1
EXHIBIT 99.1
GALILEO CORPORATION
Important Factors Regarding Forward-Looking Statements
------------------------------------------------------
From time to time, Galileo Corporation, through its management, may make
forward-looking public statements, such as statements concerning then expected
future revenues or earnings or concerning projected plans and performance, as
well as other estimates relating to future operations. Forward-looking
statements may be in reports filed under the Securities Exchange Act of 1934, as
amended, in press releases or in oral statements made with the approval of an
authorized executive officer. The words or phrases "will likely result," "are
expected to," "will continue," "is anticipated," "estimate," "believes,"
"project," or similar expressions are intended to identify "forward-looking
statements" within the meaning of Section 21E of the Securities Exchange Act of
1934 and Section 27A of the Securities Act of 1933, as enacted by the Private
Securities Litigation Reform Act. of 1995.
The Company wishes to caution readers not to place undue reliance on these
forward-looking statements which speak only as of the date on which they are
made. In addition, the Company wishes to advise readers that the factors listed
below, as well as other factors not currently identified by management, could
affect the Company's financial or other performance and could cause the
Company's actual results for the future periods to differ materially from any
opinions or statements expressed with respect to future periods or events in any
current statements.
The Company will not undertake and specifically declines any obligation to
publicly release the result of any revisions which may be made to any
forward-looking statements to reflect events or circumstances after the date of
such statements or to reflect the occurrence of anticipated or unanticipated
events which may cause management to re-evaluate such forward-looking
statements.
In connection with the "safe-harbor" provisions of the Private Securities
Litigation Reform Act of 1995, the Company is hereby filing cautionary
statements identifying factors that could cause the Company's actual results to
differ from those projected in forward-looking statements of the Company, made
by or on behalf of the Company.
LOSS OF A SIGNIFICANT CUSTOMER
On February 11, 1997, the Company received written notification from its
largest customer, Xerox Corporation, that Xerox has developed internal
production capabilities for dicorotron assemblies and will no longer purchase
these assemblies form the Company. These assemblies accounted for
approximately $20.4 million, or 48% of the Company's revenues of
16
2
$42.6 million for fiscal 1996 and approximately $3.8 million, or 39%, of the
Company's revenues of $9.7 million for the quarter ended December 31, 1996.
Reduced revenues from this product will materially adversely affect the
Company's financial performance for at least the remainder of fiscal 1997 and
likely will result in a loss for the fiscal year. There can be no assurance
whether or how quickly the Company will be able to replace this business.
TECHNOLOGICAL CHANGE AND NEW PRODUCT DEVELOPMENT
The market for the Company's products is characterized by rapidly changing
technology. The Company's future success will continue to depend upon its
ability to enhance its current products and to develop and introduce new
products that keep pace with technological developments and evolving industry
standards, respond to changes in customer requirements and achieve market
acceptance. Any failure by the Company to anticipate or respond adequately to
technological developments and customer requirements, or any significant delays
in product development or introduction, could have a material adverse effect on
the Company's business, financial condition and results of operations. In order
to develop new products successfully, the Company is dependent upon close
relationships with its customers and their willingness to share proprietary
information with the Company. There can be no assurance that the Company's
customers will continue to provide it with timely access to such information or
that the Company will be successful in developing and marketing new products and
services or product and service enhancements in a timely manner and respond
effectively to technological changes or new product announcements by others. In
addition, there can be no assurance that the new products and services or
product and service enhancements, if any, developed by the Company will achieve
market acceptance.
ACHIEVEMENT OF STRATEGIC PLAN
As part of its strategic plan, the Company is seeking to grow through
acquisitions. The Company regularly reviews various acquisition prospects of
business, technologies or products complementary to the Company's business and
periodically engages in discussions regarding such possible acquisitions.
Acquisitions involve numerous risks, including difficulties in the assimilation
of the operations and products of the acquired companies, the ability to manage
effectively geographically remote units, the diversion of management's attention
from other business concerns, risks of entering markets in which the Company has
limited or no direct experience and the potential loss of key employees of the
acquired companies. In addition, acquisitions may result in dilutive issuances
of equity securities, the incurrance of debt, reduction in 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 and results of operations.
