8-K/A

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K/A

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of report (Date of earliest event reported):      May 31, 2005

Glenayre Technologies, Inc.

(Exact name of registrant as specified in charter)

Delaware	0-15761	98-0085742
(State or other jurisdiction	(Commission	(IRS Employer
of incorporation)	file number)	Identification Number)

825 8th Avenue, 23rd Floor, New York, NY	10019
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code:      770-283-1000

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions.

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

     On June 3, 2005, Glenayre Technologies, Inc. (“Glenayre”) filed an initial Current Report on Form 8-K with the Securities and Exchange Commission reporting the acquisition (the “Acquisition”) by Entertainment Distribution Company (USA), LLC (“EDC USA”) and Blitz 05-107 GmbH (“EDC Germany”), each of which is an indirect subsidiary of Glenayre, of the CD and DVD manufacturing and distribution operations of Universal Music Group (the “Acquired Business”). Through the Acquisition, EDC USA acquired the assets comprising the United States portion of Universal Music’s CD and DVD manufacturing and distribution operations, and EDC Germany acquired all of the outstanding shares of Universal Music’s Germany subsidiary that operated the central European portion of Universal Music’s CD and DVD manufacturing and distribution operations. This report is being filed to amend the original filing to include the financial statements and pro forma financial information required by Item 9.01 of Form 8-K.

Item 9.01. Financial Statements and Exhibits.

(a) Financial Statements of Business Acquired.

      The following financial statements are filed with this Form 8-K as exhibit 99.2 and are incorporated herein by reference:

• Audited balance sheets of the Acquired Business as of December 31, 2004 and December 31, 2003

• Audited statements of income and cash flows of the Acquired Business for the years ended December 31, 2004, December 31, 2003 and December 31, 2002

(b) Pro Forma Financial Information.

      The following pro forma financial statements are filed with this Form 8-K as exhibit 99.3 and are incorporated herein by reference:

• Unaudited pro forma combined statements of operations of Glenayre and the Acquired Business for the year ended December 31, 2004 and the six months ended June 30, 2005 as if the Acquisition occurred January 1, 2004

(c) Exhibits.

10.1	Credit Agreement dated May 31, 2005 (previously filed)
10.2	Cash Collateral Agreement dated May 31, 2005 (previously filed)
10.3	Limited Liability Company Agreement of Entertainment Distribution Company, LLC (previously filed)
10.4	James Caparro Employment Agreement dated May 9, 2005 (previously filed)*
10.5	Thomas Costabile Employment Agreement dated May 9, 2005 (previously filed)*

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10.6	Letter agreement among Glenayre Electronics, Inc., James Caparro and Thomas Costabile dated May 31, 2005 (previously filed)*
10.7	US CD Manufacturing Agreement dated May 31, 2005 (previously filed)**
10.8	US HDFD Manufacturing Agreement dated May 31, 2005 (previously filed)**
10.9	International Manufacturing Agreement dated May 31, 2005 (previously filed)**
10.10	US Distribution Agreement dated May 31, 2005 (previously filed)**
10.11	International Distribution Agreement dated May 31, 2005 (previously filed)**
23.1	Consent of Ernst & Young LLP
99.1	News Release dated June 1, 2005 (previously filed)
99.2	Audited balance sheets of the Acquired Business as of December 31, 2004 and December 31, 2003 and audited statements of income and cash flows of the Acquired Business for the years ended December 31, 2004, December 31, 2003 and December 31, 2002
99.3	Unaudited pro forma combined statements of operations of Glenayre and the Acquired Business for the year ended December 31, 2004 and the six months ended June 30, 2005 as if the Acquisition occurred January 1, 2004

*	Management Contract
**	Portions of this document are confidential and have been omitted and filed separately with the Securities and Exchange Commission in connection with a request for confidential treatment of such omitted material in accordance with Rule 24b-2 under the Securities and Exchange Act of 1934.

2

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 hereunto duly authorized.

	Glenayre Technologies, Inc
Dated:     August 15, 2005	By:	/s/ Debra Ziola
	Name: Debra Ziola Title: Senior Vice President and Chief Financial Officer

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SECURITIES AND EXCHANGE COMMISSION
Washington, DC

EXHIBITS

CURRENT REPORT
ON
FORM 8-K

Date of Event Reported:     May 31, 2005 Commission File No:     0-15761

Glenayre Technologies, Inc.

EXHIBIT INDEX

Exhibit No.	Exhibit Description
10.1	Credit Agreement dated May 31, 2005 (previously filed)
10.2	Cash Collateral Agreement dated May 31, 2005 (previously filed)
10.3	Limited Liability Company Agreement of Entertainment Distribution Company, LLC (previously filed)
10.4	James Caparro Employment Agreement dated May 9, 2005 (previously filed)*
10.5	Thomas Costabile Employment Agreement dated May 9, 2005 (previously filed)*
10.6	Letter agreement among Glenayre Electronics, Inc., James Caparro and Thomas Costabile dated May 31, 2005 (previously filed)*
10.7	US CD Manufacturing Agreement dated May 31, 2005 (previously filed)**
10.8	US HDFD Manufacturing Agreement dated May 31, 2005 (previously filed)**
10.9	International Manufacturing Agreement dated May 31, 2005 (previously filed)**
10.10	US Distribution Agreement dated May 31, 2005 (previously filed)**
10.11	International Distribution Agreement dated May 31, 2005 (previously filed)**
23.1	Consent of Ernst & Young LLP
99.1	News Release dated June 1, 2005 (previously filed)

99.2	Audited balance sheets of the Acquired Business as of December 31, 2004 and December 31, 2003 and audited statements of income and cash flows of the Acquired Business for the years ended December 31, 2004, December 31, 2003 and December 31, 2002
99.3	Unaudited pro forma combined statements of operations of Glenayre and the Acquired Business for the year ended December 31, 2004 and the six months ended June 30, 2005 as if the Acquisition occurred January 1, 2004

*	Management Contract
**	Portions of this document are confidential and have been omitted and filed separately with the Securities and Exchange Commission in connection with a request for confidential treatment of such omitted material in accordance with Rule 24b-2 under the Securities and Exchange Act of 1934.

EX-23.1

Consent of Independent Auditors

We consent to the incorporation by reference in Glenayre Technologies, Inc.’s Registration Statement Number 33-68766 on Form S-8 dated September 14, 1993 (amended by Post-Effective Amendment Number 1 on Form S-8 dated August 8, 2003), Registration Statement Number 333-04635 on Form S-8 dated May 28, 1996 (amended by Post-Effective Amendment Number 1 on Form S-8 dated May 22, 1998 and Post-Effective Amendment Number 2 on Form S-8 dated August 8, 2003), Registration Statement Number 333-38169 on Form S-8 dated October 17, 1997 (amended by Post-Effective Amendment Number 1 on Form S-8 dated August 8, 2003), Registration Statement Number 333-56375 on Form S-8 dated June 9, 1998, Registration Statement number 333-81161 on Form S-8 dated June 21, 1999 (amended by Post-Effective Amendment Number 1 on Form S-8 dated August 8, 2003), Registration Statement Number 333-81155 on Form S-8 dated June 21, 1999 (amended by Post-Effective Amendment Number 1 on Form S-8 dated August 8, 2003), Registration Statement number 333-37446 on Form S-8 dated May 19, 2000 (amended by Post-Effective Amendment Number 1 on Form S-8 dated August 8, 2003), Registration Statement Number 333-107786 on Form S-8 dated August 8, 2003, and Registration Statement Number 333-107789 on Form S-8 dated August 8, 2003 of our report dated August 5, 2005, with respect to the combined financial statements of Universal Manufacturing and Logistics as of December 31, 2004, 2003 and 2002.

