<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- --- EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 0-22336
ANTEC CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 36-3892082
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
2850 W. Golf Road
Rolling Meadows, IL 60008
(847)439-4444
(Address, including zip code and telephone number, including
area code, of registrant's principal executive offices)
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
---- ----
At October 31, 1996, there were 22,996,056 shares of Common Stock, $0.01 par
value, of the registrant outstanding.
<PAGE> 2
PART I. FINANCIAL INFORMATION
ANTEC CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
ASSETS
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
-------- --------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,845 $ 979
Accounts receivable (net of allowance for
doubtful accounts of $2,612 in 1996 and
$1,956 in 1995) 102,920 106,547
Inventories, primarily finished goods 108,565 122,231
Other current assets 3,353 2,477
-------- --------
Total current assets 216,683 232,234
Property, plant and equipment, net 26,033 25,937
Goodwill (net of accumulated amortization
of $30,611 in 1996 and $26,877 in 1995) 168,374 171,815
Deferred income taxes, net 12,000 13,824
Other assets 18,652 13,108
-------- --------
$441,742 $456,918
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 41,908 $ 63,482
Accrued compensation, benefits and related taxes 18,249 15,899
Other current liabilities 22,426 22,395
-------- --------
Total current liabilities 82,583 101,776
Long-term debt 109,661 117,920
-------- --------
Total liabilities 192,244 219,696
Stockholders' equity:
Preferred stock, par value $1.00 per share, 5 million
shares authorized, none issued and outstanding --- ---
Common stock, par value $0.01 per share,
50 million shares authorized; 22.9 million shares
issued and outstanding in 1996 and 1995 229 229
Capital in excess of par value 217,403 217,013
Retained earnings 31,860 20,194
Cumulative translation adjustments 6 (214)
-------- --------
Total stockholders' equity 249,498 237,222
-------- --------
$441,742 $456,918
======== ========
</TABLE>
See accompanying notes to the consolidated financial statements.
2
<PAGE> 3
ANTEC CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except share data)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30 September 30
-------------------- --------------------
1996 1995 1996 1995
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales $ 157,956 $ 165,520 $ 483,132 $ 489,699
Cost of sales 118,815 126,926 367,919 372,544
--------- --------- --------- ---------
Gross profit 39,141 38,594 115,213 117,155
Operating expenses:
Selling, general and
administrative expenses 28,372 31,660 85,226 90,705
Amortization of goodwill 1,245 1,189 3,734 3,555
Non-recurring items --- 21,681 --- 21,681
--------- --------- --------- ---------
29,617 54,530 88,960 115,941
--------- --------- --------- ---------
Operating income (loss) 9,524 (15,936) 26,253 1,214
Other expense (income):
Interest expense and other, net 2,039 2,660 6,957 8,352
Gain on sale of Canadian business (3,835) --- (3,835) ---
--------- --------- --------- ---------
Income (loss) before income taxes 11,320 (18,596) 23,131 (7,138)
Income tax expense (benefit) 5,222 (6,668) 11,465 (686)
--------- --------- --------- ---------
Net income (loss) $ 6,098 $ (11,928) $ 11,666 $ (6,452)
========= ========= ========= =========
Net income (loss) per common
and common equivalent share $ 0.26 $ (0.52) $ 0.50 $ (0.28)
========= ========= ========= =========
Weighted average common and
common equivalent shares 23,432 22,904 23,486 23,018
========= ========= ========= =========
</TABLE>
See accompanying notes to the consolidated financial statements.
3
<PAGE> 4
ANTEC CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Nine months ended
September 30
-------------------
1996 1995
--------- --------
<S> <C> <C>
Operating activities:
Net income (loss) $ 11,666 $ (6,452)
Adjustments to reconcile net income (loss) to
net cash provided (used) by operating activities:
Depreciation and amortization 9,477 8,838
Deferred income taxes 1,824 (8,233)
Changes in operating assets and liabilities
net of effects of dispositions:
Accounts receivable (966) (25,277)
Inventories 9,171 (617)
Accounts payable and accrued liabilities (18,149) 25,359
Other, net (3,420) 1,650
--------- --------
Net cash provided (used) by operating activities 9,603 (4,732)
Investing activities:
Purchases of property, plant and equipment (5,378) (11,721)
Sale of Canadian business 3,000 ---
Other 1,523 (2,740)
--------- --------
Net cash used by investing activities (855) (14,461)
--------- --------
Net cash provided (used) before financing activities 8,748 (19,193)
Financing activities:
Borrowings 156,989 111,941
Reductions in borrowings (165,259) (91,775)
Proceeds from issuance of common stock 388 1,511
--------- --------
Net cash provided (used) by financing activities (7,882) 21,677
--------- --------
Net increase in cash and cash equivalents 866 2,484
Cash and cash equivalents at beginning of period 979 835
--------- --------
Cash and cash equivalents at end of period $ 1,845 $ 3,319
========= ========
Supplemental cash flow information:
Interest paid during the period $ 5,583 $ 8,268
========= ========
Income taxes paid during the period $ 9,910 $ 9,050
========= ========
</TABLE>
See accompanying notes to the consolidated financial statements.
