** **

**SECURITIES AND EXCHANGECOMMISSION**

**Washington, DC  20549**

 

**Form 10-Q**

 

**(Mark-One)**
| **ý**                                                                                                                                                        | ** ** | **QUARTERLY REPORT PURSUANT TO  SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**  |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------------------------------------------------------------------------------------------------|
|                                                                                                                                                              |       |                                                                                               |
| **For the  quarterly period ended June 30, 2004.**                                                                                                           |
|                                                                                                                                                              |       |                                                                                               |
| **OR**                                                                                                                                                            |
|                                                                                                                                                              |       |                                                                                               |
| **o**                                                                                                                                                             | ** ** | **TRANSITION REPORT PURSUANT TO  SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
|                                                                                                                                                              |       |                                                                                               |
| **For the transition period from             to            ** |
|                                                                                                                                                              |       |                                                                                               |
| **Commission file number 001-14617**                                                                                                                              |

 

**ANDREW CORPORATION**

(Exact name of Registrant as specified in itscharter)

 

| **DELAWARE**                                                                        | ** ** | **36-2092797**                    |
|-------------------------------------------------------------------------------------|------------|-----------------------------------|
| (State or other jurisdiction of  incorporation or organization)                     |       | (IRS Employer identification No.) |
|                                                                                |       |                              |
| **10500 W. 153rd Street, Orland  Park, Illinois 60462**                             |
| (Address of principal executive offices and  zip code)                              |
|                                                                                |       |                              |
| **(708) 349-3300**                                                                  |
| (Registrant’s telephone number, including  area code)                          |
|                                                                                |       |                              |
| **No Change**                                                                       |
| (Former name, former address and former  fiscal year, if changed since last report) |

 

Indicate by check mark whether the Registrant: (1) has filed allreports required to be filed by Section 13 or 15(d) of the SecuritiesExchange Act of 1934 during the preceding 12 months (or for such shorter periodas the Registrant was required to file such reports), and (2) has been subjectto such filing requirements for the past 90 days.

Yes  ý    No  o

 

Indicate by check mark whether the registrant is an accelerated filer(as defined in rule 12b-2 of the Act)

Yes  ý    No  o

 

Indicate the number of shares outstanding of each of the issuer’sclasses of common stock, as of the latest practical date.

 

Common Stock, $.01 Par Value – 160,798,891 shares as of August 10,2004

 

 

----

 

**INDEX**

**ANDREW CORPORATION**

 
| **PART  I.**       | **FINANCIAL  INFORMATION**                                                                           | ** ** |
|--------------------|------------------------------------------------------------------------------------------------------|------------|
| ** **         | ** **                                                                                           | ** ** |
| Item 1.            | Financial Statements (Unaudited)                                                                     |       |
|               |                                                                                                 |       |
|               | Consolidated balance sheets– June 30, 2004 and September 30,  2003                    |       |
|               |                                                                                                 |       |
|               | Consolidated statements of operations–  Three and nine months ended June 30, 2004 and 2003 |       |
|               |                                                                                                 |       |
|               | Consolidated statements of cash flows– Nine  months ended June 30, 2004 and 2003           |       |
|               |                                                                                                 |       |
|               | Notes to consolidated financial statements–  June 30, 2004                                 |       |
|               |                                                                                                 |       |
| Item 2.            | Management’s  Discussion and Analysis of Financial Condition and Results of Operations          |       |
|               |                                                                                                 |       |
| Item 3.            | Quantitative  and Qualitative Disclosures About Market Risks                                         |       |
|               |                                                                                                 |       |
| Item 4.            | Controls  and Procedures                                                                             |       |
|               |                                                                                                 |       |
| **PART II.**       | **OTHER INFORMATION**                                                                                |       |
|               |                                                                                                 |       |
| Item 1.            | Legal Proceedings                                                                                    |       |
|               |                                                                                                 |       |
| Item 2.            | Changes in Securities, Use of Proceeds and  Issuer Purchase of Equity Securities                     |       |
|               |                                                                                                 |       |
| Item 6.            | Exhibits  and Reports on Form 8-K                                                                    |       |
|               | ** **                                                                                           | ** ** |
| **SIGNATURE**      | ** **                                                                                           | ** ** |
| ** **         | ** **                                                                                           | ** ** |
| **CERTIFICATIONS** |                                                                                                 |       |

 

2

----

 

