4
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________September 30, 1996_______
OR
[ ] 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___________ 0-22874______________________
Uniphase Corporation
(Exact name of registrant as specified in its charter)
Delaware 94-2579683
(State or other jurisdiction of (I.R.S. Employer Identification No.)
or organization)
163 Baypointe Parkway
San Jose, CA 95134
(Address of principal executive offices) (Zip Code)
(408) 434-1800
(Registrant's telephone number, including area code)
__________________________________________________________________
(Former name, former address and former fiscal year if changed
since last report)
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_____
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of October 31, 1996 .
Common Stock $.001 par value 16,241,709
Class Number of Shares
Part I--FINANCIAL INFORMATION
Item 1. Financial Statements
UNIPHASE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share data) Three months ended
September 30,
1996 1995
------ -----
Net sales $23,462 $12,793
Cost of sales 12,208 6,974
-------- --------
Gross profit 11,254 5,819
Operating expenses:
Research and development 1,627 911
Royalty and license 409 363
Selling, general and administrative 4,450 2,632
-------- --------
Total operating expenses 6,486 3,906
-------- --------
Income from operations 4,768 1,913
Interest and other income, net 946 48
-------- --------
Income before income taxes 5,714 1,961
Income tax expense 2,114 745
-------- --------
Net income $ 3,600 $ 1,216
======== ========
Net income per share $ 0.21 $ 0.11
======== ========
Number of weighted average shares used in
per share amounts 17,493 10,664
======== ========
See accompanying notes on page 5
UNIPHASE CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
September 30, June 30,
1996 1996
------------- ---------
ASSETS (unaudited)
Current assets:
Cash and cash equivalents $33,450 $52,463
Short-term investments 79,953 61,279
Accounts receivable, less allowances for
returns and doubtful accounts of $307
at September 30, 1996 and $285 at
June 30, 1996 17,669 16,700
Inventories 13,656 10,641
Deferred income taxes and other current
assets 3,970 3,542
-------- --------
Total current assets 148,698 144,625
Property, plant and equipment, net 22,109 20,305
Intangible assets 8,017 8,894
-------- --------
Total assets $178,824 $173,824
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable to bank $ --- $ 548
Current portion of notes payable 6,061 ---
Accounts payable 7,165 5,391
Accrued payroll and related expenses 2,758 3,180
Other accrued expenses 4,695 4,464
-------- --------
Total current liabilities 20,679 13,583
Notes payable --- 6061
Deferred income taxes 54 656
Other non-current liabilities 206 319
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.001 par value:
Authorized shares--1,000,000
None issued and outstanding --- ---
Common stock, $0.001 par value:
Authorized shares--20,000,000
Issued and outstanding shares--16,227,730
at September 30, 1996 and 16,097,855
at June 30, 1996 16 16
Additional paid-in capital 142,445 141,354
Retained earnings 15,350 11,750
Net unrealized gain (loss) on securities
available-for-sale 39 (18)
Foreign currency translation adjustment 35 103
-------- --------
Total stockholders' equity 157,885 153,205
-------- --------
Total liabilities and stockholders' equity $178,824 $173,824
======== ========
See accompanying notes on page 5
UNIPHASE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands) Three Months Ended
September 30,
1996 1995
---- ----
Operating activities
Net income $3,600 $1,216
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and amortization 1,141 434
Change in operating assets and liabilities:
Accounts receivable (969) 193
Inventories (3,015) (1,424)
Deferred income taxes and other current
assets (471) 103
Accounts payable, accrued liabilities and
other 1,408 310
------- -------
Net cash provided by operating activities 1,694 832
------- -------
Investing activities
Increase in other assets $ --- $ 5
Purchase of short-term investments (46,277) (4)
Proceeds from sale of short-term investments 27,659 27
Purchase of property, plant and equipment (2,445) (591)
Purchase of additional equity interest in I.E.
