TABLE OF CONTENTS




|                                                                                                                  |  |  |  |  |  |  |  | 
|----------------------------------------------------------------------------------------------------------------- |  |  |  |  |  |  |  | 
|FORM 10-Q                                                                                                        
|TABLE OF CONTENTS                                                                                                
|PART I  FINANCIAL INFORMATION                                                                                   
|ALLEN TELECOM INC.
ITEM 2  MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
|ITEM 3  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS.                                            
|SIGNATURES                                                                                                       
|EXHIBIT INDEX
ALLEN TELECOM INC.                                                                                 



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##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549



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FORM 10-Q

(Mark One)

|    |                                                                                          | 
|--- | ---------------------------------------------------------------------------------------- | 
|[X] | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934 | 

For the quarterly period ended March 31, 2001

OR

|     |                                                                                          | 
|---- | ---------------------------------------------------------------------------------------- | 
|[  ] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 | 

For the transition period from Not Applicable to __________________

Commission file number      1-6016

ALLEN TELECOM INC.

(Exact Name of Registrant as Specified in Its Charter)


|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 38-0290950                          
|                                                              
|(State or Other Jurisdiction of
Incorporation or Organization) |  | (I.R.S. Employer Identification No.)

|                                                    |  |           
|--------------------------------------------------- |  | ----------
|25101 Chagrin Boulevard, Suite 350, Beachwood, Ohio |  | 44122     
|                                                   
|(Address of Principal Executive Offices)            |  | (Zip Code)

(Registrants Telephone Number, Including Area Code) (216) 765-5855

NOT APPLICABLE

Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report


Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days.

Yes X No

Indicate the number of shares outstanding of each of the issuers classes of common stock:

|                          |  |                              
|------------------------- |  | -----------------------------
|Class of Common Stock     |  | Outstanding at
April 30, 2001
|                          |  |                              
|Par value $1.00 per share |  | 28,085,489                   





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##### Table of Contents



ALLEN TELECOM INC.




TABLE OF CONTENTS

|         |                                                                                                                  |                                                                                                        |  |       |      | 
|-------- | ---------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------ |  | ----- | ---- | 
|         |                                                                                                                  |                                                                                                        |  | Page 
|         |                                                                                                                  |                                                                                                        |  | No.  
|         |                                                                                                                  |                                                                                                        |  |      
|PART I.  | FINANCIAL INFORMATION:                                                                                          
|        
|        
|        
|        
|         | ITEM 1  Financial Statements:                                                                                  
|        
|         |                                                                                                                  | Condensed Consolidated Balance Sheets -
March 31, 2001 and December 31, 2000                           |  |       | 3    | 
|        
|         |                                                                                                                  | Condensed Consolidated Statements of Income -
Three Months Ended March 31, 2001 and 2000               |  |       | 4    | 
|        
|         |                                                                                                                  | Condensed Consolidated Statements of Cash Flows -
Three Months Ended March 31, 2001 and 2000           |  |       | 5    | 
|        
|         |                                                                                                                  | Condensed Consolidated Statements of Stockholders
Equity  Three Months Ended March 31, 2001 and 2000 |  |       | 6    | 
|        
|         |                                                                                                                  | Notes to the Condensed Consolidated Financial Statements                                               |  |       | 7-10 | 
|        
|         | ITEM 2  Managements Discussion and Analysis of
Financial Condition and                   Results of Operations |                                                                                                        |  | 11-15 |     
|        
|         | ITEM 3  Quantitative and Qualitative Disclosures About
Market Risks                                             |                                                                                                        |  | 16    |     
|        
|PART II. | OTHER INFORMATION:                                                                                              
|        
|         | ITEM 6  Exhibits and Reports on Form 8-K                                                                        |                                                                                                        |  | 16    |     
|        
|         | Signatures                                                                                                       |                                                                                                        |  | 17    |     
|        
|         | Exhibit Index                                                                                                    |                                                                                                        |  | 18    |     

2



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##### Table of Contents






ALLEN TELECOM INC.PART I  FINANCIAL INFORMATION
ITEM 1  FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in Thousands)

