UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-24172
Metrologic Instruments, Inc.
(Exact name of registrant as specified in its charter)
New Jersey 22-1866172
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Coles Road at Route 42, Blackwood, New Jersey 08012
(Address of principal executive offices) (Zip Code)
(609) 228-8100
(Registrant's telephone number, including area code)
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 .
As of August 5, 1996 there were 5,252,208 shares of Common Stock, $.01 par
value per share, outstanding.
<PAGE>
METROLOGIC INSTRUMENTS, INC.
INDEX
Page
No.
Part I - Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -
June 30, 1996 and December 31, 1995 3
Condensed Consolidated Statements of Operations -
Three and Six Months Ended June 30, 1996 and 1995 4
Condensed Consolidated Statements of Cash Flows -
Six Months Ended June 30, 1996 and 1995 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
Part II - Other Information
Item 1. Legal Proceedings 13
Item 2. Changes in Securities 13
Item 3. Defaults upon Senior Securities 13
Item 4. Submission of Matters to a Vote of Security
Holders 14
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 15
Exhibit Index
Statement Regarding Computation of Per Share
Earnings.
Financial Data Schedule
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
METROLOGIC INSTRUMENTS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands except share data)
June 30, December 31,
1996 1995
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 9,884 $12,065
Accounts receivable, net of allowance of
$549 and $224 in 1996 and 1995, respectively 7,039 6,924
Inventory 5,703 3,456
Deferred income taxes 1,562 1,314
Other current assets 232 506
Total current assets 24,420 24,265
Property, plant and equipment, net 4,388 3,880
Patents and trademarks, net of amortization of
$233 and $356 in 1996 and 1995, respectively 976 878
Holographic technology, net of amortization of
$27 and $0 in 1996 and 1995, respectively 778 468
Security deposits and other assets 589 459
Deferred income taxes 1,371 1,451
Total assets $32,522 $31,401
Liabilities and stockholders' equity
Current liabilities:
Line of credit $ 164 $ 175
Current portion of notes payable 289 390
Accounts payable 2,574 2,301
Accrued expenses 6,278 6,067
Accrued legal settlement 610 599
Total current liabilities 9,915 9,532
Notes payable, net of current portion 705 817
Due to former officer, net of current portion - 84
Deferred income taxes 33 42
Accrued legal settlement 2,813 3,000
Stockholders' equity
Preferred stock, $.01 par value:
authorized shares - 500,000
issued shares - none - -
Common stock, $.01 par value
authorized shares - 10,000,000
issued and outstanding shares - 5,252,208
in 1996 and 5,249,150 in 1995 53 52
Additional paid-in capital 14,844 14,807
Retained earnings 3,796 2,621
Deferred compensation (25) (37)
Translation adjustment 388 483
Total stockholders' equity 19,056 17,926
Total liabilities and stockholders' equity $32,522 $31,401
See accompanying notes.
<PAGE>
METROLOGIC INSTRUMENTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(amounts in thousands except share and per share data)
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
Unaudited Unaudited
Sales $11,757 $10,156 $22,099 $20,653
Cost of sales 7,154 6,059 13,425 11,585
Gross profit 4,603 4,097 8,674 9,068
Selling, general and administrative
expenses 2,730 2,528 5,289 5,109
Research and development
expenses 774 784 1,571 1,448
Operating income 1,099 785 1,814 2,511
Other income (expense)
Interest expense (27) (53) (56) (60)
Interest income 98 86 227 223
Other income (expense) (65) 21 (78) 26
6 54 93 189
Income before provision for
income taxes 1,105 839 1,907 2,700
Provision for income taxes 420 327 732 1,081
Net income $ 685 $ 512 $ 1,175 $ 1,619
Net income per share $ 0.13 $ 0.10 $ 0.22 $ 0.31
Weighted average number of
shares used in computing net
income per share 5,267,840 5,262,168 5,264,657 5,306,084
See accompanying notes.
