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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q/A
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 0-22336
ANTEC CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 36-3892082
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
2850 W. GOLF ROAD
ROLLING MEADOWS, IL 60008
(847) 439-4444
(Address, including zip code and telephone number, including
area code, of registrant's principal executive offices)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES [X] NO [ ]
At July 31, 1997, there were 38,753,280 shares of Common Stock, $0.01 par
value, of the registrant outstanding.
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PART I. FINANCIAL INFORMATION
ANTEC CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
----------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 5,658 $ 27,398
Accounts receivable (net of allowance for doubtful
accounts of $4,174 in
1997 and $3,539 in 1996) 91,824 106,602
Inventories, primarily finished goods 119,479 138,785
Other current assets 3,535 9,706
-------- --------
Total current assets 220,496 282,491
Property, plant and equipment, net 37,276 35,947
Goodwill (net of accumulated amortization of $34,739 in 1997
and $31,858 in 1996) 162,147 167,128
Deferred income taxes, net 16,183 12,174
Other assets 12,958 13,153
-------- --------
$449,060 $510,893
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 26,146 $ 54,039
Accrued compensation, benefits and related taxes 14,931 19,648
Other current liabilities 25,521 24,160
-------- --------
Total current liabilities 66,598 97,847
Long-term debt 86,387 102,658
-------- --------
Total liabilities 152,985 200,505
Stockholders' equity:
Preferred stock, par value $1.00 per share, 5 million
shares authorized, none issued and outstanding -- --
Common stock, par value $0.01 per share, 50 million shares
authorized; 38.5 million and 38.4 million shares issued
and outstanding in 1997 and 1996, respectively 385 384
Capital in excess of par value 255,076 254,181
Retained earnings 40,668 55,809
Cumulative translation adjustments (54) 14
-------- --------
Total stockholders' equity 296,075 310,388
-------- --------
$449,060 $510,893
======== ========
</TABLE>
See accompanying notes to the consolidated financial statements.
2
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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,
-------------------- --------------------
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales $124,262 $188,742 $244,296 $371,891
Cost of sales 90,669 140,673 184,575 278,044
-------- -------- -------- --------
Gross profit 33,593 48,069 59,721 93,847
Operating expenses:
Selling, general and administrative expenses 27,411 31,856 54,476 64,010
Amortization of goodwill 1,228 1,245 2,472 2,489
Merger/integration costs -- -- 21,550 --
-------- -------- -------- --------
28,639 33,101 78,498 66,499
-------- -------- -------- --------
Operating income (loss) 4,954 14,968 (18,777) 27,348
Interest expense and other, net 1,679 1,977 3,041 4,327
-------- -------- -------- --------
Income (loss) before income taxes 3,275 12,991 (21,818) 23,021
Income tax expense (benefit) 2,292 5,451 (6,677) 8,011
-------- -------- -------- --------
Net income (loss) $ 983 $ 7,540 $(15,141) $ 15,010
======== ======== ======== ========
Net income (loss) per common and common equivalent
shares $ .03 $ .19 $ (.39) $ .38
======== ======== ======== ========
Weighted average common and common equivalent shares 38,452 39,568 38,436 39,583
======== ======== ======== ========
</TABLE>
See accompanying notes to the consolidated financial statements.
3
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ANTEC CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
---------------------
1997 1996
-------- ---------
<S> <C> <C>
Operating activities:
Net income (loss) $(15,141) $ 15,010
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 7,383 7,120
Deferred income taxes (4,009) (2,105)
Changes in operating assets and liabilities:
Accounts receivable 14,578 (7,046)
Inventories 19,306 12,381
Accounts payable and accrued liabilities (27,818) (6,717)
Other, net 6,429 (39)
-------- ---------
Net cash provided by operating activities 728 18,604
Investing activities:
Purchases of property, plant and equipment (6,240) (4,267)
Other (853) 1,549
-------- ---------
Net cash used by investing activities (7,093) (2,718)
-------- ---------
Net cash provided (used) before financing activities (6,365) 15,886
Financing activities:
Borrowings 66,000 117,995
Reductions in borrowings (82,271) (125,756)
Proceeds from issuance of common stock 896 500
-------- ---------
Net cash used by financing activities (15,375) (7,261)
-------- ---------
Net increase (decrease) in cash and cash equivalents (21,740) 8,625
Cash and cash equivalents at beginning of period 27,398 14,075
-------- ---------
Cash and cash equivalents at end of period $ 5,658 $ 22,700
======== =========
Supplemental cash flow information:
Interest paid during the period $ 3,310 $ 4,089
======== =========
Income taxes paid during the period $ 417 $ 6,297
======== =========
</TABLE>
See accompanying notes to the consolidated financial statements.
