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
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For the quarterly period ended January 1, 2012
OR
¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period
from to
Commission file number 0-02287
SYMMETRICOM,
INC.
(Exact name of registrant as specified in our charter)
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Delaware
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No. 95-1906306
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(State or Other Jurisdiction of
Incorporation or Organization)
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(I.R.S. Employer
Identification No.)
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2300 Orchard Parkway, San Jose, California 95131-1017
(Address of principal executive offices)
Registrants telephone number: (408) 433-0910
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 whether the registrant has submitted electronically and
posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit
and post such files). Yes
x
No
¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller
reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):
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Large accelerated filer
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¨
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Accelerated filer
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x
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Non-accelerated filer
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¨
(Do not check if a smaller reporting company)
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Smaller reporting company
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¨
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). Yes
¨
No
x
Indicate number of shares outstanding of each of the issuers classes of common stock, as of the latest practical date:
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Class
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Outstanding
as of January 29, 2012
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Common Stock
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|
42,067,830
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SYMMETRICOM, INC.
FORM 10-Q
INDEX
2
PART I. FINANCIAL INFORMATION
Item 1.
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Financial Statements
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SYMMETRICOM, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except par value)
(Unaudited)
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|
|
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January 1,
2012
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July 3,
2011
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ASSETS
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Current assets:
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Cash and cash equivalents.
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$
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22,794
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|
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$
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20,318
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Short-term investments
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35,352
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43,340
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Accounts receivable, net of allowance for doubtful accounts of $287 and $315
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36,539
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40,511
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Inventories
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62,469
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62,622
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Prepaids and other current assets
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17,861
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14,004
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|
|
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Total current assets
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175,015
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|
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180,795
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Property, plant and equipment, net
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22,715
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23,255
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Intangible assets, net
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1,954
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|
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2,429
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Deferred taxes and other assets
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27,418
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29,361
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Total assets
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$
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227,102
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$
|
235,840
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LIABILITIES AND STOCKHOLDERS EQUITY
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Current liabilities:
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|
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|
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Accounts payable
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|
$
|
8,568
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|
|
$
|
16,113
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|
Accrued compensation
|
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|
12,932
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|
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|
13,743
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|
Accrued warranty
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1,835
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|
|
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1,601
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|
Other accrued liabilities
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11,120
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|
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|
14,683
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|
|
|
|
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Total current liabilities
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34,455
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46,140
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Long-term obligations
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5,588
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5,212
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Deferred income taxes
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334
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334
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|
|
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Total liabilities
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40,377
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51,686
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Commitments and contingencies (Note 11)
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Stockholders equity:
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Preferred stock, $0.0001 par value; 500 shares authorized, none issued
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Common stock, $0.0001 par value; 70,000 shares authorized, 50,913 shares issued and 42,112 outstanding at January 1, 2012;
50,579 shares issued and 42,960 outstanding at July 3, 2011
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198,646
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201,002
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Accumulated other comprehensive loss
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(296
|
)
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|
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(29
|
)
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Accumulated deficit
|
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|
(11,625
|
)
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|
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(16,819
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)
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|
|
|
|
|
|
|
|
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Total stockholders equity
|
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186,725
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|
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184,154
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|
|
|
|
|
|
|
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Total liabilities and stockholders equity
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$
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227,102
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$
|
235,840
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|
|
|
|
|
|
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|
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See notes to the condensed consolidated financial statements.
3
SYMMETRICOM, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
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Three Months Ended
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Six Months Ended
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January 1,
2012
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December 26,
2010
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January 1,
2012
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December 26,
2010
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Net revenue
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$
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58,294
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$
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41,844
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$
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114,672
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$
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96,223
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Cost of sales:
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Cost of products and services
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32,225
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23,222
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|
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62,055
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49,828
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|
Amortization of purchased technology
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185
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|
267
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|
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|
371
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554
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Restructuring charges
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|
674
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3,910
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|
1,091
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|
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7,657
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|
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|
|
|
|
|
|
|
|
|
|
|
|
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Total cost of sales
|
|
|
33,084
|
|
|
|
27,399
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|
|
|
63,517
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|
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58,039
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|
|
|
|
|
|
|
|
|
|
|
|
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Gross profit
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25,210
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|
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|
14,445
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|
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|
51,155
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38,184
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Operating expenses:
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Research and development
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6,548
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|
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6,738
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13,446
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13,344
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Selling, general and administrative
|
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|
14,864
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13,596
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|
|
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29,674
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26,395
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|
Amortization of intangible assets
|
|
|
52
|
|
|
|
61
|
|
|
|
104
|
|
|
|
123
|
|
Restructuring charges
|
|
|
103
|
|
|
|
38
|
|
|
|
199
|
|
|
|
(843
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
21,567
|
|
|
|
20,433
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|
|
|
43,423
|
|
|
|
39,019
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Operating income (loss)
|
|
|
3,643
|
|
|
|
(5,988
|
)
|
|
|
7,732
|
|
|
|
(835
|
)
|
Interest income, net of amortization (accretion) of premium (discount) on investments
|
|
|
(296
|
)
|
|
|
331
|
|
|
|
(230
|
)
|
|
|
223
|
|
Interest expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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(55
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)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Income (loss) from continuing operations before taxes
|
|
|
3,347
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|
|
|
(5,657
|
)
|
|
|
7,502
|
|
|
|
(667
|
)
|
Income tax provision (benefit)
|
|
|
902
|
|
|
|
(2,181
|
)
|
|
|
2,308
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|
|
|
(285
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
$
|
2,445
|
|
|
$
|
(3,476
|
)
|
|
$
|
5,194
|
|
|
$
|
(382
|
)
|
Income (loss) from discontinued operations, net of tax
|
|
|
|
|
|
|
(49
|
)
|
|
|
|
|
|
|
78
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
2,445
|
|
|
$
|
(3,525
|
)
|
|
$
|
5,194
|
|
|
$
|
(304
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per sharebasic:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
$
|
0.06
|
|
|
$
|
(0.08
|
)
|
|
$
|
0.12
|
|
|
$
|
(0.01
|
)
|
Income (loss) from discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
0.06
|
|
|
$
|
(0.08
|
)
|
|
$
|
0.12
|
|
|
$
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstandingbasic
|
|
|
42,292
|
|
|
|
43,272
|
|
|
|
42,490
|
|
|
|
43,351
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per sharediluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
$
|
0.06
|
|
|
$
|
(0.08
|
)
|
|
$
|
0.12
|
|
|
$
|
(0.01
|
)
|
Income (loss) from discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
0.06
|
|
|
$
|
(0.08
|
)
|
|
$
|
0.12
|
|
|
$
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstandingdiluted
|
|
|
42,762
|
|
|
|
43,272
|
|
|
|
42,989
|
|
|
|
43,351
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to the condensed consolidated financial statements.
4
SYMMETRICOM, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
January 1,
2012
|
|
|
December 26,
2010
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
5,194
|
|
|
$
|
(304
|
)
|
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
2,854
|
|
|
|
3,879
|
|
Deferred income taxes
|
|
|
2,048
|
|
|
|
(723
|
)
|
Loss on disposal of fixed assets
|
|
|
139
|
|
|
|
5
|
|
Stock-based compensation
|
|
|
2,843
|
|
|
|
1,456
|
|
Allowance for doubtful accounts
|
|
|
10
|
|
|
|
31
|
|
Provision for excess and obsolete inventory
|
|
|
2,012
|
|
|
|
333
|
|
Changes in assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
3,962
|
|
|
|
14,517
|
|
Inventories
|
|
|
(1,859
|
)
|
|
|
(4,769
|
)
|
Prepaids and other assets
|
|
|
(3,260
|
)
|
|
|
(122
|
)
|
Accounts payable
|
|
|
(7,601
|
)
|
|
|
341
|
|
Accrued compensation
|
|
|
(811
|
)
|
|
|
(4,882
|
)
|
Other accrued liabilities
|
|
|
(3,229
|
)
|
|
|
(863
|
)
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
2,302
|
|
|
|
8,899
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
Purchases of short-term investments
|
|
|
(15,576
|
)
|
|
|
(23,384
|
)
|
Maturities/sale of short-term investments
|
|
|
22,728
|
|
|
|
23,819
|
|
Purchases of property, plant and equipment
|
|
|
(1,922
|
)
|
|
|
(2,673
|
)
|
Remaining cash proceeds from sale of discontinued operations
|
|
|
210
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities
|
|
|
5,440
|
|
|
|
(2,238
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
Proceeds from issuance of common stock
|
|
|
1,072
|
|
|
|
1,343
|
|
Repurchase of common stock
|
|
|
(6,102
|
)
|
|
|
(4,163
|
)
|
|
|
|
|
|
|
|
|
|
Net cash used in financing activities
|
|
|
(5,030
|
)
|
|
|
(2,820
|
)
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash
|
|
|
(236
|
)
|
|
|
87
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents
|
|
|
2,476
|
|
|
|
3,928
|
|
Cash and cash equivalents at beginning of period
|
|
|
20,318
|
|
|
|
21,794
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
22,794
|
|
|
$
|
25,722
|
|
|
|
|
|
|
|
|
|
|
Non-cash investing and financing activities:
|
|
|
|
|
|
|
|
|
Unrealized gain (loss) on investments, net
|
|
$
|
(31
|
)
|
|
$
|
53
|
|
Property, plant and equipment purchases included in accounts payable
|
|
|
133
|
|
|
|
160
|
|
Cash payments for:
|
|
|
|
|
|
|
|
|
Income taxes
|
|
|
264
|
|
|
|
160
|
|
See notes to the condensed consolidated financial statements.
