UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2002
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to _____
Commission file number 0-24172
Metrologic Instruments, Inc.
(Exact name of registrant as specified in its charter)
New Jersey 22-1866172
(State or other jurisdiction (I.R.S. Employer
incorporation or organization) Identification No.)
90 Coles Road, Blackwood, New Jersey 08012
(Address of principal executive offices) (Zip Code)
(856) 228-8100
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No __
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes __ No X
As of November 12, 2002 there were 5,470,039 shares of Common Stock, $.01 par
value per share, outstanding.
METROLOGIC INSTRUMENTS, INC.
INDEX
Page
No.
Part I - Financial Information
Item 1. Financial Statements (unaudited)
Condensed Consolidated Balance Sheets -
September 30, 2002 and December 31, 2001 3
Condensed Consolidated Statements of Operations -
Three and Nine Months Ended September 30,
2002 and 2001 4
Condensed Consolidated Statements of Cash Flows -
Nine Months Ended September 30, 2002 and 2001 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10
Item 3. Quantitative and Qualitative Disclosures about
Market Risk 14
Part II - Other Information
Item 1. Legal Proceedings 15
Item 2. Changes in Securities and Use of Proceeds 17
Item 3. Defaults upon Senior Securities 17
Item 4. Submission of Matters to a Vote of Security Holders 17
Item 5. Other Information 17
Item 6. Exhibits and Reports on Form 8-K 17
Signatures 18
Exhibit Index 19
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
Metrologic Instruments, Inc.
Condensed Consolidated Balance Sheets
(amounts in thousands except share data)
September 30, December 31,
Assets 2002 2001
-------- --------
(Unaudited)
Current assets:
Cash and cash equivalents $ 1,051 $ 557
Restricted cash 1,000 3,200
Accounts receivable, net of allowance 19,777 20,401
Income tax refund receivable - 4,600
Inventory 15,591 18,385
Deferred income taxes 1,181 1,535
Other current assets 2,104 2,379
-------- --------
Total current assets 40,704 51,057
Property, plant and equipment, net 13,220 13,776
Patents and trademarks, net of amortization 4,548 4,062
Holographic technology, net of amortization 397 484
Advance license fee, net of amortization 1,323 1,412
Goodwill 14,923 15,249
Deferred income taxes 1,992 701
Other assets 724 865
-------- --------
Total assets $ 77,831 $ 87,606
======== ========
Liabilities and shareholders' equity
Current liabilities:
Current portion of lines of credit $ 8,139 $ 2,433
Current portion of notes payable 11,921 10,833
Accounts payable 7,573 6,930
Accrued expenses 12,260 12,176
-------- --------
Total current liabilities 39,893 32,372
Lines of credit, net of current portion - 9,000
Notes payable, net of current portion 8,388 18,465
Deferred income taxes 1,718 951
Other liabilities 614 557
Shareholders' equity:
Preferred stock, $0.01 par value: 500,000 shares
authorized; none issued - -
Common stock, $0.01 par value: 10,000,000 shares
authorized; 5,467,579 and 5,463,382 shares
issued and outstanding at September 30, 2002
and 2001, respectively 55 55
Additional paid-in capital 17,675 17,634
Retained earnings 12,941 12,926
Accumulated other comprehensive loss (3,453) (4,354)
--------- --------
Total shareholders' equity 27,218 26,261
--------- --------
Total liabilities and shareholders' equity $ 77,831 $ 87,606
========= ========
See accompanying notes.
Metrologic Instruments, Inc.
Condensed Consolidated Statements of Operations
(amounts in thousands except share and per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
2002 2001 2002 2001
(Unaudited) (Unaudited)
Sales $27,957 $26,809 $84,898 $84,650
Cost of sales 17,101 18,089 54,009 65,104
------- ------- ------- -------
Gross profit 10,856 8,720 30,889 19,546
Selling, general and
administrative expenses 7,270 7,806 21,793 24,296
Research and development
expenses 1,754 1,612 5,287 4,883
Severance costs 251 - 602 -
Non-recurring amended credit
agreement expenses - - 732 -
------- ------- ------- -------
Operating income (loss) 1,581 (698) 2,475 (9,633)
Other income (expenses)
Interest income 15 10 70 147
Interest expense (668) (953) (2,107) (3,185)
Foreign currency transaction
(loss) gain (530) 337 (306) 176
Other, net 34 (58) 20 (137)
Non-recurring default
interest expenses - - (128) -
------- ------- ------- -------
Total other expenses (1,149) (664) (2,451) (2,999)
------- ------- ------- -------
Income (loss) before
tax benefit 432 (1,362) 24 (12,632)
Income tax expense (benefit) 164 (517) 9 (4,806)
------- ------- ------- -------
Net income (loss) $ 268 $ (845) $ 15 $(7,826)
======= ======= ======= =======
Basic income (loss) per share
Weighted average shares
outstanding 5,467,579 5,458,368 5,465,538 5,456,137
Basic income (loss)
per share $ 0.05 $ (0.15) $ 0.00 $ (1.43)
Diluted income (loss) per share
Weighted average shares
outstanding 5,467,579 5,458,368 5,465,538 5,456,137
Net effect of dilutive
securities 2,524 - 842 -
Total shares outstanding
used in computing diluted
income (loss) per share 5,470,103 5,458,368 5,466,380 5,456,137
Diluted income (loss) per
share $ 0.05 $ (0.15) $ 0.00 $ (1.43)
See accompanying notes.
Metrologic Instruments, Inc.
Condensed Consolidated Statements of Cash Flows
(amounts in thousands)
Nine Months Ended
September 30,
---------------------------
2002 2001
-------- --------
(unaudited)
Operating activities
Net cash provided by
operating activities $ 12,304 $10,910
Investing activities
Decrease in restricted cash 2,200 -
Purchase of property, plant and equipment (1,536) (1,555)
Patents and trademarks (733) (843)
Cash paid for purchase of business,
net of cash acquired - (19,739)
Other Intangibles - (100)
------- -------
Net cash used in investing activities (69) (22,237)
Financing activities
Proceeds from exercise of stock options and
employee stock purchase plan 40 55
Principal payments on notes payable (12,155) (12,145)
Proceeds from issuance of notes payable 105 20,348
Net (payments) proceeds from line of credit (102) 4,528
Capital lease payments (131) (80)
Net cash (used in) provided by ------- -------
financing activities (12,243) 12,706
Effect of exchange rates on cash 502 (427)
------- -------
Net increase in cash and
cash equivalents 494 952
Cash and cash equivalents at beginning of period 557 2,332
------- -------
Cash and cash equivalents at end of period $ 1,051 $ 3,284
======== =======
Supplemental Disclosure
Cash paid for interest $ 2,178 $ 3,002
Cash paid for income taxes $ 164 $ 112
See accompanying notes.
METROLOGIC INSTRUMENTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands)
(Unaudited)
1. Business
Metrologic Instruments, Inc. and its subsidiaries (collectively, the "Company")
design, manufacture and market bar code scanning and high-speed automated data
capture solutions using laser, holographic and vision-based technologies. The
Company offers expertise in 1D and 2D bar code reading, optical character
recognition, image lift, and parcel dimensioning and singulation detection for
customers in retail, commercial, manufacturing, transportation and logistics,
and postal and parcel delivery industries. Additionally, through its
wholly-owned subsidiary, Adaptive Optics Associates, Inc. ("AOA"), the Company
is engaged in developing, manufacturing, marketing and distributing custom
optical systems which include precision laser beam delivery, high speed imaging
control and data processing, industrial inspection, and scanning and
dimensioning systems for the aerospace and defense industry in the United
States and Canada. The Company's products are sold in more than 100 countries
worldwide through the Company's sales, service and distribution offices located
in North and South America, Europe and Asia.
