 with interest payable at market rates. There were no borrowings under this credit arrangement in 1994 or 1993, and there were no amounts outstanding at October 31, 1994 or 1993 under this credit arrangement. In 1994, the Company issued $18 million of unsecured senior notes in a private placement. $6.5 million of the proceeds were used to pay back outstanding borrowings under a previous bank line of credit. At October 31, 1994, the Company had outstanding letters of credit in the amount of $1,900,000 to meet the requirements under the Company's workers' compensation self insurance plans, and the Company's subsidiary in Scotland had outstanding letters of credit of approximately $370,000 to guarantee payment of import duty. The Company has certain financial covenants and restrictions under its bank credit arrangements and the unsecured senior notes. 3. RESTRUCTURING CHARGES In 1993, the Company took action to reduce its worldwide work force and restructure certain of its operations. Accordingly, in 1993 the Company recorded $9,746,000 of restructuring charges reflecting severance payments relating to staff reductions and reduction of the carrying value of certain equipment, inventory and other assets. 4. ACQUISITION OF MMG Effective December 31, 1992, the Company completed its acquisition of MMG Glastechnik GmbH (MMG), a precision glass fabricating company in Germany. This acquisition was accounted for as a purchase. Payment consisted of approximately $3.4 million in cash and $9.3 million in ten year notes due to the sellers which are payable in equal quarterly principal installments plus interest at 8% per annum. In connection with the acquisition, the Company assumed approximately $5.3 million of long-term debt owed by MMG. The Consolidated Statement of Operations for the fiscal year ended October 31, 1993 included ten months of MMG operation. For the ten month period ended October 31, 1993, MMG's sales and other revenues were $13.3 million and MMG's contribution to the loss before income taxes was approximately $2.0 million, including interest expense on the non-cash portion of the purchase price. At October 31, 1994, other assets and investments includes $7.5 million of intangibles, principally goodwill, resulting from the purchase of MMG, which is being amortized over 15 years. 5. STOCKHOLDERS' EQUITY STOCKHOLDER RIGHTS PLAN. In November 1987, the Company adopted a Stockholder Rights Plan, which expires in November 1997, under which the Company declared a dividend of preferred stock purchase rights which only become exercisable, if not redeemed, ten days after a person or group has acquired 20% or more of the Company's common stock or the announcement of a tender offer which would result in a person or group acquiring 30% or more of the Company's common stock. Under certain circumstances, the plan allows stockholders, other than the acquiring person or group, to purchase the Company's common stock or the common stock of the acquirer having a market value of twice the exercise price. PREFERRED STOCK. The Company has authorized 100,000 shares of preferred stock at $.01 par value of which 10,000 shares were designated Series A Preferred Stock in connection with the Company's Stockholder Rights Plan. None of the Series A Preferred Stock is issued. Additionally, 15,000 shares were designated Series B Preferred Stock, of which 8,350 shares were issued and subsequently converted to common stock on call for redemption. None of the Series B Preferred Stock is currently issued and outstanding. 