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, 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 June 30, 1996
Common Stock, 25,924,011 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, 1996 and December 31, 1995 2
Condensed Consolidated Statements of Earnings
Three and Six Months Ended June 30, 1996 and 1995 3
Condensed Consolidated Statements of Cash Flows
Three and Six Months Ended June 30, 1996 and 1995 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 1996 1995 (1)
(Unaudited)
CURRENT ASSETS:
Cash and temporary investments $ 52,579 $ 63,650
Accounts receivable, less allowance for doubtful
accounts of $9,158 and $7,816, respectively 136,753 118,175
Inventories, net 125,844 95,267
Deferred income taxes 25,473 24,488
Prepaid expenses and other current assets 17,276 14,975
TOTAL CURRENT ASSETS 357,925 316,555
PROPERTY, PLANT AND EQUIPMENT, net of accumulated
depreciation and amortization of $61,159 and
$50,716, respectively 95,286 88,264
INTANGIBLE AND OTHER ASSETS, net of accumulated
amortization of $49,596 and $42,903,
respectively 140,552 139,449
$593,763 $544,268
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 98,920 $ 81,948
Current portion of long-term debt 10,481 6,910
Income taxes payable 16,977 11,909
Deferred revenue 8,812 5,936
TOTAL CURRENT LIABILITIES 135,190 106,703
LONG-TERM DEBT, less current maturities 53,705 60,829
OTHER LIABILITIES AND DEFERRED REVENUE 22,209 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
100,000 shares; issued 27,766 shares and
27,229 shares, respectively 277 272
Retained earnings 183,454 156,075
Other stockholders' equity 198,928 196,507
382,659 352,854
$593,763 $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 Six Months Ended
June 30, June 30,
1996 1995 1996 1995
NET REVENUE $159,328 $137,629 $308,410 $268,887
COST OF REVENUE 84,617 70,119 162,933 136,859
AMORTIZATION OF SOFTWARE
DEVELOPMENT COSTS 2,493 2,286 4,996 4,519
GROSS PROFIT 72,218 65,224 140,481 127,509
OPERATING EXPENSES:
Engineering 11,517 10,386 22,273 20,658
Selling, general and
administrative 36,118 34,288 71,284 66,995
Amortization of excess
of cost over fair value
of net assets acquired 730 688 1,534 1,379
48,365 45,362 95,091 89,032
EARNINGS FROM OPERATIONS 23,853 19,862 45,390 38,477
INTEREST EXPENSE, net (804) (453) (1,230) (1,208)
EARNINGS BEFORE PROVISION
FOR INCOME TAXES 23,049 19,409 44,160 37,269
PROVISION FOR INCOME TAXES 8,759 7,628 16,781 14,736
NET EARNINGS $ 14,290 $11,781 $ 27,379 $ 22,533
EARNINGS PER SHARE:
Primary $0.53 $0.43 $1.02 $0.84
Fully-diluted $0.53 $0.43 $1.01 $0.83
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES OUTSTANDING:
Primary 27,140 27,145 26,952 26,985
Fully-diluted 27,162 27,261 27,087 27,202
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,
1996 1995
Cash flows from operating activities:
Net earnings $14,290 $11,781
Adjustments to reconcile net earnings
to net cash from operating activities:
Depreciation and amortization of property,
plant and equipment 5,765 4,106
Other amortization 3,180 3,139
Provision for losses on accounts receivable 476 687
Changes in assets and liabilities
net of effects of acquisition:
Accounts receivable (7,105) 6,414
Inventories (21,846) (4,396)
Prepaid expenses and other current assets (2,949) (414)
Intangible and other assets (5,211) (424)
Accounts payable and accrued expenses 16,960 170
Other liabilities and deferred revenue 2,003 375
Net cash provided by operating activities 5,563 21,438
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 (8,430) (15,800)
Acquisition of business (3,000) -
Net cash used in investing activities (11,430) (14,800)
Cash flows from financing activities:
Proceeds from issuance of long-term debt - 8,558
Principal repayments of long term debt (774) (175)
Exercise of stock options and warrants 7,605 5,308
Purchase of Treasury shares (1,687) -
Net cash provided by financing activities 5,144 13,691
Effects of exchange rate changes on cash (158) 433
Net (decrease) increase in cash and
temporary investments (881) 20,762
Cash and temporary investments, beginning
of period 53,460 34,330
Cash and temporary investments, end of
period $52,579 $55,092
Supplemental disclosures of cash flow
information:
Cash paid during the period for:
Interest $ 1,299 $ 1,206
Income taxes 926 4,474
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,
1996 1995
Cash flows from operating activities:
Net earnings $27,379 $22,533
Adjustments to reconcile net earnings to
net cash from operating activities:
Depreciation and amortization of property,
plant and equipment 11,127 8,003
Other amortization 6,693 6,654
Provision for losses on accounts receivable 872 1,024
Changes in assets and liabilities
net of effects of acquisition:
Accounts receivable (19,285) (4,382)
Sale of lease receivables 12,495 -
Inventories (28,883) (1,296)
Prepaid expenses and other current assets (7,673) (2,589)
Intangible and other assets (9,507) (4,328)
Accounts payable and accrued expenses 14,573 3,860
Other liabilities and deferred revenue 6,271 730
Net cash provided by operating
activities 14,062 30,209
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 (18,129) (19,172)
