Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended March 31, 1998 - Commission file Number 0-17038
Concord Camera Corp.
(Exact names of registrant as specified in its charter)
New Jersey 13-3152196
(State or other Jurisdiction (I.R.S. Employer
of Incorporation) Identification No.)
35 Mileed Way, Avenel, New Jersey 07001
(Address of principal executive office) (Zip code)
732/499-8280
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No_____
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, no par value -- 11,001,526 shares as of April 20, 1998
------------------------------
Page 1 of 17
Exhibit Index on Page
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PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
Concord Camera Corp.
Consolidated Balance Sheets
<CAPTION>
(Unaudited)
March 31, June 30,
1998 1997
<S> <C> <C>
------ -------
Current assets:
Cash $ 4,965,948 $ 5,297,820
Accounts receivable, net 10,453,458 9,866,962
Inventories 21,919,681 15,752,402
Prepaid expenses and other current assets 3,837,687 3,091,669
----------- -----------
Total current assets 41,176,774 34,008,853
Plant and equipment, net 15,974,611 13,865,777
Goodwill, net 836,835 1,089,217
Other assets 3,510,033 4,124,396
----------- -----------
Total assets $61,498,253 $53,088,243
=========== ===========
Current liabilities:
Short-term debt $ 7,088,620 $ 7,976,315
Current portion of long-term debt 34,274 33,349
Current obligations under capital leases 847,838 790,426
Accounts payable 13,914,027 8,665,622
Accrued expenses 2,570,009 2,232,289
Income taxes payable 412,810 2,831
Other current liabilities 282,115 313,965
----------- -----------
Total current liabilities 25,149,693 20,014,797
Deferred income taxes 572,538 572,492
Long-term debt 371,490 396,570
Obligations under capital leases 1,636,302 2,000,002
Other long-term liabilities 452,548 602,549
----------- -----------
Total liabilities 28,182,571 23,586,410
----------- -----------
Stockholders' equity:
Common stock, no par value, 40,000,000 shares
authorized; 11,001,526 and 10,944,026
shares issued as of March 31, 1998
and June 30, 1997, respectively 39,514,393 39,361,893
Paid in capital 850,786 850,786
Deficit (3,866,814) (7,635,654)
Notes receivable arising from common stock
purchase agreements (2,729,764) (2,622,273)
----------- -----------
33,768,601 29,954,752
Less: treasury stock, at cost; 63,553 shares (452,919) (452,919)
----------- -----------
Total stockholders' equity 33,315,682 29,501,833
----------- -----------
Total liabilities and stockholders' equity $61,498,253 $53,088,243
=========== ===========
See accompanying notes to consolidated financial statements.
</TABLE>
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<TABLE>
Concord Camera Corp.
Consolidated Statements of Operations
<CAPTION>
(unaudited)
for the three months ended March 31,
1998 1997
<S> <C> <C>
---- ----
Net sales $ 19,150,898 $12,321,789
Cost of products sold 13,982,230 9,837,075
----------- ------------
Gross profit 5,168,668 2,484,714
Selling expenses 1,715,897 1,395,482
General and administrative expenses 2,284,075 2,295,592
Financial expenses 386,754 326,262
Other (income), net (42,815) (130,012)
Legal expenses and settlement costs 79,138 74,525
----------- ------------
Income (loss) before income taxes 745,619 (1,477,135)
Provision for income taxes 85,000 7,338
----------- ------------
Net Income (loss) $660,619 ($1,484,473)
========= ===========
Common shares outstanding 10,912,134 10,880,473
Incremental shares using treasury stock method 453,533 47,110
----------- ------------
Dilutive potential common shares 11,365,667 10,927,583
=========== ============
Basic earnings (loss) per share $0.06 ($0.14)
=========== ===========
Diluted earnings (loss) per share $0.06 ($ 0.14)
=========== ===========
See accompanying notes to consolidated financial statements.
</TABLE>
3
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<TABLE>
Concord Camera Corp.
