-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, D8J8CNGbgPFZZsgf4kvXsbFa9B+oREHK0EBPD5F8a2lk7ge4fG/U4vmllGbsv8kl ZbaD1v20crioTEJxfyOoTA== 0000950137-05-013836.txt : 20060929 0000950137-05-013836.hdr.sgml : 20060929 20051114173446 ACCESSION NUMBER: 0000950137-05-013836 CONFORMED SUBMISSION TYPE: CORRESP PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 20051114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ANDREW CORP CENTRAL INDEX KEY: 0000317093 STANDARD INDUSTRIAL CLASSIFICATION: DRAWING AND INSULATING NONFERROUS WIRE [3357] IRS NUMBER: 362092797 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: CORRESP BUSINESS ADDRESS: STREET 1: 3 WESTBROOK CORPORATE CENTER, SUITE 900 CITY: WESTCHESTER STATE: IL ZIP: 60154 BUSINESS PHONE: (708) 236-6600 MAIL ADDRESS: STREET 1: 3 WESTBROOK CORPORATE CENTER, SUITE 900 CITY: WESTCHESTER STATE: IL ZIP: 60154 CORRESP 1 filename1.htm corresp
 

ANDREW CORPORATION
10500 WEST 153RD STREET
ORLAND PARK, ILLINOIS 60462
November 14, 2005
VIA EDGAR
Ms. Nili Shah
Accounting Branch Chief
Division of Corporation Finance
100 F Street, NE
U.S. Securities and Exchange Commission
Washington, D.C. 20549-0510
     
RE:
  Andrew Corporation
 
  Form 10-K for the fiscal year ended September 30, 2004
 
  Filed December 13, 2004
 
  Forms 10-Q for the Fiscal Quarters Ended December 31,
 
  2004, March 31, 2005 and June 30, 2005
 
  File No.0-21682
Dear Ms. Shah:
This letter is provided in response to the detailed message you left with my administrative assistant on November 9, 2005.
Comment #1:
Please provide a status regarding the comment letter from the Staff dated October 12, 2005.
Response:
The company continues to review the Staff’s comments with respect to the warranty and segment matters, but has not yet concluded its deliberations and therefore its recommended course of action to our Audit Committee. In addition, we are hopeful that the Staff’s review of the revenue recognition matter will be completed shortly. Because these matters must be presented to our Audit Committee for final action, our preference is to permit the Committee to consider all three issues in a single special meeting.
Comment #2:
Please provide a copy of the entire AT&T Wireless contract prior to the contract change, and then a copy of the entire contract after the change. Highlight those sections that address the certification and integration services, including Andrew’s rights in the event the contract is terminated after integration and before certification services are performed.

 

 

Response:
We have submitted separately, on a supplemental basis pursuant to Rule 12b-4, a copy of the General Purchase Agreement (GPA) between AT&T Wireless Services, Inc. and Allen Telecom, Inc. (subsequently assumed by Andrew Corporation), as well as Addendum Nos. 1 through 5 to the GPA [A001]. Addendum No. 5 is the contract change that separated PSAP integration and certification services for purposes of the Company’s right to obtain payment for completion of each such stage.
We call the Staff’s attention to Section 6.1 of the GPA, Invoices and Payment. As previously discussed, at the inception of the contract the parties anticipated that Allen would be providing a turnkey solution including territory design, equipment, installation and all services required to integrate and certify the accuracy of the equipment (that is, PSAP integration and certification, which is termed Customer Acceptance in the GPA). Article II, Section 8 of the GPA describes the requirements for the standard of performance for acceptance, which is PSAP integration and certification. The company did not believe revenue could be recognized until the certification, as described within this section, had been delivered.
To clarify Customer Acceptance in the GPA, these acceptance provisions relate only to the services to be performed (PSAP integration and certification) and not to the delivery of previous elements, (i.e. hardware and software). The company has no further procedures to perform after equipment and software is shipped as each shipment is tested prior to leaving the manufacturing facility to ensure the equipment and software are operating in compliance with required specifications. Additionally, the termination requirements in section 4.1 of the GPA specifically allow for payment of all delivered software.
Regarding PSAP integration and certification services, the Company considered its rights in case of termination as described in section 4.1 of the GPA, which allows for the company to only recover delivered equipment, software and costs for “direct, verifiable, non-recoverable expenses” incurred by the company in providing the related services. The Company did not believe its ability to recover costs for these related services would allow for revenue recognition prior to the delivery of certification.
Addendum No. 5 was executed in recognition of a change in business conditions, specifically a growing time interval between PSAP integration and certification services due to changes in the customer’s deployment methodology. This contract amendment established certification as a separate service and clarified the company’s legal rights to payment for the separate PSAP integration and certification services as they were completed. Since certification was now defined contractually as a separate service, the company believed the delivery of PSAP integration and certification would now qualify as separate revenue recognition points. This clarification changed the company’s rights, such that in the event of termination (which language was not amended), the Company would be able to collect for the PSAP integration services separately from certification services.

