-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Pq5BWH+daqkR7fcUtzfJSeqgWFN6SCPgjR3xd7l60TVafnbNgJ4VM4FGflayFr4d vojwYMbviFjG6u9r9zVrAg== 0000950148-97-002214.txt : 19970826 0000950148-97-002214.hdr.sgml : 19970826 ACCESSION NUMBER: 0000950148-97-002214 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970825 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: MRV COMMUNICATIONS INC CENTRAL INDEX KEY: 0000887969 STANDARD INDUSTRIAL CLASSIFICATION: SEMICONDUCTORS & RELATED DEVICES [3674] IRS NUMBER: 061340090 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-11174 FILM NUMBER: 97669333 BUSINESS ADDRESS: STREET 1: 8917 FULLBRIGHT AVE CITY: CHATSWORTH STATE: CA ZIP: 91311 BUSINESS PHONE: 8187739044 MAIL ADDRESS: STREET 1: 8943 FULLBRIGHT AVE CITY: CHATSWORTH STATE: CA ZIP: 91311 10-Q/A 1 FORM 10-Q/A 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q/A (Amendment No. 1) [X] Quarterly Report under Section 13 or 15 (d) of the Securities Exchange Act of 1934 for the quarterly period ended March 31, 1997 [ ] Transition Report pursuant to section 13 or 15(d) of the Securities Exchange Act. For the transition period from _______________ to ______________ Commission file number 0-25678 ------- MRV Communications, Inc. (Exact name of registrant as specified in its charter) Delaware 06-1340090 --------------------------------- ------------------- (State of other jurisdiction (IRS Employer of incorporation or organization) identification no.) 8917 Fullbright Ave., Chatsworth, CA 91311 ---------------------------------------- ---------- (Address of principal executive offices) (Zip Code) Issuer's telephone number, including area code: (818) 773-9044 -------------- Check whether the issuer:(1)has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act 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 ----- ----- As of May 8, 1997 there were 22,779,138 shares of Common Stock, $.0034 par value per share, outstanding. 2 MRV COMMUNICATIONS, INC. Form 10-Q March 31, 1997 INDEX
PAGE NUMBER ----------- PART I FINANCIAL INFORMATION Item 1: Financial Statements: Condensed Consolidated Balance Sheets as of March 31, 1997 (unaudited) and December 31, 1996 (audited) 3 Condensed Consolidated Statements of Income (unaudited) for the Three Months ended March 31, 1997 and 1996 4 Condensed Consolidated Statements of Cash Flows (unaudited) for the Three Months ended March 31, 1997 and 1996 5 Notes to Condensed Consolidated Financial Statements 6 Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations 7 PART II OTHER INFORMATION 9 Item 2: Changes in Securities. 9 SIGNATURE 10
- --------------- As used in this Report, "MRV" or the "Company" refers to MRV Communications, Inc. and its wholly owned consolidated subsidiaries. 2 3 MRV COMMUNICATIONS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share data) - --------------------------------------------------------------------------------
March 31, December 31, 1997 1996 --------- ------------ (unaudited) (audited) ASSETS CURRENT ASSETS Cash $ 7,158 $ 14,641 Short-term investments 24,544 17,659 Accounts receivable, net of reserves of $2,219 in 1997 and $2,404 in 1996 28,871 24,296 Inventories 21,007 18,238 Deferred income taxes 2,622 2,660 Due from Elbit 1,332 2,154 Other current assets 2,532 2,223 --------- -------- Total current assets 88,066 81,871 Property And Equipment- At cost, net of depreciation and amortization 6,208 6,248 Other Assets: Goodwill 2,696 2,788 Deferred income taxes 6,040 6,036 --------- -------- $ 103,010 $ 96,943 --------- -------- LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Current maturities of capital lease obligations $ 104 $ 119 Accounts payable 16,857 11,328 Accrued liabilities 5,743 6,389 Accrued restructuring costs 2,761 3,549 Customer Deposits 821 1,500 Income taxes payable 2,151 2,013 --------- -------- Total current liabilities 28,437 24,898 LONG TERM LIABILITIES Convertible debentures 300 17,325 Capital lease obligations, net of current portion 939 1,035 Other long-term liabilities 507 532 --------- -------- Total long term liabilities 1,746 18,892 --------- -------- MINORITY INTERESTS 862 852 COMMON STOCK ISSUED IN CONNECTION WITH ACQUISITION 6,300 10,530 STOCKHOLDERS' EQUITY: Preferred stock, $0.01 par value: 1,000,000 shares authorized no shares outstanding -- -- Common stock, $.0034 par value: 40,000,000 shares authorized 22,473,733 shares outstanding in 1997 and 21,286,490 shares outstanding in 1996 76 70 Additional paid-in capital 69,487 49,636 Accumulated deficit (3,607) (7,950) Cumulative translation adjustments (291) 15 --------- -------- Total stockholders' equity 65,665 41,771 --------- -------- $ 103,010 $ 96,943 ========= ========
