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, 1998
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 (I.R.S. Employer
incorporation or organization) Identification No.)
90 Coles Road , 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 11, 1998 there were 5,400,290 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, 1998 and December 31, 1997 3
Condensed Consolidated Statements of Operations -
Three and Six Months Ended June 30, 1998 and
June 30, 1997 4
Condensed Consolidated Statements of Cash Flows -
Six Months Ended June 30, 1998 and
June 30, 1997 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
Item 3. Quantitative and Qualitative Disclosures about
Market Risk 12
Part II - Other Information
Item 1. Legal Proceedings 12
Item 2. Changes in Securities and Use of Proceeds 12
Item 3. Defaults upon Senior Securities 12
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
Exhibit Index
Financial Data Schedule 16
<PAGE>
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
Metrologic Instruments, Inc.
Condensed Consolidated Balance Sheets
(amounts in thousands except share data)
June 30, December 31,
1998 1997
-------- --------
Assets (unaudited)
Current assets:
Cash and cash equivalents $ 11,148 $ 13,096
Accounts receivable, net of allowance
of $426 and $408 in 1998 and 1997,
respectively 12,398 9,249
Inventory 6,926 4,684
Deferred income taxes 1,629 1,698
Other current assets 951 604
-------- -------
Total current assets 33,052 29,331
Property, plant and equipment, net 5,187 4,625
Patents and trademarks, net of
amortization of $545 and $511 in 1998
and 1997, respectively 1,288 1,254
Holographic technology, net of
amortization of $200 and $154 in 1998
and 1997, respectively 723 734
Deferred income taxes 323 414
Advance license fee 1,824 1,882
Security deposits and other assets 1,193 218
-------- --------
Total assets $ 43,590 $ 38,458
======== ========
Liabilities and shareholders' equity
Current liabilities:
Current portion of notes payable $ 620 $ 543
Accounts payable 3,551 2,859
Accrued expenses 8,434 6,505
Accrued legal settlement 795 825
-------- --------
Total current liabilities 13,400 10,732
Notes payable, net of current portion 1,784 1,496
Deferred income taxes, net of
current portion 600 524
Accrued legal settlement 389 805
Shareholders' equity:
Preferred stock, $0.01 par value:
500,000 shares authorized;
none issued - -
Common stock, $0.01 par value:
10,000,000 shares authorized;
5,398,652 and 5,369,090 shares
issued and outstanding in 1998
and 1997, respectively 54 54
Additional paid-in capital 16,840 16,389
Retained earnings 10,645 8,576
Deferred compensation - (2)
Accumulated other comprehensive loss (122) (116)
-------- -------
Total shareholders' equity 27,417 24,901
-------- -------
Total liabilities and shareholders'
equity $ 43,590 $ 38,458
======== ========
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, June 30, June 30,
1998 1997 1998 1997
(Unaudited) (Unaudited)
Sales $16,069 $13,157 $31,296 $25,919
Cost of sales 9,619 8,438 18,986 16,405
Gross profit 6,450 4,719 12,310 9,514
Selling, general and
administrative expenses 3,834 2,753 7,177 5,681
Research and development
expenses 1,045 814 2,159 1,622
Operating income 1,571 1,152 2,974 2,211
Other (expenses) income
Interest income 122 111 259 203
Interest expense (42) (59) (80) (101)
Foreign currency transaction
(loss) gain (36) (76) 21 (241)
Other income (loss) expenses,
net 26 2 60 (1)
Total other (expenses) income 70 (22) 260 (140)
Income before provision for
income taxes 1,641 1,130 3,234 2,071
Provision for income taxes 591 430 1,164 787
Net income $ 1,050 $ 700 $ 2,070 $ 1,284
Basic earnings per share
Weighted average shares
outstanding 5,391,408 5,317,690 5,381,517 5,304,731
Basic earnings per share $ 0.19 $0.13 $ 0.38 $ 0.24
Diluted earnings per share
Weighted average shares
outstanding 5,391,408 5,317,690 5,381,517 5,304,731
Net effect of dilutive
securities 185,298 156,335 177,321 145,755
Total shares outstanding
used in computing diluted
earnings per share 5,576,706 5,474,025 5,558,838 5,450,485
Diluted earnings per share $ 0.19 $0.13 $ 0.37 $ 0.24
See accompanying notes.
<PAGE>
Metrologic Instruments, Inc.
