UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 3 to
FORM 8-K/A
Current Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of report (Date of earliest event reported): November 30, 1999
JDS Uniphase Corporation
(Exact name of registrant as specified in its charter)
163 Baypointe Parkway
San Jose, California 95134
(Address of principal executive offices including zip code)
(408) 434-1800
(Registrant's telephone number, including area code)
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
This Amendment updates Item 7. of the Report on Form 8-K/A filed by the Registrant on November 30, 1999 by including the financial statements referred to below.
Item 7. Financial Statements and Exhibits
(a) Financial Statements of Business Acquired
Optical Coating Laboratory, Inc. and Subsidiaries
Index to Consolidated Financial Statements
Quarter Ended January 31, 2000
Page(s) Consolidated Balance Sheet as of January 31, 2000 3 Consolidated Statements of Income and Comprehensive Income for the three months ended January 31, 2000 and January 31, 1999 4 Consolidated Statements of Cash Flows for the three months ended January 31, 2000 and 1999 5 - 6 Consolidated Statements of Stockholders' Equity for the three months ended January 31, 2000 7 Notes to Consolidated Financial Statements 8 - 12
Optical Coating Laboratory, Inc. and Subsidiaries
Condensed Consolidated Balance Sheet
January 31, 2000
(Unaudited)
(Dollars in thousands)
ASSETS
- -------------------------------------------------------------------------- Current Assets Cash and cash equivalents $107,023 Accounts receivable, net of allowance for doubtful accounts of $2.293 42,819 Inventories 33,331 Income taxes receivable 6,986 Deferred income tax assets 6,528 Other current assets 2,818 ------------- Total Current Assets 199,505 Other Assets Deferred income taxes 491 Property, plant and equipments held for sale 334 Goodwill and intangibles, net 26,910 Other assets and investments 8,087 Property, Plant and Equipment Land and improvements 9,088 Buildings and improvements 38,238 Machinery and equipment 135,980 Construction-in-progress 26,970 ------------- 210,276 Less accumulated depreciation (97,286) ------------- Property, plant, and equipment - net 112,990 ------------- Total Assets $348,317 =============LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------------------------------------- Current Liabilities Accounts payable $13,350 Accrued expenses 9,646 Accrued compensation expenses 8,550 Current maturities on long-term debt 2,537 Notes payable 162 Deferred revenue 1,015 ------------- Total Current Liabilites 35,260 Noncurrent Liabilities Accrued postretirement health benefits and pension liabilities 2,309 Deferred revenue 645 Deferred income tax liabilities 8,179 Long-term debt 52,019 Stockholders' Equity Common stock, $.01 par value; authorized 30,000,000 shares; issued and outstanding 14,532,000 shares 145 Paid-in capital 192,491 Retained earnings 58,059 Accumulated other comprehensive income (790) ------------- Stockholders' Equity 249,905 ------------- Total Liabilities and Stockholders' Equity $348,317 =============
The accompanying notes are an integral part of these financial statments.
Optical Coating Laboratory, Inc. and Subsidiaries
Condensed Consolidated Statements of Income
and Comprehensive Income
(Unaudited)
For the three months ended January 31, 2000 and 1999
(Amounts in thousands, except per share amounts)
2000 1999 - ----------------------------------------------------------------------- Revenues Revenues $120,375 $69,851 Cost of Sales 89,607 48,632 ---------------------------- Gross Profit 30,768 21,219 Costs and Expenses Operating Expenses: Research and development 8,127 4,644 Selling and administrative 11,718 10,193 Other operating expenses 2,710 Legal settlement, net (2,960) In process research and development charges 2,906 Amortization of intangibles 724 217 ---------------------------- Total Operating Expenses 23,279 15,000 ---------------------------- Income from Operations 7,489 6,219 Nonoperating Income (Expense): Interest income 1,680 318 Interest expense (621) (959) ---------------------------- Earnings Income Before Provision for Income Taxes and Minority Interest 8,548 5,578 Provision for income taxes 3,242 3,054 Minority interest 491 ---------------------------- Net Income 5,306 2,033 ============================ Comprehensive Income Other comprehensive income (loss): Foreign currency translation adjustment (417) (127) ---------------------------- Comprehensive income $4,889 ($1,906) ============================ Net Income Per Share, Basic $0.37 $0.17 ============================ Net Income Per Share, Diluted $0.33 $0.16 ============================ Weighted average number of common shares used to compute basic earnings per share 14,378 12,142 ============================ Weighted average number of common shares used to compute diluted earnings per share 16,320 12,868 ============================ The accompanying notes are an integral part of these financial statments.
