-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BHqnqXX8TDNEYcxm9+YMdY273lx6V/J51kkw0AT7czgLfPksVukbLadysNDs9HA9 N9GV5xg70D1QnTfdFVw2Bw== 0000074697-96-000005.txt : 19960315 0000074697-96-000005.hdr.sgml : 19960315 ACCESSION NUMBER: 0000074697-96-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960131 FILED AS OF DATE: 19960314 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-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-02537 FILM NUMBER: 96534859 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 FIRST QUARTER 1996 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 28, 1996 [ ] 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 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 29, 1996: 9,530,477 shares This document contains 16 pages. The Exhibit listing appears on Page 15. PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS OPTICAL COATING LABORATORY, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Dollars in thousands) (Unaudited) January 28, October 31, 1996 1995 ASSETS (Unaudited) Current Assets: Cash and short-term investments $ 4,555 $ 6,602 Accounts receivable, net of allowance for doubtful accounts of $1,052 and $1,229 31,239 29,565 Inventories 16,474 15,886 Income taxes recoverable 1,665 Current deferred income tax assets 6,126 6,665 Other current assets 2,956 2,476 Total Current Assets 63,015 61,194 Deferred income tax assets 4,588 4,597 Other assets and investments 11,997 12,432 Property, Plant and Equipment: Land and improvements 9,233 8,651 Buildings and improvements 33,608 31,461 Machinery and equipment 106,240 101,586 Construction-in-progress 15,182 23,717 164,263 165,415 Less accumulated depreciation (76,149) (73,804) Property, Plant and Equipment - Net 88,114 91,611 Total Assets $167,714 $169,834 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable 9,253 10,324 Accrued expenses 9,291 9,515 Accrued compensation expenses 6,129 6,559 Current maturities on long-term debt 3,303 3,344 Notes payable 3,298 3,339 Deferred revenue 696 98 Total Current Liabilities 31,970 33,179 Accrued postretirement health benefits and pension liabilities 2,140 2,150 Deferred income tax liabilities 2,325 2,239 Long-term debt 46,604 47,267 Minority interest 11,407 11,105 Convertible redeemable preferred stock 11,357 11,357 Common Stockholders' Equity: Common stock, $.01 par value; authorized 30,000,000 shares; issued and outstanding 9,522,000 and 9,489,000 shares 95 95 Paid-in capital 44,780 44,461 Retained earnings 17,830 17,901 Cumulative foreign currency translation adjustment (794) 80 Common Stockholders' Equity 61,911 62,537 Total Liabilities and Stockholders' Equity $167,714 $169,834 See Notes to Consolidated Financial Statements OPTICAL COATING LABORATORY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME For the three months ended January 28, 1996 and January 29, 1995 (Dollars in thousands, except per share amounts) (Unaudited) Three Months Ended January 28, January 29, 1996 1995 Revenue $43,911 $35,993 Cost of sales 29,495 21,352 Gross profit 14,416 14,641 Operating Expenses: Research and development 2,388 1,387 Selling and administrative 9,107 9,244 Amortization of intangibles 287 171 Total operating expenses 11,782 10,802 Income from operations 2,634 3,839 Other Income (Expense): Interest income 74 226 Interest expense (911) (920) Income before provision for income taxes and minority interest 1,797 3,145 Provision for income taxes 754 1,321 Minority Interest 303 Net income 740 1,824 Dividend on convertible redeemable preferred stock 240 Net income applicable to common stock $ 500 $ 1,824 Net income per common and common equivalent share $ .05 $ .20 Weighted average number of common shares used to compute net income per share 10,119 9,025 See Notes to Consolidated Financial Statements OPTICAL COATING LABORATORY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF COMMON STOCKHOLDERS' EQUITY For the three months ended January 28, 1996 (Amounts in thousands) (Unaudited) FOREIGN COMMON STOCK PAID-IN RETAINED CURRENCY SHARES AMOUNT CAPITAL EARNINGS TRANSLATION BALANCE AT NOVEMBER 1, 1995 9,489 $95 $44,461 $17,901 $80 Shares issued to Employee Stock Ownership Plan 5 55 Exercise of stock options, including tax benefit 28 264 Foreign currency translation adjustment for the period (874) Net income for the period 740 Dividend on preferred stock (240) Dividend on common stock (571) BALANCE AT JANUARY 28, 1996 9,522 $95 $44,780 $17,830 $(794) See Notes to Consolidated Financial Statements OPTICAL COATING LABORATORY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS For the three months ended January 28, 1996 and