4
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ANTEC CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. BASIS OF PRESENTATION
ANTEC Corporation ("ANTEC" or herein together with its consolidated
subsidiaries called the "Company") is an international communications technology
company, headquartered in Rolling Meadows, with major offices in Atlanta and
Denver. The consolidated financial statements include the accounts of the
Company after elimination of intercompany transactions. The consolidated
financial statements furnished herein reflect all adjustments (consisting of
normal recurring accruals) which are, in the opinion of management, necessary
for a fair presentation of the consolidated financial statements for the periods
shown. As described more fully in Note 2, on February 6, 1997, the merger
between ANTEC Corporation, TSX Corporation and TSX Acquisition Corporation
became effective. The consolidated financial statements have been prepared
following the pooling of interests method of accounting and reflect the combined
financial position, operating results and cash flows of ANTEC Corporation and
TSX Corporation as if they had been combined for all periods presented. Certain
amounts have been reclassified for the combined presentation.
NOTE 2. MERGER
On February 6, 1997, shareholders of ANTEC Corporation and TSX Corporation
approved the Plan of Merger ("Merger") dated as of October 28, 1996 among ANTEC
Corporation, TSX Corporation ("TSX") and TSX Acquisition Corporation, and the
Merger resulting in TSX becoming a wholly-owned subsidiary of ANTEC became
effective on that date. Under the terms of the transaction, TSX shareholders
received one share of ANTEC common stock for each share of TSX common stock that
they owned, while ANTEC shareholders continued to own their existing shares. As
a result of the Merger, ANTEC issued approximately 15.4 million shares of common
stock. The transaction was tax-free for TSX shareholders and was accounted for
as a pooling of interests.
Prior to the combination, TSX's fiscal year ended April 30, and ANTEC's
fiscal year ended December 31. TSX's historical financial statements for periods
prior to the December 31, 1996 had to be adjusted to within 93 days of ANTEC's
year-end. Therefore, the statements of operations for the three and six month
periods ended June 30, 1996 represents ANTEC's fiscal period ended on that date
combined with TSX's three and six month periods ended the last Saturday in April
1996, respectively. All intercompany sales between TSX and ANTEC were
eliminated. Operating results for the three and six months ended June 30, 1996
were as follows:
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, 1996 JUNE 30, 1996
------------- -------------
(IN THOUSANDS)
(UNAUDITED)
<S> <C> <C>
Revenue:
ANTEC $162,784 $325,176
TSX 26,758 48,315
Intercompany sales elimination (800) (1,600)
-------- --------
Combined $188,742 $371,891
======== ========
Net Income:
ANTEC $ 3,006 $ 5,568
TSX 4,534 9,442
-------- --------
Combined $ 7,540 $ 15,010
======== ========
</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
5
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ANTEC CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
of December 31, 1996. The following summarizes TSX's operating results for the
two months ended December 31, 1996 (in thousands) (unaudited):
<TABLE>
<S> <C>
Net sales $ 8,668
Operating loss $(3,560)
Net loss $(2,573)
</TABLE>
NOTE 3. MERGER/INTEGRATION COSTS
In the first quarter of 1997, in connection with the Merger discussed in
Note 2, the Company recorded merger/integration costs aggregating approximately
$28 million. The components of the non-recurring charge included $6.9 million
related to the investment banking, legal, accounting and contractual change of
control payments associated with the Merger; $11.2 million related to facility
and operational consolidation and reorganization due to the combining of various
manufacturing operations; and $3.4 million related to severance costs resulting
from the elimination of positions duplicated by the Merger and integration. The
personnel-related costs included charges related to the termination of
approximately 200 employees primarily resulting from the factors described
above. Also included in the total merger/integration charge was a write-off of
redundant inventories relating to overlapping product lines and product
development efforts totaling approximately $6.5 million which has been reflected
in cost of goods sold for the six months ended June 30, 1997. As of June 30,
1997, approximately $9 million of the charge had yet to be utilized.
