SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) April 25, 1995
GLENAYRE TECHNOLOGIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 0-15761 98-0085742
(STATE OR OTHER JURISDICTION (COMMISSION (IRS EMPLOYER
OF INCORPORATION) FILE NUMBER) IDENTIFICATION NO.)
4201 Congress Street, Suite 455, Charlotte, North Carolina 28209
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Registrant's telephone number, including area code (704) 553-0038
Not applicable
(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT.)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On April 25, 1995, the Registrant acquired 100% of the outstanding Common
Stock of Western Multiplex Corporation, a California corporation ("MUX")
pursuant to the terms of an Acquisition Agreement (the "Acquisition Agreement")
dated as of January 3, 1995 among the Registrant, MUX Acquisition Corp., a
wholly-owned subsidiary of the Registrant ("Glenayre Sub"), MUX and certain
equity holders of MUX. Pursuant to the terms of the Acquisition Agreement,
Glenayre Sub was merged with and into MUX, with MUX as the surviving corporation
and continuing as a wholly-owned subsidiary of the Registrant. In connection
with the merger, each share of MUX Common Stock outstanding at April 25, 1995
was converted into .0943848 of a share of the Registrant's Common Stock. Cash
was paid in lieu of fractional shares. In addition, each issued and unexercised
option to purchase MUX Common Stock (a "MUX Stock Option") was converted into an
option to purchase that number of shares of the Registrant's Common Stock equal
to the number of shares of MUX Common Stock covered by the MUX Stock Option
multiplied by .0943848 and the exercise price was proportionately adjusted. A
total of 526,767 shares of the Registrant's Common Stock was issued in the
merger in exchange for MUX Common Stock, and a total of 223,203 shares of the
Registrant's Common Stock was reserved for issuance upon the exercise of MUX
Stock Options. The terms of the Acquisition Agreement, including the
consideration to be paid, were negotiated on an arms-length basis by senior
members of the managements of the Registrant and MUX. During the negotiations,
the Registrant based its valuation of MUX on (i) its assessment of valuation
parameters of companies in the same or related business as MUX; (ii) MUX's
historical financial results and its prospects; and (iii) the potential effects
that a transaction would have on the Registrant's financial results.
MUX designs, manufactures and markets products for use in point-to-point
microwave communications systems. These products include microwave radios, both
in analog and digital transmission formats, and analog baseband products.
MUX's products are sold to communications service providers, including cellular,
specialized mobile radio and inter-exchange common carriers; industrial
companies, including utilities, railroads and petroleum producers; federal,
state and local governmental entities; and users of wireless data
communications. The Registrant currently intends to continue to use the plant,
equipment and other physical property of MUX to design, manufacture and market
the same or similar products.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Businesses Acquired.
(1) The consolidated financial statements of Western Multiplex
Corporation for its fiscal year ended June 30, 1994, including the
Consolidated Balance Sheet as of June 30, 1994, the Consolidated
Statement of Income for the year ended June 30, 1994, the
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Consolidated Statement of Cash Flows for the year ended June 30,
1994, the notes to the June 30, 1994 Consolidated Financial
Statements and the related report on such financial statements of
Shilling & Kenyon, Inc., are incorporated by reference to the
Registrant's Registration Statement on Form S-4, registration no.
33-88818. A copy of such financial statements, the related notes
and the report of Shilling & Kenyon, Inc. is attached hereto as
Exhibit 99.
(2) Consolidated financial statements of Western Multiplex Corporation
for the nine-months ended March 31, 1995 are not available at this
time but will be filed by the Registrant as an amendment to this
Form 8-K as soon as they are available but in any event no later
than July 10, 1995.
(b) Pro forma financial information.
(1) Pro forma financial information for the Registrant with respect to
the acquisition of Western Multiplex Corporation by the Registrant
is not available at this time but will be filed by the Registrant
as an amendment to this Form 8-K as soon as it is available but in
any event no later than July 10, 1995.
(c) Exhibits
2 Acquisition Agreement dated as of January 3, 1995, incorporated by
reference to Exhibits 2.1 and 2.2 to the Registrant's Registration
Statement on Form S-4, registration number 33-88818.
23 Consent of Shilling & Kenyon, Inc.
99 Consolidated Financial Statements of Western Multiplex Corporation
for the fiscal year ended June 30, 1994.
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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.
GLENAYRE TECHNOLOGIES, INC.
By /s/ Stanley Ciepcielinski
Stanley Ciepcielinski
Executive Vice President and
Chief Financial Officer
Dated: May 9, 1995
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
EXHIBITS
FORM 8-K
CURRENT REPORT
Date of Report Commission File Number
April 25, 1995 0-15761
GLENAYRE TECHNOLOGIES, INC.
