<PAGE> 1
FORM 8-K/A
WASHINGTON, D.C. 20549
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
MRV COMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation)
0-23452 06-1340090
(Commission File Number) (I.R.S. Employer Identification No.)
8917 Fullbright Ave.
Chatsworth, CA 91311
(Address of Principal executive offices) (Zip Code)
818 773-9044
(Registrant's telephone number, including area code)
N/A
(Form name or former address, if changed since last report)
<PAGE> 2
This Form 8-K/A Supplements and completes registrant's Form 8-K filed
October 10, 1996 and amends the Form 8-K/A filed December 9, 1996.
Item 7 Financial Statements and Exhibits
(a) Financial Statements of Business Acquired
The following financial statements of Fibronics Ltd Group are included
herewith:
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INDEPENDENT AUDITORS' REPORT 3
COMBINED FINANCIAL STATEMENTS
Balance Sheets as of December 31, 1995, 1994 and 1993 4
Statements of Operations
for the years ended December 31, 1995, 1994 and 1993 6
Statements of Cash Flows for the years ended December 31, 1995, 1994 and 1993 7
Notes to the Combined Financial Statements 8
Unaudited Combined Balance Sheet at September 25, 1996 21
Unaudited Statement of Operations Nine Months ended September 30, 1996 22
Unaudited Statement of Cash Flows Nine Months ended September 30, 1996 23
Notes to Unaudited Combined Financial Statements 24
</TABLE>
(b) Pro Forma Financial Information
The following pro forma financial information is included herewith:
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Unaudited Pro Forma Combined Statements of Operations for the year ended
December 31, 1995 25
Unaudited Pro Forma Combined Statements of Operations for the Nine Months ended
September 30, 1996 26
</TABLE>
(c) Exhibits
23.2 Consent of Luboshitz, Kaiserer Co., Arthur Anderson
2
<PAGE> 3
LUBOSHITZ,
KASIERER & CO.
ARTHUR ANDERSEN
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS OF FIBRONICS LTD.
We have audited the combined balance sheets of the Fibronics Ltd. Group (the
"Group") as of December 31, 1995 and 1994, and the related combined statements
of operations and cash flows for each of the three years in the period ended
December 31, 1995. These financial statements are the responsibility of the
Group's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards
in Israel and in the United States, including those prescribed by the Auditor's
(Mode of Performance) Regulations (Israel), 1973. Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the combined financial position of the Group as of
December 31, 1995 and 1994, and the combined results of their operations and
their combined cash flows for each of the three years in the period ended
December 31, 1995 in conformity with accounting principles generally accepted in
Israel and in the United States (as applicable to the financial statements of
the Group, such principles are practically identical).
CERTIFIED PUBLIC ACCOUNTANTS (ISR.)
Haifa, February 29, 1996
(except with respect to the subsequent events discussed in Note 20 as to which
the date is October 30, 1996).
3
<PAGE> 4
FIBRONICS LTD. GROUP
COMBINED BALANCE SHEETS
In thousands of U.S. dollars
<TABLE>
<CAPTION>
DECEMBER 31
----------------------
NOTE 1995 1994
---- ------- -------
<S> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents 1,145 759
Receivables, net (3) 10,938 8,529
Inventories (4) 7,380 6,671
Prepaid and other current assets 301 567
------ -------
Total current assets 19,764 16,526
------ -------
FIXED ASSETS (5)
Cost 12,994 14,021
Less - accumulated depreciation (9,893) (10,222)
------ -------
3,101 3,799
------ -------
OTHER ASSETS 299 349
------ -------
23,164 20,674
====== =======
</TABLE>
4
<PAGE> 5
<TABLE>
<CAPTION>
DECEMBER 31
----------------------
NOTE 1995 1994
---- ------- -------
<S> <C> <C> <C>
CURRENT LIABILITIES
Banks (6) 9,169 7,824
Trade payables 3,200 4,980
Accrued payroll and other expenses 3,371 6,215
Current maturities 5,176 4,610
------ ------
Total current liabilities 20,916 23,629
------ ------
LOAN FROM ELBIT LTD. (7) 6,781 --
------ ------
LONG-TERM LIABILITIES
Bank and others (8) 2,328 3,886
Accrued severance pay, net (9) 116 215
------ ------
2,444 4,101
------ ------
CONTINGENT LIABILITIES
AND COMMITMENTS (11)
SHAREHOLDERS' DEFICIENCY (12) (6,977) (7,056)
------ ------
23,164 20,674
====== ======
</TABLE>
. . . . . . . . . . . . . . . . . . . . . . .
