<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
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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 March 31, 1998
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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
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Commission file number 1-6016
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ALLEN TELECOM INC.
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
Delaware 38-0290950
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(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
25101 Chagrin Boulevard, Suite 350, Beachwood, Ohio 44122
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(Address of Principal Executive Offices) (Zip Code)
(Registrant's Telephone Number, Including Area Code) (216) 765-5818
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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 April 30, 1998
--------------------- --------------
Par value $1.00 per share 27,316,078
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ALLEN TELECOM INC.
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TABLE OF CONTENTS
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<TABLE>
<CAPTION>
Page
No.
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<S> <C>
PART I. FINANCIAL INFORMATION:
ITEM 1 - FINANCIAL STATEMENTS:
CONSOLIDATED CONDENSED BALANCE SHEETS -
March 31, 1998 and December 31, 1997 3
CONSOLIDATED CONDENSED STATEMENTS OF
INCOME - Three Months Ended
March 31, 1998 and 1997 4
CONSOLIDATED CONDENSED STATEMENTS OF
CASH FLOWS - Three Months Ended
March 31, 1998 and 1997 5
CONSOLIDATED CONDENSED STATEMENTS OF
STOCKHOLDERS' EQUITY - Three Months Ended
March 31, 1998 and 1997 6
NOTES TO CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS 7 - 9
ITEM 2 - MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS 10 - 12
ITEM 3 - QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK 13
PART II. OTHER INFORMATION:
ITEM 2 - CHANGES IN SECURITIES AND USE
OF PROCEEDS 13
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K 13 - 14
SIGNATURES 15
EXHIBIT INDEX 16
</TABLE>
2
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PART I - FINANCIAL INFORMATION
------------------------------
ITEM 1 - FINANCIAL STATEMENTS
-----------------------------
ALLEN TELECOM INC.
------------------
CONSOLIDATED CONDENSED BALANCE SHEETS
-------------------------------------
(Amounts in Thousands)
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
------------ ------------
(Unaudited)
<S> <C> <C>
ASSETS:
Current Assets:
Cash and equivalents $ 23,618 $ 30,775
Accounts receivable (less allowance for doubtful
accounts of $2,022 and $1,934, respectively) 112,083 105,714
Inventories: Raw materials 48,535 49,583
Work in process 25,123 24,505
Finished goods 23,876 19,680
------- -------
Total inventories 97,534 93,768
------- -------
Assets of discontinued emissions testing business 997 1,034
Other current assets (Note 2) 24,317 10,745
------- -------
Total current assets 258,549 242,036
Property, plant and equipment, net 59,174 60,543
Excess of cost over net assets of businesses acquired 126,228 126,923
Assets of discontinued emissions testing business 32,779 32,329
Other assets (Note 2) 29,968 52,602
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TOTAL ASSETS $506,698 $514,433
======= =======
LIABILITIES:
Current Liabilities:
Notes payable and current maturities of long-term
obligations $ 6,584 $ 6,119
Accounts payable 52,003 75,195
Accrued expenses 34,486 35,261
Income taxes payable 9,825 13,197
Deferred income taxes 1,271 1,249
------- -------
Total current liabilities 104,169 131,021
Long-term debt 122,998 97,915
Deferred Income Taxes 2,591 6,818
Other liabilities 18,334 17,857
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TOTAL LIABILITIES 248,092 253,611
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STOCKHOLDERS' EQUITY
Common stock 29,722 29,746
Paid-in capital 180,258 180,538
Retained earnings 76,429 70,091
Accumulated other comprehensive income (loss) (Note 3) (8,620) 207
Less: Treasury stock (at cost) (17,031) (16,992)
Unearned compensation (2,152) (2,768)
------- -------
TOTAL STOCKHOLDERS' EQUITY 258,606 260,822
------- -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $506,698 $514,433
======= =======
</TABLE>
See accompanying notes to the Consolidated Condensed Financial Statements.
3
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ALLEN TELECOM INC.
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CONSOLIDATED CONDENSED STATEMENTS OF INCOME
-------------------------------------------
(Amounts in Thousands, Except Per Share Data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------
1998 1997
---- ----
<S> <C> <C>
SALES $ 113,369 $ 102,503
--------- ---------
Costs and expenses:
Cost of sales (77,621) (65,962)
Selling, general and
administrative expenses (16,307) (16,153)
Research and development and
product engineering costs (7,625) (6,686)
Other income, net (Note 2) 1,164 1,525
Interest expense (1,564) (806)
Interest income 376 286
--------- ---------
Income before taxes and
minority interests 11,792 14,707
Provision for income taxes (4,718) (6,180)
--------- ---------
Income before minority
interests 7,074 8,527
Minority interests (736) (1,501)
--------- ---------
NET INCOME $ 6,338 $ 7,026
--------- ---------
EARNINGS PER COMMON SHARE, BASIC AND
DILUTED $ .23 $ .26
========= =========
Weighted average common
shares outstanding:
Basic 27,160 26,650
Assumed exercise of stock options 250 380
--------- ---------
Diluted 27,410 27,030
========= =========
</TABLE>
See accompanying notes to the Consolidated Condensed Financial Statements.
4
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ALLEN TELECOM INC.
