EX-99.1 3 a04-1848_2ex99d1.htm EX-99.1

Exhibit 99.1

 

 

Analyst / Investor Contacts

 

Marty Kittrell

 

Chief Financial Officer

 

708-873-3600

 

 

 

Scott Malchow

 

Investor Relations

 

708-873-8515

 

 

 

Media Contact

 

Jackie Granger

 

Corporate Communications

 

708-349-5661

 

Andrew Corporation Reports Record First Quarter Net Sales

 

                  Achieved high end of previously revised upward guidance

                  Record net sales of $411 million increased 19% sequentially and 61% year-over-year

                  Fourth consecutive quarter of book-to-bill ratio equal to or greater than 1.0 times

                  Corporate development activity focused on long-term growth strategies

 

ORLAND PARK, IL, February 2, 2004 – Andrew Corporation (NASDAQ:  ANDW), a global communications systems equipment supplier, today announced results for its first fiscal quarter ended December 31, 2003.  All per share information discussed below is presented on a fully diluted basis.

 

FIRST QUARTER RESULTS

First quarter net sales were $410.8 million, up 61% from $254.5 million in the year ago quarter and slightly better than prior guidance of $400 million to $410 million in sales.  GAAP net income was $3.8 million or $0.02 per share, compared to $6.1 million or $0.06 per share in the year ago quarter.

 

First quarter results include intangible amortization of $9.4 million ($0.04 per share), a pre-tax loss of $4.5 million ($0.02 per share) related to the sale of television broadcast assets and pre-tax restructuring charges of $0.7 million.  The year ago first quarter included intangible amortization of $3.7 million ($0.03 per share) and discontinued operations of $0.6 million ($0.01 per share).

 

“We are pleased to announce first quarter results that met the high end of our previously revised upward guidance,” said Ralph Faison, President and CEO of Andrew Corporation.  “Increased sales, synergies relating to the Allen Telecom acquisition and the initial benefits from our cost savings programs have all had a positive effect on operating leverage, despite an anticipated decline in gross margin.”

 



 

The following table is a summary of significant items impacting the comparability of results for the first quarter of fiscal 2004, fourth quarter of fiscal 2003 and first quarter of fiscal 2003 earnings per share amounts:

 

Summary of Significant
Items Impacting Results

 

Q1 FY04

 

Q4 FY03

 

Q1 FY03

 

 

 

 

 

 

 

 

 

Intangible amortization

 

$

(0.04

)

$

(0.04

)

$

(0.03

)

Gain (loss) on sale of assets

 

(0.02

)

0.01

 

N/A

 

Preferred stock dividends

 

0.00

 

(0.04

)

N/A

 

Restructuring charges

 

0.00

 

(0.04

)

N/A

 

Discontinued operations

 

N/A

 

N/A

 

(0.01

)

Per share impact

 

$

(0.06

)

$

(0.11

)

$

(0.04

)

 

Orders for the first quarter were a record $409.1 million, up 19% sequentially and 75% from the year ago quarter.  “This marks our fourth consecutive quarter of book-to-bill ratio equal to or greater than one times.  We are encouraged by the continuation of positive industry trends that began in the fourth quarter of fiscal 2003.  Additionally, the breadth and depth of orders across all major regions and product groups give us an increased comfort level that the trends we are experiencing are not largely attributable to year-end budget spending,” said Mr. Faison.

 

Sales by geographic mix for the first quarter of fiscal 2004 and fourth quarter of fiscal 2003 include the results of Allen Telecom since its acquisition on July 15, 2003.  Results are presented on a sequential basis for relevant comparisons.

 

 

 

Q1 FY04

 

Q4 FY03

 

%
Change

 

% Of

Q1 Total

 

Region:

 

 

 

 

 

 

 

 

 

Americas

 

$

228.9

 

$

195.9

 

17

%

56

%

Europe / Middle East / Africa

 

124.1

 

97.9

 

27

 

30

 

Asia Pacific

 

57.8

 

51.1

 

13

 

14

 

Total

 

$

410.8

 

$

344.9

 

19

%

100

%

 

Total sales increased 19% sequentially to $410.8 million, driven by higher sales across each major region and most major product groups.  Increased Cable Product sales reflect a 5% increase in unit volume.  Higher sales in Base Station Subsystems were driven by OEMs supporting increased operator capital expenditures for network upgrades and expansion.  Antenna and Wireless Innovation sales increased due primarily to coverage applications for network expansion.  Network Solutions sales were higher than anticipated, but declined as a percentage of total sales.

