-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SqHXDy2OLGEJpF3C0IzKhaP0ATSV+kfyH1a3EE4d100t+nugGJHSHYlwLGfffejN uxMlei+zsaSZCzroDPUEvA== 0000815910-96-000006.txt : 19960928 0000815910-96-000006.hdr.sgml : 19960928 ACCESSION NUMBER: 0000815910-96-000006 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960820 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: METROLOGIC INSTRUMENTS INC CENTRAL INDEX KEY: 0000815910 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER PERIPHERAL EQUIPMENT, NEC [3577] IRS NUMBER: 221866172 STATE OF INCORPORATION: NJ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-24712 FILM NUMBER: 96617950 BUSINESS ADDRESS: STREET 1: COLES ROAD AT RTE 42 CITY: BLACKWOOD STATE: NJ ZIP: 08012 BUSINESS PHONE: 609-228-8100 MAIL ADDRESS: STREET 1: COLES ROAD ROUTE 42 CITY: BLACKWOOD STATE: NJ ZIP: 08012 10-Q 1 FORM 10-Q SECOND QUARTER 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 June 30, 1996 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 0-24172 Metrologic Instruments, Inc. (Exact name of registrant as specified in its charter) New Jersey 22-1866172 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) Coles Road at Route 42, Blackwood, New Jersey 08012 (Address of principal executive offices) (Zip Code) (609) 228-8100 (Registrant's telephone number, including area code) 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 . As of August 5, 1996 there were 5,252,208 shares of Common Stock, $.01 par value per share, outstanding. METROLOGIC INSTRUMENTS, INC. INDEX Page No. Part I - Financial Information Item 1. Financial Statements Condensed Consolidated Balance Sheets - June 30, 1996 and December 31, 1995 3 Condensed Consolidated Statements of Operations - Three and Six Months Ended June 30, 1996 and 1995 4 Condensed Consolidated Statements of Cash Flows - Six Months Ended June 30, 1996 and 1995 5 Notes to Condensed Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9 Part II - Other Information Item 1. Legal Proceedings 13 Item 2. Changes in Securities 13 Item 3. Defaults upon Senior Securities 13 Item 4. Submission of Matters to a Vote of Security Holders 14 Item 5. Other Information 14 Item 6. Exhibits and Reports on Form 8-K 15 Exhibit Index Statement Regarding Computation of Per Share Earnings. Financial Data Schedule PART I - FINANCIAL INFORMATION Item 1. Financial Statements METROLOGIC INSTRUMENTS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands except share data) June 30, December 31, 1996 1995 (Unaudited) Assets Current assets: Cash and cash equivalents $ 9,884 $12,065 Accounts receivable, net of allowance of $549 and $224 in 1996 and 1995, respectively 7,039 6,924 Inventory 5,703 3,456 Deferred income taxes 1,562 1,314 Other current assets 232 506 Total current assets 24,420 24,265 Property, plant and equipment, net 4,388 3,880 Patents and trademarks, net of amortization of $233 and $356 in 1996 and 1995, respectively 976 878 Holographic technology, net of amortization of $27 and $0 in 1996 and 1995, respectively 778 468 Security deposits and other assets 589 459 Deferred income taxes 1,371 1,451 Total assets $32,522 $31,401 Liabilities and stockholders' equity Current liabilities: Line of credit $ 164 $ 175 Current portion of notes payable 289 390 Accounts payable 2,574 2,301 Accrued expenses 6,278 6,067 Accrued legal settlement 610 599 Total current liabilities 9,915 9,532 Notes payable, net of current portion 705 817 Due to former officer, net of current portion - 84 Deferred income taxes 33 42 Accrued legal settlement 2,813 3,000 Stockholders' equity Preferred stock, $.01 par value: authorized shares - 500,000 issued shares - none - - Common stock, $.01 par value authorized shares - 10,000,000 issued and outstanding shares - 5,252,208 in 1996 and 5,249,150 in 1995 53 52 Additional paid-in capital 14,844 14,807 Retained earnings 3,796 2,621 Deferred compensation (25) (37) Translation adjustment 388 483 Total stockholders' equity 19,056 17,926 Total liabilities and stockholders' equity $32,522 $31,401 See accompanying notes. METROLOGIC INSTRUMENTS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (amounts in thousands except share and per share data) Three Months Ended Six Months Ended June 30, June 30, 1996 1995 1996 1995 Unaudited Unaudited Sales $11,757 $10,156 $22,099 $20,653 Cost of sales 7,154 6,059 13,425 11,585 Gross profit 4,603 4,097 8,674 9,068 Selling, general and administrative expenses 2,730 2,528 5,289 5,109 Research and development expenses 774 784 1,571 1,448 Operating income 1,099 785 1,814 2,511 Other income (expense) Interest expense (27) (53) (56) (60) Interest income 98 86 227 223 Other income (expense) (65) 21 (78) 26 6 54 93 189 Income before provision