SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1996.
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 0-9514
ANDREW CORPORATION
(exact name of registrant as specified in its charter)
DELAWARE 36-2092797
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification No.)
10500 W. 153RD STREET, ORLAND PARK, ILLINOIS 60462
(Address of principal executive offices and zip code)
(708) 349-3300
(Registrant's telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
TITLE OF EACH CLASS
Common Stock, $.01 par value
Common Stock Purchase Rights
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 as 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
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein and will not be contained, to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K, or any amendment of
this Form 10-K. ( )
The aggregate market value of voting stock held by non-affiliates of the
Registrant as of November 30, 1996 was $3,501,110,729. The number of
outstanding shares of the Registrant's common stock as of that date was
60,489,128.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the Registrant's Annual Report to Stockholders for the year ended
September 30, 1996 are incorporated by reference into Parts I and II.
Portions of the Proxy Statement for the annual stockholders' meeting to be
held February 11, 1997 are incorporated by reference into Part III.
<PAGE>
PART I
ITEM 1-BUSINESS
GENERAL
All figures presented in this Form 10-K as well as any documents
incorporated by reference have been restated to reflect the recent acquisition
by Andrew Corporation ("Andrew" or the "Company") of The Antenna Company, which
was accounted for as a pooling of interests.
Andrew was reincorporated in Delaware in 1987. The Company previously was
incorporated in Illinois in 1947 as the successor to a partnership founded in
1937. Its executive offices are located at 10500 West 153rd Street, Orland Park,
Illinois, 60462, which is approximately 25 miles southwest of Chicago's loop.
Unless otherwise indicated by the context, all references herein to Andrew
include Andrew Corporation and its subsidiaries.
Andrew is a multinational supplier of communications products and systems
to worldwide commercial, industrial, governmental and military customers. Its
principal products include coaxial cables, microwave antennas for point-to-point
communication systems, special purpose antennas for commercial, government and
military end use, antennas and complete earth stations for satellite
communication systems, electronic radar systems, communication reconnaissance
systems, connectivity devices for use in communication systems, and related
ancillary items and services. These products are frequently sold as integrated
systems rather than as separate components. In addition, the Company sells
cellular antenna products and cellular telephone accessories. Andrew conducts
manufacturing operations, primarily from thirteen locations in the United States
and from four locations in other countries. Sales by non-U.S. operations and
export sales from U.S. operations accounted for approximately 47% of Andrew's
net sales in fiscal 1996, 44% in 1995, and 43% in 1994.
During fiscal 1996, Andrew completed three acquisitions which provided new
products and improved accessibility to expanding markets. In December 1995, the
Company purchased a 51% interest in Mapra Industria e Comerico Ltda. and Gerbo
Telecommunicacoes e Servicos Ltda., located in Brazil. Mapra and Gerbo
manufacture, distribute, and sell antennas, waveguides and towers and provide
installation services. Andrew also formed a cable manufacturing company with
Mapra and Gerbo in which Andrew holds a 70% interest. In March 1996, the Company
completed its acquisition of The Antenna Company, a manufacturer and distributor
of wireless telephone antennas and accessories for mobile applications. In June
1996, the company purchased an 80% interest in the Satcom Group of Companies, a
distributor of commercial products, located in South Africa.
During the year the Company operated in three strategic business areas,
Commercial, Government and Network. The Commercial business supplies coaxial
cable and antenna system equipment to telecommunications companies and agencies
and cellular antenna products and cellular phone accessories through retail
distribution channels of cellular service providers. The Government business
supplies specialized antenna systems, electronic radar systems, communication
reconnaissance systems, coaxial cable, standard antennas, and fully integrated
systems to various United States government agencies and friendly foreign
governments. The Network business supplies products and services through value
added and other resellers to data processing organizations that support the
interconnectivity needs of computer networks.
Information concerning Andrew's net sales (intersegment sales are
insignificant), operating profit and assets employed attributable to each
business area for fiscal 1996, 1995, and 1994 is included in the "Industry
Segment Information" note to Consolidated Financial Statements on page 31 of the
1996 Annual Report to Stockholders and is incorporated herein by reference.
<PAGE>
PRODUCTS AND SERVICES
The following table sets forth net sales and percentages of total net sales
represented by Andrew's principal products during the last three years:
<TABLE>
<CAPTION>
Year Ended September 30
1996 1995 1994
--------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
(Dollars in thousands)
Coaxial Cable Systems and Bulk
Cables $415,633 52% $324,790 49% $248,613 42%
Microwave Antenna Systems 153,231 19 122,576 19 107,455 18
Special Antennas and Other 88,922 11 84,663 13 107,620 19
Wireless Accessories 63,498 8 48,355 7 34,065 6
Earth Station Antennas 32,830 4 28,840 4 19,246 3
Network Products 27,569 4 39,217 6 52,208 9
Defense Electronics 11,892 2 15,519 2 19,026 3
-------- ---- --------- ---- --------- -----
$793,575 100% $663,960 100% $588,233 100%
======== ==== ======== ==== ======== ====
</TABLE>
Sales for the Company's business areas during the last three years were as
follows:
<TABLE>
<CAPTION>
Year Ended September 30
1996 1995 1994
-------------------------------------
<S> <C> <C> <C>
(Dollars in thousands)
Commercial $731,347 $579,984 $487,579
Government 34,063 41,455 43,611
Network 27,568 39,217 52,208
Other 597 3,304 4,835
-------- -------- --------
$793,575 $663,960 $588,233
======== ======== ========
</TABLE>
<PAGE>
PRINCIPAL PRODUCTS
COMMERCIAL BUSINESS
Coaxial Cable Systems and Bulk Cables:
Coaxial cable is a two-conductor, radio frequency transmission line with
the smaller of the two conductors centrally located inside the larger, tubular
conductor. It is principally used to carry radio frequency signals at
frequencies up to 2 GHz.
Waveguides are tubular conductors, the dimensions and manufacturing
tolerances of which are related to operating frequency. Waveguides find greatest
application at frequencies above 2 GHz, although they are also used in UHF-TV
broadcasting at frequencies in hundreds of megahertz. Andrew manufactures
waveguides with rectangular, circular and elliptical cross-sections. Most of
Andrew's waveguides are sold as part of its antenna systems.
Andrew sells its semi-flexible cables and waveguides under the trademark
HELIAX(R).
Microwave Antenna Systems:
A "microwave antenna system," as this term is used by Andrew, consists of
one or more microwave antennas, waveguides or coaxial cables connecting antennas
to transmitters or receivers, a tower to support the antennas, an equipment
shelter to house transmitters and receivers, various ancillary items, and field
installation services. If sold without a supporting tower, equipment shelter or
field installation, microwave antennas with their connecting cables or
waveguides are still considered by Andrew to be "microwave antenna systems."
Land-based microwave radio networks are commonly used by telecommunications
companies for intercity telephone, telex, video and data transmission. They are
also used for more specialized purposes by pipeline companies, electric
utilities and railroads.
Special Antennas and Other:
Andrew also manufactures and sells several types and configurations of
special application antennas. Applications include cellular systems, navigation,
FM and television broadcasting, multipoint distribution services and
instructional television. As with microwave antennas, Andrew considers sales of
special antennas and other various components used in the cellular market
(shelters and towers) and the installation of these components to be part of a
"cellular system."
The Company also designs and installs its proprietary distributed
communication systems. These systems permit in-building and enclosed area access
for all types of wireless communications. These systems utilize the Company's
semi-flexible coaxial cable sold under the tradename RADIAX(R).
Wireless Accessories:
Andrew manufactures and distributes accessories for personal communication
systems, cellular handsets and paging devices. Portable antennas, batteries,
battery chargers, paging accessories, hands free kits, and various other
wireless accessories are all included in this group. The recent acquisition of
The Antenna Company increased Andrew's product offering and opened domestic
distribution channels.
Earth Station Antennas:
Earth station antenna systems manufactured by Andrew are used at earth
terminals to receive signals from, and transmit signals to, communication
satellites in equatorial orbit. System elements include an antenna, from 6 to 40
feet in diameter, and may also include electronic controllers, waveguides,
polarizers, combiners, special mounting features, motor drives, position
indicators, transmitters and receivers. Andrew earth station antenna systems in
all sizes are used in various countries to broadcast and transmit programs, both
to CATV operators and to VHF or UHF broadcast stations, as well as for the long
distance transmission of conventional telecommunications traffic.
<PAGE>
GOVERNMENT BUSINESS
Defense Electronics:
Andrew manufactures electronic scanning and communication receiver systems,
which are designed to search and monitor the electromagnetic spectrum from 20
MHz to 40 GHz. These systems are purchased primarily for intelligence gathering
in strategic surveillance operations which emphasize highly sensitive reception
of weak signals as well as accuracy of signal analysis data. The Company's
highly automated receiver systems are subsystems that are incorporated into
fully-integrated systems which, in addition to the Company's receiving and
analyzing equipment, include antennas and other equipment necessary to carry out
the overall electronic reconnaissance operation.
The Company is also engaged in the supply of fully integrated electronic
surveillance systems, both for military radar reconnaissance and for
non-military communications monitoring. These surveillance systems are custom
designed by the Company's engineering staff to meet customer requirements.
Other Products:
The Company also supplies specialized microwave antenna systems to
governmental agencies and the military. In addition, coaxial cables are used in
military countermeasure devices, radar and specialized instrumentation
applications.
Earth station antenna systems and special application antennas are used for
broadcasting programs and operational traffic to military bases and telemetry
traffic associated with widely dispersed environmental monitoring stations.
Andrew also manufactures pedestals and electronic controls for radio
frequency and optical systems used in military and defense markets.