**ITEM 1. FINANCIAL STATEMENTS**

**ANDREW CORPORATION**

**CONSOLIDATED BALANCE SHEETS**

**(Dollars in thousands)**

 
| ** **                                                                                                                                                                      | ** ** | **June 30  2004** | ** **    | **September 30  2003** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------|---------------|-----------------------------|------------|
| ** **                                                                                                                                                                      | ** ** | **(UNAUDITED)**        | ** **    | ** **                  | ** ** |
| **ASSETS**                                                                                                                                                                      |       | ** **             | ** **    |                        |       |
| **Current Assets**                                                                                                                                                              |       | ** **             | ** **    |                        |       |
| Cash and cash equivalents                                                                                                                                                       |       | **$**                  | **164,753**   | ** **                  | $          | 286,269 |   |
| Accounts receivable, less allowances (**Jun. 2004 - $10,570;** Sept. 2003 –  $10,662)                                                                                      |       | **428,305**            | ** **    | 326,282                     |       |
| Inventories                                                                                                                                                                     |       | **366,701**            | ** **    | 247,750                     |       |
| Other current assets                                                                                                                                                            |       | **43,664**             | ** **    | 29,131                      |       |
| **Total Current  Assets**                                                                                                                                                       |       | **1,003,423**          | ** **    | 889,432                     |       |
|                                                                                                                                                                            |       | ** **             | ** **    |                        |       |
| **Other Assets**                                                                                                                                                                |       | ** **             | ** **    |                        |       |
| Goodwill                                                                                                                                                                        |       | **892,404**            | ** **    | 821,398                     |       |
| Intangible assets, less amortization                                                                                                                                            |       | **73,808**             | ** **    | 93,086                      |       |
| Other assets                                                                                                                                                                    |       | **42,651**             | ** **    | 50,398                      |       |
|                                                                                                                                                                            |       | ** **             | ** **    |                        |       |
| **Property, Plant and  Equipment**                                                                                                                                              |       | ** **             | ** **    |                        |       |
| Land and land improvements                                                                                                                                                      |       | **22,435**             | ** **    | 20,926                      |       |
| Buildings                                                                                                                                                                       |       | **122,706**            | ** **    | 116,038                     |       |
| Equipment                                                                                                                                                                       |       | **493,713**            | ** **    | 469,296                     |       |
| Allowance for depreciation                                                                                                                                                      |       | **(411,370**           | **)**         | (387,341                    | )          |
|                                                                                                                                                                            |       | **227,484**            | ** **    | 218,919                     |       |
| **TOTAL ASSETS**                                                                                                                                                                |       | **$**                  | **2,239,770** | ** **                  | $          | 2,073,233 |   |
|                                                                                                                                                                            |       | ** **             | ** **    |                        |       |
| **LIABILITIES AND  STOCKHOLDERS’ EQUITY**                                                                                                                                  |       | ** **             | ** **    |                        |       |
| **Current Liabilities**                                                                                                                                                         |       | ** **             | ** **    |                        |       |
| Accounts payable                                                                                                                                                                |       | **$**                  | **221,792**   | ** **                  | $          | 124,646 |   |
| Accrued expenses and other liabilities                                                                                                                                          |       | **74,403**             | ** **    | 58,893                      |       |
| Compensation and related expenses                                                                                                                                               |       | **60,265**             | ** **    | 52,255                      |       |
| Restructuring                                                                                                                                                                   |       | **11,574**             | ** **    | 20,414                      |       |
| Notes payable and current portion of  long-term debt                                                                                                                            |       | **14,180**             | ** **    | 17,750                      |       |
| **Total Current  Liabilities**                                                                                                                                                  |       | **382,214**            | ** **    | 273,958                     |       |
|                                                                                                                                                                            |       | ** **             | ** **    |                        |       |
| **Deferred  liabilities**                                                                                                                                                       |       | **59,652**             | ** **    | 73,941                      |       |
| **Long-term debt,  less current portion**                                                                                                                                       |       | **288,731**            | ** **    | 301,364                     |       |
|                                                                                                                                                                            |       | ** **             | ** **    |                        |       |
| **STOCKHOLDERS’  EQUITY**                                                                                                                                                  |       | ** **             | ** **    |                        |       |
| Redeemable convertible preferred stock (par  value, $50 per share: 130,414 shares outstanding at June 30, 2004 and  183,720 shares outstanding at September 30, 2003) |       | **6,521**              | ** **    | 9,186                       |       |
| Common stock (par value, $.01 per share:  400,000,000 shares authorized: 160,900,657 shares issued at June 30,  2004 and September 30, 2003, including treasury)      |       | **1,609**              | ** **    | 1,609                       |       |
| Additional paid-in capital                                                                                                                                                      |       | **665,033**            | ** **    | 649,667                     |       |
| Accumulated other comprehensive income  (loss)                                                                                                                                  |       | **1,444**              | ** **    | (14,115                     | )          |
| Retained earnings                                                                                                                                                               |       | **837,144**            | ** **    | 805,435                     |       |
| Cost of common stock in treasury (242,546  shares at June 30, 2004 and 2,608,290 shares at September 30, 2003)                                                        |       | **(2,578**             | **)**         | (27,812                     | )          |
|                                                                                                                                                                            |       | **1,509,173**          | ** **    | 1,423,970                   |       |
| **TOTAL LIABILITIES  AND STOCKHOLDERS’ EQUITY**                                                                                                                            |       | **$**                  | **2,239,770** | ** **                  | $          | 2,073,233 |   |

