FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] Quarterly Report under Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended, September 30, 1996
[ ] 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: 0-16195
II-VI INCORPORATED
(Exact name of registrant as specified in its charter)
PENNSYLVANIA 25-1214948
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
375 Saxonburg Boulevard
Saxonburg, PA 16056 16056
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 412-352-4455
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 the latest practicable date:
At November 7, 1996, 6,362,296 shares of Common Stock, no par value,
of the registrant were outstanding.
II-VI INCORPORATED AND SUBSIDIARIES
-----------------------------------
INDEX
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Page No.
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<S> <C>
PART 1 FINANCIAL INFORMATION
Item 1. Financial Statements.
Independent Accountants' Report. . . . . . . . . . 3
Condensed Consolidated Balance Sheets -
September 30, 1996, and June 30, 1996. . . . . . . 4
Condensed Consolidated Statements of Earnings -
Three months ended September 30, 1996
and 1995 . . . . . . . . . . . . . . . . . . . . . 5
Condensed Consolidated Statements of
Shareholders' Equity - Three months ended
September 30, 1996 . . . . . . . . . . . . . . . . 6
Condensed Consolidated Statements of
Cash Flows - Three months ended
September 30, 1996 and 1995. . . . . . . . . . . . 7
Notes to Condensed Consolidated
Financial Statements . . . . . . . . . . . . . . . 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations. . . 10
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K . . . . 12
</TABLE>
2
[LOGO OF ALPERN, ROSENTHAL & COMPANY]
Certified Public Accountants
Warner Centre, Suite 400 . 332 Fifth Avenue
Pittsburgh, Pennsylvania 15222-2413
(412) 281-2501 . Fax (412) 471-1996
Independent Accountants' Report
To the Board of Directors and
Shareholders of II-VI Incorporated
Saxonburg, Pennsylvania
We have reviewed the accompanying condensed consolidated balance sheet
of II-VI Incorporated and Subsidiaries as of September 30, 1996, and the
related condensed consolidated statements of earnings, shareholders'
equity and cash flows for the three month periods ended September 30,
1996 and 1995. These financial statements are the responsibility of the
Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical
procedures to financial data and of making inquiries of persons
responsible for financial and accounting matters. It is substantially
less in scope than an audit conducted in accordance with generally
accepted auditing standards, the objective of which is the expression of
an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to such condensed consolidated financial statements for
them to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted
auditing standards, the consolidated balance sheets of II-VI
Incorporated and Subsidiaries as of June 30, 1996, and the related
consolidated statements of earnings, shareholders' equity and cash flows
for the year then ended (not presented herein); and in our report dated
August 12, 1996, we expressed an unqualified opinion on those
consolidated financial statements. In our opinion, the information set
forth in the accompanying condensed consolidated balance sheet as of
June 30, 1996 is fairly stated, in all material respects, in relation to
the consolidated balance sheet from which it has been derived.
/s/ Alpern, Rosenthal & Company
October 16, 1996
A Professional Corporation
- ----------------------------------------------------------------
Members American and Pennsylvania
Institutes of Certified Public Accountants
Accounting Firms Associated, inc.
Member Firms in Principal Cities
<TABLE>
<S> <C>
Irving P. Rosenthal, CPA Deborah H. Wells, CPA
Michael H. Levin, CPA Fred M. Rock, CPA
Harvey A. Pollack, CPA Sean M. Brennan, CPA
Fred J. Morelli, Jr., CPA Alexander Paul, CPA
Edward F. Rockman, CPA Michael E. Forgas, CPA
Emanuel V. DiNatale, CPA Joel M. Rosenthal, CPA
</TABLE>
3
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
- ------------------------------------------------
II-VI Incorporated and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited)
($000 except share data)
<TABLE>
<CAPTION>
September 30 June 30
Assets 1996 1996
------------ -----------
<S> <C> <C>
Current Assets
Cash and equivalents $ 8,606 $ 9,417
Accounts receivable - less allowance for doubtful
accounts of $256 at 9/30/96 and $246 at 6/30/96 9,177 8,712
Inventories 6,004 5,490
Deferred income taxes 429 429
Prepaid and other current assets 720 607
------- -------
Total Current Assets 24,936 24,655
Property, Plant & Equipment, net 15,762 15,085
Goodwill 2,126 2,138
Other Assets 2,227 2,291
------- -------
$45,051 $44,169
------- -------
Liabilities and Shareholders' Equity
Current Liabilities
Notes payable $ 1,167 $ 1,393
Accounts payable - trade 1,276 1,260
Accrued salaries, wages and bonuses 1,770 3,105
Income taxes payable 950 607
Accrued profit sharing contribution 207 556
Other current liabilities 993 1,024
Current portion of long-term debt 73 23
------- -------
Total Current Liabilities 6,436 7,968
Long-Term Debt--less current portion 731 45
Deferred Income Taxes 1,753 1,753
Commitments & Contingencies - -
Shareholders' Equity
Preferred stock, no par value; authorized -
5,000,000 shares; unissued - -
Common stock, no par value; authorized
- 30,000,000 shares; issued - 6,720,636 shares in
September 1996; 6,691,718 shares in June 1996 17,121 17,055
Cumulative Translation Adjustment 81 79
Retained Earnings 19,691 18,031
------- -------
36,893 35,165
Less treasury stock, at cost - 384,440 shares at
9/30/96 and 6/30/96. 762 762
------- -------
36,131 34,403
------- -------
$45,051 $44,169
------- -------
</TABLE>
[FN]
- -See notes to condensed consolidated financial statements.
