<PAGE> 1
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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
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1999
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.)
11450 TECHNOLOGY CIRCLE
DULUTH, GA 30097
(678) 473-2000
(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, 1999, there were 36,512,409 shares of Common Stock, $0.01
par value, of the registrant outstanding.
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<PAGE> 2
ANTEC CORPORATION
FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1999
INDEX
<TABLE>
<CAPTION>
Page
Part I. Financial Information
<S> <C> <C>
Item 1. Financial Statements
a) Consolidated Balance Sheets
as of June 30, 1999 and December 31, 1998 3
b) Consolidated Statements of Operations
for the Three and Six Months Ended June 30, 1999 and 1998 4
c) Consolidated Statements of Cash Flows
for the Six Months Ended June 30, 1999 and 1998 5
d) Notes to the Consolidated Financial Statements 6 - 10
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11 - 18
Item 3. Quantitative and Qualitative Disclosures on Market Risk 19
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders 20
Item 6. Exhibits and Reports on Form 8-K 21
Signatures 22
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ANTEC CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1999 1998
----------- -----------
(UNAUDITED)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 6,234 $ 4,436
Accounts receivable (net of allowance for doubtful accounts
of $5,591 in 1999 and $4,609 in 1998) 147,637 123,959
Inventories 180,958 150,988
Other current assets 8,131 6,089
-------- --------
Total current assets 342,960 285,472
Property, plant and equipment, net 47,045 41,612
Goodwill (net of accumulated amortization of $44,168 in
1999 and $41,695 in 1998) 152,309 154,782
Deferred income taxes, net - 22,591
Investments 74,243 11,743
Other assets 19,137 16,445
-------- --------
$635,694 $532,645
======== ========
LIABILITIES AND STOCK HOLDERS' EQUITY
Current liabilities:
Accounts payable $ 75,305 $ 57,383
Accrued compensation, benefits and related taxes 16,749 19,804
Other current liabilities 23,759 24,680
-------- --------
Total current liabilities 115,813 101,867
Long-term debt 210,000 181,000
Deferred income taxes, net 3,209 -
-------- --------
Total liabilities 329,022 282,867
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, 75 million
and 50 million shares authorized;
36.5 million and 35.8 million shares issued
and outstanding in 1999 and 1998, respectively 366 358
Capital in excess of par value 219,497 209,193
Retained earnings 86,807 40,190
Cumulative translation adjustments 2 37
-------- --------
Total stockholders' equity 306,672 249,778
-------- --------
$635,694 $532,645
======== ========
</TABLE>
See accompanying notes to the consolidated financial statements
3
<PAGE> 4
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,
------------------------- ------------------------
1999 1998 1999 1998
---------- --------- ---- -------------------
<S> <C> <C> <C> <C>
Net sales $ 196,334 $ 140,704 $ 341,590 $ 264,145
Cost of sales 152,350 103,936 263,395 194,550
--------- --------- --------- ---------
Gross profit 43,984 36,768 78,195 69,595
Operating expenses:
Selling, general and administrative 27,081 26,477 51,976 53,246
Amortization of goodwill 1,237 1,227 2,473 2,453
Restructuring charge -- -- -- 10,000
--------- --------- --------- ---------
Total operating expenses 28,318 27,704 54,449 65,699
--------- --------- --------- ---------
Operating income 15,666 9,064 23,746 3,896
Gain on LANcity transaction - - (60,000) -
Interest expense 3,185 1,777 6,043 3,107
Other (income) expense, net (569) 146 (2,872) 171
--------- --------- --------- ---------
Income before income taxes 13,050 7,141 80,575 618
Income tax expense 5,048 3,492 33,958 1,587
--------- --------- --------- ---------
Net income (loss) $ 8,002 $ 3,649 $ 46,617 $ (969)
========= ========= ========= =========
Net income (loss) per Weighted average
common and common equivalent shares:
Basic $ 0.22 $ 0.10 $ 1.29 $ (0.02)
========= ========= ========= =========
Diluted $ 0.21 $ 0.09 $ 1.12 $ (0.02)
========= ========= ========= =========
Weighted average common and Common
equivalent shares:
Basic 36,416 38,273 36,251 38,809
========= ========= ========= =========
Diluted 43,189 41,303 43,020 38,809
========= ========= ========= =========
</TABLE>
See accompanying notes to the consolidated financial statements.
4
<PAGE> 5
ANTEC CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
--------------------------
1999 1998
---------- ---------
Operating activities:
<S> <C> <C>
Net income (loss) $ 46,617 $ (969)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization 8,188 7,577
Deferred income taxes 25,800 (3,385)
LANcity transaction (60,000) --
Changes in operating assets and liabilities:
(Increase) in accounts receivable (23,678) (31,620)
(Increase) in inventories (29,970) (20,029)
(Increase) in other assets, net (4,604) (1,182)
Increase in accounts payable and
accrued liabilities 11,001 29,604
Increase in other liabilities, net 410 49
--------- ---------
Net cash (used in) operating activities (26,236) (19,955)
Investing activities:
Purchases of property, plant and equipment (11,148) (6,946)
Investments in / advances to joint ventures -- (3,300)
Other -- 175
--------- ---------
Net cash (used in) investing activities (11,148) (10,071)
Financing activities:
Borrowings under credit facilities 111,500 91,000
Reductions in borrowings under credit facilities (82,500) (116,839)
Issuance of 4.5% convertible subordinated notes -- 115,000
Purchase and retirement of common stock -- (63,459)
Deferred financing costs paid (130) (4,837)
Proceeds from issuance of common stock 10,312 2,715
--------- ---------
Net cash provided by financing activities 39,182 23,580
--------- ---------
Net increase (decrease) in cash and cash equivalents 1,798 (6,446)
Cash and cash equivalents at beginning of period 4,436 7,244
--------- ---------
Cash and cash equivalents at end of period $ 6,234 $ 798
========= =========
Supplemental cash flow information:
Interest paid during the period $ 5,423 $ 2,132
========= =========
Income taxes paid during the period $ 2,868 $ 2,718
========= =========
</TABLE>
See accompanying notes to the consolidated financial statements.
5
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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 Duluth, Georgia, with major offices in Englewood,
Colorado and Tinton Falls, New Jersey. 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 in conformity to generally accepted accounting
principles. Additionally, certain prior year amounts have been reclassified to
conform to the 1999 financial statement presentation. Interim results of
operations are not necessarily indicative of results to be expected from a
twelve-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, 1998.
The Company operates in one business segment, communications, providing
a range of customers with network and system products and services, primarily
hybrid fiber / coax ("HFC") networks and systems for the communication industry.
This segment accounts for 100% of the consolidated sales, operating profit and
identifiable assets of the Company. 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 and telecommunication
providers. ANTEC supplies almost all of the products required in a broadband
communication system, including headend, distribution, drop and in-home
subscriber products.
NOTE 2. IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board issued FASB
Statement No. 133, Accounting for Derivative Instruments and Hedging Activities.
FASB Statement No. 133 was originally to go into effect for fiscal years
beginning June 15, 1999. However, on May 19, 1999 the Financial Accounting
Standards Board voted to delay its effective date for one year, to fiscal years
beginning after June 15, 2000. The Board cited concerns about companies' ability
to modify their information systems and educate their managers in time to apply
its new derivatives and hedging standard. The Statement will require the Company
to disclose certain information regarding derivative financial instruments. The
Company does not anticipate that the adoption of FASB Statement No. 133 will
have a significant effect on the results of operations or financial position.
NOTE 3. RESTRUCTURING AND OTHER CHARGES
In January 1998, ANTEC announced a consolidation plan to be implemented
concurrently with the creation of the new President and Chief Operating Officer
organization in Georgia. The Company is in the final stages of consolidating all
of its Rolling Meadows, Illinois corporate and administrative functions to
either the Duluth, Georgia or the Englewood, Colorado locations. As part of this
consolidation, the two principal facilities located in Georgia have been
consolidated and certain international operating and administrative functions
previously located in Miami and Chicago have also been consolidated in Georgia.
In connection with these consolidations, ANTEC recorded a charge of
approximately $10.0 million in the first quarter of 1998. The components of the
restructuring charge included approximately $7.6 million related to personnel
costs and approximately $2.4 million related to lease termination and other
costs. Subsequently, during the fourth quarter of 1998, this charge was reduced
by $0.9 million as a result of the ongoing evaluation of the estimated costs
associated with these actions. The personnel-related costs included termination
expenses related to the involuntary termination of approximately 177 employees,
primarily engaged in finance and management information systems activities as
well as international
6
<PAGE> 7
ANTEC CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
operational functions located in Chicago and Miami. Terminated employees were
offered separation amounts in accordance with the Company's severance policy and
were provided specific separation dates. As of June 30, 1999, 128 of the
estimated 177 employees have been terminated. As of June 30, 1999, approximately
$2.0 million of the cash costs related to personnel costs and approximately $0.5
million of cash costs related to lease termination payments and other costs had
yet to be expended. The Company anticipates these costs will be incurred during
the remainder of the current year.
NOTE 4. INVENTORIES
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
------------ ------------
(Unaudited)
<S> <C> <C>
Raw material $ 50,986 $ 37,437
Work in process 10,040 10,496
Finished goods 119,932 103,055
---------- ----------
Total inventories $ 180,958 $ 150,988
========== ==========
</TABLE>
NOTE 5. PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment, at cost, consists of
the following (in thousands):
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
------------ -------------
(Unaudited)
<S> <C> <C>
Land $ 2,549 $ 2,549
Buildings and leasehold improvements 14,424 14,548
Machinery and equipment 69,973 60,448
---------- ----------
86,946 77,545
Less: Accumulated depreciation (39,901) (35,933)
---------- ----------
Total property, plant and equipment, net $ 47,045 $ 41,612
========== ==========
</TABLE>
NOTE 6. LONG TERM DEBT
Long term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
-------------- --------------
(Unaudited)
<S> <C> <C>
Revolving Credit Facility $ 95,000 $ 66,000
4.5% Convertible Subordinated Notes 115,000 115,000
-------------- ------------
Total long term debt $ 210,000 $ 181,000
============== ============
</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.
If the Notes are redeemed during the twelve-month period commencing May 15,
2001, ANTEC will pay a premium of 1.8% of the principal amount or approximately
$2.1 million. If the Notes are redeemed in 2002 or thereafter, ANTEC will pay a
premium of 0.9% of the principal amount or approximately $1.0 million.
