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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _________ TO _________
COMMISSION FILE NO. 1-8009
ROHN INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 36-3060977
- -------------------------------------- ----------------------
(State of incorporation) (I.R.S. Employer
Identification No.)
6718 WEST PLANK ROAD, PEORIA, ILLINOIS 61604
(Address of principal executive (Zip Code)
office)
Registrant's telephone number including area code: (309) 697-4400
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock $.01 par value
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 by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. __
On March 16, 2000, 52,740,405 shares of common stock were outstanding. The
aggregate market value of stock held by nonaffiliates of the registrant is
$96,568,792, based upon the closing price of $4.188 per share on that date. For
purposes of this computation, shares held by directors of the registrant have
been excluded. Such exclusion of shares held by directors is not intended, nor
shall it be deemed, to be an admission that such persons are affiliates of the
registrant.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's definitive Proxy Statement for the Annual
Meeting of Stockholders to be held on May 11, 2000 are incorporated by reference
in Part III of this Form 10-K to the extent stated herein. Except with respect
to information specifically incorporated by reference in this Form 10-K, the
Proxy Statement shall not be deemed filed as a part hereof.
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PART I
MATTERS DISCUSSED IN THIS REPORT CONTAIN FORWARD-LOOKING STATEMENTS WHICH
REFLECT MANAGEMENT'S CURRENT JUDGMENT. MANY FACTORS, SOME OF WHICH ARE DISCUSSED
ELSEWHERE IN THIS DOCUMENT, COULD AFFECT THE FUTURE FINANCIAL RESULTS OF THE
COMPANY AND COULD CAUSE THOSE RESULTS TO DIFFER MATERIALLY FROM THOSE EXPRESSED
IN THE FORWARD-LOOKING STATEMENTS CONTAINED IN THIS DOCUMENT. THESE FACTORS
INCLUDE OPERATING, LEGAL AND REGULATORY RISKS, ECONOMIC, POLITICAL AND
COMPETITIVE FORCES AFFECTING THE TELECOMMUNICATIONS AND EQUIPMENT BUSINESS, AND
THE RISK THAT THE COMPANY'S ANALYSES OF THESE RISKS AND FORCES COULD BE
INCORRECT OR THAT THE STRATEGIES DEVELOPED TO ADDRESS THEM COULD BE
UNSUCCESSFUL. ADDITIONAL INFORMATION CONCERNING FACTORS THAT COULD CAUSE ACTUAL
RESULTS TO MATERIALLY DIFFER FROM THOSE IN THE FORWARD-LOOKING STATEMENTS IS
CONTAINED IN EXHIBIT 99.1 TO THE COMPANY'S SECURITIES AND EXCHANGE COMMISSION
FILINGS.
ITEM 1. BUSINESS.
GENERAL
ROHN Industries, Inc., formerly known as UNR Industries, Inc., ("ROHN" or
the "Company"), is a leading manufacturer and installer of infrastructure
products for the communications industry, including cellular, Personal
Communications Systems ("PCS"), Enhanced Specialized Mobile Radio ("ESMR"),
paging, radio and television broadcast, wireless cable, private microwave and
other telecommunications businesses. The Company's principal product lines are
tower structures and equipment enclosures. Although the Company has been
expanding its international business, it is primarily a domestic manufacturer,
and descriptions of market conditions relate to the domestic market. From 1995
to 1997, the Company's growth was primarily due to the growth of domestic
wireless communications systems, and the introduction and growth of its
equipment enclosures product line. While U.S. wireless capital expenditures
continued at an accelerated pace from late 1997 through the first half of 1999,
these expenditures were increasingly made in technological system improvements
rather than for additional cell site development. In addition, the development
of a new build-to-suit tower industry, along with local zoning requirements,
encouraged increased emphasis on co-location of existing and new cell sites,
further decreasing the total number of cell sites developed. These were
significant factors in the decreased revenues experienced by the Company during
1999. The Company believes it should benefit from the continued build-out of
wireless communication systems as capacity requirements increase with the growth
in both wireless voice and data communications, along with the growth of
infrastructure to support the Internet through wireless and fiber optic
transmission. It is anticipated that additional growth will be realized from the
build-to-suit industry, which erects and leases towers and shelters to wireless
carriers. Participants in this relatively new industry have acquired well over
20,000 towers from existing carriers, and anticipate constructing a significant
portion of the new towers expected to be built in the near future. These new
towers are expected to be significantly larger than towers that have been built
in previous years, but their capacity to hold more than one carrier, and in many
cases seven or eight carriers, will result in less tower density in areas of
high communication traffic.
The Company's key products consist of self-supporting and guyed
(cable-supported) towers, equipment enclosures, steel and concrete poles,
concrete and fiberglass equipment enclosures, equipment cabinets, antenna mounts
and installation services. The Company also manufactures steel agricultural
products.
The Company was organized as a Delaware corporation in 1979. In 1982, the
Company filed a voluntarily petition for reorganization under Chapter 11 of the
Federal Bankruptcy Code. Pursuant to a Plan of Reorganization accepted by the
Company's creditors and stockholders and confirmed by the Bankruptcy Court in
1989, the Company issued 42,404,847 shares of common stock to the UNR
Asbestos-Disease Claims Trust and unsecured creditors in full discharge of all
claims. The trust currently owns 29,348,051 shares of common stock representing
approximately 55% of the Company's currently outstanding shares of common stock.
In March 1997, the Company moved its principal executive offices from Chicago,
Illinois to Peoria, Illinois, and in December 1997, the Company changed its name
to ROHN Industries, Inc. The Company currently maintains its executive offices
and main tower manufacturing facility at 6718 West Plank Road, Peoria, Illinois
61604.
2
TELECOMMUNICATIONS EQUIPMENT MARKET
The use of wireless telephones in the United States has shown rapid growth
in recent years, from about five million subscribers in 1990 to over 75 million
at the end of 1999. The number of cell sites has risen from about 6,000 in 1990
to over 85,000 today and is expected to grow by as many as 34,000 in the next
year. While co-located and rooftop cells sites will make up many of these new
cell sites, the remainder are expected to require a tower or pole and equipment
enclosure. Co-located and rooftop sites will require mounts and equipment
enclosures.
Competition among wireless carriers is becoming increasingly intense,
lowering the average cost per minute for a wireless call to the point where a
wireless phone may become an economic alternative to a wireline phone. This cost
reduction may serve to further enhance the growth of wireless subscribers. In
addition, other new technologies such as broadband wireless provide
opportunities to serve the rapid growth of internet services by providing "last
mile" links from fiber-optic hubs to office buildings. New technologies are
continually being introduced to use available wireless spectrum as an
alternative to traditional copper wire. These new technologies often require the
use of towers, poles, mounts and equipment enclosures such as those manufactured
by the Company.
Radio and Television broadcast is another market served by the Company.
Recent changes in FCC regulation and the introduction of high definition
television (HDTV) should provide additional opportunities for the Company, as
new antenna support structures may be required to support these new broadcasting
technologies. In November 1999, the Company announced the execution of a
contract with Central Missouri State University to construct a 2,000-foot HDTV
tower. This contract represents the Company's first entry into the ultra high
tower market as a result of the Company's commitment to the expanding tall tower
industry. The Company has enhanced its engineering, manufacturing and
installation capabilities to enable it to expand its sales in this market
segment.
ROHN is also an active participant in the fiber optic network industry,
supplying shelters and site installation services to several of the major fiber
optic carriers in the United States. In 1999, the Company announced a major
contract to supply Peter Kiewit, Inc. with over 700 shelters during 1999 and
2000. As Internet usage results in increased demand for data-carrying capacity
over fiber optic lines, ROHN shelters will continue to provide secure housing
for valuable transmission equipment located in remote sites around the country.
The Company also plans to continue to develop overseas markets through its
United States customers and through the establishment of strategic partnerships,
such as the relationship with Radiotronica announced in September 1999. See
"--International."
PRODUCTS
TOWER STRUCTURES. The Company manufactures many configurations of towers,
ranging from a 2,000-foot high tower to small antenna mounts. The Company's
principal tower product is the tubular self-supporting tower ranging in heights
up to 900 feet. The Company's towers are used across the world for television
broadcast, AM/FM radio broadcast, microwave, cellular telephone, PCS, radar,
surveillance camera mounts, solar power stations and weather stations. Included
within the Tower Structures segment are steel and concrete poles, generally used
where space is too limited to erect a tower, as is often the case in urban
areas, and antenna mounts that are hot-dipped galvanized to prevent corrosion.
Antenna mounts range from non-penetrating roof mounts that spread the balanced
weight of an antenna over a large area to mounts that concentrate weight for
compact installation. The Company also provides tower mounts, wall mounts for
corners or flat walls, square pole mounts, and standard roof mounts for flat or
sloped roofs. Approximately 71%, 63% and 68% of the Company's revenues were
attributable to sales in the Tower Structures segment for years 1999, 1998 and
1997, respectively.
ENCLOSURES. Secure housing of highly valuable electronic components and
power systems is a major concern for communications companies. The Company's
concrete enclosures are made of lightweight concrete with steel reinforcements
for added strength. The Company's fiberglass enclosures are made of laminated
fiberglass and are lightweight, portable, strong and secure. The Company also
markets a non-combustible enclosure for rooftop applications, manufactured with
a steel frame to meet strict fire codes. Equipment cabinets, made of lightweight
concrete or molded fiberglass for water and rust resistance, are designed as
maintenance-free structures for compact equipment installations. The
3
Enclosures segment accounted for approximately 29%, 37% and 32% of the Company's
revenues for years 1999, 1998 and 1997, respectively. Concrete structures
represent the largest part of the Company's Enclosures segment, generating more
than 79% of Enclosures segment revenues for years 1999, 1998 and 1997.
See Note 19 to the Consolidated Financial Statements of the Company in Item
8 for additional financial information regarding the Company's business
segments.
PATENTS AND TRADEMARKS
The Company has a number of patents and trademarks, none of which are
considered material to its operations.
SEASONALITY OF BUSINESS
The operations of the Company are generally not subject to seasonal
fluctuations. However, in the past, the Company has seen disruptions in its
customer's ability to accept shipments due to unusual and prolonged
weather-related construction delays.
The Company has periodically experienced and expects to continue to
experience significant fluctuations in its quarterly results. It is believed
that this quarterly fluctuation is due to the capital budgeting cycle of many of
its customers who often purchase a disproportionately higher share of the
Company's products at the end of the calendar year. It is expected that
fluctuations in quarterly results could become more significant in the future as
customers move to a more centralized purchasing environment and as the
consolidation of wireless communication service providers and build-to-suit
customers continue.
The Company's working capital requirements do not vary significantly from
period to period.
INTERNATIONAL
Foreign sales accounted for approximately $22.1 million, $12.1 million and
$10.2 million of the Company's revenues for years 1999, 1998 and 1997,
respectively. The Company has sold towers and other equipment in more than 55
countries and currently operates a sales and construction office in Mexico City.
In December 1997, the Company entered into an agreement with BrasilSat Harald
S.A. ("BrasilSat") of Curitiba, Brazil to form a corporate joint venture to
serve the telecommunications infrastructure industry in Brazil and South
America. The corporate joint venture began production of enclosures in late
1998. The corporate joint venture's operations were adversely affected by the
Brazilian economy in 1998 and early 1999. In September 1999, the Company sold
its interest in the joint venture to its joint venture partner BrasilSat. The
Company plans to develop other foreign markets through its United States
customers, who are investing in telecommunications on a global basis, and
through the continued establishment of partnerships and facilities in key
developing countries.
In September 1999, the Company announced a joint marketing agreement with
Radiotronica, S.A., a Spanish multi-national firm which is one of the world's
largest turnkey telecommunications providers. Radiotronica currently operates in
Spain, Portugal, Morocco, and Latin America, where it has subsidiaries in
Argentina, Brazil, Chile, Columbia and Peru. As part of the agreement, the
Company and Radiotronica will cooperate in the development and construction of
the wireless telecommunications infrastructure in Latin America. The agreement
provides for a unified marketing and sales structure.
Substantially all of the Company's foreign sales are negotiated, invoiced
and paid in United States dollars. Accordingly, although changes in exchange
rates do not affect the Company's revenue, they can influence the willingness of
customers to purchase the Company's products. Adverse effects from economic
instability similar to those experienced by BrasilSat in 1998 and early 1999 may
have an adverse effect on the Company's foreign sales.
See Note 18 to the Consolidated Financial Statements of the Company in Item
8 for additional financial information.
