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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.....................FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
OR
[ ] 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.)
5720 PEACHTREE PARKWAY, NW
NORCROSS, GA 30092
(770) 441-0007
(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)
Securities registered pursuant to Section 12(b) of the Act:
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NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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Common stock, $0.01 par value NASDAQ National Market System
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Securities registered pursuant to Section 12(g) of the Act: None
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 shares of Registrant's common stock,
$0.01 par value, held by nonaffiliates of Registrant was approximately
$493,182,560 as of March 13, 1998.
At March 13, 1998, 39,329,289 shares of Registrant's common stock, $0.01
par value, were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of the Registrant's Proxy Statement for the 1998 Annual
Meeting of Stockholders of ANTEC Corporation are incorporated by reference into
Part III. This document consists of pages. Exhibit List is on page .
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TABLE OF CONTENTS
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PAGE
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PART I.
Item 1. Business.................................................... 3
Item 2. Properties.................................................. 9
Item 3. Legal Proceedings........................................... 9
Item 4. Submission of Matters to a Vote of Security Holders......... 10
PART II.
Item 5. Market for the Registrant's Common Stock and Related
Stockholder Matters....................................... 12
Item 6. Selected Consolidated Historical and Pro Forma Financial
Data...................................................... 13
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 14
Item 8. Consolidated Financial Statements and Supplementary Data.... 21
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................. 21
PART III.
Item 10. Directors and Executive Officers of the Registrant.......... 40
Item 11. Executive Compensation...................................... 40
Item 12. Security Ownership of Certain Beneficial Owners and
Management................................................ 40
Item 13. Certain Relationships and Related Transactions.............. 40
PART IV.
Item 14. Exhibits, Financial Statement Schedules and Reports on Form
8-K....................................................... 41
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PART I
ITEM 1. BUSINESS
GENERAL
ANTEC Corporation ("ANTEC", or herein together with its consolidated
subsidiaries, called the "Company") is an international communications
technology company primarily serving hybrid fiber/coax ("HFC") broadband
networks. The Company was incorporated in Delaware in May 1993 as a wholly-owned
subsidiary of Anixter Inc. ("Anixter"), which is a subsidiary of Anixter
International Inc. ("Anixter International").
The ANTEC business was originally formed as a division of Anixter in 1969
through the acquisition of a company involved in the cable industry. Commencing
in 1991, ANTEC established independent management, sales, marketing and data
processing functions and, in 1993, the establishment of ANTEC as a separate and
independent corporation was completed.
In September 1993, the Company completed an initial public offering (the
"Offering") with the sale of 5,400,000 shares of ANTEC common stock by the
Company and 3,972,500 shares of ANTEC common stock by Anixter International at
an offering price of $18 per share. ANTEC's net proceeds of the Offering were
used to reduce its outstanding indebtedness under its Credit Facility by
approximately $59.6 million and to redeem all of the ANTEC preferred stock held
by Anixter International for approximately $30 million. In May 1994, Anixter
International sold 4,000,000 additional shares of its ANTEC common stock. As of
December 31, 1997, Anixter International was the beneficial owner of
approximately 18% of the outstanding ANTEC common stock.
ANTEC strives to develop new or improved products and technology
applications, both through its own engineering resources and by forging
strategic alliances with other companies. The Company's role in the development
of new products is to identify new product needs in the broadband communications
industry and, through its own engineering resources and its work with strategic
allies, to develop and bring new or improved products to market. ANTEC and its
strategic partners develop products and integrated systems that enhance, enable
or are part of the emerging interactive, broadband fiber optic, video, voice and
data delivery networks in an open network architecture.
ANTEC is one of the leading suppliers to the cable industry for fiber optic
products. ANTEC also supplies cable system operators with almost all of the
products required in a cable television system, including headend, distribution,
drop and in-home subscriber products. ANTEC serves its customers through an
efficient delivery network consisting of 25 sales and stocking locations
throughout the world. ANTEC maintains complete inventories and is able to
provide overnight, as well as staged delivery, of product on an "as needed"
basis.
ANTEC has concentrated primarily on serving the cable television industry
and, as a result, has been able to identify and respond to the needs of cable
operators making the technological shift to an open network architecture. ANTEC
has developed strong relationships with its customers, having served major cable
operators such as Tele-Communications, Inc. ("TCI"), Time Warner Cable, Media
One, Inc., Comcast Corporation and Cox Communications, Inc. for many years.
ANTEC intends to continue: (i) developing innovative products and integrating
technologies through strategic alliances with other companies and through
internal research and development, (ii) maintaining its strong relationships
with its existing customers, and (iii) expanding its customer base to further
include both domestic and foreign communications companies. ANTEC intends to
achieve these objectives through internal growth and, as favorable opportunities
arise, through additional strategic acquisitions.
During 1994, ANTEC made several strategic acquisitions. In March 1994,
ANTEC acquired Electronic System Products, Inc. ("ESP"), an Atlanta-based
engineering consulting firm with core capabilities in digital design, radio
frequency ("RF") design and application specific integrated circuit development
for the broadband communications industry. ESP has continued to provide
engineering consulting services to third
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parties and to support the Company's product development efforts. In August
1994, ANTEC acquired Power Guard, Inc. ("Power Guard"), a leading manufacturer
of power supplies and high security enclosures for broadband communications
networks. Power Guard's products include uninterruptible, standby and
non-standby power supplies and new products being developed to meet the emerging
broadband communications network powering needs. In November 1994, ANTEC
acquired all of the outstanding stock of Keptel, Inc. ("Keptel"), a designer,
manufacturer and marketer of outside plant telecommunications and transmission
equipment for both residential and commercial use, primarily by telephone
companies. This acquisition provided ANTEC with new product design, development
and manufacturing capabilities and expanded the Company's product lines to
include a complete family of commercial and residential network interface
devices ("NIDs") and splice enclosures for the telephone and cable television
markets. Also in 1994, the Company entered into a joint venture, Comunicaciones
Broadband, with Scientific-Atlanta, Inc. ("Scientific-Atlanta") to provide a
wide range of broadband network communications products and services in Latin
America. Late in 1994, the Company purchased Scientific-Atlanta's ownership
interest in the joint venture.
During the fourth quarter of 1995, the Company and Northern Telecom, Inc.
("Nortel") formed a joint venture company, called Arris Interactive, L.L.C.
("Arris"), of which the Company owns 25%. Arris focuses on development,
manufacture and sale of products (marketed under the Cornerstone brand name)
that enable the provision of broad range telephone services over the hybrid
fiber/coax architectures typically in use domestically and internationally for
video distribution. The Company serves as the distribution channel to the
domestic cable market for these products.
In February 1997 the Company acquired TSX Corporation ("TSX") by a merger
of a wholly-owned subsidiary of the Company and TSX. TSX shareholders received
one share of ANTEC common stock for each share of TSX common stock they owned.
The transaction was tax-free for TSX shareholders and was accounted for as a
pooling of interests. At December 31, 1997, TCI, as a result of its prior
ownership of TSX common stock, was the beneficial owner of approximately 18% of
the outstanding ANTEC common stock. TCI's beneficial ownership includes options
to acquire an additional 854,341 shares. The acquisition brought the Company
electronic manufacturing capability and enabled the expansion of the Company's
product lines to include amplifiers and line extenders and to enhance its laser
transmitters and receiver and optical node product lines.
In January 1998, ANTEC announced a consolidation plan being implemented
concurrently with the creation of the new President & Chief Operating Officer
organization in Atlanta. ANTEC will consolidate all of its Rolling Meadows,
Illinois corporate and administrative functions into either the Atlanta
Technology Center or the Englewood, Colorado TeleWire Supply division
headquarters during 1998 and 1999. It is also anticipated as part of this
consolidation that the two principal facilities located in Atlanta will be
consolidated and that certain international operating and administrative
functions located in Miami and Chicago will also be consolidated into Atlanta.
In connection with these consolidation changes, ANTEC will take a charge of
approximately $10 to $12 million in the first quarter of 1998 reflecting the
severance, move and real estate costs associated with these consolidations.
CABLE INDUSTRY
Cable television is a service that delivers multiple channels of video
entertainment to subscribers who pay a monthly fee for the various entertainment
services they receive. A cable system consists of three principal segments. The
first is the headend where the cable system operator receives television signals
via satellite and other sources. The headend facility organizes, processes and
retransmits those signals through the second component, the distribution
network, to the subscriber. The distribution network consists of fiber optic and
coaxial cables and associated optical and electronic equipment which take the
original signal from the headend and transmit it throughout the cable system.
The third component is the "drop" which extends from the distribution network to
the subscriber's home and connects either directly to the subscriber's
television set or to a converter box. The converter box may be addressable (a
converter which permits the delivery of premium cable services, including
pay-per-view programming, by enabling the cable operator to control the
subscriber services through the headend) or non-addressable (where premium
channels are activated or eliminated by traps installed in the drop system
outside the home).
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Industry sources estimate that U.S. cable systems pass 97% of America's TV
households and in excess of 68% of those households are subscribers. As a
result, the Company expects its future domestic revenues to come primarily from
upgrading, rebuilding and maintaining existing cable systems and from new
products, rather than from constructing new systems. Construction, maintenance,
expansion and upgrade of cable systems require significant capital expenditures
by operators for the various system components, including headend equipment,
fiber optic and coaxial cable, fiber optic transmitters and receivers, radio
frequency amplifiers, various items of distribution electronics and hardware and
converters.
A major trend in the cable industry has been the continuing expansion of
channel capacity in response to the cable operators' desire to provide
subscribers with more programming selections, including pay-per-view and
additional premium programming services. In addition, the U.S. cable industry
has responded to rapid developments in fiber optic technology, digital
compression (which allows several channels to be transmitted within the same
bandwidth that a single analog channel currently requires), computer electronics
and mass storage technology by upgrading the technological capabilities of their
systems to market and supply a wide array of communication services. Such
upgrades enable not only additional enhanced channel capacity for premium
services, but also video-on-demand (a video entertainment and education library
available in the home on a real time, essentially unscheduled basis),
informational and transactional services, internet access services, interactive
entertainment and education services, competitive access services (the by-pass
of the local telephone company to access long-distance telephone carriers) and
switched voice, data and other two-way telephone communications services.
The Company's performance is largely dependent on capital spending for
constructing, rebuilding, maintaining or upgrading of domestic cable systems.
Approximately 60% of the Company's sales for 1997 came from sales to the
domestic cable industry. Capital spending in the cable industry has been
cyclical. The amount of capital spending and, therefore, the Company's sales and
profits, are affected by a variety of factors, including general economic
conditions, availability and cost of capital, other demands and opportunities
for capital (such as acquisitions), regulation, demand for cable services,
competition and technology, and real or perceived trends or uncertainties in
these factors. For example, rate reductions for cable service imposed by the FCC
in 1994 caused scheduled capital spending to be delayed. Also during 1995,
delays in the passage of the telecommunications bill and increased merger and
acquisition activity in the cable industry depressed capital spending.
In the first quarter of 1996, the telecommunications bill ("Bill") was
approved by Congress and signed by the President. Overall, the Bill allows
long-distance carriers, local phone companies and cable companies to provide
similar services across their networks. The Bill gives the FCC broad powers over
this process and the technology which will be used. The Bill also greatly eases
restrictions on ownership of radio and television stations, permits the regional
telephone companies to engage in manufacturing and research and development, and
is intended to facilitate the increased availability of wireless technologies.
The impact of the Bill on the Company and the industry it serves is not known as
the FCC, state and the courts regulators must decide how the Bill will be
implemented, and the companies must decide what services they will provide in
the future.
Technical developments and strategic decisions by cable system operators
and their competitors will significantly affect the Company. Cable systems are
now being bypassed by direct broadcast satellite services. New digital
technologies enable the compression of many channels into the bandwidth
currently used by one analog channel. There are new wireless technologies which
could be used to bypass existing distribution systems. The entrance of telephone
companies into the cable industry and the consolidation of cable companies and
telephone companies, as the result of the new Federal legislation discussed
above, may affect not only the level of capital spending in general, but the
portion thereof received by the Company.
In 1997, operators of cable systems continued or intensified efforts to
consolidate or simplify their systems. The resulting uncertainty caused delays
in expenditures for improvements in these systems.
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PRINCIPAL PRODUCTS
ANTEC has been a major supplier of products to the cable industry since
1969 and provides a broad range of products and services to cable system
operators. ANTEC supplies almost all of the products required in a cable system
including headend, distribution, drop and in-home subscriber products.
ANTEC maintains a significant inventory of headend products which its
customers require for signal acquisition and processing. Such products include
satellite receivers for signal reception and modulators, amplifiers and
equalizers which manipulate signals for further transmission. ANTEC also stocks
products that encode or descramble signals for retransmission as premium
channels.
Processed signals travel to the home along a distribution network of fiber
optic or coaxial cable. ANTEC supplies both types of cable, as well as products
capable of implementing either system design. Distribution networks, whether
fiber optic or coaxial, can be constructed either above or below ground. In an
aerial system, the transmission cable is supported by galvanized steel cables,
or "strand", which run from pole to pole. ANTEC supplies strand, as well as
other products such as bolts, braces, brackets, hooks and anchor rods used for
support and attachment. In an underground system, buried transmission cable
requires protection and is frequently encased in conduit which ANTEC also
supplies. Underground cable systems also require that underground connections be
waterproofed. The Company supplies both metal and plastic pedestals which encase
and protect such connections. ANTEC also manufacturers power supplies that
insert power at various points in the distribution system. In order to meet its
customers' needs for ancillary products, the Company supplies various
installation materials, tools and other safety equipment.
ANTEC is a leading supplier of fiber optic products to the cable industry.
Traditionally, cable systems were designed using coaxial cable and a series of
amplifiers throughout the distribution network. Today, almost every substantial
upgrade or rebuild replaces elements of the traditional system with fiber optic
technology. The use of a fiber optic system enables the operator to send its
signals greater distances and with less signal degradation than the traditional
coaxial system. In addition, fiber optic cable's capacity to transmit a wider
bandwidth greater distances than coaxial cable allows for the transmission of
more channels to the subscriber's home. The use of fiber optic technology
reduces the need for overall maintenance costs associated with active electronic
components. ANTEC supplies the key product components of a fiber optic rebuild
or upgrade: fiber optic cable, laser transmitters, laser receivers, optical
nodes and distribution amplifiers. In a fiber optic network, optical signals are
transmitted throughout the distribution system along a fiber optic cable from
the headend to the node, where the signal is received and transferred via
coaxial cable to the home. Nodes provide the interface between the fiber optic
network and the coaxial distribution system. Distribution amplifiers strengthen
the signal either on its way to the node or from the node. Laser transmitters
convert incoming electronic video signals at the headend to an optical signal
which can be transmitted over the fiber optic cable. The laser receiver is able
to detect the light coming out of the cable and convert it back into electronic
signals for further transport to the home via coaxial cable.
In addition to the key components of a fiber optic network, ANTEC sells a
variety of ancillary fiber optic products. These products include shelf
assemblies in which lasers are mounted, various splicing equipment that allows
individual fibers to be connected either mechanically or by a heat fusion
process, and splice enclosure cases. ANTEC also provides various fiber optic
technology training courses for its customers.
Signals travel from the distribution system to the home via the drop which
consists primarily of coaxial cable, taps, line passives and splitters. These
products, of which ANTEC is a leading supplier under its Regal brand name,
primarily serve to split incoming signals for transmission to multiple homes and
televisions within a home. ANTEC's Regal taps, line passives and splitters are
capable of passing 600 megahertz ("Mhz") and one gigahertz ("Ghz") of signal
bandwidth and ANTEC is a leading supplier of such products. In addition, a new
line of Regal taps permits the passage of "power" down the distribution system,
which is essential to the providing of telephony services. Through its
acquisition of Keptel, ANTEC manufactures NIDs which serve as the demarcation
point where the signal from the service provider meets the wiring of the
subscribers' premise. ANTEC has taken additional steps to meet its customers'
needs by developing and marketing the Integrated Drop System(SM).
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A large portion of the products supplied by the Company are manufactured
for it by domestic and foreign manufacturers. Approximately 33% of the Company's
purchases in 1997 were from its ten largest suppliers. The loss of a significant
manufacturing source could adversely affect ANTEC's business, although
management believes that any such loss is unlikely to have a lasting impact on
its business, since such products are generally available from alternate
sources.
ANTEC also manufactures certain telecommunications products, including T-1
repeater cases for AT&T and customized wire assemblies. The Company is also a
value-added supplier of electronic connectors for industrial original equipment
manufacturers and military markets, specializing in low-volume, hard-to-obtain
connector products.
ANTEC, through ESP, provides consulting services primarily for developers
of cable television products.
The Company also provides materials management services for several large
cable companies, including TCI. These services include providing procurement,
storage, shipping, tracking and reporting of product deployment, some of which
are on a "just-in-time" basis. The principle portion of the materials management
services program provided by the Company is scheduled to end in May 1998. 1997
net sales included approximately $8.9 million of fees related to these materials
management services programs.
DEVELOPMENTAL PRODUCTS
ANTEC is committed to being a technology integrator and product development
specialist in the evolving broadband communications market. ANTEC strives to
develop new products and technology applications, both through its own
engineering resources and by forging strategic alliances with other companies.
ANTEC is currently involved in the development of several new products. There
can be no assurance that the technology applications under development by ANTEC
will be successfully developed or, if successfully developed, that they will be
widely used or that ANTEC will otherwise be able to successfully exploit these
technology applications. Furthermore, ANTEC's competitors may develop similar or
alternative new technology applications which, if successful, could have a
material adverse effect on ANTEC. ANTEC's strategic alliances are based on
business relationships and generally are not the subject of written agreements
expressly providing for the alliance to continue for a significant period of
time. The loss of a strategic partner could have a material adverse effect on
the development of new products under development with that partner.
SALES AND MARKETING
ANTEC maintains strong customer relationships through an extensive and
experienced, worldwide sales and marketing force. The sales and marketing team
consists of (i) a senior executive sales team that calls on the highest level of
customer executives, (ii) an outside sales force organized by geographic regions
which focuses on upgrade and rebuild activity on a project by project basis, and
(iii) an inside sales group that is responsible for regular phone contact,
prompt order entry, timely and accurate delivery and effective sales
administration for the many changes frequently required in any substantial
rebuild or upgrade activity. In addition, the sales structure includes sales
engineers and technicians that can assist customers in system design and
specification and can promptly be on site to "trouble shoot" any problems as
they arise during a project. An important element of ANTEC's sales strategy is
to maintain optimal inventory levels of a wide variety of products to enable
prompt delivery to customers.
ANTEC also employs an experienced marketing and product management team
that focuses on each of the various product categories and works with ANTEC
engineers and various technology partners on new products and product
improvements. This group is responsible for inventory levels and pricing,
delivery requirements, market demand and product positioning and advertising.
Product management works closely with the sales team and executive management to
assure that customers are getting the benefits of the newest technologies and
that the Company is abreast of market trends in the industry.
The Company utilizes a sophisticated computer system. The system is an
on-line, real time, fully integrated system providing the user with cost,
product location and availability, credit history, order tracking and material
management information, daily sales and profitability information, customer
profile information, product inquiry information and the capacity to permit
paperless transactions with customers.
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INTERNATIONAL OPPORTUNITIES
Although more than 76% of ANTEC's 1997 sales are sales to U.S. domestic
customers, ANTEC believes substantial international opportunities exist. ANTEC
has sales offices in Mexico, Argentina, Brazil, the United Kingdom, Italy,
Spain, Hong Kong, China and Singapore.
SEASONALITY
Although the Company's business is not highly seasonal, the Company's sales
in the second and third quarters have generally been the strongest as cold
weather and the holiday season negatively impact construction and purchasing
patterns in the fourth quarter and, to a lesser extent, the first quarter of the
year.
SIGNIFICANT CUSTOMERS
The cable industry is highly concentrated with the majority of U.S.
domestic subscribers being served by approximately twenty-five major domestic
multi-system operators ("MSOs"). In 1997, over 41% of the Company's revenues
were obtained from sales to the twenty-five largest MSOs. Traditionally, a
significant portion of the Company's revenue is derived from sales to TCI
aggregating $46.6 million, $153.7 million and $157.1 million for the years ended
December 31, 1997, 1996 and 1995, respectively. The October 1996 decision by TCI
to cease accepting shipments of traditional products the Company sells for an
indefinite period had a material adverse effect on the Company's financial
performance in 1997.
