Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-Q

 

 

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended October 2, 2011

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 0-02287

 

 

SYMMETRICOM, INC.

(Exact name of registrant as specified in our charter)

 

 

 

Delaware		No. 95-1906306
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

2300 Orchard Parkway, San Jose, California 95131-1017

(Address of principal executive offices)

Registrant’s telephone number: (408) 433-0910

 

 

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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer		¨		Accelerated filer		x
Non-accelerated filer		¨  (Do not check if a smaller reporting company)		Smaller reporting company		¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

Indicate number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practical date:

 

Class		Outstanding as of October 30, 2011
Common Stock		42,729,345

 

 

 

---

Table of Contents

SYMMETRICOM, INC.

FORM 10-Q

INDEX

 

				Page
PART I. FINANCIAL INFORMATION
Item 1.		Financial Statements:
		Condensed Consolidated Balance Sheets— October 2, 2011 and July 3, 2011			3
		Condensed Consolidated Statements of Operations—Three months ended October 2, 2011 and September 26, 2010			4
		Condensed Consolidated Statements of Cash Flows—Three months ended October 2, 2011 and September 26, 2010			5
		Notes to Condensed Consolidated Financial Statements			6
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations			18
Item 3.		Quantitative and Qualitative Disclosures About Market Risk			24
Item 4.		Controls and Procedures			24
PART II. OTHER INFORMATION
Item 1.		Legal Proceedings			25
Item 1A.		Risk Factors			25
Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds			25
Item 3.		Defaults Upon Senior Securities			25
Item 4.		Removed and Reserved			25
Item 5.		Other Information			25
Item 6.		Exhibits			26
SIGNATURES					27

 

2

---

Table of Contents

PART I. FINANCIAL INFORMATION

 

Item 1.

Financial Statements

SYMMETRICOM, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except par value)

(Unaudited)

 

		October 2, 2011				July 3, 2011
ASSETS
Current assets:
Cash and cash equivalents		$	27,593			$	20,318
Short-term investments			29,425				43,340
Accounts receivable, net of allowance for doubtful accounts of $319 and $315			35,078				40,511
Inventories			64,612				62,622
Prepaids and other current assets			15,834				14,004
Total current assets			172,542				180,795
Property, plant and equipment, net			22,935				23,255
Intangible assets, net			2,192				2,429
Deferred taxes and other assets			27,938				29,361
Total assets		$	225,607			$	235,840
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	8,672			$	16,113
Accrued compensation			11,844				13,743
Accrued warranty			1,477				1,601
Other accrued liabilities			11,896				14,683
Total current liabilities			33,889				46,140
Long-term obligations			4,938				5,212
Deferred income taxes			334				334
Total liabilities			39,161				51,686
Commitments and contingencies (Note 11)
Stockholders’ equity:
Preferred stock, $0.0001 par value; 500 shares authorized, none issued			—				—
Common stock, $0.0001 par value; 70,000 shares authorized, 50,747 shares issued and 42,739 outstanding at October 2, 2011; 50,579 shares issued and 42,960 outstanding at July 3, 2011			200,827				201,002
Accumulated other comprehensive loss			(311	)			(29	)
Accumulated deficit			(14,070	)			(16,819	)
Total stockholders’ equity			186,446				184,154
Total liabilities and stockholders’ equity		$	225,607			$	235,840

See notes to the condensed consolidated financial statements.

 

3

---

Table of Contents

SYMMETRICOM, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(Unaudited)

 

		Three Months Ended
		October 2, 2011				September 26, 2010
Net revenue		$	56,378			$	54,379
Cost of sales:
Cost of products and services			29,830				26,606
Amortization of purchased technology			186				287
Restructuring charges			417				3,747
Total cost of sales			30,433				30,640
Gross profit			25,945				23,739
Operating expenses:
Research and development			6,898				6,606
Selling, general and administrative			14,810				12,799
Amortization of intangible assets			52				62
Restructuring charges			96				(881	)
Total operating expenses			21,856				18,586
Operating income			4,089				5,153
Interest income, net of amortization (accretion) of premium (discount) on investments			66				(108	)
Interest expense			—				(55	)
Income from continuing operations before taxes			4,155				4,990
Income tax provision			1,406				1,896
Income from continuing operations		$	2,749			$	3,094
Income from discontinued operations, net of tax			—				127
Net income		$	2,749			$	3,221
Earnings per share—basic:
Income from continuing operations		$	0.06			$	0.07
Income from discontinued operations			—				—
Net income		$	0.06			$	0.07
Weighted average shares outstanding—basic			42,687				43,430
Earnings per share—diluted:
Income from continuing operations		$	0.06			$	0.07
Income from discontinued operations			—				—
Net income		$	0.06			$	0.07
Weighted average shares outstanding—diluted			43,294				43,772

See notes to the condensed consolidated financial statements.

 

4

---

Table of Contents

SYMMETRICOM, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

		Three Months Ended
		October 2, 2011				September 26, 2010
Cash flows from operating activities:
Net income		$	2,749			$	3,221
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation and amortization			1,455				1,919
Deferred income taxes			1,231				1,786
Loss on disposal of fixed assets			73				5
Stock-based compensation			1,163				338
Allowance for doubtful accounts			6				21
Provision for excess and obsolete inventory			1,238				333
Changes in assets and liabilities:
Accounts receivable			5,427				(1,371	)
Inventories			(3,228	)			(6,050	)
Prepaids and other assets			(1,817	)			219
Accounts payable			(7,444	)			3,107
Accrued compensation			(1,899	)			(2,118	)
Other accrued liabilities			(3,073	)			(493	)
Net cash (used in) provided by operating activities			(4,119	)			917
Cash flows from investing activities:
Purchases of short-term investments			(998	)			(12,533	)
Maturities/Sale of short-term investments			14,646				15,013
Purchases of property, plant and equipment			(968	)			(1,397	)
Remaining cash proceeds from sale of discontinued operations			210				—
Net cash provided by investing activities			12,890				1,083
Cash flows from financing activities:
Proceeds from issuance of common stock			774				236
Repurchase of common stock			(2,023	)			(2,321	)
Net cash used in financing activities			(1,249	)			(2,085	)
Effect of exchange rate changes on cash			(247	)			263
Net increase in cash and cash equivalents			7,275				178
Cash and cash equivalents at beginning of period			20,318				21,794
Cash and cash equivalents at end of period		$	27,593			$	21,972
Non-cash investing and financing activities:
Unrealized gain (loss) on investments, net		$	(35	)		$	106
Property, plant and equipment purchases included in accounts payable			80				21
Cash payments for:
Income taxes			175				53

See notes to the condensed consolidated financial statements.

