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 September 30, 1997
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.)
2300 Orchard Parkway, San Jose, California 95131-1017
(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 September 30, 1997
Common Stock 15,899,747
<PAGE>
SYMMETRICOM, INC.
FORM 10-Q
INDEX
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheets --
September 30, 1997 and June 30, 1997 3
Consolidated Statements of Operations --
Three months ended September 30, 1997 and 1996 4
Consolidated Statements of Cash Flows --
Three months ended September 30, 1997 and 1996 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 14
SIGNATURES 14
2
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
SYMMETRICOM, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
September 30, June 30,
1997 1997
ASSETS
Current assets:
Cash and cash equivalents $ 28,068 $ 28,203
Short-term investments 7,503 13,384
-------- --------
Cash and investments 35,571 41,587
Accounts receivable, net 20,393 21,349
Inventories 22,784 22,023
Other current assets 4,263 3,830
-------- --------
Total current assets 83,011 88,789
Property, plant and equipment, net 39,228 39,617
Other assets, net 727 899
-------- --------
$122,966 $129,305
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities:
Accounts payable $ 6,477 $ 8,189
Accrued liabilities 14,812 16,546
Current maturities of long-term obligations 159 5,729
-------- --------
Total current liabilities 21,448 30,464
Long-term obligations 8,533 8,583
Deferred income taxes 2,746 2,655
Shareholders' equity:
Preferred stock, no par value:
Authorized--500 shares
Issued--none -- --
Common stock, no par value:
Authorized--32,000 shares
Issued and outstanding--15,900 and 15,879 shares 25,561 25,608
Retained earnings 64,678 61,995
-------- --------
Total shareholders' equity 90,239 87,603
-------- --------
$122,966 $129,305
======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
3
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SYMMETRICOM, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
Three months ended
September 30,
-------------------
1997 1996
Net sales $ 33,983 $ 32,023
Cost of sales 17,802 18,366
-------- --------
Gross profit 16,181 13,657
Operating expenses:
Research and development 4,603 3,954
Selling, general and administrative 8,141 7,103
-------- --------
Operating income 3,437 2,600
Interest income 520 458
Interest expense (292) (148)
-------- --------
Earnings before income taxes 3,665 2,910
Income taxes 982 652
-------- --------
Net earnings $ 2,683 $ 2,258
======== ========
Net earnings per common and common
equivalent share $ .17 $ .14
======== ========
Weighted average common and common
equivalent shares outstanding 16,242 16,117
======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
4
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SYMMETRICOM, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three months ended
September 30,
-------------------------
1997 1996
Cash flows from operating activities:
Cash received from customers $ 34,232 $ 29,056
Cash paid to suppliers and employees (32,522) (27,255)
Interest received 319 340
Interest paid (292) (148)
Income taxes paid (533) (11)
-------- --------
Net cash provided by operating activities 1,204 1,982
-------- --------
Cash flows from investing activities:
Purchases of short-term investments (6,619) (8,470)
Maturities of short-term investments 12,500 1,000
Purchases of plant and equipment, net (1,549) (2,045)
Other assets (4) 4
-------- --------
Net cash provided by (used for) investing activities 4,328 (9,511)
-------- --------
Cash flows from financing activities:
Repayment of long-term debt (5,620) (13)
Proceeds from issuance of common stock 777 715
Repurchase of common stock (824) --
-------- --------
Net cash provided by (used for) financing activities (5,667) 702
-------- --------
Net decrease in cash and cash equivalents (135) (6,827)
Cash and cash equivalents at beginning of period 28,203 31,327
-------- --------
Cash and cash equivalents at end of period $ 28,068 $ 24,500
======== ========
Reconciliation of net earnings to net cash
provided by operating activities:
Net earnings $ 2,683 $ 2,258
Adjustments:
Depreciation and amortization 2,084 1,523
Net deferred income taxes 131 300
Changes in assets and liabilities:
Accounts receivable 956 (2,949)
Inventories (761) (35)
Accounts payable (1,712) 587
Accrued liabilities (1,734) 903
Other (443) (605)
-------- --------
Net cash provided by operating activities $ 1,204 $ 1,982
======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE>
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, 1997.
