UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549-1004
FORM 10-Q
(Mark One)
X QUARTERLY REPORT UNDER 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 OF THE SECURITIES EXCHANGE ACT OF
1934
For the transition report from _________ to ___________
Commission file number 0-17038
-------
Concord Camera Corp.
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
New Jersey 13-3152196
------------------------------ -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4000 Hollywood Blvd. Suite 650N, Hollywood, Florida 33021
----------------------------------------------------------
(Address of principal executive offices) (Zip Code)
954/331-4200
--------------------------------------------------
(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 -27,010,208 shares as of October 26, 2000
--------------------------------------------------------------------
- --------------------------------------------------------------------------------
Index
Concord Camera Corp. and Subsidiaries
Page No.
-------
Part I. Financial Information
Item 1. Financial Statements
Condensed consolidated balance sheets as of September 30, 2000 and July 1, 2000 3
Condensed consolidated statements of income for the three months ended 4
September 30, 2000 and October 2, 1999
Condensed consolidated statements of cash flows for the three months ended 5
September 30, 2000 and October 2, 1999
Notes to condensed consolidated financial statements 6
Item 2. Management's Discussion and Analysis of Financial Condition 8
and Results of Operations
Item 3. Quantitative and Qualitative Disclosure of Market Risk 12
Part II. Other Information
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 14
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
Concord Camera Corp.
Condensed Consolidated Balance Sheets
(Unaudited) Note 1
September 30, 2000 July 1, 2000
------------------ ------------
Assets
Current Assets:
Cash and cash equivalents $ 107,209,319 $ 24,390,294
Accounts receivable, net 33,552,212 33,570,047
Inventories, net 37,815,907 31,603,147
Prepaid expenses and other current assets 5,963,830 7,374,719
-------------- -------------
Total current assets 184,541,268 96,938,207
Property, plant and equipment, net 22,969,640 22,810,021
Goodwill, net 3,578,696 3,561,770
Other assets 13,175,164 10,693,442
-------------- -------------
Total assets $ 224,264,768 $ 134,003,440
============== =============
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable $ 25,634,671 $ 25,510,625
Accrued expenses 14,412,714 12,788,653
Short-term debt 1,335,331 2,190,263
Current portion of obligations under capital leases 799,851 1,252,967
Income taxes payable 2,656,966 2,024,157
Other current liabilities 299,985 571,706
-------------- -------------
Total current liabilities 45,139,518 44,338,371
Senior notes 14,896,429 14,891,071
Obligations under capital leases, net of current portion 296,329 1,221,128
Other long-term liabilities 7,327,105 7,262,903
-------------- -------------
Total liabilities 67,659,381 67,713,473
Commitments and contingencies
Stockholders' equity:
Common stock, no par value, 100,000,000 shares authorized;
27,825,734 and 23,825,734 shares issued as of
September 30, 2000 and July 1, 2000, respectively 126,252,043 42,145,256
Paid-in capital 2,625,828 2,625,828
Retained earnings 31,890,967 25,685,258
Notes receivable arising from common stock purchase
agreements (26,313) (29,237)
-------------- -------------
160,742,525 70,427,105
Less: treasury stock, at cost, 1,542,526 shares (4,137,138) (4,137,138)
-------------- -------------
Total stockholders' equity 156,605,387 66,289,967
-------------- -------------
Total liabilities and stockholders' equity $ 224,264,768 $ 134,003,440
============== =============
See accompanying notes.
2
Concord Camera Corp.
