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, 2000
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 631-738-2400
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, 2000
Common Stock, 137,245,433 shares
par value $0.01
SYMBOL TECHNOLOGIES, INC. AND SUBSIDIARIES
INDEX TO FORM 10-Q
PAGE
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Condensed Consolidated Balance Sheets at
June 30, 2000 and December 31, 1999 2
Condensed Consolidated Statements of Earnings
Three and Six Months Ended June 30, 2000 and 1999 3
Condensed Consolidated Statements of Cash Flows
Three and Six Months Ended June 30, 2000 and 1999 4 - 5
Notes to Condensed Consolidated Financial
Statements 6 - 12
ITEM 2.
Management's Discussion and Analysis of
Financial Condition and Results of Operations 12 - 17
ITEM 3.
Quantitative and Qualitative Disclosures about
Market Risk 17
PART II. OTHER INFORMATION 18 - 23
SIGNATURES 24
ITEM 7a).
Exhibits 1 - 8
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
SYMBOL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(All amounts in thousands, except stock par value)
June 30, December 31,
ASSETS 2000 1999____
(Unaudited)
CURRENT ASSETS:
Cash and temporary investments $ 39,553 $ 30,128
Accounts receivable, less allowance for doubtful
accounts of $12,198 and $11,924, respectively 298,164 252,140
Inventories 284,741 216,709
Deferred income taxes 50,953 44,794
Prepaid and refundable income taxes 18,078 -
Other current assets 72,666 40,430
TOTAL CURRENT ASSETS 764,155 584,201
PROPERTY, PLANT AND EQUIPMENT, net of accumulated
depreciation and amortization of $138,677 and
$116,930, respectively 225,168 206,116
INTANGIBLE AND OTHER ASSETS, net of accumulated
amortization of $130,652 and $115,149,
respectively 271,678 257,627
$1,261,001 $1,047,944
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $167,309 $188,178
Current portion of long-term debt 18,189 10,046
Income taxes payable - 15,559
Deferred revenue 22,063 18,805
TOTAL CURRENT LIABILITIES 207,561 232,588
LONG-TERM DEBT, less current maturities 150,855 99,623
OTHER LIABILITIES AND DEFERRED REVENUES 72,336 75,273
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
300,000 shares; issued 155,370 shares and
101,788 shares, respectively 1,554 1,018
Retained earnings 546,354 479,806
Other stockholders' equity 282,341 159,636
830,249 640,460
$1,261,001 $1,047,944
See notes to condensed consolidated financial statements
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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,_____
2000 1999 2000 1999
NET REVENUE $341,398 $274,103 $661,409 $533,793
COST OF REVENUE 194,518 152,844 375,928 297,597
AMORTIZATION OF SOFTWARE
DEVELOPMENT COSTS 5,799 4,352 11,328 8,635
GROSS PROFIT 141,081 116,907 274,153 227,561
OPERATING EXPENSES:
Engineering 22,805 19,951 45,070 39,061
Selling, general and
administrative 61,512 52,754 122,819 105,563
Amortization of excess
of cost over fair value
of net assets acquired 1,406 1,271 2,799 2,470
85,723 73,976 170,688 147,094
EARNINGS FROM OPERATIONS 55,358 42,931 103,465 80,467
INTEREST EXPENSE, net (2,156) (1,464) (3,593) (2,668)
EARNINGS BEFORE PROVISION
FOR INCOME TAXES 53,202 41,467 99,872 77,799
PROVISION FOR INCOME TAXES 17,025 13,684 31,959 25,674
NET EARNINGS $ 36,177 $ 27,783 $ 67,913 $ 52,125
EARNINGS PER SHARE:
Basic $0.26 $0.21 $0.50 $0.39
Diluted $0.25 $0.20 $0.46 $0.37
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES OUTSTANDING:
Basic 136,918 132,242 135,857 132,350
Diluted 147,413 140,705 146,591 141,180
See notes to condensed consolidated financial statements
-3-
SYMBOL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(All amounts in thousands)
(Unaudited)
Three Months Ended June 30,
2000 1999____
Cash flows from operating activities:
Net earnings $36,177 $27,783
Adjustments to reconcile net earnings
to net cash from operating activities:
Depreciation and amortization of property,
plant and equipment 11,865 8,881
Other amortization 7,898 6,463
Provision for losses on accounts receivable 593 912
Changes in assets and liabilities
net of effects of acquisitions & divestitures:
Accounts receivable (27,977) (25,012)
Inventories (37,079) 4,041
Other current assets (22,376) (3,214)
Accounts payable and accrued expenses (5,624) 9,283
Other liabilities and deferred revenues (799) 10,640
Net cash (used in)/provided by operating
activities (37,322) 39,777
Cash flows from investing activities:
Purchases of property, plant and
equipment (25,208) (19,719)
Investments in intangible and other assets (20,527) (19,445)
Net cash used in investing activities (45,735) (39,164)
Cash flows from financing activities:
Net proceeds from issuance and repayment
of notes payable and long term debt 96,054 (2,920)
Exercise of stock options and warrants 20,441 5,096
Purchase of treasury shares (13,900) (5,348)
Net cash provided by/(used in) financing
activities 102,595 (3,172)
Effects of exchange rate changes on cash (629) (738)
Net increase/(decrease) in cash and temporary
investments 18,909 (3,297)
Cash and temporary investments, beginning
of period 20,644 27,537
Cash and temporary investments, end of
period $39,553 $24,240
Supplemental disclosures of cash flow
information:
Cash paid during the period for:
Interest $ 1,617 $ 931
Income taxes $ 2,489 $ 1,141
See notes to condensed consolidated financial statements
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SYMBOL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(All amounts in thousands)
(Unaudited)
Six Months Ended June 30,
2000 1999__
Cash flows from operating activities:
Net earnings $67,913 $52,125
Adjustments to reconcile net earnings to
net cash from operating activities:
Depreciation and amortization of property,
plant and equipment 23,468 17,352
Other amortization 15,503 12,793
Provision for losses on accounts receivable 1,168 1,970
Changes in assets and liabilities
net of effects of acquisitions & divestitures:
Accounts receivable (49,678) (12,284)
Inventories (68,521) 16,139
Other current assets (35,539) (6,087)
Accounts payable and accrued expenses (21,157) (26,464)
Other liabilities and deferred revenues (33,315) 19,265
Net cash (used in)/provided by operating
activities (100,158) 74,809
Cash flows from investing activities:
Purchases of property, plant and
equipment (42,889) (37,360)
Investments in intangible and other assets (36,882) (30,105)
Acquisition of subsidiaries (1,598) (6,224)
Net cash used in investing activities (81,369) (73,689)
Cash flows from financing activities:
Net proceeds from issuance and repayment
of notes payable and long term debt 59,375 17,724
Exercise of stock options and warrants 68,405 11,480
Dividends paid (1,365) (1,178)
Purchase of treasury shares (34,437) (18,686)
Reissuance of treasury shares 100,000 -
Net cash provided by
financing activities 191,978 9,340
Effects of exchange rate changes on cash (1,026) (2,504)
Net increase in cash and
temporary investments 9,425 7,956
Cash and temporary investments, beginning
of period 30,128 16,284
Cash and temporary investments, end of
period $39,553 $24,240
Supplemental disclosures of cash flow
information:
Cash paid during the period for:
Interest $ 3,529 $ 2,215
Income taxes $14,926 $ 2,653
See notes to condensed consolidated financial statements
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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, 2000, and the results of its operations and its cash flows
for the three and six months ended June 30, 2000 and 1999, 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, 2000, 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, 1999. Certain reclassifications have
been made to prior consolidated financial statements to conform
with current presentations.
