-----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, SJpc7aB3jFDZzkQFd4YIfbu2NKokGGhO+4AW3RmLJaJbTscPkLNG1vw6odjN5XZ3 l4a+bWB20h3PpHlxeHQC+A== 0000074697-98-000004.txt : 19980318 0000074697-98-000004.hdr.sgml : 19980318 ACCESSION NUMBER: 0000074697-98-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19980131 FILED AS OF DATE: 19980317 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: SEC FILE NUMBER: 000-02537 FILM NUMBER: 98567120 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 1998 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, 1998 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to [OCLI LOGO] 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 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, 1998: 10,684,775 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 CONDENSED CONSOLIDATED BALANCE SHEETS JANUARY 31, OCTOBER 31, ASSETS 1998 1997 (Unaudited) (Dollars in thousands, except per share amounts) CURRENT Cash and cash equivalents............... $ 3,419 $15,217 ASSETS Accounts receivable, net of allowance for doubtful accounts of $1,835 and $1,884. 37,856 34,923 Inventories............................. 24,634 22,829 Income taxes receivable................. 460 504 Deferred income tax assets.............. 6,644 6,853 Other current assets.................... 2,565 1,707 ------- ------- Total Current Assets............ 75,578 82,033 OTHER ASSETS Other assets and investments............ 8,007 8,243 PROPERTY, Land and improvements................... 9,212 9,225 PLANT AND Buildings and improvements.............. 41,615 41,944 EQUIPMENT Machinery and equipment ................ 121,900 121,717 Construction-in-progress................ 12,868 9,525 ------- ------- 185,595 182,411 Less accumulated depreciation........... (91,588) (89,194) ------- ------- Property, plant and equipment-net ... 94,007 93,217 -------- -------- Total Assets.................... $177,592 $183,493 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT Accounts payable....................... $ 9,688 $ 14,301 LIABILITIES Accrued expenses....................... 7,645 6,854 Accrued compensation expenses.......... 5,666 8,752 Income taxes payable................... 464 339 Current maturities on long-term debt... 7,801 7,888 Notes payable.......................... 544 381 Deferred revenue....................... 1,966 900 --------- -------- Total Current Liabilities ..... 33,774 39,415 NON- Accrued postretirement health benefits CURRENT and pension liabilities............... 2,080 2,040 LIABILITIES Deferred income tax liabilities........ 1,323 785 Long-term debt ........................ 40,992 40,975 Minority interest...................... 11,628 13,315 STOCK- Preferred stock-Series C; HOLDERS' 8% cumulative, convertible, redeemable; EQUITY issued and outstanding 6,250 and 12,000 shares; aggregate liquidation value at January 31, 1998 $6,250............... 5,559 5,559 Common stock, $.01 par value; authorized 30,000,000 shares; issued and outstanding 10,671,000 and 10,599,000 shares.................... 107 106 Paid-in capital........................ 56,661 55,723 Retained earnings...................... 27,052 26,217 Cumulative foreign currency translation adjustment .............. (1,584) (642) -------- --------- Common Stockholders' Equity......... 87,795 86,963 -------- --------- Total Liabilities and Stockholders' Equity ........ $177,592 $ 183,493 ======== ========= The accompanying notes are an integral part of these financial statements. OPTICAL COATING LABORATORY, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) For the three months ended January 31, 1998 and 1997 (Amounts in thousands, except per share amounts) 1998 1997 REVENUES Revenues............................... $ 53,373 $ 45,720 Cost of sales.......................... 36,235 30,199 -------- -------- Gross Profit........................ 17,138 15,521 COSTS AND Operating Expenses: EXPENSES Research and development ............. 3,821 2,562 Selling and administrative............ 9,488 10,266 Amortization of intangibles........... 200 243 -------- -------- Total Operating Expenses............. 13,509 13,071 -------- -------- Income from Operations.............. 3,629 2,450 Nonoperating Income (Expense): Interest income ...................... 84 175 Interest expense...................... (808) (1,052) -------- -------- EARNINGS Income Before Provision for Income Taxes and Minority Interest............. 2,905 1,573 Provision for income taxes............. 1,162 630 Minority interest...................... 147 36 -------- -------- Net Income.......................... 1,596 907 Dividend on convertible redeemable preferred stock....................... 