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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549-1004
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended April 1, 2000
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition report from _________ to ___________
Commission file number 0-17038
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Concord Camera Corp.
(Exact name of registrant as specified in its charter)
New Jersey 13-3152196
- -------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) 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 - 23,607,477 shares as of May 3, 2000
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Index
Concord Camera Corp.
<TABLE>
<CAPTION>
Page No.
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<S> <C>
Part I. Financial Information
Item 1. Financial Statements
Condensed consolidated balance sheets as of April 1, 2000 and July 3, 1999 3
Condensed consolidated income statements for the three and
nine months ended April 1, 2000 and April 3, 1999 4
Condensed consolidated statements of cash flows for the nine months ended 5
April 1, 2000 and April 3, 1999
Notes to condensed consolidated financial statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
Item 3. Quantitative and Qualitative Disclosure of Market Risk 13
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 14
</TABLE>
2
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PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
Concord Camera Corp.
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
(Unaudited) (Note)
April 1, 2000 July 3, 1999
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<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 32,014,947 $ 30,706,761
Accounts receivable, net 19,134,289 18,272,329
Inventories, net 27,521,884 20,620,556
Prepaid expenses and other current assets 3,177,677 2,404,400
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Total current assets 81,848,797 72,004,046
Plant and equipment, net 22,406,255 18,871,300
Goodwill, net 3,752,155 291,764
Other assets 4,659,654 5,480,342
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Total assets $ 112,666,861 $ 96,647,452
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Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable $ 17,095,257 $ 16,224,538
Accrued expenses 8,138,638 4,985,789
Short-term debt 6,796,250 8,088,901
Current portion of long-term debt - 2,100,000
Current portion of obligations under capital leases 1,660,722 2,073,492
Income taxes payable 1,810,549 896,142
Other current liabilities 557,045 188,058
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Total current liabilities 36,058,461 34,556,920
Deferred income taxes 795,055 792,358
Long-term debt, net of current portion 14,887,500 14,850,000
Obligations under capital leases, net of current portion 1,561,129 2,623,080
Other long-term liabilities 4,142,184 1,129,569
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Total liabilities 57,444,329 53,951,927
Commitments and contingencies
Stockholders' equity:
Common stock, no par value, 40,000,000 shares authorized;
23,657,234 and 23,259,184 shares issued as of April 1, 2000
and July 3, 1999, respectively 41,860,955 41,117,335
Paid-in capital 1,069,608 1,033,553
Retained earnings 16,616,315 6,086,691
Notes receivable arising from common stock purchase agreements (187,208) (2,163,542)
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59,359,670 46,074,037
Less: treasury stock, at cost, 1,542,526 and 1,351,726 shares as
as of April 1, 2000 and July 3, 1999, respectively (4,137,138) (3,378,512)
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Total stockholders' equity 55,222,532 42,695,525
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Total liabilities and stockholders' equity $ 112,666,861 $ 96,647,452
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</TABLE>
See accompanying notes.
Note: The balance sheet at July 3, 1999 has been derived from the audited
financial statements at the date but does not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements.
3
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Concord Camera Corp.
