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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
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission File No. 0-25826
HARMONIC LIGHTWAVES, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 77-0201147
(State of incorporation) (I.R.S. Employer Identification No.)
549 Baltic Way
Sunnyvale, CA 94089
(408) 542-2500
(Address, including zip code, and
telephone number, including area code, of
Registrant's principal executive offices)
--------------
Securities registered pursuant to section 12(b) of the Act: None
Securities registered pursuant to section 12(g) of the Act: Common Stock, par
value $.001 per share
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 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. ____
Based on the closing sale price of the Common Stock on the NASDAQ National
Market System on March 11, 1998, the aggregate market value of the voting stock
held by non-affiliates of the Registrant was $93,516,535. Shares of Common Stock
held by each officer and director and by each person who owns 5% or more of the
outstanding Common Stock have been excluded in that such persons may be deemed
to be affiliates. This determination of affiliate status is not necessarily a
conclusive determination for other purposes.
The number of shares outstanding of the Registrant's Common Stock, $.001 par
value, was 11,503,212 at March 11, 1998.
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DOCUMENTS INCORPORATED BY REFERENCE
Document Location in Form 10-K
-------- ---------------------
1997 Annual Report to Stockholders (pages 16 - 34). Parts II and IV
Portions of the Proxy Statement for the 1998 Annual Meeting of Stockholders
(which will be filed with the Securities and Exchange Commission within 120
days of the end of the fiscal year ended December 31, 1997). Part III
The Board Compensation Committee Report and the Performance Graph to be
included with the 1998 Proxy Statement shall not be deemed to be "soliciting
material" or to be "filed" with the Commission or otherwise incorporated by
reference into this report.
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PART I
ITEM 1. BUSINESS
Harmonic Lightwaves, Inc. ("Harmonic" or the "Company") designs, manufactures
and markets digital and lightwave based communications systems that deliver
video, audio and data over hybrid fiber/coax ("HFC"), satellite and wireless
networks. The Company's advanced solutions enable cable television and other
network operators to provide a range of broadcast and interactive broadband
services that include high speed Internet access and video on demand. The
Company offers a broad range of fiber optic transmission and digital headend
products for HFC networks, and through its acquisition of N.M. New Media
Communication Ltd. ("NMC") in January 1998 expanded its product offerings to
include high speed data delivery software and hardware. Harmonic was
incorporated in June 1988 in California and in May 1995 reincorporated into
Delaware.
This Annual Report on Form 10-K contains 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. Actual results could differ materially from
those projected in the forward-looking statements as a result of a number of
factors, including those set forth under "Factors That May Affect Future Results
of Operations" and elsewhere in this Annual Report on Form 10-K.
INDUSTRY BACKGROUND
Communications service providers worldwide are facing increasing competition as
a result of recent and proposed regulatory reform. For example, the United
States Telecommunications Act of 1996 (the "Telecom Act") permits cable
television multiple system operators ("MSOs") and local exchange carriers such
as the regional Bell operating companies ("RBOCs") to enter each other's markets
and to provide other services, such as high-speed data communications.
Historically, U.S. local exchange carriers have been prohibited from
transmitting video programming in their local service areas. Likewise, MSOs have
been prohibited by federal regulation from offering telephony services. In
addition, the emergence of direct broadcast satellite ("DBS") systems and other
alternative video programming delivery systems has subjected cable television
operators to increasing competitive pressures. DBS systems broadcast compressed
digital video over satellite to a receiving dish located at the subscriber's
home and offer consumers up to 200 channels of video programming. The continued
penetration of DBS is expected to put increasing pressure on cable television
operators to provide additional programming and better quality service. In
addition, telephone companies are introducing alternative technologies such as
DSL ("Digital Subscriber Loop") which support the delivery of video programming
and data services over their existing copper loop networks. To address this more
competitive environment and to take advantage of new business opportunities,
such as the provision of Internet access and high-speed data services, the
Company believes that domestic cable television operators will be under
increasing pressure to upgrade and rebuild their networks.
Similar government initiatives and deregulation of telecommunications markets
abroad have fostered substantial growth and competition in many foreign cable
television markets. Because of the early stage of development of many foreign
cable television markets and stringent system performance criteria established
by foreign government regulations, the provision of cable television service in
many foreign countries will require significant investment in advanced video
transmission equipment. These trends are expected to contribute to the increased
use of fiber optic transmission systems in the future.
Basic cable television service is currently available to approximately 90% of
all U.S. households. Accordingly, growth in the U.S. cable television equipment
market is being driven primarily by the need to upgrade and rebuild existing
cable television networks to provide improved and expanded services.
Internationally, significant investment in advanced network infrastructure will
be required to bring cable television service to large segments of the
population.
The introduction and deployment of fiber optic technology in cable television
networks has significantly increased network capacity, quality and reliability.
Fiber optic cables provide significant performance advantages compared to
coaxial cables, including longer transmission distance, greater channel
capacity, reduced cable size and weight, and resistance to interference from
external electronic signals. By eliminating the need for amplifiers in the trunk
section of a traditional coax network, fiber increases the reliability of a
cable television network and the quality of the signal, while
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substantially lowering network installation and maintenance cost. The higher
bandwidth of fiber can increase capacity to up to 110 analog channels on a
typical HFC network and, together with the removal of amplifiers, facilitates
the two-way communication necessary for the provision of advanced interactive
services. As a result, HFC architectures are being increasingly adopted on a
worldwide basis. In addition to upgrading network infrastructure with fiber
optics, MSOs are beginning to introduce digital transmission capability. Digital
compression technology, which will permit the system operator to provide new
integrated voice, video and data services over HFC networks, is now becoming
available. Transmissions in digital format are expected to allow operators to
provide subscribers up to several hundred channels of high-quality television,
as well as high-speed data communications, Internet access and telephony
services.
