EXHIBIT 99.1
SYMBOL TECHNOLOGIES REPORTS FIRST-QUARTER 2005 FINANCIAL RESULTS
REVENUE OF $457.5 MILLION AND NET EARNINGS OF $22.2 MILLION, OR $0.09 EPS;
TELECONFERENCE 4:45 P.M. (ET), EASTERN TIME TUESDAY, MAY 3, TO DISCUSS
FIRST-QUARTER 2005 RESULTS
HOLTSVILLE, N.Y., May 3, 2005 - Symbol Technologies, Inc. (NYSE:SBL), The
Enterprise Mobility Company(TM), today reported financial results for first
quarter 2005. The Company will host a teleconference and Web conference at 4:45
p.m. (ET), Eastern Time Tuesday, May 3, to discuss the results.
Revenue for the first quarter ended March 31, 2005, was $457.5 million,
representing the Company's highest quarterly revenue in its history as well as a
gain of 9 percent over first-quarter 2004 revenue of $419.7 million and an
increase of 2 percent over fourth-quarter 2004 revenue of $450.5 million.
First-quarter 2005 net earnings were $22.2 million, or $0.09 per share,
compared with first-quarter 2004 net earnings of $6.8 million, or $0.03 per
share, and fourth-quarter 2004 net earnings of $28.5 million, or $0.11 per
share.
FIRST-QUARTER 2005 HIGHLIGHTS
Other financial trends that the Company experienced in the first quarter of
2005 are as follows:
- Eight sequential quarters of increased product bookings, reaching $382.5
million and representing a 9 percent year-over-year increase over $351.9
million in product bookings in 2004's first quarter.
- Five sequential quarters of DSOs below 30 days.
- First-quarter 2005 inventory turns of 5.8, the highest of any quarter of the
last two years.
- Cash flow from operations of $72.7 million.
- Cash balances at March 31, 2005, at $218.2 million, which excludes the $51.6
million of restricted cash on the balance sheet.
- Drawings under short-term credit facility reduced by $50 million.
INCREASE IN PRODUCT REVENUE
First-quarter 2005 product revenue increased just over 10 percent
year-over-year to $384.2 million from $348.2 million in first quarter 2004, and
was up sequentially 2 percent from $375.0 million in 2004's fourth quarter. The
year-over-year increase in product revenue is primarily attributable to growth
in the Mobile Computing Division as well as the RFID Division. The Wireless
Infrastructure Division, together with the Advanced Data Capture Division,
generated the sequential increase in product revenue. Also, the Advanced Data
Capture Division in the first quarter experienced record product bookings, with
an increase in bookings in all three of the Company's geographic sales theaters
and across all of the division's product lines, including scan engines that the
Company sells to third parties.
SERVICE REVENUE AT EXPECTED ANNUALIZED RATE
First-quarter 2005 service revenue was $73.2 million, a 3 percent increase
versus first-quarter 2004 service revenue of $71.4 million. Service revenue
declined 3 percent from fourth quarter 2004 revenue of $75.5 million. The
year-over-year growth in overall services revenue was diluted by a 52 percent
decline in Professional Services revenue. Year-over-year growth in Customer
Services revenue was about 9 percent as improvements in the delivery execution
model generated gains in attach rates and bettered the overall customer
experience.
CONTINUED GROSS PROFIT GROWTH
Year over year, first-quarter 2005 gross profit increased just over 5
percent to $205.6 million from $194.9 million in first quarter 2004 but was down
about 5 percent sequentially from fourth-quarter 2004 gross profit of $216.7
million. First-quarter 2005 gross margins of 44.9 percent were unfavorably
impacted by a strengthening U.S. dollar and a greater mix of RFID revenue as
well as a greater-than-normal mix of revenue from larger sales with lower profit
margins.
OPERATING EXPENSES RISE
Operating expenses in first quarter 2005 were $181.2 million, up 10 percent
compared to 2004's first-quarter operating expense of $165.5 million and up 2
percent sequentially from fourth-quarter 2004 operating expense of $178.1
million. The increase was primarily the result of increased costs related to
engineering and product development as well as an increase in sales expense
related to the Company's initiative to improve its sales coverage.
DECLINES IN OPERATING INCOME AND MARGIN
Earnings from operations for 2005's first quarter were $24.3 million, just
under an 18 percent decrease from the prior year's first-quarter total of $29.5
million. Operating margin for first quarter 2005 declined 3.3 percentage points
from the fourth quarter 2004 to 5.3 percent.