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CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
-----------------------------------------------
(Amounts in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------------------
1998 1997
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<S> <C> <C>
Cash generated by operating activities $ 240 $ 8,529
-------- --------
Cash flows from investing activities:
Investment in telecommunications companies (27,583) (5,000)
Capital expenditures (3,493) (4,375)
Sales and retirements of fixed assets 18 901
Capitalized software product costs (1,200) (1,549)
Sale of investment - 505
-------- --------
Cash used by investing activities (32,258) (9,518)
-------- --------
Cash flows from financing activities:
Net proceeds from (repayments of) borrowings 26,454 (2,614)
Exercise of stock options 80 145
Treasury stock sold to employee benefit plans 424 437
-------- --------
Cash generated (used) by financing activities 26,958 (2,032)
-------- --------
Net cash used by discontinued vehicle
emissions testing business (1,441) (1,274)
-------- --------
Net cash used (6,501) (4,295)
Effect of exchange rate changes on cash and equivalents (656) (956)
Cash and equivalents at beginning of year 30,775 23,879
-------- --------
Cash and equivalents at end of period $ 23,618 $ 18,628
======== ========
Supplemental cash flow data:
Depreciation and amortization included in "Cash generated
by operating activities" $ 6,016 $ 4,996
Cash paid during the period for:
Interest 657 1,028
Income taxes 6,248 1,379
</TABLE>
See accompanying notes to the Consolidated Condensed Financial Statements.
5
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ALLEN TELECOM INC.
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CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS' EQUITY
---------------------------------------------------------
(Amounts in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Accumulated
Other
Comprehensive Retained Comprehensive Common Unearned
Total Income (Loss) Earnings Income (Loss) Stock Compensation
------------ --------------- ---------- ----------------- ---------- -------------
FOR THE THREE MONTHS ENDED MARCH 31, 1998:
<S> <C> <C> <C> <C> <C> <C>
Beginning Balance, January 1, 1998 $260,822 $70,091 $207 $29,746 ($2,768)
Comprehensive Income:
Net Income 6,338 $ 6,338 6,338
--------
Other comprehensive income (loss):
Unrealized gains on securities recorded to (9,588) (9,588)
income
Less tax on unrealized gains on securities 4,027 4,027
-------- --------
Net unrealized gains on securities (5,561) (5,561)
Foreign currency translation adjustments (3,266) (3,266)
---------
Other comprehensive loss (8,827) (8,827)
---------
Comprehensive loss $ (2,489)
=========
Exercise of stock options 80 14
Treasury stock reissued 424
Restricted Stock, net (345) (38) 502
Amortization of unearned compensation 114 114
-------- ------- -------- ------- --------
Ending Balance, March 31, 1998 $258,606 $76,429 ($8,620) $29,722 ($2,152)
======== ======= ======== ======= ========
FOR THE THREE MONTHS ENDED MARCH 31, 1997:
Beginning Balance, January 1, 1997 $225,951 $46,742 ($510) $29,614 ($2,908)
Comprehensive income:
Net Income 7,026 $ 7,026 $7,026
Other comprehensive income:
Foreign currency translation adjustments (2,196) (2,196) (2,196)
-------
Comprehensive Income $ 4,830
=======
Exercise of stock options 146 48
Treasury stock reissued 438
Amortization of unearned compensation 304 304
-------- ------- -------- ------- --------
Ending Balance, March 31, 1997 $231,669 $53,768 ($2,706) $29,662 ($2,604)
======== ======= ======== ======= ========
<CAPTION>
Treasury Paid-In
Stock Capital
---------- ----------
FOR THE THREE MONTHS ENDED MARCH 31, 1998:
<S> <C> <C>
Beginning Balance, January 1, 1998 ($16,992) $180,538
Comprehensive Income:
Net Income
Other comprehensive income (loss):
Unrealized gains on securities recorded to
income
Less tax on unrealized gains on securities
Net unrealized gains on securities
Foreign currency translation adjustments
Other comprehensive loss
Comprehensive loss
Exercise of stock options 66
Treasury stock reissued 198 226
Restricted Stock, net (237) (572)
Amortization of unearned compensation
--------- --------
Ending Balance, March 31, 1998 ($17,031) $180,258
========= ========
FOR THE THREE MONTHS ENDED MARCH 31, 1997:
Beginning Balance, January 1, 1997 ($17,932) $170,945
Comprehensive income:
Net Income
Other comprehensive income:
Foreign currency translation adjustments
Comprehensive Income
Exercise of stock options (281) 379
Treasury stock reissued 190 248
Amortization of unearned compensation
--------- --------
Ending Balance, March 31, 1997 ($18,023) $171,572
========= ========
</TABLE>
See accompanying notes to the Consolidated Condensed Financial Statements.
6
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ALLEN TELECOM INC.
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NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
----------------------------------------------------
(Unaudited)
1. General:
--------
In the opinion of the 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 March 31, 1998 and the
consolidated results of its operations, cash flows and changes in
stockholders' equity for the periods ended March 31, 1998 and 1997. The
results of operations for such interim periods are not necessarily
indicative of the results for the full year. The year-end 1997
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,
1997. Certain reclassifications have been made to the 1997 financial
statements to conform to the 1998 method of presentation.