The competitive pressures to upgrade cable television networks and the
corresponding capital requirements have led to significant domestic cable
television industry consolidation in recent years. The upgrade of existing
networks requires substantial expenditures and the replacement of significant
parts of the transmission network. As a result, MSOs have sought to increase
their size in order both to achieve the economies of scale made possible by the
ownership of adjacent systems ("clustering") and to improve their financial
strength. This has been accomplished largely through acquisitions of smaller
MSOs and independent cable television operators, many of which cannot afford
significant system upgrades. A number of sizable acquisitions and system
exchanges by MSOs have been completed during the past several years.
In addition to HFC networks and copper-based telephony networks, other delivery
methods, such as satellites and LMDS (Local Multipoint Distribution System), a
wireless-based technology, are expected to be utilized for the provision of
video and high speed data services in many areas of the world. The first LMDS
service operating in the United States offers both video and high speed data
service to residents of Queens and Manhattan in New York. The F.C.C. has held
recent auctions for licenses required for new LMDS service areas in the United
States, and a number of LMDS systems are already in operation in several foreign
countries.
Satellite service providers are now introducing data services in addition to
multiple television channels. Although such satellite systems have relatively
low penetration rates in the United States, operators in other countries are
introducing satellite data services to meet the growing demand for connection to
the Internet. New satellite systems employing low earth orbit ("LEO")
satellites, which are being developed and implemented by a number of major
international consortia, are expected to further increase the demand for
integrated communications services, including high speed data.
In contrast to the past when consumers were generally limited to a single choice
for video service and a single choice for local telephone service, consumers are
expected to be able to choose between two or more providers of highly integrated
services in the future. The factors affecting the selection of services in the
future are expected to include network reliability, price, the number of
television channels offered, the speed of data transmission, ease of access,
interactivity, and picture, sound and data quality.
N.M. NEW MEDIA COMMUNICATION LTD. ("NMC")
NMC develops systems for the delivery of high-speed data over broadband
networks. The products, which have only recently been introduced, include
transmitters, data encoders and network management software for the system
headend and PCI-based broadband receiver cards for the subscriber.
Initial customers of NMC include operators of satellite, cable television and
LMDS networks. These customers are deploying NMC products for the delivery of
high-speed data services to residential and business customers. NMC sells its
products through its own sales force and a distribution network, including the
Company's direct sales force and its distributors. The Company anticipates that
a significant portion of NMC's future revenues will be generated in
international markets. In the cable television market, NMC's competitors
include many of the Company's existing competitors as well as certain large
consumer electronics and data networking companies and smaller companies such
as Hybrid Networks, Com21 and a number of private companies. In the satellite
market, NMC's competitors include Adaptec Inc., Groupe SAGEM and Media4, Inc.
NMC's hardware products are manufactured by Rockwell Semiconductor Systems in
the U.S. Certain of its products have been developed in collaboration with IBM
Israel, although it is anticipated that in the future NMC will undertake a
greater proportion of its development projects internally. NMC is based in Tel
Aviv, Israel, operates a sales and technical support office in San Diego and
had 16 employees at December 31, 1997. NMC's revenues have not been material in
relation to those of the Company, and it incurred a net loss of $2.6 million in
1997.
PRODUCTS
Harmonic develops, manufactures and markets highly integrated fiber optic
transmission, digital headend and element management systems for delivering
interactive services over broadband networks. The Company has applied its
technical strengths in optics and electronics, including expertise with lasers,
modulators, predistortion linearizers and compression technology, to produce
products which provide enhanced network reliability and allow broadband service
providers to deliver advanced services, including two-way interactive services.
The Company's products incorporate control systems employing internally
developed embedded firmware and software to facilitate a high degree of system
integration. The "plug and play" design philosophy and communication structure
employed in the Company's products enhance ease of installation.
Optical Transmitters
The Company offers PWRLink transmitters, and MAXLink transmitters and optical
amplifiers for a wide range of optical transmission requirements.
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PWRLink Transmitters. The PWRLink series of optical transmitters
incorporates DFB semiconductor lasers and provides optical transmission
primarily for use at a headend for local distribution to optical nodes
and for narrowcasting (the transmission of programming to select
subscribers within one system).
MAXLink Transmitters and Optical Amplifiers. The MAXLink transmitters
and optical amplifiers operate at a wavelength of 1550nm and serve
long-haul applications and fiber dense architectures that are beyond
the capability of 1310nm transmitters. This system is suited to
evolving cable networks employing such features as redundant rings,
broadcast layer transmission and hub interconnects.
Optical Node Receivers
The Company's optical node receivers convert optical signals received from the
transmitters into RF signals for transmission to the home via coaxial cable.
Harmonic's receivers cause low levels of distortion, which maintain the high
performance levels provided by the Company's optical transmitters. The receivers
are installed in rack mount or strand mount housings, each of which can
accommodate return path transmitters and transponders in addition to the optical
node receiver.
Return Path and Element Management Products
The Company offers a number of return path transmitters, return path receivers
and element management hardware and software to provide two way transmission
capability to enable the network operator to monitor and control the entire
transmission network.
Return Path Transmitters. The Company's return path transmitters send
video, voice and data signals from the optical node to the headend.
Signals originating at the home can be sent via the coaxial cable to
the optical node and then transmitted in optical form to the headend by
the return path transmitter.
Return Path Receivers. Harmonic's return path receivers operate at the
headend to receive return path optical transmission from the return
path transmitters.
Element Management System ("EMS"). Harmonic's EMS consists of
transponders and element management software. The transponders operate
in broadband networks to capture measurement data. Harmonic's
Windows-based EMS software enables the broadband service operator to
monitor and control the entire HFC network from a central office or
remote locations. The Company's EMS software is designed to be
integrated into larger network management systems through the use of
simple network management protocol ("SNMP").
Digital Headend Products
The Company offers products for the headend for encoding, compression and
modulation of digital signals over broadband networks.
Encoders. The Company's encoders convert analog video and audio signals
to compressed digital format fully compliant with the MPEG-2 standard.
Modulators. Harmonic's modulators accept digital signals for modulation
on to a radio frequency ("RF") carrier for transmission over a
broadband network.
Initial shipments of these products for headend applications were made in the
fourth quarter of 1997. There can be no assurance that continued development of
these and other digital products will be completed in a timely manner, if at
all, that they will be successfully manufactured in volume, or that they will
achieve market acceptance. See "Factors That May Affect Future Results of
Operations - Rapid Technological Change."