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, 1997, the
results of operations and its 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. Inventories. Inventories are stated at the lower of cost (first-in,
first-out) or market. Inventories consist of:
September 30, June 30,
1997 1997
(In thousands)
Raw materials $ 5,889 $ 6,454
Work-in-process 10,121 8,450
Finished goods 6,774 7,119
------- -------
$22,784 $22,023
======= =======
3. Reclassifications. Certain reclassifications have been made to the 1996
consolidated statements of cash flows to conform to the 1997 presentation. Such
reclassifications had no effect on previously reported results of operations or
retained earnings.
4. Recent Accounting Pronouncements. In February 1997, Statement of Financial
Accounting Standards No. 128 (SFAS 128), "Earnings per Share," was issued which
establishes new standards for computing and presenting earnings per share
information. SFAS 128 requires the presentation of basic and diluted earnings
per share information. Basic earnings per share excludes potential common shares
such as stock options and is computed by dividing net earnings by the
weighted-average number of common shares outstanding for the period. Diluted
earnings per share is computed similarly to the existing requirements for fully
diluted earnings per share. The statement is effective for interim and annual
periods ending after December 15, 1997. Accordingly, the Company will adopt SFAS
128 starting with its second quarter ending December 31, 1997. The
6
<PAGE>
Company does not anticipate that the earnings per share calculation with the
adoption of SFAS 128 would have been materially different for the periods
presented.
5. Contingencies. In January 1994, a securities class action complaint was filed
against the Company and three of its officers in the United States District
Court, Northern District of California. The action was filed on behalf of a
putative class of purchasers of the Company's stock during the period April 6,
1993 through November 10, 1993. The complaint seeks unspecified money damages
and alleges that the Company and certain of its officers violated federal
securities laws in connection with various public statements made during the
putative class period. The Court dismissed the first and second amended
complaints with leave to amend. The plaintiff filed a third amended corrected
complaint in August 1997. The Company and its officers believe that the
complaint is entirely without merit, and intend to continue to defend the action
vigorously. The Company is also a party to certain other claims in the normal
course of its operations. While the results of such claims cannot be predicted
with certainty, management, after consultation with counsel, believes that the
final outcome of such matters will not have a material adverse effect on the
Company's financial position or results of operations.
7
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Business Outlook and Risk Factors
Certain trend analysis and other information contained in Management's
Discussion and Analysis of Financial Condition and Results of Operations
consists of "forward looking statements" within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended, and are subject to the safe harbor provisions
of those Sections. The Company's actual results could differ materially from
those discussed in the forward looking statements due to a number of factors
including the factors listed below.
Fluctuations in Operating Results. The Company's quarterly and annual
operating results have fluctuated in the past and may continue to fluctuate in
the future due to several factors, including, without limitation, the volume and
timing of orders from customers and shipments to customers, the cancelation or
rescheduling of customer orders, changes in the product or customer mix of
sales, the gain or loss of significant customers, the Company's ability to
introduce new products on a timely and cost-effective basis, the timing of new
product introductions by the Company and its competitors, customer delays in
qualification of new products, increased competition and competitive pricing
pressures, market acceptance of new or enhanced versions of the Company's and
its competitors' products, the long sales cycles associated with the Company's
products, cyclical conditions in the telecommunications and semiconductor
industries, fluctuations in manufacturing yields and other factors. The
Company's expense levels are based in part on its expectations regarding future
net sales and in the short term are to a large extent fixed. If the Company is
unable to adjust spending in a timely manner to compensate for any unexpected
future sales shortfall, the Company's business, financial condition and results
of operations could be materially and adversely affected. The Company's
operations entail a high level of fixed costs and require an adequate volume of
production and sales to maintain reasonable gross profit margins. Accordingly,
any significant decline in demand for the Company's products or reduction in the
Company's average selling prices, or any material delay in customer orders would
have a material adverse effect on the Company's business, financial condition
and results of operations. In addition, the Company's future results depend in
large part on growth in the markets for the Company's products. The growth in
each of these markets may depend on, among other things, changes in general
economic conditions, or conditions which relate specifically to the markets in
which the Company competes, changes in regulatory conditions, legislation,
export rules or conditions, interest rates and fluctuations in the business
cycle for any particular market segment.
