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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
--------------
FORM 10 - Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
/X/
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998
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 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)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
------ ------
At July 31, 1998, there were 35,406,231 shares of Common Stock, $0.01
par value, of the registrant outstanding.
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PART I. OTHER INFORMATION
ANTEC CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
---------- ------------
(Unaudited)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 798 $ 7,244
Accounts receivable (net of allowance for doubtful accounts
of $3,962 in 1998 and $4,289 in 1997) 119,420 87,800
Inventories 131,727 111,698
Other current assets 5,561 2,319
---------- ------------
Total current assets 257,506 209,061
Property, plant and equipment, net 37,930 36,108
Goodwill (net of accumulated amortization of
$39,238 in 1998 and $36,785 in 1997) 157,237 159,692
Deferred income taxes, net 22,666 19,281
Other assets 25,298 19,741
---------- ------------
$ 500,637 $ 443,883
========== ============
LIABILITIES AND STOCK HOLDERS' EQUITY
Current liabilities:
Accounts payable $ 57,365 $ 38,404
Accrued compensation, benefits and related taxes 18,735 15,958
Other current liabilities 29,511 21,397
---------- ------------
Total current liabilities
105,611 75,759
Long-term debt 161,500 72,339
---------- ------------
Total liabilities 267,111 148,098
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; 35.2 million and 39.3 million shares issued
and outstanding in 1998 and 1997, respectively 352 393
Capital in excess of par value 200,377 261,081
Retained earnings 32,821 34,365
Cumulative translation adjustments (24) (54)
---------- ------------
Total stockholders' equity 233,526 295,785
---------- ------------
$ 500,637 $ 443,883
========== ============
</TABLE>
See accompanying notes to the consolidated financial statements.
2
<PAGE> 3
ANTEC CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------------ -------------------------------
1998 1997 1998 1997
------------- ------------ -------------- -------------
<S> <C> <C> <C> <C>
Net sales $ 140,704 $ 124,262 $ 264,145 $ 244,296
Cost of sales 103,936 90,669 194,550 184,575
------------- ------------ -------------- -------------
Gross profit 36,768 33,593 69,595 59,721
Operating expenses:
Selling, general and administrative 25,917 27,411 52,196 54,476
Amortization of goodwill 1,227 1,228 2,453 2,472
Non-recurring items - - 12,000 21,550
------------- ------------ -------------- -------------
27,144 28,639 66,649 78,498
------------- ------------ -------------- -------------
Operating income (loss) 9,624 4,954 2,946 (18,777)
Interest expense and other, net 1,923 1,679 3,278 3,041
------------- ------------ -------------- -------------
Income (loss) before income taxes 7,701 3,275 (332) (21,818)
Income tax expense (benefit) 3,713 2,292 1,212 (6,677)
------------- ------------ -------------- -------------
Net income (loss) $ 3,988 $ 983 $ (1,544) $ (15,141)
============= ============ ============== =============
Net income (loss) per
weighted average common
and common equivalent shares:
Basic $ 0.10 $ 0.03 $ (0.04) $ (0.39)
============= ============ ============== =============
Diluted $ 0.10 $ 0.02 $ (0.04) $ (0.39)
============= ============ ============== =============
Weighted average common and common
equivalent shares:
Basic 38,273 38,452 38,809 38,436
============= ============ ============== =============
Diluted 41,303 39,729 38,809 38,436
============= ============ ============== =============
</TABLE>
See accompanying notes to the consolidated financial statements.