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In 1997, 1996 and 1995, sales of optical transmitters accounted for
approximately 63%, 71%, and 63%, respectively, of net sales. In 1997, 1996 and
1995, sales of optical node receivers accounted for approximately 11%, 8%, and
12%, respectively, of net sales.
SALES AND MARKETING
Harmonic markets its products worldwide through its own direct sales force as
well as through system integrators and distributors. The Company's direct sales
force supports domestic and international sales and operates from the Company's
headquarters in Sunnyvale, California and from several sales offices. Harmonic
has adopted a strategy to sell to major domestic customers through its own
direct sales force and OEM and distributor revenues were a smaller percentage of
net sales in 1997 than they have been in prior years.
Historically, the majority of Harmonic's sales have been to relatively few
customers, and Harmonic expects this customer concentration to continue in the
foreseeable future, notwithstanding the Company's strategy to sell to domestic
customers through its own direct sales force. In 1997, sales to Capella (the
Company's Canadian distributor) accounted for 17% of net sales. In 1996, sales
to Tratec (the Company's former U.K. distributor), Capella, and ANTEC
Corporation ("Antec") accounted for 15%, 15%, and 13%, respectively, of net
sales. In 1995, sales to Tratec, ANTEC and Capella accounted for 22%, 15% and
15%, respectively, of net sales. No other customer accounted for more than 10%
of the Company's net sales in 1997, 1996 or 1995. Harmonic's products have been
purchased by each of the ten largest domestic MSOs and by a number of large
cable television operators outside the United States. These end users include
Time-Warner, Inc., Cox Communications, Inc., and TeleCommunications, Inc.
("TCI"), in the U.S., Rogers Communications in Canada, CableTel and TeleWest in
the U.K., Wharf Cable in Hong Kong and a major provincial telecommunications
company in China. The loss of a significant customer or any reduction in orders
by any significant customer, or the failure of the Company to qualify its
products with a significant MSO could adversely affect the Company's business
and operating results.
Sales to customers outside of the United States in 1997, 1996 and 1995
represented approximately 59%, 57% and 65% of net sales, respectively. Harmonic
expects international sales to continue to account for a substantial portion of
its net sales for the foreseeable future. International sales are made primarily
to distributors, which are generally responsible for importing the products,
installation and technical support and service to cable television operators
within their territory. International sales are subject to a number of risks,
including changes in foreign government regulations and telecommunications
standards, export license requirements, tariffs and taxes, other trade barriers,
fluctuations in foreign currency exchange rates, difficulty in collecting
accounts receivable, difficulty in staffing and managing foreign operations,
managing distributor relations and political and economic instability. In recent
months, certain Asian currencies have devalued significantly in relation to the
U.S. dollar. The Company is currently evaluating the effect of recent
developments in Asia on the Company's business, and there can be no assurance
that the Company's sales in Asia will not be materially adversely affected by
such developments. There can be no assurance that international markets will
continue to develop or that the Company will receive future orders to supply its
products in international markets at rates equal to or greater than those
experienced in recent periods.
MANUFACTURING AND SUPPLIERS
The Company's manufacturing processes consist primarily of integration and final
assembly and test, performed by highly trained personnel employing
technologically advanced electronic equipment and proprietary test programs. The
manufacturing of the Company's products and subassemblies is a complex process
and there can be no assurance that the Company will not experience production
problems or manufacturing delays in the future. Because the Company utilizes its
own manufacturing facility for this production, and because such manufacturing
capabilities are not readily available from third parties, any interruption in
operations could have a material adverse effect on the Company's business and
operating results.
The Company uses third party contract manufacturers to assemble certain standard
parts for its products, including such items as printed circuit boards, metal
frames and power supplies. The Company intends to subcontract an increasing
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number of tasks to third parties in the future. The Company's increasing
reliance on subcontractors involves several risks, including a potential
inability to obtain an adequate supply of components on a timely basis.
Certain components and subassemblies necessary for the manufacture of the
Company's products are obtained from a sole supplier or a limited group of
suppliers. In particular, the Company relies on Fujitsu as a major source of DFB
lasers for its PWRLink and return path transmitters, for which there are limited
alternative suppliers. In addition, the optical modulators used in the Company's
MAXLink products are currently available only from Uniphase Corporation.
Although the Company has qualified alternative suppliers for its lasers, in the
event that the supply of optical modulators or lasers is interrupted for any
reason, products from alternative suppliers are unlikely to be immediately
available in sufficient volume to meet the Company's production needs. Further,
certain key elements of the Company's digital headend products are being
provided by a sole foreign supplier. The reliance on sole or limited suppliers,
particularly foreign suppliers, involves several risks, including a potential
inability to obtain an adequate supply of required components or subassemblies
and reduced control over pricing, quality and timely delivery of components.
Although the Company attempts to minimize its supply risks by holding safety
stocks and continuously evaluating other sources, any interruption in supply
could have a material adverse effect on the Company's business and operating
results. The Company does not maintain long-term agreements with any of its
suppliers. While the Company has historically been able to obtain adequate
supplies of components in a timely manner from its principal suppliers, there
can be no assurance that the Company will be able to obtain such adequate
supplies in the future. Because the purchase of certain key components involves
long lead times, in the event of unanticipated increases in demand for the
Company's products, the Company could be unable to manufacture certain products
in a quantity sufficient to meet its customers' demand. Any inability to obtain
adequate deliveries of key components could affect the Company's ability to ship
its products on a timely basis, which could damage relationships with its
current and prospective customers and could have a material adverse effect on
the Company's business and operating results.
INTELLECTUAL PROPERTY
The Company currently holds 11 United States patents and 9 foreign patents, and
has a number of patent applications pending. Although the Company attempts to
protect its intellectual property rights through patents, trademarks,
copyrights, maintaining certain technology as trade secrets and other measures,
there can be no assurance that any patent, trademark, copyright or other
intellectual property right owned by the Company will not be invalidated,
circumvented or challenged, that such intellectual property right will provide
competitive advantages to the Company or that any of the Company's pending or
future patent applications will be issued with the scope of the claims sought by
the Company, if at all. There can be no assurance that others will not develop
technologies that are similar or superior to the Company's technology, duplicate
the Company's technology or design around the patents owned by the Company. In
addition, effective patent, copyright and trade secret protection may be
unavailable or limited in certain foreign countries in which the Company does
business or intends to do business in the future.
