<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 March 31, 2000
--------------
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
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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) 765-5855
---------------
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, 2000
--------------------- --------------
Par value $1.00 per share 27,919,013
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ALLEN TELECOM INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
No.
-------------------
<S> <C>
PART I. FINANCIAL INFORMATION:
ITEM 1 - Financial Statements:
Condensed Consolidated Balance Sheets -
March 31, 2000 and December 31, 1999 3
Condensed Consolidated Statements of Income -
Three Months Ended March 31, 2000 and 1999 4
Condensed Consolidated Statements of Cash Flows -
Three Months Ended March 31, 2000 and 1999 5
Condensed Consolidated Statements of Stockholders'
Equity - Three Months Ended March 31, 2000 and 1999 6
Notes to the Condensed Consolidated Financial Statements 7-9
ITEM 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 10-13
ITEM 3 - Quantitative and Qualitative Disclosures About
Market Risks 14
PART II. OTHER INFORMATION:
ITEM 6 - Exhibits and Reports on Form 8-K 14
Signatures 15
Exhibit Index 16
</TABLE>
2
<PAGE> 3
ALLEN TELECOM INC.
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in Thousands)
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
--------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and equivalents $ 27,638 $ 22,085
Accounts receivable (less allowance for doubtful
accounts of $2,525 and $2,537, respectively) 76,555 87,394
Inventories: Raw materials 41,461 43,608
Work in process 18,947 19,343
Finished goods 24,087 19,762
-------- --------
Total inventories (net of reserves) 84,495 82,713
-------- --------
Deferred income taxes 6,944 6,966
Other current assets 5,515 4,992
-------- --------
Total current assets 201,147 204,150
Property, plant and equipment, net 47,114 49,253
Excess of cost over net assets of businesses acquired 133,371 134,723
Deferred income taxes 31,321 30,281
Other assets 31,623 33,023
-------- --------
TOTAL ASSETS $444,576 $451,430
======== ========
LIABILITIES
Current Liabilities:
Notes payable and current maturities of long-term
obligations $ 1,321 $ 2,181
Accounts payable 42,674 41,139
Accrued expenses 26,780 27,943
Income taxes payable 1,919 2,464
Deferred income taxes 2,325 2,361
-------- --------
Total current liabilities 75,019 76,088
Long-term debt 117,713 120,905
Deferred income taxes 5,241 3,455
Other liabilities 10,112 10,070
-------- --------
TOTAL LIABILITIES 208,085 210,518
-------- --------
STOCKHOLDERS' EQUITY
Common stock 30,017 30,010
Paid-in capital 181,445 181,335
Retained earnings 58,884 57,014
Accumulated other comprehensive loss (17,296) (10,685)
Less: Treasury stock (at cost) (14,855) (14,978)
Unearned compensation (1,704) (1,784)
-------- --------
TOTAL STOCKHOLDERS' EQUITY 236,491 240,912
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $444,576 $451,430
======== ========
</TABLE>
See accompanying notes to the Condensed Consolidated Financial Statements.
3
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ALLEN TELECOM INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Amounts in Thousands, Except Per Share Data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------------------------------
2000 1999
-------- --------
<S> <C> <C>
SALES $ 87,956 $ 75,913
-------- --------
Costs and expenses:
Cost of sales (Note 2) (62,574) (53,683)
Selling, general and
administrative expenses (Note 2) (16,261) (14,076)
Research and development and
product engineering costs (6,186) (7,664)
Other loss -- (165)
Interest expense (2,471) (2,356)
Interest income 510 292
-------- --------
Income (loss) before taxes and
minority interests 974 (1,739)
(Provision) benefit for income taxes (391) 607
-------- --------
Income (loss) before minority
interests 583 (1,132)
Minority interests (13) (304)
-------- --------
INCOME (LOSS) FROM CONTINUING
OPERATIONS 570 (1,436)
Discontinued emissions testing
operation: Gain on sale (net of
income taxes) (Note 3) 1,300 2,363
-------- --------
NET INCOME $ 1,870 $ 927
======== ========
EARNINGS (LOSS) PER COMMON
SHARE, BASIC AND DILUTED:
Continuing operations $ .02 ($ .05)
Discontinued operations .05 .08
-------- --------
Net income $ .07 $ .03
======== ========
Weighted average common shares outstanding:
Basic 27,780 27,350
Assumed exercise of stock options 340 60
-------- --------
Diluted 28,120 27,410
======== ========
</TABLE>
See accompanying notes to the Condensed Consolidated Financial Statements.