3
<PAGE> 4
ANTEC CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
------------------------------
1998 1997
------------ ------------
Operating activities:
<S> <C> <C>
Net loss $ (1,544) $ (15,141)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 7,577 7,383
Deferred income taxes (3,385) (4,009)
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable (31,620) 14,578
(Increase) decrease in inventories (20,029) 19,306
Increase (decrease) in accounts payable and
accrued liabilities 30,179 (27,818)
(Increase) decrease in other, net (1,163) 6,497
------------ ------------
Net cash provided by (used in) operating activities (19,985) 796
Investing activities:
Purchases of property, plant and equipment (6,946) (6,240)
Investments in / advances to joint ventures (3,300) (782)
Other 175 (71)
------------ ------------
Net cash used in investing activities (10,071) (7,093)
Financing activities:
Net borrowings under credit facilities 91,000 66,000
Net reductions in borrowings under credit facilities (116,839) (82,271)
Issuance of 4.5% convertible subordinated notes 115,000 -
Purchase and retirement of common stock (63,459) -
Deferred financing costs paid (4,837) -
Proceeds from issuance of common stock
2,715 896
------------ ------------
Net cash provided by (used in) financing activities 23,580 (15,375)
Effect of exchange rate changes on cash 30 (68)
------------ ------------
Net decrease in cash and cash equivalents (6,446) (21,740)
Cash and cash equivalents at beginning of period 7,244 27,398
------------ ------------
Cash and cash equivalents at end of period $ 798 $ 5,658
============ ============
Supplemental cash flow information:
Interest paid during the period $ 2,132 $ 3,310
============ ============
Income taxes paid during the period $ 2,718 $ 417
============ ============
</TABLE>
See accompanying notes to the consolidated financial statements.
4
<PAGE> 5
ANTEC CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. BASIS OF PRESENTATION
Antec Corporation ("ANTEC" or herein together with its consolidated
subsidiaries called the "Company") is an international communications technology
company, headquartered in Atlanta, Georgia, with a major office in Englewood,
Colorado. The consolidated financial statements include the accounts of the
Company after elimination of intercompany transactions. The consolidated
financial statements furnished herein reflect all adjustments (consisting of
normal recurring accruals) which are, in the opinion of management, necessary
for a fair presentation of the consolidated financial statements for the periods
shown. Interim results of operations are not necessarily indicative of results
to be expected for a 12-month period. These interim financial statements should
be read in conjunction with the Company's audited consolidated financial
statements and notes thereto included in the Company's Annual Report on Form
10-K for the Company's year ended December 31, 1997.
NOTE 2. IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In the first quarter of 1998, the Company adopted FASB Statement No.
130, Reporting Comprehensive Income. The impact of this Statement on the
financial statements was immaterial.
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 the 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 the 1998
annual financial statements of the Company. 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 statements.
NOTE 3. NON-RECURRING ITEMS
In January 1998, ANTEC announced a consolidation plan being implemented
concurrently with the creation of the new President and Chief Operating Officer
organization in Atlanta. The Company 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 plan
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 in Atlanta. In connection with these
consolidations, the Company recorded a charge of approximately $12.0 million in
the first quarter of 1998. The components of the non-recurring charge included
approximately $8.0 million related to personnel costs; and approximately $4.0
million related to facilities and other costs. The personnel-related costs
included charges related to the termination of approximately 170 employees. As
of June 30, 1998, approximately $8.6 million of the charge had yet to be
utilized.
In the first quarter of 1997, in connection with the February 6, 1997
merger between Antec Corporation and TSX Corporation ("Merger"), 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 related to the overlapping product lines and product
development
5
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ANTEC CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
efforts totaling approximately $6.5 million that has been reflected in the cost
of sales for the six months ended June 30, 1997. As of June 30, 1998,
approximately $2.0 million of the charge had yet to be utilized.
NOTE 4. INVENTORIES
Inventories consist of:
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
-------------- ---------------
(Unaudited)
<S> <C> <C>
Raw material $ 30,994 $ 27,931
Work in process 7,305 6,343
Finished goods 93,428 77,424
============== ===============
Total inventories $ 131,727 $ 111,698
============== ===============
</TABLE>
NOTE 5. LONG TERM DEBT
Long term debt consists of:
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
--------------- ----------------
(Unaudited)
<S> <C> <C>
Revolving Credit Facility $ 46,500 $ 70,000
4.5% Convertible Subordinated Notes 115,000 -
Other - 2,339
--------------- ----------------
Total long term debt $ 161,500 $ 72,339
=============== ================
</TABLE>
On May 8, 1998, the Company issued $115.0 million of 4.5% Convertible
Subordinated Notes ("Notes") due May 15, 2003 (the "Offering"). The Notes are
convertible, at the option of the holder, at any time prior to the close of
business on the stated maturity date, into the Company's common stock ("Common
Stock") at a conversion price of $24.00 per share. The Notes are redeemable, in
whole or in part, at the Company's option, at any time on or after May 15, 2001.