2. Investments in Telecommunication Companies:
-------------------------------------------
The Company owns common stock of RF Micro Devices, Inc., which
completed an initial public offering of its common stock on June 3,
1997. The Company has approximately 1.0 million common shares
classified as Trading at March 31, 1998 at a cost of $3.0 million. The
investment has been adjusted to market value at March 31, 1998 of $14.9
million (included in "Other current assets") based on the NASDAQ
closing rate of $14.625 ($12.7 million, at December 31, 1997 included
in "Other assets"). The Company's investment was previously subject to
certain trading restrictions, which were substantially eliminated in
the first quarter of 1998, at which time the Company decided to sell
its holdings in the near term. As a result, the Company transferred the
unrealized appreciation in the pretax amount of $11.5 million,
previously recorded in stockholders' equity, to "Other income, net" in
the Consolidated Condensed Statements of Income. Future changes in
unrealized holding gains related to this investment will be reflected
in current earnings, prior to sale. The Company has an investment in
and a receivable from NextWave Telecom Inc. ("NextWave"), who was
previously awarded telecommunications licenses under a competitive
auction bid process. In 1998, the Federal Communication Commission
issued guidelines with respect to alternatives for certain C Block
licensees in regard to the payment or return of licenses previously
awarded. These guidelines were less favorable than had been requested
by certain licensees. Accordingly, in the first quarter of 1998 the
Company recognized an impairment in the entire value of its investment
in and receivable from NextWave as a result of that action.
Additionally, in the first quarter of 1998 the Company fully reserved
an investment in a telecommunications company as a result of that
company's
7
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ALLEN TELECOM INC.
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NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
----------------------------------------------------
(Unaudited)
(Continued)
decision to liquidate and sell its assets and product lines. These
impairment reserves, totaling $10.3 million in the aggregate, are
included in the Consolidated Condensed Statements of Income in "Other
income, net". The net income effect of these actions was $.02 per
common share after related tax effects (included in the Consolidated
Condensed Statements of Income in "Other Income, net").
In the first quarter of 1997, the Company realized a gain on the sale
of all of its investment in Columbia Spectrum Management, L.P. in the
pretax amount of $1.5 million, or $.03 per common share after related
tax effects (included in the Consolidated Condensed Statement of Income
in "Other Income, Net").
3. Impact of New Accounting Pronouncements:
----------------------------------------
In March 1998, the Accounting Standards Executive Committee of the
American Institute of Certified Public Accountants issued Statement of
Position 98-1, "Accounting for the Costs of Computer Software Developed
or Obtained for Internal Use". This statement provides guidance on the
accounting treatment for certain costs incurred in developing or
purchasing software for the internal use of the Company. The Company
will adopt the standard on January 1, 1999 requiring the Company to
expense certain costs incurred on a prospective basis. The Company has
determined that once adopted, the statement will not have a material
impact on results of operations.
In June 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income". This statement is effective for financial statements issued
for periods beginning after December 15, 1997, including interim
periods. Accordingly, the Company has adopted the provisions of this
statement in the first quarter of 1998. This new statement requires
more detail balance sheet information (translation adjustments and
unrealized appreciation on investment securities) be included in the
Company's Consolidated Condensed Financial Statements. The Company has
included such information on the Consolidated Condensed Balance Sheets
and the Consolidated Condensed Statements of Stockholders' Equity.
4. Discontinued Operations Litigation:
-----------------------------------
In early 1998, the Company's Marta Technologies Inc. ("Marta")
subsidiary, which operates its discontinued vehicle emissions testing
business, reopened the Cincinnati, Ohio program for testing. In
connection with the initial suspension of that contract by the Ohio
Environmental Protection Agency ("Ohio EPA"), Marta was granted a
preliminary injunction on September 23, 1996 and a
8
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ALLEN TELECOM INC.
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NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
----------------------------------------------------
(Unaudited)
(Continued)
permanent injunction on November 19, 1997 against Ohio EPA and its
Director enjoining them from (i) conducting a hearing regarding
termination of the contract, (ii) terminating the Ohio contract, and
(iii) prohibiting Marta from performing its obligations under the Ohio
contract. On December 31, 1997, Marta filed a lawsuit against Ohio EPA
and its Director in an amount not less than $40 million claiming
damages for Ohio EPA's unilateral and illegal suspension of the program
and numerous other actions which will, in the future, increase costs to
operate the program and/or reduce the amount of revenues the State was
contractually obligated to provide. Subsequent thereto, the State
counterclaimed, denied Marta's allegations and demanded $10 million in
liquidated damages, contract damages and/or civil penalties as a result
of Marta's alleged failure to meet the terms of the contract. In the
opinion of management, based on the advice of counsel, it cannot
predict the outcome of these lawsuits and the Company has not recorded
any asset or liability with respect thereto.
9
<PAGE> 10
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
----------------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
ALLEN TELECOM INC.
------------------
RESULTS OF OPERATIONS
- ---------------------
Summary:
- --------
For the three months ended March 31, 1998 and 1997, Allen Telecom Inc. (the
"Company") reported sales of $113.4 and $102.5 million and net income of $6.3
($.23 per common share) and $7.0 million ($.26 per common share), respectively.
