-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, F5SNOclymuUmFPsJQSa8uUDAy49ZqPcjgiSfRU1zauCZYVnSO1h21RkU9niyRukG oLu7Reo4G+IOxte0rg0KmQ== 0000950168-95-000569.txt : 19950728 0000950168-95-000569.hdr.sgml : 19950728 ACCESSION NUMBER: 0000950168-95-000569 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950727 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: GLENAYRE TECHNOLOGIES INC CENTRAL INDEX KEY: 0000808918 STANDARD INDUSTRIAL CLASSIFICATION: WATER, SEWER, PIPELINE, COMM AND POWER LINE CONSTRUCTION [1623] IRS NUMBER: 980085742 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-15761 FILM NUMBER: 95556520 BUSINESS ADDRESS: STREET 1: 4201 CONGRESS ST STE 455 CITY: CHARLOTTE STATE: NC ZIP: 28209 BUSINESS PHONE: 7045530038 FORMER COMPANY: FORMER CONFORMED NAME: N W GROUP INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: NU WEST GROUP INC DATE OF NAME CHANGE: 19880221 FORMER COMPANY: FORMER CONFORMED NAME: NU WEST GROUP LTD DATE OF NAME CHANGE: 19871126 10-Q 1 GLENAYRE TECHNOLOGIES,INC. 82158 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1995 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ___________ Commission File Number 0-15761 GLENAYRE TECHNOLOGIES, INC. (Exact name of Registrant as specified in its charter) DELAWARE 98-0085742 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 4201 CONGRESS STREET, SUITE 455, CHARLOTTE, NORTH CAROLINA 28209 (Address of principal executive offices) Zip Code (704) 553-0038 (Registrant's telephone number, including area code) 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 (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No The number of shares outstanding of the Registrant's common stock, par value $.02 per share, at July 26, 1995 was 38,968,626 shares. GLENAYRE TECHNOLOGIES, INC. Index Part I - Financial Information: Item 1. Financial Statements Page Independent Accountants' Review Report............................ 3 Condensed Consolidated Balance Sheets as of June 30,1995 (Unaudited) and December 31, 1994................... 4 Condensed Consolidated Statements of Operations for the six months ended June 30, 1995 and 1994 (Unaudited)............. 5 Condensed Consolidated Statements of Operations for the three months ended June 30, 1995 and 1994 (unaudited)........... 6 Condensed Consolidated Statement of Stockholders' Equity for the six months ended June 30, 1995 (Unaudited).............. 7 Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 1995 and 1994 (Unaudited)............. 8 Notes to Condensed Consolidated Financial Statements (Unaudited)... 9 . Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations............ 12 Part II - Other Information: Item 4. Submission of Matters to a Vote of Security Holders.... 15 Item 6. Exhibits and Reports on Form 8-K.............................. 15 2 Independent Accountants' Review Report To the Board of Directors and Stockholders of Glenayre Technologies, Inc. Charlotte, North Carolina We have reviewed the accompanying condensed consolidated balance sheet of Glenayre Technologies, lnc. and subsidiaries as of June 30, 1995, and the related condensed consolidated statements of operations for the six-month period and three-month period ended June 30, 1995, the condensed consolidated statement of stockholders' equity for the six months ended June 30, 1995 and the condensed consolidated statement of cash flows for the six-month period ended June 30, 1995. These financial statements are the responsibility of the Company's management. The condensed consolidated balance sheet of Glenayre Technologies, Inc. and subsidiaries as of June 30, 1994, and the related condensed consolidated statement of operations for the six- month period and three-month period ended June 30, 1994, the condensed consolidated statement of stockholders' equity for the six months ended June 30, 1994 and the condensed consolidated statement of cash flows for the six-month period ended June 30, l994 were reviewed by other accountants whose report (dated July 26, 1994) stated that they were not aware of any material modifications that should be made to those statements for them to be in conformity with generally accepted accounting principles. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data, and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, which will be performed for the full year with the objective of expressing an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the accompanying condensed consolidated financial statements at June 30, 1995, and for the three-month and six- month periods then ended for them to be in conformity with generally accepted accounting principles. The consolidated balance sheet of Glenayre Technologies, Inc. as of December 31, 1994, and the related consolidated statements of operations, stockholders' equity, and cash flows for the year then ended (not presented herein) were previously audited, in accordance with generally accepted auditing standards, by other auditors who expressed an unqualified opinion dated February 3, 1995 on those financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 1994, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived. Ernst & Young LLP Charlotte North Carolina July 21, l995 3 GLENAYRE TECHNOLOGIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (dollars in thousands) June 30, 1995 December 31, 1994 ASSETS (Unaudited) Current Assets: Cash and cash equivalents $ 64,424 $ 52,043 Short-term investments 39,064 39,462 Accounts receivable, net 56,158 33,707 Trade notes receivable, current 5,408 8,816 Inventories (Note 3) 48,134 24,261 Deferred income taxes 4,579 6,518 Prepaid expenses and other current assets 5,048 5,526 Total current assets 222,815 170,333 Trade notes receivable 15,213 12,480 Property, plant and equipment, net 26,933 17,707 Goodwill (Note 4) 81,939 61,436 Deferred income taxes 27,631 22,510 Other assets 307 495 TOTAL ASSETS $374,838 $284,961 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable $ 16,219 $ 9,871 Accrued liabilities 36,533 25,035 Other current liabilities 336 218 Total current liabilities 53,088 35,124 Other liabilities 5,226 4,402 Stockholders' Equity (Note 6): Preferred stock, $.01 par value; 5,000,000 shares authorized, no shares issued and outstanding -- -- Common stock, $.02 par value; authorized 50,000,000 shares; outstanding: June 30, 1995 - 38,952,147 shares; December 31, 1994 - 37,327,693 shares 779 747 Contributed capital 261,743 216,235 Retained earnings from February 1, 1988 54,002 28,453 Total stockholders' equity 316,524 245,435 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $374,838 $284,961 Note: The balance sheet at December 31, 1994 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. See notes to condensed consolidated financial statements. 4 GLENAYRE TECHNOLOGIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (dollars in thousands, except per share amounts) (unaudited) Six Months Ended June 30, 1995 1994 NET SALES (Notes 1 and 2) $134,841 $79,899 COSTS AND EXPENSES: Cost of sales 58,181 34,447 Selling, general and administrative expense 24,225 18,461 Research and development expense 10,644 7,168 Depreciation and amortization expense 3,521 2,837 Total costs and expenses 96,571 62,913 INCOME FROM OPERATIONS 38,270 16,986 OTHER INCOME (EXPENSES): Interest income 4,067 1,900 Interest expense (84) (183) Foreign exchange gain (loss) 97 (317) Other, net (53) (78) Total other income (expenses), net 4,027 1,322 INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 42,297 18,308 PROVISION FOR INCOME TAXES (Note 5) 10,292 3,242 INCOME FROM CONTINUING OPERATIONS 32,005 15,066 DISCONTINUED OPERATIONS (Note 2) -- 388 NET INCOME $32,005 $15,454 PRIMARY INCOME PER COMMON SHARE (Note 6): Continuing operations $ .78 $ .39 Discontinued operations -- .01 NET INCOME PER COMMON SHARE - PRIMARY $ .78 $ .40 FULLY DILUTED INCOME PER COMMON SHARE (Note 6): Continuing operations $ .78 $ .39 Discontinued operations -- .01 NET INCOME PER COMMON SHARE - FULLY DILUTED $ .78 $ .40 See notes to condensed consolidated financial statements. 