Condensed Consolidated Income Statements
(Unaudited)
<TABLE>
<CAPTION>
For the three months ended For the nine months ended
------------------------------- ------------------------------
April 1, 2000 April 3, 1999 April 1, 2000 April 3, 1999
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net sales $ 32,717,048 $ 21,497,763 $ 118,477,347 $ 83,605,175
Cost of products sold 24,340,818 16,987,800 86,388,923 62,713,625
------------ ------------ ------------- ------------
Gross profit 8,376,230 4,509,963 32,088,424 20,891,550
Selling expenses 2,308,566 1,454,926 7,819,386 6,046,959
General and administrative expenses 3,536,665 2,187,840 11,073,944 7,162,383
Interest expense 783,537 836,769 2,525,206 2,592,477
Other income, net (548,000) (123,944) (775,398) (255,866)
------------ ------------ ------------- ------------
Income before income taxes 2,295,462 154,372 11,445,286 5,345,597
Provision for income taxes 179,680 4,142 915,680 409,142
------------ ------------ ------------- ------------
Net income $ 2,115,782 $ 150,230 $ 10,529,606 $ 4,936,455
============ ============ ============= ============
Basic earnings per share $.10 $.01 $.48 $.22
============ ============ ============= ============
Diluted earnings per share $.09 $.01 $.43 $.21
============ ============ ============= ============
Weighted average
common shares outstanding-basic 22,009,870 21,757,754 21,921,176 21,980,790
Effect of dilutive securities 2,520,886 1,637,274 2,360,226 1,690,052
------------ ------------ ------------- ------------
Weighted average
common shares outstanding-diluted 24,530,756 23,395,028 24,281,402 23,670,842
============ ============ ============= ============
</TABLE>
See accompanying notes.
4
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Concord Camera Corp.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
For the nine months ended
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April 1, 2000 April 3, 1999
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<S> <C> <C>
Cash flows from operating activties:
Net income $ 10,529,606 $ 4,936,455
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 2,837,508 3,130,917
Amortization of deferred financing costs 100,062 -
Officers notes forgiven on stock purchases 686,283 -
Interest income on notes receivable arising from
common stock agreements (90,245) (108,668)
Deferred income taxes 2,697 -
Non-cash compensation expense on stock options - 182,767
Changes in operating assets and liabilities:
Accounts receivable (861,960) 6,314,246
Inventories (6,901,328) 1,407,814
Prepaid expenses and other current assets (773,276) (591,241)
Other assets (2,737,190) (1,819,258)
Accounts payable 870,719 (3,026,856)
Accrued expenses 3,152,849 1,014,777
Income taxes payable 914,407 405,332
Other current liabilities 368,987 104,585
Other long-term liabilities 2,975,779 -
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Total adjustments 545,292 7,014,415
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Net cash provided by operating activities 11,074,898 11,950,870
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Cash flows from investing activities:
Purchases of property, plant and equipment (6,360,444) (4,987,182)
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Net cash used in investing activities (6,360,444) (4,987,182)
------------ ------------
Cash flows from financing activities:
Net (repayments) borrowings under short-term debt agreements (1,292,651) (3,382,650)
Net (repayments) borrowings under long-term debt agreements (2,025,664) 12,353,540
Principal (repayments) borrowings under capital lease obligations (1,474,722) 1,917,177
Purchases of treasury stock (758,626) (1,890,289)
Net proceeds from notes receivable arising from common
stock purchase agreements 1,437,830 -
Net proceeds from issuance of common stock 707,565 240,628
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Net cash (used in) provided by financing activities (3,406,268) 9,238,406
------------ ------------
Net increase in cash and cash equivalents 1,308,186 16,202,094
Cash and cash equivalents at beginning of period 30,706,761 7,119,699
------------ ------------
Cash and cash equivalents at end of period $ 32,014,947 $ 23,321,793
============ ============
</TABLE>
See accompanying notes.
5
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CONCORD CAMERA CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
April 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 nine month period ended April 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>
April 1, 2000 July 3, 1999
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<S> <C> <C>
Raw materials and components $19,671,938 $15,605,934
Finished goods 9,588,426 6,389,998
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Subtotal 29,260,364 21,995,932
Less: Reserve for inventory obsolescence (1,738,480) (1,375,376)
----------- -----------
Inventories, net $27,521,884 $20,620,556
=========== ===========
</TABLE>
Note 3 - Supplemental Disclosures of Cash Flow Information:
For the nine months ended
--------------------------------
April 1, 2000 April 3, 1999
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Cash paid for interest $2,143,143 $2,262,653
========== ==========
Cash paid for income taxes $ 177,942 $ 20,000
========== ==========
6
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Note 4 - Stock Split
The Company announced a two-for-one stock split of its Common Stock effected
through a stock dividend to shareholders of record on March 27, 2000 and payable
on April 14, 2000. Accordingly, share and per-share data for all periods
presented in the accompanying condensed consolidated financial statements have
been restated to reflect the stock split.
