-----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, DGe+EglDE1sXW9YiRmN3A9A2g6k07Llmb46BbxCbDmi6NXrbtvR7kaMj4WBBdiFm cTRmCFSzGSvh4faCi7FCOA== 0000003721-96-000015.txt : 19960814 0000003721-96-000015.hdr.sgml : 19960814 ACCESSION NUMBER: 0000003721-96-000015 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960813 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALLEN GROUP INC CENTRAL INDEX KEY: 0000003721 STANDARD INDUSTRIAL CLASSIFICATION: RADIO & TV BROADCASTING & COMMUNICATIONS EQUIPMENT [3663] 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: 96610884 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 June 30, 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 July 31, 1996 Par value $1.00 per share 26,635,309 Exhibit Index is on page 15 of this report. Page 1 of 17 Pages. THE ALLEN GROUP INC. TABLE OF CONTENTS Page No. PART I. Financial Information: Item 1 - Financial Statements: Consolidated Condensed Balance Sheets - June 30, 1996 and December 31, 1995 3 Consolidated Statements of Income - Three Months and Six Months Ended June 30, 1996 and 1995 4 Consolidated Condensed Statements of Cash Flows - Six Months Ended June 30, 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 - 11 PART II. Other Information: Item 4 - Submission of Matters to a Vote of Security Holders 12 Item 6 - Exhibits and Reports on Form 8-K 13 Signatures 14 Exhibit Index 15
PART I - FINANCIAL INFORMATION ITEM I - FINANCIAL STATEMENTS THE ALLEN GROUP INC. CONSOLIDATED CONDENSED BALANCE SHEETS (Amounts in Thousands) June 30, December 31, 1996 1995 (Unaudited) ASSETS: Current Assets: Cash and equivalents $ 11,707 $ 15,706 Accounts receivable (less allowance for doubtful accounts of $1,724 and $1,232, respectively) 95,916 82,015 Inventories: Raw materials 44,275 36,809 Work in process 17,398 21,310 Finished goods 12,874 12,033 74,547 70,152 Other current assets 3,301 9,941 Total current assets 185,471 177,814 Property, plant and equipment, net 74,140 77,124 Excess of cost over net assets of businesses acquired 71,768 68,310 Other assets 48,965 40,317 TOTAL ASSETS $380,344 $363,565 LIABILITIES: Current Liabilities: Notes payable and current maturities of long-term obligations $ 11,701 $ 8,741 Accounts payable 38,195 34,299 Accrued expenses 24,687 25,444 Income taxes payable 11,830 10,163 Deferred income taxes 5,290 5,796 Total current liabilities 91,703 84,443 Long-term debt 47,419 47,058 Other liabilities and deferred credits 21,262 21,687 TOTAL LIABILITIES 160,384 153,188 STOCKHOLDERS' EQUITY Common stock 29,611 29,595 Paid-in capital 169,329 168,632 Retained earnings 43,490 34,948 Translation adjustments (379) 102 Less: Treasury stock (at cost) (18,524) (18,746) Unearned compensation (3,207) (3,794) Minimum pension liability adjustment (360) (360) TOTAL STOCKHOLDERS' EQUITY 219,960 210,377 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $380,344 $363,565 See accompanying notes to the Consolidated Condensed Financial Statements.
THE ALLEN GROUP INC. CONSOLIDATED STATEMENTS OF INCOME (Amounts in Thousands, Except Per Share Data) (Unaudited) Three Months Ended Six Months Ended June 30, June 30, 1996 1995 1996 1995 Sales $ 93,547 $ 83,880 $183,417 $143,145 Costs and expenses: Cost of sales (61,562) (51,152) (121,747) (87,604) Selling, general and administrative expenses (15,049) (14,857) (29,638) (26,339) Research and development and product engineering costs (5,139) (5,261) (9,759) (8,846) Interest and financing expenses: Interest Expense (1,284) (803) (2,755) (1,684) Interest Income 167 408 396 1,096 Income before taxes and minority interest 10,680 12,215 19,914 19,768 Provision for income taxes (4,401) (4,841) (8,318) (7,648) Income before minority interests 6,279 7,374 11,596 12,120 Minority interests (1,142) (870) (2,214) (929) Income from continuing operations 5,137 6,504 9,382 11,191 Income from discontinued automotive and truck products operations (Note 4) - 2,886 - 5,255 Net Income $ 5,137 $ 9,390 $ 9,382 $ 16,446 Earnings per common share (Primary and fully diluted): Income from continuing operations $.19 $.24 $.35 $.42 Income from discontinued automotive and truck products operations (Note 4) - .11 - .20 Net Income $.19 $.35 $.35 $.62 Average common and common equivalent shares outstanding 27,198 26,779 27,075 26,670 See accompanying notes to the Consolidated Condensed Financial Statements.