5 GLENAYRE TECHNOLOGIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (dollars in thousands, except per share amounts) (unaudited) Three Months Ended June 30, 1995 1994 NET SALES (Notes 1 and 2) $74,979 $41,453 COSTS AND EXPENSES: Cost of sales 32,322 18,013 Selling, general and administrative expense 12,274 9,463 Research and development expense 5,945 3,903 Depreciation and amortization expense 1,929 1,432 Total costs and expenses 52,469 32,811 INCOME FROM OPERATIONS 22,509 8,642 OTHER INCOME (EXPENSES): Interest income 2,086 1,076 Interest expense (39) (71) Foreign exchange gain (loss) 65 (232) Other, net 6 (21) Total other income (expenses), net 2,118 752 INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 24,627 9,394 PROVISION FOR INCOME TAXES (Note 5) 6,404 1,669 INCOME FROM CONTINUING OPERATIONS 18,223 7,725 DISCONTINUED OPERATIONS (Note 2) -- 225 NET INCOME $18,223 $7,950 PRIMARY INCOME PER COMMON SHARE (Note 6): Continuing operations $ .44 $ .20 Discontinued operations -- -- NET INCOME PER COMMON SHARE - PRIMARY $ .44 $ .20 FULLY DILUTED INCOME PER COMMON SHARE (Note 6): Continuing operations $ .44 $ .20 Discontinued operations -- -- NET INCOME PER COMMON SHARE - FULLY DILUTED $ .44 $ .20 See notes to condensed consolidated financial statements. 6 GLENAYRE TECHNOLOGIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (dollars and shares in thousands) (unaudited)
Total Common Stock Contributed Retained Stockholders' Shares Amount Capital Earnings Equity Balances, December 31, 1994 37,328 $747 $216,235 $28,453 $245,435 Net income 32,005 32,005 Stock options exercised 834 16 5,182 5,198 Shares issued and options assumed in connection with business acquisition (Note 1) 790 16 27,249 27,265 Utilization of net operating loss carryforwards (Note 5) 6,456 (6,456) Tax benefit of stock options exercised 6,621 6,621 Balances, June 30, 1995 38,952 $779 $261,743 $54,002 $316,524
See notes to condensed consolidated financial statements. 7 GLENAYRE TECHNOLOGIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (dollars in thousands) (unaudited) Six Months Ended June 30, 1995 1994 NET CASH PROVIDED BY OPERATING ACTIVITIES $ 16,599 $ 11,868 CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of plant and equipment (10,168) (3,131) Proceeds from sale of equipment 15 8 Maturities of short-term investments 49,260 -- Purchases of short-term investments (48,862) (24,583) Cash acquired net of acquisition costs (Note 1) 400 -- NET CASH USED IN INVESTING ACTIVITIES (9,355) (27,706) CASH FLOWS FROM FINANCING ACTIVITIES: Changes in other liabilities (61) (1,254) Issuance of common stock 5,198 1,995 NET CASH PROVIDED BY FINANCING ACTIVITIES 5,137 741 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 12,381 (15,097) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 52,043 66,099 CASH AND CASH EQUIVALENTS AT END OF PERIOD $64,424 $51,002 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for: Interest $ 80 $ 90 Income taxes 1,027 1,159 SUPPLEMENTAL INFORMATION OF NONCASH INVESTING AND FINANCING ACTIVITIES: On April 25, 1995, the Company acquired Western Multiplex Corporation ("MUX"). In connection with this acquisition the Company paid $1,303,000 in cash and issued stock valued at $27,260,000 for assets with a fair value of $9,074,000 and assumed liabilities of $3,186,000. See notes to condensed consolidated financial statements. 8 GLENAYRE TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (tabular amounts in thousands of dollars except per share data) (unaudited) The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X . Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three-and six-month periods ended June 30, 1995 are not necessarily indicative of the results that may be expected for the year ended December 31, 1995. The Company's financial results in any quarter are highly dependent upon various factors, including the timing and size of customer orders and the shipment of products for large orders. Large orders from customers can account for a significant portion of products shipped in any quarter. Accordingly, the shipment of products in fulfillment of such large orders can dramatically affect the results of operations of any single quarter. For further information, refer to the consolidated financial statements and footnotes thereto included in the Glenayre Technologies, Inc. annual report on Form 10-K for the year ended December 31, 1994. 1. BUSINESS ACQUISITION On April 25, 1995 the Company completed the acquisition of Western Multiplex Corporation ("MUX"), located in Belmont, California. MUX designs, manufactures and markets products for use in point-to- point microwave communication systems. The purchase price of approximately $28.6 million consisted of 1,124,955 shares of the Company's common stock (including 334,805 shares issuable upon exercise of stock options) valued at approximately $27.3 million and approximately $1.3 million in acquisition costs. The consolidated financial statements for the six-months ended June 30, 1995 include the operating results of MUX for the period April 25, 1995 to June 30, 1995. The acquisition was accounted for as a purchase and the purchase price was assigned to the net assets acquired based on the fair values of such assets and liabilities at the date of the acquisition, as follows: Current assets $ 7,886 Property, plant and equipment 1,188 Goodwill 21,978 Deferred tax asset 704 Liabilities assumed (3,186) $ 28,570 The following table summarizes, on an unaudited pro forma basis, the estimated combined results of operations for the six-month periods ended June 30, 1995 and 1994 as if the acquisition of MUX had occurred at January 1, 1994, after giving effect to an adjustment to amortization of goodwill related to the acquisition. These pro forma results have been prepared for comparative purposes only and do not purport to be indicative of what would have occurred had the acquisition been made on that date. Six Months Ended June 30, 1995 1994 Net Sales $142,948 $ 88,996 Income from continuing operations 32,518 15,590 Income from continuing operations per common share $ .78 $ .40 9 2. DISCONTINUED OPERATIONS Real Estate Operations Following the November 1992 acquisition (the "Acquisition") of the telecommunications equipment manufacturing and related software business of Glentel Inc. of Vancouver, British Columbia, Canada (the "GEMS Business") the Company restructured its real estate operations. On July 6, 1993, the Company adopted a formal plan which called for the disposal of its remaining real estate assets (principally four parcels of undeveloped land in the western United States). The sales of the remaining parcels were completed as of June 30, 1994, with an aggregate recognized gain in the six months ended June 30, 1994 of approximately $388,000, net of income taxes of $248,000. Net cash proceeds from the sales of real estate properties amounted to approximately $4.9 million for the six months ended June 30, 1994. Oil and Gas Pipeline Construction Operations In October 1993, the Company sold its interest in an oil and gas pipeline construction business receiving approximately $3.3 million in cash and a $3.6 million promissory note (included in other current assets at December 31, 1994.) The $3.6 million note was paid in full in March 1995. 3. INVENTORIES June 30, December 31, Inventories consist of: 1995 1994 Raw materials $24,755 $ 10,999 Work-in-process: Uncompleted contracts 1,015 762 Other 11,301 6,425 Finished goods 11,063 6,075 $48,134 $24,261 4. GOODWILL Goodwill is shown net of accumulated amortization of $7.2 million and $5.8 million at June 30, 1995 and December 31, 1994, respectively. 5. INCOME TAXES The Company's consolidated income tax provision was different from the amount computed using the U.S. statutory income tax rate for the following reasons:
