Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended March 31, 1997 - Commission file Number 0-17038
Concord Camera Corp.
(Exact names of registrant as specified in its charter)
New Jersey 13-3152196
(State or other Jurisdiction (I.R.S. Employer
of Incorporation) Identification No.)
35 Mileed Way, Avenel, New Jersey 07001
(Address of principal executive office) (Zip code)
908/499-8280
(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_____
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, no par value -- 10,880,473 shares as of May 9, 1997
------------------------------
Page 1 of 17
Exhibit Index on Page 16
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
Concord Camera Corp.
Consolidated Balance Sheets
March 31,
1997 June 30,
(unaudited) 1996
Current assets:
Cash $ 6,591,662 $ 4,996,770
Accounts receivable, net 5,332,363 7,550,408
Inventories 18,873,253 17,491,615
Prepaid expenses and other current assets 2,933,526 2,540,802
------------- -------------
Total current assets 33,730,804 32,579,595
Plant and equipment, net 11,498,510 11,708,736
Goodwill, net 1,211,225 1,510,197
Other assets 4,987,804 4,051,268
------------- -------------
Total assets $51,428,343 $49,849,796
=========== ===========
Current liabilities:
Short-term debt $ 6,183,519 $ 6,368,972
Current portion of long-term debt 32,085 29,552
Current obligations under capital leases 642,384 570,899
Accounts payable 9,646,064 6,000,328
Accrued expenses 1,730,486 2,172,863
Income taxes payable 2,832 79,050
Other current liabilities 136,636 661,735
------------- -------------
Total current liabilities 18,374,006 15,883,399
Deferred income taxes 469,544 442,889
Long-term debt 405,633 430,589
Obligations under capital leases 1,501,558 1,948,443
Other long-term liabilities 666,791 666,791
-------------- --------------
Total liabilities 21,417,532 19,372,111
------------ ------------
Stockholders' equity:
Common stock, no par value, 20,000,000 authorized; 10,944,026 issued
as of March 31, 1997 and June 30, 1996 39,361,893 36,361,893
Paid in capital 850,786 850,786
Deficit (7,162,375) (6,802,992)
Notes receivable arising from common stock purchase agreements (2,586,574) (2,479,083)
-------------- --------------
30,463,730 30,930,604
Less: treasury stock, at cost; 63,553 shares (452,919) (452,919)
--------------- ---------------
Total stockholders' equity 30,010,811 30,477,685
---------- ------------
Total liabilities and stockholders' equity $51,428,343 $49,849,796
=========== ===========
See accompanying notes to consolidated financial statements.
2
Concord Camera Corp.
Consolidated Statements of Operations
(unaudited)
For the three months ended
March 31,
1997 1996
---- ----
Net sales $ 12,321,789 $15,534,417
Cost of products sold 9,837,075 10,986,508
------------ ------------
Gross profit 2,484,714 4,547,909
Selling expenses 1,395,482 1,732,617
General and administrative expenses 2,295,592 2,091,121
Financial expenses 326,262 384,500
Other (income), net (130,012) (70,583)
Legal expenses and settlement costs 74,525 323,593
------------ ------------
Income (loss) from operations before income taxes (1,477,135) 86,661
Provision (benefit) for income taxes 7,338 (145)
------------ ------------
Net Income (loss) ($ 1,484,473) $ 86,806
============ ===========
Income (loss) per common and common equivalent share ($0.14) $0.01
============= ===========
Weighted average number of common and common equivalent shares outstanding 10,880,473 10,959,899
============= ===========
See accompanying notes to consolidated financial statements.
3
Concord Camera Corp.
Consolidated Statements of Operations
For the nine months ended
March 31,
1997 1996
---- ----
Net sales $47,131,611 $50,933,925
Cost of products sold 34,288,051 34,360,134
----------- ------------
Gross profit 12,843,560 16,573,791
Selling expenses 5,133,040 5,814,955
General and administrative expenses 6,921,523 6,545,838
Financial expenses 1,065,413 1,128,616
Other (income), net (154,742) (29,508)
Legal expenses and settlement costs 229,769 609,275
----------- ------------
Income (loss) from operations before income taxes (351,443) 2,504,615
Provision for income taxes 7,940 626
----------- ------------
Net Income (loss) $ (359,383) $ 2,503,989
============ ============
Income (loss) per common and common equivalent share ($0.03) $0.22
============ ============
Weighted average number of common and common equivalent shares outstanding 10,880,473 11,218,845
============ ============
See accompanying notes to consolidated financial statements.
