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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
(AMENDMENT NO. 2)
(Mark one)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002
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 1-9802
SYMBOL TECHNOLOGIES, INC.
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(Exact Name of Registrant as Specified in its Charter)
DELAWARE 11-2308681
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
ONE SYMBOL PLAZA, HOLTSVILLE, NEW YORK 11742-1300
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including
area code: (631) 738-2400
Securities registered pursuant to Section 12(b) of the Act:
COMMON STOCK, PAR VALUE $.01 NEW YORK STOCK EXCHANGE
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(Title of each class) (Name of each exchange on which
registered)
Securities registered pursuant to Section 12(g) of the Act: None.
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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). YES [X] NO [ ]
The aggregate market value of the registrant's voting and non-voting stock
held by persons other than officers and directors and affiliates thereof, as of
the last business day of the second fiscal quarter ended June 30, 2004 was
$2,992,420,096.
The number of shares outstanding of the registrant's classes of common
stock, as of June 20, 2005, was as follows:
Class Number of Shares
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Common Stock, par value $0.01 242,911,689
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EXPLANATORY NOTE
Symbol Technologies, Inc. (collectively with its subsidiaries, "Symbol,"
"we," "us" and "our") is filing this Amendment No. 2 on Form 10-K/A ("Amendment
No. 2") solely to amend its disclosures in Item 9A of Part II contained in its
Amendment No. 1 to its Annual Report on Form 10-K ("Amendment No. 1") for the
fiscal year ended December 31, 2002. Amendment No. 1 was filed with the
Securities and Exchange Commission (the "SEC") on February 25, 2004 and its
original Annual Report on Form 10-K was filed on December 30, 2003. The purpose
of this Amendment No. 2 is to address comments that Symbol received from the
Staff of the Division of Corporation Finance of the SEC.
Pursuant to Rule 12b-15 under the Securities and Exchange Act of 1934, as
amended, this Amendment No. 2 contains the complete text of Item 9A of Part II,
as amended, and new certifications pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002. The representations contained in the new certifications continue to
relate solely to our fiscal year ended December 31, 2002. This Amendment No. 2
contains only the sections and exhibits to Amendment No. 1 which are being
amended and restated. The sections of and exhibits to Amendment No. 1 as
originally filed which are not included herein are unchanged and continue in
full force and effect as originally filed. This Amendment No. 2 speaks as of the
date of the original filing of Amendment No. 1 and has not been updated to
reflect events occurring subsequent to the original filing date.
PART II.
ITEM 9A. CONTROLS AND PROCEDURES
Symbol is committed to maintaining disclosure controls and procedures that
are designed to ensure that information required to be disclosed in its Exchange
Act reports is recorded, processed, summarized and reported within the time
periods specified in the Commission's rules and forms, and that such information
is accumulated and communicated to its management, including its Chief Executive
Officer and Chief Financial Officer, as appropriate, to allow for timely
decisions regarding required disclosure. In designing and evaluating the
disclosure controls and procedures, management recognizes that any controls and
procedures, no matter how well designed and operated, can provide only
reasonable assurance of achieving the desired control objectives and are subject
to certain limitations, including the exercise of judgment by individuals, the
inability to identify unlikely future events, and the inability to eliminate
misconduct completely.
In May 2001, in response to an inquiry from the Commission, we retained a
law firm to conduct an internal investigation into certain allegations
concerning Symbol's accounting practices, focusing on specific transactions with
two of our customers but also including a limited review of other large
transactions. The law firm retained an accounting firm to assist it in the
investigation. We subsequently learned that the effectiveness of this initial
investigation was hindered by the apparently deliberate actions of one or more
individuals formerly employed by Symbol. The Commission expressed
dissatisfaction with the initial investigation.
In March 2002, we retained a second law firm to conduct a wide-ranging
internal investigation into Symbol's accounting practices. The investigation was
conducted over a period of approximately eighteen months with the assistance of
an outside forensic accounting team. The investigation involved more than 200
interviews and the review of hundreds of thousands of pages of documents and
emails.