5
SYMMETRICOM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Basis of Presentation and Recently Issued Accounting Pronouncements
The condensed consolidated financial statements of Symmetricom, Inc. (Symmetricom, we,
us, the Company, or our) included herein are unaudited and reflect all adjustments (consisting only of normal recurring adjustments) which are, in the opinion of the management, necessary for a fair presentation
of the financial position, results of operations and cash flows for the interim periods presented. In presenting the financial statements in accordance with accounting principles generally accepted in the United States (US GAAP), management makes
certain estimates and assumptions that impact the amounts reported and related disclosures. Estimates, by their nature, are judgments based upon available information. Accordingly, actual results could differ from those estimates.
These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes
thereto included in Symmetricoms Annual Report on Form 10-K for the fiscal year ended July 3, 2011. The results of operations for the three and six months ended January 1, 2012 are not necessarily indicative of the results to be
anticipated for the entire fiscal year ending July 1, 2012.
The condensed consolidated balance sheet as of July 3,
2011 has been derived from the audited consolidated financial statements as of that date but does not include all of the information and footnotes required by US GAAP for complete financial statements.
Fiscal Quarter
Our fiscal quarter is 13 weeks ending on the Sunday closest to the end of the calendar quarter.
Recently Issued Accounting Pronouncements
In May 2011, the FASB
issued guidance to amend the accounting and disclosure requirements for fair value measurements. The new guidance limits the highest-and-best-use measure to non-financial assets, permits certain financial assets and liabilities with offsetting
positions in market or counterparty credit risks to be measured at a net basis, and provides guidance on the applicability of premiums and discounts. Additionally, the new guidance expands the disclosures on Level 3 inputs by requiring
quantitative disclosure of the unobservable inputs and assumptions, as well as description of the valuation processes and the sensitivity of the fair value to changes in unobservable inputs. The new guidance will be effective for us beginning third
quarter of fiscal 2012. Other than requiring additional disclosures, we do not anticipate material impacts on our financial statements upon adoption.
In June 2011, the FASB issued guidance on presentation of comprehensive income. The new guidance eliminates the current option to report other comprehensive income and its components in the statement
of stockholders equity. Instead, an entity will be required to present either a continuous statement of net income and other comprehensive income or in two separate but consecutive statements. The new guidance will be effective for
us beginning first quarter of fiscal 2013, will require retrospective application, and will only affect presentation of comprehensive income (loss).
Note 2. Financial Instruments
We account for certain assets and liabilities at fair value. The hierarchy below lists three levels of fair value based
on the extent to which inputs used in measuring fair value is observable in the market. We categorize each of our fair value measurements in one of these three levels based on the lowest level input that is significant to the fair value
measurement in its entirety. These levels are:
|
|
|
Level 1 inputs are based upon unadjusted quoted prices for identical instruments traded in active markets;
|
|
|
|
Level 2 inputs are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in
markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and
|
|
|
|
Level 3 inputs are generally unobservable and typically reflect managements estimates of assumptions that market participants would use in
pricing the asset or liability. The fair values are therefore determined using model-based techniques that include option pricing models, discounted cash flow models, and similar techniques.
|
6
SYMMETRICOM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Unaudited)
Financial assets measured at fair value on a recurring basis consisted of the following
types of instruments as of January 1, 2012 and July 3, 2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value as of
January 1, 2012
|
|
|
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
|
|
|
Significant Other
Observable
Inputs
(Level 2)
|
|
|
|
(In thousands)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds
|
|
$
|
12,385
|
|
|
$
|
12,385
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate debt securities
|
|
|
19,529
|
|
|
|
|
|
|
|
19,529
|
|
Government sponsored enterprise debt securities
|
|
|
12,934
|
|
|
|
|
|
|
|
12,934
|
|
Mutual funds
|
|
|
2,889
|
|
|
|
2,889
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total short-term investments
|
|
|
35,352
|
|
|
|
2,889
|
|
|
|
32,463
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total financial assets
|
|
$
|
47,737
|
|
|
$
|
15,274
|
|
|
$
|
32,463
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value as of
July 3,
2011
|
|
|
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
|
|
|
Significant Other
Observable Inputs
(Level 2)
|
|
|
|
(In thousands)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds
|
|
$
|
12,630
|
|
|
$
|
12,630
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate debt securities
|
|
|
23,430
|
|
|
|
|
|
|
|
23,430
|
|
Government sponsored enterprise debt securities
|
|
|
16,456
|
|
|
|
|
|
|
|
16,456
|
|
Mutual funds
|
|
|
3,454
|
|
|
|
3,454
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total short-term investments
|
|
|
43,340
|
|
|
|
3,454
|
|
|
|
39,886
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total financial assets
|
|
$
|
55,970
|
|
|
$
|
16,084
|
|
|
$
|
39,886
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7
SYMMETRICOM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Unaudited)
The fair values of our money market funds and mutual funds were derived from quoted
market prices as active markets for these instruments exist. The fair values of corporate debt securities and government sponsored enterprise debt securities were derived from non-binding market consensus prices that are corroborated by observable
market data.
The investments in mutual funds are held in a Rabbi trust to support the terms of our deferred compensation
plan.
The following table summarizes available-for-sale and trading securities recorded as cash and cash equivalents or
short-term investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized
Cost
|
|
|
Gross Unrealized
Gains (Losses)
|
|
|
Fair Value
|
|
January 1, 2012
|
|
(In thousands)
|
|
Money market funds
|
|
$
|
12,385
|
|
|
$
|
|
|
|
$
|
12,385
|
|
Corporate debt securities
|
|
|
19,570
|
|
|
|
(41
|
)
|
|
|
19,529
|
|
Government sponsored enterprise debt securities
|
|
|
12,936
|
|
|
|
(2
|
)
|
|
|
12,934
|
|
Mutual funds
|
|
|
2,889
|
|
|
|
|
|
|
|
2,889
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total financial assets
|
|
$
|
47,780
|
|
|
$
|
(43
|
)
|
|
$
|
47,737
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized
Cost
|
|
|
Gross Unrealized
Gains (Losses)
|
|
|
Fair Value
|
|
July 3, 2011
|
|
(In thousands)
|
|
Money market funds
|
|
$
|
12,630
|
|
|
$
|
|
|
|
$
|
12,630
|
|
Corporate debt securities
|
|
|
23,424
|
|
|
|
6
|
|
|
|
23,430
|
|
Government sponsored enterprise debt securities
|
|
|
16,456
|
|
|
|
|
|
|
|
16,456
|
|
Mutual funds
|
|
|
3,454
|
|
|
|
|
|
|
|
3,454
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total financial assets
|
|
$
|
55,964
|
|
|
$
|
6
|
|
|
$
|
55,970
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table summarizes the contractual maturities of fixed income securities (Corporate debt
securities and Government sponsored enterprise debt securities) recorded as short-term investments as of January 1, 2012:
|
|
|
|
|
|
|
|
|
|
|
Amortized
Cost
|
|
|
Fair
Value
|
|
|
|
(In thousands)
|
|
Less than 1 year
|
|
$
|
12,778
|
|
|
$
|
12,753
|
|
Due in 1 to 3 years
|
|
|
19,728
|
|
|
|
19,710
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
32,506
|
|
|
$
|
32,463
|
|
|
|
|
|
|
|
|
|
|
Actual maturities may differ from the contractual maturities because borrowers may have the right to call
or prepay certain obligations.
8
SYMMETRICOM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Unaudited)
Note 3. Inventories
Components of inventories were as follows:
|
|
|
|
|
|
|
|
|
|
|
January 1,
2012
|
|
|
July 3,
2011
|
|
|
|
(In thousands)
|
|
Raw materials
|
|
$
|
29,028
|
|
|
$
|
27,206
|
|
Work-in-process
|
|
|
8,593
|
|
|
|
9,520
|
|
Finished goods
|
|
|
24,848
|
|
|
|
25,896
|
|
|
|
|
|
|
|
|
|
|
Inventories
|
|
$
|
62,469
|
|
|
$
|
62,622
|
|
|
|
|
|
|
|
|
|
|
Note 4. Intangible Assets
Intangible assets consist of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
Carrying
Amount
|
|
|
Accumulated
Amortization
|
|
|
Net
Intangible
Assets
|
|
|
|
(in thousands)
|
|
Purchased technology
|
|
$
|
24,357
|
|
|
$
|
(23,597
|
)
|
|
$
|
760
|
|
Customer lists and trademarks
|
|
|
7,025
|
|
|
|
(5,831
|
)
|
|
|
1,194
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total as of January 1, 2012
|
|
$
|
31,382
|
|
|
$
|
(29,428
|
)
|
|
$
|
1,954
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased technology
|
|
$
|
24,357
|
|
|
$
|
(23,226
|
)
|
|
$
|
1,131
|
|
Customer lists and trademarks
|
|
|
7,025
|
|
|
|
(5,727
|
)
|
|
|
1,298
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total as of July 3, 2011
|
|
$
|
31,382
|
|
|
$
|
(28,953
|
)
|
|
$
|
2,429
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9
SYMMETRICOM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Unaudited)
The estimated future amortization expense by fiscal year is as follows:
|
|
|
|
|
Fiscal year:
|
|
(in thousands)
|
|
2012 (Remaining 6 months)
|
|
$
|
252
|
|
2013
|
|
|
502
|
|
2014
|
|
|
502
|
|
2015
|
|
|
232
|
|
2016
|
|
|
159
|
|
Thereafter
|
|
|
307
|
|
|
|
|
|
|
Total amortization
|
|
$
|
1,954
|
|
|
|
|
|
|
Intangible asset amortization expense for the second quarter of fiscal 2012 and 2011 was $0.2 million and
$0.3 million, respectively. Intangible asset amortization expense for the first six months of fiscal 2012 and 2011 was $0.5 million and $0.7 million, respectively.