|                     |                                                       |                                                                                               |                                            |                                     |        |             |         |              |        |         |         | 
|-------------------- | ----------------------------------------------------- | --------------------------------------------------------------------------------------------- | ------------------------------------------ | ----------------------------------- | ------ | ----------- | ------- | ------------ | ------ | ------- | ------- | 
|                     |                                                       |                                                                                               |                                            |                                     |        | March 31,   |         | December 31,
|                     |                                                       |                                                                                               |                                            |                                     |        | 2001        |         | 2000        
|                     |                                                       |                                                                                               |                                            |                                     |        |             |         |             
|                     |                                                       |                                                                                               |                                            |                                     |        | (Unaudited) |         |             
|ASSETS              
|                    
|                    
|                    
|                    
|                     | Current Assets:                                      
|                    
|                    
|                    
|                    
|                     |                                                       | Cash and equivalents                                                                          |                                            | $                                   | 18,509 |             |         | $            | 10,539 |        
|                    
|                    
|                    
|                    
|                     |                                                       | Accounts receivable (less allowance for doubtful
accounts of $4,409 and $4,739, respectively) |                                            |                                     | 97,863 |             |         |              | 93,815 |        
|                    
|                    
|                    
|                    
|                     |                                                       | Inventories:                                                                                 
|                    
|                    
|                    
|                    
|                     |                                                       |                                                                                               |                                            | Raw materials                       |        |             | 74,607  |              |        |         | 56,366  | 
|                    
|                    
|                    
|                    
|                     |                                                       |                                                                                               |                                            | Work in process                     |        |             | 34,561  |              |        |         | 25,674  | 
|                    
|                    
|                    
|                    
|                     |                                                       |                                                                                               |                                            | Finished goods                      |        |             | 33,499  |              |        |         | 19,600  | 
|                     |                                                       |                                                                                               |                                            |                                     |        |             |         |             
|                     |                                                       |                                                                                               |                                            | Total inventories (net of reserves) |        |             | 142,667 |              |        |         | 101,640 | 
|                     |                                                       |                                                                                               |                                            |                                     |        |             |         |             
|                     |                                                       | Deferred income taxes                                                                         |                                            |                                     | 3,583  |             |         |              | 3,820  |        
|                    
|                    
|                    
|                    
|                     |                                                       | Other current assets                                                                          |                                            |                                     | 14,434 |             |         |              | 7,311  |        
|                     |                                                       |                                                                                               |                                            |                                     |        |             |         |             
|                     |                                                       |                                                                                               |                                            | Total current assets                |        |             | 277,056 |              |        |         | 217,125 | 
|                    
|                    
|                    
|                    
|                    
|                    
|                    
|                    
|                    
|                    
|                    
|                    
|                    
|                    
|                    
|                    
|                    
|                    
|                    
|                    
|                     | Property, plant and equipment, net                    |                                                                                               |                                            | 42,501                              |        |             |         | 41,279       |       
|                    
|                    
|                    
|                    
|                     | Excess of cost over net assets of businesses acquired |                                                                                               |                                            | 126,817                             |        |             |         | 129,190      |       
|                    
|                    
|                    
|                    
|                     | Deferred income taxes                                 |                                                                                               |                                            | 45,661                              |        |             |         | 44,295       |       
|                    
|                    
|                    
|                    
|                     | Other assets                                          |                                                                                               |                                            | 35,504                              |        |             |         | 41,133       |       
|                     |                                                       |                                                                                               |                                            |                                     |        |             |         |             
|                     |                                                       |                                                                                               | TOTAL ASSETS                               |                                     | $      | 527,539     |         |              | $      | 473,022 |        
|                     |                                                       |                                                                                               |                                            |                                     |        |             |         |             
|LIABILITIES         
|                    
|                    
|                    
|                    
|                     | Current Liabilities:                                 
|                    
|                    
|                    
|                    
|                     |                                                       | Notes payable and current maturities of long-term
obligations                                 |                                            | $                                   | 13,256 |             |         | $            | 3,796  |        
|                    
|                    
|                    
|                    
|                     |                                                       | Accounts payable                                                                              |                                            |                                     | 78,686 |             |         |              | 45,181 |        
|                    
|                    
|                    
|                    
|                     |                                                       | Accrued expenses                                                                              |                                            |                                     | 23,687 |             |         |              | 26,305 |        
|                    
|                    
|                    
|                    
|                     |                                                       | Income taxes payable                                                                          |                                            |                                     | 8,261  |             |         |              | 3,922  |        
|                    
|                    
|                    
|                    
|                     |                                                       | Deferred income taxes                                                                         |                                            |                                     | 8,023  |             |         |              | 5,290  |        
|                     |                                                       |                                                                                               |                                            |                                     |        |             |         |             
|                     |                                                       |                                                                                               |                                            | Total current liabilities           |        |             | 131,913 |              |        |         | 84,494  | 
|                    
|                    
|                    
|                    
|                     | Long-term debt                                        |                                                                                               |                                            | 136,779                             |        |             |         | 134,639      |       
|                    
|                    
|                    
|                    
|                     | Deferred income taxes                                 |                                                                                               |                                            | 4,570                               |        |             |         | 9,168        |       
|                    
|                    
|                    
|                    
|                     | Other liabilities                                     |                                                                                               |                                            | 10,323                              |        |             |         | 9,740        |       
|                     |                                                       |                                                                                               |                                            |                                     |        |             |         |             
|                     |                                                       |                                                                                               | TOTAL LIABILITIES                          |                                     |        | 283,585     |         |              |        | 238,041 |        
|                     |                                                       |                                                                                               |                                            |                                     |        |             |         |             
|STOCKHOLDERS EQUITY
|                    
|                    
|                    
|                    
|                     | Common stock                                          |                                                                                               |                                            | 30,193                              |        |             |         | 30,092       |       
|                    
|                    
|                    
|                    
|                     | Paid-in capital                                       |                                                                                               |                                            | 184,724                             |        |             |         | 184,066      |       
|                    
|                    
|                    
|                    
|                     | Retained earnings                                     |                                                                                               |                                            | 73,936                              |        |             |         | 69,067       |       
|                    
|                    
|                    
|                    
|                     | Accumulated other comprehensive loss                  |                                                                                               |                                            | (27,663                             | )      |             |         | (31,948      | )     
|                    
|                    
|                    
|                    
|                     | Less: Treasury stock (at cost)                        |                                                                                               |                                            | (15,748                             | )      |             |         | (14,730      | )     
|                    
|                    
|                    
|                    
|                     |                                                       |                                                                                               | Unearned compensation                      |                                     |        | (1,488      | )       |              |        | (1,566  | )      
|                     |                                                       |                                                                                               |                                            |                                     |        |             |         |             
|                     |                                                       |                                                                                               | TOTAL STOCKHOLDERS EQUITY                 |                                     |        | 243,954     |         |              |        | 234,981 |        
|                     |                                                       |                                                                                               |                                            |                                     |        |             |         |             
|                     |                                                       |                                                                                               | TOTAL LIABILITIES AND STOCKHOLDERS EQUITY |                                     | $      | 527,539     |         |              | $      | 473,022 |        
|                     |                                                       |                                                                                               |                                            |                                     |        |             |         |             

See accompanying Notes to the Condensed Consolidated Financial Statements.

3



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##### Table of Contents



ALLEN TELECOM INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Amounts in Thousands, Except Per Share Data)
(Unaudited)

