-----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, HZNxjLjmej+fFndiSnJLw6Rn+8tYgtNxkwamlVT7o+OphOrCKeqBODritE+A72Je ExSepkKMKGq308r2hH6GBw== 0000074697-99-000017.txt : 19990701 0000074697-99-000017.hdr.sgml : 19990701 ACCESSION NUMBER: 0000074697-99-000017 CONFORMED SUBMISSION TYPE: 11-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990630 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: 11-K SEC ACT: SEC FILE NUMBER: 000-02537 FILM NUMBER: 99655957 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 11-K 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 11-K ANNUAL REPORT PURSUANT TO SECTION 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended DECEMBER 31, 1998 [ ] 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 OCLI 401(K)/ESOP PLAN OPTICAL COATING LABORATORY, INC. (Exact name of registrant as specified in its charter) 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 -------------- SIGNATURES OCLI 401(k)/ESOP Plan. Pursuant to the requirements of Securities Exchange Act of 1934, the trustees have duly caused this annual report to be signed on its behalf by the undersigned, thereunto duly authorized. DATE: JUNE 30, 1999 OCLI 401(K)/ESOP PLAN BY: /S/ T. ROWE PRICE ------------------ Trustee OCLI 401(K)/ESOP PLAN Financial Statements as of and for the Years Ended December 31, 1998 and 1997, Supplemental Schedules as of and for the Year Ended December 31, 1998 and Independent Auditors' Report OCLI 401(K)/ESOP PLAN TABLE OF CONTENTS PAGE INDEPENDENT AUDITORS' REPORT 1 FINANCIAL STATEMENTS: Statements of Net Assets Available for Plan Benefits with Fund Information as of December 31, 1998 and 1997 2-3 Statements of Changes in Net Assets Available for Plan Benefits with Fund Information for the Years Ended December 31, 1998 and 1997 4-5 Notes to Financial Statements for the Years Ended December 31, 1998 and 1997 6-10 SUPPLEMENTAL SCHEDULES: Item 27a - Schedule of Assets Held for Investment Purposes as of December 31, 1998 11 Item 27d - Schedule of Reportable Transactions for the Year Ended December 31, 1998 12 INDEPENDENT AUDITORS' REPORT Administrative Committee OCLI 401(k)/ESOP Plan Santa Rosa, California We have audited the accompanying statements of net assets available for plan benefits of the OCLI 401(k)/ESOP Plan (the "Plan") as of December 31, 1998 and 1997, and the related statements of changes in net assets available for plan benefits for the years then ended. These financial statements are the responsibility of the Plan'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 financial statements present fairly, in all material respects, the net assets available for plan benefits of the Plan as of December 31, 1998 and 1997, and the changes in net assets available for plan benefits for the years then ended in conformity with generally accepted accounting principles. Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedules listed in the index are presented for the purpose of additional analysis and are not a required part of the basic financial statements, but are supplementary information required by the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. The supplemental information by fund in the statements of net assets available for benefits is presented for the purpose of additional analysis rather than to present the net assets available for benefits and changes in net assets available for benefits of the individual funds. These supplemental schedules and supplemental information are the responsibility of the Plan's management. Such supplemental schedules and supplemental information by fund have been subjected to the auditing procedures applied in our audit of the basic 1998 financial statements and, in our opinion, are fairly stated in all material respects when considered in relation to the basic financial statements taken as a whole. June 4, 1999 OCLI 401(k)/ESOP PLAN STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS WITH FUND INFORMATION AS OF DECEMBER 31, 1998 Optical