<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 MARCH 31, 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>
Outstanding as of
May 10, 1999
<S> <C>
Common Stock $.01 par value............................. 52,811,009
</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
----------------------------
March 31, March 31,
1999 1998
------------ ------------
<S> <C> <C>
Net sales $ 30,162 $41,065
Cost of products sold 23,445 29,736
------------ ------------
Gross profit 6,717 11,329
Operating expenses:
Selling expenses 2,053 2,042
General and administrative expenses 2,491 2,817
------------ ------------
------------ ------------
Operating income 2,173 6,470
Interest (income), net (141) 136
Other expense 1,600 ---
------------ ------------
Income before income taxes 714 6,334
Income tax provision 225 2,375
------------ ------------
Net income $ 489 $3,959
------------ ------------
------------ ------------
Earnings per share - basic and diluted $ 0.01 $ 0.08
------------ ------------
------------ ------------
Weighted average number of shares outstanding
Basic 52,814 52,634
------------ ------------
------------ ------------
Diluted 52,814 52,646
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of these statements.
2
<PAGE>
ROHN INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ASSETS March 31, 1999 December 31,
(unaudited) 1998
--------------- -----------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 18,824 $ 19,690
Accounts, notes and other receivables, less allowance
for doubtful accounts of $1,165 in 1999 and $1,200 in 1998 23,670 28,588
Inventories 27,441 27,444
Deferred income taxes 2,600 2,600
Prepaid expenses 973 1,794
------------- -----------------
TOTAL CURRENT ASSETS 73,508 80,116
------------- -----------------
Fixed assets, net 26,443 26,630
Other assets 5,140 5,277
Long-term assets of discontinued operations 1,869 2,169
------------- -----------------
TOTAL ASSETS $ 106,960 $ 114,192
------------- -----------------
------------- -----------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term liabilities $ 1,012 $ 1,017
Accounts payable 5,801 11,331
Accrued liabilities & other 13,867 14,846
Customer deposits 233 940
Net liabilities of discontinued operations 816 1,152
------------- -----------------
TOTAL CURRENT LIABILITIES 21,729 29,286
Long-Term Debt 9,983 10,253
Nonpension post retirement benefits 2,074 2,074
------------- -----------------
TOTAL LIABILITIES 33,786 41,613
------------- -----------------
STOCKHOLDERS' EQUITY
Common Stock 536 535
Capital surplus 12,993 13,024
Retained earnings 64,992 64,503
Treasury stock (3,896) (3,896)
Unearned portion of restricted stock (1,451) (1,587)
------------- -----------------
TOTAL STOCKHOLDERS' EQUITY 73,174 72,579
------------- -----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 106,960 $ 114,192
------------- -----------------
------------- -----------------
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE>
ROHN INDUSTRIES, INC. AND SUBSIDIARIES
STATEMENTS OF CASH FLOW
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
March 31,
------------------------------
1999 1998
-------------- -------------
<C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net Income $ 489 $ 3,959
Adjustments for noncash items included in net income:
Depreciation and amortization 857 753
Operating requirements:
Accounts receivable decrease 4,918 3,074
Inventories decrease (increase) 3 (2,705)
Prepaid expenses decrease (increase) 821 (100)
Accounts payable & accrued expenses (decrease) increase (7,216) (5,583)
Discontinued operations (decrease) (336) (630)
-------------- -------------
Net cash (used in) operating activities (464) (1,232)
-------------- -------------
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of plant and equipment, net of retirements (670) (1,345)
Decrease in other assets 437 (172)
-------------- -------------
Net cash (used in) investing activities (233) (1,517)
-------------- -------------
CASH FLOW FROM FINANCING ACTIVITIES
Decrease in long-term liabilities (275) (241)
Issuance of common stock 106 83
-------------- -------------
Net cash (used in) financing activities (169) (158)
-------------- -------------
Net (decrease) in cash and cash equivalents (866) (2,907)
Cash & cash equivalents, beginning of period 19,690 5,994
-------------- -------------
Cash & cash equivalents, end of period $18,824 $ 3,087
-------------- -------------
-------------- -------------
Cash paid during the period for interest 232 264
Cash paid during the period for income taxes --- 92
</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
ROHN Industries, Inc. ("ROHN" or 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 are 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
(including normal and recurring accruals) which, in the opinion of
management, are necessary for a fair presentation of the results of
operations for the three-months ended March 31, 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
that have not been shipped.