CUSTOMERS AND BACKLOG
The Company markets its products worldwide, through a variety of marketing
channels with different customer focuses. Domestically, the Company has 10
direct salespeople.
4
For international sales efforts, the Company employs two salespeople who
concentrate on Mexico and Latin America. In addition, the Company utilizes two
key distributors and a variety of agents to cover the remainder of the world.
The Company's backlog was approximately $93.0 million, $29.0 million and
$52.4 million at December 31, 1999, 1998 and 1997, respectively. The 1999
backlog includes a $40 million contract with the State of Pennsylvania for a
statewide radio communications project. It is anticipated that this turnkey
project will be substantially completed by the end of 2000. In 1999, one
customer accounted for approximately 11% of the Company's net sales. In 1998,
one customer accounted for approximately 13% of the Company's net sales. No
customer accounted for more than 10% of the Company's sales in 1997.
COMPETITION
The telecommunications infrastructure industry is highly competitive. The
Company faces substantial competition in both the Tower Structures and
Enclosures segments of its business from established competitors, some of which
have greater financial, engineering, manufacturing, and marketing resources than
the Company. The Company's competitors can be expected to continue to improve
the design of their products, to introduce new products with competitive prices
and performance characteristics and to improve customer service. Competitive
pressures caused an erosion in operating margins in 1998 and early 1999, and
competitive pressures could necessitate further price reductions, adversely
affecting operating results in the future. The Company believes that it has
certain competitive advantages over its competitors, such as its broad
engineering flexibility and capability, its historic customer relationships, its
international relationships, its ability to retain a skilled workforce, and its
purchasing volume for raw materials. The Company can not be certain that it will
be able to maintain the competitive advantages it currently enjoys.
RAW MATERIALS
The primary raw materials used by the Company to produce its products are
steel, zinc and concrete. These materials are currently readily available in the
marketplace. The Company is not dependent upon any single supplier for any
materials essential to its business or not otherwise commercially available. The
Company has been able to obtain an adequate supply of raw materials and does not
anticipate a shortage of raw materials. The Company's ability to continue to
acquire steel, zinc and concrete on favorable terms, however, may be adversely
affected by factors beyond its control. Because steel, zinc and concrete
constitute a significant portion of the Company's cost of goods sold, any
increase in price of such materials could have a material adverse impact on the
Company's gross profit margin.
EMPLOYEES
As of December 31, 1999, the Company employed 654 people. Collective
bargaining agreements cover 322 employees at its facilities in Peoria and
Frankfort. The Company's union employees are members of the United Automobile,
Aerospace and Agricultural Implement Workers of America (UAW) in Peoria and the
Retail, Wholesale and Department Store Union (RWDSU) in Frankfort. The Company
considers its relations with its employees to be good.
The Company's success depends to a significant degree upon the continued
contributions of key management, engineering, sales, marketing, customer
support, finance and manufacturing personnel. The loss of certain personnel
could have a material adverse effect on the Company and its operations. The
Company cannot be certain that these personnel will continue to be available to
the Company. In addition, the Company believes that its success depends on its
ability to attract additional qualified employees and that the failure to do so
could have a material adverse effect on the Company and its operations.
ENVIRONMENTAL MATTERS
The Company employs some materials in its manufacturing processes, including
oils and solvents that are regulated by environmental laws. The Company has made
expenditures to comply with environmental laws and regulations, including
investigation and remediation of ground and water contamination, and expects to
continue to make such expenditures to comply with existing and future
requirements. While such expenditures have not had, and are not expected to
have, a material adverse effect on
5
the Company's financial condition or results of operations, there can be no
assurance that more stringent regulations or enforcement in the future will not
have such effects.
In some cases, the Company has notified state or federal authorities of a
possible need to remedy sites it previously operated. The Company has also been
notified by various state and federal governmental authorities that they believe
it may be a "potentially responsible party" or otherwise have responsibility
with respect to clean-up obligations at certain hazardous and other waste
disposal sites which were not owned or operated by the Company. In several such
cases, the Company has entered into settlements with the relevant authorities or
other parties for immaterial amounts. In other cases, the Company is
participating in negotiations for settlement with the relevant authorities or
other parties or has notified the authorities that it denies liability for
clean-up obligations. The costs or liabilities the Company may incur with
respect to these sites are difficult to predict until the level of contamination
is determined. The Company, after consultation with legal counsel and
environmental experts, believes that the ultimate outcome with respect to all of
these sites will not have a material adverse effect on the Company's financial
condition or on its results of operations.
ITEM 2. PROPERTIES.
The Company has 847,000 square feet of manufacturing facilities located in
Peoria, Illinois, Bessemer, Alabama and Frankfort, Indiana. The Company's
headquarters are located in Peoria, Illinois. The Frankfort, Indiana facility is
subject to a mortgage in the amount of $5.2 million. The Bessemer, Alabama
facility is subject to a mortgage in the amount of $2.1 million and a capital
lease in the amount of $2.0 million. Listed below are the manufacturing
facilities operated by the Company:
OWNED/ SQUARE
LOCATION LEASED FOOTAGE PRINCIPAL APPLICATION SERVED
- -------- -------------- -------- ----------------------------------------
Peoria, IL..................... Owned 417,000 Tower manufacturing, galvanizing
Bessemer, AL................... Owned/Leased 250,000 Enclosure manufacturing
Frankfort, IN.................. Owned 180,000 Tower, mounts, and agricultural product
manufacturing
ITEM 3. LEGAL PROCEEDINGS.
The Company is involved in various pending legal proceedings and claims
arising in the ordinary course of business, as well as claims arising from the
Company's disposition of certain Divisions in 1996. Although the outcome of such
proceedings and claims cannot be determined with certainty, the Company
believes, after consultation with legal counsel, that such proceedings and
claims, individually or in the aggregate, are not material to any of its
business, financial condition, or results of operations. See
"Business--Environmental Matters."
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of the Company's security holders during
the fourth quarter of fiscal year 1999.
6
ADDITIONAL ITEM: EXECUTIVE OFFICERS OF THE REGISTRANT
OFFICER
NAME OF EXECUTIVE OFFICER SINCE AGE PRESENT POSITION AND FIVE YEAR BUSINESS EXPERIENCE
- ------------------------- -------- -------- ------------------------------------------------------
Brian B. Pemberton 1997 55 President and Chief Executive Officer of ROHN
Industries, Inc. (commencing April 14, 1997);
President, Skycell Services, a division of American
Mobile Satellite Corporation, a common carrier
providing satellite-based mobile voice and data
services to North America ("AMSC")(August 1996 to
December 1996); President and Chief Executive Officer,
AMSC (April 1995 to August 1996).
James R. Cote 1993 50 Vice President--Sales and Marketing of ROHN
Industries, Inc. (June 1999 to present); Vice
President--International and Corporate Development
(April 1998 to June 1999); Vice-President--Sales and
Marketing (September 1997 to April 1998);
Vice-President Sales and Marketing, ROHN Division of
UNR Industries, Inc. (1994-1997).
Daniel J. Pallat 2000 62 Chief Financial Officer of ROHN Industries, Inc.
(commencing January 19, 2000); Partner, Tatum CFO
Partners, LLP (a partnership of career chief financial
officers) (January 2000 to present); Chief Financial
Officer, American Citrus Products Corporation
(December 1986 to August 1999).
Richard L. Rohn (1) 1962 55 Vice-President--Equipment Enclosures of ROHN
Industries, Inc. (September 1997 to March 2000);
President Enclosure Operations, ROHN Division of UNR
Industries, Inc. (1962--1997).
- ------------------------
(1) On January 19, 2000, the Company announced the retirement of Richard L.
Rohn, effective March 6, 2000.
7
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's common stock is quoted on the Nasdaq National Market. Its
trading symbol is ROHN. The following table sets forth, for the periods
indicated, the high and low bid quotations on the Nasdaq National Market as
reported by Dow Jones:
DIVIDENDS
HIGH LOW PER SHARE
----------- ----------- ---------
1998
First Quarter.................................... 6 1/4 4 11/16 --
Second Quarter................................... 6 1/4 3 3/4 --
Third Quarter.................................... 4 3/4 1 3/4 --
Fourth Quarter................................... 3 1/2 1 13/16 --
1999
First Quarter.................................... 3 5/8 1 7/8 --
Second Quarter................................... 2 7/32 1 1/16 --
Third Quarter.................................... 2 1/4 1 7/32 --
Fourth Quarter................................... 4 5/16 1 29/32 --
2000
First Quarter (through March 16)................. 6 7/32 2 11/16 --
As of March 16, 2000, the Company had 2,608 registered holders of record of
its common stock.
ITEM 6. SELECTED FINANCIAL DATA.
(IN THOUSANDS, EXCEPT PER SHARE DATA) 1999 1998 1997 1996 1995
- ------------------------------------- --------- --------- --------- --------- ---------
FIVE YEAR SUMMARY OF OPERATIONS
Net sales.............................. $141,896 $174,153 $158,132 $154,434 $142,216
Cost of products sold.................. 109,055 131,121 111,124 106,847 98,996
-------- -------- -------- -------- --------
Gross profit........................... 32,841 43,032 47,008 47,587 43,220
-------- -------- -------- -------- --------
Operating income....................... 13,578 24,236 26,459 32,498 29,862
-------- -------- -------- -------- --------
Interest income(expense), net.......... 117 (753) (477) 884 1,839
Other income(expense).................. (1,600) -- 4,088 -- --
-------- -------- -------- -------- --------
Income from continuing operations
before income taxes.................. 12,095 23,483 30,070 33,382 31,701
Income tax provision................... 4,500 8,900 11,151 13,100 12,700
Equity loss of corporate joint
venture.............................. 355 540 -- -- --
-------- -------- -------- -------- --------
Income from continuing operations...... 7,240 14,043 18,919 20,282 19,001
Discontinued operations--
Income from operations, net of tax... -- -- -- 3,859 10,275
Gain on dispositions, net of tax..... -- -- -- 21,900 --
-------- -------- -------- -------- --------
Net Income............................. $ 7,240 $ 14,043 $ 18,919 $ 46,041 $ 29,276
-------- -------- -------- -------- --------
Net income per share--basic
Continuing operations.................. $ 0.14 $ 0.27 $ 0.36 $ 0.39 $ 0.37
Discontinued operations--
Income from operations............... -- -- -- 0.08 0.20
Gain on dispositions................. -- -- -- 0.42 --
-------- -------- -------- -------- --------
Net income per share--basic............ $ 0.14 $ 0.27 $ 0.36 $ 0.89 $ 0.57
-------- -------- -------- -------- --------
8
(IN THOUSANDS, EXCEPT PER SHARE DATA) 1999 1998 1997 1996 1995
- ------------------------------------- --------- --------- --------- --------- ---------
Net Income per share--diluted
Continuing operations.................. $ 0.14 $ 0.27 $ 0.36 $ 0.39 $ 0.37
Discontinued operations--
Income from operations............... -- -- -- 0.08 0.20
Gain on dispositions................. -- -- -- 0.42 --
-------- -------- -------- -------- --------
Net income per share--diluted.......... $ 0.14 $ 0.27 $ 0.36 $ 0.89 $ 0.57
-------- -------- -------- -------- --------
Dividends declared per common share.... $ -- $ -- $ 0.10 $ 2.60 $ 2.55
Weighted average common shares
outstanding--Basic................... 52,575 52,774 52,475 52,383 51,813
Weighted average common shares and
equivalent shares
outstanding--Diluted................. 52,921 52,779 52,558 52,566 52,056
FIVE-YEAR SUMMARY OF FINANCIAL DATA
Total assets........................... $121,848 $114,192 $111,072 $ 93,372 $161,226
Stockholders' equity................... 80,416 72,579 58,042 42,511 127,764
Dividends declared..................... -- -- 5,245 136,368 132,274
Return on assets....................... 5.9% 12.3% 17.0% 49.3% 18.2%
Return on stockholders' equity......... 9.0% 19.3% 32.6% 108.3% 22.9%
Capital expenditures................... 3,881 2,283 8,307 11,658 2,303
Depreciation........................... 3,421 3,148 2,634 1,672 1,433
Long-term liabilities.................. 11,464 12,327 11,271 12,191 4,671
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The following discussion summarizes the significant factors affecting the
consolidated operating results and financial condition of the Company for the
three years ended December 31, 1999. This discussion should be read in
conjunction with the consolidated financial statements and notes to the
consolidated financial statements.
