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, 1998.
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. (X)
The aggregate market value of voting stock held by non-affiliates of the
Registrant as of December 16, 1998 was $1,445,218,316. The number of outstanding
shares of the Registrant's common stock as of that date was 82,877,527.
Documents incorporated by Reference:
Portions of the Registrant's Annual Report to Stockholders for the year ended
September 30, 1998 are incorporated by reference into Parts I and II.
Portions of the Proxy Statement for the annual stockholders' meeting to be held,
February 9, 1999 are incorporated by reference into Part III.
<PAGE>
PART I
Item 1-Business
General
Andrew Corporation ("Andrew" or the "Company") 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, cellular antenna products, cellular telephone
accessories, electronic radar systems, communication reconnaissance systems, and
related ancillary items and services. These products are frequently sold as
integrated systems rather than as separate components. Andrew conducts
manufacturing operations, primarily from eight locations in the United States
and from six locations in other countries. Sales by non-U.S. operations and
export sales from U.S. operations accounted for approximately 49% of Andrew's
net sales in 1998 and 48% in 1997 and 1996.
During fiscal 1996, Andrew completed three acquisitions that provided new
products and improved accessibility to expanding 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. Mapra and Gerbo
manufacture, distribute, and sell antennas, waveguides and towers and provide
installation services. Andrew 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 Satcom Systems, Pty. Ltd., a
distributor of commercial products, located in South Africa.
In June 1997, the Company decided to exit certain businesses whose
performance had not met growth expectations. The Company discontinued the
network products business, significantly restructured its European wireless
products business and phased out of the fiber optic sensors and global messaging
development activities. These actions resulted in total after-tax charges to net
income of $22.8 million or $.25 per share. While these steps negatively impacted
1997 results, they enable the company to focus on the growing wireless markets
and to further enhance long-term growth opportunities.
In October 1997, the Company purchased an additional 19% ownership
interest in Mapra Industria e Comercio Ltda. and Gerbo Telecommunicacoes e
Servicos Ltda for $3.0 million. This purchase increased the Company's ownership
percentage in Mapra and Gerbo to 70%.
During fiscal 1998 the Company operated in a dominant industry segment.
Andrew supplies coaxial cable and antenna system equipment to telecommunications
companies and agencies as well as cellular antenna products and cellular phone
accessories through retail distribution channels of cellular service providers.
The Company also supplies specialized antenna systems, electronic radar systems,
communication reconnaissance systems, standard antennas, and fully integrated
systems to various United States government agencies and friendly foreign
governments.
<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>
Dollars in thousands
Year Ended September 30
1998 1997 1996
-------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Coaxial Cable Systems and Bulk
Cables $486,788 57% $467,774 54% $415,633 54%
Other Products and Services 157,912 19 183,557 21 133,645 18
Microwave Antenna Systems 148,614 17 153,905 18 153,231 20
Wireless Accessories 59,601 7 64,239 7 63,498 8
-------- ---- -------- ---- -------- ----
$852,915 100% $869,475 100% $766,007 100%
======== ==== ======== ==== ======== ====
</TABLE>
PRINCIPAL PRODUCTS
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.
In addition to bulk cable, coaxial cable systems include: cable
connectors, accessories and assemblies. Coaxial cable connectors attach to cable
and facilitate transmission line attachment to the antennas and radio equipment.
Accessories protect and facilitate installation of coaxial cable on the tower
and into the equipment building. Accessories include lightning surge protectors,
hangers, adaptors and grounding kits. Together, connectors and cable assemblies
combine to form coaxial cable assemblies.
Andrew sells its semi-flexible cables and waveguides under the trademark
HELIAX(R).
<PAGE>
Other Products and Services:
This group includes special application antennas, support products and
various electronics.
Andrew 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 (equipment
buildings and towers) and the installation of these components to be part of a
"cellular system."
Support products include equipment buildings, which provide a controlled
environment for radio and other equipment, while towers provide support and
elevation for 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.
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.
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 that 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 that, 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.
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.
<PAGE>
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 included in this group. The acquisition of The Antenna Company
increased Andrew's product offering and opened domestic distribution channels.
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, Scotland, Brazil, China and India. Andrew's plants in the
United States also ship significant amounts of manufactured goods to export
markets. In Russia, the Ukraine and Mexico, Andrew participates in joint
ventures that operate fiber optic telecommunication networks.
During fiscal 1998 sales of products exported from the United States or
manufactured abroad were $420,376,000 or 49% of total sales compared with
$414,749,000 or 48% of total sales in fiscal 1997 and $366,324,000, or 48% of
total sales in fiscal 1996. Exports from the United States amounted to
$97,738,000 in fiscal 1998, $105,147,000 in fiscal 1997, and $108,675,000 in
fiscal 1996.
Sales and net income from continuing operations on a country-by-country
basis can 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 32 of the 1998 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 tends to
mitigate these risks.
MARKETING AND DISTRIBUTION
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 at or
near Atlanta, Dallas, Los Angeles, Miami, 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), Suzhou (China), Tokyo (Japan), Zurich
(Switzerland) and Goa (India). 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.
<PAGE>
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 Company also sells mobile cellular products such as antennas and
cellular telephone accessories. These products are sold primarily through the
retail distribution channels of cellular service providers ("Carriers"). Mobile
cellular products are also sold to distributors who then resell these products
to dealers and cellular carriers.
MAJOR CUSTOMERS
Andrew serves more than 6,000 customers in more than 170 countries. In
fiscal 1998, aggregate sales to the ten largest customers accounted for 31% of
total consolidated sales compared to 31% in 1997 and 27% in 1996. No single
customer has accounted for over 10% of consolidated annual sales in any of the
last three years.
MANUFACTURING AND RAW MATERIALS
Andrew generally develops, designs, fabricates, manufactures and assembles
the products it sells. Cable and waveguide products are produced at plants in
Illinois, Brazil, Scotland, China and India. Microwave and earth station
antennas are manufactured in Scotland, 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. Certain of the Company's
products contain multiple microprocessors for which proprietary machine readable
software is designed by the Company's engineers and technicians.
Andrew considers its sources of supply for all raw materials to be
adequate and is not dependent upon any single supplier for a 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 1998, 1997 and 1996, Andrew spent
$25,810,000, $41,076,000, and $29,624,000, respectively on research and
development activities.
Andrew holds approximately 252 active patents expiring at various times
between 1998 and 2015, relating to its products and attempts to obtain patent
protection for significant developments whenever possible. The Company believes
that, while patents in the aggregate are important to its business, the loss of
any individual patent would not have a material adverse effect on its
operations.
<PAGE>
COMPETITION
Many large manufacturers of electrical or radio equipment, some of which
have substantially greater financial resources than Andrew, compete with a
portion 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 that
require sophisticated technology and support services. Andrew competes
principally on the basis of product quality, service and continual technological
enhancement of its products.
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.
BACKLOG AND SEASONALITY
The following table sets forth the Company's backlog of orders believed to
be firm and due to ship both within the next year and beyond (government orders
included herein are funded orders):
<TABLE>
<CAPTION>
Orders to be Shipped as of September 30
1998 1997
-------- --------
<S> <C> <C>
Dollars in thousands
Within 12 months $141,847 $132,610
After 12 months 12,317 5,950
-------- --------
$154,164 $138,560
======== ========
</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 can 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 that might individually or in the aggregate have a
material adverse effect on the Company's financial condition.
EMPLOYEES
At September 30, l998, Andrew had 4,221 employees, 3,002 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 $9,520,000 in 1998,
$17,254,000 in 1997, and $18,250,000 in 1996. These contracts are typically less
than 12 months in duration.
Andrew, in common with other companies that 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 that may change as contracts progress. Contract prices and
costs incurred are subject to Government Procurement Regulations. 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 sixteen manufacturing facilities, thirty-seven engineering and
sales administration locations and twelve 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 Owned/Leased
- -------- ------------- ------------
<S> <C> <C>
Orland Park, Illinois 571,000 Owned
Addison, Illinois 201,000 Leased
Denton, Texas 173,000 Owned
Newnan, Georgia 110,000 Owned
Garland, Texas 88,000 Owned
Richardson, Texas 100,000 Owned
Tinley Park, Illinois 55,000 Leased
Sacramento, California 54,000 Leased
---------
U.S. sub-total 1,352,000
Sorocaba, Sao Paulo, Brazil 229,000 Owned
Lochgelly, Fife, United Kingdom 167,000 Owned/Leased
Campbellfield, Victoria, Australia 110,000 Owned
Whitby, Ontario, Canada 92,000 Owned
---------
Non-U.S. sub-total 598,000
---------
TOTAL 1,950,000
=========
</TABLE>
The Company's properties are in good condition and are suitable for the purposes
for which they are used.
Andrew owns a total of 701 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 that 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.
<PAGE>
Item 4-Submission of Matters to a Vote of Security Holders
There were no matters that required a vote of security holders during the
three months ended September 30, l998.
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"
Stock Market and Chicago Stock Exchange.
The Company had 4,885 holders of common stock of record at December 16,
1998.
Information concerning the Company's stock price during the years ended
September 30, l998 and 1997 is incorporated herein by reference from Andrew's
l998 Annual Report to Stockholders, page 33. All prices represent high and low
sales prices as reported by Nasdaq.
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 that, among other
things, restrict dividend payments. At September 30, l998, $357,948,000 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 l998 Annual Report to Stockholders, pages 36 and 37.
Item 7-Management's Discussion and Analysis of Financial Condition and Results
of Operations
Information concerning this item is incorporated herein by reference to
the l998 Annual Report to Stockholders, pages 14 through 18.
Item 7a.-Quantitative and Qualitative Disclosures about Market Risks
The Company is exposed to market risk from changes in interest rates and
foreign exchange rates, and commodities:
Interest Rate Risk - the company had $56.5 million in debt outstanding at
September 30, 1998 in the form of export financing arrangements, lines of credit
and debt agreements at both fixed and variable rates. The Company is exposed to
interest rate risk primarily through its variable rate debt, which totaled $17.6
million or 31.2% of total debt. To assess its exposure to interest rates, the
Company performed a sensitivity analysis on its variable rate debt. As a result,
the Company determined that a 100 basis point increase in short-term interest
rates would not have a material effect on the Company's financial position,
results of operations or cash flows. The Company currently does not use
derivative instruments to manage its interest rate risk.
<PAGE>
Foreign Currency Risk - Andrew's international operations represent a
substantial portion of its overall operating results and asset base. In most
cases, the Company's products are produced at manufacturing facilities located
near the customer. As a result, significant volumes of finished goods are
manufactured in countries for sale into those markets. During fiscal year 1998,
sales of products exported from the United States or manufactured abroad were
49% of total sales.
The Company's identifiable foreign exchange exposures result primarily
from the anticipated purchase of product from affiliates and third-party
suppliers along with the repayment of intercompany loans with foreign
subsidiaries denominated in foreign currencies. The Company has $59.7 million of
investments and advances to its ventures located in Russia, Ukraine and Mexico.
The ultimate collectability of these advances and the Company's ability to
recoup its investments in these ventures is tied in part to the economic
stability of these countries, particularly Russia and the stability of the
Russian Ruble. The Company manages its foreign currency risk by making use of
naturally offsetting positions, such as borrowing in functional currencies, and
structuring intercompany transactions to reduce known material exposures, where
possible. The Company currently does not use derivative financial instruments to
manage its foreign currency risk.
Commodity Risk - the Company uses various metals in the production of its
products, principally copper. As a result, the Company's earnings are exposed to
fluctuations in the price of copper. In order to reduce its exposure, the
Company has negotiated copper purchasing contracts with various suppliers
through fiscal year 1999. In general, the contracts lock copper pricing for the
full year.
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 1998 Annual Report to Stockholders, pages 19 through 34.
Item 9-Changes in and Disagreements with Accountants on Accounting and Financial
Disclosures
None
<PAGE>
PART III
Item l0-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 l998 Proxy Statement
under the captions "Election of Directors" and "Executive Officers."
Item ll-Executive Compensation
Information concerning management compensation is incorporated herein by
reference from the Company's l998 Proxy Statement under the caption "Executive
Compensation."
Item l2-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 l998 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 1998 Proxy Statement under
the caption "Security Ownership."
PART IV
Item l4-Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) The following consolidated financial statements of Andrew Corporation and
subsidiaries, included in the l998 Annual Report to Stockholders, are
incorporated by reference in Item 8 above:
Consolidated Statements of Income
years ended September 30, l998, 1997 and l996..................page 19
Consolidated Balance Sheets
September 30, l998 and 1997....................................page 20
Consolidated Statements of Cash Flows
years ended September 30, l998, l997 and l996..................page 21
Consolidated Statements of Stockholders' Equity
years ended September 30, l998, 1997 and l996..................page 22
Notes to Consolidated Financial Statements.............pages 23 through 32
Selected Quarterly Financial Information...........................page 33
Report of Independent Auditors.....................................page 34
<PAGE>
Item 14 cont.
<TABLE>
<CAPTION>
Exhibit Index:
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 herein by
reference.
4.(a) Note Agreement dated Filed as Exhibit 4(a) to Form 10-K for fiscal year
September 1, 1990 ended September 30, 1992 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
Agreement dated ended September 30, 1992 and incorporated herein by
September 1, 1990 reference.
4.(b) Stockholder Rights Agreement Filed under Item 5 of Form 8-K dated November 14, 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
(i) Agreement with Floyd L. English quarter ended June 30, 1996 and incorporated herein
(ii) Agreement with Charles R. Nicholas by reference.
10.(a)a Executive Severance Benefit Plan Filed as Exhibit 10(a)a to Form 10-K for fiscal year
(i) Agreement with Thomas E. Charlton ended September 30, 1993 and incorporated herein
(ii) Agreement with John B. Scott by reference.
10.(a)b Executive Severance Benefit Plan Filed as Exhibit 10(a)b to Form 10-Q for fiscal quarter
(i) Agreement with William B. Currer ended June 30, 1993 and incorporated herein by reference.
10.(a)c Executive Severance Benefit Plan Filed as Exhibit 10(a)c to Form 10-Q for fiscal quarter
(i) Agreement with Robert J. Hudzik ended December 31, 1997 and incorporated herein by
(ii) Agreement with Debra B. Huttenburg reference.
10.(b) Management Incentive Plan Filed as Exhibit 10(c) to Form 10-K for fiscal year
Dated February 4, 1988 ended September 30, 1993 and incorporated herein
by reference.