Three Months Ended June 30, Six Months Ended June 30, 1995 1994 1995 1994 Income tax provision at U.S. statutory rate $ 8,620 $ 3,287 $14,804 $6,407 Reduction in valuation allowance (3,261) (2,758) (6,456) (5,433) Foreign taxes at rates other than U.S. statutory rate -- 552 132 1,097 State taxes (net of federal benefit) 802 353 1,376 701 Non-deductible goodwill amortization 243 235 436 470 Income tax provision $6,404 $1,669 $10,292 $3,242
10 Subsequent to the quasi-reorganization completed on February 1, 1988, as described in Note 6, the benefits derived from the utilization of tax net operating loss carryforwards are reported in the statement of operations in the year such tax benefits are realized and then reclassified from retained earnings to contributed capital. The Company adopted the accounting method for utilization of these tax net operating loss carryforwards outlined above on February 1, 1988. On September 28, 1989, the Securities and Exchange Commission ("SEC") released Staff Accounting Bulletin No. 86 ("SAB 86") which set forth the SEC staff's position with respect to this accounting treatment. According to the SEC staff's interpretation of Statement of Financial Accounting Standards No. 96, "Accounting for Income Taxes," contained in SAB 86, realized tax benefits should be reported as a direct addition to contributed capital. Subsequently, the Company consulted with the SEC staff and determined that the SEC staff would not object to the accounting method outlined above for companies which had adopted such accounting methods prior to the issuance of SAB 86. If the original guidance in SAB 86 had been applied, the Company's net income for the six months ended June 30, 1995 and 1994 would have been reduced by the amount of the benefit from utilization of tax net operating loss carryforwards. Such reduction in net income would have been $3.3 million ($.08 per share) and $2.8 million ($.07 per share) for the three months ended June 30, 1995 and 1994, respectively. Additionally, the reduction in net income would have been $6.5 million ($.16 per share) and $5.4 million ($.14 per share) for the six months ended June 30, 1995 and 1994, respectively. The Company believes that it is more likely than not that the net deferred tax asset recorded at June 30, 1995 will be fully realized. 6. STOCKHOLDERS' EQUITY (a) Quasi-Reorganization On February 1, 1988, the Company completed a quasi-reorganization. After determining that the Company's balance sheet reflected approximate fair value on that date and that revaluation was not necessary, the accumulated deficit and the cumulative translation adjustment were adjusted to zero by reclassifying them to contributed capital. A new retained earnings account was established as of February 1, 1988. (b) Stock Split On May 24, 1995, the Board of Directors of the Company adopted a resolution authorizing a three for-two split of the Company's common stock, effected in the form of a 50% stock dividend distributed on June 19, 1995 to stockholders of record on June 5, 1995. All share and per share amounts have been restated to reflect this stock dividend. (c) Income per Common Share Primary income per common share was computed by dividing net income by the weighted average number of shares of common stock outstanding plus the shares that would be outstanding assuming exercise of dilutive stock options which are considered to be common stock equivalents. The number of common shares that would be issued from the exercise of stock options has been reduced by the number of common shares that could be purchased from the proceeds at the average market price of the Company's stock during the periods such options were outstanding. The number of shares used to compute primary per share data for the six-month periods ended June 30, 1995 and 1994 was 40,869,550 and 38,880,360, respectively. The number of shares used to compute primary per share data for the three-month periods ended June 30, 1995 and 1994 was 41,415,715 and 38,932,700, respectively. For purposes of the fully diluted income per share computations, the number of shares that could be issued from the exercise of stock options outstanding at the end of the period has been reduced by the number of shares which could have been purchased from the proceeds at the higher of the market price of the Company's stock on June 30, 1995 and 1994 or the average market prices during the periods such options were outstanding. For those options exercised during the period, the computation for the period prior to exercise is based on the market price when the option was exercised. The number of shares used to compute fully diluted per share data for the six-month periods ended June 30, 1995 and 1994 was 41,202,842 and 38,879,606, respectively. The number of shares used to compute fully diluted per share data for the three-month periods ended June 30, 1995 and 1994 was 41,610,547 and 38,933,426, respectively. 11 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Background On November 10, 1992, Glenayre Technologies, Inc. acquired the GEMS Business. The GEMS Business designs, manufactures, markets and services switches, transmitters, controls and related software used in personal communications systems (including paging, voice messaging, and message management and mobile data systems), transit communications systems and radio telephone systems. On July 6, 1993, the Company adopted formal plans to dispose of its real estate operation. This operation is accounted for as a discontinued operation and accordingly, its operating results are reported in this manner and excluded from continuing operations in the accompanying consolidated statements of operations for the six and three months ended June 30, 1994. In October 1993, the Company sold its interest in an oil and gas pipeline construction business. (See Note 2 to the Company Condensed Consolidated Financial Statements). On April 25, 1995, the Company completed the acquisition of Western Multiplex Corporation ("MUX"), located in Belmont, California. MUX designs, manufactures and markets products for use in point-to-point microwave communication systems. The purchase price of approximately $28.6 million consisted of 1,124,955 shares of the Company's common stock (including 334,805 shares issuable upon exercise of stock options) valued at approximately $27.3 million and approximately $1.3 million in acquisition costs. The acquisition was accounted for as a purchase. The Company does not expect the MUX operations will require material financing commitments by the Company for the foreseeable future. See Note 1 to the Company Condensed Consolidated Financial Statements. Set forth below are: (i) a comparison of the results of operations of the Company for the six months ended June 30, 1995 to the results of operations for the six months ended June 30, 1994 (ii) a comparison of the results of the operations of the Company for the three months ended June 30, 1995 to the results of operations for the three months ended June 30, 1994; (iii) a discussion of the Company's discontinued operations; and (iv) a discussion of the Company's financial condition and liquidity. Six Months Ended June 30, 1995 Compared with Six Months Ended June 30, 1994 NET SALES Net sales for the six months ended June 30, 1995 increased to approximately $134.8 million from net sales for the six months ended June 30, 1994 of approximately $79.9 million, an increase of approximately $54.9 million, or 68.8%. Net