UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1995
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
andreports 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 JANUARY 31, 1996
Common Stock 15,536,943
SYMMETRICOM, INC.
FORM 10-Q
INDEX
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheets
December 31, 1995 and June 30, 1995 3
Consolidated Statements of Operations
Three and six months ended December 31, 1995 and 1994 4
Consolidated Statements of Cash Flows
Six months ended December 31, 1995 and 1994 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 10
Item 6. Exhibits and Reports on Form 8-K 11
SIGNATURES 11
SYMMETRICOM, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
December 31, June 30,
1995 1995
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 22,412 $ 19,354
Short-term investments 12,970 13,851
Accounts receivable 15,377 11,845
Inventories 17,778 17,855
Other current assets 3,589 3,715
_________ _________
Total current assets 72,126 66,620
Property, plant and equipment, net 19,419 16,978
Other assets, net 1,405 1,728
_________ _________
$ 92,950 $ 85,326
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 4,453 $ 4,308
Accrued liabilities 11,892 11,521
Current maturities of long-term debt 54 52
_________ _________
Total current liabilities 16,399 15,881
Long-term debt, less current maturities 5,739 5,766
Deferred rent 125 231
Deferred income taxes 3,381 3,323
Shareholders' equity:
Preferred stock, no par value:
Authorized 500 shares
Issued none
Common stock, no par value:
Authorized 32,000 shares
Issued and outstanding 15,435
and 15,097 shares 20,135 19,062
Retained earnings 47,171 41,063
_________ _________
Total shareholders' equity 67,306 60,125
_________ _________
$ 92,950 $ 85,326
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,
1995 1994 1995 1994
Net sales $ 28,426 $ 25,590 $ 56,104 $ 49,771
Cost of sales 14,837 14,210 29,449 27,570
________ ________ ________ ________
Gross profit 13,589 11,380 26,655 22,201
Operating expenses:
Research and development 3,522 3,259 7,148 6,296
Selling, general and
administrative 5,921 5,702 11,861 11,115
________ ________ ________ ________
Operating income 4,146 2,419 7,646 4,790
Interest income 481 278 947 501
Interest expense (148) (150) (297) (300)
________ ________ ________ ________
Earnings before income taxes 4,479 2,547 8,296 4,991
Income taxes 1,142 135 2,188 580
________ ________ ________ ________
Net earnings $ 3,337 $ 2,412 $ 6,108 $ 4,411
Net earnings per common and
common equivalent share $ .21 $ .15 $ .38 $ .28
Weighted average common and common
equivalent shares outstanding 16,045 15,672 16,124 15,542
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,
1995 1994
Cash flows from operating activities:
Cash received from customers $ 51,789 $ 49,093
Cash paid to suppliers and employees (46,340) (42,330)
Interest received 884 449
Interest paid (297) (300)
Income taxes paid (208) (905)
_________ _________
Net cash provided by operating activities 5,828 6,007
_________ _________
Cash flows from investing activities:
Purchases of short-term investments (16,619) (2,903)
Maturities of short-term investments 17,500
Capital expenditures, net (4,720) (3,005)
Other assets 21 77
_________ _________
Net cash used for investing activities (3,818) (5,831)
_________ _________
Cash flows from financing activities:
Repayment of long-term debt (25) (23)
Proceeds from issuance of common stock 1,073 526
_________ _________
Net cash provided by financing activities 1,048 503
_________ _________
Net increase in cash and cash equivalents 3,058 679
Cash and cash equivalents at beginning of
period 19,354 21,250
_________ _________
Cash and cash equivalents at end of period $ 22,412 $ 21,929
Reconciliation of net earnings to net cash provided
by operating activities:
Net earnings $ 6,108 $ 4,411
Adjustments
Depreciation and amortization 2,581 2,594
Net deferred income taxes 623 (245)
(Increase) in accounts receivable (3,532) (378)
(Increase) decrease in inventories 77 (727)
(Increase) in other current assets (439) (708)
Increase in accounts payable 145 1,022
Increase in accrued liabilities 371 131
(Decrease) in deferred rent (106) (93)
_________ _________
Net cash provided by operating activities $ 5,828 $ 6,007
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, 1995.