10.(c) Non-employee Directors'
Stock Option Plan dated
February 10, 1998
10.(d) Credit Agreement dated as of Filed as Exhibit 10(e) to Form 10-K for fiscal year
June 16, 1993 ended 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
Agreement dated June 16, 1993 ended September 30, 1995 and incorporated herein
by reference.
</TABLE>
<PAGE>
Item 14 cont.
<TABLE>
<CAPTION>
Exhibit No. Description Reference
----------- ----------- ---------
<S> <C> <C>
10.(d)b Second Amendment to Credit Filed as Exhibit 10(d)b to Form 10-K for fiscal year
Agreement dated June 16, 1993 ended 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
Agreement dated June 16, 1993. ended 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
April 11, 1996. ended 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
April 8, 1996. ended June 30, 1996 and incorporated herein by
reference.
10.(e) Amended and Restated Employee
Stock Purchase Plan adopted
November 12, 1998
10.(f) Credit Agreement dated as of Filed as Exhibit 10(f) to Form 10-K for fiscal year
November 1, 1997 ended September 30, 1997 and incorporated herein by
reference.
10.(g) Amended and Restated Employee
Retirement Benefit
Restoration Plan effective
October 1, 1998.
10.(h) May 4, 1998 Assignment Agreement Filed as Exhibit 10 to Form 10-Q for fiscal quarter
between ABN-AMRO Bank N.V. and ended June 30, 1998 and incorporated herein by
Bank Austria Aktiengesellschaft reference.
l3 l998 Annual Report to Those portions of the 1998 Annual Report to
Stockholders Shareholders expressly incorporated herein by
reference.
21 List of Significant Subsidiaries
22 Proxy Statement in connection
with Annual Meeting to be held
On February 9, 1999 (To be filed
within 120 days of the Registrant's
fiscal year end).
23 Consent of Independent Auditors
27 Financial Data Schedules
99.(a) Description of Common stock Filed as Exhibit 99(a) to Form 10-K for fiscal year
ended September 30, 1997 and incorporated herein by
reference.
</TABLE>
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended September
30, 1998.
<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, 1998. 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, 1998 and 1997, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended September 30, 1998 in conformity with generally
accepted accounting principles.
Ernst & Young LLP
Chicago, Illinois
October 23, 1998
<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 21, 1998.
Andrew Corporation
By \s\ Floyd L. English
Floyd L. English
Chairman, President, and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below on December 21, 1998, by the following persons on behalf
of the Registrant in the capacities indicated.
\s\ Floyd L. English \s\ Thomas A. Donohoe
Floyd L. English Thomas A. Donohoe
Chairman, President, Chief Executive Officer Director
and Director (Principal Executive Officer)
\s\ Charles R. Nicholas \s\ Kenneth J. Douglas
Charles R. Nicholas Kenneth J. Douglas
Executive Vice President and Chief Financial Director
Officer (Principal Financial Officer)
\s\ Gregory F. Maruszak \s\ Jere D. Fluno
Gregory F. Maruszak Jere D. Fluno
Vice President Finance Director
(Principal Accounting Officer)
\s\ John G. Bollinger \s\ Ormand J. Wade
John G. Bollinger Ormand J. Wade
Director Director
\s\ Jon L. Boyes
Jon L. Boyes
Director
<PAGE>
EXHIBIT INDEX
Item Number Description
- ----------- -----------
10.(c) Non-employee Directors' Stock Option Plan
Dated February 10, 1998
10.(e) Amended and Restated Employee Stock Purchase Plan
10.(g) Employee Retirement Benefit Restoration Plan
Dated October 1, 1998
13 1998 Annual Report to Stockholders
21 List of Significant Subsidiaries
23 Consent of Independent Auditors
27 Financial Data Schedule
THE ANDREW CORPORATION
STOCK OPTION PLAN
As approved by the Board of Directors of
Andrew Corporation on November 13, 1997 and
submitted to the Stockholders of Andrew
Corporation on February 10, 1998.
<PAGE>
ANDREW CORPORATION
STOCK OPTION PLAN
FOR NON-EMPLOYEE DIRECTORS
1. Name and Identity of the Plan. This instrument and the plan set forth herein
shall be known as the Andrew Corporation Stock Option Plan for Non-Employee
Directors (hereinafter called the "Plan").
2. Definitions. As used herein, the following terms shall have the meanings
indicated below, unless the context shall give a clear meaning to the contrary:
(a) "Company" shall mean Andrew Corporation, a Delaware corporation.
(b) "Board" shall mean the Board of Directors of the Company.
(c) "Stockholders" shall mean the stockholders of the Company.
(d) "Eligible Director" shall mean a member of the Board who is not,
and has not at any time within the preceding three years, been an
officer or employee of the Company or any of its subsidiaries or
affiliates.
(e) "Administrator" shall mean the Chief Financial Officer of the
Company, or such other officer as may be designated by the Board.
(f) "Common Stock" shall mean the common stock, $.01 par value, of the
Company.
(g) "Market Value" shall mean the average of the high and low sale
prices of the Common Stock as reported on the National Association of
Securities Dealers Automated Quotation ("NASDAQ") system on the date in
question or, if such date is not a business day, on the next preceding
business day.
(h) "Option" shall mean an option granted under the Plan to an Eligible
Director for the purchase of shares of Common Stock.
(i) "Optionee" shall mean the recipient and holder of an Option.
As used herein, the singular shall include the plural and vice versa,
and words used in any gender shall include all genders, unless the context shall
give a clear meaning to the contrary.
3. Purpose of the Plan. The purpose of the Plan is to encourage the highest
level of director performance by providing to Eligible Directors the opportunity
to acquire a proprietary interest in the Company's success and progress through
the purchase of Common Stock.
4. Administration of the Plan. The Plan shall be administered by the
Administrator. Subject only to the express restrictions, limitations and
directions of other provisions of the Plan, the Administrator shall have sole,
absolute and full authority and power: (a) to interpret the Plan; (b) to
establish, amend and rescind rules and regulations relating to the Plan; and (c)
to do such other things and make such other determinations, decisions and
interpretations as he deems necessary or advisable to carry out the purposes of
the Plan and its orderly administration. All actions, determinations, decisions
and interpretations taken and made by the Administrator shall be final and
conclusively binding on all persons whomsoever.
<PAGE>
5. Stock Subject to the Plan. The aggregate number of shares of Common Stock
which may be purchased by exercise of Options shall not exceed 400,000, subject
to adjustment as provided in Section 7. Accordingly, at any one time the total
of the number of shares of Common Stock subject to outstanding Options and the
number of shares of Common Stock purchased by exercise of Options shall not
exceed 400,000, subject to such adjustment. If any Option expires or terminates
without having been exercised in full, the unpurchased shares which were subject
thereto, unless the term of the Plan has expired or it has been terminated,
shall become available for grant of other Options. Shares purchased by exercise
of Options may be authorized but unissued shares or issued shares held in
treasury.
6. Grant of Options. Each Eligible Director shall receive an automatic Option
grant on the date of the first meeting of the Board following each annual
meeting of Stockholders of the Company. The annual Option granted to each
Eligible Director shall be for 12,000 shares of Common Stock. No Option shall be
granted as provided for herein if the number of shares of Common Stock then
remaining available for grant is insufficient for full grant of all Options to
be granted on that date pursuant to the provisions of Section 5 and this Section
6.
7. Adjustment Provisions. In the event of any stock dividend, stock split,
combination of shares or other change in respect of the Common Stock, (i) the
aggregate number of shares of Common Stock then remaining available for grant of
Options under the Plan and the number of shares of Common Stock then subject to
each outstanding Option shall be adjusted in proportion to such change in issued
shares, and (ii) the option price under each then outstanding Option shall be
adjusted so that the total consideration payable to the Company upon exercise of
such Option shall not be changed by reason of such change in the Common Stock.
Notwithstanding the preceding sentence, the number of Option shares to be
granted in any year to each Eligible Director shall be 12,000, and shall not be
adjusted in accordance with this Section 7.
8. Term of Plan. The Plan shall remain in effect until terminated in accordance
with the provisions of Section 15.
9. Option Price Under an Option. The option price for each share of Common Stock
subject to an Option shall be 100% of its Market Value determined as of the date
of its grant.
10. Exercise of Options. No Option shall be exercisable during the first 12
months from and including its date of grant or later than 10 years from its date
of grant. On the date of each annual meeting of Stockholders following the grant
of an Option, such Option shall become exercisable for 20% of the shares of
Common Stock covered thereby, until the fifth annual meeting of Stockholders
following the grant of the Option, at which time such Option shall become fully
exercisable. The privilege shall be cumulative and, to the extent exercisable at
any time, shall be exercisable in whole or in part.
In the event of a tender offer or of an exchange offer (other than one
made by the Company) for shares of Common Stock, all unexercised Options granted
under the Plan shall, whether or not then exercisable, become exercisable during
the 30-day period following the first purchase of shares of Common Stock
pursuant to such tender offer or exchange offer, but not beyond the Option
expiration date.
An Option shall be exercised by written notice thereof given by the
person entitled to exercise such Option to the Administrator. Said notice shall
state the date of grant of the Option, the number of shares of Common Stock
subject thereto and the number of shares of Common Stock with respect to which
the Option is exercised. No such notice which is inconsistent with any provision
of the option agreement or the Plan shall be effective. No such notice shall be
effective unless and until the Company, in the person of the Administrator, is
in receipt of full payment of the option price for the shares of Common Stock in
respect of which the Option is exercised. No right (including, without
limitation, the right to any dividend or to vote) with respect to such shares of
Common Stock shall accrue until after the date of the stock certificate
representing such shares.
<PAGE>
Payment of the option price may be made in cash, by delivery of whole
shares of Common Stock equivalent in Market Value to the option price on the
date that the written notice of exercise is delivered by the Optionee or partly
in cash and partly in whole shares of Common Stock.
11. Non-transferability; Exceptions. Except as provided in this Section 11, no
Option may be sold, pledged, assigned, hypothecated, transferred or disposed of
in any manner other than by will or under the laws of descent and distribution,
and an Option may be exercised, during the lifetime of the Optionee, only by
such Optionee. Under such rules and procedures as the Administrator may
establish, an Optionee may transfer his Option to members of his immediate
family (i.e., children, grandchildren and spouse) or to one or more trusts for
the benefit of such family members or to partnerships in which such family
members are the only partners, provided that (i) the agreement, if any, with
respect to such Option, expressly so permits or is amended to so permit, (ii)
the Optionee does not receive any consideration for such transfer, and (iii) the
Optionee provides such documentation or information concerning any such transfer
or transferee as the Administrator may reasonably request. Any Option held by
any transferees shall be subject to the same terms and conditions that applied
immediately prior to its transfer. The Administrator may also amend the
agreements applicable to any outstanding Options to permit such transfers. Any
Option not granted pursuant to any agreement expressly permitting its transfer
or amended expressly to permit its transfer shall not be transferable.
12. Termination of Directorship. If an Optionee ceases to be a director of the
Company for any reason other than his death, each Option then held by him shall
be exercisable by him within a period of five years following the date he ceased
to be a director. The Option will continue to vest within such five-year period
as if the Optionee had continued to be a director. In the event the Optionee
dies during such five-year period, each Option then held by him shall be
exercisable by the legal representative of his estate, or by the person taking
under him by will or under the laws of descent and distribution, within the time
remaining in the five-year period or within a period of 12 months following the
date of death, whichever is longer, but only to the extent that such Option was
exercisable by the Optionee immediately prior to his death. In the event an
Optionee ceases to be a director by reason of his death, each Option then held
by him shall be exercisable by the legal representative of his estate, or by the
person taking under him by will or under the laws of descent and distribution,
within a period of 12 months following the date of death but only to the extent
that such Option was exercisable by the Optionee immediately prior to his death.
The foregoing provisions of this Section 12 shall in all events be subject to
the 10-year Option term described in Section 10.
13. Option Agreements. Each Option shall be evidenced by a written option
agreement signed by the Optionee and, on behalf of the Company, by the
Administrator. The form of the option agreement shall be as provided by the
Administrator. Each option agreement by its own express terms shall set forth:
(i) the name of the Optionee, (ii) the date of the grant of the Option, (iii)
the number of shares of Common Stock subject thereto, and (iv) the option price
per share of Common Stock. Each option agreement shall otherwise set forth the
provisions of the Plan or incorporate the same therein by reference.
<PAGE>
14. Conditions Upon Issuance of Shares. The Company shall have no obligation to
sell, issue or deliver any shares of Common Stock pursuant to any Option or the
exercise thereof if, in the opinion of counsel for the Company, the sale,
issuance or delivery of such shares of Common Stock would be in violation of any
provision of the Securities Act of 1933, as amended, or the Securities and
Exchange Act of 1934, as amended; any regulation or rule promulgated under
either of said acts; any regulation, rule or requirement of any stock exchange
upon which shares of Common Stock may then be listed; or any other law,
regulation, rule or requirement whatever which, in the opinion of said counsel,
may be applicable. In such circumstances, the Company shall be without liability
for the non-sale, non-issuance and non-delivery of such shares, except for the
return of any payment of the option price for such shares made by the Optionee,
or any person standing in his stead, to the Company. Without assumption of or
exposure to liability for failure of accomplishment of the purpose, the Company
nonetheless commits itself to a standard of reasonable care and effort for the
avoidance or cure of any obstacle to the sale, issuance and delivery of shares
hereunder. As a condition to the exercise of an Option, the Company may require
the person exercising such Option to represent and warrant in writing at the
time of such exercise that the shares of Common Stock are being purchased only
for investment and without any present intention to sell or distribute such
shares, and may require that shares delivered upon exercise of an Option bear an
appropriate restrictive legend.
15. Suspension, Termination, Modification, and Amendment. The Board shall have
the power to suspend, terminate, revise or amend the Plan; provided that
suspension, termination, revision or amendment shall be without effect on any
Option previously granted and then outstanding; and further provided that,
except with the approval of Stockholders, the Board may not increase the maximum
number of shares of Common Stock subject to the Plan (except with respect to
adjustments under Section 7).
