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ALLEN TELECOM INC
10-Q, 2000-11-13
RADIO & TV BROADCASTING & COMMUNICATIONS EQUIPMENT

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TABLE OF CONTENTS

PART I -- FINANCIAL INFORMATION
	ITEM 1 -- FINANCIAL STATEMENTS
		CONDENSED CONSOLIDATED BALANCE SHEETS
		CONDENSED CONSOLIDATED STATEMENTS OF INCOME
		CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
		CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
		NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
	ITEM 2 -- MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
	ITEM 3 -- QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
PART II -- OTHER INFORMATION
	ITEM 6 -- EXHIBITS AND REPORTS ON FORM 8-K
SIGNATURES
EXHIBIT INDEX
Exhibit 27.1--Financial Data Schedule

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SECURITIES AND EXCHANGE COMMISSION

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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 September 30, 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

ALLEN TELECOM INC.

Delaware		38-0290950
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)
25101 Chagrin Boulevard, Suite 350, Beachwood, Ohio		44122
(Address of Principal Executive Offices)		(Zip Code)

(Registrant’s Telephone Number, Including Area Code)                (216) 765-5855

NOT APPLICABLE

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  X  

Indicate the number of shares outstanding of each of the issuer’s classes of common stock:

		Outstanding at
Class of Common Stock		November 1, 2000
Par value $1.00 per share			27,966,580

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ALLEN TELECOM INC.

TABLE OF CONTENTS

				Page
				No.
PART I.		FINANCIAL INFORMATION:
		ITEM 1 — Financial Statements:
		Condensed Consolidated Balance Sheets -    September 30, 2000 and December 31, 1999		3
		Condensed Consolidated Statements of Income -    Three and Nine Months Ended September 30, 2000 and 1999		4
		Condensed Consolidated Statements of Cash Flows -    Nine Months Ended September 30, 2000 and 1999		5
		Condensed Consolidated Statements of Stockholders’ Equity -    Nine Months Ended September 30, 2000 and 1999		6
		Notes to Condensed Consolidated Financial Statements		7- 9
		ITEM 2  —  Management’s Discussion and Analysis of Financial Condition and Results of Operations		10-14
		ITEM 3  —  Quantitative and Qualitative Disclosures About Market Risks		15
PART II.		OTHER INFORMATION:
		ITEM 6  —  Exhibits and Reports on Form 8-K		15
		Signatures		16
		Exhibit Index		17

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ALLEN TELECOM INC.

							September 30,				December 31,
							2000				1999
							(Unaudited)
ASSETS
		Current Assets:
			Cash and equivalents				$	21,182			$	22,085
			Accounts receivable (less allowance for doubtful accounts of $2,771 and $2,537, respectively)					94,874				87,394
			Inventories: Raw materials					55,333				43,608
			Work in process					25,630				19,343
			Finished goods					20,521				19,762
				Total inventories (net of reserves)				101,484				82,713
			Deferred income taxes					4,288				6,966
			Other current assets					3,651				4,992
					Total current assets			225,479				204,150
		Property, plant and equipment, net						40,197				49,253
		Excess of cost over net assets of businesses acquired						131,270				134,723
		Deferred income taxes						36,805				30,281
		Other assets						40,059				33,023
				TOTAL ASSETS			$	473,810			$	451,430
	LIABILITIES
		Current Liabilities:
			Notes payable and current maturities of long-term obligations				$	895			$	2,181
			Accounts payable					46,266				41,139
			Accrued expenses					27,288				27,943
			Income taxes payable					2,979				2,464
			Deferred income taxes					5,452				2,361
				Total current liabilities				82,880				76,088
		Long-term debt						140,284				120,905
		Deferred income taxes						1,353				3,455
		Other liabilities						9,793				10,070
				TOTAL LIABILITIES				234,310				210,518
STOCKHOLDERS’ EQUITY
		Common stock						30,036				30,010
		Paid-in capital						183,076				181,335
		Retained earnings						65,411				57,014
		Accumulated other comprehensive loss						(22,832	)			(10,685	)
		Less: Treasury stock (at cost)						(14,753	)			(14,978	)
					Unearned compensation			(1,438	)			(1,784	)
			TOTAL STOCKHOLDERS’ EQUITY					239,500				240,912
			TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY				$	473,810			$	451,430

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ALLEN TELECOM INC.