NETWORK BUSINESS
Andrew designs, manufactures and markets advanced connectivity solutions
for IBM mainframe, and token ring systems. Products include protocol convertors,
local area network (LAN) gateways, terminal emulators, file transfer software,
multistation access units, adapter cards, repeaters, bridges and routers. In
addition, Andrew supplies channel interface products which provide direct
channel links between IBM or plug-compatible host computers and non-IBM devices
and networks, terminal to mainframe computer adapters and emulators for PCs and
printers, emulation for Macintosh devices and wiring products such as baluns and
star panels that provide cost-effective wiring connections for network
communications equipment.
<PAGE>
INTERNATIONAL ACTIVITIES
Andrew's international operations represent a substantial portion of its
overall operating results and asset base. Manufacturing facilities are located
in Canada, Australia, the United Kingdom, and Brazil. Andrew's plants in the
United States also ship significant amounts of manufactured goods to export
markets. In Russia, Andrew participates in joint ventures that operate fiber
optic telecommunication networks.
During fiscal 1996, sales of products exported from the United States or
manufactured abroad were $376,743,000 (47% of total sales) compared with
$287,662,000 (44% of total sales) in fiscal 1995 and $250,067,000 (43% of total
sales) in fiscal 1994. Exports from the United States amounted to $112,648,000
in fiscal 1996, $103,090,000 in fiscal 1995, and $101,829,000 in fiscal 1994.
Sales and income before income taxes on a country-by-country basis may vary
considerably year to year. Further information on Andrew's international
operations is contained in the note "Geographic Area Information" to
Consolidated Financial Statements included on page 30 of the 1996 Annual Report
to Stockholders, incorporated herein by reference.
Andrew's international operations are subject to a number of risks,
including currency fluctuations, changes in foreign governments and their
policies, and expropriation or requirements of local or shared ownership. Andrew
believes that the geographic dispersion of its sales and assets generally
mitigates these risks.
MARKETING AND DISTRIBUTION
COMMERCIAL BUSINESS
Sales engineering functions, including product application assistance, are
performed by a staff of highly trained applications engineers located at each
manufacturing facility. In addition, field sales engineers are located in or
near Atlanta, Dallas, Los Angeles, New York, San Francisco, Washington, D.C.,
Essen and Munich (Germany), Hong Kong, Johannesburg (South Africa), London
(England), Madrid (Spain), Mexico City (Mexico), Milan (Italy), Moscow (Russia),
Paris (France), Sorocaba (Brazil), Tokyo (Japan), and Zurich (Switzerland).
Unlike most of its competitors, Andrew uses its own sales and sales engineering
staffs to service its principal markets, but follows the traditional practice of
using commissioned sales agents in countries with modest sales potential.
Approximately one-half of Andrew's products are sold directly to end users.
Most of the remainder is sold to radio equipment companies which install
Andrew's products as part of a total system, with the balance being sold through
dealers and jobbers. Small or medium-size orders are normally shipped from
inventory; delivery schedules on larger orders are negotiated, but seldom exceed
five months. Andrew's sales are principally standard, proprietary items although
unique specifications or features are incorporated for special order situations.
Because most of Andrew's business is derived from large telecommunications
system operators and the radio equipment manufacturers who supply this industry,
Andrew has tailored its business strategy to serve the needs of technically
sophisticated buyers. In particular, Andrew has emphasized the compatibility of
antennas, transmission lines and related components in order to optimize their
performance as an integrated subsystem.
The commercial business also includes mobile cellular products such as
antennas and cellular telephone accessories. These products are sold primarily
through the retail distribution channels of cellular service providers. In
addition, mobile cellular products are sold to distributors who then resell
these products to dealers and cellular carriers.
<PAGE>
GOVERNMENT BUSINESS
The specialized needs of the Company's customers and the technology
required to meet those needs change constantly. Accordingly, the Company
stresses its engineering, installation, service and other support capabilities
to its government and military customers. To provide close communication with
these customers and to discern developments and trends in procurement
requirements, the Company has established a team of sales engineers located in
five offices in the United States and one office in the United Kingdom. The
Company also utilizes sales representatives in the United Kingdom, Germany and
the Middle East. In addition, technical program support and direct sales
engineering are performed at each location. The Company places great emphasis in
its marketing on extensive personal contact and continuous consultation with its
customers in an attempt to meet current technical requirements and anticipated
future technical requirements and to learn of upcoming procurement programs in
which its products may have application.
NETWORK BUSINESS
The Company's Network business emphasizes support of three major computer
connectivity market segments: mainframe interface, microcomputer to IBM midrange
access, and token ring local area networking (LAN). Due to the specialized
customer needs within these markets, each area has distinct marketing and
distribution channels. Mainframe products are sold to Original Equipment
Manufacturers (OEMs) and to a select group of specialized system integrators
whose focus is on the mainframe computer user. In the midrange area, the Company
concentrates on a large group of highly specialized midrange computer dealers
and Value-Added Resellers (VARs). LAN products are sold through a distribution
network of VARs, resellers and telesales. In addition, Andrew maintains business
partner relationships with a select group of systems integrators in order to
provide strong high-end product support channels for customers. Service and
technical support is an integral part of the Company's sales program for all
product groups and is provided either by the VAR or directly by the factory.
MAJOR CUSTOMERS
Andrew serves more than 6,000 customers in more than 130 countries. In the
last three years, aggregate sales to the ten largest customers averaged
approximately 26% of aggregate consolidated sales. No single customer has
accounted for over 10% of consolidated annual sales in any of the last three
years.
In fiscal 1996, 1995 and 1994, direct and indirect sales to U.S.
governmental agencies amounted to $18,250,000, $22,337,000, and $27,840,000,
respectively.
MANUFACTURING AND RAW MATERIALS
Andrew generally develops, designs, fabricates, manufactures and assembles
its products. In the Commercial business, cable and waveguide products are
produced at its plants in Illinois, Brazil, and the United Kingdom. Microwave
and earth station antennas are manufactured in Texas and Australia.
Self-supporting and guyed towers are also manufactured in Texas. Equipment
shelters are manufactured in Georgia and California. Wireless antennas and
accessories for mobile applications are manufactured in Illinois.
Andrew's defense electronic products are manufactured in plants located in
Texas. The Company's products are manufactured from both standard components and
parts that are built to the Company's specifications by other manufacturers. A
large number of the Company's products contain multiple microprocessors for
which proprietary machine readable software is designed by the Company's
engineers and technicians.
<PAGE>
Network products are produced at plants in California. The production
process principally entails the assembly of electronic components.
Andrew considers its sources of supply for all raw materials to be adequate
and is not dependent upon any single supplier for any significant portion of
materials used in its products.
RESEARCH AND DEVELOPMENT
Andrew believes that the successful marketing of its products depends upon
its research, engineering and production skills. Research and development
activities are undertaken for new product development and for product and
manufacturing process improvement. In fiscal 1996, 1995 and 1994 Andrew spent
$33,003,000, $25,124,000, and $26,611,000, respectively, on research and
development activities.
Andrew holds approximately 273 active patents relating to its products
expiring at various times between 1998 and 2004, and attempts to obtain patent
protection for significant developments whenever possible. The Company does not
consider patents to be material to its operations nor would the loss of any
patents have a material adverse effect on operations.
COMPETITION
COMMERCIAL
Many large manufacturers of electrical or radio equipment, some of which
have substantially greater financial resources than Andrew, compete with some of
Andrew's antenna systems equipment, wireless products, and coaxial cable product
lines. In addition, there are a number of small independent companies that
compete with portions of these product lines. Andrew has traditionally focused
on specific specialized fields within the marketplace which require
sophisticated technology and support services. Andrew competes principally on
the basis of product quality, service, and continual technological enhancement
of its products.
GOVERNMENT
There are numerous manufacturers of electronic radar systems, communication
reconnaissance systems and specialized antenna systems that supply their
equipment to United States government agencies and friendly foreign governments.
There is substantial competition within the market and the Company is not a
major competitor. Due to fixed-price contracts and pre-defined contract
specifications prevalent within this market, the Company competes primarily on
the basis of its ability to provide state-of-the-art solutions in this
technologically demanding marketplace while maintaining its competitive pricing.
NETWORK
Within the corporate network communications market, Andrew's principal
competitor is IBM which provides similar products across Andrew's product line.
There are also numerous other manufacturers that compete with portions of
Andrew's product line. Andrew's principal bases of competition within this
market are product quality and reliability and product support.
<PAGE>
BACKLOG AND SEASONALITY
The following table sets forth the backlog of orders believed to be firm in
each of Andrew's businesses (government orders included herein are funded
orders):
<TABLE>
<CAPTION>
Orders to be Shipped as of September 30
1996 1995
--------------------- ----------------------
(Dollars in thousands)
Within After Within After
12 Months 12 Months 12 Months 12 Months
-------- --------- --------- ---------
<S> <C> <C> <C> <C>
Commercial $144,700 $14,700 $115,600 $18,500
Government 7,500 --- 9,800 --
Network 1,200 --- 800 --
-------- -------- --------- --------
$153,400 $14,700 $126,200 $18,500
======== ======== ========= ========
</TABLE>
Due to variability of shipments under large contracts, customers' seasonal
installation considerations, variations in product mix and in profitability of
individual orders, the Company may experience wide quarterly fluctuations in net
sales and income. These variations can be expected to continue in the future.
Consequently, it is more meaningful to focus on annual rather than interim
results.
ENVIRONMENT
The Company engages in a variety of activities to comply with various
federal, state and local laws and regulations involving the protection of the
environment. Compliance with such laws and regulations does not currently have a
significant effect on the Company's capital expenditures, earnings, or
competitive position. In addition, the Company has no knowledge of any
environmental condition(s) which might individually or in the aggregate have a
material adverse effect on the Company's financial condition.
