<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, 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
---- ----
<TABLE>
Outstanding as of
November 9, 1998
<S> <C>
Common Stock $.01 par value........................ 52,846,009
</TABLE>
<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 Nine Months Ended
September 30, September 30,
------------------------ -------------------------
<S> <C> <C> <C> <C>
1998 1997 1998 1997
---- ---- ---- ----
Net sales $ 47,541 $ 37,427 $ 128,537 $ 114,042
Cost of products sold 37,473 27,693 95,651 80,390
--------- --------- --------- ---------
Gross profit 10,068 9,734 32,886 33,652
Operating expenses:
Selling expenses 2,102 1,704 6,630 4,897
General and administrative expenses 1,860 2,527 7,214 7,782
Restructuring charge --- 3,420 --- 3,420
--------- --------- --------- ---------
Operating income 6,106 2,083 19,042 17,553
Interest expenses, net 87 173 383 587
--------- --------- --------- ---------
Income before income taxes 6,019 1,910 18,659 16,966
Income tax provision 2,225 725 7,075 6,450
Equity loss of joint venture 233 --- 233 ---
--------- --------- --------- ---------
Net income $ 3,561 $ 1,185 $ 11,351 $ 10,516
--------- --------- --------- ---------
--------- --------- --------- ---------
Earnings per share - basic and diluted $ 0.07 $ 0.02 $ 0.22 $ 0.20
--------- --------- --------- ---------
--------- --------- --------- ---------
Weighted average number of shares outstanding
Basic 52,851 52,544 52,758 52,452
--------- --------- --------- ---------
--------- --------- --------- ---------
Diluted 52,852 52,545 52,765 52,557
--------- --------- --------- ---------
--------- --------- --------- ---------
</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 September 30, 1998 December 31,
(unaudited) 1997
----------- ------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 5,042 $ 5,994
Accounts, notes and other receivables, less allowance
for doubtful accounts of $1,694 in 1998 and $1,451 in 1997 31,813 33,748
Inventories 31,599 33,744
Deferred income taxes 4,450 4,450
Prepaid expenses 638 669
Net assets of discontinued operations 1,333 ---
--------- ---------
TOTAL CURRENT ASSETS 74,875 78,605
--------- ---------
PLANT AND EQUIPMENT, at cost 47,241 46,596
Less: Accumulated depreciation (20,788) (19,101)
--------- ---------
TOTAL PLANT AND EQUIPMENT 26,453 27,495
--------- ---------
OTHER ASSETS 5,733 2,558
--------- ---------
TOTAL ASSETS $ 107,061 $ 108,658
--------- ---------
--------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 8,863 $ 12,029
Accrued expenses 9,959 19,817
Current portion of long-term liabilities 1,000 948
Net liabilities of discontinued operations --- 842
Accrued income taxes 6,968 5,709
--------- ---------
TOTAL CURRENT LIABILITIES 26,790 39,345
--------- ---------
LONG-TERM LIABILITIES 10,507 11,271
--------- ---------
STOCKHOLDERS' EQUITY
Common Stock 535 532
Capital surplus 13,199 11,602
Retained earnings 61,811 50,460
Treasury stock (3,896) (3,896)
Unearned portion of restricted stock (1,885) (656)
--------- ---------
TOTAL STOCKHOLDERS' EQUITY 69,764 58,042
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 107,061 $ 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 NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
(In Thousands)
(unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
September 30,
------------------------
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES 1998 1997
---- ----
Net Income $ 11,351 $ 10,516
Adjustments for noncash items included in net income:
Depreciation and amortization 2,481 1,901
Restructuring charge --- 3,420
Deferred income taxes --- (450)
Operating requirements:
Accounts receivable decrease 1,935 97
Inventories decrease (increase) 2,145 (3,208)
Prepaid expenses decrease 31 329
Accounts payable & accrued expenses (decrease) increase (11,765) 1,577
Discontinued operations (decrease) (2,175) (6,636)
---------- ----------
Net cash provided (used in) by operating activities 4,003 7,546
---------- ----------
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of plant and equipment, net of retirements (1,439) (6,031)
Equity investment in joint venture (3,340) ---
Decrease in other assets 165 (162)
---------- ----------
Net cash (used in) investing activities (4,614) (6,193)
---------- ----------
CASH FLOW FROM FINANCING ACTIVITIES
Decrease in long-term liabilities (712) (610)
Proceeds from short-term borrowings --- 18,620
Payment of short-term borrowings --- (19,620)
Issuance of common stock 371 922
---------- ----------
Net cash (used in) provided by financing activities (341) (688)
---------- ----------
Net (decrease) increase in cash and cash equivalents (952) 665
Cash & cash equivalents, beginning of period 5,994 5,030
---------- ----------
Cash & cash equivalents, end of period $ 5,042 $ 5,695
---------- ----------
---------- ----------
Cash paid during the period for interest 753 1,004
Cash paid during the period for income taxes 5,816 5,016
</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 nine month periods ended September 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
Industries, Inc. and its subsidiaries ("Rohn" or "the Company"). All
significant inter-company transactions have been eliminated in consolidation.
