Symbol Technologies Reports Fourth-Quarter and Full-Year 2005 Financial Results

HOLTSVILLE, N.Y., Feb. 22 /PRNewswire-FirstCall/ -- Symbol Technologies, Inc. , The Enterprise Mobility Company, today announced revenue for the fourth quarter, ended December 31, 2005, of $438.9 million and net income of $23.9 million or $0.09 per share.

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"We are pleased with our fourth-quarter performance and appreciate the hard work of Symbol associates. We continue to show progress in revenue and margin improvement, and are lowering our operating expenses according to plan," said Sal Iannuzzi, Symbol president and chief executive officer. "In 2006, our top priorities are to drive revenue growth, invest in technology innovation that will deliver new products for our customers and remain focused on enhancing operational efficiencies."

Fourth-Quarter 2005 Highlights

-- Revenue was $438.9 million compared with revenue of $450.5 million in fourth-quarter 2004 and revenue in third-quarter 2005 of $441.5 million (including $9.3 million associated with the conversion of certain resellers from cash-basis accounting to accrual-basis accounting).

-- Fourth-quarter product revenue was $366.4 million, versus $374.9 million in fourth-quarter 2004, and $371.4 million for third-quarter 2005 (including the aforementioned $9.3 million benefit). Service revenue was $72.5 million versus $75.6 million in fourth-quarter 2004, and $70.1 million for third-quarter 2005.

-- Gross profit margins were 45.0 percent, including restructuring and impairment charges of $2.3 million. Fourth quarter gross profit margins were 45.6 percent, excluding these charges. Third quarter gross profit margins were 45.4 percent, excluding restructuring and impairment charges, as well as the impact of the cash basis conversion.

-- Fourth-quarter operating expenses were $169.9 million including restructuring and impairment charges of $3.3 million. Exclusive of such items, operating expenses were $166.6 million, demonstrating continuing progress in lowering operating expenses. Fourth-quarter normalized operating margins were 7.6 percent, compared with 6.0 percent in third-quarter 2005 (which also excludes the impact of the cash basis conversion).

-- Fourth-quarter 2005 net income was $23.9 million or $0.09 per share, which includes a tax benefit offset by restructuring and impairment charges resulting in a net benefit of $1.4 million. This compares with net income of $28.5 million, or $0.11 per share, for fourth-quarter 2004, which included a tax benefit offset by restructuring charges and a write-off of deferred financing costs resulting in a net benefit of $3.7 million, or $0.01 per share. Net income for third-quarter 2005 was $16.7 million, or $0.07 per share.

-- The ending cash balance as of December 31, 2005, was $139.1 million, compared with $155.8 million as of September 30, 2005. The decrease is primarily attributable to $26.1 million in debt repayment and $13.8 million in net capital investment partially offset by $25.1 million generated from operations.

Full-Year 2005 Summary

Revenue for the 12 months ending December 31, 2005, was $1.77 billion, compared with $1.73 billion for 2004. Full-year net earnings were $32.2 million, or $0.13 per share, compared with net earnings of $81.8 million, or $0.33 per share, for the same period in 2004.

Recent Legal Developments

Symbol is pleased to announce that earlier today the Ohio State Supreme Court declined Smart Media's request for an appeal. The Company will pursue a return of the $50 million bond as soon as the Court system allows.

On Tuesday, February 21, the judge declared a mistrial in the case against prior Symbol management. There is no definitive timetable, but current indications are that the earliest date for a new trial is this summer.

First-Quarter 2006 Outlook

The Company currently expects first-quarter 2006 revenue to be flat or slightly down from fourth-quarter revenue of $438.9 million. Inclusive of ongoing quarterly legal expenses of $7 to $9 million, earnings per share in the first quarter of 2006 are currently expected to be in the range of $0.08- $0.09 per share. This guidance excludes an estimated $0.01 per share for the expensing of stock options as required under FAS No. 123 (R), Share-Based Payment.

Teleconference Information:

Investors are invited to listen to Symbol's conference call discussing the Company's financial results for the fourth-quarter and full-year 2005. The conference call will be held at 5:30 p.m. (ET) Eastern Time today. To listen to the call, visit the Company's Web site at http://www.symbol.com/investor or dial 800-946-0783 (domestic) and 719-457-2658 (international) at least 10 minutes prior to commencement of the call.

Web cast Information:

To listen to a live audio cast (listen only), access http://www.symbol.com/investor and click on the link next to the microphone icon.

