<PAGE>
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 SEPTEMBER 30, 1997
OR
( ) 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 1-8009
UNR INDUSTRIES, INC.
(DELAWARE)
6718 West Plank Road
Peoria, Illinois 61604
I.R.S. Employer Identification Number 36-3060977
TELEPHONE NUMBER (309) 697-4400
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
--- ---
Outstanding as of
NOVEMBER 7, 1997
-----------------
Common Stock $.01 par value................ 52,543,691
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
UNR INDUSTRIES, INC. AND SUBSIDIARIES
STATEMENTS OF INCOME
(IN THOUSANDS EXCEPT PER SHARE DATA)
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1997 1996 1997 1996
--------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Net sales $ 37,427 $ 41,910 $ 114,042 $ 110,724
Cost of products sold 27,692 29,300 80,389 77,413
--------- --------- ---------- ----------
Gross Profit 9,735 12,610 33,653 33,311
--------- --------- ---------- ----------
Selling, general & administrative expenses 4,231 3,824 12,679 11,051
Restructuring charge 3,420 -- 3,420 --
--------- --------- ---------- ----------
Operating Income 2,084 8,786 17,554 22,260
Interest income/(expense), net (174) 694 (588) 637
--------- --------- ---------- ----------
Income from continuing operations before income taxes 1,910 9,480 16,966 22,897
Income tax provision 725 3,700 6,450 9,000
--------- --------- ---------- ----------
Income from continuing operations 1,185 5,780 10,516 13,897
--------- --------- ---------- ----------
Income from discontinued operations - 418 - 3,859
Gain on sales, net - 21,900 - 21,900
--------- --------- ---------- ----------
NET INCOME $ 1,185 $ 28,098 $ 10,516 $ 39,656
--------- --------- ---------- ----------
--------- --------- ---------- ----------
Net Income Per Share:
Continuing operations $ 0.02 $ 0.11 $ 0.20 $ 0.27
Discontinued Operations
Income from operations - 0.01 - 0.08
Gain on sales, net - 0.42 - 0.42
--------- --------- ---------- ----------
NET INCOME PER SHARE $ 0.02 $ 0.54 0.20 $ 0.77
--------- --------- ---------- ----------
--------- --------- ---------- ----------
Weighted average number of shares outstanding 52,544 52,431 52,456 52,355
--------- --------- ---------- ----------
--------- --------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of these statements
2
<PAGE>
<TABLE>
<CAPTION>
UNR INDUSTRIES, INC. AND SUBSIDIARIES
BALANCE SHEETS
(IN THOUSANDS)
(unaudited)
September 30, December 31,
ASSETS 1997 1997
------- ------------- ------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 5,695 $ 5,030
Accounts, notes and other receivables, less allowance for doubtful
accounts of $1,034 in 1997 and $2,374 in 1996 27,951 28,048
Inventories 33,925 30,717
Deferred income taxes 4,450 4,000
Prepaid expenses 764 1,093
-------- ---------
TOTAL CURRENT ASSETS 72,785 68,888
-------- ---------
PLANT AND EQUIPMENT, AT COST 47,122 41,091
Less: Accumulated depreciation (21,132) (19,269)
-------- ---------
TOTAL PLANT AND EQUIPMENT 25,990 21,822
-------- ---------
OTHER ASSETS 2,786 2,662
-------- ---------
TOTAL ASSETS $ 101,561 $ 93,372
-------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term borrowings $ 1,000 $ 2,000
Accounts payable 6,276 8,735
Accrued expenses 23,697 17,729
Current portion of long-term liabilities 933 831
Net liabilities of discontinued operations 2,729 9,365
Accrued income taxes 1,498 10
-------- ---------
TOTAL CURRENT LIABILITIES 36,133 38,670
-------- ---------
LONG-TERM LIABILITIES 11,479 12,191
STOCKHOLDERS' EQUITY
Common Stock 532 528
Capital surplus 11,492 9,837
Retained earnings 47,302 36,786
Treasury stock (3,895) (1,595)
Notes receivable from officers - (2,300)
Unearned portion of restricted stock (1,482) (745)
-------- ---------
TOTAL STOCKHOLDERS' EQUITY 53,949 42,511
-------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 101,561 $ 93,372
-------- ---------
-------- ---------
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE>
UNR INDUSTRIES, INC. AND SUBSIDIARIES
STATEMENTS OF CASH FLOW
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(IN THOUSANDS)
(unaudited)
<TABLE>
<CAPTION>
CASH FLOW FROM OPERATING ACTIVITIES 1997 1996
--------- ---------
<S> <C> <C>
Net Income $ 10,516 $ 39,656
Adjustments for noncash items included in net income-
Depreciation and amortization 1,901 1,150
Restructuring charge 3,420 --
Deferred income taxes (450) 5,270
Provision for deferred employee compensation 388 181
Gain on sale of discontinued operations - (21,900)
Operating requirements-
Accounts receivable decrease (increase) 97 (8,704)
Inventories (increase) (3,208) (453)
Prepaid expenses decrease 329 89
