SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
________________________
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from Not Applicable to
Commission file number 1-6016
THE ALLEN GROUP INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 38-0290950
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
25101 Chagrin Boulevard, Suite 350, Beachwood, Ohio 44122
(Address of Principal Executive Offices) (Zip Code)
(Registrant's Telephone Number, Including Area Code) 216-765-5818
NOT APPLICABLE
Former Name, Former Address and Former Fiscal Year, if Changed Since
Last Report
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months, and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's
classes of common stock:
Outstanding at
Class of Common Stock July 31, 1995
Par value $1.00 per share 26,480,125
Exhibit Index is on page 20 of this report.
Page 1 of 26 Pages.
THE ALLEN GROUP INC.
TABLE OF CONTENTS
Page
No.
PART I. Financial Information:
Item 1 - Financial Statements:
Consolidated Condensed Balance Sheets -
June 30, 1995 and December 31, 1994 3
Consolidated Statements of Income -
Three Months and Six Months Ended
June 30, 1995 and 1994 4
Consolidated Condensed Statements of
Cash Flows - Six Months Ended
June 30, 1995 and 1994 5
Notes to Consolidated Condensed
Financial Statements 6 - 11
Item 2 - Management's Discussion and
Analysis of Financial Condition and
Results of Operations 12 - 16
PART II. Other Information:
Item 4 - Submission of Matters to a Vote of
Security Holders 17 - 18
Item 6 - Exhibits and Reports on Form 8-K 18
Signatures 19
Exhibit Index 20
<TABLE>
PART I - FINANCIAL INFORMATION
ITEM I - FINANCIAL STATEMENTS
THE ALLEN GROUP INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(Amounts in Thousands)
<CAPTION>
June 30, December 31,
1995 1994
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and equivalents $ 19,974 $ 55,240
Accounts receivable, net (Note 2) 80,319 63,117
Receivable from joint venture - 857
Inventories (Note 3) 64,635 58,316
Net assets held for distribution
(Note 6) 50,593 -
Other current assets 7,030 661
Total current assets 222,551 178,191
Property, plant and equipment, net 52,932 56,860
Net investments in and advances to
joint venture (Note 6) - 24,411
Investment in FOR.E.M. S.p.A. (Note 7) - 8,458
Excess of cost over net assets of
businesses acquired 66,008 56,525
Other assets 32,599 33,271
TOTAL ASSETS $374,090 $357,716
LIABILITIES
Current Liabilities:
Notes payable and current maturities
of long-term obligations $ 10,557 $ 154
Accounts payable 30,127 26,568
Accrued expenses 30,425 37,955
Income taxes payable 8,029 2,675
Deferred federal income taxes 3,920 2,899
Total current liabilities 83,058 70,251
Long-term debt (Note 8) 31,949 44,910
Other liabilities and deferred credits 16,272 18,374
TOTAL LIABILITIES 131,279 133,535
STOCKHOLDERS' EQUITY
Common stock 29,525 29,146
Paid-in capital 167,029 161,644
Retained earnings 70,715 56,902
Translation adjustments (337) 23
Less: Treasury stock (at cost) (18,521) (17,479)
Unearned compensation (3,855) (4,310)
Minimum pension liability adjustment (1,745) (1,745)
TOTAL STOCKHOLDERS' EQUITY 242,811 224,181
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $374,090 $357,716
See accompanying notes to the Consolidated Condensed Financial Statements.
</TABLE>
<TABLE>
THE ALLEN GROUP INC.
CONSOLIDATED STATEMENTS OF INCOME
(Amounts in Thousands)
(Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Sales $ 83,880 $ 52,072 $143,145 $101,268
Costs and expenses:
Cost of sales (51,152) (30,002) (87,604) (59,806)
Selling, general and
administrative expenses (14,988) (12,670) (26,470) (22,786)
Research and development
and product engineering
costs (5,261) (2,570) (8,846) (4,509)
Interest and financing
expenses:
Interest expense (1,252) (801) (1,934) (1,603)
Interest income 988 275 1,477 732
Income before taxes and
minority interests 12,215 6,304 19,768 13,296
Provision for income taxes (4,841) (2,326) (7,648) (4,906)
Income before minority
interests 7,374 3,978 12,120 8,390
Minority interests (870) (161) (929) (313)
Income from continuing
operations 6,504 3,817 11,191 8,077
Income from discontinued
automotive and truck
products operations
(Note 6) 2,886 2,655 5,255 3,785
Net Income $ 9,390 $ 6,472 $ 16,446 $ 11,862
Earnings per common share
(Note 4):
Income from continuing
operations $.24 $.15 $.42 $.31
Income from discontinued
automotive and truck
products operations .11 .10 .20 .15
Net Income $.35 $.25 $.62 $ .46
Average common and common
equivalent shares
outstanding 26,779 25,966 26,670 25,950
See accompanying notes to the Consolidated Condensed Financial Statements.