EMPLOYEES
At September 30, l996, Andrew had 4,622 employees, 3,460 of whom were
located in the United States. None of Andrew's employees are subject to
collective bargaining agreements. As a matter of policy, Andrew seeks to
maintain good relations with employees at all locations and believes that such
relations are good.
<PAGE>
REGULATION
Andrew is not directly regulated by any governmental agency in the United
States. Most of its customers, and the telecommunications industry generally,
are subject to regulation by the Federal Communications Commission (the "FCC").
The FCC controls the allocation of transmission frequencies and the performance
characteristics of earth station antennas. As a result of these controls,
Andrew's antenna design specifications must be conformed on an ongoing basis to
meet FCC requirements. This regulation has not adversely affected Andrew's
operations.
Outside of the United States, where many of Andrew's customers are
government owned and operated entities, changes in government economic policy
and communications regulation have affected in the past, and may be expected to
affect in the future, the volume of Andrew's non-U.S. business. However, the
effect of regulation in countries other than the U.S. in which Andrew does
business has generally not been detrimental to Andrew's non-U.S. operations
taken as a whole.
GOVERNMENT CONTRACTS
Andrew performs work for the United States Government primarily under
fixed-price prime contracts and subcontracts. Under fixed-price contracts,
Andrew realizes any benefit or detriment occasioned by lower or higher costs of
performance. Total direct and indirect sales to agencies of the United States
Government, which are generally fixed-price contracts, were $18,250,000 in
fiscal 1996, $22,337,000 in 1995, and $27,840,000 in 1994. These contracts are
typically less than 12 months in duration.
Andrew, in common with other companies which derive a portion of their
revenues from the United States Government, is subject to certain basic risks,
including rapidly changing technologies, changes in levels of defense spending,
and possible cost overruns. Recognition of profits is based upon estimates of
final performance which may change as contracts progress. Contract prices and
costs incurred are subject to Government Procurement Regulations. In addition,
costs may be questioned by the Government and are subject to disallowance.
All United States Government contracts contain a provision that they may be
terminated at any time for the convenience of the Government. In such event, the
contractor is entitled to recover allowable costs plus any profits earned to the
date of termination.
<PAGE>
ITEM 2-PROPERTIES
Andrew has seventeen manufacturing facilities, thirty-nine engineering and
sales administration locations and seven distribution facilities. All are
equipped with appropriate office space. Andrew's executive offices are located
at the facility in Orland Park, Illinois. The following table sets forth certain
information regarding significant facilities:
<TABLE>
<CAPTION>
Approximate
floor area in
Location square feet Principal Use Owned/Leased
- -------- ------------ ------------- ------------
<S> <C> <C> <C>
Orland Park, Illinois 551,000 Commercial and Government Owned
Denton, Texas 244,000 Commercial and Government Owned
Newnan, Georgia 109,000 Commercial Owned
Garland, Texas 89,000 Government Owned
Itasca, Illinois 78,000 Commercial Leased
Richardson, Texas 68,000 Commercial Leased
Dolton, Illinois 55,000 Commercial Leased
Addison, Illinois 54,000 Commercial Leased
Tinley Park, Illinois 54,000 Commercial Leased
Sacramento, California 54,000 Commercial Leased
----------
U.S. sub-total 1,356,000
Sorocaba, Sao Paulo, Brazil 143,000 Commercial Owned
Lochgelly, Fife, United Kingdom 132,000 Commercial and Government Owned
Campbellfield, Victoria, Australia 115,000 Commercial and Government Owned
Whitby, Ontario, Canada 92,000 Commercial and Government Owned
----------
Non U.S. sub-total 482,000
----------
TOTAL 1,838,000
==========
<FN>
The Company's properties are in good condition and are suitable for the purposes
for which they are used.
</FN>
</TABLE>
Andrew owns a total of 664 acres of land. Of this total, 565 acres are
unimproved, including 181 acres in Orland Park, Illinois, 137 acres in Floyd,
Texas, l43 acres in Denton, Texas, and 98 acres in Ashburn, Ontario, Canada.
Andrew also leases sales offices and facilities in the United States and in
thirteen countries outside the United States.
ITEM 3-LEGAL PROCEEDINGS
Andrew is not involved in any pending legal proceedings which are
expected to have a materially adverse effect on its financial position, nor
is it aware of any proceedings of this nature or relating to the protection
of the environment contemplated by governmental authorities.
ITEM 4-SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters which required a vote of security holders during
the three months ended September 30, l996.
<PAGE>
PART II
ITEM 5-MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
The Company's Common Stock is traded over-the-counter on the Nasdaq
National Market.
The Company had 3,734 holders of Common Stock of record at December 18,
1996.
Information concerning the Company's stock price during the years
ended September 30, l996 and 1995 is incorporated herein by reference from
Andrew's l996 Annual Report to Stockholders, page 32. All prices represent
high and low sales prices as reported by the Nasdaq National Market.
It is the present practice of Andrew's Board of Directors to retain
earnings in the business to finance the Company's operations and investments
and the Company does not anticipate payment of cash dividends in the foreseeable
future.
Long-term debt agreements include restrictive covenants which, among
other things, provide restrictions on dividend payments. At September 30, l996,
$307,812,000 was not restricted for purposes of such payments.
ITEM 6-SELECTED FINANCIAL DATA
Selected financial data for the last five fiscal years is incorporated
herein by reference to the l996 Annual Report to Stockholders, pages 34 and 35.
ITEM 7-MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Information concerning this item is incorporated herein by reference from
the l996 Annual Report to Stockholders, pages 14 through 18.
ITEM 8-FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements of the Company, Notes to Consolidated
Financial Statements, Selected Quarterly Financial Information, and the
report thereon of the independent auditors are incorporated herein by
reference to the 1996 Annual Report to Stockholders, pages 19 through 33.
ITEM 9-CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES
None
<PAGE>
PART III
ITEM 10-DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information concerning directors and executive officers of the Registrant
is incorporated herein by reference from the Company's l996 Proxy Statement
under the captions "Election of Directors" and "Executive Officers" and
"Section 16(a) Beneficial Ownership Reporting Compliance."
ITEM 11-EXECUTIVE COMPENSATION
Information concerning management compensation is incorporated herein
by reference from the Company's l996 Proxy Statement under the captions
"Executive Compensation", "Director Compensation," "Report of the
Compensation Committee of the Board of Directors" and "Company Performance."
ITEM 12-SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information concerning security ownership of certain beneficial owners
and management is incorporated herein by reference from the Company's l996 Proxy
Statement under the caption "Security Ownership."
ITEM 13-CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information concerning certain relationships and related transactions is
incorporated herein by reference from the Company's 1996 Proxy Statement
under the caption "Security Ownership."
<PAGE>
PART IV
ITEM 14-EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following consolidated financial statements of Andrew Corporation and
subsidiaries, included in the l996 Annual Report to Stockholders, are
incorporated by reference in Item 8:
Consolidated Statements of Income
years ended September 30, l996, 1995 and l994.........................page 19
Consolidated Balance Sheets
September 30, l996 and 1995...................................pages 20 and 21
Consolidated Statements of Cash Flows
years ended September 30, l996, l995 and l994.........................page 22
Consolidated Statements of Stockholders' Equity
years ended September 30, l996, 1995 and l994.........................page 23
Notes to Consolidated Financial Statements................pages 24 through 31
Selected Quarterly Financial Information..............................page 32
Report of Independent Auditors........................................page 33
<PAGE>
ITEM 14 CONT.
(3) EXHIBIT INDEX:
<TABLE>
<CAPTION>
Exhibit No. Description Reference
----------- ----------- ---------
<S> <C> <C>
3.1(i) Certificate of Incorporation Filed as Exhibit 3.1(i) to Form 10-K for fiscal year ended
September 30, 1994 and incorporated herein by reference.
3.1(ii) By-Laws of Registrant Filed as Exhibit 3.1(ii) to Form 10-K for fiscal year ended
September 30, 1994 and incorporated herin by reference.
4.(a) Note Agreement dated Filed as Exhibit 4(a) to Form 10-K for fiscal year ended
September 1, 1990 September 30, 1990 and incorporated herein by reference.
4.(a)a First Amendment to Note Filed as Exhibit 4(a)a to Form 10-K for fiscal year ended
Agreement dated September 30, 1992 and incorporated herein by reference.
September 1, 1990
4.(b) Stockholder Rights Agreement Filed as Exhibit 4 to Form 8-A dated November 18, 1996
dated November 14, 1996 and incorporated herein by reference.
10.(a) Executive Severance Benefit Plan Filed as Exhibit 10(a) to Form 10-Q for fiscal quarter ended
(i) Agreement with Floyd L. English June 30, 1996 and incorporated herein by reference.
(ii) Agreement with Charles R. Nicholas
10.(a)a Executive Severance Benefit Plan Filed as Exhibit 10(a)a to Form 10-K for fiscal year ended
(i) Agreement with Thomas E. Charlton September 30, 1993 and incorporated herein by reference.
(ii) Agreement with John B. Scott
10.(a)b Executive Severance Benefit Plan Filed as Exhibit 10(a)b to Form 10-Q for fiscal quarter ended
(i) Agreement with William B. Currer June 30, 1996 and incorporated herein by reference.
10.(b) Management Incentive Plan Filed as Exhibit 10(c) to Form 10-K for fiscal year ended
dated February 4, 1988. September 30, 1993 and incorporated herein by reference.
10.(c) Non-employee Directors' Filed as Exhibit 10(d) to Form 10-K for fiscal year ended
Stock Option Plan dated September 30, 1993 and incorporated herein by reference.
February 4, 1988.
