-----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, AQPH2AXK6NKeb82P1GmD44sPsPHhyjgh3e6xu+mqd0kzcc6PJh0k2NPIE6DztTZg CJ+DTh3djkyM9y8zR6tEfA== 0000950152-00-004046.txt : 20000516 0000950152-00-004046.hdr.sgml : 20000516 ACCESSION NUMBER: 0000950152-00-004046 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALLEN TELECOM INC CENTRAL INDEX KEY: 0000003721 STANDARD INDUSTRIAL CLASSIFICATION: RADIO & TV BROADCASTING & COMMUNICATIONS EQUIPMENT [3663] IRS NUMBER: 380290950 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-06016 FILM NUMBER: 630922 BUSINESS ADDRESS: STREET 1: 25101 CHAGRIN BLVD # 350 CITY: BEACHWOOD STATE: OH ZIP: 44122-5619 BUSINESS PHONE: 2167655818 FORMER COMPANY: FORMER CONFORMED NAME: ALLEN GROUP INC DATE OF NAME CHANGE: 19920703 10-Q 1 ALLEN TELECOM INC. 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, 2000 -------------- 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 ------ ALLEN TELECOM 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) 765-5855 --------------- 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 30, 2000 --------------------- -------------- Par value $1.00 per share 27,919,013 ---------- 2 ALLEN TELECOM INC. TABLE OF CONTENTS
Page No. ------------------- PART I. FINANCIAL INFORMATION: ITEM 1 - Financial Statements: Condensed Consolidated Balance Sheets - March 31, 2000 and December 31, 1999 3 Condensed Consolidated Statements of Income - Three Months Ended March 31, 2000 and 1999 4 Condensed Consolidated Statements of Cash Flows - Three Months Ended March 31, 2000 and 1999 5 Condensed Consolidated Statements of Stockholders' Equity - Three Months Ended March 31, 2000 and 1999 6 Notes to the Condensed Consolidated Financial Statements 7-9 ITEM 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations 10-13 ITEM 3 - Quantitative and Qualitative Disclosures About Market Risks 14 PART II. OTHER INFORMATION: ITEM 6 - Exhibits and Reports on Form 8-K 14 Signatures 15 Exhibit Index 16
2 3 ALLEN TELECOM INC. PART I - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS CONDENSED CONSOLIDATED BALANCE SHEETS (Amounts in Thousands)
March 31, December 31, 2000 1999 --------- ------------ (Unaudited) ASSETS Current Assets: Cash and equivalents $ 27,638 $ 22,085 Accounts receivable (less allowance for doubtful accounts of $2,525 and $2,537, respectively) 76,555 87,394 Inventories: Raw materials 41,461 43,608 Work in process 18,947 19,343 Finished goods 24,087 19,762 -------- -------- Total inventories (net of reserves) 84,495 82,713 -------- -------- Deferred income taxes 6,944 6,966 Other current assets 5,515 4,992 -------- -------- Total current assets 201,147 204,150 Property, plant and equipment, net 47,114 49,253 Excess of cost over net assets of businesses acquired 133,371 134,723 Deferred income taxes 31,321 30,281 Other assets 31,623 33,023 -------- -------- TOTAL ASSETS $444,576 $451,430 ======== ======== LIABILITIES Current Liabilities: Notes payable and current maturities of long-term obligations $ 1,321 $ 2,181 Accounts payable 42,674 41,139 Accrued expenses 26,780 27,943 Income taxes payable 1,919 2,464 Deferred income taxes 2,325 2,361 -------- -------- Total current liabilities 75,019 76,088 Long-term debt 117,713 120,905 Deferred income taxes 5,241 3,455 Other liabilities 10,112 10,070 -------- -------- TOTAL LIABILITIES 208,085 210,518 -------- -------- STOCKHOLDERS' EQUITY Common stock 30,017 30,010 Paid-in capital 181,445 181,335 Retained earnings 58,884 57,014 Accumulated other comprehensive loss (17,296) (10,685) Less: Treasury stock (at cost) (14,855) (14,978) Unearned compensation (1,704) (1,784) -------- -------- TOTAL STOCKHOLDERS' EQUITY 236,491 240,912 -------- -------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $444,576 $451,430 ======== ========
See accompanying notes to the Condensed Consolidated Financial Statements. 3 4 ALLEN TELECOM INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Amounts in Thousands, Except Per Share Data) (Unaudited)
Three Months Ended March 31, ----------------------------------- 2000 1999 -------- -------- SALES $ 87,956 $ 75,913 -------- -------- Costs and expenses: Cost of sales (Note 2) (62,574) (53,683) Selling, general and administrative expenses (Note 2) (16,261) (14,076) Research and development and product engineering costs (6,186) (7,664) Other loss -- (165) Interest expense (2,471) (2,356) Interest income 510 292 -------- -------- Income (loss) before taxes and minority interests 974 (1,739) (Provision) benefit for income taxes (391) 607 -------- -------- Income (loss) before minority interests 583 (1,132) Minority interests (13) (304) -------- -------- INCOME (LOSS) FROM CONTINUING OPERATIONS 570 (1,436) Discontinued emissions testing operation: Gain on sale (net of income taxes) (Note 3) 1,300 2,363 -------- -------- NET INCOME $ 1,870 $ 927 ======== ======== EARNINGS (LOSS) PER COMMON SHARE, BASIC AND DILUTED: Continuing operations $ .02 ($ .05) Discontinued operations .05 .08 -------- -------- Net income $ .07 $ .03 ======== ======== Weighted average common shares outstanding: Basic 27,780 27,350 Assumed exercise of stock options 340 60 -------- -------- Diluted 28,120 27,410 ======== ========