T. Rowe T. Rowe Coating Laboratory, Travelers Price Price T. Rowe Inc. Fixed Stable Spectrum Price Value Common Income Common Income Balanced Trust Stock Fund Fund Fund Fund ASSETS: Investments at fair value: Common stock $40,006,611 Mutual funds $877,532 $5,095,889 Loans to participants Investments at contract value - - Guaranteed investment contracts $ 6,119,250 $9,388,748 Total investments 40,006,611 6,119,250 9,388,748 877,532 5,095,889 NET ASSETS AVAILABLE FOR PLAN BENEFITS $40,006,611 $ 6,119,250 $9,388,748 $ 877,532 $5,095,889 T. Rowe T. Rowe T. Rowe T. Rowe Price Price Price Price Equity Mid Cap Internatio New nal Income Growth Stock Horizons Loans to Fund Fund Fund Fund Participants ASSETS: Investments at fair value: Common stock Mutual funds $ 5,547,156 $ 2,970,230 $ 848,111 $8,576,361 Loans to participants $1,785,000 Investments at contract value - - Guaranteed investment contracts Total investments 5,547,156 2,970,230 848,111 8,576,361 1,785,000 NET ASSETS AVAILABLE FOR PLAN BENEFITS $ 5,547,156 $ 2,970,230 $ 848,111 $8,576,361 $1,785,000 Other Total ASSETS: Investments at fair value: Common stock $40,006,611 Mutual funds $ 74,082 23,989,361 Loans to participants 1,785,000 Investments at contract value - Guaranteed investment contracts 15,507,998 Total investments 74,082 81,288,970 NET ASSETS AVAILABLE FOR PLAN BENEFITS $ 74,082 $81,288,970 See notes to financial statements. OCLI 401(k)/ESOP PLAN STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS WITH FUND INFORMATION AS OF DECEMBER 31, 1997 Optical Coating T. Rowe T. Rowe Laboratory, Travelers Price Price Inc. Fixed Stable Spectrum Value Common Income Common Income Trust Stock Fund Fund Fund ASSETS: Investments at fair value: Common stock $22,016,601 Mutual funds $344,468 Loans to participants Investments at contract value - Guaranteed investment contracts $5,775,888 $ 8,928,579 Total investments 22,016,601 5,775,888 8,928,579 344,468 NET ASSETS AVAILABLE FOR PLAN BENEFITS $22,016,601 $5,775,888 $ 8,928,579 $344,468 T. Rowe T. Rowe T. Rowe T. Rowe Price Price Price Price Equity Mid Cap Internati onal Balanced Income Growth Stock Fund Fund Fund Fund ASSETS: Investments at fair value: Common stock Mutual funds $ 4,350,332 $4,905,394 $ 802,530 $450,621 Loans to participants Investments at contract value - Guaranteed investment contracts Total investments 4,350,332 4,905,394 802,530 450,621 NET ASSETS AVAILABLE FOR PLAN BENEFITS $ 4,350,332 $4,905,394 $ 802,530 $450,621 T. Rowe Price New Horizons Loans to Fund Participants Total ASSETS: Investments at fair value: Common stock $22,016,601 Mutual funds $ 9,608,697 20,462,042 Loans to participants $1,741,312 1,741,312 Investments at contract value - Guaranteed investment contracts 14,704,467 Total investments 9,608,697 1,741,312 58,924,422 NET ASSETS AVAILABLE FOR PLAN BENEFITS $ 9,608,697 $1,741,312 $58,924,422 See notes to financial statements. OCLI 401(k)/ESOP PLAN STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS WITH FUND INFORMATION AS OF DECEMBER 31, 1998 Optical Coating T. Rowe T. Rowe Laboratory, Travelers Price Price Inc. Fixed Stable Spectrum Value Common Income Common Income Stock Fund Trust Fund Fund ADDITIONS TO NET ASSETS ATTRIBUTED TO: Contributions: By the Company $ 976,325 $ 105,706 $ 12,018 By participating employees 323,649 708,548 98,905 Interest $ 343,362 529,304 Dividends 20,365 56,374 Net appreciation (depreciation) of fair value of investments 18,661,943 (15,823) Total additions 19,982,282 343,362 1,343,558 151,474 DEDUCTIONS FROM NET ASSETS ATTRIBUTED TO: Distributions and withdrawals paid to participants 1,513,430 1,458,923 58,533 Loan discharges Administrative expenses Less reimbursed by Company Total deductions 1,513,430 - 1,458,923 58,533 NET INCREASE (DECREASE) BEFORE INTERFUND TRANSFERS 18,468,852 343,362 (115,365) 92,941 INTERFUND TRANSFERS, Net (478,842) 575,534 440,123 NET INCREASE (DECREASE) 17,990,010 343,362 460,169 533,064 NET ASSETS AVAILABLE FOR PLAN BENEFITS: Beginning of