PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
SYMMETRICOM, INC. and SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
December 31, June 30,
1993 1993
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 12,763 $ 18,232
Accounts receivable 11,300 10,905
Inventories 19,997 12,937
Other current assets 1,381 216
_________ _________
Total current assets 45,441 42,290
Property, plant and equipment, net 15,787 15,942
Other assets, net 2,813 722
_________ _________
$ 64,041 $ 58,954
_________ _________
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 4,615 $ 2,914
Accrued liabilities 8,991 9,986
Current maturities of long-term debt 44 42
_________ _________
Total current liabilities 13,650 12,942
Long-term debt, less current maturities 5,842 5,865
Deferred rent 517 604
Deferred income taxes 2,016 1,441
Commitments and contingencies
Shareholders' equity:
Preferred stock, no par value:
Authorized - 500 shares
Issued-none
Common stock, no par value:
Authorized - 32,000 shares
Issued and outstanding - 13,908
and 13,728 shares 14,457 13,936
Retained earnings 27,559 24,166
_________ _________
Total shareholders' equity 42,016 38,102
_________ _________
$ 64,041 $ 58,954
_________ _________
The accompanying notes are an integral part of these consolidated financial
statements.
SYMMETRICOM, INC. and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
Three months ended Six months ended
December 31, December 31,
1993 1992 1993 1992
Net sales $ 25,011 $ 21,646 $ 49,045 $ 42,762
Cost of sales 14,200 13,050 27,814 26,601
________ ________ ________ ________
Gross profit 10,811 8,596 21,231 16,161
Operating expenses:
Research and development 3,100 1,898 6,059 3,695
Selling, general and
administrative 5,309 4,818 10,342 8,930
________ ________ ________ ________
Operating income 2,402 1,880 4,830 3,536
Interest income 55 85 159 189
Interest expense (150) (152) (302) (304)
________ ________ ________ ________
Earnings before income taxes 2,307 1,813 4,687 3,421
Income taxes 637 346 1,294 653
________ ________ ________ ________
Net earnings $ 1,670 $ 1,467 $ 3,393 $ 2,768
________ ________ ________ ________
Net earnings per common and common
equivalent share $ .11 $ .10 $ .22 $ .19
Weighted average common and common
equivalent shares outstanding 15,421 14,986 15,510 14,633
The accompanying notes are an integral part of these consolidated financial
statements.
SYMMETRICOM, INC. and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Six months ended
December 31,
1993 1992
Cash flows from operating activities:
Cash received from customers $ 49,238 $ 43,250
Cash paid to suppliers and employees (49,977) (37,204)
Interest received 163 187
Interest paid (302) (304)
Income taxes paid (771) (958)
_________ _________
Net cash provided by (used for)
operating activities (1,649) 4,971
_________ _________
Cash flows from investing activities:
Purchase of Navstar (2,012)
Capital expenditures, net (1,865) (1,933)
Disposition (acquisition) of other assets (443) 33
_________ _________
Net cash used for investing activities (4,320) (1,900)
_________ _________
Cash flows from financing activities:
Repayment of long-term debt (21) (19)
Proceeds from issuance of common stock 521 1,155
_________ _________
Net cash provided by financing activities 500 1,136
_________ _________
Net increase (decrease) in cash and cash
equivalents (5,469) 4,207
Cash and cash equivalents at beginning of period 18,232 10,146
_________ _________
Cash and cash equivalents at end of period $ 12,763 $ 14,353
_________ _________
Reconciliation of net earnings to net cash provided
by operating activities:
Net earnings $ 3,393 $ 2,768
Adjustments (net of effects of Navstar purchase):
Depreciation and amortization 2,663 2,299
Net deferred income taxes (205)
Decrease (increase) in accounts receivable (83) 497
(Increase) in inventories (6,616) (1,370)
Decrease (increase) in other current assets (385) 1
Increase (decrease) in accounts payable 666 (104)
Increase (decrease) in accrued liabilities (995) 934
(Decrease) in deferred rent (87) (54)
_________ _________
Net cash provided by (used for) operating
activities $ (1,649) $ 4,971
_________ _________
The accompanying notes are an integral part of these consolidated financial
statements.
SYMMETRICOM, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation. The consolidated financial statements included
herein have been prepared by Symmetricom, Inc., formerly known as Silicon
General, Inc. (the "Company"), without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information and
footnote disclosures, normally included in financial statements prepared in
accordance with generally accepted accounting principles, have been condensed
or omitted pursuant to such rules and regulations. Although the Company
believes that the disclosures which are made are adequate to make the
information presented not misleading, it is suggested that these consolidated
financial statements be read in conjunction with the financial statements and
the notes thereto included in the Company's Annual Report on Form 10-K for the
year ended June 30, 1993.