sales of paging systems and voice messaging systems for the six months ended June 30, 1995 increased to approximately $101.2 million and $18.0 million, respectively, from approximately $58.8 million and $11.0 million, respectively, for the prior period. The increase in net sales was primarily a result of the sales of new systems and the continued expansion and upgrading of existing systems within the installed customer base. One customer accounted for approximately 18% and 15% of sales for the six months ended June 30, 1995 and 1994, respectively. GROSS PROFIT Gross profit increased to approximately $76.7 million, or 56.9% of net sales, for the six months ended June 30, 1995, from approximately $45.5 million, or 56.9% of net sales, for the six months ended June 30, 1994. SELLING, GENERAL AND ADMINISTRATIVE EXPENSE Selling, general and administrative expense increased to approximately $24.2 million, or 18.0% of net sales, for the six months ended June 30, 1995, from approximately $18.5 million, or 23.1% of net sales, for the six months ended June 30, 1994. The $5.7 million increase primarily resulted from: (i) increased selling and marketing expenses of approximately $2.4 million for additional sales personnel, (ii) increase in commissions of $1.6 million relating to increased orders, and (iii) $1.2 million of promotional material, trade shows and increased travel. 12 RESEARCH AND DEVELOPMENT EXPENSE Research and development costs increased to approximately $10.6 million, or 7.9% of net sales, for the six months ended June 30, 1995, from approximately $7.2 million, or 9.0% of net sales, for the six months ended June 30, 1994, an increase of $3.5 million, or 47.2%. The increase of $3.5 million was primarily a result of increased research and development manpower and research material purchased. The research and development costs were primarily for new product development and enhancements to existing products. Both hardware and software development costs are included in research and development costs. All research and development costs are expensed as incurred. INTEREST INCOME, NET The Company realized net interest income of approximately $4.0 million for the six months ended June 30, 1995 compared to net interest income realized of approximately $1.7 million for the six months ended June 30, 1994. The increase is primarily attributable to (i) higher average balances in cash and cash equivalents and short-term investments and (ii) higher average interest rates earned. INCOME TAXES The difference between the combined U.S. federal and state statutory tax rate of approximately 40% and the effective tax rate of 24.3% for the six months ended June 30, 1995 and 17.7% for the six months ended June 30, 1994 is primarily the result of the utilization of the Company's net operating losses and the application of Statement of Financial Accounting Standards No. 109 "Accounting for Income Taxes," ("SFAS 109"), in computing the Company's tax provision. The difference between the effective tax rate of 24.3% in 1995 and 17.7% in 1994 is primarily the result of a variance between the 1995 and 1994 adjustments for realization of tax benefits for financial statement purposes in accordance with SFAS 109 primarily due to revisions during each period to the estimated future taxable income during the Company's loss carryforward period. See Note 5 to the Company Condensed Consolidated Financial Statements. Three Months Ended June 30, 1995 Compared with Three Months Ended June 30, 1994 NET SALES Net sales for the three months ended June 30, 1995, increased to approximately $75.0 million from net sales for the three months ended June 30, 1994 of approximately $41.5 million, an increase of approximately $33.5 million, or 80.9%. Net sales of paging systems and voice messaging systems for the three months ended June 30, 1995 increased to approximately $55.7 million and $9.4 million, respectively, from approximately $30.7 million and $4.7 million, respectively, for the prior period. The increase in net sales was primarily a result of the sales of new systems and the continued expansion and upgrading of existing systems within the installed customer base. One customer accounted for approximately 11% and 17% of sales for the three months ended June 30, 1995 and 1994, respectively. GROSS PROFIT Gross profit increased to approximately $42.7 million, or 56.9% of net sales, for the three months ended June 30, 1995, from approximately $23.4 million, or 56.5% of net sales, for the three months ended June 30, 1994. SELLING, GENERAL AND ADMINISTRATIVE EXPENSE Selling, general and administrative expense increased to approximately $12.3 million, or 16.4% of net sales, for the three months ended June 30, 1995 from approximately $9.5 million, or 22.8% of net sales, for the three months ended June 30, 1994. The $2.8 million increase primarily resulted from: (i) increased selling and marketing expenses of approximately $1.4 million for additional sales personnel; (ii) increase in commissions of $675 thousand related to increased orders and (iii) additional trade show expenses of $400 thousand. RESEARCH AND DEVELOPMENT EXPENSE Research and development costs increased to approximately $5.9 million, or 7.9% of net sales, for the three months ended June 30, 1995, from approximately $3.9 million, or 9.4% of net sales, for the three months ended June 30, 1994, an increase of $2.0 million, or 51.3%. The increase of $2.0 million was primarily a result of increased research and development manpower and research material purchased. 13 INTEREST INCOME, NET The Company realized net interest income of approximately $2.0 million for the three months ended June 30, 1995 compared to net interest income realized of approximately $1.0 million for the three months ended June 30, 1994. The increase is primarily attributable to (i) higher average balances in cash and cash equivalents and short-term investments and (ii) higher average interest rates earned. INCOME TAXES The difference between the combined U.S. federal and state statutory tax rate of approximately 40% and the effective tax rate of 26.0% for the three months ended June 30, 1995 and 17.8% for the three months ended June 30, 1994 is primarily the result of the utilization of the Company's net operating losses and the application of SFAS 109 in computing the Company's tax provision. The difference between the effective tax rate of 26.0% in 1995 and 17.8% in 1994 is primarily the result of a variance between the 1995 and 1994 adjustments for realization of tax benefits for financial statement purposes in accordance with SFAS 109 primarily due to revisions during each period to the estimated future taxable income during the Company's loss carryforward period. See Note 5 to the Company Condensed Consolidated Financial Statements. Discontinued Operations Real Estate Operations Following the Acquisition of the GEMS Business the Company restructured its real estate operations. On July 6, 1993, the Company adopted a formal plan which called for the disposal of its remaining real estate assets (principally four parcels of undeveloped land in the western United States). The sales of remaining parcels were completed as of June 30, 1994, with an aggregate recognized gain in the six months ended June 30, 1994 of approximately $388,000, net of income taxes of $248,000. Net cash proceeds from the sales of real estate properties amounted to approximately $4.9 million for the six months ended June 30, 1994. Oil and Gas Pipeline Construction Operations In October 1993, the Company sold its interest in an oil and gas pipeline construction business receiving approximately $3.3 million in cash and a $3.6 million promissory note (included in other current assets at December 31, 1994.) The $3.6 million note was