(3) 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. 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 three months ended March 31, 1999 and 1998, the effect of
potentially dilutive stock options was 0 and 12,000, respectively. The
Company had additional outstanding stock options of 1,020,000 as of March 31,
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
<PAGE>
(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>
March 31, December 31,
1999 1998
----------------- --------------------
<S> <C> <C>
Finished goods $ 12,518 $ 14,514
Work-in-process 7,037 4,650
Raw materials 7,886 8,280
----------------- ----------------
Total Inventories $ 27,441 $ 27,444
----------------- ----------------
----------------- ----------------
</TABLE>
(6) 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 S.A.
The 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 joint venture will also provide complete installation services.
As part of the joint venture agreement, 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 joint venture under the equity method.
The Company's investment in Rohn BrasilSat amounted to $3.2 million at March
31, 1999. The Company recorded a loss of $540,000 in 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. The joint venture had break even results
for the first quarter of 1999.
(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.
6
<PAGE>
(8) NEW ACCOUNTING STANDARDS
In 1999, the Company adopted Statement of Financial Accounting
Standards No. 133 (SFAS 133), "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
Structures Enclosures
For the three months ended March 31, Segment Segment Total
---------- ------------- -------------
<S> <C> <C> <C>
1999
- ----
Net sales $21,302 $ 8,860 $ 30,162
Operating profit 234 1,939 2,173
Depreciation and amortization 699 158 857
Segment assets $78,451 (1) $ 28,509 $ 106,960
1998
- ----
Net sales $27,064 $14,001 $ 41,065
Operating profit 3,521 2,949 6,470
Depreciation and amortization 594 159 753
Segment assets $67,456 $38,790 $106,246
</TABLE>
(1) Includes equity investment in Rohn BrasilSat of $3.2 million
7
<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 ended March 31, 1999. 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, 1998.
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
Ended March 31,
--------------------------
1999 1998
---- ----
<S> <C> <C>
Net sales 100.0% 100.0%
Cost of sales 77.7 72.4
-------- --------
Gross profit 22.3 27.6
S,G&A Expense 15.1 11.8
-------- --------
Operating income 7.2 15.8
Interest (income), net (.5) .4
Other expense 5.3 --
--------- --------
Income before income taxes 2.4 15.4
Income tax provision .8 5.8
Equity loss of joint venture -- --
--------- ----------
Net income from continuing operations 1.6% 9.6%
--------- ----------
--------- ----------
</TABLE>
FOR THE THREE MONTHS ENDED MARCH 31, 1999
Net sales for the first quarter ended March 31, 1999 were $30.2
million compared to $41.1 million in the first quarter of 1998, a decrease of
26.6%. The decreases in sales by business segment were as follows:
<TABLE>
<CAPTION>
Dollar Percentage
For the three months ended March 31, 1999 1998 Decrease Decrease
- ------------------------------------- ----- ----- -------- --------
<S> <C> <C> <C> <C>
Tower Structures $21.3 $27.1 (5.8) (21.3%)
Enclosures 8.9 14.0 (5.1) (36.7%)
----- ----- ------- -------
Total $30.2 $41.1 $(10.9) (26.6%)
----- ----- ------- -------
----- ----- ------- -------
</TABLE>
8
<PAGE>
The decrease in sales in the tower structures segment was a
continuation of the unfavorable industry dynamics experienced by the Company
throughout 1998. Sales activity with the traditional service provider
customers remained soft, keeping market demand for our towers at extremely
low levels. Compounding this situation, newly emerging "build-to-suit"
customers were concentrating on negotiating with the service providers to
purchase existing tower sites rather than constructing new towers.
The decrease in sales in the enclosures segment was primarily due to
a reduction in sales volume with a provider of a high-speed broadband fiber
optic network which is now nearing completion and with several prominent
telecommunication operators affected by the ongoing slowdown in the wireless
communication network buildout.
Based on the same reasons stated above, the Company has continued to
experience sales weakness in its tower structures and enclosures segments
during the beginning of the second quarter of 1999. However, the Company
anticipates stronger sales during the second half of 1999 due to increased
international sales activity, as well as the normal seasonality in the
business. Nonetheless, the Company expects sales for the 1999 fiscal year to
be significantly below 1998 sales levels.
Gross profit for the first quarter of 1999 was $6.7 million versus
$11.3 million in the first quarter of 1998, a decrease of 40.7%. As a
percentage of sales, gross profit margin was 22.3% for the current year
quarter in comparison to 27.6% for the same period a year ago. The 5.3
percentage point decrease was primarily attributable to a significant
decrease in the gross profit margin for the Company's tower products. This
gross profit margin deterioration was initially experienced during the second
half of 1998 and is due to significant industry-wide pricing pressure.
