Filed by II-VI Incorporated
pursuant to Rule 425 under the
Securities Act of 1933 and
deemed to be filed pursuant to
Rule 14d-2 of the Securities
and Exchange Act of 1934
Subject Company: Laser Power
Corporation Commission File
No.: 000-22625
CONFERENCE CALL
June 6, 2000 @ 10:00 EST
Thank you, Valerie, and welcome to II-VI Incorporated's investor
teleconference. Joining me is Fran Kramer our President and Chief
Operating Officer and Jim Martinelli our Chief Financial Officer.
Fran will present the prepared comments for today's teleconference
which are:
* A review of our offer to purchase Laser Power Corporation
and
* A description of the potential opportunities of the merger for
Shareholders, Employees, and Customers of II-VI and Laser Power.
Following these comments we'll be happy to address any questions.
Fran......
Thank you Carl,
The II-VI offer to purchase Laser Power for $4.30 per share, based
on the yesterday's II-VI closing stock price of $38.00 is a superior
offer to the $4.00 offer made by Union Miniere. Nearly one-half of
the consideration is in II-VI stock which provides current Laser
Power shareholders with upside opportunity as various synergies of
the merged companies are realized, while a floor of $4.05 limits the
downside risk. A maximum value of $5.00 per share is also provided
for in the offer, which, if realized is a full 25% premium to the
offer by Union Miniere.
As stated in the press release we have been interested in merging
with Laser Power for many years. II-VI's keen interest in acquiring
Laser Power is driven by a multifaceted opportunity to enhance the
shareholder value of II-VI. Coupled with this favorable circumstance
is the strong probability that the merger will also substantially
enhance the Laser Power's shareholder value. We believe our plan for
this acquisition will benefit both sets of shareholders, the Laser
Power workforce and customers that Laser Power and II-VI serve.
II-VI is the world's largest producer of ZnSe and also has the
capability and capacity to produce ZnS. These materials, are often
referred as "two-six" compounds, since the elements used to produce
them come from the second and sixth column of chemistry's periodic
table. ZnSe is the material of choice for carbon dioxide laser optics
and ZnS is often the chosen material for optics in infrared military
systems. II-VI is a vertically integrated manufacturer that produces
these materials and transforms them into high quality coated optics.
Laser Power is also a high quality producer of infrared optics for
carbon dioxide lasers and infrared military systems. However, Laser
Power procures the ZnSe and ZnS materials from a third party at a
substantially higher cost than that incurred by II-VI to produce
these materials. The cost to procure these raw materials is as much
as 10 to 15% of a sales dollar. II-VI's cost to produce these
materials is a fraction of this figure and may be a as low as one-half
of the cost currently being incurred by Laser Power. A Laser Power/
II-VI merger will benefit from the substantial cost savings of
producing this material internally.
The manufacturing prowess of a combined II-VI and Laser Power will
be advantageous for the marketplace we serve. II-VI has manufacturing
facilities for the infrared optics product line in Pennsylvania,
Singapore and China. A substantial portion of our manufacturing
base is installed in Asia. On the other hand Laser Power has a
strong manufacturing base in California, Mexico and Europe. We
believe these operations are complementary and intend to effectively
utilize all of the locations.
II-VI currently employees in excess of 800 personnel worldwide and
expects to increase employment by 25% in the next 12 months. We must
increase capacity to meet the robust order rate being enjoyed.
Laser Power employs approximately 200. The challenge to hire fully
trained opticians is substantial. It often takes 2 plus years to
train an optician, a thin-film coating operator, a diamond turning
machinist or a senior level technician. II-VI intends to retain
the personnel currently employed at Laser Power. Many of the
individuals are fully trained and have earned Laser Power the
reputation of a high quality, proven supplier of military infrared
optics and carbon dioxide laser optics. Job opportunities for Laser
Power employees after this potential merger will be increased as
II-VI is committed to this business and intends to expand capacity
throughout the world to better serve the market. We believe there
will be many synergies realized by our combined teams as production
is increased worldwide, while focusing the various sites on the
products that each specific site can most cost effectively manufacture.
The sales, marketing and distribution costs for carbon dioxide laser
optics can range from 15 to 30% of a sales dollar. Both II-VI and
Laser Power have global sales, marketing and distribution networks.
Substantial savings should be realized by combining these networks.
II-VI has a very strong direct selling presence in Asia/Japan, while
Laser Power does not. In that region of the world, it is possible
that distribution costs on Laser Power products will be reduced from
the high end of the distribution cost range to the low end.