Optomech --- (238)
------- -------
Net cash used in investing activities (21,063) (801)
------- -------
Financing activities
Notes payable to bank (548) ---
Proceeds from issuance of common stock under stock
option and stock purchase plans 904 655
------- -------
Net cash provided by financing activities 356 655
------- -------
Increase in cash and cash equivalents (19,013) 686
Cash and cash equivalents at beginning of period 52,463 2,880
------- -------
Cash and cash equivalents at end of period $33,450 $3,566
======= =======
See accompanying notes on page 5
UNIPHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Business Activities and Basis of Presentation
The financial information at September 30, 1996 and for the three-
month period ended September 30, 1996 and 1995 is unaudited, but includes
all adjustments (consisting only of normal recurring adjustments) that the
Company considers necessary for a fair presentation of the financial
information set forth herein, in accordance with generally accepted
accounting principles for interim financial information, the instructions
to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by generally accepted
accounting principles for annual financial statements. For further
information, refer to the Consolidated Financial Statements and footnotes
thereto included or incorporated by reference in the Company's Annual
Report on Form 10-K for the fiscal year ended June 30, 1996.
Certain reclassifications, relating to investments, have been made to
the fiscal 1996 presentation to conform to the fiscal 1997 presentation.
The results for the three-month period ended September 30, 1996 are
not considered indicative of the results to be expected for any future
period or for the entire year.
Note 2. Inventories
The components of inventory consist of the following:
September 30, June 30,
(in thousands) 1996 1996
------------- ---------
Raw materials and purchased parts $ 6,950 $ 4,100
Work in process 4,676 4,382
Finished goods 2,030 2,159
------------- ---------
$ 13,656 $ 10,641
============= =========
Note 3. Taxes
The effective tax rate used for the three-month period ended September
30, 1996 was 37%. This rate is based on the estimated annual tax rate
complying with Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes".
Note 4. Earnings per Share
Net income per share for the three-month period ended September 30,
1996 and 1995 is computed using the weighted average number of common
shares outstanding plus primary common share equivalents which have a
dilutive effect on earnings per share. Since fully diluted earnings per
share differs from primary earnings per share by less than 3%, only primary
earnings per share is shown below. Shares and net income used in the per
share computations are as follows:
Three Months Ended
September 30,
1996 1995
Weighted average common shares 16,132 9,576
Primary common share equivalents 1,361 1,088
------- -------
Total 17,493 10,664
======= =======
Net income $3,600 $ 1,216
======= =======
Net income per share $ 0.21 $ 0.11
======= =======
Note 5. Line of Credit
The Company maintains a $5.0 million revolving bank line of credit
agreement that expires on December 31, 1996. Advances under the line of
credit bear interest at the bank's prime rate (8.25% at September 30, 1996)
and are secured by inventories and accounts receivable. Under the terms of
this agreement, the Company is required to maintain certain minimum working
capital, net worth, profitability levels and other specific financial
ratios. In addition, the line of credit prohibits the payment of cash
dividends and contains certain restrictions on the Company's ability to
lend money or purchase assets or interests in other entities without the
prior written consent of the bank. There were no borrowings under the line
of credit at September 30, 1996.
Through the acquisition of UTP Fibreoptics, the Company assumed certain
previously established lines of credit. All outstanding borrowings against
these lines of credit were paid off in September 1996.
Note 6. Litigation and Contingencies
During fiscal 1996, two former employees commenced wrongful
termination actions against the Company. In September 1996, the Company
received notification of two additional lawsuits from two former employees
alleging fraud and termination in violation of public policy. The Company
believes these claims are without merit and is vigorously defending them.