The net proceeds from the Offering were used to repay all outstanding amounts
under the Company's existing credit facility, and the remainder of the net
proceeds were invested in government securities, certificates of deposits or
similar investment grade securities until June 1998 when the Company completed
the repurchase of approximately 4.4 million shares of Common Stock owned by
Anixter International Inc. ("Anixter") for approximately $63.5 million. (See
Note 6 of the Notes to the Consolidated Financial Statements.)
On May 21, 1998, the Company entered into a new secured four-year
credit facility ("New Credit Facility") with a group of banks aggregating $85.0
million. The New Credit Facility permits the Company to borrow, on a revolving
basis, an amount contingent upon the level of certain eligible assets. The New
Credit Facility provides for various interest rate alternatives. The average
annual interest rate on borrowings was approximately 8.1% at June 30, 1998. The
commitment fee on unused borrowings is approximately 0.5%. The New Credit
Facility contains various restrictions including covenants, limits on payments
to stockholders and interest coverage and net worth tests.
NOTE 6. COMMON STOCK
In June 1998, the Company repurchased approximately 4.4 million shares
of Common Stock owned by Anixter for approximately $63.5 million. The TCI
Venture Group, an affiliate of the Company, acquired the remaining 500,000
shares of Common Stock owned by Anixter for approximately $7.3 million.
6
<PAGE> 7
ANTEC CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
NOTE 7. EARNINGS PER SHARE
The following is an illustration of the reconciliation of the
numerators and denominators of the basic and diluted earnings per share ("EPS")
computations and other related disclosures.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
---------------------------- -----------------------------
1998 1997 1998 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Numerator:
Net income (loss); numerator for basic
and diluted earnings per share - income
(loss) available to common stockholders . $ 3,988 $ 983 $(1,544) $(15,141)
======= ======= ======= ========
Denominator:
Denominator for basic earnings per share -
weighted-average shares ................. 38,273 38,452 38,809 38,436
Effects of dilutive securities:
Options / warrants ...................... 3,030 1,277 -- --
------- ------- ------- --------
Denominator for diluted earnings per share 41,303 39,729 38,809 38,436
======= ======= ======= ========
Basic earnings per share ..................... $ 0.10 $ 0.03 $ (0.04) $ (0.39)
======= ======= ======= ========
Diluted earnings per share $ 0.10 $ 0.02 $ (0.04) $ (0.39)
======= ======= ======= ========
</TABLE>
The 4.5% Convertible Subordinated Notes were antidilutive for the three and six
month periods ended June 30, 1998. The effects of the options and warrants were
not presented for the six months ended June 30, 1998 and 1997 as the Company
incurred a net loss and inclusion of these securities would be antidilutive.
7
<PAGE> 8
ANTEC CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
COMPARISON OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1998 AND
1997
Net Sales. Net sales for the three and six-month periods ended June 30,
1998 were $140.7 million and $264.1 million, respectively, as compared to $124.3
million and $244.3 million for the same periods in 1997. This represents an
increase of 13.2% and 8.1% for the three and six month periods, respectively.
These increases primarily reflect additional capital spending by the Company's
largest customer, Tele-Communications, Inc. ("TCI"). These gains were partially
offset by lower international sales primarily in Latin America due to regulatory
uncertainties and in the Pacific Rim resulting from currency issues.