</TABLE>
<TABLE>
THE ALLEN GROUP INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Amounts In Thousands)
(Unaudited)
<CAPTION>
Six Months Ended
June 30,
1995 1994
<S> <C> <C>
Continuing Operations:
Cash (used) provided by operating
activities of continuing operations $(21,624) $ 10,857
Cash flows from investing activities:
Capital expenditures (8,333) (2,650)
Sales and retirements of fixed assets 94 10
Capital expenditures and start-up costs
relating to centralized emissions
inspection programs (5,025) (13,179)
Capitalized software product costs (749) (1,004)
Acquisition of business, net of
cash acquired (Note 7) (382) -
Proceeds from sale of automotive
diagnostics and lease financing
business - 19,737
Cash reclassified to assets held for
distribution (2,503) -
Cash (used) provided by investing activities (16,898) 2,914
Cash flows from financing activities:
Net repayments of long-term debt (1,871) (1,878)
Dividends paid (2,634) (2,083)
Exercise of stock options 143 39
Treasury stock sold to employee
benefit plans 563 296
Cash used by financing activities (3,799) (3,626)
Discontinued Operations:
Net cash provided by discontinued
automotive and truck products
business 7,055 3,759
Net cash (used) provided (35,266) 13,904
Cash at beginning of year 55,240 11,173
Cash at end of period $ 19,974 $ 25,077
See accompanying notes to the Consolidated Condensed Financial Statements.
</TABLE>
THE ALLEN GROUP INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. General:
In the opinion of management of The Allen Group Inc. (the "Company"), the
accompanying unaudited consolidated condensed interim financial
statements reflect all adjustments necessary to present fairly the
financial position of the Company as of June 30, 1995 and the results of
its operations and cash flows for the periods ended June 30, 1995 and
1994. The results of operations for such interim periods are not
necessarily indicative of the results for the full year. The year-end
1994 consolidated condensed balance sheet was derived from audited
financial statements, but does not include all disclosures required by
generally accepted accounting principles. For further information, refer
to the consolidated financial statements and footnotes thereto included
in the Company's Annual Report on Form 10-K for the year ended
December 31, 1994.
Certain reclassifications have been made to the financial statements to
conform to the 1995 method of presentation.
2. Accounts Receivable:
Accounts receivable are net of the following allowances for doubtful
accounts (amounts in thousands):
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
<S> <C> <C>
Allowance for doubtful
accounts $ 1,650 $ 1,684
</TABLE>
3. Inventories:
Inventories consisted of the following (amounts in thousands):
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
<S> <C> <C>
Raw Materials $34,473 $29,581
Work-In-Process 14,961 19,433
Finished Goods 15,201 9,302
$64,635 $58,316
</TABLE>
4. Earnings Per Common Share:
The primary earnings per common share calculations are based upon the
weighted average number of common and common equivalent shares
outstanding during each period. The calculations also include, if
dilutive, the incremental number of common shares issuable on a pro forma
basis upon exercise of employee stock options, assuming the proceeds are
used to repurchase outstanding common shares at the average market price
during the period.
The calculation of fully diluted earnings per common share begins with
the primary calculation but further reflects, if dilutive, the conversion
of the then outstanding convertible debentures (see Note 8 concerning the
debenture redemption in May, 1995) into common shares at the beginning of
the period and such incremental stock option shares should the market
price of the Company common stock at period end exceed the average price.
This calculation resulted in no reportable dilution for the periods ended
June 30, 1995 and 1994.
5. Supplemental Cash Flow Disclosures:
Depreciation and amortization expense, included in "Cash (used) provided
by operating activities," in the Consolidated Condensed Statements of
Cash Flows amounted to $6,947,000 and $6,044,000 for the periods ended
June 30, 1995 and 1994, respectively.
Information with respect to cash paid during the periods for interest and
income taxes is as follows (amounts in thousands):
<TABLE>
<CAPTION>
Six Months
Ended
June 30,
1995 1994
<S> <C> <C>
Interest paid $ 2,279 $ 1,763
Interest capitalized 221 140
Income taxes paid 13,232 19
</TABLE>
6. Discontinued Operations:
On June 15, 1995, the Company announced that its Board of Directors
authorized its management to pursue a tax-free spin-off of its automotive
and truck products business (the "Business"). The Business includes the
Crown and G&O Manufacturing Company divisions (which comprise the
Company's Truck Products segment) and the Company's 50% partnership joint
venture interest in GO/DAN Industries ("GDI"). In addition, subsidiaries
of the Company and Handy & Harman subsidiaries, which each currently own
50% of GDI, have entered into an agreement, together with GDI, whereby
Handy & Harman will receive $24,750,000 million in cash consideration for
its interest in GDI. The Business' subsidiaries will own 100% of GDI
after this transaction is completed.
The Company anticipates the spin-off will occur before the end of 1995.
The spin-off is subject to certain governmental regulatory approvals and
final authorization by the Company's Board of Directors. In connection
with the spin-off, the Company has presented the Business as a
discontinued operation in the Consolidated Statements of Income for the
three and six month periods ended June 30, 1995 and 1994 and has
classified the Business' related net assets held for distribution as a
current asset in the Consolidated Condensed Balance Sheet at June 30,
1995.