Consolidated Statements of Operations
<CAPTION>
(unaudited)
for the nine months ended March 31,
1998 1997
<S> <C> <C>
---- ----
Net sales $ 70,286,311 $47,131,611
Cost of products sold 51,511,245 34,288,051
----------- -----------
Gross profit 18,775,066 12,843,560
Selling expenses 6,067,001 5,133,040
General and administrative expenses 7,385,847 6,921,523
Financial expenses 1,190,937 1,065,413
Other (income), net (165,707) (154,742)
Legal expenses and settlement costs 176,600 229,769
----------- -----------
Income (loss) before income taxes 4,120,388 (351,443)
Provision for income taxes 351,548 7,940
----------- -----------
Net Income (loss) $3,768,840 ($359,383)
=========== ==========
Common shares outstanding 10,890,873 10,880,473
Incremental shares using treasury stock method 500,610 74,669
----------- -----------
Dilutive potential common shares 11,391,483 10,955,142
=========== ===========
Basic earnings (loss) per share $0.35 ($0.03)
=========== ===========
Diluted earnings (loss) per share $0.33 ( $0.03)
=========== ===========
See accompanying notes to consolidated financial statements
</TABLE>
4
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<TABLE>
Concord Camera Corp.
Consolidated statements of cash flows
<CAPTION>
(Unaudited)
for the nine months ended March 31,
1998 1997
<S> <C> <C> <C> <C> <C> <C>
---- ----
Cash flows from operating activities:
Net income (loss) $3,768,840 ($359,383)
------------- ----------
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization 2,468,440 2,317,614
Increase in deferred income taxes 45 26,655
Net (gain) on sale of property and equipment (30,697) -
Interest income on notes receivable arising from common
stock agreements (107,491) (107,491)
Change in assets and liabilities:
(Increase) decrease in accounts receivable (586,496) 2,218,045
(Increase) in inventories (6,167,279) (1,381,638)
(Increase) in prepaid expenses and other current assets (746,018) (396,000)
(Increase) decrease in other assets 179,378 (1,382,103)
Increase in accounts payable 5,248,405 3,645,736
Increase (decrease) in accrued expenses 337,720 (442,377)
Increase (decrease) in income taxes payable 409,979 (76,218)
Increase in other current liabilities (31,850) (525,099)
(Decrease) in other long-term liabilities (150,001) -
------------ ------------
Total adjustments 824,135 3,897,124
------------ ------------
Net cash provided by operating activities 4,592,975 3,537,741
------------ ------------
Cash flows from investing activities:
Purchase of property, plant and equipment (3,859,209) (1,233,623)
----------- ------------
Net cash (used in) investing activities (3,859,209) (1,233,623)
------------ ------------
Cash flows from financing activities:
Net (repayments) under short-term debt agreements (887,695) (185,453)
Net (repayments) of long-term debt (24,155) (22,423)
Principal payments under capital lease obligations (306,288) (501,350)
Net proceeds from issuance of common stock 152,500 -
----------- ------------
Net cash (used in) financing activities (1,065,638) (709,226)
----------- ------------
Net increase (decrease) in cash (331,872) 1,594,892
Cash at beginning of period 5,297,820 4,996,770
---------- ------------
Cash at end of period $4,965,948 $6,591,662
========== ===========
See accompanying notes to consolidated financial statements. See Note 3 -
Supplemental Disclosure of cash flow information.
</TABLE>
5
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CONCORD CAMERA CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1998
(unaudited)
In the opinion of Concord Camera Corp. ("the Company"), the accompanying
unaudited financial statements contain all adjustments, consisting of normal
recurring adjustments, necessary for the fair presentation of the Company`s
financial position as of March 31, 1998, and the results of operations and cash
flows for the periods ended March 31, 1998 and 1997.
The Notes to Consolidated Financial Statements, which are included in the
Company's 1997 Form 10-K Annual Report, should be read with the accompanying
financial statements.
In 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, Earnings per Share. Statement 128
replaced the previously reported primary and fully-diluted earnings per share
with basic and diluted earnings per share. Unlike primary earnings per share,
basic earnings per share excludes any dilutive effects of options, warrants, and
convertible securities. Diluted earnings per share is very similar to the
previously reported fully-diluted earnings per share. All earnings per share
amounts for all periods have been presented, and where necessary, restated to
conform to the Statement 128 requirements.
