<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 MARCH 31, 2000
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 April 30, 2000 there were 37,706,615 shares of Common Stock, $0.01
par value, of the registrant outstanding.
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ANTEC CORPORATION
FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 2000
INDEX
<TABLE>
<CAPTION>
Page
<S> <C> <C>
Part I. Financial Information
Item 1. Financial Statements
a) Consolidated Balance Sheets
as of March 31, 2000 and December 31, 1999 3
b) Consolidated Statements of Operations
for the Three Months Ended March 31, 2000 and 1999 4
c) Consolidated Statements of Cash Flows
for the Three Months Ended March 31, 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 - 17
Item 3. Quantitative and Qualitative Disclosures on Market Risk 18
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 19
Signatures 20
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ANTEC CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
---------- ------------
(UNAUDITED)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 6,332 $ 2,971
Accounts receivable (net of allowance for doubtful accounts of $7,192 in 2000
and $7,505 in 1999) 191,828 197,350
Inventories 218,381 215,216
Income taxes recoverable 2,682 10,403
Deferred income taxes 16,672 16,442
Other current assets 20,059 15,989
---------- ----------
Total current assets 455,954 458,371
Property, plant and equipment (net of accumulated depreciation of $45,450 in 2000
and $43,195 in 1999) 52,379 51,406
Goodwill (net of accumulated amortization of $47,870 in 2000 and $46,641 in 1999) 148,607 149,836
Deferred income taxes 5,918 5,918
Investments 70,968 70,968
Other assets 25,008 23,573
---------- ----------
$ 758,834 $ 760,072
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 139,580 $ 153,596
Accrued compensation, benefits and related taxes 16,504 20,539
Other accrued liabilities 28,026 31,402
---------- ----------
Total current liabilities 184,110 205,537
Long-term debt 191,500 183,500
Deferred income taxes 23,700 23,700
---------- ----------
Total Liabilities 399,310 412,737
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, 75 million shares authorized; 37.7
million and 37.6 million shares issued and outstanding in 2000 and 1999,
respectively 379 378
Capital in excess of par value 254,477 252,245
Retained earnings 104,738 94,713
Cumulative translation adjustments (70) (1)
---------- ----------
Total stockholders' equity 359,524 347,335
---------- ----------
$ 758,834 $ 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
March 31,
-------------------------
2000 1999
---------- ----------
<S> <C> <C>
Net sales $ 250,331 $ 145,256
Cost of sales 199,051 111,045
---------- ----------
Gross profit 51,280 34,211
Operating expenses:
Selling, general, administrative and development 30,731 24,895
Amortization of goodwill 1,229 1,236
---------- ----------
31,960 26,131
---------- ----------
Operating income 19,320 8,080
Interest expense 2,598 2,585
Other (income) expense, net 273 (2,030)
Gain on LANcity transaction -- (60,000)
---------- ----------
Income before income taxes 16,449 67,525
Income tax expense 6,423 28,910
---------- ----------
Net income $ 10,026 $ 38,615
========== ==========
Net income per common share:
Basic $ 0.27 $ 1.07
========== ==========
Diluted $ 0.25 $ 0.92
========== ==========
Weighted average common shares:
Basic 37,691 36,085
========== ==========
Diluted 44,513 43,140
========== ==========
Supplemental Income Statement Information:
(excluding effects of pension curtailment gain in Q1 2000 and gain related to
LANcity transaction in Q1 1999.)
Operating income $ 17,212 $ 8,080
========== ==========
Income before taxes $ 14,341 $ 7,525
========== ==========
Net income $ 8,691 $ 4,515
========== ==========
Net income per common share:
Diluted $ 0.22 $ 0.13
========== ==========
</TABLE>
See accompanying notes to the consolidated financial statements.