Replay Information: An audio replay will be available on the Company's Web site on a 24-hour non-stop basis within two hours of the conclusion of the call. An audio replay of the teleconference will be available from 7:30 p.m. (ET) Wednesday, February 22, through midnight, (CT) March 22, by calling toll- free 888-203-1112 (domestic) and 719-457-0820 (international), and entering access code 6640819.

Non-GAAP Financial Measures

In addition to including results of operations data under accounting principles generally accepted in the United States of America (U.S. GAAP), Symbol Technologies disclosed adjusted results of operations data for the third and fourth quarters of 2005 and the fourth quarter of 2004, including the effects of the restructuring and certain other items, which the Securities and Exchange Commission defines as "non-GAAP financial measures." These non- GAAP financial measures should not be considered in isolation or as an alternative to results of operations data or any other measure of performance derived in accordance to U.S. GAAP. However, these non-GAAP financial measures are presented because Symbol believes they provide useful supplemental information for management and investors and allow them to perform meaningful comparisons for the Company's past and present results. For a reconciliation of these non-GAAP measures, see the tables below with the heading "Non-GAAP Financial Measures."

About Symbol Technologies

Symbol Technologies, Inc., The Enterprise Mobility Company(TM), is a recognized worldwide leader in enterprise mobility, delivering products and solutions that capture, move and manage information in real time to and from the point of business activity. Symbol enterprise mobility solutions integrate advanced data capture products, radio frequency identification technology, mobile computing platforms, wireless infrastructure, mobility software and world-class services programs under the Symbol Enterprise Mobility Services brand. Symbol enterprise mobility products and solutions are proven to increase workforce productivity, reduce operating costs, drive operational efficiencies and realize competitive advantages for the world's leading companies. More information is available at http://www.symbol.com/.

This news release contains forward-looking statements based on current expectations, forecasts and assumptions that involve risks and uncertainties that could cause actual outcomes and results to differ materially. These risks and uncertainties include price and product competition, dependence on new product development, reliance on major customers, customer demand for our products and services, control of costs and expenses, international growth, general industry and market conditions and growth rates and general domestic and international economic conditions including interest rate and currency exchange rate fluctuations. For a further list and description of such risks and uncertainties, see the reports filed by Symbol with the Securities and Exchange Commission. Symbol disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