2. Basic earnings per share are based on the weighted average
number of shares of Common Stock outstanding during the period.
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.
On February 14, 2000 the Board of Directors approved a three for
two split of the Company's Common Stock to be effected as a 50
percent stock dividend payable on April 5, 2000 to shareholders
of record on March 13, 2000. In these financial statements, all
earnings per share amounts and the weighted average number of
Common Shares outstanding have been retroactively restated to
reflect the stock split. In addition, the number of Common
Shares issued has been adjusted to reflect the stock split and
an amount equal to the par value of the additional shares issued
has been transferred from additional paid in capital to Common
Stock.
3. Classification of inventories is:
June 30, 2000 December 31, 1999
(Unaudited)
Raw materials $150,048 $102,637
Work-in-process 20,717 15,120
Finished goods 113,976 98,952
$284,741 $216,709
-6-
4. The Company's total comprehensive earnings were as follows:
Three Months Ended Six Months Ended
June 30, June 30,____
(Unaudited) (Unaudited)
2000 1999 2000 1999
Net earnings $ 36,177 $ 27,783 $ 67,913 $ 52,125
Other comprehensive
earnings(losses), net
of tax:
Change in equity due to
foreign currency
translation adjustments (2,845) (1,327) (4,659) (5,121)
Change in equity due to
unrealized gains (losses)
on marketable securities (8,856) - ( 6,070) -
Comprehensive earnings $ 24,476 $ 26,456 $ 57,184 $ 47,004
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 not have a material adverse effect on the
Company's consolidated financial position or results of operations.
On February 8, 2000, the United States District Court in Rochester,
New York issued a decision in the suit between PSC and the Company
commenced in 1996. PSC sought to have the Court declare that two
license agreements between PSC and the Company were terminated and
that PSC was only obligated to pay royalties to the Company on
sales of its hand-held laser scanners in accordance with the much
lower rates contained in an agreement which PSC had acquired from
Spectra-Physics in 1996.
The Court held that PSC's two agreements with the Company have not
been terminated and that PSC was obligated to pay the Company the
higher royalty rates under these agreements rather than the much
lower rates contained in the Spectra agreements.
This decision results in an immediate obligation by PSC to pay the
Company back royalties from October 23, 1998. Notwithstanding the
Court's decision, PSC has not made any payment to the Company under
the PSC agreements. PSC has, however, taken a charge of $6.4
million for the period ending December 31, 1999 which was increased
by an additional $729,000 for the quarter ended March 31, 2000 for
royalties owed under the PSC agreements. In addition, pursuant to
the ruling, PSC is also obligated to pay additional estimated
royalties of approximately $5 million per year on a going forward
basis. The Court also held that the Company had purged the patent
misuse, which the Court had earlier found.
On July 21, 1999, the Company and six other leading members of the
Automatic Identification and Data Capture industry jointly
initiated a litigation against the Lemelson Medical, Educational, &
Research Foundation, Limited Partnership (the "Lemelson
Partnership"). The suit, which is entitled Symbol Technologies,
Inc. et. al. v. Lemelson Medical, Educational & Research
Foundation, Limited Partnerships, was commenced in the U.S.
District Court, District of Nevada in Reno, Nevada.
-7-
In the litigation, the Auto ID companies seek, among other
remedies, a declaration that certain patents, which have been
asserted by the Lemelson Partnership against end users of bar code
equipment, are invalid, unenforceable and not infringed. The
Company has agreed to bear approximately half of the legal and
related expenses associated with the litigation, with the remaining
portion being borne by the other Auto ID companies.
Although no claim is now or has ever been asserted by the Lemelson
Partnership for direct infringement against the Company or, to our
knowledge any other Auto ID company, the Lemelson Partnership has
contacted many of the Auto ID companies' customers demanding a one-
time license fee for certain so-called "bar code" patents
transferred to the Lemelson Partnership by the late Jerome H.
Lemelson. The Company and the other Auto ID companies have
received many requests from their customers asking that they
undertake the defense of these claims using their knowledge of the
technology at issue. Certain of these customers have requested
indemnification against the Lemelson Partnership's claims from the
Company and the other Auto ID companies, individually and/or
collectively with other equipment suppliers. The Company, and we
understand, the other Auto ID companies believe that generally they
have no obligation to indemnify their customers against these
claims and that the patents being asserted by the Lemelson
Partnership against their customers with respect to bar code
equipment are invalid, unenforceable and not infringed. However,
the Company and the other Auto ID companies believe that the
Lemelson claims do concern the Auto ID industry at large and that
it is appropriate for them to act jointly to protect their
customers against what they believe to be baseless claims being
asserted by the Lemelson Partnership.