 

5

---

Table of Contents

SYMMETRICOM, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1. Basis of Presentation and Recently Issued Accounting Pronouncements

The condensed consolidated financial statements of Symmetricom, Inc. (“Symmetricom,” “we,” “us,” the “Company,” or “our”) included herein are unaudited and reflect all adjustments (consisting only of normal recurring adjustments) which are, in the opinion of the management, necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods presented. In presenting the financial statements in accordance with accounting principles generally accepted in the United States (US GAAP), management makes certain estimates and assumptions that impact the amounts reported and related disclosures. Estimates, by their nature, are judgments based upon available information. Accordingly, actual results could differ from those estimates.

These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in Symmetricom’s Annual Report on Form 10-K for the fiscal year ended July 3, 2011. The results of operations for the three months ended October 2, 2011 are not necessarily indicative of the results to be anticipated for the entire fiscal year ending July 1, 2012.

The condensed consolidated balance sheet as of July 3, 2011 has been derived from the audited consolidated financial statements as of that date but does not include all of the information and footnotes required by US GAAP for complete financial statements.

Fiscal Quarter

Our fiscal quarter is 13 weeks ending on the Sunday closest to the end of the calendar quarter.

Recently Issued Accounting Pronouncements

In May 2011, the FASB issued guidance to amend the accounting and disclosure requirements for fair value measurements. The new guidance limits the highest-and-best-use measure to non-financial assets, permits certain financial assets and liabilities with offsetting positions in market or counterparty credit risks to be measured at a net basis, and provides guidance on the applicability of premiums and discounts. Additionally, the new guidance expands the disclosures on Level 3 inputs by requiring quantitative disclosure of the unobservable inputs and assumptions, as well as description of the valuation processes and the sensitivity of the fair value to changes in unobservable inputs. The new guidance will be effective for us beginning third quarter of fiscal 2012. Other than requiring additional disclosures, we do not anticipate material impacts on our financial statements upon adoption.

In June 2011, the FASB issued guidance on presentation of comprehensive income. The new guidance eliminates the current option to report other comprehensive income and its components in the statement of stockholders’ equity. Instead, an entity will be required to present either a continuous statement of net income and other comprehensive income or in two separate but consecutive statements. The new guidance will be effective for us beginning first quarter of fiscal 2013, will require retrospective application, and will only affect presentation of comprehensive income (loss).

Note 2. Financial Instruments

We account for certain assets and liabilities at fair value. The hierarchy below lists three levels of fair value based on the extent to which inputs used in measuring fair value is observable in the market. We categorize each of our fair value measurements in one of these three levels based on the lowest level input that is significant to the fair value measurement in its entirety. These levels are:

 

•

Level 1 – inputs are based upon unadjusted quoted prices for identical instruments traded in active markets;

 

•

Level 2 – inputs are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and

 

•

Level 3 – inputs are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques that include option pricing models, discounted cash flow models, and similar techniques.

 

6

---

Table of Contents

SYMMETRICOM, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

 

Financial assets measured at fair value on a recurring basis consisted of the following types of instruments as of October 2, 2011 and July 3, 2011:

 

		Fair Value as of October 2, 2011				Quoted Prices in Active Markets for Identical Assets (Level 1)				Significant Other Observable Inputs (Level 2)
		(In thousands)
Assets:
Money market funds		$	17,907			$	17,907			$	—
Short-term investments:
Corporate debt securities			17,663				—				17,663
Government sponsored enterprise debt securities			8,455				—				8,455
Mutual funds			3,307				3,307				—
Total short-term investments			29,425				3,307				26,118
Total financial assets		$	47,332			$	21,214			$	26,118
		Fair Value as of July 3, 2011				Quoted Prices in Active Markets for Identical Assets (Level 1)				Significant Other Observable Inputs (Level 2)
		(In thousands)
Assets:
Money market funds		$	12,630			$	12,630			$	—
Short-term investments:
Corporate debt securities			23,430				—				23,430
Government sponsored enterprise debt securities			16,456				—				16,456
Mutual funds			3,454				3,454				—
Total short-term investments			43,340				3,454				39,886
Total financial assets		$	55,970			$	16,084			$	39,886

 

7

---

Table of Contents

SYMMETRICOM, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

 

The fair values of our money market funds and mutual funds were derived from quoted market prices as active markets for these instruments exist. The fair values of corporate debt securities and government sponsored enterprise debt securities were derived from non-binding market consensus prices that are corroborated by observable market data.

The investments in mutual funds are held in a Rabbi trust to support the terms of our deferred compensation plan.

The following table summarizes available-for-sale and trading securities recorded as cash and cash equivalents or short-term investments:

 

		Amortized Cost				Gross Unrealized Gains (Losses)				Fair Value
October 2, 2011		(In thousands)
Money market funds		$	17,907			$	—			$	17,907
Corporate debt securities			17,717				(54	)			17,663
Government sponsored enterprise debt securities			8,451				4				8,455
Mutual funds			3,307				—				3,307
Total financial assets		$	47,382			$	(50	)		$	47,332
		Amortized Cost				Gross Unrealized Gains (Losses)				Fair Value
July 3, 2011		(In thousands)
Money market funds		$	12,630			$	—			$	12,630
Corporate debt securities			23,424				6				23,430
Government sponsored enterprise debt securities			16,456				—				16,456
Mutual funds			3,454				—				3,454
Total financial assets		$	55,964			$	6			$	55,970

The following table summarizes the contractual maturities of fixed income securities (Corporate debt securities and Government sponsored enterprise debt securities) recorded as short-term investments:

 

		Amortized Cost				Fair Value
		(In thousands)
Less than 1 year		$	10,648			$	10,612
Due in 1 to 3 years			15,520				15,506
Total		$	26,168			$	26,118

Actual maturities may differ from the contractual maturities because borrowers may have the right to call or prepay certain obligations.