For Symbol Technologies: For media information: Patricia Hall Symbol Technologies, Inc. 631.738.5636 patricia.hall@symbol.com For financial information: Lori Chaitman Symbol Technologies, Inc. 631.738.5050 lori.chaitman@symbol.com Symbol Technologies, Inc. & Subsidiaries Condensed Consolidated Statements of Operations (Unaudited) Three Months Ended * December September December 31, 30, 31, ($ Millions, except per share data) 2005 2005 2004 Product Revenue $366.4 $371.4 $374.9 Services Revenue 72.5 70.1 75.6 Net Revenue 438.9 441.5 450.5 Cost of Revenue 238.9 240.1 232.8 Restructuring & Asset Impairment 2.3 2.3 1.0 Cost of Revenue 241.3 242.4 233.8 Gross Profit 197.6 199.1 216.7 Operating Expenses: Engineering 34.2 38.8 41.3 S, G&A 132.3 131.5 136.1 Restructuring & Asset Impairment 3.3 4.9 0.7 Net Recovery From Legal Settlements -- (5.5) -- Operating Expenses 169.9 169.7 178.1 Earnings From Operations 27.8 29.4 38.6 Other Expense, Net (1.0) (12.2) (9.7) Earnings Before Taxes 26.8 17.3 28.9 Provision For Income Taxes 2.9 0.6 0.5 Net Earnings $23.9 $16.7 $28.5 Earnings Per Share $0.09 $0.07 $0.11 Average Diluted Shares Outstanding (in millions) 252.0 250.4 248.5 PERCENTAGE OF REVENUE Net Revenue 100.0% 100.0% 100.0% Cost of Revenue 54.4% 54.4% 51.7% Restructuring & Asset Impairment 0.5% 0.5% 0.2% Cost of Revenue 55.0% 54.9% 51.9% Gross Profit 45.0% 45.1% 48.1% Operating Expenses: Engineering 7.8% 8.8% 9.2% S, G&A 30.1% 29.8% 30.2% Restructuring & Asset Impairment 0.8% 1.1% 0.2% Net Recovery From Legal Settlements 0.0% (1.2%) 0.0% Operating Expenses 38.7% 38.4% 39.5% Earnings From Operations 6.3% 6.7% 8.6% Other Expense, Net (0.2%) (2.8%) (2.1%) Earnings Before Taxes 6.1% 3.9% 6.4% Provision For Income Taxes 0.7% 0.1% 0.1% Net Earnings 5.4% 3.8% 6.3% * Certain numbers may differ slightly due to rounding. Symbol Technologies, Inc. & Subsidiaries Condensed Consolidated Statements of Operations (Unaudited) Year Ended * December 31, December 31, ($ Millions, except per share data) 2005 2004 Product Revenue $1,477.7 $1,433.7 Services Revenue 287.9 298.5 Net Revenue 1,765.6 1,732.1 Cost of Revenue 975.2 918.2 Restructuring & Asset Impairment 20.4 5.9 Total Cost of Revenue 995.7 924.1 Gross Profit 769.9 808.0 Operating Expenses: Engineering 154.9 167.7 S, G&A 538.3 503.4 IPR&D Write Off -- 12.8 Restructuring & Asset Impairment 35.8 5.2 Net Recovery From Legal Settlements (12.6) (21.4) Total Operating Expenses 716.4 667.6 Earnings From Operations 53.5 140.4 Other Expense, Net (20.7) (16.6) Earnings Before Taxes 32.8 123.8 Provision For Income Taxes 0.6 41.9 Net Earnings $32.2 $81.8 Earnings Per Share $0.13 $0.33 Average Diluted Shares Outstanding (in millions) 250.9 246.2 PERCENTAGE OF REVENUE Net Revenue 100.0% 100.0% Cost of Revenue 55.2% 53.0% Restructuring & Asset Impairment 1.2% 0.3% Total Cost of Revenue 56.4% 53.4% Gross Profit 43.6% 46.6% Operating Expenses: Engineering 8.8% 9.7% S, G&A 30.5% 29.1% IPR&D Write Off 0.0% 0.7% Restructuring & Asset Impairment 2.0% 0.3% Net Recovery From Legal Settlements (0.7%) (1.2%) Total Operating Expenses 40.6% 38.5% Earnings From Operations 3.0% 8.1% Other Expense, Net (1.2%) (1.0%) Earnings Before Taxes 1.9% 7.1% Provision For Income Taxes 0.0% 2.4% Net Earnings 1.8% 4.7% * Certain numbers may differ slightly due to rounding. Symbol Technologies, Inc. & Subsidiaries Condensed Consolidated Statements of Operations (Unaudited) Non-GAAP Financial Measures Three Months Ended * December 31, 2005 September 30, 2005 Excluding Excluding Restruc- Restruc- Restruc- Restruc- turing turing & turing turing & ($ Millions, except As & Other Other As & Other Other per share data) Reported Items Items Reported Items Items Product Revenue $366.4 $ -- $366.4 $371.4 $(9.3)(b) $362.1 Services Revenue 72.5 -- 72.5 70.1 -- 70.1 Net Revenue 438.9 -- 438.9 441.5 (9.3) 432.2 Cost of Revenue 238.9 -- 238.9 240.1 (4.3)(b) 235.8 Restructuring & Asset Impairment 2.3 (2.3) -- 2.3 (2.3) -- Cost of Revenue 241.3 (2.3) 238.9 242.4 (6.6) 235.8 Gross Profit 197.6 2.3 200.0 199.1 (2.8) 196.4 Operating Expenses: Engineering 34.2 -- 34.2 38.8 -- 38.8 S, G&A 132.3 -- 132.3 131.5 -- 131.5 Restructuring & Asset Impairment 3.3 (3.3) -- 4.9 (4.9) -- Net Recovery From Legal Settlements -- -- -- (5.5) 5.5 (c) -- Operating Expenses 169.9 (3.3) 166.5 169.7 0.6 170.2 Earnings From Operations 27.8 5.7 33.4 29.4 (3.3) 26.1 Other Expense, Net (1.0) 0.7 (a) (0.3) (12.2) 10.6 (d) (1.5) Earnings Before Taxes 26.8 6.4 33.1 17.3 7.3 24.6 Provision For Income Taxes 2.9 7.7 10.6 0.6 6.9 7.5 Net Earnings $23.9 $(1.4) $22.6 $16.7 $0.4 $17.1 Earnings Per Share $0.09 $(0.0) $0.09 $0.07 $0.00 $0.07 Average Diluted Shares Outstanding (in millions) 252.0 252.0 252.0 250.4 250.4 250.4 PERCENTAGE OF REVENUE Net Revenue 100.0% 100.0% 100.0% 100.0% Cost of Revenue 54.4% 54.4% 54.4% 54.6% Restructuring & Asset Impairment 0.5% 0.0% 0.5% 0.0% Cost of Revenue 55.0% 54.4% 54.9% 54.6% Gross Profit 45.0% 45.6% 45.1% 45.4% Operating Expenses: Engineering 7.8% 7.8% 8.8% 9.0% S, G&A 30.1% 30.1% 29.8% 30.4% Restructuring & Asset Impairment 0.8% 0.0% 1.1% 0.0% Net Recovery From Legal Settlements 0.0% 0.0% (1.2%) 0.0% Operating Expenses 38.7% 37.9% 38.4% 39.4% Earnings From Operations 6.3% 7.6% 6.7% 6.0% Other Expense, Net (0.2%) (0.1%) (2.8%) (0.4%) Earnings Before Taxes 6.1% 7.6% 3.9% 5.7% Provision For Income Taxes 0.7% 2.4% 0.1% 1.7% Net Earnings 5.4% 5.1% 3.8% 4.0% * Certain numbers may differ slightly due to rounding. (a) Impairment of cost basis investment. (b) Impact for converting certain resellers from cash-basis accounting to accrual basis accounting. (c) PwC settlement of $14.7M offset by class action settlement shares adjustment ($9.2M). (d) Cisco SAILS's termination. Symbol Technologies, Inc. & Subsidiaries Condensed Consolidated Statements of Operations (Unaudited) Non-GAAP Financial Measures Three Months Ended * December 31, 2005 December 31, 2004 Excluding Excluding Restruc- Restruc- Restruc- Restruc- turing turing & turing turing & ($ Millions, except As & Other Other As & Other Other per share data) Reported Items Items Reported Items Items Product Revenue $366.4 $ -- $366.4 $374.9 $ -- $374.9 Services Revenue 72.5 -- 72.5 75.6 -- 75.6 Net Revenue 438.9 -- 438.9 450.5 -- 450.5 Cost of Revenue 238.9 -- 238.9 232.8 -- 232.8 Restructuring & Asset Impairment 2.3 (2.3) -- 1.0 (1.0) -- Cost of Revenue 241.3 (2.3) 238.9 233.8 (1.0) 232.8 Gross Profit 197.6 2.3 200.0 216.7 1.0 217.7 Operating Expenses: Engineering 34.2 -- 34.2 41.3 -- 41.3 S, G&A 132.3 -- 132.3 136.1 -- 136.1 Restructuring & Asset Impairment 3.3 (3.3) -- 0.7 (0.7) -- Operating Expenses 169.9 (3.3) 166.5 178.1 (0.7) 177.4 Earnings From Operations 27.8 5.7 33.4 38.6 1.7 40.3 Other Expense, Net (1.0) 0.7 (a) (0.3) (9.7) 6.3 (b) (3.4) Earnings Before Taxes 26.8 6.4 33.1 28.9 8.0 36.9 Provision For Income Taxes 2.9 7.7 10.6 0.5 11.7 12.2 Net Earnings $23.9 $(1.4) $22.6 $28.5 $(3.7) $24.8 Earnings Per Share $0.09 $(0.0) $0.09 $0.11 $(0.01) $0.10 Average Diluted Shares Outstanding (in millions) 252.0 252.0 252.0 248.5 248.5 248.5 PERCENTAGE OF REVENUE Net Revenue 100.0% 100.0% 100.0% 100.0% Cost of Revenue 54.4% 54.4% 51.7% 51.7% Restructuring & Asset Impairment 0.5% 0.0% 0.2% 0.0% Cost of Revenue 55.0% 54.4% 51.9% 51.7% Gross Profit 45.0% 45.6% 48.1% 48.3% Operating Expenses: Engineering 7.8% 7.8% 9.2% 9.2% S, G&A 30.1% 30.1% 30.2% 30.2% Restructuring & Asset Impairment 0.8% 0.0% 0.2% 0.0% Operating Expenses 38.7% 37.9% 39.5% 39.4% Earnings From Operations 6.3% 7.6% 8.6% 8.9% Other Expense, Net (0.2)% (0.1)% (2.1)% (0.7)% Earnings Before Taxes 6.1% 7.6% 6.4% 8.2% Provision For Income Taxes 0.7% 2.4% 0.1% 2.7% Net Earnings 5.4% 5.1% 6.3% 5.5% * Certain numbers may differ slightly due to rounding. (a) Impairment