SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark One)
(x) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
OR
( )TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from______ to _______
Commission file number 0-9514
ANDREW CORPORATION
(Exact name of Registrant as specified in its charter)
DELAWARE 36-2092797
(State or other jurisdiction of (IRS 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)
No Change
(Former name, former address and former fiscal year, if changed since
last report)
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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date.
Common Stock, $.01 Par Value -- 90,206,795 shares as of July 18, 1997
<PAGE>
INDEX
ANDREW CORPORATION
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated balance sheets--June 30, 1997 and September 30,
1996.
Consolidated statements of income--Three months ended June 30,
1997 and 1996; Nine months ended June 30, 1997 and 1996.
Consolidated statements of cash flows--Nine months ended June 30,
1997 and 1996.
Notes to consolidated financial statements--June 30, 1997.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
PART II. FINANCIAL INFORMATION
Item 6. Exhibits and Reports on Form 8-K
Exhibit 11 Computation of Earnings per Share.
Exhibit 27.1 Financial Data Schedule - June 30, 1997
Exhibit 27.2 Financial Data Schedule - June 30, 1996
SIGNATURES
<PAGE>
<TABLE>
ANDREW CORPORATION
CONSOLIDATED BALANCE SHEET
(Dollars in thousands)
<CAPTION>
June 30 September 30
1997 1996
---------- ---------
(unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 91,598 $ 31,295
Accounts receivable, less allowances 174,231 197,589
(Jun. - $4,165; Sep. - $3,648)
Inventories
Finished products 53,538 56,947
Materials and work in process 125,640 109,662
-------- --------
179,178 166,609
Assets related to discontinued
operations, less allowances 5,878 --
Miscellaneous current assets 10,301 6,491
-------- --------
TOTAL CURRENT ASSETS 461,186 401,984
OTHER ASSETS
Costs in excess of net assets of businesses
acquired, less accumulated amortization 26,259 42,667
(Jun. - $9,635; Sep. - $19,732)
Investments in and advances to affiliates 52,901 42,510
Investments and other assets 14,306 11,368
PROPERTY, PLANT, AND EQUIPMENT
Land and land improvements 11,718 11,103
Buildings 69,285 68,248
Equipment 273,937 254,737
Allowances for depreciation and amortization (218,721) (201,388)
-------- --------
136,219 132,700
-------- --------
TOTAL ASSETS $ 690,871 $ 631,229
======== ========
<FN>
The balance sheet at September 30, 1996 has been derived from the audited
financial statements at that date.
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
ANDREW CORPORATION
CONSOLIDATED BALANCE SHEET
(Dollars in thousands)
<CAPTION>
June 30 September 30
1997 1996
---------- -----------
(unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $ 13,096 $ -
Accounts payable 34,609 38,887
Accrued expenses and other liabilities 32,224 26,170
Compensation and related expenses 26,835 27,006
Income taxes 18,447 20,367
Restructuring 5,150 -
Liabilities related to discontinued operations 5,966 -
Current portion of long-term debt 5,010 4,952
-------- --------
TOTAL CURRENT LIABILITIES 141,337 117,382
-------- --------
DEFERRED LIABILITIES 5,083 7,919
LONG-TERM DEBT, less current portion 40,254 40,423
MINORITY INTEREST 9,289 9,291
STOCKHOLDERS' EQUITY
Common stock (par value, $.01 a share: 1,027 685
400,000,000 shares authorized;
102,718,210 shares issued, including treasury)
Additional paid-in capital 50,054 43,257
Foreign currency translation (3,382) 349
Retained earnings 516,504 458,914
Treasury stock, at cost (12,509,897 shares Jun.;
12,070,844 shares Sep.) (69,295) (46,991)
-------- --------
494,908 456,214
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 690,871 $ 631,229
======== ========
<FN>
The balance sheet at September 30, 1996 has been derived from the audited
financial statements at that date.