Uncertainty of Timing of Product Sales. A substantial portion of the
Company's quarterly net sales is often dependent upon shipment of orders
received during that quarter, of which, a significant portion may be received
during the last month or even the last few days of that quarter. Furthermore,
most orders in backlog can be rescheduled or canceled without significant
penalty. As a result, the timing of the receipt and shipment of an order, and
the magnitude of such order, may have a significant impact on the Company's net
sales and results of operations for a particular quarter. In addition, the
uncertainty in the timing and the receipt of orders, delays in product shipment
and unanticipated rescheduling or cancelation of orders may cause quarterly
operating results to vary significantly from the Company's expectations.
8
<PAGE>
Customer Concentration. A relatively small number of customers has
historically accounted for, and is expected to continue to account for, a
significant portion of the Company's net sales. In fiscal 1997, AT&T Corporation
(AT&T), a Telecom Solutions' customer, accounted for 16% of the Company's net
sales. In fiscal 1995, SBC Communications Inc., another Telecom Solutions'
customer, accounted for 11% of the Company's net sales. No other single customer
accounted for 10% or more of net sales in fiscal years 1997, 1996 or 1995. The
loss of one or more of the Company's significant customers, or a significant
reduction in sales to any such customer, could have a material adverse effect on
the Company's business, financial condition and results of operations. There can
be no assurance that the Company will continue to receive large orders from
significant customers. Also, in the past, some of the Company's large customers
have significantly reduced or delayed product purchases. The Company's sales to
its largest customers have fluctuated in the past and the Company believes such
large customer sales will continue to fluctuate significantly from
quarter-to-quarter and year-to-year in the future. For example, the Company's
sales to AT&T increased to $22.5 million in fiscal 1997 from $2.6 million in
fiscal 1996 and are expected to decrease significantly in fiscal 1998.
New Product Development. The market for the Company's products is
characterized by rapidly changing technologies, frequent new product
introductions, evolving industry standards and changes in end-user requirements.
Technological advancements could render the Company's products obsolete and
unmarketable. The Company's success will depend on its ability to respond to
changing technologies and customer requirements and on its ability to develop
and introduce, in a cost-effective and timely basis, new and enhanced products.
Delays in new product development or delays in production startup could have a
material adverse effect on the Company's business, financial condition and
results of operations. Such delays have happened in the past, and there can be
no assurance that such delays will not recur or that the Company will
successfully respond to technological changes and develop and introduce new or
enhanced products, or that such new or enhanced products will achieve market
acceptance.
Product Performance and Reliability. The Company's customers establish
demanding specifications for product performance and reliability. The Company's
products are complex and use state of the art components, processes and
techniques. There can be no assurance that new products or enhancements of
existing products will not contain undetected errors, design flaws or other
failures due to the complexities of such products. Undetected errors and design
flaws have occurred in the past. Any such unforeseen problems could have a
material adverse effect on the Company's business, operating results and
financial condition.
Competition. The telecommunications and semiconductor industries and the
markets which they serve are highly competitive. Many of the Company's
competitors or potential competitors are more established than the Company and
have greater financial, manufacturing, technical and marketing resources. In the
telecommunications market, Telecom Solutions' primary competitors are Datum Inc.
and Hewlett-Packard Company. In addition, the enactment of The
Telecommunications Act of 1996, which permits Regional Bell Operating Companies
(RBOCs), under certain conditions, to manufacture telecommunications equipment
may result in competition from these customers of the Company. In the
semiconductor market, Linfinity competes with a number of large multinational
companies and smaller niche companies.
