<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] Quarterly Report under Section 13 or 15 (d) of the Securities
Exchange Act of 1934 for the quarterly period ended March 31, 1996
[ ] Transition Report pursuant to section 13 or 15(d) of the Securities
Exchange Act.
For the transition period from _______________ to ______________
Commission file number 1-11174
MRV Communications, Inc.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Delaware 06-1340090
- - ------------------------------------------- ----------------------------------
(State of other jurisdiction (IRS Employer
of incorporation or organization) identification no.)
</TABLE>
<TABLE>
<S> <C>
8917 Fullbright Ave., Chatsworth, CA 91311
- - ------------------------------------ -------------------------
(Address of principal executive offices) (Zip Code)
</TABLE>
Issuer's telephone number, including area code: (818) 773-9044
Check whether the issuer:(1)has filed all reports required to be filed
by section 13 or 15(d) of the Securities Exchange Act 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
As of May 10, 1996 there were 9,588,437 shares of Common Stock, $.0067
par value per share, outstanding.
<PAGE> 2
MRV COMMUNICATIONS, INC.
Form 10-Q March 31, 1996
INDEX
<TABLE>
<CAPTION>
PAGE NUMBER
-----------
<S> <C> <C>
PART I FINANCIAL INFORMATION
Item 1: Financial Statements:
Condensed Consolidated Balance Sheets as of December 31,
1995 and March 31, 1996 (unaudited) 3
Condensed Consolidated Statements of Income (unaudited)
for the three months ended March 31, 1995 and 1996 4
Condensed Consolidated Statements of Cash Flows (unaudited)
for the three months ended March 31, 1995 and 1996 5
Notes to Condensed Consolidated Financial Statements 6
Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations 7 - 8
PART II OTHER INFORMATION 9
</TABLE>
<PAGE> 3
MRV COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
December 31, March 31,
1995 1996
---------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
ASSETS
------
CURRENT ASSETS
Cash $ 1,951 $ 1,173
Short-term investments 1,000 1,505
Restricted cash 6,272 5,714
Accounts receivable, net of
reserves of $825 in 1995 and $807 in 1996 10,780 12,942
Inventories 8,382 9,882
Deferred income taxes 804 804
Other current assets 608 899
---------------------------------------------------------------------------------------------------------------
Total current assets 29,797 32,919
Property And Equipment - At cost,
net of depreciation and amortization 2,060 2,335
Other Assets:
Deferred income taxes 925 925
Other 525 508
---------------------------------------------------------------------------------------------------------------
$ 33,307 $ 36,687
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 4,342 $ 5,958
Accrued liabilities 2,221 1,631
Income taxes payable 1,215 1,484
---------------------------------------------------------------------------------------------------------------
Total current liabilities 7,778 9,073
DEFERRED RENT 46 40
OTHER LONG TERM DEBT 225 300
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $0.01 par value:
1,000,000 shares authorized
no shares outstanding - -
Common stock, $.0067 par value:
20,000,000 shares authorized
9,524,293 shares outstanding in
1995 and 9,587,714 in 1996 63 64
Additional paid-in capital 23,491 23,627
Retained earnings 1,704 3,583
---------------------------------------------------------------------------------------------------------------
Total stockholders' equity 25,258 27,274
---------------------------------------------------------------------------------------------------------------
$ 33,307 $ 36,687
---------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes
3
<PAGE> 4
MRV COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited, in thousands, except share data)
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
3 Months Ended
-----------------------------------
March 31, March 31,
1995 1996
---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
REVENUES, net $ 6,737 $ 15,529
---------------------------------------------------------------------------------------------------------------
COSTS AND EXPENSES:
Cost of goods sold 4,260 8,989
Research and development
expenses 702 1,684
Selling, general and
administrative expenses 917 2,136
---------------------------------------------------------------------------------------------------------------
Operating income 858 2,720
Other income 227 80
Provision for income taxes 380 921
---------------------------------------------------------------------------------------------------------------
NET INCOME $ 705 $ 1,879
---------------------------------------------------------------------------------------------------------------
EARNINGS PER SHARE $ .08 $ .18
---------------------------------------------------------------------------------------------------------------
Weighted average number of
common shares outstanding 8,834,375 10,706,357
---------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes
4
<PAGE> 5
MRV COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
3 Months Ended
--------------------------------
March 31, March 31,
1995 1996
---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 705 $ 1,879
Adjustments to reconcile net income
to net cash used in operating activities:
Depreciation and amortization 41 78
(Increase) decrease in:
Accounts receivable (933) (2,162)
Inventories (1,421) (1,500)
Deferred income taxes (7) -
Other assets 475 (292)
Increase (decrease) in:
Accounts payable (164) 1,616
Accrued liabilities (55) (590)
Income taxes payable (90) 269
Deferred rent - (6)
Other long term debt - 75
---------------------------------------------------------------------------------------------------------------
Net cash used in
operating activities (1,449) (633)
---------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (212) (335)
Restricted Cash - 558
Purchases of investments (10,253) (505)
---------------------------------------------------------------------------------------------------------------
Net cash used in
investing activities (10,465) (282)
---------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of common stock 9,555 137
---------------------------------------------------------------------------------------------------------------
Net cash provided by (used in)
financing activities 9,555 137
---------------------------------------------------------------------------------------------------------------
Net decrease in cash (2,359) (778)
Cash at beginning of period 4,045 1,951
---------------------------------------------------------------------------------------------------------------
Cash at end of period $ 1,686 $ 1,173
---------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes.