4
II-VI Incorporated and Subsidiaries
Condensed Consolidated Statements of Earnings
(Unaudited)
($000 except per share data)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
1996 1995
-------- --------
<S> <C> <C>
Revenues
Net Sales:
Domestic $ 6,772 $ 4,237
International 4,820 3,720
------- -------
11,592 7,957
Contract research and development 518 131
------- -------
12,110 8,088
------- -------
Costs, Expenses & Other Income
Cost of goods sold 6,348 4,556
Contract research and development 395 101
Internal research and development 124 148
Selling, general and administrative expenses 3,030 2,131
Interest and other (income) expense - net (125) 16
------- -------
9,772 6,952
------- -------
Earnings Before Income Taxes 2,338 1,136
Income Tax Expense 678 330
------- -------
Net Earnings $ 1,660 $ 806
------- -------
Earnings Per Share $ 0.25 $ 0.15
------- -------
</TABLE>
[FN]
- -See notes to condensed consolidated financial statements.
5
II-VI Incorporated and Subsidiaries
Condensed Consolidated Statement of Shareholders' Equity (Unaudited)
(000)
II-VI Incorporated and Subsidiaries
Condensed Consolidated Statement of Shareholders' Equity (Unaudited)
(000)
<TABLE>
<CAPTION>
Common Stock Cumulative Treasury Stock
-------------- Translation Retained ----------------
Shares Amount Adjustment Earnings Shares Amount Total
------ ------ ----------- -------- ------- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Balance--July 1, 1996 6,692 $17,055 $ 79 $ 18,031 (384) $ (762) $34,403
Shares issued under stock option plan 29 66 - - - - 66
Net earnings for the quarter - - - 1,660 - - 1,660
Translation adjustment - - 2 - - - 2
------ ------ ----------- -------- ------- -------- -------
Balance-- September 30, 1996 6,721 $17,121 $ 81 $ 19,691 (384) $ (762) $36,131
</TABLE>
[FN]
- -See notes to condensed consolidated financial statements.
6
II-VI Incorporated and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
($000)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
1996 1995
------- -------
<S> <C> <C>
Cash Flows from Operating Activities
Net Earnings $ 1,660 $ 806
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 816 593
(Gain) loss on foreign currency transactions (58) 39
Deferred income taxes - (38)
Increase (decrease) in cash from changes in:
Accounts receivable (456) (405)
Inventories (525) (221)
Accounts payable 43 346
Accrued salaries, wages and bonuses (1,336) (923)
Accrued profit sharing contribution (349) (187)
Income taxes payable 343 (21)
Other operating net assets (132) (175)
------- -------
Net cash provided by (used in) operating activities 6 (186)
------- -------
Cash Flows from Investing Activities
Additions to property, plant, & equipment (1,407) (2,482)
Additions to other assets (9) -
------- -------
Net cash used in investing activities (1,416) (2,482)
------- -------
Cash Flows from Financing Activities
Payments on short-term borrowings (202) -
Proceeds from long-term borrowings 741 -
Payments on long-term borrowings (6) (57)
Proceeds from sale of common stock 66 51
------- -------
Net cash provided by (used in) financing activities 599 (6)
------- -------
Net decrease in cash and equivalents (811) (2,674)
Cash and Equivalents at Beginning of period 9,417 3,822
------- -------
Cash and Equivalents at End of period $ 8,606 $ 1,148
------- -------
</TABLE>
[FN]
- -See notes to condensed consolidated financial statements.
7
II-VI Incorporated and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
Note A - Basis of Presentation
The condensed consolidated financial statements for the three
month periods ended September 30, 1996 and 1995 are unaudited.
