<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 January 1, 2000 - Commission file Number 0-17038
--------------- -------
Concord Camera Corp.
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(Exact name 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
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(Address of principal executive offices) (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 -- 11,710,867 shares as of January 31, 2000
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Page 1 of 14
Exhibit Index on Page 13
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Concord Camera Corp.
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
(Unaudited) (Note)
January 1, 2000 July 3, 1999
------------------ -------------------
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $38,501,475 $30,706,761
Accounts receivable, net 24,728,516 18,272,329
Inventories, net 22,850,218 20,620,556
Prepaid expenses and other current assets 2,346,456 2,404,400
------------ -----------
Total current assets 88,426,665 72,004,046
Plant and equipment, net 20,896,779 18,871,300
Goodwill, net 3,351,490 291,764
Other assets 4,457,763 5,480,342
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Total assets $117,132,697 $96,647,452
============ ===========
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable $21,414,379 $16,224,538
Accrued expenses 10,108,770 4,985,789
Short-term debt 9,323,489 8,088,901
Current portion of long-term debt - 2,100,000
Current portion of obligations under capital leases 1,800,699 2,073,492
Income taxes payable 1,634,549 896,142
Other current liabilities 873,217 188,058
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Total current liabilities 45,155,103 34,556,920
Deferred income taxes 795,138 792,358
Long-term debt, net of current portion 14,933,289 14,850,000
Obligations under capital leases, net of current portion 1,956,037 2,623,080
Other long-term liabilities 3,380,437 1,129,569
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Total liabilities 66,220,004 53,951,927
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<PAGE>
Commitment and contingencies
Stockholders' equity:
Common stock, no par value, 40,000,000 authorized; 11,699,867 and
11,629,592 issued as of January 1, 2000 and July 3, 1999, respectively 41,210,542 41,117,335
Paid in capital 1,069,608 1,033,553
Retained earnings 14,500,515 6,086,691
Notes receivable arising from common stock purchase agreements (1,730,834) (2,163,542)
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55,049,831 46,074,037
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Less: treasury stock, at cost; 771,263 and 675,863 shares as of January 1,
2000 and July 3, 1999, respectively (4,137,138) (3,378,512)
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Total stockholders' equity
50,912,693 42,695,525
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Total liabilities and stockholders' equity $117,132,697 $96,647,452
============ ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
Note: The balance sheet at July 3, 1999 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
2
<PAGE>
Concord Camera Corp.
Condensed Consolidated Income Statements
<TABLE>
<CAPTION>
(Unaudited)
For the three months ended
------------------------------------
January 1, 2000 January 2, 1999
--------------- ---------------
<S> <C> <C>
Net sales $44,522,402 $31,083,585
Cost of products sold 32,148,987 23,144,944
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Gross profit 12,373,415 7,938,641
Selling expenses 2,995,193 2,198,854
General and administrative expenses 3,732,437 2,503,486
Interest expense 867,691 950,521
Other income, net (99,104) (218,017)
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Income before income taxes 4,877,198 2,503,797
Provision for income taxes 359,000 176,000
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Net income $4,518,198 $2,327,797
=========== ===========
Basic earnings per share $0.41 $0.21
=========== ===========
Diluted earnings per share $0.37 $0.20
=========== ===========
Weighted average common shares outstanding - basic 10,919,721 10,944,819
=========== ===========
Effect of dilutive securities: Employee stock options 1,199,601 653,500
=========== ===========
Weighted average common shares outstanding - diluted 12,119,322 11,598,319
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
Concord Camera Corp.
Condensed Consolidated Income Statements
<TABLE>
<CAPTION>
(Unaudited)
For the six months ended
------------------------------------
January 1, 2000 January 2, 1999
--------------- ---------------
<S> <C> <C>
Net sales $85,760,299 $62,107,412
Cost of products sold 62,048,105 45,725,825
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Gross profit 23,712,194 16,381,587
Selling expenses 5,510,820 4,592,033
General and administrative expenses 7,537,280 4,974,581
Interest expense 1,741,668 1,755,710
Other income, net (227,398) (131,922)
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Income before income taxes 9,149,824 5,191,185
Provision for income taxes 736,000 405,000
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Net income $8,413,824 $4,786,185
=========== ===========
Basic earnings per share $0.77 $0.43
=========== ===========
Diluted earnings per share $0.70 $0.41
=========== ===========
Weighted average common shares outstanding - basic 10,939,558 11,045,548
=========== ===========
Effect of dilutive securities: Employee stock options 1,126,173 688,669
=========== ===========
Weighted average common shares outstanding - diluted 12,065,731 11,734,217
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
Concord Camera Corp.
Condensed Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
(Unaudited)
For the six months ended
-------------------------------------
January 1, 2000 January 2, 1999
---------------- ---------------
<S> <C> <C>
Cash flows from operating activities:
Net income $8,413,824 $4,786,186
----------- -----------
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 2,137,225 1,996,108
Amortization of deferred financing costs 66,708 55,590
Officers notes forgiven on stock purchases 502,131 -
Interest income on notes receivable arising from common stock agreements (69,423) (72,184)
Compensation (income) expense on stock options (36,055) 182,767
Changes in operating assets and liabilities:
Accounts receivable (6,456,187) 2,279,754
Inventories (2,229,662) 2,460,124
Prepaid expenses and other current assets 57,944 (859,621)
Other assets (2,384,033) (1,462,259)
Accounts payable 5,189,841 (1,262,535)
Accrued expenses 5,122,981 2,444,260
Income taxes payable 738,407 405,332
Other current liabilities 685,159 227,180
Other long-term liabilities 2,250,868 -
Deferred income taxes 2,780 -
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Total adjustments 5,578,684 6,394,516
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Net cash provided by operating activities 13,992,508 11,180,702
----------- -----------
Cash flows from investing activities:
Purchase of property, plant and equipment (3,810,415) (3,518,365)
Purchase of treasury stock (758,626) (1,365,384)
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Net cash (used in) investing activities (4,569,041) (4,883,749)
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Cash flows from financing activities:
Net borrowings (repayments) under short-term debt agreements 1,234,588 (3,370,267)
Net repayments of long-term debt (2,016,711) (2,496,460)
Net proceeds from issuance of senior notes - 14,850,000
Principal payments under capital lease obligations (939,837) 2,085,167
Net proceeds from issuance of common stock 93,207 50,234
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Net cash provided by (used in) financing activities (1,628,753) 11,118,674
----------- -----------
Net increase in cash and cash equivalents 7,794,714 17,415,627
Cash and cash equivalents at beginning of period 30,706,761 7,119,699
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Cash and cash equivalents at end of period $38,501,475 $24,535,326
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
See Note 3 - Supplemental disclosure of cash flow information.
5
<PAGE>
CONCORD CAMERA CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
January 1, 2000
(unaudited)
Note 1 - General
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the six month period ended January 1, 2000
are not necessarily indicative of the results that may be expected for the year
ending July 1, 2000. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Company's annual
report on Form 10-K for the year ended July 3, 1999.
