-----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, WfnEt9EXUuSo+yZPH9AauLOmCpNras0nphkVulwSFkFb2HWZkUko1dqU/JOhCaV0 p4YIYLBlgrE7q1JmqVhXcg== 0000082628-97-000010.txt : 19970428 0000082628-97-000010.hdr.sgml : 19970428 ACCESSION NUMBER: 0000082628-97-000010 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970425 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: SYMMETRICOM INC CENTRAL INDEX KEY: 0000082628 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE & TELEGRAPH APPARATUS [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: 97587273 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 March 31, 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.) 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 practicable date: CLASS OUTSTANDING AS OF March 31, 1997 Common Stock 15,916,368 SYMMETRICOM, INC. FORM 10-Q INDEX Page PART I. FINANCIAL INFORMATION Item 1. Financial Statements: Consolidated Balance Sheets March 31, 1997 and June 30, 1996 3 Consolidated Statements of Operations Three and nine months ended March 31, 1997 and 1996 4 Consolidated Statements of Cash Flows Nine months ended March 31, 1997 and 1996 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 12 SIGNATURES 12 SYMMETRICOM, INC. CONSOLIDATED BALANCE SHEETS (In thousands) March 31, June 30, 1997 1996 (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 26,880 $ 31,327 Short-term investments 13,840 2,943 Cash and investments 40,720 34,270 Accounts receivable 21,508 14,544 Inventories 19,988 17,847 Other current assets 3,851 3,647 _________ _________ Total current assets 86,067 70,308 Property, plant and equipment, net 26,106 21,547 Other assets, net 988 1,676 _________ _________ $ 113,161 $ 93,531 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 7,901 $ 5,544 Accrued liabilities 13,892 9,185 Current maturities of long-term debt 58 57 _________ _________ Total current liabilities 21,851 14,786 Long-term debt, less current maturities 5,670 5,709 Deferred income taxes 2,714 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 15,916 and 15,570 shares 25,146 21,862 Retained earnings 57,780 48,541 _________ _________ Total shareholders' equity 82,926 70,403 _________ _________ $ 113,161 $ 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 Nine months ended March 31, March 31, 1997 1996 1997 1996 Net sales $ 37,754 $ 22,693 $105,224 $ 78,797 Cost of sales 20,243 14,365 57,946 43,814 ________ ________ ________ ________ Gross profit 17,511 8,328 47,278 34,983 Operating expenses: Research and development 5,009 3,667 13,388 10,815 Selling, general and administrative 8,078 4,905 22,970 16,766 ________ ________ ________ ________ Operating income (loss) 4,424 (244) 10,920 7,402 Interest income 515 451 1,427 1,398 Interest expense (147) (149) (442) (446) ________ ________ ________ ________ Earnings before income taxes 4,792 58 11,905 8,354 Income taxes 1,073 (260) 2,666 1,928 ________ ________ ________ ________ Net earnings $ 3,719 $ 318 $ 9,239 $ 6,426 Net earnings per common and common equivalent share $ .23 $ .02 $ .57 $ .40 Weighted average common and common equivalent shares outstanding 16,414 15,900 16,299 16,049 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, 1997 1996 Cash flows from operating activities: Cash received from customers $ 98,208 $ 78,286 Cash paid to suppliers and employees (85,930) (70,695) Interest received 1,513 1,346 Interest paid (442) (446) Income taxes paid (608) (260) _________ _________ Net cash provided by operating activities 12,741 8,231 _________ _________ Cash flows from investing activities: Purchases of short-term investments (24,397) (21,664) Maturities of short-term investments 13,500 29,550 Capital expenditures, net (8,759) (7,746) Other assets 122 (299) _________ _________ Net cash used for investing activities (19,534) (159) _________ _________ Cash flows from financing activities: Repayment of long-term debt (38) (38) Proceeds from issuance of common stock 2,384 1,744 _________ _________ Net cash provided by financing activities 2,346 1,706 _________ _________ Net increase (decrease) in cash and cash equivalents (4,447) 9,778 Cash and cash equivalents at beginning of period 31,327 19,354 _________ _________ Cash and cash equivalents at end of period $ 26,880 $ 29,132 Reconciliation of net earnings to net cash provided by operating activities: Net earnings $ 9,239 $ 6,426 Adjustments: Depreciation and amortization 4,766 3,824 Net deferred income taxes 166 752 Changes in assets and liabilities: Accounts receivable (6,964) (288) Inventories (2,141) (706) Other current assets (289) (259) Accounts payable 2,357 428 Accrued liabilities 5,607 (1,946) _________ _________ Net cash provided by operating activities $ 12,741 $ 8,231 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 March 31, 1997, 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, 1997 1996 (In thousands) Raw materials $ 6,677 $ 6,704 Work-in-process 7,520 6,868 Finished goods 5,791 4,275 _________ _________ $ 19,988 $ 17,847 3. Contingencies. In January 1994, a complaint was filed in the United States District Court for the Northern District of California against the Company and certain of its officers, by one of the Company's shareholders. The plaintiff requests that the court certify him as representative of a class of persons who purchased shares of the Company's common stock during a specified period in 1993. The complaint alleges that false and misleading statements made during that period artificially inflated the price of the Company's common stock in violation of federal securities laws. There is no specific amount of damages requested in the complaint. In February 1997, the Court dismissed the complaint with leave to amend. In March 1997, the plaintiff filed an amended class action complaint. After consultation with counsel, the Company and its officers believe that the complaint is entirely without merit, and intend to vigorously defend against the action. 