 

8

---

Table of Contents

SYMMETRICOM, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

 

Note 3. Inventories

Components of inventories were as follows:

 

		October 2, 2011				July 3, 2011
		(In thousands)
Raw materials		$	28,442			$	27,206
Work-in-process			9,190				9,520
Finished goods			26,980				25,896
Inventories		$	64,612			$	62,622

Note 4. Intangible Assets

Intangible assets consist of:

 

		Gross Carrying Amount				Accumulated Amortization				Net Intangible Assets
		(in thousands)
Purchased technology		$	24,357			$	(23,411	)		$	946
Customer lists and trademarks			7,025				(5,779	)			1,246
Total as of October 2, 2011		$	31,382			$	(29,190	)		$	2,192
Purchased technology		$	24,357			$	(23,226	)		$	1,131
Customer lists and trademarks			7,025				(5,727	)			1,298
Total as of July 3, 2011		$	31,382			$	(28,953	)		$	2,429

 

9

---

Table of Contents

SYMMETRICOM, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

 

The estimated future amortization expense by fiscal year is as follows:

 

Fiscal year:		(in thousands)
2012 (Remaining 9 months)		$	489
2013			502
2014			502
2015			232
2016			159
Thereafter			308
Total amortization		$	2,192

Intangible asset amortization expense for the first three months of fiscal 2012 and 2011 was $0.2 million and $0.3 million, respectively.

Note 5. Warranty

Changes in our accrued warranty liability were as follows:

 

		Three Months Ended
		October 2, 2011				September 26, 2010
		(In thousands)
Beginning balance		$	1,601			$	2,900
Provision for warranty			505				54
Accruals related to change in estimate			92				185
Less: Actual warranty costs			(721	)			(800	)
Ending balance		$	1,477			$	2,339

Note 6. Long-term Obligations

Long-term obligations consist of:

 

		October 2, 2011				July 3, 2011
		(In thousands)
Long-term obligations:
Deferred revenue		$	2,003			$	2,131
Lease loss accrual, net			1,666				1,793
Rent accrual			1,077				1,088
Post-retirement benefits			192				200
Total		$	4,938			$	5,212

 

10

---

Table of Contents

SYMMETRICOM, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

 

Note 7. Stockholders’ Equity

Stock Options and Awards Activity

Stock award activity for the three months ended October 2, 2011 is as follows:

 

						Non Performance-based Options Outstanding								Restricted Stock Outstanding
		Shares Available For Grant				Number of Shares				Weighted Average Exercise Price				Number of Shares				Weighted Average Grant-Date Fair Value
		(In thousands, except per share amounts)
Balances at July 3, 2011			4,463				6,534			$	5.78				228			$	6.39
Granted—options			(387	)			387				5.07				—				—
Exercised			—				(31	)			4.32				—				—
Vested			—				—				—				(32	)			5.25
Cancelled and Expired			192				(192	)			6.69				—				—
Balances at October 2, 2011			4,268				6,698			$	5.72				196			$	6.58

Stock options outstanding, vested and expected to vest, and exercisable as of October 2, 2011 were as follows:

 

Options		Number of Shares				Weighted Average Remaining Contractual Life				Weighted Average Exercise Price				Aggregate Intrinsic Value
		(In thousands)				(In years)								(In thousands)
Outstanding			6,698				4.47			$	5.72			$	207
Vested and expected to vest			6,380				4.39			$	5.73			$	207
Exercisable			3,158				2.92			$	5.77			$	195

The aggregate intrinsic value in the preceding table represents the total pre-tax value of stock options outstanding as of October 2, 2011, based on our common stock closing price of $4.34 on September 30, 2011, which would have been received by the option holders had all option holders exercised their options as of that date.

The total intrinsic value of options exercised during the first quarter of fiscal 2012 was approximately $41,000.

 

11

---

Table of Contents

SYMMETRICOM, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

 

For the first quarter of fiscal 2012 and 2011, the weighted-average estimated fair value of options granted was $2.43 and $2.53 per share, respectively. Our calculations were made using the Black-Scholes option-pricing model. The fair value of Symmetricom stock-based awards to employees was estimated assuming no expected dividend and the weighted-average assumptions for the three months ended October 2, 2011 and September 26, 2010 as follows:

 

		Three months ended
		October 2, 2011				September 26, 2010
Expected life (in years)			5.1				5.2
Risk-free interest rate			0.7	%			1.1	%
Volatility			55.7	%			57.1	%

We recorded stock-based compensation expense of $1.2 million and $0.3 million in the first quarter of fiscal 2012 and 2011, respectively. We calculated these stock-based compensation expenses using an estimated annual forfeiture rate of 7.5% for the first quarter of fiscal 2012 and 8% for the first quarter of fiscal 2011. At October 2, 2011, the total cumulative compensation cost related to unvested stock-based awards granted to employees, directors and consultants under the Company’s stock option plans that was recognized, was approximately $4.9 million, net of estimated forfeitures of $1.1 million. This cost will be amortized on an accelerated method over a period of approximately 1.3 years and will be adjusted for subsequent changes in estimated forfeitures.

The following table shows total stock-based compensation costs included in the condensed consolidated statements of operations:

 

		Three Months Ended
		October 2, 2011				September 26, 2010
		(In thousands)
Cost of sales		$	119			$	23
Research and development			289				138
Selling, general and administrative			755				291
Stock compensation expense from continuing operations			1,163				452
Stock compensation expense from discontinued operations			—				(114	)
Total		$	1,163			$	338

The above table includes expense of $0.1 million relating to the employee stock purchase plan (ESPP) for the first quarter of fiscal 2012. There was no ESPP in the first quarter of fiscal 2011.

