-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UPNgkuavP/Og1wqObHwL1UogzuzIPJzjq9km2Fli9fUlvZs2jtnF08xpvlvVQP7K 0ky/bPWT9F7PIsl68xLY5w== 0000278352-97-000002.txt : 19970304 0000278352-97-000002.hdr.sgml : 19970304 ACCESSION NUMBER: 0000278352-97-000002 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970303 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SYMBOL TECHNOLOGIES INC CENTRAL INDEX KEY: 0000278352 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER PERIPHERAL EQUIPMENT, NEC [3577] IRS NUMBER: 112308681 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-09802 FILM NUMBER: 97549561 BUSINESS ADDRESS: STREET 1: 116 WILBUR PL CITY: BOHEMIA STATE: NY ZIP: 11716 BUSINESS PHONE: 5165632400 MAIL ADDRESS: STREET 1: 116 WILBUR PL CITY: BOHEIMIA STATE: NY ZIP: 11716 10-K 1 February 28, 1997 Securities and Exchange Commission Judiciary Plaza 450 Fifth Street, NW Washington, DC 20549 Attention: Filing Desk Gentlemen: Re: Symbol Technologies, Inc. Annual Report on Form 10-K For Fiscal Year Ended December 31, 1996 File No. 1-9802 On behalf of Symbol Technologies, Inc. (the "Company"), I transmit for filing under the Securities Exchange Act of 1934 (the "Act"), the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1996. I have been advised by the Company that the financial statements contained in the report do not reflect any changes from the preceding year's financial statements with respect to accounting principles or practices or in the method of applying such principles or practices. If you have any questions regarding the enclosed materials, please call the undersigned by collect telephone at (516) 738-4765. Very truly yours, s/Leonard H. Goldner Leonard H. Goldner Senior Vice President and General Counsel LHG:mk February 28, 1997 Securities and Exchange Commission Washington, DC 20549 Gentlemen: In connection with the undersigned's Annual Report on Form 10- K for the year ended December 31, 1996 and pursuant to Item 601(b)(4)(iii) of Regulation S-K, the undersigned has not filed as exhibit 10.14 an Industrial Revenue Bond financing agreement in respect to its executive offices since the total amount of securities authorized thereunder does not exceed 10% of the Registrant's total consolidated assets. The Registrant, however, agrees to furnish a copy of such documents to the Commission, if so requested. By: s/Thomas G. Amato Senior Vice President - Finance and Chief Financial Officer TGA:mk SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1996 Commission file number 1-9802 SYMBOL TECHNOLOGIES, INC. (Exact name of Registrant as specified in its charter) Delaware 11-2308681 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) One Symbol Plaza Holtsville, NY 11742-1300 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (516) 738-2400 Securities registered pursuant to Section 12(b) of the Act: Common Stock, par value $.01 New York Stock Exchange (Title of each class) (Name of each Exchange on which registered) Securities registered pursuant to Section 12(g) of the Act: None 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 if disclosure of delinquent filers pursuant to Item 405 Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. X The aggregate market value of the voting stock held by persons other than officers and directors (and their associates) of the registrant, as of February 1, 1997 was approximately $1,168,202,600. The number of shares outstanding of each of the registrant's classes of common stock, as of December 31, 1996, was as follows: Class Number of Shares Common Stock, par value $.01 26,102,995 Documents Incorporated by Reference: The registrant's Proxy Statement to be used in conjunction with the Annual Meeting of Shareholders to be held on May 5, 1997 (the "Proxy Statement") is incorporated into Part III. 1 PART I Item 1. Business The Company Symbol Technologies, Inc. ("Symbol" and, together with its subsidiaries, the "Company"), a Delaware corporation, is the successor by merger in 1987 to Symbol Technologies, Inc., a New York corporation which was organized in 1973 and is the largest manufacturer of bar code-driven data transaction systems. The Company is the only corporation in its industry with in-house technology for the design and manufacture of bar code scanning products, hand-held computers and radio frequency (RF) data communications systems. The Company is engaged in one industry segment - the design, manufacture and marketing of bar code reading equipment, hand-held computers and radio frequency data communications systems which are used as strategic building blocks in data transaction systems in retail, transportation and logistics, parcel delivery and postal service, warehousing and distribution, factory automation, health care and many other applications. Company Products and Services General The Company develops, manufactures, sells and services (i) one-dimensional and two-dimensional bar code scanning products that principally employ laser technology to read data encoded in bar code symbols, (ii) data transaction systems incorporating application specific hand-held computers, and (iii) wireless local area network (WLAN) adapter cards and RF systems to transmit data. The Company distributes the most complete line of bar code reading equipment in the world. The Company's bar code scanning equipment is compatible with a wide variety of data collection systems, including computers, electronic cash registers and portable data collection devices. Bar code scanners are used to enhance accurate data entry and productivity in retail, transportation and logistics, parcel delivery and postal service, warehousing and distribution, factory automation and many other applications. The Company's data transaction systems consist of hand- held computers, peripheral devices, software and programming tools, and are designed to provide solutions to specific customer needs in data transactions. They are used to collect data at remote locations and to transmit information between these locations and the user's central data processing facility. Data can be entered by a touch screen or a device which reads bar codes or may be keyed into memory on a numeric or alpha-numeric keyboard. Data can be transmitted and received through direct connection, regular telephone lines with acoustic couplers and modems or by radio waves. A majority of the Company's hand-held computers include an integrated bar code reader. 2 Bar Code Scanning Products Sales of the Company's bar code scanning products have accounted for approximately 40 percent of the Company's total revenues for the years ended December 31, 1996, 1995 and 1994. The Company's bar code scanning products consist of devices designed to scan and decode bar code symbols and transmit data. The Company sells various models of its bar code reading systems, each of which consists of a laser scanner and interface controller. In some models, the interface controller is integrated into the handle of the scanner. The laser scanner reads the symbol and transmits a digitized signal to the interface controller. The interface controller contains a microprocessor which decodes the information received and interfaces with the user's computer. The Company sells several different hand-held laser scanners, the most important of which is the LS 4000 which was introduced in 1996. The LS 4000 is a trigger-operated, visible laser diode-based scanner featuring high-performance scanning and an advanced ergonomic form factor making it ideal for price scanning and inventory management in a wide variety of retail and commercial segments. The LS 2000 is a prior generation, trigger-operated, visible laser diode-based scanner with the capability to handle contact as well as non-contact scanning applications out to the limit of visibility of the scanning beam. Introduced in 1989, the LS 2000 is primarily sold to point-of-sale customers and for use in conjunction with portable data collection devices. The Company is in the process of replacing the LS 2000 with the LS 4000. The LS 3000 Series introduced in 1993, consists of trigger-operated, visible laser diode-based scanners used to read all common linear bar code symbologies and densities up to a distance of 20 feet. The LS 3000 is particularly well-suited for industrial and military applications because of its rugged housing. These devices consume less than one watt of power during scanning. Specialty versions of the LS 3000 include long range scanners capable of reading bar codes of virtually all sizes at distances ranging from near contact to more than 35 feet (LS 3000 ER) and low contrast reading capability scanners (LS 3000 HV) both using "spot and scan" two position triggers for ease of aiming and visibility. Introduced by the Company in 1995, the LS 3600 Series of laser bar code scanners incorporate fuzzy logic technology and beam management optical technology. Fuzzy logic allows these scanners to accurately digitize and decode poor quality or damaged bar codes. Beam management optical technology allows operators to scan bar codes at varying distances. 3 The LS 1000 Series, introduced in 1996, is the Company's smallest and lightest trigger operated, hand-held laser scanner. The LS 1000 is a limited performance scanner ideal for light use scanning environments where low cost is a critical factor. In 1995, the Company introduced the LT 1800 LaserTouch visible laser diode-based bar code scanner that combines the performance and accuracy of laser-based bar code technology with scanning for applications where near contact scanning and touch ergonomics are sufficient. In 1993, the Company introduced the first cableless hand- held scanner, the LS 3070. The LS 3070 transmits data via narrow band RF with a range of up to 50 feet from its base station. The scanner is particularly useful in environments where tethered scanning is inadequate. In the first quarter of 1997, the Company introduced a less expensive cableless, hand-held scanner, the LS 4071. The LS 4071 is a cordless version of the LS 4000 which utilizes a Company designed RF communication protocol to provide the user with a maximum working range of up to ten feet from its base station. This allows for scanning of heavy or bulky items, which cannot be easily moved for scanning. Designed to provide greater productivity, flexibility and convenience, the LS 4071 is intended for use in retail and light industrial applications. In 1995, the Company introduced the LS 4800, a hand-held laser scanner designed to read both PDF 417, a high-density, high-capacity portable data file storing approximately one kilobyte of data in a machine-readable code and all conventional linear bar codes. PDF 417 is a two-dimensional bar code symbology which incorporates error correction capability and has one hundred times the information capacity of a traditional linear bar code. Unlike linear bar codes, PDF 417 can contain an entire data record reducing or eliminating the need for an external system of linked data storage. PDF 417 may be read by either a laser-based bar code reader or a one- or two-dimensional charge coupled device (CCD) bar code reader. Most other two- dimensional bar codes can only be read by a CCD bar code reader. The LS 4800 integrates a miniature resonant 2D scan engine that rasters, reading PDF 417 symbols horizontally and vertically at 560 scans per second. Due to its rapid scan rate and advanced optics, the LS 4800 is adept at reading poor quality symbols. The LS 4900, introduced in 1996 is a battery-powered version of the LS 4800. Introduced in 1994, the PDF 120 is a one piece touch-only CCD based bar code reader with an integrated decoder. The PDF 120 is capable of reading PDF 417 as well as most one-dimensional bar codes. Suitable for applications that require scanning symbols of up to 1,000 characters, the PDF 120 connects to a range of PCs and terminals via an RS-232 serial interface port. 4 The PDF 620, introduced in 1995, is a fixed-station card reading device designed for accurate reading of PDF 417 and standard bar codes for a variety of identification card applications. Using CCD technology, the PDF 620 accepts ISO standard sized cards and has a typical first-time read rate of 100%. In addition to its hand-held scanners, the Company also offers several families of "hands-free" scanners. Unlike the Company's hand-held scanners, these scanners are usually triggered by an object sensor to enable use in situations where use of both hands is required. The LS 5700 and the LS 5800 miniaturized slot scanners were introduced by the Company in 1996. The LS 5700 was designed to accommodate all vertical or "on counter" applications and incorporates a full sleep mode function which allows the motor and laser to turn off after an extended period of scanner inactivity extending scanner longevity and reducing power consumption. The LS 5800 operates in horizontal or "in counter" applications and features rugged housing and a sealed exit window that resists spills and dirt. Introduced in 1996 and available in the first quarter of 1997, the MP 8000 is the Company's first multiplane, high- throughput scanner, primarily designed for point-of-sale applications in the food retail market. Versions of the MP 8000 also incorporate a scale for simultaneous weighing and scanning of items. The MP 8000 produces a 56 line scan pattern from two directions creating a 360o read zone that blankets the bar-coded item in scan lines, allowing users to scan items significantly faster with less fatigue. In 1994, the Company introduced the LS 9100, a laser-diode based projection scanner. The LS 9100 generates a large omni- directional pattern of twenty interlocking laser lines that can read bar codes at various angles for high productivity scanning. In 1996, the Company introduced the PCK 9100, a compact price checker system that allows shoppers to pass bar-coded items by its scan window and view the latest product information on its high-visibility LCD display. The PCK 9100 incorporates an LS 9100 omni-directional scanner which assures accuracy over a wide range of scanning angles, making it easy for customers to obtain price information. Since 1988, the Company has been selling a series of scan engines consisting of solid state laser diode-based laser scanners. These compact, non-contact scanners can be integrated internally with the user's own equipment or used independently as fixed-mount scanners on conveyor lines or robotic arms. The LS 1220, introduced in 1994, incorporates a Mylar scan element for scanning conventional linear bar codes. The latest 5 version, the LS 6800 Series, was introduced in 1996 and incorporates a high speed raster scan engine that operates at 560 scans per second making it ideal for rapid reading of one- dimensional and two-dimensional symbols. In 1990, the Company began marketing bar code laser scanner modules or scan engines which are integrated by unaffiliated third parties into their portable computing devices. In 1992, the Company introduced the SE 1000 Series scan engine. The SE 1000 is a small, lightweight, high performing scan engine designed for integration into portable and battery-powered devices. Versions of the SE 1000 are available with an integrated decoder and RS 232 interface. The SE 1100 Series scan engine, introduced in 1994, offers improved performance over the SE 1000 in a slightly larger size. In 1996, the Company introduced the low-cost, high- performance SE 1200 Series scan engine. The SE 1200, which measures less than one cubic inch and weighs less than one ounce, enables third-party manufacturers to integrate high-performance laser scanning into a variety of devices including hand-held computers, medical instruments, diagnostic equipment, lottery terminals, vending machines and robotics. The SE 1200 has a working range and ability to read poor quality bar codes equal to that of hand-held scanners. In the first quarter of 1997, the Company introduced a high density version of the SE 1200 capable of reading miniaturized bar codes. The Company anticipates that the SE 1200 will replace the SE 1000 and the SE 1100 in 1997. The SE 2000 Series scan engine, introduced by the Company in 1995, is a high-performance laser scan engine capable of reading both one-dimensional and two-dimensional bar codes. The SE 9100 Series scan engine, introduced in 1995, is a high speed, omni-directional scan engine providing dense scan line coverage from the face of the scanner up to a distance of eight inches allowing quick "swipe" scanning as well as standard presentation scanning. In 1995, the Company introduced the WSS 1000, an innovative hand-mounted bar code-based data transaction system that allows mobile hands-free bar code scanning, data collection and RF data communications. The WSS 1000 is a wearable computer system for users who rely on the efficiency and accuracy of bar code scanning but require the use of both hands to perform job functions. The system, which consists of two components, combines the RS1, a miniature scanner worn as a ring that allows the user to simply touch a thumb and index finger contact switch to scan a bar code and a compact, light weight, wrist mounted 16- bit computer with display which permits wireless communication to the host computer. The Company also produces a series of low cost, interface controllers. These devices permit the Company's scanner products 6 to easily interface with a wide range of standardized terminals, personal computers, point-of-sale terminals, portable terminals and dedicated computing hardware. Product list prices for the Company's bar code scanning equipment range between $645 to $4,995 depending on product configuration. The Company offers discounts off list price for quantity orders and sales are frequently made at prices below list price. Portable Data Collection Systems The Company's portable data collection systems consist of hand-held computers, peripheral devices, software and programming tools. These systems collect data at remote locations and transmit information between these locations and the user's central data processing facility and are designed to provide data collection solutions for a variety of applications. A majority of the Company's hand-held computers also include an integrated bar code reader. These systems accounted for approximately 50 percent of the Company's total revenues for the years ended December 31, 1996, 1995 and 1994. Portable Data Transaction Devices The Company's portable data transaction devices are microprocessor-based, lightweight and battery-operated hand-held computers. Data may be captured by a device which reads bar codes or may be keyed into memory via an integrated keyboard or a touch screen. The data collected by the hand-held computer can then be transmitted to a host computer by direct connection through regular telephone lines with acoustic couplers and modems (batch file transfer mode). Data may also be transmitted instantly as it is collected by radio waves (real-time transaction processing). Information from the Company's hand- held computers may be communicated to a stand-alone receiver or computer which formats the data for input into a host computer, directly into a host computer by communications controllers supplied by the Company or directly onto industry-standard Ethernet local area networks (LANs) via Company manufactured access points. Depending on the model, the Company's hand-held computers may have up to 16 megabytes of Random Access Memory (RAM) for data storage and multiple input and output capabilities for the connection of printers, bar code readers and communications devices. In addition, based upon customer specifications, the hand-held computers may also have built-in bar code readers and various built-in communications devices for transmission and receipt of data. The Company offers two spread spectrum-based, WLAN products. In 1990, the Company introduced its Spectrum One cellular radio frequency network for wireless data transactions. Installation of the network at various customer sites began in 1991 and the network is now installed in over 13,000 sites in 12 countries. Spectrum 24, introduced in 1995, is a high- 7 performance, spread spectrum, frequency hopping network which operates on a 2.4 Ghz frequency range and is designed for worldwide operation. Based on spread spectrum RF technology, Spectrum One and Spectrum 24 networks provide real-time wireless data communications with a host computer for hundreds of portable and fixed-station computers and radio-integrated scanners. Unlike traditional narrow band RF-based networks, spread spectrum installation requires no individual site license from the FCC. The Spectrum One and Spectrum 24 systems work in tandem with a broad range of the Company's RF capable hand-held computers. Design engineering and support for both the Company and third-party RF-based data communications systems is conducted in the Company's San Jose, California facility. The focus of the group is the design of wireless bar code data transaction systems based on the Company's Spectrum One and Spectrum 24 WLANs and support for the integration of those high-performance networks into customers' data networks and enterprise-wide information systems. The LRT 3800, introduced in 1990, incorporates in a single, hand-held unit, high-performance laser bar code scanning, a 16-bit DOS-based computer and a radio modem for communication via the Company's Spectrum WLANs. Based on visible laser diode scanning technology, the battery-operated LRT 3800 is compact and ergonomically designed and provides up to 1.2 megabytes of memory capacity. The LDT 3805, also introduced in 1990, is identical to the LRT 3800 in physical appearance. Its scanning and computing functions are similar but it has no RF communication capability. It is optimized for collecting and storing data, later to be downloaded to a host computer. Both the LRT and LDT have the capability for data entry via bar code scanning or by using the full-function keypad. The pair are ideal for scan-intensive applications such as receiving, shipping, inventory control, order and shelf-price verification as well as other applications in both retail and warehousing. Datawand hand-held computers were first introduced by the Company in 1985. The Company's principal Datawand product, the Datawand IIB, is a self-contained optical wand bar code reader hand-held computer which is only 7-1/4 inches long and one inch in diameter and weighs slightly more than two ounces. In 1989, the Company introduced a new optical wand bar code reader, the Datawand III, which contains 32 kilobytes of memory and a 16 character single line display. In 1993, the Company announced the co-development with Albert Heijn of The Netherlands, Europe's largest grocery market chain, and TNO Product Centre, a leading Dutch engineering design firm, of a shoppers portable self checkout system. The system, which is integrated with the retailer's point of sale system, utilizes the Company's LST 3803, a hand-held computer with an integrated laser scanner which allows shoppers to scan and 8 tabulate their purchases as they shop. In 1996, the Company introduced an RF capable version of the portable self checkout system. In 1996, installation of Symbol's portable self checkout systems has expanded both to new customers and more sites. There are currently over 150 systems installed in nine countries on four continents. Although retailers and