UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
Current Report
Pursuant To Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 9, 2012
MRV COMMUNICATIONS, INC.
(Exact name of Registrant as specified in its charter)
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DELAWARE |
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001-11174 |
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06-1340090 |
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(State or other jurisdiction of |
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(Commission file number) |
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(I.R.S. employer |
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incorporation or organization) |
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identification number) |
20415 Nordhoff Street, Chatsworth, CA 91311
(Address of principal executive offices) (zip code)
Registrant’s telephone number, including area code: (818) 773-0900
Not Applicable
Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the Registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
x Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 2.02 Results of Operations and Financial Condition
On August 9, 2012, MRV Communications, Inc. (the “Company”) issued a press release announcing its financial results for the quarter ended June 30, 2012, the text of which is set forth in Exhibit 99.1 attached hereto. All information in the press release is presented as of June 30, 2012 unless specifically stated otherwise in the press release, and the Company does not assume any obligation to update such information in the future.
The information included in this Item 2.02, as well as in Exhibit 99.1 attached hereto, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that Section, and shall not be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
Item 8.01 Other Events
The Company further announced in a press release dated August 9, 2012, that the Company has concluded the exploration of strategic alternatives that it previously disclosed in current reports on Form 8-K filed on September 2, 2011 and February 8, 2012, in that the Company has determined to pursue the divestiture of its Network Integration businesses and retain, build and invest in its core Optical Communications Systems (“OCS”) business. The Company believes that the long-term growth prospects for the optical transport and carrier Ethernet markets reinforce its decision to build its OCS business.
A copy of the press release announcing the conclusion of the Company’s exploration of strategic alternatives is attached as Exhibit 99.2 to this Current Report on Form 8-K and is incorporated by reference herein.
Item 9.01 Financial Statements and Exhibits
(d) Exhibits
Exhibit 99.1 Company’s press release dated August 9, 2012 announcing second quarter 2012 financial results
Exhibit 99.2 Company’s press release dated August 9, 2012 announcing conclusion of exploration of strategic alternatives
Exhibit 99.1
MRV Announces Second Quarter 2012 Financial Results
CHATSWORTH, Calif., August 9, 2012 — MRV Communications, Inc. (OTCQB: MRVC) (“MRV” or the “Company”), a leading provider of optical communications network infrastructure equipment and integration and managed services, today announced financial results for the second quarter ended June 30, 2012.
MRV reported second quarter 2012 revenue of $55.0 million, compared with revenue of $48.4 million in the first quarter of 2012 and $59.2 million in the second quarter of 2011. The sequential revenue increase of 14% was driven by higher Network Equipment revenue, primarily at OCS, attributable to growth in service revenue and out-of-band networking product and higher Network Integration revenue due to the recognition of previously deferred revenue. The year-over-year decline of 7% was due to a 13% decline in the Network Equipment group attributable to lower service and product revenues across all regions in OCS and a 4% decline in the Network Integration group attributable to a continued weak European telecom marketplace.
Gross margin for the second quarter of 2012 was 34.4%, compared with 35.5% in the first quarter of 2012 and 40.0% in the second quarter of 2011. The year over year decline in gross profit was impacted by the decline in revenue at the Company’s Network Integration and Network Equipment groups. In the Network Equipment group, gross margins were negatively impacted by a more competitive operating environment, which increased pricing pressure, and a write down of inventory held for sale and service support. In the Network Integration group, margins were down due to highly competitive European markets that are driving increasing pricing pressure, and a change in product and service revenue mix.
Operating expenses in the second quarter of 2012 were $22.3 million, or 40% of revenue, and included a $3.7 million goodwill impairment charge related to the Company’s subsidiary in Scandinavia. Excluding this charge, operating expenses in the second quarter were $18.6 million, or 34% of revenue, compared with $20.8 million, or 43% in the first quarter of 2012 and $21.9 million, or 37% of revenue in the second quarter of 2011. The year-over-year consolidated decrease in operating expenses reflects cost cutting initiatives including $1.9 million in lower labor cost at the operating units during the second quarter of 2012, $0.9 million in lower consulting fees, and lower organizational support cost, which were partially offset by an increase of $0.5 million in severance expense for an officer at our subsidiary in France. The year over year decrease also included several charges in the second quarter of 2011 that did not recur in 2012, including $0.7 million of legal costs related to Board activities and $0.6 million in share-based compensation paid to our former CEO.