In the opinion of management, all adjustments (consisting of
normal recurring accruals) considered necessary for a fair
presentation for the periods presented have been included.
These interim statements should be read in conjunction with the
audited consolidated financial statements and footnotes thereto
contained in the Company's 1996 Annual Report to the
shareholders. The consolidated results of operations for the
three month periods ended September 30, 1996 and 1995 are not
necessarily indicative of the results to be expected for the
full year.
Note B - Inventories ($000)
The components of inventories are as follows:
September 30 June 30
1996 1996
Raw Materials $ 2,464 $ 2,279
Work in Progress 1,550 1,427
Finished Goods 1,990 1,784
-------- -------
$ 6,004 $ 5,490
-------- -------
Note C - Property, Plant and Equipment ($000)
Property, plant and equipment consist of the following:
September 30 June 30
1996 1996
Land and land improvements $ 545 $ 539
Buildings and improvements 7,139 6,952
Machinery and equipment 23,298 22,084
------- -------
30,982 29,575
Less accumulated depreciation 15,220 14,490
------- -------
$15,762 $15,085
------- -------
8
II-VI Incorporated and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
Note D - Debt
In September of 1996, the Company secured a $741,000 low
interest rate loan from the Pennsylvania Industrial Development
Authority to finance a portion of a facility expansion. The
terms of the loan call for equal monthly payments over a
fifteen year period, including interest at three percent.
9
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
- ---------------------
Net earnings for the first quarter of fiscal 1997 were $1,660,000 ($0.25
per share) on revenues of $12,110,000. This compares to net earnings of
$806,000 ($0.15 per share) on revenues of $8,088,000 in the first
quarter of fiscal 1996. The increased earnings were driven by the
improved revenue volume.
Order bookings for the first quarter were $12,927,000 compared to
$8,017,000 for the same period last fiscal year, an increase of 61%.
Approximately two-thirds of this increase was from the VLOC operation
and included $1.1 million of Research and Development contract awards.
The remaining increase was attributable to increased demand for infrared
optics and materials in the worldwide industrial market and the
military/aerospace market, in conjunction with improved bookings in the
eV PRODUCTS division. As indicated in the Company's press release
announcing the first quarter results, overall market demand for the
Company's products continues its strong growth.
Manufacturing revenues for the first quarter increased 46% to
$11,592,000 compared to $7,957,000 for the same period last fiscal year.
This increase was the result of improved shipments in all of the markets
served by the Company with the VLOC operation contributing more than one
half of the increase.
Manufacturing gross margin for the first quarter was $5,244,000 or 45%
of revenues compared to $3,401,000 or 43% of revenues for the first
quarter of fiscal 1996. Improved manufacturing efficiency in the VLOC
operation was the primary driver to the increased gross margin as a
percentage of revenues. This was partially offset by the further
strengthening of the U.S. dollar against the Japanese Yen.
Selling, General and Administrative expenses for the quarter were
$3,030,000 or 25% of revenues compared to $2,131,000 or 26% of revenues
for last fiscal year's first quarter. The increase in expense is
attributable to increased expenses in the VLOC operation, higher
compensation expense associated with the Company's world-wide profit
driven bonus programs and higher general and administrative expenses
needed to support the Company's growth.
Other income increased by $141,000 in comparison to last fiscal year's
first quarter due to investment earnings on increased cash balances. The
increased cash is primarily due to the October 1995 public stock
offering.
The Company's first quarter effective income tax rate is 29%, the same
as last fiscal year's first quarter.
Liquidity and Capital Resources
- -------------------------------
Cash decreased during the first three months of fiscal 1997 by $800,000
primarily from $1,407,000 in capital expenditures being partially offset
by $741,000 of financing from a low interest rate loan with the
Pennsylvania Industrial Development Authority.
The capital expenditures focused on improved capacity, process
automation and the start up of the Company's China operation.
The Company generated $6,000 in cash from operations for the first
quarter of fiscal 1997, as cash generated from net earnings before
depreciation and amortization was offset by the payment of compensation
costs relating to the Company's fiscal 1996 world-wide profit-driven
bonus and retirement programs, and increases in inventories and accounts
receivable needed to support the growth in sales volume.
The current cash balance will be used for working capital needs, further
capital expenditures, and possible acquisitions of complementary
businesses, products or technologies.