Condensed Consolidated Statements of Cash Flows
(amounts in thousands)
Six Months Ended
June 30,
1998 1997
(Unaudited)
Operating activities
Net cash used in operating
activities $ (565) $ (107)
Investing activities
Purchase of property, plant and equipment (1,338) (331)
Proceeds from sale of property 65 -
Patents and trademarks (69) (209)
Advance license fee (125) (250)
Other intangibles (559) -
Purchase of Holoscan, Inc. and holographic
technology, net of cash acquired (35) (24)
------- -------
Net cash used in investing activities (2,061) (814)
Financing activities
Proceeds from issuance of notes payable $ 534 $ -
Proceeds from exercise of stock options and
employee stock purchase plan 327 868
Principal payments on notes payable (142) (112)
Payments of amounts due to former officer - (84)
Capital lease payments (41) (117)
------- -------
Net cash provided by (used in) financing activities 678 555
Effect of exchange rates on cash - 22
------- -------
Net decrease in cash and cash equivalents (1,948) (344)
Cash and cash equivalents at beginning of period 13,096 10,358
------- -------
Cash and cash equivalents at end of period $ 11,148 $10,014
======== =======
Supplemental Disclosure
Cash paid for interest $ 73 $ 67
Cash paid for income taxes $ 233 $ 53
Capital lease obligations incurred $ - $ 67
Tax benefit from stock options $ 125 $ -
See accompanying notes.
<PAGE>
METROLOGIC INSTRUMENTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands)
(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, 1997, including the Consolidated Financial Statements and the
Notes to Consolidated Financial Statements for the year ended December 31,
1997.
3. Inventory
Inventory consists of the following:
June 30, December 31,
1998 1997
Raw materials $ 3,006 $ 2,542
Work-in-process 2,351 1,590
Finished goods 1,569 552
------- -------
$ 6,926 $ 4,684
======= =======
4. Comprehensive Income
The Company adopted Statement of Financial Accounting Standards No.
130, "Reporting Comprehensive Income" (SFAS 130), at December 31, 1997. SFAS
130 establishes standards for reporting comprehensive income and requires
foreign currency translation adjustments, which prior to adoption were reported
separately in shareholders' equity, to be included in other comprehensive
income. Adoption of SFAS 130 had no impact on net income or shareholders'
equity.
Total comprehensive income amounted to $1,144 and $595, in the three months
ended June 30, 1998 and 1997, respectively, and $2,064 and $900 in the six
months ended June 30, 1998 and 1997, respectively.
5. Derivative Instruments and Hedging Activities
In June 1998, the Financial Accounting Standards Board issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities" (SFAS 133),
which is required to be adopted in years beginning after June 15, 1999. The
Company has not yet determined what the effect of SFAS 133 will be on the
earnings and financial position of the Company.
<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 Quarterly Report on Form 10-Q
and the Consolidated Financial Statements and the Notes to Consolidated
Financial Statements for the year ended December 31, 1997 appearing in the
Company's Annual Report on Form 10-K for the year ended December 31, 1997. The
Condensed Consolidated Financial Statements for the three and six months ended
June 30, 1998 and June 30, 1997 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 85 foreign countries.
Since 1997, the Company has been exposed to overall unfavorable
foreign currency fluctuations due to the reduction in the value of the German
mark against the U.S. dollar. The Company's German subsidiary accounted for
approximately 43.1% and 44.1%, respectively, of the Company's consolidated
sales for the three and six months ended June 30, 1998. Substantially all of
the German subsidiary's products are manufactured at the Company's U.S.
facility. Therefore, the subsidiary's product manufacturing costs, which
represent approximately 80.0% and 78.1% respectively, of the subsidiary's total
operating costs for the three and six months ended June 30, 1998, are incurred
by the Company in U.S. dollars. As a result, the subsidiary's sales are
significantly affected by fluctuations between the German mark and the U.S.
dollar, however, there is minimal offsetting effect in the product costs of the
subsidiary. Accordingly, the Company's consolidated operating profit is
significantly affected by changes in the exchange rate between the German mark
and U.S. dollar. (See "Liquidity and Capital Resources" for a discussion of the
Company's derivative financial instruments utilized to mitigate such exposure.)