4
<PAGE> 5
ANTEC CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------
2000 1999
---------- ----------
<S> <C> <C>
Operating activities:
Net income $ 10,026 $ 38,615
Adjustments to reconcile net income to net cash
Provided by (used in) operating activities:
Depreciation and amortization 4,803 3,986
Provision for doubtful accounts 499 512
Deferred income taxes (230) 25,800
LANcity transaction -- (60,000)
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable 5,023 (10,066)
(Increase) in inventories (3,165) (18,010)
Increase in cash overdraft -- 5,077
(Decrease) in accounts payable and (13,661) (5,018)
accrued liabilities
(Increase) decrease in other, net (5,620) 1,327
---------- ----------
Net cash (used in) operating activities (2,325) (17,777)
Investing activities:
Purchases of property, plant and equipment (4,258) (5,093)
---------- ----------
Net cash (used in) investing activities (4,258) (5,093)
Financing activities:
Borrowings under credit facilities 87,500 52,000
Reductions in borrowings under credit facilities (79,500) (41,000)
Deferred financing costs paid (289) (13)
Proceeds from issuance of common stock 2,233 7,447
---------- ----------
Net cash provided by financing activities 9,944 18,434
---------- ----------
Net increase (decrease) in cash and cash equivalents 3,361 (4,436)
Cash and cash equivalents at beginning of period 2,971 4,436
---------- ----------
Cash and cash equivalents at end of period $ 6,332 $ --
========== ==========
Supplemental cash flow information:
Interest paid during the period $ 1,235 $ 1,274
========== ==========
Income taxes paid during the period $ 3 $ 678
========== ==========
</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, with a major office in Englewood, Colorado.
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 or 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 has been
reflected in cost of sales during the fourth quarter of 1999. 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 New Jersey facility. Terminated employees
were offered separation amounts in accordance with the Company's severance
policy and were provided specific separation dates. It is anticipated that, in
addition to the recorded charge of $16.0 million, approximately $1.6 million of
6
<PAGE> 7
ANTEC CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
relocation and fixed asset depreciation expenses, to be incurred in connection
with the New Jersey facility closure, will be recognized during the second
quarter of 2000. It is anticipated that all of these actions will be fully
implemented by the end of the second quarter of 2000. These steps were taken to
structure the Company into a more efficient organization and to further
integrate ANTEC's speed-to-market philosophy. The Company's manufacturing
operations located in New Jersey are being realigned in order to accelerate the
production transition from in-house design and tooling functions into the
manufacturing process. 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. The balance of the
personnel related costs and facility expenses remained unchanged at March 31,
2000.
NOTE 4. INVENTORIES
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
---------- ------------
(Unaudited)
<S> <C> <C>
Raw material $ 58,830 $ 57,538
Work in process 11,940 9,938
Finished goods 147,611 147,740
---------- ----------
Total inventories $ 218,381 $ 215,216
========== ==========
</TABLE>
NOTE 5. PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment, at cost, consists of the following (in
thousands):
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
---------- ------------
(Unaudited)
<S> <C> <C>
Land $ 2,549 $ 2,549
Building and leasehold improvements 14,846 15,485
Machinery and equipment 80,434 76,567
---------- ----------
97,829 94,601
Less: Accumulated depreciation (45,450) (43,195)
---------- ----------
Total property, plant and equipment, net $ 52,379 $ 51,406
========== ==========
</TABLE>
NOTE 6. LONG TERM DEBT
Long term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
---------- ----------
(Unaudited)
<S> <C> <C>
Revolving Credit Facility $ 76,500 $ 68,500
4.5% Convertible Subordinated Notes 115,000 115,000
---------- ----------
Total long term debt $ 191,500 $ 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 $215 million and $175 million at March 31, 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 Credit Facility was also 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. The average annual
interest rate on borrowings was approximately 7.30% at March 31, 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 March 31, 2000, the
Company had approximately $43.5 million of available borrowings under the
Credit Facility.
NOTE 7. COMPREHENSIVE INCOME (LOSS)
Total comprehensive income for the three-month periods ended March 31,
2000 and 1999 was $10.0 million and $38.6 million, respectively. Comprehensive
income decreased approximately $69 thousand during the first quarter of 2000
and decreased approximately $37 thousand during the first quarter of 1999.
