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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED JUNE 30, 1996
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM ________ TO ________
COMMISSION FILE NUMBER 0-22874
UNIPHASE CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 163 BAYPOINTE PKWY SAN JOSE, CA 95134 94-2579683
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(STATE OR OTHER (ADDRESS OF PRINCIPAL (ZIP CODE) (I.R.S. EMPLOYER
JURISDICTION OF EXECUTIVE OFFICES) IDENTIFICATION
INCORPORATION OR NO.)
ORGANIZATION)
Registrant's telephone number, including area code (408) 434-1800
Securities registered pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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None None
Securities registered pursuant to Section 12(g) of the Act:
Common stock, par value $.001 per share
(TITLE OF CLASS)
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 by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. /X/
As of September 10, 1996, the aggregate market value of the voting stock
held by non-affiliates of the Registrant was approximately $583,869,000 based
upon the average of the high and low prices of the Common Stock as reported on
The Nasdaq National Market on such date. Shares of Common Stock held by
officers, directors and holders of more than 5% of the outstanding Common Stock
have been excluded from this calculation because such persons may be deemed to
be affiliates. This determination of affiliate status is not necessarily a
conclusive determination for other purposes.
As of September 10, 1996, Registrant had 16,218,582 shares of Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE
(To the Extent Indicated Herein)
Portions of registrants 1996 Annual Report to Stockholders (Parts II and
IV)
Portions of registrant's Proxy Statement for its 1996 Annual Meeting of
Stockholders (Part III)
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PART I
ITEM 1. BUSINESS
GENERAL
Uniphase Corporation ("Uniphase" or the "Company") is an optoelectronics
company that designs, develops, manufactures and markets laser subsystems,
laser-based semiconductor wafer defect examination and analysis equipment and
fiber optic telecommunications equipment products. Optoelectronics is a
technology that extends the speed and capacity of conventional electronic
solutions by addressing many of the constraints of the electron with the
particle of light, the photon. Since its founding, Uniphase has shipped over one
million lasers and has become a leading supplier of laser subsystems for OEMs in
the biotechnology, industrial process control, semiconductor wafer inspection,
and graphics and printing markets.
The Company's strategy is to leverage its core competencies in laser
technology to develop highly focused and differentiated applications where there
is a convergence of market need and optoelectronic technology. The Company's
knowledge of laser technology enabled it to introduce an optoelectronics
application for the semiconductor capital equipment industry, the Ultrapointe
laser imaging system ("Ultrapointe System"), in June 1993. The Ultrapointe
System works in conjunction with automated inspection systems from vendors such
as Tencor Instruments ("Tencor") and KLA Instruments ("KLA") to enable
semiconductor manufacturers to more accurately identify and classify defects.
This defect examination and analysis procedure enables semiconductor
manufacturers to improve yields by identifying and containing process problems.
In November 1995, Tencor became the exclusive OEM reseller of the Ultrapointe
System. In May 1996, the Company introduced its Identifier software product, an
optional feature that provides automated defect classification ("ADC")
capability for Ultrapointe Systems. Working in conjunction with the Ultrapointe
System, the Identifier software automates the defect classification process,
thereby improving the precision and repeatability of defect classification.
The Company extended its optoelectronic product offerings by acquiring
Uniphase Telecommunications Products, Inc. ("UTP") in May 1995. UTP designs,
develops, manufactures and markets high-speed external modulators and
transmitters for fiber optic networks in the long-haul telecommunications and
cable television ("CATV") industries. In May 1996, the Company acquired two
affiliated companies, GCA Fibreoptics Ltd. ("GCA") and Fiberoptic Alignment
Solutions, Inc. ("FAS") which the Company combined and now operates as a
division of UTP under the name of UTP Fibreoptics. The acquisition of UTP
Fibreoptics expands the Company's presence in the optoelectronic communications
market. UTP Fibreoptics custom packages laser diodes, LEDs and photodetectors
for OEMs for use in fiber optic networks for local telecommunications and data
communications.
COMPANY STRATEGY
The Company seeks to leverage its expertise in optoelectronics to develop
highly focused and differentiated applications where there is a convergence of
market need and optoelectronic technology. Uniphase seeks to integrate its
strengths in photonics, electronics and software development to provide
innovative and cost effective solutions to its customers. The key elements of
Uniphase's business strategy are as follows:
- Capitalize on Expertise in Laser Technology and Laser
Manufacturing. Since its inception in 1979, Uniphase has sold over one
million lasers to OEM customers and has become a leader in certain market
segments. The Company is currently developing solid state lasers for its
existing OEM customers and new applications. In this regard, Uniphase has
commercially introduced a series of green wavelength solid state
microlasers and a series of continuous wave and pulsed infrared solid
state lasers. In addition, the Company is in the late stage of
development of blue wavelength solid state microlasers. The Company
believes that it is well positioned to continue development of and
penetrate the market for solid state lasers, which the Company believes
will be the primary commercial laser technology in the future.
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- Offer Applications Differentiated by Optoelectronic Technologies. The
Company's expertise in laser technology has enabled it to successfully
introduce and market applications products in the semiconductor capital
equipment and telecommunications equipment markets. The Company's
Ultrapointe Systems utilize high resolution laser imaging systems for the
examination and analysis of wafer defects that are as small as 0.1
micron. The Company also develops and produces optical external
modulators and associated transmitters for fiberoptic CATV transmission
systems as well as modulators for long haul fiber optic digital
transmission. In May 1996, the Company acquired UTP Fibreoptics as a
continuance of its strategy to pursue selected opportunities where
optoelectronic technology converges on specific market needs. Through UTP
Fibreoptics, the Company will offer custom packaged laser diodes and
photodetectors for the efficient transmission of voice, data and video
across local fiber optic systems.
- Provide Cost-Effective, Demand-Driven Solutions to its OEM
Customers. The Company seeks, through close relationships, to understand
its customers' needs at an early stage in the customers' product
development cycles and to design its laser subsystems and
telecommunications equipment products to meet these specific needs. The
Company focuses on selling its subsystems to customers at the design-in
phase of a product, creating the potential for recurring sales throughout
a product's life. Following design-in of its products, the Company shifts
its focus to obtaining manufacturing efficiencies, quality enhancements
and cost reductions during the product life.
- Maintain Industry and Customer Diversity. Uniphase sells its laser
subsystems to numerous OEMs in the biotechnology, measurement systems,
semiconductor equipment and graphics and printing system industries,
which reduces the Company's vulnerability to a downturn in any specific
industry or company. The Company has also increased the diversity of its
industry and customer base by leveraging its expertise in laser
technology to develop products for the semiconductor capital equipment
and telecommunications equipment markets.
PRODUCTS AND MARKETS
The Company offers optoelectronic products in three principal product
families: laser subsystems, semiconductor capital equipment and fiber optic
telecommunications equipment products. The Company's laser subsystems were the
Company's initial product offering and these operations have enabled the Company
to invest in the further development of its laser technology and to offer new
applications products. In fiscal 1994, the Company first shipped its Ultrapointe
System for defect examination and analysis of semiconductor wafers. In May 1995,
the Company acquired UTP to provide high-speed external modulators and
transmitters for the fiber optic networks in the long-haul telecommunications
and CATV industries. In May 1996, the Company acquired UTP Fibreoptics, which
custom packages laser diodes, LEDs and photodetectors for OEMs for use in fiber
optic networks for local telecommunications and data communications. The
following table sets forth the Company's net sales by product family in fiscal
years 1996 and 1995.
NET SALES
FISCAL YEAR ENDED
JUNE 30,
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PRODUCT CATEGORY 1996 1995
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(IN THOUSANDS)
Laser Subsystems......................................... $36,565 $33,837
Semiconductor Capital Equipment.......................... 17,584 7,428
Telecommunications Equipment(1).......................... 14,924 1,017
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$69,073 $42,282
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(1) The Company first entered the telecommunications equipment market through
the acquisition of UTP in a transaction accounted for as a purchase on May
15, 1995. As a result, telecommunications equipment net sales for fiscal
1995 reflect the inclusion of UTP operations from May 15, 1995 and UTP
Fibreoptics operations from June 1, 1996.
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LASER PRODUCTS
Background
Today, lasers are used in a variety of applications in the biotechnology,
semiconductor, consumer electronics, graphic arts and industrial process control
and measurement industries. For example, in the biotechnology field, lasers are
incorporated in flow cytometers, which identify and analyze biological cells, in
DNA sequencers, which measure and identify DNA patterns, and in certain surgical
instruments. In the semiconductor field, lasers are used to perform automated
test and measurement functions. In consumer electronics markets, lasers are an
enabling technology in laser printers and compact disc players. In the
industrial process control and measurement field, lasers are used for bar code
scanning.
The principal factors that distinguish different types of lasers and
determine the particular laser suitable for a specific application are
wavelength (color), cost, operating life and output power, which is measured in
terms of watts ("W") or milliwatts ("mW"). Lasers are capable of emitting light
from low frequency, long wavelength (greater than 700 nm) infrared light through
the visible spectrum to high frequency, short wavelength (less than 400 nm)
ultraviolet light. For example, the wavelength of the laser is of key importance
in causing the fluorescence of dyes in biotechnology applications. In addition,
laser light at shorter green and blue wavelengths is capable of being focused to
smaller, more intense points of light, enabling higher resolution optoelectronic
applications, such as semiconductor wafer inspection.
Four types of lasers commonly available today are gas, liquid,
semiconductor diode and solid state, each of which derives its classification
from the lasing material it uses. Examples of gas lasers include argon lasers
used for biotechnology applications and carbon dioxide lasers used for
industrial welding applications. Liquid dye lasers are sold primarily in
research markets. Semiconductor diode lasers are used in CD players and in
telecommunications equipment.
The Company believes that solid state lasers will ultimately address all of
the applications currently served by gas lasers and that new applications for
lasers, such as marking and micromachining, will be made possible by solid state
technology. Solid state lasers use a solid material such as crystal, glass or
certain fibers as their lasing medium and, in some cases, use a semiconductor
diode laser as the energy source to stimulate their lasing medium. While
infrared solid state lasers are commercially available, shorter wavelength green
and blue solid state lasers have been commercialized on a very limited basis to
date due to cost and performance issues. The Company believes that further
development of green and blue solid state lasers may lead to significant market
opportunities for these shorter wavelength laser subsystems. In order to provide
its customers with the benefits of the smaller size and the improved efficiency
of solid state lasers, the Company is developing microlaser products.