				Three Months
				Ended								Nine Months Ended
				September 30,								September 30,
				2000				1999				2000				1999
Sales				$	106,765			$	89,536			$	283,161			$	242,950
Costs and expenses:
		Cost of sales (Note 2)			(74,835	)			(63,688	)			(198,265	)			(171,515	)
		Selling, general and administrative expenses (Note 2)			(15,353	)			(14,954	)			(46,694	)			(42,497	)
		Research and development and product engineering costs			(6,924	)			(6,890	)			(19,491	)			(22,264	)
Other income (Note 3)					—				3,013				—				3,238
Interest expense					(2,899	)			(2,397	)			(7,995	)			(7,094	)
Interest income					530				269				1,457				974
Income before taxes and minority interests					7,284				4,889				12,173				3,792
Provision for income taxes					(2,966	)			(1,810	)			(4,991	)			(1,425	)
Income before minority interests					4,318				3,079				7,182				2,367
Minority interests					(33	)			(447	)			(85	)			(1,154	)
Income from continuing operations					4,285				2,632				7,097				1,213
Discontinued emissions testing operation: Gain on sale (net of income taxes) (Note 4)					—				—				1,300				2,363
Net income				$	4,285			$	2,632			$	8,397			$	3,576
Earnings per common share, basic and diluted:
	Continuing operations			$	.15			$	.10			$	.25			$	.04
	Discontinued operations – gain on sale				—				—				.05				.09
	Net income			$	.15			$	.10			$	.30			$	.13
Weighted average common
	Shares outstanding:
		Basic			27,820				27,480				27,800				27,430
		Assumed exercise of stock options			560				240				430				180
		Diluted			28,380				27,720				28,230				27,610

      See accompanying notes to the Condensed Consolidated Financial Statements.

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ALLEN TELECOM INC.

					Nine Months Ended
					September 30,
					2000				1999
CASH FLOW FROM OPERATIONS:
	Income from continuing operations				$	7,097			$	1,213
	Adjustments to reconcile income to operating cash flow:
		Depreciation				10,086				11,236
		Amortization of goodwill				5,841				5,195
		Amortization of capitalized software				1,984				2,185
		Other amortization				232				544
		Non-cash pension gain				(1,160	)			—
		Non-cash loss on write-down of assets				393				321
		Gain on investments				—				(3,732	)
	Changes in operating assets and liabilities:
		Receivables				(13,211	)			(19,005	)
		Inventories				(24,706	)			(9,650	)
		Accounts payable and accrued expenses				14,981				4,394
		Income taxes				(1,642	)			(5,162	)
		Other, net				(2,179	)			2
	CASH USED BY OPERATING ACTIVITIES					(2,284	)			(12,459	)
CASH FLOWS FROM INVESTING ACTIVITIES:
		Sale of discontinued emissions testing business				—				9,387
		Collection from sale of common stock investment				—				10,934
		Investments in telecommunication subsidiaries				(8,512	)			(423	)
		Capital expenditures				(7,644	)			(6,208	)
		Sales and retirements of fixed assets				511				9
		Capitalized software product costs				(2,755	)			(985	)
	CASH (USED) PROVIDED BY INVESTING ACTIVITIES					(18,400	)			12,714
CASH FLOWS FROM FINANCING ACTIVITIES:
		Proceeds from (repayments of) borrowings				18,851				(6,422	)
		Collection on installment note receivable				1,000				—
		Treasury stock sold to employee benefit plan				576				694
		Exercise of stock options				297				144
	CASH PROVIDED (USED) BY FINANCING ACTIVITIES					20,724				(5,584	)
Net Cash Provided By Discontinued Emissions Testing Business						—				1,810
NET CASH PROVIDED (USED)						40				(3,519	)
Effect of foreign currency exchange rate changes on cash						(943	)			(2,156	)
Cash and equivalents at beginning of year						22,085				19,900
CASH AND EQUIVALENTS AT END OF PERIOD					$	21,182			$	14,225
Supplemental cash flow data:
		Cash paid during the period for:
			Interest		$	6,677			$	5,830
			Income taxes		$	6,127			$	6,285

      See accompanying notes to the Condensed Consolidated Financial Statements.

