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Attachment 4

 

 

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 8-K

 

Current Report
Pursuant To Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): October 26, 2010

 

MRV COMMUNICATIONS, INC.

(Exact name of Registrant as specified in its charter)

 

DELAWARE

 

001-11174

 

06-1340090

(State or other jurisdiction of

 

(Commission file number)

 

(I.R.S. employer

incorporation or organization)

 

 

 

identification number)

 

20415 Nordhoff Street, Chatsworth, CA  91311

(Address of principal executive offices)  (zip code)

 

Registrant’s telephone number, including area code: (818) 773-0900

 

Not Applicable

Former name or former address, if changed since last report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the Registrant under any of the following provisions:

 

o            Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

o            Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

o            Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

o            Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 



 

Item 1.01  Entry into a Material Definitive Agreement

 

On October 26, 2010, MRV Communications, Inc. (the “Company”) sold all of the issued and outstanding capital stock of its wholly owned subsidiaries Source Photonics, Inc. (“SPI”) and Source Photonics Santa Clara, Inc. (“SPSC”, and, together with SPI, the “Source Photonics Entities”) to Magnolia Source B.V. (“Buyer”), an entity owned and controlled by affiliates of Francisco Partners, pursuant to a Stock Purchase Agreement (the “Purchase Agreement”) dated as of October 26, 2010, by and among the Company, the Source Photonics Entities, and Buyer.  The Source Photonics Entities and their subsidiaries operate under the Source Photonics brand name and are a leading provider of optical communications products used in telecommunications systems and data communications networks.  The Purchase Agreement provides for the payment from Buyer to the Company of cash proceeds of approximately $117.8 million, as well as the assumption of debt of approximately $32.9 million, less a payment of approximately $4.6 million directly to SPI for payment of management bonuses triggered by the transaction and certain restricted stock unit settlements.  The payments are made in three installments, with the first $40.0 million (a portion of which was paid directly to SPI as described in the sentence above) paid one day after closing, the second payment of $60.0 million to occur on or before 25 days after closing, and the last payment of approximately $17.8 million to occur on or before 60 days after closing.  Two Francisco Partners funds, Francisco Partners II (Cayman), L.P. and Francisco Partners Parallel Fund II, L.P., have separately entered into a limited guarantee with the Company to guarantee the payment of the purchase price by Buyer under the Purchase Agreement.

 

The Purchase Agreement contains customary representations, warranties and covenants, as well as customary mutual indemnification obligations.  For reporting purposes, 26 operating days that reflect contributions from the Source Photonics Entities will be included in the Company’s fourth quarter 2010 results. The foregoing description of the Purchase Agreement is not complete and is qualified in its entirety by the full text of the Purchase Agreement, which is attached as Exhibit 10.1 to this Current Report on Form 8-K and is incorporated herein by reference.

 

A copy of the Company’s press release announcing the completion of the transactions contemplated by the Purchase Agreement was released on October 26, 2010 and is attached hereto as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference.

 

Item 2.01  Completion of Acquisition or Disposition of Assets

 

The disclosure contained in Item 1.01 above is incorporated herein by reference.  Additional information on the financial impact of the transaction is included in Item 9.01(b) below.

 

Item 5.02  Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

 

(d)         On October 28, 2010, the Board of Directors (the “Board”) of the Company elected Dilip Singh, the Company’s Chief Executive Officer, to the Board, effective immediately.  The election of Mr. Singh increased the size of the Board to eight directors.  Mr. Singh will continue in his role as the Company’s Chief Executive Officer, and will not receive any additional compensation for his role as a director.  He will not be joining any of the Board’s Committees at this time.

 

2



 

A press release announcing the election of Mr. Singh to the Board was released on November 1, 2010, is attached hereto as Exhibit 99.2, and is incorporated herein by reference.