Laser Subsystems Markets and Products
Uniphase's principal laser subsystem products consist of air-cooled argon
gas laser subsystems, which generally emit blue or green light, Helium Neon
("He-Ne") laser subsystems, which generally emit red or green light and solid
state lasers, which generally emit infrared, blue or green light. These systems
consist of a combination of a laser head containing the lasing medium, power
supply, cabling and packaging, including
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heat dissipation elements. Uniphase's principal laser subsystem products and
representative applications include:
LASER TYPE WAVELENGTH POWER PRICE RANGE(1) APPLICATIONS
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Gas:
He-Ne 633 nm 1-25 mW $ 50-$1,500 CAE Photoplotting
Argon 458-515 nm 3-75mW $ 2,500-$12,000 Capillary Electrophoresis
Solid State: Color Separation
Microlaser 473-1064 nm 5-50 mW $ 4,000-$9,000 Direct-to-Plate Printing
DNA Sequencing
Flow Cytometry
Particle Counting
Semiconductor Wafer Inspection
Stablelight 1064 nm Up to 4W $15,000-$20,000 Spectrometry
Daylight 349-1064 nm Up to 1mJ pulsed $30,000-$40,000 Micro Machining Marking
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(1) Product prices vary depending on order volume, power output and other
customer requirements and configurations.
The overall market for gas lasers is mature and is expected to decline as
technology transitions from conventional lasers, including gas and liquid, to
solid state lasers, which the Company expects to be the primary laser technology
in the future. In comparison to gas lasers, solid state lasers are smaller and
use less power. Sales of the Company's argon gas lasers have increased in recent
years primarily as a result of increased sales of such products for use in
biotechnology and semiconductor applications. Use of He-Ne gas lasers has
substantially declined as most customers are now using semiconductor diode
lasers to satisfy bar code scanning applications.
Uniphase introduced a series of green wavelength solid state microlasers in
May 1994. The Company is in the late stage of development of blue wavelength
solid state lasers and, in fiscal 1996, the Company has shipped such lasers to
certain customers for evaluation purposes. These products consist of a power
supply and an infrared diode laser coupled to a proprietary crystal structure
contained in a temperature controlled housing. The Company believes that these
products will ultimately address the principal markets currently served by
Uniphase's argon laser products. The Company also believes that the reduced size
and power requirements of these microlasers will permit new applications for
these products, although no assurance can be given that these microlasers will
achieve commercial acceptance for use in existing or any new applications.
Uniphase introduced a series of continuous wave and pulsed infrared solid
state laser systems at the Conference on Laser and Electro-Optics in May 1995.
These products consist of a power supply and a number of high power diodes or
diode arrays coupled to a proprietary crystal structure in a stable mechanical
structure. The continuous wave product, Stablelight, produces up to 4W of
infrared power and is principally used by customers in industrial process
control and measurement applications. The Daylight product produces pulses up to
1 milli-Joule ("mJ") and is designed for customers with micro machining or
marking requirements.
SEMICONDUCTOR CAPITAL EQUIPMENT PRODUCTS
Background
Technological advances and demands for increasing levels of performance
have led the semiconductor industry to develop more complicated devices with
increasingly smaller geometries. A current state-of-the-art microprocessor may
have four million transistors per square centimeter, four or five "wiring"
levels and require 400 process steps during its manufacture, providing ample
opportunities for particle contamination to occur on the wafer and cause
defects. As semiconductor feature sizes decrease, devices become increasingly
susceptible to smaller defects during their manufacture. It has been estimated
that 80% of the loss of manufacturing yield is caused by particle contamination
that occurs on the wafer during the manufacturing process.
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One of the semiconductor industry's responses to the increasing
vulnerability of semiconductor devices to smaller defects has been to employ
defect detection and inspection that is closely linked to the manufacturing
process. Semiconductor process engineers monitor their processes more closely,
identifying defects and their origins in order to reduce their recurrence and
maintain and improve process yields. Presently, automated inspection systems
such as those manufactured by Tencor and KLA are used on-line to detect and
locate defects as small as 0.1 micron. A single wafer may be inspected numerous
times during its progression through manufacturing. These on-line detection
systems use advanced image processing and innovative laser scanning technologies
to achieve high sensitivity and speed.
Detecting the presence of defects is only the first step in preventing
their recurrence. After detection, the defects must be examined in order to
identify their size, shape and the process step in which the defect occurred.
This examination is called "defect classification." The resulting description of
the defects is then added to a computer database. This database is used to
monitor defect trends and to pinpoint the sources of defects and contaminating
particles to specific process steps or pieces of equipment. Identification of
the sources of defects in the lengthy and complex semiconductor manufacturing
process has become essential for maintaining high yield production.
While automated inspection systems have progressed to being able to detect
submicron defects, the conventional optical microscopes that have traditionally
been used for defect classification are not capable of examining such defects.
With a state-of-the-art, conventional optical microscope, a 0.3 micron defect,
which is nearly the entire minimum feature size of today's microprocessor,
appears only as a dark speck. Further, certain types of defects that are
embedded in or under films created during gas phase semiconductor manufacturing
processes are not currently observable by such microscopes. Other very shallow
defects, which are often only 0.1 micron high and which may occur during the
chemical mechanical polishing ("CMP") process, are also not observable by
conventional microscopes.
The Ultrapointe System Solution
The Company established its Ultrapointe subsidiary in fiscal 1992 and began
shipping Ultrapointe Systems in fiscal 1994. The Ultrapointe System is a laser
imaging system ("LIS") that is capable of examining microscopic defects with the
ease and speed of conventional microscopes while also offering increased
resolution and the ability to provide three-dimensional ("3-D") images. This
system combines state-of-the-art high speed laser scanning technology, real-time
confocal imaging and digital image reconstruction to allow for 3-D imaging of
semiconductor defects as small as 0.1 micron. The Ultrapointe System works in
conjunction with automated inspection systems from vendors such as Tencor and
KLA to enable semiconductor manufacturers to more accurately identify and
classify defects. This defect examination and analysis procedure enables
semiconductor manufacturers to improve yields by identifying and containing
process problems. Ultrapointe Systems operate in the manufacturing cleanroom,
adjacent to automated inspection systems, and can in seconds produce detailed
images of defects even when they are very small or embedded or buried in films.
The Company believes that its Ultrapointe System is the only currently
available, non-destructive wafer inspection tool with increased resolution and
3-D imaging capabilities that is capable of both examining certain sub-surface
wafer defects and accurately analyzing the sources of defects.
The Ultrapointe System utilizes an optical technique called scanning laser
confocal microscopy. This technique uses, through high power microscopic optics,
an argon laser as an intense light source to scan a wafer's surface numerous
times. The return signal from the laser is processed by the system's computer
workstation, which provides a complete topological image of the wafer's surface
at the system's console and can display in a high resolution format defects as
small as 0.1 micron. Typical magnifications afforded by Ultrapointe Systems
approximate 35,000x, as compared with conventional white light microscopes upper
magnification limits of approximately 6,000x. Through software developed by the
Company, the system's workstation can also evaluate and classify defects,
communicate with automated inspection systems and store images and other data.
The Company currently offers two versions of its Ultrapointe System, the
Ultrapointe LIS 500, which has a base list price of $275,000, and the
Ultrapointe LIS 1010, which has a base list price of $368,000. These
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products differ primarily in the degree of software image manipulation available
to the operator. The systems can also be tailored, through software, to
interface with various automated inspection systems and local area networks. The
Ultrapointe LIS 500 includes full wafer automation and handling and a Silicon
Graphics workstation. The images available include a conventional, real time
white light microscopy image, real time laser confocal "slices" and a multiple
slice top view of the wafer surface and defect. The full resolving power of the
laser images is available and surface, embedded and buried defects can be
viewed. This product can be upgraded at any time with advanced two dimensional
("2-D") and 3-D imaging accessories. The Ultrapointe LIS 1010 incorporates all
of the features of the Ultrapointe LIS 500 while using a more advanced version
of the Silicon Graphics workstation.
The Ultrapointe System currently requires a human operator to classify
defects. In May 1996, the Company introduced its Identifier software product, an
optional feature that provides automatic defect classification capability for
Ultrapointe Systems. Working in conjunction with the Ultrapointe System, the
Identifier software automates the defect classification process, thereby
improving the precision and repeatability of defect classification. The ability
to review defects using ADC software is becoming increasingly important to
semiconductor manufacturers as it facilitates defect classification without
direct operator evaluation at each defect site. This automation can improve
reliability and consistency by eliminating operator-induced variations. In
addition, such automation helps speed analysis of the vast amounts of defect
data and classifications necessary for yield enhancement programs. The Company
developed the Identifier software using technology licensed from ISOA, Inc. and
in cooperation with the semiconductor industry consortium, SEMATECH. The
Identifier has a base list price of $150,000.
In November 1995, the Company entered into a three-year agreement with
Tencor under which Tencor became the exclusive OEM reseller for the Company's
Ultrapointe Systems and the Identifier, the Company's ADC software product.
Under the Agreement, Tencor will distribute the Ultrapointe System under its own
label worldwide and has the responsibility for installation and service of the
systems it sells. The Company retains the right to distribute its products
through its own channels. The Agreement includes a license providing Tencor with
certain ADC technology and payments to the Company to accelerate ADC
development.
TELECOMMUNICATIONS EQUIPMENT PRODUCTS
UTP Background
Fiber optic cable is gaining widespread acceptance in upgrades and new
installations of CATV and telecommunications systems worldwide. The use of fiber
optic cable results in vastly improved performance, flexibility, reliability and
lower installation and operating costs when compared to traditional copper and
coaxial cable. Moreover, technological innovation and market forces are creating
increased demand for communication transmission systems with multiple delivery
capability and higher performance and reliability features. Further,
telecommunications interexchange carriers are being required to provide higher
speed data transmission over longer lengths of installed optical fiber between
electronic repeater stations. Due to the high cost of new fiber installations,
interexchange carriers seek to utilize the installed fiber base to the greatest
extent possible. In the CATV industry, consolidation has resulted in a smaller
number of multiple system operators controlling larger networks. These
operators, who compete with other technologies such as direct broadcast
satellite television, are upgrading their systems and seek economical solutions
that will increase their network flexibility and reliability.