AMENDED AND RESTATED ANDREW EMPLOYEE STOCK PURCHASE PLAN
1. PURPOSE
The Amended and Restated Andrew Employee Stock Purchase Plan (the
"Plan") is intended to provide eligible employees of Andrew Corporation and its
subsidiaries (the "Company") with an opportunity to acquire a proprietary
interest in the Company through the purchase of the Company's Common Stock (the
"Common Stock"). Among other considerations, it is the intention of the Company
to have the Plan qualify as an employee stock purchase plan under Section 423 of
the Internal Revenue Code of 1986, as amended (the "Code"). The provisions of
the Plan shall, accordingly, be construed so as to extend and limit
participation in a manner consistent with the requirements of Code Section 423.
2. DEFINITIONS
The following definitions are applicable to this Plan:
"Compensation" means the salary, wages, overtime, bonuses and
commissions paid by the Company.
"Company" means Andrew Corporation and any of its divisions and
subsidiaries, excluding those organized and/or incorporated under
the laws of the Federal Republic of Brazil or any state thereof. A
"division" is any business activity for which there are maintained
separate books and records of account and for which the Board of
Directors of Andrew Corporation deems such activity as a separate
intra-corporate entity. As used herein, the term "subsidiary" has the
meaning assigned to it in Code Section 424(f).
"Committee" means the Committee appointed by the Board of Directors of
Andrew Corporation referred to in Section 13.
"Participant" means any employee of the Company who is eligible and
elects to participate pursuant to the provisions of Section 5.
3. ELIGIBILITY
All employees of the Company shall be eligible to participate in the
Plan, except that at each Offering Date and during the period between the
Offering Date and the Price Date:
(a) An employee shall not be eligible to participate in the Plan who
owns, or would own upon the exercise of any option extended hereunder,
whether qualified or non-qualified, shares possessing 5% or more of the
total combined voting power or value of all classes of stock of the
Company or any parent or subsidiary corporation;
<PAGE>
(b) A Director of the Company who is not an employee shall not be
eligible to participate in the Plan; and
(c) An employee shall not be eligible to participate in the Plan:
(i) Who has been employed less than 1,000 hours; or
(ii) Whose customary employment is 20 hours or less per week; or
(iii) Whose customary employment is for not more than five
months in any calendar year.
4. STOCK SUBJECT TO PLAN
The maximum number of shares of Common Stock which may be sold under
the Plan is 1,096,970. Such shares of Common Stock may be either authorized and
unissued shares or issued shares heretofore or hereafter acquired and held as
Treasury shares, as the Committee may from time to time determine. In the event
that there is an increase or decrease in the number of issued shares of Common
Stock by reason of any cause such as a stock split, reorganization,
recapitalization, combination or exchange of stock, merger, consolidation, or
any other change in the corporate structure without receipt or payment of
consideration by the Company, the number of shares of Common Stock then
remaining for issue under the Plan shall, in each such event, be adjusted by the
Committee in proportion to the change in issued Common Stock resulting from such
cause.
5. OFFERING DATE
From time to time, but not more frequently than once during any fiscal
year, the Committee may fix a date (hereinafter called an "Offering Date") on
which the Company will make an offer (hereinafter called an "Offering") to all
employees then eligible to participate, of options to purchase Common Stock. In
order to participate in any Offering, an eligible employee must complete and
file with the Committee a Subscription Agreement and any other papers pre-
scribed by the Committee within the time frame specified by the Committee
following such Offering Date (the "Subscription Date" as defined below). An
eligible employee shall become a "Participant" under this Plan upon the filing
of the Subscription Agreement. All Subscription Agreements shall be dated and
shall be effective as of the Subscription Date. For the purposes of this Plan,
"Subscription Date" shall mean not less than 14 days nor more than 30 days
following each "Offering Date" (or if that date is a Saturday, Sunday or legal
holiday, then the next succeeding business day).
6. METHOD OF PURCHASE AND PRICE DATE
(a) A Participant shall pay for the shares of Common Stock subscribed
for in his or her Subscription Agreement by either of the following
methods:
<PAGE>
(i) By electing to authorize payroll deductions for the
purchase price of the shares, to be made beginning with the
first pay period following the Subscription Date and ending
with the last pay period that ends on a day preceding or
coinciding with the Price Date; or
(ii) By electing to make, on or before 10 days prior to the
Price Date, a lump-sum payment for the purchase price of the
shares.
(b) Each offering shall be for a specified period of time to be fixed
by the Committee on the Offering Date and shall be for no less than six
months' duration. The last day ("Price Date") of such period shall be
the date the Participant shall become entitled to purchase such number
of whole shares of Common Stock as the Participant's accumulated
payroll deductions or lump-sum deposits during the offering period will
purchase, at a price equal to (i) 85% of the fair market value of
shares of Common Stock on the Price Date or (ii) 85% of the fair market
value of shares of Common Stock on the Subscription Date, whichever is
less. The "fair market" value shall be the closing bid price of such
shares on such date as reported on NASDAQ or the last sales price of
such shares on such date on any stock exchange on which such shares are
traded; and if there is no such sale on that date, the last bid price
prior thereto at which such sales were quoted on NASDAQ or the last
sales price prior thereto at which such shares were traded on any stock
exchange.
(c) The number of shares which may be purchased by any Participant on
the Price Date shall not exceed the lesser of the following:
(i) The number of shares of Common Stock determined by
dividing $25,000 by the fair market value of the Common Stock
on the Subscription Date; or
(ii) The number of shares of Common Stock that could be
purchased on the Price Date if this Section 6(c) did not
otherwise apply and if the Participant's accumulated payroll
deductions or lump-sum payments during the offering period
were in an aggregate amount equal to 5% of the Participant's
Compensation received during the immediately preceding
calendar year. The salary and/or wages component of the
Participant's Compensation shall be annualized if the
Participant was not employed by the Company for the entire
preceding calendar year.
7. PARTICIPANTS' ACCOUNTS
There shall be maintained by the Company individual accounts for each
Participant. All payroll deductions or lump-sum payments of a Participant shall
be credited to his or her account under the Plan. A Participant may discontinue
participation in the Plan as provided in Section 11, but no other change may be
made between the Subscription Date and the Price Date, and, specifically, a
Participant may not alter the rate of his or her payroll deductions for that
Offering.
<PAGE>
8. GRANTING OF OPTION
On the date when a Participant executes and delivers a Subscription
Agreement to the Company, he shall be granted an option for as many estimated
full shares of Common Stock as are purchasable with the authorized payroll
deductions to be credited to his or her account beginning on the Subscription
Date and ending on the Price Date, or with the lump-sum payment to be made by
the Participant. Notwithstanding anything herein to the contrary, the Committee
will have the right, on a uniform and nondiscriminatory basis, to establish a
maximum limit for the number of shares which a Participant may purchase under
any given offering under this Plan, which limit shall be expressed in a dollar
amount. In no event shall such limit on the purchase of shares exceed the limits
otherwise provided in Section 6(c).
9. EXERCISE OF OPTION
(a) Unless a Participant gives express written notice to the Committee
as hereinafter provided, the Participant's option for the purchase of
shares of Common Stock will be exercised automatically on the Price
Date for the purchase of the number of full shares of Common Stock
which the payroll deductions or deposits in his or her account will
purchase.
(b) By written notice to the Committee at any time prior to a Price
Date, a Participant who has paid for the option by payroll deductions
pursuant to subsection 6(a)(i) or by payment of a lump-sum payment
pursuant to subsection 6(a)(ii), may elect, effective at the Price
Date, to exercise a portion of his or her option for a specified number
of full shares of Common Stock less than the number of full shares of
Common Stock which the accumulated payroll deductions or lump-sum
deposits in the Participant's account will purchase, the difference to
be refunded without interest.
10. DELIVERY
As promptly as practicable after the termination of each Offering, the
Company will deliver to each Participant, as appropriate, either the shares of
Common Stock purchased upon the exercise of his or her option together with a
cash payment equal to the balance, without interest, of any payments credited to
the Participant's account during such Offering which was not used for the
purchase of shares of Common Stock or a cash payment equal to the entire balance
credited to his or her account during such Offering, without interest, where the
Participant has withdrawn his or her subscription in accordance with Section 11.
11. WITHDRAWAL
(a) A Participant may withdraw any sums credited to his or her account
at any time prior to a Price Date by giving written notice to the
Committee. All of the Participant's lump-sum deposits and payroll
deductions credited to his or her account will be paid promptly after
receipt of notice of withdrawal, without interest, and no further
payroll deductions will be made from the Participant's pay except in
accordance with a new Subscription Agreement filed in accordance with
Section 5.
<PAGE>
(b) A Participant's withdrawal will not have any effect upon his or her
eligibility to participate in a succeeding Offering or in any similar
plan which may hereafter be adopted by the Company.
12. COMMON STOCK
(a) If the total number of shares of Common Stock for which options are
to be granted on any date in accordance with Section 8 exceeds the
number of shares of Common Stock then available under the Plan (after
deduction of all shares of Common Stock for which options have been
exercised) the Committee shall make a pro rata allocation of the shares
of Common Stock remaining available in a uniform and non-discriminatory
manner. In such event, the payroll deductions to be made pursuant to
the authorizations therefor shall be reduced accordingly and the
Committee shall give written notice of such reduction to each affected
Participant.
(b) Each Participant will have no interest in shares of Common Stock
covered by his or her Subscription Agreement until the shares are
delivered to the Participant.
(c) Shares of Common Stock to be delivered to a Participant under the
Plan will be registered in the name of the Participant or, if the
Participant so directs, by written notice to the Committee prior to the
Price Date, in the names of the Participant and one such other person
as may be designated by the Participant, as joint tenants with rights
of survivorship, to the extent permitted by applicable law.
(d) The shares of Common Stock delivered to a Participant under the
Plan may not be sold for a period of one year following the Price Date
except in the event of the Participant's financial hardship as
determined by the Committee and may not be transferred for one year
following the Price Date except in the event of the Participant's
death. The certificates representing the shares of Common Stock
delivered to the Participant shall carry an appropriate legend to the
foregoing effect. The shares of Common Stock delivered to the
Participant shall be forfeited to the Company in the event of any
failure to comply with the restrictions contained in this paragraph.
13. ADMINISTRATION
The Plan shall be administered under the direction of a Committee
appointed by the Board of Directors of Andrew Corporation consisting of three or
more persons. The Committee shall have the sole and complete authority to (a)
determine Offering Dates, (b) determine the number of shares of Common Stock to
be subject to an Offering under the Plan, (c) determine the terms and conditions
on which an Offering shall be made under the Plan, (d) prescribe the forms and
terms of instruments for Participants' Common Stock subscriptions and
beneficiary designations and (e) establish from time to time regulations for the
administration of the Plan, interpret the Plan and make all determinations
necessary or advisable for the administration of the Plan, all subject to its
express limitations and other provisions.
<PAGE>
14. DESIGNATION OF BENEFICIARY
A Participant may file a written designation of a beneficiary or
beneficiaries who are to receive any of the benefits under this Plan in the form
of shares of Common Stock and/or cash in the event of such Participant's death,
whether before or after exercise of his or her options and prior to delivery of
such benefits. Such designation of beneficiary or beneficiaries may be changed
by the Participant at any time by written notice. Upon the death of a
Participant and upon receipt by the Committee of proof of the identity and
existence at the Participant's death of a beneficiary validly designated by the
Participant, the Committee shall deliver such benefits to such beneficiary. In
the event of the death of a Participant and in the absence of a beneficiary
validly designated under the Plan who is living at the time of such
Participant's death, the Committee shall deliver such benefits to the executor
or administrator of the estate of the Participant, or if no such executor or
administrator has been appointed (to the knowledge of the Committee), the
Committee, in its discretion, may deliver such benefits to the spouse or to any
one or more dependents or relatives of the participant, or if no spouse,
dependent or relative is known to the Committee, then to such other person as
the Committee may designate. No designated beneficiary shall, prior to the death
of the Participant by whom he has been designated, acquire any interest in such
benefits credited to the Participant under the Plan.
15. TRANSFERABILITY
Neither sums credited to the Participant's account nor any rights with
regard to the exercise of an option or to receive shares of Common Stock under
the Plan may be assigned, transferred, pledged or otherwise hypothecated or
disposed of in any way by the Participant other than by will and the laws of
descent and distribution. Any such attempted assignment, transfer, pledge or any
other hypothecation or disposition shall be without effect except that the
Committee may treat such act as an election to withdraw funds in accordance with
Section 11.
16. ACCOUNTS
Any payroll deductions or lump-sum deposits received by the Committee
shall be reflected in book entries maintained by the Company, which accounts
shall be kept in accordance with generally accepted accounting principles;
separate accounts shall be maintained for each Participant reflecting his or her
currently accrued payroll deductions or lump-sum deposits under any then
existing Offering.
17. TERMINATION OR AMENDMENT
The Board of Directors of Andrew Corporation may at any time terminate
or amend the Plan. No such termination shall affect options previously granted
and exercised, nor shall an amendment make any change in any option theretofore
granted which would adversely affect the rights of any Participant. Moreover, no
amendment shall be made without prior approval of the shareholders of Andrew
Corporation if such amendment would:
<PAGE>
(a) Require the sale of more shares of Common Stock than are authorized
under Section 4 of the Plan;
(b) Change the class of employees eligible to participate in the Plan;
(c) Withdraw the direction of the administration of the Plan from the
Committee;
(d) Permit payroll deductions or lump-sum deposits at a rate in excess
of 10% of a Participant's Compensation received during the period
between the Subscription Date and the Price Date; or
(e) Permit purchase of Common Stock by the Participant at a price lower
than 85% of the fair market value at the Subscription Date or the Price
Date.
18. NOTICE
All notices or other communications by a Participant to the Committee
under or in connection with the Plan shall be deemed to have been duly given
when received by the Committee or when received in the form specified by the
Committee at the location, or by the person, subsequently designated by the
Committee for the receipt thereof as given in the applicable Subscription
Agreement.
19. EFFECT OF TERMINATION OF EMPLOYMENT
If a Participant ceases to be employed by the Company for any reason
other than death, the Participant shall be permitted within a period of three
months next succeeding such cessation of employment, and in no event after the
Price Date, to exercise his or her option. In the event an option expires
without having been first exercised, or is barred from exercise, all funds
credited to a Participant's account shall be refunded without interest.
20. EFFECTIVE DATE AND TERM OF THE PLAN
The 1994 Andrew Employee Stock Purchase Plan was approved by the
stockholders of the Company at the annual meeting on February 2, 1994. This
Amended and Restated Andrew Employee Stock Purchase Plan, which is a
continuation of the 1994 Andrew Employee Stock Purchase Plan, was adopted by the
Board of Directors on November 12, 1998 and will continue in effect through
February 1, 2009, unless sooner terminated.
