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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended DECEMBER 31, 1995
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
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)
5935 CARNEGIE BOULEVARD, CHARLOTTE, NORTH CAROLINA 28209
(Address of principal executive offices) Zip Code
(704) 553-0038
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
NONE NONE
Securities registered pursuant to Section 12(g) of the Act:
Title of Class
COMMON SHARES, $.02 PAR VALUE
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
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of the
Registrant on March 8, 1996 was approximately $1.9 billion. The number of shares
of the Registrant's common stock outstanding on March 8, 1996 was 60,688,922.
DOCUMENTS INCORPORATED BY REFERENCE:
Document Location in Form 10-K
Proxy Statement for 1996 Annual Part III
Meeting of Stockholders
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EXCEPT AS NOTED, THE INFORMATION IN THIS FORM 10-K HAS BEEN ADJUSTED TO REFLECT
A 3-FOR-2 STOCK SPLIT OF THE COMPANY'S COMMON STOCK EFFECTED IN THE FORM OF A
50% STOCK DIVIDEND DISTRIBUTED JUNE 19, 1995 TO STOCKHOLDERS OF RECORD ON JUNE
5, 1995 AND TO REFLECT A 3-FOR-2 STOCK SPLIT OF THE COMPANY'S COMMON STOCK
EFFECTED IN THE FORM OF A 50% STOCK DIVIDEND DISTRIBUTED DECEMBER 29, 1995 TO
STOCKHOLDERS OF RECORD ON DECEMBER 22, 1995.
PART I
ITEM 1. BUSINESS
GENERAL DEVELOPMENT OF BUSINESS
Glenayre Technologies, Inc. ("Glenayre" or the "Company") was incorporated
pursuant to the laws of the State of Delaware on September 21, 1987, and is the
successor to a corporation organized on April 7, 1945. The principal executive
offices of the Company are located at 5935 Carnegie Boulevard, Charlotte, NC
28209. The Company's telephone number is (704) 553-0038. The term "Glenayre" or
the "Company" as used hereinafter means Glenayre Technologies, Inc. or Glenayre
Technologies, Inc. and its subsidiaries.
Glenayre is a leading worldwide supplier of telecommunications equipment and
related software used by service providers in the paging and other wireless
personal communications markets. The Company designs, manufactures, markets, and
services its products principally under the Glenayre name. These products
include switches, transmitters, receivers, controllers, software and other
equipment used in personal communications systems (including paging, voice
messaging, cellular, and message management and mobile data systems), microwave
communication systems and radio telephone systems.
In 1992, the Company acquired the telecommunications equipment and related
software business (the "GEMS Business" or "GEMS") of Glentel Inc., a Canadian
corporation ("GEL"), for a combination of cash and common stock of the Company
(the "Acquisition"). Prior to the Acquisition , the Company had been in the real
estate development business and in oil and gas pipeline construction. Effective
December 31, 1992 and July 6, 1993, the Company adopted formal plans to dispose
of its oil and gas pipeline construction and real estate operations,
respectively, in order to focus exclusively on the telecommunications industry.
In October 1993, the Company sold its interest in the oil and gas pipeline
construction operation. The sale of the Company's remaining parcels of
undeveloped real estate were completed as of June 30, 1994.
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 $28.6 million consisted of 1,687,432 shares of the
Company's common stock (including 502,206 shares issuable upon exercise of stock
options) valued at $27.3 million and $1.3 million in acquisition costs.
The Company's product families are grouped in either (i) Wireless Messaging, or
(ii) Voice and Data Technologies categories. Additionally, Glenayre provides
service and support to its products.
WIRELESS MESSAGING PRODUCTS
Glenayre's Wireless Messaging products, accounted for approximately 78%, 80% and
81% of net sales for 1995, 1994, and 1993, respectively. Included in this group
are paging and narrowband personal communication service products. Major paging
products include switches, transmitters, receivers, controllers and related
software. Glenayre believes it has the leading market share in the United States
and that it is a leading participant internationally in the paging switch,
controller and transmitter market.
Paging is a method of wireless telecommunication which uses an assigned radio
frequency to contact a paging subscriber anywhere within a service area. A
paging system is generally operated by a service provider which incurs the cost
of building and operating the system. Each service provider in the United States
licenses spectrum from the Federal Communications
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Commission ("FCC") and elsewhere from the authorized government body to operate
a paging frequency within either a local, regional or national geographical
area. Each paging subscriber is assigned a distinct telephone number which a
caller dials to activate the subscriber's pager (a pocket-sized radio receiver
carried by the subscriber). Telephone calls for a subscriber are received by a
paging switch. A network of transmitters, that broadcasts a signal over a
specific geographic area, then receives information from the paging switch
through the controller and a radio signal is sent by the transmitters via
antennae to the subscriber's pager. The transmitters manufactured by Glenayre
are specifically designed to simulcast, which is the transmission of the same
signal over two or more transmitters on the same channel at the same time in an
overlap area, resulting in superior voice and data quality and coverage area.
The radio signal causes the pager to emit a beep or to vibrate and to provide
the subscriber with information from the caller in the form of a voice, tone,
numeric or alphanumeric message.
A pager has an advantage over a landline telephone in that the pager's reception
is not restricted to a single location, and has an advantage over a cellular
portable telephone in that a pager is smaller, has a much longer battery life,
has excellent coverage, and is less expensive to use. Historically, the
principal disadvantage of traditional paging service in comparison to landline
telephones or cellular portable telephones has been that paging provided only
one-way communication capabilities.
However, this limitation may have been overcome in the United States as a result
of the auction in 1994 by the FCC of nationwide and regional licenses for
designated Narrowband Personal Communication Services ("NPCS") radio frequencies
or spectrum to service providers. All of the nationwide license holders and most
of the regional license holders are current Glenayre customers, directly or
indirectly. Additional licenses may be auctioned in 1996. The cost of the
licenses to the NPCS auction winners in 1994 was approximately $1.0 billion. The
FCC anticipates that these NPCS licenses will be used to provide such new
services as pager location, two-way acknowledgment paging, advanced voice paging
and data services.
The NPCS radio frequencies or spectrum are located at three separate points
within the total radio spectrum, at 901-902 MHz, 930-931 MHz and 940-941 MHz.
Initially, the radio frequencies located at 930-931 MHz and 940-941 MHz have
been designated for outbound message transmission (to the pager) and the 901-902
MHz have been designated response channels (from the pager). This application is
similar to traditional paging except that these license holders have been
granted wider frequency band width permitting the user to transmit substantially
more information.
The NPCS nationwide licenses cover all fifty states, the District of Columbia,
American Samoa, Guam, the Northern Marianas Islands, Puerto Rico and the United
States Virgin Islands. These licenses are divided into 50 KHz paired and
unpaired channel categories. Paired channels permit both outbound and inbound
signals while unpaired channels are limited to only outbound signals. Currently,
there are 11 nationwide licenses and 6 additional licenses which were auctioned
on a regional basis that cover the nation. Remaining to be auctioned are 7
licenses available on a major trading area ("MTA") basis and 2 licenses on a
basic trading area ("BTA") basis.
The FCC has imposed infrastructure construction or buildout requirements on all
NPCS license holders. Each NPCS license holder must establish a minimum service
availability for at least 37.5% of the population in its geographic region
within five years after receiving the license. After ten years, each NPCS
license holder must make the service available to at least 75% of the area's
population. If a NPCS license holder fails to achieve these build-out
requirements, it risks cancellation by the FCC of its NPCS license and a
forfeiture of any auction monies paid.
Glenayre's product offering to the NPCS market includes a systems approach
similar to its existing paging product line. Glenayre offers its customers an
end-to-end solution for NPCS applications. The Company has developed new
technology-based products with enhanced architecture and technology from its
existing paging systems to accommodate the advanced services available through
NPCS. This systems approach includes full product lines of radio frequency
network controllers, linear transmitters, satellite receivers, fixed receivers
(to receive the response message from the end-user) and switches. The Company
will begin shipment of its NPCS products in the first half of 1996 to various
beta test sites, based on product development schedules and the build-out
requirements of the NPCS license holders.
The design of a paging system is customer specific and depends on (i) the number
of paging subscribers the service provider desires to accommodate, (ii) the
operating radio frequency, (iii) the geography of the service area, (iv) the
expected system growth and (v) specific features desired by the customer. Paging
equipment hardware and software developed by the Company may be used with all
types of paging service, including voice, tone, numeric (telephone number
display) or alphanumeric messaging (words and numbers display).
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SWITCHES. The smallest Glenayre switch, the GL3000ES, can serve as few as 100
subscribers and can be expanded incrementally to a capacity of 75,000
subscribers. Glenayre's large paging switches, the GL3000L and the GL3000XL,
support subscriber levels from 20,000 to over 1,000,000.
The GL3000 NPCS switch is capable of being upgraded to support new NPCS voice
and data services, while retaining support for existing one-way services such as
numeric and alphanumeric paging. Service providers can combine one-way and
two-way paging service on one switch.
The Company is involved at an early stage in the development of industry wide
technology standards and is familiar with developments in paging protocol
standards throughout the world. The Company works closely with its customers in
the design of large, complex paging networks. Glenayre believes that its
customers' purchasing decisions are based, in large part, on the quality and
technological capabilities of such networks, and has adopted networking
specifications developed by the Personal Communications Industry Association
("PCIA"). Glenayre believes that its switches have the most advanced networking
capability in the industry. This networking capability allows the
interconnection of multiple switches to offer a number of wide- area
capabilities (such as remote billing, roaming and database backup). Glenayre
believes that the advanced hardware and software features of its switches ensure
high reliability and high volume call processing.
Paging switches manufactured by the Company are constructed in modular fashion,
which permits expansion to accommodate growth and the addition of technological
enhancements. Paging switch enhancements and upgrades also require the purchase
of the Company's components and software. This results from the unique and
proprietary software incorporated in Glenayre switches, which the Company
believes represents a significant technological competitive advantage.
RADIO FREQUENCY ("RF") EQUIPMENT - TRANSMITTERS AND RECEIVERS. Transmitters are
available in frequency ranges of 30MHz to 960MHz and in power levels of 4 watts
to 500 watts. Radio link receivers are available in frequency ranges of 66MHz to
960MHz. Satellite link receivers are available for integration directly with the
transmitters at both Ku- and C-band frequencies.
Glenayre's GL-T9000 series of transmitters are designed to transmit both ReFLEX
and InFLEXion NPCS formats. The design of the GL-T9000 transmitter employs new
and advanced techniques including digital signal processing ("DSP") modulation
and linearization. With the T9000 a service provider can start at a low power
level and upgrade to a higher power level in the field. This minimizes initial
investment while still allowing the service provider to grow as the subscriber
base grows.
The GL-R9000 series of receivers detects the responses sent back from the
two-way NPCS subscriber devices. The GL-R9000 series of receivers takes
advantage of innovative DSP demodulation techniques that maximize receiver
sensitivity. Available in a one-rack unit size, it can support spatial diversity
(enabling sensitivity gains from two separate receive antennas at a site).
Depending upon frequency, antenna height, topography and power, Glenayre
transmitter systems are designed to cover broadcast cells with a diameter from 3
to 100 miles. Typical simulcast systems have broadcast cells which vary from 3
to 15 miles in diameter. Glenayre transmitters are designed specifically for the
high performance and reliability required for high speed simulcast networks.
Current technology allows a transmitter that is manufactured by Glenayre or by
its competitors to be used with the Company's paging switches. However, within a
single geographic paging network (comprised of a switch, a control system and a
number of transmitters installed in a specific geography) where transmitters
simulcast on a single frequency, all transmitters must be of the same make in
order to avoid substantial and expensive modifications that would be necessary
to assure the integrity of the paging system. The Company believes its large
installed base of transmitter equipment provides it with a significant
competitive advantage in selling products for system expansions to existing
customers.
CONTROLLERS. The Company currently offers three products for transmitter
control: (i) the GL5000 control system is a medium-feature transmitter control
system used primarily in international markets; (ii) the QT1000 is a
full-feature system providing automatic early notification of system variances
and automatic remote adjustment capabilities to ensure that all transmitters in
the system remain synchronized; and (iii) the newest product, the GL-C2000,
supports all existing digital paging formats and will support all currently
proposed "high speed" paging and messaging formats with data transmission rates
from 200 to 6,400 bits per second when coupled with the appropriate Glenayre RF
hardware.
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Glenayre has extended the technology of its GL-C2000 transmitter controller to
control the Glenayre NPCS transmitter. The base station controller has voice and
high-speed data capabilities and flexible linking options. Additionally,
Glenayre's RF Director is the central control point for a two-way NPCS RF
network. The RF Director has been designed to manage a high volume of forward
and reverse channel traffic and is available with optional full redundancy.
MESSAGE MANAGEMENT SYSTEMS. Glenayre's message management systems and operator
assisted paging systems combine its paging switch hardware with its proprietary
software. Glenayre's GL3900S and GL3900A alphanumeric switches are fully
compatible with the Company's paging switches and allow extensive data entry by
as few as 2 to as many as 300 telephone operators. Glenayre's alphanumeric
messaging products allow an operator at a telephone answering service or at a
paging or cellular provider to input, store and transmit messages containing
words and numbers by utilizing a paging switch encoder. Alphanumeric messages
can be sent by telephone, facsimile or computer and can be received by pagers,
portable computers, electronic organizers, facsimile equipment and similar
personal communication devices. Due to the continuing demand for lengthier
messages and the impact of such demand on available radio frequencies, most
service providers are migrating to the more efficient, higher speed digital
format. Consequently, Glenayre believes its sophisticated high speed switches
and software are particularly well suited for alphanumeric applications.
VOICE AND DATA TECHNOLOGIES PRODUCTS
Glenayre's Voice and Data Technologies products accounted for approximately 12%,
10% and 9% of net sales for 1995, 1994 and 1993, respectively. Included in this
group are voice messaging, microwave communication and radio telephone products.
Voice Messaging
The MVP, a switching product and enhanced services platform designed by Glenayre
primarily for paging, cellular and personal communication systems, allows
subscribers both to send and receive voice and data messages to and from other
subscribers, or to receive these messages from non-subscribers. The MVP is
offered in four sizes. The MVP-E, a small starter system, is capable of
supporting from 100 to 10,000 subscribers. The medium sized MVP supports 500 to
35,000 subscribers. The large MVP-MAP (Multi Application Platform) accommodates
up to 50,000 subscribers. For systems requiring substantial capacity, the
MVP-PCS can accommodate in excess of 200,000 subscribers. The MVP is designed to
meet the reliability requirements of, and is marketed to, telecommunication
service providers. The MVP has the flexibility to provide multiple services to
multiple customers simultaneously.
In addition to its current applications, the MVP switch is presently approved as
a voice switching platform by vendors of cellular, second generation cordless
telephones ("CT-2") and broadband personal communication services products in
several countries. The MVP, together with the Company's Constant Touch software,
provides "one-number access," allowing a subscriber to direct communications to
his choice of receiving devices. In addition, it combines the uses of different
types of existing communication services such as paging, voice mail, cellular
telephone, PCS, CT-2 and facsimile.
When a user leaves a voice mail message or facsimile in a subscriber's voice
mail box, the MVP switch can automatically locate the subscriber, thereby
providing notification of the message. The MVP also allows a subscriber to
manage telephone calls using a variety of receiving devices. With the "Meet-Me"
feature, a telephone call to a subscriber can be routed through the MVP switch
where it can be held while the subscriber is immediately notified through a
paging device. The subscriber can then choose to accept the call through a
wireline or wireless telephone and be connected immediately. Through the "Direct
Call with Call Screening" feature, the MVP answers the call, and the caller is
asked to record the caller's name and stay on hold while the subscriber is
located through a page or telephone call. Once located, the subscriber has
numerous options, including connecting with the waiting call, sending the caller
to a voice mail box or another telephone number, disconnecting, or listening to
the caller's voice message.
Another feature enhancement is "Find-Me," through which the MVP will call a
pager, cellular phone or wireline telephone either simultaneously or in a
sequence predetermined by the subscriber, to notify the subscriber of an
incoming call. In addition to the subscriber's ability to determine these
notification priorities, the MVP also allows a subscriber to program a daily
schedule of such call destinations, whereby the MVP routes the call to the
destinations defined by the subscriber based on the time and day of the week.
Finally, the MVP also has integrated facsimile capabilities which can
receive an incoming facsimile
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and notify a subscriber of receipt. The subscriber can select or preprogram
the location for fax delivery, forward the fax to another subscriber or
broadcast the fax to individuals on a distribution list. The MVP provides an
advanced platform as a service enhancement node for integration into an
intelligent network.
Microwave Communication
Through its 1995 acquisition of Western Multiplex Corporation ("MUX"), the
Company designs, manufactures and markets products for use in point-to-point
microwave communications systems. These products include the microwave radios
themselves, both in analog and digital transmission formats, and analog baseband
products. In 1994 and 1995, the FCC awarded a number of new PCS licenses for the
provision of enhanced services. Encumbants currently utilizing these frequencies
will be forced to relocate their existing systems thus providing MUX with
additional market opportunities. MUX also provides cellular and PCS operators
with wireless cell site and base station interconnect infrastructure. MUX's
products are sold to communications service providers, including cellular,
specialized mobile radio ("SMR") 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.
Radio Telephone
In past years, the Company has focused on wide-area mobile radio telephone
systems utilizing its Improved Mobile Telephone Service (IMTS) technology. This
technology has essentially been replaced by the application of cost-effective
cellular systems in the markets previously served by IMTS. The Company,
utilizing internally developed digital technology, has refocused its products to
meet the basic telephone needs of rural areas around the world. Its initial
product offers a digital wireless telephone link that provides high quality,
full duplex voice and data operation on a single frequency that is capable of
operating at distances of up to approximately 45 miles. This product is targeted
to serve both remote residential and business subscriber requirements.
SERVICE AND SUPPORT
Glenayre provides service to customers on a regular basis including
installation, project management of turnkey systems, training, service or
extended warranty contracts with the Company. These revenue generating service
activities of Glenayre accounted for approximately 10% of net sales in each of
the years 1995, 1994 and 1993. The Company believes that it is essential to
provide reliable service to customers in order to solidify customer
relationships and to be the vendor of choice when new services or system
expansions are sought by a customer. This relationship is further developed as
customers come to depend upon the Company for installation, system optimization,
warranty and post-warranty services.
The Company has a warranty and maintenance program for both its hardware and
software products and maintains a large customer service network, known as the
Glenayre Care Group, throughout the world. Glenayre's standard warranty provides
its customers with repair or replacement of all defective Glenayre manufactured
equipment. The warranty is valid in the case of the majority of its transmitters
for two years, and in the case of all other products for one year from the later
of date of shipment or date of installation by a Glenayre qualified technician.
The major locations of the Glenayre Care Group are Vancouver, British Columbia;
Quincy, Illinois; Atlanta, Georgia; London, England; and Singapore. The Glenayre
Care Group, the majority of which are technical specialists, maintain the
Company's installed base of equipment and are equipped with an automated field
service management system to provide more responsive customer service.
CUSTOMERS
Glenayre sells to a range of customers worldwide. In the United States,
customers include the regional Bell operating companies, public and private
radio common carriers, private carrier paging operators, and cellular carriers.
Internationally, customers include public telephone and telegraph companies, as
well as private telecommunication service providers.
Sales to a single customer totaled approximately 16% and 13% of 1995 and 1994
net sales, respectively. Sales to two customers were each approximately 10% of
1993 net sales. Although a single customer accounted for more than of 10% of the
Company's net sales for the previous two years, the Company believes that the
largest amount of business from any single customer should generally change from
year to year, resulting from the timing of the development and expansion of its
existing customers' and new customers' systems.