|                                                                                        |                                                        |   |                    |         |      |   |         |         |  
|--------------------------------------------------------------------------------------- | ------------------------------------------------------ | - | ------------------ | ------- | ---- | - | ------- | ------- | -
|                                                                                        |                                                        |   | Three Months Ended
|                                                                                        |                                                        |   | March 31,         
|                                                                                        |                                                        |   |                   
|                                                                                        |                                                        |   | 2001               |         | 2000
|                                                                                        |                                                        |   |                    |         |     
|Sales (Note 5)                                                                          |                                                        | $ | 108,543            |         |      | $ | 88,859  |        
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|Cost of sales (Notes 2 & 5)                                                             |                                                        |   | (78,639            | )       |      |   | (63,477 | )      
|                                                                                        |                                                        |   |                    |         |      |   |         |        
|Gross profit                                                                            |                                                        |   | 29,904             |         |      |   | 25,382  |        
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|Operating expenses:                                                                    
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                        | Selling, general and administrative expenses (Note 2)  |   |                    | (14,365 | )    |   |         | (14,343 | )
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                        | Research and development and product engineering costs |   |                    | (6,900  | )    |   |         | (6,186  | )
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                        | Amortization of goodwill                               |   |                    | (1,980  | )    |   |         | (1,918  | )
|                                                                                        |                                                        |   |                    |         |      |   |         |        
|Operating income                                                                        |                                                        |   | 6,659              |         |      |   | 2,935   |        
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|Interest expense                                                                        |                                                        |   | (2,916             | )       |      |   | (2,471  | )      
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|Interest income                                                                         |                                                        |   | 321                |         |      |   | 510     |        
|                                                                                        |                                                        |   |                    |         |      |   |         |        
|Income before taxes and minority interests                                              |                                                        |   | 4,064              |         |      |   | 974     |        
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|Provision for income taxes                                                              |                                                        |   | (1,585             | )       |      |   | (391    | )      
|                                                                                        |                                                        |   |                    |         |      |   |         |        
|Income before minority interests                                                        |                                                        |   | 2,479              |         |      |   | 583     |        
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|Minority interests                                                                      |                                                        |   | (42                | )       |      |   | (13     | )      
|                                                                                        |                                                        |   |                    |         |      |   |         |        
|INCOME FROM CONTINUING OPERATIONS                                                       |                                                        |   | 2,437              |         |      |   | 570     |        
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|Discontinued emissions testing operations -
gain on sale (net of income taxes) (Note 3) |                                                        |   |                   |         |      |   | 1,300   |        
|                                                                                        |                                                        |   |                    |         |      |   |         |        
|NET INCOME                                                                              |                                                        | $ | 2,437              |         |      | $ | 1,870   |        
|                                                                                        |                                                        |   |                    |         |      |   |         |        
|EARNINGS PER COMMON SHARE, Basic and Diluted:                                          
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                        | Continuing operations                                  |   | $                  | .09     |      |   | $       | .02     |  
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                        | Discontinued operations  gain on sale                 |   |                    |        |      |   |         | .05     |  
|                                                                                        |                                                        |   |                    |         |      |   |         |        
|                                                                                        | Net income                                             |   | $                  | .09     |      |   | $       | .07     |  
|                                                                                        |                                                        |   |                    |         |      |   |         |        
|Weighted average common shares outstanding:                                            
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                        | Basic                                                  |   |                    | 27,930  |      |   |         | 27,780  |  
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                        | Assumed exercise of stock options                      |   |                    | 420     |      |   |         | 340     |  
|                                                                                        |                                                        |   |                    |         |      |   |         |        
|                                                                                        | Diluted                                                |   |                    | 28,350  |      |   |         | 28,120  |  
|                                                                                        |                                                        |   |                    |         |      |   |         |        

See accompanying Notes to the Condensed Consolidated Financial Statements.

4



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##### Table of Contents



ALLEN TELECOM INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
(Unaudited)

|                                                               |                                                         |                                              |                                  |              |         |                    |        |        |        |   |       | 
|-------------------------------------------------------------- | ------------------------------------------------------- | -------------------------------------------- | -------------------------------- | ------------ | ------- | ------------------ | ------ | ------ | ------ | - | ----- | 
|                                                               |                                                         |                                              |                                  |              |         | Three Months Ended
|                                                               |                                                         |                                              |                                  |              |         | March 31,         
|                                                               |                                                         |                                              |                                  |              |         |                   
|                                                               |                                                         |                                              |                                  |              |         | 2001               |        | 2000  
|                                                               |                                                         |                                              |                                  |              |         |                    |        |       
|CASH FLOW FROM OPERATIONS:                                    
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Income from continuing operations                       |                                              | $                                | 2,437        |         |                    | $      | 570    |       
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Adjustments to reconcile income to operating cash flow:
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               |                                                         | Depreciation                                 |                                  |              | 3,753   |                    |        |        | 3,639  |  
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               |                                                         | Amortization of goodwill                     |                                  |              | 1,980   |                    |        |        | 1,918  |  
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               |                                                         | Amortization of capitalized software         |                                  |              | 668     |                    |        |        | 575    |  
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               |                                                         | Other amortization                           |                                  |              | 78      |                    |        |        | 80     |  
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               |                                                         | Non-cash loss on write-down of assets        |                                  |              |        |                    |        |        | 393    |  
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Changes in operating assets and liabilities:           
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               |                                                         | Receivables                                  |                                  |              | (4,998  | )                  |        |        | 7,500  |  
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               |                                                         | Inventories                                  |                                  |              | (31,197 | )                  |        |        | (5,075 | )
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               |                                                         | Accounts payable and accrued expenses        |                                  |              | 17,088  |                    |        |        | 2,975  |  
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               |                                                         | Income tax payable                           |                                  |              | 1,413   |                    |        |        | (1,340 | )
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               |                                                         | Other, net                                   |                                  |              | (1,275  | )                  |        |        | 1,093  |  
|                                                               |                                                         |                                              |                                  |              |         |                    |        |       
|                                                               | CASH (USED) PROVIDED BY OPERATING ACTIVITIES            |                                              |                                  | (10,053      | )       |                    |        | 12,328 |       
|                                                               |                                                         |                                              |                                  |              |         |                    |        |       
|CASH FLOWS FROM INVESTING ACTIVITIES:                         
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               |                                                         | Capital expenditures                         |                                  |              | (3,859  | )                  |        |        | (3,041 | )
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               |                                                         | Capitalized software product costs           |                                  |              | (890    | )                  |        |        | (340   | )
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               |                                                         | Sales and retirements of fixed assets        |                                  |              | 5,808   |                    |        |        | (92    | )
|                                                               |                                                         |                                              |                                  |              |         |                    |        |       
|                                                               | CASH PROVIDED (USED) BY INVESTING ACTIVITIES            |                                              |                                  | 1,059        |         |                    |        | (3,473 | )     
|                                                               |                                                         |                                              |                                  |              |         |                    |        |       
|CASH FLOWS FROM FINANCING ACTIVITIES:                         
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               |                                                         | Repayments of borrowings                     |                                  |              | (5,748  | )                  |        |        | (3,616 | )
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               |                                                         | Acquisition of treasury shares               |                                  |              | (1,111  | )                  |        |        |       |  
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               |                                                         | Collection on installment note receivable    |                                  |              | 1,000   |                    |        |        | 1,000  |  
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               |                                                         | Treasury stock sold to employee benefit plan |                                  |              | 196     |                    |        |        | 123    |  
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               |                                                         | Exercise of stock options                    |                                  |              | 657     |                    |        |        | 35     |  
|                                                               |                                                         |                                              |                                  |              |         |                    |        |       
|                                                               | CASH USED BY FINANCING ACTIVITIES                       |                                              |                                  | (5,006       | )       |                    |        | (2,458 | )     
|                                                               |                                                         |                                              |                                  |              |         |                    |        |       
|NET CASH (USED) PROVIDED                                       |                                                         |                                              | (14,000                          | )            |         |                    | 6,397  |       
|                                                              
|                                                              
|                                                              
|                                                              
|Effect of foreign currency exchange rate changes on cash       |                                                         |                                              | 1,539                            |              |         |                    | (844   | )     
|                                                              
|                                                              
|                                                              
|                                                              
|Net cash flow from change in year-end of subsidiaries (Note 1) |                                                         |                                              | 20,431                           |              |         |                    |       |       
|                                                              
|                                                              
|                                                              
|                                                              
|Cash and equivalents at beginning of year                      |                                                         |                                              | 10,539                           |              |         |                    | 22,085 |       
|                                                               |                                                         |                                              |                                  |              |         |                    |        |       
|CASH AND EQUIVALENTS AT END OF PERIOD                          |                                                         | $                                            | 18,509                           |              |         | $                  | 27,638 |       
|                                                               |                                                         |                                              |                                  |              |         |                    |        |       
|Supplemental cash flow data:                                  
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               |                                                         |                                              | Cash paid during the period for:
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               |                                                         |                                              |                                  | Interest     |         | $                  | 1,837  |        |        | $ | 1,369 | 
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               |                                                         |                                              |                                  | Income taxes |         |                    | 1,706  |        |        |   | 1,763 | 

