<PAGE> 1
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, 1997
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
ALLEN TELECOM 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:
<TABLE>
<CAPTION>
Outstanding at
Class of Common Stock July 31, 1997
--------------------- -------------
<S> <C>
Par value $1.00 per share 27,189,244
----------
</TABLE>
Exhibit Index is on page 17 of this report.
Page 1 of 19 Pages.
<PAGE> 2
ALLEN TELECOM INC.
------------------
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
No.
-----------------
<S> <C> <C>
Part I. Financial Information:
Item 1 - Financial Statements:
Consolidated Condensed Balance Sheets -
June 30, 1997 and December 31, 1996 3
Consolidated Statements of Income -
Three Months and Six Months Ended June 30, 1997
and 1996 4
Consolidated Condensed Statements of
Cash Flows - Six Months Ended
June 30, 1997 and 1996 5
Notes to Consolidated Condensed
Financial Statements 6 - 8
Item 2 - Management's Discussion and
Analysis of Financial Condition
and Results of Operations 9 - 13
Part II. Other Information:
Item 4 - Submission of Matters to a Vote of Security Holders 14
Item 6 - Exhibits and Reports on Form 8-K 15
Signatures 16
Exhibit Index 17
</TABLE>
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
------------------------------
ITEM I - FINANCIAL STATEMENTS
-----------------------------
ALLEN TELECOM INC.
------------------
CONSOLIDATED CONDENSED BALANCE SHEETS
-------------------------------------
(Amounts in Thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
-------------- -----------
(Unaudited)
<S> <C> <C>
ASSETS:
Current Assets:
Cash and equivalents $ 22,586 $ 23,879
Accounts receivable (less allowance for doubtful
accounts of $1,680; and $1,610, respectively) 105,235 93,409
Inventories: Raw Materials 41,163 36,869
Work in process 24,013 19,256
Finished Goods 15,990 15,179
--------- ---------
81,166 71,304
Assets of discontinued emissions testing business (Note 5) 971 3,332
Other current assets 6,883 7,256
--------- ---------
Total current assets 216,841 199,180
Property, plant and equipment, net 55,723 51,942
Excess of cost over net assets of businesses acquired (Note 4) 92,095 75,502
Assets of discontinued emissions testing business (Note 5) 45,482 42,031
Other Assets (Note 3) 61,138 41,857
--------- ---------
TOTAL ASSETS $ 471,279 $ 410,512
========= =========
LIABILITIES:
Current Liabilities:
Notes payable and current maturities of long-term $ 6,426 $ 5,998
obligations
Accounts payable 44,992 36,639
Accrued expenses 33,914 37,991
Income taxes payable 24,447 19,830
Deferred income taxes 3,193 4,344
--------- ---------
Total current liabilities 112,972 104,802
Long-term debt 78,376 49,957
Other liabilities and deferred credits 26,348 29,802
--------- ---------
TOTAL LIABILITIES 217,696 184,561
--------- ---------
STOCKHOLDERS' EQUITY
Common Stock, par value $1.00 29,663 29,614
Paid-in capital 178,074 170,945
Retained earnings 60,503 46,742
Translation adjustments (4,255) (304)
Unrealized appreciation on investment securities (Note 3) 9,296 --
Less: Treasury stock (at cost) (16,992) (17,932)
Unearned compensation (2,500) (2,908)
Minimum pension liability adjustment (206) (206)
--------- ---------
TOTAL STOCKHOLDERS' EQUITY 253,583 225,951
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 471,279 $ 410,512
========= =========
</TABLE>
See accompanying notes to the Consolidated Condensed Financial Statements.
3
<PAGE> 4
Allen Telecom Inc.