A summary of the net assets held for distribution is as follows (amounts
in thousands):
Cash $ 2,503
Accounts receivable 18,933
Inventories 8,398
Property, plant and equipment 23,281
Net investment in GDI 24,625
Other assets 4,130
Accounts payable and accrued
expenses (15,122)
Long-term debt (13,585)
Other liabilities (2,570)
$50,593
Summarized information relating to the Business' results of operations
for the previous four years (as reported in discontinued operations) is
as follows (amounts in thousands, except per share data):
<TABLE>
<CAPTION>
For the Years Ended December 31,
1994 1993 1992 1991
<S> <C> <C> <C> <C>
Sales $115,039 $ 93,660 $ 83,874 $ 70,973
Operating income 16,113 9,442 5,045 932
Equity income (loss)
in joint venture 1,368 407 (3,646) (1,149)
Net income (loss) 9,983 6,061 (3,673) (952)
Income (loss) per common
share .38 .26 (.19) (.05)
</TABLE>
Summarized Quarterly information for 1994 and 1995 relating to the
Business is as follows (amounts in thousands, except per share data):
<TABLE>
<CAPTION>
For the Three Months Ended
December September June March
31 30 30 31
<S> <C> <C> <C> <C>
1994:
Sales $ 28,340 $ 29,250 $ 29,702 $ 27,747
Operating income 4,705 3,665 4,421 3,023
Equity income (loss)
in joint venture 569 1,693 99 (694)
Net income 3,075 3,123 2,655 1,130
Income per common share .11 .12 .10 .05
</TABLE>
<TABLE>
<CAPTION>
June March
30 31
<S> <C> <C>
1995:
Sales $ 32,739 $ 32,813
Operating income 4,066 4,403
Equity income (loss)
in joint venture 581 (406)
Net income(a) 2,886 2,369
Income per common share .11 .09
</TABLE>
(a) Net income for the three months ended June 30, 1995 includes
transaction costs related to the distribution of the Business of
$311,000 (pre-tax - $500,000).
7. Acquisition:
On March 17, 1995, the Company acquired an additional 40% interest in
FOR.E.M. S.p.A. ("FOREM") located in Milan, Italy; the Company had
previously acquired an initial 40% of FOREM in December 1994. The
purchase price for the 80% ownership interest aggregated approximately
$16,800,000 in cash, and includes costs of acquisition. Pursuant to the
terms of the acquisition agreement, the former shareholders of FOREM may
earn additional purchase price based upon the earnings of FOREM. The
remaining 20% of FOREM's outstanding stock is subject to certain put/call
arrangements between the Company and the sellers. The purchase price for
this remaining 20% ownership interest is based upon a formula relative to
the future earnings of FOREM.
This acquisition has been accounted for under the purchase method of
accounting; accordingly, results of operations include those of FOREM
from the acquisition date. Results of operations for FOREM prior to the
March 1995 share acquisition (reported under the equity method of
accounting) were not significant. To facilitate preparation of financial
statements on a timely basis, FOREM's financial position and results of
operations are reported and included in the Company's consolidated
financial statements on a two-month delayed basis.
The Company has made its best estimate, based on information available at
the present time, to allocate the purchase price based on the fair market
value of the assets and liabilities acquired. Certain estimates inherent
in these valuations are likely to change or have not been completed or
formalized at this time and may result in some adjustment of the recorded
assets and liabilities acquired, including the excess of cost over net
assets acquired. Such excess is being amortized over a 20-year period.
8. Redemption of Convertible Debentures:
In May 1995, the Company called for redemption the remaining $4,917,000
of Convertible Subordinated Debentures, Series A and B, due July 30,
1999, which were issued in 1992 in connection with the Company's
acquisition of Alliance Telecommunications Corporation. Subsequent
thereto, holders of these debentures converted such debentures into a
total of 351,834 shares of the Company's common stock.