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MARKETING AND SALES
The Company markets its products and services in the United States and
internationally primarily through a direct sales force. The Company also
utilizes distributors and agents to sell its products in certain countries and
geographic regions to markets outside of the Company's core markets. The Company
maintains sales offices throughout the United States.
In an effort to better serve its international customers, Glenayre has
established sales offices in various locations worldwide, including Manila,
Philippines; New Delhi, India; Singapore; Toronto, Canada; Vancouver, Canada;
Hong Kong; Mexico City, Mexico; Milton Keynes, England; Guangzhou, China;
Beijing, China; Dubai, United Arab Emirates; Prague, Czech Republic; Sao Paulo,
Brazil; Amsterdam, Netherlands; and Seoul, Korea. Glenayre has staffed each of
these offices with either local or expatriate multilingual personnel. The
Company expects to add new offices and personnel outside of the United States to
meet the increasing demand for its products in international markets.
Additionally, on a selective basis in certain countries and regions, Glenayre
utilizes external distributors and agents. See Note 14 to the Company's
Consolidated Financial Statements for information relating to export sales.
As part of the Company's integrated marketing and sales efforts, Glenayre
encourages a philosophy of open communication between the Company and its
customers. Toward that end, the Company often invites customer representatives
to meet with Glenayre's engineers and marketing personnel to collaborate in the
development of new and enhanced products.
INTERNATIONAL BUSINESS RISKS
Approximately 35% of 1995 net sales were generated in markets outside of the
United States. International sales are subject to the customary risks associated
with international transactions, including political risks, local laws and
taxes, the potential imposition of trade or currency exchange restrictions,
tariff increases, transportation delays, difficulties or delays in collecting
accounts receivable, and, to a lesser extent, exchange rate fluctuations.
Although a substantial portion of 1995 international sales of the Company's
products and services were negotiated in U.S. dollars, there can be no assurance
that the Company will be able to maintain such a high percentage of U.S. dollar
denominated international sales. The Company seeks to mitigate its currency
exchange fluctuation risk by entering into currency hedging transactions. The
Company also acts to mitigate certain risks associated with international
transactions through the purchase of political risk insurance and the use of
letters of credit.
RESEARCH AND DEVELOPMENT
The Company believes that a strong commitment to research and development is
essential to the continued growth of its business. Glenayre has consistently
developed innovative products and product improvements for the wireless personal
communications services industry and has often been the first to bring such
products to market. One of the key components of the Company's development
strategy is the promotion of a close relationship between its development staff,
internally with Glenayre's manufacturing and marketing personnel, and externally
with Glenayre's customers. This strategy has allowed Glenayre to develop and
bring to market customer-driven products in a timely manner.
The Company has extensive expertise in the technologies required to develop
wireless communications systems and products including digital signal processing
(DSP), real-time software, high-speed digital logic, very large scale integrated
circuits (VLSI), radio frequency and data network design. The Company believes
that by having a research and development staff with expertise in these key
areas, it is well positioned to develop enhancements for its existing products
as well as the next generation of personal communication products. Investment in
advanced computer-aided design tools for simulation and analysis has allowed
Glenayre to reduce the time for bringing new products to market.
The majority of the Company's research and development staff are engineers or
computer science professionals. Glenayre's research and development efforts are
located in its Vancouver, British Columbia, Canada; Quincy, Illinois; Atlanta,
Georgia and Belmont, California facilities. Total research and development costs
for the Company were $24.0 million, $16.0 million and $11.8 million or 7.5%,
9.3% and 8.7% of net sales for 1995, 1994 and 1993, respectively.
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NEW PRODUCTS AND UPGRADES
The principal new products and enhancements introduced by the Company in 1995
related to its Wireless Messaging products included the following:
(i) Digital signal processing based, low-profile transmitters to support
high-speed paging in multiple frequency bands (including the VHF, UHF, 280 MHz
and 330 MHz bands) and at multiple output power levels; (ii) advanced features
for paging switches provided by software and hardware updates including support
for the European ERMES over-the-air protocol, roaming subscribers, voice mailbox
improvements and new alphanumeric input capabilities; (iii) increased voice and
subscriber capacity for paging switches; (iv) advanced redundancy capability for
high speed control systems; (v) support for extended alarming and interfacing on
the Company's high speed control product; (vi) a receiver to support NPCS
response channel reception in the 901 MHz band; (vii) increased capacity to 300
operators in the Company's Operator Assisted Dispatch system GL 3900;
The principal new products and enhancements introduced by the Company in 1995
related to its Voice and Data Technologies products include the following:
(i) new software version for the MVP product family which provided enhancements
to the Constant Touch service and provided feature enhancements for paging and
cellular users; (ii) released new public switch telephone network interface
capabilities (SS7) connectivity for the MVP system which provides signaling and
messaging protocols for the GSM, ESMR and AIN networks; (iii) released the
Terminal Server product for the MVP system providing access for personal
computers in a dial up basis to the local area network of the MVP system for
sending paging messages; (iv) introduced the System Activation and
Administration Module (SAAM) which provides a Graphical User Interface (GUI) via
a windows application for administration of the MVP subscriber records; (v)
completed development and testing of interface to three Short Message Service
Systems, Aldiscon, CMG and Nokia; (vi) released software to support AMIS Analog
Networking for messages between multiple vendors' voice mail systems; and (vii)
introduction of a new licensed microwave digital radio at 6 GHz.
MANUFACTURING
Glenayre currently manufactures its products at Company facilities in Quincy,
Illinois; Vancouver, British Columbia, Canada; and Belmont, California. The
Company's manufacturing expertise resides in assembling sub-assemblies and final
systems that are configured to its customers' specifications. The components and
assemblies used in the Company's products include electronic components such as
resistors, capacitors, transistors, and semiconductors such as field
programmable gate arrays, digital signal processors, and microprocessors;
mechanical materials such as cabinets in which the systems are built; and
peripherals, including disk drives. Substantially all of the components and
parts used in the Company's products are available from multiple sources. In
those instances where components are purchased from a single source, the
supplier is reviewed frequently for stability and performance. Additionally, as
necessary, the Company purchases sufficient quantities of certain components
which have long-lead requirements in the world market. The Company ensures that
all products are tested, tuned and verified prior to shipment to the customer.
The Company has adopted a "Total Quality Management" philosophy throughout all
its operations. The Company has certification to the ISO 9001 international
standard for quality assurance in areas including design, manufacture, assembly
and service for the Quincy, Illinois; Vancouver, British Columbia; and Atlanta,
Georgia facilities. ISO is a worldwide federation of national standards bodies
which have united to develop internationally accepted quality systems standards
so that customers and manufacturers have a system in place that provides a known
quality. The standards set by ISO cover every facet of quality from management
responsibility to service and delivery. Management believes that adhering to the
stringent ISO 9001 procedures not only creates efficiency in its operations, but
also positions Glenayre to meet the exacting standards required by its
customers.
The Company utilizes Materials Resource Planning (MRP) systems for production
planning in its manufacturing locations and state-of-the-art workstations for
its engineering functions. In 1995, the Company completed expansions of
approximately 68,000 square feet and 50,000 square feet at its Quincy and
Vancouver facilities, respectively, in order to accommodate the foreseeable
short-term growth in its business. Additionally, the Company is currently
evaluating additional facility requirements which may be necessary to
accommodate growth in the Company's business beyond 1996.
8
<PAGE>
PATENTS AND TRADEMARKS
The Company owns or licenses numerous patents used in its current operations.
The Company believes that while these patents are useful to the Company, they
are not critical or valuable on an individual basis, and that the collective
value of the intangible property of the Company is comprised of its patents,
blueprints, specifications, technical processes and cumulative employee
knowledge. Although the Company attempts to protect its proprietary technology
through a combination of trade secrets, patent law, non-disclosure agreements
and technical measures, such protection may not preclude competitors from
developing products with features similar to the Company's products. The laws of
some foreign countries in which the Company sells or may sell its products,
including South Korea, People's Republic of China, Saudi Arabia, Thailand,
Dubai, India and Brazil, do not protect the Company's proprietary rights in the
products to the same extent as do the laws of the United States. Although the
Company believes that its products and technology do not infringe on the
proprietary rights of others, the Company is currently party to certain
infringement claims, and there can be no assurance that third parties will not
assert additional infringement claims against the Company in the future. If such
litigation resulted in the Company's inability to use technology, the Company
might be required to expend substantial resources to develop alternative
technology or to license the prior technology. There can be no assurance that
the Company could successfully develop alternative technology or license the
prior technology on commercially reasonable terms. The Company does not believe,
however, that an adverse resolution of the pending claims would have a material
adverse effect on the Company.
The Company considers its trademark "Glenayre" to be a valuable asset. The
"Glenayre" trademark is protected through trademark registrations in the United
States and various countries throughout the world.
BACKLOG
The Company's firm backlog at December 31, 1995 and 1994 was approximately $102
million and $67 million, respectively. The Company's growth in its backlog is
due to expansion of sales coverage, market growth and increased acceptance of
the Company's products. The orders supporting the Company's backlog amounts
consist of signed purchase orders and, in general, the Company expects to
commence shipment of these orders within six months of the respective backlog
dates.
COMPETITION
The Company is a leading worldwide supplier of switches, transmitters,
receivers, controllers and software used in paging, voice messaging and message
management systems. While the services from the foregoing products represent a
significant portion of the wireless personal communications systems industry
today, the industry is expanding to include new services and new markets. The
wireless personal communications industry includes equipment manufacturers that
serve many of the same personal communications services markets served by the
Company. Certain of the Company's competitors have significantly greater
resources than the Company, and there can be no assurance that Glenayre will be
able to compete successfully in the future. In addition, manufacturers of
wireless telecommunications equipment, including those in the cellular telephone
industry, certain of which are larger and have significantly greater resources
than the Company, could elect to enter into the Company's markets and compete
with Glenayre's products.
Competition in Glenayre's markets is based upon quality, product features,
service and price. While equipment and systems of the type sold by Glenayre
represent less than one-half of a paging service provider's total capital
investment, such equipment and systems are nevertheless critical for the
operation of the pager devices and the paging network. Glenayre believes that it
compares favorably with its competitors due to its reputation for high-quality
products and service and its ability to offer complete turn-key systems
customized to specifications provided by the customer.
The Company's determination of its competitive market position is based upon its
knowledge of sales of products of the type sold by the Company in the segment of
the wireless personal communications industry in which the Company competes,
information derived from its close working relationship with large paging
service providers and market information obtained from industry trade
publications and sources.
UNITED STATES
The Company believes that it has the leading market share (based on the number
of units sold) of the United States market for sales of paging switches, paging
transmitters and controllers. It is the Company's belief that its leadership
position with respect to the sale of paging switches in the United States
substantially exceeds that of its principal competitors in this market, which
are
9
<PAGE>
Motorola, Inc. ("Motorola") and L M Ericsson Telephone Company ("Ericsson"). The
Company believes that it captured the largest percentage of sales of paging
switches serving more than 10,000 subscribers in each of the last three years.
The Company believes sales of transmitter and controllers products by the
Company exceeded sales of such products by Motorola in each of the last three
years. The Company believes that Motorola remains a substantial competitor with
a significant market share in this market. Other competitors in this market
include Ericsson and smaller manufacturers that primarily serve small local
paging service providers.
For sales of voice messaging products, the Company competes in the United States
and internationally primarily with Boston Technology, Inc., Octel Communications
Corporation, Converse Technologies, Inc., Unisys Corporation and Centigram
Communications Corporation.
For sales of microwave products, the Company competes in the United States and
internationally primarily with Alcatel Alsthom, Harris Corporation, California
Microwave Corporation, Digital Microwave Corporation, Siemens A.G., Ericsson and
Philips N.V.
INTERNATIONAL
The Company believes that it is one of the leading participants in markets
outside of the United States in the sale of paging switches, paging transmitters
and controllers (based on the number of units sold). The Company believes that
it sold the most paging switches outside of the United States during each of the
last three years, exceeding sales by each of its two principal competitors in
this market, Motorola and Ericsson. Additionally, Telelink Corporation is a
competitor of the Company in the international paging switch market.
The Company believes that the Company and Motorola have the largest and
approximately equivalent shares of the international paging transmitter and
controller market. Ericsson also is a significant competitor in this market with
what the Company believes to be a substantially smaller share of the market than
either of Motorola or the Company.
The Company competes for sales of certain components of wide-area rural radio
telephone systems with companies such as Motorola, Telemobile, Inc., Exicom
Corporation, Tait Inc. and Carlson Communications.
GOVERNMENT REGULATION
Many of Glenayre's products operate on radio frequencies. Radio frequency
transmissions and emissions, and certain equipment used in connection therewith,
are regulated in the United States and internationally. Regulatory approvals
generally must be obtained by Glenayre in connection with the manufacture and
sale of its products, and by customers to operate Glenayre's products. There can
be no assurance that appropriate regulatory approvals will continue to be
obtained, or that approvals required with respect to products being developed
for the personal communications services market will be obtained. The enactment
by federal, state, local or international governments of new laws or regulations
or a change in the interpretation of existing regulations could affect the
market for Glenayre's products. Although recent deregulation of international
telecommunications industries along with recent radio frequency spectrum
allocations made by the FCC have increased the demand for Glenayre's products by
providing users of those products with opportunities to establish new paging and
other wireless personal communications services, there can be no assurance that
the trend toward deregulation and current regulatory developments favorable to
the promotion of new and expanded personal communications services will continue
or that future regulatory changes will have a positive impact on Glenayre. On
February 9, 1996, the FCC released a notice of proposed rule making covering a
licensing rule and procedure change on the 929 MHz and 931 MHz as well as
certain other paging frequencies which included a freeze on its acceptance of
new applications for paging system licenses. As the issuance of new paging
system licenses stimulates demand for the Company's products, this freeze may
adversely affect sales and the timing of sales of the Company's products.
EMPLOYEES
At December 31, 1995, the Company and its subsidiaries employed approximately
1,850 persons. The Company believes its employee relations to be good.
10
<PAGE>
ITEM 2. PROPERTIES
The following table sets forth certain information regarding the Company's
principal facilities:
<TABLE>
<CAPTION>
Size Owned or Lease
Location (Square Feet) Leased Expiration Date Uses
<S> <C> <C> <C> <C>
Vancouver, British Columbia 158,143 121,144 owned Manufacturing, service,
36,999 leased 1997-1998 accounting, purchasing and
training facilities,
research and development.
Quincy, Illinois 162,356 154,256 owned Manufacturing, service,
8,100 leased 1997 sales, accounting,
purchasing and training
facilities, research and
development.
Belmont, California 29,000 leased 1998 Manufacturing, service,
sales, accounting,
purchasing, research and
development.
Atlanta, Georgia 37,450 leased 1996 Offices for voice messaging
products, sales, service,
research and development,
and training facilities.
Charlotte, North Carolina 45,000 owned Corporate headquarters,
marketing, accounting and
finance, sales office and
training facilities.
</TABLE>
In addition to its sales offices in Atlanta, Georgia; Belmont, California;
Charlotte, North Carolina; and Quincy, Illinois listed above, the Company also
maintains sales offices throughout the United States and internationally. See
"Business--Marketing and Sales." In 1995, the Company completed expansions of
approximately 68,000 square feet and 50,000 square feet at its Quincy and
Vancouver facilities, respectively, along with the acquisition of a 45,000
square feet facility in Charlotte in order to accommodate the foreseeable
short-term growth in its business. Additionally, the Company is currently
evaluating additional facility requirements which may be necessary to
accommodate growth in the Company's business beyond 1996.
ITEM 3. LEGAL PROCEEDINGS
The Company is party to several intellectual property claims and disputes
related to its business operations. The Company believes that the ultimate
resolution of these claims and disputes will not have a material effect on the
Company's financial position or future results of operations. However, if such
litigation resulted in the Company's inability to use technology, the Company
might be required to expend substantial resources to develop alternative
technology or to license such technology on commercially reasonable terms.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Company's Special Meeting of Stockholders held December 8, 1995, an
amendment to the Company's Restated Certificate of Incorporation to increase the
number of shares of the Company's common stock which the Company shall have the
authority to issue from 50,000,000 to 200,000,000 shares was approved by a vote
of 23,485,343 in favor and 11,136,352 against, with 29,251 shares abstaining.
The number of shares voted has not been adjusted to reflect the 3-for-2 stock
split effected in the form of a stock dividend distributed December 29, 1995.
11
<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANT
Following are the persons who were the executive officers of Glenayre as of
December 31, 1995, their ages as of December 31, 1995, and their current titles
and positions held during the last five years:
Gerald B. Cramer; age 65; Chairman of the Board of Directors of the Company
since 1986; Chairman and Chief Executive Officer of Cramer Rosenthal McGlynn,
Inc. ("CRM"), an investment management firm, since 1973.
Clarke H. Bailey; age 41; Vice Chairman of the Company since November 1992;
Chairman of the Executive Committee since March 1994; Director of the Company
since December 1990; Chief Executive Officer of the Company from December 1990
to March 1994; and Acting Chief Executive Officer of the Company from May 1994
until December 1994. Chairman and Chief Executive Officer of United Acquisition
Company and its parent, United Gas Holding Corporation since February 1995;
Chairman of Arcus, Inc. since July 1995; and a variety of capacities for the
investment banking firm of Oppenheimer & Co., Inc. from March 1984 to December
1990, most recently as Managing Director and head of the Principal Investments
Department.
John J. Hurley; age 61; Vice Chairman of the Company since December 1994;
Director of the Company since November 1992; President of the Company from
November 1992 until December 1994; Chief Operating Officer of the Company from
November 1992 until March 1994; and Chief Executive Officer of the Company from
March 1994 until May 1994. President of GEL from July 1988 to November 1992;
Director of GEL from July 1988 to June 1993; Chief Operating Officer of Antenna
Specialists Company, a communications antenna manufacturer from 1985 to 1988;
and employed by General Electric Company from 1966 to 1985, where he held
several positions, including General Manager of General Electric Company's
cellular business.
Ramon D. Ardizzone; age 58; President of the Company since December 1994; Chief
Executive Officer of the Company since May 1995; Acting Chief Executive Officer
of the Company from December 1994 until May 1995; Director of the Company since
November 1992; Chief Operating Officer of the Company from June 1994 until
December 1994; Acting Chief Operating Officer of the Company from May 1994 until
June 1994; Executive Vice President of the Company from November 1992 until
December 1994; and Executive Vice President of the Company in charge of Sales
and Marketing from November 1992 until May 1994. Executive Vice President -
Sales and Marketing of GEL from August 1988 to November 1992; President of
Aerotron, Inc., a land-mobile radio manufacturing company from 1986 to 1988; and
employed by General Electric Company in various management positions from 1956
to 1986.
Gary B. Smith; age 36; Executive Vice President of the Company since September
1994; General Manager, Wireless Messaging Group since February 1995; Chief
Technical Officer of the Company from September 1994 until February 1995; and
various engineering management positions with the Company or GEMS from 1983 to
September 1994.
Kenneth C. Thompson; age 48; Executive Vice President of the Company and General
Manager, Voice and Data Technologies Group since February 1995; and various
marketing management positions with the Company or GEMS from December 1990 to
February 1995. General Manager of a division of Science Application
International Corporation from December 1987 to December 1990.
Russ K. Allen; age 55; Executive Vice President, Field Sales and Support
Operations of the Company since February 1995; and various sales management
positions with the Company or GEMS from 1985 to February 1995.
Stanley Ciepcielinski; age 39; Executive Vice President, Finance and
Administration Operations of the Company since February 1995; Executive Vice
President and Chief Financial Officer of the Company since January 1993; and
Secretary and Treasurer since April 1993. Director of Finance for the
Transformer Business Unit of Square D Company from 1989 to 1992; and Corporate
Accounting Manager of Alcatel, Inc from 1984 to 1989.