The Lemelson Partnership filed a motion to dismiss the lawsuit, or
in the alternative, to stay proceedings or to transfer the case to
the U.S. District Court in Arizona where there are pending cases
involving the Lemelson Partnership and other companies in the
semiconductor and electronics industries. The Lemelson
Partnership's motion was primarily based on grounds that there was
no legally justiciable case or controversy between the Auto ID
companies and the Lemelson Partnership because (1) the Lemelson
Partnership's asserted method claims do not apply against the bar
code equipment itself; and (2) the Lemelson Partnership had never
asserted its patent claims against the Auto ID companies.
On March 21, 2000, the U.S. District Court in Nevada denied the
Lemelson Partnership's motion to dismiss, transfer, or stay the
action. It also struck one of the four counts.
-8-
On April 12, 2000, the Lemelson Partnership filed its Answer to the
Complaint in the Symbol et al. v. Lemelson Partnership case. In
the Answer, the Lemelson Partnership included a counterclaim
against the Company and the other plaintiffs seeking a dismissal of
the case. Alternatively, the Lemelson Partnership's counterclaim
seeks a declaration that the Company and the other plaintiffs have
contributed to, or induced infringement of particular method claims
of the patents-in-suit by the plaintiffs' customers. The Company
believes there is no merit to the Lemelson Partnership's
counterclaim.
On May 10, 2000, the Lemelson Partnership filed a second motion
with the Court to stay the Auto ID action pending the resolution of
United States Metals Refining Co. ("US Metals") v. Lemelson
Medical, Education & Research Foundation, LP et al., an action in
Nevada state court wherein the plaintiff is challenging the
Lemelson Partnership's ownership of the patents at issue in the
Auto ID action. The Auto ID companies opposed the motion.
Although the Court has not yet ruled on this motion, the Nevada
state court dismissed the complaint of US Metals on July 5, 2000.
On May 15, 2000, the Auto ID companies filed a motion seeking
permission to file an interlocutory appeal of the Court's decision
to strike the fourth count of the complaint (which alleged that the
Lemelson Partnership's delays in obtaining its patents rendered
them unenforceable for laches). The motion was granted by the
Court on July 14, 2000.
On July 24, 2000, the Auto ID companies filed a motion for partial
summary judgment arguing that almost all of the claims of the
Lemelson Partnership's patents are invalid for lack of written
description.
6. During the quarter ended June 30, 2000, the Company announced its
intention to form a new company with Motorola Inc., Airclic, Inc.,
Connect Things, Inc. (an affiliate of Telefon AB L.M. Ericsson) and
others to support the use of scanners with cellular phones, T.V.
remote controls, and other consumer devices to enhance electronic
commerce. The definitive agreements are currently being negotiated
but have not yet been finalized. The Company currently anticipates
that the agreements will be finalized within the next few months.
The parties currently contemplate investing $500 million in the
aggregate, however the Company's percentage interest in the new
company and its corresponding financial commitment to it have not
yet been finalized.
7. During the quarter ended March 31, 2000 the Company entered into a
multi-year joint development agreement with Intel Corporation to
create advanced wireless networking capabilities and products.
In connection with this agreement the Company sold 2,119,434 (stock
split effected) treasury shares of Common Stock to Intel
Corporation for $100 million.
-9-
8. The Company manages its business on a geographic basis. The
Company's reportable segments have been aggregated into three
geographic reportable business segments, The Americas (which
includes North and South America), EMEA (which includes Europe,
Middle East and Africa) and Asia Pacific (which includes Japan,
the Far East and Australia).
Summarized financial information concerning the Company's
reportable segments is shown in the following table. Sales are
allocated to each of the reportable segments based upon the
location of the use of the products and services. The
"Corporate" column includes corporate related expenses (primarily
various indirect manufacturing operations costs, engineering and
general and administrative expenses) not allocated to reportable
segments. This has the effect of increasing reportable operating
profit for The Americas, EMEA and Asia Pacific.
Identifiable assets are those tangible and intangible assets used
in operations in each geographic area. Corporate assets are
principally temporary investments and the excess of cost over
fair value of net assets acquired.
-10-
<TABLE>
<CAPTION>
The Asia/
Americas EMEA Pacific Corporate Consolidated
(in thousands)
Three Months ended
June 30, 2000:
<S> <C> <C> <C> <C> <C>
Sales to unaffiliated
customers $235,290 $ 84,927 $21,181 $ - $341,398
Transfers between
geographic areas 153,766 - - (153,766) -
Total net revenue $389,056 $ 84,927 $21,181 $(153,766) $341,398
Earnings before
provision for income
taxes $ 80,969 $ 22,178 $ 7,384 $(57,329) $ 53,202
Identifiable assets $987,832 $138,085 $23,448 $111,636 $1,261,001
Three Months ended
June 30, 1999:
Sales to unaffiliated
customers $174,561 $ 84,617 $14,925 $ - $274,103
Transfers between
geographic areas 54,679 - - (54,679) -
Total net revenue $229,240 $ 84,617 $14,925 $(54,679) $274,103
Earnings before
provision for income
taxes $ 65,801 $ 23,311 $ 5,504 $(53,149) $ 41,467
Identifiable assets $633,865 $124,970 $18,568 $110,637 $888,040
Six Months ended
June 30, 2000:
Sales to unaffiliated
customers $450,373 $173,033 $38,003 $ - $661,409
Transfers between
geographic areas 233,127 - - (233,127) -
Total net revenue $683,500 $173,033 $38,003 $(233,127) $661,409
Earnings before
provision for income
taxes $158,481 $ 43,191 $13,313 $(115,113) $ 99,872
Six Months ended
June 30, 1999:
Sales to unaffiliated
customers $335,757 $169,602 $28,434 $ - $533,793
Transfers between
geographic areas 112,045 - - (112,045) -
Total net revenue $447,802 $169,602 $28,434 $(112,045) $533,793
Earnings before
provision for income
taxes $122,826 $ 48,402 $10,349 $(103,778) $ 77,799
</TABLE>
-11-
9. On July 26, 2000, the Company announced the signing of a definitive
merger agreement with Telxon Corporation ("Telxon"). The merger
agreement provides for the exchange of 0.5 shares of the Company's
common stock for each common share of Telxon. Telxon currently has
approximately 17.5 million common shares outstanding and 2.5
million options which the Company will assume. In addition, Telxon
has $107 million in convertible debt which the Company will also
assume if it is not converted. Telxon is a designer and
manufacturer of wireless networks for mobile computing solutions
and information systems. Following completion of the merger, all
aspects of Telxon's business will be fully integrated into the
Company. This transaction will be accounted for as a purchase.