------------------
Consolidated Statements of Income
---------------------------------
(Amounts in Thousands, Except Per Share Data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
--------------------- ---------------------
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
SALES $ 108,859 $ 88,459 $ 211,362 $ 172,928
--------- --------- --------- ---------
Costs and expenses:
Cost of sales (70,677) (56,900) (136,639) (112,441)
Selling, general and
administrative expenses (Note 3) (16,166) (14,166) (30,794) (27,753)
Research and development and
product engineering costs (7,611) (5,139) (14,297) (9,759)
Interest and financing expenses:
Interest expense (926) (870) (1,732) (1,915)
Interest income 177 127 463 319
--------- --------- --------- ---------
Income before taxes and
minority interests 13,656 11,511 28,363 21,379
Provision for income taxes (5,120) (4,667) (11,300) (8,781)
--------- --------- --------- ---------
Income before minority
interests 8,536 6,844 17,063 12,598
Minority interests (1,802) (1,142) (3,303) (2,214)
--------- --------- --------- ---------
INCOME FROM CONTINUING
OPERATIONS 6,734 5,702 13,760 10,384
Loss from discontinued centralized
emissions testing operations -- (565) -- (1,002)
--------- --------- --------- ---------
NET INCOME $ 6,734 $ 5,137 $ 13,760 $ 9,382
========= ========= ========= =========
EARNINGS PER COMMON SHARE
(Primary and Fully Diluted (Note 2)
Income from Continuing Operations $ .25 $ .21 $ .51 $ .39
Loss from discontinued centralized
emissions testing operations -- (.02) -- (.04)
========= ========= ========= =========
NET INCOME $ .25 $ .19 $ .51 $ .35
========= ========= ========= =========
Average common and common
equivalent shares outstanding 27,221 27,198 27,126 27,075
========= ========= ========= =========
See accompanying notes to the Consolidated Condensed Financial Statements.
</TABLE>
4
<PAGE> 5
<TABLE>
<CAPTION>
ALLEN TELECOM INC.
------------------
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
-----------------------------------------------
(Amounts in Thousands)
(Unaudited)
Six Months Ended
June 30,
-----------------------------------
1997 1996
--------------- -------------
<S> <C> <C>
CONTINUING OPERATIONS:
Cash provided by operating activities of continuing operations $ 13,192 $ 17,709
-------- --------
Cash flows from investing activities:
Capital expenditures (11,465) (8,585)
Sales and retirements of fixed assets 919 38
Capitalized software product costs (2,867) (2,199)
Sale of investment 505 --
Investment in telecommunications companies (30,989) (11,094)
-------- --------
Cash (used) by investing activities (43,897) (21,840)
-------- --------
Cash flows from financing activities:
Net proceeds of long-term debt 30,828 3,227
Exercise of stock options 243 199
Treasury stock sold to employee benefit plans 897 833
-------- --------
Cash generated by financing activities 31,968 4,259
-------- --------
DISCONTINUED OPERATIONS:
Net cash used by discontinued centralized
emissions testing operations (700) (4,127)
-------- --------
Net cash generated (used) 563 (3,999)
Effect of exchange rate changes on cash (1,856) --
Cash and equivalents at beginning of year 23,879 15,706
-------- --------
Cash and equivalents at end of period $ 22,586 $ 11,707
======== ========
Supplemental cash flow data:
Depreciation and amortization included in "Cash provided
by operating activities of continuing operations" $ 10,154 $ 9,612
Cash paid during the period for:
Interest paid 1,412 2,255
Interest capitalized 110 --
Income taxes paid 3,813 656
See accompanying notes to the Consolidated Condensed Financial Statements.
</TABLE>
5
<PAGE> 6
ALLEN TELECOM INC,
------------------
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
----------------------------------------------------
(Unaudited)
1. General:
--------
In the opinion of management of Allen Telecom 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, 1997 and the results
of its operations and its cash flows for the periods ended June 30,
1997 and 1996. The results of operations for such interim periods are
not necessarily indicative of the results for the full year. The
year-end 1996 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, 1996. Certain reclassifications have
been made to the 1996 financial statements to conform to the 1997
method of presentation.
2. Earnings Per Common Share:
--------------------------
The earnings per common share calculations are based on the weighted
average number of common shares outstanding during each period. The
calculations also include, if dilutive, the incremental common shares
issuable on a pro forma basis upon assumed exercise of employee stock
options. Such incremental common shares assume that the proceeds are
used to purchase shares at the average market price during the period,
for primary earnings per share, or at the period-end market price, if
higher, for fully diluted earnings per share. The calculation of fully
diluted earnings per common share resulted in no reportable dilution
for the periods presented.
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings Per
Share." This statement revises the standards for computing and
presenting earnings per share ("EPS"), and will be effective for
periods ending after December 15, 1997 (the statement prohibits earlier
adoption). The Company will implement the standard during the fourth
quarter of 1997, at which time all prior annual and interim period EPS
data will be restated. The Company has determined that, once adopted,
there will be no material impact on the three-month and six-month
periods ended June 30, 1997 and 1996.