4
Concord Camera Corp.
Consolidated Statements of Cash Flows
(Unaudited)
For the nine months ended March 31,
1997 1996
---- ----
Cash flows from operating activities:
Net income (loss) ($ 359,383) $ 2,503,989
------------ ------------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 2,317,614 2,182,168
Interest income on notes receivable arising from common stock agreements (107,491) (56,884)
Change in assets and liabilities:
Decrease in accounts receivable 2,218,045 861,595
(Increase) in inventories (1,381,638) (3,005,829)
Decrease (increase) in prepaid expenses and other current assets (396,000) 101,702
(Increase) in other assets (1,382,103) (229,779)
Increase (decrease) in accounts payable 3,645,736 (903,733)
(Decrease) in accrued expenses (442,377) (812,358)
(Decrease) in income taxes payable (76,218) (184,114)
(Decrease) in other current liabilities (525,099) (145,366)
Increase (decrease) in deferred income taxes 26,655 (41,953)
------------ ------------
Total adjustments 3,897,124 (2,234,551)
------------ ------------
Net cash provided by operating activities 3,537,741 269,438
------------ ------------
Cash flows from investing activities:
Purchase of property, plant and equipment (1,233,623) (2,129,917)
Decrease in investments and advances to joint ventures - 64,378
------------ ------------
Net cash (used in) investing activities (1,233,623) (2,065,539)
------------ ------------
Cash flows from financing activities:
Net borrowings (repayments) under short-term debt agreements (185,453) 1,758,912
Net borrowings (repayments) of long-term debt (22,423) 177,955
Principal payments under capital lease obligations (501,350) (755,699)
Net proceeds from issuance of common stock - 40,250
------------ ------------
Net cash provided by (used in) financing activities (709,226) 1,221,418
------------ ------------
Net increase (decrease) in cash 1,594,892 (574,683)
Cash at beginning of period 4,996,770 4,533,216
------------ ------------
Cash at end of period $6,591,662 $ 3,958,533
=========== ===========
See accompanying notes to consolidated financial statements. See Note 3 -
Supplemental Disclosure of cash flow information.
5
CONCORD CAMERA CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997
(unaudited)
In the opinion of Concord Camera Corp. ("the Company"), the accompanying
unaudited financial statements contain all adjustments, including normal
recurring adjustments, necessary for the fair presentation of the Company`s
financial position as of March 31, 1997, and the results of operations and cash
flows for the periods ended March 31, 1997 and 1996.
The Notes to Consolidated Financial Statements, which are included in the
Company's 1996 Form 10-K Annual Report, should be read with the accompanying
financial statements.
Earnings (loss) per common and common equivalent share, for the three
months ended March 31, 1997 and nine months ended March 31, 1997 and 1996 are
based on the weighted average number of common shares outstanding. Common stock
equivalents outstanding during the three and nine months ended March 31, 1997
were not included in the calculation of earnings per share because their effect
was antidilutive. Earnings per common share, for the three months ended March
31, 1996, are based on the weighted average number of common shares outstanding
and the dilutive effect of common stock equivalents, which include stock options
and/or warrants that are exercisable at prices below the average price of the
Company's common stock during the three months ended March 31, 1996.
The Company operates on a worldwide basis and its results may be adversely
or positively affected by fluctuations of various foreign currencies against the
U.S. Dollar, specifically, the Canadian Dollar, German Mark, British Pound
Sterling, Hungarian Forint, French Franc, and Japanese Yen. Each of the
Company's foreign subsidiaries purchases its inventories in U.S. Dollars and
sells them in local currency, thereby creating an exposure to fluctuations in
foreign currency exchange rates. Certain components needed to manufacture
cameras are purchased in Japanese Yen. The impact of foreign exchange
transactions is reflected in the profit and loss statement. The Company
continues to analyze the benefits and costs associated with hedging against
foreign currency fluctuations.