New York, New York
August 15, 2005

/s/ Ernst & Young LLP

EX-99.2

Exhibit 99.2

COMBINED FINANCIAL STATEMENTS

Universal Manufacturing and Logistics

Years ended December 31, 2004, 2003 and 2002
with Report of Independent Auditors

Universal Manufacturing and Logistics

Combined Financial Statements

Years ended December 31, 2004, 2003 and 2002

Contents

Report of Independent Auditors	1
Combined Balance Sheets	2
Combined Statements of Income	3
Combined Statements of Net Assets Deficiency	4
Combined Statements of Cash Flows	5
Notes to Combined Financial Statements	6

§ Ernst & Young LLP
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    New York, New York 10036-6530 § Phone: (212) 773-3000
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Report of Independent Auditors

The Board of Directors of
   Universal Music Group

We have audited the accompanying combined balance sheets of Universal Manufacturing and Logistics (“UML”) as of December 31, 2004 and 2003, and the related combined statements of income, net assets deficiency, and cash flows for each of the three years in the period ended December 31, 2004. These financial statements are the responsibility of UML’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of UML’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of UML’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the combined financial position of Universal Manufacturing and Logistics at December 31, 2004 and 2003, and the combined results of its operations and its cash flows for each of the three years in the period ended December 31, 2004, in conformity with accounting principles generally accepted in the United States.

August 5, 2005

A Member Practice of Ernst & Young Global

Universal Manufacturing and Logistics

Combined Balance Sheets

(Dollars in Millions)

	December 31
	2004			2003
Assets
Cash and cash equivalents	$	0.2		$	0.2
Accounts receivable (net of allowances of $0.1 and $0.2, respectively)		5.7			3.7
Loan receivable due from affiliate		25.7			—
Inventories, net		8.9			9.5
Spare parts, net		3.4			3.4
Deferred tax assets		3.9			3.5
Other current assets		1.0			1.0
Total current assets		48.8			21.3
Property, plant and equipment, net		39.2			83.4
Other assets		0.7			0.7
Total assets	$	88.7		$	105.4
Liabilities and net assets deficiency
Accounts payable and accrued liabilities	$	61.2		$	61.3
Total current liabilities		61.2			61.3
Deferred income taxes		3.8			2.9
Income tax payable due to an affiliate		140.9			89.5
Long term accrued liabilities		24.5			64.2
Other liabilities		5.2			5.5
Total long term liabilities		174.4			162.1
Total liabilities		235.6			223.4
Commitments and contingencies (Note 13)
Net assets deficiency		(146.9	)		(118.0	)
Total liabilities and net assets deficiency	$	88.7		$	105.4

The accompanying notes are an integral part of these financial statements.

2

Universal Manufacturing and Logistics

Combined Statements of Income

(Dollars in Millions)

	Year ended December 31
	2004			2003			2002
Revenues	$	403.1		$	345.6		$	396.8
Cost of sales		(225.6	)		(184.9	)		(187.4	)
		177.5			160.7			209.4
General and administrative costs		(57.4	)		(72.7	)		(72.3	)
Operating income		120.1			88.0			137.1
Other income (expense):
Interest income		0.7			—			0.1
Interest expense		(0.9	)		(0.6	)		(0.1	)
Other		(2.8	)		(0.5	)		(0.2	)
Income before income tax provision		117.1			86.9			136.9
Income tax provision		50.8			32.1			51.1
Net income	$	66.3		$	54.8		$	85.8

The accompanying notes are an integral part of these financial statements.

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Universal Manufacturing and Logistics

Combined Statements of Net Assets Deficiency

(Dollars in Millions)

Balance at December 31, 2001	$	12.6
Components of comprehensive income:
Net income		85.8
Foreign currency translation adjustments		7.0
Additional minimum pension liabilities, net of tax		(0.6	)
Total comprehensive income		92.2
Increase in amounts due from affiliates		(165.8	)
Balance at December 31, 2002		(61.0	)
Components of comprehensive income:
Net income		54.8
Foreign currency translation adjustments		14.9
Additional minimum pension liabilities, net of tax		(2.5	)
Total comprehensive income		67.2
Increase in amounts due from affiliates		(124.2	)
Balance at December 31, 2003		(118.0	)
Components of comprehensive income:
Net income		66.3
Foreign currency translation adjustments		11.5
Additional minimum pension liabilities, net of tax		(1.0	)
Total comprehensive income		76.8
Increase in amounts due from affiliates		(105.7	)
Balance at December 31, 2004	$	(146.9	)

The accompanying notes are an integral part of these financial statements.

4

Universal Manufacturing and Logistics

Combined Statements of Cash Flows

(Dollars in Millions)

	Year ended December 31
	2004			2003			2002
Operating activities
Net income	$	66.3		$	54.8		$	85.8
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		17.5			11.2			12.2
Loss on sale of property, plant and equipment		2.3			0.5			—
Deferred income taxes		0.5			1.1			2.3
Changes in operating assets and liabilities:
Accounts receivable		(2.0	)		(0.1	)		3.9
Inventories		0.6			(2.9	)		0.8
Spare parts		—			(0.6	)		0.4
Other current assets		—			(0.2	)		0.3
Other noncurrent assets		—			0.2			0.2
Accounts payable and accrued liabilities		(1.1	)		7.5			7.4
Income tax payable		51.4			33.8			55.6
Long-term accrued liabilities and other liabilities		(40.0	)		14.7			4.7
Net cash provided by operating activities		95.5			120.0			173.6
Investing activities
Loan to affiliate		(25.7	)		—			—
Proceeds from sale of property, plant and equipment		31.9			—			—
Capital expenditures		(7.5	)		(10.9	)		(10.9	)
Net cash used in investing activities		(1.3	)		(10.9	)		(10.9	)
Financing activities
Increase in intercompany receivable		(105.7	)		(124.2	)		(165.8	)
Net cash used in financing activities		(105.7	)		(124.2	)		(165.8	)
Effect of exchange rate changes on cash		11.5			15.0			3.3
Net (decrease) increase in cash and cash equivalents		—			(0.1	)		0.2
Cash and cash equivalents at beginning of the year		0.2			0.3			0.1
Cash and cash equivalents at end of the year	$	0.2		$	0.2		$	0.3
Supplemental disclosure of cash flow information
Interest paid	$	0.4		$	0.4		$	0.4

The accompanying notes are an integral part of these financial statements.

