-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Gx7Mt8+i84zR87ywoNCo+xPTnaK/ql7F9TBY6hYP2mFIX6mzrhWDs1syYb/4Qs/q IXAm9LCZg6M2IHIdMyYR0A== 0000003721-96-000005.txt : 19960515 0000003721-96-000005.hdr.sgml : 19960515 ACCESSION NUMBER: 0000003721-96-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960514 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALLEN GROUP INC CENTRAL INDEX KEY: 0000003721 STANDARD INDUSTRIAL CLASSIFICATION: INSTRUMENTS FOR MEAS & TESTING OF ELECTRICITY & ELEC SIGNALS [3825] IRS NUMBER: 380290950 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-06016 FILM NUMBER: 96564089 BUSINESS ADDRESS: STREET 1: 25101 CHAGRIN BLVD # 350 CITY: BEACHWOOD STATE: OH ZIP: 44122-5619 BUSINESS PHONE: 2167655818 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ________________________ FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1996 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from Not Applicable to Commission file number 1-6016 THE ALLEN GROUP INC. (Exact Name of Registrant as Specified in Its Charter) Delaware 38-0290950 (State or Other Jurisdiction of (I.R.S. Employer Identification No.) Incorporation or Organization) 25101 Chagrin Boulevard, Suite 350, Beachwood, Ohio 44122 (Address of Principal Executive Offices) (Zip Code) (Registrant's Telephone Number, Including Area Code) 216-765-5818 NOT APPLICABLE Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report 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, and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate the number of shares outstanding of each of the issuer's classes of common stock: Outstanding at Class of Common Stock April 30, 1996 Par value $1.00 per share 26,597,663 Exhibit Index is on page 13 of this report. Page 1 of 15 Pages. THE ALLEN GROUP INC. TABLE OF CONTENTS Page No. PART I. Financial Information: Item 1 - Financial Statements: Consolidated Condensed Balance Sheets - March 31, 1996 and December 31, 1995 3 Consolidated Statements of Income - Three Months March 31, 1996 and 1995 4 Consolidated Condensed Statements of Cash Flows - Three Months Ended March 31, 1996 and 1995 5 Notes to Consolidated Condensed Financial Statements 6 - 7 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations 8 - 10 PART II. Other Information: Item 6 - Exhibits and Reports on Form 8-K 11 Signatures 12 Exhibit Index 13
PART I - FINANCIAL INFORMATION ITEM I - FINANCIAL STATEMENTS THE ALLEN GROUP INC. CONSOLIDATED CONDENSED BALANCE SHEETS (Amounts in Thousands) March 31, December 31, 1996 1995 (Unaudited) ASSETS: Current Assets: Cash and equivalents $ 21,307 $ 15,706 Accounts receivable (less allowance for doubtful accounts of $1,477 and $1,232, respectively) 87,933 82,015 Inventories: Raw materials 43,931 36,809 Work in process 16,771 21,310 Finished goods 12,326 12,033 73,028 70,152 Other current assets 3,706 9,941 Total current assets 185,974 177,814 Property, plant and equipment, net 72,456 77,124 Excess of cost over net assets of businesses acquired 67,718 68,310 Other assets 47,580 40,317 TOTAL ASSETS $373,728 $363,565 LIABILITIES: Current Liabilities: Notes payable and current maturities of long-term obligations $ 10,524 $ 8,741 Accounts payable 36,164 35,072 Accrued expenses 22,451 25,444 Income taxes payable 7,071 10,163 Deferred federal income taxes 8,326 5,796 Total current liabilities 84,536 85,216 Long-term debt 52,712 47,058 Other liabilities and deferred credits 22,491 21,687 TOTAL LIABILITIES 159,739 153,961 STOCKHOLDERS' EQUITY Common stock 29,598 29,595 Paid-in capital 168,883 168,632 Retained earnings 38,337 34,175 Translation adjustments (277) 102 Less: Treasury stock (at cost) (18,556) (18,746) Unearned compensation (3,636) (3,794) Minimum pension liability adjustment (360) (360) TOTAL STOCKHOLDERS' EQUITY 213,989 209,604 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $373,728 $363,565 See accompanying notes to the Consolidated Condensed Financial Statements.
