MRV Announces 4th Quarter Results and the Acquisition of FOCI -- Fiber Optic Communications, Inc.Business Editors CHATSWORTH, Calif.--(BUSINESS WIRE)--Feb. 22, 2000 MRV Communications  OverviewMRV NASDAQ: MRVC is a company that designs, manufactures, sells, distributes, integrates and supports communication equipment and services, and optical components. , Inc. (Nasdaq:MRVC MRVC Multiple Rate Voice Card ) today reported its consolidated year-end and fourth quarter results for the period ended Dec. 31, 1999, and separately announced the acquisition of Fiber Optic Communications, Inc. ("FOCI"). Bringing into focus its business model of creating and managing growth companies in optical technology and Internet infrastructure, MRV MRV minute respiratory volume. announced the acquisition of FOCI and the decision to exit the Enterprise LAN switching
LAN switching is a form of packet switching used in local area networks. Switching technologies are crucial to network design, or to that minority of LANs that are used outside the home. business. Under the terms of the agreement, FOCI shareholders will receive shares of MRV common stock and cash with an aggregate value of approximately $263 million, based on the closing stock price of MRV on Feb. 18, 2000. MRV will take a one-time charge of approximately $13.8 million in connection with the decision to exit the enterprise LAN switching activities. Based in Hsinchu Science Park Hsinchu Science Park (Chinese: 新竹科學園區; Hanyu Pinyin: Xīnzhú Kē Xué Yuán Qū; Tongyong Pinyin: Sinjhú Ke Syué Yuán Cyu) was established by the government of Taiwan, ROC on December 15, 1980 with investment from the Kuomintang. , Taiwan, FOCI is a leading manufacturer of passive fiber optic components for WDM (1) (Wavelength Division Multiplexing) A technology that uses multiple lasers and transmits several wavelengths of light (lambdas) simultaneously over a single optical fiber. transmission. The company has a broad array of products for use in EDFA (Erbium-Doped Fiber Amplifier) A device that boosts the signal in an optical fiber. Introduced in the late 1980s, the EDFA was the first successful optical amplifier. and optical networks, including WDM couplers, isolators, attenuators, circulators, dispersion dispersion, in chemistry dispersion, in chemistry, mixture in which fine particles of one substance are scattered throughout another substance. A dispersion is classed as a suspension, colloid, or solution. compensating grating, wavelength add-drop multiplexers Not to be confused with optical add-drop multiplexer. An add-drop multiplexer (ADM) is an important element of optical fiber networks. A multiplexer combines, or multiplexes, several lower-bandwidth streams of data into a single beam of light. , thin film and fiber Bragg grating A short length of optical fiber that filters out a particular wavelength. Periodically spaced zones in the fiber core are altered to have different refractive indexes slightly higher than the core. filters, and MOICs. FOCI will showcase at the upcoming OFC OFC Office OFC Officer OFC Of Course OFC Oxygen Free Copper OFC Oceania Football Confederation (soccer) OFC Optical Fiber Cable OFC Optical Fiber Communications OFC Optical Fiber Conference show its new Lithium Niobate Lithium niobate (LiNbO3) is a compound of niobium, lithium, and oxygen. It is a colorless solid that is insoluble in water. Its melting point is 1257 °C and its density is 4.65 g/cm³. Its CAS number is []. external modulators. Additional products in development include Arrayed Waveguide Grating Arrayed waveguide gratings (AWG) are commonly used as optical (de)multiplexers in wavelength division multiplexed (WDM) systems. These devices are capable of multiplexing a large number of wavelengths into a single optical fiber, thereby increasing the transmission capacity of DWDM (Dense WDM) The term given to wavelength division multiplexing (WDM) when significantly more channels were being added. Since WDM is increasingly more "dense" all the time, both terms are used synonymously. See WDM. DWDM - wavelength division multiplexing multiplexers, and