5
<PAGE> 6
MRV COMMUNICATIONS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION - The accompanying unaudited condensed financial
statements have been prepared in accordance with the requirements of
Form 10-Q and, therefore, do not include all information and footnotes
which would be presented if such financial statements were prepared in
accordance with generally accepted accounting principles. These
statements should be read in conjunction with the audited financial
statements presented in the Company's Annual Report or Form 10-K for
the year ended December 31, 1995.
In the opinion of management, these interim financial statements
reflect all normal and recurring adjustments necessary for a fair
presentation of the financial position and results of operations for
each of the periods presented. The results of operations and cash
flows for such periods are not necessarily indicative of results to be
expected for the full year.
2. NET EARNINGS PER SHARE - Net earnings per share are based upon the
weighted average number of shares outstanding during each of the
periods. There is no significant difference between primary and fully
diluted earnings per share.
3. STOCK SPLIT - On March 5, 1996 Stockholders authorized an additional
10,000,000 shares and a three for two stock split. The date of record
for the stock split was March 20, 1996 and the distribution date was
April 2, 1996. All outstanding shares, weighted average numbers of
shares outstanding, and earnings per share calculations in this
document have been adjusted to reflect the three for two stock split.
6
<PAGE> 7
ITEM 2: Management's Discussion and Analysis of Financial Condition and
Results of Operations
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, statements of
operations data of the Company expressed as a percentage of revenues.
<TABLE>
<CAPTION>
Quarter Ended March 31
----------------------
1995 1996
---- ----
<S> <C> <C>
Revenues, net 100% 100%
Cost of goods sold 63% 58%
Gross profit 37% 42%
Operating expanses:
Research and development 10% 11%
Selling, general and administrative 14% 14%
Operating income 13% 17%
Other income, net 3% 1%
Income before taxes 16% 18%
</TABLE>
Quarter ended March 31, 1996 as compared to quarter ended March 31, 1995
Revenues
Revenues for the quarter ended March 31, 1996 from product sales were
$15,529,000 as compared to $6,737,000 for the quarter ended March 31, 1995, an
increase of $8,792,000 or 131 percent. Revenues increased as a result
of greater marketing efforts and greater market acceptance of the Company's
products, both domestically and internationally. International sales accounted
for approximately 39 percent of revenues for the period ended March 31, 1996 as
compared to 25 percent of revenues for the period ended March 31, 1995.
International sales grew as a percentage of sales because of greater marketing
efforts in overseas markets as well as increased sales and marketing resources
put in place by the Company to service overseas markets.
Gross Profit
Gross profit was $6,540,000 for the quarter ended March 31, 1996 as compared to
$2,477,000 for the same period in 1995, an increase of 164 percent. Gross
profit as a percentage of revenues increased from 37% to 42% primarily as a
result of lower cost production techniques and improved discounts obtained from
vendors as the Company has increased the volume of its purchases.
Research and Development
Research and development ("R&D") expenses were $1,684,000 and $702,000 and
represented 11 percent and 10 percent respectively of revenues for the quarters
ended March 31, 1996 and 1995. The 140 percent increase in R&D spending was
attributable to the continued development of the Company's fiber optic and
networking products, including two-way simultaneous fiber optic transmission
modules, Ethernet/Fast Ethernet Switches and ATM products. Additional costs
were also associated with the hiring of additional research and development
personnel and consultants. The Company intends to continue to invest in the
research and development of new products. Management believes that the ability
of the Company to develop and commercialize new products is a key competitive
factor.