paid in full in March 1995. Financial Condition and Liquidity The Company's working capital at June 30, 1995 was approximately $169.8 million, including cash and cash equivalents and short-term investments of approximately $103.5 million. Accounts receivable, inventories, trade notes receivable, accounts payable, and accrued expenses at June 30, 1995 increased from December 31, 1994 primarily as a result of increased levels of operating activities during the first half of 1995. During the six months ended June 30, 1995 the Company received cash of approximately $5.2 million from the exercise of stock options and $3.6 million from the payment in full of the note discussed above. During the six months ended June 30, 1995, the Company spent approximately $10.2 million for capital expenditures. These expenditures were necessary in order to provide the equipment and capacity to meet the growth of the business. The Company's cash and cash equivalents are placed in short-term investments consisting of high-grade commercial paper, bank certificates of deposit, U.S. Treasury bills and notes, and repurchase agreements backed by U.S. Government securities with original maturities of three months or less. The Company's short-term investments are comprised of identical types of investments with the exception that their original maturities are greater than three months, but do not exceed one year. The Company expects to use its cash, cash equivalents, and short-term investments for working capital and other general corporate purposes, including the expansion and development of its existing products and markets and the possible expansion into complementary businesses. The Company believes that funds generated from continuing operations, together with its current cash reserves, will be sufficient to support its short-term and long-term liquidity requirements for current operations (including capital expenditures). Company management believes that, if needed, it can establish appropriate borrowing arrangements with lending institutions. 14 PART II - OTHER INFORMATION Items 1 through 3 are inapplicable and have been omitted. Item 4. Submission of matters to a vote of security holders. At the Company's Annual Meeting of Stockholders held on May 24, 1995, the following matters were submitted to a vote of the stockholders of the Company. 1. The election of three directors each to serve a three-year term expiring in 1998: Nominee Shares Shares Voted For Withheld John J. Hurley 31,103,609 25,084 Thomas C. Israel 31,103,682 25,011 Alma McConnell 31,103,694 24,999 2. Ratification of the selection of Ernst & Young LLP as auditors for the year ending December 31, 1995 was approved by a vote of 31,114,040 shares for and 2,048 shares against, with 12,605 shares abstaining. Item 5 is inapplicable and has been omitted. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Exhibit 10 Employment Agreement, dated June 21, 1995 between Glenayre Technologies, Inc. and Ramon D. Ardizzone is filed herewith. Exhibit 11 Computation of earnings per common share for the six-month and three- month periods ended June 30, 1995 and 1994. Exhibit 15 Letter regarding unaudited interim financial information. Exhibit 27 Financial Data Schedule. (Filed in electronic format only. Pursuant to Rule 402 of Regulation S-T, this schedule shall not be deemed filed for purposes of Section 11 of the Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934.) (b) Reports on Form 8-K A report on Form 8-K dated April 7, 1995 was filed on April 13, 1995. Under Item 4 the Company reported that its Board of Directors appointed Ernst & Young LLP as independent accountants to replace Deloitte & Touche LLP. A report on Form 8-K dated April 25, 1995 was filed on May 9, 1995 as amended by Form 8-K/A, Amendment No. 1 filed on July 7, 1995. Under Item 2, the Company reported that it had acquired 100% of the outstanding common stock of Western Multiplex Corporation ("MUX"). MUX'S audited financial statements for the year ended June 30, 1994 and unaudited financial statements for the nine months ended March 31, 1995 as well as proforma financial information for the Company with respect to the MUX acquisition, including a proforma balance sheet as of March 31, 1995 and proforma income statements for the year ended December 31, 1994 and the three months ended March 31, 1995 were included. 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. Glenayre Technologies, Inc. (Registrant) /s/ Stanley Ciepcielinski Stanley Ciepcielinski Executive Vice President and Chief Financial Officer /s/ Billy C. Layton Billy C. Layton Controller and Chief Accounting Officer Date: July 27, 1995 16 EX-10 2 EXHIBIT 10 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into as of the 21st day of June, 1995 by and between GLENAYRE TECHNOLOGIES, INC., a Delaware corporation (the "Corpo- ration"), and RAMON D. ARDIZZONE, a resident of Charlotte, North Carolina (the "Executive"). Statement of Purpose The Executive is currently employed by the Corporation under an Employment Agreement dated as of November 10, 1992, as amended (the "Current Employment Agreement"). The Corporation desires to enter into this Agreement, effective as of November 11, 1995 (the "Effective Date"), in order to secure the Executive's continued participation in the manner hereinafter specified in the business of the Corporation and to make provision for payment of reason- able compensation to the Executive for such services. The Executive is willing to be employed by the Corporation to perform the duties incident to such employment upon the terms and condi- tions hereinafter set forth. NOW, THEREFORE, in consideration of the foregoing Statement of Purpose and the terms and provisions of this Agreement, the parties hereto agree as follows: 1. Employment and Duties. (a) Employment. The Corporation hereby employs the Execu- tive, and the Executive hereby agrees to serve, as the President and Chief Executive Officer of the Corporation. The Executive shall be nominated for re-election to the Board of Directors of the Corporation (the "Board") at the Corporation's 1996 annual shareholders' meeting. (b) Duties. In such capacity, the Executive agrees to per- form such duties and exercise such powers commensurate with his office as may from time to time be reasonably requested of him by the Board or vested in him by the bylaws of the Corporation, subject to the control and direction of the Board. During the Term, the Executive shall: (1) devote substantially all of his business time, attention and abilities to the businesses of the Corporation (including its subsidiaries or affiliates, when so required), and in any case as much thereof as the Board may reasonably deem to be necessary for such businesses; (2) faithfully serve the Corporation and use his best efforts to promote and develop the interests of the Corporation; and (3) not acquire, directly or indirectly, any interest in any firm, partnership, association or corporation, the business operations of which may in any manner, directly or indirectly, compete with the trade or businesses of the Corporation or any of its subsidiaries or affiliates, provided that the Executive may beneficially own, directly or indirectly, or exer- cise control or direction over, the voting securities of a publicly traded company, on the condition that the percentage of such securities owned, controlled or directed by the Executive shall not exceed 5% of the voting securities of the publicly traded company. 