Stock Repurchases

During the first quarter of fiscal 2012, we repurchased 378,939 shares of common stock pursuant to our repurchase program for an aggregate price of approximately $2.0 million. Further, we repurchased 11,750 shares in the first quarter of fiscal 2012 for an aggregate price of approximately $61,000 to cover the cost of taxes on vested restricted stock.

As of October 2, 2011, the total remaining number of shares available for repurchase under the repurchase program authorized by the Board of Directors was approximately 1.2 million.

 

12

---

Table of Contents

SYMMETRICOM, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

 

Note 8. Restructuring Charges

The following table shows the details of the restructuring cost accruals included in other accrued liabilities on our condensed consolidated balance sheet, which consist of facilities and severance costs, at October 2, 2011 and July 3, 2011:

 

		Balance at July 3, 2011				Expense Additions				Payments and Non-cash Settlements				Balance at October 2, 2011
		(in thousands)
Lease loss accrual (fiscal 2004)		$	161			$	1			$	(10	)		$	152
All other restructuring changes (fiscal 2004)			50				—				(13	)			37
Lease loss accrual (fiscal 2009)			1,797				14				(103	)			1,708
All other restructuring changes (fiscal 2010)			409				—				(70	)			339
Lease loss accrual (fiscal 2011)			403				3				(32	)			374
All other restructuring changes (fiscal 2011 and 2012)			979				495				(859	)			615
Total		$	3,799			$	513			$	(1,087	)		$	3,225

During the first quarter of fiscal 2012, we incurred approximately $0.5 million in severance, consulting, inventory and other charges in connection with the Company’s restructuring activities associated with the plan to shut down manufacturing operations at the Santa Rosa facility.

The lease loss accruals are subject to periodic revisions based on current market estimates. The balance of these lease loss accruals will be paid over the next five years. Over the next nine months, we expect to incur restructuring charges of $0.8 million, primarily relating to lease loss charges at the Santa Rosa facility.

Note 9. Comprehensive Income (Loss)

Comprehensive income (loss) is comprised of two components: net income (loss) and other comprehensive income (loss). Other comprehensive income (loss) refers to revenue, expenses, gains and losses that under US GAAP are recorded as an element of stockholders’ equity but are excluded from net income (loss). Other comprehensive income (loss) is comprised of unrealized gains and losses, net of taxes, on marketable securities categorized as available-for-sale and foreign currency translation adjustments. The components of comprehensive income (loss), net of tax, are as follows:

 

		Three Months Ended
		October 2, 2011				September 26, 2010
		(in thousands)
Net income		$	2,749			$	3,221
Other comprehensive income (loss), net of taxes:
Foreign currency translation adjustments			(247	)			263
Unrealized gain (loss) on investments			(35	)			106
Other comprehensive income (loss)			(282	)			369
Total comprehensive income		$	2,467			$	3,590

Note 10. Net Income (Loss) Per Share

Basic earnings (loss) per share is computed by dividing net income by the weighted-average number of common shares outstanding during the period less unvested shares of restricted common stock. Diluted earnings (loss) per share is calculated by dividing net income by the weighted-average number of common shares outstanding and common equivalent shares from stock options, warrants and unvested restricted stock using the treasury method, except when anti-dilutive.

 

13

---

Table of Contents

SYMMETRICOM, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

 

The following table reconciles the number of shares utilized in the net income per share calculations:

 

		Three Months Ended
		October 2, 2011				September 26, 2010
		(In thousands, except per share amounts)
Numerator:
Income from continuing operations		$	2,749			$	3,094
Income from discontinued operations			—				127
Net income		$	2,749			$	3,221
Shares (denominator):
Weighted average common shares outstanding			42,897				43,556
Weighted average common shares outstanding subject to repurchase			(210	)			(126	)
Weighted average shares outstanding—basic			42,687				43,430
Weighted average dilutive share equivalents from stock options			506				235
Weighted average dilutive common shares subject to repurchase			101				107
Weighted average shares outstanding—diluted			43,294				43,772
Earnings per share—basic:
Income from continuing operations		$	0.06			$	0.07
Income from discontinued operations			—				—
Net income		$	0.06			$	0.07
Earnings per share—diluted:
Income from continuing operations		$	0.06			$	0.07
Income from discontinued operations			—				—
Net income		$	0.06			$	0.07

Unvested restricted stock is subject to repurchase by the Company and therefore is not included in the calculation of the weighted-average shares outstanding for basic earnings per share.

The following common stock equivalents were excluded from the net income per share calculation as their effect would have been anti-dilutive:

 

		Three Months Ended
		October 2, 2011				September 26, 2010
		(In thousands)
Stock options			3,391				4,273
Total shares of common stock excluded from diluted net income (loss) per share calculation			3,391				4,273

 

14

---

Table of Contents

SYMMETRICOM, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

 

Note 11. Litigation and Contingencies

Litigation - The Company is or was a party to the following material litigations:

Former Texas Facility Environmental Cleanup

We formerly leased a tract of land in Texas for our operations. Those operations involved the use of solvents and, at the end of the lease, we remediated an area where the solvents had been deposited on the ground and obtained regulatory approval for that remedial activity. In 1996, an environmental investigation of the property detected those same contaminants in groundwater in excess of then current regulatory standards. The groundwater contamination has migrated to some adjacent properties. We have entered into the Texas Natural Resource Conservation Commission’s Voluntary Cleanup Program (the “Voluntary Cleanup Program”) to obtain regulatory approval for closure of this site and a release from liability to the State of Texas for subsequent landowners and lenders. We have notified adjacent property owners affected by the contamination of participation in the Voluntary Cleanup Program. On May 20, 2004, we received a demand from the owner of several adjacent lots for damages in the amount of $1.3 million, as well as seeking an indemnity for the contamination and a promise to remediate the contamination. On March 14, 2006, the adjacent property owner filed suit in Probate Court No. 1, Travis County, Texas (Anna B. Miller, Individually and as Executrix of the Estate of Robert L. Miller, et al. vs. Austron, Inc., et al.), seeking damages. Symmetricom has not yet been served in this matter, but we intend to defend this lawsuit vigorously. We are continuing to work on the remediation of the formerly leased site as well as the adjacent properties, and have also taken steps to begin work on the Miller property. As of October 2, 2011, we had an accrual of $38,000 for remediation costs and other ongoing monitoring costs which has been included within “other accrued liabilities” on our consolidated balance sheet.

