SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
Current Report
Pursuant To Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 26, 2010
MRV COMMUNICATIONS, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE | | 001-11174 | | 06-1340090 |
(State or other jurisdiction of | | (Commission file number) | | (I.R.S. employer |
incorporation or organization) | | | | identification number) |
20415 Nordhoff Street, Chatsworth, CA 91311
(Address of principal executive offices) (zip code)
Registrant’s telephone number, including area code: (818) 773-0900
Not Applicable
Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the Registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 1.01 Entry into a Material Definitive Agreement
On October 26, 2010, MRV Communications, Inc. (the “Company”) sold all of the issued and outstanding capital stock of its wholly owned subsidiaries Source Photonics, Inc. (“SPI”) and Source Photonics Santa Clara, Inc. (“SPSC”, and, together with SPI, the “Source Photonics Entities”) to Magnolia Source B.V. (“Buyer”), an entity owned and controlled by affiliates of Francisco Partners, pursuant to a Stock Purchase Agreement (the “Purchase Agreement”) dated as of October 26, 2010, by and among the Company, the Source Photonics Entities, and Buyer. The Source Photonics Entities and their subsidiaries operate under the Source Photonics brand name and are a leading provider of optical communications products used in telecommunications systems and data communications networks. The Purchase Agreement provides for the payment from Buyer to the Company of cash proceeds of approximately $117.8 million, as well as the assumption of debt of approximately $32.9 million, less a payment of approximately $4.6 million directly to SPI for payment of management bonuses triggered by the transaction and certain restricted stock unit settlements. The payments are made in three installments, with the first $40.0 million (a portion of which was paid directly to SPI as described in the sentence above) paid one day after closing, the second payment of $60.0 million to occur on or before 25 days after closing, and the last payment of approximately $17.8 million to occur on or before 60 days after closing. Two Francisco Partners funds, Francisco Partners II (Cayman), L.P. and Francisco Partners Parallel Fund II, L.P., have separately entered into a limited guarantee with the Company to guarantee the payment of the purchase price by Buyer under the Purchase Agreement.
The Purchase Agreement contains customary representations, warranties and covenants, as well as customary mutual indemnification obligations. For reporting purposes, 26 operating days that reflect contributions from the Source Photonics Entities will be included in the Company’s fourth quarter 2010 results. The foregoing description of the Purchase Agreement is not complete and is qualified in its entirety by the full text of the Purchase Agreement, which is attached as Exhibit 10.1 to this Current Report on Form 8-K and is incorporated herein by reference.
A copy of the Company’s press release announcing the completion of the transactions contemplated by the Purchase Agreement was released on October 26, 2010 and is attached hereto as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference.
Item 2.01 Completion of Acquisition or Disposition of Assets
The disclosure contained in Item 1.01 above is incorporated herein by reference. Additional information on the financial impact of the transaction is included in Item 9.01(b) below.
Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
(d) On October 28, 2010, the Board of Directors (the “Board”) of the Company elected Dilip Singh, the Company’s Chief Executive Officer, to the Board, effective immediately. The election of Mr. Singh increased the size of the Board to eight directors. Mr. Singh will continue in his role as the Company’s Chief Executive Officer, and will not receive any additional compensation for his role as a director. He will not be joining any of the Board’s Committees at this time.
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A press release announcing the election of Mr. Singh to the Board was released on November 1, 2010, is attached hereto as Exhibit 99.2, and is incorporated herein by reference.
Item 9.01 Financial Statements and Exhibits
(b) Pro Forma Financial Information
On October 26, 2010, the Company sold all of the issued and outstanding capital stock of the Source Photonics Entities to Buyer for, among other things, cash proceeds of $117.8 million the assumption of all of the Source Photonics Entities’ debt of $32.9 million, less a payment of approximately $4.6 million directly to SPI for the payment of management bonuses triggered by the transaction and certain restricted stock unit settlements. The description of the transaction and parties involved is contained in Item 1.01 above and is incorporated herein by reference. The following unaudited pro forma condensed consolidated balance sheet as of June 30, 2010 is based on the Company’s historical unaudited condensed consolidated balance sheet as of June 30, 2010. The pro forma condensed consolidated balance sheet gives effect to the sale of the Source Photonics Entities and related adjustments as if the transaction had occurred on June 30, 2010.
MRV Communications, Inc.