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, 1995,
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. Inventories. Inventories are stated at the lower of cost (first-in,
first-out) or market. Inventories consist of:
December 31, June 30,
1995 1995
(In thousands)
Raw materials $ 5,784 $ 5,433
Work-in-process 6,402 6,910
Finished goods 5,592 5,512
_______ _______
$17,778 $17,855
======= =======
3. Recent Accounting Pronouncements. In October 1995, Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" (SFAS 123) was issued which allows the adoption of a fair
value based method of accounting for stock-based compensation plans. The
Company believes at this time, as permitted by SFAS 123, that it will elect
to provide certain disclosures including pro forma net earnings and net
earnings per share information as if the fair value method had been adopted
beginning in its fiscal 1997 financial statements
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Business Outlook and Risk Factors
The statements contained in Management's Discussion and Analysis of
Financial Condition and Results of Operations include "forward looking
information" within the meaning of Section 21E of the Securities and
Exchange Act of 1934, as amended, and is subject to the safe harbor created
by that Section. The Company's actual results could differ materially from
those projected in the forward looking information. Some factors which could
cause future actual results to materially differ from the Company's recent
results or those projected in the forward looking information are listed
below. The Company assumes no obligation to update the information
contained herein.
Potential Fluctuations in Quarterly Operating Results. The Company's
quarterly results have fluctuated in the past, and may continue to fluctuate
in the future, due to a number of factors including the timing, cancellation
or delay of customer orders; the mix of products sold; the timing of new
product introductions by the Company or its competitors; the long sales
cycles associated with the Company's products; market acceptance of the
Company's and its competitors' products; and other competitive factors.
Company operations entail a high level of fixed costs and require an
adequate volume of production and sales to maintain adequate gross margins.
During periods of decreased demand, these high fixed costs could have a
material adverse effect on the Company's business, operating results and
financial condition. Telecom Solutions spending for selling, marketing
and research and development will increase in the third quarter of fiscal
1996.
Order Timing. A substantial portion of each quarter's shipments are based
on orders received during that quarter. Therefore, operating results may
fluctuate significantly from quarter to quarter due to uncertainty in the
timing of the receipt of orders. Low orders booked by Linfinity
Microelectronics Inc. (Linfinity) during the second
quarter and first month of the third quarter of fiscal 1996 will
result in lower Linfinity net sales and profitability in the third quarter
of fiscal 1996. As actual shipments will depend on orders received during
the quarter, and the timing of such orders is difficult to predict,
Linfinity may incur a loss during the quarter.
Product Performance and Reliability. The Company's customers establish
demanding specifications for performance and reliability. The Company's
products are complex and use many state of the art components, processes
and techniques. Any unforeseen problem due to the advanced nature of the
technology employed in the Company's products could have a material
adverse effect on the Company's operating results.
Market Change. Future results depend in large part on growth in the
market for the Company's products. These markets are subject to changes due
to economic conditions in general, or as those conditions relate
specifically to the markets in which the Company competes. Some factors
which affect the markets for the Company's products include changes in
regulatory conditions, legislation, export rules or conditions, interest
rates and fluctuations in the business cycle for any particular market
segment.
Competition. Markets for the Company's products are highly competitive,
and some of the Company's competitors, or potential competitors are
much larger than the Company, with substantially greater resources.
Operating results are subject to fluctuation based on unforeseen actions
taken by competitors. Competition with some of the Company's products is
increasing. Results will depend on the Company's ability to maintain
competitive performance, quality, cost and service.
The Company's stock price has been and may continue to be subject to
significant volatility. Many factors, including 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.
Liquidity and Capital Resources
Working capital increased by $5.0 million to $55.7 million at December 31,
1995 from $50.7 million at June 30, 1995, while the current ratio increased
to 4.4 to 1.0 from 4.2 to 1.0. During the same period, cash and cash
equivalents, and short-term investments increased to $35.4 million from
$33.2 million primarily due to $5.8 million in cash provided by operating
activities and $1.1 million in proceeds from the issuance of common stock,
partially offset by $4.7 million used for capital expenditures. At
December 31, 1995, the Company had $7.0 million of unused credit available
under its bank line of credit.
