-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BNmqGWmKGhgUahuqgnY1ZtUdJAmDOtHZj0ehkGLodBS0u+EW948iPzXWmMBfiXkI 9PpWHMF+sPqWz25PV93lTA== 0000820318-97-000005.txt : 19970222 0000820318-97-000005.hdr.sgml : 19970222 ACCESSION NUMBER: 0000820318-97-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970213 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: II-VI INC CENTRAL INDEX KEY: 0000820318 STANDARD INDUSTRIAL CLASSIFICATION: OPTICAL INSTRUMENTS & LENSES [3827] IRS NUMBER: 251214948 STATE OF INCORPORATION: PA FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-16195 FILM NUMBER: 97531527 BUSINESS ADDRESS: STREET 1: 375 SAXONBURG BLVD CITY: SAXONBURG STATE: PA ZIP: 16056 BUSINESS PHONE: 4123524455 MAIL ADDRESS: STREET 1: 375 SAXONBURG BLVD CITY: SAXONBURG STATE: PA ZIP: 16056 10-Q 1 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, December 31, 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 February 10, 1997, 6,393,780 shares of Common Stock, no par value, of the registrant were outstanding. II-VI INCORPORATED AND SUBSIDIARIES ----------------------------------- INDEX -----
Page No. -------- PART 1 FINANCIAL INFORMATION Item 1. Financial Statements. Independent Accountants' Report. . . . . . . . . . 3 Condensed Consolidated Balance Sheets - December 31, 1996, and June 30, 1996 . . . . . . . 4 Condensed Consolidated Statements of Earnings - Three and six months ended December 31, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . 5 Condensed Consolidated Statements of Shareholders' Equity - Three and six months ended December 31, 1996 . . . . . . . . . . . . . . . . . 7 Condensed Consolidated Statements of Cash Flows - Six months ended December 31, 1996 and 1995 . . . . . . . . . . . . 8 Notes to Condensed Consolidated Financial Statements . . . . . . . . . . . . . . . 9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. . . 10 PART II OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security-Holders . . . . . . . . . . . . . . . . . 11 Item 5. Other Events . . . . . . . . . . . . . . . . . . . 12 Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . 12
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 December 31, 1996, and the related condensed consolidated statements of earnings, shareholders' equity and cash flows for the six month periods ended December 31, 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 January 20, 1997 A Professional Corporation - ---------------------------------------------------------------- Members American and Pennsylvania Institutes of Certified Public Accountants Accounting Firms Associated, inc. Member Firms in Principal Cities 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
3 PART 1 - FINANCIAL INFORMATION Item 1. Financial Statements - ------------------------------------------------ II-VI Incorporated and Subsidiaries Condensed Consolidated Balance Sheets (Unaudited) ($000 except share data)
December 31 June 30 Assets 1996 1996 ------------ ----------- Current Assets Cash and equivalents $ 9,389 $ 9,417 Accounts receivable - less allowance for doubtful accounts of $266 in December and $246 in June 8,533 8,712 Inventories 6,766 5,490 Deferred income taxes 428 429 Prepaid and other current assets 687 607 ------- ------- Total Current Assets 25,803 24,655 Property, Plant & Equipment, net 17,163 15,085 Goodwill 2,090 2,138 Other Assets 2,236 2,291 ------- ------- $47,292 $44,169 ------- ------- Liabilities and Shareholders' Equity Current Liabilities Notes payable $ 926 $ 1,393 Accounts payable - trade 1,661 1,260 Accrued salaries, wages and bonuses 2,362 3,105 Income taxes payable 301 607 Accrued profit sharing contribution 346 556 Other current liabilities 999 1,024 Current portion of long-term debt 73 23 ------- ------- Total Current Liabilities 6,668 7,968 Long-Term Debt--less current portion 715 45 Deferred Income Taxes 1,697 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 - 6,751,480 shares in December 1996; 6,691,718 shares in June 1996 17,480 17,055 Foreign Currency Translation 88 79 Retained Earnings 21,406 18,031 ------- ------- 38,974 35,165 Less treasury stock, at cost - 384,440 shares at 12/31/96 and 6/30/96. 762 762 ------- ------- 38,212 34,403 ------- ------- $47,292 $44,169 ------- -------
[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)
Three Months Ended December 31, 1996 1995 -------- -------- Revenues Net Sales: Domestic $ 6,531 $ 4,076 International 4,984 3,642 ------- ------- 11,515 7,718 Contract research and development 675 236 ------- ------- 12,190 7,954 ------- ------- Costs, Expenses & Other Income Cost of goods sold 6,264 4,475 Contract research and development 468 163 Internal research and development 260 138 Selling, general and administrative expenses 2,951 2,152 Interest and other expense - net (168) (139) ------- ------- 9,775 6,789 ------- ------- Earnings Before Income Taxes 2,415 1,165 Income Tax Expense 700 331 ------- ------- Net Earnings $ 1,715 $ 834 ------- ------- Earnings Per Share $ 0.25 $ 0.14 ------- -------