6. INCENTIVE COMPENSATION PLANS, STOCK OPTION PLANS AND WARRANTS Under the Company's incentive compensation and employee stock option plans, options have been granted to purchase the common stock of the Company at prices equal to 100% of the market price of the Company's common stock at the date of grant. Outstanding options are exercisable at prices ranging from $4.50 to $10.625 per share. Options expire five years from the date of grant. Changes in options, shares reserved for issuance and options available for future grants under these plans were as follows: SHARES SUBJECT TO AVAILABLE OUTSTANDING FOR FUTURE RESERVED OPTIONS GRANTS BALANCE AT NOVEMBER 1, 1991 1,594,125 1,380,115 214,010 Authorized and reserved 500,000 500,000 Granted 474,210 (474,210) Exercised at an aggregate price of $2,409,000 (472,437) (472,437) Canceled (18,613) 18,613 BALANCE AT OCTOBER 31, 1992 1,621,688 1,363,275 258,413 Authorized and reserved 300,000 300,000 Granted 181,800 (181,800) Exercised for cash at an aggregate price of $2,019,000 (398,337) (398,337) Exercised for shares at an aggregate fair market value of $101,000 (17,859) (17,859) Canceled ________ (38,200) 38,200 BALANCE AT OCTOBER 31, 1993 1,505,492 1,090,679 414,813 Granted 819,900 (819,900) Exercised for cash at an aggregate price of $16,000 (2,884) (2,884) Canceled (3,300) (564,100) 560,800 BALANCE AT OCTOBER 31, 1994 1,499,308 1,343,595 155,713 EXERCISABLE AT OCTOBER 31, 1994 990,370
In 1993, options to purchase 17,859 shares of common stock were exercised through exchange of 11,200 shares of common stock at fair market value. In 1993, warrants to purchase 75,000 shares of the Company's common stock were exercised at $5.51 per share by the net issuance of 34,913 shares of common stock. 7. INCOME TAXES The provision (credit) for income taxes consisted of: 1994 1993 1992 (Amount in thousands) Current: Federal $ 2,174 $ 584 $ 3,017 Business tax credits (114) 2,174 470 3,017 State 516 221 943 Foreign 58 (24) 867 2,748 667 4,827 Deferred: Federal 249 (1,738) (982) State 281 (631) (190) Foreign (198) (572) (82) 332 (2,941) (1,254) $3,080 $(2,274) $ 3,573 The reconciliation of the effective income tax rates to the federal statutory rates was as follows: 1994 1993 1992 Statutory federal income tax rate 34.0% (34.0)% 34.0% State taxes, net of federal tax benefit 6.9 (2.6) 5.2 Business tax credits (1.4) Adjustment of prior year provisions (0.6) (0.4) Tax benefit from export sales corporation (1.3) (0.3) (0.8) Foreign income taxes at rates different from US statutory rates 0.7 11.8 0.1 Other 0.4 (1.5) (1.3) Effective tax rate 40.1% (28.4)% 37.2%
The tax benefit recorded in 1993 was less than would have been recorded by applying the federal and state statutory rates because, under the requirements of SFAS 109, the full tax benefit of losses incurred by European operations could not be recognized. The Company's deferred tax assets and liabilities at October 31, 1994 and 1993 under SFAS 109 arise from the following temporary differences in accounting for financial versus tax reporting purposes: DEFERRED TAX ASSET (LIABILITY) 1994 1993 CURRENT: (Amounts in thousands) Valuation reserves and accruals not deductible for tax purposes until paid or utilized $ 3,637 $3,640 Intercompany profit eliminated for financial statement purposes which is taxable currently 505 489 Revenue recognized in different periods for financial and tax reporting purposes 72 217 Tax credits eligible for carry forward, related expenses deducted for financial reporting purposes 224 Other 21 (60) 4,235 4,510 NONCURRENT: Tax depreciation greater than financial statement depreciation (2,771) (2,398) Valuation reserves and accruals not deductible for tax reporting purposes until paid or utilized 191 283 Plant and equipment written off for financial reporting purposes, depreciable for tax purposes 1,023 1,302 Burden and interest on self-constructed assets expensed for tax purposes and depreciated for financial reporting purposes (489) (562) Costs required to be capitalized under the uniform capitalization tax rules which are deducted for financial reporting purposes 353 267 State income taxes not deductible for federal purposes until the year following payment (33) (71) Liability for postretirement health benefits not deductible for tax purposes until paid 658 621 Foreign net operating losses available for carryforward 1,724 1,035 Foreign deferred taxes recorded upon the purchase of MMG (1,663) Other (85) 36 571 (1,150) Less valuation allowance (1,077) (962) (506) (2,112) Total deferred tax balances $ 3,729 $ 2,398
