<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 JUNE 30, 1998
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
ROHN 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
August 12, 1998
Common Stock $.01 par value...................... 52,851,009
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ROHN INDUSTRIES, INC. AND SUBSIDIARIES
STATEMENTS OF INCOME
(In Thousands Except Per Share Data)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
---------------------- ----------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $39,931 $38,867 $80,996 $76,615
Cost of products sold 28,442 26,785 58,178 52,697
------- ------- ------- -------
Gross profit 11,489 12,082 22,818 23,918
Operating expenses:
Selling expenses 2,486 1,630 4,528 3,193
General and administrative expenses 2,537 2,801 5,354 5,255
------- ------- ------- -------
Operating income 6,466 7,651 12,936 15,470
Interest expenses, net 160 235 296 414
------- ------- ------- -------
Income before income taxes 6,306 7,416 12,640 15,056
Income tax provision 2,475 2,825 4,850 5,725
------- ------- ------- -------
Net income $3,831 $4,591 $7,790 $9,331
------- ------- ------- -------
------- ------- ------- -------
Earnings per share - basic and diluted $0.07 $0.09 $0.15 $0.18
------- ------- ------- -------
------- ------- ------- -------
Weighted average number of shares outstanding
Basic 52,829 52,376 52,718 52,412
------- ------- ------- -------
------- ------- ------- -------
Diluted 52,840 52,508 52,728 52,563
------- ------- ------- -------
------- ------- ------- -------
</TABLE>
The accompanying notes are an integral part of these statements.
2
<PAGE>
ROHN INDUSTRIES, INC. AND SUBSIDIARIES
BALANCE SHEETS
(In Thousands)
<TABLE>
<CAPTION>
ASSETS June 30, 1998 December
(unaudited) 31,1997
------------- ---------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $6,499 $5,994
Accounts, notes and other receivables, less allowance
for doubtful accounts of $1,514 in 1998 and $1,451
in 1997 28,742 33,748
Inventories 33,899 33,744
Deferred income taxes 4,450 4,450
Prepaid expenses 577 669
Net assets of discontinued operations 156 -
-------- --------
TOTAL CURRENT ASSETS 74,323 78,605
-------- --------
PLANT AND EQUIPMENT, at cost 48,116 46,596
Less: Accumulated depreciation (20,064) (19,101)
-------- --------
TOTAL PLANT AND EQUIPMENT 28,052 27,495
-------- --------
OTHER ASSETS 2,770 2,558
-------- --------
TOTAL ASSETS $105,145 $108,658
-------- --------
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $7,834 $12,029
Accrued expenses 12,127 19,817
Current portion of long-term liabilities 983 948
Net liabilities of discontinued operations - 842
Accrued income taxes 7,378 5,709
-------- --------
TOTAL CURRENT LIABILITIES 28,322 39,345
-------- --------
LONG-TERM LIABILITIES 10,758 11,271
-------- --------
STOCKHOLDERS' EQUITY
Common Stock 535 532
Capital surplus 13,200 11,602
Retained earnings 58,250 50,460
Treasury stock (3,896) (3,896)
Unearned portion of restricted stock (2,024) (656)
-------- --------
TOTAL STOCKHOLDERS' EQUITY 66,065 58,042
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $105,145 $108,658
-------- --------
-------- --------
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE>
ROHN INDUSTRIES, INC. AND SUBSIDIARIES
STATEMENTS OF CASH FLOW
FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(In Thousands)
(unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
June 30,
-----------------------
1998 1997
---- ----
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net Income 7,790 9,331
Adjustments for noncash items included in net income:
Depreciation and amortization 1,756 1,183
Deferred income taxes - (450)
Operating requirements:
Accounts receivable decrease 5,006 1,493
Inventories (increase) (155) (8,506)
Prepaid expenses (increase) decrease 92 417
Accounts payable & accrued expenses (decrease) increase (10,216) 1,387
Discontinued operations (decrease) (998) (6,032)
------- ------
Net cash provided (used in) by operating activities 3,275 (1,177)
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of plant and equipment, net of retirements (2,313) (5,077)
(Increase) in other assets (212) (113)
------- ------
Net cash (used for) investing activities (2,525) (5,190)
------- ------
CASH FLOW FROM FINANCING ACTIVITIES
Decrease in long-term liabilities (478) (367)
Proceeds from short-term borrowings - 17,620
Payment of short-term borrowings - (14,620)
Issuance of common stock 233 804
------- ------
Net cash (used in) provided by financing activities (245) 3,437
------- ------
Net increase (decrease) in cash and cash equivalents 505 (2,930)
Cash & cash equivalents, beginning of period 5,994 5,030
------- ------
Cash & cash equivalents, end of period 6,499 2,100
------- ------
------- ------
Cash paid during the period for interest 249 678
Cash paid during the period for income taxes 3,201 (3,281)
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE>
ROHN INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED 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 on Form 10-K for the year ended
December 31, 1997.