for income taxes 1,105 839 1,907 2,700 Provision for income taxes 420 327 732 1,081 Net income $ 685 $ 512 $ 1,175 $ 1,619 Net income per share $ 0.13 $ 0.10 $ 0.22 $ 0.31 Weighted average number of shares used in computing net income per share 5,267,840 5,262,168 5,264,657 5,306,084 See accompanying notes. METROLOGIC INSTRUMENTS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (amounts in thousands) Six Months Ended June 30, 1996 1995 (Unaudited) Net cash used in operating activities $ (481) $ (1,195) Investing activities: Purchase of Holoscan, Inc. and holographic technology, net of cash acquired (521) - Purchase of equipment and building improvements (832) (655) Expenditures on patents and trademarks (132) (142) Net cash used in investing activities (1,485) (797) Financing activities: Net proceeds from employee stock purchase plan 29 162 Payments of amounts due to former officer (100) (100) Principal payments of notes payable (134) - Capital lease payments (79) (51) Net cash (used in) provided by financial activities (284) 11 Effect of exchange rate changes on cash 69 160 Net decrease in cash (2,181) (1,821) Cash at beginning of period 12,065 11,925 Cash at end of period $ 9,884 $ 10,104 Supplemental disclosure of cash flow information: Cash paid for interest $ 43 $ 22 Cash paid for income taxes $ 1,442 $ 1,177 Capital lease obligations incurred $ - $ 531 See accompanying notes. METROLOGIC INSTRUMENTS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS THREE AND SIX MONTHS ENDED JUNE 30, 1996 AND 1995 (Amount in thousands except share and per share data) (Unaudited) 1. Business Metrologic Instruments, Inc. and its wholly owned subsidiaries (the "Company") design, manufacture and market bar code scanning equipment incorporating laser and holographic technology. These scanners rapidly, accurately and efficiently read and decode all widely used bar codes and provide an efficient means for data capture and automated data entry into computerized systems. 2. Accounting Policies Interim Financial Information The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting solely of normal recurring adjustments) necessary for a fair presentation of the Condensed Consolidated Financial Statements have been included. The results of the interim periods are not necessarily indicative of the results to be obtained for a fiscal year. The Condensed Consolidated Financial Statements and these Notes should be read in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations contained in this Form 10-Q and the Company's Annual Report on Form 10-K for the year ended December 31, 1995, including the Consolidated Financial Statements and the Notes to Consolidated Financial Statements for the year ended December 31, 1995. 3. Inventory Inventory consists of the following: June 30, December 31, 1996 1995 Raw materials $2,459 $1,698 Work-in-process 2,331 1,311 Finished goods 913 447 $5,703 $3,456 4. Net Income Per Share Net income per share is calculated based on net income and the weighted average common stock outstanding and common stock equivalents during the three and six months ended June 30, 1996 and 1995. 5. Commitments and Contingencies The Company files domestic and foreign patent applications to protect its technological position and new product development. From time to time, the Company receives legal challenges to the validity of its patents or allegations that its products infringe the patents of others. The Company is a party to a legal action alleging that the Company's prior version of one of its scanners infringes a patent held by another company. The Company has filed a counterclaim for a declaratory judgment asserting that the plaintiff's patent is invalid and management believes this action will not result in any material damages. Since 1995, the Company and a competitor have been negotiating an extensive cross-licensing of patents for which the Company and the competitor may pay royalties to each other under certain circumstances. There can be no assurance that these negotiations will result in the execution of a definitive agreement by the Company and the competitor, or that patent litigation between the Company and the competitor will not result if the current negotiations are unsuccessful. 