2. Term of Employment. (a) Term. The term of the Executive's employment hereunder (the "Term") shall commence on the Effective Date and shall con- tinue until December 31, 1996. (b) Earlier Termination. Notwithstanding the provisions of Paragraph 2(a) above, the Executive's employment hereunder may be terminated prior to the expiration of the Term as follows: (1) The Corporation may terminate the Executive's employment hereunder for "Cause" (as defined in Para- graph 2(c) below), provided that the Corporation com- plies with the provisions of Paragraph 2(f)(1) and (6) below; (2) The Corporation may terminate the Executive's employment hereunder upon the Executive's "Total and Permanent Disability" (as defined in Paragraph 2(d) below), provided that the Corporation complies with the provisions of Paragraph 2(f)(1), (2), (4) and (6) below; (3) The Executive may terminate his employment hereunder for "Good Reason" (as defined in Paragraph 2(e) below); (4) The Executive's employment hereunder shall terminate automatically upon his death. (c) Definition of "Cause". As used herein, "Cause" shall mean the occurrence of any of the following: (1) the Executive's resignation from the office of President and Chief Executive Officer of the Corpo- ration without its prior consent; (2) acts of dishonesty or fraud on the part of the Executive which are intended to result in his substantial personal enrichment at the expense of the Corporation or its affiliates; 2 (3) the conviction after the exhaustion of all appeals by the Executive of a felony involving moral turpitude or the entry of a plea of nolo contendre for such a felony; or (4) material violation of the Executive's respon- sibilities as set forth herein which are willful and deliberate; provided, however, that prior to the determination by the Board that "Cause" under this Paragraph 2(c)(4) has occurred, the Board shall (A) provide to the Executive in writing, in reasonable detail, the reasons for the Board's determination that such "Cause" exists, (B) afford the Executive a reason- able opportunity to remedy any such breach, (C) provide the Executive an opportunity to be heard at the Board meeting where the final decision to terminate the Executive's employment hereunder for such "Cause" is to be considered, and (D) make any decision that such "Cause" exists in good faith. (d) Definition of "Total and Permanent Disability". The Executive shall be considered to have a "Total and Permanent Disability" if, for a continuous period of six months, he is unable to perform his duties under this Agreement for reasons of health, and, in the opinion of a physician appointed by both parties, such disability will continue indefinitely or for a prolonged period of time. (e) Definition of "Good Reason". As used herein, "Good Reason" shall mean the occurrence of any of the following: (1) except where such failure or change is spe- cifically approved by the Executive (whether as a member of the Board or individually), failure to elect or reelect or to appoint or reappoint the Executive to the office of President and Chief Executive Officer of the Corporation, or to a senior executive office of the Corporation or of any of its subsidiaries or affiliates at least equal in dignity, responsibility, importance and scope thereto, or any other material change by the Corporation of the Executive's functions, duties or responsibilities which would cause the ranking or level, dignity, responsibility, importance or scope of the Executive's position with the Corporation to become of less dignity, responsibility, importance or scope from the position and attributes thereof described in Paragraph 1 above; provided, however, that the Execu- tive must first (i) provide the Board with written notice specifying the particular failure of the Corpo- ration under this Paragraph 2(e)(1), and (ii) allow the Board 60 days from receipt of notice to cure such failure; 3 (2) the Corporation's failure to elect or reelect or to appoint or reappoint the Executive to a director- ship on the Board; (3) the liquidation, dissolution, consolidation or merger of the Corporation, or the transfer of all or substantially all of its assets, other than a transac- tion in which a successor corporation with a net worth at least equal to that of the Corporation assumes this Agreement and all obligations and undertakings of the Corporation hereunder; (4) any failure by the Corporation to pay to the Executive the Base Salary or other compensation and benefits provided for herein; (5) any other material breach of this Agreement by the Corporation; or (6) any "Change in Control", which shall mean any of the following: (A) the acquisition, after the date of this Agreement, of 25% or more of the Corp- oration's common stock by any person, entity or united group, which acquisition is not supported by the Executive and the Chairman of the Corporation; (B) a material change in the composi- tion or character of the Board which shall include, but not be limited to, (i) the re- placement of a majority of incumbent direc- tors by directors not supported by the Execu- tive and the Chairman of the Corporation or (ii) at any meeting of the Corporation's shareholders, the election of a majority of directors standing for election who have not been supported by the Executive and the Chai- rman of the Corporation. (7) Any change in the principal office of the Corporation to a location which is more than 30 miles from its current principal office at 4201 Congress Street, Suite 455, Charlotte, North Carolina. (f) Payments to the Executive Upon Termination of Employ- ment. In the event that the Executive's employment with the Corporation is terminated, whether upon the expiration of the Term or upon the earlier termination of the Term as provided in Paragraph 2(b) above, then the Corporation shall pay to the Executive the following amounts on the date of such termination and shall provide to the Executive the following benefits, as applicable: 4 (1) In the event that the Executive's employment hereunder is terminated for any reason whatsoever, the Corporation shall pay to the Executive an amount equal to the sum of (i) his accrued but unpaid Base Salary, plus (ii) his accrued but unpaid vacation pay, plus (iii) any other compensation payments or benefits which have accrued and are payable in connection with such termination. (2) In the event that the Executive's employment hereunder is terminated (i) by the Corporation because of the Executive's "Total and Permanent Disability" pursuant to Paragraph 2(b)(2) above, (ii) because of the Executive's death pursuant to Paragraph 2(b)(4) above or (iii) by the Executive for "Good Reason" pursuant to Paragraph 2(b)(3) above, then and in any such event, the Corporation shall also pay to the Executive a pro rata share of his bonus under the Management by Objectives Bonus Plan described in Para- graph 3(b) below for the fiscal year of the Corporation in which such termination occurs, calculated, for purposes of determining whether the targets contained therein have been met, under the assumption that the results of operations and financial condition of the Corporation (or any applicable subsidiary) as of the termination date shall continue on the same basis through the end of such fiscal year. (3) In the event that the Executive's employment hereunder is terminated (i) without "Cause" or (ii) by the Executive for "Good Reason" pursuant to Paragraph 2(b)(3) above, then and in any such event, the Corpora- tion shall also pay to the Executive an amount equal to two times the annual rate of Base Salary being paid to the Executive at the time of such termination. (4) In the event that the Executive's employment hereunder is terminated on account of the Executive's Total and Permanent Disability, then the Corporation shall pay to the Executive (or to Executive's benefi- ciary) the sum of $200,000. (5) [Intentionally Omitted] (6) In the event the Executive's employment here- under is terminated for any reason whatsoever, the Executive (and his dependents) shall be entitled to participate in the Corporation's Retiree Medical Plan, as amended from time to time, notwithstanding any otherwise applicable eligibility requirements of, or limitations on the term of participation in, said Retiree Medical Plan, until the earlier of: 5 (i) the date on which the Executive becomes covered under any other group health plan as an employee; or (ii) with respect to the Executive's participation in the Retiree Medical Plan, the Executive's death or with respect to a dependent's participation in the Retiree Medical Plan, the dependent's death. 