Included in results of operations are net gains in the amount of $1.2 and $1.5
million, or $.02 and $.03 per common share, for the 1998 and 1997 first quarters
respectively, with respect to certain telecom investments as discussed below.
Sales:
- ------
Sales in the first quarter of 1998 increased approximately 11% over the
comparable 1997 period. The increase in sales is due principally to the
continued success of international site management and systems product sales.
International sales constituted nearly 66% of first quarter sales, compared with
54% in the first quarter of 1997 and 60% for the full year 1997. Offsetting this
increase, in part, were lower sales of mobile and base antennas and wireless
engineering services. Further, sales from foreign operations were negatively
impacted by the weakening U.S. dollar relative to certain European currencies
since the first quarter of 1997. As a result, reported sales in the first
quarter of 1998 were $6.0 million lower as compared with the first quarter of
1997, assuming the exchange rates had stayed the same.
The Company continues to see weakness in certain Asian economies, which have
been important markets for wireless equipment products. In addition, the U.S.
wireless market continues to be soft, particularly with respect to the
developing PCS markets. Other international markets remain strong for the
Company's equipment business, although the Company has been advised by certain
European OEM's that their large inventory buildup will negatively impact near
term orders.
Operations:
- -----------
Gross profit margins were 31.5% in the first quarter of 1998 as compared with
35.6% in the first quarter of 1997. The lower gross profit margins in 1998 were
due to increased pricing pressure and a greater sales mix of lower margin
products.
Selling, general and administrative expenses were 14.4% and 15.7% for the first
quarters of 1998 and 1997, respectively. The decline in this ratio reflects the
spreading of fixed costs on higher sales as well as the impact of lower staffing
and operating expenses as a result of actions instituted in late 1997 to lower
costs. Offsetting this decline, in part, is higher amortization of goodwill
($1.5 million compared with $.7 million in the 1998 and 1997 periods,
respectively) due primarily to the acquisition of the outstanding 20% ownership
interest in the Company's FOREM S.r.l subsidiary ("Forem") in 1997.
10
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ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
----------------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
ALLEN TELECOM INC.
------------------
(Continued)
Research and development and new product engineering costs were 6.7% and 6.5% of
sales in the first quarter of 1998 and 1997, respectively and are within normal
operating ranges. However, the current rate is lower than the 7.0% to 7.4% rates
experienced in the last three quarters of 1997. This lower rate of spending is
not expected to continue as the Company further develops its geolocation product
(ability to locate subscribers who dial 911 from a wireless telephone) during
the ensuing year.
Other Income and Expense:
- -------------------------
In the first quarter of 1998, other income includes an $11.5 million pretax gain
on the Company's investment in RF Micro Devices, Inc. ("RFMD") as a result of
the Company's decision to sell its shareholdings. Previously, the gain on this
investment was included in Stockholders' Equity. RFMD completed a public
offering of its stock in 1997 and the Company, at that time, recorded the
increase in value. Future changes in unrealized holding gains, prior to sale,
related to this investment will be reflected in current earnings. Offsetting
this gain, in part, was the recognition of a loss reserve in the amount of
approximately $10.4 million relating to two telecommunications investments. In
1998, the Federal Communication Commission issued guidelines with respect to
alternatives for certain C Block licensees in regard to the payment or return of
their licenses previously awarded under competitive bids. These guidelines were
less favorable than had been requested by certain licensees. Accordingly, the
Company decided to fully reserve its aggregate investment in NextWave Telecom
Inc. to reflect the impairment in value of this investment as a result of that
action. In addition, the Company fully reserved an investment in a
telecommunications company as a result of that company's decision to liquidate
in the first quarter of 1998 and sell its assets and product lines. The Company
believes the likelihood of any significant recovery is remote. The net income
effect of these actions was $.02 per common share, after related tax effects.
These actions are the principal reason for the decline in Other assets on the
Consolidated Balance Sheet as well as the increase in Other current assets,
which includes the investment in RFMD at its current market value of $14.9
million as of March 31, 1998, pending sale. (See Note 2 of Notes to Consolidated
Condensed Financial Statements for additional information.)
In the first quarter of 1997, the Company realized a gain on the sale of all of
its investment in Columbia Spectrum Management, L.P. in the pretax amount of
$1.5 million or $.03 per common share, after related tax effects.
Net Interest and Financing Expenses:
- ------------------------------------
Net Interest and financing costs increased to $1.2 million in the first three
months of 1998 from $.5 million for the comparable 1997 period. The principal
reason for the increase is higher outstanding borrowings incurred for the
purchase of the minority interest in Forem.
11
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ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
----------------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
ALLEN TELECOM INC.
------------------
(Continued)
Provision for Income Taxes:
- ---------------------------
The Company's effective tax rate was 40% and 42% for the quarters ended March
31, 1998 and 1997, respectively. The 1998 percentage is in line with the
Company's current expectation for the full year.
Minority Interests:
- -------------------
The decrease in minority interest expense from $1.5 million to $.7 million in
the first quarter of 1998, compared with the 1997 quarter, reflects the
exclusion of the 20% minority interest in Forem which was purchased in 1997.