See accompanying notes to the Condensed Consolidated Financial Statements. 4 5 ALLEN TELECOM INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Amounts in Thousands) (Unaudited)
Three Months Ended March 31, --------------------------------- 2000 1999 -------- -------- CASH FLOW FROM OPERATIONS: Income (loss) from continuing operations $ 570 $ (1,436) Adjustments to reconcile income (loss) to operating cash flow: Depreciation 3,639 3,973 Amortization of goodwill 1,918 1,727 Amortization of capitalized software 575 650 Other amortization 80 133 Non-cash loss on write-down of assets 393 - Loss on investments - 158 Changes in operating assets and liabilities: Receivables 7,500 (5,150) Inventories (5,075) (5,660) Accounts payable and accrued expenses 2,975 2,698 Income tax payable (1,340) (768) Other, net 1,001 1,521 -------- -------- CASH PROVIDED (USED) BY OPERATING ACTIVITIES 12,236 (2,154) -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Sale of discontinued emissions testing business - 9,387 Collection from sale of common stock investment - 6,671 Capital expenditures (3,041) (1,731) Capitalized software product costs (340) (332) -------- -------- CASH (USED) PROVIDED BY INVESTING ACTIVITIES (3,381) 13,995 -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Repayments of borrowings (3,616) (21,117) Collection on installment note receivable 1,000 - Treasury stock sold to employee benefit plan 123 258 Exercise of stock options 35 - -------- -------- CASH USED BY FINANCING ACTIVITIES (2,458) (20,859) -------- -------- Net Cash Provided By Discontinued Emissions Testing Business - 1,810 -------- -------- NET CASH PROVIDED (USED) 6,397 (7,208) Effect of foreign currency exchange rate changes on cash (844) (1,096) Cash and equivalents at beginning of year 22,085 19,900 -------- -------- CASH AND EQUIVALENTS AT END OF PERIOD $ 27,638 $ 11,596 ======== ======== Supplemental cash flow data: Cash paid during the period for: Interest $ 1,369 $ 831 Income taxes 1,763 709
See accompanying notes to the Condensed Consolidated Financial Statements. 5 6 ALLEN TELECOM INC. CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Amounts in Thousands) (Unaudited)
Common Paid-In Comprehensive Retained Total Stock Capital Income (Loss) Earnings ----------- ----------- ----------- ---------------- --------- FOR THE THREE MONTHS ENDED MARCH 31, 2000: Beginning Balance, January 1, 2000 $240,912 $30,010 $181,335 $57,014 Comprehensive Income (loss): Net income 1,870 $ 1,870 1,870 Other comprehensive loss: Foreign currency translation adjustments (6,611) (6,611) ------ Comprehensive loss $ (4,741) ======= Treasury stock reissued 205 82 Exercise of stock options 35 7 28 Amortization of unearned compensation 80 -------- --------- -------- -------- Ending Balance, March 31, 2000 $236,491 $ 30,017 $181,445 $ 58,884 ======== ======== ======= ======= FOR THE THREE MONTHS ENDED MARCH 31, 1999: Beginning Balance, January 1, 1999 $250,081 $ 29,759 $180,604 $59,869 Comprehensive Income (loss): Net income 927 $ 927 927 Other comprehensive loss: Foreign currency translation adjustments (2,999) (2,999) ------ Comprehensive loss $ (2,072) ======= Treasury stock reissued 257 (114) Amortization of unearned compensation 97 -------- --------- -------- -------- Ending Balance, March 31, 1999 $248,363 $ 29,759 $180,490 $ 60,796 ======== ======== ======= ======= Accumulated Other Comprehensive Treasury Unearned Income (Loss) Stock Compensation ---------------- ------------ ---------------- FOR THE THREE MONTHS ENDED MARCH 31, 2000: Beginning Balance, January 1, 2000 $ (10,685) $(14,978) $ (1,784) Comprehensive Income (loss): Net income Other comprehensive loss: Foreign currency translation adjustments (6,611) Comprehensive loss Treasury stock reissued 123 Exercise of stock options Amortization of unearned compensation 80 ----------- -------- -------- Ending Balance, March 31, 2000 $ (17,296) $(14,855) $ (1,704) ========== ======== ======== FOR THE THREE MONTHS ENDED MARCH 31, 1999: Beginning Balance, January 1, 1999 $ (2,255) $(15,985) $ (1,911) Comprehensive Income (loss): Net income Other comprehensive loss: Foreign currency translation adjustments (2,999) Comprehensive loss Treasury stock reissued 371 Amortization of unearned compensation 97 --------- -------- -------- Ending Balance, March 31, 1999 $ (5,254) $(15,614) $ (1,814) ========= ======== ========