TURNKEY CONSTRUCTION CONTRACTS
In response to TCI's request for turnkey services, the Company has formed a
joint venture to provide turnkey construction for TCI. The Company's joint
venture partner is a consortium of two firms with experience in construction and
project management. To date this joint venture has been awarded the TCI San
Francisco, Seattle and Salt Lake City area system upgrades. The specific work to
be performed and the type and supplier of the equipment to be used will be
specified by TCI and governed by discrete project documentation to be agreed
upon by TCI and the joint venture for each segment or phase as the work
progresses. To the extent that the Company's products are used in these
projects, a substantial portion of these products will, at the beginning, come
from TCI's existing inventories. The actual performance of these turnkey
services has been subcontracted by the joint venture to the Company's partner,
which is a limited liability company with limited resources.
COMPETITION
All aspects of the Company's business are highly competitive. The Company
competes with national, regional and local manufacturers, distributors and
wholesalers including companies larger than ANTEC, such as General Instrument
Corporation and Scientific-Atlanta. Various manufacturers who are suppliers to
the Company sell directly as well as through distributors into the cable
marketplace. In addition, because of the convergence of the cable,
telecommunications and computer industries and rapid technological development,
new competitors are entering the cable market. Many of the Company's competitors
or potential competitors are substantially larger and have greater resources
than the Company. The principal methods of competition are product
differentiation, performance and quality; price and terms; and service,
technical and administrative support.
EMPLOYEES
As of December 31, 1997, the Company had approximately 2,500 full-time
employees of which approximately 40 were members of a union. The Company
believes that its relationship with its employees is excellent. The future
success of the Company depends in part on its ability to attract and retain key
executive, marketing and sales personnel. Competition for qualified personnel in
the cable industry is intense, and the loss of certain key personnel could have
a material adverse effect on the Company. The Company has entered into
employment contracts with its key executive officers. The Company also has a
stock option program which is intended to provide substantial incentives for its
key employees to remain with the Company.
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ITEM 2. PROPERTIES
The Company conducts its operations from 25 different locations, two of
which are owned and the remainder of which are leased. These facilities consist
of sales and administrative offices, warehouses and manufacturing facilities
totaling approximately 1,200,000 square feet. The Company's long-term leases
expire at various dates through 2005. The principal properties are located in
Ontario, California; Tinton Falls, New Jersey; Atlanta, Georgia; Denver,
Colorado; El Paso, Texas; Raleigh, North Carolina; Rock Falls, Illinois; Juarez,
Mexico and Chesham, England.
ITEM 3. LEGAL PROCEEDINGS
The Company is not currently engaged in any litigation that would have a
material adverse effect on its financial condition or results of operations.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of 1997, no matters were submitted to a vote of
the security holders.
EXECUTIVE OFFICERS OF THE COMPANY
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John M. Egan........................... 50 Chairman, Chief Executive Officer and Director
Robert J. Stanzione.................... 50 President, Chief Operating Officer and Director
Lawrence A. Margolis................... 50 Executive Vice President and Chief Financial Officer
Gordon E. Halverson.................... 55 Executive Vice President and Chief Executive Officer,
Telewire Supply
James L. Faust......................... 56 Executive Vice President, International and Director
Daniel J. Distel....................... 51 Vice President and Controller
James A. Bauer......................... 56 Senior Vice President, Communications and
Administration
James E. Knox.......................... 60 General Counsel and Assistant Secretary
Randall L. Talcott..................... 37 Treasurer
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John M. Egan joined the Company in 1973 and has been President and Chief
Executive Officer of ANTEC and its predecessors since 1980. He became Chairman
of ANTEC in 1997. During the period 1986-1990, he was also President of Anixter
Communications, a division of Anixter. Mr. Egan is on the Board of Directors of
the National Cable Television Association ("NCTA"), the Walter Kaitz Foundation
(an association seeking to help the cable industry diversify its management
workforce to include minorities), and has been actively involved with the
Society of Cable Television Engineers and Cable Labs, Inc. Mr. Egan received the
NCTA's 1990 Vanguard Award for Associates.
Robert J. Stanzione has been President, Chief Operating Officer and
Director since January 1998. From October 1995 to December 1997, he was
President and Chief Executive Officer of Arris Interactive, a joint venture
company of ANTEC and Nortel. From 1969 to 1995, he held various positions with
AT&T Corporation.
Lawrence A. Margolis has been Executive Vice President, Chief Financial
Officer and Secretary of ANTEC since 1992 and was Vice President, General
Counsel and Secretary of Anixter from 1986-1992 and General Counsel and
Secretary of Anixter from 1984-1986. Prior to 1984, he was a partner at the law
firm of Schiff Hardin & Waite.
Gordon E. Halverson has been Executive Vice President and Chief Executive
Officer, Telewire Supply since April 1997. From 1990 to April 1997, he was
Executive Vice President, Sales of ANTEC. During the period 1969-1990, he held
various executive positions with predecessors of ANTEC. He received the NCTA's
1993 Vanguard Award for Associates. Mr. Halverson is a member of the NCTA,
Society of Cable Television Engineers, Illinois Cable Association, Cable
Television Administration and Marketing Society.
James L. Faust was Executive Vice President, International from 1995 to
February 1998. During the period 1989-1994, he held various executive positions
with General Instrument Corporation.
Daniel J. Distel has been Vice President and Controller of ANTEC and its
predecessors since 1982. He was Corporate Controller for U.S. Reduction Co., an
aluminum smelting company, from 1979 to 1982. Prior to 1979, he was an audit
manager with Coopers & Lybrand.
James A. Bauer has been Senior Vice President Communications and
Administration since January 1995. From September 1993 to December 1994, he held
various executive positions for ANTEC. For the period 1983-1993, he held various
executive positions with Ameritech, Wisconsin Bell and Illinois Bell.
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James E. Knox has been General Counsel and Assistant Secretary since
February 1996. He has been Senior Vice President, General Counsel and Secretary
of Anixter International Inc. since 1986 and was a partner of Mayer, Brown &
Platt from 1992 to 1996.
Randall L. Talcott has been Treasurer since May 1996. He has been acting
treasurer of ANTEC from 1994 to May 1996. From 1990 to 1994, he held various
positions with Anixter International, Inc.
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<PAGE> 12
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
ANTEC Corporation's common stock trades on the NASDAQ National Market
System. The following table sets forth the high and low sales prices for the
Company's common stock on the NASDAQ.
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
1996
First Quarter............................................... $ 19 5/8 $ 14 1/2
Second Quarter.............................................. 18 1/4 13 1/2
Third Quarter............................................... 16 3/8 13 1/2
Fourth Quarter.............................................. 17 5/8 8 1/2
1997
First Quarter............................................... $ 11 5/8 $ 7 1/2
Second Quarter.............................................. 14 5/16 7 3/8
Third Quarter............................................... 15 3/8 10 3/4
Fourth Quarter.............................................. 16 5/8 12
1998
First Quarter (through March 13, 1998)...................... 16 1/2 10 3/8
</TABLE>
The Company has not paid dividends on its Common Stock since its inception.
The Credit Facility, the Company's primary loan agreement at December 31, 1997,
contains covenants which limit the Company's ability to pay dividends. The
Company does not anticipate paying any cash dividends in the foreseeable future,
and in 1997, such covenants precluded the Company from declaring any dividends
on its Common Stock.
As of March 13, 1998, there were approximately 482 holders of record of
ANTEC common stock.
12
<PAGE> 13
ITEM 6. SELECTED CONSOLIDATED HISTORICAL AND PRO FORMA FINANCIAL DATA
The selected consolidated financial data for each of the three years in the
period ended December 31, 1997 set forth below are derived from the accompanying
audited consolidated financial statements of the Company and should be read in
conjunction with such statements and related notes thereto. The selected
consolidated financial data for 1994 and 1993 is derived from the Company's
unaudited financial statements. On February 6, 1997, shareholders of ANTEC
Corporation and TSX Corporation ("TSX") approved the Plan of Merger ("Merger")
dated as of October 28, 1996 among ANTEC Corporation, TSX Corporation and TSX
Acquisition Corporation, and the Merger resulting in TSX becoming a wholly-owned
subsidiary of ANTEC became effective on the date. 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 the periods prior to December 31, 1996
had to be adjusted to within 93 days of ANTEC's year-end. Therefore, the
statement of operations for the twelve months ended December 31, 1996, 1995,
1994 and 1993 represent ANTEC's fiscal period ended on those dates combined with
TSX's twelve months ended the last Saturday in October 1996, 1995, 1994 and
1993, respectively. All intercompany sales between TSX and ANTEC were
eliminated. The pro forma and historical consolidated financial information is
not necessarily indicative of the results of future operations and should be
read in conjunction with the historical consolidated financial statements of the
Company and the related notes thereto included elsewhere in this Report.
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED OPERATING DATA:
Net sales............................... $480,078 $690,877 $738,235 $601,903 $459,828
Cost of sales(1)(2)..................... 365,860 511,646 546,591 462,963 366,678
-------- -------- -------- -------- --------
Gross profit............................ 114,218 179,231 191,644 138,940 93,150
Selling, general and administrative
expenses............................. 110,803 125,997 135,046 90,013 67,990
Amortization of goodwill................ 4,927 4,981 4,817 3,160 2,772
Non-recurring items(1)(2)(3)............ 21,550 2,109 21,681 -- --
-------- -------- -------- -------- --------
Operating income (loss)................. (23,062) 46,144 30,100 45,767 22,388
Interest expense and other, net......... 5,916 7,536 10,801 5,529 5,020
Gain on sale of Canadian business(4).... -- (3,835) -- -- --
-------- -------- -------- -------- --------
Income (loss) before income tax
expense.............................. (28,978) 42,443 19,299 40,238 17,368
Income tax expense (benefit)............ (7,534) 16,083 10,497 17,526 9,098
-------- -------- -------- -------- --------
Income (loss) from continuing
operations........................... (21,444) 26,360 8,802 22,712 8,270
Discontinued operations, net of tax..... -- -- -- (109) 621
-------- -------- -------- -------- --------
Income (loss) from before extraordinary
gain, net of tax..................... (21,444) 26,360 8,802 22,603 8,891
Extraordinary gain, net of tax.......... -- -- -- 527 --
-------- -------- -------- -------- --------
Net income (loss)....................... $(21,444) $ 26,360 $ 8,802 $ 23,130 $ 8,891
======== ======== ======== ======== ========
CONSOLIDATED BALANCE SHEET DATA:
Working capital......................... $133,302 $185,288 $165,202 $164,752 $ 81,053
Total assets............................ 443,883 510,249 509,821 472,167 270,472
Long-term debt.......................... 72,339 102,658 117,920 125,197 33,600
Stockholders' equity.................... 295,785 310,388 282,010 250,661 160,158
INCOME (LOSS) FROM CONTINUING OPERATIONS
PER COMMON SHARE:
Basic................................... $(.55) $.69 $.24 $.74
======== ======== ======== ========
Diluted................................. $(.55) $.67 $.23 $.67
======== ======== ======== ========
NET INCOME (LOSS) PER COMMON SHARE:
Basic................................... $(.55) $.69 $.24 $.75
======== ======== ======== ========
Diluted................................. $(.55) $.67 $.23 $.69
======== ======== ======== ========
</TABLE>
13
<PAGE> 14
<TABLE>
PRO FORMA INFORMATION(5):
<S> <C>
Income from continuing operations....... $ 9,765
========
Net income.............................. $ 10,386
========
Income from continuing operations per
common share:
Basic................................ $ .37
========
Diluted.............................. $ .34
========
Net income per common share:............
Basic................................ $ .39
========
Diluted.............................. $ .36
========
</TABLE>
- -------------------------
(1) In the first quarter of 1997, in connection with the Merger, the Company
recorded merger/integration costs aggregating approximately $28.0 million.
Included in the 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 sales. See Note 4 of the Notes to the Consolidated Financial Statements.
(2) In the fourth quarter of 1996, the Company recorded a one-time charge to
affect the downsizing of the Company's advertising insertion business.
Included in the charge was a write-down of inventories related to the
advertising insertion business of approximately $1.5 million which has been
reflected in cost of sales. See Note 4 of the Notes to the Consolidated
Financial Statements.
(3) In the third quarter of 1995, the non-recurring charge resulted from the
Company's decision to reorganize, streamline and consolidate its existing
businesses in order to reduce costs of operations and to refocus its product
and market development activities. See Note 4 of the Notes to the
Consolidated Financial Statements.
(4) In the third quarter of 1996, the Company sold its Canadian distribution
business to Cabletel Communications Corporation ("Cabletel"). See Note 5 of
the Notes to the Consolidated Financial Statements.
(5) Pro forma net income and net income per share has been determined assuming
the Offering had occurred on December 31, 1991, and the proceeds of the
Offering were used to reduce long-term debt by approximately $59.6 million
and redeem all of the ANTEC preferred stock for approximately $30 million.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following should be read in conjunction with the Company's consolidated
financial statements and the related notes thereto and the description of the
Company's business included elsewhere in this Report.
INDUSTRY CONDITIONS
The Company's performance is largely dependent on capital spending for
constructing, rebuilding, maintaining or upgrading of domestic cable systems.
Approximately 60% of the Company's sales for 1997 came from sales to the
domestic cable industry. Capital spending in the cable industry has been
cyclical. The amount of capital spending and, therefore, the Company's sales and
profits, are affected by a variety of factors, including general economic
conditions, availability and cost of capital, other demands and opportunities
for capital (such as acquisitions), regulation, demand for cable services,
competition and technology, and real or perceived trends or uncertainties in
these factors. For example, rate reductions for cable service imposed by the FCC
in 1994 caused scheduled capital spending to be delayed. Also during 1995,
delays in the passage of the telecommunications bill and increased merger and
acquisition activity in the cable industry depressed capital spending.
14
<PAGE> 15
In the first quarter of 1996, the telecommunications bill ("Bill") was
approved by Congress and signed by the President. Overall, the Bill allows
long-distance carriers, local phone companies and cable companies to provide
similar services across their networks. The Bill gives the FCC broad powers over
this process and the technology which will be used. The Bill also greatly eases
restrictions on ownership of radio and television stations, permits the regional
telephone companies to engage in manufacturing and research and development, and
is intended to facilitate the increased availability of wireless technologies.
The impact of the Bill on the Company and the industry it serves is not known as
the FCC, state regulators and the courts must decide how the Bill will be
implemented, and the companies must decide what services they will provide in
the future.
Technical developments and strategic decisions by cable system operators
and their competitors will significantly affect the Company. Cable systems are
now being bypassed by direct broadcast satellite services. New digital
technologies enable the compression of many channels into the bandwidth
currently used by one analog channel. There are new wireless technologies which
could be used to bypass existing distribution systems. The entrance of telephone
companies into the cable industry and the consolidation of cable companies and
telephone companies, as the result of the new Federal legislation discussed
above, may affect not only the level of capital spending in general, but the
portion thereof received by the Company.
In 1997, operators of cable systems continued or intensified efforts to
consolidate or simplify their systems. The resulting uncertainty caused delays
in expenditures for improvements in these systems.
SIGNIFICANT CUSTOMERS
The cable industry is highly concentrated with the majority of U.S.
domestic subscribers being served by approximately twenty-five major domestic
multi-system operators ("MSOs"). In 1997, over 41% of the Company's revenues
were obtained from sales to the twenty-five largest MSOs. Traditionally, a
significant portion of the Company's revenue is derived from sales to TCI
aggregating $46.6 million, $153.7 million and $157.1 million for the years ended
December 31, 1997, 1996 and 1995, respectively. The October 1996 decision by TCI
to cease accepting shipments of traditional products the Company sells for an
indefinite period had a material adverse effect on the Company's financial
performance in 1997.
TURNKEY CONSTRUCTION CONTRACTS
In response to TCI's request for turnkey services, the Company has formed a
joint venture to provide turnkey construction for TCI. The Company's joint
venture partner is a consortium of two firms with experience in construction and
project management. To date this joint venture has been awarded the TCI San
Francisco, Seattle and Salt Lake City area system upgrades. The specific work to
be performed and the type and supplier of the equipment to be used will be
specified by TCI and governed by discrete project documentation to be agreed
upon by TCI and the joint venture for each segment or phase as the work
progresses. To the extent that the Company's products are used in these
projects, a substantial portion of these products will at the beginning come
from TCI's existing inventories. The actual performance of these turnkey
services has been subcontracted by the joint venture to the Company's partner,
which is a limited liability company with limited resources.
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 and TSX Acquisition Corporation, and the merger
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. The transaction was tax-free for TSX shareholders and was
accounted for as a pooling of interests. As a result of the merger, Anixter
International Inc. ("Anixter International") and TCI are currently the
beneficial owners of approximately
15
<PAGE> 16
18%, each, of the outstanding ANTEC common stock. TCI's beneficial ownership
includes options to acquire an additional 854,341 shares.
The Merger provided ANTEC with a state-of-the-art manufacturing facility in
Juarez, Mexico. This facility will also be utilized to manufacture products
which the Company has purchased from others or has others manufacture for it.
With the addition of TSX's primary products of optical nodes and distribution
amplifiers, ANTEC completed its hybrid fiber/coax product line offering.
ANTEC and TSX incurred employee-related and other merger/integration
charges in the first quarter of 1997 as a result of the Merger. (See Financial
Liquidity and Capital Resources.)
RESULTS OF OPERATIONS
The following table sets forth certain financial data as a percentage of
net sales:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Net sales........................................... 100.0% 100.0% 100.0%
Cost of sales....................................... 76.2 74.1 74.0
----- ----- -----
Gross profit........................................ 23.8 25.9 26.0
Selling, general and administrative expenses........ 23.1 18.2 18.3
Non-recurring items................................. 4.5 0.3 2.9
----- ----- -----
Operating income (loss) before goodwill
amortization(1)................................... (3.8) 7.4 4.8
Amortization of goodwill............................ 1.0 0.7 0.7
----- ----- -----
Operating income (loss)............................. (4.8) 6.7 4.1
Interest expense and other, net..................... 1.2 1.1 1.5
Gain on sale of Canadian business................... -- (0.5) --
----- ----- -----
Income (loss) before income tax expense (benefit)... (6.0) 6.1 2.6
Income tax expense (benefit)........................ (1.5) 2.3 1.4
----- ----- -----
Net income (loss)................................... (4.5)% 3.8% 1.2%
===== ===== =====
</TABLE>
- -------------------------
(1) Based upon discussions with financial analysts, the Company considers
operating income before goodwill amortization to be a meaningful and readily
comparable measure of the Company's relative performance. Operating income
before goodwill amortization is not presented in accordance with Generally
Accepted Accounting Principles ("GAAP"), and it should not be considered in
isolation or as an alternative to GAAP-derived measures of financial
performance.
COMPARISON OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
Net Sales. Net sales were $480.1 million in 1997 as compared to $690.9
million in 1996. Net sales decreased primarily due to a substantial reduction of
sales to TCI, the completion of a major Australian rebuild during 1996 and
continued softness in the domestic market in general, due largely to the impact
of trades, swaps and partnerships that occurred among domestic cable operators
throughout most of 1997. The principle portion of the materials management
services program provided by the Company is scheduled to end in May 1998. 1997
net sales included approximately $8.9 million of fees related to these materials
management services programs.
Gross Profit. Gross profit in 1997 was $114.2 million as compared to $179.2
million in 1996. Gross profit decreased primarily due to the decrease in net
sales. 1997 includes a $6.5 million write-off of redundant inventories relating
to overlapping product lines and product development efforts in connection with
the Merger. (See Financial Liquidity and Capital Resources.) 1996 includes a
$1.5 million inventory write-down related to the one-time advertising insertion
business downsizing charge. (See Financial Liquidity and Capital Resources.)
Excluding these charges, gross profit percentages decreased to 25.1% in 1997
from 26.2% in 1996 due to the higher mix of distributed versus manufactured
product sales in 1997.
16
<PAGE> 17
Selling, General and Administrative ("SG&A") Expenses. SG&A expenses in
1997 were $110.8 million as compared to $126.0 million in 1996. This reduction
reflects the Company's continued effort to control expenses and the impact of
lower sales volumes in 1997.
Non-Recurring Items. In the first quarter of 1997, the Company recorded
merger/integration costs aggregating approximately $28.0 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 sales for the
year ended December 31, 1997. (See Financial Liquidity and Capital Resources.)
In the fourth quarter of 1996, the Company recorded a one-time charge of
approximately $3.6 million to affect the downsizing of the Company's advertising
insertion business. The fourth quarter charge was established to write-down
inventories, trade receivables and fixed assets related to the advertising
insertion business, and accrue for severance and other related costs. The
write-down of inventories related to the advertising insertion business of
approximately $1.5 million has been reflected in cost of sales. (See Financial
Liquidity and Capital Resources.)
Interest Expense and Other, Net. Interest expense and other, net was $5.9
million in 1997 as compared to $7.5 million in 1996. This decrease primarily
related to decreased debt levels resulting from lower sales volumes and
consequently lower working capital levels in 1997.