YIGAL BARUCHI PESAH DAVID
Chief Executive Officer Controller
and member of
Board of Directors
THE ACCOMPANYING NOTES FORM AN INTEGRAL PART OF THESE COMBINED
FINANCIAL STATEMENTS.
5
<PAGE> 6
FIBRONICS LTD. GROUP
COMBINED STATEMENTS OF OPERATIONS
In thousands of U.S. dollars
<TABLE>
<CAPTION>
DECEMBER 31
-------------------------------------
NOTE 1995 1994 1993
---- ------ ------- ------
<S> <C> <C> <C> <C>
Net sales 35,003 33,355 47,590
Cost of sales (13) 19,127 20,725 25,034
------ ------- ------
Gross profit 15,876 12,630 22,556
------ ------- ------
Selling expenses 15,129 16,712 19,259
Research and development costs, net (14) 545 76 4,966
Administrative and general expenses 1,485 3,751 3,202
------ ------- ------
Total operating expenses 17,159 20,539 27,427
------ ------- ------
Operating loss (1,283) (7,909) (4,871)
Financing expenses, net (15) 1,753 1,577 1,104
Restructuring costs (16) -- 1,953 --
Other income (expenses), net 815 (118) (256)
------ ------- ------
Net loss (2,221) (11,557) (6,231)
====== ======= ======
</TABLE>
THE ACCOMPANYING NOTES FORM AN INTEGRAL PART OF THESE COMBINED
FINANCIAL STATEMENTS.
6
<PAGE> 7
FIBRONICS LTD. GROUP
COMBINED STATEMENTS OF CASH FLOWS
In thousands of U.S. dollars
<TABLE>
<CAPTION>
DECEMBER 31
------------------------------
1995 1994 1993
------ ------ ------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C>
Net loss (2,221) (11,557) (6,231)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Revenues and expenses not affecting operating cash
flows:
Depreciation and amortization 1,459 2,455 2,990
Severance pay, net (99) (92) 34
Loss (gain) on disposal and write off of fixed assets (205) 410 (61)
Linkage increments on long-term loans 10 56 (35)
Changes in operating assets and liabilities:
Receivables (2,409) 751 3,698
Inventories (709) 1,524 5587
Prepaid and other current assets 266 218 73
Payables and accrued expenses (4,624) 2,693 (3,873)
------ ------ ------
Net cash used in operating activities (8,532) (3,542) (2,848)
------ ------ ------
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in fixed assets (786) (361) (943)
Proceeds from disposal of fixed assets 280 156 129
------ ------ ------
Net cash used in investing activities (506) (205) (814)
------ ------ ------
CASH FLOWS FROM FINANCING ACTIVITIES
Additional paid-in capital -- 4,183 2,022
Long-term loans from banks -- 192 227
Repayment of long-term loans from banks (1,002) (1,657) --
Loan from Elbit 9,081 -- --
Short-term borrowings from banks, net 1,345 1,165 1,507
------ ------ ------
Net cash provided by financing activities 9,424 3,883 3,756
------ ------ ------
INCREASE IN CASH AND CASH EQUIVALENTS 386 136 94
CASH AND CASH EQUIVALENTS AT BEGINNING
OF YEAR 759 623 529
------ ------ ------
CASH AND CASH EQUIVALENTS AT END OF YEAR 1,145 759 623
====== ====== ======
Interest paid 1,650 1,761 1,195
====== ====== ======
</TABLE>
THE ACCOMPANYING NOTES FORM AN INTEGRAL PART OF THESE COMBINED
FINANCIAL STATEMENTS.
7
<PAGE> 8
FIBRONICS LTD. GROUP
NOTES TO THE COMBINED STATEMENTS OF CASH FLOWS
In thousands of U.S. dollars
NOTE 1 - GENERAL
A. BASIS OF PRESENTATION
The combined financial statements of the Fibronics Ltd. Group (the
"Group") comprise the accounts of the following companies which
commencing in 1994 are, directly and indirectly, wholly-owned
subsidiaries of Elbit Ltd. ("Elbit").
- Fibronics Ltd. (the "Company") and its marketing
subsidiaries (principally in the United Kingdom and in
Germany).
- Fibronics International Inc. (marketing company in the
U.S.)
Material intercompany balances and transaction among the companies
in the Group have been eliminated in the combined financial
statements.
B. The Group is engaged in the development, manufacture and
international marketing of high-speed information transfer and
distribution systems. The term "affiliated company", as used in
these financial statements, refers to affiliates of Elbit, and its
principal shareholder, Elron Electronic Industries Ltd. ("Elron").
C. The Group incurred significant losses from operations in previous
years resulting in a shareholders' deficiency of approximately
$6,977 as of December 31, 1995. Elbit has made a commitment that
it will assist the Group in meeting its working capital needs for
1996 in order to enable the Group to continue operations.