125 240 -------- -------- Net Income Applicable to Common Stock $1,471 $ 667 ======== ======== Net Income Per Share, Basic........... $ .14 $ .07 ========= ======== Net Income Per Share, Diluted......... $ .13 $ .07 ======== ======== Weighted average number of common shares used to compute basic earnings per share... 10,625 9,777 ======== ======== Weighted average number of common shares used to compute diluted earnings per share. 11,396 10,165 ========= ======== The accompanying notes are an integral part of these financial statements. OPTICAL COATING LABORATORY, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) For the three months ended January 31, 1998 and 1997 (Amounts in thousands) 1998 1997 OPERATIONS Cash Flows From Operations: Cash received from customers.......... $ 42,062 $ 41,641 Interest received..................... 51 164 Cash paid to suppliers and employees.. (46,747) (41,811) Cash paid to OCLI 401(k)/ESOP Plan.... (129) (31) Interest paid......................... (808) (1,426) Income taxes paid, net of refunds..... (28) (51) -------- -------- Net Cash Used For Operations...... (5,599) (1,514) -------- -------- INVESTMENTS Cash Flows From Investments: Purchase of plant and equipment....... (4,261) (3,078) -------- -------- Net Cash Used For Investments..... (4,261) (3,078) FINANCING Cash Flows From Financing: Proceeds from long-term debt.......... 6,774 Repayment of long-term debt........... (6,564) (481) Proceeds from notes payable........... 183 8 Repayment of notes payable............ (418) Proceeds from exercise of stock options....................... 335 96 Proceeds from note to minority stockholder......................... 800 484 Purchase of note from minority stockholder......................... (2,600) Payment of dividend on preferred stock..................... (125) (240) Payment of dividend on common stock... (636) (586) Net Cash Used For Financing...... (1,833) (1,137) -------- -------- Effect of exchange rate changes on cash................... (105) (242) -------- -------- Decrease in cash and short-term investments....................... (11,798) (5,971) Cash and cash equivalents at beginning of period......................... 15,217 16,027 -------- -------- Cash and cash equivalents at end of period..................... $ 3,419 $ 10,056 ======== ======== OPTICAL COATING LABORATORY, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) (Unaudited) For the three months ended January 31, 1998 and 1997 (Amounts in thousands) 1998 1997 ADJUST- Reconciliation of Net Income MENTS To Cash Flows From Operations: Net income............................. $1,596 $ 907 Adjustments to reconcile net income to net cash used for operations: Depreciation and amortization ...... 2,985 3,246 Minority interest in earnings of subsidiaries .......... 147 36 Loss on disposal of equipment ...... 210 42 Accrued postretirement health benefits ................... 40 16 Deferred income tax liabilities..... 34 27 Value of shares issued to OCLI 401(k)/ESOP Plan ............. 555 159 Other non-cash adjustments to net income ..................... (84) (50) Change in: Accounts receivable............... (3,364) (4,011) Inventories....................... (2,004) (599) Income tax receivable ............ 93 852 Deferred income tax assets........ 567 (325) Other current assets and other assets and investments........... (1,074) (546) Accounts payable, accrued expenses and accrued compensation expenses............ (6,508) (1,452) Deferred revenue.................. 1,066 169 Income taxes payable.............. 142 15 -------- ------- Total adjustments................ (7,195) (2,421) -------- ------- Net Cash Used For Operations...... $(5,599) $(1,514) ======== ======= The accompanying notes are an integral part of these financial statements. OPTICAL COATING LABORATORY, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited) For the three months ended January 31, 1998 (Amounts in thousands)
FOREIGN PREFERRED STOCK COMMON STOCK PAID-IN RETAINED CURRENCY SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS TRANSLATION BALANCE AT NOVEMBER 1, 1997 6 $5,559 10,599 $106 $55,723 $26,217 $ (642) Shares issued to Employee Stock Ownership Plan 39 1 555 Exercise of stock options, including tax benefit 33 383 Foreign currency translation adjustment (942) Net income 1,596 Dividend on preferred stock (125) Dividend on common stock (636) ---- ------ ------ ---- ------- ------- ------- BALANCE AT JANUARY 31, 1998 6 $5,559 10,671 $107 $56,661 $27,052 $(1,584) ==== ====== ====== ==== ======= ======= =======