Concord Camera Corp. (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 the inventories 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 income 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:
<TABLE>
<CAPTION>
January 1, 2000 July 3, 1999
--------------- ------------
<S> <C> <C>
Raw materials and components $ 13,914,865 $ 15,605,934
Finished goods 10,638,490 6,389,998
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Subtotal 24,553,355 21,995,932
Less: Reserve for inventory obsolescence (1,703,137) (1,375,376)
------------ ------------
$ 22,850,218 $ 20,620,556
============ ============
</TABLE>
Note 3 - Supplemental Disclosures of Cash Flow Information:
<TABLE>
<CAPTION>
For the six months ended
January 1, 2000 January 2, 1999
--------------- ---------------
<S> <C> <C>
Cash paid for interest $ 1,475,985 $ 1,526,435
------------ ------------
Cash paid for taxes $ - $ -
============ ============
</TABLE>
6
<PAGE>
Note 4 -- Litigation and Settlements
Jack C. Benun. On November 18, 1994, the Company filed a demand for arbitration
in New Jersey for money damages in excess of $1.5 million against Jack C. Benun
("Benun"), its former chief executive officer who was discharged for cause in
Fiscal 1995. This action was taken due to Benun's failure to fully compensate
the Company for damages it sustained as a result of Benun's breaching his
employment obligations, his fiduciary obligations and perpetrating frauds upon
the Company, including the misappropriation of funds from the Company. Benun has
submitted a counterclaim in which he alleges wrongful termination of his
employment and denial of benefits by the Company. The Company is vigorously
pursuing its action as well as defending the counterclaim. On August 24, 1999,
the arbitrator upheld the propriety of Concord's termination for cause of Benun.
The arbitrator found that Benun perpetrated frauds on the Company by diverting
and embezzling Company monies. The Company is pursuing damage claims against
Benun related to the frauds and embezzlement.
Fuji. 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
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. Termination of the license would
have a material adverse effect on the Company's single-use camera business if
Fuji's patents were found to be valid and infringed by the Company's single-use
products. 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. The parties are
engaged in motion practice, including a motion for summary judgment which has
been filed by Fuji and a motion seeking to preclude Fuji from presenting certain
expert testimony which has been made by the Company.
Kubbany. The Company and its subsidiary have been sued in Panama before the
First Tribunal of Labor of the City of Colon, alleging breach of various
employment-related obligations of Joseph Kubbany, a former executive of Concord
Camera (Panama), Inc. A counterclaim against Kubbany has been filed on behalf of
Concord Camera (Panama), Inc. alleging a breach of his employment obligations by
taking unauthorized travel advances. Evidentiary hearings have been concluded.
Certain additional submissions and document review are taking place. Under
Panamanian law, certain claims made by Concord Camera (Panama), Inc. were not
appropriate for presentation in the Employment Tribunal; therefore, the Company
has filed a civil action against Joseph Kubbany alleging various breaches of his
obligations as the Manager for Concord Camera (Panama), Inc. and for losses
incurred because of excess inventory and the sale of film, and for restitution
of the costs of airplane tickets for his wife paid with Company funds. The
Company has named as a party to the litigation, Dynamic World Trading, Inc. This
case is ongoing.
The Company is involved from time to time in routine legal matters incidental to
its business. In the opinion of the Company's management, the resolution of such
matters, including those described above, will not have a material adverse
effect on its financial position or results of operations.
7
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
Results of Operations
The quarter ended January 1, 2000 compared to the quarter ended January 2, 1999.
Total revenues for the quarters ended January 1, 2000 and January 2,
1999 were approximately $44,522,000 and $31,084,000, respectively, an increase
of approximately $13,438,000 or 43.2%. The increase in revenues for the second
quarter of the Company's fiscal year ending July 1, 2000 ("Fiscal 2000") over
the second quarter of the Company's fiscal year ended July 3, 1999 ("Fiscal
1999") resulted principally from increases in sales to original equipment
manufacturer ("OEM") and retail distribution customers. OEM revenues for the
quarter ended January 1, 2000 and January 2, 1999 were approximately $28,131,000
and $20,000,000, respectively, an increase of approximately $8,131,000 or 40.7%.
Retail sales for the quarters ended January 1, 2000 and January 2, 1999 were
approximately $16,391,000 and $11,084,000, respectively, an increase of
approximately $5,307,000 or 47.9%.
Sales by Concord Camera HK Limited ("Concord HK") for the quarters
ended January 1, 2000 and January 2, 1999 were approximately $33,257,000 and
$24,996,000, respectively, an increase of approximately $8,261,000 or 33.0%. The
increase is due to the increases in sales to OEM and retail distribution
customers. Retail sales for the quarters ended January 1, 2000 and January 2,
1999 were approximately $5,126,000 and $4,996,000, respectively, an increase of
approximately $130,000 or 2.6%. OEM sales for the quarters ended January 1, 2000
and January 2, 1999 were approximately $28,131,000 and $20,000,000,
respectively, an increase of approximately $8,131,000 or 40.7%. The increases in
OEM and retail distribution sales were attributable to increased sales to
preexisting OEM and retail distribution customers together with sales to new OEM
and retail distribution customers.
Consolidated sales of the Company's operations in the United States,
Latin America and Canada ("Concord Americas") for the quarters ended January 1,
2000 and January 2, 1999 were approximately $6,501,000 and $3,839,000,
respectively, an increase of approximately $2,662,000 or 69.3%. In addition,
certain Concord Americas customers increased merchandise purchases on a F.O.B.
Hong Kong basis from Concord HK. During the quarters ended January 1, 2000 and
January 2, 1999, Concord Americas customers purchased approximately $3,549,000
and $2,628,000, respectively, from Concord HK, an increase of approximately
$921,000 or 35.0%. On a combined basis, sales of traditional cameras to Concord
Americas customers for the quarter ended January 1, 2000 increased by 56.3%.
Consolidated sales of Concord Camera (Europe) Ltd., Concord Camera
GmbH, and Concord Camera France S.A.R.L. ("Concord Camera Europe") for the
quarters ended January 1, 2000 and January 2, 1999, were approximately
$4,765,000 and $2,249,000, respectively, an increase of approximately $2,516,000
or 111.9%. 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 January 1, 2000 and January 2, 1999, European customers purchased
approximately $1,549,000 and $2,356,000, respectively, from Concord HK, a
decrease of approximately $807,000 or 34.3%. On a combined basis, sales to
European customers for the quarter ended January 1, 2000 increased by 37.1%.
Gross Profit
Gross profit, expressed as a percentage of sales, increased to 27.8%
for the quarter ended January 1, 2000 from 25.5% for the quarter ended January
2, 1999. This increase was primarily the result of more favorable absorption of
manufacturing overhead and labor utilization resulting from increased sales and
manufacturing volume and efficiencies. Product development costs were $1,206,000
for the quarter ended January 1, 2000 as compared to $1,192,000 for the quarter
ended January 2, 1999.
Expenses
As a percentage of sales, operating expenses, consisting of selling,
general and administrative and interest expenses, decreased to 17.1% in the
quarter ended January 1, 2000 from 18.2% in the quarter ended January 2, 1999.