[FN] - -See notes to condensed consolidated financial statements. 5 II-VI Incorporated and Subsidiaries Condensed Consolidated Statements of Earnings (Unaudited) ($000 except per share data)
Six Months Ended December 31, 1996 1995 -------- -------- Revenues Net Sales: Domestic $13,303 $ 8,313 International 9,804 7,362 ------- ------- 23,107 15,675 Contract research and development 1,193 367 ------- ------- 24,300 16,042 ------- ------- Costs, Expenses & Other Income Cost of goods sold 12,612 9,031 Contract research and development 863 264 Internal research and development 384 286 Selling, general and administrative expenses 5,981 4,283 Interest and other expense - net (293) (123) ------- ------- 19,547 13,741 ------- ------- Earnings Before Income Taxes 4,753 2,301 Income Tax Expense 1,378 661 ------- ------- Net Earnings $ 3,375 $ 1,640 ------- ------- Earnings Per Share $ 0.50 $ 0.28 ------- -------
[FN] - -See notes to condensed consolidated financial statements. 6 II-VI Incorporated and Subsidiaries Condensed Consolidated Statement of Shareholders' Equity (Unaudited) (000)
Common Stock Cumulative Treasury Stock --------------- Translation Retained ---------------- Shares Amount Adjustment Earnings Shares Amount Total ------ ------- ----------- -------- ------- -------- ----- 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 Shares issued under stock option plan 30 63 - - - - 63 Net earnings for the quarter - - - 1,715 - - 1,715 Translation adjustment - - 7 - - - 7 Tax benefit for options exercised - 296 - - - - 296 ------ ------- ----------- -------- ------- -------- ------- Balance--December 31, 1996 6,751 $17,480 $ 88 $ 21,406 (384) $ (762) $38,212
[FN] - -See notes to condensed consolidated financial statements. 7 II-VI Incorporated and Subsidiaries Condensed Consolidated Statements of Cash Flows (Unaudited) ($000)
Six Months Ended December 31, 1996 1995 ------- ------- s from Operating Activities Net Earnings $ 3,375 $ 1,640 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 1,663 1,195 (Gain) on foreign currency transactions (207) (87) Deferred income taxes (54) 4 Increase (decrease) in cash from changes in: Accounts receivable 224 (271) Inventories (1,307) (668) Accounts payable 515 298 Accrued salaries, wages and bonuses (773) (647) Accrued profit sharing contribution (210) (107) Income taxes payable (10) (354) Other operating net assets (69) (451) ------- ------- Net cash provided by operating activities 3,147 552 ------- ------- Cash Flows from Investing Activities Additions to property, plant & equipment (3,550) (3,920) Additions to other assets (87) - ------- ------- Net cash used in investing activities (3,637) (3,920) ------- ------- Cash Flows from Financing Activities Payments on short-term borrowings (388) - Proceeds from long-term borrowings 741 - Payments on long-term borrowings (21) (141) Proceeds from sale of common stock 130 10,998 ------- ------- Net cash provided by financing activities 462 10,857 ------- ------- Net increase (decrease) in cash and equivalents (28) 7,489 Cash and Equivalents at Beginning of Period 9,417 3,822 ------- ------- Cash and Equivalents at End of Period $ 9,389 $11,311 ------- -------
[FN] - -See notes to condensed consolidated financial statements. 8 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 and six month periods ended December 31, 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 and six month periods ended December 31, 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: December 31 June 30 1996 1996 Raw Materials $ 3,016 $ 2,279 Work in Progress 1,468 1,427 Finished Goods 2,282 1,784 -------- ------- $ 6,766 $ 5,490 -------- ------- Note C - Property, Plant and Equipment ($000) Property, plant and equipment consist of the following: December 31 June 30 1996 1996 Land and land improvements $ 555 $ 539 Buildings and improvements 7,254 6,952 Machinery and equipment 25,316 22,084 ------- ------- 33,125 29,575 Less accumulated depreciation 15,962 14,490 ------- ------- $17,163 $15,085 ------- ------- 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 second fiscal quarter of 1997, ended December 31, 1996, were $1,715,000 ($0.25 per share) on revenues of $12,190,000. This compares to net earnings of $834,000 ($0.14 per share) on revenues of $7,954,000 in the second quarter of fiscal 1996. For the six months ended December 31, 1996, net earnings were $3,375,000 ($0.50 per share) on revenues of $24,300,000. This compares with net earnings of $1,640,000 ($0.28 per share) on revenues of $16,042,000 for the same period last fiscal year. The increased earnings were driven by the improved revenue volume. Order bookings for the second quarter were $13,894,000 compared to $10,642,000 for the same period last fiscal year, a 31% increase. Year- to-date order bookings grew by 44% to $26,821,000 from $18,569,000 last fiscal year. Commercial orders at the Company's VLOC operation accounted for two-thirds of the increase for the quarter, while domestic industrial orders for infrared optics and materials accounted for most of the