SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended September 30, 1995
Commission file number 1-9802
SYMBOL TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 11-2308681
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
116 Wilbur Place, Bohemia, N.Y. 11716
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 516-563-2400
Former name, former address and former fiscal year, if changed
since last report.
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
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the close of the period
covered by this report.
Class Outstanding at September 30, 1995
Common Stock, 25,811,000 shares
par value $0.01 <PAGE>
SYMBOL TECHNOLOGIES, INC. AND SUBSIDIARIES
INDEX TO FORM 10-Q
PAGE
PART I. FINANCIAL INFORMATION
ITEM I. Financial Statements
Condensed Consolidated Balance Sheets at
September 30, 1995 and December 31, 1994 2
Condensed Consolidated Statements of Earnings
Three and Nine Months Ended September 30, 1995 and 1994 3
Condensed Consolidated Statements of Cash Flows
Three and Nine Months Ended September 30, 1995 and 1994 4 - 5
Notes to Condensed Consolidated Financial
Statements 6 - 7
ITEM 2.
Management's Discussion and Analysis of
Financial Condition and Results of Operations 8 - 10
PART II. OTHER INFORMATION 11
SIGNATURES 12
<PAGE>
SYMBOL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(All amounts in thousands, except stock par value)
September 30, December 31,
ASSETS 1995 1994 (1)
(Unaudited)
CURRENT ASSETS:
Cash and temporary investments $ 59,843 $ 31,389
Accounts receivable, less allowance for doubtful
accounts of $8,731 and $7,269, respectively 113,606 96,827
Inventories, net 93,383 101,038
Deferred income taxes 25,876 23,300
Prepaid expenses and other current assets 15,329 13,568
TOTAL CURRENT ASSETS 308,037 266,122
PROPERTY, PLANT AND EQUIPMENT, net of accumulated
depreciation and amortization of $54,244 and
$58,214, respectively 78,570 71,705
INTANGIBLE AND OTHER ASSETS, net of accumulated
amortization of $38,082 and $46,369,
respectively 137,773 136,386
$524,380 $474,213
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 68,378 $ 60,792
Notes payable and current portion
of long-term debt 6,910 5,285
Income taxes payable 9,693 1,382
Deferred revenue 5,839 6,840
TOTAL CURRENT LIABILITIES 90,820 74,299
LONG-TERM DEBT, less current maturities 63,852 59,884
OTHER LIABILITIES AND DEFERRED REVENUE 24,528 23,863
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, par value $1.00; authorized
10,000 shares, none issued or outstanding - -
Common stock, par value $0.01; authorized
40,000 shares; issued 27,157 shares and
26,719 shares, respectively 271 267
Retained earnings 143,590 109,589
Other stockholders' equity 201,319 206,311
345,180 316,167
$524,380 $474,213
See notes to condensed consolidated financial statements
(1) The consolidated balance sheet as of December 31, 1994 has been taken
from the audited financial statements at that date and condensed.
- -2-<PAGE>
SYMBOL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(All amounts in thousands, except per share data)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
NET REVENUE $142,811 $124,433 $411,698 $341,525
COST OF REVENUE 73,532 62,198 210,391 171,119
AMORTIZATION OF SOFTWARE
DEVELOPMENT COSTS 2,144 2,660 6,663 7,198
GROSS PROFIT 67,135 59,575 194,644 163,208
OPERATING EXPENSES:
Engineering 10,742 9,818 31,400 26,974
Selling, general and
administrative 35,184 30,692 102,179 88,050
Severance 2,500 - 2,500 -
Amortization of excess
of cost over fair value
of net assets acquired 688 688 2,067 2,085
49,114 41,198 138,146 117,109
EARNINGS FROM OPERATIONS 18,021 18,377 56,498 46,099
INTEREST EXPENSE, net (450) (1,218) (1,658) (3,853)
EARNINGS BEFORE PROVISION
FOR INCOME TAXES 17,571 17,159 54,840 42,246
PROVISION FOR INCOME TAXES 6,103 6,864 20,839 16,899
NET EARNINGS $ 11,468 $ 10,295 $ 34,001 $ 25,347
EARNINGS PER SHARE:
Primary $0.42 $0.39 $1.26 $0.98
Fully-diluted $0.42 $0.39 $1.26 $0.97
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES OUTSTANDING:
Primary 27,241 26,345 27,084 25,908
Fully-diluted 27,241 26,413 27,084 26,224
See notes to condensed consolidated financial statements
- -3-<PAGE>
SYMBOL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(All amounts in thousands)
(Unaudited)
Three Months Ended September 30,
1995 1994
Cash flows from operating activities:
Net earnings $11,468 $10,295
Adjustments to reconcile net earnings
