<PAGE>
SECURITIES AND EXCHANGE COMMISSION
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 April 3, 1999 - Commission file Number 0-17038
---------------
Concord Camera Corp.
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(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.)
4000 Hollywood Blvd. Suite 650N, Hollywood, Florida 33021
-----------------------------------------------------------
(Address of principal executive office) (Zip code)
954/331-4200
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(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 -- 11,331,343 shares as of April 30, 1999
------------------------------
Page 1 of 14
(Exhibit Index on Page 13)
<PAGE>
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
Concord Camera Corp.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
April 3, 1999
(unaudited) June 30, 1998
-------------- -------------
<S> <C> <C>
Current assets:
Cash $ 23,321,793 $ 7,119,699
Accounts receivable, net 13,647,288 19,961,534
Inventories 20,050,781 21,458,595
Prepaid expenses and other current assets 3,751,915 3,238,129
------------ ------------
Total current assets 60,771,777 51,777,957
Plant and equipment, net 18,534,705 15,930,486
Goodwill, net 412,462 727,633
Other assets 5,671,018 3,645,703
------------ ------------
Total assets $ 85,389,962 $ 72,081,779
============ ============
Current liabilities:
Short-term debt $ 7,439,362 $ 10,822,012
Current portion of long-term debt -- 35,676
Current obligations under capital leases 1,668,708 870,173
Accounts payable 11,186,901 14,213,757
Accrued expenses 5,433,381 4,418,604
Income taxes payable 784,994 379,662
Other current liabilities 329,366 224,781
------------ ------------
Total current liabilities 26,842,712 30,964,665
Deferred income taxes 689,169 689,169
Senior Notes 14,850,000 --
Long-term debt -- 2,460,784
Obligations under capital leases 2,528,507 1,409,865
Other long-term liabilities 1,013,932 452,548
------------ ------------
Total liabilities 45,924,320 35,977,031
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Stockholders' equity:
Common stock, no par value, 40,000,000 authorized; 11,331,343 and
11,214,451 issued as of April 3, 1999, and June 30, 1998, respectively 40,335,187 40,094,559
Paid in capital 1,033,553 850,786
Retained earnings (deficit) 3,314,241 (1,622,215)
Notes receivable arising from common stock purchase agreements (2,874,131) (2,765,463)
------------ ------------
41,808,850 36,557,667
Less: treasury stock, at cost; 479,263 and 63,553 shares, respectively (2,343,208) (452,919)
------------ ------------
Total stockholders' equity
39,465,642 36,104,748
------------ ------------
Total liabilities and stockholders' equity
$ 85,389,962 $ 72,081,779
============ ============
</TABLE>
See accompanying notes to consolidated financial statements
2
<PAGE>
Concord Camera Corp.
Consolidated Income Statements
<TABLE>
<CAPTION>
(Unaudited)
For the three months ended
--------------------------------------
April 3, 1999 March 31, 1998
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<S> <C> <C>
Net sales $ 21,497,763 $ 19,150,898
Cost of products sold 16,987,800 13,982,230
------------ ------------
Gross profit 4,509,963 5,168,668
Selling expenses 1,454,926 1,715,897
General and administrative expenses 2,156,574 2,284,075
Financial expenses 836,769 386,754
Other (income), net (123,944) (42,815)
Legal expenses and settlement costs 31,266 79,138
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Income before income taxes 154,412 745,619
Provision for income taxes 4,142 85,000
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Net Income $ 150,270 $ 660,619
============ ============
Weighted average common shares outstanding- basic 10,878,877 10,912,134
Incremental shares using treasury stock method 818,637 453,533
------------ ------------
Weighted average common shares outstanding-diluted 11,697,514 11,365,667
============ ============
Basic earnings per share $ 0.01 $ 0.06
============ ============
Diluted earnings per share $ 0.01 $ 0.06
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
Concord Camera Corp.