remaining increase. Year-to-date, VLOC Commercial orders were responsible for approximately one-half of the increase, followed by higher infrared optics and materials orders and Contract Research and Development awards. Manufacturing revenues for the second quarter were $11,515,000 compared to $7,718,000 for the same period last fiscal year, a 49% increase. Year-to-date manufacturing revenues grew by 47% to $23,107,000 from $15,675,000 last fiscal year. These increases are the result of improved shipments in all of the markets served by the Company. The Company's VLOC operation contributed approximately one-half of the quarter and year-to-date improvements. Manufacturing gross margin for the second quarter was $5,251,000 or 46% of revenues compared to $3,243,000 or 42% of revenues for the second quarter of fiscal 1996. Manufacturing gross margin year-to-date was $10,495,000 or 45% of revenues compared to $6,644,000 or 42% of revenues in fiscal 1996. Both the quarter and year-to-date increases in gross margin as a percent of revenues reflect lower per unit operating costs associated with increased volume and efficiency improvements, which are partially offset by the strengthening of the U.S. dollar against the Japanese yen. Selling, General and Administrative expenses for the second quarter were $2,951,000 or 24% of revenues compared to $2,152,000 or 27% of revenues for last fiscal year's second quarter. Selling, General and Administrative expenses year-to-date were $5,981,000 or 25% of revenues compared to $4,283,000 or 27% of revenues in fiscal 1996. The increases in expense are attributable to additional 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. 10 Other income for the quarter was $168,000 compared to $139,000 for last fiscal year's second quarter. Other income year-to-date was $293,000 compared to $123,000 in fiscal 1996. The year-to-date increase is primarily due to foreign currency gains and investment earnings on increased cash balances. The increase in cash was primarily due to the October 1995 public stock offering. The Company's year-to-date effective income tax rate was 29% of pre-tax earnings, the same as the first six months of fiscal 1996. Liquidity and Capital Resources Cash decreased during the first six months of fiscal 1997 by $28,000 primarily from cash generated from operations of $3,147,000 and $741,000 of financing from a low interest rate loan with the Pennsylvania Industrial Development Authority being offset by $3,550,000 of capital expenditures. The capital expenditures focused on improved capacity, process automation and the start up of the Company's China operation. The Company generated $3,147,000 in cash from operations for the first six months of fiscal 1997. The $5,038,000 in cash generated from net earnings before depreciation and amortization was offset by increases in inventories needed to support the growth in sales volume and the payment of compensation costs relating to the Company's fiscal 1996 world-wide profit-driven bonus and retirement programs. The current cash balance will be used for working capital needs, further capital expenditures, and possible acquisitions of complementary businesses, products or technologies. There are certain 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. PART II - OTHER INFORMATION Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS --------------------------------------------------- On November 1, 1996, the Company held its annual meeting of shareholders. The three matters voted upon at the annual meeting were the election of two directors, the ratification of the selection of Alpern, Rosenthal & Company as auditors for the year ending June 30, 1997 and the ratification of the purchase of common stock by the deferred compensation plan for participants. Each of the Company's nominees for director was reelected at the annual meeting. The total number of votes cast for the election of directors was 5,800,971. Following is a separate tabulation with respect to each director: Votes For Votes Withheld Carl J. Johnson 5,787,216 15,205 Thomas E. Mistler 5,784,166 15,355 11 The total number of votes cast for the ratification of the appointment of Alpern, Rosenthal & Company as auditors for the year ending June 30, 1997 was 5,800,971 with 5,734,371 votes for, 49,890 votes against and 16,710 votes abstaining. The total number of votes cast for the ratification of the purchase of common stock by the deferred compensation plan for participants was 5,800,971 with 5,562,901 votes for, 108,130 votes against and 28,720 votes abstaining. There were no broker non-votes on these three matters. Item 5. OTHER EVENTS ------------ On February 12, 1997, the Company filed a current report on Form 8-K for the events dated February 10, 1997. On February 10, 1997, the Registrant terminated Alpern, Rosenthal & Company as independent accountants for the Registrant and its subsidiaries (other than II-VI Singapore Pte. Ltd. which will continue to be serviced by Deloitte & Touche LLP) upon completion of its review of the Registrant's unaudited financial statements for its second fiscal quarter ended December 31, 1996. Also effective February 10, 1997, the Registrant engaged Deloitte & Touche LLP as independent auditors to review the Registrant's unaudited financial statements for its third fiscal quarter ending March 31, 1997, and to audit the Registrant's financial statements for the fiscal year ending 1997. Item 6. EXHIBITS AND REPORTS ON FORM 8-K. --------------------------------- (a) Exhibits. -------- 10.01 Amended and Restated II-VI Incorporated Deferred Compensation Plan . . . . . . . Filed herewith. 