10
This Management's Discussion and Analysis contains forward looking
statements as defined by Section 21E of the Securities Exchange Act of
1934, including the statement regarding strong demand for the Company's
products. The projected strong demand for our products could differ
from our statements if worldwide economic conditions change, competitive
conditions intensify, technology problems emerge, and/or if suitable
acquisitions of technologies or business cannot be consummated. There
are additional risk factors that could affect the Company's business,
results of operations or financial condition. Investors are encouraged
to review the risk factors set forth in the Company's Form 10-K filed on
September 24, 1996.
11
PART II - OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
--------
10.01 II-VI Incorporated Amended and Restated
Stock Option Plan of 1990 . . . . . . . . Filed herewith.
15.01 Accountant's acknowledgment letter dated
November 12, 1996 . . . . . . . . . . . . Filed herewith.
27.01 Financial Data Schedule . . . . . . . . . Filed herewith.
99.01 Press release dated October 17, 1996. . . Filed herewith.
(b) Reports on Form 8-K.
None
12
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.
II-VI INCORPORATED
(Registrant)
Date: November 12, 1996 By: /s/ Carl J. Johnson
-----------------------
Carl J. Johnson
Chairman and Chief
Executive Officer
Date: November 12, 1996 By: /s/ James Martinelli
-----------------------
James Martinelli
Treasurer &
Chief Financial Officer
EXHIBIT INDEX
Exhibit No.
10.01 II-VI Incorporated Amended and Restated
Stock Option Plan of 1990 . . . . . . . . Filed herewith.
15.01 Accountant's acknowledgment letter dated
November 12, 1996 . . . . . . . . . . . . Filed herewith.
27.01 Financial Data Schedule . . . . . . . . . Filed herewith.
99.01 Press release dated October 17, 1996. . . Filed herewith.
14
[Amended as of August 16, 1996]
II-VI INCORPORATED
STOCK OPTION PLAN OF 1990
Section 1. Amendment. Upon the effective date set
forth in Section 13, the II-VI Incorporated Stock Option Plan of
1987 is hereby amended and restated as the II-VI Incorporated
Stock Option Plan of 1990 (hereinafter called the "Plan"). Under
the Plan, directors, officers and key employees of II-VI
Incorporated (hereinafter called the "Company") and its
subsidiaries, if any, who are responsible for its continued growth
and development and future financial success of the Company may be
granted options to purchase shares of common stock of the Company
in order to secure to the Company the advantages of the incentive
and sense of proprietorship inherent in stock ownership by such
persons.
Section 2. Duration. All options granted under this
Plan must be granted within ten years of August 25, 1990. Any
options outstanding after the expiration of such ten-year period
may be exercised within the periods prescribed by Section 8.
Section 3. Administration. The Plan shall be
administered by the Board of Directors of the Company or, at the
election of the Board of Directors, by a committee of the Board of
Directors (the "Administrator") constituted so as to comply with
Rule 16b-3 promulgated under Section 16 of the Securities Exchange
Act of 1934, as amended, as such rule may be amended from time-to-
time, or any successor rule. In the event that the Administrator
is a committee of the Board of Directors, a majority of the
committee shall constitute a quorum and the acts of a majority of
the members present at any meeting at which a quorum is present or
acts approved in writing by a majority of the committee shall be
deemed the acts of the committee. Subject to the provisions of
the Plan and to policies determined by the Board of Directors, the
Administrator is authorized to adopt such rules and regulations
and to take such action in the administration of the Plan as it
shall deem proper.
Section 4. Eligibility. Directors, officers and key
employees of the Company and its subsidiaries, if any (including
officers and employees who are directors of the Company), who, in
the opinion of the Administrator, are mainly responsible for the
continued growth and development and future financial success of
the business shall be eligible to participate in the Plan. The
Administrator shall, in its sole discretion, from time to time,
select from such eligible persons whose to whom options shall be
granted and determine the number of shares to be included in such
option. No officer or employee shall have any right to receive an
option, except as the Administrator in its discretion shall
determine. The terms "subsidiaries" and "parent" where used in
the Plan or in any stock option agreement entered into under the
Plan means a "subsidiary corporation" or a "parent corporation"
respectively as defined in Section 424 of the Internal Revenue
Code of 1986, as it may be amended from time to time (the "Code").
Section 5. Shares Subject to Plan. Inclusive of
options granted under this Plan prior to amendment hereby, options
may be granted pursuant to the Plan to purchase up to 1,240,000
shares of no par value common stock of the Company (subject to
adjustment as provided in Section 9), which may be either
authorized and unissued shares or shares held in the treasury of
the Company. To the extent that options granted under the Plan
(including options granted under the Plan prior to amendment
hereby) shall expire or terminate without being exercised shares
covered thereby shall remain available for purposes of the Plan.