6. Incentive Plan The Incentive Committee of the Board of Directors granted incentive and non-qualified stock options as well as restricted stock awards pursuant to the Company's 1994 Incentive Plan to certain eligible employees and a Board member. As of June 30, 1996, an aggregate of 11,722 of said incentive stock options had been exercised by employees of the Company, and an aggregate of 4,000 restricted stock grants vested and were issued to senior executive officers. No incentive stock options have been exercised by executive officers or Board members. Pursuant to the Company's 1994 Incentive Plan, the Incentive Committee of the Board of Directors granted, on June 7, 1996, 251,020 incentive and non-qualified stock options to certain eligible employees. As of June 30, 1996, an aggregate of 557,194 incentive and non-qualified stock options remain outstanding of which an aggregate of 165,862 incentive and non-qualified stock options were exercisable. 7. Employee Stock Purchase Plan The Company's Board of Directors has implemented an Employee Stock Purchase Plan whereby eligible employees have the opportunity to acquire the Company's common stock through payroll deductions, quarterly, at 90% of the lower of (a) the fair market value of the stock on the first day of the applicable quarterly offering period or (b) the fair market value of the stock on the last day of the applicable quarterly offering period. As of June 30, 1996, an aggregate of 11,488 shares had been purchased by employees of the Company, including shares purchased by senior executive officers, through the Employee Stock Purchase Plan. 8. Notes Payable The Company has an unsecured revolving demand loan with a bank which allows for maximum borrowings of $5,000. The demand loan, which expires on June 30, 1997, bears interest at the bank's prime rate, which was 8.25% at June 30, 1996. The demand loan agreement requires the Company to comply with certain financial covenants. As of July 31, 1996, no amounts were outstanding under the revolving demand loan. On January 31, 1996, the Company paid a note payable which related to a patent litigation settlement entered into in December 1993. The note represented the excess of the minimum obligation of the related patent litigation settlement for the year ended December 31, 1993. (See Item 2. "Management's Discussion and Analysis of Financial Condition and Results of Operations.") 9. Acquisition of Holoscan, Inc. including Holographic Technology The Company exercised its option to purchase all of the outstanding shares of common stock of Holoscan, Inc. on March 1, 1996 for $521, net of cash acquired. The Company purchased a 51% interest in Holoscan, Inc. in 1995 in the form of non-voting, convertible preferred stock for $360. Concurrent with the exercise of the above option, the Company converted the non-voting, convertible preferred stock of Holoscan to an equal number of shares of Holoscan, Inc. common stock and now owns 100% of Holoscan, Inc. The Company has consolidated the assets and liabilities and results of operations and cash flows of Holoscan, Inc. for the period March 1, 1996 to June 30, 1996. The amount by which the consideration paid by Metrologic for the acquisition exceeded Holoscan's identifiable assets less liabilities was recorded as holographic technology which is being amortized over ten years. For the period March 1, 1996 through June 30, 1996, $27 was recorded as amortization of the holographic technology. Pursuant to an option agreement entered into by the Company, Holoscan, Inc. and the holders of all of Holoscan, Inc.'s outstanding common stock and options and warrants to purchase common stock (collectively, the "Holders"), the Company agreed to pay to each Holder, through 1998, a payment based on the Company's sales of certain holographic laser scanners. Such payments in future periods will be considered additions to the holographic technology account and amortized over the remainder of the ten year period commencing March 1, 1996. (The remainder of this page is intentionally left blank.) Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion of the Company's results of operations and liquidity and capital resources should be read in conjunction with the unaudited Condensed Consolidated Financial Statements of the Company and the related Notes thereto appearing elsewhere in this Form 10-Q and the Consolidated Financial Statements and the Notes to the Consolidated Financial Statements for the year ended December 31, 1995 appearing in the Company's Form 10-K for the year ended December 31, 1995 and the Form 10-Q for the three month period ended March 31, 1996. The Condensed Consolidated Financial Statements for the three and six month periods ended June 30, 1996 and 1995 are unaudited. The Company derives its revenues from sales of its scanners through distributors, value-added resellers ("VARs") and original equipment manufacturers ("OEMs") and directly to end-users in the United States and in over 80 foreign countries. Since 1991, the Company has experienced growth in revenues with a significant percentage of its revenues derived from international sales. Results