2. Accounting Policies
Interim Financial Information
The accompanying unaudited Condensed Consolidated Financial Statements have
been prepared in accordance with accounting principles generally accepted in
the United States for interim financial information and the instructions to
Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include
all of the information and footnotes required by accounting principles
generally accepted in the United States for complete financial statements. In
the opinion of management, all adjustments (consisting solely of normal
recurring adjustments) necessary for a fair presentation of the Condensed
Consolidated Financial Statements have been included. The results of the
interim periods are not necessarily indicative of the results to be obtained
for a full fiscal year. The Condensed Consolidated Financial Statements and
these Notes should be read in conjunction with Management's Discussion and
Analysis of Financial Condition and Results of Operations contained in this
Quarterly Report on Form 10-Q and the Company's Annual Report on Form 10-K/A
No. 3 for the year ended December 31, 2001, which was filed on July 25, 2002,
including the Consolidated Financial Statements and the Notes to Consolidated
Financial Statements for the year ended December 31, 2001 contained therein.
Use of Estimates
The preparation of the financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
Reclassifications
Certain 2001 amounts have been reclassified to conform to 2002 presentation.
3. Cost of Sales
Cost of sales for the nine months ended September 30, 2001 included $10,040 of
special charges and other costs as follows: $4,500 of costs associated with
products that are not anticipated to be included in the prospective costs to
manufacture similar products because of reductions in material costs and
manufacturing efficiencies; $3,500 of similar costs associated with a valuation
charge taken on products included in inventory at March 31, 2001 due to the
related cost reductions noted above; $1,000 of costs associated with inventory
deemed to be obsolete at March 31, 2001; and $1,000 of costs associated with
the expensing of floor stock inventory that had been previously capitalized by
the Company.
4. Inventory
Inventory consists of the following:
September 30, 2002 December 31, 2001
------------------ ------------------
Raw materials $ 5,193 $ 7,271
Work-in-process 2,526 4,144
Finished goods 7,872 6,970
------ ------
15,591 18,385
------ ------
5. Goodwill
In the first quarter of 2002, the Company adopted the Provisions of SFAS No.
142. The Company has completed a transitional impairment test as of January 1,
2002, as prescribed in SFAS 142, during the second quarter ended June 30, 2002.
The Company has determined that there was no goodwill impairment to be
recognized as a result of its testing. Fair value of the reporting units was
determined using discounted cash flow analyses.
The Company adopted Statement 142 on January 1, 2002. A reconciliation between
reported net loss to the adjusted net loss is as follows:
Three Months Ended Nine Months Ended
September 30, September 30,
2002 2001 2002 2001
Reported net income (loss) $ 268 $ (845) $ 15 $(7,826)
Add back: Goodwill
amortization - 202 - 609
------- ------- ------- -------
Adjusted net income (loss) $ 268 $ (643) $ 15 $(7,217)
======= ======= ======= =======
Basic earnings per share:
Reported net income (loss) $ 0.05 $ (0.15) $ 0.00 $ (1.43)
Goodwill amortization $ 0.00 .04 0.00 0.11
------- ------- ------- -------
Adjusted net income (loss) $ 0.05 $ (0.11) $ 0.00 $ (1.32)
======= ======= ======= =======
Diluted earnings per share:
Reported net income (loss) $ 0.05 $ (0.15) $ 0.00 $ (1.43)
Goodwill amortization $ 0.00 0.04 0.00 0.11
------- ------- ------- -------
Adjusted net income (loss) $ 0.05 $ (0.11) $ 0.00 $ (1.32)
======= ======= ======= =======
6. Comprehensive Income (Loss)
The Company's total comprehensive income (loss) were as follows:
Three Months Ended Nine Months Ended
September 30, September 30,
2002 2001 2002 2001
Net income (loss) $ 268 $ (845) $ 15 $(7,826)
Other comprehensive income
(loss):
Change in equity due to
foreign currency
translation adjustments (227) 491 901 (1,045)
------- ------- ------- -------
Comprehensive income (loss) $ 41 $ (354) $ 916 $(8,871)
======= ======= ======= =======
7. Business Segment Information
The Company generates its revenue from the sale of laser bar code scanners
primarily to distributors, value-added resellers, original equipment
manufacturers and directly to end users, in locations throughout the world. No
individual customer accounted for 10% or more of revenues in the quarters ended
September 30, 2002 or 2001.
The Company manages its business on a business segment basis dividing the
business into two major segments: Industrial scanning and Optical; and Point of
Sale ("POS")/Original Equipment Manufacturers ("OEM"). Sales were attributed to
business segments in the following table.
Industrial/ Total
Optical POS/OEM Consolidated
------- --------- ---------
Three months ended September 30, 2002:
Sales $ 6,820 21,137 27,957
Income (loss)
before provision
for income
taxes $ 270 162 432
Identifiable
assets $19,563 58,268 77,831
Three months ended
September 30, 2001
Sales $ 5,431 21,378 26,809
Income (loss)
before benefit
for income
taxes $ (16) (1,346) (1,362)
Identifiable
assets $20,843 68,098 88,941
Nine months ended September 30, 2002:
Sales $21,422 63,476 84,898
Income (loss)
before provision
for income
taxes $ (800) 824 24
Nine months ended September 30, 2001:
Sales $19,272 65,378 84,650
Income (loss)
before benefit
for income
taxes $ 999 (13,631) (12,632)
8. Acquisition
On January 8, 2001, the Company acquired all of the outstanding stock of
Adaptive Optics Associates, Inc. ("AOA"), a developer and manufacturer of
custom optical systems which include precision laser beam delivery, high speed
imaging control and data processing, industrial inspections and scanning and
dimensioning systems for the aerospace and defense industry. The total purchase
price including transaction costs was $21,612. The acquisition was accounted
for under the purchase method of accounting, and accordingly, the results of
AOA's operations from January 8, 2001 are reflected in the 2001 statement of
operations. The excess purchase price over the fair value of net assets
acquired was approximately $11,755 and was being amortized over a straight-line
basis over 10 years through December 31, 2001.
Pro forma results of operations, assuming that the AOA acquisition was
consummated on January 1, 2001, would not be materially different from actual
results.
9. Credit Facility
On July 9, 2002, the Company replaced its former Credit Facility by executing
an Amended and Restated Credit Agreement (the "Amended Credit Agreement") with
its lenders. The key terms of the Amended Credit Agreement include the waiver
of all existing defaults under the Company's former Credit Facility and the
withdrawal by the banks of a notice of default that had been issued to the
Company on April 9, 2002, and an increase in the original interest rate of the
term note by .25% per annum. The Company granted a security interest in its
assets and properties to the primary bank in favor of the banks as security for
borrowings under the Credit Facility. These security interests continue under
the Amended Credit Agreement. The Amended Credit Agreement contains various
negative and positive covenants, such as minimum tangible net worth
requirements, and expires on May 31, 2003. A portion of the outstanding
borrowing under the Amended Credit Agreement is guaranteed by C. Harry Knowles
and Janet Knowles. Additionally, the Company could be required to make
additional prepayments under the Amended Credit Agreement if there are excess
cash flows, as defined in the Amended Credit Agreement.