The Company operates on a worldwide basis and its results may be adversely
or positively affected by fluctuations of various foreign currencies against the
U.S. Dollar, specifically, the Canadian Dollar, German Mark, British Pound
Sterling, Hungarian Forint, French Franc, and Japanese Yen. Each of the
Company's foreign subsidiaries purchases its inventories in U.S. Dollars and
sells them in local currency, thereby creating an exposure to fluctuations in
foreign currency exchange rates. Certain components needed to manufacture
cameras are purchased in Japanese Yen. The impact of foreign exchange
transactions is reflected in the profit and loss statement. The Company
continues to analyze the benefits and costs associated with hedging against
foreign currency fluctuations.
Note 2 - Inventories
Inventories are comprised of the following:
March 31, June 30,
1998 1997
Raw materials and components $ 14,216,145 $ 10,517,322
Finished goods 7,703,536 5,235,080
------------ --------------
$ 21,919,681 $ 15,752,402
============ ============
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Note 3 - Supplemental Disclosures of Cash Flow Information:
For the Nine months ended March 31,
1998 1997
---- ----
Cash paid for interest $ 925,791 $ 780,949
========= ===========
Cash paid for taxes $ 80,000 $ 29,916
========== ============
There were no capital lease obligations incurred during the nine months
ended March 31, 1998. During the nine months ended March 31, 1997, capital lease
obligations of approximately $565,000 were incurred when the Company entered
into leases for the purchase of equipment.
7
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
Results of Operations
Three months ended March 31, 1998 compared to the three months ended March 31,
1997.
Total revenues for the three months ended March 31, 1998 and 1997 were
approximately $19,151,000 and $12,322,000, respectively, an increase of
approximately $6,829,000 or 55.4%. The increase is primarily attributable to
increases in original equipment manufacturer ("OEM") revenues from sales to the
Company's new and preexisting OEM customers. The increase in traditional camera
revenues included shipments of a new Advanced Photo System traditional camera to
Eastman Kodak Company ("Kodak"). Production of the Advanced Photo System
traditional camera for the current fiscal year under the Kodak contract is
expected to result in revenues of approximately $25 million as compared to the
previously estimated $20 million. Furthermore, sales revenues from traditional
and single-use product lines in the third quarter exceeded the revenues in the
same quarter last year. The Company expects the increased production and sales
levels to continue throughout Fiscal 1998 and anticipates achieving its
previously announced sales projection of $100 million to $110 million and its
net profit expectation of between $5 million to $7 million for the current
fiscal year which ends June 30, 1998. One aspect of the Company's previously
announced co-development project with Polaroid Corporation ("Polaroid") is
nearing completion and manufacturing on an exclusive basis by the Company of the
new Polaroid single-use flash instant camera is expected to commence in the
first half of Fiscal 1999. Revenues for the first 12 months from this contract
are presently estimated to be in the range of $15 to 20 million. The Company is
also engaged in discussions with certain existing OEM customers for the
addition, in the future, of new products to the Company's manufacturing
arrangements with such customers.
Sales by Concord Camera HK Limited ("Concord HK") for the three months
ended March 31, 1998 and 1997 were approximately $17,237,000 and $9,590,000,
respectively, an increase of approximately $7,647,000 or 79.7%. The increase is
due to the increase in OEM sales. OEM sales for the three months ended March 31,
1998 and 1997 were approximately $13,472,000 and $7,178,000, respectively, an
increase of approximately $6,294,000 or 87.7%. The increase was due to increases
in traditional and single-use camera revenues by the Company's new and
preexisting OEM customers. The increase in traditional camera revenues included
shipments of a new Advanced Photo System traditional camera to a previously
announced large new OEM customer.
Consolidated sales of the Company's United States, Canadian, and
Panamanian operations, collectively "Concord Americas," for the three months
ended March 31, 1998 and 1997 were approximately $924,000 and $1,632,000,
respectively, a decrease of approximately $708,000 or 43.4%. In addition,
certain Concord Americas customers increased merchandise purchases on an F.O.B.
