-----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, VByoVuUapOqbBKASMNXakxm4G2J5qeXNz2imeVQ+7/quehZTY8BcFMJlJg9sjFuM hRJqDwwwrpGtYzHp52jvXg== 0000950152-98-004321.txt : 19980513 0000950152-98-004321.hdr.sgml : 19980513 ACCESSION NUMBER: 0000950152-98-004321 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980512 SROS: NONE 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: 98616329 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. FORM 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, 1998 -------------- 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) 765-5818 --------------- 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 30, 1998 --------------------- -------------- Par value $1.00 per share 27,316,078 ---------- 2 ALLEN TELECOM INC. ------------------ TABLE OF CONTENTS -----------------
Page No. ------------ PART I. FINANCIAL INFORMATION: ITEM 1 - FINANCIAL STATEMENTS: CONSOLIDATED CONDENSED BALANCE SHEETS - March 31, 1998 and December 31, 1997 3 CONSOLIDATED CONDENSED STATEMENTS OF INCOME - Three Months Ended March 31, 1998 and 1997 4 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS - Three Months Ended March 31, 1998 and 1997 5 CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS' EQUITY - Three Months Ended March 31, 1998 and 1997 6 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS 7 - 9 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 10 - 12 ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 13 PART II. OTHER INFORMATION: ITEM 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS 13 ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K 13 - 14 SIGNATURES 15 EXHIBIT INDEX 16
2 3 PART I - FINANCIAL INFORMATION ------------------------------ ITEM 1 - FINANCIAL STATEMENTS ----------------------------- ALLEN TELECOM INC. ------------------ CONSOLIDATED CONDENSED BALANCE SHEETS ------------------------------------- (Amounts in Thousands)
March 31, December 31, 1998 1997 ------------ ------------ (Unaudited) ASSETS: Current Assets: Cash and equivalents $ 23,618 $ 30,775 Accounts receivable (less allowance for doubtful accounts of $2,022 and $1,934, respectively) 112,083 105,714 Inventories: Raw materials 48,535 49,583 Work in process 25,123 24,505 Finished goods 23,876 19,680 ------- ------- Total inventories 97,534 93,768 ------- ------- Assets of discontinued emissions testing business 997 1,034 Other current assets (Note 2) 24,317 10,745 ------- ------- Total current assets 258,549 242,036 Property, plant and equipment, net 59,174 60,543 Excess of cost over net assets of businesses acquired 126,228 126,923 Assets of discontinued emissions testing business 32,779 32,329 Other assets (Note 2) 29,968 52,602 ------- ------- TOTAL ASSETS $506,698 $514,433 ======= ======= LIABILITIES: Current Liabilities: Notes payable and current maturities of long-term obligations $ 6,584 $ 6,119 Accounts payable 52,003 75,195 Accrued expenses 34,486 35,261 Income taxes payable 9,825 13,197 Deferred income taxes 1,271 1,249 ------- ------- Total current liabilities 104,169 131,021 Long-term debt 122,998 97,915 Deferred Income Taxes 2,591 6,818 Other liabilities 18,334 17,857 ------- ------- TOTAL LIABILITIES 248,092 253,611 ------- ------- STOCKHOLDERS' EQUITY Common stock 29,722 29,746 Paid-in capital 180,258 180,538 Retained earnings 76,429 70,091 Accumulated other comprehensive income (loss) (Note 3) (8,620) 207 Less: Treasury stock (at cost) (17,031) (16,992) Unearned compensation (2,152) (2,768) ------- ------- TOTAL STOCKHOLDERS' EQUITY 258,606 260,822 ------- ------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $506,698 $514,433 ======= =======
See accompanying notes to the Consolidated Condensed Financial Statements. 3 4 ALLEN TELECOM INC. ------------------ CONSOLIDATED CONDENSED STATEMENTS OF INCOME ------------------------------------------- (Amounts in Thousands, Except Per Share Data) (Unaudited)
Three Months Ended March 31, ------------------------- 1998 1997 ---- ---- SALES $ 113,369 $ 102,503 --------- --------- Costs and expenses: Cost of sales (77,621) (65,962) Selling, general and administrative expenses (16,307) (16,153) Research and development and product engineering costs (7,625) (6,686) Other income, net (Note 2) 1,164 1,525 Interest expense (1,564) (806) Interest income 376 286 --------- --------- Income before taxes and minority interests 11,792 14,707 Provision for income taxes (4,718) (6,180) --------- --------- Income before minority interests 7,074 8,527 Minority interests (736) (1,501) --------- --------- NET INCOME $ 6,338 $ 7,026 --------- --------- EARNINGS PER COMMON SHARE, BASIC AND DILUTED $ .23 $ .26 ========= ========= Weighted average common shares outstanding: Basic 27,160 26,650 Assumed exercise of stock options 250 380 --------- --------- Diluted 27,410 27,030 ========= =========
See accompanying notes to the Consolidated Condensed Financial Statements. 4 5 ALLEN TELECOM INC. ------------------ CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS ----------------------------------------------- (Amounts in Thousands) (Unaudited)
Three Months Ended March 31, ----------------------- 1998 1997 -------- -------- Cash generated by operating activities $ 240 $ 8,529 -------- -------- Cash flows from investing activities: Investment in telecommunications companies (27,583) (5,000) Capital expenditures (3,493) (4,375) Sales and retirements of fixed assets 18 901 Capitalized software product costs (1,200) (1,549) Sale of investment - 505 -------- -------- Cash used by investing activities (32,258) (9,518) -------- -------- Cash flows from financing activities: Net proceeds from (repayments of) borrowings 26,454 (2,614) Exercise of stock options 80 145 Treasury stock sold to employee benefit plans 424 437 -------- -------- Cash generated (used) by financing activities 26,958 (2,032) -------- -------- Net cash used by discontinued vehicle emissions testing business (1,441) (1,274) -------- -------- Net cash used (6,501) (4,295) Effect of exchange rate changes on cash and equivalents (656) (956) Cash and equivalents at beginning of year 30,775 23,879 -------- -------- Cash and equivalents at end of period $ 23,618 $ 18,628 ======== ======== Supplemental cash flow data: Depreciation and amortization included in "Cash generated by operating activities" $ 6,016 $ 4,996 Cash paid during the period for: Interest 657 1,028 Income taxes 6,248 1,379