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 ("ARC"), respectively, for an aggregate sales price of
approximately $12.4 million. The Company recorded a pre-tax 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 (Loss). Net loss in 1997 was ($21.4) million as compared to net
income of $26.4 million in 1996. This decrease is due to the factors above.
COMPARISON OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
Net Sales. Net sales were $690.9 million in 1996 as compared to $738.2
million in 1995. Net sales decreased primarily due to continued softness in the
domestic cable TV market, including an abrupt decline in sales to TCI in the
fourth quarter of 1996 related to that company's capital spending reduction
program implemented in that same period. This domestic softness was partially
offset by international sales growth.
Gross Profit. Gross profit in 1996 was $179.2 million as compared to $191.6
million in 1995. Gross profit decreased primarily due to the decrease in net
sales. 1996 includes a $1.5 million inventory write-down related to the one-time
advertising insertion business downsizing charge. (See Financial Liquidity and
Capital Resources.) Excluding this charge, gross profit percentages increased to
26.2% in 1996 from 26.0% in 1995 due to changes in product mix, notably an
increase in ANTEC manufactured product sales.
Selling, General and Administrative ("SG&A") Expenses. SG&A expenses in
1996 were $126.0 million as compared to $135.0 million in 1995. This reduction
reflects the impact of ANTEC's reorganized structure and continued expense
control program.
Non-Recurring Items. In the fourth quarter of 1996, the Company recorded a
one-time charge of approximately $3.6 million to affect the downsizing of the
Company's advertising insertion business. The fourth quarter charge was
established to write-down inventories, trade receivables and fixed assets
related to the advertising insertion business, and accrue for severance and
other related costs. The write-down of
17
<PAGE> 18
inventories related to the advertising insertion business of approximately $1.5
million has been reflected in cost of sales. (See Financial Liquidity and
Capital Resources.)
In the third quarter of 1995, a $21.7 million pre-tax non-recurring charge
was recorded resulting from the Company's decision to integrate its
manufacturing and engineering businesses to capture the potential synergies of
its recent acquisitions and streamline its distribution operations, merging two
distribution divisions into one, eliminating sales and warehouse facilities.
(See Financial Liquidity and Capital Resources.)
Interest Expense and Other, Net. Interest expense and other, net was $7.5
million in 1996 as compared to $10.8 million in 1995. This decrease relates
primarily to decreased debt levels resulting from the full year impact of
improved working capital levels and, to a lesser extent, a lower average
interest rate under the Company's credit facility.
Gain on Sale of Canadian Business. In the third quarter of 1996, the
Company sold its Canadian distribution business to 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, respectively, for an aggregate sales price of
approximately $12.4 million. The Company recorded a pre-tax 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 (Loss). Net income in 1996 was $26.4 million as compared to $8.8
million in 1995. This increase is due to factors described above.
FINANCIAL LIQUIDITY AND CAPITAL RESOURCES
Reorganization/Merger Costs
In the first quarter of 1997, in connection with the Merger discussed
above, the Company recorded merger/integration costs aggregating approximately
$28.0 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 sales for the year ended December 31, 1997. As of December 31, 1997,
approximately $3.2 million of the cash costs had yet to be expended.
During the fourth quarter of 1996, the Company recorded a one-time charge
of $3.6 million to affect the downsizing of the Company's advertising insertion
business. The fourth quarter provision included: (a) write-downs of inventories,
trade receivables and fixed assets related to the advertising insertion business
of $1.5 million, $1.1 million and $0.3 million, respectively; and (b) accruals
for severance and other related costs of $0.4 million and $0.3 million,
respectively. The write-down of inventories of $1.5 million was reflected in
cost of sales for the year ended December 31, 1996. Management determined that
the downsizing was necessary due to the poor performance of this business's
digital advertising insertion product line and the substantial resources that
would have been required to ensure the continued marketability of this product
line. At December 31, 1997, substantially all of the cash costs had been
expended.
In the third quarter of 1995, ANTEC announced plans to reorganize the
Company in order to reduce costs of operations and to refocus its product and
market development activities. The Company's decision to reorganize was a result
of the impact of reduced spending in the domestic CATV industry. The Company had
expected its aggressive product development and international expansion to be
funded by continued increases in spending by domestic customers. When this did
not occur, due to softness in the domestic market, the Company took steps
necessary to consolidate operations to reflect current customer spending
patterns. The four major components of the Company's reorganization plan were
to: (1) streamline the distribution organization by merging two divisions into
one, resulting in the closing of six sales offices and four warehouse
18
<PAGE> 19
locations and a resultant planned reduction in inventory; (2) refocus product
development on those activities that directly support the network elements for
the early deployment of hybrid/fiber coax architectures and eliminate or delay
spending on other selected projects; (3) concentrate international activities on
growing existing programs, especially in Asia and South America; and (4) capture
synergies of 1994 acquisitions by accelerating integration and consolidation of
the engineering and manufacturing operations functions of the acquired
businesses. The components of the non-recurring charge included $9.0 million
related to personnel-related costs and operating lease commitments for facility
closings, $10.0 million for the write-down to net realizable value of inventory
in discontinued product lines and $2.7 million for the write-down of other
assets. The personnel-related costs included charges related to the termination
of approximately 100 employees primarily resulting from the factors described
above. The inventory write-down to net realizable value related to the refocus
of product development which eliminated selected projects and related inventory
and the consolidation of the distribution divisions which eliminated certain
competing product lines. In the fourth quarter of 1995, the Company paid
approximately $3.0 million relating to the personnel and operating lease costs.
In 1996, the Company paid approximately $4.0 million relating to the personnel
and operating lease costs. At December 31, 1997, all of the cash costs had been
expended.
In January 1998, ANTEC announced a consolidation plan being implemented
concurrently with the creation of the new President & Chief Operating Officer
organization in Atlanta. ANTEC will consolidate all of its Rolling Meadows,
Illinois corporate and administrative functions into either the Atlanta
Technology Center or the Englewood, Colorado TeleWire Supply division
headquarters during 1998 and 1999. It is also anticipated as part of this
consolidation that the two principal facilities located in Atlanta will be
consolidated and that certain international operating and administrative
functions located in Miami and Chicago will also be consolidated into Atlanta.
In connection with these consolidation changes, ANTEC will take a charge of
approximately $10 to $12 million in the first quarter of 1998 reflecting the
severance, move and real estate costs associated with these consolidations.
Financing
In March 1995, the Company and a group of banks executed a restatement and
amendment to the revolving credit facility (the "Credit Facility") extending the
maturity to 1999 and increasing the loan commitments to $225 million. After the
reorganization of the Company's business and related non-recurring charge in
September 1995, the terms and conditions of the Credit Facility were further
amended to enhance the Company's flexibility and reduce the size of the facility
to $185 million. As of December 31, 1997, the Company had approximately $23
million of available borrowings under the Credit Facility. The Company is
currently in the process of renewing the Credit Facility. The new credit
facility is expected to have higher interest costs and will require the Company
to pledge certain assets. The Company anticipates the size of the facility will
range from $125-135 million.
Capital Expenditures
The Company's capital expenditures were $12.8 million in 1997 as compared
to $10.5 million in 1996. 1995 capital expenditures of $17.5 million included
planned sales office and warehouse improvements and expansion. Except for the
impact of the Year 2000 discussed below, the Company had no significant
commitments for capital expenditures at December 31, 1997.
Cash Flow
Cash flows provided by operating activities were $26.8 million, $28.1
million and $35.0 million for the years ended December 31, 1997, 1996 and 1995,
respectively. 1997 includes expenses paid related to the Merger. 1996 includes
payments made related to the Company's 1995 reorganization. 1995 includes the
impact of the Company's efforts to significantly improve working capital levels.
Cash flows used by investing activities were ($20.5) million, ($1.6) million and
($23.5) million for the years ended December 31, 1997, 1996 and 1995,
respectively. 1997 includes investments in/advances to joint ventures of
approximately $7.8 million. In 1996, the Company sold its ownership in the
Sumitomo joint venture and received $4.0 million in cash. Also in 1996, ANTEC
sold its Canadian distribution business for approximately $6.0 million in cash
19
<PAGE> 20
and notes, as well as 1,450,000 and 500,000 shares of common stock in Cabletel
and ARC, respectively, for an aggregate sales price of approximately $12.4
million. 1995 includes planned sales office and warehouse improvements and
expansion. In 1995, the Company paid approximately $11.0 million in cash and
ANTEC common stock principally resulting from the final settlement of contingent
payments for certain 1994 acquisitions.
Cash flows used by financing activities were ($26.4) million, ($13.2)
million and ($7.5) million for the years ended December 31, 1997, 1996 and 1995,
respectively. The decrease in 1997 reflects improved working capital levels (ie:
accounts receivable and inventory). The decrease in 1996 reflects positive cash
flow from operations and the proceeds from the sales of the Company's Canadian
distribution business and its Sumitomo joint venture. The decrease in 1995 was
primarily due to improved working capital, primarily inventory levels.
NOL Carryforwards
As of December 31, 1997, the Company had net operating loss carryforwards
("NOL") for domestic and foreign income tax purposes of approximately $13.2
million and $6.9 million, respectively. The Company established a valuation
allowance in accordance with the provisions of SFAS No. 109 Accounting for
Income Taxes. The Company continually reviews the adequacy of the valuation
allowance and recognizes the benefits only as reassessment indicates that it is
more likely than not that the benefits will be realized. As of December 31,
1997, the valuation allowance on deferred tax assets was approximately $4.9
million.
The availability of tax benefits of NOL carryforwards to reduce the
Company's Federal and state income tax liability is subject to various
limitations under the Internal Revenue Code. The availability of tax benefits of
NOL carryforwards to reduce the Company's foreign income tax liability is
subject to the various tax provisions of the respective countries.
Tax benefits arising from NOL carryforwards of approximately $7.7 million
originating prior to TSX's quasi-reorganization would be credited directly to
additional paid-in capital if and when realized.
Impact of Year 2000
The Year 2000 Issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Any of the Company's
computer programs that have time-sensitive software may recognize a date using
"00" as the year 1900 rather than the year 2000. This could result in a system
failure or miscalculations causing disruptions of operations, including, among
other things, a temporary inability to process transactions, send invoices, or
engage in similar normal business activities.
Based on a recent assessment, and the Company's ongoing assessment of its
computer processing systems, the Company determined that it will be required to
modify or replace significant portions of its software to significantly improve
those systems and to enable these systems to function properly with respect to
dates in the year 2000 and thereafter. The Company presently believes that with
modifications to existing software and conversions to new software, the Year
2000 Issue will not pose significant operational problems for its computer
systems. However, if such modifications and conversions are not made, or are not
completed timely, the Year 2000 Issue could have a material impact on the
operations of the Company.
The Company's total Year 2000 project cost and estimates to complete
include the estimated costs and time associated with the impact of third party
Year 2000 Issues based on presently available information. However, there can be
no guarantee that the systems of other companies on which the Company's systems
rely will be timely converted and would not have an adverse effect on the
Company's systems. The Company has determined it has no exposure to
contingencies related to the Year 2000 Issue for the products it has sold.
The Company will utilize both internal and external resources to reprogram,
or replace, and test the software for the system improvement and Year 2000
modifications. The Company anticipates completing the system improvement and the
Year 2000 project within one year but not later than March 31, 1999, which is
prior to any anticipated impact on its operating systems. The total cost of the
system improvement and the Year 2000 project is estimated at approximately $5.0
million and is being funded through operating cash flows.
20
<PAGE> 21
Of the total project cost, approximately $2.0 million is attributable to the
purchase of new software and hardware which will be capitalized. The remaining
$3.0 million, which will be expensed as incurred, is not expected to have a
material effect on the results of operations. To date, the Company has incurred
approximately $2.3 million ($0.9 million expensed and $1.4 million capitalized
for new systems) related to its system improvement and the Year 2000 project.
The costs of the project and the date on which the Company believes it will
complete the Year 2000 modifications are based on management's best estimates,
which were derived utilizing numerous assumptions of future events, including
the continued availability of certain resources, third party modification plans
and other factors. However, there can be no guarantee that these estimates will
be achieved and actual results could differ materially from those anticipated.
Specific factors that might cause such material differences include, but are not
limited to, the availability and cost of personnel trained in this area, the
ability to locate and correct all relevant computer codes, and similar
uncertainties.
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The report of independent auditors and consolidated financial statements
and notes thereto for the Company are included in this Report and are listed in
the Index to Consolidated Financial Statements which appears on page 22.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
21
<PAGE> 22
ANTEC CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Auditors.............................. 23
Consolidated Balance Sheets at December 31, 1997 and 1996... 24
Consolidated Statements of Operations for the years ended
December 31, 1997, 1996 and 1995.......................... 25
Consolidated Statements of Cash Flows for the years ended
December 31, 1997, 1996 and 1995.......................... 26
Consolidated Statements of Stockholders' Equity for the
years ended December 31, 1997, 1996 and 1995.............. 27
Notes to the Consolidated Financial Statements.............. 28
</TABLE>
22
<PAGE> 23
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Stockholders
ANTEC Corporation
We have audited the accompanying consolidated balance sheets of ANTEC
Corporation as of December 31, 1997 and 1996 and the related consolidated
statements of operations, stockholders' equity and cash flows for each of the
three years in the period ended December 31, 1997. These financial statements
are the responsibility of ANTEC's management. Our responsibility is to express
an opinion on these financial statements based on our audits. We did not audit
the 1996 and 1995 financial statements of TSX Corporation, which statements
reflect approximately 14.2% of consolidated assets as of December 31, 1996 and
approximately 13.0% and 11.4% of consolidated sales for the years ended December
31, 1996 and 1995, respectively. Those statements were audited by other auditors
whose report has been furnished to us, and our opinion, insofar as it relates to
data included for TSX Corporation for 1996 and 1995, is based solely on the
report of other auditors.
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 presentation. We believe
that our audits and the report of other auditors provide a reasonable basis for
our opinion.
In our opinion, based on our audits and the report of other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the consolidated financial position of ANTEC Corporation at
December 31, 1997 and 1996, and the consolidated results of its operations and
its cash flows for the three years ended December 31, 1997, in conformity with
generally accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
January 30, 1998
23
<PAGE> 24
ANTEC CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1997 1996
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 7,244 $ 27,398
Accounts receivable (net of allowances for doubtful
accounts of $4,289 in 1997 and $3,539 in 1996)......... 87,800 106,602
Inventories, primarily finished goods..................... 111,698 138,785
Other current assets...................................... 2,319 9,706
-------- --------
Total current assets................................... 209,061 282,491
Property, plant and equipment, net.......................... 36,108 35,947
Goodwill (net of accumulated amortization of $36,785 in 1997
and $31,858 in 1996)...................................... 159,692 167,128
Deferred income taxes, net.................................. 19,281 11,531
Other assets................................................ 19,741 13,152
-------- --------
$443,883 $510,249
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 38,404 $ 54,039
Accrued compensation, benefits and related taxes.......... 15,958 20,748
Other accrued liabilities................................. 21,397 22,416
-------- --------
Total current liabilities.............................. 75,759 97,203
Long-term debt.............................................. 72,339 102,658
-------- --------
Total liabilities...................................... 148,098 199,861
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; 39.3 million and 38.4 million shares issued
and outstanding in 1997 and 1996, respectively......... 393 384
Capital in excess of par value............................ 261,081 254,181
Retained earnings......................................... 34,365 56,008
Cumulative translation adjustments........................ (54) (185)
-------- --------
Total stockholders' equity............................. 295,785 310,388
-------- --------
$443,883 $510,249
======== ========
</TABLE>
See accompanying notes to the consolidated financial statements.
24
<PAGE> 25
ANTEC CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------
1997 1996 1995
---- ---- ----
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C>
Net sales.................................................. $ 480,078 $ 690,877 $ 738,235
Cost of sales.............................................. 365,860 511,646 546,591
--------- --------- ---------
Gross profit.......................................... 114,218 179,231 191,644
Operating expenses:
Selling, general and administrative expenses.......... 110,803 125,997 135,046
Amortization of goodwill.............................. 4,927 4,981 4,817
Non-recurring items................................... 21,550 2,109 21,681
--------- --------- ---------
137,280 133,087 161,544
--------- --------- ---------
Operating income (loss).................................... (23,062) 46,144 30,100
Other expense (income):
Interest expense and other, net....................... 5,916 7,536 10,801
Gain on sale of Canadian business..................... -- (3,835) --
--------- --------- ---------
Income (loss) before income tax expense (benefit).......... (28,978) 42,443 19,299
Income tax expense (benefit)............................... (7,534) 16,083 10,497
--------- --------- ---------
Net income (loss).......................................... $ (21,444) $ 26,360 $ 8,802
========= ========= =========
Net income (loss) per common share:
Basic............................................ $ (.55) $ .69 $ .24
========= ========= =========
Diluted.......................................... $ (.55) $ .67 $ .23
========= ========= =========
Weighted average common shares:
Basic............................................ 38,751 38,286 36,823
========= ========= =========
Diluted.......................................... 38,751 39,523 38,884
========= ========= =========
</TABLE>
See accompanying notes to the consolidated financial statements.
25
<PAGE> 26
ANTEC CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------
1997 1996 1995
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Operating activities:
Net income (loss)........................................ $ (21,444) $ 26,360 $ 8,802
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization....................... 15,234 14,726 13,528
Deferred income taxes............................... (7,750) 3,289 (7,741)
Gain on sale of Canadian business................... -- (3,835) --
Changes in operating assets and liabilities, net of
effects of acquisitions:
Accounts receivable.............................. 18,802 8,409 (19,929)
Inventories...................................... 27,087 (6,114) 9,755
Accounts payable and accrued liabilities......... (6,868) (16,596) 29,925
Other, net....................................... 1,748 1,850 698
--------- --------- ---------
Net cash provided by operating activities.................. 26,809 28,089 35,038
Investing activities:
Purchases of property, plant and equipment............... (12,841) (10,502) (17,533)
Sale of Canadian business................................ -- 3,000 --
Investments in/Advances to joint ventures................ (7,780) 5,590 (2,859)
Acquisitions of other businesses......................... -- -- (2,734)
Other.................................................... 72 345 (344)
--------- --------- ---------
Net cash used by investing activities...................... (20,549) (1,567) (23,470)
--------- --------- ---------
Net cash provided before financing activities.............. 6,260 26,522 11,568
Financing activities:
Borrowings............................................... 119,500 182,984 132,262
Reductions in borrowings................................. (149,819) (198,262) (144,886)
Other.................................................... 3,905 2,079 5,113
--------- --------- ---------
Net cash used by financing activities...................... (26,414) (13,199) (7,511)
--------- --------- ---------
Net increase (decrease) in cash and cash equivalents....... (20,154) 13,323 4,057
Cash and cash equivalents at beginning of year............. 27,398 14,075 10,018
--------- --------- ---------
Cash and cash equivalents at end of year................... $ 7,244 $ 27,398 $ 14,075
========= ========= =========
Supplemental cash flow information:
Interest paid during the year............................ $ 6,277 $ 7,875 $ 11,116
========= ========= =========
Income taxes paid during the year........................ $ 948 $ 18,014 $ 10,193
========= ========= =========
</TABLE>
See accompanying notes to the consolidated financial statements.
26
<PAGE> 27
ANTEC CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
--------------------------------------------------------
CAPITAL IN CUMULATIVE
COMMON EXCESS OF RETAINED TRANSLATION
STOCK PAR VALUE EARNINGS ADJUSTMENTS TOTAL
------ ---------- -------- ----------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1994................. $356 $227,062 $ 23,425 $(181) $250,662
Net income............................... -- -- 8,802 -- 8,802
Issuance of common stock and other....... 26 13,866 (6) -- 13,886
Charge in lieu of tax.................... -- 169 -- -- 169
Tax benefit related to exercise of stock
options/warrants...................... -- 8,834 -- -- 8,834
Translation adjustment................... -- -- -- (232) (232)
---- -------- -------- ----- --------
Balance, December 31, 1995................. 382 249,931 32,221 (413) 282,121
Net income............................... -- -- 26,360 -- 26,360
Issuance of common stock and other....... 2 2,076 -- -- 2,078
Charge in lieu of tax.................... -- 1,904 -- -- 1,904
Tax benefit related to exercise of stock
options/warrants...................... -- 270 -- -- 270
Translation adjustment................... -- -- -- 228 228
Reporting period adjustment (See Note
3).................................... -- -- (2,573) -- (2,573)
---- -------- -------- ----- --------
Balance, December 31, 1996................. 384 254,181 56,008 (185) 310,388
Net loss................................. -- -- (21,444) -- (21,444)
Issuance of common stock and other....... 9 3,896 (199) -- 3,706
Tax benefit related to exercise of stock
options/warrants...................... -- 3,004 -- -- 3,004
Translation adjustment................... -- -- -- 131 131
---- -------- -------- ----- --------
Balance, December 31, 1997................. $393 $261,081 $ 34,365 $ (54) $295,785
==== ======== ======== ===== ========
</TABLE>
See accompanying notes to the consolidated financial statements.