See accompanying Notes to the Condensed Consolidated Financial Statements.

5



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##### Table of Contents



ALLEN TELECOM INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
(Amounts in Thousands)
(Unaudited)

|                                           |                                                                    |                                          |         |       |        |       |        |         |  |               |         |               |  |               |   |               |        |              |        |          |  |   |         |             |        |   |         |   |  |   |        |   |  | 
|------------------------------------------ | ------------------------------------------------------------------ | ---------------------------------------- | ------- | ----- | ------ | ----- | ------ | ------- |  | ------------- | ------- | ------------- |  | ------------- | - | ------------- | ------ | ------------ | ------ | -------- |  | - | ------- | ----------- | ------ | - | ------- | - |  | - | ------ | - |  | 
|                                           |                                                                    |                                          |         |       |        |       |        |         |  |               |         |               |  |               |   |               |        |              |        |          |  |   |         | Accumulated
|                                           |                                                                    |                                          |         |       |        |       |        |         |  |               |         |               |  |               |   |               |        |              |        |          |  |   |         | Other      
|                                           |                                                                    |                                          |         |       |        |       |        | Common  |  | Paid-In       |         | Comprehensive |  | Retained      |   | Comprehensive |        | Treasury     |        | Unearned
|                                           |                                                                    |                                          |         | Total |        | Stock |        | Capital |  | Income (Loss) |         | Earnings      |  | Income (Loss) |   | Stock         |        | Compensation
|                                           |                                                                    |                                          |         |       |        |       |        |         |  |               |         |               |  |               |   |               |        |             
|For the three months ended March 31, 2001:
|                                          
|                                          
|                                          
|                                          
|Beginning Balance, January 1, 2001         |                                                                    | $                                        | 234,981 |       |        | $     | 30,092 |         |  | $             | 184,066 |               |  |               |   |               |        | $            | 69,067 |          |  | $ | (31,948 | )           |        | $ | (14,730 | ) |  | $ | (1,566 | )
|                                          
|                                          
|                                          
|                                          
|Comprehensive income:                     
|                                          
|                                          
|                                          
|                                          
|                                           | Net income                                                         |                                          |         | 2,437 |        |       |        |         |  |               |         |               |  |               | $ | 2,437         |        |              |        | 2,437    | 
|                                          
|                                          
|                                          
|                                          
|                                           | Net income from change in fiscal year-end
of subsidiaries (Note 1) |                                          |         | 2,432 |        |       |        |         |  |               |         |               |  |               |   |               |        |              |        | 2,432    | 
|                                          
|                                          
|                                          
|                                          
|                                           | Other comprehensive income:                                       
|                                          
|                                          
|                                          
|                                          
|                                           |                                                                    | Foreign currency translation adjustments |         |       | 4,285  |       |        |         |  |               |         |               |  |               |   |               | 4,285  |              |        |          |  |   |         |             | 4,285  |  
|                                           |                                                                    |                                          |         |       |        |       |        |         |  |               |         |               |  |               |   |              
|                                           |                                                                    | Comprehensive income                     |         |       |        |       |        |         |  |               |         |               |  |               |   | $             | 6,722  |             
|                                           |                                                                    |                                          |         |       |        |       |        |         |  |               |         |               |  |               |   |              
|Treasury stock reissued                    |                                                                    |                                          | 195     |       |        |       |        |         |  |               |         |               |  |               |   |               |        |              |        |          |  |   |         |             |        |   | 93      |  
|                                          
|                                          
|                                          
|                                          
|Acquisition of treasury shares             |                                                                    |                                          | (1,111  | )     |        |       |        |         |  |               | 102     |               |  |               |   |               |        |              |        |          |  |   |         |             |        |   | (1,111  | )
|                                          
|                                          
|                                          
|                                          
|Exercise of stock options                  |                                                                    |                                          | 657     |       |        |       | 101    |         |  |               | 556     |              
|                                          
|                                          
|                                          
|                                          
|Amortization of unearned compensation      |                                                                    |                                          | 78      |       |        |       |        |         |  |               |         |               |  |               |   |               |        |              |        |          |  |   |         |             |        |   |         |   |  |   | 78     |  
|                                           |                                                                    |                                          |         |       |        |       |        |         |  |               |         |               |  |               |   |               |        |              |        |          |  |   |         |             |        |   |         |   |  |   |        |  
|Ending Balance, March 31, 2001             |                                                                    | $                                        | 243,954 |       |        | $     | 30,193 |         |  | $             | 184,724 |               |  |               |   |               |        | $            | 73,936 |          |  | $ | (27,663 | )           |        | $ | (15,748 | ) |  | $ | (1,488 | )
|                                           |                                                                    |                                          |         |       |        |       |        |         |  |               |         |               |  |               |   |               |        |              |        |          |  |   |         |             |        |   |         |   |  |   |        |  
|For the three months ended March 31, 2000:
|                                          
|                                          
|                                          
|                                          
|Beginning Balance, January 1, 2000         |                                                                    | $                                        | 240,912 |       |        | $     | 30,010 |         |  | $             | 181,335 |               |  |               |   |               |        | $            | 57,014 |          |  | $ | (10,685 | )           |        | $ | (14,978 | ) |  | $ | (1,784 | )
|                                          
|                                          
|                                          
|                                          
|Comprehensive income (loss):              
|                                          
|                                          
|                                          
|                                          
|                                           | Net income                                                         |                                          |         | 1,870 |        |       |        |         |  |               |         |               |  |               | $ | 1,870         |        |              |        | 1,870    | 
|                                          
|                                          
|                                          
|                                          
|                                           | Other comprehensive loss:                                         
|                                          
|                                          
|                                          
|                                          
|                                           |                                                                    | Foreign currency translation adjustments |         |       | (6,611 | )     |        |         |  |               |         |               |  |               |   |               | (6,611 | )            |        |          |  |   |         |             | (6,611 | )
|                                           |                                                                    |                                          |         |       |        |       |        |         |  |               |         |               |  |               |   |              
|                                           |                                                                    | Comprehensive loss                       |         |       |        |       |        |         |  |               |         |               |  |               |   | $             | (4,741 | )           
|                                           |                                                                    |                                          |         |       |        |       |        |         |  |               |         |               |  |               |   |              
|Treasury stock reissued                    |                                                                    |                                          | 205     |       |        |       |        |         |  |               | 82      |              
|                                          
|                                          
|                                          
|                                          
|Exercise of stock options                  |                                                                    |                                          | 35      |       |        |       | 7      |         |  |               | 28      |               |  |               |   |               |        |              |        |          |  |   |         |             |        |   | 123     |  
|                                          
|                                          
|                                          
|                                          
|Amortization of unearned compensation      |                                                                    |                                          | 80      |       |        |       |        |         |  |               |         |               |  |               |   |               |        |              |        |          |  |   |         |             |        |   |         |   |  |   | 80     |  
|                                           |                                                                    |                                          |         |       |        |       |        |         |  |               |         |               |  |               |   |               |        |              |        |          |  |   |         |             |        |   |         |   |  |   |        |  
|Ending Balance, March 31, 2000             |                                                                    | $                                        | 236,491 |       |        | $     | 30,017 |         |  | $             | 181,445 |               |  |               |   |               |        | $            | 58,884 |          |  | $ | (17,296 | )           |        | $ | (14,855 | ) |  | $ | (1,704 | )
|                                           |                                                                    |                                          |         |       |        |       |        |         |  |               |         |               |  |               |   |               |        |              |        |          |  |   |         |             |        |   |         |   |  |   |        |  