D. The accompanying financial statements have been prepared in U.S.
dollars, as the currency of the primary economic environment in
which the operations of the Group are conducted is the U.S.
dollar. The majority of the Group's sales are made outside Israel
in non-Israeli currencies (mainly the U.S. dollar), as are the
majority of purchases of materials and components. Thus, the
functional currency of the Group is the U.S. dollar.
Transactions and balances originally denominated in U.S. dollars
are presented at their original amounts. Transactions and balances
in other currencies are remeasured into U.S. dollars in accordance
with principles identical to those prescribed in Statement No. 52
of the Financial Accounting Standards Board of the United States
(FASB). Exchange gains and losses from the aforementioned
remeasurement are reflected in the statement of operations.
8
<PAGE> 9
FIBRONICS LTD. GROUP
NOTES TO THE COMBINED STATEMENTS OF CASH FLOWS (CONT.)
In thousands of U.S. dollars
NOTE 1 - GENERAL (CONT.)
E. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
F. REORGANIZATION OF ELBIT
In December 1995, Elbit announced that its Board of Directors
approved in principle the exploration of a strategic split of
Elbit's business segments into three separate publicly-traded
companies in the defense, healthcare and commercial businesses.
The proposal is subject to all necessary approvals, permits and
licenses required by law, in both Israel and in other applicable
countries. Upon final approval of this proposal by the Elbit Board
of Directors, it will be submitted for approval by Elbit's
shareholders. The accompanying financial statements do not reflect
the impact of any adjustments that may result from this
reorganization.
NOTE 2 - ACCOUNTING POLICIES
The financial statements have been prepared in conformity with
accounting principles generally accepted in Israel and in the United
States (as applicable to the financial statements of the Group such
principles are practically identical). The significant accounting
policies followed in the preparation of the financial statements, on a
consistent basis, are:
A. INVENTORIES
Inventories are valued at the lower of cost or market, cost being
determined as follows:
Raw materials - "first-in, first-out" method.
Finished products and
work in process - materials as above; labor and
overhead on an average basis
9
<PAGE> 10
FIBRONICS LTD. GROUP
NOTES TO THE COMBINED STATEMENTS OF CASH FLOWS (CONT.)
In thousands of U.S. dollars
NOTE 2 - ACCOUNTING POLICIES (CONT.)
B. CASH EQUIVALENTS
All highly liquid investments are considered as cash equivalents
if the investments mature within three months from the date of
acquisition.
C. FIXED ASSETS
Fixed assets are stated at cost, net of investment grants
received. Repairs and maintenance expenses are charged to
operations as incurred. Depreciation is calculated by the
straight-line method over the estimated useful lives of the assets
(principally five to fifteen years).
D. RESEARCH AND DEVELOPMENT COSTS
Research and development costs, net of participations, are
charged to operations as incurred.
E. PRODUCT WARRANTY
The provision for product warranty is recorded based on the
Company's experience and engineering estimates.
F. DOUBTFUL DEBTS
Known bad debts are written off. Doubtful debts are provided for
specifically.
G. BALANCES IN FOREIGN CURRENCY AND LINKED BALANCES
Balances in foreign currency are translated at the exchange rates
in effect at balance sheet date.
Balances linked to the Consumer Price Index in Israel (CPI) are
stated at the latest index published prior to balance sheet date.
10
<PAGE> 11
FIBRONICS LTD. GROUP
NOTES TO THE COMBINED STATEMENTS OF CASH FLOWS (CONT.)
In thousands of U.S. dollars
NOTE 2 - ACCOUNTING POLICIES (CONT.)
G. BALANCES IN FOREIGN CURRENCY AND LINKED BALANCES (Cont.)
Data regarding the representative exchange rate of the U.S. dollar
and the CPI are as follows:
<TABLE>
<CAPTION>
EXCHANGE RATE OF CONSUMER
END OF YEAR U.S. DOLLAR PRICE INDEX
-------------------------- ---------------- -----------
<S> <C> <C>
1995 3.135 313.3
1994 3.018 289.7
1993 2.986 253.2
CHANGE DURING THE YEAR % %
-------------------------- ---------------- -----------
1995 3.9 8.1
1994 1.1 14.5
1993 8.0 11.2
</TABLE>
NOTE 3 - RECEIVABLES
<TABLE>
<CAPTION>
DECEMBER 31
-----------
1995 1994
---- ----
<S> <C> <C>
Trade -
Elbit 198 -
Other (*) 9,999 7,673
Government departments 712 826
Sundry 29 30
------ -----
10,938 8,529
====== =====
(*) Net of allowance for doubtful debts 264 509
====== =====
</TABLE>
NOTE 4 - INVENTORIES
<TABLE>
<CAPTION>
DECEMBER 31
-----------
1995 1994
----- ----
<S> <C> <C>
Raw materials 2,636 2,576
Work in process 1,246 833
Finished products 3,498 3,262
------ -----
7,380 6,671
====== =====
</TABLE>
11
<PAGE> 12
FIBRONICS LTD. GROUP
NOTES TO THE COMBINED STATEMENTS OF CASH FLOWS (CONT.)