However, on a sequential basis, gross profit margins on manufactured towers
appear to have stabilized. In the last 3 quarters, gross profit margins for
manufactured towers were 20.2%, 18.2% and 20.9%, respectively.
Selling, general and administrative ("SG&A") expenses were $4.5
million in the first quarter of 1999 versus $4.9 million in the first quarter
of 1998. In comparison to the prior year, SG&A expenses decreased by $0.4
million or by 6.5%. The decrease in operating expenses 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.
Other expense of $1.6 million relates to the fees and expenses in
connection with the proposed merger with PiRod Holdings, Inc., which was
terminated on March 31, 1999.
Earnings per share (basic and diluted) in the first quarter of 1999
were $0.01 versus $0.08 in the first quarter of 1998. Earnings for the first
quarter were negatively impacted by $0.02 due to the expenses associated with
the terminated proposed merger and the Company expects earnings per share for
all of 1999 to be significantly lower due to lower sales levels and margin
deterioration described above.
9
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The following table sets forth selected information concerning the
Company's financial condition:
<TABLE>
<CAPTION>
(Dollars in thousands) March 31, 1999 December 31, 1998
- ---------------------- -------------- -----------------
<S> <C> <C>
Cash $18,824 $19,690
Working capital 51,779 50,830
Total debt 10,995 11,270
Current ratio 3.38:1 2.73:1
</TABLE>
The Company's working capital was $51.8 million at March 31, 1999
compared to $50.8 million at December 31, 1998, an increase of $1.0 million.
At March 31, 1999, the Company had long-term indebtedness of $11.0
million including current maturities of long-term debt. The Company's
long-term indebtedness was related to mortgage notes payable and capital
leases.
As a result of lower expected sales and gross margins, the Company
expects cash flow from operations to also decrease significantly in 1999. The
Company anticipates 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 Rohn BrasilSat S.A.
The 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 joint venture will also provide complete installation services.
As part of the joint venture agreement, BrasilSat is the exclusive
distributor for ROHN's self-supporting and guyed towers in Brazil, which ROHN
has exclusive rights to distribute BrasilSat brand towers worldwide except in
Brazil.
The Company accounts for the joint venture under the equity method.
The investment in ROHN BrasilSat amounted to $3.2 million at March 31, 1999.
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. The joint venture had break even results for the
first quarter of 1999.
INFLATION
Inflation has not had a material effect on the Company's business or
results of operation.
10
<PAGE>
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.
MARKET RISK SENSITIVITY
The Company has very limited exposure to market risk sensitivity and
any adverse effects 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 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
11
<PAGE>
equipment, heating, ventilation and air conditioning systems and water
treatment systems, are included in the remediation and replacement plan
discussed below. As 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 non-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 is in the process of surveying its primary and critical
raw material, utility and transportation suppliers for Y2K compliance. The
Company expects to complete this process by July 15, 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 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 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.
12
<PAGE>
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 will actually 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.
RECENT DEVELOPMENTS
The UNR Asbestos-Disease Claims Trust ("the Trust") informed the
Company in April 1998, that it had reviewed its investment in ROHN and had
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 retained Donaldson, Lufkin & Jenrette ("DLJ) to assist in soliciting
proposals which might achieve its objective. The Company agreed to pay the
transaction fee of the investment banker (one percent of the consideration
received, plus debt assumed) and to indemnify the investment banker against
certain liabilities if a transaction involving a disposition of all of the
common stock of the Company is effected.
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 tax effect,
in fees and expenses in connection with the proposed merger. These expenses
would have been capitalized in the transaction, but the Company is now
required to recognize them as expenses in the first quarter, resulting in an
adverse impact on earnings of approximately $0.02 per share.
The Company and DLJ have re-initiated the process of actively
seeking a sale of the Trust's shares, a merger or a like transaction that
would involve liquidating the Trust's entire investment in the Company. At
this time, it is not possible to determine the outcome or timing of any
potential transaction
13
<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.
14
<PAGE>
PART II - OTHER INFORMATION
ITEM 5 OTHER INFORMATION
None
ITEM 6 EXHIBITS AND REPORTS ON FORM 8K
(A.) Exhibits
10.1 Shareholders' Agreement between BrasilSat Harald, S.A. and
the Company.
11. The computation can be determined from the report.
27. Financial data schedule.
(A.) 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: May 14, 1999 /s/ Brian B. Pemberton
- --------------------- ---------------------------------------------
Brian B. Pemberton
President [and principal financial officer]
15
<PAGE>
SHAREHOLDERS AGREEMENT
BRASILSAT HARALD S/A
ROHN INDUSTRIES, INC.
