<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
[X] Quarterly Report under Section 13 or 15 (d) of the Securities Exchange
Act of 1934 for the quarterly period ended September 30, 1996
[ ] Transition Report pursuant to section 13 or 15(d) of the Securities
Exchange Act.
For the transition period from _______________ to _______________
Commission file number 0-23452
MRV COMMUNICATIONS, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 06-1340090
--------------------------------- -------------------
(State of other jurisdiction (IRS Employer
of incorporation or organization) identification no.)
8917 Fullbright Ave., Chatsworth, CA 91311
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
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 November 11, 1996 there were 20,646,746 shares of Common
Stock, $0.0034 par value per share, outstanding.
<PAGE> 2
MRV COMMUNICATIONS, INC.
Form 10-Q September 30, 1996
As used herein, "MRV" or "the Company" refers to MRV Communications, Inc.
INDEX
<TABLE>
<CAPTION>
PAGE
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NUMBER
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<S> <C>
PART I FINANCIAL INFORMATION
Item 1: Financial Statements:
Condensed Consolidated Balance Sheets as of December 31,
1995 and September 30, 1996 (unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Condensed Consolidated Statements of Operations (unaudited)for the Three and Nine Months ended September 30,
1995 and 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Condensed Consolidated Statements of Cash Flows(unaudited)
for the Nine Months ended September 30, 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
Part II Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Signature . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
</TABLE>
2
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MRV COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share data)
<TABLE>
<CAPTION>
(unaudited) (audited)
------------- -----------
September 30, December 31,
1996 1995
------------- ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 6,176 $ 1,951
Short-term investments 11,700 1,000
Restricted cash 5,070 6,272
Accounts receivable, net of
reserves of $1,647 in 1996 and $825 in 1995 23,344 10,780
Inventories 17,327 8,382
Deferred income taxes 918 804
Other current assets 2,523 608
------- -------
Total current assets 67,058 29,797
------- -------
PROPERTY AND EQUIPMENT - At cost,
net of depreciation and amortization 6,399 2,060
OTHER ASSETS:
Goodwill 2,882 525
Deferred income taxes 8,917 925
Other 17 -
------- -------
$85,273 $33,307
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable 10,057 4,342
Current maturities of financing lease
obligations 156 33
Accrued liabilities 10,693 2,221
Income taxes payable 1,554 1,215
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Total current liabilities 22,460 7,778
------- -------
LONG-TERM LIABILITIES:
Deferred rent 38 46
Deferred income taxes 129 -
Other long term liabilities 306 191
Financing lease obligations 1,068 34
Convertible debentures 30,000 -
------- -------
Total long-term liabilities 31,541 271
------- -------
Minority interests 805 -
STOCKHOLDERS' EQUITY:
Preferred stock, $0.01 par value:
no shares outstanding - -
Common stock, $0.0033 par value:
40,000,000 shares authorized and
20,013,450 shares outstanding in 1996
and 18,929,538 shares outstanding in
1995 66 63
Additional paid-in capital 39,998 23,491
Retained earnings (Deficit) (9,638) 1,704
Adjustment for foreign currency translation 41 -
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Total stockholders' equity 30,467 25,258
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$85,273 $33,307
======= =======
</TABLE>
See accompanying notes
3
<PAGE> 4
MRV COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands, except share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
-------------------------------- -----------------------------------
September 30, September 30, September 30, September 30,
1996 1995 1996 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
REVENUES, net $ 22,664 $11,135 $ 57,779 $26,182
-------- ------- -------- -------
COSTS AND EXPENSES:
Cost of goods sold 13,282 6,309 33,682 15,404
Research and development
expenses 2,111 1,160 5,787 2,662
Selling, general and
administrative expenses 3,713 2,021 8,808 4,392
Purchased technology
in progress 17,795 0 17,795 6,211
Restructuring costs 6,974 0 6,974 1,465
-------- ------- -------- -------
Operating income (loss) (21,211) 1,645 (15,267) (3,952)
Other income, net of interest 132 118 296 526
expense
Interest expense related to
convertible debentures and
acquisition 2,236 - 2,236 -
(Credit) Provision for
income taxes (7,865) 608 (5,982) (579)
Minority interests 54 - 117 -
-------- ------- -------- -------
NET (LOSS) INCOME $(15,504) $ 1,155 $(11,342) $(2,847)
-------- ------- -------- -------
EARNINGS (LOSS) PER SHARE: $ (0.79) $ 0.06 $ (0.59) $ (0.15)
-------- ------- -------- -------
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES
OUTSTANDING: 19,686,685 20,031,960 19,312,171 18,716,322
---------- ---------- ---------- ----------
PRO FORMA INFORMATION (prior to non-recurring charges)
NET INCOME PRIOR TO
NON-RECURRING CHARGES
NET OF THEIR TAX EFFECTS 2,584 1,155 6,746 2,771
EARNINGS PER SHARE PRIOR TO
NON-RECURRING CHARGES
NET OF THEIR TAX EFFECTS $ 0.12(a) $ 0.06 $ 0.31(a) $ 0.15
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES
OUTSTANDING: 22,861,611(a) 20,031,960 22,112,731(a) 18,716,322
</TABLE>
See accompanying notes
(a) The earnings per share prior to non-recurring charges net of their tax
effects is based on the weighted average number of common shares
outstanding which includes the common stock equivalents of the convertible
debentures issued during the three and nine months ended September 30,
1996. Therefore, the interest expense accrued on the debentures for the
periods, $153,000 less tax benefits of $55,000 for both periods, has been
added to proforma net income in the calculations of proforma earnings
per share.