Note 5. Warranty
Changes in our accrued warranty liability were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
January 1,
2012
|
|
|
December 26,
2010
|
|
|
January 1,
2012
|
|
|
December 26,
2010
|
|
|
|
(In thousands)
|
|
|
(In thousands)
|
|
Beginning balance
|
|
$
|
1,477
|
|
|
$
|
2,339
|
|
|
$
|
1,601
|
|
|
$
|
2,900
|
|
Provision for warranty
|
|
|
725
|
|
|
|
(52
|
)
|
|
|
1,230
|
|
|
|
2
|
|
Accruals related to change in estimate
|
|
|
251
|
|
|
|
237
|
|
|
|
343
|
|
|
|
422
|
|
Less: Actual warranty costs
|
|
|
(618
|
)
|
|
|
(522
|
)
|
|
|
(1,339
|
)
|
|
|
(1,322
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
1,835
|
|
|
$
|
2,002
|
|
|
$
|
1,835
|
|
|
$
|
2,002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
SYMMETRICOM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Unaudited)
Note 6. Long-term Obligations
Long-term obligations consist of:
|
|
|
|
|
|
|
|
|
|
|
January 1, 2012
|
|
|
July 3, 2011
|
|
|
|
(In thousands)
|
|
Long-term obligations:
|
|
|
|
|
|
|
|
|
Deferred revenue
|
|
$
|
2,218
|
|
|
$
|
2,131
|
|
Lease loss accrual, net
|
|
|
2,060
|
|
|
|
1,793
|
|
Rent accrual
|
|
|
1,124
|
|
|
|
1,088
|
|
Post-retirement benefits
|
|
|
186
|
|
|
|
200
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
5,588
|
|
|
$
|
5,212
|
|
|
|
|
|
|
|
|
|
|
Note 7. Stockholders Equity
Stock Options and Awards Activity
Stock award activity for the six months ended January 1, 2012 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non Performance-based
Options Outstanding
|
|
|
Restricted Stock
Outstanding
|
|
|
|
Shares
Available
For Grant
|
|
|
Number of
Shares
|
|
|
Weighted
Average
Exercise Price
Per Share
|
|
|
Number of
Shares
|
|
|
Weighted
Average
Grant-Date
Fair Value
|
|
|
|
(In thousands, except per share amounts)
|
|
Balances at July 3, 2011
|
|
|
4,463
|
|
|
|
6,534
|
|
|
$
|
5.78
|
|
|
|
228
|
|
|
$
|
6.39
|
|
Granted - options
|
|
|
(1,808
|
)
|
|
|
1,808
|
|
|
|
5.08
|
|
|
|
|
|
|
|
|
|
Granted -restricted shares
|
|
|
(200
|
)
|
|
|
|
|
|
|
|
|
|
|
100
|
|
|
|
5.13
|
|
Exercised
|
|
|
|
|
|
|
(96
|
)
|
|
|
4.47
|
|
|
|
|
|
|
|
|
|
Vested
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(67
|
)
|
|
|
5.76
|
|
Cancelled and Expired
|
|
|
320
|
|
|
|
(320
|
)
|
|
|
6.67
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at January 1, 2012
|
|
|
2,775
|
|
|
|
7,926
|
|
|
$
|
5.60
|
|
|
|
261
|
|
|
$
|
6.07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11
SYMMETRICOM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Unaudited)
Stock options outstanding, vested and expected to vest, and exercisable as of
January 1, 2012 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
|
|
Number of
Shares
|
|
|
Weighted
Average
Remaining
Contractual
Life
|
|
|
Weighted
Average
Exercise Price
|
|
|
Aggregate
Intrinsic
Value
|
|
|
|
(In thousands)
|
|
|
(In years)
|
|
|
|
|
|
(In thousands)
|
|
Outstanding
|
|
|
7,926
|
|
|
|
4.70
|
|
|
$
|
5.60
|
|
|
$
|
2,603
|
|
Vested and expected to vest
|
|
|
7,489
|
|
|
|
4.59
|
|
|
$
|
5.62
|
|
|
$
|
2,497
|
|
Exercisable
|
|
|
3,624
|
|
|
|
3.21
|
|
|
$
|
5.79
|
|
|
$
|
1,540
|
|
The aggregate intrinsic value in the preceding table represents the total pre-tax value of stock options
outstanding as of January 1, 2012, based on our common stock closing price of $5.39 on December 30, 2011, which would have been received by the option holders had all option holders exercised their options as of that date.
The total intrinsic value of options exercised during the second quarter of fiscal 2012 and 2011 was approximately $54,000 and $335,000,
respectively.
12
SYMMETRICOM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Unaudited)
For the second quarter of fiscal 2012 and 2011, the weighted-average estimated fair
value of options granted was $2.43 and $3.10 per share, respectively. For the six months ended January 1, 2012 and December 26, 2010, the weighted-average estimated fair value of options granted was $2.43 and $3.08 per share, respectively.
Our calculations were made using the Black-Scholes option-pricing model. The fair value of Symmetricom stock-based awards to employees was estimated assuming no expected dividend and the weighted-average assumptions for the three and six months
ended January 1, 2012 and December 26, 2010 as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
|
Six months ended
|
|
|
|
January 1,
|
|
|
December 26,
|
|
|
January 1,
|
|
|
December 26,
|
|
|
|
2012
|
|
|
2010
|
|
|
2012
|
|
|
2010
|
|
Expected life (in years)
|
|
|
4.9
|
|
|
|
5.1
|
|
|
|
5.0
|
|
|
|
5.1
|
|
Risk-free interest rate
|
|
|
0.6
|
%
|
|
|
1.1
|
%
|
|
|
0.7
|
%
|
|
|
1.1
|
%
|
Volatility
|
|
|
56.8
|
%
|
|
|
56.7
|
%
|
|
|
56.2
|
%
|
|
|
56.9
|
%
|
We calculated the stock-based compensation expense in the second quarter of fiscal 2012 and 2011, using
an estimated annual forfeiture rate of 7.2% and 8.0%, respectively. At January 1, 2012, the total cumulative compensation cost related to unvested stock-based awards granted to employees, directors and consultants under the Companys stock
option plans, but not yet recognized, was approximately $6.8 million, net of estimated forfeitures of $1.5 million. This cost will be amortized on an accelerated method basis over a period of approximately 1.5 years and will be adjusted for
subsequent changes in estimated forfeitures.
The following table shows total stock-based compensation costs included in the
condensed consolidated statements of operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
January 1,
2012
|
|
|
December 26,
2010
|
|
|
January 1,
2012
|
|
|
December 26,
2010
|
|
|
|
(In thousands)
|
|
|
(In thousands)
|
|
Cost of sales
|
|
$
|
215
|
|
|
$
|
230
|
|
|
$
|
334
|
|
|
$
|
253
|
|
Research and development
|
|
|
295
|
|
|
|
184
|
|
|
|
584
|
|
|
|
322
|
|
Selling, general and administrative
|
|
|
1,170
|
|
|
|
704
|
|
|
|
1,925
|
|
|
|
995
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock compensation expense from continuing operations
|
|
|
1,680
|
|
|
|
1,118
|
|
|
|
2,843
|
|
|
|
1,570
|
|
Stock compensation expense from discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(114
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,680
|
|
|
$
|
1,118
|
|
|
$
|
2,843
|
|
|
$
|
1,456
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The above table includes expense of $0.2 million and $0.3 million, relating to the employee stock
purchase plan (ESPP) for the second quarter and first six months of fiscal 2012, respectively. There was no ESPP in the second quarter and first six months of fiscal 2011.
Performance Awards
In the second quarter of fiscal 2012, the
Company communicated its intention to grant 110,000 shares of performance based restricted stock to its executive management employees subject to the achievement of certain financial performance targets. The number of stock awards that will
ultimately vest depends on actual business performance measured for fiscal 2012 against certain targets for revenue and profitability for the Companys business as well as continued employment with the Company.
13
SYMMETRICOM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Unaudited)
Stock Repurchases
During the second quarter of fiscal 2012, we repurchased 779,245 shares of common stock pursuant to our repurchase program for an
aggregate price of approximately $4.0 million. Further, we repurchased 12,841 shares in the second quarter of fiscal 2012 for an aggregate price of approximately $66,000 to cover the cost of employee income taxes on vested restricted stock.
On November 17, 2011, the Companys Board of Directors authorized management to repurchase an additional
4.1 million shares of Symmetricom common stock in addition to the remaining shares available for repurchase under previously approved programs. As of January 1, 2012, the total number of shares available for repurchase under the repurchase
program authorized by the Board of Directors was approximately 4.5 million.