Accounts payable & accrued expenses increase 1,577 6,831
Discontinued operations reserves (6,636) (25,866)
--------- ---------
Net cash (used in) provided by operating activities 7,934 (3,746)
--------- ---------
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of plant and equipment (6,031) (4,543)
Proceeds from the sale of discontinued operations - 153,869
(Increase) in other assets (162) (5,952)
--------- ---------
Net cash provided by (used for) investing activities (6,193) 143,374
--------- ---------
CASH FLOW FROM FINANCING ACTIVITIES
Decrease in long-term liabilities (610) (140)
Increase in long-term liabilities - 6,000
Proceeds from short-term borrowings 18,620 4,000
Payment of short-term borrowings (19,620) (10,000)
Dividends paid - (104,667)
Repayment of Officer's loans - 2,515
Issuance of common stock 534 1,152
--------- ---------
Net cash provided by financing activities (1,076) (101,140)
--------- ---------
Net increase in cash and cash equivalents 665 38,488
Cash & cash equivalents, beginning of period 5,030 5,878
--------- ---------
Cash & cash equivalents, end of period $ 5,695 $ 44,366
--------- ---------
--------- ---------
Cash paid during the period for interest $ 1,004 $ 595
--------- ---------
--------- ---------
Cash paid during the period for income taxes $ 5,016 $ 7,259
--------- ---------
--------- ---------
The accompanying notes are an integral part of these statements.
</TABLE>
4
<PAGE>
UNR INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(1) BASIS OF REPORTING FOR INTERIM FINANCIAL STATEMENTS:
The unaudited financial statements included herein have been prepared by
the Company pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been omitted pursuant to such rules and
regulations, although the Company believes that the disclosures are adequate
to make the information presented not misleading. It is suggested that these
financial statements be read in conjunction with the financial statements and
notes thereto included in the Company's Annual Report and Form 10-K for the
year ended December 31, 1996.
The financial statements presented herewith reflect all adjustments
(including normal and recurring accruals) which, in the opinion of management,
are necessary for fair statement of the results of operations for the three and
nine-month periods ended September 30, 1997 and 1996. Results of operations for
interim periods are not necessarily indicative of results to be expected for an
entire year.
(2) PRINCIPLES OF CONSOLIDATION:
The financial statements include the consolidated accounts of UNR and its
subsidiaries. All significant inter-company transactions have been eliminated
in consolidation.
(3) INCOME TAXES:
The Company's remaining NOL carry forwards, general business credit carry
forwards, and AMT credit carry forwards, were fully utilized during 1996.
(4) NET INCOME PER SHARE:
Net income per share is based on the weighted average number of common
shares outstanding during each period. Dilution, which would result if all
outstanding options were exercised, is not significant to the net income per
share computation.
(5) INVENTORIES:
Inventories are stated at the lower of cost or market. Cost is determined
using the first-in, first-out (FIFO) method. Inventory costs include material,
labor and factory overhead.
Total inventories included the following classifications (In Thousands):
September 30, December 31,
1997 1996
------------ ------------
Finished goods $ 16,856 $ 13,065
Work-in-process 6,029 5,678
Raw materials 11,040 11,974
------------ ------------
Total Inventories $ 33,925 $ 30,717
------------ ------------
------------ ------------
5
<PAGE>
(6) RESTRUCTURING CHARGE:
The Company's Board of Directors approved a special charge of $3.4 million
($2.1 million after tax or $.04 per share) to cover the costs of a restructuring
program. The restructuring charge was related to cost cutting measures
including early retirement costs, other workforce reductions, and expenses
associated with the development and implementation of this program.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
The following discussion summarizes the significant factors affecting the
consolidated operating results and financial condition of UNR Industries, Inc.
("the Company") for the nine months ended September 30, 1997. This discussion
should be read in conjunction with the consolidated financial statements and
notes to the consolidated financial statements. Reference should be made to the
consolidated financial statements and related notes included in the Company's
Annual Report on Form 10-K for the year ended December 31, 1996.