The flexibility and performance of fiber optic systems has been enhanced
through the use of two types of signal encoding techniques: direct modulation
and external modulation. In direct modulation, the light output from a diode
laser is switched on and off to generate a signal, similar to the operation of a
flashlight. This frequent switching, however, causes wavelength instability,
which limits the distance of transmission before signal regeneration is
required. Further, the diode lasers used in direct modulation have limited power
and modulation rate, thereby constraining the performance of the signal
transmission system. In external modulation, the light output of a continuously
powered laser is switched in a separate crystal of lithium niobate. Light from
the laser travels along waveguides patterned into lithium niobate crystals and
electrical
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signals applied to electrodes alongside the waveguides encode the signal onto a
light beam for transmission in the optical fiber. As compared to direct
modulation, external modulation has the following advantages:
- Longer Distances in Telecommunications. External modulators enable
signal transmission over longer distances in telecommunications systems
before signal regeneration is required. External modulation thereby
reduces the required number of expensive repeaters or amplifiers, which
are a significant cost in transmission systems.
- Higher Capacity in Telecommunications. External modulation is being used
by equipment suppliers that are developing transmission hardware
incorporating wavelength division multiplexing ("WDM"). WDM is capable of
increasing the capacity of a fiber route up to 16 times without upgrading
to more expensive electronic multiplexing/demultiplexing equipment. WDM is
compatible with the large installed base of fiber optic networks and can
be used to increase significantly the data carrying capacity of such
networks. External modulators also enable higher data rates (e.g. OC-192
or 10 Gbps) to be effectively transmitted over long distances.
- Longer Distances and Higher Fidelity in CATV. External modulators
operate at higher laser power and therefore allow signals to be
transmitted over longer distances without detection and retransmission. In
addition, external modulation provides inherently higher fidelity because
of lower laser noise and low noise susceptibility to optical system
reflections, such as those arising from existing fiber optic connections.
External modulators are fully compatible with CATV distribution systems
that utilize fiber optical amplifiers.
UTP Products and Markets
In May 1995, the Company purchased UTP, which designs, develops,
manufactures and markets high-speed external modulators and transmitters for
fiber optic networks in the CATV and telecommunications industries. The Company
acquired UTP as part of its strategy to pursue selected opportunities where
opto-electronic technology converges on specific market needs which have not
been adequately addressed by conventional electronic solutions.
The Company produces lithium niobate integrated optic circuits by using its
proprietary Annealed Proton Exchange (APE(R)) fabrication process. The Company
believes that this process produces modulators which have higher optical power
handling, and inherently better fidelity as compared with competing external
modulators. The Company also sells customized external modulators for a variety
of customer applications.
The Company's principal modulator products include:
TYPE WAVELENGTH APPLICATION
------------------------------- ---------------- -------------------------------
CATV Modulators................ 1300 nm, 1550 nm CATV Super Trunk Transmitter
2.5 Gbps Digital Modulators.... 1300 nm, 1550 nm OC-48 Telecommunications
Microwave and Radio Frequency
Modulators................... 1300 nm, 1550 nm Antenna Links, Radar, Cellular
UTP began to supply turn-key externally modulated CATV transmitters to CATV
OEMs in September 1995. These transmitters incorporate a continuous-wave diode
laser, a lithium niobate modulator and patented electronic linearity and control
circuitry. The Company routinely customizes its transmitter to the
specifications of the OEM customer. The Company also resells optical fiber
amplifiers as part of providing complete optical transmission functionality to
OEMs.
The principal applications addressed by the Company's telecommunications
equipment products are as follows.
- Cable. The principal cable television applications addressed by the
Company are externally modulated transmitters for trunk-line applications.
These transmitters operate at the preferred optical wavelength of 1550 nm.
They incorporate high power (>20 mw) diode lasers and the Company's
modulators to provide high optical powers for the transmission of
broadcast television signals over long
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distances. In addition, they are compatible with existing optical
amplifier technology, which allows the transmission distance or the
subscriber area to be increased. The Company's modulated transmitters are
designed for use in broadband systems, are operational over bandwidths of
up to 1 Ghz and are compatible with hybrid fiber coax ("HFC") systems
being developed by certain telecommunications equipment providers for the
transmission of voice, data and video.
- Long-Haul Telecommunications. The principal long-haul telecommunications
application addressed by the Company is a 2.5 Gbps transmission system for
long distance telephone interexchange carriers. The Company's external
modulators are used in these systems to significantly increase the space
between repeaters in such systems. The Company's modulators allow the
transmission of up to 32,000 phone conversations over a single fiber to
switching sites across distances of up to 350 miles. In addition, the
Company's external modulators are well suited for WDM applications at 2.5
Gbps. In such applications, multiple wavelength telecommunications signals
are transmitted over the same fiber, thereby multiplying the capacity of
the fiber cable system. Telecommunications customers are presently
deploying systems with four and eight separate wavelengths in order to
accommodate 10 Gbps and 20 Gbps, respectively, using UTP's OC-48
modulators. The Company is also developing a higher speed modulator to
provide similar capability at 10 Gbps (OC-192 data rate).
- Wireless Antenna Links. The rapid growth of wireless communication
systems is producing many deployment situations where the antenna must be
located a significant distance from the telephone base station. The
Company's modulators are well suited for fiber optic transmitter systems
to carry RF signals from the antenna in cellular systems to the base
stations.
- Specialty Products and Markets. In May 1996, UTP entered into an
agreement with Sanders, a Lockheed Martin Company, to develop and produce
fiber optic transmitters for the United States government to be installed
on high performance aircraft. Additional applications for the Company's
integrated optic modulators include fiber optic gyroscopes ("FOGs"),
analog RF fiber optic systems and laboratory and research and development
activities. The Company is a leading commercial supplier of multi-function
integrated optic signal processing chips for FOGs. FOGs are intended for
use in commercial aviation, military/aerospace and industrial
applications. The Company also offers a variety of integrated optic
modulators and switches for use at frequencies to 20 Ghz that are being
used in a large variety of industrial, government and university research
and development programs.
UTP Fibreoptics Products and Markets
In May 1996, the Company acquired UTP Fibreoptics, which custom packages
laser diodes, LEDs and photodetectors for OEMs for use in fiber optic networks.
UTP Fibreoptics uses its proprietary technologies of epoxy-based attachment and
laser welding to attach fiber ("pigtailing") to these optoelectronic components
in a variety of configurations to meet the specific needs of its OEM customers.
The principal applications addressed by UTP Fibreoptics are as follows:
- Data communications. The ever-increasing use of computer networks is
fueling a growth in fiber data communications systems. Fiber offers
advantages over copper-wire links that include longer distance
transmission, higher data rates, ease of multiplexing, and immunity from
electromagnetic interference. UTP Fibreoptics offers custom packaged
optical sources and detectors for a variety of fiber-based data
communications applications such as single-fiber Ethernet and Token Ring.
- Local telecommunications. Low-cost diodes are used in the feeder and
loop portions of the local telephone network to accommodate various data
rates. The Company supplies custom packaged components to
telecommunications equipment manufacturers. For example, UTP Fibreoptics
supplies custom laser-diode submodules for use as optical sources and
detectors in SONET OC-3 (155 Mbps) networks.
- Specialty Markets. UTP Fibreoptics products are well suited for several
specialty markets such as fiber optic test and measurement equipment,
fiber optic sensors and military and aerospace data
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communications applications. For example, the Company pigtails red diode
lasers for use in hand-held fiber optic fault locators.
SALES AND MARKETING
Uniphase markets its laser subsystem products principally to OEMs through
its own sales force in the United States, United Kingdom and Germany and through
a worldwide network of representatives and distributors to service smaller
domestic accounts, including those in the research and education markets. The
Company's sales and marketing strategy for its laser subsystem products is to
establish long term relationships with its OEM customers through early design-in
phase of its laser subsystems into customers applications and through high
levels of customer service and support. The following chart sets forth the
Company's principal OEM customers for laser subsystems by application:
INDUSTRIAL PROCESS
CONTROL AND
MEASUREMENT WAFER INSPECTION GRAPHICS AND PRINTING
BIOTECHNOLOGY INSTRUMENTS INSTRUMENTS SYSTEMS SYSTEMS
- ------------------------- ---------------------- ------------------- --------------------------
Applied Biosystems Allen-Bradley Co. ADE Corporation Crosfield Electronics Ltd.
Beckman Instruments ASM Lithography, B.V. Nikon Corporation Gerber Systems Corporation
Coulter Corporation Canon Tencor Instruments Optronics, a division of
Intergraph Corporation
Molecular Dynamics ICL Plc Purup Pre-Press A/S
Ortho Diagnostic Systems Scitex Corporation Ltd
One laser subsystems customer, the Applied Biosystems Division of
Perkin-Elmer Corporation, accounted for approximately 12%, 12% and 12% of the
Company's net sales for fiscal years 1996, 1995, and 1994, respectively. In
addition, in fiscal 1996, Tencor accounted for 13% of the Company's sales
through the purchase of both laser subsystems and Ultrapointe Systems. A
reduction or delay in orders from this customer could adversely affect the
Company's results of operations. In addition, another laser subsystem customer
accounted for 10% of net sales in fiscal year 1994.
Uniphase markets its Ultrapointe Systems through Tencor's worldwide
distribution channels and a network of four independent sales representatives in
the United States and Canada. In Japan, the Company has a distribution agreement
with Tencor and Innotech Corporation for sales to Japan's semiconductor
industry. In Europe and the Pacific Rim, the Company distributes its products
through Tencor; however, the Company has the right to market its products
through its own distribution channels.
As of June 30, 1996, the Company had sold 75 Ultrapointe Systems in the
United States, Japan and Korea. Customers for the Company's Ultrapointe System
include:
American Microsystems Micron Technology*
Analog Devices Microunity
Applied Materials Motorola*
Digital Equipment Corporation* Philips Semiconductors*
Fujitsu, Ltd.* Samsung*
IBM Corporation* SEMATECH
Intel* Sony Corporation
LSI Logic Corporation* Toshiba*
Lucent Technologies* (formerly
AT&T) VLSI Technology*
L.G. Semicon VTC
Matsushita Electric* Yamaha Corporation
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* Indicates customers that have purchased multiple Ultrapointe Systems.