See accompanying notes 3 4 MRV COMMUNICATIONS, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited, in thousands, except per share data) - --------------------------------------------------------------------------------
3 Months Ended ------------------------- March 31, March 31, 1997 1996 --------- -------- REVENUES, net $ 35,564 $15,529 -------- ------- COSTS AND EXPENSES: Cost of goods sold 20,176 8,989 Research and development expenses 2,748 1,684 Selling, general and administrative expenses 5,775 2,136 -------- ------- Operating income 6,865 2,720 Interest expenses related to convertible debenture & acquisition (408) -- Other (expenses) income, net (166) 80 Provision for income taxes 1,938 921 Minority interests 10 -- -------- ------- NET INCOME $ 4,343 $ 1,879 -------- ------- EARNINGS PER SHARE $ 0.18 $ 0.09 -------- ------- WEIGHTED AVERAGE NUMBER OF COMMON SHARES AND COMMON SHARES EQUIVALENT OUTSTANDING 24,795 21,412 -------- -------
See accompanying notes 4 5 MRV COMMUNICATIONS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited, in thousands) - --------------------------------------------------------------------------------
3 Months Ended -------------------------- March 31, March 31, 1997 1996 --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ 4,343 $ 1,879 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 132 78 Interest related to convertible debentures and acquisition 408 Minority interests' share of income 10 -- (Increase) decrease in: Accounts receivable (4,575) (2,162) Inventories (2,769) (1,500) Due from Elbit 822 -- Deferred income taxes 34 -- Other assets (309) (292) Increase (decrease) in: Accounts payable 5,529 1,616 Accrued liabilities (646) (590) Accrued restructuring costs (788) -- Income taxes payable 138 269 Customer deposits (679) -- Deferred rent -- (6) Other long term liabilities (25) 75 ------- -------- Net cash (used in) operating activities 1,840 (633) ------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment (215) (335) Restricted cash -- 558 Purchases of investments (13,918) (505) Redemption of short-term investments 7,033 -- ------- -------- Net cash provided by (used in) investing activities (7,100) (282) ------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Repayment of capital lease obligations (111) -- Repurchase of common stock (4,230) -- Net proceeds from issuance of common stock 2,118 137 ------- -------- Net cash (used in) provided by financing activities (2,223) 137 ------- -------- Net decrease in cash (7,483) (778) Cash at beginning of period 14,641 1,951 ------- -------- Cash at end of period $ 7,158 $ 1,173 ------- --------
See accompanying notes. 5 6 MRV COMMUNICATIONS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. GENERAL Basis of Presentation - The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the requirements of Form 10-Q and, therefore, do not include all information and footnotes which would be presented if such financial statements were prepared in accordance with generally accepted accounting principles. These statements should be read in conjunction with the audited financial statements presented in the Company's Annual Report or Form 10-K for the year ended December 31, 1996. In the opinion of management, these interim financial statements reflect all normal and recurring adjustments necessary for a fair presentation of the financial position and results of operations for each of the periods presented. The results of operations and cash flows for such periods are not necessarily indicative of results to be expected for the full year. 2. NET EARNINGS PER SHARE Net earnings per share are based upon the weighted average number of shares outstanding during each of the periods, including the dilutive effect of common stock equivalents. Weighted average shares outstanding include the common stock equivalents of the convertible debentures, stock options and warrants outstanding during the period and net income for the purpose of calculating earnings per share is consequently adjusted for the interest payable to debenture holders. 