Acquisition of businesses (7,080) -
Net cash used in investing activities (25,209) (18,172)
Cash flows from financing activities:
Proceeds from issuance of long-term debt - 8,558
Principal repayments of long term debt (3,553) (2,965)
Exercise of stock options and warrants 12,185 6,294
Purchase of Treasury shares (8,152) (995)
Net cash provided by financing activities 480 10,892
Effects of exchange rate changes on cash (404) 774
Net (decrease) increase in cash and temporary
investments (11,071) 23,703
Cash and temporary investments, beginning
of period 63,650 31,389
Cash and temporary investments, end of
period $52,579 $55,092
Supplemental disclosures of cash flow
information:
Cash paid during the period for:
Interest $ 2,429 $ 2,357
Income taxes 4,082 7,279
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, 1996, and the results of
its operations and its cash flows for the three and six months ended
June 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 six
months ended June 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.
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 was recorded as a reduction of prepaid and other
current assets, and intangibles and other assets.
4. Classification of inventories is:
June 30, 1996 December 31, 1995
(Unaudited)
Raw materials $ 64,380 $ 47,701
Work-in-process 15,667 9,181
Finished goods 45,797 38,385
$125,844 $ 95,267
5. 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
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.
- -6-<PAGE>
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. An amended complaint was served on May 29,
1996 adding additional antitrust and related claims, as well as claims
seeking a declaratory judgement that PSC has not breached its license
agreements with the Company. 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. Responses to
the complaints are due on July 26, 1996.
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.
6. 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. 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. 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. 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 initial cost of the Denmark acquisition was paid in April,
1996. Proforma operating results for the year ended December 31,
1995, and quarter ended June 30, 1996 assuming both acquisitions
occurred at the beginning of each of these periods are not materially
different than reported operating results.
- -7-<PAGE>
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations
Net revenue of $159,328,000 and $308,410,000 for the three and six
months ended June 30, 1996 increased 15.8 percent and 14.7 percent,
respectively, over the comparable prior year periods. The increase for the
three and six months ended June 30, 1996 is due to increased worldwide
sales of scanner and hand held computer systems. Foreign exchange rate
fluctuations unfavorably impacted net revenue by approximately 1.2 percent
and 1.0 percent, respectively for the three and six months ended June 30,
1996 and favorably impacted net revenue by approximately 2.5 percent for
the three and six months ended June 30, 1995.
Geographically, North America revenue increased 12.6 percent and 8.5
percent, respectively, for the three and six months ended June 30, 1996
over the comparable prior year periods. International revenue increased
21.0 percent and 25.2 percent, respectively, for the three and six months
ended June 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 53.1 percent and
52.8 percent for the three and six months ended June 30, 1996, increased
from 50.9 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, an increase in revenue
derived from the Company's indirect sales channel, and the impact of new
product start up costs.
Amortization of software development costs of $2,493,000 and
$4,996,000 for the three and six months ended June 30, 1996 increased from
$2,286,000 and $4,519,000 in the comparable prior year periods due to new
product releases.
Engineering expenses for the three and six months ended June 30, 1996
increased to $11,517,000 and $22,273,000 from $10,386,000 and $20,658,000,
respectively, for the comparable prior year periods. While in absolute
dollars engineering expenses increased 10.9 percent and 7.8 percent,
respectively, from the prior year periods, as a percentage of revenue such
expenses decreased to 7.2 percent for the three and six months ended June
30, 1996 from 7.5 percent and 7.7 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 $36,118,000 and
$71,284,000 for the three and six months ended June 30, 1996 increased from
$34,288,000 and $66,995,000, respectively, for the comparable prior year
periods. While in absolute dollars, selling, general and administrative
expenses increased 5.3 percent and 6.4 percent, respectively, from the
prior year periods, as a percentage of revenue such expenses decreased to
22.7 percent and 23.1 percent for the three and six months ended June 30,
1996 from 24.9 percent in the comparable prior year periods. The increase
in absolute dollars reflects expenses incurred to support a higher revenue
base.
