<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, 2000
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, 2000 there were 37,937,631 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, 2000
INDEX
<TABLE>
<CAPTION>
Page
<S> <C> <C>
Part I. Financial Information
Item 1. Financial Statements
a) Consolidated Balance Sheets
as of June 30, 2000 and December 31, 1999 3
b) Consolidated Statements of Operations
for the Three and Six Months Ended June 30, 2000 and 1999 4
c) Consolidated Statements of Cash Flows
for the Six Months Ended June 30, 2000 and 1999 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 18 - 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,
2000 1999
--------- -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 3,684 $ 2,971
Accounts receivable (net of allowance for doubtful accounts of $7,196 in 2000
and $7,505 in 1999) 216,854 197,350
Inventories 199,524 215,216
Income taxes recoverable 563 10,403
Deferred income taxes 18,407 16,442
Investments held for resale 6,900 --
Other current assets 23,845 15,989
--------- ---------
Total current assets 469,777 458,371
Property, plant and equipment (net of accumulated depreciation of $48,862 in 2000
and $43,195 in 1999) 53,753 51,406
Goodwill (net of accumulated amortization of $49,100 in 2000 and $46,641 in 1999) 147,377 149,836
Deferred income taxes 5,918 5,918
Investments 104,262 70,968
Other assets 25,634 23,573
--------- ---------
$ 806,721 $ 760,072
========= =========
LIABILITIES AND STOCK HOLDERS' EQUITY
Current liabilities:
Accounts payable $ 152,231 $ 153,596
Accrued compensation, benefits and related taxes 17,842 20,539
Other accrued liabilities 28,393 31,402
--------- ---------
Total current liabilities 198,466 205,537
Long-term debt 177,000 183,500
Deferred income taxes 39,137 23,700
--------- ---------
Total Liabilities 414,603 412,737
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, 150 million & 75 million shares
authorized; 37.9 million and 37.6 million shares issued and outstanding
in 2000 and 1999, respectively 381 378
Capital in excess of par value 257,498 252,245
Retained earnings 134,350 94,713
Cumulative translation adjustments (111) (1)
--------- ---------
Total stockholders' equity 392,118 347,335
--------- ---------
$ 806,721 $ 760,072
========= =========
</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,
------------------------- -------------------------
2000 1999 2000 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales $ 276,116 $ 196,334 $ 526,447 $ 341,590
Cost of sales 223,290 152,350 422,340 263,395
--------- --------- --------- ---------
Gross profit 52,826 43,984 104,107 78,195
Operating expenses:
Selling, general and administrative
and development 33,906 27,081 64,638 51,976
Amortization of goodwill 1,230 1,237 2,459 2,473
--------- --------- --------- ---------
Total operating expenses 35,136 28,318 67,097 54,449
--------- --------- --------- ---------
Operating income 17,690 15,666 37,010 23,746
Gain on LANcity transaction (30,000) -- (30,000) (60,000)
Gain on Chromatis investment (5,900) -- (5,900) --
Interest expense 2,541 3,185 5,139 6,043
Other (income) expense, net 192 (569) 465 (2,872)
--------- --------- --------- ---------
Income before income taxes 50,857 13,050 67,306 80,575
Income tax expense 21,246 5,048 27,669 33,958
--------- --------- --------- ---------
Net income $ 29,611 $ 8,002 $ 39,637 $ 46,617
========= ========= ========= =========
Net income per common share:
Basic $ 0.78 $ 0.22 $ 1.05 $ 1.29
========= ========= ========= =========
Diluted $ 0.68 $ 0.21 $ 0.93 $ 1.12
========= ========= ========= =========
Weighted average common shares:
Basic 37,867 36,416 37,779 36,251
========= ========= ========= =========
Diluted 44,733 43,189 44,623 43,020
========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
Supplemental Income Statement Information: results net of LANcity and Chromatis gains of $30.0 and $5.9
million, respectively, and $3.5 million restructuring charge in the second quarter 2000; the $2.1 million
pension curtailment gain in the first quarter 2000; and the initial $60.0 million gain on the LANcity
transaction in the first quarter 1999:
<S> <C> <C> <C> <C>
Gross profit $ 53,326 $ 43,984 $ 107,611 $ 78,195
========= ========= ========= =========
Operating income $ 21,190 $ 15,666 $ 38,402 $ 23,746
========= ========= ========= =========
Income before income taxes $ 18,457 $ 13,050 $ 32,798 $ 20,575
========= ========= ========= =========
Net income $ 11,213 $ 8,002 $ 19,903 $ 12,517
========= ========= ========= =========
Net income per common share:
Diluted $ 0.27 $ 0.21 $ 0.49 $ 0.33
========= ========= ========= =========
</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,
-------------------------
2000 1999
--------- ---------
<S> <C> <C>
Operating activities:
Net income $ 39,637 $ 46,617
Adjustments to reconcile net income to net cash
Provided by (used in) operating activities:
Depreciation and amortization 9,737 8,188
Provision for doubtful accounts 499 1,959
Deferred income taxes 13,472 25,800
LANcity transaction (30,000) (60,000)
Gain on Chromatis investment (5,900) --
Changes in operating assets and liabilities:
(Increase) in accounts receivable (20,003) (25,637)
(Increase) Decrease in inventories 15,692 (29,970)
Increase in accounts payable and 2,832 11,001
accrued liabilities
(Increase) decrease in other, net (11,384) (4,194)
--------- ---------
Net cash provided by (used in) operating activities 14,582 (26,236)
Investing activities:
Purchases of property, plant and equipment (9,046) (11,148)
Other investments (3,000) --
--------- ---------
Net cash (used in) investing activities (12,046) (11,148)
Financing activities:
Borrowings under credit facilities 155,000 111,500
Reductions in borrowings under credit facilities (161,500) (82,500)
Deferred financing costs paid (579) (130)
Proceeds from issuance of common stock 5,256 10,312
--------- ---------
Net cash provided by (used in) financing activities (1,823) 39,182
--------- ---------
Net increase in cash and cash equivalents 713 1,798
Cash and cash equivalents at beginning of period 2,971 4,436
--------- ---------
Cash and cash equivalents at end of period $ 3,684 $ 6,234
========= =========
Supplemental cash flow information:
Interest paid during the period $ 2,546 $ 5,423
========= =========
Income taxes paid during the period $ 887 $ 2,868
========= =========
</TABLE>
See accompanying notes to the consolidated financial statements.