7
<PAGE> 8
ANTEC CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
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 6.67% at June 30, 1999. The
commitment fee on unused borrowings is approximately 0.5%. The New Credit
Facility contains various restrictions and covenants, including limits on
payments to stockholders, interest coverage, and net worth tests. All borrowings
under the New Credit Facility are secured by substantially all of the Company's
assets.
In April 1999, the Company amended the New Credit Facility. This
amendment increased the existing line from $85.0 million to $120.0 million;
$110.0 million of which is currently committed. The New Credit Facility has also
been amended to increase the assets eligible for borrowings to be advanced
against. None of the other significant terms, including pricing, were changed
with the amendment. As of June 30, 1999, the Company had approximately $15.0
million of available borrowings under the New Credit Facility.
NOTE 7. COMPREHENSIVE INCOME (LOSS)
Total comprehensive income for the three and six-month periods ended
June 30, 1999 was $8.0 million and $46.6 million, respectively. Total
comprehensive income (loss) for the three and six-month periods ended June 30,
1998 was $3.6 million and $(1.0) million, respectively. Comprehensive income
increased approximately $2 thousand during the second quarter of 1999 and
decreased $35 thousand through the six months ended June 30, 1999. Comprehensive
income decreased approximately $1 thousand during the second quarter of 1998 and
increased by approximately $30 thousand through the first half of 1998.
NOTE 8. SALES INFORMATION
As of June 30, 1999, Liberty Media Corporation, which is part of the
Liberty Media Group of AT&T whose financial performance is "tracked" by a
separate class of AT&T stock, was the beneficial owner of approximately 21.0% of
the outstanding ANTEC common stock. This beneficial ownership includes options
to acquire an additional 854,341 shares. A significant portion of the Company's
revenue was derived from sales to AT&T aggregating approximately $68.8 million
and $34.9 million for the quarters ended June 30, 1999 and 1998, respectively.
Through the first six months of 1999, revenue generated by sales to AT&T were
approximately $106.7 million as compared to the first half of 1998 where sales
to AT&T totaled $61.2 million.
The Company sells its products primarily in the United States.
International revenue is being generated primarily from Asia Pacific, Europe,
Latin America and Canada. The Asia Pacific market includes Australia, New
Zealand, China, Hong Kong, Taiwan, India, Indonesia, Japan, Korea, Malaysia,
Philippines, Sampan, Singapore and Thailand. The European market includes the
United Kingdom, Ireland, France, Italy, Portugal and Spain. International sales
for the three and six month periods ended June 30, 1999 and 1998, respectively,
are as follows (in thousands):
8
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ANTEC CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
----------------------------- --------------------------------
1999 1998 1999 1998
------------- ------------ ------------- --------------
INTERNATIONAL REGION
<S> <C> <C> <C> <C>
Asia Pacific....................... $ 3,037 $ 4,242 $ 7,010 $ 10,326
Europe............................. 4,375 3,435 7,499 5,847
Latin America...................... 5,759 6,924 12,899 13,731
Canada............................. 755 890 1,451 1,413
------------- ------------ ------------- --------------
Total international sales $ 13,926 $ 15,491 $ 28,859 $ 31,317
============= ============= ============= ==============
</TABLE>
Total identifiable international assets were immaterial.
NOTE 9. LANCITY TRANSACTION
During the first quarter of 1999, the Company completed the combination
of the Broadband Technology Division of Nortel Networks (LANcity) with Arris
Interactive, LLC, a joint venture between ANTEC and Nortel Networks. This
combination was effected by the contribution of the LANcity assets and business
into Arris Interactive. ANTEC's interest in the joint venture was reduced by
6.25% from 25% to 18.75%, while Nortel's interest was increased from 75.0% to
81.25%. In addition, based on the achievement of certain revenue goals for
LANcity products, up to an additional 6.25% of dilution in ANTEC's interest (to
12.5%) may occur. Nortel, however, has the option to take, in lieu of the
additional interest in Arris, up to 2,747,252 shares of ANTEC stock. In order to
achieve the full amount of ANTEC shares or the full additional 6.25% ownership
interest in Arris Interactive, sales of LANcity products from January 1, 1999 to
June 30, 2000 must reach or exceed $300.0 million during such period. The amount
of additional Arris interest or ANTEC stock will be prorated on a straight-line
basis for sales between $180.0 million and $300.0 million. No additional
interest or stock ownership will occur if sales of LANcity products during the
eighteen-month period are less than $180.0 million. Through the six months ended
June 30, 1999, total LANcity product sales were approximately $66.6 million.
The Company recorded a gain of $60.0 million, net of related expenses,
based on an independent valuation of LANcity. The Company has elected to
recognize gains or losses on the sale of previously unissued stock of a
subsidiary or investee based on the difference between the carrying amount of
the equity interest in the investee immediately before and after the
transaction.
9
<PAGE> 10
ANTEC CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
NOTE 10. EARNINGS PER SHARE
The following is a reconciliation of the numerators and denominators of
the basic and diluted earnings per share ("EPS") computations for the periods
indicated (in thousands except per share data):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------- -------------------
1999 1998 1999 1998
-------- -------- -------- --------
Basic:
<S> <C> <C> <C> <C>
Net income (loss) $ 8,002 $ 3,649 $ 46,617 $ (969)
======== ======== ======== ========
Weighted average shares outstanding 36,416 38,273 36,251 38,809
======== ======== ======== ========
Basic earnings per share $ 0.22 $ 0.10 $ 1.29 $ (0.02)
======== ======== ======== ========
Diluted:
Net income (loss) $ 8,002 $ 3,649 $ 46,617 $ (969)
Add:
4.5% convertible subordinated notes
interest and fees, net of federal income
tax effect 887 - 1,774 -
-------- -------- -------- --------
Total $ 8,889 $ 3,649 $ 48,391 $ (969)
======== ======== ======== ========
Weighted average shares outstanding 36,416 38,273 36,251 38,809
Net effect of dilutive securities:
Add options / warrants 1,981 3,030 1,977 -
Add assumed conversion of
4.5 % convertible subordinated notes 4,792 - 4,792 -
-------- -------- -------- --------
Total 43,189 41,303 43,020 38,809
======== ======== ======== ========
Diluted earnings per share $ 0.21 $ 0.09 $ 1.12 $ (0.02)
======== ======== ======== ========
</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 as the Company incurred a
net loss and inclusion of these securities would be antidilutive.
10
<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
COMPARISON OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1999 AND
1998
Net Sales. Net sales for the three and six-month periods ended June 30,
1999 were $196.3 million and $341.6 million, respectively as compared to $140.7
million and $264.1 million for the same periods in 1998. Revenue for the second
quarter of 1999 established a new record for the Company and marked an increase
of approximately 39.5% over the second quarter of 1998 and was up sequentially
35.2% as compared to the first quarter of 1999. This revenue growth is a result
of several factors. The Company's Cornerstone voice and data product sales have
grown from $9.6 million in the second quarter of 1998 to $45.2 million during
the second quarter of 1999. Through six months, Cornerstone's voice and data
volume has increased approximately 423% from $12.7 million recorded through June
30, 1998 to $66.3 million at the close of the first half of 1999. Cornerstone's
volume growth has been pushed by the strength of Host Digital Terminal ("HDT")
sales. The HDT product provides an interface between the hybrid fiber / coax
("HFC") system and digital telephone switches. Additionally, the introduction of
revenue from LANcity cable product sales, Cornerstone "data", was included in
the results for the second quarter of 1999.
The remaining balance of the revenue increase for the three and six
months ended June 30, 1999 as compared to the same periods last year, stems from
substantial revenue growth across the Company's various product offerings.
Exclusive of the Cornerstone voice and data revenue growth as previously noted,
combined sales for the remaining product lines increased approximately $20.0
million and $23.8 million for the three and six month periods, respectively. The
major areas of growth include the Company's repeater and fiber product lines,
which experienced combined increases of approximately $2.7 million and $3.4
million over the three and six month periods ended June 30, 1999 as compared to
the same periods last year. The Company's optronics business, particularly the
headend and node product lines, have helped to increase revenues approximately
$8.5 million and $10.3 million for the three and six month periods ended June
30, 1999 as compared to the same periods last year. The Company's Telewire
products have also experienced an increase of approximately $11.6 million and
$13.2 million over the three and six month periods as compared to the same
periods last year.
Sales to ANTEC's largest customer, AT&T, reached approximately $68.8
million during the second quarter of 1999 or 35.0% of the quarterly volume as
compared to the same period last year when sales to AT&T were $34.9 million or
24.8% of the volume for the quarter. Year to date, sales to AT&T grew to $106.7
million in 1999 as compared to $61.2 million recorded for the same period last
year. Sales to AT&T have grown approximately 74.3% when comparing the first six
months of 1999 to the first half of 1998.
Gross Profit. Gross profit for the three and six-month periods ended
June 30, 1999 were $44.0 million and $78.2 million, respectively, as compared to
$36.8 million and $69.6 million for the same periods in 1998. Gross profit, as a
percentage of sales, for the three and six-month periods ended June 30, 1999 was
22.4% and 22.9%, respectively, as compared to 26.1% and 26.3% for the same
periods in 1998. Although the sales volume has increased, the Company's gross
margin percentage has slipped slightly during the current year. The decreased
gross profit percentage for the three and six-month periods is a direct result
of the increased Cornerstone sales, as previously mentioned, which carried a
lower than average gross margin as do the LANcity product sales. ANTEC has
exclusive domestic distribution rights for both the Cornerstone and LANcity
products to the cable MSO's. This agreement affords ANTEC distribution type
margins traditionally in the 15% range. Additionally, manufacturing
inefficiencies associated with new product introductions during 1999 had an
adverse effect on margins. As the factories become more familiar with the
procedures necessary to manufacture these new products, this trend is expected
to reverse and the respective gross profit margins on these products are
expected to improve.
Additionally, the Company recognized $0.9 million and $2.1 million in
additional gross margin related to intercompany profit in inventory pertaining
to sales of the Company's products to the Tanco joint venture for the three and
six-month periods ended June 30, 1999. This venture provided turnkey
construction or upgrading of broadband distribution services. ANTEC deferred its
ownership portion of this
11
<PAGE> 12
profit on sales to Tanco until Tanco effectively transferred the inventory to
the ultimate customer. The Tanco joint venture is currently in the final stages
of dissolution as all remaining contracts relating to the venture have been
terminated by AT&T/TCI. Consequently, there will no longer be any deferral of
intercompany profit in inventory pertaining to transactions with the venture.