 

Item 9.01  Financial Statements and Exhibits

 

(b)           Pro Forma Financial Information

 

On October 26, 2010, the Company sold all of the issued and outstanding capital stock of the Source Photonics Entities to Buyer for, among other things, cash proceeds of $117.8 million the assumption of all of the Source Photonics Entities’ debt of $32.9 million, less a payment of approximately $4.6 million directly to SPI for the payment of management bonuses triggered by the transaction and certain restricted stock unit settlements.  The description of the transaction and parties involved is contained in Item 1.01 above and is incorporated herein by reference.  The following unaudited pro forma condensed consolidated balance sheet as of June 30, 2010 is based on the Company’s historical unaudited condensed consolidated balance sheet as of June 30, 2010.  The pro forma condensed consolidated balance sheet gives effect to the sale of the Source Photonics Entities and related adjustments as if the transaction had occurred on June 30, 2010.

 

MRV Communications, Inc.

Unaudited Pro Forma Condensed Balance Sheet

As of June 30, 2010

(In thousands, except par values)

 

 

 

 

 

Pro forma
adjustments (1)

 

 

 

 

 

As reported

 

Source
Photonics (1)

 

Impact of
transaction

 

Pro forma

 

Assets

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

36,191

 

$

(4,316

)

33,913

(2)

$

65,788

 

Short-term marketable securities

 

32,740

 

 

 

 

32,740

 

Time deposits (restricted)

 

18,940

 

(17,272

)

 

 

1,668

 

Accounts receivable, net

 

112,632

 

(65,536

)

 

 

47,096

 

Inventories

 

81,571

 

(41,581

)

 

 

39,990

 

Deferred income taxes

 

2,868

 

(1,303

)

 

 

1,565

 

Other current assets

 

27,370

 

(5,819

)

78,541

(3)

100,092

 

Total current assets

 

312,312

 

(135,827

)

112,454

 

288,939

 

Non-current assets

 

60,997

 

(27,956

)

 

 

33,041

 

Total assets

 

$

373,309

 

$

(163,783

)

112,454

 

$

321,980

 

 

 

 

 

 

 

 

 

 

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

Accounts payable

 

$

78,711

 

$

(46,491

)

 

 

$

32,220

 

Short-term debt

 

51,646

 

(40,635

)

 

 

11,011

 

Other current liabilities

 

59,417

 

(12,967

)

1,605

(4)

48,055

 

Total current liabilities

 

189,774

 

(100,093

)

1,605

 

91,286

 

Long-term liabilities

 

8,028

 

(538

)

 

 

7,490

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

Equity:

 

 

 

 

 

 

 

 

 

MRV stockholders’ equity:

 

 

 

 

 

 

 

 

 

Preferred stock, $.0.01 par value:

 

 

 

 

 

 

 

 

 

Authorized - 1,000 shares; no shares issued or outstanding

 

 

 

 

 

 

 

 

Common stock, $0.0017 par value:

 

 

 

 

 

 

 

 

 

Authorized - 320,000 shares Issued - 158,960 shares Outstanding - 157,607 shares

 

268

 

 

 

 

268

 

Other stockholders’ equity

 

169,385

 

(63,152

)

111,595

(5)

217,828

 

Total MRV stockholder’s equity

 

169,653

 

(63,152

)

111,595

 

218,096

 

Noncontrolling interests in consolidated subsidiaries

 

5,854

 

 

(746

)(6)

5,108

 

Total equity

 

175,507

 

(63,152

)

110,849

 

223,204

 

Total liabilities and equity

 

$

373,309

 

$

(163,783

)

112,454

 

$

321,980

 

 


(1)

Adjustments to eliminate the assets and liabilities of the Source Photonics Entities as of June 30, 2010.

(2)

Proceeds received by the Company as a result of the sale of the Source Photonics Entities in the first payment at closing, net of transaction fees of $1.4 million.

(3)

Includes $77.8 million receivable for additional proceeds to be received by the Company within 60 days of transaction closing and a $0.7 million receivable assigned to the Company in the transaction.

(4)

Includes $0.5 million of accrued liabilities related to legal matters for which the Company has indemnified the buyer and $1.1 million of taxes payable related to the gain on the sale of the Source Photonics Entities.

(5)

Adjustment to stockholders’ equity to reflect the net impact of the disposition.

(6)

Balance of non-controlling interest in the Source Photonics Entities as of June 30, 2010.