The proposed transaction is subject to Telxon shareholder approval
and regulatory approvals and customary closing conditions. The
closing date for this transaction is expected to take place in the
fourth quarter of 2000.
Safe harbor for forward looking statements under securities litigation
act of 1995; certain cautionary statements
This report contains forward-looking statements based on current
expectations, forecasts and assumptions that involve risks and
uncertainties that could cause actual outcomes and results to differ
materially. These risks and uncertainties include price and product
competition, dependence on new product development, reliance on major
customers, customer demand for the Company's products and services,
control of costs and expenses, international growth, general industry and
market conditions and growth rates and general domestic and international
economic conditions including interest rate and currency exchange rate
fluctuations. For a further list and description of such risks and
uncertainties, see the reports filed by the Company with the Securities
and Exchange Commission. The Company disclaims any intention or
obligation to update or revise any forward-looking statements, whether as
a result of new information, future events or otherwise.
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations
Net revenue of $341,398,000 and $661,409,000 for the three and
six months ended June 30, 2000 increased 24.6 percent and 23.9
percent, respectively, over the comparable prior year periods. The
increase in net revenue for the three and six months ended June 30,
2000 is due to increased equipment sales partially offset by the
decrease in the six months ended June 30, 2000 in revenue associated
with the Company's contract with the United States Postal Service
which was substantially completed during the quarter ended March 31,
1999. Foreign exchange rate fluctuations unfavorably impacted net
revenue by approximately 2.4 percent and 2.1 percent for the three and
-12-
six months ended June 30, 2000, respectively. Foreign exchange rate
fluctuations unfavorably impacted net revenue by approximately 1.0
percent for the three months ended June 30, 1999, but did not have a
material impact on net revenue for the six months ended June 30, 1999.
Geographically, The Americas revenue increased 34.8 percent and
34.1 percent, respectively, for the three and six months ended June
30, 2000 over the comparable prior year periods. EMEA revenue
increased 0.4 percent and 2.0 percent, respectively and Asia Pacific
revenue increased 41.9 percent and 33.7 percent, respectively, over
the comparable prior year periods. The Americas, EMEA and Asia
Pacific revenue represent approximately 69 percent, 25 percent and 6
percent of net revenue, respectively for the three months ended June
30, 2000 and 68 percent, 26 percent and 6 percent of net revenue,
respectively for the six months ended June 30, 2000.
Cost of revenue (as a percentage of net revenue) of 57.0 percent
and 56.8 percent for the three and six months ended June 30, 2000
increased from 55.8 percent for the comparable prior year periods due
to a shift in product mix in the fastest growing proportion of the
Company's business to lower margin products versus the historical mix
of products coupled with the continued unfavorable impact of foreign
exchange rate fluctuations on net revenue as well as increased costs
resulting from shortages and delivery delays for the limited
quantities of components and subassemblies procured from suppliers
partially offset by increased royalty income.
Amortization of software development costs of $5,799,000 and
$11,328,000 for the three and six months ended June 30, 2000 increased
from $4,352,000 and $8,635,000 in the comparable prior year periods
due to new product releases.
Engineering expenses for the three and six months ended June 30,
2000 increased to $22,805,000 and $45,070,000 from $19,951,000 and
$39,061,000, respectively, for the comparable prior year periods. In
absolute dollars engineering expenses increased 14.3 percent and 15.4
percent, respectively, from the prior year periods. As a percentage
of net revenue such expenses decreased to 6.7 percent and 6.8 percent
for the three and six months ended June 30, 2000 compared to 7.3
percent for the comparable prior year periods. 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 as well as a decrease in the amount
of capitalized costs incurred for internally developed product
software where economic and technological feasibility has been
established.
Selling, general and administrative expenses of $61,512,000 and
$122,819,000 for the three and six months ended June 30, 2000
increased from $52,754,000 and $105,563,000, respectively, for the
comparable prior year periods. While in absolute dollars, selling,
general and administrative expenses increased 16.6 percent and 16.3
percent, respectively, from the prior year periods, as a percentage
-13-
of net revenue such expenses decreased to 18.0 percent and 18.6
percent for the three and six months ended June 30, 2000 from 19.2
percent and 19.8 percent, respectively, in the comparable prior year
periods due to ongoing cost containment programs. The increase in
absolute dollars reflects expenses incurred to support a higher
revenue base.
Amortization of excess of cost over fair value of net assets
acquired of $1,406,000 and $2,799,000 for the three and six months
ended June 30, 2000, increased from $1,271,000 and $2,470,000,
respectively for the comparable prior year periods due to the
acquisition of a subsidiary subsequent to March 31, 1999, as well as
additional contingent acquisition related payments which increased
the value of excess cost over net assets acquired.
Net interest expense increased to $2,156,000 and $3,593,000 for
the three and six months ended June 30, 2000 from $1,464,000 and
$2,668,000 for the comparable prior year periods primarily due to
increased borrowings under the Company's revolving credit facility,
partially offset by a reduction in interest expense due to annual
mandatory repayments of indebtedness.
The Company's effective tax rate of 32.0 percent for the three
and six months ended June 30, 2000 decreased from 33.0 percent in the
comparable prior year periods primarily due to an increase in federal
tax credits and exempt earnings of the foreign sales corporation.
Liquidity and Capital Resources
The Company utilizes a number of measures of liquidity including
the following:
June 30, December 31,
2000 1999_____
Working Capital (in thousands) $556,594 $351,613
Current Ratio (Current Assets
to Current Liabilities) 3.7:1 2.5:1
Long-Term Debt to Capital 15.4% 13.5%
(Long-term debt to long-term
debt plus equity)
Current assets increased by $179,954,000 from December 31, 1999
principally due to an increase in accounts receivable as a result of
the increase in net revenue, inventories and other current assets due
to increased operating levels and prepaid and refundable income taxes
resulting from the tax benefits of stock option exercises.
Current liabilities decreased $25,027,000 from December 31, 1999
primarily due to decreases in accounts payable and accrued expenses
and income taxes payable.