of Operations Three Months Ended June 30, 1996 Compared with Three Months Ended June 30, 1995 Sales increased $1,601,000 or 15.8%, to $11,757,000 in the three months ended June 30, 1996 from $10,156,000 in the three months ended June 30, 1995, principally as a result of an increase in market acceptance of the Company's hand-held and industrial scanners. Sales increased $1,415,000 in the three months ended June 30, 1996 from $10,342,000 in the three months ended March 31, 1996 primarily due to the Company's increased marketing and sales efforts. International sales accounted for $7,480,000 (63.6% of total sales) in the three months ended June 30, 1996 and $5,933,000 (58.4% of total sales) in the three months ended June 30, 1995. The increase in the percentage of international sales to total sales in the three months ended June 30, 1996 compared with the same period a year ago is primarily due to the Company's increase in sales to customers in Europe. One customer accounted for approximately 7.8% of total sales and another accounted for approximately 5.9% of total sales for the three months ended June 30, 1996. During the same period no other customer accounted for more than 5% of the Company's revenues. Cost of sales increased from $6,059,000 in the three months ended June 30, 1995 to $7,154,000 in the three months ended June 30, 1996, an 18.1% increase, and cost of sales as a percentage of sales increased to 60.8% from 59.7% for the same period a year ago. Both the increase in the cost of sales and the increase in cost of sales as a percentage of sales were largely due to lower average unit selling prices on certain products compared with the same period a year ago. Selling, general and administrative expenses increased to $2,730,000 in the three months ended June 30, 1996 from $2,528,000 in the three months ended June 30, 1995, an 8.0% increase, and decreased as a percentage of sales from 24.9% to 23.2%. The increase was due primarily to increased expenditures on marketing and sales costs, including increased salaries resulting from the hiring of additional marketing personnel. Research and development expenses decreased from $784,000 in the three months ended June 30, 1995 to $774,000 in the three months ended June 30, 1996, and decreased as a percentage of sales from 7.7% to 6.6% for the three months ended June 30, 1995 and 1996, respectively. These decreases were primarily due to the increased expenditures associated with the development of holographic technology during the three months ended June 30, 1995, which were substantially completed as of March 31, 1996. Operating income increased 40.0% to $1,099,000 in the three months ended June 30, 1996 from $785,000 in the three months ended June 30, 1995, and operating income as a percentage of sales increased to 9.3% in the three months ended June 30, 1996 from 7.7% in the three months ended June 30, 1995. Other income decreased to $6,000 in the three months ended June 30, 1996 from $54,000 in the three months ended June 30, 1995. Other income consisted principally of interest income in the amount of $98,000 and $86,000 for the three months ended June 30, 1996 and 1995, respectively. For the three months ended June 30, 1996, interest income was offset by foreign currency transaction losses of $65,000 which were incurred by the Company's German subsidiary, Metrologic Instruments GmbH. The foreign currency losses resulted from the strengthening of the United States dollar compared to the German deutsche mark in the three months ended June 30, 1996. Net income increased 33.8% to $685,000 in the three months ended June 30, 1996 from $512,000 in the three months ended June 30, 1995. Net income reflects a 38.0% effective income tax rate in the second quarter of 1996 compared with 39.0% in the second quarter of 1995. The reduced effective income tax rate resulted primarily from increased tax benefits arising from the Company's foreign sales corporation, in accordance with the United States Internal Revenue Code, which effectively permits the Company to reduce its U.S. federal income tax liability resulting from sales to foreign customers. Six Months Ended June 30, 1996 Compared with the Six Months Ended June 30, 1995. Sales increased $1,446,000 or 7.0%, to $22,099,000 in the first six months of 1996 from $20,653,000 in the first six months of 1995 principally as a result of an increase in market acceptance of the Company's hand-held and industrial scanners, and increased marketing and sales efforts. The sales volume increase in the first six months of 1996 was mitigated by increased competition in the point-of-sale ("POS")/retail laser bar code industry. International sales accounted for $13,385,000 (60.6% of total sales) for the first six months of 1996 and $11,903,000 (57.6% of total sales) for the first six months of 1995. One customer accounted for approximately 7.1% of total sales in the first six months of 1996. Another customer accounted for approximately 6.6% of total sales in the first six months of 1996. No other customer accounted for more than 5.0% of total sales for the first six months of 1996. Cost of sales increased to $13,425,000 in the first six months of 1996 from $11,585,000 in the first six months of 1995, a 15.9% increase. Cost of sales as a percentage of sales increased to 60.7% from 56.1%. These increases were due to decreased average selling prices of certain of the Company's products compared with the same period a year ago. Selling, general, and administrative expenses increased to $5,289,000 in the first six months of 1996 from $5,109,000 in the first six months of 1995, and decreased as a percentage of sales from 24.7% to 23.9%. The increase was primarily due to increased marketing and sales costs, including increased salaries resulting from the hiring of additional marketing personnel. Research and development expenses increased 8.5% to $1,571,000 in the first six months of 1996 from $1,448,000 in the first six months of 1995 and increased as a percentage of sales from 7.0% to 7.1% for the six months ended June 30, 1995 and 1996, respectively. This increase was due primarily to expenditures related to the development of holographic technology and products, and new POS laser scanners. Operating income decreased 27.8% to $1,814,000 in the first six months of 1996 from $2,511,000 in the first six months of 1995. Operating income as a percentage of sales decreased to 8.2% in the first six months of 1996 from 12.2% in the first six months of 1995. These decreases were principally due to the increase in selling, general and administrative and research and development expenses and reductions in the average unit selling prices of certain of the Company's products. Other income decreased to $93,000 in the first six months of 1996 from $189,000 in the first six months of 1995. Other income consisted principally of interest income in the amount of $227,000 and $223,000 for the first six months of 1996 and 1995, respectively. For the six months ended June 30, 1996, interest income was offset by foreign currency transaction losses of $78,000 incurred by the Company's German subsidiary due to the strengthening of the United States dollar compared to the German deutsche mark during the period. Net income decreased to $1,175,000 in the first six months of 1996 from $1,619,000 in the first six months of 1995. Inflation and Seasonality Inflation and seasonality have not had a material impact on the Company's results of operations. There can be no assurance, however, that the Company's sales in future years will not be impacted by fluctuations in seasonal demand from European customers in its third quarter or from reduced production days in its fourth quarter. Liquidity and Capital Resources As of June 30, 1996 and December 31, 1995, the Company's working capital was approximately $14,505,000 and $14,733,000, respectively. During the six months ended June 30, 1996, the Company satisfied its cash requirements of net cash used in operating activities, which decreased to $481,000 in the six months ended June 30, 1996 from $1,195,000 in the six months ended June 30, 1995, from its cash and cash equivalent funds. The cash used in operating activities in the six months ended June 30, 1996 primarily resulted from an increase in inventory which was financed by an increase in accounts payable and accrued expenses. The Company's primary uses of cash have been for operating expenses, research and development expenses, capital expenditures, investments in patents and trademarks and the acquisition of Holoscan, Inc. including holographic technology. Pursuant to the settlement of a patent lawsuit in December 1993, the Company is required to pay amounts based on gross sales commencing in 1993 for a 12 year period with an aggregate maximum of $7,500,000 and an aggregate minimum of $4,450,000, which was charged to net income in 1993. Annual minimum payment obligations are $375,000. In addition to such minimum obligations for 1996, the Company incurred approximately $255,000 pursuant to the settlement agreement during the six months ended June 30, 1996. On January 31, 1996, the Company paid a note payable relating to the patent litigation settlement which represented the excess of the minimum obligation for the year ended December 31, 1993. The Company's total deferred income tax asset (current and long-term) of approximately $2,933,000 is based