See accompanying notes to the Condensed Consolidated Financial Statements. 6 7 ALLEN TELECOM INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. GENERAL: In the opinion of the management of Allen Telecom 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, 2000 and the consolidated results of its operations, cash flows and changes in stockholders' equity for the periods ended March 31, 2000 and 1999. The results of operations for such interim periods are not necessarily indicative of the results for the full year. The year-end 1999 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, 1999. 2. SPECIAL CHARGES: In the fourth quarter 1999, the Company announced the restructuring of certain operations including the discontinuance of certain product lines, the closing of a manufacturing facility and other items. As previously indicated in the financial statements for the year ending December 31, 1999, in the first quarter 2000, the Company incurred pretax charges of $1,678,000, or $.04 per basic and diluted share after related income tax effect, incremental to the fourth quarter 1999 restructuring charge. These first quarter 2000 charges, which were not accruable at December 31, 1999, include termination costs of employees notified subsequent to December 31, 1999, relocation costs, asset write-offs, and other termination related benefits. Of this pretax charge $960,000 was recorded in cost of sales and $718,000 in selling, general and administrative expenses. Of the charge, $393,000 relates to a non-cash write-off of capital assets and $1,285,000 are cash related charges. The following is a summary of the activity for exit costs incurred (amounts in thousands, except for employee data).
Severance -------------------------- Number of Sale of Building Accrual Employees and Equipment Other Accrual balance at December 31, 1999 $1,374 93 $2,271 $517 Addition to accrual in first quarter 2000 327 5 393 958 Employees terminated - (77) - - Charged against accrual (468) - (415) (810) ------------------------------------------------------ Balance March 31, 2000 $1,233 21 $2,249 $665
The term of severance is based on years of service or determined by contractual obligation, and is payable over a period of time. Severance will be paid out in its entirety by October 31, 2001. 7 8 ALLEN TELECOM INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued) 3. DISCONTINUED OPERATIONS: The gain on sale from discontinued operations in the first quarter of 2000 represents income from previously contingent purchase price consideration (in the form of a 12% interest bearing installment note) earned on the sale of the Company's former automotive emissions testing business sold in the first quarter of 1999. The gains in the first quarters of 2000 and 1999 are net of related income taxes in the amount of $700,000 and $1,403,000, respectively. 4. SEGMENT DISCLOSURES: The following table shows sales to external customers and results of operations for the Company's two operating segments (amounts in thousands):
Three Months Ended March 31, 2000 1999 -------- -------- Sales to external customers: Telecommunications equipment manufacturing $ 81,956 $ 70,045 Wireless engineering services 6,000 5,868 -------- -------- Total sales $ 87,956 $ 75,913 ======== ======== Results of Operations: Segment Results: Telecommunications equipment manufacturing $ 5,680 $ 3,223 Wireless engineering services 885 236 -------- -------- 6,565 3,459 Other loss - (165) -------- -------- Goodwill amortization (1,918) (1,727) General corporate expenses (1,712) (1,242) Net financing costs (1,961) (2,064) -------- -------- Income (loss) before taxes and minority interests $ 974 $ (1,739) ======== ========
8 9 ALLEN TELECOM INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued) 5. IMPACT OF NEW ACCOUNTING PRONOUNCEMENTS: The Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities," in June 1998 which will now be effective for financial statements for all fiscal quarters of fiscal years beginning after June 15, 2000. Accordingly, the Company will adopt the provisions of the standard on January 1, 2001. The Company utilizes hedging activities primarily in its foreign subsidiaries to limit foreign currency exchange rate risk on receivables. The Company has not yet determined the effect, if any, of the adoption of this Statement on results of operations and financial position. In March 2000, the Financial Accounting Standards Board issued FASB Interpretation No. 44, "Accounting for Certain Transactions involving Stock Compensation, an interpretation of APB Opinion No. 25". This interpretation clarifies the application of APB Opinion 25, under which the Company accounts for stock based compensation awards, for certain issues. This Interpretation is effective July 1, 2000, but certain conclusions in this interpretation cover specific events that occurred after either December 15, 1998, or January 12, 2000. To the extent that this Interpretation covers events occurring during the period after December 15, 1998, or January 12, 2000, but before the effective date of July 1, 2000, the effects of applying this Interpretation are recognized on a prospective basis from July 1, 2000. The Company has not yet determined the effect, if any, of the adoption of this Statement on results of operations and financial position. 