Beverley W. Cox; age 38; Vice President, Human Resources of the Company since
February 1995; Corporate Director-Human Resources with the Company from November
1993 to February 1995. Various human resource management positions with Cadmus
Communications, Inc. from July 1989 to November 1993.
Billy C. Layton; age 49; Vice President of the Company since December 1995;
Controller and Chief Accounting Officer of the Company since November 1992; and
various accounting management positions with GEMS from 1990 to November 1992.
12
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The Company's common stock trades on The Nasdaq Stock Market under the symbol
"GEMS." The table below sets forth the high and low sale prices for the
Company's common stock on The Nasdaq Stock Market for the periods indicated, as
adjusted to reflect a 3-for-2 stock split effected in the form of a 50% stock
dividend distributed on January 5, 1995 to stockholders of record on December
22, 1994, a 3-for-2 stock split effected in the form of a 50% stock dividend
distributed on June 19, 1995 to stockholders of record on June 5, 1995 and to
reflect a 3-for-2 stock split effected in the form of a 50% stock dividend
distributed on December 29, 1995 to stockholders of record on December 22, 1995.
<TABLE>
<CAPTION>
Price Range of
Common Stock
High Low
<S> <C> <C>
Year Ended December 31, 1994
First Quarter...................................................... $12.78 $10.16
Second Quarter..................................................... 13.58 9.44
Third Quarter...................................................... 17.64 10.89
Fourth Quarter..................................................... 18.37 14.88
Year Ended December 31, 1995
First Quarter...................................................... 21.18 15.90
Second Quarter..................................................... 36.17 18.70
Third Quarter...................................................... 49.00 32.67
Fourth Quarter..................................................... 49.17 33.00
</TABLE>
At March 8, 1996 there were approximately 1,440 holders of record of the
Company's common stock.
The Company has not paid cash dividends since 1982 and does not anticipate
paying cash dividends in the foreseeable future. The Company expects to utilize
future earnings to finance the development and expansion of its business.
13
<PAGE>
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
(In thousands, except per share data)
The following Selected Consolidated Financial Data of Glenayre presented below
for each of the five years in the period ended December 31, 1995 has been
derived from the Company's audited Consolidated Financial Statements. The
Company acquired the GEMS Business on November 10, 1992 from GEL. Prior to the
Acquisition, the Company had been in the real estate development business and in
oil and gas pipeline construction. This Selected Consolidated Financial Data
reflects the operating results of the GEMS Business only from November 10, 1992,
the date of the Acquisition, thus the operating results for fiscal years 1991
and 1992 are not comparable to the operating results for subsequent years. The
year ended December 31, 1991 reflects only the discontinued operations while the
year ended December 31, 1992 reflects only 51 days of the operating results of
the GEMS Business following the Acquisition. The results for 1995 include the
results of MUX from April 25, 1995, the day of its acquisition by the Company.
The Selected Consolidated Financial Data should be read in conjunction with the
Consolidated Financial Statements and Notes thereto, "MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" and the other
financial data included elsewhere herein.
<TABLE>
Year Ended December 31,
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Net sales................................. $321,404 $172,107 $136,139 $ 15,586 $ ---
Income (loss) from continuing
operations before extraordinary
item(1)............................. 76,448 33,095 23,700 865 (183)
Discontinued operations(2).............. --- 388 100 (7,990) 687
Extraordinary item...................... --- --- (1,695) --- ---
Net income (loss)....................... 76,448 33,483 22,105 (7,125) 504
PRIMARY PER SHARE DATA:
Income (loss) from continuing operations
before extraordinary item............ 1.22 0.56 0.48 0.02 ---
Net income (loss)....................... 1.22 0.57 0.45 (0.19) 0.01
At December 31,
1995 1994 1993 1992 1991
BALANCE SHEET DATA:
Working capital(3)..................... $223,487 $135,209 $ 94,898 $ 20,217 $ 48,575
Total assets........................... 447,580 284,961 228,244 169,476 80,650
Long-term debt, including current portion. 2,147 2,019 3,451 67,981 1,751
Minority interest in consolidated
subsidiaries........................... --- --- --- 3,565 6,180
Put warrants.............................. --- --- --- 459 ---
Stockholders' equity...................... 390,694 245,435 198,708 64,022 59,964
</TABLE>
(1) Income (loss) from continuing operations prior to November 10, 1992,
resulted primarily from interest income and gains (losses) related to the
Company's cash and marketable securities and other income and expenses
unrelated to the discontinued operations.
(2) Effective December 31, 1992 and July 6, 1993, the Company adopted formal
plans to dispose of its oil and gas pipeline construction and real estate
operations, respectively. These operations are accounted for as
discontinued for all periods presented. See Note 1 to the Consolidated
Financial Statements.
(3) Working capital includes approximately $2.1 million and $9.5 million
attributable to the Company's discontinued oil and gas pipeline
construction operations at December 31, 1992 and 1991, respectively.
14
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
BACKGROUND
In 1992, the Company acquired the telecommunications equipment and related
software business of Glentel, Inc., a Canadian corporation ("GEL"). Glenayre
designs, manufactures, markets and services telecommunications equipment and
software used in wireless personal communications systems throughout the world.
The Company's product families are grouped in either (i) Wireless Messaging, or
(ii) Voice and Data Technologies categories. Additionally, Glenayre provides
service and support to its products.
Prior to 1992, the Company was engaged in the real estate development business
and the construction of oil and gas pipelines. In order to focus exclusively on
the telecommunications industry, Glenayre adopted formal plans to dispose of its
oil and gas pipeline construction and real estate operations, effective December
31, 1992 and July 6, 1993, respectively. These business segments are accounted
for as discontinued operations for all periods presented and, accordingly, their
operating results are excluded from continuing operations.
In April 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 $28.6 million consisted of 1,687,432 shares of the
Company's common stock (including 502,206 shares issuable upon exercise of stock
options) valued at $27.3 million and $1.3 million in acquisition costs. The
operating results of MUX are included in the consolidated results of the Company
since the acquisition date.
The market for the wireless personal communications industry remains robust. The
Company's diversified customer base and technological competitive advantage
should allow the Company to capitalize on the overall industry growth. As the
service providers expand their systems to accommodate new subscribers, services,
and territories, there should be opportunities for sales of the Company's
expansion and enhancement products and related software. Additionally, the
Company expects to participate in the delivery of products supporting the
development of the more advanced Narrowband Personal Communication Services
("NPCS"). Although the Company will begin shipment of its NPCS products in 1996,
the timing of the impact of NPCS products on the Company's revenues in 1996 and
subsequent years will be based on product development schedules and build-out
requirements of NPCS license holders.
The Company's results of continuing operations (tabular amounts in thousands of
dollars) and as a percentage of net sales are presented below:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C> <C> <C> <C>
Net sales $ 321,404 100.0% $ 172,107 100.0% $ 136,139 100.0%
Cost of sales 138,773 43.2 72,908 42.4 60,561 44.5
Gross profit 182,631 56.8 99,199 57.6 75,578 55.5
Selling, general and
administrative expense 56,579 17.6 41,079 23.9 31,638 23.2
Research and development
expense 23,968 7.5 15,991 9.3 11,843 8.7
Depreciation and amortization
expense 8,571 2.7 5,884 3.4 5,059 3.7
Income from operations 93,513 29.1 36,245 21.1 27,038 19.9
Interest income (expense), net 8,267 2.6 4,450 2.6 (2,828) (2.1)
Income from continuing
operations before income
taxes and extraordinary item 101,745 31.7 40,295 23.4 24,161 17.7
Provision for income taxes 25,297 7.9 7,200 4.2 461 0.3
Income from continuing
operations before
extraordinary item $ 76,448 23.8% $ 33,095 19.2% $ 23,700 17.4%
</TABLE>
15
<PAGE>
The following discussion should be read in conjunction with the Company's
Consolidated Financial Statements and related Notes.
1995 COMPARED WITH 1994
NET SALES
Net sales in 1995 increased to $321.4 million from 1994 net sales of $172.1
million, an increase of $149.3 million, or 87%. This increase was primarily
attributable to greater sales of Wireless Messaging products of approximately
$114 million, or 83% over 1994, and increased sales of Voice and Data products
of approximately $22 million, or 126% over 1994. The increase of Wireless
Messaging products was primarily due to: (i) the continued expansion and
upgrading of existing systems within the installed customer base; (ii)
continuing to expand internationally into new markets, and (iii) growth in
market share. The increase in Voice and Data products was comprised of increased
voice messaging sales with the remainder principally attributable to the MUX
operations included only since its April 1995 acquisition. Net sales to United
States customers in 1995 increased by approximately 80% over 1994 while 1995 net
sales to international customers increased approximately 100% over 1994.
GROSS PROFIT
Gross profit increased to $182.6 million, or 56.8% of 1995 net sales, from $99.2
million, or 57.6% of 1994 net sales. The minimal change in the gross profit
margin percentage is due to a change in the mix in products shipped and the
impact of increased fixed manufacturing costs incurred as additional
manufacturing capacity was brought on line during 1995.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE
Selling, general and administrative expense increased to $56.6 million, or 17.6%
of 1995 net sales, from $41.1 million, or 23.9% of 1994 net sales. Selling,
general and administrative expense increased by $15.5 million from 1994 to 1995.
The increase primarily resulted from: (i) increased selling and marketing
expenses of approximately $10.8 million (due to increased staffing, commissions,
travel expenses, promotional material and new international sales offices
openings) required to achieve growth in net sales; (ii) approximately $4.7
million related to increased administrative staffing and travel expenses; and
(iii) general increases in employee costs and purchased services.
RESEARCH AND DEVELOPMENT EXPENSE
Research and development expense increased to $24.0 million, or 7.5% of 1995 net
sales, from $16.0 million, or 9.3% of 1994 net sales. These research and
development costs were for enhancements to existing products and new product
development such as the NPCS products, from which revenue is expected to be
realized in 1996 and subsequent years. Both hardware and software development
costs are included in research and development costs. All research and
development costs are expensed as incurred.
DEPRECIATION AND AMORTIZATION EXPENSE
Depreciation and amortization expense increased to $8.6 million for 1995 from
$5.9 million for 1994. The increase is primarily attributable to (i)
significantly higher incremental purchases of plant and equipment in 1995
compared to 1994 and (ii) goodwill related to the acquisition of MUX in April
1995. In order to provide the equipment and capacity necessary to meet the
growth of the business, Glenayre spent approximately $35 million during 1995 for
capital expenditures (including approximately $18 million related to the
expansion of the Quincy and Vancouver facilities and the purchase of the
Charlotte facility).
INTEREST INCOME, NET
The Company realized net interest income of $8.3 million for 1995 compared to
net interest income of $4.5 million for 1994. The increase is primarily
attributable to (i) higher average balances in cash and cash equivalents and
short-term investments and (ii) higher average rates earned.
16
<PAGE>
INCOME TAXES
The difference between the combined U.S. federal and state statutory tax rate of
approximately 40% and the effective tax rate of 24.9% for 1995 and 17.9% for
1994 is primarily the result of the utilization of the Company's Net Operating
Losses ("NOLs") 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 24.9%
in 1995 and 17.9% in 1994 is primarily the result of a significant variance
between the 1995 and 1994 adjustments for realization of tax benefits of net
operating loss carryforwards for financial statement purposes in accordance with
SFAS 109 primarily due to revisions during each year to the estimated future
taxable income during the Company's loss carryforward period. See Note 8 to the
Company's Consolidated Financial Statements and "--Financial Condition and
Liquidity."
1994 COMPARED WITH 1993
NET SALES
Net sales in 1994 increased to $172.1 million from 1993 net sales of $136.1
million, an increase of $36.0 million, or 26.4%. This increase was primarily
attributable to greater sales of Wireless Messaging products of approximately
$27 million, or 25% over 1993, and increased sales of Voice and Data products of
approximately $5 million, or 44% over 1993. The increase in Wireless Messaging
products was primarily due to: (i) the continued expansion and upgrading of
existing systems within the installed customer base; (ii) the build out of
private carrier paging systems which the FCC reallocated from non-exclusive to
exclusive in 1993; and (iii) sales of new paging systems both in the United
States and internationally. The increase of Voice and Data product sales was
principally comprised of additional sales to existing customers in order to
upgrade their service to their paging subscribers, sales to resellers and sales
to cellular operators. Net sales to United States customers in 1994 increased by
approximately 45% over 1993 while 1994 net sales to international customers were
comparable to 1993.
GROSS PROFIT
Gross profit increased to $99.2 million, or 57.6% of 1994 net sales, from $75.6
million, or 55.5% of 1993 net sales. The increase in gross profit margin is
primarily a result of a favorable mix in products shipped and services provided,
the impact of increased sales volume versus fixed manufacturing costs, and
favorable material pricing due to higher volume purchasing levels. The Company's
net selling prices realized in 1994 were, on average, equivalent to those
realized in 1993.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE
Selling, general and administrative expense increased to $41.1 million, or 23.9%
of 1994 net sales, from $31.6 million, or 23.2% of 1993 net sales. Selling,
general and administrative expense increased by $9.4 million from 1993 to 1994.
The increase primarily resulted from: (i) increased selling and marketing
expenses of approximately $7.5 million (due to increased staffing, commissions,
travel expenses, promotional material and new international sales offices
openings) required to achieve growth in net sales; (ii) approximately $1.2
million related to increased administrative staffing and travel expenses; and
(iii) general increases in employee costs and purchased services.
RESEARCH AND DEVELOPMENT EXPENSE
Research and development expense increased to $16.0 million, or 9.3% of 1994 net
sales, from $11.8 million, or 8.7% of 1993 net sales. These research and
development costs were for new product development and enhancements to existing
products.
DEPRECIATION AND AMORTIZATION EXPENSE
Depreciation and amortization expense increased to $5.9 million for 1994 from
$5.1 million for 1993. The increase is attributable to higher incremental
purchases of equipment in 1994 compared to 1993.
17
<PAGE>
INTEREST INCOME, NET
Interest income, net increased to $4.5 million, or 2.6% of 1994 net sales, from
interest expense, net of $2.8 million or 2.1% of 1993 net sales. The increase is
primarily attributable to the October 1993 payoff of the bank debt originally
incurred in connection with the acquisition of the telecommunications equipment
and related software business of GEL (the "Acquisition") and interest income
earned on significant cash and cash equivalents and short-term investments for
all of 1994 compared to only the last quarter of 1993. See Note 12 to the
Company's Consolidated Financial Statements and "----Financial Condition and
Liquidity."
INCOME TAXES
The difference between the combined U.S. federal and state statutory tax rate of
approximately 40% and the effective tax rate of 17.9% for 1994 and 1.9% for 1993
is primarily the result of the utilization of the Company's NOLs and the
application of SFAS 109, in computing the Company's tax provision. The
difference between the effective tax rate of 17.9% in 1994 and 1.9% in 1993 is
primarily the result of a significant variance between the 1994 and 1993
adjustments for realization of tax benefits of net operating loss carryforwards
for financial statement purposes in accordance with SFAS 109 primarily due to
revisions during each year to the estimated future taxable income during the
Company's loss carryforward period. See Note 8 to the Company's Consolidated
Financial Statements and "----Financial Condition and Liquidity."
GLENAYRE TECHNOLOGIES, INC. DISCONTINUED OPERATIONS
Subsequent to the Acquisition, the Company decided to dispose of its oil and gas
pipeline construction operations and its real estate operations in order to
focus exclusively on the telecommunications industry.
Effective December 31, 1992, the Company adopted a formal plan to dispose of its
oil and gas pipeline construction operations. The Company sold its interest in
the oil and gas pipeline construction business in 1993, receiving approximately
$3.3 million in cash and a $3.6 million promissory note. The results of
discontinued operations for the year ended December 31, 1993 consisted of a
$100,000 gain, net of tax, on the sale of its oil and gas pipeline operations.
The $3.6 million note was paid in full in 1995.
On July 6, 1993, the Company adopted a formal disposal plan which called for the
disposal of its remaining real estate assets. Portions of the four parcels of
undeveloped land were sold during 1993. The sales of the remaining parcels were
completed as of June 30, 1994 with an aggregate recognized gain in 1994 of
$388,000, net of income taxes of $248,000.
FINANCIAL CONDITION AND LIQUIDITY
FINANCIAL CONDITION AND LIQUIDITY
Net cash provided by operations increased to $39.0 million in 1995 compared to
$32.4 million in 1994. The Company's working capital at December 31, 1995 was
$223.5 million, including cash and cash equivalents and short-term investments
of $114.7 million. Accounts receivable, inventories, accounts payable, and
accrued liabilities at December 31, 1995 increased from December 31, 1994
primarily as a result of increased levels of operating activities during 1995.
Goodwill at December 31, 1995 increased from December 31, 1994 due to the
acquisition of MUX in April 1995. During 1995 the Company received cash of $16.1
million from the exercise of stock options and $3.6 million from the payment in
full of the note described above. During 1995, the Company spent $34.6 million
for capital expenditures (including approximately $18 million related to the
expansion of the Quincy and Vancouver facilities and the purchase of the
Charlotte facility). These expenditures were necessary in order to provide the
equipment and capacity to meet the short-term growth of the business. The
Company is currently evaluating additional facility requirements which may be
necessary to accommodate growth in the Company's business beyond 1996.
18
<PAGE>
The Company's cash and cash equivalents consist 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 expansion into complementary
businesses. Additionally, the Company may be requested by certain NPCS license
holders to provide equipment financing in order to meet the build-out
requirements established by the FCC.
The Company believes that funds generated from continuing operations, together
with its current cash reserves and short-term investments, will be sufficient to
support the short-term and long-term liquidity requirements for current
operations (including annual capital expenditures). Company management believes
that, if needed, it can establish appropriate borrowing arrangements with
lending institutions.
INCOME TAX MATTERS
The Company presently has a favorable income tax position principally because of
the existence of a significant amount of U.S. tax net operating loss
carryforwards. These tax loss carryforwards are available to shelter future U.S.
taxable income generated by the Company. Under the Company's current operating
and business structure, the Company expects that the majority of the worldwide
taxable income will be earned in the United States. Therefore, the Company's
actual cash outlay for income taxes for the next several years will be limited
to U.S. alternative minimum tax and foreign and state income taxes.
As described in Note 8 to the Company's Consolidated Financial Statements, the
Company at December 31, 1995 had U.S. NOLs aggregating $116.0 million. However,
several factors somewhat mitigate the Company's favorable tax position.
Approximately $16 million of the Company's NOLs are subject to limitations and
are likely to expire unused. Approximately 73% of the $116.0 million of NOLs
will expire, if unused, between 1996 and 1998. Accordingly, there is no
assurance that the U.S. taxable income will be sufficient to fully use these
NOLs. Additionally, as the volume of international sales is expected to grow,
the percentage of worldwide income taxable in international jurisdictions may
increase in the future.
The Company has recorded a deferred tax asset of $35 million, net of a valuation
allowance of $17.9 million, at December 31, 1995, in accordance with SFAS 109.
This amount represents management's best estimate of the amount of NOLs and
other future deductions that are more likely than not to be realized as offsets
to future taxable income. The factors that affect the amount of U.S. taxable
income in the future, in relation to reported income before income taxes,
primarily include the amount of employee stock options exercised and the portion
of such income taxable in jurisdictions outside the U.S., both of which reduce
the amount of income subject to U.S. tax, and therefore reduce the utilization
of existing net operating loss carryforwards.
INFLATION
For the three fiscal years ended December 31, 1995, the Company does not believe
inflation has had a material effect on its results of operations.