NOTE 8. SALES INFORMATION
As of March 31, 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 20.4%
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
$109.8 million and $37.9 million for the quarters ended March 31, 2000 and
1999, respectively.
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 months ended March 31, 2000 and 1999 are as follows (in thousands):
<TABLE>
<CAPTION>
Three Months Ended March 31,
---------------------------
2000 1999
---------- ----------
INTERNATIONAL REGION (Unaudited) (Unaudited)
<S> <C> <C>
Asia Pacific ..................................... $ 4,139 $ 3,973
Europe ........................................... 6,971 3,124
Latin America .................................... 4,223 7,140
Canada ........................................... 1,341 696
---------- ----------
Total international sales $ 16,674 $ 14,933
========== ==========
</TABLE>
Total identifiable international assets were immaterial.
8
<PAGE> 9
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 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 fifteen months ended March 31, 2000, consolidated LANcity product sales,
through all sales channels, totaled approximately $163.2 million.
During the first quarter of 1999, 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 ANTEC's 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.
At the expiration of the eighteen-month period discussed above, a
second independent valuation of LANcity will be performed in order to determine
the value of any additional interest to be given to Nortel if Nortel elects to
further dilute ANTEC's interest. In addition, upon the expiration of the
measurement period on June 30, 2000, and, based upon the second independent
valuation, ANTEC will record a gain or loss equal to their final ownership
percentage less the previously recorded amount of $60.0 million from the
initial valuation.
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
March 31,
-------------------------
2000 1999
---------- ----------
<S> <C> <C>
Basic:
Net income $ 10,026 $ 38,615
========== ==========
Weighted average shares outstanding 37,691 36,085
========== ==========
Basic earnings per share $ 0.27 $ 1.07
========== ==========
Diluted:
Net income $ 10,026 $ 38,615
Add:
4.5% convertible subordinated notes interest
and fees, net of federal income tax effect 887 887
---------- ----------
Total $ 10,913 $ 39,502
========== ==========
Weighted average shares outstanding 37,691 36,085
Dilutive securities net of income tax benefit:
Add options/warrants 2,030 2,263
Add assumed conversion of
4.5 % convertible subordinated notes 4,792 4,792
---------- ----------
Total 44,513 43,140
========== ==========
Diluted earnings per share $ 0.25 $ 0.92
========== ==========
</TABLE>
10
<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
COMPARISON OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
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 and Services.
Net Sales. ANTEC's revenue for the first quarter 2000 increased 72% to
a record $250.3 million. 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 telephony. Sales in all ANTEC markets were up
substantially. Sales to AT&T increased 190% to $109.8 million in the first
quarter. Sales to non-AT&T customers increased 30.9% over the comparable quarter
last year and 20.5% over the level of the fourth quarter 1999. International
sales increased 11.7% to $16.7 million as compared to the first quarter 1999 and
increased 39.6% over the fourth quarter 1999. International sales of $16.7
million represented approximately 10% of sales excluding the Cornerstone
products, which are included as part of the Cable Telephony & Internet Access
product offerings, which the Company does not sell internationally.
The first quarter's record results were driven by strong year over
year revenue increases within all product categories.
- The Company's Optical & Broadband Transmission product
offerings experienced revenue growth of approximately 64% to
$71.3 million as compared to the first quarter 1999. All
product lines within this category experienced increased
sales. In particular, the optical transmission products grew
approximately 70% from sales generated on products designed
and introduced in the last twelve months.
- Cable Telephony & Internet Access revenues increased over
300% as compared to the same quarter in 1999 or from $20.5
million to $82.8 million. Increased voice port and Host
Digital Terminal ("HDT") shipments throughout the first
quarter 2000 as compared to the same period last year
generated approximately 250% of this growth. Cornerstone data
sales were approximately $10.9 million for the quarter and
were zero during the first quarter last year due to the
timing of the completion of the LANcity transaction during
last year.