4
<PAGE> 5
ANTEC CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1. BASIS OF PRESENTATION
The accompanying consolidated financial statements should be read in
conjunction with the consolidated financial statements included in ANTEC
Corporation's (the "Company" or "ANTEC") Annual Report on Form 10-K for the
year ended December 31, 1995. The consolidated financial information furnished
herein reflects all adjustments (consisting of normal recurring accruals) which
are, in the opinion of management, necessary for a fair presentation of the
consolidated financial statements for the periods shown.
NOTE 2. SALE OF CANADIAN BUSINESS
In the third quarter of 1996, the Company sold its Canadian distribution
business to Cabletel Communications Corporation ("Cabletel") for approximately
$6.0 million in cash and notes, as well as 1,450,000 and 500,000 shares of
common stock in Cabletel and ARC International Corporation, respectively, for
an aggregate sales price of approximately $12.4 million. The Company recorded
a pretax gain of approximately $3.8 million in connection with the sale. The
Canadian distribution business was immaterial to the Company's consolidated
results of operations and financial position.
NOTE 3. SUBSEQUENT EVENT
On October 28, 1996, ANTEC Corporation and TSX Corporation executed a
definitive agreement whereby a wholly-owned subsidiary of the Company will
merge into TSX Corporation. Under the terms of the transaction, TSX
Corporation shareholders will receive 1.00 share of ANTEC Corporation stock for
each share of TSX Corporation stock that they own. It is contemplated that the
transaction will be tax-free for TSX Corporation shareholders and will be
accounted for as a pooling of interests. Both companies' boards of directors
have approved the transaction and, subject to shareholder approval and
satisfaction of other conditions, the transaction is anticipated to close in
early 1997.
5
<PAGE> 6
ANTEC CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
COMPARISON OF OPERATIONS FOR THE NINE AND THREE MONTHS ENDED SEPTEMBER 30, 1996
AND 1995
Net Sales. Net sales for the nine and three month periods ended September
30, 1996 were $483.1 million and $158.0 million, respectively, compared to
$489.7 million and $165.5 million for the same periods in 1995. 1996 sales
reflect international sales growth offset by continued softness in the domestic
cable TV market.
Gross Profit. Gross profit for the nine and three month periods ended
September 30, 1996 was $115.2 million and $39.1 million, respectively, compared
to $117.2 million and $38.6 million for the same periods in 1995. Gross profit
as a percentage of net sales for the nine and three month periods ended
September 30, 1996 was 23.8% and 24.8%, respectively, compared to 23.9% and
23.3% for the same periods in 1995. The improved gross profit percentage for
the three month period ended September 30, 1996 is a result of product mix,
notably an increase in ANTEC manufactured product sales.
Selling, General and Administrative ("SG&A") Expenses. SG&A expenses for
the nine and three month periods ended September 30, 1996 were $85.2 million
and $28.4 million, respectively, compared to $90.7 million and $31.7 million
for the same periods in 1995. This represents decreases of 6.0% and 10.4% for
the nine and three month periods, respectively. These reductions primarily
reflect the impact of ANTEC's reorganized structure.
Non-recurring Items. In the third quarter of 1995, a $21.7 million pretax
non-recurring charge was recorded resulting principally from the Company's
decision to accelerate the integration and consolidation of its 1994
engineering and manufacturing acquisitions and the streamlining of its
distribution business by merging two divisions. The one-time charge includes
the cost of employee separations, facility consolidations and closings, and the
writedown to net realizable value of inventory in discontinued product lines.
As of September 30, 1996, approximately $3 million of the Company's 1995
non-recurring charge had yet to be utilized. It is currently anticipated that
the remaining balance will be expended by the end of 1996, except for amounts
related to long-term property lease commitments.
Interest Expense and Other, Net. Interest expense and other, net for the
nine and three month periods ended September 30, 1996 was $7.0 million and $2.0
million, respectively, compared to $8.4 million and $2.7 million for the same
periods in 1995. These decreases primarily relate to decreased debt levels
resulting from an improved working capital position, driven largely by a
significant reduction in inventory levels and, to a lesser extent, a lower
average interest rate under the Company's credit facility.