Condensed Consolidated Statements of Income
(Unaudited)
For the three months ended
-----------------------------------
September 30, 2000 October 2, 1999
------------------ ---------------
Net sales $ 62,722,902 $ 41,237,897
Cost of products sold 46,991,665 29,899,118
------------ ------------
Gross profit 15,731,237 11,338,779
Selling expenses 3,411,781 2,515,627
General and administrative expenses 4,418,130 3,804,843
Terminated acquisition costs 800,207 -
Interest expense 651,611 873,977
Other income, net 314,433 128,294
------------ ------------
Income before income taxes 6,763,941 4,272,626
Provision for income taxes 558,232 377,000
------------ ------------
Net income $ 6,205,709 $ 3,895,626
============ ============
Basic earnings per share $.28 $.18
============ ============
Diluted earnings per share $.25 $.16
============ ============
Weighted average
common shares outstanding-basic 22,427,340 21,918,354
Effect of dilutive securities-stock options 2,389,012 1,970,298
------------ ------------
Weighted average
common shares and assumed conversions-diluted 24,816,352 23,888,652
=========== ============
See accompanying notes.
3
Concord Camera Corp.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
For the three months ended
-------------------------------------------
September 30, 2000 October 2, 1999
------------------ ---------------
Cash flows from operating activties:
Net income $ 6,205,709 $ 3,895,626
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 1,192,399 1,053,711
Amortization of deferred financing costs 38,712 33,354
Non cash compensation officers' notes forgiven and related
interest income associated with common stock agreements 43,368 216,354
Non-cash compensation expense on stock options 125,160 -
Changes in operating assets and liabilities:
Accounts receivable 17,836 (1,025,194)
Inventories (6,212,760) (1,647,758)
Prepaid expenses and other current assets 1,047,301 (498,637)
Other assets (1,754,961) 237,528
Accounts payable 124,046 3,158,709
Accrued expenses 1,019,561 2,569,735
Income taxes payable 632,809 379,407
Other current liabilities (271,722) 71,692
Other long-term liabilities 64,202 (87,876)
------------- ------------
Total adjustments 3,934,049 4,461,025
------------- ------------
Net cash provided by operating activities 2,271,660 8,356,651
------------- ------------
Cash flows from investing activities:
Purchases of property, plant and equipment (1,326,574) (1,878,672)
-------------- ------------
Net cash used in investing activities (1,326,574) (1,878,672)
-------------- ------------
Cash flows from financing activities:
Net (repayments) borrowings under short-term debt
agreements (854,934) 120,380
Principal repayments under capital lease obligations (1,377,915) (513,545)
Purchases of treasury stock - (758,626)
Net borrowings of long-term debt - (2,100,000)
Net proceeds from issuance of common stock 84,106,788 51,250
------------- ------------
Net cash provided by (used in) financing activities 81,873,939 (3,200,541)
------------- ------------
Net increase in cash and cash equivalents 82,819,025 3,277,438
Cash and cash equivalents at beginning of period 24,390,294 30,706,761
------------- ------------
Cash and cash equivalents at end of period $ 107,209,319 $ 33,984,199
============= ============
See accompanying notes.
4
CONCORD CAMERA CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
September 30, 2000
-----------------
(Unaudited)
Note 1 - General
- ---------------
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles 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 principles 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 September 30,
2000 are not necessarily indicative of the results that may be expected for the
fiscal year ending June 30, 2001. The balance sheet at July 1, 2000 has been
derived from the audited financial statements at that date, but does not include
all of the information and footnotes required by generally accepted accounting
principles for complete financial statements. For further information, refer to
the consolidated financial statements and footnotes thereto included in the
Company's Annual Report on Form 10-K for the fiscal year ended July 1, 2000.
Concord Camera Corp. (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. The majority
of the Company's foreign subsidiaries' sales and inventory purchases are made or
denominated in the U.S. Dollar. Accordingly, the U.S. Dollar is the functional
currency. However, certain sales to customers and purchases of certain
components to manufacture cameras are made in local currency, thereby creating
exposure to fluctuations in foreign currency exchange rates. The impact of
foreign currency exchange transactions is reflected in the statement of income.
The Company continues to analyze the benefits and costs associated with hedging
against foreign currency fluctuations.