Operating loss for the second quarter of 2012 was $3.4 million, and included a $3.7 million goodwill impairment charge related to the Company’s subsidiary in Scandinavia. Excluding this charge, the operating profit in the second quarter was $0.3 million, compared with a loss of $3.6 million in the first quarter of 2012 and an operating profit of $1.8 million in the second quarter of 2011. Operating losses included share-based compensation expense of $0.2 million and $0.8 million in the second quarter of 2012 and 2011, respectively.
As publicly announced on May 2, 2012, MRV’s Board of Directors declared a special dividend of $0.30 per share payable on May 25, 2012 to stockholders of record as of May 16, 2012 and therefore MRV disbursed $47.3 million to investors in the second quarter of 2012.
A more detailed discussion of MRV’s 2012 second quarter financial results, including an analysis by business segment, is included in the Management’s Discussion and Analysis section of the Company’s quarterly report filed with the Securities and Exchange Commission (“SEC”) on Form 10-Q today.
Commenting on the Company’s financial results, Barry Gorsun, MRV’s chief executive officer, stated “While the markets we sell into have been experiencing near term weakness, we had several key successes in the quarter and we continue to expand our customer footprint among existing customers as well as added 41 new customers. A top tier service provider recently selected MRV’s OptiSwitch® and ProVision® solutions for an international metro-Ethernet deployment. Additionally, we continue to gain new data center and content delivery customers and increase sales for our 4G backhaul solutions.”
“During the quarter our OCS division expanded its award winning Pro-Vision product family to support the recently defined Metro Ethernet Forum specifications for Carrier Ethernet 2.0 to enable differentiated services over managed and interconnected global Ethernet networks. We will continue to leverage our technology and resources to deliver innovative products to key segments of our markets.”
Mr. Gorsun continued, “As we separately announced today, we have concluded our review of strategic alternatives and have decided to pursue divestitures of our Network Integration businesses and will be retaining, investing and building our core Optical Communications Systems business. OCS’s markets are poised for significant long term growth due to rising demand for bandwidth intensive applications, mobility and cloud computing that are leading carriers to upgrade their infrastructure and networks. With our renewed focus on supporting the next generation products in our pipeline, we believe that we will be well-positioned to support our customers’ expanding needs and capitalize on the growth of this market.”
Proposed Transactions
As set forth in MRV’s preliminary proxy statement filed on Schedule 14A with the SEC on August 9, 2012, the Company is seeking stockholder approval for two transactions in the Company’s Network Integration business. The Company has entered into a sale purchase agreement for the sale of its French subsidiary, Interdata, and it has entered into a letter of intent which anticipates a potential sale of its Swedish subsidiary, Alcadon-MRV AB. MRV has also retained investment bank Headwaters BD, LLC, to evaluate and explore strategic alternatives for its Italian subsidiary, Tecnonet S.p.A. A detailed discussion of MRV’s proposed sale of Interdata and Alcadon can be found in its preliminary proxy statement on file with the SEC.
About MRV Communications, Inc.
MRV Communications, Inc. is a leading global provider of carrier Ethernet, wavelength division multiplexing optical transport, infrastructure management equipment and solutions, as well as network integration and managed services. MRV’s solutions enable the delivery and provisioning of next-generation optical transport and carrier Ethernet services over any fiber infrastructure. MRV provides equipment and services worldwide to telecommunications service providers, enterprises, and governments, enabling network evolution and increasing efficiency, while reducing complexity and costs. Through its subsidiaries, MRV operates development centers in North America and Europe, along with support centers and sales offices around the world. For more information about MRV, visit http://www.mrv.com.
Forward Looking Statements
In connection with the proposed sales, MRV has filed a preliminary proxy statement and will be filing a definitive proxy statement and other materials with the SEC in the near future. The Company urges investors to read the Proxy Statement and these other materials carefully when they become available because they will contain important information about the Company and the proposed sales. Investors may obtain free copies of the preliminary (and definitive when available) proxy statements as well as other filed documents containing information about the Company at http://www.sec.gov, the SEC’s free Internet site.