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
ANDREW CORPORATION
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(Amounts in thousands, except per share amounts)
<CAPTION>
Three Months Ended Nine Months Ended
June 30 June 30
----------------------- -----------------------
1997 1996 1997 1996
----------------------- -----------------------
<S> <C> <C> <C> <C>
SALES $208,911 $189,907 $636,853 $535,818
Cost of products sold 116,965 107,696 374,692 315,300
-------- -------- -------- --------
GROSS PROFIT 91,946 82,211 262,161 220,518
OPERATING EXPENSES
Research and development 11,345 7,724 30,267 21,104
Sales and administrative 37,019 35,341 109,581 99,206
Restructuring 5,150 - 5,150 -
-------- -------- -------- --------
53,514 43,065 144,998 120,310
-------- -------- -------- --------
OPERATING INCOME 38,432 39,146 117,163 100,208
OTHER
Interest expense 1,657 1,470 4,440 4,211
Interest income (1,236) (555) (2,885) (1,711)
Other (income) expense (387) (262) (2,862) 1,565
-------- -------- -------- --------
34 653 (1,307) 4,065
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 38,398 38,493 118,470 96,143
Income taxes 13,439 13,887 41,464 34,614
-------- -------- -------- --------
INCOME FROM CONTINUING OPERATIONS 24,959 24,606 77,006 61,529
-------- -------- -------- --------
DISCONTINUED OPERATIONS
Loss from operations of Network Products
Business, net of applicable tax benefit 1,135 599 3,330 2,319
Loss on disposal of Network Products
Business, including provision of $1,040
for operating losses during phase-out
period - net of applicable tax benefits 16,086 - 16,086 -
-------- -------- -------- --------
17,221 599 19,416 2,319
-------- -------- -------- --------
NET INCOME $ 7,738 $ 24,007 $ 57,590 $ 59,210
======== ======== ======== ========
INCOME FROM CONTINUING OPERATIONS
PER AVERAGE SHARE OF COMMON STOCK
OUTSTANDING $ 0.27 $ 0.27 $ 0.84 $ 0.67
======== ======== ======== ========
NET INCOME PER AVERAGE SHARE OF
COMMON STOCK OUTSTANDING $ 0.08 $ 0.26 $ 0.63 $ 0.64
======== ======== ======== ========
AVERAGE SHARES OUTSTANDING 91,627 91,976 91,953 91,872
======== ======== ======== ========
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
ANDREW CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Dollars in thousands)
<CAPTION>
Nine Months Ended
June 30
------------------------
1997 1996
--------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATIONS
Net Income $ 57,590 $ 59,210
ADJUSTMENTS TO NET INCOME
Restructuring 5,150 -
Discontinued operations 22,771 -
Depreciation and amortization 29,143 23,924
Decrease (increase) in accounts receivable 15,691 (11,638)
Increase in inventories (17,379) (33,879)
Increase in miscellaneous current and other assets (7,662) (1,348)
Increase in receivables from affiliates (161) (111)
Increase in accounts payable and other liabilities 4,823 5,622
Other (127) 270
-------- --------
NET CASH FROM OPERATIONS 109,839 42,050
INVESTING ACTIVITIES
Capital expenditures (31,532) (37,692)
Acquisition of businesses, net of cash acquired - (18,550)
Investments in and advances to affiliates (10,370) (7,704)
Proceeds from sale of property, plant and equipment 379 452
-------- --------
NET CASH USED IN INVESTING ACTIVITIES (41,523) (63,494)
FINANCING ACTIVITIES
Payments on long-term debt (90) (995)
Proceeds from (payments on) short-term borrowings 13,115 (2,452)
Payments to acquire treasury stock (23,793) -
Stock purchase and option plans 4,331 2,666
-------- --------
NET CASH USED IN FINANCING ACTIVITIES (6,437) (781)
Effect of exchange rate changes on cash (1,576) (936)
-------- --------
INCREASE (DECREASE) FOR THE PERIOD 60,303 (23,161)
Cash and equivalents at beginning of period 31,295 46,064
-------- --------
CASH AND EQUIVALENTS AT END OF PERIOD $ 91,598 $ 22,903
======== ========
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>
<PAGE>
ANDREW CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A--BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three month period ended June 30, 1997
are not necessarily indicative of the results that may be expected for the year
ending September 30, 1997. For further information, refer to the consolidated
financial statements and footnotes thereto included in the company's annual
report on Form 10-K for the year ended September 30, 1996.