The termination of these contracts and the dissolution of the venture are not
expected to have any material adverse effect on the Company or its product sales
to AT&T/TCI.
Selling, General and Administrative ("SG&A") Expenses. SG&A expenses
for the three and six-month periods ended June 30, 1999 were $27.1 million and
$52.0 million, respectively, as compared to $26.5 million and $53.2 million for
the same periods in 1998. The six month positive spending variance includes the
reversal of approximately $1.8 million in over-accrued expenses made during the
first quarter of 1999 due to a change in estimated bonuses and a reduction in
self-insurance reserves from year end. SG&A expenses have increased during the
second quarter and six months of 1999 as compared to the prior year primarily as
a result of the increased spending for the Cornerstone products sales marketing
and support.
Restructuring. In the first quarter of 1998, ANTEC recorded a
restructuring charge of approximately $10.0 million, which was subsequently
reduced to $9.1 million in the fourth quarter of 1998 based on the continuing
evaluation of these expenses. This 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 Duluth,
Georgia or the Englewood, Colorado locations; the consolidation of the Company's
two principal facilities in Georgia into one; and the consolidation of certain
international operating and administrative functions located in Miami and
Chicago into Georgia. (See Note 3 of the Notes to the Consolidated Financial
Statements.)
Other Charges. The costs incurred to make modifications to previously
sold TSX products have been charged against a reserve created in December 1996,
initially $1.6 million, when TSX agreed to make these modifications. These
charges were $0.2 million and $0.4 million in the three and six-month periods
ended June 30, 1999. As of June 30, 1999 the final modifications were completed
and this reserve balance stood at zero.
Gain on LANcity Transaction. The transaction was accounted for, in
effect, as if it were a gain on the sale of ANTEC's 6.25% interest in Arris
Interactive to Nortel in exchange for 12.5% of LANcity. As a result, a pre-tax
gain of approximately $60.0 million was recognized during the quarter ended
March 31, 1999. Additionally, ANTEC has become the exclusive distributor of
LANcity products to domestic cable operators. (See Note 9 of the Notes to the
Consolidated Financial Statements.)
Interest Expense. Interest expense for the three and six-month periods
ended June 30, 1999 was recorded at $3.2 million and $6.0 million, respectively,
as compared to $1.8 million and $3.1 million recorded for the same periods
during 1998. Interest expense for 1999 reflects the cost of the increased
short-term borrowings coupled with the impact of the issuance of $115.0 million
of 4.5% Convertible Subordinated Notes completed during the second quarter of
1998.
12
<PAGE> 13
The three and six-month periods ended June 30, 1998 also include the
impact of the repurchase of 4.4 million shares of the Company's common stock
from Anixter International, Inc. for $63.5 million. Additionally, interest
expense for 1998 includes the write-off of the remaining deferred financing fees
related to the Company's previous credit facility paid down in May 1998.
Other Income and Expense. The results for the six-month period ended
June 30, 1999 include the impact of approximately $2.2 million of channel fees
recorded related to LANcity's first quarter sales to domestic cable companies.
Beginning in April, all LANcity revenue, pertaining to cable modem and headend
products sold into the Company's market, were recorded by ANTEC. Due to the
timing of the completion of this transaction, a channel fee of 15% was earned by
ANTEC for sales of LANcity products sold in the first quarter of 1999.
Net Income (Loss). Net income (loss) for the three and six-month
periods ended June 30, 1999 was $8.0 million and $46.6 million, respectively, as
compared to $3.6 million and a loss of ($1.0) million for the same periods
during 1998. The first half of 1999 includes the gain on the LANcity transaction
of approximately $60.0 million, whereas, included in the net loss for 1998, was
a restructuring charge of approximately $10.0 million. Additionally, the strong
revenue volume helped strengthen net income during 1999 given that gross margin,
as a percentage of sales, was down and expenses remained relatively flat.
FINANCIAL LIQUIDITY AND CAPITAL RESOURCES
REORGANIZATION
In January 1998, ANTEC announced a consolidation plan to be implemented
concurrently with the creation of the new President and Chief Operating Officer
organization in Georgia. The Company is in the final stages of consolidating all
of its Rolling Meadows, Illinois corporate and administrative functions into
either the Duluth, Georgia or the Englewood, Colorado locations. As part of this
consolidation, the two principal facilities located in Georgia have been
consolidated and certain international operating and administrative functions
located in Miami and Chicago have also been consolidated in Georgia. In
connection with these consolidations, ANTEC recorded a charge of approximately
$10.0 million in the first quarter of 1998. The components of the non-recurring
charge included approximately $7.6 million related to personnel costs and
approximately $2.4 million related to facilities and other costs. Subsequently,
during the fourth quarter of 1998 this charge was reduced by $0.9 million as a
result of the ongoing evaluation of the estimated costs associated with these
actions. The personnel-related costs included termination costs related to the
involuntary termination of approximately 177 employees, primarily related to
finance, management information systems, and international operations functions
located in Chicago and Miami. Terminated employees were offered separation
amounts in accordance with the Company's severance policy and were provided
specific separation dates. As of June 30, 1999, 128 of the estimated 177
employees have been terminated. As of June 30, 1999, approximately $2.0 million
of the cash costs related to personnel costs and approximately $0.5 million of
cash costs related to lease termination payments and other costs had yet to be
expended. The Company anticipates these costs will be charged during the
remainder of the current year.
FINANCING
As of June 30, 1999, the Company had a balance of $95.0 million
outstanding under its Credit Facility and $15.0 million of available borrowings.
The average interest rate on its outstanding borrowings was 6.67% at June 30,
1999. The commitment fee on unused borrowings is approximately 0.5%. In April
1999, the Company, with its banks, amended its line of credit. This amendment
increased the existing line from $85.0 million to $120.0 million; $110.0 million
of which is currently committed. The line has also been amended to increase the
assets eligible for borrowings to be advanced against. None of the other
significant terms, including pricing, were changed in the amendment.
13
<PAGE> 14
CAPITAL EXPENDITURES
The Company's capital expenditures were $11.1 million and $6.9 million
for the six months ended June 30, 1999 and 1998, respectively. Except for the
Year 2000 project discussed in a separate section of this document, the Company
had no significant commitments for capital expenditures at June 30, 1999.
CASH FLOW
Cash levels have increased by approximately $1.8 million in the first
half of 1999 and decreased by $6.4 million during the same period last year.
Through the six months ended June 30, 1999 cash used in operating activities was
$26.2 million while the Company spent $11.1 million in capital expenditures.
Positive cash flows of $39.2 million were provided through financing activities
during the first six months of 1999. Cash used in operating activities was $20.0
million during the six months ended June 30, 1998. During the first half of
1998, the Company recorded capital expenditures of $6.9 million while $3.3
million was invested in / advanced to joint ventures. These cash outlays during
1998 were partially offset by the positive cash flows of $23.6 million generated
through financing activities at that time.
Operating activities utilized cash of $26.2 million, which is
reflective of the increased working capital levels required by the increased
sales volume during the period ended June 30, 1999. In the first quarter of
1999, the Company recorded an investment of $62.5 million in its Arris joint
venture based on the joint venture's estimated value at the time of the
transaction (See Note 9 of the Notes to the Consolidated Financial Statements).
Additionally, increases in accounts receivable and inventories during the period
ended June 30, 1999 utilized cash of approximately $23.7 million and $30.0
million, respectively. An increase in accounts payable and accrued liabilities
provided approximately $11.0 million through June 30, 1999. Cash flows used by
operating activities were $20.0 million for the six months ended June 30,1998.
Increases in receivables and inventories utilized cash of approximately $31.6
million and $20.0 million respectively. An increase in accounts payable and
accrued liabilities during this same period in 1998 provided positive cash flow
of $29.6 million.
Day's sales outstanding have decreased to approximately 68 days at the
close of June 30, 1999 as compared to approximately 77 days at the end of the
first half of 1998. This marked decrease in day's sales outstanding is
consistent with the surge in sales volume during 1999 and specifically during
the second quarter.
The increase in current inventory levels during the six months of 1999
is reflective of the increased revenue and product demands during that period.
Additionally, part of this increase is being driven by contractual obligations
with certain suppliers combined with temporary softness in sales of those same
supplied products. It is expected that this trend will reverse and inventory
levels will be reduced over the coming months. Despite the respective increases
in inventory levels, inventory turns have remained fairly stable at 3.0 times
and 3.1 times for the six months ended June 30, 1999 and 1998, respectively.
Cash flows used in investing activities were $11.1 million and $10.1
million for the six months ended June 30, 1999 and 1998, respectively. The $11.1
million relates to expenditures for capital assets during 1999 while the 1998
investing activities consisted of $6.9 million spent on capital assets and $3.3
million invested in / advanced to joint ventures.
Cash flows provided by financing activities were $39.2 million and
$23.6 million for the six months ended June 30, 1999 and 1998, respectively.
Both periods reflect their respective trends in operating and investing
activities. The first half of 1999 was also affected by the exercise of stock
options that provided positive cash flows of approximately $10.3 million as
compared to $2.7 million through June 30, 1998. Net borrowings under the credit
facility were $29.0 million for the six months ended June 30, 1999. The most
significant financing activities which occurred during the six months ended June
30, 1998 included the impact of the issuance of $115.0 million of 4.5%
Convertible Subordinated Notes and the repurchase of 4.4 million shares of
Common Stock from Anixter International, Inc. for approximately $63.5 million.
14
<PAGE> 15
Based upon current levels of operations and anticipated growth, the
Company expects that sufficient cash flow will be generated from operations, so
that, combined with other financing alternatives available, including bank
credit facilities, the Company will be able to meet all of its debt service,
capital expenditures and working capital requirements for the immediately
foreseeable future.
YEAR 2000 DISCLOSURE
IMPACT OF YEAR 2000:
As the millenium approaches, the Company, like most other companies,
has been preparing for the impact of its arrival on the Company's business, as
well as on the businesses of its customers, suppliers, and business partners.
The Year 2000 Issue is the result of computer programs being written using two
digits rather than four to define the applicable year. With regard to dates
after December 31, 1999, computer programs that have time-sensitive software may
interpret a date using "00" as the year 1900 rather than the year 2000. The Year
2000 Issue creates potential risks for the Company. The Company has numerous
operating components consisting of hardware, software, operating systems,
telecommunications applications and database software that, if failure were to
occur, would jeopardize the operations of the Company and its ability to conduct
normal business activities. The Company may also be exposed to risks from third
parties with whom the Company conducts business who fail to adequately address
their own Year 2000 Issues.