Even if these claims are adjudicated in favor of the plaintiffs, the
Company does not believe that the ultimate resolution of these matters will
have a material adverse impact on the Company or its operations.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
UNIPHASE CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Risk Factors
The statements contained in this Report on Form 10-Q that are not
purely historical are forward looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934, including statements regarding the Company's
expectations, hopes, intentions, beliefs or strategies regarding the
future. Forward looking statements include the Company's' expectations
concerning periodic fluctuations in gross margins and the Company's
liquidity, anticipated cash needs and availability, and anticipated expense
levels under the heading "Management's Discussion and Analysis of Financial
Condition and Results of Operations." All forward looking statements
included in this document are based on information available to the Company
on the date of this Report, and the Company assumes no obligation to update
any such forward looking statement. It is important to note that the
Company's actual results could differ materially from those in such forward
looking statements. Among the factors that could cause actual results to
differ materially the cyclicality of the semiconductor industry, the
declining market for gas lasers, development and other risks relating to
solid state laser technologies, management of growth, UTP Fibreoptics
acquisition, variability and uncertainty of quartile operating results,
dependence on key OEM relationships, dependence on sole and limited source
suppliers, difficulties in manufacture of the Company's products and future
capital requirements, as detailed below. You should also consult the risk
factors listed from time to time in the Company's Reports on Form 10-Q, 8-
K, 10-K and Annual Reports to Stockholders.
Cyclicality of Semiconductor Industry
The Company's Ultrapointe Systems and a portion of its laser
subsystems businesses depend upon capital expenditures by manufacturers of
semiconductor devices, including manufacturers that are opening new or
expanding existing fabrication facilities, which, in turn, depend upon the
current and anticipated market demand for semiconductor devices and the
products utilizing such devices. The semiconductor industry is highly
cyclical, and historically has experienced periods of oversupply, resulting
in significantly reduced demand for capital equipment. The semiconductor
industry is currently experiencing a downturn which has led many
semiconductor manufacturers to delay or cancel capital expenditures.
Certain of the Company's customers have delayed or canceled purchase of the
Company's Ultrapointe Systems. There can be no assurance that the Company's
operating results will not be materially and adversely affected by these
factors. Furthermore, there can be no assurance that the semiconductor
industry will not experience further downturns or slowdowns in the future,
which may materially and adversely affect the Company's business and
operating results.
Declining Market for Gas Lasers; Development and Other Risks Relating
to Solid State Laser Technologies
To date, a substantial portion of the Company's revenue has been
derived from sales of gas laser subsystems. The market for gas lasers is
mature and is expected to decline as customers transition from conventional
lasers, including gas, to solid state lasers, which are currently expected
to be the primary commercial laser technology in the future. In response to
this transition, the Company has devoted substantial resources to
developing solid state laser products and has introduced its initial solid
state products. To date, sales of the Company's solid state laser products
have been limited and primarily for customer evaluation purposes. Solid
state laser products are still evolving, and there can be no assurance that
the Company's solid state laser products will be successfully designed into
customers' products or achieve commercial sales volumes. The Company
believes that a number of companies are further advanced than the Company
in their development efforts for solid state lasers and are competing with
evaluation units for many of the same design-in opportunities than the
Company is pursuing. It is anticipated that the average selling price of
solid state lasers may be significantly less in certain applications than
the gas laser products the Company is currently selling in these markets.
If the Company is unable to successfully make this transition from gas to
solid state lasers, its business, operating results and financial condition
will be materially and adversely affected. The Company further believes it
will be necessary to continue to reduce the cost of manufacturing and to
broaden the wavelengths provided by its laser products. There can be no
assurance that the Company will successfully develop new solid state laser
products, or that any solid state laser products will achieve market
acceptance or not be rendered obsolete or uncompetitive by products of
other companies.
Management of Growth; UTP Fibreoptics Acquisition
The Company has experienced recent growth through both increased
levels of operations in its existing businesses and the acquisition of UTP
in May 1995. The Company is devoting significant resources to develop new
solid state lasers for OEM customers, to improve products and increase
market penetration of its Ultrapointe Systems and to increase its
penetration of the CATV and telecommunications industries. In addition, the
Company is now increasing its marketing, customer support and
administrative functions in order to support an increased level of
operations primarily from sales of its telecommunications equipment
products. No assurance can be given that the Company will be successful in
creating this infrastructure or that any increase in the level of such
operations will justify the increased expense levels associated with these
businesses.