Operating expenses increased to $7,595,000 in the quarter ended January 1, 2000
from $5,653,000 in the quarter ended January 2, 1999, an increase of $1,942,000
or 34.4%.
8
<PAGE>
Selling expenses increased to $2,995,000 or 6.7% of net sales in the
quarter ended January 1, 2000 from $2,199,000 or 7.1% of net sales in the
quarter ended January 2, 1999. The increase was primarily attributable to
increases in royalty expenses, freight costs and promotional allowances net of
benefits from certain cost cutting activities.
General and Administrative expenses increased to $3,732,000 or 8.4% of
net sales in the quarter ended January 1, 2000 from $2,503,000 or 8.1% of net
sales in the quarter ended January 2, 1999.
Interest expenses decreased to $868,000 or 1.9% of net sales for the
quarter ended January 1, 2000 from $951,000 or 3.0% of net sales in the quarter
ended January 2, 1999.
Other Income, Net
Other income, net was approximately $99,000 and $218,000 in the
quarters ended January 1, 2000 and January 2, 1999, 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 January
1, 2000 is primarily related to the earnings of the Company's Far East and
United States operations, net of benefits relating to operating loss
carryforwards and overpayments/refunds on the Company's other subsidiaries.
Net Income
As a result of the matters described above, the Company had net income
of approximately $4,518,000 or $0.37 per diluted share in the quarter ended
January 1, 2000, as compared to net income of $2,328,000 or $0.20 per diluted
share in the quarter ended January 2, 1999. The Company achieved its profit plan
for the second quarter and is in line to achieve its previously announced
projected profit of $13.5 to $14 million or $1.12 to $1.16 per diluted share for
the current fiscal year.
9
<PAGE>
Six months ended January 1, 2000 compared to the six months ended January 2,
1999.
Total revenues for the six months ended January 1, 2000 and January 2,
1999 were approximately $85,760,000 and $62,107,000, respectively, an increase
of approximately $23,653,000 or 38.1%. The increase in revenues for the six
month period of the Company's fiscal year ending July 1, 2000 ("Fiscal 2000")
over the six month period of the Company's fiscal year ended July 3, 1999
("Fiscal 1999') resulted principally from increases in sales to original
equipment manufacturer ("OEM") and retail distribution customers. OEM revenues
for the six months ended January 1, 2000 and January 2, 1999 were approximately
$56,214,000 and $40,997,000, respectively, an increase of approximately
$15,217,000 or 37.1%. Retail sales for the six months ended January 1, 2000 and
January 2, 1999 were approximately $29,546,000 and $21,110,000, respectively, an
increase of approximately $8,436,000 or 40.0%.
Sales by Concord Camera HK Limited ("Concord HK") for the six months
ended January 1, 2000 and January 2, 1999 were approximately $69,522,000 and
$52,265,000, respectively, an increase of approximately $17,257,000 or 33.0%.
The increase is due to the increases in sales to OEM and retail distribution
customers. Retail sales for the six months ended January 1, 2000 and January 2,
1999 were approximately $13,309,000 and $11,268,000, respectively, an increase
of approximately $2,041,000 or 18.1%. OEM revenues for the six months ended
January 1, 2000 and January 2, 1999 were approximately $56,213,000 and
$40,997,000, respectively, an increase of approximately $15,216,000 or 37.1%.
The increases in OEM and retail distribution sales were attributable to
increased sales to preexisting OEM and retail distribution customers together
with sales to new OEM and retail distribution customers.
Consolidated sales of the Company's operations in the United States,
Latin America and Canada ("Concord Americas") for the six months ended January
1, 2000 and January 2, 1999 were approximately $8,988,000 and $5,690,000,
respectively, an increase of approximately $3,298,000 or 58.0%. In addition
certain Concord Americas customers increased merchandise purchases on a F.O.B.
Hong Kong basis from Concord HK. During the six months ended January 1, 2000 and
January 2, 1999, Concord Americas customers purchased approximately $8,967,000
and $6,396,000, respectively, from Concord HK, an increase of approximately
$2,571,000 or 40.2%. On a combined basis, sales of traditional cameras to
Concord Americas customers in the six months ended January 1, 2000 increased by
48.6%.
Consolidated sales of Concord Camera (Europe) Ltd., Concord Camera
GmbH, and Concord Camera France S.A.R.L. ("Concord Camera Europe") for the six
months ended January 1, 2000 and January 2, 1999, were approximately $7,250,000
and $4,152,000, respectively, an increase of approximately $3,098,000 or 74.6%.
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 six months
ended January 1, 2000 and January 2, 1999, European customers purchased
approximately $4,314,000 and $4,796,000, respectively, from Concord HK, a
decrease of approximately $482,000 or 10.0%. On a combined basis, sales to
European customers for the six months ended January 1, 2000 increased by 29.2%.
Gross Profit
Gross profit, expressed as a percentage of sales, increased to 27.6%
for the six months ended January 1, 2000 from 26.4% for the six months ended
January 2,1999. This increase was primarily the result of more favorable
absorption of manufacturing overhead and labor utilization resulting from
increased sales and manufacturing volume and efficiencies. Product development
costs were $2,388,000 for the six months ended January 1, 2000 as compared to
$2,436,000 for the six months ended January 2, 1999.
Expenses
As a percentage of sales, operating expenses, consisting of selling,
general and administrative and interest expenses, decreased to 17.2% in the six
months ended January 1, 2000 from 18.2% in the six months ended January 2, 1999.
Operating expenses increased to $14,790,000 in the six months ended January 1,
2000 from $11,322,000 in the six months ended January 2, 1999, an increase of
$3,468,000 or 30.6%.
10
<PAGE>
Selling expenses increased to $5,511,000 or 6.4% of net sales in the
six months ended January 1, 2000 from $4,592,000 or 7.4% of net sales in the six
months ended January 2, 1999. The increase was primarily attributable to
increases in royalty expenses, freight costs and promotional allowances net of
benefits from certain cost cutting activities.
General and Administrative expenses increased to $7,537,000 or 8.8% of
net sales in the six months ended January 1, 2000 from $4,975,000 or 8.0% of net
sales in the six months ended January 2, 1999.
Interest expenses decreased to $1,742,000 or 2.0% of net sales for the
six months ended January 1, 2000 from $1,756,000 or 2.8% of net sales in the six
months ended January 2, 1999.
Other Income, Net
Other income, net was approximately $227,000 and $132,000 in the six
months ended January 1, 2000 and January 2, 1999, 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 six months ended
January 1, 2000 is primarily related to the earnings of the Company's Far East
and United States operations, net of benefits relating to operating loss
carryforwards and overpayments/refunds on the Company's other subsidiaries.
Net Income
As a result of the matters described above, the Company had net income of
approximately $8,414,000 or $0.70 per diluted share in the six months ended
January 1, 2000, as compared to net income of $4,786,000 or $0.41 per diluted
share in the six months ended January 2, 1999. The Company achieved its profit
plan for the second six months and is in line to achieve its previously
announced projected profit of $13.5 to $14 million or $1.12 to $1.16 per diluted
share for the current fiscal year.
