SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to ___________
Commission File Number 0-15761
GLENAYRE TECHNOLOGIES, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 98-0085742
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
4201 CONGRESS STREET, SUITE 455, CHARLOTTE, NORTH CAROLINA 28209
(Address of principal executive offices) Zip Code
(704) 553-0038
(Registrant's telephone number, including area code)
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 (or for such shorter period
that the Registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes X No
The number of shares outstanding of the Registrant's common stock, par
value $.02 per share, at July 26, 1995 was 38,968,626 shares.
<PAGE>
GLENAYRE TECHNOLOGIES, INC.
Index
Part I - Financial Information:
Item 1. Financial Statements Page
Independent Accountants' Review Report............................ 3
Condensed Consolidated Balance Sheets as of
June 30,1995 (Unaudited) and December 31, 1994................... 4
Condensed Consolidated Statements of Operations for the
six months ended June 30, 1995 and 1994 (Unaudited)............. 5
Condensed Consolidated Statements of Operations for the
three months ended June 30, 1995 and 1994 (unaudited)........... 6
Condensed Consolidated Statement of Stockholders' Equity
for the six months ended June 30, 1995 (Unaudited).............. 7
Condensed Consolidated Statements of Cash Flows for the
six months ended June 30, 1995 and 1994 (Unaudited)............. 8
Notes to Condensed Consolidated Financial Statements (Unaudited)... 9
.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............ 12
Part II - Other Information:
Item 4. Submission of Matters to a Vote of Security Holders.... 15
Item 6. Exhibits and Reports on Form 8-K.............................. 15
2
<PAGE>
Independent Accountants' Review Report
To the Board of Directors and Stockholders of
Glenayre Technologies, Inc.
Charlotte, North Carolina
We have reviewed the accompanying condensed consolidated balance sheet
of Glenayre Technologies, lnc. and subsidiaries as of June 30, 1995,
and the related condensed consolidated statements of operations for the
six-month period and three-month period ended June 30, 1995, the
condensed consolidated statement of stockholders' equity for the six
months ended June 30, 1995 and the condensed consolidated statement of
cash flows for the six-month period ended June 30, 1995. These
financial statements are the responsibility of the Company's
management. The condensed consolidated balance sheet of Glenayre
Technologies, Inc. and subsidiaries as of June 30, 1994, and the
related condensed consolidated statement of operations for the six-
month period and three-month period ended June 30, 1994, the condensed
consolidated statement of stockholders' equity for the six months ended
June 30, 1994 and the condensed consolidated statement of cash flows
for the six-month period ended June 30, l994 were reviewed by other
accountants whose report (dated July 26, 1994) stated that they were
not aware of any material modifications that should be made to those
statements for them to be in conformity with generally accepted
accounting principles.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical
procedures to financial data, and making inquiries of persons
responsible for financial and accounting matters. It is substantially
less in scope than an audit conducted in accordance with generally
accepted auditing standards, which will be performed for the full year
with the objective of expressing an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an
opinion.
Based on our review, we are not aware of any material modifications
that should be made to the accompanying condensed consolidated
financial statements at June 30, 1995, and for the three-month and six-
month periods then ended for them to be in conformity with generally
accepted accounting principles.
The consolidated balance sheet of Glenayre Technologies, Inc. as of
December 31, 1994, and the related consolidated statements of
operations, stockholders' equity, and cash flows for the year then
ended (not presented herein) were previously audited, in accordance
with generally accepted auditing standards, by other auditors who
expressed an unqualified opinion dated February 3, 1995 on those
financial statements. In our opinion, the information set forth in the
accompanying condensed consolidated balance sheet as of December 31,
1994, is fairly stated, in all material respects, in relation to the
consolidated balance sheet from which it has been derived.
Ernst & Young LLP
Charlotte North Carolina
July 21, l995
3
<PAGE>
GLENAYRE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
June 30, 1995 December 31, 1994
ASSETS (Unaudited)
Current Assets:
Cash and cash equivalents $ 64,424 $ 52,043
Short-term investments 39,064 39,462
Accounts receivable, net 56,158 33,707
Trade notes receivable, current 5,408 8,816
Inventories (Note 3) 48,134 24,261
Deferred income taxes 4,579 6,518
Prepaid expenses and other current
assets 5,048 5,526
Total current assets 222,815 170,333
Trade notes receivable 15,213 12,480
Property, plant and equipment, net 26,933 17,707
Goodwill (Note 4) 81,939 61,436
Deferred income taxes 27,631 22,510
Other assets 307 495
TOTAL ASSETS $374,838 $284,961
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 16,219 $ 9,871
Accrued liabilities 36,533 25,035
Other current liabilities 336 218
Total current liabilities 53,088 35,124
Other liabilities 5,226 4,402
Stockholders' Equity (Note 6):
Preferred stock, $.01 par value;
5,000,000 shares authorized, no
shares issued and outstanding -- --
Common stock, $.02 par value;
authorized 50,000,000 shares;
outstanding: June 30, 1995 -
38,952,147 shares; December 31, 1994
- 37,327,693 shares 779 747
Contributed capital 261,743 216,235
Retained earnings from February 1, 1988 54,002 28,453
Total stockholders' equity 316,524 245,435
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $374,838 $284,961
Note: The balance sheet at December 31, 1994 has been derived from the
audited financial statements at that date but does not include all
of the information and footnotes required by generally accepted
accounting principles for complete financial statements.
See notes to condensed consolidated financial statements.
4
<PAGE>
GLENAYRE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except per share amounts)
(unaudited)
Six Months Ended
June 30,
1995 1994
NET SALES (Notes 1 and 2) $134,841 $79,899
COSTS AND EXPENSES:
Cost of sales 58,181 34,447
Selling, general and
administrative expense 24,225 18,461
Research and development expense 10,644 7,168
Depreciation and amortization expense 3,521 2,837
Total costs and expenses 96,571 62,913
INCOME FROM OPERATIONS 38,270 16,986
OTHER INCOME (EXPENSES):
Interest income 4,067 1,900
Interest expense (84) (183)
Foreign exchange gain (loss) 97 (317)
Other, net (53) (78)
Total other income (expenses), net 4,027 1,322
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 42,297 18,308
PROVISION FOR INCOME TAXES (Note 5) 10,292 3,242
INCOME FROM CONTINUING OPERATIONS 32,005 15,066
DISCONTINUED OPERATIONS (Note 2) -- 388
NET INCOME $32,005 $15,454
PRIMARY INCOME PER COMMON SHARE (Note 6):
Continuing operations $ .78 $ .39
Discontinued operations -- .01
NET INCOME PER COMMON SHARE - PRIMARY $ .78 $ .40
FULLY DILUTED INCOME PER COMMON SHARE
(Note 6):
Continuing operations $ .78 $ .39
Discontinued operations -- .01
NET INCOME PER COMMON SHARE - FULLY
DILUTED $ .78 $ .40
See notes to condensed consolidated financial statements.