See accompanying notes to the Consolidated Condensed Financial Statements. 5 6 ALLEN TELECOM INC. ------------------ CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS' EQUITY --------------------------------------------------------- (Amounts in Thousands) (Unaudited)
Accumulated Other Comprehensive Retained Comprehensive Common Unearned Total Income (Loss) Earnings Income (Loss) Stock Compensation ------------ --------------- ---------- ----------------- ---------- ------------- FOR THE THREE MONTHS ENDED MARCH 31, 1998: Beginning Balance, January 1, 1998 $260,822 $70,091 $207 $29,746 ($2,768) Comprehensive Income: Net Income 6,338 $ 6,338 6,338 -------- Other comprehensive income (loss): Unrealized gains on securities recorded to (9,588) (9,588) income Less tax on unrealized gains on securities 4,027 4,027 -------- -------- Net unrealized gains on securities (5,561) (5,561) Foreign currency translation adjustments (3,266) (3,266) --------- Other comprehensive loss (8,827) (8,827) --------- Comprehensive loss $ (2,489) ========= Exercise of stock options 80 14 Treasury stock reissued 424 Restricted Stock, net (345) (38) 502 Amortization of unearned compensation 114 114 -------- ------- -------- ------- -------- Ending Balance, March 31, 1998 $258,606 $76,429 ($8,620) $29,722 ($2,152) ======== ======= ======== ======= ======== FOR THE THREE MONTHS ENDED MARCH 31, 1997: Beginning Balance, January 1, 1997 $225,951 $46,742 ($510) $29,614 ($2,908) Comprehensive income: Net Income 7,026 $ 7,026 $7,026 Other comprehensive income: Foreign currency translation adjustments (2,196) (2,196) (2,196) ------- Comprehensive Income $ 4,830 ======= Exercise of stock options 146 48 Treasury stock reissued 438 Amortization of unearned compensation 304 304 -------- ------- -------- ------- -------- Ending Balance, March 31, 1997 $231,669 $53,768 ($2,706) $29,662 ($2,604) ======== ======= ======== ======= ======== Treasury Paid-In Stock Capital ---------- ---------- FOR THE THREE MONTHS ENDED MARCH 31, 1998: Beginning Balance, January 1, 1998 ($16,992) $180,538 Comprehensive Income: Net Income Other comprehensive income (loss): Unrealized gains on securities recorded to income Less tax on unrealized gains on securities Net unrealized gains on securities Foreign currency translation adjustments Other comprehensive loss Comprehensive loss Exercise of stock options 66 Treasury stock reissued 198 226 Restricted Stock, net (237) (572) Amortization of unearned compensation --------- -------- Ending Balance, March 31, 1998 ($17,031) $180,258 ========= ======== FOR THE THREE MONTHS ENDED MARCH 31, 1997: Beginning Balance, January 1, 1997 ($17,932) $170,945 Comprehensive income: Net Income Other comprehensive income: Foreign currency translation adjustments Comprehensive Income Exercise of stock options (281) 379 Treasury stock reissued 190 248 Amortization of unearned compensation --------- -------- Ending Balance, March 31, 1997 ($18,023) $171,572 ========= ========
See accompanying notes to the Consolidated Condensed Financial Statements. 6 7 ALLEN TELECOM INC. ------------------ NOTES TO CONSOLIDATED CONDENSED 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, 1998 and the consolidated results of its operations, cash flows and changes in stockholders' equity for the periods ended March 31, 1998 and 1997. The results of operations for such interim periods are not necessarily indicative of the results for the full year. The year-end 1997 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, 1997. Certain reclassifications have been made to the 1997 financial statements to conform to the 1998 method of presentation. 2. Investments in Telecommunication Companies: ------------------------------------------- The Company owns common stock of RF Micro Devices, Inc., which completed an initial public offering of its common stock on June 3, 1997. The Company has approximately 1.0 million common shares classified as Trading at March 31, 1998 at a cost of $3.0 million. The investment has been adjusted to market value at March 31, 1998 of $14.9 million (included in "Other current assets") based on the NASDAQ closing rate of $14.625 ($12.7 million, at December 31, 1997 included in "Other assets"). The Company's investment was previously subject to certain trading restrictions, which were substantially eliminated in the first quarter of 1998, at which time the Company decided to sell its holdings in the near term. As a result, the Company transferred the unrealized appreciation in the pretax amount of $11.5 million, previously recorded in stockholders' equity, to "Other income, net" in the Consolidated Condensed Statements of Income. Future changes in unrealized holding gains related to this investment will be reflected in current earnings, prior to sale. The Company has an investment in and a receivable from NextWave Telecom Inc. ("NextWave"), who was previously awarded telecommunications licenses under a competitive auction bid process. In 1998, the Federal Communication Commission issued guidelines with respect to alternatives for certain C Block licensees in regard to the payment or return of licenses previously awarded. These guidelines were