THE ALLEN GROUP INC. CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Amounts In Thousands) (Unaudited) Six Months Ended June 30, 1996 1995 Continuing Operations: Cash provided (used) by operating activities of continuing operations $ 15,367 $(20,833) Cash flows from investing activities: Capital expenditures ( 8,585) (8,333) Sales and retirements of fixed assets 38 94 Centralized emissions inspection programs: Program expenditures (2,946) (5,025) Program payment received 1,161 - Capitalized software product costs (2,199) (1,474) Acquisition of businesses, net of cash acquired (11,094) (382) Cash used by investing activities (23,625) (15,120) Cash flows from financing activities: Net proceeds (repayments) of long-term debt 3,227 (1,937) Dividends paid - (2,634) Exercise of stock options 199 143 Treasury stock sold to employee benefit plans 833 563 Assets held for distribution - (2,503) Cash provided (used) by financing activities 4,259 (6,368) Discontinued Operations: Net cash provided by discontinued automotive and truck products business - 7,055 Net cash used (3,999) (35,266) Cash at beginning of year 15,706 55,240 Cash at end of period $ 11,707 $ 19,974 Supplemental cash flow data: Depreciation and amortization included in "Cash provided (used) by operating activities of continuing operations" $ 10,188 $ 6,516 Cash paid during the period for: Interest paid 2,255 2,279 Interest capitalized - 221 Income taxes paid 656 13,232 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 June 30, 1996 and the results of its operations and cash flows for the periods ended June 30, 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. 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 June 30, 1996 and 1995, respectively. 3. Acquisitions: In May 1996, the Company acquired a 64.3% 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. Management of Tekmar owns the remaining 35.7% interest. In addition, 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. This acquisition has been accounted for under the Purchase method; accordingly, the consolidated condensed balance sheet of the Company as of June 30, 1996 reflects the inclusion of Tekmar. Tekmar will be included in the Company's consolidated condensed financial statements on a two-month delayed basis; therefore, Tekmar's results of operations will be included in the consolidated condensed results of operations starting in the third quarter of 1996. This acquisition resulted in $3,004,000 of excess of cost over net assets acquired (goodwill). Further, in May 1996, the Company acquired the remaining 20% minority interest of Grayson Electronics Company. 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 June 30, 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 June 30, 1996 and 1995, The Allen Group Inc. ("the Company") reported income from continuing operations of $5.1 million ($.19 per common share) and $6.5 million ($.24 per common share), respectively. For the six months ended June 30, 1996 and 1995, the Company reported income from continuing operations of $9.4 million ($.35 per common share) and $11.2 million ($.42 per common share), respectively. The 1995 results exclude sales and earnings from the Company's automotive and truck products business spun-off to the Company's stockholders on September 29, 1995. Accordingly, such results have been reported as income from discontinued operations for the applicable 1995 periods. The decline in income from continuing operations for the three months ended June 30, 1996 is attributable to the impact of lower sales and margins relating to the domestic cellular market, particularly for the Company's site management and systems products, as well as higher interest expense. These income declines were partially offset by increased sales of products relating to the Personal Communications Systems ("PCS") market, particularly base station antennas and frequency planning and systems design as well as international site management product sales. The decline in income from continuing operations for the six months ended June 30, 1996 was impacted by these factors as well as the impact of the inclusion of the profitable operations of FOR.E.M. S.p.A. ("FOREM") and MIKOM G.m.b.H. ("MIKOM") for a full six month period in 1996 as compared with only the second quarter in 1995. Sales: Consolidated sales from continuing operations by industry segment are:
Three Months Six Months Ended Ended June 30, June 30, ($ Millions) 1996 1995 1996 1995 Mobile Communications $88.4 $81.6 $172.9 $140.1 Centralized Automotive Emissions Testing 5.1 2.3 10.5 3.0 $93.5 $83.9 $183.4 $143.1
For the three months and six months ended June 30, 1996, Mobile Communications sales increased over the prior year periods by $6.8 million (8.3%) and $32.8 million (23.4%), respectively. Sales for the three month period ending June 30, 1996 exceeded the prior year period principally due to higher sales of PCS related products and services ($10.2 million), and higher demand for international site management products. These sales increases were partially offset by weaker demand for the domestic cellular market, particularly for site management products. The increase in sales for the six month period ended June 30 was attributable to these same factors, as well as the inclusion of the Company's FOREM and MIKOM subsidiaries in its operating results for the full six month period in 1996 as compared with only the second quarter 1995. Centralized Automotive Emissions Testing sales consist of revenues from the Company's MARTA Technologies, Inc. ("MARTA") subsidiary. MARTA's sales grew by $2.8 million for the three months ended June 30, 1996 and $7.5 million for the six months ended June 30, 1996 compared to the same periods last year, due to the start-up of the emissions testing programs for 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. Operating Income: Overall, gross margins on product sales approximated 34% and 39% for both the three and six months ended June 30, 1996 and 1995, respectively. The decline in gross margins is attributable to pricing pressures, excess capacity and changes in the product mix for the Company's site management and systems products. Selling, general and administrative expenses increased by $192,000 and $3,299,000 for the three months and six months ended June 30, 1996, respectively, compared to the same periods in 1995 due primarily to the inclusion of FOREM and MIKOM on a consolidated basis starting in the second quarter of 1995. Selling, general and administrative expenses represent 16.1% and 16.2% of sales through three months and six months ended June 30, 1996, respectively, compared to 17.7% and 18.4% for the same periods 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 decreased by $122,000 for the three months ended June 30, 1996 and increased by $913,000 (10.3%) for the six months ended June 30, 1996 over the comparable 1995 periods and is attributable to the Company's Mobile Communications segment. Research and development and new product engineering costs represent 5.5% and 6.3% of sales for the three months ended June 30, 1996 and 1995, respectively, and 5.3% and 6.2% of sales for the six months ended June 30,1996 and 1995, respectively. These expenses are a lower percentage of sales in 1996 compared with 1995 due to the spreading of such expenses over higher sales. Interest and financing costs: Interest expense increased for the three months and six months ended June 30, 1996 compared to the 1995 periods due to the inclusion of FOREM and MIKOM, interest payments on MARTA's capital lease related to the Cincinnati, Ohio emissions inspection program (which commenced in the first quarter of 1996) and acquisition payments relating to FOREM. Income Taxes: The Company's effective income tax rate on continuing operations for the three months ended June 30, 1996 and 1995 was 41.2% and 39.6%, respectively, and for the six months ended June 30, 1996 and 1995 was 41.8% and 38.7%, respectively. Higher effective tax rates in 1996 reflect the higher proportion of foreign income taxed at higher rates than at combined U.S. Federal and state income tax rates. Minority interests: The increase in minority interest for the three months and six months ended June 30, 1996 compared to the same periods in 1995, is due primarily to the minority share portion of related earnings growth of FOREM and MIKOM. LIQUIDITY AND CAPITAL RESOURCES As set forth in the Consolidated Condensed Statements of Cash Flows, the Company generated $15.4 million in cash from continuing operations for the six months ended June 30, 1996 compared to cash used by continuing operations of $20.8 million for the same period in 1995. The increase in cash flow from operations, despite lower earnings, is due principally to a lower rate of increase in