Note 2 - Inventories
Inventories are comprised of the following:
March 31, June 30,
1997 1996
Raw materials and components $12,063,664 $ 7,743,884
Finished goods 6,809,589 9,747,731
----------- -----------
$18,873,253 $17,491,615
=========== ===========
6
Note 3 - Supplemental Disclosures of Cash Flow Information:
For the nine months ended March 31,
1997 1996
---- ----
Cash paid for interest $ 780,949 $ 651,537
=========== ===========
Cash paid for taxes $ 29,916 $ 252,518
=========== ===========
During the nine months ended March 31, 1997 and 1996, capital lease
obligations of approximately $126,000 and $565,000 were incurred when the
Company entered into leases for the purchase of equipment.
7
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
Results of Operations
Three months ended March 31, 1997 compared to the three months ended March 31,
1996.
Total revenues for the three months ended March 31, 1997 and 1996 were
approximately $12,322,000 and $15,534,000, respectively, a decrease of
approximately $3,212,000 or 20.7%. Sales to original equipment manufacturer
("OEM") customers for the three months ended March 31, 1997 and 1996 were
approximately $7,178,000 and $7,647,000, respectively, a decrease of
approximately $469,000 or 6.1%. Sales to Customers in the Americas for the three
months ended March 31, 1997 and 1996 were approximately $2,673,000 and
$4,891,000 respectively, a decline of approximately $2,218,000 or 45.3%. Sales
to customers in Europe for the three months ended March 31, 1997 and 1996 were
approximately $2,471,000 and $2,996,000 respectively, a decline of approximately
$525,000 or 17.5%. These decreases are due to lower sales of traditional and
single- use camera models. The decrease in traditional camera revenues was
anticipated and previously outlined in the Company's Form 10-K, for the fiscal
year ended June 30, 1996, in connection with management's decision to eliminate
a number of older motorized and manual traditional models, which resulted in
inventory provisions in the fourth quarter of Fiscal 1996. Furthermore, sales of
traditional 110 and 35 millimeter cameras are sluggish industry-wide as
retailers have been reducing the shelf space they are devoting to these camera
models because of the introduction of Advanced Photo System products. With
respect to single-use cameras, slower than planned production ramp-up of new
single-use Advanced Photo System cameras continued to impact the Company's
ability to satisfy all OEM customer orders in the third quarter, and the Company
expects increased production levels in the fourth quarter and anticipates
single-use camera sales for the fiscal year will exceed last year's level.
The Company has designed and will be introducing a number of innovative
Advanced Photo System traditional cameras in the fourth quarter of Fiscal 1997
and in the first half of Fiscal 1998. These models have been well received at
major photographic trade shows and by large potential customers . Sales of
traditional cameras are not expected to increase until these new models are
introduced. Demand for the Company's single- use cameras continues to be strong.
The Company has already received substantial orders for its newly introduced OEM
Customer Advanced Photo System single-use cameras.
In the single-use camera category, the Company is readying two additional
Advanced Photo System models, one daylight and one flash, two other Advanced
Photo System models for a major OEM customer and a compact 35mm camera in a
single-use body design in which new rolls of film can be reloaded. In addition,
the Company is completing development of two new 35mm single-use cameras,
daylight and flash, for its OEM customers, with initial anticipated delivery in
the Company's fourth fiscal quarter and the first half of Fiscal 1998.
In addition to developing two Advanced Photo System traditional cameras,
the Company is engaged in developing and/or completing two 35mm traditional
cameras for two well known manufacturers of high profile branded educational
toys, with initial production for one of these products expected to commence
during the fourth quarter of Fiscal 1997. The Company is also well along in
negotiations with two potential new OEM customers for the Company's new
traditional Advanced Photo System cameras. Annualized sales estimates for the
larger of these two potential contracts are projected in the $30 million range
once full production is attained. While the Company has a number of quality and
performance evaluations it has to meet before these arrangements can be
completed, initial production under the larger potential contract is expected to
begin in the fourth quarter of Fiscal 1997 or shortly thereafter. The Company
has also commenced negotiations and quality
8
testing with one of these potential OEM customers for a significant Advanced
Photo System single-use camera contract.