<PAGE>
METROLOGIC INSTRUMENTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands)
Six Months Ended
June 30,
1996 1995
(Unaudited)
Net cash used in operating activities $ (481) $ (1,195)
Investing activities:
Purchase of Holoscan, Inc. and holographic
technology, net of cash acquired (521) -
Purchase of equipment and building improvements (832) (655)
Expenditures on patents and trademarks (132) (142)
Net cash used in investing activities (1,485) (797)
Financing activities:
Net proceeds from employee stock purchase plan 29 162
Payments of amounts due to former officer (100) (100)
Principal payments of notes payable (134) -
Capital lease payments (79) (51)
Net cash (used in) provided by financial activities (284) 11
Effect of exchange rate changes on cash 69 160
Net decrease in cash (2,181) (1,821)
Cash at beginning of period 12,065 11,925
Cash at end of period $ 9,884 $ 10,104
Supplemental disclosure of cash flow information:
Cash paid for interest $ 43 $ 22
Cash paid for income taxes $ 1,442 $ 1,177
Capital lease obligations incurred $ - $ 531
See accompanying notes.
<PAGE>
METROLOGIC INSTRUMENTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE AND SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(Amount in thousands except share and per share data)
(Unaudited)
1. Business
Metrologic Instruments, Inc. and its wholly owned subsidiaries (the
"Company") design, manufacture and market bar code scanning equipment
incorporating laser and holographic technology. These scanners rapidly,
accurately and efficiently read and decode all widely used bar codes and
provide an efficient means for data capture and automated data entry into
computerized systems.
2. Accounting Policies
Interim Financial Information
The accompanying unaudited Condensed Consolidated Financial Statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information and the instructions to Form
10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all
of the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
all adjustments (consisting solely of normal recurring adjustments)
necessary for a fair presentation of the Condensed Consolidated Financial
Statements have been included. The results of the interim periods are not
necessarily indicative of the results to be obtained for a fiscal year. The
Condensed Consolidated Financial Statements and these Notes should be read
in conjunction with Management's Discussion and Analysis of Financial
Condition and Results of Operations contained in this Form 10-Q and the
Company's Annual Report on Form 10-K for the year ended December 31, 1995,
including the Consolidated Financial Statements and the Notes to
Consolidated Financial Statements for the year ended December 31, 1995.
3. Inventory
Inventory consists of the following:
June 30, December 31,
1996 1995
Raw materials $2,459 $1,698
Work-in-process 2,331 1,311
Finished goods 913 447
$5,703 $3,456
4. Net Income Per Share
Net income per share is calculated based on net income and the
weighted average common stock outstanding and common stock equivalents
during the three and six months ended June 30, 1996 and 1995.
5. Commitments and Contingencies
The Company files domestic and foreign patent applications to protect
its technological position and new product development. From time to time,
the Company receives legal challenges to the validity of its patents or
allegations that its products infringe the patents of others.
The Company is a party to a legal action alleging that the Company's
prior version of one of its scanners infringes a patent held by another
company. The Company has filed a counterclaim for a declaratory judgment
asserting that the plaintiff's patent is invalid and management believes
this action will not result in any material damages.
Since 1995, the Company and a competitor have been negotiating an
extensive cross-licensing of patents for which the Company and the
competitor may pay royalties to each other under certain circumstances.
There can be no assurance that these negotiations will result in the
execution of a definitive agreement by the Company and the competitor, or
that patent litigation between the Company and the competitor will not
result if the current negotiations are unsuccessful.
6. Incentive Plan
The Incentive Committee of the Board of Directors granted incentive
and non-qualified stock options as well as restricted stock awards pursuant
to the Company's 1994 Incentive Plan to certain eligible employees and a
Board member. As of June 30, 1996, an aggregate of 11,722 of said incentive
stock options had been exercised by employees of the Company, and an
aggregate of 4,000 restricted stock grants vested and were issued to senior
executive officers. No incentive stock options have been exercised by
executive officers or Board members.
Pursuant to the Company's 1994 Incentive Plan, the Incentive Committee
of the Board of Directors granted, on June 7, 1996, 251,020 incentive and
non-qualified stock options to certain eligible employees. As of June 30,
1996, an aggregate of 557,194 incentive and non-qualified stock options
remain outstanding of which an aggregate of 165,862 incentive and
non-qualified stock options were exercisable.