5
<PAGE> 6
ANTEC CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. BASIS OF PRESENTATION
ANTEC Corporation (together with its consolidated subsidiaries "ANTEC"
or the "Company") is an international communications technology company,
headquartered in Duluth, Georgia. ANTEC is a designer, developer, manufacturer
and supplier of products and transmission equipment for the construction,
rebuilding and maintenance of broadband communications systems. ANTEC supplies
equipment and services for these systems primarily to broadband communication
providers, earning a reputation as a high-quality, one-stop provider of
substantially all of the equipment needed for hybrid fiber-coax ("HFC") networks
between the headend and the home. The Company has developed, for example, a full
line of technologically advanced fiber optic products to capitalize on the
current upgrades of HFC cable systems that enable reliable, high-speed, two-way
transmission of video, telephony, and data. The Company's expansive product
offerings position it well to meet the dynamic industry challenges, offering a
full range of end-to-end solutions for its customers. 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. Additionally, certain prior year amounts have
been reclassified to conform to the 2000 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, 1999.
The Company operates in one business segment, Communications, providing
a range of customers with network and system products and services, primarily
HFC networks and systems, for the communication industry. This segment accounts
for 100% of consolidated sales, operating profit and identifiable assets of the
Company.
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 effective for fiscal years beginning June
15, 1999. However, on May 19, 1999, the FASB voted to delay the effective date
for one year, to fiscal years beginning after June 15, 2000 by issuing FASB
Statement No. 137. The Statement will require the Company to disclose certain
information regarding derivative financial instruments. The Company is in the
process of reviewing the effects that the adoption of FASB Statement No. 133
will have on the Company's results of operations and financial position.
NOTE 3. RESTRUCTURING AND OTHER CHARGES
In the fourth quarter of 1999, in conjunction with the consolidation of
the New Jersey facility to Georgia and the Southwest, coupled with the
discontinuance of certain product offerings, the Company recorded a charge of
approximately $16.0 million. Included in the charge was approximately $2.6
million related to personnel costs and approximately $3.0 million related to
lease termination and other facility shutdown charges. Also included in the
restructuring was the elimination of certain product lines resulting in an
inventory write-off totaling approximately $10.4 million, which was reflected in
cost of sales during the fourth quarter of 1999. During the second quarter of
2000, the Company, in further evaluating its powering UCF and certain RF
products, recorded an additional charge of $3.5 million against cost of goods
sold, bringing the total reorganization related charge to $19.5 million. The
personnel-related costs included termination expenses for the involuntary
dismissal of 87 employees, primarily engaged in engineering, inside sales and
warehouse functions performed at the
6
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ANTEC CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
New Jersey facility. Terminated employees were offered separation amounts in
accordance with the Company's severance policy and were provided specific
separation dates. As of June 30, 2000 only 13 of the original 87 employees
remain. In addition to the charges totaling $19.5 million, it is anticipated
that approximately $1.6 million of relocation and fixed asset depreciation
expenses will be incurred in connection with the New Jersey facility closure, of
which approximately $0.6 million was recognized during the second quarter of
2000. As of June 30, 2000, $1.0 million related to personnel costs and
approximately $1.8 million related to lease termination and other facility
shutdown expenses remain to be paid. It is anticipated that the remaining
actions will be fully implemented during the third quarter of 2000.
NOTE 4. INVENTORIES
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
-------- ------------
(Unaudited)
<S> <C> <C>
Raw material $ 57,068 $ 57,538
Work in process 9,939 9,938
Finished goods 132,517 147,740
--------- --------
Total inventories $ 199,524 $215,216
========= ========
</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,
2000 1999
-------- ------------
(Unaudited)
<S> <C> <C>
Land $ 2,549 $ 2,549
Building and leasehold improvements 15,097 15,485
Machinery and equipment 84,969 76,567
--------- --------
102,615 94,601
Less: Accumulated depreciation (48,862) (43,195)
--------- --------
Total property, plant and equipment, net $ 53,753 $ 51,406
========= ========
</TABLE>
NOTE 6. LONG TERM DEBT
Long term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
-------- ------------
(Unaudited)
<S> <C> <C>
Revolving Credit Facility $ 62,000 $ 68,500
4.5% Convertible Subordinated Notes 115,000 115,000
--------- --------
Total long term debt $ 177,000 $183,500
========= ========
</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
7
<PAGE> 8
ANTEC CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
twelve-month period commencing May 15, 2001, ANTEC will pay a premium of 1.8% of
the principal amount or approximately $2.1 million. The estimated fair market
value of the Notes, based upon the closing market price of the Company's Common
Stock was approximately $199 million and $175 million at June 30, 2000 and
December 31, 1999, respectively.