21. RIGHT OF PERSONAL REPRESENTATIVE TO PURCHASE SHARES
In the event of the death of a Participant while in the employ of the
Company prior to the Price Date, and while an option remains outstanding and
unexercised, the Participant's beneficiary (or the personal representative of
such Participant if such beneficiary has predeceased the Participant and no
alternate beneficiary has been designated by the Participant) shall be entitled
to purchase so much of the Common Stock as the Participant shall have subscribed
to purchase under his or her Subscription Agreement, and shall be entitled to
make a lump-sum payment (giving credit for prior payroll deductions withheld or
other deposits made for such purposes) for such Common Stock within three months
after the death of such Participant, by providing written notice to the
Committee requesting exercise of such option and making such payment in cash.
The Committee reserves the right to require evidence satisfactory to it as
evidence of the beneficiary's or personal representative's status as such with
regard to the former Participant.
<PAGE>
22. LOAN
The Company shall not, either directly or indirectly, lend money to any
person for the purpose of assisting such person to acquire shares of Common
Stock issued upon the exercise of any option granted under the Plan.
23. USE OF PROCEEDS
Proceeds from the sale of Common Stock pursuant to the options granted
under this Plan shall constitute general funds of Andrew Corporation.
24. NON-EXCLUSIVITY OF THE PLAN
Neither the adoption of this Plan by the Board of Directors of Andrew
Corporation nor the submission of the Plan to the shareholders of Andrew
Corporation for approval shall be construed as creating any limitations on the
power of the Board of Directors of Andrew Corporation to adopt such other
incentive arrangements as it may deem desirable, including without limitation,
the granting of stock options otherwise than under this Plan, and such other
incentive arrangements may be either generally applicable or applicable only in
specific cases.
25. NON-INTERFERENCE WITH EMPLOYMENT RELATIONSHIP
This Plan, and the options granted pursuant to it, shall not confer
upon any employee who is a Participant any right with respect to continuation of
employment by the Company, and neither the Plan nor any such option shall
interfere in any way with the Participant's or the Company's right to terminate
the Participant's employment at any time.
ANDREW CORPORATION
EMPLOYEE RETIREMENT BENEFIT RESTORATION PLAN
(Established Effective October 1, 1997;
Amended and Restated Effective October 1, 1998)
<PAGE>
ANDREW CORPORATION
EMPLOYEE RETIREMENT BENEFIT RESTORATION PLAN
ARTICLE1. ESTABLISHMENT AND PURPOSE
Section1.1. Establishment. Andrew Corporation (the "Employer")
establishes, effective as of October 1, 1997, a non-qualified retirement plan
for the benefit of a select group of management or highly compensated employees
of the Employer. The plan shall be known as the Andrew Corporation Employee
Retirement Benefit Restoration Plan (the "Plan").
Section1.2. Purpose. The purpose of the Plan is to enhance the ability
of the Employer to attract and retain qualified personnel by providing
Participants with additional retirement income by means of nonelective employer
contributions. The Plan is designed to provide additional retirement benefits to
eligible employees whose benefits from the Andrew Profit Sharing Trust ("APST")
may be reduced due to various U.S. government-imposed limitations.
ARTICLE2. DEFINITIONS
Section2.1. Definitions. Whenever used in this Plan, the following
words and phrases shall have the meanings set forth below unless the context
plainly requires a different meaning. When the defined meaning is intended, the
term is capitalized.
(a) "Account" means, as of a particular date, the amount of
each Participant's Deferred Compensation that is credited to the
Participant as of that date, adjusted for earnings or losses to the
Account under Section 6.1.
(b) "APST" means the Andrew Corporation Profit Sharing Trust,
as amended from time to time.
(c) "Board of Directors" means the Board of Directors of the
Employer.
<PAGE>
(d) "Change in Control" means any of the following: (i) any
"person" (as such term is used in Sections 13(d) and 14(d)(2) of the
Securities Exchange Act of 1934), in a transaction or series of
transactions, becomes beneficial owner, directly or indirectly, of
securities of the Employer representing 5% or more of the combined
voting power of the Employer's then outstanding securities, and there
is outstanding an exchange or tender offer for securities of the
Employer, and the Committee, in its sole discretion, determines that a
Change in Control has occurred; (ii) any "person" (as above-referenced)
or entity, other than a trustee or other fiduciary of securities held
under an employee benefit plan of the Employer, becomes the beneficial
owner, directly or indirectly, of securities of the Employer
representing 25% or more of the combined voting power of the Employer's
then outstanding securities; or (iii) individuals who were members of
the Board of Directors immediately prior to a meeting of the
shareholders of the Employer involving a contest for the election of
directors shall not constitute a majority of the Board of Directors
following such election.
(e) "Code" means the Internal Revenue Code of 1986, as amended
from time to time.
(f) "Committee" means the Compensation Committee of the Board
of Directors, such other committee designated by the Board of Directors
to administer this Plan, or such other person or committee as may be
appointed from time to time by the Board of Directors to administer
this Plan.
(g) "Compensation" means "allocable compensation", as defined
in the APST, without regard to the limitation on annual amounts that
may be taken into account under Code Section 401(a)(17).
(h) "Deferred Compensation" means the amount of compensation
not yet earned, which shall be deferred in accordance with the Plan,
and which shall be provided by the Employer in accordance with the
Plan.
(i) "Disability" means disability, as defined in the
Employer's long-term disability plan.
(j) "Effective Date" means October 1, 1997, the date on which
the Plan has become effective.
(k) "Employer" means Andrew Corporation and any participating
subsidiary thereof, or their successors.
(l) "ERISA" means the Employee Retirement Income Security Act
of 1974, as amended from time to time.
(m) "Participant" means each management-level or
highly-compensated employee of the Employer who is designated by the
Employer as a Participant in the Plan under Section 3.1 and whose
Account has not been distributed in full.
(n) "Plan" means this Andrew Corporation Employee Retirement
Benefit Restoration Plan, as amended from time to time.
(o) "Plan Year" means each 12-month period ending September
30.
(p) "Retirement" means termination of employment on or after
attainment of age 65 or, with the approval of the Employer's Chief
Executive Officer, termination of employment prior to age 65.
<PAGE>
Section2.2. Gender and Number. Except as otherwise indicated by the
context, masculine terminology also includes the feminine, and terms used in the
singular may also include the plural.
ARTICLE3. ELIGIBILITY AND PARTICIPATION
Section3.1. Participation. Any management-level or highly-compensated
employee of the Employer who is designated by the Committee shall be considered
a Participant under this Plan as of the date specified by the Committee. No
employee has a right to be selected as a Participant under this Plan. It is
intended by the Employer that all persons designated as Participants shall
collectively comprise a "select group of management or highly compensated
employees", within the meaning of ERISA Sections 201(2), 301(a)(3) and
401(a)(1).
Section3.2. Termination of Participation. Once an employee becomes a
Participant, he or she shall remain a Participant until the earlier to occur of
the following:
(a) The Participant's employment with the Employer has
terminated for any reason; or
(b) The Employer decides to terminate his or her participation
in the Plan for any reason including that the Participant no longer
satisfies the definition of "select group of management or highly-
compensated employees", within the meaning of ERISA Sections 201(2),
301(a)(3) and 401(a)(1), or otherwise causes the Plan to be subject to
Part 2, 3 or 4 of Subtitle B of Title I of ERISA. Such an individual
shall continue to be considered a Participant for all Plan purposes
except that he or she shall not be eligible for contributions under
Article 4.
ARTICLE4. CONTRIBUTIONS
Section4.1. Matching Contributions. As soon as practicable after the
end of each Plan Year, the Employer shall credit to the Account of each
Participant an amount equal to 3% of his or her Compensation for such Plan Year
in excess of the dollar limitation under Code Section 401(a)(17).
Section4.2. Profit-Sharing Contributions. As soon as practicable after
the end of each Plan Year, the Employer shall credit each Participant an amount
equal to (a) minus (b), where:
(a) equals the amount determined by applying the annual rate
of the profit-based contribution made to the APST on the Participant's
behalf for such Plan Year (expressed as a percentage of his or her
"allocable compensation", with the percentage rounded to the nearest
tenth of a percent) to the Participant's Compensation for the Plan
Year; and
(b) equals the annual profit-based contribution actually made
by the Employer to the APST on the Participant's behalf for such Plan
Year.
ARTICLE5. VESTING
A Participant will become vested in amounts credited to his or her
Account upon the earlier of (i) his or her attainment of age 65, (ii) his or her
termination of employment with the Employer by reason of Death, Disability or
Retirement, or (iii) the occurrence of a Change in Control. If a Participant
terminates employment with the Employer other than upon Death, Disability,
Retirement prior to attaining age 65, or on or after the occurrence of a Change
in Control, he or she shall forfeit his or her entire Account.
<PAGE>
ARTICLE6. STATUS OF DEFERRED AMOUNTS
Section6.1. Earnings. Subject to the discretion of the Committee to
choose a different investment crediting approach for any Plan Year, on or about
the end of each Plan Year, the balance of a Participant's Account as of the
beginning of such Plan Year shall be credited with earnings or losses at an
annual rate of return equal to the weighted average rate of return achieved by
such Participant with respect to his or her APST accounts for such Plan Year.
Such rate of return shall be rounded to the nearest tenth of a percent.
Section6.2. Unfunded Plan. The Employer may choose to place Deferred
Compensation in trust and any such amounts held in trust shall be invested in
accordance with the trust agreement but shall remain subject to the terms and
conditions of the Plan. The Employer shall be the applicant for, owner of, and
beneficiary under any such investment made under this Plan. The Employer (within
guidelines that it establishes) shall direct the investment of amounts held on
behalf of each Participant under the Plan. In so directing, the Committee may
(but is not required to) take into consideration the earnings/loss crediting
method described in Section 6.1. Title to and beneficial ownership of all such
investments (whether or not held in trust) shall at all times remain in the
Employer and shall constitute a general asset of the Employer, subject only to
claims of the Employer's general creditors. A Participant or his or her
beneficiary shall not under any circumstances acquire any proprietary or
beneficial interest in any such policy or other asset of the Employer by virtue
of a Participant's participation in this Plan.
ARTICLE7. DISTRIBUTIONS
Section7.1. Right to Receive Distribution. Subject to Section 7.5, a
Participant shall be entitled to receive distributions of the vested amount in
his or her Account upon the earliest to occur of his or her Retirement,
Disability and Death.
Section7.2. Timing of Distribution. The Employer shall make
distributions in the form specified in Section 7.3 or 7.4 as soon as
administratively practicable after the close of the Plan Year in which occurs
the event under Section 7.1 that establishes the right to receive such
distribution.
Section7.3. Form of Distribution. If a Participant becomes entitled to
a distribution, the distribution will be made, as elected by the Participant (on
a form approved by the Committee, which is attached to the Plan as Appendix A),
in the form of a single-sum payment or in the form of substantially equal
installments paid over a period not to exceed the longer of 15 years or the
Participant's remaining life expectancy. For this purpose, life expectancy shall
be calculated as of the end of the Plan Year during which the distribution event
described in Section 7.1 occurs, and shall not be recalculated thereafter. The
Participant's initial election as to the form of payment of his or her vested
Account must be made within 30 days of his or her commencement of participation
in the Plan. A Participant may subsequently change his or her election as to the
form of payment of his or her vested Account by submitting a revised election
indicating the revised manner of distribution. Notwithstanding the foregoing, if
the Participant's benefits under the Plan commence upon his or her Retirement,
then any revised election as to the form of payment of such Participant's vested
Account shall not be given effect unless it is submitted to the Committee prior
to the last full Plan Year of the Participant's employment with the Employer.
Earnings/losses shall be credited pursuant to Section 6.1 with respect to any
distribution under this Section 7.3 as shall be determined by the Committee.
<PAGE>
Section7.4. Distribution Upon Death. If a Participant becomes entitled
to a distribution upon his or her death, the distribution to his or her
beneficiary will be made in the form elected by the Participant in accordance
with Section 7.3. If a Participant dies while receiving installment payments
under Section 7.3, or if a Participant dies before receiving a single-sum
distribution under Section 7.3, the payment of the balance in the Participant's
Account shall be made to the beneficiary determined under this Section in
accordance with the election made by the Participant pursuant to Section 7.3.
Each Participant must designate at least one individual or other entity as a
beneficiary in the event of the Participant's death. The Participant may also
designate one or more contingent beneficiaries. These designations must be made
on the appropriate beneficiary designation form attached to the Plan as Appendix
B and must be filed with the Committee. If a designated beneficiary does not
survive the Participant, then the beneficiary shall be the Participant's estate.
Earnings/losses shall be credited pursuant to Section 6.1 with respect to any
distribution under this Section 7.4 as shall be determined by the Committee.
Section7.5. Change in Control. Notwithstanding any other provision of
this Plan, each Participant's entire Account shall be distributed in a
single-sum payment to the Participant or his or her beneficiary immediately upon
the occurrence of a Change in Control. Immediately prior to making such
distributions, the balance of each Participant's Account as of the beginning of
the Plan Year shall be credited with earnings or losses at a rate of return
equal to the weighted average rate of return achieved by such Participant with
respect to his or her APST accounts for such Plan Year through the date on which
the Change in Control occurs. Such rate of return shall be rounded to the
nearest tenth of a percent.
Section7.6. Claims Procedure. If a Participant or his or her
beneficiary (hereinafter referred to as a "Claimant") is denied all or a portion
of an expected benefit under the Plan for any reason, he or she may file a claim
with the Committee. The Committee shall notify the Claimant within 90 days after
receipt of the claim (or within 180 days if special circumstances apply) of
allowance or denial of the claim. If the claim for benefits is denied, in whole
or in part, the Claimant will receive a written explanation of:
(a) The specific reasons for the denial;
(b) The specific references to provisions of the Plan document
that support those reasons;
(c) Any additional information that must be provided to
improve the claim and the reasons why that information is necessary;
and
(d) The procedures that are available for a further review of
the claim.
A Claimant is entitled to request a review of any denial of his or her claim by
the Committee. The request for review must be submitted within 60 days of
receipt of the denial. Absent a request for review within the 60-day period, the
claim shall be deemed to be conclusively denied. The Claimant or his or her
representatives shall be entitled to review all pertinent documents and to
submit issues and comments in writing as part of any request for review. The
Committee will conduct a full and fair review of the claim and will notify the
Claimant of the decision within 60 days (or 120 days if special circumstances
apply). The decision must be in writing and will include the specific reasons
and references to Plan provisions on which the decision is based. The Committee
has the exclusive right and discretion to interpret the provisions of the Plan
and the entitlement to benefits, and its decision is conclusive and final and
not subject to further review.