4
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ALLEN TELECOM INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------------------
2000 1999
-------- --------
CASH FLOW FROM OPERATIONS:
<S> <C> <C>
Income (loss) from continuing operations $ 570 $ (1,436)
Adjustments to reconcile income (loss) to operating cash flow:
Depreciation 3,639 3,973
Amortization of goodwill 1,918 1,727
Amortization of capitalized software 575 650
Other amortization 80 133
Non-cash loss on write-down of assets 393 -
Loss on investments - 158
Changes in operating assets and liabilities:
Receivables 7,500 (5,150)
Inventories (5,075) (5,660)
Accounts payable and accrued expenses 2,975 2,698
Income tax payable (1,340) (768)
Other, net 1,001 1,521
-------- --------
CASH PROVIDED (USED) BY OPERATING ACTIVITIES 12,236 (2,154)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Sale of discontinued emissions testing business - 9,387
Collection from sale of common stock investment - 6,671
Capital expenditures (3,041) (1,731)
Capitalized software product costs (340) (332)
-------- --------
CASH (USED) PROVIDED BY INVESTING ACTIVITIES (3,381) 13,995
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of borrowings (3,616) (21,117)
Collection on installment note receivable 1,000 -
Treasury stock sold to employee benefit plan 123 258
Exercise of stock options 35 -
-------- --------
CASH USED BY FINANCING ACTIVITIES (2,458) (20,859)
-------- --------
Net Cash Provided By Discontinued
Emissions Testing Business - 1,810
-------- --------
NET CASH PROVIDED (USED) 6,397 (7,208)
Effect of foreign currency exchange rate changes on cash (844) (1,096)
Cash and equivalents at beginning of year 22,085 19,900
-------- --------
CASH AND EQUIVALENTS AT END OF PERIOD $ 27,638 $ 11,596
======== ========
Supplemental cash flow data: Cash paid during the period for:
Interest $ 1,369 $ 831
Income taxes 1,763 709
</TABLE>
See accompanying notes to the Condensed Consolidated Financial Statements.
5
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ALLEN TELECOM INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Amounts in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Common Paid-In Comprehensive Retained
Total Stock Capital Income (Loss) Earnings
----------- ----------- ----------- ---------------- ---------
<S> <C> <C> <C> <C> <C>
FOR THE THREE MONTHS ENDED MARCH 31, 2000:
Beginning Balance, January 1, 2000 $240,912 $30,010 $181,335 $57,014
Comprehensive Income (loss):
Net income 1,870 $ 1,870 1,870
Other comprehensive loss:
Foreign currency translation adjustments (6,611) (6,611)
------
Comprehensive loss $ (4,741)
=======
Treasury stock reissued 205 82
Exercise of stock options 35 7 28
Amortization of unearned compensation 80
-------- --------- -------- --------
Ending Balance, March 31, 2000 $236,491 $ 30,017 $181,445 $ 58,884
======== ======== ======= =======
FOR THE THREE MONTHS ENDED MARCH 31, 1999:
Beginning Balance, January 1, 1999 $250,081 $ 29,759 $180,604 $59,869
Comprehensive Income (loss):
Net income 927 $ 927 927
Other comprehensive loss:
Foreign currency translation adjustments (2,999) (2,999)
------
Comprehensive loss $ (2,072)
=======
Treasury stock reissued 257 (114)
Amortization of unearned compensation 97
-------- --------- -------- --------
Ending Balance, March 31, 1999 $248,363 $ 29,759 $180,490 $ 60,796
======== ======== ======= =======
Accumulated
Other
Comprehensive Treasury Unearned
Income (Loss) Stock Compensation
---------------- ------------ ----------------
<S> <C> <C> <C>
FOR THE THREE MONTHS ENDED MARCH 31, 2000:
Beginning Balance, January 1, 2000 $ (10,685) $(14,978) $ (1,784)
Comprehensive Income (loss):
Net income
Other comprehensive loss:
Foreign currency translation adjustments (6,611)
Comprehensive loss
Treasury stock reissued 123
Exercise of stock options
Amortization of unearned compensation 80
----------- -------- --------
Ending Balance, March 31, 2000 $ (17,296) $(14,855) $ (1,704)
========== ======== ========
FOR THE THREE MONTHS ENDED MARCH 31, 1999:
Beginning Balance, January 1, 1999 $ (2,255) $(15,985) $ (1,911)
Comprehensive Income (loss):
Net income
Other comprehensive loss:
Foreign currency translation adjustments (2,999)
Comprehensive loss
Treasury stock reissued 371
Amortization of unearned compensation 97
--------- -------- --------
Ending Balance, March 31, 1999 $ (5,254) $(15,614) $ (1,814)
========= ======== ========
</TABLE>
See accompanying notes to the Condensed Consolidated Financial Statements.
6
<PAGE> 7
ALLEN TELECOM INC.
NOTES TO CONDENSED CONSOLIDATED 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, 2000 and the
consolidated results of its operations, cash flows and changes in
stockholders' equity for the periods ended March 31, 2000 and 1999. The
results of operations for such interim periods are not necessarily
indicative of the results for the full year. The year-end 1999
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,
1999.