RESULTS OF OPERATIONS
The Company is a leading manufacturer and installer of infrastructure
products for the communications industry, including cellular, Personal
Communications Systems ("PCS"), Enhanced Specialized Mobile Radio ("ESMR"),
paging, radio and television broadcast, wireless cable, private microwave and
other telecommunications businesses. The Company's principal product lines are
tower structures and enclosures.
9
The following table sets forth, for the fiscal periods indicated, the
percentage of net sales represented by certain items reflected in the Company's
consolidated statements of income.
FOR THE YEARS ENDED DECEMBER 31, 1999 1998 1997
- -------------------------------- -------- -------- --------
Net sales................................................... 100.0% 100.0% 100.0%
Cost of sales............................................... 76.9 75.3 70.3
----- ----- -----
Gross profit................................................ 23.1 24.7 29.7
Selling, general and administrative expense................. 13.5 10.8 10.8
Restructuring expense....................................... -- -- 2.2
----- ----- -----
Total operating expenses.................................... 13.5 10.8 13.0
----- ----- -----
Operating income............................................ 9.6 13.9 16.7
Interest income/(expense), net.............................. 0.1 (.4) (.3)
Other income/(expense)...................................... (1.1) -- 2.6
----- ----- -----
Income before income taxes.................................. 8.6 13.5 19.0
Income tax provision........................................ 3.2 5.1 7.0
Equity loss of joint venture................................ .3 .3 --
----- ----- -----
Income from continuing operations........................... 5.1% 8.1% 12.0%
===== ===== =====
1999 COMPARED TO 1998
Net sales for 1999 were $141.9 million compared to $174.2 million in 1998, a
decrease of 18.5%. The decreases in sales by business segment were as follows:
DOLLAR PERCENTAGE
FOR THE YEARS ENDED DECEMBER 31, 1999 1998 DECREASE DECREASE
- -------------------------------- -------- -------- -------- ----------
Tower Structures...................................... $100.2 $110.1 $ 9.9 9.0%
Enclosures............................................ 41.7 64.1 22.4 34.9%
------ ------ ----- ----
Total................................................. $141.9 $174.2 $32.3 18.5%
====== ====== ===== ====
The decrease in sales in the Tower Structures segment was primarily the
result of a continued softness in the demand for the installation and erection
of towers within the Company's construction business. The decrease in sales in
the Enclosures segment was primarily due to a significant reduction in sales
volume to a provider of a high-speed broadband fiber optic network whose
buildout was completed in 1999. 1998 sales for the Enclosures segment were
significantly higher due to the significant volume of business with this same
provider of a high-speed broadband fiber optic network.
International sales increased to $22.1 million in 1999 from $12.1 million in
1998, an increase of $10.0 million or 82.6%. This increase in international
sales is the result of the Company's efforts to increase international market
penetration, particularly in Mexico and the rest of Latin America.
Many times, the Company's customers experience delays due to weather, zoning
approvals, and other similar circumstances, and request that the Company hold
their inventory. In these situations where the product is available for
shipment, and title has passed to the customer, the Company recognizes revenue
for its Tower Structures segment. Results of operations for the years ended
December 31, 1999 and 1998 include Tower Structures revenues of $2.4 million and
$4.2 million, respectively, related to product not yet shipped, but where the
previously-discussed earnings criteria had been met.
The Enclosures segment differs from Tower Structures in that enclosures are
generally ordered by the customer in multiple units on a project basis and are
not necessarily site specific. Therefore, the revenue recognition policy for
enclosures, in addition to the requirements of the Tower Structures segment,
also requires that actual payment be received. Results of operations for the
years ended December 31, 1999 and 1998 include Enclosures revenues of
$4.9 million and $6.5 million, respectively, related to product not yet shipped,
but where the earnings criteria had been met.
Gross profit for 1999 was $32.8 million versus $43.0 million in 1998, a
decrease of 23.7%. Gross profit margin was 23.1% in 1999 versus 24.7% for 1998.
The decrease in gross profit margin was
10
primarily attributable to non-recurring charges taken during the first half of
1999 totaling $1.8 million, of which $1.5 million related to a writedown of
inventory and $.3 million related to severance payments due to a reduction in
workforce. Without the impact of the non-recurring charges taken during the
first half of 1999, gross margin would have been $34.6 million or 24.4% of
sales. Gross profit margins for the Company's Tower Structures segment increased
from approximately 18% at the end of 1998 to 26% at the end of 1999. This
increase in gross margin was primarily the result of cost cutting measures
implemented in 1999, including the reduction of raw material costs. Gross profit
margins for the Company's Enclosure segment decreased from approximately 26% at
the end of 1998 to 18% at the end of 1999. This decrease in gross margin was
primarily the result of intense price competition for new orders received in
1999.
In November 1999, the Company entered into a contract with the State of
Pennsylvania to supply and install communications towers/poles and/or enclosures
for a state-wide radio communications project. This contract could generate
approximately $40 million in revenues, and it is anticipated that this project
will be substantially completed by the end of 2000. Historically, margins on the
Company's installation business have been significantly lower than margins on
sales of its tower and enclosure products. Due to the large portion of the
contract which comprises installation and civil engineering work, it is
anticipated that the margins to be recognized on the State of Pennsylvania
contract will be significantly lower than the margins the Company has recently
achieved in its Tower Structures or Enclosures segment.
Selling, general and administrative ("SG&A") expenses were $19.3 million in
1999 versus $18.8 million in 1998, an increase of $0.5 million, or 2.7%. As a
percentage of sales, SG&A expenses were 13.6% in 1999 and 10.8% in 1998. The
increase in SG&A expenses was primarily attributable to a charge for severance
payments of $.7 million taken in the second quarter of 1999 relating to a
reduction in workforce. Without this non-recurring charge, SG&A expense for 1999
would have been $18.6 million.
The Company incurred other expenses of approximately $1.6 million related to
fees and expenses in connection with the proposed merger with PiRod
Holdings, Inc., which was terminated on March 30, 1999. These expenses were
recognized by the Company in the first quarter of 1999, resulting in an adverse
impact on earnings of approximately $.02 per share.
The Company's effective tax rate for 1999 was 37.2% versus 37.9% in 1998.
The equity loss of the corporate joint venture of $.36 million relates to
the Company's share of the operating losses for ROHN BrasilSat, as well as the
loss related to the sale of its joint venture interest. The Company accounted
for this corporate joint venture under the equity method until its disposition
in September 1999. Of the $.36 million loss recorded by the Company in 1999,
$.12 million represented the Company's share of the operating losses of the
entity and $.24 million of the loss was related to the sale of the Company's
interest in the joint venture. The operations of ROHN BrasilSat started in 1998.
The Company sold its 49% interest in the joint venture to its joint venture
partner in September 1999.
Earnings per share (basic and diluted) were $0.14 in 1999 versus $0.27 in
1998. The decrease in earnings per share was primarily attributable to the
softness in demand for the Company's products in 1999, the non-recurring charges
of $2.5 million taken during the second quarter of 1999, and the charge of
$1.6 million taken during the first quarter of 1999 for the failed merger
transaction. The charges taken in the first half of 1999 related to the failed
merger, inventory writedown and severance payments reduced earnings per share
for 1999 by $.05 per share basic and diluted.
1998 COMPARED TO 1997
Net sales for 1998 were $174.2 million compared to $158.1 million in 1997,
an increase of 10.2%. The increases in sales by business segment were as
follows.
DOLLAR PERCENTAGE
FOR THE YEARS ENDED DECEMBER 31, 1998 1997 INCREASE INCREASE
- -------------------------------- -------- -------- -------- ----------
Tower Structures....................................... $110.1 $107.1 $ 3.0 2.8%
Enclosures............................................. 64.1 51.0 13.1 25.7%
------ ------ ----- ----
Total.................................................. $174.2 $158.1 $16.1 10.2%
====== ====== ===== ====
11
The increase in sales in the Tower Structures segment was primarily due to a
$1.0 million increase in sales in international markets as well as recapturing
market penetration domestically. The Company believes that the overall market
for tower products in 1998 was unchanged from 1997. One of the Company's
principal business objectives in 1998 was to reverse losses in market share
experienced in previous years. The Company's Enclosures segment benefited from a
wider range of applications for these products both within the communications
industry and outside the industry.
In 1998, many of the Company's customers experienced delays and requested
that the Company hold their inventory. In circumstances where the product is
ready for shipment, the customer requests delayed shipment and risk of ownership
has passed to the customer, the Company recognizes revenue for its Tower
Structures segment. Results of operations for the year ended December 31, 1998,
included approximately $4.2 million of Tower Structures revenues related to
product that had not been shipped, but where the earnings criteria were met. No
such revenues were recorded in 1997, in accordance with generally accepted
accounting principles, because the revenue recognition criteria were not met.
The Enclosures segment differs from the Tower Structures segment in that the
Enclosures are generally ordered by the customer in multiple units on a project
basis and are not necessarily site specific. Therefore, the revenue recognition
policy for enclosures, in addition to the requirements for the Tower Structures
segment, also requires that actual payment be received. Results of operations
for the year ended December 31, 1998, included approximately $6.5 million of
Enclosures revenues related to product that had not been shipped, but where the
earnings criteria was met. No such revenues were recorded in 1997, in accordance
with generally accepted accounting principles, because the revenue recognition
criteria were not met.
Gross profit for 1998 was $43.0 million versus $47.0 million in 1997, a
decrease of 8.5%. Gross profit margin was 24.7% in 1998 versus 29.7% for 1997.
The 5% decrease was attributable to a significant decrease in gross profit
margins for the Company's tower products. This gross profit margin deterioration
was experienced primarily in the last two quarters of 1998. Significant
industry-wide pricing pressure was experienced as certain competitors lowered
prices and demand remained flat during the year. In addition, the Company
experienced increases in production costs related to annual purchasing
commitments for its primary raw materials such as steel and increased operating
costs of its new galvanizing facility which was brought on-line during the
latter half of 1997.
SG&A expenses were $18.8 million in 1998 versus $17.1 million in 1997, an
increase of $1.7 million, or 9.9%. As a percentage of sales, SG&A expenses were
10.8% in both 1998 and 1997. The increase in SG&A expenses was primarily
attributable to an increase in sales and marketing costs. The Company invested
in additional sales, project management and customer service personnel and
enhanced sales tools such as catalogs and trade shows to gain sales momentum in
the domestic market place. Also, the Company increased its spending to improve
its worldwide market presence.
During the third quarter of 1997, the Company's Board of Directors approved
a special charge of $3.4 million ($2.1 million after tax or $0.04 per share) to
cover the costs of a restructuring program. The restructuring charge was related
to cost cutting measures including early retirement costs, other workforce
reductions, and expenses associated with the development and implementation of
this program. The provision for the reduction in workforce included severance
and other benefits for approximately 25 employees, the majority of whom were
based in Peoria, Illinois and Frankfort, Indiana. During 1997, cash expenditures
of $1.9 million were charged against the reserve. Approximately $1.1 million of
expenses were charged against the reserve in 1998, with the remaining balance
expended in 1999.
The Company's 1998 effective tax rate was 37.9% versus 37.1% in 1997. This
increase in the effective tax rate was primarily due to the non-recurring nature
of certain adjustments made in 1997. These adjustments were recorded by the
Company when it finalized its 1996 return in late 1997.
The equity loss of the corporate joint venture of $.5 million in 1998
related to the Company's share of the start-up losses for ROHN BrasilSat. The
operations of ROHN BrasilSat began in 1998.
Earnings per share (basic and diluted) were $0.27 in 1998 versus $0.36 in
1997. The decrease in earnings per share was primarily attributable to the
significant decrease in gross profit margin experienced by the Tower Structures
segment in 1998. The 1997 earnings per share included $0.05 per share
12
gain on the sale of an investment in a non-related business and a $0.04 per
share loss related to the restructuring charge.
The Company reduced in size due to the sale of Leavitt Tube, Unarco
Commercial Products, UNR Home Products and Real Time Solutions, Inc. in 1996,
and the closing in 1997 of the Company's former corporate office in Chicago, IL.
In 1998, the Company implemented a thorough review of its recorded reserves and
discovered that reserves for postretirement benefits other than pensions had not
been properly provided for in accordance with Statement of Financial Accounting
Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions." As of January 1, 1998, the Company had an unfunded accumulated
postretirement benefit obligation of $3.5 million and an unamortized net
transition obligation of $1.8 million, resulting in an accrual requirement of
$1.7 million at the beginning of the year. The Company recorded a charge in 1998
to establish a postretirement benefit liability of approximately $2.2 million as
of December 31, 1998. Also, in connection with the Company's thorough review of
its recorded reserves, it was determined that there were excess reserves of
approximately $2.4 million related to insurance, accounts receivable and other
miscellaneous reserves that were not material to the prior year consolidated
financial statements. These excess reserves were reversed in 1998. Due to the
immateriality of the postretirement benefit charges to the consolidated
financial statements of the Company from 1993 through 1997, no restatement was
made.