The Company and its executive officers and directors may be deemed, under SEC rules, to be participants in the solicitation of proxies from the Company’s stockholders with respect to the proposed transaction. Information regarding the executive officers and directors of the Company will be included in the proxy statement to be filed with the SEC with respect to the Company’s Annual Meeting of Stockholders. More detailed information regarding the identity of the potential participants, and their direct or indirect interests, by security holdings or otherwise, is set forth in the proxy statement and other materials filed or to be filed with SEC in connection with the proposed sales.
This press release may contain statements regarding future financial and operating results of MRV, management’s assessment of business trends, and other statements about management’s future expectations, beliefs, goals, plans or prospects and those of the market segments in which MRV is engaged that are based on management’s current expectations, estimates, forecasts and projections about MRV and its consolidated businesses and the respective market segments in which MRV’s businesses operate, in addition to management’s assumptions. Statements in this press release regarding MRV’s future financial and operating results, which are not statements of historical facts, constitute forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Words such as “expects,” “anticipates,” “envisions,” “estimates,” “targets,” “intends,” “plans,” “believes,” “seeks,” “should,” “could,” “forecasts,” “projects,” variations of such words and similar expressions, are intended to identify such forward-looking statements which are not statements of historical facts. These forward-looking statements are not guarantees of future performance nor guarantees that the events anticipated will occur or expected conditions will remain the same or improve. These statements involve certain risks, uncertainties and assumptions, the likelihood of which are difficult to assess and may not occur, including risks that each of its business segments may not make the expected progress in its respective market, that the proposed sales will not close, including due to the fact that we have not yet entered into a sale purchase agreement with the potential purchaser of Alcadon, conditions precedent need to be met for the Interdata sale, failure of the Company’s stockholders to approve the transactions, and including risks relating to the Company’s ability to make changes in the strategic direction of the Company as determined by its Board of Directors. Therefore, actual outcomes, performance and results may differ from what is expressed or forecast in such forward-looking statements, and such differences may vary materially from current expectations.
For further information regarding risks and uncertainties associated with MRV’s businesses, please refer to the “Management’s Discussion and Analysis of Results of Operations and Financial Condition” and “Risk Factors” sections of MRV’s SEC filings, including, but not limited to, its annual report on Form 10-K for the year ended December 31, 2011, and its quarterly report on Form 10-Q for the quarter ended June 30, 2012, copies of which may be obtained by contacting MRV’s investor relations department or by visiting MRV’s website at http://www.mrv-corporate.com or the SEC’s EDGAR website at http://www.sec.gov.
All information in this release is as of June 30, 2012 unless otherwise stated. MRV undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in MRV’s expectations.
Contact:
Investor Relations:
MRV Communications, Inc.
(818) 886-MRVC (6782)
ir@mrv.com
or
Media Relations:
MRV Communications, Inc.