STATE OF READINESS:
The Company has been addressing the Year 2000 Issue since the beginning
of 1997 starting with the review of its internal Information Technology ("IT")
and non-IT systems and assessing potential exposures. In 1998, the Company began
concentrating on a more centralized approach to the Year 2000 Issue and
subsequently created a Year 2000 Committee. This Committee is comprised of a
cross-functional team from various disciplines throughout the Company. The
Committee meets regularly to set milestones, review the process to date,
formulate contingency plans and evaluate cost summaries as they relate to the
Year 2000 Issue. These periodic reviews are summarized and the results are
communicated to the Company' management and to the Board of Directors as
requested.
The Year 2000 Committee outlined and defined the Company's strategy for
identifying and managing exposure to mission critical applications due to the
change in the millenium. This strategy delineates scope and responsibility,
defines a methodology and approach for identifying and assessing risk, develops
contingency plans where required, and provides a structure for maintaining the
oversight and accountability of the Year 2000 project.
Based on its assessments, the Company determined that it would be
required to modify or replace significant portions of its software and certain
hardware to enable those systems to properly utilize and recognize dates beyond
December 31, 1999. The Company presently believes that with modifications or
replacements of existing software and certain hardware, and conversions to new
software, the Year 2000 Issue will not pose significant operational problems for
its computer systems. However, if such modifications, replacements 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 plan regarding the Year 2000 Issue evolves through four
phases: assessment, remediation, testing and implementation. The Company had
completed its assessment of all mission critical systems that could be
significantly affected by the Year 2000 Issue by the end of the first quarter of
1999. As previously mentioned, based on the review conducted during 1997, it was
concluded that a significant portion of the Company's information technology
software and certain hardware as they pertain to the Company's distribution
efforts, were to be replaced. The Company's assessment further indicated that
the software and hardware used in its production and manufacturing systems had
limited risk and would require module upgrades to attain compliance. In
addition, the Company has reviewed its product lines and has determined that it
has no exposure to contingencies related to the Year 2000 Issue for the products
it
15
<PAGE> 16
has sold. Also, the Company has gathered information about Year 2000 compliance
status of its significant suppliers, subcontractors, and customers and continues
to monitor their compliance.
For its information technology exposures, the Company was 100% complete
on the remediation phase pertaining to the replacement, reprogramming and
modifications to its software and certain hardware by the close of the first
quarter of 1999. The testing and implementation phases run concurrently for
different systems. Testing on the information technology software related to the
Company's distribution efforts was completed during the second quarter of 1999.
Implementation of this software took place on July 6, 1999. As with any new
implementation, the Company continues to monitor the performance and success of
the new system through the testing and generation of reports using live data. At
the close of the first quarter of 1999, the implementation and testing of
software and hardware modifications used in the Company's production and
manufacturing systems had been completed. The Company has scheduled a final
intensive review of its production and manufacturing system during the third
quarter of 1999. Additionally, the Company's final implementation of system
upgrades, as they pertain to the Company's telecommunications application, was
completed during the second quarter of 1999.
The Company's primary information technology systems used for
manufacturing, production and distribution do not interface directly with any
suppliers, customers, subcontractors or business partners. The Company has
queried its significant suppliers, subcontractors, customers and business
partners as to their state of readiness and compliance to the Year 2000 Issue.
To date, the Company is not aware of any external agent with a Year 2000 Issue
that could materially impact the Company's results of operations, liquidity, or
capital resources. 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 operations. The Company, based on
its normal interaction with its customers and suppliers and the wide attention
the Year 2000 Issue has received, believes that its suppliers and customers will
be prepared for the Year 2000 Issue. There can, however, be no assurance that
this will be so. The Company continues to solicit written assurances from its
major suppliers, customers, and service providers, however, these assurances, if
given, may not be enforceable.
COSTS:
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. The Company utilizes
both internal and external resources to reprogram, replace, implement and test
the software for the system improvements and Year 2000 modifications. The
Company's final system improvements and testing related to its distribution
efforts were completed during the second quarter of 1999 and the implementation
took place in July 1999. The Company plans to closely monitor and test the
performance of the new system. The total cost of the system improvement and the
Year 2000 project was originally estimated at approximately $6.0 million to be
funded through operating cash flows. Of the total $6.0 million estimated for
the project cost, approximately $3.8 million was attributable to the purchase
of new software and hardware that is being capitalized. The remaining $2.2
million, which is being expensed as incurred, has not had a material effect on
the results of operations.
To date, the Company has already incurred approximately $6.2 million
($4.3 million capitalized for new systems and $1.9 million expensed as
incurred) related to its system improvement and the Year 2000 project related
to the Company's distribution efforts. Currently, the Company estimates that
approximately $0.5 million additional dollars will be spent on consulting
efforts through the month of August 1999, to be added to the $6.2 million
already accumulated regarding this implementation.
Approximately $0.2 million has been expended on modifying all other
mission critical information applications. Another $0.2 million is expected to
be incurred by the close of the third quarter of 1999 related to the compliance
efforts regarding the telecommunications applications and the final code review
within the production and manufacturing system environment. As a result, the
Company's current estimate of the aggregate cost expenditure is $7.1 million.
16
<PAGE> 17
RISKS:
The Management of the Company believes it has an effective program in
place to resolve the Year 2000 Issue in a timely manner. As previously noted,
the Company is in the final stages of compliance on all its mission critical
information technology systems. If any of the Company's suppliers or customers
do not, or if the Company itself does not, successfully deal with the Year 2000
Issue, the Company could experience delays in receiving or sending goods that
would increase its costs and that could cause the Company to lose business and
even customers and could subject the Company to claims for damages. Problems
with the Year 2000 Issue could also result in delays in the Company invoicing
its customers or in the Company receiving payments from them that would affect
the Company's liquidity. Problems with the Year 2000 Issue could affect the
activities of the Company's customers to the point that their demand for the
Company's products is reduced. The severity of these possible problems would
depend on the nature of the problem and how quickly it could be corrected or an
alternative implemented, which is unknown at this time. In the extreme, such
problems could have a significant adverse effect on the Company's operations to
the point of ceasing all normal business activities.
Some risks of the Year 2000 Issue are beyond the control of the Company
and its suppliers and customers. For example no preparations or contingency plan
will protect the Company from a down turn in economic activity caused by the
possible ripple effect throughout the entire economy that could be caused by the
problems of others with the Year 2000 Issue.
CONTINGENCY PLANS:
The Company is constantly evaluating the need for contingency plans for
the Year 2000 Issue. This need is being continuously monitored as the Company
acquires more information about the preparations of its suppliers and customers
as well as its continued assessment of internal risk factors.
YEAR 2000 FORWARD LOOKING STATEMENTS:
The foregoing Year 2000 discussion contains "forward-looking
statements" within the meaning defined by the Private Securities Litigation
Reform Act of 1995. Such statements, including without limitation, anticipated
costs and the dates by which the Company expects to complete certain actions,
are based on management's best current estimates, which were derived utilizing
numerous assumptions about future events, including the continued availability
of certain resources, representations received from third parties and other
factors. However, there can be no guarantee that these estimates will be
achieved and that actual results could differ materially from those anticipated.
Specific factors that might cause such material differences include, but are not
limited to,
- the ability to identify and remediate all relevant IT and
non-IT systems,
- results of Year 2000 testing,
- adequate resolution of Year 2000 Issues by businesses and
other third parties who are service providers, suppliers or
customers of the Company,
- unanticipated system costs, the adequacy of and ability to
develop and implement contingency plans and similar
uncertainties.
The "forward-looking statements" made in the foregoing Year 2000 discussion
speak only as of the date on which such statements are made, and the Company
undertakes no obligation to update any forward-looking statement to reflect
events or circumstances after the date on which such statement is made or to
reflect the occurrence of unanticipated events.
17
<PAGE> 18
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," "could be," 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 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 that 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.
18
<PAGE> 19
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES OF MARKET RISK
The following discussion of the Company's risk-management activities
includes "forward looking statements" that involve risks and uncertainties.
Actual results could differ materially from those projected in the forward
looking statements.
ANTEC is exposed to various market risks, including interest rates and
foreign currency rates. Changes in these rates may adversely affect its results
of operations and financial condition. To manage the volatility relating to
these typical business exposures, ANTEC may enter into various derivative
transactions, when appropriate. ANTEC does not hold or issue derivative
instruments for trading or other speculative purposes.
ANTEC uses an interest rate swap agreement, with large creditworthy
financial institutions, to manage its exposure to interest rate changes. The
swap involves the exchange of fixed and variable interest rate payments without
exchanging the notional principal amount. Payments or receipts on the agreement
are recorded as adjustments to interest expense. At June 30, 1999 the Company
had an outstanding interest rate swap agreement denominated in dollars, maturing
in 2001, with an aggregate notional principal amount of $50.0 million. Under
this agreement, the Company receives a floating rate marked to LIBOR and pays a
fixed interest rate. The swap effectively changes the Company's payment of
interest on $50.0 million of variable rate debt to fixed rate debt.
The fair value of the interest rate swap agreement represents the
estimated receipts or payments that would be made to terminate the agreement. At
June 30, 1999, the Company would have paid $1.2 million to terminate the
agreement. A 1% decrease in short-term borrowing rates would increase the amount
paid to terminate the agreement by approximately $1.1 million.
The Company is exposed to foreign currency exchange rate risk as a
result of sales of its products in various foreign countries and manufacturing
operations conducted in Juarez, Mexico. In order to minimize the risks
associated with foreign currency fluctuations most sales contracts are issued in
U.S. dollars. The Company has previously used foreign currency contracts to
hedge the risks associated from foreign currency fluctuations for significant
sales contracts. The Company constantly monitors the exchange rate between the
U.S. dollar and Mexican peso to determine if any adverse exposure exists
relative to its costs of manufacturing. As a result of current market conditions
there are currently no material contracts denominated in foreign currencies.
