UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
AMENDMENT 1
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
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 incorporation (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
April 30, 1997 .
Common Stock $.001 par value 16,678,086
Class Number of Shares
This amendment to Part I, Item 1. of the 10-Q filed on May 8, 1997, is
to clarify certain misstatements made on the Condensed Consolidated
Statements of Cash Flows for the nine months ended March 31, 1997 and
1996 and Note 7. on Notes to Condensed Conolidated Financial Statements.
Part I--FINANCIAL INFORMATION
Item 1. Financial Statements
UNIPHASE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share Three months ended Nine months ended
data) March 31, March 31,
1997 1996 1997 1996
------- ------- ------- -------
Net sales $26,928 $18,876 $73,073 $47,342
Cost of sales 14,703 9,818 39,167 25,102
------- ------- ------- -------
Gross profit 12,225 9,058 33,906 22,240
Operating expenses:
Research and development 2,552 1,634 6,307 4,093
Royalty and license 389 455 1,209 1,205
Selling, general and
administrative 8,965 3,277 17,635 8,942
Infrequent or unusual items:
Acquired in-process research
and development 33,314 --- 33,314 ---
------- ------- ------- -------
Total operating expenses 45,220 5,366 58,465 14,240
------- ------- ------- -------
Income (loss) from operations (32,995) 3,692 (24,559) 8,000
Interest and other income, net 877 449 2,805 887
------ ------- ------- ------
Income (loss) before income
taxes (32,118) 4,141 (21,754) 8,887
Income tax expense 2,429 1,588 6,056 3,226
------- ------- -------- ------
Net income (loss) $(34,547) $ 2,553 $(27,810) $5,661
======= ======= ======== ======
Net income (loss) per share $ (2.08) $ 0.17 $ (1.69) $ 0.43
======= ======= ======== ======
Number of weighted average shares
used in per share amounts 16,612 14,706 16,489 12,962
======= ======= ======== ======
See accompanying notes on page 5
UNIPHASE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
March 31, June 30,
1997 1996
ASSETS
(unaudited)
Current assets:
Cash and cash equivalents $ 24,268 $ 52,463
Short-term investments 46,766 61,279
Accounts receivable, less allowances for
doubtful accounts of $1,660 at March
31, 1997 and $285 at June 30, 1996 23,202 16,700
Inventories 20,580 10,641
Refundable income taxes 2,207 --
Deferred income taxes and other current assets 5,833 3,542
--------- --------
Total current assets 122,856 144,625
Property, plant and equipment, net 29,113 20,305
Intangible assets 11,652 8,894
--------- --------
Total assets $163,621 $173,824
========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable to bank $ -- $ 548
Current portion of notes payable 6,061 --
Accounts payable 9,381 5,391
Accrued payroll and related expenses 3,758 3,180
Other accrued expenses 6,956 4,464
-------- --------
Total current liabilities 26,156 13,583
Notes payable -- 6,061
Deferred income taxes -- 656
Other non-current liabilities 1,720 319
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--16,647,008
at March 31, 1997 17 16
and 16,097,855 at June 30, 1996
Additional paid-in capital 151,912 141,354
Retained earnings (deficit) (16,060) 11,750
Net unrealized (loss) on securities available-
for-sale (217) (18)
Foreign currency translation adjustment 93 103
------- --------
Total stockholders' equity 135,745 153,205
------- --------
Total liabilities and stockholders' equity $163,621 $173,824
======= ========
See accompanying notes on page 5
UNIPHASE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands) Nine Months Ended
March 31,
1997 1996
Operating activities
Net income (loss) $(27,810) 5,661
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and amortization 3,595 1,435
Acquired in-process research and development 33,314 --
Write-off of property, plant and equipment 1,500 --
Write-off of intangible assets and other assets 500 --
Change in operating assets and liabilities:
Accounts receivable (2,702) (4,031)
Inventories (6,595) (3,332)
Deferred income taxes and other current
assets 4,159 152
Accounts payable, accrued liabilities and others 2,858 2,717
------- -------
Net cash provided by operating activities 8,819 2,602
------- -------
Investing activities
Increase in other assets -- 21
Purchase of short-term investments (18,291) (36,731)
Proceeds from sale of short-term investments 32,605 8,212
Purchase of property, plant and equipment (8,894) (14,665)
Purchase of net assets of Laser Enterprise (45,000) --
Purchase of additional equity interest in I.E.