to net cash from operating activities:
Depreciation and amortization of property,
plant and equipment 4,910 3,688
Other amortization 3,487 3,609
Provision for losses on accounts receivable 1,759 758
Changes in assets and liabilities:
Accounts receivable (15,906) 3,711
Inventories 8,373 (7,858)
Prepaid expenses and other current assets (1,248) 1,202
Intangible and other assets (4,188) (2,895)
Accounts payable and accrued expenses 11,106 205
Accrued restructuring costs - (1,518)
Other liabilities and deferred revenue (1,223) (559)
Net cash provided by operating activities 18,538 10,638
Cash flows from investing activities:
Proceeds from sale of property, plant and
equipment 115 -
Expenditures for property, plant and
equipment (5,480) (7,549)
Other investing activities, net - 146
Net cash used in investing activities (5,365) (7,403)
Cash flows from financing activities:
Proceeds from issuance of long-term debt - 420
Repayment of notes payable - (12)
Exercise of stock options and warrants 2,822 8,367
Purchase of Treasury shares (11,113) (2,731)
Net cash (used in)/provided by
financing activities (8,291) 6,044
Effects of exchange rate changes on cash (131) 124
Net increase in cash and temporary
investments 4,751 9,403
Cash and temporary investments, beginning
of period 55,092 5,650
Cash and temporary investments, end of
period $59,843 $15,053
Supplemental disclosures of cash flow
information:
Cash paid during the period for:
Interest $ 1,632 $ 1,442
Income taxes 3,119 4,356
See notes to condensed consolidated financial statements
- -4-<PAGE>
SYMBOL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(All amounts in thousands)
(Unaudited)
Nine Months Ended September 30,
1995 1994
Cash flows from operating activities:
Net earnings $34,001 $25,347
Adjustments to reconcile net earnings to
net cash from operating activities:
Depreciation and amortization of property,
plant and equipment 12,913 10,704
Other amortization 10,141 10,009
Provision for losses on accounts receivable 2,783 1,961
Changes in assets and liabilities:
Accounts receivable (20,288) (7,742)
Inventories 7,077 (23,667)
Prepaid expenses and other current assets (3,837) (1,213)
Intangible and other assets (8,516) (10,067)
Accounts payable and accrued expenses 14,966 6,236
Accrued restructuring costs (157) (10,241)
Other liabilities and deferred revenue (336) 1,923
Net cash provided by operating activities 48,747 3,250
Cash flows from investing activities:
Note receivable (3,500) -
Proceeds from sale of property, plant
and equipment 4,615 -
Expenditures for property, plant and
equipment (24,659) (15,872)
Other investing activities, net 8 719
Net cash used in investing activities (23,536) (15,153)
Cash flows from financing activities:
Proceeds from issuance of long-term debt 8,558 3,000
Repayment of notes payable (2,965) (57)
Exercise of stock options and warrants 9,116 21,461
Purchase of Treasury shares (12,108) (5,389)
Net cash provided by financing activities 2,601 19,015
Effects of exchange rate changes on cash 642 442
Net increase in cash and temporary
investments 28,454 7,554
Cash and temporary investments, beginning
of period 31,389 7,499
Cash and temporary investments, end of
period $59,843 $15,053
Supplemental disclosures of cash flow
information:
Cash paid during the period for:
Interest $ 3,989 $ 3,725
Income taxes 10,398 6,548
See notes to condensed consolidated financial statements
- -5-<PAGE>
SYMBOL TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(All amounts in thousands, except per share data)
1. In the opinion of management, the accompanying unaudited condensed
consolidated financial statements include all necessary adjustments
(consisting of normal recurring accruals) and present fairly the
Company's financial position as of September 30, 1995, and the results
of its operations and its cash flows for the three and nine months
ended September 30, 1995 and 1994, in conformity with generally
accepted accounting principles for interim financial information
applied on a consistent basis. The results of operations for the three
and nine months ended September 30, 1995, are not necessarily
indicative of the results to be expected for the full year. 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 year ended December 31, 1994. Certain reclassifications have
been made to the prior year condensed consolidated financial statements
to conform with the current year presentation.