15.01 Accountant's acknowledgment letter dated February 13, 1997 . . . . . . . . . . . . Filed herewith. 27.01 Financial Data Schedule . . . . . . . . . Filed herewith. 99.01 Press release dated January 21, 1997. . . Filed herewith. (b) Reports on Form 8-K. None 12 SIGNATURES 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: February 13, 1997 By: /s/ Carl J. Johnson ----------------------- Carl J. Johnson Chairman and Chief Executive Officer Date: February 13, 1997 By: /s/ James Martinelli ----------------------- James Martinelli Treasurer & Chief Financial Officer EXHIBIT INDEX Exhibit No. - ----------- 10.01 Amended and Restated II-VI Incorporated Deferred Compensation Plan . . . . . . . Filed herewith. 15.01 Accountant's acknowledgment letter dated February 13, 1997 . . . . . . . . . . . . Filed herewith. 27.01 Financial Data Schedule . . . . . . . . . Filed herewith. 99.01 Press release dated January 21, 1997. . . Filed herewith. 14 EX-10 2 AMENDED AND RESTATED II-VI INCORPORATED DEFERRED COMPENSATION PLAN Effective June 30, 1996 Amended November 2 , 1996 TABLE OF CONTENTS 1. Definitions . . . . . . . . . . . . . . . . . . . . . 2. Participation . . . . . . . . . . . . . . . . . . . . 3. Contributions . . . . . . . . . . . . . . . . . . . . 4. Investment of Contributions . . . . . . . . . . . . . 5. Benefits. . . . . . . . . . . . . . . . . . . . . . . 6. Distribution of Benefits . . . . . . . . . . . . . . 7. General Provisions. . . . . . . . . . . . . . . . . . 8. Plan Execution. . . . . . . . . . . . . . . . . . . . INTRODUCTION The Employer is establishing a nonqualified, defined contribution employees' retirement plan which has been designed as, and is intended to be, an unfunded plan for purposes of the Employee Retirement Income Security Act of 1974, as amended, and a nonqualified plan under the Internal Revenue Code of 1986, including any later amendments to the Code. The Employer agrees to operate the plan according to the terms, provisions and conditions set forth in this document. Any funds accumulated for purposes of providing benefits under this plan are fully available to satisfy the claims of the Employer's creditors. Participants have no greater rights with regard to such fund than any other general creditor of the Employer. The Plan was originally adopted by II-VI Incorporated to be effective as of June 30, 1996. ARTICLE I DEFINITIONS 1.01 "Account" means, for a Participant, a bookkeeping account that reflects the amount available for benefits under this Plan. Separate accounting records are kept for those parts of his Account that result from: (a) Salary Deferral Contributions. (b) Matching Contributions. (c) Discretionary Contributions. A Participant's Account shall be reduced by any distribution of his Account. A Participant's Account will participate in the earnings credited, expenses charged and any appreciation or depreciation of the deemed investments of the Plan. His Account is subject to any minimum guarantees applicable under the Group Contract or other investment arrangements. 1.02 "Beneficiary" means the person or persons named by a Participant to receive any benefits under this Plan upon the Participant's death. 1.03 "Benefit Date" means, for a Participant, the first day of the first period for which an amount of benefit is payable to him under this Plan. See Article V - BENEFITS. 1.04 "Code" means the Internal Revenue Code of 1986, as amended. 1.05 "Compensation" means the total earnings paid or made available to an Employee by the Employer during any specified period. 1.06 "Contributions" means, Salary Deferral Contributions, Matching Contributions or Discretionary Contributions, as set out in Article III, unless the context clearly indicates otherwise. 1.07 "Eligible Employee" means any Employee of the Employer who is invited to participate in the Plan and who represents a select group of highly-compensated or management employees, as determined by the Employer. 1.08 "Employee" means an individual who is employed by the Employer. 1.09 "Employer" means II-VI INCORPORATED or any subsidiary corporations which are included in a parent subsidiary controlled group or brother/sister controlled group of corporations under Sect. 1653 of the Internal Revenue Code. 1.10 "Entry Date" means the date an Employee first enters the Plan as an Active Participant. See Article II - PARTICIPATION. 1.11 "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. 