The investigation found that, during the period covered by the
restatement, certain members of former management engaged in, directed and/or
created an environment that encouraged a variety of inappropriate activities
that resulted in accounting errors and irregularities affecting our previously
issued financial statements that we have now restated. The errors and
irregularities caused by these actions primarily concerned the timing and amount
of product and service revenue recognized. In particular, the investigation
found that revenue was accelerated from the appropriate quarters to earlier
quarters through a variety of improper means and, on a more limited basis,
revenue was improperly created and inflated on a net basis. Additionally, there
were errors and irregularities associated with the establishment and utilization
of certain reserves and restructurings, including certain end-of-quarter
adjustments that were apparently made in order to achieve previously forecasted
financial results. There were also errors and/or irregularities associated with
the administration of certain options programs, as well as several categories of
cost of revenue and operating expenses, including efforts to artificially reduce
reported inventory. For a more detailed description and the scope of these
accounting errors and irregularities, see Item 7, "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
The investigation also found that, in addition to the specific items of
misconduct giving rise to the need for the restatement, there was a failure by
Symbol's former management to establish an appropriate control environment, and
there were significant failures in Symbol's internal controls and procedures
resulting from numerous causes, including inadequate hiring of qualified and
experienced personnel, insufficient training and supervision of personnel, a
decentralized accounting structure for operations in the United States and
inadequate systems and systems interfaces. The investigation also found
instances in which some members of former management and sales and
finance-related employees devoted insufficient attention and resources to
ensuring accurate accounting and financial reporting. Indeed, as the guilty
pleas of two former senior members of our finance group illustrate, there were
also instances in which such activity rose to the level of criminal misconduct.
We have taken measures to improve the effectiveness of our internal
controls and we believe these efforts address the matters described above. Since
the commencement of the investigations, Symbol has terminated a number of
employees whose improper activities resulted in inaccurate accounting and
financial reporting. In addition, Symbol has implemented the following
initiatives to improve Symbol's internal controls, including disclosure controls
and procedures, and to address the areas of weakness identified during the
investigations and the restatement:
NEW MANAGEMENT
We appointed new executive officers who have primary responsibility for
financial reporting, including a new Chief Executive Officer, President and
Chief Operating Officer, a new Chief Financial Officer and a new Senior Vice
President - Finance and Business Controller. In addition, we appointed a new
Chief Information Officer, a new Senior Vice President, General Counsel and
Secretary and new Senior Vice Presidents in our Sales, Operations, Global
Products and Customer Service organizations.
CENTRALIZED FINANCE FUNCTION
Previously, each regional office in the United States was responsible for
its financial controls and processes, with the business manager in each regional
office acting relatively autonomously from Symbol's headquarters. Now, all
finance personnel from our regional offices in the United States are required to
report directly to the finance department in Symbol's headquarters and
ultimately to the Chief Financial Officer. Similar procedures are in place with
respect to our foreign regional offices, with the head of finance for each
country, or groups of countries, reporting directly to the Chief Financial
Officer.
ADDITIONAL FINANCE PERSONNEL
We have created two new controller positions: business controller and
revenue controller. The business controller is responsible for ensuring the
accuracy and completeness of our internal reporting functions. The revenue
controller, who will report directly to the Chief Accounting Officer, is
responsible for ensuring that revenue is recognized properly. We have also hired
additional employees for our accounting, finance and audit divisions with the
aim of broadening our collective knowledge on a variety of technical accounting
issues.
REVIEW OF SIGNIFICANT AND NON-STANDARD TRANSACTIONS
We have implemented a formal review process of all transactions involving
amounts over $500,000 and all transactions that are structured differently from
our normal business procedures (e.g., "bill and hold" transactions). The "deals
desk," which is comprised of members from the finance department, must approve
any significant or non-standard transaction prior to booking. In addition, all
sales transactions are now reported directly to headquarters rather than the
regional business manager, as was the prior practice.
STRENGTHENED INTERNAL AUDIT PROCESS
We have augmented the month-end review process by performing random
testing of transactions to insure that they have been accounted for properly.
Also, during each month-end review process, certain members of the finance
department will focus on any variances from expectations, significant
transactions (including charges relating to restructurings and acquisitions),
transactions that required the use of judgment and balance sheet
accounts. The Chief Financial Officer, the Chief Accounting Officer, and the
revenue controller will participate in the month-end review process. We are also
in the process of developing procedures to ensure more timely reconciliations on
a monthly basis.