9. Additional Information:
Consolidated Statements of Income restated for, and excluding, the
discontinued automotive and truck products business (as described in Note
6) for each of the last four years and quarterly results for 1994 and
1995 are as follows (amounts in thousands, except per share data):
9. Additional Information, Continued:
<TABLE>
<CAPTION>
For the Years Ended December 31,
1994 1993 1992 1991
<S> <C> <C> <C> <C>
Sales $216,313 $186,371 $129,079 $ 80,559
Costs and expenses:
Cost of sales (129,085) (110,943) (66,686) (40,813)
Selling, general and
administrative
expenses (46,362) (40,710) (31,045) (27,603)
Research and development
and product engineering
costs (8,865) (7,886) (4,487) (2,611)
Equity in loss of joint
venture - - (96) (250)
Interest and financing
expenses (1,294) (2,190) (1,165) (666)
Income before taxes and
minority interest 30,707 24,642 25,600 8,616
Provision for income taxes (10,973) (661) (1,279) (1,605)
Income before minority
interests 19,734 23,981 24,321 7,011
Minority interests (523) (518) (608) (201)
Income from continuing
operations $ 19,211 $ 23,463 $ 23,713 $ 6,810
Income per common share $.74 $.93 $1.00 $.15
</TABLE>
9. Additional Information, Continued:
<TABLE>
<CAPTION>
For the Three Months Ended
1995 1994
Mar 31 Dec 31 Sept 30 June 30 Mar 31
<S> <C> <C> <C> <C> <C>
Sales $59,265 $59,815 $55,230 $52,072 $49,196
Costs and expenses:
Cost of sales (36,452) (36,707) (32,572) (30,002) (29,804)
Selling, general and
administrative
expenses (11,482) (11,396) (12,180) (12,670) (10,116)
Research and develop-
ment and product
engineering costs (3,585) (2,685) (1,671) (2,570) (1,939)
Interest and financing
expenses (193) (144) (279) (526) (345)
Income before taxes and
minority interest 7,553 8,883 8,528 6,304 6,992
Provision for income
taxes (2,807) (3,083) (2,984) (2,326) (2,580)
Income before minority
interests 4,746 5,800 5,544 3,978 4,412
Minority interests (59) (111) (99) (161) (152)
Income from continuing
operations 4,687 5,689 5,445 3,817 4,260
Income from discontinued
operations 2,369 3,075 3,123 2,655 1,130
Net Income $ 7,056 $ 8,764 $ 8,568 $ 6,472 $ 5,390
Earnings per common share:
Income from continuing
operations $.18 $.22 $.21 $.15 $.16
Income from discontinued
operations .09 .11 .12 .10 .05
Net Income $.27 $.33 $.33 $.25 $.21
Average common and common
equivalent shares
outstanding 26,561 26,298 26,092 25,966 25,934
</TABLE>
THE ALLEN GROUP INC.
ITEM 2 - MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Summary:
For the three month and six month periods ended June 30, 1995, The Allen
Group Inc. ("the Company") reported income from continuing operations of $6.5
million ($.24 per common share) and $11.2 million ($.42 per common share),
respectively, compared to $3.8 million ($.15 per common share) and $8.1
million ($.31 per common share), respectively, during the comparable 1994
periods. The increase in income from continuing operations is due, in large
part, to the initial inclusion of the operating results of the Company's 80%
owned Italian subsidiary, FOR.E.M. S.p.A. ("FOREM") and its majority owned
German subsidiary, MIKOM G.m.b.H. ("MIKOM") in the Company's second quarter
1995 results of operations, as well as continued strong sales by the
Company's existing telecommunications business. The increase in operating
income, however, is tempered by the Company's spending on research and
development for the Mobile Communications product lines which is expected to
continue at an increased level through the rest of the year.
In connection with the Company's announcement to pursue a tax-free spin-off
of its Automotive and Truck Products Business to its shareholders, the
Company reported the operating results of such business as discontinued
operations. Accordingly, the Company reported income from discontinued
operations for the three and six months ended June 30, 1995 of $2,886 ($.11
per common share) and $5,255 ($.20 per common share), respectively, versus
$2,655 ($.10 per common share) and $3,785 ($.15 per common share) for the
comparable 1994 periods. For further information regarding this transaction,
see Note 6 of Notes to Consolidated Condensed Financial Statements.
Sales:
Consolidated sales from continuing operations by industry segment are:
<TABLE>
<CAPTION>
Three Months Six Months
Ended Ended
June 30, June 30,
($ Millions) ($ Millions)
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Mobile Communications $81.6 $51.4 $140.1 $ 99.9
Centralized Automotive
Emissions Testing 2.3 .7 3.0 1.4
$83.9 $52.1 $143.1 $101.3
</TABLE>
Mobile Communications sales increased over the prior year periods by
$30.2 million (59%) and $40.2 million (40%) for the three and six months
ended June 30, 1995, respectively. A major reason for this growth was due to
the initial full consolidation of the Company's FOREM subsidiary and its
German subsidiary, MIKOM, in the second quarter 1995 and was responsible for
57% and 43% of the sales increase ($16.6 million) for the three months and
six months ended June 30, 1995, respectively. In addition, sales of site
management products, base station antennae and frequency planning services
from the Company's domestic Mobile Communications segment continue to
experience particularly strong growth and contributed to the remaining sales
growth for this segment.
Centralized Automotive Emissions Testing sales consist of revenues from
the Company's MARTA Technologies, Inc. ("MARTA") subsidiary. MARTA's sales
grew by $1.6 million for both the three month and six month periods ended
June 30, 1995 over the same periods in 1994 and is primarily attributed to
the start-up of the Maryland emission testing program on May 1, 1995.
This industry has been hampered by an unsettled political climate that
delayed programs previously awarded and the bidding and awarding of new
programs; however, several states have once again begun to review their
requirements which may lead to program proposals in the near term.
