UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: September 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
Commission file number: 0-21823
FIBERCORE, INC.
(Exact name of registrant as specified in its charter)
Nevada 87-0445729
--------------------------------------------------------------------------------
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
253 Worcester Road, P.O. Box 180
Charlton, MA 01507
-----------------------------------------------------
(Address and Zip Code of principal executive offices)
(508) 248-3900
----------------------------------------------------
(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
----- -----
The number of shares of the Registrant's common stock outstanding as of October
31, 2000 was 54,242,342.
<PAGE>
FIBERCORE, INC. AND SUBSIDIARIES
INDEX
PAGE
----
PART I FINANCIAL INFORMATION.............................................. 3
ITEM 1. FINANCIAL STATEMENTS...................................... 3
CONDENSED CONSOLIDATED BALANCE SHEETS
AT SEPTEMBER 30, 2000 (UNAUDITED) AND DECEMBER 31, 1999... 3
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30,
2000 AND 1999 (UNAUDITED)................................. 4
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE
INCOME (LOSS) FOR THE THREE AND NINE MONTHS ENDED
SEPTEMBER 30, 2000 AND 1999............................... 5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(UNAUDITED)............................................... 6
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)............................................... 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS............. 11
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK............................................... 13
PART II OTHER INFORMATION.................................................. 14
ITEM 1. LEGAL PROCEEDINGS......................................... 14
ITEM 2. CHANGES IN SECURITIES..................................... 14
ITEM 3. DEFAULTS UPON SENIOR SECURITIES........................... 14
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS....... 14
ITEM 5. OTHER INFORMATION......................................... 15
ITEM 6. EXHIBITS & REPORTS ON FORM 8-K............................ 15
SIGNATURES.................................................................. 17
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
FIBERCORE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<CAPTION>
Dollars in thousands except share data) September 30, December 31,
2000 1999
------------- ------------
(Unaudited)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents.................................................................... $ 3,378 $ 487
Restricted cash.............................................................................. 924 ---
Accounts receivable - net.................................................................... 7,988 2,013
Inventories.................................................................................. 6,421 3,047
Prepaid and other current assets............................................................. 263 16
------------- ------------
Total current assets....................................................................... 18,974 5,563
------------- ------------
Property and equipment - net................................................................... 15,240 4,062
------------- ------------
Other assets:
Notes receivable from joint venture partners................................................. 4,949 4,949
Restricted cash.............................................................................. 1,740 1,981
Patents - net................................................................................ 4,309 4,762
Investments in joint ventures................................................................ 1,425 1,425
Goodwill..................................................................................... 11,238 ---
Other........................................................................................ 1,121 1,320
------------- ------------
Total other assets......................................................................... 24,782 14,437
Total assets............................................................................... $ 58,996 $ 24,062
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable................................................................................ $ 1,434 $ 2,006
Accounts payable............................................................................. 6,342 1,536
Accrued expenses............................................................................. 5,392 980
------------- ------------
Total current liabilities.................................................................. 13,168 4,522
Long-term interest and other payables.......................................................... 1,607 1,267
Long-term debt................................................................................. 9,473 8,296
------------- ------------
Total liabilities.......................................................................... 24,248 14,085
------------- ------------
Minority interest.............................................................................. 4,543 3,263
------------- ------------
Stockholders' equity:
Preferred stock, $.001 par value, authorized 10,000,000 shares; no shares
issued and outstanding....................................................................... --- ---
Common stock, $.001 par value, authorized 100,000,000 shares; issued and out-
standing: 54,242,342 at September 30, 2000 and 41,404,602 at December 31, 1999............. 54 42
Paid in capital.............................................................................. 54,091 24,874
Accumulated deficit.......................................................................... (22,189) (17,196)
Accumulated other comprehensive income (deficit):
Foreign currency translation adjustment.................................................... (1,751) (1,006)
------------- ------------
Total stockholders' equity............................................................... 30,205 6,714
Total liabilities and stockholders' equity............................................... $ 58,996 $ 24,062
============= ============
</TABLE>
See accompanying notes to the consolidated financial statements.