The Company believes that cash and 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, 1995,
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, 1995 and
1994 were as follows:
Three Months Six Months
Ended Ended
December 31, December 31,
1995 1994 Change 1995 1994 Change
(In millions)
Net sales data*:
Telecom Solutions $18.4 $15.8 17% $35.6 $30.2 18%
Linfinity
Microelectronics Inc. 10.1 9.8 2% 20.5 19.6 5%
_____ _____ _____ _____
$28.4 $25.6 11% $56.1 $49.8 13%
* May not add due to rounding.
Telecom Solutions net sales increased 17% in the second quarter of fiscal
1996 compared to the second quarter of fiscal 1995 primarily due to higher
Integrated Digital Services Terminal (IDST) sales. Telecom Solutions net
sales increased 18% in the first half of fiscal 1996 compared to the first
half of fiscal 1995 principally due to higher new synchronization product
and IDST sales which more than offset declines in mature synchronization
product sales. Linfinity net sales remained relatively flat during
the second quarter of fiscal 1996 and increased 5% in the first half of fiscal
1996 compared to the corresponding periods of fiscal 1995. The increase
was primarily due to higher unit volume.
The gross profit margin, as a percentage of net sales, increased to 48% in
both the second quarter and first half of fiscal 1996 compared to 44% and
45% in the corresponding periods of fiscal 1995. The fiscal 1996 second
quarter increase resulted primarily from higher efficiencies at Linfinity.
The fiscal 1996 first half increase was primarily attributable to increased
unit volume and other manufacturing efficiencies at both operations.
Future gross profit margins will largely depend on product mix,
manufacturing efficiencies and selling prices.
Research and development expense was $3.5 million (or 12% of sales) and
$7.1 million (or 13% of sales) in the second quarter and first half of
fiscal 1996, respectively, compared to $3.3 million (or 13% of sales) and
$6.3 million (or 13% of sales) in the corresponding periods of fiscal 1995
as the Company continued to focus on new product development at both
Telecom Solutions and Linfinity.
Selling, general and administrative expense increased to $5.9 million (or
21% of sales) and $11.9 million (or 21% of sales) in the second quarter and
first half of fiscal 1996, respectively, compared to $5.7 million (or 22%
of sales) and $11.1 million (or 22% of sales) in the corresponding periods
of fiscal 1995. The dollar increases were primarily due to higher Telecom
Solutions selling expenses and increased Linfinity general and
administrative costs.
Interest income increased to $.5 million and $.9 million in the second
quarter and first half of fiscal 1996, respectively, compared to $.3
million and $.5 million in the corresponding periods of fiscal 1995
primarily due to an increase in funds available for investment.
The Company's effective tax rate was 25% and 26% in the second quarter and
first half of fiscal 1996, respectively, compared to 5% and 12% in the
corresponding periods of fiscal 1995 and 11% for all of fiscal 1995. The
effective tax rate for fiscal 1996 is expected to be lower than the
combined federal and state tax rate primarily due to the benefit of lower
income tax rates on income earned in Puerto Rico and state tax credits.
The lower effective tax rate in fiscal 1995 compared to fiscal 1996 was
primarily due to the reduction in the valuation allowance for deferred tax
assets in fiscal 1995. In future years, certain provisions of the Omnibus
Budget Reconciliation Act of 1993 may result in less favorable tax
treatment for income earned in Puerto Rico. Additionally, several
legislative proposals currently in Congress, if enacted, would result in
the eventual elimination of the favorable tax treatment for income earned
in Puerto Rico.
As a result of the above factors, net earnings in the second quarter of
fiscal 1996 increased to $3.3 million, or $.21 per share, compared to $2.4
million, or $.15 per share, in the second quarter of fiscal 1995. Net
earnings in the first half of fiscal 1996 increased to $6.1 million, or
$.38 per share, from $4.4 million, or $.28 per share, in the same period of
fiscal 1995.
Accounting Pronouncement
In October 1995, Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" (SFAS 123) was issued which
allows the adoption of a fair value based method of accounting for stock-
based compensation plans. The Company believes at this time, as permitted
by SFAS 123, that it will elect to provide certain disclosures including
pro forma net earnings and net earnings per share information as if the
fair value method had been adopted beginning in its fiscal 1997 financial
statements.