January 29, 1995 (Amounts in thousands) (Unaudited) Three Months Ended January 28, January 29, 1996 1995 Cash Flows from Operating Activities: Cash received from customers $42,911 $37,258 Interest received 101 297 Cash paid to suppliers and employees (37,568) (35,037) Interest paid (2,892) (1,270) Income taxes paid, net of refunds (4,633) (369) Net cash (used for) provided by operating activities (2,081) 879 Cash Flows from Investing Activities: Purchase of plant and equipment (5,421) (3,301) Proceeds from sale/leaseback of equipment 5,900 Net cash provided by (used for) investing activities 479 (3,301) Cash Flows from Financing Activities: Proceeds from long term debt 2,600 Proceeds from notes payable 154 182 Proceeds from exercise of stock options 198 2 Repayment of long-term debt (2,468) (404) Payment of dividend on preferred stock (240) Payment of dividend on common stock (571) (539) Net cash provided by (used for) financing activities (327) (759) Effect of exchange rate changes on cash (118) (30) Decrease in cash and short-term investments (2,047) (3,211) Cash and short-term investments at beginning of period 6,602 19,663 Cash and short-term investments at end of period $4,555 $16,452 OPTICAL COATING LABORATORY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS For the three months ended January 28, 1996 and January 29, 1995 (Amounts in thousands) (Unaudited) Three Months Ended January 28, January 29, 1996 1995 Reconciliation of net income to cash flows from operating activities: Net income $ 740 $1,824 Adjustments to reconcile net income to net cash (used for) provided by operating activities: Depreciation and amortization 3,178 1,821 Minority interest in earnings of Flex Products, Inc. 302 Loss on disposal or abandonment of equipment 2 19 Accrued postretirement health benefits 11 27 Deferred income tax liabilities 97 357 Other non-cash adjustments to net income (81) (60) Change in: Accounts receivable (1,337) (2,953) Inventories (883) (1,689) Income tax recoverable (1,589) Deferred income tax assets 531 (711) Other current assets and other assets and investments (875) (1,328) Accounts payable, accrued expenses and accrued compensation expenses (2,406) 2,013 Deferred revenue 74 208 Income taxes payable 155 1,351 Total adjustments (2,821) (945) Net cash (used for) provided by operating activities $(2,081) $ 879 See Notes to Consolidated Financial Statements OPTICAL COATING LABORATORY, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Three Months Ended January 28, 1996 and January 29, 1995 (Unaudited) 1. GENERAL Optical Coating Laboratory, Inc. (OCLI) develops, manufactures and sells thin film coated products. Thin film coatings control and enhance light by altering the transmission, reflection and absorption of the various wavelengths of light energy to achieve a desired effect such as antireflection, shielding, conductivity or abrasion resistance. OCLI markets and sells its products worldwide to original equipment manufacturers (OEM's) who utilize thin film coated components or devices for optical and electro-optical systems for computers, photocopiers, LCD desktop projectors, scanners, instruments and satellites. OCLI sells its Glare/Guard(R) ergonomic computer display products through distributors and office supply retailers. Flex Products, Inc. (Flex Products), OCLI's 60% owned subsidiary, develops and manufactures thin film coatings on plastic film with a proprietary high speed process. The Consolidated Balance Sheet as of January 28, 1996, the Consolidated Statements of Income for the three month periods ended January 28, 1996 and January 29, 1995, the Consolidated Statement of Common Stockholders' Equity for the three month period ended January 28, 1996 and the Consolidated Statements of Cash Flows for the three month periods ended January 28, 1996 and January 29, 1995 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 28, 1996 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 included in the Company's Annual Report to Stockholders for fiscal 1995. The results of operations for the period ended January 28, 1996 are not necessarily indicative of the operating results anticipated for the full year. 2. INVENTORIES Inventories consisted of the following: January 28, October 31, 1996 1995 (Amounts in thousands) Raw materials and supplies $7,464 $7,330 Work-in-process and finished goods 9,010 8,556 $16,474 $15,886 3. ACCRUED EXPENSES Accrued expenses consisted of the following: January 28, October 31, 1996 1995 (Amounts in thousands) Workers' compensation reserve $ 992 $ 937 Ground water remediation reserve 1,182 1,187 Other accrued liabilities 7,079 7,391 $9,253 $9,515 4. LONG-TERM DEBT Long-term debt consisted of: January 28, October 31, 1996 1995 (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 $18,000 Unsecured bank term loan. Variable interest rates averaging 7.3% at January 28, 1996, payable quarterly. Principal payable semiannually as follows: Payment Dates Amounts April 1996 $ 500,000 October 1996 and April 1997 1,000,000 Each October and April thereafter 2,000,000 14,500 14,500 Mortgage payable. Interest at 8%. Collateralized by a 72,000 sq. ft. newly constructed building and related land area. Principal and interest payable over 15 years at $25,000 per month. 