- Sales within the Outside Plant & Powering product family
increased approximately 27% to $35.6 million during the
quarter as compared to the same period last year. This growth
stems from increased sales of powering products, Monarch
brand drop passives, Digicon connectors and network interface
devices ("NIDs"), which increased year over year by
approximately 37%, 54%, 48% and 10%, respectively.
- ANTEC's Supplies & Services product offerings experienced 14%
revenue growth to $60.6 million in the first quarter 2000.
Installation materials and tools grew over 40% when comparing
first quarter results.
Gross Profit. Gross profit for the first three months of 2000 was
$51.3 million as compared to $34.2 million for the first three months of 1999,
generating $17.1 million in improvement.
- The Company's Optical & Broadband Transmission product
offerings generated approximately $8.9 million in additional
margin on a 1.8 percentage point improvement over the first
quarter last year. This positive margin performance was lead
by the increase in sales of optronic and node products at an
improved gross profit percentage as compared to the same
period last year.
11
<PAGE> 12
- ANTEC's Cable Telephony & Internet Access product category
provided approximately $9.4 million in margin dollar growth
as the margin percentage increased 0.6 percentage points when
comparing first quarter 2000 to the same period last year.
Volume and improved gross profit percentages fueled this
positive performance.
- Gross profit for the Outside Plant & Powering product
offerings increased approximately $0.6 million. This increase
was driven by the revenue growth as the gross margin
percentage decreased 4.2 percentage points to 23.0% for the
first quarter 2000. Manufacturing absorption issues added
approximately $1.3 million to cost of sales during the first
quarter 2000 as compared to providing approximately $1.1
million to gross profit in the same period last year. This
increase in underabsorption was driven by the new product
introductions, such as the Total System Power ("TSP")
product, that also affected the latter part of 1999. Pricing
pressure, particularly on drop passive products, also
adversely effected the margin performance within this product
category.
- The Company's Supplies & Services products experienced a 3.5
percentage point decline in gross margin, which translated
into a $0.6 million decrease in gross profit dollars as
compared to the first quarter last year. The product mix
within this category, particularly the increase in sales of
products such as fiber optic cable, which is experiencing
strong margin pressure, resulted in the gross profit
shortfall.
Although sales volume increased, generating a higher gross margin
dollar amount, the Company's consolidated gross margin percentage slipped to
20.5% for the first quarter 2000, down 3.1 percentage points from 23.6%
recorded in the comparable period last year. This decrease in the gross margin
percentage is primarily the result of several 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 33% of
the total sales volume during the first quarter 2000 as
compared to 14% of total revenue during the first quarter
last year. As Cable Telephony and Internet Access products
become a larger part of the Company's overall revenue stream,
consolidated gross margin percentage will trend toward the
lower percentage range.
- During the quarter ended March 31, 1999, the Company
recognized approximately $1.2 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. 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 first three months of 2000 were $30.7 million compared to
$24.9 million for the first three months of 1999. Research and development
expenses related to new product introductions accounted for $2.3 million of this
increase and selling expenses accounted for $2.7 million of the 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 results for the first quarter 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. This difference between
first quarter 2000 SGA&D expenses, as compared to the prior year, also includes
the reversal of approximately $1.8 million in over-accrued expenses made during
the first quarter 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 first quarter 2000
expenses.
12
<PAGE> 13
Gain on LANcity Transaction. The transaction was accounted for, in
effect, as if it were a gain on the sale of ANTEC's 12.5% 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 became 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 was $2.6 million for the first
quarter of both 2000 and 1999. Interest expense for both quarters reflects the
cost of borrowings on the Company's revolving line of credit coupled with the
full impact of the issuance of $115.0 million of 4.5% Convertible Subordinated
Notes completed during 1998. As of March 31, 2000, the Company had a balance of
$76.5 million outstanding under its Credit Facility of which $50.0 million was
hedged by interest rate swap agreements at a fixed rate leaving $26.5 million
in floating debt. As of March 31, 2000, the average interest rate on its
outstanding line of credit borrowings was 7.30% with an overall blended rate of
approximately 5.5% when considering the subordinated debt. This compares to
$77.0 million outstanding in the first quarter 1999 also hedged with $50.0
million in swaps at a fixed rate and $27.0 million in floating debt. As of
March 31, 1999, the average interest rate on the Company's outstanding line of
credit borrowings was 6.85%, with an overall blended rate of approximately 5.5%
including the subordinated debt. The low levels of floating debt mitigated the
increase of 45 basis points during the first quarter 2000 as compared to the
same period last year.