Management expects that the fourth quarter will be profitable with sales
ahead of those for the fourth quarter of last year. Management remains cautious
about near term financial performance, but is enthusiastic over the potential
results to be realized from the introduction of the Company's new products.
Management anticipates increased sales and production volume in the fourth
fiscal quarter to reverse the decline in gross profit margin from the prior
year.
Gross Profit
Gross profit, expressed as a percentage of sales, decreased to 20.2% for
the three months ended March 31, 1997 from 29.3% for the three months ended
March 31, 1996. This decrease was due in part to the decline in manufacturing
volume, increases in license and royalty expenses, and substantial increases in
product development costs. Product development costs for the three months ended
March 31, 1997 and 1996, were approximately $746,000 and $387,000, respectively,
an increase of approximately $359,000, or 92.8%.
Expenses
Operating expenses consisting of selling, general and administrative and
financial expenses, decreased to $4,017,000 in the three months ended March 31,
1997 from $4,208,000 in the three months ended March 31, 1996, a decrease of
$191,000. As a percentage of sales, operating expenses increased to 32.6% in the
three months ended March 31, 1997 from 27.1% in the three months ended March 31,
1996.
Selling expenses decreased to $1,395,000 or 11.3% of net sales in the
three months ended March 31, 1997 from $1,733,000 or 11.2% of net sales in the
three months ended March 31, 1996. The decrease was primarily attributable to
the decreases in sales commissions due to decreased volume in the Americas and
Europe and benefits from the consolidation of warehouse and administration
facilities undertaken in Fiscal 1996.
General and Administrative expenses increased to $2,296,000 or 18.6% of
net sales in the three months ended March 31, 1997 from $2,091,000 or 13.5% of
net sales in the three months ended March 31, 1996. The increase is primarily
attributable to a reduction in the amortization period for goodwill and
increases in professional fees and expenses related to OEM customer contracts.
Financial expenses decreased to $326,000 or 2.6% of net sales in the three
months ended March 31, 1997 from $385,000 or 2.5% of net sales in the three
months ended March 31, 1996. Such decrease was primarily a result of a decrease
in average debt outstanding during the three months ended March 31, 1997,
partially offset by an increase in the prime lending rate.
Litigation and settlement costs in the three months ended March 31, 1997
and 1996 were approximately $75,000 and $324,000, respectively, a decrease of
approximately $249,000, or 76.9%. The decrease in litigation and settlement
expenses reflects the disposition of a number of outstanding matters in Fiscal
1996. The Company incurred legal expenses and settlement costs in the three
months ended March 31, 1997 in connection with non-operating matters, primarily
the demand for arbitration and other litigation against Jack Benun. In the three
months ended March 31, 1996, litigation and settlement expenses were comprised
of primarily the demand for arbitration and other litigation against Jack Benun,
a purported class action, and legal fees related to the Roland Kohl Settlement.
9
Other (Income), Net
Other income, net includes foreign exchange gains and losses and interest
income net of directors fees and certain public relations costs.
Income Taxes
The Company has made a minimal tax provision for the three months ended
March 31, 1997 and 1996 because of loss carryforwards available in countries
where the Company has earnings.
10
Nine months ended March 31, 1997 compared to the nine months ended March 31,
1996.
Total revenues for the nine months ended March 31, 1997 and 1996 were
approximately $47,132,000 and $50,934,000, respectively, a decrease of
approximately $3,802,000 or 7.5%. Sales to OEM customers for the nine months
ended March 31, 1997 and 1996 were approximately $21,683,000 and $19,735,000,
respectively, an increase of approximately $1,948,000 or 9.9%. Sales to
Customers in the Americas for the nine months ended March 31, 1997 and 1996 were
approximately $16,335,000 and $20,406,000 respectively, a decline of
approximately $4,071,000 or 20.0%. Sales to customers in Europe for the nine
months ended March 31, 1997 and 1996 were approximately $9,114,000 and
$10,793,000 respectively, a decline of approximately $1,679,000 or 15.6%. These
decreases are due to lower sales of traditional and single-use camera models.