PREAMBLE
By this private instrument, at one side,
1. BRASILSAT HARALD S/A, with its head office and legal domicile
at Curitiba, Parana, Brazil, at Rua AT 6, Industrial City of Curitiba,
hereinafter referred to as "BrasilSat", in this act represented by Joao do
Espirito Santo Abreu - President Director - and Joao Alexandre de Abreu -
Vice President Director;
and, at other side,
2. ROHN Industries, Inc., with its head office at 6718 W. Plank
Road, P.O. Box 2000, Peoria, Illinois, USA, in this act represented by Brian
B. Pemberton - President and Chief Executive Officer, and Richard L. Rohn -
Vice-President;
WHEREAS, BrasilSat is currently engaged, among other things, in the
design, engineering, manufacture, marketing, sales, distribution and
installation of angle and solid leg towers;
WHEREAS, ROHN is currently engaged, among other things, in the design,
engineering, manufacture, marketing, sales, distribution and installation of
tubular leg towers, poles, steel accessories and equipment shelters;
WHEREAS, BrasilSat is the lessor of the land and constructions
presently being used by BrasilSat for its tower facilities and has agreed in
principle and obtained authorization from the owner of the land to sublease
to the Company hereinafter described a portion of the land and constructions
for a manufacturing and storage and operations facility;
WHEREAS, BrasilSat and ROHN have agreed in principle to incorporate a
Company in Brazil (the "Company") for the purpose of the design, engineering,
manufacture, marketing, sales, distribution and installation of the Products
in the Territory as defined in Clause One definitions;
WHEREAS, BrasilSat and ROHN concluded the necessary researches for the
implementation of this association and have obtained the authorizations of
its competent boards to incorporate a Company;
WHEREAS, BrasilSat and ROHN ratify totally the terms of the Memorandum
of Understandings executed by October 1, 1997, which contains the fundamental
principles that regulate the association between them;
<PAGE>
DECIDE to execute this Shareholders Agreement (the "Agreement") to
establish the principles and basic conditions of the operations of the
Company, in accordance with article 118, of the Corporation Law, and in the
following terms:
CLAUSE ONE - DEFINITIONS
For the purposes of this Agreement, the following terms shall mean the
defined hereby:
(a) "Agreement" means this Shareholders Agreement.
(b) "BrasilSat" means BrasilSat Harald S/A;
(c) "ROHN" means ROHN Industries, Inc.;
(d) "Parties" means in the plural both BrasilSat and ROHN referred
jointly and in the singular, only one of them;
(e) "Company" means the close capital corporation to be
incorporated by the Parties;
(f) Towers - towers and other similar structures manufactured of
steel members, designed to support antennas and other devises required to be
raised above ground level;
(g) "Poles" - tubular structures made of steel, concrete, fiber
glass or other materials, designed to support antennas and other devices
required to be raised above ground level, for use in the communications
markets in the Territory and other as yet unknown applications;
(h) "Equipment Shelters" - relocatable enclosures constructed of a
variety of materials including concrete, steel, fiberglass and others, which
are designed to house electronic equipment in connection with the tower and
steel poles and other as yet unknown applications;
(i) "Steel Accessories Components" - platforms, braces, dish
mounts, antenna mounts, safety cables and devices, lighting hardware and
grounding materials for the tower and poles;
(j) "Products" - Poles, Equipment Shelters and Steel Accessories
Components when referred collectively; Towers shall be considered as Products
only under the conditions set forth in Clause 3.4;
(k) "Installation Services" - all installations and site services
related to the above Products;
(l) "Galvanizing" - the process of applying molten zinc to steel;
(m) "Territory" means South America and such other territories as
the parties may hereafter mutually agree;
(n) "Corporation Law" means Law nDEG. 6.404/76 and all its latter
alterations.
2
<PAGE>
CLAUSE TWO OF THE
INCORPORATION OF THE COMPANY
2.1 The parties shall incorporate a Company, called ROHN-BRASILSAT
S/A, with main place of business and domicile in Curitiba, Capital of the
State of Parana, in which BrasilSat shall detain 51% (fifty-one percent) of
the voting capital and ROHN shall detain 49% (forty-nine percent) of the
voting capital.
2.2 In the act of incorporation of the Company, BrasilSat shall
subscribe and pay for 51% (fifty-one percent) of the shares of stock of the
Company; and ROHN shall subscribe and pay for 49% (forty-nine percent) of the
share of stock of the Company. Any additional working capital that may be
required for the operation of the Company will be obtained through additional
capital contributions or through normal banking facilities as agreed by
BrasilSat and ROHN.