UTP markets its telecommunications equipment products to OEMs through its
own direct sales force and is in the process of establishing a sales office in
Chalfont, Pennsylvania. In addition, UTP sells such products
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through distributors in Europe, Australia, Japan and Taiwan. Customers for the
Company's telecommunications equipment products include Ericsson Raynet and
Harmonic Lightwaves.
CUSTOMER SUPPORT AND SERVICE
The Company believes that a high level of customer support is necessary to
successfully develop and maintain long term relationships with its OEM customers
in its laser subsystems and telecommunications equipment businesses. This close
relationship begins at the design-in phase and is maintained as customer needs
change and evolve. The Company provides direct service and support to its OEM
customers through its offices in the United States. The Company's European laser
subsystem customers are serviced through its sales and support offices in the
United Kingdom and Germany. In Japan, the Company's laser subsystems
distributor, Autex, assists in performing support and service functions. The
Company provides support through both on-site customer service and telephone
support from its various facilities that perform sales and service functions.
The Company generally warrants all of its laser products for a period of one
year from the date of shipment. Certain argon lasers carry warranties based on
hours of use.
A high level of customer support is also necessary when providing
production instrumentation for the semiconductor industry. Tencor and all
distributors of Ultrapointe Systems are responsible for sales, installation,
warranty and postwarranty support. Ultrapointe Systems generally carry a
one-year warranty from the date of installation or fifteen months from shipment,
whichever occurs first. Service contracts are available for system support after
the warranty period.
RESEARCH AND DEVELOPMENT
During fiscal years 1996, 1995 and 1994, Uniphase spent $5.8 million, $3.7
million, and $3.1 million, respectively, on research and development. In fiscal
1996 and 1995 Uniphase incurred charges totaling $4.5 million and $4.5 million
for acquired in-process research and development, most of which were incurred in
connection with the acquisition of UTP in fiscal 1995 and UTP Fibreoptics in
fiscal 1996. In fiscal 1996, the Company's laser research and development
efforts focus primarily on the continued development of solid state lasers.
These programs are supported by a $1.4 million award from the Advanced
Technologies Program of the Department of Commerce which expires in December
1996. The Company also has development and licensing agreements with Stanford
University and the University of St. Andrews, Scotland which give the Company
the right to manufacture and sell certain next generation laser products being
developed by these universities. If the Company manufactures such products, it
will be required to pay the universities certain royalties based on sales of the
products.
The Company continues to devote substantial research and development
resources to its Ultrapointe Systems product line. These efforts focus on the
Company's Identifier software product and enhancement of laser images. In
addition to the Identifier, the Company is also exploring a number of methods to
improve the resolution of the scanning laser confocal microscopy technique used
in the Ultrapointe System and, in particular, the Company is currently working
with a leading semiconductor manufacturer to enable the Ultrapointe System to
examine semiconductor masks.
The Company is developing new and enhanced telecommunications equipment
products and enhancing its manufacturing capability for telecommunications
equipment products. For example, higher performance modulators and transmitters
are under development, as are advanced multi-gigabit modulators. In
manufacturing, the Company is developing improved CAD design tools and advanced
modulator packages. The Company also participates in two national consortia: the
Analog Optoelectronics Module Consortium, which seeks to develop new and
cost-effective RF and microwave transmitters and receivers, and the National
Transparent Optical Network Consortium, which is involved in advanced high
capacity WDM fiber optic communications components and networks.
MANUFACTURING
The Company manufactures its argon laser subsystems and related power
supplies at its San Jose, California facility and its He-Ne lasers at its
Manteca, California facility. The Company assembles and tests
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its Ultrapointe Systems and manufactures initial systems of its microlasers at
its San Jose, California facility. The Company's modulator products are
manufactured at its facility in Bloomfield, Connecticut (where it is expanding a
clean room) and its transmitters are manufactured at its facility in Chalfont,
Pennsylvania. UTP Fibreoptics products are manufactured at the Company's
facilities in Witney, United Kingdom and Batavia, Illinois. The Company
manufactures its Stablelight and Daylight solid state laser subsystems products
at its I.E. Optomech Ltd. subsidiary located in the United Kingdom. The Company
has purchasing, materials management, assembly, final testing and quality
assurance functions at each location for the products that are manufactured at
that facility.
The manufacture of the Company's laser subsystems, Ultrapointe Systems and
telecommunications equipment products is a highly complex and precise process,
requiring production in a highly controlled environment. The Company maintains a
newly expanded 2,000 square foot class 100 clean room in which all Ultrapointe
System assembly takes place. Systems are tested and then packaged for direct
shipment into a customer's clean room. Changes in the Company's or its
suppliers' manufacturing processes or the inadvertent use of defective or
contaminated materials by the Company or its suppliers could adversely affect
the Company's ability to achieve acceptable manufacturing yields and product
reliability. To the extent the Company does not achieve such yields or product
reliability, its operating results and customer relationships would be adversely
affected.
The raw materials and sub-components which the Company requires for the
manufacture of its products are generally available from several sources. The
Company purchases some raw materials and components from single sources, but has
no reason to believe it could not purchase such materials and components from
alternative sources of supply on comparable terms. The Company obtains all the
robotics, workstations, and many optical components used in its Ultrapointe
Systems from Equipe Technologies, Silicon Graphics, Inc., and Olympus
Corporation, respectively. The Company currently utilizes a sole source for the
crystal semiconductor chip sets incorporated in its solid state microlaser
products and acquires its pump diodes for use in its solid state laser products
from SDL Inc., Opto Power Corporation and GEC. Certain of these companies also
manufacture products that compete with those of the Company. The Company obtains
lithium niobate wafers and specialized fiber components used in its
telecommunications products from primarily Crystal Technology, Inc. and Fujikura
Ltd., respectively. From time to time, the Company has experienced delays in
obtaining raw materials and components. However, to date such delays have not
materially affected its operations. The Company does not have long-term volume
purchase agreements with any of these suppliers, and no assurance can be given
that these components will be available in the quantities required by the
Company, if at all.
COMPETITION
The industries in which the Company sells its products are highly
competitive. Uniphase's overall competitive position depends upon a number of
factors, including the price and performance of its products, the level of
customer service and quality of its manufacturing processes, the compatibility
of its products with existing laser systems and Uniphase's ability to
participate in the growth of emerging technologies, such as solid state lasers.
In the argon laser market, Uniphase primarily competes with American Laser,
Coherent, Ion Laser Technology, NEC, Omnichrome, Spectra-Physics, Toshiba and
Carl Zeiss. In the He-Ne laser market, Uniphase considers Melles-Griot, NEC and
Carl Zeiss to be its primary competitors. In the solid state laser markets,
Uniphase's competitors include Coherent, Hitachi, IBM, Lightwave, Opto Power
Corporation, Philips, SDL, Inc., Siemens and Sony.
Significant competitive factors in the market for Ultrapointe Systems
include specific system performance, cost of ownership, support and
infrastructure and the ability to interface to existing automated inspection
systems and local area networks. Ultrapointe Systems compete with the following
three types of devices: scanning electron microscopes, conventional white light
microscopes and laser confocal microscopes. The Company believes that its
principal competitors include Amray, Hitachi, JEOL, Kinetek, Kensington,
Lasertech, Leica, Nidek, Nikon, Stahl Research and Carl Zeiss.
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Competitive factors in the market for the Company's telecommunications
equipment products include price, product performance and reliability, the
capability to provide strong customer support and service, customer
relationships and the breadth of product line. In this market, the Company faces
competition from companies that have substantially greater financial,
engineering, research, development, manufacturing, marketing, service and
support resources, greater name recognition than the Company and long-standing
customer relationships. With respect to modulator products for CATV and
telecommunications equipment suppliers, the Company's competitors include Lucent
Technologies (formerly AT&T Micro Electronics), Crystal Technology, Inc.,
Fujitsu, Integrated Optical Components, Ltd., and Sumitomo Cement Opto
Electronics Group. With respect to CATV 1550 nm transmitters for supply to OEMs,
the Company's competitors include AEL, Harmonic Lightwaves, Kablerhydt, Ortel,
Synchronous Communications and PAi. Other CATV equipment suppliers may also
enter this market. With respect to laser diode products for data communications
and local telecommunications equipment suppliers, the Company's competitors
include Oz Optics, and SDL-Optics as well as larger optoelectronic suppliers
such as AMP and Hewlett-Packard. Potential new technologies may also emerge to
compete with the Company's products, such as electro-absorption modulators that
are being introduced for long-haul telecommunications.
PATENTS AND PROPRIETARY RIGHTS
The Company holds 30 United States patents and certain corresponding
foreign patents on the technologies related to its products and processes. The
United States patents expire on dates ranging from 1999 to 2014. The Company has
applied for additional patents related to its solid state laser products, its
Ultrapointe Systems (three of which were recently issued) and its
telecommunications products. The Company has also acquired several patent
licenses involving areas such as end-pumped solid state lasers, diode-pumped
blue light lasers and waveguides.
The laser, semiconductor equipment, CATV and telecommunications industries
in which the Company sells its products are characterized by frequent litigation
regarding patent and other intellectual property rights. Numerous patents in
these industries are held by others, including academic institutions and
competitors of the Company. Such patents could inhibit the Company's ability to
develop new products for such markets. From time to time, the Company has
received notices claiming that it has infringed third-party patents or other
intellectual property rights. While in the past licenses generally have been
available to the Company where third-party technology was necessary or useful
for the development or production of the Company's products, there can be no
assurance that licenses to third-party technology will be available on
commercially reasonable terms, if at all. Generally, a license, if granted,
would include payments by the Company of up-front fees, ongoing royalties or a
combination thereof. There can be no assurance that such royalty or other terms
would not have a significant adverse impact on the Company's operating results.