The decrease in traditional camera revenues was anticipated and previously
outlined in the Company's Form 10-K for the fiscal year ended June 30, 1996 in
connection with management's decision to eliminate a number of older motorized
and manual traditional models, which resulted in inventory provisions in the
fourth quarter of Fiscal 1996. Furthermore, sales of traditional 110 and 35
millimeter cameras are sluggish industry-wide as retailers have been reducing
the shelf space they are devoting to these camera models because of the
introduction of Advanced Photo System products. With respect to single-use
cameras, for the first nine months, unit sales of single-use cameras were lower
than the same period in the prior year, although revenue from the sale of these
cameras was essentially flat, which is attributable to favorable product mix and
higher average selling prices. Slower than planned production ramp-up of new
single-use Advanced Photo System cameras continued to impact the Company's
ability to satisfy all OEM customer orders in the third quarter, and the Company
expects increased production levels in the fourth quarter and anticipates
single-use camera sales for the fiscal year will exceed last year's level.
The Company has designed and will be introducing a number of innovative
Advanced Photo System traditional cameras in the fourth quarter of Fiscal 1997
and in the first half of Fiscal 1998. These models have been well received at
major photographic trade shows and by large potential customers. Sales of
traditional cameras are not expected to increase until these new models are
introduced. Demand for the Company's single- use cameras continues to be strong.
The Company has already received substantial orders for its newly introduced OEM
Customer Advanced Photo System single-use cameras.
In the single-use category, the Company is readying two additional
Advanced Photo System models, one daylight and one flash, two other Advanced
Photo System models for a major OEM customer and a compact 35mm camera in a
single-use body design in which new rolls of film can be reloaded. In addition,
the Company is completing development of two new 35mm single-use cameras,
daylight and flash, for its OEM customers, with initial anticipated delivery in
the Company's fourth fiscal quarter and the first half of Fiscal 1998.
In addition to developing two Advanced Photo System traditional cameras,
the Company is engaged in developing and/or completing two 35mm traditional
cameras for two well known manufacturers of high profile branded educational
toys, with initial production for one of these products expected to commence
during the fourth quarter of Fiscal 1997. The Company is also well along in
negotiations with two potential new OEM customers for the Company's new
traditional Advanced Photo System cameras. Annualized sales estimates for the
larger of these two potential contracts are projected in the $30 million range
once full production is attained. While the Company has a number of quality and
performance evaluations it has to meet before these arrangements can be
completed, initial production under the larger potential contract is expected to
begin in the fourth quarter of Fiscal 1997 or shortly thereafter. The Company
has also commenced negotiations and quality testing with one of these potential
OEM customers for a significant Advanced Photo System single-use camera
contract.
11
Management expects that the fourth quarter will be profitable with sales
ahead of those for the fourth quarter of last year. Management remains cautious
about near term financial performance, but is enthusiastic over the potential
results to be realized from the introduction of the Company's new products.
Management anticipates increased sales and production volume in the fourth
fiscal quarter to reverse the decline in gross profit margin from the prior
year.
Gross Profit
Gross profit, expressed as a percentage of sales, decreased to 27.3% for
the nine months ended March 31, 1997 from 32.5% for the nine months ended March
31, 1996. This decrease was due to increases in license and royalty expenses,
and substantial increases in product development costs. Product development
costs for the nine months ended March 31, 1997 and 1996, were approximately
$2,327,000 and $1,081,000, respectively, an increase of approximately
$1,246,000, or 115.4%. As new products are introduced and production volume
increases, the Company expects margins to increase.
Expenses
Operating expenses consisting of selling, general and administrative and
financial expenses, decreased to $13,120,000 in the nine months ended March 31,
1997 from $13,489,000 in the nine months ended March 31, 1996, a decrease of
$369,000 or 2.7%. As a percentage of sales, operating expenses increased to
27.8% in the nine months ended March 31, 1997 from 26.5% in the nine months
ended March 31, 1996.