See accompanying Notes to the Condensed Consolidated Financial Statements.

6



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##### Table of Contents



ALLEN TELECOM INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)



|1. |  | Significant Accounting Policies:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | General                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|  
|   |  | In the opinion of the management of Allen Telecom Inc. (the Company),
the accompanying unaudited condensed consolidated interim financial
statements reflect all adjustments necessary to present fairly the
financial position of the Company as of March 31, 2001 and the
consolidated results of its operations, cash flows and changes in
stockholders equity for the periods ended March 31, 2001 and 2000. The
results of operations for such interim periods are not necessarily
indicative of the results for the full year. The year-end 2000 condensed
consolidated balance sheet was derived from audited financial statements,
but does not include all disclosures required by accounting principles
generally accepted in the United States of America. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Companys Annual Report on Form 10-K for the year
ended December 31, 2000.
|  
|   |  | Consolidation Policy                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|  
|   |  | The Companys consolidated financial statements include the accounts of
all wholly owned and majority owned subsidiaries. Intercompany accounts
and transactions have been eliminated. To facilitate preparation of
financial statements, the Companys principal European operations, for
periods on a prior to December 31, 2000, were included in the consolidated
financial statements on a two-month delayed basis.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|  
|   |  | Effective January 1, 2001, such European operations changed their fiscal
year-end from October 31 to December 31, consistent with the balance of
the Companys operations. The results of operations (net income of
$2,432,000) for these European subsidiaries for the period November and
December 2000, were recorded directly to retained earnings in the first
quarter of 2001 and the results of operations for the period January 1,
2001 through March 31, 2001 were included in first quarter 2001 reported
results of operations.                                                                                                                                                                                                                                                                                                                                                                                                                      
|  
|   |  | Cash flow of such European operations for the two month period November
and December 2000 is summarized as follows (amounts in millions):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

|                             |                                  |   |      |      | 
|---------------------------- | -------------------------------- | - | ---- | ---- | 
|Net income from operations   |                                  | $ | 2.4  |     
|                            
|                            
|                            
|                            
|Increase in inventories      |                                  |   | (8.7 | )   
|                            
|                            
|                            
|                            
|Decrease in receivables      |                                  |   | 3.2  |     
|                            
|                            
|                            
|                            
|Increase in accounts payable |                                  |   | 14.1 |     
|                            
|                            
|                            
|                            
|Decrease in taxes payable    |                                  |   | (6.1 | )   
|                            
|                            
|                            
|                            
|Net increase in fixed assets |                                  |   | (1.2 | )   
|                            
|                            
|                            
|                            
|Borrowings                   |                                  |   | 16.1 |     
|                            
|                            
|                            
|                            
|Other                        |                                  |   | .6   |     
|                             |                                  |   |      |     
|                             | Increase in cash and equivalents |   | $    | 20.4 | 
|                             |                                  |   |      |     