The Company is a licensee of a number of third party technologies and
intellectual property rights and is required to pay royalties to these third
party licensors on certain of its products, including its Ultrapointe Systems
and its solid state lasers. In fiscal 1996 and 1995, the Company expensed $1.3
million and $1.2 million, respectively, in license and royalty fees primarily in
connection with its gas laser subsystems. In addition, there can be no assurance
that third parties will not assert claims against the Company with respect to
its existing products or with respect to future products under development by
the Company. In the event of litigation to determine the validity of any
third-party claims, such litigation could result in significant expense to the
Company and divert the efforts of the Company's technical and management
personnel, whether or not such litigation is determined in favor of the Company.
In the event of an adverse result in any such litigation, the Company could be
required to expend significant resources to develop non-infringing technology or
to obtain licenses to the technology which is the subject of the litigation.
There can be no assurance that the Company would be successful in such
development or that any such licenses would be available to the Company. In the
absence of such a license, the Company could be enjoined from future sales of
the infringing product or products. In fiscal years 1992 and 1993, the Company
incurred substantial legal expenses in connection with a patent infringement
action relating to the Company's current gas laser subsystems brought by
Spectra-Physics Lasers, Inc. ("Spectra-Physics"). While the Spectra-Physics case
has since been settled, no assurance can be given that, in the future, the
Company will be able to avoid similar actions by competitors or others or not be
forced to initiate its own actions to protect its proprietary position.
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BACKLOG
Backlog consists of written purchase orders for products for which the
Company has assigned shipment dates within the following 12 months. As of June
30, 1996 the Company's backlog was approximately $20.7 million, as compared with
a backlog of approximately $10.1 million at June 30, 1995. Orders in backlog are
firm, but are subject to cancellation or rescheduling by the customer. Because
of possible changes in product delivery schedules and cancellation of product
orders and because the Company's sales will often reflect orders shipped in the
same quarter that they are received, the Company's backlog at any particular
date is not necessarily indicative of actual sales for any succeeding period.
Certain of the Company's laser subsystems customers are adopting "just in time"
techniques with respect to ordering the Company's products, which will cause the
Company to have shorter lead times for providing products. Such shorter lead
times are likely to result in lower backlog.
EMPLOYEES
At June 30, 1996, the Company had a total of 409 full-time employees,
including 62 in research, development and engineering, 41 in sales, marketing
and service, 256 in manufacturing, and 50 in general management, administration
and finance. The Company intends to hire additional personnel during the next 12
months in each of these areas. The Company's future success will depend in part
on its ability to attract, train, retain and motivate highly qualified
employees, who are in great demand. There can be no assurance that the Company
will be successful in attracting and retaining such personnel. The Company's
employees are not represented by any collective bargaining organization, and the
Company has never experienced a work stoppage, slowdown or strike. The Company
considers its employee relations to be good.
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RISK FACTORS
The statements contained in this Report on Form 10-K that are not purely
historical are forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934, including but not limited to statements regarding the Company's
expectations, hopes, beliefs, intentions or strategies regarding the future.
Actual results could differ materially from those projected in any
forward-looking statements as a result of a number of factors, including those
detailed in this "Risk Factors" portion as well as those set forth elsewhere in
this Report on Form 10-K. The forward-looking statements are made as of the date
hereof and the Company assumes no obligation to update the forward-looking
statements, or to update the reasons why actual results could differ materially
from those projected in the forward-looking statements.
RISKS ASSOCIATED WITH THE TELECOMMUNICATIONS EQUIPMENT MARKET
The Company entered the telecommunications equipment market by acquiring
UTP in May 1995. UTP designs, develops, manufactures and markets high-speed
external modulators and transmitters for fiber optic networks in the long-haul
telecommunications and CATV industries. The CATV and telecommunications
industries are characterized by rapidly evolving technology, intense
competition, fluctuations in capital spending and uncertainty surrounding the
level of governmental regulation. To compete successfully, the Company must
design, develop, manufacture and sell new products that provide increasingly
higher levels of performance and reliability. As new markets develop, the
Company must successfully develop new products for these markets to remain
competitive. There can be no assurance that the Company will successfully
develop new products, or that new products developed by the Company will achieve
market acceptance or not be rendered obsolete or uncompetitive by products of
other companies. Significant competitive factors include product performance and
reliability, product price, the capability to provide strong customer support
and service, customer relationships and breadth of product line. There can be no
assurance that the Company will be able to compete successfully in the future
with respect to these or any other competitive factors or that competition in
these markets will not have a material adverse effect on the Company's business
and operating results. In May 1996, the Company acquired UTP Fibreoptics. UTP
Fibreoptics custom packages laser diodes, LEDs and photodetectors for OEMS for
use in fiber optic networks for local telecommunications and data
communications. Prior to acquiring UTP Fibreoptics, the Company had not been
engaged in local telecommunications and data communications applications and has
no experience in developing, manufacturing, selling or supporting products for
these applications. No assurance can be made that the Company can successfully
provide these applications for the local telecommunications or data
communications markets or that it can successfully assimilate UTP Fibreoptics
into the Company's other business operations.
UTP's and UTP Fibreoptics's products are designed to operate in CATV and
other communications networks that use fiber optic cable to transmit signals.
Thus, demand for the Company's products depends to a significant extent upon the
magnitude and timing of capital spending by CATV and telecommunications
operators for constructing, rebuilding or upgrading fiber optic systems which in
turn directly affects purchases by CATV and telecommunications equipment
suppliers. Furthermore, sales of the Company's CATV products are highly
dependent on the rate at which CATV OEMs and in turn, their customers, the
multiple systems operators ("MSOs"), move to adopt externally modulated products
operating at 1550 nanometers ("nm") for their trunk lines. Although the Company
believes that this technology offers certain advantages, there is no assurance
that OEMs and MSOs will continue to migrate to this solution. In addition, the
uncertainty regarding the level of governmental regulation and regulatory reform
affects capital expenditures in the CATV and telecommunications industries.
There can be no assurance that the Company's business and operating results will
not be materially and adversely affected by these factors.
CYCLICALITY OF SEMICONDUCTOR INDUSTRY
The Company's Ultrapointe Systems and a portion of its laser subsystems
businesses depend upon capital expenditures by manufacturers of semiconductor
devices, including manufacturers that are opening new or expanding existing
fabrication facilities, which, in turn, depend upon the current and anticipated
market demand for semiconductor devices and the products utilizing such devices.
The semiconductor industry is
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highly cyclical, and historically has experienced periods of oversupply,
resulting in significantly reduced demand for capital equipment. The
semiconductor industry is currently experiencing a downturn which has led many
semiconductor manufacturers to delay or cancel capital expenditures. Certain of
the Company's customers have delayed or canceled purchase of the Company's
Ultrapointe Systems. There can be no assurance that the Company's operating
results will not be materially and adversely affected by these factors.
Furthermore, there can be no assurance that the semiconductor industry will not
experience further downturns or slowdowns in the future, which may materially
and adversely affect the Company's business and operating results.
DECLINING MARKET FOR GAS LASERS; DEVELOPMENT AND OTHER RISKS RELATING TO SOLID
STATE LASER TECHNOLOGIES
To date, a substantial portion of the Company's revenue has been derived
from sales of gas laser subsystems. The market for gas lasers is mature and is
expected to decline as customers transition from conventional lasers, including
gas, to solid state lasers, which are currently expected to be the primary
commercial laser technology in the future. In response to this transition, the
Company has devoted substantial resources to developing solid state laser
products and has introduced its initial solid state products. To date, sales of
the Company's solid state laser products have been limited and primarily for
customer evaluation purposes. Solid state laser products are still evolving, and
there can be no assurance that the Company's solid state laser products will be
successfully designed into customers' products or achieve commercial sales
volumes. The Company believes that a number of companies are further advanced
than the Company in their development efforts for solid state lasers and are
competing with evaluation units for many of the same design-in opportunities
than the Company is pursuing. It is anticipated that the average selling price
of solid state lasers may be significantly less in certain applications than the
gas laser products the Company is currently selling in these markets. If the
Company is unable to successfully make this transition from gas to solid state
lasers, its business, operating results and financial condition will be
materially and adversely affected. The Company further believes it will be
necessary to continue to reduce the cost of manufacturing and to broaden the
wavelengths provided by its laser products. There can be no assurance that the
Company will successfully develop new solid state laser products, or that any
solid state laser products will achieve market acceptance or not be rendered
obsolete or uncompetitive by products of other companies
MANAGEMENT OF GROWTH; UTP FIBREOPTICS ACQUISITION
The Company has experienced recent growth through both increased levels of
operations in its existing businesses and the acquisition of UTP in May 1995.
The Company is devoting significant resources to develop new solid state lasers
for OEM customers, to improve products and increase market penetration of its
Ultrapointe Systems and to increase its penetration of the CATV and
telecommunications industries. In addition, the Company is now increasing its
marketing, customer support and administrative functions in order to support an
increased level of operations primarily from sales of its telecommunications
equipment products. No assurance can be given that the Company will be
successful in creating this infrastructure or that any increase in the level of
such operations will justify the increased expense levels associated with these
businesses.
In May 1996, the Company acquired UTP Fibreoptics. The total purchase price
of $9.1 million included aggregate consideration of $8.6 million, payable
through a combination of cash and notes, and estimated direct transaction costs
of $500,000. As a result of acquiring UTP Fibreoptics, the Company has entered
the local telecommunications and data communications market in which it had no
previous experience, and has expanded its employee base by approximately 45
persons. The success of the UTP Fibreoptics acquisition will be dependent on the
Company's ability to integrate UTP Fibreoptics into its existing operations as a
division of UTP. UTP's ability to manage UTP Fibreoptics will be complicated by
the geographical distance between UTP's facilities in Bloomfield, Connecticut
and Chalfont, Pennsylvania and UTP Fibreoptics's locations in the United Kingdom
and in Batavia, Illinois. There can be no assurance that the operations of UTP
Fibreoptics can be successfully integrated into UTP or that such integration
will not strain the Company's available management, manufacturing, financial and
other resources.
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The Company also made capital expenditures to acquire certain properties in
San Jose, California totaling 109,000 square feet, which included land,
buildings and improvements for an aggregate purchase price of approximately
$11.0 million and continues to invest in property, plant and equipment needed
for its business requirements, including adding to manufacturing capacity
throughout the Company. Any failure to utilize these areas in an efficient
manner could have a material adverse effect on the Company.