Note 8. Restructuring Charges
The following table shows the details of the restructuring cost accruals, which consist of facilities and severance
costs, at January 1, 2012 and July 3, 2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
July 3,
2011
|
|
|
Expense
Additions
|
|
|
Payments and
Non-cash
Settlements
|
|
|
Balance at
January 1,
2012
|
|
|
|
(in thousands)
|
|
Lease loss accrual (fiscal 2004)
|
|
$
|
161
|
|
|
$
|
2
|
|
|
$
|
(19
|
)
|
|
$
|
144
|
|
All other restructuring changes (fiscal 2004)
|
|
|
50
|
|
|
|
36
|
|
|
|
(36
|
)
|
|
|
50
|
|
Lease loss accrual (fiscal 2009)
|
|
|
1,797
|
|
|
|
26
|
|
|
|
(206
|
)
|
|
|
1,617
|
|
All other restructuring changes (fiscal 2010)
|
|
|
409
|
|
|
|
83
|
|
|
|
(228
|
)
|
|
|
264
|
|
Lease loss accrual (fiscal 2011 and 2012)
|
|
|
403
|
|
|
|
830
|
|
|
|
(64
|
)
|
|
|
1,169
|
|
All other restructuring changes (fiscal 2011 and 2012)
|
|
|
979
|
|
|
|
313
|
|
|
|
(1,267
|
)
|
|
|
25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
3,799
|
|
|
$
|
1,290
|
|
|
$
|
(1,820
|
)
|
|
$
|
3,269
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During the first six months of fiscal 2012, we incurred approximately $1.3 million in lease loss charges,
severance, consulting, and other charges in connection with the Companys restructuring activities associated with the shutdown of certain activities at our Santa Rosa facility.
The lease loss accruals are subject to periodic revisions based on current market estimates. The lease loss accruals as of
January 1, 2012 will be paid over the next five years.
14
SYMMETRICOM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Unaudited)
Note 9. Comprehensive Income (Loss)
Comprehensive income (loss) is comprised of two components: net income (loss) and other comprehensive income (loss).
Other comprehensive income (loss) refers to revenue, expenses, gains and losses that under US GAAP are recorded as an element of stockholders equity but are excluded from net income (loss). Other comprehensive income (loss) is comprised
of unrealized gains and losses, net of taxes, on marketable securities categorized as available-for-sale and foreign currency translation adjustments. The components of comprehensive income (loss), net of tax, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
January 1,
2012
|
|
|
December 26,
2010
|
|
|
January 1,
2012
|
|
|
December 26,
2010
|
|
|
|
(in thousands)
|
|
|
(in thousands)
|
|
Net income (loss)
|
|
$
|
2,445
|
|
|
$
|
(3,525
|
)
|
|
$
|
5,194
|
|
|
$
|
(304
|
)
|
Other comprehensive income (loss), net of taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments
|
|
|
11
|
|
|
|
(176
|
)
|
|
|
(236
|
)
|
|
|
87
|
|
Unrealized gain (loss) on investments
|
|
|
4
|
|
|
|
(53
|
)
|
|
|
(31
|
)
|
|
|
53
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss)
|
|
|
15
|
|
|
|
(229
|
)
|
|
|
(267
|
)
|
|
|
140
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income (loss)
|
|
$
|
2,460
|
|
|
$
|
(3,754
|
)
|
|
$
|
4,927
|
|
|
$
|
(164
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 10. Net Income (Loss) Per Share
Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of common
shares outstanding during the period. Diluted earnings (loss) per share is calculated by dividing net income (loss) by the weighted average number of common shares outstanding and common equivalent shares from dilutive stock options, employee stock
purchase plan and restricted stock using the treasury stock method, except when antidilutive.
15
SYMMETRICOM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Unaudited)
The following table reconciles the number of shares utilized in the net income (loss)
per share calculations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
January 1,
2012
|
|
|
December 26,
2010
|
|
|
January 1,
2012
|
|
|
December 26,
2010
|
|
|
|
(In thousands, except per share amounts)
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
$
|
2,445
|
|
|
$
|
(3,476
|
)
|
|
$
|
5,194
|
|
|
$
|
(382
|
)
|
Income (loss) from discontinued operations
|
|
|
|
|
|
|
(49
|
)
|
|
|
|
|
|
|
78
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
2,445
|
|
|
$
|
(3,525
|
)
|
|
$
|
5,194
|
|
|
$
|
(304
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares (denominator):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding
|
|
|
42,530
|
|
|
|
43,405
|
|
|
|
42,715
|
|
|
|
43,480
|
|
Weighted average common shares outstanding subject to repurchase
|
|
|
(238
|
)
|
|
|
(133
|
)
|
|
|
(225
|
)
|
|
|
(129
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstandingbasic
|
|
|
42,292
|
|
|
|
43,272
|
|
|
|
42,490
|
|
|
|
43,351
|
|
Weighted average dilutive share equivalents from stock options
|
|
|
355
|
|
|
|
|
|
|
|
392
|
|
|
|
|
|
Weighted average dilutive common shares subject to repurchase
|
|
|
115
|
|
|
|
|
|
|
|
107
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding diluted
|
|
|
42,762
|
|
|
|
43,272
|
|
|
|
42,989
|
|
|
|
43,351
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per share basic:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
$
|
0.06
|
|
|
$
|
(0.08
|
)
|
|
$
|
0.12
|
|
|
$
|
(0.01
|
)
|
Income (loss) from discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
0.06
|
|
|
$
|
(0.08
|
)
|
|
$
|
0.12
|
|
|
$
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per share diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
$
|
0.06
|
|
|
$
|
(0.08
|
)
|
|
$
|
0.12
|
|
|
$
|
(0.01
|
)
|
Income (loss) from discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
0.06
|
|
|
$
|
(0.08
|
)
|
|
$
|
0.12
|
|
|
$
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested restricted stock is subject to repurchase by the Company and therefore is not included in the
calculation of the weighted-average shares outstanding for basic earnings per share.
The following common stock equivalents
were excluded from the earnings (loss) per share calculation as their effect would have been anti-dilutive:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
January 1,
2012
|
|
|
December 26,
2010
|
|
|
January 1,
2012
|
|
|
December 26,
2010
|
|
|
|
(In thousands)
|
|
|
(In thousands)
|
|
Stock options
|
|
|
5,531
|
|
|
|
6,456
|
|
|
|
4,785
|
|
|
|
6,182
|
|
Common shares subject to repurchase
|
|
|
|
|
|
|
133
|
|
|
|
|
|
|
|
129
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shares of common stock excluded from diluted net income (loss) per share calculation
|
|
|
5,531
|
|
|
|
6,589
|
|
|
|
4,785
|
|
|
|
6,311
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16
SYMMETRICOM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Unaudited)
Note 11. Litigation and Contingencies
LitigationThe Company is or was a party to the following material litigations:
Former Texas Facility Environmental Cleanup
We formerly leased a tract of land in Texas for our operations. Those operations involved the use of solvents and, at the end of the lease, we remediated an area where the solvents had been deposited
on the ground and obtained regulatory approval for that remedial activity. In 1996, an environmental investigation of the property detected those same contaminants in groundwater in excess of then current regulatory standards. The
groundwater contamination has migrated to some adjacent properties. We have entered into the Texas Natural Resource Conservation Commissions Voluntary Cleanup Program (the Voluntary Cleanup Program) to obtain regulatory
approval for closure of this site and a release from liability to the State of Texas for subsequent landowners and lenders. We have notified adjacent property owners affected by the contamination of participation in the Voluntary Cleanup
Program. On May 20, 2004, we received a demand from the owner of several adjacent lots for damages in the amount of $1.3 million, as well as seeking an indemnity for the contamination and a promise to remediate the
contamination. On March 14, 2006, the adjacent property owner filed suit in Probate Court No. 1, Travis County, Texas (Anna B. Miller, Individually and as Executrix of the Estate of Robert L. Miller, et al. vs.
Austron, Inc., et al.), seeking damages. Symmetricom has not yet been served in this matter, but we intend to defend this lawsuit vigorously. We are continuing to work on the remediation of the formerly leased site
as well as the adjacent properties, and have also taken steps to begin work on the Miller property. As of January 1, 2012, we had an accrual of $50,000 for remediation costs and other ongoing monitoring costs which has been included
within other accrued liabilities on our condensed consolidated balance sheet.
Michael E. McNeil, et al.
vs. Jason Book, et al.
On or around May 25, 2010, Symmetricom was served with the first amended complaint in the case
of Michael E. McNeil, et al. vs. Jason Book, et al. (Case No. CV165643) filed in Santa Cruz County Superior Court, California. The first amended complaint added Symmetricom and several other parties to the lawsuit, which had been originally filed in
2009 by plaintiffs against their former attorney for legal malpractice in connection with certain settlement agreements in 1999 between plaintiffs and Datum (a company acquired by Symmetricom) in which they assigned to Datum certain
intellectual property rights. The complaint has since been amended for the second time and Symmetricom was served with the second amended complaint on or around January 7, 2011. The second amended complaint alleges several causes of
action, including claims against Symmetricom for contract rescission, breach of contract, conversion and unjust enrichment, and seeks unspecified monetary damages along with equitable relief. Management believes that this lawsuit has no merit
or basis and intends to defend this lawsuit vigorously and as a result, no accrual has been made in relation to this litigation. Management believes the final outcome of this matter will not have a material adverse effect on our financial
position and results of operations.