The Amended Credit Agreement also includes a revolving credit facility of
$14,000 that expires on May 31, 2003. Amounts available for borrowing under
this facility are equal to a percentage of the total of eligible accounts
receivable and inventories, as defined in the agreement, plus an allowable
overadvance of $2,750. The overadvance allowance expires on January 1, 2003.
The Amended Credit Agreement requires the daily application of Company receipts
as payments against the revolving credit facility and daily borrowings to fund
cash requirements. Interest on outstanding borrowings is at the bank's prime
rate plus 2.5%, and the agreement provides for a commitment fee of .5% on the
unused facility.
In connection with the Amended Credit Agreement, certain directors and
executive officers have made loans to the Company, which amounts will be held
as cash collateral under the terms of the Amended Credit Agreement and have
been classified as restricted cash on the accompanying balance sheet.
Specifically, C. Harry Knowles and Janet H. Knowles, Dale M. Fischer and Hsu
Jau Nan have loaned the Company $400, $125 and $475, respectively. The loans
bear interest at a rate of nine percent (9%) per annum and will be repaid in
full upon the earliest of: (a) the Company's repayment in full of its
obligations under the Amended Credit Agreement or (b) the release of the
security interest held by the Company's primary bank in such cash being loaned
by the above mentioned directors and executive officers.
As the Amended Credit Agreement expires on May 31, 2003, all outstanding bank
borrowings are classified as current liabilities on the September 30, 2002
balance sheet. Management plans to refinance this Amended Credit Agreement
prior to March 31, 2003 and replace it with longer term debt under terms more
favorable to the Company.
10. Recently Issued Accounting Standards
In April 2002, the FASB issued Statement No. 145, "Rescission of FASB
Statements No. 4,44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections." In addition to other technical provisions, this Statement
rescinds FASB Statement No. 4, which required all gains and losses from
extinguishment of debt to be aggregated and, if material, classified as an
extraordinary item, net of tax. This provision is effective for fiscal years
beginning after May 15, 2002, with early adoption permitted.
In July 2002, the FASB issued Statement No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities". This statement nullifies EITF
Issue No. 94-3, "Liability Recognition for Certain Employee Termination
Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred
in a Restructuring)." Statement 146 requires that a liability for a cost
associated with an exit or disposal activity be recognized when the liability
is incurred. Under Issue 94-3, certain liabilities were recognized at the date
of an entity's commitment to an exit plan. The provisions of this Statement
will be adopted by the Company for exit or disposal activities initiated after
December 31, 2002.
11. Legal Matters
Symbol Technologies, Inc. v. Metrologic
On May 3, 2002, the Company was served with a lawsuit that was filed on April
12, 2002 by Symbol in the United States District Court for the Eastern District
of New York alleging that the Company is in breach of the terms of the License
Agreement between Symbol and the Company (the "Agreement"). The allegations of
breach relate to the dispute between the parties as to which products are
covered by the licenses under the Agreement. On May 30, 2002, the Company was
served with an amended Complaint in this action. The amended Complaint also
includes new claims of patent infringement from the date of the alleged breach
against both the Company and C. Harry Knowles, the Company's Chairman and CEO.
The amended complaint further includes claims for injunctive relief and a claim
of fraudulent transfer related to the transactions under the Amended Credit
Agreement. The Company believes that Symbol's claims in the lawsuit are without
merit and intends to vigorously defend its rights.
The Company has filed a motion with the court to stay the infringement actions,
and to allow the parties to arbitrate those claims in accordance with the
procedures set forth in the Agreement. The Company has not yet filed its answer
to the Complaint. In response, Symbol filed a motion to stay the arbitration
proceedings pending a decision by the court as to whether the issues are
subject to arbitration. These motions are now pending before the court.
On October 4, 2002, the parties had a conference with the judge during which a
schedule was set for the filing of the parties' cross motions for summary
judgment. These motions are now pending before the court.
Management is of the opinion that there are no legal claims against the Company
which will have a material adverse effect on the Company's consolidated
financial position, results of operations or cash flows.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
General
The following discussion of the Company's results of operations and liquidity
and capital resources should be read in conjunction with the unaudited
Condensed Consolidated Financial Statements of the Company and the related
Notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q and the
Consolidated Financial Statements and the Notes to Consolidated Financial
Statements for the year ended December 31, 2001 appearing in the Company's
Annual Report on Form 10-K/A No. 3 for the year ended December 31, 2001, which
was filed on July 25, 2002. The Condensed Consolidated Financial Statements for
the three and nine months ended September 30, 2002 and 2001 are unaudited.
Metrologic Instruments, Inc. and its subsidiaries (collectively, the "Company")
design, manufacture and market bar code scanning and high-speed automated data
capture solutions using laser, holographic and vision-based technologies. The
Company offers expertise in 1D and 2D bar code reading, optical character
recognition, image lift, and parcel dimensioning and singulation detection for
customers in retail, commercial, manufacturing, transportation and logistics,
and postal and parcel delivery industries. Additionally, through its
wholly-owned subsidiary, Adaptive Optics Associates, Inc. ("AOA"), the Company
is engaged in developing, manufacturing, marketing and distributing custom
optical systems which include precision laser beam delivery, high speed imaging
control and data processing, industrial inspection, and scanning and
dimensioning systems for the aerospace and defense industry in the United
States and Canada. The Company's products are sold in more than 100 countries
worldwide through the Company's sales, service and distribution offices located
in North and South America, Europe and Asia.
Most of the Company's product sales in Western Europe, Brazil and Asia are
billed in foreign currencies and are subject to currency exchange rate
fluctuations. A significant percentage of the Company's products were
manufactured in the Company's U.S. facility in 2002, and therefore, sales and
results of operations are affected by fluctuations in the value of the U.S.
dollar relative to foreign currencies. In addition, manufacture of the
Company's POS products in its Suzhou, China facility is expected to increase in
2002 and 2003, which will partially mitigate the profit impact of foreign
exchange rate fluctuation with reduced labor costs in the Company's POS
scanners. Accordingly, in the three months ended September 30, 2002, sales and
gross profit were favorably affected by the continuing decline in the value of
the US dollar in relation to certain foreign currencies, especially the Euro.
This favorable impact offsets the adverse impact of the strengthening value of
the US dollar on sales and gross profit in the three months ended March 31,
2002. However, in the three months ended September 30, 2002, sales and gross
profits were negatively affected by the strengthening of the value of the US
dollar in relation to the Brazilian real.