Michael E. McNeil, et al. vs. Jason Book, et al.

On or around May 25, 2010, Symmetricom was served with the first amended complaint in the case of Michael E. McNeil, et al. vs. Jason Book, et al. (Case No. CV165643) filed in Santa Cruz County Superior Court, California. The first amended complaint added Symmetricom and several other parties to the lawsuit, which had been originally filed in 2009 by plaintiffs against their former attorney for legal malpractice in connection with certain settlement agreements in 1999 between plaintiffs and Datum (a company acquired by Symmetricom) in which they assigned to Datum certain intellectual property rights. The complaint has since been amended for the second time and Symmetricom was served with the second amended complaint on or around January 7, 2011. The second amended complaint alleges several causes of action, including claims against Symmetricom for contract rescission, breach of contract, conversion and unjust enrichment, and seeks unspecified monetary damages along with equitable relief. Management believes that this lawsuit has no merit or basis and intends to defend this lawsuit vigorously and as a result, no accrual has been made in relation to this litigation. Management believes the final outcome of this matter will not have a material adverse effect on our financial position and results of operations.

General

Under the indemnification provisions of our standard sales contracts, we agree to defend the customer against third party claims asserting infringement of certain intellectual property rights, which may include patents, copyrights, trademarks or trade secrets, and to pay any judgments entered on such claims against the reseller/customer. The exposure to us under these indemnification provisions is generally limited to the total amount paid by the customer under the agreement. However, certain agreements include indemnification provisions that could potentially expose us to losses in excess of the amount received under the agreement. To date, there have been no claims under such indemnification provisions. We believe the estimated fair value of these indemnification agreements is not material.

We are also a party to certain other claims in the normal course of our operations. While the results of these claims cannot be predicted with any certainty, we believe that the final outcome of these matters will not have a material adverse effect on our consolidated financial position and results of operations.

 

15

---

Table of Contents

SYMMETRICOM, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

 

Note 12. Business Segment Information

Symmetricom is organized into two operating segments corresponding to our two divisions: Communications and Government and Enterprise. These two operating segments are our reporting segments. The Chief Operating Decision Maker (CODM), as defined by authoritative accounting guidance on Segment Reporting, is our President and Chief Executive Officer (CEO). Our CEO allocates resources to and assesses the performance of each operating segment using information about its revenue and operating income (loss) before interest and taxes.

With the exception of intangible assets, we do not identify or allocate assets by operating segment, nor does our CEO evaluate operating segments using discrete asset information. We do not allocate restructuring charges, interest and other income, interest expense, or income taxes to operating segments.

The following describes our two reporting segments:

Communications

Our Communications business supplies timing technologies and services for worldwide communications infrastructure. Products include primary reference sources, synchronization distribution systems, embedded components and software, and test and measurement equipment, all of which support the timing and synchronization requirements of telecommunications and cable networks and equipment.

Government and Enterprise

Our Government and Enterprise business provides time technology products for aerospace/defense, IT infrastructure and science and metrology applications. Precision time and frequency systems enable a range of critical operations, including the international time scale, global navigation, the management of power grids, synchronization of complex control systems, and signals intelligence for securing communications in remote and hostile environments. Through fiscal 2011, we named this business as Government; however, in the first quarter of fiscal 2012, we changed the name to Government and Enterprise to more accurately reflect the business’ customers and initiatives.

 

16

---

Table of Contents

SYMMETRICOM, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

 

Segment revenue, gross profit and operating income (loss) were as follows during the periods presented:

 

Three months ended October 2, 2011
		Communications				Government  and Enterprise				Corporate				Total
		(In thousands)
Net revenue		$	33,570			$	22,808			$	—			$	56,378
Cost of sales			16,279				13,737				417				30,433
Gross profit			17,291				9,071				(417	)			25,945
Operating expenses			9,730				6,269				5,857				21,856
Operating income (loss)		$	7,561			$	2,802			$	(6,274	)		$	4,089
Three months ended September 26, 2010
		Communications				Government and Enterprise				Corporate				Total
		(In thousands)
Net revenue		$	33,149			$	21,230			$	—			$	54,379
Cost of sales			15,495				11,398				3,747				30,640
Gross profit			17,654				9,832				(3,747	)			23,739
Operating expenses			8,416				5,967				4,203				18,586
Operating income (loss)		$	9,238			$	3,865			$	(7,950	)		$	5,153

The information in the Corporate category above represents corporate-related costs that are not allocated to either of our two segments for the purpose of evaluating their performance. The following table outlines our major corporate-related costs:

 

		Three Months Ended
		October 2, 2011				September 26, 2010
		(In thousands)
Selling, general and adminstrative costs		$	5,761			$	5,084
Restructuring charges			513				2,866
Corporate-related total		$	6,274			$	7,950

 

17

---

Table of Contents

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read together with the condensed consolidated financial statements and related notes included elsewhere in this report.

When used in this discussion or elsewhere in this report, the words “expects,” “anticipates,” “estimates,” “believes,” “plans,” “will,” “intend,” “can” and similar expressions are intended to identify forward-looking statements. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected.