The Company has provided a valuation allowance related to the deferred tax asset resulting from the operating loss carryforwards of certain of its foreign subsidiaries until the realization of the loss carryforwards is determinable. The deferred tax liability relating to the purchase of the German subsidiary in 1993 has been reversed as a result of a tax reorganization of the Company's German subsidiaries during 1994. Income taxes have not been provided on approximately $9.1 million of unremitted earnings of the Company's subsidiary in Scotland. The Company intends to continue to reinvest these amounts in the subsidiary's operations. Should any of these amounts be distributed to the Company, any taxes on these distributions would be substantially offset by foreign tax credits. 8. EMPLOYEE BENEFIT PLANS US OPERATIONS. The Company has an Employee Stock Ownership Plan (ESOP+), a defined contribution plan for its US employees. Company contributions to ESOP+ are determined by a profit sharing formula with additional contributions, if any, determined by the Company's Board of Directors. The Company follows the policy of funding ESOP+ contributions as accrued. The Company contributions are made in the form of cash to purchase the Company's common stock or in the form of the Company's common stock. The Company contributed to ESOP+ and charged to operations $950,000, $500,000 and $1,000,000 for 1994, 1993 and 1992. In 1993, as part of its restructuring, the Company offered a voluntary severance program to US employees who had met certain age and service requirements. The Company expensed $550,000 as part of its restructuring charges as a result of this program. SCOTTISH OPERATIONS. The Company's Scottish subsidiary maintains a contributory defined benefit pension program covering most of its employees. Benefits are primarily based on years of service and the employee's compensation. The program is funded in conformity with the funding requirements of applicable UK government regulations. Plan assets are invested in diversified fund units which are comprised primarily of corporate equity securities. The following table sets forth the plan's funded status at October 31: 1994 1993 1992 (Amounts in thousands) Plan assets at fair value $ 4,971 $ 3,824 $ 3,383 Projected benefit obligation (4,820) (3,890) (3,466) Plan assets greater (less) than projected benefit obligation 151 (66) (83) Unrecognized net loss 640 700 798 Unrecognized transition asset being amortized over 19 years (521) (510) (635) Net effect of exchange rate fluctuations 13 2 Prepaid pension cost included in other assets $ 270 $ 137 $ 82
At October 31, 1994, 1993 and 1992, the projected benefit obligations include accumulated benefit obligations of $4,621,000, $3,675,000 and $3,365,000, of which $4,602,258, $3,667,000 and $3,064,000 are vested. A discount rate of 8.5% in 1994, 8.0% in 1993 and 9.0% in 1992 was used in determining the present value of the projected benefit obligation. The expected long-term rate of return on assets was 9.0% and the assumed rate of increase in future compensation levels was 5.5% in 1994 and 1993 and 6.5% in 1992. The net pension expense recorded in 1994, 1993 and 1992 included the following components: 1994 1993 1992 (Amounts in thousands) Service-cost benefits earned during the period $ 275 $278 $286 Interest cost on projected benefit obligation 317 269 298 Actual return on plan assets (479) (688) 71 Net amortization and deferral 92 389 (421) Net pension expense $ 205 $248 $234
9. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS The Company sponsors a contributory defined benefit postretirement plan for its US operations which provides medical, dental and life insurance benefits to employees who meet age and years of service requirements prior to retirement and agree to contribute a portion of the cost. The Company has the right to modify or terminate this benefit program. The Company's contribution is a set amount per retiree depending on the retiree's years of service and dependent status at the date of retirement and the age of the retiree and dependents when benefits are provided. Cost increases are paid by the retiree. The postretirement plan's benefit obligation was as follows: 10/31/94 10/31/93 10/31/92 (Amounts in thousands) Accumulated postretirement benefit obligation: Retirees $ 894 $921 $680 Fully eligible plan participants 175 135 110 Other active plan participants 590 653 544 Total accumulated postretirement benefit obligation (unfunded) 1,659 1,709 1,334 Unrecognized loss (227) Accrued postretirement benefit obligation $1,659 $1,482 $1,334 Net periodic postretirement benefit cost included the following components: Service-cost benefits earned during the period $ 59 $ 42 $ 39 Interest cost on accumulated postretirement benefit obligation 120 11 106 Effect of special termination benefits 71 Net postretirement benefit cost $179 $227 $145