<PAGE>
ARTICLE8. PROVISIONS RELATING TO PARTICIPATION
Section8.1. Extent to Which Other Parties Bound by Plan. The Plan shall
be binding upon, and shall inure to the benefit of the Employer and its
successors and assigns, and of the Participants and their heirs, administrators
and personal representatives.
Section8.2. Payment of Taxes. To the extent required by law, the
Employer shall withhold Federal, state and local taxes (including but not
limited to income taxes and taxes under the Federal Insurance Contributions Act)
with respect to any vested contributions and any distributions from the Plan to
a Participant or beneficiary.
ARTICLE9. ADMINISTRATION
Section9.1. Administration. The Plan shall be administered by the
Committee.
Section9.2. Powers of Committee. The Committee shall have all powers
necessary to administer the Plan, including, without limitation, the power to
interpret the provisions of the Plan, to decide all questions of eligibility, to
establish rules and forms for the administration of the Plan, and to appoint
individuals to assist in the administration of the Plan and any other agents it
deems advisable.
Section9.3. Actions of the Committee. All determinations,
interpretations, rules, and decisions of the Committee shall be conclusive and
binding upon all persons having or claiming to have any interest or right under
the Plan.
Section9.4. Delegation. The Committee shall have the power to delegate
specific duties and responsibilities to officers or other employees of the
Employer or to other individuals or entities. Any delegation may be rescinded by
the Committee at any time. Except as otherwise required by law, each person or
entity to whom a duty or responsibility has been delegated shall be responsible
for the exercise of such duty or responsibility and shall not be responsible for
any act or failure to act of any other person or entity.
Section9.5. Indemnification. The members of the Committee and the Board
of Directors shall be indemnified by the Employer against any and all
liabilities arising by reason of any act or failure to act made in good faith in
accordance with the provisions of the Plan. For this purpose, liabilities
include expenses reasonably incurred in the defense of any claim relating to the
Plan.
Section9.6. Reports and Records. The Committee and those to whom the
Committee has delegated duties under the Plan shall keep records of all their
proceedings and actions and shall maintain books of account, records, and other
data as shall be necessary for the proper administration of the Plan and for
compliance with applicable law.
Section9.7. Review of Plan Terms, Conditions and Funding. The Committee
shall review the terms and conditions of the Plan and the Plan's funding status
as it deems necessary.
ARTICLE10. AMENDMENT AND TERMINATION
Section10.1. Amendments. The Board of Directors may amend the Plan, in
full or in part, at any time. However, no amendment shall decrease the then
vested Account of any Participant.
Section10.2. Termination. The Employer expects the Plan to be
permanent, but necessarily must, and does, reserve the right to modify, revise
or terminate the Plan at any time.
<PAGE>
ARTICLE11. MISCELLANEOUS
Section11.1. No Guaranty of Employment. The adoption and maintenance of
the Plan shall not be deemed to be a contract of employment between the Employer
and any employee. Nothing contained in the Plan shall give any employee the
right to be retained in the employ of the Employer or to interfere with the
right of the Employer to discharge any employee at any time, nor shall it give
the Employer the right to require any employee to remain in its employ or to
interfere with the employee's right to terminate his or her employment at any
time.
Section11.2. Non-Alienation. No benefit payable at any time under this
Plan shall be subject in any manner to alienation, sale, transfer, assignment,
pledge, attachment or encumbrance of any kind.
Section11.3. Applicable Law. The Plan and all rights under the Plan
shall be governed by and construed according to the laws of the State of
Illinois, except to the extent preempted by federal law.
Section11.4. Severability. If any provision of the Plan shall be found
to be invalid or unenforceable by a court of competent jurisdiction, the
validity or enforceability of the remaining provisions of the Plan shall remain
in full force and effect.
IN WITNESS WHEREOF, the Employer has caused this Plan to be executed on
this day of , 1998.
---------- ----------------------
ANDREW CORPORATION
By:
Its:
OPERATIONS REVIEW
During 1998, several of our markets achieved good growth, but the growth was not
large enough to offset slowed cellular and PCS wireless markets in the United
States and the delays in business in Southeast Asia.
Sales declined $16.6 million or 1.9% in 1998 to $852.9 million from $869.5
million in 1997. International sales grew 2.4% to $420.4 million in 1998
compared with $414.7 million in 1997 and $336.3 million in 1996. International
sales represented 49% of total revenue in 1998 and 48% in both 1997 and 1996.
In 1998, wireless infrastructure sales increased slightly. Strong growth
in international cellular sales was partially offset by the impact of the Hong
Kong Metro distributed communications project, which was completed in 1997.
Sales last year included $20 million in revenues from this project. Sales to
the land mobile radio market showed moderate growth over 1997, domestic cellular
declined slightly and domestic personal communications sales remained relatively
unchanged. Sales to the common carrier and private microwave market accounted
for the majority of the decline in 1998 sales, with lower sales across all
geographic areas, except Latin America, which showed significant improvement
over 1997. Sales of wireless accessories were higher in the U.S., but declined
overall, due mainly to weakness in Europe, which resulted from the 1997
restructuring. Broadcast and government sales were also lower compared with
1997 levels.
From a product standpoint, coaxial cable sales, in 1998, increased 4.1%
while terrestrial microwave antennas, other products and services, and wireless
accessories declined 3.4%, 14.0% and 7.2%, respectively. In 1997, coaxial cable
sales and other products and services drove the increase in sales over 1996.
Cost of Products Sold, as a percentage of sales, was 61.2% in 1998
compared with 59.1% and 58.2% in 1997 and 1996, respectively. In 1998,
increased price pressures and lower volumes in the towers business contributed
to the growth in cost of products sold, as a percentage of sales. This trend
was partially offset by positive contributions from product mix and efficiency
improvements over 1997. In 1997, competitive price pressure and changes in
product mix were partially offset by productivity gains, volume efficiencies and
manufacturing improvements, resulting in an increase in cost of products sold,
as a percentage of sales.
Research and Development Expenditures declined $15.3 million or 37.2% to
$25.8 million in 1998. As a percentage of sales revenue, research and
development expenses were 3.0%, 4.7% and 3.9% in 1998, 1997 and 1996,
respectively. The decline in 1998 was primarily due to the phase-out of the
company's fiber optic sensors and global messaging development activities and to
the transition of new product lines into production. The company expects
research and development expenses to grow 10 to 15% in 1999 as the company
continues to expand and enhance its core products and markets and develop new
products.
Sales and Administrative Expenses in 1998 were $145.3 million, basically
unchanged from 1997. In addition to lower spending levels driven by the
above-mentioned product phase-outs, the company also benefited from the 1997
restructuring of its European wireless products business. Offsetting these
reductions, administrative expenses increased due to the company's continued
investments in upgrading its business and information systems. As a percentage
of sales revenue, selling and administrative expenses increased slightly to
17.0% compared with 16.8% in 1997 and 18.2% in 1996. During 1999, the company
will continue to focus on providing the resources to support revenue growth in
the most cost-effective method possible.
Other Income and Expense in 1998 resulted in an expense of $2.5 million
compared with income of $2.0 million in 1997 and an expense of $4.7 million in
1996. In 1998, net interest income was $1.6 million compared with net interest
expense of $0.9 million in 1997 and $3.4 million in 1996. The increase of $2.5
million in 1998 was due to interest earned on advances to the company's joint
ventures, as well as higher average investment balances. Net other expense was
$4.0 million in 1998 compared with net other income of $2.9 million in 1997 and
net other expense of $1.4 million in 1996. In 1998, net other expense consisted
primarily of foreign exchange losses during the fourth quarter compared with
foreign exchange gains in 1997.
Income from Continuing Operations declined 3.6% to $103.8 million in 1998
compared with $107.8 million in 1997 and $93.8 million in 1996. During 1998,
the company's effective income tax rate for continuing operations decreased to
34.0% from 35.0% in 1997 and 36.0% in 1996.
<PAGE>
Liquidity
Cash and cash equivalents were $78.4 million in 1998, $93.8 million in 1997 and
$31.3 million in 1996. Working capital was $320.1 million in 1998, $332.7
million in 1997 and $284.6 million in 1996. Management believes the current
level of working capital will be adequate to meet the company's liquidity needs
related to normal operations. The decrease in working capital in 1998 was due
mainly to purchases of the company's common stock through its stock buyback
program. The increase in working capital in 1997 was due mainly to cash
generated from operations, which was partially offset by repurchase of the
company's common stock.
During 1998, the company generated $149.9 million in cash from operations,
principally from net income of $103.8 million, which included non-cash charges
of $36.6 million. Changes in accounts receivable and receivables from
affiliates accounted for the remainder of the growth in cash from operations.
Days sales in billed receivables increased from 67 days in 1997 to 70 days in
1998. During 1997 the company generated $151.7 million in cash from operations,
mainly from net income of $88.3 million, which included non-cash charges of
$66.5 million. Included in those non-cash charges was a charge of $22.8 million
related to the discontinuation of the company's network products business.
Days sales in billed receivables decreased from 72 days in 1996 to 67 days in
1997. During 1996, the company generated $66.8 million in cash from operations.
Net cash used in investing activities was $64.1 million in 1998, $61.4
million in 1997 and $78.7 million in 1996. During 1998, the company spent $58.5
million on property, plant and equipment, which included expenditures of $8.3
million related to the construction of a cable manufacturing facility in Suzhou,
China and $10.7 million related to the construction of facilities in Texas.
Capital spending totaled $49.1 million in 1997 and $52.5 million in 1996.
<PAGE>
During the first quarter of fiscal year 1998, the company purchased an
additional 19% interest in its Brazilian operations for $3.0 million bringing
the company's ownership percentage to 70%. In 1996, the company purchased a 51%
interest in its Brazilian operations for $14.6 million, net of cash received.
During 1996, the company also purchased an 80% interest in Satcom Group of
Companies, located in South Africa, for $3.2 million, net of cash received.
No cash was used for acquisitions in 1997.
Net cash used in financing activities was $100.4 million in 1998, $25.5
million in 1997 and $2.0 million in 1996. In May 1997, the company's Board or
Directors authorized the company to repurchase 5.0 million shares of its common
stock. In June 1998, the company's Board of Directors increased this total to
10.0 million. During 1997, the company repurchased 1.5 million shares of its
common stock for $41.6 million. During 1998, the company repurchased an
additional 5.5 million shares for $105.4 million, bringing the total repurchased
under the stock buyback program to 7.0 million shares, at a total cost of $147.0
million. Shares repurchased under this program will be held to meet potential
employee compensation needs or used in future acquisitions. Although the
company has never paid cash dividends, the Board of Directors periodically
reviews this practice and, to date, had elected to retain earnings in the
business to finance future investments and operations.
The company currently maintains three revolving line of credit agreements.
The first is a $50 million revolving line of credit agreement with Bank of
America, Illinois. During 1997 and 1998, the company's French operations
borrowed a total of $3.8 million under this agreement. There were no amounts
outstanding under this line of credit agreement at September 30, 1996. In 1997,
the company arranged a $15.0 million line of credit agreement with ABN-AMRO for
its Brazilian operations. In 1997, the company's Brazilian operation borrowed
$10.7 million under this agreement to finance its facility expansion. During
1998, the company paid down the majority of this loan and only $3.5 million
remained at September 30, 1998. During 1998, the company initiated a $12.0
million line of credit agreement with Bank Austria Creditanstalt. As of
September 30, 1998, there was $5.5 million outstanding under the agreement.
The company currently has $31.8 million in senior notes payable
outstanding, of which $4.5 million is due within one year. In addition, the
company also has a $3.8 million industrial development revenue bond outstanding,
which was used to facilitate the construction of a manufacturing facility in
Newnan, Georgia in 1995. This debt is due to be repaid in 2005. During 1998,
the company's Brazilian subsidiary entered into a loan agreement with Banco
Nacional De Desenvolvimento Economico E Social for $7.0 million, the proceeds of
which were used to pay down a portion of the company's oustanding line of credit
with ABN-AMRO. This debt is due to be repaid starting in 2003.
Year 2000
The Year 2000 issue arose because many existing computer programs use only the
last two digits to refer to a year. Therefore, these computer programs do not
properly recognize a year that begins with 20 instead of 19. If not
corrected, many computer applications could fail or create erroneous results.
In 1994, the company instituted a program to routinely review its computer
hardware and software to increase operational efficiencies. As an output from
this effort, the company purchased a new business system in 1994 that would not
only meet the company's needs but was also Year 2000 compliant. To date, the
company has completed it testing and is currently in the process of implementing
the system at all operating locations. The company expects to have the system
fully implemented at all major locations by March 1999. Amounts expended or to
be expended on information technology systems exclusively to ensure Year 2000
compliance are not expected to be material to the company's consolidated results
of operations or financial position.
Management has also initiated a comprehensive program to prepare the
company's manufacturing and facility systems for the year 2000. The company is
actively engaged in testing and fixing applications such as security,
environmental, desktop computers and production equipment to ensure they are
Year 2000 ready. The company currently does not expect remediation costs to be
material nor does it expect any significant interruption to its operations
because of Year 2000 problems. Most of the company's products do not have Year
2000 readiness issues because they do not contain date-sensitive functions.
The company is in the process of contacting all third parties with which it
has significant relationships, to determine the extent to which the company
could be vulnerable to failure by any of them to obtain Year 2000 compliance.
Some of the company's major suppliers, customers and financial institutions have
confirmed that they anticipate being Year 2000 compliant on or before December
31, 1999, although many have only indicated that they have Year 2000 readiness
programs. To date, the company is not aware of any significant third parties
with a Year 2000 issue that could materially impact the company's operations,
liquidity or capital resources. However, the company has no means of ensuring
that third parties will be Year 2000 ready and the potential effect of third-
party non-compliance is currently not determinable.
<PAGE>
The company has devoted and will continue to devote the resources necessary
to ensure that all Year 2000 issues are properly addressed. However, there can
be no assurance that all Year 2000 problems are detected. Further, there can be
no assurance that the company's assessment of its third party vendors and
suppliers will be accurate. Some of the potential worst-case scenarios that
could occur include: (1)corruption of data in the company's internal systems;
(2)failure of infrastructure services provided by government agencies; and (3)
health, environmental and safety issues relating to the company's facilities.