In thousands of U.S. dollars
NOTE 5 - FIXED ASSETS
<TABLE>
<CAPTION>
DECEMBER 31
-----------
1995 1994
---- ----
<S> <C> <C>
Machinery, computers and vehicles 9,022 10,107
Office furniture and fixtures 3,801 3,706
Leasehold improvements 171 208
------ ------
12,994 14,021
Less - accumulated depreciation and
amortization (9,893) (10,222)
------ ------
3,101 3,799
====== ======
</TABLE>
Depreciation and amortization expense totaled approximately $1,409,
$1,933 and $2.171 in 1995, 1994 and 1993, respectively.
Investment grants deducted from cost of fixed assets amount to $680
(1994 - same).
Liens - see Note 10.
NOTE 6 - BANKS
The loans are linked to the U.S. dollar and bear interest at annual
rates of between 6.5% and 7.2%.
Collateral - see Note 10.
NOTE 7 - LOAN FROM ELBIT LTD.
The loan is linked to the U.S. dollar and bears interest at an annual
rate of 7.5%. Maturity dates have not yet been determined.
12
<PAGE> 13
FIBRONICS LTD. GROUP
NOTES TO THE COMBINED STATEMENTS OF CASH FLOWS (CONT.)
In thousands of U.S. dollars
NOTE 8 - LONG-TERM LIABILITIES
A. COMPOSITION:
<TABLE>
<CAPTION>
DECEMBER 31
ANNUAL --------------
INTEREST 1995 1994
RATE ------ -----
% (4)
--------
<S> <C> <C> <C> <C>
Bank loans (1) 7.2 4,250 4,250
Bank loans (2) 8.5-10.5 3,154 3,758
Capital lease - 173
Other (3) 10.0-11.5 100 315
------ -----
7,504 8,496
Less - current maturities 5,176 4,610
------ -----
2,328 3,886
====== =====
</TABLE>
(1) These loans are subject to various financial covenants.
(2) The loans are secured by guarantees from the Government of
Israel in accordance with the Law for the Encouragement of
Capital Investments, 1959.
(3) Loans of $100 (1994 - $280) are linked to the CPI.
(4) The loans bear interest mainly based on the LIBOR rate. The
above mentioned rates are the rates as of December 31, 1995.
B. MATURITIES
<TABLE>
<CAPTION>
<S> <C>
First year - current maturities 5,176
Second year 1,596
Third year 486
Fourth year 124
Fifth year 122
-----
7,504
=====
</TABLE>
C. COLLATERAL - see Note 10.
13
<PAGE> 14
FIBRONICS LTD. GROUP
NOTES TO THE COMBINED STATEMENTS OF CASH FLOWS (CONT.)
In thousands of U.S. dollars
NOTE 9 - ACCRUED SEVERANCE PAY, NET
The Company is obligated to make severance payments to employees upon
termination of their employment. For some of its employees, including
senior employees, the Company discharges its obligation for severance
pay by the payment of premiums to an insurance company under an approve
plan. Other employees have joined a comprehensive pension plan. The
deposits with the insurance company and the pension fund are not under
the control of the Company and, therefore, are not presented in the
balance sheet.
The Company makes deposits with a severance pay fund to cover a portion
of its liability for severance pay over and above its contributions to
the pension plan as detailed below:
<TABLE>
<CAPTION>
DECEMBER 31
-----------
1995 1994
---- ----
<S> <C> <C>
Accrued severance pay 324 410
Less - deposits (including accrued profits) 208 195
---- -----
116 215
==== =====
</TABLE>
NOTE 10 - LIENS
As collateral for its liabilities to banks and to the State of Israel
(in respect of investment grants), the Company has registered fixed and
floating charges on its assets.
NOTE 11 - CONTINGENT LIABILITIES AND COMMITMENTS
A. LEASES
Various companies in the Group lease facilities under operating
leases, certain of which include escalation clauses, purchase
options, renewal options and requirements to pay property taxes
and utilities. The companies also lease certain furniture and
equipment under non-cancellable operating lease agreements.
14
<PAGE> 15
FIBRONICS LTD. GROUP
NOTES TO THE COMBINED STATEMENTS OF CASH FLOWS (CONT.)