In April 1999, the Company amended its secured four-year credit
facility ("Credit Facility") to increase the existing line from $85.0 million to
$120.0 million. The amended Credit Facility increased the assets eligible for
borrowings to be advanced against. None of the other significant terms,
including pricing, were changed with the amendment. The average annual interest
rate on borrowings was approximately 7.94% at June 30, 2000. The commitment fee
on unused borrowings is approximately 0.5%. The Credit Facility contains various
restrictions and covenants, including limits on payments to stockholders,
interest coverage, and net worth tests. As of June 30, 2000, the Company had
approximately $58.0 million of available borrowings under the Credit Facility.
NOTE 7. COMPREHENSIVE INCOME (LOSS)
Total comprehensive income for the three and six-month periods ended
June 30, 2000 was $29.6 million and $39.6 million, respectively. Total
comprehensive income for the three and six-month periods ended June 30, 1999 was
$8.0 million and $46.6 million, respectively. Comprehensive income decreased
approximately $41 thousand during the second quarter of 2000 and decreased
approximately $110 thousand through the six months ended June 30, 2000.
Comprehensive income increased approximately $2 thousand during the second
quarter of 1999 and decreased $35 thousand through the first half of 1999.
NOTE 8. SALES INFORMATION
As of June 30, 2000, 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 20.2% 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 $130.8 million
and $68.8 million for the quarters ended June 30, 2000 and 1999, respectively.
Through the first six months of 2000, revenue generated by sales to AT&T were
approximately $240.6 million as compared to the first half of 1999 when sales to
AT&T totaled $106.7 million.
The Company sells its products primarily in the United States with its
international revenue being generated 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 months ended June 30, 2000 and 1999 are as follows (in thousands):
(Total identifiable international assets were immaterial.)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
----------------------- ------------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
INTERNATIONAL REGION
Asia Pacific........................ $ 3,660 $ 3,037 $ 7,849 $ 7,010
Europe.............................. 10,681 4,375 17,652 7,499
Latin America....................... 8,717 5,759 12,940 12,899
Canada.............................. 852 755 2,193 1,451
-------- -------- -------- --------
Total international sales $ 23,910 $ 13,926 $ 40,634 $ 28,859
======== ======== ======== ========
</TABLE>
8
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ANTEC CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
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. 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 connection with the transaction, the Company recorded a pre-tax gain
of $60.0 million, net of related expenses, based upon an independent valuation
of LANcity. The transaction was accounted for, in effect, as if it were a gain
on the sale of a 12.50% interest in Arris to Nortel in exchange for 12.50% 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 and deferred income taxes are provided on such
gain.
The Company's interest in Arris was subject to further dilution based
upon its performance over the eighteen-month period ended June 30, 2000. At the
expiration of the eighteen-month period, no further dilution of ANTEC's share
occurred, and, based upon the initial independent valuation, ANTEC recorded an
additional gain of $30.0 million to reflect the Company's final ownership
percentage in the joint venture of 18.75%.
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,
------------------------ ------------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Basic:
Net income $ 29,611 $ 8,002 $ 39,637 $ 46,617
======== ======== ======== ========
Weighted average shares outstanding 37,867 36,416 37,779 36,251
======== ======== ======== ========
Basic earnings per share $ 0.78 $ 0.22 $ 1.05 $ 1.29
======== ======== ======== ========
Diluted:
Net income $ 29,611 $ 8,002 $ 39,637 $ 46,617
Add:
4.5% convertible subordinated notes interest
and fees, net of federal income tax effect 887 887 1,774 1,774
-------- -------- -------- --------
Total $ 30,498 $ 8,889 $ 41,411 $ 48,391
======== ======== ======== ========
Weighted average shares outstanding 37,867 36,416 37,779 36,251
Dilutive securities net of income tax benefit:
Add options/warrants 2,074 1,981 2,052 1,977
Add assumed conversion of
4.5% convertible subordinated notes 4,792 4,792 4,792 4,792
-------- -------- -------- --------
Total 44,733 43,189 44,623 43,020
======== ======== ======== ========
Diluted earnings per share $ 0.68 $ 0.21 $ 0.93 $ 1.12
======== ======== ======== ========
</TABLE>
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, 2000 AND
1999
In order to provide a clearer understanding of ANTEC's product mix,
although it operates in only one segment, the Company is providing financial
information broken down into four major product categories: Optical & Broadband
Transmission, Cable Telephony & Internet Access, Outside Plant & Powering and
Supplies & Services.
Net Sales. ANTEC's revenue for the second quarter 2000 increased 40.6%
to a record $276.1 million as compared to the second quarter last year, and
increased 10.3% sequentially from the previous revenue record set during the
first quarter of 2000. For the six-month periods ended June 30, 2000 and 1999,
net sales were $526.4 million and $341.6 million, respectfully, an increase of
54.0% year-over-year. The Company continues to benefit from the strong capital
spending by communication providers, especially the multiple system operators
("MSOs") as they rebuild their plants in an effort to provide additional
services, such as cable telephony. Sales in all ANTEC markets were up
substantially during 2000.
Through the three and six months ended June 30, 2000, revenue growth
was robust across all product categories as compared to the respective periods
last year.
- The Company's Optical & Broadband Transmission product
offerings experienced year-over-year quarterly revenue growth
of approximately 36.0% to $76.0 million up from $55.9 million
in 1999. Through six months of 2000, revenue reached $147.3
million or an increase of 48.1% from the $99.4 million in the
first half of 1999. All product lines within this category
experienced increased sales for the periods reported. In
particular, the optical transmission product revenue
year-over-year growth of approximately 46.3% was spurred from
sales generated on products designed and introduced in the
last fifteen months. Taps and line passive products also
experienced strong growth as sales increased approximately 70%
on a year-over-year comparison.