Hong Kong basis from Concord HK. During the three months ended March 31, 1998
and 1997 Concord Americas customers purchased approximately $2,162,000 and
$1,041,000, respectively, from Concord HK, an increase of approximately
$1,121,000 or 107.7%. If this increase were added to the three months ended
March 31, 1998 American sales, sales of traditional cameras to Concord Americas
customers would have increased by 15.4%.
Consolidated sales of Concord Camera GmbH ("Concord Germany"), Concord
Camera Europe (formerly Concord Camera UK Limited) ("Concord UK"), and Concord
Camera France ("Concord France"), collectively "Concord Europe", for the three
months ended March 31, 1998 and 1997, were approximately $990,000 and
$1,099,000, respectively, a decrease of approximately $109,000 or 9.9%. In
addition, certain Concord Europe customers increased merchandise purchases on an
F.O.B. Hong Kong basis from Concord HK. During the three months ended March 31,
1998 and 1997 European customers purchased approximately $1,532,000 and
$1,254,000, respectively, from Concord HK, an increase of approximately $278,000
or 22.2%. If this increase were added to the sales for the three months ended
March 31, 1998, European sales to European customers would
8
<PAGE>
have increased by 7.2%.
Gross Profit
Gross profit, expressed as a percentage of sales, increased to 27.0% for
the three months ended March 31, 1998 from 20.2% for the three months ended
March 31, 1997. This increase was primarily a result of more favorable
absorption of manufacturing overhead and labor utilization resulting from the
increased sales and manufacturing volume and efficiencies, net of increases in
license and royalty expenses attributable to a higher proportion of sales of
products for which licensed technology is used. Product development costs for
the three months ended March 31, 1998 and 1997, were approximately $1,096,000
and $746,000, respectively, an increase of approximately $350,000, or 46.9%. As
new products continue to be introduced and manufacturing volume and efficiencies
increase, the Company expects margins to increase.
Expenses
As a percentage of sales, operating expenses decreased to 22.9% in the
three months ended March 31, 1998 from 32.6% in the three months ended March 31,
1997. Operating expenses consisting of selling, general and administrative and
financial expenses, increased to $4,387,000 in the three months ended March 31,
1998 from $4,017,000 in the three months ended March 31, 1997, an increase of
$370,000.
As a percentage of sales, selling expenses decreased to 9.0% in the three
months ended March 31, 1998 from 11.3% in the three months ended March 31, 1997.
Selling expenses increased to $1,716,000 in the three months ended March 31,
1998 from $1,395,000 in the three months ended March 31, 1997. The increase was
primarily attributable to the Company's increased sales volume and increases in
freight costs, royalty expenses and promotion allowances net of benefits from
the consolidation of warehouse facilities undertaken by the Company in Fiscal
1996.
As a percentage of sales, general and administrative expenses decreased to
11.9% in the three months ended March 31, 1998 from 18.6% in the three months
ended March 31, 1997. General and Administrative expenses decreased to
$2,284,000 in the three months ended March 31, 1998 from $2,296,000 in the three
months ended March 31, 1997.
As a percentage of sales, financial expenses decreased to 2.0% in the
three months ended March 31, 1998 from 2.6% in the three months ended March 31,
1997. Financial expenses increased to $387,000 in the three months ended March
31, 1998 from $326,000 in the three months ended March 31, 1997. Such increase
was primarily a result of an increase in average debt outstanding during the
three months ended March 31, 1998.
Litigation and settlement costs in the three months ended March 31, 1998
and 1997 were approximately $79,000 and $75,000, respectively. The Company
incurred legal expenses and settlement costs in the three months ended March 31,
1998 and 1997 in connection with non-operating matters, primarily the demand for
arbitration and other litigation against Jack Benun.
Other (Income), Net
Other income, net includes foreign exchange gains and losses and interest
income net of directors fees and certain public relations costs.
9
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Income Taxes
The Company's provision for income taxes for the three months ended March
31, 1998 is primarily related to the earnings of the Company's Far East and
domestic operations, net of benefits relating to operating loss carryforwards
and overpayments/refunds on the Company's other subsidiaries.