Liquidity and Capital Resources
At January 1, 2000, the Company had working capital of $43,272,000 as
compared to $37,447,000 at July 3, 1999. Cash flow provided by operating
activities was approximately $13,993,000 and $11,181,000 for the six months
ended January 1, 2000 and January 2, 1999, respectively. Capital expenditures
for the six months ended January 1, 2000 and January 2, 1999 were approximately
$3,810,000 and $3,518,000, 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 Payable. 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
indenture governing the notes contains certain restrictive covenants relating
to, among other things, incurrence of additional indebtedness and dividend and
other payment restrictions affecting subsidiaries.
Hong Kong Credit Facility. During the second quarter of Fiscal 2000, Concord HK
consummated a $26.2 million credit facility (the "HK Facility") that is
guaranteed by the Company, is secured by certain accounts receivables of the
Company's Hong Kong operations and bears interest at 0.5% above the prime
lending rate. The HK Facility is comprised of 1) a $5.6 million Import Facility,
2) a $2.6 million Packing Credit and Export Facility, and 3) an $18 million
Accounts Receivable Financing Facility. Availability under the accounts
receivable financing facility is subject to advance formulas based on eligible
accounts receivable with no minimum borrowings. The Company utilized the HK
Facility to replace a Non-notification Factoring with Recourse Facility it had
with a Hong Kong bank. At January 1, 2000, approximately $8,049,000 was
outstanding and classified as short-term debt.
Other Arrangements and Future Cash Commitments. Management believes that
anticipated cash flow from operations together with financing from the Senior
Notes Payable and the HK Facility, or replacement facilities, will be sufficient
to fund its operating cash needs for the foreseeable future.
11
<PAGE>
Impact of Year 2000
In the Company's previous filings with the Securities and Exchange Commission on
Forms 10-Q and 10-K, extensive descriptions of the Company's Year 2000 (Y2K)
initiative were presented. Nothing has come to the Company's attention which
would cause it to believe that its Y2K compliance effort was not successful.
While the Company will continue to monitor for Y2K related problems, to date no
significant Y2K issues have been encountered and the Company does not currently
anticipate incurring additional expenses to address Y2K-related issues.
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, projected profits 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 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 negatively affecting the market
for the Company's products. Obtaining 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 January 1, 2000 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 II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
<TABLE>
<CAPTION>
Exhibit No. Exhibit Method of Filing
----------- ------- ----------------
<S> <C> <C>
3.1 Certificate of Incorporation of the Company Incorporated by reference to the Company's Form 10-Q
as amended for the quarter ended October 2, 1999.
3.2 Restated By-Laws of the Company Incorporated by reference to the Company's Form 10-K
for the year ended June 30, 1997.
4.1 Form of Common Stock Certificate Incorporated by reference to the Company's Form S-18
(No. 33-21156) declared effective July 12, 1988.
4.2 Purchase Agreement, dated July 30, 1998, Incorporated by reference to the Company's Form S-4
between Dreyfus High Yield Strategies (No. 33-64713) dated September 30, 1998.
Fund and the Company
4.3 Indenture, dated July 30, 1998, between Incorporated by reference to the Company's Form S-4
Bankers Trust Company and the Company (No. 33-64713) dated September 30, 1998.
4.4 Registration Rights Agreement, dated Incorporated by reference to the Company's Form S-4
July 30, 1998, between Dreyfus High (No. 33-64713) dated September 30, 1998.
Yield Strategies Fund and the Company
4.5 Hong Kong Credit Facility, dated Filed herewith.
September 9, 1999, between The
Hongkong and Shanghai Banking
Corporation Ltd. and the Company
27 Financial Data Schedule Filed herewith.
</TABLE>
b. Reports on Form 8-K
No reports on Form 8-K were filed by the registrant during the quarter
ended January 1, 2000.
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: February 4, 2000
<PAGE>
FACTORING AGREEMENT
BETWEEN--
THE HONGKONG AND SHANGHAI BANKING CORPORATION LIMITED; and
THE CLIENT
This Agreement comprises the Schedule below and the attached Conditions
SCHEDULE
Client Name Concord Camera Hong Kong Ltd
Address 14/F Fortei Building
98 Texaco Road
Tsuen Wan
New Territories
Commencement Date 8 September 1999
Concentration Percentage Funding Sub-limits are to be set
as stipulated in our facility
letter of 8 September 1999
Discounting Charge at 0. 5 % below our USD bills rate
Prepayment Percentage 80%
Service Charge 0. i %
Terms o Payment Up to 90 days
Aggregate FIU Limit USD18,000,000.-
Executed under the Seal of Client
the in the presence of:
Director
Director/Secretary
Signed for and on behalf of the Bank--
Authorised Signatory
<PAGE>
CONDITIONS OF FACTORING
1 Definitions
"Administration Charge" means such commission and charge(s) as the Bank may
prescribe in respect of the administration of the services covered by this
Agreement in addition to the Service Charge and also includes all costs and
expenses incurred or payable by the Bank in connection with this Agreement, any
Contract of Sale, any Associated Rights, any Interfactor Arrangement and the
collection of Unapproved Debts;
"Associated Rights" means, in relation to a Debt, all the Client's rights
provided by or retained under the Contract of Sale, all instruments, securities,
insurances, guarantees, indemnities and negotiable instruments and all rights to
any ledger, computer or electronic data or any document recording or evidencing
the same;
"Authorised Person(s)" means the person(s) authorised by the Client to give
instructions to the Bank in connection with this Agreement as notified to the
Bank from time to time in such manner as the Bank requires;
"Bank" means The Hongkong and Shanghai Banking Corporation Limited and its
successors and assigns;
"Bank Group" means the group comprising HSBC Holdings plc and companies which
are its subsidiaries within the meaning of Section 2(4) of the Hong Kong
Companies Ordinance;
"Base Rate" means the best lending rate or any replacement or substitute
interest rate as quoted by the Bank from time to time in Hong Kong for the
relevant currency but subject to a minimum of 3 %;
"Business Day" means a day, including Saturday, on which the Bank is open to the
general public for business in Hong Kong for the whole of its usual business
hours on that day;
"Client" means the person which has entered into this 'Agreement with the Bank,
the name and address of which are set out in the Schedule;
"Clint Factoring Account" means an account established and maintained to record
all sums payable and paid to the Client, all payments received in relation to
Debts and all charges, expenses and other sums payable or paid by the Client to
the Bank under this Agreement;
"Client Group" means the group comprising any person which holds, directly or
indirectly, any of the share capital or voting power or comparable interest in
the Client, any other person in which such person holds, directly or indirectly,
any such capital, power or interest and any person in which the Client holds,
directly or indirectly, any such capital, power or interest;
"Commencement Date" means the date this Agreement commences, as specified in the
Schedule;
- 2 -
<PAGE>
"Concentration Percentage" means the percentage which the total of prepayments
made by the Bank in relation to unpaid Debts of any one Customer bears to the
total of unpaid Debts Vested in the Bank from time to time, as specified in the
Schedule;
"Contract of Sale" means any contract for the supply or provision of Goods by
the Client in the ordinary course of its business except for any such contract
which falls within a category notified by the Bank to the Client as unacceptable