9 10 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ALLEN TELECOM INC. RESULTS OF OPERATIONS SUMMARY: Allen Telecom Inc. reported net income from continuing operations of $.6 million ($.02 per common share) for the first quarter 2000, as compared with a loss of $1.4 million ($.05 loss per common share) for the first quarter 1999. Total sales for the Company increased 16% from $75.9 million in the first quarter 1999 to $88.0 million in the first quarter 2000. Included in the results of operations for the first quarter 2000, are incremental pretax restructuring charges of approximately $1.7 million, or $.04 per basic and diluted share after related income tax effect. The Company has estimated cost savings resulting from restructuring actions taken in the fourth quarter 1999 and first quarter 2000 to be in the pretax range of $6.0 to $8.0 million on an annual basis. These savings are expected to be realized beginning in the second quarter 2000, coincident with the final closedown of its domestic manufacturing facility. Of the projected cost savings, approximately $4.4 million relate to cost of sales, $1.9 million to selling, general and administrative costs, and $.7 million to R&D costs. See Note 2 of Notes to Consolidated Condensed Financial Statements for additional information concerning such special items. TELECOMMUNICATIONS EQUIPMENT MANUFACTURING: Telecommunications Equipment Manufacturing sales were up 17%, from $70.0 million in first quarter 1999 to $82.0 million in the first quarter 2000. This sales increase was due primarily to increased demand for Site Management and Antenna products. Sales of Systems products were down 15% from first quarter 1999 due primarily to order weakness in the test and measurement business and a seasonal slowdown of project revenue in Europe where weather is a factor. Geographically, sales were up primarily in Europe with a 35% increase over the same period last year, with smaller increases in North America, where sales were up 13% over the same period last year. First quarter sales are slightly lower than fourth quarter 1999 (down 4%); however, the first quarter is traditionally the lowest quarter for sales during the year due to winter impacting the deployment of new cell sites and antenna installations. The strong U.S. dollar relative to the Euro negatively impacted reported sales and pretax income of European operations in the first quarter of 2000 as compared to the first quarter of 1999. As a result of exchange differences, reported sales and pretax income in the three months ended March 31, 2000 were $6.3 million and $1.1 million lower, respectively, as compared with the corresponding prior year period, assuming the exchange rates stayed the same. 10 11 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ALLEN TELECOM INC. (Continued)
- ------------------------------------------------------------------------------------------------------- SALES BY PRODUCT LINE - ------------------------------------------------------------------------------------------------------- ($ MILLIONS) 1Q 2000 1Q 1999 4Q 1999 ------------------------------------------------ Systems Products $ 19.6 $ 23.1 $ 23.5 Site Management and Other Non-Antenna Products 43.2 32.2 40.8 Mobile and Base Station Antennas 19.2 14.7 21.0 - ------------------------------------------------------------------------------------------------------- Total Telecommunications Equipment Manufacturing $ 82.0 $ 70.0 $ 85.3 ------------------------------------------------
Backlog for this Segment increased 18% from $83.6 million at December 31, 1999 to $98.4 million at March 31, 2000. This is the fifth consecutive increase in quarterly backlog. Gross profit margins were 29.3% (excluding the aforementioned incremental restructuring costs) in the first quarter of 2000, as compared with 29.6% in the first quarter of 1999. The lower gross profit margins in 2000 were due to product mix, with less sales coming from the higher margin measurement products, and due to manufacturing inefficiencies related to the closedown of the site management products manufacturing plant in the first quarter 2000. Selling, general and administrative expenses were $10.5 million, or 12.9% of sales (excluding the aforementioned incremental restructuring costs), and $9.8 million, or 14.0% of sales, for the first quarters of 2000 and 1999, respectively. Spending as a percentage of sales is lower due to the spreading of fixed costs on higher sales. WIRELESS ENGINEERING SERVICES: Wireless Engineering Services sales were up slightly from $5.9 million in first quarter 1999 to $6.0 million in first quarter 2000. Backlog was unchanged at $1.4 million from year-end 1999. Gross profit margins for this segment were 37.7% in the first quarter 2000, as compared with 25.7% in the first quarter 1999. This increase is primarily attributable to higher software sales and full deployment of engineers. Selling, general and administrative expenses were relatively flat at 23% and 22% of sales for the first quarters of 2000 and 1999, respectively. RESEARCH AND DEVELOPMENT: Research and development and product engineering costs were 7.0% and 10.1% of sales in the first quarter of 2000 and 1999, respectively. The decreased rate of spending as a percentage of sales is attributable to the increase in sales in the current quarter and the sale of the Company's former government and defense engineering business, Signal Science, in the third quarter of 1999, which invested heavily in research and development. The Company believes that product development costs will increase throughout the year, principally due to increased spending for field trials and other testing of its E-911 Geolocation product. 