Three Months Ended June 30, 1998 Compared with Three Months Ended June 30, 1997
(amounts in thousands except per share information)
Sales increased 22.1% to $16,069 in the three months ended June 30,
1998 from $13,157 in the three months ended June 30, 1997, principally as a
result of the continued increase in market acceptance of the Company's
point-of-sale ("POS") products, an increase in sales of the Company's
HoloTrak(TM) industrial holographic laser scanners, and increased sales and
marketing efforts. The increase in sales volume in 1998 was offset by lower
average unit selling prices on POS products, compared to the corresponding
period in 1997, and also reflected unfavorable foreign exchange fluctuations.
The reduction in the value of the German mark against the U.S. dollar, as
compared to the corresponding period in 1997, negatively affected the recorded
U.S. dollar value of the Company's German subsidiary's sales by approximately
4.2% or $301 in the three months ended June 30, 1998.
International sales accounted for $9,966 (62.0% of total sales) in the
three months ended June 30, 1998 and $8,314 (63.2% of total sales) in the three
months ended June 30, 1997. One customer accounted for 5.5% of the Company's
revenues in the three months ended June 30, 1998. One customer accounted for
7.3% of the Company's revenues in the three months ended June 30, 1997.
Cost of sales increased 14.0% to $9,619 in the three months ended June
30, 1998 from $8,438 in the three months ended June 30, 1997, and cost of sales
as a percentage of sales decreased to 59.9% from 64.1%. The decrease in cost of
sales as a percentage of sales was due primarily to increased sales of the
Company's industrial laser scanners which traditionally yield higher gross
profit margins than the Company's POS products, reduced product costs resulting
from engineering enhancements to certain POS products, and manufacturing
efficiencies and operating leverage that result from greater unit volumes,
partially offset by lower average unit selling prices on certain of the
Company's products as noted above. If sales are adjusted to negate the effect
of unfavorable foreign currency fluctuations as compared to the corresponding
period in 1997, cost of sales as a percentage of sales would have been 58.8%
for the three months ended June 30, 1998.
<PAGE>
Selling, general and administrative ("SG&A") expenses increased 39.3%
to $3,834 in the three months ended June 30, 1998 from $2,753 in the three
months ended June 30, 1997 and increased as a percentage of sales to 23.9% from
20.9%. The increase in SG&A expenses was due primarily to increased marketing
efforts, which include costs associated with the Company's Concert Program(TM),
a business partner program that markets and promotes the Company's products.
SG&A expenses in the three months ended June 30, 1998 were positively affected
by reductions in the value of the German mark against the U.S. dollar as
compared to the corresponding period in 1997. The positive impact of the
reduced value of the German mark relative to the U.S. dollar on the Company's
consolidated SG&A expenses was approximately 1.4% or $53 in the three months
ended June 30, 1998.
Research and development ("R&D") expenses increased 28.4% to $1,045 in
the three months ended June 30, 1998 from $814 in the three months ended June
30, 1997, and increased as a percentage of sales to 6.5% from 6.2%. The
increase in R&D expenses was due primarily to higher expenditures for the
development of new POS and industrial products, including development of the
Company's HoloTunnel(TM), a six-sided holographic scanner tunnel system.
Operating income increased 36.4% to $1,571 in the three months ended
June 30, 1998 from $1,152 in the three months ended June 30, 1997, and
operating income as a percentage of sales increased to 9.8% from 8.8%.
Other income/expenses reflect net other income of $70 in the three
months ended June 30, 1998 compared to net other expenses of $22 in the
corresponding period in 1997. Net other income for the three months ended June
30, 1998 reflects higher interest income and other miscellaneous income and
lower interest expenses and foreign currency transaction losses, compared to
the corresponding period in 1997.
Net income increased 50.0% to $1,050 in the three months ended June
30, 1998 from $700 in the three months ended June 30, 1997. Net income reflects
a 36% effective income tax rate for the three months ended June 30, 1998
compared to 38% for the corresponding period in 1997. The reduced effective
income tax rate resulted from the utilization of the Company's foreign sales
corporation which permits the Company to reduce its United States federal
income tax liability on profits from sales to foreign customers. Further, the
Company utilized net operating loss carryforwards on certain of its foreign
subsidiaries in the three months ended June 30, 1998. The reduction in the
value of the German mark against the U.S. dollar as compared to the
corresponding period in 1997 negatively affected diluted earnings per share by
approximately $.02 per share.