27
<PAGE> 28
ANTEC CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION AND BASIS OF PRESENTATION
ANTEC Corporation ("ANTEC," or herein together with its consolidated
subsidiaries called the "Company") is an international communications technology
company, headquartered in Atlanta, Georgia, with a major office in Denver. ANTEC
specializes in the design and engineering of hybrid fiber/coax broadband
networks. ANTEC is a leading developer, manufacturer and supplier of optical
transmission, construction, rebuild and maintenance equipment for the broadband
communications industry. ANTEC provides a broad range of products and services
to cable system operators. ANTEC supplies almost all of the products required in
a cable TV system, including headend, distribution, drop and in-home subscriber
products. As of December 31, 1997, Anixter International Inc. ("Anixter
International") and Tele-Communications, Inc. ("TCI") were the beneficial owners
of approximately 18%, each, of the outstanding ANTEC common stock. TCI's
beneficial ownership includes options to acquire an additional 854,341 shares.
Prior to its initial public offering in 1993, the ANTEC business was operated as
several divisions or business units of Anixter Inc. ("Anixter"), a subsidiary of
Anixter International.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION
The consolidated financial statements include the accounts of the Company
after elimination of intercompany transactions.
USE OF ESTIMATES
The preparation of the consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the consolidated financial
statements and accompanying notes. Actual results could differ from those
estimates.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with a maturity of
three months or less to be cash equivalents. The carrying amount reported in the
consolidated balance sheets for cash and cash equivalents approximates fair
value.
INVENTORIES
Inventories are stated at the lower of average, approximating first-in,
first-out, cost or market.
DEPRECIATION
The Company provides for depreciation of plant and equipment principally on
the straight-line basis over the estimated useful lives of 25 to 40 years for
buildings and improvements, 3 to 10 years for machinery and equipment, and the
term of the lease for leasehold improvements.
GOODWILL
Goodwill relates to the excess of cost over net assets resulting
principally from the acquisition of Anixter by Anixter International in 1986
which has been allocated to the Company, and from subsequent acquisitions by
ANTEC and by Anixter of businesses now owned by ANTEC. Goodwill resulting from
the acquisition of Anixter by Anixter International was allocated to the Company
based on the Company's proportionate share of total operating earnings of
Anixter for the period subsequent to the acquisition by Anixter International.
The Company, at each balance sheet date, evaluates for recognition of potential
impairment, its recorded
28
<PAGE> 29
ANTEC CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
goodwill against the current and undiscounted expected future operating income
before goodwill amortization expense. Non-cash amortization expense is being
recognized as a result of amortization of goodwill on a straight-line basis over
a period of 40 years from the respective dates of acquisition.
ADVERTISING AND SALES PROMOTION
Advertising and sales promotion costs are expensed as incurred.
INCOME TAXES
The Company uses the liability method of accounting for income taxes which
requires recognition of temporary differences between financial statement and
income tax basis of assets and liabilities, measured by enacted tax rates.
FOREIGN CURRENCY
The financial position and operating results of the Company's foreign
operations are consolidated using the local currency as the functional currency.
All balance sheet accounts of foreign subsidiaries are translated at the current
exchange rate at the end of the accounting period. Income statement items are
translated at average currency exchange rates. The resulting translation
adjustment is recorded as a separate component of stockholders' equity.
STOCK-BASED COMPENSATION
The Company grants stock options for a fixed number of shares to employees
with an exercise price equal to the fair value of the shares at the date of
grant. The Company accounts for stock option grants in accordance with APB
Opinion No. 25, Accounting for Stock Issued to Employees, and, accordingly,
recognizes no compensation expense for the stock option grants. As required by
FASB Statement 123, the Company presents supplemental information disclosing pro
forma net income (loss) and net income (loss) per common share as if the Company
had recognized compensation expense on stock options granted subsequent to
December 31, 1994 under the fair value method of that statement (see Note 10).
NON-CASH TRANSACTIONS
In the second half of 1995, the Company issued approximately 512,000 shares
of ANTEC common stock as partial consideration for the final payment of
contingent consideration for certain 1994 acquisitions.
INTEREST RATE AGREEMENTS
The Company has entered into an interest rate swap agreement which
effectively fixes the interest rate on a portion of its floating rate
obligation. The interest rate swap agreement has a notional principal amount of
$50 million and a fixed rate of approximately 6.0%. This agreement expires in
2000. The interest differential paid or received is recognized as an adjustment
to interest expense. The fair value of the interest rate swap agreement was
estimated using a quote from an outside source and represents the cash
requirement as if the agreement had been settled at year end. The fair value of
the interest rate swap agreement, which is not reflected in the financial
statements, was approximately a $0.2 million liability at December 31, 1997.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1997, the FASB issued Statement No. 131, Disclosures about Segments
of an Enterprise and Related Information, which establishes standards for the
way that public business enterprises report information about operating segments
and related disclosures about products and services, geographic areas, and major
customers. Statement 131 is effective for financial statements for fiscal years
beginning after
29
<PAGE> 30
ANTEC CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
December 15, 1997, and therefore the Company will adopt the new requirements
retroactively in 1998. Management has not completed its review of Statement 131,
but does not anticipate that the adoption of this statement will have a
significant effect on the Company's financial information.
NOTE 3. 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. As a result, all amounts from the prior years have
been restated to reflect the Merger.
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 December 31, 1996 had to be adjusted to within 93 days of ANTEC's
year-end. Therefore, the statement of operations for the twelve months ended
December 31, 1996 and 1995 represent ANTEC's fiscal period ended on those dates
combined with TSX's twelve months ended the last Saturday in October 1996 and
1995, respectively. All intercompany sales between TSX and ANTEC were
eliminated. Operating results for the years ended December 31, 1996 and 1995
were as follows (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1996 1995
---- ----
<S> <C> <C>
Revenue:
ANTEC..................................................... $604,382 $658,237
TSX....................................................... 89,695 84,272
Intercompany sales elimination............................ (3,200) (4,274)
-------- --------
Combined............................................... $690,877 $738,235
======== ========
Net income (loss):
ANTEC..................................................... $ 13,457 $ (3,619)
TSX....................................................... 12,903 12,421
-------- --------
Combined............................................... $ 26,360 $ 8,802
======== ========
</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):
<TABLE>
<S> <C>
Net sales.................................................. $ 8,668
Operating loss............................................. $(3,560)
Net loss................................................... $(2,573)
</TABLE>
Included in the operating loss was a provision for warranty costs of
approximately $2.6 million relating to preemptive repairs and modifications of
equipment that was in service and operating for one of the Company's largest
customers, TCI.
30
<PAGE> 31
ANTEC CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 4. NON-RECURRING ITEMS
In the first quarter of 1997, in connection with the Merger discussed in
Note 3, the Company recorded merger/integration costs aggregating approximately
$28.0 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 sales for the year ended December 31, 1997. As of December 31, 1997,
approximately $3.2 million of the cash costs had yet to be expended.
During the fourth quarter of 1996, the Company recorded a one-time charge
of $3.6 million to affect the downsizing of the Company's advertising insertion
business. The fourth quarter provision included: (a) write-downs of inventories,
trade receivables and fixed assets related to the advertising insertion business
of $1.5 million, $1.1 million and $0.3 million, respectively; (b) accruals for
severance and other related costs of $0.4 million and $0.3 million,
respectively. The write-down of inventories of $1.5 million was reflected in
cost of sales for the year ended December 31, 1996. As of December 31, 1997,
substantially all of the cash costs had been expended.
In the third quarter of 1995, a $21.7 million pre-tax 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 components of the non-recurring charge included $9.0 million
related to operating lease commitments for facility closings and
personnel-related costs, $10.0 million for the write-down to net realizable
value of inventory in discontinued product lines and $2.7 million for the
write-down of other assets. As of December 31, 1997, all of the cash costs had
been expended.
NOTE 5. SALE OF CANADIAN BUSINESS
In the third quarter of 1996, the Company sold its Canadian distribution
business to Cabletel Communications Corp. ("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
pre-tax 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 6. PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment, at cost, consisted of the following (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1997 1996
---- ----
<S> <C> <C>
Land.................................................... $ 3,094 $ 2,347
Buildings and improvements.............................. 13,641 14,265
Machinery and equipment................................. 51,806 52,395
-------- --------
68,541 69,007
Less: Accumulated depreciation.......................... (32,433) (33,060)
-------- --------
$ 36,108 $ 35,947
======== ========
</TABLE>
31
<PAGE> 32
ANTEC CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 7. LONG-TERM DEBT
Long-term debt consisted of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1997 1996
---- ----
<S> <C> <C>
Credit Facility......................................... $ 70,000 $100,000
Other................................................... 2,339 2,658
-------- --------
$ 72,339 $102,658
======== ========
</TABLE>
The Credit Facility provides for various interest rate alternatives. The
average interest rate on borrowings was approximately 6.7% and 6.4% at December
31, 1997 and 1996, respectively. The commitment fee on unused borrowings is
approximately 1/4 of 1%. The Credit Facility contains various restrictions and
covenants, including a restriction on the incurrence of additional debt,
limitations on dividends and certain other payments to stockholders and interest
coverage and net worth maintenance tests. The Company does not anticipate paying
any cash dividends in the foreseeable future, and in 1997, such covenants
precluded the Company from declaring any dividends on its Common Stock. The
interest rates on the Company's debt are periodically adjusted to reflect
changes in overall market interest rates and, therefore, the carrying amount
approximates fair value.
The Credit Facility matures in 1999, and as of December 31, 1997, the
Company had approximately $23 million of available borrowings under the Credit
Facility.
NOTE 8. INCOME TAXES
Income (loss) before income taxes consisted of the following (in
thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Domestic (U.S.).................................... $(28,978) $40,340 $16,653
Foreign............................................ -- 2,103 2,646
-------- ------- -------
$(28,978) $42,443 $19,299
======== ======= =======
</TABLE>
Income tax expense (benefit) consisted of the following (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Current -- Federal................................. $ 313 $ 5,849 $15,249
State.................................. (97) 1,388 1,826
Foreign................................ -- 3,653 994
-------- ------- -------
216 10,890 18,069
-------- ------- -------
Deferred -- Federal................................ (6,384) 1,474 (6,369)
State................................. (1,366) 1,013 (1,372)
Foreign............................... -- 802 --
-------- ------- -------
(7,750) 3,289 (7,741)
-------- ------- -------
Provision in lieu of tax........................... -- 1,904 169
-------- ------- -------
$ (7,534) $16,083 $10,497
======== ======= =======
</TABLE>
32
<PAGE> 33
ANTEC CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
A reconciliation of income tax expense (benefit) to the Statutory Federal
tax rate of 35% was as follows (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Statutory Federal income tax expense (benefit)..... $(10,142) $14,855 $ 6,755
Effects of:
Amortization of goodwill......................... 1,531 1,531 1,530
State income taxes, net of Federal benefit....... (951) 1,561 295
Acquisition fees................................. 998 -- --
Meals and entertainment.......................... 279 634 844
Reduction in deferred tax valuation allowance.... -- (2,533) --
Other, net....................................... 751 35 1,073
-------- ------- -------
$ (7,534) $16,083 $10,497
======== ======= =======
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes.
Significant components of the Company's net deferred tax assets were as
follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1996
---- ----
<S> <C> <C>
Federal/state net operating loss carryforwards.............. $ 5,195 $ 5,195
Foreign net operating loss carryforwards.................... 2,358 2,358
Inventory costs............................................. 9,452 5,901
Merger related reserves..................................... 2,892 --
Plant and equipment, depreciation differences............... 2,292 569
Other, principally operating expenses....................... 1,973 2,389
-------- --------
Total deferred tax assets.............................. 24,162 16,412
Valuation allowance on deferred tax assets.................. (4,881) (4,881)
-------- --------
Net deferred tax assets................................ $ 19,281 $ 11,531
======== ========
</TABLE>
The Company established a valuation allowance in accordance with the
provisions of SFAS No. 109 Accounting for Income Taxes. The Company continually
reviews the adequacy of the valuation allowance and recognizes the benefits only
as reassessment indicates that it is more likely than not that the benefits will
be realized. In 1996, the Company determined that earnings would more likely
than not be sufficient to realize net deferred tax assets of $4.2 million.
Accordingly, a valuation allowance reduction was recorded as a $2.5 million
reduction in tax expense and a $1.7 million credit to equity for the portion of
the benefit originating prior to TSX's quasi-reorganization. The valuation
allowance was reduced to the extent deferred tax assets were expected to be
realized. The Company will continue to review the deferred tax asset valuation
allowance on a timely basis and make adjustments as appropriate.
33
<PAGE> 34
ANTEC CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company had U.S. and foreign net operating loss carryforwards at
December 31, 1997 expiring as follows (in thousands):
<TABLE>
<CAPTION>
U.S. FOREIGN
EXPIRATION IN CALENDAR YEAR AMOUNT AMOUNT
--------------------------- ------- --------
<S> <C> <C>
2001..................................................... $ 5,493 $ --
2003..................................................... 1,099 --
2004..................................................... 1,099 --
2005..................................................... -- 6,935
2006..................................................... 501 --
2007..................................................... 2,793 --
2008..................................................... 1,099 --
2009..................................................... 1,099 --
------- ------
$13,183 $6,935
======= ======
</TABLE>
The actual amount of loss carryforwards that will be available to offset
future taxable income may be subject to change depending upon the tax laws in
effect in the years in which the carryforwards are used and may be further
limited in subsequent years should future changes in ownership take place as
defined in the Tax Reform Act of 1986. The Company also had a loss carryforward
for alternative minimum tax ("AMT") purposes of approximately $13.2 million at
December 31, 1997 that could be used to offset up to 90% of future alternative
minimum taxable income. The AMT loss carryforwards expire as shown in the table
above. Tax benefits arising from loss carryforwards of approximately $7.7
million originating prior to TSX's quasi-reorganization on November 22, 1985
would be credited directly to additional paid-in capital if and when realized.
NOTE 9. COMMITMENTS
The Company leases certain office, distribution, and manufacturing
facilities and equipment under long-term operating leases expiring at various
dates through 2005. Future minimum lease payments under non-cancelable operating
leases (excluding operating leases related to closed facilities -- See Note 4)
at December 31, 1997 were as follows (in thousands):
<TABLE>
<S> <C>
1998........................................................ $ 6,592
1999........................................................ 5,449
2000........................................................ 3,815
2001........................................................ 2,713
2002........................................................ 1,835
Thereafter.................................................. 2,200
-------
Total minimum lease payments................................ $22,604
=======
</TABLE>
Total rental expense for all operating leases amounted to approximately
$9.4 million, $11.0 million and $11.3 million for the years ended December 31,
1997, 1996 and 1995, respectively.
NOTE 10. STOCK-BASED COMPENSATION
The Company grants stock options for a fixed number of shares to employees
and directors with an exercise price equal to the market price of the shares at
the date of grant. The Company accounts for stock option grants in accordance
with APB Opinion No. 25, Accounting for Stock Issued to Employees and,
accordingly, recognizes no compensation expense for the stock option grants. The
Company has elected to
34
<PAGE> 35
ANTEC CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
follow APB 25 because, as discussed below, the alternative fair value accounting
provided for under FASB Statement No. 123, Accounting for Stock-Based
Compensation, requires use of option valuation models that were not developed
for use in valuing employee stock options.
The Company grants stock options under its 1997 Stock Incentive Plan
("SIP"), its 1993 Employee Stock Incentive Plan ("ESIP"), and Director Stock
Option Plan ("DSOP") and issued stock purchase rights under its Employee Stock
Purchase Plan ("ESPP"). Additionally, TSX issued options under its Long-Term
Incentive Plan ("LTIP"). For descriptions of these plans, see below.
As required by FASB Statement 123, the Company presents below supplemental
information disclosing pro forma net income (loss) and net income (loss) per
common share as if the Company had recognized compensation expense on stock
options granted subsequent to December 31, 1994 under the fair value method of
that statement. The fair value for these options was estimated using a
Black-Sholes option pricing model. The assumptions used in this model to
estimate the fair value of options granted under the SIP for 1997 were as
follows: risk-free interest rate of 5.79%; a dividend yield of 0%; volatility
factor of the expected market price of the Company's common stock of .54; and
expected life of 6 years. In respect to the ESIP, LTIP and DSOP, the weighted
average assumptions used in this model to estimate the fair value of options
granted under these plans for 1997, 1996 and 1995 were as follows: risk-free
interest rates of 5.36%, 5.46% and 6.81%, respectively; a dividend yield of 0%;
volatility factor of the expected market price of the Company's common stock of
.54; and a weighted average expected life of 5 years. The assumptions used for
the ESPP for 1997, 1996 and 1995 were as follows: risk-free rate of 5.0%, 5.8%
and 5.8%, respectively; a dividend yield of 0%; volatility factor of the
expected market price of the Company's common stock of .54; and an expected life
of one year.
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions, including the expected stock price
volatility. Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The Company's
pro forma information follows (in thousands, except share data):
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Pro forma net income (loss)............................ $(23,980) $23,796 $7,819
======== ======= ======
Pro forma net income (loss) per common share:
Basic................................................ $ (.62) $ .62 $ .21
======== ======= ======
Diluted.............................................. $ (.62) $ .60 $ .20
======== ======= ======
</TABLE>
Compensation expense recognized for pro forma purposes was approximately
$4.2 million, $4.3 million and $1.6 million for 1997, 1996 and 1995,
respectively. FASB Statement 123 is applicable only to options granted
subsequent to December 31, 1994.
In 1997, the Board of Directors approved the SIP to facilitate the hiring,
retention and continued motivation of key employees, consultants and directors
and to align more closely their interests with those of the Company and its
stockholders. Awards under the SIP may be in the form of incentive stock
options, non-qualified stock options, stock grants, stock units, restricted
stock, stock appreciation rights, performance shares and units, dividend
equivalent rights and reload options. A total of 3,750,000 shares of the
Company's common stock may be issued pursuant to this plan. Vesting requirements
for issuances under the SIP may vary.
35
<PAGE> 36
ANTEC CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
A total of 3,234,000 options were granted under the SIP in 1997 with a
weighted average exercise price and fair value of $9.37 and $5.39, respectively.
During the year, 137,000 were terminated with exercise prices of $8.88. At
December 31, 1997, 3,097,000 options were outstanding under the SIP with a
weighted average exercise price of $9.39. Of the options outstanding at
year-end, 2,752,000 had an exercise price of $8.88 and remaining contractual
life of 6.33 years. The remaining outstanding options at December 31, 1997 have
exercise prices ranging from $13.44 to $15.56 with a weighted average exercise
price of $13.50 and weighted average remaining contractual life of 6.95 years.
No issues under the SIP were vested as of December 31, 1997. Substantially all
of these options become exercisable in May 2003, although vesting will
accelerate if the Company's stock closes above specified prices ($15, $20 and
$25) for 20 consecutive days and the Company's diluted earnings per common share
(before non-recurring items) over a period of four consecutive quarters exceed
$1.00 per common share.
In 1993, the Board of Directors approved the ESIP which provides for
granting key employees and consultants options to purchase up to 1,925,000
shares of ANTEC common stock. In 1996, an amendment to the ESIP was approved
increasing the number of shares of ANTEC common stock which may be issued
pursuant to that plan from 1,925,000 shares to 3,225,000 shares. One-third of
these options vest each year on the anniversary of the date of grant beginning
with the second anniversary. The options terminate seven years from the date of
grant.
In 1993, the Board of Directors also approved the DSOP which provides for
the granting to each director of the Company who has not been granted any
options under the ESIP each January 1, commencing January 1, 1994, an option to
purchase 2,500 shares of ANTEC common stock for the average closing price for
the ten trading days preceding the date of grant. A total of 75,000 shares of
ANTEC common stock have been allocated to this plan. These options vest six
months from date of grant and terminate seven years from date of grant.
Pursuant to the Merger, an option to purchase TSX common stock under the
LTIP was converted to an option to purchase ANTEC common stock. A total of
883,900 shares of ANTEC common stock have been allocated to this plan.
Pursuant to the Merger Agreement between ANTEC and Keptel, on November 17,
1994 under the ANTEC/Keptel Exchange Option Plan ("EOP"), each Keptel stock
option, whether or not then exercisable, was canceled and substituted with an
ANTEC/Keptel exchange option to acquire shares of ANTEC common stock. Each
ANTEC/Keptel exchange option provides the option holder with rights and benefits
that are no less favorable than were provided under the former Keptel stock
option plan. A total of 360,850 shares of ANTEC common stock have been allocated
to this plan.
