-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, mccNKzhwm94cSzJdDD2uyGQ6uYOld+ypW+1Adv5Tn82trULxnLNrySfMokur9ggZ hTNuWE7BD7dZwieeXbYPeg== 0000003721-95-000008.txt : 19950509 0000003721-95-000008.hdr.sgml : 19950509 ACCESSION NUMBER: 0000003721-95-000008 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950331 FILED AS OF DATE: 19950508 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALLEN GROUP INC CENTRAL INDEX KEY: 0000003721 STANDARD INDUSTRIAL CLASSIFICATION: INSTRUMENTS FOR MEAS & TESTING OF ELECTRICITY & ELEC SIGNALS [3825] IRS NUMBER: 380290950 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-06016 FILM NUMBER: 95535089 BUSINESS ADDRESS: STREET 1: 25101 CHAGRIN BLVD # 350 CITY: BEACHWOOD STATE: OH ZIP: 44122-5619 BUSINESS PHONE: 2167655818 10-Q 1 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 March 31, 1995 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from Not Applicable to Commission file number 1-6016 THE ALLEN GROUP INC. (Exact Name of Registrant as Specified in Its Charter) Delaware 38-0290950 (State or Other Jurisdiction of (I.R.S. Employer Identification No.) Incorporation or Organization) 25101 Chagrin Boulevard, Suite 350, Beachwood, Ohio 44122 (Address of Principal Executive Offices) (Zip Code) (Registrant's Telephone Number, Including Area Code) 216-765-5818 NOT APPLICABLE Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report 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, and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate the number of shares outstanding of each of the issuer's classes of common stock: Outstanding at Class of Common Stock April 28, 1995 Par value $1.00 per share 26,111,429 Exhibit Index is on page 14 of this report. Page 1 of 19 Pages. THE ALLEN GROUP INC. TABLE OF CONTENTS Page No. PART I. Financial Information: Item 1 - Financial Statements: Consolidated Condensed Balance Sheets - March 31, 1995 and December 31, 1994 3 Consolidated Statements of Income - Three Months Ended March 31, 1995 and 1994 4 Consolidated Condensed Statements of Cash Flows - Three Months Ended March 31, 1995 and 1994 5 Notes to Consolidated Condensed Financial Statements 6 - 8 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations 9 - 11 PART II. Other Information: Item 5 - Other Information 12 Item 6 - Exhibits and Reports on Form 8-K 12 Signatures 13 Exhibit Index 14 PART I - FINANCIAL INFORMATION ITEM I - FINANCIAL STATEMENTS THE ALLEN GROUP INC. CONSOLIDATED CONDENSED BALANCE SHEETS (Amounts in Thousands)
March 31, December 31, 1995 1994 (Unaudited) (Note 6) ASSETS Current Assets: Cash and equivalents $ 41,697 $ 55,240 Accounts receivable (Note 2) 84,421 63,117 Receivable from joint venture 895 857 Inventories (Note 3) 67,500 58,316 Prepaid expenses 900 661 Total current assets 195,413 178,191 Property, plant and equipment, net 71,682 56,860 Net investments in and advances to joint venture 24,039 24,411 Investment in FOR.E.M. S.p.A. (Note 6) - 8,458 Excess of cost over net assets of businesses acquired 67,122 56,525 Other assets 38,410 33,271 TOTAL ASSETS $396,666 $357,716 LIABILITIES: Current Liabilities: Notes payable and current maturities of long-term obligations $ 11,759 $ 154 Accounts payable 32,694 26,568 Accrued expenses 37,142 37,955 Income taxes payable 8,955 2,675 Deferred federal income taxes 2,603 2,899 Total current liabilities 93,153 70,251 Long-term debt (Note 7) 51,094 44,910 Other liabilities and deferred credits 21,965 18,374 TOTAL LIABILITIES 166,212 133,535 STOCKHOLDERS' EQUITY Common stock 29,170 29,146 Paid-in capital 162,344 161,644 Retained earnings 62,646 56,902 Translation adjustments 50 23 Less: Treasury stock (at cost) (17,391) (17,479) Unearned compensation (4,620) (4,310) Minimum pension liability adjustment (1,745) (1,745) TOTAL STOCKHOLDERS' EQUITY 230,454 224,181 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $396,666 $357,716 See accompanying notes to the Consolidated Condensed Financial Statements.