Reducing costs through the elimination of the redundant expenses
associated with two public companies is an expected benefit of this
merger. Reductions in professional service fees, and savings from
optimizing administrative functions are also are anticipated.
The infrared optics market, like other laser optics market segments
and even the telecom optics market segment, are affected by yields.
The combined II-VI and Laser Power entity will have more infrared
knowledgeable engineers, material scientists and thin film coating
scientists than any other independent public company. We expect
to realize yield improvements as the know-how of the two organizations
is exchanged. Efficiency, productivity and gross margins will be
positively affected. Throughput increases should allow more
favorable coverage of fixed costs and improved on time delivery of
products to our customers.
In summary the merger should provide synergies that include;
* 1st--Reduced costs of ZnSe and ZnS material (5 to 7% of sales).
* 2nd--Worldwide manufacturing optimization affecting (1 to 2 % of sales).
* 3rd--Optimization of the combined sales, marketing & distribution
network (1 to 3 % of sales).
* 4th--Elimination of redundant expenses for two public companies
(1 % of sales).
* 5th--Increased yields, throughput, productivity and gross margin
(2 to 4% of sales).
The total synergies for the short term are in the range of 10% of
sales and may increase to 15 to 18% of Laser Power's sales longer
term.
II-VI's current business generates a 43% gross margin. Laser Power's
gross margin after the merger and realization of a portion of the
synergies just outlined, are projected to improve from the mid-twenty
to the mid-thirty percentage range. There is a longer-term opportunity
to increase the Laser Power gross margin to the 40% range, comparable
to the historical gross margin realized by II-VI.
We believe opportunities for shareholders of II-VI and Laser Power are
enhanced by the stock component of our offer. The growth potential of
the combined businesses is excellent. The market for carbon dioxide
lasers grew in excess of 25% in the last twelve months. Industry
forecasts are for it to grow in the mid to high teens in the next 12
months. In addition there is a large installed base of industrial
carbon dioxide lasers that consume optics as they produce the myriad
of goods we all use. The market demand for II-VI infrared optics has
helped propel the II-VI order growth rate to over 30% for the current
fiscal year.
Employees, shareholders and customers are all potential beneficiaries
of this merger. We think there is a compelling case for Laser Power's
Board to view our proposal favorably. That concludes our formal
remarks....Carl
Thank you Fran, before we begin Q&A, I would like to mention that
these comments and answers to certain questions contain forward
looking statements which are based on our current expectations and
acceptance of our offer to purchase Laser Power.
If our offer is accepted by the Board of Directors of Laser Power,
we will prepare and file a registration statement with the
Securities and Exchange Commission. Laser Power stockholders would
then be able to obtain such materials for free at the Commission's
Web site at www.sec.gov. Laser Power stockholders are urged to
carefully read the complete terms and conditions of those materials
prior to making any decisions with respect to an actual offer.
This document contains forward-looking statements concerning the
financial condition, results of operations and business of II-VI
and its proposed acquisition of Laser Power, the anticipated
financial and other benefits of such proposed acquisition and the
plans and objectives of II-VI's management following such proposed
acquisition, including, without limitation, statements relating to:
(A) the likelihood of consummating the proposed acquisition, (B)
the cost savings expected to result from the proposed acquisition,
(C) anticipated results of operations of the combined company
following the proposed acquisition, (D) projected earnings per
share of the combined company following the proposed acquisition,
and (E) the restructuring charges estimated to be incurred in
connection with the proposed acquisition. Generally, the words
"will," "may," "should," "continue," "believes," "expects,"
"anticipates" or similar expressions identify forward-looking
statements. These forward-looking statements involve certain
risks and uncertainties. Factors that could cause actual results
to differ materially from those contemplated by the forward-looking
statements include, among others, the following factors: (1)
the proposed acquisition may not be consummated on the terms being
offered or at all, (2) cost savings expected to results from the
proposed acquisition may not be fully realized or realized within
the expected time frame; (3) operating results following the
proposed acquisition may be lower than expected; (4) competitive
pressures may increase significantly; (5) costs or difficulties
related to the integration of the businesses of II-VI and Laser
Power may be greater than expected; (6) general economic
conditions, whether nationally or in the markets in which II-VI
and Laser Power conduct business, may be less favorable than
expected; (7) legislation or regulatory changes may adversely
affect the businesses in which II-VI and Laser Power are engaged;
or (8) adverse changes may occur in the securities markets.