EXHIBIT INDEX
Exhibit No Exhibit Description
2 Acquisition Agreement dated as of January 3, 1995,
incorporated by reference to Exhibits 2.1 and 2.2 to the
Registrant's Registration Statement on Form S-4, registration no.
33-88818.
23 Consent of Shilling & Kenyon, Inc. (page 6 of the
sequentially numbered pages).
99 Consolidated financial statements of Western Multiplex
Corporation for the fiscal year ended June 30, 1994 (page 7 of
the sequentially numbered pages).
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EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference into this Current Report on
Form 8-K for Glenayre Technologies, Inc. dated April 25, 1995 of our report
dated August 8, 1994 relating to the financial statements of Western Multiplex
Corporation for the fiscal year ended June 30, 1994 included in the Registration
Statement on Form S-4 of Glenayre Technologies, Inc., registration number 33-
88818.
SHILLING & KENYON, INC.
San Jose, California
May 9, 1995
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EXHIBIT 99
INDEPENDENT AUDITORS' REPORT
To the Stockholders
Western Multiplex Corporation
We have audited the accompanying consolidated balance sheet of Western
Multiplex Corporation as of June 30, 1994, and the related consolidated
statements of income, stockholders' equity and cash flows for the year then
ended. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Western Multiplex Corporation as of June 30, 1994, and the results of its
operations and its cash flows for the year then ended in conformity with
generally accepted accounting principles.
Shilling & Kenyon, Inc.
San Jose, California
August 8, 1994
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WESTERN MULTIPLEX CORPORATION
CONSOLIDATED BALANCE SHEET
JUNE 30, 1994
ASSETS
CURRENT ASSETS
Cash and cash equivalents - Note 3 $ 1,067,505
Accounts receivable, less allowance for
doubtful accounts of $20,000 - Notes 3 and 4 2,641,080
Inventories - Notes 2, 3 and 4 2,598,510
Prepaid expenses 34,617
Deferred income taxes - Note 9 287,896
Total current assets 6,629,608
PROPERTY AND EQUIPMENT - Notes 3,4 and 5
Office equipment 407,843
Test and production equipment 1,031,928
Equipment under capital lease obligations 632,726
Leasehold improvements 28,851
2,101,348
Less accumulated depreciation and amortization 1,207,304
894,044
OTHER ASSETS
Deposits 22,295
Other assets 76,381
98,676
$ 7,622,328
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WESTERN MULTIPLEX CORPORATION
CONSOLIDATED BALANCE SHEET
JUNE 30, 1994
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt $ 50,580
Current portion of obligations under capital leases 182,654
Accounts payable 261,453
Accrued expenses - Note 6 1,623,909
Income taxes payable 922,960
Total current liabilities 3,041,556
LONG-TERM DEBT, less current portion - Note 4 31,505
OBLIGATIONS UNDER CAPITAL LEASES, less current portion -
Note 5 329,812
DEFERRED INCOME TAXES - Note 9 182,000
COMMITMENTS - Note 10 -
STOCKHOLDERS' EQUITY - Note 8
Common stock, no par value, 25,000,000
shares authorized, 5,477,445 outstanding 749,132
Retained earnings 3,288,323
4,037,455
$ 7,622,328
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WESTERN MULTIPLEX CORPORATION
CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED JUNE 30, 1994
Amount Percent
NET SALES $ 15,759,232 100.0%
COST OF SALES 7,117,086 45.2
GROSS PROFIT 8,642,146 54.8
OPERATING EXPENSES
Sales and marketing 2,265,301 14.4
Engineering and development 1,511,463 9.6
General and administrative 1,948,091 12.3
5,724,855 36.3
OPERATING INCOME 2,917,291 18.5
OTHER INCOME (EXPENSE)
Interest (net) (26,630) (.1)
Other 14,429 -
(12,201) (.1)
INCOME BEFORE INCOME TAXES 2,905,090 18.4
PROVISION FOR INCOME TAXES - Note 9 1,220,000 7.7
NET INCOME $ 1,685,090 10.7%
INCOME PER COMMON SHARE $ .23
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WESTERN MULTIPLEX CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
YEAR ENDED JUNE 30, 1994
Total
Common Stock Retained Stockholders'
Shares Amount Earnings Equity
BALANCES,
July 1, 1993 5,444,945 $ 734,932 $ 1,603,233 $ 2,338,165
ISSUANCE OF COMMON
STOCK - Note 8 32,500 14,200 - 14,200
NET INCOME - - 1,685,090 1,685,090
BALANCES,
June 30, 1994 5,477,445 $ 749,132 $ 3,288,323 $ 4,037,455
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WESTERN MULTIPLEX CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
YEAR ENDED JUNE 30, 1994
CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from customers $ 14,820,527
Cash paid to suppliers and employees (12,988,145)
Income taxes paid (306,863)
Interest paid (31,513)
Interest received 4,883
Net cash provided by operating
activities 1,498,889
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (109,583)
Change in other assets (29,416)
Net cash used by investing activities (138,999)
CASH FLOWS FROM FINANCING ACTIVITIES
Notes payable to bank (250,000)
Payments on long term debt and capital lease
obligations (158,692)
Proceeds from issuance of common stock 14,200
Net cash used by financing activities (394,492)
NET INCREASE IN CASH AND CASH EQUIVALENTS 965,398
CASH AND CASH EQUIVALENTS, July 1, 1993 102,107
CASH AND CASH EQUIVALENTS, June 30, 1994 $ 1,067,505
SUPPLEMENTAL DISCLOSURE OF NON-CASH TRANSACTIONS:
During the year ended June 30, 1994, the Company entered into capital lease
obligations for equipment totaling approximately $367,700.