THE ALLEN GROUP INC. CONSOLIDATED STATEMENTS OF INCOME (Amounts in Thousands) (Unaudited)
Three Months Ended March 31 1995 1994 SALES $ 92,078 $ 76,942 Costs and Expenses: Cost of Sales (66,487) (54,249) Selling, General and Administrative Expenses (13,501) (12,485) Equity in Loss of Joint Venture (406) (694) Interest and Financing Expenses: Interest Expense (896) (1,046) Interest Income 618 500 INCOME BEFORE TAXES 11,406 8,968 Provision for Income Taxes (4,350) (3,578) NET INCOME $ 7,056 $ 5,390 EARNINGS PER COMMON SHARE (Primary and Fully Diluted) (Note 4) $.27 $.21 Average common and common equivalent shares outstanding 26,561 25,934 See accompanying notes to the Consolidated Condensed Financial Statements.
THE ALLEN GROUP INC. CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Amounts In Thousands) (Unaudited)
Three Months Ended March 31, 1995 1994 Cash (used) provided by operating activities $ (800) $ 5,910 Cash flows from investing activities: Capital expenditures (4,286) (2,016) Sales and retirements of fixed assets 18 40 Capital expenditures relating to centralized emissions inspection programs (6,260) (3,040) Capitalized software product costs (460) (504) Acquisition of business, net of $7,701 cash acquired (Note 6) (610) - Cash used by investing activities (11,598) (5,520) Cash flows from financing activities: Net repayments of long-term debt (88) (1,112) Dividends paid (1,312) (1,041) Exercise of stock options 5 13 Treasury stock sold to employee benefit plans 250 126 Cash used by financing activities (1,145) (2,014) Net cash used (13,543) (1,624) Cash at beginning of year 55,240 11,173 Cash at end of period $ 41,697 $ 9,549 See accompanying notes to the Consolidated Condensed Financial Statements.
THE ALLEN GROUP INC. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS 1. General: In the opinion of management of The Allen Group Inc. (the "Company"), the accompanying unaudited consolidated condensed interim financial statements reflect all adjustments necessary to present fairly the financial position of the Company as of March 31, 1995 and the results of its operations and cash flows for the periods ended March 31, 1995 and 1994. The results of operations for such interim periods are not necessarily indicative of the results for the full year. The year-end 1994 consolidated condensed balance sheet was derived from audited financial statements, but does not include all disclosures required by generally accepted accounting principles. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 1994. Certain reclassifications have been made to the financial statements to conform to the 1995 method of presentation. 2. Accounts Receivable: Accounts receivable are net of the following allowances for doubtful accounts (amounts in thousands):
March 31, December 31, 1995 1994 Allowance for doubtful accounts $ 1,721 $ 1,684 3. Inventories: Inventories consisted of the following (amounts in thousands): March 31, December 31, 1995 1994 Raw Materials $33,755 $29,581 Work-In-Process 20,610 19,433 Finished Goods 13,135 9,302 $67,500 $58,316
4. Earnings Per Common Share: The primary earnings per common share calculations are based upon the weighted average number of common and common equivalent shares outstanding during each period. The calculations also include, if dilutive, the incremental number of common shares issuable on a pro forma basis upon exercise of employee stock options, assuming the proceeds are used to repurchase outstanding common shares at the average market price during the period. The calculation of fully diluted earnings per common share begins with the primary calculation but further reflects, if dilutive, the conversion of the convertible debentures into common shares at the beginning of the period. This calculation resulted in no reportable dilution for the periods ended March 31, 1995 and 1994. 5. Supplemental Cash Flow Disclosures: Depreciation expense, included in "Cash (used) provided by operating activities", in the Consolidated Condensed Statements of Cash Flows amounted to $2,057,000 and $1,731,000 for the periods ended March 31, 1995 and 1994, respectively. Information with respect to cash paid during the periods for interest and income taxes is as follows:
Three Months Ended March 31, 1995 1994 Interest paid $1,290 $1,190 Interest capitalized 93 64 Income taxes paid (refunded) 1,819 (288)
