<PAGE>
UNITED STATES
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, 1999
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
IRS 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>
<CAPTION>
Shares Outstanding
as of August 11, 1999
---------------------
<S> <C>
Common Stock $.01 par value.............. 52,752,259
</TABLE>
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ROHN INDUSTRIES, INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
---------------------------- --------------------------
June 30, June 30, June 30, June 30,
1999 1998 1999 1998
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
Net sales $ 29,068 $ 39,931 $ 59,230 $ 80,996
Cost of products sold 23,706 28,442 47,151 58,178
------------ ------------ ----------- -----------
Gross profit 5,362 11,489 12,079 22,818
Operating expenses:
Selling expenses 2,072 2,486 4,125 4,528
General and administrative expenses 3,083 2,537 5,574 5,354
------------ ------------ ----------- -----------
Operating income 207 6,466 2,380 12,936
Interest expense(income), net 124 160 (17) 296
Other expense ---- ---- 1,600 ----
------------ ------------ ----------- -----------
Income before income taxes 83 6,306 797 12,640
Income tax provision 25 2,475 250 4,850
Equity loss of corporate joint venture 57 0 57 0
------------ ------------ ----------- -----------
Net income $ 1 $ 3,831 $ 490 $ 7,790
------------ ------------ ----------- -----------
------------ ------------ ----------- -----------
Earnings per share - basic and diluted $ 0.00 $ 0.07 $ 0.01 $ 0.15
------------ ------------ ----------- -----------
------------ ------------ ----------- -----------
Weighted average number of shares outstanding
Basic 52,784 52,829 52,798 52,718
------------ ------------ ----------- -----------
------------ ------------ ----------- -----------
Diluted 52,821 52,840 52,819 52,728
------------ ------------ ----------- -----------
------------ ------------ ----------- -----------
</TABLE>
The accompanying notes to the financial statements are an integral part of these
statements.
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<PAGE>
ROHN INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ASSETS June 30, 1999 December 31,
(unaudited) 1998
------------- ------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 19,642 $ 19,690
Accounts, notes and other receivables, less allowance
for doubtful accounts of $1,165 in 1999 and $1,200 in 1998 24,033 28,588
Inventories 26,144 27,444
Deferred income taxes 2,600 2,600
Prepaid expenses 991 1,794
--------- ---------
TOTAL CURRENT ASSETS 73,410 80,116
--------- ---------
Property, plant and equipment 49,203 48,025
Less: accumulated depreciation (23,076) (21,395)
--------- ---------
TOTAL PROPERTY, PLANT AND EQUIPMENT 26,127 26,630
--------- ---------
Other assets 4,933 5,277
Long-term assets of discontinued operations 1,680 2,169
--------- ---------
TOTAL ASSETS $ 106,150 $ 114,192
--------- ---------
--------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term liabilities $ 1,030 $ 1,017
Accounts payable 5,760 11,331
Accrued liabilities & other 12,621 14,846
Customer deposits 61 940
Net liabilities of discontinued operations 1,300 1,152
--------- ---------
TOTAL CURRENT LIABILITIES 20,772 29,286
Long-term debt 9,707 10,253
Nonpension post retirement benefits 2,241 2,074
--------- ---------
TOTAL LIABILITIES 32,720 41,613
--------- ---------
STOCKHOLDERS' EQUITY
Common stock 534 535
Capital surplus 12,793 13,024
Retained earnings 64,993 64,503
Treasury stock (3,896) (3,896)
Unearned portion of restricted stock (994) (1,587)
--------- ---------
TOTAL STOCKHOLDERS' EQUITY 73,430 72,579
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 106,150 $ 114,192
--------- ---------
--------- ---------
</TABLE>
The accompanying notes to the financial statements are an integral part of these
statements.
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<PAGE>
ROHN INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
June 30,
-----------------------
1999 1998
------- --------
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net income $ 490 $ 7,790
Adjustments for noncash items included in net income:
Depreciation and amortization 1,682 1,756
Operating requirements:
Accounts receivable decrease 4,555 5,006
Inventories decrease/(increase) 1,300 (155)
Prepaid expenses decrease 803 92
Accounts payable & accrued expenses (decrease)/increase (8,674) (10,216)
Discontinued operations increase/(decrease) 148 (998)
------- --------
Net cash provided by operating activities 304 3,275
------- --------
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of plant and equipment, net of retirements (1,179) (2,313)
Decrease/(increase) in other assets 833 (212)
------- --------
Net cash used in investing activities (346) (2,525)
------- --------
CASH FLOW FROM FINANCING ACTIVITIES
Repayment of borrowings (533) (478)
Increase in long-term liabilities 167 ---
Cancellation of common stock 360 233
------- --------
Net cash used in financing activities (6) (245)
------- --------
Net increase/(decrease) in cash and cash equivalents (48) 505
Cash & cash equivalents, beginning of period 19,690 5,994
------- --------
Cash & cash equivalents, end of period $19,642 $ 6,499
------- --------
------- --------
Cash paid during the period for interest 211 249
Cash paid during the period for income taxes --- 3,201
</TABLE>
The accompanying notes to the financial statements are an integral part of these
statements.