for the purposes of this Agreement;
"Credit Cover" means the amount which shall be due to the Client from the Bank
on the Insolvency of the Customer by applying the Credit Cover Percentage to the
amount of any unpaid Debt but after deducting from such Debt any tax payable by
the Customer;
"Credit Cover Percentage" means the percentage specified in the Schedule which
shall be applied in determining Credit Cover;
"Customer" means any person which incurs any obligation to make payment under a
Contract of Sale;
"Debt" means all payment obligations of a Customer under a Contract of Sale and,
where the context permits, a part or balance of such obligations; " Approved
Debt" means a Debt which is within a Permitted Limit and which has not become an
Unapproved Debt- "Unapproved Debt" means a Debt which is outside a Permitted
Limit;
"Delivered" means, in relation to goods, despatched to the order of the Customer
and, in relation to services, complete performance;
"Discounting Charge" means a charge calculated as the percentage specified in
the Schedule of the Funds in Use;
"Exchange Rate" means the rate for converting one currency into another currency
which the Bank determines to be prevailing in the relevant foreign exchange
market at the relevant time, such determination to be conclusive and binding on
the Client;
"Funds in Use" means the excess, for the time being, of all Purchase Price
payments plus the Administration Charge and the Service Charge to the extent
that they are not deducted in calculating the Purchase Price over the total
amount of cleared funds received by the Bank in relation to Debts;
"Goods" means actual goods and services;
"HEXAGON Facility" means such computer software and other goods ("Equipment")
and such information and service ("Information") as the Bank may from time to
time provide at its discretion so as to assist communications between the Bank
and the Client;
"Insolvency" means, in relation to (i) an individual, the bankruptcy of that
individual or the issue of a bankruptcy notice or bankruptcy petition against
that individual, (ii) a partnership,
-3-
<PAGE>
its winding up or dissolution or the bankruptcy of any partner or issue of a
bankruptcy notice or bankruptcy petition against any partner if such bankruptcy
or notice or petition relates to a partnership debt, (iii) a limited company,
the passing of a resolution for voluntary winding up, the presentation of a
winding up petition, the making of a winding up order, the appointment of a
liquidator or dissolution, (iv) any person, inability or failure or admission of
inability to pay debts as they fall due, stopping, suspending or threatening to
stop or suspend payment of debts, readjustment, rescheduling or deferral of
debts, an arrangement, composition or general assignment with or for the benefit
of any creditors, the levying or, enforcement of any distress, execution or
similar process on any of the person's assets or the appointment of a receiver,
administrator, trustee or similar officer in respect of the person or any of the
person's assets and "insolvent" shall be construed accordingly;
"Interfactor Arrangement" means an arrangement on terms acceptable to the Bank
which is entered into between the Bank and a correspondent factor outside Hong
Kong in connection with international factoring transactions involving the Bank,
the Client and one or more other parties;
"Minimum Service Charge" means the minimum Service Charge payable in any
12-month period from the first of the month following the Commencement Date, as
specified in the Schedule;
"Permitted Limit" means a limit fixed by the Bank at its discretion and notified
to the Client from time to time for the purpose of determining, in respect of
any Customer, whether a Debt is an Approved Debt or an Unapproved Debt;
"Person" includes an individual, firm, company, corporation and an
unincorporated body of persons;
"Prepayment Percentage" means the percentage specified in the Schedule of the
Purchase Price of an Approved Debt up to which the Bank will prepay;
"Purchase Price" means the amount the Bank agrees to pay to the Client for a
Debt and its Associated Rights which is, in the case of Conditions 4.01(a) and
4.02(a), the amount payable by the Customer, in the case of Conditions 4.01(b)
and 4.02(b), the amount actually received by the Bank from the Customer and, in
the case of Condition 4.01(c), the amount payable by the Customer as specified
in Condition 4. 01 (c) less, in each case, any discount, allowance or credit and
after deducting the Service Charge and the Administration Charge to the extent
(if any) that the Bank decides to attribute them to the Debt;
"Recourse" means the right of the Bank to require the Client by notice, which
may be oral, to repurchase an outstanding Debt at a price specified in Condition
9.02;
"Service Charge" means a charge in respect of the establishment and continuance
of the services covered by this Agreement calculated as the percentage specified
in the Schedule of the amount of all Debts;
-4 -
<PAGE>
"Termination Event" means any event specified in Condition 15;
"Terms of Pavment" means the terms specified in the Schedule as to the time for
payment under a Contract of Sale and as to any discount, allowance or credit due
or allowable to the Customer; "Trading Conditions" means the other terms and
conditions under a Contract of Sale; and "Vested" means, in relation to a Debt,
vesting in or held on trust for the Bank.
2. Duration
2.01 This Agreement shall begin on the Commencement Date and continue for 12
months and thereafter until terminated by either the Bank or the Client giving
to the other 30 days' notice except that the Bank shall have the right to
terminate this Agreement immediately by notice to the Client at any time
following the happening of a Termination Event.
2.02 Any termination will not, however, affect the rights or obligations of
either the Bank or the Client in relation to any Debt then Vested in the Bank
and this Agreement shall continue in effect for so long as may be necessary to
satisfy those rights and obligations.
3. Vesting and Collection of Debts
3.01 The ownership of Debts and Associated Rights shall, as regards Debts
existing at the Commencement Date, vest in the Bank on that date and shall, as
regards future Debts, vest in the Bank automatically upon coming into existence.
3.02 Any Debt and its Associated Rights which fail, for any reason, to vest in
the Bank effectively shall be held by the Client on trust for the Bank.
3.03 The Bank may at any time require the Client, at the Client's expense, to
complete an assignment in writing in a form approved by the Bank of any Debt and
its Associated Rights.
3.04 The Bank shall have the exclusive right to collect and enforce payment of
any Debt and its Associated Rights in such manner as it may decide and, for such
purpose, to appoint collection agents, legal advisers and others and to
institute, conduct, defend or compromise in the name of the Bank or the Client,
on such terms as the Bank thinks fit, any legal proceedings in relation to such
Debt and its Associated Rights; for any such purpose, the Client shall provide
such assistance as the Bank may request.
- 5 -
<PAGE>
4. Prepayments and Payments of Purchase Price
4.01 In relation to an Approved Debt, the Bank shall pay to the Client:-
(a) on request, the Prepayment Percentage of the Purchase Price or
any other amount agreed between the Bank and the Client; and
(b) after receipt by the Bank of cleared funds for the amount of
the Debt, the balance of the Purchase Price; or
(c) where the relevant Customer becomes insolvent, so that such
cleared funds are not received and the Credit Cover Percentage
is not zero, the amount payable by the Customer up to the
amount of the Credit Cover less any amount prepaid pursuant to
Condition 4.01(a).
4.02 In relation to an Unapproved Debt, the Bank shall pay the Client:-
(a) on request, such amount of the Purchase Price, if any, as the
Bank may, at its discretion, decide; and
(b) after receipt by the Bank of cleared funds for the amount of
the Debt, the balance of the Purchase Price.
