SYMBOL(TM)
The Enterprise Mobility Company(TM) FOR IMMEDIATE RELEASE
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SYMBOL TECHNOLOGIES REPORTS RECORD QUARTER
REPORTS REVENUE OF $432.8 MILLION AND NET EARNINGS OF
$28.8 MILLION, OR $0.12 EPS;
TELECONFERENCE 8 A.M. THURSDAY, JULY 29, TO DISCUSS 2004 2ND-QUARTER RESULTS
HOLTSVILLE, N.Y., July 28, 2004 - Symbol Technologies, Inc. (NYSE:SBL)
today reported financial results for second quarter 2004. The Company will host
a teleconference and Web conference at 8 a.m. Thursday, July 29, to discuss the
results.
Revenue for the second quarter ended June 30, 2004, was $432.8 million,
representing the Company's highest quarterly revenue in its history as well as a
gain of 16 percent over second-quarter 2003 revenue of $373.8 million and an
increase of 3 percent over first-quarter 2004 revenue of $419.7 million.
Second-quarter 2004 net earnings were $28.8 million, or $0.12 per
share, compared with second-quarter 2003 net earnings of $6.6 million, or $0.03
per share, and first-quarter 2004 net earnings of $6.8 million, or $0.03 per
share.
NEW PRODUCTS LEAD REVENUE GAIN
Product revenue of $356.6 million represents a 23 percent increase over
product revenue of $290.3 million in 2003's second quarter and a 2 percent gain
sequentially from 2004's first-quarter product revenue of $348.2 million.
Product revenue growth was led by gains from the Company's Mobile Computing and
Wireless Infrastructure Divisions. Advanced Data Capture Division revenue
increased 27 percent over 2003's second-quarter revenue but declined
sequentially following the division's booking of record revenue in 2004's first
quarter.
Sales of new Symbol products again led the gain in revenue. Of note
were the following:
o Revenue from sales of the Symbol MC9000 core mobile computer, in
its three form factors, more than doubled in 2004's second quarter
compared to its first-quarter revenue.
o The Symbol LS2200 handheld laser bar code scanner realized a 60
percent sequential revenue gain in 2004's second quarter.
o In second quarter 2004, the Wireless Infrastructure Division
experienced its best-ever quarterly revenue, which grew 26 percent
over the division's first-quarter 2004 revenue.
SERVICE REVENUE AT EXPECTED ANNUALIZED RATE
Second-quarter 2004 service revenue of $76.2 million was in line with
management's anticipated annual run rate of approximately $300.0 million and
showed a decline of 9 percent from revenue of $83.5 million in 2003's second
quarter, which was positively impacted by the timing of cash receipts on revenue
recognized on a billed-and-collected basis. Second-quarter 2004 service revenue
improved 7 percent from first-quarter 2004 revenue of $71.4 million.
CONTINUED GROSS PROFIT GROWTH
Second-quarter 2004 gross profit of $196.7 million showed solid growth
of 29 percent over 2003's second-quarter gross profit of $152.4 million and
increased slightly on a sequential basis - a 1 percent increase from $194.9
million in 2004's first quarter. Included in second-quarter 2004 gross profit of
45.4 percent is a charge of $3.9 million recorded for the Company's ongoing
restructuring of its Global Services Division. Partially offsetting this charge
is a reduction of the Company's standard warranty expense accrual of
approximately $1.1 million due to improvement in the reliability rates of the
Company's products as well as a reduction in the estimated average cost of
repairs because of the Company's increased efficiencies in repair depot
operations, which the Company believes will continue.
OPERATING EXPENSES DOWN SEQUENTIALLY
Operating expenses in second quarter 2004 were $153.0 million, up $4.9
million compared to 2003's second quarter and down $12.5 million from
first-quarter 2004 operating expenses of $165.5 million. In second quarter 2004,
the Company reduced by $9.0 million its net estimated accrual related to the
tentative settlement of the recently concluded government investigations and
associated class action litigation. This included a reduction of $4.0 million,
part of the amount of the originally estimated Company liability that ultimately
was paid by Jerome Swartz, a former chairman and chief executive officer of the
Company, as well as the receipt of $5.0 million of insurance proceeds related to
the class action settlement.