General
Under the indemnification provisions of our standard sales contracts, we agree to defend the customer against third party claims asserting infringement of certain intellectual property rights, which may
include patents, copyrights, trademarks or trade secrets, and to pay any judgments entered on such claims against the reseller/customer. The exposure to us under these indemnification provisions is generally limited to the total amount paid by the
customer under the agreement. However, certain agreements include indemnification provisions that could potentially expose us to losses in excess of the amount received under the agreement. To date, there have been no claims under such
indemnification provisions. We believe the estimated fair value of these indemnification agreements is not material.
We are
also a party to certain other claims in the normal course of our operations. While the results of these claims cannot be predicted with any certainty, we believe that the final outcome of these matters will not have a material adverse effect on our
consolidated financial position and results of operations.
17
SYMMETRICOM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Unaudited)
Note 12. Business Segment Information
Symmetricom is organized into two operating segments corresponding to our two divisions:
Communications
and
Government and Enterprise
. These two operating segments are our reporting segments. The Chief Operating Decision Maker (CODM), as defined by authoritative accounting guidance on Segment Reporting, is our President and Chief Executive Officer
(CEO). Our CEO allocates resources to and assesses the performance of each operating segment using information about its revenue and operating income (loss) before interest and taxes.
With the exception of intangible assets, we do not identify or allocate assets by operating segment, nor does our CEO evaluate operating
segments using discrete asset information. We do not allocate restructuring charges, interest and other income, interest expense, or income taxes to operating segments.
The following describes our two reporting segments:
Communications
Our Communications business supplies timing technologies and services for worldwide communications infrastructure.
Products include primary reference sources, synchronization distribution systems, embedded components and software, and test and measurement equipment, all of which support the timing and synchronization requirements of telecommunications and cable
networks and equipment.
Government and Enterprise
Our Government and Enterprise business provides time technology products for aerospace/defense, IT infrastructure and science and
metrology applications. Precision time and frequency systems enable a range of critical operations, including the international time scale, global navigation, the management of power grids, synchronization of complex control systems, and signals
intelligence for securing communications in remote and hostile environments. Through fiscal 2011, we named this business as Government; however, in the first quarter of fiscal 2012, we changed the name to Government and Enterprise to more accurately
reflect the business customers and initiatives.
18
SYMMETRICOM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Unaudited)
Segment revenue, gross profit and operating income (loss) were as follows during the
periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended January 1, 2012
|
|
Communications
|
|
|
Government and
Enterprise
|
|
|
Corporate
|
|
|
Total
|
|
|
|
(In thousands)
|
|
Net revenue
|
|
$
|
33,307
|
|
|
$
|
24,987
|
|
|
$
|
|
|
|
$
|
58,294
|
|
Cost of sales
|
|
|
16,856
|
|
|
|
15,554
|
|
|
|
674
|
|
|
|
33,084
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
16,451
|
|
|
|
9,433
|
|
|
|
(674
|
)
|
|
|
25,210
|
|
Operating expenses
|
|
|
9,518
|
|
|
|
6,746
|
|
|
|
5,303
|
|
|
|
21,567
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
$
|
6,933
|
|
|
$
|
2,687
|
|
|
$
|
(5,977
|
)
|
|
$
|
3,643
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended December 26, 2010
|
|
Communications
|
|
|
Government and
Enterprise
|
|
|
Corporate
|
|
|
Total
|
|
|
|
(In thousands)
|
|
Net revenue
|
|
$
|
20,369
|
|
|
$
|
21,475
|
|
|
$
|
|
|
|
$
|
41,844
|
|
Cost of sales
|
|
|
11,752
|
|
|
|
11,737
|
|
|
|
3,910
|
|
|
|
27,399
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
8,617
|
|
|
|
9,738
|
|
|
|
(3,910
|
)
|
|
|
14,445
|
|
Operating expenses
|
|
|
8,767
|
|
|
|
5,803
|
|
|
|
5,863
|
|
|
|
20,433
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
$
|
(150
|
)
|
|
$
|
3,935
|
|
|
$
|
(9,773
|
)
|
|
$
|
(5,988
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended January 1, 2012
|
|
Communications
|
|
|
Government and
Enterprise
|
|
|
Corporate
|
|
|
Total
|
|
|
|
(In thousands)
|
|
Net revenue
|
|
$
|
66,877
|
|
|
$
|
47,795
|
|
|
$
|
|
|
|
$
|
114,672
|
|
Cost of sales
|
|
|
33,135
|
|
|
|
29,291
|
|
|
|
1,091
|
|
|
|
63,517
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
33,742
|
|
|
|
18,504
|
|
|
|
(1,091
|
)
|
|
|
51,155
|
|
Operating expenses
|
|
|
19,248
|
|
|
|
13,015
|
|
|
|
11,160
|
|
|
|
43,423
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
$
|
14,494
|
|
|
$
|
5,489
|
|
|
$
|
(12,251
|
)
|
|
$
|
7,732
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended December 26, 2010
|
|
Communications
|
|
|
Government and
Enterprise
|
|
|
Corporate
|
|
|
Total
|
|
|
|
(In thousands)
|
|
Net revenue
|
|
$
|
53,518
|
|
|
$
|
42,705
|
|
|
$
|
|
|
|
$
|
96,223
|
|
Cost of sales
|
|
|
27,247
|
|
|
|
23,135
|
|
|
|
7,657
|
|
|
|
58,039
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
26,271
|
|
|
|
19,570
|
|
|
|
(7,657
|
)
|
|
|
38,184
|
|
Operating expenses
|
|
|
17,183
|
|
|
|
11,770
|
|
|
|
10,066
|
|
|
|
39,019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
$
|
9,088
|
|
|
$
|
7,800
|
|
|
$
|
(17,723
|
)
|
|
$
|
(835
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19
The information in the Corporate category above represents corporate-related costs that are
not allocated to either of our two segments for the purpose of evaluating their performance. The following table outlines our major corporate-related costs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
January 1,
2012
|
|
|
December 26,
2010
|
|
|
January 1,
2012
|
|
|
December 26,
2010
|
|
|
|
(In thousands)
|
|
|
(In thousands)
|
|
Selling, general and adminstrative costs
|
|
$
|
5,200
|
|
|
$
|
5,825
|
|
|
$
|
10,961
|
|
|
$
|
10,909
|
|
Restructuring charges
|
|
|
777
|
|
|
|
3,948
|
|
|
|
1,290
|
|
|
|
6,814
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate-related total
|
|
$
|
5,977
|
|
|
$
|
9,773
|
|
|
$
|
12,251
|
|
|
$
|
17,723
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read together with
the condensed consolidated financial statements and related notes included elsewhere in this report.
When used in this
discussion or elsewhere in this report, the words expects, anticipates, estimates, believes, plans, will, intend, can and similar expressions are
intended to identify forward-looking statements. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected.
These risks and uncertainties include, but are not limited to, risks relating to general economic conditions in the markets we address
and the telecommunications market in general, risks related to the development of our new products and services, the reliance on our contract manufacturer, the effects of increasing competition and competitive pricing pressure, uncertainties
associated with changing intellectual property laws, developments in and expenses related to litigation, inability to obtain sufficient amounts of key components, the rescheduling or cancellations of key customer orders, the loss of a key customer,
the effects of new and emerging technologies, the risk that excess inventory may result in write-offs, price erosion and decreased demand, fluctuations in the rate of exchange of foreign currency, changes in our effective tax rate, market acceptance
of our new products and services, technological advancements, undetected errors or defects in our products, the risks associated with our international sales, potential short-term investment losses and other risks due to credit market dislocation,
geopolitical risks and risk of terrorist activities, the risks associated with attempting to integrate other companies and businesses we acquire, and the risks set forth below in Part II, Item 1A, Risk Factors.
These forward-looking statements speak only as of the date hereof. We expressly disclaim any obligation or undertaking to release
publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances or on which any such statement is based.
All references to Symmetricom, we, us, and our mean
Symmetricom, Inc. and its subsidiaries, except where it is made clear that the term means only the parent company. Dollar amounts in the tables in this Managements Discussion and Analysis of Financial Condition and Results of
Operations are in thousands.
Overview
Symmetricom is a leading source worldwide of highly precise timekeeping technologies, instruments and solutions. We generate, distribute
and apply precise time for the communications, aerospace/defense, IT infrastructure and metrology industries. Symmetricoms customers, from communications service providers and network equipment manufacturers to governments and their suppliers
worldwide, are able to build more reliable networks and systems by using our advanced timing technologies, atomic clocks, services and solutions. Our products support todays precise timing standards, including GPS-based timing, IEEE 1588
(PTP), Network Time Protocol (NTP), Synchronous Ethernet, Building Integrated Timing Supply (BITS) and Data Over Cable Service Interface Specifications (DOCSIS(R)) timing.
Critical Accounting Estimates
Our condensed consolidated financial
statements have been prepared in accordance with accounting principles generally accepted in the United States, which require us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and
related disclosures at the date of our financial statements. On an ongoing basis, management evaluates its estimates and judgments. Management bases its estimates and judgments on historical experience and on various other factors that are believed
to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates
under different assumptions or conditions.
20
An accounting policy is deemed to be critical if it requires an accounting estimate to be
made based on assumptions about matters that are highly uncertain at the time the estimate is made, if different estimates reasonably could have been used, or if changes in the estimate that are reasonably likely to occur could materially impact the
financial statements. We believe that there have been no significant changes during the three and six months ended January 1, 2012 to the items that we disclosed as our critical accounting policies and estimates in Managements Discussion
and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended July 3, 2011.