Other Income and Expense. The results for the quarter ended March 31,
1999 included the impact of approximately $2.2 million of channel fees related
to LANcity's first quarter sales. LANcity sales at quarter end were
approximately $15.0 million. Beginning in 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.
Net Income. Net income of $10.0 million was recorded for the first
three months of 2000, as compared to net income of $38.6 million for the first
three months of 1999. First quarter results for 1999 included a pre-tax gain on
the LANcity transaction of approximately $60.0 million, whereas, 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. Exclusive of the
above transactions, net income for 2000 surged 92% to $8.7 million or $.22 per
diluted share as compared to $4.5 million or $.13 per diluted share in the
first quarter 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. 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. These steps were taken to structure the Company into a more
efficient organization and to further integrate ANTEC's speed-to-market
philosophy. The Company's manufacturing operations located in New Jersey are
being realigned in order to accelerate the production transition from in-house
design and tooling functions into the manufacturing process. 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. The balance of the personnel related costs and facility expenses
remained unchanged at March 31, 2000. It is anticipated that the majority of
these charges will be expended during the second quarter.
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 Atlanta. As of March 31, 1999, 126 of the
estimated 177 employees had been terminated. As of March 31, 1999,
approximately $2.3 million of the cash costs related to personnel costs and
approximately $1.1 million of cash costs related to
13
<PAGE> 14
lease termination payments and other costs had yet to be expended. All the
remaining costs were charged throughout 1999.
FINANCIAL LIQUIDITY AND CAPITAL RESOURCES
FINANCING
As of March 31, 2000, the Company had a balance of $76.5 million
outstanding under its Credit Facility and $43.5 million of available
borrowings. The average interest rate on its outstanding borrowings was 7.30%
at March 31, 2000. The commitment fee on unused borrowings is approximately
0.5%.
CAPITAL EXPENDITURES
The Company's capital expenditures were $4.3 million and $5.1 million
in the three months ended March 31, 2000 and 1999, respectively. The Company
had no significant commitments for capital expenditures at March 31, 2000.
CASH FLOW
Cash levels have increased by approximately $3.4 million in the first
quarter of 2000 and decreased by $4.4 million during the same period of the
prior year. During the quarter ended March 31, 2000, net cash used in operating
activities was $2.3 million, related primarily to the decrease in accounts
payable and accrued liabilities as compared to year-end. The Company also spent
approximately $4.3 million on capital purchases during the first three months of
the year. These first quarter cash outlays were fully offset by positive cash
flows of $9.9 million provided through financing activities. Cash used by
operating activities during the first quarter of 1999 was $17.8 million,
primarily due to increases in accounts receivable and inventory levels in
support of the Company's growth. Investment activity during the first quarter of
1999 consumed approximately $5.1 million. These first quarter outlays during
1999 were partially offset by $18.4 million of positive cash flows from
financing activities.
Operating activities utilized cash of $2.3 million during the first
quarter of 2000. With the payment of bonuses and other accrued liabilities
during the first quarter 2000, decreases in accounts payable and accrued
liabilities used approximately $13.7 million in cash. This decrease in cash was
partially offset by the positive cash flow provided by the net income for the
quarter of $10.0 million. Inventory levels increased slightly during the first
quarter 2000, utilizing $3.2 million of cash, which is reflective of the
increased revenue and product demands during the quarter. In the first quarter
of 1999, the Company recorded a 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 quarter ended March 31, 1999 utilized cash of approximately $10.1
million and $18.0 million, respectively.