pr@mrv.com
MRV Communications, Inc
Statement of Operations
(In thousands, except per share data)
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Three Months Ended June 30, |
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Six months ended June 30, |
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2012 |
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2011 |
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2012 |
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2011 |
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(unaudited) |
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(unaudited) |
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Revenue |
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55,020 |
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59,232 |
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103,391 |
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112,403 |
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Cost of goods sold |
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36,066 |
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35,552 |
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67,278 |
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69,043 |
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Gross profit |
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18,954 |
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23,680 |
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36,113 |
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43,360 |
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Operating expenses: |
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Product development and engineering |
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3,429 |
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3,604 |
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7,174 |
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7,441 |
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Selling, general and administrative |
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15,245 |
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18,326 |
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32,284 |
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34,427 |
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Impairment of goodwill |
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3,634 |
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— |
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3,634 |
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— |
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Total operating expenses |
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22,308 |
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21,929 |
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43,092 |
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41,869 |
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Operating income (loss) |
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(3,354 |
) |
1,750 |
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(6,979 |
) |
1,491 |
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Interest Expense |
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(213 |
) |
(190 |
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(458 |
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(437 |
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Gain from settlement of deferred Consideration obligation |
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2,314 |
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2,314 |
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Other income (loss), net |
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(316 |
) |
(48 |
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(33 |
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(212 |
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Income (loss) from continuing operations before taxes |
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(1,569 |
) |
1,512 |
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(5,156 |
) |
842 |
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Provision (benefit) for income taxes |
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545 |
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1,281 |
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1,321 |
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2,512 |
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Net income (loss) of continuing operations |
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(2,114 |
) |
231 |
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(6,477 |
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(1,670 |
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Income (loss) from discontinued operations, net of income taxes of $0 in 2012 and $889 in 2011 |
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— |
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(2,097 |
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7,975 |
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(740 |
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Net income (loss) |
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(2,114 |
) |
(1,866 |
) |
1,498 |
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(2,410 |
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Net income (loss) per share - basic: |
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From continuing operations: |
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$ |
(0.01 |
) |
$ |
0.00 |
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$ |
(0.04 |
) |
$ |
(0.01 |
) |
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From discontinued operations: |
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$ |
— |
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$ |
(0.01 |
) |
$ |
0.05 |
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$ |
— |
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Net income (loss) per share - basic (1) |
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$ |
(0.01 |
) |
$ |
(0.01 |
) |
$ |
0.01 |
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$ |
(0.01 |
) |
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Net income (loss) per share - diluted: |
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From continuing operations: |
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$ |
(0.01 |
) |
$ |
0.00 |
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$ |
(0.04 |
) |
$ |
(0.01 |
) |
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From discontinued operations: |
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$ |
— |
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$ |
(0.01 |
) |
$ |
0.05 |
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$ |
— |
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Net income (loss) per share - diluted (1) |
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$ |
(0.01 |
) |
$ |
(0.01 |
) |
$ |
0.01 |
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$ |
(0.01 |
) |
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|
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Weighted average number of shares: |
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Basic |
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157,738 |
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157,449 |
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157,744 |
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157,150 |
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Diluted |
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157,738 |
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157,449 |
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157,972 |
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157,150 |
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(1) Amounts may not add due to rounding.
MRV Communications, Inc
Balance Sheet
(In thousands)
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June 30, |
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December 31, |
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Current assets: |
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Cash and cash equivalents |
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$ |
43,372 |
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$ |
71,352 |
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Short-term marketable securities |
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Restricted time deposits |
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2,721 |
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380 |
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Accounts receivable, net |
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43,844 |
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55,654 |
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Other recievables |
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12,316 |
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11,604 |
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Inventories |
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30,195 |
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28,134 |
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Deferred income taxes |
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1,417 |
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1,660 |
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Other current assets |
