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, 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, N.Y. 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 September 30, 1996
Common Stock, 25,928,754 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, 1996 and December 31, 1995 2
Condensed Consolidated Statements of Earnings
Three and Nine Months Ended September 30, 1996 and 1995 3
Condensed Consolidated Statements of Cash Flows
Three and Nine Months Ended September 30, 1996 and 1995 4 - 5
Notes to Condensed Consolidated Financial
Statements 6 - 8
ITEM 2.
Management's Discussion and Analysis of
Financial Condition and Results of Operations 9 - 11
PART II. OTHER INFORMATION 12
SIGNATURES 13
<PAGE>
SYMBOL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(All amounts in thousands, except stock par value)
September December 31,
ASSETS 1996 1995 (1)
(Unaudited)
CURRENT ASSETS:
Cash and temporary investments $ 27,954 $ 63,650
Accounts receivable, less allowance for doubtful
accounts of $9,352 and $7,816, respectively 155,757 118,175
Inventories, net 128,615 95,267
Deferred income taxes 25,068 24,488
Prepaid expenses and other current assets 13,695 14,975
TOTAL CURRENT ASSETS 351,089 316,555
PROPERTY, PLANT AND EQUIPMENT, net of accumulated
depreciation and amortization of $54,503 and
$50,716, respectively 97,865 88,264
INTANGIBLE AND OTHER ASSETS, net of accumulated
amortization of $53,890 and $42,903,
respectively 150,907 139,449
$599,861 $544,268
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 97,703 $ 81,948
Current portion of long-term debt 10,384 6,910
Income taxes payable 15,754 11,909
Deferred revenue 9,855 5,936
TOTAL CURRENT LIABILITIES 133,696 106,703
LONG-TERM DEBT, less current maturities 53,705 60,829
OTHER LIABILITIES AND DEFERRED REVENUE 21,790 23,882
COMMON EQUITY PUT OPTIONS 11,041 -
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
100,000 shares; issued 27,877 shares and
27,229 shares, respectively 278 272
Retained earnings 190,957 156,075
Other stockholders' equity 188,394 196,507
379,629 352,854
$599,861 $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 Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
NET REVENUE $170,963 $142,811 $479,373 $411,698
COST OF REVENUE 91,399 73,532 254,332 210,391
AMORTIZATION OF SOFTWARE
DEVELOPMENT COSTS 2,802 2,144 7,798 6,663
GROSS PROFIT 76,762 67,135 217,243 194,644
OPERATING EXPENSES:
Engineering 12,062 10,742 34,335 31,400
Selling, general and
administrative 38,264 35,184 109,548 102,179
Purchased research and
development and merger
integration costs 12,341 - 12,341 -
Severance - 2,500 - 2,500
Amortization of excess
of cost over fair value
of net assets acquired 1,048 688 2,582 2,067
63,715 49,114 158,806 138,146
EARNINGS FROM OPERATIONS 13,047 18,021 58,437 56,498
INTEREST EXPENSE, net (945) (450) (2,175) (1,658)
EARNINGS BEFORE PROVISION
FOR INCOME TAXES 12,102 17,571 56,262 54,840
PROVISION FOR INCOME TAXES 4,599 6,103 21,380 20,839
NET EARNINGS $ 7,503 $ 11,468 $ 34,882 $ 34,001
EARNINGS PER SHARE:
Primary $0.28 $0.42 $1.29 $1.26
Fully-diluted $0.28 $0.42 $1.28 $1.26
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES OUTSTANDING:
Primary 27,134 27,241 27,009 27,084
Fully-diluted 27,187 27,241 27,146 27,084
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,
1996 1995
Cash flows from operating activities:
Net earnings $ 7,503 $11,468
Adjustments to reconcile net earnings
to net cash from operating activities:
Depreciation and amortization of property,
plant and equipment 6,046 4,910
Other amortization 4,294 3,487
Provision for losses on accounts receivable 467 1,759
Charge for purchased research and development 10,741 -
Changes in assets and liabilities
net of effect of acquisition:
Accounts receivable (13,693) (15,906)
Sale of lease receivables 4,813 -
Inventories (1,313) 8,373
Prepaid expenses and other current assets 4,834 (1,248)
Intangible and other assets (11,277) (4,188)
Accounts payable and accrued expenses (6,101) 11,106
Other liabilities and deferred revenue (4,417) (1,223)
Net cash provided by operating activities 1,897 18,538
Cash flows from investing activities:
Note receivable 500 -
Proceeds from sale of property, plant and
equipment - 115
Expenditures for property, plant and
equipment (7,350) (5,480)
Acquisition of business, net of cash acquired (19,818) -
Net cash used in investing activities (26,668) (5,365)
Cash flows from financing activities:
Proceeds from issuance of notes payable 29,405 -
Repayment of notes payable (29,502) -
Exercise of stock options and warrants 3,240 2,822
Proceeds from common equity put options 946 -
Purchase of treasury shares (4,338) (11,113)
Net cash used in financing activities (249) (8,291)
Effects of exchange rate changes on cash 395 (131)