Unaudited Pro Forma Condensed Balance Sheet
As of June 30, 2010
(In thousands, except par values)
| | | | Pro forma
adjustments (1) | | | |
| | As reported | | Source
Photonics (1) | | Impact of
transaction | | Pro forma | |
Assets | | | | | | | | | |
Current assets: | | | | | | | | | |
Cash and cash equivalents | | $ | 36,191 | | $ | (4,316 | ) | 33,913 | (2) | $ | 65,788 | |
Short-term marketable securities | | 32,740 | | — | | | | 32,740 | |
Time deposits (restricted) | | 18,940 | | (17,272 | ) | | | 1,668 | |
Accounts receivable, net | | 112,632 | | (65,536 | ) | | | 47,096 | |
Inventories | | 81,571 | | (41,581 | ) | | | 39,990 | |
Deferred income taxes | | 2,868 | | (1,303 | ) | | | 1,565 | |
Other current assets | | 27,370 | | (5,819 | ) | 78,541 | (3) | 100,092 | |
Total current assets | | 312,312 | | (135,827 | ) | 112,454 | | 288,939 | |
Non-current assets | | 60,997 | | (27,956 | ) | | | 33,041 | |
Total assets | | $ | 373,309 | | $ | (163,783 | ) | 112,454 | | $ | 321,980 | |
| | | | | | | | | |
Liabilities and stockholders’ equity | | | | | | | | | |
Current liabilities: | | | | | | | | | |
Accounts payable | | $ | 78,711 | | $ | (46,491 | ) | | | $ | 32,220 | |
Short-term debt | | 51,646 | | (40,635 | ) | | | 11,011 | |
Other current liabilities | | 59,417 | | (12,967 | ) | 1,605 | (4) | 48,055 | |
Total current liabilities | | 189,774 | | (100,093 | ) | 1,605 | | 91,286 | |
Long-term liabilities | | 8,028 | | (538 | ) | | | 7,490 | |
Commitments and contingencies | | | | | | | | | |
Equity: | | | | | | | | | |
MRV stockholders’ equity: | | | | | | | | | |
Preferred stock, $.0.01 par value: | | | | | | | | | |
Authorized - 1,000 shares; no shares issued or outstanding | | — | | | | | | | |
Common stock, $0.0017 par value: | | | | | | | | | |
Authorized - 320,000 shares Issued - 158,960 shares Outstanding - 157,607 shares | | 268 | | — | | | | 268 | |
Other stockholders’ equity | | 169,385 | | (63,152 | ) | 111,595 | (5) | 217,828 | |
Total MRV stockholder’s equity | | 169,653 | | (63,152 | ) | 111,595 | | 218,096 | |
Noncontrolling interests in consolidated subsidiaries | | 5,854 | | — | | (746 | )(6) | 5,108 | |
Total equity | | 175,507 | | (63,152 | ) | 110,849 | | 223,204 | |
Total liabilities and equity | | $ | 373,309 | | $ | (163,783 | ) | 112,454 | | $ | 321,980 | |
(1) | Adjustments to eliminate the assets and liabilities of the Source Photonics Entities as of June 30, 2010. |
(2) | Proceeds received by the Company as a result of the sale of the Source Photonics Entities in the first payment at closing, net of transaction fees of $1.4 million. |
(3) | Includes $77.8 million receivable for additional proceeds to be received by the Company within 60 days of transaction closing and a $0.7 million receivable assigned to the Company in the transaction. |
(4) | Includes $0.5 million of accrued liabilities related to legal matters for which the Company has indemnified the buyer and $1.1 million of taxes payable related to the gain on the sale of the Source Photonics Entities. |
(5) | Adjustment to stockholders’ equity to reflect the net impact of the disposition. |
(6) | Balance of non-controlling interest in the Source Photonics Entities as of June 30, 2010. |
The following unaudited consolidated pro forma financial information presents statements of operations for the years ended December 31, 2009, 2008 and 2007, and the six months ended June 30, 2010 and 2009, and is based on the audited consolidated financial statements for the Company for the year ended December 31, 2009, the unaudited condensed consolidated financial statements for the six months ended June 30, 2010, and 2009, and the audited operating results of Source Photonics for the periods presented. The pro forma financial information gives effect to the divestiture of the Source Photonics Entities as if it had occurred on January 1, 2007.
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MRV Communications, Inc.