Note 5 - 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 April 1, 2000 compared to the quarter ended April 3, 1999.
Total sales for the quarters ended April 1, 2000 and April 3, 1999 were
approximately $32,717,000 and $21,498,000, respectively, an increase of
approximately $11,219,000, or 52.2%. The increase in sales for the quarter ended
April 1, 2000 compared to quarter ended April 3, 1999 resulted principally from
increases in sales to original equipment manufacturer ("OEM") and retail
distribution customers. OEM sales for the quarters ended April 1, 2000 and April
3, 1999 were approximately $25,012,000 and $15,626,000, respectively, an
increase of approximately $9,386,000, or 60.1%. Retail distribution customer
sales for the quarters ended April 1, 2000 and April 3, 1999 were approximately
$7,705,000 and $5,872,000, respectively, an increase of approximately
$1,833,000, or 31.2%. The increases in OEM and retail distribution customer
sales were attributable to increased sales to both pre-existing and new OEM and
retail distribution customers.
Sales by Concord Camera HK Limited ("Concord HK") for the quarters ended April
1, 2000 and April 3, 1999 were approximately $28,777,000 and $19,061,000,
respectively, an increase of approximately $9,716,000, or 51.0%. The increase
was primarily due to increased sales to OEM customers. Consolidated sales of the
Company's operations in the United States, Latin America and Canada ("Concord
Americas") for the quarters ended April 1, 2000 and April 3, 1999 were
approximately $2,017,000 and $892,000, respectively, an increase of
approximately $1,125,000, or 126.1%. In addition, certain Concord Americas
customers increased purchases on a F.O.B. Hong Kong basis from Concord HK.
During the quarters ended April 1, 2000 and April 3, 1999, Concord Americas
customers purchased approximately $1,269,000 and $1,114,000, respectively, from
Concord HK, an increase of approximately $155,000, or 13.9%. On a combined
basis, sales of traditional film based cameras by Concord HK and Concord
Americas to Concord Americas customers for the quarter ended April 1, 2000
increased by 63.9% compared to the same prior year quarter. Consolidated sales
of Concord Camera (Europe) Limited, Goldline (Europe) Limited, Concord Camera
GmbH, and Concord Camera France S.A.R.L. ("Concord Camera Europe") for the
quarters ended April 1, 2000 and April 3, 1999, were approximately $1,923,000
and $1,545,000, respectively, an increase of approximately $378,000, or 24.5%.
During the quarters ended April 1, 2000 and April 3, 1999, European customers
purchased approximately $2,593,000 and $2,332,000, respectively, from Concord HK
on a F.O.B. Hong Kong basis, an increase of approximately $261,000, or 11.2%. On
a combined basis, sales of traditional film based cameras by Concord HK and
Concord Camera Europe to European customers for the quarter ended April 1, 2000
increased by 16.5% compared to the same prior year quarter.
Gross Profit
Gross profit, expressed as a percentage of sales, increased to 25.6% for the
quarter ended April 1, 2000 from 21.0% for the quarter ended April 3, 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 $1,179,000 for the
quarter ended April 1, 2000 as compared to $1,149,000 for the quarter ended
April 3, 1999.
Expenses
As a percentage of sales, operating expenses, consisting of selling, general and
administrative and interest expenses decreased to 20.3% for the quarter ended
April 1, 2000 from 20.8% for the quarter ended April 3, 1999. Operating expenses
increased to $6,629,000 for the quarter ended April 1, 2000 from $4,480,000 for
the quarter ended April 3, 1999, an increase of $2,149,000, or 48.0%.
Selling expenses increased to $2,309,000, or 7.1% of net sales, for the quarter
ended April 1, 2000 compared to $1,455,000, or 6.8% of net sales, for the
quarter ended April 3, 1999. The increase was primarily attributable to
increases in promotional allowances and, to a lesser extent, increases in travel
and entertainment expenses.