customers have been very pleased with the portable self checkout system and other food and non-food retailers have expressed an interest in the self checkout concept, due to the innovative nature of the concept, there can be no assurance that self checkout will be implemented on a wide scale either internationally or domestically. The PDT family of general purpose hand-held computers features advanced technology including Very Large Scale Integrated (VLSI) circuits, which incorporate many standardized integrated circuits into one computer chip allowing for size and cost reductions. Also, the PDT family employs surface mounted component technology for reduced size and increased performance and dependability, as well as industry standard 8-, 16- and 32- bit microprocessors. The PDT family includes a series of hand- held computers which are available with different features and at varying costs depending on customer requirements and preferences. The PDT hand-held computers feature up to sixteen lines of liquid crystal display, slim, lightweight design, multiple input and output ports and up to 7.6 megabytes of internal memory. PDT hand-held computers have various keyboard configurations, including a user configurable keyboard. The PDT family was originally introduced in 1985. The PDT 3100 hand-held computer, a 16-bit DOS-compatible computer, was introduced in 1993. Versions of the PDT 3100 also incorporate the Company's SE 1200 scan engine and feature a unique swivel-head scanner design which adjusts instantly for right- or left-hand scanning operation. The PDT 3100 is the Company's largest selling hand-held computer. In 1994, the Company introduced versions of the PDT 3100 incorporating the Company's Spectrum One data communications network and direct or acoustic modems for telephone line communications and in 1996, the Company introduced versions of the PDT 3100 which incorporate the Company's Spectrum 24 WLAN communications capability. In 1996, the Company introduced two other versions of the 3100, the PDT 3000 and the PDT 3500. The PDT 3000 is a compact, efficient, hand-held computer designed for use in the food and drug retail and convenience store industries. Weighing less than 13 ounces, the PDT 3000 is a limited performance, lower cost version of the PDT 3100. The PDT 3500, features a larger display screen, a choice of Spectrum One or Spectrum 24 networking options and an SE 2000 scan engine providing one- and two- dimensional bar code scanning capability. Introduced in 1996, the PDT 2100 hand-held integrated computer is the Company's smallest and lightest high-performance 9 hand-held computer with laser scanning capability. Versions of the PDT 2100 incorporate the Company's Spectrum LAN communication capability. The PDT 2100 design, which resembles a TV remote controller, facilitates easy intuitive use while the PC-standard 16-bit architecture and Microsoft MS-DOS operating system provide superior data management capabilities. In 1990, the Company introduced the PDT 3300, a 16-bit DOS-compatible batch hand-held computer. The PDT 3300 provides expanded program capacity and keyboard and display flexibility coupled with an environmentally sealed unit for use in harsh environments. The Company also offers versions of the PDT 3300 which operate with the Company's Spectrum One and Spectrum 24 networks. In 1996, the Company introduced the PDT 1000, a pocket- sized integrated laser scanning computer designed for batch processing. The PDT 1000 is approximately one inch by two inches by 6.5 inches and weighs only seven ounces. The rugged construction, simple three-button keyboard and 96 kilobyte memory make the PDT 1000 suitable for a wide variety of tracking and asset management applications where bar code data capture and storage are required. The PPT family of portable pen computers integrates several key technologies for improving information management. These PC compatible hand-held computers incorporate pen and touch input on an active matrix screen, a graphical user interface, an SE 1100 or SE 1200 scan engine, and standard PCMCIA slots for memory, modem, wireless or wide area network capability and other peripherals. The PPT 4100, introduced in 1994, is intended for use in information-intensive applications in retail and other environments where managers will benefit by accessing remote databases to make real-time inventory and purchasing decisions to significantly enhance customer service and improve productivity. The PPT 4600, introduced in 1995, incorporates a 486 microprocessor which supports both DOS and Windows based applications and an SE 2000 scan engine, making it the first hand-held computer that has the capability to scan and decode PDF 417. Engineered to withstand rugged treatment and endure outdoor conditions such as windblown rain or dust and extreme temperatures, the PPT 4600 is intended for use in industrial and mobile environments. In 1996, the Company introduced versions of the PPT 4100 and PPT 4600 incorporating Spectrum 24 WLAN communication capability and a fully integrated radio modem optimized for wireless wide area communication. Introduced in 1996, the PPT 4200 is a high-performance, hand-held touch/pen computer. With options such as a magnetic stripe reader, laser bar code scanner, hard drive, wireless radio 10 and voice capabilities, the PPT 4200 provides all the functions and power of a standard notebook computer packed into a 5 inch by 9 inch hand-held computer, weighing less than three pounds. The PPT 4200 supports industry-standard PC cards, operating systems and popular pen development tools such as Pen Pal, and Visual Basic providing operating and programming flexibility for retail and industrial management applications. In 1997, the Company introduced the VRC 4000, a ruggedized vehicle mounted or wall mounted touch screen computer. Designed for rugged, industrial use in warehouse and yard management applications, the VRC 4000 is a PC compatible computer with 16 megabytes of memory and includes a full 10.3 inch VGA display with an infrared touch screen interface. The VRC 4000 is capable of communicating with a host computer or other hand-held devices via the Company's Spectrum 24 wireless network. Product list prices for the Company's portable data collection equipment range between $395 to $8,250 depending on product configuration. The Company offers discounts off list price for quantity orders and sales are frequently made at prices below list price. Software and Programming Tools The Company's portable hand-held computers utilize software which consists of a number of specialized applications and communications software programs, that run under Microsoft MS-DOS and Windows operating systems. A series of application development kits (ADKs) and software development kits (SDKs) are available to allow the Company's programmers, VARs ("Value Added Resellers") and end-user customers to develop applications that fully utilize the integrated features of the Company's family of portable hand-held computers. The ADKs and SDKs provide the software drivers and libraries required to maximize product performance. Used in conjunction with industry standard development tools including Visual Basic and C++, software developers can easily create and support applications to meet specific customer requirements. The Company has also developed several communication applications designed to facilitate transmission and reception of data between mobile computers and stand-alone receivers or host computers. These applications include a suite of terminal emulation products, host enablers and various protocols. The Company has entered into alliances with independent suppliers of software who assist the Company in development of software. Customer Support The Company has a customer support organization which repairs and maintains the Company's products. The Company's domestic customer support operations include locations in Arkansas, California, Georgia, Illinois, Kentucky, 11 Michigan, Minnesota, New Jersey, New York, North Carolina, Texas and Virginia. The Company also has foreign customer support offices in Australia, Austria, Belgium, Canada, China, Denmark, France, Germany, Italy, Norway, Singapore, South Africa, Spain and the United Kingdom. In Japan, customer support is provided by Olympus Optical Co., Ltd. These centers enhance the Company's ability to respond to its customers' requirements for fast, efficient service. The Company currently offers a variety of service arrangements to meet customer needs. The Company's On-Site service provides for maintenance and repairs at any customer location. Depot Service includes maintenance and repairs at the Company's field service offices. The Self-Service contracts generally have a term of from one to five years. In addition, the Company offers Time-And-Materials service on a non-contract, as-needed basis. The Company undertakes to correct defects in materials and workmanship for a period of time after delivery of its products. The period of time covered by these warranties varies depending on the product involved as well as contractual arrangements but is generally twelve months. Maintenance and support revenues contributed less than 10 percent of the Company's total revenues for the years ended December 31, 1996, 1995 and 1994. Sales and Marketing The Company presently markets its products domestically and internationally through a variety of distribution channels, including a direct sales force, original equipment manufacturers, VARs and sales representatives and distributors. VARs distribute the Company's products to customers while also selling to those customers other products or services not provided by the Company. The Company's sales organization includes domestic sales offices located throughout the United States and foreign sales offices in Australia, Austria, Belgium, Canada, China, Denmark, France, Germany, Italy, Mexico, Norway, Singapore, South Africa, Spain and the United Kingdom. The Company currently has contractual relationships and strategic alliances with unaffiliated partners. Through these relationships, the Company is able to broaden its distribution network and participate in industries other than those serviced by the Company's direct sales force and distributors. Customers generally order products for delivery within 45 days. Accordingly, shipments made during any particular quarter generally represent orders received either during that quarter or shortly before the beginning of that quarter and generally consist of products manufactured in the quarter. The Company maintains significant levels of inventory to facilitate meeting delivery requirements of its customers. The Company, pursuant to 12 contract or invoice, normally extends 30 day payment terms to its customers. Actual payment terms vary from time to time but generally do not exceed 90 days. Since a substantial portion of the Company's sales of scanner products are to retail organizations which tend not to purchase equipment such as the Company's scanner products during the Christmas selling season, the Company's business has, from time to time, been seasonal in the fourth quarter. The Company believes there may again be reduced demand for its scanner products in the fourth quarter of the current fiscal year. The Company attempts to offset the reduced demand of the retail industry by selling its products to other market segments. While this effort was successful in 1996, there can be no assurance that the effort will succeed in 1997 and subsequent years. The following table sets forth certain information as to international sales of the Company: Year Ended December 31, (in thousands) 1996 1995 1994 Area Western Europe $222,611 $178,027 $141,090 Other $ 44,545 $ 40,402 $ 25,999 The Company undertakes hedging activities to the extent of known cash flow in an attempt to minimize the impact of foreign currency fluctuations. Manufacturing The products which are manufactured by the Company are manufactured at its Bohemia, New York facilities. While components and supplies are generally available from a variety of sources, the Company presently depends on a single source or a limited number of suppliers for several components of its equipment, certain subassemblies and certain of its products. Certain of the Company's products are manufactured in Japan and Taiwan. Due to the general availability of components and supplies, the Company does not believe that the loss of any supplier or subassembly manufacturer would have a long-term material adverse effect on its business although set-up costs and delays could occur if the Company changes any single source supplier. In the past, delays in delivery of components have not had a material adverse effect on shipments of the Company's products. Certain of the Company's products are manufactured by third parties. Failure of such third parties to supply products to the Company could have an adverse affect on the Company's ability to deliver such products to its customers. However, the Company has no reason to believe that these suppliers will be unable to meet their supply or delivery obligations to the Company over any extended period. 13 The Company employs certain advanced manufacturing processes that require highly sophisticated and costly equipment and are continuously being modified in an effort to improve efficiency, reduce manufacturing costs and incorporate product improvements. Research and Product Development The Company believes that its future growth depends, in large part, upon its ability to continue to apply its technology to develop new products, improve existing products and expand market applications for its products. The Company's research and development projects include, among others: improvements to the reliability, quality and readability of its laser scanners at increased working distances and higher density codes (including, but not limited to, two-dimensional codes); improvements in and expansion of its series of interface controllers; continued development of its solid state laser diode scanners; improvements to packaging and miniaturization technology for bar code data capture products, portable data collection devices and integrated bar coded data capture products; development of high-performance digital data radios, high-speed radio frequency data communications networks and telecommunications protocols and products; and the addition of application software to provide a complete line of high-performance interface hardware. The Company uses both its own associates and from time to time unaffiliated consultants in its product engineering and research and development programs. Dr. Jerome Swartz, Chairman of the Board of Directors and Chief Executive Officer of the Company, leads the Company's research, patent and new product development programs. From time-to-time the Company has participated with and/or partially funded research projects in conjunction with a number of universities including the State University of New York at Stony Brook, Polytechnic University of New York and Tel Aviv University in Israel. The Company expended (including overhead charges) approximately $ 20,164,000, $19,879,000 and $16,678,000 for research and development during the years ended December 31, 1996, 1995 and 1994, respectively. Competition The business in which the Company is engaged is highly competitive and acutely influenced by advances in technology, product improvements and new product introduction, and price competition. To the Company's knowledge, many firms are engaged in the manufacture and marketing of portable data collection systems and bar code reading equipment utilizing laser technology. In addition, the Company's bar code reading equipment also competes with devices which utilize technologies other than laser scanners such as CCDs and optical wands. Furthermore, numerous companies, including present manufacturers of scanners, lasers, optical instruments, microprocessors, notebook computers, PDAs and data radios have the technical 14 potential to compete with the Company. Many of these firms have far greater financial, marketing and technical resources than the Company. The Company competes principally on the basis of performance and the quality of its products and services. The Company believes that its principal competitors in the bar code scanning equipment industry are INTERMEC Corporation, Matsushita Electric Corporation, Metrologic Instruments, Inc., NipponDenso Co., Ltd., Opticon, Inc., PSC Inc. and Welch Allyn, Inc. and that its principal competitors in the portable data transaction systems industry are Fujitsu, Ltd., Hand Held Products, Inc., INTERMEC Corporation, LXE Inc., NipponDenso Co., Norand Corporation, Mars Electronics and Telxon Corporation. Some of the Company's competitors in the portable data transaction systems industry also participate in the field service market. Patent and Trademark Matters The Company files domestic and foreign patent applications to support its technology position and new product development. The Company owns over 250 U.S. Letters Patents covering various aspects of the technology used in the Company's principal products and has entered into cross-license agreements with other companies. In addition, the Company owns numerous foreign companion patents. The Company has also filed additional patent applications in the U.S. Patent and Trademark Office as well as in foreign patent offices. The Company will continue to file patents, both U.S. and foreign, to cover its most recent research developments in the scanning, data collection and RF data communications fields. Key patents covering basic hand-held laser scanning technology begin to expire in 2000 and key patents covering scanner integrated hand-held computers begin to expire in 2005. The Company believes that its patent portfolio does provide some competitive advantage in that such patents tend to limit the number of unlicensed competitors and permit the Company to manufacture products which may have features which provide better performance and/or lower cost. Although management believes that its patents provide some competitive advantage, the Company depends more for its success upon its proprietary know-how, innovative skills, technical competence and marketing abilities. In addition, because of rapidly changing technology, the Company's present intention is not to rely primarily on patents or other intellectual property rights to protect or establish its market position. Instead, the Company has established an active program to protect its investment in technology by enforcing and licensing certain of its intellectual property rights. The Company has entered into royalty-bearing license agreements with, among others, Hand Held Products, Inc., INTERMEC Corporation, LXE Inc., Metrologic Instruments, Inc., Norand Corporation, Olympus Optical Co., Ltd, Opticon Sensors Europe, B.V., PSC Inc., Spectra Physics, Inc. and Telxon Corporation. 15 On April 1, 1996, PSC Inc. ("PSC") commenced suit against the Company purporting to assert claims against the Company for alleged violations of the federal antitrust laws, unfair competition and also seeking a declaratory judgment of non- infringement and invalidity as to certain of the Company's patents. The Company has consented to PSC's serving a Third Amended Complaint, which purports to assert essentially the same antitrust and unfair competition claims against the Company, and also seeks a declaratory judgment of alleged non-infringement and validity of nine of the Company's patents, and a declaratory judgment that PSC has not breached its two license agreements with the Company and that those agreements have been terminated. The Company intends to amend its suit against PSC to assert infringement of four Symbol patents, breach of contract, and fraud. The Company is also seeking damages of over $1 million plus interest in unpaid royalties for each quarter since the second quarter of 1996. The Company had also sued Data General Corporation ("Data General"), a manufacturer of portable integrated scanning terminals incorporating a component manufactured by PSC, for infringement of the same four patents and five additional patents. The nine patents asserted against Data General are the same nine Symbol patents as to which PSC is seeking declaratory relief. On October 9, 1996, the Court granted the Company's motion to sever and stay PSC's antitrust, unfair competition and related claims. On the same day, the Court denied Data General's motion to stay the Company's claims against it. The Company moved that an expedited hearing to be held at the end of March, 1997 on three of the patents asserted against PSC, and to stay all non-patent discovery. PSC opposed the Company's motion and made a cross-motion that no hearing be held until October, 1997 at the earliest and that all issues be tried in the Spring of 1998 or thereafter. On October 9, 1996, the Court set a one week trial for July 14, 1997 to construe the claims in all nine patents asserted by Symbol against Data General and PSC, and stayed discovery on all non-patent claims. The Company believes that all claims purportedly asserted against it by PSC are factually and legally baseless, and wholly without merit. The Company intends to vigorously defend the litigation. Although the Company believes that its products and technology do not infringe the proprietary rights of others, there can be no assurance that third parties will not assert infringement and other claims against the Company or that such claims will not be successful. From time to time, the Company has received and may receive in the future notices of claims of infringement of other parties' rights. In such event, the Company has and will continue to take reasonable steps to evaluate the merits of such claims, take such action as it may deem appropriate, which action may require that the Company enter into licensing discussions, if available, and/or modify the 16 affected products and technology, or result in litigation against parties seeking to enforce a claim which the Company reasonably believes is without merit. In the event litigation is commenced, such parties are likely to claim damages and/or seek to enjoin commercial activities relating to the Company's products or technology affected by such party's rights. In addition to subjecting the Company to potential liability for damages, such litigation may require the Company to obtain a license in order to manufacture or market the affected products and technology. To date, such activities have not had a material adverse affect on the Company's business and the Company has either prevailed in all litigation, obtained a license on commercially acceptable terms or otherwise been able to modify any affected products or technology. However, there can be no assurance that the Company will continue to prevail in any such actions or that any license required under any such patent would be made available on commercially acceptable terms, if at all. There are a significant number of U.S. and foreign patents and patent applications in the Company's areas of interest, and the Company believes that there has been and is likely to continue to be significant litigation in the industry regarding patent and other intellectual property rights. The Company has also obtained certain domestic and international trademark registrations for its products and maintains certain