In thousands of U.S. dollars
A. LEASES (Cont.)
The future minimum lease commitments under operating leases as of
December 31, 1995, are as follows:
Year ending December 31:
------------------------
<TABLE>
<S> <C> <C>
1996 605
1997 450
1998 197
1999 91
2000 86
Thereafter 68
--------
1,497
========
</TABLE>
Rentals charged to operations under these leases for the year
ended December 31, 1995, 1994 and 1993 amounted to approximately
$460, $600 and $1,636, respectively.
B. ROYALTIES
In connection with its research and development, the Company has
received participation payments from the State of Israel. The
participation commits the Company to pay royalties of 2%, mainly
on the related product sales, and is subject to various time
restrictions and maximum amounts. Royalties for the current year
amounting to $300 (1994 - $386. 1993 - $386) are included in
selling expenses.
The Company received in prior years participations in selling
expenses by the Government of Israel. The participations commit
the Company to pay a royalty of 3% of the increase in sales over a
base amount.
C. According to a letter of understanding between the Company and a
supplier (Kalpana), the Company will pay the supplier royalties of
$25 per unit sold, after the first 12,000 units.
15
<PAGE> 16
FIBRONICS LTD. GROUP
NOTES TO THE COMBINED STATEMENTS OF CASH FLOWS (CONT.)
In thousands of U.S. dollars
NOTE 11 - CONTINGENT LIABILITIES AND COMMITMENTS (CONT.)
D. According to an agreement between the Company and a supplier
(QSP), the Company may be liable for payment of up to $200, if the
agreement with the supplier is terminated
E. According to terms of an agreement between the Company and Elbit,
Elbit has undertaken to finance the Company's research and
development expenses, contingent upon specific conditions, during
the years 1995 and 1996. In consideration for the financing of its
research and development programs, commencing on January 1, 1997,
and for a period of five years, the Company is committed to pay
Elbit royalties for each product developed through this financing
at a rate of 3% of total sales (see Note 14).
F. According to an agreement between the Company and a supplier
(Plaintree), the Company has a commitment to purchase chips of the
supplier in 1996 of up to $1,200.
G. Short-term deposits amounting to $105 are pledged to secure bank
credit received by a company in Germany.
NOTE 12 - SHAREHOLDERS' DEFICIENCY
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31
---------------------
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
Balance, beginning of year (7,056) 318 4,418
Additional paid-in capital -- 4,183 109
Net income (loss) 79 (11,557) (6,231)
------- ------- -------
(6,977) (7,056) 318
======= ======= =======
</TABLE>
16
<PAGE> 17
FIBRONICS LTD. GROUP
NOTES TO THE COMBINED STATEMENTS OF CASH FLOWS (CONT.)
In thousands of U.S. dollars
NOTE 13 - COST OF SALES
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31
----------------------------------
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
Materials 16,951 15,115 17,506
Labor and overhead 2,417 4,161 5,529
Depreciation and amortization 408 937 1,069
------- ------- -------
19,776 20,213 24,104
Decrease (increase) in inventories of finished
products and work in process (649) 512 930
------- ------- -------
19,127 20,725 25,034
======= ======= =======
</TABLE>
NOTE 14 - RESEARCH AND DEVELOPMENT COSTS, NET
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31
--------------------------------
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Total expenditure for research and
product development net 4,578 6,186 6,772
Less - participation by:
The Government of Israel (2,233) (2,589) (1,806)
Elbit Ltd. (1,800) (3,521) --
------ ------ ------
545 76 4,966
====== ====== ======
</TABLE>
NOTE 15 - FINANCING EXPENSES, NET
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31
----------------------------------
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Expenses:
Long-term loans 694 658 564
Short-term loans and other 1,055 864 700
Loan from Elron 147 94 6
----- ----- -----
1,896 1,616 1,270
Less - financing income 143 39 166
----- ----- -----
1,753 1,577 1,104
===== ===== =====
</TABLE>
17
<PAGE> 18
FIBRONICS LTD. GROUP
NOTES TO THE COMBINED STATEMENTS OF CASH FLOWS (CONT.)
In thousands of U.S. dollars
NOTE 16 - RESTRUCTURING COSTS
<TABLE>
<CAPTION>
FOR THE
YEAR ENDED
DECEMBER 31
1994
-----------
<S> <C>
Writedown of discontinued fixed assets
and facility closure costs 416
Severance payments in excess of regular
provisions and involuntary employee
termination costs 837
Lease buyout 325
Other 375
-----
1,953
=====
</TABLE>
NOTE 17 - TRANSACTIONS WITH RELATED PARTIES
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31
---------------------------
1995 1994 1993
------ ----- -----
<S> <C> <C> <C>
Income:
Sales 9,399 9,729 --
Participation in research and
development 1,800 3,521 --
Forgiveness of debt 2,300 -- --
Costs and expenses:
Cost of sales, net 1,917 302 --
Selling expenses 150 673 --
Financing expenses 147 94 6
Sales of fixed assets 320 -- --
Exercise of warrants by Elron -- -- 1,550
</TABLE>
18
<PAGE> 19
FIBRONICS LTD. GROUP
NOTES TO THE COMBINED STATEMENTS OF CASH FLOWS (CONT.)