This unsettled climate has particularly impacted MARTA's El Paso, Texas
program which has been suspended, along with similar programs for another
contractor in Dallas and Houston, pursuant to legislation adopted in February
1995. Subsequent legislation, enacted by the State of Texas, directed the
Governor to enter into negotiations with the U.S. Federal Environmental
Protection Agency ("EPA") as to the impact on the States Federal clean air
emissions credits and provided the Governor wide latitude in determining what
type of emissions test programs to implement. The State also requested the
EPA to exempt the El Paso region from the emissions testing requirement. The
EPA has not exempted El Paso from testing requirements, but has authorized
certain credits which could allow for an emissions test less stringent than
the previously envisioned centralized IM/240 test program. In response to
the Governor's request, the Texas Natural Resources Conservation Commission
("TNRCC") has recommended three types of reduced testing programs (remote
sensing, decentralized and a combination centralized/decentralized program),
all of which could result in no role for MARTA's centralized testing program
as currently designed and contracted for with the State. None of the
programs recommended by the TNRCC have, as yet, been endorsed by the
Governor, they have varying degrees of emissions credits associated with them
and remain subject to review and approval by the EPA. While it becomes
increasingly possible that MARTA's centralized program will not be
implemented, or if so, in a significantly reduced version, the Company
continues to believe that its existing contract provides for appropriate
compensation should such changes occur, subject to the appropriation of funds
by the State of Texas. Marta will pursue all remedies available to protect
its interests regarding its contract with the State of Texas. The recorded
carrying value of its investment in the El Paso program is approximately $7.8
million.
The Cincinnati, Ohio program is expected to commence operations in early
1996. The Northern Kentucky program, originally scheduled to begin January
1, 1996, has been delayed as the State of Kentucky reviews the effect of the
EPA's changing mandates on planned and implemented programs. Earlier in
1995, Kentucky had requested MARTA to limit its activities to the search for
suitable test station locations, but not to enter into any contractual
arrangements to lease or purchase property. However, Kentucky and MARTA have
recently initiated negotiations for a nine to ten-year program, commencing on
approximately October 1, 1996.
Operating Income: Overall, gross margins on product sales approximated
39% and 42% for the three month period ended June 30, 1995 and 1994,
respectively, and 39% and 41% for the six month period ended June 30, 1995
and 1994, respectively. The decline in gross margins between periods is
primarily attributable to the change in sales mix in the Mobile
Communications segment offset, in part, by the inclusion of FOREM and MIKOM
in the second quarter of 1995.
Selling, general and administrative expenses increased by $2.3 million
and $3.7 million, respectively, for the three months and six months ended
June 30, 1995, respectively, compared to the same periods in 1994. The
increase is primarily due to the inclusion of FOREM and MIKOM and to the
start-up of the Maryland emissions testing program, both of which occurred in
the second quarter of 1995. Selling, general and administrative expenses
represent 17.9% and 18.5% of sales, respectively, for the three and six month
periods ended June 30, 1995, respectively, as compared to 24.3% and 22.5% for
the respective periods in 1994. The lower percentage of sales is due to the
spreading of fixed expenses over higher sales as a result of the initial
inclusion of FOREM and MIKOM as well as continued sales growth from the
Company's existing telecommunications products.
Due to the increasing significance of research and development and new
product engineering costs, the Company is now separately classifying this
item on its' Consolidated Statements of Income and has reclassified prior
periods to conform to the new format. Spending for the three months and six
months ended June 30, 1995 increased by $2.7 million (105%) and $4.3 million
(96%) over the respective 1994 periods and is attributable to the Company's
Mobile Communications segment. Such expenses represent 6.3% and 4.9% of
sales for the three months ended June 30, 1995 and 1994, respectively, and
6.2% and 4.5% for the six months ended June 30, 1995 and 1994, respectively.
The Company expects research and development costs to continue at these high
levels through the end of 1995.
Interest and financing costs: The significant increase in the components
of interest and financing expenses, both expense and income, is due
principally to the inclusion of FOREM and MIKOM in the second quarter of
1995. The decline in net interest costs in the second quarter of 1995 ($.3
million) and six months ended June 30, 1995 ($.5 million), as compared to the
second quarter 1994 ($.5 million) and six months ended June 30, 1994 ($.9
million) is due primarily to lower long-term debt levels.
Income Taxes: The Company's effective income tax rate on continuing
operations for the three months ended June 30, 1995 and 1994 was 39.6% and
36.9%, respectively, and 38.7% and 36.9% for the six months ended June 30,
1995 and 1994, respectively. These rates reflect the inclusion of the full
statutory rate for U.S. Federal taxes of 35% plus applicable state and local
taxes.
Minority interests: The increase in minority interest in the 1995
periods, as compared to the respective 1994 periods, is principally a result
of the inclusion of the outstanding 20% minority interest of FOREM in the
second quarter of 1995.
LIQUIDITY AND CAPITAL RESOURCES
As set forth in the Consolidated Condensed Statements of Cash Flows, the
Company used $21.6 million in cash from continuing operations for the six
months ended June 30, 1995 compared to cash generated from continuing
operations of $10.9 million for the six months ended June 30,1994. The
significant decrease in cash flow from operations is principally due to
higher inventories levels and trade accounts receivable balances as a result
of the increased sales volume in 1995 and a higher level of estimated income
tax payments.
The Company has made significant capital investments in test equipment
and plant facilities for its Mobile Communications segment and for the Ohio
emissions testing program of its Centralized Automotive Emissions Testing
segment. In addition, the Company acquired an additional 40% interest in
FOREM on March 17, 1995 for approximately $8.3 million in cash. All of these
were financed by internally generated funds.