7. Employee Stock Purchase Plan
The Company's Board of Directors has implemented an Employee Stock
Purchase Plan whereby eligible employees have the opportunity to acquire
the Company's common stock through payroll deductions, quarterly, at 90% of
the lower of (a) the fair market value of the stock on the first day of the
applicable quarterly offering period or (b) the fair market value of the
stock on the last day of the applicable quarterly offering period.
As of June 30, 1996, an aggregate of 11,488 shares had been purchased
by employees of the Company, including shares purchased by senior executive
officers, through the Employee Stock Purchase Plan.
8. Notes Payable
The Company has an unsecured revolving demand loan with a bank which
allows for maximum borrowings of $5,000. The demand loan, which expires on
June 30, 1997, bears interest at the bank's prime rate, which was 8.25% at
June 30, 1996. The demand loan agreement requires the Company to comply
with certain financial covenants. As of July 31, 1996, no amounts were
outstanding under the revolving demand loan.
On January 31, 1996, the Company paid a note payable which related to
a patent litigation settlement entered into in December 1993. The note
represented the excess of the minimum obligation of the related patent
litigation settlement for the year ended December 31, 1993. (See Item 2.
"Management's Discussion and Analysis of Financial Condition and Results of
Operations.")
9. Acquisition of Holoscan, Inc. including Holographic Technology
The Company exercised its option to purchase all of the outstanding
shares of common stock of Holoscan, Inc. on March 1, 1996 for $521, net of
cash acquired. The Company purchased a 51% interest in Holoscan, Inc. in
1995 in the form of non-voting, convertible preferred stock for $360.
Concurrent with the exercise of the above option, the Company converted the
non-voting, convertible preferred stock of Holoscan to an equal number of
shares of Holoscan, Inc. common stock and now owns 100% of Holoscan, Inc.
The Company has consolidated the assets and liabilities and results of
operations and cash flows of Holoscan, Inc. for the period March 1, 1996 to
June 30, 1996. The amount by which the consideration paid by Metrologic for
the acquisition exceeded Holoscan's identifiable assets less liabilities
was recorded as holographic technology which is being amortized over ten
years. For the period March 1, 1996 through June 30, 1996, $27 was recorded
as amortization of the holographic technology.
Pursuant to an option agreement entered into by the Company, Holoscan,
Inc. and the holders of all of Holoscan, Inc.'s outstanding common stock
and options and warrants to purchase common stock (collectively, the
"Holders"), the Company agreed to pay to each Holder, through 1998, a
payment based on the Company's sales of certain holographic laser scanners.
Such payments in future periods will be considered additions to the
holographic technology account and amortized over the remainder of the ten
year period commencing March 1, 1996.
(The remainder of this page is intentionally left blank.)
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
The following discussion of the Company's results of operations and
liquidity and capital resources should be read in conjunction with the
unaudited Condensed Consolidated Financial Statements of the Company and
the related Notes thereto appearing elsewhere in this Form 10-Q and the
Consolidated Financial Statements and the Notes to the Consolidated
Financial Statements for the year ended December 31, 1995 appearing in the
Company's Form 10-K for the year ended December 31, 1995 and the Form 10-Q
for the three month period ended March 31, 1996. The Condensed Consolidated
Financial Statements for the three and six month periods ended June 30,
1996 and 1995 are unaudited.
The Company derives its revenues from sales of its scanners through
distributors, value-added resellers ("VARs") and original equipment
manufacturers ("OEMs") and directly to end-users in the United States and
in over 80 foreign countries. Since 1991, the Company has experienced
growth in revenues with a significant percentage of its revenues derived
from international sales.
Results of Operations
Three Months Ended June 30, 1996 Compared with Three Months Ended June 30,
1995
Sales increased $1,601,000 or 15.8%, to $11,757,000 in the three
months ended June 30, 1996 from $10,156,000 in the three months ended June
30, 1995, principally as a result of an increase in market acceptance of
the Company's hand-held and industrial scanners. Sales increased $1,415,000
in the three months ended June 30, 1996 from $10,342,000 in the three
months ended March 31, 1996 primarily due to the Company's increased
marketing and sales efforts. International sales accounted for $7,480,000
(63.6% of total sales) in the three months ended June 30, 1996 and
$5,933,000 (58.4% of total sales) in the three months ended June 30, 1995.