Planar A technique developed by Fairchild Instruments that creates transistor sublayers by forcing chemicals under pressure into exposed areas. Planar superseded the mesa process and was a major step toward creating the chip. lightwave circuit (PLC) photonic switches See optical switch. . Applications for FOCI product lines range from Long Haul Long distance. Long haul implies traversing a state or a country. Contrast with short haul. Telecommunication systems to Fiber to The Home (FTTH (Fiber To The Home) See FTTP. ). FOCI has more than 80 engineers, of which 45 have advanced degrees. All FOCI facilities, composed of 150,000 sq.ft., are ISO (1) See ISO speed. (2) (International Organization for Standardization, Geneva, Switzerland, www.iso.ch) An organization that sets international standards, founded in 1946. The U.S. member body is ANSI. certified. The additional manufacturing space more than doubles MRV's available optical manufacturing capacity. MRV announced its intent to merge the FOCI operation with its Optical Access division prior to the contemplated IPO (Initial Public Offering) The first time a company offers shares of stock to the public. While not a computer term per se, many founders, employees and insiders of computer companies have found this acronym more exciting than any tech term they ever heard. . The Optical Access division of MRV is a world class leader in active optical components. When combined, the merged company will be one of the largest and most advanced optical component and module manufacturers in the world. It will be the only known manufacturer, other than JDS-Uniphase, to combine active and passive technologies. Combining active and passive capabilities will lead to optical networking Communications between computers, telephones and other electronic devices using light. An optical network is far more reliable and has far greater potential transmission capacity than networking in the electrical domain. See optical fiber. products with tightly integrated active and passive components, as well as MOICs and OEICs. By joining forces, the new entity will offer customers a broad array of active and passive components, and integrated modules, used to transmit and manage optical signals in fiber optic networks. Noam Lotan, President and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. of MRV Communications commented on the acquisition: "Together with FOCI, we now have the ability to produce breakthrough hybrid products based on integrated active and passive components. It is important to note that FOCI has an exceptionally strong and cohesive management team, which worked together for many years at ITRI ITRI Industrial Technology Research Institute (Taiwan, ROC) ITRI Information Technology Research Institute ITRI Inhalation Toxicology Research Institute ITRI International Tin Research Institute Ltd ITRI Information Technology Reuse Initiative , prior to founding FOCI. We have great confidence in their abilities and our engineers are anxious to get started on some exciting joint projects." Steve Lin, President of FOCI added: "We are excited to align our technology, manufacturing expertise and capacity with a world class leader like MRV. By combining our complementary portfolios, we can offer a broad range of solutions integrating both active and passive components to meet the increasing demand for products with a higher level of functionality." With the broad product range of the new entity, MRV becomes a powerhouse in optical technology. In addition to FOCI's line of passive components, the current activities within MRV include an in-house foundry for Long-Reach DFB DFB acronym for dark, firm, dry meat. Called also dark cutting beef. lasers, optical transceivers, hybrid Triplexers for residential connectivity, and coarse WDM See CWDM. modules. The R&D activities of MRV's affiliates include extreme high power 980nm pump lasers A laser used as the pump for an optical amplifier or other laser. See EDFA and laser. for optical amplifiers A device that boosts light signals in an optical fiber network. Unlike regenerators, which