-14-
The aforementioned activity resulted in a working capital increase
of $204,981,000 for the six months ended June 30, 2000. The Company's
current ratio at June 30, 2000 increased to 3.7:1 compared with 2.5:1 as
of December 31, 1999.
Property, plant and equipment expenditures for the six months ended
June 30, 2000 totaled $42,889,000 compared to $37,360,000 for the six
months ended June 30, 1999. During the fourth quarter of 1999 the
Company entered into a construction commitment to expand capacity by
constructing a 140,000 square foot manufacturing and distribution
facility in Reynosa, Mexico. The addition of this facility is part of
the Company's global logistics strategy of supply chain management
through vertical manufacturing integration. The project cost, including
land and building, is estimated at approximately $10,000,000 and is
anticipated to be completed in the third quarter of 2000. Total
construction in process to date related to this project is $7,000,000 as
of June 30, 2000. The Company also continues to make capital
investments in major systems and networks conversions but does not have
any other material commitments for capital expenditures.
The Company's long-term debt to capital ratio increased to 15.4
percent at June 30, 2000 from 13.5 percent at December 31, 1999
primarily due to increased borrowings under the Company's revolving
credit facility and issuance of foreign-denominated promissory notes,
which exceeded the payment of the annual installments of the Company's
long-term indebtedness, treasury stock repurchases, and the change in
equity due to foreign currency translation adjustments and unrealized
losses on marketable securities. Partially offsetting this are the
benefits realized by stock option exercises and the Company's sale in
the first quarter of 2000 of 2,119,434 (stock split effected) treasury
shares of Common Stock to Intel Corporation for $100 million in
connection with a multi-year joint development agreement and increased
equity from results of profitable operations.
The Company maintains a revolving credit facility with a syndicate
of U.S. and International banks of $350 million for which the terms
extend to 2004. As of June 30, 2000 the Company had outstanding
borrowings of $120,000,000 under this facility as compared to
$57,000,000 outstanding as of December 31, 1999.
The Company used $37,322,000 in operating activities for the three
months ended June 30, 2000, but experienced an overall increase in cash
of $18,909,000 for the period. The positive cash flow provided by the
issuance and repayments of notes payable and long term debt and cash
flow generated from and tax benefits associated with the exercise of
stock options was offset by cash used in operations, investing
activities and treasury stock repurchases of 228,416 (stock split
effected) shares of the Company's Common Stock.
-15-
During the quarter ended June 30, 2000, the Company announced its
intention to form a new company with Motorola Inc., Airclic, Inc.,
Connect Things, Inc. (an affiliate of Telefon AB L.M. Ericsson) and
others to support the use of scanners with cellular phones, T.V. remote
controls, and other consumer devices to enhance electronic commerce. The
definitive agreements are currently being negotiated but have not yet
been finalized. The Company currently anticipates that the agreements
will be finalized within the next few months. The parties currently
contemplate investing $500 million in the aggregate, however the
Company's percentage interest in the new company and its corresponding
financial commitment to it have not yet been finalized.
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.
In December 1999, the Securities and Exchange Commission (SEC)
issued Staff Accounting Bulletin No. 101 ("SAB 101"), "Revenue
Recognition in Financial Statements". SAB 101 summarizes certain of
the SEC's views in applying generally accepted accounting principles to
revenue recognition in financial statements. The Company is evaluating
the impact of SAB 101 currently and expects to adopt the provisions
during the quarter ended September 30, 2000.
January 2000 Update
Through the second quarter of the year 2000, the Company's
operations around the world are fully functioning and have not
experienced any significant issues associated with the Year 2000 problem
(as described below). The Company has not experienced any significant
Year 2000-related issues worldwide that would affect its ability to
manufacture, ship, sell or service its products. The Company will
continue to monitor its operations.
The Company's total cost of its Year 2000 activities through 1999
were approximately $2,800,000 which includes approximately $2,300,000
of capitalized fixed assets.
Year 2000 Readiness Overview
The Year 2000 issue is the result of computer programs being
written using two digits rather than four to define the applicable year.
Computer systems may recognize a date using "00" as the year 1900 rather
than the year 2000. This could have resulted in product and/or system
failures or other computer errors causing disruption of the Company's
operations.
The Company's Year 2000 initiatives focused on the following areas
of risk: a) the failure or disruption of systems used by the Company to
run its business operations and facilities, b) the failure or disruption
of systems used by the Company's suppliers and vendors, c) warranty or
other claims by customers due to failure or malfunctioning of the
Company's products.
-16-
The Company established a steering committee including senior
executives to address Year 2000 issues which report periodically to the
Board of Directors. The Company's plan to address Year 2000 issues
resulted in the formation of three main teams: (a) internal systems
team, (b) external vendors/suppliers team, and (c) product readiness
team.
The Company assessed the extent to which the Company's interface
systems and sources of supply were vulnerable to third party hardware
and software suppliers' failure to remediate their Year 2000 issues.
The Company determined that it would not have to modify or replace
significant portions of its product offerings so that such products
would function properly with respect to dates in the Year 2000.
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
Refer to ITEM 7, in the Company's annual report on Form 10-K for the
year ended December 31, 1999 for required disclosure.
-17-
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings
The Company is currently involved in matters of litigation
arising from the normal course of business including matters
described below. 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.
On April 1, 1996, PSC, Inc. (PSC) commenced suit against the
company in Federal District court for the Western District of New
York, asserting 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. PSC served a Third
Amended Complaint, which asserted essentially the same antitrust
and unfair competition claims against the Company, and also
sought a declaratory judgment of alleged non-infringement and
invalidity of nine of the Company's patents, and a declaratory
judgment that PSC had not breached its two agreements with the
Company and that those agreements had been terminated. The
Company also sued Data General Corporation (Data General), a
manufacturer of portable integrated scanning terminals which
incorporate scan engines from PSC, for infringement of the same
four patents and five additional patents. The nine patents
asserted against Data General were the same nine of the Company's
patents as to which PSC was seeking declaratory relief.
On October 9, 1996, the Court granted the Company's motion,
to sever and stay PSC's antitrust, unfair competition and related
claims. On the same day, the Court denied Data General's motion
to stay the Company's claims against it.