Six Months Ended June 30, 1998 Compared with Six Months Ended June 30, 1997
(amounts in thousands except per share information)
Sales increased 20.7% to $31,296 in the six months ended June 30, 1998
from $25,919 in the six months ended June 30, 1997, principally as a result of
the continued increase in market acceptance of the Company's POS products, an
increase in sales of the Company's HoloTrak(TM) industrial holographic laser
scanners, and increased sales and marketing efforts. The increase in sales
volume in 1998 was offset by lower average unit selling prices on its POS
products, compared to the corresponding period in 1997, and reflected
unfavorable foreign exchange fluctuations. The reduction in the value of the
German mark against the U.S. dollar, as compared to the corresponding period in
1997, negatively affected the recorded U.S. dollar value of the Company's
German subsidiary's sales by approximately 6.5% or $957 in the six months ended
June 30, 1998.
International sales accounted for $19,117 (61.1% of total sales) in
the six months ended June 30, 1998 and $16,541 (63.8% of total sales) in the
six months ended June 30, 1997. Two customers accounted for 5.2% and 5.1%,
respectively, of the Company's revenues in the six months ended June 30, 1998.
One customer accounted for 6.5% of the Company's revenues in the six months
ended June 30, 1997.
Cost of sales increased 15.7% to $18,986 in the six months ended June
30, 1998 from $16,405 in the six months ended June 30, 1997, and cost of sales
as a percentage of sales decreased to 60.7% from 63.3%. The decrease in cost of
sales as a percentage of sales was due primarily to increased sales of the
Company's industrial laser scanners which traditionally yield higher gross
profit margins than the Company's POS products, reduced product costs resulting
from engineering enhancements to certain POS products, and manufacturing
efficiencies and operating leverage that result from greater unit volumes,
partially offset by lower average unit selling prices on certain of the
Company's products as noted above. If sales are adjusted to negate the effect
of unfavorable foreign currency fluctuations as compared to the corresponding
period in 1997, cost of sales as a percentage of sales would have been 58.9%
for the six months ended June 30, 1998.
<PAGE>
SG&A expenses increased 26.3% to $7,177 in the six months ended June
30, 1998 from $5,681 in the six months ended June 30, 1997 and increased as a
percentage of sales to 22.9% from 21.9%. The increase in SG&A expenses was due
primarily to increased marketing efforts, which include costs associated with
the Company's Concert Program(TM) SG&A expenses in the six months ended June
30, 1998 were positively affected by reductions in the value of the German mark
against the U.S. dollar as compared to the corresponding period in 1997. The
positive impact of the reduced value of the German mark relative to the U.S.
dollar on the Company's consolidated SG&A expenses was approximately 3.5% or
$257 in the six months ended June 30, 1998.
R&D expenses increased 33.1% to $2,159 in the six months ended June
30, 1998 from $1,622 in the six months ended June 30, 1997, and increased as a
percentage of sales to 6.9% from 6.3%. The increase in R&D expenses was due
primarily to higher expenditures for the development of new POS and industrial
products, including development of the Company's HoloTunnel(TM), a six-sided
holographic scanner tunnel system.
Operating income increased 34.5% to $2,974 in the six months ended
June 30, 1998 from $2,211 in the six months ended June 30, 1997, and operating
income as a percentage of sales increased to 9.5% from 8.5%.
Other income/expenses reflect net other income of $260 in the six
months ended June 30, 1998 compared to net other expenses of $140 in the
corresponding period in 1997. Net other income for the six months ended June
30, 1998 reflects higher interest income and other miscellaneous income, lower
interest expenses, and higher net foreign currency transaction gains compared
to the corresponding period in 1997.
Net income increased 61.2% to $2,070 in the six months ended June 30,
1998 from $1,284 in the six months ended June 30, 1997. Net income reflects a
36% effective income tax rate for the six months ended June 30, 1998 compared
to 38% for the corresponding period in 1997. The reduced effective income tax
rate resulted from the utilization of the Company's foreign sales corporation
which permits the Company to reduce its United States federal income tax
liability on profits from sales to foreign customers. Further, the Company
utilized net operating loss carryforwards on certain of its foreign
subsidiaries in the six months ended June 30, 1998. The reduction in the value
of the German mark against the U.S. dollar as compared to the corresponding
period in 1997 negatively affected diluted earnings per share by approximately
$.08 per share.
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 (amounts in thousands)
The Company's working capital increased approximately 5.6% to $19,652
as of June 30, 1998 from $18,599 as of December 31, 1997.
The Company's operating activities used net cash of $565 compared with
$107 for the six months ended June 30, 1998 and 1997, respectively. Net cash
used in operating activities for the six months ended June 30, 1998 resulted
primarily from increases in accounts receivable and inventory, offset by
increases in accrued expenses and accounts payable.