Known Trends and Uncertainties Impacting Future Results of Operations: Global Market and Economic Conditions
Current macro-economic factors are dynamic and uncertain and are likely to remain so for the remainder of fiscal year 2012. If economic conditions remain uncertain or worsen (for example, due to the
ongoing financial crisis in Europe or a slowdown in the economic growth rate in China), or if there are reductions in government and/or defense spending, our customers may delay or reduce capital expenditures. Among other things, these factors could
result in reductions in sales of our products, longer sales cycles, difficulties in collecting accounts receivable, additional excess and obsolete inventory, gross margin deterioration, slower adoption of new technologies, increased price
competition and supplier difficulties.
Results of Operations
The following table presents selected items in our condensed consolidated statements of operations as a percentage of total net revenue
for the three and six months ended January 1, 2012 and December 26, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
January
1,
2012
|
|
|
December
26,
2010
|
|
|
January
1,
2012
|
|
|
December
26,
2010
|
|
|
|
|
|
Net revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Communications
|
|
|
57.1
|
%
|
|
|
48.7
|
%
|
|
|
58.3
|
%
|
|
|
55.6
|
%
|
Government and Enterprise
|
|
|
42.9
|
%
|
|
|
51.3
|
%
|
|
|
41.7
|
%
|
|
|
44.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net revenue
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
Cost of products and services
|
|
|
55.3
|
%
|
|
|
55.6
|
%
|
|
|
54.1
|
%
|
|
|
51.7
|
%
|
Amortization of purchased technology
|
|
|
0.3
|
%
|
|
|
0.6
|
%
|
|
|
0.3
|
%
|
|
|
0.6
|
%
|
Restructuring charges
|
|
|
1.2
|
%
|
|
|
9.3
|
%
|
|
|
1.0
|
%
|
|
|
8.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
43.2
|
%
|
|
|
34.5
|
%
|
|
|
44.6
|
%
|
|
|
39.7
|
%
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
11.2
|
%
|
|
|
16.1
|
%
|
|
|
11.7
|
%
|
|
|
13.9
|
%
|
Selling, general and administrative
|
|
|
25.5
|
%
|
|
|
32.5
|
%
|
|
|
25.9
|
%
|
|
|
27.5
|
%
|
Amortization of intangible assets
|
|
|
0.1
|
%
|
|
|
0.1
|
%
|
|
|
0.1
|
%
|
|
|
0.1
|
%
|
Restructuring charges
|
|
|
0.2
|
%
|
|
|
0.1
|
%
|
|
|
0.2
|
%
|
|
|
(0.9
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
6.2
|
%
|
|
|
(14.3
|
)%
|
|
|
6.7
|
%
|
|
|
(0.9
|
)%
|
Interest income, net of amortization (accretion) of premium (discount) on investments
|
|
|
(0.5
|
)%
|
|
|
0.8
|
%
|
|
|
(0.2
|
)%
|
|
|
0.3
|
%
|
Interest expense
|
|
|
|
%
|
|
|
|
%
|
|
|
|
%
|
|
|
(0.1
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations before taxes
|
|
|
5.7
|
%
|
|
|
(13.5
|
)%
|
|
|
6.5
|
%
|
|
|
(0.7
|
)%
|
Income tax provision (benefit)
|
|
|
1.5
|
%
|
|
|
(5.2
|
)%
|
|
|
2.0
|
%
|
|
|
(0.3
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
|
4.2
|
%
|
|
|
(8.3
|
)%
|
|
|
4.5
|
%
|
|
|
(0.4
|
)%
|
Income (loss) from discontinued operations, net of tax
|
|
|
|
%
|
|
|
(0.1
|
)%
|
|
|
|
%
|
|
|
0.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
4.2
|
%
|
|
|
(8.4
|
)%
|
|
|
4.5
|
%
|
|
|
(0.3
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21
Net Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
$ Change
|
|
|
% Change
|
|
|
Six Months Ended
|
|
|
$ Change
|
|
|
% Change
|
|
|
|
January 1,
2012
|
|
|
December 26,
2010
|
|
|
|
|
|
|
|
|
January 1,
2012
|
|
|
December 26,
2010
|
|
|
|
|
|
|
|
Net Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Communications
|
|
$
|
33,307
|
|
|
$
|
20,369
|
|
|
$
|
12,938
|
|
|
|
63.5
|
%
|
|
$
|
66,877
|
|
|
$
|
53,518
|
|
|
$
|
13,359
|
|
|
|
25.0
|
%
|
Government and Enterprise
|
|
|
24,987
|
|
|
|
21,475
|
|
|
|
3,512
|
|
|
|
16.4
|
|
|
|
47,795
|
|
|
|
42,705
|
|
|
|
5,090
|
|
|
|
11.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Net Revenue
|
|
$
|
58,294
|
|
|
$
|
41,844
|
|
|
$
|
16,450
|
|
|
|
39.3
|
%
|
|
$
|
114,672
|
|
|
$
|
96,223
|
|
|
$
|
18,449
|
|
|
|
19.2
|
%
|
Percentage of Revenue
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
Second Quarter of Fiscal 2012:
Net revenue consists of sales of products, software licenses and
services. In the second quarter of fiscal 2012, net revenue increased $16.5 million, or 39.3%, compared to the corresponding quarter of fiscal 2011. The increase in Communications revenue is due to the completion of our transition to an outsourced
manufacturing and logistics model that adversely impacted revenue in the second quarter of fiscal 2011. Further, the increase in Communications revenue is attributable to higher shipments of traditional sync, PackeTime and DOCSIS Timing
Interface (DTI) products. The increase in Government and Enterprise segment revenue is due to an increase in our government program business, sale of atomic clocks and Quantum Chip Scale Atomic Clocks (CSAC), partially offset by a decrease in
sales of enterprise and instrument products.
First Six Months of Fiscal 2012:
In the first six months of fiscal 2012,
net revenue increased $18.4 million, or 19.2%, compared to the corresponding period of fiscal 2011. Communications revenue increased $13.4 million, or 25.0%, compared to the same period for the prior year, due to the completion of our transition to
an outsourced manufacturing and logistics model that adversely impacted revenue in the second quarter of fiscal 2011. Further, in the first six months of fiscal 2012, Communication revenue increased due to higher shipments of traditional sync, DTI
and PackeTime products and higher installation revenues, offset by lower sales of embedded solutions products. Government and Enterprise segment revenue increased $5.1 million, or 11.9% compared to the same period for the prior year, due to an
increase in our government programs business, enterprise products, and sales of Quantum Chip Scale Atomic Clocks (CSAC).
Gross Profit:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
$ Change
|
|
|
% Change
|
|
|
Six Months Ended
|
|
|
$ Change
|
|
|
% Change
|
|
|
|
January 1,
2012
|
|
|
December 26,
2010
|
|
|
|
|
|
|
|
|
January 1,
2012
|
|
|
December 26,
2010
|
|
|
|
|
|
|
|
Gross Profit:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Communications
|
|
$
|
16,451
|
|
|
$
|
8,617
|
|
|
$
|
7,834
|
|
|
|
90.9
|
%
|
|
$
|
33,742
|
|
|
$
|
26,271
|
|
|
$
|
7,471
|
|
|
|
28.4
|
%
|
Government and Enterprise
|
|
|
9,433
|
|
|
|
9,738
|
|
|
|
(305
|
)
|
|
|
(3.1
|
)
|
|
|
18,504
|
|
|
|
19,570
|
|
|
|
(1,066
|
)
|
|
|
(5.4
|
)
|
Corporate related
|
|
|
(674
|
)
|
|
|
(3,910
|
)
|
|
|
3,236
|
|
|
|
(82.8
|
)
|
|
|
(1,091
|
)
|
|
|
(7,657
|
)
|
|
|
6,566
|
|
|
|
(85.8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Gross Profit
|
|
$
|
25,210
|
|
|
$
|
14,445
|
|
|
$
|
10,765
|
|
|
|
74.5
|
%
|
|
$
|
51,155
|
|
|
$
|
38,184
|
|
|
$
|
12,971
|
|
|
|
34.0
|
%
|
Percentage of Revenue
|
|
|
43.2
|
%
|
|
|
34.5
|
%
|
|
|
|
|
|
|
|
|
|
|
44.6
|
%
|
|
|
39.7
|
%
|
|
|
|
|
|
|
|
|
Second Quarter of Fiscal 2012:
Gross profit in the second quarter of fiscal 2012 increased by
$10.8 million, or 74.5%, compared to the corresponding quarter of fiscal 2011. Gross profit as a percentage of revenue in the second quarter of fiscal 2012 increased to 43.2% as compared to 34.5% in the corresponding quarter of fiscal 2011 due to a
decrease in corporate-related restructuring charges.
Gross profit for our Communications segment increased by 90.9% in the
second quarter of fiscal 2012 compared to the corresponding quarter of fiscal 2011 whereas the revenue in this segment increased by 63.5% compared to the same period in the prior year due to higher revenues and a lower sales mix of lower margin
embedded products. Gross profit for our Government and Enterprise segment decreased by 3.1% in the second quarter of fiscal 2012 compared to the corresponding quarter of fiscal 2011 due to a higher mix of government programs business and CSAC which
carries lower gross margins. Gross profit was also impacted in the second quarter of fiscal 2012 by higher manufacturing costs due to lower-than normal production and ramp up of new products, including CSAC.