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ALLEN TELECOM INC.

								Common				Paid-In				Comprehensive				Retained
				Total				Stock				Capital				Income (Loss)				Earnings
For the nine months ended September 30, 2000:
Beginning Balance, January 1, 2000				$	240,912			$	30,010			$	181,335							$	57,014
Comprehensive Income (loss):
	Net income				8,397											$	8,397				8,397
	Other comprehensive loss:
		Foreign currency translation adjustments			(12,147	)											(12,147	)
		Comprehensive loss														$	(3,750	)
Treasury stock reissued					576								263
Exercise of stock options					297				33				264
Employee stock plan tax benefits					1,331								1,331
Restricted stock cancellation					(98	)			(7	)			(117	)
Amortization of unearned compensation					232
Ending Balance, September 30, 2000				$	239,500			$	30,036			$	183,076							$	65,411
For the nine months ended September 30, 1999:
Beginning Balance, January 1, 1999				$	250,081			$	29,759			$	180,604							$	59,869
Comprehensive Income (loss):
	Net income				3,576											$	3,576				3,576
	Other comprehensive loss:
		Foreign currency translation adjustments			(7,099	)											(7,099	)
		Comprehensive loss														$	(3,523	)
Treasury stock reissued					694								(81	)
Exercise of stock options					144								68
Restricted stock, net					(170	)			32				61
Amortization of unearned compensation					302
Ending Balance, September 30, 1999				$	247,528			$	29,791			$	180,652							$	63,445

[Additional columns below]

[Continued from above table, first column(s) repeated]

				Accumulated
				Other
				Comprehensive				Treasury				Unearned
				Loss				Stock				Compensation
For the nine months ended September 30, 2000:
Beginning Balance, January 1, 2000				$	(10,685	)		$	(14,978	)		$	(1,784	)
Comprehensive Income (loss):
	Net income
	Other comprehensive loss:
		Foreign currency translation adjustments			(12,147	)
		Comprehensive loss
Treasury stock reissued									313
Exercise of stock options
Employee stock plan tax benefits
Restricted stock cancellation									(88	)			114
Amortization of unearned compensation													232
Ending Balance, September 30, 2000				$	(22,832	)		$	(14,753	)		$	(1,438	)
For the nine months ended September 30, 1999:
Beginning Balance, January 1, 1999				$	(2,255	)		$	(15,985	)		$	(1,911	)
Comprehensive Income (loss):
	Net income
	Other comprehensive loss:
		Foreign currency translation adjustments			(7,099	)
		Comprehensive loss
Treasury stock reissued									775
Exercise of stock options									76
Restricted stock, net													(263	)
Amortization of unearned compensation													302
Ending Balance, September 30, 1999				$	(9,354	)		$	(15,134	)		$	(1,872	)

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ALLEN TELECOM INC.

1.	Significant Accounting Policies:

General

In the opinion of the management of Allen Telecom Inc. (the “Company”), the accompanying unaudited condensed consolidated interim financial statements reflect all adjustments necessary to present fairly the financial position of the Company as of September 30, 2000 and the consolidated results of its operations, cash flows and changes in stockholders’ equity for the periods ended September 30, 2000 and 1999 in accordance with accounting principles generally accepted in the United States of America. 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.

Consolidation Policy

The Company’s consolidated financial statements include the accounts of all wholly owned and majority owned subsidiaries. Intercompany accounts and transactions have been eliminated. To facilitate preparation of financial statements, the Company’s principal European operations are included in the consolidated financial statements on a two-month delayed basis.

Effective January 1, 2001, such European operations will change their fiscal year-end from October 31 to December 31, consistent with the balance of the Company’s operations. The results of operations for these European operations for the period November and December  2000 will be recorded directly to retained earnings in the first quarter of 2001 and the operations for January through March 31, 2000 will be included in first quarter reported results. This change in reporting period is not expected to have a significant effect on the consolidated reported results of operations.

2.	Special Charges (Gain):

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 ended 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, included termination costs of employees notified subsequent to December 31,

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1999, relocation costs, asset write-offs, and other termination related benefits. Of the charge, $393,000 relates to a non-cash write-off of capital assets and $1,285,000 are cash related charges.