Net (decrease) increase in cash and
temporary investments (24,625) 4,751
Cash and temporary investments, beginning
of period 52,579 55,092
Cash and temporary investments, end of
period $27,954 $59,843
Supplemental disclosures of cash flow
information:
Cash paid during the period for:
Interest $1,080 $1,632
Income taxes 5,019 3,119
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,
1996 1995
Cash flows from operating activities:
Net earnings $34,882 $34,001
Adjustments to reconcile net earnings to
net cash from operating activities:
Depreciation and amortization of property,
plant and equipment 17,173 12,913
Other amortization 10,987 10,141
Provision for losses on accounts receivable 1,339 2,783
Charge for purchased research and
development 10,741 -
Changes in assets and liabilities
net of effects of acquisitions:
Accounts receivable (32,978) (20,288)
Sale of lease receivables 17,308 -
Inventories (30,196) 7,077
Prepaid expenses and other current assets (2,839) (3,837)
Intangible and other assets (20,784) (8,516)
Accounts payable and accrued expenses 8,472 14,809
Other liabilities and deferred revenue 1,854 (336)
Net cash provided by operating
activities 15,959 48,747
Cash flows from investing activities:
Note receivable 500 (3,500)
Proceeds from sale of property, plant
and equipment - 4,615
Expenditures for property, plant and
equipment (25,479) (24,651)
Acquisition of businesses, net of
cash acquired (26,898) -
Net cash used in investing activities (51,877) (23,536)
Cash flows from financing activities:
Proceeds from issuance of notes payable and
long term debt 29,405 8,558
Repayments of notes payable and
long term debt (33,055) (2,965)
Exercise of stock options and warrants 15,425 9,116
Proceeds from common equity put options 946 -
Purchase of treasury shares (12,490) (12,108)
Net cash provided by financing activities 231 2,601
Effects of exchange rate changes on cash (9) 642
Net (decrease) increase in cash and temporary
investments (35,696) 28,454
Cash and temporary investments, beginning
of period 63,650 31,389
Cash and temporary investments, end of
period $27,954 $59,843
Supplemental disclosures of cash flow
information:
Cash paid during the period for:
Interest $ 3,509 $ 3,989
Income taxes 9,101 10,398
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, 1996, and the results
of its operations and its cash flows for the three and nine months
ended September 30, 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
and nine months ended September 30, 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.
During 1996, the Company sold certain lease receivables relating to
sales type leases for approximately $17,308,000, which represents the
present value of the uncollected balance as of the date of sale. 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 was recorded as a reduction of prepaid and other
current assets, and intangibles and other assets.
4. Classification of inventories is:
September 30, 1996 December 31, 1995
(Unaudited)
Raw materials $ 59,938 $ 47,701
Work-in-process 17,464 9,181
Finished goods 51,213 38,385
$128,615 $ 95,267
5. During 1996 the Company issued common equity put options on 297,000
shares of its common stock which are exercisable for periods that
range from six months to one year from the date of issuance and give
independent parties the right to sell such shares to the Company at
strike prices that range from $36.632 per share to $40.045 per share.
The balance of the common equity put option account is the amount the
Company would be obligated to pay if all the put options were
exercised. Proceeds of $946,000 from the issuance of the put options
were charged to additional paid in capital.
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 not have a 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
- -6-<PAGE>
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
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 has consented to PSC's serving
a Second Amended Complaint, which purports to assert essentially the
same antitrust and unfair competition claims against the Company, and
also seeks a declaratory judgement of alleged non-infringement of nine
of the Company's patents, and a declaratory judgement that PSC has not
breached its two license agreements with the Company and that those
agreements have been terminated. The Company had previously amended
its suit against PSC to assert infringement of four Symbol patents,
breach of contract, and fraud. The Company had also sued Data General
Corporation ("Data General"), a manufacturer of portable integrated
scanning terminals incorporating a component manufactured by PSC, for
infringement of the same four patents and five additional patents.