1.12 "Fiscal Year" means the Employer's taxable year. The last day of the Fiscal Year is June 30. 1.13 "Group Contract" means the group annuity contract or contracts into which the Trustee enters with the Insurer for the investment of Contributions and the payment of benefits under this Plan. The term Group Contract as it is used in this Plan is deemed to include the plural unless the context clearly indicates otherwise. Any funds accumulated under the Group Contract are available to the general creditors of the Employer. 1.14 "Insurer" means Principal Mutual Life Insurance Company and any other insurance company or companies named by the Trustee or Employer. 1.15 "Monthly Date" means each Yearly Date and the same day of each following month during the Plan Year beginning on such Yearly Date. 1.16 "Participant" means an Eligible Employee who is actively participating in the Plan. 1.17 "Plan" means the nonqualified retirement plan of the Employer set forth in this document, including any later amendments to it. 1.18 "Plan Administrator" means the person or persons who administer the Plan. The Plan Administrator is the Employer. 1.19 "Plan Year" means a period beginning on a Yearly Date and ending on the day before the next Yearly Date. 1.20 "Qualified Plan" means The II-VI Incorporated Employees Profit Sharing Plan. 1.21 "Reentry Date" means the date a former Participant reenters the Plan. See Article II - PARTICIPATION. 1.22 "Retirement Date" means his retirement date under the Qualified Plan. 1.23 "Totally and Permanently Disabled" means that a Participant is disabled to the extent he is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or be of long-continued and indefinite duration, pursuant to Code Section 72(m)(7), and, as a result of such condition, the Participant's employment with the Employer terminates. 1.24 "Trust" means an agreement of trust between the Employer and Trustee established for the purpose of holding and distributing the Trust Fund under the provisions of the Plan and conforming to the terms of the model trust, as described in Revenue Ruling 92-64. The Trust may provide for the investment of all or any portion of the Trust Fund in the Group Contract. 1.25 "Trust Fund" means the total funds held under the Trust for the purpose of providing benefits for Participants. These funds result from Contributions made under the Plan which are forwarded to the Trustee to be deposited in the Trust Fund. 1.26 "Trustee" means the trustee or trustees under the Trust. The term Trustee as it is used in this Plan is deemed to include the plural unless the context clearly indicates otherwise. 1.27 "Yearly Date" means June 30, 1996, and each following July 1. ARTICLE II PARTICIPATION An Employee shall first become a Participant (begin active participation in the Plan) on the earliest Yearly Date on or after June 30, 1996, on which he is an Eligible Employee. This date is his Entry Date. A former Participant shall again become a Participant (resume active participation in the Plan) on the date he again performs an hour of service as an Eligible Employee. This date is his Reentry Date. A Participant shall cease to be a Participant on the date he is no longer an Eligible Employee and the value of his Account is zero. ARTICLE III CONTRIBUTIONS 3.01 Employer Contributions. Employer Contributions for each Plan Year will be equal to the Employer Contributions as described below. (a) Salary Deferral Contributions. The amount of each Salary Deferral Contribution for a Participant shall be equal to any percentage of his Compensation for the pay period as elected in his or her deferral agreement. An Employee who is eligible to participate in the Plan may file a deferral agreement with the Employer. Except as otherwise provided in this Section 3.01, the deferral agreement to start Salary Deferral Contributions must be effective on the 1st day of January immediately following a Participant's Entry Date (Reentry Date, if applicable) or any following Yearly Date. The Participant shall make any change or terminate the deferral agreement by filing a new deferral agreement. A Participant's deferral agreement making a change may be effective on any date a deferral agreement to start Salary Deferral Contributions could be effective. A Participant' deferral agreement to stop Salary Deferral Contributions may be effective on any date. Except as otherwise provided in this Section, to be effective the deferral agreement must be in writing and filed with the Employer before the beginning of the calendar year in which Salary Deferral Contributions are to start, change or stop. In the year that the Plan is first implemented, a Participant's deferral agreement may be filed with the Employer and become effective for the current calendar year within thirty (30) days after the Plan is effective. In the first year in which a Participant becomes eligible to participate in the Plan, such Participant's deferral agreement may be filed with the Employer and become effective for the current calendar