4.03 The Bank shall pay each amount due to the Client in accordance with
Conditions 4.01 and 4.02 on such Business Day as may be agreed between the Bank
and the Client and, otherwise, if practicable, on the Business Day after receipt
of the relevant request or, as the case may be, receipt of the cleared funds or,
in the case of Condition 4. 0 1 (c), on the Business Day after receipt by the
Bank of satisfactory confirmation of the Insolvency of the relevant Customer or
the due date for payment of the Debt, if later, but, in each of the above cases,
not later than the second Business Day after such receipt or due date.
4.04 All payments of the Purchase Price shall be in the currency in which the
relevant Debt is denominated except to the extent that the Client may request
payment in a different currency and the Bank shall agree, in which event the
Purchase Price shall be converted into the agreed currency at the Exchange Rate.
4.05 If an amount payable to the Bank is received in a currency other than the
currency of the relevant Debt or another agreed currency, the Client shall
remain liable for any shortfall arising from converting the currency received
into such currency at the Exchange Rate.
4.06 If, for any reason, any payment has to be returned or any financial
instrument is dishonoured or any other similar circumstance occurs, the Bank
shall be entitled to adjust the Client Factoring Account including, without
limitation, any Concentration Percentage, Credit Cover, Permitted Limit and
Purchase Price to reflect the same (such adjustment to be conclusive and binding
on the Client) and the rights and powers of the Bank shall be as if there had
been no such payment, dishonour or circumstance.
- 6 -
<PAGE>
4.07 In the case of a credit balance for the account of a Customer on the Client
Factoring Account (whether arising from the issue of a credit note by the Client
or otherwise), the Client irrevocably authorises the Bank to hold and/or to make
payment and/or otherwise to deal with the same as the Bank thinks fit.
4.08 The Bank shall not be obliged to prepay any amount of the Purchase Price of
a Debt if: -
(a) such payment would result in the total amount of all payments
made in relation to Debts owing by any one Customer being in
excess of the Concentration Percentage; or
(b) a Termination Event has happened or notice to terminate this
Agreement has been given under Condition 2.01; or
(c) the Bank notifies the Client that it is not satisfied with any
aspect(s) of the information provided by the Client and/or the
Customer in relation to the Debt.
5. Charges
5.01 The Service Charge and the Administration Charge shall be debited to the
Client Factoring Account on the last Business Day of each calendar month or on
such other Business Days as may be agreed between the Bank and the Client and,
to the extent that they are not deducted in calculating the Purchase Price,
shall be paid by the Client to the Bank on demand.
5.02 The Discounting Charge shall be debited to the Client Factoring Account on
the last Business Day of each calendar month and shall be paid by the Client to
the Bank on demand.
5.03 Any shortfall between the Service Charge and the Minimum Service Charge in
any year from the first of the month following the Commencement Date or its
anniversary shall be paid by the Client to the Bank on demand after the end of
such year or at such earlier time(s) as the Bank may require by reference to
estimates by the Bank of such shortfall.
6. Appropriation and Allocation of Receipts and Allowances
6.01 In any case where Approved Debts and Unapproved Debts are owing by the
same Customer, the Bank may, notwithstanding any appropriation by the Customer
or the Client, appropriate any payment made in or towards discharge of any
Approved Debt in priority to any Unapproved Debt and appropriate any allowance
or credit granted to the Customer in or towards discharge of any Approved Debt
in priority to any Unapproved Debt.
6.02 Any dividend, distribution or similar payment received following the
Insolvency of a Customer shall be allocated first in or towards payment of any
moneys owing by the Client to the Bank pursuant to this Agreement and,
thereafter, between the Bank and the Client
- 7 -
<PAGE>
pro rata to the total amount of Approved Debts and Unapproved Debts owing by the
Customer at the date of Insolvency.
7. Permitted Limits
7.01 At the Client's request, the Bank may, at its discretion, establish a
Permitted Limit for a Customer by reference to which Debts will be determined to
be Approved Debts or Unapproved Debts.
7.02 In determining which of two or more Debts is within a Permitted Limit or
which Debt is to be apportioned as partly within and partly outside a Permitted
Limit, the Debts shall be treated as an Approved Debt or an Unapproved Debt in
the order in which they respectively become due for payment.
7.03 The Bank may, at its discretion, increase, reduce or cancel any Permitted
Limit by notice to the Client which may be oral and, if so, shall have immediate
effect except that no reduction or cancellation shall affect any Approved Debt
arising from Goods Delivered prior to receipt of such notice.
7.04 Where the total of Debts outstanding from any one Customer is in excess of
the Permitted Limit relating to that Customer, to the extent that any Debt
within the Permitted Limit shall be paid, the next Debt outside the Permitted
Limit shall fall within it.
7.05 All Permitted Limits shall automatically cease upon the happening of a
Termination Event or the giving of a notice to terminate this Agreement under
Condition 2.01.
8. Conversion of Approved Debt to Unapproved Debt
In addition to the circumstances set out in Condition 7 which determine whether
a Debt is an Approved Debt or an Unapproved Debt, an Approved Debt shall
automatically be converted to an Unapproved Debt and shall remain so unless and
until the Bank notifies the Client that the Debt is again to be treated as an
Approved Debt where:-
(a) the Approved Debt becomes the subject of a dispute between the
Client and a Customer; or
(b) the Credit Cover Percentage is zero and the Approved Debt
remains unpaid 60 days or such lesser period as the Bank may
specify after its due date for payment.
9. Right of Recourse
9.01 The Bank shall have the right to immediate Recourse:-
(a) in respect of each Unapproved Debt, following non-payment by
its due date for payment;
- 8 -
<PAGE>
(b) of all outstanding Debts, upon the happening of a Termination
Event or the giving of a notice to terminate this Agreement
under Condition 2.01;
(c) where the Credit Cover is neither zero nor 100%, in respect of
the amount of each Approved Debt that exceeds the Credit Cover
to the extent that it does so on the 60th day after its due
date for payment or, if earlier, the date of Insolvency of the
relevant Customer; and
(d) where there is an Interfactor Arrangement, in respect of any
Debt the Purchase Price of which has been paid by the Bank
under the Interfactor Arrangement and the Bank is later
obliged, by reason of a dispute affecting such Debt, to pay an
equivalent sum to another factor in respect of that Debt under
the Interfactor Arrangement.
9.02 The amount payable by the Client to the Bank in accordance with Condition
9.01(a), (b) or (c) shall be the amount prepaid (if any) by the Bank to the
Client in respect of the Debt in question pursuant to Condition 4. The amount
payable by the Client to the Bank in accordance with Condition 9.01(d) shall be
the Purchase Price of the Debt in question. The Client shall pay all such
amounts on receipt of demand for payment from the Bank.
9.03 All Debts and Associated Rights the subject of Recourse shall remain Vested
in the Bank until the repurchase price of all such Debts has been paid; any
amount received by the Bank in relation to a Debt after payment of such
repurchase price shall be paid to the Client.