The nine patents asserted against Data General are the same nine
Symbol patents as to which PSC is seeking declaratory relief. 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., and the Bar Code Data Capture Division of BCP Hardware
A/S, respectively. The initial costs of the acquisitions amounted to
$4,080,000 and $3,000,000 respectively. These acquisitions have been
accounted for as purchases and, accordingly the cost of each
acquisition has been allocated to net assets acquired based upon fair
values. The excess of cost over net assets acquired of approximately
$3,700,000 and $2,700,000, respectively, relating to these
acquisitions is being amortized over twenty and ten years,
respectively. Additional acquisition 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.
Results of operations of these subsidiaries have been included in
consolidated operations as of their respective effective acquisition
dates. Pro forma results of operations, assuming these acquisitions
had been completed at the beginning of each period presented, would
not differ materially from the reported results.
In August, 1996, the Company acquired LIS Holdings Ltd., ("LIS")
headquartered in the United Kingdom. LIS is one of Europe's largest
providers of technology-based logistics management systems providing
technology solutions based on its own open software products in
concert with bar code, wireless networking and ruggedized terminals.
Terms of the acquisition included an initial payment of $20,844,000
and subsequent additional payments, that range from zero to a total of
$7,800,000 and are contingent upon the attainment of certain annual
net revenue levels, as defined, during the next three years. This
- -7-<PAGE>
acquisition has been accounted for as a purchase. The purchase price
(including acquisition costs) has been allocated to net assets
acquired based upon fair values. After allocating the purchase price
to net tangible assets, purchased software, which had reached
technological feasibility, was valued using a cash flow model, under
which future cash flows were discounted utilizing an assessment of the
life expectancy of purchased software. The purchased software of
$1,000,000 has been capitalized and is being amortized over three
years. Purchased research and development, which has not reached
technological feasibility and has no alternative future use has been
valued using the same methodology, amounted to $10,741,000 and has
been charged to operations at the acquisition date. In addition, the
Company has charged current operations with accrued merger integration
costs of $1,600,000 representing costs to be incurred associated
primarily with combining the Company's existing operations in the
United Kingdom with newly acquired facilities of LIS. The excess of
cost over net assets acquired of approximately $8,300,000, relating to
the acquisition, is being amortized over seven years.
The following pro forma combined results of operations (unaudited) of
the Company and LIS are presented on the basis that the acquisition
had taken place at the beginning of each of the periods presented and
excludes the effect of the one-time pre-tax charges totaling
$12,341,000 previously discussed:
For the
Nine Months Ended September 30,
1996 1995
Revenue $490,207 $424,389
Net Earnings $ 41,984 $ 32,976
Fully-Diluted Earnings per share $ 1.55 $ 1.22
Fully-Diluted weighted average
shares outstanding 27,146 27,084
In the opinion of management, the pro forma combined results of
operations are not indicative of the actual results that would have
occurred had LIS been under the ownership and operation of the Company
during the periods presented.
- -8-<PAGE>
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations
Net revenue of $170,963,000 and $479,373,000 for the three and nine
months ended September 30, 1996 increased 19.7 percent and 16.4 percent,
respectively, over the comparable prior year periods. The increase for the
three and nine months ended September 30, 1996 is due to increased
worldwide sales of both scanner and hand held computer systems. Foreign
exchange rate fluctuations unfavorably impacted net revenue by
approximately 0.7 percent and 0.6 percent, respectively for the three and
nine months ended September 30, 1996 and favorably impacted net revenue by
approximately 1.2 percent and 2.0 percent for the three and nine months
ended September 30, 1995.
Geographically, North America revenue increased 11.8 percent and 9.6
percent, respectively, for the three and nine months ended September 30,
1996 over the comparable prior year periods. International revenue
increased 32.5 percent and 27.8 percent, respectively, for the three and
nine months ended September 30, 1996 over the comparable prior year
periods. 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 net revenue) of 53.5 percent and
53.1 percent for the three and nine months ended September 30, 1996,
increased from 51.5 percent and 51.1 percent, respectively, 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, an increase in revenue derived from the Company's
indirect sales channel, the impact of new product start up costs and the
reduction in royalty payments from PSC (see Part II, item 1 of this
document).