OTHER INCOME/EXPENSE AND EFFECTIVE TAX RATE
First-quarter 2005 net earnings of $22.2 million, or $0.09 per share,
included a negative impact of a mark-to-market adjustment of the Cisco SAILS by
$3.5 million. In addition, the Company did not receive a $2.5 million royalty
payment that was due at the end of the first quarter. Due to a number of
favorable items, the effective tax rate in first quarter 2005 was a negative 25
percent. This tax benefit is attributable to refunds and settlements relating to
foreign and domestic tax matters, as well as the receipt of favorable rulings
from U.S. and foreign tax authorities.
CONTINUED STRONG CASH FLOW FROM OPERATIONS
The Company ended March 2005 with $218.2 million in cash, a slight increase
from December 31, 2004, after paying down $50 million of its short-term credit
facility. In first quarter 2005, the Company had cash flow from operations of
$72.7 million.
CONTINUED STRONG OPERATING AND FINANCIAL PERFORMANCE
"The positive trends that we experienced during 2003 and 2004 continued in
2005's first quarter. At $457.5 million, this was a record-revenue quarter for
Symbol, although it was slightly lower than we had expected, as the economy and
information technology spending cooled in Q1," said William R. Nuti, Symbol
president and chief executive officer.
"Going forward, we're planning to adopt a more concerted approach to
reducing total operating expenses, both on an absolute basis and as a percentage
of sales. As we complete our three-year turn-around plan, which we began to
implement in 2003, our attentions can now be focused on organizing around growth
and profitability versus a successful turn-around. Net-
net, with the turn-around phase of our strategic plan nearing its end, now is
the right time to take the work that has been substantially completed and turn
it into bottom-line leverage for our shareholders. While we cannot discuss
details with you right now, our target is to lower our operating expense run
rate to approximately $170 million by year-end 2005. On our 2005 second-quarter
earnings call, likely to be held in early August, we will provide details on any
charges associated with this plan and outline the anticipated financial impact
to our operating margins in 2005," Nuti added.
Mark T. Greenquist, Symbol senior vice president and chief financial
officer, said, "With cash flow from operations of approximately $73 million,
2005's first quarter represented another solid performance for cash generation.
In addition, at $218 million, our cash balances at March 31, 2005, remained
unchanged versus year-end 2004. That balance excludes the $52 million of
restricted cash on the balance sheet. Also of note, the Company paid down an
additional $50 million in bank debt in the first quarter."
2005 SECOND-QUARTER AND FULL-YEAR GUIDANCE
The Company expects that revenue in second quarter 2005 will be in a range
of $460 million to $470 million, representing growth of 1 percent to 3 percent
sequentially and 6 percent to 9 percent year-over-year. With regard to full-year
revenue guidance, the Company believes that revenue growth for fiscal year 2005
will likely be at the lower end of its previously disclosed 10 percent to 15
percent range. Second-quarter gross margin is expected to be in the 45 percent
to 46 percent range, and operating expenses are anticipated to be in a range of
$177 million to $180 million.
Diluted earnings per share for second quarter 2005 are expected to be
$0.05 to $0.07 per share, reflecting the anticipated impact of a change in
New York state tax law that would result in a second-quarter effective tax rate
of approximately 50 percent, compared to a normalized effective tax rate of 34
percent.
Without the one-time negative impact, diluted EPS would be $0.07 to
$0.09, which would represent second-quarter operating margins of approximately
6.5 percent to 7.5 percent.
In addition to including diluted earnings per share in guidance for the
second quarter ending June 30, 2005, under accounting principles generally
accepted in the U.S. ("GAAP"), Symbol disclosed adjusted diluted earnings per
share guidance after giving effect to the anticipated impact of a change in New
York state tax law that would negatively affect diluted earnings per share for
the second quarter ending June 30, 2005, that the Securities and Exchange
Commission defines as a "non-GAAP financial measure." This non-GAAP financial
measure should not be considered in isolation or as an alternative to diluted
earnings per share or any other measure of performance derived in accordance
with GAAP. However, a non-GAAP measure provides useful supplemental information
for management and investors and allows them to perform meaningful comparisons
for the Company's past and present results. For a reconciliation of this
non-GAAP measure, see the table below with the heading "Non-GAAP Financial
Measure."
TELECONFERENCE INFORMATION
To participate in the teleconference, dial 800-946-0720 (domestic) and
719-457-2646 (international) at least 10 minutes prior to commencement of the
call.
WEBCAST INFORMATION: To listen to a live audiocast (listen only), access
www.symbol.com/investor and click on the link next to the microphone icon.