Since January 1996, the Company has completed the sale of four of its five
operating divisions while maintaining ownership of the ROHN Division. This
action will allow the Company to focus on the strategic growth and development
of ROHN, a leading manufacturer and installer of wireless infrastructure
equipment for the communications industry. The following table summarizes the
four divestitures:
($ in Millions)
Date Business Purchaser Sales Price
- ---- -------- --------- -------------
July 1996 Unarco Commercial Products Richards Capital Fund, L.P 41.0
August 1996 UNR Leavitt Division Chase Brass Industries, Inc. 95.0
Sept. 1996 UNR Home Products Franke, Inc. 21.4
Dec. 1996 Real Time Solutions, Inc. Pinnacle Automation 4.0
The sale of these divisions in 1996 resulted in a gain of $21.9 million,
net of $14.6 million of taxes, which was recorded in the third quarter of 1996.
The final sales price of these operations were subject to the normal closing
adjustments. Total sales of these operations were $157 million, $242 million,
and $265 million for the years ended December 31, 1996, 1995 and 1994,
respectively.
RESULTS OF OPERATIONS
UNR Industries, Inc. through its ROHN Division, is a leading manufacturer
and installer of wireless infrastructure equipment for the communications
industry including cellular, PCS, radio and television broadcast markets.
The Company's products include towers, equipment shelters, cabinets, poles
and antenna mounts. The following table sets forth, for the fiscal periods
indicated, the percentage of net sales represented by certain items reflected
in the Company's consolidated statement of income.
6
<PAGE>
For the Three Months For the Three Months
ended September 30, ended September 30,
1997 1996 1997 1996
------ ------ ------ -------
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 74.0 69.9 70.5 69.9
------ ------ ------ -------
Gross profit 26.0 30.1 29.5 30.1
Selling, general and
administrative expense 11.3 9.1 11.1 10.0
Restructuring charge 9.1 - 3.0 -
------ ------ ------ -------
Total operating expenses 20.4 9.1 14.1 10.0
------ ------ ------ -------
Operating income 5.6 21.0 15.4 20.1
Interest expense (income), net .5 (1.6) .5 (.6)
Income before provision
------ ------ ------ -------
for income taxes 5.1 22.6 14.9 20.7
Provision for income taxes 1.9 8.8 5.7 8.1
------ ------ ------ -------
Net income from continuing
operations 3.2% 13.8% 9.2% 12.6%
------ ------ ------ -------
------ ------ ------ -------
FOR THE THREE MONTHS ENDED, SEPTEMBER 30, 1997
Sales for the third quarter ended, September 30, 1997 were $37.4 million in
comparison to $41.9, a decrease of 10.7%, from the same period a year ago. The
reason for the decrease in sales was lower demand for the Company's tower
products, partially offset by an increase in demand for shelters. This decrease
was attributable to a slowdown in the PCS segment of the market which has had
difficulty in obtaining sufficient capital to finance additions and completions
to digital networks and in overcoming zoning hurdles. The demand for equipment
shelters increased as the Company was able to benefit from a wider range of
applications for this product outside of traditional PCS and cellular.
Gross profit for the third quarter was decreased primarily due to the
reduction in sales volume. As a percent to sales, gross margin was 26.0% for
the current quarter in comparison to 30.1% for the same period a year ago. The
4.1 percent point decrease was not only due to the decrease in volume but also
to sales mix. Traditionally, the Company's tower products have higher gross
margins than its shelter product line. The difference in gross margins between
the product lines is due to the higher content in shelters of relatively
sophisticated environmental and electrical control equipment which is purchased
from outside suppliers.
Selling, general and administrative expenses ("S,G&A") were $4.2 million
for the three months ended September 30, 1997 versus $3.8 million a year ago, an
increase of $0.4 million or 10.5%. The increase in S,G&A expenses was a result
of additional salaries for the new senior management team as the Company
transitioned from a holding company to a more focused operating company and the
costs associated with a new enterprise resource planning software system.
The Company's Board of Directors approved a special charge of $3.4 million
($2.1 million after-tax or $0.04 per share) to cover the costs of a
restructuring program. The restructuring charge was related to cost cutting
measures including early retirement costs, other workforce reductions, and
expenses associated with the development and implementation of this program.
Interest expense/(income), net for the quarter ended September 30, 1997 was
$0.2 million in comparison to interest income of ($0.7) million for the same
period a year ago. In the prior year, excess
7
<PAGE>
cash generated by the sale of certain divisions of the Company was invested
before it was subsequently returned to the shareholders in the form of
extraordinary dividends.
Earnings per share from continuing operations for the three months ended
September 30, 1997 were $0.02 versus $0.11 a year ago. In general, the decrease
in earnings per share was attributable to the 10.7% decrease in sales volume,
the $0.04 per share impact of the restructuring charge and the change in net
interest expense.