The increase in the percentage of international sales to total sales in the
three months ended June 30, 1996 compared with the same period a year ago
is primarily due to the Company's increase in sales to customers in Europe.
One customer accounted for approximately 7.8% of total sales and
another accounted for approximately 5.9% of total sales for the three
months ended June 30, 1996. During the same period no other customer
accounted for more than 5% of the Company's revenues.
Cost of sales increased from $6,059,000 in the three months ended June
30, 1995 to $7,154,000 in the three months ended June 30, 1996, an 18.1%
increase, and cost of sales as a percentage of sales increased to 60.8%
from 59.7% for the same period a year ago. Both the increase in the cost of
sales and the increase in cost of sales as a percentage of sales were
largely due to lower average unit selling prices on certain products
compared with the same period a year ago.
Selling, general and administrative expenses increased to $2,730,000
in the three months ended June 30, 1996 from $2,528,000 in the three months
ended June 30, 1995, an 8.0% increase, and decreased as a percentage of
sales from 24.9% to 23.2%. The increase was due primarily to increased
expenditures on marketing and sales costs, including increased salaries
resulting from the hiring of additional marketing personnel.
<PAGE>
Research and development expenses decreased from $784,000 in the three
months ended June 30, 1995 to $774,000 in the three months ended June 30,
1996, and decreased as a percentage of sales from 7.7% to 6.6% for the
three months ended June 30, 1995 and 1996, respectively. These decreases
were primarily due to the increased expenditures associated with the
development of holographic technology during the three months ended June
30, 1995, which were substantially completed as of March 31, 1996.
Operating income increased 40.0% to $1,099,000 in the three months
ended June 30, 1996 from $785,000 in the three months ended June 30, 1995,
and operating income as a percentage of sales increased to 9.3% in the
three months ended June 30, 1996 from 7.7% in the three months ended June
30, 1995.
Other income decreased to $6,000 in the three months ended June 30,
1996 from $54,000 in the three months ended June 30, 1995. Other income
consisted principally of interest income in the amount of $98,000 and
$86,000 for the three months ended June 30, 1996 and 1995, respectively.
For the three months ended June 30, 1996, interest income was offset by
foreign currency transaction losses of $65,000 which were incurred by the
Company's German subsidiary, Metrologic Instruments GmbH. The foreign
currency losses resulted from the strengthening of the United States dollar
compared to the German deutsche mark in the three months ended June 30,
1996.
Net income increased 33.8% to $685,000 in the three months ended June
30, 1996 from $512,000 in the three months ended June 30, 1995. Net income
reflects a 38.0% effective income tax rate in the second quarter of 1996
compared with 39.0% in the second quarter of 1995. The reduced effective
income tax rate resulted primarily from increased tax benefits arising from
the Company's foreign sales corporation, in accordance with the United
States Internal Revenue Code, which effectively permits the Company to
reduce its U.S. federal income tax liability resulting from sales to
foreign customers.
Six Months Ended June 30, 1996 Compared with the Six Months Ended June 30, 1995.
Sales increased $1,446,000 or 7.0%, to $22,099,000 in the first six
months of 1996 from $20,653,000 in the first six months of 1995 principally
as a result of an increase in market acceptance of the Company's hand-held
and industrial scanners, and increased marketing and sales efforts. The
sales volume increase in the first six months of 1996 was mitigated by
increased competition in the point-of-sale ("POS")/retail laser bar code
industry. International sales accounted for $13,385,000 (60.6% of total
sales) for the first six months of 1996 and $11,903,000 (57.6% of total
sales) for the first six months of 1995.
One customer accounted for approximately 7.1% of total sales in the
first six months of 1996. Another customer accounted for approximately 6.6%
of total sales in the first six months of 1996. No other customer accounted
for more than 5.0% of total sales for the first six months of 1996.