have to convert light to electricity in order to amplify it and then convert it back again to light, the optical amplifier amplifies the light signal itself. , DWDM modules and EDFAs. Over the past 2 years, MRV adopted a business model of creating and managing several start-up companies start-up company A new business. and forming independent business units, in order to take them public. The principal focus of the MRV group of companies, which now comprises 14 companies, is: Optical components, Optical networks and Internet infrastructure. The FOCI acquisition and merger with MRV's Optical division, creates a stronger candidate for an IPO. This will further validate MRV's basic business model. Accordingly, MRV decided to exit the Enterprise LAN switching business, which no longer fits MRV's business model. Lotan continued: "Our business model supports the creation of value by focusing on faster growing entities and at the same time creating new start-up companies in optics and Internet infrastructure. Discontinuing our Enterprise LAN switching activity in favor of growing our optical components, optical networks and carriers revenue is the logical choice. It allows us to focus on higher pay-off opportunities in optics." Revenues for the three months ended December 31, 1999 and 1998 were $73,903,000 and $74,883,000, respectively. For the years ended December 31, 1999 and 1998 revenues were $288,524,000 and $264,075,000, respectively. Pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma net income, before the charge for the write-off of inventories associated with LAN switching products was $669,000 for the fourth quarter of 1999 compared with $239,000 for the fourth quarter of 1998. Pro Forma Basic and Diluted Earnings per Share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of before the charge for Q4 1999 were $.02 compared with $.01 in the fourth quarter of 1998. Pro Forma net income before the charge for the year 1999 was $852,000 compared with a net loss of $20,106,000 in 1998. Pro Forma Basic and Diluted Earnings per Share, before the charge, for the year 1999 were $.03 compared with a Basic and Diluted Loss per Share of $.76 in 1998. Net Loss, including the charge for the write-off of inventories associated with LAN switching products was $13,092,000 for the fourth quarter of 1999 compared with Net Income of $239,000 for the fourth quarter of 1998. Basic and Diluted Losses per Share including the charge for Q4 1999 were $.48 compared with Earnings per Share of $.01 in the fourth quarter of 1998. Net Loss including the charge for the year 1999 was $12,909,000 compared with a net loss of $20,106,000 in 1998. Basic and Diluted Losses per Share, including the charge, for the year 1999 were $.48 compared with $.76 in 1998. About MRV Communications, Inc. MRV Communications, Inc. is in the business of creating and managing growth companies in Optical Technology and Internet infrastructure. The company has leveraged its early leadership in fiber optic transmission into a well-focused range of solutions, integrating switching, routing, access servers and optical transmission systems. As the Internet evolves into a single global communication network, MRV has launched the development of new technologies to drive the next generation infrastructures. Such developments encompass optical access systems, subscribers' management systems and Linux-based solutions. MRV has initiated and funded cutting-edge start-up companies including New Access Communications
Access Communications Co-operative Ltd. , Charlotte's Networks, Hyperchannel and Zuma Networks. This release may contain forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. that involve risks and uncertainties. These statements may differ materially from actual future events or results. Readers are referred to the documents filed by MRV with the Securities and Exchange Commission, specifically the most recent reports on Forms 10K and 10Q, which identify important risk factors that could cause actual results to differ from those contained in the forward-looking statements, including potential fluctuations in operating results, dependence on new product developments, rapid technological and market changes, manufacturing risks, volatility of the company's stock price, financial risk management, and future growth subject to risks.
