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 March 31, 1996
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.)
One Symbol Plaza, Holtsville, NY 11742
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 516-738-2400
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 March 31, 1996
Common Stock, 25,648,000 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
March 31, 1996 and December 31, 1995 2
Condensed Consolidated Statements of Earnings
Three Months Ended March 31, 1996 and 1995 3
Condensed Consolidated Statements of Cash Flows
Three Months Ended March 31, 1996 and 1995 4
Notes to Condensed Consolidated Financial
Statements 5 - 6
ITEM 2.
Management's Discussion and Analysis of
Financial Condition and Results of Operations 7 - 9
PART II. OTHER INFORMATION 10
SIGNATURES 11
<PAGE>
SYMBOL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(All amounts in thousands, except stock par value)
March 31, December 31,
ASSETS 1996 1995 (1)
(Unaudited)
CURRENT ASSETS:
Cash and temporary investments $ 53,460 $ 63,650
Accounts receivable, less allowance for doubtful
accounts of $8,779 and $7,816, respectively 130,288 118,175
Inventories, net 104,062 95,267
Deferred income taxes 25,173 24,488
Prepaid expenses and other current assets 14,627 14,975
TOTAL CURRENT ASSETS 327,610 316,555
PROPERTY, PLANT AND EQUIPMENT, net of accumulated
depreciation and amortization of $55,563 and
$50,716 respectively 92,644 88,264
INTANGIBLE AND OTHER ASSETS, net of accumulated
amortization of $46,116 and $42,903,
respectively 138,821 139,449
$559,075 $544,268
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 85,180 $ 81,948
Current portion of long-term debt 10,481 6,910
Income taxes payable 12,728 11,909
Deferred revenue 8,803 5,936
TOTAL CURRENT LIABILITIES 117,192 106,703
LONG-TERM DEBT, less current maturities 54,479 60,829
OTHER LIABILITIES AND DEFERRED REVENUES 24,464 23,882
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 27,450 shares and
27,229 shares, respectively 274 272
Retained earnings 169,164 156,075
Other stockholders' equity 193,502 196,507
362,940 352,854
$559,075 $544,268
See notes to condensed consolidated financial statements
(1) The consolidated balance sheet as of December 31, 1995 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
March 31,
1996 1995
NET REVENUE $149,082 $131,258
COST OF REVENUE 78,316 66,740
AMORTIZATION OF SOFTWARE DEVELOPMENT COSTS 2,503 2,233
GROSS PROFIT 68,263 62,285
OPERATING EXPENSES:
Engineering 10,756 10,272
Selling, general and administrative 35,166 32,707
Amortization of excess of cost over
fair value of net assets acquired 804 691
46,726 43,670
EARNINGS FROM OPERATIONS 21,537 18,615
INTEREST EXPENSE, net (426) (755)
EARNINGS BEFORE PROVISION FOR
INCOME TAXES 21,111 17,860
PROVISION FOR INCOME TAXES 8,022 7,108
NET EARNINGS $ 13,089 $ 10,752
EARNINGS PER SHARE:
Primary $0.49 $0.40
Fully-diluted $0.49 $0.40
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING:
Primary 26,754 26,804
Fully-diluted 26,754 26,909
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 March 31,
1996 1995
Cash flows from operating activities:
Net earnings $13,089 $10,752
Adjustments to reconcile net earnings
to net cash from operating activities:
Depreciation and amortization of property,
plant and equipment 5,362 3,895
Other amortization 3,513 3,515
Provision for losses on accounts receivable 396 337
Changes in assets and liabilities net of
effects of acquisitions:
Accounts receivable (12,180) (10,796)
Sale of lease receivables 12,495 -
Inventories (7,037) 3,099
Prepaid expenses and other current assets (4,724) (2,175)
Intangible and other assets (4,296) (3,904)
Accounts payable and accrued expenses (2,387) 3,533
Other liabilities and deferred revenues 4,268 514
Net cash provided by operating activities 8,499 8,770
Cash flows from investing activities:
Expenditures for property, plant and
equipment (9,699) (3,371)
Acquisition of business (4,080) -
Net cash used in investing activities (13,779) (3,371)
Cash flows from financing activities:
Principal repayments of long-term debt (2,779) (2,790)
Exercise of stock options and warrants 4,580 986
Purchase of treasury shares (6,465) (995)
Net cash used in financing activities (4,664) (2,799)
Effects of exchange rate changes on cash (246) 341
Net (decrease) increase in cash and
temporary investments (10,190) 2,941
Cash and temporary investments, beginning
of period 63,650 31,389
Cash and temporary investments, end of
period $53,460 $34,330
Supplemental disclosures of cash flow
information:
Cash paid during the period for:
Interest $ 1,130 $ 1,151
Income taxes $ 3,156 $ 1,918
See notes to condensed consolidated financial statements
-4-<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 March 31, 1996, and the results of
its operations and its cash flows for the three months ended March 31,
1996 and 1995, in conformity with generally accepted accounting
principles for interim financial information applied on a consistent
basis. The results of operations for the three months ended March 31,
1996, 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, 1995.