5
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GLENAYRE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except per share amounts)
(unaudited)
Three Months
Ended
June 30,
1995 1994
NET SALES (Notes 1 and 2) $74,979 $41,453
COSTS AND EXPENSES:
Cost of sales 32,322 18,013
Selling, general and administrative expense 12,274 9,463
Research and development expense 5,945 3,903
Depreciation and amortization expense 1,929 1,432
Total costs and expenses 52,469 32,811
INCOME FROM OPERATIONS 22,509 8,642
OTHER INCOME (EXPENSES):
Interest income 2,086 1,076
Interest expense (39) (71)
Foreign exchange gain (loss) 65 (232)
Other, net 6 (21)
Total other income (expenses), net 2,118 752
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 24,627 9,394
PROVISION FOR INCOME TAXES (Note 5) 6,404 1,669
INCOME FROM CONTINUING OPERATIONS 18,223 7,725
DISCONTINUED OPERATIONS (Note 2) -- 225
NET INCOME $18,223 $7,950
PRIMARY INCOME PER COMMON SHARE (Note 6):
Continuing operations $ .44 $ .20
Discontinued operations -- --
NET INCOME PER COMMON SHARE - PRIMARY $ .44 $ .20
FULLY DILUTED INCOME PER COMMON SHARE (Note 6):
Continuing operations $ .44 $ .20
Discontinued operations -- --
NET INCOME PER COMMON SHARE - FULLY DILUTED $ .44 $ .20
See notes to condensed consolidated financial statements.
6
<PAGE>
GLENAYRE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(dollars and shares in thousands)
(unaudited)
<TABLE>
<CAPTION>
Total
Common Stock Contributed Retained Stockholders'
Shares Amount Capital Earnings Equity
<S> <C> <C> <C> <C> <C>
Balances, December 31, 1994 37,328 $747 $216,235 $28,453 $245,435
Net income 32,005 32,005
Stock options exercised 834 16 5,182 5,198
Shares issued and options assumed in
connection with business acquisition
(Note 1) 790 16 27,249 27,265
Utilization of net operating
loss carryforwards (Note 5) 6,456 (6,456)
Tax benefit of stock options
exercised 6,621 6,621
Balances, June 30, 1995 38,952 $779 $261,743 $54,002 $316,524
</TABLE>
See notes to condensed consolidated financial statements.
7
<PAGE>
GLENAYRE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
(unaudited)
Six Months Ended June 30,
1995 1994
NET CASH PROVIDED BY OPERATING
ACTIVITIES $ 16,599 $ 11,868
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of plant and equipment (10,168) (3,131)
Proceeds from sale of equipment 15 8
Maturities of short-term investments 49,260 --
Purchases of short-term investments (48,862) (24,583)
Cash acquired net of acquisition costs (Note 1) 400 --
NET CASH USED IN INVESTING ACTIVITIES (9,355) (27,706)
CASH FLOWS FROM FINANCING ACTIVITIES:
Changes in other liabilities (61) (1,254)
Issuance of common stock 5,198 1,995
NET CASH PROVIDED BY FINANCING
ACTIVITIES 5,137 741
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 12,381 (15,097)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 52,043 66,099
CASH AND CASH EQUIVALENTS AT END OF PERIOD $64,424 $51,002
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Interest $ 80 $ 90
Income taxes 1,027 1,159
SUPPLEMENTAL INFORMATION OF NONCASH
INVESTING AND FINANCING ACTIVITIES:
On April 25, 1995, the Company acquired
Western Multiplex Corporation ("MUX").
In connection with this acquisition the
Company paid $1,303,000 in cash and
issued stock valued at $27,260,000 for
assets with a fair value of $9,074,000
and assumed liabilities of $3,186,000.
See notes to condensed consolidated financial statements.
8
<PAGE>
GLENAYRE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(tabular amounts in thousands of dollars except per share data)
(unaudited)
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions
to Form 10-Q and Article 10 of Regulation S-X . Accordingly, they do
not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In
the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three-and six-month periods
ended June 30, 1995 are not necessarily indicative of the results that
may be expected for the year ended December 31, 1995. The Company's
financial results in any quarter are highly dependent upon various
factors, including the timing and size of customer orders and the
shipment of products for large orders. Large orders from customers can
account for a significant portion of products shipped in any quarter.
Accordingly, the shipment of products in fulfillment of such large
orders can dramatically affect the results of operations of any single
quarter.
For further information, refer to the consolidated financial statements
and footnotes thereto included in the Glenayre Technologies, Inc.
annual report on Form 10-K for the year ended December 31, 1994.
1. BUSINESS ACQUISITION
On April 25, 1995 the Company completed the acquisition of Western
Multiplex Corporation ("MUX"), located in Belmont, California. MUX
designs, manufactures and markets products for use in point-to-
point microwave communication systems. The purchase price of
approximately $28.6 million consisted of 1,124,955 shares of the
Company's common stock (including 334,805 shares issuable upon
exercise of stock options) valued at approximately $27.3 million
and approximately $1.3 million in acquisition costs. The
consolidated financial statements for the six-months ended June 30,
1995 include the operating results of MUX for the period April 25,
1995 to June 30, 1995. The acquisition was accounted for as a
purchase and the purchase price was assigned to the net assets
acquired based on the fair values of such assets and liabilities at
the date of the acquisition, as follows:
Current assets $ 7,886
Property, plant and equipment 1,188
Goodwill 21,978
Deferred tax asset 704
Liabilities assumed (3,186)
$ 28,570
The following table summarizes, on an unaudited pro forma basis,
the estimated combined results of operations for the six-month
periods ended June 30, 1995 and 1994 as if the acquisition of MUX
had occurred at January 1, 1994, after giving effect to an
adjustment to amortization of goodwill related to the acquisition.
These pro forma results have been prepared for comparative purposes
only and do not purport to be indicative of what would have
occurred had the acquisition been made on that date.
Six Months Ended June 30,
1995 1994
Net Sales $142,948 $ 88,996
Income from continuing operations 32,518 15,590
Income from continuing operations per common share $ .78 $ .40
9
<PAGE>
2. DISCONTINUED OPERATIONS
Real Estate Operations
Following the November 1992 acquisition (the "Acquisition") of the
telecommunications equipment manufacturing and related software
business of Glentel Inc. of Vancouver, British Columbia, Canada
(the "GEMS Business") the Company restructured its real estate
operations. On July 6, 1993, the Company adopted a formal plan
which called for the disposal of its remaining real estate assets
(principally four parcels of undeveloped land in the western United
States).
The sales of the remaining parcels were completed as of June 30,
1994, with an aggregate recognized gain in the six months ended
June 30, 1994 of approximately $388,000, net of income taxes of
$248,000.
Net cash proceeds from the sales of real estate properties amounted
to approximately $4.9 million for the six months ended June 30,
1994.