Note 2 - Cash
- -------------
The Company has a cash management program which provides for the investment of
excess cash balances into cash equivalents, which are highly liquid investments
with a maturity of three months or less that are readily convertible into known
amounts of cash. These investments consist primarily of U.S. treasury bills,
money market funds, and U.S. federal agency securities.
Note 3 - Inventories
- --------------------
Inventories are comprised of the following:
September 30, 2000 July 1, 2000
------------------ ------------
Raw materials and components $23,057,721 $22,116,287
Finished goods 14,758,186 9,486,860
----------- -----------
$37,815,907 $31,603,147
=========== ===========
5
Note 4 - Supplemental Disclosures of Cash Flow Information:
- -----------------------------------------------------------
For the three months ended
---------------------------
September 30, 2000 October 2, 1999
------------------ ---------------
Cash paid for interest $ 539,373 $ 747,517
========== =========
Cash paid for income taxes $ 195,524 $ -
========== =========
Note 5 - Public Offering
- ------------------------
On September 26, 2000, the Company sold, pursuant to an underwritten public
offering, 3,900,000 shares of its common stock at a price of $23.00 per share.
The net proceeds of the offering to the Company were $84,005,000, after offering
costs and underwriting fees of $5,695,000. This amount will be used to repay
outstanding indebtedness including capital leases, for capital expenditures and
for general corporate and strategic purposes, including working capital and
investments in new technologies, product lines and complementary businesses.
(See Note 9 -Subsequent Event).
Note 6 - Terminated Acquisition Costs
- -------------------------------------
Terminated acquisition costs of $800,000, for the three months ended September
30, 2000 were related to a proposed acquisition that was not consummated.
Negotiations, which had been ongoing regarding this acquisition, were terminated
in September, 2000.
Note 7 - 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. Benun's counterclaim does not
contain any statement of the dollar amount of his alleged damages, although he
has written to the Company asserting damages of approximately $6.7 million. 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 is pursuing
damage claims against Benun related to the frauds and embezzlement. The final
phase of the arbitration (phase two), which is to determine the amount of the
Company's damages and any validity of Benun's counterclaim and alleged damages
related thereto, began during the week of September 25, 2000 and testimony
concluded on October 31, 2000. The parties have until January 2, 2001 to submit
certain post-hearing position statements and a decision of the arbitrator is
expected thereafter.
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 intellectual property in connection
with the manufacture and sale of single use cameras. Termination of the license
would have a material adverse effect on the Company's single use camera business
if Fuji's patents were found to be valid and infringed by the Company's single
use products. 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 disputes, the restraining order will
continue in effect as long as the Company refrains from making any further
shipments pursuant to the purchase order that gave rise to the dispute. Fuji
filed a motion for summary judgment, and the Company filed a motion seeking to
preclude Fuji from presenting certain expert testimony. Both motions were denied
by the Court, but Concord will be allowed to reassert its motion at trial if
Fuji does not establish an adequate evidentiary basis for the expert testimony.
The Court has allowed Fuji to amend its pleading to assert an additional cause
of action claiming damages on an alternative theory of liability
6
outside the scope of the license agreement. In the Company's opinion, the
amended pleading does not alter the total damages claimed by Fuji. The Court has
also allowed the Company to file a claim, based on Fuji's amended pleading,
seeking the return of royalties paid. This matter is scheduled for trial
beginning in February 2001.
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 will not have a material adverse effect on its financial position or
results of operations.
Note 8 - Recent Accounting Pronouncements
- -----------------------------------------
In December 1999, the SEC issued Staff Accounting Bulletin No. 101 ("SAB 101"),
"Revenue Recognition in Financial Statements." SAB 101 summarizes the
requirements that must be met in order to recognize revenue and provides
guidance for disclosure of revenue recognition policies. In June 2000, the SEC
issued SAB No. 101B which delays the implementation date of SAB 101 until no
later than the fourth quarter of Fiscal 2000. The Company has assessed the
provisions of SAB 101 and does not expect the adoption of SAB 101 to have a
material effect on its financial position or results of operations.