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<PAGE>
ROHN INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED FINANCIAL STATEMENTS
(1) BASIS OF REPORTING FOR INTERIM FINANCIAL STATEMENTS
The Company, pursuant to the rules and regulations of the Securities
and Exchange Commission, has prepared the unaudited financial statements
included herein. 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, 1998.
The financial statements presented herewith reflect all adjustments
(consisting of only normal and recurring accruals) which, in the opinion of
management, are necessary for a fair presentation of the results of operations
for the three-month and six month periods ended June 30, 1999 and 1998. The
results of operations for interim periods are not necessarily indicative of
results to be expected for an entire year.
(2) REVENUE RECOGNITION
The Company's products have been manufactured according to stringent
customer specifications and engineering design, and are available for immediate
delivery according to the schedule requested by the customer. Revenue is
generally recognized when the product is shipped. However, the Company
recognizes revenue for its Tower Structures segment prior to the time a product
is shipped if each of the following conditions are met:
1. The risks of ownership have passed to the customer;
2. The customer has a fixed commitment to purchase the goods;
3. The customer, not the Company, has requested that the shipment
of the product be delayed and that the transaction be on a bill
and hold basis;
4. There is a fixed schedule for delivery of the product;
5. The Company has not retained any specific performance
obligations with respect to the product such that the
earnings process is not complete;
6. The ordered product has been segregated from the
Company's inventory and is not subject to being used to
fill other orders; and
7. The product is complete and ready for shipment.
The Enclosures segment differs from Tower Structures in that
enclosures are generally ordered by the customer in multiple units on a project
basis and are not necessarily site specific. Therefore, the revenue recognition
policy for enclosures also requires that actual payment be received for
enclosures on a bill and hold basis.
(3) 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 corporate joint venture in
Brazil, under the equity method.
(4) NET INCOME 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, 1999 and 1998, the effect of
potentially dilutive stock options was 21,000 and 10,000, respectively. For the
three months ended June 30, 1999 and 1998, the effect of potentially
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<PAGE>
dilutive stock options was 37,000 and 11,000, respectively. The Company had
additional outstanding stock options of 745,000 as of June 30, 1999, 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) 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>
June 30, December 31,
1999 1998
-------- ------------
<S> <C> <C>
Finished goods $ 12,827 $ 14,514
Work-in-process 5,754 4,650
Raw materials 7,563 8,280
-------- --------
Total Inventories $ 26,144 $ 27,444
-------- --------
-------- --------
</TABLE>
(6) INVESTMENT IN JOINT VENTURE
In December 1997, the Company formed a corporate 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 corporate joint
venture, which operates under the name ROHN BrasilSat, S.A.
The corporate joint venture is currently constructing production
facilities in Curitiba, Brazil for the manufacture of concrete and
lightweight composite equipment enclosures, tapered steel poles, and
self-supporting and guyed towers. The corporate joint venture will also
provide complete installation services. As part of the agreement between the
parties, ROHN BrasilSat is the exclusive distributor for ROHN's
self-supporting and guyed towers in Brazil, while ROHN has exclusive rights
to distribute BrasilSat brand towers worldwide except in Brazil.
The Company accounts for the corporate joint venture under the equity
method. The Company's investment in ROHN BrasilSat amounted to $3.2 million at
June 30, 1999. The Company recorded a loss of $57,000 in the second quarter of
1999, which represented the Company's share of the operating losses of the
entity. The Company recorded a loss of $540,000 in the third and fourth quarter
of 1998, which represented the Company's share of the start-up losses during the
first year of operation.
(7) 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.
(8) NEW ACCOUNTING STANDARDS
In 1999, the Company adopted Statement of Financial Accounting
Standards No. 133 (SFAS 133),
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<PAGE>
"Accounting for Derivative Instruments and Hedging Activities", which
establishes accounting and reporting standards for derivative instruments and
for hedging activities. It requires that an entity recognize all derivatives
as either assets or liabilities in the statement of financial position and
measure those instruments at fair value. The Company does not currently
engage in these types of transactions.
(9) BUSINESS SEGMENT INFORMATION
The Company operates in two business segments: Tower
Structures and Enclosures. The segments are managed as strategic business units
due to their distinct manufacturing processes and potential end-user
application. The Tower Structures segment includes manufacturing plants in
Peoria, Illinois and Frankfort, Indiana, as well as a world-wide sales,
marketing and distribution effort. The Enclosures segment includes a
manufacturing plant in Bessemer, Alabama and shares the Tower Structures
segment's sales and marketing resources.
Accounting policies for measuring segment assets and earnings
before interest and taxes are substantially consistent with those described in
Note 1. The Company evaluates segment performance based on earnings before
interest and taxes. Transfers between segments, which are not material in
nature, are recorded at cost.