year 22,016,601 5,775,888 8,928,579 344,468 End of year $40,006,611 $6,119,250 $9,388,748 $ 877,532 T. Rowe T. Rowe T. Rowe T. Rowe Price Price Price Price Equity Mid Cap International Balanced Income Growth Stock Fund Fund Fund Fund ADDITIONS TO NET ASSETS ATTRIBUTED TO: Contributions: By the Company $ 47,604 $ 75,077 $ 44,618 $ 15,054 By participating 604,627 employees 393,573 503,116 143,721 Interest Dividends 148,663 418,094 59,092 31,971 Net appreciation (depreciation) of fair value of investments 553,444 53,891 338,748 57,516 Total additions 1,143,284 1,151,689 945,574 248,262 DEDUCTIONS FROM NET ASSETS ATTRIBUTED TO: Distributions and withdrawals paid to participants 266,027 414,720 21,778 4,975 Loan discharges Administrative expenses Less reimbursed by Company Total deductions 266,027 414,720 21,778 4,975 NET INCREASE (DECREASE) BEFORE INTERFUND TRANSFERS 877,257 736,969 923,796 243,287 INTERFUND TRANSFERS, Net (131,700) (95,207) 1,243,904 154,203 NET INCREASE (DECREASE) 745,557 641,762 2,167,700 397,490 NET ASSETS AVAILABLE FOR PLAN BENEFITS: Beginning of year 4,350,332 4,905,394 802,530 450,621 End of year $ 5,095,889 $5,547,156 $2,970,230 $ 848,111 T. Rowe Price New Horizons Loans to Fund Participants Other Total ADDITIONS TO NET ASSETS ATTRIBUTED TO: Contributions: By the Company $ 113,883 $ 1,390,285 By participating employees 851,881 3,628,020 Interest $ 170,812 1,043,478 Dividends 451,958 1,186,517 Net appreciation (depreciation) of fair value of investments 93,260 19,742,979 Total additions 1,510,982 170,812 26,991,279 DEDUCTIONS FROM NET ASSETS ATTRIBUTED TO: Distributions and withdrawals paid to participants 674,075 4,412,461 Loan discharges 214,270 214,270 Administrative exp $ 31,189 31,189 Less reimbursed by Company (31,189) (31,189) Total deductions 674,075 214,270 - 4,626,731 NET INCREASE (DECREASE) BEFORE INTERFUND TRANSFERS 836,907 (43,458) 22,364,548 INTERFUND TRANSFERS, Net (1,869,243) 87,146 74,082 NET INCREASE (DECREASE) (1,032,336) 43,688 74,082 22,364,548 NET ASSETS AVAILABLE FOR PLAN BENEFITS: Beginning of year 9,608,697 1,741,312 58,924,422 End of year $ 8,576,361 $1,785,000 $ 74,082 $81,288,970 See notes to financial statements. OCLI 401(k)/ESOP PLAN STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS WITH FUND INFORMATION AS OF DECEMBER 31, 1997 Optical Coating T. Rowe Laboratory, Travelers Price Short-Term Inc. Fixed Stable Value Income Common Income Common Fund Stock Fund Trust Fund ADDITIONS TO NET ASSETS ATTRIBUTED TO: Contributions: By the Company $ 589,184 $ 128,367 By participating employees 246,287 828,516 Interest $ 323,683 624,164 Dividends 23,176 Net appreciation (depreciation) of fair value of investments 4,733,922 Total additions - 5,592,569 323,683 1,581,047 DEDUCTIONS FROM NET ASSETS ATTRIBUTED TO: Distributions and withdrawals paid to participants 639,383 565,378 Administrative expenses Less reimbursed by Company Total deductions - 639,383 - 565,378 NET INCREASE BEFORE INTERFUND TRANSFERS 4,953,186 323,683 1,015,669 INTERFUND TRANSFERS $(16,396,122) 162,777 105,981 NET INCREASE (DECREASE) (16,396,122) 5,115,963 323,683 1,121,650 NET ASSETS AVAILABLE FOR PLAN BENEFITS: Beginning of year 16,396,122 16,900,638 5,452,205 7,806,929 End of year $ - $22,016,601 $5,775,888 $ 8,928,579 T. Rowe T. Rowe Price T. Rowe Price Spectrum Price Equity Income Balanced Income Fund Fund Fund ADDITIONS TO NET ASSETS ATTRIBUTED TO: Contributions: By the Company $ 4,936 $ 47,625 $ 64,538 By participating employees 85,165 324,941 593,748 Interest 14,840 Dividends 164,028 453,702 Net appreciation (depreciation) of fair value of investments 8,953 534,243 474,530 Total additions 113,894 1,070,837 1,586,518 DEDUCTIONS FROM NET ASSETS ATTRIBUTED TO: Distributions and withdrawals paid to participants 11,959 160,699 159,917 Administrative expenses Less reimbursed by Company Total deductions 11,959 160,699 159,917 NET INCREASE BEFORE INTERFUND TRANSFERS 101,935 910,138 1,426,601 INTERFUND TRANSFERS 242,533 3,440,194 