Net postretirement benefit costs and accumulated benefit obligation for 1993 were increased by $71,000 as a result of special termination benefits provided to US employees who participated in a voluntary severance program. Because the Company has established a maximum amount it will pay per retiree under the plan, health care cost trends do not affect the calculation of the accumulated benefit obligation or the net postretirement benefit cost. The weighted average discount rate used in determining the accumulated benefit obligation was 8.0% in 1994, 7.0% in 1993 and 8.5% in 1992. 10. CONTINGENCIES AND COMMITMENTS INTEREST RATE SWAP AGREEMENT. The Company has entered into an interest rate swap agreement to reduce the impact of changes in interest rates on its floating rate term loan. The interest rate differential that is paid or received under this agreement is accrued as interest rates change and is recognized over the life of the agreement. At October 31, 1994, the Company had an interest rate swap agreement with a commercial bank having a notional principal amount of $5,500,000. The agreement effectively changes the Company's interest rate on the $5,500,000 floating rate term loan to a fixed 9.7%. The interest rate swap agreement matures in accordance with the due date of the payment of the term loan. While the Company does not anticipate nonperformance, it is exposed to credit loss in the event of nonperformance by the other party to the swap agreement. CONCENTRATIONS OF CREDIT RISK. The Company grants credit to customers, subject to credit approval, for most of its sales. At October 31, 1994, accounts receivable from customers in foreign countries, primarily in Europe and Asia, were $12.2 million, constituting 55% of accounts receivable. OPERATING LEASE AGREEMENTS. The Company and its subsidiaries lease computer equipment, manufacturing space and warehouse space. Such operating lease payments are recorded as rental expense and totaled $2,186,000, $2,075,000 and $2,041,000 for 1994, 1993 and 1992. Future minimum operating lease payments amount to $3,606,000, and for the years 1995 through 1999 are $1,522,000, $759,000, $222,000, $44,000 and $38,000 under present operating lease agreements. EMPLOYMENT AGREEMENTS. The Company has approved employment agreements for officers, as well as increases in severance benefits for full-time employees, to be effective in the event of certain changes in control of the Company. These agreements are currently effective through 1995. PROPERTY, PLANT AND EQUIPMENT PURCHASES. At October 31, 1994, the Company had no significant commitments for property, plant or equipment additions. 11. INFORMATION ON OPERATIONS INVENTORIES. Inventories as of October 31 consisted of: 1994 1993 (Amounts in thousands) Raw materials and supplies $ 3,633 $ 5,730 Work-in-process and finished goods 6,926 5,875 $10,559 $11,605 ACCRUED EXPENSES. Accrued expenses at October 31 consisted of: 1994 1993 (Amounts in thousands) Workers' compensation reserve $ 1,578 $ 1,897 Ground water remediation reserve 1,197 1,433 Other accrued liabilities 5,648 4,364 $ 8,423 $ 7,694
INTEREST. Interest expense and amounts capitalized were as follows: 1994 1993 1992 (Amounts in thousands) Interest costs incurred $3,372 $3,176 $2,341 Less amounts capitalized 157 178 118 Net interest expense $3,215 $2,998 $2,223