General and Administrative expenses increased to $3,537,000, or 10.8% of net
sales, for the quarter ended April 1, 2000 compared to $2,188,000, or 10.2% of
net sales, for the quarter ended April 3, 1999. The increase of $1,349,000 was
the result of the Company continuing to build its infrastructure to support its
growth.
8
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Interest expenses decreased to $784,000, or 2.4% of net sales, for the quarter
ended April 1, 2000 compared to $837,000, or 3.9% of net sales, in the quarter
ended April 3, 1999 as a result of lower debt levels during the quarter.
Other Income, Net
Other income, net was approximately $548,000 and $124,000 for the quarters ended
April 1, 2000 and April 3, 1999, respectively. Other income, net includes
directors' fees, certain public relations costs, foreign exchange gains and
losses and interest income. The increase is primarily attributable to higher
interest income for the quarter ended April 1, 2000 as compared to the same
prior year quarter.
Income Taxes
The Company's provision of $179,680 for income taxes for the quarter ended April
1, 2000 was primarily related to the earnings of the Company's Far East and
United States operations, and is based on the Company's anticipated annual
effective tax rate after consideration of 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 $2,116,000, or $0.09 per diluted share, for the quarter ended
April 1, 2000, as compared to net income of $150,000, or $0.01 per diluted
share, for the quarter ended April 3, 1999. The Company expects to achieve its
previously announced projected profit of $13.5 to $14 million, or $.56 to $.58
per diluted share, for the current fiscal year.
9
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Nine months ended April 1, 2000 compared to the nine months ended April 3, 1999.
Total sales for the nine months ended April 1, 2000 and April 3, 1999 were
approximately $118,477,000 and $83,605,000, respectively, an increase of
approximately $34,872,000, or 41.7%. The increase in sales for the first nine
months of the Company's fiscal year ending July 1, 2000 ("Fiscal 2000") compared
to the first nine months of the Company's fiscal year ended July 3, 1999
("Fiscal 1999") resulted principally from increases in sales to OEM and retail
distribution customers. OEM sales for the nine months ended April 1, 2000 and
April 3, 1999 were approximately $81,226,000 and $56,623,000, respectively, an
increase of approximately $24,603,000, or 43.5%. Retail distribution customer
sales for the nine months ended April 1, 2000 and April 3, 1999 were
approximately $37,251,000 and $26,982,000, respectively, an increase of
approximately $10,269,000, or 38.1%. The increase in sales to OEM and retail
distribution customers were primarily attributable to increased sales to
pre-existing OEM and retail distribution customers and, to a lesser extent, new
OEM and retail distribution customers.
Consolidated sales of Concord HK for the nine months ended April 1, 2000 and
April 3, 1999 were approximately $98,299,000 and $71,325,000, respectively, an
increase of approximately $26,974,000, or 37.8%. The increase was primarily due
to higher sales to OEM and, to a lesser extent, retail distribution customers.
Consolidated sales of Concord Americas for the nine months ended April 1, 2000
and April 3, 1999 were approximately $11,005,000 and $6,583,000, respectively,
an increase of approximately $4,422,000, or 67.2%. In addition, certain Concord
Americas customers increased purchases on a F.O.B. Hong Kong basis from Concord
HK. During the nine months ended April 1, 2000 and April 3, 1999, Concord
Americas customers purchased approximately $10,237,000 and $7,510,000,
respectively, from Concord HK, an increase of approximately $2,727,000, or
36.3%. On a combined basis, sales of traditional film based cameras to Concord
Americas customers by Concord Americas and Concord HK for the nine months ended
April 1, 2000 increased by 50.8% compared to the same prior year period.
