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 March 31, 2000
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
of incorporation or organization) Identification No.)
90 Coles Road , Blackwood, New Jersey 08012
(Address of principal executive offices) (Zip Code)
(856) 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 May 12, 2000 there were 5,437,848 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 -
March 31, 2000 and December 31, 1999 3
Condensed Consolidated Statements of Operations -
Three Months Ended March 31, 2000 and March 31, 1999 4
Condensed Consolidated Statements of Cash Flows -
Three Months Ended March 31, 2000 and
March 31, 1999 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
Part II - Other Information
Item 1. Legal Proceedings 12
Item 2. Changes in Securities and Use of Proceeds 13
Item 3. Defaults upon Senior Securities 13
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
Signatures 14
Exhibit Index 15
Financial Data Schedule 16
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Metrologic Instruments, Inc.
Consolidated Balance Sheets
(amounts in thousands except share data)
March 31, December 31,
Assets 2000 1999
-------- --------
(Unaudited)
Current assets:
Cash and cash equivalents $ 7,236 $ 6,970
Accounts receivable, net of allowance 24,164 21,474
Inventory 14,466 11,231
Deferred income taxes 872 872
Other current assets 692 1,239
-------- --------
Total current assets 47,430 41,786
Property, plant and equipment, net 9,336 8,873
Patents and trademarks, net of amortization 2,599 2,469
Holographic technology, net of amortization 687 716
Advance license fee, net of amortization 1,618 1,647
Security deposits and other assets 2,443 1,182
-------- --------
Total assets $ 64,113 $ 56,673
======== ========
Liabilities and shareholders' equity
Current liabilities:
Line of credit $ 8,310 $ 3,050
Current portion of notes payable 1,320 1,282
Accounts payable 5,801 3,741
Accrued expenses 8,986 10,054
-------- --------
Total current liabilities 24,417 18,127
Notes payable, net of current portion 3,773 3,414
Deferred income taxes 590 588
Other liabilities 298 -
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; 5,429,434 and 5,416,792 shares
issued and outstanding in 2000 and 1999,
respectively 54 54
Additional paid-in capital 17,189 17,083
Retained earnings 19,177 17,966
Accumulated other comprehensive income (1,385) (559)
-------- --------
Total shareholders' equity 35,035 34,544
-------- --------
Total liabilities and shareholders' equity $ 64,113 $ 56,673
======== ========
See accompanying notes.
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Metrologic Instruments, Inc.
Condensed Consolidated Statements of Operations
(amounts in thousands except share and per share data)
Three Months Ended
March 31,
2000 1999
(unaudited)
Sales $ 22,332 $ 18,253
Cost of sales 13,215 10,963
-------- --------
Gross profit 9,117 7,290
Selling, general and administrative expenses 5,770 4,588
Research and development expenses 1,332 960
-------- --------
Operating income 2,015 1,742
Other (expenses) income
Interest income 71 131
Interest expense (139) (57)
Foreign currency transaction gain (loss) 13 (214)
Other, net (67) -
-------- --------
Total other (expense) income (122) (140)
-------- --------
Income before provision for income taxes 1,893 1,602
Provision for income taxes 681 561
-------- --------
Net income $ 1,212 $ 1,041
======== ========
Basic earnings per share
Weighted average shares outstanding 5,420,321 5,408,560
======== ========
Basic earnings per share $ 0.22 $ 0.19
======== ========
Diluted earnings per share
Weighted average shares outstanding 5,420,321 5,408,560
Net effect of dilutive securities 161,389 92,668
-------- --------
Total shares outstanding used in
computing diluted earnings per share 5,581,710 5,501,228
======== ========
Diluted earnings per share $ 0.22 $ 0.19
======== ========
See accompanying notes.
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Metrologic Instruments, Inc.