The financial statements presented herewith reflect all adjustments
(including normal and recurring accruals) which, in the opinion of management,
are necessary for fair presentation of the results of operations for the three
month and six month periods ended June 30, 1998 and 1997. The 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 Rohn and its
subsidiaries. All significant inter-company transactions have been eliminated
in consolidation.
(3) EARNINGS PER SHARE
Basic earnings per share were computed by dividing net income by the
weighted average number of shares outstanding during each period. Diluted
earnings per share were calculated by including the effect of all dilutive
securities. For the six months ended June 30, 1998 and 1997, the effect of
potentially dilutive stock options was 10,000 and 151,000, respectively. For
the three months ended June 30, 1998 and 1997, the effect of potentially
dilutive stock options was 11,000 and 132,000, respectively. The Company had
additional outstanding stock options of 1,050,000 as of June 30, 1998, which
were not included in the computation of diluted earnings per share because the
options' exercise price was greater than the average market price of the common
shares.
5
<PAGE>
(4) 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):
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
------- ------------
<S> <C> <C>
Finished goods $12,237 $12,181
Work-in-process 7,085 7,060
Raw materials 14,577 14,503
------- -------
Total Inventories $33,899 $33,744
------- -------
------- -------
</TABLE>
(5) COMPREHENSIVE INCOME
In 1998, the Company adopted Statement of Financial Accounting Standards
No. 130 (SFAS 130), "Reporting Comprehensive Income," which requires companies
to report all changes in equity during a period, except those resulting in
investment by owners and distribution to owners, in a financial statement for
the period in which they are recognized. The Company has not had any
transactions that would cause any difference in the amount reported as net
income and comprehensive income.
6
<PAGE>
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 Rohn Industries, Inc.
("Rohn" or "the Company") for the three months and six months ended June 30,
1998. 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, 1997.
RESULTS OF OPERATIONS
Rohn 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,
enclosures/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 statements
of income.
<TABLE>
<CAPTION>
For the Three Months For the Six Months
ended June 30, ended June 30,
-------------------- ------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 71.2 68.9 71.8 68.8
----- ----- ----- -----
Gross profit 28.8 31.1 28.2 31.2
S, G & A expense 12.6 11.4 12.2 11.0
----- ----- ----- -----
Operating income 16.2 19.7 16.0 20.2
Interest expense, net 0.4 0.6 0.4 0.5
----- ----- ----- -----
Income before income taxes 15.8 19.1 15.6 19.7
Provision for income taxes 6.2 7.3 6.0 7.5
----- ----- ----- -----
Net income from continuing operations 9.6% 11.8% 9.6% 12.2%
----- ----- ----- -----
----- ----- ----- -----
</TABLE>
7
<PAGE>
FOR THE THREE MONTHS ENDED JUNE 30, 1998
Net sales for the second quarter ended June 30, 1998 were $39.9 million in
comparison to $38.9 million, an increase of 2.7% over the same period a year
ago. The increase in sales was primarily in the enclosure product line offset
somewhat by a decrease in sales in the Company's tower product line. Enclosure
sales continue to benefit form a wider range of applications within the
communications industry while tower sales remain somewhat depressed from prior
period levels.