- Cable Telephony & Internet Access revenues of $85.4 million
for the three months ended June 30, 2000 marked an increase of
approximately 92.5% as compared to the $44.4 million generated
during the same quarter in 1999. For the six-month period,
sales increased 159% from $64.9 million in 1999 to $168.2
million in 2000 on the strength of increased voice port and
Host Digital Terminal ("HDT") shipments throughout the current
year as compared to the prior year. Cornerstone data sales
were approximately $3.8 million for the quarter as compared to
$12.5 million during the second quarter 1999. This drop in
revenue coincides with the expiration of the earn out
potential with respect to LANcity becoming a part of Arris
Interactive, ANTEC's joint venture with Nortel. (See Note 9 of
the Notes to the Consolidated Financial Statements.)
- Sales within the Outside Plant & Powering product family
increased approximately 14.6% to $44.6 million during the
second quarter as compared to the same period last year.
Through the first six months of 2000, revenue grew 19.8% to
$80.2 million as compared to $66.9 million through the first
half of 1999. The year-over-year quarterly growth was
generated by increased sales of Monarch brand drop passives
and Digicon connectors, which increased by approximately 59%
and 84%, respectively. On the year to date comparison, in
addition to the above-mentioned products with increases of
approximately 57% and 68%, respectively, powering product
sales rose more than 40% during the first six months of the
year.
- ANTEC's Supplies & Services product offerings experienced
22.7% revenue growth to $70.1 million in the second quarter
2000 with an 18.4% increase to $130.7 million through the
first half of 2000 as compared to the respective periods last
year. These increases were driven by strong fiber optic cable
sales as well as installation materials and tools, which grew
over 50%
11
<PAGE> 12
and 25%, respectively, for the quarter and 35% and 32%,
respectively, year to date as compared to the results of the
prior year.
Sales to AT&T reached approximately $130.8 million during the second
quarter of 2000 or 47.4% of the quarterly volume as compared to the same period
last year when sales to AT&T were $68.8 million or 35.0% of the quarterly
volume. Year to date, sales to AT&T increased 125% to $240.6 million in 2000 as
compared to $106.7 million in the first half of 1999. The strength of the
revenue stream generated from AT&T is reflective of its continued upgrade of
plant infrastructure and movement into the local loop access market. Sales to
non-AT&T customers increased 6.8% over the comparable quarter last year and
approximately 19.0% year-over-year.
International sales for the quarter increased 71.7% to $23.9 million as
compared to the second quarter 1999 and increased 40.8% year to date.
International sales of $23.9 million and $40.6 million for the three and
six-months ended June 30, 2000 represented approximately 12.8% and 11.5% of
sales, respectively, exclusive of the Cornerstone products that are included as
part of the Cable Telephony & Internet Access product offerings, which the
Company does not sell internationally. This compares to international revenue
achieving 9.2% and 10.5% of sales for the same periods during 1999, also net of
the Cornerstone product sales.
Gross Profit. Gross profit for the three and six months ended June 30,
2000 were $52.8 million and $104.1 million, respectively, as compared to $44.0
million and $78.2 million for the comparable periods of 1999, generating an $8.8
million improvement for the quarter and $25.9 million year to date. During the
second quarter of 2000, the Company booked an additional $3.5 million charge for
product discontinuation costs, as an increase to cost of goods sold, related to
the reorganization that occurred in the fourth quarter of 1999. Excluding this
charge, gross profit for the three and six-month periods ended June 30, 2000
would have been $56.3 million and $107.6 million, respectively. (See Note 3 of
the Notes to the Consolidated Financial Statements.)
- The Company's Optical & Broadband Transmission product
offerings generated approximately $5.0 million in additional
margin on a 1.1 percentage point decrease over the second
quarter last year. Year-over-year margin dollars increased
$13.9 million with a 0.3 percentage point increase in the
blended margin percentage. This positive margin dollar
performance was lead by the increase in sales as compared to
the same periods last year.
- ANTEC's Cable Telephony & Internet Access product category
provided approximately $5.8 million in margin dollar growth as
the margin percentage decreased 0.5 percentage points when
comparing second quarter 2000 to the same period last year.
Year to date this product category generated $15.2 million in
additional margin as compared to 1999 with the blended
six-month margin percentage remaining flat. Volume growth
fueled this positive performance.
- Gross profit for the Outside Plant & Powering product
offerings increased approximately $2.0 million driven by a
margin increase of 1.6 percentage points to 25.0% for the
second quarter 2000. Pushed by strong volume during the year,
gross profit increased $2.6 million as compared to the first
half of 1999. On the year to date basis, the 2000 margin
performance slipped 0.9 percentage points as compared to last
year. This drop in margin percentage is due mainly to
absorption issues driven by new product introductions, such as
the Total System Power ("TSP") product, as well as pricing
pressure, particularly on drop passive products, which also
adversely effected the margin performance within this product
category.
- The Company's Supplies & Services products experienced a 3.0
percentage point decline in gross margin for the quarter, with
a $0.5 million increase in gross margin dollars as compared to
the second quarter last year. Year to date gross margin has
declined 3.2 percentage points with an overall decrease in
margin dollars of $0.2 million. The increased sales of
products within this category, particularly fiber optic cable,
which are experiencing strong margin pressure, resulted in the
gross profit shortfall for the six months.