17
3
Although management expects to carefully analyze any such opportunity before
committing the Company's resources, there can be no assurance that the Company
will be successful in making acquisitions, that the prices and terms of any
acquisitions will be favorable to the Company, that any completed acquisition
will result in long-term benefits to the Company or that the Company's
management will be able to manage effectively the resulting businesses.
COMPETITION
The Company's competitive position depends primarily on the technological
development of its products, as well as on service, quality and price. Some of
the Company's competitors are major corporations, or divisions of major
corporations, which have greater financial, technological and personnel
resources than the Company and may represent significant competition for the
Company. Such companies may succeed in developing technologies and products that
are more effective or less costly than any of those that may be developed by the
Company, and such companies may be more successful than the Company in
developing, manufacturing and marketing products. There can be no assurance that
the Company will be able to compete successfully in the future or that
developments by others will not render the Company's products obsolete or
non-competitive or that the Company's customers will not choose to use competing
technologies or products. Further, the entry of new competitors into the markets
for the Company's products could cause downward pressure on the prices of such
products and a material adverse effect on the Company's business, financial
condition and results of operations.
DEPENDENCE ON PROPRIETARY TECHNOLOGY
Although the Company does not believe that its success is dependent upon the
protection offered by patents, the Company possesses many patents which relate
to its technology. There can be no assurance that the steps taken by the Company
to protect its proprietary technology will be adequate to prevent
misappropriation of its technology by third parties or will be adequate under
the laws of some foreign countries, which may not protect the Company's
proprietary rights to the same extent as do laws of the United States. In
addition, there remains the possibility that others will "reverse engineer" the
Company's products in order to determine their method of operation and introduce
competing products or that others will develop competing technology
independently. Any such adverse circumstances could have a material adverse
effect on the Company's business, financial condition and results of operations.
Further, some of the markets in which the Company competes are characterized by
the existence of a large number of patents and frequent litigation for financial
gain that is based on patents with broad, and often questionable, application.
As the number of its products increases, the markets in which its products are
sold expands, and the functionality of those products grows and overlaps with
products offered by competitors, the Company believes that it may become
increasingly subject to infringement claims. Although the Company does not
believe any of its products or proprietary rights infringe the rights of third
parties, there can be no assurance that infringement claims will not be asserted
against the
18
4
Company in the future or that any such claims will not require the Company to
enter into royalty arrangements or result in costly litigation.
The Company also relies upon trade secrets, technical know-how and continuing
technological innovation to develop and maintain its competitive position. The
Company typically requires its employees, consultants and advisors to execute
confidentiality and assignment of inventions agreements in connection with their
employment, consulting or advisory relationships with the Company. There can be
no assurance, however, that these agreements will not be breached or that the
Company will have adequate remedies for any breach. Furthermore, there can be no
assurance that competitors will not independently develop substantially
equivalent proprietary information and techniques or otherwise gain access to
the Company's proprietary technology, or that the Company can meaningfully
protect its rights in unpatented proprietary technology. Several of the
Company's management and scientific personnel were formerly associated with
competitive companies. In some cases, these individuals are conducting research
in similar areas with which they were involved prior to joining the Company. As
a result, the Company, as well as these individuals, could be subject to claims
of violation of trade secrets and similar claims.
The Company intends to vigorously protect and defend its intellectual property.
Costly and time-consuming litigation brought by the Company may be necessary to
enforce patents issued to the Company, to protect trade secrets or know-how
owned by the Company, or to determine the enforceability, scope and validity of
the proprietary rights of others.
POTENTIAL PRODUCT LIABILITY EXPOSURE AND INSURANCE
The Company's products, particularly its Medical Products, may expose the
Company to product liability claims, and there can be no assurance that the
Company will not experience material product liability losses in the future. The
Company currently has product liability insurance coverage for the commercial
sale of its products. However, a successful claim brought against the Company in
excess of available insurance coverage, or a claim or product recall that
results in significant adverse publicity against the Company, may have a
material adverse effect on the Company's business, financial condition and
results of operations.
19