2. SPECIAL CHARGES:
In the fourth quarter 1999, the Company announced the restructuring of
certain operations including the discontinuance of certain product
lines, the closing of a manufacturing facility and other items. As
previously indicated in the financial statements for the year ending
December 31, 1999, in the first quarter 2000, the Company incurred
pretax charges of $1,678,000, or $.04 per basic and diluted share after
related income tax effect, incremental to the fourth quarter 1999
restructuring charge. These first quarter 2000 charges, which were not
accruable at December 31, 1999, include termination costs of employees
notified subsequent to December 31, 1999, relocation costs, asset
write-offs, and other termination related benefits. Of this pretax
charge $960,000 was recorded in cost of sales and $718,000 in selling,
general and administrative expenses. Of the charge, $393,000 relates to
a non-cash write-off of capital assets and $1,285,000 are cash related
charges.
The following is a summary of the activity for exit costs incurred
(amounts in thousands, except for employee data).
<TABLE>
<CAPTION>
Severance
--------------------------
Number of Sale of Building
Accrual Employees and Equipment Other
<S> <C> <C> <C> <C>
Accrual balance at December 31, 1999 $1,374 93 $2,271 $517
Addition to accrual in first quarter 2000 327 5 393 958
Employees terminated - (77) - -
Charged against accrual (468) - (415) (810)
------------------------------------------------------
Balance March 31, 2000 $1,233 21 $2,249 $665
</TABLE>
The term of severance is based on years of service or determined by
contractual obligation, and is payable over a period of time. Severance
will be paid out in its entirety by October 31, 2001.
7
<PAGE> 8
ALLEN TELECOM INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Continued)
3. DISCONTINUED OPERATIONS:
The gain on sale from discontinued operations in the first quarter of
2000 represents income from previously contingent purchase price
consideration (in the form of a 12% interest bearing installment note)
earned on the sale of the Company's former automotive emissions testing
business sold in the first quarter of 1999. The gains in the first
quarters of 2000 and 1999 are net of related income taxes in the amount
of $700,000 and $1,403,000, respectively.
4. SEGMENT DISCLOSURES:
The following table shows sales to external customers and results of
operations for the Company's two operating segments (amounts in
thousands):
<TABLE>
<CAPTION>
Three Months Ended March 31,
2000 1999
-------- --------
<S> <C> <C>
Sales to external customers:
Telecommunications equipment
manufacturing $ 81,956 $ 70,045
Wireless engineering services 6,000 5,868
-------- --------
Total sales $ 87,956 $ 75,913
======== ========
Results of Operations:
Segment Results:
Telecommunications equipment manufacturing $ 5,680 $ 3,223
Wireless engineering services 885 236
-------- --------
6,565 3,459
Other loss - (165)
-------- --------
Goodwill amortization (1,918) (1,727)
General corporate expenses (1,712) (1,242)
Net financing costs (1,961) (2,064)
-------- --------
Income (loss) before taxes and minority interests $ 974 $ (1,739)
======== ========
</TABLE>
8
<PAGE> 9
ALLEN TELECOM INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Continued)
5. IMPACT OF NEW ACCOUNTING PRONOUNCEMENTS:
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities," in June 1998 which will now be effective for
financial statements for all fiscal quarters of fiscal years beginning
after June 15, 2000. Accordingly, the Company will adopt the provisions
of the standard on January 1, 2001. The Company utilizes hedging
activities primarily in its foreign subsidiaries to limit foreign
currency exchange rate risk on receivables. The Company has not yet
determined the effect, if any, of the adoption of this Statement on
results of operations and financial position.
In March 2000, the Financial Accounting Standards Board issued FASB
Interpretation No. 44, "Accounting for Certain Transactions involving
Stock Compensation, an interpretation of APB Opinion No. 25". This
interpretation clarifies the application of APB Opinion 25, under which
the Company accounts for stock based compensation awards, for certain
issues. This Interpretation is effective July 1, 2000, but certain
conclusions in this interpretation cover specific events that occurred
after either December 15, 1998, or January 12, 2000. To the extent that
this Interpretation covers events occurring during the period after
December 15, 1998, or January 12, 2000, but before the effective date
of July 1, 2000, the effects of applying this Interpretation are
recognized on a prospective basis from July 1, 2000. The Company has
not yet determined the effect, if any, of the adoption of this
Statement on results of operations and financial position.
9
<PAGE> 10
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
ALLEN TELECOM INC.
RESULTS OF OPERATIONS
SUMMARY:
Allen Telecom Inc. reported net income from continuing operations of $.6 million
($.02 per common share) for the first quarter 2000, as compared with a loss of
$1.4 million ($.05 loss per common share) for the first quarter 1999. Total
sales for the Company increased 16% from $75.9 million in the first quarter 1999
to $88.0 million in the first quarter 2000.