6. Acquisition: On March 17, 1995, the Company acquired an additional 40% interest in FOR.E.M. S.p.A. ("FOREM") located in Milan, Italy; the Company had previously acquired an initial 40% of FOREM in December 1994. The purchase price for the 80% ownership interest aggregated approximately $16,769,000 in cash, and includes certain costs of acquisition. Pursuant to the terms of the acquisition, the former shareholders of FOREM may earn additional purchase price based upon earnings. The remaining 20% of FOREM's outstanding stock is subject to certain put/call arrangements between the Company and the sellers. The purchase price for this remaining 20% ownership interest is based upon a formula relative to future earnings. This acquisition has been accounted for under the purchase method of accounting; accordingly, the Company's consolidated financial position as of March 31, 1995 reflects the acquisition of FOREM. Results of operations for FOREM prior to the latest share acquisition (reported under the equity method of accounting) was not significant. To facilitate preparation of financial statements on a timely basis, FOREM's financial position and results of operations will be reported and included in the Company's consolidated financial statements on a two-month delayed basis. A summary of the net assets of FOREM acquired is as follows (amounts in thousands): Cash $ 7,701 Accounts Receivable 12,428 Inventories 7,178 Fixed Assets 12,599 Excess of cost over net assets acquired 11,006 Other assets 619 Accounts payable and accrued expenses (12,570) Debt (17,876) Other liabilities (4,316) $16,769 The Company has made its best estimate, based on information available at the present time, to allocate the purchase price based on the fair market value of the assets and liabilities acquired. Certain estimates inherent in these valuations are likely to change or have not been completed or formalized at this time and may result in some adjustment of the recorded assets and liabilities acquired, including the excess of cost over net assets acquired. Such excess is being amortized over a 20-year period. 7. Redemption of Convertible Debentures: The Board of Directors of the Company approved the redemption on May 31, 1995, of the remaining $4,915,000 of Convertible Subordinated Debentures, Series A and B, due July 30, 1999, which were issued in 1992 in connection with the Company's acquisition of Alliance Telecommunications Corporation. Holders of these debentures will have the right, until May 24, 1995, to convert the debentures into a total of 351,641 shares of the Company's common stock at the conversion price of $13.9702, plus the accrued and unpaid interest on such debentures through the date of conversion. To the extent such debentures are not converted, the holders would be entitled to receive the redemption price of 106% of the outstanding principal amount of each debenture plus the accrued and unpaid interest to the redemption date. THE ALLEN GROUP INC. ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS For the three months ended March 31, 1995, The Allen Group Inc. ("the Company") reported net income of $7,056,000 ($.27 per common share) compared to $5,390,000 ($.21 per common share) during the comparable 1994 period. The increase in earnings is due primarily to increased sales in the Mobile Communications and Truck Products segments and lower general corporate expenses offset, in part, by increased operating losses in the centralized automotive emissions inspection product line and higher engineering costs of the Mobile Communications segment. In the first quarter of 1995, research and development expenses in the Mobile Communications product lines were up an additional $1.2 million (65%) over the 1994 first quarter, and the Company expects research and development spending to continue at this increased level through the rest of the year. Sales: Consolidated sales from continuing operations by industry segment were:
Three Months Ended March 31, ($ Millions) 1995 1994 Mobile Communications $58.6 $48.5 Truck Products 32.8 27.7 Centralized Automotive Emissions Testing .7 .7 $92.1 $76.9
Mobile Communications sales grew by $10.1 million (20.8%) during the three months ended March 31, 1995 over the comparable period in 1994. Site management product sales, base station antenna sales and higher sales of frequency planning services were the primary reasons for the increase. Truck Products sales increased by $5.1 million (18.4%) for the three months ended March 31, 1995 compared to the same period last year. This increase is primarily attributable to higher crew cab sales. Production levels of the crew cab during the first quarter of 1995 was 16% above the average level for 1994. Centralized Automotive Emissions Testing sales consist of revenues from the Company's MARTA Technologies, Inc. ("MARTA") subsidiary. This industry continues to be burdened by unsettled political and implementation issues which have delayed programs previously awarded and the bidding and award of new programs. The operating results of MARTA were approximately $1 million lower than the comparable results for the first quarter of 1994 due to the delays in the State of Maryland and El Paso region of Texas programs. The Maryland program has since begun operations as of May 2, 1995. We expect that with the Maryland program now operational, MARTA should operate at break-even levels, or a small profit, for each of the remaining quarters of 1995. On May 2, 1995, the State of Texas enacted legislation that could provide for a cancellation of the existing centralized IM 240 emissions inspection programs throughout Texas, including the El Paso, Texas program contracted with MARTA. This legislation directed the Governor of Texas