22
Corporate related charges decreased by $3.2 million, or 82.8%, in the second quarter of
fiscal 2012 due to higher restructuring charges in the second quarter of fiscal 2011 related to activities associated with the phased closure of our Puerto Rico manufacturing facility, which was completed in fiscal 2011.
We expect gross margins in the third quarter of fiscal 2012 to remain similar to or slightly lower than the second quarter of fiscal 2012
as we maintain lower-than-normal production and ramp up new products, including CSAC.
First Six Months of Fiscal 2012
Gross profit in the first six months of fiscal 2012 increased by $13.0 million, or 34.0%, compared to the corresponding
period of fiscal 2011. Gross profit as a percentage of revenue in the first six months of fiscal 2012 increased to 44.6% as compared to 39.7% in the corresponding period of fiscal 2011 due primarily to a decrease in corporate-related restructuring
charges.
Gross profit for our Communications segment increased by 28.4% in the first six months of fiscal 2012 compared to
the corresponding period of fiscal 2011 whereas the revenue in this segment increased 25.0% compared to the same period in the prior year due to higher revenues and a sales mix of higher margin products (PackeTime and DTI products). Gross
profit for our Government and Enterprise segment decreased by 5.4% in the first six months of fiscal 2012 compared to the corresponding period of fiscal 2011 whereas revenue increased 11.9% compared to the same period in the prior year, due to
higher revenues and sales mix of lower margin products (government programs business and CSAC).
Corporate related charges
decreased $6.6 million, or 85.8% , in the first six months of fiscal 2012, due to higher restructuring charges in the first six months of fiscal 2011 from activities associated with the phased closure of our Puerto Rico manufacturing facility, which
was completed in fiscal 2011.
Operating Expenses:
Research and Development Expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
$ Change
|
|
|
% Change
|
|
|
Six Months Ended
|
|
|
$ Change
|
|
|
% Change
|
|
|
|
January 1,
2012
|
|
|
December 26,
2010
|
|
|
|
|
|
|
|
|
January 1,
2012
|
|
|
December 26,
2010
|
|
|
|
|
|
|
|
Research and development expense
|
|
$
|
6,548
|
|
|
$
|
6,738
|
|
|
$
|
(190
|
)
|
|
|
(2.8
|
)%
|
|
$
|
13,446
|
|
|
$
|
13,344
|
|
|
$
|
102
|
|
|
|
0.8
|
%
|
Percentage of Revenue
|
|
|
11.2
|
%
|
|
|
16.1
|
%
|
|
|
|
|
|
|
|
|
|
|
11.7
|
%
|
|
|
13.9
|
%
|
|
|
|
|
|
|
|
|
Second Quarter of Fiscal 2012:
Research and development expense consists primarily of salaries and
benefits, prototype expenses and fees paid to outside consultants. Research and development expenses in the second quarter of fiscal 2012 were comparable to the same quarter of fiscal 2011. We expect that research and development expenses in the
third quarter of fiscal 2012 will increase as compared to the second quarter of fiscal 2012 as we continue to invest in new product development.
First Six Months of Fiscal 2012:
Research and development expense in the first six months of fiscal 2012 were comparable to the same period of fiscal 2011.
Selling, General and Administrative:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
$ Change
|
|
|
% Change
|
|
|
Six Months Ended
|
|
|
$ Change
|
|
|
% Change
|
|
|
|
January 1,
2010
|
|
|
December 26,
2012
|
|
|
|
|
|
|
|
|
January 1,
2012
|
|
|
December 26,
2010
|
|
|
|
|
|
|
|
Selling, general and administrative
|
|
$
|
14,864
|
|
|
$
|
13,596
|
|
|
$
|
1,268
|
|
|
|
9.3
|
%
|
|
$
|
29,674
|
|
|
$
|
26,395
|
|
|
$
|
3,279
|
|
|
|
12.4
|
%
|
Percentage of Revenue
|
|
|
25.5
|
%
|
|
|
32.5
|
%
|
|
|
|
|
|
|
|
|
|
|
25.9
|
%
|
|
|
27.5
|
%
|
|
|
|
|
|
|
|
|
Second Quarter of Fiscal 2012:
Selling, general and administrative expenses consist primarily of
salaries, benefits, sales commissions and travel-related expenses for our sales and services, marketing, finance, human resources, information technology and facilities departments. These expenses increased in the second quarter of fiscal 2012
compared to the same quarter of fiscal 2011 due to higher spending on employee compensation costs, outside consulting expenses, travel, and sales commission expenses. This increase was partially offset by lower facilities expenses. We expect that
selling, general and administrative expenses in the third quarter of fiscal 2012 will be consistent with the second quarter of fiscal 2012.
23
First Six Months of Fiscal 2012:
Selling, general and administrative expenses in the
first six months of fiscal 2012 increased compared to the same period for fiscal 2011 due to higher spending on employee compensation costs, outside consulting expenses, travel expenses, and sales commission expenses. This increase was partially
offset by lower facilities expenses.
Amortization of intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
$ Change
|
|
|
% Change
|
|
|
Six Months Ended
|
|
|
$ Change
|
|
|
% Change
|
|
|
|
January 1,
2012
|
|
|
December 26,
2010
|
|
|
|
|
|
|
|
|
January 1,
2012
|
|
|
December 26,
2010
|
|
|
|
|
|
|
|
Amortization of intangible assets
|
|
$
|
52
|
|
|
$
|
61
|
|
|
$
|
(9
|
)
|
|
|
(14.8
|
)%
|
|
$
|
104
|
|
|
$
|
123
|
|
|
$
|
(19
|
)
|
|
|
(15.4
|
)%
|
Percentage of Revenue
|
|
|
0.1
|
%
|
|
|
0.1
|
%
|
|
|
|
|
|
|
|
|
|
|
0.1
|
%
|
|
|
0.1
|
%
|
|
|
|
|
|
|
|
|
Amortization of intangibles decreased in the second quarter and first six months of fiscal 2012 compared
to the corresponding period of fiscal 2011 due to certain assets being fully amortized before or during the first six months of fiscal 2012.
Restructuring charges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
$ Change
|
|
|
% Change
|
|
|
Six Months Ended
|
|
|
$ Change
|
|
|
% Change
|
|
|
|
January 1,
2012
|
|
|
December 26,
2010
|
|
|
|
|
|
|
|
|
January 1,
2012
|
|
|
December 26,
2010
|
|
|
|
|
|
|
|
Restructuring charges
|
|
$
|
103
|
|
|
$
|
38
|
|
|
$
|
65
|
|
|
|
171.1
|
%
|
|
$
|
199
|
|
|
$
|
(843
|
)
|
|
$
|
1,042
|
|
|
|
(123.6
|
)%
|
Percentage of Revenue
|
|
|
0.2
|
%
|
|
|
0.1
|
%
|
|
|
|
|
|
|
|
|
|
|
0.2
|
%
|
|
|
(0.9
|
)%
|
|
|
|
|
|
|
|
|
Restructuring charges in the second quarter of fiscal 2012 consisted of lease loss charges, partially
offset by a reduction in accrual of severance and relocation costs that are not expected to be incurred. Restructuring charges increased in the first six months of fiscal 2012 compared to the same period of fiscal 2011 due to sub-lease in the first
six months of fiscal 2011 of a space in our Santa Rosa facility that had previously been recorded as a lease loss.
Interest income, net of amortization (accretion) of premium (discount) on investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
$ Change
|
|
|
% Change
|
|
|
Six Months Ended
|
|
|
$ Change
|
|
|
% Change
|
|
|
|
January 1,
2012
|
|
|
December 26,
2010
|
|
|
|
|
|
|
|
|
January 1,
2012
|
|
|
December 26,
2010
|
|
|
|
|
|
|
|
Interest income, net of amortization (accretion) of premium (discount) on investments
|
|
$
|
(296
|
)
|
|
$
|
331
|
|
|
$
|
(627
|
)
|
|
|
(189.4
|
)%
|
|
$
|
(230
|
)
|
|
$
|
223
|
|
|
$
|
(453
|
)
|
|
|
(203.1
|
)%
|
Percentage of Revenue
|
|
|
(0.5
|
)%
|
|
|
0.8
|
%
|
|
|
|
|
|
|
|
|
|
|
(0.2
|
)%
|
|
|
0.3
|
%
|
|
|
|
|
|
|
|
|
Interest income, net of amortization (accretion) of premium (discount) on investments decreased $0.6
million in the second quarter of fiscal 2012 compared to the same period of prior year due to higher amortization of premium on investments and a $0.4 million decline in fair value of mutual funds in the second quarter of fiscal 2012.
Interest income, net of amortization (accretion) of premium (discount) on investments decreased $0.5 million in the first six months of
fiscal 2012 compared to the same period of fiscal 2011 due to higher amortization of premium on investments in the first six months of fiscal 2012.