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7,669 |
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5,168 |
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Current assets from discontinued operations held for sale |
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— |
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24,810 |
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Total current assets |
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141,534 |
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198,762 |
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Property and equipment, net |
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6,670 |
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6,789 |
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Goodwill |
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1,334 |
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5,156 |
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Deferred income taxes, net of current portion |
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4,360 |
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4,113 |
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Intangibles, net |
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400 |
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0 |
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Other assets |
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299 |
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574 |
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Noncurrent assets from discontinued operations |
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— |
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15,295 |
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Total assets |
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$ |
154,597 |
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$ |
230,689 |
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Liabilities and stockholders’ equity |
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Current liabilities: |
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Short-term debt |
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$ |
6,266 |
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$ |
8,987 |
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Deferred consideration payable |
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2,614 |
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4,615 |
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Accounts payable |
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23,984 |
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31,359 |
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Accrued liabilities |
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19,513 |
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20,924 |
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Deferred revenue |
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12,583 |
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10,985 |
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Other current liabilities |
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203 |
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1,693 |
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Current liabilities from discontinued operations held for sale |
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— |
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3,236 |
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Total current liabilities |
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65,163 |
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81,799 |
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Other long-term liabilities |
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5,771 |
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6,209 |
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Long-term liabilities from discontinued operations |
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— |
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467 |
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Commitments and contingencies |
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Stockholders’ equity: |
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Issued — 161,267 shares in 2012 and 160,609 shares in 2011 |
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Outstanding — 157,751 shares in 2012 and 157,704 in 2011 |
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271 |
|
270 |
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Additional paid-in capital |
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1,291,102 |
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1,337,935 |
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Accumulated deficit |
|
(1,205,681 |
) |
(1,207,178 |
) | ||
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Treasury stock — 2,692 shares in 2012 and 2011 |
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(3,271 |
) |
(3,271 |
) | ||
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Accumulated other comprehensive income |
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1,242 |
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14,458 |
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Total stockholders’ equity |
|
83,663 |
|
142,214 |
| ||
|
Total liabilities and stockholders’ equity |
|
$ |
154,597 |
|
$ |
230,689 |
|
Exhibit 99.2
MRV Announces Conclusion of Exploration of Strategic Alternatives
Retaining, Building and Investing in Core Optical Communications Systems Business;
Divesting Network Integration Businesses
CHATSWORTH, Calif., August 9, 2012 — MRV Communications, Inc. (OTCQB: MRVC) (“MRV” or the “Company”), a leading provider of optical communications network infrastructure equipment and integration and managed services, today announced the conclusion of its previously announced exploration of strategic alternatives. MRV has determined to divest its Network Integration businesses and retain, build and invest in its core Optical Communications Systems (“OCS”) business. The long-term growth prospects for the optical transport and carrier Ethernet markets reinforce MRV’s decision to build its OCS business. MRV’s OCS products are well positioned in the marketplace and are known for their rich feature set, for their ability to improve the efficiency of their customers’ networks, and for the industry-leading bandwidth to power consumption ratio of its products.
“After a careful and thorough review of our businesses and the markets we serve, the management team and Board of Directors determined that the best course of action for MRV is to pursue divestiture of our Network Integration subsidiaries in Europe and retain and expand our OCS business,” said Barry Gorsun, chief executive officer of MRV.
“During our strategic review process, it became very apparent that there is real value in the OCS technology platform and that we are well positioned in the optical transport and carrier Ethernet markets and specifically in the rapidly growing mobile backhaul data center and cloud computing verticals. We believe that we could best serve our stockholders and customers by leveraging these strengths to deliver innovative new products to the high growth segments of our markets. This decision was reinforced by a top tier service provider who recently selected MRV’s OptiSwitch® and ProVision® solutions for an international metro-Ethernet deployment. In fact, we have already started shipping against this contract.”
Gorsun continued, “Rising demand for bandwidth intensive applications, mobility and cloud computing are the catalysts forcing carriers to upgrade their infrastructure to next-generation networks. Recent market data estimates that the subsets of these markets that MRV addresses are poised for solid long-term growth, despite the current challenging macroeconomic spending environment. Service providers around the globe have come to expect best-in-class products and services from MRV and we intend to build upon this tradition to drive growth and increase our market share over the long term.”
For over 20 years, MRV has been providing innovative and award winning solutions to the market. MRV’s OCS division is an end-to-end provider of optical communications network infrastructure equipment that facilitates access, transport, aggregation and management of voice, data and video traffic in networks, data centers and laboratories used by telecommunications service providers, cable operators, enterprise customers and governments worldwide.
MRV’s OCS division serves the optical transport and carrier Ethernet markets for telecommunications service providers and large enterprises around the globe from the edge to the core of the network. Infonetics Research, Inc. forecasts that the optical transport and carrier Ethernet markets will grow at a compound annual growth rate of 12 percent and 6 percent, respectively, through 2016. These markets are being driven by the proliferation of network traffic due to the increase in 4G mobile network upgrades, cloud computing, data center services, business services, wholesale exchanges, and the systematic conversion to packet-based networks as operators attempt to fill the ever-increasing demand for bandwidth and complex services.
MRV’s award winning product families include the OptiSwitch carrier Ethernet, FiberDriver® and LambdaDriver® optical transport, ProVision element management system and MCC and LX infrastructure management solutions.