10.(d) Credit Agreement dated as of Filed as Exhibit 10(e) to Form 10-K for fiscal year ended
June 16, 1993. September 30, 1993 and incorporated herein by reference.
10.(d)a First Amendment to Credit Filed as Exhibit 10(d)a to Form 10-K for fiscal year ended
Agreement dated June 16, 1993. September 30, 1995 and incorporated herein by reference.
10.(d)b Second Amendment to Credit Filed as Exhibit 10(d)b to Form 10-K for fiscal year ended
Agreement dated June 16, 1993. September 30, 1995 and incorporated herein by reference.
10.(d)c Third Amendment to Credit Filed as Exhibit 10(d)c to Form 10-Q for fiscal quarter ended
Agreement dated June 16, 1993. June 30, 1996 and incorporated herein by reference.
10.(d)d Guaranty dated as of Filed as Exhibit 10(d)d to Form 10-Q for fiscal quarter ended
April 11, 1996. June 30, 1996 and incorporated herein by reference.
10.(d)e Replacement Note dated as of Filed as Exhibit 10(d)e to Form 10-Q for fiscal quarter ended
April 8, 1996. June 30, 1996 and incorporated herein by reference.
10.(e) 1994 Employee Stock Purchase Filed with Proxy statement in connection with
Plan Annual Meeting held February 2, 1994.
11 Computation of Earnings
per Share
l3 l996 Annual Report to Those portions of the 1996 Annual Report to Shareholders
Stockholders expressly incorporated herein by reference.
21 List of Significant Subsidiaries
22 Proxy Statement in connection
with Annual Meeting to be held
on February 11, 1997 (To be
filed within 120 days of the
Registrant's fiscal year end.)
<PAGE>
23 Consent of Independent Auditors
27 Financial Data Schedules
</TABLE>
(b) Reports on Form 8-K
On September 20, 1996, the Company filed a restated 1995 Annual Report
under Item 5 of Form 8-K. Andrew restated the 1995 Annual Report due to the
acquisition of The Antenna Company which was accounted for as a pooling of
interests. In compliance with the accounting for a pooling of interests all
prior financial data has been restated to include the results of operations of
The Antenna Company.
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Stockholders and Board of Directors
Andrew Corporation
We have audited the consolidated financial statements of Andrew Corporation
and subsidiaries listed in Item 14 (a) of the annual report on Form 10-K of
Andrew Corporation for the year ended September 30, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Andrew Corporation and subsidiaries at September 30, 1996 and 1995, and
the consolidated results of their operations and their cash flows for each of
the three years in the period ended September 30, 1996 in conformity with
generally accepted accounting principles.
/s/ Ernst & Young LLP
Chicago, Illinois
October 25, 1996
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, on December 20,
1996.
Andrew Corporation
By \s\ Floyd L. English
--------------------------
Floyd L. English
Chairman, President, and
Chief Executive Officer
By \s\ Charles R. Nicholas
---------------------------
Charles R. Nicholas
Executive Vice President and
Chief Financial Officer
By \s\ Gregory F. Maruszak
---------------------------
Gregory F. Maruszak
Vice President and Controller
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below on December 20,1996, by the following
persons on behalf of the Registrant in the capacities indicated.
\s\ John G. Bollinger \s\ Jere D. Fluno
---------------------- ------------------------
John G. Bollinger Jere D. Fluno
Director Director
\s\ Jon L. Boyes \s\ Carole M. Howard
---------------------- ------------------------
Jon L. Boyes Carole M. Howard
Director Director
\s\ George N. Butzow \s\ Ormand J. Wade
--------------------- ------------------------
George N. Butzow Ormand J. Wade
Director Director
\s\ Kenneth J. Douglas
-----------------------
Kenneth J. Douglas
Director
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C>
11 Computation of Earnings per Share
13 Portions of 1996 Annual Report to Shareholders
Incorporated by Reference
21 List of Significant Subsidiaries
23 Consent of Independent Auditors
27 Financial Data Schedule
</TABLE>
EXHIBIT 11
<TABLE>
ANDREW CORPORATION AND SUBSIDIARIES
Computation of Earnings Per Share
<CAPTION>
Year Ended September 30
1996 1995 1994
------- ------- -------
(Amounts in thousands,
except per share data)
<S> <C> <C> <C>
PRIMARY EARNINGS PER SHARE
Average shares outstanding 60,175 59,453 58,562
Net effect of dilutive stock options--
based on the treasury stock method
using average market price 821 838 1,653
------- ------- -------
TOTAL 60,996 60,291 60,215
======= ======= =======
Net income $90,397 $69,955 $45,767
======= ======= =======
Per share amount $ 1.48 $ 1.16 $ .76
======= ======= =======
FULLY DILUTED EARNINGS PER SHARE
Average shares outstanding 60,175 59,453 58,562
Net effect of dilutive stock options--
based on the treasury stock method
using the year-end market price 1,013 1,032 1,746
------- ------- -------
TOTAL 61,188 60,485 60,308
======= ======= =======
Net income $90,397 $69,955 $45,767
======= ======= =======
Per share amount $ 1.48 $ 1.16 $ .76
======= ======= =======
<FN>
Note: The fully diluted earnings per share calculation is submitted in
accordance with the Securities Exchange Act of l934 Release No. 9038
although not required by footnote 2 to paragraph l4 of APB Opinion No. l5
because it results in dilution of less than 3%.
</FN>
</TABLE>
OPERATIONS REVIEW
Andrew Corporation once again set record highs in orders, sales, net income and
net income per share for the fiscal year ended September 30, 1996. In the United
States, accelerating construction for PCS more than offset slower cellular
construction. International cellular, common carrier and broadcast markets were
consistently strong throughout the year. Expanded manufacturing capacity, new
distribution locations and new products strengthened the company's ability to
compete in the growing, global wireless market.
During fiscal 1996, Andrew completed three acquisitions that added new products
and improved accessibility to our markets. In December 1995, the company
purchased a 51% interest in MAPRA Industria e Comercio Ltda. and GERBO
Telecommunicacoes e Servicos Ltda., located in Brazil. The companies
manufacture, distribute and sell antennas, waveguide and towers and provide
installation services. In March 1996, the company completed its acquisition of
The Antenna Company, a manufacturer and distributor of wireless telephone
accessories and mobile antennas. In June 1996, Andrew purchased an 80% interest
in the SATCOM Group of Companies, a distributor of commercial products, located
in South Africa.
Sales for the year increased $129.6 million or 20% over 1995 to $793.6 million.
Sales in the commercial business segment increased $151.4 million or 26% to
$731.3 million. In 1996, a 28% increase in sales of coaxial cable, a 25%
increase in terrestrial microwave antenna systems and a 31% increase in cellular
telephone accessories fueled the increase in the commercial business segment. In
1996, the government business segment and the network business segment declined
18% and 30%, respectively. In 1995, the commercial business segment increased
$92.4 million or 19% over 1994 to $580.0 million. Increased sales of coaxial
cable and strong growth in terrestrial microwave, wireless accessories and
broadcast products contributed to growth in the commercial segment in 1995.
Cost of Products Sold, as a percentage of sales revenue, remained relatively
unchanged over the three-year period. Cost of goods sold as a percentage of
sales revenue was 58.1%, 57.5% and 58.8% in 1996, 1995 and 1994, respectively.
During 1996, increased raw material prices and price competition were partially
offset by changes in product mix, the effect of efficiencies of volume and
manufacturing improvements.
Research and Development expenses rose as the company continued to invest in the
future. In 1996, research and development spending increased $7.9 million or
31.4% to $33.0 million, compared with $25.1 million in 1995 and $26.6 million
in 1994. The increase in 1996 reflects the company's new product development
efforts in the commercial business segment. The decline in 1995 stems from the
company's cost reduction efforts in the government business segment and
the network business.
Operating Expenses over the last three years increased at a much lower rate than
the increase in sales revenue. Improved systems, centralization of selling and
administrative functions and productivity gains are all important factors in
this trend. Selling and administrative expenses as a percentage of sales revenue
decreased to 19.3% in 1996 compared with 21.5% in 1995 and 23.3% in 1994. Total
spending increased $10.3 million or 7.2% to $153.3 million in 1996 compared to
$143.0 million in 1995 and $136.8 million in 1994.
Other Expense increased 5.2% over 1995 to $4.7 million, while 1995 decreased
39.5% compared with 1994. In 1996, net interest expense increased 6.5% to $3.3
million. In 1995, it decreased 25.7% from the $4.1 million reported in 1994. Net
other expense in 1996 increased to $1.5 million from $1.4 million and in 1995,
it decreased from $3.3 million in 1994. In 1996, foreign exchange gains of $1.0
million were offset by the one-time charge of $1.5 million related to
acquisition of The Antenna Company and recording of the minority interest's
share in the net income of the company's operations in Brazil and South Africa.
In 1995, net other expense included foreign exchange losses ($1.7 million), the
company's share of the losses in its joint ventures in Russia ($1.5 million) and
other miscellaneous expenses ($0.9 million). In 1995, these expenses were offset
by the $2.7 million gain on the sale of the Allen group debentures.
Net Income increased 29.2% to $90.4 million in 1996, making this the sixth
consecutive year in which the percentage increase in net income exceeded the
percentage increase in sales revenue. Volume efficiencies, increased
productivity, cost containment and favorable product mix all contributed with
this trend.
<PAGE>
Liquidity: Net cash from operations increased 19.7% to $66.8 million in 1996
compared with $55.8 million in 1995 and $52.3 million in 1994. In 1996,
increases in net income, depreciation, accounts payable and accrued liabilities
were partially offset by increases in accounts receivable and inventory. Higher
sales volume in the fourth quarter of 1996 contributed to the increase in
accounts receivable.