Oil and Gas Pipeline Construction Operations
In October 1993, the Company sold its interest in an oil and gas
pipeline construction business receiving approximately $3.3 million
in cash and a $3.6 million promissory note (included in other
current assets at December 31, 1994.) The $3.6 million note was
paid in full in March 1995.
3. INVENTORIES
June 30, December 31,
Inventories consist of: 1995 1994
Raw materials $24,755 $ 10,999
Work-in-process:
Uncompleted contracts 1,015 762
Other 11,301 6,425
Finished goods 11,063 6,075
$48,134 $24,261
4. GOODWILL
Goodwill is shown net of accumulated amortization of $7.2 million
and $5.8 million at June 30, 1995 and December 31, 1994,
respectively.
5. INCOME TAXES
The Company's consolidated income tax provision was different from
the amount computed using the U.S. statutory income tax rate for
the following reasons:
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Income tax provision at U.S. statutory rate $ 8,620 $ 3,287 $14,804 $6,407
Reduction in valuation allowance (3,261) (2,758) (6,456) (5,433)
Foreign taxes at rates other than U.S. statutory rate -- 552 132 1,097
State taxes (net of federal benefit) 802 353 1,376 701
Non-deductible goodwill amortization 243 235 436 470
Income tax provision $6,404 $1,669 $10,292 $3,242
</TABLE>
10
<PAGE>
Subsequent to the quasi-reorganization completed on February 1,
1988, as described in Note 6, the benefits derived from the
utilization of tax net operating loss carryforwards are reported in
the statement of operations in the year such tax benefits are
realized and then reclassified from retained earnings to
contributed capital. The Company adopted the accounting method for
utilization of these tax net operating loss carryforwards outlined
above on February 1, 1988. On September 28, 1989, the Securities
and Exchange Commission ("SEC") released Staff Accounting Bulletin
No. 86 ("SAB 86") which set forth the SEC staff's position with
respect to this accounting treatment. According to the SEC staff's
interpretation of Statement of Financial Accounting Standards No.
96, "Accounting for Income Taxes," contained in SAB 86, realized
tax benefits should be reported as a direct addition to contributed
capital. Subsequently, the Company consulted with the SEC staff and
determined that the SEC staff would not object to the accounting
method outlined above for companies which had adopted such
accounting methods prior to the issuance of SAB 86.
If the original guidance in SAB 86 had been applied, the Company's
net income for the six months ended June 30, 1995 and 1994 would
have been reduced by the amount of the benefit from utilization of
tax net operating loss carryforwards. Such reduction in net income
would have been $3.3 million ($.08 per share) and $2.8 million
($.07 per share) for the three months ended June 30, 1995 and 1994,
respectively. Additionally, the reduction in net income would have
been $6.5 million ($.16 per share) and $5.4 million ($.14 per
share) for the six months ended June 30, 1995 and 1994,
respectively.
The Company believes that it is more likely than not that the net
deferred tax asset recorded at June 30, 1995 will be fully
realized.
6. STOCKHOLDERS' EQUITY
(a) Quasi-Reorganization
On February 1, 1988, the Company completed a quasi-reorganization.
After determining that the Company's balance sheet reflected
approximate fair value on that date and that revaluation was not
necessary, the accumulated deficit and the cumulative translation
adjustment were adjusted to zero by reclassifying them to
contributed capital. A new retained earnings account was
established as of February 1, 1988.
(b) Stock Split
On May 24, 1995, the Board of Directors of the Company adopted a
resolution authorizing a three for-two split of the Company's
common stock, effected in the form of a 50% stock dividend
distributed on June 19, 1995 to stockholders of record on June 5,
1995.
All share and per share amounts have been restated to reflect this
stock dividend.
(c) Income per Common Share
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. The number of common shares that would
be issued from the exercise of stock options has been reduced by
the number of common shares that could be purchased from the
proceeds at the average market price of the Company's stock during
the periods such options were outstanding. The number of shares
used to compute primary per share data for the six-month periods
ended June 30, 1995 and 1994 was 40,869,550 and 38,880,360,
respectively. The number of shares used to compute primary per
share data for the three-month periods ended June 30, 1995 and 1994
was 41,415,715 and 38,932,700, respectively.
For purposes of the fully diluted income per share computations,
the number of shares that could be issued from the exercise of
stock options outstanding at the end of the period has been reduced
by the number of shares which could have been purchased from the
proceeds at the higher of the market price of the Company's stock
on June 30, 1995 and 1994 or the average market prices during the
periods such options were outstanding. For those options exercised
during the period, the computation for the period prior to exercise
is based on the market price when the option was exercised. The
number of shares used to compute fully diluted per share data for
the six-month periods ended June 30, 1995 and 1994 was 41,202,842
and 38,879,606, respectively. The number of shares used to compute
fully diluted per share data for the three-month periods ended June
30, 1995 and 1994 was 41,610,547 and 38,933,426, respectively.
11
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Background
On November 10, 1992, Glenayre Technologies, Inc. acquired the GEMS
Business. The GEMS Business designs, manufactures, markets and
services switches, transmitters, controls and related software used in
personal communications systems (including paging, voice messaging, and
message management and mobile data systems), transit communications
systems and radio telephone systems.
On July 6, 1993, the Company adopted formal plans to dispose of its
real estate operation. This operation is accounted for as a
discontinued operation and accordingly, its operating results are
reported in this manner and excluded from continuing operations in the
accompanying consolidated statements of operations for the six and
three months ended June 30, 1994. In October 1993, the Company sold
its interest in an oil and gas pipeline construction business. (See
Note 2 to the Company Condensed Consolidated Financial Statements).
On April 25, 1995, the Company completed the acquisition of Western
Multiplex Corporation ("MUX"), located in Belmont, California. MUX
designs, manufactures and markets products for use in point-to-point
microwave communication systems. The purchase price of approximately
$28.6 million consisted of 1,124,955 shares of the Company's common
stock (including 334,805 shares issuable upon exercise of stock
options) valued at approximately $27.3 million and approximately $1.3
million in acquisition costs. The acquisition was accounted for as a
purchase. The Company does not expect the MUX operations will require
material financing commitments by the Company for the foreseeable
future. See Note 1 to the Company Condensed Consolidated Financial
Statements.
Set forth below are: (i) a comparison of the results of operations of
the Company for the six months ended June 30, 1995 to the results of
operations for the six months ended June 30, 1994 (ii) a comparison
of the results of the operations of the Company for the three months
ended June 30, 1995 to the results of operations for the three months
ended June 30, 1994; (iii) a discussion of the Company's discontinued
operations; and (iv) a discussion of the Company's financial
condition and liquidity.