4
<PAGE> 5
MRV COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
<TABLE>
<CAPTION>
Nine months ended
September 30,
---------------------------
1996 1995
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss (11,342) (2,847)
Adjustments to reconcile net loss
to net cash used in operating activities:
Depreciation and amortization 493 154
Purchased technology in progress 17,795 5,691
Interest related to convertible debentures and acquisition 2,236 -
Provision for losses on accounts receivable 822 160
Minority interest in subsidiary 117 11
Change in assets and liabilities:
Decrease (increase) in:
Accounts receivable (8,012) (5,307)
Inventories (4,735) (3,705)
Deferred income taxes (7,977) (1,927)
Other assets (1,932) (3)
Increase (decrease) in:
Accounts payable 1,257 782
Accrued liabilities 6,546 557
Income taxes payable 339 218
Deferred rent (8) (9)
------- -------
Net cash used in operating activities (4,401) (6,225)
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (2,494) (504)
Purchases of investments (21,449) (12,487)
Proceeds from sale of investments 10,749 9,206
Restricted cash 1,202 -
Net cash used in acquisitions (13,282) (1,000)
------- -------
Net cash used in
investing activities (25,274) (4,785)
------- ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of common stock 3,744 9,506
Proceeds from issuance of convertible debentures 30,000 -
Loans receivable from officers - 42
Other long-term liabilities 115 -
------- -------
Net cash provided by
financing activities 33,859 9,548
Effect of exchange rates on cash and cash equivalents 41,000 -
------- -------
NET INCREASE (DECREASE) IN CASH 4,225 (1,462)
CASH, beginning of period 1,951 4,045
------- -------
CASH, end of period $ 6,176 $ 2,583
======= =======
</TABLE>
See accompanying notes
5
<PAGE> 6
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 (LOSS) EARNINGS PER SHARE - Net (loss) 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 July 11, 1996, Stockholders authorized an additional
20,000,000 shares and a two for one stock split. The date of record for the
stock split was July 29, 1996 and the distribution date was July 31, 1996.
Except where otherwise indicated, all outstanding shares, weighted average
numbers of shares outstanding, and earnings per share calculations in this
document have been adjusted to reflect the two for one stock split.
4. ACQUISITION - This financial statement reflects the acquisition of
Fibronics assets which was completed September 26, 1996. The assets acquired
included purchased technology in progress, inventories, property and equipment
and goodwill. The non-recurring charges for purchased technology in progress
and restructuring resulted from the acquisition and the restructuring plan
adopted in connection the integration of those assets. Charges for interest
expense related to convertible debentures and acquisition were connected with
the private placement of $30,000,000 principal amount of convertible
subordinated debentures in August and September 1996, proceeds from which were
used to finance the cash portion of the purchase price for the Fibronics
assets.
5. RECLASSIFICATIONS - Certain reclassifications have been made to prior
year's amounts to conform to the current year presentation.