7



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##### Table of Contents



ALLEN TELECOM INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Continued)



|2. |  | Special Charges:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | In the fourth quarter 1999, the Company announced the restructuring of
certain operations. In the first quarter 2000, the Company incurred
incremental pretax charges of $1,678,000, or $.04 per basic and diluted
share after related income tax effect in connection with such
restructuring. These charges were not accruable at December 31, 1999.
Of this pretax charge, $960,000 was recorded in cost of sales and
$718,000 in selling, general and administrative expenses. Of the charge,
$393,000 relates to a non-cash write-off of capital assets and $1,285,000
were cash related charges.
|  
|   |  | The following is a summary of the activity for exit costs incurred
(amounts in thousands).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

|                                     |  |           |     |                  |  |       |        |   |  |   |     |  
|------------------------------------ |  | --------- | --- | ---------------- |  | ----- | ------ | - |  | - | --- | -
|                                     |  | Severance |     | Sale of Building
|                                     |  | Accrual   |     | and Equipment    |  | Other
|                                     |  |           |     |                  |  |      
|Accrual balance at December 31, 2000 |  | $         | 219 |                  |  | $     | 1,549  |   |  | $ | 317 |  
|                                    
|                                    
|                                    
|                                    
|Charged against accrual              |  |           | (41 | )                |  |       | (1,300 | ) |  |   | (28 | )
|                                     |  |          
|Balance March 31, 2001               |  | $         | 178 |                  |  | $     | 249    |   |  | $ | 289 |  
|                                     |  |          



|   |  | The term of severance is based on years of service or determined by
contractual obligation, and is payable over a period of time. Severance
will be paid out in its entirety by October 31, 2001.                                                                                                                                           
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|3. |  | Discontinued Operations:                                                                                                                                                                                                                                                                                                                    
|  
|   |  | The gain on sale from discontinued operations in the first quarter of
2000 represents income from previously contingent purchase price
consideration earned on the sale of the Companys former automotive
emissions testing business sold in the first quarter of 1999. This gain
is net of related income taxes in the amount of $700,000.

8



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##### Table of Contents



ALLEN TELECOM INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Continued)



|4. |  | Segment Disclosures:                                                                                                                                             
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | The following table shows sales to external customers, results of
operations and asset positions for the Companys two operating segments
(amounts in thousands):

|                             |                                              |                                            |                                         |        |                    |         |        |       |        |        | 
|---------------------------- | -------------------------------------------- | ------------------------------------------ | --------------------------------------- | ------ | ------------------ | ------- | ------ | ----- | ------ | ------ | 
|                             |                                              |                                            |                                         |        | Three Months Ended
|                             |                                              |                                            |                                         |        | March 31,         
|                             |                                              |                                            |                                         |        |                   
|                             |                                              |                                            |                                         |        | 2001               |         | 2000  
|                             |                                              |                                            |                                         |        |                    |         |       
|Sales to external customers:
|                            
|                            
|                            
|                            
|                             | Wireless communications equipment:          
|                            
|                            
|                            
|                            
|                             |                                              | Base station subsystems and components     |                                         | $      | 59,423             |         |        | $     | 43,274 |       
|                            
|                            
|                            
|                            
|                             |                                              | Repeater and in-building coverage products |                                         |        | 22,820             |         |        |       | 19,467 |       
|                            
|                            
|                            
|                            
|                             |                                              | Base station and mobile antennas           |                                         |        | 20,520             |         |        |       | 20,118 |       
|                             |                                              |                                            |                                         |        |                    |         |        |      
|                             |                                              |                                            | Total wireless communications equipment |        |                    | 102,763 |        |       |        | 82,859 | 
|                            
|                            
|                            
|                            
|                             | Wireless engineering and consulting services |                                            |                                         | 5,780  |                    |         |        | 6,000 |       
|                             |                                              |                                            |                                         |        |                    |         |        |      
|                             |                                              |                                            | Total sales                             |        | $                  | 108,543 |        |       | $      | 88,859 | 
|                             |                                              |                                            |                                         |        |                    |         |        |      
|Results of operations:      
|                            
|                            
|                            
|                            
|                             | Wireless communications equipment            |                                            | $                                       | 10,262 |                    |         | $      | 5,680 |       
|                            
|                            
|                            
|                            
|                             | Wireless engineering and consulting services |                                            |                                         | 158    |                    |         |        | 885   |       
|                             |                                              |                                            |                                         |        |                    |         |        |      
|                             |                                              |                                            | 10,420                                  |        |                    |         | 6,565  |      
|                            
|                            
|                            
|                            
|Goodwill amortization        |                                              |                                            | (1,980                                  | )      |                    |         | (1,918 | )    
|                            
|                            
|                            
|                            
|General corporate expenses   |                                              |                                            | (1,781                                  | )      |                    |         | (1,712 | )    
|                             |                                              |                                            |                                         |        |                    |         |        |      
|                             |                                              |                                            | Operating income                        |        | $                  | 6,659   |        |       | $      | 2,935  | 
|                             |                                              |                                            |                                         |        |                    |         |        |      

|                               |                                              |              |         |                |         |                   |         |         |         | 
|------------------------------ | -------------------------------------------- | ------------ | ------- | -------------- | ------- | ----------------- | ------- | ------- | ------- | 
|                               |                                              |              |         | As of         
|                               |                                              |              |         | March 31, 2001 |         | December 31, 2000
|                               |                                              |              |         |                |         |                  
|Segment Assets:               
|                              
|                              
|                              
|                              
|                               | Wireless communications equipment            |              | $       | 314,722        |         |                   | $       | 261,227 |        
|                              
|                              
|                              
|                              
|                               | Wireless engineering and consulting services |              |         | 14,600         |         |                   |         | 13,676  |        
|                               |                                              |              |         |                |         |                   |         |        
|                               |                                              |              | 329,322 |                |         |                   | 274,903 |        
|                              
|                              
|                              
|                              
|Goodwill                       |                                              |              | 126,817 |                |         |                   | 129,190 |        
|                              
|                              
|                              
|                              
|Deferred income taxes          |                                              |              | 49,244  |                |         |                   | 48,115  |        
|                              
|                              
|                              
|                              
|Other general corporate assets |                                              |              | 22,156  |                |         |                   | 20,814  |        
|                               |                                              |              |         |                |         |                   |         |        
|                               |                                              | Total Assets |         | $              | 527,539 |                   |         | $       | 473,022 | 
|                               |                                              |              |         |                |         |                   |         |        