3
<PAGE>
<TABLE>
FIBERCORE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(Dollars in thousands except share data)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------- -------------------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales........................................ $ 13,188 $ 2,824 $ 23,054 $ 7,850
Cost of sales.................................... 9,329 2,563 16,773 6,846
----------- ----------- ----------- -----------
Gross profit................................... 3,859 261 6,281 1,004
Operating expenses:
Selling, general and administrative expenses... 1,665 580 3,338 1,761
Research and development....................... 233 125 663 414
----------- ----------- ----------- -----------
Income (loss) from operations................ 1,961 (444) 2,280 (1,171)
Interest income.................................. 128 --- 209 85
Interest expense................................. (709) (233) (6,533) (681)
Foreign exchange income (loss) - net............. 16 (30) (18) (348)
Other income - net............................... 37 118 98 152
Minority interest in income of subsidiary........ (90) --- (127) ---
----------- ----------- ----------- -----------
Income (loss) before income taxes.............. $ 1,343 $ (589) $ (4,091) $ (1,963)
Provision for income taxes (507) --- (902) ---
----------- ----------- ----------- -----------
Net income (loss).............................. $ 836 $ (589) $ (4,993) $ (1,963)
=========== =========== =========== ===========
Income (loss) per share of common stock:
Basic............................................ $ 0.02 $ (0.02) $ (0.11) $ (0.05)
Diluted.......................................... $ 0.01 $ (0.02) $ (0.11) $ (0.05)
Weighted average shares:
Basic............................................ 52,803,670 36,709,964 47,073,042 36,324,061
Diluted.......................................... 59,482,582 36,709,964 47,073,042 36,324,061
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
4
<PAGE>
<TABLE>
FIBERCORE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
(Dollars in thousands except share data)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------- -------------------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income (loss)................................ $ 836 $ (589) $ (4,993) $ (1,963)
Other comprehensive income (loss):
Foreign currency translation adjustment........ (699) 103 (745) (193)
----------- ----------- ----------- -----------
Comprehensive income (loss) $ 137 $ (486) $ (5,738) $ (2,156)
=========== =========== =========== ===========
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
5
<PAGE>
FIBERCORE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(Dollars in thousands except share data)
Nine Months Ended
September 30,
-------------------------
2000 1999
---- ----
Cash flows from operating activities:
Net loss....................................... $ (4,993) $ (1,963)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization................ 1,943 1,342
Non-cash interest expense.................... 5,405 289
Deferred income tax provision................ 234 ---
Other........................................ 127 435
Changes in assets and liabilities,
excluding acquisition:
Accounts receivable.......................... (2,086) (572)
Inventories.................................. 187 159
Prepaid and other current assets............. 450 (18)
Accounts payable............................. 1,028 (150)
Accrued expenses............................. 1,233 163
----------- -----------
Net cash provided by (used in) operating
activities............................... 3,528 (315)
----------- -----------
Cash flows from investing activities:
Purchase of property and equipment............. (2,882) (965)
Reimbursement from government grant............ 155 511
Cash used for acquisition...................... (10,460) ---
Cash acquired from acquisition ................ 196 ---
Other.......................................... (958) (153)
----------- -----------
Net cash used in investing activities........ (13,949) (607)
----------- -----------
Cash flows from financing activities:
Proceeds from sale of common stock............. 17,671 374
Proceeds (repayment) of debt - net............. (4,404) 974
----------- -----------
Net cash provided by financing activities.... 13,267 1,348
----------- -----------
Effect of foreign exchange rate change on cash... 45 (2)
----------- -----------
Increase in cash................................. 2,891 424
Cash, beginning of period........................ 487 150
----------- -----------
Cash, end of period.............................. $ 3,378 $ 574
=========== ===========
Supplemental disclosure:
Common stock issued for conversion of debt..... $ 6,079
Cash paid for interest........................... $ 448
See accompanying notes to the condensed consolidated financial statements.
6
<PAGE>
FIBERCORE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and Marks in thousands except share data)
1. BASIS OF PRESENTATION
The condensed consolidated balance sheet as of September 30, 2000 and the
related condensed consolidated statements of operations and comprehensive income
(loss) for the three and nine month periods and statements of cash flows for the
nine month periods ended September 30, 2000 and 1999 included herein have been
prepared by the Company in accordance with the rules and regulations of the
Securities and Exchange Commission for reports on Form 10-Q. These statements
are unaudited. In the opinion of management, all adjustments necessary for a
fair presentation of such financial statements have been included and such
adjustments consist of normal recurring items.