Note 9 - Subsequent Event
- -------------------------
As part its public offering, on October 3, 2000, the Company sold an additional
585,000 shares of common stock at $23.00 per share pursuant to an over-allotment
option granted to the underwriters, and raised an additional $12,500,000 net of
offering costs.
7
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
Results of Operations
- ---------------------
The quarter ended September 30, 2000 compared to the quarter ended
October 2, 1999
- ------------------------------------------------------------------
Total sales for the quarter ended September 30, 2000 and October 2, 1999 were
approximately $62,723,000 and $41,238,000, respectively, an increase of
approximately $21,485,000, or 52.1%. The increase in sales for the quarter ended
September 30, 2000 compared to the quarter ended October 2, 1999 resulted
principally from increases in sales to both original equipment manufacturer
("OEM") and retail sales and distribution ("RSD") customers. OEM sales for the
quarters ended September 30, 2000 and October 2, 1999 were approximately
$42,765,000 and $28,083,000, respectively, an increase of approximately
$14,682,000, or 52.3%. This increase is primarily attributable to sales of new
products, including digital cameras, to new and existing OEM customers, and to a
lesser extent, sales of existing products to existing OEM customers. RSD
customer sales for the quarters ended September 30, 2000 and October 2, 1999
were approximately $19,958,000 and $13,155,000, respectively, an increase of
approximately $6,803,000, or 51.7%. The increase in sales is primarily
attributable to sales to existing customers, and to a lesser extent, sales to
new customers.
Sales of the Company's operations in Asia ("Concord Asia") for the quarters
ended September 30, 2000 and October 2, 1999, were approximately $55,328,000 and
$36,265,000, respectively, an increase of approximately $19,063,000, or 52.7%.
Included in these amounts were FOB Hong Kong sales to customers at the Company's
operations in the United States, Latin America and Canada ("Concord Americas")
and sales to customers of Concord Camera (Europe) Limited, Goldline (Europe)
Limited, Concord Camera GmbH, and Concord Camera France S.A.R.L. ("Concord
Camera Europe") of $12,556,000 and $8,183,000, for the quarters ended September
30, 2000 and October 2, 1999, respectively. The increase in sales for Concord
Asia was primarily due to higher sales to OEM and, to a lesser extent, retail
sales and distribution customers.
Sales of Concord Americas for the quarters ended September 30, 2000, and October
2, 1999, including FOB Hong Kong sales to Concord Americas customers were
approximately $9,307,000 and $7,905,000, respectively, an increase of
approximately $1,402,000, or 17.7%. The increase was primarily due to successful
implementation of new programs with new and existing customers with new and
existing products.
Sales of Concord Europe for the quarters ended September 30, 2000, and October
2, 1999, including FOB Hong Kong sales to Concord Europe customers were
approximately $10,644,000 and $5,251,000, respectively, an increase of
approximately $5,393,000, or 102.7%. This increase was primarily due to
increased sales to both existing and new customers.
Gross Profit
- ------------
Gross profit, expressed as a percentage of sales, decreased to 25.1% for the
quarter ended September 30, 2000 from 27.5% for the quarter ended October 2,
1999. This decrease was primarily the result of a change in product mix for the
quarter ended September 30, 2000 compared to the same prior year quarter. Sales
for the quarter ended September 30, 2000 included revenues from digital
products, which are sold at significantly higher prices, but generate lower
gross profits as a percentage of sales, compared to the traditional film based
products the Company had historically sold. The Company's historical product
mix, which consisted of all traditional film based products, is expected to
change with the introduction of more digital products in the future, and
consequently, gross profits as a percentage of sales are anticipated to be lower
compared to historical gross profits as a percentage of sales. However, since
digital products are expected to generate greater sales revenue and gross profit
on a per unit basis, as compared to the traditional film based products Concord
has sold historically, average revenue and gross profit amounts per unit can be
expected to increase as digital products contribute to a greater percentage of
the product mix. Included in costs of products sold, were product development
costs which were $1,505,000 for the quarter ended September 30, 2000 as compared
to $1,182,000 for the quarter ended October 2, 1999.
