<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 March 31, 1997
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 April 30, 1997, there were 38,419,781 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)
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
-------- --------
(Unaudited)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 895 $ 27,398
Accounts receivable (net of allowance for
doubtful accounts of $4,189 in 1997 and
$3,539 in 1996) 94,434 106,602
Inventories, primarily finished goods 127,634 138,785
Other current assets 5,403 9,706
-------- --------
Total current assets 228,366 282,491
Property, plant and equipment, net 36,366 35,947
Goodwill (net of accumulated amortization
of $32,933 in 1997 and $31,858 in 1996) 163,375 167,128
Deferred income taxes, net 17,707 12,174
Other assets 13,064 13,153
-------- --------
$458,878 $510,893
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 26,051 $ 54,039
Accrued compensation, benefits and related taxes 13,415 19,648
Other current liabilities 29,812 24,160
-------- --------
Total current liabilities 69,278 97,847
Long-term debt 95,390 102,658
-------- --------
Total liabilities 164,668 200,505
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; 38.4 million shares
issued and outstanding in 1997 and 1996 384 384
Capital in excess of par value 254,181 254,181
Retained earnings 39,685 55,809
Cumulative translation adjustments (40) 14
-------- --------
Total stockholders' equity 294,210 310,388
-------- --------
$458,878 $510,893
======== ========
</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
March 31,
--------------------
1997 1996
--------- ---------
<S> <C> <C>
Net sales $ 120,034 $ 183,149
Cost of sales 93,906 137,371
--------- ---------
Gross profit 26,128 45,778
Operating expenses:
Selling, general and
administrative expenses 27,065 32,154
Amortization of goodwill 1,244 1,244
Merger/integration costs 21,550 -
--------- ---------
49,859 33,398
--------- ---------
Operating income (loss) (23,731) 12,380
Interest expense and other, net 1,362 2,350
--------- ---------
Income (loss) before income taxes (25,093) 10,030
Income tax expense (benefit) (8,969) 2,560
--------- ---------
Net income (loss) $ (16,124) $ 7,470
========= =========
Net income (loss) per common and
common equivalent shares $ (.42) $ .19
========= =========
Weighted average common and
common equivalent shares 38,420 39,593
========= =========
</TABLE>
See accompanying notes to the consolidated financial statements.
3
<PAGE> 4
ANTEC CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Three months ended
March 31,
--------------------
1997 1996
-------- --------
<S> <C> <C>
Operating activities:
Net income (loss) $ (16,124) $ 7,470
Adjustments to reconcile net income (loss) to
net cash provided (used) by operating activities:
Depreciation and amortization 3,705 3,506
Deferred income taxes (5,533) (2,499)
Changes in operating assets and liabilities:
Accounts receivable 12,168 (889)
Inventories 11,151 5,496
Accounts payable and accrued liabilities (25,174) 3,929
Other, net 4,270 326
--------- ---------
Net cash provided (used) by operating activities (15,537) 17,339
Investing activities:
Purchases of property, plant and equipment (2,880) (2,191)
Other (818) (444)
--------- ---------
Net cash used by investing activities (3,698) (2,635)
--------- ---------
Net cash provided (used) before financing activities (19,235) 14,704
Financing activities:
Borrowings 39,000 62,495
Reductions in borrowings (46,268) (72,753)
Proceeds from issuance of common stock - 221
--------- ---------
Net cash used by financing activities (7,268) (10,037)
--------- ---------
Net increase (decrease) in cash and cash equivalents (26,503) 4,667
Cash and cash equivalents at beginning of period 27,398 14,075
--------- ---------
Cash and cash equivalents at end of period $ 895 $ 18,742
========= =========
Supplemental cash flow information:
Interest paid during the period $ 1,714 $ 2,038
========= =========
Income taxes paid during the period $ 54 $ 1,405
========= =========
</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
ANTEC Corporation ("ANTEC" or herein together with its consolidated
subsidiaries called the "Company") is an international communications
technology company, headquartered in Rolling Meadows, with major offices in
Atlanta and Denver. The consolidated financial statements include the accounts
of the Company after elimination of intercompany transactions. The
consolidated financial statements furnished herein reflect 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. As described more fully in Note 2, on
February 6, 1997, the merger between ANTEC Corporation, TSX Corporation and TSX
Acquisition Corporation became effective. The consolidated financial
statements have been prepared following the pooling of interests method of
accounting and reflect the combined financial position, operating results and
cash flows of ANTEC Corporation and TSX Corporation as if they had been
combined for all periods presented. Certain amounts have been reclassified for
the combined presentation.