Selling, General and Administrative
Selling, General and Administrative ("SG&A") expenses increased to $2,136,000
for the quarter ended March 31, 1996 from $917,000 for the quarter ended March
31, 1995. The increase was due primarily to increased marketing and personnel
costs, as well as other administrative expenses. As a percentage of revenues,
SG&A was unchanged at 14 percent.
7
<PAGE> 8
Net Income
Net income increased to $1,879,000 for the quarter ended March 31, 1996
compared with a net income of $705,000 for the quarter ended March 31, 1995.
This increase of 167 percent is primarily due to substantially increased sales
and higher gross profit margins.
LIQUIDITY AND CAPITAL RESOURCES
Net cash used in operating activities for the three months ended March 31, 1996
was $633,000 and $1,449,000 for same period in 1995. The funds were used
primarily in increased research and development, marketing expenses, and
increased inventories and receivables as a result of increased revenues. Net
cash provided by financing activities for the three months ending March 31,
1995 were $9,555,000. The cash provided by financing activities resulted
primarily from the issuance of 1,350,000 shares of common stock at $8.00 per
share less offering costs. Net cash provided by financing activities for the
three months ending March 31, 1996 were $137,000 which resulted primarily from
the issuance of shares upon the exercise of employee incentive stock options.
Net cash used in investing activities for the three months ended March 31, 1996
was $505,000 and $10,465,000 for the same period in 1995. For the three months
ended March 31, 1996 cash was primarily used to purchase short term investments
and was provided by the release of a portion of the restricted cash used as
security against letters of credit issued by a bank on behalf of the Company.
The cash used in investing activity for the three months ended March 31, 1995
was primarily used to purchase U.S. Government securities.
Effects of Inflation
The Company believes that the relatively moderate rate of inflation over the
past few years has not had a significant impact on the Company's sales or
operating results, or on the prices of raw materials.
8
<PAGE> 9
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company is not involved in any legal proceedings as of the date of this
report.
Item 2. Change in Securities
(a) Not applicable
(b) Not applicable
Item 3. Defaults Upon Senior Securities
Not applicable
Item 4. Submission of matters to a vote of Security Holders
On March 5, 1996 a special meeting of stockholders was held to approve
an amendment to the Company's Certificate of Incorporation to effect
a three-for-two split of the Company's Common Stock, to increase the
number of authorized shares of the Company's Common Stock from
10,000,000 to 20,000,000 shares and to decrease the par value per
share of the Company's Common Stock from $0.01 to $0.0067. The
results of the voting were as follows:
<TABLE>
<CAPTION>
Votes Votes Broker
For Against Abstentions Non Votes
----- ------- ----------- ---------
<S> <C> <C> <C>
5,676,297 33,739 6,355 642,318
</TABLE>
Item 5. Other information
Not applicable
Item 6. Exhibits and reports on Form 8-K
(a) Not applicable
(b) No reports on Form 8-K were filed during the quarter for
which this report on form 10-Q is filed.
SIGNATURES
Pursuant to the requirements of the Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant certifies that it has duly caused this
Report to be signed on its behalf by the undersigned, thereunto duly authorized
on May 13, 1996.
MRV COMMUNICATIONS, INC.
By: /s/ Noam Lotan
---------------------
Noam Lotan,
President
By: /s/ Edmund Glazer
---------------------
Edmund Glazer,
Chief Financial Officer
9
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<EXCHANGE-RATE> 1,000
<CASH> 6,887
<SECURITIES> 1,505
<RECEIVABLES> 13,749
<ALLOWANCES> 807
<INVENTORY> 9,882
<CURRENT-ASSETS> 32,919
<PP&E> 2,831
<DEPRECIATION> 496
<TOTAL-ASSETS> 36,687
<CURRENT-LIABILITIES> 9,073
<BONDS> 0
0
0
<COMMON> 64
<OTHER-SE> 27,210
<TOTAL-LIABILITY-AND-EQUITY> 36,687
<SALES> 15,529
<TOTAL-REVENUES> 15,529
<CGS> 8,989
<TOTAL-COSTS> 12,809
<OTHER-EXPENSES> (80)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,800
<INCOME-TAX> 921
<INCOME-CONTINUING> 1,879
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,879
<EPS-PRIMARY> .18
<EPS-DILUTED> .18
</TABLE>
