Revenues were a record $442.7M, up 17% from last year, for net earnings of $21.1M ($0.09/share), up from $11.5M ($0.05/share)

October 26, 2004

6 Min Read

HOLTSVILLE, N.Y. -- Symbol Technologies, Inc. (NYSE:SBL) today reported financial results for third quarter 2004.

Revenue for the third quarter ended September 30, 2004, was $442.7 million, representing the Company's highest quarterly revenue in its history as well as a gain of 17 percent over third-quarter 2003 revenue of $377.1 million and an increase of just over 2 percent compared to second-quarter 2004 revenue of $432.8 million.

Third-quarter 2004 net earnings were $21.1 million, or $0.09 per share, compared with third-quarter 2003 net earnings of $11.5 million, or $0.05 per share, and second-quarter 2004 net earnings of $28.8 million, or $0.12 per share.

The Company's September acquisition of Matrics, Inc. had a $13.8 million negative impact on third-quarter 2004 net earnings, and a $0.05 negative impact on earnings per share. Before giving effect of the acquisition, net earnings and earnings per share were $34.9 million and $0.14, respectively, exceeding by $0.02 the Company's third-quarter guidance, which when provided July 29, 2004, excluded any impact of the acquisition.

Third-Quarter 2004 Highlights

Third-quarter 2004 results extended some financial trends that the Company has been achieving, as follows:

Five sequential quarters of revenue growth, most recently to $442.7 million in the third quarter from $432.8 million in the prior quarter.

Four sequential quarters with gross margins in excess of 45 percent, improving to 46.5 percent in the third quarter from 45.4 percent in the prior quarter.

Seven sequential quarters of improved operating income and operating margin, absent the effect of the Matrics acquisition, to $47.2 million and 10.7 percent, respectively, in third quarter 2004 from $43.7 million and 10.1 percent, respectively, in the prior quarter.

A strong balance sheet, with $231.5 million in cash at September 30, 2004, compared to $143.7 million at June 30, 2004.

Product Revenue Increase

Product revenue of $367.4 million, including $1.8 million from Matrics, represented a 19 percent increase over product revenue of $308.8 million in 2003's third quarter and a 3 percent gain sequentially from 2004's second-quarter product revenue of $356.6 million. Product revenue gains were led by sales of the Symbol MC9000 rugged mobile computer in its three form factors. As of September 30, 2004, Symbol had shipped more than $140 million in MC9000 products since its initial release a year ago.

Service Revenue at Anticipated Annualized Rate

Third-quarter 2004 service revenue of $75.3 million was positively impacted by $3.2 million, primarily as a result of recording certain new contracts on an accrual basis from a billed-and-collected basis of accounting as they met all revenue recognition criteria. A 10.2 percent increase over third-quarter 2003 service revenue of $68.3 million, the $75.3 million was in line with the Company's anticipated annual run rate of approximately $300.0 million. Service revenue declined 1.2 percent from second-quarter 2004 revenue of $76.2 million.

Continued Gross Profit Growth

Year-over-year, third-quarter 2004 gross profit increased 23.3 percent to $205.8 million from $166.9 million in third quarter 2003 and increased 4.6 percent sequentially from second-quarter 2004 gross profit of $196.7 million. Gross margin as a percentage of revenue rose to 46.5 percent in the third quarter from 44.3 percent a year ago and from 45.4 percent in 2004's second quarter.

Operating Expenses Rise

Operating expenses in third quarter 2004 were $172.1 million, up 15.6 percent compared to 2003's third-quarter operating expenses of $148.9 million and up 12.5 percent sequentially from second-quarter 2004 operating expenses of $153.0 million. Approximately $14.0 million of 2004's third-quarter operating expense was ascribed to the effect of the Company's acquisition of Matrics. Absent these expenses, the Company's operating expense in the quarter increased $5.1 million, or 3.3 percent, sequentially to $158.1 million.

Operating Income and Margin Gains

Earnings from operations for 2004's third quarter were $33.7 million, an 87.2 percent increase from the prior year's third-quarter total of $18.0 million. Operating margin for the third quarter 2004 declined sequentially 2.5 percentage points from second quarter 2004 to 7.6 percent. Absent the effect of the acquisition of Matrics, operating income and margins improved to $47.2 million and 10.7 percent, respectively, in third quarter 2004 from $43.7 million and 10.1 percent, respectively, in the prior quarter.

Solid Cash Flow From Operations

The Company ended September 2004 with $231.5 million in cash, an increase of $87.8 million from June 30, 2004. In third quarter 2004, the Company had cash flow from operations of $104.4 million. In addition, the Company borrowed $250.0 million under a short-term credit facility, which was used to fund the acquisition of Matrics, as well as costs related to the acquisition. The Company expects to pay down this borrowing with an anticipated equity offering in the fourth quarter of 2004.

Nine-Month Financial Summary

Revenue for the nine months ended September 30, 2004, was $1,295.1 million, an increase of 14 percent over revenue of $1,137.3 million in the nine months ended September 30, 2003. Gross profit for the nine months ended September 30, 2004, was $597.4 million or 46.1 percent compared to $491.2 million or 43.2 percent in the nine months ended September 30, 2003. Operating expenses decreased $15.5 million to $490.5 million for the nine months ended September 30, 2004, from $506.0 million for the nine months ended September 30, 2003. Net earnings were $56.7 million, or earnings of $0.24 per diluted share, for the nine months ended September 30, 2004, compared with a net loss of $12.9 million, or a loss of $0.06 per diluted share, for the nine months ended September 30, 2003.

Driving Financial and Operational Improvement

"Our third-quarter performance is a shared success. Once again I want to thank our associates and channel partners for their hard work, dedication and results. Symbol Technologies continues to focus on the customer, enterprisewide operational improvements and the value-creation engine - sales, service, products and systems. As evidenced by our quarterly results, positive trend-lines and improving market position, we have taken another important step in our goal to become the enterprise mobility market leader," William Nuti, Symbol president and chief executive officer, said.

Mark T. Greenquist, Symbol senior vice president and chief financial officer, said, "In the third quarter, we again were encouraged by our earnings performance as well as the continued strong positive cash flow from operations. Cash balances of over $230 million, an increase of almost $90 million vs. the prior quarter, exceeded our expectations."

2004 Fourth-Quarter Guidance

Building on the strong 2004 third-quarter financial results, the Company expects that fourth-quarter 2004 revenue will be in a range of $445 million to $450 million, flat to up 2 percent sequentially and up 13 percent to 14 percent year-over-year. Earnings per share for the fourth-quarter of 2004 are expected to be $0.09 to $0.10. It should be noted that this guidance includes an anticipated negative $0.05 impact on fourth-quarter earnings resulting from the combined impact of the Matrics acquisition, including interest expense and amortization of fees associated with the short-term debt financing as well as the dilutive impact of an anticipated equity offering.

Symbol Technologies Inc.

Subscribe and receive the latest news from the industry.
Join 62,000+ members. Yes it's completely free.

You May Also Like