 

The following unaudited consolidated pro forma financial information presents statements of operations for the years ended December 31, 2009, 2008 and 2007, and the six months ended June 30, 2010 and 2009, and is based on the audited consolidated financial statements for the Company for the year ended December 31, 2009, the unaudited condensed consolidated financial statements for the six months ended June 30, 2010, and 2009, and the audited operating results of Source Photonics for the periods presented.  The pro forma financial information gives effect to the divestiture of the Source Photonics Entities as if it had occurred on January 1, 2007.

 

3



 

MRV Communications, Inc.

Unaudited Pro Forma Statement of Operations

For the six months ended June 30, 2010

(In thousands, except per share data)

 

 

 

 

 

Pro forma
adjustments (1)

 

 

 

 

 

As reported

 

Source
Photonics

 

Pro forma

 

Revenue

 

$

231,299

 

$

(112,999

)

$

118,300

 

Cost of goods sold

 

150,030

 

(86,870

)

63,160

 

Gross profit

 

81,269

 

(26,129

)

55,140

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

Product development and engineering

 

18,872

 

(8,756

)

10,116

 

Selling, general and administrative

 

48,285

 

(10,082

)

38,203

 

Amoritization of intangibles

 

1,128

 

(1,128

)

 

Total operating expenses

 

68,285

 

(19,966

)

48,319

 

Operating income (loss)

 

12,984

 

(6,163

)

6,821

 

Interest expense

 

(1,468

)

1,031

 

(437

)

Other income, net

 

1,129

 

(690

)

439

 

Income before income taxes

 

12,645

 

(5,822

)

6,823

 

Provision (benefit) for income taxes

 

4,936

 

(1,224

)

3,712

 

Net income

 

7,709

 

(4,598

)

3,111

 

Less: net income attributable to noncontrolling interests

 

1,120

 

 

1,120

 

Net income attributable to MRV

 

$

6,589

 

$

(4,598

)

$

1,991

 

 

 

 

 

 

 

 

 

Net income per share attributable to MRV common stockholders:

 

 

 

 

 

 

 

Basic

 

$

0.04

 

$

(0.03

)

$

0.01

 

Diluted

 

$

0.04

 

$

(0.03

)

$

0.01

 

Weighted average number of shares:

 

 

 

 

 

 

 

Basic

 

157,657

 

 

157,657

 

Diluted

 

158,552

 

 

158,552

 

 

4



 

MRV Communications, Inc.

Unaudited Pro Forma Statement of Operations

For the six months ended June 30, 2009

(In thousands, except per share data)

 

 

 

 

 

Pro forma
adjustments (1)

 

 

 

 

 

As reported

 

Source
Photonics

 

Pro forma

 

Revenue

 

$

208,543

 

$

(97,644

)

$

110,899

 

Cost of goods sold

 

157,948

 

(92,889

)

65,059

 

Gross profit

 

50,595

 

(4,755

)

45,840

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

Product development and engineering

 

17,578

 

(7,174

)

10,404

 

Selling, general and administrative

 

48,284

 

(9,862

)

38,422

 

Amoritization of intangibles

 

1,128

 

(1,128

)

 

Total operating expenses

 

66,990

 

(18,164

)

48,826

 

Operating loss

 

(16,395

)

13,409

 

(2,986

)

Interest expense

 

(1,597

)

773

 

(824

)

Other income, net

 

1,136

 

(317

)

819

 

Loss from continuing operations before income taxes

 

(16,856

)

13,865

 

(2,991

)

Provision for income taxes

 

3,424

 

(859

)

2,565

 

Loss from continuing operations

 

(20,280

)

14,724

 

(5,556

)

Loss from discontinued operations, net of income taxes of $321

 

338

 

 

 

338

 

Net loss

 

(19,942

)

14,724

 

(5,218

)

Less:

 

 

 

 

 

 

 

Income from continuing operations attributable to noncontrolling interests

 

1,118

 

 

 

1,118

 

Income from discontinued operations attributable to noncontrolling interests

 

10

 

 

 

10

 

Net loss attributable to MRV

 

$

(21,070

)

$

14,724

 

$

(6,346

)

Loss from continuing operations attributable to MRV

 

(21,398

)

14,724

 

(6,674

)

Income from discontinued operations attributable to MRV

 

328

 

 

328

 

 

 

 

 

 

 

 

 

Net loss per share attributable to MRV common stockholders:

 

 

 

 

 

 

 

Basic and Diluted

 

(0.13

)

0.09

 

(0.04

)

Weighted average number of shares:

 

 

 

 

 

 

 

Basic and Diluted

 

157,489

 

 

157,489

 

 

5



 

MRV Communications, Inc.