Condensed Consolidated Statements of Cash Flows
(amounts in thousands)
Three Months Ended
March 31,
2000 1999
(Unaudited)
Operating activities
Net cash used in operating activities $ (3,154) $(2,061)
Investing activities
Purchase of property, plant and equipment (818) (742)
Patents and trademarks (178) (153)
Purchase of subsidiary (1,196) -
------- -------
Net cash used in investing activities (2,192) (895)
Financing activities
Proceeds from exercise of stock options and
employee stock purchase plan 106 65
Proceeds from issuance of notes payable 610 336
Principal payments on notes payable (175) (124)
Net proceeds from line of credit 5,260 -
Capital lease payments (23) (21)
------- -------
Net cash provided by financing activities 5,778 256
Effect of exchange rates on cash (166) (45)
------- -------
Net increase (decrease) in cash and
cash equivalents 266 (2,745)
Cash and cash equivalents at beginning of period 6,970 10,684
------- -------
Cash and cash equivalents at end of period $ 7,236 $ 7,939
======== =======
Supplemental Disclosure
Cash paid for interest $ 85 $ 58
Cash paid for income taxes $ 263 $ 192
Tax benefit from stock options $ 0 $ 4
See accompanying notes.
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METROLOGIC INSTRUMENTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands)
(Unaudited)
1. Business
Metrologic Instruments, Inc. and its 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 full 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 Quarterly Report on Form 10-Q and the Company's Annual Report
on Form 10-K for the year ended December 31, 1999, including the Consolidated
Financial Statements and the Notes to Consolidated Financial Statements for the
year ended December 31, 1999 contained therein.
Use of Estimates
The preparation of the financial statements in conformity with
accounting principles generally accepted in the United States, requires
management to make estimates and assumptions that affect the amounts reported
in the financial statements and accompanying notes. Actual results could differ
from those estimates.
3. Inventory
Inventory consists of the following:
March 31, December 31,
2000 1999
Raw materials $ 5,164 $ 4,273
Work-in-process 5,324 4,020
Finished goods 3,978 2,938
------- -------
$14,466 $11,231
4. Comprehensive Income
The Company's total comprehensive earnings were as follows:
Three Months Ended
March 31,
(Unaudited)
2000 1999
Net earnings $ 1,212 $ 1,041
Other comprehensive losses:
Change in equity due to foreign
currency translation adjustments (826) (416)
------- -------
Comprehensive earnings $ 386 $ 625
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5. Geographical Information
The Company generates its revenue from the sale of laser bar code scanners
primarily to distributors, value-added resellers, original equipment
manufacturers and directly to end users, in locations throughout the world. No
individual customer accounted for 10% or more of revenues in 2000 or 1999.
The Company manages its business on a geographic basis and has principal
operations in the United States and Europe. Sales were attributed to geographic
areas in the following table based on the location of the Company's customers.
United States Operations European
North Other Operations Total
America Europe Export Total Europe Consolidated
Three months ended March 31, 2000:
Sales $11,643 $584 $ 2,074 $14,301 $ 8,031 $22,332
Income (loss)
before provision
for income taxes $ 2,240 $ (347) $ 1,893
Identifiable
assets $51,741 - - $51,741 $12,372 $64,113
Three months ended March 31, 1999:
Sales $ 7,004 $ 951 $ 2,626 $10,581 $ 7,672 $18,253
Income (loss)
before provision
for income taxes $ 1,753 $ (151) $ 1,602
Identifiable
assets $ 38,815 - - $38,815 $ 8,135 $46,950
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<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, 1999 appearing in the
Company's Annual Report on Form 10-K for the year ended December 31, 1999. The
Condensed Consolidated Financial Statements for the three months ended March
31, 2000 and March 31, 1999 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 90 foreign countries.
Most of the Company's product sales in Western Europe, Singapore and
Brazil are billed in foreign currencies and are subject to currency exchange
rate fluctuations. Substantially all of the Company's products are manufactured
in the Company's U.S. facility, and therefore, sales and results of operations
are affected by fluctuations in the value of the U.S. dollar relative to
foreign currencies. Accordingly, in the three months ended March 31, 2000 and
1999, sales and gross profit were adversely affected by the continuing rise in
the value of the U.S. dollar in relation to foreign currencies.