5

Universal Manufacturing and Logistics

Notes to Combined Financial Statements

December 31, 2004

1. Description of Businesses

The businesses included in these Combined Financial Statements of Universal Manufacturing and Logistics (“UML”) comprise the manufacturing and distribution operations of Universal Music Group (“UMG”) in the United States and Germany. In the United States, these operations consist of certain assets and liabilities through which UMG manufactures and distributes compact discs (“CDs”) and related products (primarily DVDs) in the United States. Germany operations consist of Universal Manufacturing and Distribution GmbH, which manufactures and distributes compact discs and related products primarily in Europe. Both operations are wholly owned by UMG and substantially all product is manufactured and distributed for UMG affiliates. The degree of dependence of UML on UMG and its affiliates is more fully disclosed in Note 3 below. Certain operations of the German legal entity have been excluded from these Combined Financial Statements to reflect the German operations sold to Blitz 05-107 GmbH (“EDC Germany”).

On May 31, 2005, Entertainment Distribution Company (USA), LLC (“EDC USA”) and EDC Germany, each of which is an indirect subsidiary of Glenayre Technologies, Inc. (“Glenayre”), collectively purchased UML. See Note 15 for further information.

2. Basis of Presentation

These combined financial statements have been prepared in accordance with generally accepted accounting principles in the United States.

The operations have been presented on a combined basis as they are under the common control of UMG and represent a combination of the assets and liabilities, revenues and expenses and cash flows which collectively comprise UML after eliminating balances owing to, or from, other UML entities.

The accompanying Combined Financial Statements reflect the historical results for the periods presented of those operations included in the sale to EDC USA more fully described in Note 15. Where appropriate, transactions which had been reflected in the historical managerial results of UML, but did not reflect arms length transactions, or the underlying risks and rewards of UML, have been excluded from these Combined Financial Statements.

6

Universal Manufacturing and Logistics

Notes to Combined Financial Statements (continued)

2. Basis of Presentation (continued)

The accompanying Combined Financial Statements include allocations of certain costs of UMG to present the financial position, results of operations, changes in equity and cash flows of UML’s US operations on a stand alone basis. The financial information included herein does not necessarily reflect the financial position, results of operations, and cash flows of UML in the future or what would have been reflected had UML been a separate, stand alone entity during the periods presented. Certain general and administrative costs incurred by UMG, or other UMG related entities, have been allocated to UML US operations, including pension and other benefit related costs, insurance related costs and other general and administrative costs. These cost allocations were determined based on specific identification or allocations based on UML’s US operations headcount. The costs allocated to UML US operations are not necessarily indicative of the costs that would have been incurred if UML had obtained such services independently, nor are they indicative of costs that will be charged or incurred in the future.

The income tax provisions, and current and deferred tax balances have been prepared as if UML operated as a stand alone taxpayer. Although UML’s taxable results are included in the consolidated income tax returns of UMG or its subsidiaries, all current and deferred tax assets and liabilities have been separately stated in the accompanying Combined Balance Sheets. See Note 9 for additional information related to taxes.

UML has various commercial and financing arrangements with UMG and its affiliates. More specifically, UML does not hold its own bank accounts for its normal trading activity and substantially all of its cash transactions are carried out through intercompany accounts. Given the intercompany nature of these and other arrangements, the related payables and receivables generally are not settled through periodic cash payments and receipts. In addition, such balances were not repaid nor acquired by EDC USA as part of the sale of UML. Accordingly, the net amounts due from all transactions with UMG affiliated companies have been classified as net assets in the accompanying Combined Balance Sheets.

Certain transactions and balances are included in these Combined Financial Statements which were originated by UMG management. These transactions may not have been entered into had UML been a stand alone entity. These transactions are described in more detail in Note 12, or elsewhere in these Combined Financial Statements where appropriate.

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Universal Manufacturing and Logistics

Notes to Combined Financial Statements (continued)

3. Risks and Uncertainties

Concentration of Credit Risk

As disclosed in Note 1 above, in excess of 90% of UML’s revenues are earned from UMG and its affiliates and substantially all of its cash payments and receipts are effected via intercompany accounts with UMG and its affiliates. Therefore, UML is significantly dependent on UMG and its affiliates.

Concentration of Suppliers

UML has a limited number of suppliers who are able to provide it with its raw materials. In Germany, all polystyrene (accounting for approximately 3.0% of total cost of sales) is purchased from BP PLC and all polycarbonate (accounting for approximately 3.0% of total cost of sales) is purchased from Bayer AG. In the United States, all polycarbonate (accounting for approximately 2% of total cost of sales) is purchased from Bayer Polymers LLC. These inputs are crucial to the production of CDs and DVDs and while there are alternative suppliers of these products, it would be extremely disruptive to UML’s production if either of these companies were unable to deliver its product to UML.

Workforce Subject to Collective Bargaining Agreements

In the United States, approximately 28% of UML’s workforce of 950 employees is unionized and subject to collective bargaining agreements. None of these agreements expire within one year. In Germany, approximately 44% of UML’s workforce of 830 employees is unionized. However, collective bargaining agreements negotiated by the unions cover the whole workforce. None of these agreements expire within one year.

8

Universal Manufacturing and Logistics

Notes to Combined Financial Statements (continued)

4. Summary of Significant Accounting Policies

Use of Estimates

The preparation of these Combined Financial Statements requires management to make informed estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the Combined Financial Statements and the reported amounts of revenues and expenses during the reporting period. On an on going basis, management evaluates its estimates and judgments to evaluate the ultimate recoverability of accounts receivable and in determining valuation allowances for inventories, long lived assets, pension liabilities and deferred taxes. Estimates and judgments are also required and regularly evaluated concerning financial operations, restructuring costs, contingencies and litigation. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Allocation methodologies used to prepare the Combined Financial Statements are based on estimates and have been described in the notes, where appropriate. Actual results could differ significantly from these estimates under different assumptions or conditions. Changes in estimates are reflected in the Combined Financial Statements in the period in which they become known.

Foreign Currency Translation

Translation of Universal Manufacturing and Logistics GmbH’s Operations

These Combined Financial Statements are stated in U.S. dollars. The operations of Universal Manufacturing and Logistics GmbH, for which the functional currency is the Euro, are translated into dollars at applicable exchange rates. All asset and liability accounts are translated at the appropriate year end exchange rate, and all income and expense accounts and cash flow statements are translated at average exchange rates. Adjustments resulting from such translation for the years covered by these Combined Financial Statements are reported separately as a component of accumulated other comprehensive income in equity.

9

Universal Manufacturing and Logistics

Notes to Combined Financial Statements (continued)

4. Summary of Significant Accounting Policies (continued)

Foreign Currency Transactions

Foreign currency transactions and balances are converted into dollars at the exchange rate on the transaction date and the balance sheet date, respectively. The resulting exchange gains and losses are recorded in current period earnings.

Revenues

Pursuant to Staff Accounting Bulletin 104, UML recognizes revenue when a signed contract exists, the fee is fixed and determinable, delivery has occurred, and collection of the resulting receivable is probable. Revenues from the sale of CDs and related products are recognized on shipment to third parties for product sales with terms FOB shipping point and on delivery for products sold FOB destination.

Revenues are based upon the transfer prices employed by UMG management as between UML and UMG affiliates during the years covered by these Combined Financial Statements. Management believes that these prices approximated the prices charged to third parties by UML for the same products. No volume or other discounts were permitted to UMG affiliates. These transfer prices differ significantly from the prices that will be charged to UMG by UML following its sale to EDC USA.