Consolidated sales of Concord Camera Europe for the nine months ended April 1,
2000 and April 3, 1999, were approximately $9,179,000 and $5,707,000,
respectively, an increase of approximately $3,472,000, or 60.8%. 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 nine months ended April 1,
2000 and April 3, 1999, European customers purchased approximately $2,269,000
and $7,128,000, respectively, from Concord HK, a decrease of approximately
$4,859,000, or 68.2%. On a combined basis, sales of traditional film based
cameras to European customers by Concord Camera Europe and Concord HK for the
nine months ended April 1, 2000 decreased by 10.8% compared to the same prior
year period.
Gross Profit
Gross profit, expressed as a percentage of sales, increased to 27.1% for the
nine months ended April 1, 2000 from 25.0% for the nine months ended April
3,1999. 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 $3,567,000
for the nine months ended April 1, 2000 as compared to $3,585,000 for the nine
months ended April 3, 1999.
Expenses
As a percentage of sales, operating expenses, consisting of selling, general and
administrative and interest expenses decreased to 18.1% for the nine months
ended April 1, 2000 from 18.9% for the nine months ended April 3, 1999.
Operating expenses increased to $21,419,000 for the nine months ended April 1,
2000 from $15,802,000 for the nine months ended April 3, 1999, an increase of
$5,617,000, or 35.5%.
Selling expenses increased to $7,819,000, or 6.6% of net sales, for the nine
months ended April 1, 2000 from $6,047,000, or 7.2% of net sales, for the nine
months ended April 3, 1999. The increase was primarily attributable to increases
in promotional allowances, freight costs, and royalty expenses net of benefits
from certain cost cutting activities.
10
<PAGE>
General and Administrative expenses increased to $11,074,000, or 9.3% of net
sales, for the nine months ended April 1, 2000 from $7,162,000, or 8.6% of net
sales, for the nine months ended April 3, 1999. The increase in general and
administrative expenses was primarily attributable to the Company continuing to
build its infrastructure to accommodate its growth. Interest expenses decreased
to $2,525,000, or 2.1% of net sales, for the nine months ended April 1, 2000
from $2,592,000, or 3.1% of net sales, for the nine months ended April 3, 1999.
Other Income, Net
Other income, net was approximately $775,000 and $256,000 for the nine months
ended April 1, 2000 and April 3, 1999, respectively. Other income, net includes
directors' fees, certain public relations costs, foreign exchange gains and
losses and interest income. The increase was primarily attributable to higher
interest income for the nine months ended April 1, 2000 as compared to the same
prior year period.
Income Taxes
The Company's provision of $915,680 for income taxes for the nine months ended
April 1, 2000 was primarily related to the earnings of the Company's Far East
and United States operations, and is based on the Company's anticipated annual
effective tax rate after consideration of 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 $10,530,000, or $0.43 per diluted share, for the nine months ended
April 1, 2000, as compared to net income of $4,936,000, or $0.21 per diluted
share, for the nine months ended April 3, 1999.
Liquidity and Capital Resources
At April 1, 2000, the Company had working capital of $45,790,000 as compared to
$37,447,000 at July 3, 1999. Cash provided by operating activities was
approximately $11,075,000 and $11,951,000 for the nine months ended April 1,
2000 and April 3, 1999, respectively. Capital expenditures for the nine months
ended April 1, 2000 and April 3, 1999 were approximately $6,360,000 and
$4,987,000, respectively.
Senior Notes Payable. On July 30, 1998, the Company consummated a private
placement of $15,000,000 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 the Company and its subsidiaries.
Hong Kong Credit Facility. During the second quarter of Fiscal 2000, Concord HK
consummated a $26,200,000 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 $5,600,000 Import Facility, 2) a $2,600,000
Packing Credit and Export Facility, and 3) an $18,000,000 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 April 1, 2000, approximately $6,496,000 was outstanding under the HK Facility
and classified as short-term debt.
United Kingdom Credit Facility. During the second quarter of Fiscal 2000, the
Company, through its Concord Camera Europe operations became indebted under a
credit facility (the "UK Facility") in the United Kingdom that is secured by
substantially all of the assets of its Goldline (Europe) Limited subsidiary. The
UK Facility bears interest at 2.0% above the prime lending rate, is principally
utilized for working capital needs and allows borrowings of up to approximately
$1,000,000. At April 1, 2000, approximately $300,000 was outstanding under the
UK Facility and classified as short-term debt.