NOTE 4. IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In February 1997, the FASB issued Statement No. 128, Earnings per Share,
which is required to be adopted on December 31, 1997. At that time, the Company
will be required to change the method currently used to compute earnings per
share and to restate all prior periods. The impact of Statement 128 is not
expected to be material.
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ANTEC CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
COMPARISON OF OPERATIONS FOR THE SIX AND THREE MONTHS ENDED JUNE 30, 1997 AND
1996
Net Sales. Net sales for the six and three month periods ended June 30,
1997 were $244.3 million and $124.3 million, respectively, compared to $371.9
million and $188.7 million for the same period in 1996. This decrease primarily
reflects the ongoing reduction in capital spending by ANTEC's largest customer,
Tele-Communications, Inc. ("TCI") and the impact of the substantial completion
of a major Australian system build in 1996.
Gross Profit. Gross profit for the six and three month periods ended June
30, 1997 was $59.7 million and $33.6 million, respectively, compared to $93.8
million and $48.1 million for the same periods in 1996. These decreases reflect
lower sales discussed above and, for the six month period ended June 30, 1997, a
$6.5 million write-off of redundant inventories relating to overlapping product
lines and product development efforts in connection with the Merger. (See Note 3
of the Notes to the Consolidated Financial Statements.) Excluding the inventory
charge, gross profit as a percentage of net sales for the six and three month
periods ended June 30, 1997 was 27.1% and 27.0%, respectively, compared to 25.2%
and 25.5% for the same periods in 1996. The improved gross profit percentages
for the six and three month periods ended June 30, 1997 are a result of product
mix, notably an increase in ANTEC manufactured product sales.
Gross profit for the six and three month periods ended June 30, 1997,
includes $1.0 million for the partial reversal of a charge taken in December
1996 by TSX for modifications it had agreed to make to products previously sold
by TSX. The partial reversal of this charge in the second quarter of 1997 was
due to the agreement of the customer during the second quarter to permit
products to be modified in the Company's factory instead of in the field as
originally contemplated and the determination as the result of testing that was
completed during the second quarter that a smaller number of units needed to be
modified than originally contemplated. The initial charge for $2.6 million was
taken in December 1996 primarily because TSX agreed at that time to replace the
lids on 3,447 gate keepers, to install new covers on 58,950 minibridgers, and to
replace the plugs and gaskets on 10,771 amplifiers and line extenders for a
customer who had purchased these products from TSX over the period 1993 to 1994.
The customer in November and December 1996 pressed TSX to agree to make these
modifications because of the customer's concern that these products might
prematurely fail. TSX believed that the customer's concern was not justified and
that it was not obligated to make these modifications under its warranties
covering these products. Nevertheless, in order to maintain good relations with
a major customer, TSX agreed in December 1996 at the insistence of the customer
to make these modifications. Having agreed to make these modifications, TSX
believed it was legally obligated to make modifications without further
consideration from the customer other than its forbearance. Although the
agreement was not in writing, TSX's understanding was that it was obligated to
make the requested modifications to the customer's reasonable satisfaction as
soon as practicable at no significant cost or inconvenience to the customer. The
Company initially estimated the cost of making the modifications by multiplying
the estimated labor and material costs for modifying each unit times the number
of units then believe to be involved based upon the number of units that had
been sold to the customer. The Company determined that it would cost
approximately $2.4 million to complete these modifications for this customer.
(This estimate was subsequently revised as described above.) It was contemplated
that these modifications would begin promptly and be completed in a few months.
However because of a general hold on construction imposed by the customer, the
modifications have not been made as of June 30, 1997.
Selling, General and Administrative ("SG&A") Expenses. SG&A expenses for
the six and three month periods ended June 30, 1997 were $54.5 million and $27.4
million, respectively, compared to $64.0 million and $31.9 million for the same
periods in 1996. This represents decreases of 14.9% and 14.0% for the six and
three month periods, respectively. These reductions reflect ongoing expense
controls and savings resulting from the Merger.