In the opinion of the management, these unaudited statements contain all
adjustments (consisting only of normal recurring adjustments) necessary to
present fairly the financial position of the Company at December 31, 1993, the
results of operations for the three and six month periods then ended and cash
flows for the six month period then ended. The results of operations for the
periods presented are not necessarily indicative of those that may be expected
for the full year.
2. Fiscal Period. Fiscal years 1994 and 1993 consist of 53 and 52 weeks,
respectively. The fiscal 1994 and 1993 first quarters consist of fourteen and
thirteen weeks, respectively.
3. Inventories. Inventories are stated at the lower of cost (first-in,
first-out) or market. Inventories consist of:
December 31, June 30,
1993 1993
(In thousands)
Raw materials $ 9,784 $ 4,115
Work-in-progress 5,938 5,424
Finished goods 4,275 3,398
_________ ________
$ 19,997 $ 12,937
_________ ________
4. Acquisition. In August 1993, the Company acquired, in a purchase
transaction, substantially all the assets and certain liabilities of Navstar
Limited and its U.S. affiliate (collectively "Navstar") for $3,047,000. The
Company paid $2,012,000 in cash, $1,756,000 for technology, $36,000 for net
tangible assets and $220,000 for acquisition expenses. Net tangible assets
included substantially all tangible assets, $1,071,000, and assumed tangible
liabilities of $1,035,000. The operating results of Navstar have been
included in the consolidated statements of operations since the date of
acquisition and are not material in relation to consolidated operations.
Unaudited pro forma combined results of operations of the Company for the year
ended June 30, 1993, assuming the acquisition of Navstar had occurred on July
1, 1992, are as follows: net sales, $90,342,000, net earnings, $5,052,000, and
net earnings per common and common equivalent share, $.34.
5. Litigation. On January 11, 1994, a complaint was filed in the United
States District Court for the Northern District of California against the
Company, three of its officers and two unaffiliated parties, by one of the
Company's shareholders. The complaint requests that the court certify a class
of plaintiffs consisting of persons who purchased shares of the Company's
common stock during a specified period in 1993. The complaint alleges that
false and misleading statements made during that period artificially inflated
the price of the common stock in violation of federal securities laws. There
is no specific amount of damages requested in the complaint.
The Company and its officers believe that the complaint is entirely
without merit, and intend to vigorously defend against the action.
6. Reclassifications. Certain 1993 balances have been reclassified to
conform to the 1994 presentation.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources
Working capital increased by $2.5 million to $31.8 million at December
31, 1993 from $29.3 million at June 30, 1993, while the current ratio remained
at 3.3 to 1.0. During the same period, cash and cash equivalents decreased by
$5.4 million to $12.8 million from $18.2 million. The decrease was primarily
due to $1.6 million used for operating activities, $2.0 million used for the
acquisition of Navstar and $1.9 million used for capital expenditures. Net
cash used for operating activities included approximately $5.0 million for the
stockpiling of certain electronic components for Telecom Solutions due to the
possible shortage of epoxy resin used in the manufacture of these components.
At December 31, 1993, the Company had no outstanding borrowings under its $7.0
million bank line of credit.
The Company believes that cash and cash equivalents, funds generated
from operations and funds available under its bank line of credit will be
sufficient to satisfy working capital and capital equipment requirements over
the near term. At December 31, 1993, the Company had no material outstanding
commitments to purchase capital equipment.
Results of Operations
Net sales increased in the second quarter of fiscal 1994 by 16% to $25.0
million from $21.6 million in the second quarter of fiscal 1993, and in the
first half of fiscal 1994 by 14% to $49.0 million from $42.8 million in the
first half of fiscal 1993. The sales increases were principally due to higher
unit shipments in the Company's Linfinity Microelectronics Inc. (LMI)
operation and to the net sales of Navstar which was acquired by the Company in
August 1993.
Three months Six months
ended ended
December 31, December 31,
1993 1992 Change 1993 1992 Change
Net sales data* (In millions):
Telecom Solutions:
Synchronization $10.8 $11.8 (8%) $23.0 $22.5 2%
IDST 1.5 .9 67% 3.0 2.5 20%
Analog 1.6 1.3 23% 2.5 2.9 (14%)
Navstar 1.2 2.0
_____ _____ _____ _____
15.2 14.0 9% 30.4 27.9 9%
LMI 9.9 7.6 30% 18.7 14.8 26%
_____ _____ _____ _____
$25.0 $21.6 16% $49.0 $42.8 14%
_____ _____ _____ _____
* May not add due to rounding.
Telecom Solutions' net sales are highly dependent on obtaining large
orders of which there is no assurance. Furthermore, the timing of the receipt
and shipment of any such orders may result in a significant fluctuation of net
sales from quarter to quarter.