36
<PAGE> 37
ANTEC CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
A summary of activity of the Company's options granted under its ESIP,
DSOP, LTIP and EOP is presented below:
<TABLE>
<CAPTION>
1997 1996 1995
-------------------------- -------------------------- ---------------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
OPTIONS EXERCISE PRICE OPTIONS EXERCISE PRICE OPTIONS EXERCISE PRICE
------- -------------- ------- -------------- ------- --------------
<S> <C> <C> <C> <C> <C> <C>
Beginning balance......... 3,406,657 $11.11 2,938,327 $ 9.99 3,519,150 $ 6.43
Grants.................... 793,000 $10.88 675,010 $15.74 695,200 $16.92
Exercises................. (817,339) $ 3.80 (131,713) $ 7.43 (1,095,890) $ 2.62
Terminations.............. (223,100) $14.75 (74,967) $15.56 (148,400) $14.42
Expirations............... (68,968) $14.09 -- -- (31,733) $16.62
--------- ------ --------- ------ ---------- ------
Ending balance............ 3,090,250 $12.65 3,406,657 $10.60 2,938,327 $ 9.32
========= ====== ========= ====== ========== ======
Vested at period end...... 1,668,582 $11.76 1,893,795 $ 8.84 1,459,073 $ 7.51
========= ====== ========= ====== ========== ======
Weighted average fair
value of options granted
during year............. $ 5.77 $ 8.20 $ 9.20
========= ========= ==========
</TABLE>
The following table summarizes information about ESIP, DSOP, LTIP and EOP
options outstanding at December 31, 1997.
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
----------------------------------------------- ----------------------------
WEIGHTED
NUMBER AVERAGE WEIGHTED NUMBER WEIGHTED
OUTSTANDING REMAINING AVERAGE EXERCISABLE AVERAGE
RANGE OF AT 12/31/97 CONTRACTUAL LIFE EXERCISE PRICE AT 12/31/97 EXERCISE PRICE
EXERCISE PRICES ----------- ---------------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
$ 2.00................ 20,000 5.25 years $ 2.00 20,000 $ 2.00
$ 5.00................ 2,400 6.58 years $ 5.00 2,400 $ 5.00
$ 9.23 to $10.00................ 1,162,517 2.03 years $ 9.99 1,162,517 $ 9.99
$10.50 to $15.83................ 1,475,750 5.80 years $12.95 231,750 $13.64
$16.60 to $25.09................ 429,583 3.74 years $19.35 251,915 $19.04
--------- ---------- ------ --------- ------
$ 2.00 to $25.09................ 3,090,250 4.09 years $12.65 1,668,582 $11.76
========= ========== ====== ========= ======
</TABLE>
Additionally, ANTEC has an ESPP which enables its employees to purchase a
total of 300,000 shares of ANTEC common stock over a period of time.
Participants can request that up to 10% of their base compensation be applied
toward the purchase of ANTEC common stock under ANTEC's ESPP. Purchases by any
one participant are limited to $25,000 in any one year. The exercise price is
the lower of 85% of the fair market value of the ANTEC common stock at the date
of grant or at the later exercise date (currently one year). Under the ESPP,
employees of the Company purchased 48,377, 90,057 and 49,515 shares of ANTEC
common stock in 1997, 1996 and 1995, respectively. At December 31, 1997,
approximately 59,577 shares are subject to purchase under the ESPP at a price of
no more than $9.99 per share.
Pursuant to the Merger Agreement between ANTEC and Keptel, on November 17,
1994, each Keptel warrant, whether or not then exercisable, was canceled and
substituted with a warrant to acquire shares of ANTEC common stock. Each warrant
provides the warrant holder with rights and benefits that are no less favorable
than were provided under the former Keptel warrant plan. At December 31, 1997,
12,600 warrants were outstanding and exercisable at prices ranging from $8.57 to
$10.71, expiring January 28, 1998.
37
<PAGE> 38
ANTEC CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In 1989, Anixter and Anixter International established an equity
participation plan ("EPP") which provided for awards of EPP units to its key
employees, including certain employees of the then ANTEC division. The value of
units at the date of grant and at the conversion date was based upon a formula
which takes into consideration earnings and return on investment of the Company.
The employees did not purchase the units but upon conversion received cash for
the difference between the escalating beginning unit value and the unit value at
date of conversion. Each holder of EPP units was granted stock options effective
January 1, 1993 pursuant to the ESIP. Options under this plan can be exercised
only if all EPP units held by the optionee are surrendered unconverted. The
Company has not recorded an expense for the value of the outstanding EPP units
for the years ended December 31, 1997, 1996 and 1995 because management believes
the liability relating to the units is insignificant since exercise of any EPP
units precludes the holder from exercising stock options granted prior to 1995.
In 1997, the Company paid its non-employee directors annual retainer fees
in the form of stock units. These stock units convert to Common Stock of the
Company at the prearranged time selected by each director. At December 31, 1997
there were 20,500 units issued and outstanding.
NOTE 11. PENSION PLANS
The Company sponsors two non-contributory defined-benefit pension plans
which cover substantially all of the Company's U.S. employees.
The U.S. pension plan benefit formulas generally provide for payments to
retired employees based upon their length of service and compensation as defined
in the plans. The Company's policy is to fund the plans as required by the
Employee Retirement Income Security Act of 1974 (ERISA) and to the extent that
such contributions are tax deductible.
Assets of the Company's plans at fair value were $10.3 million and $8.3
million at December 31, 1997 and 1996, respectively. The projected benefit
obligations of the Company's plans were $16.7 million and $14.7 million at
December 31, 1997 and 1996, respectively. The accumulated benefit obligations of
the Company's plans were $9.1 million and $7.3 million at December 31, 1997 and
1996, respectively. The weighted average assumed discount rate used to measure
the projected benefit obligation was 7.5% at December 31, 1997 and 1996. The
assumed rate of increase in future compensation levels was approximately 6.0%
for all years presented. Pension expense for the years ended December 31, 1997,
1996 and 1995 was approximately $2.0 million, $1.3 million and $1.0 million,
respectively.
NOTE 12. SALES INFORMATION
A significant portion of the Company's revenue is derived from sales to TCI
aggregating $46.6 million, $153.7 million and $157.1 million for the years ended
December 31, 1997, 1996 and 1995, respectively. Export sales accounted for
approximately 17%, 17% and 12% of total sales for the years ended December 31,
1997, 1996 and 1995, respectively. Sales to international customers (including
export sales) were approximately 24%, 24% and 21% of total sales for the years
ended December 31, 1997, 1996 and 1995, respectively.
NOTE 13. SUBSEQUENT EVENT
In January 1998, ANTEC announced a consolidation plan being implemented
concurrently with the creation of the new President & Chief Operating Officer
organization in Atlanta. ANTEC will consolidate all of its Rolling Meadows,
Illinois corporate and administrative functions into either the Atlanta
Technology Center or the Englewood, Colorado TeleWire Supply division
headquarters during 1998 and 1999. It is also anticipated as part of this
consolidation that the two principal facilities located in Atlanta will be
consolidated and that certain international operating and administrative
functions located in Miami and Chicago will also be consolidated into Atlanta.
In connection with these consolidation changes, ANTEC will take a charge of
38
<PAGE> 39
ANTEC CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
approximately $10 to $12 million in the first quarter of 1998 reflecting the
severance, move and real estate costs associated with these consolidations.
NOTE 14. SUMMARY QUARTERLY CONSOLIDATED FINANCIAL INFORMATION (UNAUDITED)
The following table summarizes the Company's quarterly consolidated
financial information (in thousands, except share data).
<TABLE>
<CAPTION>
QUARTERS IN 1997 ENDED
----------------------------------------------------
MARCH 31, JUNE 30, SEPT. 30, DEC. 31,
--------- -------- --------- --------
<S> <C> <C> <C> <C>
Net sales.................................... $120,034 $124,262 $120,365 $115,417
Gross profit(1).............................. 26,128 33,593 29,316 25,181
Operating income (loss)(1)................... (23,731) 4,954 (164) (4,121)
Income (loss) before income taxes............ (25,093) 3,275 (1,669) (5,491)
Net income (loss)............................ $(16,124) $ 983 $ (1,999) $ (4,304)
======== ======== ======== ========
Net income (loss) per common share:
Basic...................................... $ (.42) $ .03 $ (.05) $ (.11)
======== ======== ======== ========
Diluted.................................... $ (.42) $ .02 $ (.05) $ (.11)
======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
QUARTERS IN 1996 ENDED
----------------------------------------------------
MARCH 31, JUNE 30, SEPT. 30, DEC. 31,
--------- -------- --------- --------
<S> <C> <C> <C> <C>
Net sales.................................... $183,149 $188,742 $178,329 $140,657
Gross profit(2).............................. 45,778 48,069 47,346 38,038
Operating income (loss)(2)................... 12,380 14,968 13,847 4,949
Income (loss) before income taxes(3)......... 10,030 12,991 15,931 3,491
Net income (loss)............................ $ 7,470 $ 7,540 $ 9,594 $ 1,756
======== ======== ======== ========
Net income (loss) per common share:
Basic...................................... $ .20 $ .20 $ .25 $ .05
======== ======== ======== ========
Diluted.................................... $ .19 $ .19 $ .24 $ .04
======== ======== ======== ========
</TABLE>
- -------------------------
(1) First quarter 1997 includes $28 million of merger/integration costs of which
$6.5 million relating to the write-off of inventories has been reflected in
cost of sales. See Note 4 to the Consolidated Financial Statements.
(2) Fourth quarter 1996 includes a $3.6 million one-time charge to affect the
downsizing of the Company's advertising insertion business. Included in the
charge was a write-down of inventories related to the advertising insertion
business of approximately $1.5 million which has been reflected in cost of
sales. See Note 4 to the Consolidated Financial Statements.
(3) Third quarter 1996 includes a $3.8 million pre-tax gain in connection with
the sale of the Company's Canadian distribution business. See Note 5 to the
Consolidated Financial Statements.
39
<PAGE> 40
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information relating to directors of the Company is set forth under the
caption entitled "Election of Directors" in the Company's Proxy Statement for
the 1998 Annual Meeting of Stockholders and is incorporated herein by reference.
Certain information concerning the executive officers of the Company is set
forth in Part I of this Report on Form 10-K under the caption entitled
"Executive Officers of the Company." Information about Section 16(a) Reporting
Delinquencies is set forth under this caption in the Proxy Statement.
ITEM 11. EXECUTIVE COMPENSATION
Information regarding compensation of officers and directors of the Company
is set forth under the captions entitled "Executive Compensation," "Compensation
of Directors," "Employment Contracts and Termination of Employment and
Change-In-Control Arrangements" and "Compensation Committee Interlocks and
Insider Participation" in the Proxy Statement and is incorporated herein by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information regarding ownership of the Company's common stock is set forth
under the captions entitled "Security Ownership of Management" and "Security
Ownership of Principal Stockholders" in the Proxy Statement and is incorporated
herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information regarding certain relationships and related transactions with
the Company is set forth under the captions entitled "Compensation Committee
Interlocks and Insider Participation" and "Certain Relationships and Related
Transactions" in the Proxy Statement and is incorporated herein by reference.
40
<PAGE> 41
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(A) EXHIBITS.
The exhibits listed below in Item 14(a)1, 2 and 3 are filed as part of this
Report. Each management contract or compensatory plan required to be filed as an
exhibit is identified by an asterisk(*).
(B) REPORTS ON FORM 8-K.
None
ITEM 14(A)1 & 2. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL
STATEMENT SCHEDULES
FINANCIAL STATEMENTS
The following Consolidated Financial Statements of ANTEC Corporation and
Report of Independent Auditors are filed as part of this Report.
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Auditors.............................. 23
Consolidated Balance Sheets at December 31, 1997 and 1996... 24
Consolidated Statements of Operations for the years ended
December 31, 1997, 1996 and 1995.......................... 25
Consolidated Statements of Cash Flows for the years ended
December 31, 1997, 1996 and 1995.......................... 26
Consolidated Statements of Stockholders' Equity for the
years ended December 31, 1997,
1996 and 1995............................................. 27
Notes to the Consolidated Financial Statements.............. 28
</TABLE>
FINANCIAL STATEMENT SCHEDULES
Schedules have been omitted for the reason that they are not required or
are not applicable, or the required information is shown in the financial
statements or notes thereto.
41
<PAGE> 42
ITEM 14(A)3. EXHIBIT LIST
Each management contract or compensation plan required to be filed as an
exhibit is identified by an asterisk(*).
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT PAGE
------- ---------------------- ----
<S> <C> <C>
3.1 Certificate of Incorporation and Certificate of Amendment
thereto**...................................................
3.1(a) Restated Certificate of Incorporation**.....................
3.2 By-laws**...................................................
4.1 Form of Certificate for Common Stock**......................
10.1(a)* Amended and Restated Employee Stock Incentive Plan**........
10.1(b)* Form of Stock Option Grant**................................
10.1(c)* Amendment Increasing Number of Shares Covered by Amended and
Restated Employee Stock Incentive Plan (Incorporated by
reference from ANTEC Corporation's Registration Statement on
Form S-8, Registration Number 33-12131, Exhibit 4). ........
10.1(d)* Amended Form of Stock Option Grant (Incorporated by
reference from ANTEC Corporation's Annual Report on Form
10-K for the fiscal year ended December 31, 1996, as the
same number exhibit). ......................................
10.1(e)* Amended Form of Stock Option................................
10.2 Form of Employee Stock Purchase Plan**......................
10.2(a) Amendment to Employee Stock Purchase Plan**.................
10.3* Form of Director Stock Option Plan**........................
10.4* Form of Supplemental Retirement Benefits Plan**.............
10.5 Form of Tax Allocation Agreement**..........................
10.6* Form of Agreement with Bruce Van Wagner**...................
10.7 Form of Management Services Agreement**.....................
10.8 Form of Directors & Officers Insurance Agreement**..........
10.9 Registration Rights Agreement with Anixter
International**.............................................
10.10 Revolving Credit Agreement**................................
10.10(a) Amendment No. 1 to Revolving Credit Agreement**.............
10.10(b) Amended and Restated Revolving Credit Agreement
(Incorporated by reference from ANTEC Corporation's
Quarterly Report on Form 10-Q for the fiscal quarter ended
March 31, 1995, Exhibit 10.18)..............................
10.10(c) Amendment No. 1 to the Amended and Restated Revolving Credit
Agreement (Incorporated by reference from ANTEC
Corporation's Annual Report on Form 10-K for the fiscal year
ended December 31, 1995, as the same number exhibit). ......
10.11 Bill of Sale and General Conveyance and Assumption of
Liabilities**...............................................
10.12* Form of Employment Agreement for John M. Egan**.............
10.13* Form of Employment Agreement for Lawrence A. Margolis,
Gordon E. Halverson and Martin C. Ingram**..................
10.14* Consulting Agreement dated February 1, 1998 for James L.
Faust.......................................................
10.15* Form of Stock Option Grant for Converted Keptel Options
(Incorporated by reference from ANTEC Corporation's Annual
Report on Form 10-K for the fiscal year ended December 31,
1994, as the same number exhibit). .........................
10.16 Agreement and Plan of Merger with Keptel, Inc., dated July
27, 1994 (Incorporated by reference to Keptel, Inc.
Registration Statement on Form S-1, Registration Number
33-16278, as amended). .....................................
10.17* Retainer Agreement with James E. Knox (Incorporated by
reference from ANTEC Corporation's Annual Report on Form
10-K for the fiscal year ended December 31, 1996, as the
same number exhibit). ......................................
</TABLE>
42
<PAGE> 43
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT PAGE
------- ---------------------- ----
<C> <S> <C>
10.18 Amendments to Employment Agreements for Messrs. Margolis,
Halverson, Ingram and Faust (Incorporated by reference from
ANTEC Corporation's Annual Report on Form 10-K for the
fiscal year ended December 31, 1995, as the same number
exhibit). ..................................................
10.19 Limited Liability Company Agreement of Products Venture
L.L.C. (Incorporated by reference from ANTEC Corporation's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1995, as the same number exhibit)..............
10.20 Agreement dated as of February 27, 1998 among Northern
Telecom Inc., ANTEC Corporation and Arris Interactive
L.L.C., amending among other agreements the Limited
Liability Company Agreement of Products Venture L.L.C.......
10.21 Products Distribution Agreement between Products Venture
L.L.C. and ANTEC Corporation (Incorporated by reference from
ANTEC Corporation's Annual Report on Form 10-K for the
fiscal year ended December 31, 1995, Exhibit 10.20). .......
10.22 Plan of Merger dated October 28, 1996, among ANTEC
Corporation, TSX Corporation and TSX Acquisition Corporation
(Incorporated by reference to ANTEC Corporation's
Registration Statement on Form S-4, Registration Number
333-19129, Exhibit 2.1). ...................................
10.23* Employment Agreement, dated May 1, 1995, for William H.
Lambert (Incorporated by reference from TSX Corporation's
Annual Report on Form 10-K for the fiscal year ended April
30, 1995, Exhibit 10(A)(1)1). ..............................
10.24* Amendment to Employment Agreement for William H. Lambert
(Incorporated by reference from ANTEC Corporation's Annual
Report on Form 10-K for the fiscal year ended December 31,
1996, as the same number exhibit)...........................
10.25* Stock Option Agreement with William H. Lambert dated March
14, 1994 (Incorporated by reference from TSX Corporation's
Annual Report on Form 10-K for the fiscal year ended April
30, 1994, Exhibit 10(A)(1)3)................................
10.26* Employment Agreement dated October 16, 1995 for Robert J.
Stanzione...................................................
10.27* Amendment to Employment Agreement for Robert J. Stanzione...
13.1 Report of KPMG Peat Marwick LLP.............................
21.1 Subsidiaries of the Registrant..............................
23.1 Consent of Ernst & Young LLP................................
23.2 Consent of KPMG Peat Marwick LLP............................
24.1 Power of Attorney executed by Rod F. Dammeyer...............
24.2 Power of Attorney executed by John R. Petty.................
24.3 Power of Attorney executed by Bruce Van Wagner..............
24.4 Power of Attorney executed by Samuel K. Skinner.............
24.5 Power of Attorney executed by William H. Lambert............
24.6 Power of Attorney executed by James L. Faust................
</TABLE>
- -------------------------
** Incorporated by reference to ANTEC Corporation Registration Statement on Form
S-1, Registration Number 33-65488, filed July 2, 1993, as amended, as the
same number exhibit.
43
<PAGE> 44
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.
ANTEC CORPORATION
/s/ LAWRENCE A. MARGOLIS
--------------------------------------
Lawrence A. Margolis
Executive Vice President
Dated: March 20, 1998
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 and on the dates indicated.
<TABLE>
<S> <C> <C>
/s/ JOHN M. EGAN Chairman, Chief Executive Officer and March 20, 1998
- --------------------------------------------- Director
John M. Egan (Principal Executive Officer)
/s/ ROBERT J. STANZIONE President and Chief Operating Officer March 20, 1998
- --------------------------------------------- (Principal Operating Officer)
Robert J. Stanzione
/s/ LAWRENCE A. MARGOLIS Executive Vice President March 20, 1998
- --------------------------------------------- (Principal Financial Officer)
Lawrence A. Margolis
/s/ DANIEL J. DISTEL Vice President and Controller March 20, 1998
- --------------------------------------------- (Principal Accounting Officer)
Daniel J. Distel
/s/ JAMES L. FAUST* Director March 20, 1998
- ---------------------------------------------
James L. Faust
/s/ BRUCE VAN WAGNER* Director March 20, 1998
- ---------------------------------------------
Bruce Van Wagner
/s/ ROD F. DAMMEYER* Director March 20, 1998
- ---------------------------------------------
Rod F. Dammeyer
/s/ JOHN R. PETTY* Director March 20, 1998
- ---------------------------------------------
John R. Petty
/s/ WILLIAM H. LAMBERT* Director March 20, 1998
- ---------------------------------------------
William H. Lambert
/s/ SAMUEL K. SKINNER* Director March 20, 1998
- ---------------------------------------------
Samuel K. Skinner
By /s/ LAWRENCE A. MARGOLIS
--------------------------------------------
Lawrence A. Margolis
(Attorney in fact)
</TABLE>
* Lawrence A. Margolis, as attorney in fact for each person indicated.
44
<PAGE> 1
EXHIBIT 10.1(e)
THIS DOCUMENT CONSTITUTES PART OF A
PROSPECTUS COVERING SECURITIES THAT HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933
STOCK OPTION GRANT
THIS GRANT is made as of the _____ day of __________, 199__ by ANTEC
CORPORATION, a Delaware corporation (the "Corporation"), to (name) (the
"Optionee").