2.3 ROHN will, pursuant to a Technology License and Technical
Assistance Agreement to be executed with the Company, provide the Company, at
no cost, with technical information, design criteria and specifications,
manufacturing methods, process and know-how of a highly technical nature for
the design, engineering, manufacture, marketing, sale and installation of the
Products, and, will license the Company, at no cost, to use ROHN's name and
trademarks in connection with the sale of the Products. In the same manner
BrasilSat will license the Company, at no cost, to use BrasilSat's name and
trademarks in connection with the sale of the Products.
2.4 BrasilSat and ROHN will, pursuant to a Supply Agreement to be
executed with the Company, provide the Company with required parts and other
capital and production items at manufacturing or acquisition costs plus 10%
for handling, where economic or other advantage exists to the Company. All
freight and other expenses will be the responsibility of the Company, when it
may apply.
2.5 BrasilSat will sublease to the Company for a maximum of a
two-year term a portion of the land and construction that are presently being
used by BrasilSat, according to Lease Agreement to be executed by the
Parties. BrasilSat will vacate that portion of its facilities to be leased to
the Company, as well as obtain all necessary authorization from the owner of
the property. The Company will be responsible for the required leasehold
improvements.
CLAUSE THREE OF THE
PURPOSES OF THE COMPANY
3.1 The Company shall have as purpose the design, engineering,
manufacture, marketing, sales, distribution and installation of the Products
in the Territory.
3.2 The Company has the exclusive right to sell all Products and
those developed in the future to all markets within the Territory. This
exclusivity is subject to existing ROHN distribution contracts and shall
depend in the ability and willingness of the Company to provide economic and
logistic advantages to the target market in the Territory.
3
<PAGE>
3.3 The Company will use "ROHN" and "BrasilSat" name and trademarks
to maximize market acceptance of the Products.
3.4 ROHN's tubular leg towers shall be included in the purposes of
the Company after a 12 (twelve) to 18 (eighteen) month period, counted from
October 2, 1997, at ROHN's option. During this period of 12 (twelve) to 18
(eighteen) months BrasilSat will be the exclusive distributor of ROHN's
designed Towers in Brazil, observing the same conditions established in 3.2.
During this period of 12 (twelve) to 18 (eighteen) months ROHN will be the
exclusive distributor of BrasilSat's towers outside of Brazil. BrasilSat
retains and shall have forever the right to manufacture and sell angle and
solid leg towers. ROHN retains and shall have forever the right to
manufacture and sell ROHN tubular leg towers if they are not included in the
purposes of the Company after the 12 (twelve) to 18 (eighteen) months.
CLAUSE FOUR OF THE
ADMINISTRATION OF THE COMPANY
4.1 The Parties compromise to vote at the General Assembly in a way
that two of the members of the Directory shall be persons appointed by
BrasilSat and the other shall be person appointed by ROHN.
4.2 The parties compromise to appoint the offices of the Directory
observing the following rules:
(a) BrasilSat shall appoint the President Director and the
Commercial Director;
(b) ROHN shall appoint the Chief Financial Officer;
4.3 BrasilSat acknowledges that the Chief Financial Officer, as the
only representative of ROHN in the Directory, must be involved in all
relevant activities of the Company and participate in a direct and effective
form in its administration, in all its aspects. With the purpose of
guaranteeing such involvement and participation, BrasilSat will take all the
measures necessary to make that its appointed Directors respect this
condition and the powers that the Statute assignees to the Chief Financial
Officer.
Sole Paragraph - According to this, it shall be preferentially
assigned to the Chief Financial Officer, observing the orientation
of the General Assembly and jointly with other Director as
established in Clause 24 of the Statutes of the Company:
(a) co-sign all checks above R$ 25.000,00; (b) co-sign all compromises
and contracts that involve debits of more than R$ 25.000,00.
4.4 The Parties compromise to vote at the General Assembly in a way
that the services of external auditors hired by the Company are executed by
an audit company indicated by ROHN, selected among external audit companies
of international reputation, such as, but not limited to, Price Waterhouse,
Arthur Andersen, KPMG and Coopers & Lybrand, respecting the market value for
this kind of professional service.
4
<PAGE>
4.5 The Parties compromise to vote at the General Assembly in a way
that the legal advisors of the Company are fluent in English.