NEW DISCLOSURE COMMITTEE
We have formed a new Disclosure Committee comprised of the Chief Executive
Officer, Chief Financial Officer, Senior Vice President - Finance and Business
Controller, Chief Accounting Officer and General Counsel. The Disclosure
Committee meets prior to significant filings with the Commission, and issuances
of significant press releases.
EXPANSION OF BOARD OF DIRECTORS
As of December 15, 2003, we have expanded our Board of Directors and added
three new members. Also, we are actively searching for additional qualified
individuals to serve as independent members on our Board of Directors. In
addition, the Audit Committee charter has been revised to grant the Audit
Committee greater responsibility and authority to oversee financial matters.
THE CONTROL ENVIRONMENT
In connection with the implementation of the foregoing initiatives,
Symbol's Board of Directors and senior management team, including the Chief
Executive Officer and Chief Financial Officer, have stressed the importance of
creating a control environment based on integrity and honesty.
- CODE OF CONDUCT AND COMPLIANCE POLICIES. We amended our code of conduct
and compliance policies to include company-wide principles and procedures for
maintaining the integrity and transparency of our compliance, accounting, and
reporting systems.
- CONFIDENTIAL HOTLINE. We have created a confidential hotline number to
provide a means for employees to anonymously report any suspected violations of
law or our standards of conduct. In recent memos and meetings with our
employees, we have urged anyone with knowledge of improper or unethical conduct
to report that conduct to outside counsel or any trusted supervisor or officer
or directly to the Commission.
SOFTWARE AND SYSTEMS UPGRADE
Our new management has approved a comprehensive software and systems
upgrade that will improve the integration of our sales and finance departments
and improve the adequacy of accounting journal entries. We have engaged an
outside consultant to assist in these efforts.
As required by Rule 13a-15(b) of the Exchange Act, Symbol has carried out
an evaluation, under the supervision and with the participation of its
management, including its Chief Executive Officer and its Chief Financial
Officer, of the effectiveness of the design and operation of its disclosure
controls and procedures. The evaluation examined those disclosure controls and
procedures as of December 31, 2002, the end of the period covered by this
report. Based upon the evaluation and the results of the investigations
discussed above, Symbol's management, including its Chief Executive Officer and
its Chief Financial Officer, concluded that, as of December 31, 2002, Symbol's
disclosure controls and procedures were ineffective.
It will take some time before we have in place the rigorous disclosure
controls and procedures, including internal controls and procedures, that our
Board of Directors and senior management are striving for. As a result of our
efforts described above, however, we believe that our Consolidated Financial
Statements fairly present, in all material respects, our financial condition,
results of operations and cash flows as of, and for, the periods presented and
that this Annual Report on Form 10-K contains no material inaccuracies or
omissions of material fact and contains the information required to be included
in accordance with the Exchange Act.
The process and control improvements described above are the only changes
in our internal controls over financial reporting during the period covered by
this report that have materially affected, or are reasonably likely to
materially affect, our internal controls over financial reporting. We will
continue to assess our internal controls and procedures and will take any
further actions that we deem necessary.
PART IV.
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
Note: Item 15 in Amendment No. 1, as originally filed, is unchanged except
for the filing of additional certifications pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
(a) Exhibits
See "Exhibit Index" on the page following the Signature Page.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this amendment to be signed on its
behalf by the undersigned, thereunto duly authorized.
SYMBOL TECHNOLOGIES, INC.
(Registrant)
June 24, 2005 By: /s/ William R. Nuti
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William R. Nuti
Chief Executive Officer, President and
Director
(principal executive officer)
June 24, 2005 By: /s/ Mark T. Greenquist
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Mark T. Greenquist
Senior Vice President -- Finance
and Chief Financial Officer
(principal financial officer)
June 24, 2005 By: /s/ James M. Langrock
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James M. Langrock
Vice President -- Controller and
Chief Accounting Officer
(principal accounting officer)
EXHIBIT INDEX
31.1 Certification of Chief Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
31.2 Certification of Chief Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002