On April 3, 1998, the Court, with the consent of the
parties, lifted the stay previously in effect with the respect to
the contract issues in the litigation.
On September 12, 1998, PSC filed a motion for partial
summary judgment alleging that the Company was guilty of patent
"misuse" since PSC is obligated under a 1991 Agreement with the
Company to pay royalties to the Company on sales of scan engines
to certain PSC customers who also pay royalties to the Company
when they incorporate these scan engines into their integrated
-18-
scanning terminals. In this motion, PSC claimed that this
practice should have barred the Company from collecting past
royalties which the Company alleged were owed by PSC under the
1991 Agreement. Since July 1996, PSC has not paid the Company
royalties under the 1991 Agreement and has instead been paying
royalties under the agreement it obtained in connection with the
acquisition of Spectra-Physics Scanning Systems in 1996.
On October 22, 1998, the Court issued a decision and order
granting PSC's motion, which decision was subsequently
reconfirmed by the Court on April 30, 1999.
On November 16, 1999, both parties filed motions for partial
summary judgment. The Company's motion contended that (a) its
two agreements with PSC had not been terminated; (b) PSC is
obligated to pay royalties to the Company pursuant to these
agreements in those circumstances in which the agreements overlap
with an agreement the Company had entered into with Spectra-
Physics, and; (c) the Company had purged the misuse found by the
Court. PSC's motion claimed that (a) its agreements with the
Company had been terminated; (b) if the agreements had not been
terminated, PSC was entitled to operate under the more favorable
terms of the Spectra Agreement, and; (c) Symbol had not purged
the misuse found by the Court.
On February 8,2000, the Court granted the Company's motion in
its entirety and issued a decision that PSC's two license
agreements with the Company have not been terminated and that PSC
was obligated to pay the Company the higher royalty rates under
those agreements rather than the much lower royalty rates
contained in the Spectra Agreements. This decision results in an
immediate obligation by PSC to pay back royalties from October
23, 1998. The Court also held that on October 23, 1998 the
Company had purged the patent misuse previously found by the
Court.
On February 23, 2000, PSC moved for reconsideration of that
portion of the Court's decision which held that PSC must pay
royalties to the Company under the higher rates contained in
PSC's Agreements with the Company. PSC moved in the alternative
for permission to appeal the decision immediately to the United
States Court of Appeals for the Federal Circuit.
Notwithstanding the Court's decision, PSC has made royalty
payments to the Company only in accordance with the lower royalty
rates contained in the Spectra Agreement, rather than at the
higher royalty rates set forth in the PSC Agreements as ordered
by the Court. PSC has since publicly reported that the past-due
royalties to the Company amounted to $6.4 million for the period
ending December 31, 1999, which amount has been increased by an
additional $729,000 for the quarter ended March 31, 2000.
-19-
The Company has filed a motion seeking to have PSC held in
contempt for violating the February 8 decision, as well as a
Consent Judgment entered into by the parties in 1991, and an
Order requiring PSC to pay royalties and prepare royalty reports
in accordance with the PSC Agreements. PSC has moved the Court
to stay the effect of its February 8 decision, and to dispense
with any requirement that PSC post security in lieu of paying the
higher royalties to the Company.
All of these motions have been fully briefed and the parties
are now awaiting a decision by the Court. The Company believes
that PSC's motions are without merit.
On July 21, 1999, the Company and six other leading members
of the Automatic Identification and Data Capture industry jointly
initiated litigation against the Lemelson Medical, Educational, &
Research Foundation, Limited Partnership (the "Lemelson
Partnership"). The suit, which is entitled Symbol Technologies,
Inc. et. al. v. Lemelson Medical, Educational & Research
Foundation, Limited Partnerships, was commenced in the U.S.
District Court, District of Nevada in Reno, Nevada. In the
litigation, the Auto ID companies seek, among other remedies, a
declaration that certain patents, which have been asserted by the
Lemelson Partnership against end users of bar code equipment, are
invalid, unenforceable and not infringed. The other six Auto ID
companies who are plaintiffs in the lawsuit are Accu-Sort
Systems, Inc., Intermec Technologies Corporation, a wholly-owned
subsidiary of UNOVA, Inc., Metrologic Instruments, Inc., PSC
Inc., Teklogix Corporation, a wholly-owned U.S. subsidiary of
Teklogix International, Inc. and Zebra Technologies Corporation.
The Company has agreed to bear approximately half of the legal
and related expenses associated with the litigation, with the
remaining portion being borne by the other Auto ID companies.
Although no claim for direct infringement is now or has ever
been asserted by the Lemelson Partnership against the Company or,
to our knowledge any other Auto ID company, the Lemelson
Partnership has contacted many of the Auto ID companies'
customers demanding a one-time license fee for certain so-called
"bar code" patents transferred to the Lemelson Partnership by the
late Jerome H. Lemelson. The Company and the other Auto ID
companies have received many requests from their customers asking
that they undertake the defense of these claims using their
knowledge of the technology at issue. Certain of these customers
have requested indemnification against the Lemelson Partnership's
claims from the Company and the other Auto ID companies,
individually and/or collectively with other equipment suppliers.
The Company, and we understand, the other Auto ID companies
believe that generally they have no obligation to indemnify their
customers against these claims and that the patents being
-20-
asserted by the Lemelson Partnership against their customers with
respect to bar code equipment are invalid, unenforceable and not
infringed. However, the Company and the other Auto ID companies
believe that the Lemelson claims do concern the Auto ID industry
at large and that it is appropriate for them to act jointly to
protect their customers against what they believe to be baseless
claims being asserted by the Lemelson Partnership.
The Lemelson Partnership has filed a motion to dismiss the
lawsuit, or in the alternative, to stay proceedings or to
transfer the case to the U.S. District Court in Arizona where
there are pending cases involving the Lemelson Partnership and
other companies in the semiconductor and electronics industries.
The Lemelson Partnership's motion was primarily based on grounds
that there is no legally justiciable case or controversy between
the Auto ID companies and the Lemelson Partnership because (1)
the Lemelson Partnership's asserted method claims do not apply
against the bar code equipment itself; and (2) the Lemelson
Partnership has never asserted its patent claims against the Auto
ID companies.