The Company's total deferred income tax asset (current and long-term)
of $1,952 and deferred tax liability of $600 are based upon cumulative
temporary differences as of June 30, 1998, which provide approximately $3,267
of future income tax deductions against future taxable income. The deferred tax
asset arises primarily from recording the December 1993 settlement of a patent
lawsuit as an expense for accounting purposes prior to receiving the related
tax benefit. The deferred tax liability arises primarily from recording the
advance license fee pursuant to the December 1996 licensing agreement with
Symbol Technologies, Inc. as an expense for tax purposes and an amortizable
asset for book purposes.
The Company is a party to an Amended and Restated Loan and Security
Agreement, as amended, with its primary bank which provides for an unsecured
line of credit in the amount of $7,500. The line of credit requires the Company
to comply with certain financial covenants and other restrictions. As of June
30, 1998, the Company was in compliance with these financial covenants and no
amounts were outstanding under this line of credit. The Amended and Restated
Loan and Security Agreement expires on June 30, 1999.
<PAGE>
The Company also has a 500 German mark unsecured revolving credit
facility with a German bank in the name of its German subsidiary, Metrologic
Instruments GmbH. As of June 30, 1998, no amounts were outstanding under this
revolving credit facility. In April 1998, the Company entered into a
convertible line of credit with its primary bank, denominated in German marks,
in an amount not to exceed $1,500, for the purchase of fixed assets. As of June
30, 1998, approximately $528 was outstanding under this line of credit. The
Company is currently making interest only payments on the line of credit until
December 31, 1998, at which time amounts outstanding under this line will
convert to a term note, payable over a 54 month period.
The Company's current plans for capital expenditures for the next
twelve months potentially include the purchase of (i) the Company's office and
manufacturing facility currently being leased from the Company's principal
stockholder, Chairman, President, and CEO, and his spouse, the Company's Vice
President, Administration and Treasurer, or other additional manufacturing
facilities; (ii) manufacturing automation equipment; (iii) office equipment;
and (iv) a new integrated management information system. Potential capital
expenditures amount to approximately $7,000. The purchase of the Company's
office and manufacturing facility could potentially save the Company
approximately $200 annually of rent expenses, net of depreciation and interest
expenses. The Company expects to finance such potential expenditures with a
combination of term notes, operating and capital leases, and mortgages.
The Company's liquidity has been, and may continue to be, adversely
affected by changes in foreign currency exchange rates, particularly the value
of the German mark against the U.S. dollar. In an effort to mitigate the
financial implications of the volatility in the exchange rate between the
German mark and the U.S. dollar, the Company has selectively entered into
derivative financial instruments to offset its exposure to foreign currency
risks. Derivative financial instruments currently include (i) foreign currency
forward exchange contracts with its primary bank for periods not exceeding six
months, which partially hedge sales to the Company's German subsidiary and (ii)
German mark based loans, which act as a partial hedge against outstanding
intercompany receivables and the net assets of its German subsidiary, which are
denominated in German marks. Additionally, the German subsidiary invoices and
receives payment in certain other major European currencies, which result in an
additional mitigating measure that reduces the Company's exposure to the
fluctuation between the German mark and the U.S. dollar.
The Company believes that its current cash and cash equivalent
balances, along with cash generated from operations and availability under its
revolving credit facilities, will be adequate to fund the Company's operations
through at least the next twelve months.
Impact of Year 2000
The Year 2000 issue is the result of computer programs using only the
last two digits to indicate the year. If uncorrected, such computer programs
will be unable to interpret dates beyond the year 1999, which could cause
computer system failure or other computer errors disrupting operations. The
Company has been evaluating its year 2000 readiness and taking corrective
action where necessary. The scope of the Year 2000 readiness effort includes
(i) information technology ("IT") such as software and hardware; (ii) non-IT
systems or embedded technology such as microcontrollers contained in various
manufacturing and lab equipment, facilities and utilities, and the Company's
products with date-sensitivity; and (iii) readiness of key third parties,
including suppliers and customers. If needed modifications and conversions are
not made on a timely basis, the Year 2000 issue could have a material adverse
effect on the Company operations.