11 12 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ALLEN TELECOM INC. (Continued) INTEREST AND FINANCING EXPENSES: Net interest and financing costs decreased slightly to $2.0 million from $2.1 million for the three months ended March 31, 2000 and 1999, respectively. The lower interest expense is due principally to lower working capital requirements and the repayment of debt with the proceeds from the sale of discontinued operations and investments, offset in part by higher interest rates. PROVISION FOR INCOME TAXES: The Company's effective tax rate was 40.1% and 35.0% for the quarters ended March 31, 2000 and 1999, respectively. The principal reason for the increase is the increased income relating to the Company's foreign operations, which are taxed at higher rates than the United States. The 2000 percentage is in line with the Company's current expectation for the full year. MINORITY INTERESTS: Minority interest expense decreased from $304 thousand to $13 thousand in the quarters ended March 31, 1999 and 2000, respectively. This decrease is due to the acquisition in late 1999 of the remaining minority interest in one of the Company's foreign subsidiaries. LIQUIDITY AND CAPITAL RESOURCES: As set forth in the Condensed Consolidated Statements of Cash Flows, the Company generated $12.2 million of cash from operations for the three months ended March 31, 2000 as compared to using $2.2 million for the comparable 1999 period. The increase in cash flow from operations is principally due to the collection of certain trade receivables and increasing income from continuing operations. The Company used $3.4 million in investing activities in the first quarter 2000, due primarily to capital expenditures, as compared to generating $14.0 million in the first quarter 1999. The higher cash flow from investing activities in 1999 related to the sale of the Company's discontinued emissions testing business and cash collected from the sale of a common stock investment. Cash used by financing activities for the three months ended March 31, 2000 and March 31, 1999 was $2.5 million and $20.9 million, respectively. The cash generated from investing activities in the first quarter 1999 was used primarily to repay long-term borrowings. At March 31, 2000, the Company had available unused worldwide lines of credit in the amount of $84.2 million. 12 13 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ALLEN TELECOM INC. (Continued) LEGAL DISCLAIMER: Statements included in this Form 10-Q, which are not historical in nature, are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements regarding the Company's future performance and financial results are subject to certain risks and uncertainties that could cause actual results to differ materially from those set forth in the forward-looking statements. Factors that could cause the Company's actual results to materially differ from forward-looking statements made by the Company, including, among others, the cost, success and timetable for new product development, the health and economic stability of the world and national markets, the uncertain timing and level of purchases by current and prospective customers of the Company's products and services, the impact of competitive products and pricing, the future utilization of the Company's tax loss carry forwards, the impact of U.S. and foreign government legislative/regulatory actions, including, for example, the scope and timing of E911 geolocation requirements and spectrum availability for new wireless applications, the cost and availability of financing for geolocation projects and collectability of notes and accounts receivable. Allen Telecom Inc.'s Annual Report on Form 10-K and Quarterly Reports on Form 10-Q contain additional details concerning these factors. 13 14 ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" under Item 7 of its Annual Report on Form 10-K for the year ended December 31, 1999. PART II - OTHER INFORMATION ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K. (a) EXHIBITS (10) Material Contracts. (a) Amendment No. 2 To Credit Agreement. (b) Amendment No. 5 To Key Employee Severance Policy. (27) Financial Data Schedule. (b) REPORTS ON FORM 8-K Not Applicable. 14 15 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.