NOTE 2. MERGER
On February 6, 1997, shareholders of ANTEC Corporation and TSX Corporation
approved the Plan of Merger ("Merger") dated as of October 28, 1996 among ANTEC
Corporation, TSX Corporation ("TSX") and TSX Acquisition Corporation, and the
Merger resulting in TSX becoming a wholly-owned subsidiary of ANTEC became
effective on that date. Under the terms of the transaction, TSX shareholders
received one share of ANTEC common stock for each share of TSX common stock
that they owned, while ANTEC shareholders continued to own their existing
shares. As a result of the Merger, ANTEC issued approximately 15.4 million
shares of common stock. The transaction was tax-free for TSX shareholders and
was accounted for as a pooling of interests.
Prior to the combination, TSX's fiscal year ended April 30, and ANTEC's
fiscal year ended December 31. TSX's historical financial statements for
periods prior to the December 31, 1996 had to be adjusted to within 93 days of
ANTEC's year-end. Therefore, the statement of operations for the three months
ended March 31, 1996 represents ANTEC's fiscal period ended on that date
combined with TSX's three months ended the last Saturday in January 1996. All
intercompany sales between TSX and ANTEC were eliminated. Operating results
for the three months ended March 31, 1996 were as follows:
5
<PAGE> 6
ANTEC CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CON'T.)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31, 1996
------------------
(In thousands)
(Unaudited)
<S> <C>
Revenue:
ANTEC $162,392
TSX 21,557
Intercompany sales elimination (800)
----------
Combined $183,149
==========
Net Income:
ANTEC $ 2,562
TSX 4,908
----------
Combined $ 7,470
==========
</TABLE>
As a result of the change in the fiscal year end of TSX, the operating
results of TSX for the two months ended December 31, 1996 was reflected as an
adjustment to retained earnings of the combined companies as of December 31,
1996. The following summarizes TSX's operating results for the two months
ended December 31, 1996 (in thousands) (unaudited):
<TABLE>
<S> <C>
Net sales $ 8,668
Operating loss $(3,561)
Net loss $(2,571)
</TABLE>
NOTE 3. MERGER/INTEGRATION COSTS
In the first quarter of 1997, in connection with the Merger discussed in
Note 2, the Company recorded merger/integration costs aggregating approximately
$28 million. The components of the non-recurring charge included $6.9 million
related to the investment banking, legal, accounting and contractual change of
control payments associated with the Merger; $11.2 million related to facility
and operational consolidation and reorganization due to the combining of
various manufacturing operations; and $3.4 million related to severance costs
resulting from the elimination of positions duplicated by the Merger and
integration. The personnel-related costs included charges related to the
termination of approximately 200 employees primarily resulting from the factors
described above. Also included in the total merger/integration charge was a
write-off of redundant inventories relating to overlapping product lines and
product development efforts totaling approximately $6.5 million which has been
reflected in cost of goods sold for the three months ended March 31, 1997. As
of March 31, 1997, approximately $12 million of the charge had yet to be
utilized.
6
<PAGE> 7
ANTEC CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CON'T.)
(Unaudited)
NOTE 4. IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In February 1997, the FASB issued Statement No. 128, Earnings per Share,
which is required to be adopted on December 31, 1997. At that time, the
Company will be required to change the method currently used to compute
earnings per share and to restate all prior periods. The impact of Statement
128 is not expected to be material.