Forward Looking Statements; Certain Cautionary Language
Written and oral statements provided by the Company from time to time may
contain certain forward looking information, as that term is defined in the
Private Securities Litigation Reform Act of 1995 (the "Act") and in releases
made by the Securities and Exchange Commission ("SEC"). The cautionary
statements which follow are being made pursuant to the provisions of the Act
and with the intention of obtaining the benefits of the "safe harbor"
provisions of the Act. While the Company believes that the assumptions
underlying such forward looking information are reasonable based on present
conditions, forward looking statements made by the Company involve risks and
uncertainties and are not guarantees of future performance. Actual results may
differ materially from those in the Company's written or oral forward looking
statements as a result of various factors, including but not limited to, the
following:
Metrologic's ability to comply with the terms of the credit facility so that it
is able to borrow funds in accordance with the terms of the facility; no
assurance that cost controls and working capital procedures will result in
reduced bank debt, increased operating profit or positive cash flow from
operations; the ability of the Company to refinance its credit facility and
term loan on more favorable terms; the resolution or outcome of litigation;
reliance on third party resellers, distributors and OEMs which subject the
Company to risks of business failure, credit and collections exposure, and
other business concentration risks; continued or increased competitive pressure
which could result in reduced selling prices of products or increased sales and
marketing promotion costs; a prolonged disruption of scheduled deliveries from
suppliers when alternative sources of supply are not available to satisfy the
Company's requirements for raw material and components; continued or prolonged
capacity constraints that may hinder the Company's ability to deliver ordered
product to customers; difficulties or delays in the development, production,
testing and marketing of products, including, but not limited to, a failure to
ship new products when anticipated, failure of customers to accept these
products when planned, any defects in products or a failure of manufacturing
efficiencies to develop as planned; the costs of legal proceedings or
assertions by or against the Company relating to intellectual property rights
and licenses, the Company's ability to successfully negotiate and amend its
licensing agreement with Symbol Technologies; the Company's ability to
successfully defend against challenges to its patents; the ability of
competitors to avoid infringement of the Company's patents; the ability of the
Company to develop products which avoid infringement of third parties' patents;
and adoption of new or changes in accounting policies and practices;
occurrences affecting the slope or speed of decline of the life cycle of the
Company's products, or affecting the Company's ability to reduce product and
other costs, and to increase productivity; the impact of unusual items
resulting from the Company's ongoing evaluation of its business strategies,
acquisitions, asset valuations and organizational structures; the price and
payment schedule the Company is able to negotiate for the shares in its
subsidiary, Metrologic Eria Iberica; the effects of and changes in trade,
monetary and fiscal policies, laws and the ability of the Company to integrate
AOA with other Company subsidiaries, and realize the anticipated impact on
results of operations; the Company's ability to refinance its debt with its
banks, or successfully negotiate additional financing arrangements; regulations
and other activities of governments, agencies and similar organizations,
including but not limited to trade restrictions or prohibitions, inflation,
monetary fluctuations, import and other charges or taxes, nationalizations and
unstable governments; the future health of the U.S. and international economies
and other economic factors that directly or indirectly affect the demand for
the Company's products; foreign currency exchange rate fluctuations between the
U.S. Dollar and other major currencies including, but not limited to, the Euro,
Singapore Dollar, Brazilian Real, and British Pound affecting the Company's
results of operations; the economic slowdown of foreign nations other than
those may also adversely affect the Company's results of operations; issues
that have not been anticipated in the transition to the new European currency
that may cause prolonged disruption of the Company's business; and increased
competition due to industry consolidation or new entrants into the Company's
existing markets.
All forward-looking statements included herein are based upon information
presently available, and the Company assumes no obligation to update any
forward-looking statements.
Critical Accounting Policies
For a discussion of the Company's critical accounting policies and use of
estimates, please refer to Management's Discussion and Analysis of Financial
Condition and Results of Operations contained in the Company's Annual Report on
Form 10-K/A No. 3 for the year ended December 31, 2001, which was filed on July
25, 2002. The only change in critical accounting policies during the three or
nine month periods ending September 30, 2002 is the adoption of SFAS 142 during
the first quarter of 2002. The Company has completed a transitional impairment
test as of January 1, 2002, as prescribed in SFAS 142, during the second
quarter ended June 30, 2002. The Company has determined that there was no
goodwill impairment to be recognized as a result of its testing. Fair value of
the reporting units was determined using discounted cash flow analyses.
Three Months Ended September 30, 2002 Compared with Three Months Ended
September 30, 2001 (dollars in thousands except per share information)
Sales for the quarter ended September 30, 2002 increased by $1,148, or 4.3%, to
$27,957 compared with $26,809 for the same period in 2001. The increase was
primarily attributable to higher industrial products revenues, particularly
resulting from sales of the Company's iQ(R)180 vision systems camera. Sales of
Metrologic's point-of-sale ("POS") and original equipment manufacturers ("OEM")
products in 2002 approximated 2001 sales of these products. Sales of POS and
OEM products in North America increased 10% in 2002 and sales of these products
in the Far East nearly doubled. However, these increases were mostly offset by
decreased sales in Europe due to lower unit demand resulting from the recession
in Europe. The Company did benefit from the strengthening of the euro against
the US dollar during the third quarter of 2002. Sales in euros were down 27%
from the prior year while in dollars, the decrease was 20%.
International sales were $14,606 (52.2% of total sales) in the three months
ended September 30, 2002 and $15,726 (58.7% of total sales) in the three months
ended September 30, 2001. No individual customer accounted for 10% or more of
revenues in the three months ended September 30, 2002 or 2001.
Cost of sales decreased to $17,101 in the three months ended September 30, 2002
from $18,089 in the three months ended September 30, 2001. As a percentage of
sales, cost of sales decreased from 67.5% in 2001 to 61.2% in 2002 primarily as
a result of increased unit production at the Company's Suzhou facility
resulting in reduced labor costs, reduced direct labor costs as a result of the
workforce reductions that occurred during March and April 2002, lower material
costs resulting from the Company's continuing efforts to lower bill of material
costs, and lower freight costs. Cost of sales during the three months ended
September 30, 2002 was also favorably impacted by the decrease in the value of
the US dollar to the euro as compared to the corresponding period in 2001.
Selling, general and administrative ("SG&A") expenses for the three months
ended September 30, 2002 were $7,270 or 26.0% of sales, compared with $7,806,
or 29.1% for the corresponding period in 2001. The decrease was due primarily
to reduced marketing and promotion expenses, lower personnel costs as the
result of the workforce reduction in March and April 2002, and no goodwill
amortization expense in 2002 in accordance with Statement of Financial
Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets",
which decrease was partially offset by increased legal expenses in 2002.
Research and Development ("R&D") expenses increased 8.8% to $1,754 in the three
months ended September 30, 2002 from $1,612 in 2001. The increase primarily was
the result of expanded R&D efforts focused on the development of the Company's
iQ180 camera-based acquisition vision system.
Severance costs of $251 for the three months ended September 30, 2002 were due
to a workforce reduction in August and September 2002.
Net interest expense decreased 30.8% from $943 for the three months ended
September 30, 2001 to $653 for the three months ended September 30, 2002 due to
lower outstanding borrowings in 2002.
Other income/expense reflect net other expenses of $496 in the three months
ended September 30, 2002 compared to net other income of $279 in the
corresponding period in 2001. The increase in net other expense is primarily
due to foreign currency transaction losses of $530 in 2002 compared with
transaction gains of $337 in 2001. The foreign currency losses in 2002 are
primarily attributable to the weakening value of the Brazilian real in relation
to the US dollar.
Net income was $268 in the three months ended September 30, 2002 compared with
a net loss of $845 in 2001. Net income (loss) reflects a 38% effective income
tax rate in 2002 and 2001.
Nine Months Ended September 30, 2002 Compared with Nine Months Ended September
30, 2001 (dollars in thousands except per share information)
Sales increased .3% to $84,898 in the nine months ended September 30, 2002 from
$84,650 in the nine months ended September 30, 2001. Sales of POS and OEM
products increased 1.4%, while sales of industrial products and optical systems
decreased by 3%. The decrease in industrial products and optical systems
reflects the completion of certain fixed price projects at AOA in 2001
partially offset by sales of iQ180's in 2002.
International sales were $42,784 (50.4% of total sales) in the nine months
ended September 30, 2002 and $44,740 (52.9% of total sales) in the three months
ended September 30, 2001. No individual customer accounted for 10% or more of
revenues in the nine months ended September 30, 2002 or 2001.