3. Compensation. Subject to the terms of this Agreement and until the termination of the Term as provided in Paragraph 2 above, the Corporation shall pay compensation and provide bene- fits to the Executive as follows: (a) Base Salary. The Corporation shall pay to the Execu- tive an initial base salary of $235,000 per annum (which, with any increases during the Term, is referred to herein as the "Base Salary"), payable in equal monthly installments on the last busi- ness day of each month, or in such other installments and at such other times as the parties hereto may mutually agree upon. The Base Salary may be increased (but not decreased) in the manner determined by the Board or its Compensation Committee in its absolute discretion. (b) Management by Objectives Bonus Plan. The Executive shall participate in the Glenayre Management by Objective Plan as in effect from time to time. (c) [Intentionally Omitted] (d) Life Insurance. The Corporation shall assume and pay during the Term the premiums for the current life insurance policy on Executive's life, for the insured sum of $250,000, which policy of insurance shall be for the benefit of the Execu- tive's estate or such beneficiaries as the Executive may direct from time to time. Said policy of life insurance shall be of such type so that the insurance proceeds shall not be subject to federal income taxation. Such policy shall be assigned to the Executive, without charge, upon the termination of his employment with the Corporation. (e) 401(K) Plan. The Executive shall be eligible to par- ticipate in the Corporation's 401(K) voluntary deferred compensa- tion program (the "401(K) Plan") up to the maximum amount permit- ted by the terms of the 401(K) Plan, and the Corporation agrees to match the amounts of compensation deferred up to the maximum amount permitted under the provisions of the 401(K) Plan. (f) Automobile. The Corporation shall furnish an automo- bile to the Executive. Such automobile shall be commensurate with the Executive's senior position and the Corporation shall pay all 6 reasonable expenses for the operation, insurance and maintenance of such automobile. (g) Vacation. The Executive shall be entitled to take four weeks of vacation in each successive 12-month period during the Term at such times as shall be mutually convenient to the Execu- tive and the Corporation. (h) Other Benefits. In addition to participation in all of the compensation and incentive programs as described in this Agreement, the Executive shall be entitled to participate in all bonus, compensation, savings, stock option, and other incentive plans and programs and in all retirement, life, medical/dental and disability insurance and benefit plans of the Corporation, to the extent that he qualifies under the eligibility requirements of the respective plan or program. (i) Reimbursement of Expenses. In addition to automobile expenses, the Corporation shall reimburse the Executive for all reasonable expenses incurred personally by him on behalf of the Corporation. 4. Location of Office. The Executive's principal place of employment shall be in Charlotte, North Carolina and he shall not be required to change such principal place of employment. 5. Confidential Information. (a) Covenant. The Executive shall not divulge, during the Term or at any time thereafter, to any person not employed by the Corporation or its subsidiaries or affiliates or otherwise engaged to render services to the Corporation or its subsidiaries or affiliates, any material Confidential Information. (b) Definition of "Confidential Information". As used herein, "Confidential Information" means: (1) the name, address or requirements of any customer of the Corporation; or (2) any other secret or confidential information relating to any activity, invention or discovery of the Corporation not already in the public domain that the Executive has or shall have acquired during his employ- ment under this Agreement. Provided, however, that this provision shall not preclude the Executive from disclosing such Confidential Information as may be required by any applicable law, regulation or directive or any governmental agency, court or other authority having jurisdiction in the matter, or in the proper course of conduct of the Corpora- tion's business. In the event that any person seeks legally to 7 compel the Executive to disclose Confidential Information, the Executive shall promptly provide the Corporation with notice so that the Corporation may have opportunity to seek a protective order or other appropriate remedy. 6. Benefit of Designs. (a) Familiarity with Inventions, Etc. In this Paragraph 6, the term "Corporation" includes any of its subsidiaries or affiliates thereof. The Executive acknowledges that the Corpora- tion is engaged in the research, design and manufacture of various products and desires to acquire inventions and improve- ments relating thereto. The Executive, in connection with his duties hereunder, will become familiar with the Corporation's businesses and is expected, to the extent consistent with his senior position, to utilize the Corporation's time, materials, facilities and information in making inventions and improvements relating to such products. (b) Records and Disclosure. The Executive shall keep, maintain and make available to the Corporation complete and up- to-date written records, including photographs and drawings, of his inventions and improvements relating to the Corporation's products that the Executive may solely or jointly make during the period of employment under this Agreement, which records shall be the property of the Corporation. The Executive shall promptly and fully disclose in writing to the Corporation all such inven- tions and improvements, whether patentable or not, which relate to the Corporation's products that the Executive may solely or jointly make during the period of his employment under this Agreement which relate directly to any circuit, circuit design concept or program developed or being developed by the Corpora- tion during the period of the Executive's employment of which he was aware, and all such inventions and improvements shall be the sole and exclusive property of the Corporation. (c) Rights to Inventions, Etc. The Executive further agrees to assign and does hereby assign and transfer to the Corporation all his right, title and interest in and to all such inventions and improvements and in and to any letter patent or application for letters patent thereon in and for all countries. The Executive further agrees, at the expense of the Corporation, to do all things and to execute and deliver all documents neces- sary therefor whenever so requested by the Corporation. 