12
<PAGE> 13
Although sales volume increased, generating a higher gross margin
dollar amount, the Company's consolidated gross margin percentage, excluding the
additional charge for product discontinuation costs during the second quarter,
slipped to 20.4% for both the second quarter and year to date 2000, down 2.0 and
2.5 percentage points from the comparable periods last year. This decrease in
the gross margin percentage is primarily the result of two factors;
- Cornerstone sales, part of the Cable Telephony & Internet
Access product offerings, which carry distribution type gross
margins in the 15% range, accounted for approximately 31% of
the total sales volume during the second quarter 2000 and 32%
of the year to date volume as compared to 23% and 19% for the
comparable periods last year.
- The Company recognized approximately $0.9 million and $2.1
million in previously deferred 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 profit on sales to Tanco until Tanco effectively
transferred the inventory to the ultimate customer. The joint
venture is currently inactive and moving through the process
of dissolution.
Selling, General Administrative, and Development ("SGA&D") Expenses.
SGA&D expenses for the three and six-month periods ended June 30, 2000 were
$33.9 million and $64.6 million, respectively as compared to $27.1 million and
$52.0 million for the same periods last year. Research and development expenses
related to new product introductions accounted for $2.0 million and $4.3 million
of this quarterly and year to date increase, respectively. Selling expenses
accounted for $3.8 million of the quarterly increases and $6.4 million of the
year to date increase as ANTEC added personnel resources in support of the top
line growth. SGA&D expenses are expected to maintain a quarterly level between
$32.0 million and $34.0 million for the remainder of 2000.
It should be noted that the first half of 2000 included a one-time
pre-tax gain of $2.1 million realized as a result of employee elections
associated with a new and enhanced benefit plan and the resultant effect on the
Company's defined benefit pension plan. Additionally, approximately $0.6 million
was charged to expense during the second quarter of 2000 that was incurred in
connection with the New Jersey facility closure. (See Note 3 of the Notes to the
Consolidated Financial Statements.) This year-over-year difference between SGA&D
expenses also includes the reversal of approximately $1.8 million in
over-accrued expenses made during 1999 due to a change in estimated bonuses and
a reduction in self-insurance reserves from the year ended 1998. This decrease
in 1999 expenses increased the change in spending levels as compared to expenses
for 2000.
Gain on LANcity Transaction. The transaction was accounted for, in
effect, as if it were a gain on the sale of ANTEC's 18.75% interest in Arris
Interactive to Nortel in exchange for 18.75% of LANcity. As a result, a pre-tax
gain of approximately $60.0 million was recognized during the quarter ended
March 31, 1999 (the equivalent of ANTEC's 12.5% interest in Arris) with an
additional pre-tax gain of $30.0 million being recorded during the second
quarter of 2000 (the equivalent of ANTEC's 6.25% interest in the venture). (See
Note 9 of the Notes to the Consolidated Financial Statements)
Gain on Chromatis Investment. During the second quarter of 2000, the
Company made a $1.0 million strategic investment in Chromatis Networks, Inc.,
receiving 56,882 shares of the company's preferred stock. On June 28, 2000,
Lucent Technologies announced it had completed an acquisition of Chromatis,
making it part of Lucent's Optical Networking Group. The conversion of Chromatis
shares to Lucent shares resulted in the Company receiving approximately 120,809
shares of Lucent's stock. Lucent's stock price on the date of the completed
acquisition was $57.48, valuing ANTEC's investment at approximately $6.9
million, thus producing a pre-tax gain of $5.9 million. These shares of Lucent
stock are considered trading securities held for resale.
13
<PAGE> 14
Interest Expense. Interest expense for the quarters ended June 30, 2000
and 1999 was $2.5 and $3.2 million, respectively. Interest expense for the first
six months of 2000 was $5.1 million as compared to $6.0 million for the first
half of 1999. Interest expense for all periods reflects the cost of borrowings
on the Company's revolving line of credit and interest on $115.0 million of 4.5%
Convertible Subordinated Notes issued during 1998. As of June 30, 2000, the
Company had a balance of $62.0 million outstanding under its Credit Facility in
floating debt. As of June 30, 2000, the average interest rate on its outstanding
line of credit borrowings was 7.94% with an overall blended rate of
approximately 5.7% when considering the subordinated debt. This compares to
$95.0 million outstanding in the second quarter 1999 hedged with $50.0 million
in swaps at a fixed rate and $45.0 million in floating debt. As of June 30,
1999, the average interest rate on the Company's outstanding line of credit
borrowings was 6.67%, with an overall blended rate of approximately 5.5%
including the subordinated debt. The low levels of floating debt mitigated the
increase of 127 basis points during the second quarter 2000 as compared to the
same period last year.
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
related to LANcity's first quarter sales to domestic cable companies. Beginning
April 1999, all LANcity revenue, pertaining to cable modem and headend products
sold into ANTEC's market, was 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. Net income of $29.6 million was recorded for the second
quarter of 2000, as compared to net income of $8.0 million for the same period
last year. Second quarter results for 2000 included a pre-tax gain on the
LANcity transaction of $30.0 million, a pre-tax gain of $5.9 million related to
the Company's investment in Chromatis, and an additional charge of $3.5 million
in connection with product discontinuation costs reflected as an increase in
cost of goods sold. Excluding this net one-time pre-tax gain of $32.4 million,
net income for the second quarter of 2000 was $11.2 million. Net income for the
six-month period ended June 30, 2000 was $39.6 million as compared to $46.6
million for the same period last year. In addition to the above mentioned items,
included in the net income for 2000, was a pre-tax curtailment gain on the
Company's defined benefit pension plan of approximately $2.1 million recorded
during the first quarter of 2000. Exclusive of the above transactions, net
income for 2000, as compared to the same period last year, excluding the
pre-tax gain of $60.0 million related to the LANcity transaction recorded
during 1999, surged 59% to $19.9 million or $.49 per diluted share. Exclusive of
the LANcity gain recorded during 1999, net income was $12.5 million or $.33 per
diluted share in the first half of 1999.