TELECONFERENCE PRESENTATION: To view the financial presentation via the Web,
access www.symbol.com/investor at least 10 minutes prior to the start of the
teleconference. At the site, click on the link next to the microphone icon; you
are required to provide your name and e-mail address. Please be advised that
registration permits you to enroll prior to the conference, but this is not
mandatory for participation. This is an unrestricted Web site and a password is
not required. In addition, a copy of the presentation will be posted in PDF
format on the Company's investor home page, www.symbol.com/investor.
REPLAY INFORMATION: A synchronized Web cast and audio replay will be available
on the Company's investor home page on a 24-hour non-stop basis within two hours
of the conclusion of the call. An audio replay of the teleconference will be
available from 7:30 p.m. ET (Eastern Time) Tuesday, May 3, through
Tuesday, May 31, by calling toll-free 888-203-1112 (domestic) and 719-457-0820
(international), and entering access code 3429710.
ABOUT SYMBOL TECHNOLOGIES
Symbol Technologies, Inc., The Enterprise Mobility Company(TM), is a
recognized worldwide leader in enterprise mobility, delivering products and
solutions that capture, move and manage information in real time to and from the
point of business activity. Symbol enterprise mobility solutions integrate
advanced data capture technology, mobile computing platforms, wireless
infrastructure, mobility software and world-class services programs under the
Symbol Enterprise Mobility Services brand. Symbol enterprise mobility products
and solutions are proven to increase workforce productivity, reduce operating
costs, drive operational efficiencies and realize competitive advantages for the
world's leading retailers, transportation and logistics companies,
manufacturers, warehouse and distribution centers, government agencies and
healthcare. More information is available at www.symbol.com.
FORWARD-LOOKING STATEMENTS
This news release contains forward-looking statements based on current
expectations, forecasts and assumptions that involve risks and uncertainties
that could cause actual outcomes and results to differ materially. These risks
and uncertainties include price and product competition, dependence on new
product development, reliance on major customers, customer demand for our
products and services, control of costs and expenses, international growth,
general industry and market conditions and growth rates and general domestic and
international economic conditions including interest rate and currency exchange
rate fluctuations. For a further list and description of such risks and
uncertainties, see the reports filed by Symbol with the Securities and Exchange
Commission. Symbol disclaims any intention or obligation to update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise.
FOR MEDIA INFORMATION:
Patricia Hall
Symbol Technologies, Inc.
631-738-5636
hallp@symbol.com
FOR FINANCIAL INFORMATION:
Nancy Tully
Symbol Technologies, Inc.
631-738-5050
tullyn@symbol.com
SYMBOL TECHNOLOGIES, INC. & SUBSIDIARIES
Condensed Consolidated Statement of Operations
THREE MONTHS ENDING
-------------------
($ Millions, except per share data) MARCH 31, 2005 DECEMBER 31, 2004 MARCH 31, 2004
-------------- ----------------- --------------
Net Revenue $ 457.5 $ 450.5 $ 419.7
Cost of Revenue 251.9 233.8 224.7
------- ------- -------
Gross Profit 205.6 216.7 194.9
Operating Expenses:
Engineering 42.4 41.4 41.6
S, G&A 138.9 136.1 123.9
Other -- 0.6 --
------- ------- -------
Total Operating Expenses 181.2 178.1 165.5
------- ------- -------
Earnings from operations 24.3 38.6 29.5
Other Expense (Income), net 6.6 9.6 (1.0)
------- ------- -------
Net earnings before taxes 17.8 29.0 30.5
(Benefit from) Provision for income taxes (4.4) 0.5 23.6
------- ------- -------
Net Earnings $ 22.2 $ 28.5 $ 6.8
======= ======= =======
Earnings per share $ 0.09 $ 0.11 $ 0.03
Avg. Diluted shares outstanding (M) 251.3 248.5 239.4
PERCENTAGE OF REVENUE*
Net Revenue 100.0% 100.0% 100.0%
Cost of Revenue 55.1% 51.9% 53.5%
------- ------- -------