19
<PAGE> 20
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Annual Meeting of Stockholders of ANTEC Corporation held May 6,
1999:
An election of ten Directors was held and the shares so present were
voted as follows for the election of each of the following:
<TABLE>
<CAPTION>
Number of Number of
Shares Shares
Voted For Withheld
------------- -------------
<S> <C> <C>
J. A. Ian Craig 31,717,873 2,108,509
------------- -------------
Rod F. Dammeyer 31,717,303 2,109,079
------------- -------------
John M. Egan 31,718,736 2,107,646
------------- -------------
James L. Faust 31,719,491 2,106,891
------------- -------------
William H. Lambert 31,719,040 2,107,342
------------- -------------
John R. Petty 31,719,608 2,106,774
------------- -------------
William T. Schleyer 31,718,003 2,108,379
------------- -------------
Samuel K. Skinner 31,716,803 2,109,579
------------- -------------
Robert J. Stanzione 31,720,095 2,106,287
------------- -------------
Bruce Van Wagner 31,713,058 2,113,324
------------- -------------
</TABLE>
A proposal was made and adopted to increase the number of shares of
Common Stock that may be issued pursuant to the Company's Employee Stock
Purchase Plan from 300,000 shares to 800,000 shares, and the shares so present
were voted as follows:
<TABLE>
<CAPTION>
Number of Number of Number of
Shares Shares Voted Shares
Voted For Against Withheld
------------- --------------- --------------
<S> <C> <C> <C>
Approval of amendment Employee Stock
Purchase Plan increasing the number
of shares of Common Stock which may be issued
pursuant to that plan from 300,000 shares to
800,000 shares 31,566,122 2,232,179 28,081
------------- --------------- --------------
</TABLE>
A proposal was made and adopted to increase the number of authorized
shares of Common Stock from 50,000,000 shares to 75,000,000 shares, and the
shares so present were voted as follows:
<TABLE>
<CAPTION>
Number of Number of Number of
Shares Shares Voted Shares
Voted For Against Withheld
------------- --------------- --------------
<S> <C> <C> <C>
Approval of amendment to the
Company's Certificate of Incorporation
to increase the number of authorized
shares of Common Stock from 50,000,000
shares to 75,000,000 shares 33,292,794 510,297 23,291
------------- --------------- --------------
</TABLE>
20
<PAGE> 21
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3.1(b) Amendment of June 16, 1999 to Restated Certificate of
Incorporation
10.31(a) Amended and Restated Employment Agreement, dated
April 29, 1999, with John Egan
10.31(b) Consulting Agreement, dated April 29, 1999, with John
Egan
10.31(c) Supplemental Executive Retirement Plan for John
Egan
10.32 Amended and Restated Employment Agreement, dated
April 29, 1999, with Robert Stanzione
10.33 Amended and Restated Employment Agreement, dated
April 29, 1999, with Lawrence Margolis
27.1 Financial Data Schedules (for SEC use only)
(b) Reports on Form 8-K
None
21
<PAGE> 22
SIGNATURES
Pursuant to the requirements 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
(Principal Financial Officer, duly
authorized to sign on behalf of
the registrant)
Dated: August 16, 1999
22
<PAGE> 1
EXHIBIT 3.1(b)
CERTIFICATE OF AMENDMENT
TO THE
RESTATED CERTIFICATE OF INCORPORATION
OF
ANTEC CORPORATION
--------------------------------------------
Pursuant to Section 242 of the General
Corporation Law of the State of Delaware
--------------------------------------------
ANTEC Corporation, a Delaware corporation (hereinafter the
"Corporation"), does hereby certify as follows:
FIRST: The Corporation has capital stock.
SECOND: Article FOURTH of the Corporation's Restated
Certificate of Incorporation is hereby amended to
read in its entirety as set forth below:
FOURTH: The total number of shares of stock of all
classes which the corporation shall have authority to
issue is eighty million (80,000,000) shares
consisting of seventy-five million (75,000,000)
shares of common stock, par value $.01 per share, and
five million (5,000,000) shares of preferred stock,
par value $1.00 per share.
THIRD: The foregoing amendment was duly adopted in
accordance with Section 242 of the General
Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, ANTEC Corporation has caused this Certificate to be
executed in its corporate name this 16th day of June, 1999.
ANTEC Corporation
By:
---------------------
Name: Robert Stanzione
Title: President
ATTEST:
By:
------------------------
Name: Lawrence Margolis
Title: Secretary
<PAGE> 1
EXHIBIT 10.31 (a)
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
THIS AGREEMENT, initially made as of the 1st of August, 1993, is
amended and restated as of the 29th day of April, 1999 (the "Effective Date"),
by and between ANTEC CORPORATION, a Delaware corporation ("Company"), and John
Egan ("Executive").
WHEREAS, Company and Executive desire to modify their current
contractual relationship:
WHEREAS, Company recognizes Executive's knowledge and experience in its
industry and business and Executive's desire to assure Executive's continued
employment; and
WHEREAS, Executive is desirous of serving Company on the terms herein
provided, including those restricting Executive's ability to compete in the
future;
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. Company will employ Executive and Executive will
work for Company as follows: Executive will serve as Chairman and Chief
Executive Officer for such portion of the remainder of 1999 as the
Board of Directors of Company (the "Board") shall determine. Thereafter
until May 31, 2002 or this Agreement is terminated as provided in
Section 5 (the "Termination Date,") Executive will serve as Chairman.
As Chairman, Executive will perform on a full-time basis such services
of an executive nature within Executive's abilities as the Chief
Executive Officer or the Board from time to time shall reasonably
determine.
2. COMPENSATION. Company will pay Executive for the performance of
Executive's duties through May 31, 2002 (a) a salary at the rate of
$500,000 a year ("Base Compensation"), plus (b) a bonus ("Bonus") for
each year 1999 through 2001 and the partial year January 1 to May 31,
2002 in an amount determined by Company using such criteria as it deems
fair and equitable, allowing up to 200% of planned Bonus for
performance above target goals. The amount of the planned Bonus shall
be $375,000 for each year 1999 through 2001 and $156,250 for the
partial year January 1 to May 31, 2002. The target goals for 1999 shall
be those previously approved by the Compensation Committee of the
Board. For following years, the target goals shall be those established
by the Board or its Compensation Committee on the recommendation of the
Chief Executive Officer that can reasonably be substantially impacted
by Executive. Bonuses for 2000 and thereafter will be cut in half in
any year in which Company's earnings (or equivalent measure then being
utilized) are not sufficient for the Chief Executive to earn a minimum
pay-out for the portion of the Chief Executive Officer's bonus for that
year dependent upon earnings (or the equivalent measure than being
utilized). Executive's Base Compensation shall be payable semi-monthly,
and the Bonus shall be payable as soon after the end of each calendar
year as it can be determined, but in any event within ninety (90) days
thereafter.
3. ADDITIONAL BENEFITS. Executive will be entitled to participate in and
receive benefits under any retirement plan, health plan, disability
plan and life insurance plan or other similar executive benefit plan or
arrangement (collectively "Benefit Plans") generally made available by
Company from time to time to its senior executives. Company will not
substantially reduce the aggregate amount it is currently incurring to
provide Benefit Plans to Executive. Executive will be entitled to
<PAGE> 2
such other benefits, including vacation, fringe benefits and expense
reimbursement as generally made available by Company from time to time
to its senior executives.
4. STOCK OPTIONS AND OTHER INCENTIVES. Executive will not be granted any
further stock options or participate in any incentive programs of
Company, other than the Bonus as provided in this Agreement.
5. TERMINATION OF AGREEMENT.
(a) This Agreement may be terminated by Company by written notice to
Executive 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 two
years after written notice of termination is given Executive unless
termination is for "Good Cause." "Good Cause" shall mean (i)
Executive's conviction of any embezzlement or any felony involving
fraud or breach of trust relating to the performance of Executive's
duties for Company, (ii) Executive's willful engagement in gross
misconduct in the performance of Executive's duties, (iii) Executive's
death, or (iv) permanent disability which materially impairs
Executive's performance of Executive's duties and qualifies Executive
for full benefits under Company's long term disability insurance
policy.
(b) Executive may terminate this Agreement by giving Company written
notice of termination. The termination will not be effective until two
years after written notice is given Company unless termination is for
"Good Reason." "Good Reason" shall exist if (i) Company continues in
material breach of this Agreement for more than thirty (30) days after
being notified in writing by Executive of such breach, provided
Executive has given such notice to Company within thirty (30) days of
first becoming aware of the facts constituting such breach, (ii)
Company gives Executive a notice of termination without "Good Cause" as
specified above, provided Executive terminates this Agreement within 30
days of receiving such notice, or (iii) a "Change of Control" occurs,
and Executive's employment hereunder is terminated by Company other
than for "Good Cause" or by Executive for any reason. A "Change of
Control" shall mean any person, as such term is used in section 13(d)
of and 14(d) of the Securities Exchange Act of 1934, amended (the
"Exchange Act"), is or becomes the "beneficial owner" (as defined in
Rule 13(d)-3 under the Exchange Act) of securities of Company
representing more than 25% of the combined voting power of Company's
then outstanding voting securities.
(c) If Executive terminates this Agreement and simultaneously therewith
his employment by Company for good Reason, all of Executive's stock
options outstanding and unexercised at the Termination Date (except for
the option granted on May 7, 1997 which shall continue to be governed
by the terms of that option) shall become immediately and fully
exercisable as of the Termination Date, and Company for a period of two
years from such termination (the "Severance Period") shall continue to
provide to Executive (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 paid or payable to Executive 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
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 Company's breach or constructive breach of this Agreement
and payment for the non-competition provisions of this Agreement, and
Company agrees that (i) Executive shall not be required to mitigate his
damages by seeking other employment or otherwise, and (ii) Company's
payments and other obligations under this
2
<PAGE> 3
Agreement shall not be reduced in any way by reason of any compensation
received by Executive from sources other than Company after the
Termination Date, except as otherwise expressly provided herein.
(e) Termination of this Agreement shall not affect the Consulting
Agreement between the parties or the Supplemental Retirement Plan
provided pursuant to that agreement.
6. MINIMUM INVESTMENT. Through May 31, 2002 or earlier Change of Control,
Executive will maintain a minimum investment in Company of 100,000
shares or 200,000 exercisable options to purchase shares or any
equivalent combination of shares and exercisable options, with shares
having twice the weight of options. The number of shares shall be
appropriately adjusted for any changes in the shares or extraordinary
distributions
7. NON-COMPETITION COVENANT. Executive 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 or joint venture or as an employee, officer, director or
stockholder of any corporation or in any other capacity:
(a) engage in any activity which is competitive with the business of
Company in the United States or in any foreign county in which Company
is carrying on such business, provided that the foregoing provision
shall not be deemed to prohibit Executive from purchasing for
investment any securities or interest in any publicly-owned
organization which is competitive with the business of 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
Company, any customers or suppliers which he solicited on behalf of
Company or on behalf of the business of Company.