If any of these situations were to occur, the company's operations in certain
areas could be temporarily interupted.
These interruptions could be more severe in countries outside the U.S.
where the company does a considerable amount of its business. The company
intends to develop Year 2000 contingency plans for continuing operations in the
event such problems arise. The company has operations around the world and is
considering shifting operations to different facilities if there are
interruptions to operations in particular countries or regions.
Risk Factors
Safe Harbor for Forward-Looking Statements. We have made forward-looking
statements in this Annual Report under "Letter to Stockholders", in "Operations
Review" and elsewhere. Although we have based these statements on the beliefs
and assumptions of our management and on information currently available to
them, they are subject to risks and uncertainties. We wish to ensure that such
statements are accompanied by meaningful cautionary statements, so as to obtain
the protections of the safe harbor established in the Private Securities
Litigation Reform Act of 1995. Accordingly, such statements are qualified by
reference to the discussion below of certain important factors that could cause
actual results to differ materially from those projected in such forward-
looking statements.
We caution the reader that the list of factors may not be exhaustive. We
operate in a continually changing business environment, and new risk factors
emerge from time to time. We cannot predict such reisk factors, nor can we
assess the impact, if any, or such risk factors on our business or the extent
to which any factors may cause actual results to differ materially from those
projected in any forward-looking statements. Accordingly, you should not put
undue reliance on any forward looking statements.
Share Price Volatility. In the past years, the market price of our common
stock has been very volatile. We believe that the price has fluctuated in
response to such things as changes in growth rates of sales, net income and
cash flow; volatility in the U.S. stock market in general and in wireless
equipment stocks in particular; changes in analysts' estimates; and changes in
general economic conditions. We expect that the price of our common stock will
fluctuate in the future, perhaps substantially.
Fluctutations in Operating Results. Historically our quarterly and annual
revenues and operating results have fluctuated. We expect similar fluctuations
in the future. In addition to general economic and political conditions, the
following factors affect our revenues: timing of significant customer orders,
inability to forecast future revenue due to our just-in-time supply approach,
changes in competitive pricing, and wide variations in profitability by product
line. Since our quarterly and annual revenues and operating results vary, we
believe that period-to-period comparisons are not necessarily meaningful and you
should not rely on such comparisons as indicators of our future performance.
<PAGE>
Intense Competition and Pricing Pressure. We believe that to be profitable
in the future we must respond effectively to increased competitive pressure. We
consider our principal competitive factors to include product quality and
performance, service and support, pricing and proprietary technology. Over the
past three years, in response to aggressive pricing practices by our
competitors, we have lowered prices for most of our products by 5 to 6% per
year. If we are unable to compete successfully, we may lose market share. We
expect that a significant loss in market share would have a material negative
effect on our business, financial condition and operating results.
Rapid Technological Change and Pressure to Develop New Products. We
believe that our future success depends on our ability to effectively anticipate
and respond to changes in technology, customer needs and industry standards.
Failure to anticipate changes, to adapt current products, to develop and
introduce new products on a timely basis, or to gain market acceptance for new
products would impair our competitiveness and could have a material negative
impact on our business and operating results.
International Risk. Nearly half of our sales are outside the United States
and in recent years we have significantly increased our international
manufacturing capabilities. We anticipate that international sales will
continue to represent a substantial portion of our revenues and that continued
growth and profitability will require further international expansion.
International business risks include currency fluctuations, tariffs and other
trade barriers, longer customer payment cycles, adverse taxes, restrictions on
the repatriation of earnings, compliance with local laws and regulations,
political and economic instability, and difficulties in managing and staffing
operations. In particular, the recent deterioration of certain economies, such
as Southeast Asia and Russia, did have a negative impact on the financial
results of our business in these regions during 1998. We believe that
international risk factors could materially impact our future sales, financial
condition and operating results.
Ability to Attract and Retain Qualified People. We believe that our future
success significantly depends on our ability to attract and retain highly
qualified personnel. We cannot be sure that we will be able to attract and
retain key personnel in the future. We believe our inability to do so could
negatively impact our business, financial condition and operating results.
Year 2000 Compliance. We are working toward bringing our business,
manufacturing and facilities systems into Year 2000 compliance. We also are
contacting third parties with whom we have significant relationships to
determine our vulnerability to their failure to achieve Year 2000 compliance.
Our failure to detect and address our own third-party Year 2000 problems could
have a significant negative impact on our business, financial condition and
results of operations.
Dependence on Intellectual Property Rights. Others could obtain or use our
intellectual property without our permission, develop equivalent or superior
technology, or claim that we have infringed on their intellectual property
rights. We rely on a combination of patent, copyright, trademark and trade
secret laws, and non-disclosure and non-competition agreements to protect our
rights. We are dependent on our intellectual property rights as a whole;
however, we do not believe that the loss of exclusivity with respect to any one
right would have a significant negative impact on our business, financial
condition or operating results.
Impact of Governmental Regulation. We are not directly regulated in the
U.S., but most of our customers and the telecommunications industry generally
are subject to Federal Communications Commission regulation. We believe that
regulatory changes could have a significant negative effect on our business and
operating results by restricting our customers' development efforts, making
current products obsolete or increasing competition. Internationally, where
many of our customers are government owned and operated entities, we also are
at risk of changes in economic policy and communications regulation. In
addition, our joint ventures in Russia and Mexico require telecommunications
licenses, which may limit or otherwise affect the operations of the ventures.
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
Year Ended September 30
-----------------------------
Amounts in thousands, except per share amounts 1998 1997 1996
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales $ 852,915 $ 869,475 $ 766,007
Cost of products sold 521,996 513,809 445,521
- -------------------------------------------------------------------------------------------
Gross Profit 330,919 355,666 320,486
Operating Expenses
Research and development 25,810 41,076 29,624
Sales and administrative 145,313 145,647 139,558
Restructuring - 5,150 -
- -------------------------------------------------------------------------------------------
171,123 191,873 169,182
- -------------------------------------------------------------------------------------------
Operating Income 159,796 163,793 151,304
Other
Interest expense 6,060 5,003 5,183
Interest income (7,615) (4,124) (1,831)
Other (income) expense 4,007 (2,868) 1,386
- -------------------------------------------------------------------------------------------
2,452 (1,989) 4,738
- -------------------------------------------------------------------------------------------
Income from Continuing Operations
Before Income Taxes 157,344 165,782 146,566
Income taxes 53,497 58,024 52,764
- -------------------------------------------------------------------------------------------
Income from Continuing Operations 103,847 107,758 93,802
Discontinued Operations
Loss from operations of Network Products
Business, net of applicable tax benefit - 3,330 3,405
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 -
- -------------------------------------------------------------------------------------------
- 19,416 3,405
- -------------------------------------------------------------------------------------------
Net Income $ 103,847 $ 88,342 $ 90,397
===========================================================================================
Basic Income from Continuing Operations per Average
Share of Common Stock Outstanding $ 1.18 $ 1.18 $ 1.04
Diluted Income from Continuing Operations per Average
Share of Common Stock Outstanding $ 1.18 $ 1.18 $ 1.03
Basic Net Income per Average Share of
Common Stock Outstanding $ 1.18 $ 0.97 $ 1.00
Diluted Net Income per Average Share of
Common Stock Outstanding $ 1.18 $ 0.97 $ 0.99
===========================================================================================
Average Basic Shares Outstanding 87,941 90,947 90,263
Average Diluted Shares Outstanding 88,306 91,539 91,033
===========================================================================================
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
<TABLE>
CONSOLIDATED BALANCE SHEETS
<CAPTION>
September 30
--------------------------
Dollars in thousands 1998 1997
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 78,395 $ 93,823
Accounts receivable, less allowances
(1998 - $3,026; 1997 - $2,754) 181,389 185,752
Inventories
Finished products 56,736 57,458
Materials and work in process 111,057 109,432
- ---------------------------------------------------------------------------------------------
167,793 166,890
Assets related to discontinued operations, less allowances - 4,811
Miscellaneous current assets 9,229 8,538
- ---------------------------------------------------------------------------------------------
Total Current Assets 436,806 459,814
Other Assets
Costs in excess of net assets of businesses acquired,
less accumulated amortization
(1998 - $10,291; 1997 - $8,742) 23,177 24,726
Investments in and advances to affiliates 59,691 55,628
Investments and other assets 9,267 13,396
Property, Plant and Equipment
Land and land improvements 15,507 11,646
Buildings 83,789 72,884
Equipment 301,757 275,015
Allowances for depreciation and amortization (247,091) (221,955)
- --------------------------------------------------------------------------------------------
153,962 137,590
- --------------------------------------------------------------------------------------------
Total Assets $ 682,903 $ 691,154
============================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Notes payable $ 13,897 $ 14,319
Accounts payable 32,867 37,237
Accrued expenses and other liabilities 17,098 21,014
Compensation and related expenses 32,424 29,312
Income taxes 15,835 16,430
Liabilities related to discontinued operations - 3,637
Current portion of long term debt 4,568 5,144
- --------------------------------------------------------------------------------------------
Total Current Liabilities 116,689 127,093
Deferred Liabilities 14,044 10,239
Long Term Debt, less current portion 38,031 35,693
Minority Interest 5,361 9,006
Stockholders' Equity
Common stock (par value, $.01 a share:
400,000,000 shares authorized;
102,718,210 shares issued, including treasury) 1,027 1,027
Additional paid-in capital 53,309 51,810
Foreign currency translation (7,617) (4,532)
Retained earnings 651,103 547,256
Treasury stock, at cost ( 18,210,250 shares in 1998;
13,060,876 shares in 1997) (189,044) (86,438)
- --------------------------------------------------------------------------------------------
508,778 509,123
- --------------------------------------------------------------------------------------------
Total Liabilities and Equity $ 682,903 $ 691,154
============================================================================================
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Year Ended September 30
--------------------------------
Dollars in thousands 1998 1997 1996
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Flows from Operations
Net Income $ 103,847 $ 88,342 $ 90,397
Adjustments to Net Income
Restructuring costs (864) 4,439 -
Discontinued operations - 22,771 -
Depreciation and amortization 37,494 39,274 34,334
Decrease (increase) in accounts receivable 3,637 4,074 (45,681)
Increase in inventories (107) (577) (34,705)
Decrease (increase) in miscellaneous
current and other assets 1,117 (3,331) (1,663)
Decrease (increase) in receivables from affiliates 3,150 (161) 130
Increase (decrease) in accounts payable and other liabilities 1,754 (2,471) 23,321
Other (176) (680) 663
- ---------------------------------------------------------------------------------------------------
Net Cash from Operations 149,852 151,680 66,796
Investing Activities
Capital expenditures (58,529) (49,144) (52,475)
Acquisition of businesses, net of cash acquired (3,000) - (17,802)
Investments in and advances to affiliates (3,195) (13,097) (9,030)
Proceeds from sale of property, plant and equipment 607 814 624
- ---------------------------------------------------------------------------------------------------
Net Cash Used for Investing Activities (64,117) (61,427) (78,683)
Financing Activities
Long term borrowings (payments) - net 2,223 (4,524) (5,229)
Short-term borrowings (payments) - net (38) 14,356 (2,455)
Stock purchase and option plans 2,859 6,297 5,712
Purchases of treasury stock (105,405) (41,628) -
- ---------------------------------------------------------------------------------------------------
Net Cash Used for Financing Activities (100,361) (25,499) (1,972)
Effect of exchange rate changes on cash (802) (2,226) (910)
- ---------------------------------------------------------------------------------------------------
(Decrease) Increase for the year (15,428) 62,528 (14,769)
Cash and equivalents at beginning of year 93,823 31,295 46,064
- ---------------------------------------------------------------------------------------------------
Cash and Equivalents at End of Year $ 78,395 $ 93,823 $ 31,295
===================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
<TABLE>
Consolidated Statements of Stockholders' Equity
<CAPTION>
Year Ended September 30
-----------------------------
Dollars in thousands 1998 1997 1996
- -------------------------------------------------------------------------
<S> <C> <C> <C>
Common Stock Issued
Balance at beginning of year $ 1,027 $ 685 $ 457
Three-for-two stock split - 342 228
- -------------------------------------------------------------------------
Balance at End of Year $ 1,027 $ 1,027 $ 685
=========================================================================
Additional Paid-In Capital
Balance at beginning of year $ 51,810 $ 43,257 $ 35,588
Three-for-two stock split - (342) (228)
Stock purchase and option plans 1,499 8,895 7,897
- -------------------------------------------------------------------------
Balance at End of Year $ 53,309 $ 51,810 $ 43,257
=========================================================================
Retained Earnings
Balance at beginning of year $ 547,256 $ 458,914 $ 368,517
Net Income 103,847 88,342 90,397
- -------------------------------------------------------------------------
Balance at End of Year $ 651,103 $ 547,256 $ 458,914
=========================================================================
Treasury Stock
Balance at beginning of year $ (86,438) $ (46,991) $ (48,448)
Repurchase of shares (105,405) (41,628) -
Stock purchase and option plans 2,799 2,181 1,457
- -------------------------------------------------------------------------
Balance at End of Year $(189,044) $ (86,438) $ (46,991)
=========================================================================
</TABLE>
See Notes to Consolidated Financial Statements.
<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 in which the company exercises control. 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 50% of total inventories in 1998
and 44% of total inventories in 1997. The remaining inventories are valued on
the first-in, first-out (FIFO) method.
If the FIFO method, which approximates current replacement cost, had been
used for all inventories, the total amount of inventories would have remained
unchanged at September 30, 1998, but would have increased by $1,395,000 at
September 30, 1997.
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.
<PAGE>
Income from continuing operations per share and net income per share
During the first quarter of fiscal year 1998, the company adopted Statement of
Financial Accounting Standard (SFAS) No. 128, "Earnings per Share". Income from
continuing operations per share and net income per share are 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.
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.
Recently issued accounting policies
In June 1997, the Financial Accounting Standards Board (FASB) issued SFAS No.
130, "Reporting Comprehensive Income". This statement establishes standards for
the reporting and display of comprehensive income and its components in a full
set of general purpose financial statements. The Company will adopt this
statement in the first quarter of fiscal year 1999. The Company does not believe
the additional reporting and disclosures will have a significant impact on the
Company's financial statements.