In May 1996, the Company acquired UTP Fibreoptics. The total purchase
price of $9.1 million included aggregate consideration of $8.6 million,
payable through a combination of cash and notes, and estimated direct
transaction costs of $500,000. As a result of acquiring UTP Fibreoptics,
the Company has entered the local telecommunications and data
communications market in which it had no previous experience, and has
expanded its employee base by approximately 45 persons. The success of the
UTP Fibreoptics acquisition will be dependent on the Company's ability to
integrate UTP Fibreoptics into its existing operations as a division of
UTP. UTP's ability to manage UTP Fibreoptics will be complicated by the
geographical distance between UTP's facilities in Bloomfield, Connecticut
and Chalfont, Pennsylvania and UTP Fibreoptics's locations in the United
Kingdom and in Batavia, Illinois. There can be no assurance that the
operations of UTP Fibreoptics can be successfully integrated into UTP or
that such integration will not strain the Company's available management,
manufacturing, financial and other resources.
The Company also made capital expenditures to acquire certain
properties in San Jose, California totaling 109,000 square feet, which
included land, buildings and improvements for an aggregate purchase price
of approximately $11.0 million and continues to invest in property, plant
and equipment needed for its business requirements, including adding to
manufacturing capacity throughout the Company. Any failure to utilize these
areas in an efficient manner could have a material adverse effect on the
Company.
The Company currently has no commitments with respect to any future
acquisitions. The Company, however, frequently evaluates the strategic
opportunities available to it and may in the future pursue acquisitions of
additional complementary products, technologies or businesses. Such
acquisitions by the Company may result in the diversion of management's
attention from the day-to-day operations of the Company's business and may
include numerous other risks, including difficulties in the integration of
the operations and products, integration and retention of personnel of the
acquired companies and certain financial risks. Further acquisitions by the
Company may result in dilutive issuances of equity securities, the
incurrence of additional debt, reduction of existing cash balances,
amortization expenses related to goodwill and other intangible assets and
other charges to operations that may materially adversely affect the
Company's business, financial condition or operating results.
Variability and Uncertainty of Quarterly Operating Results
The Company has experienced and expects to continue to experience
significant fluctuations in its quarterly results. The Company believes
that fluctuations in quarterly results may cause the market price of its
Common Stock to fluctuate, perhaps substantially. Factors which have had an
influence on and may continue to influence the Company's operating results
in a particular quarter include the timing of the receipt of orders from
major customers, product mix, competitive pricing pressures, the relative
proportions of domestic and international sales, costs associated with the
acquisition or disposition of businesses, products or technologies, the
Company's ability to design, manufacture, and ship products on a cost
effective and timely basis, the delay between incurrence of expenses to
further develop marketing and service capabilities and realization of
benefits from such improved capabilities, the announcement and introduction
of cost effective new products by the Company and by its competitors, and
expenses associated with any intellectual property litigation. In addition,
the Company's sales will often reflect orders shipped in the same quarter
that they are received. Moreover, customers may cancel or reschedule
shipments, and production difficulties could delay shipments. The timing of
sales of the Company's Ultrapointe Systems may result in substantial
fluctuations in quarterly operating results due to the substantially higher
per unit price of these products relative to the Company's other products.
In addition, the Company sells its telecommunications equipment products to
OEMs who typically order in large quantities and therefore the timing of
such sales may significantly affect the Company's quarterly results. The
timing of such OEM sales can be affected by factors beyond the Company's
control, including demand for the OEM's products and manufacturing issues
experienced by OEMs. In this regard, the Company recently experienced a
temporary rescheduling of orders by one OEM telecommunications customer. As
a result of the above factors, the Company's results of operations are
subject to significant variability from quarter to quarter.