Consolidated Income Statements
<TABLE>
<CAPTION>
(Unaudited)
For the nine months ended
--------------------------------------
April 3, 1999 March 31, 1998
------------- --------------
<S> <C> <C>
Net sales $ 83,605,175 $ 70,286,311
Cost of products sold 62,713,625 51,511,244
------------ ------------
Gross profit 20,891,550 18,775,067
Selling expenses 6,046,959 6,067,001
General and administrative expenses 7,037,791 7,385,847
Financial expenses 2,592,477 1,190,938
Other (income), net (255,866) (165,707)
Legal expenses and settlement costs 124,592 176,600
------------ ------------
Income before income taxes 5,345,597 4,120,388
Provision for income taxes 409,142 351,548
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Net Income $ 4,936,455 $ 3,768,840
============ ============
Weighted average common shares outstanding- basic 10,990,395 10,890,873
Incremental shares using treasury stock method 845,026 500,610
------------ ------------
Weighted average common shares outstanding-diluted 11,835,421 11,391,483
============ ============
Basic earnings per share $ 0.45 $ 0.35
============ ============
Diluted earnings per share $ 0.42 $ 0.33
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
Concord Camera Corp.
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
(Unaudited)
For the nine months ended
---------------------------------
April 3, 1999 March 31, 1998
------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 4,936,456 $ 3,768,840
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 3,130,916 2,468,440
Interest income on notes receivable arising from common stock purchase agreements (108,668) (107,491)
Non-cash compensation expense 182,767 --
Change in assets and liabilities:
(Increase) decrease in accounts receivable 6,314,246 (586,496)
(Increase) decrease in inventories 1,407,814 (6,167,279)
(Increase) in prepaid expenses and other current assets (591,241) (746,018)
(Increase) decrease in other assets (1,819,258) 148,681
Increase (decrease) in accounts payable (3,026,856) 5,248,405
Increase in accrued expenses 1,014,777 337,720
Increase in income taxes payable 405,332 409,979
Increase (decrease) in other current liabilities 104,585 (31,850)
Decrease in other long-term liabilities
-- (149,956)
------------ ------------
Total adjustments 7,014,414 824,135
------------ ------------
Net cash provided by operating activities 11,950,870 4,592,975
------------ ------------
Cash flows from investing activities:
Purchase of property, plant and equipment (4,987,182) (3,859,209)
Purchase of Treasury Stock (1,890,289) --
------------ ------------
Net cash (used in) investing activities (6,877,471) (3,859,209)
------------ ------------
Cash flows from financing activities:
Net borrowings under short-term debt agreements (3,382,650) (887,695)
Net borrowings (repayments) of long-term debt 12,353,540 (24,155)
Principal payments under capital lease obligations 1,917,177 (306,288)
Net proceeds from issuance of common stock 240,628 152,500
------------ ------------
Net cash provided by (used in) financing activities 11,128,695 (1,065,638)
------------ ------------
Net increase (decrease) in cash 16,202,094 (331,872)
Cash at beginning of period 7,119,699 5,297,820
------------ ------------
Cash at end of period $ 23,321,793 $ 4,965,948
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
See Note 3 - Supplemental disclosure of cash flow information.
5
<PAGE>
CONCORD CAMERA CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 3, 1999
(unaudited)
Note 1 - General
In the opinion of Concord Camera Corp. ("the Company"), the accompanying
unaudited financial statements contain all adjustments, including normal
recurring adjustments, necessary for the fair presentation of the Company's
financial position as of April 3, 1999, and the results of operations and cash
flows for the periods ended April 3, 1999 and March 31, 1998.
The Notes to Consolidated Financial Statements, which are included in the
Company's 1998 Form 10-K Annual Report, should be read with the accompanying
financial statements.
In 1997, the Financial Accounting Standards Board ("FASB") issued Statement No.
128, Earnings per Share ("Statement 128"). Statement 128 replaced the
calculation of 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 are calculated on a basis similar to
fully diluted earnings per share. All applicable earnings per share amounts 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, 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:
April 3, 1999 June 30, 1998
------------- -------------
Raw materials and components $ 14,219,574 $13,033,653
Finished goods 5,831,207 8,424,942
$ 20,050,781 $21,458,595
============ ===========
Note 3 - Supplemental Disclosures of Cash Flow Information:
For the Nine Months ended
April 3, 1998 March 31
------------- ---------
1998
Cash paid for interest $ 2,262,653 $ 925,791
=========== =========
Cash paid for taxes $ 20,000 $ 80,000
=========== ========
6
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
Results of Operations
The quarter ended April 3, 1999 compared to the quarter ended March 31, 1998.