Optical Coating Laboratory, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
For the three months ended January 31, 2000 and 1999
(Amounts in thousands)
2000 1999 - ---------------------------------------------------------------------------- Operations Cash Flows From Operations: Cash received from customers $67,521 $53,208 Interest received 2,369 371 Cash paid to suppliers and employees (69,023) (40,018) Interest paid (394) (523) Income taxes paid, net of refunds (4,604) (836) ------------------------ Net Cash Provided By (Used For) Operations (4,131) 12,202 ------------------------ Investments Cash Flows From Investments: Purchase of remaining interest in Flex Products (30,035) Purchase of plant and equipment (13,408) (5,055) Investment in Multiplex, Inc. (7,000) ------------------------ Net Cash Used For Investments (20,408) (35,090) ------------------------ Financing Cash Flows From Financing: Decrease in short term investments 111,833 Proceeds form long-term debt 630 47 Repayment of long-term debt (249) (1,401) Proceeds from exercise of stock options 3,643 849 Proceeds from shares purchased under Employee Stock Purchase Plan 763 Purchase of note from minority stockholder (2,400) Payment of dividend on common stock (857) (726) ------------------------ Net Cash Provided By (Used For) Financing 115,763 (3,631) ------------------------ Effect of exchange rate changes on cash and cash equivalents 65 (37) ------------------------ Increase (decrease) in cash and cash equivalents 91,289 (26,556) Cash and cash equivalents at beginning of period 15,734 40,880 ------------------------ Cash and cash equivalents at end of period $107,023 $14,324 ======================== Adjustments Reconciliation of Net Income To Cash Flows From Operations: Net Income (loss) $5,306 $2,033 Adjustments to reconcile net income to net cash provided by operations: Depreciation and amortization 4,280 2,985 Minority interest in earnings of subsidiaries 491 Net book value of equipment sold 2,690 557 Non cash compensation for option acceleration 1,305 Other non-cash adjustments to net income (296) 793 Change in: Account receivable (8,228) (905) Inventories (7,515) 2,207 Income taxes receivable and income taxes payable (836) (2,454) Deferred income taxes 75 9,158 Other current assets and other assets and investments 73 (292) Accounts payable, accrued expenses and accrued compensation expenses (782) (7,164) Deferred revenue (203) 4,793 ------------------------ Total adjustments (9,437) 10,169 ------------------------ Net Cash Provided By (Used For) Operations ($4,131) $12,202 ========================
Supplemental Schedule of Non-Cash Investing and Financing Activities:
In the first quarter of 1999, the Company issued 39,914 shares of common stock to OCLI 401(k) / Employee Stock Ownership Plan at fair market value to satisfy a portion of its Company contribution.
The accompanying notes are an integral part of these financial statements.
Optical Coating Laboratory, Inc. and Subsidiaries
Condensed Consolidated Statements of Stockholders' Equity
For the three months ended January 31, 2000
(Unaudited)
Accumulated Other Common Stock Paid-In Retained Comprehensive Shares Amount Capital Earnings Income - -------------------------------------------------------------------------------- (Amounts in thousands) Balance at October 31, 1999 14,262 $143 $181,309 $53,610 ($373) Exercise of stock options including tax benefit and issuance of shares under Employee Stock Purchase Plan 270 2 9,877 Compensation charge for acceleration of employee stock option Foreign currency translation adjustment (417) Net Income 5,306 Dividend on common stock (857) - -------------------------------------------------------------------------------- Balance at January 31, 2000 14,532 $145 $192,491 $58,059 ($790) ================================================================================
OPTICAL COATING LABORATORY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Three Months Ended January 31, 2000 and 1999
(Unaudited)
1. GENERAL
Nature of Operations. Optical Coating Laboratory, Inc. ("The Company") 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. The Company markets and distributes components primarily to original equipment manufacturers (OEMs) of color shifting, optical and electro- optical systems. the Company's products are found in many applications including computer monitors, flat panel displays, telecommunication systems, office equipment, medical/analytical equipment and instruments, projection imaging systems, satellite power systems and aerospace and defense systems. Through its wholly owned subsidiary, Flex Products, Inc. (Flex), the Company designs and manufactures thin film coatings on flexible substrates using high vacuum roll-to-roll processes. Flex supplies critical pigments for use in anti- counterfeiting applications, energy conserving window film for residential and commercial applications and ChromaFlair® light interference pigments for commercial paints.
Interim Financial Information. The Condensed Consolidated Balance Sheet as of January 31, 2000, the Condensed Consolidated Statements of Income and Other Comprehensive Income for the three month periods ended January 31, 2000 and 1999, the Condensed Consolidated Statements of Cash Flows for the three month periods ended January 31, 2000 and 1999 and the Condensed Consolidated Statement of Stockholders' Equity, 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, 2000 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, 1999.
The results of operations for the period ended January 31, 2000 are not necessarily indicative of the operating results anticipated for the full year.
2. COMPREHENSIVE INCOME
Comprehensive income consists of foreign currency translation adjustments which are reported as a separate component of equity.