Three Months Ended March 31, 2000 Compared with Three Months Ended March 31,
1999 (amounts in thousands except per share information)
Sales increased 22.3% to $22,332 in the three months ended March 31,
2000 from $18,253 in the three months ended March 31, 1999, principally as
a result of the continued increase in market acceptance of the Company's
point-of-sale ("POS") products, and an increase in sales of the Company's
HoloTrak(R) industrial holographic laser scanners. The increase in sales volume
in the three months ended March 31, 2000 was offset by lower average unit
selling prices on certain POS products compared to the corresponding period in
1999, which were mostly due to unfavorable foreign exchange fluctuations. The
reduction in the value of the Euro against the U.S. dollar negatively affected
the recorded U.S. dollar value of quarterly European operation sales by
approximately 13.5% and quarterly consolidated sales by approximately 3.4% as
compared to the corresponding period in 1999.
International sales accounted for $10,689 (47.9% of total sales) in
the three months ended March 31, 2000 and $11,249 (61.6% of total sales) in the
three months ended March 31, 1999. Three customers accounted for 11.1%, 5.2%
and 5.1%, respectively of total revenues in the three months ended March 31,
2000. One customer accounted for 9.2% of the Company's total revenues in the
three months ended March 31, 1999.
Cost of sales increased 20.5% to $13,215 in the three months ended
March 31, 2000 from $10,963 in the three months ended March 31, 1999, while
cost of sales as a percentage of sales decreased to 59.2% from 60.1%. 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 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, offset by lower average unit selling prices on certain of the
Company's POS products as noted above. If sales in the three months ended March
31, 2000 are adjusted to negate the effect of the reduction in the value of the
Euro against the U.S. dollar as compared to the corresponding period in 1999,
cost of sales as a percentage of sales would have been 57.2% in the three
months ended March 31, 2000.
Selling, general and administrative ("SG&A") expenses increased 25.8%
to $5,770 in the three months ended March 31, 2000 from $4,588 in the three
months ended March 31, 1999 and increased as a percentage of sales to 25.8%
from 25.1%. The increase in SG&A expenses was due primarily to increased
marketing efforts, which include costs associated with the Company's
Concert(TM) program, a business partner program used to market and promote the
Company's products.
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<PAGE>
Research and development ("R&D") expenses increased 38.8% to $1,332 in
the three months ended March 31, 2000 from $960 in the three months ended March
31, 1999, and increased as a percentage of sales to 6.0% from 5.3%. The
increase is due to an increase in R&D personnel and higher expenditures in the
development of new POS products.
Operating income increased 15.7% to $2,015 in the three months ended
March 31, 2000 from $1,742 in the three months ended March 30, 1999, and
operating income as a percentage of sales decreased to 9.0% from 9.5%.
Other income/expenses reflect net other expenses of $122 in the three
months ended March 31, 2000 compared to net other expenses of $140 in the
corresponding period in 1999. Net other expenses for the three months ended
March 31, 2000 reflect higher interest expenses due to increased borrowings.
Net income increased 16.4% to $1,212 in the three months ended March
31, 2000 from $1,041 in the three months ended March 31, 1999. Net income
reflects a 36.0% effective income tax rate for the three months ended March 31,
2000 compared to 35.0% for the corresponding period in 1999. The increased
effective income tax rate resulted from a reduction in the recorded foreign tax
benefit. The increase in the value of the U.S. dollar relative to other foreign
currencies negatively affected diluted earnings per share by approximately
$0.07 as compared to the corresponding period in 1999.
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 periods will not be impacted by fluctuations in
seasonal demand from European customers in its third quarter or from reduced
production days in the Company's fourth quarter.
Liquidity and Capital Resources (amounts in thousands)
The Company's working capital decreased to $23,013 as of March 31,
2000 from $23,659 as of December 31, 1999.
The Company's operating activities used net cash of $3,154 compared
with net cash used of $2,061 for the three months ended March 31, 2000 and
1999, respectively. Net cash used by operating activities for the three months
ended March 31, 2000 resulted primarily from increases in accounts receivable
and inventory commenserate with the growth in sales, offset by an increase in
net income plus non-cash charges and an increase in accrued expenses.