<TABLE>
<CAPTION>
Tower
For the three months ended June 30, Structures Enclosures
Segment Segment Total
---------- ---------- -----
<S> <C> <C> <C>
1999
----
Net sales $21,270 $ 7,798 $ 29,068
Operating income/(loss) (643) 850 207
Depreciation and amortization 691 134 825
Segment assets $77,666 (1) $28,484 $106,150
1998
----
Net sales $23,157 $16,774 $ 39,931
Operating income 2,904 3,562 6,466
Depreciation and amortization 839 164 1,003
Segment assets $62,496 (2) $42,493 $104,989
</TABLE>
<TABLE>
<CAPTION>
Tower
For the six months ended June 30, Structures Enclosures
Segment Segment Total
---------- ---------- -------
<S> <C> <C> <C>
1999
----
Net sales $42,572 $16,658 $ 59,230
Operating income/(loss) (409) 2,789 2,380
Depreciation and amortization 1,390 292 1,682
Segment assets $77,666 (1) $28,484 $106,150
1998
----
Net sales $50,221 $30,775 80,996
Operating income 6,425 6,511 12,936
Depreciation and amortization 1,433 323 1,756
Segment assets $62,496 (2) $42,493 $104,989
</TABLE>
(1) Includes equity investment in ROHN BrasilSat of $3.2 million
(2) Includes equity investment in ROHN BrasilSat of $214,000
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<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 for the three
months and six months ended June 30, 1999. This discussion should be read in
conjunction with the consolidated financial statements and notes to the
consolidated financial statements contained in item 1 above and the consolidated
financial statements and related notes included in the Company's Annual Report
on Form 10-K for the year ended December 31, 1998.
RESULTS OF OPERATIONS
ROHN is a leading manufacturer and installer of wireless infrastructure
equipment for the communication's 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,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 81.6 71.2 79.6 71.8
----- ----- ----- -----
Gross profit 18.4 28.8 20.4 28.2
S,G&A expense 17.7 12.6 16.4 12.2
----- ----- ----- -----
Operating income .7 16.2 4.0 16.0
Interest expense/(income), net .4 .4 (.1) .4
Other expense 0.0 0.0 2.7 0.0
----- ----- ----- -----
Income before income taxes .3 15.8 1.4 15.6
Income tax provision .1 6.2 0.4 6.0
Equity loss of corporate joint venture .2 0.0 .1 0.0
----- ----- ----- -----
Net income from continuing operations 0.0% 9.6% 0.9% 9.6%
----- ----- ----- -----
----- ----- ----- -----
</TABLE>
FOR THE THREE MONTHS ENDED JUNE 30, 1999
Net sales for the second quarter ended June 30, 1999 were $29.1
million compared to $39.9 million in the second quarter of 1998, a decrease
of 27.1%. The decreases in sales by business segment were as follows:
<TABLE>
<CAPTION>
Dollar Percentage
For the three months ended June 30, 1999 1998 Decrease Decrease
- ------------------------------------ ----- ----- -------- --------
<S> <C> <C> <C> <C>
Tower Structures $21.4 $23.6 (2.2) (9.3%)
Enclosures 7.7 16.3 (8.6) (52.8%)
----- ----- ------ ----
Total $29.1 $39.9 $(10.8) (27.1%)
----- ----- ------ ----
----- ----- ------ ----
</TABLE>
The decrease in sales in the tower structures segment was primarily the
result of a continuation in the softness of the installation and erection of
towers within the Company's construction business. The decrease in sales in the
enclosures segment was primarily due to a reduction in sales volume to a
provider of a high-speed broadband fiber optic network whose buildout is now
nearing completion.
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<PAGE>
The Company expects sales in the remaining quarters of the year to be
stronger than the first two quarters due to normal seasonality in the business
and increased international sales activity. Nonetheless, the Company expects
sales for the 1999 fiscal year to be significantly below 1998 sales levels.
Gross profit for the second quarter of 1999 was $5.4 million versus
$11.5 million in the second quarter of 1998, a decrease of 53.0%. As a
percentage to sales, gross profit margin was 18.4% for the current 1999
quarter in comparison to 28.8% for the same period a year ago. The 10.4
percentage point decrease was mainly attributable to non-recurring charges
taken during the quarter and the continuation of significant industry wide
pricing pressures in the tower and enclosure markets. The non-recurring
charges include a $1 million charge for severance payments relating to a
reduction in workforce (of which $250,000 affected gross profit margins), and
a $1.5 million charge for excess and obsolete inventory which also affected
gross profit margins. Together, these charges had a significant negative
impact on gross profit margins. Without these non-recurring charges, the
gross profit margin percentage for the second quarter would have been 24.7%.
Gross profit margins on manufactured towers, however, continue to increase.
In the last 3 quarters, gross profit margins on manufactured towers were
18.2%, 20.9% and 25.8% (exclusive of the non-recurring charges) for the
fourth quarter of 1998, first quarter of 1999 and the second quarter of 1999,
respectively.
Selling, general and administrative ("SG&A") expenses were $5.2 million
in the second quarter of 1999 versus $5.0 million in the second quarter of 1998.
The second quarter of 1999 included a charge of $1 million for severance
payments relating to a reduction in workforce of which $750,000 was included in
SG&A costs. Without the non-recurring charge for severance payments, SG&A
expenses for the second quarter of 1999 would have been $4.4 million. The
decrease in operating expenses, exclusive of the non-recurring charge, reflects
the continuation of the Company's efforts to reduce operating expenses, while at
the same time, not reversing the investments made to enhance customer service
and sales related activities.
Earnings per share (basic and diluted) in the second quarter of 1999
were $0.0 versus $0.07 in the second quarter of 1998. Earnings per share for the
second quarter of 1999 were negatively impacted by $0.03 due to the expenses
associated with the non-recurring charges taken for the reduction in workforce
and excess and obsolete inventory.
FOR THE SIX MONTHS ENDED JUNE 30, 1999
Net sales for the six months ended June 30, 1999 were $59.2 million
compared to $81.0 million, a decrease of 26.9%, from the same period a year ago.