In June 1997, the FASB issued SFAS No. 131, "Disclosure about Segments of an
Enterprise and Related Information." This statement, which is effective for the
Company's fiscal year-end 1999 financial statements, establishes standards for
the way enterprises report information about operating segments in annual
financial statements and requires that enterprises report selected information
about operating segments in interim financial reports. The Company does not
believe the additional disclosures will have a significant impact on the
Company's financial statements.
In March 1998, the American Institute of Certified Public Accountants (AICPA)
issued Statement of Position (SOP) 98-1, " Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use". SOP 98-1 provides guidance on
the accounting treatment of costs related to software obtained or developed for
internal use. The Company will adopt this statement in the first quarter of
fiscal year 2000. Adoption of this statement is not expected to have a material
effect on the Company's financial statements.
Business Acquisitions
- --------------------------------------------------------------------------------
In December 1995, the company purchased a 51% interest in Mapra Industria e
Comerico, 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, waveguides 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
Telecommuicacoes 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 Corporation exchanged 2,312,346
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>
In October 1997, the company purchased an additional 19% interest in Mapra
Industria e Comerico, Ltda. and Gerbo Telecommunicacoes e Servicos, Ltda. for
$3.0 million. This acquisition was accounted for as a purchase and,
accordingly, the company has included the additional operating results of Mapra
and Gerbo since the date of acquisition.
Discontinued Operations
- --------------------------------------------------------------------------------
On July 14, 1997, the company adopted a plan to discontinue the operations of
its network products business. The business was acquired by Nlynx Systems Inc.
during 1998. As such, there are no remaining assets or liabilities related to
the business. The losses associated with the disposition did not materially
differ from the estimated loss on disposal of the discontinued operations of
$16.1 million (net of applicable taxes of $6.7 million) recorded during the
third quarter 1997.
Earnings per Share
- --------------------------------------------------------------------------------
In 1997, the Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards (SFAS) No. 128, "Earnings Per Share". Statement
128 replaces the computation of primary and fully diluted earnings per share
with basic and diluted earnings per share. Unlike primary earnings per share,
basic earnings per share excludes any dilutive effects of options, warrants and
convertible securities. Diluted earnings per share is very similar to the
previously reported fully diluted earnings per share. The company adopted
Statement 128 in the first quarter of fiscal year 1998. All share and per share
amounts have been presented and, where necessary, restated to conform with the
requirements of Statement 128.
The following table sets forth the computation of basic and diluted earnings per
share:
<TABLE>
<CAPTION>
Year Ended September 30
---------------------------------
In thousands, except per share amounts 1998 1997 1996
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BASIC EARNINGS PER SHARE
Numerator:
Numerator for income from continuing operations per $ 103,847 $ 107,758 $ 93,802
share
Numerator for net income per share $ 103,847 $ 88,342 $ 90,397
Denominator:
Weighted average shares outstanding 87,941 90,947 90,263
- ----------------------------------------------------------------------------------------------
Income from continuing operations per share - basic $ 1.18 $ 1.18 $1.04
===============================================================================================
Net income per share - basic $ 1.18 $ 0.97 $1.00
===============================================================================================
DILUTED EARNINGS PER SHARE
Numerator:
Numerator for income from continuing operations per $ 103,847 $ 107,758 $ 93,802
share
Numerator for net income per share $ 103,847 $ 88,342 $ 90,397
Denominator:
Weighted average shares outstanding 87,941 90,947 90,263
Effect of dilutive securities:
Stock options 365 592 770
- -----------------------------------------------------------------------------------------------
88,306 91,539 91,033
===============================================================================================
Income from continuing operations per share - diluted $ 1.18 $ 1.18 $ 1.03
===============================================================================================
Net income per share - diluted $ 1.18 $ 0.97 $ 0.99
===============================================================================================
</TABLE>
<PAGE>
Options to purchase 2,143,000 shares of common stock, at prices ranging from
$17.11 to $38.17 per share, were not included in the September 1998 computation
of diluted earnings per share, because the option's exercise price was greater
than the average market price of the common shares. Options to purchase 609,000
shares of common stock at, prices ranging from $37.25 to $38.17 per share were
not included in the September 1997 diluted earnings per share calculation since
the option's exercise price was higher than the average market price of the
common shares. Options to purchase 97,000 shares of common stock, at prices
ranging from $28.39 to $29.04 per share, were not included in the September 1996
computation of diluted earnings per share since the option's exercise price was
higher than the average market price of the common shares.
Investments in and Advances to Affiliates
- --------------------------------------------------------------------------------
The company has various investments in ventures that are accounted for by the
equity method. Eight of the ventures are engaged in communication and data
transmission in Russia, Ukraine and Mexico. The company has minority interest
holdings in six of the ventures and a majority interest holding in two of the
ventures. The company does not consolidate the majority-owned ventures because
of governmentally imposed uncertainties that significantly affect the company's
ability to exercise control. The method of accounting is evaluated on a periodic
basis for appropriateness based on the existing conditions and the company's
ability to exercise control. The company has no investments in ventures that are
accounted for by the cost method. The combined operating results of the ventures
and the company's share thereof were not material to the company's 1998, 1997
and 1996 operating results. The company guarantees a $25.0 million line of
credit with ABN-AMRO, which is used by its ventures. As of September 30, 1998,
$19.0 million was outstanding under the agreement.
Unbilled Receivables
- --------------------------------------------------------------------------------
At September 30, 1998, unbilled receivables of $4,205,000 are included in
accounts receivable compared with $8,546,000 at September 30, 1997. 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 1998, 1997 and 1996 were
$14,967,000, $12,933,000 and $13,678,000, respectively.
Borrowings
- --------------------------------------------------------------------------------
Lines of Credit
The company maintains a $50 million revolving line of credit agreement with Bank
of America, NT and SA. The maximum outstanding during 1998 under the line of
credit was $3.8 million with a weighted average interest rate of 3.92%. The
outstanding balance at September 30, 1998 was $3.8 million.
The company also maintains a $15.0 million line of credit agreement with
ABN-AMRO for its Brazilian operations. The maximum oustanding during 1998 under
the line of credit was $10.7 million with a weighted average interest rate of
22.43%. The outstanding line of credit balance at September 30, 1998 was $3.5
million.
In addition, the company also has a $12.0 million line of credit agreement with
Bank Austria Creditanstalt. The maximum oustanding during 1998 under the
agreement was $5.5 million with a weighted average interest rate of 6.40%. The
outstanding balance at September 30, 1998 was $5.5 million.
The company also maintains various export financing arrangements with ABN-AMRO
related to its Brazilian operations. The outstanding balance at September 30,
1998 was $1.1 million.
<PAGE>
Long Term Debt
Long term debt at September 30 consisted of the following:
<TABLE>
<CAPTION>
Dollars In Thousands, Except per Share Amounts 1998 1997
- ---------------------------------------------------------------------
<S> <C> <C>
9.52% senior notes payable to insurance companies
in annual installments from 1995 through 2005 $31,818 $36,364
Variable rate Industrial Development Revenue Bond
with Coweta County, Georgia 3,800 3,800
12.00% loan agreement with Banco Nacional De
Desenvolvimento Economico E Social 6,960 -
Other 21 673
Less: Current Portion 4,568 5,144
- ---------------------------------------------------------------------
Total Long Term Debt $38,031 $35,693
=====================================================================
</TABLE>
Under the terms of the loan agreements, the company has agreed to maintain
certain levels of working capital and net worth. At September 30, 1998, all
these requirements have been met.
The principal amounts of long term debt maturing after September 30, 1998 are:
Dollars In Thousands 1999 2000 2001 2002 2003 Thereafter
- -------------------------------------------------------------------------
$4,568 $4,545 $4,545 $9,553 $6,497 $12,891
Cash payments for interest on all borrowings were $7,146,000, $4,246,000 and
$4,752,000 in 1998,1997 and 1996, respectively.
The carrying amount of long term debt as of September 30, 1998 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.
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. The restructuring was substantially complete
as of June 30, 1998. Actual costs were not materially different than the total
after-tax charges of $3.3 million or $.04 per diluted share recorded in June
1997.
<PAGE>
<TABLE>
INCOME TAXES
- --------------------------------------------------------------------------------
The composition of the provision for income taxes follows:
<CAPTION>
Year Ended September 30
--------------------------
Dollars in thousands 1998 1997 1996
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Currently Payable:
Federal $ 24,539 $ 29,636 $ 35,013
Non-United States 17,043 19,852 15,702
State 4,708 5,281 4,779
- -----------------------------------------------------------------------------
46,290 54,769 55,494
Deferred (Credit):
Federal and State 7,091 3,280 (2,608)
Non-United States 116 (25) (122)
- -----------------------------------------------------------------------------
7,207 3,255 (2,730)
- -----------------------------------------------------------------------------
$ 53,497 $ 58,024 $ 52,764
=============================================================================
Income Taxes Paid $ 56,162 $ 44,641 $ 37,041
=============================================================================
Components of Income from Continuing
Operations before Income Taxes:
United States $ 97,909 $ 99,782 $ 82,078
Non-United States 59,435 66,000 64,488
- -----------------------------------------------------------------------------
$ 157,344 $ 165,782 $ 146,566
=============================================================================
</TABLE>
The company's effective income tax rate varied from the statutory United States
federal income tax rate because of the following:
<TABLE>
<CAPTION>
Year Ended September 30
--------------------------
1998 1997 1996
- -------------------------------------------------------------------------
<S> <C> <C> <C>
Statutory United States federal tax rate 35.0 % 35.0 % 35.0 %
Foreign Sales Corporation (FSC) (2.0) (2.8) (2.7)
State income taxes, net of federal tax effect 2.2 2.2 2.1
Other items (1.2) 0.6 1.6
- -------------------------------------------------------------------------
Effective Tax Rate 34.0 % 35.0 % 36.0 %
=========================================================================
</TABLE>
The tax effects of temporary differences have given rise to gross deferred tax
assets of $11,300,000, primarily accrued expenses and inventory, and gross
deferred tax liabilities of $17,386,000, primarily depreciation, as of
September 30, 1998. 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 $19,408,000 as of
September 30, 1998, which would be payable should undistributed net income
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
- --------------------------------------------------------------------------------
Common Stock
The company has authorized 400,000,000 shares of common stock with a par value
of $.01 per share. As of September 30, 1998, 84,507,960 shares of common stock
were outstanding. 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 15% or more of the company's Common Stock or announces an offer
to acquire 15% 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.
During the third quarter of fiscal year 1997, the company implemented a stock
buy back program, which authorized the company to repurchase up to five million
shares of its common stock. As of September 30, 1997, the company had
repurchased 1,545,000 shares of common stock at a total cost of $41,628,000. In
June 1998, the company's Board of Directors authorized an additional five
million common shares to be repurchased under the company's stock buyback plan,
bringing the total authorized for repurchase to 10 million shares. During fiscal
year 1998, the company repurchased 5,472,732 shares, at a total cost of
$105,405,000, bringing the total shares repurchased under the stock buyback
program to 7,017,732 shares at a total cost of $147,033,000. The common shares
repurchased under this program may be used to meet employee compensation needs
or used in future acquisitions.
A three-for-two stock split was effected in March 1997 and March 1996.
Common Stock issued and outstanding and held in treasury is summarized in the
tables below:
<TABLE>
<CAPTION>
Year Ended September 30
-----------------------------------------
1998 1997 1996
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Shares of Common Stock - Issued
Balance at beginning of year 102,718,210 68,479,398 45,653,823
Three-for-two stock split - 34,238,812 22,825,575
- ---------------------------------------------------------------------------------------------
Balance at End of Year 102,718,210 102,718,210 68,479,398
- ---------------------------------------------------------------------------------------------
Shares of Common Stock - Held in Treasury
Balance at beginning of year 13,060,876 8,047,229 5,620,970
Three-for-two stock split - 4,023,615 2,809,352
Stock repurchase 5,472,732 1,545,000 -
Stock purchase and option plans (323,358) (554,968) (383,093)
- ---------------------------------------------------------------------------------------------
Balance at End of Year 18,210,250 13,060,876 8,047,229
- ---------------------------------------------------------------------------------------------
</TABLE>
As of September 30, 1998, 5,177,454 shares of Common Stock were reserved for the
various stock plans described in the following stock-based compaensation
section.
<PAGE>
Stock Based Compensation
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation," encourages, but does not require, companies to record
compensation expense for stock-based employee compensation plans at fair value.
The company has chosen to continue to account for stock-based compensation using
the intrinsic value method described in Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees," and related Interpretations.
Under APB No. 25, compensation expense is measured as the excess of market price
over the price the employee must pay to acquire the stock on the grant date. All
options are granted by the company at market price and, as a result, no
compensation expense is recorded.
The company maintains a long term Management Incentive Program (MIP),
which provides for the issuance of up to 9,112,500 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. Options under this plan vest over
a four-year period. Options granted prior to fiscal year 1996 expire five years
after grant, while options granted during fiscal years 1996, 1997 and 1998
expire ten years after grant. In fiscal year 1998, there were 599,150 options
granted under the plan .
The company maintains a Stock Option Plan for Non-Employee Directors that
provides for the issuance of up to 1,012,500 common shares. Options under this
plan vest over a five-year period and expire ten years after grant. In fiscal
year 1998, this plan was terminated due to an insufficient number of shares
available for new grants. On February 10, 1998, the company's shareholders
ratified a new Stock Option Plan for Non-Employee Directors (DSP) that provides
for the issuance of up to 400,000 common shares. Options under this plan vest
over a five-year period and expire ten years after grant. In fiscal year 1998,
there were 60,000 options granted under this plan.
The company has an Employee Stock Purchase Plan (ESPP) that expires on
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 1,771,875 shares of Common Stock to be sold to employees at 85% of market
value. All shares issued under this plan are restricted and cannot be sold for
one year following the date of purchase. In fiscal year 1998, there were 68,319
shares purchased by employees under the plan.
Pro forma information regarding net income and earnings per share is required by
Statement 123, and has been determined as if the company had accounted for its
stock option plans under the fair value method of that Statement. The fair value
of these options was estimated at the date of grant using a Black-Scholes option
pricing model with the following weighted average assumptions for the 1998, 1997
and 1996 MIP, DSP, and ESPP respectively: risk-free interest rate of 4.39%,
6.11% and 6.70%; dividend yield of 0%; a volatility factor of .477 for 1998,
.415 for 1997 and 1996, and a weighted average expected life of the options of
six years.