The Company continues to utilize internally generated cash resources to
fund its operating and capital activities, and at June 30, 1995, cash and
equivalents totalled $20.0 million as compared with $55.2 million at December
31, 1994. These balances were principally invested in money market funds,
bankers acceptances and Dutch auction, tax exempt securities (which are
afforded one of the two highest ratings by nationally recognized ratings
firms).
With respect to the aforementioned spin-off of its automotive and truck
products business, the Company does not anticipate such transaction (which
will be accounted for as a dividend with the net assets charged to retained
earnings when distributed) will have any significant impact on its liquidity
or capital resources. The primary purpose of the spin-off is to enable both
the Company, and the new business that will emerge, to independently pursue
their own respective strategies and objectives. The Company recognizes that
no significant synergies exist between the Company and the new business in
terms of their respective operations, customer base or distribution networks.
The Company is currently employing a business strategy that involves,
among other things, the expansion of its telecommunications equipment
business, through both strategic acquisitions and capital expenditure
programs. In its pursuit of strategic acquisitions, the Company believes
that the spin-off will enable it to use its common stock as an acquisition
currency, to effectively reduce the cost of such acquisitions to the Company.
The spin-off also will enable the new business to independently pursue
its own business strategies and objectives tailored to its unique financial
and operating requirements under the direction of the management group that
is properly incentized towards that end. Following the spin-off, the new
business will be able to establish its own criteria for making capital
investments and/or strategic acquisitions of other businesses that are
desirable for the new business to maximize its future growth and
profitability. In addition, as a result of the spin-off, the new business
will gain independent, direct access to the capital markets to finance such
capital expenditures or acquisitions.
The Company believes that continued profitability, cash and short term
investments and available unused credit lines of $93 million, as well as
unused credit lines for MARTA of $60 million, will provide sufficient
liquidity to fund future growth, expansion and acquisitions.
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
At the Annual Meeting of Stockholders of the Company held on April 27,
1995, three proposals were voted upon by the Company's stockholders. A brief
description of each proposal voted upon at the Annual Meeting and the number
of votes cast for, against and withheld, as well as the number of abstentions
and broker non-votes as to each such proposal, are set forth below.
A vote by ballot was taken at the Annual Meeting for the election of 10
Directors of the Company to hold office until the next Annual Meeting of
Stockholders of the Company and until their respective successors shall have
been duly elected and qualified. The aggregate numbers of shares of Common
Stock (a) voted in person or by proxy for each nominee, or (b) with respect
to which proxies were withheld for each nominee, together with (c) the number
of broker non-votes as to each nominee, were as follows:
Broker
Nominee For Withheld Non-Votes
George A. Chandler 21,945,391 161,866 0
Philip Wm. Colburn 21,902,239 205,018 0
Jill K. Conway 21,947,552 159,705 0
Albert H. Gordon 21,887,650 219,607 0
William O. Hunt 21,932,021 175,236 0
J. Chisholm Lyons 21,908,374 198,883 0
Robert G. Paul 21,905,113 202,144 0
Charles W. Robinson 21,919,934 187,323 0
Richard S. Vokey 21,930,220 177,037 0
William M. Weaver, Jr. 21,930,647 176,610 0
A vote by ballot was taken at the Annual Meeting on the proposal to
approve the adoption of the amendment to increase the number of shares
available under, and make certain other changes in, the Company's 1992 Stock
Plan. The aggregate numbers of shares of Common Stock in person or by proxy
which (a) voted for, (b) voted against or (c) abstained from the vote on such
proposal, together with (d) the number of broker non-votes as to such
proposal, were as follows:
Broker
For Against Abstain Non-Votes
17,643,934 4,307,902 155,341 80
A vote by ballot was taken at the Annual Meeting on the proposal to
ratify the appointment of Coopers & Lybrand as auditors for the Company for
the fiscal year ending December 31, 1995. The aggregate numbers of shares of
Common Stock in person or by proxy which: (a) voted for, (b) voted against
or (c) abstained from the vote on such proposal, together with (d) the number
of broker non-votes on such proposal, were as follows:
Broker
For Against Abstain Non-Votes
22,048,225 22,605 36,427 0
The foregoing proposals are described more fully in the Company's
definitive proxy statement dated March 17, 1995, filed with the Securities
and Exchange Commission pursuant to Section 14(a) of the Securities Act of
1934, as amended, and the rules and regulations promulgated thereunder.
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
(10.1) Amendment, dated as of June 14, 1995, to The Allen Group Inc.
1982 Stock Plan, as amended.
(10.2) Fourth Amendment to The Allen Group Inc. 1992 Stock Plan,
dated as of June 14, 1995.
(11) Statement re computation of earnings per common share.
(27) Financial Data Schedule.
(b) Reports on Form 8-K
The Company filed a Form 8-K Current Report dated June 15, 1995 in
which it reported under Item 5 - "Other Events" that its Board of
Directors authorized its management to pursue a tax-free spin-off of
a new company consisting of its Crown and G&O Manufacturing Company
divisions, which comprise the Company's Truck Products segment,
together with GO/DAN Industries ("GDI"), a manufacturer of heat
transfer products for the automotive aftermarket.