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
Sales for the nine months ended September 30, 1997 were $114.0 million in
comparison to $110.7 million in 1996, an increase of 3.0%. The increase in
sales was in the shelter product line as the Company benefited from a wider
range of applications for this product within the communications industry.
Gross profit for the nine months ended September 30, 1997 was $33.7 million
versus $33.3 million for the same period a year ago, an increase of 1.2%. As a
percent to sales, gross margin was 29.5% for the current year nine month period
in comparison to 30.1% for the nine months ended September 30, 1996. The 0.6
percentage point decrease was primarily due to a change in sales mix.
Traditionally, the Company's tower product line has had higher gross margins
than its other primary product--shelters. The difference in gross margins
between the product line is due to the higher content in shelters of relatively
sophisticated environmental and electrical equipment which is purchased from
third party suppliers.
S,G&A expenses were $12.7 million for the nine months ended September 30,
1997 in comparison to $11.1 million for the same period a year ago. In
comparison to the prior year, S,G&A expenses increased by $1.6 million or by
14.4%. The increase in S,G&A expenses was attributable to salaries for the new
senior management team as the Company transitioned from a holding company to a
more focused operating company and the costs associated with the Company's new
enterprise resource planning software system.
During the third quarter of 1997, the Company's Board of Directors approved
a special charge of $3.4 million ($2.1 million after-tax or $0.04 per share) to
cover the costs of a restructuring program. The restructuring charge was
related to cost cutting measures including early retirement costs, other
workforce reductions, and expenses associated with the development and
implementation of this program.
Interest expense/(income), net for the nine months ended September 30, 1997
was $.6 million in comparison to interest income of ($0.6) million for the nine
months ended September 30, 1996. In 1996, excess cash generated by the sale of
certain operating divisions of the Company was invested before it was
subsequently returned to the shareholders in the form of extraordinary
dividends.
Earnings per share from continuing operations for the nine months ended
September 30, 1997 were $0.20 versus $0.27 for the same period a year go. In
general, the decrease in earnings per share was attributable to $0.04 per share
impact of the restructuring charge, the increase in S,G&A expenses and the
change in net interest expense.
8
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The following table sets forth selected information concerning the
Company's financial condition:
September 30, December 31,
(Dollars in Thousands) 1997 1996
---------------------- ------------- ------------
Cash 5,695 5,030
Working capital 36,652 30,218
Total debt 13,412 15,022
Current ratio 2.02:1 1.79:1
The Company's working capital was $36.7 million at September 30, 1997
compared to $30.2 million at December 31, 1996, an increase of $6.5 million.
This increase in working capital primarily reflected a $3.2 million increase
in inventories and a $2.5 million decrease in accrued expenses primarily
associated with discontinued operations. The increase in inventory was
primarily in finished shelters ready for delivery to customers. These units
are currently on hold pending authorization from the customer to release to a
specific construction site. In the majority of these situations, the units
have been completed, progress billed to the customer and paid for by the
customer.
At September 30, 1997, the Company had aggregate indebtedness of $13.4
million including $1.0 million borrowed under a $20.0 million short-term credit
facility. The remainder of the Company's outstanding indebtedness was related
to mortgage notes payable and capital leases.
The Company expects that it will meet its ongoing working capital and
capital expenditure requirements from operating cash flows. In addition, the
Company's strong balance sheet allows it substantial financial flexibility.
Inflation has not had a material effect on the Company's business or
results of operation.
ACCOUNTING CHANGES
The Financial Accounting Standards Board has issued Statement of Financial
Standards ("SFAS") No. 128, Earnings Share, which is effective for financial
statements for both interim and annual periods ending after December 15, 1997
and SFAS No. 129, Disclosure of Information, which is effective for periods
ending after December 15, 1997. The expected impact of the adoption of these
standards will not be material.
FORWARD-LOOKING INFORMATION
From time to time, in written reports and oral statements, the Company
discusses the expectations regarding future performance. These "forward-looking
statements" are based on currently available competitive, financial and economic
data and our operating plans. These statements are inherently uncertain.
Investors should recognize that actual results could differ materially from
those expressed or implied in forward-looking statements.
9
<PAGE>
PART II - OTHER INFORMATION
ITEM 5. OTHER INFORMATION
1.) The Company's annual meeting of stockholders has been postponed and is
presently expected to occur on or about December 17, 1997.