8
Expenses
- --------
As a percentage of sales, operating expenses, consisting of selling, general and
administrative and interest expenses, decreased to 13.5% for the quarter ended
September 30, 2000 from 17.4% for the quarter ended October 2, 1999. Operating
expenses increased to $8,482,000 for the quarter ended September 30, 2000 from
$7,194,000 for the quarter ended October 2, 1999, an increase of $1,288,000, or
17.9%.
Selling expenses increased to $3,412,000, or 5.4% of net sales, for the quarter
ended September 30, 2000 compared to $2,516,000, or 6.1% of net sales, for the
quarter ended October 2, 1999. The increase was primarily attributable to
increases in promotional allowances, freight costs, and increases in sales
related salaries and commissions.
General and Administrative expenses increased to $4,418,000, or 7.0% of net
sales, for the quarter ended September 30, 2000 compared to $3,805,000, or 9.2%
of net sales, for the quarter ended October 2, 1999. The increase of $613,000
was the result of the Company continuing to build its infrastructure to support
its growth.
Terminated acquisition costs of $800,000, for the quarter ended September 30,
2000 related to a proposed acquisition that was not consummated. Negotiations,
which had been ongoing regarding this acquisition, were terminated in September,
2000.
Interest expenses decreased to $652,000, or 1.0% of net sales, for the quarter
ended September 30, 2000 compared to $873,000, or 2.1% of net sales, in the
quarter ended October 2, 1999 as a result of lower debt levels during the
quarter.
Other Income, Net
- -----------------
Other income, net was approximately $315,000 and $128,000 for the quarters ended
September 30, 2000 and October 2, 1999, respectively. Other income, net includes
directors' fees, certain public relations costs, foreign exchange gains and
losses and interest income. The increase is primarily attributable to higher
interest income for the quarter ended September 30, 2000 as compared to the same
prior year quarter.
Income Taxes
- ------------
The Company's provision for income taxes increased to $558,000 for the quarter
ended September 30, 2000 from $377,000 for the quarter ended October 2, 1999.
The increase was primarily related to increased income before income taxes. In
general, the effective income tax rate is largely a function of the balance
between income from domestic and foreign operations. Currently, Concord's
foreign operations taken as a whole are effectively taxed at a higher rate than
those in the United States due to domestic operating loss carryforwards.
Net Income
- ----------
As a result of the matters described above, the Company had net income of
approximately $6,206,000, or $0.25 per diluted share, for the quarter ended
September 30, 2000, as compared to net income of $3,896,000, or $0.16 per
diluted share, for the quarter ended October 2, 1999.
9
Liquidity and Capital Resources
- -------------------------------
At September 30, 2000, the Company had working capital of $139,402,000 as
compared to $52,600,000 at July 1, 2000. The increase in working capital was
primarily attributable to the net proceeds of approximately $84,005,000 the
Company received from a public offering in September 2000. Cash provided by
operating activities was approximately $2,272,000 and $8,357,000 for the quarter
ended September 30, 2000 and October 2, 1999, respectively. The changes in cash
provided by operating activities for the respective quarters ended September 30,
2000, and October 2, 1999, were primarily attributable to changes in inventories
and accounts payable.
Capital expenditures for the quarter ended September 30, 2000 and October 2,
1999 were approximately $1,327,000 and $1,879,000, respectively, and related
primarily to plant and equipment purchases for the manufacturing facility
located in the People's Republic of China.
