-----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, KvnHFSQWoiFOK6rEX3HwqkftmT1YwNwMbo1159Y7/dzCf1SPBHr3fwmTKn/ec6Lb HvuxpeJyJsIu1piCBBHEwg== 0000074697-95-000009.txt : 19950616 0000074697-95-000009.hdr.sgml : 19950616 ACCESSION NUMBER: 0000074697-95-000009 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19950131 FILED AS OF DATE: 19950316 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: OPTICAL COATING LABORATORY INC CENTRAL INDEX KEY: 0000074697 STANDARD INDUSTRIAL CLASSIFICATION: 3827 IRS NUMBER: 680164244 STATE OF INCORPORATION: DE FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-02537 FILM NUMBER: 95521106 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-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (MARK ONE) [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended JANUARY 31, 1995 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 0-2537 OPTICAL COATING LABORATORY, INC. (Exact name of registrant as specified in its charter) DELAWARE (State or other jurisdiction of incorporation or organization) 68-0164244 (I.R.S. Employer Identification No.) 2789 NORTHPOINT PARKWAY, SANTA ROSA, CA 95407-7397 (Address of principal executive offices) (707) 545-6440 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No APPLICABLE ONLY TO CORPORATE ISSUERS Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Classes of Common Stock COMMON STOCK, $.01 PAR VALUE Outstanding at February 28, 1995: 9,013,793 Shares This document contains 16 pages. The Exhibit listing appears on Page 14. PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS OPTICAL COATING LABORATORY, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Dollars in thousands) (Unaudited) January 31, October 31, 1995 1994 (Unaudited) ASSETS Current Assets: Cash and short-term investments $16,452 $19,663 Accounts receivable, net of allowance for doubtful accounts of $1,767 and $1,810 24,767 22,007 Inventories 12,187 10,559 Deferred income tax assets 4,946 4,235 Other current assets 2,464 1,246 ------ ------ Total Current Assets 60,816 57,710 Other Assets and Investments 9,054 9,159 Property, Plant and Equipment: Land and improvements 8,619 8,623 Buildings and improvements 27,628 27,495 Machinery and equipment 80,724 80,206 Construction-in-progress 5,507 3,083 ________ ________ 122,478 119,407 Less accumulated depreciation (68,916) (67,397) Property, Plant and ________ ________ Equipment - Net 53,562 52,010 ________ ________ $123,432 $118,879 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable $6,503 $ 6,197 Accrued expenses 9,253 8,423 Accrued compensation expenses 5,398 4,785 Income taxes payable 3,019 1,671 Current maturities on long-term debt 6,947 6,878 Notes payable 613 428 Deferred revenue 844 636 ------ ------ Total Current Liabilities 32,577 29,018 Accrued postretirement health benefits and pension liabilities 1,907 1,877 Deferred income tax liabilities 853 506 Long-term debt 34,955 35,441 Stockholders' Equity: Common stock, $.01 par value; authorized 30,000,000 shares; issued and outstanding 8,978,000 and 8,973,000 shares 90 90 Paid-in capital 39,969 39,967 Retained earnings 13,340 12,055 Cumulative foreign currency translation adjustment (259) (75) ------ ------- Total Stockholders' Equity 53,140 52,037 $123,432 $118,879 ======== ======== See Notes to Consolidated Financial Statements
OPTICAL COATING LABORATORY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS For the three months ended January 31, 1995 and 1994 (Dollars in thousands, except per share amounts) (Unaudited) Three Months Ended January 31, 1995 1994 Net sales and other revenues $35,993 $30,091 Costs and expenses: Cost of sales 21,352 19,017 Research and development 1,387 1,111 Selling and administrative 9,244 7,208 Amortization of intangibles 171 166 ------ ------ Total costs and expenses 32,154 27,502 ------ ------ Earnings from operations 3,839 2,589 Other income (expense): Interest income 226 9 Interest expense (920) (698) ------ ------- Earnings before income taxes 3,145 1,900 Income taxes 1,321 798 ------ ------- Net earnings $1,824 $1,102 ======= ======= Net earnings per common and common equivalent share $ .20 $ .12 ======== ======== See Notes to Consolidated Financial Statements
OPTICAL COATING LABORATORY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY For the three months ended January 31, 1995 (Amounts in thousands) (Unaudited) FOREIGN COMMON STOCK PAID-IN RETAINED CURRENCY SHARES AMOUNT CAPITAL EARNINGS TRANSLATION BALANCE AT NOVEMBER 1, 1994 8,978 $90 $39,967 $12,055 $(75) Exercise of stock options, including tax benefit 2 Foreign currency translation adjustment for the period (184) Net earnings for the period 1,824 Dividend on common stock (539) _____ ___ _______ _______ _____ BALANCE AT JANUARY 31, 1995 8,978 $90 $39,969 $13,340 $(259) ===== === ======= ======= ===== See Notes to Consolidated Financial Statements