details about its processes, products and strategies as trade secrets. The Company regards its software as proprietary and attempts to protect it with copyrights, trade secret law and international nondisclosure safeguards, as well as restrictions on disclosure and transferability that are incorporated into its software license agreements. The Company licenses its software products to customers rather than transferring title. Despite these restrictions, it may be possible for competitors or users to copy aspects of the Company's products or to obtain information which the Company regards as trade secrets. Computer software generally has not been patented and existing copyright laws afford only limited practical protection. In addition, the laws of foreign countries generally do not protect the Company's proprietary rights in its products to the same extent as do the laws of the United States. Government Regulations The use of lasers and radio emissions are subject to regulation in the United States and in other countries in which the Company does business. In the United States, various Federal agencies, including the Center for Devices and Radiological Health of the Food and Drug Administration, the Federal Communications Commission, the Occupational Safety and Health Administration and various State agencies, have promulgated regulations which concern the use of lasers and/or radio/electromagnetic emissions standards. Member countries of the European community have enacted or are in the process of 17 adopting standards concerning electrical and laser safety and electromagnetic compatibility and emissions standards. The Company believes that all of its products are in material compliance with current standards and regulations; however, regulatory changes in the United States and other countries may require modifications to certain of the Company's products in order for the Company to continue to be able to manufacture and market these products. The Company's RF hand-held computers include various models all of which intentionally transmit radio signals as part of their normal operation. The Company's LRT 3800 laser radio hand- held computer and certain versions of its hand-held computers and its Spectrum One and Spectrum 24 cellular frequency networks utilize spread spectrum radio technology. The Company has obtained certification from the FCC for its products which utilize this radio technology. Such certification is valid for the life of the product unless and until the circuitry of the product is altered in material respects, in which case a new certification may be required. Users of these products in the United States do not require any license from the FCC to use or operate the product. Certain of the Company's products transmit narrow band radio signals as part of their normal operation. The Company has obtained certification from the FCC for its narrow band radio products. However, these models must not only be accepted by the FCC prior to marketing but users of these devices must themselves also obtain a site license from the FCC to operate them. Associates At December 31, 1996, the Company had approximately 2,900 full-time associates. Of these, approximately 2,300 were employed domestically. The Company also employs temporary production personnel. None of the Company's associates are represented by a labor union. The Company considers its relationship with its associates to be good. Item 2. Properties The following table states the location, primary use and approximate size of all principal plants and facilities of the Company and its subsidiaries and the duration of the Company's tenancy with respect to each facility. 18 Location Principal Use Size Tenancy/Ownership One Symbol Plaza World headquarters 174,000 square Owned (subject to Holtsville, NY feet mortgage) 116 Wilbur Place Customer support 92,000 square Owned (subject to Bohemia, NY and warehousing feet mortgage) 110 Wilbur Place Manufacturing 30,000 square Owned (subject to Bohemia, NY feet mortgage) 12 & 13 Oaklands Pk. International head- 21,700 square Owned Fishponds Road quarters, marketing feet Wokingham, Berkshire and administration England and U.K. headquarters 110 Orville Drive Manufacturing 110,000 square Leased: expires Bohemia, NY feet Aug. 31, 2001 1101 Lakeland Ave. Manufacturing 90,400 square Leased: expires Bohemia, NY and distribution feet Aug. 31, 2001 2145 Hamilton Ave. Network systems, 51,500 square Leased: expires San Jose, CA engineering, feet March 3, 1999 marketing 340 Fischer Ave. Service and sales 31,200 square Leased: expires Costa Mesa, CA feet May 31, 2001 180 Orville Drive Warehousing and 22,612 square Leased: expires Bohemia, NY facilities feet Aug. 31, 2001 management Knaves House Administration 10,900 square Leased: expires High Wycombe, feet June 24, 2003 Buckinghamshire England Knaves Beech Customer Service 6,185 square Leased: expires Business Center feet Sept. 28, 2003 High Wycombe, Buckinghamshire England Ilex House Customer service 5,400 square Leased: expires Mulberry Business Pk. feet April 5, 2002 Fishponds Road Wokingham, Berkshire England In addition to these principal locations, the Company and its subsidiaries also lease other offices throughout the world, ranging in size from approximately 150 to 24,000 square feet. 19 Item 3. Legal Proceedings On January 13, 1997, the Court, in the action entitled In re. Symbol Technologies, Inc. Class Action Litigation issued an order granting the Company's motion for summary judgment and dismissing all claims against the Company. Final Judgment of dismissal was entered on January 24, 1997. See, also, Patent and Trademark Matters for a discussion of certain other litigation involving the Company. Item 4. Submission of Matters to a Vote of Security Holders Not applicable Item 4A. Executive Officers of the Registrant The following table sets forth the names, ages and all positions and offices held by the Company's executive officers: Jerome Swartz.......... 56 Chairman of the Board of Directors Chief Executive Officer and Director Tomo Razmilovic........ 54 President, Chief Operating Officer and Director Fred Heiman............ 57 Executive Vice President and Director Thomas G. Amato........ 51 Senior Vice President-Finance and Chief Financial Officer Richard Bravman........ 42 Senior Vice President, Sales/Marketing-Wireless Systems Division Brian T. Burke......... 50 Vice President, Controller and Chief Accounting Officer Allen C. Creveling..... 55 Senior Vice President-Human Resources Richard M. Feldt....... 45 Senior Vice President, General Manager-Worldwide Operations Leonard H. Goldner..... 49 Senior Vice President, General Counsel and Secretary Joseph Katz............ 44 Senior Vice President, Research and Development Boris Metlitsky........ 49 Senior Vice President, General Manager-Scanner Products Division Satya Sharma........... 56 Senior Vice President-Quality 20 Dr. Swartz co-founded and has been employed by the Company from its inception in 1973. He has been the Chairman of the Board of Directors and Chief Executive Officer of the Company for more than the past ten years. Dr. Swartz was an industry consultant for 12 years in the areas of optical and electronic systems and instrumentation and has a total of some 140 technical papers and issued and pending U.S. patents to his credit, including the Company's basic patents in hand-held laser scanning. He is also a trustee of the Polytechnic University of New York and an adjunct full professor of Electrical Engineering at the State University of New York at Stony Brook. He is also a fellow of the Institute of Electrical and Electronic Engineering. Mr. Razmilovic has been the President and Chief Operating Officer of the Company since October 1995. He was previously Senior Vice President-Worldwide Sales and Services. He first joined the Company in September 1989. From January 1989 to August 1989, he was President and Chief Executive Officer of Cominvest Group, a Swedish multinational high technology company. From August 1985 to December 1988, he was President of ICL International, a major European computer manufacturer and he also led its industry marketing and software development divisions. Dr. Heiman joined the Company in July 1986. He had previously been employed by Intel Corporation, a manufacturer of semiconductor components, from May 1983 until July 1986, in a number of positions, the most recent of which was as its Director of Corporate Planning. Dr. Heiman is the inventor or co-inventor of 20 issued U.S. patents, including the first MOS integrated circuit chip, which became the basis of much of the modern revolution in computer and electronics communications and the first silicon storage tube used in display and scanning applications. Mr. Amato joined the Company in October 1990. Prior to joining the Company he was Senior Vice President of Finance and Administration and Chief Financial Officer for Amcast Industrial Corp., a manufacturer of metal components, from 1985 to 1990. Mr. Bravman has been employed by the Company for more than the past fifteen years in various management positions. Mr. Burke joined the Company in November 1987. From October 1984 to October 1987, he was President, Chief Executive Officer and Director of Super Web Press Service Corporation, a manufacturer of printing presses. Mr. Creveling joined the Company in February 1989. From January 1988 to January 1989, he was Chief Financial Officer at Keystone Camera Corp. From 1971 to 1987, he was employed by Mars Electronics, a division of M&M/Mars, where he held the position of Vice President Finance. Mr. Feldt joined the Company in September 1995. From 1991 to August 1995, he was Vice President of Manufacturing at A.T. 21 Cross, a leading manufacturer of writing instruments. From July, 1988 to December, 1990, Mr. Feldt served as a Director of the Imaging and Publishing Systems Division of Eastman Kodak. Mr. Goldner joined the Company in September 1990. From September 1979 until August 1990, he was a partner of the New York law firm of Shereff, Friedman, Hoffman & Goodman, which firm was securities counsel to the Company. Dr. Metlitsky joined the Company in March 1983 and has served in various technical and managerial positions. Dr. Katz joined the Company in January 1989 and has held several positions in Research and Development. From May 1981 until January 1989, Dr. Katz held a number of positions at the Jet Propulsion Laboratory of the California Institute of Technology, the most recent of which was as Technical Group Supervisor. Dr. Sharma joined the Company in March 1995. Prior to joining the Company, Dr. Sharma held various management positions at AT&T. From April 1990 to March 1995 Dr. Sharma served as Director of Quality of AT&T's Power Systems Division and from January 1986 to April 1990 he was a Department Head at AT&T Bell Labs. 22 PART II Item 5. Market for the Registrant's Common Equity and Related Security Holder Matters The Company's Common Stock is listed on the New York Stock Exchange. The following table sets forth, for each quarter period of the last two years, the high and low sales prices as reported by the New York Stock Exchange. Year Ending: High Low December 31, 1995 First Quarter 31 1/4 24 3/8 Second Quarter 40 1/2 28 5/8 Third Quarter 40 5/8 32 7/8 Fourth Quarter 40 29 3/8 December 31, 1996 First Quarter 40 1/4 31 7/8 Second Quarter 48 35 1/8 Third Quarter 46 7/8 38 Fourth Quarter 49 1/2 41 1/2 As of February 1, 1997 there were 1,153 holders of record of the Company's Common Stock. Historically, changes in the Company's results of operations or projected results of operations have resulted in significant changes in the market price of the Company's Common Stock. As a result, the market price of the Company's Common Stock has been highly volatile. To date, the Company has not paid any cash dividends to its shareholders. The Company's ability to pay cash dividends is limited by certain of the Company's loan agreements, the most restrictive of which would generally limit dividends payable in any year to an amount not greater than 50 percent of the Company's net income. On February 10, 1997, the Board of Directors declared a semi-annual dividend of $.03 per share, payable on April 1, 1997 to all shareholders of record on March 10, 1997. On the same date, the Board declared a 3 for 2 stock split, to be effected as a 50% stock dividend payable on April 1, 1997 to all shareholders of record on March 10, 1997. References to shares of the Company's Common Stock have not been adjusted to reflect this stock split. 23 Item 6. Selected Financial Data (in thousands, except per share data) Year Ended December 31, Operating Results: 1996(1) 1995(2) 1994 1993 1992(3) Net Revenue $656,675 $555,163 $465,306 $359,980 $344,940 Earnings (Loss) Before Cumulative Effect of Accounting Change $ 50,256 $46,486 $34,984 $12,445 ($15,506) Net Earnings (Loss) $ 50,256 $46,486 $34,984 $12,445 ($16,250) Earnings (Loss) Per Share: Primary Earnings (Loss) Before Cumulative Effect of Accounting Change $1.86 $1.72 $1.34 $0.50 ($0.65) Net Earnings (Loss) $1.86 $1.72 $1.34 $0.50 ($0.68) Fully-diluted Earnings (Loss) Before Cumulative Effect of Accounting Change $1.85 $1.71 $1.33 $0.50 ($0.65) Net Earnings (Loss) $1.85 $1.71 $1.33 $0.50 ($0.68) Financial Position: Total Assets $614,238 $544,268 $474,213 $419,615 $378,666 Working Capital $221,678 $209,852 $191,823 $141,739 $88,623 Long-Term Debt, less Current Maturities $50,541 $60,829 $59,884 $62,077 $14,582 Stockholders' Equity $399,676 $352,854 $316,167 $258,746 $244,961 Weighted Average Number of Common Shares Outstanding: Primary 27,079 27,052 26,162 24,661 24,028 Fully-diluted 27,122 27,220 26,392 25,072 24,028 (1) Includes a pre-tax charge for costs associated with acquisition related matters of $12,341 or $0.28 per share. (2) Includes a pre-tax charge for costs associated with a management change of $2,500 or $0.06 per share. (3) Includes cumulative effect of a change in accounting for income taxes of $744 or ($0.03) per share and a pre-tax charge of $40,933 related to a workforce reduction and the consolidation and restructuring of the Company's operations. -24- SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS UNDER SECURITIES LITIGATION REFORM ACT OF 1995; CERTAIN CAUTIONARY STATEMENTS From time to time, the Company or its representatives have made or may make forward-looking statements, orally or in writing. Such forward-looking statements may be included in, but not limited to, press releases, oral statements made with the approval of an authorized executive officer or in various filings made by the Company with the Securities and Exchange Commission. The words or phrases "will likely result", "are expected to", "will continue", "is anticipated", "estimate", "project" or similar expressions are intended to identify "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 (the "Reform Act"). The Company wishes to ensure that such statements are accompanied by meaningful cautionary statements, so as to maximize to the fullest extent possible the protections of the safe harbor established in the Reform Act. Accordingly, such statements are qualified in their entirety by reference to and are accompanied by the following discussion of certain important factors that could cause actual results to differ materially from such forward-looking statements. The risks included here are not exhaustive. Furthermore, reference is also made to other sections of this report which include additional factors which could adversely impact the Company's business and financial performance. Moreover, the Company operates in a very competitive and rapidly changing environment. New risk factors emerge from time to time and it is not possible for management to predict all of such risk factors, nor can it assess the impact of all of such risk factors on the Company's business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Accordingly, forward-looking statements should not be relied upon as a prediction of actual results. Shareholders should be aware that while the Company does, from time to time, communicate with securities analysts, it is against the Company's policy to disclose to such analysts any material non-public information or other confidential commercial information. Accordingly, shareholders should not assume that the Company agrees with any statement or report issued by any analyst irrespective of the content of such statement or report. Furthermore, the Company has a policy against issuing financial forecasts or projections or confirming the accuracy of forecasts or projections issued by others. Accordingly, to the extent that reports issued by securities analysts contain any projections, forecasts or opinions, such reports are not the responsibility of the Company. Financial Performance. The Company's operating results may fluctuate in the future as a result of a number of factors, including but not limited, to a shift in the mix of the Company's 25 products and/or sales channels, the market acceptance of new and enhanced versions of the Company's products, the timing of acquisitions of other products and technology and any associated charges to earnings as well as any cancellation or postponement of orders. The volume and timing of orders received during a quarter are difficult to forecast. In addition, from time to time, customers have either canceled orders or rescheduled shipments previously ordered from the Company. Additionally, the Company has historically operated with a relatively small backlog. While the Company does monitor backlog, it does not consider it to be a reliable predictor of financial performance for periods other than the then current quarter because customers generally order products for delivery within 45 days. Accordingly, shipments made during any particular quarter generally represent orders received either during that quarter or shortly before the beginning of that quarter. Shipments for orders received in a fiscal quarter are generally from products manufactured in that quarter. The Company maintains significant levels of raw materials to facilitate meeting delivery requirements of its customers. However, there can be no assurance that during any given quarter, the Company has or can procure the appropriate mix of raw materials in order to accommodate any given order. In light of the levels of current and anticipated backlog, the Company's financial performance in any quarter is dependent to a significant degree upon obtaining orders in that quarter which can be manufactured and delivered to its customers in that quarter. Thus, financial performance for any given quarter cannot be known or fully assessed until near the end of that quarter. Furthermore, the Company's expense levels are based, in part, on expectations of future revenues, and the Company has been increasing and expects to continue to increase its total operating expenses as it expands its operations. As a result of the difficulty of forecasting revenue and the Company's planned growth in spending, operating expenses could be disproportionately high for any given quarter and the Company's operating revenue for any given quarter and potentially several quarters thereafter could be adversely affected. Foreign Sales. Foreign sales have represented a substantial and increasing portion of the Company's net revenues. In 1996, foreign sales accounted for approximately 40 percent of net revenue. Such sales are subject to the normal risks of foreign operations, such as protective tariffs and other potential trade barriers, export/import controls and transportation delays and interruptions, reduced protection for intellectual property rights in some countries, the impact of recessionary foreign economies and long receivable collection periods. The majority of the Company's equipment sales in Western Europe and Asia are generally billed in foreign currencies and are subject to currency exchange fluctuations. Since the Company's products are principally manufactured in the United States, sales and results of operations could be affected by fluctuations in the U.S. dollar. Changes in the relative value of the U.S. dollar in terms of foreign currencies in the past have had an impact on the Company's sales and margins. It is impossible to predict whether 26 the United States or any other country will impose new quotas, tariffs, taxes or other trade barriers upon the importation of the Company's products or supplies or to gauge the effect that such actions would have on the financial position or results of operations. Dependence upon Retail Industry. A significant portion of the Company's revenues are derived from sales of products and services to customers in the non-food retail industry. This industry is currently experiencing a financial down turn and in 1995 and continuing in 1996, several of the Company's customers consolidated operations and/or initiated bankruptcy or reorganization proceedings. The Company is attempting to expand its customer base to other industries, including but not limited to the transportation and logistics industry. However, for the current and foreseeable future, the Company's financial performance remains dependent to a material extent upon revenues derived from the non-food retail industry. Continued or increased instability in this industry could have an adverse affect on the Company's business and financial performance. Competition. The business in which the Company is engaged is highly competitive and acutely influenced by advances in technology, product improvements and new product introduction, and price competition. Failure to keep pace with product and technological advances could adversely affect the Company's competitive position and prospects for growth. Price. Traditionally, the selling price of the Company's products decreases over the life of the product. The Company endeavors to reduce manufacturing costs of existing products and to introduce new products, functions and other price/performance- enhancing features in order to mitigate the effect of such decreases. To the extent that such cost reductions, product enhancements and new product introductions do not occur in a timely manner or do not achieve market acceptance, the Company's operating results could be materially, adversely affected. Research and Development. There can be no assurance that the Company's research and development activities will lead to the successful introduction of new or improved products or that the Company will not encounter delays or problems in connection therewith. New products frequently take longer to develop, often have fewer features than originally considered desirable and achieve higher cost targets than initially estimated. Moreover, there can be no assurance that there will not be delays in commencing volume production of such products or that such products will ultimately be commercially successful. In addition, products under development are frequently announced before introduction and such announcements may cause customers to delay purchases of existing products in anticipation of new or improved versions of those products. New Product Introduction. Historically, the Company has been dependent upon the introduction of new and improved product 27 offerings. This is particularly true for 1997, since the Company has introduced a large number of new products during the past 18 months. The Company's financial performance in 