year within thirty (30) days after the date on which such Participant becomes eligible to participate in the Plan. Salary Deferral Contributions may include contributions the Employee would have made to the Qualified Plan of the Employer under its contribution formula but for the additional restrictions imposed by such Plan to meet the qualification requirements of the Internal Revenue Code. (b) Matching Contributions. The amount of each Matching Contribution made by the Employer for a Participant shall be equal to a percentage as determined by the Employer, of the Participant's Salary Deferral Contributions for the pay period. Said percentage shall be uniform for all Participants. However, Salary Deferral Contributions in excess of the percentage of Compensation as provided in the Qualified Plan will not be matched. (c) Discretionary Contributions. The amount of each Discretionary Contribution made by the Employer for the Participant shall be determined by the Employer and shall be made on a uniform basis for all Participants. 3.02 Allocation. The following Contributions for each Plan Year shall be allocated among all eligible persons: Discretionary Contributions The eligible persons are all Participants who the Employer determines are eligible for an allocation for the Plan Year. The amount allocated to such a person shall be determined below. The following Contributions for each Plan Year shall be allocated to each Participant for whom such Contributions were made under the EMPLOYER CONTRIBUTIONS SECTION of Article III: Salary Deferral Contributions Matching Contributions These Contributions shall be allocated when made and credited to the Participant's Account. Discretionary Contributions and Matching Contributions shall be allocated in a uniform manner by the Employer. ARTICLE IV INVESTMENT OF CONTRIBUTIONS 4.01 The Participants' Accounts shall be valued at current fair market value as of the last day of the last calendar month ending in the Plan Year and, at the discretion of the Plan Administrator, may be valued more frequently. The Account of a Participant shall be considered a deemed investment of the Plan and shall be credited with its share of the deemed gains and losses of the deemed investments of the Plan. 4.02 The Plan at all times shall be considered unfunded both for tax purposes and for purposes of Title I of the ERISA. Any funds invested hereunder shall continue for all purposes to be part of the general assets of the Employer and available to its general creditors in the event of bankruptcy or insolvency. This Plan constitutes a mere promise by the Employer to make benefit payments in the future to Participants or to Participants' beneficiaries. ARTICLE V BENEFITS 5.01 Retirement Benefits. On a Participant's Retirement Date, his Account shall be distributed to him according to the distribution of benefits provisions of Article VI. This date shall be a Participant's Benefit Date. 5.02 Death Benefits. If a Participant dies before his Retirement Date, his Account shall be distributed according to the distribution of benefits provisions of Article VI. This date shall be a Participant's Benefit Date. 5.03 Disability Benefits. If a Participant becomes Totally and Permanently Disabled before his Retirement Date causing the termination of his employment with the Employer, his Account shall be distributed according to the distribution of benefits provisions of Article VI. The date of such Participant's termination of employment shall be a Participant's Benefit Date. 5.04 Termination Benefits. A Participant will receive a distribution of his Account according to the distribution provisions of Article VI, if he ceases to be an Employee before his Retirement Date, provided he has not again become an Employee. This date shall be a Participant's Benefit Date. 5.05 Withdrawal Privileges. Before he ceases to be an Employee, a Participant may withdraw up to 90% of the value of his Account in the event of an unforeseeable emergency. The Participant's request for a withdrawal shall include his statement that such an unforeseeable emergency exists and explain its nature. To qualify as an unforeseeable emergency withdrawal, it must be determined that the amount of the withdrawal is to meet a severe financial hardship to the Participant and the amount of the withdrawal is not reasonably available from other resources of the Participant. Examples of severe financial hardship may include a sudden and unexpected illness or accident of the Participant or a dependent of the Participant, loss of the Participant's property due to casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant. The Plan Administrator will establish uniform, nondiscriminatory guidelines to use in determining if such a condition of undue financial hardship exists. The Plan Administrator's determination shall be final. The Participant has no legal or equitable right to such a withdrawal. A request for withdrawal shall be in writing on a form furnished for that purpose and delivered to the Plan Administrator