2.) In November 1997 , the Company signed a six-year collective bargaining
agreement with the United Automobile, Aerospace and Agriculture Implement
Workers of America ("UAW"). The UAW is the bargaining agent for the hourly
production-related workers at its Peoria, Illinois facility. The Company
expects that the terms of the agreement will provide enhanced stability to
its tower product line manufacturing capabilities and, at the same time,
the financial terms of the agreement will not have a material adverse
impact on the Company.
3.) In October 1997, the Company sold all of its shares of common stock of
Cognex Corporation in two open market transactions. Original ownership of
this stock related to the Company's former subsidiary RTS. The Company
will realize a $4.1 million pre-tax gain in the fourth quarter of 1997.
4.) In October 1997, the Company announced an Agreement to form a joint venture
with BrasilSat Harald, S.A. to serve the telecommunications infrastructure
industry in Brazil and the rest of South America. It is estimated that the
Company's initial investment would be $1 million, and the long term could
approximate $10 million. The equity method of accounting will be used for
this investment.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A.) EXHIBITS
2. Plan of Reorganization incorporated herein by reference from
Exhibit A of the 1989 first quarter Form 10-Q.
11. The computation can be determined from the report.
14. Material Contracts - Memorandum of Understanding on Joint
Venture
15. None
18. None
19. None
22. None
23. None
24. None
27. Financial data schedule.
(B) Reports on Form 8-K
None
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.
10
<PAGE>
UNR INDUSTRIES, INC.
Dated: November 7, 1997 /s/ Rodney B. Harrison
- ------------------------ -----------------------------------------
Rodney B. Harrison
Vice President, Treasurer and Controller
11
<PAGE>
MEMORANDUM OF UNDERSTANDING
THIS MEMORANDUM OF UNDERSTANDING ("MEMORANDUM") is made this 1st day of
October, 1997 ("EXECUTION DATE"), and contains the principal terms of the
understandings and agreements reached as of October 1, 1997, between
BrasilSat Harald, S.A., ("BRASILSAT"), a corporation organized and existing
under the laws of Brasil, South America, with domicile at Curitiba, Parana,
Brasil and UNR-ROHN Division of UNR Industries, Inc. ("ROHN"), a corporation
organized and existing under the laws of the State of Delaware, United States
of America, with domicile at Peoria, Illinois, U.S.A., related to the
incorporation of a Company in Brasil.
WITNESSETH:
WHEREAS, BrasilSat is currently engaged, among other things, in the design,
engineering, manufacture, marketing, sales, distribution and installation of
angle and solid leg towers.
WHEREAS, ROHN is currently engaged, among other things, in the design,
engineering, manufacture, marketing, sales, distribution and installation of
tubular and solid leg towers, poles, steel accessories and equipment shelters.
WHEREAS, BrasilSat is the owner of the land and constructions presently being
used by BrasilSat for its tower facilities and has agreed in principle to
lease to the Company hereinafter described a portion of the land and
constructions for a manufacturing and storage and operations facility.
WHEREAS, BrasilSat and ROHN have agreed in principle to incorporate a Company
in Brasil ("THE COMPANY") for the purpose of the design, engineering,
manufacture, marketing, sales, distribution and installation in Brasil of
towers, steel and concrete poles, equipment shelters, related accessories and
galvanizing facilities.
WHEREAS, for the purposes aforesaid, BrasilSat, ROHN, and the Company will
enter into certain agreements in accordance with the Schedule of Related
Agreements hereinafter provided. The existing galvanizing plant and the
planned galvanizing expansion of Harald are not part of the above scope of
this instrument.
WHEREAS, BrasilSat, and ROHN hereby wish to agree and determine the extent
and understandings of the agreements reached between them with respect
thereto.
NOW THEREFORE, BrasilSat, and ROHN hereby express their agreement and
understanding as to the following matters:
Page 1
<PAGE>
ARTICLE I
BUSINESS PURPOSES
1.1 The Company will design, engineer, manufacture, market, sell,
distribute and install the following products:
A. TOWERS: Towers and other similar structures manufactured of
steel members, designed to support antennae and other devices
required to be raised above ground level ("TOWERS"). Towers will
be included after a 12 to 18 month period from the Closing Date
at ROHN's option. BrasilSat retains the right to manufacture
and sell angle and solid leg towers after this period. During
this period (12 to 18 month period from the Closing Date)
BrasilSat will be the exclusive distributor of ROHN's towers in
Brazil. During this period (12 to 18 month period from the
Closing Date) ROHN will be the exclusive distributor of
BrasilSat's towers outside of Brasil.
B. POLES: Tubular structures made of steel, concrete, fiber glass
or other material, designed to support antennae and other
devices required to be raised above ground level, for use in
the communications markets in the territory and other as yet
unknown applications ("POLES").
