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 June 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 June 30, 1995
Common Stock, 25,997,000 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
June 30, 1995 and December 31, 1994 2
Condensed Consolidated Statements of Earnings
Three and Six Months Ended June 30, 1995 and 1994 3
Condensed Consolidated Statements of Cash Flows
Three and Six Months Ended June 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)
June 30, December 31,
ASSETS 1995 1994 (1)
(Unaudited)
CURRENT ASSETS:
Cash and temporary investments $ 55,092 $ 31,389
Accounts receivable, less allowance for doubtful
accounts of $7,047 and $7,269, respectively 99,645 96,827
Inventories, net 101,830 101,038
Deferred income taxes 25,609 23,300
Prepaid expenses and other current assets 14,348 13,568
TOTAL CURRENT ASSETS 296,524 266,122
PROPERTY, PLANT AND EQUIPMENT, net of accumulated
depreciation and amortization of $58,963 and
$58,214, respectively 78,148 71,705
INTANGIBLE AND OTHER ASSETS, net of accumulated
amortization of $44,981 and $46,369,
respectively 137,072 136,386
$511,744 $474,213
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 58,387 $ 60,792
Notes payable and current portion
of long-term debt 6,910 5,285
Income taxes payable 8,507 1,382
Deferred revenue 5,898 6,840
TOTAL CURRENT LIABILITIES 79,702 74,299
LONG-TERM DEBT, less current maturities 63,852 59,884
OTHER LIABILITIES AND DEFERRED REVENUE 25,692 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 27,035 shares and
26,719 shares, respectively 270 267
Retained earnings 132,122 109,589
Other stockholders' equity 210,106 206,311
342,498 316,167
$511,744 $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 Six Months Ended
June 30, June 30,
1995 1994 1995 1994
NET REVENUE $137,629 $113,423 $268,887 $217,092
COST OF REVENUE 70,119 56,848 136,859 108,921
AMORTIZATION OF SOFTWARE
DEVELOPMENT COSTS 2,286 2,407 4,519 4,538
GROSS PROFIT 65,224 54,168 127,509 103,633
OPERATING EXPENSES:
Engineering 10,386 8,390 20,658 17,156
Selling, general and
administrative 34,288 29,781 66,995 57,358
Amortization of excess
of cost over fair value
of net assets acquired 688 687 1,379 1,397
45,362 38,858 89,032 75,911
EARNINGS FROM OPERATIONS 19,862 15,310 38,477 27,722
INTEREST EXPENSE, net (453) (1,315) (1,208) (2,635)
EARNINGS BEFORE PROVISION
FOR INCOME TAXES 19,409 13,995 37,269 25,087
PROVISION FOR INCOME TAXES 7,628 5,598 14,736 10,035
NET EARNINGS $ 11,781 $ 8,397 $ 22,533 $ 15,052
EARNINGS PER SHARE:
Primary $0.43 $0.32 $0.84 $0.59
Fully-diluted $0.43 $0.32 $0.83 $0.58
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES OUTSTANDING:
Primary 27,145 25,983 26,985 25,672
Fully-diluted 27,261 26,031 27,202 25,884
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 June 30,
1995 1994
Cash flows from operating activities:
Net earnings $11,781 $ 8,397
Adjustments to reconcile net earnings
to net cash from operating activities:
Depreciation and amortization of property,
plant and equipment 4,106 3,674
Other amortization 3,139 3,324
Provision for losses on accounts receivable 687 526
Changes in assets and liabilities:
Accounts receivable 6,414 (1,149)
Inventories (4,396) (12,216)
Prepaid expenses and other current assets (414) (2,899)
Intangible and other assets (424) (4,378)
Accounts payable and accrued expenses 170 11,481
Accrued restructuring costs - (3,439)
Other liabilities and deferred revenue 375 475
Net cash provided by operating activities 21,438 3,796
Cash flows from investing activities:
Note receivable (3,500) -
Proceeds from sale of property, plant and
equipment 4,500 -
Expenditures for property, plant and
equipment (15,802) (6,270)
Other investing activities, net 2 394
Net cash used in investing activities (14,800) (5,876)
Cash flows from financing activities:
Proceeds from issuance of long-term debt 8,558 -
Repayment of notes payable (175) (6,929)
Exercise of stock options and warrants 5,308 11,939
Purchase of Treasury shares - (2,658)
Net cash provided by financing activities 13,691 2,352
Effects of exchange rate changes on cash 433 169
Net increase in cash and temporary
investments 20,762 441
Cash and temporary investments, beginning
of period 34,330 5,209
Cash and temporary investments, end of
period $55,092 $ 5,650
Supplemental disclosures of cash flow
information:
Cash paid during the period for:
Interest $ 1,206 $ 1,300
Income taxes 4,474 1,213
See notes to condensed consolidated financial statements
- -4-<PAGE>
SYMBOL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(All amounts in thousands)
(Unaudited)
Six Months Ended June 30,
1995 1994
Cash flows from operating activities:
Net earnings $22,533 $15,052
Adjustments to reconcile net earnings to
net cash from operating activities:
Depreciation and amortization of property,
plant and equipment 8,003 7,017
Other amortization 6,654 6,400
Provision for losses on accounts receivable 1,024 1,203
Changes in assets and liabilities:
Accounts receivable (4,382) (11,453)
Inventories (1,296) (15,809)
Prepaid expenses and other current assets (2,589) (2,415)
Intangible and other assets (4,328) (7,172)
Accounts payable and accrued expenses 3,860 6,031
Accrued restructuring costs (157) (8,723)
Other liabilities and deferred revenue 887 2,481
Net cash provided by (used in) operating
activities 30,209 (7,388)
Cash flows from investing activities:
Note receivable (3,500) -
Proceeds from sale of property, plant
and equipment 4,500 -
Expenditures for property, plant and
equipment (19,180) (8,323)
Other investing activities, net 8 573
Net cash used in investing activities (18,172) (7,750)
Cash flows from financing activities:
Proceeds from issuance of long-term debt 8,558 2,580
Repayment of notes payable (2,965) (45)
Exercise of stock options and warrants 6,294 13,094
Purchase of Treasury shares (995) (2,658)
Net cash provided by financing activities 10,892 12,971
Effects of exchange rate changes on cash 774 318
Net increase in cash and temporary
investments 23,703 (1,849)
Cash and temporary investments, beginning
of period 31,389 7,499
Cash and temporary investments, end of
period $55,092 $ 5,650
Supplemental disclosures of cash flow
information:
Cash paid during the period for:
Interest $ 2,357 $ 2,283
Income taxes 7,279 2,192
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 June 30, 1995, and the results of
its operations and its cash flows for the three and six months ended
June 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 six
months ended June 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:
June 30, 1995 December 31, 1994
(Unaudited)
Raw materials $ 43,221 $ 46,442
Work-in-process 8,826 8,485
Finished goods 49,783 46,111
$101,830 $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.
5. During the three months ended June 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.
Interest is payable monthly. 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 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 $869,000 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 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 $137,629,000 and $268,887,000 for the three and
six months ended June 30, 1995 increased 21.3 percent and 23.9
percent, respectively, over the comparable prior year periods. The
increase for the three months ended June 30, 1995 is due to increased
worldwide sales of scanner and terminal products. The increase for
the six months ended June 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 2.5 percent for the three and six months
ended June 30, 1995.
Geographically, North America revenue increased 18.9 percent and
20.0 percent, respectively, for the three and six months ended June
30, 1995 over the comparable prior year periods. International
revenue increased 25.6 percent and 31.0 percent, respectively, for the
three and six months ended June 30, 1995 over the comparable prior
year periods. North America and International revenue continue to
represent approximately two-thirds and one-third of the net revenue,
respectively.
Cost of revenue (as a percentage of net revenue) of 50.9 percent
for the three and six months ended June 30, 1995, increased from 50.1
percent and 50.2 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 $2,286,000 and
$4,519,000 for the three and six months ended June 30, 1995 remained
relatively constant compared with the comparable prior year periods.
Engineering expenses for the three and six months ended June 30,
1994 increased to $10,386,000 and $20,658,000 from $8,390,000 and
$17,156,000, respectively, for the comparable prior year periods.
While in absolute dollars engineering expenses increased 23.8 percent
and 20.4 percent, respectively, from the comparable prior year
periods, as a percentage of revenue such expenses remained relatively
constant. 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 $34,288,000 and
$66,995,000 for the three and six months ended June 30, 1995 increased
from $29,781,000 and $57,358,000, respectively, for the comparable
prior year periods. While in absolute dollars, selling, general and
administrative expenses increased 15.1 percent and 16.8 percent,
respectively, from the prior year periods, as a percentage of revenue
such expenses decreased to 24.9 percent for the three and six months
ended June 30, 1995 from approximately 26.4 percent in the comparable
prior year periods due to the increase in revenue and ongoing cost-
containment 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.