2. Primary and fully-diluted earnings per share are based on the weighted
average number of shares of common stock and common stock equivalents
(options and warrants) outstanding during the period, computed in
accordance with the treasury stock method.
3. Classification of inventories is:
September 30, 1995 December 31, 1994
(Unaudited)
Raw materials $ 43,865 $ 46,442
Work-in-process 8,908 8,485
Finished goods 40,610 46,111
$ 93,383 $101,038
4. When property, plant and equipment is retired or has been fully
depreciated and is no longer utilized, its cost and the related
accumulated depreciation are written off. Capitalized software
development costs fully amortized for two years or more are also
written off. For the nine months ended September 30, 1995, the
Company retired $18,700,000 and $18,400,000 of fully depreciated
property, plant and equipment and fully amortized capitalized software
development costs, respectively.
5. During the nine months ended September 30, 1995, the Company sold land
and a building located in Costa Mesa, California, for $1,000,000 cash
and a $3,500,000 promissory note bearing interest at 8.0 percent.
Principal payments of $500,000 are due in April 1996 and 1997 with the
remaining balance of unpaid principal and interest due in April 1999.
In addition, the Company purchased a 48-acre site in Holtsville, New
York, including a 174,000 square foot office building for $4,200,000
cash and assumed $7,282,000 in revenue bond financing made to Northrop
Grumman Corporation by the New York Industrial Development Authority
and the Town of Brookhaven. The bond bears interest at 12.3 percent
and principal and interest will be repaid in ten equal semi-annual
installments of $997,000 beginning in October, 1995. Based upon the
borrowing rates currently available to the Company, a bond premium of
$1,274,000 has been recorded in long-term debt and will be amortized
over the life of the bond. The sale of the Costa Mesa property and
purchase of the Holtsville site were accounted for as a like-kind
exchange for income tax purposes.
- -6-<PAGE>
6. The Company accrued severance costs of $2,500,000 as of September
30, 1995 in connection with the resignation of its president and
chief operating officer. This charge is reported as a separate
line item in the accompanying condensed consolidated financial
statements.
7. The Company is currently involved in matters of litigation
arising from the normal course of business. Management is of the
opinion that such litigation will have no material adverse effect
on the Company's consolidated financial position or results of
operations.
In March, 1993, the Company and certain of its officers received
a purported first Consolidated Amended Class Action Complaint in
the action entitled In re. Symbol Technologies Class Action
Litigation ("First Complaint") in the Eastern District of New
York which essentially asserted the same alleged violations of
Section 10(b) of the Securities Exchange Act of 1934 and Rule
10b-5 promulgated thereunder as had been contained in six
separate purported class action suits previously filed, and
alleged a class period of March 17, 1992 through September 14,
1992. Defendants moved to dismiss the First Complaint for
failure to state a cause of action and for failure to allege
fraud with particularity. On September 14, 1993, the Court
granted defendants' motion and dismissed the First Complaint.
However, the Court granted plaintiffs leave to file a new
complaint within 30 days. On October 14, 1993, a second
Consolidated Amended Class Action Complaint ("Second Complaint")
was served. It alleges essentially similar violations as had the
prior complaints but alleges a class period from June 8, 1992, to
September 14, 1992. Defendants moved to dismiss the Second
Complaint and such motion is currently pending before the Court.
The Company believes that the litigation is without merit and
intends to defend it vigorously.
- -7-<PAGE>
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations
Net revenue of $142,811,000 and $411,698,000 for the three and
nine months ended September 30, 1995 increased 14.8 percent and 20.5
percent, respectively, over the comparable prior year periods. The
increase for the three months ended September 30, 1995 is due to
increased sales of worldwide terminal and international scanner
products. The increase for the nine months ended September 30, 1995
is primarily due to increased worldwide sales of terminal products
introduced over the last two years. Foreign exchange rate
fluctuations favorably impacted net revenue by approximately 1.2
percent and 2.0 percent, respectively, for the three and nine months
ended September 30, 1995.
Geographically, North America revenue increased 9.7 percent and
16.3 percent, respectively, for the three and nine months ended
September 30, 1995 over the comparable prior year periods.
International revenue increased 23.9 percent and 28.4 percent,
respectively, for the three and nine months ended September 30, 1995
over the comparable prior year periods. North America and
International revenue represent approximately three-fifths and two
fifths of net revenue, respectively, for the three and nine months
ended September 30, 1995, and approximately two-thirds and one-third
of the net revenue, respectively, for the comparable prior year
periods.