Unaudited Pro Forma Statement of Operations

For the year ended December 31, 2009

(In thousands, except per share data)

 

 

 

 

 

Pro forma
adjustments (1)

 

 

 

 

 

As reported

 

Source
Photonics

 

Pro forma

 

Revenue

 

$

448,120

 

$

(209,134

)

$

238,986

 

Cost of goods sold

 

322,306

 

(181,694

)

140,612

 

Gross profit

 

125,814

 

(27,440

)

98,374

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

Product development and engineering

 

36,735

 

(14,003

)

22,732

 

Selling, general and administrative

 

99,622

 

(20,317

)

79,305

 

Amoritization of intangibles

 

2,257

 

(2,257

)

 

Total operating expenses

 

138,614

 

(36,577

)

102,037

 

Operating loss

 

(12,800

)

9,137

 

(3,663

)

Interest expense

 

(2,958

)

1,633

 

(1,325

)

Other income, net

 

25,210

 

(587

)

24,623

 

Income from continuing operations before income taxes

 

9,452

 

10,183

 

19,635

 

Provision for income taxes

 

5,345

 

(1,178

)

4,167

 

Income from continuing operations

 

4,107

 

11,361

 

15,468

 

Loss from discontinued operations, net of income taxes of $927

 

(2,707

)

 

(2,707

)

Net income

 

1,400

 

11,361

 

12,761

 

Less:

 

 

 

 

 

 

 

Income from continuing operations attributable to noncontrolling interests

 

1,757

 

 

1,757

 

Income from discontinued operations attributable to noncontrolling interest

 

47

 

 

 

47

 

Net income (loss) attributable to MRV

 

$

(404

)

$

11,361

 

$

10,957

 

Income from continuing operations attributable to MRV

 

$

2,350

 

$

11,361

 

$

13,711

 

Loss from discontinued operations attributable to MRV

 

$

(2,754

)

$

 

$

(2,754

)

 

 

 

 

 

 

 

 

Net income (loss) per share attributable to MRV common stockholders:

 

 

 

 

 

 

 

Basic

 

$

(0.00

)

$

0.07

 

$

0.07

 

Diluted

 

$

(0.00

)

$

0.07

 

$

0.07

 

Weighted average number of shares:

 

 

 

 

 

 

 

Basic

 

157,547

 

 

157,547

 

Diluted

 

157,547

 

 

157,665

 

 

6



 

MRV Communications, Inc.

Unaudited Pro Forma Statement of Operations

For the year ended December 31, 2008

(In thousands, except per share data)

 

 

 

 

 

Pro forma
adjustments (1)

 

 

 

 

 

As reported

 

Source
Photonics

 

Pro forma

 

Revenue

 

$

466,821

 

$

(200,162

)

$

266,659

 

Cost of goods sold

 

331,753

 

(171,479

)

160,274

 

Gross profit

 

135,068

 

(28,683

)

106,385

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

Product development and engineering

 

38,746

 

(15,863

)

22,883

 

Selling, general and administrative

 

116,595

 

(27,296

)

89,299

 

Impairment of goodwill and other intangibles

 

100,250

 

(93,879

)

6,371

 

Amoritization of intangibles

 

2,434

 

(2,434

)

 

Total operating expenses

 

258,025

 

(139,472

)

118,553

 

Operating loss

 

(122,957

)

110,789

 

(12,168

)

Interest expense

 

(3,497

)

1,271

 

(2,226

)

Other income, net

 

4,283

 

(410

)

3,873

 

Loss from continuing operations before income taxes

 

(122,171

)

111,650

 

(10,521

)

Provision for income taxes

 

1,936

 

1,259

 

3,195

 

Loss from continuing operations

 

(124,107

)

110,391

 

(13,716

)

Income from discontinued operations, net of income taxes of $1,215

 

1,002

 

 

1,002

 

Net loss

 

(123,105

)

