-----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, E/L0LrUUJJRPg3XhAS8E0wNmB4t9ZK1QoEwVin1hGmTVa54uI3l2F6d2WQkjobRq oAJtjdHTHGBL6umEVGOqlw== 0000082628-96-000014.txt : 19961205 0000082628-96-000014.hdr.sgml : 19961205 ACCESSION NUMBER: 0000082628-96-000014 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961025 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: 96647859 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 THIS CONFORMING PAPER FORMAT DOCUMENT IS BEING SUBMITTED PURSUANT TO RULE 901(d) OF REGULATION S-T 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, 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 September 30, 1996 Common Stock 15,650,849 SYMMETRICOM, INC. FORM 10-Q INDEX Page PART I. FINANCIAL INFORMATION Item 1. Financial Statements: Consolidated Balance Sheets September 30, 1996 and June 30, 1996 3 Consolidated Statements of Operations Three months ended September 30, 1996 and 1995 4 Consolidated Statements of Cash Flows Three months ended September 30, 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 10 SIGNATURES 10 PART I. FINANCIAL INFORMATION Item 1. Financial Statements SYMMETRICOM, INC. CONSOLIDATED BALANCE SHEETS (In thousands) September 30, June 30, 1996 1996 (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 24,500 $ 31,327 Short-term investments 10,413 2,943 --------- --------- Cash and investments 34,913 34,270 Accounts receivable 17,493 14,544 Inventories 17,882 17,847 Other current assets 4,027 3,647 _________ _________ Total current assets 74,315 70,308 Property, plant and equipment, net 22,282 21,547 Other assets, net 1,459 1,676 _________ _________ $ 98,056 $ 93,531 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 6,131 $ 5,544 Accrued liabilities 10,088 9,185 Current maturities of long-term debt 59 57 _________ _________ Total current liabilities 16,278 14,786 Long-term debt, less current maturities 5,694 5,709 Deferred income taxes 2,708 2,633 Shareholders' equity: Preferred stock, no par value: Authorized 500 shares Issued none Common stock, no par value: Authorized 32,000 shares Issued and outstanding 15,651 and 15,570 shares 22,577 21,862 Retained earnings 50,799 48,541 _________ _________ Total shareholders' equity 73,376 70,403 _________ _________ $ 98,056 $ 93,531 ========= ========= 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 September 30, 1996 1995 Net sales $ 32,023 $ 27,678 Cost of sales 18,366 14,612 ________ ________ Gross profit 13,657 13,066 Operating expenses: Research and development 3,954 3,626 Selling, general and administrative 7,103 5,940 ________ ________ Operating income 2,600 3,500 Interest income 458 466 Interest expense (148) (149) ________ ________ Earnings before income taxes 2,910 3,817 Income taxes 652 1,046 ________ ________ Net earnings $ 2,258 $ 2,771 ======== ======== Net earnings per common and common equivalent share $ .14 $ .17 ======== ======== Weighted average common and common equivalent shares outstanding 16,117 16,203 ======== ======== The accompanying notes are an integral part of these consolidated financial statements. SYMMETRICOM, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) Three months ended September 30, 1996 1995 Cash flows from operating activities: Cash received from customers $ 29,056 $ 25,440 Cash paid to suppliers and employees (27,391) (24,247) Interest received 476 441 Interest paid (148) (149) Income taxes paid (11) (98) _________ _________ Net cash provided by operating activities 1,982 1,387 _________ _________ Cash flows from investing activities: Purchases of short-term investments (8,470) (12,266) Maturities of short-term investments 1,000 11,303 Capital expenditures, net (2,045) (1,747) Other assets 4 50 _________ _________ Net cash used for investing activities (9,511) (2,660) _________ _________ Cash flows from financing activities: Repayment of long-term debt (13) (13) Proceeds from issuance of common stock 715 1,044 _________ _________ Net cash provided by financing activities 702 1,031 _________ _________ Net decrease in cash and cash equivalents (6,827) (242) Cash and cash equivalents at beginning of period 31,327 19,354 _________ _________ Cash and cash equivalents at end of period $ 24,500 $ 19,112 ========= ========= Reconciliation of net earnings to net cash provided by operating activities: Net earnings $ 2,258 $ 2,771 Adjustments: Depreciation and amortization 1,523 1,280 Net deferred income taxes 300 421 Changes in assets and liabilities: Accounts receivable (2,949) (2,058) Inventories (35) 97 Other current assets (605) (662) Accounts payable 587 577 Accrued liabilities 903 (1,039) _________ _________ Net cash provided by operating activities $ 1,982 $ 1,387 ========= ========= 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, 1996. 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, 1996, 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, 1996 1996 (In thousands) Raw materials $ 6,546 $ 6,704 Work-in-process 7,608 6,868 Finished goods 3,728 4,275 _______ _______ $17,882 $17,847 ======= ======= 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 consist 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 Quarterly Operating Results. The Company's quarterly results have fluctuated in the past, and are expected to fluctuate in the future, due to a number of factors, including the timing, cancellation or delay of customer orders; changes in the product or customer mix of sales; the timing of new product introductions by the Company or its competitors; customer delays in qualification of key new products; delays in new product development and new product production; increasing competition; market acceptance of the Company's and its competitors' products; the long sales cycles associated with the Company's products; other competitive factors; and the overall condition of the semiconductor industry. Company operations entail a high level of fixed costs and require an adequate sales volume 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 often dependent upon orders received during that quarter, of which a significant portion may be received in the last month of that quarter. Furthermore, most orders in backlog can be rescheduled or cancelled without significant penalty. Such reschedules and cancellations have happened in the past, most recently in the second and third quarters of fiscal 1996. 