LIQUIDITY AND CAPITAL RESOURCES
The following table sets forth selected information concerning the Company's
financial condition:
DECEMBER 31, DECEMBER 31,
(DOLLARS IN THOUSANDS) 1999 1998
- ---------------------- ------------ ------------
Cash.............................................. $27,634 $19,690
Working capital................................... 61,773 50,830
Total debt........................................ 10,230 11,270
Current ratio..................................... 3.06:1 2.73:1
The Company's working capital was $61.8 million at December 31, 1999
compared to $50.8 million at December 31, 1998, an increase of $11.0 million.
This increase in working capital primarily reflects an increase in cash and
accounts receivable related to increased sales at year end.
At December 31, 1999, the Company had aggregate indebtedness of
$10.2 million. The Company's outstanding indebtedness was related to mortgage
notes payable and capital leases.
The Company does not have any material capital commitments. The Company
expects that it will meet its ongoing working capital and capital expenditure
requirements from operating cash flows. In addition, the Company believes that
its strong balance sheet allows it substantial financial flexibility.
INFLATION
Inflation has not had a material effect on the Company's business or results
of operations.
SEASONALITY AND QUARTERLY RESULTS OF OPERATIONS
The operations of the Company are generally not subject to seasonal
fluctuations. However, in the past, the Company has seen disruptions in its
customer's ability to accept shipments due to unusual and prolonged
weather-related construction delays.
The Company has periodically experienced and expects to continue to
experience significant fluctuations in its quarterly results. The Company
believes that this quarterly fluctuation is due to the capital budgeting cycle
of many of its customers who often purchase a disproportionately higher share of
the Company's products at the end of the calendar year. It is expected that
fluctuations in quarterly results could become more significant in the future as
customers move to a more centralized purchasing environment and as the
consolidation of wireless communication service providers and build-to-suit
customers continues.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, Statement of Financial Accounting Standards ("SFAS") No. 133,
"ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES," was issued. This
standard establishes accounting and
13
reporting standards for derivative instruments and hedging activities. It
requires that an entity recognize all derivatives as either assets or
liabilities in the balance sheet and measure those instruments at fair value.
Changes in the fair value of derivatives are recorded in earnings or other
comprehensive income, based on whether the instrument is designated as part of a
hedge transaction. The Company adopted SFAS No. 133 in 1999. The adoption of
this statement did not have a material effect on the Company's results of
operations or financial condition as the Company historically does not enter
into these types of transactions in the normal course of business.
YEAR 2000 COMPLIANCE
Historically, certain computer programs were written using two digits rather
than four to define the applicable year. Accordingly, a company's software may
have recognized a date using "00" as the year 1900 rather than the year 2000,
which could result in computer system failures or miscalculations, commonly
referred to as the Year 2000 ("Y2K") issue. The Y2K issue could have arisen at
any point in the Company's supply, manufacturing, processing, distribution and
financial chains. Incomplete or untimely resolution of the Y2K issue by the
Company, key suppliers, customers and other parties could have had a material
adverse effect on the Company's results of operations, financial condition and
cash flows.
The aggregate cost of the Company's Y2K efforts was approximately
$4.7 million. Approximately $4.5 million of these costs were related to the
acquisition of new computer systems which have been capitalized, with the
remainder being funded through operating cash flows. The Company incurred Y2K
costs of approximately $0.1 million in 1999. The Company believes material
implications and risks related to Year 2000 have expired and, therefore, does
not anticipate experiencing any additional effects related to this issue. The
Company did not experience a significant increase in customer demand for
products as a result of Year 2000, nor did it experience any problems with its
key vendors.
SUBSEQUENT EVENTS
On January 7, 2000, the Company announced the resignation of Maureen B.
Bellantoni as Executive Vice President and Chief Financial Officer of the
Company, effective February 4, 2000. Ms. Bellantoni assumed the position of
Chief Financial Officer at Burger King North America. Daniel J. Pallat has been
hired as interim CFO of ROHN until a permanent replacement for Maureen
Bellantoni is employed. Mr. Pallat is a partner with Tatum CFO Partners, LLP, a
national organization of senior financial executives that provides CFO services
to businesses on a permanent or transitional basis. Prior to joining Tatum, he
served in financial and operating management positions from CFO to Group Vice
President with several public companies.
On January 19, 2000, the Company announced the retirement of Richard L. Rohn
as Vice President--Equipment Enclosures, effective March 6, 2000. The Company
will record a charge in 2000 related to Mr. Rohn's retirement, the amount of
which has not yet been determined.
14
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The Company has limited exposure to market rate sensitivity and any adverse
impacts realized would not be material to its financial results. The principal
market risks to which the Company is currently exposed to or may be exposed to
during 2000 or beyond are changes in interest rates and foreign currency
exchange rates.
The Company currently manages its exposure to changes in interest rates by
utilizing primarily all fixed rate debt. In the future, it is expected that if
additional debt is incurred, the Company would manage its exposure to changes in
interest rates by optimizing the use of variable-rate and fixed-rate debt and by
utilizing interest rate swaps. International sales, which accounted for 15.6% of
net sales in 1999, are concentrated principally in Latin America. In the future,
the Company expects that if it experiences significant growth in its
international sales activity, the Company would manage its exposure to changes
in exchange rates by borrowing in foreign currencies and by utilizing either
cross-currency swaps or forward contracts. Such swaps or forward contracts would
be entered into for periods consistent with related underlying exposures and
would not constitute positions independent of those exposures. The Company does
not expect to enter into contracts for speculative purposes.
15
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
ROHN INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31,
1999 1998 1997
------------ ------------ ------------
(IN THOUSANDS EXCEPT FOR PER SHARE DATA)
Net sales................................................... $141,896 $174,153 $158,132
Cost of products sold....................................... 109,055 131,121 111,124
-------- -------- --------
Gross profit................................................ 32,841 43,032 47,008
Operating expenses:
Selling expense........................................... 7,551 8,600 6,607
General and administrative................................ 11,712 10,196 10,522
Restructuring............................................. -- -- 3,420
-------- -------- --------
Operating income............................................ 13,578 24,236 26,459
-------- -------- --------
Interest income............................................. 948 292 822
Interest expense............................................ (831) (1,045) (1,299)
Other income/(expense)...................................... (1,600) -- 4,088
-------- -------- --------
Income from continuing operations before income taxes....... 12,095 23,483 30,070
Income tax provision........................................ 4,500 8,900 11,151
Equity loss of corporate joint venture...................... 355 540 --
-------- -------- --------
Net income.................................................. $ 7,240 $ 14,043 $ 18,919
======== ======== ========
Earnings per share--basic and diluted....................... $ 0.14 $ 0.27 $ 0.36
======== ======== ========
Weighted average shares outstanding--basic.................. 52,575 52,774 52,475
Weighted average shares and equivalent shares outstanding--
diluted................................................... 52,921 52,779 52,558
The accompanying notes are an integral part of these statements
16
ROHN INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31,
1999 1998
--------- ---------
(IN THOUSANDS)
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 27,634 $ 19,690
Accounts, notes and other receivables, less allowance for
doubtful accounts of $1,246 in 1999 and $1,200 in
1998.................................................... 34,051 28,588
Inventories............................................... 25,885 27,444
Deferred income taxes..................................... 2,900 2,600
Prepaid expenses.......................................... 1,271 1,794
-------- --------
Total Current Assets........................................ 91,741 80,116
Fixed assets, net........................................... 27,090 26,630
Other Assets................................................ 1,337 5,277
Long-term assets of discontinued operations................. 1,680 2,169
-------- --------
Total Assets................................................ $121,848 $114,192
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term liabilities.................. $ 1,066 $ 1,017
Accounts payable.......................................... 11,474 11,331
Accrued liabilities & other............................... 15,463 14,846
Customer deposits......................................... 808 940
Net liabilities of discontinued operations................ 1,157 1,152
-------- --------
Total Current Liabilities................................... 29,968 29,286
Long-Term debt.............................................. 9,164 10,253
Nonpension post retirement benefits......................... 2,300 2,074
-------- --------
Total Liabilities........................................... 41,432 41,613
-------- --------
Stockholders' Equity:
Common stock, $0.01 par value, authorized -- 60,000 shares
issued -- 52,752 in 1999 and 52,816 in 1998............... 534 535
Capital surplus........................................... 12,815 13,024
Retained earnings......................................... 71,743 64,503
Less -- 635 in 1999 and 1998 treasury shares, at cost..... (3,896) (3,896)
-- Unearned portion of restricted stock.............. (780) (1,587)
-------- --------
Total Stockholders' Equity.................................. 80,416 72,579
-------- --------
Total Liabilities and Stockholders' Equity.................. $121,848 $114,192
======== ========
The accompanying notes are an integral part of these statements
17
ROHN INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
COMMON STOCK
------------------- TREASURY STOCK N/R
SHARES CAPITAL RETAINED ------------------- RESTRICTED FROM
ISSUED AMOUNT SURPLUS EARNINGS SHARES AMOUNT STOCK OFFICERS
-------- -------- -------- -------- -------- -------- ---------- --------
(IN THOUSANDS)
Balance, December 31, 1996.............. 52,838 $528 $ 9,837 $36,786 (326) $(1,595) $ (745) $(2,300)
Net income............................ -- -- -- 18,919 -- -- -- --
Issuance of restricted stock.......... 150 2 1,123 -- -- -- (1,125) --
Restricted stock canceled............. (10) -- (61) -- -- -- 61 --
Amortization of restricted shares..... -- -- -- -- -- -- 1,153 --
Repayment of officers' loans.......... -- -- -- -- (309) (2,301) -- 2,300
Cash dividends -- $0.10 per share..... -- -- -- (5,245) -- -- -- --
Director's stock plan................. 28 -- 140 -- -- -- -- --
Stock options exercised............... 200 2 165 -- -- -- -- --
Stock options tax benefit............. -- -- 398 -- -- -- -- --
------ ---- ------- ------- ---- ------- ------- -------
Balance, December 31, 1997.............. 53,206 $532 $11,602 $50,460 (635) $(3,896) $ (656) $ --
Net income............................ -- -- -- 14,043 -- -- -- --
Issuance of restricted stock.......... 280 3 1,597 -- -- -- (1,600) --
Restricted stock canceled............. (30) -- (175) -- -- -- 143 --
Amortization of restricted shares..... -- -- -- -- -- -- 526 --
------ ---- ------- ------- ---- ------- ------- -------
Balance, December 31, 1998.............. 53,456 $535 $13,024 $64,503 (635) $(3,896) $(1,587) $ --
Net income............................ -- -- -- 7,240 -- -- -- --
Restricted stock canceled............. (69) (1) (371) -- -- -- 320 --
Director's stock plan................. -- -- 162 -- -- -- -- --
Amortization of restricted shares..... -- -- -- -- -- -- 487 --
------ ---- ------- ------- ---- ------- ------- -------
Balance, December 31, 1999.............. 53,387 $534 $12,815 $71,743 (635) $(3,896) $ (780) $ --
====== ==== ======= ======= ==== ======= ======= =======
The accompanying notes are an integral part of these statements
18
ROHN INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31,
------------------------------
1999 1998 1997
-------- -------- --------
(IN THOUSANDS)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income.................................................. $ 7,240 $14,043 $18,919
Adjustments to reconcile net income to net cash provided by
(used in) operating activities --
Depreciation.............................................. 3,421 3,148 2,634
Deferred income tax....................................... (300) 1,850 (450)
Equity loss of corporate joint venture.................... 355 540 --
Operating requirements --
Accounts receivable decrease (increase)................. (5,463) 5,160 (5,700)
Inventory decrease (increase)........................... 1,559 6,300 (3,027)
Prepaid expenses (increase) decrease.................... 523 (1,125) 424
Accounts payable and accrued expense (decrease)
increase............................................... 854 (8,364) 11,081
Discountinued operations.................................. 494 (1,859) (8,523)
Investment in non-related business gain................... -- -- (4,088)
------- ------- -------
Net Cash provided by operating activities............... $ 8,683 $19,693 $11,270
------- ------- -------
CASH FLOW FROM INVESTING ACTIVITIES:
Purchase of plant and equipment, net of dispositions and
retirements............................................. $(3,881) $(2,283) $(8,307)
Decrease in other assets.................................. 2,670 410 104
Proceeds from the sale of corporate joint venture......... 915 -- --
Investment in equity of joint venture..................... -- (3,669) --
Proceeds from the sale of an investment in non-related
business................................................ -- -- 4,088
------- ------- -------
Net Cash (used in) financing activities................. $ (296) $(5,542) $(4,115)
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of long-term debt................................. $(1,040) $ (949) $ (803)
Proceeds from short-term borrowings....................... -- -- 5,150
Payment of short-term borrowings.......................... -- -- (7,150)
Dividends paid............................................ -- -- (5,245)
Repayment of officers' loans.............................. -- -- 2,300
Common stock issued....................................... 597 494 1,858
Treasury stock purchases.................................. -- -- (2,301)
------- ------- -------
Net cash (used in) financing activities................. $ (443) $ (455) $(6,191)
------- ------- -------
Net increase in cash and cash equivalents............... $ 7,944 $13,696 $ 964
Cash and cash equivalents at beginning of period............ $19,690 5,994 5,030
------- ------- -------
Cash and cash equivalents at end of period.................. $27,634 $19,690 $ 5,994
======= ======= =======
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest................................................ $ 831 $ 1,045 $ 1,299
Income taxes............................................ $ 2,610 $ 5,814 $ 5,143
The accompanying notes are an integral part of these statements
19
1. NATURE OF OPERATIONS
ROHN Industries, Inc. and subsidiaries ("ROHN" or the "Company")
manufactures and installs towers, poles, mounts and related accessories used
principally to support telecommunications antennae for wireless communications,
such as cellular telephone, personal communications systems ("PCS"), private
microwave, commercial and amateur broadcasting and home television. The Company
also produces equipment enclosures and cabinets of concrete and fiberglass to
house electronic telecommunications equipment. The Company has manufacturing
facilities in Peoria, Illinois (towers and poles), Bessemer, Alabama (equipment
enclosures), and Frankfort, Indiana (towers, tower component, mounts and
agricultural products). The Company's products are sold direct to customers and
through the use of distributors throughout the United States and in
international markets.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies followed by the Company are described
below:
PRINCIPLES OF CONSOLIDATION
The financial statements include the consolidated accounts of the Company
and its subsidiaries. All significant intercompany transactions have been
eliminated in consolidation. The Company accounted for its 49% interest in ROHN
BrasilSat, a corporate joint venture in Brazil, under the equity method until
its disposition in September 1999.