Optomech -- (238)
------- --------
Net cash used in investing activities (39,580) (43,401)
------- --------
Financing activities
Notes payable to bank (548) --
Proceeds from issuance of common stock from public
and other offerings -- 52,812
Proceeds from issuance of common stock under stock
option and stock purchase plans 3,114 3,688
-------- -------
Net cash provided by financing activities 2,566 56,500
-------- -------
Increase (decrease) in cash and cash equivalents (28,195) 15,701
Cash and cash equivalents at beginning of period 52,463 2,880
-------- -------
Cash and cash equivalents at end of period $ 24,268 $18,581
======== =======
Supplemental Cash Flow Information
Tax benefits on stock option and stock purchase
plans $ 6,884 --
======= =======
See accompanying notes on page 5
UNIPHASE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Business Activities and Basis of Presentation
On March 10, 1997, the Company executed a definitive agreement with
IBM Corporation (IBM) and acquired the net assets of Uniphase Laser
Enterprises AG (ULE), formerly the laser operations of IBM's Zurich
Research Laboratory in Switzerland (See Note 7). As a result of the
acquisition, the Company recorded in-process research and development costs
of $33.3 million during the third quarter of fiscal 1997 representing the
estimated value of development programs that had not reached technological
feasibility and therefore charged to operations.
The ULE acquisition prompted a change in the Company's strategic focus
with respect to laser diode based applications, resulting in charges of
$4.2 million during the quarter ended March 31, 1997. Of the total charges
approximately $1.0 million was recorded in cost of sales as an inventory
write down and approximately $3.2 million was included in selling, general
and administrative expenses.
As a result of the acquisition, the Company will consolidate its
European laser research to Switzerland, close Uniphase Lasers Ltd., located
in Rugby, England and consolidate the laser packaging operations of UTP
Fibreoptics resulting in $2.2 million of the charges, including a charge
for the impairment of goodwill (see Note 8). In addition, certain customer
and product strategies at UTP incorporating lower powered amplifiers were
modified resulting in charges of $2.0 million related to the write down of
existing asssets and an increase in inventory reserves.
The financial information at March 31, 1997 and for the three-month
and nine-month periods ended March 31, 1997 and 1996 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 have been made to the fiscal 1996
presentation to conform to the fiscal 1997 presentation.
The results for the three-month and nine-month periods ended March 31,
1997 are not necessarily 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:
(In thousands) March 31, June 30,
1997 1996
Raw materials and
purchased parts $ 10,250 $ 4,100
Work in process 8,007 4,382
Finished goods 2,323 2,159
------- ----------
20,580 10,641
======= ==========
Note 3. Taxes
The effective tax rate used for the nine-month period ended March 31,
1997 was 36% applied to income before taxes, exclusive of deductions for
acquired in-process research and development. This rate is based on the
estimated annual tax rate complying with Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes". The Company has
established a valuation allowance against its deferred tax assets generated
in the third quarter of fiscal 1997 due to the uncertainty surrounding the
realization of such assets. Management evaluates on a quarterly basis the
recoverability of the deferred tax assets and the level of the valuation
allowance. At such time as it is determined that it is more likely than not
that deferred tax assets are realizable, the valuation allowance will be
appropriately reduced with the corresponding credit being first to
intangibles resulting from the ULE acquisition and any excess to income tax
expense.