In thousands of U.S. dollars
NOTE 18 - TAXES ON INCOME
A. The Company's production facilities have been granted the status
of "approved enterprise" entitling the Company to certain tax
benefits. The period of such benefits is limited to a certain
number of years. This period will terminate in 1996 and 1997 for
certain plant expansions and in 2005 and 2007 in respect of other
expansions.
Income deriving from the "approved enterprise" is subject to tax
at a reduced rate.
The above benefits are conditional, inter alia, on the Company
exporting specified percentages of its annual turnover. The
Company has fulfilled this condition to date.
B. The Group has tax loss carryforwards amounting to approximately
$14,500 some of which expire in varying amounts through 2009. A
valuation allowance has been provided for the full amount of the
deferred tax benefit related to these carryforwards due to the
uncertainty in respect of their realization.
C. Final tax assessments for the Company have been received through
1993.
NOTE 19 - CONCENTRATIONS OF CREDIT RISK
Financial instruments which potentially subject the Group to
concentrations of credit risk consist principally of accounts
receivable. These concentrations of credit risk within geographical
markets may be affected by changes in economic or other conditions and
may, accordingly, impact the Group's overall credit risk. The Group
performs ongoing credit evaluations of its customers and maintains
allowances for credit losses.
Accounts receivable-trade, classified by geographical markets at
December 31, 1995 and 1994 are:
<TABLE>
<CAPTION>
DECEMBER 31
------------------------
1995 1994
----- -----
<S> <C> <C>
Americas 1,207 1,966
Israel 1,097 468
Europe 7,039 4,600
Other 656 639
----- -----
9,999 7,673
===== =====
</TABLE>
19
<PAGE> 20
FIBRONICS LTD. GROUP
NOTES TO THE COMBINED STATEMENTS OF CASH FLOWS (CONT.)
In thousands of U.S. dollars
NOTE 20 - SUBSEQUENT EVENTS
Pursuant to an agreement signed in September 1996, all the assets,
of the Group except cash and cash equivalents, trade and other
receivables, rights and obligations of the Group under certain
lease agreements and other assets, were sold to MRV
Communications, Inc. ("MRV"), a U.S. publicly traded company, in
consideration of approximately $23,000 in cash and shares of MRV,
which consideration exceeds the carrying value of the assets sold.
According to the agreement Elbit and the Group may not produce or
sell any proprietary software or hardware developed by the Group
and transferred to MRV except for a specific technology which is
shared by both sides, for a period of 18 months from the date of
closing.
# # # # # #
20
<PAGE> 21
FIBRONICS LTD, GROUP
COMBINED BALANCE SHEET (Unaudited)
SEPTEMBER 25, 1996
<TABLE>
<CAPTION>
CURRENT ASSETS
<S> <C>
Cash $ 1,648,000
Receivables, net
6,418,000
Inventories
8,433,000
Prepaid and other assets
1,391,000
------------
Total current assets 17,890,000
------------
FIXED ASSETS
Cost 13,608,000
Less - accumulated depreciation (10,674,000)
------------
2,934,000
------------
OTHER ASSETS
299,000
------------
TOTAL ASSETS $ 21,123,000
============
CURRENT LIABILITIES
Suppliers
2,654,000
Accrued payroll and other expenses
4,046,000
------------
Total current
liabilities 6,700,000
------------
LOAN FROM ELBIT LTD 13,545,000
------------
LONG-TERM LIABILITIES
Banks and others 13,996,000
------------
SHAREHOLDERS' DEFICIENCY
Share capital
405,000
Additional paid-in capital 41,642,000
Accumulated deficit (55,165,000)
------------
(13,118,000)
------------
TOTAL LIABILITIES & SHAREHOLDERS' DEFICIENCY $ 21,123,000
============
</TABLE>
21
<PAGE> 22
FIBRONICS LTD, GROUP
STATEMENT OF OPERATIONS (Unaudited)
<TABLE>
<CAPTION>
For the Period
January 1, 1996 For the Nine Months
to September 25, Ended September 30,
1996 1995
------------- ------------------
<S> <C> <C>
NET SALES $ 19,481,000 $ 25,946,000