Cost of Sales and General and Administrative Costs

Cost of sales includes manufacturing costs and direct overhead and inventory obsolescence and distribution costs. Included in general and administrative costs are indirect overheads.

Shipping and Handling Costs Reimbursed by Customers

Shipping and handling costs reimbursed by customers for invoice charges such as postage, freight packing and small order surcharges are recorded as revenue. The total of these amounts was $8.4 million, $7.5 million and $6.4 million for each of the years ended December 31, 2004, 2003 and 2002, respectively. Shipping and handling costs are included within cost of sales in the Combined Statements of Income.

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Universal Manufacturing and Logistics

Notes to Combined Financial Statements (continued)

4. Summary of Significant Accounting Policies (continued)

Income Taxes

The results of UML are included in the consolidated U.S. federal, and certain state, local and German income tax returns of UMG or its subsidiaries. The income tax provision reflected in the Combined Statement of Income of UML is presented as if UML had operated on a stand alone basis, consistent with the liability method prescribed by Statement of Financial Accounting Standards (“SFAS”) No. 109 “Accounting for Income Taxes”. Under the liability method, deferred income taxes are recognized based on the differences between the financial statement and tax bases of assets and liabilities. Deferred tax amounts, recorded at the tax rate in effect at the balance sheet date, are adjusted for the impact of changes in tax law and statutory tax rates in the period in which the laws are enacted. The majority of deferred tax balances are recognized for deductible timing differences and adjustments to the historical carrying value of assets and liabilities established at the time of the acquisition of UMG by Vivendi Universal S.A. of The Seagram Company Limited (“VU Acquisition”). A valuation allowance is provided when it is determined that it is more likely than not that deferred tax assets will not be recovered. The provisions of the American Job Creation Act should not have any material impact on these Combined Financial Statements.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash in banks and on hand. UML considers all highly liquid investments with original maturities of three months or less when purchased to be cash equivalents.

UML has agreements with UMG, whereby generally all cash received or paid by UML is included in, or funded by, clearing accounts or international cash pools within UMG’s centralized cash management system. Such balances are reflected as a reduction to net assets deficiency in the accompanying Combined Balance Sheets.

Inventories

Inventories are valued using average cost methods, and are recorded at the lower of cost or net realizable value.

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Universal Manufacturing and Logistics

Notes to Combined Financial Statements (continued)

4. Summary of Significant Accounting Policies (continued)

Property, Plant and Equipment

Property, plant and equipment are carried at historical cost, except that, following the VU Acquisition, the owned buildings within UML were revalued to then current market value. Depreciation is computed using the straight line method based on the estimated useful life of the assets, generally 40 years for buildings, three to ten years for equipment and machinery, three to ten years for furniture and fixtures and three years for computer equipment. Assets acquired through capital leases are capitalized and amortized over the shorter of the lease term or the estimated useful life of the assets. Leasehold improvements are amortized over their estimated useful lives not to exceed the life of the lease.

Valuation of Long Lived Assets

UML periodically reviews the carrying value of its long lived assets, including property, plant and equipment, whenever events or changes in circumstances indicate that the carrying value may not be recoverable. To the extent the estimated future cash inflows attributable to the asset, less estimated future cash outflows, are less than the carrying amount, an impairment loss is recognized in an amount equal to the difference between the carrying value of such asset and its fair value.

Fair Value of Financial Instruments

The carrying amounts of UML’s financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, approximate fair value because of their short maturities.

Segment Information

UML discloses information regarding segments in accordance with SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information”. SFAS No. 131 establishes standards for reporting of financial information about operating segments in financial statements. The disclosure of segment information was not required as UML operates in only one reportable business segment, but does primarily operate from two geographical areas.

12

Universal Manufacturing and Logistics

Notes to Combined Financial Statements (continued)

5. Property, Plant and Equipment

Property, plant and equipment consist of the following:

	December 31
	2004			2003
	(Dollars in Millions)
Land	$	1.2		$	9.0
Buildings		6.0			68.5
Machinery and equipment		220.4			211.5
Construction-in-progress		0.5			2.1
Software		24.3			20.9
Other		10.9			10.5
Gross property, plant and equipment		263.3			322.5
Less accumulated depreciation and amortization		(224.1	)		(239.1	)
Net property, plant and equipment	$	39.2		$	83.4

Depreciation and amortization, including capitalized lease amortization for property, plant and equipment was $17.5 million, $11.2 million and $12.2 million for the years ended December 31, 2004, 2003 and 2002, respectively. Amortization related to capital leases was $0.1 million, $0.7 million and $0.6 million for the years ended December 31, 2004, 2003 and 2002, respectively. Accumulated amortization of capital leases was $2.9 million and $2.5 million at December 31, 2004 and 2003, respectively.

On June 30, 2004, UML sold its buildings in Germany. See Note 12 for further information.

6. Inventories

Inventories consist of the following:

	December 31
	2004			2003
	(Dollars in Millions)
Raw materials	$	12.7		$	10.7
Finished goods		4.2			4.2
		16.9			14.9
Less reserves for obsolete inventory		(8.0	)		(5.4	)
	$	8.9		$	9.5

13

Universal Manufacturing and Logistics

Notes to Combined Financial Statements (continued)

7. Accounts Payable and Accrued Liabilities

Accounts payable and accrued liabilities consist of the following:

	December 31
	2004		2003
	(Dollars in Millions)
Trade accounts payable	$	31.5	$	28.9
Accrued salaries and benefits		7.1		6.3
Taxes other than on income		0.6		0.8
Royalty accrued		6.9		5.0
Restructuring reserve (a)		2.4		4.4
Other		12.7		15.9
Account payable and accrued liabilities	$	61.2	$	61.3

(a) For further information regarding restructuring, see Note 11.

8. Long-term Accrued Liabilities

Provisions consist of the following:

	December 31
	2004		2003
	(Dollars in Millions)
Pensions (a)	$	17.3	$	55.1
Jubilee and related costs		7.2		6.9
Others		—		2.2
	$	24.5	$	64.2

(a) For further information regarding pensions, see Note 10.

14

Universal Manufacturing and Logistics

Notes to Combined Financial Statements (continued)

9. Income Taxes

The taxable results of UML are included in the consolidated U.S. federal and various state, local and German income tax returns of UMG or its subsidiaries. The tax provisions and related balance sheet disclosures have been prepared assuming UML was a stand alone taxpayer for the years presented.