Cost of sales increased to $13,425,000 in the first six months of 1996
from $11,585,000 in the first six months of 1995, a 15.9% increase. Cost of
sales as a percentage of sales increased to 60.7% from 56.1%. These
increases were due to decreased average selling prices of certain of the
Company's products compared with the same period a year ago.
<PAGE>
Selling, general, and administrative expenses increased to $5,289,000
in the first six months of 1996 from $5,109,000 in the first six months of
1995, and decreased as a percentage of sales from 24.7% to 23.9%. The
increase was primarily due to increased marketing and sales costs,
including increased salaries resulting from the hiring of additional
marketing personnel.
Research and development expenses increased 8.5% to $1,571,000 in the
first six months of 1996 from $1,448,000 in the first six months of 1995
and increased as a percentage of sales from 7.0% to 7.1% for the six months
ended June 30, 1995 and 1996, respectively. This increase was due primarily
to expenditures related to the development of holographic technology and
products, and new POS laser scanners.
Operating income decreased 27.8% to $1,814,000 in the first six months
of 1996 from $2,511,000 in the first six months of 1995. Operating income
as a percentage of sales decreased to 8.2% in the first six months of 1996
from 12.2% in the first six months of 1995. These decreases were
principally due to the increase in selling, general and administrative and
research and development expenses and reductions in the average unit
selling prices of certain of the Company's products.
Other income decreased to $93,000 in the first six months of 1996 from
$189,000 in the first six months of 1995. Other income consisted
principally of interest income in the amount of $227,000 and $223,000 for
the first six months of 1996 and 1995, respectively. For the six months
ended June 30, 1996, interest income was offset by foreign currency
transaction losses of $78,000 incurred by the Company's German subsidiary
due to the strengthening of the United States dollar compared to the German
deutsche mark during the period.
Net income decreased to $1,175,000 in the first six months of 1996
from $1,619,000 in the first six months of 1995.
Inflation and Seasonality
Inflation and seasonality have not had a material impact on the
Company's results of operations. There can be no assurance, however, that
the Company's sales in future years will not be impacted by fluctuations in
seasonal demand from European customers in its third quarter or from
reduced production days in its fourth quarter.
Liquidity and Capital Resources
As of June 30, 1996 and December 31, 1995, the Company's working
capital was approximately $14,505,000 and $14,733,000, respectively.
During the six months ended June 30, 1996, the Company satisfied its
cash requirements of net cash used in operating activities, which decreased
to $481,000 in the six months ended June 30, 1996 from $1,195,000 in the
six months ended June 30, 1995, from its cash and cash equivalent funds.
The cash used in operating activities in the six months ended June 30, 1996
primarily resulted from an increase in inventory which was financed by an
increase in accounts payable and accrued expenses.
The Company's primary uses of cash have been for operating expenses,
research and development expenses, capital expenditures, investments in
patents and trademarks and the acquisition of Holoscan, Inc. including
holographic technology.
<PAGE>
Pursuant to the settlement of a patent lawsuit in December 1993, the
Company is required to pay amounts based on gross sales commencing in 1993
for a 12 year period with an aggregate maximum of $7,500,000 and an
aggregate minimum of $4,450,000, which was charged to net income in 1993.
Annual minimum payment obligations are $375,000. In addition to such
minimum obligations for 1996, the Company incurred approximately $255,000
pursuant to the settlement agreement during the six months ended June 30,
1996. On January 31, 1996, the Company paid a note payable relating to the
patent litigation settlement which represented the excess of the minimum
obligation for the year ended December 31, 1993.
The Company's total deferred income tax asset (current and long-term)
of approximately $2,933,000 is based upon cumulative temporary differences
as of June 30, 1996, which provide approximately $6,819,000 of future
income tax deductions against future taxable income. The temporary
differences arise primarily from recording the patent lawsuit settlement as
an expense for accounting purposes prior to receiving the related tax
benefit.
The Company is a party to an Amended and Restated Loan Agreement with
Midlantic Bank, N.A. for an unsecured $5,000,000 revolving loan facility
expiring on June 30, 1997. The revolving loan facility requires the Company
to comply with certain financial covenants and other restrictions. As of
July 31, 1996, the Company was in compliance with the financial covenants
and no amounts were outstanding under this revolving loan facility.