3,478,793 NET INCREASE (DECREASE) 344,468 4,350,332 4,905,394 NET ASSETS AVAILABLE FOR PLAN BENEFITS: Beginning of year End of year $ 344,468 $4,350,332 $ 4,905,394 T. Rowe T. Rowe T. Rowe T. Rowe Price Price Price Price Equity Mid Cap International New Income Growth Stock Horizons Fund Fund Fund Fund ADDITIONS TO NET ASSETS ATTRIBUTED TO: Contributions: By the Company $ 64,538 $ 22,632 $ 9,893 $ 143,816 By participating employees 593,748 219,690 92,884 982,813 Interest Dividends 453,702 8,336 23,848 233,335 Net appreciation (depreciation) of fair value of investments 474,530 80,920 (41,316) 636,210 Total additions 1,586,518 331,578 85,309 1,996,174 DEDUCTIONS FROM NET ASSETS ATTRIBUTED TO: Distributions and withdrawals paid to participants 159,917 31,934 22,899 362,772 Administrative expenses Less reimbursed by Company Total deductions 159,917 31,934 22,899 362,772 NET INCREASE BEFORE INTERFUND TRANSFERS 1,426,601 299,644 62,410 1,633,402 INTERFUND TRANSFERS 3,478,793 502,886 388,211 7,975,295 NET INCREASE (DECREASE) 4,905,394 802,530 450,621 9,608,697 NET ASSETS AVAILABLE FOR PLAN BENEFITS: Beginning of year End of year $ 4,905,394 $ 802,530 $ 450,621 $ 9,608,697 Loans to Participants Other Total ADDITIONS TO NET ASSETS ATTRIBUTED TO: Contributions: By the Company $ 1,010,991 By participating employee 3,374,044 Interest $ 150,080 1,112,767 Dividends 906,425 Net appreciation (depreciation) of fair value of investments 6,427,462 Total additions 150,080 - 12,831,689 DEDUCTIONS FROM NET ASSETS ATTRIBUTED TO: Distributions and withdrawals paid to participants 1,954,941 Administrative expenses $ 66,536 66,536 Less reimbursed by Company (66,536) (66,536) Total deductions - - 1,954,941 NET INCREASE BEFORE INTERFUND TRANSFERS 150,080 10,876,748 INTERFUND TRANSFERS 106,245 (6,793) NET INCREASE (DECREASE) 256,325 (6,793) 10,876,748 NET ASSETS AVAILABLE FOR PLAN BENEFITS: Beginning of year 1,484,987 6,793 48,047,674 End of year $ 1,741,312 $ - $58,924,422 See notes to financial statements. OCLI 401(K)/ESOP PLAN NOTES TO FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1998 AND 1997 1. SUMMARY DESCRIPTION OF PLAN The following description of the Optical Coating Laboratory, Inc. (the "Company") 401(k)/ESOP Plan (the "Plan") provides only general information. Participants should refer to the Plan document for a more complete description of the Plan's provisions. Effective January 1, 1997, the name of the Plan was changed from OCLI ESOP+ to OCLI 401(k)/ESOP Plan. In addition, T. Rowe Price Trust Company was appointed trustee of the Plan and T. Rowe Price Retirement Plan Services, Inc. was appointed recordkeeper for the Plan. GENERAL - The Plan is a defined contribution plan for employees of the Company. Effective January 1, 1997, employees are eligible to participate in the Plan on the participants' employment date. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 ("ERISA"). CONTRIBUTIONS - Under the Section 401(k) provision of the Plan, an eligible employee may contribute from 1% to 15% of his or her salary to the Plan up to $10,000 per year in 1998 and 1997. Contributions by highly compensated employees may be limited by anti-discrimination rules. Effective January 1, 1997, the Company amended the Plan to include a matching contribution and a revision to the annual Company profit-sharing contribution. The matching contribution is equal to 25% of each participant's deferred income contributions for the plan year, not to exceed 6% of the participant's compensation. The annual Company profit-sharing contribution is equal to 5% of the net earnings before taxes of the Company including the Company's share of the net earnings before taxes of its majority owned subsidiaries and joint ventures. The annual Company contribution (in the Company's common stock) is allocated to eligible participants based on their proportionate percentage of the Company's total matching contributions for the plan year. Generally, a participant must be an employee