Amortization of software development costs of $2,802,000 and
$7,798,000 for the three and nine months ended September 30, 1996 increased
from $2,144,000 and $6,663,000 in the comparable prior year periods due to
new product releases.
Engineering expenses for the three and nine months ended September 30,
1996 increased to $12,062,000 and $34,335,000 from $10,742,000 and
$31,400,000, respectively, for the comparable prior year periods. While in
absolute dollars engineering expenses increased 12.3 percent and 9.3
percent, respectively, from the prior year periods, as a percentage of
revenue such expenses decreased to 7.1 percent and 7.2 percent,
respectively, for the three and nine months ended September 30, 1996 from
7.5 percent and 7.6 percent from the comparable prior year periods due to
the proportionately higher increase in net revenue. The increase in
absolute dollars 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 $38,264,000 and
$109,548,000 for the three and nine months ended September 30, 1996
increased from $35,184,000 and $102,179,000, respectively, for the
comparable prior year periods. While in absolute dollars, selling, general
and administrative expenses increased 8.8 percent and 7.2 percent,
respectively, from the prior year periods, as a percentage of revenue such
expenses decreased to 22.4 percent and 22.9 percent for the three and nine
months ended September 30, 1996 from 24.6 percent and 24.8 percent,
respectively, in the comparable prior year periods. The increase in
absolute dollars reflects expenses incurred to support a higher revenue
base and expenses incurred by acquired subsidiaries.
- -9-<PAGE>
During the three and nine months ended September 30, 1996, the Company
recognized a one-time pre-tax charge of $12,341,000 related to write off of
purchased research and development and accrued merger integration costs as
described in Note 7 of the Notes to Condensed Consolidated Financial
Statements. Such acquisition related charges are reported as a separate
line item in the statement of earnings and had an effect of $0.28 per share
for the quarter ended September 30, 1996.
During the three and nine months ended September 30, 1995, the Company
recognized a one-time pretax charge of $2,500,000 for severance expense, in
connection with the resignation of its former president and chief operating
officer.
Amortization of excess of cost over fair value of net assets acquired
of $1,048,000 and $2,582,000 for the three and nine months ended September
30, 1996, increased from $688,000 and $2,067,000 in 1995 due to the
acquisitions described in Note 7 of the Notes to Condensed Consolidated
Financial Statements.
Net interest expense increased to $945,000 and $2,175,000 for the
three and nine months ended September 30, 1996, respectively, from $450,000
and $1,658,000 for the comparable prior year periods. The increase for the
three months ended September 30, 1996 is due to decreased interest income
as a result of the decrease in cash and temporary investments described
below and an increase in interest expense related to short term borrowings
under existing credit lines. The increase for the nine months ended
September 30, 1996, is due to the aforementioned factors coupled with
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 partially offset, in part, by a reduction in
interest expense due to repayments of indebtedness.
The Company's effective tax rate of 38.0 percent for the three months
ended September 30, 1996, increased from 34.7 percent in the prior year
period due to a cumulative adjustment recorded in the three months ended
September 30, 1995, to reduce the estimated effective tax rate from 39
percent to 38 percent. The Company's effective tax rate of 38.0 percent
for the nine months ended September 30, 1996, is consistent with the
comparable prior year period.
Liquidity and Capital Resources
The Company utilizes a number of measures of liquidity including the
following:
September 30, December 31,
1996 1995
Working Capital (in thousands) $217,393 $209,852
Current Ratio (Current Assets
to Current Liabilities) 2.6:1 3.0:1
Long-Term Debt to Capital 13.2% 14.7%
(Long-term debt to long-term
debt plus equity)
Current assets increased by $34,534,000 from December 31, 1995
principally due to an increase in accounts receivable and inventories to
support higher operating levels.
Current liabilities increased $26,993,000 from December 31, 1995
primarily due to increases in accounts payable and accrued expenses, income
taxes payable, deferred revenue and the reclassification of the first annual
installment of the Company's 7.76 percent Series B Senior Notes to current
portion of long-term debt.
- -10-<PAGE>
The aforementioned activity resulted in a working capital increase of
$7,541,000 for the nine months ended September 30, 1996. The Company's
current ratio at September 30, 1996 decreased to 2.6:1 from 3.0:1 at December
31, 1995 primarily due to the decrease in cash flow as a result of the
investments described below.
