SYMMETRICOM, INC.
FORM 10-Q
INDEX
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheets
September 30, 1994 and June 30, 1994 3
Consolidated Statements of Operations
Three months ended September 30, 1994 and 1993 4
Consolidated Statements of Cash Flows
Three months ended September 30, 1994 and 1993 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 8
SIGNATURES 9
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
SYMMETRICOM, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
September 30, June 30,
1994 1994
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 22,337 $ 21,250
Accounts receivable 12,092 12,277
Inventories 16,406 15,811
Other current assets 3,056 2,405
________ ________
Total current assets 53,891 51,743
Property, plant and equipment, net 15,002 14,930
Other assets, net 2,140 2,381
________ ________
$ 71,033 $ 69,054
________ ________
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,809 $ 4,224
Accrued liabilities 8,994 8,969
Current maturities of long-term debt 47 47
________ ________
Total current liabilities 12,850 13,240
Long-term debt, less current maturities 5,807 5,818
Deferred rent 387 430
Deferred income taxes 2,878 2,780
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 - 14,234
and 14,071 shares 16,395 16,069
Retained earnings 32,716 30,717
________ ________
Total shareholders' equity 49,111 46,786
________ ________
$ 71,033 $ 69,054
________ ________
The accompanying notes are an integral part of these consolidated financial
statements.
SYMMETRICOM, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
Three months ended
September 30,
1994 1993
Net sales $ 24,181 $ 24,034
Cost of sales 13,360 13,614
________ ________
Gross profit 10,821 10,420
Operating expenses:
Research and development 3,037 2,959
Selling, general and administrative 5,413 5,033
________ ________
Operating income 2,371 2,428
Interest income 223 104
Interest expense (150) (152)
________ ________
Earnings before income taxes 2,444 2,380
Income taxes 445 657
________ ________
Net earnings $ 1,999 $ 1,723
________ ________
Net earnings per common and common
equivalent share $ .13 $ .11
Weighted average common and common
equivalent shares outstanding 15,413 15,599
The accompanying notes are an integral part of these consolidated financial
statements.
SYMMETRICOM, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three months ended
September 30,
1994 1993
Cash flows from operating activities:
Cash received from customers $ 24,361 $ 25,180
Cash paid to suppliers and employees (22,228) (28,334)
Interest received 223 117
Interest paid (150) (152)
Income taxes paid (327) (273)
________ ________
Net cash provided by (used for) operating
activities 1,879 (3,462)
________ ________
Cash flows from investing activities:
Purchase of Navstar - (2,012)
Capital expenditures, net (1,181) (1,118)
(Increase) decrease in other assets 74 (94)
________ ________
Net cash used for investing activities (1,107) (3,224)
________ ________
Cash flows from financing activities:
Repayment of long-term debt (11) (11)
Proceeds from issuance of common stock 369 353
Notes receivable for common stock purchase (43) -
________ ________
Net cash provided by financing activities 315 342
________ ________
Net increase (decrease) in cash and cash
equivalents 1,087 (6,344)
Cash and cash equivalents at beginning of period 21,250 18,232
________ ________
Cash and cash equivalents at end of period $ 22,337 $ 11,888
________ ________
Reconciliation of net earnings to net cash provided
by operating activities:
Net earnings $ 1,999 $ 1,723
Adjustments:
Depreciation and amortization 1,276 1,274
Net deferred income taxes (80) 148
Decrease in accounts receivable 185 737
(Increase) in inventories (595) (6,414)
(Increase) in other current assets (473) (641)
Increase (decrease) in accounts payable (415) 1,641
Increase (decrease) in accrued liabilities 25 (1,886)
(Decrease) in deferred rent (43) (44)
________ ________
Net cash provided by (used for) operating
activities $ 1,879 $ (3,462)
________ ________
The accompanying notes are an integral part of these consolidated financial
statements.
SYMMETRICOM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation. The consolidated financial statements included
herein have been prepared by Symmetricom, 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 consolidated financial statements and the notes thereto included in
the Company's Annual Report on Form 10-K for the year ended June 30, 1994.
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 September 30, 1994,
the results of operations and the cash flows for the three month period then
ended. The results of operations for the period presented are not necessarily
indicative of those that may be expected for the full year.