The accompanying notes are an integral part of these statements. OPTICAL COATING LABORATORY, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Three Months Ended January 31, 1998 and 1997 (Unaudited) 1. GENERAL OCLI designs, develops and manufactures multi-layer thin film coatings which control and enhance light by altering the transmission, reflection and absorption of its various wavelengths to achieve a desired effect such as anti-reflection, anti-glare, electromagnetic shielding, electrical conductivity and abrasion resistance. OCLI markets and distributes components to original equipment manufacturers ("OEMs") of optical and electro-optical systems and sells its GlareGuardO brand ergonomic computer display products through resellers and office retailers. OCLI's products are found in many applications including computer monitors, flat panel displays, telecommunication systems, photocopiers, fax machines, medical/analytical equipment and instruments, projection imaging systems, satellite power systems and aerospace and defense systems. Through its 60% owned subsidiary, Flex Products, Inc. ("Flex Products"), the Company designs and manufactures thin film coatings on flexible substrates using high vacuum roll-to-roll processes. Flex Products supplies critical pigments for use in anti-counterfeiting applications, energy conserving window film for residential, commercial, and automotive applications, photoreceptor components for copiers and ChromaFlair light interference pigments for commercial paints. The Condensed Consolidated Balance Sheet as of January 31, 1998, the Condensed Consolidated Statements of Income for the three month periods ended January 31, 1998 and 1997, the Condensed Consolidated Statement of Stockholders' Equity for the three month period ended January 31, 1998 and the Condensed Consolidated Statements of Cash Flows for the three month periods ended January 31, 1998 and 1997 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, 1998 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 condensed consolidated financial statements be read in conjunction with the financial statements and notes included in the Company's Annual Report on Form 10-K for the year ended October 31, 1997. The results of operations for the period ended January 31, 1998 are not necessarily indicative of the operating results anticipated for the full year. In the first quarter of 1998, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings Per Share," which required the Company to replace its presentation of primary earnings per share with a presentation of basic earnings per share and requires dual presentation of basic and diluted earnings per share on the face of the income statement. Basic earnings per share is computed by dividing net income by the weighted average number of common shares outstanding. Diluted earnings per share under the new statement includes the potential dilution of convertible securities, stock options and warrants. The earnings per share presentation for 1997 was restated to conform to the new statement, however, diluted earnings per share for the first quarter of 1997 is the same as net income per common and common equivalent share as previously reported. 2. INVENTORIES Inventories consisted of the following: JANUARY 31, OCTOBER 31, (Amounts in thousands) 1998 1997 (Unaudited) Raw materials and supplies $ 9,122 $ 7,541 Work-in-process 12,137 12,308 Finished goods 3,375 2,980 ------- ------- Total inventories $24,634 $22,829 ======= ======= 3. ACCRUED EXPENSES Accrued expenses consisted of the following: JANUARY 31, OCTOBER 31, (Amounts in thousands) 1998 1997 (Unaudited) Workers' compensation reserve $ 763 $ 555 Ground water remediation reserve 759 759 Other accrued liabilities 6,123 5,540 ------ ------ $7,645 $6,854 ====== ====== PART I. FINANCIAL INFORMATION ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF CHANGES IN RESULTS OF OPERATIONS AND FINANCIAL CONDITION THE INFORMATION CONTAINED IN MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION INCLUDES FORWARD LOOKING STATEMENTS WHICH ARE TYPICALLY IDENTIFIED BY THE WORDS "ANTICIPATES," "BELIEVES," "EXPECTS," "INTENDS," "FORECASTS," "PLANS," "FUTURE," "STRATEGY," OR WORDS OF SIMILAR IMPORT. VARIOUS IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE EXPRESSED IN THE FORWARD LOOKING STATEMENTS ARE IDENTIFIED BELOW. ACTUAL RESULTS MAY VARY SIGNIFICANTLY BASED ON A NUMBER OF FACTORS INCLUDING, BUT NOT LIMITED TO, PRODUCT DEVELOPMENT, COMMERCIALIZATION AND TECHNOLOGICAL DIFFICULTIES; MANUFACTURING COSTS AND YIELD ISSUES ASSOCIATED WITH INITIATING PRODUCTION AT NEW FACILITIES; THE IMPACT OF COMPETITIVE PRODUCTS AND PRICING; CHANGING CUSTOMER REQUIREMENTS; AND THE CHANGE IN ECONOMIC CONDITIONS OF THE VARIOUS MARKETS THE COMPANY SERVES. RESULTS OF OPERATIONS REVENUE. Revenue for the first quarter of fiscal 1998 was $53.4 million, an increase of $7.7 million, or 17%, over revenues of $45.7 million in the first quarter of fiscal 1997. The 1998 increase was primarily due to revenue growth in the telecommunications markets ($8.4 million) and increased sales of security products ($1.0 million) by the Company's 60% owned subsidiary, Flex Products Inc. (Flex Products). The increase in telecommunications sales is due to the Company's participation with its partner, JDS FITEL Inc. (JDS) in the growing market for wavelength division multiplexers (WDM's) and to the expanding market for space satellites. Sales of security products by Flex Products were affected by increased demand but were also positively affected by the rescheduling of orders from Flex Products' major customer and minority stockholder, SICPA Holding S.A. (SICPA), to align the quarterly order periods from calendar quarters to the Company's fiscal quarters. This rescheduling could result in offsetting adjustments in order quantities over the remainder of the fiscal year. Revenues in the Company's office automation, display and other markets decreased by a total of $1.7 million primarily due to slower demand and currency issues due to economic conditions in Asia. GROSS PROFIT. Gross profit for the first quarter of fiscal 1998 was $17.1 million, or 32.1% of revenue, compared to $15.5 million, or 33.9% of revenue, for the first quarter of fiscal 1997. The 1998 gross margin decrease is primarily due to sales of WDM products becoming a more prominent part of the total sales mix. Margins on WDM sales are lower than Company average gross margins although the contribution to income from operations as a percent of sales is consistent with the Company's average. RESEARCH AND DEVELOPMENT. Research and development expenditures in the first quarter of 1998 were $3.8 million, an increase of $1.2 million, or 49%, over expenditures of $2.6 million in 1997. The 1998 increase is primarily due to increased spending by Flex Products for the qualification of new products and processes incorporating new production equipment, the development and improvement of telecommunications products and research and development investments in other strategic market areas. SELLING AND ADMINISTRATIVE. Selling and administrative expenses in the first quarter of fiscal 1998 were $9.5 million, a decrease of $800,000, or 8%, from selling and administrative expenses of $10.3 million for the first quarter of 1997. The 1998 decrease was primarily due to simplification of some of the Company's sales processes and to lower legal expenses primarily due to the settlement of lawsuits. AMORTIZATION OF INTANGIBLES. The Company recorded amortization of intangibles of $200,000 in 1998 and $243,000 in 1997, primarily resulting from amortization of goodwill. The 1998 decrease was primarily due to exchange rate changes. INCOME FROM OPERATIONS. As a result of the foregoing changes in revenue, gross profit and operating expenses, the Company's income from operations was $3.6 million for the first quarter of fiscal 1998 compared to $2.5 million for the first quarter of fiscal 1997. INTEREST INCOME AND EXPENSE. Interest income for the first quarter of fiscal 1998 was $84,000 compared to interest income of $175,000 for the first quarter of fiscal 1997. Interest expense, net of capitalized interest, for the first quarter of 1998 was $808,000 compared to $1.1 million for the first quarter of fiscal 1997. Capitalized interest for the first quarter of 1998 was $84,000 compared to $50,000 for the first quarter of fiscal 1997. The decrease in interest expense is due to lower interest rates on borrowings that were refinanced in the second quarter of fiscal 1997. PROVISION FOR INCOME TAXES AND MINORITY INTEREST. The effective income tax rate was 40% for the first quarter of 1998 and the first quarter of 1997. Minority interest was $147,000 in 1998 compared to $36,000 for the first quarter of 1997. 1998 minority interest represents the share of net income of Flex Products accruing to its 40% stockholder and the portion of operating results of OCLI Asia attributable to its Japanese partner. 1997 minority interest represents the share of net income of Flex Products accruing to its 40% stockholder. NET INCOME APPLICABLE TO COMMON STOCK. The Company had net income applicable to common stock of $1.5 million, or $.13 per share on a diluted basis, for the first quarter of fiscal 1998 compared to $667,000, or $.07 per share on a diluted basis, for the first quarter of fiscal 1997. As described in Note 1 to the Condensed Consolidated Financial Statements, in fiscal 1998, the Company adopted Statement of Financial Accounting Standards No. 128, "Earnings per Share", which requires dual presentation of basic and diluted earnings per share. Prior period amounts have been restated to reflect this change. LITIGATION In July of 1996, SICPA filed a lawsuit in Delaware Chancery Court in order to block an attempted initial public offering by Flex Products arguing that such an offering without SICPA's consent was prohibited