The gross profit margin, as a percentage of net sales, increased to 43%
in the second quarter and the first half of fiscal 1994 compared to 40% and
38% in the corresponding periods of fiscal 1993. The increase in the gross
profit margin percentage resulted primarily from higher unit volume and
improved manufacturing efficiencies in LMI which more than offset lower gross
margins in Telecom Solutions due to a shift to lower margin products and
decreased manufacturing efficiency. Future gross profit margins will largely
depend on product mix and manufacturing efficiencies.
Research and development expenses increased to $3.1 million and $6.1
million in the second quarter and first half of fiscal 1994, respectively,
representing increases of 63% and 65%, compared to $1.9 million and $3.7
million in the corresponding periods of fiscal 1993. The growth in research
and development expenses was due to increased development of new products and
enhancement of existing products in both Telecom Solutions and LMI.
Selling, general and administrative expenses increased to $5.3 million
and $10.3 million in the second quarter and first half of fiscal 1994,
respectively, representing increases of 10% and 16%, compared to $4.8 million
and $8.9 million in the corresponding periods of fiscal 1993. The increases
were due to higher selling expenses associated with higher sales and increased
emphasis on marketing and sales support.
The Company's effective tax rate was 28% in the second quarter and first
half of fiscal 1994 compared to 19% in the corresponding periods of fiscal
1993 and 22% for all of fiscal 1993. The increase in the fiscal 1994 tax rate
was due to the Company's expectation that a lower percentage of the Company's
income will be derived from its Puerto Rico operation in fiscal 1994 than in
fiscal 1993. The provisions of the Omnibus Budget Reconciliation Act of 1993
(Act) are not expected to have a material effect on the Company's financial
position or its results of operations in fiscal 1994. However, certain
provisions of the Act may result in less favorable tax treatment for its
Puerto Rico operations in future years.
Net earnings in the second quarter of fiscal 1994 increased to $1.7
million or $.11 per share from $1.5 million or $.10 per share in the same
quarter of fiscal 1993. Net earnings in the first half of fiscal 1994
increased to $3.4 million or $.22 per share from $2.8 million or $.19 per
share in the same period of fiscal 1993.
The Company's future earnings and stock price may be subject to
significant volatility. Any shortfall in sales or earnings from levels
expected by securities analysts and investors could have an immediate and
significant adverse effect on the trading price of the Company's common stock.
PART II. OTHER INFORMATION
Item 1. Litigation
On January 11, 1994, a complaint was filed in the United States
District Court for the Northern District of California against the
Company, three of its officers and two unaffiliated parties, by one
of the Company's shareholders. The complaint requests that the
court certify a class of plaintiffs consisting of persons who
purchased shares of the Company's common stock during a specified
period in 1993. The complaint alleges that false and misleading
statements made during that period artificially inflated the price
of the common stock in violation of federal securities laws. There
is no specific amount of damages requested in the complaint.
The Company and its officers believe that the complaint is entirely
without merit, and intend to vigorously defend against the action.
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Company's Annual Meeting of Shareholders was held on October
21, 1993.
(b) All director candidates, William D. Rasdal, Allen M. Peterson, Paul
N. Risinger and Robert M. Wolfe, were duly elected.
(c)(i) The votes for the director candidates were as follows:
Nominee Votes For Votes Withheld
William D. Rasdal 12,031,508 665,235
Allen M. Peterson 12,034,720 662,023
Paul N. Risinger 12,035,052 661,691
Robert M. Wolfe 12,030,920 665,823
There were no abstentions or broker non-votes with respect to
election of directors.
(c)(ii) The shareholders approved an amendment to the Company's Articles of
Incorporation to change the name of the Company to Symmetricom,
Inc. The vote was 12,242,806 for, 331,084 against and 122,853
abstaining.
(c)(iii) The shareholders approved Article III, Section 15, of the Company's
Bylaws to provide that the Company may, upon the approval of its
Board of Directors, make loans to officers of the Company. The
vote was 6,931,938 for, 1,849,701 against and 136,993 abstaining,
with 3,778,111 broker non-votes.
(c)(iv) The shareholders ratified loans of $95,000 and $10,000 made by the
Company in April 1993 and January 1993, respectively, to an officer
of the Company. The vote was 7,303,022 for, 1,374,926 against and
240,684 abstaining, with 3,778,111 broker non-votes.
(c)(v) The shareholders ratified the appointment of Deloitte & Touche as
the Company's independent auditors for the current fiscal year.
The vote was 12,608,134 for, 14,185 against and 74,424 abstaining.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the three months ended
December 31, 1993.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SYMMETRICOM, INC.
(Registrant)
DATE: January 20, 1994 By: /s/J. Scott Kamsler
_____________________________
J. Scott Kamsler
Vice President, Finance
and Chief Financial Officer
(for Registrant and as Principal
Financial and Accounting Officer)