19
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements of the Company and its subsidiaries as of
December 31, 1995, 1994 and 1993 and for each of the three years in the period
ended December 31, 1995, as well as the independent auditors' reports thereon,
are set forth on the following pages. The index to such financial statements and
required financial statement schedules is set forth below and at Item 14(a) of
this Annual Report on Form 10-K.
INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULE
<TABLE>
<CAPTION>
(i) Financial Statements: Page
<S> <C>
Report of Ernst & Young LLP Independent Auditors ................................................ 21
Report of Deloitte & Touche LLP Independent Auditors............................................ 22
Consolidated Balance Sheets at December 31, 1995 and 1994........................................ 23
Consolidated Statements of Income for the years ended December 31, 1995, 1994 and 1993........... 24
Consolidated Statements of Stockholders' Equity for the years ended December 31, 1995,
1994 and 1993.................................................................................. 25
Consolidated Statements of Cash Flows for the years ended December 31, 1995, 1994 and 1993....... 26
Notes to Consolidated Financial Statements....................................................... 28
(ii) Supplemental Schedule:
(For the years ended December 31, 1995, 1994 and 1993)
Schedule II - Valuation and Qualifying Accounts ................................................. 47
</TABLE>
All other schedules are omitted because they are not applicable or not required.
20
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Stockholders
Glenayre Technologies, Inc.
We have audited the consolidated balance sheet of Glenayre Technologies, Inc.
and subsidiaries as of December 31, 1995, and the related consolidated
statements of income, stockholders' equity and cash flows for the year then
ended. Our audit also included the supplemental schedule listed in the Index of
Item 14(a). These financial statements and the supplemental financial statement
schedule are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements and the supplemental
schedule based on our audit. The consolidated financial statements of Glenayre
Technologies, Inc. and subsidiaries for the years ended December 31, 1994 and
1993, were audited by other auditors whose report dated February 3, 1995,
expressed an unqualified opinion on those statements.
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 1995 consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Glenayre Technologies, Inc. and subsidiaries at December 31, 1995, and the
consolidated results of their operations and their cash flows for the year then
ended in conformity with generally accepted accounting principles. Also, in our
opinion, the related supplemental financial statement schedule, when considered
in relation to the basic consolidated financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
ERNST & YOUNG LLP
Charlotte, North Carolina
January 31, 1996
21
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
Glenayre Technologies, Inc.
We have audited the accompanying consolidated balance sheet of Glenayre
Technologies, Inc. and subsidiaries as of December 31, 1994, and the related
consolidated statements of income, stockholders' equity, and cash flows for each
of the two years in the period ended December 31, 1994. Our audits also included
the information for each of the two years in the period ended December 31, 1994
on the supplemental schedule listed in the Index at Item 14(a). These financial
statements and the supplemental schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and the supplemental schedule based on our audits.
We conducted our audits 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 audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Glenayre
Technologies, Inc. and subsidiaries at December 31, 1994, and the results of
their operations and their cash flows for each of the two years in the period
ended December 31, 1994 in conformity with generally accepted accounting
principles. Also, in our opinion, such supplemental schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly in all material respects the information set forth therein for
each of the two years in the period ended December 31, 1994.
DELOITTE & TOUCHE LLP
Charlotte, North Carolina
February 3, 1995
22
<PAGE>
GLENAYRE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
December 31,
1995 1994
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 70,600 $ 52,043
Short-term investments 44,054 39,462
Accounts receivable, net 89,265 33,707
Trade notes receivable, current 7,960 8,816
Inventories 50,045 24,261
Deferred income taxes 7,568 6,518
Prepaid expenses and other current assets 7,189 5,526
- ------------------------------------------------------------------------------ -------- --------
Total current assets 276,681 170,333
Trade notes receivable 14,973 12,480
Property, plant and equipment, net 47,920 17,707
Goodwill 80,240 61,436
Deferred income taxes 27,487 22,510
Other assets 279 495
- ------------------------------------------------------------------------------ -------- --------
TOTAL ASSETS $447,580 $284,961
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 15,709 $ 9,871
Accrued liabilities 36,162 25,035
Other current liabilities 1,323 218
- ------------------------------------------------------------------------------ -------- --------
Total current liabilities 53,194 35,124
Other liabilities 3,692 4,402
Stockholders' Equity:
Preferred stock, $.01 par value; 5,000,000 shares
authorized, no shares issued and outstanding -- --
Common stock, $.02 par value; authorized: 200,000,000
shares; outstanding: 1995-60,044,752 shares;
1994-55,991,136 shares 1,201 1,120
Contributed capital 297,017 215,862
Retained earnings 92,476 28,453
- ------------------------------------------------------------------------------ -------- --------
Total stockholders' equity $390,694 245,435
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $447,580 $284,961
======== ========
</TABLE>
See notes to consolidated financial statements.
23
<PAGE>
GLENAYRE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Year Ended December 31,
1995 1994 1993
<S> <C> <C> <C>
NET SALES $ 321,404 $ 172,107 $ 136,139
COSTS AND EXPENSES:
Cost of sales 138,773 72,908 60,561
Selling, general and administrative expense 56,579 41,079 31,638
Research and development expense 23,968 15,991 11,843
Depreciation and amortization expense 8,571 5,884 5,059
Total costs and expenses 227,891 135,862 109,101
INCOME FROM OPERATIONS 93,513 36,245 27,038
OTHER INCOME (EXPENSES):
Interest income 8,457 4,750 1,344
Interest expense (190) (300) (4,172)
Foreign exchange gain (loss) 94 (220) (137)
Other, net (129) (180) 88
Total other income (expenses), net 8,232 4,050 (2,877)
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES AND EXTRAORDINARY ITEM 101,745 40,295 24,161
PROVISION FOR INCOME TAXES 25,297 7,200 461
INCOME FROM CONTINUING OPERATIONS
BEFORE EXTRAORDINARY ITEM 76,448 33,095 23,700
GAIN FROM DISCONTINUED OPERATIONS -- 388 100
INCOME BEFORE EXTRAORDINARY ITEM 76,448 33,483 23,800
EXTRAORDINARY LOSS FROM
EARLY RETIREMENT OF DEBT -- -- (1,695)
NET INCOME $ 76,448 $ 33,483 $ 22,105
PRIMARY INCOME PER COMMON SHARE:
Continuing operations $ 1.22 $ .56 $ .48
Discontinued operations -- .01 --
Income before extraordinary item 1.22 .57 .48
Extraordinary item -- -- (.03)
NET INCOME PER COMMON SHARE--PRIMARY $ 1.22 $ .57 $ .45
FULLY DILUTED INCOME PER COMMON SHARE:
Continuing operations $ 1.22 $ .56 $ .48
Discontinued operations -- .01 --
Income before extraordinary item 1.22 $ .57 .48
Extraordinary item -- -- (.03)
NET INCOME PER COMMON SHARE--FULLY DILUTED $ 1.22 $ .57 $ .45
</TABLE>
See notes to consolidated financial statements.
24
<PAGE>
GLENAYRE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(DOLLARS AND SHARES IN THOUSANDS)
<TABLE>
<CAPTION>
Unrealized
Unearned Loss on
Retained Stock Marketable Total
Common Stock Contributed Earnings Compen- Equity Stockholders'
Shares Amount Capital (Deficit) sation Securities Equity
<S> <C> <C> <C> <C> <C> <C> <C>
Balances, December 31, 1992.......... 42,226 $844 $69,545 $ (5,370) $(986) $(11) $ 64,022
Net income........................... 22,105 22,105
Effect of exercise of put warrants... 459 459
Amortization of unearned
stock compensation................. 496 496
Utilization of net operating
loss carryforwards ................ 11,898 (11,898)
Stock offering....................... 8,437 167 102,763 102,930
Other shares issued.................. 3,128 65 3,198 3,263
Stock options granted................ 822 822
Tax benefit of stock options
exercised ........................... 4,600 4,600
Change in net unrealized loss
on marketable equity securities.... 11 11
Balances, December 31, 1993.......... 53,791 1,076 192,826 5,296 (490) -- 198,708
Net income........................... 33,483 33,483
Amortization of unearned stock
compensation........................ 490 490
Utilization of net operating loss
carryforwards..................... 10,326 (10,326)
Stock options exercised.............. 2,284 45 4,271 4,316
Tax benefit of stock options
exercised ........................... 9,726 9,726
Repurchase of common stock........... (84) (1) (1,287) (1,288)
Balances, December 31, 1994.......... 55,991 1,120 215,862 28,453 -- -- 245,435
Net income........................... 76,448 76,448
Stock options exercised.............. 2,899 58 16,090 16,148
Shares issued and options assumed in
connection with business
acquisition........................ 1,185 24 27,244 27,268
Utilization of net operating loss
carryforwards...................... 12,425 (12,425)
Tax benefit of stock options
exercised............................ 26,433 26,433
Repurchase of common
stock................................ (30) (1) (1,037) (1,038)
Balances, December 31, 1995......... 60,045 $1,201 $297,017 $92,476 $-- $-- $390,694
</TABLE>
See notes to consolidated financial statements.
25
<PAGE>
GLENAYRE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(TABULAR AMOUNTS IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
Year Ended December 31,
1995 1994 1993
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ............................................................ $ 76,448 $ 33,483 $ 22,105
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization ....................................... 8,571 5,884 5,059
Write-off of debt issuance costs .................................... -- -- 2,734
Gain on disposal of discontinued operations ......................... -- (388) (100)
Changes in deferred income taxes .................................... (4,998) (5,218) (9,782)
Loss on disposal of equipment ....................................... 203 65 257
Tax benefit of stock options exercised .............................. 26,433 9,726 4,600
Stock compensation expense .......................................... 169 490 1,318
Other noncash expenses .............................................. 73 222 454
Changes in operating assets and liabilities, net of
effects of business acquisitions and the sale of
discontinued operations:
Restricted cash .................................................. -- -- 510
Accounts receivable .............................................. (54,222) (6,622) (5,132)
Notes receivable ................................................. (1,637) (13,174) (1,391)
Inventories ...................................................... (23,152) (5,207) 614
Prepaids and other current assets ................................ 227 (802) 1,529
Real estate held for sale ........................................ -- 2,700 1,119
Other assets ..................................................... (3,384) (143) 659
Accounts payable ................................................. 5,406 5,085 (2,908)
Accrued liabilities .............................................. 8,811 4,002 (2,594)
Other liabilities ................................................ 93 2,337 1,333
NET CASH PROVIDED BY OPERATING
ACTIVITIES ........................................................... 39,041 32,440 20,384
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment ............................ (34,638) (8,627) (3,447)
Proceeds from sale of equipment ....................................... 26 13 1,510
Net proceeds from sale of interest in oil and gas
pipeline construction business ...................................... 3,600 -- 903
Maturities of short-term investments .................................. 122,679 29,503 --
Purchases of short-term investments ................................... (127,271) (68,965) --
Cash acquired, net of acquisition
costs ................................................................. 396 -- --
NET CASH USED IN INVESTING ACTIVITIES ................................. (35,208) (48,076) (1,034)
</TABLE>
26
<PAGE>
GLENAYRE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(TABULAR AMOUNTS IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
Year Ended December 31,
1995 1994 1993
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term borrowings ........... -- -- 347
Repayments of long-term borrowings ........... (325) (1,448) (64,723)
Issuance of common stock ..................... 16,087 4,316 106,193
Common stock repurchases ..................... (1,038) (1,288) --
NET CASH PROVIDED BY FINANCING ACTIVITIES .... 14,724 1,580 41,817
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS ........................... 18,557 (14,056) 61,167
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 52,043 66,099 4,932
CASH AND CASH EQUIVALENTS AT END OF YEAR ..... $ 70,600 $ 52,043 $ 66,099
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION:
Cash paid during the year for:
Interest ................................... $ 85 $ 144 $ 3,951
Income taxes ............................... 1,843 1,176 1,042
</TABLE>
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 $1,323,000 in acquisition
costs and issued common stock valued at $27,260,000 for assets with a fair value
of $31,769,000 and assumed liabilities of $3,186,000.
During 1993, the Company sold its interest in the oil and gas pipeline
construction business. In connection with this sale the Company received
$3,298,000 in cash and a $3,600,000 promissory note for the stock of such
business with net assets of $6,798,000 (including $2,395,000 in cash).
See notes to consolidated financial statements.
27
<PAGE>
GLENAYRE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (tabular amounts in thousands of
dollars except per share amounts)
1. BUSINESS ACQUISITION AND DISCONTINUED OPERATIONS
(A) WESTERN MULTIPLEX ACQUISITION
On April 25, 1995 Glenayre Technologies, Inc. (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 $28.6
million consisted of 1,687,432 shares of the Company's common stock (including
502,206 shares issuable upon exercise of stock options) valued at $27.3 million
and $1.3 million in acquisition costs. The Company's consolidated financial
statements for the year ended December 31, 1995 include the operating results of
MUX for the period April 25, 1995 to December 31, 1995. The acquisition was
accounted for as a purchase and the purchase price was assigned to the net
assets acquired based on the fair values of such assets and liabilities at the
date of the acquisition, as follows:
Current assets.........................................$ 7,886
Property, plant and equipment.......................... 1,188
Goodwill .............................................. 21,991
Deferred tax asset..................................... 704
Liabilities assumed ................................... (3,186)
$ 28,583
The following table summarizes, on an unaudited pro forma basis, the estimated
combined results of operations for the years ended December 31, 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
unaudited 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 or to reflect the results of operations which may be
achieved in the future.
1995 1994
Net sales ........................................ $326,656 $190,920
Income from continuing operations ................ 76,600 34,550
Income from continuing operations per
common share ................................. $ 1.22 $ .58
(b) DISCONTINUED OPERATIONS
Oil and Gas Pipeline Construction Operations. Effective December 31, 1992, the
Company adopted a formal plan to dispose of its oil and gas pipeline
construction operations. The Company sold its interest in the oil and gas
pipeline construction business on October 22, 1993 for $6.9 million, resulting
in a gain of $100,000, net of tax. The Company received $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.
Revenues of the oil and gas pipeline construction operations amounted to
approximately $16.3 million for the period from January 1, 1993 to the date of
sale. There was no material operating income or loss from this operation in
1993.
Real Estate Operations. In November 1992, the Company restructured its real
estate operations headquartered in Phoenix, Arizona. The restructuring plan
called for a new real estate sales strategy and the shutdown of the Phoenix real
estate office. The Phoenix real estate office was closed on June 30, 1993.
28
<PAGE>
GLENAYRE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(tabular amounts in thousands of dollars except per share amounts)
In July 1993, the Company adopted a formal plan of disposal which called for
disposal of its remaining real estate assets (principally four parcels of
undeveloped land in the western United States). Adoption of the disposal plan
did not result in any further write-downs of the real estate held for sale or
any additional reserves related to the shutdown of the Phoenix real estate
office. The sales of the remaining parcels were completed as of June 30, 1994,
with an aggregate recognized gain in 1994 of $388,000, net of income taxes of
$248,000.
Revenues from the sale of real estate amounted to approximately $6.5 million and
$571,000 for the years ended December 31, 1994 and 1993, respectively.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
The Company designs, manufactures, markets and services switches, transmitters,
receivers, controllers, software and other equipment used in personal
communications systems (including paging, voice messaging, cellular and message
management and mobile data systems), microwave communication systems and radio
telephone systems. The Company sells to a range of customers worldwide. In the
United States, customers include the regional Bell operating companies, public
and private radio common carriers and private carrier paging operators.
Internationally, customers include public telephone and telegraph companies, as
well as private telecommunication service providers.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
CONSOLIDATION
The consolidated financial statements include the accounts of Glenayre
Technologies, Inc. and its subsidiaries. All significant intercompany accounts
and transactions are eliminated in consolidation.
OPERATING CYCLE
Assets and liabilities related to long-term contracts are included in current
assets and current liabilities in the consolidated balance sheets, as they will
be liquidated in the normal course of contract completion.
CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with original
maturities of three months or less to be cash equivalents. These investments
consist of high-grade commercial paper, bank certificates of deposits, U.S.
Treasury bills and notes and repurchase agreements backed by U.S. Government
securities.
INVENTORIES
Inventories are valued at the lower of average cost or market.
29
<PAGE>
GLENAYRE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(tabular amounts in thousands of dollars except per share amounts)
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost less accumulated depreciation.
Depreciation is computed principally using the straight-line method based on the
estimated useful lives of the related assets (buildings, 20-40 years; furniture,
fixtures and equipment, 3-7 years).
GOODWILL
Goodwill represents the excess of cost over assigned fair market value of net
assets acquired and is being amortized on a straight-line basis over estimated
useful lives not exceeding 30 years. Goodwill is shown net of accumulated
amortization of $8.9 and $5.8 million at December 31, 1995 and 1994,
respectively. The carrying amount of goodwill is reviewed if facts and
circumstances suggest that it may be impaired. If this review indicates that
goodwill will not be recoverable, as determined based on the expected future
profitability of the entity acquired over the remaining amortization period, the
carrying amount of the goodwill is reduced by the estimated shortfall. In
addition, the Company assesses long-lived assets for impairment under FASB
Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of." Under those rules, goodwill associated
with assets acquired in a purchase business combination is included in
impairment evaluations when events or circumstances exist that indicate the
carrying amount of those assets may not be recoverable. The adoption of this
standard did not affect reported earnings because this was essentially the same
method used in the past to measure and record asset impairments.
FOREIGN CURRENCY TRANSLATION
The accounts of foreign subsidiaries have been translated into U.S. dollars
using the current exchange rate in effect at the balance sheet date for monetary
assets and liabilities; and for non-monetary items, the exchange rates in effect
when acquired. Revenues and expenses are translated into U.S. dollars using
average exchange rates, except for depreciation, which is translated at the
exchange rate in effect when the related assets were acquired. The resulting
gains or losses on currency translations are included in the consolidated
statements of income.
REVENUE RECOGNITION
The Company recognizes revenues at the time products are shipped (except for
certain long-term contracts described below) and collection of the resulting
receivable is deemed probable by the Company. Existing customers may purchase
product enhancements and upgrades after such enhancements or upgrades are
developed by the Company. The Company has no obligations to customers after the
date products, product enhancements and upgrades are shipped, except for product
warranties as described below.
The Company recognizes fees from installation and repair services when such
services are provided to customers. Revenues derived from contractual
postcontract support services are recognized ratably over the one-year contract
period of required support.
The Company uses the percentage-of-completion method to recognize revenues on
certain long-term telecommunications hardware and installation contracts.
Earnings are accrued based on the completion of key contract performance
requirements. As long-term contracts extend over one or more years, revisions in
cost and profit estimates are reflected in the accounting period in which the
facts that require the revision become known. At the time a loss on a contract
becomes known, the entire amount of the estimated ultimate loss is accrued.
COMPUTER SOFTWARE DEVELOPMENT COSTS
Computer software development costs are expensed as incurred. Such costs are
required to be expensed until the point of technological feasibility is
established. Costs which may otherwise be capitalized after such point are
generally not significant and are therefore expensed as incurred.
30
<PAGE>
GLENAYRE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(tabular amounts in thousands of dollars except per share amounts)
ESTIMATED WARRANTY COSTS
The Company warrants its telecommunications products other than certain
transmitters for one year after sale. The majority of the Company's transmitters
are warranted for two years after sale. A provision for estimated warranty costs
is recorded at the time of sale.
STOCK-BASED COMPENSATION
The Company grants stock options and issues shares under option plans and an
employee stock purchase plan as described in Note 11. The Company accounts for
stock option grants and shares sold under the employee stock purchase plan in
accordance with APB Opinion No. 25, "Accounting for Stock Issued to Employees",
and, accordingly, records compensation expense for options granted and sales
made at prices that are less than fair market value at the date of grant or
sale. No compensation expense is recognized for options granted to employees
with an exercise price equal to the fair value of the shares at the date of
grant.