For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the option's vesting period. The company's pro
forma information follows:
<TABLE>
<CAPTION>
Year Ended September 30
------------------------------
Dollars In thousands except per share amounts 1998 1997 1996
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Pro forma income from continuing operations $99,891 $104,485 $92,172
Pro forma net income 99,891 85,069 88,767
Pro forma net income from continuing operations per share
Basic 1.14 1.15 1.02
Diluted 1.13 1.14 1.01
Pro forma net income per share
Basic 1.14 0.94 0.98
Diluted $ 1.13 $ 0.93 $ 0.98
- -----------------------------------------------------------------------------------------------
</TABLE>
The effects on pro forma disclosures of applying Statement No. 123 are not
likely to be representative of the effects of such disclosures in future years.
Because Statement No. 123 is applicable only to options granted subsequent to
September 30, 1995, the pro forma effect is not fully reflected in fiscal years
1996, 1997 and 1998.
<PAGE>
A summary of the company's stock option activity and related information
follows:
<TABLE>
<CAPTION>
------------------------------------------
1998 1997 1996
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Outstanding at beginning of year 2,648,033 2,618,631 2,367,636
Granted 659,150 662,250 1,011,825
Expired or cancelled (136,098) (143,925) (274,270)
Exercised (259,254) (488,923) (486,560)
- ---------------------------------------------------------------------------------------
Outstanding at End of Year 2,911,831 2,648,033 2,618,631
- ---------------------------------------------------------------------------------------
Exercisable at End of Year 1,232,536 673,147 472,275
- ---------------------------------------------------------------------------------------
Weighted Average Exercise Price
- ---------------------------------------------------------------------------------------
Outstanding at beginning of year $11.64 $13.92 $ 9.44
Granted 23.69 37.60 20.60
Expired or cancelled 27.01 20.91 12.73
Exercised 8.12 9.55 6.71
Outstanding at End of Year 21.81 20.26 13.92
Exercisable at End of Year $17.26 $11.64 $ 8.16
- ---------------------------------------------------------------------------------------
</TABLE>
The weighted average fair value of options granted during fiscal years 1998,
1997 and 1996 was $12.93, $13.84 and $10.05 per share, respectively. The
weighted average contractual life of options outstanding as of September 30,
1998 is 9.27 years. The range of exercise prices for options outstanding at
September 30, 1998 was $2.02 to $38.17. The range of exercise prices for
options is wide due to the increasing price of Andrew Corporation stock over the
period of the grants, as well as the various stock splits that have occurred.
Other
Foreign currency translation adjustments decreased equity by $3.1 million during
the year ended September 30, 1998. Foreign currency translation adjustments
decreased equity by $4.9 million and $0.7 million during the years ended
September 30, 1997 and 1996, respectively.
<PAGE>
Geographic Segment Information
- --------------------------------------------------------------------------------
As a result of the disposal of the network products segment, the company's
operations now consist of a dominant industry segment, Commercial Operations.
This segment serves commercial markets, including wireless service operators,
radio equipment companies, television stations, utilities and distributors.
Products include antennas, antenna systems and coaxial cable. Principal
financial data by major geographic area is as follows:
<TABLE>
<CAPTION>
Year Ended September 30
--------------------------
Dollars in thousands 1998 1997 1996
- --------------------------------------------------------------
<S> <C> <C> <C>
Sales:
United States:
Customers $530,277 $559,873 $508,358
Intercompany 106,536 115,647 87,714
- --------------------------------------------------------------
636,813 675,520 596,072
Europe, Africa, Middle East:
Customers 175,021 178,773 147,917
Intercompany 11,657 8,896 12,024
- --------------------------------------------------------------
186,678 187,669 159,941
Asia-Pacific:
Customers 59,782 51,419 50,344
Intercompany 2,253 3,672 2,298
- --------------------------------------------------------------
62,035 55,091 52,642
Other Americas:
Customers 87,835 79,410 59,388
Intercompany 8,221 6,382 5,557
- --------------------------------------------------------------
96,056 85,792 64,945
Eliminations 128,667 134,597 107,593
- --------------------------------------------------------------
Consolidated Sales $852,915 $869,475 $766,007
==============================================================
United States - Export Sales $ 97,738 $105,147 $108,675
==============================================================
Operating Income:
United States $ 95,586 $104,154 $ 87,522
Europe 39,861 33,603 36,055
Asia-Pacific 16,461 20,460 23,951
Other Americas 7,888 5,576 3,776
- --------------------------------------------------------------
Consolidated Operating Income $159,796 $163,793 $151,304
==============================================================
Assets Identifiable to:
United States $411,545 $456,566 $442,721
Europe 144,137 112,726 107,051
Asia-Pacific 52,000 48,362 18,559
Other Americas 75,221 73,500 62,898
- --------------------------------------------------------------
Consolidated Assets $682,903 $691,154 $631,229
==============================================================
</TABLE>
Sales and transfers between geographic areas are made on terms and conditions
comparable with sales to external customers.
<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.
<TABLE>
<CAPTION>
Dollars in thousands, except per share amounts December March June September Total
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1998:
Sales $231,136 $196,872 $204,220 $220,687 $852,915
Gross profit 89,597 77,110 81,315 82,897 330,919
Income from continuing operations before income taxes 42,932 36,585 37,257 40,570 157,344
Net income 28,334 24,147 24,590 26,776 103,847
Basic and diluted income from continuing operations per share 0.32 0.27 0.28 0.31 1.18
Basic and diluted net income per share 0.32 0.27 0.28 0.31 1.18
Common Stock Price Range:
High 29 5/16 29 5/8 23 29/32 18 3/4
Low 22 3/8 19 5/16 18 12 1/4
====================================================================================================================
1997:
Sales $225,715 $202,227 $208,911 $232,622 $869,475
Gross profit 87,486 82,729 91,946 93,505 355,666
Income from continuing operations before income taxes 39,333 40,739 38,398 47,312 165,782
Discontinued operations 1,227 968 17,221 - 19,416
Net income 24,340 25,512 7,738 30,752 88,342
Basic and diluted income from continuing operations per share 0.28 0.29 0.27 0.34 1.18
Basic and diluted net income per share 0.27 0.28 0.08 0.34 0.97
Common Stock Price Range:
High 41 1/8 42 1/4 36 5/8 33 3/16
Low 31 1/6 33 2/3 22 5/8 24 7/8
=====================================================================================================================
</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, 1998 and 1997, and the related
consolidated statements of income, stockholders' equity and cash flows for each
of the three years in the period ended September 30, 1998. 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 susbsidiaries at September 30, 1998 and 1997, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended September 30, 1998, in conformity with
generally accepted accounting principles.
/s/Ernst & Young LLP
Chicago, Illinois
October 23, 1998
<PAGE>
<TABLE>
ELEVEN YEAR FINANCIAL SUMMARY
<CAPTION>
-----------------------------------------------------------
Dollars in thousands, except per share amounts 1998 1997 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operations <F1>,<F2>
Sales $ 852,915 $ 869,475 $ 766,007 $ 624,743 $ 536,025
Gross profit 330,919 355,666 320,486 264,013 217,796
Operating income 159,796 163,793 151,304 116,803 84,497
Other (income) expense 2,452 (1,989) 4,738 4,362 7,226
Income from continuing operations
before taxes 157,344 165,782 146,566 112,441 77,271
Income from continuing operations 103,847 107,758 93,802 71,854 49,360
Discontinued Operations
Loss (income) from operations of network business,
net of taxes - 3,330 3,405 1,899 3,593
Loss on disposal of network business,
net of taxes - 16,086 0 0 0
Net income 103,847 88,342 90,397 69,955 45,767
Basic income from continuing operations per share 1.18 1.18 1.04 0.81 0.56
Diluted income from continuing operations per share 1.18 1.18 1.03 0.80 0.55
Basic net income per share 1.18 0.97 1.00 0.78 0.52
Diluted net income per share 1.18 0.97 0.99 0.78 0.51
========================================================================================================================
Financial Position
Working capital 320,117 332,721 284,602 227,164 171,705
Total assets 682,903 691,154 631,229 505,114 425,326
Long-term debt 38,031 35,693 40,423 45,255 46,092
Stockholders' equity 508,778 509,123 456,214 357,191 276,553
========================================================================================================================
Cash Flow
From operations 149,852 151,680 66,796 55,816 52,343
Used in investing activities (64,117) (61,427) (78,683) (55,367) (38,692)
From (used for) financing activities (100,361) (25,499) (1,972) 4,570 4,259
Cash and equivalents $ 78,395 $ 93,823 $ 31,295 $ 46,064 $ 40,714
========================================================================================================================
Ratios and Other Data
Current ratio 3.7 3.6 3.4 3.4 2.8
Return on Sales:
Income from continuing operations 12.2% 12.4% 12.2% 11.5% 9.2%
Net Income 12.2% 10.2% 11.8% 11.2% 8.5%
Return on average assets 15.1% 13.4% 15.9% 15.0% 11.9%
Return on average stockholders' equity 20.4% 18.3% 22.2% 22.1% 18.4%
========================================================================================================================
Stockholder's equity per share outstanding $ 6.02 $ 5.68 $ 5.03 $ 3.97 $ 3.12
Foreign exchange gain (loss) (2,988) 3,433 972 (1,612) (1,922)
Research and development 25,810 41,076 29,624 21,041 20,377
Additions to property, plant and equipment 58,529 49,144 52,475 48,076 28,471
Net assets located outside U.S. at year end 272,661 228,488 220,600 160,700 130,900
Orders entered 874,717 864,918 790,621 684,504 532,881
Order backlog at year end (under 12 months) 141,847 132,610 152,205 125,446 83,884
Order backlog at year end (over 12 months) $ 12,317 $ 5,950 $ 14,756 $ 18,529 $ 595
========================================================================================================================
Number of full time equivalent employees at year end:
Outside United States 1,219 1,185 1,162 763 661
Total employee 4,221 4,227 4,622 3,677 3,405
Average basic shares of stock outstanding (thousands) 87,941 90,947 90,263 89,177 87,845
Average diluted shares of stock outstanding (thousands) 88,306 91,539 91,033 89,964 89,204
Stockholders of record at year end 4,727 4,599 3,242 2,340 1,482
========================================================================================================================
<FN>
<F1> The results of operations for fiscal years 1988 through 1996 have been updated for the disposal of the network products
segment in 1997.
<F2> 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.
</FN>
</TABLE>
<PAGE>
<TABLE>
Appendix A
<CAPTION>
PAGE WHERE GRAPHIC
IMAGE APPEARS DESCRIPTION OF GRAPHIC AND IMAGE MATERIAL
- ------------------ -----------------------------------------
<S> <C>
Page 15 Bar Graph of Sales (Dollars in Millions)
Data Points: 1994-$536, 1995-$625, 1996-$766, 1997-$869, 1998-$853
Gross Profit (Dollars in Millions)
Data Points: 1994-$218, 1995-$264, 1996-$320, 1997-$356, 1998-$331
Operating Expenses (Dollars in Millions)
Data Points: 1994-$133, 1995-$147, 1996-$169, 1997-$192, 1998-$171
Page 17 Combination Graph
Net Income (Dollars in Millions)
Data Points: 1994-$46, 1995-$70, 1996-$90, 1997-$88, 1998-$104
Net Income Including Discontinued Operations and Restructuring Charges (Dollars in Millions)
Data Points: 1994-$49, 1995-$72, 1996-$94, 1997-$111, 1998-$104
Net Cash from Operations (Dollars in Millions)
Data Points: 1994-$52, 1995-$56, 1996-$67, 1997-$152, 1998-$150
Capital Expenditures (Dollars in Millions)
Data Points: 1994-$28, 1995-$48, 1996-$52, 1997-$49, 1998-$59
</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:
Jurisdiction
Name of Subsidiary of Incorporation
Andrew A.B................................................................Sweden
Andrew AG............................................................Switzerland
Andrew AO.................................................................Russia
Andrew Canada, Inc........................................................Canada
Andrew Communications Oy.................................................Finland
Andrew Corporation (Mexico), S.A. de C.V..................................Mexico
Andrew Espana, S.A.........................................................Spain
Andrew Financial Services Corporation..........................State of Delaware
Andrew GmbH..............................................................Germany
Andrew Industria e Comercio, Ltda. (owned 70%)............................Brazil
Andrew International Corporation...............................State of Illinois
Andrew Kommunikationssysteme AG......................................Switzerland
Andrew Satcom Africa (Pty.) Ltd. (owned 80%)........................South Africa
Andrew SciComm Inc................................................State of Texas
Andrew S.A.R.L............................................................France
Andrew S.R.L...............................................................Italy
Andrew Systems Inc.............................................State of Delaware
Andrew Telecom, Inc............................................State of Delaware
Andrew Telecommunications India Pvt. Ltd...................................India
Andrew Telecommunications (Suzhou) Co. Ltd.................................China
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. 333-12743
on Form S-4 dated September 26, 1996; Registration Statement No. 333-52575 on
Form S-8 dated May 13, 1998; and Registration Statement No. 333-57273 on Form
S-8 dated June 19, 1998, all pertaining to Andrew Corporation, of our report
dated October 23, 1998, with respect to the consolidated financial statements of
Andrew Corporation incorporated by reference in the Annual Report (Form 10-K)for
the year ended September 30, 1998.
/s/ Ernst & Young LLP
Chicago, Illinois
December 21, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> SEP-30-1998
<CASH> 78,395
<SECURITIES> 0
<RECEIVABLES> 184,415
<ALLOWANCES> 3,026
<INVENTORY> 167,793
<CURRENT-ASSETS> 436,806
<PP&E> 401,053
<DEPRECIATION> 247,091
<TOTAL-ASSETS> 682,903
<CURRENT-LIABILITIES> 116,689
<BONDS> 38,031
0
0
<COMMON> 1,027
<OTHER-SE> 507,751
<TOTAL-LIABILITY-AND-EQUITY> 682,903
<SALES> 852,915
<TOTAL-REVENUES> 852,915
<CGS> 521,996
<TOTAL-COSTS> 521,996
<OTHER-EXPENSES> 171,123
<LOSS-PROVISION> 608
<INTEREST-EXPENSE> 6,060
<INCOME-PRETAX> 157,344
<INCOME-TAX> 53,497
<INCOME-CONTINUING> 103,847
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 103,847
<EPS-PRIMARY> 1.18
<EPS-DILUTED> 1.18
</TABLE>