The condensed consolidated financial statements do not contain certain
information included in the Company's annual audited financial statements. These
financial statements should be read in conjunction with the annual audited
financial statements and notes thereto for the year ended December 31, 1999
included in the Company's Report on Form 10-K.
Certain amounts in the prior year have been reclassified to conform to the
current period presentation.
2. ACQUISITION OF XTAL FIBERCORE S. A.
On June 20, 2000, the Company, through a wholly owned subsidiary, acquired
as of June 1, 2000, 90% of the capital stock of Xtal FiberCore S. A., ("Xtal"),
from Algar S. A., ("Algar"), and entered into an agreement to acquire the
remaining 10% of the capital stock (collectively, the "Acquisition"). Xtal's
manufacturing facility is located in Campinas, Brazil and manufactures primarily
singlemode optical fiber for sale mainly in Brazil. The acquisition was
accounted for as a purchase.
Prior to the Acquisition, no material relationship existed between Algar
and the Company, the Company's affiliates, directors and officers, and
associates of such directors and officers. The cost for the 90% interest in Xtal
was $20,000 plus costs (commissions, legal and accounting fees) of approximately
$1,657, and is subject to certain adjustments described below. At the closing of
the Acquisition, the Company paid Algar $10,000 in cash and issued to Algar a
$10,000, 6% note, payable on December 31, 2000. The Company was entitled to
receive a $1 million discount if the Company redeemed the $10,000 note by August
31, 2000. At the closing of the Acquisition, the Company also issued to Algar a
$2,500, 6% note, payable in two installments of $1,250 each, on September 20,
2001, and on December 20, 2002, respectively. The Company's obligation to pay
the $2,500 note is contingent on Xtal's achieving certain profitability targets
in 2000 and 2001. The Company may acquire the remaining 10% of Xtal's common
stock upon payment of an additional $2,500, plus 6% interest, on or before June
20, 2003. The cost of the acquisition of $21,657 exceeded the preliminary
estimate of the fair value of the net assets acquired by $11,277. This excess
has been accounted for as goodwill and is being amortized over twenty (20)
years.
On August 29, 2000, Algar's Chief Operating Officer, on behalf of Algar,
agreed, in writing, to allow the Company to receive the $1,000 discount,
described above, if the remaining $9,000 of the note was paid by September 8,
2000. On September 8, 2000 the Company paid the $9,000, plus interest.
Subsequently, Algar informed the Company that it disputes the understanding that
was reached with the Chief Operating Officer extending the time within which to
prepay the note and receive the discount. Currently, the Company is engaged in
discussions with Algar to resolve the matter.
7
<PAGE>
FIBERCORE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The funds the Company used, at closing, to pay the $10,000 in cash paid to
Algar were obtained from (i) Crescent International Ltd. pursuant to an
agreement under which the Company may require Crescent to purchase securities
from time to time for an aggregate of up to $30,000 and (ii) proceeds received
by the Company upon Tyco Electronics Corporation's exercise of warrants to
purchase the Company's common stock. The Company used proceeds from the
September 5, 2000 sale of common stock to Tyco Sigma Ltd, a wholly owned
subsidiary of Tyco International Ltd., to make the $9,000, September 8, 2000
payment to Algar.
Assuming the acquisition of Xtal had occurred at the beginning of each
period presented, the pro forma net sales, gross profit, net income and basic
and diluted loss per share of common stock are provided below.
The unaudited pro forma combined information is presented for illustrative
purposes only and is not necessarily indicative of the operating results or
financial position that would have occurred if the transactions had been
consummated at the date indicated, nor is it necessarily indicative of future
operating results or financial position of the combined company.