Cost of sales decreased by $11,095 to $54,009 for the nine months ended
September 30, 2002 from $65,104 for the corresponding period in 2001. As a
percentage of sales, cost of sales was 63.6% in 2002 compared with 76.9% of
sales in 2001. Cost of sales for the nine months ended September 30, 2001
included $10,040 of special charges and other costs that are not expected to
reoccur in subsequent quarters as follows: $4,500 of costs associated with
products that are not anticipated to be included in the prospective costs to
manufacture similar products because of reductions in material costs and
manufacturing efficiencies; $3,500 of similar costs associated with a valuation
charge taken on products included in inventory at March 31, 2001 due to the
related cost reductions noted above; $1,000 of costs associated with inventory
deemed to be obsolete at March 31, 2001; and $1,000 of costs associated with
the expensing of floor stock inventory that had been previously capitalized by
the Company. Cost of sales excluding the $10,040 of special charges and other
costs decreased by $1,055 in 2002 in comparison to 2001. The decrease is
attributable to increased unit production in the Company's Suzhou facility
resulting in reduced labor costs, reduced direct labor costs as a result of the
workforce reductions that occurred in March and April 2002, and lower freight
costs, partially offset by increased sales of lower margin non-Metrologic
manufactured products. The Company also incurred lower royalty costs in 2002
due to a reduction in the number of products covered by the agreement between
Symbol Technologies, Inc. and the Company. (See Note 11, Legal Matters).
Selling, general and administrative ("SG&A") expenses for the nine months ended
September 30, 2002 were $22,525, including $732 of non-recurring expenses
related to the Amended and Restated Credit Agreement that was completed on July
9, 2002. Excluding such expenses, SG&A expenses were $21,793, or 25.7% of
sales, for the nine months ended September 30, 2002 compared with $24,296, or
28.7% for the corresponding period in 2001. The decrease was due primarily to
reduced marketing and promotion expenses, lower personnel costs as the result
of the workforce reduction in March and April 2002, and no goodwill
amortization expense in 2002 in accordance with Statement of Financial
Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets",
partially offset by increased legal expenses in 2002.
Research and development ("R&D") expenses increased 8.3% to $5,287 in the nine
months ended September 30, 2002 from $4,883. The increase primarily was the
result of expanded R&D efforts focused on the development of the Company's
iQ180 camera-based acquisition vision system.
Severance costs of $602 for the nine months ended September 30, 2002 were due
to workforce reductions in March and April and further reductions in August and
September 2002.
Net interest expense decreased by 28.7% from $3,038 in 2001 to $2,165 in 2002.
The decrease is due to lower outstanding borrowings in 2002. Interest expense
in 2002 includes $128 of non-recurring interest expense that resulted from the
incremental 200 basis point default interest rate charged by the Company's bank
group from April 12, 2002 to July 10, 2002.
Other income/expense reflect net other expense of $286 in the nine months ended
September 30, 2002 compared to net other income of $39 in the corresponding
period in 2001. The increase in other expense was due to foreign currency
transaction losses of $306 in 2002 as compared with transaction gains of $176
in 2001.
Net income was $15 in the nine months ended September 30, 2002 compared with a
net loss of $7,826 in 2001. Net income (loss) reflects a 38% effective income
tax rate in 2002 and 2001.
Inflation and Seasonality
Inflation and seasonality have not had a material impact on the Company's
results of operations. There can be no assurance, however, that the Company's
sales in future periods will not be impacted by fluctuations in seasonal demand
from European customers in its third quarter or from reduced production days in
the Company's fourth quarter.
Liquidity and Capital Resources (amounts in thousands)
The Company's working capital decreased to $811 as of September 30, 2002 from
$18,685 as of December 31, 2001 due primarily to the classification of all
outstanding borrowings under the Amended Credit Agreement as current
liabilities on the balance sheet as of September 30, 2002 as the Amended Credit
Agreement matures on May 31, 2003.
The Company's operating activities provided net cash of $12,304 and $10,910 for
the nine months ended September 30, 2002 and 2001, respectively. Net cash
provided by operating activities for the nine months ended September 30, 2002
resulted primarily from reductions in accounts receivable and inventory, and
receipt of tax refunds of approximately $4,471.
On July 9, 2002, the Company replaced its former Credit Facility by executing
an Amended and Restated Credit Agreement (the "Amended Credit Agreement") with
its lenders. The key terms of the Amended Credit Agreement include the waiver
of all existing defaults under the Company's former Credit Facility and the
withdrawal by the banks of a notice of default that has been issued to the
Company on April 9, 2002, and an increase in the original interest rate of the
term note by .25% per annum. The Company granted a security interest in its
assets and properties to the primary bank in favor of the banks as security for
borrowings under the Credit Facility. These security interests continue under
the Amended Credit Agreement. The Amended Credit Agreement contains various
negative and positive covenants, such as minimum tangible net worth
requirements, and expires on May 31, 2003. A portion of the outstanding
borrowing under the Amended Credit Agreement is guaranteed by C. Harry Knowles
and Janet Knowles. Additionally, the Company could be required to make
additional prepayments under the Amended Credit Agreement if there are excess
cash flows, as defined in the Amended Credit Agreement.
The Amended Credit Agreement also includes a revolving credit facility of
$14,000 that expires on May 31, 2003. Amounts available for borrowing under
this facility are equal to a percentage of the total of eligible accounts
receivable and inventories, as defined in the agreement, plus an allowable
overadvance of $2,750. The overadvance allowance expires on January 1, 2003.
The Amended Credit Agreement requires the daily application of Company receipts
as payments against the revolving credit facility and daily borrowings to fund
cash requirements. Interest on outstanding borrowings is at the bank's prime
rate plus 2.5%, and the agreement provides for a commitment fee of .5% on the
unused facility.
In connection with the Amended Credit Agreement, certain directors and
executive officers have made loans to the Company, which amounts will be held
as cash collateral under the terms of the Amended Credit Agreement.
Specifically, C. Harry Knowles and Janet H. Knowles, Dale M. Fischer and Hsu
Jau Nan have loaned the Company $400, $125 and $475, respectively. The loans
bear interest at a rate of nine percent (9%) per annum and will be repaid in
full upon the earliest of: (a) the Company's repayment in full of its
obligations under the Amended Credit Agreement or (b) the release of the
security interest held by the Company's primary bank in such cash being loaned
by the above mentioned directors and executive officers.
As the Amended Credit Agreement matures on May 31, 2003, all outstanding bank
borrowings are classified as current liabilities. Management plans to refinance
this Amended Credit Agreement prior to March 31, 2002 and replace it with
longer term debt under terms more favorable to the Company. Management also
plans to replace the allowable overadvance by January 1, 2003, with local
financing agreements in Europe.
In April 2002, in order to reduce debt and increase future profitability, the
Company implemented a workforce reduction and identified additional cost
reductions representing estimated annualized savings of approximately $3,000 in
overhead and operating expenses, and additional reductions in direct costs. The
Company implemented further workforce reductions in August and September 2002.
Also in connection with the acquisition of AOA, the Company entered into a
Subordinated Promissory Note ("Subordinated Debt") of $11,000 with United
Technologies Optical Systems, Inc. ("UTOS"), the former parent of AOA, with
maturities of $0 in 2002 and $9,000 in 2003 and $1,000 in 2004 and 2005. The
interest rate is fixed at 10%. Under the terms of the Amended Credit Agreement,
the Company is prohibited from making principal payments on the subordinated
debt if such payment would result in a breach of any financial covenants
contained in the Amended Credit Agreement.