REVENUE RECOGNITION
The Company's products are manufactured according to stringent customer
specifications and engineering design, and are available for immediate delivery
according to the schedule requested by the customer. Revenue is generally
recognized when product is shipped. However, the Company recognizes revenue for
its Tower Structures segment prior to the time a product is shipped if each of
the following conditions are met:
1) The risks of ownership have passed to the customer;
2) The customer has a fixed commitment to purchase the goods;
3) The customer, not the Company, has requested that the shipment of the
product be delayed and that the transaction be on a bill and hold basis;
4) There is a fixed schedule for delivery of the product;
5) The Company has not retained any specific performance obligations with
respect to the product such that the earnings process is not complete;
6) The ordered product has been segregated from the Company's inventory and is
not subject to being used to fill other orders; and
7) The product is complete and ready for shipment.
Many times, the Company's customers experience delays due to weather, zoning
approvals, and other similar circumstances, and request that the Company hold
their inventory. In these situations where the product is available for
shipment, and title has passed to the customer, the Company recognizes revenue
for its Tower Structures segment. Results of operations for the years ended
December 31, 1999 and 1998 include Tower Structures revenues of $2.4 million and
$4.2 million, respectively, related to product not yet shipped, but where the
previously-discussed earnings criteria had been met. No such revenues were
recorded in 1997, in accordance with generally accepted accounting principles,
as the revenue recognition criteria had not been met.
The Enclosures segment differs from Tower Structures in that enclosures are
generally ordered by the customer in multiple units on a project basis and are
not necessarily site specific. Therefore, the revenue recognition policy for
enclosures, in addition to the requirements of the Tower Structures segment,
also requires that actual payment be received. Results of operations for the
years ended December 31, 1999 and 1998 include Enclosures revenues of
$4.9 million and $6.5 million, respectively, related to product not yet shipped,
but where the earnings criteria had been met. No such revenues were
20
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
recorded in 1997, in accordance with generally accepted accounting principles,
as the revenue recognition criteria had not been met.
CASH EQUIVALENTS
The Company considers all highly liquid short-term investments purchased
with a maturity of three months or less and all treasury bills to be cash
equivalents. Cash equivalents are carried at cost which approximates market
value.
INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined
using the first-in, first-out (FIFO) method. Inventory costs include material,
labor and factory overhead. Obsolete or unsalable inventories are reflected at
their estimated net realizable values.
Total inventories in 1999 and 1998 included the following classifications
(in thousands):
1999 1998
-------- --------
Finished goods........................................... $11,632 $14,514
Work-in-progress......................................... 7,883 4,650
Raw materials............................................ 6,370 8,280
------- -------
Total Inventories........................................ $25,885 $27,444
======= =======
PLANT AND EQUIPMENT
Land, buildings and equipment are carried at cost. Expenditures for
maintenance and repairs are charged directly against income and major
renewals/betterments are capitalized. When properties are retired or otherwise
disposed of, the original cost and accumulated depreciation are removed from the
respective accounts and the profit or loss resulting from the disposal is
reflected in income.
The Company provides for depreciation of plant and equipment over the
estimated useful lives of the assets (buildings--20 to 40 years; machinery and
equipment--3 to 15 years). Depreciation is generally provided on the
straight-line method for financial reporting purposes and on accelerated methods
for tax purposes.
INCOME TAXES
Under Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes" (SFAS 109), the Company recognizes deferred tax liabilities and
assets for the expected future tax consequences of events that have been
recognized in the Company's financial statements or tax returns.
Total income tax expense for the years ended December 31, 1999, 1998, and
1997, was allocated as follows (in thousands):
1999 1998 1997
-------- -------- --------
Income from continuing operations................ $4,500 $8,900 $11,151
Stockholders' equity, for compensation expense
for tax purposes in excess of amounts
recognized for financial reporting purposes.... -- 71 (398)
------ ------ -------
$4,500 $8,971 $10,753
====== ====== =======
Income tax expense attributable to income from continuing operations
consists of current provisions of $4.8 million, $7.1 million, and $11.7 million
and deferred provisions of $(0.3) million, $1.8 million, and $(0.5) million for
the years ended December 31, 1999, 1998, and 1997, respectively.
21
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Income tax expense attributable to income from continuing operations was
$4.5 million, $8.9 million, and $11.2 million, for the years ended December 31,
1999, 1998, and 1997, respectively, and differed from the U.S. Federal statutory
income tax rate as follows (in thousands):
1999 1998 1997
---------------------- ---------------------- ----------------------
AMOUNT % AMOUNT % AMOUNT %
-------- -------- -------- -------- -------- --------
Computed statutory provision.............. $4,233 35 $8,200 35 $10,500 35
State taxes, net of federal effect........ 484 4 900 4 1,200 4
Other, net................................ (217) (2) (200) (1) (549) (2)
------ --- ------ --- ------- ---
Total provision........................... $4,500 37 $8,900 38 $11,151 37
====== === ====== === ======= ===
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at
December 31, 1999 and 1998 are as follows (in thousands):
1999 1998
-------- --------
Postretirement benefits other than pensions................ $1,080 $ 880
Depreciation............................................... (757) (836)
Accrued insurance reserves................................. 345 630
Other, net................................................. 2,232 1,926
------ ------
Net deferred tax assets.................................... $2,900 $2,600
====== ======
NET INCOME PER SHARE
Basic earnings per share were computed by dividing net income by the
weighted average number of shares outstanding during the year. Diluted earnings
per share were calculated by including the effect of all dilutive securities.
For the years ended December 31, 1999, 1998 and 1997, the effect of potentially
dilutive stock options was approximately 346,000, 5,000 and 83,000,
respectively. The Company had additional outstanding stock options of 745,000 as
of December 31, 1999, which were not included in the computation of diluted
earnings per share because the options' exercise price was greater than the
average market price of the common shares.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements as well as the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform with the
current year presentation.
NEW ACCOUNTING STANDARDS
In 1998, the Company adopted SFAS No. 130, "REPORTING COMPREHENSIVE INCOME,"
SFAS No. 131, "DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED
INFORMATION," and SFAS No. 132, "EMPLOYERS' DISCLOSURES ABOUT PENSIONS AND OTHER
POSTRETIREMENT BENEFITS." These statements expanded or modified disclosures and
had no material impact on the Company's results of operations, financial
condition or cash flows.
SFAS No. 130 established standards for reporting and display of
comprehensive income, its components and accumulated balances. Comprehensive
income is defined to include all changes in equity except those resulting from
investments by owners and distributions to owners. Among other disclosures, SFAS
No. 130 requires that all items that are required to be recognized under current
accounting standards as components of comprehensive income be reported in a
financial statement that is displayed in the same prominence as other financial
statements. The Company has no differences between reported net income and
comprehensive income.
22
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
SFAS No. 131 established standards for the way that public enterprises
report information about operating segments in annual financial statements and
require reporting of selected information about operating segments in interim
financial statements issued to the public. It also established standards for
disclosures regarding products and services, geographic areas, and major
customers. SFAS No. 131 defines operating segments as components of an
enterprise about which separate financial information is available that is
evaluated regularly by the chief operating decision maker in deciding how to
allocate resources and in assessing performance. The company maintains two
segments: Tower Structures and Enclosures.
SFAS No. 132 changed certain disclosure requirements for pensions and other
postretirement benefits.
In June 1998, SFAS No. 133, "ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND
HEDGING ACTIVITIES" was issued. This standard establishes accounting and
reporting standards for derivative instruments and hedging activities. It
requires that an entity recognize all derivatives as either assets or
liabilities in the balance sheet and measure those instruments at fair value.
Changes in the fair value of derivatives are recorded in earnings or other
comprehensive income, based on whether the instrument is designated as part of a
hedge transaction. The Company adopted SFAS No. 133 in 1999. The adoption of
this statement did not have a material effect on the Company's results of
operations or financial condition, as the Company historically does not enter
into these types of transactions in the normal course of business.
3. PREPAID EXPENSES
Prepaid expenses at December 31, 1999 and 1998 consist of the following (in
thousands):
1999 1998
-------- --------
Catalogues, trade shows and sales promotion................ $ -- $ 243
Insurance.................................................. 598 167
Tax deposits............................................... 448 294
Merger and share repurchase related........................ -- 1,017
Other...................................................... 225 73
------ ------
$1,271 $1,794
====== ======
4. FIXED ASSETS
Fixed assets at December 31, 1999 and 1998 consist of the following (in
thousands):
1999 1998
-------- --------
Land................................................... $ 1,255 $ 1,168
Buildings.............................................. 21,150 20,749
Machinery and equipment................................ 29,500 26,107
-------- --------
51,905 48,024
Less accumulated depreciation.......................... (24,815) (21,394)
-------- --------
$ 27,090 $ 26,630
======== ========
23
5. OTHER ASSETS
Other assets at December 31, 1999 and 1998 consist of the following (in
thousands):
1999 1998
-------- --------
Equity investment in Brazil................................ $ -- $3,129
Computer system conversion costs........................... 770 1,468
Funds held by trustee--Frankfort, IN Construction Fund..... 270 260
Note receivable............................................ 103 126
Other...................................................... 194 294
------ ------
$1,337 $5,277
====== ======
6. ACCRUED LIABILITIES AND OTHER
Accrued and other liabilities at December 31, 1999 and 1998 consist of the
following (in thousands):
1999 1998
-------- --------
Payroll related.......................................... $ 1,938 $ 3,250
Insurance related........................................ 1,240 2,183
Income taxes............................................. 9,008 6,782
Other.................................................... 3,277 2,631
------- -------
$15,463 $14,846
======= =======
7. PENSION, PROFIT SHARING AND POSTRETIREMENT BENEFITS
GENERAL
The Company has defined benefit and/or defined contribution retirement plans
covering substantially all of its employees. Included in these plans are certain
union sponsored plans to which the Company makes annual contributions equal to
the amounts accrued. The total pension expense for union sponsored plans for
1999, 1998, and 1997, was $785,000, $856,000, and $740,000, respectively. The
Company has one trustee-administered profit sharing plan covering all eligible
employees in its Enclosures segment, located in Bessemer, Alabama. Discretionary
contributions of $227,000, $165,000, and $240,000, were charged to expense in
1999, 1998, and 1997, respectively. Total pension expense for Company-sponsored
plans for 1999, 1998, and 1997 was $148,000, $20,000, and $300,000,
respectively.