Six Months Ended June 30, 1995
Compared with Six Months Ended June 30, 1994
NET SALES
Net sales for the six months ended June 30, 1995 increased to
approximately $134.8 million from net sales for the six months ended
June 30, 1994 of approximately $79.9 million, an increase of
approximately $54.9 million, or 68.8%. Net sales of paging systems and
voice messaging systems for the six months ended June 30, 1995
increased to approximately $101.2 million and $18.0 million,
respectively, from approximately $58.8 million and $11.0 million,
respectively, for the prior period. The increase in net sales was
primarily a result of the sales of new systems and the continued
expansion and upgrading of existing systems within the installed
customer base. One customer accounted for approximately 18% and 15% of
sales for the six months ended June 30, 1995 and 1994, respectively.
GROSS PROFIT
Gross profit increased to approximately $76.7 million, or 56.9% of net
sales, for the six months ended June 30, 1995, from approximately $45.5
million, or 56.9% of net sales, for the six months ended June 30, 1994.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE
Selling, general and administrative expense increased to approximately
$24.2 million, or 18.0% of net sales, for the six months ended June 30,
1995, from approximately $18.5 million, or 23.1% of net sales, for the
six months ended June 30, 1994. The $5.7 million increase primarily
resulted from: (i) increased selling and marketing expenses of
approximately $2.4 million for additional sales personnel, (ii)
increase in commissions of $1.6 million relating to increased orders,
and (iii) $1.2 million of promotional material, trade shows and
increased travel.
12
<PAGE>
RESEARCH AND DEVELOPMENT EXPENSE
Research and development costs increased to approximately $10.6
million, or 7.9% of net sales, for the six months ended June 30, 1995,
from approximately $7.2 million, or 9.0% of net sales, for the six
months ended June 30, 1994, an increase of $3.5 million, or 47.2%. The
increase of $3.5 million was primarily a result of increased research
and development manpower and research material purchased. The research
and development costs were primarily for new product development and
enhancements to existing products. Both hardware and software
development costs are included in research and development costs. All
research and development costs are expensed as incurred.
INTEREST INCOME, NET
The Company realized net interest income of approximately $4.0 million
for the six months ended June 30, 1995 compared to net interest income
realized of approximately $1.7 million for the six months ended June
30, 1994. The increase is primarily attributable to (i) higher average
balances in cash and cash equivalents and short-term investments and
(ii) higher average interest rates earned.
INCOME TAXES
The difference between the combined U.S. federal and state statutory
tax rate of approximately 40% and the effective tax rate of 24.3% for
the six months ended June 30, 1995 and 17.7% for the six months ended
June 30, 1994 is primarily the result of the utilization of the
Company's net operating losses and the application of Statement of
Financial Accounting Standards No. 109 "Accounting for Income Taxes,"
("SFAS 109"), in computing the Company's tax provision. The difference
between the effective tax rate of 24.3% in 1995 and 17.7% in 1994 is
primarily the result of a variance between the 1995 and 1994
adjustments for realization of tax benefits for financial statement
purposes in accordance with SFAS 109 primarily due to revisions during
each period to the estimated future taxable income during the Company's
loss carryforward period. See Note 5 to the Company Condensed
Consolidated Financial Statements.
Three Months Ended June 30, 1995
Compared with Three Months Ended June 30, 1994
NET SALES
Net sales for the three months ended June 30, 1995, increased to
approximately $75.0 million from net sales for the three months ended
June 30, 1994 of approximately $41.5 million, an increase of
approximately $33.5 million, or 80.9%. Net sales of paging systems and
voice messaging systems for the three months ended June 30, 1995
increased to approximately $55.7 million and $9.4 million,
respectively, from approximately $30.7 million and $4.7 million,
respectively, for the prior period. The increase in net sales was
primarily a result of the sales of new systems and the continued
expansion and upgrading of existing systems within the installed
customer base. One customer accounted for approximately 11% and 17% of
sales for the three months ended June 30, 1995 and 1994, respectively.
GROSS PROFIT
Gross profit increased to approximately $42.7 million, or 56.9% of net
sales, for the three months ended June 30, 1995, from approximately
$23.4 million, or 56.5% of net sales, for the three months ended June
30, 1994.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE
Selling, general and administrative expense increased to approximately
$12.3 million, or 16.4% of net sales, for the three months ended June
30, 1995 from approximately $9.5 million, or 22.8% of net sales, for
the three months ended June 30, 1994. The $2.8 million increase
primarily resulted from: (i) increased selling and marketing expenses
of approximately $1.4 million for additional sales personnel; (ii)
increase in commissions of $675 thousand related to increased orders
and (iii) additional trade show expenses of $400 thousand.
RESEARCH AND DEVELOPMENT EXPENSE
Research and development costs increased to approximately $5.9 million,
or 7.9% of net sales, for the three months ended June 30, 1995, from
approximately $3.9 million, or 9.4% of net sales, for the three months
ended June 30, 1994, an increase of $2.0 million, or 51.3%. The
increase of $2.0 million was primarily a result of increased research
and development manpower and research material purchased.
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INTEREST INCOME, NET
The Company realized net interest income of approximately $2.0 million
for the three months ended June 30, 1995 compared to net interest
income realized of approximately $1.0 million for the three months
ended June 30, 1994. The increase is primarily attributable to (i)
higher average balances in cash and cash equivalents and short-term
investments and (ii) higher average interest rates earned.
INCOME TAXES
The difference between the combined U.S. federal and state statutory
tax rate of approximately 40% and the effective tax rate of 26.0% for
the three months ended June 30, 1995 and 17.8% for the three months
ended June 30, 1994 is primarily the result of the utilization of the
Company's net operating losses and the application of SFAS 109 in
computing the Company's tax provision. The difference between the
effective tax rate of 26.0% in 1995 and 17.8% in 1994 is primarily the
result of a variance between the 1995 and 1994 adjustments for
realization of tax benefits for financial statement purposes in
accordance with SFAS 109 primarily due to revisions during each period
to the estimated future taxable income during the Company's loss
carryforward period. See Note 5 to the Company Condensed Consolidated
Financial Statements.
Discontinued Operations
Real Estate Operations
Following the Acquisition of the GEMS Business the Company restructured
its real estate operations. On July 6, 1993, the Company adopted a
formal plan which called for the disposal of its remaining real estate
assets (principally four parcels of undeveloped land in the western
United States).
The sales of remaining parcels were completed as of June 30, 1994, with
an aggregate recognized gain in the six months ended June 30, 1994 of
approximately $388,000, net of income taxes of $248,000.
Net cash proceeds from the sales of real estate properties amounted to
approximately $4.9 million for the six months ended June 30, 1994.
Oil and Gas Pipeline Construction Operations
In October 1993, the Company sold its interest in an oil and gas
pipeline construction business receiving approximately $3.3 million in
cash and a $3.6 million promissory note (included in other current
assets at December 31, 1994.) The $3.6 million note was paid in full
in March 1995.