Section 6. Types of Options. Options granted pursuant
to the Plan may be either options which are intended to be treated
as incentive stock options under Section 422 of the Code
(hereinafter called "Incentive Stock Options") of other options
not intended to be treated as incentive stock options under
Section 422 of the Code (hereinafter called "Nonstatutory Stock
Options"). Incentive Stock Options and Nonstatutory Stock Options
shall be granted separately hereunder. Subject to the foregoing,
the Administrator shall determine, in its sole discretion, whether
and to what extent options granted under the Plan shall be
Incentive Stock Options or Nonstatutory Stock Options.
Section 7. Authority of Administrator. The
Administrator, in its sole discretion, may permit an optionee
voluntarily to surrender for cancellation an option granted under
the Plan, such surrender to be conditioned upon the granting to
such optionee of a new option under the Plan for the same or a
different number of shares as the option surrendered, or may
require such voluntary surrender as condition precedent to the
grant of a new option to such optionee. Any such new option shall
be exercisable at the price, during the period, and in accordance
with any other terms and conditions specified by the Administrator
at the time the new option is granted, all determined in
accordance with the provisions of the Plan without regard to the
price, period of exercise, or any other terms or conditions of the
option surrendered for cancellation. The grant of such new option
shall not be deemed an amendment of the Plan or the option
surrendered. For purposes of Section 5 hereof, options granted
under this Plan and subsequently surrendered for cancellation
shall be deemed to have terminated without being exercised.
Section 8. Terms of Options. Each option granted
under the Plan shall be evidenced by a stock option agreement
between the Company and the person to whom such option is granted
designating the option as either an Incentive Stock Option or a
Nonstatutory Stock Option and shall be subject to the following
terms and conditions:
(a) Subject to adjustment as provided in Section
9 of this Plan, the price at which each share covered by an option
may be purchased shall be determined in each case by the committee
but shall not be less than the fair market value thereof at the
time the option is granted. If an optionee owns (or is deemed to
own under applicable provisions of the Code and rules and
regulations promulgated thereunder) more than 10% of the combined
voting power of all classes of the stock of the Company (or any
parent or subsidiary of the Company) and an option granted to such
optionee is designated as an Incentive Stock Option, the option
price shall be no less than 110% of the fair market value of the
shares covered by the option on the date the option is granted.
(b) During the lifetime of the optionee the
option may be exercised only by the optionee. The option shall
not be transferable by the optionee otherwise than by will or by
the laws of descent and distribution.
(c) An option may be exercised in whole at any
time, or in part from time to time, within such period or periods
not to exceed ten years from the granting of the option as may be
determined by the Administrator and set forth in the stock option
agreement (such period or periods being hereinafter referred to as
the "option period"), provided that all options will terminate if
the optionee shall cease to be employed by the Company or any of
its subsidiaries except as follows:
(i) if the optionee shall cease to be
employed by the Company or any of its subsidiaries because of
early, normal or late retirement, as those terms are defined in
the Company's profit sharing plan, the option may be exercised
only within three years after the termination of employment and
only within the option period;
(ii) if the optionee shall cease to be
employed by the Company or any of its subsidiaries because of a
total and permanent disability as that term is defined in Section
22(e)(3) of the Code, the option may be exercised only within
twelve months after the termination and only within the option
period; and
(iii) if the optionee shall die, the option
may be exercised only within twelve months after the optionee's
death and only within the option period (and only within the
period set forth in subparagraph (i) hereof if such death follows
a termination of employment other than for a total and permanent
disability; or only within the period set forth in subparagraph
(ii) hereof if such death follows a termination of employment due
to a total and permanent disability as set forth in subparagraph
(ii)) and only by the optionee's personal representatives or
persons entitled thereto under the optionee's will or the laws of
descent and distribution.
(d) The option may not be exercised for more
shares (subject to adjustment as provided in Section 9) after the
termination of the optionee's employment or the optionee's death
than the optionee was entitled to purchase thereunder at the time
of the termination of the optionee's employment or the optionee's
death.
(e) If an optionee owns (or is deemed to own
under applicable provisions of the Code and rules and regulations
promulgated thereunder) more than 10% of the combined voting power
of all classes of stock of the Company (or any parent or
subsidiary of the Company) and an option granted to such optionee
is designated as an Incentive Stock Option, the option by its
terms may not be exercisable after the expiration of five years
from the date such option is granted.