The decrease in sales is mainly the result of a continued softness in
the installation and erection of tower structures within the Company's
construction business, and a decrease in sales in the enclosures segment
primarily due to a reduction in sales volume to a provider of a high-speed
broadband fiber optic network whose buildout is now nearing completion.
Gross profit for the first six months of 1999 was $12.1 million versus
$22.8 million for the same period a year ago. As a percentage of sales, gross
profit margin was 20.4% for the first half in comparison to 28.2% for the same
period a year ago. The 7.8% drop was primarily due to two factors. The first was
continued price competition in the market for the Company's products, and the
second was non-recurring charges of $1 million relating to reductions in
workforce ($250,000 of which affected gross profit margins) and a $1.5 million
charge for excess and obsolete inventory.
SG&A expenses were $9.7 million in the first six months of 1999
compared to $9.9 million in the first half of 1998. In comparison to the
previous year, SG&A expenses decreased $200,000 or 2%. SG&A expense for the
first six months of 1999 includes $750,000 of the $1 million charge for
severance costs relating to the reduction in workforce. Without this
non-recurring charge, SG&A expense for the first six months of 1999 would have
been $8.9 million, or a 10% reduction from the previous year.
Other expense of $1.6 million for the six months ended June 30, 1999
relates to fees and expenses in connection with the proposed merger with
PiRod holdings, Inc, which was terminated on March 31, 1999.
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<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The following table sets forth selected information concerning the
Company's financial condition:
<TABLE>
<CAPTION>
(Dollars in thousands)
June 30, 1999 December 31, 1998
------------- -----------------
<S> <C> <C>
Cash $19,642 $19,690
Working capital 52,637 50,830
Total debt 10,737 11,270
Current ratio 3.53:1 2.73:1
</TABLE>
The Company's working capital was $52.6 million at June 30, 1999
compared to $50.8 million at December 31, 1998, an increase of $1.8 million.
At June 30, 1999, the Company had long-term indebtedness of $10.7
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 corporate 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 corporate joint venture,
which operates under the name ROHN BrasilSat, S.A.
The corporate joint venture is currently constructing production
facilities in Curitiba, Brazil for the manufacture of concrete and lightweight
composite equipment enclosures, tapered steel poles, and self-supporting and
guyed towers. The corporate joint venture will also provide complete
installation services. As part of the agreement between the parties, BrasilSat
is the exclusive distributor for ROHN's self-supporting and guyed towers in
Brazil, while ROHN has exclusive rights to distribute BrasilSat brand towers
worldwide except in Brazil.
The Company accounts for the corporate joint venture under the equity
method. The Company's investment in ROHN BrasilSat amounted to $3.2 million at
June 30, 1999. The Company recorded a loss of $57,000 in the second quarter of
1999 which represented the Company's share of the operating losses of the
entity. The Company recorded a loss of $540,000 in the third and fourth quarter
of 1998, which represented the Company's share of the start-up losses during the
first year of operation.
INFLATION
Inflation has not had a material effect on the Company's business or
results of operation.
SEASONALITY
The Company has periodically experienced and expects to continue to
experience significant fluctuations in its quarterly results. The Company has
seen disruptions in its customer's ability to accept shipments due to unusual
and prolonged weather-related construction delays. Also, it is believed that
quarterly fluctuations are due to the capital budgeting cycle of many of its
customers who often purchase a disproportionately higher share of the Company's
products at the end of the calendar year. It is expected that fluctuations in
quarterly results could become more significant in the future as customers move
to a more centralized purchasing environment and as the consolidation of
wireless communication service providers and build to suit customers continue.
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<PAGE>
RECENT DEVELOPMENTS
On December 22, 1998, the Company and PiRod Holdings, Inc. ("PiRod"), a
privately held company headquartered in Plymouth, Indiana, signed a merger
agreement (the "Merger Agreement") that provided that PiRod would be merged with
the Company and up to 52.5 percent of the outstanding shares of Company common
stock would be converted into the right to receive $3.78 per share in cash.
PiRod shares would be converted into a total of approximately 7.9 million shares
of Company common stock.
On March 31, 1999, the Company announced that the continued slowdown in
the buildout of wireless telephone systems affected the results of operations of
both companies and the amount of financing available for the proposed
transaction. As a result, the parties mutually agreed to terminate the Merger
Agreement. The Company incurred approximately $1.1 million, net of taxes, in
fees and expenses in connection with the proposed merger. These expenses were
recognized by the Company in the first quarter of 1999, resulting in an adverse
impact on earnings of approximately $0.02 per share.
In May 1999, the Board of Directors, in discussions with the UNR
Asbestos-Disease Claims Trust, concluded not to pursue a sale of the Company or
merger of the Company with a strategic partner at such time. The Board
announcement also noted that it would continue to examine alternatives that are
consistent with the objective of enhancing long-term value for shareholders.
MARKET RISK SENSITIVITY
The Company has very limited exposure to market rate sensitivity and
adverse impacts would not be material to its financial results. The principal
market risks to which the Company is currently exposed to or may be exposed to
during 1999 or beyond are changes in interest rates and foreign currency
exchange rates.