3. Investments in Telecommunication Companies
------------------------------------------
In the first quarter of 1997, the Company realized a before-tax gain on
the sale of the Company's partial ownership investment in Columbia
Spectrum Management, L.P., in the amount of $1,525,000, or $.03 per
common share after related tax effects. This gain is included in
selling, general, and administrative expenses.
6
<PAGE> 7
ALLEN TELECOM INC,
------------------
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
----------------------------------------------------
(Continued)
(Unaudited)
The Company owns common stock and warrants in RF Micro Devices, Inc.
which completed an initial public offering of its common stock on June
3, 1997. The Company's investment is currently subject to certain
trading restrictions. At June 30, 1997, the investment value has been
increased to the market value at that date of approximately $19,300,000
(included in "Other assets"). The Company has 954,278 common shares and
36,412 warrants classified as available-for-sale at June 30, 1997. The
common shares have an aggregate fair value of $18,250,567 and a cost
basis of $2,778,333 resulting in an unrealized holding gain of
$15,472,234. The warrants held as available-for-sale have an aggregate
fair value of $696,380 and an unrealized holding gain of $555,352.
Unrealized appreciation in the amount of $9,296,000, after related
income tax effect, is included in Stockholders' Equity as "unrealized
appreciation on investment securities" as it is the Company's intent to
treat the securities classified as available-for-sale as a long-term
investment.
4. Purchase of Minority Interest
-----------------------------
On June 4, 1997, the Company acquired the outstanding 20% minority
interest in FOR.E.M. S.p.A. ("FOREM"), and now owns 100% of FOREM.
FOREM is a leading manufacturer of filters, combiners, and tower mount
amplifiers for GSM cellular and DCS 1800 wireless communications
systems. This acquisition also increases the effective ownership of
FOREM's 62% owned subsidiary, Mikom GmbH. The final purchase price (in
the form of cash and/or common stock of the Company) is contingent upon
the net income of FOREM's 1997 fiscal year. In a series of
transactions, the Company has paid $21,680,000 in cash and 261,014
shares of the Company's common stock with an aggregate value of
approximately $6,000,000, and expects to make additional payments in
September 1997 and January 1998. This purchase is the principal reason
for the increase in the "Excess of cost over net assets of businesses
acquired" in the Consolidated Condensed Balance Sheet.
5. Discontinued Operations
-----------------------
In 1996, the Company decided to exit the centralized automotive
emissions testing business operated by its MARTA Technologies, Inc.
("MARTA") subsidiary and has presented such operations as "Discontinued
Operations" in the Consolidated Statements of Income.
On May 27, 1997, the Company announced that MARTA and Envirotest
Systems Corp. ("Envirotest") had jointly decided to terminate the
agreement of sale between MARTA and Envirotest, which provided for the
transfer of MARTA's centralized emissions testing program for the
Cincinnati region of Ohio to Envirotest. Due to uncertainty of
legislative and administrative actions in defining the future direction
and economics of the program and other contractual matters, the parties
were unable to reach agreement on the financial and other terms of the
transaction.
7
<PAGE> 8
ALLEN TELECOM INC.
------------------
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
----------------------------------------------------
(Continued)
(Unaudited)
As a result of the termination of the agreement of sale, MARTA has
entered into discussions with the Ohio Environmental Protection Agency
regarding the reopening of the Cincinnati, Ohio program. Additionally,
on August 1, 1997, the State of Maryland notified MARTA that it was
exercising the first of the two one-year renewal options as contained
in the original contract. This renewal option extends the program
through April 30, 1999. These developments do not change the Company's
strategy of focusing its future solely on the wireless communications
industry. MARTA will continue to operate its programs and fulfill its
contractual commitments pending any disposition.
With respect to the Company's claim against the State of Texas for
compensation in connection with the discontinuance of the El Paso,
Texas centralized emissions test program, on August 11, 1997, the
Company received $11 million in settlement of its claims against the
State. In addition, MARTA will retain any proceeds from the sale of the
program assets.
8
<PAGE> 9
ALLEN TELECOM INC.
------------------
ITEM 2 - MANAGEMENT'S DISCUSSION AND
------------------------------------
ANALYSIS OF FINANCIAL CONDITION AND
-----------------------------------
RESULTS OF OPERATIONS
---------------------
RESULTS OF OPERATIONS
- ---------------------
Summary:
- --------
For the three months ended June 30, 1997 and 1996, Allen Telecom Inc. ("the
Company") reported income from continuing operations of $6.7 million, or $.25
per common share, and $5.7 million, or $.21 per common share, respectively. For
the six months ended June 30, 1997 and 1996, the Company reported income from
continuing operations of $13.8 million, or $.51 per common share, and $10.4
million, or $.39 per common share, respectively.