CLAUSE FIVE
RESTRICTION ON THE TRANSFERENCE OF SHARES
AND OPTION TO BUY AND SELL SHARES
5.1 Except to wholly owned subsidiaries or in the hypothesis of
Clauses Six of this Agreement, neither BrasilSat or ROHN will for any reason
sell, assign, transfer or otherwise dispose of its shares of the Company
either acquired or subscribed to as of the incorporation of Company, or at
any future time, during a period of three (3) years following the
incorporation date of the Company.
5.2 After the period mentioned in 5.1 above, any sale, assignment,
transfer or other disposition of shares of the Company, including those
effected by legal requirements, and those that may result from a pledge or
other encumbrance of, or lien imposed on the shares, will require the prior
offer of these shares to the other Party in this Agreement, through written
notification, which may exercise its right of preference in the acquisition
of these shares in a period of 60 (sixty) days, acquisition which must refer
to the totality of the offered shares.
5.3 The offer referred to in 5.2 shall be accompanied by the price
of the shares, which shall attend their fair market value, according to
evaluation done by a company among one of those acknowledged capability in
this activity, such as, but not limited to, Banco Pactual, Banco Garantia,
J.P. Morgan, Morgan Stanley, etc., evaluation which shall accompany the
offer. The Party offering its shares shall assume all the costs related to
the evaluation and the payment of the fees to this company. The offer shall
also mention the time and form of payment.
5.4 If the Party that receives the offer does not exercise its
right of preference in the acquisition of all the shares offered for sale in
a period of 60 (sixty) days, then the other Party shall be free to sell the
totality of the offered shares to a third party as long as it does for the
same price and conditions established in the offer.
Paragraph First. The third party can not be a direct or indirect
competitor of the Party that remains as partner in the Company, in
any of its areas or sections of doing business, unless the Party
agrees, in express and written terms, to have this competitor as
partner in the Company.
Paragraph Second. In any situation the shares can only be sold to
a third party if it agrees to sign and assume all the conditions
and obligations established in this Agreement.
5.5 Neither Parties - BrasilSat or ROHN - or any of their
controlled or affiliated companies, for a period of 2 (two) years after the
transference of the shares, shall act in an ostensible way towards making
employees to leave the Company.
5
<PAGE>
CLAUSE SIX
OPTION TO BUY AND SELL SHARES IN CASE OF DEADLOCK
6.1 In case of a deadlock between the Parties to deliberate about
any matter, without the possibility of them, by their selves, reaching a
satisfactory solution, shall be observed the following procedure:
(i) for a period of 30 (thirty) days after the deadlock any Party has
the right to change its positions and eliminate the deadlock
through the calling of an Extraordinary General Assembly that
shall deliberate again about the matter and in which the calling
Party shall cast its vote in a form that shall eliminate the
deadlock;
(ii) if no resolution sufficient to solve the deadlock is forwarded in
the 30 (thirty) day period mentioned in (i), any Party may address
to the other an accurate and determined proposal for the buy or
sell of the totality of its shares, establishing at the same time
the proposed price, in accordance with the evaluation procedure
established Clause 5.3;
(iii) the Party to which is destined the offer shall have the option to
purchase the participation in the social capital of the proposing
shareholder, for the price and conditions proposed, or sell its
corresponding participation, for the same price and conditions, in
180 (one hundred and eighty) days from the receipt of the offer,
not being allowed any other alternative;
(iv) the acceptance of the proposal to buy or sell the participation in
the social capital shall be communicated to the proposing Party
within 180 (one hundred and eighty) days. In the absence of any
manifestation regarding the acceptance of the offer by the Party
to which the offer was destined, its silence shall be interpreted
as an effective acceptance of the proposal by the Party to which
the offer was destined, being it obliged to buy or sell the shares
in the terms of the received offer;
(v) the price of the shares to be transferred will be payable in cash
against the registration in the respective Book of Shares or
otherwise as may be sufficient to transfer ownership, observing
all formalities required by the applicable legislation; the
payment of the price and transference of the shares shall occur
within the 180 (one hundred and eighty) days mentioned in (iii)
above.
6.2 A deadlock is deemed existent whenever the General Assembly is
not able to deliberate on certain matters because of a tide voting or because
it was not reached the qualified majority required by law or by the Statutes.
The deadlock shall be proved by the written minutes of the General Assembly
or by a written notification from one Party to the other, mentioning the
existence of the deadlock.