Net cash used in investing activities increased 42.1% to $78.7 million in 1996.
The company's acquisitions in Brazil and South Africa required the use of $17.8
million. In 1996, capital expenditures increased 9.2% to $52.5 million, and 1995
was up 68.9% over 1994. During 1996, the company spent $2.9 million of a
projected $10 million investment in equipment and expanded manufacturing
capacity at its recently acquired facilities in Brazil. In the United States,
investments in additional cable manufacturing facilities also contributed
to this increase. In 1995, plant expansion and productivity-related
enhancements to increase capacity within the commercial business segment
contributed to the majority of the increase in capital expenditures over 1994.
In 1996, the company loaned $7.8 million to its joint ventures in Russia.
Net cash used in financing activities was $2.0 million in 1996 compared with net
cash from financing activities of $4.6 million and $4.3 million in 1995 and
1994, respectively. During 1996, the company liquidated The Antenna Company's
short-term debt of $5.0 million. As of September 30, 1996 the company had $40.9
million of senior notes outstanding of which $5.0 million was due within one
year. The company maintains a $75 million revolving line of credit agreement
with Bank of America, Illinois under which there were no amounts outstanding as
of September 30, 1996.
Although Andrew has never paid cash dividends, the Board of Directors
periodically reviews this practice and to date has elected to retain earnings in
the business to finance investments and operations.
Risk Factors: This annual report may contain forward looking statements that
involve risks and uncertainties. Factors that could cause actual results to
differ materially from forecasts or expectations include but are not limited to
impact of competitive products and pricing; regional economic and political
conditions that may impact customers' ability to purchase our products and
services; availability of qualified technical management, principally in
emerging markets and end user demand for wireless communication products. In
addition, the company may, from time to time, list risk factors in the company's
reports filed with the SEC.
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
Year Ended September 30
- --------------------------------------------------------------------------------
Amounts in thousands, except per share amounts 1996 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
SALES $793,575 $663,960 $588,233
Cost of products sold 461,310 381,842 345,768
- --------------------------------------------------------------------------------
GROSS PROFIT 332,265 282,118 242,465
OPERATING EXPENSES
Research and development 33,003 25,124 26,611
Sales and administrative 153,277 143,015 136,766
- --------------------------------------------------------------------------------
186,280 168,139 163,377
- --------------------------------------------------------------------------------
OPERATING INCOME 145,985 113,979 79,088
OTHER
Interest expense 5,183 5,643 5,492
Interest income (1,903) (2,562) (1,343)
Other expense 1,460 1,425 3,295
- --------------------------------------------------------------------------------
4,740 4,506 7,444
- --------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 141,245 109,473 71,644
Income taxes 50,848 39,518 25,877
- --------------------------------------------------------------------------------
NET INCOME $ 90,397 $ 69,955 $ 45,767
================================================================================
NET INCOME PER AVERAGE SHARE
OF COMMON STOCK OUTSTANDING $ 1.48 $ 1.16 $ 0.76
================================================================================
AVERAGE SHARES OUTSTANDING 61,188 60,485 60,308
================================================================================
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED BALANCE SHEETS
<CAPTION>
September 30
- -------------------------------------------------------------------
Dollars in thousands 1996 1995
- -------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 31,295 $ 46,064
Accounts receivable, less allowances
(1996 - $3,648; 1995 - $3,071) 197,589 147,598
Inventories
Finished products 56,947 45,333
Materials and work in process 109,662 78,992
- -------------------------------------------------------------------
166,609 124,325
Miscellaneous current assets 6,491 4,758
- -------------------------------------------------------------------
TOTAL CURRENT ASSETS 401,984 322,745
OTHER ASSETS
Costs in excess of net assets of businesses
acquired, less accumulated amortization
(1996 - $19,732; 1995 - $16,524) 42,667 35,667
Investments in and advances to affiliates 42,510 33,480
Investments and other assets 11,368 10,661
PROPERTY, PLANT AND EQUIPMENT
Land and land improvements 11,103 9,402
Buildings 68,248 55,069
Equipment 254,737 212,952
Allowances for depreciation and amortization (201,388) (174,862)
- --------------------------------------------------------------------
132,700 102,561
- --------------------------------------------------------------------
TOTAL ASSETS $631,229 $505,114
====================================================================
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED BALANCE SHEETS
<CAPTION>
September 30
- -----------------------------------------------------------------------
Dollars in thousands 1996 1995
- -----------------------------------------------------------------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 38,887 $ 30,628
Accrued expenses and other liabilites 26,170 20,343
Compensation and related expenses 27,006 25,815
Income taxes 20,367 13,994
Current portion of long-term debt 4,952 4,801
- -----------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 117,382 95,581
DEFERRED LIABILITIES 7,919 7,087
LONG-TERM DEBT, less current portion 40,423 45,255
MINORITY INTEREST 9,291 -
STOCKHOLDERS' EQUITY
Common stock (par value, $.01 a share:
100,000,000 shares authorized;
68,479,398 shares issued, including treasury) 685 457
Additional paid-in capital 43,257 35,588
Foreign currency translation 349 1,077
Retained earnings 458,914 368,517
Treasury stock, at cost (8,047,229 shares in 1996;
8,431,449 shares in 1995) (46,991) (48,448)
- -----------------------------------------------------------------------
456,214 357,191
- -----------------------------------------------------------------------
TOTAL LIABILTIES AND EQUITY $631,229 $505,114
=======================================================================
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Year Ended September 30
- ----------------------------------------------------------------------------------
Dollars in thousands 1996 1995 1994
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATIONS
Net Income $90,397 $69,955 $45,767
ADJUSTMENTS TO NET INCOME
Depreciation and amortization 34,334 25,803 22,889
Increase in accounts receivable (45,681) (15,334) (18,087)
Increase in inventories (34,705) (32,078) (17,725)
(Increase) decrease in miscellaneous
current and other assets (1,663) 5,488 (1,667)
(Increase) decrease in receivables from affiliates 130 (1,171) (6,467)
Increase in accounts payable and
other liabilities 23,321 1,638 27,561
Other 663 1,515 72
- ----------------------------------------------------------------------------------
NET CASH FROM OPERATIONS 66,796 55,816 52,343
INVESTING ACTIVITIES
Capital expenditures (52,475) (48,076) (28,471)
Acquisition of businesses, net of cash acquired (17,802) - -
Investments in and advances to affiliates (9,030) (7,823) (10,626)
Proceeds from sale of property, plant and equipment 624 532 405
- ----------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES (78,683) (55,367) (38,692)
FINANCING ACTIVITIES
Proceeds from issuance of long-term debt - 3,842 -
Payments on long-term debt (5,229) (5,583) (696)
Short-term borrowings (payments)-net (2,455) 750 1,700
Stock purchase and option plans 5,712 5,561 3,255
- ----------------------------------------------------------------------------------
NET CASH FROM (USED IN) FINANCING ACTIVITIES (1,972) 4,570 4,259
Effect of exchange rate changes on cash (910) 331 803
- ----------------------------------------------------------------------------------
(DECREASE) INCREASE FOR THE YEAR (14,769) 5,350 18,713
Cash and equivalents at beginning of year 46,064 40,714 22,001
- ----------------------------------------------------------------------------------
CASH AND EQUIVALENTS AT END OF YEAR $31,295 $46,064 $40,714
==================================================================================
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<CAPTION>
Year Ended September 30
- ----------------------------------------------------------------------------------
Dollars in thousands 1996 1995 1994
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK ISSUED
Balance at beginning of year $ 457 $ 304 $ 203
Three-for-two stock split 228 153 101
- ----------------------------------------------------------------------------------
BALANCE AT END OF YEAR $ 685 $ 457 $ 304
==================================================================================
ADDITIONAL PAID-IN CAPITAL
Balance at beginning of year $ 35,588 $ 22,356 $ 19,599
Three-for-two stock split (228) (153) (101)
Stock purchase and option plans 7,897 13,385 2,858
- ----------------------------------------------------------------------------------
BALANCE AT END OF YEAR $ 43,257 $ 35,588 $ 22,356
==================================================================================
RETAINED EARNINGS
Balance at beginning of year $368,517 $298,562 $252,795
Net Income 90,397 69,955 45,767
- ----------------------------------------------------------------------------------
BALANCE AT END OF YEAR $458,914 $368,517 $298,562
==================================================================================
TREASURY STOCK
Balance at beginning of year $(48,448) $(43,419) $(45,323)
Stock purchase and option plans 1,457 (5,029) 1,904
- ----------------------------------------------------------------------------------
BALANCE AT END OF YEAR $(46,991) $(48,448) $(43,419)
==================================================================================
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
Principles of consolidation
The consolidated financial statements include the accounts of the company and
its majority-owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated.
Cash equivalents
The company considers all highly liquid investments purchased with maturities of
three months or less to be cash equivalents. The carrying amount of cash
equivalents approximates fair value due to the relative short-term maturity of
these investments.
Inventories
Inventories are stated at the lower of cost or market. Inventories stated under
the last-in, first-out (LIFO) method represent 41% of total inventories in 1996
and 39% of total inventories in 1995. The remaining inventories are valued on
the first-in, first-out (FIFO) method and the weighted average method.
If the FIFO method, which approximates current replacement cost, had been used
for all inventories, the total amount of inventories would have been increased
by $8,435,000 and $11,189,000 at September 30, 1996 and 1995, respectively.
Depreciation and amortization
The company provides for depreciation and amortization of property, plant and
equipment, all of which are recorded at cost, principally using accelerated
methods based on estimated useful lives of the assets for both financial
reporting and tax purposes. Costs in excess of net assets of businesses acquired
are amortized on the straight-line basis over periods ranging from 10 to 40
years.