OPERATING MARGIN IMPROVEMENT
Earnings from operations for 2004's second quarter were $43.7 million,
a 49 percent increase sequentially from first quarter's $29.4 million. Operating
margin for second quarter 2004 improved sequentially 3 percentage points and 9
percentage points year-over-year, to 10 percent, a significant milestone for
Symbol.
Below the operating income line, second-quarter 2004 net earnings of
$28.8 million were negatively impacted by a non-operating accounting charge of
approximately $6.2 million for the change in fair value of the Company's
derivative financial instrument, an embedded equity collar contained in its
Shared Appreciation Income Linked Securities debt arrangement with a financial
institution, which is collateralized by shares of Cisco Systems, Inc. common
stock. The Company benefited in second quarter 2004 from a lower-than-expected
effective tax rate of 19.4 percent, which differs from the statutory rate
primarily due to the implementation of a tax planning strategy that resulted in
the release of certain valuation allowances.
SOLID CASH FLOW FROM OPERATIONS
In second quarter 2004 the Company's operating income and strong cash
collections generated cash flow from operations of $62.8 million, excluding
$40.0 million paid toward the settlement with the U.S. Attorney's Office and the
Securities and Exchange Commission related to Symbol's past accounting
practices. Net of this payment, cash flow from operations was $22.8 million. In
addition, $50.0 million in cash was placed in an account with the Clerk of the
Court of Common Pleas for Summit County, Ohio, to bond the judgment entered in
the litigation involving the Smart Media of Delaware, Inc. case against Symbol
and its wholly owned subsidiary, Telxon Corporation, which is under appeal in
the Ohio Court of Appeals for the Ninth District. Partially offsetting these
events, the Company received $5.0 million in insurance proceeds related to the
class action settlement. The Company's cash balance of $143.7 million at June
30, 2004, excludes the $50 million of restricted cash, which is shown on the
Company's balance sheet within long-term assets, reflected a $35.3 million
reduction from the March 31, 2004, balance of $179.0 million.
SIX-MONTH TO-DATE FINANCIAL SUMMARY
Revenue for the six months ended June 30, 2004, was $852.4 million, an
increase of 12 percent over revenue of $760.2 million in the six months ended
June 30, 2003. Gross profit for the six months ended June 30, 2004, was $391.6
million or 46 percent compared to $324.3 million or 43 percent in the six months
ended June 30, 2003. Operating expenses decreased $38.6 million to $318.5
million in the six-month period ended June 30, 2004, from $357.1 million for the
six months ended June 30, 2003, during which time the Company recorded a $72.0
million litigation settlement provision. Net earnings were $35.6 million or
earnings of $0.15 per diluted share for the six months ended June 30, 2004,
compared with a net loss of $24.4 million, or a loss of $0.11 per diluted share,
for the six months ended June 30, 2003.
CONTINUED STRONG OPERATING AND FINANCIAL PERFORMANCE
"On balance, this was an impressive quarter for Symbol Technologies.
During the quarter, we put the vast majority of our past issues behind us -
settling with the SEC, with a former chairman/CEO and with the United States
Attorney's office, which agreed not to file criminal charges against the
Company, as well as the tentative settlement with the Symbol class action
plaintiffs. During the same time, we drove record results, achieving revenue of
$432.8 million, EPS of $0.12 and double-digit operating margins, all of which
exceeded our May guidance. These successes are a credit to the hard work and
determination of Symbol employees and our channel partners - delivering
outstanding service, products and enterprise mobility system solutions to our
customers. New products within our enterprise mobility strategy continued to
drive accelerated revenue, reinforcing our belief that Symbol market share gains
are ongoing. Although operating expense discipline is progressing, we remain
committed to further improving the bottom line by focusing on employee
productivity and operational efficiencies," William Nuti, Symbol president and
chief executive officer, said.
Mark T. Greenquist, senior vice president and chief financial officer,
said, "Symbol continues to improve our balance sheet and to generate strong
positive cash flow from operations, and we believe that this trend should
continue through 2004's second half. A further decline in receivables, resulting
in an additional quarter-to-quarter three-day drop in DSOs to 23 days, and
improving inventory turns all point to persistent solid financial performance.