In the third quarter of 2000, the Company recognized a non-cash pretax gain of $1,160,000, or $.03 per basic and diluted share after related income tax effect, with respect to a pension curtailment gain as a result of a reduction in workforce in connection with the aforementioned restructuring. Of the third quarter pretax gain, $406,000 was recorded in cost of sales and $754,000 in selling, general and administrative expenses. For the nine months ended September 30, 2000, the Company has incurred net pretax charges (related to the two items discussed above) of $518,000, or $.01 per basic and diluted share, after related income tax effect. Of the nine months charge, $554,000 was recorded in cost of sales and a gain of $36,000 in selling, general and administrative expense.

The following is a summary of the activity for exit costs incurred (amounts in thousands, except for employee data).

		Severance
						Number of				Sale of Building
		Accrual				Employees				and Equipment				Other
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			—				(98	)			—				—
Charged against accrual			(1,375	)			—				(506	)			(1,129	)
Balance September 30, 2000		$	326				—			$	2,158			$	346

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.

3.	Other Income:

Other income for the three and nine-months ended September 30, 1999 relates principally to a gain on sale of the Company’s investment in NextWave Telecom Inc. The aggregate impact of other income is $.07 and $.08 per basic and diluted share after related income tax effects, for the three and nine-month periods, respectively.

4.	Discontinued Operations:

The gain on sale from discontinued operations in 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 2000 and 1999 are net of related income taxes in the amount of $700,000 and $1,403,000, respectively.

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ALLEN TELECOM INC.

5.	Segment Disclosures:

The following table presents sales to external customers and results of operations for the Company’s two operating segments (amounts in thousands):

				Three Months Ended								Nine Months Ended
				September 30,								September 30,
				2000				1999				2000				1999
Sales to external customers:
	Telecommunications equipment			$	100,251			$	84,470			$	263,769			$	225,959
	Wireless engineering services				6,514				5,066				19,392				16,991
		Total sales		$	106,765			$	89,536			$	283,161			$	242,950
Results of operations:
	Telecommunications equipment			$	12,675			$	7,491			$	26,145			$	15,050
	Wireless engineering services				1,005				(180	)			3,902				1,275
					13,680				7,311				30,047				16,325
Other income					—				3,013				—				3,238
Goodwill amortization					(1,980	)			(1,733	)			(5,841	)			(5,195	)
General corporate expenses					(2,047	)			(1,574	)			(5,495	)			(4,456	)
Net financing costs					(2,369	)			(2,128	)			(6,538	)			(6,120	)
Income before taxes and minority interests				$	7,284			$	4,889			$	12,173			$	3,792

6.	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 limited 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 December 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 101 (SAB 101), “ Revenue Recognition in Financial Statements”. SAB 101 summarizes certain of the staff’s views in applying generally accepted accounting principles to revenue recognition in financial statements. SAB 101 is effective no later than the fourth fiscal quarter of fiscal years beginning after December 15, 1999. The provisions of SAB 101 did not require any change in the Company’s revenue recognition policies and practices.

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Results of Operations

Allen Telecom Inc. reported income from continuing operations of $4.3 million or $.15 per common share (all per share information relates to both basic and fully diluted earnings per common share) for the three months ended September 30, 2000, as compared with $2.6 million ($.10 per share) for the three months ended September 30, 1999. For the nine months ended September 30, 2000 the Company reported $7.1 million of income from continuing operations ($.25 per share), as compared with $1.2 million ($.04 per share) in 1999. Total sales for the three months ended September 30, 2000 increased 19% from $89.5 million in the third quarter 1999 to $106.8 million in the third quarter 2000. Sales for the nine months ended September 30, 2000 increased 17% over the same period last year from $243.0 million to $283.2 million, respectively.