NOTE B--STOCK SPLIT
On February 11, 1997 the company's Board of Directors declared a three-for-two
stock split to stockholders of record on February 25, 1997, payable March 11,
1997. All share and per share amounts have been restated for all periods
presented to reflect the stock split. Also, on February 11, 1997 the
stockholders approved an increase in the common stock authorized from
100,000,000 to 400,000,000.
NOTE C--RESTRUCTURING
During June 1997, the company initiated a plan to restructure its European
wireless products business and phase out its fiber optic sensors and global
messaging development activities.
In connection with the restructuring plan, approximately 300 employees will
be terminated. Estimated employee termination costs of $1.6 million have been
accrued in June 1997. In addition to termination costs, the restructuring
reserve includes an estimated loss on disposal of equipment of $1.7 million,
long-term lease commitments of $.8 million, and a goodwill writeoff of $1.1
million.
The severance costs are expected to be paid by the end of the fiscal fourth
quarter of 1997. Total after-tax charges were $3.3 million or $.04 per share.
NOTE D--DISCONTINUED OPERATIONS
On July 14, 1997 the company adopted a plan to discontinue the operations of its
network products business. The company expects to complete the disposition by
the end of the 1997 calendar year.
The network products business operating loss of $1.1 million and $3.3 million
(net of applicable taxes of $.6 million and $1.8 million) for the three months
and nine months ended June 30, 1997 are shown separately under discontinued
operations in the accompanying income statement. Likewise, fiscal year 1996 has
been restated to show separately under Discontinued Operations, the operating
loss of $.6 million and $2.3 million (net of applicable taxes of $.3 million and
$1.3 million) for the three months and nine months ended June 30, 1996. The
estimated loss on disposal of the discontinued operations of $16.1 million (net
of applicable taxes of $6.7 million) represents the estimated loss on the
disposal of the assets of the network products business and a provision of $1.0
million (net of applicable taxes of $.6 million) for expected operating losses
during the phase-out period.
Net sales of the network products business for the nine months ended June 30,
1997 and 1996 were $17.1 million and $22.5 million respectively. The assets of
the network products business to be disposed of consist primarily of accounts
receivable, inventories and equipment.
NOTE E--ACCOUNTING CHANGES
In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standard (SFAS) No. 128, "Earnings per Share,"
which requires the company to change the method currently used to compute
earnings per share and to restate all prior periods. The Company is required to
adopt SFAS No. 128 during the first quarter of fiscal year 1998. Adoption of
this statement is not expected to have a material effect on the company's
financial statements.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net sales for the quarter ended June 30, 1997 increased 10% to $208.9 million
compared to $189.9 million for the third quarter of fiscal year 1996. Personal
Communication Services (PCS) and European wireless products sales were down
compared to the third quarter of fiscal year 1996 while U.S. cellular sales were
flat. On a worldwide basis, wireless infrastructure, land mobile radio, private
microwave and broadcast sales were higher while network and wireless products
as a whole were down. For the first nine months of fiscal year 1997 net sales
totaled $636.9 million compared to $535.8 million for the same period last
fiscal year.
As a percentage of sales, cost of products sold for the third quarter of fiscal
year 1997 improved to 56.0%, down from 56.7% in the same period last year. For
the first nine months of fiscal year 1997 cost of products sold, as a percentage
of sales, remained unchanged.