LIQUIDITY AND CAPITAL RESOURCES:
- --------------------------------
As set forth in the Consolidated Condensed Statement of Cash Flows, the Company
generated $.2 million in cash from operations for the three months ended March
31, 1998 as compared with cash generation of $8.5 million for the comparable
1997 period. The decline in cash flow from operations is due principally to
income tax payments by the Company's foreign subsidiaries in the first quarter
of 1998. Further, the Company expended $27.6 million relating primarily to the
final purchase price for the outstanding minority interest in Forem. This latter
amount was financed through long-term borrowings. This payment is the reason for
the decline in Accounts payable and the corresponding increase in Long-term debt
in the Consolidated Condensed Balance Sheet at March 31, 1998. At March 31,
1998, the Company had available unused lines of credit in the amount of $56
million.
- --------------------------------------------------------------------------------
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. Forward-looking statements
regarding the Company's future performance and financial results are subject to
certain risks and uncertainties that could cause actual results to differ
materially from those set forth in the forward-looking statements. Allen
Telecom's Annual Report on Form 10-K contains certain detailed factors that
could cause the Company's actual results to materially differ from
forward-looking statements made by the Company, including, among others, the
costs and timetable for new product development, the health and economic
stability of the world and national markets, 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 potential impact of the
Company's attempts to sell it discontinued operations in the vehicle emissions
testing business, and the ultimate market value of the Company's investments in
telecom ventures.
12
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ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
- --------------------------------------------------------------------
Not applicable.
PART II - OTHER INFORMATION
---------------------------
ITEM 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS.
- ---------------------------------------------------
On January 5, 1998, the Board of Directors of the Company adopted a
replacement share purchase rights plan to replace the existing share
purchase rights plan, which expired on January 20, 1998, and declared a
dividend distribution of one right (a "Right") for each share of common
stock of the Company outstanding at the close of business on January
20, 1998. A copy of the letter dated January 20, 1998 to the Company's
stockholders from Robert G. Paul, President and Chief Executive Officer
of the Company, describing the new share purchase rights plan and the
Rights, is filed as Exhibit 99 hereto.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K.
- ------------------------------------------
(a) Exhibits
--------
(3) Second Restated Certificate of Incorporation (filed as Exhibit
No. 4(a) to Registrant's Registration Statement on Form S-8,
Registration No. 333-51739 (Commission file number 1-6016) and
incorporated herein by reference).
(4) Rights Agreement, dated as of January 20, 1998, between the
Registrant and Harris Trust Company of New York, as Rights Agent
(filed as Exhibit Number 4.1 to Registrant's Current Report on
Form 8-K dated January 5, 1998 (Commission file number 1-6016)
and incorporated herein by reference).
(10) Allen Telecom Inc. 1992 Stock Plan, as amended and restated as
of May 1, 1998 (filed as Exhibit No. 4(e) to Registrant's
Registration Statement on Form S-8, Registration No. 333-51739
(Commission file number 1-6016) and incorporated herein by
reference).
(11) Statement re computation of per share earnings.
(27) Financial Data Schedule.
(99) Letter dated January 20, 1998, from Robert G. Paul, President
and Chief Executive Officer of the Company, to the stockholders
of the Company, describing the replacement share purchase rights
plan.
13
<PAGE> 14
PART II - OTHER INFORMATION
---------------------------
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K.
------------------------------------------
(Continued)
(b) Reports on Form 8-K
-------------------
On January 6, 1998 the Company filed a Current Report on Form
8-K dated January 5, 1998, reporting that the Board of
Directors of the Company declared a dividend distribution of
one right for each share of common stock of the Company
outstanding at the close of business on January 20, 1998,
pursuant to the terms of a Rights Agreement, dated as of
January 20, 1998, between the Company and Harris Trust Company
of New York, as Rights Agent.
14
<PAGE> 15
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.
Allen Telecom Inc.
--------------------------
(Registrant)
Date: May 12, 1998 By: /s/ Robert A. Youdelman
------------ ---------------------------------
Robert A. Youdelman
Executive Vice President
(Chief Financial Officer)
Date: May 12, 1998 By: /s/ James L. LePorte, III
------------ ---------------------------------
James L. LePorte, III
Vice President, Treasurer
and Controller
(Principal Accounting Officer)
15
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EXHIBIT INDEX
-------------
ALLEN TELECOM INC.
------------------
<TABLE>
<CAPTION>
Exhibit Number
- --------------
<S> <C>
(3) Second Restated Certificate of Incorporation (filed as Exhibit No 4(a) to
Registrant's Registration Statement on Form S-8, Registration No. 333-51739
(Commission file number 1-6016) and incorporated herein by reference).
(4) Rights Agreement, dated as of January 20, 1998, between the Registrant and
Harris Trust Company of New York, as Rights Agent (filed as Exhibit Number 4.1
to Registrant's Current Report on Form 8-K dated January 5, 1998 (Commission
file number 1-6016) and incorporated herein by reference).
(10) Allen Telecom Inc. 1992 Stock Plan, as amended and restated as of May 1, 1998
(filed as Exhibit No. 4(e) to Registrant's Registration Statement on Form S-8,
Registration No. 333-51739 (Commission file number 1-6016) and incorporated
herein by reference).