Investments in affiliates
Investments in affiliates are accounted for using the equity method, under which
the company's share of earnings or losses of these affiliates is reflected in
income as earned, and dividends are credited against the investment in
affiliates when received.
Revenue recognition
Revenue is recognized from sales, other than long-term contracts, when a product
is shipped or a service is performed. Sales under long-term contracts generally
are recognized under the percentage of completion method and include a portion
of the earnings expected to be realized on the contract in the ratio that costs
incurred bear to estimated total costs. Contracts in progress are reviewed
monthly, and sales and earnings are adjusted in current accounting periods based
on revisions in contract value and estimated costs at completion. Estimated
losses on contracts are provided when identified.
Foreign currency translation
The functional currency for the company's foreign operations is predominantly
the applicable local currency. Accounts of foreign operations are translated
into U.S. dollars using year-end exchange rates for assets and liabilities and
average monthly exchange rates for revenue and expense accounts. Adjustments
resulting from translation are included as a separate component of stockholders'
equity. Gains and losses resulting from foreign currency transactions are
included in determining net income.
Income taxes
Deferred income taxes reflect the impact of temporary differences between the
amounts of assets and liabilities recognized for financial reporting purposes
and such amounts recognized for tax purposes.
Net income per share
Net income per share is based on the weighted average number of common shares
outstanding during each year after giving effect to stock options considered to
be dilutive common stock equivalents. Fully diluted net income per share is not
materially different from primary earnings per share.
Use of estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
Accounting changes
In March 1995, The Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standard (SFAS) No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed of," which
requires long-lived assets to be reviewed for impairment when events or
circumstances indicate that an impairment exists. The company is required to
adopt SFAS No. 121 during the first quarter of fiscal year 1997. Adoption of
this Statement is not expected to have a material effect on the company's
financial statements. During the first quarter of fiscal year 1995, the company
adopted SFAS No. 115, "Accounting for Certain Investments in Debt and Equity
Securities." The adoption of this statement did not have a material effect on
the company's financial statements.
<PAGE>
BUSINESS ACQUISITIONS
================================================================================
In December 1995, the company purchased a 51% interest in Mapra Industria e
Comercio, Ltda. and Gerbo Telecommunicacoes e Servicos, Ltda. located in
Brazil, for $14.6 million, net of cash received. The acquisition was accounted
for as a purchase and, accordingly, the operating results of Mapra and Gerbo
have been included in the consolidated operating results since the date of
acquisition. Mapra and Gerbo manufacture, distribute and sell antennas,
waveguide and towers and also provide installation services.
In June 1996, the company purchased an 80% interest in SATCOM Group of
Companies, located in South Africa, for $3.2 million net of cash received. The
acquisition of SATCOM was accounted for as a purchase and, accordingly, the
operating results of SATCOM have been included in the consolidated operating
results since the date of acquisition.
If the acquisitions of Mapra Industria e Comercio, Ltda., Gerbo
Telecommunicacoes e Servicos, Ltda. and SATCOM Group of Companies had taken
place at the beginning of fiscal year 1996, Andrew Corporation's consolidated
sales and net income would not have been materially affected.
In March 1996, Andrew Corporation completed its acquisition of The Antenna
Company, a manufacturer and distributor of wireless telephone antennas and
accessories for mobile applications. The transaction has been accounted for as a
pooling of interests and, accordingly, the accompanying financial statements
have been restated to include the accounts and operations of The Antenna Company
for all periods prior to the merger. Andrew exchanged 1,541,564 shares of its
common stock for all the outstanding stock of the privately held The Antenna
Company. In addition, $1.5 million in acquisition costs were incurred to
complete the merger.
<PAGE>
INVESTMENTS IN AFFILIATES
- --------------------------------------------------------------------------------
The company's investments in affiliates represent 40 to 50 percent interests in
several start-up network telecommunications joint ventures located in Russia and
Ukraine. The combined operating results of the ventures and the company's share
thereof were not material to the company's 1996, 1995 and 1994 operating
results.
UNBILLED RECEIVABLES
- --------------------------------------------------------------------------------
As of September 30, 1996, unbilled receivables of $7,634,000 are included in
accounts receivable, compared with $11,750,000 as of September 30, 1995. These
amounts will be billed in accordance with contract terms and delivery schedules
and are generally expected to be collected within one year.
PROFIT SHARING PLANS
- --------------------------------------------------------------------------------
Most employees of Andrew Corporation and its subsidiaries participate in various
retirement plans, principally defined contribution profit sharing plans. The
amounts charged to earnings for these plans in 1996, 1995 and 1994 were
$13,678,000, $11,696,000 and $11,027,000, respectively.
<PAGE>
BORROWINGS
================================================================================
Lines of Credit
The company maintains a $75 million revolving line of credit agreement with Bank
of America, Illinois. The maximum outstanding during 1996 under the line of
credit was $3.5 million with a weighted average interest rate of 5.58%. There
were no amounts outstanding under the line of credit agreement as of September
30, 1996.
Long-Term Debt
Long-term debt as of September 30 consisted of the following:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
Dollars in thousands 1996 1995
- ----------------------------------------------------------------------
<S> <C> <C>
9.52% senior notes payable to insurance companies
in annual installments from 1995 to 2005 $40,910 $45,455
Variable rate Industrial Development Revenue Bond
with Coweta County, Georgia 3,800 3,800
Other 665 801
Less: Current Portion 4,952 4,801
- ----------------------------------------------------------------------
Total Long-Term Debt $40,423 $45,255
- ----------------------------------------------------------------------
</TABLE>
Under the terms of the loan agreements, the company has agreed to maintain
certain levels of working capital and net worth. As of September 30, 1996, all
these requirements have been met.
The principal amounts of long-term debt maturing after September 30, 1996 are:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------
Dollars in thousands 1997 1998 1999 2000 2001 Thereafter
- ------------------------------------------------------------------------------------
$4,952 $4,766 $4,582 $4,545 $4,545 $21,985
====================================================================================
</TABLE>
Cash payments for interest on all borrowings were $4,752,000, $5,339,000 and
$5,307,000 in 1996, 1995 and 1994, respectively.
The carrying amount of long-term debt as of September 30, 1996 approximates fair
value. The fair value was determined by discounting the future cash outflows
based upon the current market rates for instruments with a similar risk and term
to maturity.
<PAGE>
INCOME TAXES
- ----------------------------------------------------------------------
The composition of the provision for income taxes follows:
<TABLE>
<CAPTION>
Year Ended September 30
- ------------------------------------------------------------------------------
Dollars in thousands 1996 1995 1994
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Currently Payable:
Federal $ 32,644 $ 19,957 $ 14,191
Non-United States 16,155 13,640 12,860
State 4,779 3,624 3,008
- ------------------------------------------------------------------------------
53,578 37,221 30,059
Deferred (Credit):
Federal and State (2,608) 2,199 (3,662)
Non-United States (122) 98 (520)
- ------------------------------------------------------------------------------
(2,730) 2,297 (4,182)
- ------------------------------------------------------------------------------
$ 50,848 $ 39,518 $ 25,877
==============================================================================
Income Taxes Paid $ 37,041 $ 27,387 $ 19,461
==============================================================================
Components of Income Before Income Taxes:
United States $ 75,025 $ 67,079 $ 32,918
Non-United States 66,220 42,394 38,726
- ------------------------------------------------------------------------------
$141,245 $109,473 $ 71,644
==============================================================================
</TABLE>
The company's effective income tax rate varied from the statutory United States
federal income tax rate because of the following:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
1996 1995 1994
- ----------------------------------------------------------------------
<S> <C> <C> <C>
Statutory United States federal tax rate 35.0 % 35.0 % 35.0 %
Foreign Sales Corporation (2.7) (2.3) (2.7)
State income taxes, net of federal tax effect 2.1 2.2 2.4
Other items 1.6 1.2 1.4
- ----------------------------------------------------------------------
Effective Tax Rate 36.0 % 36.1 % 36.1 %
======================================================================
</TABLE>
<PAGE>
The tax effects of temporary differences have given rise to gross deferred tax
assets of $10,197,000, primarily accrued expenses and inventory pricing methods,
and gross deferred tax liabilities of $6,784,000, primarily depreciation, as of
September 30, 1996. The company has not recorded a valuation allowance for
deferred tax assets because the existing net deductible temporary differences
will reverse during periods in which the company expects to generate taxable
income.
No provision has been made for income taxes of approximately $10,750,000 as
of September 30, 1996, which would be payable should undistributed net income of
$84,300,000 of subsidiaries located outside the United States be distributed as
dividends. The company plans to continue its non-United States operations and
anticipates the ability to use tax planning opportunities if any dividends are
declared or paid from these operations.
<PAGE>
STOCKHOLDERS' EQUITY
- --------------------------------------------------------------------------------
Each outstanding common share has attached to it a one Share Purchase Right
that, until exercisable, cannot be transferred apart from the company's Common
Stock. The Rights will only become exercisable if a person or group acquires 27%
or more of the company's Common Stock or announces an offer to acquire 30% or
more of the company's Common Stock. In the event the Rights become exercisable,
each Right may entitle the holder to purchase Common Stock of either the
surviving or acquired company at one-half its market price.
The company currently maintains a long-term Management Incentive Program, which
provides for the issuance of up to 6,075,000 common shares in the form of stock
options and awards and the awarding of performance units payable in cash or
stock to key officers and other employees. Substantially all options granted
under this plan become fully exercisable at the end of a four-year period.
Options granted prior to fiscal year 1996 expire five years after grant, while
options granted during fiscal year 1996 expire ten years after grant.