24
Income tax provision:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
$ Change
|
|
|
% Change
|
|
|
Six Months Ended
|
|
|
$ Change
|
|
|
% Change
|
|
|
|
January 1,
2012
|
|
|
December 26,
2010
|
|
|
|
|
|
|
|
|
January 1,
2012
|
|
|
December 26,
2010
|
|
|
|
|
|
|
|
Income tax provision (benefit)
|
|
$
|
902
|
|
|
$
|
(2,181
|
)
|
|
$
|
3,083
|
|
|
|
(141.4
|
)%
|
|
$
|
2,308
|
|
|
$
|
(285
|
)
|
|
$
|
2,593
|
|
|
|
(909.8
|
)%
|
Percentage of Revenue
|
|
|
1.5
|
%
|
|
|
(5.2
|
)%
|
|
|
|
|
|
|
|
|
|
|
2.0
|
%
|
|
|
(0.3
|
)%
|
|
|
|
|
|
|
|
|
Second Quarter of Fiscal 2012:
Our income tax provision was $0.9 million in the second quarter of
fiscal 2012, compared to a benefit of $2.2 million in the corresponding quarter of fiscal 2011. Our effective tax rate in the second quarter of fiscal 2012 was 27.0%, compared to an effective tax rate of 38.5% in the corresponding period of fiscal
2011. The effective tax rate for the second quarter of fiscal 2012 benefited from the reversal of a reserve on uncertain tax position due to expiration of the statute of limitation.
First Six Months of Fiscal 2012:
Our income tax provision was $2.3 million in the first six months of fiscal 2012, compared to a
benefit of $0.3 million in the corresponding period of fiscal 2011. Our effective tax rate in the first six months of fiscal 2012 was 30.8%, compared to an effective tax rate of 42.7% in the corresponding period of fiscal 2011. The effective tax
rate for the first six months of fiscal 2012 benefited from the utilization of a capital loss and from the reversal of a reserve on uncertain tax position due to expiration of the statute of limitation. Also, in the first six months of fiscal 2011,
the effective tax rate was impacted by a net loss position.
Key Operating Metrics
Key operating metrics for measuring our performance include sales backlog and contract revenue. A comparison of these metrics at the end
of the second quarter of fiscal 2012 with the end of fiscal 2011 is below:
Sales Backlog:
Our backlog consists of firm orders that have yet to be shipped to the customer, or may not be shippable to a customer until a future
period. Most orders included in backlog can be rescheduled or cancelled by customers without significant penalty. Historically, a substantial portion of net revenue in any fiscal period has been derived from orders received during that fiscal
period.
Our backlog amounted to $59.6 million as of January 1, 2012, compared to $60.3 million as of July 3, 2011.
Our backlog, which is shippable within the next six months, was $40.5 million as of January 1, 2012, compared to $38.6 million as of July 3, 2011.
Contract Revenue:
As of January 1, 2012, we had approximately $19.3
million in contract revenue to be performed and recognized within the next 36 months, whereas as of July 3, 2011, we had approximately $16.1 million in contract revenue that was to be performed and recognized within 36 months following
July 3, 2011. These amounts have been included in our sales backlog discussed above.
Liquidity and Capital
Resources
Balance Sheet and Cash Flows
The following table summarizes our cash, cash equivalents and short-term investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 1,
2012
|
|
|
July 3,
2011
|
|
|
Change
|
|
Cash and cash equivalents
|
|
$
|
22,794
|
|
|
$
|
20,318
|
|
|
$
|
2,476
|
|
Short-term investments
|
|
|
35,352
|
|
|
|
43,340
|
|
|
|
(7,988
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
58,146
|
|
|
$
|
63,658
|
|
|
$
|
(5,512
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of January 1, 2012, our principal sources of liquidity consisted of cash, cash equivalents and
short-term investments of $58.1 million and accounts receivable of $36.5 million.
25
As of January 1, 2012, working capital was $140.6 million compared to $134.7 million as
of July 3, 2011. Cash, cash equivalents and short-term investments as of January 1, 2012 decreased to $58.1 million from $63.7 million as of July 3, 2011.
Our days sales outstanding in accounts receivable was 57 days as of January 1, 2012, compared to 65 days as of July 3, 2011.
Our principal uses of cash historically have consisted of the purchase of inventories, payroll and other operating expenses related to
the manufacturing of products, development of new products and purchase of property and equipment.
Cash flows from
operating activities
Net cash provided by operating activities in the first six months of fiscal 2012 was $2.3
million. Net cash provided by operating activities consisted of net income of $5.2 million and non-cash charges of $9.9 million. The non-cash charges consisted of $2.9 million in depreciation and amortization, $2.8 million in stock-based
compensation, $2.0 million in provision for excess and obsolete inventory and $2.0 million in deferred income taxes. Cash provided in the first six months of fiscal 2012 was partially offset by $12.8 million of net changes in assets and liabilities.
Those net changes consisted primarily of a $7.6 million decrease in accounts payable, $3.3 million increase in prepaid and other assets, $3.2 million decrease in other accrued liabilities, $1.9 million increase in inventories, partially offset by a
decrease in accounts receivable of $4.0 million.
Cash flows from investing activities
Net cash provided by investing activities was $5.4 million in the first six months of fiscal 2012, which represented sales/maturities of
short-term investments of $22.7 million and $0.2 million from income on release of funds that were held in escrow to satisfy indemnification obligations to the buyer of our QoE business, partially offset by the purchase of short-term investments and
property, plant and equipment of $15.6 million and $1.9 million, respectively.
Cash flows from financing activities
Net cash used for financing activities was $5.0 million in the first six months of fiscal 2012, which represented the
repurchase of common stock of $6.1 million, partially offset by cash generated from the issuance of common stock under our ESPP and exercise of common stock options of $1.1 million.
Contingencies
See Item 1 of Part I, Financial Statements Note 11 Litigation and Contingencies.
Recently Issued Accounting Pronouncements
See Item 1 of Part I,
Financial StatementsNote 1Basis of Presentation and Recently Issued Accounting Pronouncements.
Item 3.
|
Quantitative and Qualitative Disclosures About Market Risk
|
For quantitative and qualitative disclosures about market risk affecting Symmetricom see Quantitative and Qualitative Disclosures About Market Risk in Item 7A of Part II of our
Annual Report on Form 10-K for the fiscal year ended July 3, 2011. Our exposure to market risk has not changed materially since July 3, 2011.
Item 4.
|
Controls and Procedures
|
Evaluation of Disclosure Controls and Procedures
Our disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, is
(i) recorded, processed, summarized and reported, within the time periods specified in the SECs rules and forms, and (ii) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial
Officer, as appropriate to allow timely decisions regarding required disclosure. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are effective as of the end
of the fiscal quarter covered by this report.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during the quarter ended January 1, 2012 that
have affected, or are reasonably likely to materially affect, our internal control over financial reporting.
26
PART II. OTHER INFORMATION
Item 1.
|
Legal Proceedings
|
See
Item 1 of Part I, Financial Statements Note 11 Litigation and Contingencies.
In addition
to the other information set forth in this report, you should carefully consider the factors discussed in Part I, Item 1A Risk Factors in our Annual Report on Form 10-K for our fiscal year ended July 3, 2011. The risks
discussed in our Annual Report on Form 10-K could materially affect our business, financial condition and future results. The risks described in our Annual Report on Form 10-K are not the only risks facing us. Additional risks and uncertainties not
currently known to us or that we currently deem to be immaterial also may materially and adversely affect our business, financial condition or operating results.
Item 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds
|
|
c)
|
The following table provides monthly detail regarding our share repurchases during the three months ended January 1, 2012:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period
|
|
Total
Number of
Shares
Purchased
|
|
|
Average
Price Paid
per Share
|
|
|
Total Number of
Shares
Purchased as Part of
Publicly Announced
Plans or
Programs
|
|
|
Approximate Number
of Shares
That
May Yet Be
Purchased Under the
Plans or Programs
|
|
October 3, 2011 through October 30, 2011
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
1,221,368
|
|
October 31, 2011 through November 27, 2011
|
|
|
331,786
|
|
|
|
5.09
|
|
|
|
318,945
|
|
|
|
4,969,300
|
|
November 28, 2011 through January 1, 2012
|
|
|
460,300
|
|
|
|
5.21
|
|
|
|
460,300
|
|
|
|
4,509,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
792,086
|
|
|
$
|
5.16
|
|
|
|
779,245
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During the second quarter of fiscal 2012, we repurchased 779,245 shares of common stock pursuant to our
repurchase program for an aggregate price of approximately $4.0 million. Further, we repurchased 12,841 shares in the second quarter of fiscal 2012 for an aggregate price of approximately $66,000 to cover the cost of employee income taxes on vested
restricted stock.
On November 17, 2011, the Companys Board of Directors authorized management to repurchase an
additional 4.1 million shares of Symmetricom common stock in addition to the remaining shares available for repurchase under previously approved programs. As of January 1, 2012, the total number of shares available for repurchase under the
repurchase program authorized by the Board of Directors was approximately 4.5 million.
Item 3.
|
Defaults Upon Senior Securities
|
Not applicable.
Item 4.
|
Mine Safety Disclosures
|
Not applicable.
Item 5.
|
Other Information
|
Not
applicable.
27
|
|
|
Exhibit
Number
|
|
Description of Exhibits
|
|
|
31
|
|
Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
32
|
|
Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
101
|
|
Interactive Data File.
|
28
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on our
behalf by the undersigned thereunto duly authorized.
|
|
|
|
|
|
|
SYMMETRICOM, INC.
|
|
|
(Registrant)
|
|
|
|
Date: February 8, 2012
|
|
By:
|
|
/S/ DAVID G. CÔTÉ
|
|
|
|
|
David G. Côté
|
|
|
|
|
Chief Executive Officer
(Principal Executive Officer) and Director
|
|
|
|
Date: February 8, 2012
|
|
By:
|
|
/S/ JUSTIN R. SPENCER
|
|
|
|
|
Justin R. Spencer
|
|
|
|
|
Executive Vice President, Chief Financial Officer and
Secretary
(Principal Financial and Accounting Officer)
|
29
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