 

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In the first quarter, Lucent Technologies and AT&T Wireless each accounted for more than 10% of sales.  The top 25 customers represented 70% of total sales in the first quarter compared to 66% in the fourth quarter of 2003. 

 

FIRST QUARTER HIGHLIGHTS

                  Acquired selected assets of Channel Master LLC, a manufacturer of high volume antennas for professional VSAT, consumer DBS and television accessory markets.

                  Announced the joint development of an integrated amplifier radio subsystem supporting CDMA2000 and WCDMA 3G air interfaces at multiple frequencies for deployment in Samsung’s V.5 BTS product.

                  Acquired selected assets of Yantai Fine Cable Company, a manufacturer of high-quality subscriber-access drop cable for the critical last mile in broadband cable TV infrastructure.

                  Announced an investment in Andes Industries, Inc., and its principal operating subsidiary PCT International, a leading supplier of optical and RF equipment for the broadband cable market.

                  Sold selected television broadcast assets to Electronics Research, Inc.

 

“The corporate development activities in the first quarter highlight our long-term growth strategy and financial flexibility.  We will continue to explore opportunities that enable the company to grow faster than the overall market, including the development of integrated products, as well as the rationalization of underperforming or non-strategic assets,” said Mr. Faison. 

 

FIRST QUARTER FINANCIAL SUMMARY

Gross margins were 25.3%, compared with 28.3% in the prior quarter and 28.0% in the year ago quarter.  The decrease in gross margins, which was anticipated, reflects continued start-up costs associated with the Reynosa, Mexico and Brno, Czech Republic manufacturing facilities.  Significant increases in unit volumes for certain new and existing product lines at these locations have had a temporary effect on the company’s ability to complete its restructuring program in the first quarter.  Additionally, gross margins declined as Network Solutions sales represented a lower percentage of total sales in the first quarter.

 

Research and development expenses were $25.6 million or 6.2% of sales, compared to $25.7 million or 7.4% of sales in the prior quarter and $19.9 million or 7.8% of sales in the year ago quarter.  Sales and administrative expenses were $52.5 million or 12.8% of sales, compared to $47.9 million or 13.9% of total sales in the prior quarter and $36.8 million or 14.5% in the year ago quarter.  Total operating expenses declined as a percentage of sales due primarily to increased sales and the initial effects of the company’s cost savings programs.

 

Intangible amortization was $9.4 million in the first quarter, compared to $8.2 million in the prior quarter and $3.7 million in the year ago quarter.  The increase in intangible amortization expenses was related to the Allen Telecom acquisition.  It is

 

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anticipated that intangible amortization will be approximately $38.0 million in fiscal 2004 and decline to approximately $20.0 million in fiscal 2005.

 

Included in other income is a $4.5 million pre-tax loss from the sale of selected television broadcast assets, which includes a $4.1 million write-off of goodwill.  Interest expense of $3.9 million increased from $1.1 million in the year ago quarter due to the sale of convertible notes in August 2003.

 

The company’s effective tax rate for the first quarter was 35.0%, in-line with the prior quarter, and higher than the 30.0% in the year ago quarter due to an increased percentage of domestic taxable income following the Allen Telecom acquisition.

 

COST SAVINGS UPDATE

“I am pleased with the progress made on our cost savings programs that we anticipate will remove more than $100 million of annual costs in 2005.  We have made substantial progress with the relocation of several product lines into new manufacturing facilities located in Reynosa, Mexico and Brno, Czech Republic.  We anticipate that the majority of restructuring and start-up costs associated with these facilities will be complete during the third quarter of fiscal 2004,” said Mr. Faison.