Financial Condition and Liquidity
The Company's working capital at June 30, 1995 was approximately $169.8
million, including cash and cash equivalents and short-term investments
of approximately $103.5 million. Accounts receivable, inventories,
trade notes receivable, accounts payable, and accrued expenses at June
30, 1995 increased from December 31, 1994 primarily as a result of
increased levels of operating activities during the first half of 1995.
During the six months ended June 30, 1995 the Company received cash of
approximately $5.2 million from the exercise of stock options and $3.6
million from the payment in full of the note discussed above. During
the six months ended June 30, 1995, the Company spent approximately
$10.2 million for capital expenditures. These expenditures were
necessary in order to provide the equipment and capacity to meet the
growth of the business.
The Company's cash and cash equivalents are placed in short-term
investments consisting of high-grade commercial paper, bank
certificates of deposit, U.S. Treasury bills and notes, and repurchase
agreements backed by U.S. Government securities with original
maturities of three months or less. The Company's short-term
investments are comprised of identical types of investments with the
exception that their original maturities are greater than three months,
but do not exceed one year.
The Company expects to use its cash, cash equivalents, and short-term
investments for working capital and other general corporate purposes,
including the expansion and development of its existing products and
markets and the possible expansion into complementary businesses.
The Company believes that funds generated from continuing operations,
together with its current cash reserves, will be sufficient to support
its short-term and long-term liquidity requirements for current
operations (including capital expenditures). Company management
believes that, if needed, it can establish appropriate borrowing
arrangements with lending institutions.
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PART II - OTHER INFORMATION
Items 1 through 3 are inapplicable and have been omitted.
Item 4. Submission of matters to a vote of security holders.
At the Company's Annual Meeting of Stockholders held on May 24, 1995,
the following matters were submitted to a vote of the stockholders of
the Company.
1. The election of three directors each to serve a three-year term
expiring in 1998:
Nominee Shares Shares
Voted For Withheld
John J. Hurley 31,103,609 25,084
Thomas C. Israel 31,103,682 25,011
Alma McConnell 31,103,694 24,999
2. Ratification of the selection of Ernst & Young LLP as auditors for
the year ending December 31, 1995 was approved by a vote of
31,114,040 shares for and 2,048 shares against, with 12,605 shares
abstaining.
Item 5 is inapplicable and has been omitted.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 10 Employment Agreement, dated June 21,
1995 between Glenayre Technologies,
Inc. and Ramon D. Ardizzone is filed
herewith.
Exhibit 11 Computation of earnings per common
share for the six-month and three-
month periods ended June 30, 1995
and 1994.
Exhibit 15 Letter regarding unaudited interim
financial information.
Exhibit 27 Financial Data Schedule. (Filed in
electronic format only. Pursuant to
Rule 402 of Regulation S-T, this
schedule shall not be deemed filed
for purposes of Section 11 of the
Securities Act of 1933 or Section 18
of the Securities Exchange Act of
1934.)
(b) Reports on Form 8-K
A report on Form 8-K dated April 7, 1995 was filed on
April 13, 1995. Under Item 4 the Company
reported that its Board of Directors appointed Ernst & Young LLP as
independent accountants to replace Deloitte & Touche LLP.
A report on Form 8-K dated April 25, 1995 was filed on
May 9, 1995 as amended by Form 8-K/A, Amendment No. 1 filed
on July 7, 1995. Under Item 2, the Company reported that it
had acquired 100% of the outstanding common stock of Western
Multiplex Corporation ("MUX"). MUX'S audited financial statements
for the year ended June 30, 1994 and unaudited financial
statements for the nine months ended March 31, 1995 as
well as proforma financial information for the Company
with respect to the MUX acquisition, including a proforma
balance sheet as of March 31, 1995 and proforma income
statements for the year ended December 31, 1994 and the
three months ended March 31, 1995 were included.
15
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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.
(Registrant)
/s/ Stanley Ciepcielinski
Stanley Ciepcielinski
Executive Vice President and
Chief Financial Officer
/s/ Billy C. Layton
Billy C. Layton
Controller and
Chief Accounting Officer
Date: July 27, 1995
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EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and
entered into as of the 21st day of June, 1995 by and between
GLENAYRE TECHNOLOGIES, INC., a Delaware corporation (the "Corpo-
ration"), and RAMON D. ARDIZZONE, a resident of Charlotte, North
Carolina (the "Executive").
Statement of Purpose
The Executive is currently employed by the Corporation under
an Employment Agreement dated as of November 10, 1992, as amended
(the "Current Employment Agreement"). The Corporation desires to
enter into this Agreement, effective as of November 11, 1995 (the
"Effective Date"), in order to secure the Executive's continued
participation in the manner hereinafter specified in the business
of the Corporation and to make provision for payment of reason-
able compensation to the Executive for such services. The
Executive is willing to be employed by the Corporation to perform
the duties incident to such employment upon the terms and condi-
tions hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing Statement
of Purpose and the terms and provisions of this Agreement, the
parties hereto agree as follows:
1. Employment and Duties.
(a) Employment. The Corporation hereby employs the Execu-
tive, and the Executive hereby agrees to serve, as the President
and Chief Executive Officer of the Corporation. The Executive
shall be nominated for re-election to the Board of Directors of
the Corporation (the "Board") at the Corporation's 1996 annual
shareholders' meeting.
(b) Duties. In such capacity, the Executive agrees to per-
form such duties and exercise such powers commensurate with his
office as may from time to time be reasonably requested of him by
the Board or vested in him by the bylaws of the Corporation,
subject to the control and direction of the Board. During the
Term, the Executive shall:
(1) devote substantially all of his business
time, attention and abilities to the businesses of the
Corporation (including its subsidiaries or affiliates,
when so required), and in any case as much thereof as
the Board may reasonably deem to be necessary for such
businesses;
(2) faithfully serve the Corporation and use his
best efforts to promote and develop the interests of
the Corporation; and
<PAGE>
(3) not acquire, directly or indirectly, any
interest in any firm, partnership, association or
corporation, the business operations of which may in
any manner, directly or indirectly, compete with the
trade or businesses of the Corporation or any of its
subsidiaries or affiliates, provided that the Executive
may beneficially own, directly or indirectly, or exer-
cise control or direction over, the voting securities
of a publicly traded company, on the condition that the
percentage of such securities owned, controlled or
directed by the Executive shall not exceed 5% of the
voting securities of the publicly traded company.
2. Term of Employment.
(a) Term. The term of the Executive's employment hereunder
(the "Term") shall commence on the Effective Date and shall con-
tinue until December 31, 1996.