INCOME TAXES
Income taxes have been provided using the liability method in accordance with
SFAS 109, "Accounting for Income Taxes."
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of cash and cash equivalents, short-term investments, trade
accounts and notes receivable, and other current and long-term liabilities
approximates their respective fair values.
RECLASSIFICATIONS
Certain 1994 and 1993 amounts have been reclassified to conform with the 1995
financial statement presentation.
3. SHORT-TERM INVESTMENTS
Short-term investments amounting to $44.1 million and $39.5 million at December
31, 1995 and 1994, respectively are comprised of highly liquid, 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 greater than three months, but not exceeding one year. Short-term
investments are stated at cost which approximates fair market value.
4. ACCOUNTS RECEIVABLE
Accounts receivable at December 31, 1995 and 1994 consist of:
1995 1994
Trade receivables .............................. $ 89,372 $ 34,320
Retainage receivable ........................... 1,364 1,333
Other .......................................... 2,586 1,159
93,322 36,812
Less: allowance for doubtful accounts ......... (4,057) (3,105)
$ 89,265 $ 33,707
31
<PAGE>
GLENAYRE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED) (tabular amounts in thousands of
dollars except per share amounts)
5. INVENTORIES
Inventories at December 31, 1995 and 1994 consist of:
1995 1994
Raw materials .............................. $30,191 $10,999
Work-in-process:
Uncompleted contracts ................... 604 762
Other ................................... 7,743 6,425
Finished goods ............................. 11,507 6,075
$50,045 $24,261
6. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at December 31, 1995 and 1994 consist of:
1995 1994
Land ........................................... $ 1,562 $ 1,228
Buildings ...................................... 21,376 5,937
Furniture, fixtures and equipment .............. 34,646 15,899
Leasehold improvements ......................... 1,142 531
58,726 23,595
Less: Accumulated depreciation ................. (10,806) (5,888)
$ 47,920 $ 17,707
7. ACCRUED LIABILITIES
Accrued liabilities at December 31, 1995 and 1994 consist of:
1995 1994
Accrued project
costs .................................... $ 3,310 $ 3,039
Accrued warranty
costs .................................... 2,713 4,312
Accrued sales
commissions .............................. 1,603 2,274
Accrued compensation and
benefits ................................. 10,107 4,402
Accrued income taxes ....................... 5,972 3,220
Other Accruals .............................. 12,457 7,788
$36,162 $25,035
32
<PAGE>
GLENAYRE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(tabular amounts in thousands of dollars except per share amounts)
8. INCOME TAXES
The Company's income tax provision consists of the following:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Current provision:
United States Federal................................ $ 6,398 $ -- $1,062
Charge equivalent to tax benefit of stock
option exercises................................... 26,433 9,726 4,600
Foreign.............................................. 2,658 2,653 3,509
State and local...................................... 962 40 744
Total current...................................... 36,451 12,419 9,915
Deferred provision (benefit):
Before valuation allowance adjustment................ 1,271 5,107 2,444
Adjustment to valuation allowance.................... (12,425) (10,326) (11,898)
Total deferred provision (benefit)................. (11,154) (5,219) (9,454)
Total provision......................................... $25,297 $ 7,200 $ 461
</TABLE>
The sources of income from continuing operations before income taxes and
extraordinary item are presented as follows:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
United States.............................................. $ 87,919 $35,437 $20,588
Foreign.................................................... 13,826 4,858 3,573
Income from continuing operations.......................... $101,745 $40,295 $24,161
</TABLE>
The consolidated income tax provision from continuing operations was different
from the amount computed using the U.S. statutory income tax rate for the
following reasons:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Income tax provision at US statutory rate ........... $ 35,611 $ 14,104 $ 8,456
Reduction in valuation allowance .................... (12,425) (10,326) (11,898)
Foreign taxes at rates other than U.S. statutory rate (2,129) 1,997 2,053
State taxes (net of federal benefit) ................ 3,307 655 909
Non-deductible goodwill amortization ................ 933 770 941
Income tax provision ................................ $ 25,297 $ 7,200 $ 461
</TABLE>
33
<PAGE>
GLENAYRE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(tabular amounts in thousands of dollars except per share amounts)
The tax effect of temporary differences and net operating loss carryforwards
that gave rise to the Company's deferred tax assets and liabilities at December
31, 1995 and 1994 are as follows:
1995 1994
Assets:
U.S. net operating loss carryforwards .... $ 40,612 $ 48,173
State net operating loss carryforwards ... 3,495 2,342
U.S. capital loss carryforwards .......... 439 1,588
Other .................................... 13,822 11,522
58,368 63,625
Less: Valuation allowance ................ (17,861) (33,246)
40,507 30,379
Liabilities ................................ (5,452) (1,351)
Deferred tax asset, net .................... $ 35,055 $ 29,028
The reduction in the valuation allowance of $15,385,000 during the year ended
December 31, 1995 included $1,149,000 related to the expiration of U.S. capital
loss carryforwards as well as $12,425,000 related to the recognition of tax
benefits which arose prior to the 1988 quasi-reorganization (see below). The
Company believes that it is more likely than not that the net deferred tax asset
recorded at December 31, 1995 will be fully realized.
At December 31, 1995, the Company has U.S. net operating loss carryforwards and
capital loss carryforwards as follows:
<TABLE>
<CAPTION>
Operating Capital
Year of Expiration Losses Losses
<S> <C> <C>
1996................................................. $15,854 $1,254
1997................................................. 23,820 ---
1998................................................. 45,290 ---
1999................................................. --- ---
2000................................................. 5,318 ---
2001................................................. 5,397 ---
2002................................................. 9,133 ---
Thereafter.............................................. 11,223 ---
$116,035 $1,254
</TABLE>
The deferred tax asset is broken down between current and noncurrent amounts in
the accompanying 1995 consolidated balance sheet according to the classification
of the related asset and liability or, in the case of tax loss carryforwards,
based on their expected utilization date.
Subsequent to the quasi-reorganization completed on February 1, 1988, as
described in Note 11, the benefits derived from the utilization of these 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 SFAS 96 contained in SAB 86, realized tax benefits
should be reported as a direct addition to contributed capital. Subsequently,
the Company consulted with 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.
34
<PAGE>
GLENAYRE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(tabular amounts in thousands of dollars except per share amounts)
If the original guidance in SAB 86 had been applied, the Company's net income
for the years ended December 31, 1995, 1994 and 1993 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 $12,425,000 ($.20
per share) in 1995, $10,326,000 ($.18 per share) in 1994, and $11,898,000 ($.24
per share) in 1993.
9. OPERATING LEASE COMMITMENTS
The Company leases office facilities and various equipment under noncancellable
operating leases. Future minimum lease payments under noncancellable operating
leases (with minimum or remaining lease terms in excess of one year) for
calendar years subsequent to December 31, 1995 are as follows:
1996............................. $ 2,895
1997............................. 2,029
1998............................. 1,327
1999............................. 688
2000............................. 372
Thereafter...................... 205
$7,516
Rent expense for continuing operations amounted to $2,184,000, $1,254,000 and
$923,000 for the years ended December 31, 1995, 1994 and 1993, respectively.
10. EMPLOYEE BENEFIT PLANS
(A) POSTRETIREMENT HEALTH CARE BENEFITS
The Company provides its U.S. employees with certain health care benefits upon
retirement assuming the employees meet minimum age and service requirements. The
Company's policy is to fund benefits as they become due.
Effective January 1, 1993, the Company adopted Statement of Financial Accounting
Standards No. 106 "Employers' Accounting for Postretirement Benefits Other Than
Pensions" ("SFAS 106"), which requires the Company to accrue the estimated cost
of retiree benefit payments during the years the employee provides services.
The accumulated amortization of an initial obligation of approximately $1.0
million related to an acquisition in 1992 being amortized over twenty years was
$151,000 at December 31, 1995.
The Company's accumulated postretirement benefit obligation at December 31, 1995
and 1994 relate to:
1995 1994
Retirees ......................................... $ 532 $ 387
Fully eligible plan participants ................. 379 331
Other active plan participants ................... 607 248
$1,518 $ 966
35
<PAGE>
GLENAYRE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(tabular amounts in thousands of dollars except per share amounts)
Net postretirement benefit cost for the years ended December 31, 1995, 1994 and
1993 consist of the following components:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Service cost .................................................. $ 105 $ 84 $ 68
Interest cost on accumulated postretirement benefit obligation. 84 87 88
Amortization of gain .......................................... (17) -- --
Amortization of transition obligation ......................... 51 51 51
$ 223 $ 222 $ 207
</TABLE>
The assumed health care cost trend rate used in measuring the accumulated
postretirement benefit obligation as of December 31, 1995 was 12% for 1996,
decreasing linearly each successive year until it reaches 4.75% in 2003, after
which it remains constant. A one-percentage-point increase in the assumed health
care cost trend rate for each year would increase the accumulated postretirement
benefit obligation as of December 31, 1995 and the 1995 net postretirement
health care cost by approximately 14.6% and 13.4%, respectively. The assumed
discount rate used in determining the accumulated postretirement benefit
obligation at December 31, 1995 and December 31, 1994 was 7.25% and 8%,
respectively.
(B) DEFINED CONTRIBUTION PLANS
The Company has defined contribution plans covering substantially all of its
full-time employees. Under the plans, the employees can contribute a certain
percentage of their compensation and the Company matches a portion of the
employees' contribution. The Company's contributions under these plans
attributable to continuing operations amounted to approximately $1,830,000,
$1,159,000 and $1,051,000 during the years ended December 31, 1995, 1994 and
1993, respectively.
11. 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 SPLITS
On December 8, 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 December 29, 1995 to stockholders of
record on December 22, 1995.
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 these stock
dividends.
(C) INCREASE IN COMMON STOCK AUTHORIZED
On December 8, 1995, the Company's stockholders approved an amendment to the
Company's Restated Certificate of Incorporation providing for an increase in the
number of shares of common stock authorized from 50,000,000 shares to
200,000,000 shares.
36
<PAGE>
GLENAYRE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(tabular amounts in thousands of dollars except per share amounts)
(D) STOCK REPURCHASE PLAN
On December 8, 1994, the Board of Directors of the Company adopted a resolution
authorizing the repurchase from time-to-time of the Company's common stock not
to exceed in the aggregate 1,687,500 shares. The Company repurchased 30,000
shares at a cost of $1.0 million, and 84,375 shares at a cost of $1.3 million
(shown as a reduction of common stock and contributed capital) in December 1995
and December 1994, respectively.
(E) STOCK OPTION PLANS
On May 14, 1991, the Company's stockholders approved the establishment of the
1991 Long-Term Incentive Plan (the "Plan") to promote the long-term financial
interests and growth of the Company, reserving 3,847,500 common shares for
directors, officers and other key employees of the Company and its subsidiaries.
The Plan is administered by a committee of the Board of Directors (the
"Committee"). On October 30, 1992, the Company's stockholders approved an
amendment to the Plan (i) to increase the number of shares of common stock
available for issuance pursuant to awards under the plan from 3,847,500 to
8,100,000; (ii) to permit the Company to sell stock under the Plan at less than
fair market value; and (iii) to provide for formula-based awards of stock
options to the non-employee directors of the Company based on their years of
service. Further, on May 26, 1994, the Company's stockholders approved an
amendment to the Plan (i) to change the name to the Long-Term Incentive Plan and
(ii) to increase the number of shares of common stock available for issuance
pursuant to awards under the plan from 8,100,000 to 11,475,000 shares.
During 1995, 1994 and 1993, the Committee granted options to purchase 81,000,
60,750 and 60,750 shares of common stock at $43.59, $11.11 and $1.28 per share,
respectively, to five directors pursuant to the formula-based award provision of
the Plan. In addition, at various dates during 1995, 1994 and 1993, the
Committee granted options to purchase in the aggregate 1,547,723, 2,051,663 and
178,875 shares, respectively, of common stock at the fair market value at the
date of grant to certain officers and employees. All these options to purchase
shares expire ten years from the date of grant.
Since certain options granted in 1993 and 1992 were fully vested immediately and
as the exercise price of certain stock options was below the market price at the
date of grant, the Company recorded compensation expense for the vested portion
of $490,000 and $1,286,000 in 1994 and 1993, respectively, which is included in
selling, general and administrative expenses.
Activity and price information regarding the Plan is summarized as follows:
Price
Shares Range
Outstanding, December 31, 1992 6,724,559 $ 1.27---$2.47
Granted ...................... 239,625 1.28---11.11
Exercised .................... (1,429,983) 1.28---2.47
Canceled ..................... (253,125) 1.27
Outstanding, December 31, 1993 5,281,076 1.27---11.11
Granted ...................... 2,112,413 11.11---17.26
Exercised .................... (1,989,646) 1.27---12.74
Canceled ..................... (33,750) 12.74
Outstanding, December 31, 1994 5,370,093 1.27---17.26
Granted ...................... 1,628,723 16.72---47.67
Exercised .................... (2,180,558) 1.27---28.22
Canceled ..................... (20,814) 12.74---22.44
Outstanding, December 31, 1995 4,797,444 $1.27---$47.67
Of the outstanding options at December 31, 1995, 3,158,624 are currently
exercisable.
37
<PAGE>
GLENAYRE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(tabular amounts in thousands of dollars except per share amounts)
On June 23, 1987, the Company's stockholders approved the establishment of the
1987 Stock Option Plan (the "1987 Plan"), reserving 3,847,500 common shares for
directors, officers and other key employees of the Company and its subsidiaries.
The 1987 Plan is also administered by the Committee. Effective July 15, 1992,
the Board of Directors amended the 1987 Plan to reduce the number of shares
reserved to 1,751,625. All options granted under the 1987 Plan expire ten years
from the date of grant.
Activity and price information regarding the Plan is summarized as follows:
Price
Shares Range
Outstanding, December 31, 1992 1,690,875 $1.02---$1.27
Exercised .................... (779,605) 1.02--- 1.27
Outstanding, December 31, 1993 911,270 1.04--- 1.26
Exercised .................... (256,500) 1.04--- 1.26
Canceled ...................... (20) 1.26
Outstanding, December 31, 1994 654,750 1.04--- 1.26
Exercised .................... (459,000) 1.17--- 1.26
Outstanding, December 31, 1995 195,750 $1.04---$1.26
All outstanding options at December 31, 1995 are currently exercisable.
In connection with the April 25, 1995 acquisition of MUX, the Company agreed to
issue 502,206 shares of its common stock upon the exercise of certain
outstanding options which had previously been granted by MUX to certain of its
employees (the "MUX Options").
Activity and price information regarding the MUX Options is summarized as
follows:
Price
Shares Range
Outstanding, April 25, 1995 .. 502,206 $1.84---$6.60
Exercised .................... (188,084) 1.84--- 6.60
Outstanding, December 31, 1995 314,122 $1.98---$6.60
All outstanding options at December 31, 1995 are currently exercisable.
Contributed capital was increased $26.4 million, $ 9.7 million and $4.6 million
in 1995 and 1994 and 1993, respectively, which represents the income tax
benefits the Company realized from stock options exercised during these periods.
(F) EMPLOYEE STOCK PURCHASE PLAN
Effective July 1, 1993, the Company established the Glenayre Technologies, Inc.
Employee Stock Purchase Plan (the "ESP Plan") reserving 506,250 shares of common
stock. The purpose of the ESP Plan is to give employees an opportunity to
purchase common stock of the Company through payroll deductions, thereby
encouraging employees to share in the economic growth and success of the
Company.
38
<PAGE>
GLENAYRE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(tabular amounts in thousands of dollars except per share amounts)
All permanent full-time employees of the Company are eligible to enter the ESP
Plan as of the first day of each six month period beginning every January 1 and
July 1. The price for common stock offered under the ESP Plan for each six-month
period is equal to 90% of the average market price of the common stock for the
five trading days prior to the first day of the six-month period. For the
January 1, 1996 to June 30, 1996 period, the stock purchase price will be
$37.07. As of December 31, 1995, 109,489 shares had been issued at a purchase
price range of $5.60 to $15.27 with 396,761 shares reserved under the ESP Plan.
Additionally, in January 1996, 33,122 shares at a purchase price of $29.37 were
issued.
(G) 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.
The number of shares used to compute primary per share data for the years ended
December 31, 1995, 1994 and 1993 was 62,479,480; 58,703,468; and 49,399,106,
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 December 31, 1995,1994 and 1993 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 years ended December 31, 1995, 1994
and 1993 was 62,813,289; 58,791,720; and 49,879,503, respectively.
12. EXTRAORDINARY ITEM
During 1993, the Company paid off all bank debt incurred in connection with an
acquisition and wrote off the entire remaining balance of debt issuance costs of
approximately $2.7 million, resulting in an extraordinary loss of $1.7 million
after income tax benefit.
13. CONTINGENCIES
The Company is currently involved in various disputes and legal actions related
to its business operations. In the opinion of the Company, the ultimate
resolution of these actions will not have a material effect on the Company's
financial position, or future results of operations or cash flows.
39
<PAGE>
GLENAYRE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(tabular amounts in thousands of dollars except per share amounts)
14. LINE OF BUSINESS AND OPERATIONS BY GEOGRAPHIC AREAS
The Company's continuing operations involve one business segment: the
manufacture and sale of telecommunications equipment and related software used
by service providers and other wireless personal communications markets. The
Company markets and services its products in the United States, Canada and other
foreign countries through its own direct sales organization or outside
distributors and agents. Information about the Company's operations in different
geographic areas at December 31, 1995, 1994 and 1993, and for the years then
ended, is presented below:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
NET SALES:
United States................................................. $321,184 $171,780 $134,562
Canada........................................................ 82,892 42,354 39,272
Other countries............................................... 8,761 5,294 2,916
Eliminations.................................................. (91,433) (47,321) (40,611)
$321,404 $172,107 $136,139
</TABLE>
Net sales include intergeographic sales ($65,703,000 in Canada during 1995;
$30,925,000 in Canada during 1994; and $1,613,000 in the U.S. and $21,197,000 in
Canada during 1993) and intergeographic service revenues ($17,189,000 in Canada
and $8,541,000 in other countries during 1995; $11,429,000 in Canada and
$4,967,000 in other countries during 1994; $2,855,000 in the U.S., $12,126,000
in Canada and $2,820,000 in other countries during 1993) which have been
eliminated in consolidation. Net sales and service revenues between geographic
areas are generally priced to recover cost plus an appropriate markup for
profit. Sales to one customer amounted to approximately 16% and 13% of sales for
1995 and 1994, respectively. Sales to two customers amounted to approximately
10% each of sales for 1993. Export sales from the U.S. to unaffiliated customers
were approximately $113,853,000 in 1995 which includes sales of approximately
$16,930,000 to the Middle East, $54,705,000 to the Pacific Rim and $17,793,000
to Europe. Export sales from the U.S. to unaffiliated customers were
approximately $56,868,000 in 1994, which includes sales of approximately
$612,000 to the Middle East, $38,895,000 to the Pacific Rim and $8,306,000 to
Europe. Export sales from the U.S. to unaffiliated customers were approximately
$50,865,000 in 1993, which includes sales of approximately $4,252,000 to the
Middle East and $38,585,000 to the Pacific Rim.