1. INCORPORATION OF TERMS
This Grant shall be governed by the attached ANTEC Corporation Stock
Option Terms (the "Terms"), all of the provisions of which are hereby
incorporated herein.
2. GRANT OF OPTION
On the terms and conditions stated herein and in the Terms, the
Corporation hereby grants to the Optionee the option to purchase (amount) Shares
as defined in the Terms for an exercise price of __________ dollars
($__________) per Share.
3. RIGHT TO EXERCISE
Subject to the conditions and the exceptions set forth in this Grant
and in the Terms, this Option shall become exercisable on __________. This
Option shall become exercisable prior thereto as follows:
a. One third (1/3) of the Shares covered by this Option shall be eligible
for vesting, with 50% of this amount being immediately exercisable and the
remaining 50% becoming exercisable twelve (12) months thereafter (a "Delayed
Vesting Period"), once the fully diluted earnings per Share of Stock of the
Corporation, before consideration of non-recurring items, over any four
consecutive fiscal quarters have totaled more than __________ dollar ($_______)
a Share (the "Earnings Target"), and the daily closing price per Share of Stock
for twenty (20) consecutive trading days has been __________ dollars ($_______)
per Share or more (a "Stock Price Target").
b. One third (1/3) of the Shares covered by this Option shall be eligible
for vesting, with 50% of this amount being immediately exercisable and the
remaining 50% becoming exercisable twelve (12) months thereafter (a "Delayed
Vesting Period"), once the Earnings Target has been met and the daily closing
price per Share of Stock for twenty (20) consecutive trading days has been
__________ dollars ($_______) per Share or more (a "Stock Price Target").
c. One third (1/3) of the Shares covered by this Option shall be eligible
for vesting, with 50% of this amount being immediately exercisable and the
remaining 50% becoming exercisable twelve (12) months thereafter (a "Delayed
Vesting Period"), once the Earnings Target has been met and the daily closing
price per Share of Stock for twenty (20) consecutive trading days has been
__________ dollars ($_______) per Share or more (a "Stock Price Target").
d. All of the Shares covered by Option shall be exercisable upon the
occurrence of a Change of Control. For this purpose a Change of Control shall be
the acquisition of the beneficial ownership by any person and that person's
affiliates (excluding Anixter International Inc., Tele-Communications, Inc. and
their affiliates) of more than 50% of the Shares of Stock of the Corporation or
the commencement of a tender offer, the consummation of which would result in
such an acquisition.
<PAGE> 2
Upon an Employment Termination, this Option can be exercised only to
the extent it was exercisable on the date of that termination and only as
otherwise provided in the Terms. The only exception is that if the Employment
Termination was by the Corporation without cause during a Delayed Vesting
Period, the Optionee can exercise this Option for the Shares which become
available at the end of that Delayed Vesting Period, and for this purpose the
term of this Option shall be extended to the day thirty (30) days after the end
of that Delayed Vesting Period, but not beyond _______________.
In the event this Option is adjusted pursuant to the Terms, an
appropriate adjustment shall be made by the Board to the Earnings Target and the
Share Price Targets. The determination by the Board or the authorized committee
of the Board on these matters as well as all other matters concerning this
Option, including the computation of fully diluted earning per Share before
non-recurring items, shall be final and binding.
NO EXISTING CONTRACT WHICH PROVIDES FOR THE VESTING OR EXERCISABILITY
OF STOCK OPTIONS OTHER THAN AS PROVIDED IN THIS GRANT SHALL APPLY TO THIS
OPTION. BY ACCEPTING THIS OPTION, THE OPTIONEE IS AGREEING THAT ANY EXISTING
CONTRACTUAL PROVISIONS TO THE CONTRARY ARE BEING MODIFIED AS PROVIDED HEREIN. NO
FUTURE CONTRACT SHALL APPLY TO THIS OPTION UNLESS SUCH CONTRACT EXPRESSLY
PROVIDES TO THE CONTRARY, REFERRING TO THIS OPTION BY DATE OF GRANT AND EXERCISE
PRICE.
4. TERM OF OPTION
This Option shall in any event expire in its entirety __________. This
Option shall further expire as set forth in the Terms.
5. EXERCISE CONSTITUTES AGREEMENT TO REFRAIN FROM COMPETITION
By exercising any portion of this Option, the Optionee will be
signifying the agreement of Optionee to refrain for a period of nine months from
the termination of Optionee's employment with the Corporation and its
subsidiaries, from participating in any activities which are competitive with
any activities of the Corporation or its subsidiaries in which the Optionee
participated. Participation shall not include the ownership of less than 1% of a
publicly traded security.
IN WITNESS WHEREOF, the Corporation has caused this Grant to be
executed on its behalf by its officer duly authorized to act on behalf of the
Corporation.
ANTEC CORPORATION,
a Delaware corporation
By: ________________________
Lawrence A. Margolis
Its: Executive Vice President
<PAGE> 1
EXHIBIT 10.14
[ANTEC LETTERHEAD]
January 6, 1998
Mr. James L. Faust
30 Logan Terrace
Golf, IL 60029
Dear Jim:
I am writing to set forth our agreement for your new relationship with ANTEC.
Effective February 1, 1998, you are being retained as a consultant to the
Company for a period of five years ending January 31, 2003. During this period,
you will consult with and assist the Company on matters which are within your
expertise. Your relationship with the Company will be that of an independent
contractor as distinguished from an employee or agent. As such, you are free to
work for others. Requests for your assistance will be scheduled to not
unreasonably interfere with the time you are required to spend on other
activities. However, without the Company's consent, which will not be
unreasonably withheld, you will not undertake any activities which would
materially interfere with your ability to consult with the Company on major
matters.
You will be paid a fee of $550,000 payable in quarterly installments of
$27,500. It is contemplated that you will continue as a director of the Company
through at least the 1999 stockholder meeting. Any fees you receive as a
director of the Company, including the value of stock units on the date of
grant, will be deducted from the fee payable to you as a consultant. You will
be reimbursed for reasonable expenses incurred by you in connection with
matters assigned to you. For one year, the Company will absorb the premium you
would otherwise have to pay the Company for the cost of your COBRA medical
coverage and will provide the financial/tax counseling you are currently
receiving as an employee. For the period ending January 31, 2003, the Company
will make available to you the life insurance you are currently receiving as an
employee. You will continue to pay the portion of the premium for this coverage
you are currently paying.
During the period you are a consultant to the Company, all your options to
purchase stock (except as provided below) and your restricted stock will
continue to vest in accordance with their terms. The only exception is the
special stock option granted to you on May 7, 1997 to purchase 250,000 shares.
This option will expire on January 31, 1998, and you are expressly and
unconditionally waiving any rights you may otherwise have in this option.
The above arrangement is in lieu of any rights you may have under your
employment agreement with the Company and any other understandings with the
Company, including without limitation, any agreement for a special pension or
additional credit under the Company's pension plan. In consideration of the
above arrangement, you are releasing the Company from any liability to you,
other than as set forth in this agreement, including without limitation, any
liability arising from the termination of your employment under the laws
protecting you from discrimination because of your age or otherwise.
<PAGE> 2
Mr. James L. Faust
January 6, 1998
Page 2
Jim, I think you know I have enjoyed our association over the past three years
and am pleased with what we have accomplished. I look forward to the
continuation of our business relationship in this new format which I believe
will be beneficial for you and the company. Please indicate your agreement by
signing a copy of this letter.
Sincerely,
/s/Lawrence A. Margolis
---------------------
Lawrence A. Margolis
Executive Vice President
/jb
Agreed: /s/James L. Faust
-----------------------
James L. Faust
Dated: 1/13,1998
------------------------
<PAGE> 1
EXHIBIT 10.20
AGREEMENT
Agreement, dated as of February 27, 1998, by and among Northern Telecom
Inc. ("Nortel"), Antec Corporation ("Antec") and Arris Interactive L.L.C.
("Arris").
WHEREAS, Antec and Nortel are parties to a Limited Liability Company
Agreement, dated as of November 1, 1995 which established Arris ("LLC
Agreement");
WHEREAS, Nortel, Antec and Arris are parties to a Framework Agreement
dated as of November 1, 1995 ("Framework Agreement");
WHEREAS, Antec and Arris are parties to a License Agreement related to
Digital Video Technology, dated as of November 17, 1995 ("Antec License
Agreement");
WHEREAS, Nortel and Arris are parties to a License Agreement related to
Cornerstone Total Access, Voice and Data, dated as of November 17, 1997
("Nortel License Agreement");
WHEREAS, Nortel, Antec and Arris are parties to a Secured Loan Agreement,
dated as of November 17, 1995 ("Loan Agreement");
WHEREAS Nortel and Arris contemplate entering into an additional agreement
after the effective date of this Agreement, providing for the distribution by
Nortel of Arris' products outside North America ("International Distribution
Agreement"); and
WHEREAS, the applicable parties to the agreements described above wish to
amend such agreements.
NOW, THEREFORE, in consideration of the mutual promises of the parties,
and of good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, it is agreed as follows (capitalized terms used and
not defined in this Agreement have the meanings given to them in the referenced
agreement):
1. Each of Nortel and Antec represents and warrants to the other that:
(a) It has all requisite power and authority to own its property, to
conduct its business as currently conducted and to execute and deliver, and to
perform its obligations under this Agreement.
(b) This Agreement has been duly authorized, executed and delivered
by it and constitutes a legal, valid and binding obligation of it, enforceable
against it in accordance with its terms.
<PAGE> 2
(c) No permits, licenses, franchises, approvals, authorizations,
qualifications or consents of, or registrations or filings with, governmental
authorities are required in connection with the execution or delivery by it of,
or the performance by it of its obligations under this Agreement, except such
as have been obtained or made and are in full force and effect.
(d) The execution and delivery of, and the performance by it of its
obligations under this Agreement does not and will not result in a breach or
constitute a violation of, conflict with, or constitute a default under, its
certificate of incorporation or bylaws or any law, regulation, order or
judgment applicable to it or any agreement, course of dealing, obligation or
instrument to which it is a party or by which it or any of its property is
bound, which breach, violation, conflict or default could have an adverse
effect on the other parties to this Agreement or their affiliates or on the
ability of it or Arris to perform their obligations under this Agreement.
(e) No actions, proceedings or claims are pending or, to the
knowledge of it, threatened against it or any of its property that could affect
the validity or enforceability of this Agreement, or that could have a
materially adverse effect on the ability of it to perform its obligations under
this Agreement.
2. With respect to the Loan Agreement, Nortel, Antec and Arris agree:
(a) In the first WHEREAS clause, "$84 million" is changed to "$150
million."
(b) In Article I under Additional Loan, "$18 million" is changed to
"$84 million."
(c) In Article I under Availability Period, "third" is changed to
"fifth."
(d) In Article X, Section 10.02(a) is amended in its entirety to
read as follows:
Section 10.02. Payments. (a)(i) From and after the date of the
purchase of an Optional Participating Interest by Antec, whenever the
Lender receives or collects any payment of principal or interest or
any other payment made under this Agreement in respect of the Loans,
including by way of set-off, deduction or counterclaim, the Lender
shall pay over 50% of such amounts to Antec within two Banking Days of
the Lender's receipt thereof. (ii) Except as set forth in Section
10.02(a)(i), whenever the Lender receives or collects any payment of
principal or interest or any other payment made under this Agreement
in respect of the Loans and/or the Additional Loans, including by way
of set-off, deduction or counterclaim, the Lender shall pay over to
Antec within two Banking Days of the Lender's receipt thereof an
amount equal to the product of (x) the amount of such payment and (y)
a fraction, the numerator of which is the aggregate amount of
Mandatory Participating Interest paid by Antec to the Lender and the
aggregate
2
<PAGE> 3
accrued and unpaid interest on such amount, and the denominator of which
is aggregate amount of the Loans and the Additional Loans and the aggregate
accrued and unpaid interest on such amount.
(e) In Article XI, Section 11.01, 11.02(b) and 11.03(a) are amended in
their entirety to read as follows:
Section 11.01. Additional Commitment to Lend. On the terms and subject
to the conditions set forth under this Article XI, the Lender shall, upon
the Products Venture's request made in accordance with Section 11.02, make
additional loans, to the Products Venture during the Availability Period
(each such additional loan an "Additional Loan"). The aggregate principal
amount of the Additional Loans made by the Lender hereunder shall not,
in the aggregate (excluding any interest accrued on Additional Loans made
hereunder), exceed $84 million. Each Additional Loan made hereunder shall
be in multiples of $500,000; provided, that (i) the Lender shall not be
required to make more than four Additional Loans during any Fiscal quarter
and (ii) the Members Committee shall approve any Additional Loan, the
principal amount of which is in excess of $2,000,000.
Section 11.02(b). The obligation of the Lender to make an Additional
Loan is subject to the satisfaction of the following conditions:
(1) (i) receipt by the Lender of a Notice of Additional Borrowing as
required by Section 11.02(a);
(ii) the Security Agreement shall be in full force and effect; and
(iii) The Pledge Agreement shall be in full force and effect.
(2) Provided the aggregate principal amount of the Additional Loans
made by the Lender hereunder is either (i) less than $34 million or (ii)(A)
$34 million or more, (B) the condition set forth in Section 11.02(b)(3) is
satisfied and (C) Antec has elected to make a Mandatory Participating
Interest pursuant to Section 11.03, which election may be reversed (with
respect to Additional Loans not then made) at any time at the sole
discretion of Antec:
3
<PAGE> 4
(A) receipt by the Lender from Antec of its agreement to
participate in the Additional Loan in the form attached as Exhibit D hereto
("Antec's Participation Commitment"); and
(B) receipt by the Lender from Antec of payment in cash of an
amount equal to 25% of the principal amount of the Additional Loan.
(3) Provided the aggregate principal amount of the Additional Loans
made by the Lender is $34 million or more, election by the Lender to make
Additional Loans, which election may be reversed (with respect to Additional
Loans not then made) at any time at the sole discretion of the Lender.
(4) Each of the Lender and Antec shall be deemed to have made an
affirmative election to make Additional Loans, in the case of the Lender, and a
Mandatory Participating Interest, in the case of Antec, during the period
between (i) when the aggregate principal amount of the Additional Loans made by
the Lender is $34 million or more and (ii) provided a request for a
determination of the Fair Market Price (as defined in, and in accordance with,
Section 6.04 of the Products LLC Agreement) has been made, the date of
completion of such determination.
Section 11.03. Mandatory Participation by Antec.
(a) Unless a negative election has been made by Antec pursuant to
Section 11.02(b)(2)(ii)(C), Antec shall purchase from the Lender an undivided
25% participating interest in and to such Additional Loan (a "Mandatory
Participating Interest") for payment in cash to the Lender of an amount equal to
25% of the principal amount of such Additional Loan, within two Banking Days of
receipt by Antec of a Notice of Additional Borrowing from the Products Venture.
3. With respect to the LLC Agreement, Antec and Nortel agree:
(a) The third WHEREAS clause is amended in its entirety to read as
follows:
WHEREAS, it is intended that the Company shall, for multiple services
operators and telephone company network operators develop, manufacture and have
manufactured, sell directly and distribute, digital broadband access networking
products and applications for the delivery of narrow band and broadband services
over a Hybrid Fiber Coaxial Cable Network consisting of network elements for
headend and premises deployment ("Cornerstone Products") ("the Business Scope");
4
<PAGE> 5
(b) In Article I, under Section 1.01, Interest is amended in its
entirety to read as follows:
"Interest" means, in the case of Nortel, Nortel's initial 75%
interest in the Company or any other percentage interest in the
Company held by Nortel as a result of either a Transfer of a portion
of its percentage interest pursuant to Section 2.05(c) or an
adjustment of its percentage interest made pursuant to Section 2.05(e)
or (f) and, in the case of Antec, Antec's 25% interest in the Company
or any other percentage interest in the Company held by Antec as a
result of an adjustment of its percentage interest made pursuant to
Section 2.05(e) or (f).
(c) In Article II, the following is added to Section 2.05 as
subparagraphs (e), (f) and (g):
(e) Provided (1)(i) the aggregate principal amount of the
Additional Loans (as defined in the Product Loan Agreement) then made
is $34 million or more and (ii) Antec has elected not to make a
Mandatory Participating Interest (as defined in the Product Loan
Agreement) for the then requested Additional Loan to which such
Mandatory Participating Interest relates and the determination of the
Fair Market Price in connection with such election has been made and
(2) Nortel has not exercised its right under Section 6.04(a)(y), and
subject to Section 2.05(g), Nortel shall have the option, at its sole
discretion, to increase its Capital Contribution by contributing to
the Products Venture the amount of the Mandatory Participating
Interest in connection with such Additional Loan, and after such
contribution has been made, Nortel's and Antec's Interest shall be
adjusted based upon the then current Fair Market Price determined in
accordance with Section 6.04.
(f) Provided (1)(i) the aggregate principal amount of the
Additional Loans then made is $34 million or more and (ii) Nortel has
elected not to make the Additional Loan then requested and the
determination of the Fair Market Price in connection with such
election has been made and (2) Antec has not exercised its right
under Section 6.04(a)(y), and subject to Section 2.05(g), Antec shall
have the option, at its sole discretion, to increase its Capital
Contribution by contributing to the Products Venture 100% the
principal amount of such Additional Loan, and after such contribution
has been made, Nortel's and Antec's Interest shall be adjusted based
upon the then current Fair Market Price determined in accordance with
Section 6.04.
5
<PAGE> 6
(g) If the Fair Market Price is a negative amount, then the Member
which has elected not to make an Additional Loan or a Mandatory
Participating Interest, as the case may be, shall have the right to reverse
its election within 10 days of the date of the determination of such Fair
Market Price.
(d) In Article III, Sections 3.02(a) and (b) are amended in their
entirety to read as follows:
SECTION 3.02. OFFICERS.
(a) PRESIDENT. The president of the Company (the "President") shall
initially be appointed by Nortel. Each President shall be appointed for an
initial term of two years and may be reappointed. Nortel shall have
the right, after consultation with Antec (provided that such consultation
shall not be required if Antec's Interest is less than 20%), to dismiss any
incumbent President and appoint any successor or replacement President.
(b) VICE PRESIDENT-FINANCE. The Vice President-Finance of the Company
(the "Vice President-Finance") shall initially be appointed by Nortel.
Each Vice President-Finance shall be appointed for an initial term of two
years and may be reappointed. So long as any amount is outstanding under
the Products Loan Agreement, Nortel shall have the right, after
consultation with Antec (provided that such consultation shall not be
required if Antec's Interest is less than 20%), to dismiss any incumbent
Vice President-Finance and appoint any successor or replacement Vice
President-Finance and, thereafter, provided (1) Antec's Interest is 20% or
more and (2) no amount is outstanding under the Products Loan Agreement,
Antec shall have the right, after consultation with Nortel, to dismiss any
incumbent Vice President-Finance and appoint any successor or replacement
Vice President-Finance.
(c) In Article III at the end of Section 3.04, the following is added:
, provided, however, if pursuant to Section 2.05(e) of this
Agreement, the Interest of Antec is reduced to less than (1) 15% then
subparagraphs (b), (e), (f), (g), (i), (k), (l), (o) and (r), and (2) 10%
then subparagraphs (j), (n), (p), (q), (s) and (t), of this Section 3.04
shall be deleted and such subparagraphs shall be added to Section 3.03 of
this Agreement, and the affirmative vote of a majority of the
Representatives of the Members Committee shall be required to approve or
disapprove any matter set forth in any
6
<PAGE> 7
such subparagraph without regard to whether or not any such matter has been
specifically provided for in an approved Budget or Business Plan.
(f) In Article VI, Section 6.02(f) is amended in its entirety to read as
follows:
(f)(i) The failure of the Company, which for these purposes means the
occurrence of an Event of Default under the Products Loan Agreement, and (ii)
the failure of the Members to exercise their rights under Section 6.03(a).
(g) In Article VI, the following is added to Section 6.02 as
subparagraph (g):
(g) The election by both Nortel (as Lender) not to make Additional
Loans and Antec not to make a Mandatory Participating Interest (as such terms
are defined in and pursuant to Article XI of the Products Loan Agreement) after
the aggregate principal amount of the Additional Loans then made is $34 million
or more and the Fair Market Price in connection with such elections has been
determined.
(h) In Article VI, Section 6.03 is amended in its entirety to read as
follows:
Section 6.03. Procedure in case of Certain Events of Dissolution.
(a) Upon the occurrence and continuance of either of the events
referred to in Section 6.02(a)(i) or 6.02(f)(i), first Nortel, and then Antec
shall have the right, subject to the conditions specified in Sections
6.03(b)-(d), to purchase the other Member's Interest.