The company also maintains a Stock Option Plan for non-employee Directors that
provides for the issuance of up to 675,000 common shares. Options issued under
this plan vest over a five-year period and expire ten years after grant.
Information on options for the last three years ended September 30 is as
follows:
<TABLE>
<CAPTION>
Year Ended September 30
- ------------------------------------------------------------------------------
1996 1995 1994
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Outstanding at beginning of year 1,578,425 2,347,200 2,531,142
Granted 674,550 558,675 693,225
Expired or cancelled (182,847) (48,101) (95,715)
Exercised (324,374) (1,279,350) (781,452)
- ------------------------------------------------------------------------------
Outstanding at End of Year 1,745,754 1,578,424 2,347,200
==============================================================================
Exercisable at End of Year 314,850 204,525 765,742
==============================================================================
</TABLE>
<TABLE>
<CAPTION>
Price range of options:
<S> <C> <C> <C>
Outstanding at end of year $ 1.97 - 43.56 $ 1.97 - 25.67 $ 1.97 - 14.37
Granted during the year $29.00 - 43.56 $22.89 - 25.67 $10.45 - 14.37
Exercised during the year $ 2.70 - 25.67 $ 2.89 - 6.26 $ 2.07 - 8.07
==============================================================================
</TABLE>
The company also has an Employee Stock Purchase Plan that expires February 1,
1999. All employees with six months of service as of the annual offering date
are eligible to participate in this Plan. The Plan authorizes up to 1,181,250
shares of Common Stock to be sold to employees at 85% of market value.
Through September 30, 1996, 353,466 shares have been issued under the Plan.
<PAGE>
As of September 30, 1996, 3,560,850 shares of Common Stock were reserved for the
various stock plans described above.
On February 7, 1996, the company's Board of Directors approved a three-for-two
stock split to stockholders of record on February 21, 1996, payable March 6,
1996. A three-for-two stock split was also effected in March 1995 and in March
1994.
Common Stock issued and outstanding and held in treasury is summarized in the
tables below:
<TABLE>
<CAPTION>
Year Ended September 30
- ------------------------------------------------------------------------------
1996 1995 1994
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
SHARES OF COMMON STOCK - ISSUED
Balance at beginning of year 45,653,823 30,435,882 20,290,588
Three-for-two stock split 22,825,575 15,217,941 10,145,294
- ------------------------------------------------------------------------------
Balance at End of Year 68,479,398 45,653,823 30,435,882
==============================================================================
</TABLE>
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK - HELD IN TREASURY
<S> <C> <C> <C>
Balance at beginning of year 5,620,970 4,206,023 3,038,920
Three-for-two stock split 2,809,352 2,103,012 1,519,460
Stock purchase and option plans (383,093) (688,065) (352,357)
- ------------------------------------------------------------------------------
Balance at End of Year 8,047,229 5,620,970 4,206,023
==============================================================================
</TABLE>
Foreign currency translation adjustments decreased equity by $0.7 million during
the year ended September 30, 1996. Foreign currency translation adjustments
increased equity $2.3 million and $4.2 million during the years ended September
30, 1995 and 1994, respectively.
<PAGE>
GEOGRAPHIC AREA INFORMATION
- ------------------------------------------------------------------------------
Principal financial data by major geographic area:
<TABLE>
<CAPTION>
Year Ended September 30
- ------------------------------------------------------------------------------
Dollars in thousands 1996 1995 1994
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
SALES:
United States:
Customers $529,480 $474,388 $439,995
Intercompany 93,872 61,865 42,728
- ------------------------------------------------------------------------------
623,352 536,253 482,723
Europe:
Customers 154,363 129,029 99,039
Intercompany 81,090 13,890 5,462
- ------------------------------------------------------------------------------
235,453 142,919 104,501
Asia-Pacific:
Customers 50,344 38,026 29,698
Intercompany 2,314 1,645 416
- ------------------------------------------------------------------------------
52,658 39,671 30,114
Other Americas:
Customers 59,388 22,517 19,501
Intercompany 5,557 5,285 3,449
- ------------------------------------------------------------------------------
64,945 27,802 22,950
Eliminations 182,833 82,685 52,055
- ------------------------------------------------------------------------------
CONSOLIDATED SALES $793,575 $663,960 $588,233
==============================================================================
UNITED STATES - EXPORT SALES $112,648 $103,090 $101,829
==============================================================================
OPERATING INCOME:
United States $ 80,756 $ 72,010 $ 44,803
Europe 36,792 20,092 17,629
Asia-Pacific 23,951 18,199 12,377
Other Americas 4,486 3,678 4,279
- ------------------------------------------------------------------------------
CONSOLIDATED OPERATING INCOME $145,985 $113,979 $ 79,088
==============================================================================
ASSETS IDENTIFIABLE TO:
United States $453,217 $367,025 $320,193
Europe 104,208 101,550 76,758
Asia-Pacific 18,559 17,449 12,710
Other Americas 55,245 19,090 15,665
- ------------------------------------------------------------------------------
CONSOLIDATED ASSETS $631,229 $505,114 $425,326
==============================================================================
<FN>
Sales and transfers between geographic areas are made at amounts that
approximate manufacturing cost and generally consist of products that
require additional processing and with respect to which related selling,
marketing and engineering expenses are incurred prior to shipment to customers.
</FN>
</TABLE>
<PAGE>
INDUSTRY SEGMENT INFORMATION
- --------------------------------------------------------------------------------
The company operates in three strategic business segments: commercial,
government and network. The commercial segment serves commercial markets,
including telecommunications companies, radio equipment companies, television
stations, utilities and distributors. Products include antennas, and antenna
systems and coaxial cable. The government segment serves government
markets-federal, foreign and local. Products include specialized antennas and
communication reconnaissance systems sold to various United States government
agencies and friendly international governments. Products also include coaxial
cable and standard antennas sold to government customers. The network segment
provides products and services that support the integration of voice, data and
video in corporate telecommunication networks. The corporate and other category
includes certain expenses for corporate administration, long-range research and
development, costs related to unconsolidated affiliates and results of
operations that do not relate to business segments as well as the assets
associated therewith. Corporate identifiable assets also include cash and
equivalents. In 1996, direct and indirect sales to agencies of the United States
federal government totaled $18,250,000 compared with $22,337,000 in 1995 and
$27,840,000 in 1994.
Financial information by industry segment is as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
Corporate
Dollars in thousands Commercial Government Network and Other Total
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1996:
Sales $731,347 $34,063 $27,568 $ 597 $793,575
Operating income (loss) 170,401 1,154 (3,143) (22,427) 145,985
Identifiable assets 476,787 43,938 33,417 77,087 631,229
Capital expenditures 47,328 1,700 2,394 1,053 52,475
Depreciation and amortization 27,474 1,911 3,183 1,767 34,335
- --------------------------------------------------------------------------------------------------
1995:
Sales $579,984 $41,455 $39,217 $ 3,304 $663,960
Operating income (loss) 142,658 3,879 (3,048) (29,510) 113,979
Identifiable assets 329,039 75,308 36,834 63,933 505,114
Capital expenditures 42,535 1,436 1,305 2,800 48,076
Depreciation and amortization 19,132 2,131 3,202 1,338 25,803
- --------------------------------------------------------------------------------------------------
1994:
Sales $487,579 $43,611 $52,208 $ 4,835 $588,233
Operating income (loss) 114,590 1,067 (5,409) (31,160) 79,088
Identifiable assets 238,276 66,800 42,502 77,748 425,326
Capital expenditures 24,362 1,527 655 1,927 28,471
Depreciation and amortization 14,076 3,256 3,494 2,063 22,889
- --------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
SELECTED QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
- --------------------------------------------------------------------------------
Due to variability of shipments under large contracts, customers' seasonal
installation considerations, variations in product mix and in profitability of
individual orders, the company can experience wide quarterly fluctuations in
net sales and income. Consequently, it is more meaningful to focus on annual
rather than quarterly results. All quarters have been updated to reflect the
pooling of interests acquisition of The Antenna Company in 1996.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
Dollars in thousands,
except per share amounts December March June September Annual
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1996:
Sales $177,924 $183,159 $197,209 $235,283 $793,575
Gross profit 71,853 72,818 85,036 102,558 332,265
Income before income taxes 26,424 28,537 37,558 48,726 141,245
Net income 16,911 18,292 24,007 31,187 90,397
Net income per share 0.28 0.30 0.39 0.51 1.48
Common Stock Closing Price Range:
High 39 1/3 39 55 1/2 53 7/8
Low 24 2/3 20 3/4 38 3/4 40 1/2
- -------------------------------------------------------------------------------------------------------
1995:
Sales $151,731 $163,736 $170,478 $178,015 $663,960
Gross profit 62,251 65,983 73,688 80,196 282,118
Income before income taxes 18,543 22,065 29,735 39,130 109,473
Net income 11,954 14,129 18,960 24,912 69,955
Net income per share 0.20 0.23 0.31 0.41 1.16 <F1>
Common Stock Closing Price Range:
High 23 7/8 29 7/8 38 5/8 42 2/3
Low 19 2/3 22 2/3 27 1/3 36 2/3
- -------------------------------------------------------------------------------------------------------
<FN>
<F1> The sum of net income per share for the four quarters in 1995 does not equal
earnings per share for the year due to differences in average shares
outstanding.
</FN>
</TABLE>
<PAGE>
Report of Independent Auditors
TO THE STOCKHOLDERS AND BOARD OF DIRECTORS
ANDREW CORPORATION
We have audited the accompanying consolidated balance sheets of Andrew
Corporation and subsidiaries as of September 30, 1996 and 1995, and the related
consolidated statements of income, stockholders' equity and cash flows for each
of the three years in the period ended September 30, 1996. These financial
statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Andrew Corporation
and subsidiaries at September 30, 1996 and 1995, and the consolidated results of
their operations and their cash flows for each of the three years in the period
ended September 30, 1996 in conformity with generally accepted accounting
principles.