(b) Earlier Termination. Notwithstanding the provisions of
Paragraph 2(a) above, the Executive's employment hereunder may be
terminated prior to the expiration of the Term as follows:
(1) The Corporation may terminate the Executive's
employment hereunder for "Cause" (as defined in Para-
graph 2(c) below), provided that the Corporation com-
plies with the provisions of Paragraph 2(f)(1) and (6)
below;
(2) The Corporation may terminate the Executive's
employment hereunder upon the Executive's "Total and
Permanent Disability" (as defined in Paragraph 2(d)
below), provided that the Corporation complies with the
provisions of Paragraph 2(f)(1), (2), (4) and (6)
below;
(3) The Executive may terminate his employment
hereunder for "Good Reason" (as defined in Paragraph
2(e) below);
(4) The Executive's employment hereunder shall
terminate automatically upon his death.
(c) Definition of "Cause". As used herein, "Cause" shall
mean the occurrence of any of the following:
(1) the Executive's resignation from the office
of President and Chief Executive Officer of the Corpo-
ration without its prior consent;
(2) acts of dishonesty or fraud on the part of
the Executive which are intended to result in his
substantial personal enrichment at the expense of the
Corporation or its affiliates;
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<PAGE>
(3) the conviction after the exhaustion of all
appeals by the Executive of a felony involving moral
turpitude or the entry of a plea of nolo contendre for
such a felony; or
(4) material violation of the Executive's respon-
sibilities as set forth herein which are willful and
deliberate; provided, however, that prior to the
determination by the Board that "Cause" under this
Paragraph 2(c)(4) has occurred, the Board shall (A)
provide to the Executive in writing, in reasonable
detail, the reasons for the Board's determination that
such "Cause" exists, (B) afford the Executive a reason-
able opportunity to remedy any such breach, (C) provide
the Executive an opportunity to be heard at the Board
meeting where the final decision to terminate the
Executive's employment hereunder for such "Cause" is to
be considered, and (D) make any decision that such
"Cause" exists in good faith.
(d) Definition of "Total and Permanent Disability". The
Executive shall be considered to have a "Total and Permanent
Disability" if, for a continuous period of six months, he is
unable to perform his duties under this Agreement for reasons of
health, and, in the opinion of a physician appointed by both
parties, such disability will continue indefinitely or for a
prolonged period of time.
(e) Definition of "Good Reason". As used herein, "Good
Reason" shall mean the occurrence of any of the following:
(1) except where such failure or change is spe-
cifically approved by the Executive (whether as a
member of the Board or individually), failure to elect
or reelect or to appoint or reappoint the Executive to
the office of President and Chief Executive Officer of
the Corporation, or to a senior executive office of the
Corporation or of any of its subsidiaries or affiliates
at least equal in dignity, responsibility, importance
and scope thereto, or any other material change by the
Corporation of the Executive's functions, duties or
responsibilities which would cause the ranking or
level, dignity, responsibility, importance or scope of
the Executive's position with the Corporation to become
of less dignity, responsibility, importance or scope
from the position and attributes thereof described in
Paragraph 1 above; provided, however, that the Execu-
tive must first (i) provide the Board with written
notice specifying the particular failure of the Corpo-
ration under this Paragraph 2(e)(1), and (ii) allow the
Board 60 days from receipt of notice to cure such
failure;
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<PAGE>
(2) the Corporation's failure to elect or reelect
or to appoint or reappoint the Executive to a director-
ship on the Board;
(3) the liquidation, dissolution, consolidation
or merger of the Corporation, or the transfer of all or
substantially all of its assets, other than a transac-
tion in which a successor corporation with a net worth
at least equal to that of the Corporation assumes this
Agreement and all obligations and undertakings of the
Corporation hereunder;
(4) any failure by the Corporation to pay to the
Executive the Base Salary or other compensation and
benefits provided for herein;
(5) any other material breach of this Agreement
by the Corporation; or
(6) any "Change in Control", which shall mean any
of the following:
(A) the acquisition, after the date of
this Agreement, of 25% or more of the Corp-
oration's common stock by any person, entity
or united group, which acquisition is not
supported by the Executive and the Chairman
of the Corporation;
(B) a material change in the composi-
tion or character of the Board which shall
include, but not be limited to, (i) the re-
placement of a majority of incumbent direc-
tors by directors not supported by the Execu-
tive and the Chairman of the Corporation or
(ii) at any meeting of the Corporation's
shareholders, the election of a majority of
directors standing for election who have not
been supported by the Executive and the Chai-
rman of the Corporation.
(7) Any change in the principal office of the
Corporation to a location which is more than 30 miles
from its current principal office at 4201 Congress
Street, Suite 455, Charlotte, North Carolina.
(f) Payments to the Executive Upon Termination of Employ-
ment. In the event that the Executive's employment with the
Corporation is terminated, whether upon the expiration of the
Term or upon the earlier termination of the Term as provided in
Paragraph 2(b) above, then the Corporation shall pay to the
Executive the following amounts on the date of such termination
and shall provide to the Executive the following benefits, as
applicable:
4
<PAGE>
(1) In the event that the Executive's employment
hereunder is terminated for any reason whatsoever, the
Corporation shall pay to the Executive an amount equal
to the sum of (i) his accrued but unpaid Base Salary,
plus (ii) his accrued but unpaid vacation pay, plus
(iii) any other compensation payments or benefits which
have accrued and are payable in connection with such
termination.
(2) In the event that the Executive's employment
hereunder is terminated (i) by the Corporation because
of the Executive's "Total and Permanent Disability"
pursuant to Paragraph 2(b)(2) above, (ii) because of
the Executive's death pursuant to Paragraph 2(b)(4)
above or (iii) by the Executive for "Good Reason"
pursuant to Paragraph 2(b)(3) above, then and in any
such event, the Corporation shall also pay to the
Executive a pro rata share of his bonus under the
Management by Objectives Bonus Plan described in Para-
graph 3(b) below for the fiscal year of the Corporation
in which such termination occurs, calculated, for
purposes of determining whether the targets contained
therein have been met, under the assumption that the
results of operations and financial condition of the
Corporation (or any applicable subsidiary) as of the
termination date shall continue on the same basis
through the end of such fiscal year.
(3) In the event that the Executive's employment
hereunder is terminated (i) without "Cause" or (ii) by
the Executive for "Good Reason" pursuant to Paragraph
2(b)(3) above, then and in any such event, the Corpora-
tion shall also pay to the Executive an amount equal to
two times the annual rate of Base Salary being paid to
the Executive at the time of such termination.
(4) In the event that the Executive's employment
hereunder is terminated on account of the Executive's
Total and Permanent Disability, then the Corporation
shall pay to the Executive (or to Executive's benefi-
ciary) the sum of $200,000.
(5) [Intentionally Omitted]
(6) In the event the Executive's employment here-
under is terminated for any reason whatsoever, the
Executive (and his dependents) shall be entitled to
participate in the Corporation's Retiree Medical Plan,
as amended from time to time, notwithstanding any
otherwise applicable eligibility requirements of, or
limitations on the term of participation in, said
Retiree Medical Plan, until the earlier of:
5
<PAGE>
(i) the date on which the Executive
becomes covered under any other group health
plan as an employee; or
(ii) with respect to the Executive's
participation in the Retiree Medical Plan,
the Executive's death or with respect to a
dependent's participation in the Retiree
Medical Plan, the dependent's death.