2,600 Unsecured borrowings under revolving bank line of credit. Repaid during first quarter of fiscal 1996. 2,000 Land improvement assessment. Interest at an average rate of 6.75%. Principal and interest payable in semiannual installments of $77,000 through 1998. 330 401 Scottish Development Agency (SDA) building loan, with a conditional interest moratorium through January 31, 1998 with interest at 9.5% thereafter. Semiannual principal payments of approximately $100,000 are payable through January 1998 with subsequent payments of $331,000, comprising principal and interest, through 2006. Collateralized by the land and building of the Company's Scottish subsidiary. 3,823 4,026 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 $420,000 through 2003. 7,035 7,721 Bank loans of MMG with interest rates ranging from 4.5% to 8.0%. Payable in semiannual and annual installments through 2005. Partly collateralized by mortgages on MMG land and buildings and liens on equipment. 2,787 3,050 Present value of obligations under capital leases at an assumed interest rate of 8.0% payable in monthly installments through 2004. 832 913 49,907 50,611 Less current maturities (3,303) (3,344) $46,604 $47,267 The Company has a $30 million unsecured credit facility comprised of a $15 million term loan and a $15 million revolving line of credit. During fiscal 1995, $2 million was borrowed under the $15 million revolving credit facility which balance was repaid during the first quarter of fiscal 1996. The revolving line of credit carries a commitment fee of .375% per year on the unused portion of the facility and expires on April 28, 2000. The Company has an incremental credit facility to cover a surety letter for approximately $3.5 million issued to secure 50% of the Company's notes payable arising from the purchase of MMG. The Company also has a letter of credit for approximately $1.5 million to satisfy the Company's workers' compensation self-insurance requirements. The surety commitment and letter of credit facilities carry a fee of 1.25% per year. During the first quarter of fiscal 1996 the Company entered into an operating lease arrangement in the amount of $5.9 million for a newly acquired continuous coating machine and related equipment. The term of the operating lease is six years and provides for an early buyout at fair value at the end of five years. The Company's subsidiary in Scotland has a credit arrangement of up to approximately $470,000 at market interest rates and has outstanding letters of credit of approximately $320,000 to guarantee import duty. There were no borrowings under the credit arrangement in the first quarter of fiscal 1996 or in fiscal year 1995. The Company's subsidiary in Germany has various credit facilities with local banks totaling approximately $3.5 million which are used for working capital requirements. These credit facilities are utilized as part of normal local payment practices. The Company has certain financial covenants and restrictions under its bank credit arrangements and the unsecured senior notes. 5. STOCK OPTIONS During the first quarter of 1996, no options were granted under the Company's incentive compensation and employee stock option plans. At January 28, 1996, 1,502,500 shares are subject to outstanding options, of which 1,138,125 options are exercisable. Options to purchase 307,713 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 REVENUE. Revenue for the first quarter of fiscal 1996 was $43.9 million, an increase of $7.9 million, or 22%, over revenue of $36 million in the first quarter of fiscal 1995. Fiscal 1996 first quarter revenue includes $7.4 million of revenue from Flex Products, Inc. (Flex Products). The Company increased its ownership in Flex Products from 40% to a controlling 60% in May of 1995, resulting in the consolidation of Flex Products' financial results into the Company's financial statements beginning in the third quarter of fiscal 1995. For the first quarter of fiscal 1996 compared