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>
Three months ended Nine months ended
September 30 September 30
---------------------- ----------------------
1996 1995 1996 1995
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<S> <C> <C> <C> <C>
Revenues, net 100.0% 100.0% 100.0% 100.0%
Cost of goods sold 58.6 56.7 58.3 58.8
----- ----- ----- -----
Gross profit 41.4 43.3 41.7 41.2
Operating expenses:
Research and development expenses 9.3 10.4 10.0 10.2
Selling, general and
administrative and expenses 16.4 18.1 15.2 16.8
----- ----- ----- -----
Operating income before non-
recurring charges 15.7 14.8 16.4 14.2
Purchased technology in progress 78.5 - 30.8 23.7
Restructuring costs 30.8 - 12.1 5.6
----- ----- ----- -----
Operating income (93.6) 14.8 (26.4) (15.1)
Other income (expense), net 0.6 1.1 0.5 2.0
Interest expense related to convertible
debentures and acquisition (9.9) - (3.9) -
----- ----- ----- -----
Income (loss) before taxes (102.9) 15.8 (29.8) (13.1)
Provision (credit) for income taxes (34.7) 5.5 (10.4) (2.2)
Minority interests 0.2 0.0 0.2 0.0
----- ----- ----- -----
Net income (loss) (68.4) 10.4 (19.6) (10.9)
===== ===== ===== =====
</TABLE>
On September 26, 1996, the Company completed an acquisition (the
"Fibronics Acquisition") from Elbit Ltd. ("Elbit") of certain of the assets and
selected liabilities of Elbit's wholly-owned subsidiary, Fibronics Ltd. and its
subsidiaries (collectively "Fibronics") related to Fibronics' computer
networking and telecommunications businesses (the "Fibronics Business") in
Germany, the United States, the United Kingdom, the Netherlands and Israel. The
assets acquired include Fibronics' technology in progress and existing
technology, its marketing channels, its GigaHub family of computer networking
products and other rights. The purchase price for the Fibronics Business was
approximately $22,800,000 which was paid using a combination of cash and shares
of Common Stock of the Company.
In September 1996, the Company completed a private placement of an
aggregate of $30,000,000 principal amount of 5% convertible subordinated
debentures due August 6, 1999 (the "Debentures"). Proceeds from this private
placement were used to purchase the Fibronics Business. The Debentures were
convertible into Common Stock of the Company at any time at the option of the
holders at a discount from the market price of the Common Stock at the time of
conversion that decreased over the life of the Debentures until it reached a
floor. At a meeting of the Emerging Issues Task Force held on March 13, 1997,
the staff of the Securities Exchange Commission ("SEC") announced its position
on the accounting treatment for the issuance of convertible preferred stock and
debt securities with a beneficial conversion feature such as that contained in
the Debentures. As announced, the SEC requires that a beneficial conversion
feature attached to instruments such as the Debentures that are convertible
into equity be recognized and measured by allocating a portion of the proceeds
equal to the intrinsic value of that feature to additional paid-in capital and
charging it to interest expense. As a result of this position, the Company
added a non-recurring, non-cash charge of $2,236,000 to its results of
operations for the three and nine months ended September 30, 1996 related to
the issuance of the Debentures and the Fibronics Acquisition.
Revenues. Revenues for the three months ended September 30, 1996 were
$22,664,000 compared to $11,135,000 for the three months ended September 30,
1995, an increase of 104%. Revenues for the nine months ended September 30,
1996 were $57,779,000 compared to $26,182,000 for the nine months ended
September 30, 1995, an increase of 121%. Revenues from sales of networking
products and optical transmission products were 70% and 30%, respectively, of
total revenues during the three months ended September 30, 1996 as compared to
64% and 36%, respectively, of total revenues during the three months ended
September 30,1995. The changes represented increases of $8,634,000 or 78% and
$2,895,000 or 26% in revenues from networking products and optical transmission
7
<PAGE> 8
products, respectively, for the three months ended September 30, 1996. Revenues
from sales of networking products and optical transmission products were 67% and
33%, respectively, of total revenues during the nine months ended September 30,
1996 as compared to 59% and 41%, respectively, of total revenues during the nine
months ended September 30,1995. The changes represented increases of $23,333,000
or 151% and $8,284,000 or 77% in revenues from networking products and optical
transmission products, respectively, for the nine months ended September 30,
1996. Total revenues increased as a result of strong demand for fiber optic
products and LAN connectivity. Revenues from networking products increased
primarily due to sales of the MegaSwitch II product line and revenues from
optical transmission products increased primarily as a result of volume
shipments, beginning in the three months ended September 30, 1996, of a new
bidirectional optical transmission and reception module for Fiber-to-the-Curb
("FTTC") applications and sales to the cable TV industry. International sales
accounted for approximately 56% and 50% of revenues for the three and nine
months ended September 30, 1996, respectively, as compared to approximately 49%
and 40% of revenues for the three and nine months ended September 30, 1995,
respectively. International sales, as a percentage of total revenues, increased
because of increased concentration of sales and marketing efforts overseas.