- -8-<PAGE>
Amortization of excess of cost over fair value of net assets acquired
of $730,000 and $1,534,000 for the three and six months ended June 30,
1996, increased from $688,000 and $1,379,000 in 1995 due to the
acquisitions described in Note 6 of the Notes to Condensed Consolidation
Financial Statements.
Net interest expense increased to $804,000 and $1,230,000 for the
three and six months ended June 30, 1996 from $453,000 and $1,208,000 for
the comparable prior year periods due to decreased interest income as a
result of the decrease in cash and temporary investments and 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 by a reduction in interest expense due to
repayments of indebtedness.
The Company's effective tax rate of 38.0 percent for the three and six
months ended June 30, 1996, respectively, decreased from 39.3 percent and
39.5 percent for the three and six months ended June 30, 1995 primarily due
to an increase in 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:
June 30, December 31,
1996 1995
Working Capital (in thousands) $222,735 $209,852
Current Ratio (Current Assets
to Current Liabilities) 2.6:1 3.0:1
Long-Term Debt to Capital 12.3% 14.7%
(Long-term debt to long-term
debt plus equity)
Current assets increased by $41,370,000 from December 31, 1995
principally due to an increase in accounts receivable and inventories to
support higher operating levels, prepaid expenses and other current assets.
Current liabilities increased $28,487,000 from December 31, 1995
primarily due to an increases in accounts payable and accrued expenses,
income taxes payable 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.
The aforementioned activity resulted in a working capital increase of
$12,883,000 for the six months ended June 30, 1996. The Company's current
ratio at June 30, 1996 decreased to 2.6:1 from 3.0:1 at December 31, 1995
primarily due to the higher percentage increase in current liabilities
described above.
Property, plant and equipment expenditures for the six months ended June
30, 1996 totalled $18,129,000 compared to $19,172,000 for the six months
ended June 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.
- -9-<PAGE>
The Company's long-term debt to capital ratio decreased to 12.3 percent
at June 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.
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, 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
June 30, 1996, but experienced negative cash flow for the same period
principally due to expenditures for property, plant and equipment, payment of
the acquisition of the Bar Code Data Capture Division of BCP Hardware A/S and
the purchase of common stock.
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 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. Both PSC and the Company have served discovery requests in the
Symbol Litigation. 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. An amended complaint was served on May 29, 1996,
adding additional antitrust and related claims, as well as claims seeking a
declaratory judgment that PSC has not breached its license agreements with
the Company. 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.
The Symbol Litigation has been transferred to the Western District of
New York on motion of PSC. Responses to complaints in both litigations are
due on July 26, 1996.
Item 4. Submission of Matters to a Vote of Security Holders
The Company's Annual Meeting of Shareholders was held on April 29, 1996.
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 23,085,621 393,178
Harvey P. Mallement 23,083,191 395,608
Frederic P. Heiman 23,082,671 396,128
Raymond R. Martino 23,084,176 394,623
Saul P. Steinberg 23,263,513 215,286
Lowell Freiberg 23,268,846 209,953
George Bugliarello 23,263,301 215,498
Charles Wang 23,273,896 204,903
Tomo Razmilovic 23,088,007 390,792
The shareholders voted in favor of a proposal to amend the Corporation's
Certificate of Incorporation to increase the number of shares of authorized
common stock to 100,000,000 by a vote of 18,517,435 in favor, 4,894,558
opposed and 66,806 abstaining.
Shareholders also ratified the appointment of Deloitte & Touche as the
Company's auditors for fiscal 1996 by a vote of 23,411,932 in favor, 39,274
opposed and 27,593 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 19, 1996 By: /s/ Jerome Swartz
Jerome Swartz, Chairman and
Chief Executive Officer
Dated: July 19, 1996 By: /s/ Thomas G. Amato
Thomas G. Amato
Senior Vice President -
Chief Financial Officer
- -12-
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<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 52,579,000
<SECURITIES> 0
<RECEIVABLES> 145,911,000
<ALLOWANCES> (9,158,000)
<INVENTORY> 125,844,000
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<BONDS> 53,705,000
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0
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