1997 will be heavily dependent upon the successful introduction of such products. This success will be dependent upon, among other factors, the ability of the Company to complete development and launch of certain of such products within the year, customer acceptance of and demand for these products and the ability of the Company to efficiently manufacture such products and to meet delivery schedules. Failure in any of these areas could have a material adverse effect on the Company's financial results for 1997. Intellectual Property. The Company seeks to protect its proprietary information and technology through contractual confidentiality provisions and the application for United States and foreign patents, trademarks and copyrights. There can be no assurance that such applications will result in the issuance of patents, trademarks or copyrights or that third parties will not seek to challenge, invalidate or circumvent such applications or resulting patents, trademarks or copyrights. Additionally, competitors may independently develop equivalent or superior, non-infringing technologies. The Company's licensing revenue could be adversely affected to the extent that such technologies avoid infringement of the Company's licensed patents. Furthermore, there can be no assurance that third parties will not assert claims of infringement of intellectual property rights against the Company and that such claims will not lead to litigation and/or require the Company to significantly modify or even discontinue sales of certain of its products. Manufacturing. In the event use of the Company's manufacturing facilities in Bohemia, New York were interrupted by natural disaster or otherwise, the Company's operations would be materially, adversely affected until alternative production and service operations could be established. Certain of the Company's products are manufactured in Japan and Taiwan. The Company anticipates that an increased percentage of new products will be manufactured by third parties, many of which are located in foreign countries. The manufacture of these items is subject to risks common to all foreign manufacturing activities such as governmental regulation, currency fluctuations, transportation delays and interruptions, political and economic disruptions and the risk of imposition of tariffs or other trade barriers. In the past, the Company has experienced manufacturing problems that have caused delivery delays. There can be no assurance that the Company will not experience production difficulties and product delivery delays in the future as a result of, among other matters, changing process technologies, ramping production and installing new equipment at its manufacturing facilities. The Company has in the past, and may in the future, encounter shortages of supplies and delays in deliveries of 28 necessary components or products. While past shortages and delays have not had a material adverse effect on the Company, shortages and delays could have such effect in the future. Certain components, subassemblies and products are sourced from a single supplier or a limited number of suppliers. The loss of any such supplier may cause the Company to incur additional set- up costs and delays in manufacturing and delivery of products. Third Party Products. Historically, the Company has manufactured almost all of it product offerings. Beginning in 1996 and anticipated to expand in 1997, the Company is offering for sale an increased number of third party products. Although the Company hopes that sales of such products will result in higher operating income, the sales of third party products traditionally generate lower margins which may not be fully offset by lower expenses. In the event that any of these third party suppliers become unable or unwilling to manufacture such products or fail to meet the Company's volume and quality requirements and delivery schedules, the Company's ability to market such products could be negatively affected. In addition, many of these third party products are manufactured outside of the United States and supply of such products could be negatively affected by factors normally attendant to the conduct of foreign trade, including imposition of duties, taxes, fees or other trade restrictions fluctuation in currency exchange rates and longer delivery times. Government Regulations. The Company is also subject to the risks associated with changes in United States and foreign regulatory requirements. There can be no assurances that more stringent regulatory requirements and/or safety and quality standards will not be issued in the future with an adverse effect on the business of the Company. In addition, sales of the Company's products could be adversely affected if more stringent safety standards are adopted by potential customers such as electronic cash register manufacturers. The Company's Spectrum One and Spectrum 24 spread spectrum wireless communication products operate through the transmission of radio signals. These products are subject to regulation by the Federal Communications Commission in the United States and corresponding authorities in other countries. Currently, operation of such products in specified frequency bands does not require licensing by such regulatory authorities. Regulatory changes restricting the use of such bands or allocating available frequencies could have a material adverse effect on the Company's business and its results of operations. Safety Risk. Recently, there has been some concern over the potentially adverse effects of electromagnetic emissions associated with cellular telephones. While the Company's RF products do emit electromagnetic radiation, the Company believes that due to the low power output of its products and the logistics of their use, there is no health risk to end-users in the normal operation of its products. There can be no assurance that the Company's RF products will not become the subject of 29 such concerns in the future. Such safety issues and the associated publicity could have a material adverse effect on the Company's business and its results of operations. Acquisitions. The Company has in the past and may in the future acquire businesses or product lines as a way of expanding its product offerings and acquiring new technology. Failure of the Company to identify future acquisition opportunities and/or to integrate effectively businesses that it may acquire could have a material adverse effect on the Company's growth. 30 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations The following table sets forth for the years indicated (i) certain revenue and expense items expressed as a percentage of net revenue and (ii) the percentage increase or decrease of such items as compared to corresponding prior years. 31 Year to Year Changes Year Ending December 31, Percentage of Revenue 1996 1995 Year Ending December 31, vs. vs. 1996 1995 1994 1995 1994 Net Revenue 100.0% 100.0% 100.0% 18.3% 19.3% Cost of Revenue 53.2 51.3 50.1 22.7 22.3 Amortization of Software Development Costs 1.6 1.6 2.1 21.0 (11.4) Gross Profit 45.2 47.1 47.8 13.4 17.6 Operating Expenses: Engineering 7.1 7.6 7.9 10.8 15.1 Selling, General and Administrative 22.8 24.8 25.7 8.7 15.0 Purchased Research and Development and Merger Integration Costs 1.9 - - - - Severance - 0.5 - - - Amortization of Excess of Cost Over Fair Value of Net Assets Acquired 0.6 0.5 0.6 33.5 (0.7) 32.3 33.3 34.2 14.7 16.3 Earnings from Operations 12.8 13.8 13.6 10.2 20.8 Net Interest Expense (0.5) (0.3) (1.1) 120.2 (71.4) Earnings Before Income Taxes 12.3 13.5 12.5 8.1 28.6 Provision for Income Taxes 4.7 5.1 5.0 8.1 22.2 Net Earnings 7.7% 8.4% 7.5% 8.1% 32.9% - -32- For the year ended December 31, 1996 Net revenue of $656,675,000 for the year ended December 31, 1996, increased 18.3 percent over 1995. The increase in net revenue is primarily due to increased worldwide sales of both scanner products and hand-held computer systems. Foreign exchange fluctuations unfavorably impacted net revenue by approximately 0.7 percent for the year ended December 31, 1996 and favorably impacted net revenue by 1.9 percent for the year ended December 31, 1995. Geographically, North America revenue increased 15.7 percent over the prior year and International revenue increased 22.3 percent over the prior year. North America and International revenue continue to represent approximately three-fifths and two- fifths of net revenue, respectively. Cost of revenue (as a percentage of net revenue) of 53.2 percent for the year ended December 31, 1996, increased from 51.3 percent in 1995. This increase resulted primarily from a change in the mix of the Company's products sold to a higher percentage of lower margin products, an increase in revenue derived from the indirect sales channel, and the impact of new product start-up costs. Amortization of software development costs totaling $10,686,000 for the year ended December 31, 1996, increased from $8,828,000 in the prior year due to new product releases. Engineering costs increased to $46,752,000, for the year ended December 31, 1996, from $42,205,000 for 1995. While in absolute dollars engineering expenses increased 10.8 percent for the year ended December 31, 1996, from the prior year, as a percentage of revenue such expenses were reduced to 7.1 percent for the year ended December 31, 1996, from 7.6 percent for the prior year due to the proportionately higher increase in revenue. The increase in absolute dollars reflects expenses incurred in connection with the continuing research and development of new products and the improvement of existing products partially offset by increased capitalized costs incurred for internally developed product software where economic and technological feasibility has been established. Selling, general and administrative expenses increased to $149,602,000 for the year ended December 31, 1996, from $137,640,000 in 1995. While in absolute dollars selling, general and administrative expenses increased 8.7 percent for the year ended December 31, 1996, from the prior year, as a percentage of revenue such expenses were reduced to 22.8 percent for the year ended December 31, 1996, from 24.8 percent in 1995 due to the increase in revenue and ongoing cost-containment programs. The increase in absolute dollars reflects expenses incurred to support a higher revenue base and expenses incurred by three recently acquired subsidiaries. 33 During the year ended December 31, 1996, the Company recognized a one-time pretax charge of $12,341,000 related to write off of purchased research and development and accrued merger integration costs as a result of the acquisition of LIS Holdings Ltd., headquartered in the United Kingdom. Such acquisition related charges are reported as a separate line item in the consolidated statement of earnings and had an effect of $0.28 per share net of tax for the year ended December 31, 1996. Amortization of excess of cost over fair value of net assets acquired of $3,679,000 for year ended December 31, 1996, increased from $2,755,000 in 1995 due to the acquisitions of the new subsidiaries. Net interest expense increased to $3,129,000, for the year ended December 31, 1996, from $1,421,000 in 1995 primarily due to decreased interest income resulting from the decrease in cash and temporary investments described below, an increase in interest expense related to interim short term borrowings under existing credit lines and decreased capitalized interest partially offset by a reduction in interest expense due to annual repayments of outstanding debt. The Company's effective tax rate for 1996 remained constant at 38.0 percent. At December 31, 1996, the Company had net deferred tax assets of approximately $17,981,000, consisting of current deferred tax assets of $26,125,000 and long-term deferred tax liabilities of $8,144,000. The current deferred tax assets reflect a valuation allowance of approximately $601,000 relating to New York State investment tax credit carryforwards which may be recaptured. No other valuation allowance is necessary due to the Company's history of profitability and anticipated future profitability. For the year ended December 31, 1995 Net revenue of $555,163,000 for the year ended December 31, 1995, increased 19.3 percent over 1994. The increase in net revenue is primarily due to increased worldwide sales of both scanner products and hand-held computer systems. Foreign exchange fluctuations favorably impacted net revenue by 1.9 percent for the year ended December 31, 1995. Geographically, North America revenue increased 12.9 percent over the prior year and International revenue increased 30.7 percent over the prior year. North America and International revenue represent approximately three-fifths and two-fifths of net revenue, respectively, for the year ended December 31, 1995, and approximately two-thirds and one-third of net revenue, respectively, for the comparable prior year period. Cost of revenue (as a percentage of net revenue) of 51.3 percent for the year ended December 31, 1995, increased from 50.1 percent in 1994. This increase resulted primarily from a change in the mix of the Company's products sold to a higher percentage of lower margin products and an increase in revenue derived from the 34 indirect sales channel. The increase was offset, in part, by the impact on net revenue of favorable fluctuations in foreign exchange rates discussed above. Amortization of software development costs totaling $10,089,000 for the year ended December 31, 1995, including the portion classified in cost of revenue, remained relatively constant compared with the comparable prior year period. Engineering costs increased to $42,205,000, for the year ended December 31, 1995, from $36,682,000 for 1994. While in absolute dollars engineering expenses increased 15.1 percent for the year ended December 31, 1995, from the prior year, as a percentage of revenue such expenses were reduced to 7.6 percent for the year ended December 31, 1995, from 7.9 percent for the prior year due to the 19.3 percent increase in revenue. The increase in absolute dollars reflects expenses incurred in connection with the continuing research and development of new products and the improvement of existing products. Selling, general and administrative expenses increased to $137,640,000 for the year ended December 31, 1995, from $119,733,000 in 1994. While in absolute dollars selling, general and administrative expenses increased 15.0 percent for the year ended December 31, 1995, from the prior year, as a percentage of revenue such expenses were reduced to 24.8 percent for the year ended December 31, 1995, from 25.7 percent in 1994 due to the increase in revenue and ongoing cost-containment programs. The increase in absolute dollars reflects expenses incurred to support a higher revenue base and higher International expenses due to a weakened U.S. dollar. During the year ended December 31, 1995, the Company recognized a one-time pretax charge of $2,500,000 ($0.06 per share) of severance expense, in connection with the resignation of its former president and chief operating officer. Net interest expense decreased to $1,421,000, for the year ended December 31, 1995, from $4,960,000 in 1994 primarily due to increased interest income resulting from the increase in cash and temporary investments, a reduction in interest expense due to annual repayments of outstanding debt and interest capitalized in connection with the renovation of the building purchased as described below. The effective tax rate for 1995 decreased to 38.0 percent from 40.0 percent in 1994 primarily due to an increase in exempt earnings from foreign sales and a decrease in state taxes. At December 31, 1995, the Company had net deferred tax assets of approximately $16,212,000, consisting of current deferred tax assets of $24,488,000 and long-term deferred tax liabilities of $8,276,000. The current deferred tax assets reflect a valuation allowance of approximately $812,000 relating to New York State investment tax credit carryforwards which may be recaptured. No 35 other valuation allowance is necessary due to the Company's history of profitability and anticipated future profitability. Liquidity and Capital Resources The Company utilizes a number of measures of liquidity including the following: Year Ended December 31, 1996 1995 1994 Working Capital (in thousands) $221,678 $209,852 $191,823 Current Ratio (Current Assets to Current Liabilities) 2.7:1 3.0:1 3.6:1 Long-Term Debt to Capital 11.2% 14.7% 15.9% (Long-term debt to long- term debt plus equity) Current assets increased by $35,799,000 from December 31, 1995, principally due to an increase in accounts receivable and inventories to support higher operating levels, partially offset by the decrease in cash. The decrease in cash was primarily due to cash used in investing activities for acquisitions and capital expenditures. Current liabilities increased $23,973,000 from December 31, 1995, primarily due to increases in accounts payable and accrued expenses, deferred revenue and the reclassification of the first annual installment of the Company's 7.76 percent Series B Senior Notes to current portion of long-term debt. The aforementioned activity resulted in a working capital increase of $11,826,000 for the fiscal year ended December 31, 1996. The Company's current ratio at December 31, 1996, decreased to 2.7:1 from 3.0:1 at December 31, 1995. The Company generated $33,855,000 cash flow from operations but experienced an overall decrease in cash and temporary investments of $29,360,000 for the year ended December 31, 1996. The decrease resulted from the acquisitions of three subsidiaries, capital expenditures and the purchase of 484,000 shares of common stock for $19,157,000, partially offset by profitable operations and equity proceeds of stock option exercises and the corresponding tax benefits. The Company generated an increase of $32,261,000 in cash and temporary investments during 1995, primarily as a result of net earnings and equity proceeds of stock exercises and the corresponding tax benefits, partially offset by capital expenditures and the purchase of the Company's common stock. Property, plant and equipment expenditures for the year ended December 31, 1996, totaled $34,680,000 compared to $36,636,000 for the year ended December 31, 1995. Such property, plant and equipment expenditures for the period were financed by 36 existing cash and temporary investments. The Company does not have any other material commitments for capital expenditures. At December 31, 1996, the Company had $50,541,000 in long-term debt outstanding, excluding current maturities. In March 1993 the Company issued $25,000,000 of its 7.76 percent Series A Notes due February 15, 2003, and $25,000,000 of its 7.76 percent Series B Senior Notes due February 15, 2003, to four insurance companies for working capital and general corporate purposes. The Series A Senior Notes are being repaid in equal annual installments of $2,778,000 which began in February 1995. The Series B Senior Notes are being repaid in equal annual installments of $3,571,000 which began in February 1997. The Senior Notes represent $38,097,000 of the total long-term debt balance outstanding at December 31, 1996. The remaining $12,444,000 is primarily related to the Industrial Development Bond financing completed in October 1989, a low-interest loan from an agency of the State of New York and debt assumed in connection with the purchase of the Company's Worldwide Headquarters facility in 1995. The Company's long-term debt to capital ratio decreased to 11.2 percent at December 31, 1996, from 14.7 percent at December 31, 1995, primarily due to increased equity from the results of profitable operations and payment of the annual installment of the Company's long-term obligations previously described. The Company has loan agreements with three banks pursuant to which the banks have agreed to provide lines of credit totalling $60,000,000. As of December 31, 1996, the Company had no outstanding borrowings under these lines. These agreements expire between June 30, 1997, and December 31, 1997. The Company believes that it has adequate liquidity to meet its current and anticipated needs from the results of its operations, working capital and existing credit facilities. In the opinion of management, inflation has not had a material effect on the operations of the Company. 37 Item 8. Financial Statements and Supplementary Data The following documents are filed on the pages listed below, as part of Part II, Item 8 of this report. Document Page 1. Financial Statements and Accountants' Report: Independent Auditors' Report F-1 Consolidated Financial Statements: Balance Sheets as of December 31, 1996 and 1995 F-2 Statements of Operations for the Years Ended December 31, 1996, 1995 and 1994 F-3 Statement of Stockholders' Equity for the F-4 Years Ended December 31, 1996, 1995 and 1994 Statements of Cash Flows for the Years Ended F-5 December 31, 1996, 1995 and 1994 Notes to Consolidated Financial Statements F-6 through F-18 2. Financial Statement Schedules: Schedule II S-1 Item 9. Disagreements on Accounting and Financial Disclosure Not applicable 38 PART III Item 10. Directors and Executive Officers of the Registrant (a) Identification of Directors: The section entitled "Nominees for Election" contained in the Proxy Statement is hereby incorporated by reference. (b) Identification of Executive Officers: See PART I of this Form 10-K. Item 11. Executive Compensation The section entitled "Management Remuneration and Transactions" contained in the Proxy Statement is hereby incorporated by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management The sections entitled "Principal Shareholders" and "Security Ownership of Management" contained in the Proxy Statement are hereby incorporated by reference. Item 13. Certain Relationships and Related Transactions The section entitled "Management Remuneration and Transactions" contained in the Proxy Statement is hereby incorporated by reference. 39 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K. (a) 1. FINANCIAL STATEMENTS: Independent Auditors' Report Consolidated Balance Sheets as of December 31, 1996 and 1995 Consolidated Statements of Operations for the Years Ended December 31, 1996, 1995 and 1994 Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 1996, 1995 and 1994 Consolidated Statements of Cash Flows for the Years Ended December 31, 1996, 1995 and 1994 Notes to Consolidated Financial Statements 2. FINANCIAL STATEMENT SCHEDULES Included in Part IV of this report: Schedules: II Valuation and Qualifying Accounts Other schedules are omitted because of the absence of conditions under which they are required or because the required information is given in the consolidated financial statements or notes thereto. Individual financial statements of the Company are omitted as the Company is primarily an operating company and the subsidiaries included in the consolidated financial statements filed are substantially wholly-owned and are not indebted to any person other than the parent in amounts which exceed 5% of total consolidated assets at the date of the latest balance sheet filed, excepting indebtedness incurred in the ordinary course of business which is not overdue and which matures within one year from the date of its creation, whether evidenced by securities or not, and indebtedness which is collateralized by the parent by guarantee, pledge, assignment or otherwise. 