10
<PAGE>
Nine months ended March 31, 1998 compared to the nine months ended March 31,
1997.
Total revenues for the nine months ended March 31, 1998 and 1997 were
approximately $70,286,000 and $47,132,000, respectively, an increase of
approximately $23,154,000 or 49.1%. The increase is primarily attributable to
increases in original equipment manufacturer ("OEM") revenues from sales to the
Company's new and preexisting OEM customers. The increase in traditional camera
revenues included shipments of a new Advanced Photo System traditional camera to
Eastman Kodak Company ("Kodak"). Production of the Advanced Photo System
traditional camera for the current fiscal year under the Kodak contract is
expected to result in revenues of approximately $25 million as compared to the
previously estimated $20 million. Furthermore, sales revenues from all product
lines in the nine-month period ended March 31, 1998 exceeded the revenues in the
same period last year. The Company expects the increased production and sales
levels to continue throughout Fiscal 1998 and anticipates achieving its
previously announced sales projection of $100 million to $110 million and its
net profit expectation of between $5 million to $7 million for the current
fiscal year which ends June 30, 1998. One aspect of the Company's previously
announced co-development project with Polaroid Corporation ("Polaroid") is
nearing completion and manufacturing on an exclusive basis by the Company of the
new Polaroid single-use flash instant camera is expected to commence in the
first half of Fiscal 1999. Revenues for the first 12 months from this contract
are presently estimated to be in the range of $15 to 20 million. The Company is
also engaged in discussions with certain existing OEM customers for the
addition, in the future, of new products to the Company's manufacturing
arrangements with such customers.
Sales by Concord Camera HK Limited ("Concord HK") for the nine months
ended March 31, 1998 and 1997 were approximately $57,740,000 and $32,221,000,
respectively, an increase of approximately $25,519,000 or 79.2%. The increase is
due primarily to the increase in OEM sales. OEM sales for the nine months ended
March 31, 1998 and 1997 were approximately $45,527,000 and $21,835,000,
respectively, an increase of approximately $23,692,000 or 108.5%. The increase
was due to increases in traditional and single-use camera revenues by the
Company's new and preexisting OEM customers. The increase in traditional camera
revenues included shipments of a new Advanced Photo System traditional camera to
a previously announced large new OEM customer.
Consolidated sales of the Company's United States, Canadian, and
Panamanian operations, collectively "Concord Americas," for the nine months
ended March 31, 1998 and 1997 were approximately $7,566,000 and $9,468,000,
respectively, a decrease of approximately $1,902,000 or 20.1%. In addition,
certain Concord Americas customers increased merchandise purchases on an F.O.B.
Hong Kong basis from Concord HK. During the nine months ended March 31, 1998 and
1997 Concord Americas customers purchased approximately $7,574,000 and
$6,885,000, respectively, from Concord HK, an increase of approximately $689,000
or 10.0%. If this increase were added to the nine months ended March 31, 1998
American sales, sales of traditional cameras to Concord Americas customers would
have decreased by 7.4%. This decrease in sales to Concord Americas resulted from
an aging product line of traditional cameras and intensified competition in the
sale of single-use cameras.
Consolidated sales of Concord Camera GmbH ("Concord Germany"), Concord
Camera Europe (formerly Concord Camera UK Limited) ("Concord UK"), and Concord
Camera France ("Concord France"), collectively "Concord Europe", for the nine
months ended March 31, 1998 and 1997, were approximately $4,980,000 and
$5,442,000, respectively, a decrease of approximately $462,000 or 8.5%. In
addition, certain Concord Europe customers increased merchandise purchases on an
F.O.B. Hong Kong basis from Concord HK. During the nine months ended March 31,
1998 and 1997 European customers purchased approximately $4,069,000 and
$2,927,000, respectively, from Concord HK, an increase of approximately
$1,142,000 or 39.0%. If this increase were added to the sales for the nine
months ended March 31, 1998, European sales to European customers would have
increased by 8.1%.