before the withdrawal is to occur. Any Participant who chooses to exercise this option shall not be allowed to make Salary Deferral Contributions to this Plan for a period of one year from the time such withdrawal is received by the Participant. ARTICLE VI DISTRIBUTION OF BENEFITS 6.01 Automatic Forms of Distribution. The automatic form of benefit payable to or on behalf of a Participant is determined as follows: The automatic form of benefit shall be a lump sum payment or a series of installments for periods of 2, 5 or 10 years as chosen by the Participant to begin at any time on or within thirty (30) days after his Benefit Date, provided that beginning with the year in which the Participant turns age 70 1/2, a minimum payment each year shall apply. The minimum payment will be based on a period equal to the joint and last survivor expectancy of the Participant and the Participant's spouse, if any, where the joint and last survivor expectancy is recalculated. The election shall be irrevocable and must be made by the Participant in his first written deferral agreement effective for a specific calendar year. ARTICLE VII GENERAL PROVISIONS 7.01 Amendments. The Employer may amend this Plan at any time, including any remedial retroactive changes (within the specified period of time as may be determined by Internal Revenue Service regulations) to comply with the requirements of any law or regulation issued by any governmental agency to which the Employer is subject. 7.02 Employment Status. Nothing contained in this Plan gives an Employee the right to be retained in the Employer's employ or to interfere with the Employer's right to discharge any Employee. 7.03 Rights to Plan Assets. No Employee shall have any right to or interest in any assets of the Plan upon termination of his employment or otherwise except as a general unsecured creditor of the Employer. Any final payment or distribution to a Participant or his legal representative or to any Beneficiaries or spouse of such Participant under the Plan provisions shall be in full satisfaction of all claims against the Plan, the Plan Administrator and the Employer arising under or by virtue of the Plan. 7.04 Nonalienation of Benefits. Benefits payable under the Plan are not subject to the claims of any creditor of any Participant, Beneficiary or spouse. A Participant, Beneficiary of spouse does not have any rights to alienate, anticipate, commute, pledge, encumber or assign any of such benefits. The preceding sentences shall also apply to the creation, assignment, or recognition of a right to any benefit payable with respect to a Participant according to a domestic relations order, unless such order is determined by the Plan Administrator to be a qualified domestic relations order, as defined in ERISA Act Section 206(d), or any domestic relations order entered before January 1, 1985. 7.05 Legal Actions. The Plan and the Plan Administrator are the necessary parties to any action or proceeding involving the assets held with respect to the Plan or administration of the Plan or Trust. No person employed by the Employer, no Participant, former Participant or their Beneficiaries or any other person having or claiming to have an interest in the Plan is entitled to any notice of process. A final judgment entered in any such action or proceeding shall be binding and conclusive on all persons having or claiming to have an interest in the Plan. 7.06 Word Usage. The masculine gender, where used in this Plan, shall include the feminine gender and the singular words as used in this Plan may include the plural, unless the context indicates otherwise. By executing this Plan, the Employer acknowledges having counseled to the extent necessary with selected legal and tax advisors regarding the Plan's legal and tax implications. Executed this 2nd day of November, 1996. II-VI INCORPORATED By: /s/ Francis J. Kramer ---------------------------- Francis J. Kramer, President EX-15 3 [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 December 31, 1996 and 1995, as indicated in our report dated January 20, 1997; 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 December 31, 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 February 13, 1997 A Professional Corporation - ---------------------------------------------------------------- Members American and Pennsylvania Institutes of Certified Public Accountants Accounting Firms Associated, inc. Member Firms in Principal Cities 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
EX-27 4
5 1,000 6-MOS JUN-30-1997 JUL-01-1996 DEC-31-1996 9,389 0 8,799 266 6,766 25,803 33,125 15,962 47,292 6,668 715 0 0 17,480 21,494 47,292 24,300 24,300 13,475 13,475 6,072 0 0 4,753 1,378 3,375 0 0 0 3,375 .50 0