The Company's current management information systems ("MIS") are not
year 2000 compliant. The Company is currently in the process of replacing its
current MIS system with a new, Year 2000 compliant, fully integrated MIS system
for itself and its subsidiaries. The total cost of the new MIS system is
estimated to be approximately $1,400, which includes external resource costs, a
substantial portion of which will be capitalized. The new MIS system is
estimated to be implemented in the Company's U.S. operations in February 1999
and its international operations by June 1999, which is prior to any
anticipated impact on its operating systems.
The Company is in contact with key suppliers to assure no interruption
in the relationship between the Company and these important third parties from
the year 2000 issue. If third parties do not convert their systems in a timely
manner and in a way that is compatible with the Company's systems, the Year
2000 issue could have a material adverse effect on company operations. The
Company believes that its actions with key suppliers and customers will
minimize these risks.
<PAGE>
The Company's current estimates of the amount of time and costs
necessary to resolve Year 2000 issues are based on the facts and circumstances
existing at this time. The estimates were made using assumptions of future
events including the continued availability of certain resources, Year 2000
modification plans, implementation success by key third-parties, and other
factors. There can be no assurance that these estimates will be achieved and
actual results could differ materially from those anticipated.
The discussion in this Quarterly Report on 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; fluctuations in the
exchange rate between the German mark and the U.S. dollar; the Company's
ability to enter into and settle forward exchange contracts; availability of
patent protection for the Company's holographic scanners and other products;
and market acceptance of the Company's new products.
Item 3. Quantitative and Qualitative Disclosure about Market Risk.
Not applicable.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable.
Item 2. Changes in Securities and Use of Proceeds
Not applicable.
Item 3. Defaults upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
The Company's Annual Meeting of Shareholders was held on June 25,
1998. At such meeting, the following matters were voted upon by the
shareholders, receiving the number of affirmative, negative and withheld votes,
as well as abstentions and broker non-votes, set forth below each matter.
(1) The vote of the Common Shareholders for the election of William
Rulon-Miller as a director to serve a three-year term ending in 2001 was as
follows:
No. of Votes For Name
5,313,029 William Rulon-Miller
(2) The vote of the Common Shareholders for the appointment of Ernst &
Young as the independent auditors for the Company for the fiscal year ending
December 31, 1998 was as follows:
5,312,679 For 600 Against 567 Abstain
--------- --- ---
The directors of the Company whose terms continue after the
Annual Meeting of Shareholders referenced above are C. Harry Knowles, Janet H.
Knowles, and Stanton L. Meltzer.
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit Number
27 Financial Data Schedule.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed by the Company
during the quarter ended June 30, 1998.
<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 14, 1998 By:/s/ C. Harry Knowles
------------ -----------------------
C. Harry Knowles
Chairman of the Board,
President and Chief Executive Officer
(Principal Executive Officer)
Date: August 14, 1998 By:/s/Thomas E. Mills IV
------------ -------------------------
Thomas E. Mills IV
Executive Vice President,
Chief Operating Officer and Chief
Financial Officer
(Principal Financial Officer)
<PAGE>
EXHIBIT INDEX
Exhibit No. 27
Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
UNAUDITED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30, 1998
AND JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 6-MOS
<PERIOD-START> JAN-01-1998 JAN-01-1997
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1996
<PERIOD-END> JUN-30-1998 JUN-30-1997
<CASH> 11,148,000 10,014,000
<SECURITIES> 0 0
<RECEIVABLES> 12,398,000 9,384,000
<ALLOWANCES> 426,000 452,000
<INVENTORY> 6,926,000 6,544,000
<CURRENT-ASSETS> 33,052,000 27,915,000
<PP&E> 5,187,000 4,684,000
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 43,590,000 37,257,000
<CURRENT-LIABILITIES> 13,400,000 10,819,000
<BONDS> 0 0
0 0
0 0
<COMMON> 54,000 53,000
<OTHER-SE> 27,363,000 22,777,000
<TOTAL-LIABILITY-AND-EQUITY> 43,590,000 37,257,000
<SALES> 31,296,000 25,919,000
<TOTAL-REVENUES> 31,296,000 25,919,000
<CGS> 18,986,000 16,405,000
<TOTAL-COSTS> 28,322,000 23,708,000
<OTHER-EXPENSES> (260,000) 140,000
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 80,000 101,000
<INCOME-PRETAX> 3,234,000 2,071,000
<INCOME-TAX> 1,164,000 787,000
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 2,070,000 1,284,000
<EPS-PRIMARY> .38 .24
<EPS-DILUTED> .37 .24
</TABLE>