The Company's operating results in a particular quarter may also be
affected by the acquisition or disposition of other businesses, products or
technologies by the Company. For example, in the fourth quarter of fiscal
1995, the Company incurred charges totaling $5.4 million, primarily for
acquired in-process research and development in connection with the
Company's acquisition of UTP, and to a lesser extent from the loss on the
sale of the Company's diode laser product line. Such charges reduced net
income per share for the fourth quarter of fiscal 1995 by $0.34 and for
fiscal 1995 by $0.33. During the quarter ended June 30, 1996, the Company
incurred a charge of approximately $3.0 million in connection with the
cancellation of certain UTP options and granting of replacement options to
purchase Uniphase Common Stock to UTP employees in order to operate UTP
Fibreoptics as a division of UTP. The Company also incurred a charge of
$4.5 million for acquired in-process research and development in connection
with the acquisition of UTP Fibreoptics in the quarter ended June 30, 1996.
There can be no assurance that other acquisitions or dispositions of
businesses, products or technologies by the Company in the future will not
result in substantial charges or other expenses that may cause fluctuations
in the Company's quarterly operating results.
Dependence on Key OEM Relationships
In November 1995, the Company entered into an exclusive OEM resale
agreement with Tencor pursuant to which Tencor will distribute Ultrapointe
Systems through its worldwide distribution channels. As a result of such
agreement, the Company currently expects that Tencor will account for a
majority of Ultrapointe's net sales for the foreseeable future. In
addition, one laser subsystems customer, the Applied Biosystems Division of
Perkin-Elmer Corporation, accounted for approximately 12% of the Company's
net sales for fiscal years 1996, 1995, and 1994, respectively. The loss of
orders from these or other OEM relationships could have a materially
adverse effect on the Company's business and operating results.
Dependence on Sole and Limited Source Suppliers
Various components included in the manufacture of the Company's
products are currently obtained from single or limited source suppliers. A
disruption or loss of supplies from these companies or an increase in price
of these components would have a material adverse effect on the Company's
results of operations, product quality and customer relationships. For
example, the Company obtains all the robotics, workstations and many
optical components used in its Ultrapointe Systems from Equipe
Technologies, Silicon Graphics, Inc., and Olympus Corporation,
respectively. The Company currently utilizes a sole source for the crystal
semiconductor chip sets incorporated in the Company's solid state
microlaser products and acquires its pump diodes for use in its solid state
laser products from SDL, Inc., Opto Power Corporation and GEC. The Company
also obtains lithium niobate wafers and specialized fiber components used
in its UTP products primarily from Crystal Technology, Inc. and Fujikura,
Ltd., respectively. The Company does not have long-term or volume purchase
agreements with any of these suppliers, and no assurance can be given that
these components will be available in the quantities required by the
Company, if at all. Further, UTP depends on relatively specialized
components and it cannot be assured that its respective suppliers will be
able to continue to meet UTP's requirements.
Difficulties in Manufacture of the Company's Products
The manufacture of the Company's products involves highly complex and
precise processes, requiring production in highly controlled and clean
environments. Changes in the Company's or its suppliers' manufacturing
process or the inadvertent use of defective or contaminated materials by
the Company or its suppliers could adversely affect the Company's ability
to achieve acceptable manufacturing yields and product reliability. In
addition, UTP has previously experienced certain manufacturing yield
problems that have materially and adversely affected both UTP's ability to
deliver products in a timely manner to its customers and its operating
results. The Company recently began manufacturing UTP products at its newly
constructed clean room at UTP's Bloomfield, Connecticut facility and in May
1996 vacated the clean room space leased from UTP's former parent
corporation. No assurance can be given that the Company will be successful
in manufacturing UTP products in the future at performance or cost levels
necessary to meet its customer needs, if at all. In addition, UTP
established a new transmitter production facility in Chalfont, Pennsylvania
in March 1996 and consolidated the transmitter production line previously
located in Bloomfield, Connecticut into this facility in April 1996. The
Company has no assurance that this facility will be able to deliver the
planned production qualities of transmitters to customers specifications at
the cost and yield levels required. To the extent the Company or UTP does
not achieve and maintain yields or product reliability, the Company's
operating results and customer relationships will be adversely affected.