11
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Gross Profit
Gross profit, expressed as a percentage of sales, decreased to 26.7% for
the nine months ended March 31, 1998 from 27.3% for nine months ended March 31,
1997. This decrease was due to increases in license and royalty expenses
attributable to a higher proportion of sales of products for which licensed
technology is used. Product development costs for the nine months ended March
31, 1998 and 1997, were approximately $2,809,000 and $2,503,000, respectively,
an increase of approximately $306,000, or 12.2%. As new products continue to be
introduced and manufacturing volume and efficiencies increase, the Company
expects margins to increase.
Expenses
As a percentage of sales, operating expenses decreased to 20.8% in the
nine months ended March 31, 1998 from 27.8% in the nine months ended March 31,
1997. Operating expenses consisting of selling, general and administrative and
financial expenses, increased to $14,644,000 in the nine months ended March 31,
1998 from $13,120,000 in the nine months ended March 31, 1997, an increase of
$1,524,000.
As a percentage of sales, selling expenses decreased to 8.6% in the nine
months ended March 31, 1998 from 10.9% in the nine months ended March 31, 1997.
Selling expenses increased to $6,067,000 in the nine months ended March 31, 1998
from $5,133,000 in the nine months ended March 31, 1997. The increase was
primarily attributable to the Company's increased sales volume and increases in
freight costs, royalty expenses and promotion allowances net of benefits from
the consolidation of warehouse facilities undertaken by the Company in Fiscal
1996.
As a percentage of sales, general and administrative expenses decreased to
10.5% in the nine months ended March 31, 1998 from 14.7% in the nine months
ended March 31, 1997. General and Administrative expenses increased to
$7,386,000 in the nine months ended March 31, 1998 from $6,922,000 in the nine
months ended March 31, 1997. The increase is primarily attributable to increases
in professional fees and expenses related to the new OEM contracts, increased
rent and other expenses.
As a percentage of sales, financial expenses decreased to 1.7% in the nine
months ended March 31, 1998 from 2.3% in the nine months ended March 31, 1997.
Financial expenses increased to $1,191,000 in the nine months ended March 31,
1998 from $1,065,000 in the nine months ended March 31, 1997. Such increase was
primarily a result of an increase in average debt outstanding during the nine
months ended March 31, 1998.
Litigation and settlement costs in the nine months ended March 31, 1998
and 1997 were approximately $177,000 and $230,000, respectively. The Company
incurred legal expenses and settlement costs in the nine months ended March 31,
1998 and 1997 in connection with non-operating matters, primarily the demand for
arbitration and other litigation against Jack Benun.
Other (Income), Net
Other income, net includes foreign exchange gains and losses and interest
income net of directors fees and certain public relations costs.
Income Taxes
The Company's provision for income taxes for the nine months ended
March 31, 1998 is primarily related to the earnings of the Company's Far East
and domestic operations, net of benefits relating to operating loss
12
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carryforwards and overpayments/refunds on the Company's other subsidiaries.
Liquidity and Capital Resources
At March 31, 1998, the Company had working capital of $16,027,000 as
compared to $13,994,000 at June 30, 1997. Cash flow provided by operating
activities for the nine months ended March 31, 1998 and 1997 was approximately
$4,593,000 and $3,538,000, respectively. Capital expenditures, excluding assets
financed under capital leases, for the nine months ended March 31, 1998 and 1997
were approximately $3,859,000 and $1,234,000, respectively. The Company's
principal funding requirement has been, and is expected to continue to be, the
financing of accounts receivable and inventory.
The Bank of East Asia, Limited New York ("BOEA NY")
On December 20, 1994, the Company obtained a one-year, $1,500,000
revolving credit facility with BOEA NY (the "BOEA NY Facility") . On September
20, 1995, the Company executed an amendment increasing the BOEA NY Facility to
$3,000,000. The BOEA NY Facility has also been extended to May 15, 1998. The
Company anticipates replacing The BOEA NY Facility with the East Asia Heller
Facility (see East Asia Heller). The BOEA NY Facility is secured by certain
accounts receivable of the Company's Hong Kong operations and bears interest at
2% above BOEA NY's prime lending rate, which was 8.5% at March 31, 1998.
Availability under the BOEA NY Facility is subject to advance formulas based on
eligible accounts receivable with no minimum borrowing. At March 31, 1998,
approximately $3,000,000 was outstanding and classified as short-term debt under
the BOEA NY Facility.