Property, plant & equipment expenditures were $1,536 and $1,555 for the nine
months ended September 30, 2002 and 2001, respectively. The Company's current
plans for future capital expenditures include: (i) investment in the Company's
Suzhou, China facility; (ii) continued investment in manufacturing capacity
expansion at the Blackwood, NJ headquarters; (iii) additional Company
facilities; and (iv) enhancements to existing information systems, and
additional information systems.
The Company's liquidity has been, and may continue to be, affected by changes
in foreign currency exchange rates, particularly the value of the U.S. dollar
relative to the euro, the Brazilian real, the Singapore dollar, and the Chinese
renminbi. In an effort to mitigate the financial implications of the volatility
in the exchange rate between the euro and the U.S. dollar, the Company has
selectively entered into derivative financial instruments to offset its
exposure to foreign currency risks. Derivative financial instruments may
include (i) foreign currency forward exchange contracts with its primary bank
for periods not exceeding six months, which partially hedge sales to the
Company's German subsidiary and (ii) euro based loans, which act as a partial
hedge against outstanding intercompany receivables and the net assets of its
European subsidiary, which are denominated in euros. However, no material
derivative instruments were outstanding at September 30, 2002. Additionally,
the Company's European subsidiary invoices and receives payment in certain
other major currencies, including the British pound, which results in an
additional mitigating measure that reduces the Company's exposure to the
fluctuation between the euro and the U.S. dollar although it does not offer
protection against fluctuations of that currency against the U.S. Dollar.
The Company's 51% joint venture interests in Metrologic Eria Iberica and
Metrologic Eria France contain options for the Company to purchase the
remaining 49% minority interests. The purchase option is calculated based on a
twelve month multiple of sales. In March 2002, the minority shareholders in
Metrologic Eria Iberica provided notice of their intent to sell their 49%
interests and the purchase price is estimated at $4,570.
Disclosures about Contractual Obligations and Commercial Commitments
Less
than 1 1-3 4-5 After
Contractual Obligations Total Year Years Years 5 Years
- ----------------------- ----- ---- ----- ----- -----
Long-Term Debt 20,204 11,886 7,318 1,000 -
Capital Lease Obligations 105 105 - - -
Operating Leases* 14,278 2,369 5,496 4,975 1,438
Option to purchase minority
interest in joint venture 4,570 4,570 - - -
--------- ------- -------- ------- ---------
Total Contractual Cash
Obligations $ 39,157 $18,930 $ 12,814 $5,975 $ 1,438
========= ======= ======== ====== ========
*Based on information as of December 31, 2001.
Total Less
Amounts than 1 1-3 4-5 Over 5
Other Commercial Commitments Committed Year Years Years Years
- ---------------------------- --------- ---- ----- ----- -----
Revolving Credit Facility $ 8,139 $ - $ - $ - $ -
======== ====== ====== ===== =====
Euro Conversion.
On January 1, 1999, several member countries of the European Union established
fixed conversion rates between their existing sovereign currencies and adopted
the Euro as their new common legal currency. As of that date, the Euro traded
on currency exchanges and the legacy currencies remain legal tender in the
participating countries for a transition period between January 1, 1999 and
January 1, 2002. The countries that adopted the Euro on January 1, 1999 are
Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, The
Netherlands, Portugal, and Spain. During the transition period, non-cash
payments were made in the Euro, and parties could elect to pay for goods and
services and transact business using either the Euro or legacy currency.
Between January 1, 1999 and January 1, 2002 the participating countries
introduced Euro notes and coins and withdrew all legacy currencies. The Euro
conversion may affect cross-border competition by creating cross-border
transparency. The Company continues to evaluate its pricing/marketing strategy
in order to insure that it remains competitive in a broader European market.
Item 3- Quantitative and Qualitative Disclosures about Market Risk (amounts in
thousands)
The information contained in Item 7A of the Company's Annual Report on Form
10-K for the year ended December 31, 2001 is hereby incorporated herein by
reference.
Item 4- Controls and Procedures
As of November 13, 2002, the principal executive officer, chief operating
officer and principal financial officer evaluated the Company's controls and
procedures related to its reporting and disclosure obligations. These officers
have concluded that these disclosure controls and procedures are sufficient to
provide that (a) material information relating to the Company is made known to
these officers by other employees of the Company, particularly material
information related to the period for which this periodic report is being
prepared; and (b) this information is recorded, processed, summarized,
evaluated and reported, as applicable, within the time periods specified in the
rules and forms promulgated by the Securities and Exchange Commission.
There have been no significant changes in the Company's internal controls or in
other factors that could significantly affect these internal controls
subsequent to the date of their evaluation.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company is currently involved in matters of litigation arising from the
normal course of business including matters described below. Management is of
the opinion that there are no legal claims against the Company which will have
a material adverse effect on the Company's consolidated financial position,
results of operations or cash flows.
A. Symbol Technologies, Inc. et. al. v. Lemelson Medical, Educational &
Research Foundation, Limited Partnerships
On July 12, 2002, the Auto ID Companies filed three summary judgment motions,
one each directed to prosecution laches, non-infringement and invalidity with
regard to certain claims of the patents in suit. In response to these summary
judgment motions the Lemelson Partnership filed a motion to strike the motions
related to non-infringement and invalidity as being "untimely" and requested
that the District Court (the "Court") reserve all three motions for trial.
Alternatively, the Lemelson Partnership asked the Court for a sixty-day
extension to take discovery on the prosecution laches issues and serve its
opposition papers to all three motions. These motions have been denied.
On October 7, 2002, the U.S. Supreme Court denied the Lemelson Partnership's
Petition for Certiorari regarding the decision by the Court of Appeals for the
Federal Circuit earlier this year upholding the prosecution laches defenses
raised by the Auto ID Companies in their complaint.
On September 25, 2002, the Court issued a trial order allocating thirty-four
(34) days for the trial on this matter commencing November 18, 2002 and
concluding on January 24, 2003.
B. Metrologic v. PSC Inc.
In June 2002, both sides filed their motions for summary judgment and their
Markman briefs with the Court. On August 6-7, 2002 a Markman hearing was held
by the Court during which the parties argued claim interpretations of the
patents in suit. The parties are now waiting for the court's decision on the
Markman hearing.
C. Symbol Technologies, Inc. v. Metrologic
On May 3, 2002, the Company was served with a lawsuit that was filed on April
12, 2002 by Symbol in the United States District Court for the Eastern District
of New York alleging that the Company is in breach of the terms of the License
Agreement between Symbol and the Company (the "Agreement"). The allegations of
breach relate to the dispute between the parties as to which products are
covered by the licenses under the Agreement. On May 30, 2002, the Company was
served with an amended Complaint in this action. The amended Complaint also
includes new claims of patent infringement from the date of the alleged breach
against both the Company and C. Harry Knowles, the Company's Chairman and CEO.
The amended complaint further includes claims for injunctive relief and a claim
of fraudulent transfer related to the transactions under the Amended Credit
Agreement. The Company believes that Symbol's claims in the lawsuit are without
merit and intends to vigorously defend its rights.
The Company has filed a motion with the court to stay the infringement actions,
and to allow the parties to arbitrate those claims in accordance with the
procedures set forth in the Agreement. The Company has not yet filed its answer
to the Complaint. In response, Symbol filed a motion to stay the arbitration
proceedings pending a decision by the court as to whether the issues are
subject to arbitration. These motions are now pending before the court.
