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 December 31, 1994
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 0-2287
SYMMETRICOM, INC.
(Exact name of registrant as specified in its charter)
California No. 95-1906306
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
85 West Tasman Drive, San Jose, California 95134-1703
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (408) 943-9403
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
Applicable Only to Issuers Involved in Bankruptcy Proceedings
During the Preceding Five Years:
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes No
Applicable Only to Corporate Issuers:
Indicate number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date:
CLASS OUTSTANDING AS OF December 31, 1994
Common Stock 14,381,729
SYMMETRICOM, INC.
FORM 10-Q
INDEX
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheets
December 31, 1994 and June 30, 1994 3
Consolidated Statements of Operations
Three and six months ended December 31, 1994 and 1993 4
Consolidated Statements of Cash Flows
Six months ended December 31, 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 4. Submission of Matters to a Vote of Security Holders 9
Item 6. Exhibits and Reports on Form 8-K 9
SIGNATURES 10
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
SYMMETRICOM, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
December 31, June 30,
1994 1994
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 21,929 $ 21,250
Short-term investments 2,903
Accounts receivable 12,655 12,277
Inventories 16,538 15,811
Other current assets 3,539 2,405
_________ _________
Total current assets 57,564 51,743
Property, plant and equipment, net 15,678 14,930
Other assets, net 1,967 2,381
_________ _________
$ 75,209 $ 69,054
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 5,246 $ 4,224
Accrued liabilities 9,100 8,969
Current maturities of long-term debt 49 47
_________ _________
Total current liabilities 14,395 13,240
Long-term debt, less current maturities 5,793 5,818
Deferred rent 337 430
Deferred income taxes 2,961 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 - 14,382
and 14,071 shares 16,595 16,069
Retained earnings 35,128 30,717
_________ _________
Total shareholders' equity 51,723 46,786
_________ _________
$ 75,209 $ 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 Six months ended
December 31, December 31,
1994 1993 1994 1993
Net sales $ 25,590 $ 25,011 $ 49,771 $ 49,045
Cost of sales 14,210 14,200 27,570 27,814
________ ________ ________ ________
Gross profit 11,380 10,811 22,201 21,231
Operating expenses:
Research and development 3,259 3,100 6,296 6,059
Selling, general and
administrative 5,702 5,309 11,115 10,342
________ ________ ________ ________
Operating income 2,419 2,402 4,790 4,830
Interest income 278 55 501 159
Interest expense (150) (150) (300) (302)
________ ________ ________ ________
Earnings before income taxes 2,547 2,307 4,991 4,687
Income taxes 135 637 580 1,294
________ ________ ________ ________
Net earnings $ 2,412 $ 1,670 $ 4,411 $ 3,393
Net earnings per common and common
equivalent share $ .15 $ .11 $ .28 $ .22
Weighted average common and common
equivalent shares outstanding 15,672 15,421 15,542 15,510
The accompanying notes are an integral part of these consolidated financial
statements.
SYMMETRICOM, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Six months ended
December 31,
1994 1993
Cash flows from operating activities:
Cash received from customers $ 49,093 $ 49,238
Cash paid to suppliers and employees (42,330) (49,977)
Interest received 449 163
Interest paid (300) (302)
Income taxes paid (905) (771)
_________ _________
Net cash provided by (used for)
operating activities 6,007 (1,649)
_________ _________
Cash flows from investing activities:
Purchase of short-term investments (2,903)
Capital expenditures, net (3,005) (1,865)
Disposition (acquisition) of other assets 77 (443)
Purchase of Navstar (2,012)
_________ _________
Net cash used for investing activities (5,831) (4,320)
_________ _________
Cash flows from financing activities:
Repayment of long-term debt (23) (21)
Proceeds from issuance of common stock 526 521
_________ _________
Net cash provided by financing activities 503 500
_________ _________
Net increase (decrease) in cash and cash
equivalents 679 (5,469)
Cash and cash equivalents at beginning of period 21,250 18,232
_________ _________
Cash and cash equivalents at end of period $ 21,929 $ 12,763
Reconciliation of net earnings to net cash provided
by (used for) operating activities:
Net earnings $ 4,411 $ 3,393
Adjustments:
Depreciation and amortization 2,594 2,663
Net deferred income taxes (245) (205)
(Increase) in accounts receivable (378) (83)
(Increase) in inventories (727) (6,616)
(Increase) in other current assets (708) (385)
Increase in accounts payable 1,022 666
Increase (decrease) in accrued liabilities 131 (995)
(Decrease) in deferred rent (93) (87)
_________ _________
Net cash provided by (used for) operating
activities $ 6,007 $ (1,649)
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 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 December 31, 1994, 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 1995 and 1994 consist of 52 and 53 weeks,
respectively. The three month periods ended December 31, 1994 and 1993
consist of thirteen weeks. The six month periods ended December 31, 1994 and
1993 consist of twenty-six and twenty-seven weeks, respectively.
3. Short-term investments. Short-term investments, consisting of debt
securities, are valued at amortized cost which approximates market. 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.
4. Inventories. Inventories are stated at the lower of cost (first-in,
first-out) or market. Inventories consist of:
December 31, June 30,
1994 1994
(In thousands)
Raw materials $ 6,075 $ 7,677
Work-in-process 6,570 5,110
Finished goods 3,893 3,024
_________ ________
$ 16,538 $ 15,811
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources
Working capital increased by $4.7 million to $43.2 million at December
31, 1994 from $38.5 million at June 30, 1994, while the current ratio
increased to 4.0 to 1.0 from 3.9 to 1.0. During the same period, cash and
cash equivalents increased by $.7 million to $21.9 million from $21.3 million.