Total revenues for the quarters ended April 3, 1999 and March 31, 1998
were approximately $21,498,000 and $19,151,000, respectively, an increase of
approximately $2,347,000 or 12.3%. The increase in revenues for the third
quarter of the company's fiscal year ended July 3, 1999 ("Fiscal 1999") over the
third quarter of the company's fiscal year ended June 30, 1998 ("Fiscal 1998')
resulted principally from increases in sales to original equipment manufacturer
("OEM") customers. OEM revenues for the quarter ended April 3, 1999 and March
31, 1998 were approximately $15,626,000 and $13,473,000, respectively, an
increase of approximately $2,153,000 or 16.0%. Retail sales for the quarters
ended April 3, 1999 and March 31, 1998 were approximately $5,872,000 and
$5,678,000, respectively, an increase of approximately $194,000 or 3.4%.
Sales by Concord Camera HK Limited ("Concord HK") for the quarters
ended April 3, 1999 and March 31, 1998 were approximately $19,061,000 and
$17,237,000, respectively, an increase of approximately $1,824,000 or 10.6%. The
increase is due primarily to the increases in sales to OEM customers net of
decreases in sales to retail customers. OEM sales for the quarters ended April
3, 1999 and March 31, 1998 were approximately $15,626,000 and $13,472,000,
respectively, an increase of approximately $2,154,000 or 16.0%. Retail sales for
the quarters ended April 3, 1999 and March 31, 1998 were approximately
$3,434,000 and $3,765,000, respectively, a decrease of approximately $331,000 or
8.8%. The increases in OEM sales were primarily due to sales of the Company's
new Instant single-use and Instant traditional camera products that were
launched during Fiscal 1999.
Consolidated sales of the Company's operations in the United States,
Latin America and Canada ("Concord Americas") for the quarters ended April 3,
1999 and March 31, 1998 were approximately $892,000 and $924,000, respectively,
a decrease of approximately $32,000 or 3.5%. In addition, certain Concord
Americas customers decreased merchandise purchases on a F.O.B. Hong Kong basis
from Concord HK. During the quarters ended April 3, 1999 and March 31, 1998,
Concord Americas customers purchased approximately $484,000 and $2,162,000,
respectively, from Concord HK, a decrease of approximately $1,678,000 or 77.6%.
If this decrease was added to the quarter ended April 3, 1999 Concord Americas
sales, sales of traditional cameras to Concord Americas customers would have
decreased by 55.4%.
Consolidated sales of Concord Camera Europe, Concord Camera GmbH, and
Concord Camera France ("Concord Camera Europe") for the quarters ended April 3,
1999 and March 31, 1998, were approximately $1,545,000 and $990,000,
respectively, an increase of approximately $550,000 or 56.1%. The increase in
sales was offset by a decrease in sales to certain European customers on a
F.O.B. Hong Kong basis from Concord HK. During the quarters ended April 3, 1999
and March 31, 1998, European customers purchased approximately $229,000 and
$1,532,000, respectively, from Concord HK, a decrease of approximately
$1,303,000 or 85.1%. If this decrease was added to the sales for the quarter
ended April 3, 1999, European sales to European customers would have decreased
by 29.7%.
Gross Profit
Gross profit, expressed as a percentage of sales, decreased to 21.0%
for the quarter ended April 3, 1999 from 27.0% for the quarter ended March 31,
1998. This decrease was primarily the result of increased costs associated with
the production ramp up of new products, increases in license costs, royalty
expenses, and product development costs associated with new products. Product
development costs were $1,149,000 for the quarter ended April 3, 1999 as
compared to $1,096,000 for the quarter ended March 31, 1998, an increase of
approximately $53,000.
Expenses
As a percentage of sales, operating expenses, consisting of selling,
general and administrative and financial expenses, decreased to 20.7% in the
quarter ended April 3, 1999 from 22.9% in the quarter ended March 31, 1998.