It's what we've been working toward, and what we feel Symbol can continue to
deliver."
2004 THIRD-QUARTER GUIDANCE
Building on the improving 2004 first-half financial results, Symbol
expects that third- quarter 2004 revenue will be in a range of $435.0 million to
$445.0 million, representing a sequential increase of 1 percent to 3 percent and
year-over-year growth of 15 percent to 18 percent. Symbol believes that revenue
growth will be fueled primarily by gains in product revenue, as service revenue
is expected to be flat versus the second quarter of 2004. Net earnings for the
third quarter of 2004 are expected to be $0.11 to $0.12 per share. Third-quarter
2004 guidance does not reflect any impact of the pending acquisition of Matrics,
Inc., the agreement of which was announced July 27, 2004, and which the Company
believes will close by 2004 third-quarter end.
TELECONFERENCE AND WEB PRESENTATION DETAILS
A teleconference and Web conference are scheduled for 8 a.m. Thursday,
July 29.
TELECONFERENCE INFORMATION
To participate in the Thursday morning teleconference, dial
1-800-946-0785 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 entitled "Symbol Technologies 2004
Second Quarter Financial Results."
TELECONFERENCE PRESENTATION
To view the financial presentation via WebEx, access
HTTP://SYMBOL.WEBEX.COM at least 10 minutes prior to the start of the
teleconference. At the site, log in to "Symbol Technologies-Q2 2004 Financial
Results" by clicking the "join" button; you are required to provide your name
and e-mail address. Please be advised that WebEx 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 WebEx and audio replay will be available on the
Company's investor home page on a 24-hour non-stop basis within four hours of
the conclusion of the call.
An audio replay of the teleconference will be available from 11 a.m.
Thursday, July 29, through Friday, Aug. 13, by calling toll-free 1-888-203-1112
and entering access code 325926.
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.
NON-GAAP FINANCIAL MEASURE
In addition to including cash flows from operations under accounting principles
generally accepted in the U.S. ("GAAP"), Symbol disclosed adjusted cash flows
from operations for second quarter 2004, before giving effect to a payment of
$40.0 million as mentioned above, that the Securities and Exchange Commission
defines as a "non-GAAP financial measure." This non-GAAP financial measure
should not be considered in isolation or as an alternative to cash flows from
operations or any other measure of performance derived in accordance with GAAP.
However, this non-GAAP financial measure is presented because Symbol believes
this non-GAAP measure provides useful supplemental information for management
and investors and allows them to perform meaningful comparisons for the
Company's past and present results. For a reconciliation of this non-GAAP
measure see the table below with the heading "Non-GAAP Financial Measure."
FOR MEDIA INFORMATION:
Patricia Hall
Symbol Technologies, Inc.
631-738-5636
hallp@symbol.com
FOR FINANCIAL INFORMATION:
Nancy Tully
Symbol Technologies, Inc.