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 $10,000. The line of credit requires the
Company to comply with certain financial covenants and other restrictions. As
of March 31, 2000, the Company was in compliance with these financial covenants
and $8,310 was outstanding under this line of credit. The Amended and Restated
Loan and Security Agreement expires annually on June 30.
The Company also has a 1,100 Euros unsecured revolving credit facility
with a German bank in the name of its German subsidiary, Metrologic Instruments
GmbH. As of March 31, 2000, no amounts were outstanding under this revolving
credit facility.
In August 1999, the Company entered into an additional $2,400 line of
credit with its primary bank for the purchase of fixed assets and such bank has
a security interest in the purchased assets. As of March 31, 2000, $1,685 was
outstanding under this line. The Company is currently making interest-only
payments until December 31, 2000, at which time amounts outstanding will
convert to a term note, payable over a 60-month period.
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<PAGE>
Property, plant and equipment expenditures were $818 and $742 for
the three months ended March 31, 2000 and 1999, respectively. The Company's
current plan for future capital expenditures include: (i) investment in the
Company's Suzhou, China facility; (ii) continued investment in manufacturing
capacity expansion at the Blackwood, NJ headquarters; (iii) additional
manufacturing facilities; (iv) business acquisitions and joint ventures; and
(v) additional information systems.
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 U.S. dollar relative to the Euro and the Brazilian real. In an effort to
mitigate the financial implications of the volatility in the exchange rate
between the Euro 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 may 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 European subsidiary and
(ii) Euro based loans, which act as a partial hedge against outstanding
intercompany receivables and the net assets of its European subsidiary, which
are denominated in Euros. Additionally, the European subsidiary invoices and
receives payment in certain other major European currencies, including the
British pound, which result in an additional mitigating measure that reduces
the Company's exposure to the fluctuation between the Euro and the U.S. dollar
although it does not offer protection against fluctuations of that currency
against 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
current revolving credit facilities will be adequate to fund the Company's
operations through at least the next twelve months.
Forward Looking Statements; Certain Cautionary Language
Written and oral statements provided by the Company from time to time,
including those in this report, may contain certain forward looking
information, as that term is defined in the Private Securities Litigation
Reform Act of 1995 (the "Act") and in releases made by the Securities and
Exchange Commission ("SEC"). The cautionary statements which follow are being
made pursuant to the provisions of the Act and with the intention of obtaining
the benefits of the "safe harbor" provisions of the Act. While the Company
believes that the assumptions underlying such forward looking information are
reasonable based on present conditions, forward looking statements made by the
Company involve risks and uncertainties and are not guarantees of future
performance. Actual results may differ materially from those in the Company's
written or oral forward looking statements as a result of various factors,
including but not limited to, the following:
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Reliance for sales on third party resellers, distributors and OEMs
which subject the Company to risks of business failure, credit and collections
exposure, and other business concentration risks; continued or increased
competitive pressure which could result in reduced selling
prices of products or increased sales and marketing promotion costs;
foreign currency exchange rate fluctuations between the U.S. Dollar and
other major currencies including, but not limited to, the Euro, Singapore
Dollar, Brazilian Real, and British Pound affecting the Company's results
of operations; difficulties or delays in the development, production,
testing and marketing of products, including, but not limited to, a
failure to ship new products when anticipated, failure of customers to
accept these products when planned, any defects in products or a failure
of manufacturing efficiencies to develop as planned; a prolonged
disruption of scheduled deliveries from suppliers when alternative sources
of supply are not available to satisfy the Company's requirements for raw
material and components; continued or prolonged capacity constraints that
may hinder the Company's ability to deliver ordered product to customers;
the costs of legal proceedings or assertions by or against the Company
relating to intellectual property rights and licenses, and adoption of new
or changes in accounting policies and practices; occurrences affecting the
slope or speed of decline of the life cycle of the Company's products, or
affecting the Company's ability to reduce product and other costs, and to
increase productivity; the impact of unusual items resulting from the
Company's ongoing evaluation of its business strategies, acquisitions,
asset valuations and organizational structures; the effects of and changes
in trade, monetary and fiscal policies, laws and regulations and other
activities of governments, agencies and similar organizations, including
but not limited to trade restrictions or prohibitions, inflation, monetary
fluctuations, import and other charges or taxes, nationalizations and
unstable governments; the future health of the U.S. and international
economies and other economic factors that directly or indirectly affect
the demand for the Company's products; the economic slowdown of foreign
nations other than those using may also adversely affect the Company's
results of operations; issues that have not been anticipated in the
transition to the new European currency that may cause prolonged
disruption of the Company's business; and increased competition due to
industry consolidation or new entrants into the Company's existing
markets.
