Some stuff from the November 13, 1998 Form 10-Q filed by the Company:
1) Yes, the debt was placed and placed privately in June, 1998.
2) Cash was used for Xyplex.
3) Cash seems to be sufficient for the next 4 plus years at the current burn rate.
4) Number of people interested to get back to higher stock price levels (I'll cover in my closing comments).
5) Effects of potential debt conversion are currently anti-dilutive at $27.0475 per share, but would result in only approximately 3.7 million shares, or about 13.9%.
Interest Expense Related to Convertible Debt
On June 26, 1998, the Company sold $100,000,000 principal amount of 5% convertible subordinated notes due 2003 (the "Notes") in a 144A private placement to qualified institutional investors at 100% of their principal amount, less a selling discount of 3% of the principal amount. This resulted in interest expense of $1,370,000 for both the three and nine months ended September 30, 1998. The Company incurred a charge of $427,000 during the nine months ended September 30, 1997 as additional interest expense related to the issuance in 1996 of convertible subordinated debentures (the "Debentures"), proceeds from which were used to finance the Company's acquisition of the Fibronics business in 1996. The Company did not report charges relating to the
issuance of the Debentures for the quarter ended September 30, 1997 as the outstanding principal and accrued interest were paid in full at April 4, 1997 through their conversion into Common Stock.
Net Income (Loss)
The Company reported net income (loss) of $1,555,000 and ($29,731,000) during the three and nine months ended September 30, 1998, respectively, compared to net income of $5,922,000 and $15,474,000 during the three and nine months ended September 30, 1997. Net income decreased by $4,367,000 for the three months ended September 30, 1998 over the three months ended September 30, 1997. Net income for the nine months ended September 30, 1998 would have been $17,768,000, excluding $53,765,000 of charges, associated with the Xyplex Acquisition, as compared to net income of $15,474,000.
LIQUIDITY AND CAPITAL RESOURCES
In September 1997, the Company completed a follow-on public offering of 2,785,000 shares of Common Stock raising net proceeds of approximately $93,320,000. In June 1998, the Company sold an aggregate $100,000,000 principal amount of 5% convertible subordinated notes due 2003 (the "Notes") in a private placement raising net proceeds of $96,423,000 (the "1998 Private Placement"). The Notes are convertible into Common Stock of the Company at a conversion price of $27.0475 per share (equivalent to a conversion rate of approximately 36.97 shares per $1,000 principal amount of notes), representing an initial conversion premium of 24%, for a total of approximately 3.7 million shares of Common Stock of the Company. The Notes have a five-year term and are not callable for the first three years. Interest on the Notes is at 5% per annum and is payable semi-annually on June 15 and December 15, commencing on December 15, 1998.
Cash and cash equivalents and short-term investments totaled approximately $56,112,000 at September 30, 1998. Such cash and cash equivalents and short-term investments, as well as cash flow from operations, are the Company's principal sources of liquidity.
Net cash used in operating activities for the nine months ended September 30, 1998 was $9,676,000. The funds were used primarily to purchase technology in progress and for restructuring costs in connection with the Xyplex Acquisition. Net cash used in investing activities for the nine months ended September 30, 1998 was $83,603,000. Cash used in the Xyplex Acquisition accounted for most of the cash used in investing activities for the nine months ended September 30, 1998 and cash provided by the sale of investments to finance the Xyplex Acquistion accounted for most of the cash provided by investing activities for the same period. The sale of the Notes in the 1998 Private Placement accounted for substantially all of the $97,779,000 of cash provided by financing activities during the nine months ended September 30, 1998.
Accounts receivable were $ 57,232,000 at September 30, 1998 as compared to $47,258,000 at December 31, 1997. The increase in accounts receivable was primarily attributable to the increase in overall sales in Europe where terms of sale are traditionally longer than in the United States.
Inventories were $49,711,000 at September 30, 1998 as compared to $41,689,000 at December 31, 1997. The increase in inventories was primarily attributable to the Company's decision to add larger inventories to shorten lead times for customers and the Xyplex Acquisition. Management believes that the Company's inventory
levels at various points in time may not necessarily be comparable to those of many other companies in its industry. This is because MRV conducts significant in-house manufacturing of various components used in its products and thus carries substantial raw materials and work-in-progress in addition to finished products in its inventories. In contrast, many competitors outsource to turnkey contract manufacturers substantial portions of their production requirements and thus do not include material amounts of raw materials or work in progress in inventories and may in some circumstances not even include finished products in inventory if the contract manufacturer ships directly to the competitors' customers.
EFFECTS OF INFLATION AND CURRENCY EXCHANGE RATES
The Company believes that the relatively moderate rate of inflation in the United States over the past few years has not had a significant impact on the Company's sales or operating results or on the prices of raw materials. However, in view of the Company's recent expansion of operations in Israel which has experienced substantial inflation, there can be no assurance that inflation in Israel will not have a materially adverse effect on the Company's operating results in the future.
The secondary purchasers are in at $33.50; Whittaker from their sale of Xyplex has warrants that are not "in the money" unless the stock is over $35; the debt converts at $27.0475. So there are a few players who don't hit until this thing starts rolling again in stock price.
Hummm.....
Later, (-8 Dennis 8-) |