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
OPERATING PROFIT:
United States ....................................... $ 83,245 $ 36,564 $ 28,885
Canada .............................................. 13,348 5,560 4,353
Other countries ..................................... 774 828 143
97,367 42,952 33,381
Corporate, interest and other income (expenses)
and eliminations ................................. 4,378 (2,657) (9,220)
Income from continuing operations before income taxes
and extraordinary item ........................... $ 101,745 $ 40,295 $ 24,161
IDENTIFIABLE ASSETS:
United States ....................................... $ 350,860 $ 174,538 $ 150,362
Canada .............................................. 39,940 18,078 17,617
Other countries ..................................... 2,813 1,200 1,460
Geographic totals ................................... 393,613 193,816 169,439
General corporate assets ............................ 53,967 91,145 58,805
Total assets ........................................ $ 447,580 $ 284,961 $ 228,244
</TABLE>
40
<PAGE>
GLENAYRE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED QUARTERLY FINANCIAL DATA
(tabular amounts in thousands of dollars except per share amounts)
15. RELATED PARTY TRANSACTION
During each of the years 1994 and 1993, the Company paid $200,000 (included in
selling, general and administrative expense) for various financial advisory
services from an investment management firm, two of the principals of which
serve on the Board of Directors of the Company.
16. CONCENTRATIONS OF CREDIT RISK
The Company maintains cash and cash equivalents and short-term investments with
various financial institutions. These financial institutions are large
diversified entities with operations throughout the U.S. and Company policy is
designed to limit exposure to any one institution. The Company performs periodic
evaluations of the relative credit standing of those financial institutions that
are considered in the Company's investment strategy.
Concentrations of credit risk with respect to trade notes and accounts
receivable are limited due to the large number of entities comprising the
Company's customer base. However, as of December 31, 1995 the Company's
receivables are all concentrated in the telecommunications industry. Notes
receivable are from customers located in the U.S. and Pacific Rim with
approximately 50% of the December 31, 1995 balance receivable from a single U.S.
customer. Principally all notes receivable are secured by the related equipment.
17. INTERIM FINANCIAL DATA--UNAUDITED
<TABLE>
<CAPTION>
Quarters ended
March 31 June 30 Sept. 30 Dec. 31
<S> <C> <C> <C> <C>
1995
Net sales ....................... $ 59,862 $ 74,979 $ 88,104 $ 98,459
Income from continuing operations 13,782 18,223 21,061 23,382
Net income ...................... 13,782 18,223 21,061 23,382
Primary Income per common share:
Continuing operations ......... 0.23 0.29 0.33 0.37
Net income .................... 0.23 0.29 0.33 0.37
Fully diluted per common share:
Continuing Operations ......... 0.23 0.29 0.33 0.37
Net income .................... 0.23 0.29 0.33 0.37
1994
Net sales ....................... $ 38,446 $ 41,453 $ 43,892 $ 48,316
Income from continuing operations 7,341 7,725 8,385 9,644
Net income ...................... 7,504 7,950 8,385 9,644
Primary income per common share:
Continuing operations ......... 0.13 0.13 0.14 0.16
Net income .................... 0.13 0.14 0.14 0.16
Fully diluted per common share:
Continuing operations ......... 0.13 0.13 0.14 0.16
Net income .................... 0.13 0.14 0.14 0.16
</TABLE>
41
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Deloitte & Touche LLP served as the Company's independent auditors for the years
ended December 31, 1994 and 1993 and for prior years. On April 7, 1995, the
Company replaced Deloitte & Touche LLP with Ernst & Young LLP as its independent
auditors for the year ending December 31, 1995. This change in independent
auditors, effective April 7, 1995, was recommended by the Audit Committee of the
Company's Board of Directors, approved by the Board of Directors on April 4,
1995 and ratified by the stockholders on May 24, 1995.
Deloitte & Touche LLP's reports on the consolidated financial statements of the
Company for the years ended December 31, 1994 and 1993 did not contain an
adverse opinion or a disclaimer of opinion and were not qualified or modified as
to uncertainty, audit scope or accounting principles. Also, during the conduct
of the 1994 and 1993 audits (i) there were no disagreements with Deloitte &
Touche LLP on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure for which disagreements, if
not resolved to the satisfaction of Deloitte & Touche LLP, would have caused
them to make reference to the subject matter of the disagreements in their
independent auditors' reports, and (ii) no "reportable events" (as defined in
Item 304(a)(1)(v) of Regulation S-K) occurred.
PART III
Items 10 through 13 are incorporated herein by reference to the sections
captioned "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT,"
"ELECTION OF DIRECTORS," "COMPENSATION--Compensation of Directors,"
"COMPENSATION--Executive Compensation," "COMPENSATION--Employment Agreements,"
"COMPENSATION--Compensation Committee Interlocks and Insider Participation," and
"CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS" and "COMPLIANCE WITH SECTION
16(a) OF THE EXCHANGE ACT OF 1934" in the Company's Proxy Statement for the
Annual Meeting of Stockholders to be held May 22, 1996.
42
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON FORM 8-K
A. INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULE
<TABLE>
<CAPTION>
(i) Financial Statements Page
<S> <C>
Report of Ernst & Young LLP Independent Auditors................................................. 21
Report of Deloitte & Touche LLP Independent Auditors............................................. 22
Consolidated Balance Sheets at December 31, 1995 and 1994........................................ 23
Consolidated Statements of Income for the years ended December 31, 1995, 1994 and 1993........... 24
Consolidated Statements of Stockholders' Equity for the years ended December 31, 1995,
1994 and 1993................................................................................... 25
Consolidated Statements of Cash Flows for the years ended December 31, 1995, 1994 and 1993....... 26
Notes to Consolidated Financial Statements....................................................... 28
(ii) Supplemental Schedule:
(For the years ended December 31, 1995, 1994 and 1993)
Schedule II - Valuation and Qualifying Accounts................................................... 47
</TABLE>
All other schedules are omitted because they are not applicable or not required.
B. REPORTS ON FORM 8-K
There were no reports on Form 8-K for the three months ended December 31,
1995.
43
<PAGE>
C. EXHIBITS
Exhibit
Number Description
2.1 Purchase and Sale Agreement dated as of July 16, 1992 among Glenayre
Electronics Ltd. ("GEL"), as Seller and N-W Group, Inc. ("N-W"),
Nu-West, Inc. ("Nu-West") and N-W Group Canada Inc. ("N-W Canada"), as
Purchasers, was filed as Exhibit 2 to the Registrant's Current Report
on Form 8-K filed on July 27, 1992 and is incorporated herein by
reference.
2.2 Amendment to Purchase and Sale Agreement, dated November 10, 1992,
among GEL, N-W, Nu-West, Glenayre Manufacturing, Ltd. (formerly called
N-W Canada) ("Manufacturing"), and Glenayre R & D, Inc. ("R&D") was
filed as Exhibit 2(b) to the Registrant's Current Report on Form 8-K
filed November 25, 1992 and is incorporated herein by reference.
2.3 Second Amendment to Purchase and Sale Agreement, dated September 21,
1995, among GEL, N-W, Nu-West, Manufacturing, and R&D, is filed
herewith.
3.1 Composite Certificate of Incorporation of Glenayre reflecting the
Certificate of Amendment filed December 8, 1995 is filed herewith.
3.2 Restated by-laws of Glenayre effective June 7, 1990, as amended
September 21, 1994 was filed as Exhibit 3.5 to the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1994 and is
incorporated herein by reference.
4 Pursuant to Item 601(4)(iii) of Regulation S-K, an Indenture, dated
September 15, 1981, between Hallcraft Homes, Inc. and U.S. Trust
Company of New York, and Supplemental Indentures, dated April 30, 1987
and March 11, 1983, are not filed as exhibits to Annual Report on Form
10-K. The Company hereby agrees to furnish a copy of such instrument to
the Commission upon request.
10.1 Employment Agreement, dated December 3, 1990, between the Company and
Clarke H. Bailey was filed as Exhibit 10(i) to the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1990 and is
incorporated herein by reference.*
10.2 Stock option agreement, dated December 3, 1990, between the Company and
Clarke H. Bailey which, in part, amends the Employment Agreement, dated
December 31, 1990, between the Company and Clarke H. Bailey was filed
as Exhibit 10(a)(1) to the Registrant's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1994 and is incorporated herein by
reference.*
10.3 First Amendment, dated April 15, 1994, to the Employment Agreement,
dated December 3, 1990, between the Company and Clarke H. Bailey was
filed as Exhibit 10(a)(2) to the Registrant's Quarterly Report on Form
10-Q for the quarter ended March 31, 1994 and is incorporated herein by
reference.*
10.4 Amendment Agreement, dated February 1, 1995, which in part, amends the
Employment Agreement dated December 3, 1990 and the Stock Option
agreement dated December 3, 1990 between the Company and Clarke H.
Bailey was filed as Exhibit 10.4 to the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1994 and is incorporated
herein by reference.*
44
<PAGE>
10.5 Employment Agreement, dated November 10, 1992, between N-W and Ramon D.
Ardizzone was filed as Exhibit 10(b) to the Registrant's Current Report
on Form 8-K filed November 25, 1992 and is incorporated herein by
reference.*
10.6 Amendment, dated March 9, 1995, to the Employment Agreement dated
November 10, 1992 between the Company and Ramon D. Ardizzone was filed
as Exhibit 10.8 to the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1994 and is incorporated herein by reference.*
10.7 Employment Agreement, dated June 21, 1995, between the Company and
Ramon D. Ardizzone was filed as Exhibit 10 to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1995 and
is incorporated herein by reference.*
10.8 Amendment, dated December 8, 1995, to the Employment Agreement dated
June 21, 1995 between the Company and Ramon D. Ardizzone is filed
herewith.*
10.9 Executive Severance Benefit Agreement, dated February 1, 1995, between
the Company and Stan Ciepcielinski (the "Ciepcielinski Agreement") was
filed as Exhibit 10.9 to the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1994 and is incorporated herein by
reference. Executive Severance Benefit Agreements, dated February 1,
1995 between the Company and individually with Russ K. Allen, Kenneth
C. Thompson, and Gary B. Smith are identical, in all material respects,
with the Ciepcielinski Agreement and are not filed as exhibits. *
10.10 ET Securities Agreement, dated November 10, 1992, between N-W and seven
senior employees of the Company was filed as Exhibit 10(c) to the
Registrant's Current Report on Form 8-K filed November 25, 1992 and is
incorporated herein by reference.*
10.11 First Amendment to ET Securities Agreement, dated December 29, 1992,
between the Company and seven senior employees of the Company was filed
as Exhibit 25(a) to the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1992 and is incorporated herein by reference.*
10.12 Second Amendment to ET Securities Agreement, dated March 17, 1994,
between the Company and seven senior employees of the Company was filed
as Exhibit 10(f) to the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1993 and is incorporated herein by reference.*
10.13 Third Amendment to ET Securities Agreement, dated March 9, 1995,
between the Company and seven senior employees of the Company was filed
as Exhibit 10.13 to the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1994 and is incorporated herein by reference.*
10.14 ET Securities Agreement Releases dated as of June 21, 1994 and August
31, 1994 was filed as Exhibit 10(a) to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1994 and is
incorporated herein by reference.*
10.15 Glenayre Management By Objective Plan for the year ended December 31,
1994 was filed as Exhibit 10(h) to the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1993 and is incorporated
herein by reference.*
10.16 Glenayre Management By Objective Plan for the year ended December 31,
1995 was filed as Exhibit 10.16 to the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1994 and is incorporated
herein by reference.*
45
<PAGE>
10.17 Glenayre Management By Objective Plan for the year ended December 31,
1996 is filed herewith.*
10.18 Glenayre Long-Term Incentive Plan, as amended and restated effective
May 26, 1994, was filed as Exhibit 4 to the Registrant's Form S-8 filed
June 16, 1994 and is incorporated herein by reference.
10.19 N-W 1987 Stock Option Plan (conformed to incorporate first amendment
effective as of January 12, 1990, second amendment effective as of May
1, 1991 and third amendment effective as of July 15, 1992) was filed as
Exhibit 10(v) to the Registrant's Current Report on Form 8-K filed
November 25, 1992 and is incorporated herein by reference.
10.20 Investment Advisory Agreement, dated October 7, 1988, between Nu-West,
Inc. and Cramer Rosenthal McGlynn, Inc. was filed as Exhibit 28(b) to
the Registrant's Annual Report on Form 10-K for the year ended December
31, 1989 and is incorporated herein by reference.
11 Computation of Earnings per Common Share is filed herewith.
21 Subsidiaries of the Company is filed herewith.
23.1 Consent of Ernst & Young LLP is filed herewith.
23.2 Consent of Deloitte & Touche LLP is filed herewith.
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.)
*Management Contract
46
<PAGE>
GLENAYRE TECHNOLOGIES, INC. AND SUBSIDIARIES
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
Additions
Balance at Charged to Charged to Balance at
Beginning Costs and Other End of
Description of Period Expenses Accounts Deductions Period
<S> <C> <C> <C> <C> <C>
ALLOWANCE FOR DOUBTFUL ACCOUNTS ON
ACCOUNTS AND NOTES RECEIVABLE:
Year ended December 31, 1995 $ 3,148 $ 505 $ 483 $ 64 $ 4,072
Year ended December 31, 1994 2,499 129 603 83 3,148
Year ended December 31, 1993 1,560 640 956(1) 657(2) 2,499
VALUATION ALLOWANCE ON
NOTES RECEIVABLE - FAIR
MARKET VALUE ADJUSTMENT:
Year ended December 31, 1995 442 (48) --- --- 394
Year ended December 31, 1994 --- 442 --- --- 442
Year ended December 31, 1993 --- --- --- --- ---
VALUATION ALLOWANCE ON
INVENTORIES:
Year ended December 31, 1995 3,153 2,270 (611) 107 4,705
Year ended December 31, 1994 1,481 2,687 --- 1,015(5) 3,153
Year ended December 31, 1993 --- 1,622 --- 141 1,481
VALUATION ALLOWANCE ON REAL
ESTATE HELD FOR SALE:
Year ended December 31, 1995 --- --- --- --- ---
Year ended December 31, 1994 19,657 --- (1,844)(4) 17,813(3) ---
Year ended December 31, 1993 19,503 --- 448 294 19,657
</TABLE>
(1) Previously established reserves reclassified from accrued liabilities.
(2) Includes amounts written off ($139) and amounts related to discontinued
operations ($518).
(3) Reduction on real estate assets sold.
(4) Previously established reserves reclassified to accrued liabilities.
(5) Includes amounts written off ($700) or revalued ($315).
47
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 on March 28, 1996.
GLENAYRE TECHNOLOGIES, INC.
By /s/ Ramon D. Ardizzone
Ramon D. Ardizzone
PRESIDENT, CHIEF EXECUTIVE OFFICER,
AND DIRECTOR
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities indicated on March 28, 1996:
/s/ Gerald B. Cramer /s/ Barry W. Gray
Gerald B. Cramer Barry W. Gray
CHAIRMAN OF THE BOARD AND DIRECTOR DIRECTOR
/s/ Clarke H. Bailey /s/ Thomas C. Israel
Clarke H. Bailey Thomas C. Israel
VICE CHAIRMAN AND DIRECTOR DIRECTOR
/s/ John J. Hurley
John J. Hurley
VICE CHAIRMAN
AND DIRECTOR
/s/ Ramon D. Ardizzone /s/ Edward J. Rosenthal
Ramon D. Ardizzone Edward J. Rosenthal
PRESIDENT, CHIEF EXECUTIVE OFFICER DIRECTOR
(PRINCIPAL EXECUTIVE OFFICER),
AND DIRECTOR
/s/ Stan Ciepcielinski /s/ Thomas E. Skidmore
Stan Ciepcielinski Thomas E. Skidmore
EXECUTIVE VICE PRESIDENT, CHIEF FINANCIAL OFFICER DIRECTOR
(PRINCIPAL FINANCIAL OFFICER),
SECRETARY AND TREASURER
/s/ Billy C. Layton
Billy C. Layton
VICE PRESIDENT,
CONTROLLER, AND CHIEF ACCOUNTING OFFICER
(PRINCIPAL ACCOUNTING OFFICER)
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
2.1 Purchase and Sale Agreement dated as of July 16, 1992 among Glenayre
Electronics Ltd. ("GEL"), as Seller and N-W Group, Inc. ("N-W"),
Nu-West, Inc. ("Nu-West") and N-W Group Canada Inc. ("N-W Canada"), as
Purchasers, was filed as Exhibit 2 to the Registrant's Current Report
on Form 8-K filed on July 27, 1992 and is incorporated herein by
reference.
2.2 Amendment to Purchase and Sale Agreement, dated November 10, 1992,
among GEL, N-W, Nu-West, Glenayre Manufacturing, Ltd. (formerly called
N-W Canada) ("Manufacturing"), and Glenayre R & D, Inc. ("R&D") was
filed as Exhibit 2(b) to the Registrant's Current Report on Form 8-K
filed November 25, 1992 and is incorporated herein by reference.
2.3 Second Amendment to Purchase and Sale Agreement, dated September 21,
1995, among GEL, N-W, Nu-West, Manufacturing, and R&D, is filed
herewith.
3.1 Composite Certificate of Incorporation of Glenayre reflecting the
Certificate of Amendment filed December 8, 1995 is filed herewith.
3.2 Restated by-laws of Glenayre effective June 7, 1990, as amended
September 21, 1994 was filed as Exhibit 3.5 to the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1994 and is
incorporated herein by reference.
4 Pursuant to Item 601(4)(iii) of Regulation S-K, an Indenture, dated
September 15, 1981, between Hallcraft Homes, Inc. and U.S. Trust
Company of New York, and Supplemental Indentures, dated April 30, 1987
and March 11, 1983, are not filed as exhibits to Annual Report on Form
10-K. The Company hereby agrees to furnish a copy of such instrument to
the Commission upon request.
10.1 Employment Agreement, dated December 3, 1990, between the Company and
Clarke H. Bailey was filed as Exhibit 10(i) to the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1990 and is
incorporated herein by reference.*
10.2 Stock option agreement, dated December 3, 1990, between the Company and
Clarke H. Bailey which, in part, amends the Employment Agreement, dated
December 31, 1990, between the Company and Clarke H. Bailey was filed
as Exhibit 10(a)(1) to the Registrant's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1994 and is incorporated herein by
reference.*
10.3 First Amendment, dated April 15, 1994, to the Employment Agreement,
dated December 3, 1990, between the Company and Clarke H. Bailey was
filed as Exhibit 10(a)(2) to the Registrant's Quarterly Report on Form
10-Q for the quarter ended March 31, 1994 and is incorporated herein by
reference.*
10.4 Amendment Agreement, dated February 1, 1995, which in part, amends the
Employment Agreement dated December 3, 1990 and the Stock Option
agreement dated December 3, 1990 between the Company and Clarke H.