 

BALANCE SHEET AND CASH FLOW HIGHLIGHTS

Cash and cash equivalents decreased to $220.1 million at December 31, 2003, compared to $286.3 million at September 30, 2003.  Cash and cash equivalents declined due to working capital requirements associated with higher sales, the acquisition of the assets of Channel Master LLC and Yantai Fine Cable Company, a strategic investment in Andes International and its subsidiary, PCT International, capital expenditures related to the company’s two new manufacturing facilities and an $11.9 million reduction of total debt.

 

Accounts receivables were $379.5 million and days’ sales outstanding (DSOs) were 83 days at December 31, 2003, compared to $326.3 million and 80 days at September 30, 2003.  Inventories were $284.2 million and inventory turns were 4.3x at December 31, 2003, compared to $247.8 million and 4.2x at September 30, 2003.

 

Total debt outstanding decreased to $308.7 million at December 31, 2003, compared to $319.1 million at September 30, 2003. Total debt to capital decreased to 17.5% at December 31, 2003, compared to 18.3% at September 30, 2003.

 

Cash flow used in operations was $15.7 million in the first quarter compared to cash flow from operations of $12.7 million in the year ago quarter.  During the quarter, a $7.5 million cash payment was made to improve the funding status of the former Allen Telecom noncontributory defined benefit pension plan.  Capital expenditures were $19.6 million in the first quarter and $9.4 million in the prior year quarter.  Depreciation was $15.2 million in the first quarter compared to $12.7 million in the year ago quarter.

 

4



 

During the quarter, approximately 23,000 shares of outstanding 7.75% convertible preferred stock were converted into 264,000 common shares, leaving approximately 161,000 shares of preferred stock outstanding.  Also during the quarter, the company repurchased 225,000 shares of common stock at an average purchase price of $10.95 per share.  The company has 13.0 million shares that remain available under its authorized share repurchase program.

 

LITIGATION SETTLEMENT

Subsequent to the close of the first quarter, the company reached a definitive agreement with TruePosition, Inc., to settle pending patent infringement litigation filed against Allen Telecom, Inc., on December 11, 2001, prior to the acquisition by Andrew in July 2003.  The definitive agreement, which settles all patent infringement litigation between the parties, provides for Andrew to pay TruePosition $35 million in cash payments and issue warrants to purchase one million shares of common stock that have a four-year term and a $17.70 exercise price per share.  The parties also agreed to cross-license geolocation-related patents and to provide Andrew with the opportunity to manufacture certain geolocation hardware for TruePosition through October 2006.  The terms of this settlement will be accounted for as an increase to the liabilities assumed in the acquisition of Allen Telecom and should not have a material affect on future operating results.

 

SECOND QUARTER GUIDANCE

For the second quarter, we expect revenues to range from $350 to $380 million and GAAP earnings per share to range from breakeven to $0.03, including intangible amortization and restructuring costs of approximately $0.04 per share.  Due to on-going start-up costs and the effects of increased unit volumes for certain new and existing product lines at the Reynosa, Mexico and Brno, Czech Republic facilities, we anticipate that gross margins for the second quarter will be relatively flat with the first quarter. We anticipate a normalized tax rate of approximately 35% and basic common shares outstanding of approximately 159.0 million in the second quarter.  Basic shares outstanding exclude any potential dilutive effects of the convertible preferred, convertible notes, stock options and warrants.

 

“Our second quarter guidance anticipates a less than traditional seasonal decline from the first quarter.  We are encouraged by the positive industry trends that continued throughout the first quarter and we are committed to achieving our fiscal 2005 operating model,” said Mr. Faison.

 

Attached to this news release are preliminary financial statements for the first quarter ended December 31, 2003.

 

Conference Call Webcast

Andrew Corporation will host a conference call to discuss its first quarter fiscal 2004 results on Monday, February 2, 2004 at 8:00 a.m. CST.  Interested investors can participate via a live webcast over the Internet at www.andrew.com.  An audio replay of the conference call will be made available for 60 days following the event.

 

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About Andrew

Andrew Corporation (NASDAQ:ANDW - News) designs, manufactures and delivers innovative and essential equipment and solutions for the global communications infrastructure market. The company serves operators and original equipment manufacturers from facilities in 60 countries.  Andrew (www.andrew.com), headquartered in Orland Park, IL, is an S&P 500 company founded in 1937.