upon cumulative temporary differences as of June 30, 1996, which provide approximately $6,819,000 of future income tax deductions against future taxable income. The temporary differences arise primarily from recording the patent lawsuit settlement as an expense for accounting purposes prior to receiving the related tax benefit. The Company is a party to an Amended and Restated Loan Agreement with Midlantic Bank, N.A. for an unsecured $5,000,000 revolving loan facility expiring on June 30, 1997. The revolving loan facility requires the Company to comply with certain financial covenants and other restrictions. As of July 31, 1996, the Company was in compliance with the financial covenants and no amounts were outstanding under this revolving loan facility. The Company also has a 500,000 deutsche mark (approximately $328,000 as of June 30, 1996) unsecured revolving credit facility with Bayerische Hypotheken-Und Wechsel-Bank in the name of its German subsidiary, Metrologic Instruments GmbH. As of July 31, 1996, approximately $319,000 ($5,000 at June 30, 1996) was outstanding under this revolving credit facility. The Company's current plans for additional capital expenditures in 1996 include manufacturing automation equipment, office equipment and a newly integrated management information system, in the aggregate amount of approximately $800,000, and leasehold improvements and other costs relating to the Company's office and manufacturing facility expansion in the amount of approximately $300,000. The Company may be subject to losses as a result of foreign currency transactions. Accordingly, the Company's liquidity could be adversely affected by changes in foreign currency exchange rates. On March 1, 1996, the Company exercised its option under its March 1995 Option Agreement (as defined herein) with Holoscan, Inc. of San Jose, California and the holders of all of Holoscan's common stock and options and warrants to purchase common stock to acquire the outstanding equity securities of Holoscan, and made payments aggregating approximately $521,000. (See also Part II, Item 5. "Other Information.") The Company believes that its current cash and cash equivalents balances, along with cash generated from operations and the available revolving credit facilities with banks, will be adequate to fund the Company's operations through at least the next twelve months. The discussion in this Form 10-Q includes forward-looking statements based on current management expectations. Factors which would cause the results to differ from these expectations include the following: general economic conditions; competitive factors and pricing pressures; technological changes in the scanner industry; availability of patent protection for the Company's holographic scanners and other products; and market acceptance of the Company's new products. PART II - OTHER INFORMATION Item 1. Legal Proceedings On July 7, 1992, PSC, Inc. ("PSC"), a competitor of the Company, filed a lawsuit in the United States District Court for the Western District of New York (the "Court") against the Company, alleging that the Company's prior version of its MS900 series of hand-held scanners infringed a PSC patent. The complaint seeks an injunction and damages in an unstated amount. The Company filed a counterclaim for a declaratory judgment asserting that the PSC patent is invalid and that the Company's prior version of its MS900 series of hand-held scanners did not infringe such patent. On October 13, 1995, the Court interpreted the claims of the PSC patent in a patent infringement lawsuit filed by PSC against another competitor. Based upon that interpretation, it is the Company's belief that the MS900 series scanners do not infringe the subject patent. Accordingly, on October 20, 1995, Metrologic filed a motion seeking summary judgment of non-infringement. In response, the Court stayed this action, including the motion for summary judgment, pending the outcome of the appeal filed by PSC in the other patent infringement lawsuit. The Company redesigned its MS900 series of hand-held scanners in 1993 in an effort to avoid any interruption of sales which would result from the possibility of the entry of an injunction and to minimize any damage award that PSC might receive. While the Company believes that PSC will not prevail on this infringement claim with respect to the redesigned MS900 series of hand-held scanners, there can be no assurance that PSC will not prevail. While the amount of any potential damage award is presently unknown, the Company believes that an adverse decision in this action would not have a material adverse effect on the Company. However, patent damage awards are unpredictable and there