THE ALLEN GROUP INC. CONSOLIDATED STATEMENTS OF INCOME (Amounts In Thousands) (Unaudited) Three Months Ended March 31, 1996 1995 SALES $ 89,870 $ 59,265 Costs and Expenses: Cost of Sales (60,185) (36,452) Selling, General and Administrative Expenses (14,589) (11,482) Research and Development and New Product Engineering Costs (4,620) (3,585) Interest and Financing Expenses: Interest Expense (1,471) (682) Interest Income 229 489 Income before Taxes and Minority Interest 9,234 7,553 Provision for Income Taxes (3,917) (2,807) Income before Minority Interests 5,317 4,746 Minority Interests (1,072) (59) Income from Continuing Operations 4,245 4,687 Income from Discontinued Truck Products Business - 2,369 NET INCOME $ 4,245 $ 7,056 EARNINGS PER COMMON SHARE (Primary and Fully Diluted): Income from Continuing Operations $.16 $.18 Income from Discontinued Truck Products Business - .09 NET INCOME $.16 $.27 Average Common and Common Equivalent Shares Outstanding 26,952 26,561 See accompanying notes to the Consolidated Condensed Financial Statements.
THE ALLEN GROUP INC. CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Amounts In Thousands) (Unaudited) Three Months Ended March 31, 1996 1995 Continuing Operations: Cash provided (used) by operating activities of continuing operations $ 3,208 $ (5,132) Cash flows from investing activities: Capital expenditures ( 3,776) (3,814) Sales and retirements of fixed assets 7 18 Centralized emissions inspection programs: Program expenditures (1,861) (6,260) Program payment received 1,161 - Capitalized software product costs (973) (864) Acquisition of business, net of cash acquired - (610) Cash used by investing activities (5,442) (11,530) Cash flows from financing activities: Net proceeds (repayments) of long-term debt 7,391 (88) Dividends paid - (1,312) Exercise of stock options 23 5 Treasury stock sold to employee benefit plans 421 250 Cash provided (used) by financing activities 7,835 (1,145) Discontinued Operations: Net cash provided by discontinued automotive and truck products business - 4,264 Net cash provided (used) 5,601 (13,543) Cash at beginning of year 15,706 55,240 Cash at end of period $ 21,307 $ 41,697 Supplemental cash flow data: Depreciation and amortization included in "Cash provided (used) by operating activities of continuing operations" $ 5,050 $ 2,839 Cash paid during the period for: Interest paid 1,607 1,290 Interest capitalized - 93 Income taxes (refunded) paid (1,605) 1,819 See accompanying notes to the Consolidated Condensed Financial Statements.
THE ALLEN GROUP INC. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS 1. General: In the opinion of management of The Allen Group Inc. (the "Company"), the accompanying unaudited consolidated condensed interim financial statements reflect all adjustments necessary to present fairly the financial position of the Company as of March 31, 1996 and the results of its operations and cash flows for the periods ended March 31, 1996 and 1995. The results of operations for such interim periods are not necessarily indicative of the results for the full year. The year-end 1995 consolidated condensed balance sheet was derived from audited financial statements, but does not include all disclosures required by generally accepted accounting principles. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 1995. Certain reclassifications have been made to the financial statements to conform to the 1996 method of presentation. In the first quarter of 1996, the Company retroactively adjusted retained earnings in the amount of $773,000 with an equal and offsetting adjustment to accounts payable. Such adjustment was required to amend the dividend recorded in connection with the spin-off distribution of TransPro, Inc. in 1995. 2. Earnings Per Common Share: The primary earnings per common share calculations are based upon the weighted average number of common shares outstanding during each period. The calculations also include, if dilutive, the incremental number of common shares issuable on a pro forma basis upon exercise of stock options, assuming the proceeds are used to repurchase outstanding common shares at the average market price during the period. The calculations of fully diluted earnings per common share begin with the primary calculation but further reflect, if dilutive, the conversion of the then outstanding convertible debentures (redeemed in May, 1995) into common shares at the beginning of the period, and such incremental stock option shares should the market price of the Company common stock at period end exceed the average price. This calculation resulted in no reportable dilution for the periods ended March 31, 1996 and 1995, respectively. 3. Acquisitions (Subsequent Events): In April 1996, the Company signed an agreement to acquire a 64% interest in Tekmar Sistemi S.r.l. ("Tekmar"), an Italian company that produces fiber optic modules used predominately in the wireless telecommunications and cable television markets. The purchase agreement is subject to certain pre-closing conditions and is expected to take place before the end of the second quarter of 1996. The management of Tekmar will own the remaining 36% interest; however, the Company will have the right, pursuant to certain put and call options, to acquire the remaining minority interest of Tekmar over a five-year period. On May 7, 1996, the Company acquired the remaining 20% minority interest of Grayson Electronics Company ("Grayson") from Grayson's minority shareholders. The Company previously acquired its initial 80% ownership interest in Grayson on August 10, 1990. 