9
<PAGE>
The Company's ability to compete successfully is dependent on its response
to the entry of new competitors or the introduction of new products by the
Company's competitors, changing technology and customer requirements, timely
development or acquisition of new or enhanced products, the timing of new
product introductions by the Company or its competitors, continued improvement
of existing products, cost effectiveness, quality, price, service and market
acceptance of the Company's products. Operating results may fluctuate as a
result of unforeseen actions by competitors, the entry of new competitors and
the introduction of new or enhanced competing products. Competition for many of
the Company's products continues to increase in existing markets and in the new
markets in which the Company has entered. Furthermore, the Company has
experienced, and expects to continue to experience, significant pricing
pressures in these markets.
Dependence on Foundries, Assembly and Test Services. The Company is
utilizing IMP, Inc., an independent semiconductor foundry located in San Jose,
California, to supply most of its BiCMOS wafer requirements. The Company uses
its own semiconductor fabrication facility to manufacture bipolar wafers.
Reliance on outside foundries minimizes fixed costs and capital expenditures but
increases certain operational risks, including the lack of an assured wafer
supply and limited control over delivery schedules and manufacturing yields.
Delayed wafer supply or reduced manufacturing yields may materially and
adversely affect the Company's business, financial condition and operating
results. In addition, any sudden demand for an increased amount of wafers or
sudden reduction or elimination of wafers from the Company's outside foundry,
whether as a result of financial or operational difficulties at such foundry or
otherwise, could result in a material delay in the shipment of the Company's
products and have a material adverse effect on the Company's business, financial
condition and results of operations.
Linfinity also relies on independent contract manufacturers in the Far East
to assemble and test a significant percentage of its integrated circuits and
most of its electronic modules. Reliance on independent contractors can lengthen
manufacturing cycle times, especially if the Company is required, due to
capacity constraints, to compete against others for these contractors' services.
Any inability to obtain sufficient manufacturing capacity through existing or
alternative sources at favorable prices, if and as required, could result in
delays or reductions in product shipments which, in turn, could have a material
adverse effect on the Company's customer relationships and operating results.
Proprietary Technology. The Company's success will depend, in part, on its
ability to protect trade secrets, obtain or license patents and operate without
infringing on the rights of others. The Company relies on a combination of
trademark, copyright and patent registration, contractual restrictions and
internal security to establish and protect its proprietary rights. There can be
no assurance that such measures will provide meaningful protection for the
Company's trade secrets or other proprietary information. The Company has United
States patents and patent applications pending covering certain technology used
by its Telecom Solutions and Linfinity operations. However, while the Company
believes that its patents have value, the Company relies primarily on
innovation, technological expertise and marketing competence to maintain its
competitive advantage. The telecommunications and semiconductor industries are
both characterized by the existence of a large number of patents and frequent
litigation based on allegations of patent infringement. The Company intends to
continue its efforts to obtain patents, whenever
10
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possible, but there can be no assurance that patents will be issued or that any
existing patents or patents that are obtained will not be challenged,
invalidated or circumvented or that the rights granted will provide any
commercial benefit to the Company. The Company is also subject to the risk of
adverse claims and litigation alleging infringement of the intellectual property
rights of others. From time to time the Company has received claims from other
parties asserting that their proprietary rights had been infringed, although the
Company is not a party to any intellectual property litigation. There can be no
assurance that third parties will not assert infringement claims against the
Company in the future or that any such claims will not result in costly
litigation or require the Company to obtain a license for such intellectual
property rights regardless of the merit of such claims. No assurance can be
given that any necessary licenses will be available or that, if available, such
licenses can be obtained on commercially reasonable terms.
Environmental Matters. The Company's operations are subject to numerous
federal, state and local environmental regulations related to the storage, use,
discharge and disposal of toxic, volatile or otherwise hazardous chemicals used
in its manufacturing process. While the Company has not experienced any
materially adverse effects on its operations from environmental regulations,
there can be no assurance that changes in such regulations will not impose the
need for additional capital equipment or other requirements or restrict the
Company's ability to expand its operations. Failure to comply with such
regulations could result in suspension or cessation of the Company's operations,
or could subject the Company to significant future liabilities.