The Company currently has no commitments with respect to any future
acquisitions. The Company, however, frequently evaluates the strategic
opportunities available to it and may in the future pursue acquisitions of
additional complementary products, technologies or businesses. Such acquisitions
by the Company may result in the diversion of management's attention from the
day-to-day operations of the Company's business and may include numerous other
risks, including difficulties in the integration of the operations and products,
integration and retention of personnel of the acquired companies and certain
financial risks. Further acquisitions by the Company may result in dilutive
issuances of equity securities, the incurrence of additional debt, reduction of
existing cash balances, amortization expenses related to goodwill and other
intangible assets and other charges to operations that may materially adversely
affect the Company's business, financial condition or operating results.
VARIABILITY AND UNCERTAINTY OF QUARTERLY OPERATING RESULTS
The Company has experienced and expects to continue to experience
significant fluctuations in its quarterly results. The Company believes that
fluctuations in quarterly results may cause the market price of its Common Stock
to fluctuate, perhaps substantially. Factors which have had an influence on and
may continue to influence the Company's operating results in a particular
quarter include the timing of the receipt of orders from major customers,
product mix, competitive pricing pressures, the relative proportions of domestic
and international sales, costs associated with the acquisition or disposition of
businesses, products or technologies, the Company's ability to design,
manufacture, and ship products on a cost effective and timely basis, the delay
between incurrence of expenses to further develop marketing and service
capabilities and realization of benefits from such improved capabilities, the
announcement and introduction of cost effective new products by the Company and
by its competitors, and expenses associated with any intellectual property
litigation. In addition, the Company's sales will often reflect orders shipped
in the same quarter that they are received. Moreover, customers may cancel or
reschedule shipments, and production difficulties could delay shipments. The
timing of sales of the Company's Ultrapointe Systems may result in substantial
fluctuations in quarterly operating results due to the substantially higher per
unit price of these products relative to the Company's other products. In
addition, the Company sells its telecommunications equipment products to OEMs
who typically order in large quantities and therefore the timing of such sales
may significantly affect the Company's quarterly results. The timing of such OEM
sales can be affected by factors beyond the Company's control, including demand
for the OEM's products and manufacturing issues experienced by OEMs. In this
regard, the Company recently experienced a temporary rescheduling of orders by
one OEM telecommunications customer. As a result of the above factors, the
Company's results of operations are subject to significant variability from
quarter to quarter.
The Company's operating results in a particular quarter may also be
affected by the acquisition or disposition of other businesses, products or
technologies by the Company. For example, in the fourth quarter of fiscal 1995,
the Company incurred charges totaling $5.4 million, primarily for acquired
inprocess research and development in connection with the Company's acquisition
of UTP, and to a lesser extent from the loss on the sale of the Company's diode
laser product line. Such charges reduced net income per share for the fourth
quarter of fiscal 1995 by $0.34 and for fiscal 1995 by $0.33. During the quarter
ended June 30, 1996, the Company incurred a charge of approximately $3.0 million
in connection with the cancellation of certain UTP options and granting of
replacement options to purchase Uniphase Common Stock to UTP employees in order
to operate UTP Fibreoptics as a division of UTP. The Company also incurred a
charge of $4.5 million for acquired in-process research and development in
connection with the acquisition of UTP Fibreoptics in the quarter ended June 30,
1996. There can be no assurance that other acquisitions or dispositions of
businesses, products or technologies by the Company in the future will not
result in substantial charges or other expenses that may cause fluctuations in
the Company's quarterly operating results.
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INTENSE INDUSTRY COMPETITION
The laser, semiconductor capital equipment, CATV and telecommunications
industries in which the Company sells its products are highly competitive. In
each of the markets it serves, the Company faces intense competition from
established competitors, many of which have substantially greater financial,
engineering, research and development, manufacturing, marketing, service and
support resources. The Company is a recent entrant into the semiconductor
capital equipment, the CATV and telecommunications marketplaces and competes
with many companies in those markets that have substantially greater resources,
including greater name recognition, a larger installed base of products and
longer standing customer relationships. In order to remain competitive, the
Company must maintain a high level of investment in research and development,
marketing, and customer service and support. There can be no assurance that the
Company will be able to compete successfully in the laser, semiconductor capital
equipment, CATV or telecommunications industries in the future, that the Company
will have sufficient resources to continue to make such investments, that the
Company will be able to make the technological advances necessary to maintain
its competitive position or that its products will receive market acceptance.
The semiconductor capital equipment market is frequently affected by new product
introductions and new technologies that make existing production and inspection
equipment obsolete. There can be no assurance that others will not introduce
products which compete with the Ultrapointe System or which render the
Ultrapointe System obsolete or uncompetitive based on existing or new
technologies. In addition, there can be no assurance that technological changes
or development efforts by the Company's competitors will not render the
Company's products or technologies obsolete or uncompetitive.
DEPENDENCE ON KEY OEM RELATIONSHIPS
In November 1995, the Company entered into an exclusive OEM resale
agreement with Tencor pursuant to which Tencor will distribute Ultrapointe
Systems through its worldwide distribution channels. As a result of such
agreement, the Company currently expects that Tencor will account for a majority
of Ultrapointe's net sales for the foreseeable future. In addition, one laser
subsystems customer, the Applied Biosystems Division of Perkin-Elmer
Corporation, accounted for approximately 12%, 12% and 12% of the Company's net
sales for fiscal years 1996, 1995, and 1994, respectively. The loss of orders
from these or other OEM relationships could have a materially adverse effect on
the Company's business and operating results.
ATTRACT AND RETAIN KEY PERSONNEL
The future success of the Company is dependent, in part, on its ability to
attract and retain certain key personnel. In particular, the Company's research
and development efforts are dependent on the Company being able to hire and
retain engineering staff with the requisite qualifications. Competition in
recruiting highly skilled engineering personnel is extremely intense, and the
Company is currently experiencing substantial difficulty in identifying and
hiring certain qualified engineering personnel in many areas of its business. No
assurance can be given that the Company will be able to successfully hire such
personnel at the compensation levels that are consistent with the Company's
existing compensation and salary structure. The Company's future success will
also depend to a large extent on the continued contributions of its executive
officers and other key management and technical personnel, none of whom has an
employment agreement with the Company and each of whom would be difficult to
replace. The Company maintains a key person life insurance policy on its Chief
Executive Officer, but it does not maintain such insurance on any other persons.
The loss of the services of one or more of the Company's executive officers or
key personnel or the inability to continue to attract qualified personnel could
delay product development cycles or otherwise have a material adverse effect on
the Company's business and operating results.
CONFLICTING PATENTS AND INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES; POTENTIAL
INFRINGEMENT CLAIMS
The laser, semiconductor capital equipment, CATV and telecommunications
industries in which the Company sells its products are characterized by frequent
litigation regarding patent and other intellectual property rights. Numerous
patents in these industries are held by others, including academic institutions
and competitors of the Company. Such patents could inhibit the Company's ability
to develop new products for such markets. From time to time, the Company has
received notices claiming that it has infringed third-party
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patents or other intellectual property rights. While in the past licenses
generally have been available to the Company were third-party technology was
necessary or useful for the development or production of the Company's products,
there can be no assurance that licenses to third-party technology will be
available on commercially reasonable terms, if at all. Generally, a license, if
granted, would include payments by the Company of up-front fees, ongoing
royalties or a combination thereof. There can be no assurance that such royalty
or other terms would not have a significant adverse impact on the Company's
operating results. The Company is a licensee of a number of third party
technologies and intellectual property rights and is required to pay royalties
to these third party licensors on certain of its products. During fiscal 1996
and 1995, the Company expensed approximately $1.3 million and $1.2 million,
respectively, in license and royalty fees primarily in connection with its gas
laser subsystems. In addition, there can be no assurance that third parties will
not assert claims against the Company with respect to the Company's existing
products or with respect to future products under development by the Company. In
the event of litigation to determine the validity of any third-party claims,
such litigation could result in significant expense to the Company and divert
the efforts of the Company's technical and management personnel, whether or not
such litigation is determined in favor of the Company. In the event of an
adverse result in any such litigation, the Company could be required to expend
significant resources to develop non-infringing technology or to obtain licenses
to the technology which is the subject of litigation. There can be no assurance
that the Company would be successful in such development or that any such
licenses would be available to the Company. In the absence of such a license,
the Company could be enjoined from future sales of the infringing product or
products. In fiscal years 1992 and 1993, the Company incurred substantial legal
expenses in connection with a patent infringement action relating to the
Company's current gas laser subsystems brought by Spectra-Physics Lasers, Inc.
("Spectra-Physics"). While the Spectra-Physics case has since been settled, no
assurance can be given that, in the future, the Company will be able to avoid
similar actions by competitors or others or that the Company will not be forced
to initiate its own actions to protect its proprietary position
LIMITED PROTECTION OF INTELLECTUAL PROPERTY
The Company's future success depends in part upon its intellectual
property, including trade secrets, know-how and continuing technological
innovation. There can be no assurance that the steps taken by the Company to
protect its intellectual property will be adequate to prevent misappropriation
or that others will not develop competitive technologies or products. The
Company currently holds 30 U.S. patents on products or processes and certain
corresponding foreign patents and has applications for certain patents currently
pending. While three patents have been issued with respect to the Company's
Ultrapointe Systems, no assurance can be given that competitors will not
successfully challenge the validity of these patents or design products that
avoid infringement of the Company's proprietary rights with respect to its
Ultrapointe Systems. There can be no assurance that other companies are not
investigating or developing other technologies that are similar to the
Company's, that any patents will issue from any application pending or filed by
the Company or that, if patents do issue, the claims allowed will be
sufficiently broad to deter or prohibit others from marketing similar products.
In addition, there can be no assurance that any patents issued to the Company
will not be challenged, invalidated or circumvented, or that the rights
thereunder will provide a competitive advantage to the Company. Further, the
laws of certain territories in which the Company's products are or may be
developed, manufactured or sold, including Asia, Europe or Latin America, may
not protect the Company's' products and intellectual property rights to the same
extent as the laws of the United States.