by Flex Products' articles of incorporation, as well as by certain contractual provisions between the Company and SICPA. In fiscal 1998, the Company announced that it had completed final negotiations for the settlement of the litigation with SICPA. Under the terms of the settlement, the Company and SICPA have agreed to modify their co-ownership agreement to enable OCLI to more effectively manage the day-to-day operations of Flex Products, to allow for public financing of Flex Products' operations and to modify the License and Supply Agreement between Flex Products and SICPA to provide for more attractive scheduled pricing discounts on higher volume purchases and to change the scheduled order patterns to be consistent with the Company's fiscal quarters. In addition, the Company purchased $2.6 million of Flex Products' working capital loan from SICPA. IMPACT OF FOREIGN OPERATIONS, EXPORT SALES AND FOREIGN CURRENCY The Company has significant investments in Germany, Scotland and Japan. Changes in the value of those countries' currencies relative to the U.S. dollar are recorded as direct charges or credits to equity. The Company also has manufacturing operations in Germany, Scotland and Japan and sales presence in other European and Asian countries. A significant weakening of the currencies in Europe or Asia in relation to the U.S. dollar could reduce the reported results of those operations. In addition, a significant amount of the Company's sales are export sales which could be subject to competitive price pressures if the U.S. dollar was to strengthen compared to the currency of foreign competitors. In the first quarter of 1998, 32% of the Company's consolidated sales constituted sales to customers in Europe and 13% of the Company's consolidated sales constituted sales to customers in Asia. In the first quarter of 1998, the Company experienced a 2% decline in sales mix from sales to customers in Asia (from 15% of consolidated sales in 1997 to 13% of consolidated sales in 1998) and a slight decline in sales mix from sales to customers in Europe (from 33% of consolidated sales in 1997 to 32% in 1998). The Company attributes the decline in the Asian sales mix to economic factors in Asia and the decline in European sales mix to growth in other geographic markets. FINANCIAL CONDITION At January 31, 1998, the Company's cash and cash equivalents position decreased by $11.8 million from October 31, 1997. $5.6 million was used for operations, primarily due to increased accounts receivable and inventory, $4.3 million was invested in plant and equipment, $761,000 was used to pay dividends and $2.6 million was used to purchase a portion of Flex Products' working capital loan from SICPA. These decreases were offset by stockholder investments of $335,000, working capital loans from SICPA to Flex Products of $800,000 and net borrowings and noncash items totaling $393,000. At January 31, 1998, the Company's working capital, excluding cash and short-term investments, increased $11.0 million, primarily due to increased accounts receivable and inventories and decreased accounts payable and accrued compensation expenses. The increased accounts receivable and inventory balances are due to increased sales and bookings. The decrease in accounts payable is due to higher than average accounts payable at the end of fiscal year 1997. The decrease in accrued compensation expenses is due to payment in the first quarter of 1998 of annual bonus and commission payments accrued in fiscal year 1997. Management believes that the cash on hand at January 31, 1998, 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, capital expenditures, debt service requirements and payment of dividends as declared for the foreseeable future. SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1996 Except for historical information contained in this report, matters discussed in this report are forward-looking statements that involve risks and uncertainties. Actual results may vary significantly based on a number of factors including, but not limited to, product development, commercialization and technological difficulties, manufacturing costs and yield issues associated with initiating production at new facilities, the impact of competitive products and pricing, changing customer requirements and the change in economic conditions of the various markets the Company serves. INDEPENDENT ACCOUNTANTS' REVIEW The January 31, 1998 condensed 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, 1998, and the related condensed consolidated statements of income and cash flows for the three-month periods ended January 31, 1998 and 1997 and the related condensed consolidated statement of stockholders' equity for the three- month period ended January 31, 1998. 