Gross Profit. Gross profit for the three and six-month periods ended
June 30, 1998 was $36.8 million and $69.6 million, respectively, as compared to
$33.6 million and $59.7 million for the same periods in 1997. The six-month
period ended June 30, 1997 includes a $6.5 million write-off of redundant
inventories related to overlapping product lines and product development efforts
in connection with the merger between Antec Corporation and TSX Corporation
("Merger"). Excluding the inventory charge, gross profit as a percentage of
sales for the three and six-month periods ended June 30, 1998 was 26.1% and
26.3%, respectively, as compared to 27.0% and 27.1% for the same periods in
1997. The decreased gross profit percentage for the three and six-month periods
ended June 30, 1998 are primarily due to the completion of certain material
management contracts and from manufacturing inefficiencies associated with new
product introductions.
Selling, General and Administrative ("SG&A") Expenses. SG&A expenses
for the three and six month periods ended June 30, 1998 were $25.9 million and
$52.2 million, respectively, as compared to $27.4 million and $54.5 million for
the same periods in 1997. These expenses decreased by 5.5% and 4.2% for the
three and six-month periods, respectively, as a result of ongoing expense
control.
Non-Recurring Items. In the first quarter of 1998, the Company recorded
a one-time charge of approximately $12.0 million. The non-recurring charge
included the severance, relocation and real estate costs associated with: the
consolidation of the Company's Rolling Meadows, Illinois corporate and
administrative functions into either the Atlanta Technology Center or the
Englewood, Colorado Telewire Supply division headquarters; the consolidation of
the Company's two principal facilities in Atlanta into one; and the
consolidation of certain international operating and administrative functions
located in Miami and Chicago into Atlanta. As of June 30, 1998, approximately
$8.6 million of the charge had yet to be utilized. (See Note 3 of the Notes to
the Consolidated Financial Statements.)
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 as noted in the gross profit
narrative. As of June 30, 1998, approximately $2.0 million of the charge had yet
to be utilized. (See Note 3 of the Notes to the Consolidated Financial
Statements.)
Interest Expense and Other, Net. Interest expense and other, net for
the three and six-month periods ended June 30, 1998 were $1.9 million and $3.3
million, respectively, as compared to $1.7 million and $3.0 million for the same
periods in 1997. The three and six-months ended June 30, 1998 includes the
impact of the issuance of $115.0 million of 4.5% Convertible Subordinated Notes
("Notes") and the related deferred financing fees. The periods ended June 30,
1998 also include the impact of the repurchase of 4.4 million shares of the
Company's common stock ("Common Stock") from Anixter International Inc.
("Anixter") for $63.5 million. Additionally, interest expense for 1998 includes
the write-off of the
8
<PAGE> 9
ANTEC CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED)
remaining deferred financing fees related to the Company's previous credit
facility paid down in May 1998. (See Notes 5 and 6 of the Notes to the
Consolidated Financial Statements.)
Net Income (Loss). Net income (loss) for the three and six-month
periods ended June 30, 1998 was $4.0 million and $(1.5) million, respectively,
as compared to $1.0 million and $(15.1) million for the same periods in 1997.
Included in the net losses for the six month periods ended June 30, 1998 and
1997 were non-recurring items of approximately $12.0 and $28.0 million,
respectively. (See Note 3 of the Notes to the Consolidated Financial
Statements.)
FINANCIAL LIQUIDITY AND CAPITAL RESOURCES
FINANCING
On May 8, 1998, the Company issued $115.0 million of 4.5% Notes due May
15, 2003 (the "Offering"). The Notes are convertible, at the option of the
holder, at any time prior to the close of business on the stated maturity date,
into the Company's Common Stock at a conversion price of $24.00 per share. The
Notes are redeemable, in whole or in part, at the Company's option, at any time
on or after May 15, 2001. The net proceeds from the Offering were used to repay
all outstanding amounts under the Company's existing credit facility, and the
remainder of the net proceeds were invested in government securities,
certificates of deposits or similar investment grade securities until June 1998
when the Company completed the repurchase of approximately 4.4 million shares of
Common Stock owned by Anixter for approximately $63.5 million. The TCI Venture
Group, an affiliate of the Company, acquired the remaining 500,000 shares of
Common Stock owned by Anixter for approximately $7.3 million. (See Notes 5 and 6
of the Notes to the Consolidated Financial Statements.)