DEPENDENCE ON SOLE AND LIMITED SOURCE SUPPLIERS
Various components included in the manufacture of the Company's products
are currently obtained from single or limited source suppliers. A disruption or
loss of supplies from these companies or an increase in price of these
components would have a material adverse effect on the Company's results of
operations, product quality and customer relationships. For example, the Company
obtains all the robotics, workstations and many optical components used in its
Ultrapointe Systems from Equipe Technologies, Silicon Graphics, Inc., and
Olympus Corporation, respectively. The Company currently utilizes a sole source
for the crystal semiconductor chip sets incorporated in the Company's solid
state microlaser products and acquires its pump diodes for use in its solid
state laser products from SDL, Inc., Opto Power Corporation and GEC. The Company
also
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20
obtains lithium niobate wafers and specialized fiber components used in its UTP
products primarily from Crystal Technology, Inc. and Fujikura, Ltd.,
respectively. The Company does not have long-term or volume purchase agreements
with any of these suppliers, and no assurance can be given that these components
will be available in the quantities required by the Company, if at all. Further,
UTP depends on relatively specialized components and it cannot be assured that
its respective suppliers will be able to continue to meet UTP's requirements
DIFFICULTIES IN MANUFACTURE OF THE COMPANY'S PRODUCTS
The manufacture of the Company's products involves highly complex and
precise processes, requiring production in highly controlled and clean
environments. Changes in the Company's or its suppliers' manufacturing process
or the inadvertent use of defective or contaminated materials by the Company or
its suppliers could adversely affect the Company's ability to achieve acceptable
manufacturing yields and product reliability. In addition, UTP has previously
experienced certain manufacturing yield problems that have materially and
adversely affected both UTP's ability to deliver products in a timely manner to
its customers and its operating results. The Company recently began
manufacturing UTP products at its newly constructed clean room at UTP's
Bloomfield, Connecticut facility and in May 1996 vacated the clean room space
leased from UTP's former parent corporation. No assurance can be given that the
Company will be successful in manufacturing UTP products in the future at
performance or cost levels necessary to meet its customer needs, if at all. In
addition, UTP established a new transmitter production facility in Chalfont,
Pennsylvania in March 1996 and consolidated the transmitter production line
previously located in Bloomfield, Connecticut into this facility in April 1996.
The Company has no assurance that this facility will be able to deliver the
planned production qualities of transmitters to customers specifications at the
cost and yield levels required. To the extent the Company or UTP does not
achieve and maintain yields or product reliability, the Company's operating
results and customer relationships will be adversely affected.
FUTURE CAPITAL REQUIREMENTS
The Company is devoting substantial resources to the development of new
products for the solid state laser, semiconductor capital equipment, CATV and
telecommunications markets. Although the Company believes existing cash
balances, cash flow from operations and available lines of credit, will be
sufficient to meet its capital requirements at least through the end of calendar
year 1997, the Company may be required to seek additional equity or debt
financing to compete effectively in these markets. The timing and amount of such
capital requirements cannot be precisely determined at this time and will depend
on several factors, including the Company's acquisitions and the demand for the
Company's products and products under development. There can be no assurance
that such additional financing will be available when needed, or, if available,
will be on terms satisfactory to the Company.
VOLATILITY OF COMMON STOCK PRICE
The market price of the Company's Common Stock has recently been and is
likely to continue to be highly volatile and significantly affected by factors
such as fluctuations in the Company's operating results, announcements of
technological innovations or new products by the Company or its competitors,
governmental regulatory action, developments with respect to patents or
proprietary rights, general market conditions and other factors. Further, the
Company's net sales or operating results in future quarters may be below the
expectations of public market securities analysts and investors. In such event,
the price of the Company's Common Stock would likely decline, perhaps
substantially. In addition, the stock market has from time to time experienced
significant price and volume fluctuations that are unrelated to the operating
performance of particular companies.
RISKS ASSOCIATED WITH INTERNATIONAL SALES
International sales accounted for approximately 24.3%, 30.3% and 28.2% of
the Company's net sales in fiscal years 1996, 1995 and 1994, respectively, and
the Company expects that international sales will continue to account for a
significant portion of the Company's net sales. The Company may continue to
expand its
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21
operations outside of the United States and to enter additional international
markets, both of which will require significant management attention and
financial resources. International sales are subject to inherent risks,
including unexpected changes in regulatory requirements, tariffs, and other
trade barriers, political and economic instability in foreign markets,
difficulties in staffing and management and integration of foreign operations,
longer payment cycles, greater difficulty in accounts receivable collection,
currency fluctuations and potentially adverse tax consequences. Since
substantially all of the Company's foreign sales are denominated in US dollars,
the Company's products may also become less price competitive in countries in
which local currencies decline in value relative to the US dollar. The Company's
business and operating results may also be materially and adversely affected by
lower sales levels which typically occur during the summer months in Europe and
certain other overseas markets. Furthermore, the sales of many of the Company's
OEM customers are dependent on international sales and, consequently, this
further exposes the Company to the risks associated with such international
sales.
ISSUANCE OF PREFERRED STOCK; POTENTIAL ANTI-TAKEOVER EFFECTS OF DELAWARE LAW
The Board of Directors has the authority to issue up to 1,000,000 shares of
undesignated Preferred Stock and to determine the powers, preferences and rights
and the qualifications, limitations or restrictions granted to or imposed upon
any wholly unissued shares of undesignated Preferred Stock and to fix the number
of shares constituting any series and the designation of such series, without
any further vote or action by the Company's stockholders. The Preferred Stock
could be issued with voting, liquidation, dividend and other rights superior to
those of the holders of Common Stock. The issuance of Preferred Stock under
certain circumstances could have the effect of delaying, deferring or preventing
a change in control of the Company.
The Company is subject to the provisions of Section 203 of the Delaware
General Corporation Law prohibiting publicly-held Delaware corporations from
engaging in business combinations with certain stockholders for a specified
period of time without the approval of substantially all of its outstanding
voting stock. Such provisions could delay or impede the removal of incumbent
directors and could make more difficult a merger, tender offer or proxy contest
involving the Company, even if such events could be beneficial, in the short
term, to the interests of the stockholders. In addition, such provisions could
limit the price that certain investors might be willing to pay in the future for
shares of the Company' Common Stock. The Company's Certificate of Incorporation
and Bylaws contain provisions related to the limitations of liability and
indemnification of its directors and officers, dividing its Board of Directors
into three classes of directors serving three-year terms and providing that its
stockholders can take action only a duly called annual or special meeting of
stockholders. These provisions also may have the effect of deterring hostile
takeovers or delaying changes in control or management of the Company.
ITEM 2. PROPERTIES
On February 8, 1996, the Company acquired two properties in San Jose,
California, totaling 109,000 square feet, which included land, buildings and
improvements, for an aggregate purchase price of approximately $11.0 million.
One of the properties is the Company's current principal facility previously
occupied under an operating lease which would have expired in August 1998. The
Company has expanded certain of its operations into the additional building. The
Company's principal sales, marketing, technical support, administration, and
research and development operations as well as manufacturing operations for the
argon laser and Ultrapointe products occupy these facilities. The Company is
currently leasing unused space to a tenant.
The Company's manufacturing facilities for its He-Ne laser products occupy
a 20,000 square foot building in Manteca, California. The building is leased
through September 1998. The Company's facilities for its telecommunications
equipment products occupy a 33,000 square foot leased building in Bloomfield,
Connecticut, where its modulator products are manufactured and a 18,000 square
foot leased building in Chalfont, Pennsylvania where its transmitter products
are manufactured. UTP Fibreoptics products are manufactured at the Company's
7,000 square foot facility in Witney, United Kingdom and its 5,000 square foot
facility in Batavia, Illinois. Leases for the Bloomfield, Chalfont, Witney and
Batavia facilities expire in July 2002 (with a lease extension available through
2007), February 2001, December 2013, and July 1999,
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22
respectively. The Company also maintains sales and service offices in both the
United Kingdom and Germany to support its European operations.
ITEM 3. LEGAL PROCEEDINGS
During fiscal 1996, two former employees commenced wrongful termination
actions against the Company. 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.
In the ordinary course of business, various lawsuits and claims are filed
against the Company. While the outcome of these matters is currently not
determinable, management believes that the ultimate resolution of these matters
will not have a material adverse effect on the Company's financial statements.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The information required by this Item is included on the inside back cover
and on pages 32 of the Company's 1996 Annual Report to Stockholders and is
incorporated herein by reference. See "Item 7 -- Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources" and Note 2 of Notes to Consolidated Financial Statements
contained in Item 8.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this Item is included in the Financial
Highlights for the five years ended June 30, 1996, which appears on page 1 of
the Company's 1996 Annual Report to Stockholders and is incorporated herein by
reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information required by this Item is included in the section entitled
"Management's Discussion and Analysis of Financial Condition and Results of
Operations", which appears on pages 11 to 15 of the Company's 1996 Annual Report
to Stockholders and is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this Item is included on pages 16 to 31 of the
Company's 1996 Annual Report to Stockholders and is incorporated herein by
reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
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PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND OTHER OFFICERS OF THE REGISTRANT
The information required by this Item is included in the Proposal One:
Elections of Directors, Directors and Executive Officers, and Section 16(a)
Beneficial Ownership Reporting Compliance sections of the Company's Proxy
Statement to be filed in connection with the Company's 1996 Annual Meeting of
Stockholders and is incorporated hereby by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is included in the Executive
Compensation and Related Information sections of the Company's Proxy Statement
to be filed in connection with the Company's 1996 Annual Meeting of Stockholders
and is incorporated hereby by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is included in the Security Ownership
of Certain Beneficial Owners and Management section of the Company's Proxy
Statement to be filed in connection with the Company's 1996 Annual Meeting of
Stockholders and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is included in the Compensation
Committee Interlocks and Insider Participation and Certain Transactions sections
of the Company's Proxy Statement to be filed in connection with the Company's
1996 Annual Meeting of Stockholders and is incorporated herein by reference.
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25
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(A)(1) FINANCIAL STATEMENTS
The financial statements listed in the accompanying index to financial
statements and financial statement schedules are filed or incorporated by
reference as part of this annual report.
(A)(2) FINANCIAL STATEMENT SCHEDULES
The financial statements listed in the accompanying index to financial
statements and financial statement schedules are filed or incorporated by
reference as part of this annual report.