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. The Company offers lease financing of its products to its customers.
In March 1996, the Company sold certain lease receivables relating to
sales type leases for approximately $12,495,000, which represents the
present value of the uncollected balance as of March 31, 1996. Due to
the fact that the sale of these lease receivables was with recourse,
the Company retains the same credit risk as if the receivables had not
been sold. The sale is recorded as a reduction of prepaid and other
current assets and intangibles and other assets.
4. Classification of inventories is:
March 31, 1996 December 31, 1995
(Unaudited)
Raw materials $ 52,148 $ 47,701
Work-in-process 12,374 9,181
Finished goods 39,540 38,385
$104,062 $ 95,267
5. 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.
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 October 1993, the Company and certain of its officers received a
purported Second Consolidated Amended Class Action Complaint in the
action entitled In re. Symbol Technologies Class Action Litigation
("Second Complaint") in the Eastern District of New York, which
asserts alleged violations of Section 10(b) of the Securities Exchange
Act of 1934 and Rule 10b-5 promulgated thereunder. The Second
Complaint alleges a class period from June 8, 1992, to September 14,
1992. Defendants have moved for summary judgement dismissing the
-5-<PAGE>
Second Complaint. Oral argument on the motion was heard on April 19,
1996 and the parties are awaiting a decision from the Court. The
Company believes that the litigation is without merit and intends to
defend it vigorously.
On April 1, 1996, PSC, Inc. ("PSC") commenced suit against the Company
purporting to assert claims against the Company for alleged violations
of the federal antitrust laws, unfair competition and also seeking a
declaratory judgment of non-infringement and invalidity as to certain
of the Company's patents. The Company had previously filed a suit
against PSC for infringement of 19 patents owned by the Company and
breach of its two license agreements with the Company.
The Company believes that all claims purportedly asserted by PSC are
factually and legally baseless, and wholly without merit. The Company
intends to vigorously defend the litigation.
7. In January and March 1996 the Company established wholly owned
subsidiaries in Africa and Denmark through the acquisition of Barcodes
(pty) LTD., South Africa and the Bar Code Data Capture Department of
BCP Hardware A/S, respectively. The initial costs of the acquisitions
amounted to $4,080,000 and $3,000,000 respectively. The fair value of
net assets acquired relating to these subsidiaries was approximately
$348,000 and $335,000, respectively. The excess of cost over net
assets acquired relating to these acquisitions is being amortized over
twenty and ten years, respectively. Future additional acquisition
installment payments are contingent upon the attainment of certain
annual net revenue levels, as defined in the respective agreements by
each of these acquired subsidiaries during the next three years and
four years, respectively. These acquisitions have been accounted for
as purchases and, accordingly the cost has been allocated to net
assets acquired based upon fair values. Results of operations of
these subsidiaries have been included in consolidated operations as of
their respective effective acquisition dates. The cost of the Denmark
acquisition has been recorded in accounts payable and accrued expenses
as of March 31, 1996. Proforma operating results for the year ended
December 31, 1995, and quarter ended March 31, 1996 assuming both
acquisitions occurred at the beginning of each of these periods are
not materially different than reported operating results.