3. Compensation. Subject to the terms of this Agreement
and until the termination of the Term as provided in Paragraph 2
above, the Corporation shall pay compensation and provide bene-
fits to the Executive as follows:
(a) Base Salary. The Corporation shall pay to the Execu-
tive an initial base salary of $235,000 per annum (which, with
any increases during the Term, is referred to herein as the "Base
Salary"), payable in equal monthly installments on the last busi-
ness day of each month, or in such other installments and at such
other times as the parties hereto may mutually agree upon. The
Base Salary may be increased (but not decreased) in the manner
determined by the Board or its Compensation Committee in its
absolute discretion.
(b) Management by Objectives Bonus Plan. The Executive
shall participate in the Glenayre Management by Objective Plan as
in effect from time to time.
(c) [Intentionally Omitted]
(d) Life Insurance. The Corporation shall assume and pay
during the Term the premiums for the current life insurance
policy on Executive's life, for the insured sum of $250,000,
which policy of insurance shall be for the benefit of the Execu-
tive's estate or such beneficiaries as the Executive may direct
from time to time. Said policy of life insurance shall be of
such type so that the insurance proceeds shall not be subject to
federal income taxation. Such policy shall be assigned to the
Executive, without charge, upon the termination of his employment
with the Corporation.
(e) 401(K) Plan. The Executive shall be eligible to par-
ticipate in the Corporation's 401(K) voluntary deferred compensa-
tion program (the "401(K) Plan") up to the maximum amount permit-
ted by the terms of the 401(K) Plan, and the Corporation agrees
to match the amounts of compensation deferred up to the maximum
amount permitted under the provisions of the 401(K) Plan.
(f) Automobile. The Corporation shall furnish an automo-
bile to the Executive. Such automobile shall be commensurate
with the Executive's senior position and the Corporation shall
pay all
6
<PAGE>
reasonable expenses for the operation, insurance and
maintenance of such automobile.
(g) Vacation. The Executive shall be entitled to take four
weeks of vacation in each successive 12-month period during the
Term at such times as shall be mutually convenient to the Execu-
tive and the Corporation.
(h) Other Benefits. In addition to participation in all of
the compensation and incentive programs as described in this
Agreement, the Executive shall be entitled to participate in all
bonus, compensation, savings, stock option, and other incentive
plans and programs and in all retirement, life, medical/dental
and disability insurance and benefit plans of the Corporation, to
the extent that he qualifies under the eligibility requirements
of the respective plan or program.
(i) Reimbursement of Expenses. In addition to automobile
expenses, the Corporation shall reimburse the Executive for all
reasonable expenses incurred personally by him on behalf of the
Corporation.
4. Location of Office. The Executive's principal place of
employment shall be in Charlotte, North Carolina and he shall not
be required to change such principal place of employment.
5. Confidential Information.
(a) Covenant. The Executive shall not divulge, during the
Term or at any time thereafter, to any person not employed by the
Corporation or its subsidiaries or affiliates or otherwise
engaged to render services to the Corporation or its subsidiaries
or affiliates, any material Confidential Information.
(b) Definition of "Confidential Information". As used
herein, "Confidential Information" means:
(1) the name, address or requirements of any
customer of the Corporation; or
(2) any other secret or confidential information
relating to any activity, invention or discovery of the
Corporation not already in the public domain that the
Executive has or shall have acquired during his employ-
ment under this Agreement.
Provided, however, that this provision shall not preclude the
Executive from disclosing such Confidential Information as may be
required by any applicable law, regulation or directive or any
governmental agency, court or other authority having jurisdiction
in the matter, or in the proper course of conduct of the Corpora-
tion's business. In the event that any person seeks legally to
7
<PAGE>
compel the Executive to disclose Confidential Information, the
Executive shall promptly provide the Corporation with notice so
that the Corporation may have opportunity to seek a protective
order or other appropriate remedy.
6. Benefit of Designs.
(a) Familiarity with Inventions, Etc. In this Paragraph 6,
the term "Corporation" includes any of its subsidiaries or
affiliates thereof. The Executive acknowledges that the Corpora-
tion is engaged in the research, design and manufacture of
various products and desires to acquire inventions and improve-
ments relating thereto. The Executive, in connection with his
duties hereunder, will become familiar with the Corporation's
businesses and is expected, to the extent consistent with his
senior position, to utilize the Corporation's time, materials,
facilities and information in making inventions and improvements
relating to such products.
(b) Records and Disclosure. The Executive shall keep,
maintain and make available to the Corporation complete and up-
to-date written records, including photographs and drawings, of
his inventions and improvements relating to the Corporation's
products that the Executive may solely or jointly make during the
period of employment under this Agreement, which records shall be
the property of the Corporation. The Executive shall promptly
and fully disclose in writing to the Corporation all such inven-
tions and improvements, whether patentable or not, which relate
to the Corporation's products that the Executive may solely or
jointly make during the period of his employment under this
Agreement which relate directly to any circuit, circuit design
concept or program developed or being developed by the Corpora-
tion during the period of the Executive's employment of which he
was aware, and all such inventions and improvements shall be the
sole and exclusive property of the Corporation.
(c) Rights to Inventions, Etc. The Executive further
agrees to assign and does hereby assign and transfer to the
Corporation all his right, title and interest in and to all such
inventions and improvements and in and to any letter patent or
application for letters patent thereon in and for all countries.
The Executive further agrees, at the expense of the Corporation,
to do all things and to execute and deliver all documents neces-
sary therefor whenever so requested by the Corporation.
7. Non-Competition. The Executive agrees that following
the termination of his employment by the Corporation, he will not
at any time during the period of two years from the date of such
termination (without the prior written consent of the Corpora-
tion, which consent will not be unreasonably withheld), either
individually or in partnership, or in conjunction with any person
or persons, firm, association, syndicate, company or corporation
as
8
<PAGE>
principal, agent, director, officer, employee, consultant,
investor or in any other manner whatsoever, carry on or be
engaged in or be concerned with or interested in, or advise, lend
money to, guarantee the debts or obligations of or permit his
name or any part thereof to be used or employed by any such
person or persons, firm, association, syndicate, company, or
corporation engaged in or concerned with any interests in any
business in competition with the business of the Corporation (or
any of its subsidiaries or affiliates) carried on by them during
the term or terms of this Agreement within North America; provid-
ed that the Executive may beneficially own, directly or indirect-
ly, or exercise control or direction over the voting securities
of a publicly traded company, but the number of voting securities
so owned, controlled or directed by the Executive shall not
exceed 5% of the voting securities of such publicly traded
company; and further provided that where the Executive's employ-
ment under this Agreement is terminated without "Cause" or by the
Executive for "Good Reason" and in either case the Corporation
makes the payment described in Paragraph 2(f)(3) hereof, the
period of non-competition described in this Paragraph 7 shall be
one year from the date of termination of the Executive's employ-
ment under this Agreement.