On March 21, 2000, the U.S. District Court in Nevada denied
the Lemelson Partnership's motion to dismiss, transfer or stay
the Auto ID action. It also struck one of the four counts of the
complaint and ordered the action consolidated with an action
against the Lemelson Partnership brought by Cognex Corp. pending
in the same Court.
On March 31, 2000, the Lemelson Partnership's moved (1) to
have a new magistrate appointed and (2) to transfer the case from
Reno, Nevada to the unofficial southern division of Nevada in Las
Vegas. The motion was denied by the Court on April 10, 2000.
On April 12, 2000, the Lemelson Partnership filed its Answer
to the Complaint in the Symbol et al. v. Lemelson Partnership
case. In the Answer, the Lemelson Partnership included a
counterclaim against the Company and the other plaintiffs seeking
a dismissal of the case. Alternatively, the Lemelson
Partnership's counterclaim seeks a declaration that the Company
and the other plaintiffs have contributed to, or induced
infringement of particular method claims of the patents-in-suit
by the plaintiffs' customers. The Company believes there is no
merit to the Lemelson Partnership's counterclaim.
On May 15, 2000, the Auto ID companies filed a motion
seeking permission to file an interlocutory appeal of the Court's
decision to strike the fourth count of the complaint (which
alleged that the Lemelson Partnership's delays in obtaining its
patents rendered them unenforceable for laches). The motion was
granted by the Court on July 14, 2000.
-21-
On May 10,2000, the Lemelson Partnership filed a second
motion with the Court to stay the Auto ID action pending the
resolution of United States Metals Refining Co. ("US Metals") v.
Lemelson Medical, Education & Research Foundation, LP et al., an
action in Nevada state court where in the plantiff is challenging
the Lemelson Partnership's ownership of the patents at issue in
the Auto ID action. The Auto ID companies opposed the motion.
Although the Court has not yet ruled on this motion, the Nevada
state court dismissed the complaint of US Metals on July 5, 2000.
On July 24, 2000, the Auto ID companies filed a motion for
partial summary judgment arguing that almost all of the claims of
the Lemelson Partnership's patents are invalid for lack of
written description.
ITEM 4. Submission of Matters to a Vote of Security Holders
The Company's Annual Meeting of Shareholders was held on
May 8, 2000. At the meeting ten directors nominated by the
Company were elected. The votes cast on a pre-stock split basis
for each nominee were as follows:
For Against
George Bugliarello 75,572,877 534,856
Lowell C. Freiberg 75,560,291 547,442
Leo A. Guthart 75,560,890 546,843
Harvey P. Mallement 75,593,189 514,544
Raymond R. Martino 75,602,052 505,681
Tomo Razmilovic 75,599,630 508,103
James Simons 75,552,489 555,244
Saul P. Steinberg 75,554,324 553,409
Jerome Swartz 62,821,314 13,286,419
Charles B. Wang 55,612,746 20,494,987
The shareholders also approved proposals to (i) approve the 2000
Directors' Stock Option Plan and (ii) ratify the appointment of
Deloitte & Touche LLP auditors for fiscal 2000. The number of
shares voted for, voted against or abstained from voting upon,
each proposal was as follows:
For Against Abstain_
Proposal to approve the 2000
Directors' Stock Option Plan 55,277,178 20,645,361 185,194
Proposal to ratify the appointment
of Deloitte & Touche LLP auditors
for Fiscal 2000 75,961,722 78,119 67,892
ITEM 5. Other Events
On July 26, 2000, the Company announced the signing of a
definitive merger agreement with Telxon Corporation ("Telxon").
The merger agreement provides for the exchange of 0.5 shares of
-22-
the Company's common stock for each common share of Telxon.
Telxon currently has approximately 17.5 million common shares
outstanding and 2.5 million options which the Company will
assume. In addition, Telxon has $107 million in convertible debt
which the Company will also assume if it is not converted.
Telxon is a designer and manufacturer of wireless networks for
mobile computing solutions and information systems. Following
completion of the merger, all aspects of Telxon's business will
be fully integrated into the Company. This transaction will be
accounted for as a purchase. The proposed transaction is subject
to Telxon shareholder approval and regulatory approvals and
customary closing conditions. The closing date for this
transaction is expected to take place in the fourth quarter of
2000.
ITEM 7. Financial Statements, Pro Forma Financial Information
and Exhibits
a) Exhibits:
99.1 Joint Press Release of the Company and Seller, issued on
July 26, 2000.
-23-
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 31, 2000 By: /s/ Tomo Razmilovic________
Tomo Razmilovic, President and
Chief Executive Officer
Dated: July 31, 2000 By: /s/ Kenneth V. Jaeggi
Kenneth V. Jaeggi
Senior Vice President -
Chief Financial Officer
-24-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________________________________
QUARTERLY REPORT
ON
FORM 10-Q
FOR QUARTER ENDED
JUNE 30, 2000
__________________________________
SYMBOL TECHNOLOGIES, INC.
EXHIBITS
-1-
7a). Exhibits
Exhibit
99.1 Joint Press Release of the Company and
Telxon Corporation, issued on July 26, 2000.
-2-
Exhibit 99.1
-3-
SYMBOL TO ACQUIRE TELXON IN A STOCK-FOR-STOCK TRANSACTION
Will Create A Global Leader In Wireless Handheld Computing
Across Many Industries
HOLTSVILLE, NY and CINCINNATI, OH, July 26, 2000 - Symbol
Technologies, Inc. (NYSE: SBL) and Telxon Corporation (NASDAQ:
TLXN) today announced that Symbol will acquire Telxon in a stock-
for-stock merger that will create a global leader in wireless
handheld computing systems across many industries and vertical
applications.
Under the terms of a definitive merger agreement
unanimously approved by both Boards of Directors, Telxon
shareholders will receive 0.50 of a Symbol share for each
Telxon share. The transaction has a total equity value of
approximately $465 million based on Symbol's closing share
price yesterday of $49.88. Telxon also has $107 million in
convertible debt. The acquisition is expected to be accounted
for as a purchase and to be tax-free to Telxon shareholders.