Bailey was filed as Exhibit 10.4 to the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1994 and is incorporated
herein by reference.*
<PAGE>
10.5 Employment Agreement, dated November 10, 1992, between N-W and Ramon D.
Ardizzone was filed as Exhibit 10(b) to the Registrant's Current Report
on Form 8-K filed November 25, 1992 and is incorporated herein by
reference.*
10.6 Amendment, dated March 9, 1995, to the Employment Agreement dated
November 10, 1992 between the Company and Ramon D. Ardizzone was filed
as Exhibit 10.8 to the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1994 and is incorporated herein by reference.*
10.7 Employment Agreement, dated June 21, 1995, between the Company and
Ramon D. Ardizzone was filed as Exhibit 10 to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1995 and
is incorporated herein by reference.*
10.8 Amendment, dated December 8, 1995, to the Employment Agreement dated
June 21, 1995 between the Company and Ramon D. Ardizzone is filed
herewith.*
10.9 Executive Severance Benefit Agreement, dated February 1, 1995, between
the Company and Stan Ciepcielinski (the "Ciepcielinski Agreement") was
filed as Exhibit 10.9 to the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1994 and is incorporated herein by
reference. Executive Severance Benefit Agreements, dated February 1,
1995 between the Company and individually with Russ K. Allen, Kenneth
C. Thompson, and Gary B. Smith are identical, in all material respects,
with the Ciepcielinski Agreement and are not filed as exhibits. *
10.10 ET Securities Agreement, dated November 10, 1992, between N-W and seven
senior employees of the Company was filed as Exhibit 10(c) to the
Registrant's Current Report on Form 8-K filed November 25, 1992 and is
incorporated herein by reference.*
10.11 First Amendment to ET Securities Agreement, dated December 29, 1992,
between the Company and seven senior employees of the Company was filed
as Exhibit 25(a) to the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1992 and is incorporated herein by reference.*
10.12 Second Amendment to ET Securities Agreement, dated March 17, 1994,
between the Company and seven senior employees of the Company was filed
as Exhibit 10(f) to the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1993 and is incorporated herein by reference.*
10.13 Third Amendment to ET Securities Agreement, dated March 9, 1995,
between the Company and seven senior employees of the Company was filed
as Exhibit 10.13 to the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1994 and is incorporated herein by reference.*
10.14 ET Securities Agreement Releases dated as of June 21, 1994 and August
31, 1994 was filed as Exhibit 10(a) to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1994 and is
incorporated herein by reference.*
10.15 Glenayre Management By Objective Plan for the year ended December 31,
1994 was filed as Exhibit 10(h) to the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1993 and is incorporated
herein by reference.*
10.16 Glenayre Management By Objective Plan for the year ended December 31,
1995 was filed as Exhibit 10.16 to the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1994 and is incorporated
herein by reference.*
<PAGE>
10.17 Glenayre Management By Objective Plan for the year ended December 31,
1996 is filed herewith.*
10.18 Glenayre Long-Term Incentive Plan, as amended and restated effective
May 26, 1994, was filed as Exhibit 4 to the Registrant's Form S-8 filed
June 16, 1994 and is incorporated herein by reference.
10.19 N-W 1987 Stock Option Plan (conformed to incorporate first amendment
effective as of January 12, 1990, second amendment effective as of May
1, 1991 and third amendment effective as of July 15, 1992) was filed as
Exhibit 10(v) to the Registrant's Current Report on Form 8-K filed
November 25, 1992 and is incorporated herein by reference.
10.20 Investment Advisory Agreement, dated October 7, 1988, between Nu-West,
Inc. and Cramer Rosenthal McGlynn, Inc. was filed as Exhibit 28(b) to
the Registrant's Annual Report on Form 10-K for the year ended December
31, 1989 and is incorporated herein by reference.
11 Computation of Earnings per Common Share is filed herewith.
21 Subsidiaries of the Company is filed herewith.
23.1 Consent of Ernst & Young LLP is filed herewith.
23.2 Consent of Deloitte & Touche LLP is filed herewith.
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.)
*Management Contract
<PAGE>
EXHIBIT 2.3
SECOND AMENDMENT TO PURCHASE AND SALE AGREEMENT
THIS SECOND AMENDMENT TO PURCHASE AND SALE AGREEMENT (this
"Amendment") is made and entered into as of the 21st day of September, 1995 by
and among GLENTEL INC., a corporation continued under the laws of Canada and
formerly named "Glenayre Electronics Ltd." ("Glentel"), GLENAYRE TECHNOLOGIES,
INC., a Delaware corporation formerly named "N-W Group, Inc." ("GTI"), GLENAYRE
ELECTRONICS, INC., a Colorado corporation formerly named "Nu-West, Inc."
("GEI"), GLENAYRE MANUFACTURING LTD., a corporation continued under the laws of
Canada and formerly named "N-W Group Canada Inc." ("GM") and GLENAYRE R&D, INC.,
a corporation continued under the laws of Canada ("R&D") (GTI, GEI, GM and R&D
are collectively referred to herein as "Glenayre").
Statement of Purpose
Glentel and Glenayre entered into a Purchase and Sale Agreement dated
as of July 16, 1992, as amended by Amendment to Purchase and Sale Agreement
dated as of November 10, 1992 (the Purchase and Sale Agreement, as so amended,
is referred to herein as the "Purchase Agreement"). Article 8 of the Purchase
Agreement provides certain indemnification obligations of Glentel to Glenayre.
The parties believe that it is desirable and in their mutual best interests to
amend, as hereinafter set forth, certain provisions of Section 8.3 of the
Purchase Agreement pertaining to specified litigation matters.
NOW, THEREFORE, in consideration of the foregoing Statement of Purpose
and the mutual covenants and agreements contained herein, the parties do hereby
agree as follows:
Section 1. Indemnification for Certain IP Actions.
(a) On or Before November 10, 1995. The provisions of this Section 1
shall apply only to the indemnification obligations of Glentel after November
10, 1995 with respect to Special IP Actions. Nothing in this Section 1 shall in
any way modify, limit or restrict the indemnification obligations of Glentel
with respect to Special IP Actions on or before November 10, 1995, such
indemnification obligations to continue in all respects to be subject to the
provisions of Section 8.3 of the Purchase Agreement without regard to this
Section 1.
(b) After November 10, 1995. With respect to the Special IP Actions,
Glentel shall be liable for, shall pay or cause to be paid, and shall indemnify
and hold Glenayre and the Acquired Companies and in each case their respective
shareholders, directors, officers, employees, agents and Affiliates, harmless
from and against 50% of any and all Losses in any way relating to or arising out
of the Special IP Actions realized after November 10, 1995 and on or before
November 10, 1998; provided, however, that in no event shall Glentel's portion
of such Losses exceed CDN $3,000,000.
<PAGE>
(c) Other Provisions. The provisions of Section 8.3(a), (c), (e) and
(f) of the Purchase Agreement shall be applicable to all indemnification
obligations of Glentel arising under this Section 1. The obligations of Glentel
to provide letters of credit as security for its obligations under Article 8 of
the Purchase Agreement shall continue in effect without regard to this Amendment
and this Amendment shall not itself effect any extension of the periods during
which Glentel is required to provide the Letter of Credit under the Letter of
Credit Agreement dated as of November 10, 1992 between Glentel and GTI.
(d) Definitions. For purposes of this Section 1, the following terms
shall have the following meanings:
"Special IP Actions" means any of the actions described on Schedule 1
to this Amendment.
"Loss" shall have the meaning set forth in Schedule 1 to the Purchase
Agreement.
"Affiliates" shall have the meaning set forth in Schedule 1 to the
Purchase Agreement.
"Acquired Companies" shall have the meaning set forth in Schedule 1 to
the Purchase Agreement.
Section 2. Non-Applicability of Certain Limitations. The parties
acknowledge and agree that the limitations on indemnifications set forth in
Section 8.5 of the Purchase Agreement do not apply in any manner whatsoever to
(i) any indemnification obligations of Glentel under Section 8.3 of the Purchase
Agreement or (ii) any indemnification obligations of Glentel under Section 1 of
this Amendment.
Section 3. Release. Glenayre hereby releases Glentel from any and all
liability for indemnification under the Purchase Agreement with respect to the
following claim: claim for infringement of U.S. Patent No. 5,239,671 of
PageMart, Inc., and any and all civil actions and other proceedings of any type
whatsoever concerning such patent, including but not limited to PageMart, Inc.
v. Mobile Media, United States District Court for the Northern District of
Texas, Dallas Division, Action No. 3-96CV1048-P.
Section 4. Certain Nondisclosed IP Actions. The parties confirm that
the following claims are IP Actions which were not Disclosed IP Actions: (i)
claim for infringement by Sherman Wolf of U.S. Patent No. 5,151,929, and any and
all civil actions and other proceedings of any kind whatsoever relating to such
patent, (ii) claim for infringement by Polansky Electronics Ltd. of Australian
Patent No. 588943 and Russian Patent Application No. 4742501.09, and any and all
civil actions and other proceedings of any type whatsoever relating to such
patents and (iii) claim for infringement by Theis Research, Inc. of U.S. Patent
Nos. 4,270,024, 4,559,416, 4,747,125, 4,800,583 and 4,982,420, and any and all
civil actions and other proceedings of any type whatsoever relating to such
patents, including but not limited to Octel Communications Corporation et al. v.
Theis Research, Inc. et al., United States District
2
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Court for the Northern District of California, San Jose Division, Action Nos. C
92 20217 RMW (PVT), C 93 20287 JW (EAI), C 93 20288 RMW (EAI). The parties agree
that each such claim is, therefore, subject to the provisions of Section 8.3(d)
of the Purchase Agreement. The terms "IP Action" and "Disclosed IP Action" shall
have the meanings set forth in the Purchase Agreement.
Section 5. Effect. Except as amended by this Amendment, the Purchase
Agreement shall continue in full force and effect to the extent provided
therein.
IN WITNESS WHEREOF, the parties have executed this Amendment effective
as of the day and year first above written.
GLENTEL INC.
By: /s/ Thomas Skidmore
Name: Thomas Skidmore
Title: Chairman/CEO
GLENAYRE TECHNOLOGIES, INC.
By: /s/ Clarke H. Bailey
Name: Clarke H. Bailey
Title: Vice Chairman
GLENAYRE ELECTRONICS, INC.
By: /s/ Clarke H. Bailey
Name: Clarke H. Bailey
Title: Chairman
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GLENAYRE MANUFACTURING LTD.
By: /s/ Clarke H. Bailey
Name: Clarke H. Bailey
Title: Chairman
GLENAYRE R&D, INC.
By: /s/ Clarke H. Bailey
Name: Clarke H. Bailey
Title: Chairman
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SCHEDULE 1
TO
SECOND AMENDMENT TO PURCHASE AND SALE AGREEMENT
A. POLANSKY PATENT CLAIM
Claim for infringement of the following patents: U.S. Patent No.
4,809,297 and Canadian Patent No. 1,233,059, and any and all civil actions and
other proceedings of any type whatsoever relating to those parents, including
but not limited to Polansky Electronics Ltd. v. Glenayre Electronics Ltd.,
Celcom Electronics, Ltd., Glenayre Communications Inc., Clinton Millett, and
Cyril Johnson, Queen's Bench of Alberta, Judicial District of Calgary, Action
No. 9001-14858, Glenayre Electronics Ltd. v. Polansky Electronics Ltd., Federal
Court of Canada, Calgary, Action No. T-618-91, Glenayre Electronics Ltd. v.
Polansky Electronics Ltd., United States District Court for the District of
Columbia, Civil Action No. 90-1255, and proposed re- examination of U.S. Patent
No. 4,809,297 before the United States Patent and Trademark Office.
B. Gilbarco Patent Claim
Claim for infringement of U.S. Patent No. 4,625,081, and any and all
civil actions and other proceedings of any kind whatsoever relating to such
patent, including but not limited to Gilbarco Inc. v. Octel Communications
Corporation, United States District Court for the Northern District of
California, San Jose Division, Action No. C-94 20780 JW.
C. THEIS PATENT CLAIM
Claim for infringement of the following patents: U.S. Patent Nos.
4,112,384, 4,150,255, 4,152,547, 4,328,396, 4,338,494, 4,439,635, 4,539,436,
4,692,817, 4,719,647 and 4,856,050, and any and all civil actions and other
proceedings of any type whatsoever relating to such patents, including but not
limited to Octel Communications Corporation et al. v. Theis Research, Inc., et
al., United States District Court for the Northern District of California, San
Jose Division, Action Nos. C 92 20217 RMW (PVT), C 93 20287JW (EAI), C 93
20288RMW (EAI).
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EXHIBIT 3.1
COMPOSITE CERTIFICATE OF INCORPORATION
OF
GLENAYRE TECHNOLOGIES, INC.
FIRST: The name of the Corporation is Glenayre Technologies, Inc.
SECOND: The registered office of the Corporation is to be located at
Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, in the
County of New Castle, in the State of Delaware. The name of its registered agent
at that address is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of Delaware.
FOURTH: The total number of shares of capital stock which the
Corporation shall have authority to issue is 205,000,000 consisting of
200,000,000 Common Shares with a par value of $0.02 per share and 5,000,000
Preferred Shares with a par value of $0.01 per share.
The Board of Directors is authorized, subject to limitations prescribed
by law, to provide for the issuance of the Preferred Shares in series, and by
filing a certificate pursuant to the applicable law of the State of Delaware, to
establish from time to time the number of shares to be included in each such
series, and to fix the designation, powers, preferences and rights of the shares
of each such series and the qualifications, limitations or restrictions thereof.
The authority of the Board with respect to each series shall include,
but not be limited to, determination of the following:
(a) The number of shares constituting that series and the distinctive
designation of that series;
(b) The rights in respect of dividends on the shares of that series,
whether dividends shall be cumulative and, if so, from which date or dates and
the relative rights of priority, if any, of payment of dividends on shares of
that series;
(c) Whether that series shall have voting rights in addition to the
voting rights provided by law and, if so, the terms and extent of such voting
rights.
(d) Whether that series shall have conversion privileges and, if so,
the terms and conditions of such conversion, including provision for adjustment
of the conversion rate in such events as the Board of Directors shall determine;
(e) Whether or not the shares of that series shall be redeemable and,
if so, the terms and conditions of such redemption, including the date or dates
upon or after which they shall
<PAGE>
be redeemable and the amount per share payable in case of redemption which
amount may vary under different conditions and at different redemption dates;
(f) Whether that series shall have a sinking fund for the redemption or
purchase of shares of that series and, if so, the terms and amount of such
sinking fund;
(g) The rights of the shares of that series in the event of voluntary
or involuntary liquidation, dissolution or winding up of the Corporation and the
relative rights of priority, if any, of payment of shares of that series; and
(h) Any other relative rights, preferences, limitations and powers of
that series.
FIFTH: The name and address of the Incorporator are as follows:
NAME ADDRESS
Diane Flanagan 229 South State Street
Dover, Delaware 19901
SIXTH: The following provisions are inserted for the management of the
business and for the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and of
its directors and stockholders:
(1) Except as otherwise permitted by any provisions of the Certificate
of Incorporation relating to the rights of holders of any class or series of
shares, having a preference over the Common Shares as to dividends or upon
liquidation, to elect additional directors in certain circumstances, the number
of directors of the Corporation shall be fixed from time to time by the vote of
a majority of the entire Board of Directors, but such number shall in no case be
less than three. Any such determination made by the Board of Directors shall
continue in effect unless and until changed by the Board of Directors, but not
such changes shall affect the term of any director then in office.
The directors shall be divided into three classes, designated Class I,
Class II and Class III. Each class shall consist, as nearly as may be possible,
of one-third of the total number of directors constituting the entire Board of
Directors. At the 1990 annual meeting of stockholders, Class I directors shall
be elected for a one-year term, Class II directors for a two-year term and Class
III directors for a three-year term. At each succeeding annual meeting of
stockholders beginning in 1991, successors to the class of directors whose term
expires at that annual meeting shall be elected for a three-year term. If the
authorized number of directors is changed, any increase or decrease shall be
apportioned among the classes so as to maintain the number of directors in each
class as nearly equal as possible, and any additional director of any class
elected to fill a vacancy resulting from an increase in such class shall hold
office for a term that shall coincide with the remaining term of that class, but
in no case will a decrease in the number of directors shorten the term of any
incumbent director. A director shall hold office until the
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annual meeting for the year in which his or her term expires and until his or
her successor shall be elected and shall qualify, subject, however, to prior
death, resignation, retirement, disqualification or removal from office. A
majority of the entire Board of Directors shall constitute a quorum for the
transaction of business. Except as otherwise required by law or permitted by any
provisions of the Certificate of Incorporation relating to the rights of holders
of any class or series of shares, having a preference over the Common Shares as
to dividends or upon liquidation, to elect directors in certain circumstances,
any vacancy on the Board of Directors that results from an increase in the
number of directors shall be filled only by a majority of the Board of Directors
then in office provided that a quorum is present, and any other vacancy
occurring in the Board of Directors shall be filled by a majority of the
directors then in office, even if less than a quorum, or by a sole remaining
director. Any director elected to fill a vacancy not resulting from an increase
in the number of directors shall have the same remaining term as that of his or
her predecessor.
Notwithstanding the foregoing, whenever the holders of any one or more
classes or series of shares, having a preference over the Common Shares as to
dividends or upon liquidation, issued by the Corporation shall have the right,
voting separately by class or series, to elect directors at an annual or special
meeting of stockholders, the election, term of office, filling of vacancies and
other features of such directorships shall be governed by the terms of the
Certificate of Incorporation applicable thereto, and such directors so elected
shall not be divided into classes pursuant to this Article SIXTH, Section 1.
Any director elected by the stockholders, or by the Board of Directors
to fill a vacancy, may be removed only for cause by the affirmative vote of the
holders of a majority of the voting power represented by all the shares of stock
of the Corporation outstanding and entitled to vote for the election of
directors, given at a duly called annual or special meeting of stockholders.
(2) In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized to make, alter or repeal
the by-laws of the Corporation.
(3) The directors in their discretion may submit any contract or act
for approval or ratification at any annual meeting of the stockholders or at any
meeting of the stockholders called for the purpose of considering any such act
or contract, and any contract or act that shall be approved or be ratified by
the vote of the holders of a majority of the stock of the Corporation which is
represented in person or by proxy at such meeting and entitled to vote thereat
(provided that a lawful quorum of stockholders be there represented in person or
by proxy) shall be as valid and as binding upon the Corporation and upon all the
stockholders is though it had been approved or ratified by every stockholder of
the Corporation, whether or not the contract or act would otherwise be open to
legal attack because of directors' interest, or for any other reason.
(4) In addition to the powers and authorities hereinbefore or by
statute expressly conferred upon them, the directors are hereby empowered to
exercise all such powers and do all such acts and things as may be exercised or
done by the Corporation; subject, nevertheless, to the provisions of the
statutes of Delaware, of this Certificate, and to the by-laws as from time
3
<PAGE>
to time in effect; provided, however, that no such by-law shall invalidate any
prior act of the directors which would have been valid if such by-law had not
been made.
SEVENTH: (1) No director of the Corporation shall be personally liable
to the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except (i) for any breach of a director's duty of
loyalty to the Corporation or its stockholder, (ii) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the General Corporation Law of Delaware, or (iv)
for any transaction from which a director derived an improper personal benefit.
(2) The Corporation shall indemnify, in accordance with and to the full
extent now or hereafter permitted by law, any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding whether civil, criminal, administrative or investigative
(including, without limitation, an action by or in the right of the
Corporation), by reason of his acting as a director or officer of the
Corporation (and the Corporation, in the discretion of the Board of Directors,
may so indemnify a person by reason of the fact that he is or was an employee of
the Corporation or is or was serving at the request of the Corporation in any
other capacity for or on behalf of the Corporation) against any liability or
expense actually and reasonably incurred by such person in respect thereof;
provided, however, the Corporation shall be required to indemnify an officer or
director in connection with an action, suit or proceeding initiated by such
person only if such action, suit or proceeding was authorized by the Board of
Directors of the Corporation. Such indemnification is not exclusive of any other
right to indemnification provided by law or otherwise. The right to
indemnification conferred by this paragraph (2) of Article Seventh shall be
deemed to be a contract between the Corporation and each person referred to
herein.
(3) No amendment to or repeal of these provisions shall apply to or
have any effect on the liability or alleged liability of any person for or with
respect to any acts or omissions of such person occurring prior to such
amendment.
EIGHTH: Any action required or permitted to be taken by the
stockholders of the Corporation must be effected at a duly called annual or
special meeting of such holders and may not be effected by a consent in writing
by any such holders.
NINTH: Except as otherwise required by law and subject to the rights of
the holders of any class or series of shares issued by the Corporation, having a
preference over the Common Shares as to dividends or upon liquidation, to elect
directors in certain circumstances, special meetings of the stockholders of the
Corporation may be called only by (i) the Board of Directors pursuant to a
resolution approved by the affirmative vote of a majority of the directors then
in office, (ii) the Chairman of the Board, if one is elected or (iii) the
President. Only those matters set forth in the notice of the special meeting may
be considered or acted upon at such special meeting, unless otherwise provided
by law.