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. While sales and bookings increased in the first quarter of fiscal 1997 compared to the fourth quarter of fiscal 1996, the Company's long-term challenge remains to increase earnings through sales growth and improved gross margins. There can be no assurance that the Company will achieve sales growth or improve gross margins. Product Development. The Company is affected by changing technologies and frequent product introductions. The Company's success will depend on its ability to respond to changing technologies and customer requirements. Delays in product development or production startup inefficiencies could have a material adverse effect on the Company's business, operating results and financial condition. Such delays in product development and production startup inefficiencies have happened in the past, most recently in the first quarter of fiscal 1997. There can be no assurance that the Company will successfully 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 demand exacting product performance and reliability specifications. These products are complex and use state of the art components, processes and techniques. There can be no assurance that the Company's products do not contain undetected errors or design flaws. Such engineering issues have happened in the past, most recently in the third quarter of fiscal 1996. Any such unforeseen problems 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 continues to increase in existing markets. In addition, the Company has entered into new, highly competitive markets. Results will depend on the Company's ability to provide competitive performance, quality, price and service. Semiconductor Manufacturing Capacity. Linfinity Microelectronics Inc. (Linfinity) is nearing full utilization of its wafer fabrication facility and anticipates increasing its capacity by improving yields, adding resources including capital equipment and utilizing outside foundries. Wafers manufactured by outside foundries may result in lower gross profit percentages. While the Company believes that foundry capacity is currently available, there can be no assurance that the Company will be able to obtain such capacity or that such capacity will be available in the future. Effective Tax Rate. The Company's future net earnings will be affected by changes in its effective tax rate due to shifts in the earnings mix between Puerto Rico and the United States. In addition certain provisions of the Omnibus Budget Reconciliation Act of 1993 and the Small Business Job Protection Bill of 1996 may result in less favorable tax treatment for future income earned in Puerto Rico, prior to the statutory termination of this favorable tax treatment in fiscal 2006. 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 the Company, 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 $58.0 million at September 30, 1996 from $55.5 million at June 30, 1996 and the current ratio decreased to 4.6 to 1.0 from 4.8 to 1.0 during the same period. Cash, cash equivalents and short-term investments increased to $34.9 million at September 30, 1996 from $34.3 million at June 30, 1996 principally due to $2.0 million in cash provided by operating activities and $.7 million in proceeds from the issuance of common stock, partially offset by $2.0 million used for capital expenditures. At September 30, 1996, the Company had $7.0 million of unused credit available under its bank line of credit. The Company believes that cash, cash equivalents, short-term investments, funds generated from operations and funds available under its bank line of credit will be sufficient to satisfy working capital and capital equipment requirements over the near term. At September 30, 1996, the Company had no material outstanding commitments to purchase capital equipment. Results of Operations Net sales increased by $4.3 million (16%) to $32.0 million in the first quarter of fiscal 1997 from $27.7 million in the first quarter of fiscal 1996. Telecom Solutions net sales increased by $2.8 million (16%) to $20.0 million in the first quarter of fiscal 1997 from $17.2 million in the corresponding period of fiscal 1996 primarily due to higher domestic sales of synchronization products. Linfinity net sales increased by $1.6 million (15%) to $12.0 million in the first quarter of fiscal 1997 from $10.5 million in the first quarter of fiscal 1996 principally due to higher unit volume and a shift in sales to higher priced products. The Company's gross profit, as a percentage of net sales, decreased to 43% in the first quarter of fiscal 1997, compared to 47% in the first quarter of fiscal 1996 principally due to lower manufacturing efficiencies at Linfinity, higher costs related to the initial production of Linfinity's new module products, and to inefficient operations at Telecom Solutions partially offset by a shift to higher margin products at Telecom Solutions. Future gross profit, as a percentage of net sales, will largely depend on product mix, manufacturing efficiencies, selling prices and the development of and market acceptance of new products. Research and development expense was $4.0 million (or 12% of net sales) in the first quarter of fiscal 1997, compared to $3.6 million (or 13% of net sales) in the first quarter of fiscal 1996 as the Company continued to invest in new product development and the enhancement of existing products at both Telecom Solutions and Linfinity. Selling, general and administrative expense increased to $7.1 million (or 22% of net sales) in the first quarter of fiscal 1997 from $5.9 million (or 21% of net sales) in the first quarter of fiscal 1996. The increase was essentially due to higher marketing and sales expense related to expanded geographic sales support at Telecom Solutions, the introduction of new products at both operations, and to higher selling expense associated with higher sales at both operations. Interest income was $.5 million in both the first quarter of fiscal 1997 and fiscal 1996. The Company's effective tax rate was 22% in the first quarter of fiscal 1997, compared to 27% in the first quarter of fiscal 1996 and 21% for all of fiscal 1996. The effective tax rate for fiscal 1997 is expected to be lower than the combined federal and state tax rate principally due to the benefit of lower income tax rates on income earned in Puerto Rico and state tax credits. Certain provisions of the Omnibus Budget Reconciliation Act of 1993 and the Small Business Job Protection Bill of 1996 may result in less favorable tax treatment for future income earned in Puerto Rico, prior to the statutory termination of this favorable tax treatment in fiscal 2006. As a result of the factors discussed above, net income in the first quarter of fiscal 1997 decreased to $2.3 million, or $.14 per share, compared to $2.8 million, or $.17 per share, in the first quarter of fiscal 1996. 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 A report on Form 8-K was filed during July 1996, pursuant to Item 5 of Form 8-K, to report the retirement on August 15, 1996, of Paul Risinger, a Director and the Vice Chairman of the Company. 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 25, 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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