Components of Pre-tax Income

	Year ended December 31
	2004		2003		2002
	(Dollars in Millions)
Pre-tax income attributable to:
U.S.	$	95.7	$	80.5	$	122.4
Germany		21.4		6.4		14.5
	$	117.1	$	86.9	$	136.9

Components of Income Tax Expense

	Year ended December 31
	2004			2003			2002
	(Dollars in Millions)
Current income tax provision applicable to:
U.S. Federal	$	32.7		$	25.6		$	44.8
State and local		3.8			3.0			5.0
Germany		14.4			2.2			3.1
		50.9			30.8			52.9
Deferred income tax provision applicable to:
U.S. Federal		0.6			2.6			(2.0	)
State and local		0.1			0.3			(0.1	)
Germany		(0.8	)		(1.6	)		0.3
		(0.1	)		1.3			(1.8	)
Total income tax provision	$	50.8		$	32.1		$	51.1

15

Universal Manufacturing and Logistics

Notes to Combined Financial Statements (continued)

9. Income Taxes (continued)

Components of Deferred Tax Assets and Liabilities

	December 31
	2004		2003
	(Dollars in Millions)
Deferred tax assets:
Provisions for bad debt	$	4.3	$	2.8
Provisions for risks and liabilities		2.4		5.5
Other		0.7		0.7
Gross deferred tax assets		7.4		9.0
Deferred tax liabilities:
Fixed assets		7.3		8.4
Gross deferred tax liabilities		7.3		8.4
Net deferred tax assets	$	0.1	$	0.6

Deferred tax assets and liabilities are recognized based on differences between the financial statement and tax basis of assets and liabilities using presently enacted tax rates.

Effective Income Tax Rate

The reconciliation of the differences between the U.S. federal statutory income tax rate and UMG’s effective income tax rate is as follows:

	December 31
	2004			2003			2002
U.S. federal statutory rate		35.0	%		35.0	%		35.0	%
State and local, net of federal benefit		3.9			3.9			3.9
German statutory tax rates		4.5			(2.0	)		(1.6	)
Effective income tax rate		43.4	%		36.9	%		37.3	%

UMG is subject to tax audits by the respective tax authorities of the jurisdictions in which UML has operations. However, following the sale to EDC USA, any tax assessments in respect of additional income taxes of years prior to the sale of UML are to UMG’s account. The increase in the effective income tax rate in 2004 was due to a non-deductible pension expense in Germany.

16

Universal Manufacturing and Logistics

Notes to Combined Financial Statements (continued)

10. Pensions and Other Postretirement Benefits

Summary

UML maintains defined benefit plans in the U.S. with the single exception of the Grover, North Carolina facility. Employees generally participate in defined benefit pension plans sponsored by UMG. In Germany, employees participate in one of four unfunded defined benefit plans.

Employees Participating in U.S. Plans

For the U.S. employees participating in UMG sponsored plans, for the years ended December 31, 2004, 2003 and 2002, UML recognized an expense of approximately $0.9 million, $1.4 million and $0.6 million, respectively, related to pensions and other postretirement benefits in respect of these employees. These expenses are determined by a formula which averages the per employee cost of these benefits across all employees in UMG’s U.S. operations participating in these plans for which UML is charged an allocable share of plan expenses. Management believes that this charge reflects, in all material respects, the costs that would be attributable to UML on a stand alone basis.

At the Grover facility, employees participate in a defined contribution plan (401k). UML recognized an expense of approximately $1.0 million, $1.1 million and $1.1 million for the years ended December 31, 2004, 2003 and 2002, respectively, related to this plan.

Employees in Germany

Employees in Germany participate in one of four defined benefit plans which offer materially the same benefits and have materially the same provisions. All plans are wholly unfunded. The following information relates solely to employees participating in UMG’s German pension plans and is based upon an actuarial review performed in May 2004.

17

Universal Manufacturing and Logistics

Notes to Combined Financial Statements (continued)

10. Pensions and Other Postretirement Benefits (continued)

The average rates and assumptions utilized in accounting for these plans for the years ended December 31, 2004, 2003 and 2002 were:

	Year ended December 31
	2004			2003			2002
Discount rate		4.40	%		5.25	%		5.50	%
Rate of post retirement pension increase		1.50			1.50			1.50
Rate of compensation increase		3.50			3.50			3.50
Expected residual active life (in years)		10.00			11.00			11.00

The following tables provide reconciliations of the changes in benefit obligations and fair value of the plans’ assets for the years ended December 31, 2004 and 2003.

	December 31
	2004			2003
	(Dollars in Millions)
Change in benefit obligations
Benefit obligations at the beginning of the year	$	64.1		$	51.1
Service cost		0.8			0.7
Interest cost		2.5			3.1
Transfers		(46.4	)		—
Actuarial loss, net		3.1			1.5
Benefits paid		(2.3	)		(3.1	)
Foreign currency exchange changes		1.8			10.8
Benefit obligation at the end of the year	$	23.6		$	64.1
Change in fair value of plans’ assets
Fair value of plans’ assets at the beginning of the year	$	—		$	—
Employers’ contributions		2.3			3.1
Benefits paid		(2.3	)		(3.1	)
Fair value of plan assets at the end of the year	$	—		$	—

18

Universal Manufacturing and Logistics

Notes to Combined Financial Statements (continued)

10. Pensions and Other Postretirement Benefits (continued)

The accumulated benefit obligation as of December 31, 2004 and 2003 is as follows:

	December 31
	2004			2003
	(Dollars in Millions)
Accumulated benefit obligation	$	(20.2	)	$	(61.5	)

UML expects benefits to be paid of approximately $0.5 million in each of the five years ended December 31, 2005, 2006, 2007, 2008 and 2009 and an aggregate of approximately $2.5 million in the five years following.

In 2004, the pension liabilities for inactive former employees and pensioners were transferred to Universal Pensionsverwaltung GmbH & Co. KG, a UMG affiliate.

The following tables provide the unfunded status, the breakdowns of the balance sheet net accrued liability and net periodic pension cost for the years ended December 31, 2004 and 2003:

	December 31
	2004			2003
	(Dollars in Millions)
Unfunded status
Unfunded status	$	(23.6	)	$	(64.1	)
Unrecognized actuarial loss		4.7			4.3
Net accrued liability	$	(18.9	)	$	(59.8	)
Amount recognized
Accrued benefit obligation	$	(20.5	)	$	(61.9	)
Accumulated other comprehensive income		1.6			2.1
	$	(18.9	)	$	(59.8	)
Reconciliation of FAS 87 accrued pension cost
Accrued at beginning of year	$	(59.8	)	$	(48.9	)
Net periodic pension cost		(3.3	)		(3.8	)
Company contributions		—			3.1
Benefits paid directly by UML for the year		2.3			—
Transfers		43.5			—
Foreign currency exchange changes		(1.6	)		(10.2	)
Accrued at end of year	$	(18.9	)	$	(59.8	)

19

Universal Manufacturing and Logistics

Notes to Combined Financial Statements (continued)

10. Pensions and Other Postretirement Benefits (continued)

	Year ended December 31
	2004		2003		2003
	(Dollars in Millions)
Net periodic pension cost
Service cost	$	0.8	$	0.7	$	0.6
Interest cost		2.5		3.1		2.8
Total expense	$	3.3	$	3.8	$	3.4

11. Restructuring Costs

UML engaged in restructuring activities in 2003 and 2004 to better position it in a market that has exhibited increasing levels of piracy and illegal downloading and the increased competition for the consumer dollar. These restructuring activities consisted of general headcount reductions. The total reduction in headcount was 175 employees. The remaining balance of the liability at the end of 2004 relates to extended payment terms for severance obligations. These remaining obligations are expected to be settled by the end of 2005. The charges made during the years ended December 31, 2004 and 2003, $1.0 million and $6.5 million, respectively, is recorded in General and Administrative Costs in the Combined Statement of Income. The following table illustrates the movements in this provision.