Pro Forma
Nine Months Ended
September 30,
-------------------------
2000 1999
---- ----
Net sales........................................ $ 34,543 $ 18,216
Gross Profit .................................... $ 7,941 $ 2,184
Net Loss ........................................ $ (4,914) $ (5,986)
Basic and diluted loss per share of common stock. $ (.10) $ (.14)
Weighted average shares outstanding.............. 50,843,872 42,327,968
3. AGREEMENTS WITH TYCO INTERNATIONAL, LTD.
On May 19, 2000, the Company entered into an Agreement with Tyco
Electronics Corporation (formerly "AMP Incorporated" and a wholly owned
subsidiary of Tyco International Ltd., "Tyco"), whereby Tyco agreed to convert
the two notes due Tyco into common stock of the Company and to exercise warrants
previously issued to Tyco in connection with the one of the notes. In accordance
with the note agreement dated April 17, 1995 Tyco converted the remaining $2,000
in principal plus accrued interest of approximately $460 into 3,419,977 common
shares of the Company. Also Tyco converted $3,000 plus accrued interest of
approximately $972 on the note dated November 27, 1996 into 1,031,532 common
shares. Additionally, Tyco exercised warrants, purchasing 2,765,487 common
shares for cash of $2,000. In connection with the conversion of debt and the
agreement, Tyco released its liens on the Company's assets.
On September 5, 2000, the Company sold 1,352,275 shares of its common
stock to Tyco Sigma Limited, a wholly owned subsidiary of Tyco International
Ltd., and received proceeds of $9,000. Tyco does not have registration rights
with respect to the 1,352,275 shares. The proceeds were used to prepay the
$10,000 note to Algar, incurred in connection with our acquisition of Xtal, at a
$1,000 discount for early payment. Algar has informed the Company that it
disputes the understanding that was reached with Algar's Chief Operating
Officer, extending the time within which to prepay the note to receive the
discount. See also Note 2.
8
<PAGE>
FIBERCORE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. AGREEMENT WITH CRESCENT INTERNATIONAL LTD.
On June 9, 2000 the Company concluded an agreement with Crescent
International Ltd., an investment fund based in Geneva, Switzerland, whereby
Crescent agreed to purchase up to $30,000 worth of securities which will include
common stock of the Company and convertible notes up to $7,500. At the closing
on June 9, 2000 the Company issued 1,200,274 common shares for $3,500 and issued
a $6,000 convertible note, due June 9, 2002. An additional $1,500 convertible
note, due July 5, 2002, was issued to Crescent on July 5, 2000.
The Company, in accordance with the agreement, filed a registration
statement to register shares underlying the transaction. The registration
statement was declared effective September 29, 2000.
The agreement extends for a period of two years until June 9, 2002 and
provides that subsequent to September 29, 2000, the effective date of the
registration statement, the Company may require Crescent, pursuant to the
agreement, to purchase common shares of the Company on a monthly basis over the
two-year period. The price per share will be 93% of the average of the lowest
three consecutive weighted-average trading prices during the 22 trading days
prior to the notice to Crescent to purchase shares. The Company is limited to a
maximum of $3,500 for each sale of common stock during any twenty- two (22) day
trading period.
The convertible notes are convertible into common shares of the Company at
the lower of i) the volume-weighted average trading prices during the 10
trading days preceding the closing, or ii) 93% of the average of the lowest
three consecutive days weighted average trading price during the 22 trading
days preceding conversion. In connection with the deemed beneficial conversion
feature of the $6,000 and $1,500 note and, in accordance with accounting
pronouncements, the Company recorded as of June 9, 2000 and July 5, 2000,
$5,317 and $88, respectively, of non-cash interest expense offset by an
increase in paid in capital. The adjustments have no effect on the net equity
of the Company. On June 26, 2000, $2,000 of the $6,000 note was converted into
685,871 shares of common stock.
At the closing the Company received proceeds of $9,500 of which
approximately $1,369 was used to pay fees related to the transaction; the
balance used to finance the Xtal acquisition discussed in note 2 above. On July
5, 2000, the Company received $1,500 from the issuance of a convertible note,
of which approximately $35 was used to pay fees related to the transaction.
5. COMMON STOCK ISSUED TO OTHERS.
On September 13, 2000, upon completion of an additional sale to two
venture capital companies outside of the United States pursuant to Regulation S
under the Securities Act of 1933, the Company issued 155,718 shares of common
stock at a price of $7.179 per share and received $1,117,900. The investors in
both these transactions did not receive registration rights. In connection with
that transaction, the Company paid fees of $33 and issued 4,672 five year
warrants at $7.179.