less favorable than had been requested by certain licensees. Accordingly, in the first quarter of 1998 the Company recognized an impairment in the entire value of its investment in and receivable from NextWave as a result of that action. Additionally, in the first quarter of 1998 the Company fully reserved an investment in a telecommunications company as a result of that company's 7 8 ALLEN TELECOM INC. ------------------ NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS ---------------------------------------------------- (Unaudited) (Continued) decision to liquidate and sell its assets and product lines. These impairment reserves, totaling $10.3 million in the aggregate, are included in the Consolidated Condensed Statements of Income in "Other income, net". The net income effect of these actions was $.02 per common share after related tax effects (included in the Consolidated Condensed Statements of Income in "Other Income, net"). In the first quarter of 1997, the Company realized a gain on the sale of all of its investment in Columbia Spectrum Management, L.P. in the pretax amount of $1.5 million, or $.03 per common share after related tax effects (included in the Consolidated Condensed Statement of Income in "Other Income, Net"). 3. Impact of New Accounting Pronouncements: ---------------------------------------- In March 1998, the Accounting Standards Executive Committee of the American Institute of Certified Public Accountants issued Statement of Position 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use". This statement provides guidance on the accounting treatment for certain costs incurred in developing or purchasing software for the internal use of the Company. The Company will adopt the standard on January 1, 1999 requiring the Company to expense certain costs incurred on a prospective basis. The Company has determined that once adopted, the statement will not have a material impact on results of operations. In June 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income". This statement is effective for financial statements issued for periods beginning after December 15, 1997, including interim periods. Accordingly, the Company has adopted the provisions of this statement in the first quarter of 1998. This new statement requires more detail balance sheet information (translation adjustments and unrealized appreciation on investment securities) be included in the Company's Consolidated Condensed Financial Statements. The Company has included such information on the Consolidated Condensed Balance Sheets and the Consolidated Condensed Statements of Stockholders' Equity. 4. Discontinued Operations Litigation: ----------------------------------- In early 1998, the Company's Marta Technologies Inc. ("Marta") subsidiary, which operates its discontinued vehicle emissions testing business, reopened the Cincinnati, Ohio program for testing. In connection with the initial suspension of that contract by the Ohio Environmental Protection Agency ("Ohio EPA"), Marta was granted a preliminary injunction on September 23, 1996 and a 8 9 ALLEN TELECOM INC. ------------------ NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS ---------------------------------------------------- (Unaudited) (Continued) permanent injunction on November 19, 1997 against Ohio EPA and its Director enjoining them from (i) conducting a hearing regarding termination of the contract, (ii) terminating the Ohio contract, and (iii) prohibiting Marta from performing its obligations under the Ohio contract. On December 31, 1997, Marta filed a lawsuit against Ohio EPA and its Director in an amount not less than $40 million claiming damages for Ohio EPA's unilateral and illegal suspension of the program and numerous other actions which will, in the future, increase costs to operate the program and/or reduce the amount of revenues the State was contractually obligated to provide. Subsequent thereto, the State counterclaimed, denied Marta's allegations and demanded $10 million in liquidated damages, contract damages and/or civil penalties as a result of Marta's alleged failure to meet the terms of the contract. In the opinion of management, based on the advice of counsel, it cannot predict the outcome of these lawsuits and the Company has not recorded any asset or liability with respect thereto. 9 10 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL ---------------------------------------------------------- CONDITION AND RESULTS OF OPERATIONS ----------------------------------- ALLEN TELECOM INC. ------------------ RESULTS OF OPERATIONS - --------------------- Summary: - -------- For the three months ended March 31, 1998 and 1997, Allen Telecom Inc. (the "Company") reported sales of $113.4 and $102.5 million and net income of $6.3 ($.23 per common share) and $7.0 million ($.26 per common share), respectively. Included in results of operations are net gains in the amount of $1.2 and $1.5 million, or $.02 and $.03 per common share, for the 1998 and 1997 first quarters respectively, with respect to certain telecom investments as discussed below. Sales: - ------ Sales in the first quarter of 1998 increased approximately 11% over the comparable 1997 period. The increase in sales is due principally to the continued success of international site management and systems product sales. International sales constituted nearly 66% of first quarter sales, compared with 54% in the first quarter of 1997 and 60% for the full year 1997. Offsetting this increase, in part, were lower sales of mobile and base antennas and wireless engineering services. Further, sales from foreign operations were negatively impacted by the weakening U.S. dollar relative to certain European currencies since the first quarter of 1997. As a result, reported sales in the first