40 3. Exhibits Exhibit 3.1 Certificate of Incorporation of Symbol Technologies, Inc. and amendments thereto. 3.3 By-laws of the Company as currently in effect. 4.1 Form of Certificate for Shares of the Common Stock of the Company. (Incorporated by reference to Exhibit 4.1 of the Form 8-B Registration No. 0-9028, filed with the Commission on November 23, 1987). 10.1 1991 Employee Stock Option Plan (Incorporated by reference to Exhibit 10.1 of the Company's Annual Report on Form 10-K for the year ended December 31, 1991 (the "1991 Form 10-K").) 10.2 1990 Non-Executive Stock Option Plan, as amended. (Incorporated by reference to Exhibit 10.1 of the Company's Annual Report on Form 10-K for the year ended December 31, 1995 (the "1995 Form 10-K").) 10.3 1987 Consultant Stock Option Plan, as amended. (Incorporated by reference to Exhibit 10.3 of the 1991 Form 10-K.) 10.4 Employment Agreement by and between the Company and Raymond Martino, dated as of June 12, 1994. (Incorporated by reference to Exhibit 10.3 to the Company's Annual Report on Form 10-K for the year ended December 31, 1994.) 10.5 Employment Agreement by and between the Company and Jerome Swartz, dated as of June 30, 1995. (Incorporated by reference to Exhibit 10.4 to the 1995 Form 10-K.) 10.6 Employment Agreement by and between the Company and Tomo Razmilovic, dated as of October 16, 1995. (Incorporated by reference to Exhibit 10.5 of the 1995 Form 10-K.) 10.7 Employment Agreement by and between the Company and Frederic P. Heiman, dated as of June 30, 1995. (Incorporated by reference to Exhibit 10.6 of the 1995 Form 10-K.) 10.8 Employment Agreement by and between the Company and Leonard H. Goldner, dated as of November 1, 1995. (Incorporated by reference to Exhibit 10.7 of the 1995 Form 10-K.) 41 10.9 Form of 2000 Stock Purchase Warrant issued to directors. (Incorporated by reference to Exhibit 10.11 to the 1991 Form 10-K.) 10.10 1994 Directors Stock Option Plan. (Incorporated by reference to Exhibit 4.1 to Registration Statement No. 33-78678 on Form S-8.) 10.11 Executive Retirement Plan, as amended. (Incorporated by reference to Exhibit 10.14 to the Company's Annual Report on Form 10-K for the year ended December 31, 1989 (the "1989 Form 10-K").) 10.12 Symbol Technologies, Inc. Stock Ownership and Option Retention Program. (Incorporated by reference to Exhibit 10.13 of the 1995 Form 10-K.) 10.13 Summary of Symbol Technologies, Inc. Executive Bonus Plan. (Incorporated by reference to Exhibit 10.14 of the 1995 Form 10-K.) 10.14 Lease Agreement and Amended and Restated Lease Agreement dated as of October 1, 1989 between Suffolk County Industrial Development Agency and Symbol Technologies, Inc. (Incorporated by reference to Exhibit 10.15 to the 1989 Form 10-K.) 10.15 Sublease dated June 28, 1995 between Grumman Data Systems Corporation and Symbol Technologies, Inc. (Incorporated by reference to Exhbit 10.16 to the 1995 Form 10-K.) 10.16 Form of Note Agreements dated as of February 15, 1993 relating to the Company's 7.76% Series A and Series B Senior Notes due February 15, 2003 (Incorporated by reference to Exhibit 10.14 to the Company's Annual Report on Form 10-K for the year ended December 31, 1992.) 22. Subsidiaries. 23. Consent of Deloitte & Touche LLP (b) Reports on Form 8-K Not Applicable 42 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. SYMBOL TECHNOLOGIES, INC. (Registrant) By: s/ Jerome Swartz Jerome Swartz Chairman of the Board Dated: February 28, 1997 43 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date s/ Jerome Swartz Chairman of the February 28, 1997 Jerome Swartz Board and Director (Principal Executive Officer) s/ Tomo Razmilovic Director February 28, 1997 Tomo Razmilovic s/ Raymond R. Martino Director February 28, 1997 Raymond R. Martino s/ Harvey P. Mallement Director February 28, 1997 Harvey P. Mallement s/ Frederic P. Heiman Director February 28, 1997 Frederic P. Heiman s/ Saul P. Steinberg Director February 28, 1997 Saul P. Steinberg s/ Lowell C. Freiberg Director February 28, 1997 Lowell C. Freiberg s/ George Bugliarello Director February 28, 1997 George Bugliarello s/ Charles Wang Director February 28, 1997 Charles Wang s/ Thomas G. Amato Senior Vice President February 28, 1997 Thomas G. Amato Finance (Chief Financial Officer) s/ Brian T. Burke Vice President and February 28, 1997 Brian T. Burke Controller (Chief Accounting Officer) 44 SYMBOL TECHNOLOGIES, INC. AND SUBSIDIARIES ------ CONSOLIDATED FINANCIAL STATEMENTS COMPRISING ITEM 8 AND SCHEDULE II LISTED IN THE INDEX AT ITEM 14(a)2 OF ANNUAL REPORT ON FORM 10-K TO SECURITIES AND EXCHANGE COMMISSION FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 SYMBOL TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 I N D E X PAGE Independent auditors' report F-1 Consolidated financial statements: Balance sheets F-2 Statements of earnings F-3 Statements of stockholders' equity F-4 Statements of cash flows F-5 Notes to consolidated financial statements (1-15) F-6 through F-18 Additional financial information pursuant to the requirements of Form 10-K: Schedule: II - Valuation and qualifying accounts S-1 Schedules not listed above have been omitted because they are either not applicable or the required information has been provided elsewhere in the consolidated financial statements or notes thereto. INDEPENDENT AUDITORS' REPORT To the Board of Directors and Stockholders of Symbol Technologies, Inc. Holtsville, New York We have audited the accompanying consolidated balance sheets of Symbol Technologies, Inc. and subsidiaries as of December 31, 1996 and 1995, and the related consolidated statements of earnings, stockholders' equity and cash flows for each of the three years in the period ended December 31, 1996. Our audits also included the financial statement schedule listed in the index at Item 14(a)2. These financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on the financial statements and financial statement schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Symbol Technologies, Inc. and subsidiaries as of December 31, 1996 and 1995 and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1996 in conformity with generally accepted accounting principles. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein. /s/ DELOITTE & TOUCHE LLP Jericho, New York February 12, 1997 F-1 SYMBOL TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (All amounts in thousands, except stock par value) December 31, December 31, ASSETS 1996 1995 CURRENT ASSETS: Cash, including temporary investments of $16,715 and $62,887, respectively $ 34,290 $ 63,650 Accounts receivable, less allowance for doubtful accounts of $10,123 and $7,816, respectively 146,273 118,175 Inventories, net 133,637 95,267 Deferred income taxes 26,125 24,488 Prepaid expenses and other current assets 12,029 14,975 TOTAL CURRENT ASSETS 352,354 316,555 PROPERTY, PLANT AND EQUIPMENT, net 101,331 88,264 INTANGIBLE ASSETS, net 113,187 96,338 SOFTWARE DEVELOPMENT COSTS, net 23,974 21,054 OTHER ASSETS 23,392 22,057 $614,238 $544,268 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable and accrued expenses $ 99,241 $ 81,948 Current portion of long-term debt 10,384 6,910 Income taxes payable 9,141 11,909 Deferred revenue 11,910 5,936 TOTAL CURRENT LIABILITIES 130,676 106,703 LONG-TERM DEBT, less current maturities 50,541 60,829 DEFERRED REVENUE 3,146 5,664 OTHER LIABILITIES 19,158 18,218 COMMON EQUITY PUT OPTIONS 11,041 - COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY Preferred stock, par value $1.00; authorized 10,000 shares; none issued or outstanding - - Common stock, par value $0.01; authorized 100,000 shares; issued 28,195 shares and 27,229 shares, respectively 282 272 Additional paid-in capital 258,792 245,728 Cumulative translation adjustments (5,650) (8,299) Retained earnings 206,331 156,075 459,755 393,776 Less: Treasury stock at cost, 2,092 shares and 1,608 shares, respectively (60,079) (40,922) 399,676 352,854 $614,238 $544,268 See notes to consolidated financial statements F-2 SYMBOL TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (All amounts in thousands, except per share data) Year ended December 31, 1996 1995 1994 NET REVENUE 656,675 $555,163 $465,306 COST OF REVENUE 349,428 284,836 232,889 AMORTIZATION OF SOFTWARE DEVELOPMENT COSTS 10,686 8,828 9,963 GROSS PROFIT 296,561 261,499 222,454 OPERATING EXPENSES: Engineering 46,752 42,205 36,682 Selling, general and administrative 149,602 137,640 119,733 Purchased research and development and merger integration costs 12,341 - - Severance - 2,500 - Amortization of excess of cost over fair value of net assets acquired 3,679 2,755 2,773 212,374 185,100 159,188 EARNINGS FROM OPERATIONS 84,187 76,399 63,266 OTHER (EXPENSE)/INCOME: Interest income 1,756 3,143 352 Interest expense (4,885) (4,564) (5,312) (3,129) (1,421) (4,960) EARNINGS BEFORE INCOME TAXES 81,058 74,978 58,306 PROVISION FOR INCOME TAXES 30,802 28,492 23,322 NET EARNINGS $ 50,256 $ 46,486 $ 34,984 EARNINGS PER SHARE: Primary $1.86 $1.72 $1.34 Fully-diluted $1.85 $1.71 $1.33 WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING: Primary 27,079 27,052 26,162 Fully-diluted 27,122 27,220 26,392 See notes to consolidated financial statements F-3 SYMBOL TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (All amounts in thousands, except stock par value) Common Stock $0.01 Par Value Additional Cumulative Total Shares Paid-in Translation Retained Treasury Stockholders' Issued Amount Capital Adjustments Earnings Stock Equity BALANCE, JANUARY 1, 1994 24,716 $247 $201,885 ($5,317) $74,605 ($12,674) $258,746 Exercise of stock options 1,993 20 32,803 - - - 32,823 Exercise of warrants 10 - 110 - - - 110 Purchase of treasury shares - - - - - (7,626) (7,626) Translation adjustments - - - (2,870) - - (2,870) Net earnings - - - - 34,984 - 34,984 BALANCE, DECEMBER 31, 1994 26,719 267 234,798 (8,187) 109,589 (20,300) 316,167 Exercise of stock options 510 5 10,930 - - - 10,935 Purchase of treasury shares - - - - - (20,622) (20,622) Translation adjustments - - - (112) - - (112) Net earnings - - - - 46,486 - 46,486 BALANCE, DECEMBER 31, 1995 27,229 272 245,728 (8,299) 156,075 (40,922) 352,854 Exercise of stock options 919 10 22,701 - - - 22,711 Exercise of warrants 47 - 458 - - - 458 Proceeds from sale of common equity put options - - 946 - - - 946 Reclassification of common equity put options obligation - - (11,041) - - - (11,041) Purchase of treasury shares - - - - - (19,157) (19,157) Translation adjustments - - - 2,649 - - 2,649 Net earnings - - - - 50,256 - 50,256 BALANCE, DECEMBER 31, 1996 28,195 $282 $258,792 ($5,650) $206,331 ($60,079) $399,676 See notes to consolidated financial statements F-4 SYMBOL TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (All amounts in thousands) Year ended December 31, 1996 1995 1994 Cash flows from operating activities: Net earnings $ 50,256 $ 46,486 $ 34,984 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization of property, plant and equipment 23,247 18,911 14,063 Other amortization 16,276 15,347 13,756 Provision for losses on accounts receivable 2,270 3,458 2,336 Charge for purchased research and development 10,741 - - Deferred income taxes (2,835) 1,958 5,854 Changes in assets and liabilities: Accounts receivable (24,481) (25,131) (10,614) Sale of lease receivables 17,308 - - Inventories (33,880) 5,672 (18,914) Prepaid expenses and other current assets 605 (4,553) (2,954) Software development costs (13,606) (11,324) (11,245) Intangible assets (7,054) (3,654) (2,289) Other assets (14,150) (3,432) (463) Accounts payable and accrued expenses 10,981 21,033 4,589 Income taxes payable (3,319) 10,527 (1,901) Accrued restructuring costs - - (10,386) Other liabilities and deferred revenue 1,496 (885) 4,977 Net cash provided by operating activities 33,855 74,413 21,793 Cash flows from investing activities: Note receivable 500 (3,500) - Proceeds from sale of property, plant and equipment - 4,615 - Expenditures for property, plant and equipment (34,680) (36,636) (24,790) Acquisition of subsidiaries, net of cash acquired (26,962) - - Other investing activities, net - - 720 Net cash used in investing activities (61,142) (35,521) (24,070) Cash flows from financing activities: Proceeds from issuance of notes payable and long-term debt 48,400 8,558 3,000 Principal repayments of notes payable and long-term debt (55,214) (5,988) (2,494) Exercise of stock options and warrants 23,169 10,935 32,933 Proceeds from common equity put options 946 - - Purchase of treasury shares (19,157) (20,622) (7,626) Net cash (used in) provided by financing activities (1,856) (7,117) 25,813 Effects of exchange rate changes on cash (217) 486 354 Net (decrease)/increase in cash and temporary investments (29,360) 32,261 23,890 Cash and temporary investments, beginning of year 63,650 31,389 7,499 Cash and temporary investments, end of year $ 34,290 $ 63,650 $ 31,389 Supplemental disclosures of cash flow information: Cash paid during the year for: Interest $ 4,987 $ 4,914 $ 5,177 Income taxes $ 19,685 $ 12,614 $ 7,513 See notes to consolidated financial statements F-5 SYMBOL TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES a. Principles of Consolidation The consolidated financial statements include the accounts of Symbol Technologies, Inc. and its subsidiaries (the "Company"), substantially all of which are wholly-owned. Significant intercompany transactions and balances have been eliminated in consolidation. b. Temporary Investments Temporary investments include highly liquid investments with original maturities of three months or less and consist of money market funds and time deposits at December 31, 1996 and 1995. Temporary investments are stated at cost, which approximates market value. These investments are not subject to significant market risk. c. Inventories Inventories are stated at the lower of cost (determined on a first-in, first- out basis) or market. d. Property, Plant and Equipment Property, plant and equipment is recorded at cost. Depreciation and amortization is provided on a straight-line basis over the following estimated useful lives: Buildings and improvements 15 to 40 years Machinery and equipment 2 to 5 years Furniture, fixtures and office equipment 5 to 10 years Leasehold improvements (limited to terms of the leases) 2 to 10 years Construction in progress (which includes capitalized interest) is amortized over the estimated lives of the related assets when they are placed into service. The Company capitalized interest costs of $258,000 and $646,000 for the years ended December 31, 1996 and 1995, respectively. No interest was capitalized for the year ended December 31, 1994. e. Intangible Assets The excess of cost over fair value of net assets acquired is generally being amortized on the straight-line method over 40 years. Patents and trademarks, including costs incurred in connection with the protection of patents, are amortized over their estimated useful lives, not exceeding 20 years, using the straight-line method. f. Software Development Costs The Company capitalizes costs incurred for internally developed product software where economic and technological feasibility has been established and for qualifying purchased product software. Capitalized software costs are amortized on a straight-line basis over the estimated useful product lives (normally three years). Software development costs which have been fully amortized for two years or more are written off. g. Research and Development Expenses The Company expenses all research and development costs as incurred. The Company incurred research and development expenses of approximately $20,164,000, $19,879,000 and $16,678,000, for the years ended December 31, 1996, 1995 and 1994, respectively, which are classified in engineering expenses. F-6 h. Revenue Recognition Revenue from sales of the Company's products is recognized upon shipment. In conjunction with these sales, field service maintenance agreements are sold for certain products. When such revenue is recorded prior to providing repair and maintenance service, it is deferred and recognized over the term of the related agreements. i. Income Taxes The Company accounts for income taxes under the provisions of Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes," ("SFAS 109") which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the Company's financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial accounting and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Investment, research and development and other tax credits are accounted for by the flow-through method. The cumulative amount of undistributed earnings of foreign subsidiaries at December 31, 1996, approximates $28,734,000. The Company does not provide deferred taxes on undistributed earnings of foreign subsidiaries since the Company anticipates no significant incremental U.S. income taxes on the repatriation of these earnings as tax rates in foreign jurisdictions generally approximate or exceed the U.S. Federal rate. j. Earnings Per Share Primary and fully-diluted earnings per share are based on the weighted average number of shares of common stock and common stock equivalents (options and warrants) outstanding during the period, computed in accordance with the treasury stock method. k. Foreign Currency Translation and Transactions Assets and liabilities of foreign subsidiaries are translated at year-end exchange rates. Results of operations are translated using the average exchange rates prevailing throughout the year. Gains and losses from foreign currency transactions are included in net earnings for the year and are not material. Exchange rate changes arising from translation are included in the cumulative translation adjustments component of stockholders' equity. The Company has only limited involvement with derivative financial instruments and does not use them for trading purposes. The Company enters into foreign currency forward exchange contracts to hedge a portion of its intercompany accounts receivable transactions. The effect of this practice is to minimize the impact of foreign exchange rate movements on the Company's operating results. The Company's hedging activities do not subject the Company to exchange rate risk because gains and losses on these contracts offset losses and gains on the related intercompany receivables being hedged. As of December 31, 1996, the Company had no forward exchange contracts outstanding. The forward exchange contracts generally have maturities that do not exceed 12 months and require the Company to exchange foreign currencies for U.S. dollars at maturity, at rates agreed to at inception of the contracts. l. Pervasiveness of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. F-7 2. ACQUISITIONS In January and March 1996 the Company established wholly owned subsidiaries in Africa and Denmark through the acquisition of Barcodes (Pty) Ltd., and the Bar Code Data Capture Division of BCP Hardware A/S, respectively. The initial costs of the acquisitions amounted to $4,080,000 and $3,000,000, respectively. These acquisitions have been accounted for as purchases and, accordingly the cost of each acquisition has been allocated to net assets acquired based upon fair values. The excess of cost over net assets acquired of approximately $3,700,000 and $2,700,000, respectively, relating to these acquisitions is being amortized over twenty and ten years, respectively. Additional acquisition payments are contingent upon the attainment of certain annual net revenue levels, as defined in the respective agreements, by each of these acquired subsidiaries during the next three years and four years, respectively. Results of operations of these subsidiaries have been included in consolidated operations as of their respective effective acquisition dates. Pro forma results of operations, assuming these acquisitions had been completed at the beginning of 1996 and 1995, would not differ materially from the reported results. In August, 1996, the Company acquired LIS Holdings Ltd., ("LIS") headquartered in the United Kingdom. LIS is one of Europe's largest providers of technology- based logistics management systems providing technology solutions based on its own software products in concert with bar code, wireless networking and ruggedized terminals. Terms of the acquisition included an initial payment of $20,844,000 and subsequent additional payments, that range from zero to a total of $7,800,000 and are contingent upon the attainment of certain annual net revenue levels, as defined, during the next three years. This acquisition has been accounted for as a purchase. The purchase price (including acquisition costs) has been allocated to net assets acquired based upon fair values. After allocating the purchase price to net tangible assets, purchased software, which had reached technological feasibility, was valued using a cash flow model, under which future cash flows were discounted utilizing an assessment of the life expectancy of the purchased software. This purchased software of $1,000,000 has been capitalized and is being amortized over three years. Purchased research and development, which had not reached technological feasibility and has no alternative future use was valued using the same methodology. This purchased research and development amounted to $10,741,000 and has been charged to operations at the acquisition date. In addition, the Company has charged current operations with accrued merger integration costs of $1,600,000, representing costs to be incurred associated primarily with combining the Company's existing operations in the United Kingdom with newly acquired facilities of LIS. The excess of cost over net assets acquired of approximately $8,800,000, relating to the acquisition, is being amortized over seven years. The following unaudited pro forma combined results of operations of the Company and LIS are presented on the basis that the acquisition had taken place at the beginning of each of 1996 and 1995, and exclude the effect of the one-time pre- tax charges totaling $12,341,000 previously discussed: Year Ended December 31, 1996 1995 (in thousands) Revenue $667,509 $572,204 Net Earnings $ 57,342 $ 45,529 Fully-Diluted Earnings per share $ 2.11 $ 1.67 Fully-Diluted weighted average shares outstanding 27,122 27,220 In the opinion of management, the unaudited pro forma combined results of operations are not necessarily indicative of the actual results that would have occurred had LIS been under the ownership and operation of the Company during the periods presented. F-8 3. INVENTORIES December 31, December 31, 1996 1995 (in thousands) Raw materials $ 54,534 $47,701 Work-in-process 18,425 9,181 Finished goods 60,678 38,385 $133,637 $95,267 4. PROPERTY, PLANT AND EQUIPMENT December 31, December 31, 1996 1995 (in thousands) Land $ 8,636 $ 8,326 Buildings and improvements 32,172 12,648 Machinery and equipment 67,243 54,208 Furniture, fixtures and office equipment 47,084 36,743 Leasehold improvements 6,640 8,634 Construction in progress - 18,421 161,775 138,980 Less: Accumulated depreciation and amortization 60,444 50,716 $101,331 $ 88,264 During the year ended December 31, 1995, the Company sold land and a building located in Costa Mesa, California, for $1,000,000 cash and a $3,500,000 promissory note bearing interest at 8.0 percent. Principal payments of $1,000,000 have been received with the remaining balance of unpaid principal and interest due in April 1999. In addition, the Company purchased a 48-acre site in Holtsville, New York, including a 174,000-square-foot office building for $4,200,000 cash and the assumption of debt related to the facility, which had a value of $8,556,000 based upon borrowing rates available to the Company at the date the transaction occurred. 