Included in the results of operations for the first quarter 2000, are
incremental pretax restructuring charges of approximately $1.7 million, or $.04
per basic and diluted share after related income tax effect. The Company has
estimated cost savings resulting from restructuring actions taken in the fourth
quarter 1999 and first quarter 2000 to be in the pretax range of $6.0 to $8.0
million on an annual basis. These savings are expected to be realized beginning
in the second quarter 2000, coincident with the final closedown of its domestic
manufacturing facility. Of the projected cost savings, approximately $4.4
million relate to cost of sales, $1.9 million to selling, general and
administrative costs, and $.7 million to R&D costs. See Note 2 of Notes to
Consolidated Condensed Financial Statements for additional information
concerning such special items.
TELECOMMUNICATIONS EQUIPMENT MANUFACTURING:
Telecommunications Equipment Manufacturing sales were up 17%, from $70.0 million
in first quarter 1999 to $82.0 million in the first quarter 2000. This sales
increase was due primarily to increased demand for Site Management and Antenna
products. Sales of Systems products were down 15% from first quarter 1999 due
primarily to order weakness in the test and measurement business and a seasonal
slowdown of project revenue in Europe where weather is a factor. Geographically,
sales were up primarily in Europe with a 35% increase over the same period last
year, with smaller increases in North America, where sales were up 13% over the
same period last year. First quarter sales are slightly lower than fourth
quarter 1999 (down 4%); however, the first quarter is traditionally the lowest
quarter for sales during the year due to winter impacting the deployment of new
cell sites and antenna installations.
The strong U.S. dollar relative to the Euro negatively impacted reported sales
and pretax income of European operations in the first quarter of 2000 as
compared to the first quarter of 1999. As a result of exchange differences,
reported sales and pretax income in the three months ended March 31, 2000 were
$6.3 million and $1.1 million lower, respectively, as compared with the
corresponding prior year period, assuming the exchange rates stayed the same.
10
<PAGE> 11
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
ALLEN TELECOM INC.
(Continued)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
SALES BY PRODUCT LINE
- -------------------------------------------------------------------------------------------------------
($ MILLIONS) 1Q 2000 1Q 1999 4Q 1999
------------------------------------------------
<S> <C> <C> <C>
Systems Products $ 19.6 $ 23.1 $ 23.5
Site Management and Other Non-Antenna
Products 43.2 32.2 40.8
Mobile and Base Station Antennas 19.2 14.7 21.0
- -------------------------------------------------------------------------------------------------------
Total Telecommunications Equipment Manufacturing $ 82.0 $ 70.0 $ 85.3
------------------------------------------------
</TABLE>
Backlog for this Segment increased 18% from $83.6 million at December 31, 1999
to $98.4 million at March 31, 2000. This is the fifth consecutive increase in
quarterly backlog.
Gross profit margins were 29.3% (excluding the aforementioned incremental
restructuring costs) in the first quarter of 2000, as compared with 29.6% in the
first quarter of 1999. The lower gross profit margins in 2000 were due to
product mix, with less sales coming from the higher margin measurement products,
and due to manufacturing inefficiencies related to the closedown of the site
management products manufacturing plant in the first quarter 2000.
Selling, general and administrative expenses were $10.5 million, or 12.9% of
sales (excluding the aforementioned incremental restructuring costs), and $9.8
million, or 14.0% of sales, for the first quarters of 2000 and 1999,
respectively. Spending as a percentage of sales is lower due to the spreading of
fixed costs on higher sales.
WIRELESS ENGINEERING SERVICES:
Wireless Engineering Services sales were up slightly from $5.9 million in first
quarter 1999 to $6.0 million in first quarter 2000. Backlog was unchanged at
$1.4 million from year-end 1999. Gross profit margins for this segment were
37.7% in the first quarter 2000, as compared with 25.7% in the first quarter
1999. This increase is primarily attributable to higher software sales and full
deployment of engineers. Selling, general and administrative expenses were
relatively flat at 23% and 22% of sales for the first quarters of 2000 and 1999,
respectively.
RESEARCH AND DEVELOPMENT:
Research and development and product engineering costs were 7.0% and 10.1% of
sales in the first quarter of 2000 and 1999, respectively. The decreased rate of
spending as a percentage of sales is attributable to the increase in sales in
the current quarter and the sale of the Company's former government and defense
engineering business, Signal Science, in the third quarter of 1999, which
invested heavily in research and development. The Company believes that product
development costs will increase throughout the year, principally due to
increased spending for field trials and other testing of its E-911 Geolocation
product.
11
<PAGE> 12
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
ALLEN TELECOM INC.