(A)(3) EXHIBITS
The exhibits listed in the accompanying index to exhibits are filed or
incorporated by reference as a part of this annual report.
(B) REPORTS ON FORM 8-K
During the third quarter of fiscal year 1996, the Company filed the Current
Report on Form 8-K dated February 8, 1996 reported under Item 2, Acquisition or
Disposition of Assets, the Company's acquisition of certain properties from
Tasman-Sterling Associates, a California general partnership.
The Company filed a report on Form 8-K on June 17, 1996, reporting the
purchase of UTP Fibreoptics and including the audited financial statements of
Fiberoptic Alignment Solutions, Inc. and GCA Fibreoptics Limited in accordance
with Rule 3.05 of Regulation S-X and the pro forma financial information
required by Article 11 of Regulation S-X.
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
REFERENCE PAGE
----------------------------------
1996 ANNUAL
FORM 10-K REPORT TO STOCKHOLDERS
--------- ----------------------
Consolidated Balance Sheets -- June 30, 1996 and 1995........... -- 17
Consolidated Statements of Operations -- June 30, 1996, 1995 and
1994.......................................................... -- 16
Consolidated Statement of Cash Flows -- June 30, 1996, 1995 and
1994.......................................................... -- 18
Consolidated Statement of Stockholders' Equity -- June 30, 1996,
1995 and 1994................................................. -- 19
Notes to Consolidated Financial Statements...................... -- 20-31
Report of Ernst & Young LLP, Independent Auditors............... -- 32
Schedule II -- Valuation and Qualifying Accounts -- June 30,
1996, 1995 and 1994........................................... 25 --
Financial statement schedules have been omitted because they are not
applicable or are not required or the information required to be set forth
therein is included in the Company's financial statements set forth in Item 8 of
this Form 10-K and the notes thereto.
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26
UNIPHASE CORPORATION
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
BALANCE AT CHARGED TO BALANCE AT
BEGINNING COST AND END OF
DESCRIPTIONS OF PERIOD EXPENSES DEDUCTION(1) PERIOD
- ---------------------------------------------- ---------- ---------- ------------ ----------
(IN THOUSANDS)
Year ended June 30, 1994
Allowance for doubtful accounts............. $ 95 $ 2 $ (3) $100
Year ended June 30, 1995
Allowance for doubtful accounts............. $100 $ 59 $ 5 $164
Year ended June 30, 1996
Allowance for doubtful accounts............. $164 $139 $ 18 $285
- ---------------
(1) Charges for uncollectible accounts, net of recoveries.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Date: September 25, 1996 UNIPHASE CORPORATION
By: /s/ KEVIN N. KALKHOVEN
------------------------------------
Kevin N. Kalkhoven
President, Chief Executive Officer
and
Chairman of the Board
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Kevin N. Kalkhoven and Danny E. Pettit,
and each of them, his or her attorneys-in-fact, each with the power of
substitution, for him or her in any and all capacities, to sign any amendments
to this Report on Form 10-K, and to file the same with exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his substitute or substitutes, may do or cause to be done
by virtue hereof.
Pursuant to the requirements of the Securities Act of 1934, this report has
been signed below by the following persons on behalf of the Registrant and in
the capacities and on the dates indicated.
SIGNATURE TITLE DATE
- ------------------------------------------ ------------------------------ -------------------
/s/ KEVIN N. KALKHOVEN President, Chief Executive September 25, 1996
- ------------------------------------------ Officer and Chairman of the
Kevin N. Kalkhoven Board (Principal Executive
Officer)
/s/ DANNY E. PETTIT Vice President, Finance, Chief September 25, 1996
- ------------------------------------------ Financial Officer and
Danny E. Pettit Secretary (Principal Financial
and Accounting Officer)
/s/ WILLIAM B. BRIDGES Director September 25, 1996
- ------------------------------------------
William B. Bridges
Director
- ------------------------------------------
Robert C. Fink
/s/ CATHERINE P. GOODRICH Director September 25, 1996
- ------------------------------------------
Catherine P. Goodrich
Director
- ------------------------------------------
Stephen C. Johnson
/s/ ANTHONY R. MULLER Director September 25, 1996
- ------------------------------------------
Anthony R. Muller
Director
- ------------------------------------------
Wilson Sibbett, Ph.D.
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UNIPHASE CORPORATION
ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED JUNE 30, 1996
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ---------- ---------------------------------------------------------------------------
2.1(1) -- Purchase and Sale Agreement between Registrant and Tasman-Sterling
Associates, a California general partnership, dated January 30, 1996.
2.2(8) -- Form of Stock Purchase Agreement between Registrant, Fiberoptic Alignment
Solutions, Inc., an Illinois corporation ("FAS"), Uniphase
Telecommunications Products, Inc., a Delaware corporation, and the
shareholders of FAS named therein, and Amendment No. 1 thereto dated as of
May 31, 1996.
2.3(9) -- Form of Agreement between Registrant and GCA Fibreoptics Limited for the
Sale and Purchase of the entire issued shares capital of GCA Fibreoptics
Limited as of May 24, 1996.
3(i)(b)(2) -- Amended and Restated Certificate of Incorporation.
3(ii)(c)(7) -- Bylaws of the Registrant, as amended.
10.1(2) -- Superseding Patent License Agreement, dated June 21, 1989, between Patlex
Corporation and the Registrant.
10.2(2) -- Project Agreement, dated May 15, 1991, among the members of the National
Storage Industry Consortium, as amended July 1, 1993.
10.3(2) -- Agreement, dated December 2, 1991, between Crosfield Electronics Limited
and the Registrant.
10.4(2) -- License Agreement, dated December 18, 1991, between The Regents of
University of California and the Registrant.
10.5(2) -- License Agreement, dated August 2, 1993, between Research Corporation
Technologies, Inc., and the Registrant.
10.6(3) -- 1984 Amended and Restated Stock Plan.
10.7(3) -- 1993 Flexible Stock Incentive Plan.
10.8(3) -- 1993 Amended and Restated Employee Stock Purchase Plan.
10.9(2) -- Patent License Agreement, dated October 29, 1993, by and between the
Registrant and Molecular Dynamics, Inc.
10.10(4) -- Lease Agreement, dated August 23, 1993, between Eastrich No. 101
Corporation and the Registrant, as amended February 1, 1994.
10.11(5) -- Distribution Agreement, dated May 16, 1994, between Metron Semiconductors
Ltd. and the Registrant.
10.12(5) -- License Agreement, May 9, 1994, between I.E. Optomech Ltd. and the
Registrant.
10.13(6) -- Loan and Security Agreement, dated March 15, 1995, between Bank of the West
and the Registrant.
10.14(7) -- Preferred Partner Agreement, dated October 14, 1994, between Tencor
Instruments and the Registrant.
10.15(7) -- Distributor Agreement, dated October 1, 1994, between Innotech Corporation
and the Registrant.
10.16(7) -- Joint Venture Agreement, dated July 24, 1995, between Daniel Guillot and
the Registrant.
10.17(7) -- Amendment, dated July 14, 1995, to Lease, dated November 6, 1984, between
Alexander/Dorothy Scheflo and the Registrant.
10.18(7) -- Laser Technology Sublicense Agreement, dated October 13, 1994, between The
University Court of The University of St. Andrews through I.E. Optomech and
the Registrant.
10.19(7) -- Nonexclusive Sublicense Agreement, dated July 14, 1995, between Coherent,
Inc. and the Registrant.
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29
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ---------- ---------------------------------------------------------------------------
10.20(7) -- Sublicense Agreement, dated May 26, 1995, between Stanford University and
the Registrant.
10.21(7) -- License Agreement, dated June 8, 1995, between ISOA, Inc. and the
Registrant.
10.22(7) -- Research and Development Contract, dated January 18, 1995, between the
National Institute of Standards and Technology to the Registrant.
10.23(10) -- Joint Venture agreement, dated July 24, 1995, between Daniel Guillot and
the Registrant, as amended October 6, 1995.
10.24(10) -- OEM Agreement, dated November 20, 1995, between the Registrant and Tencor
Instruments.
10.25(10) -- License Agreement, dated November 20, 1995, between the Registrant and
Tencor Instruments.
10.26(11) -- Amended and Restated 1993 Flexible Stock Incentive Plan.
13 -- Portions of the Annual Report to Stockholders for fiscal year ended
December 30, 1995 expressly incorporated by reference herein.
21.1 -- Subsidiaries of the Registrant.
23.1 -- Consent of Ernst & Young LLP, independent auditors.
24.1 -- Powers of Attorney. (See Page 26)
27 -- Financial Data Schedule
- ---------------
(1) Incorporated by reference to the exhibit to the Company's current Report on
Form 8-K filed February 22, 1996.
(2) Incorporated by reference to the exhibits filed with the Registrant's
registration statement on Form S-1, file number 33-68790, which was
declared effective November 17, 1993.
(3) Incorporated by reference to the exhibits filed with the Registrant's
registration statement on Form S-8, file number 33-74716 filed with the
Securities and Exchange Commission on February 1, 1994.
(4) Incorporated by reference to the exhibits filed with the Registrant's
quarterly report on Form 10-Q for the period ended March 31, 1994 filed
with the Securities and Exchange Commission on May 12, 1994.
(5) Incorporated by reference to the exhibits filed with the Registrant's
annual report on Form 10-K for the period ended June 30, 1994.
(6) Incorporated by reference to the exhibits filed with the Registrant's
quarterly report on Form 10-Q for the period ended March 31, 1995.
(7) Incorporated by reference to the exhibit filed with the Registrant's annual
report on Form 10-K for the period ended June 30, 1995.
(8) Incorporated by reference to the exhibit to the Company's Form S-3/A filed
June 7, 1996.
(9) Incorporated by reference to the exhibit to the Company's Post-Effective
Amendment No. 1 to Registration Statement on Form S-3 filed June 20, 1996.
(10) Incorporated by reference to exhibits filed with the Registrant's quarterly
report on Form 10-Q for the period ended December 31, 1995.
(11) Incorporated by reference to exhibits filed with the Registrant's
registration statement on Form S-8, file number 33-31722 filed with the
Securities and Exchange Commission on February 27, 1996.
28