All forward-looking statements included herein are based upon
information presently available, and the Company assumes no obligation to
update any forward-looking statements.
Impact of Year 2000 (amounts in thousands)
As of March 2000, the Company has not experienced significant issues
resulting from Year 2000 computer system errors. The Company's worldwide
operations are functioning normally. There can be no assurance, however, that
the Company will not encounter significant issues resulting from Year 2000
computer system errors in the future.
Total expenditures for replacing substantially all IT systems with
new, Year 2000 compliant IT systems for the Company and subsidiaries amounted
to approximately $1,800, which includes external resource costs, a substantial
portion of which was capitalized.
Euro Conversion.
On January 1, 1999, several member countries of the European Union
established fixed conversion rates between their existing sovereign currencies
and adopted the Euro as their new common legal currency. As of that date, the
Euro traded on currency exchanges and the legacy currencies remain legal tender
in the participating countries for a transition period between January 1, 1999
and January 1, 2002. The countries that adopted the Euro on January 1, 1999 are
Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, The
Netherlands, Portugal, and Spain. During the transition period, non-cash
payments can be made in the Euro, and parties can elect to pay for goods and
services and transact business using either the Euro or legacy currency.
Between January 1, 1999 and January 1, 2002 the participating countries will
introduce Euro notes and coins and withdraw all legacy currencies so that they
will no longer be available. The Euro conversion may affect cross-border
competition by creating cross-border transparency. The Company is assessing its
pricing/marketing strategy in order to insure that it remains competitive in a
broader European market. The Company is also assessing its information
technology systems to allow for transactions to take place in both legacy
currencies and the Euro and the eventual elimination of the legacy currencies,
and is reviewing whether certain existing contracts will need to be modified.
The Company's currency risk and risk management for operations in participating
countries may be reduced as the legacy currencies are converted to the Euro.
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Item 3. Quantitative and Qualitative Disclosures about Market Risk
The information contained in Item 7A of the Company's Annual Report on
Form 10-K for the year ended December 31, 1999 is hereby incorporated herein by
reference.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
A. Symbol Technologies, Inc. et. al. v. Lemelson Medical, Educational &
Research Foundation, Limited Partnerships
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 July 21, 1999 the Company and six other leading members of the
Automatic Identification and Data Capture Industry (the "Auto ID companies")
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. 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., PSC Inc., Symbol Technologies, Inc., Teklogix Corporation, a wholly-owned
U.S. subsidiary of Teklogix International, Inc., and Zebra Technologies
Corporation. Symbol Technologies, Inc. has agreed to bear approximately half of
the legal and related expenses associated with the litigation, with the
remaining portion being borne by the Company and the other Auto ID companies.
Although no claim is now or had ever been asserted by the Lemelson
Partnership directly 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 to the Company's
knowledge, 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 Auto ID companies
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.
In response to the action commenced by the Company and the other
plaintiffs, the Lemelson Partnership filed a motion to dismiss the lawsuit, or
alternatively, to stay the proceedings pending the outcome of other litigation
or transfer the case in its entirety to the U.S. District Court for Arizona
where several infringement suits filed by the Lemelson Partnership are pending
against other companies. The Lemelson Partnership has stated that the primary
grounds for its motion to dismiss are the lack of a legally justifiable case or
controversy between the parties because (1) the method claims asserted by the
Lemelson Partnership apply only to the "use" of bar code equipment by the
end-users and not the bar code equipment itself; and (2) the Lemelson
Partnership has never asserted claims of infringement against the Auto ID
companies. The Auto ID Companies have filed papers arguing against the Lemelson
Partnerships' motion, and the motion is currently pending.