Property, plant and equipment expenditures for the nine months ended
September 30, 1996 totalled $25,479,000 compared to $24,651,000 for the nine
months ended September 30, 1995. Such expenditures for the period were
financed by existing cash and temporary investments. The Company does not
have any material commitments for capital expenditures.
The Company's long-term debt to capital ratio decreased to 13.2 percent
at September 30, 1996 from 14.7 percent at December 31, 1995 primarily due to
increased equity from the results of operations, payment of the annual
installment of the Company's 7.76 percent Series A Senior Notes and
reclassification of the first annual installment of the Company's 7.76
percent Series B Senior Notes previously described, partially offset by the
reclassification of the obligation of common equity put options from
stockholders equity to a separate account.
The Company has credit agreements with three banks pursuant to which the
banks have agreed to provide lines of credit totalling $60,000,000. As of
September 30, 1996, the Company had no outstanding borrowings under these
lines. These agreements expire between December 31, 1996 and June 30, 1997.
The Company generated cash from operations for the three months ended
September 30, 1996, but experienced overall negative cash flow for the same
period. This is principally due to expenditures for property, plant and
equipment, initial payment for the acquisition of LIS Holding Ltd. and the
purchase of 106,632 shares of common stock for $4,338,000.
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.
- -11-<PAGE>
Part II - Other Information
Item 1. Legal Proceedings:
On July 23, 1996, the Company moved to sever and stay all antitrust and
related claims asserted against the Company by PSC Inc. ("PSC") in the
litigation commenced by PSC in the Western District of New York (the "PSC
Litigation"). PSC opposed the motion. On July 25, 1996, Data General
Corporation ("Data General") moved to stay the Company's patent infringement
claims asserted by the Company against Data General in the litigation
commenced by the Company against Data General and PSC (the "Symbol
Litigation"). The Company opposed the motion.
On August 29, 1996, over PSC's objection but with the court's approval,
the Company voluntarily withdrew its claims against PSC asserted in the
Symbol Litigation; on the same day, the Company asserted its claims against
PSC as counterclaims in the PSC Litigation. The claims against PSC are for
infringement of four Symbol patents, breaches of PSC's two license agreements
with the Company, failure to pay approximately $1 million in royalties for
Q2, 1996 with respect to non-DI-1000 products and fraud in connection with a
Letter of Intent the Company entered into with PSC in 1995.
Data General has consented to the Company supplementing its Complaint
against Data General in the Symbol Litigation. The Company's Supplemental
Complaint asserts infringement by Data General of nine of the Company's
patents (which include the four patents asserted against PSC).
The Company has consented to PSC amending its Complaint against the
Company in the PSC Litigation. PSC's Second Amended Complaint asserts claims
for declaratory judgment of non-infringement and invalidity of the nine
Symbol patents asserted against Data General (four of which the Company has
also asserted against PSC), declaratory judgment that PSC has not breached
its two license agreements with the Company and that those agreements have
been terminated, and for alleged violations of federal and state antitrust
and unfair competition laws (and related tort claims).
On October 9, 1996, the Court granted the Company's motion to sever and
stay PSC's antitrust, unfair competition and related claims asserted in the
PSC Litigation; on the same day, the Court denied Data General's motion to
stay the Company's claims against it asserted in the Symbol Litigation.
The Company moved that an expedited hearing be held at the end of March
1997 on three of the four patents asserted against PSC, and to stay all non-
patent discovery. PSC opposed the Company's motion and made a cross-motion
that no hearing be held until October, 1997 at the earliest and that all
issues be tried in the Spring of 1998 or thereafter. On October 9, 1996, the
Court set a one week trial for July 14, 1997 to construe the claims in all
nine patents asserted by Symbol against Data General and PSC, and stayed
discovery on all non-patent claims.
The Company believes that all claims purportedly asserted against it by
PSC in the PSC Litigation are factually and legally baseless, and wholly
without merit. The Company intends to vigorously defend the PSC Litigation.
- -12-<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 18, 1996 By: /s/ Jerome Swartz
Jerome Swartz, Chairman and
Chief Executive Officer
Dated: October 18, 1996 By: /s/ Thomas G. Amato
Thomas G. Amato
Senior Vice President -
Chief Financial Officer
- -13-
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