Operating expenses increased to $4,448,000 in the quarter ended April 3, 1999
from $4,387,000 in the quarter ended March 31, 1998, an increase of $61,000 or
1.4%.
7
<PAGE>
Selling expenses decreased to $1,455,000 or 6.8% of net sales in the
quarter ended April 3, 1999 from $1,716,000 or 9.0% of net sales in the quarter
ended March 31, 1998. The decrease was primarily attributable to decreases in
royalty expenses and promotional allowances and the benefits from other cost
cutting methods.
General and Administrative expenses decreased to $2,157,000 or 10.0% of
net sales in the quarter ended April 3, 1999 from $2,284,000 or 11.9% of net
sales in the quarter ended March 31, 1998.
Financial expenses increased to $837,000 or 3.9% of net sales for the
quarter ended April 3, 1999 from $387,000 or 2.0% of net sales in the quarter
ended March 31, 1998. Such increase was primarily a result of an increase in
average debt outstanding during the quarter ended April 3, 1999.
Litigation and settlement costs in the quarters ended April 3, 1999 and
March 31, 1998 were approximately $31,000 and $79,000, respectively, a decrease
of approximately $48,000. The costs were incurred in connection with
non-operating matters, primarily the arbitration against Jack C. Benun, the
Company's former Chairman and CEO.
Other (income), Net
Other (income), net was approximately $124,000 and $43,000 in the
quarters ended April 3, 1999 and March 31, 1998, respectively. Other (income),
net includes directors' fees, certain public relations costs, foreign exchange
gains and losses and interest income.
Income Taxes
The Company's provision for income taxes for the quarter ended April 3,
1999 is primarily related to the earnings of the Company's Far East and domestic
operations.
Net Income
As a result of the matters described above, the Company had net income
of approximately $150,000 or $0.01 per diluted share in the quarter ended April
3, 1999, as compared to net income of $661,000 or $.06 per diluted share in the
quarter ended March 31, 1998. The Company achieved its profit plan for the third
quarter and is in line to achieve its previously announced projected profit of
$7 to $8 million or $0.58 to $0.66 per diluted share for the current fiscal
year.
8
<PAGE>
Nine Months ended April 3, 1999 compared to the Nine Months ended March 31,
1998.
Total revenues for the nine months ended April 3, 1999 and March 31,
1998 were approximately $83,605,000 and $70,286,000, respectively, an increase
of approximately $13,319,000 or 18.9%. The increase in revenues for the nine
months of Fiscal 1999 over the nine months of Fiscal 1998 resulted principally
from increases in sales to OEM and retail customers. OEM revenues for the nine
months ended March 31, 1998 included approximately $9,492,000 of non-recurring
sales. For comparison purposes, excluding the approximate $9,492,000 of
non-recurring sales in the nine months of Fiscal 1998, net sales for the nine
months of Fiscal 1999 were $83,605,000 versus $60,794,000 for the nine months of
last year, an increase of approximately $22,811,000 or 37.5%.
Sales by Concord HK for the nine months ended April 3, 1999 and March
31, 1998 were approximately $71,325,000 and $57,740,000, respectively, an
increase of approximately $13,585,000 or 23.5%. The increase is due primarily to
the increases in sales to OEM and retail customers. OEM sales for the nine
months ended April 3, 1999 and March 31, 1998 were approximately $56,623,000 and
$45,528,000, respectively, an increase of approximately $11,095,000 or 24.3%.
Retail sales for the nine months ended April 3, 1999 and March 31, 1998 were
approximately $14,702,000 and $12,212,000, respectively, an increase of
approximately $2,490,000 or 20.4%. These increases were due to increases in
traditional and single-use camera revenues by the Company's OEM and retail
customers.
Consolidated sales of Concord Americas for the nine months ended April
3, 1999 and March 31, 1998 were approximately $6,583,000 and $7,566,000,
respectively, a decrease of approximately $983,000 or 12.9%. In addition,
certain Concord Americas customers decreased merchandise purchases on a F.O.B.