9
<PAGE>
6. INVENTORIES
Inventories consist of the following:
September 30, 2000 December 31, 1999
------------------ -----------------
Raw material $ 4,744 $ 1,745
Work-in-progress 927 361
Finished goods 750 941
------- ---------
Total $ 6,421 $ 3,047
======= =========
7. EARNINGS PER SHARE
The following table shows the reconciliation of basic weighted average
shares to diluted weighted average shares used in the computation of
earnings per share for the three months ended September 30, 2000:
Weighted average shares - basic 52,803,670
Dilutive effect of options and warrants 6,678,912
------------
Weighted average shares - dilutive 59,482,582
The shares related to the Company's convertible debt were not included in
the calculation as the effect of these shares would have been
anti-dilutive. Due to the losses incurred by the Company for the nine
months ended September 30, 2000 and for the three and nine months ended
September 30, 1999, there was no difference between the basic and dilutive
earnings per share.
8. ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities", which requires that an entity recognize all
derivatives as either assets or liabilities in the consolidated balance sheets
and measure those instruments at fair value. The accounting for changes in fair
value of a derivative depends on the intended use of the derivative and its
resulting designation. The Company is completing its evaluation of the effect
this new standard will have on the Company's financial statements. The Company
believes that adopting this statement will not have a material adverse effect on
the financial position or results of operations of the Company. The Company is
required to adopt this standard, as amended, by January 1, 2001.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin ("SAB") 101, "Revenue Recognition in Financial Statements",
which provides guidance related to revenue recognition based on interpretations
and practices followed by the SEC. SAB 101, as amended by SAB 101A and SAB 101B,
is effective for the Company's fourth quarter of 2000. It requires companies to
report any changes in revenue recognition as a cumulative change in accounting
principle at the time of implementation in accordance with Accounting Principles
Board Opinion 20, "Accounting Changes." The Company does not expect that SAB 101
will have a material effect on its financial position or results of operations.
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2000
AND 1999
The results for the three and nine month periods include the operations of
Xtal FiberCore S.A., the Company's recently acquired facility in Brazil,
from June 1, 2000.
Sales for the three and nine month periods ended September 30, 2000 were
$13,188,000 and $23,054,000, respectively, compared to sales of $2,824,000 and
$7,850,000 for the same periods in 1999. This represents an increase of
$10,364,000 or 367% for the three months and of $15,204,000 or 194% for the nine
months ended September 30, 2000 compared to the same periods in 1999. The
increase includes the sales of Xtal for the three months ended September 30,
2000 of $9,214,000. Additionally, sales from the Company's German subsidiary
increased by $1,150,000 or 41% and by $3,396,000 or 43% for the three and nine
months ended September 30, 2000, respectively, compared to the same period in
1999. The revenue increases are primarily due to increases in product shipped to
new and continuing customers, as well as increases in the prices of the
Company's products. High product demand, higher pricing and strong sales growth
at Xtal continued to strengthen during the nine months of 2000, and this trend
is expected to continue.
Gross profit improved to $3,859,000 (29% of sales) and $6,281,000 (27% of
sales) for the three and nine months ended September 30, 2000, respectively,
compared to $261,000 (9% of sales) and $1,004,000 (13% of sales) for the same
periods of 1999. This improvement in the profit margin results from the
Brazilian acquisition price increases and shipment increases. The Company
anticipates that the gross margins will continue to improve as production levels
are increased and as cost reductions and process improvements are implemented at
both the German and Brazilian facilities.
Selling, general and administrative costs increased $1,085,000 or 187%,
and $1,577,000 or 90% for the three and nine months ended September 30, 2000,
respectively, compared to the same periods in 1999. Xtal represented
approximately 95% of the quarterly increase and 76% of the year to date
increase. Research and development costs increased $108,000 or 86% and $249,000
or 60% for the three and nine months ended September 30, 2000. The increase in
research and development costs was due to increased spending on a new technology
development project and other process improvements. The Company intends to
continue current spending levels on research and development through the
remainder of 2000.
Interest expense increased by $476,000 and $5,852,000 for the three and
nine months ended September 30, 2000, respectively, compared to the same periods
in 1999. The three and nine month increases include non-cash interest charges
recorded in connection with the deemed beneficial conversion feature on two
notes issued to Crescent International Ltd. The June 2000 note for $6,000,000
and the July 2000 note for $1,500,000 gave rise to non-cash interest charges of
$5,317,000 and $88,000, respectively. The interest charges were offset by an
increase in paid in capital. Accordingly, the charges had no effect on the net
equity of the Company.