10. Returned Goods
10.01 All Goods recovered by the Client or the Bank in exercise of any
Associated Rights relating to any Debt purchased shall be treated as returned
Goods.
10.02 Any returned Goods not in the Bank's possession shall be promptly notified
to the Bank, shall be set aside and marked with the Bank's name as owner and
shall be held by the Client as trustee for the Bank separate and apart from the
Client's own Goods pending delivery to the Bank or to its order.
10.03 The Bank shall have the right to take possession of any returned Goods and
to sell those Goods on such terms as it deems fit and the proceeds of sale,
after deduction of all costs and expenses relating to such possession and sale,
shall be treated by the Bank as a payment of or on account of the Debt to which
such Goods relate.
11. Client Factoring Account
The Bank shall maintain the Client Factoring Account and will
send to the Client at least once in each calendar month a statement of the
Client Factoring Account which shall be deemed to be correct and binding on the
Client unless the Bank is notified of errors within 30 days of the date of its
despatch.
- 9 -
<PAGE>
12. Client Inf ormation
12.01 The Client shall allow any duly authorised representative or agent of the
Bank, at all reasonable times, to attend at any premises where the Client
carries on business to inspect, check, verify and copy (at the Client's expense)
all books, accounts, computer or other records, orders and original
correspondence and such other of the Client's papers as the Bank may desire and
to furnish the Bank, at its request, with certified statements showing the
Client's financial position and the results of the Client's operations.
12.02 The Client authorises the Bank to provide the Client's banks, auditors and
accountants with such information as they may require in relation to the Client
Factoring Account and shall procure that the Bank may obtain from the Client's
banks, auditors and accountants such information as the Bank may require.
13. HEXAGON Facility
In order to facilitate communications between the Bank and the Client, the Bank
may provide the Client with a HEXAGON Facility without any responsibility or
liability on the Bank's part and the Client agrees--
(a) to use the Equipment only for the purpose of obtaining and
using the Information and communicating with the Bank and to
keep the Information confidential to the Client's business;
(b) to maintain the Equipment in good working order and to keep it
comprehensivelv insured to its full replacement cost for the
Bank's benefit;
(c) to allow the Bank to inspect and check the Equipment and
Information and to enter on the Client's premises to do so;
(d) to return the Equipment to the Bank immediately upon the
happening of a Termination Event or the termination of this
Agreement under Condition 2.01; and
(e) to indemnify the Bank against any loss or damage arising from
the provision or use of the HEXAGON Facility.
14. Undertakings and Warranties
- 10 -
The Client undertakes and warrants, as applicable, in addition
to any other undertakings and warranties by the Client in or pursuant to this
Agreement:-
(a) that, before entering into this Agreement, the Client
disclosed to the Bank all facts and matters then known or
which should reasonably then have been known to the Client
which might in any way influence the Bank's decision to enter
into this Agreement and, throughout the term of this
Agreement, promptly to disclose any such facts and matters of
which the Client becomes aware or any changes or prospective
changes in its constitution or control or other facts or
matters known to the Client which might in any way influence
the Bank's decision in the establishment, cancellation,
variation of a Permitted Limit, the payment or prepayment of a
Purchase Price or in any other respect;
(b) that, save as disclosed by the Client to the Bank, no
disposition, charge, trust or other encumbrance affects or may
affect any Debts or Associated Rights and no other person has
or will have any interest in or right relating to any Debts or
Associated Rights;
(c) in respect of every Debt, as soon as the relevant Goods have
been Delivered or at any other time as required by the Bank,
to notify the Bank promptly in such manner and with such
particulars and documents relating to such Debt as the Bank
may require but the Bank may give notice to the Client
excluding certain Debts from notification;
(d) that no Contract of Sale shall be effected on terms requiring
payment by letter of credit or cash except with the Bank's
prior approval;
(e) promptly to perform all further and continuing obligations of
the Client to the Customer under each Contract of Sale and, at
the Bank's request, to provide satisfactory evidence of such
performance and, in the event of any failure of such
performance, to permit the Bank, on such terms as it considers
appropriate, to perform any such obligations at the Client's
expense;
(f) to ensure that each invoice issued by the Client to any
Customer relating to a Debt covers Goods which have been
actually despatched and contains, in such form as the Bank may
require (a) a notice of assignment, (b) the Terms of Payment
and (c) the customary trade particulars as to description,
quality and quantity of the relevant Goods;
(g) not to grant any discount, allowance or credit to a Customer
in respect of any Debt above 5 % or such higher percentage as
may be agreed between the Bank and the Client at any time and
from time to time;
(h) to supply promptly to the Bank copies of all credit notes
issued to Customers;
- 11 -
<PAGE>
(i) to notify the Bank promptly of any dispute of any kind between
the Client and a Customer relating to a Debt and to resolve
that dispute immediately subject to any instructions which the
Bank may give and so that any resolution by the Bank of a
dispute between the Client and a Customer shall be conclusive
and binding on the Client;
(j) to deliver to the Bank immediately any financial instrument
received by the Client in respect of a payment of or on
account of or in any way relating to Debts and/or their
Associated Rights;
(k) as trustee for the Bank, to hold and keep separate from the
Client's other money any remittance received by the Client in
payment of or on account of or in any way relating to Debts or
their Associated Rights and immediately to pay to the Bank a
sum equivalent to the remittance or, if so required by the
Bank, to transfer the remittance received to such account as
the Bank may specify;
(l) to ensure the due and punctual payment by Customers to the
Bank of all Debts;
(m) to ensure that, in relation to any request for a Permitted
Limit for any Customer, the full and correct name of that
Customer is provided to the Bank and that no details
whatsoever relating to any such request or the Bank's response
shall be disclosed to that Customer or any other person;
(n) that the Terms of Payment and Trading Conditions are and will
be valid and binding obligations of the Customer arising out
of a Contract of Sale which is subject to and conforming with
the applicable laws to which the Contract of Sale is subject;
(o) that the Trading Conditions shall be acceptable to the Bank in
all respects including, without limitation, a condition which
reserves title and ownership of the relevant Goods in favour
of the Client;
(p) not to amend or permit any amendment to the Terms of Payment
or the Trading Conditions;
(q) that the Client is not and will not be in breach of its
obligations to any Customer and the Customer will accept the
Goods sold and the invoice (or, if the Customer is insolvent,
the Customer's liquidator or equivalent will accept a proof of
debt for the unpaid balance of the invoiced price) without any
dispute or claim;
(r) that no Customer is or will be a member of the Client Group;
and
(s) that no Customer has or will have any right, other than under
the relevant Contract of Sale, the exercise of which would
reduce or extinguish the Debt.