Hong Kong basis from Concord HK. During the nine months ended April 3, 1999 and
March 31, 1998, Concord Americas customers purchased approximately $7,424,000
and $7,500,000, respectively, from Concord HK, a decrease of approximately
$76,000 or 1.0%. If this decrease was added to the sales for the nine months
ended April 3, 1999, sales of traditional cameras to Concord Americas customers
would have decreased by 7.0%.
Consolidated sales of Concord Camera Europe for the nine months ended
April 3, 1999 and March 31, 1998, were approximately $5,697,000 and $4,980,000,
respectively, an increase of approximately $717,000 or 14.4%. In addition
certain European customers increased merchandise purchases on a F.O.B. Hong Kong
basis from Concord HK. During the nine months ended April 3, 1999 and March 31,
1998, European customers purchased approximately $5,024,000 and $3,392,000,
respectively, from Concord HK, an increase of approximately $1,632,000 or 48.1%.
If this increase was added to the sales for the nine months ended April 3, 1999,
Concord Camera Europe sales to European customers would have increased by 28.0%.
Gross Profit
Gross profit, expressed as a percentage of sales, decreased to 25.0%
for the nine months ended April 3, 1999 from 26.7% for the nine months ended
March 31, 1998. This decrease was primarily the result of costs associated with
the production ramp up of new products, increases in license costs, royalty
expenses, and product development costs associated with new products. Product
development costs were $3,585,000 for the nine months ended April 3, 1999 as
compared to $2,809,000 for the nine months ended March 31, 1998, an increase of
approximately $776,000 or 27.6%.
Expenses
As a percentage of sales, operating expenses, consisting of selling,
general and administrative and financial expenses, decreased to 18.8% in the
nine months ended April 3, 1999 from 20.8% in the nine months ended March 31,
1998. Operating expenses increased to $15,677,000 in the nine months ended April
3, 1999 from $14,644,000 in the nine months ended March 31, 1998, an increase of
$1,033,000 or 7.1%.
Selling expenses decreased to $6,047,000 or 7.2% of net sales in the
nine months ended April 3, 1999 from $6,067,000 or 8.6% of net sales in the nine
months ended March 31, 1998.
General and Administrative expenses decreased to $7,038,000 or 8.4% of
net sales in the nine months ended April 3, 1999 from $7,386,000 or 10.5% of net
sales in the nine months ended March 31, 1998.
9
<PAGE>
Financial expenses increased to $2,592,000 or 3.1% of net sales for the
nine months ended April 3, 1999 from $1,191,000 or 1.7% of net sales in the nine
months ended March 31, 1998. Such increase was primarily a result of an increase
in average debt outstanding during the nine months ended April 3, 1999.
Litigation and settlement costs in the nine months ended April 3, 1999
and March 31, 1998 were approximately $125,000 and $177,000, respectively. The
costs were incurred in connection with non-operating matters, primarily the
arbitration against Jack C. Benun, the Company's former Chairman and CEO.
Other (income), Net
Other (income), net was approximately $256,000 and $166,000 in the nine
months ended April 3, 1999 and March 31, 1998, respectively. Other (income), net
includes directors' fees, certain public relations costs, foreign exchange gains
and losses and interest income.
Income Taxes
The Company's provision for income taxes for the nine months ended
April 3, 1999 is primarily related to the earnings of the Company's Far East and
domestic operations.
Net Income
As a result of the matters described above, the Company had net income
of approximately $4,937,000 or $0.42 per diluted share in the nine months ended
April 3, 1999, as compared to net income of $3,769,000 or $.33 per diluted share
in the nine months ended March 31, 1998. The Company achieved its profit plan
for the nine months and is in line to achieve its previously announced projected
profit of $7 to $8 million or $0.58 to $0.66 per diluted share for the current
fiscal year.
Liquidity and Capital Resources
At April 3, 1999, the Company had working capital of $33,929,000 as
compared to $20,813,000 at June 30, 1998. Cash flow provided by operating
activities was approximately $11,951,000 and $4,593,000 for the nine months
ended April 3, 1999 and March 31, 1998, respectively. Capital expenditures for
the nine months ended April 3, 1999 and March 31, 1998 were approximately
$4,987,000 and $3,859,000, respectively. The Company's principal funding
requirement has been, and is expected to continue to be, the financing of
accounts receivable and inventory. Additionally, the combined United States
operation is dependent upon funding received from the foreign operations.