can be no certainty with respect to the size of any such award. Item 2. Changes in Securities Not applicable. Item 3. Defaults upon Senior Securities Not applicable. Item 4. Submission of Matters to a Vote of Security Holders The Company's Annual Meeting of Stockholders was held on May 23, 1996. At such meeting, the following matters were voted upon by the stockholders, receiving the number of affirmative, negative and withheld votes, as well as abstentions and broker non-votes, set forth below each matter. (1) Election of Janet H. Knowles to the Company's Board of Directors to serve as a Class III director to serve until the 1999 Annual Meeting of Stockholders or until her successor is elected and qualified. 4,005,753 Affirmative 0 Negative 950 Withheld 0 Abstentions and broker non-votes (2) Ratification of the appointment of Ernst & Young LLP as the Company's independent auditors for the fiscal year ending December 31, 1996. 4,006,036 Affirmative 0 Negative 0 Withheld 667 Abstentions and broker non-votes The directors of the Company whose terms continue after the Annual Meeting of Stockholders referenced above are Lester Hill, C. Harry Knowles, and Stanton L. Meltzer. Item 5. Other Information In March 1995, the Company, Holoscan and the Holders entered into a stock purchase agreement (the "Stock Purchase Agreement") and an option agreement (the "Option Agreement"). Pursuant to the terms of the Stock Purchase Agreement, the Company purchased for $360,000 shares of Holoscan's convertible preferred stock. The Company elected to convert these shares of convertible preferred stock into shares of common stock on March 1, 1996, resulting in the Company's ownership of 51% of the outstanding Holoscan common stock. Pursuant to the Option Agreement, the Holders granted the Company an option to acquire from each Holder the equity securities of Holoscan owned by such Holder. In addition, the Company agreed to pay to each Holder, through 1998, a payment based on the Company's sales of certain holographic laser scanners. In the absence of such sales, the Holders may obtain an exclusive license for certain technology related to the holographic laser scanner, in consideration for which the Holders will pay a royalty to the Company. On March 1, 1996, the Company exercised its option under the Option Agreement and acquired the remaining 49% of the outstanding Holoscan common stock and other outstanding equity securities of Holoscan from the Holders. As a result, Holoscan is a wholly-owned subsidiary of the Company. (See also Part I, Item 2. - "Management's Discussion and Analysis of Financial Condition and Results of Operations"). Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: Exhibit Number 11 Statement Regarding Computation of Per Share Earnings. 27 Financial Data Schedule (b) Reports on Form 8-K. No reports on Form 8-K were filed during the quarter for which this report on Form 10-Q is being filed. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed by the undersigned thereunto duly authorized. METROLOGIC INSTRUMENTS, INC. Date: August 12, 1996 By:/s/ C. Harry Knowles C. Harry Knowles Chairman of the Board, President and Chief Executive Officer Date: August 12, 1996 By:/s/Thomas E. Mills IV Thomas E. Mills IV Vice President Finance & Chief Financial Officer (Principal Financial Officer) EXHIBIT INDEX Exhibit No. 11 Statement Regarding Computation of Per Share Earnings 27 Financial Data Schedule EX-11 2 COMPUTATION OF PER SHARE EARNINGS Three Months Ended Six Months Ended June 30, June 30, 1996 1995 1996 1995 (Unaudited) (Unaudited) Primary Average shares outstanding 5,251 5,238 5,250 5,231 Net effect of dilutive stock options- based on the treasury stock method using average market price 12 16 10 66 Net effect of dilutive restricted stock grants 5 8 5 9 Total 5,268 5,262 5,265 5,306 Net income $ 685 $ 512 $1,175 $1,619 Per share earnings $0.13 $0.10 $ 0.22 $ 0.31 Fully Diluted Average shares outstanding 5,251 5,238 5,250 5,231 Net effect of dilutive stock options- based on the treasury stock method using average market price 12 16 22 66 Net effect of dilutive restricted stock grants 5 8 5 9 Total 5,268 5,262 5,277 5,306 Net income $ 685 $ 512 $1,175 $1,619 Per share earnings $0.13 $0.10 $ 0.22 $ 0.31 EX-27 3 FDS --
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM UNAUDITED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 6-MOS JAN-01-1996 DEC-31-1995 JUN-30-1996 9,884,000 0 7,588,000 549,000 5,703,000 24,420,000 4,388,000 0 32,522,000 9,915,000 0 0 0 53,000 19,003,000 32,522,000 22,099,000 22,099,000 13,425,000 20,285,000 (93,000) 0 56,000 1,907,000 732,000 0 0 0 0 1,175,000 .22 .22
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