OPTICAL COATING LABORATORY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS For the three months ended January 31, 1995 and 1994 (Amounts in thousands) (Unaudited) Three Months Ended January 31, 1995 1994 Cash Flows from Operating Activities: Cash received from customers $37,258 $31,017 Interest received 297 5 Cash paid to suppliers and employees (35,037) (28,428) Interest paid (1,270) (506) Income taxes paid, net of refunds (369) 588 Net cash provided by operating activities 879 2,676 Cash Flows from Investing Activities: Purchase of plant and equipment (3,301) (1,523) Cash Flows used for Financing Activities: Proceeds from notes payable 182 152 Proceeds from exercise of stock options 2 4 Repayment of long-term debt (404) (467) Repayment of notes payable (17) Payment of dividend on common stock (539) (538) Net cash used for financing activities (759) (866) Effect of exchange rate changes on cash (30) (27) Net increase (decrease) in cash and short-term investments (3,211) 260 Cash and short-term investments at beginning of period 19,663 2,284 Cash and short-term investments at end of period $ 16,452 $ 2,544
OPTICAL COATING LABORATORY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS For the three months ended January 31, 1995 and 1994 (Amounts in thousands) (Unaudited) Three Months Ended January 31, 1995 1994 Reconciliation of net earnings to cash flows from operating activities: Net earnings $1,824 $1,102 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 1,821 1,720 Loss on disposal or abandonment of equipment 19 3 Accrued postretirement health benefits 27 (31) Deferred income taxes 357 56 Other non-cash adjustments to net earnings (60) (39) Change in: Accounts receivable (2,953) 228 Inventories (1,689) (236) Income tax receivable 1,345 Deferred income tax assets (711) (36) Other current assets and other assets and investments (1,328) (825) Accounts payable, accrued expenses and accrued compensation expenses 2,013 (381) Deferred revenue 208 (209) Income taxes payable 1,351 (21) Total adjustments (945) 1,574 Net cash provided by operating activities $ 879 $ 2,676
See Notes to Consolidated Financial Statements OPTICAL COATING LABORATORY, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Three Months Ended January 31, 1995 and 1994 (Unaudited) 1. GENERAL The Consolidated Balance Sheet as of January 31, 1995, the Consolidated Statements of Earnings for the three month periods ended January 31, 1995 and 1994, the Consolidated Statement of Stockholders' Equity for the three month period ended January 31, 1995 and the Consolidated Statements of Cash Flows for the three month periods ended January 31, 1995 and 1994 have been prepared by the Company without audit. In the opinion of management, all adjustments consisting of normal recurring accruals, necessary to present fairly the financial position, results of operations and cash flows at January 31, 1995 and for all periods presented have been made. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. It is suggested that these consolidated financial statements be read in conjunction with the financial statements and notes thereto included in the Company's Annual Report to Stockholders for fiscal 1994. Certain amounts in the 1994 consolidated financial statements have been reclassified to conform with the presentation in the 1995 consolidated financial statements. The results of operations for the period ended January 31, 1995 are not necessarily indicative of the operating results anticipated for the full year. 2. INVENTORIES Inventories consisted of the following: January 31, October 31, 1995 1994 (Amounts in thousands) Raw materials and supplies $ 4,940 $ 3,633 Work-in-process and finished goods 7,247 6,926 $12,187 $10,559 3. ACCRUED EXPENSES Accrued expenses consisted of the following: January 31, October 31, 1995 1994 (Amounts in thousands) Workers' compensation reserve $ 1,619 $ 1,578 Ground water remediation reserve 1,193 1,197 Other accrued liabilities 6,441 5,648 $ 9,253 $ 8,423 4. LONG-TERM DEBT Long-term debt consisted of: January 31, October 31, 1995 1994 (Amounts in thousands) Unsecured Senior Notes. Interest at 8.71% payable semi-annually. Principal payable in annual installments of $3.6 million from 1998 through 2002. $18,000 $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 5,500 Land improvement assessment, at an average rate of 6.75% interest. Principal and interest payable in semi-annual installments of $77,000 through 1998. 459 517 Scottish Development Agency (SDA) building loan, at 12%, with semi-annual payments of approximately $357,000, each comprising principal and interest through 2006. Collateralized by the land and building of the Company's Scottish subsidiary. 4,209 4,289 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. 7,920 8,167 Bank loans of MMG with interest rates ranging from 4.5% to 9.75%. Payable in annual and semi-annual installments through 2014. Partly collateralized by mortgages on MMG land and buildings and liens on equipment. 5,157 5,133 Present value of obligations under capital leases at an assumed interest rate of 7.5% payable in monthly installments through 2004. 