Unaudited Pro Forma Statement of Operations
For the six months ended June 30, 2010
(In thousands, except per share data)
| | | | Pro forma
adjustments (1) | | | |
| | As reported | | Source
Photonics | | Pro forma | |
Revenue | | $ | 231,299 | | $ | (112,999 | ) | $ | 118,300 | |
Cost of goods sold | | 150,030 | | (86,870 | ) | 63,160 | |
Gross profit | | 81,269 | | (26,129 | ) | 55,140 | |
| | | | | | | |
Operating expenses: | | | | | | | |
Product development and engineering | | 18,872 | | (8,756 | ) | 10,116 | |
Selling, general and administrative | | 48,285 | | (10,082 | ) | 38,203 | |
Amoritization of intangibles | | 1,128 | | (1,128 | ) | — | |
Total operating expenses | | 68,285 | | (19,966 | ) | 48,319 | |
Operating income (loss) | | 12,984 | | (6,163 | ) | 6,821 | |
Interest expense | | (1,468 | ) | 1,031 | | (437 | ) |
Other income, net | | 1,129 | | (690 | ) | 439 | |
Income before income taxes | | 12,645 | | (5,822 | ) | 6,823 | |
Provision (benefit) for income taxes | | 4,936 | | (1,224 | ) | 3,712 | |
Net income | | 7,709 | | (4,598 | ) | 3,111 | |
Less: net income attributable to noncontrolling interests | | 1,120 | | — | | 1,120 | |
Net income attributable to MRV | | $ | 6,589 | | $ | (4,598 | ) | $ | 1,991 | |
| | | | | | | |
Net income per share attributable to MRV common stockholders: | | | | | | | |
Basic | | $ | 0.04 | | $ | (0.03 | ) | $ | 0.01 | |
Diluted | | $ | 0.04 | | $ | (0.03 | ) | $ | 0.01 | |
Weighted average number of shares: | | | | | | | |
Basic | | 157,657 | | — | | 157,657 | |
Diluted | | 158,552 | | — | | 158,552 | |
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MRV Communications, Inc.
Unaudited Pro Forma Statement of Operations
For the six months ended June 30, 2009
(In thousands, except per share data)
| | | | Pro forma
adjustments (1) | | | |
| | As reported | | Source
Photonics | | Pro forma | |
Revenue | | $ | 208,543 | | $ | (97,644 | ) | $ | 110,899 | |
Cost of goods sold | | 157,948 | | (92,889 | ) | 65,059 | |
Gross profit | | 50,595 | | (4,755 | ) | 45,840 | |
| | | | | | | |
Operating expenses: | | | | | | | |
Product development and engineering | | 17,578 | | (7,174 | ) | 10,404 | |
Selling, general and administrative | | 48,284 | | (9,862 | ) | 38,422 | |
Amoritization of intangibles | | 1,128 | | (1,128 | ) | — | |
Total operating expenses | | 66,990 | | (18,164 | ) | 48,826 | |
Operating loss | | (16,395 | ) | 13,409 | | (2,986 | ) |
Interest expense | | (1,597 | ) | 773 | | (824 | ) |
Other income, net | | 1,136 | | (317 | ) | 819 | |
Loss from continuing operations before income taxes | | (16,856 | ) | 13,865 | | (2,991 | ) |
Provision for income taxes | | 3,424 | | (859 | ) | 2,565 | |
Loss from continuing operations | | (20,280 | ) | 14,724 | | (5,556 | ) |
Loss from discontinued operations, net of income taxes of $321 | | 338 | | | | 338 | |
Net loss | | (19,942 | ) | 14,724 | | (5,218 | ) |
Less: | | | | | | | |
Income from continuing operations attributable to noncontrolling interests | | 1,118 | | | | 1,118 | |
Income from discontinued operations attributable to noncontrolling interests | | 10 | | | | 10 | |
Net loss attributable to MRV | | $ | (21,070 | ) | $ | 14,724 | | $ | (6,346 | ) |
Loss from continuing operations attributable to MRV | | (21,398 | ) | 14,724 | | (6,674 | ) |
Income from discontinued operations attributable to MRV | | 328 | | — | | 328 | |
| | | | | | | |
Net loss per share attributable to MRV common stockholders: | | | | | | | |
Basic and Diluted | | (0.13 | ) | 0.09 | | (0.04 | ) |
Weighted average number of shares: | | | | | | | |
Basic and Diluted | | 157,489 | | — | | 157,489 | |
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MRV Communications, Inc.