of cost basis investment. (b) Amortization of bridge loan deferred financing fees. Symbol Technologies, Inc. & Subsidiaries Condensed Consolidated Balance Sheets (unaudited) Balance Sheet at * December September December ($ Millions) 31, 2005 30, 2005 31, 2004 Assets Cash and Cash Equivalents $139.1 $155.8 $217.6 Accounts Receivable, Net 213.0 190.7 164.2 (a) Inventories 182.2 166.0 207.3 Deferred Income Taxes 172.5 126.5 179.8 Other Current Assets 22.9 27.9 24.4 Total Current Assets 729.7 666.9 793.3 Property, Plant & Equipment, Net 240.2 246.7 241.5 Restricted Cash 52.8 52.4 51.4 Intangible and Other Assets, Net 793.6 839.9 894.7 Total Assets $1,816.3 $1,805.9 $1,980.9 Liabilities & Stockholders' Equity A/P and Accrued Expenses $371.5 $362.4 $475.4 Current Portion of L.T.D. 57.9 72.9 118.1 Income Taxes Payable 10.7 8.3 20.1 Deferred Revenue 57.3 55.4 43.7 Total Current Liabilities 497.4 499.0 657.3 Long-Term Debt, less Current Maturities 44.5 55.6 176.1 Other Liabilities and Deferred Revenue 67.1 70.0 75.0 Total Stockholders' Equity 1,207.3 1,181.3 1,072.5 Total Liabilities and Stockholders' Equity $1,816.3 $1,805.9 $1,980.9 Financial ratios: Days Sales Outstanding 44 39 33 Inventory Turnover 5.3 5.8 4.5 Return on Assets 5.3% 3.6% 5.8% Working Capital % of Revenue 13.2% 9.5% 7.5% Current Ratio 1.5 1.3 1.2 * Certain numbers may differ slightly due to rounding. (a) Certain reclassifications were made to previously disclosed amounts to conform to current presentations. The balance sheet above includes a reclassification to reflect net credit customer accounts receivable balances as a component of accounts payable and accrued expenses and not as a reduction of accounts receivable as was reflected in the Company's Q1 2005 and prior filings. Symbol Technologies, Inc. & Subsidiaries Condensed Consolidated Statements of Cash Flows (Unaudited) Three Months Ended * December September December ($ Millions) 31, 2005 30, 2005 31, 2004 Cash Flows from Operating Activities Net earnings $23.9 $16.7 $28.5 Depreciation & amortization 17.2 17.9 23.5 Other, net 8.3 8.8 (9.7) Changes in Operating Assets & Liabilities Accounts receivable (24.8) -- (9.0) Inventories (22.5) 4.3 11.9 Accounts payable & accrued expenses 16.4 9.5 0.7 Other, net 6.6 (15.7) 13.1 Net Cash provided by Operating Activities 25.1 41.5 59.0 Cash Flows from Investing Activities Purchases of PP&E (9.1) (11.5) (27.8) Other, net (4.7) (1.9) (1.6) Net Cash used in Investing Activities (13.8) (13.4) (29.4) Cash Flows from Financing Activities Net changes in debt (26.1) (18.2) (57.1) Other, net (1.9) 9.8 13.6 Net Cash used in Financing Activities (including FX) (28.0) (8.4) (43.5) Net Change in Cash (16.7) 19.7 (13.9) Beginning Cash Balance 155.8 136.1 231.5 Ending Cash Balance $139.1 $155.8 $217.6 * Certain numbers may differ slightly due to rounding. Symbol Technologies, Inc. & Subsidiaries Condensed Consolidated Statements of Cash Flows (Unaudited) Year Ended * December 31, December 31, ($ Millions) 2005 2004 Cash Flows from Operating Activities Net earnings $32.2 $81.8 Depreciation & amortization 70.8 77.8 Other, net 38.3 77.8 Changes in Operating Assets & Liabilities Accounts receivable (58.8) 75.0 Inventories 11.3 (5.9) Accounts payable & accrued expenses 7.6 (109.0) Other, net 10.3 27.0 Net Cash provided by Operating Activities 111.7 224.5 Cash Flows from Investing Activities Purchases of PP&E (68.6) (88.0) Other, net (10.9) (293.8) Net Cash used in Investing Activities (79.5) (381.8) Cash Flows from Financing Activities Net changes in debt (112.5) 199.8 Other, net 1.8 25.1 Net Cash (used in) / provided by Financing Activities (including FX) (110.7) 224.9 Net Change in Cash (78.5) 67.6 Beginning Cash Balance 217.6 150.0 Ending Cash Balance $139.1 $217.6 * Certain numbers may differ slightly due to rounding.

First Call Analyst: FCMN Contact: nancy.coco@symbol.com