6
<PAGE> 7
ANTEC CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CON'T.)
Gain on Sale of Canadian Business. In the third quarter of 1996, the
Company sold its Canadian distribution business to Cabletel Communications
Corporation ("Cabletel") for approximately $6.0 million in cash and notes, as
well as 1,450,000 and 500,000 shares of common stock in Cabletel and ARC
International Corporation, respectively, for an aggregate sales price of
approximately $12.4 million. The Company recorded a pretax gain of
approximately $3.8 million in connection with the sale. The Canadian
distribution business was immaterial to the Company's consolidated results of
operations and financial position.
Net Income. Net income for the nine and three month periods ended
September 30, 1996 was $11.7 million and $6.1 million, respectively, compared
to net loss of $6.5 million and $11.9 million for the same periods in 1995.
These increases are due to the factors described above.
7
<PAGE> 8
ANTEC CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CON'T.)
FINANCIAL LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1996, the Company had a balance of $107.0 million
outstanding and had approximately $58 million of available borrowings under its
credit facility. The average interest rate on these borrowings was 6.5% at
September 30, 1996. The commitment fee on unused borrowings is approximately
1/4 of 1%.
The Company's capital expenditures were $5.4 million and $11.7 million for
the nine months ended September 30, 1996 and 1995, respectively. 1995 capital
expenditures consisted primarily of planned sales office and warehouse
improvements and expansion. The Company has no significant commitments for
capital expenditures at September 30, 1996.
As of September 30, 1996, approximately $3 million of the Company's 1995
non-recurring charge had yet to be utilized. It is currently anticipated that
the remaining balance will be expended by the end of 1996, except for amounts
related to long-term property lease commitments.
The Company's primary need for capital is to fund working capital
requirements, primarily accounts receivable and inventory. The accounts
receivable component of working capital tends to fluctuate closely with the
overall volume of sales activity. The Company has generally been able to
adjust inventory levels according to anticipated business activity. Reflecting
sales fluctuations, the investment in accounts receivable and inventory
(decreased) increased approximately ($8.2) million and $25.9 million in the
nine months ended September 30, 1996 and 1995.
CASH FLOW
Cash flows provided (used) by operating activities were $9.6 million and
($4.7) million for the nine months ended September 30, 1996 and 1995,
respectively. 1996 reflects the Company's improved operating results and its
continued effort to control inventory. 1995 reflects increased investment in
accounts receivables resulting from increased sales activity.
Cash flows used by investing activities were $0.9 million and $14.5
million for the nine months ended September 30, 1996 and 1995, respectively.
1996 includes $3.0 million in cash received from the sale of the Canadian
distribution business. 1995 includes the impact of planned sales and warehouse
improvements.
Cash flows (used) provided by financing activities were ($7.9) million and
$21.7 million for the nine months ended September 30, 1996 and 1995,
respectively. Both periods reflect their respective operating results and
investing activities.
8
<PAGE> 9
ANTEC CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CON'T.)
RECENT DEVELOPMENTS
In October 1996, Tele-Communications, Inc. ("TCI") announced that it was
temporarily ceasing to accept shipments of traditional cable television
products while continuing to accept shipments of digital set top and cable
telephony products. ANTEC's near-term financial results will be adversely
affected by this development. Whether this action by TCI is merely a temporary
inventory and capital expenditure control measure or a significant change in
direction is not known.
9
<PAGE> 10
PART II. OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
None
10
<PAGE> 11
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ANTEC CORPORATION
Dated: November 13, 1996 /s/ Lawrence A. Margolis
-----------------------------------
Lawrence A. Margolis
Executive Vice President
(Principal Financial Officer, duly
authorized to sign on behalf of the
registrant)
11
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JUL-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 1,845
<SECURITIES> 0
<RECEIVABLES> 102,920
<ALLOWANCES> 1,956
<INVENTORY> 108,565
<CURRENT-ASSETS> 216,683
<PP&E> 26,033
<DEPRECIATION> 21,557
<TOTAL-ASSETS> 441,742
<CURRENT-LIABILITIES> 82,583
<BONDS> 109,661
<COMMON> 229
0
0
<OTHER-SE> 249,269
<TOTAL-LIABILITY-AND-EQUITY> 441,742
<SALES> 157,956
<TOTAL-REVENUES> 157,956
<CGS> 118,815
<TOTAL-COSTS> 118,815
<OTHER-EXPENSES> 29,617
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,039
<INCOME-PRETAX> 11,320
<INCOME-TAX> 5,222
<INCOME-CONTINUING> 6,098
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,098
<EPS-PRIMARY> $.26
<EPS-DILUTED> $.26
</TABLE>