The Company currently manages its exposure to changes in interest rates
by utilizing primarily all fixed rate debt. In the future, it is expected that
if additional debt is incurred, the Company would manage its exposure to changes
in interest rates by optimizing the use of variable-rate and fixed-rate debt and
by utilizing interest rate swaps. International operations, which accounted for
less than 10% of 1998 net sales, are concentrated principally in Mexico and
Brazil. In the future, it is expected that if significant growth is incurred in
international operations, the Company would manage its exposure to changes by
borrowing in foreign currencies and by utilizing either cross-currency swaps or
forward contracts. Such swaps or forward contracts would be entered into for
periods consistent with related underlying exposures and would not constitute
positions independent of those exposures. The Company would not enter into
contracts for speculative purposes.
YEAR 2000 COMPLIANCE
Historically, certain computer programs were written using two digits
rather than four to define the applicable year. Accordingly, the Company's
software may recognize a date using "OO" as 1900 rather than the year 2000,
which could result in computer system failures or miscalculations, commonly
referred to as the Year 2000 ("Y2K") issue. The Y2K issue can arise at any point
in the company's supply, manufacturing, processing, distribution and financial
chains. Incomplete or untimely resolution of the Y2K issue by the company, key
suppliers, customers and other parties could have a material adverse effect on
the Company's results of operations, financial condition and cash flows.
The Company's plan for addressing the Y2K issue is divided into three
major phases: Business Systems Inventory and Assessment, Redemption and
Replacement, and Testing.
BUSINESS SYSTEMS INVENTORY AND ASSESSMENT - The internal inventory
portion of this phase, completed in 1997, was designed to identify internal
business systems that were susceptible to system failure or processing errors as
a result of the Y2K issue. In addition, the Company is in the process of
completing the inventory and assessment of its non-information technology
systems (Non-IT). The remediation and replacement of these systems, which
include manufacturing production lines and equipment, heating, ventilation and
air conditioning systems and water treatment systems, are included in the
remediation and replacement plan discussed below. As
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<PAGE>
part of this phase, significant service providers, vendors, suppliers,
customers and governmental entities that are believed to be critical to
business operations after January 1, 2000, are being identified and steps
undertaken to ascertain their stage of Y2K readiness through questionnaires,
interviews, and other available means.
REMEDIATION AND REPLACEMENT - The Company has developed and is in the
process of implementing its remediation and replacement plan for all affected
systems including IT and Non-IT systems. This phase is approximately 75%
complete. The Company's plan established priorities for remediation or
replacement. The business systems considered most critical to ongoing operations
were given the highest priority. The Company has prioritized its business
systems into "Mission Critical" and "All Other." "Mission Critical" systems are
defined as business systems such as Business Planning and Control Process
manufacturing, Sales Order Billing and Inventory Control systems, that, if shut
down or interrupted, could have a material adverse effect on the Company's
results of operations, financial condition and cash flows. "All Other" systems
are defined as business systems such as Job Bidding systems that, if shut down
or interrupted, may have an adverse impact on the Company. The Company is
utilizing internal and external resources to execute the plan and has
substantially completed all remediation and replacement of "Mission Critical"
systems and expects to complete "All Other" systems by the beginning of the
fourth quarter 1999. The Company is on schedule to meet these objectives.
TESTING - This phase is ongoing as systems are remediated and replaced.
The Company's efforts in this phase include testing by users and determination
by appropriate local and Y2K project management that the remediated or replaced
systems are Y2K compliant. The Company expects to substantially complete testing
of "Mission Critical" systems by third quarter 1999 and "All Other" systems
during the fourth quarter of 1999.
The Company surveyed its primary and critical raw material, utility
and transportation suppliers for Y2K compliance. The Company completed this
process in July 1999. The Company will establish contingency plans to obtain
the goods and services provided by any vendors determined to be non-compliant
at the end of August 1999. Since substantially all of these goods and
services are generally viewed as commodities, and are available from many
different sources at comparable prices, the Company has elected not to use
independent verification and validation of vendors' Y2K compliance through a
third party. The cost of the internally conducted surveying process is
expected to be approximately $0.1 million in 1999.
Because the Company's Y2K compliance is dependent upon key third
parties also being Y2K compliant on a timely basis, there can be no guarantee
that the Company's efforts will prevent a material adverse impact on its results
of operations, financial condition and cash flows. The possible consequences to
the Company or its business partners not being fully Y2K compliant include
temporary plant closings, delays in the delivery of finished products, delays in
the receipt of key raw materials and supplies, invoice and collection errors,
and inventory and supply obsolescence. These consequences could have a material
adverse impact on the Company's results of operations, financial condition and
cash flows if the Company is unable to conduct its business in the ordinary
course. The Company believes that its readiness program, including the
contingency plans discussed below, should significantly reduce the adverse
effect any such disruptions may have.
The Company is developing contingency plans to mitigate the potential
disruptions that may result from the Y2K issue. These plans may include
identifying and securing alternate suppliers of key raw materials, stockpiling
of finished component inventories and other measures considered appropriate by
management. Once developed and approved, contingency plans, and the related cost
estimates, will be continually refined, as additional information becomes
available. Because the testing phase is ongoing, the Company has not identified
which of the contingency plans that will be implemented. All contingency plans
are expected to be completed by the end of the third quarter in 1999.