5. INTANGIBLE ASSETS December 31, December 31, 1996 1995 (in thousands) Excess of cost over fair value of net assets acquired $118,147 $102,903 Patents, trademarks and purchased technologies 25,479 18,492 Executive retirement plan unrecognized prior service costs 948 1,060 144,574 122,455 Less: Accumulated amortization 31,387 26,117 $113,187 $ 96,338 F-9 6. SOFTWARE DEVELOPMENT COSTS Year Ended December 31, 1996 1995 1994 (in thousands) Beginning of year $21,054 $18,558 $17,276 Amounts capitalized 13,606 11,324 11,245 34,660 29,882 28,521 Less: Amortization 10,686 8,828 9,963 End of year $23,974 $21,054 $18,558 7. ACCOUNTS PAYABLE AND ACCRUED EXPENSES December 31, December 31, 1996 1995 (in thousands) Accounts payable $45,251 $32,110 Accrued payroll, bonuses, fringe benefits, severance and payroll taxes 29,174 28,491 Other accrued expenses 24,816 21,347 $99,241 $81,948 8. LONG-TERM DEBT December 31, December 31, 1996 1995 (in thousands) Senior Notes (a) $44,446 $47,222 Industrial Development Bonds (b) 7,106 9,475 Assumed Revenue Bond Financing (c) 6,335 7,903 State Loan (d) 3,000 3,000 Other 38 139 60,925 67,739 Less: Current maturities 10,384 6,910 $50,541 $60,829 (a) In March 1993 the Company issued $25,000,000 of its 7.76 percent Series A Senior Notes due February 15, 2003, and $25,000,000 of its 7.76 percent Series B Senior Notes due February 15, 2003, to four insurance companies. The Series A Senior Notes are being repaid in equal annual installments of $2,778,000 which began in February 1995. The Series B Senior Notes are being repaid in equal annual installments of $3,571,000 that began in February 1997. Interest is payable quarterly for these Notes. The financing agreements contain certain covenants regarding the maintenance of a minimum level of tangible net worth, as well as certain financial ratios, as defined, and certain restrictions including limitations on indebtedness. F-10 (b) Borrowings under the Industrial Development Bond financing accrue interest at the rate of 8.95 percent, payable quarterly, and the loan is being repaid in equal annual installments of $2,368,000 which began in October 1992. The Company's owned facilities located in Bohemia, New York, are pledged as collateral for this debt. The financing agreements contain certain covenants regarding the maintenance of a minimum level of tangible net worth and working capital, as well as certain financial ratios, as defined, and limitations on investments, dividends and indebtedness. (c) In June 1995 the Company assumed a $7,282,000 New York Industrial Development bond which is collateralized by its facilities located in Holtsville, New York. The bond bears interest at 12.3 percent and principal and interest are being repaid in ten equal semi-annual installments of $997,000 which began in October 1995. Based upon borrowing rates of 6.7 percent available to the Company at the time the transaction occurred, a bond premium of $1,274,000 has been recorded in long-term debt and is being amortized over the life of the bond. (d) In 1994, the Company received a $3,000,000 loan from an agency of New York State. The loan bears interest at 1.0 percent, payable monthly, and the principal is to be repaid in one installment in 2001. The interest rate is subject to a covenant requiring a minimum level of full-time permanent employees. Based on the borrowing rates currently available to the Company for bank loans with similar terms, the fair values of Senior Notes and Industrial Development Bonds approximates their carrying values. The fair value of the State Loan as of December 31, 1996, is approximately $2,300,000. Long-term debt maturities are: Year ending December 31, (in thousands) 1997 $10,384 1998 10,476 1999 10,577 2000 7,411 2001 9,353 Thereafter 12,724 $60,925 9. INCOME TAXES The provision for income taxes consists of: Year Ended December 31, 1996 1995 1994 (in thousands) Current: Federal $19,460 $15,254 $11,067 State and local 4,036 3,136 3,168 Foreign 10,141 8,144 3,233 33,637 26,534 17,468 Deferred: Federal 16 1,788 4,714 State and local (697) 237 1,246 Foreign (2,154) (67) (106) (2,835) 1,958 5,854 Total Provision for Income Taxes $30,802 $28,492 $23,322 F-11 A reconciliation between the statutory U.S. Federal income tax rate and the Company's effective tax rate is: Year Ended December 31, 1996 1995 1994 Statutory U.S. Federal rate 35.0% 35.0% 35.0% State taxes, net of Federal tax effect 2.7 2.9 4.9 Tax credits (2.6) (1.6) (4.6) Amortization of excess of cost over fair value of net assets acquired 1.2 1.3 1.5 Exempt income of foreign sales corporation (3.2) (1.9) (1.1) Income of foreign subsidiaries taxed at higher tax rates 2.0 1.8 1.1 Other, net 2.9 0.5 3.2 38.0% 38.0% 40.0% At December 31, 1996, 1995 and 1994, other liabilities include deferred income taxes of $8,144,000, $8,276,000 and $9,690,000 respectively. The deferred tax assets and liabilities at December 31, 1996, 1995 and 1994, respectively, are comprised of: Year Ended December 31, 1996 1995 1994 Deferred Tax Deferred Tax Deferred Tax Assets/(Liabilities) Assets/(Liabilities) Assets/(Liabilities) (in thousands) Receivables $ 3,176 $ 4,441 $ 4,977 Inventory 6,751 6,113 6,249 Net investment in sales-type leases (3,360) (3,053) (2,245) Accrued compensation and associate benefits 4,051 3,876 3,739 Other accrued liabilities 4,509 5,128 3,382 Accrued restructuring and severance costs 10 957 61 Deferred revenue - current 2,778 1,890 2,296 Deferred revenue - long term 1,689 2,348 1,511 Deferred patent and product development costs (15,465) (13,809) (10,427) Purchased technology & other intangibles 4,814 - - Property, plant and equipment (440) (1,127) (1,492) Investments 557 878 1,338 Cumulative translation adjustments 3,732 5,505 945 Tax credit carryforwards 2,438 2,895 3,410 Other, net 3,342 982 680 18,582 17,024 14,424 Less: Valuation allowance 601 812 814 Net Deferred Tax Asset $17,981 $16,212 $13,610 The valuation allowance decreased by $211,000 and $2,000 during 1996 and 1995, respectively, and increased by $151,000 during 1994. The valuation allowance relates to state investment tax credit carryforwards which are likely to be recaptured. No other valuation allowances for deferred tax assets are necessary due to the Company's history of profitability and anticipated future profitability. F-12 10. COMMITMENTS AND CONTINGENCIES a. Lease Agreements Future minimum annual rental payments required under noncancellable operating leases are: Year ending December 31, (in thousands) 1997 $ 6,391 1998 5,988 1999 4,347 2000 3,319 2001 2,119 Thereafter 1,252 $23,416 Rent expense under substantially all operating leases was $6,728,000, $6,173,000 and $5,673,000, for the years ended December 31, 1996, 1995 and 1994, respectively. b. Credit Facilities The Company has loan agreements with three banks pursuant to which the banks have agreed to provide lines of credit totalling $60,000,000. As of December 31, 1996, and 1995, the Company had no borrowings outstanding under these lines. Such borrowings would bear interest at the respective bank's cost of funds rate, which approximated 6.0 percent at December 31, 1996. These agreements expire between June 30, 1997, and December 31, 1997. c. Employment Contracts The Company has executed employment contracts with certain senior executives that vary in length, for which the Company has a minimum commitment aggregating approximately $6,241,000 at December 31, 1996. d. Sale of Lease Receivables The Company offers lease financing of its products to its customers. During 1996, the Company sold certain lease receivables relating to sales-type leases for approximately $17,308,000, which represents the present value of uncollected receivable balances sold as of the date of sale. Due to the fact that the sale of these lease receivables was with recourse, the Company retains the same credit risk as if the receivables had not been sold. An allowance for doubtful accounts is maintained at a level which the Company believes is sufficient to cover potential losses on receivables sold. The balance of uncollected receivables as of December 31, 1996 sold approximated $13,520,000. The sale was recorded as a reduction of prepaid and other current assets, and other assets. e. Legal Matters The Company is currently involved in matters of litigation arising from the normal course of business. Management is of the opinion that such litigation will not have a material adverse effect on the Company's consolidated financial position or results of operations. On January 13, 1997, the Court, in the action entitled In re. Symbol Technologies, Inc. Class Action Litigation issued an order granting the Company's motion for summary judgment and dismissing all claims against the Company. Final judgment of dismissal was entered on January 24, 1997. On April 1, 1996, PSC, Inc. ("PSC") commenced suit against the Company purporting to assert claims against the Company for alleged violations of the federal antitrust laws, unfair competition and also seeking a declaratory judgment of non-infringement and invalidity as to certain of the Company's patents. The Company has consented to PSC's serving a Third Amended Complaint, which purports to assert essentially the same antitrust and unfair competition claims against the Company, and also seeks a declaratory judgment of alleged non-infringement of nine of the Company's patents, and a declaratory judgment that PSC has not breached its two license agreements with the Company and that those agreements have been terminated. The Company intends to amend its suit against PSC to assert infringement of four Symbol patents, breach of contract, and fraud. The Company is also seeking damages of over $1 million plus interest in unpaid royalties for each quarter since the second quarter of 1996. The Company had also sued Data General Corporation ("Data General"), a manufacturer of portable integrated scanning terminals incorporating a component manufactured by PSC, for infringement of the same four patents and five additional patents. The nine patents asserted against Data General are the same nine Symbol patents as to which PSC is seeking declaratory relief. On October 9, 1996, the Court granted the Company's motion to sever and stay PSC's antitrust, unfair competition and related claims. On the same day, the Court denied Data General's motion to stay the Company's claims against it. The Company moved that an expedited hearing to be held at the end of March, 1997 on three of the four patents asserted against PSC, and to stay all non-patent discovery. PSC opposed the Company's motion and made a cross-motion that no hearing be held until October, 1997 at the earliest and that all issues be tried in the Spring of 1998 or thereafter. On October 9, 1996, the Court set a one week trial for July 14, 1997 to construe the claims in all nine patents asserted by Symbol against Data General and PSC, and stayed discovery on all non-patent claims. The Company believes that all claims purportedly asserted against it by PSC are factually and legally baseless, and wholly without merit. The Company intends to vigorously defend the litigation. F-13 11. STOCKHOLDERS' EQUITY a. Common Equity Put Options During 1996 the Company issued common equity put options on 297,000 shares of its common stock which are exercisable for periods that range from six months to one year from the date of issuance and give independent parties the right to sell such shares to the Company at strike prices that range from $36.632 per share to $40.055 per share. The balance of the common equity put option account is the amount the Company would be obligated to pay if all the put options were exercised. Proceeds of $946,000 from the issuance of the put options were credited to additional paid in capital. b. Stock Option Plans There are a total of 4,648,000 shares of Common Stock reserved for issuance under the Company's stock option plans at December 31, 1996. All stock options granted to date vest over a four to five year period, expire after seven to ten years and have exercise prices equal to the market value of the Company's common stock at the date of grant. A summary of changes in the stock option plans is: Shares Under Option Number of Weighted Option Price Shares Avg. Exercise per Share (in thousands) Price Shares under option at December 31, 1994 3,580 $14.70 Granted $26.25 to $39.38 1,242 $30.68 Exercised $ 8.00 to $24.25 (510) $13.20 Cancelled $ 9.00 to $38.00 (301) $20.66 Shares under option at December 31, 1995 4,011 $19.31 Granted $37.50 to $47.50 843 $41.69 Exercised $ 6.50 to $29.88 (919) $13.16 Cancelled $ 9.00 to $47.00 (130) $25.96 Shares under option at December 31, 1996 3,805 $25.50 Shares exercisable at December 31, 1996 $ 5.50 to $29.88 1,367 $13.64 The following table summarizes information concerning currently outstanding and exercisable options: Weighted Weighted Range of Number Remaining Average Number Average Exercise Outstanding Life Exercise Exercisable Exercise Prices (In thousands) (years) Price (In thousands) Price $ 5.50 - $ 8.13 217 .5 $ 7.93 217 $ 7.93 $ 9.00 - $12.50 878 5.5 $12.05 730 $11.96 $13.63 - $20.38 493 5.5 $17.97 324 $18.01 $20.88 - $29.88 853 7.5 $26.45 96 $24.46 $33.63 - $47.50 1,364 8.5 $39.09 - $ - 3,805 1,367 At December 31, 1996, an aggregate of 843,000 shares remain available for grant under the stock option plans. The tax benefits arising from stock option exercises during the years ended December 31, 1996, 1995 and 1994, in the amount of $10,761,000, $4,184,000, and $14,066,000, respectively, were recorded in stockholders' equity as additional paid-in capital. The Company applies APB opinion No. 25 and related interpretations in accounting for its plans. Accordingly, no compensation cost has been recognized for the fixed portion of its plans. F-14 If compensation cost for the Company's fixed stock options (including outside directors' options and stock purchase warrants discussed below) had been determined consistent with Statement of Financial Accounting Standards No. 123 "Accounting for Stock-Based Compensation to Employees" ("SFAS No. 123"), the Company's net income and earnings per share would have been the pro forma amounts indicated below: Year Ended December 31, 1996 1995 (in thousands) Net Income: As Reported $50,256 $46,486 Pro Forma $48,401 $45,804 Fully-diluted Earnings Per Share: As Reported $1.85 $1.71 Pro Forma $1.78 $1.68 The weighted average fair value of options granted during 1996 and 1995 was $14.03 and $10.32 per option, respectively. In determining the fair value of options and outside directors' options and stock purchase warrants granted in 1996 and 1995 for pro forma purposes the Company used the Black-Scholes option pricing model and assumed the following: a risk free interest rate of 5.5 percent; an expected option life of 4.5 years; an expected volatility of 29 percent; and dividend yield of 0.14 percent per year. As required by SFAS No. 123, the impact of outstanding non-vested stock options granted prior to 1995 has been excluded from the pro-forma calculation; accordingly, the 1995 and 1996 pro- forma adjustments are not indicative of future period pro-forma adjustments when the calculation will apply to all applicable stock options. c. Outside Directors' Options and Stock Purchase Warrants Any option issued to outside directors vest over a two year period and expire after ten years. All options and warrants have exercise prices equal to the market value of the Company's common stock at the date of grant. In addition, prior to 1994 the Company issued warrants to outside directors' which have a term of seven years and were all vested prior to 1994. The following table indicates the number of common shares issuable upon exercise and the exercise price per share of all outstanding outside Directors' options and stock purchase warrants as of December 31, 1996: Exercisable Number of Shares Exercise Price Shares Vested to Issuable Upon Exercise per Share at December 31,1996 1997 6,000 $11.00 6,000 2000 22,000 $ 8.13 to $15.50 22,000 2004 20,000 $25.25 to $27.75 20,000 2005 10,000 $33.63 5,000 2006 13,000 $47.00 - 71,000 53,000 The weighted average exercise price was $25.10 and $19.11 for the number of shares issuable upon exercise and shares vested at December 31, 1996, respectively. The weighted average fair value of outside directors options and stock purchase warrants granted during 1996 and 1995 was $15.79 and $11.30 per share, respectively. d. Treasury Stock Treasury stock is comprised of 707,000 shares of Common Stock purchased for a total cost of $20,150,000 from certain officers related to the exercise of stock options and 1,385,000 shares purchased in open market transactions for a total cost of $39,929,000 pursuant to the stock repurchase programs authorized by the Board of Directors on May 8, 1995, and May 4, 1992. 12. ASSOCIATE BENEFIT PLANS a. Profit Sharing Retirement Plan The Company maintains a 401(k) profit sharing retirement plan for all U.S. associates meeting certain service requirements. The Company contributes monthly, 50.0 percent of associates' contributions up to a maximum of 6.0 percent F-15 of annual compensation. Plan expense for the years ended December 31, 1996, 1995 and 1994 was $3,469,000, $2,959,000 and $2,559,000, respectively. b. Health Benefits The Company pays substantially all costs incurred in connection with providing associate health benefits through a program administered by an insurance company. Such costs amounted to $9,701,000, $10,700,000, and $8,536,000, for the years ended December 31, 1996, 1995 and 1994, respectively. c. Executive Retirement Plan The Company maintains an Executive Retirement Plan (the "Plan") in which certain highly compensated associates are eligible to participate. Participants are selected by a committee of the Board of Directors. Benefits vest after five years of service and are based on a percentage of average compensation for the three years immediately preceding termination of the participant's full-time employment. As of December 31, 1996, 13 officers were participants in the Plan. The Company's obligations under the Plan are not funded apart from the Company's general assets. The Company's funding policy is to set aside assets for the Plan based on the annual net periodic pension expense. The funded assets are classified in other assets. Plan costs are: Year Ended December 31, 1996 1995 1994 (in thousands) Service cost - benefits earned during the period $ 656 $ 650 $ 543 Interest cost on projected benefit obligation 665 588 624 Amortization of unfunded prior service costs and unrecognized loss 113 121 130 Net periodic pension expense $1,434 $1,359 $1,297 The Plan's funded status is as follows: December 31, December 31, 1996 1995 (in thousands) Accumulated benefit obligation $5,972 $4,904 Projected benefit obligation ($8,342) ($7,446) Unrecognized net loss 542 838 Unrecognized prior service costs 948 1,060 Accrued pension costs ($6,852) ($5,548) The Plan had $5,972,000, and $4,735,000 of vested benefit obligations at December 31, 1996, and 1995, respectively which are included in other liabilities. The projected benefit obligation at December 31, 1996, 1995 and 1994 was determined using an assumed weighted average discount rate of 7.5 percent, 8.0 percent and 8.0 percent, respectively, and an assumed increase in the long-term rate of compensation of 5.0 percent. The Company also maintains a retirement pension plan related to the acquisition of LIS. Net periodic pension expense related to the LIS plan was approximately $200,000 for the year ended December 31, 1996. 13. OPERATIONS BY GEOGRAPHIC AREA The Company is engaged in one industry, specifically, the design, manufacture and marketing of bar code reading equipment, portable data collection systems and radio frequency data communications products. Operations in this business segment are summarized below by geographic area. The Company's operations in Western Europe generally consist of selling and performing field service maintenance on products designed and manufactured primarily in the United States. F-16 North Western America Europe Other Eliminations Consolidated (in thousands) Year ended December 31, 1996: Sales to unaffiliated customers $389,519 $222,611 $44,545 $ - $656,675 Transfers between geographic areas 140,126 - - (140,126) - Total net revenue $529,645 $222,611 $44,545 ($140,126) $656,675 Earnings before provision for income taxes $ 84,447 $ 1,939(1)$ (366) $ (4,962) $ 81,058 Identifiable assets $379,114 $108,871 $15,916 $ - $503,901 Corporate assets 110,337 Total assets $614,238 (1) Includes a pre-tax charge of $10,741,000 related to acquisition costs associated with purchased research and development. Year ended December 31, 1995: Sales to unaffiliated customers $336,734 $178,027 $40,402 $ - $555,163 Transfers between geographic areas 93,028 - - (93,028) - Total net revenue$429,762 $178,027 $40,402 ($93,028) $555,163 Earnings before provision for income taxes $ 55,505 $ 15,049 $ 592 $ 3,832 $ 74,978 Identifiable assets $327,018 $ 73,953 $ 5,593 $ - $406,564 Corporate assets 137,704 Total assets $544,268 Year ended December 31, 1994: Sales to unaffiliated customers $298,217 $141,090 $25,999 $ - $465,306 Transfers between geographic areas 97,981 - - (97,981) - Total net revenue$396,198 $141,090 $25,999 ($97,981) $465,306 Earnings before provision for income taxes $ 46,502 $ 4,783 $ 836 $ 6,185 $ 58,306 Identifiable assets $296,530 $ 62,839 $ 3,217 $ - $362,586 Corporate assets 111,627 Total assets $474,213 F-17 In determining earnings before provision for income taxes for each geographic area, sales and purchases between areas have been accounted for on the basis of internal transfer prices set by the Company. Certain U.S. operating expenses are allocated between geographic areas based upon the percentage of geographic area revenue to total revenue. This allocation has the effect of reducing reported European and other operating profit. Identifiable assets are those tangible and intangible assets used in operations in each geographic area. Corporate assets are principally temporary investments and the excess of cost over fair value of net assets acquired. The Company's export sales, primarily to Europe, approximated $267,156,000, $218,429,000 and $167,089,000 for the years ended December 31, 1996, 1995 and 1994, respectively. The Company has customers in the retail industry which accounted for approximately $26,275,000 and $30,524,000 in accounts receivable at December 31, 1996 and 1995, respectively. The carrying amounts of accounts receivable approximate fair value because of the short maturity of these instruments. 