quarter of 1998 were $6.0 million lower as compared with the first quarter of 1997, assuming the exchange rates had stayed the same. The Company continues to see weakness in certain Asian economies, which have been important markets for wireless equipment products. In addition, the U.S. wireless market continues to be soft, particularly with respect to the developing PCS markets. Other international markets remain strong for the Company's equipment business, although the Company has been advised by certain European OEM's that their large inventory buildup will negatively impact near term orders. Operations: - ----------- Gross profit margins were 31.5% in the first quarter of 1998 as compared with 35.6% in the first quarter of 1997. The lower gross profit margins in 1998 were due to increased pricing pressure and a greater sales mix of lower margin products. Selling, general and administrative expenses were 14.4% and 15.7% for the first quarters of 1998 and 1997, respectively. The decline in this ratio reflects the spreading of fixed costs on higher sales as well as the impact of lower staffing and operating expenses as a result of actions instituted in late 1997 to lower costs. Offsetting this decline, in part, is higher amortization of goodwill ($1.5 million compared with $.7 million in the 1998 and 1997 periods, respectively) due primarily to the acquisition of the outstanding 20% ownership interest in the Company's FOREM S.r.l subsidiary ("Forem") in 1997. 10 11 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL ---------------------------------------------------------- CONDITION AND RESULTS OF OPERATIONS ----------------------------------- ALLEN TELECOM INC. ------------------ (Continued) Research and development and new product engineering costs were 6.7% and 6.5% of sales in the first quarter of 1998 and 1997, respectively and are within normal operating ranges. However, the current rate is lower than the 7.0% to 7.4% rates experienced in the last three quarters of 1997. This lower rate of spending is not expected to continue as the Company further develops its geolocation product (ability to locate subscribers who dial 911 from a wireless telephone) during the ensuing year. Other Income and Expense: - ------------------------- In the first quarter of 1998, other income includes an $11.5 million pretax gain on the Company's investment in RF Micro Devices, Inc. ("RFMD") as a result of the Company's decision to sell its shareholdings. Previously, the gain on this investment was included in Stockholders' Equity. RFMD completed a public offering of its stock in 1997 and the Company, at that time, recorded the increase in value. Future changes in unrealized holding gains, prior to sale, related to this investment will be reflected in current earnings. Offsetting this gain, in part, was the recognition of a loss reserve in the amount of approximately $10.4 million relating to two telecommunications investments. In 1998, the Federal Communication Commission issued guidelines with respect to alternatives for certain C Block licensees in regard to the payment or return of their licenses previously awarded under competitive bids. These guidelines were less favorable than had been requested by certain licensees. Accordingly, the Company decided to fully reserve its aggregate investment in NextWave Telecom Inc. to reflect the impairment in value of this investment as a result of that action. In addition, the Company fully reserved an investment in a telecommunications company as a result of that company's decision to liquidate in the first quarter of 1998 and sell its assets and product lines. The Company believes the likelihood of any significant recovery is remote. The net income effect of these actions was $.02 per common share, after related tax effects. These actions are the principal reason for the decline in Other assets on the Consolidated Balance Sheet as well as the increase in Other current assets, which includes the investment in RFMD at its current market value of $14.9 million as of March 31, 1998, pending sale. (See Note 2 of Notes to Consolidated Condensed Financial Statements for additional information.) In the first quarter of 1997, the Company realized a gain on the sale of all of its investment in Columbia Spectrum Management, L.P. in the pretax amount of $1.5 million or $.03 per common share, after related tax effects. Net Interest and Financing Expenses: - ------------------------------------ Net Interest and financing costs increased to $1.2 million in the first three months of 1998 from $.5 million for the comparable 1997 period. The principal reason for the increase is higher outstanding borrowings incurred for the purchase of the minority interest in Forem. 11 12 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL ---------------------------------------------------------- CONDITION AND RESULTS OF OPERATIONS ----------------------------------- ALLEN TELECOM INC. ------------------ (Continued) Provision for Income Taxes: - --------------------------- The Company's effective tax rate was 40% and 42% for the quarters ended March 31, 1998 and 1997, respectively. The 1998 percentage is in line with the Company's current expectation for the full year. Minority Interests: - ------------------- The decrease in minority interest expense from $1.5 million to $.7 million in the first quarter of 1998, compared with the 1997 quarter, reflects the exclusion of the 20% minority interest in Forem which was purchased in 1997. LIQUIDITY AND CAPITAL RESOURCES: - -------------------------------- As set forth in the Consolidated Condensed Statement of Cash Flows, the Company generated $.2 million in cash from operations for the three months ended March 31, 1998 as compared with cash generation of $8.5 million for