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WESTERN MULTIPLEX CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)
YEAR ENDED JUNE 30, 1994
RECONCILIATION OF NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES
Net income $ 1,685,090
Adjustments to reconcile net income to
net cash provided by operating activities
Depreciation and amortization 336,125
Deferred income taxes (1,896)
Bad debts (20,491)
Cash provided by (used for):
Accounts receivable (932,643)
Inventories (957,497)
Prepaid expenses 15,764
Accounts payable (309,913)
Accrued expenses 769,317
Income taxes payable 915,033
Total adjustments (186,201)
Net cash provided by operating activities $ 1,498,889
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WESTERN MULTIPLEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1994
NOTE 1 - DESCRIPTION OF OPERATIONS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
(a) Western Multiplex Corporation (the Company) was founded and incorporated
under the laws of California in December, 1979. The Company is engaged in the
development, manufacture, and distribution of analog and digital microwave radio
and baseband equipment.
(b) The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiary, Western Multiplex International Sales
Corporation, a Domestic International Sales Corporation (DISC). All
significant intercompany accounts have been eliminated.
(c) Revenue is recognized at the time products are shipped to customers.
(d) Inventories are stated at the lower of average cost or market.
(e) Property and equipment are stated at cost. Depreciation is computed on
the straight-line and accelerated methods, with useful lives ranging from three
to seven years. Leasehold improvements are amortized over the shorter of the
lease term or the estimated useful life.
(f) The Company warrants certain products from between one and five years
after sale. A provision for estimated warranty costs is recorded at the time of
sale.
(g) All research and development costs are expensed as incurred.
(h) For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three months or less
to be cash equivalents.
(i) The Company accounts for income taxes in accordance with statement of
Financial Accounting Standards (SFAS) No. 109, Accounting For Income Taxes.
Tax credits are recorded as a reduction of tax expense when realized.
(j) Primary income per common share was computed by dividing net income by
the weighted average number of shares of common stock outstanding plus the
shares that would be outstanding assuming exercise of dilutive stock options,
which are considered to be common stock equivalents.
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WESTERN MULTIPLEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1994
NOTE 2 - INVENTORIES
Inventories consist of the following:
Raw materials $ 1,056,462
Work-in-process 357,939
Finished goods 1,184,109
$ 2,598,510
NOTE 3 - NOTE PAYABLE TO BANK
The Company has a $1,000,000 bank line of credit which bears interest at the
bank's prime rate (6.75% at June 30, 1994) plus 1.25%. Maximum borrowings are
limited to eighty percent of eligible accounts receivable plus the lesser of
$200,000 or twenty percent of inventories. The line is secured by substantially
all the assets of the Company. The credit agreement requires the Company, among
other things, to maintain a minimum quick ratio of .75 to 1, minimum working
capital of $1,250,000 and a maximum debt to net worth ratio of 1.25 to 1. There
were no outstanding borrowings on the line at June 30, 1994.
In addition, the Company has a $500,000 term debt facility available under
the above agreement through November, 1994 for the purchase of equipment. There
were no borrowings outstanding under this facility at June 30, 1994.