7
<PAGE> 8
ANTEC CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
COMPARISON OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
Net Sales. Net sales for the first three months of 1997 were $120.0
million as compared to $183.1 million for the first three months of 1996, a
decrease of 34.5%. This decrease primarily reflects the ongoing reduction in
capital spending by ANTEC's largest customer, Tele-Communications, Inc.
("TCI").
Gross Profit. Gross profit for the first three months of 1997 was $26.1
million as compared to $45.8 million for the first three months of 1996,
reflecting lower sales discussed above and a $6.5 million write-off of
redundant inventories relating to overlapping product lines and product
development efforts in connection with the Merger. (See Note 3 of the Notes to
the Consolidated Financial Statements.) Excluding the inventory charge, gross
profit as a percentage of net sales for the first three months of 1997 was
27.1% as compared to 25.0% for the first three months of 1996. The improved
gross profit percentage for the three-month period is a result of product mix,
notably an increase in ANTEC manufactured product.
Selling, General and Administrative ("SG&A") Expenses. SG&A expenses for
the first three months of 1997 were $27.1 million compared to $32.2 million for
the first three months of 1996. This represents a decrease of 15.8% and
reflects ongoing expense controls and preliminary savings resulting from the
Merger.
Merger/Integration Costs. In the first quarter of 1997, the Company
recorded merger/integration costs aggregating approximately $28 million. The
non-recurring charge included investment banking, legal, accounting and
contractual change of control payments associated with the Merger; facility and
operational consolidation and reorganization costs due to the combining of
various manufacturing operations; and severance costs resulting from the
elimination of positions duplicated by the Merger and integration. Also
included in the total merger/integration charge was a write-off of redundant
inventories relating to overlapping product lines and product development
efforts totaling approximately $6.5 million which has been reflected in cost of
goods sold for the three months ended March 31, 1997. (See Note 3 of the Notes
to the Consolidated Financial Statements.)
Interest Expense and Other, Net. Interest expense and other, net was $1.4
million in the first three months of 1997 as compared to $2.4 million in the
first three months of 1996. This decrease primarily relates to decreased debt
levels resulting from improved working capital levels and, to a lesser extent,
a lower average interest rate under the Company's Credit Facility.
8
<PAGE> 9
ANTEC CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CON'T.)
Net Income (Loss). Net loss was $16.1 million for the first three months
of 1997 as compared to net income of $7.5 million for the first three months of
1996. Included in the net loss for 1997 were approximately $28.0 million of
pretax merger/integration costs. (See Note 3 of the Notes to the Consolidated
Financial Statements.) The decrease in net income from the same period in 1996
was due to the factors described above.
FINANCIAL LIQUIDITY AND CAPITAL RESOURCES
In the first quarter of 1997, in connection with the Merger discussed in
Note 2 of the Notes to the Consolidated Financial Statements, the Company
recorded merger/integration costs aggregating approximately $28 million. The
components of the non-recurring charge included $6.9 million related to the
investment banking, legal, accounting and contractual change of control
payments associated with the Merger; $11.2 million related to facility and
operational consolidation and reorganization due to the combining of various
manufacturing operations; and $3.4 million related to severance costs resulting
from the elimination of positions duplicated by the Merger and integration.
The personnel-related costs included charges related to the termination of
approximately 200 employees primarily resulting from the factors described
above. Also included in the total merger/integration charge was a write-off of
redundant inventories relating to overlapping product lines and product
development efforts totaling approximately $6.5 million which has been
reflected in cost of goods sold for the three months ended March 31, 1997. As
of March 31, 1997, approximately $12 million of the charge had yet to be
utilized.
As of March 31, 1997, the Company had a balance of $93 million outstanding
under its credit facility. At March 31, 1997, the Company had approximately
$58 million of available borrowings under its Credit Facility. The average
interest rate on these borrowings was 6.4% at March 31, 1997. The commitment
fee on unused borrowings is approximately 1/4 of 1%.