The Company also announced that subsidiaries of the Company and Handy
& Harman have entered into an agreement, together with GDI, whereby
Handy & Harman will receive approximately $25 million in total cash
consideration for its interest in GDI. The Company's subsidiaries
will own 100% of GDI after this transaction. For additional
information, see Note 6 of Notes to Consolidated Condensed Financial
Statements.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
The Allen Group Inc.
(Registrant)
Date: August 11, 1995 By: /s/ Robert A. Youdelman
Robert A. Youdelman
Senior Vice President-Finance
(Chief Financial Officer)
Date: August 11, 1995 By: /s/ James L. LePorte
James L. LePorte
Vice President and Controller
(Principal Accounting Officer)
THE ALLEN GROUP INC.
EXHIBIT INDEX
Page
Exhibit Number:
(10.1) Amendment, dated as of June 14, 1995, to
The Allen Group Inc. 1982 Stock Plan,
as amended......................................... 21 - 22
(10.2) Fourth Amendment to The Allen Group Inc.
1992 Stock Plan, dated as of June 14, 1995......... 23 - 24
(11) Statement re computation of earnings per
common share....................................... 25
(27) Financial Data Schedule ........................... 26
EXHIBIT 10.1
AMENDMENT TO
THE ALLEN GROUP INC.
1982 STOCK PLAN
This Amendment to The Allen Group Inc. 1982 Stock Plan (the "Plan")
hereby is adopted this 14th day of June, 1995, to provide as follows:
1. Section 7(a) of the Plan hereby is amended by deleting Section 7(a)
in its entirety and inserting in place thereof the following
provisions:
"(a) The Committee may make or provide for such adjustments in
the option price and in the number or kind of shares or other
securities covered by options and Restricted Shares outstanding
under the Plan as the Committee in its sole discretion, exercised
in good faith, shall determine is equitably required to prevent
dilution or enlargement of rights of optionees and holders of
Restricted Shares that would otherwise result from (i) any stock
dividend, stock split, combination of shares, issuance of rights or
warrants to purchase stock, recapitalization or other changes in
the capital structure of the Company, (ii) any merger,
consolidation, reorganization, split-up, split-off, spin-off or
partial or complete liquidation, or (iii) any other corporate
transaction or event having an effect similar to any of the
foregoing. The Committee also may make or provide for such
adjustments in (A) the number or kinds of shares of Common Stock or
other securities which may be acquired pursuant to options granted
under the Plan and the number of such securities to be awarded to
each optionee, and (B) the number or kinds of shares of Common
Stock available for awards of Restricted Shares under the Plan, as
the Committee in its sole discretion, exercised in good faith,
shall determine is appropriate to reflect any transaction or event
described in the preceding sentence. The determination of the
Committee as to what adjustments shall be made, and the extent
thereof, shall be final, binding and conclusive."
2. Section 7(b) of the Plan hereby is amended by deleting Section 7(b)
in its entirety and inserting in place thereof the following
provisions:
"(b) In the event of the proposed dissolution or
liquidation of the Company,in addition to the
alternatives described in this Section 7, the Committee
may provide that the holder of each option then
exercisable shall have the right to exercise such option
(at its then option price) solely for the kind and amount
of shares of stock and other securities, property, cash
or any combination thereof receivable upon such
dissolution or liquidation by a holder of the number of
shares of Common Stock for which such option might have
been exercised immediately prior to such dissolution or
liquidation; or the Committee may provide, in the
alternative, that each option granted under the Plan
shall terminate as of a date to be fixed by the Board,
provided, however, that not less than thirty (30) days
written notice of the date so fixed shall be given to
each optionee, who shall have the right, during the
period of thirty (30) days preceding such termination, to
exercise the option as to all or any part of the shares
of Common Stock covered thereby, including shares as to
which such option would not otherwise be exercisable."
3. Section 7(h) of the Plan hereby is deleted in its entirety.
4. Section 6(c) of the Plan hereby is amended by deleting the
reference to "Section 7(h)" in the last sentence of Section 6(c)
and inserting in place thereof the phrase "Section 7(a)."
All other provisions of the Plan hereby are ratified, confirmed and
approved.
IN WITNESS WHEREOF, the Company has caused this Amendment to be duly
executed in its name by its duly authorized officer this 14th day of June,
1995.
THE ALLEN GROUP INC.
By:/s/ Philip Wm. Colburn
Philip Wm. Colburn
Chairman of the Board
ATTEST:
/s/ McDara P. Folan, III
McDara P. Folan, III
Secretary
EXHIBIT 10.2
FOURTH AMENDMENT TO
THE ALLEN GROUP INC.