(11) Statement re computation of per share earnings.
(27) Financial Data Schedule.
(99) Letter dated January 20, 1998, from Robert G. Paul, President and Chief
Financial Officer of the Company, to the stockholders of the Company, describing
the replacement share purchase rights plan.
</TABLE>
16
<PAGE> 1
EXHIBIT 11
----------
COMPUTATION OF PER SHARE EARNINGS
---------------------------------
ALLEN TELECOM INC.
------------------
(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
MARCH 31,
----------------------------------
1998 1997
-------------- ---------------
<S> <C> <C>
Income:
- -------
Net income applicable to
Common stock - Basic and Diluted $ 6,338 $ 7,026
============== ===============
Common Shares:
- --------------
Weighted average common shares outstanding-
Basic 27,160 26,650
Assumed exercise of stock options 250 380
-------------- ---------------
Common shares - Diluted 27,410 27,030
============== ===============
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ALLEN
TELECOM'S MARCH 31, 1998 CONSOLIDATED FINANCIAL STATEMENTS IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 23,618
<SECURITIES> 0
<RECEIVABLES> 114,105
<ALLOWANCES> (2,022)
<INVENTORY> 97,534
<CURRENT-ASSETS> 258,549
<PP&E> 107,627
<DEPRECIATION> (48,453)
<TOTAL-ASSETS> 506,698
<CURRENT-LIABILITIES> 104,169
<BONDS> 122,998
0
0
<COMMON> 29,722
<OTHER-SE> 228,884
<TOTAL-LIABILITY-AND-EQUITY> 506,698
<SALES> 113,369
<TOTAL-REVENUES> 113,369
<CGS> (77,621)
<TOTAL-COSTS> (77,621)
<OTHER-EXPENSES> (22,697)
<LOSS-PROVISION> (71)
<INTEREST-EXPENSE> (1,188)
<INCOME-PRETAX> 11,792
<INCOME-TAX> (4,718)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,338
<EPS-PRIMARY> .23<F1>
<EPS-DILUTED> .23<F1>
<FN>
<F1>The Earnings per Share amounts have been calculated in accordance with the
provisions of Statement of Financial Accounting Standards No. 128, "Earnings
per Share". The above captions for primary and fully diluted include in the
basic and diluted EPS amounts, respectively.
</FN>
</TABLE>
<PAGE> 1
EXHIBIT 99
----------
January 20, 1998
Dear Shareholders:
The enclosed press release announces that Allen Telecom Inc. has
adopted a new share purchase rights plan to replace the Company's existing
rights plan, which expires on January 20, 1998.
A summary of the share purchase rights plan (which explains the terms
and nature of the rights) is enclosed. Shareholders are urged to review the
summary carefully and retain it with their permanent records.
Sincerely,
Robert G. Paul
President and
Chief Executive Officer
<PAGE> 2
FOR IMMEDIATE RELEASE
---------------------
ALLEN TELECOM INC. ADOPTS REPLACEMENT
-------------------------------------
SHARE PURCHASE RIGHTS PLAN
--------------------------
Beachwood, Ohio, January 5, 1998 - Allen Telecom Inc. (NYSE:ALN)
("Allen Telecom") announced today that its Board of Directors has adopted a
replacement share purchase rights plan that provides for rights to be issued to
stockholders of record on January 20, 1998. The new rights plan replaces Allen
Telecom's existing rights plan, which expires on that date.
According to Robert G. Paul, President and Chief Executive Officer,
"This action was not taken in response to any pending takeover or proposed
change in control of the Company. Like the Company's existing rights plan, the
new rights plan is intended to protect the Company and its stockholders from
potentially coercive takeover practices or takeover bids which are inconsistent
with the interests of the Company and its stockholders. Share purchase rights
plans have become common in major American companies and are a well-accepted
approach to ensuring that all stockholders receive a fair price and are treated
equally in the event of a takeover."
Under the plan, the rights will initially trade together with Allen
Telecom common stock and will not be exercisable. In the absence of further
action by Allen Telecom's Board of Directors, the rights generally will become
exercisable and allow the holder to acquire Allen Telecom common stock at a
discounted price if a person or group acquires 20 percent or more of the
outstanding shares of Allen Telecom common stock. Rights held by persons who
exceed the applicable threshold will be void. Under certain circumstances, the
rights will entitle the holder to buy shares in an acquiring entity at a
discounted price.
2
<PAGE> 3
The plan also includes an exchange option. In general, after the rights
become exercisable, in certain circumstances the Board of Directors may, at its
option and without requiring any payment, effect an exchange of part or all of
the rights - other than rights that have become void - for shares of Allen
Telecom common stock. Under this option, Allen Telecom would issue one share of
common stock for each right, subject to adjustment in certain circumstances.
Allen Telecom's Board of Directors may, at its option, redeem all
rights for $.01 per right, generally at any time prior to the rights becoming
exercisable. The rights will expire January 20, 2008, unless earlier redeemed,
exchanged or amended by the Board of Directors.
The issuance of the rights is not a taxable event, will not affect
Allen Telecom's reported financial condition or results of operations (including
earnings per share) and will not change the way in which Allen Telecom common
stock is currently traded.