On May 21, 1998, the Company entered into a new secured four-year
credit facility ("New Credit Facility") with a group of banks aggregating $85.0
million. The New Credit Facility permits the Company to borrow, on a revolving
basis, an amount contingent upon the level of certain eligible assets. The New
Credit Facility provides for various interest rate alternatives. The average
annual interest rate on borrowings was approximately 8.1% at June 30, 1998. The
commitment fee on unused borrowings is approximately 0.5%. The New Credit
Facility contains various restrictions including covenants, limits on payments
to stockholders and interest coverage and net worth tests. As of June 30, 1998,
the Company is in compliance with all such covenants.
CAPITAL EXPENDITURES
The Company's capital expenditures were $6.9 million and $6.2 million
for the six months ended June 30, 1998 and 1997, respectively. Except for the
impact of the Year 2000 Issue discussed below, the Company had no significant
commitments for capital expenditures at June 30, 1998.
CASH FLOWS
Cash levels have decreased by approximately $6.4 million during the
first six months of 1998 as compared to year end December 31, 1997. Cash used
in operating activities was $20.0 million while the Company spent $6.9 million
in capital expenditures and $3.3 million in additional investments in its joint
ventures. These cash outlays were partially offset by net positive cash flows
of $23.6 million provided through financing activities and $0.2 million
provided through other investing activities.
9
<PAGE> 10
ANTEC CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED)
CASH FLOWS - CONTINUED
Operating activities utilized cash of $20.0 million, which is
reflective of the increased working capital levels required by increased sales
volume during the period ended June 30, 1998. For the same period in 1997,
operating activities provided $0.8 million. Most significant to this negative
cash flow was an increase in accounts receivable levels of approximately $31.6
million since year-end 1997 to $119.4 million. The increase is primarily related
to the increase in sales and does not represent a significant change in aging.
Also related to operating activities was an increase in inventories of
approximately $20.0 million since year-end December 1997 to $131.7 million. This
increase is primarily within finished goods which is reflective of the higher
revenues and product demands. Despite the increased inventory levels during the
first six months of 1998, inventory turns have remained fairly stable at 3.3
times.
These negative operating cash flows were partially offset by increased
levels of accounts payable. This increase provided $30.2 million of positive
operating cash flows and is indicative of the increased purchasing necessary to
meet product demand volumes.
Cash flows used by investing activities were $10.1 million for the six
months ended June 30, 1998 as compared to $7.1 million for the same period in
1997. The investments during 1998 include $6.9 million spent on capital assets
and $3.3 million invested in or advanced to the Company's joint ventures. During
the first six months of 1997 the Company had capital expenditures of $6.2
million and investments in or advances to its joint ventures of $0.8 million.
Cash flows provided by financing activities were $23.6 million for the
six months ended June 30, 1998 as compared to negative cash flows of $15.4
million for the same period in 1997. The most significant financing activities
which occurred during the six months ended June 1998 include the impact of the
issuance of $115.0 million of 4.5% Notes and the repurchase of 4.4 million
shares of Common Stock from Anixter for approximately $63.5 million. (See Notes
5 and 6 of the Notes to the Consolidated Financial Statements.)
The Company believes that funds generated from operations, existing
cash balances and its available senior credit facility will be sufficient to
support the Company's future growth.
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 evaluation of
its computer processing systems, the Company determined that it would be
required to modify or replace significant portions of its software to improve
those systems. It is anticipated that these modifications and improvements will
enable its computer processing 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.
10
<PAGE> 11
ANTEC CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED)
IMPACT OF YEAR 2000 - (CONTINUED)
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 ANTEC's systems rely
will be timely converted and would not have an adverse effect on the Company's
operations. The Company has determined that it has no exposure to contingencies
related to the Year 2000 Issue for the products sold.