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<PAGE>
On March 15, 2000, Judge Pro of the U.S. District Court for the
District of Nevada issued a ruling denying the Lemelson Foundation's motion (a)
to dismiss the lawsuit for lack of a legally justifiable case or controversy
and (b) transfer the case to the U.S. District Court for the District of
Arizona. However the Court granted the Lemelson Partnership's motion to dismiss
our claim that the patents are invalid due to laches in prosecution of the
patents.
On March 30, 2000, the Lemelson Partnership filed a motion (a) to
appoint a permanent magistrate judge to the case and remove Magistrate Judge
Atkins and (b) to transfer the case from the court in Reno, Nevada, where it is
currently assigned to a court in Las Vegas, Nevada. The Auto ID Companies filed
papers opposing both motions. On April 10, 2000, Judge Pro again ruled against
the Lemelson Partnership on both motions. The case is now in the early states
of discovery.
B. Metrologic v. PSC
On October 13, 1999, the Company filed suit for patent infringement
against PSC Inc. (PSC) in United States District Court for the District of New
Jersey. The complaint asserts that at least seven of the Company's patents are
infringed by a variety of point-of-sale bar code scanner products manufactured
and sold by PSC. The patents cited in the complaint cover a broad range of bar
code scanning technologies important to scanning in a retail environment
including the configuration and structure of various optical components,
scanner functionalities and shared decoding architecture. The complaint seeks
monetary damages as well as a permanent injunction to prevent future sales of
the infringing products.
On December 22, 1999, PSC filed an answer to the complaint citing a
variety of affirmative defenses to the allegations of infringement asserted by
the Company in its complaint. PSC additionally asserted a counterclaim under
the Lanham Act claiming that the Company made false and misleading statements
in its October 13, 1999 press release regarding the patent infringement suit
against PSC. The Company does not believe that this counterclaim has any merit
and has made a claim with its insurance carrier to pay for the defense of this
claim.
The court has ordered the case to mediation, and discovery is stayed
pending the outcome of the mediation.
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
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 March 31, 2000.
-13-
<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.
/s/ C. Harry Knowles Chairman of the Board May 15, 2000
C. Harry Knowles and Chief Executive Officer
(Principal Executive Officer)
/s/ Thomas E. Mills IV President, Chief Operating May 15, 2000
Thomas E. Mills IV Officer, and Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
-14-
<PAGE>
EXHIBIT INDEX
Page No.
Exhibit No. 27 Financial Data Schedule 16
-15-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
UNAUDITED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31,
2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<RESTATED>
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<PERIOD-START> JAN-01-2000 JAN-01-1999
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-END> MAR-31-2000 MAR-31-1999
<CASH> 7,236,000 7,939,000
<SECURITIES> 0 0
<RECEIVABLES> 24,573,000 15,593,000
<ALLOWANCES> 409,000 407,000
<INVENTORY> 14,466,000 9,481,000
<CURRENT-ASSETS> 47,430,000 34,633,000
<PP&E> 16,802,000 12,784,000
<DEPRECIATION> 7,466,000 6,019,000
<TOTAL-ASSETS> 64,113,000 46,950,000
<CURRENT-LIABILITIES> 24,417,000 13,036,000
<BONDS> 0 0
0 0
0 0
<COMMON> 54,000 54,000
<OTHER-SE> 34,981,000 30,641,000
<TOTAL-LIABILITY-AND-EQUITY> 64,113,000 46,950,000
<SALES> 22,332,000 18,253,000
<TOTAL-REVENUES> 22,332,000 18,253,000
<CGS> 13,215,000 10,963,000
<TOTAL-COSTS> 20,317,000 16,511,000
<OTHER-EXPENSES> (17,000) 83,000
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 139,000 57,000
<INCOME-PRETAX> 1,893,000 1,602,000
<INCOME-TAX> 681,000 561,000
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1,212,000 1,041,000
<EPS-BASIC> .22 .19
<EPS-DILUTED> .22 .19
</TABLE>
