Symbol Posts Record Revenue
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.