657 713 41,902 42,319 Less current maturities (6,947) (6,878) $34,955 $35,441 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 at market interest rates of up to approximately $430,000 with interest payable at market rates. There were no borrowings under this credit arrangement in the first quarter 1995 or in 1994. The Company has outstanding letters of credit in the amount of $1.9 million to meet the requirements under the Company's workers' compensation self insurance plans, and the Company's subsidiary in Scotland has outstanding letters of credit of approximately $370,000 to guarantee payment of import duty. 5. STOCK OPTIONS During the first quarter of 1995, the Company granted options to purchase 338,000 shares of the Company's common stock at a price equal to 100% of the market price on the date of grant under the Company's incentive compensation and employee stock option plans. At January 31, 1995, 1,680,737 shares are subject to outstanding options, of which 1,157,362 options are exercisable. Options to purchase 418,213 shares of common stock are available for future grants under the plans. PART I. FINANCIAL INFORMATION ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF MATERIAL CHANGES IN RESULTS OF OPERATIONS AND FINANCIAL CONDITION RESULTS OF OPERATIONS Net sales and other revenues for the first quarter of 1995 were $36.0 million, up 20% over net sales and other revenues of $30.1 million for the first quarter of 1994. The increase in net sales and other revenues for the first quarter of 1995 over the comparative period of 1994 was primarily due to increased demand for the Company's visual filters and instrument components, for X-ray telescope work for NASA, and for fabricated glass components in the U.S. and Europe. The Company's DirectCoatTM operation, a new capability as compared to the first quarter of 1994, shipped at available capacity during the first quarter of 1995. During the first quarter of 1995, the Company estimates that it experienced a price decline of approximately 5% in its OEM display product line. This price decline was substantially offset by incremental volume in the product area. The Company experienced no other significant price changes in other product areas in the first quarter of 1995. Cost of sales as a percent of sales was 59.3% for the first quarter of 1995 compared to 63.2% for the first quarter of 1994. The lower cost of sales ratio in the first quarter of 1995 reflects the increased utilization of existing capacity due to the higher level of sales during the period. Research and development expenditures in the first quarter of 1995 were 3.9% of sales, compared to 3.7% for the first quarter of 1994; with the level of expenditure increasing by $276,000, or 25%, in the current period compared to the first quarter of 1994. This reflects management's objective to maintain research and development expenditures at a relatively consistent level as a percent of sales. Selling and administrative expenses in the first quarter of 1995 were 25.7% of sales, compared to 24.0% for the first quarter of 1994; with the level of expenditure increasing by $2.0 million, or 28%, in the current period compared to the first quarter of 1994. This increase primarily reflects higher general and administrative expenses in the current period. Interest income in the first quarter of 1995 increased $217,000 compared to the first quarter of 1994, reflecting the higher short term investment balances on hand in the current period. Interest expense for the first quarter of 1995 increased $222,000, or 32%, compared to the first quarter of 1994, reflecting the increase in the Company's long-term debt. As a result of the foregoing, the Company reported earnings before income taxes of $3.1 million in the first quarter of 1995 compared to $1.9 million in the first quarter of 1994. The effective income tax rate was 42% for the first quarter of 1995 and 1994. The Company had net earnings of $1.8 million, or $.20 per share, for the first quarter of 1995, compared to $1.1 million, or $.12 per share, for the first quarter of 1994. FINANCIAL CONDITION During the first quarter ended January 31, 1995, the Company's operating activities provided $879,000 in cash flow while $3.3 million was expended to purchase plant and equipment. During the first quarter of 1995, working capital, other than cash and temporary investments, increased by $2.8 million primarily due to increases in accounts receivable and inventories associated with higher sales. As a result of its operating activities and changes in its working capital, the Company's cash and short term investment position decreased by $3.2 million during the quarter. During the first quarter of 1995, the Company announced that it had signed a Letter of Intent to increase its equity position from 40% to 60% in Flex Products, Inc. Flex Products is the exclusive supplier of Optically Variable Pigment, produced by a proprietary and patent protected thin film roll-coating process and used in approximately 30 countries for anti-counterfeiting imprinting of currencies. The Company also completed negotiations to acquire a precision plastic optics manufacturer to add this capability to its overall product offerings. The Company is also adding additional MetaMode(R) machine capacity to its Linear Polarizer and DirectCoatTM operations and is upgrading its in-line MetaMACTM sputter coater for increased capacity for front surface mirror products. Relatedly, management has initiated discussions with its banks to increase its bank borrowing and line of credit facilities to have available incremental borrowing capacity to meet the cash flow requirements associated with the Company's capital investment and selected acquisition programs. The Company has also initiated the potential private placement, in an amount