3. PRO FORMA FINANCIAL DATA In September 1996, the Company completed a private placement of an aggregate of $30,000,000 principal amount of 5% convertible subordinated debentures due August 6, 1999 (the "Debentures"). Proceeds from this private placement were used to purchase the Fibronics Business. The Debentures were convertible into Common Stock of the Company at any time at the option of the holders at a discount from the market price of the Common Stock at the time of conversion that increased over the life of the Debentures until it reached a floor. At a meeting of the Emerging Issues Task Force held on March 13, 1997, the staff of the Securities and Exchange Commission ("SEC") announced its position on the accounting treatment for the issuance of convertible preferred stock and debt securities with a beneficial conversion feature such as that contained in the Debentures. As announced, the SEC requires that a beneficial conversion feature attached to instruments such as the Debentures that are convertible into equity be recognized and measured by allocating a portion of the proceeds equal to the intrinsic value of that feature to additional paid-in capital and charging it to interest expense. As a result of this position, the Company added a non-recurring, non-cash charge to its results of operations for the quarter ended March 31, 1997 related to the issuance of the Debentures in the amount of $408,000. The following unaudited pro forma summary sets forth results of operations excluding the non recurring charges for interest related to convertible debentures and acquisition.
Dollars in Thousands Three Months Except Per Share Data Ended (Unaudited) March 31, 1997 --------------------- -------------- Revenues $35,564,000 Income before income taxes $ 6,689,000 Net income $ 4,751,000 Earnings per share $ 0.19
6 7 ITEM 2: Management's Discussion and Analysis of Financial Condition and Results of Operations RESULTS OF OPERATIONS The following table sets forth, for the periods indicated, statements of operations data of the Company expressed as a percentage of revenues. - --------------------------------------------------------------------------------
3 Months Ended -------------------- March 31 March 31 1997 1996 ---- ----- Revenues, net ........................................... 100.0% 100.0% Cost of goods sold ...................................... 56.7% 57.9% Gross profit ............................................ 43.3% 42.1% Operating expenses: Research and development ............................ 7.7% 10.8% Selling, general and administrative ................. 16.2% 13.8% Operating income ........................................ 19.3% 17.5% Interest expenses related to convertible debenture & acquisition ........................................... 1.1% - Other (expenses) income, net ............................ (0.5%) 0.5% Income before taxes ..................................... 18.8% 18.0% Provision for income taxes .............................. 5.4% 5.9% Net Income .............................................. 12.2% 12.1%
Revenues Revenues for the quarter ended March 31, 1997 and 1996 were $35,564,000 and $15,529,000 respectively. The changes represented an increase of $20,035,000 or 129% percent for the quarter ended March 31, 1997 over the quarter ended March 31, 1996. Revenues increased as a result of greater marketing efforts and greater market acceptance of the Company's products, both domestically and internationally. International sales accounted for approximately 57% percent of revenues for the quarter ended March 31, 1997 as compared to 39% percent of revenues for the quarter ended March 31, 1996. International sales, as a percentage of total revenues, increased mainly as a result of increased sales, marketing and support resources in place in Europe and increased sales to the Pacific Rim region. Sales of networking products represented approximately 75% of total sales during the quarter ended March 31, 1997 compared to approximately 63% for the quarter ended March 31, 1996. The increase in sales of networking products was due primarily to increased sales of the MegaSwitch family of products. Gross Profit Gross profit for the quarter ended March 31, 1997 was $15,389,000 compared to $6,540,000 for the quarter ended March 31, 1996. Gross Profit as a percentage of revenues rose from 42.1% during the quarter ended March 31, 1996 to 43.3% during the quarter ended March 31, 1997 as a result of increased sales of higher margin products such as the MegaSwitch family of products as well as lower cost production techniques. Research and Development Research and development ("R&D") expenses were $2,748,000 and $1,684,000 and represented 7.7% percent and 10.8% percent respectively of revenues for the quarters ended March 31, 1997 and 1996. The 63% increase in R&D spending during the quarter ended March 31, 1997 over the comparable period in 1996 was attributable to the continued development of the Company's networking and fiber optic products including Ethernet/Fast Ethernet/Gigabit Ethernet switches, Gigahub modules and three-way simultaneous fiber optic transmission modules. Additional costs were also associated with the hiring of additional research and development personnel and consultants. The Company intends to continue to invest in the research and development of new products. Management believes that the ability of the Company to develop and commercialize new products is a key competitive factor. 