Statements included in this news releases 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. Allen
Telecom's Annual Report on Form 10-K and Quarterly Reports on Form 10-Q contain
certain detailed factors that could cause Allen Telecom's actual results to
materially differ from forward-looking statements made by Allen Telecom,
including, among others, the costs and timetable for new product development,
the uncertain level of purchases by current and prospective customers of Allen
Telecom's products and services and the impact of competitive products and
pricing.
Allen Telecom Inc. is a leading supplier to the worldwide two-way
wireless communications marketplace of systems expansion products, site
management products and antennas and provides frequency planning, system
engineering services and software design programs to current and emerging
wireless markets.
For further information contact: Robert A. Youdelman
216/765-5820
http://www.allentelecom.com
---------------------------
3
<PAGE> 4
SUMMARY OF RIGHTS TO PURCHASE PREFERRED STOCK
The Board of Directors (the "Board") of Allen Telecom Inc. (the
"Company") has declared a dividend distribution of one right (a "Right") for
each outstanding share of Common Stock, par value $1.00 per share (the "Common
Shares"), of the Company. The distribution is payable on January 20, 1998 (the
"Record Date") to the stockholders of record as of the close of business on the
Record Date. Each Right entitles the registered holder thereof to purchase from
the Company one one-hundredth of a share of Series C Junior Participating
Preferred Stock, without par value (the "Preferred Shares"), of the Company at a
price (the "Purchase Price") of $100.00 per one one-hundredth of a Preferred
Share, subject to adjustment. The description and terms of the Rights are set
forth in a Rights Agreement, dated as of January 20, 1998 (the "Rights
Agreement"), between the Company and Harris Trust Company of New York, as Rights
Agent (the "Rights Agent").
Under the Rights Agreement, the Rights will be evidenced by the
certificates evidencing Common Shares until the earlier (the "Distribution
Date") of: (i) the close of business on the first date (the "Share Acquisition
Date") of public announcement that a person (other than the Company, a
subsidiary or employee benefit or stock ownership plan of the Company or any of
its affiliates or associates), together with its affiliates and associates, has
acquired beneficial ownership of 20% or more of the outstanding Common Shares
(any such person being hereinafter called an "Acquiring Person") or (ii) the
close of business on the tenth business day (or such later date as may be
specified by the Board) following the commencement of a tender offer or exchange
offer by a person (other than the Company, a subsidiary or employee benefit or
stock ownership plan of the Company or any of its affiliates or associates), the
consummation of which would result in beneficial ownership by such person of 20%
or more of the outstanding Common Shares.
The Rights Agreement provides that, until the Distribution Date, the
Rights may be transferred with and only with the Common Shares. Until the
Distribution Date (or earlier redemption or expiration of the Rights), any
certificate evidencing Common Shares of the Company issued upon transfer or new
issuance of the Common Shares will contain a notation incorporating the Rights
Agreement by reference. Until the Distribution Date (or earlier redemption or
expiration of the Rights), the surrender for transfer of any certificates
evidencing Common Shares will also constitute the transfer of the Rights
associated with such certificates. As soon as practicable following the
Distribution Date, separate certificates evidencing the Rights ("Right
Certificates") will be mailed to holders of record of Common Shares as of the
close of business on the Distribution Date and such separate Right Certificates
alone will evidence the Rights. No Right is exercisable at any time prior to the
Distribution Date. The Rights will expire on the tenth anniversary of the Record
Date (the "Final Expiration Date") unless earlier redeemed, exchanged or amended
by the Company as described below. Until a Right is exercised, the holder
thereof, as such, will have no rights as a stockholder of the Company, including
the right to vote or to receive dividends.
4
<PAGE> 5
The Purchase Price payable, and the number of the Preferred Shares or
other securities issuable, upon exercise of the Rights will be subject to
adjustment from time to time to prevent dilution (i) in the event of a stock
dividend on, or a subdivision, combination or reclassification of, the Preferred
Shares, (ii) upon the grant to holders of Preferred Shares of certain rights or
warrants to subscribe for or purchase the Preferred Shares at a price, or
securities convertible into the Preferred Shares with a conversion price, less
than the then-current market price of the Preferred Shares, or (iii) upon the
distribution to holders of the Preferred Shares of evidences of indebtedness,
cash (excluding regular periodic cash dividends), assets, stock (excluding
dividends payable in the Preferred Shares) or subscription rights or warrants
(other than those referred to above). The number of outstanding Rights and the
number of one one-hundredths of the Preferred Shares issuable upon exercise of
each Right will be subject to adjustment in the event of a stock dividend on the
Common Shares payable in Common Shares or a subdivision, combination or
reclassification of Common Shares occurring, in any such case, prior to the
Distribution Date.
The Preferred Shares issuable upon exercise of the Rights will not be
redeemable. Each Preferred Share will be entitled, in connection with the
declaration of a dividend on the Common Shares, to a preferential dividend
payment equal to the greater of (i) $1.00 per share and (ii) an amount equal to
100 times the related dividend declared per Common Share. Subject to customary
anti-dilution provisions, in the event of liquidation, the holders of Preferred
Shares will be entitled to a preferential liquidation payment equal to the
greater of (a) $100 per share and (b) an amount equal to 100 times the
liquidation payment made per Common Share. Because of the nature of the
Preferred Shares' dividend, voting and liquidation rights, the value of the one
one-hundredth interest in a Preferred Share purchasable upon exercise of a Right
should approximate the value of one Common Share.