6.3 In the hypothesis of ROHN or BrasilSat's leave of the Company,
whatever may be the cause, either voluntarily in the hypothesis of Clause
Five, or motivated by a deadlock as established in this Clause Six, the
company appointed to evaluate the price of sale of the shares, shall
aggregate to it the value referent to the technology so far assimilated by
the Company. In
6
<PAGE>
the same way, BrasilSat or ROHN, respectively, shall, if it is the case, do
what is necessary to alter the social denomination of the Company, in order
that is taken out from it any use or reference to the term ROHN or BrasilSat,
as well as cease immediately any use of the trademark ROHN or BrasilSat, or
any other trademark, logotype, or other distinctive sign that is property of
ROHN or of BrasilSat, registered or not, in the marketing of the Products of
the Company.
CLAUSE SEVEN
EXERCISE OF THE RIGHT OF VOTE FOR THE
INSTALLATION OF THE FISCAL COUNCIL
The Parties compromise to deliberate for the installation of the
Fiscal Council in the General Assembly, besides the cases expressly
established in the law, only when exist mutual consent regarding its
installation.
CLAUSE EIGHT
DECLARATIONS AND GUARANTEES BY THE PARTIES
8.1 BrasilSat declares and guarantees to ROHN the following:
(a) it is a company duly incorporated and validly existing under the
laws of Brazil and has the requirements to execute this Agreement,
as well as to execute the operations herein established, and
accomplish the obligations following therefrom;
(b) the execution of this Agreement and the accomplishment of the
operations herein established have been duly and validly
authorized by all necessary corporate boards, not being required
any other corporate authorization from BrasilSat for the execution
of the obligations here established;
(c) the execution of this Agreement, the execution of the operations
herein established and the accomplishment of the obligations by
BrasilSat does not conflict or result in violation of any
disposition of:
(c.1) its bylaws;
(c.2) any contract under which BrasilSat is liable;
(c.3) any legal regulation to which BrasilSat and/or its assets
is submitted.
(d) does not exist against BrasilSat any suit or procedure,
administrative or judicial, raising from obligations or duty
legally constituted before the enforcement of this Agreement and
that, for any reason, may affect with burdens the patrimony of the
Company or of ROHN, being considered as this, but not limited to,
tax, labor, security or environmental related obligations or,
furthermore, that may affect or prevent, in a substantial way, the
accomplishment of the obligations assumed by BrasilSat under this
Agreement;
7
<PAGE>
(e) BrasilSat has financial capacity to comply with the monetary
related obligations assumed under this Agreement and Related
Agreements.
8.2 ROHN declares and guarantees to BrasilSat the following:
(a) it is a company duly incorporated and validly existing under the
laws of the State of Delaware, United States of America, and has
the requirements to execute this Agreement, as well as to execute
the operations herein established, and accomplish the obligations
following therefrom;
(b) the execution of this Agreement and the accomplishment of the
operations herein established have been duly and validly
authorized by all necessary corporate boards, not being required
any other corporate authorization from ROHN for the execution of
the obligations herein established;
(c) the execution of this Agreement, the execution of the operations
herein established and the accomplishment of the obligations by
ROHN does not conflict or result in violation of any disposition
of:
(c.1) its bylaws;
(c.2) any contract under which ROHN is liable;
(c.3) any legal regulation to which ROHN and/or its assets is
submitted.
(d) does not exist against ROHN any suit or procedure, administrative
or judicial, raising from obligations or duty legally constituted
before the enforcement of this Agreement and that, for any reason,
may affect with burdens the patrimony of the Company or of
BrasilSat, being considered as this, but not limited to tax,
labor, security or environmental related obligations or,
furthermore, that may affect or prevent, in a substantial way, the
accomplishment of the obligations assumed by ROHN under this
Agreement;
(e) ROHN has financial capacity to comply with the monetary related
obligations assumed under this Agreement and Related Agreements.
CLAUSE NINE
RESPONSIBILITIES AND INDEMNIFICATIONS
9.1 BrasilSat assumes the obligation to indemnify the Company and
ROHN by the total amount of its losses of any nature, including costs and
reasonable expenses with lawyers, that have been suffered by the Company or
ROHN as consequence of (i) inexactitude or falsity of any declaration given
in this Agreement; (ii) non accomplishment of any guarantee given in favor of
the Company and/or ROHN; (iii) non accomplishment of any obligation assumed
under this Agreement.
9.2 ROHN assumes the obligation to indemnify the Company and
BrasilSat by the total amount of its losses of any nature, including costs
and reasonable expenses with lawyers,
8
<PAGE>
that have been suffered by the Company or BrasilSat as consequence of (i)
inexactitude or falsity of any declaration given in this Agreement; (ii) non
accomplishment of any guarantee given in favor of the Company and/or
BrasilSat; (iii) non accomplishment of any obligation assumed under this
Agreement.