to enter into negotiations with the U.S. Federal Environmental Protection Agency (EPA) as to the impact such legislation would have on the state's federal clean air emissions credits, and provided the Governor wide latitude in determining what type of emissions test program would be enacted based on the results of these negotiations. In addition, the State of Texas has made a request to the EPA to exempt the El Paso region from emissions testing requirements; no determination has yet been made. MARTA believes its existing contract provides for appropriate compensation should this program be substantially changed or cancelled, subject to the appropriation of funds by the State. MARTA plans to pursue all remedies available to protect its interests regarding its contract with the State of Texas. At the present time, it is not possible to predict the outcome of future actions or decisions by the State of Texas or EPA. The Cincinnati program remains scheduled to commence operations in early 1996. The Northern Kentucky program, originally scheduled to begin January 1, 1996, will likely be delayed as the State of Kentucky is reviewing the effect of the EPA's changing mandates on planned and implemented programs. Kentucky has requested MARTA to limit its activities to the search for suitable test station locations, but not to enter into any contractual arrangements to lease or purchase property until the state resolves its issues with the EPA. Operating Income: Overall gross margins on product sales approximated 27.8% and 29.5% for the three months ended March 31, 1995 and 1994, respectively. The decrease in gross margins reflects increased spending by the Company's Mobile Communications segment for research and development and increases in other new product engineering expenditures. This decrease is offset, in part, by improved margins in the Company's Truck Products segment. Selling, general and administrative expenses were 14.7% and 16.2% of product sales for the three months ended March 31, 1995 and 1994, respectively. This improved ratio is attributable to the spreading of fixed costs on higher sales and lower general corporate compensation items in the first quarter of 1995. Joint Venture Operations: For the three months ended March 31, 1995, the Company reported an equity loss from its joint venture of $406,000, compared to $694,000 for the three months ended March 31, 1994. Results for the periods presented are attributable to GO/DAN Industries ("GDI"), a 50/50 partnership accounted for under the equity method. Such losses are due to the seasonality of GDI's business which is traditionally weakest in the first quarter. Interest and Financing Expense: The lower interest expense in 1995, when compared with 1994, reflects the repayment of $7,265,000 of long- term debt in early 1994 offset, in part, by higher borrowing rates for the Company's outstanding industrial revenue bonds. The increase in interest income reflects higher income from the investment of cash generated from operations. The majority of the Company's cash is invested in short-term, tax-exempt securities which has the impact of lowering the net interest income yield compared to what might otherwise be expected from comparable pre-tax instruments. Income Taxes: The Company's effective income tax rate for the three months ended March 31, 1995 and 1994 was 38.1% and 39.9%, respectively, and reflects the inclusion of the full statutory rate for U.S. Federal taxes of 35% plus applicable state and local taxes for both periods. LIQUIDITY AND CAPITAL RESOURCES As set forth in the Consolidated Condensed Statements of Cash Flows, the Company used $800,000 in cash from operations for the three months ended March 31, 1995 compared to cash generated from operations of $5.9 million for the comparable period in 1994. The significant decrease in cash flow is principally due to increased investment in higher trade accounts receivable and inventory levels as a result of higher sales volume in 1995. At March 31, 1995, the Company held $41.7 million in cash and equivalents. Approximately $34 million of these funds are invested in highly liquid investments with maturities of three months or less and are composed primarily of investments in money market funds, bankers acceptances and Dutch auction, tax exempt securities which were afforded one of the two highest ratings by nationally recognized ratings firms. The remainder was held in cash. On March 17, 1995, the Company acquired an additional 40% interest in FOREM, an Italian telecommunications equipment manufacturer, for approximately $8.3 million in cash financed through internally generated funds. See Note 6 of Notes to Consolidated Condensed Financial Statements for additional information, including a summarization of the assets and liabilities acquired, which account for the several significant increases in the March 31, 1995 Consolidated Condensed Balance Sheet when compared with December 31, 1994. On April 28, 1995, the Company issued a Notice of Redemption of its Convertible Subordinated Debentures