Cost of revenue (as a percentage of net revenue) of 51.5 percent
and 51.1 percent, respectively, for the three and nine months ended
September 30, 1995, increased from 50.0 percent and 50.1 percent for
the comparable prior year periods. This increase resulted primarily
from a change in the mix of the Company's products sold to a higher
percentage of lower margin products. The increase was offset, in
part, by the impact on net revenue of favorable fluctuations in
foreign exchange rates discussed above.
Amortization of software development costs of $2,144,000 and
$6,663,000 for the three and nine months ended September 30, 1995
decreased from $2,660,000 and $7,198,000, for the comparable prior
year periods due to the timing of product releases.
Engineering expenses for the three and nine months ended
September 30, 1995 increased to $10,742,000 and $31,400,000 from
$9,818,000 and $26,974,000, respectively, for the comparable prior
year periods. While in absolute dollars engineering expenses
increased 9.4 percent and 16.4 percent, respectively, from the
comparable prior year periods, as a percentage of revenue such
expenses were reduced to 7.5 percent and 7.6 percent, respectively,
for the three and nine months ended September 30, 1995, from 7.9
percent in the comparable prior year periods due to the increases in
revenue. The increase in absolute dollars reflects expenses incurred
in connection with the continuing research and development of new
products and the improvement of existing products.
Selling, general and administrative expenses of $35,184,000 and
$102,179,000 for the three and nine months ended September 30, 1995
increased from $30,692,000 and $88,050,000, respectively, for the
comparable prior year periods. While in absolute dollars, selling,
general and administrative expenses increased 14.6 percent and 16.0
percent, respectively, from the prior year periods, as a percentage of
revenue such expenses decreased to 24.6 percent and 24.8 percent,
respectively, for the three and nine months ended September 30, 1995
from 24.7 percent and 25.8 percent in the comparable prior year
periods due to the increase in revenue and ongoing cost-containment
- -8-<PAGE>
programs. The increase in absolute dollars reflects expenses incurred
to support a higher revenue base and higher International expenses due
to a weakened U.S. dollar.
During the three and nine months ended September 30, 1995 the
Company recognized a one-time pretax charge of $2,500,000 of severance
expense, in connection with the resignation of its president and chief
operating officer. Excluding this charge, the Company generated
fully-diluted earnings per share of $0.48 and $1.32, respectively, for
the three and nine months ended September 30, 1995.
Net interest expense decreased to $450,000 and $1,658,000 for the
three and nine months ended September 30, 1995 from $1,218,000 and
$3,853,000 for the comparable prior year periods due to increased
interest income as a result of the increase in cash and temporary
investments and a reduction in interest expense due to annual
repayments of outstanding debt.
The Company's effective tax rate of 34.7 percent and 38.0 percent
for the three and nine months ended September 30, 1995, respectively,
decreased from 40.0 percent for the three and nine months ended
September 30, 1994 primarily due to an increase in the exempt earnings
of the Foreign Sales Corporation, a decrease in incremental foreign
income taxes and an increase in federal tax credits.
Liquidity and Capital Resources
The Company utilizes a number of measures of liquidity including
the following:
September 30, December 31,
1995 1994
Working Capital (in thousands) $217,217 $191,823
Current Ratio (Current Assets
to Current Liabilities) 3.4:1 3.6:1
Long-Term Debt to Capital 15.6% 15.9%
(Long-term debt to long-term
debt plus equity)
Current assets increased by $41,915,000 from December 31, 1994
principally due to an increase in accounts receivable to support higher
operating levels, deferred income taxes and cash. The increase in cash
was primarily due to cash generated by profitable operations, exercise
of stock options and the proceeds from issuance of long-term debt,
offset, in part by capital spending and the purchase of treasury shares.
The increase in current assets were offset, in part, by reduced
inventories as a result of the increase in product shipments.
Current liabilities increased $16,521,000 from December 31, 1994
primarily due to increases in accounts payable and accrued expenses,
income taxes payable and the current portion of long term debt assumed
in connection with the purchase of land and a building described below.
The aforementioned activity resulted in a working capital increase
of $25,394,000 for the nine months ended September 30, 1995 and a
decrease in the Company's current ratio at September 30, 1995 to 3.4:1
from 3.6:1 at December 31, 1994.