PENSION PLAN
The Company's non-union employees of its Tower Structures segment in Peoria,
Illinois and Frankfort, Indiana, are covered by a noncontributory defined
benefit pension plan. Plan benefits are generally based on years of service and
employee compensation during the last years of employment. Benefits are paid
from funds previously provided to trustees for those plans. Actuarial
assumptions and provisions are reviewed regularly by the Company and its
independent actuary to ensure that plan assets will be adequate to provide
pension benefits. Plan assets consist primarily of investments in equities,
fixed income securities and money market funds.
Pension expense includes the following components (in thousands):
1999 1998 1997
-------- -------- --------
Service cost--benefits earned during the period........ $320 $228 $322
Interest on projected benefit obligations.............. 650 457 522
Expected return on plan assets......................... (835) (678) (560)
Net amortization and deferral.......................... 13 13 16
---- ---- ----
Net pension expense.................................... $148 $ 20 $300
==== ==== ====
24
7. PENSION, PROFIT SHARING AND POSTRETIREMENT BENEFITS (CONTINUED)
The status of the plans at the respective year-ends was as follows (in
thousands):
1999 1998 1997
-------- -------- --------
Fair market value of plan assets............................ $ 9,818 $ 9,114 $ 8,473
======= ======= =======
The funded status of the plan was as follows:
Accumulated benefit obligation.............................. 7,754 8,086 6,899
Effect of projected future salary increases................. 737 1,200 1,079
------- ------- -------
Projected benefit obligation................................ $ 8,491 $ 9,286 $ 7,978
======= ======= =======
Excess (Deficit) of plan assets over projected
benefit obligations......................................... $ 1,327 $ (172) $ 495
Unrecognized net transitional asset......................... 19 25 31
Unrecognized market (gain) loss............................. (1,364) 295 (323)
Unrecognized prior service costs............................ 43 50 57
------- ------- -------
Prepaid pension asset....................................... $ 25 $ 198 $ 260
======= ======= =======
The expected long-term rate of return on plan assets was 9.0% for 1999 and
1998 and 8.0% for 1997. The weighted average discount rate and rate of increase
in future compensation levels used in determining the actuarial present value of
accumulated benefit obligations were 7.75% and 3%, respectively, in 1999, 7% and
3%, respectively, in 1998 and 8% and 4%, respectively in 1997.
RETIREMENT PLAN
The Company has a 401(k) Tax Deferred Savings Plan for the benefit of
non-union employees. After one year of continuous service, the Company matches
25% of employee contributions up to 12% of an employee's compensation and
subject to the limits allowed by the Internal Revenue Service. The matching
contribution made by the Company was $188,000 in 1999, $176,000 in 1998 and
$173,000 in 1997.
RETIREE BENEFITS
The Company provides certain postretirement healthcare benefits to both the
union and non-union employees located in Peoria, Illinois. Employees who retire
from the Company after reaching the age of 65 are eligible to participate in the
postretirement healthcare plan.
Postretirement benefit expense includes the following (in thousands):
1999 1998
-------- --------
Benefits earned during the year.......................... $ 179 $ 149
Interest cost............................................ 306 244
Amortization of gains and losses......................... 11 --
Amortization of transition obligation.................... 121 121
------- -------
Postretirement benefit expense........................... $ 617 $ 514
======= =======
1999 1998
-------- --------
Actuarial present value of benefit obligation:
Retirees................................................. $ 1,903 $ 1,604
Fully eligible active plan participants.................. 86 67
Other active plan participants........................... 2,463 2,142
------- -------
Accumulated benefit obligation........................... $ 4,452 $ 3,813
Unamortized net transition obligation.................... (1,575) (1,697)
Unrecognized net gain.................................... (386) --
------- -------
Accrued postretirement benefit liability................. $ 2,491 $ 2,116
======= =======
25
7. PENSION, PROFIT SHARING AND POSTRETIREMENT BENEFITS (CONTINUED)
The discount rate used to determine the accumulated postretirement
healthcare benefit obligation was 7.5% and 7.0% in 1999 and 1998, respectively.
The assumed healthcare cost trend rate used to measure the accumulated
postretirement benefit obligation was 9.0% in 1999, declining to 5.5% over a
period of 8 years and continuing at 5.5% thereafter. A one percentage point
increase in the assumed healthcare cost trend would have increased the
accumulated postretirement benefit obligation by $525,390 and $590,000 for 1999
and 1998, respectively, and the postretirement benefit expense by $63,170 and
$68,000 for 1999 and 1998, respectively. A one percentage point decrease in the
assumed healthcare cost trend would have reduced the accumulated postretirement
benefit obligation by $506,770 and $527,000 for 1999 and 1998, respectively, and
the postretirement benefit expense by $61,295 and $62,000 for 1999 and 1998,
respectively.
The current portion of non-pension post retirement healthcare benefits
included in accrued liabilities was approximately $200,000 and $126,000 at
December 31, 1999 and 1998, respectively.
The Company has reduced in size due to the sale of Leavitt Tube, Unarco
Commercial Products, UNR Home Products and Real Time Solutions, Inc. in 1996,
and the closing in 1997 of the Company's former corporate office located in
Chicago, Illinois. In 1998, the Company implemented a thorough review of its
recorded reserves and discovered that reserves for postretirement benefits other
than pensions had not been properly provided for in accordance with Statement of
Financial Accounting Standards No. 106, "EMPLOYERS' ACCOUNTING FOR
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS." As of January 1, 1998, the Company
had an unfunded accumulated postretirement benefit obligation of $3.5 million
and an unamortized net transition obligation of $1.8 million, resulting in an
accrual requirement of $1.7 million at the beginning of the year. The Company
recorded a charge in 1998 to establish a postretirement benefit liability of
approximately $2.2 million as of December 31, 1998. Also, in connection with the
Company's thorough review of its recorded reserves, it was determined that there
were excess reserves of approximately $2.4 million related to insurance,
accounts receivable and other miscellaneous reserves that were not material to
the prior year consolidated financial statements. These excess reserves were
reversed in 1998. Due to the immateriality of the postretirement benefit charges
to the consolidated financial statements of the Company from 1993 through 1997,
no restatement was made.
8. LITIGATION
The Company is involved in various pending legal proceedings and claims
arising in the normal course of its business. Although the outcome of such
proceedings and claims cannot be determined with certainty, the Company
believes, after consultation with counsel, that such proceedings and claims,
individually or in the aggregate, are not material to either its business,
financial condition, or results of operations.
9. LEASES
The Company leases certain of its facilities and equipment under operating
leases or capital leases, as defined by SFAS No. 13. The Company's property
under capital leases, which is included in plant and equipment, consists of
$2.4 million at December 31, 1999 and $2.7 million at December 31, 1998.
Future minimum payments for operating leases at December 31, 1999 are
$339,000 in 2000, $312,000 in 2001, $240,000 in 2002, $119,000 in 2003, $82,000
in 2004 and $71,000 thereafter. Rental expense under operating leases was
approximately $476,000 in 1999, $493,000 in 1998, and $469,000 in 1997.
26
10. LONG-TERM BORROWINGS
Total borrowings of the Company at December 31, 1999 and 1998, consisted of
the following (in thousands):
1999 1998
-------- --------
Mortgage notes payable at 7.5% to 9.5%................... $ 7,323 $ 7,651
Capital leases........................................... 2,907 3,619
------- -------
Total.............................................. $10,230 $11,270
======= =======
Classified in the balance sheet as follows:
Current portion of long-term liabilities................. $ 1,066 $ 1,017
Notes and capital leases................................. 9,164 10,253
------- -------
Total.............................................. $10,230 $11,270
======= =======
Aggregate annual payments required on secured debt, including capitalized
leases, are $1,067,000 in 2000, $797,000 in 2001, $537,000 in 2002, $635,000 in
2003 and $7,195,000 thereafter.
11. STOCK OPTION PLANS
The Company had three stock option plans at December 31, 1999, the Key
Executives' Stock Option Plan ("Executive Plan"), the 1994 Stock Option Plan
("1994 Plan") and the 1999 Stock Option Plan ("1999 Plan").
The Executive Plan was approved by the shareholders of the Company on
July 12, 1990. This plan provides for granting of non-qualified and incentive
stock options, and reserves for the issuance of up to 2,500,000 authorized but
unissued shares of common stock. Options granted under this plan are exercisable
at a price equal to the fair market value at the date of grant and expire in ten
years from the date of grant. At December 31, 1999, 27,000 common shares were
available for grant under this plan. At December 31, 1999, 1,126,000 options
were outstanding under this plan.
The 1994 Plan was approved by the shareholders of the Company on
November 1, 1994. This plan provides for granting of non-qualified options and
reserves for the issuance of up to 500,000 shares. Outstanding options granted
under this plan are exercisable at a price equal to the fair market value at the
date of grant, reduced by the amount of any "Extraordinary Dividend" made after
the date of grant, and expire in five years from the date of grant. Each option
is exercisable upon the attainment of certain stock price thresholds, adjusted
for extraordinary dividends, or 54 months, whichever comes earlier. At
December 31, 1999, 55,000 common shares were available for grant under this
plan. At December 31, 1999, no options were outstanding under this plan.
The 1999 Plan was approved by shareholders of the Company on May 18, 1999.
This plan provides for the granting of non-qualified and incentive stock
options, and reserves for the issuance of 2,500,000 authorized but unissued
shares of common stock. Options granted under this plan are exercisable at a
price established by the Compensation Committee of the Board of Directors and
expire ten years from the date of grant. At December 31, 1999, 1,400,000 common
shares were available for granting under this plan. At December 31, 1999,
1,100,000 options were outstanding under this plan.
27
Information relating to these plans is summarized below (in thousands except
for per share data):
AVERAGE
SHARES OPTION
SUBJECT TO PRICE PER
OPTIONS SHARE
---------- ---------
Outstanding December 31, 1996, adjusted for extraordinary
dividends.............................................. 200 $0.838
Granted................................................ 210 6.199
Exercised.............................................. (200) 0.838
----- ------
Outstanding December 31, 1997, adjusted for extraordinary
dividends.............................................. 210 $6.199
Granted................................................ 950 5.872
Canceled............................................... (140) 5.609
----- ------
Outstanding December 31, 1998, adjusted for extraordinary
dividends.............................................. 1,020 $5.976
Granted................................................ 1,481 1.674
Canceled............................................... (275) 5.567
----- ------
Outstanding December 31, 1999, adjusted for extraordinary
dividends.............................................. 2,226 $3.164
===== ======
12. STOCK-BASED COMPENSATION PLANS
The Company has three stock option plans, the Executive Plan, the 1994 Plan,
and the 1999 Plan. The Company accounts for all stock option plans under APB
Opinion No. 25, under which no compensation cost has been recognized. Had
compensation cost for stock options awarded under the plans been determined
consistent with SFAS No. 123, the Company's net income and earnings per share
would have been reduced to the following pro forma amounts:
TWELVE MONTHS ENDED
(IN THOUSANDS, EXCEPT PER SHARE DATA) DECEMBER 31, 1999
- ------------------------------------- -------------------
Net income:
As reported............................................. $ 7,240
Pro forma............................................... 6,589
Basic EPS:
As reported............................................. $ 0.14
Pro forma............................................... $ 0.13
Diluted EPS:
As reported............................................. $ 0.14
Pro forma............................................... $ 0.12
TWELVE MONTHS ENDED
(IN THOUSANDS, EXCEPT PER SHARE DATA) DECEMBER 31, 1998
- ------------------------------------- -------------------
Net income:
As reported............................................. $14,043
Pro forma............................................... 13,576
Basic EPS:
As reported............................................. $ 0.27
Pro forma............................................... $ 0.26
Diluted EPS:
As reported............................................. $ 0.27
Pro forma............................................... $ 0.26
28
TWELVE MONTHS ENDED
(IN THOUSANDS, EXCEPT PER SHARE DATA) DECEMBER 31, 1997
- ------------------------------------- -------------------
Net income:
As reported............................................. $18,919
Pro forma............................................... 18,854
Basic EPS:
As reported............................................. $ 0.36
Pro forma............................................... $ 0.36
Diluted EPS:
As reported............................................. $ 0.36
Pro forma............................................... $ 0.36
As of December 31, 1999, the Company has 1,482,000 shares available for
grant under the Plans. At December 31, 1999, the Company has options outstanding
and not yet exercised of 2,226,000 shares under the Executive Plan, the 1994
Plan, and the 1999 Plan. Under the option plans, the options vest 33.33% per
year beginning with the first year and expire in either five or ten years.