The increase in earnings for the three and six-month periods ending June 30,
1997 is due primarily to higher sales of $108.9 million and $211.4 million, as
compared with $88.5 million and $172.9 million in the comparable 1996 periods.
In the first quarter of 1997, the Company realized a before-tax gain on the sale
of the Company's partial ownership interest in Columbia Spectrum Management,
L.P., in the pre-tax amount of $1.5 million, or $.03 per common share after
related tax effects. This gain is included in selling, general and
administrative expenses.
Sales:
- ------
Sales for the second quarter and six-month period ended June 30, 1997 increased
23% and 22%, respectively, over the comparable 1996 periods. In the second
quarter, sales in each of the Company's three equipment product lines increased
over the 1996 second quarter, with the largest increase coming from a continued
increase in European market penetration in the site management product line. The
Company's engineering services business, which predominantly is a supplier of
services and software to the domestic wireless markets, recorded a small
reduction in sales during the second quarter compared to the prior year.
For the six-month period, the Company reported sales increases in each of its
four product lines. Sales to the emerging Personal Communications Systems
("PCS") markets increased to 13% of sales as compared with 10% in the prior year
period. This growth was most evident in sales of system test and measurement
products, and PCS sales for the first six months of 1997 increased in each
product line as compared with the first six months of 1996. As noted above, the
Company also continued to see significant sales growth in its European based
businesses.
Operations:
- -----------
Gross profit margins were 35.1% in the second quarter of 1997 as compared with
35.7% in the comparable 1996 period. The decrease is due primarily to the slight
decrease in sales in the Company's engineering services business with no
corresponding reduction in direct labor costs, offset, in part, by improved
margins in the Company's domestic site management product line.
9
<PAGE> 10
ALLEN TELECOM INC.
------------------
ITEM 2 - MANAGEMENT'S DISCUSSION AND
------------------------------------
ANALYSIS OF FINANCIAL CONDITION AND
-----------------------------------
RESULTS OF OPERATIONS
---------------------
(Continued)
For the six-month period ended June 30, 1997 and 1996, gross profit margins were
35.4% and 35.0%, respectively. The small increase in 1997 is due primarily to
the increased sales of system test and measurement products along with continued
sales growth in the Company's European based businesses, offset, in part, by the
aforementioned lower sales and margins in the Company's engineering services
business.
Selling, general and administrative expenses (excluding the aforementioned gain
from the sale of an investment), were 14.9% and 16.0% for the second quarter
1997 and 1996, respectively, and 15.3% and 16.0% for the six-month periods ended
June 30, 1997 and 1996, respectively. The lower percentages in the current
periods reflect the spreading of fixed costs on higher sales and are within
normal operating ranges.
Research and development and product engineering costs increased $2.5 million
and $4.5 million in the three and six months ended June 30, 1997 as compared
with the comparable 1996 periods. Such costs were 7.0% and 5.8% of sales for the
second quarter 1997 and 1996, respectively, and 6.8% and 5.6% of sales for the
six months ended June 30, 1997 and 1996, respectively. These increases are
indicative of the ongoing trend experienced by the Company in recent years.
Interest and Financing Expenses:
- --------------------------------
Net interest cost for the second quarter of 1997 was flat in comparison with the
second quarter of the prior year due to the lower net financing cost of the
Company's cash generating operations, offset by higher interest costs incurred
to finance investments in telecommunications companies (see also Liquidity and
Capital Resources below).
The lower net interest cost for the six months of 1997 compared with the
comparable 1996 period reflects the lower net financing costs of the Company's
European operations. These operations continue to generate cash from profitable
operations in excess of current operating needs including, in particular, the
delayed payment of estimated income taxes as allowable under local tax
regulations (see also Liquidity and Capital Resources below). These operations
anticipate the payment of substantial estimated and actual taxes later in 1997
utilizing available cash investments and local lines of credit, if necessary.
Provision For Income Taxes:
- ---------------------------
The Company's effective tax rate on continuing operations approximated 37.5% and
40.5% for the second quarter 1997 and 1996 periods, and 39.8% and 41%,
respectively, for the 1997 and 1996 year-to-date periods.
