SECURITIES AND EXCHANGE COMMISSION
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 October 2, 1999 - Commission file Number 0-17038
---------------
Concord Camera Corp.
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(Exact names of registrant as specified in its charter)
New Jersey 13-3152196
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(State or other Jurisdiction (I.R.S. Employer
of Incorporation) Identification No.)
4000 Hollywood Blvd. Suite 650N, Hollywood, Florida 33021
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(Address of principal executive office) (Zip code)
954/331-4200
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(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
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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 -- 11,686,117 shares as of October 27, 1999
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Page 1 of 12
(Exhibit Index on Page 11)
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
Concord Camera Corp.
Condensed Consolidated Balance Sheets
(Unaudited) (Note)
October 2, 1999 July 3, 1999
--------------- ------------
Assets
Current Assets:
Cash and cash equivalents $33,984,199 $30,706,761
Accounts receivable, net 19,297,523 18,272,329
Inventories, net 22,268,414 20,620,556
Prepaid expenses and other current assets 2,898,643 2,404,400
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Total current assets 78,448,679 72,004,046
Plant and equipment, net 19,827,865 18,871,300
Goodwill, net 279,109 291,764
Other assets 5,094,906 5,480,342
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Total assets $103,650,559 $96,647,452
============ ===========
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable $19,383,247 $16,224,538
Accrued expenses 7,555,524 4,985,789
Short term debt 8,209,281 8,088,901
Current portion of long-term debt - 2,100,000
Current portion of obligations under capital leases 1,934,585 2,073,492
Income taxes payable 1,275,549 896,142
Other current liabilities 259,751 188,058
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Total current liabilities 38,617,937 34,556,920
Deferred income taxes 792,358 792,358
Long-term debt, net of current portion 14,850,000 14,850,000
Obligations under capital leases, net of current portion 2,248,442 2,623,080
Other long-term liabilities 1,041,693 1,129,569
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Total liabilities 57,550,430 53,951,927
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Commitment and contingencies
Stockholders' equity:
Common stock, no par value, 40,000,000 authorized; 11,686,117 and
11,629,592 issued as of October 2, 1999 and July 3, 1999, respectively 41,168,585 41,117,335
Paid in capital 1,033,553 1,033,553
Retained earnings 9,982,317 6,086,691
Notes receivable arising from common stock purchase agreements (1,947,188) (2,163,542)
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50,237,267 46,074,037
Less: treasury stock, at cost; 771,263 and 675,863 shares as of October 2,
1999 and July 3, 1999, respectively (4,137,138) (3,378,512)
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Total stockholders' equity 46,100,129 42,6925,525
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Total liabilities and stockholders' equity $103,650,559 $96,647,452
============ ===========
See accompanying notes to condensed consolidated financial statements.
Note: The balance sheet at July 3, 1999 has been derived from the audited
financial statements at that date bur does not include all of the information
and footnotes required by generally accepted accounting principals for complete
financial statements.
2
Concord Camera Corp.
Condensed Consolidated Income Statements
(Unaudited)
For the three months ended
October 2, 1999 October 3, 1998
--------------- ---------------
Net sales $41,237,897 $31,023,827
Cost of products sold 29,899,118 22,580,881
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Gross profit 11,338,779 8,442,946
Selling expenses 2,515,627 2,393,179
General and administrative expenses 3,804,843 2,471,095
Interest expense 873,977 805,189
Other (income) expense, net (128,294) 86,095
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Income before income taxes 4,272,626 2,687,338
Provision for income taxes 377,000 229,000
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Net Income $3,895,626 $2,458,388
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Basic earnings per share $0.36 $0.22
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Diluted earnings per share $0.33 $0.21
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Weighted average common shares outstanding - basic 10,959,177 11,139,915
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Effect of dilutive securities: Employee stock options 985,149 720,636
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Weighted average common shares outstanding - diluted 11,944,326 11,860,551
============ ==========
See accompanying notes to condensed consolidated financial statements
3
Concord Camera Corp.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
For the three months ended
October 2, 1999 October 3, 1998
--------------- ---------------
Cash flows from operating activities:
Net income $ 3,895,626 $ 2,458,389
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Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 1,053,711 989,310
Amortization of deferred financing costs 33,354 22,236
Officers notes forgiven on stock purchases 251,066 -