4. Common Stock. In April 1997, the Company's Board of Directors authorized a program to repurchase up to 500,000 shares of the Company's outstanding Common Stock which will be used to offset shares issued pursuant to the Company's stock plans. Repurchases may be made from time to time by the Company in the open market in compliance with Rule 10b-18 of the Securities Act of 1933 and applicable Securities and Exchange Commission guidelines. 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 sales mix; the timing of new product introductions by the Company or its competitors; customer delays in qualification of products; delays in new product development and new product production; manufacturing inefficiencies; increasing competition; market acceptance of the Company's and its competitors' products; the long sales cycles and short product life cycles associated with some of the Company's products; other competitive factors; and the overall demand for semiconductors, particularly semiconductors used in personal computers. Any significant decline in sales could have a material adverse effect on the Company's business, operating results and financial condition due to the high level of fixed costs. Although net sales and the gross margin percentage increased in the third quarter of fiscal 1997 compared to the first and second quarters of fiscal 1997, there can be no assurance that net sales will continue to grow or that gross margins will improve in future periods. 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, and even the last few days, 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. The sales cycle for the Company's products can be long and subject to uncertainties, particularly for Telecom Solutions products which can be affected by changes in customer funding of capital equipment programs. Cancellations or delays in the timing or funding of such programs by one or more customers, which have happened in the past, could have a material adverse impact on the Company's business, operating results and financial condition. 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. Dependence on Major Customers. The Company often depends, and expects to continue to depend, upon a relatively small number of customers for a significant percentage of its net sales. For the third quarter and the first three quarters of fiscal 1997, the Company's three largest customers accounted for approximately 36% and 30% of net sales, respectively. AT&T accounted for approximately 15% and 14% of net sales, for such periods, respectively. Southwestern Bell accounted for approximately 12% and 10% of net sales in the third quarter and first three quarters of fiscal 1997, respectively. The loss of any one or more of the Company's large customers or the significant reduction in sales to any such customer would have a material adverse effect on the Company's business, operating results and financial condition. In the past, some of the Company's large customers have significantly reduced or delayed the amount of products they have ordered. There can be no assurance that the Company will continue to receive large orders from these customers or that the Company will generate significant sales from new customers. 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. Delays in product development and production startup inefficiencies have happened in the past, most recently in the first and second quarters of fiscal 1997. There can be no assurance that such delays will not recur or 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. In addition, the Company's products are complex and use state of the art components, processes and techniques. Accordingly, there can be no assurance that the Company's products do not contain 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 Company results are due in large part to 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, specific conditions in the markets in which the Company competes, regulatory and legislative environment, export rules and conditions, and interest rates. 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 actions taken 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. In addition, the Company has entered into new, highly competitive markets. Future results will depend on the Company's ability to provide competitive performance, quality, price and service. Future Dependence on Foundries. The Company anticipates that future growth will also depend on its ability to secure sufficient outside foundry capacity. There can be no assurance that the Company will be able to secure and maintain sufficient outside foundry capacity or that such foundries will be able or willing to satisfy all of the Company's requirements on a timely basis at favorable prices. In addition, the Company may encounter delays in the qualification process and production ramp-up at new foundries. Also, there can be no assurance that the Company will not suffer from service disruptions, raw material shortages or future price increases