Allen Telecom Inc. ------------------ (Registrant) Date: May 12, 2000 By: /s/ Robert A. Youdelman ------------ --------------------------------------------------------- Robert A. Youdelman Executive Vice President (Chief Financial Officer) Date: May 12, 2000 By: /s/ James L. LePorte, III ------------ --------------------------------------------------------- James L. LePorte, III Vice President Finance (Principal Accounting Officer)
15 16 EXHIBIT INDEX ALLEN TELECOM INC. EXHIBIT NUMBER (10) Material Contracts. (a) Amendment No. 2 To Credit Agreement. (b) Amendment No. 5 To Key Employee Severance Policy. (27) Financial Data Schedule. 16 EX-10.A 2 EXHIBIT 10(A) 1 Exhibit 10(a) - -------------------------------------------------------------------------------- ALLEN TELECOM INC. AS BORROWER THE LENDERS NAMED HEREIN AS LENDERS NBD BANK AS DOCUMENTATION AGENT AND [KEYBANK LOGO] KEYBANK NATIONAL ASSOCIATION AS A LENDER, THE SWING LINE LENDER, A LETTER OF CREDIT ISSUER AND AS THE SYNDICATION AGENT, THE ADMINISTRATIVE AGENT AND THE COLLATERAL AGENT --------------------- AMENDMENT NO. 2 DATED AS OF APRIL 19, 2000 TO CREDIT AGREEMENT DATED AS OF DECEMBER 31, 1998 --------------------- - -------------------------------------------------------------------------------- 2 AMENDMENT NO. 2 TO CREDIT AGREEMENT THIS AMENDMENT NO. 2 TO CREDIT AGREEMENT, dated as of April 19, 2000 ("THIS AMENDMENT"), among the following: (i) ALLEN TELECOM INC., a Delaware corporation (herein, together with its successors and assigns, the "BORROWER"); (ii) the Lenders party hereto; (iii) NBD BANK as a Lender and as Documentation Agent (the "DOCUMENTATION AGENT"); and (iv) KEYBANK NATIONAL ASSOCIATION, a national banking association, as a Lender, the Swing Line Lender, the Letter of Credit Issuer, and as the Syndication Agent, the Administrative Agent and the Collateral Agent under the Credit Agreement: PRELIMINARY STATEMENTS: (1) The Borrower, the Lenders named therein, the Swing Line Lender, the Letter of Credit Issuers, the Documentation Agent, the Syndication Agent and the Administrative Agent entered into the Credit Agreement, dated as of December 31, 1998, as amended by Amendment No. 1 thereto, dated as of July 30, 1999 (as so amended, the "CREDIT AGREEMENT"; with the terms defined therein, or the definitions of which are incorporated therein, being used herein as so defined). (2) The parties hereto desire to change certain of the terms and provisions of the Credit Agreement, all as more fully set forth below. NOW, THEREFORE, the parties hereby agree as follows: 10 AMENDMENTS, ETC. With retroactive effect to March 31, 2000, section 9.9 of the Credit Agreement is amended to read in its entirety as follows: 9.9. MINIMUM CONSOLIDATED EBITDA. The Borrower will not at any time permit its Consolidated EBITDA for its Testing Period most recently ended to be less than the amount indicated below:
--------------------------------------------------------- ------------------------------ TESTING PERIOD AMOUNT --------------------------------------------------------- ------------------------------ Any Testing Period ended on or prior to $45,000,000 December 31, 1998 --------------------------------------------------------- ------------------------------ Any Testing Period ended thereafter and on or prior to $36,000,000 September 30, 1999 --------------------------------------------------------- ------------------------------ Testing Period ended December 31, 1999 $41,000,000 --------------------------------------------------------- ------------------------------ Testing Period ended March 31, 2000 $41,000,000 --------------------------------------------------------- ------------------------------
3
--------------------------------------------------------- ------------------------------ TESTING PERIOD AMOUNT --------------------------------------------------------- ------------------------------ Testing Period ended June 30, 2000 $42,000,000 --------------------------------------------------------- ------------------------------ Testing Period ended September 30, 2000 $42,000,000 --------------------------------------------------------- ------------------------------ Any Testing Period thereafter $45,000,000 --------------------------------------------------------- ------------------------------
20 REPRESENTATIONS AND WARRANTIES. The Borrower represents and warrants to the Lenders, the Swing Line Lender, the Letter of Credit Issuer, the Documentation Agent, the Administrative Agent and the Collateral Agent as follows: (a) AUTHORIZATION AND VALIDITY OF AMENDMENT, ETC. This Amendment has been duly authorized by all necessary corporate action on the part of the Borrower, has been duly executed and delivered by a duly authorized officer of the Borrower, and constitutes the valid and binding agreement of the Borrower, enforceable against the Borrower in accordance with its terms, except to the extent that the enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws generally affecting creditors' rights and by equitable principles (regardless of whether enforcement is sought in equity or at law). (b) REPRESENTATIONS AND WARRANTIES. The representations and warranties of the Credit Parties contained in the Credit Agreement or in the other Credit Documents are true and correct in all material respects on and as of the date hereof as though made on and as of the date hereof, except to the extent that such representations and warranties expressly relate to an earlier specified date, in which case such representations and warranties are hereby reaffirmed as true and correct in all material respects as of the date when made. (c) NO EVENT OF DEFAULT. No condition or event has occurred or exists which constitutes or which, after notice or lapse of time or both, would constitute an Event of Default. (d) COMPLIANCE. The Borrower is in full compliance with all covenants and agreements contained in the Credit Agreement, as amended hereby, and the other Credit Documents to which it is a party; and without limitation of the foregoing, each Subsidiary of the Borrower which, as of the date hereof, is required to be a Subsidiary Guarantor, has as on or prior to the date hereof become a Subsidiary Guarantor under the Subsidiary Guaranty. (e) FINANCIAL STATEMENTS, ETC. The Borrower has furnished to the Lenders and the Administrative Agent complete and correct copies of the audited consolidated balance sheets of the Borrower and its consolidated subsidiaries as of December 31, 1998, and December 31, 1999, and the related audited consolidated statements of income, stockholders' equity, and cash flows for the fiscal years then ended, accompanied by the unqualified report thereon of the Borrower's independent accountants. All such financial statements have been prepared in accordance with GAAP, consistently applied (except as stated therein), and fairly present the financial position of the Borrower and its consolidated subsidiaries as of the respective dates indicated and the consolidated results of their operations and cash flows for the respective periods indicated. 