9



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##### Table of Contents



ALLEN TELECOM INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Continued)



|5. |  | Impact of New Accounting Pronouncements:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 133, Accounting for Derivative Instruments and
Hedging Activities, in June 1998 which is now effective. Accordingly,
the Company has adopted the provisions of the standard on January 1,
2001. The Company utilizes hedging activities primarily in its foreign
subsidiaries to limit foreign currency exchange rate risk on receivables
and to offset the impact of currency rate changes with regard to certain
intercompany payables and foreign denominated purchase obligations. The
adoption of SFAS No. 133 as of January 1, 2001 did not have a material
impact on the Companys results of operations or financial position for
the period ended March 31, 2001.
|  
|   |  | In the fourth quarter of 2000, the Company adopted the provisions of
Emerging Issues Task Force Issue No. 00-10, Accounting for Shipping and
Handling Fees and Costs. Accordingly, prior year amounts have been
reclassified to conform to the 2001 presentation. The previously
reported amounts for each of sales and cost of sales for the three months
ended March 31, 2000 have been increased $903,000 to conform with the
current presentation. These reclassifications had no net impact on
previously reported results of operations or stockholders equity.                                                                                                                                                                                                     
|  
|6. |  | Reclassifications:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|  
|   |  | Certain prior year balances have been reclassified to conform to the
current year presentation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|  
|7. |  | Subsequent Event:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|  
|   |  | On January 23, 2001, the Company announced that it had entered into a
non-binding letter of intent, subject to certain conditions, to acquire
Smith Woolley Telecoms (SWT), a division of Smith Woolley Chartered
Surveyors located in England. The Company and SWT have allowed their
letter of intent to lapse on the expiration date, April 30, 2001,
principally due to the stock market volatility and the inability to
finalize acquisition terms acceptable to both parties.                                                                                                                                                                                                                                                                                       

10



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##### Table of Contents






ALLEN TELECOM INC.
ITEM 2  MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

Overview

We design, manufacture, and market wireless communications infrastructure
equipment and provide wireless engineering and consulting services for the
global wireless communications markets. Our products and services improve the
capacity, coverage and performance of wireless networks, including emerging 3G
networks. As part of our commitment to our customers evolving needs, we have
also developed new products for E 911 geolocation and other emerging wireless
equipment markets such as next generation power amplifiers. Our products and
services serve all major wireless standards and frequencies.

Results of Operations

Summary:

We reported net income from continuing operations of $2.4 million ($.09 per
common share) for the first quarter 2001, as compared with $0.6 million ($.02
per common share) for the first quarter 2000. Total sales increased 22% from
$88.9 million in the first quarter 2000 to $108.5 million in the first quarter
2001.

The strong U.S. dollar relative to the Euro negatively impacted reported sales
and pretax income of European operations in the first quarter of 2001 as
compared to the first quarter of 2000. As a result of exchange differences,
reported sales and pretax income in the three months ended March 31, 2001 were
$4.0 million and $0.6 million lower, respectively, as compared with the
corresponding prior year period, assuming the exchange rates stayed the same.

Included in the results of operations for the first quarter 2000, are
incremental pretax restructuring charges of approximately $1.7 million, or $.04
per basic and diluted share after related income tax effect. See Note 2 of
Notes to Condensed Consolidated Financial Statements for additional information
concerning such special items.

11



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##### Table of Contents



ALLEN TELECOM INC.
ITEM 2  MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(Continued)

Wireless Communications Equipment:

Wireless communications equipment sales were up 24% from $82.9 million in first
quarter 2000 to $102.8 million in the first quarter 2001. Sales increased
across all product lines with base station subsystems and components showing
the largest increase of 37% from $43.3 million to $59.4 million for the three
months ended March 31, 2000 and 2001, respectively. For the same time period,
sales of repeaters and in-building coverage products and base station and
mobile antennas were up 17% and 2%, respectively. Geographically, sales were up
in all parts of the world with the exception of the Asian region. Sales were
up 21% in North America, 72% in South America and 26% in Europe. Sales were
down 27% in the Asian region, primarily due to a decrease in sales in Australia
relating to the completion of the in-building coverage system for the 2000
summer Olympics.

|                                           |  |         |       |         |  |   |      | 
|------------------------------------------ |  | ------- | ----- | ------- |  | - | ---- | 
|Sales By Product Line                     
|                                          
|($ Millions)                               |  | 1Q 2001 |       | 1Q 2000
|                                           |  |        
|Base station subsystems and components     |  | $       | 59.4  |         |  | $ | 43.3 | 
|                                          
|                                          
|                                          
|                                          
|Repeater and in-building coverage products |  |         | 22.8  |         |  |   | 19.5 | 
|                                          
|                                          
|                                          
|                                          
|Base station and mobile antennas           |  |         | 20.6  |         |  |   | 20.1 | 
|                                          
|Total Wireless Communications Equipment    |  | $       | 102.8 |         |  | $ | 82.9 | 
|                                           |  |        

Backlog for this segment increased 22% from $106.9 million at December 31, 2000
to $130.2 million at March 31, 2001.

Gross profit margins were 27.4% in the first quarter of 2001, as compared with
29.3% (excluding the aforementioned incremental restructuring costs) in the
first quarter of 2000. The lower gross profit margins in 2001 were due to a
change in product mix, with less sales coming from the higher margin test and
measurement products and more sales coming from certain lower margin combiner
products.

Selling, general and administrative expenses were $11.0 million, or 10.7% of
sales, and $10.5 million, or 12.7% of sales (excluding the aforementioned
incremental restructuring costs), for the first quarters of 2001 and 2000,
respectively. Spending as a percentage of sales is lower due to the spreading
of fixed costs on higher sales.