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), for the three month period ended January 31, 1997 whose total revenues constituted 17% of consolidated total revenues for that period. 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, 1997, 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 19, 1997, we expressed an unqualified opinion on those consolidated financial statements based on our audit. In our opinion, based on our audit, and the report of other auditors, the information set forth in the accompanying condensed consolidated balance sheet as of October 31, 1997 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived. Deloitte & Touche LLP San Jose, California February 18, 1998 INDEPENDENT ACCOUNTANTS' REPORT To the Board of Directors and Stockholders of Flex Products, Inc. Santa Rosa, California We have reviewed the balance sheet of Flex Products, Inc. as of February 2, 1997 and the related statements of operations and cash flows for the three- month periods ended February 2, 1997 and January 28, 1996. These financial statements are the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted 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. These financial statements have been prepared on a historical basis of accounting and do not reflect any purchase accounting adjustments recorded by Optical Coting Laboratory, Inc. as a result of their acquisition of a majority interest in Flex Products, Inc. as of May 8, 1995. Based on our review, we are not aware of any material modifications that should be made to the financial statements referred to above for them to be in conformity with generally accepted accounting principles. The balance sheet as of November 2, 1997 was audited by us, and we expressed an unqualified opinion on it in our report dated November 26, 1997, but we have not performed any auditing procedures since that date. KPMG Peat Marwick LLP San Francisco, California February 17, 1997 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS 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 (3) None (4) None (10) None (11)* Computation of earnings per share for the three months ended January 31, 1998 and 1997. (15)* Letter of Deloitte & Touche LLP regarding unaudited interim financial information. (18) None (19) None (22) None (23) None (24) None (27)* Financial Data Schedule for the three months ended January 31, 1998. * Items not previously filed are designated by an asterisk. (b) Reports on Form 8-K filed for the three months ended January 31, 1998. 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 17, 1998 /s/ CRAIG B. COLLINS - -------------- ---------------------------------- Date Craig B. Collins Vice President, Finance and Chief Financial Officer (Principal Financial Officer) EX-11 2 OPTICAL COATING LABORATORY, INC. AND SUBSIDIARIES EXHIBIT 11. COMPUTATION OF EARNINGS PER SHARE For the three months ended January 31, 1998 and 1997 (Amounts in thousands, except per share data) 1998 1997 BASIC SHARES: Average common shares outstanding..................... 10,625 9,777 ======= ======== Net income............................................ $ 1,596 $ 907 Less dividend on preferred stock...................... (125) (240) ------- -------- Net income applicable to common stock................. $ 1,471 $ 667 ======= ======== Net income per common share, basic.................... $ .14 $ .07 ======= ======== DILUTED SHARES: Average common shares outstanding..................... 10,625 9,777 Dilutive effect of employee stock options............. 771 388 Potential dilution of preferred stock................. * * ------- ------ 11,396 10,165 ======= ====== Net income applicable to common stock................. $ 1,471 $ 667 Add back dividend on preferred stock.................. * * ------- ------- Net income for calculating diluted earnings per share. $ 1,471 $ 667 ======= ======= Net income per share, diluted......................... $ .13 $ .07 ======= ======= *Anti-dilutive EX-15 3 EXHIBIT 15. LETTER REGARDING UNAUDITED INTERIM FINANCIAL INFORMATION 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, 1998 and 1997 as indicated in our report dated February 18, 1998. 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, 1998, is incorporated by reference in Registration Statements No. 33-41050, No. 33-26271, No. 33-12276, No. 33-48808, No. 33-65132, No. 33-60891 and No. 333-13013 on Forms S-8, 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 Jose, California March 17, 1998 EX-27 4
5 0000074697 OPTICAL COATING LABORATORY, INC. 1,000 3-MOS OCT-31-1997 JAN-31-1998 3,419 0 37,856 1,835 24,634 75,578 185,595 91,588 177,592 33,774 0 87,795 0 5,559 25,468 177,592 53,373 53,373 36,235 36,235 13,509 0 808 2,905 1,162 1,596 0 0 0 1,596 .14 .13
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