Other Arrangements and Future Cash Commitments. Management believes that
anticipated cash flows from operations together with financing from the Senior
Notes Payable, the HK Facility and the UK Facility, or replacement facilities,
will be sufficient to fund its operating cash needs for the foreseeable future.
Historically, the Company's principal funding requirements have been and are
11
<PAGE>
expected to continue to be the financing of accounts receivable and inventory.
However, the Company may seek alternative financing including the issuance of
additional debt or equity instruments depending on strategic considerations.
There is no assurance as to the availability or the terms upon which such
financing may be available.
The Company is evaluating various growth opportunities and has from time to time
held, and continues to hold, discussions and negotiations with (i) companies
that represent potential acquisition or investment opportunities for the
Company, (ii) potential strategic and financial investors who have expressed an
interest in making an investment in or acquiring the Company, (iii) potential
joint venture partners looking toward formation of strategic alliances that
would broaden the Company's product base or enable the Company to enter new
lines of business without necessarily acquiring an additional investment in or
by the Company and (iv) potential new and existing OEM customers where the
design, development and production of new products including certain new
technologies would enable the Company to expand its existing business, and enter
new markets outside its traditional business including new ventures focusing on
wireless connectivity and other new communication technologies. There can be no
assurance any definitive agreement will be reached regarding any of the
foregoing, nor does management believe such agreements are necessary to
successful implementation of the Company's strategic plans.
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.
12
<PAGE>
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 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.
13
<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 Incorporated by reference to the Company's Form 10-Q
September 9, 1999, between The for the quarter ended January 1, 2000.
Hongkong and Shanghai Banking
Corporation Ltd. and the Company
9.0 Agreement, dated as of January 6, 2000, pursuant Incorporated by reference to the exhibits to Schedule
to which Harlan I. Press agreed to be bound by 13D Amendment No. 3 filed February 11, 2000.
the Amended and Restated Voting Agreement, dated
February 28, 1997, with respect to certain shares
of the Company's Common Stock.
27 Financial Data Schedule Filed herewith.
</TABLE>
b. Reports on Form 8-K
On March 14, 2000, the registrant filed a report on Form 8-K reporting its
announcement of the approval of a two-for-one split of its Common Stock to be
effected through a stock dividend payable April 14, 2000 to stockholders of
record as of March 27, 2000.
14
<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
Vice President, Treasurer and Assistant Secretary
DULY AUTHORIZED AND CHIEF ACCOUNTING OFFICER
DATE: May 15, 2000
15
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Concord
Camera Corp.'s Consolidated financial statements as of April 1, 2000 and the
results of operations for the nine months ended April 1, 2000 and is qualified
in its entirety and reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUL-01-2000
<PERIOD-END> APR-01-2000
<CASH> 32,014,497
<SECURITIES> 0
<RECEIVABLES> 19,580,392
<ALLOWANCES> (446,103)
<INVENTORY> 27,521,884
<CURRENT-ASSETS> 81,848,797
<PP&E> 43,749,969
<DEPRECIATION> (21,343,714)
<TOTAL-ASSETS> 112,666,861
<CURRENT-LIABILITIES> 36,058,461
<BONDS> 14,887,500
0
0
<COMMON> 41,860,955
<OTHER-SE> 13,361,577
<TOTAL-LIABILITY-AND-EQUITY> 112,666,861
<SALES> 118,477,347
<TOTAL-REVENUES> 118,477,347
<CGS> 86,388,923
<TOTAL-COSTS> 21,418,536
<OTHER-EXPENSES> (775,398)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,525,206
<INCOME-PRETAX> 11,445,286
<INCOME-TAX> 915,680
<INCOME-CONTINUING> 10,529,606
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,529,606
<EPS-BASIC> 0.48
<EPS-DILUTED> 0.43
</TABLE>