COST OF SALES
10,823,000 14,490,000
------------ ------------
GROSS PROFIT
8,658,000 11,456,000
RESEARCH & DEVELOPMENT
1,879,000 419,000
SELLING, GENERAL & ADMINISTRATIVE EXPENSES
11,489,000 12,131,000
------------ ------------
TOTAL OPERATING EXPENSES
13,368,000 12,550,000
------------ ------------
OPERATING LOSS
(4,710,000) (1,094,000)
FINANCING EXPENSES, NET
1,240,000 (1,246,000)
OTHER INCOME
(193,000) 806,000
------------ ------------
NET LOSS $ (6,143,000) $ (1,534,000)
============ ============
</TABLE>
22
<PAGE> 23
FIBRONICS LTD. GROUP
STATEMENT OF CASH FLOWS (UNAUDITED)
FOR THE PERIOD JANUARY 1, 1996 TO SEPTEMBER 25, 1996
<TABLE>
<CAPTION>
FOR THE PERIOD FOR THE NINE
JANUARY 1, 1996 MONTHS ENDED
TO SEPTEMBER 25, SEPTEMBER 30,
1996 1995
--------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net loss $(5,799,000) $(1,534,000)
Adjustments to reconcile loss to net cash provided by operating
activities:
Revenues and expenses not affecting operating cash flows:
Depreciation and amortization 920,000 1,213,000
Severance pay, net (116,000) (23,000)
Gain on disposal and write-off of fixed assets (58,000) (150,000)
Linkage increments on long-term loans -- 7,000
Changes in operating assets and liabilities:
Receivables 3,653,000 (1,691,000)
Inventories (1,420,000) (2,082,000)
Prepaid and other current assets (224,000) 98,000
Payables and accrued expenses 156,000 (2,619,000
----------- -----------
Net cash used in operating activities (2,888,000) (6,781,000)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in fixed assets (761,000) (450,000)
Proceeds from disposal of fixed assets 64,000 270,000
----------- -----------
Net cash used in investing activities (697,000) (180,000)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of long-term loans from banks (7,504,000) (639,000)
Loan from Elbit 6,765,000 7,372,000
Short-term borrowings from banks, net 4,088,000 680,000
----------- -----------
Net cash provided by financing activities 3,094,000 7,413,000
----------- -----------
INCREASE IN CASH AND CASH EQUIVALENTS 503,000 452,000
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 1,145,000 759,000
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF YEAR 1,648,000 1,211,000
=========== ===========
Interest paid 1,300,000 $ 1,150,000
=========== ===========
</TABLE>
23
<PAGE> 24
FIBRONICS LTD. GROUP
NOTES TO UNAUDITED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION - The accompanying unaudited condensed
financial statements have been prepared in accordance with the
requirements of Regulation S-X 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 included
elsewhere herein.
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 the period presented. The results of operations and cash
flows for such period is not necessarily indicative of results to
be expected for the full year.
24
<PAGE> 25
UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
For the Year ended December 31, 1995
(in thousands except per share amounts)
<TABLE>
<CAPTION>
For the Year For the Four Months
ended ended
December 31, 1995 April 30, 1995
MRV Communications, Inc. Galcom Networking, Ltd
(a) (b)
<S> <C> <C>
REVENUES $ 39,202 $ 2,076
COSTS AND EXPENSES
Cost of goods sold 22,608 1,285
Research and development
expenses 4,044 28
Selling, general and
administrative expenses 6,799 964
Purchased technology in
progress 6,211 --
Restructuring costs 1,465 --
-------- -------
41,127 2,277
-------- -------
Operating income (loss) (1,925) (201)
Financing expenses, net --
Other income (expense) 654 (222)
(Credit) Provision for income taxes 2 --
Net income (loss) (1,273) (423)
Net income (loss) per share
Weighted average common and
common equivalent shares outstanding
</TABLE>
<TABLE>
<CAPTION>
For the period For the Year
January 1, 1995 ended
to June 29, 1995 December 31, 1995
Ace 400 Communications Ltd Fibronics Group Ltd.