(f) The option price of each share purchased
pursuant to an option shall be paid in full at the time of each
exercise of the option either (i) in cash, (ii) by delivering to
the Company shares of the common stock of the Company having an
aggregate fair market value equal to the option price of such
shares being purchased; or, (iii) by delivering a combination of
the foregoing having an aggregate fair market value equal to the
option price of such shares being purchased.
(g) Nothing contained in the Plan or in any stock
option agreement shall confer upon any optionee any right with
respect to the continuance of employment by the Company or any
subsidiary or interfere in any way with the right of the Company
or any subsidiary to terminate his employment or change his
compensation at any time.
(h) If the optionee terminates his employment
with the Company or a subsidiary for any reason, and commences
employment with a Competitor of the Company or a subsidiary within
twelve months of the date the option is exercised, the optionee
shall return to the Company the shares acquired pursuant to such
exercise and the Company shall return the purchase price of such
shares in cash or certified check within thirty days after the
optionee commences such employment with a Competitor. If the
optionee has sold such shares, then he agrees to pay to the
company, in cash or certified funds, an amount equal to the
proceeds received by the optionee on the sale of such shares less
the amount which the optionee paid for such shares on the exercise
of the option. Such amount shall be paid to the Company within
thirty days after the optionee commences his employment with the
Competitor. For the purpose of this Plan, a "Competitor" shall
mean any corporation, partnership, sole proprietorship or other
entity who sells, manufactures, produces or modifies a product or
products similar to, the same as or a substitute for any product
or products sold by the Company or any subsidiary.
(i) A stock option agreement may contain
such other terms and conditions not inconsistent with the
foregoing as the Administrator shall approve for any or all
options granted hereunder, including a vesting restriction on
exercise for some or all of the shares subject to the option for
certain periods of time not to exceed five years.
Section 9. Adjustment of Number and Price of Shares.
(a) In the event that a dividend shall be
declared upon the common stock of the Company payable in shares of
said stock, including any such dividend declared prior to the
effective date of this amendment to the Plan, the number of shares
of common stock covered by each outstanding option and the number
of shares available for issuance pursuant to the Plan but not yet
covered by an option shall be adjusted by adding thereto the
number of shares which would have been distributable thereon if
such shares had been outstanding on the date fixed for determining
the shareholders entitled to receive such stock dividend.
(b) In the event that the outstanding shares of
common stock of the Company shall be changed into or exchanged for
a different number or kind of shares of stock or other securities
of the Company or of another corporation, whether through
reorganization, recapitalization, stock split-up, combination of
shares, merger or consolidation, then there shall be substituted
for the shares of common stock covered by each outstanding option
and for the shares available for issuance pursuant to the Plan but
not yet covered by an option, the number and kind of shares of
stock or other securities which would have been substituted
therefor if such shares had been outstanding on the date fixed for
determining the shareholders entitled to receive such changed or
substituted stock or other securities.
(c) In the event there shall be any change, other
than specified above in this Section 9, in the number or kind of
outstanding shares of common stock of the Company or of any stock
or other securities into which such common stock shall be changed
or for which it shall have been exchanged, then, if the Board of
Directors shall determine, in its discretion, that such change
equitably requires an adjustment in the number or kind of shares
covered by an option, such adjustment shall be made by the Board
of Directors and shall be effective and binding for all purposes
of the Plan and on each outstanding stock option agreement.
(d) In the event that, by reason of a corporate
merger, consolidation, acquisition of property or stock,
separation, reorganization or liquidation, the Board of Directors
shall authorize the issuance or assumption of a stock option or
stock options in a transaction to which Section 424(a) of the Code
applies, then, notwithstanding any other provision of the Plan,
the Committee may grant an option or options upon such terms and
conditions as it may deem appropriate for the purpose of
assumption of the old option, or substitution of a new option for
the old option, in conformity with the provisions of such Section
424(a) and the regulations thereunder, as they may be amended from
time to time.
(e) No adjustment or substitution provided for in
this Section 9 shall require the Company to issue or to sell a
fractional share under any stock option agreement and the total
adjustment or substitution with respect to each stock option
agreement shall be limited accordingly.
(f) In the case of any adjustment or substitution
provided for in this Section 9, the option price per share in each
stock option agreement shall be equitably adjusted by the Board of
Directors to reflect the greater or lesser number of shares of
stock or other securities into which the stock covered by the
option may have been changed or which may have been substituted
therefor.
Section 10. Fair Market Value. In any determination
of fair market value under this Plan, fair market value shall be
deemed to be (i) if there quoted, the closing price on the
National Association of Securities Dealers Automated Quotation-
National Market System, for the no par value common stock of the
Company for the date in question, or if no sales were made on that
date, on the next preceding date on which sales were made, or (ii)
the mean between the bid and the asked price as quoted by the
National Association of Securities Dealers Automated Quotation
System.