The Company will utilize both internal and external resources to
reprogram, or replace, and test the software for the system improvements and
Year 2000 modifications. The Company anticipates completing the system
improvements and the Year 2000 project within one year but no later than March
31, 1999, which is prior to any anticipated impact on its operating systems. The
total cost of the system improvements and the Year 2000 project is estimated at
approximately $5.0 million and is being funded through operating cash flows.
Of the total project cost, approximately $3.8 million is attributable
to the purchase of new software and hardware, in addition to consulting fees,
which will be capitalized. The remaining $1.2 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 $2.9 million ($1.0
million expensed and $1.9 million capitalized for new systems) related to its
system improvements 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. These estimates 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.
FORWARD LOOKING STATEMENTS
Any of the above statements that are not statements about historical
facts are forward looking statements. The forward looking statements, as
outlined in the Private Securities Litigation Reform Act of 1995 ("the Act"),
can be identified by the use of terms such as "may," "expect," "anticipate,"
"intend," "estimate," "believe," "continue," or similar variations or the
negative thereof. Such forward looking statements are based on current
expectations but involve risks and uncertainties. The Company's business is
dependent upon general economic conditions as well as competitive,
technological, and regulatory developments and trends specific to the Company's
industry and customers. These conditions and events could be substantially
different than believed or expected and these differences may cause actual
results to vary materially from the forward looking statements made or the
results which could be expected to accompany such statements. Specific factors
which could cause such material differences include the following: Design or
manufacturing defects in the Company's products which could curtail sales and
subject the Company to substantial costs for removal, replacement and
reinstallation of such products; manufacturing or product development problems
that the Company does not anticipate because of the Company's relative
experience with these activities; an inability to absorb or adjust costs in
response to lower than anticipated sales volumes; unanticipated costs or
inefficiencies from the ongoing consolidation of certain activities; loss of key
management, sales or technical employees; decisions, by the Company's larger
customers, to cancel contracts or orders as they are entitled to do or not enter
into new contracts or orders with the Company because of dissatisfaction,
technological or competitive changes, changes in
11
<PAGE> 12
ANTEC CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED)
FORWARD LOOKING STATEMENTS - (CONTINUED)
control or other reasons; and the Company's inability, as a result of the
Company's relative experience, to deliver construction services within
anticipated costs and time frames which could cause loss of business, operating
losses and damage claims. The above list is representative of the factors which
could affect the Company's forward looking statements and is not intended as an
all encompassing list of such factors. In providing forward looking statements,
the Company is not undertaking any obligation to update publicly or otherwise
these statements, whether as a result of new information, future events or
otherwise.
12
<PAGE> 13
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 Credit Agreement (Incorporated by reference from ANTEC
Corporation's Registration Statement on Form S-3,
Registration Number 333-58437, Exhibit 10.1)
27 Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K
None
13
<PAGE> 14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ANTEC CORPORATION
By: /s/ LAWRENCE A. MARGOLIS
-----------------------------------
Lawrence A. Margolis
Executive Vice President
(Principal Financial Officer, duly
authorized to sign on behalf of
the registrant)
Dated: August 12, 1998
14
<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, 1998.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 798
<SECURITIES> 0
<RECEIVABLES> 119,420
<ALLOWANCES> 3,962
<INVENTORY> 131,727
<CURRENT-ASSETS> 5,561
<PP&E> 37,930
<DEPRECIATION> 0
<TOTAL-ASSETS> 500,637
<CURRENT-LIABILITIES> 105,611
<BONDS> 161,500
0
0
<COMMON> 352
<OTHER-SE> 233,174
<TOTAL-LIABILITY-AND-EQUITY> 500,637
<SALES> 264,145
<TOTAL-REVENUES> 264,145
<CGS> 194,550
<TOTAL-COSTS> 194,550
<OTHER-EXPENSES> 66,649
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,278
<INCOME-PRETAX> (332)
<INCOME-TAX> 1,212
<INCOME-CONTINUING> (1,544)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,544)
<EPS-PRIMARY> (.04)
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