SALES INFORMATION. Information on sales to significant customers and sales to the federal government is as follows: Sales to the Company's largest customer, who is also an approximately 10% stockholder of the Company, accounted for 7% of net sales and other revenues in 1994 and 1993 and 6% of net sales and other revenues in 1992. Sales of products and services to the federal government, primarily under subcontracts, were 11%, 7% and 8% of net sales and other revenues in 1994, 1993 and 1992. Certain of these contracts are subject to cost review by various governmental agencies. Management believes that refunds will not exceed amounts already reserved. FOREIGN OPERATIONS. Foreign sales of the Company were as follows: 1994 1993 1992 (Amounts in thousands) Export sales by US operations: To Asian countries $15,012 $11,454 $ 9,574 To European and other countries 4,243 2,850 6,767 19,255 14,304 16,341 Foreign Sales by European operations 40,241 36,104 24,153 $59,496 $50,408 $40,494
Identifiable assets of the Company's foreign operations were $43.3 million at October 31, 1994, $37.7 million at October 31, 1993 and $19.8 million at October 31, 1992. COMPONENTS OF EARNINGS. The components of earnings (loss) before income taxes were as follows: 1994 1993 1992 (Amounts in thousands) Domestic $ 8,311 $(3,480) $ 7,057 Foreign (627) (4,531) 2,543 $ 7,684 $(8,011) $ 9,600
12. QUARTERLY RESULTS (UNAUDITED) Results of operations for each quarter of 1994 and 1993 were as follows: FIRST SECOND THIRD FOURTH TOTAL QUARTER QUARTER QUARTER QUARTER YEAR (Amounts in thousands, except per share data) 1994 Net sales and other revenues $30,091 $33,544 $33,403 $34,742 $131,780 Gross profit 11,074 13,000 11,364 12,341 47,779 Net earnings $ 1,102 $ 1,347 $ 910 $ 1,245 $ 4,604 Net earnings per share $ .12 $ .15 $ .10 $ .14 $ .51 1993 Net sales and other revenues $27,987 $32,416 $31,497 $31,113 $123,013 Gross profit 10,700 12,316 8,069 10,043 41,128 Net earnings (loss) $ 1,067 $ 1,371 $(6,822) $(1,353) $(5,737) Net earnings (loss) per share $ .12 $ .15 $ (.77) $ (.15) $ (.65)
The third and fourth quarters of 1993 included restructuring charges of $8,637,000 and $1,109,000, which increased the net loss per share by $.60 and $.09 in the respective quarter and by $.70 for the year. 13. OTHER INVESTMENTS FLEX PRODUCTS, INC. JOINT VENTURE. In 1988, the Company formed a joint venture, consisting of its Flex Products operation, with ICI Americas Inc., the US subsidiary of Imperial Chemical Industries PLC (ICI). The joint venture, Flex Products, Inc., is 40% owned by the Company and 60% owned by ICI. The Company received proceeds in excess of the carrying amount of the assets contributed to the joint venture. The proceeds were allocated first to reduce the carrying amount of the Company's investment to zero, with the remaining proceeds reported as gain on sale of equity in affiliated company. Since the Company carries its investment in the joint venture at zero and is not obligated to make further investment in the joint venture, it has not recognized losses attributable to its equity position in the joint venture. The Flex Products, Inc. joint venture received an $18 million investment, plus a $5 million working capital loan, form ICI for ICI's 60% interest. In consideration for OCLI's contribution of the assets and business of its Flex Products operation and a covenant not to compete with the joint venture, Flex Products, Inc. assumed and paid $12 million of OCLI's bank term loan and paid OCLI $6 million cash for a total of $18 million. Simultaneously with entering into the joint venture agreement, the parties entered into several other agreements pursuant to which OCLI is receiving, or has received, the following additional payments: (i) $5 million over the first five years of the joint venture for research and development services; (ii) $1.8 million over the first two years of the joint venture in technology support fees under a support services agreement; and (iii) royalties starting at 10% of joint venture sales and declining to 4% over the first five years of the joint venture and continuing thereafter at 4% until cumulative royalties of $13.7 million have been paid to the Company. The joint venture agreement also includes a buyout option of the Company's interest by ICI that began five years after the close of the transaction. As of October 31, 1994, the Company has received cumulative