The results of operations for the three months ending September 30, 2000 include a pretax gain of approximately $1.2 million, or $.03 per share after related income tax effect, with respect to a pension curtailment gain as a result of a reduction in force in connection with the restructuring announced during the fourth quarter of 1999. For the nine months ended September 30, 2000, the Company has incurred net pretax charges of $.5 million, or $.01 per share, after related income tax effect. This net charge includes, in addition to the aforementioned gain, incremental costs for the discontinuance of certain product lines, the closing of a manufacturing facility, employee termination costs and other items reflected in the first quarter of 2000. Of the third quarter pretax gain, $.4 million was recorded in cost of sales and $.8 million in selling, general and administrative expenses. Of the nine months net charge, $.6 million was recorded in cost of sales and a gain of $.1 million in selling, general and administrative expenses. See Note 2 of Notes to Condensed Consolidated Financial Statements for additional information concerning such special items.

Telecommunications Equipment Manufacturing:

Telecommunications Equipment Manufacturing sales increased $15.9 million, or 19%, from $84.4 million in the third quarter 1999 to $100.3 million in the third quarter 2000. Sales increased approximately 17% from $226.0 million for the nine-month period ended September 30, 1999 to $263.8 million for the nine-month period ended September 30, 2000. Increasing demand for antenna and site management products drove the sales increase in both periods. Geographically, all regions showed sales increases with the exception of Asia, which had a decrease in the sales of low margin cable products to China. Sales by product line were as follows:

		Three Months Ended								Year To Date
Sales By Product Line
($ Millions)		3Q 2000				3Q 1999				3Q 2000				3Q 1999
Systems Products		$	20.4			$	24.2			$	58.7			$	70.0
Site Management and Other Non-Antenna Products			52.4				39.1				137.5				102.5
Mobile and Base Station Antennas			27.5				21.1				67.6				53.5
Total Telecommunications Equipment Manufacturing		$	100.3			$	84.4			$	263.8			$	226.0

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ALLEN TELECOM INC.

The strong U.S. dollar relative to the Euro negatively impacted sales and pretax income of European operations in the third quarter 2000 as compared to the third quarter 1999. As a result of exchange differences, reported sales and pretax income in the three months ended September 30, 2000 were $5.7 million and $0.9 million lower, respectively, as compared with the corresponding prior year period, assuming the exchange rates stayed the same. For the nine months ended September 30, 2000, the reported sales and pretax income were $17.2 million and $3.1 million lower, respectively.

Backlog for the Telecommunications Equipment Manufacturing Segment at September 30, 2000 increased 12% from June 30, 2000 to $128.8 million from $114.6 million, and 54% from $83.6 million at December 31, 1999 to September 30, 2000.

Gross profit margins were 29% in the third quarter of 2000 (29.4% for the nine months ended September 30, 2000), as compared with 29.2% in the third quarter of 1999 (29.5% for the nine months ended September 30, 1999), prior to the aforementioned special charges and gain.

Selling, general and administrative expenses were $10.6 million, or 10.6% of sales, and $9.8 million, or 11.6% of sales (excluding special gains and charges), for the third quarters of 2000 and 1999, respectively. These higher costs were related primarily to higher incentive compensation and sales commission expenses; however, the ratio of expenses to sales decreased from the third quarter of 1999 to the third quarter of 2000 due to the spreading of fixed costs on higher sales. For the nine-month periods ended September 30, 2000 and 1999, the ratio of selling, general and administrative expenses to sales were 11.9% and 12.8% (excluding special charges and gain), respectively.

Wireless Engineering Services:

Wireless Engineering Services sales were up $1.4 million, or 27%, from $5.1 million in third quarter 1999 to $6.5 million in third quarter 2000. This increase was due primarily to higher software and engineering consulting sales. Sales were up approximately $2.4 million or 14% from $17.0 million for the nine-month period ended September 30, 1999 to $19.4 million for the nine-month period ended September 30, 2000.

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ALLEN TELECOM INC.

Gross profit margins for Wireless Engineering Services were 37.9% in the third quarter of 2000 (40.9% for the nine months ended September 30, 2000), as compared with 23.1% in the third quarter of 1999 (27.8% for the nine months ended September 30, 1999). This margin increase is primarily attributable to an increase in higher margin software sales, as well as the benefits from restructuring actions taken during the fourth quarter of 1999, which improved margins of the engineering product lines. In addition, the increased utilization of available engineers contributed to the higher margins.