due July 30, 1999 issued in connection with the acquisition of Alliance Telecommunications Corporation in 1992. See Note 7 of Notes to Consolidated Condensed Financial Statements and Item 5 on page 12 of this report for additional information. The Company believes that continued profitability, cash and short- term investments and available unused credit lines of $93.1 million, as well as unused credit lines for MARTA of $60 million, will provide sufficient liquidity to fund future growth, expansion and acquisitions. PART II - OTHER INFORMATION Item 5 - Other Information On April 28, 1995 the Company issued a Notice of Redemption of Convertible Subordinated Debentures, Series A and B, Due July 30, 1999. A copy of the Redemption Notice is filed as Exhibit 99 to this Report. See Note 7 of Notes to Consolidated Condensed Financial Statements for additional information. Item 6 - Exhibits and Reports on Form 8-K (a) Exhibits (11) Statement re computation of earnings per common share. (27) Financial Data Schedule (EDGAR Filing Only). (99) Notice of Redemption of Convertible Subordinated Debentures, Series A and B, Due July 30, 1999, dated April 28, 1995. (b) Reports on Form 8-K There were no reports on Form 8-K filed during the quarter for which this report is filed. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. The Allen Group Inc. (Registrant) Date: May 5, 1995 By: /s/ Robert A. Youdelman Robert A. Youdelman Senior Vice President-Finance (Chief Financial Officer) Date: May 5, 1995 By: /s/ James L. LePorte James L. LePorte Vice President and Controller (Principal Accounting Officer) THE ALLEN GROUP INC. EXHIBIT INDEX Page Exhibit Number: (11) Statement re computation of earnings per common share........................................... 15 (27) Financial Data Schedule (EDGAR Filing Only)............ 16 (99) Notice of Redemption of Convertible Subordinated Debentures, Series A and B, Due July 30, 1999, dated April 28, 1995................................... 17 EXHIBIT 11 THE ALLEN GROUP INC. EARNINGS PER COMMON SHARE DATA (Amounts in Thousands) Net income and common shares used in the calculations of earnings per common share were computed as follows:
Three Months Ended March 31, 1995 1994 Income: Net income applicable to common stock - primary $ 7,056 $ 5,390 Adjustments for Fully Diluted: Convertible debenture interest 74 74 Net income applicable to common stock - fully diluted $ 7,130 $ 5,464 Common Shares: Weighted average outstanding common shares 25,392 25,321 Common stock equivalents 1,169 613 Common shares - primary 26,561 25,934 Common shares issuable for: Stock options 29 - Conversion of debentures 351 359 Common shares - fully diluted 26,941 26,293 The calculation of fully diluted earnings per common share is submitted in accordance with Regulation S-K Item 601(b)(11) although not required for income statement presentation because it results in dilution of less than 3 percent.
EXHIBIT 27 FINANCIAL DATA SCHEDULE EXHIBIT 99 THE ALLEN GROUP INC. 25101 Chagrin Boulevard Beachwood, OH 44122 _______________________ NOTICE OF REDEMPTION OF CONVERTIBLE SUBORDINATED DEBENTURES, SERIES A AND B, DUE JULY 30, 1999 To the Holders of April 28, 1995 Convertible Subordinated Debentures, Series A and B, due July 30, 1999: NOTICE IS HEREBY GIVEN that, pursuant to Section 3 of the Convertible Subordinated Debentures, Series A and B, due July 30, 1999 (the "Debentures") of The Allen Group Inc., a Delaware corporation (the "Company"), and resolutions duly adopted by the Board of Directors of the Company, the Company will redeem on May 31, 1995 (the "Redemption Date"), all of the outstanding Debentures at the redemption price of 106 percent of the outstanding principal amount of each Debenture plus the accrued and unpaid interest on such Debenture to the Redemption Date. On the Redemption Date, the Redemption Price will become due and payable on each Debenture and interest thereon will cease to accrue on and after such date; provided, however, that pursuant to the terms of the Series B Debentures, the due date for payment of the portion of the Series B Debentures which remains subject to offset shall be extended to the date which is three business days after the first date on which such payment can be made without reducing the principal balance of the Series B Debentures to an amount less than the amount then subject to offset. As a result of calling the Debentures for redemption, the Debentures will not be convertible into shares of Common Stock, par value $1 per share, of the Company (the "Common Stock") from and after the close of business on May 24, 1995. Until such date, each Debenture is convertible into that number of shares of Common Stock determined by dividing the principal amount of such Debenture, or such portion thereof surrendered for conversion, by the Conversion Price of $13.9702 and rounded to the nearest 1/100 of a share. Each holder should consult with his or her tax advisor with respect to the tax consequences of the conversion or redemption of his or her Debentures. The right of a