-6-<PAGE>
Safe harbor for forward looking statements under Securities Litigation
Act of 1995; certain cautionary statements
Pursuant to the safe harbor provision of the Private Securities
Litigation Reform Act of 1995, certain comments included herein are
forward looking statements. The actual results may differ materially
from those projected in the forward looking statements. Furthermore,
such forward looking statements are subject to a number of risks and
uncertainties including, but not limited to the state of the US and
European economies, the level of competition within the industry and its
effect on product prices, the Company's ability to timely launch new
products, and various other factors. Additional information concerning
these factors is set forth herein and in the Company's Annual Report on
Form 10-K which was filed with the Securities and Exchange Commission in
March, 1996.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations
Net revenue of $149,082,000 for the three months ended March 31,
1996 increased 13.6 percent over the comparable prior year period due to
increased worldwide sales of both scanner and terminal products.
Foreign exchange rate fluctuations did not have a material impact on net
revenue for the three months ended March 31, 1996.
Geographically, North America revenue increased 4.4 percent and
International revenue increased 30.0 percent, respectively, over the
prior year. North America and International revenue continue to
represent approximately three-fifths and two-fifths of net revenue,
respectively.
Cost of revenue (as a percentage of revenue) of 52.5 percent for
the three months ended March 31, 1996 increased from 50.8 percent for
the three months ended March 31, 1995. This increase resulted primarily
from a change in the mix of the Company's products sold to a higher
percentage of lower margin products, an increase in revenue derived from
the Company's indirect sales channel, the impact of new product start up
costs and production interruptions due to severe winter weather
conditions.
Amortization of software development costs of $2,503,000 for the
three months ended March 31, 1996 increased from $2,233,000 for the
three months ended March 31, 1995 due to new product releases.
Engineering costs for the three months ended March 31, 1996
increased to $10,756,000 from $10,272,000 for the three months ended
March 31, 1995. This increase is due to additional expenses incurred in
connection with the continuing research and development of new products
and the improvement of existing products partially offset by increased
capitalized costs incurred for internally developed product software
where economic and technological feasibility has been established.
Selling, general and administrative expenses of $35,166,000 for the
three months ended March 31, 1996 increased from $32,707,000 for the
three months ended March 31, 1995. While in absolute dollars, selling,
general and administrative expenses increased 7.5 percent from the prior
year period, as a percentage of revenue such expenses were reduced to
23.6 percent for the three months ended March 31, 1996, from 24.9
percent in 1995. The increase in absolute dollars reflects expenses
incurred to support a higher revenue base.
-7-<PAGE>
Amortization of excess of cost over fair value of net assets
acquired of $804,000 for the three months ended March 31, 1996 increased
from $691,000 for the three months ended March 31, 1995 due to the
recent acquisitions described in Note 7 of the Notes to Condensed
Consolidated Financial Statements.
Net interest expense decreased to $426,000 for the three months
ended March 31, 1996 from $755,000 for the three months ended March 31,
1995 due to increased interest income as a result of the increase in
cash and temporary investments, a reduction in interest expense due to
repayments of outstanding debt and interest capitalized in connection
the renovation of the Company's worldwide headquarters partially offset
by increased interest expense incurred due to the Industrial Development
Bond assumed by the Company in June 1995 in connection with the purchase
of its worldwide headquarters.
The Company's effective tax rate of 38.0 percent for the three
months ended March 31, 1996 decreased from 39.8 percent for the three
months ended March 31, 1995 primarily due to an increase in the exempt
earnings of the Company's foreign sales corporation.
Liquidity and Capital Resources
The Company utilizes a number of measures of liquidity including the
following:
March 31, December 31,
1996 1995
Working Capital (in thousands) $210,418 $209,852
Current Ratio (Current Assets
to Current Liabilities) 2.8:1 3.0:1
Long-Term Debt to Capital 13.1% 14.7%
(Long-term debt to long-term
debt plus equity)
Current assets increased by $11,055,000 from December 31, 1995
principally due to an increase in accounts receivable as a result of the
increase in net revenue and increased inventory to support higher operating
levels.