2. Fiscal Period. Fiscal years 1995 and 1994 consist of 52 and 53 weeks,
respectively. The fiscal 1995 and 1994 first quarters consist of thirteen and
fourteen weeks, respectively.
3. Inventories. Inventories are stated at the lower of cost (first-in,
first-out) or market. Inventories consist of:
September 30, June 30,
1994 1994
(In thousands)
Raw materials $ 6,315 $ 7,677
Work-in-progress 6,809 5,110
Finished goods 3,282 3,024
________ ________
$ 16,406 $ 15,811
________ ________
4. Adoption of New Accounting Standard. Effective July 1, 1994, the
Company adopted the provisions of Statement of Financial Accounting Standards
No. 115, "Accounting for Certain Investments in Debt and Equity Securities",
with no significant effect on the Company's financial position or results of
operation.
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 $41.0 million at September
30, 1994 from $38.5 million at June 30, 1994, while the current ratio
increased to 4.2 to 1.0 from 3.9 to 1.0. During the same period, cash and
cash equivalents increased by $1.0 million to $22.3 million from $21.3
million. The increase was primarily due to $1.9 million in cash provided by
operating activities and $.3 million in proceeds from issuance of common
stock, offset by $1.2 million used for capital expenditures. At September 30,
1994, the Company had $7.0 million of unused credit available under its 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 September 30, 1994, the Company had no material outstanding
commitments to purchase capital equipment.
Results of Operations
Net sales increased in the first quarter of fiscal 1995 by 1% to $24.2
million from $24.0 million in the first quarter of fiscal 1994. Telecom
Solutions net sales for the same periods were $14.4 million compared to $15.2
million, respectively, as higher IDST sales were more than offset by lower
synchronization and analog sales. IDST sales continue to be highly dependent
on large customer orders and may fluctuate significantly from quarter to
quarter. While overall synchronization sales were lower in the first quarter
of fiscal 1995, new synchronization products became generally available and
sales have increased from prior quarters. The analog product line is mature
and sales are expected to decline substantially during fiscal 1995. Linfinity
Microelectronics Inc. (LMI) net sales increased in the first quarter of fiscal
1995 by 11% to $9.8 million from $8.8 million in the first quarter of fiscal
1994 principally due to higher unit volume which more than offset a shift in
sales to lower priced products.
The gross profit margin, as a percentage of net sales, increased to 45%
in the first quarter of fiscal 1995 compared to 43% in the corresponding
period of fiscal 1994. The higher gross profit margin percentage resulted
primarily from increased unit volume and other manufacturing efficiencies at
LMI which offset a shift to lower margin products at Telecom Solutions.
Future gross profit margins will largely depend on product mix and
manufacturing efficiencies.
Research and development expense was $3.0 million (or approximately 12%
of sales) in the first quarter of both fiscal 1995 and 1994 as the Company
continues its emphasis on new product development at both Telecom Solutions
and LMI.
Selling, general and administrative expense increased by 8% to $5.4
million (or 22% of sales) in the first quarter of fiscal 1995 from $5.0
million (or 21% of sales) in the corresponding period of fiscal 1994. The
increase was due to higher selling expenses and increased general and
administrative costs.
The Company's effective tax rate was 18% in the first quarter of fiscal
1995 compared to 28% in the corresponding period of fiscal 1994 and 19% for
all of fiscal 1994. The effective tax rate for fiscal 1995 is expected to be
lower than the combined federal and state tax rate primarily due to an
anticipated reduction in the valuation allowance for deferred tax assets based
on the Company's assessment of future realizability of such assets, and to the
anticipated benefit of having a portion of the Company's income taxed at lower
rates in Puerto Rico.
As a result of the above factors, net earnings in the first quarter of
fiscal 1995 increased to $2.0 million, or $.13 per share, compared to $1.7
million, or $.11 per share, in the first quarter of fiscal 1994.
Future Company operating results will largely depend upon the Company's
ability to implement new technologies and products, changes in product mix and
manufacturing efficiencies. Future Telecom Solutions operating results will
also continue to be highly dependent on receipt of orders during any
particular fiscal period. Future LMI operating results will also be subject
to the cyclical nature of the semiconductor industry.
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 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 September 30, 1994.
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: October 19, 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)
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