4. Disposition: On September 29, 1995, the Company completed the spin-off distribution (the "Distribution") of 100% of the common shares of its wholly owned subsidiary, TransPro, Inc. to the Company's common stockholders. In connection with the Distribution, the Company has presented the spun-off automotive and truck products business as a discontinued operation in the comparative results of operations for the period ended March 31, 1995. THE ALLEN GROUP INC. ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Summary: For the three months ended March 31, 1996 and 1995, The Allen Group Inc. ("the Company") reported income from continuing operations of $4.2 million ($.16 per common share) and $4.7 million ($.18 per common share), respectively. The 1995 results exclude sales and earnings from the Company's automotive and truck products businesses which were spun-off to the Company's stockholders on September 29, 1995. Accordingly, such results have been reported as income from discontinued operations at March 31, 1995. The decline in income from continuing operations is attributable to the impact of lower margins on domestic site management and systems product sales (offset, in part by strong base station antenna margins and international sales), increased spending on research and development by the mobile communications segment offset, in part, by the inclusion of the operating results of its European based subsidiary FOR.E.M. S.p.A. as discussed below. Sales: Consolidated sales from continuing operations by industry segment are:
Three Months Ended March 31, ($ Millions) 1996 1995 Mobile Communications $ 84.5 $ 58.6 Centralized Automotive Emissions Testing 5.4 .7 $ 89.9 $ 59.3
For the three months ended March 31, 1996, Mobile Communications sales increased over the prior year period by $25.9 million (44%), primarily due to the initial full consolidation of the Company's 80% owned Italian subsidiary, FOR.E.M S.p.A., and its majority owned German subsidiary, MIKOM G.m.b.H. (collectively, both companies referred to herein as "FOREM"), commencing in the second quarter 1995. Domestic sales for systems and site management products for the first quarter 1996 have declined compared to the same period in 1995 due to the slowdown in equipment sales to the existing cellular telephone network and continued delays in infrastructure deployment for Personal Communication Systems ("PCS"). This decline, however, is more than offset by strong base station antenna sales, and increased engineering and consulting revenues from the Company's Comsearch division. Centralized Automotive Emissions Testing sales consist of revenues from the Company's MARTA Technologies, Inc. ("MARTA") subsidiary. MARTA's sales grew by $4.7 million for the three months ended March 31, 1996 compared to the same period last year, due to the start-up of the emission testing programs for the State of Maryland on May 1, 1995 and the Cincinnati region of Ohio on January 1, 1996. As previously reported by the Company, MARTA's El Paso, Texas program was officially terminated in January 1996. The Company is formally proceeding with the settlement and damage provisions set forth in its contract with the State of Texas and has filed a claim with the State. The Company believes that its contract provides for appropriate compensation and will pursue all remedies available to protect its interest regarding its investment in the program. The recorded carrying value of its investment in the El Paso program is approximately $7.9 million. Although MARTA continues to incur certain costs (in particular, interest on the carrying value of its investment), these costs are, for financial reporting purposes, being expensed as incurred and have been included in the claim. At this time, it is not possible to predict the ultimate outcome of the settlement process or the timing of the receipt of any funds related thereto which would be subject to appropriation by the State of Texas. It is likely that this process will continue into fiscal year 1997 before a resolution is reached. The industry continues to be hampered by an unsettled climate, which has delayed the bidding and awarding of new programs. Even with respect to MARTA's existing operations in Jacksonville, Florida, Maryland and Cincinnati, Ohio, there exists proposed legislation, or the discussion of legislation, to change, amend or cancel such programs. However, several states once again have begun to review their requirements which may lead to program proposals in the near term. Operating Income: Overall, gross margins on product sales approximated 33% and 38% for the three months ended March 31, 1996 and 1995, respectively. The decline in gross margins is attributable to pricing pressures and changes in the product mix for the Company's site management and systems products. Selling, general and administrative expenses increased by $3.1 million for the three months ended March 31, 1996 compared to the same period in 1995 due primarily to the inclusion of FOREM on a consolidated basis at March 31, 1996. Selling, general and administrative expenses represent 16.2% of sales through three months ended March 31, 1996 compared to 19.4% for the same period in 1995. The lower percentage of sales is due to the spreading of fixed expenses over higher sales. Research and development and new product engineering costs for the three months ended March 31, 1996 increased by $1.1 million (29%) over the comparable 1995 period and is attributable to the Company's Mobile Communications segment. Such expenses represent 5.1% and 6.1% of sales for the three months ended March 31, 1996 and 1995, respectively. The Company expects research and development costs to continue at these increased levels in 1996. Interest and financing costs: Interest expense increased for the three months ended March 31, 1996 compared to the same period 1995, due to the inclusion of FOREM, interest payments on MARTA's capital lease related to the Cincinnati, Ohio emissions inspection program, which commenced in the first quarter 1996, and lower investment income. Income Taxes: The Company's effective income tax rate on continuing operations for the three months ended March 31, 1996 and 1995 was 42.4% and 37.2%, respectively. The higher effective tax rate in 1996 reflects the higher proportion of foreign income (primarily due to FOREM) taxed at a higher rate than the combined U.S. Federal and state income tax rates. Minority interests: The increase in minority interest at March 31, 1996 compared to the same period in 1995, is due to the inclusion of the minority interest of FOREM. LIQUIDITY AND CAPITAL RESOURCES As set forth in the Consolidated Condensed Statements of Cash Flows, the Company generated $3.2 million in cash from continuing operations for the three months ended March 31, 1996 compared to cash used by continuing operations of $5.1 million for the three months ended March 31, 1995. The increase in cash flow from operations, despite lower earnings is due principally to higher non-cash depreciation and amortization included in earnings and a refund of income taxes relating to 1995 in the first quarter of 1996. The Company continues to utilize internally generated cash resources to fund its operating and investing activities. At March 31, 1996, cash and equivalents totalled $21.3 million as compared with $15.7 million at December 31, 1995. These balances were principally invested in money market funds, bankers acceptances and Dutch auction, tax exempt securities (which are afforded one of the two highest ratings by nationally recognized ratings firms). The Company believes that continued profitability, cash and short-term investments and available unused credit lines of $69.6 million, as well as unused credit lines for MARTA of $60 million, will provide sufficient liquidity to fund future growth, expansion and acquisitions. In the second quarter of 1996, the Company anticipates expending approximately $7.9 million to acquire interests in two companies. See Note 3 of Notes to Consolidated Condensed Financial Statements for additional information regarding these acquisitions. _____ _____ Statements included in this Quarterly Report on Form 10-Q which are not historical in nature are forward-looking statements. Such forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Reform Act of 1995. Forward-looking statements regarding the Company's future performance and financial results are subject to certain risks and uncertainties that could cause actual results to differ materially from those set forth in the forward-looking statements due to a variety of factors, including, besides those mentioned herein, those factors listed in the Company's 1995 Annual Report on Form 10-K. PART II - OTHER INFORMATION Item 6 - Exhibits and Reports on Form 8-K (a) Exhibits (11) Statement re computation of earnings per common share. (27) Financial Data Schedule. (b) Reports on Form 8-K There were no reports on Form 8-K filed during the quarter for which this report is filed. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. The Allen Group Inc. (Registrant) Date: May 14, 1996 By: /s/ Robert A. Youdelman Robert A. Youdelman Senior Vice President-Finance (Chief Financial Officer) Date: May 14, 1996 By: /s/ James L. LePorte, III James L. LePorte, III Vice President, Treasurer and Controller (Principal Accounting Officer) THE ALLEN GROUP INC. EXHIBIT INDEX Page Exhibit Number: (11) Statement re computation of earnings per common share....................................... 14 (27) Financial Data Schedule ........................... 15 EXHIBIT 11
THE ALLEN GROUP INC. STATEMENT RE COMPUTATION OF EARNINGS PER COMMON SHARE DATA (Amounts in Thousands) Net income and common shares used in the calculations of earnings per common share were computed as follows: Ended March 31, 1996 1995 Income: Net income applicable to common stock - primary $ 4,245 $ 7,056 Adjustment for fully diluted: Convertible debenture interest - 74 Net income applicable to common stock - fully diluted $ 4,245 $ 7,130 Common Shares: Weighted average outstanding common shares 26,384 25,909 Shares issuable upon assumed exer- cise of stock options 568 652 Common shares - primary 26,952 26,561 Adjustment for full dilution: Common shares issuable for: Incremental stock options 2 29 Convertible securities 1 351 Common shares - fully diluted 26,955 26,941 The calculation of fully diluted earnings per common share is submitted in accordance with Regulation S-K Item 601(b)(11) although not required for income statement presentation because it results in dilution of less than 3 percent.
EXHIBIT 27 FINANCIAL DATA SCHEDULE EX-27 2
5 1,000 3-MOS DEC-31-1996 MAR-31-1996 21,307 0 89,410 (1,477) 73,028 185,974 96,362 (23,906) 373,728 84,536 52,712 29,598 0 0 184,391 373,728 89,870 89,870 (60,185) (60,185) (19,149) (60) (1,242) 9,234 (3,917) 4,245 0 0 0 4,245 .16 0
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