(Continued)
INTEREST AND FINANCING EXPENSES:
Net interest and financing costs decreased slightly to $2.0 million from $2.1
million for the three months ended March 31, 2000 and 1999, respectively. The
lower interest expense is due principally to lower working capital requirements
and the repayment of debt with the proceeds from the sale of discontinued
operations and investments, offset in part by higher interest rates.
PROVISION FOR INCOME TAXES:
The Company's effective tax rate was 40.1% and 35.0% for the quarters ended
March 31, 2000 and 1999, respectively. The principal reason for the increase is
the increased income relating to the Company's foreign operations, which are
taxed at higher rates than the United States. The 2000 percentage is in line
with the Company's current expectation for the full year.
MINORITY INTERESTS:
Minority interest expense decreased from $304 thousand to $13 thousand in the
quarters ended March 31, 1999 and 2000, respectively. This decrease is due to
the acquisition in late 1999 of the remaining minority interest in one of the
Company's foreign subsidiaries.
LIQUIDITY AND CAPITAL RESOURCES:
As set forth in the Condensed Consolidated Statements of Cash Flows, the Company
generated $12.2 million of cash from operations for the three months ended March
31, 2000 as compared to using $2.2 million for the comparable 1999 period. The
increase in cash flow from operations is principally due to the collection of
certain trade receivables and increasing income from continuing operations. The
Company used $3.4 million in investing activities in the first quarter 2000, due
primarily to capital expenditures, as compared to generating $14.0 million in
the first quarter 1999. The higher cash flow from investing activities in 1999
related to the sale of the Company's discontinued emissions testing business and
cash collected from the sale of a common stock investment. Cash used by
financing activities for the three months ended March 31, 2000 and March 31,
1999 was $2.5 million and $20.9 million, respectively. The cash generated from
investing activities in the first quarter 1999 was used primarily to repay
long-term borrowings. At March 31, 2000, the Company had available unused
worldwide lines of credit in the amount of $84.2 million.
12
<PAGE> 13
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
ALLEN TELECOM INC.
(Continued)
LEGAL DISCLAIMER:
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. Factors that could cause the Company's actual
results to materially differ from forward-looking statements made by the
Company, including, among others, the cost, success and timetable for new
product development, the health and economic stability of the world and national
markets, the uncertain timing and level of purchases by current and prospective
customers of the Company's products and services, the impact of competitive
products and pricing, the future utilization of the Company's tax loss carry
forwards, the impact of U.S. and foreign government legislative/regulatory
actions, including, for example, the scope and timing of E911 geolocation
requirements and spectrum availability for new wireless applications, the cost
and availability of financing for geolocation projects and collectability of
notes and accounts receivable. Allen Telecom Inc.'s Annual Report on Form 10-K
and Quarterly Reports on Form 10-Q contain additional details concerning these
factors.
13
<PAGE> 14
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations" under Item 7 of its Annual Report on Form 10-K for the year ended
December 31, 1999.
PART II - OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS
(10) Material Contracts.
(a) Amendment No. 2 To Credit Agreement.
(b) Amendment No. 5 To Key Employee Severance Policy.
(27) Financial Data Schedule.
(b) REPORTS ON FORM 8-K
Not Applicable.
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.
<TABLE>
<CAPTION>
Allen Telecom Inc.
------------------
(Registrant)
<S> <C>
Date: May 12, 2000 By: /s/ Robert A. Youdelman
------------ ---------------------------------------------------------
Robert A. Youdelman
Executive Vice President
(Chief Financial Officer)
Date: May 12, 2000 By: /s/ James L. LePorte, III
------------ ---------------------------------------------------------
James L. LePorte, III
Vice President Finance
(Principal Accounting Officer)
</TABLE>
15
<PAGE> 16
EXHIBIT INDEX
ALLEN TELECOM INC.
EXHIBIT NUMBER
(10) Material Contracts.
(a) Amendment No. 2 To Credit Agreement.
(b) Amendment No. 5 To Key Employee Severance Policy.
(27) Financial Data Schedule.
16
<PAGE> 1
Exhibit 10(a)
- --------------------------------------------------------------------------------
ALLEN TELECOM INC.