Cash provided by financing activities was $81,874,000 for the quarter ended
September 30, 2000 compared to cash used of $3,201,000 for the quarter ended
October 2, 1999. The increase in cash for the quarter ended September 30, 2000
was primarily attributable to a public offering (more fully discussed below)
completed in September, 2000.
Senior Notes Payable. On July 30, 1998, the Company consummated a private
placement of $15,000,000 of senior notes. The notes bear interest at 11.0%, and
mature on July 15, 2005. Interest payments are due quarterly. The indenture
governing the notes contains certain restrictive covenants relating to, among
other things, incurrence of additional indebtedness and dividend and other
payment restrictions affecting the Company and its subsidiaries. The indenture
also includes an early redemption fee, currently at 5% of the outstanding
principal, which decreases 2% annually, every July 16, commencing in 2001.
Hong Kong Credit Facilities. A Company subsidiary, Concord Camera Limited
("Concord HK") has various revolving credit facilities in place providing an
aggregate of approximately $33,500,000 in borrowing capacity. Certain of the
revolving credit facilities are denominated in Hong Kong dollars. The revolving
credit facilities are comprised of 1) an $11,000,000 Import Facility, 2) a
$2,600,000 Packing Credit and Export Facility, 3) a $1,900,000 Foreign Exchange
Facility and 4) an $18,000,000 Accounts Receivable Financing Facility. The
$18,000,000 Accounts Receivable Financing Facility is secured by certain
accounts receivables of Concord HK and guaranteed by the Company. A significant
portion of the remaining $15,500,000 of borrowing capacity is also guaranteed by
the Company. Availability under the Accounts Receivable Financing Facility is
subject to advance formulae based on Eligible Accounts Receivable and all the
credit facilities are subject to certain financial ratios and covenants. At
September 30, 2000, approximately $1,335,000 was outstanding under these
facilities.
United Kingdom Credit Facility. A Concord Camera Europe subsidiary of the
Company, has a revolving credit facility in place which provides approximately
$1,000,000 of borrowing capacity. The facility is secured by substantially all
of the assets of the subsidiary, and is principally utilized for working capital
needs. There were no amounts outstanding under the facility as of September 30,
2000.
Concord Americas Credit Facilities. Concord Camera Corp. and a U.S. subsidiary
each entered into credit facilities (collectively, the "US Facilities") with
lenders that provide Concord Keystone Sales Corp. and Concord Camera Corp. with
up to $5,000,000 and $2,500,000, respectively, of unsecured working capital. No
amounts were outstanding under the US Facilities at September 30, 2000.
Public Offering. On September 26, 2000, the Company sold pursuant to an
underwritten public offering, 3,900,000 shares of its common stock at a price of
$23.00 per share. The net proceeds of the offering to the Company were
$84,005,000, after offering costs and underwriting fees of $5,695,000. This
amount will be used to repay outstanding indebtedness including capital leases,
for capital expenditures and for general corporate and strategic purposes,
including working capital and investments in new technologies, product lines and
complementary businesses. The net proceeds are currently invested in cash
equivalents. As part its public offering, on October 3, 2000, the Company sold
an additional 585,000 shares of common stock at $23.00 per share, pursuant to an
over-allotment option granted to the underwriters, and raised an additional
$12,500,000 net of offering costs.
10
Future Cash Commitments. Management believes that anticipated cash flow from
operations, amounts available under its credit facilities and the proceeds from
the offering will be sufficient to fund its operating cash needs for the
foreseeable future.
The Company is evaluating various growth opportunities which could require
significant funding commitments. We have from time to time held, and continue to
hold, discussions and negotiations with (i) companies that represent potential
acquisition or investment opportunities, (ii) potential strategic and financial
investors who have expressed an interest in making an investment in or acquiring
the Company, (iii) potential joint venture partners looking toward formation of
strategic alliances that would broaden the Company's product base or enable the
Company to enter new lines of business and (iv) potential new and existing OEM
customers where the design, development and production of new products,
including certain new technologies, would enable the Company to expand its
existing business, and enter new markets outside its traditional business
including new ventures focusing on wireless connectivity and other new
communication technologies. There can be no assurance any definitive agreement
will be reached regarding any of the foregoing, nor does management believe such
agreements are necessary for successful implementation of the Company's
strategic plans.