The Company believes that the future success of its business will depend on its
ability to translate the technological expertise and innovation of its personnel
into new and enhanced products. The Company generally enters into
confidentiality or license agreements with its employees, consultants, vendors
and customers as needed, and generally limits access to and distribution of its
proprietary information. Nevertheless, there can be no assurance that the steps
taken by the Company will prevent misappropriation of its technology. In
addition, the Company has taken in the past, and may take in the future, legal
action to enforce the Company's patents and other intellectual property rights,
to protect the Company's trade secrets, to determine the validity and scope of
the proprietary rights of others, or to defend against claims of infringement or
invalidity. Such litigation could result in substantial costs and diversion of
resources and could have a material adverse effect on the Company's business and
operating results.
In order to successfully develop and market its planned products for digital
headend applications, the Company may be required to enter into technology
development or licensing agreements with third parties. Although many companies
are often willing to enter into such technology development or licensing
agreements, there can be no assurance that such agreements will be negotiated on
terms acceptable to the Company, or at all. The failure to enter into technology
development or licensing agreements, when necessary, could limit the Company's
ability to develop and market new products and could have a material adverse
effect on the Company's business and operating results.
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As is common in its industry, the Company has from time to time received
notification from other companies of intellectual property rights held by those
companies upon which the Company's products may infringe. Any claim or
litigation, with or without merit, could be costly, time consuming and could
result in a diversion of management's attention, which could have a material
adverse effect on the Company's business operating results and financial
condition. If the Company were found to be infringing on the intellectual
property rights of any third party, the Company could be subject to liabilities
for such infringement, which could be material, and could be required to seek
licenses from other companies or to refrain from using, manufacturing or selling
certain products or using certain processes. Although holders of patents and
other intellectual property rights often offer licenses to their patent or other
intellectual property rights, no assurance can be given that licenses would be
offered, that the terms of any offered license would be acceptable to the
Company or that failure to obtain a license would not adversely affect the
Company's operating results.
BACKLOG
The Company schedules production of its systems based upon its backlog, informal
commitments from customers and sales projections. The Company's backlog consists
of firm purchase orders by customers for delivery within the next twelve months.
At December 31, 1997, order backlog amounted to $5.5 million, compared to $9.8
million at December 31, 1996. Anticipated orders from customers may fail to
materialize and delivery schedules may be deferred or canceled for a number of
reasons, including reductions in capital spending by cable television operators
or changes in specific customer requirements. In addition, due to
weather-related seasonal factors and annual capital spending budget cycles at
many of its major end-users, the Company's backlog at December 31, 1997 or any
other date, is not necessarily indicative of actual sales for any succeeding
period.
In October 1996, the Company and several other equipment vendors received a
letter from TCI asking them to stop product shipments until further notice. The
Company has excluded from its December 31, 1997 and 1996 backlog all orders from
TCI other than those for which firm shipment dates and instructions had been
provided by TCI.
COMPETITION
The market for cable television transmission equipment is extremely competitive
and is characterized by rapid technological change. The principal competitive
factors in this market include product performance, reliability, price, breadth
of product line, network management capabilities, sales and distribution
capability, technical support and service, relationships with cable television
operators and general industry and economic conditions. Certain of these factors
are outside of the Company's control.
The Company's competitors for its fiber optic transmission products include
established suppliers of cable television and telecommunications equipment such
as ADC Telecommunications, ANTEC, Lucent Technologies, General Instrument,
Philips and Scientific-Atlanta, as well as a number of smaller, more specialized
companies. For digital headend products, the Company's competitors include many
of the same competitors as in headend fiber optic transmission products, and a
number of new competitors. Most of the Company's competitors are substantially
larger and have greater financial, technical, marketing and other resources than
the Company. Many of such large competitors are in a better position to
withstand any significant reduction in capital spending by cable television
operators and other broadband service providers. In addition, many of the
Company's competitors have more long standing and established relationships with
domestic and foreign MSOs than does the Company.
RESEARCH AND DEVELOPMENT
The Company has historically devoted a significant amount of its resources to
research and development. Research and development expenses in 1997, 1996 and
1995 were $11.7 million, $9.2 million, and $6.1 million, respectively. The
Company expects that research and development expenses will continue to increase
in the future.
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Any success of the Company in designing, developing, manufacturing and selling
new and/or enhanced products will depend on a variety of factors, including the
identification of market demand for new products, product selection, timely
implementation of product design and development, product performance and
effective manufacturing and assembly processes and sales and marketing. Because
of the complexity inherent in such research and development efforts, 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. Any
failure of the Company to successfully develop and introduce new products could
have a material adverse effect on the Company's business and operating results.
FACTORS THAT MAY AFFECT FUTURE RESULTS OF OPERATIONS
Potential Fluctuations in Future Operating Results
The Company's operating results have fluctuated and are likely to continue to
fluctuate in the future, on an annual and a quarterly basis, as a result of a
number of factors, many of which are outside of the Company's control. Such
factors include the level of capital spending in the cable television industry,
changes in the regulatory environment, changes in market demand, the timing of
customer orders, competitive market conditions, lengthy sales cycles, new
product introductions by the Company and its competitors, market acceptance of
new or existing products, the cost and availability of components, the mix of
the Company's customer base and sales channels, the mix of products sold,
development of custom products, the level of international sales and general
economic conditions. In addition, in each quarter of 1997 the Company recognized
a substantial portion of its revenues in the last month of the quarter. The
Company establishes its expenditure levels for product development and other
operating expenses based on projected sales levels, and expenses are relatively
fixed in the short term. Accordingly, variations in timing of sales can cause
significant fluctuations in operating results. In addition, because a
significant portion of the Company's business is derived from orders placed by a
limited number of large customers, the timing of such orders can also cause
significant fluctuations in the Company's operating results. If sales are below
expectations in any given quarter, the adverse impact of the shortfall on the
Company's operating results may be magnified by the Company's inability to
adjust spending to compensate for the shortfall.