The Company currently estimates that the aggregate cost of its Y2K
efforts will be approximately $4.7 million, of which $4.6 million has been
incurred to date. These costs, except for capital costs of approximately $4.5
million, are being funded through operating cash flows. The Company expects to
incur Y2K costs of approximately $ 0.1 million in 1999.
-12-
<PAGE>
FORWARD-LOOKING INFORMATION
Matters discussed in this report contain forward-looking statements
which reflect management's current judgment. Statements containing words such as
"believes," "expects," "anticipates," or similar expressions are forward-looking
statements. Many factors, some of which are discussed elsewhere in this
document, could affect the future financial results of the Company and could
cause those results to differ materially from those expressed in the
forward-looking statements contained in this document. These factors include
operating, legal and regulatory risks, economic, political and competitive
forces affecting the telecommunications and equipment business, and the risk
that the Company's analyses of these risks and forces could be incorrect or that
the strategies developed to address them could be unsuccessful.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
See "Market Risk Sensitivity" under Item 2.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURIITES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS ON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its Annual Meeting of Stockholders on May 18, 1999.
The following matters were voted upon:
Proposal 1: Election of Directors. The following nominees were elected
to serve as directors of the Company, to serve until the next annual meeting or
until their successors are elected and qualified, by the following vote:
<TABLE>
<CAPTION>
Nominee For Against Abstentions Broker Non-Votes
------- --- ------- ----------- ----------------
<S> <C> <S> <C> <C>
John H. Laeri, Jr. 45,803,659 3,837,396 --- ---
Michael E. Levine 45,827,359 3,813,696 --- ---
Gene Locks 45,823,781 3,817,274 --- ---
Brian B. Pemberton 43,925,025 5,716,030 --- ---
Alan Schwarz 45,837,033 3,804,022 --- ---
</TABLE>
Proposal 2: Approval of the 1999 Stock Option Plan. The ROHN
Industries, Inc. 1999 Stock Option Plan was approved by the following vote:
-13-
<PAGE>
<TABLE>
<CAPTION>
For Against Abstentions Broker Non-Votes
--- ------- ----------- ----------------
<S> <C> <C> <C>
41,766,312 7,704,771 169,972 ---
</TABLE>
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8K
(a) Exhibits
10.1 Amended and Restated ROHN Industries 1994
Non-employee Director Stock Ownership Plan
10.2 ROHN Industries, Inc. 1999 Stock Option Plan
(incorporated by reference to Exhibit A to the
Company's Definitive Proxy Statement on Schedule 14A
filed with the Securities and Exchange Commission on
April 21, 1999)
11. The computation can be determined from the report.
27. Financial data schedule.
(b) Reports on Form 8-K
On May 17, 1999 the Company filed a report on Form 8-K,
reporting under Items 5 and 7, disclosing the resignation of the
Company's chief financial officer. The Form 8-K also included the
Company's press release issued on May 14, 1999 pertaining to the
Company's announcement of this event.
On May 25, 1999 the Company filed a report on Form 8-K,
reporting under Items 5 and 7, disclosing (a) the Company's
determination (i) to take actions to reduce costs and streamline
operations and (ii) not to seek a sale of the Company or merger with a
strategic partner and (b) the resignations of certain officers. The
Form 8-K also included the Company's press release issued May 24, 1999
pertaining to the Company's announcement of these events.
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 11, 1999 /s/ Lester H. Nelson, III
- ----------------------------------------------------
Lester H. Nelson, III
Corporate Controller (and Principal
Accounting Officer)
-14-
<PAGE>
AMENDED AND RESTATED
ROHN INDUSTRIES, INC. 1994 NONEMPLOYEE DIRECTOR
STOCK OWNERSHIP PLAN
ARTICLE I - PURPOSE OF THE PLAN
The purpose of the Amended and Restated ROHN Industries, Inc. 1994 Nonemployee
Director Stock Ownership Plan, (formerly known as the URN Industries, Inc., 1994
Nonemployee Director Stock Ownership Plan) is to further the growth,
development, and financial success of the Corporation by strengthening the
Corporation's ability to attract and retain the services of experienced and
knowledgeable Nonemployee Directors by enabling them to participate in the
Corporation's growth and by linking the personal interests of Nonemployee
Directors to those of the Corporation's shareholders.
ARTICLE II - CERTAIN DEFINITIONS
Unless the context clearly indicates otherwise, the following terms shall have
the following meanings:
2.1 "AWARD" means the crediting of Stock Units to a Participant's
Stock Unit Account under the Plan.
2.2 "BOARD" means the board of directors of ROHN Industries, Inc.
2.3 "CHANGE OF CONTROL" shall mean the occurrence of any of the
following events:
(a) The acquisition, by a person or group of persons acting in
concert, of a beneficial ownership interest in the Corporation, resulting in the
total beneficial ownership of such person or group of persons equaling or
exceeding 50% of the outstanding Shares and warrants of the Corporation;
provided, however, that no such person or group of persons shall be deemed to
beneficially own (i) any Shares or warrants acquired directly from the
Corporation or (ii) any Shares or warrants held by the Corporation or any of its
subsidiaries or any employee benefit plan (or any related trust) of the
Corporation or its subsidiaries. The Change in Control shall be deemed to occur
on the date the beneficial ownership of the acquiring person or group of persons
first equals or exceeds 50% of the outstanding Shares and warrants of the
Corporation.