to the first quarter of fiscal 1995, revenue was higher in the office automation, defense and aerospace and specialty products markets served by the Company. Revenue in the instrumentation and the Glare/Guard(R) computer display markets was substantially the same in the comparative quarters. However, revenue in the OEM (original equipment manufacturer) display market was substantially down, by approximately 40%, in the current year first quarter versus the year ago quarter. The Company experienced price declines of approximately 3% in segments of its office automation market during the first quarter of fiscal 1996. GROSS PROFIT. Gross profit, while substantially at the same dollar level, was 32.8% of revenue for the first quarter of fiscal 1996 compared to 40.7% of revenue for the first quarter of fiscal 1995. The gross profit margin decline in the current year first quarter was in the OEM display area where manufacturing costs could not be sufficiently reduced to compensate for the impact of lower volume, the impact of start up costs and incremental depreciation and rental expense associated with the new continuous coating platform being brought on line. OPERATING EXPENSES. Research and development expenditures in the first quarter of 1996 were up $1.0 million, or 72%, compared to the first quarter of 1995. The current quarter increase reflects the realignment of engineering resources to new product development programs ($477,000) and the consolidation of Flex Products' research and development costs ($524,000). Selling and administrative expenses in the first quarter of fiscal 1996 were 20.7% of revenue compared to 25.7% for the first quarter of 1995, while substantially at the same dollar amount for the comparative quarters. The lower selling and administrative expense ratio for the current quarter reflects primarily the consolidation of Flex Products whose selling expenses per revenue dollar are substantially less than those for the other product areas of the Company. INCOME FROM OPERATIONS. As a result of the foregoing changes in revenue, gross profit and operating expenses, the Company's income from operations was $2.6 million for the first quarter of fiscal 1996 compared to $3.8 million for the first quarter of fiscal 1995, a decrease of $1.2 million or 31%. INTEREST INCOME AND EXPENSE. Interest income for the first quarter of fiscal 1996 was significantly down, by $152,000 or 67%, compared to the first quarter of fiscal 1995 reflecting the lower average cash balances available for investment in the current quarter compared to the year ago quarter. Interest expense, net of capitalized interest, was substantially the same for the first quarter of 1996 and 1995; however, capitalized interest relating to ongoing building and equipment projects was $76,000 higher for the current quarter versus the prior year quarter. INCOME TAXES AND MINORITY INTEREST. The effective income tax rate was 42% for the first quarter of fiscal 1996 and 1995. Minority interest was $303,000 for the first quarter of fiscal 1996, representing the 40% share of Flex Products' net income for the period accruing to the minority shareholder. NET INCOME. The Company had net income applicable to common stock of $500,000, or $.05 per share, for the first quarter of fiscal 1996, compared to $1.8 million, or $.20 per share, for the first quarter of fiscal 1995. FINANCIAL CONDITION During the first quarter of fiscal 1996, the Company used $2.1 million, net, for its operating activities. Net income, depreciation and amortization, generated $3.9 million in cash flow, while increases in working capital and other operating activities required $6.0 million. The Company's investing activities provided $479,000 of cash for the first quarter of 1996. Approximately $5.4 million was invested in plant and equipment while $5.9 million was generated by an operating lease arrangement for a newly acquired continuous coating machine and related equipment. During the first quarter of fiscal 1996, the Company entered into a mortgage loan agreement in the amount of $2.6 million, collateralized by a newly constructed 72,000 square foot manufacturing facility located on the Company's Santa Rosa, California campus. Separately, the Company repaid approximately $2.5 million of long-term debt. As a result of these operating, investment and financing activities, the Company's cash and short-term investment position decreased by $2.0 million during the first quarter of fiscal 1996. At January 28,1996, the Company had financial obligations of approximately $2.0 million for the completion of a new manufacturing and office