Future Capital Requirements
The Company is devoting substantial resources to the development of
new products for the solid state laser, semiconductor capital equipment,
CATV and telecommunications markets. Although the Company believes existing
cash balances, cash flow from operations and available lines of credit,
will be sufficient to meet its capital requirements at least through the
end of calendar year 1997, the Company may be required to seek additional
equity or debt financing to compete effectively in these markets. The
timing and amount of such capital requirements cannot be precisely
determined at this time and will depend on several factors, including the
Company's acquisitions and the demand for the Company's products and
products under development. There can be no assurance that such additional
financing will be available when needed, or, if available, will be on terms
satisfactory to the Company.
Results of Operations
Net Sales
In the first quarter of fiscal 1997, ended September 30, 1996, net
sales were $23.5 million, which represented a $10.7 million or 83.4%
increase over net sales of $12.8 million in the first quarter of fiscal
1996. The increase was primarily attributable to an increase of
$6.8 million in sales of the Company's Uniphase Telecommunications Products
("UTP"), which included $2.4 million of UTP sales resulting from the
acquisition of UTP Fibreoptics in a purchase transaction acquisition
in May 1996. In addition, sales of the Company's lasers subsystems increased
$2.6 million primarily from increased argon gas laser subsystem shipments.
Ultrapointe sales increased $1.3 million primarily due to an increase in
shipments of the Company's Ultrapointe Laser Imaging Systems ("Ultrapointe
Systems").
Gross Profit
In the first quarter of fiscal 1997, the Company's gross profit
increased 93.4% to $11.3 million or 48.0% of net sales from $5.8 million or
45.5% of net sales in the same period of fiscal 1996. Gross profit
increased in absolute dollars and as a percentage of net sales primarily
due to higher sales volumes. In addition, gross profit as a percentage of
net sales increased due to the higher proportion of UTP and Ultrapointe
products sales relative to laser subsystems sales; UTP and Ultrapointe
products currently have higher gross margins than the Company's laser
subsystems. There can be no assurance that these trends will continue and
that the Company will be able to sustain its gross margin at current levels.
The Company expects that there will continue to be periodic fluctuations in
its gross margin resulting from changes in its sales and product mix,
competitive pricing pressures, manufacturing yields, inefficiencies
associated with new product introductions and a variety of other factors.
Research and Development Expense
In the first quarter of fiscal 1997, research and development expense
was $1.6 million or 6.9% of net sales which represented a $716,000 or 78.6%
increase over research and development expense of $911,000 or 7.1% of net
sales in the first quarter of fiscal 1996. The increase in research and
development expense is due to increased expenditures associated with the
continued development and enhancement of the Company's Ultrapointe and
telecommunications product lines, which included expenses of the newly
acquired UTP Fibreoptics division. The Company also continues to invest in
the development of solid state lasers.
Royalty and License Expense
In the first quarter of fiscal 1997, royalty and license expense
increased $46,000 to $409,000 from $363,000 in the same period of fiscal
1996 and decreased as a percentage of net sales to 1.7% in the quarter
ended September 30, 1996 from 2.8% in the same period in fiscal 1996. The
decrease as a percentage of net sales was due to the increasing proportion
of revenues that the Company derived from royalty-free UTP products.
The Company continues to develop products in solid state laser,
telecommunications and semiconductor equipment technology. There are
numerous patents in these areas that are held by others, including academic
institutions and competitors of the Company. Such patents could inhibit
the Company's ability to develop, manufacture and sell products in this
area. A number of the patents are conflicting. If there is conflict
between a competitor's patents or products and those of the Company, it
could be very costly for the Company to enforce its rights in an
infringement action or defend such an action brought by another party. In
addition, the Company may need to obtain license rights to certain patents
and may be required to make substantial payments, including continuing
royalties, in exchange for such license rights. There can be no assurance
that licenses to third party technology, if needed, will be available on
commercially reasonable terms.