8. Indemnification. The Corporation agrees to indemnify,
defend and hold harmless the Executive from and against any and
all liabilities to which he may be subject as a result of his
employment hereunder (as a result of his service as an officer or
director of the Corporation or as an officer or director of any
of its subsidiaries or affiliates), as well as the costs, includ-
ing attorney's and other professional fees and disbursements, of
any legal action brought or threatened against him as a result of
such employment, to the fullest extent permitted by, and subject
to the limitations of, Delaware law.
9. Reimbursement of Legal and Related Expenses. In the
event that any dispute shall arise between the Executive and the
Corporation relating to his rights under this Agreement, and it
is determined by agreement between the parties, or by a final
judgment of a court of competent jurisdiction that is no longer
subject to appeal, that the Executive has been substantially
successful in his claims, then reasonable legal fees and dis-
bursements of the Executive in connection with such dispute shall
be paid by the Corporation.
10. Assignment. The Executive may not assign this Agree-
ment or any of his rights, benefits, obligations or duties
hereunder to any other person, firm, corporation or other entity.
11. Notices. All notices and other communications required
or permitted hereunder shall be in writing and shall be deemed to
have been duly given when personally delivered or on the fourth
business day after being placed in the United States mail by
certified mail, return receipt requested, postage prepaid,
9
<PAGE>
addressed to the parties hereto as follows (provided that notice
of change of address shall be deemed given only when actually
received):
As to the Corporation: Glenayre Technologies, Inc.
667 Madison Avenue, 25th Floor
New York, New York 10021-8029
Attention: Clarke H. Bailey
As to the Executive: Mr. Ramon D. Ardizzone
5416 Challisford Lane
Charlotte, North Carolina 28226
The address of any of the parties may be changed from time to
time by such party serving notice upon the other parties.
12. Law Applicable. This Agreement is made and executed
with the intention that the construction, interpretation and
validity hereof shall be determined in accordance with and
governed by the laws of the State of New York.
13. Binding Effect. This Agreement shall be binding upon
and inure to the benefit of the Corporation, its successors and
assigns. This Agreement shall be binding upon and inure to the
benefit of the Executive, his heirs and personal representatives.
14. Entire Agreement; Modification. This Agreement consti-
tutes the entire agreement between the parties with respect to
the subject matter hereof and supersedes and cancels all prior or
contemporaneous oral or written agreements and understandings
between them with respect to the subject matter hereof (including
the Current Employment Agreement as of the Effective Date). This
Agreement may not be changed or modified orally but only by an
instrument in writing signed by the parties hereto, which instru-
ment states that it is an amendment to this Agreement.
15. Severability. Should any provision of this Agreement
or any part thereof be held invalid or unenforceable, the same
shall not affect or impair any other provision of this Agreement
or any part thereof and the invalidity or unenforceability of any
provision of this Agreement shall not have any effect on or
impair the obligation of the Corporation or the Executive.
16. Execution. This Agreement is hereby executed in
multiple counterparts, each of which shall be deemed an original
hereof.
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IN WITNESS WHEREOF, the Corporation has caused this Agree-
ment to be signed by its officers and its corporate seal to be
hereunto affixed, and the Executive has hereunto set his hand and
seal, all as of the day and year first above written.
GLENAYRE TECHNOLOGIES, INC.
[CORPORATE SEAL]
By:________________________________
ATTEST: Title:_____________________________
_____________________
Secretary
_____________________________[SEAL]
Ramon D. Ardizzone
11
<PAGE>
Exhibit 11
GLENAYRE TECHNOLOGIES, INC.
COMPUTATION OF EARNINGS PER COMMON SHARE
In Thousands Except Per Share Amounts
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30, Three Months Ended June 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Income from continuing operations $32,005 $15,066 $18,223 $ 7,725
Income from discontinued operations -- 388 -- 225
Net Income $32,005 $15,454 $18,223 $ 7,950
Primary Earnings Per Share:
Weighted average shares outstanding during the period 38,069 36,317 38,566 36,640
Common stock equivalents 2,801 2,563 2,850 2,293
40,870 38,880 41,416 38,933
Continuing operations $ .78 $ .39 $ .44 $ .20
Discontinued operations -- .01 -- --
Net income per share $ .78 $ .40 $ .44 $ .20
Fully Diluted Earnings Per Share:
Weighted average shares outstanding during the period 38,069 36,317 38,566 36,640
Common stock equivalents 3,134 2,563 3,045 2,293
41,203 38,880 41,611 38,933
Continuing operations $ .78 $ .39 $ .44 $ .20
Discontinued operations -- .01 -- --
Net income per share $ .78 $ .40 $ .44 $ .20
</Table
</TABLE>
Exhibit 15
July 21, l995
To the Board of Directors and Stockholders of
Glenayre Technologies, Inc.
Charlotte, North Carolina
We are aware of the incorporation by reference in the Registration
Statement Number 33-43797 on Form S-8 dated November 5, 1991,
Registration Statement Number 33-43798 on Form S-8 dated November 5,
1991 (amended December 9, 1992), Registration Statement Number 33-68766
on Form S-8 dated September 14, 1993, and Registration Statement Number
33-80464 on Form S-8 dated June 17, 1994, of our report dated July 21,
1995 relating to the unaudited condensed consolidated interim financial
statements of Glenayre Technologies, Inc. and subsidiaries which are
included in its Form 10-Q, for the quarter ended June 30, 1995.
Pursuant to Rule 436(c) of the Securities Act of 1933 our report is not
a part of the registration statement prepared or certified by
accountants within the meaning of Section 7 or 11 or the Securities Act
of 1933.
Ernst & Young LLP
Charlotte, North Carolina
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE QUARTER ENDED
JUNE 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 103,488
<SECURITIES> 0
<RECEIVABLES> 76,779
<ALLOWANCES> 0
<INVENTORY> 48,134
<CURRENT-ASSETS> 222,815
<PP&E> 26,933
<DEPRECIATION> 0
<TOTAL-ASSETS> 374,838
<CURRENT-LIABILITIES> 53,088
<BONDS> 0
<COMMON> 262,522
0
0
<OTHER-SE> 54,002
<TOTAL-LIABILITY-AND-EQUITY> 374,838
<SALES> 134,841
<TOTAL-REVENUES> 134,841
<CGS> 58,181
<TOTAL-COSTS> 58,181
<OTHER-EXPENSES> 38,390
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 84
<INCOME-PRETAX> 42,297
<INCOME-TAX> 10,292
<INCOME-CONTINUING> 32,005
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 32,005
<EPS-PRIMARY> .78
<EPS-DILUTED> .78
</TABLE>