inventory and receivables, in support of increasing sales levels which increased $32 million in the first six months of 1995 as compared with a $17 million increase in 1996. The first six months of 1996 also includes an $8 million refund of income tax payments made in 1995. In addition, the Company has, over the course of the last six months, made certain business acquisitions which required cash outlays of approximately $11 million. The Company continues to utilize internally generated cash resources to fund its operating and investing activities. At June 30, 1996, cash and equivalents totalled $11.7 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 $72.7 million, as well as unused credit lines for MARTA of $60 million, will provide sufficient liquidity to fund future growth, expansion and 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 4. Submission of Matters to a Vote of Security Holders At the Annual Meeting of Stockholders of the Company held on April 23, 1996, two proposals were voted upon by the Company's stockholders. A brief description of each proposal voted upon at the Annual Meeting and the number of votes cast for, against and withheld, as well as the number of abstentions and broker non-votes as to each such proposal, are set forth below. A vote by ballot was taken at the Annual Meeting for the election of 10 Directors of the Company to hold office until the next Annual Meeting of Stockholders of the Company and until their respective successors shall have been duly elected and qualified. The aggregate numbers of shares of Common Stock (a) voted in person or by proxy for each nominee, or (b) with respect to which proxies were withheld for each nominee, together with (c) the number of broker non-votes as to each nominee, were as follows:
Broker Nominee For Withheld Non-Votes George A. Chandler 19,279,209 874,196 0 Philip Wm. Colburn 19,259,926 893,479 0 Jill K. Conway 19,280,419 872,986 0 Albert H. Gordon 19,244,559 908,846 0 William O. Hunt 19,261,434 891,971 0 J. Chisholm Lyons 19,259,748 893,657 0 John F. McNiff 19,281,033 872,372 0 Robert G. Paul 19,260,988 892,417 0 Charles W. Robinson 19,267,855 885,550 0 William M. Weaver, Jr. 19,267,672 885,733 0
A vote by ballot was taken at the Annual Meeting on the proposal to ratify the appointment of Coopers & Lybrand L.L.P. as auditors for the Company for the fiscal year ending December 31, 1996. The aggregate numbers of shares of Common Stock in person or by proxy which: (a) voted for, (b) voted against or (c) abstained from the vote on such proposal, together with (d) the number of broker non-votes on such proposal, were as follows: Broker For Against Abstain Non-Votes 20,111,290 26,354 15,761 0 The foregoing proposals are described more fully in the Company's definitive proxy statement dated March 15, 1996, filed with the Securities and Exchange Commission pursuant to Section 14(a) of the Securities Act of 1934, as amended, and the rules and regulations promulgated thereunder. 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: August 13, 1996 By: /s/ Robert A. Youdelman Robert A. Youdelman Senior Vice President-Finance (Chief Financial Officer) Date: August 13, 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....................................... 16 (27) Financial Data Schedule ........................... 17
EXHIBIT 11 THE ALLEN GROUP INC. 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: Three Months Six Months Ended Ended June 30, June 30, 1996 1995 1996 1995 Income: Net income applicable to common stock - primary $ 5,137 $ 9,390 $ 9,382 $16,446 Adjustments for fully diluted: Convertible debenture interest - 35 - 108 Net income applicable to common stock - fully diluted $ 5,137 $ 9,425 $ 9,382 $16,554 Common Shares: Weighted average outstanding common shares 26,419 26,118 26,401 26,013 Common stock equivalents 779 661 674 657 Common shares - primary 27,198 26,779 27,075 26,670 Common shares issuable for: Stock options - 135 1 82 Conversion of debentures - 147 - 249 Common shares - fully diluted 27,198 27,061 27,076 27,001 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 6-MOS DEC-31-1996 JUN-30-1996 11,707 0 97,640 (1,724) 74,547 185,471 101,382 (27,242) 380,344 91,703 47,419 0 0 29,611 190,349 380,344 183,417 183,417 (121,747) (121,747) (39,252) (145) (2,359) 19,914 (8,318) 9,382 0 0 0 9,382 .35 0
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