AS BORROWER
THE LENDERS NAMED HEREIN
AS LENDERS
NBD BANK
AS DOCUMENTATION AGENT
AND
[KEYBANK LOGO]
KEYBANK NATIONAL ASSOCIATION
AS A LENDER,
THE SWING LINE LENDER, A LETTER OF CREDIT ISSUER
AND AS THE SYNDICATION AGENT, THE ADMINISTRATIVE AGENT AND THE COLLATERAL AGENT
---------------------
AMENDMENT NO. 2
DATED AS OF
APRIL 19, 2000
TO
CREDIT AGREEMENT
DATED AS OF
DECEMBER 31, 1998
---------------------
- --------------------------------------------------------------------------------
<PAGE> 2
AMENDMENT NO. 2 TO CREDIT AGREEMENT
THIS AMENDMENT NO. 2 TO CREDIT AGREEMENT, dated as of April 19, 2000
("THIS AMENDMENT"), among the following:
(i) ALLEN TELECOM INC., a Delaware corporation (herein,
together with its successors and assigns, the "BORROWER");
(ii) the Lenders party hereto;
(iii) NBD BANK as a Lender and as Documentation Agent (the
"DOCUMENTATION AGENT"); and
(iv) KEYBANK NATIONAL ASSOCIATION, a national banking
association, as a Lender, the Swing Line Lender, the Letter of Credit
Issuer, and as the Syndication Agent, the Administrative Agent and the
Collateral Agent under the Credit Agreement:
PRELIMINARY STATEMENTS:
(1) The Borrower, the Lenders named therein, the Swing Line Lender, the
Letter of Credit Issuers, the Documentation Agent, the Syndication Agent and the
Administrative Agent entered into the Credit Agreement, dated as of December 31,
1998, as amended by Amendment No. 1 thereto, dated as of July 30, 1999 (as so
amended, the "CREDIT AGREEMENT"; with the terms defined therein, or the
definitions of which are incorporated therein, being used herein as so defined).
(2) The parties hereto desire to change certain of the terms and
provisions of the Credit Agreement, all as more fully set forth below.
NOW, THEREFORE, the parties hereby agree as follows:
10 AMENDMENTS, ETC. With retroactive effect to March 31, 2000, section
9.9 of the Credit Agreement is amended to read in its entirety as follows:
9.9. MINIMUM CONSOLIDATED EBITDA. The Borrower will not at any
time permit its Consolidated EBITDA for its Testing Period most
recently ended to be less than the amount indicated below:
<TABLE>
<CAPTION>
--------------------------------------------------------- ------------------------------
TESTING PERIOD AMOUNT
--------------------------------------------------------- ------------------------------
<S> <C>
Any Testing Period ended on or prior to $45,000,000
December 31, 1998
--------------------------------------------------------- ------------------------------
Any Testing Period ended thereafter and on or prior to $36,000,000
September 30, 1999
--------------------------------------------------------- ------------------------------
Testing Period ended December 31, 1999 $41,000,000
--------------------------------------------------------- ------------------------------
Testing Period ended March 31, 2000 $41,000,000
--------------------------------------------------------- ------------------------------
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
--------------------------------------------------------- ------------------------------
TESTING PERIOD AMOUNT
--------------------------------------------------------- ------------------------------
<S> <C>
Testing Period ended June 30, 2000 $42,000,000
--------------------------------------------------------- ------------------------------
Testing Period ended September 30, 2000 $42,000,000
--------------------------------------------------------- ------------------------------
Any Testing Period thereafter $45,000,000
--------------------------------------------------------- ------------------------------
</TABLE>
20 REPRESENTATIONS AND WARRANTIES. The Borrower represents and warrants
to the Lenders, the Swing Line Lender, the Letter of Credit Issuer, the
Documentation Agent, the Administrative Agent and the Collateral Agent as
follows:
(a) AUTHORIZATION AND VALIDITY OF AMENDMENT, ETC. This
Amendment has been duly authorized by all necessary corporate action on
the part of the Borrower, has been duly executed and delivered by a
duly authorized officer of the Borrower, and constitutes the valid and
binding agreement of the Borrower, enforceable against the Borrower in
accordance with its terms, except to the extent that the enforceability
thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws generally affecting
creditors' rights and by equitable principles (regardless of whether
enforcement is sought in equity or at law).
(b) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Credit Parties contained in the Credit Agreement or
in the other Credit Documents are true and correct in all material
respects on and as of the date hereof as though made on and as of the
date hereof, except to the extent that such representations and
warranties expressly relate to an earlier specified date, in which case
such representations and warranties are hereby reaffirmed as true and
correct in all material respects as of the date when made.
(c) NO EVENT OF DEFAULT. No condition or event has occurred or
exists which constitutes or which, after notice or lapse of time or
both, would constitute an Event of Default.
(d) COMPLIANCE. The Borrower is in full compliance with all
covenants and agreements contained in the Credit Agreement, as amended
hereby, and the other Credit Documents to which it is a party; and
without limitation of the foregoing, each Subsidiary of the Borrower
which, as of the date hereof, is required to be a Subsidiary Guarantor,
has as on or prior to the date hereof become a Subsidiary Guarantor
under the Subsidiary Guaranty.