	December 31
	2004			2003
	(Dollars in Millions)
Restructuring provision at the beginning of the year	$	4.4		$	0.9
Charge		1.0			6.5
Utilization		(3.1	)		(3.3	)
Foreign currency exchange changes		0.1			0.3
Restructuring provision at the end of the year	$	2.4		$	4.4

20

Universal Manufacturing and Logistics

Notes to Combined Financial Statements (continued)

12. Related Party Transactions

Related Party Transactions with UMG and its Affiliates

In the normal course of conducting its business, UML has various transactions with UMG and its affiliates. The following is a summary of the principal transactions between UML and UMG and its affiliates.

Manufacturing and Distribution Services with UMG and its Affiliates

UML manufactures CDs and other related products for UMG and its affiliates. Amounts included in Revenues in connection with these services were $223.8 million in 2004, $175.2 million in 2003 and $224.3 million in 2002. Management believes that these revenues approximate market rates. UML also distributes product for UMG and its affiliates. Amounts included in Revenues in connection with these services were $141.4 million in 2004, $135.2 million in 2003 and $142.2 million in 2002. Management believes that these revenues approximate market rates.

Financing Arrangements with UMG and its Affiliates

UML has agreements with UMG, whereby all cash received or paid by UML is included in, or funded by, clearing accounts or international cash pools within UMG’s centralized cash management system.

Affiliated Management Services

Certain general and administrative costs incurred by UMG have been allocated to UML’s US operations, including legal, accounting, IT, financial and tax services. These cost allocations were determined based on specific identification or allocations based on UML’s headcount. The costs allocated to UML are not necessarily indicative of the costs that would have been incurred if UML had obtained such services independently, nor are they indicative of costs that will be charged or incurred in the future. However, management believes that such allocations are reasonable. Net amounts included in General and Administrative Costs in connection with these affiliated management service costs were $7.3 million in 2004, $11.9 million in 2003 and $12.8 million in 2002.

21

Universal Manufacturing and Logistics

Notes to Combined Financial Statements (continued)

12. Related Party Transactions (continued)

Share Based Payments

A small number of employees of UML participate in the Vivendi Universal S.A. share option plan. The costs associated with their participation are incurred at UMG and are not passed on to UML. Such share options were cancelled on the sale to EDC USA. Had UMG passed the costs associated with the share options of UML employees to UML in each of the years included in these Combined Financial Statements and UML accounted for these in accordance with FAS 123R, the impact on the Combined Financial Statements would have been less than $1,000 for the years ended December 31, 2004, 2003 and 2002.

Sale of Real Estate

On June 30, 2004, UML sold its factory and distribution land and buildings to Universal Verwaltungs-und Dienstleistungs GmbH and Deutsche Grammaphon Gesellschaft GmbH, UMG affiliates, for $31.9 million, which resulted in a $2.3 million loss.

In 2004, UML entered into a lease agreement with Universal Verwaltungs-und Dienstleistungs GmbH for a lease term of ten years. Rent expense for the year ended December 31, 2004 amounted to $2.0 million.

Loan to Universal International Music BV

In 2004, UML granted a short term loan of $25.7 million to Universal International Music BV, Baarn, The Netherlands. The loan bears interest at a rate of “Euribor 1 month” plus 0.6%. and paid quarterly. The loan has been repaid in May 2005.

13. Commitments and Contingencies

Commitments

UML occupies various facilities and uses certain equipment under many operating leases. Lease terms generally range from one to ten years with options to renew at varying terms. Net rent expense was approximately $6.4 million in 2004, $4.6 million in 2003 and $4.6 million in 2002.

22

Universal Manufacturing and Logistics

Notes to Combined Financial Statements (continued)

13. Commitments and Contingencies (continued)

UML enters into purchase commitments with jewel box suppliers for the supply of its raw materials. Such commitments are generally over a two or three year duration and subject UML to a minimum guaranteed purchase commitment. Purchases under these arrangements were $22.9 million, $15.0 million and $1.3 million for years ended December 31, 2004, 2003 and 2002, respectively.

Future minimum payments under each of these arrangements and other arrangements are as follows:

							Payment Due In
	Total		2005		2006		2007		2008		2009		Thereafter
	(Dollars in Millions)
Operating leases	$	64.8	$	7.5	$	7.3	$	7.1	$	7.2	$	7.3	$	28.4
Purchase commitments		17.7		14.8		2.9		—		—		—		—
	$	82.5	$	22.3	$	10.2	$	7.1	$	7.2	$	7.3	$	28.4

14. Geographical Information

Revenues (attributed to countries based on the location of the customer) and total assets relating to operations in different geographical areas are set forth below:

	Year ended December 31
	2004		2003		2002
	(Dollars in Millions)
Revenues
United States	$	248.6	$	215.8	$	272.7
Benelux		67.7		52.8		60.3
Germany		58.0		55.2		48.9
Other Europe		18.8		13.4		8.7
Rest of world		10.0		8.4		6.2
	$	403.1	$	345.6	$	396.8

	December 31
	2004		2003
	(Dollars in Millions)
Total assets
United States	$	25.1	$	31.3
Germany		63.6		74.1
	$	88.7	$	105.4

23

Universal Manufacturing and Logistics

Notes to Combined Financial Statements (continued)

15. Subsequent Events

On May 31, 2005, EDC USA and EDC Germany, both of which is an indirect subsidiary of Glenayre, collectively purchased UML subject to the Asset Purchase Agreement and the Share Purchase Agreement dated May 9, 2005 to which they are party with certain subsidiaries of UMG. The purchased assets include UMG’s manufacturing and distribution operations in Hanover, Germany, its manufacturing operations in Grover, North Carolina, and its distribution operations in Fishers, Indiana, Reno, Nevada and Wilkes-Barre, Pennsylvania. EDC is leasing all of the facilities with the exception of the manufacturing facility in Grover, North Carolina, which it owns.

The total purchase price paid at closing was $82.6 million of which $30.5 million was for the U.S. operations, $43.9 million (€35.5 million) was for the European operations, and the balance constituted transaction expenses. Additionally, UMG is obligated to purchase manufacturing and distribution services from EDC USA from 2005 through 2015.

24

EX-99.3

EXHIBIT 99.3

GLENAYRE TECHNOLOGIES, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

On May 31, 2005 Entertainment Distribution Company (USA), LLC (“EDC USA”) and Blitz 05-107 GmbH (“EDC Germany”), each of which is an indirect subsidiary of Glenayre Technologies, Inc., closed the transactions under the Asset Purchase Agreement and the Share Purchase Agreement dated May 9, 2005 to which they are party with certain subsidiaries of Universal Music Group (“Universal Music”). Under the Asset Purchase Agreement, EDC USA acquired the assets comprising the United States portion of Universal Music’s CD and DVD manufacturing and distribution operations (“UM&L USA”). Under the Share Purchase Agreement, EDC Germany acquired all of the outstanding shares of Universal Music’s Germany subsidiary (“UM&L Germany”) that operated the central European portion of Universal Music’s CD and DVD manufacturing and distribution operations.