10
<PAGE> 11
ALLEN TELECOM INC.
------------------
ITEM 2 - MANAGEMENT'S DISCUSSION AND
------------------------------------
ANALYSIS OF FINANCIAL CONDITION AND
-----------------------------------
RESULTS OF OPERATIONS
---------------------
(Continued)
Minority Interest:
- ------------------
The increase in minority interest in the second quarter and six months of 1997,
as compared with the 1996 periods, is due to the related earnings growth of the
Company's minority owned European subsidiaries. As discussed in "Liquidity and
Capital Resources" below, future results of operations will no longer include
minority interest expense relating to FOR.E.M. S.p.A. ("FOREM"), as a result of
the acquisition of the previously outstanding 20% minority interest in FOREM.
However, the Company will continue to record minority interest expense with
respect to FOREM's 62% owned subsidiary, Mikom GmbH as well as other companies.
Discontinued Operations:
- ------------------------
In 1996, the Company decided to exit the centralized automotive emissions
testing business operated by its MARTA Technologies, Inc. ("MARTA") subsidiary
and has presented such operations as "Discontinued Operations" in the
Consolidated Statements of Income. On May 27, 1997, the Company announced that
MARTA and Envirotest Systems Corp. ("Envirotest") had jointly decided to
terminate the agreement of sale between MARTA and Envirotest, providing for the
transfer of MARTA's centralized emissions testing program for the Cincinnati
region of Ohio to Envirotest. Due to uncertainty of legislative and
administrative actions in defining the future direction and economics of the
program and other contractual matters, the parties were unable to reach
agreement on the financial and other terms of the transaction. As a result of
the termination of the agreement of sale, MARTA has entered into discussions
with the Ohio Environmental Protection Agency regarding the reopening of the
Cincinnati, Ohio program. MARTA will continue to operate its programs and
fulfill its contractual commitments pending any disposition. This development
does not change the Company's stated strategy of focusing the future solely on
the wireless communications industry.
With respect to the Company's claim against the State of Texas for compensation
in connection with the discontinuance of the El Paso, Texas centralized
emissions test program, on August 11, 1997, the Company received $11 million in
settlement of its claims against the State. In addition, MARTA will retain any
proceeds from the sale of the program assets.
Discontinued operations include management's best estimate of the loss from the
disposal of the emissions testing business. Actual results could differ from
their estimates and are dependent, among other factors, upon the outcomes of
ongoing litigation and/or claims with the states of Ohio and Kentucky with
respect to their suspension or cancellation respectively, of MARTA's emissions
testing programs within their states.
11
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ALLEN TELECOM INC.
------------------
ITEM 2 - MANAGEMENT'S DISCUSSION AND
------------------------------------
ANALYSIS OF FINANCIAL CONDITION AND
-----------------------------------
RESULTS OF OPERATIONS
---------------------
(Continued)
LIQUIDITY AND CAPITAL RESOURCES:
- --------------------------------
As set forth in the Consolidated Condensed Statement of Cash Flows, the Company
generated $13.2 million in cash from the operating activities of continuing
operations for the six months ended June 30, 1997 as compared with a cash
generation of $17.7 million for the comparable 1996 period. The decrease in cash
flow, despite increased earnings, is due principally to working capital changes
in support of higher sales and backlog.
As a result of a series of transactions, on June 4, 1997, the Company acquired
the outstanding 20% minority interest in FOREM, increasing its ownership
interest to 100%. In connection with these transactions, the Company has paid
$26.7 million in cash and Company common stock which is the principal reason for
the increase in "Excess of cost over net assets of businesses acquired" in the
Consolidated Condensed Balance Sheet. The final purchase price is contingent
upon the final 1997 earnings of FOREM and is payable (in cash and/or Company
common stock) in late 1997 and 1998.
To fund the FOREM acquisition, along with other investments, the Company has
borrowed approximately $31 million under its credit facilities. At June 30,
1997, the Company had available, unused lines of credit in the amount of
approximately $52 million.
At June 30, 1997, cash and equivalents totaled $22.6 million, most of which are
held by the Company's European subsidiaries. The Company's European subsidiaries
will be making substantial estimated and actual income tax payments in 1997 for
which such cash balances will be utilized and, if necessary, locally available
lines of credit.