Interest income on notes receivable arising from common stock purchase agreements (34,712) (36,092)
Change in assets and liabilities:
Accounts receivable (1,025,194) 3,977,077
Inventories (1,647,758) (2,049,942)
Prepaid expenses and other current assets (498,637) (1,141,291)
Other assets 237,528 (913,894)
Accounts payable 3,158,709 903,759
Accrued expenses 2,569,735 1,818,655
Income taxes payable 379,407 229,332
Other current liabilities 71,692 226,537
Other long-term liabilities (87,876) -
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Total adjustments 4,461,025 4,025,687
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Net cash provided by operating activities 8,356,651 6,484,076
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Cash flows from investing activities:
Purchase of property, plant and equipment (1,878,672) (1,977,749)
Purchase of treasury stock (758,626) (724,778)
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Net cash used in investing activities (2,637,298) (2,702,527)
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Cash flows from financing activities:
Net borrowings (repayments) under short-term debt agreements 120,380 (1,758,327)
Net borrowings of long-term debt (2,100.000) (8,516)
Net proceeds from issuance of senior notes, net - 14,850,000
Net repayments under capital lease obligations (513,545) (209,590)
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Net proceeds from issuance of common stock 51,250 -
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Net cash used in financing activities (2,441,915) (12,873,567)
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Net increase in cash $ 3,277,438 $16,655,116
Cash at beginning of period 30,706,761 7,119,699
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Cash at end of period $33,984,199 $23,774,815
=========== ===========
See accompanying notes to condensed consolidated financial statements.
See Note 3 - Supplemental disclosure of cash flow information.
4
CONCORD CAMERA CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 2, 1999
(unaudited)
Note 1 - General
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principals for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principals for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three month period ended October 2,
1999 are not necessarily indicative of the results that may be expected for the
year ended July 1, 2000. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Registrant Company's
annual report on Form 10-K for the year ended July 3, 1999.
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, 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:
October 2, 1999 July 3, 1999
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Raw materials and components $14,592,588 $ 15,605,934
Finished goods 9,342,913 6,389,998
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Subtotal 23,935,501 21,995,932
Less: Reserve for inventory obsolescence (1,667,187) (1,375,376)
----------- ------------
$22,268,414 $20,620,556
=========== ===========
Note 3 - Supplemental Disclosures of Cash Flow Information:
For the three months ended
October 2, 1999 October 3, 1998
--------------- ---------------
Cash paid for interest $ 747,517 $ 700,250
=========== ===========
Cash paid for taxes $ - $ -
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5
Note 4 -- Litigation and Settlements
Jack C. Benun. On November 18, 1994, the Company filed a demand for arbitration
in New Jersey for money damages in excess of $1.5 million against Jack C. Benun
("Benun"), its former chief executive officer who was discharged for cause in
Fiscal 1995. This action was taken due to Benun's failure to fully compensate
the Company for damages it sustained as a result of Benun's breaching his
employment obligations, his fiduciary obligations and perpetrating frauds upon
the Company including the misappropriation of funds from the Company. Benun has
submitted a counterclaim in which he alleges wrongful termination of his
employment and denial of benefits by the Company. The Company is vigorously
pursuing its action as well as defending the counterclaim. On August 24, 1999,
the arbitrator upheld the propriety of Concord's termination for cause of Benun.
The arbitrator found that Benun perpetrated frauds on the Company by diverting
and embezzling company monies. The Company will now pursue its further damage
claims against Benun related to the frauds and embezzlement.
Fuji. On December 30, 1997, the Company commenced in the United States District
Court of the Southern District of New York (the "Court") an action against Fuji
seeking to enforce the terms of a Settlement Agreement between the Company and
Fuji (the "Settlement Agreement") and to restrain Fuji from terminating the
Settlement Agreement. Under the terms of the Settlement Agreement, the Company
has been granted a worldwide (subject to certain geographic limitations),
non-exclusive license to use certain Fuji technology in connection with the
manufacture and sale of single-use cameras. On January 9, 1998, the Court
granted the Company's request for an order restraining Fuji from terminating the
Settlement Agreement. Pending a final judicial determination of the dispute, the
restraining order will continue in effect as long as the Company refrains from
making any further shipments pursuant to the purchase order which gave rise to
the dispute. The parties are presently engaged in the conception of discovery
and motion practice.