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 25,
1995.
(b) All director candidates, William D. Rasdal, Paul N. Risinger, Howard
Anderson, Roger A. Strauch 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 13,866,110 114,386
Paul N. Risinger 13,918,710 61,786
Howard Anderson 13,918,878 61,618
Roger A. Strauch 13,914,618 65,878
Robert M. Wolfe 13,917,178 63,318
There were no abstentions or broker non-votes with respect to election of
directors.
(c)( ii) The shareholders approved the amendments to the Company's 1990
Employee Stock Plan (the "1990 Plan") to (i) increase the number of shares
reserved for issuance thereunder from 1,700,000 to 2,200,000, (ii) provide
that on the first day of each fiscal year of the corporation, beginning
with the fiscal year commencing July 1, 1996, the number of shares reserved
for issuance under the 1990 Plan shall be increased by an amount equal to
3.0% of the outstanding shares of the Company's Common Stock as of the last
trading day of the Company's immediately preceding fiscal year, and (iii)
provide that the number of shares that may be granted to any employee of
the Company in any fiscal year is limited to 250,000 shares to comply with
the requirements applicable to "performance-based compensation" under
Section 162(m) of the Internal Revenue Code of 1986, as amended; provided
that at the time of initial hire, an employee of the Company may be granted
an option to purchase an additional 250,000 shares which shall not count
against the 250,000 share limit set forth above. The vote was 10,781,007
for, 2,856,675 against and 99,754 abstaining, with 243,060 broker non-
votes.
(c)(iii) The shareholders approved the amendments to the Company's 1990
Director Option Plan to (i) increase the number of shares reserved for
issuance thereunder from 150,000 to 300,000, (ii) provide for the automatic
grant to each outside director of (a) a 10,000 share option on the date on
which such person first becomes an outside director and (b) a 10,000 share
option on January 1 of each year, if on such date, such person shall have
served on the Board for at least six months, and (iii) modify the section
pertaining to merger and sale of assets to (a) provide for full
acceleration of vesting in a merger or sale transaction in the event that
outstanding options are not assumed or substituted, (b) amend the
definition of "Change in Control" to delete reference to transactions
requiring shareholder approval, and (c) provide for full acceleration of
vesting in the event of the acquisition by a person of 50% or more of the
combined voting power of the Company's then outstanding securities. The
vote was 12,423,502 for, 1,005,159 against and 113,157 abstaining, with
438,678 broker non-votes.
(c)(iv) The shareholders ratified the appointment of Deloitte & Touche
LLP as the Company's independent auditors for the current fiscal year. The
vote was 13,777,294 for, 162,400 against and 39,302 abstaining, with 1,500
broker non-votes.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.25 Supplement and Amendment, dated November 27, 1995, to the Lease
Agreement by and between Telecom Solutions Puerto Rico, Inc., a
subsidiary of the Company, and Puerto Rico Industrial Development
Company dated August 9, 1994.
27.1 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the three months ended
December 31, 1995.
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: February 12, 1996 By:
/s/J. Scott Kamsler
J. Scott Kamsler
Vice President, Finance
and Chief Financial Officer
(for Registrant and as Principal
Financial and Accounting Officer)
PUERTO RICO INDUSTRIAL DEVELOPMENT COMPANY
SAN JUAN, PUERTO RICO 00936-2350
SUPPLEMENT AND AMENDMENT TO LEASE CONTRACT
PROJECT NO S-1309-0-80
LOCATION: AGUADA PUERTO RICO
NOW COMES the PUERTO RICO INDUSTRIAL DEVELOPMENT COMPANY (hereinafter
referred to as the "LANDLORD") and TELECOM SOLUTIONS PUERTO RICO, INC.,
(hereinafter referred to as the "TENANT") and agree to supplement and
amend a certain Lease Contract entered into by them on August 9, 1994 as
subsequently amended (hereinafter referred to as the "Contract")
covering certain land site and buildings located at Aguada, Puerto Rico,
identified as Project No. S-1309-0-80 (hereinafter referred to as the
"Original Premises"), in the following aspects:
ONE: LANDLORD hereby demises and lets unto TENANT, and TENANT hereby
leases from LANDLORD the Premises identified as Project No. S-1309-0-80
located at Aguada, Puerto Rico, (hereinafter referred to as the
"Additional Premises") which are fully described in Schedule "A" hereto
annexed and made a part hereof. The Additional Premises shall be used
and occupied exclusively in the manufacture of communication equipment
(SIC, #03663).