Governmental Regulations. Federal and state regulatory agencies, including
the Federal Communications Commission and the various state public utility
commissions and public service commissions, regulate most of the Company's
domestic telecommunications customers. Although the Company is generally not
directly affected by such legislation, the effects of such regulation on the
Company's customers may, in turn, adversely impact the Company's business and
operating results. For instance, the sale of the Company's products may be
affected by the imposition upon certain of the Company's customers of common
carrier tariffs and the taxation of telecommunications services. These
regulations are continuously reviewed and subject to change by the various
governmental agencies. In addition, the recent enactment of The
Telecommunications Act of 1996 allows RBOCs, which are among the Company's
largest customers, to manufacture telecommunications equipment. RBOCs may,
therefore, increasingly become competitors of the Company in the markets it
serves. Changes in current or future laws or regulations, in the United States
or elsewhere, could materially and adversely affect the Company's business.
Risks Associated with International Sales. The Company's export sales, which
were primarily to the Far East, Canada and Western Europe, accounted for 26%,
28% and 24% of the Company's net sales in fiscal years 1997, 1996 and 1995,
respectively. Export sales to the Far East accounted for 16%, 13% and 11% of net
sales in fiscal years 1997, 1996 and 1995, respectively. International sales may
be subject to certain risks, including but not limited to, foreign currency
fluctuations, export restrictions, longer payment cycles and unexpected changes
in regulatory requirements or tariffs. To date, sales and purchase obligations
denominated in foreign currencies have not been significant. However, if in the
future, a higher portion of such sales and purchases are denominated in foreign
currencies, gains and losses on the conversion to U.S. dollars of foreign
currency accounts receivable and accounts payable arising from international
operations may contribute to
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fluctuations in the Company's business and operating results. Accordingly, the
Company does not currently engage in foreign currency hedging activities or
derivative arrangements but may do so in the future to the extent that such
obligations become more significant. Additionally, currency fluctuations could
have an adverse effect on the demand for the Company's products in foreign
markets. Higher international sales also subject the Company to increased risks
associated with political and economic instability and changes in diplomatic and
trade relationships. There can be no assurance that such factors will not
materially and adversely affect the Company's operations in the future or
require the Company to modify significantly its current business practices. In
addition, the laws of certain foreign countries may not protect the Company's
proprietary technology to the same extent as do the laws of the United States.
Changes to Effective Tax Rate. The Company's effective tax rate is affected
by the percentage of qualified Puerto Rico earnings compared to total earnings
as most of the Company's Puerto Rico earnings are taxed under Section 936 of the
U.S. Internal Revenue Code which exempts qualified Puerto Rico earnings from
federal income taxes. This exemption expires at the end of fiscal 2006. In
addition, the benefit of the exemption is subject to certain wage-based
limitations. This benefit will be further limited based on certain prior year
Puerto Rico earnings during fiscal years 2003 through 2006. The Company expects
the fiscal 1998 effective tax rate to increase due to the anticipated increase
in the percentage of total earnings that is expected to be earned in the U.S.
compared to fiscal 1997.
Fluctuations in Stock Price. 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.
Results of Operations
The Company operates in two different industry segments. Telecom Solutions, a
division of the Company, designs, manufactures and markets advanced network
synchronization systems and intelligent access systems for the
telecommunications industry. Linfinity Microelectronics Inc., a subsidiary of
the Company, designs, manufactures and markets linear and mixed signal
integrated circuits, and modules for use in desktop power system, portable power
system and data communications applications.
Net sales increased by $2.0 million (6%) to $34.0 million in the first
quarter of fiscal 1998 from $32.0 million in the first quarter of fiscal 1997.