Kubbany. The Company and its subsidiary have been sued in Panama before the
First Tribunal of Labor of the City of Colon, alleging breach of various
employment-related obligations of Joseph Kubbany, a former executive of Concord
Camera (Panama), Inc. A counterclaim against Kubbany has been filed on behalf of
Concord Camera (Panama), Inc. alleging a breach of his employment obligations by
taking unauthorized travel advances. Evidentiary hearing dates have been
concluded. Certain additional submissions and document review are taking place.
Under Panamanian law, certain claims of the employer exceeding the forgoing
amounts were not appropriate for presentation in the Employment Tribunal;
therefore, the Company has filed a civil action against Joseph Kubbany alleging
various breaches of his obligations as the Manager for Concord. (Panama), Inc.
and for losses incurred because of excess inventory and the sale of film and for
restitution of the costs of airplane tickets for his wife paid with Company
funds. The Company has named as a party to the litigation, Dynamic World
Trading, Inc. This case is on going.
The Company is involved from time to time in routine legal matters incidental to
its business. In the opinion of the Company's management, the resolution of such
matters, including those described above, will not have a material effect on its
financial position or results of operations.
6
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Results of Operations
The quarter ended October 2, 1999 compared to the quarter ended October 3, 1998.
Total revenues for the quarters ended October 2, 1999 and October 3,
1998 were approximately $41,238,000 and $31,024,000, respectively, an increase
of approximately $10,214,000 or 32.9%. The increase in revenues for the first
quarter of the company's fiscal year ended July 1, 2000 ("Fiscal 2000") over the
corresponding quarter of the company's fiscal year ended July 3, 1999 ("Fiscal
1999') resulted principally from increases in sales to original equipment
manufacturer ("OEM") and retail distribution customers. OEM revenues for the
quarter ended October 2, 1999 and October 3, 1998 were approximately $28,083,000
and $20,998,000, respectively, an increase of approximately $7,085,000 or 25.2%.
Retail sales for the quarters ended October 2, 1999 and October 3, 1998 were
approximately $13,155,000 and $10,026,000, respectively, an increase of
approximately $3,129,000 or 31.2%.
Sales by Concord Camera HK Limited ("Concord HK") for the quarters
ended October 2, 1999 and October 3, 1998 were approximately $36,265,000 and
$27,269,000, respectively, an increase of approximately $8,996,000 or 33.0%. The
increase is due to the increases in sales to OEM and retail distribution
customers. OEM revenues generated by Concord HK for the quarters ended October
2, 1999 and October 3, 1998 were approximately $28,083,000 and $20,998,000,
respectively, an increase of approximately $7,085,000 or 25.2%. Retail sales
generated by Concord HK for the quarters ended October 2, 1999 and October 3,
1998 were approximately $8,183,000 and $6,271,000, respectively, an increase of
approximately $1,912,000 or 30.5%. The increases in OEM and retail sales are
attributable to increased sales to preexisting OEM and retail customers together
with sales to new OEM and Retail customers.
Consolidated sales of the Company's operations in the United States,
Latin America and Canada ("Concord Americas") for the quarters ended October 2,
1999 and October 3, 1998 were approximately $2,487,000 and $1,852,000,
respectively, an increase of approximately $635,000 or 34.3%. In addition,
certain Concord Americas customers increased merchandise purchases on a F.O.B.
Hong Kong basis from Concord HK. During the quarters ended October 2, 1999 and
October 3, 1998, Concord Americas customers purchased approximately $5,418,000
and $3,803,000, respectively, from Concord HK, an increase of approximately
$1,615,000 or 42.5%. If this increase was added to the quarter ended October 2,
1999 Concord Americas sales, sales to Concord Americas customers would have
increased by 39.8% over sales to such customers during the first quarter of
Fiscal 1999.
Consolidated sales of Concord Camera Europe, Concord Camera GmbH, and
Concord Camera France ("Concord Camera Europe") for the quarters ended October
2, 1999 and October 3, 1998, were approximately $2,485,000 and $1,903,000,
respectively, an increase of approximately $582,000 or 30.6%. In addition,
certain Concord Europe customers increased merchandise purchases on a F.O.B.
