-----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, NpV9zDY2ocCiz3YKZUBd79gLzSH1MKh5piYtDAJZprzrQwU+cb2+LIh+tWrgS5Eo 5fhWI6iVAEGj1BHBGDtgjQ== 0000082628-96-000006.txt : 19960625 0000082628-96-000006.hdr.sgml : 19960625 ACCESSION NUMBER: 0000082628-96-000006 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960509 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: SYMMETRICOM INC CENTRAL INDEX KEY: 0000082628 STANDARD INDUSTRIAL CLASSIFICATION: 3661 IRS NUMBER: 951906306 STATE OF INCORPORATION: CA FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-02287 FILM NUMBER: 96558469 BUSINESS ADDRESS: STREET 1: 85 W TASMAN DR CITY: SAN JOSE STATE: CA ZIP: 95134-1703 BUSINESS PHONE: 4089439403 MAIL ADDRESS: STREET 1: 85 WEST TASMAN DRIVE CITY: SAN JOSE STATE: CA ZIP: 95134-1703 FORMER COMPANY: FORMER CONFORMED NAME: SILICON GENERAL INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: REDCOR CORP DATE OF NAME CHANGE: 19820720 10-Q 1 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 March 31, 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 0-2287 SYMMETRICOM, INC. (Exact name of registrant as specified in its charter) California No. 95-1906306 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 85 West Tasman Drive, San Jose, California 95134-1703 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (408) 943-9403 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No _____ Applicable Only to Issuers Involved in Bankruptcy Proceedings During the Preceding Five Years: Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes No Applicable Only to Corporate Issuers: Indicate number of shares outstanding of each of the issuer's classes of common stock, as of the latest practical date: CLASS OUTSTANDING AS OF APRIL 30, 1996 Common Stock 15,559,818 SYMMETRICOM, INC. FORM 10-Q INDEX Page PART I. FINANCIAL INFORMATION Item 1. Financial Statements: Consolidated Balance Sheets March 31, 1996 and June 30, 1995 3 Consolidated Statements of Operations Three and nine months ended March 31, 1996 and 1995 4 Consolidated Statements of Cash Flows Nine months ended March 31, 1996 and 1995 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 6. Exhibits and Reports on Form 8-K 11 SIGNATURES 11 PART I. FINANCIAL INFORMATION Item 1. Financial Statements SYMMETRICOM, INC. CONSOLIDATED BALANCE SHEETS (In thousands) March 31, June 30, 1996 1995 (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 29,132 $ 19,354 Short-term investments 5,965 13,851 Accounts receivable 12,133 11,845 Inventories 18,561 17,855 Other current assets 3,285 3,715 _________ _________ Total current assets 69,076 66,620 Property, plant and equipment, net 21,354 16,978 Other assets, net 1,573 1,728 _________ _________ $ 92,003 $ 85,326 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 4,736 $ 4,308 Accrued liabilities 9,235 11,521 Current maturities of long-term debt 56 52 _________ _________ Total current liabilities 14,027 15,881 Long-term debt, less current maturities 5,724 5,766 Deferred rent 71 231 Deferred income taxes 3,386 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 15,560 and 15,097 shares 21,306 19,062 Retained earnings 47,489 41,063 _________ _________ Total shareholders' equity 68,795 60,125 _________ _________ $ 92,003 $ 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 Nine months ended March 31, March 31, 1996 1995 1996 1995 Net sales $ 22,693 $ 26,261 $ 78,797 $ 76,032 Cost of sales 14,365 13,798 43,814 41,368 ________ ________ ________ ________ Gross profit 8,328 12,463 34,983 34,664 Operating expenses: Research and development 3,667 3,313 10,815 9,609 Selling, general and administrative 4,905 6,226 16,766 17,341 ________ ________ ________ ________ Operating income (loss) (244) 2,924 7,402 7,714 Interest income 451 378 1,398 879 Interest expense (149) (150) (446) (450) ________ ________ ________ ________ Earnings before income taxes 58 3,152 8,354 8,143 Income taxes (260) 366 1,928 946 ________ ________ ________ ________ Net earnings $ 318 $ 2,786 $ 6,426 $ 7,197 ======== ======== ======== ======== Net earnings per common and common equivalent share $ .02 $ .18 $ .40 $ .46 Weighted average common and common equivalent shares outstanding 15,900 15,786 16,049 15,624 The accompanying notes are an integral part of these consolidated financial statements. SYMMETRICOM, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) Nine months ended March 31, 1996 1995 Cash flows from operating activities: Cash received from customers $ 78,286 $ 74,016 Cash paid to suppliers and employees (70,695) (64,272) Interest received 1,346 770 Interest paid (446) (450) Income taxes paid (260) (1,037) _________ _________ Net cash provided by operating activities 8,231 9,027 _________ _________ Cash flows from investing activities: Purchases of short-term investments (21,664) (5,899) Maturities of short-term investments 29,550 Capital expenditures, net (7,746) (4,828) Other assets (299) 75 _________ _________ Net cash used for investing activities (159) (10,652) _________ _________ Cash flows from financing activities: Repayment of long-term debt (38) (35) Proceeds from issuance of common stock 1,744 1,469 _________ _________ Net cash provided by financing activities 1,706 1,434 _________ _________ Net increase (decrease) in cash and cash equivalents 9,778 (191) Cash and cash equivalents at beginning of period 19,354 21,250 _________ _________ Cash and cash equivalents at end of period $ 29,132 $ 21,059 ========= ========= Reconciliation of net earnings