holder to convert his or her Debentures into Common Stock is a valuable right. For example, based on the closing market price of $22.00 per share for the Common Stock on the New York Stock Exchange on April 27, 1995, the holder of a Debenture in the principal amount of $1,000, if converted, would receive 71.58 shares of Common Stock having an aggregate closing market value on such date of $1,574.76, plus the accrued and unpaid interest on such Debenture. On the other hand, if such Debenture were not converted into Common Stock, the holder of such Debenture would be entitled to receive on the Redemption Date the redemption price of $1,060 plus the accrued and unpaid interest on such Debenture in the amount of $20.17. The market price for the Common Stock, however, can vary widely. Accordingly, in reaching a decision as to the desirability of conversion, each holder should consult with his or her financial advisor. Conversion may be effected as set forth below. The conversion right provided in Section 2 of the Debentures shall be exercised by the holder of a Debenture by the surrender of such Debenture to the Company at any time on or before the close of business on May 24, 1995 at the Company's offices at 25101 Chagrin Boulevard, Beachwood, Ohio 44122, Attention: Secretary, accompanied by (1) written notice in the form annexed to the Debenture that the holder thereof elects to convert the Debenture or a portion thereof and specifying the amount to be converted and the name (with address) in which a certificate for Common Stock is to be issued, and (2) with respect to the Series B Debentures only, the "Alternate Security" required to be delivered to the Company pursuant to Section 2.4 of the Series B Debentures. Alternate Security can be in the form of a letter of credit or a cash deposit in an amount equal to 69.4 percent of the face amount of the Series B Debenture being converted. If the Alternate Security is a cash deposit under $5,000, the holder of the Series B Debenture desiring to convert that Debenture must submit to the Company a certified or cashier's check in the amount of the cash deposit, together with a Security Agreement (a copy of which is enclosed herewith) signed by the holder. The Security Agreement provides that the Company will hold the cash deposit in its general accounts as Alternate Security and that the Company may reduce the amount of the cash deposit to the same extent it could have taken an offset against the Series B Debenture. If the Alternate Security is a cash deposit over $5,000, the holder of the Series B Debenture desiring to convert that Debenture must submit to the Company a certified or cashier's check in the amount of the cash deposit, together with the following documents (copies of which are enclosed herewith) signed by the holder: (1) Letter of Authorization, (2) Form W-9 and (3) Security Agreement. The Company has arranged for interest bearing accounts to be opened at Harris Trust and Savings Bank for cash deposits in excess of $5,000. The account will be in the name of "The Allen Group Inc., F/B/O [Name of Holder]". Pursuant to the Letter of Authorization and Security Agreement, the Company will be the sole authorized signer for each account, and the interest on the cash deposits contained in each account will be paid directly to the holder. The Company will be able to draw from each account to the same extent it could have taken an offset against the Series B Debenture. If the Alternate Security is a letter of credit, the holder of the Series B Debenture desiring to convert must submit to the Company a Letter of Credit (substantially in the form enclosed herewith) from a bank with assets of at least $500,000,000. The form of the letter of credit provides for multiple draws by the Company to the same extent it could have taken an offset against the Series B Debenture. HOLDERS OF THE DEBENTURES WHO DESIRE TO CONVERT MUST SUBMIT THEIR DEBENTURES AND THE DOCUMENTS REQUIRED TO EFFECT SUCH CONVERSION, AS DESCRIBED ABOVE, BEFORE THE CLOSE OF BUSINESS ON WEDNESDAY, MAY 24, 1995. HOLDERS OF THE DEBENTURES WHO DO NOT CONVERT THEIR DEBENTURES BY MAY 24, 1995 ARE HEREBY NOTIFIED TO DELIVER AND SURRENDER THEIR DEBENTURES TO THE COMPANY BY MAIL OR BY HAND DURING NORMAL BUSINESS HOURS AT THE COMPANY'S OFFICES AT 25101 CHAGRIN BOULEVARD, BEACHWOOD, OHIO 44122, ATTENTION: SECRETARY, ON OR BEFORE THE REDEMPTION DATE OF MAY 31, 1995, AND ON SUCH DATE, THEY WILL BECOME ENTITLED TO RECEIVE THE REDEMPTION PRICE OF 106 PERCENT OF THE OUTSTANDING PRINCIPAL AMOUNT OF EACH DEBENTURE SURRENDERED PLUS THE ACCRUED AND UNPAID INTEREST ON SUCH DEBENTURE TO THE REDEMPTION DATE, LESS THE PRINCIPAL AMOUNT OF SERIES B DEBENTURES WHICH REMAINS SUBJECT TO OFFSET. By Order of the Board of Directors, McDara P. Folan, III Secretary EX-27 2
5 1,000 3-MOS DEC-31-1995 MAR-31-1995 41,697 0 86,142 (1,721) 67,500 195,413 111,223 (39,541) 396,666 93,153 51,094 29,170 0 0 201,284 396,666 92,078 92,078 66,487 66,487 13,426 75 278 11,406 4,350 7,056 0 0 0 7,056 .27 0
-----END PRIVACY-ENHANCED MESSAGE-----