A summary of the status of the Company's option plans for the years
December 31, 1997 through December 31, 1999 and changes during the years then
ended is presented in the table and narrative below:
TWELVE MONTHS ENDED
DECEMBER 31, 1999
---------------------------
WEIGHTED AVERAGE SHARES
EXERCISE PRICE (000)
---------------- --------
Outstanding at beginning of period................... $5.976 1,020
Granted.............................................. 1.674 1,481
Exercised............................................ -- --
Forfeited............................................ -- --
Expired.............................................. -- --
Canceled............................................. 5.567 (275)
------ -----
Outstanding at end of period......................... $3.164 2,226
Exercisable at end of year........................... $6.199 281
Weighted average fair value of options granted....... $ 1.10
TWELVE MONTHS ENDED
DECEMBER 31, 1998
---------------------------
WEIGHTED AVERAGE SHARES
EXERCISE PRICE (000)
---------------- --------
Outstanding at beginning of period................... $6.199 210
Granted.............................................. 5.872 950
Exercised............................................ -- --
Forfeited............................................ -- --
Expired.............................................. -- --
Canceled............................................. 5.609 (140)
------ -----
Outstanding at end of period......................... $5.976 1,020
Exercisable at end of year........................... $5.525 70
Weighted average fair value of options granted....... $2.664
29
TWELVE MONTHS ENDED
DECEMBER 31, 1997
---------------------------
WEIGHTED AVERAGE SHARES
EXERCISE PRICE (000)
---------------- --------
Outstanding at beginning of period................... $ .838 200
Granted.............................................. 6.199 210
Exercised............................................ .838 (200)
Forfeited............................................ -- --
Expired.............................................. -- --
Canceled............................................. -- --
------ -----
Outstanding at end of period......................... $6.199 210
Exercisable at end of year........................... -- --
Weighted average fair value of options granted....... $2.322
The 2,226,000 options outstanding at December 31, 1999 had an exercise price
between $1.281 and $7.75 with a weighted-average exercise price of $3.164 and a
weighted average remaining contractual life of 7.93 years. The fair value of
each option grant is estimated on the date of grant using the Black-Scholes
option pricing model with the following weighted-average assumptions used for
the option grants in 1999: risk-free interest rate of 6.01 percent, expected
dividend yield of 0.00 percent, expected life of 10.0 years, and expected
volatility of 44.81 percent. The following weighted-average assumptions were
used for the options granted in 1998: risk-free interest rate of 5.63 percent,
expected dividend yield of 1.79 percent, expected life of 10.0 years, and
expected volatility of 36.81 percent. The following weighted-average assumptions
were used for the options granted in 1997: risk-free interest rate of
6.45 percent, expected dividend yield of 1.72 percent, expected life of
5.0 years, and expected volatility of 37.18 percent.
13. RESTRICTED STOCK PLAN
The Restricted Stock Plan was approved by the shareholders of the Company on
July 30, 1992. The Plan provides for the granting of restricted stock to certain
key employees and reserves for issuance of 1,000,000 shares of common stock.
The Company had 220,840, 388,990 and 242,048 shares of restricted stock
outstanding at December 31, 1999, 1998 and 1997, respectively. Of the current
shares outstanding, 50,000 were awarded to Brian B. Pemberton in connection with
his employment agreement and 170,840 shares were issued to Brian B. Pemberton
and other key employees of the Company. These shares have the same dividend and
voting rights as other common stock. Restricted stock is considered to be
currently issued and outstanding. The cost of the restricted stock, determined
as the fair market value of the shares at the date of grant, is expensed ratably
over a three to five-year vesting period. Such expense amounted to $487,000 in
1999; $526,000 in 1998, and $1,153,000 in 1997.
14. DIRECTOR'S STOCK OWNERSHIP PLAN
The Company has a stock ownership plan for non-employee directors, the
Amended and Restated ROHN Industries, Inc., 1994 Nonemployee Director Stock
Ownership Plan (the "Director Plan"), which was approved by the stockholders of
the Company in 1994. A total of 200,000 shares of the Company's common stock was
initially reserved for issuance under the Director Plan. The Director Plan
initially allowed each non-employee director to elect to receive all or a part
of such director's annual retainer fee, which would otherwise be paid in cash,
in shares of restricted stock held in custody by the Company. The Director Plan
was amended by the Board of Directors on May 18, 1999, to require that directors
receive their entire annual retainer fee in the form of "Stock Units", which
represent the right to receive shares of common stock upon the earliest of the
fifth anniversary of the date on which the Stock Units are granted, the
termination of the participant's service as a director, or a change of control.
15. STOCKHOLDERS' EQUITY
On September 24, 1990, the Company announced that its Board of Directors had
authorized the acquisition, through both negotiated transactions involving large
blocks and open-market purchases, of up to 1.5 million shares of its common
stock to be held as treasury shares and be available to meet
30
requirements of its Key Executives' Stock Option Plan. As of December 31, 1999
and 1998, 1,133,565 shares have been purchased, respectively.
On December 29, 1997, the Company paid a dividend of $0.10 per share to
stockholders of record as of the close of business on December 15, 1997.
16. RESTRUCTURING
During the third quarter of 1997, the Company recorded a restructuring
charge of $3.4 million related to cost-cutting measures including early
retirement costs, work force reductions, and expenses associated with the
development and implementation of this program. The provision for the reduction
in workforce included severance and other benefits for approximately 25
employees, the majority of whom were based in Peoria, Illinois and Frankfort,
Indiana.
During 1997, cash expenditures of $1.9 million were charged against the
reserve. Approximately $1.1 million of expenses were charged against the reserve
in 1998. The Company spent the remaining $0.4 million of the restructuring
reserve in 1999.
17. RELATED PARTY TRANSACTIONS
The Company held three notes receivable for a total of $2,300,000 from
executive officers of the Company which were paid in full by the executive
officers during 1997 by transferring 309,000 shares of common stock to the
Company. These notes were related to the 1994 Executive Stock Purchase Plan
approved by shareholders of the Company on November 1, 1994. Under the Plan,
executive officers purchased 1,650,000 shares of common stock from the Company,
at the then fair market value. Shares were paid for in cash in the amount of the
par value of the stock and the balance in promissory notes due in three years.
The notes were interest free (although interest was imputed for tax purposes),
except in the event a participant resigned from the Company, was terminated for
cause or, if the stock was sold within three years, the notes would become due
and interest at the applicable federal rate was applied retroactively from the
date of the notes.
18. INVESTMENT IN CORPORATE JOINT VENTURE
In December 1997, the Company formed a corporate joint venture with
BrasilSat Harald, S.A., Brazil's largest tower manufacturer and installer, to
serve the growing telecommunications infrastructure industry in Brazil and the
rest of South America. In September 1999, after re-evaluating its investment,
the Company sold its 49% in ROHN BrasilSat to its joint venture partner,
BrasilSat Harald, S.A.
ROHN accounted for the corporate joint venture under the equity method until
its disposition in September 1999. The Company recorded a loss of approximately
$355,000 in 1999 arising out of the corporate joint venture, of which $120,000
represented the Company's share of the operating losses of the joint venture and
$235,000 of the loss was related to the sale of the Company's interest in the
joint venture. The Company's investment in ROHN BrasilSat amounted to $0 and
$3,129,000 at December 31, 1999, and 1998, respectively. There was no investment
in ROHN BrasilSat in 1997. The Company recorded a loss of $540,000 for the year
ended December 31, 1998, which represented the Company's share of the start-up
losses.
19. BUSINESS SEGMENT INFORMATION
The Company operates in two business segments: Tower Structures and
Enclosures. The segments are managed as strategic business units due to their
distinct manufacturing processes and potential end-user application. The Tower
Structures segment includes manufacturing plants in Peoria, Illinois and
Frankfort, Indiana, as well as a world-wide sales, marketing and distribution
effort. The Enclosures segment includes a manufacturing plant in Bessemer,
Alabama and has a sales, marketing and distribution effort separate from the
Tower Structures segment's sales and marketing resources.
Accounting policies for measuring segment assets and earnings before
interest and taxes are substantially consistent with those described in Note 2.
The Company evaluates segment performance
31
based on earnings before interest and taxes. Transfers between segments, which
are not material in nature, are recorded at cost.
TOWER
STRUCTURES ENCLOSURES
1999 (IN THOUSANDS) SEGMENT SEGMENT ELIMINATION TOTAL
- ------------------- ---------- ---------- ----------- ---------
Net sales......................................... $101,797 $41,680 $(1,581) $141,896
Earnings before interest and taxes................ 5,110 6,868 -- 11,978
Depreciation...................................... 2,765 656 -- 3,421
Capital expenditures(1)........................... 3,180 701 -- 3,881
Segment assets.................................... $ 92,529 $29,319 -- $121,848
TOWER
STRUCTURES ENCLOSURES
1998 (IN THOUSANDS) SEGMENT SEGMENT ELIMINATION TOTAL
- ------------------- ---------- ---------- ----------- ---------
Net sales......................................... $111,545 $64,143 $(1,535) $174,153
Earnings before interest and taxes................ 9,201 15,035 -- 24,236
Depreciation...................................... 2,508 640 -- 3,148
Capital expenditures(1)........................... 1,964 319 -- 2,283
Segment assets.................................... 84,873(2) $29,319 -- $114,192
TOWER
STRUCTURES ENCLOSURES
1997 (IN THOUSANDS) SEGMENT SEGMENT ELIMINATION TOTAL
- ------------------- ---------- ---------- ----------- ---------
Net sales......................................... $110,136 $51,025 $(3,029) $158,132
Earnings before interest and taxes................ 16,790 9,669 -- 26,459
Depreciation...................................... 2,062 572 -- 2,634
Capital expenditures(1)........................... 7,627 680 -- 8,307
Segment assets.................................... $ 70,158 $40,914 $-- $111,072
- ------------------------
(1) Net of asset dispositions and retirements.
(2) Includes equity investment in Brazil of $3,129.
In 1999, the Tower Structures segment had one customer that accounted for
approximately 16% of total segment revenues and 11% of consolidated net sales.
The Enclosures segment had two customers that accounted for 24% of total segment
revenue, or 7% of consolidated net sales. In 1998, the Tower Structures segment
had one customer that accounted for approximately 13% of total segment revenues.
The Enclosures segment had four customers that accounted for 65% of total
segment revenue with one customer at 35% of total segment revenues, or 13% of
consolidated net sales. In 1997, no one customer accounted for more than 10% of
the Company's sales.
Revenues and long-lived assets are related to U.S. operations, except for
Mexico, which had revenues of approximately $3.9 million, $0.9 million and
$0.5 million for the years ended December 31, 1999, 1998 and 1997, respectively,
and long-lived assets of $60,000, $50,000 and $10,000 as of December 31, 1999,
1998 and 1997, respectively.
20. EXPORT SALES
Export sales for the years ended December 31, 1999, 1998, and 1997 were
$22.1 million, $12.1 million, and $10.2 million, respectively.
21. COMMITMENTS AND CONTINGENCIES
From time to time, the Company becomes party to various claims and legal
actions arising during the ordinary course of business. Management believes that
the Company's cost and any potential judgments resulting from such claims and
actions would be covered by the Company's product liability insurance, except
for deductible limits and self-insured retention. The Company intends to defend
such claims and actions in cooperation with its insurers. It is management's
opinion that, in any event, their outcome would not have a material adverse
effect on the Company's financial position or results of operations.
32
The Company employs some materials in its manufacturing processes, including
oils and solvents that are regulated by environmental laws. The Company has made
expenditures to comply with environmental laws and regulations, including
investigation and remediation of ground and water contamination, and expects to
continue to make such expenditures to comply with existing and future
requirements. While such expenditures have not had, and are not expected to
have, a material adverse effect on the Company's financial condition or results
of operations, there can be no assurance that more stringent regulations or
enforcement in the future will not have such effects.