The Company's capital expenditures were $2.9 million and $2.2 million in
the three months ended March 31, 1997 and 1996, respectively. The Company has
no significant commitments for capital expenditures at March 31, 1997.
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 decreases, the investment in accounts receivable and inventory decreased
approximately $23.3 million and $4.6 million for the three months ended March
31, 1997 and 1996, respectively.
9
<PAGE> 10
ANTEC CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CON'T.)
CASH FLOW
Cash flows provided (used) by operating activities were ($15.5) million
and $17.3 million for the three months ended March 31, 1997 and 1996,
respectively. 1997 includes the impact of merger/integration costs and a
reduction in accounts payable. 1996 reflects the Company's improved working
capital position resulting from its continued effort to control inventory.
Cash flows used by investing activities were $3.7 million and $2.6 million
for the three months ended March 31, 1997 and 1996, respectively. Both periods
include the impact of planned sales and warehouse improvements.
Cash flows provided (used) by financing activities were ($7.3) million and
$10.0 million for the three months ended March 31, 1997 and 1996, respectively.
Both periods reflect their respective trends in operating activities.
10
<PAGE> 11
PART II. OTHER INFORMATION
Item 4. SUBMISSION OF MATTER TO A VOTE OF SECURITY HOLDERS
At the Annual Meeting of Stockholders of ANTEC Corporation held
May 6, 1997:
An election of eight directors was held, and the shares so present
were voted as follows for the election of each of the following:
<TABLE>
<CAPTION>
Number of Number of
Shares Voted For Shares Withheld
---------------- ---------------
<S> <C> <C>
Rod F. Dammeyer 28,930,617 482,380
John M. Egan 28,934,885 478,112
James L. Faust 28,930,220 482,777
William H. Lambert 28,906,945 506,052
John R. Petty 28,929,920 483,077
Samuel K. Skinner 28,929,960 483,037
Bruce Van Wagner 28,929,310 483,687
Mary Agnes Wilderotter 28,931,639 481,358
</TABLE>
The Company's 1997 Stock Incentive Plan was approved:
<TABLE>
<CAPTION>
Number of Number of Number of Number of
Shares Voted For Shares Against Shares Abstain Broker "No Vote"
----------------- -------------- -------------- ----------------
<S> <C> <C> <C>
13,409,604 8,332,286 100,321 7,570,786
</TABLE>
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
On February 19, 1997, ANTEC filed a report on Form 8-K
relating to Item 2, Acquisition or Disposition of Assets, to
describe the consummation of the merger among ANTEC
Corporation, TSX Corporation and TSX Acquisition Corporation.
11
<PAGE> 12
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: May 13, 1997 By: /s/ Lawrence A. Margolis
------------------------------------
Lawrence A. Margolis
Executive Vice President
(Principal Financial Officer, duly
authorized to sign on behalf of
the registrant)
12
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 895
<SECURITIES> 0
<RECEIVABLES> 94,434
<ALLOWANCES> 4,189
<INVENTORY> 127,634
<CURRENT-ASSETS> 228,366
<PP&E> 36,366
<DEPRECIATION> 34,134
<TOTAL-ASSETS> 458,878
<CURRENT-LIABILITIES> 69,278
<BONDS> 95,390
0
0
<COMMON> 384
<OTHER-SE> 293,826
<TOTAL-LIABILITY-AND-EQUITY> 458,878
<SALES> 120,034
<TOTAL-REVENUES> 120,034
<CGS> 93,906
<TOTAL-COSTS> 93,906
<OTHER-EXPENSES> 49,859
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,362
<INCOME-PRETAX> (25,093)
<INCOME-TAX> (8,969)
<INCOME-CONTINUING> (16,124)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (16,124)
<EPS-PRIMARY> (.42)
<EPS-DILUTED> (.42)
</TABLE>