631-738-5050
tullyn@symbol.com
SYMBOL TECHNOLOGIES, INC. & SUBSIDIARIES
Consolidated Balance Sheet Trend
BALANCE SHEET AT
------------------------------------
($ MILLIONS) 06/30/04 03/31/04 06/30/03
-------- -------- --------
Assets
Cash and temp. investments $ 143.7 $ 179.0 $ 98.0
Accounts receivable, net 110.5 119.6 126.6
Inventories 216.4 211.7 211.5
Deferred income taxes 167.6 141.0 146.7
Ppd. and refund. inc. taxes
Other current assets 31.6 25.9 39.7
-------- -------- --------
Total current assets 669.8 677.2 622.5
Property, plant & equipment, net 211.4 207.5 206.1
Restricted cash 50.0 -- --
Intangible and other assets, net 688.6 705.3 698.0
-------- -------- --------
Total assets $1,619.8 $1,590.0 $1,526.6
======== ======== ========
Liabilities & stockholders' equity
A/P and accrued exp $ 403.6 $ 442.2 $ 453.1
Current portion of L.T.D 7.0 3.6 15.3
Income taxes payable 9.8 0.5 --
Deferred revenue & Other 47.2 42.7 44.2
-------- -------- --------
Total current liabilities 467.6 489.0 512.6
L.T.D., less current maturities 107.9 104.4 65.4
Other liabilities and deferred rev 61.9 62.2 76.0
Stockholders' equity
Common stock issued 2.7 2.6 2.6
Other stockholders' equity 979.7 931.8 870.1
-------- -------- --------
Total stockholders' equity 982.4 934.4 872.7
Total liabilities and equity $1,619.8 $1,590.0 $1,526.7
======== ======== ========
Financial ratios:
Days sales outstanding 23 26 31
Inventory turnover 4.4 4.2 4.2
Working capital % of revenue 11.7 % 11.2 % 7.4 %
Return on assets 7.2 % 1.7 % 1.7 %
Return on equity 12.0 % 3.0 % 3.1 %
Debt to Cash 80.0 % 60.4 % 82.3 %
Debt to Working Capital 53.4 % 55.5 % 59.5 %
SYMBOL TECHNOLOGIES, INC. & SUBSIDIARIES
Cash Flow Trend
THREE MONTHS ENDING
--------------------------------
($ Millions) 06/30/04 03/31/04 06/30/03
-------- -------- --------
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings 28.8 6.8 6.6
Depreciation & amortization of PP&E 14.0 14.4 13.0
Other amortization (Cap Eng & Purch Tech.) 4.7 3.6 3.7
Provisions for losses on A/R 0.4 0.5 13.7
Non-Cash impairment and compensation charge 0.4 2.2 1.5
Deferred Income Tax & Other (2.2) 23.9 (5.1)
CHANGES IN ASSETS & LIABILITIES
Accounts receivable 8.5 27.6 11.9
Inventories (5.4) 1.4 22.6
Other assets (1.2) 7.9 2.3
Accounts payable & accrued expenses (25.6) (49.6) (25.9)
Other liabilities & deferred revenues 0.4 2.1 4.7
----- ----- -----
NET CASH PROVIDED BY OPERATING ACTIVITIES 22.8 40.8 49.0
----- ----- -----
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of property, plant & equipment -- -- 0.1
Expenditures for PP&E (18.9) (11.2) (13.8)
Intangible & other assets (1.9) -- --
Resticted cash (50.0) -- --
Purchase of available for sales securities -- -- --
Investment (0.5) (4.0) (0.8)
----- ----- -----
NET CASH USED IN INVESTING ACTIVITIES (71.3) (15.2) (14.5)
----- ----- -----
CASH FLOWS FROM FINANCING ACTIVITIES
(Repayment)/Proceeds of/from STD / LTD (0.1) 13.7 (35.1)
Stock options & warrants 23.7 10.3 --
Dividends paid (2.3) -- (2.3)
Treasury share repurchases (6.4) (20.0) --
Other -- -- --
----- ----- -----
NET CASH USED IN FINANCING ACTIVITIES 14.9 4.0 (37.4)
===== ===== =====
Exchange rate impact (1.7) (0.6) 2.3
----- ----- -----
NET CHANGE IN CASH (35.3) 29.0 (0.6)
===== ===== =====
Beginning Cash Balance 179.0 150.0 98.6
===== ===== =====
Ending Cash Balance 143.7 179.0 98.0
===== ===== =====
SYMBOL TECHNOLOGIES, INC. & SUBSIDIARIES
Statement of Operations
SIX MONTHS ENDING
----------------------------
($ MILLIONS, EX. EPS) JUNE 30, 2004 JUNE 30, 2003