The CIT Group/Credit Finance, Inc ("CIT")
The Company has a $4,500,000 credit facility with CIT (the "CIT Facility")
which expires on May 31, 1999. The CIT Facility is secured by accounts
receivable, inventory and other related assets of the Company's United States
operations and bears interest at 1.5% above CIT's prime lending rate, which was
8.5% at March 31, 1998. Availability under the CIT Facility is subject to
advance formulas based on eligible inventory and accounts receivable with
minimum borrowing of $1,500,000. At March 31, 1998, approximately $687,000 was
outstanding and classified as short-term debt under the CIT Facility.
Bank of East Asia, Limited ("BOEA") -- Hong Kong
Concord HK has a credit facility (the "BOEA HK Facility") with BOEA that
provides Concord HK with up to $6,900,000 of financing as follows: letters of
credit and standby letters of credit up to $2,825,000, overdraft and packing
loans of up to $3,600,000 and an installment loan of $475,000. The installment
loan was utilized in part to repay the outstanding mortgage obligation on the
Hong Kong office property to the Bank of China. As of March 31, 1998,
approximately $4,470,000 was utilized under the BOEA HK Facility. Approximately
$1,429,000 of the total $4,470,000 utilized was in the form of trade finance,
including but not limited to import letters of credit. The BOEA HK Facility,
which is payable on demand, bears interest at 2% above BOEA's prime lending rate
for letters of credit and 2.25% above BOEA's prime lending rate for overdraft
and packing loans. At March 31, 1998 BOEA's prime lending rate was 8.5%. In
connection with the BOEA HK Facility, Concord HK has placed a $1,252,000 time
deposit with BOEA, which is included in prepaid and other current assets at
March 31, 1998 and such deposit is pledged as collateral for the BOEA HK
Facility. In addition, all amounts outstanding under the BOEA HK Facility are
guaranteed by Concord.
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Toronto Dominion Bank ("TDB")
On November 25, 1996, the Company obtained a $1,090,000 working capital
facility with TDB (the "TDB Facility") which expires on October 31, 1998. The
TDB Facility is secured by accounts receivable, inventory and other related
assets of the Company's Canadian operations and bears interest at 1% above TDB's
prime lending rate, which was 5.5% at March 31, 1998. Availability under the TDB
Facility is subject to advance formulas based on eligible accounts receivable
and seasonable inventory eligibility with no minimum borrowings. At March 31,
1998, approximately $77,000 was outstanding and classified as short-term debt.
Shenzhen Development Bank Limited ("SDB")
On April 9, 1998, the Company entered into a 15 month $2,100,000 mortgage
loan agreement with the Shenzhen Development Bank Limited (the "SDB Facility").
The SDB Facility is secured by the Company-owned manufacturing facilities
located in Baoan County, Shenzhen Municipal, PRC and bears interest at 12.986%.
The mortgage loan agreement requires monthly payments of interest only and a
balloon payment of $2,100,000 on July 9, 1999.
East Asia Heller Limited ("EAH")
On May 8, 1998, Concord HK received a commitment letter for a $10,000,000
Non-Notification Factoring with Recourse Facility with East Asia Heller Limited
("EAH Facility "). The EAH Facility will be guaranteed by the Company, will be
secured by certain accounts receivables of the Company's Hong Kong operations
and will bear interest at 1.5% above Citibank of New York's prime lending rate.
Availability under the EAH Facility will be subject to advance formulas based on
eligible accounts receivable with no minimum borrowings. The Company anticipates
utilizing this Facility during the fourth quarter of Fiscal 1998 to replace the
BOEA NY Facility.
Other Arrangements and Future Cash Commitments
Management believes that anticipated cash flow from operations
together with financing from BOEA, CIT, TDB, EAH, and SDB or replacement
facilities will be sufficient to fund its operating cash needs over the next
twelve months.