Senior Notes. On July 30, 1998, the Company consummated a private placement of
$15 million of senior notes. The notes bear interest at 11%, and the maturity
date is July 15, 2005. Interest payments are due quarterly. The agreement
contains certain restrictive covenants relating to, among other things,
incurrence of additional indebtedness and dividend and other payment
restrictions affecting subsidiaries.
Mortgage Payable. On April 9, 1998, the Company entered into a 15 month
$2,100,000 mortgage loan agreement that is secured by the Company-owned
manufacturing facilities located in Baoan County, Shenzhen Municipal, Peoples
Republic of China 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.
Non-Notification Factoring with Recourse Facility. During the last quarter of
Fiscal 1998, Concord HK consummated a $10,000,000 Non-Notification Factoring
with Recourse Facility, (the "Factoring Facility"), that is guaranteed by the
Company, is secured by certain accounts receivables of the Company's Hong Kong
operations and bears interest at 1.5% above the prime lending rate. Availability
is subject to advance formulas based on eligible accounts receivable with no
minimum borrowings. The Company utilized the Factoring Facility during the
fourth quarter of Fiscal 1998 to replace a one-year $1,500,000 revolving credit
facility with a U.S. bank. At April 3, 1999, approximately $4,483,000 was
outstanding and classified as short-term debt.
10
<PAGE>
U.S. Credit Facility. The Company has a $4,500,000 credit facility, (the "U.S.
Credit Facility"), which expires on May 31, 1999, that is secured by accounts
receivable, inventory and other related assets of the Company's United States
operations and bears interest at 1.5% above the prime lending rate, which was
8.5% at April 3, 1999. Availability is subject to advance formulas based on
eligible inventory and accounts receivable with interest calculated on borrowing
of $1,500,000. At April 3, 1999, approximately $280,000 was outstanding and
classified as short-term debt under the U.S. Credit Facility.
Hong Kong Credit Facility. Concord HK has credit facilities, (the "HK
Facilities"), that provide Concord HK with up to $2,700,000 of financing as
follows: letters of credit and standby letters of credit of up to $1,800,000 and
packing loans of up to $900,000. As of April 3, 1999, approximately $2,612,000
was utilized under the HK Facilities. The HK Facilities, which are payable on
demand, bear interest at 2% above the prime lending rate, which was 10% on April
3, 1999. The Company guarantees all amounts outstanding under the HK Facilities.
Canadian Working Capital Facility. On November 25, 1996, the Company obtained a
$990,000 working capital facility, (the "Canadian Facility"), with a Canadian
bank, which is secured by accounts receivable, inventory and other related
assets of the Company's Canadian operations and bears interest at 1% above the
prime lending rate, which was 7.75% at April 3, 1999. Availability under the
Canadian Facility is subject to advance formulas based on eligible accounts
receivable and seasonable inventory eligibility with no minimum borrowings and
is subject to monthly covenant requirements. No funds were utilized on April 3,
1999.
Other Arrangements and Future Cash Commitments. Management believes that
anticipated cash flow from operations together with financing from the Senior
Notes, the Factoring Facility, the U.S. Credit Facility, the HK Facilities, and
the Canadian Facility, or replacement facilities, will be sufficient to fund its
operating cash needs for the foreseeable future.
Impact of Year 2000
The Year 2000 issue is the result of computer-controlled systems using two
digits rather than four to define the applicable year. For example, computer
programs that have time-sensitive software may recognize a date ending in "00"
as the year 1900 rather than the year 2000. This could result in system failure
or miscalculations causing disruptions of operations including, among other
things, a temporary inability to process transactions, send invoices, or engage
in similar normal business activities.