The Company accounts for its 49% interest in Rohn BrasilSat, a joint venture
in Brazil, under the equity method.
(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 nine months ended September 30, 1998 and 1997, the
effect of potentially dilutive stock options was 7,000 and 105,000,
respectively. For the three months ended September 30, 1998 and 1997, the
effect of potentially dilutive stock options was 1,000 for each time period.
The Company had additional outstanding stock options of 1,153,000 as of
September 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
(In Thousands):
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
------------- ------------
<S> <C> <C>
Finished goods $ 14,658 $ 12,181
Work-in-process 6,287 7,060
Raw materials 10,654 14,503
--------- ---------
Total Inventories $ 31,599 $ 33,744
--------- ---------
--------- ---------
</TABLE>
(5) INVESTMENT IN JOINT VENTURE
In December 1997, the Company formed a joint venture with BrasilSat
Harald, S.A., Brazil's largest tower manufacturer and installer, to serve the
growing telecommunications infrastructure industry in Brazil and the rest of
South America. Rohn owns 49 percent of the joint venture, which will operate
under the name Rohn BrasilSat.
The joint venture is currently constructing production and galvanizing
facilities in Curitiba, Brazil for the manufacture of concrete and
lightweight composite equipment enclosures, tapered steel poles , and
self-supporting and guyed towers. The joint venture will also provide
complete installation services, as well. As part of the agreement, BrasilSat
will become the exclusive distributor for Rohn's self-supporting and guyed
tower in Brazil, while Rohn has exclusive rights to distribute BrasilSat
brand tower worldwide except in Brazil.
The Company accounts for the joint venture under the equity method. The
investment Rohn BrasilSat amounted to $3.3 million at September 30, 1998.
There was no investment in Rohn BrasilSat in 1977. The Company has recorded
a loss of $233,000 in the accompanying consolidated statements of income,
which represents the Company's share of the start-up losses. The Company
expects Rohn BrasilSat to start shipping products to customer in the fourth
quarter of 1998.
6
<PAGE>
(6) 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.
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 for the
three months and nine months ended September 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 Nine Months
ended September 30, ended September 30,
--------------------- ----------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 78.8 74.0 74.4 70.5
----- ----- ----- -----
Gross profit 21.2 26.0 25.6 29.5
S, G & A expense 8.4 11.3 10.8 11.1
Restructuring charge --- 9.1 --- 3.0
----- ----- ----- -----
Operating income 12.8 5.6 14.8 15.4
Interest expense, net 0.2 0.5 0.3 0.5
----- ----- ----- -----
Income before income taxes 12.6 5.1 14.5 14.9
Income tax provision 4.7 1.9 5.5 5.7
Equity loss of joint venture 0.4 --- 0.2 ---
----- ----- ----- -----
Net income from continuing operations 7.5% 3.2% 8.8% 9.2%
----- ----- ----- -----
----- ----- ----- -----
</TABLE>
7
<PAGE>
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998
Net sales for the third quarter ended September 30, 1998 were $47.5
million in comparison to $37.4 million, an increase of 27.0% over the same
period a year ago. The Company had sales increases in the third quarter in
all three product categories - towers, enclosures and distributor products of
20.8%, 31.9% and 48.7% respectively. The increase in sales was due to the
following factors: the Company's strategy to aggressively increase market
share for its tower products and enclosure sales continuing to benefit from a
wider range of applications within the communication industry
Gross profit for the third quarter of 1998 was $10.1 million versus $9.7
million in the third quarter of 1997, a increase of 3.4%. As a percent to
sales, gross profit margin was 21.2% for the current quarter in comparison to
26.0% for the same period a year ago. The 4.8 percentage point decrease was
primarily attributable to significant pricing pressures for the Company's
tower products. The gross profit margin percentage for towers was 18.6% in
the third quarter of 1998 down from 29.6% for the same period in 1997.
Gross profit margins for the Company's other principal product lines were
increased over the prior year's third quarter.
Selling, general and administrative ("S, G & A") expenses were $4.0
million in the third quarter of 1998 versus $4.2 million for the same period
a year ago. In comparison to the prior year, S, G & A expenses decreased by
$0.2 million or by 6.4%. The decrease in operating expenses was achieved
despite 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 third quarter were $0.07 a
share versus $0.02 in the third quarter of 1997. The earnings per share in
the third quarter of 1997 included the impact of $3.4 million ($2.1 million
after-tax or $0.04 per share) special charge 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.
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
Net sales for the nine months ended September 30, 1998 were $128.5
million in comparison to $114.0 million, an increase of 12.7% 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 by 2.8% 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. The price competition that
was initially experienced in the first quarter of 1998 has intensified during
the year.