The increase in other assets in the Consolidated Condensed Balance Sheet is due
primarily to common shares and warrants of RF Micro Devices, Inc. ("RFMD"). RFMD
completed an initial public offering of its common stock on June 3, 1997. At
June 30, 1997, the value of these assets has been adjusted to reflect current
market value of approximately $19.3 million. Likewise, the net unrealized
appreciation in the amount of $9.3 million, after related income tax effect, is
included in Stockholders' Equity as "unrealized appreciation on investment
securities," as it is the Company's intent to treat the securities classified as
available-for-sale as a long-term investment. The Company's investment is
currently subject to certain trading restrictions.
12
<PAGE> 13
ALLEN TELECOM INC.
------------------
ITEM 2 - MANAGEMENT'S DISCUSSION AND
------------------------------------
ANALYSIS OF FINANCIAL CONDITION AND
-----------------------------------
RESULTS OF OPERATIONS
---------------------
(Continued)
In 1996, the Company entered into an agreement to make an equity investment of
$5 million in Nextwave Telecom Inc. ("Nextwave"), and whereby Nextwave agreed to
purchase $50 million of equipment and services over a five-year period from the
Company. In connection with this agreement, subject to certain preconditions
that have not yet occurred, the Company has agreed to provide secured product
financing in addition to its $5.0 million investment. At June 30, 1997, the
Company had outstanding approximately $2.0 million of receivables with Nextwave.
In early 1997, the U.S. Government suspended interest payments on license fees
due from certain companies, such as Nextwave, who were awarded
telecommunications licenses under a competitive auction bid process. While there
is some uncertainty about the possible long-term funding of certain "C Block"
PCS companies, the Company believes, at this time, that there has been no
impairment in the aggregate carrying value of its aggregate investment in
Nextwave.
----------------------------------
Statements included in this Form 10-Q which are not historical in nature are
forward-looking statements made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. Certain factors could cause
the Company's actual results to materially differ from forward-looking
statements made by the Company, including, among others, the uncertain level of
purchases by current and prospective customers of the Company's products and
services, the impact of competitive products and pricing, the pace of the
development of worldwide telecommunications systems and the ultimate market
value of the Company's investments in other telecom ventures. In addition, the
amount of the charges to discontinued operations with respect to MARTA will
depend on a number of factors, including the outcome of any divestiture,
negotiations or litigation with certain states and the final determination of
the net realizable values of assets to be sold or otherwise realized. Also, the
recovery of the Company's investment in and receivables from Nextwave may be
dependent upon Nextwave securing adequate additional financing and the
subsequent implementation of its telecommunications systems. The Company's
Annual Report on Form 10-K contains certain other detailed factors that could
cause the Company's actual results to materially differ from forward-looking
statements made by the Company.
13
<PAGE> 14
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 25, 1997, two
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 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, were as follows:
<TABLE>
<CAPTION>
Nominee For Withheld
------- --- --------
<S> <C> <C>
George A. Chandler 20,999,448 1,095,957
---------- ----------
Philip Wm. Colburn 20,999,719 1,095,686
---------- ----------
Jill K. Conway 20,998,175 1,097,230
---------- ----------
Albert H. Gordon 20,988,247 1,107,158
---------- ----------
William O. Hunt 20,999,592 1,095,813
---------- ----------
J. Chisholm Lyons 20,998,091 1,097,314
---------- ----------
John F. McNiff 20,895,521 1,199,884
---------- ----------
Robert G. Paul 20,999,747 1,095,658
---------- ----------
Charles W. Robinson 20,993,578 1,101,827
---------- ----------
William M. Weaver, Jr 20,988,881 1,106,524
---------- ----------
</TABLE>
A vote by ballot was taken at the Annual Meeting on the proposal to ratify the
appointment of Coopers & Lybrand L.L.P. as auditors for the Company for the
fiscal year ending December 31, 1997. 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 were as follows:
For Against Abstain
--- ------- -------
22,030,485 8,553 53,367
The foregoing proposals are described more fully in the Company's definitive
proxy statement dated March 15, 1997, 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.