While the Company has achieved significant revenue growth in previous periods,
there can be no assurance that the Company will sustain such growth.
Gross Profit. Gross profit for the three months ended September 30,
1996 was $9,382,000 as compared to $4,826,000 for the three months ended
September 30, 1995. The changes represented an increase of $4,556,000 or 94%
for the three months ended September 30, 1996. Gross profit as a percentage of
revenues decreased to 41.4% for the three months ended September 30, 1996 from
44.3% for the three months ended September 30, 1995, primarily as a result of a
larger proportion of sales coming from networking products. Gross profit for
the nine months ended September 30, 1996 was $24,097,000 as compared to
$10,778,000 for the nine months ended September 30, 1995. The changes
represented an increase of $13,319,000 or 124% for the nine months ended
September 30, 1996. Gross profit as a percentage of revenues increased from
41.2% for the nine months ended September 30, 1995 to 41.7% for the nine months
ended September 30, 1996.
Research and Development. For the three months ended September 30, 1996
and 1995, research and development expenses ("R&D") expenses were $2,111,000, or
9.3% of net revenues, and $1,160,000 or 10.4% of net revenues, respectively. R&D
expenses as a percentage of revenues during the three months ended September 30,
1996 were less than during comparable period in 1995 because revenues grew at a
faster rate than R&D expenditures. For the nine months ended September 30, 1996
and 1995, R&D expenses were $5,780,000 and $2,662,000 which represented
approximately 10% for both periods. The Company continue to devote significant
resources to its R&D efforts. During these periods the Company's R&D activities
were focused on expanding its family of networking switching products and
extending its fiber optic expertise into new product areas.
Selling, General and Administrative. For the three months ended
September 30, 1996 and 1995, selling, general and administrative ("SG&A")
expenses increased to $3,713,000 from $2,021,000. As a percentage of sales,
SG&A expenses decreased from 18.1% to 16.4% for the three months ended
September 30, 1995 and September 30, 1996, respectively. For the nine months
ended September 30, 1996 and 1995, SG&A expenses increased to $8,808,000 from
$4,392,000. As a percentage of sales, SG&A expenses decreased from 16.8% to
15.2% for the nine months ended September 30, 1995 and September 30, 1996,
respectively. The increase in SG&A expenses is due primarily to increased
marketing expenses, including those associated with additions to personnel.
SG&A expenses decreased as a percentage of sales in the three and nine months
ended September 30, 1996 because increases experienced in the comparable
periods of 1995 resulting from the opening of additional offices were not
incurred in 1996.
Purchased Technology in Progress and Restructuring Costs. Purchased
technology in progress for the nine months ended September 30,1995 was
$6,211,000. The purchased technology is for R&D projects in progress at the
time of acquisition of assets from Galcom Networking, Ltd. and Ace 400
Communications Ltd. ("Ace"), both of which occurred in the second quarter of
1995. Purchased technology in progress for the nine months ended September
30,1996 was $17,795,000. The purchased technology in the nine months ended
8
<PAGE> 9
September 30, 1996 was for R&D projects of Fibronics in progress at the time of
the Fibronics Acquisition on September 26, 1996. Restructuring costs during the
nine months ended September 30, 1995 were $1,465,000. Restructuring costs
during the nine months ended September 30, 1996 were $6,974,000. The
restructuring in 1995 was associated with a plan adopted by the Company on June
30, 1995 calling for the merger of new subsidiaries acquired in the Ace and
Galcom acquisitions in the second quarter of 1995 and the Company's LAN products
division. The plan also called for the closure of some facilities, termination
of redundant employees and cancellation of representation agreements. The
restructuring in 1996 was associated with a plan adopted by the Company on
September 30, 1996 to integrate the Fibronics assets and operations with those
of the Company. The plan calls for the reduction of workforce, closing of
certain facilities, retraining of certain employees and elimination of
particular product lines.
Net (Loss) Income. The Company incurred a net loss of $(15,504,000)
during the three months ended September 30, 1996 compared to net income of
$1,155,000 during the three months ended September 30, 1995. Net loss increased
from a loss of $(2,847,000) during the nine months ended September 30, 1995 to a
loss of $(11,342,000) for the nine months ended September 30, 1996. The net
losses in the three and nine months ended September 30, 1996 were due to the
Fibronics Acquisition, which included charges for purchased technology in
progress, restructuring costs and interest expense related to the Debentures.