1992 STOCK PLAN
This Fourth Amendment to The Allen Group Inc. 1992 Stock Plan, as
previously amended (the "Plan"), hereby is adopted this 14th day of June,
1995, to provide as follows:
1. Section 7(a) of the Plan hereby is amended by deleting Section 7(a)
in its entirety and inserting in place thereof the following
provisions:
"(a) The Committee may make or provide for such
adjustments in the option price and in the number or kind
of shares or other securities covered by outstanding
options and to the number and class of shares available
for awards of Restricted Shares under the Plan or to any
outstanding Restricted Shares as the Committee in its
sole discretion, exercised in good faith, shall determine
is equitably required to prevent dilution or enlargement
of rights of optionees and holders of Restricted Shares
that would otherwise result from (i) any stock dividend,
stock split, combination of shares, issuance of rights or
warrants to purchase stock, recapitalization or other
changes in the capital structure of the Company, (ii) any
merger, consolidation, reorganization, split-up, split-
off, spin-off or partial or complete liquidation, of (c)
any other corporate transaction or event having an effect
similar to any of the foregoing. The Committee also may
make or provide for such adjustments in the number or
kinds of shares of Common Stock or other securities which
may be acquired pursuant to the options granted under the
Plan and the number of such securities to be awarded to
each optionee as the Committee in its sole discretion,
exercised in good faith, shall determine is appropriate
to reflect any transaction or event described in the
preceding sentence. The determination of the Committee
as to what adjustments shall be made, and the extent
thereof, shall be final, binding and conclusive."
2. Section 7(b) of the Plan hereby is amended by deleting Section 7(b)
in its entirety and inserting in place thereof the following
provisions:
"(b) In the event of the proposed dissolution or
liquidation of the Company,in addition to the
alternatives described in subsection (a) of this Section
7, the Committee may provide that the holder of each
option then exercisable shall have the right to exercise
such option (at its then option price) solely for the
kind and amount of shares of stock and other securities,
property, cash or any combination thereof receivable upon
such dissolution or liquidation by a holder of the number
of shares of Common Stock for which such option might
have been exercised immediately prior to such dissolution
or liquidation; or the Committee may provide, in the
alternative, that each option granted under the Plan
shall terminate as of a date to be fixed by the Board,
provided, however, that not less than thirty (30) days
written notice of the date so fixed shall be given to
each optionee, who shall have the right, during the
period of thirty (30) days preceding such termination, to
exercise the option as to all or any part of the shares
of Common Stock covered thereby, including shares as to
which such option would not otherwise be exercisable."
3. Section 7(h) of the Plan hereby is deleted in its entirety.
4. Section 6(c) of the Plan hereby is amended by deleting the
reference to "Section 7(h)" in the last sentence of Section 6(c)
and inserting in place thereof the phrase "Section 7(a)."
All other provisions of the Plan hereby are ratified, confirmed and
approved.
IN WITNESS WHEREOF, the Company has caused this Fourth Amendment to be
duly executed in its name by its duly authorized officer this 14th day of
June, 1995.
THE ALLEN GROUP INC.
By:/s/ Philip Wm. Colburn
Philip Wm. Colburn
Chairman of the Board
ATTEST:
/s/ McDara P. Folan, III
McDara P. Folan, III
Secretary
EXHIBIT 11
THE ALLEN GROUP INC.
EARNINGS PER COMMON SHARE DATA
(Amounts in Thousands)
Net income and common shares used in the calculations of earnings per common
share were computed as follows:
<TABLE>
<CAPTION>
Three Months Six Months
Ended Ended
June 30, June 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Income:
Net income applicable to
common stock - primary $ 9,390 $ 6,472 $16,446 $11,862
Adjustments for fully diluted:
Convertible debenture
interest 35 74 108 148
Net income applicable to
common stock - fully
diluted $ 9,425 $ 6,546 $16,554 $12,010
Common Shares:
Weighted average outstanding
common shares 25,577 25,335 25,484 25,328
Common stock equivalents 1,202 631 1,186 622
Common shares - primary 26,779 25,966 26,670 25,950
Common shares issuable for:
Stock options 135 54 82 27
Conversion of debentures 147 359 249 359
Common shares - fully diluted 27,061 26,379 27,001 26,336
</TABLE>
The calculation of fully diluted earnings per common share is submitted in
accordance with Regulation S-K Item 601(b)(11) although not required for
income statement presentation because it results in dilution of less than 3
percent.
EXHIBIT 27
FINANCIAL DATA SCHEDULE
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 19,974
<SECURITIES> 0
<RECEIVABLES> 81,969
<ALLOWANCES> (1,650)
<INVENTORY> 64,635
<CURRENT-ASSETS> 222,551
<PP&E> 68,220
<DEPRECIATION> 15,288
<TOTAL-ASSETS> 374,090
<CURRENT-LIABILITIES> 83,058
<BONDS> 31,949
<COMMON> 29,525
0
0
<OTHER-SE> 213,286
<TOTAL-LIABILITY-AND-EQUITY> 374,090
<SALES> 143,145
<TOTAL-REVENUES> 143,145
<CGS> 87,604
<TOTAL-COSTS> 87,604
<OTHER-EXPENSES> 35,183
<LOSS-PROVISION> 133
<INTEREST-EXPENSE> 457
<INCOME-PRETAX> 19,768
<INCOME-TAX> 7,648
<INCOME-CONTINUING> 11,191
<DISCONTINUED> 5,256
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,447
<EPS-PRIMARY> .62
<EPS-DILUTED> 0
</TABLE>