The Company also has a 500,000 deutsche mark (approximately $328,000
as of June 30, 1996) unsecured revolving credit facility with Bayerische
Hypotheken-Und Wechsel-Bank in the name of its German subsidiary,
Metrologic Instruments GmbH. As of July 31, 1996, approximately $319,000
($5,000 at June 30, 1996) was outstanding under this revolving credit
facility.
The Company's current plans for additional capital expenditures in
1996 include manufacturing automation equipment, office equipment and a
newly integrated management information system, in the aggregate amount of
approximately $800,000, and leasehold improvements and other costs relating
to the Company's office and manufacturing facility expansion in the amount
of approximately $300,000.
The Company may be subject to losses as a result of foreign currency
transactions. Accordingly, the Company's liquidity could be adversely
affected by changes in foreign currency exchange rates.
On March 1, 1996, the Company exercised its option under its March
1995 Option Agreement (as defined herein) with Holoscan, Inc. of San Jose,
California and the holders of all of Holoscan's common stock and options
and warrants to purchase common stock to acquire the outstanding equity
securities of Holoscan, and made payments aggregating approximately
$521,000. (See also Part II, Item 5. "Other Information.")
The Company believes that its current cash and cash equivalents
balances, along with cash generated from operations and the available
revolving credit facilities with banks, will be adequate to fund the
Company's operations through at least the next twelve months.
<PAGE>
The discussion in this Form 10-Q includes forward-looking statements
based on current management expectations. Factors which would cause the
results to differ from these expectations include the following: general
economic conditions; competitive factors and pricing pressures;
technological changes in the scanner industry; availability of patent
protection for the Company's holographic scanners and other products; and
market acceptance of the Company's new products.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
On July 7, 1992, PSC, Inc. ("PSC"), a competitor of the Company, filed
a lawsuit in the United States District Court for the Western District of
New York (the "Court") against the Company, alleging that the Company's
prior version of its MS900 series of hand-held scanners infringed a PSC
patent. The complaint seeks an injunction and damages in an unstated
amount. The Company filed a counterclaim for a declaratory judgment
asserting that the PSC patent is invalid and that the Company's prior
version of its MS900 series of hand-held scanners did not infringe such
patent. On October 13, 1995, the Court interpreted the claims of the PSC
patent in a patent infringement lawsuit filed by PSC against another
competitor. Based upon that interpretation, it is the Company's belief that
the MS900 series scanners do not infringe the subject patent. Accordingly,
on October 20, 1995, Metrologic filed a motion seeking summary judgment of
non-infringement. In response, the Court stayed this action, including the
motion for summary judgment, pending the outcome of the appeal filed by PSC
in the other patent infringement lawsuit. The Company redesigned its MS900
series of hand-held scanners in 1993 in an effort to avoid any interruption
of sales which would result from the possibility of the entry of an
injunction and to minimize any damage award that PSC might receive. While
the Company believes that PSC will not prevail on this infringement claim
with respect to the redesigned MS900 series of hand-held scanners, there
can be no assurance that PSC will not prevail. While the amount of any
potential damage award is presently unknown, the Company believes that an
adverse decision in this action would not have a material adverse effect on
the Company. However, patent damage awards are unpredictable and there can
be no certainty with respect to the size of any such award.
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults upon Senior Securities
Not applicable.
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders
The Company's Annual Meeting of Stockholders was held on May 23, 1996.
At such meeting, the following matters were voted upon by the stockholders,
receiving the number of affirmative, negative and withheld votes, as well
as abstentions and broker non-votes, set forth below each matter.
(1) Election of Janet H. Knowles to the Company's Board of Directors
to serve as a Class III director to serve until the 1999 Annual Meeting of
Stockholders or until her successor is elected and qualified.
4,005,753 Affirmative 0 Negative
950 Withheld 0 Abstentions and
broker non-votes
(2) Ratification of the appointment of Ernst & Young LLP as the
Company's independent auditors for the fiscal year ending December 31,
1996.
4,006,036 Affirmative 0 Negative
0 Withheld 667 Abstentions and
broker non-votes
The directors of the Company whose terms continue after the Annual
Meeting of Stockholders referenced above are Lester Hill, C. Harry Knowles,
and Stanton L. Meltzer.