The selling, general and administrative expenses for Wireless Engineering Services were 22.5% and 26.6% of sales for the third quarters of 2000 and 1999, respectively. The ratio of expenses to sales decreased from the third quarter of 1999 to the third quarter of 2000 due to the spreading of fixed costs on higher sales. For the nine-month period ended September 30, 2000 and 1999 the ratios of selling, general and administrative expense to sales were 20.5% and 20.3%, respectively.

Research and Development:

Research and development and new product engineering costs were flat at $6.9 million and 6.9% and 8.2% of sales in the third quarter of 2000 and 1999, respectively. The decreased rate is attributable to the fourth quarter 1999 sale of the Company’s SSI government development business, which primarily had R&D expenditures. The Company expects R&D spending to gradually increase due to development efforts on new products and continued spending on E911 Geolocation products.

Interest and Financing Expenses:

Net interest and financing costs increased from $6.1 million for the nine months ended September 30, 1999 to $6.5 million for the nine months ended September 30, 2000, and from $2.1 million in the third quarter 1999 to $2.4 million in the third quarter of 2000. The principal reasons for the increase are a higher level of outstanding borrowings, as well as higher average interest rates.

Provision for Income Taxes:

The Company’s effective tax rate was approximately 41.0% for the quarter and nine months ended September 30, 2000 as compared with approximately 37.0% for the comparable 1999 periods. The principal reason for the increase is higher income relating to the Company’s foreign operations, which are taxed at rates higher than the United States. The effective tax rate percentage for the nine months ended September 30, 2000 is in line with the Company’s current expectation for the full year.

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ALLEN TELECOM INC.

Minority Interests:

Minority interest expense decreased from $1.2 million to $.1 million and from $.4 million to $.1 million in the nine and three months ended September 30, 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 used $2.3 million of cash by operating activities for the nine months ended September 30, 2000 as compared to using $12.5 million for the comparable 1999 period. The improvement in cash flow from operations is principally due to increased income from operations. The Company used $18.4 million of cash in investing activities in the first nine months of 2000, due primarily to the payment of purchase price for the minority interests of European subsidiaries and capital expenditures, as compared to generating $12.7 million in 1999. The 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 provided by financing activities for the period ended September 30, 2000 was $20.7 million as compared with cash usage of $5.6 million for the comparable 1999 period. Such change in cash flows is primarily due to proceeds from borrowings. At September 30, 2000, the Company had available unused worldwide lines of credit in the amount of approximately $65.0 million.

As indicated above, the strong U.S. dollar relative to the Euro has negatively impacted the translated value of the Company’s European operations, whose assets and liabilities are denominated principally in Euro currencies. As can be seen in the Condensed Consolidated Statements of Stockholders’ Equity, the “Accumulated Other Comprehensive Loss” (representing the net impact on the translated net asset investment of foreign subsidiaries) has increased from $10.7 million at December 31, 1999 to $22.8 million at September 30, 2000. This decline in the translated value of the Company’s net foreign asset position, despite increased earnings, is the principal reason for the small decline in Stockholders’ Equity at September 30, 2000 as compared with December 31, 1999.

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ALLEN TELECOM INC.

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, include, among others, the cost, success and timetable for new product development, including specifically products for 3G, E911, and power amplification, the health and economic stability of the world and national markets, the availability of capital and financing to the wireless carriers, the uncertain timing and level of purchases of both current products and those under development for current and prospective customers of the Company’s products and services, the impact of competitive products and pricing in the Company’s market, 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 and licensing for new wireless applications, and the cost and availability of financing for customers of the Company’s geolocation projects. Allen Telecom Inc.’s Annual Report on Form 10-K and Quarterly Reports on Form 10-Q contain additional details concerning these factors.

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ITEM 3 — QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under Item 7A 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
		(27) Financial Data Schedule.
(b)		REPORTS ON FORM 8-K.
		None

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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:		November 13, 2000		By:		/s/ Robert A. Youdelman
						Robert A. Youdelman Executive Vice President (Chief Financial Officer)
Date:		November 13, 2000		By:		/s/ James L. LePorte, III
						James L. LePorte, III Vice President — Finance (Principal Accounting Officer)

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EXHIBIT INDEX

Exhibit Number
(27)		Financial Data Schedule

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