Accumulated comprehensive income presented on the Condensed Consolidated Balance Sheet consists of cumulative foreign currency translation adjustments.
3. OTHER OPERATING EXPENSES
On November 3, 1999, the Company entered into a definitive agreement to be acquired by JDS Uniphase Corporation (see Note 11). In connection with the merger, the Company incurred $1.4 million of professional fees in the first quarter of fiscal year 2000. In addition, the Company incurred $1.3 million of noncash compensation expense for the acceleration of the vesting terms of one long-term option in the first quarter of fiscal 2000.
4. LEGAL SETTLEMENT
On January 15, 1999, the Company announced that it had settled a lawsuit with Optical Corporation of America and certain of its shareholders regarding a failed merger in fiscal 1996. The Company received cash, net of related legal expenses, of $2.9 million which was recorded as a benefit in the first quarter of 1999.
5. OTHER ASSETS AND INVESTMENTS
In the first quarter of fiscal 2000, the Company paid $7.0 million for 1,614,000 shares of Series B Preferred Stock (approximately 10% of the total ownership) of Multiplex, Inc., a nonpublic manufacturer of lasers and photoreceivers for high speed telecommunications. The shares are convertible, at the option of the Company, on a one to one ratio into shares of Common Stock of Multiplex, Inc. and will be converted into shares of Common Stock if Multiplex, Inc. issues shares in a public offering.
6. DISPOSALS AND ACQUISITIONS
In the first quarter of 1999, Glas-Trösch GmbH, a privately held glass company in Switzerland, purchased the business and operating assets (inventory, equipment, furniture, two buildings, workforce, customer lists and other related intangibles) of the Company's manufacturing subsidiary in Germany (MMG) for $4.3 million. As the Company had previously recorded an impairment loss to reduce MMG's assets to fair value on a liquidation basis, no gain or loss was recognized on the sale. The cash proceeds from the sale were received in February 1999 and, as a result, the amount receivable from the sale is included in other current assets at January 31, 1999. An office building in Germany, with a carrying value of $334,000 which was not part of the sale, is being held for sale.
In connection with the sale of MMG, the Company also received $1.2 million for a three-year covenant not to compete and $600,000 for a three-year license and supply agreement that incorporates the use of the OCLI name. The $1.8 million received for those contracts is being recognized as revenue over the three-year terms of the agreements.
In February 1999, the Company purchased OPKOR Inc., an optical design and manufacturing company specializing in precision polymer optic components and assemblies, for $9.0 million consisting of $1.8 million in cash and 267,285 shares of OCLI common stock. Pursuant to this transaction, the Company recorded goodwill of $7.0 million that is being amortized over an average life of 8 years.
7. EARNINGS PER SHARE
The following is a reconciliation of the numerators and denominators of the basic and diluted earnings per share computations for the three months ended January 31, 2000 and January 31, 1999:
January 31, January 31, 2000 1999 (Amounts in thousands, except per share amounts) - ----------------------------------------------------------------------- Basic Earnings Per Share: Weighted average common shares outstanding 14,378 12,142 ========================= Net income $5,306 $2,033 ========================= Net income per common shares, basic $0.37 $0.17 ========================= Diluted Earnings Per Share: Weighted average common shares outstanding, basic 14,378 12,142 Dilutive effect of employee stock options 1,942 726 ------------------------- Average shares outstanding, diluted 16,320 12,868 ========================= Net income applicable to common stock, diluted $5,306 $2,033 ========================= Net income per share, diluted $0.33 $0.16 =========================
8. FINANCIAL DERIVATIVES AND HEDGING
The Company, from time to time, enters into derivative transactions in order to hedge foreign currency risk on existing commitments, open receivables, payables and debt instruments when the currency risk is considered material to the Company. In addition, the Company may enter into interest rate swaps or similar instruments in order to reduce interest rate risk on its debt instruments. The Company does not enter into derivatives for trading purposes.
At January 31, 2000, the Company has outstanding foreign currency forward contracts for the principal and interest payments under an intercompany note receivable denominated in British Pounds and for firm customer commitments in Japanese yen. The notional amounts, carrying amounts and fair values of the Company's derivatives position at January 31, 2000 are included in the table below:
Estimated Fair Value of Foreign Notional Carrying Exchange Amount Amount Contract (Amounts in thousands ) - --------------------------------------------------------------------------- Foreign currency forward exchange contracts: British Pounds 2,389 0 (119) Japanese yen 650 0 7
9. INVENTORIES
Inventories consisted of the following at January 31, 2000:
Raw materials and supplies $4,518 Work-in-process 24,566 Finished goods 4,247 ----------- Total inventories $33,331 ===========
10. SEGMENT INFORMATION
In the fourth quarter of 1999, the Company adopted SFAS No. 131, "Disclosures About Segments of an Enterprise and Related Information," which establishes standards for reporting information about a company's operating segments. The Company has divided its operations into three reportable segments: Telecommunications Products, Light Interference Pigments and Applied Photonics. Segment determination is based on market similarity and management of the Company's business.