TWO: The additional premises shall be included as part of the demised
premises covered by the contract and, as such , subject to all
applicable terms, convenants and conditions thereof as they have been
hereby supplemented and/or amended.
THREE: The deposit required under the provisions of this contract shall
be complied with by TENANT as hereinafter specified: a. the amount of
$1,038.00 previously deposited by TENANT reserved Project S-1309-0-80
(CR No. 134412 of March 14, 1995), b. the amount of $4,943.24 shall be
paid by Tenant in certified check with execution of this Supplement to
Lease Contract.
This deposit shall guarantee the compliance by TENANT of its
obligations, under this Contract, particularly, but not limited to, the
payment of rent, the compliance of the environmental clauses herein
included and the return of the Premises in proper condition at the
termination of this Lease. On said termination, if TENANT is not
in default of any of the terms and conditions of this Contract, LANDLORD
will return to TENANT the sum of money, if any, held pursuant to this
provision, after LANDLORD's Environmental Office certifies
that there are no environmental deficiencies as a result of Tenant's
manufacturing operation on the demised Premises.
FOUR: Commencing on the first day of the first month after the delivery
of the additional premises, TENANT shall pay to LANDLORD an annual
rental of $2.20 per square foot of gross building area for the remanent
term equally to $4,153.64 monthly.
The monthly installments for rent specified herein, shall be paid in
advance on the first day of each month at LANDLORD'S office, or at any
other place that LANDLORD may notify. In the event that the date of
commencement does not fall on the first of the month, TENANT further
agrees to pay the first partial monthly installments, prior to, or on
the date of commencement.
FIVE: Not Applicable.
SIX: TENANT agrees to have on the date of commencement of the term of
this Lease a capitalization of $150,000.00.
Likewise TENANT agrees to install within six (6) months from the same
date manufacturing machinery and equipment with a value of at least
$150,000.00.
This shall not include the cost of transportation and installation
thereof, nor its ordinary depreciation after installation; and within
eighteen (18) months from the date of commencement of the term, to
employ a minimum of seventy five (75), The aforementioned levels, shall
be maintained throughout the term of this Lease or any extension thereof
and shall be in addition to the of capitalization, machinery and
employment levels established in the original Contract.
SEVEN : All notices,demands,approvals,consents and/or communications
herein required or permitted shall be in writing. If by mail, should
be certified and to the following addresses; To LANDLORD:
PO BOX 362350, SAN JUAN, PUERTO RICO 00936-2350. To TENANT:
TELECOM SOLUTIONS, 85 West Tasman Drive, San Jose, CA AND/OR Mr.
Nick Barreto, General Manager, P. 0. Box 1046, Aguada, Puerto
Rico 00602.
EIGHT: Net Lease - This Lease shall be interpreted as a net lease; it
being the exclusive responsibility of TENANT to pay for all operating
expenses, utilities, maintenance, expenses, insurance, taxes or any
other costs, expenses or charges of any nature not specifically assumed
by LANDLORD hereunder.
NINE: TENANT hereby acknowledges that the building herein demised is in
need of certain repairs which LANDLORD undertakes to commence presently
after execution hereof.
TEN: In as much as TENANT represented that in order to carry out
its operations it is necessary to install and operate an emergency
generator, solder machine, and vapors generator; it is hereby
specifically agreed and understood that: (1) Such installation shall be
made in coordination and with the approval of LANDLORD; (2) TENANT
shall request and obtain from the Environmental Quality, the necessary
permit to operate the said installation and, thereafter, shall abide by
and comply with all requisites imposed by the said Board for such
operations. It being further agreed and understood that
non-compliance by TENANT with the foregoing provisions shall constitute
an additional event of default under the provisions of this Contract.