Gross Profit 44.9% 48.1% 46.5%
Operating Expenses:
Engineering 9.3% 9.2% 9.9%
S, G&A 30.4% 30.2% 29.5%
Other -- 0.1% --
------- ------- -------
Total Operating Expenses 39.6% 39.5% 39.4%
------- ------- -------
Earnings from operations 5.3% 8.6% 7.0%
Other Expense (Income), net 1.4% 2.1% (0.2)%
------- ------- -------
Net earnings before taxes 3.9% 6.4% 7.3%
(Benefit from) Provision for income taxes (1.0)% 0.1% 5.6%
------- ------- -------
Net Earnings 4.8% 6.3% 1.6%
* Certain numbers may differ slightly due to rounding
Page 1 of 4
SYMBOL TECHNOLOGIES, INC. & SUBSIDIARIES
Condensed Consolidated Balance Sheet Trend
BALANCE SHEET AT
----------------
($ Millions) March 31, 2005 December 31, 2004 March 31, 2004
-------------- ----------------- --------------
Assets
Cash and cash equivalents $ 218.2 $ 217.6 $ 179.0
Accounts receivable, net 111.1 113.7 119.6
Inventories, net 172.4 207.3 211.7
Deferred income taxes 180.4 179.9 141.0
Other current assets 27.0 24.3 25.9
---------- ---------- ----------
Total current assets 709.2 742.8 677.2
Property, plant & equipment, net 249.5 241.5 207.5
Intangible and other assets, net 912.6 946.1 705.3
---------- ---------- ----------
Total assets $ 1,871.3 $ 1,930.4 $ 1,590.0
========== ========== ==========
Liabilities & stockholders' equity
A/P and accrued exp $ 399.8 $ 414.9 $ 442.2
Current portion of L.T.D 79.2 118.1 3.6
Income taxes payable 9.0 20.1 0.5
Deferred revenue & other 59.4 53.7 42.7
Total current liabilities 547.4 606.8 489.0
L.T.D., less current maturities 162.7 176.1 104.4
Other liabilities and deferred rev 61.4 75.0 62.2
Stockholders' equity
Common stock issued 2.7 2.7 2.6
Other stockholders' equity 1,097.1 1,069.8 931.8
Total stockholders' equity 1,099.8 1,072.5 934.4
---------- ---------- ----------
Total liabilities and stockholders' equity $ 1,871.3 $ 1,930.4 $ 1,590.0
========== ========== ==========
Financial ratios:
Days sales outstanding 22 23 26
Inventory turnover 5.8 4.5 4.2
Working capital % of revenue 8.8% 7.6% 11.2%
Return on assets 4.7% 5.9% 1.7%
Return on equity 8.2% 10.9% 3.0%
* Certain numbers may differ slightly due to rounding
Page 2 of 4
SYMBOL TECHNOLOGIES, INC. & SUBSIDIARIES
Condensed Consolidated Cash Flow Trend
THREE MONTHS ENDING
-------------------
($ Millions) MARCH 31, 2005 MARCH 31, 2004
-------------- --------------
Cash Flows from Operating Activities
Net earnings $ 22.2 $ 6.8
Depreciation & amortization 17.3 18.0
CHANGES IN ASSETS & LIABILITIES
Accounts receivable 0.8 27.6
Inventories 33.2 0.2
Accounts payable & accrued expenses (5.9) (49.6)
Other changes, net 5.1 37.7
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 72.7 40.8
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Expenditures for PP&E (21.1) (11.2)
Other investing (1.7) (4.0)
-------- --------
NET CASH USED IN INVESTING ACTIVITIES (22.8) (15.2)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Net changes in debt (50.3) 13.7
Other 1.0 (10.3)
-------- --------
NET CASH PROVIDED BY/(USED IN) FINANCING ACTIVITIES (INC. FX) (49.3) 3.4
======== ========
NET CHANGE IN CASH 0.6 29.0
======== ========
Beginning Cash Balance 217.6 150.0
======== ========
Ending Cash Balance $ 218.2 $ 179.0
======== ========
* Certain numbers may differ slightly due to rounding
Page 3 of 4
SYMBOL TECHNOLOGIES, INC. & SUBSIDIARIES
Non-GAAP Financial Measure
ADJUSTED DILUTED EARNINGS PER SHARE:
Symbol believes that diluted earnings per share is the financial
measure calculated and presented in accordance with GAAP that is most
directly comparable to adjusted diluted earnings per share. The
following table reconciles diluted earnings per share to adjusted
diluted earnings per share for the second quarter ending June 30, 2005
guidance.
DILUTED EARNINGS PER SHARE GUIDANCE
FOR THE QUARTER ENDING JUNE 30, 2005
----------------------------------------
GUIDANCE FOR Q2 2005 DILUTED EARNINGS PER SHARE - GAAP $0.05 - $0.07
ANTICIPATED IMPACT OF A CHANGE IN NEW YORK STATE TAX LAW 0.02 - 0.02
----------------------------------------
GUIDANCE FOR Q2 2005 ADJUSTED DILUTED EARNINGS PER SHARE - NON GAAP $0.07 - $0.09
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