of the Company on December 31 to share in the annual allocation of the Company contribution. However, if an employee retires, dies or terminates due to disability or under the Company's Voluntary Severance Plans, he or she will receive a Company contribution for the plan year. PARTICIPANT ACCOUNTS - Each participating employee's share of the net assets is segregated in an individual account. VESTING - Both Company and employee contributions are 100% vested at the time of contribution. Participants may withdraw their employee contributions upon reaching age 59-1/2, under hardship conditions, or if the participant has borrowed the maximum amount allowed under the Plan (see below). Otherwise, employee and Company contributions may be withdrawn only upon retirement, disability, death or termination of service. Benefits are paid in cash and, to the extent so invested, in Company stock. LOANS TO PARTICIPANTS - The maximum amount a participant may borrow is the lesser of (i) fifty percent of the total account balance of the participant, (ii) the balance of the participant's employee contribution amount or (iii) $50,000 reduced by the excess of the highest outstanding balance of loans to the participant during the one year period prior to the date of the loan minus the outstanding balance of any loan to the participant on the date on which such loan was made. The loan must bear a reasonable rate of interest and the loan term cannot exceed five years unless the loan is for the purpose of a primary residence, in which case, the loan term cannot exceed fifteen years. A participant may have only one loan outstanding at a time and the minimum loan amount is $500. Loan principal and interest repayments are made via payroll deductions, are credited directly to the participant's account and are invested in the same investments as the employee's before tax voluntary savings deductions. If a participant terminates employment, loan principal and interest balances not paid within thirty days are deemed to be taxable distributions from the Plan (see "Income Taxes" below). INVESTMENT OPTIONS - Upon enrollment in the Plan, a participant may direct contributions in one or more of the following investment options: . Optical Coating Laboratory, Inc. common stock. . Travelers Fixed Income Fund which consists of a Travelers Insurance Group Annuity Contract. The contract matured on March 31, 1999. Contributions can no longer be invested in this fund. . T. Rowe Price Stable Value Common Trust Fund which invests primarily in guaranteed investment contracts. . T. Rowe Price Spectrum Income Fund which invests primarily in fixed income securities. . T. Rowe Price Balanced Fund which invests primarily in common stocks and fixed income securities. . T. Rowe Price Equity Income Fund which invests primarily in common stocks of established companies. . T. Rowe Price Mid Cap Growth Fund which invests in U.S. common stocks, foreign securities, convertible securities, and warrants. . T. Rowe Price International Stock Fund which invests primarily in common stocks of established non-U.S. companies. . T. Rowe Price New Horizons Fund which invests primarily in common stocks of small, rapidly growing companies. Employees may change investments or transfer funds from one investment to another on a daily basis. During 1998, at age 55 and after, employees could transfer a portion of their Company contribution account to one of the voluntary investments listed above. The portion of such stock that could be sold and transferred each plan year was 25% on a cumulative basis and increased to 50% in the plan years following the employee's 60th birthday. Beginning January 1, 1999, through March 31, 1999 all participant's investments in Company stock ("ESOP shares") may be transferred to other investment options. This transfer will be limited to one- third of their total ESOP shares (calculated as of January 1, 1999) in each thirty-day period for the first 90 days of 1999. After March 31, 1999, each participant's ESOP shares will become his or her Optical Coating Laboratory, Inc. Stock Fund shares in the 401(k) Plan and there will be no restrictions on transfers to other funds. 