Gross profit for the second quarter of 1998 was $11.5 million versus $12.1
million in the second quarter of 1997, a decrease of 4.9%. As a percent to
sales, gross margin was 28.8% for the current quarter in comparison to 31.2%
for the same period a year ago. The 2.4 percentage point decrease was due to a
change in sales mix -- a greater percentage of enclosure sales versus tower
sales, and continuing competitive price pressure in the tower market.
Selling, general and administrative ("S, G & A") expenses were $5.0
million in the second quarter of 1998 versus $4.4 for the same period a year
ago. In comparison to the prior year, S, G & A expenses increased by $0.6
million or by 13.4%. The increase in operating expenses was due to an increase
in sales related expenses. With the enhancements made in sales, marketing and
distribution, the Company strongly feels that it is well positioned to regain
any market share losses and to provide superior service to the new build-to-
suit customers that are rapidly emerging in the market place.
Earnings per share (basic and diluted) in the second quarter was $0.07 a
share versus $0.09 in the second quarter of 1997.
FOR THE SIX MONTHS ENDED JUNE 30, 1998
Net sales for the six months ended June 30, 1998 were $81.0 million in
comparison to $76.6 million, an increase of 5.7% over the same period a year
ago. The increase is sales was primarily in the equipment enclosure/shelter
product line as the company benefited from a wider range of applications for
these products within the communications industry. At the same time, the sales
of towers decreased due to a continued slowdown in the build out of PCS systems
and due to some loss of market share. The Company believes that it may have
lost market share, especially in the first quarter of the year, as certain
competitors lowered unit prices significantly in response to reduced demand for
tower products.
Gross profit for the first six months of 1998 was $22.8 million versus
$23.9 million a year ago. As a percentage to sales, gross margin was 28.2% for
the first half in comparison to 31.2% for the same period a year ago. The 3.0
percentage point decrease was primarily due to two factors. The first factor
was sales mix -- as lower margin products, enclosures and distributor products,
accounted for a greater percentage of total revenue -- 47% in the first half
of 1998 versus to 33% in the same period a year ago. The same time, tower
sales, historically the Company's highest profitability product line decreased
to 53% of total revenue from 67% a year ago. Secondly, intense price
competition for the Company's tower products contributed to a 3.5 percentage
point in gross profit margin for this product in comparison to the same period
a year ago.
8
<PAGE>
S, G & A expenses were $9.9 million in the first six months of 1998 in
comparison to $8.5 million in the first half of 1997. In comparison to the
prior year, S, G & A expenses increased by $1.4 million or by 16.5%. The
increase in operating expenses was primarily related to an increase in sales
and marketing costs. The Company has invested to reverse the domestic market
share losses in towers with additional and upgraded personnel, increased
customer relations and enhanced sales tools such as catalogues, and trade
shows. Also, the Company has increased its spending to improve its worldwide
market presence.
Earnings per share (basic and diluted) was $0.15 per share for the six
months ended June 30, 1998 in comparison to $0.18 per share for the same period
a year. Even with the 5.7% increase in net sales during the first half of
1998, earnings per share still decreased by $0.03 per share due to reduced
gross profits and an increase in sales related operating expenses.
LIQUIDITY AND CAPITAL RESOURCES
The following table sets forth selected information concerning the
Company's financial condition:
<TABLE>
<CAPTION>
June 30, December 31,
(Dollars in Millions) 1998 1997
- --------------------- -------- ------------
<S> <C> <C>
Cash $ 6.5 $6.0
Working capital 46.0 39.3
Total debt 11.8 12.2
Current ratio 2.62:0 2.00:1
</TABLE>
The Company's working capital was $46.0 million at June 30, 1998 compared
to $39.3 million at December 31, 1997, an increase of $6.7 million. This
increase in working capital primarily reflected an $11.3 million decrease in
current liabilities offset somewhat by a $5.0 million reduction in accounts
receivable.