8
<PAGE>
Gross profit for the first nine months of 1998 was $32.9 million versus
$33.7 million a year ago. As a percentage to sales, gross profit margin was
25.6% for the first nine months in comparison to 29.5% for the same period a
year ago. The 3.9 percentage point decrease was primarily due to intense
price competition for the Company's tower products. The gross profit margins
for tower products for the first nine months of 1998 were 26.9% in comparison
to 34.9% for the same period in 1997. It is not known how long this pricing
pressure will continue.
S, G & A expenses were $13.8 million in the first nine months of 1998 in
comparison to $12.7 million in the first nine months of 1997. In comparison
to the prior year, S, G & A expenses increased by $1.1 million or by 9.2%.
The increase in operating expenses was primarily related to an increase in
sales and marketing costs. The Company has invested in additional sales,
project management and customer service personnel and enhanced sales tools
such as catalogues and trade shows to reverse the domestic market share
losses in towers. Also, the Company has increased its spending to improve
its worldwide market presence.
Earnings per share (basic and diluted) were $0.22 per share for the nine
months ended September 30, 1998 in comparison to $0.20 per share for the same
period a year ago. The earnings per share in 1997 included the impact of
$3.4 million ($2.1 million after-tax or $0.04 per share) special charge 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
implantation of this program.
LIQUIDITY AND CAPITAL RESOURCES
The following table sets forth selected information concerning the
Company's financial condition:
<TABLE>
<CAPTION>
September 30, December 31,
(Dollars in Millions) 1998 1997
--------------------- ---- ----
<S> <C> <C>
Cash $ 5.0 $ 6.0
Working capital 48.1 39.3
Total debt 11.5 12.2
Current ratio 2.79:1 2.00:1
</TABLE>
The Company's working capital was $48.1 million at September 30, 1998
compared to $39.3 million at December 31, 1997, an increase of $8.8 million.
This increase in working capital primarily reflected an $12.2 million
decrease in current liabilities offset by a $1.9 million reduction in
accounts receivable and a $2.1 million decrease in inventory.
9
<PAGE>
At September 30, 1998, the Company had long-term indebtedness of $11.5
million including current maturities of long-term debt. The Company's
long-term 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.
INVESTMENT IN JOINT VENTURE
In December 1997, the Company formed a joint venture with BrasilSat
Harald, S.A., Brazil's largest tower manufacturer and installer, to serve the
growing telecommunications infrastructure industry in Brazil and the rest of
South America. Rohn owns 49 percent of the joint venture, which will operate
under the name BrasilSat.
The Joint venture is currently constructing production and galvanizing
facilities in Curitiba, Brazil for the manufacture of concrete and
lightweight composite equipment enclosures, tapered steel poles, and
self-supporting and guyed towers. The joint venture will also provide
complete installation services, as well. As part of the agreement, BrasilSat
will become the exclusive distributor for Rohn's self-supporting and guyed
tower in Brazil, while Rohn has exclusive rights to distribute BrasilSat
brand tower worldwide except in Brazil.
The Company accounts for the joint venture under the equity method. The
investment Rohn BrasilSat amounted to $3.3 million at September 30, 1998.
There was no investment in Rohn BrasilSat in 1977. The Company has recorded
a loss of $233,000 in the accompanying consolidated statements of income,
which represents the Company's share of the start-up losses. The Company
expects Rohn BrasilSat to start shipping products to customer in the fourth
quarter of 1998.
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.
10
<PAGE>
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 remain very
actively engaged in this process. At this time, it is not possible 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.
11
<PAGE>
PART II - OTHER INFORMATION
ITEM 5 OTHER INFORMATION
Details pertaining to the Company's annual meeting of stockholders
have not been established by the Board of Directors at this time.
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: November 10, 1998 /s/ David V. LaRusso
- ------------------------- ----------------------------------------------
David V. LaRusso
Vice President and Chief Financial Officer
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 5,042
<SECURITIES> 0
<RECEIVABLES> 33,507
<ALLOWANCES> 1,694
<INVENTORY> 31,599
<CURRENT-ASSETS> 74,875
<PP&E> 47,241
<DEPRECIATION> (20,788)
<TOTAL-ASSETS> 107,061
<CURRENT-LIABILITIES> 26,790
<BONDS> 10,507
0
0
<COMMON> 535
<OTHER-SE> 69,229
<TOTAL-LIABILITY-AND-EQUITY> 107,061
<SALES> 128,537
<TOTAL-REVENUES> 128,537
<CGS> 95,651
<TOTAL-COSTS> 13,844
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 383
<INCOME-PRETAX> 18,659
<INCOME-TAX> 7,075
<INCOME-CONTINUING> 11,584
<DISCONTINUED> 0
<EXTRAORDINARY> 233
<CHANGES> 0
<NET-INCOME> 11,351
<EPS-PRIMARY> 0.22
<EPS-DILUTED> 0.22
</TABLE>