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," "plans," 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 as a result
of certain factors including, but not limited to, those discussed in the
Company's most recent Annual Report filed with the SEC on Form 10-K and the
factors set forth under the caption "Risk Factors" in the Company's Prospectus
dated September 21, 2000, filed with the SEC. 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.
11
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 September 30, 2000 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.
12
PART II. OTHER INFORMATION
Item 5. Other Information
-----------------
Shareholder Proposals for 2001 Annual Meeting
The Company's next annual meeting of shareholders has been scheduled
for January 18, 2001. Under the rules of the SEC, any shareholder proposal
intended to be presented at the Company's 2001 annual meeting of shareholders
must be received by the Secretary of the Company at its executive offices no
later than November 15, 2000, in order to be considered for inclusion in the
Company's proxy statement and form of proxy relating to such meeting.
If a shareholder notifies the Company of an intent to present a
proposal at the Company's 2001 annual meeting of shareholders less than 40 days
before the meeting (and for any reason the proposal is voted on at that annual
meeting), the Company's proxy holders will have the right to exercise
discretionary voting authority with respect to the proposal, if presented at the
meeting, without including information regarding the proposal in its proxy
materials.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
No. Description Method of Filing
- --- ----------- ----------------
3.1 Certificate of Incorporation, as amended Incorporated by reference to the
through May 9, 2000 Company's annual report on Form
10-K for the year ended July 1, 2000.
3.2 Restated By-Laws, as amended through April Incorporated by reference to the
24, 2000 Company's annual report on Form
10-K for the year ended July 1, 2000.
4.1 Form of Common Stock Certificate Incorporated by reference to the
Company's registration statement on
Form 8-A filed on September 20,
2000.
4.2 Purchase Agreement, dated July 30, 1998, Incorporated by reference to the
between Dreyfus High Yield Strategies Fund Company's annual report on Form
and the Company 10-K for the year ended June 30,
1998.
4.3 Indenture, dated July 30, 1998, between Incorporated by reference to the
Bankers Trust Company and the Company Company's annual report on Form
10-K for the year ended June 30,
1998.
4.4 Registration Rights Agreement, dated July 3, Incorporated by reference to the
1998, between Dreyfus High Yield Strategies Company's annual report on Form
Fund and the Company 10-K for the year ended June 30,
1998.
13
10.1 Master Processing Contract No. (86)507 Filed herewith.
with Shenzhen Baoan County Foreign Trade
Company and Baoan Henggang Concord
Electronics Factory, dated October 28, 1986,
and approval certificate issued November 1,
1986 by the Baoan Commission of Foreign
Trade and Economic Cooperation
(English translations)
10.2 First renewal agreement of Master Processing Filed herewith.
Contract No. (86)507, dated June 22, 1991, and
approval notice issued by the Baoan Office of
Foreign Trade (English translations)
10.3 Second renewal agreement of Master Processing Filed herewith.
Contract No. (86) 507, dated March 15, 1996, and
approval notice issued by the Longgang Economic
Development Bureau (English translations)
10.4 Contract for Grant of State-Owned Land Use Filed herewith.
Right, dated November 8, 1994, with the
Shenzhen Land Bureau (English translation)
27. Financial Data Schedule Filed herewith.
(b) Reports on Form 8-K
On September 21, 2000, the Company filed a report on Form 8-K in order
to file certain letter agreements relating to and amending exhibit 10.17 to its
Annual Report on Form 10-K for the fiscal year ended July 1, 2000.
14
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
Vice President and Treasurer
DULY AUTHORIZED AND CHIEF ACCOUNTING OFFICER
DATE: November 11, 2000
15