At June 30, 1998, the Company had aggregate indebtedness of $11.8 million.
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.
9
<PAGE>
INFLATION
Inflation has not had a material effect on the Company's business or
results of operation.
SEASONALITY
The operations of the Company are generally not subject to seasonal
fluctuations. However, in the past, the Company has seen disruptions in its
customer's ability to accept shipments due to unusual and prolonged weather-
related construction delays.
RECENT DEVELOPMENTS
The UNR Asbestos-Disease Claims Trust ("the Trust") informed the Company
that it has recently reviewed its investment in Rohn and has decided to seek a
sale of its shares, a merger or a like transaction that would involve
liquidating its entire investment in the Company, and that the Trust has
retained Donaldson, Lufkin & Jenrette ("DLJ") to assist in soliciting proposals
which might achieve its objective. The Company has agreed to pay the fees of
the investment banker (one percent of the consideration received, plus debt
assumed) and to indemnify the investment banker against certain liabilities
only if a transaction involving a disposition of all of the common stock of the
Company is effected. DLJ and the Company currently are actively engaged in
this process. At this time, it is impossible to determine the outcome or
timing of any potential transaction.
YEAR 2000 COMPLIANCE
The year 2000 issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Any of the
Company's computer programs that have time-sensitive software may recognize a
date using "00" as the year 1900 rather than the year 2000. This could result
in a system failure or miscalculations causing disruptions of operations,
including , among other things, a temporary inability to process transactions,
send invoices, or engage in similar normal business activities. The Company
believes that its internal systems are year 2000 compliant. However, the
Company is uncertain as to the extent its customers and vendors may be affected
by year 2000 issues that require commitment of significant resources and may
cause disruptions in the customers' and vendors' businesses.
RECENT ACCOUNTING PRONOUNCEMENT
In 1998, the Company adopted Statement of Financial Accounting Standards
No. 130 (SFAS 130), "Reporting Comprehensive Income," which requires companies
to report all changes in equity during a period, except those resulting in
investment by owners and distribution to owners, in a financial statement for
the period in which they are recognized. The Company has not had any
transactions that would cause any difference in the amount reported as net
income and comprehensive income.
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 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.
10
<PAGE>
PART II - OTHER INFORMATION
ITEM 5 OTHER INFORMATION
The Company's annual meeting of stockholders has been postponed and
will be scheduled by the Board of Directors of the Company during the fourth
quarter of 1998.
ITEM 6 EXHIBITS AND REPORTS ON FORM 8K
(A.) Exhibits
11. The computation can be determined from the report.
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.
ROHN INDUSTRIES, INC.
Dated: August 14, 1998 /s/ David V. LaRusso
--------------------------------------------
David V. LaRusso
Vice President and Chief Financial Officer
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 6,499
<SECURITIES> 0
<RECEIVABLES> 30,256
<ALLOWANCES> (1,514)
<INVENTORY> 33,899
<CURRENT-ASSETS> 74,323
<PP&E> 48,116
<DEPRECIATION> (20,064)
<TOTAL-ASSETS> 105,145
<CURRENT-LIABILITIES> 28,322
<BONDS> 10,758
0
0
<COMMON> 535
<OTHER-SE> 65,530
<TOTAL-LIABILITY-AND-EQUITY> 105,145
<SALES> 80,996
<TOTAL-REVENUES> 80,996
<CGS> 58,178
<TOTAL-COSTS> 68,060
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 296
<INCOME-PRETAX> 12,640
<INCOME-TAX> 4,850
<INCOME-CONTINUING> 7,790
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,790
<EPS-PRIMARY> .15
<EPS-DILUTED> .15
</TABLE>