The acquisition is expected to result in substantial initial
operating efficiencies of at least $75 million annually from
eliminating duplicate functions, rationalizing manufacturing
facilities and sales offices and realizing purchasing, sales,
manufacturing and other efficiencies. All aspects of Telxon's
business will be fully integrated into Symbol. Before one-time
transaction costs, the acquisition is expected to be
approximately neutral to Symbol's earnings per share in 2001 and
significantly accretive thereafter as the substantial synergies
are realized. The transaction is expected to be completed in the
fourth quarter of 2000 and is subject to regulatory clearance,
approval by Telxon's shareholders and customary closing
conditions.
-4-
Telxon had revenues of $363 million in the last 12 months and
holds 4.1 million shares of Cisco Systems (NASDAQ: CSCO) with a
current pre-tax value of approximately $283 million. Upon
completion of the acquisition, Symbol will have estimated pro
forma 2000 revenues of approximately $1.8 billion. Symbol
shareholders will own over 90% of the combined company.
"Under John Paxton's leadership, Telxon has made great
progress in stabilizing its operations," said Tomo Razmilovic,
Symbol's President and CEO. "We are very excited about the
future prospects of the combined company, its complementary
technology, product lines, customer bases and network of
partnerships. The transaction is financially as well as
strategically compelling for Symbol, based on the substantial
synergies we believe that we can achieve and the significant
value of the Cisco shares owned by Telxon."
"Acquiring Telxon is a unique opportunity to combine our two
companies' resources to develop and bring to market mobile
computing systems and wireless data networks that enhance
productivity and reduce costs across a wide range of industries
and vertical applications," said Jerome Swartz, Symbol's
Chairman. "As the Information Technology and Communications
industries rapidly converge, Symbol and Telxon's complementary
strengths will allow us to do more for our combined customers
around the world than either company could have done separately."
John W. Paxton. Sr., Telxon's Chairman and CEO said, "This
strategic combination makes sense for both companies, and I
firmly believe it is the right step at the right time for
Telxon's customers and shareholders. Our customers will benefit
from greater resources and economies of scale, and our
shareholders will benefit from a significant current premium and
the opportunity to participate in the upside of this compelling
combination."
-5-
Symbol's current management team will lead the combined
company and Paxton will assist in the integration.
Added Razmilovic, "We will keep a sharp focus on customers as
we fully and completely integrate Telxon into Symbol. We are
committed to seamless convergence of existing Symbol and Telxon
products, systems and sales forces and to providing unparalleled
customer service and support. We plan no interruptions in any
scheduled or committed rollouts from either company, and we
intend to support all existing Symbol and Telxon products and
services. We intend to honor all existing agreements with
customers, VARs, distributors, OEMs and other strategic
partners."
Bear, Stearns & Co. Inc. is serving as financial advisor to
Symbol and Prudential Securities is serving as financial advisor
to Telxon.
Telxon Corporation is a leading global designer and
manufacturer of wireless networks for mobile computing solutions
and information systems. The company integrates advanced mobile
computing and wireless data communication technology with a wide
array of peripherals, application-specific software and global
customer services for its customers in more than 60 countries
around the world. Telxon's global web site address is:
www.telxon.com.
Symbol Technologies, Inc., winner of this year's National
Medal of Technology, is a global leader in mobile data transaction
systems, providing innovative customer solutions based on wireless
local area networking for data and voice, application-specific
mobile computing and bar-code data capture. Symbol's Wireless
Information Appliances connect the physical world of people on the
move, packages, paper and shipping pallets, to information systems
-6-
and the Internet. Today, some 10 million Symbol bar-code
scanners, mobile computers and wireless LANs are utilized
worldwide in markets ranging from retailing to transportation and
distribution logistics, manufacturing, parcel and postal delivery,
government, healthcare and education. Symbol's systems and
products are used to increase productivity from the factory floor
to the retail store, to the enterprise and out to the home.
Information about Symbol is available at www.symbol.com.
A conference call has been set up for 11:00 am EDT today to
discuss the transaction and Symbol and Telxon's financial results,
also released this morning. The dial in number is 785-832-1077,
Pass Code Symbol Technologies Q2. A replay has been set up and
will be available beginning 3:00 pm EDT on Wednesday, July 26th
through Tuesday, August 1st on a 24-hour non-stop basis. The dial
in number to access this replay is: 719-457-0820 Pass Code:
529921.
Except for historical information, all other information in this
presentation consists of forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995.
These forward-looking statements are subject to risks and
uncertainties which could cause actual results to differ
materially from those projected, anticipated or implied. The
following factors, among others, could cause actual results to
differ materially from those described in the forward-looking
statements: the risk that the business and technology of Telxon
will not be integrated successfully; the failure to realize
planned synergies on a timely basis; costs related to the
proposed transaction; failure of Telxon's stockholders to approve
the proposed transaction; and delays in obtaining regulatory
approval of the proposed transaction. Neither Symbol or Telxon
undertakes any obligation to publicly update or revise any
forward-looking statements.
The proposed transaction will be submitted to Telxon's
stockholders for their consideration. Such stockholders should
read the proxy statement/prospectus concerning the transaction
that will be filed with the Securities and Exchange Commission
and mailed to stockholders. The proxy statement/prospectus will
contain important information that Telxon's stockholders should
consider before making any decision regarding the proposed
transaction. Such stockholders will be able to obtain the proxy
-7-
statement/prospectus, as well as other filings containing
information about Symbol and Telxon, without charge, at the SEC's
internet site (http://www.sec.gov). Copies of the proxy
statement/prospectus and the SEC filings that will be
incorporated by reference in the proxy statement/prospectus will
be obtainable, without charge, from Symbol and Telxon.
Symbol and Telxon and certain other persons named below may be
deemed to be participants in the solicitation of proxies of
Telxon's stockholders to approve the transaction. The
participants in this solicitation may include the directors and
executive officers of Telxon and executive officers of Symbol as
listed in Symbol's proxy statement for its 2000 annual meeting
which may be obtained without charge, at the SEC's internet site
(http://www.sec.gov).
As of the date of this communication, none of the foregoing
participants individually beneficially owns in excess of 5% of
Symbol' common shares or 5% of Telxon's common shares. Except as
disclosed above, to the knowledge of Symbol and Telxon, none of
the directors or executive officers of Symbol or Telxon has any
interest, direct or indirect, by security holdings or otherwise
in Symbol or Telxon.
-8-