Telecom Solutions net sales decreased by $1.5 million (8%) to $18.5 million in
the first quarter of fiscal 1998 from $20.0 million in the corresponding period
of fiscal 1997 primarily due to lower sales of transmission products. Linfinity
Microelectronics Inc. (Linfinity) net sales increased by $3.5 million (29%) to
$15.5 million in the first quarter of fiscal 1998 from $12.0 million in the
first quarter of fiscal 1997 principally due to higher unit volume.
The Company's gross profit, as a percentage of net sales, increased to 48%
in the first quarter of fiscal 1998, compared to 43% in the first quarter of
fiscal 1997 principally due to a shift to higher profit margin products and
increased manufacturing efficiencies at both operations. Future gross profit
margins will largely depend on product mix, manufacturing efficiencies and
selling prices.
12
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Research and development expense was $4.6 million (or 14% of net sales) in
the first quarter of fiscal 1998, compared to $4.0 million (or 12% of net sales)
in the first quarter of fiscal 1997 as the Company increased its investment in
new product development and existing product enhancement at Telecom Solutions.
Selling, general and administrative expense increased to $8.1 million (or
24% of net sales) in the first quarter of fiscal 1998 from $7.1 million (or 22%
of net sales) in the first quarter of fiscal 1997 principally due to costs
associated with higher sales at Linfinity and to the substantial enhancement of
Linfinity's sales, marketing and administrative staff. This increase was
partially offset by lower expenditures at Telecom Solutions.
Interest income was $.5 million in both the first quarter of fiscal 1998 and
fiscal 1997.
The Company's effective tax rate was 27% in the first quarter of fiscal 1998
compared to 22% in the first quarter of fiscal 1997. The effective tax rate for
fiscal 1998 is expected to be lower than the federal tax rate primarily due to
the benefit of lower income tax rates on Puerto Rico earnings. The Company's
effective tax rate is affected by the percentage of qualified Puerto Rico
earnings compared to total earnings as most of the Company's Puerto Rico
earnings are taxed under Section 936 of the U.S. Internal Revenue Code which
exempts qualified Puerto earnings from federal income taxes. This exemption
expires at the end of fiscal 2006. In addition, the benefit of exemption is
subject to certain wage-based limitations. This benefit will be further limited
based on certain prior year Puerto Rico earnings during fiscal years 2003
through 2006. The Company expects the effective tax rate to be higher in fiscal
1998 due to an anticipated increase in the percentage of total earnings that is
expected to be earned in the U.S. in fiscal 1998 compared to fiscal 1997.
As a result of the factors discussed above, net income in the first quarter
of fiscal 1998 increased to $2.7 million, or $.17 per share, compared to $2.3
million, or $.14 per share, in the first quarter of fiscal 1997.
Liquidity and Capital Resources
Working capital increased to $61.6 million at September 30, 1997 from
$58.3 million at June 30 1997, while the current ratio increased to 3.9 to 1.0
from 2.9 to 1.0. The increase in the current ratio resulted primarily from the
repayment of a $5.7 million long-term note. During the same period, cash, cash
equivalents and short-term investments decreased to $35.6 million from $41.6
million primarily due to the early repayment of the long-term note due in
November 1997 and $1.5 million used for capital expenditures which more than
offset $1.2 million in cash provided by operating activities. At September 30,
1997, 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 requirements and capital
expenditures over the near term. At September 30, 1997, the Company had no
material outstanding commitments to purchase capital equipment.
13
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PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27.1Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the three months ended
September 30, 1997.
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 21, 1997 By:
/s/ J. Scott Kamsler
--------------------
J. Scott Kamsler
Senior Vice President, Finance
and Chief Financial Officer
(for Registrant and as Principal
Financial and Accounting Officer)
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<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 28,068
<SECURITIES> 7,503
<RECEIVABLES> 20,887
<ALLOWANCES> 494
<INVENTORY> 22,784
<CURRENT-ASSETS> 4,263
<PP&E> 73,747
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<NET-INCOME> 2,683
<EPS-PRIMARY> .17
<EPS-DILUTED> .17
</TABLE>