C. EQUIPMENT SHELTERS: Relocatable enclosures constructed of a
variety of materials including concrete, steel, fiberglass and
others, which are designed to house electronics in connection
with the towers and steel poles and other as yet unknown
applications ("SHELTERS").
D. STEEL ACCESSORIES COMPONENTS: Platforms, braces, dish mounts,
antenna mounts, safety cables and devices, lighting hardware
and grounding materials for the towers and poles.
E. INSTALLATION SERVICES: All installations and site services
related to the above products.
F. GALVANIZING: The process of applying molten zinc to steel.
(The Towers, Steel Poles, Equipment Shelters, Steel Accessories
Components, Installation Services and Galvanizing are hereinafter
collectively referred to as the "PRODUCTS".)
1.2 The Company may engage in any and all acts, things, business and
activities that are related, incidental or conducive directly to the sale of
the Products in the Territory as defined in the article 1.6.
1.3 The Company has the exclusive right to sell all Products, referred
in subparagraph (1.1) of Subsections A to F of this Section 1., and those
developed in the future to all markets in the Territory as defined in the
article 1.6. This exclusivity is subject to existing ROHN distribution
contracts and the ability and willingness of the Company to provide economic
and logistic advantages to the target market in the Territory as defined in
the article 1.6.
Page 2
<PAGE>
1.4 New Products may be added from time to time when business
requirements mandate as determined by the Company's management consistent
with any agreements entered into by BrasilSat or ROHN.
1.5 The Company will use ROHN's and BrasilSat's name and trademarks
under the Technology License and Technical Assistance Agreement to maximize
market acceptance of the Products.
1.6 For purposes of Article I of this Memorandum, the word "Territory"
shall mean South America and such other territories as the parties may
hereafter mutually agree.
ARTICLE II
CONTRIBUTIONS
2.1 BrasilSat will provide the Company with 51%, and ROHN will provide
the Company with 49%, of the initial working capital for the operations of
the Company. Any additional working capital that may be required for the
operation of the Company will be obtained through additional capital
contributions or through normal banking facilities as agreed by BrasilSat and
ROHN. It is the desire of the Parties that the Company shall borrow its
capital requirements whenever possible and practical.
2.2 ROHN will, pursuant to a Technology License and Technical
Assistance Agreement, provide the Company, at no cost, with technical
information, design criteria and specifications, manufacturing methods,
process and know-how of a highly technical nature for the design,
engineering, manufacture, marketing, sale and installation of the Products;
and will license the Company to use ROHN's name and trademarks in connection
with the sale of the Products.
2.3 BrasilSat and ROHN will, pursuant to Supply Agreements, provide the
Company with required parts and other capital and production items at
manufacturing or acquisition cost plus 10% for handling, where economic or
other advantage exists to the Company. All freight and other expenses will be
the responsibility for the Company, when it may apply.
2.4 BrasilSat will lease to the Company at least for a two-year term a
portion of the land and constructions that are presently being used as
BrasilSat's facilities, at the cost of US$ 100.00 (one hundred dollars) per
month.
2.4.1. The Company will be responsible for the required leasehold
improvements. (The Company will explore Parana' State benefits available
to industrial facilities).
2.5 BrasilSat will vacate that portion of BrasilSat's facilities to be
leased by BrasilSat to the Company.
Page 3
<PAGE>
ARTICLE III
FORMATION AND ORGANIZATION OF THE COMPANY;
DISPOSITION OF SHARES
3.1 BrasilSat and ROHN will, on the Incorporation Date, incorporate the
Company as a jointly owned capital corporation under, and in accordance with,
the laws of Brasil, with corporate domicile in Curitiba, Parana, Brasil.
3.2 The name of the Company will be ROHN/BrasilSat S.A. or such other
name authorized by necessary governmental approval and corporate action of
the Company.
3.3 BrasilSat will subscribe and pay for 51% of the shares of stock of
the Company; and, ROHN will subscribe and pay for 49% of the shares of stock
of the Company.
3.4 The management and the regulations of the Company are set forth in
the Attachments A (Statutes of the Company) and B (Shareholders Agreement) of
this document. The parties agree to execute the terms of those documents
according to the Section VI (Incorporation and Closing Date), as a final
document that will be not submitted to later negotiation, except if agreed by
parties or changes necessary to comply with Government ruling.
ARTICLE IV
FUNDING AND CAPITAL
4.1 The initial minimum portion of the capital stock of the Company will
be the equivalent amount of approximately U.S. $1,000,000.00 represented by
shares with par value of U.S. $1,000.00 each, fully subscribed and paid in.