royalties of $4.1 million. In 1994, 1993 and 1992, the Company received $906,000, $859,000 and $856,000 as royalties on sales. In addition, in 1994, 1993 and 1992, Flex Products Inc. paid the Company approximately $916,000, $761,000 and $720,000, for facility rent; $565,000, $616,000 and $730,000 in cost reimbursement for general, administrative and support services; and $217,000, $808,000 and $788,000 under the research, development and engineering services contract. These amounts are reflected in the operating results of the Company for the respective years. INVESTMENT IN SUPERCONDUCTOR TECHNOLOGIES, INC. In January 1988, OCLI made an investment of $250,000, to purchase 83,333 shares of Series B Preferred Stock of Superconductor Technologies, Inc. (STI). These preferred shares have been converted to 41,666 common shares of STI with an approximate fair value of $270,000. MILAS MONITOR PRODUKTE GMBH JOINT VENTURE. In March 1993, the Company formed a joint venture with Mr. Waldemar Milas, a distributor of the Company's Glare/Guard(R) product line in Germany. At October 31, 1993, the Company wrote down its investment and the receivables relating to this investment due to the uncertainty of the viability of this venture. On July 29, 1994, the Company terminated its contractual obligations under the joint venture with Mr. Milas. However, Mr. Milas remains a 49% shareholder of Milas Monitor Produckte GmbH. NESA MONITOR PRODUCTS SRL JOINT VENTURE. In April 1993, the Company formed a joint venture with Nesa Informatica Srl, a distributor of the Company's Glare/Guard(R) product line in Italy. The Company's investment in the joint venture was approximately $590,000. EX-21 5 OPTICAL COATING LABORATORY, INC. AND SUBSIDIARIES EXHIBIT 21: SUBSIDIARIES OF THE REGISTRANT Optical Coating Laboratory, Inc. was incorporated in Delaware in 1948. The Company was reincorporated in California in 1963 and again reincorporated in Delaware November 2, 1987. Optical Coating Laboratory, Inc. has the following subsidiaries: NAME OWNERSHIP PLACE OF INCORPORATION OCLI International Service Corporation 100% California OCLI Foreign Sales Corporation 100% Guam OCLI Optical Coatings Limited 100% Scotland OCLI Optical Coatings Espana S.A. 100% Spain Optical Coating Laboratory B.V. 100% Netherlands OCLI Optical Coating Laboratory GmbH 100% Germany MMG Glastechnik GmbH 100% Germany Optical Coating Laboratory EURL 100% France Optical Coating Laboratory Srl 100% Italy Milas Monitor Produkte GmbH 51% Germany Nesa Monitor Products Srl 51% Italy Flex Products, Inc. (i) 40% Delaware The subsidiaries listed above are included in the consolidated financial statements of the Company which are incorporated by reference to the Company's 1994 Annual Report. Flex Products, Inc. is not a consolidated subsidiary. (i) Flex Products, Inc. is comprised of the Company's former roll coating activities which business and assets were contributed to an unconsolidated 40% owned joint venture effective October 31, 1988. EX-23 6 EXHIBIT 23 INDEPENDENT AUDITORS' CONSENT AND REPORT ON SCHEDULE We consent to the incorporation by reference in Registration Statements No. 33-41050, No. 33-26271, No. 33-12276, No. 33-48808 and No. 33-65132 of Optical Coating Laboratory, Inc. on Forms S-8 and Registration Statement No. 2-97482 on Form S-3 of our report dated December 14, 1994, appearing in this Annual Report on Form 10-K of Optical Coating Laboratory, Inc. for the year ended October 31, 1994. Our audits of the consolidated financial statements referred to in our aforementioned report also included the financial statement schedule of Optical Coating Laboratory, Inc., listed in Item 14(a)(2). The financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, the financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. DELOITTE & TOUCHE LLP San Francisco, California January 24, 1995 EX-27 7
5 0000074697 OCLI 1,000 12-MOS OCT-31-1994 OCT-31-1994 5,578 14,085 22,007 1,810 10,559 57,510 52,010 6,930 118,879 29,018 0 90 0 0 51,947 118,879 131,780 131,780 84,001 84,001 37,218 0 3,215 7,684 3,080 0 0 0 0 4,604 .51 .51
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