of up to $10 million, of a new series of convertible redeemable preferred stock. Management believes that the cash on hand at January 31, 1995, cash anticipated to be generated from future operations, borrowings available from renegotiated bank loan and credit arrangements, and private placement of preferred stock will be sufficient for the Company to meet its near-term working capital needs, capital expenditures, above referenced acquisitions, debt service requirements and payments of dividends as declared. INDEPENDENT ACCOUNTANTS' REVIEW The January 31,1995 consolidated financial statements included in this filing on Form 10-Q have been reviewed by Deloitte & Touche LLP, independent accountants, in accordance with established professional standards and procedures for such a review. The report of Deloitte & Touche LLP commenting on their review follows. INDEPENDENT ACCOUNTANTS' REPORT To the Board of Directors and Stockholders of Optical Coating Laboratory, Inc. Santa Rosa, California We have reviewed the accompanying condensed consolidated balance sheet of Optical Coating Laboratory, Inc. and subsidiaries as of January 31, 1995 and the related condensed consolidated statements of earnings and cash flows for the three-month periods ended January 31, 1995 and 1994 and the related condensed consolidated statement of stockholders' equity for the three-month period ended January 31, 1995. These financial statements are the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institure of Certified Public Accountants. A review of interim financial information consists of applying analytical review procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to such condensed consolidated financial statements for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet of Optical Coating Laboratory, Inc. and subsidiaries as of October 31, 1994, and the related consolidated statements of earnings, stockholders' equity, and cash flows for the year then ended (not presented herein); and in our reported dated December 14, 1994, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of October 31, 1994 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived. /s/DELOITTE & TOUCHE LLP San Francisco, California February 15, 1995 PART II. OTHER INFORMATION Item 1. Legal Proceedings Page(s) None Item 2. Changes in Securities None Item 3. Defaults upon Senior Securities None Item 4. Submission of Matters to a Vote of Security Holders None Item 5. Other Information None Item 6. Exhibits and Reports on Form 8-K (a) The following are filed as Exhibits to this Quarterly Report. The numbers refer to the Exhibit Table of Item 601 of Regulation S-K. (2) None (4) None (11)* Computation of per share earnings for the three months ended January 31, 1995 and 1994. (15)* Letter of Deloitte & Touche regarding unaudited interim financial information. (18) None (19)* Items not previously filed are designated by an asterisk. (22) None (23) None (24) None (27) None (b) Reports on Form 8-K filed for the three months ended January 31, 1995. None SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized and in the capacity indicated. OPTICAL COATING LABORATORY, INC. (Registrant) March 16, 1995 /s/HERBERT M. DWIGHT, JR. Date Herbert M. Dwight, Jr. President and Chief Financial Officer (Principal Financial Officer) EX-11 2 EXHIBIT 11. COMPUTATION OF EARNINGS PER SHARE (Dollars in thousands, except per share data) (Unaudited) Three Months Ended January 31, 1995 1994 Primary Shares: Average common shares outstanding 8,978 8,972 Common equivalent shares outstanding 47 47 9,025 9,019 Net earnings $ 1,824 $1,102 Net earnings per common and common equivalent share, primary $ .20 $ .12 Fully Diluted Shares: Average common shares outstanding 8,978 8,972 Common equivalent shares outstanding 117 97 9,095 9,069 Net earnings $ 1,824 $1,102 Net earnings per common and common equivalent share, fully diluted $ .20 $ .12 Fully diluted earnings per share do not result in dilution of three percent or more and are, therefore, not presented.
EX-15 3 EXHIBIT 15 To the Board of Directors and Stockholders of Optical Coating Laboratory, Inc. Santa Rosa, California We have reviewed, in accordance with standards established by the American Institute of Certified Public Accountants, the unaudited interim financial information of Optical Coating Laboratory, Inc. and subsidiaries for the periods ended January 31, 1995 and 1994 as indicated in our report dated February 15, 1995; because we did not perform an audit, we expressed no opinion on that information. We are aware that our report referred to above, which is included in your Quarterly Report on Form 10-Q for the quarter ended January 31, 1995, is incorporated by reference in Registration Statements No. 33-41050, No. 33-26271, No. 33-12276, No. 33-48808 and No. 33-65132 on Forms S-8 and Registration Statement No. 2-97482 on Form S-3. We are also aware that the aforementioned report, pursuant to Rule 436(c) under the Securities Act, is not considered a part of the Registration Statement prepared or certified by an accountant or a report prepared or certified by an accountant within the meaning of Sections 7 and 11 of that Act. /s/ DELOITTE & TOUCHE LLP San Francisco, California March 10, 1995 -----END PRIVACY-ENHANCED MESSAGE-----