4.2 BrasilSat and ROHN will subscribe and pay in cash for shares of the
minimum portion of the capital stock of the Company on the Incorporation
Date, in the amounts set forth opposite their respective names below:
Name of Shareholder Number of Shares Percentage
------------------- ---------------- ----------
BrasilSat 510 51%
ROHN 490 49%
Page 4
<PAGE>
ARTICLE V
CONDITIONS FOR INCORPORATION AND CLOSING
5.1 The incorporation of the Company shall be subject to fulfillment,
prior to the Incorporation Date, of the following conditions, and each of the
parties hereto shall do all things necessary for the due fulfillment of such
conditions prior to or on the Incorporation Date:
A. GOVERNMENTAL APPROVAL. All necessary governmental consent,
authorization or approval must be obtained for entering into
the Shareholders' Agreement, for engaging in the business
purposes described in this Memorandum, for the incorporation of
the Company, and for the purchase of the shares of the Company
by BrasilSat and ROHN.
B. OTHER GOVERNMENTAL PERMITS. The Company and each of the parties
shall have obtained the necessary governmental permits and
authorizations to enable them to comply with their obligations
under the agreements described in Section 6.2 of this
Memorandum and under the Articles of Incorporation and Bylaws
of the Company.
C. SHAREHOLDERS' AGREEMENT. BrasilSat and ROHN shall have entered
into a Shareholders' Agreement in form and substance
satisfactory to BrasilSat and ROHN as set forth in Attachment B.
D. INCORPORATION INSTRUMENT. The Bylaws of the Company and any
necessary permit for incorporation shall have been duly
executed by BrasilSat and ROHN as set forth in Attachment A.
E. SUBSCRIPTION AND PAYMENT FOR SHARES. BrasilSat and ROHN shall
have subscribed and paid in full for their shares of capital
stock of the Company as provided in Article III of this
Memorandum.
F. UNR-ROHN Board of Directors Approval.
G. BrasilSat Board of Directors Approval.
H. OTHER INSTRUMENTS AND STEPS. All actions to be taken at the
Incorporation Date pursuant to this Memorandum shall be deemed
to have taken place simultaneously, and no actions or
transactions will be deemed to have taken place, or document to
have been delivered, or payment to have been made, unless all
actions and transactions have been completed and all documents
have been executed and delivered.
5.2 The obligations of the parties hereunder, and of BrasilSat and ROHN
under the Shareholders' Agreement, shall be subject to fulfillment, prior to
the Closing Date, of the following conditions, and each of the parties hereto
shall do all things necessary for the due fulfillment of such conditions
prior to or on the Closing Date:
A. INCORPORATION OF THE COMPANY. The conditions in Section 6.1 shall
have been satisfied.
B. TECHNOLOGY LICENSE AND TECHNICAL ASSISTANCE AGREEMENT. ROHN,
BrasilSat and the Company shall have entered into a Technology
License and
Page 5
<PAGE>
Technical Assistance Agreement in the form and substance
satisfactory to BrasilSat and ROHN pursuant to which ROHN and
BrasilSat will provide the Company, at no cost, with technical
information, assistance and counsel, design criteria and
specifications (which are already in their possession),
manufacturing methods, minimum quality standards, process and
know-how of a highly technical nature for the design,
manufacture, marketing, sale and installation of the Products;
and, will license the Company to use ROHN's and BrasilSat's
name and trademarks in connection with the sale of the Products.
C. SUPPLY AGREEMENTS. BrasilSat, ROHN and the Company shall have
entered into Supply Agreements in form and substance
satisfactory to BrasilSat and ROHN pursuant to which BrasilSat
and ROHN will provide the Company with required parts and other
capital and production items at manufacturing or acquisition
cost plus 10% for handling, where economic or other advantage
exists to the Company.
C.1. The Company shall enter into an agreement to acquire from
ROHN at ROHN's cost the presses and welding equipment required
for the production of tapered steel poles.
D. LEASE AGREEMENT. BrasilSat shall have entered into a
Commercial Lease agreement with the Company.
E. MANAGEMENT APPOINTMENTS. BrasilSat shall appoint the President
and ROHN shall appoint the Chief Financial Officer and the
independent auditors.
F. OTHER INSTRUMENT AND STEPS. All actions to be taken at the
Closing Date pursuant to this Memorandum shall be deemed to
have taken place simultaneously, and no actions or transactions
will be deemed to have taken place, or document to have been
delivered, or payment to have been made, unless all actions and
transactions have been completed and all documents have been
executed and delivered.