4 30 RATIFICATIONS. Except as expressly modified and superseded by this Amendment, the terms and provisions of the Credit Agreement are ratified and confirmed and shall continue in full force and effect. 40 BINDING EFFECT. This Amendment shall become effective on April 19, 2000 (the "EFFECTIVE Date"), if the following conditions shall have been satisfied on and as of such date: (a) this Amendment shall have been executed by the Borrower and the Administrative Agent, and counterparts hereof as so executed shall have been delivered to the Administrative Agent; (b) the Administrative Agent shall have been notified by the Required Lenders that such Lenders have executed this Amendment (which notification may be by facsimile or other written confirmation of such execution); (c) the Borrower shall have paid to the Administrative Agent, in immediately available funds, for the account of each Lender which shall have executed this Amendment and delivered its signed signature page (via physical delivery or facsimile transmission) to the Administrative Agent by 5:00 P.M. (local time at the Notice Office) on the Effective Date, an amendment fee computed at the rate of 5 basis points on the General Revolving Commitment of any such applicable Lender (the Administrative Agent shall promptly pay over to each such signing Lender its amendment fee as aforesaid); and thereafter this Amendment shall be binding upon and inure to the benefit of the Borrower, each Lender, the Swing Line Lender, the Letter of Credit Issuers, the Documentation Agent, the Syndication Agent, the Administrative Agent and the Collateral Agent and their respective successors and assigns. After this Amendment becomes effective, the Administrative Agent will promptly furnish a copy of this Amendment to each Lender and the Borrower and advise them of the Effective Date. 50 MISCELLANEOUS. 5.1. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and warranties made in this Amendment shall survive the execution and delivery of this Amendment, and no investigation by the Administrative Agent or any Lender or any subsequent Loan or other Credit Event shall affect the representations and warranties or the right of the Administrative Agent or any Lender to rely upon them. 5.2. REFERENCE TO CREDIT AGREEMENT. The Credit Agreement and any and all other agreements, instruments or documentation now or hereafter executed and delivered pursuant to the terms of the Credit Agreement as amended hereby, are hereby amended so that any reference therein to the Credit Agreement shall mean a reference to the Credit Agreement as amended hereby. 5.3. EXPENSES. As provided in the Credit Agreement, but without limiting any terms or provisions thereof, the Borrower shall pay on demand all reasonable costs and expenses incurred by the Administrative Agent in connection with the preparation, negotiation, and execution of this Amendment, including without limitation the reasonable costs and fees of the Administrative Agent's special legal counsel, regardless of whether this Amendment becomes effective in accordance with the terms hereof, and all reasonable costs and expenses incurred by the Administrative Agent or any Lender in connection with the enforcement or preservation of any rights under the Credit Agreement, as amended hereby. 3 5 5.4. SEVERABILITY. Any term or provision of this Amendment held by a court of competent jurisdiction to be invalid or unenforceable shall not impair or invalidate the remainder of this Amendment and the effect thereof shall be confined to the term or provision so held to be invalid or unenforceable. 5.5. APPLICABLE LAW. This Amendment shall be governed by and construed in accordance with the laws of the State of Ohio. 5.6. HEADINGS. The headings, captions and arrangements used in this Amendment are for convenience only and shall not affect the interpretation of this Amendment. 5.7. ENTIRE AGREEMENT. This Amendment is specifically limited to the matters expressly set forth herein. This Amendment and all other instruments, agreements and documentation executed and delivered in connection with this Amendment embody the final, entire agreement among the parties hereto with respect to the subject matter hereof and supersede any and all prior commitments, agreements, representations and understandings, whether written or oral, relating to the matters covered by this Amendment, and may not be contradicted or varied by evidence of prior, contemporaneous or subsequent oral agreements or discussions of the parties hereto. There are no oral agreements among the parties hereto relating to the subject matter hereof or any other subject matter relating to the Credit Agreement. 5.8. JURY TRIAL WAIVER. EACH OF THE PARTIES TO THIS AMENDMENT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AMENDMENT, THE OTHER CREDIT DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. EACH PARTY HERETO HEREBY (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AMENDMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION. 5.9. COUNTERPARTS. This Amendment may be executed by the parties hereto separately in one or more counterparts, each of which when so executed shall be deemed to be an original, but all of which when taken together shall constitute one and the same agreement. 4 6 IN WITNESS WHEREOF, this Amendment has been duly executed and delivered as of the date first above written.