Reorganization. In December 1999, ANTEC announced the consolidation of its New
Jersey facility into either its Duluth, Georgia office or down to the Southwest,
as well as the discontinuance of certain product offerings. Related to this
announcement, ANTEC booked a charge of $16.0 million. During the second quarter
of 2000, the Company, in further evaluating its powering UCF and certain RF
products, recorded an additional charge of $3.5 million against cost of goods
sold, bringing the total reorganization related charge to $19.5 million.
Included in the charge was approximately $2.6 million related to personnel costs
and approximately $3.0 million related to lease termination and other facility
shutdown charges. With the exception of saving approximately $1.5 million in
lease obligation and SGA&D costs, the remaining costs related to the New Jersey
facility will shift to Georgia and the Southwest. As of June 30, 2000, $1.0
million related to personnel costs and approximately $1.8 million related to
lease termination and other facility shutdown expenses remain to be paid. It is
anticipated that all of the remaining actions will be fully implemented during
the third quarter of 2000.
In January 1998, ANTEC announced a consolidation plan implemented
concurrently with the creation of the new President and Chief Operating Officer
organization in Atlanta. Charges related to this reorganization for the three
and six-month periods ended June 30, 1999 were $0.9 million and $2.0 million,
respectively. The balance of expenditures related to this reorganization were
charged throughout the remainder of 1999.
14
<PAGE> 15
FINANCIAL LIQUIDITY AND CAPITAL RESOURCES
FINANCING
As of June 30, 2000, the Company had a balance of $62.0 million
outstanding under its Credit Facility and $58.0 million of available borrowings.
The average interest rate on its outstanding borrowings was 7.94% at June 30,
2000. The commitment fee on unused borrowings is approximately 0.5%.
CAPITAL EXPENDITURES
The Company's capital expenditures were $4.7 million and $6.0 million
in the three months ended June 30, 2000 and 1999, respectively. Capital
expenditures were $9.0 million for the first six months of 2000 as compared to
$11.1 million during 1999. The Company had no significant commitments for
capital expenditures at June 30, 2000.
CASH FLOW
Cash levels have increased by approximately $0.7 million in the first
half of 2000 and increased by $1.8 million during the same period of the prior
year. Through the six months ended June 30, 2000, net cash provided by operating
activities was $14.6 million, related primarily to the decrease in inventories
coupled with the slight increase in accounts payable and accrued liabilities as
compared to year-end. The Company also spent approximately $9.0 million on
capital purchases and recorded $3.0 million in additional investments during the
first six months of the year. Financing activities used approximately $1.8
million in cash during the first half of 2000. During the six months ended June
30, 1999, cash used in operating activities was $26.2 million pushed by
increases in accounts receivable and inventory levels in support of the
Company's growth. Investment activity during the first half of 1999 consumed
approximately $11.1 million. These cash outlays during 1999 were fully offset by
$39.2 million of positive cash flows from financing activities.
Operating activities provided cash of $14.6 million during the
six-month period ended June 30, 2000. Inventory levels have decreased, providing
$15.7 million in positive cash flow. A slight increase in accounts payable and
accrued liabilities provided approximately $2.8 million in cash. Positive cash
flow was provided by the net income for the six-month period of $39.6 million
while depreciation and deferred income taxes provided $9.7 million and $13.5
million, respectively. Reflective of the record revenue growth, increased
receivable levels, product demand and the timing of shipments utilized $20.0
million of cash during 2000. Additionally, during the second quarter of 2000,
the Company recorded a pre-tax gain of $30.0 million in their Arris joint
venture based on the Company's final ownership percentage in the transaction.
(See Note 9 of the Notes to the Consolidated Financial Statements.) The Company
also recorded a $5.9 million pre-tax gain related to its investment in Chromatis
during the second quarter of 2000. Operating activities utilized cash of $26.2
million, which is indicative of the increased working capital levels required
during the period ended June 30, 1999. In the first half of 1999, the Company
recorded an initial pre-tax gain of $60.0 million in their 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 $25.6 million and $30.0
million, respectively. An increase in accounts payable and accrued liabilities
provided approximately $11.0 million through June 30, 1999. Positive cash flow
was provided by the net income for the six-month period of $46.6 million while
depreciation and deferred income taxes provided $8.2 million and $25.8 million,
respectively.
Days sales outstanding were approximately 68 days at June 30, 2000 as
compared to approximately 66 days at the end of the first half of 1999. Despite
the marked growth in revenue during 2000 along with the correlating increase in
receivable levels, the Company has been able to maintain a relatively level
number of days of uncollected sales in receivables. This has been achieved
through a change in the dynamics of the Company's accounts receivable aging
driven by two main factors. First, just as AT&T has become a large part of
ANTEC's sales volume, they also account for a large portion of the receivable
balance. Historically, AT&T has promptly paid the majority of its account
balance within twenty
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<PAGE> 16
days. Second, slower paying accounts have remained a smaller percentage of the
overall total accounts receivable balance as the Company has been able to
collect on certain extended-term accounts during the latter part of last year
and into 2000.
Cash flows used in investing activities were $12.0 million and $11.1
million for the six months ended June 30, 2000 and 1999, respectively. These
investment amounts reflect $9.0 million and $11.1 million in purchases of
capital assets during the respective periods. Additionally, the Company funded
approximately $3.0 million in strategic investments during 2000.
