SYMMETRICOM, INC. and SUBSIDIARIES
FORM 10-Q
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
SYMMETRICOM, INC. and SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
March 31, June 30,
1994 1993
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 15,792 $ 18,232
Accounts receivable 11,777 10,905
Inventories 18,273 12,937
Other current assets 1,366 216
_________ _________
Total current assets 47,208 42,290
Property, plant and equipment, net 15,139 15,942
Other assets, net 2,667 722
_________ _________
$ 65,014 $ 58,954
_________ _________
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,684 $ 2,914
Accrued liabilities 8,973 9,986
Current maturities of long-term debt 45 42
_________ _________
Total current liabilities 12,702 12,942
Long-term debt, less current maturities 5,830 5,865
Deferred rent 474 604
Deferred income taxes 2,347 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 - 13,976
and 13,728 shares 14,631 13,936
Retained earnings 29,030 24,166
_________ _________
Total shareholders' equity 43,661 38,102
_________ _________
$ 65,014 $ 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 Nine months ended
March 31, March 31,
1994 1993 1994 1993
Net sales $ 24,368 $ 22,067 $ 73,413 $ 64,829
Cost of sales 14,457 12,937 42,271 39,538
________ ________ ________ ________
Gross profit 9,911 9,130 31,142 25,291
Operating expenses:
Research and development 2,567 2,258 8,626 5,953
Selling, general and
administrative 5,244 4,730 15,586 13,660
________ ________ ________ ________
Operating income 2,100 2,142 6,930 5,678
Interest income 83 104 242 293
Interest expense (151) (152) (453) (456)
________ ________ ________ ________
Earnings before income taxes 2,032 2,094 6,719 5,515
Income taxes 561 571 1,855 1,224
________ ________ ________ ________
Net earnings $ 1,471 $ 1,523 $ 4,864 $ 4,291
________ ________ ________ ________
Net earnings per common and common
equivalent share $ .10 $ .10 $ .32 $ .29
Weighted average common and common
equivalent shares outstanding 15,263 15,333 15,428 14,866
The accompanying notes are an integral part of these consolidated financial
statements.
SYMMETRICOM, INC. and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Nine months ended
March 31,
1994 1993
Cash flows from operating activities:
Cash received from customers $ 73,116 $ 63,875
Cash paid to suppliers and employees (69,688) (55,885)
Interest received 255 284
Interest paid (453) (456)
Income taxes paid (1,324) (1,157)
_________ _________
Net cash provided by operating activities 1,906 6,661
_________ _________
Cash flows from investing activities:
Purchase of Navstar (2,012)
Capital expenditures, net (2,463) (3,360)
Disposition (acquisition) of other assets (534) 17
_________ _________
Net cash used for investing activities (5,009) (3,343)
_________ _________
Cash flows from financing activities:
Repayment of long-term debt (32) (29)
Proceeds from issuance of common stock 695 1,523
_________ _________
Net cash provided by financing activities 663 1,494
_________ _________
Net increase (decrease) in cash and cash
equivalents (2,440) 4,812
Cash and cash equivalents at beginning of period 18,232 10,146
_________ _________
Cash and cash equivalents at end of period $ 15,792 $ 14,958
_________ _________
Reconciliation of net earnings to net cash provided
by operating activities:
Net earnings $ 4,864 $ 4,291
Adjustments (net of effects of Navstar purchase):
Depreciation and amortization 4,146 3,545
Net deferred income taxes 168
(Increase) in accounts receivable (560) (949)
(Increase) in inventories (4,892) (1,430)
Decrease (increase) in other current assets (412) 49
(Decrease) in accounts payable (265) (259)
Increase (decrease) in accrued liabilities (1,013) 1,512
(Decrease) in deferred rent (130) (98)
_________ _________
Net cash provided by operating activities $ 1,906 $ 6,661
_________ _________
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 March 31, 1994, the
results of operations for the three and nine month periods then ended and cash
flows for the nine 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:
March 31, June 30,
1994 1993
(In thousands)
Raw materials $ 8,703 $ 4,115
Work-in-progress 5,060 5,424
Finished goods 4,510 3,398
_________ ________
$ 18,273 $ 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 $5.2 million to $34.5 million at March 31,
1994 from $29.3 million at June 30, 1993, while the current ratio increased to
3.7 to 1.0 from 3.3 to 1.0. During the same period, cash and cash equivalents
decreased by $2.4 million to $15.8 million from $18.2 million. The decrease
was primarily due to $2.0 million used for the acquisition of Navstar and $2.5
million used for capital expenditures, offset by $1.9 million in cash provided
by operating activities which was net of an approximate $5.0 million increase
in inventory. The inventory increase was substantially due to the purchase of
certain components by the Company's Telecom Solutions operation in
anticipation of possible shortages. At March 31, 1994, 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 March 31, 1994, the Company had no material outstanding
commitments to purchase capital equipment.
Results of Operations
Net sales increased in the third quarter of fiscal 1994 by 10% to $24.4
million from $22.1 million in the third quarter of fiscal 1993, and in the
first three quarters of fiscal 1994 by 13% to $73.4 million from $64.8 million
in the first three quarters 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 addition of sales by Navstar
which was acquired by the Company in August 1993 for its Telecom Solutions
operation.
Three months Nine months
ended ended
March 31, March 31,
1994 1993 Change 1994 1993 Change
Net sales data* (In millions):
Telecom Solutions $ 14.2 $ 14.0 1% $ 44.5 $ 42.0 6%
LMI 10.2 8.0 28% 28.9 22.9 26%
______ ______ ______ ______
$ 24.4 $ 22.1 10% $ 73.4 $ 64.8 13%
______ ______ ______ ______
*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, was 41% in the
third quarter of fiscal 1994 and 1993 and increased to 42% in the first three
quarters of fiscal 1994 compared to 39% in the corresponding period of fiscal
1993. The gross profit margin percentages were impacted by higher unit volume
and improved manufacturing efficiencies in LMI, and by a shift to lower margin
products and decreased manufacturing efficiencies in Telecom Solutions.
Future gross profit margins will largely depend on product mix and
manufacturing efficiencies.
Research and development expenses increased to $2.6 million and $8.6
million in the third quarter and first three quarters of fiscal 1994,
respectively, representing increases of 13% and 43%, compared to $2.3 million
and $6.0 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 $5.2 million
and $15.6 million in the third quarter and first three quarters of fiscal
1994, respectively, representing increases of 11% and 14%, compared to $4.7
million and $13.7 million in the corresponding periods of fiscal 1993. The
increases were due to higher selling expenses associated with an increased
emphasis on marketing and sales activities.
The Company's effective tax rate was 28% in the third quarter and first
three quarters of fiscal 1994 compared to 27% and 22% in the corresponding
periods of fiscal 1993 and 22% for all of fiscal 1993. The increase in the
fiscal 1994 tax rate was primarily 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 operation in future years.
Net earnings in the third quarter of fiscal 1994 and 1993 were $1.5
million or $.10 per share. Net earnings in the first three quarters of fiscal
1994 increased to $4.9 million or $.32 per share from $4.3 million or $.29 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 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
March 31, 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: April 15, 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)