These risks and uncertainties include, but are not limited to, risks relating to general economic conditions in the markets we address and the telecommunications market in general, risks related to the development of our new products and services, the reliance on our contract manufacturer, the effects of increasing competition and competitive pricing pressure, uncertainties associated with changing intellectual property laws, developments in and expenses related to litigation, inability to obtain sufficient amounts of key components, the rescheduling or cancellations of key customer orders, the loss of a key customer, the effects of new and emerging technologies, the risk that excess inventory may result in write-offs, price erosion and decreased demand, fluctuations in the rate of exchange of foreign currency, changes in our effective tax rate, market acceptance of our new products and services, technological advancements, undetected errors or defects in our products, the risks associated with our international sales, potential short-term investment losses and other risks due to credit market dislocation, geopolitical risks and risk of terrorist activities, the risks associated with attempting to integrate other companies and businesses we acquire, and the risks set forth below in Part II, Item 1A, “Risk Factors.”

These forward-looking statements speak only as of the date hereof. We expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances or on which any such statement is based.

All references to “Symmetricom,” “we,” “us,” and “our” mean Symmetricom, Inc. and its subsidiaries, except where it is made clear that the term means only the parent company. Dollar amounts in the tables in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” are in thousands.

Overview

Symmetricom is a leading source worldwide of highly precise timekeeping technologies, instruments and solutions. We generate, distribute and apply precise time for the communications, aerospace/defense, IT infrastructure and metrology industries. Symmetricom’s customers, from communications service providers and network equipment manufacturers to governments and their suppliers worldwide, are able to build more reliable networks and systems by using our advanced timing technologies, atomic clocks, services and solutions. Our products support today’s precise timing standards, including GPS-based timing, IEEE 1588 (PTP), Network Time Protocol (NTP), Synchronous Ethernet, Building Integrated Timing Supply (BITS) and Data Over Cable Service Interface Specifications (DOCSIS(R)) timing.

Critical Accounting Estimates

Our condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States, which require us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosures at the date of our financial statements. On an ongoing basis, management evaluates its estimates and judgments. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, if different estimates reasonably could have been used, or if changes in the estimate that are reasonably likely to occur could materially impact the financial statements. We believe that there have been no significant changes during the three months ended October 2, 2011 to the items that we disclosed as our critical accounting policies and estimates in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended July 3, 2011.

 

18

---

Table of Contents

Known Trends and Uncertainties Impacting Future Results of Operations: Global Market and Economic Conditions

Current macro-economic factors are dynamic and uncertain and are likely to remain so for the remainder of fiscal year 2012. If economic conditions remain uncertain or worsen (for example, due to the ongoing financial crisis in Europe or a slowdown in the economic growth rate in China), or if there are reductions in government and/or defense spending, our customers may delay or reduce capital expenditures. Among other things, these factors could result in reductions in sales of our products, longer sales cycles, difficulties in collecting accounts receivable, additional excess and obsolete inventory, gross margin deterioration, slower adoption of new technologies, increased price competition and supplier difficulties.

Results of Operations

The following table presents selected items in our condensed consolidated statements of operations as a percentage of total net revenue for the three months ended October 2, 2011 and September 26, 2010:

 

		Three Months Ended
		October 2, 2011				September 26, 2010
Net revenue
Communications			59.5	%			61.0	%
Government and Enterprise			40.5	%			39.0	%
Total net revenue			100.0	%			100.0	%
Cost of products and services			52.9	%			48.9	%
Amortization of purchased technology			0.3	%			0.5	%
Restructuring charges			0.7	%			6.9	%
Gross profit			46.0	%			43.7	%
Operating expenses:
Research and development			12.2	%			12.1	%
Selling, general and administrative			26.3	%			23.6	%
Amortization of intangible assets			0.1	%			0.1	%
Restructuring charges			0.2	%			(1.6	)%
Operating income			7.3	%			9.5	%
Interest income, net of amortization (accretion) of premium (discount) on investments			0.1	%			(0.2	)%
Interest expense			—	%			(0.1	)%
Income from continuing operations before taxes			7.3	%			9.2	%
Income tax provision			2.4	%			3.5	%
Income from continuing operations			4.9	%			5.7	%
Income from discontinued operations, net of tax			—	%			0.2	%
Net income			4.9	%			5.9	%

 

19

---

Table of Contents

Net Revenue:

 

		Three Months Ended								$ Change				% Change
		October 2, 2011				September 26, 2010
Net Revenue :
Communications		$	33,570			$	33,149			$	421				1.3	%
Government and Enterprise			22,808				21,230				1,578				7.4
Total Net Revenue		$	56,378			$	54,379			$	1,999				3.7
Percentage of Revenue			100	%			100	%

Net revenue consists of sales of products, software licenses and services. In the first quarter of fiscal 2012, net revenue increased $2.0 million, or 3.7%, compared to the corresponding quarter of fiscal 2011. The increase in Communications revenue is due to an increase in sale of our DOCSIS Timing Interface (DTI) products which was partially offset by decreases in our traditional sync and embedded timing systems. Government and Enterprise segment revenue increased $1.6 million, or 7.4% compared to the same quarter for the prior year, due primarily to an increase in Space, Defense and Avionics (SDA) program business.

Gross Profit:

 

		Three Months Ended								$ Change				% Change
		October 2, 2011				September 26, 2010
Gross Profit :
Communications		$	17,291			$	17,654			$	(363	)			(2.1	)%
Government and Enterprise			9,071				9,832				(761	)			(7.7	)
Corporate related			(417	)			(3,747	)			3,330				(88.9	)
Total Gross Profit		$	25,945			$	23,739			$	2,206				9.3
Percentage of Revenue			46.0	%			43.7	%

Gross profit in the first quarter of fiscal 2012 increased by $2.2 million, or 9.3%, compared to the corresponding quarter of fiscal 2011. Gross profit as a percentage of revenue in the first quarter of fiscal 2012 increased to 46.0% as compared to 43.7% in the corresponding quarter of fiscal 2011 due primarily to a decrease in corporate-related restructuring charges. In the first quarter of fiscal 2011, we incurred $3.7 million in restructuring charges due to severance, product transfer costs and additional depreciation costs related to restructuring activities associated with the phased closure of our Puerto Rico manufacturing facility, which was completed in fiscal 2011.