the comparable 1997 period. The decline in cash flow from operations is due principally to income tax payments by the Company's foreign subsidiaries in the first quarter of 1998. Further, the Company expended $27.6 million relating primarily to the final purchase price for the outstanding minority interest in Forem. This latter amount was financed through long-term borrowings. This payment is the reason for the decline in Accounts payable and the corresponding increase in Long-term debt in the Consolidated Condensed Balance Sheet at March 31, 1998. At March 31, 1998, the Company had available unused lines of credit in the amount of $56 million. - -------------------------------------------------------------------------------- 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. Allen Telecom's Annual Report on Form 10-K contains certain detailed factors that could cause the Company's actual results to materially differ from forward-looking statements made by the Company, including, among others, the costs and timetable for new product development, the health and economic stability of the world and national markets, the uncertain level of purchases by current and prospective customers of the Company's products and services, the impact of competitive products and pricing, the potential impact of the Company's attempts to sell it discontinued operations in the vehicle emissions testing business, and the ultimate market value of the Company's investments in telecom ventures. 12 13 ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. - -------------------------------------------------------------------- Not applicable. PART II - OTHER INFORMATION --------------------------- ITEM 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS. - --------------------------------------------------- On January 5, 1998, the Board of Directors of the Company adopted a replacement share purchase rights plan to replace the existing share purchase rights plan, which expired on January 20, 1998, and declared a dividend distribution of one right (a "Right") for each share of common stock of the Company outstanding at the close of business on January 20, 1998. A copy of the letter dated January 20, 1998 to the Company's stockholders from Robert G. Paul, President and Chief Executive Officer of the Company, describing the new share purchase rights plan and the Rights, is filed as Exhibit 99 hereto. ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K. - ------------------------------------------ (a) Exhibits -------- (3) Second Restated Certificate of Incorporation (filed as Exhibit No. 4(a) to Registrant's Registration Statement on Form S-8, Registration No. 333-51739 (Commission file number 1-6016) and incorporated herein by reference). (4) Rights Agreement, dated as of January 20, 1998, between the Registrant and Harris Trust Company of New York, as Rights Agent (filed as Exhibit Number 4.1 to Registrant's Current Report on Form 8-K dated January 5, 1998 (Commission file number 1-6016) and incorporated herein by reference). (10) Allen Telecom Inc. 1992 Stock Plan, as amended and restated as of May 1, 1998 (filed as Exhibit No. 4(e) to Registrant's Registration Statement on Form S-8, Registration No. 333-51739 (Commission file number 1-6016) and incorporated herein by reference). (11) Statement re computation of per share earnings. (27) Financial Data Schedule. (99) Letter dated January 20, 1998, from Robert G. Paul, President and Chief Executive Officer of the Company, to the stockholders of the Company, describing the replacement share purchase rights plan. 13 14 PART II - OTHER INFORMATION --------------------------- ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K. ------------------------------------------ (Continued) (b) Reports on Form 8-K ------------------- On January 6, 1998 the Company filed a Current Report on Form 8-K dated January 5, 1998, reporting that the Board of Directors of the Company declared a dividend distribution of one right for each share of common stock of the Company outstanding at the close of business on January 20, 1998, pursuant to the terms of a Rights Agreement, dated as of January 20, 1998, between the Company and Harris Trust Company of New York, as Rights Agent. 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, 1998 By: /s/ Robert A. Youdelman ------------ --------------------------------- Robert A. Youdelman Executive Vice President (Chief Financial Officer) Date: May 12, 1998 By: /s/ James L. LePorte, III ------------ --------------------------------- James L. LePorte, III Vice President, Treasurer and Controller (Principal Accounting Officer) 15 16 EXHIBIT INDEX ------------- ALLEN TELECOM INC. ------------------
Exhibit Number - -------------- (3) Second Restated Certificate of Incorporation (filed as Exhibit No 4(a) to Registrant's Registration Statement on Form S-8, Registration No. 333-51739 (Commission file number 1-6016) and incorporated herein by reference). (4) Rights Agreement, dated as of January 20, 1998, between the Registrant and Harris Trust Company of New York, as Rights Agent (filed as Exhibit Number 4.1 to Registrant's Current Report on Form 8-K dated January 5, 1998 (Commission file number 1-6016) and incorporated herein by reference). (10) Allen Telecom Inc. 1992 Stock Plan, as amended and restated as of May 1, 1998 (filed as Exhibit No. 4(e) to Registrant's Registration Statement on Form S-8, Registration No. 333-51739 (Commission file number 1-6016) and incorporated herein by reference). (11) Statement re computation of per share earnings. (27) Financial Data Schedule. (99) Letter dated January 20, 1998, from Robert G. Paul, President and Chief Financial Officer of the Company, to the stockholders of the Company, describing the replacement share purchase rights plan.