CLAUSE TEN
GOVERNING LAW
This Agreement shall be governed by the applicable Brazilian laws.
CLAUSE ELEVEN
NO WAIVER
The failure by any of the Parties to object, at any time, to a Party's
non-compliance, in whole or in part, with any of the obligations of the
Agreement, shall not imply in renunciation or waiver of such obligations, nor
shall signify novation, which can not be presumed, being the mentioned
obligations valid and enforceable at any time, until occurs the complete
fulfillment of all the obligations established in this Agreement.
CLAUSE TWELVE
SEVERABILITY
The non validity or non effectiveness of one of the dispositions of
this Agreement shall not have effect on the validity or effectiveness or the
other dispositions.
CLAUSE THIRTEEN
ASSIGNMENT
This Agreement can not be transferred or assigned by any of the
Parties, partially or in its totality, without the previous authorization of
the other Party.
CLAUSE FOURTEEN
SUCCESSION
This Agreement is binding between the Parties and its successors or
assignees under any title, which have to accomplish the totality of its
corresponding obligations under this Agreement.
CLAUSE FIFTEEN
ALTERATIONS
Any alterations in this Agreement shall be valid when done in writing
and executed by both Parties.
9
<PAGE>
CLAUSE SIXTEEN
TITLES
The titles of the clauses of this Agreement are used only as
reference, not defining, limiting or restraining any of its terms and
conditions.
CLAUSE SEVENTEEN
COMMUNICATIONS
17.1 All communications, notices or demands related to the execution
of this Agreement shall be done in writing, delivered with protocol, sent by
mail with returned receipt and sent by fax to the following addresses:
When to BrasilSat:
BrasilSat Harald S/A
At. Joao do Espirito Santo Abreu
Rua Guilherme Weigert, 220, Curitiba, PR, Brasil
(CEP 82720-000)
Fax: nDEG. (041) 256-6122)
c/c Joao Alexandre de Abreu
When to ROHN:
ROHN Industries, Inc.
At. Brian B. Pemberton
6718 W. Plank Road
P.O. Box 2000
Peoria, Illinois USA 61656
Fax: nDEG. (309) 633-2693
c/c Richard L. Rohn
1100 Industrial Blvd.
P.O. Box 1470
Bessemer, Alabama USA 35021
Fax: nDEG. (205) 428-9362
and
ROHN's attorneys in fact in Brazil.
17.2 In case of change of address, the Parties shall communicate
this fact to the other, and, if they do not, it shall be deemed as good and
valid the communications, notices and notifications done to the address and
fax numbers referred to in this Clause.
10
<PAGE>
CLAUSE EIGHTEEN
LANGUAGE
This Agreement shall be signed also in Portuguese. However, in the
event of difference between the versions in different languages, the
Portuguese version shall prevail.
CLAUSE NINETEEN
COURT
To decide any conflict from the application or interpretation of this
Agreement the Courts of Curitiba, Capital of the State of Parana, shall be
the competent venue, with the exclusion of any other, no matter how
privileged it may be.
And being this the intention of the parties, they sign this instrument
in 4 (four) copies with same content and for its legal effects, in the
presence of two witnesses also nominated and signed.
Curitiba, december 29, 1997
/s/ Joao Espirito Santo Abreu /s/ Brian P. Pemberton
- ------------------------------------ ------------------------------------
BrasilSat Harald S/A ROHN Industries, Inc.
Witness:
1. /s/ Joao Alexandre de Abreu 2. /s/ Richard L. Rohn
- ------------------------------------ ------------------------------------
RG 32 40776-8 RG 29456-863-3
11
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<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 18,824
<SECURITIES> 0
<RECEIVABLES> 24,835
<ALLOWANCES> 1,165
<INVENTORY> 27,441
<CURRENT-ASSETS> 73,508
<PP&E> 48,686
<DEPRECIATION> (22,243)
<TOTAL-ASSETS> 106,960
<CURRENT-LIABILITIES> 21,729
<BONDS> 0
0
0
<COMMON> 536
<OTHER-SE> 72,638
<TOTAL-LIABILITY-AND-EQUITY> 106,960
<SALES> 30,162
<TOTAL-REVENUES> 30,162
<CGS> 23,445
<TOTAL-COSTS> 4,544
<OTHER-EXPENSES> 1,600
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (141)
<INCOME-PRETAX> 714
<INCOME-TAX> 225
<INCOME-CONTINUING> 489
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 489
<EPS-PRIMARY> 0.01
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