Based on an assessment, the Company determined that it will be required to
modify or replace portions of its software and hardware so that its systems will
function properly with respect to dates in the year 2000 and thereafter. The
Company presently believes that with modifications to existing software and
conversions to new software and hardware, the Year 2000 issue will not pose
significant operational problems for its systems. However, if such modifications
and conversions are not made, or are not completed in a timely fashion, the Year
2000 problems could have a material impact on the operations of the Company.
The Company is continuing to contact all of its significant suppliers and large
customers to determine the extent to which the Company's interface systems are
vulnerable to those third parties' failure to remediate their own Year 2000
issues. The Company's total Year 2000 project cost and estimates for completion,
including the estimated costs and time associated with the impact of third party
Year 2000 issues based on presently available information, are approximately
$100,000. However, there can be no guarantee that the systems of other companies
on which the Company's systems rely will be converted on a timely basis and will
not have a material adverse effect on the Company's systems.
The Company is actively engaged in utilizing both internal and external
resources to reprogram, or replace, and test its software and hardware for Year
2000 compliance. The Company's objective is to complete the Year 2000 project
not later than July 1, 1999, which is prior to any anticipated impact on its
operating systems. The Fiscal 1999 cost of the Year 2000 project is not expected
to have a material effect on the results of operations.
11
<PAGE>
The costs of the project and the date which the Company has established to
complete the Year 2000 modifications are based on management's best estimates,
which were derived utilizing numerous assumptions of future events, including
the continued availability of certain resources, third party modification plans
and other factors. However, there can be no guarantee that these estimates will
be achieved and actual results could differ materially from those anticipated.
Specific factors that might cause such material differences include, but are not
limited to, the availability and cost of personnel trained in this area, the
ability to locate and correct all relevant computer codes, and similar
uncertainties.
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. 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 for
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 negatively 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.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The company, as a result of its global operating and financial
activities, is exposed to changes in interest rates and foreign currency
exchange rates which may adversely affect its results of operations and
financial position. In seeking to minimize the risks and/or costs associated
with such activities, the Company manages exposures to changes in interest rates
and foreign currency rates through its regular operating and financing
activities. 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's hedging activities were immaterial and as of April 3, 1999 there were
no forward exchange contracts outstanding. The Company continues to analyze the
benefits and costs associated with hedging against foreign currency
fluctuations. The Company's exposure to changes in interest rates results from
its borrowing activities used to meet its liquidity needs. Long-term debt is
generally used to finance long-term investments, while short-term debt is used
to meet working capital requirements. Derivative instruments are not presently
used to adjust the Company's interest rate risk profile. The Company does not
utilize financial instruments for trading or speculative purposes, nor does it
utilize leveraged financial instruments.
12
<PAGE>
PART 2. OTHER INFORMATION
a. Item 6. Reports on Form 8-K
None
b. Exhibits
Exhibit No. Exhibit
----------- -------
27 Financial Data Schedule
13
<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 13, 1999
14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Concord
Camera Corp.'s Consolidated financial statements as of April 3, 1999 and the
results of operations for the nine months ended April 3, 1999 and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUL-03-1999
<PERIOD-END> APR-03-1999
<CASH> 23,321,793
<SECURITIES> 0
<RECEIVABLES> 14,533,884
<ALLOWANCES> 886,596
<INVENTORY> 20,050,781
<CURRENT-ASSETS> 60,771,777
<PP&E> 36,239,577
<DEPRECIATION> (17,704,872)
<TOTAL-ASSETS> 85,389,962
<CURRENT-LIABILITIES> 26,842,712
<BONDS> 14,850,000
0
0
<COMMON> 40,335,187
<OTHER-SE> (869,539)
<TOTAL-LIABILITY-AND-EQUITY> 85,389,962
<SALES> 83,605,175
<TOTAL-REVENUES> 83,605,175
<CGS> 62,713,625
<TOTAL-COSTS> 15,801,820
<OTHER-EXPENSES> (255,866)
<LOSS-PROVISION> 38,518
<INTEREST-EXPENSE> 2,267,935
<INCOME-PRETAX> 5,345,597
<INCOME-TAX> 409,142
<INCOME-CONTINUING> 4,936,455
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,936,455
<EPS-PRIMARY> 0.45
<EPS-DILUTED> 0.42
</TABLE>