The Company had foreign exchange gains (losses) of $16,000 and ($18,000)
for the three and nine months ended September 30, 2000, respectively, compared
to a loss of $30,000 in the third quarter 1999 and a loss of $348,000 for the
nine months of 1999. The gains and losses are principally due to the impact of
the fluctuations in the value of the Euro and DM versus the U.S. dollar.
11
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
The Company recorded expense of $90,000 and $127,000 for the three and
nine months ended September 30, 2000, respectively, attributable to the 10%
minority interest in the earnings of Xtal.
The Company recorded a tax provision related to the foreign subsidiaries
of $507,000 and $902,000 for the three and nine months ended September 30, 2000,
respectively. The Company had no tax provision in the same periods in 1999
because the net deferred tax benefit of net operating loss carryovers was fully
reserved at September 30, 1999.
LIQUIDITY AND CAPITAL RESOURCES
The Company generated cash flow from operations of $3,528,000 in the first
nine months of 2000 compared to the cash outflow from operations of $315,000 in
the first nine months of 1999, an increase of $3,843,000 or 1220%. This resulted
from the loss for the period of $4,993,000 offset primarily by depreciation and
amortization of $1,943,000, non-cash interest expense of $5,405,000 and net
changes in working capital items of $812,000. The improvement in cash from
operations is the result of the higher sales and gross profit.
Accounts receivable increased by $2,086,000 due to the increases in sales,
and inventories decreased by $187,000 as a result of the increase in shipments.
Accrued expenses increased by $1,233,000 principally due to increases in accrued
legal and accounting fees related to the Xtal acquisition and the Crescent
investment and increases in accrued salaries and interest payable.
The Company invested $2,882,000 in new equipment during the nine months
ended September 2000 and received $155,000 in German government grants for
investments. Cash paid in connection with the Xtal acquisition was $10,460,000.
Included in "Other" cash flows from investing activities is Restricted Cash of
$924,000, which relates to a money market account pledged as cash collateral for
a letter of credit issued for the benefit of Xtal.
The Company received net proceeds of $17,671,000 from the sale of common
stock, principally from the Crescent investment, the exercise of warrants to
purchase common stock by Tyco, and by Tyco's $9,000,000 purchase of common
stock. Loan repayments totaling $9,754,000, which consisted of $9,000,000
relating to the Xtal acquisition note and $754,000 relating to short-term German
loans, were primarily offset by the issuance of $5,500,000 of convertible notes
to Crescent. The proceeds from the sale of common stock and the notes issued to
Crescent, as well as proceeds from Tyco's warrant exercise and $9,000,000 common
stock purchase were used primarily for the Xtal acquisition.
12
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risks from changes in foreign currency
exchange rates and interest rates. The Company has two principal operating
subsidiaries, FiberCore Jena, which is located in Germany and its functional
currency is the EURO, and Xtal, which is located in Campinas, Brazil, and its
functional currency is the Real.
FOREIGN CURRENCY RISK. FiberCore Jena and Xtal may, from time to time, purchase
short-term forward exchange contracts to hedge payments and/or receipts due in
currencies other than the EURO and Real. At September 30, 2000, FiberCore Jena
had outstanding forward exchange contracts for the sale of U.S. Dollars totaling
$550,000, which mature at various dates in 2000 and 2001. The weighted-average
exchange rate in these contracts is $0.9250 per Euro. A 10% change in the
exchange rate could result in a gain or loss on these contracts of approximately
$50,000. At September 30, 2000, Xtal had no outstanding forward exchange
contracts.
At September 30, 2000, the Company had a long-term loan denominated in
Deutsche Marks (DM) totaling DM 7,700,000. The principal of the loan is due at
maturity, September 2006. Interest on the loan is payable quarterly at the fixed
rate of 6.25% per annum. A 10% change in the DM exchange rate to the U.S. dollar
could increase or decrease the cash flow requirements of the Company by
approximately $5,500 for the year 2000, $22,000 for each of the years 2001
through 2005, and $16,500 in 2006.
Substantially all of the Company's sales are through the Company's German
and Brazilian subsidiaries. Additionally, at September 30, 2000, 56%, 16% and 8%
of the Company's assets were at its Brazilian, German, and Malaysian
subsidiaries, respectively. The Company, therefore, is subject to foreign
currency translation gains or losses in reporting its consolidated financial
position and results of operations.