(b) Upon the occurrence and continuance of an Event of Dissolution
referred to in Section 6.02(a) or 6.02(f), Nortel may exercise its right under
Section 6.03(a) by Notice to Antec, indicating its interest in purchasing
Antec's Interest. If the Members are unable to agree on an amount for which
Nortel is willing to buy from Antec, and Antec is willing to sell to Nortel,
Antec's Interest, free and clear of all pledges, liens, security interest or
other encumbrances, Antec's Interest shall be determined pursuant to the second
sentence of Section 6.04(c).
(c) Upon the occurrence and continuance of an Event of Dissolution
referred to in Section 6.02(a) or 6.02(f), provided, Nortel has not given
Notice to Antec that it will exercise its right under Section 6.03(a), Antec
may exercise its right under Section 6.03(a) by Notice to Nortel, indicating
its interest in purchasing Nortel's Interest. If the Members are unable to
agree on an amount for which Antec is willing to buy from Nortel, and Nortel is
willing to sell Antec,
7
<PAGE> 8
Nortel's Interest, free and clear of all pledges, liens, security
interests or other encumbrances, Nortel's Interest shall be determined
pursuant to the second sentence of Section 6.04(c).
(d) The closing of the purchase and sale of a Member's Interest under
this Section 6.03 shall be held on a business day designated by the
purchasing Member upon not less than 10 business days' prior written
Notice given on or after the date on which there is a determination of
the purchase price pursuant to Section 6.03(b) or 6.03(c), as the case may
be, but not later than 60 days after such date.
(i) In Article VI, Section 6.04 is amended in its entirety to read as
follows:
Section 6.04. Procedure in Case of Certain Other Events.
(a) Upon the occurrence of the following events or conditions
(the "Triggering Events"):
(i) a material breach of this Agreement that is not
capable of being cured or a material breach of this Agreement by a
Member that is capable of being cured and is not cured within
30 days after Notice thereof (the failure of Antec (I) under the
Products Loan Agreement to satisfy the condition set forth in
either Section 11.02(b)(2)(A) or (B) (provided the aggregate
principal amount of the Additional Loans made by Nortel hereunder
is either (i) less than $34 million or (ii)(A) $34 million or more
and (B) Antec has elected not to make a Mandatory Participating
Interest and a determination of the Fair Market Price in
connection with such election has not then been completed or (II)
to pay the Company $1,000,000 or more for 180 days or more for
amounts due the Company pursuant to any distribution agreements
between Antec and Arris or any other contractual relationship
between Antec and the Company, including any accrued interest for
past due amounts arising therefrom, shall be deemed to constitute
a material breach of this Agreement by Antec that is not capable
of being cured);
(ii) a change of control of a Member;
(iii) the bankruptcy of a Member; or
(iv) the election by either Nortel not to make an
Additional Loan or Antec not to make a Mandatory
8
<PAGE> 9
Participating Interest, after the aggregate principal amount
of the Additional Loans then made is $34 million or more;
provided such election is not withdrawn within 15 days from
the date the Fair Market Price has been agreed upon or Notice
has been given to the Members of the determination thereof.
the other Member (the "Non-Affected Member") shall have the right
(x) to request a determination of the Fair Market Price of its
Interest and the other Member's Interest and (y) to purchase, at
the Fair Market Price, all of the other Member's Interest in the
Company, subject, in the case of (i) above, to an adjustment of
minus 30%.
(b) A Member may exercise its rights under Section
6.04(a)(y) by Notice to the other Member between the 16th and the
30th day from the date on which the Fair Market Price has been
agreed upon or Notice has been given to the Members of the
determination thereof.
(c) If the Triggering Event is (i), (ii) or (iii) above, the
fair market price of any Member's Interest (the "Fair Market
Price") shall be the amount obtained by multiplying the total fair
market value of the Company and its subsidiaries, as agreed by the
Members within 30 days of the giving of the Notice referred to in
Section 6.04(b) or, failing such agreement, a determination shall
be made by a nationally recognized investment banking firm
selected by the Non-Affected Member, by such Member's percentage
Interest in the Company. If the Triggering Event is (iv) above,
or Nortel or Antec has availed itself of the right provided to it
under Section 6.03(b) or (c), as the case may be, (I) such
determination shall be made by the banking firm of Donaldson,
Lufkin and Jenrette or other firm mutually agreed to by the
Members; (II) in making the determination such firm, shall assume
that the Company has an indefinite term rather than a finite term
as specified in this Article VI; (III) the determination shall be
made on an "equity" rather than an "enterprise" valuation basis;
(IV) the Fair Market Price of a Member's Interest shall be, if the
difference between the equity value and the amount outstanding
under the Products Loan Agreement ("Balance") is a negative
number, the product of (1) the Balance and (2) a fraction, the
numerator of which, in the case of Antec, shall be the aggregate
amount of Mandatory Participating Interest paid by Antec to the
Lender and the aggregate accrued and unpaid interest on such
amount ("Antec Amount"), and, in the case of Nortel, shall be the
difference between the Balance and the
9
<PAGE> 10
Antec Amount ("Member Repayment Amount") and the denominator of
which shall be the Balance, and, if the difference between the
equity value and the Balance is a positive number, the sum of the
(A) Member Repayment Amount and (B) the product of (i) such
difference and (ii) the amount of the Member's Interest (expressed
as a percentage); and (V) the Fair Market Price so determined
shall be valid for one year from the date of its completion unless
a Fair Market Price is required in connection with Section
6.04(a)(y) in which event a new Fair Market Price shall be
determined unless the prior one was completed within the
immediately preceding 90 days. The fees and expenses of such
investment banking firm will be paid by the breaching Member, in
the case of a determination resulting from an event described in
Section 6.04(a)(i) and otherwise such fees and expenses shall be
borne by the Company. For purposes of this Section 6.04, a change
of control shall be deemed to occur upon the direct or indirect
acquisition by any Person (other than an Affiliate of Nortel or
BCE Inc., in the case of Nortel and other than an Affiliate of
Anixter International Inc. or Tele-Communication, Inc. in the
case of Antec) who is a Competitor of the other Member of
Securities representing 20% or more of the voting rights
attached to voting securities of such other Member and of the
power to direct the management of a Member, whether by
ownership of voting securities, by contract or otherwise (a
"Change of Control").
4. With respect to the Antec License Agreement, Arris and Antec
agree that the License Agreement is terminated, and Antec and Nortel agree that
Articles VII and VIII of the Framework Agreement are deleted, as of August 1,
1997, and that all obligations thereunder by each party have been performed,
provided, however, that any rights or obligations intended to survive
termination shall remain in effect.
5. With respect to the Framework Agreement, and as of the effective
date of the International Distribution Agreement, Antec, Nortel, and Arris
agree:
(a) In Article I the following is added under Section 1.01;
"International Distribution Agreement" shall mean the agreement between Nortel
and Product Venture providing for the distribution by Nortel of Product Venture
Products outside North America.
(b) In Article I the definitions of "Related Agreements" and the
"Distribution Agreements" are amended to add the International Distribution
Agreement.
(c) In Article IV, Section 4.02(a) is amended in its entirety to read
as follows:
10
<PAGE> 11
Products Venture. (a) The Parents will serve as the exclusive
distributors for all Products Venture Products that are the subject of
Distribution Agreements in the respective territories in the United States and
Canada and to the respective customers as specified in the applicable
Distribution Agreements and in Article VI hereof. Except as provided in the
International Distribution Agreement, the Products Venture may sell directly the
Products worldwide outside North America. Except as specified in the
Distribution Agreements, in Article VI hereof or the Products Manufacturing
Agreement, neither the Parents nor their respective Affiliates shall have the
right to distribute for another Person, sell for their own account, develop or
manufacture (or license the underlying technology for purposes of manufacturing
or sale) any products for use in a Hybrid Fiber Coaxial Cable Network that are
directly competitive with the Products Venture Products in the United States or
Canada. For purposes of this Agreement, the term "directly competitive" shall
not include wireless products, personal communications systems products,
switching products, asynchronous transfer mode products, DPN products or the
product line identified as Cornerstone Multimedia.
(d) Article VI is amended in its entirety to read as follows:
Subject to the Distribution Agreements, the scope of this Agreement and
the Related Agreements for the development, sale and distribution of the
Products Venture Product shall be worldwide. The parties agree that in the
future they will meet and negotiate in good faith with a view to granting, on a
case-by case basis, distribution rights not granted to Nortel under the
International Distribution Agreement to Antec outside the United States and
Canada in cases where Antec can demonstrate a competitive advantage in
distributing the Products Venture Products.
6. With respect to the Nortel License Agreement, and as of the
effective date of the International Distribution Agreement, Arris and Nortel
agree:
(a) The third WHEREAS clause, Article II, Section 2.2(b) and Article
IV, Section 4-1(b) are amended to delete "in the United States of America".
(b) In Article II, Section 2.1 is amended in its entirety to read as
follows:
Nortel, to the extent of its legal right so to do, hereby grants to
PJV, subject to the terms and conditions of this Agreement, a personal),
non-transferable, non-assignable, indivisible, non-exclusive right to use and
modify Hardware Technical Information supplied hereunder solely to manufacture
or have manufactured Hardware for use in Hybrid Fiber-Coax Networks solely for
the sale as permitted in the Framework Agreement, provided:
(a) the right to modify shall be restricted to the development
and implementation of modifications having application in Hybrid
Fiber-Coax Networks; and
11
<PAGE> 12
(b) the right to manufacture shall not of itself include the
right to manufacture parts, components, sub-assemblies and
assemblies, except for incorporation into, or for spare and/or
replacement parts for repair of, Hardware.
(c) In Article II, the following is added as a new Section 2.5 and the
existing Section 2.5 is renumbered as Section 2.6.
2.5 Prior to an agreement, between Nortel and PJV providing for the
distribution by Nortel of Licensed Products outside North America, becoming
effective and subsequent to the termination or expiration of such agreement, and
notwithstanding Section 2.4 to the contrary, Nortel shall not use the Hardware
Technical Information and the Operating Software for the purpose of
manufacturing or selling products directly competitive with the Licensed
Products, provided, however, such restriction shall not prevent Nortel from
manufacturing or selling products obtained or licensed from a third party or
developed independently of the Hardware Technical Information and Operating
Software.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first above written.
NORTHERN TELECOM INC.
By: /s/ J. A. Craig
-----------------------------------
Name: J. A. CRAIG
---------------------------------
Title: President Broadband Network
--------------------------------
ANTEC CORPORATION
By: /s/ Lawrence A. Margolis
-----------------------------------
Name: LAWRENCE A. MARGOLIS
---------------------------------
Title: Exec. Vice President
--------------------------------
ARRIS INTERACTIVE L.L.C.
By: /s/ David B. Potts
-----------------------------------
Name: DAVID B. POTTS
---------------------------------
Title: Vice President Finance
--------------------------------
12
<PAGE> 1
EXHIBIT 10.26
EMPLOYMENT AGREEMENT
This Agreement is made as of the 16th of October, 1995, the "Effective
Date," by and between ANTEC Corporation, a Delaware corporation (the
"Company"), and Robert J. Stanzione, an individual residing at 29 Colts Glen
Lane, Basking Ridge, New Jersey (the "Employee").
WHEREAS, the Company wants to employ the Employee and the Employee
wants to be employed by the Company;
NOW, THEREFORE, in consideration of the foregoing and of the
respective covenants and agreements of the parties herein contained, the
parties hereto agree as follows:
1. Employment and Term. The Company hereby agrees to employ the
Employee in an executive capacity, and the Employee hereby agrees to serve the
Company in such capacity, subject to the terms and conditions hereof for the
period commencing on the Effective Date and continuing until terminated as
provided in Section 4 (the "Termination Date"). The Employee is engaged on a
full time basis by the Company to perform services of an executive nature within
the Employee's abilities.
2. Compensation. The Company shall pay the Employee for the
performance of his duties under this Agreement during the term of his employment
(a) base compensation ("Base Compensation"), which as of the effective date of
this Agreement shall be at the rate of $300,000 per year, plus (b) a bonus
("Bonus") for each fiscal year after 1995 in an amount determined by the Board
of Directors using such criteria as it deems fair and equitable allowing up to
150% of planned Bonus for performance above target goals. The amount of the
planned Bonus shall be 75% of Base Compensation. The Employee's Base
Compensation shall be subject to annual or periodic review, in accordance with
the Company's customary practice for its other executives and increased in the
sole discretion of the Company. Once Base Compensation has been increased, it
shall not thereafter be decreased. The Employee's Base Compensation under this
Section shall be payable semi-monthly, and the Bonus shall be payable as soon
after the end of each fiscal year as it can be determined, but in any event
within ninety (90) days thereafter. If the employment of Employee is terminated
at other than year-end, the Bonus will be pro rated to reflect the period during
the year Employee was employed. The Bonus for 1995 shall be 75% of the Base
Compensation paid the Employee for 1995.
3. (a) Additional Benefits. The Employee shall be entitled to
participate in and receive benefits under any defined benefit retirement plan,
related excess benefit plan, health plan, disability plan and life insurance
plan or other similar employee benefit plan or arrangement (collectively,
"Benefit Plans") made available by the Company from time to
<PAGE> 2
time to its executives. The Company agrees that it will not substantially
reduce the aggregate amount it is currently incurring to provide Benefit Plans
to Employee. The Employee shall be entitled to such other benefits, including
vacation, fringe benefits and expense reimbursement as are currently in effect
for executives as the same may be from time to time be amended.
(b) Additional Pension. Upon the achievement of both 5 years of
service and the substantial performance of his obligations under this Agreement,
the Employee will be provided a supplemental pension equal to (i) the amount of
pension he would have had under the Company's defined benefit retirement plan
and related excess benefit plan if period of the Employee's service under those
plans were tripled, less (ii) the amount of pension to which the Employee is
entitled under the Company's defined benefit retirement plan and related excess
benefit plan.
(c) Long Term Incentives. In addition to the long term
incentives granted the Employee on the Effective Date, the Employee, beginning
in 1997, will be eligible for such long term incentive awards as shall be
periodically granted to other executives of the Company.
4. Termination. (a) This Agreement may be terminated by the Company
by written notice to the Employee only by adoption by the Board of Directors of
a resolution approved by directors constituting a majority of all of the
directors then holding office. The termination will not be effective until the
later of three years after the Effective Date or one year after written notice
of termination is given the Employee unless the termination is for "Good Cause."
"Good Cause" shall mean (i) the Employee's conviction of any embezzlement or any
felony involving fraud or breach of trust relating to the performance of
Employee's duties for the Company, (ii) the Employee's willful engagement in
gross misconduct in the performance of his duties, (iii) Employee's death or
(iv) permanent disability which materially impairs Employee's performance of his
duties.
(b) The Employee may terminate this Agreement by giving the
Company written notice of termination. The termination will not be effective
until the later of three years after the Effective Date or one year after
written notice of termination is given the Company unless the termination is
for "Good Reason." "Good Reason" shall exist if (i) the Company continues in
material breach of this Agreement for more than 30 days after being notified in
writing by Employer of such breach provided Employee has given such notice to
the Company within 30 days of first becoming aware of the facts constituting
such breach, (ii) the Company gives Employee a notice of termination without
"Good Cause" as specified above provided Employee terminates this Agreement
within 30 days of receiving such notice, or (iii) a "Change of Control" occurs,
and the Employee's employment hereunder is terminated by the Company other than
for "Good Cause" or by the Employee for any reason. A "Change of Control" shall
mean any person (as such term is used in section 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") is or becomes
the "beneficial owner" (as defined in Rule 13(d)-3 under the Exchange Act), (i)
of
2
<PAGE> 3
securities of the Company representing the higher of (x) more than 25% of the
combined voting power of the Company's then outstanding voting securities,
excluding Anixter International Inc. ("Anixter") or any successor or
"affiliates" as defined pursuant to the Exchange Act or (y) more than such
voting securities beneficially owned by Anixter and its successors and
affiliates, or (ii) if Anixter and its successors and affiliates beneficially
own more than 25% of such securities of the Company, of securities of Anixter
representing the higher of (x) more than 25% of the combined voting power of
Anixter's then outstanding voting securities (excluding Samuel Zell, B. Ann
Lurie, Sheli Rosenberg and their affiliates) or (y) more than such voting
securities held by Samuel Zell, B. Ann Lurie, Sheli Rosenberg and their
affiliates.
(c) If the Employee terminates this Agreement and simultaneously
therewith his employment by the Company for Good Reason, all of the Employee's
shares of restricted stock will vest and all his stock options outstanding and
unexercised at the Termination Date shall become immediately and fully
exercisable as of the Termination Date and the Company for a period of one year
from such termination or through three years after the Effective Date whichever
is later (the "Severance Period") shall continue to provide to the Employee (a)
his Base Compensation, at the rate most recently determined (b) a Bonus for
each fiscal year (and a pro rata amount for each partial year) in an amount
equal to the most recent Bonus (annualized if for a partial year) paid or
payable to the Employee prior to the Termination Date, and (c) the Benefit Plans
as provided by Section 3 (subject in the case of long-term disability to the
availability of such coverage under the Company's insurance policy).
(d) The parties agree that the payments and benefits provided
for in subsection (c) of this Section shall be deemed to constitute liquidated
damages for the Company's breach or constructive breach of this Agreement and
payment for the non-competition provisions of this Agreement, and the Company
agrees that (i) Employee shall not be required to mitigate his damages by
seeking other employment or otherwise, and (ii) the Company's payments and
other obligations under this Agreement shall not be reduced in any way by reason
of any compensation received by Employee from sources other than the Company
after the Termination Date, except as otherwise expressly provided herein.
(e) If the Employee should be offered a position with an
affiliate of the Company (as defined under the Exchange Act) and chose to accept
that position, this Agreement shall terminate and the parties shall have no
further obligations to one another under this Agreement except as otherwise
agreed by the Employee and the Company in connection with such transfer.
5. Non-Competition Covenant. The Employee agrees that throughout
his employment hereunder and during the Severance Period he will not directly or
indirectly, alone or as a member of partnership, association of joint venture or
as an employee, officer, director or stockholder of any corporation or in any
other capacity:
3
<PAGE> 4
(a) engage in any activity which is competitive with the business
of the Company in the United States or in any foreign country in which the
Company is carrying on such business, provided that the foregoing provision
shall not be deemed to prohibit the Employee from purchasing for investment any
securities or interest in any publicly-owned organization which is competitive
with the business of the Company so long as his investment in any such
organization does not exceed one percent of its total equity; or
(b) solicit in connection with any activity which is competitive
with the Company, any customers or suppliers which he solicited on behalf of the
Company or on behalf of the business of the Company.
6. Entire Agreement. The terms and provisions of this Agreement
constitute the entire agreement between the parties and supersede any previous
oral or written communications, representations or agreements with respect to
the subject matter hereof.
7. Notice. Any Notices given hereunder shall be in writing and shall
be given by personal delivery or by certified or registered mail, return receipt
requested, addressed to:
If to the Company: If to the Employee:
ANTEC Corporation the address shown at
2850 West Golf Road the beginning of this
Rolling Meadows, IL 60008 Agreement
Attn: Larry Margolis
or such other address as shall be furnished in writing by one party to the
other.
8. Severability. The invalidity or unenforceability of any
particular provision of this Agreement shall not affect the other provisions
hereof, and this Agreement shall be construed in all respects as if the invalid
or unenforceable provision had been omitted.
9. Company Assignment. The Company's obligations hereunder shall be
binding legal obligations of any successor to all or substantially all of the
Company's business by purchase, merger, consolidation or otherwise. The Company
may not sell or otherwise dispose of all or substantially all of its assets or
merge or consolidate with any other entity without making adequate provision for
its obligations hereunder. The Employee may not assign this Agreement during his
life, and upon his death, this Agreement shall be binding upon and inure to the
benefit of his heirs, legatees and the legal representative of each.
10. Applicable Law. This Agreement shall be construed and interpreted
pursuant to the laws of Illinois.
4
<PAGE> 5
11. Amendment. This Agreement may be amended only by a written
document signed by both parties.
12. Taxes. Company shall pay to Employee the amount of any exercise
taxes imposed on Employee under Section 4999 of the Internal Revenue Code as
currently written by reason of payments or benefits received by Employee under
the other provisions of this Agreement. Employee and Company will minimize the
impact of any future changes in the tax laws (other than changes in rates) by
reforming this Agreement if it is possible to do so in a manner which is
economically equivalent to the current provisions of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Employment Agreement
effective as of the Day and year first above written.