building to be leased on its completion to Flex Products. Separately, Flex Products has remaining financial obligations of approximately $8.6 million on two large-scale coating machines and $3.5 million for site, facilities and leasehold improvements at the end of the first quarter of fiscal 1996. The Company anticipates that it will obtain mortgage debt financing on the building being constructed for Flex Products and that Flex Products will enter into equipment financing arrangements on the coating machines it is acquiring. Management believes that the cash on hand at January 28, 1996, cash anticipated to be generated from future operations, the available funds from revolving credit arrangements, the anticipated building financing and Flex Products' equipment financing will be sufficient for the Company, including the Flex Products subsidiary, to meet near-term working capital needs, capital expenditures, debt service requirements and payment of dividends as declared. INDEPENDENT ACCOUNTANTS' REVIEW The January 28,1996 consolidated financial statements included in this filing on Form 10-Q have been reviewed by Deloitte & Touche LLP (which makes reference to the report of other accountants), 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, 1996, and the related condensed consolidated statements of income and cash flows for the three-month periods ended January 31, 1996 and 1995 and the related condensed consolidated statement of stockholders' equity for the three- month period ended January 31, 1996. These financial statements are the responsibility of the Company's management. We were furnished with the report of other accountants on their review of the interim financial information of Flex Products, Inc. (a consolidated subsidiary), whose total assets constituted, 20% of consolidated total assets at January 31, 1996 and whose total revenues constituted 17% of consolidated total revenues for the three-month period ended January 31, 1996. We conducted our review in accordance with standards established by the American Institute 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 and the report of other accountants, 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, 1995, and the related consolidated statements of income, stockholders' equity, and cash flows for the year then ended (not presented herein); and in our report dated December 18, 1995, we expressed an unqualified opinion on those consolidated financial statements based on our audit. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of October 31, 1995 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived. Deloitte & Touche LLP San Francisco, California February 14, 1996 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 28, 1996 and January 29, 1995. (15)* Letter of Deloitte & Touche LLP 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 28, 1996. 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) /s/ JOHN M. MARKOVICH Date: March 14, 1996 John M. Markovich Vice President Finance 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 28, JANUARY 29, 1996 1995 PRIMARY SHARES: Average common shares outstanding 9,514 8,978 Common equivalent shares 605 47 10,119 9,025 Net income $ 740 $1,824 Dividend on preferred stock (240) Net earnings applicable to common stock $ 500 $1,824 Net income per common and common equivalent share, primary $ .05 $ .20 FULLY DILUTED SHARES: Average common shares outstanding 9,514 8,978 Common equivalent shares 605 117 Potential dilution of convertible preferred stock 1,143 11,262 9,095 Net earnings applicable to common stock $ 500 $1,824 Add back dividend on preferred stock 240 Net income for calculating fully diluted earnings per share $ 740 $1,824 Net income per common and common equivalent share, fully diluted $ .07 $ .20 Note: Fully diluted earnings per common and common equivalent share do not result in dilution of three percent or more or are anti-dilutive and are, therefore, not presented separately in the consolidated statements of income. 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, 1996 and 1995 as indicated in our report (which report makes reference to the report of other accountants), dated February 14, 1996. 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, 1996, is incorporated by reference in Registration Statements No. 33-41050, No. 33-26271, No. 33-12276, No. 33-48808, No. 33-65132, and No. 33-60891 on Forms S-8 and Registration Statement No. 33-61177 and No. 33-65319 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. Deloitte & Touche LLP San Francisco, California March 14, 1996 -----END PRIVACY-ENHANCED MESSAGE-----