The following unaudited pro forma condensed combined statements of operations are based on the historical financial statements of Glenayre Technologies, Inc. (“Glenayre” or the “Company”) and the historical combined carve-out financial statements of certain CD and DVD manufacturing and distribution subsidiaries of Universal Music Group (“UM&L”), after giving effect to Glenayre’s acquisition of UM&L, and the assumptions and adjustments described in the accompanying notes to the unaudited pro forma condensed combined financial statements.

The unaudited pro forma condensed combined statements of operations of Glenayre and UM&L for year ended December 31, 2004 and the six months ended June 30, 2005 are presented as if the acquisition had taken place on January 1, 2004 and were carried forward through June 30, 2005.

The preliminary allocation of the purchase price used in the unaudited pro forma condensed combined statements of operations is based upon a preliminary valuation. The estimated fair values of certain assets and liabilities have been determined with the assistance of a third-party valuation firm and such firm’s preliminary work. These estimates and assumptions are subject to change upon the finalization of the valuation. The primary areas of the purchase price allocation which are not yet finalized relate to fixed assets, identifiable intangible assets and goodwill, and the fair value of profits interests as of the acquisition date.

The unaudited pro forma condensed combined statements of operations are not intended to represent or be indicative of the consolidated results of operations or financial position of Glenayre that would have been reported had the acquisition been completed as of the dates presented, and should not be taken as representative of the future consolidated results of operations of Glenayre. The unaudited pro forma financial statements do not reflect any operating efficiencies and cost savings that EDC may achieve with respect to the combined companies. The unaudited pro forma condensed combined financial statements should be read in conjunction with historical carve-out financials statements and accompanying notes of UM&L included in this filing and the historical consolidated financial statements and accompanying notes of Glenayre included in its annual reports on Form 10-K and quarterly reports on Form 10-Q.

1

GLENAYRE TECHNOLOGIES, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
For the year ended December 31, 2004
$000’s

				Universal
	Glenayre			Manufacturing &			Pro Forma
	Technologies, Inc.			Logistics			Adjustments			Notes			Consolidated
Revenues	$	50,575		$	403,103		$	(122,728	)		(a	)	$	330,950
Cost of Revenues		25,857			250,164			(20,643	)		(b	)		255,377
GROSS MARGIN		24,718			152,939			(102,085	)					75,572
OPERATING EXPENSES:
Selling, general and administrative expense		19,886			32,756			5,888			(c	)		58,530
Research and development expense		13,374			—			—						13,374
Advertising expense		556			—			—						556
Amortization of intangible assets		—			—			6,805			(d	)		6,805
Other operating expenses		172			—			—						172
Total Operating Expenses		33,987			32,756			12,692						79,436
OPERATING INCOME (LOSS)		(9,269	)		120,183			(114,777	)					(3,864	)
OTHER INCOME (EXPENSE):
Interest income		1,203			714			—						1,917
Interest expense		(228	)		(953	)		(4,966	)		(e	)		(6,147	)
Gains (losses) on disposal of assets, net		84			—			—						84
Other income		15			(2,800	)		2,880			(f	)		95
Total Other Income (expense)		1,074			(3,039	)		(2,086	)					(4,051	)
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES		(8,195	)		117,144			(116,863	)					(7,915	)
Provision (benefit) for income taxes		(55	)		50,832			(49,157	)		(g	)		1,620
INCOME (LOSS) FROM CONTINUING OPERATIONS	$	(8,140	)	$	66,312		$	(67,706	)				$	(9,535	)
INCOME (LOSS) PER WEIGHTED AVERAGE COMMON SHARE:
Income (loss) from continuing operations	$	(0.12	)	$	1.00		$	(1.02	)				$	(0.14	)
INCOME (LOSS) PER COMMON SHARE — ASSUMING DILUTION:
Income (loss) from continuing operations	$	(0.12	)	$	1.00		$	(1.02	)				$	(0.14	)
Depreciation expense included in Income (Loss) from continuing operations:	$	1,783		$	20,165		$	(3,354	)				$	18,594

See notes to unaudited pro forma condensed combined statement of operations

2

GLENAYRE TECHNOLOGIES, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
For the six months ended June 30, 2005
$000’s

				Universal
	Glenayre			Manufacturing &			Pro Forma
	Technologies, Inc.			Logistics			Adjustments			Notes			Consolidated
Revenues	$	60,676		$	163,450		$	(47,403	)		(a	)	$	176,723
Cost of Revenues		34,146			97,925			(2,548	)		(b	)		129,522
GROSS MARGIN		26,530			65,525			(44,855	)					47,200
OPERATING EXPENSES:
Selling, general and administrative expense		19,085			17,420			2,083			(c	)		38,588
Research and development expense		6,982			—			—						6,982
Advertising expense		—			—			—						—
Amortization of intangible assets		566			—			2,903			(d	)		3,469
Other operating expenses		15			—			—						15
Total Operating Expenses		26,648			17,420			4,986						49,054
OPERATING INCOME (LOSS)		(118	)		48,105			(49,841	)					(1,853	)
OTHER INCOME (EXPENSE):
Interest income		1,101			259			—						1,360
Interest expense		(512	)		(143	)		(1,758	)		(e	)		(2,413	)
Gains (losses) on disposal of assets, net		(1	)		(39	)		—						(40	)
Other income		(1,005	)		1,399			—						394
Total Other Income (expense)		(417	)		1,476			(1,758	)					(699	)
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES		(535	)		49,581			(51,599	)					(2,553	)
Provision (benefit) for income taxes		163			12,207			(12,207	)		(g	)		163
INCOME (LOSS) FROM CONTINUING OPERATIONS	$	(698	)	$	37,374		$	(39,392	)				$	(2,716	)
INCOME (LOSS) PER WEIGHTED AVERAGE COMMON SHARE:
Income (loss) from continuing operations	$	(0.01	)	$	0.56		$	(0.59	)				$	(0.04	)
INCOME (LOSS) PER COMMON SHARE — ASSUMING DILUTION:
Income (loss) from continuing operations	$	(0.01	)	$	0.56		$	(0.59	)				$	(0.04	)
Depreciation expense included in Income (Loss) from continuing operations:	$	2,022		$	5,546		$	—					$	7,568

See notes to unaudited pro forma condensed combined statement of operations

3

GLENAYRE TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO THE UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION

On May 31, 2005 the Company completed the acquisition of the North American and central European CD and DVD manufacturing and distribution operations from Universal Music Group (“Universal”) for a purchase price of approximately $122.2 million. The results of operations of the acquired operations have been included in the consolidated financial statements of the Company since the acquisition date. The acquisition was made through Entertainment Distribution Company, LLC (“EDC”), a newly formed division of Glenayre. The acquisition was a strategic opportunity for the Company to become an industry leader in providing pre-recorded products and distribution services to the entertainment industry. As part of the transaction, EDC entered into 10-year supply agreements with Universal under which it is the exclusive manufacturer and distributor for approximately 80% of Universal’s CD and DVD requirements for North America and central Europe.

The North American CD and DVD manufacturing and distribution operations were acquired under an Asset Purchase Agreement. The central European CD and DVD manufacturing and distribution operations were acquired under a Share Purchase Agreement. The acquired assets include Universal’s manufacturing and distribution operations in Hanover, Germany, its manufacturing operations in Grover, North Carolina, and its distribution operations in Fishers, Indiana, Reno, Nevada and Wilkes-Barre, Pennsylvania. EDC is leasing all of the facilities with the exception of the manufacturing facility in Grover, North Carolina, which it acquired from Universal.