Selling, General and Administrative Expense
In the first quarter of fiscal 1997, selling, general and
administrative expense was $4.4 million or 19.0% of net sales, which
represented a $1.8 million or 69.1% increase over selling, general and
administrative expense of $2.6 million or 20.6% of net sales in the first
quarter of fiscal 1996. The increase is due primarily to expenses in
support of UTP's Pennsylvania facility, which was established in April
1996, the addition of expenses from UTP Fibreoptics, and the amortization
of intangible assets and compensation expense related to the acquisition
of UTP Fibreoptics.
Interest and Other Income, Net
In the first quarter of fiscal 1997, interest and other income, net
was $946,000, which represented a $898,000 increase over interest and other
income, net of $48,000 in the first quarter of fiscal 1996. The increase in
the interest and other income, net is due to the related interest on
investment of proceeds received on sale of common stock subsequent to the
first quarter of fiscal 1996.
Income Tax Expense
As stated in Note 3 of Notes to Consolidated Financial Statements, the
effective tax rate used for the first quarter of fiscal 1997 was 37% as
compared to 38% used in the same period of fiscal 1996.
Liquidity and Capital Resources
At September 30, 1996 the Company's combined balance of cash, cash
equivalents and short-term investments was $113.4 million. The Company has
met its liquidity needs to date primarily through cash generated from
operations.
Cash generated from operations was $1.8 million in the first
quarter of fiscal year 1997, compared with $815,000 in the first quarter
of fiscal year 1996. The increase in cash generated from operations
resulted primarily from increases in net income before depreciation and
amortization expense and accounts payable and accrued expenses which
together more than offset an increase in inventories and accounts
receivable. The increase in inventory and the accounts payables is
primarily due to an increase in inventory levels at UTP associated with
higher sales. The increase in accounts receivable is due primarily to
increased sales.
Cash used in investing activities was $21.1 million in the first
quarter of fiscal year 1997. The Company incurred capital expenditures of
$2.4 million primarily in facilities improvements and the acquisition of
manufacturing and other equipment to expand its manufacturing capacities
and research and development efforts primarily in its telecommunications
product line.
The Company has a $5.0 million revolving line of credit with a bank.
There were no borrowings under the line of credit at September 30, 1996.
Advances under the line of credit bear interest at the bank's prime rate
(8.25% at September 30, 1996) and are secured by inventories and accounts
receivable. Under the terms of the line of credit agreement, the Company
is required to maintain certain minimum working capital, net worth,
profitability levels and other specific financial ratios. In addition, the
agreement prohibits the payment of cash dividends and contains certain
restrictions on the Company's ability to borrow money or purchase assets or
interests in other entities without the prior written consent of the bank.
The line of credit expires on December 31, 1996. Through the acquisition
of UTP Fibreoptics in May 1996, the Company assumed certain previously
established lines of credit. All outstanding borrowing against these lines
of credit were repaid in September 1996.
The Company believes that its existing cash balances and short-term
investments, together with existing cash flow from operations and available
line of credit will be sufficient to meet its liquidity and capital
spending requirements at least through the end of calendar year 1997.
However, possible acquisitions of complementary businesses, products or
technologies may require additional financing prior to such time. There
can be no assurance that additional financing will be available when
required or, if available, will be on terms satisfactory to the Company.
PART II--OTHER INFORMATION
Item 1. Legal Proceedings
During fiscal 1996, two former employees commenced wrongful
termination actions against the Company. In September 1996, the Company
received notification of two additional lawsuits from two former employees
alleging fraud and termination in violation of public policy. The Company
believes these claims are without merit and is vigorously defending them.
Even if these claims are adjudicated in favor of the plaintiffs, the
Company does not believe that the ultimate resolution of these matters will
have a material adverse impact on the Company or its operations.
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) Exhibits
27. Financial Data Schedule
b) Forms 8-K
None
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.
Uniphase Corporation
(Registrant)
Date November 13, 1996 \s\ Danny E. Pettit
Danny E. Pettit, Vice President of Finance and CFO
(Principal Financial and Accounting Officer)
Date November 13, 1996 \s\ Kevin Kalkhoven
Kevin N. Kalkhoven, Chairman and CEO
(Principal Executive Officer)