14. SELECTED QUARTERLY FINANCIAL DATA (unaudited) The following tables set forth unaudited quarterly financial information for the years ended December 31, 1996, and 1995: Quarter Ended March 31 June 30 September 30 December 31 (in thousands, except per share amounts) Year Ended December 31, 1996: Net revenue $149,082 $159,328 $170,963 $177,302 Gross profit 68,263 72,218 76,762 79,318 Net earnings 13,089 14,290 7,503 15,374 Primary earnings per share: $0.49 $0.53 $0.28 (1) $0.57 Fully diluted earnings per share: $0.49 $0.53 $0.28 (1) $0.56 (1) Includes a pre-tax charge of $12,341,000 ($0.28 per share after tax) related to acquisition costs associated with purchased research and development ($10,741,000) and merger integration costs ($1,600,000). Year Ended December 31, 1995: Net revenue $131,258 $137,629 $142,811 $143,465 Gross profit 62,285 65,224 67,135 66,855 Net earnings 10,752 11,781 11,468 12,485 Primary earnings per share: $0.40 $0.43 $0.42 (2) $0.47 Fully diluted earnings per share: $0.40 $0.43 $0.42 (2) $0.46 (2) Includes a pre-tax charge of $2,500,000 ($0.06 per share after tax) related to severance and a $575,000 (or $0.02 per share) year to date adjustment to reduce the estimated effective tax rate. The quarterly earnings per share information is computed separately for each period. Therefore, the sum of such quarterly per share amounts may differ from the total for the year. 15. SUBSEQUENT EVENT On February 10, 1997 the Board of Directors approved a three for two split of the Company's common stock to be effected as a 50 percent stock dividend and a $0.03 semi-annual cash dividend both of which are payable on April 1, 1997 to shareholders of record on March 10, 1997. Per share amounts contained herein have not been adjusted to reflect this split. F-18 SCHEDULE II SYMBOL TECHNOLOGIES, INC. AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 (All amounts in thousands) COLUMN A COLUMN B COLUMN C COLUMN DCOLUMN E Additions (1) (2) Balance at Charged to Charged Balance beginning cost and to other at end Description of year expenses accounts Deductionsof year Allowance for doubtful accounts: December 31, 1996 $7,816 $2,270 $890 (a) $ 853 (b)$10,123 December 31, 1995 $7,269 $3,458 $569 (a) $3,480 (b)$ 7,816 December 31, 1994 $5,112 $2,336 $ - $ 179 (b)$ 7,269 (a) Primarily collection of accounts previously written off. (b) Uncollectible accounts written off. S-1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 __________________________________ ANNUAL REPORT ON FORM 10-K FOR FISCAL YEAR ENDED DECEMBER 31, 1996 _________________________________ SYMBOL TECHNOLOGIES, INC. EXHIBITS -1- 3. Exhibits Exhibit 3.1 Certificate of Incorporation of Symbol Technologies, Inc. and amendments thereto. 4 3.3 By-laws of the Company as currently in effect. 21 4.1 Form of Certificate for Shares of the Common Stock of the Company. (Incorporated by reference to Exhibit 4.1 of the Form 8-B Registration No. 0-9028, filed with the Commission on November 23, 1987). 10.1 1991 Employee Stock Option Plan (Incorporated by reference to Exhibit 10.1 of the Company's Annual Report on Form 10-K for the year ended December 31, 1991 (the "1991 Form 10-K").) 10.2 1990 Non-Executive Stock Option Plan, as amended. (Incorporated by reference to Exhibit 10.1 of the Companys Annual Report on Form 10-K for the year ended December 31, 1995 (the "1995 Form 10-K").) 10.3 1987 Consultant Stock Option Plan, as amended. (Incorporated by reference to Exhibit 10.3 of the 1991 Form 10-K.) 10.4 Employment Agreement by and between the Company and Raymond Martino, dated as of June 12, 1994. (Incorporated by reference to Exhibit 10.3 to the Company's Annual Report on Form 10-K for the year ended December 31, 1994.) 10.5 Employment Agreement by and between the Company and Jerome Swartz, dated as of June 30, 1995. (Incorporated by reference to Exhibit 10.4 to the 1995 Form 10-K.) 10.6 Employment Agreement by and between the Company and Tomo Razmilovic, dated as of October 16, 1995. (Incorporated by reference to Exhibit 10.5 of the 1995 Form 10-K.) 10.7 Employment Agreement by and between the Company and Frederic P. Heiman, dated as of June 30, 1995. (Incorporated by reference to Exhibit 10.6 of the 1995 Form 10-K.) 10.8 Employment Agreement by and between the Company and Leonard H. Goldner, dated as of November 1, 1995. (Incorporated by reference to Exhibit 10.7 of the 1995 Form 10-K.) 2 10.9 Form of 2000 Stock Purchase Warrant issued to directors. (Incorporated by reference to Exhibit 10.11 to the 1991 Form 10-K.) 10.10 1994 Directors Stock Option Plan. (Incorporated by reference to Exhibit 4.1 to Registration Statement No. 33-78678 on Form S-8.) 10.11 Executive Retirement Plan, as amended. (Incorporated by reference to Exhibit 10.14 to the Company's Annual Report on Form 10-K for the year ended December 31, 1989 (the "1989 Form 10-K").) 10.12 Symbol Technologies, Inc. Stock Ownership and Option Retention Program. (Incorporated by reference to Exhibit 10.13 of the 1995 Form 10-K.) 10.13 Summary of Symbol Technologies, Inc. Executive Bonus Plan. (Incorporated by reference to Exhibit 10.14 of the 1995 Form 10-K.) 10.14 Lease Agreement and Amended and Restated Lease Agreement dated as of October 1, 1989 between Suffolk County Industrial Development Agency and Symbol Technologies, Inc. (Incorporated by reference to Exhibit 10.15 to the 1989 Form 10-K.) 10.15 Sublease dated June 28, 1995 between Grumman Data Systems Corporation and Symbol Technologies, Inc. (Incorporated by reference to Exhbit 10.16 to the 1995 Form 10-K.) 10.16 Form of Note Agreements dated as of February 15, 1993 relating to the Company's 7.76% Series A and Series B Senior Notes due February 15, 2003 (Incorporated by reference to Exhibit 10.14 to the Company's Annual Report on Form 10-K for the year ended December 31, 1992.) 22. Subsidiaries. 21 23. Consent of Deloitte & Touche LLP 24 (b) Reports on Form 8-K Not Applicable 3 EXHIBIT 3.1 4 Amended as of February 12, 1996 CERTIFICATE OF INCORPORATION OF SYMBOL TECHNOLOGIES, INC. FIRST: The name of the corporation is Symbol Technologies, Inc. (the "Corporation"). SECOND: The address of the registered office of the Corporation in the State of Delaware is 229 South State Street, in the City of Dover, County of Kent. The name of its registered agent at that address is The Prentice-Hall Corporation System, Inc. THIRD: The purpose of the Corporation is to engage in any lawful act or activity for which a corporation may now or hereafter be organized under the General Corporation Law of the State of Delaware, as from time to time amended (the "GCL"). FOURTH: (a) The total number of shares of stock which the Corporation shall have the authority to issue is one hundred and ten million (110,000,000), consisting of one hundred million (100,000,000) shares of common stock, par value $.01 per share (the "Common Stock") and ten million (10,000,000) shares of preferred stock, par value $1.00 per share (the "Preferred Stock"). (b) The Preferred Stock may be issued from time to time in one or more series. The Board of Directors is hereby authorized to fix or alter the dividend rights, dividend rate, conversion rights, voting rights, rights and terms of redemption (including sinking fund provisions), the redemption price or prices, the liquidation preferences of any wholly unissued series of Preferred Stock, the number of shares constituting any such series and the designation thereof, and any other relative rights, preferences or limitations of the shares of such class or series, or any of them; and to increase or decrease the number of shares of any series subsequent to the issue of shares of that series, but not below the number of shares of such series then outstanding. In case the number of shares of any series shall be so decreased, the shares constituting such decrease shall resume the status which they had prior to the adoption of the resolution originally fixing the number of shares of such series. (c) Except as otherwise provided by statute, or in the resolution or resolutions of the Board of Directors of the Corporation authorizing the issuance of a class or a series of Preferred Stock and fixing and determining the voting rights of the shares of any such class or series, the only class of capital stock of the Corporation entitled to voting rights for any purpose shall be the Common Stock, the holders of which shall have one vote for each share held by them of record. 5 FIFTH: (a) The business and affairs of the Corporation shall be managed under the direction of the Board of Directors, the number of which, subject to any right of the holders of any series of Preferred Stock then outstanding to elect additional directors under specified circumstances, shall be fixed from time to time by the Board of Directors pursuant to the By-laws of the Corporation. (b) Subject to the rights of holders of any series of Preferred Stock then outstanding, newly created directorships resulting from any increase in the authorized number of directors or any vacancies in the Board of Directors resulting from death, resignation, retirement, disqualification, removal from office or other cause shall be filled by a majority vote of the directors then in the office. Any director elected in accordance with the preceding sentence of this paragraph (b) of this Article FIFTH shall hold office until the next meeting of stockholders at which the election of directors is in the regular course of business and until such director's successor has been elected and qualified. No decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director. SIXTH: No director of the Corporation shall be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty or loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the GCL, or (iv) for any transaction from which the director derived an improper personal benefit. SEVENTH: In furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized to adopt, repeal, alter, amend or rescind the By-laws of the Corporation. In addition, the By-laws of the Corporation may be adopted, repealed, altered, amended, or rescinded by the affirmative vote of a majority of the outstanding shares of stock of the Corporation entitled to vote thereon. EIGHTH: From time to time any of the provisions of this Certificate of Incorporation may be amended, altered or repealed, and other provisions authorized by the laws of the State of Delaware at the time in force may be added or inserted in the manner and at the time prescribed by said laws, and all rights at any time conferred upon the stockholders of the Corporation by this Certificate of Incorporation are granted subject to the provisions of this Article EIGHTH. NINTH: The incorporator is Leonard H. Goldner, whose business address is c/o Shereff, Friedman, Hoffman & Goodman, 919 Third Avenue, New York, New York 10022. 6 I, the undersigned, for the purpose of forming a corporation under the laws of the State of Delaware, do make, file and record this Certificate and do certify that the facts herein stated are true, and I have accordingly hereunto set my hand this 18th day of August, 1987. s/Leonard H. Goldner Leonard H. Goldner Secretary 7 EXHIBIT 3.3 18 Amended as of April 29, 1996 By-laws OF SYMBOL TECHNOLOGIES, INC. ________________________ ARTICLE I OFFICES Section 1.1. Registered Office. The registered office of the Corporation within the State of Delaware shall be located at the principal place of business in said State of such corporation or individual acting as the Corporation's registered agent in Delaware. Section 1.2. Other Offices. The Corporation may also have offices and places of business at such other places both within and without the State of Delaware as the Board of Directors may from time to time determine or the business of the Corporation may require. ARTICLE II MEETING OF STOCKHOLDERS Section 2.1. Place of Meetings. All meetings of stockholders shall be held at the principal office of the Corporation, or at such other place within or without the State of Delaware as shall be stated in the notice of the meeting or in a duly executed waiver of notice thereof. Section 2.2. Annual Meeting. The Annual Meeting of Stockholders shall be held at such time on such day as shall be fixed by and in the discretion of the Board of Directors. At the annual meeting, the stockholders entitled to vote for the election of directors shall elect, by a plurality vote, a Board of Directors and transact such other business as may properly come before the meeting. Section 2.3. Special Meetings. Special meetings of stockholders, for any purpose or purposes, may be called by the Chief Executive Officer and shall be called promptly by the Chairman of the Board, if there be a Chairman of the Board, the President or the Secretary at the written request of a majority of the entire Board of Directors or the holders of record of at least fifty percent (50%) of the issued and outstanding shares of the Corporation entitled to vote for the election of directors. Any such request shall state the purpose or purposes of the proposed meeting. At any special meeting of stockholders, only such business may be transacted as is related to the purpose or purposes set forth in the notice or waiver of notice thereof. Section 2.4. Notice of Meeting. Written notice of every meeting of stockholders, stating the place, date and hour 8 thereof and, in the case of a special meeting of stockholders, the purpose or purposes thereof and the person or persons by whom or at whose direction such meeting has been called and such notice is being issued shall be given not less than ten (10) nor more than sixty (60) days before the date of the meeting, either personally or by mail, such notice shall be deemed given when deposited in the United States mail, with postage prepaid, directed to the stockholder at his address as it appears on the record of the shareholders or if he shall have filed with the Secretary of the Corporation a written request that notices to him be mailed to some other address, then directed to him at such other address. Nothing herein contained shall preclude any stockholder from waiving notice as provided in Section 4 hereeof. Section 2.5. Quorum. The holders of a majority of the issued and outstanding shares of stock of the Corporation entitled to vote thereat, represented in person or by proxy, shall be necessary to and shall constitute a quorum for the transaction of business at any meeting of stockholders. If, however, such quorum shall not be present or represented at any meeting of stockholders, the stockholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At any such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally noticed. Notwithstanding the foregoing, if after any such adjournment the Board of Directors shall fix a new record date for the adjourned meeting, or if the adjournment is for more than thirty (30) days, a notice of such adjourned meeting shall be given as provided in Section 2.4 of these By-laws, but such notice may be waived as provided in Section 4 hereof. Section 2.6. Voting. At each meeting of stockholders, each holder of record of shares of stock entitled to vote shall be entitled to vote in person or by proxy, and each such holder shall be entitled to one vote for every share standing in his name on the books of the Corporation as of the record date fixed by the Board of Directors or prescribed by law and, if a quorum is present, a majority of the shares of such stock present or represented at any meeting of stockholders shall be the vote of the stockholders with respect to any item of business, unless otherwise provided by any applicable provision of law, by these By-laws or by the Certificate of Incorporation. The Board of Directors, in its discretion, or the officer of the Corporation presiding at a meeting of stockholders, in his discretion, may require that any votes cost at such meeting shall be cast by written ballot. Section 2.7. Proxies. Every stockholder entitled to vote at a meeting may authorize another person or persons to act for him by proxy. Each proxy shall be in writing executed by the stockholder giving the proxy or by his duly authorized attorney. No proxy shall be valid after the expiration of three (3) years from its date, unless a longer period is provided for in such proxy. Unless and until voted, every proxy shall be revocable at 9 the pleasure of the person who executed it, or his legal representatives or assigns except in those cases where an irrevocable proxy permitted by law has been given. Section 2.8. Written Consent. Any action required or permitted to be taken by the stockholders of the Corporation at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Section 2.9. List of Stockholders. The officer of the Corporation having charge of the stock ledger shall make, at least ten (10) days before each meeting of stockholders, a complete list of the stockholder entitled to vote at such meeting or any adjournment thereof, arranged in alphabetical order and showing the address of and the number and class and series, if any, of shares held by each. Such list, for a period of ten (10) days prior to such meeting, shall be kept at the principal place of business of the Corporation or at the office of the transfer agent or registrar of the Corporation and such other places as required by statute and shall be subject to inspection by any stockholder for any purpose germane to the meeting at any time during usual business hours. Such list shall also be produced and kept open at the time and place of the meeting and may be inspected by any stockholder who is present. Section 2.10. Stock Ledger. The stock ledger of the Corporation shall be the only evidence as to who are the stockholder entitled to examine the stock ledger, the list required by Section 2.9 or the books of the Corporation, or to vote in person or by proxy at any meeting of stockholders. ARTICLE III DIRECTORS Section 3.1. Number of Directors. The number of directors of the Corporation which shall constitute the entire Board of Directors shall be fixed from time to time by a vote of a majority of the entire Board and shall be not less than one (1) nor more than fifteen (15). Section 3.2. Election of Directors; Terms. Except as otherwise provided in the By-laws, only persons who are nominated in accordance with the procedures in this Section shall be eligible for election as directors of the Corporation. Nominations of persons for election to the Board of Directors may be made at any annual meeting of stockholders by or at the direction of the Board of Directors, or by any stockholder of record entitled to vote at the meeting if written notice of the stockholder's intent to nominate such person or persons is delivered to, or mailed, postage prepaid, and received by, the Secretary of the Corporation at the principal executive offices of the Corporation no later than December 32 of the year 10 preceding the date of the meeting. Each such notice given by a stockholder must set forth any information relating to the nominee that would be required to be disclosed in a proxy statement or other filing required to be made under state or federal securities laws. The directors shall be elected at the annual meeting of stockholders and until his successor shall have been elected and qualified. Directors need not be stockholders of the Corporation. Section 3.3. Resignations. Any director of the Corporation may resign at any time by giving written notice to the Board or to the Secretary of the Corporation. Any such resignation shall take effect at the time specified therein, or, if the time be not specified, it shall take effect immediately upon its receipt, and unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. section 3.4. Removal. At a special meeting of stockholders called for this purpose in the manner herein provided, the Board of Directors, or any individual director, may be removed from office, with or without cause, and a new director or directors elected by a vote of stockholders holding a majority of the outstanding shares entitled to vote at an election of directors. Section 3.5. Newly Created Directorships and Vacancies. Subject to the rights of the holders of any series of Preferred Stock then outstanding, newly created directorships resulting from any increase in the authorized number of directors or any vacancies in the Board of Directors resulting from death, resignation, retirement, disqualification, removal from office or other cause shall be filled by a majority vote of the directors then in office. Any director elected in accordance with the preceding sentence of this Section 3.5 shall hold office until the next meting of stockholders at which the election of directors is in the regular course of business and until such director's successor has been elected and qualified. No decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director. Section 3.6. Powers and Duties. Subject to the applicable provisions of law, these By laws or the Certificate of Incorporation, but in furtherance and not in limitation of any rights therein conferred, the Board of Directors shall have the control and management of the business and affairs of the Corporation and shall exercise all such powers of the Corporation and do all such lawful acts and things as may be exercised by the Corporation. Section 3.7. Place of Meetings. All meetings of the Board of Directors may be held either within or without the State of Delaware. Section 3.8. Annual Meeting. If the first meeting of each newly elected Board of Directors shall be held immediately after the annual stockholder's meeting and in the same place, 11 notice thereof shall not be necessary in order to constitute the meeting, provided a quorum shall be present. In the event that such meeting is not held at such date, time and place, the meeting may be held on any other date, time and place as shall be specified in a notice thereof given as hereinafter provided in Section 3.11 or as shall be specified in any waiver of notice thereof. Section 3.9. Regular Meetings. Regular meetings of the Board of Directors may be held upon notice or without notice, and at such time and at such place as shall from time to time be determined by the Board. Section 3.10. Special Meetings. Special meetings of the Board of Directors may be called by the Chairman of the Board, if there be a Chairman of the Board, or by the President or if he is absent, unable or refuses to act, by the Secretary and shall be called promptly upon the written request of any two directors specifying the special purpose thereof, on not less than two (2) days notice to each directors. Such requests shall state the date, time and place of the meeting. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board of Directors need be specified in the notice or waiver of notice of such meeting. Section 3.11. Notice of Meeting. Notice of each special meeting of the Board (and of each regular meeting for which notice shall be required) shall be given by the Chairman of the Board, if there be a Chairman of the Board, the President or the Secretary and shall state the place, date and time of the meeting. Notice of each such meeting shall be given orally or shall be mailed to each director at his residence or usual place of business. If notice of less than one week is given, it shall be oral, whether by telephone or in person, or sent by special delivery or express mail, telecopy, telex, cable, telegraph or any other electronic means of communication. If mailed, the notice shall be deemed given when deposited in the United States mail, postage prepaid. Notice of any adjourned meeting, including the place, date and time of the new meeting, shall be given to all directors not present at the time of the adjournment, as well as to the other directors unless the place, date and time of the new meeting is announced at the adjourned meeting. Nothing herein contained shall preclude the directors from waiving notice as provided in Section 4 hereof. Section 3.12. Quorum and Voting. At all meetings of the Board of Directors a majority of the entire Board shall be necessary to and shall constitute a quorum for the transaction of business at any meeting of the Board of Directors, unless otherwise provided by any applicable provision of law, by these By-laws, or by the Certificate of Incorporation. The act of a majority of the directors present at the time of the vote, if a quorum is present at such time, shall be the act of the Board of Directors, unless otherwise provided by any applicable provision of law, by these By-laws or by the Certificate of Incorporation. If a quorum shall not be present at any meeting of the Board of 12 Directors, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. Section 3.13. Compensation. The Board of Directors, by the affirmative vote of a majority of the directors then in office and irrespective of any personal interest of any of its members, shall have authority to establish reasonable compensation of all directors for services to the Corporation as directors, officers or otherwise. The Board of Directors may also provide that the directors may be reimbursed for their expenses, if any, or attendance at any meeting of the Board or any committee thereof. Section 3.14. Books and Records. The directors may keep the books for the Corporation, except such as are required by law to be kept within the state, outside of the State of Delaware, at such place or places as they may from time to time determine. Section 3.15. Action Without a Meeting. Any action required or permitted to be taken by the Board, or by a committee of the Board, may be taken without a meeting if all members of the Board or committee, as the case may be, consent in writing to the adoption of a resolution authorizing the action. Any such resolution and the written consents thereto by the members of the Board or committee shall be filed with the minutes of the proceedings of the Board or committee. Section 3.16. Telephonic Meetings. Any one or more members of the Board, or any committee of the Board, may participate in a meeting of the Board or committee by means of a conference telephone or similar communications equipment allowing all persons participating in the meeting to hear each other at the same time. Participation by such means shall constitute presence in person at a meeting. Section 3.17. Committee of the Board. The Board may, by resolution adopted by a majority of the entire Board, designate from among its members an executive and other committees, each consisting of one (1) or more directors. The Board may designate one or more directors as alternate members of any such committee. Such alternate members may replace any absent member or members at any meeting of any such committee. In the absence or disqualification of a member if a committee, and in the absence of a designation by the Board of Directors of an alternate member to replace the absent or disqualified member, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any absent or disqualified member. The Board may also designate one or more directors as an additional member or members of any such committee solely for purposes of a specific meeting or series of meetings of any such committee. Each committee (including the members thereof) shall serve at the pleasure of the Board and shall keep minutes of its meetings and report the same to the 13 Board. Vacancies in the membership of the committee shall be filled by the Board at a regular meeting or at a special meeting for that purpose. A majority of the entire committee shall be necessary to and shall constitute a quorum for the transaction of business at any meeting of the committee, unless otherwise provided by any applicable provision of law, these By-laws or the Certificate of Incorporation. The act of a majority of the members of the committee present at the time of the vote, if a quorum is present at such time, shall be the act of the committee, unless otherwise provided by any applicable provision of law, these By-laws or the Certificate of Incorporation. Section 3.18. Authority of Committees; Duties of Directors. Except as otherwise provided by law, each such committee shall have and may exercise all the authority of the Board with respect to all matters, to the extent provided in the resolution of the Board establishing such committee or in any subsequent resolution of the Board. ARTICLE IV WAIVER Section 4. Waiver Whenever a notice is required to be given by any provision of law, by these By-laws, or by the Certificate of Incorporation, a waiver thereof in writing, or by telecopy or any other means of communication permissible by law, whether before or after the time stated therein, shall be deemed equivalent to such notice. In addition, any stockholder attending a meeting of stockholders in person or by proxy without protesting prior to the conclusion of the meeting the lack of notice thereof to him, and any director attending a meeting of the Board of Directors without protesting prior to the meeting or at its commencement such lack of notice, shall be conclusively deemed to have waived notice of such meeting. ARTICLE V OFFICERS Section 5.1. Officers. The officers of the Corporation shall be a Chairman of the Board, one or more Vice Presidents and a Secretary. The Corporation may also have, at the discretion of the Board, one or more Assistant Secretaries, one or more Assistant Vice Presidents, one or more Assistant Treasurers, a Controller and one or more Assistant Controllers, and such other officers as the Board of Directors shall at anytime or from time to time deem necessary or advisable to designate as officers or as may be appointed in accordance with the provisions of Section 5.3 of this Article V. Any person may hold two or more of such officers. All officers, as between themselves and the Corporation, shall have such authority and perform such duties in the management of the business and affairs of the Corporation as may be provided in these By-laws, or to the extent not so provided, as may be prescribed by the Board of Directors or the Chief Executive Officer as provided in Section 5.3 of this Article V. 14 Section 5.2. Election. The officers of the Corporation, except such officers as may be appointed in accordance with the provisions of Section 5.3 or Section 5.5 of this Article, shall have been elected annually at the annual meeting of the Board of Directors following the annual meeting of stockholders and, as vacancies occur, from time to time by the Board of Directors. Each officer shall hold his office until he shall resign or shall be removed or otherwise disqualified to serve, or his successor shall have been elected and qualified. The officers of the Corporation need not be stockholders of the Corporation nor, except for the Chairman of the Board, need such officers be directors of the Corporation. Section 5.3. Subordinate Officers. The Board may appoint, or may authorize the Chief Executive Officer to appoint, such other officers as the business of the Corporation may require, each of whom shall have authority and perform such duties as are provided in these By-laws or as the Board or the Chief Executive Officer may from time to time specify and each shall hold office until he shall resign or shall have been removed or otherwise disqualified to serve. Section 5.4. Removal and Resignation. Any officer may be removed, either with or without cause, by a majority of the directors at the time in office, at any regular or special meeting of the Board, or, except in the case of an officer chosen by the Board, by any officer upon whom such power of removal may be conferred by the Board. Any office may resign at any time by giving written notice to the Board, the Chairman of the Board, the President or the Secretary of the Corporation. Any such resignation shall take effect at the date of the receipt of such notice or at any later time specified therein; and unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. Section 5.5. Vacancies. A vacancy in any office because of death, resignation, removal, disqualification or any other cause shall be filled in the manner prescribed in the By- laws for the regular appointments to such office. Section 5.6. Compensation. The salaries and other compensation of all officers and agencies of the Corporation shall be fixed by or in the manner prescribed by the Board of Directors. Section 5.7. Chairman of the Board. The Chairman of the Board shall preside at all meetings of the Board of Directors. The Chairman of the Board shall be the Chief Executive Officer of the Corporation, if designated as such by the Board of Directors. Section 5.8. President. The President shall be the Chief Executive Officer and/or the Chief Operating Officer of the Corporation, as determined by the Board of Directors. In the absence of the Chairman of the Board, if the President is a director of the Corporation, the President shall preside at 15 meetings of the Board of Directors. The President shall have general and active management of the business and affairs of the Corporation and be responsible for its day-to-day operations, subject to the control of the Board of Directors and the Chief Executive Officer, if the President does not hold that position, and shall see to it that all orders and resolutions of the Board of Directors are carried into effect. Section 5.9. Vice Presidents. Each Vice President (including any Executive Vice President or Senior Vice President) shall have such powers and limiting titles and shall perform such duties as may from time to time be assigned to him by the Board of Directors and/or the Chief Executive Officer. Section 5.10. Secretary. The Secretary shall attend all meetings of the stockholders and all meetings of the Board of Directors and shall record all proceedings taken at such meeting in a book to be kept for the purpose; he or an Assistant Secretary shall see that all notices of meetings of stockholders and special meetings of the Board of Directors are duly given in accordance with the provisions of these By-laws or as required by law; and he shall be custodian of the records and of the corporate seal or seals of the Corporation; he or an Assistant Secretary shall have authority to affix the corporate seal or seals to all documents, the execution of which, on behalf of the Corporation, under its seal, is duly authorized, and when so affixed it may be attested by his signature or the signature of such Assistant Secretary; and in general, he shall perform all duties incident to the office of the Secretary of the corporation and such other duties as the Board of Directors may from time to time prescribe. The Board of Directors may give general authority to any other officer to affix the seal of the Corporation and to attest the affixing by his signature. ARTICLE VI PROVISIONS RELATING TO STOCK CERTIFICATES AND STOCKHOLDERS Section 6.1. Form and Signature. The shares of the Corporation shall be represented by certificates signed by the President or any Vice President or the Chairman of the Board, if there be a Chairman, or any Vice Chairman of the Board, if any, and by the Secretary or any Assistant Secretary, if any, or the Treasurer to any Assistant Treasurer, if any, and shall bear the seal of the Corporation or a facsimile thereof. Each certificate representing shares shall state upon its face (a) that the Corporation is formed under the laws of the State of Delaware, (b) the name of the person or persons to whom it is issued, (c) the number of shares which such certificate represents and (d) the par value, if any, of each share represented by such certificate. Section 6.2. Registered Stockholders. The Corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares of stock to receive dividends or other distributions, and to vote as such owner, and to hold liable for calls and assessments a person 16 registered on its books as the owner of shares of stock, and shall not be bound to recognize any equitable or legal claim to or interest in such share or shares on the part of any other person. Section 6.3. Transfer of Stock. Upon surrender to the Corporation or the appropriate transfer agent, if any, of the Corporation, of a certificate representing shares of stock of the Corporation, duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, and, in the event that the certificate refers to any agreement restricting transfer of the shares which it represents, proper evidence of compliance with such agreement, a new certificate shall be issued to the person entitled thereto, and the old certificate cancelled and the transaction recorded upon the books of the Corporation. Section 6.4. Lost Certificates, etc. The Corporation may issue a new certificate for shares in place of any certificate theretofore issued by it, alleged to have been lost, mutilated, stolen or destroyed, and the Board may require the owner of such lost, mutilated, stolen or destroyed certificate, or his legal representatives, to make an affidavit of that fact and/or to give the Corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the Corporation on account of the alleged loss, mutilation, theft or destruction of any such certificate or the issuance of any such new certificate. Section 6.5. Record Date. For the purpose of determining the stockholders entitled to notice of, or to vote at, any meeting of stockholders or any adjournment thereof, or to express written consent to, or dissent from, any corporate action without a meeting, or for the purpose of determining stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board may fix, in advance, a record date. Such date shall not be more than sixty (60) nor less than ten (10) days before the date of any such meeting, nor more than sixty (60) days prior to any other action. Section 6.6. Regulations. Except as otherwise provided by law, the Board may make such additional rules and regulations, not inconsistent with these By-laws, as it may deem expedient, concerning the issue, transfer and registration of certificates for the securities of the Corporation. The Board may appoint, or authorize any officer or officers to appoint, one or more transfer agents and one or more registrars and may require all certificates for shares of capital stock to bear the signature or signatures of any of them. ARTICLE VII GENERAL PROVISIONS Section 7.1. Dividends and Distributions. Dividends and other distributions upon or with respect to outstanding 17 shares of stock of the Corporation may be declared by the Board of Directors at any regular or special meeting, and may be paid in cash, bonds, property, or in shares of stock of the Corporation. The Board shall have full power and discretion, subject to the provisions of the Certificate of Incorporation or the terms of any other corporate document or instrument binding upon the Corporation to determine what, if any, dividends or distributions shall be declared and paid or made. Section 7.2. Checks, etc.. All checks or demands for money and notes or other instruments evidencing indebtedness or obligations of the Corporation shall be signed by such officer or officers or other person or persons as may from time to time be designated by the Board of Directors. Section 7.3. Seal. The corporate seal shall have inscribed thereon the name of the Corporation, the year of its incorporation and the words "Corporate Seal Delaware". The seal may be used by causing it or a facsimile thereof to be impressed or affixed or otherwise reproduced. Section 7.4. Fiscal Year. The fiscal year of the Corporation shall be determined by the Board of Directors. Section 7.5. General and Special Bank Accounts. The Board may authorize from time to time the opening and keeping of general and special bank accounts with such banks, trust companies or other depositories as the Board may designate or as may be designated by any officer or officers of the Corporation to whom such power of designation may be delegated by the Board from time to time. The Board may make such special rules and regulations with respect to such bank accounts, not inconsistent with the provisions of these By-laws, as it may deem expedient. ARTICLE VIII INDEMNIFICATION OF DIRECTORS, OFFICERS AND OTHERS Section 8.1. Indemnification by the Corporation. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (including but not limited to any action or suit by or in the right of the Corporation to procure a judgment in its favor) by reason of the fact that he is or was a director or officer of the Corporation, or is or was serving at the request of the Corporation as a director, office, employee or agent of another corporation, partnership, joint venture, trust, or other enterprise in any capacity, against expenses (including attorneys' fees), judgments fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding; provided, however, that no indemnification shall be made to or on behalf of any person if such indemnification would be prohibited under applicable law. The foregoing indemnification shall be in addition to any other rights to which those indemnified may be entitled under any law, agreement, vote or stockholders, or otherwise. 18 Section 8.1. Contract Right; Advances. The right to indemnification conferred in this Article VIII shall be a contract right and shall include the right to be paid by the corporation the expenses incurred in defending any proceeding referred to in Section 8.1 in advance of its final disposition; provided, however, that the payment of such expenses incurred by a director or officer in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by such person while a director or officer) in advance of the final disposition of a proceeding, shall be made only upon delivery to the Corporation of an undertaking, by or on behalf of such director or officer, to repay all amounts so advanced if it shall ultimately be determined that such director or officer is not entitled to be indemnified under this Article VIII or otherwise. Section 8.23. Indemnification of Other Persons. The Corporation may, by action of the Board of Directors, indemnify any other person to whom the Corporation is permitted to provide indemnification or the advancement of expenses under applicable directors and officers; provided, however, that no indemnification shall be made to or on behalf of any such other person if such indemnification would be prohibited under applicable law. Section 8.4. Right to Bring Suit. If a claim for indemnification under Section 8.1 of this Article VIII is not paid in full by the Corporation within thirty days after a written claim has been received by the Corporation, the claimant may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall be entitled to also be paid the expense of prosecuting such claim. Neither the failure of the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances, nor an actual determination by the Corporation(including its Board of Directors, independent legal counsel or its stockholders) that the claimant is not entitled to indemnification or to reimbursement or advancement of expenses, shall be a defense to the action or create a presumption that the claimant is not so entitled. Section 8.5. Insurance. The Corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, truest or other enterprise against any such expense, liability or loss under the Delaware General Corporation law. ARTICLE I ADOPTION AND AMENDMENTS Section 9. Amendments. These By-laws may be repealed, altered or amended or new By-laws adopted by the 19 stockholders. The Board of Directors shall have the authority, if such authority is conferred upon the Board of Directors by the Certificate of Incorporation,, to repeal, alter or amend these By-laws or adopt new By-laws (including, without limitation, the amendment of any By-laws setting forth the number of directors who shall constitute the whole Board of Directors) subject to the power of the stockholders to change or repeal such By-laws. 20 EXHIIT 23 21 SYMBOL TECHNOLOGIES, INC. 100% Owned by Symbol Technologies, Inc. Symbol Technologies International, Inc. One Symbol Plaza Holtsville, NY 11742-1300 State of Incorporation: New York Symbol Technologies International, Inc. One Symbol Plaza Holtville, NY 11742-1300 State of Incorporation: Delaware SymboLease, Inc. One Symbol Plaza Holtsville, NY 11742-1300 State of Incorporation: Delaware Symbol Technologies Africa, Inc. 387 Devereux Avenue Winchester Hills, Ext. 1 Johannesburg 2091 South Africa State of Incorporation: Delaware Symbol Technologies Asia, Inc. 230 Victoria Street 04-05 Bugis Junction Office Tower Singapore 0718 State of Incorporation: Delaware SymboLease Canada, Inc. 2540 Matheson Boulevard East Mississauga, Ontario, Canada L4W 4Z2 State of Incorporation: Delaware Symbol Technologies Mexico, Limited Bld.M. Avila Camacho #88 39 Pisco Col. Lomas de Chapultepec Mexico City, Mexico 11000DF Country of Incorporation: Mexico Symbol Technologies Texas, Inc. One Symbol Plaza Holtsville, NY 11742-1300 State of Incorporation: Texas Subsidiaries of Symbol Technologies International, Inc. (Delaware) Symbol Australia Pty. Ltd. 432 St. Kilda Road Melbourne, Victoria 3004 Australia Country of Incorporation: Australia 22 Symbol Technologies GmbH 2 Haus - 5 Stock Prinz-Eugenstrasse 70 1040 Wein Austria Country of Incorporation: Austria Symbol Technologies Canada, Inc. 2540 Matheson Blvd. East Mississauga, Ontario, Canada L4W 4Z2 Country of Incorporation: Canada Symbol Technologies A/S Carlsbergvej 32 3400 Hillrod, Denmark Country of Incorporation: Denmark Symbol Technologies S.A. Centre d'Affaire d'Anthony 3 Rue du la Renaissance 92184 Antony Cedex, France Country of Incorporation: France Symbol Technologies GmbH Waldstrasse 68 6057 Dietzenbach Germany Country of Incorporation: Germany Symbol Technologies, S.R.L. Via Cristoforo Colombo, 49 20090 Trezzano S/L Naviglio, Milan, Italia Country of Incorporation: Italy Symbol Technologies, S.A. * Calle Princesa 32 Edificion Piovera Azul 28042 Madrid Spain Country of Incorporation: Spain Symbol Technologies Limited 12 Oaklands Park Fishponds Road Wokingham Berkshire, England RG11 2FD Country of Incorporation: United Kingdom Symbol-LIS Knaves House Knaves Beech Business Centre Loudwater High Wycome Bucks, England HP10 9QR * Majority owned by Symbol Technologies International, Inc. 23 EXHIBIT 23 24 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in Registration Statements No. 2-81405, No. 2-94868, No. 2-94876, No. 33-3771, No. 33-13009, No. 33-18748, No. 33-25509, No. 33-25484, No. 33-25567, No. 33-35821, No. 33-43580, No. 33-48025, No. 35-48026, No. 33-78622, No. 33-78678, No.33-59333 and No. 333-01769 on Form S-8 and No. 33-18745, No. 33-25432, No. 33-43581, No. 33-43584 and No. 33-45016 on Form S-3 of Symbol Technologies, Inc. of our report dated February 12, 1997, appearing in this Annual Report on Form 10-K of Symbol Technologies, Inc. for the year ended December 31, 1995. Deloitte and Touche LLP Jericho, New York March 3, 1997 25
EX-27 2
5 12-MOS DEC-31-1996 DEC-31-1996 34,290,000 0 156,396,000 (10,123,000) 133,637,000 352,354,000 161,775,000 (60,444,000) 614,238,000 130,676,000 50,541,000 0 0 282,000 399,394,000 614,238,000 656,675,000 656,675,000 349,428,000 360,114,000 212,374,000 0 (3,129,000) 81,058,000 30,802,000 50,256,000 0 0 0 50,256,000 1.86 1.85
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