7 8 Selling, General and Administrative Selling, general and administrative ("SG&A") expenses increased to $5,775,000 for the quarter ended March 31, 1997 from $2,136,000 for the quarter ended March 31, 1996. As a percentage of revenues, SG&A increased from 13.8 percent for the quarter ended March 31, 1996 to 16.2 percent for the quarter ended March 31, 1997. The increase in SG&A expenses is due primarily to substantially increased marketing efforts as well as additional personnel and overhead costs in additional and expanded locations. Interest Expense Related to Convertible Debentures and Acquisition To give effect to the accounting treatment announced by the staff of the SEC at the March 13, 1997 meeting of the Emerging Issues Task Force relevant to the Company's issuance of the Debentures having "beneficial conversion" features, the value of the fixed discount has been reflected in the Company's financial statements at and for the quarter ended March 31, 1997 as additional interest expense and such fixed discount has been accreted through the first possible conversion date of the respective issuance. Similarly, the Company also plans to report additional non-recurring charges of approximately $40,000 for the quarter ending June 30, 1997. The Company will not need to report future charges relating to the issuance of the Debentures beyond the second quarter of 1997 as the outstanding principal and accrued interest were paid in full at April 4, 1997 through conversion into Common Stock. See "Liquidity and Capital Resources" below. Net Income Net income increased from $1,879,000 for the quarter ended March 31, 1996 to $4,343,000 for the quarter ended March 31, 1997. Net income increased primarily due to substantially increased sales. LIQUIDITY AND CAPITAL RESOURCES In October 1994, the Company received proceeds of approximately $5,497,000 from the issuance of 3,439,430 shares of Common Stock, upon exercise of the same number of warrants that had been issued in the Company's initial public offering of December 1992. In January 1995, the Company received net proceeds of approximately $9,355,000 from the public offering of 2,700,000 shares of Common Stock. In September 1996, the Company completed a private placement of $30,000,000 principal amount of Debentures. The Debentures were convertible into Common Stock at a discount from the market price at the time of conversion. At April 4, 1997, principal and accrued interest on the Debentures had been paid in full through their conversion into a total of 1,816,159 shares of Common Stock at an average conversion rate of $16.77 per share. As part of the private placement, the Company also issued to the investors three-year warrants to purchase an aggregate of up to 600,000 shares of Common Stock at a weighted average exercise price of $26.67 per share. In September 1996, the Company completed the Fibronics Acquisition from Elbit. The purchase price for the Fibronics Business was approximately $22,770,000, which was paid using a combination of cash and shares of Common Stock of the Company. Cash in the amount of $12,240,000 was paid at the time of sale and the balance was paid by the delivery of 458,991 shares of Common Stock of the Company. The cash was provided from a portion of the proceeds of the private placement of Debentures. In connection with the 458,991 shares of Common Stock that were originally delivered to Elbit as partial payment of the purchase price, the Company made certain guarantees to Elbit regarding the minimum proceeds Elbit would receive upon resale of the shares. The Company secured such guarantees by delivering to Elbit (i) a letter of credit from a major bank in the amount of approximately $4,301,00 and (ii) an additional 137,305 shares of its Common Stock ( the "Security Shares" ). In March 1997, MRV and Elbit agreed to amend their agreement (the "March 1997 Amendment") regarding the Common Stock portion of the purchase price paid to Elbit for the Fibronics Business. First, the Company repurchased 184,381 shares, paying Elbit $4,230,000 (approximately $23.00 