Days sales outstanding improved to approximately 71 days at the close
of the first quarter 2000 as compared to approximately 82 days at the end of
the first quarter 1999. This improvement was driven by a change in the dynamics
of the Company's accounts receivable aging achieved 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 days. Second, slower
paying accounts, in particular international customers, have become 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 the first quarter 2000.
Cash flows used in investing activities were $4.3 million and $5.1
million for the three months ended March 31, 2000 and 1999, respectively. These
investment amounts reflect purchases of capital assets during the respective
quarters.
Cash flows provided by financing activities were $9.9 million and
$18.4 million for the three months ended March 31, 2000 and 1999, respectively.
Both periods reflect their respective trends in operating and investing
activities. Each quarter was also affected by the exercise of stock options
that provided positive cash flows of approximately $2.2 million and $7.4
million for 2000 and 1999,
14
<PAGE> 15
respectively. Net borrowings under the credit facility were $8.0 million and
$11.0 million for the quarters ended March 31, 2000 and 1999, respectively.
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
ANTEC transitioned through January 1, 2000 and experienced no
significant date related processing issues. During 1999, the Company incurred
approximately $7.5 million ($5.7 million capitalized for new systems and $1.8
million expensed as incurred) related to its overall system improvements and
the Year 2000 project. ANTEC does not anticipate incurring any material direct
costs related to the Year 2000 Issue going forward.
As of March 31, 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 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
15
<PAGE> 16
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.
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
16
<PAGE> 17
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.
17
<PAGE> 18
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 March 31, 2000,
the Company had no material contracts denominated in foreign currencies.
ANTEC uses interest rate swap agreements, with large creditworthy
financial institutions, to manage its exposure to interest rate changes. The
swaps involve the exchange of fixed and variable interest rate payments without
exchanging the notional principal amount. Payments or receipts on the
agreements are recorded as adjustments to interest expense. At March 31, 2000
the Company had outstanding interest rate swap agreements denominated in
dollars, maturing in 2001, with an aggregate notional principal amount of $50.0
million. Under these agreements, the Company receives a floating rate marked to
LIBOR and pays a fixed interest rate. The swaps effectively change 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 agreements represents the
estimated receipts or payments that would be made to terminate the agreement.
At March 31, 2000, the Company would have received approximately $10,000 upon
termination of the agreements. A 1% decrease in short-term borrowing rates
would increase the amount paid to terminate the agreements by approximately
$0.6 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, however, no such contracts were in place at March 31, 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.
18
<PAGE> 19
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.18* 2000 Stock Incentive Plan
10.19* Management Incentive Plan
27.0 Financial Data Schedules (for SEC use only)
(b) Reports on Form 8-K
None
- ----------------
* Denotes management compensation plan.
19
<PAGE> 20
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: May 12, 2000
20
<PAGE> 1
EXHIBIT 10.18
ANTEC CORPORATION
2000 STOCK INCENTIVE PLAN
1. PURPOSE AND EFFECTIVE DATE. ANTEC Corporation (the "Company") has
established this 2000 Stock Incentive Plan (the "Plan") to facilitate the
retention and continued motivation of key employees, consultants and directors
and to align more closely their interests with those of the Company and its
stockholders. The effective date of the Plan shall be March 1, 2000 subject to
the approval of the Company's shareholders at the 2000 Annual Meeting.
2. ADMINISTRATION. The Plan shall be administered by the Board of
Directors, or the Compensation Committee of the Company's Board of Directors or
such other Board committee as the Board may designate (the "Committee"). The
Committee has the authority and responsibility for the interpretation,
administration and application of the provisions of the Plan, and the
Committee's interpretations of the Plan, and all actions taken by it and
determinations made by it shall be binding on all persons. No Board or
Committee member shall be liable for any determination, decision or action made
in good faith with respect to the Plan.