Selling expenses decreased to $5,133,000 or 10.9% of net sales in the nine
months ended March 31, 1997 from $5,815,000 or 11.4% of net sales in the nine
months ended March 31, 1996. The decrease was primarily attributable to the
decreases in sales commissions due to decreased volume in the Americas and
Europe and benefits from the consolidation of warehouse and administration
facilities undertaken in Fiscal 1996.
General and Administrative expenses increased to $6,922,000 or 14.7% of
net sales in the nine months ended March 31, 1997 from $6,546,000 or 12.9% of
net sales in the nine months ended March 31, 1996. The increase is primarily
attributable to a reduction in the amortization period for goodwill and
increases in professional fees and expenses related to OEM customer contracts.
Financial expenses decreased to $1,065,000 or 2.3% of net sales in the
nine months ended March 31, 1997 from $1,129,000 or 2.2% of net sales in the
nine months ended March 31, 1996. Such decrease was primarily a result of a
decrease in average debt outstanding during the nine months ended March 31,
1997, partially offset by an increase in the prime lending rate.
Litigation and settlement costs in the nine months ended March 31, 1997
and 1996 were approximately $230,000 and $609,000, respectively, a decrease of
approximately $379,000, or 62.2%. The decrease in litigation and settlement
expenses reflects the settlement of a number of outstanding issues in Fiscal
1996. The legal expenses and settlement costs incurred in the nine months ended
March 31, 1997 were related primarily to the demand for arbitration and other
litigation against Jack Benun. In the nine months ended March 31, 1996,
litigation and settlement expenses were comprised of primarily the demand for
arbitration and other litigation against Jack Benun, a purported class action,
and the Roland Kohl litigation.
Other (Income), Net
Other income, net includes foreign exchange gains and losses and interest
income net of directors fees and
12
certain public relations costs.
Income Taxes
The Company has made a minimal tax provision for the nine months ended
March 31, 1997 and 1996 because of loss carryforwards available in countries
where the Company has earnings.
13
Liquidity and Capital Resources
At March 31, 1997, the Company had working capital of $15,357,000 as
compared to $16,696,000 at June 30, 1996. Cash flow provided by operating
activities was approximately $3,538,000 and $269,000 for the nine months ended
March 31, 1997 and 1996, respectively. Capital expenditures, excluding assets
financed under capital leases, for the nine months ended March 31, 1997 and 1996
were approximately $1,234,000 and $2,130,000, respectively. The Company's
principal funding requirement has been, and is expected to continue to be, the
financing of accounts receivable and inventory.
The Bank of East Asia, Limited New York ("BOEA NY")
On December 20, 1994, the Company obtained a one year, $1,500,000
revolving credit facility with BOEA NY. On September 20, 1995, the Company
executed an amendment to its revolving line of credit with the BOEA NY to
increase the credit facility to $3,000,000. The facility has been extended to
December 19, 1997. The BOEA NY Facility is secured by certain accounts
receivable of the Company's Hong Kong operations and bears interest at 2% above
BOEA NY's prime lending rate, which was 8.5% at March 31, 1997. Availability
under the BOEA NY Facility is subject to advance formulas based on eligible
accounts receivable with no minimum borrowing. At March 31, 1997, approximately
$1,873,000 was outstanding and classified as short-term debt under the BOEA NY
Facility.
The CIT Group/Credit Finance, Inc ("CIT")
The Company has a $5,000,000 credit facility with CIT (the "CIT Facility")
which expires on May 31, 1997. The CIT Facility is secured by accounts
receivable, inventory and other related assets of the Company's United States
operations and bears interest at 2% above CIT's prime lending rate, which was
8.5% at March 31, 1997. Availability under the CIT Facility is subject to
advance formulas based on eligible inventory and accounts receivable with
minimum borrowing of $2,000,000. At March 31, 1997, approximately $1,382,000 was
outstanding and classified as short-term debt under the CIT Facility.