EX-99 5 January 21, 1997 Jim Martinelli Treasurer & Chief Financial Officer (412) 352-4455 II-VI INCORPORATED ANNOUNCES SECOND QUARTER RESULTS PITTSBURGH, PA., January 21, 1997--II-VI Incorporated (NASDAQ NMS: IIVI) today reported results for its second fiscal quarter ended December 31, 1996. Net earnings for the period were $1,715,000 ($0.25 per share) on revenues of $12,190,000. These results compare with net earnings of $834,000 ($0.14 per share) on revenues of $7,954,000 in the second quarter of last fiscal year. For the six months ended December 31, 1996, net earnings were $3,375,000 ($0.50 per share) on revenues of $24,300,000. This compares with net earnings of $1,640,000 ($0.28 per share) on revenues of $16,042,000 for the same period last fiscal year. Bookings for the quarter increased 31% to $13,894,000 from $10,642,000 for the same period last year. Bookings year-to- date increased 44% to $26,821,000 from $18,659,000 in last fiscal year. Commercial bookings at the Company's VLOC operation accounted for almost two-thirds of the increase for the quarter, and domestic industrial orders of infrared optics and materials accounted for most of the remaining increase. Approximately one-half of the year-to-date increase was attributable to VLOC commercial orders, one-third to increased orders for infrared optics and materials and the remaining increase was for Contract Research and Development Contracts. Manufacturing revenues for the quarter increased 49% to $11,515,000 from $7,718,000 for the same period last year. Manufacturing revenues year-to-date increased 47% to $23,107,000 from $15,675,000 for the same period last year. The quarter and year-to-date increases reflect increased shipments of VLOC products and infrared optics and materials to the domestic and international industrial market. VLOC products account for slightly more than one-half of the increase for both the quarter and year-to-date. Manufacturing gross margin for the quarter was $5,251,000 or 46% of net sales compared to $3,243,000 or 42% of net sales for the same period last year. Manufacturing gross margin year-to-date was $10,495,000 or 45% of net sales compared to $6,644,000 or 42% of net sales in fiscal 1996. The quarter and year-to-date increases reflect the lower per unit operating cost associated with the higher production volume and improved manufacturing efficiencies offset slightly by the strengthening of the U.S. dollar against the Japanese yen. Selling, general and administrative expenses for the quarter were $2,951,000 or 24% of revenues compared to $2,152,000 or 27% of revenues for the same period last year. Selling, general and administrative expenses year-to-date were $5,981,000 or 25% of revenues compared to $4,283,000 or 27% of revenues in fiscal 1996. 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 said, "To meet increased customer demand for our products, we have made significant progress during the past year expanding our manufacturing capacity at every II-VI location. We plan to continue this expansion program for our current product lines and to develop new products and markets to achieve the Company growth targets." 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 subsidiary 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 Operations (Unaudited) ($000 except per share data) Three Months Ended December 31, 1996 1995 Revenues Net sales 11,515 7,718 Contract research and development 675 236 12,190 7,954 Costs, Expenses & Other Income Cost of goods sold 6,264 4,475 Contract research and development 468 163 Internal research and development 260 138 Selling, general and administrative expenses 2,951 2,152 Interest and other (income) expense - net (168) (139) 9,775 6,789 Earnings Before Income Taxes 2,415 1,165 Income Tax Expense 700 331 Net Earnings $ 1,715 $ 834 Earnings Per Share $ 0.25 $ 0.14 Average Shares Outstanding 6,800 6,155 II-VI Incorporated and Subsidiaries Condensed Consolidated Statements of Operations (Unaudited) ($000 except per share data) Six Months Ended December 31, 1996 1995 Revenues Net sales 23,107 15,675 Contract research and development 1,193 367 24,300 16,042 Costs, Expenses & Other Income Cost of goods sold 12,612 9,031 Contract research and development 863 264 Internal research and development 384 286 Selling, general and administrative expenses 5,981 4,283 Interest and other (income) expense - net (293) (123) 19,547 13,741 Earnings Before Income Taxes 4,753 2,301 Income Tax Expense 1,378 661 Net Earnings $ 3,375 $1,640 Earnings Per Share $ 0.50 $ 0.28 Average Shares Outstanding 6,761 5,834 II-VI Incorporated and Subsidiaries Condensed Consolidated Balance Sheets (Unaudited) ($000) December 31, June 30, Assets 1996 1996 Current Assets Cash and equivalents $ 9,389 $ 9,417 Accounts receivable 8,533 8,712 Inventories 6,766 5,490 Other current assets 1,115 1,036 Total Current Assets 25,803 24,655 Property, Plant & Equipment, net 17,163 15,085 Other Assets 4,326 4,429 $ 47,292 $ 44,169 Liabilities and Shareholders' Equity Current Liabilities Notes payable $ 926 $ 1,393 Accounts payable 1,661 1,260 Other current liabilities 4,081 5,315 Total Current Liabilities 6,668 7,968 Long-Term Debt--less current portion 715 45 Deferred Income Taxes 1,697 1,753 Shareholders' Equity 38,212 34,403 $ 47,292 $ 44,169 # # # # -----END PRIVACY-ENHANCED MESSAGE-----