8. TAXES. Company will timely pay to Executive the amount of any excise
taxes imposed on Executive under Section 4999 of the Internal Revenue
Code as currently written by reason of payments or benefits under the
provisions of this Agreement, including this provision, and the amount
of any federal and state income taxes imposed on Executive by reason of
payments to Executive under this Section.
9. 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 Company: If to Executive:
ANTEC Corporation Current address in
11450 Technology Circle the records of the
Duluth, Georgia 30097 Company
or such other address as shall be furnished in writing by one party to
the other.
10. 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 has been omitted.
3
<PAGE> 4
11. ASSIGNMENT. Company's obligations hereunder shall be binding legal
obligations of any successor to all or substantially all of Company's
business by purchase, merger, consolidation or otherwise. 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. Except in accordance with
foregoing, neither party may assign this Agreement provided that upon
Executive's death, this Agreement shall be binding upon and inure to
the benefit of Executive's heirs, legatees and the legal representative
of each.
12. APPLICABLE LAW. This Agreement shall be construed and interpreted
pursuant to the laws of Georgia.
13. AMENDMENT. This Agreement may be amended only by a written document
signed by both parties.
14. LEGAL FEES. The prevailing party in any litigation concerning this
Agreement shall be reimbursed by the party found to be in breach of
this Agreement for all reasonable costs, including attorney fees,
incurred by the prevailing party in enforcing this Agreement.
IN WITNESS WHEREOF, the parties have executed this Employment Agreement
as of the day and year first above written.
ANTEC CORPORATION
By:
-------------------------------------- --------------------------------
Its:
--------------------------------------
4
<PAGE> 1
EXHIBIT 10.31 (b)
CONSULTING AGREEMENT
ANTEC Corporation, Delaware corporation, ("Company") and John Egan
("Consultant") hereby agree as follows:
1. Upon the termination of Consultant's employment with Company
for any reason other than death or full and permanent
disability, Consultant will serve Company as a consultant on
matters within Consultant's expertise, knowledge or abilities
as may be reasonably requested by Company. Such consultation
may include, among other things without limitation, meeting
with customers and suppliers of Company and serving on the
Board of Directors of Company. Consultant's obligations under
this Agreement will end on May 31, 2007 or Consultant's
earlier death or full and permanent disability.
2. Consultant will not in any 12 month period be required to make
himself available to consult with Company for more than 20
days. No more than three days of consultation may be
consecutive. Consultation will be arranged by Company so as to
not unreasonably interfere with other permitted activities of
Consultant.
3. Consultant will not disclose or use for any purpose other than
assisting Company, any information about Company or its
business that is not publicly known.
4. Consultant will not during the period of this Agreement engage
in any activities or make any investments that would be
inconsistent or in conflict with his obligations to Company
under this Agreement. For instance, Consultant during the
period of this Agreement will not assist anyone compete with
Company and will not enter into any arrangement with a
competitor of Company in which Consultant could inadvertently
use or disclose confidential information of Company.
Consultant however is permitted to own interests in a
competitor constituting less than 1% of the beneficial
interests of that firm and to consult with firms that do not
compete with Company. Upon being asked in writing, Company
will advise Consultant within 15 days whether Consultant is
able to engage in a proposed activity. Any such inquiry should
be addressed to Company's Chief Executive Officer.
5. As consideration for the entering into this Agreement and the
services performed thereunder, Company will:
a. provide the supplemental retirement benefit set forth
in the attached Supplemental Retirement Plan;
<PAGE> 2
b. continue to provide medical coverage as if Consultant
continued to be an employee of Company until he and
his spouse as of the date of this Agreement are
eligible for Medicare;
c. provide, from and after the date this Agreement is
signed, in addition to any life insurance available
to Consultant as an executive of Company, a death
benefit of $3,000,000 payable to Consultant's
surviving spouse upon Consultant's death prior to age
55. Upon request of Company, Consultant will provide
such information and take such tests as may be
necessary for Company to obtain insurance for this
benefit; and
d. reimburse Consultant for any expenses incurred by
Consultant in performing consulting services for
Company.
6. Company's sole remedy for breach of this Agreement by
Consultant will be damages and/or injunctive relief.
Consultant acknowledges that his services are unique and that
damages for breach of this Agreement would not adequately
compensate Company and agrees that Company is entitled to
injunctive relief for breach of this Agreement and that
Company may seek such relief without posting any bond. Any
fees and costs incurred by either party in enforcing this
Agreement shall be reimbursed by the party found to be in
breach.
7. Company's obligations hereunder shall be binding legal
obligations of any successor to all or substantially all of
Company's business by purchase, merger, consolidation or
otherwise. 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 under this Agreement.
IN WITNESS WHEREOF, the parties has executed this agreement as of
April 29, 1999.
ANTEC CORPORATION ---------------------
John Egan
By:
----------------------
Its
--------------
<PAGE> 1
Exhibit 10.31(c)
JOHN M. EGAN SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
ARTICLE I
DEFINITIONS
1.01 Actuarial Equivalent
A benefit of equivalent actuarial present value when computed using the UP-84
Mortality Table and an interest rate equivalent to that specified by the Pension
Benefit Guaranty Corporation as of the January 1st of each calendar year for
valuing immediate annuities for single-employer pension plans. If the Pension
Benefit Guaranty Corporation does not provide this rate, the 30-year Treasury
rates proscribed by the IRS pursuant to Internal Revenue Code Section 417(e)(3)
will be utilized.
1.02 Board
The Board of Directors of the Corporation
1.03 Committee
The Compensation Committee of the Board, or any successor committee.
1.04 Corporation
ANTEC Corporation.
1.05 Effective Date
April 29, 1999
1.06 Participant
John M. Egan.
1.07 Normal Retirement Date
May 31, 2002.
1.08 Other Retirement Programs
See Appendix A.
<PAGE> 2
1.09 Plan
The John M. Egan Supplemental Executive Retirement Plan.
1.10 Surviving Spouse
The Spouse of Participant who died while in the employ of the Corporation and
had been married to that spouse for at least twelve (12) months prior to his
Termination of Service.
1.11 Termination of Service
Participant's separation from the active employment of the Corporation, as
defined by the Board, whether by resignation, discharge, death, disability,
retirement or otherwise.
ARTICLE II
BENEFITS TO PARTICIPANT
2.01 Eligibility for Benefits
No benefits will be payable pursuant to the Plan if Participant dies prior to
June 1, 2002 . Otherwise, Participant will be eligible for benefits under
Section 2.02 or Section 2.03 below at the later of his Normal Retirement Date or
Termination of Service.
2.02 Normal Retirement Benefits
Participant shall receive a Normal Retirement Benefit payable as a single life
annuity of $41,667 a month less the benefits payable to him from the Other
Retirement Programs (expressed as Actuarial Equivalent monthly benefits payable
as single life annuities commencing on the first day of the month coincident
with or next following his Normal Retirement Date). Benefit payments shall
commence on the first day of the month coincident with or next following the
Participant's Normal Retirement Date or if later the date of Termination of
Service. Participant may delay the commencement of Benefit payments, but such
delay shall not affect the amount of Participant's Normal Retirement Benefit.
2.03 Late Retirement Benefits
If Participant incurs a Termination of Service after his Normal Retirement Date,
he shall receive a Late Retirement Benefit equal to his Normal Retirement
Benefit, calculated as of his Normal Retirement Date in accordance with Section
2.02 without regard to changes in benefits payable from Other Retirement
Programs.
2.04 Joint and Survivor Annuities
2
<PAGE> 3
In lieu of a single life annuity, Participant may elect, at any time during the
ninety day period ending on the date benefit payments commence, to receive a
reduced benefit payable during his lifetime with 50%, 66-2/3%, 75% or 100% of
such reduced amount automatically continuing to his Surviving Spouse (a 50%,
66-2/3%, 75% or 100% Joint and Survivor Annuity) upon his death. The reductions
to Participant's single life benefit shall be made in accordance with Appendix
B.
2.05 Death Benefits
If Participant dies after his Normal Retirement Date but before he has commenced
receiving his benefits from the Plan, death benefits shall be distributed in the
form of monthly payments to his Surviving Spouse, continuing for her lifetime.
Payment of such benefits shall commence on the first day of the month coincident
with or next following the date of his death. The monthly benefit to which the
Surviving Spouse shall be entitled shall be the Actuarial Equivalent of the
benefits to which the Participant would have been entitled if he had retired on
the day prior to his death.
If Participant dies prior to his Normal Retirement Date or does not have a
Surviving Spouse, no benefits shall be payable under the Plan.
2.06 Lump Sum Settlement
In lieu of the benefits to which Participant or Surviving Spouse would otherwise
be entitled under the foregoing provisions of this Article II, the Participant
or Surviving Spouse may elect to receive an Actuarial Equivalent lump sum
payment, subject to the following:
(a) Except as provided in paragraph (c) below, Participant's
election of a lump sum payment must be filed with the
Committee at least one year prior to the date of the
Participant's Termination of Service.
(b) A lump sum payment elected by Participant under paragraph (a)
above shall be paid to him as soon as practicable after his
Termination of Service.
(c) If Participant dies prior to his Termination of Service, any
election filled by the Participant under this Section 2.06
shall be void. A Participant's Surviving Spouse, if any, may
request the Corporation to make an Actuarial Equivalent lump
sum payment of the benefit to which the Surviving Spouse is
otherwise entitled under Section 2.05; provided, however, that
no such payment shall be made without the authorization of the
Committee, in its sole discretion.
(d) Any election or request by Participant or Surviving Spouse
under this Section 2.06 shall be in writing, in such form as
the Committee may require, and, once filed with the Committee,
shall be irrevocable.
3
<PAGE> 4
ARTICLE III
ADMINISTRATION
3.01 Duties of the Committee
The Committee shall have full responsibility for the management, operation,
interpretation and administration of the Plan in accordance with its terms, and
shall have such authority as is necessary or appropriate in carrying out its
responsibilities.
3.02 Liabilities of the Committee
Neither the Committee nor its individual members shall be deemed to be a
fiduciary with respect to this Plan, nor shall any of the foregoing individuals
or entities be liable to any Participant, former Participant, beneficiary or
other interested party in connection with the management, operation,
interpretation or administration of the Plan, any such liability being solely of
the Corporation.