ELEVEN: TENANT must strictly comply with the rules established in "OSHA
Standards for General Industry" regulations, in specific, sections
1910.104, 1910.106 and 1910.110 and with any other local applicable
regulation in relation to the localization, accessibility, spillage and
escapes, elevations, dams, distances between tanks, design,
construction, security equipment, operation and maintenance of the
propane and oxygen tanks to be installed. As a desirable security
measure a minimum distance of 25 feet between the exterior diameter of
the tanks and the closest industrial building is suggested when and if
the physical conditions of the lot so permits. Under no circumstances
will distances smaller than those established in the hereinabove
mentioned regulations be permitted.
TWELVE: Anything contained in this Supplement to the contrary
notwithstanding, it is hereby agreed and understood by the parties
hereto that the total investment, investment in machinery and equipment
and employment provided in this Contract are in addition to and not in
lieu of the total investment of $4,500,000.00, investment in machinery
and equipment of $2,200,000.00, and employment of one hundred eighty
(180) persons heretofore required from TENANT under the Contract with
LANDLORD.
THIRTEEN: All terms and conditions of the Lease Contract executed on
August 9, 1994 shall be deemed supplemented and amended to the extent
inconsistent with the terms hereof and the ones not expressly
supplemented and amended shall remain in full force and effect.
FOURTEEN: TENANT agrees to submit to LANDLORD within thirty (30) days
from the date of execution of this Contract: a certificate of a
resolution of its Board of Directors either authorizing or ratifying the
execution of this Contract.
IN WITNESS WHEREOF, LANDLORD AND TENANT have respectively signed upon
proper authority this Lease, this 27th day of November 1995.
PUERTO RICO INDUSTRIAL DEVELOPMENT COMPANY
BY: /s/Puerto Rico Industrial Development Company
TELECOM SOLUTIONS PUERTO RICO, INC.
66-04-7003
BY: /s/ J. Scott Kamsler
SCHEDULE "A"
DESCRIPTION OF PROJECT NO. S-1309-0-80
LOCATED AT AGUADA, PUERTO RICO
This is a pitched roof type building consisting of reinforced concreted
foundations, steel columns, and girders supporting 30 feet long steel
joists which in turn support gauge #22 Standard galvanized steel deck
covered by 1" fiberglass insulation and a 3 plies built-up roofing.
Roof ventilators are provided.
The structure consists of a main floor 240'-6" x 90'-6" out to out
dimensions with an area of 21,765.25 sq. ft. of manufacturing space; an
entrance porch 16'-2" x 8'-4" for an area of 134.70 sq. ft.; lean-to
60'-6" x 12'-6" for an area of 1,756.25 sq. ft. This amounts to a total
area of 22,656.20 sq. ft. of covered floor space.
The floor consists of a 4" thick reinforced concrete slab with a
monolithic cement finish. Floor slab designed for a live load of 150
pounds per square feet.
Exteriors walls are of concrete blocks plastered and painted in both
sides.
Interiors walls at the lean-to are plastered and painted together with a
6'-1" high sprayed-on glazed finish wainscoat.
Ceiling is rubbed and painted throughout the building.
Windows are Miami Aluminum type throughout the building.
Interior doors are made of plywood and exterior are industrial type
metal ones.
Two (2) metal rolling doors 10'-0" x 10'-O" at loading area.
Clearance in the manufacturing area from finish floor to lowest part of
beams at the side eaves is 12'-2 1/2".
DESCRIPTION OF PARCEL OF LAND, LOT NO. 9
LOCATED AT AGUADA INDUSTRIAL PARK, AGUADA, P.R.
SITE FOR PROJECT NO. S-1309-0-80
Parcel of land, Lot No. 9 located at Aguada Industrial Park, in Aguada,
Puerto Rico. It bounds: by the NORTH, with land owned by "Comunidad
Agricola Bianchi"; by the SOUTH, with Lot No, 7 of the same industrial
subdivision; by the EAST, with land owned by "Comunidad Agricola
Bianchi"; and by the WEST with Street "A" of the same industrial
subdivision.
It has an approximate surface area of 5,582.335 square meters,
equivalent to 1.4203 "cuerdas".
It is affected by 3.0 meters wide right of way for a storm sewer system
running along its Northern and Eastern boundaries.
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