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TENTH: The Corporation reserves the right to repeal, alter or amend
this Certificate of Incorporation in the manner now or hereafter prescribed by
statute. No repeal, alteration or amendment of this Certificate of Incorporation
shall be made unless the same is first approved by the Board of Directors of the
Corporation pursuant to a resolution adopted by the affirmative vote of a
majority of the directors then in office and thereafter approved by the
stockholders. For purposes of the foregoing sentence and in addition to any
other vote required by law, the affirmative vote of the holders of shares of
capital stock having at least 80% of the votes which could be cast by the
holders of all shares of capital stock entitled to vote thereon (or such greater
proportion as may be required by law), voting together as a single class, at a
duly constituted meeting of stockholders called expressly for such purpose,
shall be required to repeal, alter or amend any provision of, or adopt any
provision inconsistent with, Section 1 of Article SIXTH or Article EIGHTH or
NINTH or this Article TENTH.
ELEVENTH: Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware, may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this Corporation under the provisions of Section 279 of Title 8 of the
Delaware Code order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this Corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths in value of the creditors or class or
creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this Corporation as a consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders of this Corporation, as the case may be,
and also on this Corporation.
TWELFTH: The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation in the
manner now or hereafter prescribed by law, and all rights and powers conferred
herein on stockholders, directors and officers are subject to this reserved
power.
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EXHIBIT 10.8
AMENDMENT TO EMPLOYMENT AGREEMENT
THIS AMENDMENT TO EMPLOYMENT AGREEMENT (this "Amendment") is made and
entered into as of the 8th day of December, 1995 by and between GLENAYRE
TECHNOLOGIES, INC., a Delaware corporation (the "Corporation"), and RAMON D.
ARDIZZONE.
Statement of Purpose
The Corporation and the Executive entered into an Employment Agreement
dated as of June 21, 1995 (the "Employment Agreement"). The Corporation and the
Executive desire to amend the Employment Agreement as 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:
I. Paragraph 1(a) of the Employment Agreement is hereby amended to read
as follows:
"(a) Employment. The Corporation hereby employs the Executive,
and the Executive hereby agrees to serve, as President and Chief
Executive Officer of the Corporation, provided that at such time as the
Board of Directors of the Corporation (the `Board') shall determine,
but in no event later than January 1, 1997, the Executive shall become
Vice Chairman of the Board and Chief Executive Officer of the
Corporation. The Executive shall be nominated for re-election to a new
three-year term as a member of the Board at the Corporation's 1996
annual shareholders' meeting."
II. Paragraph 2(a) of the Employment Agreement is hereby amended to
read as follows:
"(a) Term. The initial term of the Executive's employment
hereunder shall commence on the Effective Date and shall continue until
December 31, 1997. The term of the Executive's employment hereunder
shall be renewed for successive one-year renewal terms thereafter
unless written notice is given by either party to the other party not
less than 90 days prior to the expiration of the initial term or any
renewal term. The initial term and each renewal term are referred to
collectively in this Agreement as the `Term.'"
III. Paragraph 2(b) of the Employment Agreement is hereby amended to
add the following Paragraph 2(b)(5):
<PAGE>
"(5) The Corporation may terminate the Executive's employment
hereunder for any reason whatsoever upon 60 days prior written notice
of such termination to the Executive during the initial term of his
employment hereunder or upon 14 days prior written notice of such
termination to the Executive during any renewal term of his employment
hereunder, provided that the Corporation complies with the provisions
of Paragraph 2(f)(1),(2),(4) and (6) below."
IV. Paragraph 2(c)(1) of the Employment Agreement is hereby amended to
read as follows:
"(1) the Executive's resignation from the office of President
and Chief Executive Officer or Vice Chairman of the Board and Chief
Executive Officer (as applicable at the time) without the Corporation's
prior consent;"
V. Paragraph 2(e)(1) of the Employment Agreement is hereby amended to
read as follows:
"(1) except where such failure or change is specifically
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 either to the office of President and Chief Executive
Officer of the Corporation or Vice Chairman of the Board and Chief
Executive Officer of the Corporation, 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 Executive must first (i)
provide the Board with written notice specifying the particular failure
of the Corporation under this Paragraph 2(e)(1), and (ii) allow the
Board 60 days from receipt of notice to cure such failure;"
VI. Paragraph 2(e)(7) of the Employment Agreement is hereby amended to
read as follows:
"(7) Any change in the principal office of the Corporation to
a location which is more than 30 miles from its current location at
5935 Carnegie Boulevard, Charlotte, North Carolina."
VII. Paragraph 2(f)(2) of the Employment Agreement is hereby amended to
read as follows:
"(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
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Executive's death pursuant to Paragraph 2(b)(4) above, (iii) by the
Executive for `Good Reason' pursuant to Paragraph 2(b)(3) above or (iv)
by the Corporation pursuant to Paragraph 2(b)(5) 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 Paragraph 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."
VIII. Paragraph 2(f)(3)(i) of the Employment Agreement is hereby
amended to read as follows:
"(i) by the Corporation without `Cause'"
IX. Paragraph 3(a) of the Employment Agreement is hereby amended to
read as follows:
"(a) Base Salary. The Corporation shall pay to the Executive
an initial Base Salary of $350,000, provided, however, that at such
time as the Executive becomes Vice Chairman of the Board and Chief
Executive Officer of the Corporation, such Base Salary shall become
$150,000 per annum (the applicable Base Salary, with any increases
during the Term being referred to herein as the `Base Salary'). The
Base Salary shall be payable in equal monthly installments on the last
business 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."
X. Paragraph 3(b) of the Employment Agreement is hereby amended to read
as follows:
"(b) Management by Objectives Bonus Plan. The Executive shall
participate at a 50% level in the Glenayre Management by Objectives
Bonus Plan as in effect from time to time (the `MBO Plan'), provided
that at such time as the Executive becomes Vice Chairman of the Board
and Chief Executive Officer of the Corporation, his annual bonus under
the MBO Plan shall be increased to $300,000. In the event that the
Executive becomes Vice Chairman of the Board and Chief Executive
Officer of the Corporation during a particular fiscal year in the
Corporation, the Corporation and the Executive shall agree upon an
equitable determination of his bonus under the MBO Plan for such year
to take into account the change in the determination of such bonus."
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XI. Paragraph 3(c) of the Employment Agreement shall be amended to read
as follows:
"(c) Stock Options. Within 30 days prior to January 1, 1996,
January 1, 1997 and each January 1 thereafter during remainder of the
Term, the Executive shall be awarded options, under the Corporations's
Long-Term Incentive Plan or any similar or substitute option plan (the
`Option Plan'), to purchase no fewer than 50,000 shares of the common
stock of the Corporation. For each award, the exercise price of such
option shall be the `Closing Price' (as defined in the Option Plan) on
the day of such award. Each such option shall be vested as follows:
one-third of the shares subject to such option shall be vested on the
date of such award, an additional one-third of the shares subject to
such option shall be vested on the first anniversary of such award and
the remaining one-third of the shares subject to such option shall be
vested on the second anniversary of such award, provided, however, that
such stock option shall be fully vested upon any termination of the
Executive's employment hereunder other than for Cause or upon any
`Change in Control' of the Corporation (as defined in the Option
Plan)."
XII. The Executive acknowledges and agrees that no event has occurred
prior to the date hereof which constitutes "Good Reason" (as defined in
Paragraph 2(e) of the Employment Agreement), including without limitation a
"Change in Control", as defined in Paragraph 2(e)(6) of the Employment
Agreement), which would entitle the Executive to terminate his employment under
the Employment Agreement and to be paid certain payments under Paragraph 2(f) of
the Employment Agreement.
XIII. Except as expressly amended hereby, the Employment Agreement
shall continue in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
day and year first above written.
GLENAYRE TECHNOLOGIES, INC.
By: /s/ Clarke H. Bailey
Title: Vice Chairman
/s/ Ramon D. Ardizzone
Ramon D. Ardizzone
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Glenayre Management By Objective Plan
for the year ended
December 31, 1996
In accordance with Instruction 2 of Item 402(k) of Regulation S-K,
certain information relating to target levels and factors involving
confidential business information, the disclosure of which would have an
adverse effect on Registrant, has been omitted from this Exhibit.
<PAGE>
Glenayre Technologies, Inc.
Management By Objective (MBO) Plan
For the year ended December 31, 1996
The Management By Objectives Plan (the "Plan") is established to
motivate and provide incentive to the key operations managers of
Glenayre Technologies, Inc. and its wholly-owned subsidiaries around the
world ("the Company") to improve profits over budgeted amounts.
Minimum and Maximum Performance
The focus of the Plan is for "Earnings" to exceed $ US, i.e.,
the top level of annualized "Earnings" of Glenayre Technologies, Inc.
required to maximize the 1996 MBO payment, where "Earnings" is defined
as Income from Operations plus Goodwill Amortization Expense.l The 1996
Minimum Annual Target of annualized Earnings for any MBO payments to be
made has been set at $ US. These Targets have been established by the
Board of Directors.
This Plan is only valid and funds will only be paid if the Company's
Quarterly and Annual 1996 Earnings exceed the respective quarterly
Minimum Targets described below.
Employment Term
All participants must remain as full-time employees of the Company for
the full year ending December 31, 1996.
Participants
Each Plan participant will have a maximum potential MBO bonus, as
established by management, and approved annually by the Board of
Directors, ranging from % to % of his/her respective Base Annual Salary.
An employee may only participate in one bonus or incentive pay program
within the Company.
Any additions or changes to the 1996 MBO Plan participants must have
advance approval of the President. An individual who becomes eligible to
participate in the Plan after the first of the Plan year at any level
will be paid on a prorated basis for the period of time that he/she
participates in the Plan. Also, if an approved change occurs for a Plan
participant, such change will be implemented prospectively from the
effective date of the change.
Performance Measurement for Bonus Payment
An individual's actual Bonus payments will be based on the following two
Performance Measurement Segments:
* 70% of the Bonus will be based on the Company achieving
the Earnings Target used to establish the Payment Pool, as defined below
("Earnings Segment").
1 "Earnings" does not include the impact of interest income or
expense, exchange gain/(loss), other income/(loss), income taxes or
investment tax credits, any real estate transactions and expenses, and
business unit disposal or acquisition costs.
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* 30% of the Bonus will be based on achievement of Individual
Objectives as provided on the Glenayre Performance Appraisal form
("Performance Segment").
Each individual must have at least three measurable objectives stated on
the Glenayre Performance Appraisal form, as established in a partnership
manner between the employee and his/her manager, in order for him/her to
participate. The achievement of these objectives will be monitored by
the employee's respective supervisor.
Bonus Payments
Bonus payments will be made on a quarterly basis in 1996 based on the
following parameters:
- Achievement of Board-minimum quarterly cumulative Earnings
Targets, as defined below:
Calendar Cumulative Target
Quarter % of Cumulative Minimum
Annual Minimum Target Earnings
1 25% $ US
2 50% $ US
3 75% $ US
4 100% $ US
- - If the maximum quarterly cumulative Earnings Targets, as defined below,
are not met, all individual bonus payments will be made on a pro rata
basis.
Calendar Cumulative Target Cumulative
Quarter % of Maximum
Annual Maximum Target Earnings
1 25% $ US
2 50% $ US
3 75% $ US
4 100% $ US
- - No portion of the Performance Segment, (i.e., the 30% portion, as
defined under Performance Measurement) is paid out until the year end
bonus payment is made, as described below.
- - The Earnings Segment of the 1996 bonus payment (i.e., the 70% portion
as defined under Performance Measurement) has the following cumulative
quarterly limitations on the amount that will actually be paid in a
given quarter:
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Calendar Cumulative Limitation
Quarter
1st 50% of cumulative bonus
2nd 50% of cumulative bonus
3rd 70% of cumulative bonus
Year End Balance of cumulative bonus
Example of Bonus Payment on the Earnings Segment (i.e., the 70% Segment)
Before Year End:
A Plan participant with a Base Annual Salary of $ per year who is
employed for the full year with a maximum potential MBO bonus percentage
of Base Annual Salary of 10% has a total 1996 bonus potential of $ ,
i.e., $ Salary times 10% Maximum potential MBO bonus percentage.
This maximum $ bonus potential would be paid out if all Targets are met
as follows:
--70% (i.e., $ ) on fully achieving the pro rata portion of the top
level Earnings Objective of $
US
--30% (i.e., $ ) on fully achieving Individual Objectives of the
Performance Segment
Based on this allocation, the potential bonus available to be paid for
the Earnings Segment of the Plan before year end is as follows:
Calendar Quarterly Maximum Estimated
Quarter Cumulative Cumulative Payment
Limitation Calculation Potential(1) Date
1st 50% $ *50%/4 $ May 1996
2nd 50% $ *50%/4*2 August 1996
3rd 70% $ *70%/4*3 November 1996
(1) Assumes 100% of the cumulative top level Earnings Target is achieved.
These amounts do not include any amounts for achievement of
individual objectives under the Performance Segment which is
determined and paid out after year end. Also, each quarter's payment
as calculated above is reduced by any previously received payments
under the Plan.
Year End MBO Bonus Payment
The Year End MBO Bonus payment for 1996, as described in the example
below, will be made within forty-five (45) days after the audit
completion and Board approval of the Company's 1996 year-end financial
statements.
The Year End MBO Bonus payment will be comprised of two segments. The
following formulae reflects achieving 100% of the top level Target
Earnings Objective of $ US. If less than 100% of such Objective is
achieved, the Year End MBO Bonus will be reduced on a pro rata basis.
The formulae are as follows:
4
<PAGE>
Target Earnings Segment (i.e., the 70% segment):
((1996 Base Annual Salary) X (Individual's % of Base Pay for Bonus) X
(70%)
X (% of Target Earnings Achieved))
Less (1996 Bonus Amounts Previously Paid)
Equals Final "Earnings Segment" Bonus
Individual Performance Segment (i.e., the 30% segment):
((1996 Base Salary) X (Individual's % of Base Pay for Bonus) X (30%)
X (Achievement % of Individual Objectives) X (% of Target Earnings
Achieved)
Equals Final "Performance Segment" Bonus
The sum of these two segments represents the total final 1996 Year End
MBO Bonus amount to be paid.
5
<PAGE>
Exhibit 11
GLENAYRE TECHNOLOGIES, INC.
COMPUTATION OF EARNINGS PER COMMON SHARE
FOR THE THREE YEARS ENDED DECEMBER 31, 1995 (1)
(In Thousands Except per Share Amounts)
Year Ended December 31,
1995 1994 1993
Income from continuing operations
before extraordinary item ...... $ 76,448 $ 33,095 $ 23,700
Gain from discontinued operations . -- 388 100
Income before extraordinary item .. 76,448 33,483 23,800
Extraordinary item ................ -- -- (1,695)
Net income ........................ $ 76,448 $ 33,483 $ 22,105
PRIMARY EARNINGS PER SHARE
Weighted average shares outstanding
during the period .............. 58,298 55,007 45,362
Common stock equivalents .......... 4,182 3,696 4,037
62,480 58,703 49,399
Continuing operations ............. $ 1.22 $ 0.56 $ 0.48
Discontinued operations ........... -- 0.01 --
Income before extraordinary item .. 1.22 0.57 0.48
Extraordinary item ................ -- -- (0.03)
Net income per share .............. $ 1.22 0.57 $ 0.45
FULLY DILUTED EARNINGS PER SHARE
Weighted average shares outstanding
during the period .............. 58,298 55,007 45,362
Common stock equivalents .......... 4,515 3,785 4,518
62,813 58,792 49,880
Continuing operations ............. $ 1.22 $ 0.56 $ 0.48
Discontinued operations ........... -- 0.01 --
Income before extraordinary item .. 1.22 0.57 0.48
Extraordinary item ................ -- -- (0.03)
Net income per share .............. $ 1.22 $ 0.57 $ 0.45
(1) Financial information contained in this report has been adjusted for a
three-for-two common stock split distributed on June 19, 1995 and a
three-for-two common stock split distributed on December 29, 1995.
<PAGE>
Exhibit 21
SUBSIDIARIES OF GLENAYRE
The following subsidiaries are wholly-owned, directly or indirectly through
wholly-owned subsidiaries of Glenayre.
Name of Subsidiary Jurisdiction of Incorporation
Glenayre Electronics, Inc. Colorado, U.S.A.
Glenayre Manufacturing Ltd. Canada
Glenayre R & D, Inc. Canada
Glenayre Electronics Singapore PTE Ltd. Singapore
Glenayre Electronics (U.K.) Limited United Kingdom
Glenayre Digital Systems, Inc. North Carolina, U.S.A.
Glenayre Services Ltd. Canada
Glenayre de Mexico SA de CV Mexico
Glenayre Administracion SA de CV Mexico
Glenayre Electronics South America Ltda. Brazil
Glenayre Electronics Europe B.V. Netherlands
Glenayre Electronics (Hong Kong) Limited Hong Kong
Glenayre Electronics Philippines, Inc. Philippines
Genera Hawaii Commerce Corp. Hawaii, U.S.A.
Headway Colorado, Inc. Colorado, U.S.A.
Headway Hawaii, Inc. Hawaii, U.S.A.
Headway Texas, Inc. Texas, U.S.A.
Sunway Financial Services, Inc. Texas, U.S.A.
Sunway Management, Inc. Texas, U.S.A.
Western SCC, Inc. California, U.S.A.
Western Multiplex Corporation California, U.S.A.
The names of other subsidiaries have been omitted because, considered in
the aggregate as a single subsidiary, they would not constitute a
significant subsidiary.
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in Glenayre Technologies, Inc.'s
Registration Statements No. 33-43797 on Form S-8, No. 33-43798 on Form S-8, No.
33-68766 on Form S-8, No. 33-80464 on Form S-8 and No. 33-88818 on Form S-4, as
amended by Post-Effective Amendment No. 1 on Form S-8 of our report dated
January 31, 1996, with respect to the consolidated financial statements and
schedule of Glenayre Technologies, Inc. included in the Annual Report (Form
10-K) for the year ended December 31, 1995.
ERNST & YOUNG LLP
Charlotte, North Carolina
March 27, 1996
<PAGE>
Exhibit 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Glenayre Technologies, Inc.'s
Registration Statements No. 33-43797 on Form S-8, No. 33-43798 on Form S-8, No.
33-68766 on Form S-8, No. 33-80464 on Form S-8 and No. 33-88818 on Form S-4, as
amended by Post-Effective Amendment No. 1 on Form S-8 of our report dated
February 3, 1995, appearing in the Annual Report on Form 10-K of Glenayre
Technologies, Inc. for the year ended December 31, 1995.
DELOITTE & TOUCHE LLP
Charlotte, North Carolina
March 27, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 114,654
<SECURITIES> 0
<RECEIVABLES> 112,305
<ALLOWANCES> 4,057
<INVENTORY> 50,045
<CURRENT-ASSETS> 276,681
<PP&E> 47,920
<DEPRECIATION> 10,806
<TOTAL-ASSETS> 447,580
<CURRENT-LIABILITIES> 53,194
<BONDS> 0
0
0
<COMMON> 298,218
<OTHER-SE> 92,476
<TOTAL-LIABILITY-AND-EQUITY> 447,580
<SALES> 321,404
<TOTAL-REVENUES> 321,404
<CGS> 138,773
<TOTAL-COSTS> 138,773
<OTHER-EXPENSES> 89,118
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 190
<INCOME-PRETAX> 101,745
<INCOME-TAX> 25,297
<INCOME-CONTINUING> 76,448
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 76,448
<EPS-PRIMARY> 1.22
<EPS-DILUTED> 1.22
</TABLE>