with any contract foundry with which it develops a relationship. Effective Tax Rate. The Company's future net earnings will be affected by changes in its effective tax rate due to the extent there are 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 $64.2 million at March 31, 1997 from $55.5 million at June 30, 1996 and the current ratio decreased to 3.9 to 1.0 from 4.8 to 1.0 during the same period. Cash, cash equivalents and short-term investments increased to $40.7 million at March 31, 1997 from $34.3 million at June 30, 1996 principally due to $12.7 million in cash provided by operating activities and $2.4 million in proceeds from the issuance of common stock, partially offset by $8.8 million used for capital expenditures. At March 31, 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 and capital equipment requirements over the near term. The Company currently has both the intent and ability to refinance the existing $5.7 million note, payable in November 1997, on a long-term basis. At March 31, 1997, the Company had outstanding capital spending commitments of $6.3 million for tenant improvements at the new San Jose facility and other equipment purchases. In April 1997, the Company's Board of Directors authorized a program to repurchase up to 500,000 shares of the Company's outstanding common stock which will be used to offset shares issued pursuant to the Company's stock plans. Results of Operations Net sales for the three and nine month periods ended March 31, 1997 and 1996 were as follows: Three months Nine months Ended Ended March 31, March 31, 1997 1996 Change 1997 1996 Change (In millions) Net sales data*: Telecom Solutions $ 23.5 $ 14.3 64% $ 65.1 $ 49.9 30% Linfinity Microelectronics Inc. 14.2 8.4 70% 40.1 28.9 39% ______ _____ ______ ______ $ 37.8 $ 22.7 66% $105.2 $ 78.8 34% * May not add due to rounding. Telecom Solutions net sales increased by 64% and 30% in the third quarter and first three quarters of fiscal 1997, respectively, compared to the third quarter and first three quarters of fiscal 1996 primarily due to higher domestic sales of synchronization products. Linfinity net sales increased by 70% and 39% in the third quarter and first three quarters of fiscal 1997, respectively, compared to the corresponding periods of fiscal 1996 principally due to higher unit volume of new standard commercial products and a shift in sales to higher priced products. The Company's gross margin percentage increased to 46% and 45% in the third quarter and first three quarters of fiscal 1997, respectively, compared to 37% and 44% in the corresponding periods of fiscal 1996 principally due to higher volume and increased manufacturing efficiencies at both operations. Future gross margins will largely depend on product mix, manufacturing efficiencies and selling prices. Research and development expense was $5.0 million (or 13% of net sales) and $13.4 million (or 13% of net sales) in the third quarter and first three quarters of fiscal 1997, respectively, compared to $3.7 million (or 16% of net sales) and $10.8 million (or 14% of net sales) in the corresponding periods of fiscal 1996. The increases were principally due to the development of new wireless synchronization products at Telecom Solutions. Selling, general and administrative expense increased to $8.1 million (or 21% of net sales) and $23.0 million (or 22% of net sales) in the third quarter and first three quarters of fiscal 1997, respectively, compared to $4.9 million (or 22% of net sales) and $16.8 million (or 21% of net sales) in the corresponding periods of fiscal 1996. The increases were essentially due to higher earnings-based incentive compensation, higher marketing and sales expense related to expanded sales support, new product promotion and higher selling expense associated with higher sales. Interest income of $.5 million and $1.4 million in the third quarter and first three quarters of fiscal 1997, respectively, remain unchanged from the corresponding periods of fiscal 1996. The Company's effective tax rate was 22% in both the third quarter and first three quarters of fiscal 1997, compared to 23% in the first three quarters 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 essentially due to the benefit of lower income tax rates on income earned in Puerto Rico and state tax credits. The Company's future net earnings will be affected by changes in its effective tax rate to the extent there are 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 Puerto Rico earnings, prior to the statutory termination of the current favorable tax treatment in fiscal 2006. As a result of the factors discussed above, net earnings in the third quarter of fiscal 1997 were $3.7 million, or $.23 per share, compared to $.3 million, or $.02 per share, in the third quarter of fiscal 1996. Net earnings in the first three quarters of fiscal 1997 increased to $9.2 million, or $.57 per share, from $6.4 million, or $.40 per share, in the first three quarters 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 No reports on Form 8-K were filed during the three months ended March 31, 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: April 25, 1997 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-27.1 2
5 1000 9-MOS JUN-30-1997 JUL-01-1996 MAR-31-1997 26880 13840 21968 460 19988 86067 59193 33087 113161 21851 0 0 0 25146 0 113161 105224 105224 57946 57946 0 0 442 11905 2666 9239 0 0 0 9239 .57 .57
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