Section 11. Amendment and Discontinuance. The Board
of Directors may alter, amend, suspend or discontinue the Plan,
provided that no such action shall deprive any person without such
person's consent of any rights theretofore granted pursuant
hereto. Except as provided in Section 9, the Board of Directors
shall submit any amendment to the Plan to the stockholders of the
Company for approval only if (i) required by law, or (ii)
considered advisable or necessary by the Board of Directors.
Section 12. Compliance with Governmental Regulations.
(a) Notwithstanding any provision of the Plan or
the terms of any stock option agreement issued under the Plan, the
Company shall not be required to issue any shares hereunder prior
to registration of the shares subject to the Plan under the
Securities Act of 1933 or the Securities Exchange Act of 1934, if
such registration shall be necessary, or before compliance by the
Company of any participant with any other provisions of either of
those acts or of regulations or rulings of the Securities and
Exchange Commission thereunder, or before compliance with all
other federal and state laws and regulations and rulings
thereunder.
(b) The Company shall use its best efforts to
effect such registrations (except as otherwise provided in
paragraph (c) hereof) and to comply with such laws, regulations
and rulings forthwith upon advice by its counsel that any such
registration or compliance is necessary.
(c) The Company may, based upon advice by counsel
to the Company, require an optionee to make such representations
and warranties at the time of exercise of a stock option granted
under the Plan as shall be necessary or convenient to cause the
issuance of the shares to such optionee to be in compliance with
such laws, regulations and rulings without registration.
Section 13. Effective Date of Amended Plan. The Plan,
as amended, is effective as of August 25, 1990, subject to
approval and adoption of the amendment to the Plan by the holders
of a majority of the votes cast at the 1990 annual meeting of
stockholders.
[LOGO OF ALPERN, ROSENTHAL & COMPANY]
Certified Public Accountants
Warner Centre, Suite 400 . 332 Fifth Avenue
Pittsburgh, Pennsylvania 15222-2413
(412) 281-2501 . Fax (412) 471-1996
To the Board of Directors and
Shareholders of II-VI Incorporated
Saxonburg, Pennsylvania
We have made a review, in accordance with standards established by
the American Institute of Certified Public Accountants, of the
unaudited interim financial information of II-VI Incorporated and
Subsidiaries for the periods ended September 30, 1996 and 1995, as
indicated in our report dated October 16, 1996; because we did not
perform an audit, we expressed no opinion on that information.
We are aware that our report referred to above, which is included in
your Quarterly Report on Form 10-Q for the quarter ended September 30,
1996, is incorporated by reference in Registration Statements No.
33-19511, No. 33-38019, No. 33-19510 and No. 33-63739 on Form S-8.
We are also are aware that the aforementioned report, pursuant to
Rule 436(c) under the Securities Act of 1933, is not considered a part
of the Registration Statement prepared or certified by an accountant or
a report prepared or certified by an accountant within the meaning of
Sections 7 and 11 of that Act.
/s/ Alpern, Rosenthal & Company
November 12, 1996
A Professional Corporation
- ----------------------------------------------------------------
Members American and Pennsylvania
Institutes of Certified Public Accountants
Accounting Firms Associated, inc.
Member Firms in Principal Cities
<TABLE>
<S> <C>
Irving P. Rosenthal, CPA Deborah H. Wells, CPA
Michael H. Levin, CPA Fred M. Rock, CPA
Harvey A. Pollack, CPA Sean M. Brennan, CPA
Fred J. Morelli, Jr., CPA Alexander Paul, CPA
Edward F. Rockman, CPA Michael E. Forgas, CPA
Emanuel V. DiNatale, CPA Joel M. Rosenthal, CPA
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 8,606
<SECURITIES> 0
<RECEIVABLES> 9,433
<ALLOWANCES> 256
<INVENTORY> 6,004
<CURRENT-ASSETS> 24,936
<PP&E> 30,982
<DEPRECIATION> 15,220
<TOTAL-ASSETS> 45,051
<CURRENT-LIABILITIES> 6,436
<BONDS> 731
0
0
<COMMON> 17,121
<OTHER-SE> 19,772
<TOTAL-LIABILITY-AND-EQUITY> 45,051
<SALES> 12,110
<TOTAL-REVENUES> 12,110
<CGS> 6,743
<TOTAL-COSTS> 6,743
<OTHER-EXPENSES> 3,029
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,338
<INCOME-TAX> 678
<INCOME-CONTINUING> 1,660
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,660
<EPS-PRIMARY> .25
<EPS-DILUTED> 0
</TABLE>
October 17, 1996
Jim Martinelli
Treasurer & Chief Financial Officer
(412) 352-4455
II-VI INCORPORATED ANNOUNCES RECORD FIRST QUARTER RESULTS
PITTSBURGH, PA., October 17, 1996--II-VI Incorporated
(NASDAQ NMS: IIVI) today reported results for its first
fiscal quarter ended September 30, 1996. Net earnings for
the period increased 106% to $1,660,000 ($0.25 per share)
on revenues of $12,110,000. These results compare with net
earnings of $806,000 ($0.15 per share) on revenues of
$8,088,000 in the first quarter of last fiscal year.