Cash used in financing activities was $1.8 million during the period
ended June 30, 2000. Payments under the Company's credit facilities exceeded
borrowings by $6.5 million. This cash outlay was partially offset by the
exercise of stock options during the first six months of 2000 that provided
positive cash flows of approximately $5.3 million. Cash provided by financing
activities during 1999 was $39.2 million driven by net borrowings of $29.0
million and the exercise of stock options that provided an additional $10.3
million in positive cash flows during 1999. Financing activities during both
periods reflect their respective trends in operating and investing activities.
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. However, the Company is in the process of examining its
current revolving credit facility in order to determine whether alternative
borrowing sources, such as an accounts receivable securitization program, might
help reduce the overall cost of borrowed funds. In the event that the Company
utilizes a securitization program it also is likely to renegotiate its current
credit facilities.
YEAR 2000 DISCLOSURE
ANTEC transitioned through January 1, 2000 and experienced no
significant date related processing issues. ANTEC does not anticipate incurring
any material direct costs related to the Year 2000 Issue going forward. As of
June 30, 2000, the Company is not aware of any material problems resulting from
Year 2000 issues, either with its products, its internal systems, or the
products, services and systems of its major suppliers, customers or third
parties. The Company will continue to monitor its mission critical computer
applications and those of its suppliers and vendors throughout 2000 to ensure
that any latent Year 2000 matters that may arise are addressed promptly.
FORWARD LOOKING STATEMENTS
Certain information and statements contained in this Management Discussion
and Analysis of Financial Condition and Results of Operations and other sections
of this report, including statements using terms such as "may," "expect,"
"anticipate," "intend," "estimate," "believe," "plan," "continue," "could be,"
or similar variations or the negative thereof, constitute forward looking
statements with respect to the financial condition, results of operations, and
business of ANTEC, including statements that are based on current expectations,
estimates, forecasts, and projections about the markets in which the Company
operates, the margins it expects from its products and its expectations
regarding SGA&D expenses, as well as management's beliefs and assumptions
regarding these markets. Any statements that are not statements about historical
facts also are forward looking statements. The Private Securities Litigation
Reform Act of 1995 (the "Act") provides a "safe harbor" for forward looking
statements. These Cautionary Statements are being made pursuant to the
provisions of the Act and with the intention of obtaining the benefits of the
terms of the "safe harbor" provisions of the Act. In order to comply with the
terms of the "safe harbor," the Company cautions investors that any forward
looking statements made by the Company are not guarantees of future performance
and that a variety of factors could cause the Company's actual results to differ
materially from the anticipated results or other expectations expressed in the
Company's forward looking statements. Several factors that could cause results
or events to differ from current expectations are discussed below. These factors
are not intended to be an all-encompassing list of risks and uncertainties that
may affect the operations, performance, development and results of the Company's
business. In
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<PAGE> 17
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.
Gross profit for the product category disclosures. Gross profit for the
product category disclosures within Management's Discussion and Analysis of
Financial Condition and Results of Operations section of this report was derived
from estimates using standard product margins and an allocation of manufacturing
variances based on a percentage of product category sales.
Rapid technological change and voice and data convergence. ANTEC
expects that data communications traffic will grow substantially in the future
compared to the modest growth expected for voice traffic. The growth of data
traffic is expected to have a significant impact on traditional voice networks
and create market discontinuities that should drive the convergence of data and
telephony. Many of the Company's traditional customers have already been
investing in data networking and that trend is expected to continue. Due to the
evolving nature of the communications industry and the technologies involved,
there can be no assurance as to the rate of such convergence.
Rapidly changing technologies, evolving industry standards, frequent
new product introductions, and relatively short product life cycles characterize
the markets for ANTEC's products. The Company's success is expected to depend,
in substantial part, on the timely and successful introduction of new products
and upgrades of current products to comply with emerging industry standards and
to address competing technological and product developments achieved by its
competitors. The success of new or enhanced products is dependent on a number of
factors including the timely introduction of such products, market acceptance of
new technologies and industry standards, and the pricing and marketing of such
products. An unanticipated change in one or more of the technologies affecting
telecommunications and data networking, or in market demand for products based
on specific technology could have a material adverse effect on the business,
results of operations, and financial condition of the Company if it fails to
respond in a timely and effective manner to such changes.
Competition. The Company competes with national, regional and local
manufacturers, distributors and wholesalers including some companies larger than
ANTEC. The Company's competitors include General Instrument Corporation, now a
part of Motorola, Inc., Scientific-Atlanta, Inc., Philips, Harmonic Inc., and
C-COR.net Corporation. Since the markets in which the Company competes are
characterized by rapid growth and, in certain cases, low barriers to entry and
rapid technological changes, smaller niche market companies and start-up
ventures may become principal competitors in the future.
ANTEC expects that it will face additional competition from existing
competitors and from a number of companies that may enter ANTEC's existing and
future markets. Some of the Company's current and potential competitors have
greater financial, marketing and technical resources. A majority of ANTEC's
current and potential competitors also have established relationships with the
Company's current and potential customers. Increased competition could result in
price reductions, reduced profit margins, and loss of market share, each of
which could have a material adverse effect on the business, results of
operations, and financial condition of the Company.
International growth, foreign exchange, and interest rates. ANTEC
intends to continue to pursue growth opportunities in international markets. In
many international markets, long-standing relationships, including local content
requirements and type approvals, create barriers to entry. In addition, pursuit
of such international growth opportunities may require significant investments
for an extended period before returns on such investments, if any, are realized.