3. SHARES SUBJECT TO PLAN. A total of 2,500,000 shares of Common Stock
of the Company ("Shares"), par value $.01 per share may be issued pursuant to
the Plan. The Shares may be authorized but unissued Shares or Shares reacquired
by the Company and held in its treasury. Grants of incentive awards under the
Plan will reduce the number of Shares available thereunder by the maximum
number of Shares obtainable under such grants. If all or any portion of the
Shares otherwise subject to any grant under the Plan are not delivered for any
reason including, but not limited to, the cancellation, expiration or
termination of any option right or unit, the settlement of any award in cash,
the forfeiture of any restricted stock, or the repurchase of any Shares by the
Company from a participant for the cost of the participant's investment in the
Shares, such number of Shares shall be available again for issuance under the
Plan. The number of Shares covered by or specified in the Plan and the number
of Shares and the purchase price for Shares under any outstanding awards, may
be adjusted proportionately by the Committee for any increase or decrease in
the number of issued Shares or any change in the value of the Shares resulting
from a subdivision or consolidation of Shares, reorganization,
recapitalization, spin-off, payment of stock dividends on the Shares, any other
increase or decrease in the number of issued Shares made without receipt of
consideration by the Company, or the payment of an extraordinary cash dividend.
4. ELIGIBILITY. All key employees, active consultants and directors of
the Company and its subsidiaries are eligible to be selected to receive a grant
under the Plan by the Committee. The Committee may condition eligibility under
the Plan or participation under the Plan, and any grant or exercise of an
incentive award under the Plan on such conditions, limitations or restrictions
as the Committee determines to be appropriate for any reason. No person may be
granted in any period of two consecutive calendar years, awards covering more
than 1,000,000 Shares.
5. AWARDS. The Committee may grant awards under the Plan to eligible
persons in the form of stock options (including incentive stock options within
the meaning of section 422 of the Code), stock grants, stock units, restricted
stock, stock appreciation rights, performance shares and units and dividend
equivalent rights, and reload options to purchase additional Shares if Shares
are delivered in payment of any other options, and shall establish the number
of Shares subject to each such grant and the terms thereof, including any
adjustments for reorganizations and dividends, subject to the following:
(a) All awards granted under the Plan shall be evidenced by
agreements in such form and containing such terms and
conditions not inconsistent with the Plan as the Committee
shall prescribe.
(b) The exercise price of any option or stock appreciation
right shall not be less than 85% of the fair market value of
a corresponding number of Shares as of the date of grant,
<PAGE> 2
except that such minimum option price may be reduced (but not
below par value) in the case of options granted in
consideration of a reduction in compensation by the amount of
such reduction.
(c) No more than 20% of the Shares may be awarded in a form
other than options or stock appreciation rights unless such
Shares are in payment of compensation earned or due at the
time of the award or within one year thereof.
(d) No option may be repriced by amendment, substitution or
cancellation and regrant, unless authorized by the
stockholders. Adjustments pursuant to Section 3 above shall
not be considered repricing.
6. AMENDMENT OF THE PLAN. The Board of Directors or the Committee may
from time to time suspend, terminate, revise or amend the Plan or the terms of
any grant in any respect whatsoever, provided that, without the approval of the
stockholders of the Company, no such revision or amendment may increase the
number of Shares subject to the Plan, change the provisions of Section 5 above,
or expand those eligible for grants under the Plan.
<PAGE> 1
EXHIBIT 10.19
ANTEC CORPORATION
MANAGEMENT INCENTIVE PLAN
1. PURPOSE AND EFFECTIVE DATE. ANTEC Corporation (the "Company") has
established this Management Incentive Plan (the "Plan") to provide awards to
the executives of the Company for the achievement of goals of the Company for a
year or a specified number of years. The effective date of the Plan shall be
January 1, 2000 subject to the approval of the Company's shareholders at the
2000 Annual Meeting.
2. ADMINISTRATION. The Plan shall be administered by the Board of
Directors, or the Compensation Committee of the Company's Board of Directors or
such other Board committee as the Board may designate (the "Committee"). The
Committee has the authority and responsibility for the interpretation,
administration and application of the provisions of the Plan, and the
Committee's interpretations of the Plan, and all actions taken by it and
determinations made by it shall be binding on all persons. No Board or
Committee member shall be liable for any determination, decision or action made
in good faith with respect to the Plan.