Unaudited Pro Forma Statement of Operations
For the year ended December 31, 2009
(In thousands, except per share data)
| | | | Pro forma
adjustments (1) | | | |
| | As reported | | Source
Photonics | | Pro forma | |
Revenue | | $ | 448,120 | | $ | (209,134 | ) | $ | 238,986 | |
Cost of goods sold | | 322,306 | | (181,694 | ) | 140,612 | |
Gross profit | | 125,814 | | (27,440 | ) | 98,374 | |
| | | | | | | |
Operating expenses: | | | | | | | |
Product development and engineering | | 36,735 | | (14,003 | ) | 22,732 | |
Selling, general and administrative | | 99,622 | | (20,317 | ) | 79,305 | |
Amoritization of intangibles | | 2,257 | | (2,257 | ) | — | |
Total operating expenses | | 138,614 | | (36,577 | ) | 102,037 | |
Operating loss | | (12,800 | ) | 9,137 | | (3,663 | ) |
Interest expense | | (2,958 | ) | 1,633 | | (1,325 | ) |
Other income, net | | 25,210 | | (587 | ) | 24,623 | |
Income from continuing operations before income taxes | | 9,452 | | 10,183 | | 19,635 | |
Provision for income taxes | | 5,345 | | (1,178 | ) | 4,167 | |
Income from continuing operations | | 4,107 | | 11,361 | | 15,468 | |
Loss from discontinued operations, net of income taxes of $927 | | (2,707 | ) | — | | (2,707 | ) |
Net income | | 1,400 | | 11,361 | | 12,761 | |
Less: | | | | | | | |
Income from continuing operations attributable to noncontrolling interests | | 1,757 | | — | | 1,757 | |
Income from discontinued operations attributable to noncontrolling interest | | 47 | | | | 47 | |
Net income (loss) attributable to MRV | | $ | (404 | ) | $ | 11,361 | | $ | 10,957 | |
Income from continuing operations attributable to MRV | | $ | 2,350 | | $ | 11,361 | | $ | 13,711 | |
Loss from discontinued operations attributable to MRV | | $ | (2,754 | ) | $ | — | | $ | (2,754 | ) |
| | | | | | | |
Net income (loss) per share attributable to MRV common stockholders: | | | | | | | |
Basic | | $ | (0.00 | ) | $ | 0.07 | | $ | 0.07 | |
Diluted | | $ | (0.00 | ) | $ | 0.07 | | $ | 0.07 | |
Weighted average number of shares: | | | | | | | |
Basic | | 157,547 | | — | | 157,547 | |
Diluted | | 157,547 | | — | | 157,665 | |
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MRV Communications, Inc.
Unaudited Pro Forma Statement of Operations
For the year ended December 31, 2008
(In thousands, except per share data)
| | | | Pro forma
adjustments (1) | | | |
| | As reported | | Source
Photonics | | Pro forma | |
Revenue | | $ | 466,821 | | $ | (200,162 | ) | $ | 266,659 | |
Cost of goods sold | | 331,753 | | (171,479 | ) | 160,274 | |
Gross profit | | 135,068 | | (28,683 | ) | 106,385 | |
| | | | | | | |
Operating expenses: | | | | | | | |
Product development and engineering | | 38,746 | | (15,863 | ) | 22,883 | |
Selling, general and administrative | | 116,595 | | (27,296 | ) | 89,299 | |
Impairment of goodwill and other intangibles | | 100,250 | | (93,879 | ) | 6,371 | |
Amoritization of intangibles | | 2,434 | | (2,434 | ) | — | |
Total operating expenses | | 258,025 | | (139,472 | ) | 118,553 | |
Operating loss | | (122,957 | ) | 110,789 | | (12,168 | ) |
Interest expense | | (3,497 | ) | 1,271 | | (2,226 | ) |
Other income, net | | 4,283 | | (410 | ) | 3,873 | |
Loss from continuing operations before income taxes | | (122,171 | ) | 111,650 | | (10,521 | ) |
Provision for income taxes | | 1,936 | | 1,259 | | 3,195 | |
Loss from continuing operations | | (124,107 | ) | 110,391 | | (13,716 | ) |
Income from discontinued operations, net of income taxes of $1,215 | | 1,002 | | — | | 1,002 | |
Net loss | | (123,105 | ) | 110,391 | | (12,714 | ) |
Less: | | | | | | | |
Net income from continuing operations attributable to noncontrolling interests | | 40 | | — | | 40 | |
Net income from discontinued operations attributable to noncontrolling interests | | 59 | | — | | 59 | |
| | | | | | | |
Net loss attributable to MRV | | $ | (123,204 | ) | $ | 110,391 | | $ | (12,813 | ) |
Loss from continuing operations attributable to MRV | | $ | (124,147 | ) | $ | 110,391 | | $ | (13,756 | ) |
Income from discontinued operations attributable to MRV | | $ | 943 | | $ | — | | $ | 943 | |
| | | | | | | |
Net loss per share attributable to MRV common stockholders: | | | | | | | |
Basic and Diluted | | $ | (0.78 | ) | $ | 0.70 | | $ | (0.08 | ) |
Weighted average number of shares: | | | | | | | |
Basic and Diluted | | 157,323 | | — | | 157,323 | |
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MRV Communications, Inc.