For the quarter ended June 30, 1997, research and development expenses increased
47% and accounted for 5.4% of sales, or $11.3 million, compared to 4.1% of sales
or $7.7 million in the quarter ended June 30, 1996. For the first nine months of
fiscal year 1997, research and development expense increased 43% to $30.3
million. The growth for both the quarter and the year is attributable to the
continued development of new wireless applications in the communication products
group. Sales and administrative expenses increased 4.7% to $37.0 million this
quarter, however, as a percentage of sales, sales and administrative expenses
decreased to 17.7% compared to 18.6% in the third quarter of fiscal year 1996.
For the year sales and administrative expenses have increased $10.3 million to
$109.6 million, while decreasing to 17.2% of sales. Sales and administrative
expenses, for the first nine months of fiscal year 1996, were $99.2 million and
accounted for 18.5% of sales. Fiscal year 1997 operating expenses also include a
$5.2 million charge for the restructuring of the company's European wireless
products business and phasing out of the company's fiber optic sensors and
global messaging development activities. For more information see Note C -
Restructuring.
Net interest expense, for both the third quarter and first nine months of fiscal
year 1997, improved slightly compared to the same periods last year due to
improved liquidity. Other income for the third quarter of fiscal year 1997
remained relatively stable, when compared to the same period last fiscal year
while other income/expense for the year has improved by $4.4 million mainly due
to foreign currency conversion gains. Fiscal year 1996 other expense included a
charge of $1.5 million related to the acquisition of The Antenna Company in
March 1996.
In June 1997, the company decided to discontinue its network products business.
As a result of this decision the company has incurred a charge of $16.1 million
related to the disposal, net of applicable tax benefits. For more information
see Note D - Discontinued Operations.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
LIQUIDITY AND CAPITAL RESOURCES
Net cash from operations, for the first nine months of fiscal year 1997, totaled
$109.8 million, an increase of $67.8 million compared to the same period last
fiscal year. Increased inflows from accounts receivable and a decreased
investment in inventories contributed to the increase in cash from operations.
Cash from operations also benefitted from the significant non-cash expenses
recorded as a result of the company's decision to discontinue its network
products business.
Net cash used in investing activities, for the first nine months of fiscal year
1997, decreased $22.0 million to $41.5 million compared to the same period last
fiscal year. The decrease is due primarily to the company's purchase, in
December 1996, of Mapra Industria e Comercio, Ltda. and Gerbo Telecommunicacoes
e Servicos Ltda. for $14.6 million, net of cash received, and the company's
purchase in June 1996 of the SATCOM Group of companies.
Net cash used in financing activities increased to $6.4 million compared to $0.8
million for the first nine months of fiscal year 1996. During fiscal year 1997,
the company has borrowed $9.5 million for the expansion of its manufacturing
facilities in Brazil. During the third quarter of fiscal year 1997 the company
initiated a stock buy-back program. Shares acquired through the stock buy-back
program will be held to meet any employee compensation needs or held for use in
future acquisitions. During the first nine months of fiscal year 1997, the
company purchased 895,000 shares of its common stock.