Net income for the three and nine months ended September 30, 1996 would have
been $2,584,000 and $6,746,000, respectively, excluding $18,080,000 of charges,
net of tax effects, for both periods associated with the Fibronics Acquisition.
Net income for the nine months ended September 30, 1995 would have been
$2,771,000, excluding $5,618,000 of charges, net of tax effects, associated with
the acquisitions of Galcom and Ace. Excluding, these non-recurring charges, net
income increased by $1,429,000 or 124% for the three months ended September 30,
1996 and $3,375,000 or 144% for the nine months ended September 30, 1996.
LIQUIDITY AND CAPITAL RESOURCES
In October 1994, the Company received proceeds of approximately
$5,497,000 from the issuance of 3,439,430 shares of Common Stock, upon exercise
of the same number of warrants that had been issued in the Company's initial
public offering of December 1992. In January 1995, MRV received net proceeds of
approximately $9,355,000 from the public offering of 2,700,000 shares of Common
Stock.
Net cash used in operating activities for the nine months ended
September 30, 1996 was $4,401,000 and $6,225,000 for same period in 1995. The
funds were used primarily for increased inventories and receivables as a result
of increased revenues and to purchase technology in progress and for
restructuring costs in connection with the acquisition of the Fibronics
Business. For the period ended September 30, 1995, funds were used in the
purchase of technology in progress and restructuring costs in connection with
the acquisition of Ace and Galcom assets. Net cash provided by financing
activities for the nine months ended September 30, 1995 and 1996 were
$9,548,000 and $33,859,000, respectively. Net cash used in investing
activities for the nine months ended September 30, 1995 was $4,963,000. Net
cash used in investing activities for the nine months ended September 30,
1996 was $25,274,000. Cash provided by financing activities in 1996 was
primarily from the private placement of $30,000,000 principal amount of
Debentures and from the cancellation of restrictions on cash. The majority of
cash used for investing activities during 1996 was for the purchase of the
Fibronics Business and net purchases of investments.
Accounts receivable were $23,344,000 at September 30, 1996 as compared
to $10,780,000 at December 31, 1995. The increase in accounts receivable was
primarily attributable to the increase in international sales, which involve
longer payment terms from those that are typically applicable to domestic sales.
In addition, a significant portion of the international sales were concentrated
at the end of the third quarter due to vacation schedules in Europe.
9
<PAGE> 10
Inventories were $17,327,00 and $8,382,000 at September 30, 1996 and
December 31, 1995, respectively. Inventories during these periods have
increased as a result of increased sales. Inventories as a percentage of assets
have increased because an increasing portion of the Company's business has come
from LAN products which have longer production cycles than the Company's
optical transmission products.
Royalties are payable by Galcom, Ace and Fibronics to the Office of
the Chief Scientist of Israel ("OCS") at rates of approximately 2% to 3% on
proceeds from the sale of products arising from the research and development
activities for which OCS has provided grants. The total amount of royalties
may not exceed the amount of the grants. The Company does not expect that
revenues from royalty bearing products will result in material royalty payment
obligations in the future.
In September 1996, the Company completed a private placement of
$30,000,000 principal amount of Debentures. The Debentures are convertible into
Common Stock at a discount from the market price at the time of conversion. As
part of the private placement, the Company also issued to the investors
three-year warrants to purchase an aggregate of up to 600,000 shares of Common
Stock at an exercise price of $26.67 per share.
In September 1996, the Company completed the Fibronics Acquisition
from Elbit. The purchase price for the Fibronics Business was approximately
$22,800,000, approximately $10,500,000 of which was paid by the delivery of
458,991 shares of Common Stock and the balance in cash. The cash was provided
from a portion of the proceeds of the private placement of Debentures. The
Company has guaranteed Elbit that it will realize at least $10,500,000 plus
interest thereon at 0.67% per month from January 1, 1997 until such shares are
resold and has secured the guarantee with a letter of credit from a major bank
in the amount of $4,300,000 and by issuing to a trustee an additional 137,305
shares of Common Stock. After January 14, 1997, Elbit can, under certain
circumstances, elect to cause the Company to repurchase up to 274,610 shares
for $6,300,000, plus interest thereon at 0.67% per month from January 1, 1997
through the date of purchase.
Effects of Inflation
The Company believes that the relatively moderate rate of inflation in
the United States 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.
However, in view of the Company's recent expansion of operations in Israel
which has experienced substantial inflation, there can be no assurance that
inflation in Israel will not have a materially adverse effect on the Company's
operating results in the future.