per share) plus accrued interest thereon at 0.67% per month from January 1, 1997 through the date of Elbit's resale. To secure any shortfall, the Company delivered to Elbit pending resale of the Additional Shares a letter of credit from a major bank, expiring on June 15, 1997, in the amount of approximately $6,536,000. Elbit has agreed to sell the Additional Shares in the open market at no less than the prevailing bid price at the time of sale; provided, however, that in no event shall sales of the Additional Shares be at less than $23.00 per share. Elbit must pay to the Company any difference between the amount received upon resale of the Additional Shares and $6,300,000 (plus accrued interest) and return any unsold Additional Shares to the Company. As part of the March 1997 Amendment, Elbit also returned the Security Shares to the Company. Due to the contingency relating to the Additional Shares, the remaining 274,610 Additional Shares and the $6,300,000 has been shown on the March 31, 1997 Balance Sheet outside of stockholders' equity (until the contingency is resolved). This accounting treatment is consistent with the accounting relating to these shares as of December 31, 1996. 8 9 Net cash provided by operating activities for the three months ended March 31, 1997 was $1,840,000. Net cash used in financing activities for the three months ending March 31, 1997 were $2,223,000. The cash used in financing activities was primarily used for repurchase of the Common Stock from Elbit. Net cash used in investing activities for the three months ended March 31, 1997 was $7,100,000. The cash used in investing activities was primarily used to purchase investments U.S. Government securities. INFLATION The company believes that the relatively moderate rate of inflation over the past few years has not had a significant impact on the Company's sales or operating results, or on the prices of raw materials. PART II - OTHER INFORMATION Item 2. Change in Securities (a) Not applicable (b) Not applicable (c) During August and September 1996, the Company sold an aggregate of $30 million principal amount 5% convertible subordinated debentures due August 6, 1999 (the "Debentures") and warrants to purchase up to 600,000 shares of Common Stock at a weighted average exercise price of $26.67 per share for three years to a total of 14 investors in a private financing, receiving proceeds aggregating $30 million. The Debentures were convertible into Common Stock of the Company at any time at the option of the holders at a discount from the market price of the Common Stock at the time of conversion that increased over the life of the Debentures until it reached a floor. During the period from January 1, 1997 through March 31, 1997 $17,025,000 principal amount of Debentures and approximately $407,000 of accrued interest were converted into approximately 986,000 shares of Common Stock. The issuance of shares upon conversion of the Debentures were not effected through any broker-dealer, and no underwriting discounts or commissions were paid in connection with such issuance. Exemption from registration requirements is claimed under the Securities Act of 1933 (the "Securities Act") in reliance on Section 4(2) of the Securities Act, Regulation D promulgated thereunder or Section 3(a)(9) of the Securities Act. The recipients of securities in each such transaction represented their intention to acquire the securities for investment only and not with a view to, or for sale in connection with, any distribution thereof and appropriate legends were affixed to the certificates evidencing the securities in such transactions. All recipients had adequate access to information about the Company. No consideration or other remuneration was paid or given, and no solicitation was made, in connection with the conversion of the Debentures. 9 10 SIGNATURES Pursuant to the requirements of the Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant certifies that it has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized on August 25, 1997. MRV COMMUNICATIONS, INC. By: /s/ Edmund Glazer -------------------------- Edmund Glazer Chief Financial Officer 10 EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND CONDENSED CONSOLIDATED BALANCE SHEETS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 U.S. DOLLARS 3-MOS DEC-31-1997 JAN-01-1997 MAR-31-1997 1 7,158 24,544 31,090 2,219 21,007 88,066 6,208 1,712 103,010 28,437 300 0 0 76 65,589 103,010 35,564 35,564 20,176 8,553 166 0 408 6,865 1,938 4,343 0 0 0 4,343 $0.18 $0.18
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