Current liabilities increased $10,489,000 from December 31, 1995
primarily due to an increase in income taxes payable from the results of
profitable operations, reclassification of the first installment associated
with the Company's 7.76% series B Senior Notes due February 1997, and
increases in accounts payable, accrued expenses and deferred revenue.
The aforementioned activity resulted in a working capital increase of
$566,000 for the three months ended March 31, 1996. The Company's current
ratio at March 31, 1996 decreased to 2.8:1 from 3.0:1 at December 31, 1995
primarily from the increase in income taxes payable described above and the
decrease in cash which is described below.
Property, plant and equipment expenditures for the three months ended
March 31, 1996 totalled $9,699,000 compared to $3,377,000 for the three
months ended March 31, 1995. Such expenditures were financed by existing
cash and temporary investments. The Company does not have any material
commitments for capital expenditures.
- -8-<PAGE>
The Company's long-term debt to capital ratio decreased to 13.1% at
March 31, 1996 from 14.7% at December 31, 1995 primarily due to increased
equity from results of operations and payment of the annual installment of
the Company's 7.76% Series A Senior Notes.
The Company has loan agreements with three banks pursuant to which the
banks have agreed to provide lines of credit totalling $30,000,000. As of
March 31, 1996, the Company had no outstanding borrowings under these
lines. These agreements expire between June 30, 1996 and December 31,
1996.
The Company experienced negative cash flow for the three months ended
March 31, 1996 primarily due to investments in receivables and inventories
to support higher operating levels, the purchase of 193,524 shares of
common stock for $6,465,000, the repayment of the annual installment of the
Series A Senior Notes, and the acquisition of Barcodes (PTY) LTD., South
Africa. These uses of cash were partially offset by the proceeds from the
sale of certain lease receivables.
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.
-9-<PAGE>
Part II - Other Information
Item 1. Legal Proceedings:
On March 31, 1996, the Company commenced suit in the United States
District Court for the Southern District of New York against PSC Inc.
("PSC"), having commenced suit on March 28, 1996 against PSC's customer,
Data General Corporation (the "Symbol Litigation"). The Symbol
Litigation asserts claims against Data General for infringement of 4
patents owned by the Company, and against PSC for infringement of 19
patents owned by the Company. The Symbol Litigation also asserts claims
against PSC for breach of its two license agreements with the Company,
and for violation of a 1991 Consent Judgement in which PSC agreed not to
infringe certain patents owned by the Company. The Company intends to
prosecute the Symbol Litigation vigorously and is seeking preliminary
and permanent injunctive relief as well as damages.
On April 1, 1996, PSC commenced suit against the Company in the
United States District Court for the Western District of New York (the
"PSC Litigation"). The PSC Litigation purports to assert claims against
the Company for alleged violations of the federal antitrust laws based
on the Company's patent licensing practices, and unfair competition by
allegedly causing false and misleading statements to be circulated
concerning PSC and its products and also seeks a declaratory judgment of
noninfringement and invalidity as to 32 (including 17 of the patents in
the Symbol Litigation) of the Company's patents.
The Company believes that all claims purportedly asserted in the
PSC Litigation are factually and legally baseless, and wholly without
merit. The Company intends to vigorously defend the PSC Litigation.
PSC has moved to transfer the Symbol Litigation to the Western
District of New York, which the Company will oppose. In the meantime,
both PSC and the Company have served discovery requests in the Symbol
Litigation. The PSC Litigation has been stayed by agreement of the
parties pending a ruling on PSC's motion to transfer.
-10-<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: April 26, 1996 By: /s/ Jerome Swartz
Jerome Swartz, Chairman and
Chief Executive Officer
Dated: April 26, 1996 By: /s/ Thomas G. Amato
Thomas G. Amato
Senior Vice President -
Chief Financial Officer
- -11-
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<PERIOD-END> MAR-31-1996
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<RECEIVABLES> 139,067,000
<ALLOWANCES> (8,779,000)
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<BONDS> 54,479,000
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