Dependence on Cable Television Industry Capital Spending
To date, substantially all of the Company's sales have been derived, directly or
indirectly, from sales to cable television operators. Demand for the Company's
products depends to a significant extent upon the magnitude and timing of
capital spending by cable television operators for constructing, rebuilding or
upgrading their systems. The capital spending patterns of cable television
operators are dependent on a variety of factors, including access to financing,
cable television operators' annual budget cycles, the status of federal, local
and foreign government regulation of telecommunications and television
broadcasting, overall demand for cable television services, competitive
pressures (including the availability of alternative video delivery technologies
such as satellite broadcasting), discretionary customer spending patterns and
general economic conditions. The Company believes that the consolidation of
ownership of domestic cable television systems, by acquisition and system
exchanges, together with uncertainty over regulatory issues, particularly the
debate over the provisions of the Telecommunications Act of 1996, caused delays
in capital spending by major domestic MSOs during the second half of 1995 and
first quarter of 1996. Also, the Company's net sales in the second half of 1997
were adversely affected by a slow-down in spending by cable television
operators. The factors contributing to this slow capital spending include
consolidation and system exchanges by domestic cable customers, which generally
has had the effect of delaying certain system upgrades, uncertainty related to
development of industry standards for digital transmission, evaluation by many
cable customers of which advanced services and system architectures to provide
and use, and emphasis on marketing and customer service strategies by certain
international customers rather than continued construction of networks. The
Company is unable to predict when cable television industry capital spending
will increase. In addition, cable television capital spending can be subject to
the effects of seasonality, with fewer construction and upgrade projects
typically occurring in winter months and otherwise being affected by inclement
weather.
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Dependence on Key Customers and End Users
Historically, a majority of the Company's sales have been to relatively few
customers. Sales to the Company's ten largest customers in 1997, 1996 and 1995
accounted for approximately 56%, 72% and 80%, respectively, of its net sales.
Due in part to the consolidation of ownership of domestic cable television
systems, the Company expects that sales to relatively few customers will
continue to account for a significant percentage of net sales for the
foreseeable future. Harmonic has adopted a strategy to sell to major domestic
customers through its own direct sales force and domestic OEM and distributor
revenues were a smaller percentage of net sales in 1997 than they have been in
prior years. Substantially all of the Company's sales are made on a purchase
order basis, and none of the Company's customers has entered into a long-term
agreement requiring it to purchase the Company's products. The loss of, or any
reduction in orders from, a significant customer would have a material adverse
effect on the Company's business and operating results.
Highly Competitive Industry
The market for cable television transmission equipment is extremely competitive
and has been characterized by rapid technological change. Most of the Company's
competitors are substantially larger and have greater financial, technical,
marketing and other resources than the Company. Many of such large competitors
are in a better position to withstand any significant reduction in capital
spending by cable television operators. In addition, many of the Company's
competitors have more long standing and established relationships with domestic
and foreign cable television operators than does the Company. There can be no
assurance that the Company will be able to compete successfully in the future or
that competition will not have a material adverse effect on the Company's
business and operating results.
Rapid Technological Change
The market for the Company's products is relatively new, making it difficult to
accurately predict the market's future growth rate, size and technological
direction. In view of the evolving nature of this market, there can be no
assurance that cable television operators, telephone companies or other
suppliers of broadband services will not decide to adopt alternative
architectures or technologies that are incompatible with the Company's products,
which would have a material adverse effect on the Company's business and
operating results.
The broadband communications markets are characterized by continuing
technological advancement. 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 for broadband
communications equipment continue to develop, the Company must successfully
develop new products for these markets in order to remain competitive. For
example, to compete successfully in the future, the Company believes that it
must successfully develop and introduce products that will facilitate the
processing and transmission of digital signals over optical networks. While the
Company has commenced shipment of products for digital applications, there can
be no assurance that the Company will successfully complete development of, or
successfully introduce, products for digital applications, or that such products
will achieve commercial acceptance. In addition, in order to successfully
develop and market its planned products for digital applications, the Company
may be required to enter into technology development or licensing agreements
with third parties. Although many companies are often willing to enter into such
technology development or licensing agreements, there can be no assurance that
such agreements will be negotiated on terms acceptable to the Company, or at
all. The failure to enter into technology development or licensing agreements,
when necessary, could limit the Company's ability to develop and market new
products and could have a material adverse effect on the Company's business and
operating results.
The failure of the Company to successfully develop and introduce new products
that address the changing needs of the broadband communications market could
have a material adverse effect on the Company's business and operating results.
In addition, there can be no assurance that the successful introduction by the
Company of new products will not have an adverse effect on the sales of the
Company's existing products. For instance, an emerging trend in the domestic
market toward narrowcasting (targeted delivery of advanced services to small
groups of subscribers) is causing changes in the network architectures of some
cable operators. This may have the effect of changing the Company's product mix
toward lower price transmitters, which could adversely affect the Company's
gross margins.
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Risks Associated with the Acquisition of N.M. New Media Communication, Ltd.
The growth in the Company's business has placed, and is expected to continue to
place, a significant strain on the Company's limited personnel, management and
other resources. Through its acquisition of NMC in January 1998, the Company
increased the scope of its product line to include broadband, high-speed data
delivery software and hardware and increased the scope of its international
operations in Israel. The acquisition of NMC involves numerous risks and
challenges, including: difficulties in the assimilation of operations, research
and development efforts, products, personnel and cultures of Harmonic and NMC;
the potential adverse effects of the acquisition on relationships with
customers, distributors, suppliers and other business partners of the two
companies; the dependence on the evolution and growth of the market for wireless
and satellite broadband services; regulatory developments; rapid technological
change; the highly competitive nature of the telecommunications industry; the
Company's ability to successfully develop, manufacture and gain market
acceptance of the products of NMC; the ability to manage geographically remote
units; the integration of NMC's management information systems with those of the
Company; potential adverse short-term effects on the Company's operating
results; the amortization of acquired intangible assets; the risk of entering
emerging markets in which the Company has limited or no direct experience; and
the potential loss of key employees of NMC. The Company's future operating
results will be significantly affected by its ability to successfully integrate
NMC, to implement operating, manufacturing and financial procedures and
controls, to improve coordination among different operating functions, to
strengthen management information and telecommunications systems and to continue
to attract, train and motivate additional qualified personnel in all areas.