ARTICLE VI
INCORPORATION AND CLOSING DATES;
SCHEDULE OF RELATED AGREEMENTS
6.1 For purposes of this Memorandum, "Incorporation Date" shall mean
October 15, 1997, or any such later date as may be agreed by BrasilSat and
ROHN, which shall be no later than November 11, 1997, the date on which the
Company will be incorporated.
6.2 For purposes of this Memorandum, "Closing Date" shall mean
October 2, 1997.
6.3 For purposes of this Memorandum, the following Schedule of Related
Agreements, the date for submission of initial drafts, and the parties
responsible for preparation
Page 6
<PAGE>
of the initial drafts shall govern:
SCHEDULE OF RELATED AGREEMENTS
DATE OF RESPONSIBLE
AGREEMENT INITIAL DRAFT PARTY
--------- ------------- -----------
Shareholders' Agreement Oct. 2 both
Bylaws Oct. 2 both
Technology License and
Technical Assistance Agreement Oct. 2 ROHN
BrasilSat's Supply Agreement Oct. 2 BrasilSat
ROHN's Supply Agreement Oct. 2 ROHN
Lease Agreement Oct. 2 BrasilSat
Distribution Agreement Nov. 3 ROHN
In addition, the parties will enter into such other agreements, as the
parties deem necessary or desirable to consummate and perform the
transactions contemplated herein. The parties will promptly enter into good
faith negotiations and will use their best efforts to enter into the
foregoing definitive agreements prior to the Closing Date.
ARTICLE VII
NEGOTIATION EXCLUSIVITY; LANGUAGE;
GOVERNING LAW;
7.1 Until the Closing Date, or the mutual termination of negotiations,
whichever occurs first, the parties agree not to solicit from, negotiate or
enter into any agreement with any other person or entity with respect to the
transactions that are the subject of this Memorandum.
7.2 This Memorandum will be executed in English, and Portuguese and
English will be the language to govern. The agreements described in
Section 6.3 will be executed in Portuguese, and Portuguese will be the
language to govern.
7.3 This Memorandum, and the agreements described in Section 6.3 will
be governed by and interpreted in accordance with the laws of Brasil.
The transactions noted above will require the approval of the Boards of
Directors of BrasilSat and ROHN and all necessary government approvals. The
purpose of this Memorandum is to confirm the parties' discussions to date
regarding the transactions noted above. This Memorandum is not binding on any
party, and creates no rights or duties in any of the parties. Binding rights
and duties will only be created or imposed pursuant to the Shareholders'
Agreement and other definitive agreements described in Section 6.3 of
Page 7
<PAGE>
this Memorandum. Any precontractual liability for any act or omission, or any
express or implied business combination, partnership or venture of the
parties under the principles set forth in this Memorandum, is expressly
excluded.
ARTICLE VIII
CONFIDENTIALITY
8.1 The parties agree that during the course of the negotiations either
party may acquire access to confidential or proprietary information of the
other and agree that said information shall be held in strict confidence and
shall not be revealed, disclosed, published or distributed to any third
party, except their employees, agents and representatives who need to know
such information in order to facilitate the purpose of this Memorandum and
the negotiation and execution of the definitive agreements described in
Section 7.3.
IN WITNESS WHEREOF, BrasilSat and ROHN have caused this Memorandum to be duly
executed as of the Execution Date.
BrasilSat Harald, S.A. UNR-ROHN
Division of UNR Industries, Inc.
- -------------------------------------------------------------------------------
/s/ Joao do Espirito Santo Abreu /s/ Brian B. Pemberton
- -------------------------------------------------------------------------------
Joao do Espirito Santo Abreu Brian B. Pemberton
- -------------------------------------------------------------------------------
Diretor Presidente President and
Chief Executive Officer
Page 8
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 5,695
<SECURITIES> 0
<RECEIVABLES> 28,985
<ALLOWANCES> 1,034
<INVENTORY> 33,925
<CURRENT-ASSETS> 72,785
<PP&E> 47,122
<DEPRECIATION> 21,132
<TOTAL-ASSETS> 101,561
<CURRENT-LIABILITIES> 36,133
<BONDS> 11,479
0
0
<COMMON> 532
<OTHER-SE> 53,417
<TOTAL-LIABILITY-AND-EQUITY> 101,541
<SALES> 114,042
<TOTAL-REVENUES> 114,042
<CGS> 80,389
<TOTAL-COSTS> 17,554
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 588
<INCOME-PRETAX> 16,966
<INCOME-TAX> 6,450
<INCOME-CONTINUING> 10,516
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,516
<EPS-PRIMARY> .20
<EPS-DILUTED> .20
</TABLE>