2. SIGNIFICANT ACCOUNTING POLICIES BASIS OF ACCOUNTING - The financial statements of the Plan are prepared on the accrual basis. USE OF ESTIMATES - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of additions to and deductions from net assets during the reporting period. Actual results could differ from those estimates. INVESTMENTS - The investments of the Plan are stated at fair value. Quoted market prices are used to determine the fair value of investments in Company common stock and mutual funds. Investments in the fixed income funds, under the group annuity contracts, are stated at contract value. Contract value represents contributions made under the contract plus interest at the contract rate. Investments in the money market fund are stated at cost plus accrued interest which is fair value. Participant notes receivable are valued at cost, which approximates fair value. Purchase and sales of securities are recorded on a trade date basis. Interest income is recorded on the accrual basis. Dividends are recorded on the ex-dividend date. INCOME TAXES - The Plan obtained its latest determination letter in July 1995, in which the Internal Revenue Service stated that the Plan, as amended, meets the requirements of Section 401(a) of the Code an is exempt from federal income tax under Section 501(a) of the Code. The Plan administrator believes that the Plan is designed and is currently being operated in compliance with the applicable requirements of the Internal Revenue Code, and that the Plan was qualified and the related trust was tax-exempt as of the financial statement date. Therefore, no provision for income taxes has been included in the accompanying financial statements. In accordance with Section 401(k) of the Code, employee contributions are made on a pre-tax basis. Employee's pre-tax contributions, employer contributions and investment income are taxable to participants upon distribution. Employees' after tax contributions are not taxable upon distribution, however, amounts attributable to earnings on such contributions are subject to income tax. Taxable distributions or withdrawals before age 59-1/2 are subject to a 10% federal income tax penalty unless certain exceptions apply. Withdrawals qualifying as lump-sum distributions under the Code may be eligible for five or ten year forward averaging. With certain restrictions, employees may continue to defer income taxes on their distributions by investing them in another qualified plan within sixty days of the distribution date. Beginning January 1, 1993, the Plan Administrator is required to withhold 20% of the taxable portion of withdrawals for federal income taxes, unless the withdrawals are directly rolled over into another qualified plan or IRA. The foregoing abbreviated discussion of the income tax consequences resulting from participation in the Plan is not intended to include all tax aspects of such participation. BENEFITS PAYABLE - Benefits are recorded when paid. Included in net assets are deferred vested benefits of participants who have withdrawn from participation in the Plan. Such benefits were $1,567,954 and $432,801 at December 31, 1998 and 1997, respectively. 3. TERMINATION OF THE PLAN The Company has submitted a request for IRS approval to terminate the Company's existing 401(k)/ESOP Plan and establish a new, enhanced 401(k) Plan effective January 1, 1999. The newly proposed plan would offer a 100% match of employee contributions for the first 3% of salary deferred by the employee and an additional 50% match of employee contributions for the next 3% of salary deferred by an employee for a total match of 4.5%. 