MRV COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
December 31,
1999 1998
(audited)
ASSETS
CURRENT ASSETS:
Cash & cash equivalents $ 34,330 $ 20,692
Short-term investments 10,141 30,493
Accounts receivable, net of
reserves of $8,451 in 1999
and $8,487 in 1998 60,637 54,596
Inventories 35,392 47,467
Refundable income taxes 3,216 --
Deferred income taxes 6,907 5,035
Other current assets 6,336 5,508
Total current assets 156,959 163,791
PROPERTY AND EQUIPMENT - At cost,
net of depreciation and amortization 19,600 19,357
OTHER ASSETS:
Goodwill, net 27,214 26,666
Investments, principally U.S. Treasuries 101,936 100,138
Deferred income taxes 5,324 5,661
Loan financing costs and other 3,500 4,579
$ 314,533 $ 320,192
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of financing
lease obligations $ 198 $ 185
Accounts payable 33,455 29,757
Accrued liabilities 15,403 13,606
Accrued restructuring costs -- 82
Deferred revenue 1,478 4,398
Income taxes payable -- 445
Total current liabilities 50,534 48,473
LONG-TERM LIABILITIES
Convertible debentures 90,000 90,000
Capital lease obligations,
net of current portion 1,481 1,400
Deferred income taxes 281 48
Other long-term liabilities 2,647 2,869
Total long term liabilities 94,409 94,317
MINORITY INTERESTS 2,775 2,973
STOCKHOLDERS' EQUITY:
Preferred stock, $0.01 par value:
1,000 shares authorized no shares outstanding -- --
Common stock, $0.0034 par value:
80,000 shares authorized and
28,117 shares outstanding in 1999
and 26,639 shares outstanding in 1998 124 88
Additional paid-in capital 191,440 180,656
Treasury stock (133) (133)
Retained earnings (deficit) (18,377) (5,471)
Accumulated other comprehensive loss (6,239) (711)
Total stockholders' equity 166,815 174,429
$ 314,533 $ 320,192
MRV COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
Year Ended, Three Months Ended
December 31, December 31,
1999 1998 1999 1998
(Audited) (Unaudited)
REVENUES, net $288,524 $264,075 $ 73,903 $ 74,883
COSTS AND EXPENSES:
Cost of goods sold 197,442 165,385 58,828 56,287
Research and development
expenses 35,319 25,817 9,806 8,480
Selling, general and
administrative expenses 71,757 56,753 23,488 16,978
Purchased technology
in progress -- 20,633 -- --
Restructuring costs -- 15,671 -- (7,523)
Operating (loss) income (15,994) (20,184) (18,219) 661
Interest expense related
to convertible notes 4,500 2,480 1,125 1,110
Other income (expense),
net 4,822 6,819 872 3,537
Provision (credit) for
income taxes (2,153) 5,707 (4,731) 4,665
Minority interests (610) 1,345 (649) 975
NET INCOME (LOSS) BEFORE
EXTRAORDINARY ITEM (12,909) (22,897) (13,092) (2,552)
EXTRAORDINARY ITEM
Gain on repurchase of
convertible notes -- 2,791 -- 2,791
NET INCOME (LOSS) $(12,909) $(20,106) $(13,092) $ 239
NET INCOME (LOSS)
PER-SHARE - BASIC,
BEFORE EXTRAORDINARY
ITEM $ (0.48) $ (0.86) $ (0.48) $ (0.10)
NET INCOME (LOSS)
PER-SHARE DILUTED,
BEFORE EXTRAORDINARY
ITEM $ (0.48) $ (0.86) $ (0.48) $ (0.10)
NET INCOME (LOSS)
PER SHARE - BASIC $ (0.48) $ (0.76) $ (0.48) $ 0.01
NET INCOME (LOSS)
PER SHARE - DILUTED $ (0.48) $ (0.76) $ (0.48) $ 0.01
SHARES USED IN PER SHARE
CALCULATION - BASIC 26,960 26,532 27,541 26,637
SHARES USED IN PER SHARE
CALCULATION - DILUTED 26,960 26,532 27,541 30,207
PRO FORMA INFORMATION
(UNAUDITED)
WRITE OFF OF ASSETS
ASSOCIATED
WITH LAN PRODUCTS $ 13,761 $-- $ 13,761 $--
NET INCOME (LOSS)
BEFORE WRITE OFF OF
ASSETS ASSOCIATED
WITH LAN PRODUCTS $ 852 $(20,106) $ 669 $ 239
EARNINGS PER SHARE
BEFORE WRITE OFF OF
ASSETS ASSOCIATED WITH
LAN PRODUCTS
- BASIC $ 0.03 $ (0.76) $ 0.02 $ 0.01
EARNINGS PER SHARE
BEFORE WRITE OFF OF
ASSETS ASSOCIATED WITH
LAN PRODUCTS
- DILUTED $ 0.03 $ (0.76) $ 0.02 $ 0.01
SHARES USED IN PER-SHARE
CALCULATION - BASIC 26,960 26,532 27,541 26,637
SHARES USED IN PER-SHARE
CALCULATION - DILUTED 29,601 26,532 30,786 30,207
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