There can be no assurance that the Company will be able to manage these
activities and implement these additional systems and controls successfully, and
any failure to do so could have a materially adverse effect upon the Company's
operating results. The Company expects that the inclusion of NMC's operations,
combined with seasonally low sales to both domestic and international cable
customers, will result in an operating loss for the Company in the first quarter
of 1998. In addition, the acquisition of NMC has resulted in significant
additional working capital requirements. While the Company believes that it
currently has sufficient funds to finance its operations for at least the next
twelve months, to the extent that such funds are insufficient to fund the
Company's activities, including any potential acquisitions, the Company may need
to raise additional funds through public or private equity or debt financing
from other sources. The sale of additional equity or convertible debt may result
in additional dilution to the Company's stockholders and such securities may
have rights, preferences or privileges senior to those of the Common Stock.
There can be no assurance that additional equity or debt financing will be
available or that if available it can be obtained on terms favorable to the
Company or its stockholders.
Sole or Limited Sources of Supply
Certain components and subassemblies necessary for the manufacture of the
Company's products are obtained from a sole supplier or a limited group of
suppliers. The reliance on sole or limited suppliers and the Company's
increasing reliance on subcontractors involve several risks, including a
potential inability to obtain an adequate supply of required components or
subassemblies and reduced control over pricing, quality and timely delivery of
components or subassemblies. The Company does not maintain long-term agreements
with any of its suppliers or subcontractors. An inability to obtain adequate
deliveries or any other circumstance that would require the Company to seek
alternative sources of supply could affect the Company's ability to ship its
products on a timely basis, which could damage relationships with current and
prospective customers and could have a material adverse effect on the Company's
business and operating results. The Company believes that investment in
inventories will continue to constitute a significant portion of its working
capital in the future. As a result of such investment in inventories, the
Company may be subject to an increasing risk of inventory obsolescence in the
future, which could materially and adversely affect its business and operating
results.
Risks of International Operations
Sales to customers outside of the United States in 1997, 1996 and 1995
represented 59%, 57% and 65% of net sales, respectively, and the Company expects
that international sales will continue to represent a substantial portion of its
net sales for the foreseeable future. In addition, the Company has two Israeli
subsidiaries, NMC and a subsidiary that engages primarily in research and
development. International operations are subject to a number of risks,
including changes in foreign government regulations and telecommunications
standards, export license requirements, tariffs and
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taxes, other trade barriers, fluctuations in currency exchange rates, difficulty
in collecting accounts receivable, difficulty in staffing and managing foreign
operations and political and economic instability. While international sales are
typically denominated in U.S. dollars, fluctuations in currency exchange rates
could cause the Company's products to become relatively more expensive to
customers in a particular country, leading to a reduction in sales or
profitability in that country. Payment cycles for international customers are
typically longer than those for customers in the United States. There can be no
assurance that foreign markets will continue to develop or that the Company will
receive additional orders to supply its products for use in foreign broadband
systems. In recent months, certain Asian currencies have devalued significantly
in relation to the U.S. dollar. The Company is currently evaluating the effect
of recent developments in Asia on the Company's business, and there can be no
assurance that the Company's sales in Asia will not be materially adversely
affected by such developments.
Risks of Information Systems
The Company has commenced, for all its information systems, a Year 2000 date
conversion project to address all necessary changes to be Year 2000 compliant.
The Company is expensing the costs of addressing the "Year 2000 issue" as
incurred. The Company does not expect that Year 2000 issues from its own
information systems will have a material adverse impact on its financial
position or results of operations. However, the Company could be adversely
impacted by Year 2000 issues faced by major customers and suppliers and other
organizations with which the Company interacts. The Company is in the process of
determining the impact that third parties who are not Year 2000 compliant may
have on the operations of the Company.
EMPLOYEES
As of December 31, 1997, the Company employed a total of 253 people, including
95 in manufacturing operations, 75 in research and development, 54 in sales and
marketing and 29 in a general and administrative capacity. The Company also
employs a number of temporary employees and consultants on a contract basis.
None of the Company's employees is represented by a labor union with respect to
his or her employment by the Company. The Company has not experienced any work
stoppages and considers its relations with its employees to be good. The
Company's future success will depend, in part, upon its ability to attract and
retain qualified personnel. Competition for qualified personnel in the
communications industry and in the Company's immediate geographic area is
intense, and there can be no assurance that the Company will be successful in
retaining its key employees or that it will be able to attract skilled personnel
as the Company grows.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information regarding the executive
officers of the Company and their ages as of March 1, 1998:
NAME AGE POSITION
---- --- --------
Anthony J. Ley 59 Chairman of the Board of Directors,
President and Chief Executive Officer
Moshe Nazarathy 46 Senior Vice President, General Manager of Israel R&D
Center, and Director
Robin N. Dickson 50 Chief Financial Officer
Michael Yost 54 Vice President, Operations
John E. Dahlquist 51 Vice President, Marketing
Anthony J. Ley has served as the Company's President and Chief Executive Officer
since November 1988. Mr. Ley was elected Chairman of the Board of Directors in
February 1995. From 1963 to 1987, Mr. Ley was employed at Schlumberger, both in
Europe and the United States, holding various senior business management and
research and development positions, most recently as Vice President, Research
and Engineering at Fairchild Semiconductor/Schlumberger in Palo Alto,
California. Mr. Ley holds an M.A. in mechanical sciences from the
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University of Cambridge and an S.M.E.E. from the Massachusetts Institute of
Technology, is named as an inventor on 29 patents and is a Fellow of the I.E.E.
(U.K.) and a senior member of the I.E.E.E.