(b) (b)
<S> <C> <C>
REVENUES $ 5,727 $ 35,003
COSTS AND EXPENSES
Cost of goods sold 3,607 19,127
Research and development
expenses 529 545
Selling, general and
administrative expenses 1,894 16,614
Purchased technology in
progress -- --
Restructuring costs -- --
-------- --------
6,030 36,286
-------- --------
Operating income (loss) (303) (1,283)
Financing expenses, net (1,753)
Other income (expense) (517) 815
(Credit) Provision for income taxes -- --
Net income (loss) (820) (2,221)
Net income (loss) per share
Weighted average common and
common equivalent shares outstanding
</TABLE>
<TABLE>
<CAPTION>
Pro Forma
Adjustment Balances
(c) (b) (d)
<S> <C> <C>
REVENUES $ -- $82,008
COSTS AND EXPENSES
Cost of goods sold -- 46,627
Research and development
expenses -- 5,146
Selling, general and
administrative expenses -- 26,271
Purchased technology in
progress 6,211 --
Restructuring costs -- 1,465
-------- -------
6,211 79,509
-------- -------
Operating income (loss) (6,211) 2,499
Financing expenses, net -- (1,753)
Other income (expense) -- 730
(Credit) Provision for income taxes (2,236) 2,238
Net income (loss) (3,975) 762
Net income (loss) per share $ 0.04
Weighted average common and
common equivalent shares outstanding 18,377
</TABLE>
Note
a Includes results of operations associated with assets acquired from
Galcom Networking Ltd for the period May 2, 1995 to December 31, 1995
and also includes results of operations associated with assets acquired
from ACE 400 Communications Ltd for the period June 30, 1995 to
December 31, 1995.
b The pro forma information above shows the combined statements of
operations of MRV Communications, Inc. and operations associated with
assets acquired from ACE 400 Communications, Ltd, Galcom Networking Ltd
and Fibronics Group Ltd as if the purchase of those assets had taken
place as of January 1, 1995. The results of Galcom Networking, Ltd. for
the four months ended April 30, 1995 include only those related to the
assets purchased by MRV. The assets acquired and liabilities assumed
from ACE 400 Communications did not include those of a subsidiary named
North Hills Europe on whose financial statements their auditor has
issued a disclaimer of opinion. The Company is not liable for
resolution of liablities related to North Hills Europe or its
liquidation proceedings. North Hills Europe has no effect on an
investment decision on the Company's securities. North Hills Europe
ceased operations in 1995. Any amounts for the period January 1, 1995
to June 29, 1995, related to North Hills Europe, included in the
results of ACE 400 Communications, Ltd. above are immaterial.
c Adjustment to eliminate nonrecurring purchased technology in progress
and tax effect thereon.
d Adjustments to amortize goodwill recorded and fair value adjustments to
property, plant and equipment are not material.
25
<PAGE> 26
UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
For the Period January 1, 1996 to September 25, 1996
(in thousands except per share amounts)
<TABLE>
<CAPTION>
For the Nine Months For the period
ended January 1, 1996 to
September 30, 1996 September 25, 1996 Pro Forma
MRV Communications, Inc. Fibronics Group Ltd. Adjustment Balances
(a) (b) (c)
<S> <C> <C> <C> <C>
REVENUES $ 57,779 $ 19,481 $ -- $ 77,260
COSTS AND EXPENSES
Cost of goods sold 33,682 10,823 -- 44,505
Research and development
expenses 5,787 1,879 -- 7,666
Selling, general and
administrative expenses 8,808 11,489 -- 20,297
Purchased technology in
progress 17,795 -- 17,795 --
Restructuring costs 6,974 -- -- 6,974
-------- -------- ------- --------
73,046 24,191 17,795 79,442
-------- -------- ------- --------
Operating income (loss) (15,267) (4,710) (17,795) (2,182)
Financing expenses, net -- (1,240) -- (1,240)
Other income (expense) 296 (193) -- 103
(Credit) Provision for income taxes (5,982) -- (6,406) 424
Minority interests 117 -- -- 117
-------- -------- ------- --------
Net income (loss) (9,106) (6,143) (11,389) (3,860)
Net income (loss) per share $ (0.20)
Weighted average common and
common equivalent shares outstanding 19,312
</TABLE>
Note
a Includes results of operations associated with assets acquired from
Fibronics Group Ltd for the period September 26, 1996 to September 30,
1996.
b Adjustment to eliminate nonrecurring purchased technology in progress
and tax effect thereon.
c The pro forma information above shows the combined statements of
operations of MRV Communications, Inc. and operations associated with
assets acquired from Fibronics Group Ltd. as if the purchase of those
assets had taken place as of January 1, 1996. Adjustments to amortize
goodwill recorded and fair value adjustments to property, plant and
equipment are not material.
26
<PAGE> 27
SIGNATURES
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 this 5th day of August, 1997 hereunto duly
authorized.
MRV COMMUNICATIONS, INC.
BY: /s/ EDMUND GLAZER
----------------------------
Edmund Glazer
Chief Financial Officer
27
<PAGE> 1
EXHIBIT 23.2
LUBOSHITZ, KASIERER & CO
ARTHUR ANDERSEN
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our report dated February 29, 1996
and to all references to our firm included in or made a part of this
Registration Statement on form S-3.
Luboshitz, Kasierer & Co.
Certified Public Accountants (Isr.)
Haifa, Israel
July 31, 1997