7. Non-Competition. The Executive agrees that following the termination of his employment by the Corporation, he will not at any time during the period of two years from the date of such termination (without the prior written consent of the Corpora- tion, which consent will not be unreasonably withheld), either individually or in partnership, or in conjunction with any person or persons, firm, association, syndicate, company or corporation as 8 principal, agent, director, officer, employee, consultant, investor or in any other manner whatsoever, carry on or be engaged in or be concerned with or interested in, or advise, lend money to, guarantee the debts or obligations of or permit his name or any part thereof to be used or employed by any such person or persons, firm, association, syndicate, company, or corporation engaged in or concerned with any interests in any business in competition with the business of the Corporation (or any of its subsidiaries or affiliates) carried on by them during the term or terms of this Agreement within North America; provid- ed that the Executive may beneficially own, directly or indirect- ly, or exercise control or direction over the voting securities of a publicly traded company, but the number of voting securities so owned, controlled or directed by the Executive shall not exceed 5% of the voting securities of such publicly traded company; and further provided that where the Executive's employ- ment under this Agreement is terminated without "Cause" or by the Executive for "Good Reason" and in either case the Corporation makes the payment described in Paragraph 2(f)(3) hereof, the period of non-competition described in this Paragraph 7 shall be one year from the date of termination of the Executive's employ- ment under this Agreement. 8. Indemnification. The Corporation agrees to indemnify, defend and hold harmless the Executive from and against any and all liabilities to which he may be subject as a result of his employment hereunder (as a result of his service as an officer or director of the Corporation or as an officer or director of any of its subsidiaries or affiliates), as well as the costs, includ- ing attorney's and other professional fees and disbursements, of any legal action brought or threatened against him as a result of such employment, to the fullest extent permitted by, and subject to the limitations of, Delaware law. 9. Reimbursement of Legal and Related Expenses. In the event that any dispute shall arise between the Executive and the Corporation relating to his rights under this Agreement, and it is determined by agreement between the parties, or by a final judgment of a court of competent jurisdiction that is no longer subject to appeal, that the Executive has been substantially successful in his claims, then reasonable legal fees and dis- bursements of the Executive in connection with such dispute shall be paid by the Corporation. 10. Assignment. The Executive may not assign this Agree- ment or any of his rights, benefits, obligations or duties hereunder to any other person, firm, corporation or other entity. 11. Notices. All notices and other communications required or permitted hereunder shall be in writing and shall be deemed to have been duly given when personally delivered or on the fourth business day after being placed in the United States mail by certified mail, return receipt requested, postage prepaid, 9 addressed to the parties hereto as follows (provided that notice of change of address shall be deemed given only when actually received): As to the Corporation: Glenayre Technologies, Inc. 667 Madison Avenue, 25th Floor New York, New York 10021-8029 Attention: Clarke H. Bailey As to the Executive: Mr. Ramon D. Ardizzone 5416 Challisford Lane Charlotte, North Carolina 28226 The address of any of the parties may be changed from time to time by such party serving notice upon the other parties. 12. Law Applicable. This Agreement is made and executed with the intention that the construction, interpretation and validity hereof shall be determined in accordance with and governed by the laws of the State of New York. 13. Binding Effect. This Agreement shall be binding upon and inure to the benefit of the Corporation, its successors and assigns. This Agreement shall be binding upon and inure to the benefit of the Executive, his heirs and personal representatives. 14. Entire Agreement; Modification. This Agreement consti- tutes the entire agreement between the parties with respect to the subject matter hereof and supersedes and cancels all prior or contemporaneous oral or written agreements and understandings between them with respect to the subject matter hereof (including the Current Employment Agreement as of the Effective Date). This Agreement may not be changed or modified orally but only by an instrument in writing signed by the parties hereto, which instru- ment states that it is an amendment to this Agreement. 15. Severability. Should any provision of this Agreement or any part thereof be held invalid or unenforceable, the same shall not affect or impair any other provision of this Agreement or any part thereof and the invalidity or unenforceability of any provision of this Agreement shall not have any effect on or impair the obligation of the Corporation or the Executive. 16. Execution. This Agreement is hereby executed in multiple counterparts, each of which shall be deemed an original hereof. 10 IN WITNESS WHEREOF, the Corporation has caused this Agree- ment to be signed by its officers and its corporate seal to be hereunto affixed, and the Executive has hereunto set his hand and seal, all as of the day and year first above written. GLENAYRE TECHNOLOGIES, INC. [CORPORATE SEAL] By:________________________________ ATTEST: Title:_____________________________ _____________________ Secretary _____________________________[SEAL] Ramon D. Ardizzone 11 EX-11 3 EXHIBIT 11 Exhibit 11 GLENAYRE TECHNOLOGIES, INC. COMPUTATION OF EARNINGS PER COMMON SHARE In Thousands Except Per Share Amounts (Unaudited)
Six Months Ended June 30, Three Months Ended June 30, 1995 1994 1995 1994 Income from continuing operations $32,005 $15,066 $18,223 $ 7,725 Income from discontinued operations -- 388 -- 225 Net Income $32,005 $15,454 $18,223 $ 7,950 Primary Earnings Per Share: Weighted average shares outstanding during the period 38,069 36,317 38,566 36,640 Common stock equivalents 2,801 2,563 2,850 2,293 40,870 38,880 41,416 38,933 Continuing operations $ .78 $ .39 $ .44 $ .20 Discontinued operations -- .01 -- -- Net income per share $ .78 $ .40 $ .44 $ .20 Fully Diluted Earnings Per Share: Weighted average shares outstanding during the period 38,069 36,317 38,566 36,640 Common stock equivalents 3,134 2,563 3,045 2,293 41,203 38,880 41,611 38,933 Continuing operations $ .78 $ .39 $ .44 $ .20 Discontinued operations -- .01 -- -- Net income per share $ .78 $ .40 $ .44 $ .20
EX-15 4 EXHIBIT 15 Exhibit 15 July 21, l995 To the Board of Directors and Stockholders of Glenayre Technologies, Inc. Charlotte, North Carolina We are aware of the incorporation by reference in the Registration Statement Number 33-43797 on Form S-8 dated November 5, 1991, Registration Statement Number 33-43798 on Form S-8 dated November 5, 1991 (amended December 9, 1992), Registration Statement Number 33-68766 on Form S-8 dated September 14, 1993, and Registration Statement Number 33-80464 on Form S-8 dated June 17, 1994, of our report dated July 21, 1995 relating to the unaudited condensed consolidated interim financial statements of Glenayre Technologies, Inc. and subsidiaries which are included in its Form 10-Q, for the quarter ended June 30, 1995. Pursuant to Rule 436(c) of the Securities Act of 1933 our report is not a part of the registration statement prepared or certified by accountants within the meaning of Section 7 or 11 or the Securities Act of 1933. Ernst & Young LLP Charlotte, North Carolina EX-27 5 EXHIBIT 27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE QUARTER ENDED JUNE 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1000 6-MOS DEC-31-1995 JUN-30-1995 103,488 0 76,779 0 48,134 222,815 26,933 0 374,838 53,088 0 262,522 0 0 54,002 374,838 134,841 134,841 58,181 58,181 38,390 0 84 42,297 10,292 32,005 0 0 0 32,005 .78 .78
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