Bank of East Asia, Limited ("BOEA") --Hong Kong
Concord HK has a credit facility (the "BOEA Facility") with BOEA that
provides Concord HK with up to $6,900,000 of financing as follows: letters of
credit and standby letters of credit up to $2,825,000, overdraft and packing
loans of up to $3,600,000 and an installment loan of $475,000. The installment
loan was utilized in part to repay the outstanding mortgage obligation on the
Hong Kong office property to the Bank of China. As of March 31, 1997,
approximately $5,003,000 was utilized and approximately $1,422,000 was available
under the BOEA Facility. Approximately $3,854,000 of the total $5,003,000
utilized, was in the form of trade finance, including but not limited to import
letters of credit. The BOEA Facility, which is payable on demand, bears interest
at 2% above BOEA's prime lending rate for letters of credit and 2.25% above
BOEA's prime lending rate for overdraft and packing loans. At March 31, 1997
BOEA's prime lending rate was 8.5%. In connection with the BOEA Facility,
Concord HK has placed a $1,184,000 time deposit with BOEA, which is included in
prepaid and other current assets at March 31, 1997 and such deposit is pledged
as collateral for the BOEA facility. In addition, all amounts outstanding under
the BOEA Facility are guaranteed by Concord. At March 31, 1997, approximately
$2,854,000 was classified as short-term debt under the BOEA facility.
On January 31, 1997, the Company received a commitment letter from the
East Asia Finance Company, a wholly-owned subsidiary of BOEA, to extend to
Concord HK a five year equipment leasing facility in the amount of $1,100,000 to
finance $1,600,000 of capital expenditures for its expanded China manufacturing
14
facilities. The Company anticipates utilizing this facility during the fourth
quarter of Fiscal 1997 to acquire additional equipment to help meet the demand
for additional production in the fourth quarter and in Fiscal 1998.
Toronto Dominion Bank ("TDB")
On November 25, 1996, the Company obtained a $1,090,000 working capital
facility with TDB (the "TDB Facility") with an annual review date of October 31,
1997. The TDB Facility is secured by accounts receivable, inventory and other
related assets of the Company's Canadian operations and bears interest at 1%
above TDB's prime lending rate, which was 4.75% at March 31, 1997. Availability
under the TDB Facility is subject to advance formulas based on eligible accounts
receivable and seasonable inventory eligibility with no minimum borrowings and
is subject to monthly covenant requirements. At March 31, 1997, approximately
$107,000 was outstanding and classified as short-term debt and the Company was
in compliance with all covenants under the TDB Facility.
Other arrangements and future cash commitments
The Company anticipates utilizing a five year equipment leasing facility
in the amount of $1,100,000 from the East Asia Finance Company to finance
$1,600,000 of capital expenditures for its expanded China manufacturing
facilities during the fourth quarter of Fiscal 1997. [See Bank of East Asia,
Limited ("BOEA") - Hong Kong].
Management believes that anticipated cash flow from operations together
with financing from BOEA and CIT or replacement facilities will be sufficient to
fund its operating cash needs over the next twelve months.
The information set forth under "Results of Operations" above includes
forward-looking statements that involve numerous risks and uncertainties. The
Company's actual results could differ materially from those anticipated in such
forward-looking statements as a result of certain factors, including those set
forth in the Company's Form 10-K Annual Report for its Fiscal Year ended June
30, 1996. In particular, expected sales increases could be adversely affected by
production difficulties or economic conditions adversely affecting the market
for the Company's products. To obtain the results expected from the introduction
of the new products will require timely completion of development, successful
ramp up of full-scale production on a timely basis and consumer acceptance of
the products. In addition, the Company's potential new OEM relationships will
require successful conclusion of negotiations, continued ability of the Company
to meet quality and performance tests and successful implementation of
production at greatly increased volumes, as to all of which there can be no
assurance.
15
PART 2. OTHER INFORMATION
a. Item 6. Reports on Form 8-K None
b. Exhibits
Exhibit No. Exhibit
27 Financial Data Schedule
16
S I G N A T U R E
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.
CONCORD CAMERA CORP.
(Registrant)
BY: /s/ Harlan I. Press
(Signature)
Harlan I. Press
Corporate Controller and Assistant Secretary
DULY AUTHORIZED AND PRINCIPAL ACCOUNTING
OFFICER
DATE: May 12, 1997
17