7
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ANTEC CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- (CONTINUED)
Merger/Integration Costs. In the first quarter of 1997, the Company
recorded merger/integration costs aggregating approximately $28 million. The
non-recurring charge included investment banking, legal, accounting and
contractual change of control payments associated with the Merger; facility and
operational consolidation and reorganization costs due to the combining of
various manufacturing operations; and severance costs resulting from the
elimination of positions duplicated by the Merger and integration. Also included
in the total merger/integration charge was a write-off of redundant inventories
relating to overlapping product lines and product development efforts totaling
approximately $6.5 million which has been reflected in cost of goods sold for
the six months ended June 30, 1997. (See Note 3 of the Notes to the Consolidated
Financial Statements.)
Interest Expense and Other, Net. Interest expense and other, net for the
six and three month periods ended June 30, 1997 was $3.0 million and $1.7
million, respectively, compared to $4.3 million and $2.0 million for the same
periods in 1996. These decreases primarily relate to decreased debt levels
resulting from improved working capital levels and, to a lesser extent, a lower
average interest rate under the Company's Credit Facility.
Net Income (Loss). Net income (loss) for the six and three month periods
ended June 30, 1997 was $(15.1) million and $1.0 million, respectively, compared
to $15.0 million and $7.5 million for the same periods in 1996. Included in the
net loss for the six month period ended June 30, 1997 were approximately $28.0
million of pretax merger/integration costs. (See Note 3 of the Notes to the
Consolidated Financial Statements.) The decreases in net income from the same
periods in 1996 are due to the factors described above.
FINANCIAL LIQUIDITY AND CAPITAL RESOURCES
In the first quarter of 1997, in connection with the Merger discussed in
Note 2 of the Notes to the Consolidated Financial Statements, the Company
recorded merger/integration costs aggregating approximately $28 million. The
components of the non-recurring charge included $6.9 million related to the
investment banking, legal, accounting and contractual change of control payments
associated with the Merger; $11.2 million related to facility and operational
consolidation and reorganization due to the combining of various manufacturing
operations; and $3.4 million related to severance costs resulting from the
elimination of positions duplicated by the Merger and integration. The
personnel-related costs included charges related to the termination of
approximately 200 employees primarily resulting from the factors described
above. Also included in the total merger/integration charge was a write-off of
redundant inventories relating to overlapping product lines and product
development efforts totaling approximately $6.5 million which has been reflected
in cost of goods sold for the six months June 30, 1997. As of June 30, 1997,
approximately $9 million of the charge had yet to be utilized.
As of June 30, 1997, the Company had a balance of $84 million outstanding
under its credit facility. At June 30, 1997, the Company had approximately $101
million of available borrowings under its Credit Facility. The average interest
rate on these borrowings was 6.5% at June 30, 1997. The commitment fee on unused
borrowings is approximately 1/4 of 1%.
The Company's capital expenditures were $6.2 million and $4.3 million in
the six months ended June 30, 1997 and 1996, respectively. The Company has no
significant commitments for capital expenditures at June 30, 1997.
The Company's primary need for capital has been to fund working capital
requirements, primarily accounts receivable and inventory. The accounts
receivable component of working capital tends to fluctuate closely with the
overall volume of sales activity. The Company has generally been able to adjust
inventory levels according to anticipated business activity. Reflecting sales
decreases, the investment in accounts
8
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ANTEC CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- (CONTINUED)
receivable and inventory decreased approximately $33.9 million and $5.3 million
for the six months ended June 30, 1997 and 1996, respectively.
CASH FLOW
Cash flows provided by operating activities were $0.7 million and $18.6
million for the six months ended June 30, 1997 and 1996, respectively. 1997
includes the impact of merger/integration costs and a reduction in accounts
payable. 1996 reflects the Company's improved working capital position resulting
from its continued effort to control inventory.
Cash flows used by investing activities were $7.1 million and $2.7 million
for the six months ended June 30, 1997 and 1996, respectively. Both periods
include the impact of planned sales, factory and warehouse improvements.
Cash flows used by financing activities were $15.4 million and $7.3 million
for the six months ended June 30, 1997 and 1996, respectively. Both periods
reflect their respective trends in operating and investing activities.
9
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PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
None
10
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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: October , 1998
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