Total assets for the wireless communications equipment segment increased 20%
from $261.2 million at December 31, 2000 to $314.7 million at March 31, 2001.
This increase is primarily due to an increase in inventory for the base station
subsystems and components product line, due to the significant planned increase
in production based on preliminary discussions with OEM customers and their
anticipated orders. The OEMs have dramatically changed their outlook in
early 2001. We have

12



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##### Table of Contents



ALLEN TELECOM INC.
ITEM 2  MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(Continued)

initiated plans to reduce this inventory to amounts more in line with revised
near term sales projections. We believe this could take six to nine months
based on current sales projections. This is also the reason for the increase
in accounts payable. While we have initiated plans to reduce the level of
inventory, there are certain risks inherent in such inventory including the
potential for increased obsolescence. We believe there is no need, at present,
for significant increases in our reserves for obsolescence; however, such
factors as technological obsolescence, dependency on customer orders and the
effectiveness of our action plans may require reassessment in the future. We
will continue to monitor this aspect closely.

Wireless Engineering and Consulting Services:

Wireless engineering and consulting services sales were down slightly from $6.0
million in first quarter 2000 to $5.8 million in first quarter 2001. Backlog
was down $0.7 million from year-end 2000 to $3.7 million. Gross profit margins
for this segment were 30.6% in the first quarter 2001, as compared with 37.7%
in the first quarter 2000. This decrease in margins is primarily attributable
to lower software sales, which contribute higher margins than other products
and services. Selling, general and administrative expenses increased to 27.8%
of sales for the first quarter of 2001 compared to 23.0% for the first quarter
of 2000. This higher ratio was primarily due to one time expenses related to
the now terminated letter of intent to acquire Smith Woolley. (See Note 7 of
the Notes to Condensed Consolidated Financial Statements.)

Research and Development:

Research and development and product engineering costs were 6.4% and 7.0% of
sales in the first quarter of 2001 and 2000, respectively. The decreased rate
of spending as a percentage of sales is attributable to the increase in sales
in the current quarter. We believe that product development costs will remain
fairly consistent in dollars throughout the year.

Interest and Financing Expenses:

Net interest and financing costs increased to $2.6 million from $2.0 million
for the three months ended March 31, 2001 and 2000, respectively. The higher
interest expense is due principally to higher debt levels to finance working
capital requirements offset, in part, by lower interest rates.

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ALLEN TELECOM INC.
ITEM 2  MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(Continued)

Provision for Income Taxes:

Our effective income tax rate was 39.0% and 40.1% for the quarters ended March
31, 2001 and 2000, respectively. The principal reason for the decrease is due
to lower statutory tax rates for our major German subsidiary and the forecasted
increase in income in other lower tax jurisdictions. The first quarter 2001
tax rate is in line with our current expectation for the full year 2001.

Liquidity and Capital Resources:

As set forth in the Condensed Consolidated Statements of Cash Flows, we used
$10.1 million of cash in operations for the three months ended March 31, 2001
as compared to a cash generation of $12.3 million for the comparable 2000
period. This decline in cash flow is due primarily to the aforementioned
increase in inventory. We generated $1.0 million of cash from investing
activities in the first quarter 2001, due primarily to the sale of idle
facilities, as compared to using $3.5 million in the first quarter 2000. Cash
used by financing activities for the three months ended March 31, 2001 and
March 31, 2000 was $5.0 million and $2.5 million, respectively. At March 31,
2001, we had available unused worldwide lines of credit of $63.0 million.

As described in Note 1, we changed the fiscal year-end of certain of our
foreign subsidiaries effective January 1, 2001. The Condensed Consolidated
Statements of Cash Flows for 2001 now includes these operations for the three
month period ended March 31, 2001. The net cash flow for the two month period
ended December 31, 2000 is shown separately in the Statements of Cash Flows.
Note 1 of the Notes to Condensed Consolidated Financial Statements includes
summarized information for the components of this $20.4 million increase in
cash.

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ALLEN TELECOM INC.
ITEM 2  MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

(Continued)

Legal Disclaimer:

Statements included in this Form 10-Q, which are not historical in nature, are
forward-looking statements made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. Forward-looking statements
regarding the Companys future performance and financial results are subject to
a number of risks and uncertainties that could cause actual results to differ
materially from those set forth in the forward-looking statements. Factors
that could cause the Companys actual results to materially differ from
forward-looking statements made by the Company, include, among others, the
cost, success and timetable for new product development, including specifically
products for 3G, E 911 and power amplification, the health and economic
stability of the world and national markets, the availability of capital and
financing to the wireless carriers, the uncertain timing and level of purchases
of both current products and those under development for current and
prospective customers of the Companys products and services, the effective
realization of inventory and other working capital assets to cash, the
collectability of receivables, the impact of competitive products and pricing
in the Companys markets, the future utilization of the Companys tax loss
carry forwards, the impact of U.S. and foreign government
legislative/regulatory actions, including, for example, the scope and timing of
E 911 geolocation requirements in the U.S. markets and spectrum availability
and licensing for new wireless applications, and the cost and availability of
financing for customers of the Companys geolocation projects. Allen Telecom
Inc.s Annual Report on Form 10-K and Quarterly Reports on Form 10-Q contain
additional details concerning these factors.

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ITEM 3  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS.

See Managements Discussion and Analysis of Financial Condition and Results of
Operations under Item 7 of its Annual Report on Form 10-K for the year ended
December 31, 2000.

PART II  OTHER INFORMATION

ITEM 6  EXHIBITS AND REPORTS ON FORM 8-K.

(a) Exhibits

(10) Material Contracts.

(b) Reports on Form 8-K

Not Applicable.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto
duly authorized.

|                    |  |                                                                                     
|------------------- |  | ------------------------------------------------------------------------------------
|                    |  | Allen Telecom Inc.                                                                  
|                    |  |                                                                                     
|                    |  | (Registrant)                                                                        
|                   
|Date:  May 14, 2001 |  | By:      /s/ Robert A. Youdelman                                                    
|                    |  |                                                                                     
|                    |  | Robert A. Youdelman
    Executive Vice President
    (Chief Financial Officer)      
|                   
|                   
|Date:  May 14, 2001 |  | By:      /s/ James L. LePorte, III                                                  
|                    |  |                                                                                     
|                    |  | James L. LePorte, III
    Vice President  Finance
    (Principal Accounting Officer)

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EXHIBIT INDEX
ALLEN TELECOM INC.

Exhibit Number



| | (10) |  | Amended and restated, Allen Telecom Inc. 1994 Non-Employee
Directors Stock Option Plan, filed as exhibit A in the Registrants
Proxy Statement dated March 16, 2001 (commission file number 1-6016)
and incorporated herein by reference.
| | ---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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