4. ADMINISTRATIVE COMMITTEE AND TRUSTEES OF THE PLAN The Plan provides for an Administrative Committee to manage and administer the Plan. The four members of the Administrative Committee are appointed by the Board of Directors of the Company. The Administrative Committee, as allowed by the Plan, delegated the routine administration of the Plan to T. Rowe Price Retirement Plan Services, Inc. The Plan also provides for a trustee, whose duties are to safeguard and value trust assets, invest and reinvest trust funds and carry out directions of the Administrative Committee. Beginning January 1, 1997, T. Rowe Price Trust Company assumed these duties. Prior to January 1, 1997, these duties were performed by Wells Fargo Bank. 5. INVESTMENT CONTRACT WITH INSURANCE COMPANY Travelers Fixed Income Fund is a four year contract with a fixed interest rate of 6.45% and fair value of $6,119,250. No employee contributions are being invested in Travelers Fixed Income Fund. 6. FINANCIAL INSTRUMENTS WITH CONCENTRATION OF CREDIT RISK Financial instruments which potentially subject the assets in the fund to concentrations of credit risk consist principally of common stock, group annuity contracts, and mutual funds. As described under Investment Options, contributions made by the Company are reinvested in Optical Coating Laboratory, Inc. common stock in accordance with the Plan provisions and cannot be routinely transferred. This creates a greater risk for this segment of plan assets. As the portfolio for the remaining plan assets is well diversified and issuers of the securities are dispersed throughout many industries and geographies, the concentrations of credit risk are limited for this segment of plan assets. 7. PARTY IN INTEREST TRANSACTIONS At December 31, 1998 and 1997, the Plan's assets included Optical Coating Laboratory, Inc. (the sponsoring Company) common stock as follows: 1998 1997 ----------- ----------- Number of shares 1,538,716 1,599,947 Cost $21,931,441 $11,051,883 Fair value 40,006,611 22,016,601 8. INVESTMENTS The fair value or contract value of the investments that represent more than 5% of the Plan's net assets available for benefits are as follows: 1998 1997 ----------- ----------- Optical Coating Laboratory, Inc. common stock $40,006,611 $22,016,601 Travelers Fixed Income Fund 6,119,250 5,775,888 T. Rowe Price Stable Value Common Trust Fund 9,388,748 8,928,579 T. Rowe Price Balanced Fund 5,095,889 4,350,332 T. Rowe Price Equity Income Fund 5,547,156 4,905,394 T. Rowe Price New Horizons Fund 8,576,361 9,608,697 ** ** ** OCLI 401(k)/ESOP PLAN ITEM 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES DECEMBER 31, 1998 DESCRIPTION OF IDENTITY OF ISSUE INVESTMENT COST FAIR VALUE ================== ================ =========== =========== Optical Coating Lab Inc. Common Stock $21,931,441 $40,006,611 Travelers Fixed Income Fund, 6.45% 6,119,250 6,119,250* T. Rowe Price Stable Value Common Trust Fund 9,388,748 9,388,748 T. Rowe Price Spectrum Income Fund 889,366 877,532 T. Rowe Price Balanced Fund 4,600,853 5,095,889 T. Rowe Price Equity Income Fund 5,530,229 5,547,156 T. Rowe Price Mid Cap Growth Fund 2,653,888 2,970,230 T. Rowe Price International Stock Fund 799,004 848,111 T. Rowe Price New Horizons Fund 8,480,583 8,576,361 Loans to participants, including accrued interest (interest rate range 8%-12%, 259 loans outstanding) 1,785,000 Other 74,082 ----------- ----------- Total $60,393,362 $81,288,970 =========== =========== *Represents contract value OCLI 401(k)/ESOP PLAN ITEM 27D - SCHEDULE OF REPORTABLE TRANSACTIONS DECEMBER 31, 1998 PURCHASES IDENTITY OF ISSUE DESCRIPTION NUMBER COST ================== ============================== ====== ========== T. Rowe Price Stable Value Common Trust Fund 85 $3,372,496 There were no reportable sales transactions EX-15 2 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in Registration Statement No. 33-26271 of Optical Coating Laboratory, Inc. on Form S-8 of our report dated June 4, 1998, appearing in this Annual Report on Form 11-K of the OCLI 401(k)/ESOP Plan for the year ended December 31, 1998. June 29, 1999 -----END PRIVACY-ENHANCED MESSAGE-----