16 EX-11 2 EXHIBIT 11 1 EXHIBIT 11 ---------- COMPUTATION OF PER SHARE EARNINGS --------------------------------- ALLEN TELECOM INC. ------------------ (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, ---------------------------------- 1998 1997 -------------- --------------- Income: - ------- Net income applicable to Common stock - Basic and Diluted $ 6,338 $ 7,026 ============== =============== Common Shares: - -------------- Weighted average common shares outstanding- Basic 27,160 26,650 Assumed exercise of stock options 250 380 -------------- --------------- Common shares - Diluted 27,410 27,030 ============== ===============
EX-27 3 EXHIBIT 27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ALLEN TELECOM'S MARCH 31, 1998 CONSOLIDATED FINANCIAL STATEMENTS IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS DEC-31-1998 MAR-31-1998 23,618 0 114,105 (2,022) 97,534 258,549 107,627 (48,453) 506,698 104,169 122,998 0 0 29,722 228,884 506,698 113,369 113,369 (77,621) (77,621) (22,697) (71) (1,188) 11,792 (4,718) 0 0 0 0 6,338 .23 .23 The Earnings per Share amounts have been calculated in accordance with the provisions of Statement of Financial Accounting Standards No. 128, "Earnings per Share". The above captions for primary and fully diluted include in the basic and diluted EPS amounts, respectively.
EX-99 4 EXHIBIT 99 1 EXHIBIT 99 ---------- January 20, 1998 Dear Shareholders: The enclosed press release announces that Allen Telecom Inc. has adopted a new share purchase rights plan to replace the Company's existing rights plan, which expires on January 20, 1998. A summary of the share purchase rights plan (which explains the terms and nature of the rights) is enclosed. Shareholders are urged to review the summary carefully and retain it with their permanent records. Sincerely, Robert G. Paul President and Chief Executive Officer 2 FOR IMMEDIATE RELEASE --------------------- ALLEN TELECOM INC. ADOPTS REPLACEMENT ------------------------------------- SHARE PURCHASE RIGHTS PLAN -------------------------- Beachwood, Ohio, January 5, 1998 - Allen Telecom Inc. (NYSE:ALN) ("Allen Telecom") announced today that its Board of Directors has adopted a replacement share purchase rights plan that provides for rights to be issued to stockholders of record on January 20, 1998. The new rights plan replaces Allen Telecom's existing rights plan, which expires on that date. According to Robert G. Paul, President and Chief Executive Officer, "This action was not taken in response to any pending takeover or proposed change in control of the Company. Like the Company's existing rights plan, the new rights plan is intended to protect the Company and its stockholders from potentially coercive takeover practices or takeover bids which are inconsistent with the interests of the Company and its stockholders. Share purchase rights plans have become common in major American companies and are a well-accepted approach to ensuring that all stockholders receive a fair price and are treated equally in the event of a takeover." Under the plan, the rights will initially trade together with Allen Telecom common stock and will not be exercisable. In the absence of further action by Allen Telecom's Board of Directors, the rights generally will become exercisable and allow the holder to acquire Allen Telecom common stock at a discounted price if a person or group acquires 20 percent or more of the outstanding shares of Allen Telecom common stock. Rights held by persons who exceed the applicable threshold will be void. Under certain circumstances, the rights will entitle the holder to buy shares in an acquiring entity at a discounted price. 2 3 The plan also includes an exchange option. In general, after the rights become exercisable, in certain circumstances the Board of Directors may, at its option and without requiring any payment, effect an exchange of part or all of the rights - other than rights that have become void - for shares of Allen Telecom common stock. Under this option, Allen Telecom would issue one share of common stock for each right, subject to adjustment in certain circumstances. Allen Telecom's Board of Directors may, at its option, redeem all rights for $.01 per right, generally at any time prior to the rights becoming exercisable. The rights will expire January 20, 2008, unless earlier redeemed, exchanged or amended by the Board of Directors. The issuance of the rights is not a taxable event, will not affect Allen Telecom's reported financial condition or results of operations (including earnings per share) and will not change the way in which Allen Telecom common stock is currently traded. Statements included in this news releases 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. Allen Telecom's Annual Report on Form 10-K and Quarterly Reports on Form 10-Q contain certain detailed factors that could cause Allen Telecom's actual results to materially differ from forward-looking statements made by Allen Telecom, including, among others, the costs and timetable for new product development, the uncertain level of purchases by current and prospective customers of Allen Telecom's products and services and the impact of competitive products and pricing. Allen Telecom Inc. is a leading supplier to the worldwide two-way wireless communications marketplace of systems expansion products, site management products and antennas and provides frequency planning, system engineering services and software design programs to current and emerging wireless markets. For further information contact: Robert A. Youdelman 216/765-5820 http://www.allentelecom.com --------------------------- 3 4 SUMMARY OF RIGHTS TO PURCHASE PREFERRED STOCK The Board of Directors (the "Board") of Allen Telecom Inc. (the "Company") has declared a dividend distribution of one right (a "Right") for