to net cash provided by operating activities: Net earnings $ 6,426 $ 7,197 Adjustments: Depreciation and amortization 3,824 3,921 Net deferred income taxes 752 (660) (Increase) in accounts receivable (288) (2,155) (Increase) in inventories (706) (2,081) (Increase) in other current assets (259) (360) Increase in accounts payable 428 1,018 Increase (decrease) in accrued liabilities (1,786) 2,293 (Decrease) in deferred rent (160) (146) _________ _________ Net cash provided by operating activities $ 8,231 $ 9,027 ========= ========= 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 March 31, 1996, the results of operations for the three and nine month periods then ended and cash flows for the nine month period then ended. The results of operations for the periods presented are not necessarily indicative of those that may be expected for the full year. 2. Inventories. Inventories are stated at the lower of cost (first-in, first-out) or market. Inventories consist of: March 31, June 30, 1996 1995 (In thousands) Raw materials $ 6,653 $ 5,433 Work-in-process 7,390 6,910 Finished goods 4,518 5,512 _______ _______ $18,561 $17,855 ======= ======= 3. Recent Accounting Pronouncements. In October 1995, Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation," 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 that it will continue to account for employee stock options under Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees." The Company will provide certain disclosures including pro forma net earnings and net earnings per share information as if the fair value method had been adopted for fiscal 1997. 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 information" 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 is subject to the safe harbor created by those Sections. 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 differ materially 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; delays in new product development and new product production; market acceptance of the Company's and its competitors' products; the long sales cycles associated with the Company's 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 reasonable gross margins. Accordingly, any significant decline in demand could have a material adverse effect on the Company's business, operating results and financial condition. Order Timing. A substantial portion of each quarter's shipments is based on orders received during that quarter, and from time to time, a significant portion of each quarter's shipments is based on orders received in the last month of that quarter. Therefore, operating results may fluctuate significantly from the Company's expectations quarter to quarter due to uncertainty in the timing and the receipt of orders, delays in product shipment and rescheduling or cancellation of orders. The Company presently expects only modest improvement in sales and earnings in the fourth quarter of fiscal 1996 compared to the third quarter of fiscal 1996. The expected improvement is due, in part, to the higher backlog at the beginning of the fourth quarter than at the beginning of the third quarter. However, orders can generally be cancelled or rescheduled by the Company's customers at any time without significant penalty. In addition, there can be no assurance that the Company will receive a sufficient number of new orders during the fourth quarter or that these orders can be shipped in the fourth quarter. Furthermore, there can be no assurance that fourth quarter sales and earnings will show modest improvement from those of the preceding quarter. New Product Development. The Company is affected by changing technologies and frequent new product introductions. The Company's success will depend on its ability to respond to changing technologies and customer requirements. Delays in new product development or delays in new product production could have a material adverse effect on the Company's business, operating results and financial condition. There can be no assurance that the Company will successfully develop and introduce new products, or such new products will achieve market acceptance. Product Performance and Reliability. The Company's customers establish demanding specifications for 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 or failures due to the complexities of such products. Any such unforeseen problem could have a material adverse effect on the Company's business, operating results and financial condition. Market Change. Future results depend in large part on growth in the markets for the Company's products. The growth in each of these markets depends on, among other things, changes in general economic conditions, or conditions which 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 financial, manufacturing, technical and marketing resources. Operating results are subject to fluctuation based on unforeseen actions taken by competitors, the entry of new competitors and the introduction of new or enhanced competing products. Competition for 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 to $55.0 million at March 31, 1996 from $50.7 million at June 30, 1995 and the current ratio increased to 4.9 to 1.0 from 4.2 to 1.0 during the same period primarily due to the decrease in accrued liabilities to $9.2 million from $11.5 million. This decrease was essentially due to the payment of fiscal 1995 earnings- based incentive compensation and to the reversal of substantially all accrued fiscal 1996 earnings-based incentive