Gross profit for our Communications segment decreased by 2.1% in the first quarter of fiscal 2012 compared to the corresponding quarter of fiscal 2011 whereas the revenue in this segment increased by 1.3% compared to the same period due to higher manufacturing costs that were partially offset by a favorable sales mix of higher margin products, (mainly DOCSIS Timing Interface (DTI) products). Gross profit for our Government and Enterprise segment decreased by 7.7%, in the first quarter of fiscal 2012 compared to the corresponding quarter of fiscal 2011 whereas revenue increased 7.4% compared to the same period, due to higher manufacturing costs.

 

20

---

Table of Contents

Operating Expenses:

Research and Development Expense:

 

		Three Months Ended								$ Change				% Change
		October 2, 2011				September 26, 2010
Research and development expense		$	6,898			$	6,606			$	292				4.4	%
Percentage of Revenue			12.2	%			12.1	%

Research and development expense consists primarily of salaries and benefits, prototype expenses and fees paid to outside consultants. Research and development expenses increased in the first quarter of fiscal 2012 compared to the same quarter of fiscal 2011 due to higher facilities and IT costs, and higher employee compensation, partially offset by lower engineering project expenses. We expect that research and development expenses in the second quarter of fiscal 2012 will be consistent with the first quarter of fiscal 2012.

Selling, General and Administrative:

 

		Three Months Ended								$ Change				% Change
		October 2, 2011				September 26, 2010
Selling, general and administrative		$	14,810			$	12,799			$	2,011				15.7	%
Percentage of Revenue			26.3	%			23.6	%

Selling, general and administrative expenses consist primarily of salaries, benefits, sales commissions and travel-related expenses for our sales and services, marketing, finance, human resources, information technology and facilities departments. These expenses increased in the first quarter of fiscal 2012 compared to the same quarter of fiscal 2011 due to higher spending on employee compensation costs, travel expenses and facilities expenses. This increase was partially offset by a decrease in IT costs. We expect that selling, general and administrative expenses in the second quarter of fiscal 2012 will be consistent with the first quarter of fiscal 2012.

Amortization of intangibles:

 

		Three Months Ended								$ Change				% Change
		October 2, 2011				September 26, 2010
Amortization of intangible assets		$	52			$	62			$	(10	)			(16.1	)%
Percentage of Revenue			0.1	%			0.1	%

Amortization of intangibles decreased in the first quarter of fiscal 2012 compared to the corresponding period of fiscal 2011 due to certain assets being fully amortized before or during the first quarter of fiscal 2012.

 

21

---

Table of Contents

Restructuring charges:

 

		Three Months Ended								$ Change				% Change
		October 2, 2011				September 26, 2010
Restructuring charges		$	96			$	(881	)		$	977				(110.9	)%
Percentage of Revenue			0.2	%			(1.6	)%

Restructuring charges in the first quarter of fiscal 2012 consisted of severance, consulting and outside services. In the first quarter of fiscal 2011, restructuring charges consisted of a partial reduction in the lease loss accrual associated with the sublease of a portion of the Santa Rosa facility.

Interest income, net of amortization (accretion) of premium (discount) on investments:

 

		Three Months Ended								$ Change				% Change
		October 2, 2011				September 26, 2010
Interest income, net of amortization (accretion) of premium (discount) on investments		$	66			$	(108	)		$	174				(161.1	)%
Percentage of Revenue			0.1	%			(0.2	)%

Interest income (loss), net of amortization (accretion) of premium (discount) on investments increased $0.2 million in the first quarter of fiscal 2012 compared to the same period in fiscal 2011 due to a decrease in amortization of premium on short-term investments.

Income tax provision:

 

		Three Months Ended								$ Change				% Change
		October 2, 2011				September 26, 2010
Income tax provision		$	1,406			$	1,896			$	(490	)			(25.8	)%
Percentage of Revenue			2.4	%			3.5	%

Our income tax provision was $1.4 million in the first quarter of fiscal 2012, compared to $1.9 million in the corresponding quarter of fiscal 2011. Our effective tax rate in the first quarter of fiscal 2012 was 33.8%, compared to an effective tax rate of 38.0% in the corresponding period of fiscal 2011. The effective tax rate for the first quarter of fiscal 2012 benefited from federal research and development credits and the utilization of a capital loss.

 

22

---

Table of Contents

Income (loss) from discontinued operations, net of tax:

 

		Three Months Ended								$ Change				% Change
		October 2, 2011				September 26, 2010
Income from discontinued operations, net of tax		$	—			$	127			$	(127	)			(100.0	)%
Percentage of Revenue			—	%			0.2	%

Discontinued operations relate to our Quality of Experience business (QOE) which we sold in the third quarter of fiscal 2010. In the first quarter of fiscal 2011, we recorded income from discontinued operations of $0.1 million, net of income taxes, due primarily to the finalization of compensation costs of former employees. There was no income or expense in first quarter of fiscal 2012.

Key Operating Metrics

Key operating metrics for measuring our performance include sales backlog and contract revenue. A comparison of these metrics at the end of the first quarter of fiscal 2012 with the end of fiscal 2011 is below:

Sales Backlog:

Our backlog consists of firm orders that have yet to be shipped to the customer, or may not be shippable to a customer until a future period. Most orders included in backlog can be rescheduled or cancelled by customers without significant penalty. Historically, a substantial portion of net revenue in any fiscal period has been derived from orders received during that fiscal period.

Our backlog amounted to $62.9 million as of October 2, 2011, compared to $60.3 million as of July 3, 2011. Our backlog, which is shippable within the next six months, was $34.8 million as of October 2, 2011, compared to $38.6 million as of July 3, 2011.

Contract Revenue:

As of October 2, 2011, we had approximately $19.3 million in contract revenue to be performed and recognized within the next 36 months, whereas as of July 3, 2011, we had approximately $16.1 million in contract revenue that was to be performed and recognized within 36 months following July 3, 2011. These amounts have been included in our sales backlog discussed above.