each outstanding share of Common Stock, par value $1.00 per share (the "Common Shares"), of the Company. The distribution is payable on January 20, 1998 (the "Record Date") to the stockholders of record as of the close of business on the Record Date. Each Right entitles the registered holder thereof to purchase from the Company one one-hundredth of a share of Series C Junior Participating Preferred Stock, without par value (the "Preferred Shares"), of the Company at a price (the "Purchase Price") of $100.00 per one one-hundredth of a Preferred Share, subject to adjustment. The description and terms of the Rights are set forth in a Rights Agreement, dated as of January 20, 1998 (the "Rights Agreement"), between the Company and Harris Trust Company of New York, as Rights Agent (the "Rights Agent"). Under the Rights Agreement, the Rights will be evidenced by the certificates evidencing Common Shares until the earlier (the "Distribution Date") of: (i) the close of business on the first date (the "Share Acquisition Date") of public announcement that a person (other than the Company, a subsidiary or employee benefit or stock ownership plan of the Company or any of its affiliates or associates), together with its affiliates and associates, has acquired beneficial ownership of 20% or more of the outstanding Common Shares (any such person being hereinafter called an "Acquiring Person") or (ii) the close of business on the tenth business day (or such later date as may be specified by the Board) following the commencement of a tender offer or exchange offer by a person (other than the Company, a subsidiary or employee benefit or stock ownership plan of the Company or any of its affiliates or associates), the consummation of which would result in beneficial ownership by such person of 20% or more of the outstanding Common Shares. The Rights Agreement provides that, until the Distribution Date, the Rights may be transferred with and only with the Common Shares. Until the Distribution Date (or earlier redemption or expiration of the Rights), any certificate evidencing Common Shares of the Company issued upon transfer or new issuance of the Common Shares will contain a notation incorporating the Rights Agreement by reference. Until the Distribution Date (or earlier redemption or expiration of the Rights), the surrender for transfer of any certificates evidencing Common Shares will also constitute the transfer of the Rights associated with such certificates. As soon as practicable following the Distribution Date, separate certificates evidencing the Rights ("Right Certificates") will be mailed to holders of record of Common Shares as of the close of business on the Distribution Date and such separate Right Certificates alone will evidence the Rights. No Right is exercisable at any time prior to the Distribution Date. The Rights will expire on the tenth anniversary of the Record Date (the "Final Expiration Date") unless earlier redeemed, exchanged or amended by the Company as described below. Until a Right is exercised, the holder thereof, as such, will have no rights as a stockholder of the Company, including the right to vote or to receive dividends. 4 5 The Purchase Price payable, and the number of the Preferred Shares or other securities issuable, upon exercise of the Rights will be subject to adjustment from time to time to prevent dilution (i) in the event of a stock dividend on, or a subdivision, combination or reclassification of, the Preferred Shares, (ii) upon the grant to holders of Preferred Shares of certain rights or warrants to subscribe for or purchase the Preferred Shares at a price, or securities convertible into the Preferred Shares with a conversion price, less than the then-current market price of the Preferred Shares, or (iii) upon the distribution to holders of the Preferred Shares of evidences of indebtedness, cash (excluding regular periodic cash dividends), assets, stock (excluding dividends payable in the Preferred Shares) or subscription rights or warrants (other than those referred to above). The number of outstanding Rights and the number of one one-hundredths of the Preferred Shares issuable upon exercise of each Right will be subject to adjustment in the event of a stock dividend on the Common Shares payable in Common Shares or a subdivision, combination or reclassification of Common Shares occurring, in any such case, prior to the Distribution Date. The Preferred Shares issuable upon exercise of the Rights will not be redeemable. Each Preferred Share will be entitled, in connection with the declaration of a dividend on the Common Shares, to a preferential dividend payment equal to the greater of (i) $1.00 per share and (ii) an amount equal to 100 times the related dividend declared per Common Share. Subject to customary anti-dilution provisions, in the event of liquidation, the holders of Preferred Shares will be entitled to a preferential liquidation payment equal to the greater of (a) $100 per share and (b) an amount equal to 100 times the liquidation payment made per Common Share. Because of the nature of the Preferred Shares' dividend, voting and liquidation rights, the value of the one one-hundredth interest in a Preferred Share purchasable upon exercise of a Right should approximate the value of one Common Share. Rights will be exercisable to purchase Preferred Shares only after the Distribution Date occurs and prior to the occurrence of a Flip-in Event as described below. A Distribution Date resulting from the commencement of a tender offer or exchange offer described in clause (ii) of the second paragraph of this summary could precede the occurrence of a Flip-in Event and thus result in the Rights being exercisable to purchase Preferred Shares. A Distribution Date resulting from any occurrence described in clause (i) of the second