Unaudited Pro Forma Statement of Operations
For the year ended December 31, 2007
(In thousands, except per share data)
| | | | Pro forma
adjustments (1) | | | |
| | As reported | | Source
Photonics | | Pro forma | |
Revenue | | $ | 380,033 | | $ | (143,805 | ) | $ | 236,228 | |
Cost of goods sold | | 267,367 | | (116,148 | ) | 151,219 | |
Gross profit | | 112,666 | | (27,657 | ) | 85,009 | |
| | | | | | | |
Operating expenses: | | | | | | | |
Product development and engineering | | 33,387 | | (12,016 | ) | 21,371 | |
Selling, general and administrative | | 90,901 | | (15,397 | ) | 75,504 | |
Amoritization of intangibles | | 1,906 | | (1,906 | ) | — | |
Total operating expenses | | 126,194 | | (29,319 | ) | 96,875 | |
Operating loss | | (13,528 | ) | 1,662 | | (11,866 | ) |
Interest expense | | (3,521 | ) | 392 | | (3,129 | ) |
Other income (expense), net | | (1,108 | ) | (755 | ) | (1,863 | ) |
Loss from continuing operations before income taxes | | (18,157 | ) | 1,299 | | (16,858 | ) |
Provision for income taxes | | 2,881 | | 58 | | 2,939 | |
Loss from continuing operations | | (21,038 | ) | 1,241 | | (19,797 | ) |
Income from discontinued operations, net of income taxes of $1,343 | | 1,519 | | — | | 1,519 | |
Net loss | | (19,519 | ) | 1,241 | | (18,278 | ) |
Less: | | | | | | | |
Net loss from continuing operations attributable to noncontrolling interests | | (531 | ) | — | | (531 | ) |
Net income from discontinued operations attributable to noncontrolling interests | | 106 | | — | | 106 | |
Net loss attributable to MRV | | $ | (19,094 | ) | $ | 1,241 | | $ | (17,853 | ) |
Loss from continuing operations attributable to MRV | | $ | (20,507 | ) | $ | 1,241 | | $ | (19,266 | ) |
Income from discontinued operations attributable to MRV | | $ | 1,413 | | $ | — | | $ | 1,413 | |
| | | | | | | |
Net loss per share attributable to MRV common stockholders: | | | | | | | |
Basic and Diluted | | $ | (0.14 | ) | $ | 0.01 | | $ | (0.13 | ) |
Weighted average number of shares: | | | | | | | |
Basic and Diluted | | 140,104 | | — | | 140,104 | |
(1) Pro forma adjustments eliminate the revenue, expenses and income of the Source Photonics Entities assuming the transaction occurred on the first day of the period presented.
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(d) Exhibits
Exhibit 10.1 | | Stock Purchase Agreement, dated as of October 26, 2010, by and among Magnolia Source B.V., Source Photonics, Inc., Source Photonics Santa Clara, Inc. and the Company |
| | |
Exhibit 99.1 | | Press release of the Company dated October 26, 2010 |
| | |
Exhibit 99.2 | | Press release of the Company dated November 1, 2010 |
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Company has duly caused this Report to be signed on its behalf by the undersigned, hereunto duly authorized.
Date: November 1, 2010 | |
| |
| |
| MRV COMMUNICATIONS, INC. |
| |
| |
| By: | /s/ Chris King |
| | Chris King |
| | Chief Financial Officer |
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