Liquidity and Capital Resources

Balance Sheet and Cash Flows

The following table summarizes our cash, cash equivalents and short-term investments:

 

		October 2, 2011				July 3, 2011				Change
Cash and cash equivalents		$	27,593			$	20,318			$	7,275
Short-term investments			29,425				43,340				(13,915	)
Total		$	57,018			$	63,658			$	(6,640	)

As of October 2, 2011, our principal sources of liquidity consisted of cash, cash equivalents and short-term investments of $57.0 million and accounts receivable of $35.1 million.

 

23

---

Table of Contents

As of October 2, 2011, working capital was $138.6 million compared to $134.7 million as of July 3, 2011. Cash, cash equivalents and short-term investments as of October 2, 2011 decreased to $57.0 million from $63.7 million as of July 3, 2011.

Our days sales outstanding in accounts receivable was 57 days as of October 2, 2011, compared to 65 days as of July 3, 2011.

Our principal uses of cash historically have consisted of the purchase of inventories, payroll and other operating expenses related to the manufacturing of products, development of new products and purchase of property and equipment.

Cash flows from operating activities

Net cash used in operating activities in the first quarter of fiscal 2012 was $4.1 million reflecting a significant reduction in payables associated with a higher level of inventory receipts at the end of fiscal 2011. The net cash used in operating activities was driven by net changes in operating assets and liabilities which used $12.0 million, partially offset by the net income of $2.7 million and non-cash charges of $5.2 million.

Changes in operating assets and liabilities consisted primarily of a $7.4 million decrease in accounts payable, a $3.2 million increase in inventories, a $3.1 million decrease in other accrued liabilities, a $1.9 million decrease in accrued compensation, and a $1.8 million increase in prepaids and other assets, partially offset by a decrease in accounts receivable of $5.4 million. The non-cash charges consisted of $1.5 million in depreciation and amortization expenses, $1.2 million deferred tax charges, $1.2 million of stock-based compensation expense and $1.2 million of provision for excess and obsolete inventories.

Cash flows from investing activities

Net cash provided by investing activities was $12.9 million in the first quarter of fiscal 2012, which represented sales/maturities of short-term investments of $14.7 million and $0.2 million from income on release of funds that were held in escrow to satisfy indemnification obligations to the buyer of our QOE business, partially offset by the purchase of short-term investments and property, plant and equipment of $1.0 million and $1.0 million, respectively.

Cash flows from financing activities

Net cash used for financing activities was $1.2 million in the first quarter of fiscal 2012, which represented the repurchase of common stock of $2.0 million, partially offset by cash generated from the issuance of common stock under our ESPP and exercise of common stock options of $0.8 million.

Contingencies

See Item 1 of Part I, Financial Statements — Note 11 — Litigation and Contingencies.

Recently Issued Accounting Pronouncements

See Item 1 of Part I, Financial Statements—Note 1—Basis of Presentation and Recently Issued Accounting Pronouncements

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

For quantitative and qualitative disclosures about market risk affecting Symmetricom, Inc. see “Quantitative and Qualitative Disclosures About Market Risk” in Item 7A of Part II of our Annual Report on Form 10-K for the fiscal year ended July 3, 2011. Our exposure to market risk has not changed materially since July 3, 2011.

 

Item 4.

Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, is (i) recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and (ii) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are effective as of the end of the fiscal quarter covered by this report.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the quarter ended October 2, 2011 that have affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

24

---

Table of Contents

PART II. OTHER INFORMATION

 

Item 1.

Legal Proceedings

See Item 1 of Part I, Financial Statements — Note 11 — Litigation and Contingencies.

 

Item 1A.

Risk Factors

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, Item 1A “Risk Factors” in our Annual Report on Form 10-K for our fiscal year ended July 3, 2011. The risks discussed in our Annual Report on Form 10-K could materially affect our business, financial condition and future results. The risks described in our Annual Report on Form 10-K are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially and adversely affect our business, financial condition or operating results.

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

a)

Not applicable.

 

b)

Not applicable.

 

c)

The following table provides monthly detail regarding our share repurchases during the three months ended October 2, 2011:

 

Period		Total Number of Shares Purchased				Average Price Paid per Share				Total Number of Shares Purchased as Part of Publicly  Announced Plans or Programs				Approximate Number of Shares That May Yet Be Purchased Under the Plans or Programs
July 3, 2011 through July 31, 2011			—			$	—				—				1,600,307
August 1, 2011 through August 28, 2011			233,507				5.21				221,757				1,378,550
August 29, 2011 through October 2, 2011			157,182				5.10				157,182				1,221,368
Total			390,689			$	5.17				378,939

During the first quarter of fiscal 2012, we repurchased 378,939 shares of common stock pursuant to our repurchase program for an aggregate price of approximately $2.0 million. Further, we repurchased 11,750 shares in the first quarter of fiscal 2012 for an aggregate price of approximately $61,000 to cover the cost of employee income taxes on vested restricted stock.

As of October 2, 2011, the total number of shares available for repurchase under the repurchase program authorized by the Board of Directors was approximately 1.2 million.

 

Item 3.

Defaults Upon Senior Securities

Not applicable.

 

Item 4.

Removed and Reserved

 

Item 5.

Other Information

Not applicable.

 

25

---

Table of Contents

Item 6.

Exhibits

 

Exhibit Number		Description of Exhibits
31		Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32		Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101		Interactive Data File.

 

26

---

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on our behalf by the undersigned thereunto duly authorized.

 

				SYMMETRICOM, INC.
				(Registrant)
Date: November 10, 2011				By:		/S/    DAVID G. CÔTÉ
						David G. Côté
						Chief Executive Officer (Principal Executive Officer) and Director
Date: November 10, 2011				By:		/S/    JUSTIN R. SPENCER
						Justin R. Spencer
						Executive Vice President, Chief Financial Officer and Secretary (Principal Financial and Accounting Officer)

 

27