 

Forward Looking Statements

Some of the statements in this news release are forward looking statements and we caution our stockholders and others that these statements involve certain risks and uncertainties. Factors that may cause actual results to differ from expected results include the company’s ability to integrate acquisitions and to realize the anticipated synergies and cost savings, the effects of competitive products and pricing, economic and political conditions that may impact customers’ ability to fund purchases of our products and services, the company’s ability to achieve the cost savings anticipated from cost reduction programs, fluctuations in international exchange rates, the timing of cash payments and receipts, end use demands for wireless communication services, the loss of one or more significant customers, and other business factors. Investors should also review other risks and uncertainties discussed in company documents filed with the Securities and Exchange Commission.

 

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UNAUDITED - PRELIMINARY

 

ANDREW CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars In thousands, except per share amounts)

 

 

 

Three Months Ended
December 31

 

 

 

2003

 

2002

 

 

 

 

 

 

 

Sales

 

$

410,771

 

$

254,526

 

Cost of products sold

 

306,702

 

183,313

 

Gross Profit

 

104,069

 

71,213

 

 

 

 

 

 

 

Operating Expenses

 

 

 

 

 

Research and development

 

25,623

 

19,899

 

Sales and administrative

 

52,493

 

36,814

 

Intangible amortization

 

9,421

 

3,682

 

Restructuring

 

694

 

79

 

 

 

88,231

 

60,474

 

 

 

 

 

 

 

Operating Income

 

15,838

 

10,739

 

 

 

 

 

 

 

Other

 

 

 

 

 

Interest expense

 

3,887

 

1,060

 

Interest income

 

(749

)

(323

)

Loss on sale of Broadcast assets

 

4,511

 

 

Other (income) expense, net

 

1,850

 

520

 

 

 

9,499

 

1,257

 

Income from Continuing Operations Before Income Taxes

 

6,339

 

9,482

 

 

 

 

 

 

 

Income Taxes

 

2,219

 

2,845

 

Income from Continuing Operations

 

4,120

 

6,637

 

 

 

 

 

 

 

Discontinued Operations, net of tax benefit

 

 

570

 

 

 

 

 

 

 

Net Income

 

4,120

 

6,067

 

 

 

 

 

 

 

Preferred Stock Dividends

 

315

 

 

 

 

 

 

 

 

Net Income Available to Common Shareholders

 

$

3,805

 

$

6,067

 

 

 

 

 

 

 

Basic and Diluted Income per Share from Continuing Operations

 

$

0.02

 

$

0.07

 

Basic and Diluted Net Income per Share

 

$

0.02

 

$

0.06

 

 

 

 

 

 

 

Average Shares Outstanding

 

 

 

 

 

Basic

 

158,345

 

98,285

 

Diluted

 

158,642

 

98,288

 

 

 

 

 

 

 

Orders Entered

 

409,065

 

234,162

 

Total Backlog

 

332,077

 

166,593

 

 



 

UNAUDITED - PRELIMINARY

 

ANDREW CORPORATION

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)

 

 

 

December 31
2003

 

September 30
2003

 

ASSETS

 

 

 

 

 

Current Assets

 

 

 

 

 

Cash and cash equivalents

 

$

220,116

 

$

286,269

 

Accounts receivable,  less allowances (Dec. 2003 - $11,472; Sept. 2003 - $10,662)

 

379,495

 

326,282

 

Inventories

 

284,190

 

247,750

 

Other current assets

 

36,457

 

29,131

 

Total Current Assets

 

920,258

 

889,432

 

 

 

 

 

 

 

Other Assets

 

 

 

 

 

Goodwill

 

828,295

 

821,398

 

Intangible assets, less amortization

 

90,814

 

93,086

 

Other assets

 

54,526

 

50,398

 

 

 

 

 

 

 

Property, Plant, and Equipment

 

 

 

 

 

Land and land improvements

 

23,671

 

20,926

 

Buildings

 

126,004

 

116,038

 

Equipment

 

480,749

 

469,296

 

Allowance for depreciation

 

(401,639

)

(387,341

)

 

 

228,785

 