Hong Kong basis from Concord HK. During the quarters ended October 2, 1999 and
October 3, 1998, European customers purchased approximately $2,765,000 and
$2,440,000, respectively, from Concord HK, an increase of approximately $325,000
or 13.3%. If this increase was added to the sales for the quarter ended October
2, 1999, European sales to European customers would have increased by 20.9% over
sales to such customers during the first quarter of Fiscal 1999.
Gross Profit
Gross profit, expressed as a percentage of sales, increased to 27.5%
for the quarter ended October 2, 1999 from 27.2% for the quarter ended October
3, 1998. This increase was primarily the result of more favorable absorption of
manufacturing overhead and labor utilization resulting from increased sales and
manufacturing volume and efficiencies. Product development costs were $1,182,000
for the quarter ended October 2, 1999 as compared to $1,244,000 for the quarter
ended October 3, 1998, a decrease of approximately $60,000.
Expenses
As a percentage of sales, operating expenses, consisting of selling,
general and administrative and interest expense, decreased to 17.4% in the
quarter ended October 2, 1999 from 18.3% in the quarter ended October 3, 1998.
Operating expenses increased to $7,194,000 in the quarter ended October 2, 1999
from $5,669,000 in the quarter ended October 3, 1998, an increase of $1,525,000
or 26.9%.
7
Selling expenses increased to $2,516,000 or 6.1% of net sales in the
quarter ended October 2, 1999 from $2,393,000 or 7.7% of net sales in the
quarter ended October 3, 1998. The increase was primarily attributable to
increases in royalty expenses and promotional allowances net of the benefits
from certain cost cutting activities.
General and administrative expenses increased to $3,805,000 or 9.2% of
net sales in the quarter ended October 2, 1999 from $2,471,000 or 8.0% of net
sales in the quarter ended October 3, 1998.
Interest expense increased to $873,000 or 2.1% of net sales for the
quarter ended October 2, 1999 from $805,000 or 2.6% of net sales in the quarter
ended October 3, 1998. Such increase was primarily a result of an increase in
average debt outstanding during the quarter ended October 2, 1999.
Other (income), Net
Other (income) expense, net was approximately ($128,000) and $86,000 in
the quarters ended October 2, 1999 and October 3, 1998, respectively. Other
(income) expense, net includes directors' fees, certain public relations costs,
foreign exchange gains and losses and interest income.
Income Taxes
The Company's provisions for income taxes for the quarters ended
October 2, 1999 and October 3, 1998 are primarily related to the earnings of the
Company's Far East and domestic operations.
Net Income
As a result of the matters described above, the Company had net income
of approximately $3,896,000 or $0.33 per diluted share in the quarter ended
October 2, 1999, as compared to net income of approximately $2,458,000 or $0.21
per diluted share in the quarter ended October 3, 1998. The Company achieved its
profit plan for the first quarter and is in line to achieve its previously
announced projected profit of $11 to $12 million or $0.94 to $1.03 per diluted
share for the current fiscal year.
Liquidity and Capital Resources
At October 2, 1999, the Company had working capital of $39,830,000 as
compared to $37,447,000 at July 3, 1999. Cash flow provided by operating
activities was approximately $8,357,000 and $6,484,000 for the three months
ended October 2, 1999 and October 3, 1998, respectively. Capital expenditures
for the three months ended October 2, 1999 and October 3, 1998 were
approximately $1,879,000 and $1,978,000, respectively. The Company's principal
funding requirement has been, and is expected to continue to be, the financing
of accounts receivable and inventory. Additionally, the combined United States
operation is dependent upon funding received from the foreign operations.
Senior Notes. On July 30, 1998, the Company consummated a private placement of
$15 million of senior notes. The notes bear interest at 11%, and the maturity
date is July 15, 2005. Interest payments are due quarterly. The agreement
governing the senior notes contains certain restrictive covenants relating to,
among other things, incurrence of additional indebtedness and dividend and other
payment restrictions affecting subsidiaries.
Non-Notification Factoring with Recourse Facility. During the last quarter of
Fiscal 1998, Concord HK consummated a $10,000,000 Non-Notification Factoring
with Recourse Facility (the "Factoring Facility") that is guaranteed by the
Company, is secured by certain accounts receivables of the Company's Hong Kong
operations and bears interest at 1.5% above the prime lending rate. During the
last quarter of Fiscal 1999, $2,000,000 of the factoring facility was converted
into two $1,000,000 equipment leasing facilities with terms of three and four
years each. Availability under the factoring facility is subject to advance
formulas based on eligible accounts receivable with no minimum borrowings. At
October 2, 1999, approximately $6,798,000 was outstanding and classified as
short-term debt.