Rights will be exercisable to purchase Preferred Shares only after the
Distribution Date occurs and prior to the occurrence of a Flip-in Event as
described below. A Distribution Date resulting from the commencement of a tender
offer or exchange offer described in clause (ii) of the second paragraph of this
summary could precede the occurrence of a Flip-in Event and thus result in the
Rights being exercisable to purchase Preferred Shares. A Distribution Date
resulting from any occurrence described in clause (i) of the second paragraph of
this summary would necessarily follow the occurrence of a Flip-in Event and thus
result in the Rights being exercisable to purchase Common Shares or other
securities as described below.
Under the Rights Agreement, in the event (a "Flip-in Event") that any
person, together with its affiliates and associates, becomes the beneficial
owner of 20% or more of the outstanding Common Shares, then proper provision
will be made so that from and after the Share Acquisition Date each holder of a
Right, other than Rights that are or were owned beneficially by an Acquiring
Person (which, from and after the date of a Flip-in Event, will be void), will
have the right to receive, upon exercise thereof at the then-current exercise
price of the Right, that number of Common Shares (or, under certain
circumstances, an economically equivalent security or securities of the Company)
that on the Share Acquisition Date have a market value of two times the exercise
price of the Right.
5
<PAGE> 6
In the event (a "Flip-over Event") that, at any time after a person has
become an Acquiring Person, (i) the Company merges with or into any person and
the Company is not the surviving corporation, (ii) any person merges with or
into the Company and the Company is the surviving corporation, but all or part
of the Common Shares are changed or exchanged for stock or other securities of
any other person or cash or any other property, or (iii) 50% or more of the
Company's assets or earning power, including securities creating obligations of
the Company, are sold, in each case as described in the Rights Agreement, then,
in each such case, proper provision will be made so that from and after the
later of the Share Acquisition Date and the date of the occurrence of such
Flip-over Event each holder of a Right, other than Rights which have become
void, will have the right to receive, upon the exercise thereof at the
then-current exercise price of the Right, that number of shares of common stock
(or, under certain circumstances, an economically equivalent security or
securities) of such other person that at the time of such Flip-over Event have a
market value of two times the exercise price of the Right.
From and after the Share Acquisition Date, Rights (other than any
Rights that have become void) will be exercisable as described above, upon
payment of the aggregate exercise price in cash. In addition, at any time after
the Share Acquisition Date and prior to the acquisition by any person or group
of affiliated or associated persons of 50% or more of the outstanding Common
Shares, the Company may exchange the Rights (other than any rights that have
become void), in whole or in part, without requiring payment, at an exchange
ratio of one Common Share per Right (subject to adjustment).
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment in the Purchase
Price of at least 1%. The Company will not be required to issue fractional
Preferred Shares (other than fractions that are integral multiples of one
one-hundredth of a Preferred Share, which may, at the option of the Company, be
evidenced by depositary receipts) or fractional Common Shares or other
securities issuable upon the exercise of Rights. In lieu of issuing such
securities, the Company may make a cash payment, as provided in the Rights
Agreement.
The Company may, at its option, redeem the Rights in whole, but not in
part, at a price of $.01 per Right, subject to adjustment (the "Redemption
Price"), at any time prior to the close of business on the Share Acquisition
Date. Immediately upon any redemption of the Rights, the right to exercise the
Rights will terminate and the only right of the holders of Rights will be to
receive the Redemption Price.
The Rights Agreement may be amended by the Company without the approval
of any holders of Right Certificates, including amendments that increase or
decrease the Purchase Price, that add other events requiring adjustment to the
Purchase Price payable and the number of the Preferred Shares or other
securities issuable upon the exercise of the Rights or that modify procedures
relating to the redemption of the Rights, except that no amendment may be made
that decreases the stated Redemption Price to an amount less than $.01 per
Right.
6
<PAGE> 7
The Board will have the exclusive power and authority to administer the
Rights Agreement and to exercise all rights and powers specifically granted to
the Board or to the Company therein, or as may be necessary or advisable in the
administration of the Rights Agreement, including without limitation the right
and power to interpret the provisions of the Rights Agreement and to make all
determinations deemed necessary or advisable for the administration of the
Rights Agreement (including any determination to redeem or not redeem the Rights
or to amend or not amend the Rights Agreement). All such actions, calculations,
interpretations and determinations (including any omission with respect to any
of the foregoing) which are done or made by the Board in good faith will be
final, conclusive and binding on the Company, the Rights Agent, the holders of
the Rights and all other parties and will not subject the Board to any liability
to any person, including without limitation the Rights Agent and the holders of
the Rights.
A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission as an exhibit to a Registration Statement on Form 8-A. A
copy of the Rights Agreement is available free of charge from the Company.
This summary description of the Rights is as of the Record Date, does
not purport to be complete and is qualified in its entirety by reference to the
Rights Agreement, which is incorporated herein by this reference.
7