 

 

Comment #3
Andrew’s SAB 99 analysis – in the analysis provided on November 7 the line that says “revenue per 97-2”, please provide detail to show two things:
  1)   the flow through of the amount of deferred revenue that should have been recognized from the purchase accounting related to Allen
 
  2)   the revenue related to PCS services that should have been properly recognized under SOP 97-2 subsequent to the Allen acquisition
Response:
The table below provides the additional information the Staff has requested in Andrew’s SAB 99 analysis.

 

 

                 
 
    Q4     Fiscal Year  
Fiscal 2003 (dollars in thousands)   2003     2003  
 
 
                
PCS Revenue (based on shipments)
     (2,707 )     (2,707 )
Revenue per 97-2—50% PCS pre acquisition Note 1
     1,077       1,077  
Revenue per 97-2—100% PCS post acquisition Note 2
     —       —  
 
            
Revenue — Increase/(Decrease)
     (1,630 )     (1,630 )
 
            
Income from Continuing Operations
                
Before Income Taxes — Increase/(Decrease)
     (1,588 )     (1,588 )
 
            
Net Income — Increase/(Decrease)
     (985 )     (985 )
 
                                         
 
    Q1     Q2     Q3     Q4     Fiscal Year  
Fiscal 2004 (dollars in thousands)   2004     2004     2004     2004     2004  
 
 
                                        
PCS Revenue (based on shipments)
     (1,473 )     (1,819 )     (1,800 )     (1,292 )     (6,384 )
Revenue per 97-2—50% PCS pre acquisition Note 1
     1,079       841       483       122       2,525  
Revenue per 97-2—100% PCS post acquisition Note 2
     494       916       1,305       1,821       4,536  
 
    
Revenue — Increase/(Decrease)
     100       (62 )     (12 )     651       677  
 
            
Income from Continuing Operations
                                        
Before Income Taxes — Increase/(Decrease)
     107       (73 )     (16 )     651       669  
 
            
Net Income — Increase/(Decrease)
     66       (45 )     (10 )     404       415  
 
                                 
 
                    Estimated        
    Q1     Q2     Q3     Fiscal Year  
Fiscal 2005 (dollars in thousands)   2005     2005     2005     2005  
       
 
                                
PCS Revenue (based on shipments)
     (716 )     (1,681 )     (1,510 )     (3,907 )
Revenue per 97-2—50% PCS pre acquisition Note 1
     —       —       —       —  
Revenue per 97-2—100% PCS post acquisition Note 2
     1,678       1,461       1,424       4,563  
 
          
Revenue — Increase/(Decrease)
     962       (220 )     (86 )     656  
 
            
Income from Continuing Operations
                                
Before Income Taxes — Increase/(Decrease)
     1,212       (287 )     (86 )     839  
 
            
Net Income — Increase/(Decrease)
     752       (178 )     (53 )     520  
 
Note 1
The flow through of the amount of deferred revenue that should have been recognized from the purchase accounting related to Allen. If Allen had recognized revenue under SOP 97-2 at the date of the merger Allen would have had $7.2 million in deferred revenue on its balance sheet. This analysis assumes that 50% or $3.6 million of this revenue was recognized post merger.
Note 2
The revenue related to PCS services that should have been properly recognized under SOP 97-2 subsequent to the Allen acquisition. This revenue is 100% of the PCS value for product installed after the Allen acquisition.
Comment #4
Within the SAB 99 analysis, please provide the effect of the correcting adjustment on Network Solutions segment revenues by quarter from Q4 2003 to present.
Response:
The table below provides the additional information the Staff has requested.

 

 

Impact of Revenue Recognition Change on Network Solution’s Segment Revenue
 
                 
    Q4     Fiscal Year  
Fiscal 2003   2003     2003  
 
Network Solutions Revenue
     43,772       43,772  
 
Impact of Revenue Recognition Change
     (1,630 )     (1,630 )
Percentage of revenue
     -3.7 %     -3.7 %
 
                                         
    Q1     Q2     Q3     Q4     Fiscal Year  
Fiscal 2004   2004     2004     2004     2004     2004  
 
Network Solutions Revenue
     38,585       44,888       43,733       58,572       185,778  
 
Impact of Revenue Recognition Change
     100       (62 )     (12 )     651       677  
Percentage of revenue
     0.3 %     -0.1 %     0.0 %     1.1 %     0.4 %
 
                                         
    Q1     Q2     Q3             Fiscal Year  
Fiscal 2005   2005     2005     2005             2005  
     
Network Solutions Revenue
     35,009       44,004       42,196               121,209  
 
Impact of Revenue Recognition Change
     962       (220 )     (86 )             656  
Percentage of revenue
     2.7 %     -0.5 %     -0.2 %             0.5 %
 
If you have any questions or comments regarding this letter, please contact the undersigned at (708) 873-3600.
         
  Very truly yours,

  
  /s/ Marty R. Kittrell    
  Marty R. Kittrell
Chief Financial Officer 		  
 
     
Cc:
  Ms. Tracey Houser (Securities and Exchange Commission)
 
  Mr. Nathan Cheney (Securities and Exchange Commission)
 
  Mr. James P. Sherman (Ernst & Young LLP)
 
  Mr. Dewey B. Crawford (Foley & Lardner LLP)

 

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