compensation. Cash and cash equivalents, and short-term investments increased to $35.1 million at March 31, 1996 from $33.2 million at June 30, 1995 principally due to $8.2 million in cash provided by operating activities and $1.7 million in proceeds from the issuance of common stock, partially offset by $7.7 million used for capital expenditures. At March 31, 1996, 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 March 31, 1996, the Company had no material outstanding commitments to purchase capital equipment. Results of Operations Net sales for the three and nine month periods ended March 31, 1996 and 1995 were as follows: Three Months Nine Months Ended Ended March 31, March 31, 1996 1995 Change 1996 1995 Change (Dollars in millions) Net sales data*: Telecom Solutions $14.3 $16.0 (11)% $49.9 $46.2 8% Linfinity Microelectronics Inc. 8.4 10.2 (18)% 28.9 29.8 (3)% _____ _____ _____ _____ $22.7 $26.3 (14)% $78.8 $76.0 4 % * May not add due to rounding. Telecom Solutions net sales decreased 11% in the third quarter of fiscal 1996 compared to the third quarter of fiscal 1995 essentially due to lower synchronization sales as some orders received during the third quarter of fiscal 1996 were not deliverable until after the end of the quarter and other orders were delayed pending completion of engineering. Telecom Solutions net sales increased 8% in the first three quarters of fiscal 1996 compared to the first three quarters of fiscal 1995 principally due to the increase in Integrated Digital Services Terminal (IDST) and new synchronization product sales which offset declines in mature synchronization product sales. Linfinity Microelectronics Inc. (Linfinity) net sales decreased by 18% in the third quarter of fiscal 1996 compared to the third quarter of fiscal 1995 primarily due to lower orders received, customer rescheduling of orders in backlog and a shift in sales to lower priced products. Linfinity net sales decreased by 3% in the first three quarters of fiscal 1996 compared to the corresponding period of fiscal 1995 principally due to a shift in sales to lower priced products. The gross profit margin, as a percentage of net sales, decreased to 37% and 44% in the third quarter and first three quarters of fiscal 1996, respectively, compared to 47% and 46% in the corresponding periods of fiscal 1995 principally due to lower manufacturing efficiencies at both operations. Future gross profit margins will largely depend on product mix, manufacturing efficiencies and selling prices. Research and development expense, and selling, general and administrative expense in the third quarter and the first three quarters of fiscal 1996 are net of the significant reversal, in the fiscal 1996 third quarter, of substantially all fiscal 1996 year to date earnings- based incentive compensation due to lower than expected performance in Telecom Solutions and Linfinity whereas the corresponding periods of fiscal 1995 included significant accruals for earnings-based incentive compensation. Research and development expense was $3.7 million (or 16% of sales) and $10.8 million (or 14% of sales) in the third quarter and first three quarters of fiscal 1996, respectively, compared to $3.3 million (or 13% of sales) and $9.6 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 decreased to $4.9 million (or 22% of sales) and $16.8 million (or 21% of sales) in the third quarter and first three quarters of fiscal 1996, respectively, compared to $6.2 million (or 24% of sales) and $17.3 million (or 23% of sales) in the corresponding periods of fiscal 1995. Interest income increased to $.5 million and $1.4 million in the third quarter and first three quarters of fiscal 1996, respectively, compared to $.4 million and $.9 million in the corresponding periods of fiscal 1995 principally due to an increase in funds invested. The tax credit in the third quarter of fiscal 1996 resulted from the adjustment of the annual estimated effective tax rate due to the increase in the percentage of income expected to be earned in Puerto Rico as a result of lower than anticipated earnings at Linfinity. The Company's effective tax rate was 23% in the first three quarters of fiscal 1996 compared to 12% in the corresponding period 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. However, the effective tax rate in fiscal 1996 is estimated to be higher than the effective tax rate in fiscal 1995 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 third quarter of fiscal 1996 decreased to $.3 million, or $.02 per share, compared to $2.8 million, or $.18 per share, in the third quarter of fiscal 1995. Net earnings in the first three quarters of fiscal 1996 decreased to $6.4 million, or $.40 per share, from $7.2 million, or $.46 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," 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 that it will continue to account for employee stock options under Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees." The Company will provide certain disclosures including pro forma net earnings and net earnings per share information as if the fair value method had been adopted for fiscal 1997. PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 27.1 Financial Data Schedule (b) Reports on Form 8-K No reports on Form 8-K were filed during the three months ended March 31, 1996. 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: May 9, 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) EX-27 2
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