NOTE 4 - LONG-TERM DEBT
Long-term debt consists of the following:
Note payable, secured by accounts receivable,
inventories and equipment, with monthly principal and
interest
payments of $3,265 through November, 1995, with interest
at the
Bank's prime rate plus 2% $ 55,485
Note payable, secured by accounts receivable,
inventories and equipment, with monthly principal and
interest
payments of $950 monthly through November, 1996, with
interest at the Bank's prime rate plus 2% 26,600
82,085
Less current portion 50,580
$ 31,505
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WESTERN MULTIPLEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1994
NOTE 4 - LONG-TERM DEBT (CONTINUED)
Maturities on long-term debt are as follows:
Year Ending
June 30,
1995 $ 50,580
1996 27,705
1997 3,800
$ 82,085
NOTE5 - OBLIGATIONS UNDER CAPITAL LEASES
The Company leases equipment which is classified as capital leases and
consists of the following:
Equipment $ 632,726
Less accumulated amortization 164,346
$ 468,380
The capital leases expire on various dates through February, 1999. The
following is a schedule by year of future minimum lease payments under these
leases together with the present value of the net minimum lease payments:
Year Ending
June 30,
1995 $ 231,723
1996 117,905
1997 108,435
1998 88,044
1999 43,569
Total payments 589,676
Less amounts representing interest 77,210
Present value of minimum lease payments 512,466
Current portion 182,654
Obligations under capital leases, less current portion $ 329,812
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WESTERN MULTIPLEX CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1994
NOTE 6 - ACCRUED EXPENSES
Accrued expenses consists of the following:
Wages and related taxes and benefits $ 647,543
ESOP payable 306,537
Bonus payable 394,759
Warranty accrual 175,000
Other 100,070
$ 1,623,909
NOTE 7 - EMPLOYEE BENEFIT PLANS
The Company has an Employee Stock Option Plan (ESOP) which covers
substantially all qualified employees. Contributions are determined annually by
the Board of Directors. The Company contributed approximately $516,500 to the
plan for the year ended June 30, 1994.
In addition, the Company has a 401(k) plan which covers all qualified
employees. Semi-annual employer contributions to the plan are made at the
discretion of the Board of Directors. The employer also matches 50% of employee
contributions up to 2% of eligible compensation. The Company contributed
approximately $141,300 to the plan for the year ended June 30, 1994.
NOTE 8 - STOCK OPTIONS
The Company has an incentive stock option plan that covers substantially
all employees. Under the provisions of the plan options may be granted to
employees to purchase common stock. The option price under the plan is
determined by the Board of Directors and will not be less than the fair market
value of the stock on the date the option is granted. Options are granted for a
period not to exceed five years; some are exercisable at the date of grant,
while others are exercisable according to a vesting schedule. The Company has
the right of first refusal, to purchase at fair market value, shares issued
under the plan.
At June 30, 1994, 1,903,750 shares are fully vested and no shares were
available for future grant.
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WESTERN MULTIPLEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1994
NOTE 8 - STOCK OPTIONS (CONTINUED)
A summary of stock option activity follows:
Option
Shares Price
Balance, July 1, 1993 2,168,750 $ .39-.51
Options granted 332,500 1.40
Options exercised (32,500) .39-.51
Balance, June 30, 1994 2,468,750 $ .39-1.40
NOTE 9 - PROVISION FOR INCOME TAXES
The provision for income taxes consist of the following:
Current
Federal $ 1,032,200
State 297,800
Less research and development tax credits (100,000)
1,230,000
Deferred
Federal 12,000
State (22,000)
(10,000)
$ 1,220,000
The effective tax rate differs from the federal statutory tax rate as
follows:
Tax computed at federal statutory rate 34.0%
State income taxes, net of federal benefit 6.6
Research and development tax credits (3.4)
Non-deductible expenses and other items 4.8
42.0%
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WESTERN MULTIPLEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1994
NOTE 9 - PROVISION FOR INCOME TAXES (CONTINUED)
The tax effects of temporary differences that give rise to deferred tax
assets and deferred tax liabilities are as follows:
Deferred tax assets:
Accounts receivable, due to allowances for
doubtful accounts $ 6,660
Inventories, due to reserves and capitalized costs
for tax purposes 73,240
Warranty accrued 72,775
Vacation accrual 49,800
State taxes 85,421
Gross deferred tax assets 287,896
Deferred tax liabilities:
Depreciation (42,400)
Undistributed earnings of the DISC (139,600)
Gross deferred tax liabilities (182,000)
Net deferred tax assets $ 105,896
NOTE 10 - COMMITMENTS
The Company has a noncancelable operating lease for its office,
manufacturing and warehousing facilities. The lease expires on April 30, 1998
with scheduled rent increase after July, 1995.
Future minimum lease payment are approximately as follows:
Year Ending
June 30,
1995 $ 267,000
1996 293,000
1997 296,000
1998 246,000
$ 1,102,000
Total rent expense was approximately $271,500 for the year ended June 30,
1994. Company subleases a portion of the facilities on a month to month basis.
Sublease income was approximately $31,800 for the year ended June 30, 1994.
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WESTERN MULTIPLEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1994
NOTE 12 - SUBSEQUENT EVENT
Subsequent to June 30, 1994, the Company authorized a 5 for 1 stock split.
All share and per share amounts have been restated to reflect the split.
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