On October 4, 2002, the parties had a conference with the judge during which a
schedule was set for the filing of the parties' cross motions for summary
judgment. These motions are now pending before the court.
Item 2. Changes in Securities and Use of Proceeds
Not applicable.
Item 3. Defaults upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
The Company's Annual Meeting of Shareholders was held on September 19, 2002. At
such meeting, the following matters were voted upon by the shareholders,
receiving the number of affirmative, negative and withheld votes, as well as
abstentions and broker non-votes, set forth below for each matter.
(1) The vote of the common shareholders for the election of Janet H.
Knowles, Thomas E. Mills IV and Hsu Jau Nan as directors to serve a three-year
term ending in 2005 were as follows:
Number of Votes For Number of Votes Withheld Name
5,201,727 46,067 Janet H. Knowles
5,187,114 60,680 Thomas E. Mills IV
5,188,528 59,267 Hsu Jau Nan
(2) The vote of the common shareholders for the appointment of Ernst &
Young as the independent auditors for the Company for the fiscal year ending
December 31, 2002 was as follows:
5,239,354 For 8,320 Against 120 Abstain
The directors of the Company whose terms continue after the Annual Meeting of
Shareholders referenced above are Richard C. Close, C. Harry Knowles, John H.
Mathias, Stanton L. Meltzer, and William Rulon-Miller.
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
3.1 Amended and Restated Certificate of Incorporation of
Metrologic Instruments, Inc. (incorporated by reference to
Exhibit 3.1 to the Registrant's Annual Report on Form 10-K for
the year ended December 31, 1994).
3.2 Amended and Restated Bylaws of Metrologic Instruments, Inc.
(incorporated by reference to Exhibit 3.02 to the Registrant's
Annual Report on Form 10-K for the year ended December 31,
1994).
4.1 Specimen Stock Certificate (incorporated by reference to
Exhibit 4.1 to the Registrant's Registration Statement on Form
S-1 (Reg. No. 33-78358)).
10.1 Employment Agreement dated as of May 13, 2002 between
Metrologic Instruments, Inc. and Janet H. Knowles
(incorporated hereto by reference to Exhibit 10.24 to the
Registrant's Annual Report on Form 10-K Amendment No. 3 filed
July 25, 2002).
10.2 Amended and Restated Credit Agreement dated July 9, 2002 by
and among Metrologic Instruments, Inc., Adaptive Optics
Associates, Inc., the Guarantors named therein, PNC Bank,
National Association, as agent to the Banks and the Banks
named therein (incorporated hereto by reference to Exhibit
10.25 to the Registrant's Annual Report on Form 10-K Amendment
No. 3 filed July 25, 2002).
10.3 Lease Modification Agreement dated July 9, 2002 between C.
Harry and Janet H. Knowles and Metrologic Instruments, Inc.
(incorporated hereto by reference to Exhibit 10.26 to the
Registrant's Annual Report on Form 10-K Amendment No. 3 filed
July 25, 2002).
10.4 Landlord's Waiver dated July 9, 2002 between C. Harry Knowles
and Janet H. Knowles, and PNC Bank, National Associates as
Agent (incorporated hereto by reference to Exhibit 10.27 to
the Registrant's Annual Report on Form 10-K Amendment No. 3
filed July 25, 2002).
10.5 Subordinated Promissory Note dated July 9, 2002 between
Metrologic Instruments, Inc., Adaptive Optics Associates, Inc.
and MTLG Investments Inc. (the "Borrowers") and C. Harry
Knowles and Janet H. Knowles (the "Lenders") (incorporated
hereto by reference to Exhibit 10.28 to the Registrant's
Annual Report on Form 10-K Amendment No. 3 filed July 25,
2002).
10.6 Subordinated Promissory Note dated July 9, 2002 between
Metrologic Instruments, Inc., Adaptive Optics Associates, Inc.
and MTLG Investments Inc. (the "Borrowers") and Hsu Jau Nan
(the "Lender") (incorporated hereto by reference to Exhibit
10.29 to the Registrant's Annual Report on Form 10-K Amendment
No. 3 filed July 25, 2002).
10.7 Subordinated Promissory Note dated July 9, 2002 between
Metrologic Instruments, Inc., Adaptive Optics Associates, Inc.
and MTLG Investments Inc. (the "Borrowers") and Dale M.
Fischer (the "Lender") (incorporated hereto by reference to
Exhibit 10.30 to the Registrant's Annual Report on Form 10-K
Amendment No. 3 filed July 25, 2002).
99.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
executed by the Chief Executive Officer of the Company
attached hereto as Exhibit 99.1.
99.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
executed by the President and Chief Operating Officer of the
Company attached hereto as Exhibit 99.2
99.3 Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
executed by the Chief Financial Officer of the Company
attached hereto as Exhibit 99.3
(b) Reports on Form 8-K.
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed by the undersigned
thereunto duly authorized.
METROLOGIC INSTRUMENTS, INC.
Date: November 14, 2002 By:/s/ C. Harry Knowles
---------------- -----------------------
C. Harry Knowles
Chairman of the Board
and Chief Executive Officer
(Principal Executive Officer)
Date: November 14, 2002 By:/s/Thomas E. Mills IV
---------------- --------------------------
Thomas E. Mills IV
President and Chief Operating Officer
Date: November 14, 2002 By:/s/Kevin J. Bratton
---------------- --------------------------
Kevin J. Bratton
Chief Financial Officer
(Principal Financial and
Accounting Officer)
CERTIFICATIONS
I, C. Harry Knowles, certify that:
1. I have reviewed this quarterly report on Form 10-Q of
Metrologic Instruments, Inc.;
2. Based on my knowledge, this quarterly report does not contain
any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light
of the circumstances under which such statements were made,
not misleading with respect to the period covered by this
quarterly report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report,
fairly present in all material respects the financial
condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are
responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules
13a-14 and 15d-14) for the registrant and have:
(a) designed such disclosure controls and procedures to
ensure that material information relating to the
registrant, including its consolidated subsidiaries,
is made known to us by others within those entities,
particularly during the period in which this
quarterly report is being prepared;
(b) evaluated the effectiveness of the registrant's
disclosure controls and procedures as of a date
within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
(c) presented in this quarterly report our conclusions
about the effectiveness of the disclosure controls
and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have
disclosed, based on our most recent evaluation, to the
registrant's auditors and the audit committee of registrant's
board of directors (or persons performing the equivalent
function):
(a) all significant deficiencies in the design or
operation of internal controls which could adversely
affect the registrant's ability to record, process,
summarize and report financial data and have
identified for the registrant's auditors any
material weaknesses in internal controls; and
(b) any fraud, whether or not material, that involves
management or other employees who have a significant
role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have
indicated in this quarterly report whether there were
significant changes in internal controls or in other factors
that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies
and material weaknesses.