(e) FINANCIAL STATEMENTS, ETC. The Borrower has furnished to
the Lenders and the Administrative Agent complete and correct copies of
the audited consolidated balance sheets of the Borrower and its
consolidated subsidiaries as of December 31, 1998, and December 31,
1999, and the related audited consolidated statements of income,
stockholders' equity, and cash flows for the fiscal years then ended,
accompanied by the unqualified report thereon of the Borrower's
independent accountants. All such financial statements have been
prepared in accordance with GAAP, consistently applied (except as
stated therein), and fairly present the financial position of the
Borrower and its consolidated subsidiaries as of the respective dates
indicated and the consolidated results of their operations and cash
flows for the respective periods indicated.
<PAGE> 4
30 RATIFICATIONS. Except as expressly modified and superseded by this
Amendment, the terms and provisions of the Credit Agreement are ratified and
confirmed and shall continue in full force and effect.
40 BINDING EFFECT. This Amendment shall become effective on April 19,
2000 (the "EFFECTIVE Date"), if the following conditions shall have been
satisfied on and as of such date:
(a) this Amendment shall have been executed by the Borrower
and the Administrative Agent, and counterparts hereof as so executed
shall have been delivered to the Administrative Agent;
(b) the Administrative Agent shall have been notified by the
Required Lenders that such Lenders have executed this Amendment (which
notification may be by facsimile or other written confirmation of such
execution);
(c) the Borrower shall have paid to the Administrative Agent,
in immediately available funds, for the account of each Lender which
shall have executed this Amendment and delivered its signed signature
page (via physical delivery or facsimile transmission) to the
Administrative Agent by 5:00 P.M. (local time at the Notice Office) on
the Effective Date, an amendment fee computed at the rate of 5 basis
points on the General Revolving Commitment of any such applicable
Lender (the Administrative Agent shall promptly pay over to each such
signing Lender its amendment fee as aforesaid);
and thereafter this Amendment shall be binding upon and inure to the benefit of
the Borrower, each Lender, the Swing Line Lender, the Letter of Credit Issuers,
the Documentation Agent, the Syndication Agent, the Administrative Agent and the
Collateral Agent and their respective successors and assigns. After this
Amendment becomes effective, the Administrative Agent will promptly furnish a
copy of this Amendment to each Lender and the Borrower and advise them of the
Effective Date.
50 MISCELLANEOUS. 5.1. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties made in this Amendment shall survive the
execution and delivery of this Amendment, and no investigation by the
Administrative Agent or any Lender or any subsequent Loan or other Credit Event
shall affect the representations and warranties or the right of the
Administrative Agent or any Lender to rely upon them.
5.2. REFERENCE TO CREDIT AGREEMENT. The Credit Agreement and any and
all other agreements, instruments or documentation now or hereafter executed and
delivered pursuant to the terms of the Credit Agreement as amended hereby, are
hereby amended so that any reference therein to the Credit Agreement shall mean
a reference to the Credit Agreement as amended hereby.
5.3. EXPENSES. As provided in the Credit Agreement, but without
limiting any terms or provisions thereof, the Borrower shall pay on demand all
reasonable costs and expenses incurred by the Administrative Agent in connection
with the preparation, negotiation, and execution of this Amendment, including
without limitation the reasonable costs and fees of the Administrative Agent's
special legal counsel, regardless of whether this Amendment becomes effective in
accordance with the terms hereof, and all reasonable costs and expenses incurred
by the Administrative Agent or any Lender in connection with the enforcement or
preservation of any rights under the Credit Agreement, as amended hereby.
3
<PAGE> 5
5.4. SEVERABILITY. Any term or provision of this Amendment held by a
court of competent jurisdiction to be invalid or unenforceable shall not impair
or invalidate the remainder of this Amendment and the effect thereof shall be
confined to the term or provision so held to be invalid or unenforceable.
5.5. APPLICABLE LAW. This Amendment shall be governed by and construed
in accordance with the laws of the State of Ohio.
5.6. HEADINGS. The headings, captions and arrangements used in this
Amendment are for convenience only and shall not affect the interpretation of
this Amendment.
5.7. ENTIRE AGREEMENT. This Amendment is specifically limited to the
matters expressly set forth herein. This Amendment and all other instruments,
agreements and documentation executed and delivered in connection with this
Amendment embody the final, entire agreement among the parties hereto with
respect to the subject matter hereof and supersede any and all prior
commitments, agreements, representations and understandings, whether written or
oral, relating to the matters covered by this Amendment, and may not be
contradicted or varied by evidence of prior, contemporaneous or subsequent oral
agreements or discussions of the parties hereto. There are no oral agreements
among the parties hereto relating to the subject matter hereof or any other
subject matter relating to the Credit Agreement.
5.8. JURY TRIAL WAIVER. EACH OF THE PARTIES TO THIS AMENDMENT HEREBY
IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AMENDMENT, THE OTHER CREDIT
DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. EACH PARTY HERETO
HEREBY (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER
PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT,
IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, AND (B)
ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER
INTO THIS AMENDMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION.