10
<PAGE> 11
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
In July 1996, R. Douglas Sherrod, a former employee of the Company who
was terminated in August 1994, filed an action in Superior Court of Los Angeles
County, California against the Company and three of its executive officers and
directors, Mr. Noam Lotan, Dr. Shlomo Margalit and Dr. Zeev Rav-Noy. The
complaint seeks compensatory and punitive damages in unspecified amounts,
together with attorneys fees and costs of suit, for alleged wrongful
termination, breach of contract, negligent misrepresentation and fraud. The
bases of the complaint are Mr. Sherrod's claims that he was terminated
supposedly in retaliation for having informed the Company of its alleged use of
proprietary information of a third party and claimed that he insisted that such
information be destroyed; that he was purportedly induced by the defendants to
join the Company by the entry into a stock option agreement which the Company
allegedly had no intention of performing; and that the Company allegedly
breached the stock option agreement. Management believes that the complaint is
without merit and intends to vigorously defend the action.
Item 2. Changes 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 July 11, 1996, the Company held its Annual Meeting of
Shareholders (the "Annual Meeting") at which, among other things, the Company's
entire board of directors was elected. The name of each director elected at the
Annual Meeting, and the number of votes cast for and against (or withheld) were
as follows:
<TABLE>
<CAPTION>
Number of Votes
Name Number of Votes For* Against or Withheld*
---- ------------------- -------------------
<S> <C> <C>
Noam Lotan 8,549,130 9,338
Shlomo Margalit 8,549,130 9,338
Zeev Rav-Noy 8,549,130 9,338
Leonard Mautner 8,549,130 9,338
Milton Rosenberg 8,549,130 9,338
</TABLE>
- --------------------
* Does not give effect to 2-for-1 stock split that was approved at the
Annual Meeting and effected thereafter.
11
<PAGE> 12
The other matters voted upon at the meeting and the number of votes cast for,
against or withheld, including abstentions and broker non-votes, as to each
matter were as follows:
<TABLE>
<CAPTION>
Proposal For* Against* Abstain*
-------- ---- -------- -------
<S> <C> <C> <C>
To approve an amendment to the Company's Certificate of 8,529,288 19,765 9,415
Incorporation to effect a two-for-one split of the Company's
Common Stock, to increase the number of authorized shares of the
Company's Common Stock from 20,000,000 to 40,000,000 shares and
to decrease the par value per share of Common Stock from $0.0067
to $0.0034.
To approve amendments to the Company's 1992 Stock Option Plan 8,335,504 90,428 43,307
(the "Stock Option Plan") to increase by 75,000 shares the
number of shares of Common Stock that can be optioned and sold
under the Stock Option Plan.
To ratify the appointment of Arthur Andersen LLP as independent 8,524,607 10,375 23,486
accountants for the year ending December 31, 1996.
In their discretion, the Proxies are each authorized to vote 8,202,332 286,997 69,139
upon such other business as may properly come before the
meeting.
</TABLE>
- -----------------
* Does not give effect to 2-for-1 stock split that was approved at the
Annual Meeting and effected thereafter.
Item 5. Other information
Not applicable
Item 6. Exhibits and reports on Form 8-K
(a) Not applicable
(b) Not applicable
12
<PAGE> 13
SIGNATURE
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 April 14, 1997.
MRV COMMUNICATIONS, INC.
By: /s/ Edmund Glazer
Edmund Glazer
Vice President of Finance and
Administration and Chief (Principal)
Financial (and Accounting) Officer
13
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<RESTATED>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JUL-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 11,246
<SECURITIES> 11,700
<RECEIVABLES> 24,991
<ALLOWANCES> 1,647
<INVENTORY> 17,327
<CURRENT-ASSETS> 67,058
<PP&E> 6,399
<DEPRECIATION> 910
<TOTAL-ASSETS> 85,273
<CURRENT-LIABILITIES> 22,460
<BONDS> 1,068
0
0
<COMMON> 66
<OTHER-SE> 30,401
<TOTAL-LIABILITY-AND-EQUITY> 85,273
<SALES> 22,664
<TOTAL-REVENUES> 22,664
<CGS> 13,282
<TOTAL-COSTS> 5,824
<OTHER-EXPENSES> 24,769
<LOSS-PROVISION> 129
<INTEREST-EXPENSE> 2,389
<INCOME-PRETAX> (23,369)
<INCOME-TAX> (7,865)
<INCOME-CONTINUING> (15,504)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (15,504)
<EPS-PRIMARY> (.79)
<EPS-DILUTED> (.79)
</TABLE>