Note 4. Earnings per Share
Net income per share for the three-month and nine-month periods ended
March 31, 1997 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. As the Company incurred a loss in
its most recent fiscal year, common share equivalents have been excluded
from the computation for 1997 as they are antidilutive. 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 Nine Months Ended
Ended
March 31 March 31
(In thousands, except per share 1997 1996 1997 1996
data)
Weighted average common
shares 16,612 13,616 16,489 11,854
Primary common share
equivalents -- 1,090 -- 1,108
------- ------- ------- -------
Total 16,612 14,706 16,489 12,962
======== ======= ======== =======
Net income $(34,547) $ 2,553 $(27,810)$ 5,661
======== ======= ========= =======
Net income per share $ (2.08) 0.17 (1.69) 0.43
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, Earnings per Share, which is required to be adopted on
June 30, 1998. At that time, the Company will be required to change the
method currently used to compute earnings per share and to restate all
prior periods. Under the new requirements for calculating primary earnings
per share, the dilutive effect of stock options will be excluded. The
impact is expected to result in an increase in primary earnings per share
for the three and nine-months ended March 31, 1996 of $0.02 and $0.04 per
share, respectively. The Company's primary common share equivalents for the
three and nine month periods ended March 31, 1997, were anti-dilutive and
accordingly there is expected to be no impact on primary income per share.
The Company has not yet determined what the impact of Statement 128 will be
on the calculation of fully diluted earnings per share.
Note 5. Line of Credit
The Company maintains a $5.0 million revolving bank line of credit
agreement that expires on January 28, 1999. Advances under the line of
credit bear interest at the bank's prime rate (8.5% at March 31, 1997) 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 March 31, 1997.
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.
Note 7. Asset Purchase of Uniphase Laser Enterprises AG
On March 10, 1997, the Company executed a definitive agreement with
IBM and acquired the net assets of ULE, formerly the laser operations of
IBM's Zurich Research Laboratory in Switzerland. ULE develops, manufactures
and markets semiconductor chips for use in laser telecommunication
applications.The acquisition has been accounted for under the purchase
method of accounting, and accordingly, the accompanying financial
statements include the operations of ULE subsequent to the date of
acquisition.
The $45.9 million purchase price consisted of $45 million cash and
acquisition expenses of approximately $900,000.
The preliminary allocation of ULE's purchase price based on the fair
value of net assets acquired is as follows:
(In thousands) March 31,
1997
Current assets acquired 9,078
Property, plant and equipment 3,503
Intangibles, primarily developed 4,768
technology
Current liabilities assumed (3,087)
Retirement benefits assumed (1,676)
Acquired in-process research and
development costs 33,314
--------
Total purchase price $45,900
========
The purchased intangibles are being amortized over an average estimated
useful life of five years. Pro-forma results of operations as if the
transaction had occurred at the beginning of fiscal year 1996 are not shown
as the information is unavailable as of this filing. Pro-forma information
is expected to be included in an amendment to Form 8-K the Company
anticipates filing with the Securities and Exchange Commission on or about
May 23, 1997. The purchase price allocation is preliminary and is dependant
upon the Company's final analysis.
Note 8 Goodwill Impairment
At June 30, 1996, intangible assets included the excess of the
investment in I.E. Optomech ("Optomech") over the fair market value of the
net assets acquired of approximately $527,000. The intangible asset was
reviewed during the third quarter of 1997 in light of the Company's
acquisition of ULE and the resultant closure of Optomech. This review
suggested that the Optomech intangible asset was impaired, as determined
based on projected cash flows from Optomech over the remaining amortization
period. The cash flow projections take into effect the change in strategic
focus by the Company for semiconductor laser based applications to ULE, the
costs and expected benefit from Optomech products prospectively, and
management's intention to cease capital funding at Optomech. Consequently,
the carrying value of the Optomech intangible asset totaling $477,000 was
written off as a component of operating expenses during the third quarter.
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 June 9, 1997 /s/ Danny E. Pettit
Danny E. Pettit, Vice President of Finance
and CFO
(Principal Financial and Accounting Officer)
Date June 9, 1997 /s/ Kevin N. Kalkhoven
Kevin N. Kalkhoven, Chairman and CEO
(Principal Executive Officer)