110,391

 

(12,714

)

Less:

 

 

 

 

 

 

 

Net income from continuing operations attributable to noncontrolling interests

 

40

 

 

40

 

Net income from discontinued operations attributable to noncontrolling interests

 

59

 

 

59

 

 

 

 

 

 

 

 

 

Net loss attributable to MRV

 

$

(123,204

)

$

110,391

 

$

(12,813

)

Loss from continuing operations attributable to MRV

 

$

(124,147

)

$

110,391

 

$

(13,756

)

Income from discontinued operations attributable to MRV

 

$

943

 

$

 

$

943

 

 

 

 

 

 

 

 

 

Net loss per share attributable to MRV common stockholders:

 

 

 

 

 

 

 

Basic and Diluted

 

$

(0.78

)

$

0.70

 

$

(0.08

)

Weighted average number of shares:

 

 

 

 

 

 

 

Basic and Diluted

 

157,323

 

 

157,323

 

 

7



 

MRV Communications, Inc.

Unaudited Pro Forma Statement of Operations

For the year ended December 31, 2007

(In thousands, except per share data)

 

 

 

 

 

Pro forma
adjustments (1)

 

 

 

 

 

As reported

 

Source
Photonics

 

Pro forma

 

Revenue

 

$

380,033

 

$

(143,805

)

$

236,228

 

Cost of goods sold

 

267,367

 

(116,148

)

151,219

 

Gross profit

 

112,666

 

(27,657

)

85,009

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

Product development and engineering

 

33,387

 

(12,016

)

21,371

 

Selling, general and administrative

 

90,901

 

(15,397

)

75,504

 

Amoritization of intangibles

 

1,906

 

(1,906

)

 

Total operating expenses

 

126,194

 

(29,319

)

96,875

 

Operating loss

 

(13,528

)

1,662

 

(11,866

)

Interest expense

 

(3,521

)

392

 

(3,129

)

Other income (expense), net

 

(1,108

)

(755

)

(1,863

)

Loss from continuing operations before income taxes

 

(18,157

)

1,299

 

(16,858

)

Provision for income taxes

 

2,881

 

58

 

2,939

 

Loss from continuing operations

 

(21,038

)

1,241

 

(19,797

)

Income from discontinued operations, net of income taxes of $1,343

 

1,519

 

 

1,519

 

Net loss

 

(19,519

)

1,241

 

(18,278

)

Less:

 

 

 

 

 

 

 

Net loss from continuing operations attributable to noncontrolling interests

 

(531

)

 

(531

)

Net income from discontinued operations attributable to noncontrolling interests

 

106

 

 

106

 

Net loss attributable to MRV

 

$

(19,094

)

$

1,241

 

$

(17,853

)

Loss from continuing operations attributable to MRV

 

$

(20,507

)

$

1,241

 

$

(19,266

)

Income from discontinued operations attributable to MRV

 

$

1,413

 

$

 

$

1,413

 

 

 

 

 

 

 

 

 

Net loss per share attributable to MRV common stockholders:

 

 

 

 

 

 

 

Basic and Diluted

 

$

(0.14

)

$

0.01

 

$

(0.13

)

Weighted average number of shares:

 

 

 

 

 

 

 

Basic and Diluted

 

140,104

 

 

140,104

 

 


(1) Pro forma adjustments eliminate the revenue, expenses and income of the Source Photonics Entities assuming the transaction occurred on the first day of the period presented.

 

8



 

(d)     Exhibits

 

Exhibit 10.1

 

Stock Purchase Agreement, dated as of October 26, 2010, by and among Magnolia Source B.V., Source Photonics, Inc., Source Photonics Santa Clara, Inc. and the Company

 

 

 

Exhibit 99.1

 

Press release of the Company dated October 26, 2010

 

 

 

Exhibit 99.2

 

Press release of the Company dated November 1, 2010

 

9



 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Company has duly caused this Report to be signed on its behalf by the undersigned, hereunto duly authorized.

 

Date: November 1, 2010

 

 

 

 

 

 

MRV COMMUNICATIONS, INC.

 

 

 

 

 

By:

/s/ Chris King

 

 

Chris King

 

 

Chief Financial Officer

 

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