Item 5. Other Information
In March 1995, the Company, Holoscan and the Holders entered into a
stock purchase agreement (the "Stock Purchase Agreement") and an option
agreement (the "Option Agreement"). Pursuant to the terms of the Stock
Purchase Agreement, the Company purchased for $360,000 shares of Holoscan's
convertible preferred stock. The Company elected to convert these shares of
convertible preferred stock into shares of common stock on March 1, 1996,
resulting in the Company's ownership of 51% of the outstanding Holoscan
common stock. Pursuant to the Option Agreement, the Holders granted the
Company an option to acquire from each Holder the equity securities of
Holoscan owned by such Holder. In addition, the Company agreed to pay to
each Holder, through 1998, a payment based on the Company's sales of
certain holographic laser scanners. In the absence of such sales, the
Holders may obtain an exclusive license for certain technology related to
the holographic laser scanner, in consideration for which the Holders will
pay a royalty to the Company. On March 1, 1996, the Company exercised its
option under the Option Agreement and acquired the remaining 49% of the
outstanding Holoscan common stock and other outstanding equity securities
of Holoscan from the Holders. As a result, Holoscan is a wholly-owned
subsidiary of the Company. (See also Part I, Item 2. - "Management's
Discussion and Analysis of Financial Condition and Results of Operations").
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit Number
11 Statement Regarding Computation of Per
Share Earnings.
27 Financial Data Schedule
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter for
which this report on Form 10-Q is being filed.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed by the undersigned
thereunto duly authorized.
METROLOGIC INSTRUMENTS, INC.
Date: August 12, 1996 By:/s/ C. Harry Knowles
C. Harry Knowles
Chairman of the Board,
President and Chief Executive Officer
Date: August 12, 1996 By:/s/Thomas E. Mills IV
Thomas E. Mills IV
Vice President Finance &
Chief Financial Officer
(Principal Financial Officer)
<PAGE>
EXHIBIT INDEX
Exhibit No.
11 Statement Regarding Computation of Per Share Earnings
27 Financial Data Schedule
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
(Unaudited) (Unaudited)
Primary
Average shares outstanding 5,251 5,238 5,250 5,231
Net effect of dilutive stock options-
based on the treasury stock method
using average market price 12 16 10 66
Net effect of dilutive restricted
stock grants 5 8 5 9
Total 5,268 5,262 5,265 5,306
Net income $ 685 $ 512 $1,175 $1,619
Per share earnings $0.13 $0.10 $ 0.22 $ 0.31
Fully Diluted
Average shares outstanding 5,251 5,238 5,250 5,231
Net effect of dilutive stock options-
based on the treasury stock method
using average market price 12 16 22 66
Net effect of dilutive restricted
stock grants 5 8 5 9
Total 5,268 5,262 5,277 5,306
Net income $ 685 $ 512 $1,175 $1,619
Per share earnings $0.13 $0.10 $ 0.22 $ 0.31
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM UNAUDITED FINANCIAL STATEMENTS FOR
THE SIX MONTHS ENDED JUNE 30, 1996 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<PERIOD-START> JAN-01-1996
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1996
<CASH> 9,884,000
<SECURITIES> 0
<RECEIVABLES> 7,588,000
<ALLOWANCES> 549,000
<INVENTORY> 5,703,000
<CURRENT-ASSETS> 24,420,000
<PP&E> 4,388,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 32,522,000
<CURRENT-LIABILITIES> 9,915,000
<BONDS> 0
0
0
<COMMON> 53,000
<OTHER-SE> 19,003,000
<TOTAL-LIABILITY-AND-EQUITY> 32,522,000
<SALES> 22,099,000
<TOTAL-REVENUES> 22,099,000
<CGS> 13,425,000
<TOTAL-COSTS> 20,285,000
<OTHER-EXPENSES> (93,000)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 56,000
<INCOME-PRETAX> 1,907,000
<INCOME-TAX> 732,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,175,000
<EPS-PRIMARY> .22
<EPS-DILUTED> .22
</TABLE>