The purchase price paid at closing was $82.6 million and is subject to post-closing adjustments. Of the purchase price paid at closing, $30.5 million was for the U.S. operations, $43.9 million (€35.2 million) was for the central European operations, and the balance constituted transaction expenses. Additionally, under the terms of the supply contracts entered into as part of the transaction, EDC is obligated to pay to Universal future scheduled amounts with a net present value totaling approximately $39.6 million. This long-term obligation is scheduled to be paid as follows: approximately $5.6 million is payable on December 15, 2005, approximately $8.0, $13.4, $13.8 and $1.4 million is payable on each of May 31, 2006 through 2009, respectively, and approximately $400,000 is payable on each of December 15, 2006 through 2014, respectively. Approximately 46% of the total obligation is payable in Euros.

EDC was capitalized with a $35 million equity capital contribution from Glenayre. Following the closing, members of EDC management purchased $772,000 of Glenayre’s equity interest. In addition, certain profits interests were issued at closing to EDC management, Universal and the Company’s financial advisor that will entitle these parties to up to thirty percent of EDC’s profits, after Glenayre has received a return of its equity capital contribution and certain internal rate of return hurdles and other conditions have been met.

To fund the balance of the purchase price and provide for working capital needs, EDC obtained a senior secured credit facility with Wachovia Bank, National Association for an aggregate principal amount of $56.5 million consisting of a term facility of $46.5 million repayable over five years, and a revolving credit facility of $10.0 million. Glenayre

4

GLENAYRE TECHNOLOGIES, INC. AND SUBSIDIARIES

collateralized $16.5 million of the credit facility by depositing cash in the same amount with the lender on the closing date.

The acquisition was accounted for as a purchase business combination in accordance with SFAS 141, Business Combinations. The purchase price is being allocated to the related tangible and identifiable intangible assets acquired and liabilities assumed based on their respective estimated fair values on the acquisition date. Identifiable intangible assets acquired include 10-year manufacturing and distribution services supply agreements between EDC and Universal Music Group. In accordance with SFAS 142, Goodwill and Other Intangible Assets, the fair values of the identifiable intangible assets are being amortized over their estimated useful lives in a manner that best reflects the economic benefits derived from such assets. The purchase price is being allocated to the assets and liabilities based upon their estimated fair value at the date of the acquisition as noted below. Included in the assets purchased was $38.4 million (€30.8 million) of cash contributed by the seller. $30.6 million (€24.5 million) of the cash contributed was to fund certain net liabilities assumed by EDC as described below, and the remaining $7.8 million (€6.2 million) was to meet certain German regulatory requirements. The preliminary allocation was based on real estate appraisals obtained for land and buildings, on net book values for furniture and equipment, and on preliminary calculations of the present value of the cash flows of the supply agreements. These estimated values are subject to change upon the finalization of the valuations. Valuations for the profits interests granted to the investment banker, Universal and certain EDC management, and for management members’ right to force sell (put) their ownership to EDC, LLC or the Company have not been finalized, and therefore allocations for these items have not yet been assigned.

	Estimated Fair
	Value at
(in millions)	Acquisition Date
Cash		38.4
Accounts Receivable		5.7
Other receivables		2.3
Inventories		10.1
Prepaid Assets		1.8
Property, Plant & Equipment		36.8
Long-term Receivable from Universal**		21.1
Deferred Financing Fees		1.0
Intangible Assets		68.6
Accounts Payable and Accrued Expenses		(27.9	)
Long term Liabilities		(35.7	)
Total	$	122.2

**Under the terms of the share purchase agreement relating to the acquisition of Universal’s central European operations, the seller will reimburse EDC for $51.7 million relating to the liabilities net of accounts receivable and other receivables assumed by EDC at the acquisition date. Amounts not paid or received in future periods for these assumed liabilities and receivables,

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GLENAYRE TECHNOLOGIES, INC. AND SUBSIDIARIES

with the exception of the pension obligation, will be adjusted through the seller receivable. To fund the payment of these obligations, Universal contributed $30.9 million (€24.5 million) of cash at the time of the acquisition and will contribute the remaining $21.1 million (€16.9 million) as future obligations become due. $24.1 million (€19.3 million) of the cash contributed at the acquisition will be held in escrow until May 31, 2010 to fund various long-term pension and employee loan obligations, many of which extend beyond 2010.

Assumptions underlying the pro forma adjustments necessary to present this pro forma information are described in notes herein. Certain amounts from UM&L USA and UM&L Germany’s combined historical carve-out financial statements have been reclassified to conform to the Glenayre presentation. Discontinued operations and cumulative effects of changes in accounting and the related earnings per share data have been excluded from the presentation of the unaudited pro forma combined statements of operations.

The following pro forma adjustments are included in the unaudited pro forma condensed combined statements of operations:

(a) To adjust revenues as follows:

• Reduce revenue by approximately $102 million for 2004 and $39 million for the six months ended June 30, 2005 to reflect the pricing terms in the supply agreements in effect immediately after the acquisition transaction between Entertainment Distribution Company, LLC (“EDC”), a majority owned subsidiary of Glenayre, and Universal Music Group; and

• Eliminate freight revenue of approximately $20 million for 2004 and $8 million for the six months ended June 30, 2005 to reflect net revenue based on the terms of the new supply agreements.

(b) To adjust cost of revenues as follows:

• Eliminate freight of approximately $20 million for 2004 and $8 million for the six months ended June 30, 2005 based on the terms of the new supply agreements; and

• Increase royalty expenses by approximately $5 million for the six months ended June 30, 2005 to reflect the royalty rates to be paid by EDC.

(c) To adjust general and administrative costs as follows:

• Add certain corporate overhead and compensation costs of $5 million for 2004 and $2.1 million for the six months ended June 30, 2005 for incremental costs related to new contracts to support the acquired business;

• Eliminate pension costs of approximately $1.6 million related to pension liabilities not acquired, and certain other general and administrative costs of $0.3 million incurred by businesses not acquired for 2004; and

• To eliminate certain non-recurring income of $2.9 million for 2004 generated by former business of UM&L that were not acquired.

(d) To reflect additional amortization expenses related to intangible assets acquired. The actual amortization amount is subject to change based on the final valuation results.

(e) To reflect additional interest charges related to the new term loan of $46.5 million, the amortization of related deferred financing costs, and accretion of deferred rebates to be paid to Universal Music Group, pursuant to the asset and share purchase agreements.

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GLENAYRE TECHNOLOGIES, INC. AND SUBSIDIARIES

(f) To eliminate loss of $2.9 million for 2004 related to sale of buildings to other affiliates of Universal Music.

(g) To adjust the combined tax provision to reflect the tax effect of the pro forma adjustments and the application of Glenayre’s tax attributes to the acquired business. The pro forma combined provision for income taxes does not reflect the amounts that would have resulted had Glenayre and UM&L filed consolidated income tax returns during the periods presented.

The pro forma basic and diluted earnings per share are based on the weighted average number of shares of Glenayre common stock outstanding for year ended December 31, 2004 and six months ended June 30, 2005.

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