<PAGE>
(b) A change, within any period of twenty-four (24) months or less, in
the composition of the Board such that at the end of such period a majority of
the directors who are then serving were not serving at the beginning of such
period, unless at the end of such period the majority of the directors in office
were nominated upon the recommendation of a majority of the Board at the
beginning of such period. The Change in Control shall be deemed to occur on the
date the last director necessary to result in a Change in Control takes office
or resigns from office, as applicable.
(c) Approval by securityholders of the Corporation of a merger,
consolidation or other reorganization having substantially the same effect, or
the sale of all or substantially all the consolidated assets of the Corporation
in each case, with respect to which the person or group of persons who were the
respective beneficial owners of the Shares or warrants immediately prior to such
event do not, following such event, beneficially own, directly or indirectly,
more than 50% of, respectively, the then outstanding voting securities of the
corporation resulting from such event or the corporation purchasing or receiving
assets pursuant to such event. The Change in Control shall be deemed to occur
on the date on which the transaction is approved by the Corporation's
securityholders.
2.4 "CODE" means the Internal Revenue Code of 1986, as amended from
time to time.
2.5 "CORPORATION" means ROHN Industries, Inc.
2.6 "DISABILITY" means total disability within the meaning of Section
22(e)(3) of the Code.
2.7 "EMPLOYEE" means any full time worker, paid hourly or by salary,
in the employment of the Corporation or any of its subsidiaries.
2.8 "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
2.9 "FAIR MARKET VALUE" means on any date the average of the average
of the highest and lowest sales prices of Shares on the National Association of
Securities Dealers, Inc.'s Automated Quotation/National Market System
("NASDAQ/NMS") (or if Shares are not then traded on the NASDAQ/NMS, on the
principal market where Shares are actively traded) (as reported in THE WALL
STREET JOURNAL, Midwest Edition) on each of the five trading days immediately
preceding such date.
2.10 "NONEMPLOYEE DIRECTOR" means any individual who is a member of the
Board, but who is not otherwise an Employee of the Corporation.
-2-
<PAGE>
2.11 "PARTICIPANT" means a Nonemployee Director who has received an
Award under the Plan.
2.12 "PLAN" means the ROHN Industries, Inc. 1994 Nonemployee Director
Stock Ownership Plan, as amended from time to time.
2.13 "STOCK UNITS" means units credited to a Participant's Stock Unit
Account pursuant to Article V hereof.
2.14 "STOCK UNIT ACCOUNT" mean a memorandum account established on the
books of the Corporation on behalf of a Participant to which is credited a
number of Stock Units pursuant to Article V hereof.
2.15 "SHARE" means a share of common stock of the Corporation.
2.16 "SHARE DELIVERY DATE" means the date with respect to an Award
which is the earlier of (a) the fifth anniversary of the date of such Award, (b)
the termination of a Participant's service as a director, other than for cause,
or (3) a Change of Control.
ARTICLE III - ADMINISTRATION
3.1 ADMINISTRATION OF PLAN. The Plan shall be administered by the
Board, subject to the restrictions set forth in the Plan.
3.2 AUTHORITY OF THE BOARD. The Board shall have the full power,
discretion, and authority to interpret and administer the Plan in a manner which
is consistent with the Plan's provisions.
3.3 EFFECT OF BOARD DETERMINATIONS. All determinations and decisions
made by the Board pursuant to the provisions of the Plan and all related orders
or resolutions of the Board shall be final, conclusive, and binding on all
persons, including the Corporation, its shareholders, Employees, Participants
and their estates and beneficiaries.
ARTICLE IV - STOCK UNITS AND SHARES SUBJECT TO THE PLAN
4.1 NUMBER OF SHARES SUBJECT TO THE PLAN. Subject to adjustment as
provided herein, the total number of Shares available for issuance under the
Plan may not exceed 200,000. If any Stock Units or Shares Awarded under the
Plan shall be forfeited, such Shares or the Shares underlying such Stock Units
shall again become available for future Awards under the Plan.
-3-
<PAGE>
4.2 CAPITAL ADJUSTMENTS. In the event of any merger, reorganization,
consolidation, recapitalization, liquidation, stock dividend, split up, Share
combination, or other change in the corporate structure of the Corporation
affecting the Shares, the Board may make appropriate adjustments to (a)
outstanding Awards to prevent dilution or enlargement of rights, and (b) the
number of Shares available for Awards under the Plan.
ARTICLE V - STOCK UNITS AWARDS
5.1 AWARDS OF STOCK UNITS. As of each annual meeting, commencing with
the 1999 annual meeting, each Nonemployee Director shall receive, in lieu of his
or her annual retainer otherwise payable in cash, a number of Stock Units which
shall be credited to his or her Stock Unit Account on the date of the annual
meeting at which the Nonemployee Director is elected or re-elected, or if
elected or appointed to the Board other than at an annual meeting, upon the
first meeting of the Board of which such Participant serves as a Nonemployee
Director. The number of Stock Units so credited shall be determined by dividing
the annual cash retainer otherwise payable by the Fair Market Value of a Share
on the date the Stock Units are credited to the Participant's Stock Unit
Account. Each Stock Unit shall represent the right to receive one Share upon
the Share Delivery Date with respect to such Award.