The Company's Telecommunications Products segment manufactures and sells optical components for fiber optic communications systems. The main application for these products is to control the reflection, transmission and absorption of lightwave signals that are transmitted through fiber optic cables. Current products include WDM products and switches.
The Light Interference Pigments segment manufactures and sells color shifting light interference pigments used to prevent counterfeiting of the world's currencies and other value documents and for use in paints for automobiles and other consumer products.
The Applied Photonics segment manufactures and sells: optical components used in display systems such as cathode ray tube displays, flat panel displays and business projection systems; optical components used in defense and aerospace products, automated data collection products and medical, scientific and analytical instruments; and optical components used in office automation products such as copiers, scanners and printers.
The reporting segments follow the same accounting policies used for the Company's consolidated financial statements and described in the summary of significant accounting policies. Corporate costs are allocated to the segments based on factors intended to approximate actual usage. Management evaluates a segment's performance based on operating profit and return on net assets. Return on net assets is net income before minority interest and tax effected interest expense for the previous four quarters divided by average net assets. Net assets is total assets less current liabilities plus notes payable and current maturities on long term debt. Intersegment sales and transfers are recorded based on prevailing market prices. Corporate operations include miscellaneous income, elimination of intersegment revenues and profit, unallocated administrative expenses, merger related expenses and legal settlements. Corporate net assets include cash and short-term investments, property plant and equipment used in administrative functions and other unallocated corporate assets and liabilities.
The following table presents business segment information for the three months ended January 31, 2000 and 1999:
January 31, January 31, 2000 1999 - ----------------------------------------------------------------- Revenues: Telecommunications Products $60,014 $22,129 Light Interference Pigments 18,285 14,591 Applied Photonics 42,076 33,131 ------------- ------------- Total revenues $120,375 $69,851 ============= ============= Income from Operations: Telecommunications Products $8,266 $3,018 Light Interference Pigments 5,534 (592) Applied Photonics 2,165 2,310 Corporate and eliminations (8,476) 1,483 ------------- ------------- Total income from operations $7,489 $6,219 ============= ============= Return on net assets: Telecommunications Products 75.6% 76.8% Light Interference Pigments 18.3% 5.2% Applied Photonics 9.0% 8.8% Assets: Telecommunications Products $34,057 $8,357 Light Interference Pigments 66,626 58,334 Applied Photonics 90,109 94,685 Corporate and eliminations 157,525 43,430 ------------- ------------- Total assets $348,317 $204,806 ============= ============= Capital expenditures: Telecommunications Products $4,220 $735 Light Interference Pigments 7,561 1,924 Applied Photonics 800 1,501 Corporate and eliminations 827 895 ------------- ------------- Total capital expenditures $13,408 $5,055 ============= =============
11. SUBSEQUENT EVENT
On November 3, 1999, the Company entered into a definitive agreement to be acquired by JDS Uniphase Corporation for common stock valued at approximately $2.7 billion. The acquisition was completed on February 4, 2000. Upon closing of the acquisition, the Company exchanged each share of its common stock for 3.712 shares of common stock of JDS Uniphase Corporation. The exchange ratio gives effect to the two-for-one stock split of JDS Uniphase common stock for stockholders of record as of March 2, 2000. In addition, JDS Uniphase issued options in exchange for outstanding options of the Company with the number of shares and the exercise prices appropriately adjusted by the exchange ratio.
In contemplation of the merger, the Company amended certain employment agreements and incurred certain expenses that would not have been recoverable if the merger had not closed. Those costs were expensed in the first quarter of fiscal year 2000. An additional $26.7 million of merger related costs that were contingent on the closing of the merger were expensed subsequent to the first quarter on the closing date of the merger.
As a result of the merger and under direction from JDS Uniphase Corporation, the Company repaid principal amounts totaling $47.5 million, to retire the outstanding balances of its Unsecured Senior Notes after the first quarter of fiscal year 2000. In connection with those early payments, the Company wrote off $816,000 of deferred loan fees and paid $600,000 of early payment penalties that were expensed after the first quarter of fiscal year 2000.
Item 7. Pro Forma Information and Exhibits (continued)
(C) Exhibits
23.1 Consent of Deloitte & Touche LLP, Independent Auditors.
23.2 Consent of KPMG LLP, Independent Accountants
The documents listed below have been filed by OCLI under the Exchange Act with the Commission and are incorporated herein by reference:
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 hereunto duly authorized.
| JDS Uniphase Corporation |
| By: | /s/ Anthony R. Muller |
| Anthony R. Muller | |
| Executive Vice President and Chief Financial Officer |
Date: May 31, 2000