3. AWARDS UNDER THE PLAN. The Committee shall assign a target
expressed as a percentage of salary each year. The targets may be as high as
200% and as low as 20% of salary.
At least 51% of the target shall be dependent on the achievement of
financial objectives such as (i) operating, pretax, or net earnings of the
Company, a subsidiary, a business unit thereof, or an other entity where there
is a significant investment by the Company and opportunity to influence the
performance of that entity; (ii) earnings per share of the Company; (iii) cash
flow of any of these entities; (iv) return on capital, tangible or total,
employed by any of these entities as measured by any of these earnings; (v)
achievement of specified revenues or proceeds from specified activities, in or
out of the ordinary course of business; or (vi) other similar financial
objectives that the Committee determines to be in the interest of the Company.
Up to 49% of the target of a participant may be dependent on the subjective
determination of the Committee (or in the case of participants other than the
Chief Executive Officer and the Chairman, of an executive officer) of the
achievement of qualitative goals. In the case of John Egan, his target shall be
dependent on goals that are in accordance with his employment agreement.
The actual awards may range from zero to 200% of the assigned targets
depending on the achievement of the objectives established by the Committee (or
in the case of qualitative goals of participants, other than the Chief
Executive Officer or the Chairman, by an executive officer) during the first 90
days of the year.
4. ELIGIBILITY. All executive officers of the Company and the other
executives of the Company and its subsidiaries, who report directly to the
Chief Executive Officer of the Company are eligible to be selected to receive
an award under the Plan by the Committee. The Committee may condition
eligibility under the Plan or participation under the Plan, and any award under
the Plan on such conditions, limitations or restrictions as the Committee
determines to be appropriate for any reason and consistent with the terms of
the Plan. No person may be awarded, for any one year, more than $2,000,000, as
this amount is adjusted for inflation in the Consumer Price Index after
December 31, 2000.
5. PAYMENT OF AWARDS. Amounts earned under the Plan shall be
determined and be paid as soon as practical after the end of each year or if
based on multiple years, the end of the last year of that period. The
Committee, in establishing the targets and goals for a year, may determine that
all or a portion of an award payable under the Plan to certain participants
shall or may be paid in stock or phantom stock of the Company that may or may
not be restricted. The computation of the amount of stock may be based on the
average market price of the stock over a period, up to one year, selected by
the Committee, or based on a percentage, not to be less than 75%, of the market
price of the stock at the end of the year for which the award was earned or
during a period during the last month of that year selected by the Committee.
<PAGE> 2
6. AMENDMENT OF THE PLAN. The Committee may amend or terminate the
Plan at any time, provided however, that in no event can the Committee, after
the period for establishing the objectives for a year, adjust for that year any
targets, objectives, or the percentage of target earned by levels of
achievement of each objective in a manner that would increase the amount of
compensation that would be payable under the Plan without such adjustment.
<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 THREE MONTHS ENDED MARCH 31,
2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
AND RELATED NOTES TO ANTEC CORPORATION'S FORM 10-Q.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 6,332
<SECURITIES> 0
<RECEIVABLES> 191,828
<ALLOWANCES> 7,192
<INVENTORY> 218,381
<CURRENT-ASSETS> 455,954
<PP&E> 97,829
<DEPRECIATION> 45,450
<TOTAL-ASSETS> 758,834
<CURRENT-LIABILITIES> 184,110
<BONDS> 191,500
0
0
<COMMON> 379
<OTHER-SE> 359,145
<TOTAL-LIABILITY-AND-EQUITY> 758,834
<SALES> 250,331
<TOTAL-REVENUES> 250,331
<CGS> 199,051
<TOTAL-COSTS> 199,051
<OTHER-EXPENSES> 31,960
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,598
<INCOME-PRETAX> 16,449
<INCOME-TAX> 6,423
<INCOME-CONTINUING> 10,026
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,026
<EPS-BASIC> 0.27
<EPS-DILUTED> 0.25
</TABLE>