3.03 Expenses
Any expenses incurred in the management, operation, interpretation or
administration of the Plan shall be paid by the Corporation. In no event shall
the benefits otherwise payable under this Plan be reduced to offset the expenses
incurred in managing, operating, interpreting or administering the Plan.
3.04 Unfunded Character of the Plan
The Plan shall be unfunded. Neither the Corporation nor the Committee nor its
individual members shall segregate or otherwise identify specific assets to be
applied to the purposes of the Plan, nor shall any of them be deemed to be a
trustee of any amounts to be paid under the Plan. Any liability of the
Corporation to any person with respect to benefits payable under the Plan shall
be based solely upon such contractual obligations, if any, as shall be created
by the Plan, and shall give rise only to a claim against the general assets of
the Corporation. No such liability shall be deemed to be secured by any pledge
or any encumbrance on any specific property of the Corporation.
4
<PAGE> 5
ARTICLE IV
MISCELLANEOUS PROVISIONS
4.01 Operation as Unfunded Supplemental Executive Retirement Plan
The Plan is intended to be a deferred compensation plan as contemplated by
Section 3(2) of ERISA for the purpose of providing supplemental retirement
benefits to selected members of management. The Plan is not intended to comply
with the qualification requirements of the Internal Revenue Code of 1986. The
plan shall be administered and construed so as to effectuate this intent.
4.02 Construction of Language
Wherever appropriate in the Plan, words used in the singular may be read in the
plural, words in the plural may be read in the singular, and words importing the
masculine gender shall be deemed equally to refer to the feminine and the
neuter. Any reference to any Article or Section shall be to an Article or
Section of this Plan, unless otherwise indicated.
4.03 Non-Alienation of Benefits
The right to receive a benefit under the Plan shall not be subject in any manner
to anticipation, alienation or assignment, nor shall such right be liable for or
subject to debts, contracts, liabilities or torts. Should Participant,
beneficiary or other interested party attempt to anticipant, alienate or assign
his interest in or right to a benefit, or should any person claiming against him
seek to subject such interest or right to legal or equitable process, all the
interest or right of Participant or, beneficiary or other interested party
entitled to benefits under the Plan shall cease, and in that event, such
interest or right shall be held or applied, at the direction of the Committee,
for or to the benefit of Participant, beneficiary or other interested party or
his spouse, children or other dependents in such manner and in such proportions
as the Committee may deem proper.
5
<PAGE> 6
APPENDIX A
OTHER RETIREMENT PROGRAMS
ANTEC Corporation Defined Benefit Retirement Plan
ANTEC Corporation Supplemental Retirement Benefits Plan
(but only in the case Participant and his spouse have not waived to the
satisfaction of the Committee all interest in any benefits under that plan)
6
<PAGE> 1
EXHIBIT 10.32
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
THIS AGREEMENT, initially made as of the 16th of October, 1995, is
amended and restated as of the 29th day of April, 1999 (the "Effective Date"),
by and between ANTEC CORPORATION, a Delaware corporation ("Company"), and Robert
Stanzione ("Executive").
WHEREAS, Company and Executive desire to modify their current
contractual relationship;
WHEREAS, Company recognizes Executive's knowledge and experience in its
industry and business and Executive's desire to assure Executive's continued
employment; and
WHEREAS, Executive is desirous of serving Company on the terms herein
provided, including those restricting Executive's ability to compete in the
future;
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. Company will employ Executive and Executive will
work for Company in the Atlanta area as follows: Executive will serve
as President and Chief Operating Officer for such portion of the
remainder of 1999 as the Board of Directors of Company (the "Board")
shall determine. Thereafter Executive will serve as President and Chief
Executive Officer until Executive reaches the age of 65 or this
agreement is terminated as provided in Section 5 (the "Termination
Date"). As President and Chief Executive Officer, Executive will
perform on a full-time basis the normal services of a chief executive
officer, including without limitation, the assignment and review of
tasks to be performed by the Chairman of the Board outside of meetings
of the Board.
2. COMPENSATION. Company will pay Executive for the performance of
Executive's duties as President and Chief Operating or Chief Executive
Officer (a) a salary ("Base Compensation"), at the rate of $420,000 a
year for the period January 1 to December 31, 1999, at the rate of
$500,000 a year for the year 2000, and thereafter at the rate of at
least $500,000 a year adjusted minimally for inflation since January 1,
2000 and any significant increase in the complexity of Company, and (b)
a bonus ("Bonus") for each year and partial year in an amount
determined by Company using such criteria as it deems fair and
equitable, allowing up to 150% of planned Bonus for 1999 and 200% of
planned Bonus for subsequent years for performance above target goals.
The amount of the planned Bonus shall be 75% of total Base Compensation
for the year or partial year for which the Bonus is being paid.
Executive's Base Compensation shall be payable semi-monthly, and the
Bonus shall be payable as soon after the end of each calendar year as
it can be determined, but in any event within ninety (90) days
thereafter.
3. ADDITIONAL BENEFITS.
(a) Executive will be entitled to participate in and receive benefits
under any retirement plan, health plan, disability plan and life
insurance plan or other similar executive benefit plan or arrangement
(collectively "Benefit Plans") generally made available by Company from
time to time to its senior executives. Company will not substantially
reduce the aggregate amount it is currently incurring to provide
Benefit Plans to Executive. Executive will be entitled to such other
<PAGE> 2
benefits, including vacation, fringe benefits and expense reimbursement
as generally made available by Company from time to time to its senior
executives.
(b) On the condition that prior to October 30, 2000, this Agreement has
not been terminated either by Company with Good Cause (other then
disability of Executive) or by Executive without Good Reason, Executive
will be provided a supplemental pension equal to (i) the amount of
pension he would have had under Company's defined benefit retirement
plan and related excess benefit plan if period of Executive's service
under those plans were tripled for all purposes including without
limitation for purposes of eligibility for a pension, less (ii) the
amount of pension to which Executive is entitled under Company's
defined benefit retirement plan and related excess benefit plan. This
additional benefit will be paid in accordance with the provisions of
the excess benefit plan as they read on the Effective Date.
4. STOCK OPTIONS. Beginning with the year 2001, Executive will be granted
each year options to purchase 100,000 to 160,000 shares of Company as
determined by the Board or its Compensation Committee in its sole
discretion. The number of shares will be appropriately adjusted for any
change in the shares or extraordinary distributions. These options will
be granted at the same time options are granted generally to other
senior executives of Company. The exercise price of these options will
be the market price of the shares at time of grant. The options will
otherwise have terms similar to the terms of the option granted to
Executive on April 29, 1999.
5. TERMINATION OF AGREEMENT.
(a) This Agreement may be terminated by Company by written notice to
Executive 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 two
years after written notice of termination is given Executive unless
termination is for "Good Cause." "Good Cause" shall mean (i)
Executive's conviction of any embezzlement or any felony involving
fraud or breach of trust relating to the performance of Executive's
duties for Company, (ii) Executive's willful engagement in gross
misconduct in the performance of Executive's duties, (iii) Executive's
death, or (iv) permanent disability which materially impairs
Executive's performance of Executive's duties and qualifies Executive
for full benefits under Company's long term disability insurance
policy.
(b) Executive may terminate this Agreement by giving Company written
notice of termination. The termination will not be effective until two
years after written notice is given Company unless termination is for
"Good Reason." "Good Reason" shall exist if (i) Company continues in
material breach of this Agreement for more than thirty (30) days after
being notified in writing by Executive of such breach, provided
Executive has given such notice to Company within thirty (30) days of
first becoming aware of the facts constituting such breach, (ii)
Company gives Executive a notice of termination without "Good Cause" as
specified above, provided Executive terminates this Agreement within 30
days of receiving such notice, or (iii) a "Change of Control" occurs,
and Executive's employment hereunder is terminated by Company other
than for "Good Cause" or by Executive for any reason. A "Change of
Control" shall mean any person, as such term is used in section 13(d)
of and 14(d) of the Securities Exchange Act of 1934, amended (the
"Exchange Act"), is or becomes the "beneficial owner" (as defined in
Rule 13(d)-3 under the Exchange Act) of securities of Company
representing more than 25% of the combined voting power of Company's
then outstanding voting securities.
(c) If Executive terminates this Agreement and simultaneously therewith
his employment by Company for good Reason, all of Executive's stock
options outstanding and unexercised at the Termination Date (except for
the option granted on February 10, 1998 which shall continue to
2
<PAGE> 3
be governed by the terms of that option) shall become immediately and
fully exercisable as of the Termination Date, and Company for a period
of two years from such termination (the "Severance Period") shall
continue to provide to Executive (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 paid or payable to Executive 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
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 Company's breach or constructive breach of this Agreement
and payment for the non-competition provisions of this Agreement, and
Company agrees that (i) Executive shall not be required to mitigate his
damages by seeking other employment or otherwise, and (ii) Company's
payments and other obligations under this Agreement shall not be
reduced in any way by reason of any compensation received by Executive
from sources other than Company after the Termination Date, except as
otherwise expressly provided herein.
6. SPECIAL BONUS. On June 30, 2001, without regard to whether Executive is
employed by Company or this Agreement has been terminated, provided
that Executive prior thereto has not given Company notice of
termination without Good Reason, Company will pay Executive a special
bonus of $750,000.
7. NON-COMPETITION COVENANT. Executive 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 or joint venture or as an employee, officer, director or
stockholder of any corporation or in any other capacity:
(a) engage in any activity which is competitive with the
business of Company in the United States or in any foreign
county in which Company is carrying on such business,
provided that the foregoing provision shall not be deemed
to prohibit Executive from purchasing for investment any
securities or interest in any publicly-owned organization
which is competitive with the business of 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 Company, any customers or suppliers which
he solicited on behalf of Company or on behalf of the
business of Company.
8. TAXES. Company will timely pay to Executive the amount of any excise
taxes imposed on Executive under Section 4999 of the Internal Revenue
Code as currently written by reason of payments or benefits under the
provisions of this Agreement, including this provision, and the amount
of any federal and state income taxes imposed on Executive by reason of
payments to Executive under this Section.
3
<PAGE> 4
9. 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 Company: If to Executive:
ANTEC Corporation Current address in
11450 Technology Circle the records of the
Duluth, Georgia 30097 Company
or such other address as shall be furnished in writing by one party to
the other.