Date: November 14, 2002 /s/C. Harry Knowles
----------------------------------
C. Harry Knowles
Chief Executive Officer
CERTIFICATIONS
I, Thomas E. Mills IV, certify that:
1. I have reviewed this quarterly report on Form 10-Q of
Metrologic Instruments, Inc.;
2. Based on my knowledge, this quarterly report does not contain
any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light
of the circumstances under which such statements were made,
not misleading with respect to the period covered by this
quarterly report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report,
fairly present in all material respects the financial
condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are
responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules
13a-14 and 15d-14) for the registrant and have:
(a) designed such disclosure controls and procedures to
ensure that material information relating to the
registrant, including its consolidated subsidiaries,
is made known to us by others within those entities,
particularly during the period in which this
quarterly report is being prepared;
(b) evaluated the effectiveness of the registrant's
disclosure controls and procedures as of a date
within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
(c) presented in this quarterly report our conclusions
about the effectiveness of the disclosure controls
and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have
disclosed, based on our most recent evaluation, to the
registrant's auditors and the audit committee of registrant's
board of directors (or persons performing the equivalent
function):
(a) all significant deficiencies in the design or
operation of internal controls which could adversely
affect the registrant's ability to record, process,
summarize and report financial data and have
identified for the registrant's auditors any
material weaknesses in internal controls; and
(b) any fraud, whether or not material, that involves
management or other employees who have a significant
role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have
indicated in this quarterly report whether there were
significant changes in internal controls or in other factors
that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies
and material weaknesses.
Date:November 14, 2002 /s/Thomas E. Mills IV
----------------------------------
Thomas E. Mills IV
President and Chief Operating Officer
CERTIFICATIONS
I, Kevin J. Bratton, certify that:
1. I have reviewed this quarterly report on Form 10-Q of
Metrologic Instruments, Inc.;
2. Based on my knowledge, this quarterly report does not contain
any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light
of the circumstances under which such statements were made,
not misleading with respect to the period covered by this
quarterly report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report,
fairly present in all material respects the financial
condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are
responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules
13a-14 and 15d-14) for the registrant and have:
(a) designed such disclosure controls and procedures to
ensure that material information relating to the
registrant, including its consolidated subsidiaries,
is made known to us by others within those entities,
particularly during the period in which this
quarterly report is being prepared;
(b) evaluated the effectiveness of the registrant's
disclosure controls and procedures as of a date
within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
(c) presented in this quarterly report our conclusions
about the effectiveness of the disclosure controls
and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have
disclosed, based on our most recent evaluation, to the
registrant's auditors and the audit committee of registrant's
board of directors (or persons performing the equivalent
function):
(a) all significant deficiencies in the design or
operation of internal controls which could adversely
affect the registrant's ability to record, process,
summarize and report financial data and have
identified for the registrant's auditors any
material weaknesses in internal controls; and
(b) any fraud, whether or not material, that involves
management or other employees who have a significant
role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have
indicated in this quarterly report whether there were
significant changes in internal controls or in other factors
that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies
and material weaknesses.
Date:November 14, 2002 /s/Kevin J. Bratton
----------------------------------
Kevin J. Bratton
Chief Financial Officer
EXHIBIT INDEX
Exhibit No. Page No.
3.1 Amended and Restated Certificate of Incorporation of
Metrologic Instruments, Inc. (incorporated by reference to
Exhibit 3.1 to the Registrant's Annual Report on Form 10-K for
the year ended December 31, 1994).
3.2 Amended and Restated Bylaws of Metrologic Instruments, Inc.
(incorporated by reference to Exhibit 3.02 to the Registrant's
Annual Report on Form 10-K for the year ended December 31,
1994).
4.1 Specimen Stock Certificate (incorporated by reference to
Exhibit 4.1 to the Registrant's Registration Statement on Form
S-1 (Reg. No. 33-78358)).
10.1 Employment Agreement dated as of May 13, 2002 between
Metrologic Instruments, Inc. and Janet H. Knowles
(incorporated hereto by reference to Exhibit 10.24 to the
Registrant's Annual Report on Form 10-K Amendment No. 3 filed
July 25, 2002).
10.2 Amended and Restated Credit Agreement dated July 9, 2002 by
and among Metrologic Instruments, Inc., Adaptive Optics
Associates, Inc., the Guarantors named therein, PNC Bank,
National Association, as agent to the Banks and the Banks
named therein (incorporated hereto by reference to Exhibit
10.25 to the Registrant's Annual Report on Form 10-K Amendment
No. 3 filed July 25, 2002).
10.3 Lease Modification Agreement dated July 9, 2002 between C.
Harry and Janet H. Knowles and Metrologic Instruments, Inc.
(incorporated hereto by reference to Exhibit 10.26 to the
Registrant's Annual Report on Form 10-K Amendment No. 3 filed
July 25, 2002).
10.4 Landlord's Waiver dated July 9, 2002 between C. Harry Knowles
and Janet H. Knowles, and PNC Bank, National Associates as
Agent (incorporated hereto by reference to Exhibit 10.27 to
the Registrant's Annual Report on Form 10-K Amendment No. 3
filed July 25, 2002).
10.5 Subordinated Promissory Note dated July 9, 2002 between
Metrologic Instruments, Inc., Adaptive Optics Associates, Inc.
and MTLG Investments Inc. (the "Borrowers") and C. Harry
Knowles and Janet H. Knowles (the "Lenders") (incorporated
hereto by reference to Exhibit 10.28 to the Registrant's
Annual Report on Form 10-K Amendment No. 3 filed July 25,
2002).
10.6 Subordinated Promissory Note dated July 9, 2002 between
Metrologic Instruments, Inc., Adaptive Optics Associates, Inc.
and MTLG Investments Inc. (the "Borrowers") and Hsu Jau Nan
(the "Lender") (incorporated hereto by reference to Exhibit
10.29 to the Registrant's Annual Report on Form 10-K Amendment
No. 3 filed July 25, 2002).
10.7 Subordinated Promissory Note dated July 9, 2002 between
Metrologic Instruments, Inc., Adaptive Optics Associates, Inc.
and MTLG Investments Inc. (the "Borrowers") and Dale M.
Fischer (the "Lender") (incorporated hereto by reference to
Exhibit 10.30 to the Registrant's Annual Report on Form 10-K
Amendment No. 3 filed July 25, 2002).
99.1 Certification pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 executed by the Chief Executive Officer of
the Company attached hereto as Exhibit 99.1. 26
99.2 Certification pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 executed by the President and Chief Operating
Officer of the Company attached hereto as Exhibit 99.2 27
99.3 Certification pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 executed by the Chief Financial Officer of
the Company attached hereto as Exhibit 99.3 28
EXHIBIT 99.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Metrologic
Instruments, Inc. (the "Company") on Form 10-Q for the period ending September
30, 2002 as filed with the Securities and Exchange Commission on the date
hereof (the "Report"), I, C. Harry Knowles, Chief Executive Officer of the
Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss.
906 of the Sarbanes-Oxley Act of 2002, that:
1. The Report fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Company.
/s/C. Harry Knowles
- ------------------------------------
C. Harry Knowles
Chief Executive Officer
November 14, 2002
EXHIBIT 99.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Metrologic
Instruments, Inc. (the "Company") on Form 10-Q for the period ending September
30, 2002 as filed with the Securities and Exchange Commission on the date
hereof (the "Report"), I, Thomas E. Mills IV, President and Chief Operating
Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted
pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that:
1. The Report fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Company.
/s/Thomas E. Mills IV
- ------------------------------------
Thomas E. Mills IV
President and Chief Operating Officer
November 14, 2002
EXHIBIT 99.3
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Metrologic
Instruments, Inc. (the "Company") on Form 10-Q for the period ending September
30, 2002 as filed with the Securities and Exchange Commission on the date
hereof (the "Report"), I, Kevin J. Bratton, Chief Financial Officer of the
Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss.
906 of the Sarbanes-Oxley Act of 2002, that:
1. The Report fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Company.
/s/Kevin J. Bratton
- ------------------------------------
Kevin J. Bratton
Chief Financial Officer
November 14, 2002