Such projects and investments could be adversely affected by reversals or delays
in the opening of foreign markets to new competitors, exchange controls,
currency fluctuations, investment policies, repatriation of cash,
naturalization, social and political risks, taxation and other factors,
depending on the country in which such opportunities arise. Difficulties in
foreign financial markets and economies, and of foreign financial institutions,
could adversely affect demand from customers in the affected countries.
In order to grow internationally, it is expected that the Company will
be required to provide significant amounts of customer financing in connection
with the sale of products and services.
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<PAGE> 18
Capital spending of key customers. Changes in spending patterns of
ANTEC's key customers will have a direct effect on the results of the Company's
operations and financial condition. In particular, sales to AT&T, ANTEC's
largest customer has accounted for over 40% of the Company's revenue. A future
decision by AT&T to reduce purchases could have a material adverse effect on the
Company's business, results of operations, and financial condition.
General industry and market conditions and growth rates. ANTEC's future
operating results may be affected by various trends and factors that must be
managed in order to achieve desired operating results. In addition, there are
trends and factors beyond the Company's control, which affect its operations.
Such trends and factors include general domestic or global economic conditions
as well as competitive, technological, and regulatory developments and trends
specific to the Company's industry, customers and markets. 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.
ANTEC competes in a highly volatile and rapidly growing industry that
is characterized by vigorous competition for market share and rapid
technological development carried out amidst uncertainty over adoption of
industry standards and protection of intellectual property rights. These factors
could result in aggressive pricing practices and growing competition both from
start-up companies and from well-capitalized communications companies.
Consolidations in the telecommunications industry. The
telecommunications industry has experienced the consolidation of many industry
participants and this trend is expected to continue. ANTEC and one or more of
its competitors may each supply products to the corporations that have merged or
will merge. This consolidation could result in delays in purchasing decisions by
the merged corporations with the Company playing a greater or lesser role in
supplying the communications products to the merged entity. These purchasing
decisions of the merged companies could have a material adverse effect on the
Company's business, results of operations, and financial condition.
Mergers among the supplier base have recently increased and this trend
is also expected to continue. The larger combined companies with pooled capital
resources may be able to provide solution alternatives with which the Company
would be put at a disadvantage to compete. The larger breath of product
offerings these consolidated suppliers could provide could result in customers
electing to trim their supplier base for the advantages of one-stop shopping
solutions for all their product needs. These consolidated supplier companies
could have a material adverse effect on the Company's business, results of
operations, and financial conditions. Current and future strategic alliances and
acquisitions will play a strong role in the Company's ability to compete within
this changing landscape.
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. As of June 30, 2000, the
Company had no material contracts denominated in foreign currencies.
In the past, ANTEC has used interest rate swap agreements, with large
creditworthy financial institutions, to manage its exposure to interest rate
changes. These swaps would involve the exchange of
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<PAGE> 19
fixed and variable interest rate payments without exchanging the notional
principal amount. At June 30, 2000 the Company did not have any outstanding
interest rate swap agreements.
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 with foreign currency fluctuations for significant
sales contracts, however, no such contracts were in place at June 30, 2000. 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. The Company does not maintain Mexican peso-denominated
currency. Instead, U.S. dollars are exchanged for pesos at the time of payments.
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<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 4,
2000:
An election of eleven Directors was held and the shares 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 30,262,911 5,020,700
---------- ----------
Rod F. Dammeyer 34,941,236 342,375
---------- ----------
John M. Egan 34,869,816 413,795
---------- ----------
James L. Faust 34,943,828 339,783
---------- ----------
William H. Lambert 34,942,777 340,834
---------- ----------
John R. Petty 34,944,206 339,405
---------- ----------
Larry Romrell 34,939,296 344,315
---------- ----------
William T. Schleyer 34,943,556 340,055
---------- ----------
Samuel K. Skinner 34,942,906 340,705
---------- ----------
Robert J. Stanzione 34,942,856 339,755
---------- ----------
Bruce Van Wagner 34,937,178 346,433
---------- ----------
</TABLE>
A proposal was made and adopted to approve 2,500,000 of shares of
Common Stock that may be issued pursuant to the Company's 2000 Stock Incentive
Plan and the shares present were voted as follows:
<TABLE>
<CAPTION>
Number of Number of Number of
Shares Shares Voted Shares
Voted For Against Abstaining
----------- ------------- ----------
<S> <C> <C> <C>
Approval of 2000 Stock Incentive Plan with
2,500,000 shares of Common Stock which
may be issued pursuant to that plan 25,972,536 9,282,148 28,927
---------- ---------- ------
</TABLE>
A proposal was made and adopted to approve the Company's Management
Incentive Plan, and the shares present were voted as follows:
<TABLE>
<CAPTION>
Number of Number of Number of
Shares Shares Voted Shares
Voted For Against Abstaining
----------- ------------- ----------
<S> <C> <C> <C>
Approval of Management Incentive Plan 31,760,126 3,493,380 30,105
---------- ---------- ------
</TABLE>
20
<PAGE> 21
A proposal was made and adopted to increase the number of authorized
shares of Common Stock from 75,000,000 shares to 150,000,000 shares, and the
shares present were voted as follows:
<TABLE>
<CAPTION>
Number of Number of Number of
Shares Shares Voted Shares
Voted For Against Abstaining
----------- ------------- ----------
<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 75,000,000 shares to 150,000,000 shares 34,394,769 839,659 49,183
---------- ------- ------
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<S> <C>
3.1(c) Amendment of May 8, 2000 to Restated Certificate of
Incorporation
27.0 Financial Data Schedules (for SEC use only)
</TABLE>
(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 11, 2000
22