ANTEC Corporation Employee
By
/s/ Lawrence A. Margolis /s/ Robert J. Stanzione
------------------------ ------------------------
Its
5
<PAGE> 1
EXHIBIT 10.27
[ANTEC NETWORK TECHNOLOGIES LETTERHEAD]
December 22, 1997
Mr. Robert Stanzione
9355 Chandler Bluff
Alpharetta, Georgia 330022
Dear Bob:
I am writing to set forth our arrangement for your assumption of the
office of President and Chief Operating Officer of ANTEC, effective
January 1, 1998.
Your employment will continue under the terms of your existing employment
agreement:
Your salary will be at the rate of $340,000 a year, effective
January 1, 1998.
You will be granted for 1997 an option, in the form attached,
to purchase 335,000 shares of ANTEC stock. This option will
be granted no later than January 31, 1998.
For each share of this option you exercise, the Company will
pay you an amount equal to the amount by which the exercise
price of your option exceeds $9.75 per share. The payment
will be made on the later of the date of exercise or
November 15, 2000.
Please indicate your acceptance of the above by signing and returning a copy of
this letter to me. This letter supercedes our letter of November 22, 1997.
Sincerely,
/s/ Lawrence A. Margolis
--------------------
Lawrence A. Margolis
LAM/slc
Enclosure
AGREED: Jan. 16
-----------------, 1998
/s/ Robert J. Stanzione
--------------------
Robert J. Stanzione
<PAGE> 2
THIS DOCUMENT CONSTITUTES PART OF A
PROSPECTUS COVERING SECURITIES THAT HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933
STOCK OPTION GRANT
THIS GRANT is made as of the 10th day of February, 1998 by ANTEC
CORPORATION, a Delaware corporation (the "Corporation"), to ROBERT STANZIONE
(the "Optionee").
1. INCORPORATION OF TERMS
This Grant shall be governed by the attached ANTEC Corporation Stock
Option Terms (the "Terms"), all of the provisions of which are hereby
incorporated herein.
2. GRANT OF OPTION
On the terms and conditions stated herein and in the Terms, the
Corporation hereby grants to the Optionee the option to purchase 335,000 Shares
as defined in the Terms for an exercise price of eleven dollars and twelve and
one-half cents ($11.125) per Share. This option replaces the option for the
same number of shares granted to Optionee on December 18, 1997.
3. RIGHT TO EXERCISE
Subject to the conditions and the exceptions set forth in this
Grant and in the Terms, this Option shall become exercisable on May 7, 2003.
This Option shall become exercisable prior thereto as follows:
a. One third (1/3) of the Shares covered by this Option shall be
eligible for vesting, with 50% of this amount being immediately
exercisable and the remaining 50% becoming exercisable twelve (12) months
thereafter (a "Delayed Vesting Period"), once the fully diluted earnings per
Share of Stock of the Corporation, before consideration of non-recurring
items, over any four consecutive fiscal quarters have totaled more than one
dollar ($1) a Share (the "Earnings Target"), and the daily closing price per
Share of Stock for twenty (20) consecutive trading days has been fifteen
dollars ($15) per Share or more (a "Stock Price Target").
b. One third (1/3) of the Shares covered by this Option shall be
eligible for vesting, with 50% of this amount being immediately exercisable and
the remaining 50% becoming exercisable twelve (12) months thereafter (a
"Delayed Vesting Period"), once the Earnings Target has been met and the
daily closing price per Share of Stock for twenty (20) consecutive trading
days has been twenty dollars ($20) per Share or more (a "Stock Price Target").
c. One third (1/3) of the Shares covered by this Option shall be
eligible for vesting, with 50% of this amount being immediately
exercisable and the remaining 50% becoming exercisable twelve (12) months
thereafter (a "Delayed Vesting Period"), once the Earnings Target has been
met and the daily closing price per Share of Stock for twenty (20) consecutive
trading days has been twenty-five dollars ($25) per Share or more (a "Stock
Price Target").
d. All of the Shares covered by Option shall be exercisable upon
the occurrence of a Change of Control. For this purpose a Change of Control
shall be the acquisition of the beneficial ownership by any person and that
person's affiliates (excluding Anixter International Inc., Tele-Communications,
Inc. and their affiliates) of more than 50% of the Shares of Stock of the
Corporation or the commencement of a tender offer, the consummation of which
would result in such an acquisition.
<PAGE> 3
Upon an Employment Termination, this Option can be exercised only
to the extent it was exercisable on the date of that termination and only as
otherwise provided in the Terms. The only exception is that if the
Employment Termination was by the Corporation without cause during a
Delayed Vesting Period, the Optionee can exercise this Option for the
Shares which become available at the end of that Delayed Vesting Period,
and for this purpose the term of this Option shall be extended to the day
thirty (30) days after the end of that Delayed Vesting Period, but not beyond
May 7, 2004.
In the event this Option is adjusted pursuant to the Terms, an
appropriate adjustment shall be made by the Board to the Earnings Target and
the Share Price Targets. The determination by the Board or the authorized
committee of the Board on these matters as well as all other matters
concerning this Option, including the computation of fully diluted earning
per Share before non-recurring items, shall be final and binding.
NO EXISTING CONTRACT WHICH PROVIDES FOR THE VESTING OR EXERCISABILITY
OF STOCK OPTIONS OTHER THAN AS PROVIDED IN THIS GRANT SHALL APPLY TO THIS
OPTION. BY ACCEPTING THIS OPTION, THE OPTIONEE IS AGREEING THAT ANY EXISTING
CONTRACTUAL PROVISIONS TO THE CONTRARY ARE BEING MODIFIED AS PROVIDED HEREIN.
NO FUTURE CONTRACT SHALL APPLY TO THIS OPTION UNLESS SUCH CONTRACT EXPRESSLY
PROVIDES TO THE CONTRARY, REFERRING TO THIS OPTION BY DATE OF GRANT AND
EXERCISE PRICE.
4. TERM OF OPTION
This Option shall in any event expire in its entirety May 7, 2004.
This Option shall further expire as set forth in the Terms.
5. EXERCISE CONSTITUTES AGREEMENT TO REFRAIN FROM COMPETITION
By exercising any portion of this Option, the Optionee will be
signifying the agreement of Optionee to refrain for a period of nine
months from the termination of Optionee's employment with the Corporation and
its subsidiaries, from participating in any activities which are competitive
with any activities of the Corporation or its subsidiaries in which the
Optionee participated. Participation shall not include the ownership of less
than 1% of a publicly traded security.
IN WITNESS WHEREOF, the Corporation has caused this Grant to be
executed on its behalf by its officer duly authorized to act on behalf of the
Corporation.
ANTEC CORPORATION,
a Delaware corporation
By: Lawrence A. Margolis
----------------------------
Lawrence A. Margolis
Its: Executive Vice President
Accepted:
Robert J. Stanzione 2/10/98
- ----------------------------------
Robert J. Stanzione
<PAGE> 1
EXHIBIT 13.1
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
TSX Corporation:
We have audited the consolidated balance sheet of TSX Corporation and
subsidiary as of December 31, 1996, and the related consolidated statements of
operations, changes in stockholders equity, and cash flows for the
twelve-month periods ended the last Saturday of October 1996, 1995, and 1994
(not presented herein). These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our 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 TSX Corporation and
subsidiary as of December 31, 1996, and the results of their operations and
their cash flows for each of the years in the twelve-month periods ended the
last Saturday of October 1996, 1995, and 1994, in conformity with generally
accepted accounting principles.
KPMG Peat Marwick LLP
El Paso, Texas
May 30, 1997
<PAGE> 1
EXHIBIT 21.1
--------------------------------
ANTEC CORPORATION & SUBSIDIARIES
--------------------------------
ANTEC CORPORATION, 36-3892082 (Delaware)
TSX Corporation, 74-2678034 (Nevada)
Texscan Corporation, 35-1109686 (Delaware)
Texscan MSI Corporation, 87-0363200
Texscan Trading Company, 74-2675440
ANTEC International Corp. (Barbados)
Texscan Limited (United Kingdom)
Texscan de Mexico, S.A. de C.V. (Mexico)
Scientific-Atlanta LA Venture, Inc., 58-2084469 (Florida)
ANTEC Pacific, Inc., 36-4011273 (Illinois)
Australia Branch
ANTEC Spain, Inc., 36-4011277 (Illinois)
Spain Branch
ANTEC Digital Video Inc., 58-2163150 (shell company) (Illinois)
Itel Holdings, Inc., 36-3661133 (Illinois)
Electronic Connector Corp. of Illinois, 36-3542005
(Illinois)
Regal Technologies, Ltd., 36-3661130 (Illinois)
ANTEC Latin America, Inc., 36-3684616 (Illinois)
Communicaciones Broadband S.A. de C.V.
Communicaciones Broadband Argentina,
Communicaciones Broadband do Brazil, Ltd
Power Guard, Inc., 63-1139816 (Illinois)
Engineering Technologies Group, Inc., 36-4019840 (Colorado)
Electronic System Product, Inc., 36-4011341 (Illinois)
Keptel, Inc., 36-3977107 (Delaware)
Comfab Technologies, Inc., 36-2820491 (Delaware)
Benefits Connection, Inc., 22-3333376 (New Jersey)
Keptel de Mexico S.A. de C.V. (Mexico)
Anixter CATV Industries, 95-3582672 (California)
Home Satellite System, 95-3954194 (California)
MSO Supply Company, 95-3795688 (California)
ANTEC International Holdings, Inc., 36-3943825 (Illinois)
ANTEC Hong Kong
ANTEC China
ANTEC Singapore
Antec Foreign Sales Corporation (Barbados)
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the following Registration
Statements of ANTEC Corporation of our report dated January 30, 1998, with
respect to the consolidated financial statements of ANTEC Corporation included
in this Annual Report (Form 10K) for the year ended December 31, 1997:
Form S-8 No. 33-71384 (Amended and Restated Employee Stock Incentive Plan)
Form S-8 No. 3371386 (ANTEC Corporation Director Stock Option Plan)
Form S-8 No. 3371388 (ANTEC Corporation Employee Stock Purchase Plan)
Form S-8 No. 3389704 (ANTEC/Keptel Exchange Options)
Form S-8 No. 333-11921 (ESP Stock Plan)
Form S-8 No. 333-12131 (ANTEC Corporation Amended and Restated Employee
Stock Incentive Plan)
Form S-8 No. 333-19129 (TSX Corporation 1996 Second Amended and Restated
Long-Term Incentive Compensation Program; TSX Corporation 1993
Amended and Restated Directors Stock Option Plan, As Amended; TSX
Corporation 1994 W.H. Lambert Stock Option Agreement)
ERNST & YOUNG LLP
Chicago, Illinois
March 20, 1998
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
TSX Corporation:
We consent to incorporation by reference in the following registration
statements on Form S-8 of ANTEC Corporation of our report dated May 30, 1997,
relating to the consolidated balance sheet of TSX Corporation and subsidiary,
as of December 31, 1996, and the related consolidated statements of
operations, changes in stockholders' equity, and cash flows for the
twelve-month periods ended the last Saturday of October, 1996, 1995, and 1994,
which report appears in the December 31, 1997, annual report on Form 10-K of
ANTEC Corporation.
No. 33-71384 Amended and Restated Employee Stock Incentive Plan
No. 33-71386 ANTEC Corporation Director Stock Option Plan
No. 33-71388 ANTEC Corporation Employee Stock Purchase Plan
No. 33-89704 ANTEC/Keptel Exchange Options
No. 333-11921 ESP Stock Plan
No. 333-12131 ANTEC Corporation Amended and Restated Employee Stock
Incentive Plan
No. 333-19129 TSX Corporation 1996 Second Amended an Restated
Long-Term Incentive Compensation Program; TSX
Corporation 1993 Amended and Restated Directors Stock
Option Plan, As Amended; TSX Corporation 1994 W.H.
Lambert Stock Option Agreement.
KPMG Peat Marwick LLP
El Paso, Texas
March 23, 1998
<PAGE> 1
EXHIBIT 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned officer and/or
director of ANTEC Corporation, a Delaware corporation (the "Corporation"),
which is about to file an annual report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended on Form 10-K, hereby constitutes
and appoints Lawrence A. Margolis, Daniel J. Distel and James E. Knox and each
of them his or her true and lawful attorney-in-fact and agents, with full power
and all capacities, to sign the Corporation's Form 10-K and any and all
amendments thereto, and any other documents in connection therewith, to be
filed with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as she or he might or could do
in person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or their substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand
and seal as of the 20th day of March, 1998.
/s/ Rod Dammeyer
------------------------
Rod Dammeyer
<PAGE> 1
EXHIBIT 24.2
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned officer and/or
director of ANTEC Corporation, a Delaware corporation (the "Corporation"),
which is about to file an annual report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended on Form 10-K, hereby constitutes
and appoints Lawrence A. Margolis, Daniel J. Distel and James E. Knox and each
of them his or her true and lawful attorney-in-fact and agents, with full power
and all capacities, to sign the Corporation's Form 10-K and any and all
amendments thereto, and any other documents in connection therewith, to be
filed with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as she or he might or could do
in person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or their substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand
and seal as of the 20th day of March, 1998.
/s/ John R. Petty
--------------------
John R. Petty
<PAGE> 1
EXHIBIT 24.3
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned officer and/or
director of ANTEC Corporation, a Delaware corporation (the "Corporation"),
which is about to file an annual report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended on Form 10-K, hereby constitutes
and appoints Lawrence A. Margolis, Daniel J. Distel and James E. Knox and each
of them his or her true and lawful attorney-in-fact and agents, with full power
and all capacities, to sign the Corporation's Form 10-K and any and all
amendments thereto, and any other documents in connection therewith, to be
filed with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as she or he might or could do
in person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or their substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand
and seal as of the 20th day of March, 1998.
/s/ Bruce Van Wagner
------------------------
Bruce Van Wagner
<PAGE> 1
EXHIBIT 24.4
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned officer and/or
director of ANTEC Corporation, a Delaware corporation (the "Corporation"),
which is about to file an annual report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended on Form 10-K, hereby constitutes
and appoints Lawrence A. Margolis, Daniel J. Distel and James E. Knox and each
of them his or her true and lawful attorney-in-fact and agents, with full power
and all capacities, to sign the Corporation's Form 10-K and any and all
amendments thereto, and any other documents in connection therewith, to be
filed with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as she or he might or could do
in person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or their substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand
and seal as of the 20th day of March, 1998.
/s/ Samuel K. Skinner
-----------------------
Samuel K. Skinner
<PAGE> 1
EXHIBIT 24.5
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned officer and/or
director of ANTEC Corporation, a Delaware corporation (the "Corporation"),
which is about to file an annual report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended on Form 10-K, hereby constitutes
and appoints Lawrence A. Margolis, Daniel J. Distel and James E. Knox and each
of them his or her true and lawful attorney-in-fact and agents, with full power
and all capacities, to sign the Corporation's Form 10-K and any and all
amendments thereto, and any other documents in connection therewith, to be
filed with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as she or he might or could do
in person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or their substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand
and seal as of the 20th day of March, 1998.
/s/ William H. Lambert
-----------------------
William H. Lambert
<PAGE> 1
EXHIBIT 24.6
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned officer and/or
director of ANTEC Corporation, a Delaware corporation (the "Corporation"),
which is about to file an annual report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended on Form 10-K, hereby constitutes
and appoints Lawrence A. Margolis, Daniel J. Distel and James E. Knox and each
of them his or her true and lawful attorney-in-fact and agents, with full power
and all capacities, to sign the Corporation's Form 10-K and any and all
amendments thereto, and any other documents in connection therewith, to be
filed with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as she or he might or could do
in person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or their substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand
and seal as of the 20th day of March, 1998.
/s/ James L. Faust
---------------------
James L. Faust
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS AND RELATED NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS OF ANTEC CORPORATION AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS AND RELATED NOTES IN ANTEC CORPORATION'S
FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997.
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<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
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<SECURITIES> 0
<RECEIVABLES> 87,800
<ALLOWANCES> 4,289
<INVENTORY> 111,698
<CURRENT-ASSETS> 209,061
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<CURRENT-LIABILITIES> 75,759
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0
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<COMMON> 393
<OTHER-SE> 295,392
<TOTAL-LIABILITY-AND-EQUITY> 443,883
<SALES> 480,078
<TOTAL-REVENUES> 480,078
<CGS> 365,860
<TOTAL-COSTS> 365,860
<OTHER-EXPENSES> 137,280
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,916
<INCOME-PRETAX> (28,978)
<INCOME-TAX> (7,534)
<INCOME-CONTINUING> (21,444)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
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<NET-INCOME> (21,444)
<EPS-PRIMARY> (.55)
<EPS-DILUTED> (.55)
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS AND RELATED NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS OF ANTEC CORPORATION AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS AND RELATED NOTES IN ANTEC CORPORATION'S
FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 27,398
<SECURITIES> 0
<RECEIVABLES> 106,602
<ALLOWANCES> 3,539
<INVENTORY> 138,785
<CURRENT-ASSETS> 282,491
<PP&E> 35,947
<DEPRECIATION> 33,060
<TOTAL-ASSETS> 510,249
<CURRENT-LIABILITIES> 97,203
<BONDS> 102,658
0
0
<COMMON> 384
<OTHER-SE> 310,004
<TOTAL-LIABILITY-AND-EQUITY> 510,249
<SALES> 690,877
<TOTAL-REVENUES> 690,877
<CGS> 511,646
<TOTAL-COSTS> 511,646
<OTHER-EXPENSES> 133,087
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,536
<INCOME-PRETAX> 42,443
<INCOME-TAX> 16,083
<INCOME-CONTINUING> 26,360
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 26,360
<EPS-PRIMARY> .69
<EPS-DILUTED> .67
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS AND RELATED NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS OF ANTEC CORPORATION AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS AND RELATED NOTES IN ANTEC CORPORATION'S
FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 14,075
<SECURITIES> 0
<RECEIVABLES> 120,768
<ALLOWANCES> 2,366
<INVENTORY> 137,201
<CURRENT-ASSETS> 275,093
<PP&E> 35,013
<DEPRECIATION> 24,921
<TOTAL-ASSETS> 509,821
<CURRENT-LIABILITIES> 109,891
<BONDS> 117,920
0
0
<COMMON> 382
<OTHER-SE> 281,628
<TOTAL-LIABILITY-AND-EQUITY> 509,821
<SALES> 738,235
<TOTAL-REVENUES> 738,235
<CGS> 546,591
<TOTAL-COSTS> 546,591
<OTHER-EXPENSES> 161,544
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,801
<INCOME-PRETAX> 19,299
<INCOME-TAX> 10,497
<INCOME-CONTINUING> 8,802
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,802
<EPS-PRIMARY> .24
<EPS-DILUTED> .23
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS AND RELATED NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS OF ANTEC CORPORATION AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS AND RELATED NOTES IN ANTEC CORPORATION'S
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997.
</LEGEND>
<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>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS AND RELATED NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS OF ANTEC CORPORATION AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS AND RELATED NOTES IN ANTEC CORPORATION'S
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
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<SECURITIES> 0
<RECEIVABLES> 91,824
<ALLOWANCES> 4,174
<INVENTORY> 119,479
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<PP&E> 37,276
<DEPRECIATION> 34,670
<TOTAL-ASSETS> 449,060
<CURRENT-LIABILITIES> 66,598
<BONDS> 86,387
0
0
<COMMON> 385
<OTHER-SE> 295,690
<TOTAL-LIABILITY-AND-EQUITY> 449,060
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<TOTAL-REVENUES> 244,296
<CGS> 184,575
<TOTAL-COSTS> 184,575
<OTHER-EXPENSES> 78,498
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,041
<INCOME-PRETAX> (21,818)
<INCOME-TAX> (6,677)
<INCOME-CONTINUING> (15,141)
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (15,141)
<EPS-PRIMARY> (.39)
<EPS-DILUTED> (.39)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS AND RELATED NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS OF ANTEC CORPORATION AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS AND RELATED NOTES IN ANTEC CORPORATION'S
FROM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
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<CURRENT-ASSETS> 221,535
<PP&E> 38,669
<DEPRECIATION> 0
<TOTAL-ASSETS> 453,867
<CURRENT-LIABILITIES> 65,309
<BONDS> 93,342
0
0
<COMMON> 390
<OTHER-SE> 294,826
<TOTAL-LIABILITY-AND-EQUITY> 453,867
<SALES> 364,661
<TOTAL-REVENUES> 364,661
<CGS> 275,624
<TOTAL-COSTS> 275,624
<OTHER-EXPENSES> 107,978
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,546
<INCOME-PRETAX> (23,487)
<INCOME-TAX> (6,347)
<INCOME-CONTINUING> (17,140)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (17,140)
<EPS-PRIMARY> (.44)
<EPS-DILUTED> (.44)
</TABLE>