------------- -------------
Net Revenue $852.4 $760.2
Cost of Revenue 460.8 435.9
------ ------
Gross Profit 391.6 324.3
Operating Expenses:
Net Engineering 84.4 75.2
S, G&A 243.1 209.9
(Recovery)/Provision for legal settlements (9.0) 72.0
Other -- --
------ ------
Total Operating Expenses 318.5 357.1
------ ------
Earnings from operations 73.1 (32.8)
Gain from sale of business --
(Other Income) / Interest Expense, net 7.0 (0.5)
------ ------
NEBT 66.1 (32.3)
Provision for income taxes 30.5 (7.9)
------ ------
N.I. before extraordinary item 35.6 (24.4)
Extraordinary item -- --
Net Earnings $ 35.6 $(24.4)
====== ======
EPS (Diluted) $ 0.15 $ (0.11)
PERCENTAGE OF REVENUE
Net Revenue 100.0 % 100.0 %
Cost of Revenue 54.1 % 57.3 %
------ ------
Gross Profit 45.9 % 42.7 %
Operating Expenses:
Net Engineering 9.9 % 9.9 %
S, G&A 28.5 % 27.6 %
(Recovery)/Provision for legal settlements (1.1)% 9.5 %
Other -- --
------ ------
Total Operating Expenses 37.4 % 47.0 %
------ ------
Earnings from operations 8.6 % (4.3)%
Gain from sale of business
Interest Expense, net 0.8 % (0.1)%
------ ------
NEBT 7.8 % (4.2)%
Provision for income taxes 3.6 % (1.0)%
------ ------
Net Earnings 4.2 % (3.2)%
SYMBOL TECHNOLOGIES, INC. & SUBSIDIARIES
Statement of Operations
THREE MONTHS ENDING
--------------------------------------------
($ Millions, ex. EPS) JUNE 30, 2004 MARCH 31, 2004 JUNE 30, 2003
------------- -------------- -------------
Net Revenue $432.8 $419.7 $373.8
Cost of Revenue 236.1 224.8 221.4
------ ------ ------
Gross Profit 196.7 194.9 152.4
Operating Expenses:
Net Engineering 42.8 41.6 38.1
S, G&A 119.2 123.9 110.0
(Recovery)/Provision for legal settlements (9.0) -- --
Other -- -- --
------ ------ ------
Total Operating Expenses 153.0 165.5 148.1
------ ------ ------
Earnings from operations 43.7 29.4 4.3
Gain from sale of business -- -- --
(Other Income) / Interest Expense, net 8.0 (1.0) (4.5)
------ ------ ------
NEBT 35.7 30.4 8.8
Provision for income taxes 6.9 23.6 2.2
------ ------ ------
N.I. before extraordinary item 28.8 6.8 6.6
Extraordinary item -- -- --
Net Earnings $ 28.8 $ 6.8 $ 6.6
====== ====== =====
EPS (Diluted) $ 0.12 $ 0.03 $0.03
------ ------ ------
PERCENTAGE OF REVENUE
Net Revenue 100.0 % 100.0 % 100.0 %
Cost of Revenue 54.6 % 53.6 % 59.2 %
------ ------ ------
Gross Profit 45.4 % 46.4 % 40.8 %
Operating Expenses:
Net Engineering 9.9 % 9.9 % 10.2 %
S, G&A 27.5 % 29.5 % 29.4 %
(Recovery)/Provision for legal settlements (2.1)% -- --
Other -- -- --
------ ------ ------
Total Operating Expenses 35.3 % 39.4 % 39.6 %
------ ------ ------
Earnings from operations 10.1 % 7.0 % 1.2 %
Gain from sale of business -- -- --
Interest Expense, net 1.8 % (0.2)% (1.2)%
------ ------ ------
NEBT 8.3 % 7.2 % 2.4 %
Provision for income taxes 1.6 % 5.6 % 0.6 %
------ ------ ------
Net Earnings 6.7 % 1.6 % 1.8 %
------ ------ ------
SYMBOL TECHNOLOGIES, INC. & SUBSIDIARIES
Non-GAAP Financial Measure
$ In Millions
Adjusted Cash Flows From Operations:
Symbol believes that cash flows from operations, is the
financial measure calculated and presented in accordance
with GAAP that is most directly comparable to adjusted cash
flows from operations. The following table reconciles cash
flows from operations to adjusted cash flows from operations
for the second quarter of 2004.
06/30/04
-------------
Cash flows from operations-GAAP $22.8
Payment related to Symbol class action litigation 40.0
-------------
Adjusted cash flows from operations-Non-GAAP $62.8
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