INTEREST RATE RISK. At September 30, 2000, the Company had a short-term loan
with an interest rate based on the prime rate, which is adjusted quarterly based
on the prevailing market rates. A 10% change in the interest rates on this loan
would not have a material impact on the results of operations.
13
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PART II - OTHER INFORMATION
ITEMS 1 - 3
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Company's Annual Meeting of Shareholders ("Annual Meeting"),
held on July 27, 2000, 48,302,347 shares of Common Stock were
represented, in person or by proxy, constituting a quorum, of the
total of 50,317,418 shares of Common Stock outstanding and entitled
to vote at the Annual Meeting.
At the Annual Meeting, the directors nominated were elected by the
following votes:
Number of Shares Number of Shares
Voted For Withheld
--------------- ---------------
Mohd A. Aslami 46,895,363 1,406,984
Charles DeLuca 46,895,363 1,406,984
No director received fewer than 46,895,363 votes or 93.2% of the
outstanding Common Stock. No shares of the Common Stock voted
against the election of Dr. Aslami and Mr. DeLuca. There were no
broker non-votes on this proposal.
At the Annual Meeting, the election of Deloitte & Touche LLP,
independent certified public accountants, as auditors for the
Company for the fiscal year ending December 31, 2000, was ratified
by a vote of 46,851,995 shares (93.1% of the outstanding Common
Stock). Holders of 20,290 shares voted against the proposal and
holders of 112,389 shares abstained. There were no broker non-votes
on this proposal. In addition, the Company's 2000 Long-Term
Incentive Stock Plan was approved by a vote of 27,250,809 (54.2% of
the outstanding Common Stock). Holders of 837,359 shares voted
against the proposal and holders of 219,127 shares abstained. There
were no broker non-votes on this proposal.
14
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ITEM 5.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 3(ii): Amended and Restated By-Laws
Exhibit 27: Financial Data Schedule
(b) Reports on Form 8-K
On June 9, 2000 the Company filed a report on Form 8-K,
reporting the agreement between the Company and Tyco
Electronics Corporation wherein Tyco agreed to convert certain
debt into common shares of the Company and exercise warrants.
On June 15, 2000 the Company filed a report on Form 8-K,
reporting the agreement between the Company and Crescent
International Limited wherein Crescent agreed to subscribe to
purchase common shares of the Company and to loan the Company
up to seven million five hundred thousand dollars
($7,500,000.00) under a convertible note agreement.
On July 3, 2000, the Company filed a Form 8-K, reporting the
acquisition of Xtal FiberCore S. A.
On July 10, 2000, the Company filed an amended Form 8-K to
include the audited financial statements of Xtal FiberCore
S. A.
On August 9, 2000, the Company filed a Form 8-K, reporting the
resignation of Michael J. Beecher, Treasurer and Chief
Financial Officer, effective July 31, 2000 and the appointment
of Steven Phillips, as interim Treasurer and Chief Financial
Officer.
On August 15, 2000, the Company filed a Form 8-K reporting a
revision of second quarter earnings resulting from a non-cash
adjustment to account for convertible securities with deemed
beneficial conversion features.
15
<PAGE>
On September 11, 2000, the Company filed a Form 8-K reporting
the sale of 1,352,375 shares of its common stock to a wholly
owned subsidiary of Tyco International Ltd.
On October 20, 2000, the Company filed a Form 8-K reporting
expansion plans for the German and Brazilian manufacturing
facilities, and the election of Michael A. Robinson to its
board of directors.
On November 7, 2000, the Company filed a Form 8-K reporting an
increase of approximately $67 million in connection with a
previous reported Brazilian sales contract.
16
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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 thereunto duly authorized.
FiberCore, Inc.
---------------
(Registrant)
Date: November 14, 2000 /s/ Mohd Aslami
---------------------------------------
Dr. Mohd A. Aslami
Chairman, President and Chief Executive
Officer
(Duly Authorized Officer)
Date: November 14, 2000 /s/ Steven Phillips
---------------------------------------
Steven Phillips
Interim Chief Financial Officer and
Treasurer
(Principal Financial Officer)
17
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EXHIBIT INDEX
Exhibit No. Description
----------- -----------
3(ii) Amended and Restated By-Laws
27 Financial Data Schedule
18