Property, plant and equipment expenditures for the nine months
ended September 30, 1995 totalled $24,659,000 compared to $15,872,000
for the nine months ended September 30, 1994. During the nine months
ended September 30, 1995, the Company sold land and a building located
in Costa Mesa, California, for $1,000,000 cash and a $3,500,000
promissory note bearing interest at 8.0 percent. Principal payments of
-9-<PAGE>
$500,000 are due in April 1996 and 1997 with the remaining balance of
unpaid principal and interest due in April 1999. In addition, the
Company purchased a 48-acre site in Holtsville, New York, including a
174,000 square foot office building for $4,200,000 cash and assumed
$7,282,000 in revenue bond financing made to Northrop Grumman
Corporation by the New York Industrial Development Authority and the
Town of Brookhaven. The bond bears interest at 12.3 percent and
principal and interest will be repaid in ten equal semi-annual
installments of $997,000 beginning in October, 1995. Based upon the
borrowing rates currently available to the Company, a bond premium of
$1,274,000 has been recorded in long-term debt and will be amortized
over the life of the bond. The sale of the Costa Mesa property and
purchase of the Holtsville site were accounted for as a like-kind
exchange for income tax purposes.
Following an estimated $8,000,000 renovation, completion of which
is expected in April, 1996, the facility will become the Company's
headquarters and will house the Company's administrative, engineering,
sales and marketing functions now located in the two buildings owned by
the Company in Bohemia, New York subject to the Industrial Revenue
financings completed in 1989. Long-term development plans allow for
future construction of the Company's manufacturing and distribution
facilities on the site. The Company is now in the process of evaluating
its future space requirements and its plans for the owned properties
currently occupied in Bohemia, which may include the sale or lease of
the properties. In the event of a sale, based upon current market
conditions, it is likely the sales price will be less than the book
value of the properties. Other property, plant and equipment
expenditures for the period were financed by existing cash and temporary
investments. The Company does not have any other material commitments
for capital expenditures.
The Company's long-term debt to capital ratio decreased to 15.6% at
September 30, 1995 from 15.9% at December 31, 1994 primarily due to
increased equity from the results of profitable operations and payment
of the annual installment of the Company's 7.76% Series A Senior Notes
offset, in part, by the assumed debt described above and the purchase of
its common stock described below.
The Company has credit agreements with three banks pursuant to
which the banks have agreed to provide lines of credit totalling
$30,000,000. As of September 30, 1995, the Company had no outstanding
borrowings under these lines. These agreements expire between December
31, 1995 and June 30, 1996.
During the three months ended September 30, 1995 the Company
purchased 307,300 shares of its common stock in the open market at a
total cost of $11,113,000 pursuant to the stock repurchase program
authorized by the Board of Directors on May 8, 1995.
The Company generated positive cash flow for the three months ended
September 30, 1995 primarily due to cash provided by operations,
decreased inventories and increased total liabilities, offset, in part,
by expenditures for property, plant and equipment and the purchase of
its common stock previously described.
The Company believes that it has adequate liquidity to meet its
current and anticipated needs from working capital, results of its
operations, and existing credit facilities.
- -10-<PAGE>
Part II - Other Information
-None-
- -11-<PAGE>
SIGNATURES
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.
SYMBOL TECHNOLOGIES, INC.
Dated: October 23, 1995 By: /s/ Jerome Swartz
Jerome Swartz, Chairman and
Chief Executive Officer
Dated: October 23, 1995 By: /s/ Thomas G. Amato
Thomas G. Amato
Senior Vice President -
Chief Financial Officer
- -12-
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<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 59,843,000
<SECURITIES> 0
<RECEIVABLES> 122,337,000
<ALLOWANCES> (8,731,000)
<INVENTORY> 93,383,000
<CURRENT-ASSETS> 308,037,000
<PP&E> 132,814,000
<DEPRECIATION> (54,244,000)
<TOTAL-ASSETS> 524,380,000
<CURRENT-LIABILITIES> 90,820,000
<BONDS> 63,852,000
<COMMON> 271,000
0
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<OTHER-SE> 344,909,000
<TOTAL-LIABILITY-AND-EQUITY> 524,380,000
<SALES> 411,698,000
<TOTAL-REVENUES> 411,698,000
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<TOTAL-COSTS> 217,054,000
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<INTEREST-EXPENSE> (1,658,000)
<INCOME-PRETAX> 54,840,000
<INCOME-TAX> 20,839,000
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