Hong Kong Credit Facilities. Concord HK has credit facilities (the "HK
Facilities") that provides Concord HK with up to $4,200,000 of financing as
follows: letters of credit of up to $2,900,000, and packing loans of up to
$1,300,000. As of October 2, 1999, approximately $1,411,000 was utilized under
the HK Facilities. The HK Facilities, which are payable on demand, bear interest
at 2% above the prime lending rate, which was 8.5% at October 2, 1999. The
Company guarantees all amounts outstanding under the HK Facilities.
8
Other Arrangements and Future Cash Commitments. Management believes that
anticipated cash flow from operations together with financing from the Senior
Notes, the Factoring Facility, and HK Facilities or replacement facilities, will
be sufficient to fund its operating cash needs for the foreseeable future.
Impact of Year 2000
Many currently installed computer systems and software are coded to accept only
two digit entries in the date code field. Beginning in the year 2000, these date
code fields will need to accept four digit entries to distinguish twenty-first
century dates from twentieth century dates. As a result computer systems and/or
software used by many companies may need to be upgraded to comply with such
"Year 2000" requirements. The Company has assessed the potential impact of Year
2000 on the processing of date-sensitive information by the Company's
information systems, manufacturing systems and other ancillary systems. While
there can be no assurance that Year 2000 matters will be satisfactorily
identified and resolved, the Company currently believes, based on internal
evaluations and discussions with its information systems vendors, that Year 2000
issues will not have a material adverse affect on the Company.
The Company's Year 2000 initiative is being managed by an internal staff and is
designed to ensure that there are no adverse effects on the Company's ability to
conduct business. The initiative covers the corporate office network and
financial systems, payroll processing, corporate computers, manufacturing
systems and telephone systems. In addition, the Company is reviewing the Year
2000 compliance efforts of the Company's key suppliers and other principal
business partners.
Effective July 4, 1999, the Company implemented an integration software package,
which is fully year 2000 compliant. The implementation was completed as an
Enterprise Resource Planning (ERP) package, which controls the Company's main
systems of (a) shipping/distribution, (b) accounting, (c) customer service/order
entry system, and (d) manufacturing. The Company outsources the payroll portion
of its accounting functions, and such provider has represented to the Company
that it is year 2000 compliant. Thus, all of the Company's computer-dependent
systems have been replaced by the year 2000 compliant package. The Company has
established a supplier compliance program, and is working with its key suppliers
to minimize such risks. The costs incurred related to systems implementation
have not been material to the Company's results of operations, financial
condition or cash flow. The Company believes that future costs of system
implementation will primarily be enhancements to provide for more complete
utilization of applications and are not requirements for year 2000 readiness and
will not have a material impact on the Company's results of operations,
financial condition or cash flows. The Company currently estimates that it will
incur expenses of approximately $50,000 through calendar year 1999 in connection
with its anticipated Year 2000 efforts. The timing and amount of the Company's
expenses may vary and are not necessarily indicative of readiness efforts or
progress to date.
The Company is in the process of developing contingency and business continuity
plans tailored for Year 2000-related occurrences. The Company believes its
significant hardware and software systems are Year 2000 compliant. The Company
believes that the most reasonably likely worst case scenario of failure by the
Company or its suppliers to adequately resolve Year 2000 issues would arise from
a failure of its order entry and accounts receivable system. Such a failure
would require the Company to resort to "non-computerized" means to undertake
such sales and distribution functions as placing customer orders and ordering
inventory. While the Company believes that it is equipped to operate in such a
"non-computerized" mode to address such a failure, there can be no assurance
that the Company would not, as a result of such or any other unanticipated Year
2000 failure, suffer from lost revenues, increased operating costs, loss of
customers or other business interruptions of a material nature.
In consideration of the potential impact of Year 2000 issues on its business,
operations, and financial condition, the Company has addressed issues which may
arise from its systems as described below.