paragraph of this summary would necessarily follow the occurrence of a Flip-in Event and thus result in the Rights being exercisable to purchase Common Shares or other securities as described below. Under the Rights Agreement, in the event (a "Flip-in Event") that any person, together with its affiliates and associates, becomes the beneficial owner of 20% or more of the outstanding Common Shares, then proper provision will be made so that from and after the Share Acquisition Date each holder of a Right, other than Rights that are or were owned beneficially by an Acquiring Person (which, from and after the date of a Flip-in Event, will be void), will have the right to receive, upon exercise thereof at the then-current exercise price of the Right, that number of Common Shares (or, under certain circumstances, an economically equivalent security or securities of the Company) that on the Share Acquisition Date have a market value of two times the exercise price of the Right. 5 6 In the event (a "Flip-over Event") that, at any time after a person has become an Acquiring Person, (i) the Company merges with or into any person and the Company is not the surviving corporation, (ii) any person merges with or into the Company and the Company is the surviving corporation, but all or part of the Common Shares are changed or exchanged for stock or other securities of any other person or cash or any other property, or (iii) 50% or more of the Company's assets or earning power, including securities creating obligations of the Company, are sold, in each case as described in the Rights Agreement, then, in each such case, proper provision will be made so that from and after the later of the Share Acquisition Date and the date of the occurrence of such Flip-over Event each holder of a Right, other than Rights which have become void, will have the right to receive, upon the exercise thereof at the then-current exercise price of the Right, that number of shares of common stock (or, under certain circumstances, an economically equivalent security or securities) of such other person that at the time of such Flip-over Event have a market value of two times the exercise price of the Right. From and after the Share Acquisition Date, Rights (other than any Rights that have become void) will be exercisable as described above, upon payment of the aggregate exercise price in cash. In addition, at any time after the Share Acquisition Date and prior to the acquisition by any person or group of affiliated or associated persons of 50% or more of the outstanding Common Shares, the Company may exchange the Rights (other than any rights that have become void), in whole or in part, without requiring payment, at an exchange ratio of one Common Share per Right (subject to adjustment). With certain exceptions, no adjustment in the Purchase Price will be required until cumulative adjustments require an adjustment in the Purchase Price of at least 1%. The Company will not be required to issue fractional Preferred Shares (other than fractions that are integral multiples of one one-hundredth of a Preferred Share, which may, at the option of the Company, be evidenced by depositary receipts) or fractional Common Shares or other securities issuable upon the exercise of Rights. In lieu of issuing such securities, the Company may make a cash payment, as provided in the Rights Agreement. The Company may, at its option, redeem the Rights in whole, but not in part, at a price of $.01 per Right, subject to adjustment (the "Redemption Price"), at any time prior to the close of business on the Share Acquisition Date. Immediately upon any redemption of the Rights, the right to exercise the Rights will terminate and the only right of the holders of Rights will be to receive the Redemption Price. The Rights Agreement may be amended by the Company without the approval of any holders of Right Certificates, including amendments that increase or decrease the Purchase Price, that add other events requiring adjustment to the Purchase Price payable and the number of the Preferred Shares or other securities issuable upon the exercise of the Rights or that modify procedures relating to the redemption of the Rights, except that no amendment may be made that decreases the stated Redemption Price to an amount less than $.01 per Right. 6 7 The Board will have the exclusive power and authority to administer the Rights Agreement and to exercise all rights and powers specifically granted to the Board or to the Company therein, or as may be necessary or advisable in the administration of the Rights Agreement, including without limitation the right and power to interpret the provisions of the Rights Agreement and to make all determinations deemed necessary or advisable for the administration of the Rights Agreement (including any determination to redeem or not redeem the Rights or to amend or not amend the Rights Agreement). All such actions, calculations, interpretations and determinations (including any omission with respect to any of the foregoing) which are done or made by the Board in good faith will be final, conclusive and binding on the Company, the Rights Agent, the holders of the Rights and all other parties and will not subject the Board to any liability to any person, including without limitation the Rights Agent and the holders of the Rights. A copy of the Rights Agreement has been filed with the Securities and Exchange Commission as an exhibit to a Registration Statement on Form 8-A. A copy of the Rights Agreement is available free of charge from the Company. This summary description of the Rights is as of the Record Date, does not purport to be complete and is qualified in its entirety by reference to the Rights Agreement, which is incorporated herein by this reference. 7 -----END PRIVACY-ENHANCED MESSAGE-----