/s/ Ernst & Young LLP
Chicago, Illinois
October 25, 1996
<PAGE>
<TABLE>
<CAPTION>
FIVE YEAR FINANCIAL SUMMARY
- -----------------------------------------------------------------------------------------------------------
Dollars in thousands, except per share amounts 1996 1995 1994 1993 1992
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPERATIONS <F1>
- -----------------------------------------------------------------------------------------------------------
Sales $793,575 $663,960 $588,233 $451,957 $453,408
Employee compensation 200,945 192,469 174,701 152,570 148,660
Materials, supplies and services 450,834 366,907 332,396 236,652 229,723
Depreciation 30,516 22,683 19,773 18,357 18,026
Increase (decrease) in inventory 34,705 32,078 17,725 5,185 (11,309)
Interest expense 5,183 5,643 5,492 5,772 6,161
Interest income 1,903 2,562 1,343 830 1,328
Other income (expense) (1,460) (1,425) (3,295) 1,530 944
Non-recurring items <F2> - - - - -
Income tax 50,848 39,518 25,877 16,748 15,650
Net income 90,397 69,955 45,767 29,403 26,151
Net income per share 1.48 1.16 0.76 0.50 0.39
===========================================================================================================
FINANCIAL POSITION
Working capital 284,602 227,164 171,705 142,675 126,764
Property, plant and equipment-net 132,700 102,561 76,618 68,891 71,296
Total assets 631,229 505,114 425,326 343,876 318,062
Long-term debt 40,423 45,255 46,092 52,467 54,223
Stockholders' equity 456,214 357,191 276,553 221,872 192,956
===========================================================================================================
RATIOS AND OTHER DATA
Current ratio 3.4 3.4 2.8 3.2 2.9
Return on net sales 11.4% 10.5% 7.8% 6.5% 5.8%
Return on average assets 15.9% 15.0% 11.9% 8.9% 7.9%
Return on average stockholders' equity 22.2% 22.1% 18.4% 14.2% 12.8%
Stockholders' equity per share outstanding $7.55 $5.95 $4.69 $3.81 $3.41
Foreign exchange gain (loss) <F3> 964 (1,709) (2,021) 1,340 17
Research & development 33,003 25,124 26,611 22,479 20,481
Additions to property, plant and equipment 52,475 48,076 28,471 18,479 18,188
Net assets located outside U.S. at year end 220,600 160,700 130,900 90,300 65,100
Orders entered 818,600 723,600 584,800 457,400 429,700
Order backlog at year end (under 12 months) 153,400 126,200 84,800 86,400 84,800
Order backlog at year end (over 12 months) 14,800 18,500 600 1,600 5,500
Number of full time equivalent employees at year end:
Outside United States 1,162 763 661 584 596
Total employees 4,622 3,677 3,405 3,110 3,144
Average shares of stock outstanding (thousands) 61,188 60,485 60,308 59,192 66,261
Stockholders of record at year end 3,242 2,340 1,482 1,133 1,057
===========================================================================================================
<FN>
<F1> The results of operations for fiscal years 1991 through 1995 have been
updated for the pooling of interests with The Antenna Company in 1996. All
other acquisitions have been included in operations since the date of
acquisition.
<F2> In 1987, pretax charge of $19,000 for restructuring less pretax gain
of $5,941 on sale of land.
<F3> Total foreign exchange gain or loss, realized and unrealized, before
provision for applicable taxes.
</FN>
</TABLE>
<PAGE>
APPENDIX A
<TABLE>
<CAPTION>
PAGES WHERE GRAPHIC DESCRIPTION OF GRAPHIC AND IMAGE MATERIAL
IMAGE APPEARS (In thousands, except per share data)
<S> <C>
14 Bar graph of Sales (Dollars in Millions)
Data points: 1992-$453, 1993-$452, 1994-$588, 1995-$664, 1996-$794
14 Bar graph of Sales-International (Dollars in Millions)
Data points: 1992-$169, 1993-$177, 1994-$250, 1995-$293, 1996-$377
14 Bar graph of Sales- U.S. Export (Dollars in Millions)
Data points: 1992-$49, 1993-$54, 1994-$102, 1995-$103, 1996-$113
15 Bar graph of Gross Profit (Dollars in Millions)
Data points: 1992-$174, 1993-$187, 1994-$242, 1995-$282, 1996-$332
15 Bar graph of Sales and Administrative (Dollars in Millions)
Data points: 1992-$108, 1993-$115, 1994-$137, 1995-$143, 1996-$153
15 Bar graph of Research and Development (Dollars in Millions)
Data points: 1992-$20, 1993-$22, 1994-$27, 1995-$25, 1996-$33
16 Bar graph of Operating Income (Dollars in Millions)
Data points: 1992-$46, 1993-$50, 1994-$79, 1995-$114, 1996-$146
16 Bar graph of Net Income (Dollars in Millions)
Data points: 1992-$26, 1993-$29, 1994-$46, 1995-$70, 1996-$90
16 Bar graph of 12-Month Backlog (Dollars in Millions)
Data points: 1992-$85, 1993-$86, 1994-$85, 1995-$126, 1996-$153
17 Bar graph of Return on Equity (Percent)
Data points: 1992-12.8, 1993-14.2, 1994-18.4, 1995-22.1, 1996-22.2
17 Bar graph of Return on Assets (Percent)
Data points: 1992-7.9, 1993-8.9, 1994-11.9, 1995-15.0, 1996-15.9
17 Bar graph of Sales per Employee (Dollars in Thousands)
Data points: 1992-$137.5, 1993-$144.5, 1994-$180.6, 1995-$187.5, 1996-$191.2
18 Bar graph of Net Cash from Operations (Dollars in Millions)
Data points: 1992-$51.7, 1993-$54.9, 1994-$52.3, 1995-$55.8, 1996-$66.8
18 Bar graph of Capital Expenditures (Dollars in Millions)
Data points: 1992-$18, 1993-$18, 1994-$28, 1995-$48, 1996-$52
18 Bar graph of Total Debt (Dollars in Millions)
Data points: 1992-$65, 1993-$56, 1994-$52, 1995-$50, 1996-$45
</TABLE>
EXHIBIT 21
ANDREW CORPORATION AND SUBSIDIARIES
List of Significant Subsidiaries
Significant subsidiaries of the registrant, all of which are wholly-owned unless
otherwise indicated, are as follows:
Name of Jurisdiction
Subsidiary of Incorporation
Andrew AG....................................................Switzerland
Andrew Canada Inc............................................Canada
Andrew Corporation (Australia) Pty. Ltd......................Australia
Andrew Data Corporation......................................State of Delaware
Andrew do Brazil, Limitada...................................Brazil
(70% owned)
Andrew Espana, S.A...........................................Spain
Andrew GmbH..................................................Germany
Andrew International Corporation.............................State of Illinois
Andrew KMW Systems Inc.......................................State of Delaware
Andrew Kommunikationssysteme AG..............................Switzerland
Andrew Corporation (Mexico), S.A. de C.V.....................Mexico
Andrew NPG Ltd...............................................United Kingdom
Andrew Satcom Systems........................................South Africa
(80% owned)
Andrew SciComm Inc...........................................State of Texas
Andrew S.A.R.L...............................................France
Andrew S.R.L.................................................Italy
Andrew Soracaba, Brazil......................................Brazil
(51% owned)
Andrew Systems Inc...........................................State of Delaware
Andrew VSAT Systems Inc......................................State of California
(90% owned)
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in Registration Statement
No. 2-86070 on Form S-8 dated August 23, 1983; Registration Statement
No. 33-30364 on Form S-8 dated August 7, 1989; Registration Statement No.
33-58750 on Form S-8 dated February 24, 1993; Registration Statement No.
33-58752 on Form S-8 dated February 24, 1993; Registration Statement No.
33-52487 on Form S-8 dated March 2, 1994 and Post-Effective Amendment No.
1 to Registration Statement No. 33-52487 on Form S-8 dated March 3, 1994;
Registration Statement No. 333-00887 on Form S-4 dated February 13, 1996 and
Post-Effective Amendment No. 1 to Registration Statement No. 333-00887 on
Form S-4 dated February 14, 1996; Registration Statement No. 333-12743 on
Form S-4 dated September 26, 1996 of our report dated October 25, 1996, with
respect to the consolidated financial statements incorporated by reference in
the Annual Report (Form 10-K) of Andrew Corporation for the year ended
September 30, 1996.
/s/ Ernst & Young LLP
Chicago, Illinois
December 19, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> SEP-30-1996
<CASH> 31,295
<SECURITIES> 0
<RECEIVABLES> 201,237
<ALLOWANCES> 3,648
<INVENTORY> 166,609
<CURRENT-ASSETS> 401,984
<PP&E> 334,088
<DEPRECIATION> 201,388
<TOTAL-ASSETS> 631,229
<CURRENT-LIABILITIES> 117,382
<BONDS> 40,423
0
0
<COMMON> 685
<OTHER-SE> 455,529
<TOTAL-LIABILITY-AND-EQUITY> 631,229
<SALES> 793,575
<TOTAL-REVENUES> 793,575
<CGS> 461,310
<TOTAL-COSTS> 461,310
<OTHER-EXPENSES> 186,280
<LOSS-PROVISION> 1,227
<INTEREST-EXPENSE> 5,183
<INCOME-PRETAX> 141,245
<INCOME-TAX> 50,848
<INCOME-CONTINUING> 90,397
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 90,397
<EPS-PRIMARY> 1.48
<EPS-DILUTED> 1.48
</TABLE>