As set forth in MRV’s preliminary proxy statement filed on Schedule 14A with the Securities and Exchange Commission (“SEC”) on August 9, 2012, the Company is seeking stockholder approval for two transactions in the Company’s Network Integration business. The Company has entered into a sale purchase agreement for the sale of its French subsidiary, Interdata, and it has entered into a letter of intent which anticipates a potential sale of its Swedish subsidiary, Alcadon-MRV AB. MRV has also retained the investment bank Headwaters BD, LLC, to evaluate and explore strategic alternatives for its Italian subsidiary, Tecnonet S.p.A. A detailed discussion of MRV’s proposed sale of Interdata and Alcadon can be found in its preliminary proxy statement on file with the SEC.
About MRV Communications, Inc.
MRV Communications, Inc. is a leading global provider of carrier Ethernet, wavelength division multiplexing optical transport, infrastructure management equipment and solutions, as well as network integration and managed services. MRV’s solutions enable the delivery and provisioning of next-generation optical transport and carrier Ethernet services over any fiber infrastructure. MRV provides equipment and services worldwide to telecommunications service providers, enterprises, and governments, enabling network evolution and increasing efficiency, while reducing complexity and costs. Through its subsidiaries, MRV operates development centers in North America and Europe, along with support centers and sales offices around the world. For more information about MRV, visit http://www.mrv.com.
Additional Information
In connection with the proposed sales, MRV has filed a preliminary proxy statement and will be filing a definitive proxy statement and other materials with the SEC in the near future. The Company urges investors to read the Proxy Statement and these other materials carefully when they become available because they will contain important information about the Company and the proposed sales. Investors may obtain free copies of the preliminary (and definitive when available) proxy statements as well as other filed documents containing information about the Company at http://www.sec.gov, the SEC’s free Internet site.
The Company and its executive officers and directors may be deemed, under SEC rules, to be participants in the solicitation of proxies from the Company’s stockholders with respect to the proposed transaction. Information regarding the executive officers and directors of the Company will be included in the proxy statement to be filed with the SEC with respect to the Company’s Annual Meeting of Stockholders. More detailed information regarding the identity of the potential participants, and their direct or indirect interests, by security holdings or otherwise, is set forth in the proxy statement and other materials filed or to be filed with SEC in connection with the proposed sales.
This press release may contain statements regarding future financial and operating results of MRV, management’s assessment of business trends, and other statements about management’s future expectations, beliefs, goals, plans or prospects and those of the market segments in which MRV is engaged that are based on management’s current expectations, estimates, forecasts and projections about MRV and its consolidated businesses and the respective market segments in which MRV’s businesses operate, in addition to management’s assumptions. Statements in this press release regarding MRV’s future financial and operating results, which are not statements of historical facts, constitute forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Words such as “expects,” “anticipates,” “envisions,” “estimates,” “targets,” “intends,” “plans,” “believes,” “seeks,” “should,” “could,” “forecasts,” “projects,” variations of such words and similar expressions, are intended to identify such forward-looking statements which are not statements of historical facts. These forward-looking statements are not guarantees of future performance nor guarantees that the events anticipated will occur or expected conditions will remain the same or improve. These statements involve certain risks, uncertainties and assumptions, the likelihood of which are difficult to assess and may not occur, including risks that the proposed sales will not close, including due to the fact that we have not yet entered into a sale purchase agreement with the potential purchaser of Alcadon, conditions precedent need to be met for the Interdata sale, failure of the Company’s stockholders to approve the transactions, and including risks relating to the Company’s ability to make changes in the strategic direction of the Company as determined by its Board of Directors. Therefore, actual outcomes, performance and results may differ from what is expressed or forecast in such forward-looking statements, and such differences may vary materially from current expectations.
For further information regarding risks and uncertainties associated with MRV’s businesses, please refer to the “Management’s Discussion and Analysis of Results of Operations and Financial Condition” and “Risk Factors” sections of MRV’s SEC filings, including, but not limited to, its annual report on Form 10-K for the year ended December 31, 2011, and its quarterly report on Form 10-Q for the quarter ended June 30, 2012, copies of which may be obtained by contacting MRV’s investor relations department or by visiting MRV’s website at http://www.mrv-corporate.com or the SEC’s EDGAR website at http://www.sec.gov.
Contact:
Investor Relations:
MRV Communications, Inc.
(818) 886-MRVC (6782)
ir@mrv.com
or
Media Relations:
MRV Communications, Inc.
pr@mrv.com