Moshe Nazarathy, a founder of the Company, has served as Senior Vice President,
General Manager of Israel R&D Center, since December 1993, as a director of the
Company since the Company's inception and as Vice President, Research, from the
Company's inception through December 1993. From 1985 to 1988, Dr. Nazarathy was
employed in the Photonics and Instruments Laboratory of Hewlett-Packard Company,
most recently serving as Principal Scientist from 1987 to 1988. From 1982 to
1984, Dr. Nazarathy held post-doctoral and adjunct professor positions at
Stanford University. Dr. Nazarathy holds a B.S. and a Ph.D. in electrical
engineering from Technion-Israel Institute of Technology and is named as an
inventor on twelve patents.
Robin N. Dickson joined the Company in April 1992 as Chief Financial Officer.
From 1989 to March 1992, Mr. Dickson was corporate controller of Vitelic
Corporation, a semiconductor manufacturer. From 1976 to 1989, Mr. Dickson held
various positions at Raychem Corporation, a materials science company, including
regional financial officer of the Asia-Pacific Division of the International
Group. Prior to joining Raychem Corporation, Mr. Dickson worked with the
accounting firm of Deloitte, Haskins & Sells in Brussels, Belgium. Mr. Dickson
holds a Bachelor of Laws from the University of Edinburgh and is a member of the
Institute of Chartered Accountants of Scotland.
Michael Yost joined the Company in September 1991 as Vice President, Operations.
From 1983 until December 1990, Mr. Yost was employed at Vitalink Communications,
a satellite communications systems manufacturer, holding various senior
management positions, most recently as Vice President, Operations. Mr. Yost
holds a B.S. in management from San Jose State University.
John E. Dahlquist joined the Company in November 1993 as Vice President
Marketing. From September 1990 to October 1993, Mr. Dahlquist served as Vice
President, Marketing at Philips Broadband Networks, Inc. From 1967 to August
1990, Mr. Dahlquist was employed at the Jerrold Division of General Instrument
Corporation, where he held various engineering and marketing management
positions, including Director International Business Programs from 1989 to 1990
and Director of European Cable Operations, U.K. from 1984 to 1989. Mr. Dahlquist
holds a B.S.E.E. and an M.B.A. from Drexel University.
ITEM 2. PROPERTIES
The Company's principal operations are located at its corporate headquarters in
Sunnyvale, California. The lease on its headquarters building, of approximately
110,000 square feet, expires in July 2006. The Company has subleased
approximately 25,000 square feet of its headquarters through July 1998. The
Company also has several sales offices in the United States, a sales and support
center in the United Kingdom and two subsidiaries, N.M. New Media Communication
Ltd., and a research and development facility in Israel. The Company believes
that its existing facilities will be adequate to meet its needs in the
foreseeable future.
ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings to which the Company is a party
or to which any of its properties is subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER
MATTERS
The information required by this Item is set forth on page 16 of the 1997 Annual
Report to Stockholders under the caption "Selected Financial Data" and is
incorporated herein by reference. At December 31, 1997, there were 171 holders
of record of the Company's Common Stock.
ITEM 6. SELECTED FINANCIAL DATA
A summary of selected financial data for the Company for each of the last five
fiscal years appears on page 16 of the 1997 Annual Report to Stockholders under
the caption "Selected Financial Data" and is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" appears on pages 17 - 22 of the 1997 Annual Report to Stockholders
and is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this Item is incorporated herein by reference to
pages 23 - 34 of the 1997 Annual Report to Stockholders filed as Exhibit 13.1 to
this Annual Report on Form 10-K. Selected quarterly financial data for the
Company appear on page 16 of the 1997 Annual Report to Stockholders under the
caption "Selected Financial Data" and are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
Not applicable.
PART III
Certain information required by Part III is omitted from this Report on Form
10-K in that the Registrant will file its definitive Proxy Statement for its
Annual Meeting of Stockholders to be held on April 29, 1998, pursuant to
Regulation 14A of the Securities Exchange Act of 1934, as amended (the "1998
Proxy Statement"), not later than 120 days after the end of the fiscal year
covered by this Report, and certain information included in the Proxy Statement
is incorporated herein by reference.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a) Executive Officers - See the section entitled "Executive Officers" in
Part I, Item 1 hereof.
(b) Directors - The information required by this Item is incorporated by
reference to the section entitled "Election of Directors" in the 1998
Proxy Statement.
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ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is included in the 1998 Proxy Statement
under the caption "Executive Compensation" and is incorporated herein by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information related to security ownership of certain beneficial owners and
security ownership of management is set forth in the 1998 Proxy Statement under
the caption "Security Ownership of Certain Beneficial Owners and Management" and
is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND TRANSACTIONS
Not applicable.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(1) Financial Statements
The following consolidated financial statements of the Company and
subsidiaries and Report of Independent Accountants are included in
the 1997 Annual Report to Stockholders filed herewith as Exhibit
13.1 and are incorporated herein by reference:
1997 Annual
Report Page
-----------
Consolidated Balance Sheets as at 23
December 31, 1997, and 1996
Consolidated Statement of Operations 24
for the years ended,
December 31, 1997, 1996 and 1995
Consolidated Statement of 25
Stockholders' Equity (Deficit)
for the years ended
December 31, 1997, 1996, and 1995
Consolidated Statement of Cash Flows 26
for the years ended
December 31, 1997, 1996, and 1995
Notes to Consolidated Financial Statements 27 - 34
Report of Independent Accountants 34
(a)(2) Financial Statement Schedules
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16
Schedules have been omitted because they are inapplicable, because
the required information has been included in the financial
statements or notes thereto, or the amounts are immaterial.
(a)(3) Exhibits
The documents listed on the Exhibit Index appearing at page 18 of
this Report are filed herewith. The 1997 Annual Report to
Stockholders and 1998 Proxy Statement shall be deemed to have been
"filed" with the Securities and Exchange Commission only to the
extent portions thereof are expressly incorporated herein by
reference. Copies of the exhibits listed in the Exhibit Index will
be furnished, upon request, to holders or beneficial owners of the
Company's Common Stock.