Bookings increased 61% to $12,927,000 for the quarter from
$8,017,000 for the same period last year. Approximately
two-thirds of the increase was attributable to bookings
from the VLOC operation and includes $1,100,000 of Research
and Development contract awards. Infrared optics and
materials bookings accounted for most of the remaining
increase. Bookings from the eV PRODUCTS division of nearly
$400,000 doubled last year's first quarter bookings.
Manufacturing revenues increased 46% to $11,592,000 for the
quarter from $7,957,000 for the same period last year.
Increased shipments of the VLOC operation accounted for the
majority of this increase. Improved shipments were recorded
in all of the markets served by the Company.
Manufacturing gross margin was $5,244,000 or 45% of net sales
for the quarter compared to $3,401,000 or 43% of net sales for
the same period last year. Improved manufacturing efficiency
in the VLOC operation was the primary driver to the
increased gross margin as a percentage of revenues. This was
partially offset by the strengthening of the U.S. dollar
against the Japanese yen.
Selling, general and administrative expenses were $3,030,000
or 25% of revenues for the quarter as compared to $2,131,000
or 26% of revenues for the same period last year. The
expense increase is attributable to increased expenses in the
VLOC operation, higher compensation expense associated with
the Company's worldwide profit-driven bonus programs and
higher general and administrative expenses needed to support
the Company's growth.
Francis J. Kramer, president and chief operating officer
stated, "Market demand for our products continues to grow
rapidly. We have invested in all of our manufacturing
operations and have increased the capacity to support this
increased demand. Our focus on quality, service and cost is
aimed at establishing and maintaining leadership positions in
every market we serve."
Headquartered in Saxonburg, Pennsylvania II-VI Incorporated
designs, manufactures and markets optical and electro-optical
components, devices and materials for precision use in
infrared, near infrared, visible light and x-ray instruments
and applications. The Company's infrared products are used in
high-power CO2 (carbon dioxide) lasers for industrial
processing worldwide. The Company's VLOC operation
manufactures near infrared and visible light products used in
industrial, scientific and medical instruments and solid-state
(such as YAG and YLF) lasers. II-VI is also developing and
marketing solid-state x-ray and gamma-ray products for the
nuclear radiation detection industry through its eV PRODUCTS
division.
II-VI Incorporated and Subsidiaries
Condensed Consolidated Statements of Earnings (Unaudited)
($000 except per share data)
Three Months Ended
September 30,
1996 1995
Revenues
Net sales 11,592 7,957
Contract research and development 518 131
12,110 8,088
Costs, Expenses & Other Income
Cost of goods sold 6,348 4,556
Contract research and development 395 101
Internal research and development 124 148
Selling, general and administrative expenses 3,030 2,131
Interest and other (income) expense - net (125) 16
9,772 6,952
Earnings Before Income Taxes 2,338 1,136
Income Tax Expense 678 330
Net Earnings $ 1,660 $ 806
Earnings Per Share $ 0.25 $ 0.15
Average Shares Outstanding 6,743 5,506
II-VI Incorporated and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited)
($000)
September 30, June 30,
Assets 1996 1996
Current Assets
Cash and equivalents $ 8,606 $ 9,417
Accounts receivable 9,177 8,712
Inventories 6,004 5,490
Other current assets 1,149 1,036
Total Current Assets 24,936 24,655
Property, Plant & Equipment, net 15,762 15,085
Other Assets 4,353 4,429
$ 45,051 $ 44,169
Liabilities and Shareholders' Equity
Current Liabilities
Notes payable $ 1,167 $ 1,393
Accounts payable 1,276 1,260
Other current liabilities 3,993 5,315
Total Current Liabilities 6,436 7,968
Long-Term Debt--less current portion 731 45
Deferred Income Taxes 1,753 1,753
Shareholders' Equity 36,131 34,403
$ 45,051 $ 44,169