<PAGE>
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit 11 - Computation of Earnings per Share
Exhibit 27.1 - Financial Data Schedule - June 30, 1997
Exhibit 27.2 - Financial Data Schedule - June 30, 1996
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ending June 30,
1997.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ANDREW CORPORATION
Date August 6, 1997 /s/ F. L. English
--------------------- -------------
F. L. English
Chairman, President and
Chief Executive Officer
Date August 6, 1997 /s/ C. R. Nicholas
--------------------- --------------
C. R. Nicholas
Executive Vice President and
Chief Financial Officer
<TABLE>
EXHIBIT 11
ANDREW CORPORATION
Computation of Earnings Per Share
(Amounts in thousands, except per share amounts)
<CAPTION>
Three Months Ended Nine Months Ended
June 30 June 30
------------------- -----------------
1997 1996 1997 1996
------ ------ ------- -------
<S> <C> <C> <C> <C>
PRIMARY EARNINGS PER SHARE
Average shares outstanding 90,639 90,284 90,796 90,180
Net effect of dilutive stock options--
based on the treasury stock method
using average market price 964 1,593 1,157 1,194
------ ------ ------ ------
TOTAL 91,603 91,877 91,953 91,374
====== ====== ====== ======
Income from Continuing Operations $24,959 $24,606 $77,006 $61,529
====== ====== ====== ======
Net income $ 7,738 $24,007 $57,590 $59,210
====== ====== ====== ======
Income from Continuing
Operations per Share $ 0.27 $ 0.27 $ 0.84 $ 0.67
====== ====== ====== ======
Net Income per Share $ 0.08 $ 0.26 $ 0.63 $ 0.65
====== ====== ====== ======
FULLY DILUTED EARNINGS PER SHARE
Average shares outstanding 90,639 90,284 90,796 90,180
Net effect of dilutive stock options--
based on the treasury method
using the greater of ending or
average market price 988 1,692 1,157 1,692
------ ------ ------ ------
TOTAL 91,627 91,976 91,953 91,872
====== ====== ====== ======
Income from Continuing Operations $24,959 $24,606 $77,006 $61,529
====== ====== ====== ======
Net income $ 7,738 $24,007 $57,590 $59,210
====== ====== ====== ======
Income from Continuing
Operations per Share $ 0.27 $ 0.27 $ 0.84 $ 0.67
====== ====== ====== ======
Net Income per Share $ 0.08 $ 0.26 $ 0.63 $ 0.64
====== ====== ====== ======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> JUN-30-1997
<CASH> 91,598
<SECURITIES> 0
<RECEIVABLES> 178,396
<ALLOWANCES> 4,165
<INVENTORY> 179,178
<CURRENT-ASSETS> 461,186
<PP&E> 354,940
<DEPRECIATION> 218,721
<TOTAL-ASSETS> 690,871
<CURRENT-LIABILITIES> 141,337
<BONDS> 40,254
0
0
<COMMON> 1,027
<OTHER-SE> 493,881
<TOTAL-LIABILITY-AND-EQUITY> 690,871
<SALES> 636,853
<TOTAL-REVENUES> 636,853
<CGS> 374,692
<TOTAL-COSTS> 374,692
<OTHER-EXPENSES> 144,998
<LOSS-PROVISION> 407
<INTEREST-EXPENSE> 4,440
<INCOME-PRETAX> 118,470
<INCOME-TAX> 41,464
<INCOME-CONTINUING> 77,006
<DISCONTINUED> 19,416
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 57,590
<EPS-PRIMARY> 0.63
<EPS-DILUTED> 0.63
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> JUN-30-1996
<CASH> 22,903
<SECURITIES> 0
<RECEIVABLES> 165,387
<ALLOWANCES> 3,411
<INVENTORY> 165,025
<CURRENT-ASSETS> 356,049
<PP&E> 319,972
<DEPRECIATION> 193,062
<TOTAL-ASSETS> 580,207
<CURRENT-LIABILITIES> 102,630
<BONDS> 45,013
0
0
<COMMON> 685
<OTHER-SE> 417,513
<TOTAL-LIABILITY-AND-EQUITY> 580,207
<SALES> 535,818
<TOTAL-REVENUES> 535,818
<CGS> 315,300
<TOTAL-COSTS> 315,300
<OTHER-EXPENSES> 120,310
<LOSS-PROVISION> 633
<INTEREST-EXPENSE> 4,211
<INCOME-PRETAX> 96,143
<INCOME-TAX> 34,614
<INCOME-CONTINUING> 61,529
<DISCONTINUED> 2,319
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 59,210
<EPS-PRIMARY> 0.65
<EPS-DILUTED> 0.64
<FN>
All amounts in this exhibit have been restated to reflect the disposal of the
company's network products business, as well as a three-for-two stock split for
stockholders of record on February 25, 1997.
</FN>
</TABLE>