218,919

 

TOTAL ASSETS

 

$

2,122,678

 

$

2,073,233

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

Current Liabilities

 

 

 

 

 

Notes payable

 

$

247

 

$

284

 

Accounts payable

 

166,432

 

124,646

 

Accrued expenses and other liabilities

 

74,965

 

58,893

 

Compensation and related expenses

 

42,806

 

52,255

 

Restructuring

 

15,070

 

20,414

 

Current portion of long-term debt

 

14,236

 

17,466

 

Total Current Liabilities

 

313,756

 

273,958

 

 

 

 

 

 

 

Deferred liabilities

 

60,559

 

73,941

 

Long-term debt, less current portion

 

294,222

 

301,364

 

 

 

 

 

 

 

STOCKHOLDERS’ EQUITY

 

 

 

 

 

Redeemable convertible preferred stock (par value, $50 a share: 160,814 shares outstanding Dec. 2003 and 183,720 shares outstanding Sept. 2003)

 

8,041

 

9,186

 

Common stock (par value, $.01 a share: 400,000,000 shares authorized: 160,900,657 shares issued in Dec. 2003 and Sept. 2003, including treasury)

 

1,609

 

1,609

 

Additional paid-in capital

 

648,119

 

649,667

 

Accumulated other comprehensive loss

 

13,616

 

(14,115

)

Retained earnings

 

809,240

 

805,435

 

Treasury stock, at cost (2,493,662 shares in Dec. 2003; 2,608,290 shares in Sept. 2003)

 

(26,484

)

(27,812

)

 

 

1,454,141

 

1,423,970

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

 

$

2,122,678

 

$

2,073,233

 

 



 

UNAUDITED - PRELIMINARY

 

ANDREW CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

 

 

 

Three Months Ended
December 31

 

 

 

2003

 

2002

 

 

 

 

 

 

 

Cash Flows from Operations

 

 

 

 

 

Net Income

 

$

4,120

 

$

6,067

 

 

 

 

 

 

 

Adjustments to Net Income

 

 

 

 

 

Depreciation

 

15,219

 

12,711

 

Amortization

 

9,421

 

3,682

 

Other

 

(90

)

(97

)

Restructuring and Discontinued Operations

 

 

 

 

 

Restructuring costs

 

(8,609

)

(2,153

)

Discontinued operations, net of taxes

 

 

3,067

 

Change in Operating Assets / Liabilities

 

 

 

 

 

(Increase) / Decrease in accounts receivable

 

(38,863

)

5,069

 

(Increase) in inventories

 

(26,646

)

(6,375

)

(Increase) / Decrease in other assets

 

(4,638

)

6,721

 

Increase / (Decrease) in accounts payable and other liabilities

 

34,420

 

(16,037

)

Net Cash From (Used for) Operations

 

(15,666

)

12,655

 

 

 

 

 

 

 

Investing Activities

 

 

 

 

 

Capital expenditures

 

(19,573

)

(9,432

)

Acquisition of businesses, net of cash acquired

 

(23,227

)

(114

)

Decrease (Increase) in long-term investments

 

(6,500

)

 

Proceeds from sale of businesses and investments

 

3,000

 

3,508

 

Proceeds from sale of property, plant and equipment

 

549

 

388

 

Net Cash Used for Investing Activities

 

(45,751

)

(5,650

)

 

 

 

 

 

 

Financing Activities

 

 

 

 

 

Long-term debt (payments) borrowings, net

 

(11,691

)

(4,350

)

Notes payable (payments) borrowings, net

 

(174

)

(19,526

)

Preferred stock dividends

 

(315

)

 

Payments to acquire treasury stock

 

(2,472

)

 

Stock purchase and option plans

 

636

 

56

 

Net Cash Used for Financing Activities

 

(14,016

)

(23,820

)

 

 

 

 

 

 

Effect of exchange rate changes on cash

 

9,280

 

3,368

 

 

 

 

 

 

 

Decrease for the Period

 

(66,153

)

(13,447

)

Cash and Equivalents at Beginning of Period

 

286,269

 

84,871

 

Cash and Equivalents at End of Period

 

$

220,116

 

$

71,424