5.9. COUNTERPARTS. This Amendment may be executed by the parties hereto
separately in one or more counterparts, each of which when so executed shall be
deemed to be an original, but all of which when taken together shall constitute
one and the same agreement.
4
<PAGE> 6
IN WITNESS WHEREOF, this Amendment has been duly executed and delivered
as of the date first above written.
<TABLE>
<CAPTION>
- ----------------------------------------------------------- --------------------------------------------------------
<S> <C>
ALLEN TELECOM INC. KEYBANK NATIONAL ASSOCIATION,
INDIVIDUALLY AS THE SWING LINE LENDER,
A LENDER, A LETTER OF CREDIT ISSUER,
AND AS THE SYNDICATION AGENT AND
THE ADMINISTRATIVE AGENT
BY:
-------------------------------
VICE PRESIDENT--FINANCE
BY:
-------------------------------
SENIOR VICE PRESIDENT
- ----------------------------------------------------------- --------------------------------------------------------
BANK ONE, MICHIGAN FIRSTAR BANK, NATIONAL ASSOCIATION
(SUCCESSOR TO NBD BANK), (FORMERLY STAR BANK, NATIONAL ASSOCIATION)
INDIVIDUALLY AS A LENDER AND
AS DOCUMENTATION AGENT
BY:
-------------------------------
TITLE:
BY:
-------------------------------
TITLE:
- ----------------------------------------------------------- --------------------------------------------------------
DRESDNER BANK AG, SANPAOLO IMI, S. P. A.,
NEW YORK AND GRAND CAYMAN BRANCHES, NEW YORK BRANCH
INDIVIDUALLY AS A LENDER AND AS
A LETTER OF CREDIT ISSUER
BY:
-------------------------------
TITLE:
BY:
-------------------------------
TITLE:
BY: BY:
------------------------------- -------------------------------
TITLE: TITLE:
- ----------------------------------------------------------- --------------------------------------------------------
FIFTH THIRD BANK, NORTHEASTERN OHIO LASALLE BANK, NATIONAL ASSOCIATION
(FORMERLY LASALLE NATIONAL BANK)
BY:
-------------------------------
TITLE: BY:
-------------------------------
TITLE:
- ----------------------------------------------------------- --------------------------------------------------------
</TABLE>
5
<PAGE> 1
Exhibit 10(b)
AMENDMENT NO. 5 TO THE ALLEN TELECOM INC. KEY EMPLOYEE SEVERANCE POLICY
Allen Telecom Inc., formerly known as The Allen Group Inc. (the
"Company"), by action of the Board of Directors of the Company on February 24,
2000, adopted this Amendment No. 5 to the Allen Telecom Inc. Key Employee
Severance Policy (the "Policy"), effective as of February 24, 2000:
The second sentence of the first paragraph of the Policy is hereby
amended and restated in its entirety to read as follows:
"For purposes of this Policy, a key employee shall be (a) any
employee of the Company who at any time prior to February 24,
2000 held stock options granted under the Company's 1982 Stock
Plan, 1992 Stock Plan or any successor plan thereto, or (b)
any employee of the Company who is designated by the
Management Compensation Committee of the Board of Directors of
the Company, except as to any employee who is (i) an employee
of one of the Company's foreign subsidiaries, (ii) an employee
covered by an employment or severance agreement with the
Company or, (iii) an employee of the Company or one of its
domestic subsidiaries, eligible to receive severance under the
laws or general business practices of any foreign country."
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ALLEN
TELECOM'S March 31, 2000 CONSOLIDATED FINANCIAL STATEMENTS AND 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-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 27,638
<SECURITIES> 0
<RECEIVABLES> 79,080
<ALLOWANCES> (2,525)
<INVENTORY> 84,495
<CURRENT-ASSETS> 201,147
<PP&E> 110,767
<DEPRECIATION> (63,653)
<TOTAL-ASSETS> 444,576
<CURRENT-LIABILITIES> 75,019
<BONDS> 117,713
0
0
<COMMON> 30,017
<OTHER-SE> 206,474
<TOTAL-LIABILITY-AND-EQUITY> 444,576
<SALES> 87,956
<TOTAL-REVENUES> 87,956
<CGS> (62,574)
<TOTAL-COSTS> (62,574)
<OTHER-EXPENSES> (22,447)
<LOSS-PROVISION> (103)
<INTEREST-EXPENSE> (1,961)
<INCOME-PRETAX> 974
<INCOME-TAX> (391)
<INCOME-CONTINUING> 570
<DISCONTINUED> 1,300
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,870
<EPS-BASIC> .07<F1>
<EPS-DILUTED> .07<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".
</FN>
</TABLE>