(b) Reports on Form 8-K
A report on Form 8-K was filed on September 16, 1997. As reported
in such report, the Registrant, N.M. New Media Communication
Ltd., a corporation organized under the laws of Israel ("NMC"),
and each shareholder of NMC (collectively, the "Sellers"), entered
into a Stock Purchase Agreement (the "Purchase Agreement"),
whereby, among other things, the Sellers agreed to sell, and the
Registrant agreed to purchase, all of the issued outstanding
securities of NMC (the "Acquisition") and NMC was to become a
wholly-owned subsidiary of the Registrant.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant, Harmonic Lightwaves, Inc., a Delaware
corporation, has duly caused this Report on Form 10-K to be signed on its behalf
by the undersigned, hereunto duly authorized, in the City of Sunnyvale, State
of California, on March 27, 1998.
HARMONIC LIGHTWAVES, INC.
By: /s/Anthony J. Ley
-----------------------------------------
Anthony J. Ley, Chairman of the Board,
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENT, that each person whose signature
appears below constitutes and appoints Anthony J. Ley and Robin N. Dickson,
jointly and severally, his attorneys-in-fact, each with the power of
substitution, for him 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 attorney-in-fact, or his
substitute or substitutes, may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities and Exchange Act of
1934, this registration statement has been signed by the following persons in
the capacities and on the date indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/Anthony J. Ley Chairman of the Board, President and March 27, 1998
- ------------------------------------ Chief Executive Officer (Principal
(Anthony J. Ley) Executive Officer)
/s/Robin N. Dickson Chief Financial Officer (Principal March 27, 1998
- ------------------------------------ Financial and Accounting Officer)
(Robin N. Dickson)
/s/Barry Lemieux Director March 27, 1998
- ------------------------------------
(Barry Lemieux)
/s/E. Floyd Kvamme Director March 27, 1998
- ------------------------------------
(E. Floyd Kvamme)
/s/David A. Lane Director March 27, 1998
- ------------------------------------
(David A. Lane)
/s/Moshe Nazarathy Director March 27, 1998
- ------------------------------------
(Moshe Nazarathy)
/s/Michel L. Vaillaud Director March 27, 1998
- ------------------------------------
(Michel L. Vaillaud)
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EXHIBIT INDEX
The following Exhibits to this report are filed herewith, or if marked with a
(i), (ii), (iii), (iv), (v), (vi), or a (vii) are incorporated herein by
reference.
Exhibit
Number Description
- ------ -----------
3.1 (i) Certificate of Incorporation of Registrant
3.2 (i) Form of Restated Certificate of Incorporation of Registrant
3.3 (i) Bylaws of Registrant
4.1 (i) Form of Common Stock Certificate
10.1 (i)+ Form of Indemnification Agreement
10.2 (i)+ 1988 Stock Option Plan and form of Stock Option Agreement
10.3 (i)+ 1995 Stock Plan and form of Stock Option Agreement
10.4 (i)+ 1995 Employee Stock Purchase Plan and form of Subscription
Agreement
10.5 (i)+ 1995 Director Option Plan and form of Director Option Agreement
10.6 (i) Registration and Participation Rights and Modification Agreement
dated as of July 22, 1994 among Registrant and certain holders
of Registrant's Common Stock
10.7 (i) Distributor Agreement dated June 15, 1994 by and between
Registrant and Scientific-Atlanta, Inc.
10.8 (i) Warrant to purchase Common Stock of Registrant issued to
Scientific-Atlanta, Inc. on June 15, 1994
10.10 (i) Warrant to purchase Series D Preferred Stock of Registrant
issued to Comdisco, Inc. on February 10, 1993
10.14 (ii) Business Loan Agreement, Commercial Security Agreement and
Promissory Note dated August 26, 1993, as amended on September
14, 1995, between Registrant and Silicon Valley Bank
10.15 (ii) Facility lease dated as of January 12, 1996 by and between
Eastrich No. 137 Corporation and Company
10.16 Amended and Restated Loan and Security Agreement dated December
24, 1997 between Registrant and Silicon Valley Bank
10.17 (iii)+ Change of Control Severance Agreement dated March 27, 1997
between Registrant and Anthony J. Ley
10.18 (iii)+ Form of Change of Control Severance Agreement between Registrant
and certain executive officers of Registrant
10.19 (iv) Stock Purchase Agreement, dated September 16, 1997 among
Registrant, N.M. New Media Communication Ltd., ("NMC") and
Sellers of NMC.
10.20 (v) First Amendment to Stock Purchase Agreement, dated November 25,
1997 among Registrant, N. M. New Media Communication Ltd.,
("NMC") and Sellers of NMC.
10.21 (vi) Registration Rights Agreement dated as of January 5, 1998 by and
among the Registrant and the persons and entities listed in
Schedule A thereto (the "NMC Shareholders").
10.22 (vii) 1997 Nonstatutory Stock Option Plan.
13.1 1997 Annual Report (to be deemed filed with the Securities and
Exchange Commission only to the extent required by the
instruction to exhibits for reports on Form 10-K)
21.1 Subsidiaries of Registrant
23.1 Consent of Independent Accountants
24.1 Power of Attorney
27.17 Financial Data Schedule
(i) Previously filed as an Exhibit to the Company's Registration Statement on
Form S-1 No. 33-90752.
(ii) Previously filed as an Exhibit to the Company's 10-K for the year ended
December 31, 1995.
(iii) Previously filed as an Exhibit to the Company's 10-K for the year ended
December 31, 1996.
(iv) Previously filed as an Exhibit to the Company's Current Report on 8-K
dated September 29, 1997.
(v) Previously filed as an Exhibit to the Company's Current Report on 8-K
dated January 6, 1998.
(vi) Previously filed as an Exhibit to the Company's Registration
Statement on Form S-3 dated January 8, 1998.
(vii) Previously filed as an exhibit to the Company's Registration Statement on
Form S-8 dated January 14, 1998.
+ Management Contract or Compensatory Plan or Arrangement required to be
filed as an exhibit to this report on Form 10-K.
18