The Company has not formally determined a most reasonably likely worst case
scenario regarding the impact of Year 2000 problems on its business. However,
management believes the most likely and significant Year 2000 related risks
faced by the Company are business interruptions by its customers. Such
interruptions could include distribution and temporary related reduction of
demand for Company products by such customers until the Year 2000 problem is
remedied. Management will attempt to identify and assess any such risks and
follow up with any significant customers that could likely be less than fully
Year 2000 compliant. Based on its assessment and remediation efforts to date,
the Company does not believe that any problems resulting from the Year 2000
issue will have a material adverse effect on its financial condition or results
of operations.
9
The Company believes that its continuing assessment, planning and implementation
process will be effective to achieve a level of readiness that will meet the
challenges presented by Year 2000 issues in a timely manner. Although the
Company is evaluating the Year 2000 readiness of third-party software, computer
technology and other hardware and software, the Company cannot guarantee the
Year 2000 readiness of third-party products, services, or providers that may
impact the Company's operations.
The above information is based on the Company's current best estimates, which
were derived using numerous assumptions of future events, including the
availability and future costs of certain technological and other resources,
third party modification actions and other factors. Given the complexity of
these issues and possible as yet unidentified risks, actual results may vary
materially from those anticipated and discussed above. Specific factors that
might cause such differences include, among others, the availability and cost of
personnel trained in this area, the ability to locate and correct all affected
computer codes, the timing and success of remedial efforts of the Company's
third party suppliers and similar uncertainties.
Forward-Looking Statements
The statements contained in this report that are not historical facts
are "forward-looking statements" (as such term is defined in the Private
Securities Litigation Reform Act of 1995), which can be identified by the use of
forward-looking terminology such as: "estimates," "projects," "anticipates,"
"expects," "intends," "believes," or the negative thereof or other variations
thereon or comparable terminology, or by discussions of strategy that involve
risks and uncertainties. The Company's actual results could differ materially
from those anticipated in such forward-looking statements. Management wishes to
caution the reader that these forward-looking statements, such as statements
regarding development of the Company's business, the Company's anticipated
capital expenditures, projected profits and other statements contained in this
report regarding matters that are not historical facts, are only estimates or
predictions. No assurance can be given that future results will be achieved.
Actual events or results may differ materially as a result of risks facing the
Company or actual results differing from the assumptions underlying such
statements. In particular, expected revenues could be adversely affected by
production difficulties or economic conditions negatively affecting the market
for the Company's products. Obtaining the results expected from the introduction
of the Company's new products will require timely completion of development,
successful ramp-up of full-scale production on a timely basis and customer and
consumer acceptance of those products. In addition, the OEM agreements require
an ability to meet high quality and performance standards, successful
implementation of production at greatly increased volumes and an ability to
sustain production at greatly increased volumes, as to all of which there can be
no assurance. There also can be no assurance that products under development
will be successfully developed or that once developed such products will be
commercially successful.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company, as a result of its global operating and financial
activities, is exposed to changes in interest rates and foreign currency
exchange rates which may adversely affect its results of operations and
financial position. In seeking to minimize the risks and/or costs associated
with such activities, the Company manages exposures to changes in interest rates
and foreign currency rates through its regular operating and financing
activities. 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's hedging activities were immaterial and as of October 2, 1999 there
were no forward exchange contracts outstanding. The Company continues to analyze
the benefits and costs associated with hedging against foreign currency
fluctuations. The Company's exposure to changes in interest rates results from
its borrowing activities used to meet its liquidity needs. Long-term debt is
generally used to finance long-term investments, while short-term debt is used
to meet working capital requirements. Derivative instruments are not presently
used to adjust the Company's interest rate risk profile. The Company does not
utilize financial instruments for trading or speculative purposes, nor does it
utilize leveraged financial instruments.
10
PART 2. OTHER INFORMATION
a. Item 6. Reports on Form 8-K
None
b. Exhibits
Exhibit No. Exhibit
- ----------- -------
3.1 Certificate of Incorporation of the Company, as amended
10.1 First Amendment to lease dated August 12, 1998 (the "Original
Lease") between the Company and CarrAmerica Realty Corporation
dated October 12, 1999.
27 Financial Data Schedule
11
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.
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(Registrant)
BY: /s/ Harlan I. Press
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(Signature)
Harlan I. Press
Corporate Controller and Assistant Secretary
DULY AUTHORIZED AND PRINCIPAL ACCOUNTING
OFFICER
DATE: November 10, 1999
12