- -8-<PAGE>
Net interest expense decreased to $453,000 and $1,208,000 for the
three and six months ended June 30, 1995 from $1,315,000 and
$2,635,000 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 39.3 and 39.5 percent for the
three and six months ended June 30, 1995, respectively, decreased from
40.0 percent for the three and six months ended June 30, 1994 due to
the effect of changes in permanent differences between the financial
accounting and tax bases of assets and liabilities.
Liquidity and Capital Resources
The Company utilizes a number of measures of liquidity including
the following:
June 30, December 31,
1995 1994
Working Capital (in thousands) $216,822 $191,823
Current Ratio (Current Assets
to Current Liabilities) 3.7:1 3.6:1
Long-Term Debt to Capital 15.7% 15.9%
(Long-term debt to long-term
debt plus equity)
Current assets increased by $30,402,000 from December 31, 1994
principally due to an increase in accounts receivable and inventories to
support higher operating levels, deferred income taxes and cash
generated by profitable operations.
Current liabilities increased $5,403,000 from December 31, 1994
primarily due to an increase in income taxes payable and an increase in
the current portion of long term debt assumed in connection with the
purchase of land and a building described below, offset, in part, by a
decrease in accounts payable and accrued expenses.
The aforementioned activity resulted in a working capital increase
of $24,999,000 for the six months ended June 30, 1995. The Company's
current ratio at June 30, 1995 increased to 3.7:1 from 3.6:1 at December
31, 1994 primarily from the increase in current assets described above.
Property, plant and equipment expenditures for the six months ended
June 30, 1995 totalled $19,180,000 compared to $8,323,000 for the six
months ended June 30, 1994. During the three months ended June 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. Interest is payable monthly. 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 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
$869,000 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.
- -9-<PAGE>
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 15.7% at
June 30, 1995 from 15.9% at December 31, 1994 primarily due to increased
equity from the results of operations and payment of the first annual
installment of the Company's 7.76% Series A Senior Notes offset, in
part, by the assumed debt described above.
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 June 30, 1995, the Company had no outstanding
borrowings under these lines. These agreements expire between December
31, 1995 and June 30, 1996.
The Company generated positive cash flow for the three months ended
June 30, 1995 primarily due to cash provided by operations and financing
activities, offset, in part, by expenditures for property, plant and
equipment.
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
Item 4. Submission of Matters to a Vote of Security Holders
The Company's Annual Meeting of Shareholders was held on May 8,
1995. At the meeting all nine directors nominated by the Company were
reelected. The votes cast for each nominee were as follows:
For Against
Jerome Swartz 20,960,288 337,720
Harvey P. Mallement 21,103,733 194,275
Frederic P. Heiman 20,960,026 337,982
Raymond R. Martino 20,958,515 339,493
Saul P. Steinberg 20,850,141 447,867
Lowell Freiberg 20,957,241 340,767
George Bugliarello 21,098,045 199,963
Jan Lindelow 21,104,113 193,895
Charles Wang 21,103,958 194,050
The shareholders voted in favor of a proposal to approve an
amendment to the 1991 Employee Stock Option Plan by a vote of 16,034,406
in favor and 1,873,068 opposed and 152,941 abstaining.
In addition, the shareholders voted in favor of a proposal to
approve the adoption of the Executive Bonus Plan by a vote of 20,369,414
in favor, 747,375 opposed and 181,219 abstaining.
Shareholders also ratified the appointment of Deloitte & Touche as
the Company's auditors for fiscal 1995 by a vote of 21,162,954 in favor,
35,425 opposed and 99,629 abstaining.
- -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: July 25, 1995 By: /s/ Jerome Swartz
Jerome Swartz, Chairman and
Chief Executive Officer
Dated: July 25, 1995 By: /s/ Thomas G. Amato
Thomas G. Amato
Senior Vice President -
Chief Financial Officer
- -12-
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<PERIOD-END> JUN-30-1995
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<RECEIVABLES> 106,692,000
<ALLOWANCES> (7,047,000)
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