The increase was primarily due to $6.0 million in cash provided by operating
activities and $.5 million in proceeds from issuance of common stock,
partially offset by $2.9 million used for purchases of short-term investments
and $3.0 million used for capital expenditures. At December 31, 1994, the
Company had $7.0 million of unused credit available under its bank line of
credit.
The Company believes that cash, cash equivalents, short-term
investments, 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, 1994, the Company
had no material outstanding commitments to purchase capital equipment.
Results of Operations
Net sales for the three and six month periods ended December 31, 1994
and 1993 were as follows:
Three Months Six Months
Ended Ended
December 31, December 31,
1994 1993 Change 1994 1993 Change
(In millions)
Net sales data*:
Telecom Solutions $ 15.8 $ 15.2 4% $ 30.2 $ 30.4 (1)%
Linfinity
Microelectronics Inc. 9.8 9.9 - 19.6 18.7 5 %
______ ______ ______ ______
$ 25.6 $ 25.0 2% $ 49.8 $ 49.0 1 %
*May not add due to rounding.
Telecom Solutions net sales increased in the second quarter of fiscal
1995 compared to the second quarter of fiscal 1994 as higher synchronization
sales more than offset lower IDST, Navstar and analog sales. Telecom
Solutions net sales were essentially unchanged in the first half of fiscal
1995 compared to the first half of fiscal 1994 as higher synchronization sales
were more than offset by lower Navstar and analog sales. The higher
synchronization sales were primarily due to sales of new products. IDST sales
continue to be highly dependent on large customer orders and may fluctuate
significantly from quarter to quarter. The analog product line is mature and
sales are expected to decline substantially during fiscal 1995 and be
negligible thereafter. Linfinity Microelectronics Inc. (LMI) net sales were
basically flat during the second quarter of fiscal 1995 and increased by 5%
during the first half of fiscal 1995 compared to the corresponding periods of
fiscal 1994. The increase was primarily 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 44%
and 45% in the second quarter and first half of fiscal 1995, respectively,
compared to 43% in both of the corresponding periods of fiscal 1994. The
fiscal 1995 second quarter increase resulted primarily from a shift in Telecom
Solutions sales to higher margin products and improved Telecom Solutions
manufacturing efficiencies which more than offset a shift in LMI sales to
lower margin products. The fiscal 1995 first half increase was primarily
attributable to increased unit volume and other manufacturing efficiencies at
LMI. Future gross profit margins will largely depend on product mix and
manufacturing efficiencies.
Research and development expense was $3.3 million (or 13% of sales) and
$6.3 million (or 13% of sales) in the second quarter and first half of fiscal
1995, respectively, compared to $3.1 million (or 12% of sales) and $6.1
million (or 12% of sales) in the corresponding periods of fiscal 1994 as the
Company continued its emphasis on new product development at both Telecom
Solutions and LMI.
Selling, general and administrative expense increased to $5.7 million
(or 22% of sales) and $11.1 million (or 22% of sales) in the second quarter
and first half of fiscal 1995, respectively, compared to $5.3 million (or 21%
of sales) and $10.3 million (or 21% of sales) in the corresponding periods of
fiscal 1994. The increases were primarily due to higher compensation levels.
Interest income increased to $.3 million and $.5 million in the second
quarter and first half of fiscal 1995, respectively, compared to $.1 million
and $.2 million in the corresponding periods of fiscal 1994 primarily due to
an increase in cash available for investment and higher interest rates.
The Company's effective tax rate was 5% and 12% in the second quarter
and first half of fiscal 1995, respectively, compared to 28% in both of the
corresponding periods 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.
In future years, the Company expects the effective rate to more closely
approximate the combined federal and state tax rate reduced by any benefit
that may be derived from the Company's operation in Puerto Rico.
As a result of the above factors, net earnings in the second quarter of
fiscal 1995 increased to $2.4 million, or $.15 per share, compared to $1.7
million, or $.11 per share, in the same quarter of fiscal 1994. Net earnings
in the first half of fiscal 1995 increased to $4.4 million, or $.28 per share,
from $3.4 million, or $.22 per share, in the same period of fiscal 1994.
Future Company operating results will largely depend upon the Company's
ability to implement new technologies and develop new 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 4. Submission of Matters to a Vote of Security Holders
(a) The Company's Annual Meeting of Shareholders was held on October
20, 1994.
(b) All director candidates, William D. Rasdal, Paul N. Risinger,
Robert M. Wolfe and Howard Anderson, were duly elected.
(c)(i) The votes for the director candidates were as follows:
Nominee Votes For Votes Withheld
William D. Rasdal 13,138,329 289,181
Paul N. Risinger 13,295,494 132,016
Robert M. Wolfe 13,347,244 80,266
Howard Anderson 13,346,544 80,966
There were no abstentions or broker non-votes with respect to
election of directors.
(c)(ii) The shareholders ratified the adoption of the Employee Stock
Purchase Plan and the reservation of 450,000 shares of Common
Stock for issuance thereunder. The vote was 12,883,886 for,
267,939 against and 71,410 abstaining, with 204,275 broker non
votes.
(c)(iii) The shareholders ratified the appointment of Deloitte & Touche LLP
as the Company's independent auditors for the current fiscal year.
The vote was 13,331,406 for, 31,402 against and 64,702 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, 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: January 25, 1995 By: /s/J. Scott Kamsler
_____________________________
J. Scott Kamsler
Vice President, Finance
and Chief Financial Officer
(for Registrant and as Principal
Financial and Accounting Officer
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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