Form 10-K405 for MRV COMMUNICATIONS INC filed on Mar 31 1999
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____________ to ___________
Commission file number 0-25678
MRV COMMUNICATIONS, INC.
(Name of registrant as specified in its charter)
Delaware 06-1340090
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
8917 Fullbright Avenue 91311
Chatsworth, California 91311 (Zip Code)
(Address of principal executive offices)
Issuer's telephone number: (818) 773-9044; (818) 773-0906 (Fax)
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $0.0034 par value
Indicate by checkmark whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past 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 by checkmark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
State the aggregate market value of the voting and non-voting common equity held
by non-affiliates computed by reference to the price at which common equity was
sold, or the average bid and asked prices of such stock, as of a specified date
within the past 60 days: $139,436,000 based on the closing sale price of a share
of Common Stock at March 19, 1999 as reported by The Nasdaq National Market.
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 26,671,831 shares of Common
Stock, $0.0034 par value at March 19, 1999.
DOCUMENTS INCORPORATED BY REFERENCE:
None
The Annual Report on Form 10-K contains forward-looking statements.
These statements are subject to certain risks and uncertainties that could cause
actual results to differ materially from those anticipated in the
forward-looking statements. Factors that might cause such a difference include,
but are not limited to, those discussed in the Section under Item 1 Description
of Business -- Risk Factors.
Readers should not place undue reliance on forward-looking statements,
which reflect management's view only as of the date of this Report. The Company
undertakes no obligation to publicly revise these forward-looking statements to
reflect subsequent events or circumstances. Readers should also carefully review
the risk factors described in other documents the Company files from time to
time with the Securities and Exchange commission.
As used in this Report, "MRV" or the "Company" refers to MRV
Communications, Inc., its predecessor and its wholly-owned consolidated
subsidiaries, except where the context otherwise indicates. AccelerRouter, Any
Speed to Any Speed Ethernet, EdgeBlaster, EdgeGuardian, Fiber Driver, GigaHub,
MAXserver, MegaStack, MegaSwitch, MegaSwitch II, MegaVision, MRV Communications,
NBase, Network 3000, Network 9000, RouteRunner, West Hills LAN System and Xyplex
are trademarks or trade names of the Company. Trademarks of other companies are
also used in this Report and are the property of their respective owners.
PART I
ITEM 1. DESCRIPTION OF BUSINESS
OVERVIEW
MRV is a leading manufacturer and marketer of optical high speed
networks that integrate switching, routing, remote access and fiber optic
transmission systems. The Company designs, manufactures and sells two groups of
products: (i) computer networking products, primarily Ethernet LAN routing
switches, WAN and remote access devices and (ii) fiber optic components for the
transmission of voice, video and data across enterprise, telecommunications and
cable TV networks. The Company's advanced networking solutions greatly enhance
the functionality of local area network ("LANs") and wide area networks ("WANs")
by reducing network congestion while allowing end users to preserve their legacy
investments in pre-existing networks and providing cost-effective migration
paths to next generation technologies such as Gigabit Ethernet. The Company's
fiber optic components incorporate proprietary technology which delivers high
performance under demanding environmental conditions.
The Company offers a family of network, switching and related products
that enhance LAN performance and facilitate the migration to next generation
technologies such as Fast Ethernet, Gigabit Ethernet and Asynchronous Transfer
Mode ("ATM"). MRV's MegaSwitch and GigaFrame families of switching products
range from complete switching systems to stackable switches which upgrade
performance of existing LANs by relieving network congestion without requiring
replacement of existing technologies. In addition, the Company offers
EdgeBlaster, a multi-functional remote access router that connects enterprise
LANs to remote offices and telecommuters securely through the Internet using
virtual private network ("VPN") technology.
The Company complements its switching products with a family of optical
transmission components and modules designed for transmission over fiber optic
cable. These products enable the transmission of voice, data, and video across
fiber and are also used in optical fiber test equipment. The Company's products
include discrete components, such as laser diodes and LEDs, and integrated
components such as transmitters, receivers and transceivers. The Company's
components are used in data networks, telecommunication transmission and access
networks.
The Company's principal executive offices are located at 8943 Fullbright
Avenue, Chatsworth, California 91311 and its telephone and fax numbers are (818)
773-9044 and (818) 773-0906, respectively. The Company maintains Web sites at
"http://www.mrv.com" and "http://www.nbase-xyplex.com." Information contained in
the Company's Web sites shall not be deemed part of this Report.
2
BACKGROUND
The Company was organized in July 1988 as MRV Technologies, Inc., a
California corporation and reincorporated in Delaware in April 1992, at which
time it changed its name to MRV Communications, Inc.
On May 1, 1995, the Company acquired certain assets and the distribution
business of Galcom Networking, Ltd. ("Galcom"), a network equipment company
located in Israel. The purchase price paid by the Company was approximately
$900,000 in cash and the assumption of approximately $1,800,000 in liabilities
and debt. In connection with the acquisition of assets from Galcom, the Company
issued to Galcom and certain of its employees five-year warrants to purchase an
aggregate of 300,000 shares at prices ranging from $4.25 to $7.38 per share.
On June 29, 1995, the Company acquired certain assets and the
distribution business of Ace 400 Communications Ltd. ("Ace"), a network
equipment company also located in Israel. The purchase price paid by the Company
was approximately $4,477,000 comprised of $100,000 in cash, the assumption of
approximately $467,000 in liabilities and debt and the issuance of approximately
855,000 shares of Common Stock valued at approximately $3,910,000 and extended a
right to Ace to sell to the Company up to $400,000 of Ace's inventory. In
connection with the acquisition of assets from Ace, the Company issued to the
trustee and an employee of Ace five-year warrants to purchase an aggregate of
330,000 shares of Common Stock at prices ranging from $4.57 to $4.67 per share.
The Galcom and Ace acquisitions provided the Company with experienced
personnel and technology for the Token Ring LAN, IBM Connectivity and
Multi-Platform, Network Management IBM NetView and HP OpenView markets.
Following the acquisitions, the Company consolidated these operations in Israel
with its networking operations in the U.S.
On September 26, 1996, the Company completed an acquisition (the
"Fibronics Acquisition") from Elbit Ltd. ("Elbit") of certain of the assets and
selected liabilities of Elbit's wholly-owned subsidiary, Fibronics Ltd. and its
subsidiaries (collectively "Fibronics") related to Fibronics' computer
networking and telecommunications businesses (the "Fibronics Business") in
Germany, the United States, the United Kingdom, the Netherlands and Israel. The
assets acquired included Fibronics' technology in progress and existing
technology, its marketing channels, its GigaHub family of computer networking
products and other rights. The purchase price for the Fibronics Business was
approximately $22,800,000. The purchase price was paid using a combination of
cash and shares of Common Stock, all of which Elbit subsequently resold in the
open market.
The Fibronics Business has enabled MRV to enhance the development of
Fast Ethernet and Gigabit Ethernet functions through the Fibronics GigaHub
family of products, to offer a broader range of networking products and to
benefit from combined distribution channels and sales in both the United States
and Europe and greater product development capability.
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