Forward-Looking Statements
The statements contained in this report that are not historical facts are
"forward-looking statements" (as such term is defined in the Private Securities
Litigation Reform Act of 1995) which can be identified by the use of
forward-looking terminology such as; "estimates," "projects," "anticipates,"
"expects," "intends," "believes," or the negative thereof or other variations
thereon or comparable terminology, or by discussions of strategy that involve
risks and uncertainties. The Company's actual results could differ materially
from those anticipated in such forward- looking statements as a result of
certain factors, including those set forth in the Company's Form 10-K Annual
Report for its Fiscal Year ended June 30, 1997. Management wishes to caution the
reader that these forward- looking statements, such as statements regarding
development of the Company's business, the Company's anticipated capital
expenditures and other statements contained in this report regarding matters
that are not historical facts are only estimates or predictions. No assurance
can be given that future results will be achieved; actual events
14
<PAGE>
or results may differ materially as a result of risks facing the Company or
actual results differing from the assumptions underlying such statements. In
particular, expected revenues could be adversely affected by production
difficulties or economic conditions adversely affecting the market for the
Company's products. To obtain the results expected from the introduction of the
Company's new products will require timely completion of development, successful
ramp-up of full-scale production on a timely basis and customer and consumer
acceptance of those products. In addition, the OEM agreements require an ability
to meet high quality and performance standards, successful implementation of
production at greatly increased volumes and an ability to sustain production at
greatly increased volumes as to all of which there can be no assurance. There
also can be no assurance that products under development will be successfully
developed or that once developed such products will be commercially successful.
15
<PAGE>
PART 2. OTHER INFORMATION
Item 1.
On December 30, 1997, the Company commenced in the United
States District Court of the Southern District of New York
(the "Court") an action against Fuji Photo Film Co., Ltd.
("Fuji") seeking to enforce the terms of a Settlement
Agreement between the Company and Fuji (the "Settlement
Agreement") and to restrain Fuji from terminating the
Settlement Agreement. Under the terms of the Settlement
Agreement, the Company has been granted a worldwide
(subject to certain geographic limitations), non-exclusive
license to use certain Fuji technology in connection with
the manufacture and sale of single-use cameras. On January
9, 1998, the Court granted the Company's request for an
order restraining Fuji from terminating the Settlement
Agreement. Pending a final judicial determination of the
dispute, the restraining order will continue in effect as
long as the Company refrains from making any further
shipments pursuant to the purchase order which gave rise to
the dispute.
Item 6.
a. Exhibits
Exhibit No. Exhibit
27 Financial Data Schedule
b. Reports on Form 8-K
None
16
<PAGE>
S I G N A T U R E
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CONCORD CAMERA CORP.
(Registrant)
BY: /s/ Harlan I. Press
(Signature)
Harlan I. Press
Corporate Controller and Assistant Secretary
DULY AUTHORIZED AND PRINCIPAL ACCOUNTING
OFFICER
DATE: May 10, 1998
17
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Concord
Camera Corp.'s Consolidated financial statemetns as of March 31, 1998 and the
results of operations for the nine months ended March 31, 1998 and is qualified
in its entiriety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> MAY-31-1998
<CASH> $4,965,948
<SECURITIES> 0
<RECEIVABLES> 11,006,688
<ALLOWANCES> 553,230
<INVENTORY> 21,919,681
<CURRENT-ASSETS> 41,176,773
<PP&E> 30,630,127
<DEPRECIATION> (14,655,516)
<TOTAL-ASSETS> 61,498,253
<CURRENT-LIABILITIES> 25,149,693
<BONDS> 371,490
0
0
<COMMON> 39,514,393
<OTHER-SE> (6,198,711)
<TOTAL-LIABILITY-AND-EQUITY> 61,498,253
<SALES> 70,286,311
<TOTAL-REVENUES> 70,286,311
<CGS> 51,511,245
<TOTAL-COSTS> 14,820,385
<OTHER-EXPENSES> (165,707)
<LOSS-PROVISION> 39,644
<INTEREST-EXPENSE> 933,783
<INCOME-PRETAX> 4,120,388
<INCOME-TAX> 351,548
<INCOME-CONTINUING> 3,786,840
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,768,840
<EPS-PRIMARY> $0.35
<EPS-DILUTED> $0.33
</TABLE>