In some cases, the Company has notified state or federal authorities of a
possible need to remedy sites it previously operated. The Company has also been
notified by various state and federal governmental authorities that they believe
it may be a "potentially responsible party" or otherwise have responsibility
with respect to clean-up obligations at certain hazardous and other waste
disposal sites which were not owned or operated by the Company. In several such
cases, the Company has entered into settlements with the relevant authorities or
other parties for immaterial amounts. In other cases, the Company is
participating in negotiations for settlement with the relevant authorities or
other parties or has notified the authorities that it denies liability for
clean-up obligations. The costs or liabilities the Company may incur with
respect to these sites are difficult to predict until the level of contamination
is determined. The Company, after consultation with legal counsel and
environmental experts, believes that the ultimate outcome with respect to all of
these sites will not have a material adverse effect on the Company's financial
condition or on its results of operations.
22. QUARTERLY RESULTS OF OPERATIONS
UNAUDITED (IN THOUSANDS, EXCEPT PER SHARE DATA) FIRST SECOND THIRD FOURTH YEAR
- ----------------------------------------------- -------- -------- -------- -------- ---------
1999
Net Sales.................................... $30,162 $29,068 $36,855 $45,811 $141,896
Gross profit................................. 6,717 5,362 9,641 11,121 32,841
Operating income............................. 3,773 207 5,318 4,280 13,578
Income before income taxes................... 714 83 5,330 5,968 12,095
Net income................................... $ 489 $ 1 $ 3,032 $ 3,718 $ 7,240
Net income per share--basic.................. $ 0.01 $ 0.00 $ 0.06 $ 0.07 $ 0.14
Net income per share--diluted................ $ 0.01 $ 0.00 $ 0.06 $ 0.07 $ 0.14
Market price of common stock:
High....................................... $ 3.625 $ 2.219 $ 2.250 $ 4.313
Low........................................ $ 1.875 $ 1.063 $ 1.219 $ 1.906
UNAUDITED (IN THOUSANDS, EXCEPT PER SHARE DATA) FIRST SECOND THIRD FOURTH YEAR
- ----------------------------------------------- -------- -------- -------- -------- ---------
1998
Net Sales.................................... $41,065 $39,931 $47,541 $45,616 $174,153
Gross profit................................. 11,329 11,489 10,068 10,146 43,032
Operating income............................. 6,470 6,466 6,106 5,194 24,236
Income before income taxes................... 6,334 6,306 6,019 4,824 23,483
Net income................................... $ 3,959 $ 3,831 $ 3,561 $ 2,692 $ 14,043
Net income per share--basic.................. $ 0.08 $ 0.07 $ 0.07 $ 0.05 $ 0.27
Net income per share--diluted................ $ 0.08 $ 0.07 $ 0.07 $ 0.05 $ 0.27
Market price of common stock:
High....................................... $ 6.250 $ 6.250 $ 4.750 $ 3.500
Low........................................ $ 4.688 $ 3.750 $ 1.750 $ 1.813
33
23. SUBSEQUENT EVENTS
On January 7, 2000, the Company announced the resignation of Maureen B.
Bellantoni as Executive Vice President and Chief Financial Officer of the
Company, effective February 4, 2000. Ms. Bellantoni assumed the position of
Chief Financial Officer at Burger King North America. Daniel J. Pallat has been
hired as interim CFO of ROHN until a permanent replacement for Maureen
Bellantoni is employed. Mr. Pallat is a partner with Tatum CFO Partners, LLP, a
national organization of senior financial executives that provides CFO services
to businesses on a permanent or transitional basis. Prior to joining Tatum, he
served in financial and operating management positions from CFO to Group Vice
President with several public companies.
On January 19, 2000, the Company announced the retirement of Richard L. Rohn
as Vice President--Equipment Enclosures, effective March 6, 2000. The Company
will record a charge in 2000 related to Mr. Rohn's retirement, the amount of
which has not yet been determined.
34
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO THE STOCKHOLDERS AND BOARD OF DIRECTORS OF
ROHN INDUSTRIES, INC.:
We have audited the accompanying consolidated balance sheets of ROHN
Industries, Inc. (a Delaware corporation) and Subsidiaries as of December 31,
1999 and 1998, and the related consolidated statements of income, stockholders'
equity and cash flows for each of the three years in the period ended
December 31, 1999. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of ROHN
Industries, Inc. and Subsidiaries as of December 31, 1999 and 1998, and the
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1999 in conformity with generally accepted accounting
principles.
Arthur Andersen LLP
Chicago, Illinois
February 16, 2000
35
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
ITEM 10. DIRECTOR AND EXECUTIVE OFFICERS OF THE REGISTRANT.
See Part I, page 7 for Item 10 information regarding Executive Officers of
the Registrant. The information with respect to the remaining portion of Item 10
is set forth in the Company's definitive proxy statement for its annual meeting
of shareholders to be held on May 11, 2000 (the "Proxy Statement"), under the
captions "Section 16(a) Beneficial Ownership Reporting Compliance" and "Election
of Directors", and such information is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION.
The information with respect to Item 11 is set forth in the Company's Proxy
Statement, under the caption "Executive Compensation" (other than that set forth
under the sub-captions "Stock Performance Graph" and "Compensation Committee
Report on Executive Compensation"), and such information is incorporated herein
by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information with respect to Item 12 is set forth in the Company's Proxy
Statement, under the caption "Stock Ownership", and such information is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information with respect to Item 13 is set forth in the Company's Proxy
Statement, under the caption "Employment Contracts and Other Agreements", and
such information is incorporated herein by reference. See also, Note 17 to the
consolidated financial statements.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K.
(a) 1. Financial Statements:
The information required by this item is included in Item 8 of this report.
2. The following financial schedule for the years 1999, 1998 and 1997 is
submitted herewith:
Schedule II--Allowance for Doubtful Accounts.
3. Exhibits:
The following list sets forth the exhibits to this Form 10-K as required by
Item 601 of Regulation S-K. Certain exhibits are filed herewith, while the
balance are incorporated by this reference to documents previously filed
with the Securities and Exchange Commission.
NUMBER DESCRIPTION
- ------ -----------
2.1 Plan of Reorganization (incorporated herein by reference to
Exhibit A to ROHN's Form 10-Q for the quarter ended March
31, 1989).
3.1 Amended and restated Certificate of Incorporation of ROHN
dated December 31, 1997 (incorporated herein by reference to
Exhibit A to ROHN's Current Report on Form 8-K filed on
December 19, 1997).
3.2 Amended and Restated By-laws of ROHN (adopted March 10,
2000).
4.1 Loan Agreement dated March 9, 1998 by and among LaSalle
National Bank and ROHN (incorporated herein by reference to
Exhibit 4 to ROHN's Annual Report on Form 10-K for the
fiscal year ended December 31, 1997).
10.1* UNR Industries, Inc. 1992 Restricted Stock Plan
(incorporated herein by reference to Exhibit 10 to ROHN's
Form 10-K for the fiscal year ended December 31, 1992).
10.2* UNR Industries, Inc. 1994 Stock Option Plan (incorporated
herein by reference to Exhibit A to ROHN's Proxy Statement,
dated October 11, 1994).
36
NUMBER DESCRIPTION
- ------ -----------
10.3* UNR Industries, Inc. 1994 Executive Stock Purchase Plan
(incorporated herein by reference to Exhibit B to ROHN's
Proxy Statement, dated October 11, 1994).
10.4* Change of Control Agreement between the Company and James R.
Cote, dated November 30, 1996 (incorporated herein by
reference to Exhibit 10.1(a) to ROHN's Form 10-K for the
fiscal year ended December 31, 1998).
10.5* Letter Agreement, dated July 24, 1998 between ROHN
Industries, Inc. and Richard L. Rohn (incorporated by
reference to Exhibit 10.3(b) to ROHN's Form 10-K for the
fiscal year ended December 31, 1998).
10.6 Termination Agreement dated March 30, 1999 between ROHN
Industries, Inc. and PiRod Holdings, Inc. (incorporated
herein by reference to Exhibit 10.5 to ROHN's Form 10-K for
the fiscal year ended December 31, 1998).
10.7* Employment Agreement between the Company and Brian B.
Pemberton, effective November 11, 1999.
10.8* Amended and Restated ROHN Industries, Inc. 1994 Non-employee
Director Stock Ownership Plan, as amended March 27, 2000.
10.9* ROHN Industries, Inc. 1999 Stock Option Plan, as amended
November 11, 1999.
10.10* UNR Industries, Inc. Supplemental Executive Retirement Plan
effective as of January 1, 1993 (incorporated herein by
reference to Exhibit 10 to ROHN's Form 10-K for the fiscal
year ended December 31, 1993).
10.11* Form of Indemnification Agreement, between ROHN Industries,
Inc. and each of its directors and officers.
10.12* UNR Industries, Inc. Key Executives' Stock Option Plan, as
amended May 6, 1993.
10.13 Statewide Radio System Site Development between The
Governor's Office of Administration, Commonwealth of
Pennsylvania and the Company, dated November 23, 1999.
11.1 Computation can be determined from this report.
21.1 List of Subsidiaries.
23.1 Consent of Arthur Andersen LLP.
27.1 Financial Data Schedule.
99.1 Cautionary Statement for purposes of the "Safe Harbor"
Provisions of the Private Litigation Reform Act of 1995.
Exhibits marked with an "*" indicate the exhibit is a management contract or
compensatory plan or arrangement.
(b) A Form 8-K was filed on November 3, 1999 reporting that the Company had
hired Maureen B. Bellantoni to serve as Executive Vice President and
Chief Financial Officer.
(c) Exhibits--See section (a) above.
(d) None.
37
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SUPPLEMENTAL SCHEDULE
To the Stockholders and Board of Directors of ROHN Industries, Inc.:
We have audited in accordance with generally accepted auditing standards,
the consolidated financial statements of ROHN Industries, Inc. and subsidiaries
included in this Form 10-K, and have issued our report thereon dated
February 16, 2000. Our audit was made for the purpose of forming an opinion on
the basic consolidated financial statements taken as a whole. The supplemental
Allowance for Doubtful Accounts Schedule Included in Part IV, Item 14(d) is the
responsibility of the Company's management and is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not part of
the basic consolidated financial statements. This schedule has been subjected to
the auditing procedures applied in the audit of the basic consolidated financial
statements and, in our opinion, fairly states in all material respects the
financial data required to be set forth therein in relation to the basic
consolidated financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Chicago, Illinois
February 16, 2000
38
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
ROHN INDUSTRIES, INC.
/s/ BRIAN B. PEMBERTON
---------------------------------------------
Brian B. Pemberton
CHIEF EXECUTIVE OFFICER, PRESIDENT, SECRETARY
& DIRECTOR
March 30, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
/s/ BRIAN B. PEMBERTON
------------------------------------------------------- March 30, 2000
Brian B. Pemberton
CHIEF EXECUTIVE OFFICER, PRESIDENT, SECRETARY & DIRECTOR
/s/ DANIEL J. PALLAT
------------------------------------------------------- March 30, 2000
Daniel J. Pallat
CHIEF FINANCIAL OFFICER
/s/ LESTER H. NELSON, III
------------------------------------------------------- March 30, 2000
Lester H. Nelson, III
CORPORATE CONTROLLER AND PRINCIPAL ACCOUNTING OFFICER
/s/ MICHAEL E. LEVINE
------------------------------------------------------- March 30, 2000
Michael E. Levine
DIRECTOR, CHAIRMAN OF THE BOARD
/s/ STEPHEN E. GORMAN
------------------------------------------------------- March 30, 2000
Stephen E. Gorman
DIRECTOR
/s/ JOHN H. LAERI, JR.
------------------------------------------------------- March 30, 2000
John H. Laeri, Jr.
DIRECTOR
/s/ GENE LOCKS
------------------------------------------------------- March 30, 2000
Gene Locks
DIRECTOR
39
/s/ JORDAN RODERICK
------------------------------------------------------- March 30, 2000
Jordan Roderick
DIRECTOR
/s/ ALAN SCHWARTZ
------------------------------------------------------- March 30, 2000
Alan Schwartz
DIRECTOR
40
SCHEDULE II
ALLOWANCE FOR DOUBTFUL ACCOUNTS (IN THOUSANDS)
Changes in the allowance for doubtful accounts for the three years ended
December 31 are as follows:
1997 1998 1999
-------- -------- --------
Balance--beginning of year.................................. $1,136 $1,451 $1,200
Add (deduct)
- --Provision charged to income............................... 1,233 30 245
- --Bad debts written-off..................................... (918) (169) (543)
- --Reserve reversal and other................................ -- (112) 344
------ ------ ------
Balance--end of year........................................ $1,451 $1,200 $1,246
====== ====== ======
41