10. 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 has been omitted.
11. ASSIGNMENT. Company's obligations hereunder shall be binding legal
obligations of any successor to all or substantially all of Company's
business by purchase, merger, consolidation or otherwise. 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. Except in accordance with
foregoing, neither party may assign this Agreement, provided that upon
Executive's death, this Agreement shall be binding upon and inure to
the benefit of Executive's heirs, legatees and the legal representative
of each.
12. APPLICABLE LAW. This Agreement shall be construed and interpreted
pursuant to the laws of Georgia.
13. AMENDMENT. This Agreement may be amended only by a written document
signed by both parties.
14. PRIOR AGREEMENTS. This Agreement supersedes any agreements relating to
the option granted Executive on February 10, 1998 that are not set
forth in that option.
15. LEGAL FEES. The prevailing party in any litigation concerning this
Agreement shall be reimbursed by the party found to be in breach of
this Agreement for all reasonable costs, including attorney fees,
incurred by the prevailing party in enforcing this Agreement
IN WITNESS WHEREOF, the parties have executed this Employment Agreement
as of the day and year first above written.
ANTEC CORPORATION
By:
--------------------------------------- ---------------------------------
Its:
--------------------------------------
4
<PAGE> 1
EXHIBIT 10.33
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
THIS AGREEMENT, initially made as of the 1st of August, 1993,
is amended and restated as of the 29th day of April, 1999 (the "Effective
Date"), by and between ANTEC CORPORATION, a Delaware corporation ("Company"),
and Lawrence Margolis ("Executive").
WHEREAS, Company and Executive desire to modify their current
contractual relationship;
WHEREAS, Company recognizes Executive's knowledge and
experience in its industry and business and Executive's desire to assure
Executive's continued employment; and
WHEREAS, Executive is desirous of serving Company on the terms
herein provided, including those restricting Executive's ability to compete in
the future;
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. Company will employ Executive and Executive will
work for Company in the Atlanta area as Executive Vice President until
Executive reaches the age of 65 or this Agreement is terminated as
provided in Section 5 (the "Termination Date"). As Executive Vice
President, Executive will perform on a full-time basis the normal
services of a senior executive officer, including without limitation,
the supervision of Company's financial, accounting, legal and
administrative functions.
2. COMPENSATION. Company will pay Executive for the performance of
Executive's duties as Executive Vice President (a) a salary ("Base
Compensation"), at the rate of $300,000 a year for the period January 1
to December 31, 1999, and thereafter at the rate of at least $300,000 a
year adjusted minimally for inflation since January 1, 1999 and any
significant increase in the complexity of Company, and (b) a bonus
("Bonus") for each year and partial year in an amount determined by
Company using such criteria as it deems fair and equitable, allowing up
to 150% of planned Bonus for 1999 and 200% of planned Bonus for
subsequent years for performance above target goals. The amount of the
planned Bonus shall be 60% of total Base Compensation for the year or
partial year for which the Bonus is being paid. Executive's Base
Compensation shall be payable semi-monthly, and the Bonus shall be
payable as soon after the end of each calendar year as it can be
determined, but in any event within ninety (90) days thereafter.
3. ADDITIONAL BENEFITS. Executive will be entitled to participate in and
receive benefits under any retirement plan, health plan, disability
plan and life insurance plan or other similar executive benefit plan or
arrangement (collectively "Benefit Plans") generally made available by
Company from time to time to its senior executives. Company will not
substantially reduce the aggregate amount it is currently incurring to
provide Benefit Plans to Executive. Executive will be entitled to such
other benefits, including vacation, fringe benefits and expense
reimbursement as generally made available by Company from time to time
to its senior executives.
<PAGE> 2
4 STOCK OPTIONS. From time to time, Executive will be granted options to
purchase shares of Company as determined by the Board or its
Compensation Committee in its sole discretion. These options will be
granted at the same time options are granted generally to other senior
executives of Company. The exercise price of these options will be the
market price of the shares at time of grant. The options will otherwise
have terms similar to the terms of the option granted to Executive on
April 29, 1999.
5. TERMINATION OF AGREEMENT.
(a) This Agreement may be terminated by Company by written notice
to Executive 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 two
years after written notice of termination is given Executive unless
termination is for "Good Cause." Good Cause shall mean (i) Executive's
conviction of any embezzlement or any felony involving fraud or breach
of trust relating to the performance of Executive's duties for Company,
(ii) Executive's willful engagement in gross misconduct in the
performance of Executive's duties, (iii) Executive's death, or (iv)
permanent disability which materially impairs Executive's performance
of Executive's duties and qualifies Executive for full benefits under
Company's long term disability insurance policy.
(b) Executive may terminate this Agreement by giving Company
written notice of termination. The termination will not be effective
until two years after written notice is given Company unless
termination is for "Good Reason." Good Reason shall exist if (i)
Company continues in material breach of this Agreement for more than
thirty (30) days after being notified in writing by Executive of such
breach, provided Executive has given such notice to Company within
thirty (30) days of first becoming aware of the facts constituting such
breach, (ii) Company gives Executive a notice of termination without
"Good Cause" as specified above, provided Executive terminates this
Agreement within 30 days of receiving such notice, or (iii) a "Change
of Control" occurs, and Executive's employment hereunder is terminated
by Company other than for "Good Cause" or by Executive for any reason.
A "Change of Control" shall mean any person, as such term is used in
section 13(d) of and 14(d) of the Securities Exchange Act of 1934,
amended (the "Exchange Act"), is or becomes the "beneficial owner" (as
defined in Rule 13(d)-3 under the Exchange Act) of securities of
Company representing more than 25% of the combined voting power of
Company's then outstanding voting securities.
(c) If Executive terminates this Agreement and simultaneously
therewith his employment by Company for good Reason, all of Executive's
stock options outstanding and unexercised at the Termination Date
(except for the option granted on May 7, 1997 which shall continue to
be governed by the terms of that option) shall become immediately and
fully exercisable as of the Termination Date, and Company for a period
of two years from such termination (the "Severance Period") shall
continue to provide to Executive (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 paid or payable to Executive 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
Company's insurance policy).
2
<PAGE> 3
(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 Company's breach or constructive breach of this
Agreement and payment for the non-competition provisions of this
Agreement, and Company agrees that (i) Executive shall not be required
to mitigate his damages by seeking other employment or otherwise, and
(ii) Company's payments and other obligations under this Agreement
shall not be reduced in any way by reason of any compensation received
by Executive from sources other than Company after the Termination
Date, except as otherwise expressly provided herein.
6. RELOCATION. Company will provide Executive an advance of $180,000 in
connection with his relocation to the Atlanta area in addition to the
benefits provided by Company's relocation expense reimbursement
practices for senior executives. This advance will be forgiven in four
equal annual portions each April 30, beginning April 30, 2000. All
income taxes arises from this forgiveness shall be the responsibility
of Executive. Any portion of this advance not forgiven at the time of
termination by Executive of this Agreement without Good Reason or by
Company with Good Cause other than death or disability shall be
promptly repaid to Company. If this Agreement is terminated by Company
without Good Cause or by Executive with Good Reason prior to the third
anniversary of the Effective Date, Company, at the request of Executive
within one year of such termination, will purchase from Executive the
residence in the Atlanta area purchased or being purchased by Executive
at the Effective Date at the higher of its then appraised value or
Executive's then investment in this residence.
7. NON-COMPETITION COVENANT. Executive 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 or joint venture or as an employee, officer, director or
stockholder of any corporation or in any other capacity:
(a) engage in any activity which is competitive with the
business of Company in the United States or in any foreign county in
which Company is carrying on such business, provided that the
foregoing provision shall not be deemed to prohibit Executive from
purchasing for investment any securities or interest in any
publicly-owned organization which is competitive with the business of
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 Company, any customers or suppliers which he
solicited on behalf of Company or on behalf of the business of
Company.
8. TAXES. Company will timely pay to Executive the amount of any excise
taxes imposed on Executive under Section 4999 of the Internal Revenue
Code as currently written by reason of payments or benefits under the
provisions of this Agreement, including this provision, and the amount
of any federal and state income taxes imposed on Executive by reason of
payments to Executive under this Section.
3
<PAGE> 4
9. 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 Company: If to Executive:
ANTEC Corporation Current address in
11450 Technology Circle the records of the
Duluth, Georgia 30097 Company
or such other address as shall be furnished in writing by one party to
the other.
10. 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 has been omitted.
11. ASSIGNMENT. Company's obligations hereunder shall be binding legal
obligations of any successor to all or substantially all of Company's
business by purchase, merger, consolidation or otherwise. 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. Except in accordance with
foregoing, neither party may t assign this Agreement provided that upon
Executive's death, this Agreement shall be binding upon and inure to
the benefit of Executive's heirs, legatees and the legal representative
of each.
12. APPLICABLE LAW. This Agreement shall be construed and interpreted
pursuant to the laws of Georgia.
13. AMENDMENT. This Agreement may be amended only by a written document
signed by both parties.
14. LEGAL FEES. The prevailing party in any litigation concerning this
Agreement shall be reimbursed by the party found to be in breach of
this Agreement for all reasonable costs, including attorney fees,
incurred by the prevailing party in enforcing this Agreement
IN WITNESS WHEREOF, the parties have executed this
Employment Agreement as of the day and year first above written.
ANTEC CORPORATION
By:
------------------------------- ------------------------------------
Its:
-------------------------------
4
<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 FOR THE SIX MONTHS ENDED JUNE 30, 1999
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS AND
RELATED NOTES IN ANTEC CORPORATION'S FORM 10-Q.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 147,637
<ALLOWANCES> 5,591
<INVENTORY> 180,958
<CURRENT-ASSETS> 8,131
<PP&E> 47,045
<DEPRECIATION> 0
<TOTAL-ASSETS> 635,694
<CURRENT-LIABILITIES> 115,813
<BONDS> 210,000
0
0
<COMMON> 366
<OTHER-SE> 306,306
<TOTAL-LIABILITY-AND-EQUITY> 635,694
<SALES> 341,590
<TOTAL-REVENUES> 341,590
<CGS> 263,395
<TOTAL-COSTS> 263,395
<OTHER-EXPENSES> 2,473
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,043
<INCOME-PRETAX> 80,575
<INCOME-TAX> 33,958
<INCOME-CONTINUING> 46,617
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 46,617
<EPS-BASIC> 1.29
<EPS-DILUTED> 1.12
</TABLE>