5.2 DIVIDEND EQUIVALENTS. In the event of a dividend paid with
respect to Shares:
(a) in the case of a cash dividend, or a dividend of stock of the
Corporation (other than Shares) or other property, each Participant shall
receive from the Corporation an amount of such cash, stock or property, as the
case may be, as if such Participant held a number of Shares equal to the number
of Stock Units credited to such Participant's Stock Unit Account on the record
date for the payment of such dividend;
(b) in the case of a dividend consisting of Shares, each Participant's
Stock Unit Account will be credited with a number of Stock Units equal to the
number of Stock Units in such account immediately prior to such dividend
multiplied by the number of Shares paid as a dividend per Share.
5.3 VESTING. Participant's shall be fully (100%) vested in their
Stock Unit Accounts at all times.
-4-
<PAGE>
ARTICLE VI - PAYMENT OF STOCK UNIT ACCOUNT
6.1 SHARE DELIVERY DATE. Upon the Share Delivery Date with respect to
an Award, one or more certificates representing a number of Shares equal to the
number of Stock Units credited to the Participant's Stock Unit Account with
respect to such Award, including any Stock Units credited to such Award as a
result of dividend equivalents (rounded to the nearest whole number) shall be
delivered to such Participant, or in the case of the Participant's death or
Disability, to the Participant's personal representative or to the person to
whom such Shares are transferred by will or by the applicable laws of descent
and distribution. The number of Stock Units in such Nonemployee Director's
Stock Unit Account shall be reduced by the number of Shares delivered.
6.2 TERMINATION FOR CAUSE. In the event a Participant's service as a
Nonemployee Director is terminated on account of (a) fraud or intentional
misrepresentation, or (b) embezzlement, misappropriation, or conversion of
assets or opportunities of the Corporation, all Stock Units awarded to such
Participant prior to the date of termination shall be immediately forfeited.
ARTICLE VII - AMENDMENT, MODIFICATION AND TERMINATION
7.1 AMENDMENT, MODIFICATION AND TERMINATION. Subject to the terms set
forth in this Section 7.1, the Board may terminate, amend, or modify the Plan at
any time and from time to time. The Plan shall terminate when all of the Shares
subject to it have been awarded according to the provisions of the Plan.
However, in no event shall an Award be made under the Plan on or after [May 10,
2002].
Without the approval of the voting securityholders of the Corporation as
may be required by the Code, by the rules of Section 16 of the Exchange Act, by
any national securities exchange or system on which the Shares are then listed
or reported, or by a regulatory body having jurisdiction with respect hereto, no
such termination, amendment or modification may:
(a) Materially increase the total number of Shares which may be
available for grants of Awards under the Plan, except as provided in Section 4.2
herein;
(b) Materially modify the requirements with respect to eligibility to
participate in the Plan; or
(c) Materially increase the benefits accruing to Nonemployee Directors
under the Plan.
-5-
<PAGE>
7.2 AWARDS PREVIOUSLY GRANTED. Unless required by law, no
termination, amendment or modification of the Plan shall materially affect, in
an adverse manner, any Award previously granted under the Plan, without the
consent of the Participant to whom the Award was made.
ARTICLE VIII - MISCELLANEOUS
8.1 NO RIGHTS OF A SHAREHOLDER. Participants shall have none of the
rights of shareholders of the Corporation with respect to any Stock Unit.
8.2 NO RIGHT OF NOMINATION. Nothing in the Plan shall be deemed to
create any obligation on the part of the Board to nominate any Participant for
reelection by the Corporation's securityholders.
8.3 NONASSIGNABILITY. The right to receive benefits under the Plan
may not be anticipated, alienated, sold, transferred, assigned, pledged,
encumbered or subjected to any garnishment, charge or legal process.
8.4 UNSECURED GENERAL CREDITOR. Participants shall have no legal or
equitable rights, interest or claims in any property or assets of the
Corporation. For purposes of the payment of benefits under the Plan, any and
all of the Corporation's assets shall be, and remain, the general, unpledged
unrestricted assets of the Corporation. The Corporation's obligations under the
Plan shall be merely that of an unfunded and unsecured promise to make payments
in the future.
8.5 REQUIREMENTS OF LAW. The granting of Awards under the Plan and
the issuance of stock certificates shall be subject to all applicable laws,
rules, and regulations and to such approvals by any governmental agencies or
national securities exchanges as may be required.
8.6 EFFECTIVE DATE. The Amended and Restated Plan is effective as of
May 18, 1999.
-6-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 19,642
<SECURITIES> 0
<RECEIVABLES> 25,198
<ALLOWANCES> 1,165
<INVENTORY> 26,144
<CURRENT-ASSETS> 73,410
<PP&E> 49,203
<DEPRECIATION> 23,076
<TOTAL-ASSETS> 106,150
<CURRENT-LIABILITIES> 20,772
<BONDS> 0
0
0
<COMMON> 534
<OTHER-SE> 72,896
<TOTAL-LIABILITY-AND-EQUITY> 106,150
<SALES> 59,230
<TOTAL-REVENUES> 59,230
<CGS> 47,151
<TOTAL-COSTS> 9,699
<OTHER-EXPENSES> 1,657
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (17)
<INCOME-PRETAX> 740
<INCOME-TAX> 250
<INCOME-CONTINUING> 490
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 490
<EPS-BASIC> .01
<EPS-DILUTED> .01
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