14
<PAGE> 15
Item 6 - Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Exhibits
--------
(11) Statement re computation of earnings per common shares
(27) Financial data schedule
(b) Reports on Form 8-K
-------------------
(1) The Company filed a Current Report on Form 8-K dated April 17,
1997, reporting the acquisition of 6,200 shares of Telia, S.A.,
located in France, representing 62% of the outstanding capital of
Telia. Telia was purchased through the Company's wholly owned
French subsidiary, Allen Telecom (France), S.A. The remaining
shares of Telia are subject to put and call options, which provide
for a purchase price based upon future operating results. The
Company also reported that as part of the acquisition, the sellers
received a total of 28,375 shares of common stock of the Company,
which represented approximately 20% of the purchase price. The
shares were issued pursuant to Regulation S, promulgated by the
Securities and Exchange Commission under the Securities Act of
1933, as amended. The remaining 80% of the purchase price was paid
in cash.
(2) The Company filed a Current Report on Form 8-K dated May 30, 1997,
reporting the acquisition by the Company on June 4, 1997, of the
outstanding minority interests in FOR.E.M. S.p.A. ("FOREM") and
that the Company now owns 100% of FOREM. The minority interests
were purchased through the Company's wholly owned Italian
subsidiary, Allen Telecom Group (Italia) S.r.l. ("Allen Italia").
This acquisition also increased the Company's effective ownership
of FOREM's 62% owned subsidiary, Mikom GmbH. The final purchase
price for this minority interest (in the form of cash and common
stock of the Company) will be determined after the net income for
FOREM's 1997 fiscal year is finalized. The Company also reported
that on May 30, 1997, Allen Italia had acquired the pre-emptive
rights for the subscription to new shares of common stock of FOREM
from the minority shareholders for an aggregate purchase price
equal to approximately $21.7 million in cash and $5 million in
common stock of the Company (261,014 shares). The shares were
issued pursuant to Regulation S, promulgated by the Securities and
Exchange Commission under the Securities Act of 1933, as amended.
15
<PAGE> 16
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.
<TABLE>
<CAPTION>
<S> <C>
Allen Telecom Inc.
------------------
(Registrant)
Date: August 13, 1997 By: /s/ Robert A. Youdelman
--------------- -------------------------------------------
Robert A. Youdelman
Executive Vice President
(Chief Financial Officer)
Date: August 13, 1997 By: /s/ James L. LePorte, III
--------------- -------------------------------------------
James L. LePorte, III
Vice President, Treasurer
and Controller
(Principal Accounting Officer)
</TABLE>
16
<PAGE> 17
ALLEN TELECOM INC.
------------------
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
Exhibit Number Page
- -------------- ----
<S> <C> <C>
(11) Statement re computation of earnings per common share 18
(27) Financial Data Schedule 19
</TABLE>
17
<PAGE> 1
EXHIBIT 11
ALLEN TELECOM 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 ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------------------- ---------------------------------
1997 1996 1997 1996
--------------- --------------- --------------- -------------
<S> <C> <C> <C> <C>
Income:
- -------
Net income applicable to common
stock - primary $ 6,734 $ 5,137 $ 13,760 $ 9,382
=============== =============== =============== =============
Common Shares:
- --------------
Weighted average outstanding
common shares 26,829 26,419 26,741 26,401
Dilutive common stock options 392 779 385 674
--------------- --------------- --------------- -------------
Common shares - primary 27,221 27,198 27,126 27,075
Additional common shares issuable
for stock options -- -- 15 1
--------------- --------------- --------------- -------------
Common shares - fully diluted 27,221 27,198 27,141 27,076
=============== =============== =============== =============
</TABLE>
This 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.
18
<TABLE> <S> <C>
<ARTICLE>5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> Dec-31-1997
<PERIOD-END> Jun-30-1997
<CASH> 22,586
<SECURITIES> 0
<RECEIVABLES> 106,845
<ALLOWANCES> (1,680)
<INVENTORY> 81,186
<CURRENT-ASSETS> 216,041
<PP&E> 90,561
<DEPRECIATION> (34,838)
<TOTAL-ASSETS> 471,279
<CURRENT-LIABILITIES> 112,972
<BONDS> 78,376
<COMMON> 29,663
0
0
<OTHER-SE> 223,920
<TOTAL-LIABILITY-AND-EQUITY> 471,279
<SALES> 211,362
<TOTAL-REVENUES> 211,362
<CGS> (136,639)
<TOTAL-COSTS> (136,639)
<OTHER-EXPENSES> (45,258)
<LOSS-PROVISION> (169)
<INTEREST-EXPENSE> (1,269)
<INCOME-PRETAX> 28,363
<INCOME-TAX> (11,300)
<INCOME-CONTINUING> 13,760
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,760
<EPS-PRIMARY> .51
<EPS-DILUTED> .51
</TABLE>