- ----------------------------------------------------------- -------------------------------------------------------- ALLEN TELECOM INC. KEYBANK NATIONAL ASSOCIATION, INDIVIDUALLY AS THE SWING LINE LENDER, A LENDER, A LETTER OF CREDIT ISSUER, AND AS THE SYNDICATION AGENT AND THE ADMINISTRATIVE AGENT BY: ------------------------------- VICE PRESIDENT--FINANCE BY: ------------------------------- SENIOR VICE PRESIDENT - ----------------------------------------------------------- -------------------------------------------------------- BANK ONE, MICHIGAN FIRSTAR BANK, NATIONAL ASSOCIATION (SUCCESSOR TO NBD BANK), (FORMERLY STAR BANK, NATIONAL ASSOCIATION) INDIVIDUALLY AS A LENDER AND AS DOCUMENTATION AGENT BY: ------------------------------- TITLE: BY: ------------------------------- TITLE: - ----------------------------------------------------------- -------------------------------------------------------- DRESDNER BANK AG, SANPAOLO IMI, S. P. A., NEW YORK AND GRAND CAYMAN BRANCHES, NEW YORK BRANCH INDIVIDUALLY AS A LENDER AND AS A LETTER OF CREDIT ISSUER BY: ------------------------------- TITLE: BY: ------------------------------- TITLE: BY: BY: ------------------------------- ------------------------------- TITLE: TITLE: - ----------------------------------------------------------- -------------------------------------------------------- FIFTH THIRD BANK, NORTHEASTERN OHIO LASALLE BANK, NATIONAL ASSOCIATION (FORMERLY LASALLE NATIONAL BANK) BY: ------------------------------- TITLE: BY: ------------------------------- TITLE: - ----------------------------------------------------------- --------------------------------------------------------
5 EX-10.B 3 EXHIBIT 10(B) 1 Exhibit 10(b) AMENDMENT NO. 5 TO THE ALLEN TELECOM INC. KEY EMPLOYEE SEVERANCE POLICY Allen Telecom Inc., formerly known as The Allen Group Inc. (the "Company"), by action of the Board of Directors of the Company on February 24, 2000, adopted this Amendment No. 5 to the Allen Telecom Inc. Key Employee Severance Policy (the "Policy"), effective as of February 24, 2000: The second sentence of the first paragraph of the Policy is hereby amended and restated in its entirety to read as follows: "For purposes of this Policy, a key employee shall be (a) any employee of the Company who at any time prior to February 24, 2000 held stock options granted under the Company's 1982 Stock Plan, 1992 Stock Plan or any successor plan thereto, or (b) any employee of the Company who is designated by the Management Compensation Committee of the Board of Directors of the Company, except as to any employee who is (i) an employee of one of the Company's foreign subsidiaries, (ii) an employee covered by an employment or severance agreement with the Company or, (iii) an employee of the Company or one of its domestic subsidiaries, eligible to receive severance under the laws or general business practices of any foreign country." EX-27 4 EXHIBIT 27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ALLEN TELECOM'S March 31, 2000 CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS DEC-31-2000 MAR-31-2000 27,638 0 79,080 (2,525) 84,495 201,147 110,767 (63,653) 444,576 75,019 117,713 0 0 30,017 206,474 444,576 87,956 87,956 (62,574) (62,574) (22,447) (103) (1,961) 974 (391) 570 1,300 0 0 1,870 .07 .07 The Earnings per Share amounts have been calculated in accordance with the provisions of Statement of Financial Accounting Standards No. 128, "Earnings per Share".
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