- 12 -
<PAGE>
15. Termination Events
The Bank may, at any time, by notice to the Client, immediately
terminate this Agreement if any of the following events happen:-
(a) the Client breaches any term of this Agreement or any other
agreement between the Client and any member of the Bank Group
or any other member of the Client Group breaches any term of
any agreement between such member and a member of the Bank
Group which the Bank, at its discretion, considers material;
(b) the Client breaches any of its obligations relating to a
Contract of Sale;
(c) the Client fails, for a period of 28 consecutive days, to
notify the Bank of the coming into existence of any Debt;
(d) no Debt comes into existence for a period of 28 consecutive
days;
(e) the Client becomes insolvent;
(f) any person which has given the Bank a guarantee or indemnity
in respect of the Client's obligations under this Agreement or
any other agreement between the Client and any member of the
Bank Group or the obligations of any other member of the
Client Group under any agreement between such member and a
member of the Bank Group becomes insolvent or terminates that
guarantee or indemnity;
(g) there is any change, whether direct or indirect, in the
ownership, control, constitution or composition of the Client
which the Bank, at its discretion, considers material;
(h) there is any adverse change in the overall financial condition
or operating performance of the Client which the Bank, in its
discretion, considers material;
(i) the Client ceases or threatens to cease to carry on business;
(j) any judgment is entered against the Client which remains
unsatisfied for seven days;
(k) any member of the Client Group, without the Bank's written
consent, sells, assigns or charges any Debt to any other
person; and
(l) any other event occurs or circumstance arises which, in the
Bank's opinion, is likely adversely to affect the Client's
ability to comply with its obligations under this Agreement.
- 13 -
<PAGE>
16. Power of Attorney and Further Assurance
The Client hereby irrevocably appoints the Bank and any person
appointed by it to be the attorney for the Client and in the name and on behalf
and as the act or deed of the Client or otherwise, without any reference to or
consent from the Client, to sign and execute all cheques and other instruments
and to do all things as may be required for the full exercise of all or any of
the powers hereby conferred on the Bank and its rights under this Agreement as
it may consider expedient in connection with the exercise of such powers and
rights and in order to perfect its title to any Debt and/or Associated Rights
and to secure performance by the Client of its obligations hereunder or under
any Contract of Sale. At the request of the Bank, the Client shall sign and
execute such instruments and perform such acts as the Bank may consider
expedient for any such purpose.
17. Indenmity
17.01 The Client shall indemnify the Bank, its officers and employees against
all liabilities, claims, costs and damages of any kind which may be incurred by
any of them and all actions or proceedings which may be brought by or against
them as a result of any Termination Event or in connection with the exercise of
the powers and rights of the Bank under this Agreement and any related
arrangement including, without limitation, any Interfactor Arrangement, unless
due to the negligence or willful default of the Bank, its officers or employees.
17.02 The Client shall use its best efforts to minimise any potential loss to
the Bank in relation to a Debt and, for such purpose, shall provide the Bank
with such assistance as it may require.
18. Limitation on Liability
The Bank shall not be liable to the Client or any other person for any act,
delay or failure to act, on the part of the Bank or any other person, in respect
of any of its rights or obligations under this Agreement unless due to the
negligence or willful default of the Bank. its Officers or employees.
19. Client's Instructions
19.01 The Bank is authorised to act on the instructions of the Authorised
Person(s).
19.02 The Bank may, at its discretion, accept instructions believed by it to
have emanated from the Authorised Person(s) and, if it acts in good faith on
such instructions, such instructions shall be binding on the Client and the Bank
shall not be liable for doing so, whether or not the instructions were given by
the Authorised Person(s) and the Bank shall not be under any duty to verify the
identity of the person(s) giving those instructions.
19.03 The Bank reserves the right to refuse to act on the instructions of the
Client if, in its opinion, there are grounds for doing so.
- 14 -
<PAGE>
20. Set-off
The Bank may, at any time and without notice, apply any credit
balance to which the Client is entitled on the Client Factoring Account and any
other account with the Bank in or towards satisfaction of any or all moneys
payable by the Client to the Bank. For this purpose, the Bank is authorised to
purchase, at the Exchange Rate, such other currencies as may be necessary to
effect such application with the moneys standing to the credit of any such
account.
21. Lien
The Bank is also authorised to exercise a lien over all
property of the Client coming into the Bank's possession or control, for custody
or any other reason and whether or not in the ordinary course of banking
business, with power in favour of the Bank to sell such property to satisfy the
moneys payable by the Client to the Bank.
22. No Waiver
No act or omission by the Bank pursuant to this Agreement
shall affect its rights, powers and remedies hereunder or any further or other
exercise of such rights, powers or remedies.
23. Entire Agreement
This Agreement contains all the terms and conditions agreed
between the Bank and the Client as to its subject matter and supersedes any
previous agreement and/or arrangement between them, whether written or oral.
24. Assignment
The Client may not assign or transfer any rights or obligations
of the Client hereunder. The Bank may assign any of its ri2hts hereunder.
25. Communications
Any notice, demand or other communication under this Agreement,
except where it expressly permits otherwise, shall be in writing addressed to
the Client at the last address registered with the Bank and addressed to the
Bank at its Hong Kong office or such other address as the Bank may notify to the
Client for this purpose and may be delivered personally, by leaving it at such
address, by post, facsimile transmission, telex or HEXAGON and shall be deemed
to have been delivered to the Client at the time of personal delivery or on
leaving it at such address or on the second day following the day of posting or
on the day of despatch, if sent by facsimile transmission, telex, or HEXAGON and
to the Bank on the day of actual receipt.
- 15 -
<PAGE>
26. Severabiliiy
Each of the provisions of this Agreement is severable and
distinct from the others and, if one or more of such provisions is or becomes
illegal, invalid or unenforceable, the remaining provisions shall not be
affected in any way.
27. Governing Law and Jurisdiction
27.01 This Agreement is governed by and shall be construed in accordance with
the laws of Hong Kong.
27.02 The Client submits to the non-exclusive jurisdiction of the Hong Kong
Courts but this Agreement may be enforced in the courts of any competent
jurisdiction.
- 16 -
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Concord
Camera Corp.'s Consolidated financial statements as of January 1, 2000 and the
results of operations for the six months ended January 1, 2000 and is qualified
in its entirety and reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-01-2000
<PERIOD-END> JAN-01-2000
<CASH> 38,501,475
<SECURITIES> 0
<RECEIVABLES> 25,592,436
<ALLOWANCES> (863,920)
<INVENTORY> 22,850,218
<CURRENT-ASSETS> 88,426,665
<PP&E> 41,257,454
<DEPRECIATION> (20,360,676)
<TOTAL-ASSETS> 117,132,697
<CURRENT-LIABILITIES> 45,155,103
<BONDS> 14,933,289
0
0
<COMMON> 41,210,542
<OTHER-SE> 9,702,151
<TOTAL-LIABILITY-AND-EQUITY> 117,132,697
<SALES> 85,760,299
<TOTAL-REVENUES> 85,760,299
<CGS> 62,048,105
<TOTAL-COSTS> 14,789,768
<OTHER-EXPENSES> (227,398)
<LOSS-PROVISION> 53,136
<INTEREST-EXPENSE> 1,475,985
<INCOME-PRETAX> 9,149,824
<INCOME-TAX> 736,000
<INCOME-CONTINUING> 8,413,824
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,413,824
<EPS-BASIC> 0.77
<EPS-DILUTED> 0.70
</TABLE>