 

See Notes toConsolidated Financial Statements

 

3

----

 

**ANDREW CORPORATION**

**CONSOLIDATED STATEMENTS OF OPERATIONS(Unaudited)**

**(Dollars in thousands, except per shareamounts)**

 
| ** **                                                         | ** ** | **Three Months Ended  June 30** |        | **Nine Months Ended  June 30** | ** ** |
|--------------------------------------------------------------------|------------|--------------------------------------|-------------|-------------------------------------|------------|
| **2004**                                                           | ** ** | **2003**                             | **2004**    | ** **                          | **2003**   |
|                                                               |       |                                 | ** **  |                                |       |   | ** ** |   |   |
| **Sales**                                                          | ** ** | **$**                                | **492,998** | ** **                          | $          | 213,721 |   | **$** | **1,350,915** | ** ** | $ | 669,565 |   |
| Cost of products sold                                              | ** ** | **365,309**                          | ** **  | 159,091                             |       | **1,008,503** | ** ** | 492,005 |   |
| **Gross Profit**                                                   | ** ** | **127,689**                          | ** **  | 54,630                              |       | **342,412** | ** ** | 177,560 |   |
|                                                               |       |                                 | ** **  |                                |       |   | ** ** |   |   |
| **Operating Expenses**                                             |       |                                 | ** **  |                                |       |   | ** ** |   |   |
| Research and development                                           | ** ** | **29,295**                           | ** **  | 18,921                              |       | **83,377** | ** ** | 58,485 |   |
| Sales and administrative                                           | ** ** | **56,889**                           | ** **  | 32,815                              |       | **162,036** | ** ** | 100,943 |   |
| Intangible amortization                                            | ** ** | **9,583**                            | ** **  | 3,662                               |       | **28,855** | ** ** | 11,027 |   |
| Restructuring                                                      | ** ** | **719**                              | ** **  | 472                                 |       | **4,181** | ** ** | 677 |   |
| ** **                                                         |       | **96,486**                           | ** **  | 55,870                              |       | **278,449** | ** ** | 171,132 |   |
|                                                               |       |                                 | ** **  |                                |       |   | ** ** |   |   |
| **Operating Income  (Loss)**                                       | ** ** | **31,203**                           | ** **  | (1,240                              | )          | **63,963** | ** ** | 6,428 |   |
|                                                               |       |                                 | ** **  |                                |       |   | ** ** |   |   |
| **Other**                                                          |       |                                 | ** **  |                                |       |   | ** ** |   |   |
| Interest expense                                                   | ** ** | **3,533**                            | ** **  | 682                                 |       | **11,375** | ** ** | 2,648 |   |
| Interest income                                                    | ** ** | **(628**                             | **)**       | (249                                | )          | **(2,359** | **)** | (751 | ) |
| Gain on real estate transactions                                   | ** ** | **—**                           | ** **  | (9,357                              | )          | **(1,402** | **)** | (9,398 | ) |
| Loss on sale of broadcast assets                                   | ** ** | **—**                           | ** **  | —                              |       | **4,511** | ** ** | — |   |
| Other expense (income), net                                        | ** ** | **885**                              | ** **  | (362                                | )          | **2,192** | ** ** | (1,211 | ) |
| ** **                                                         |       | **3,790**                            | ** **  | (9,286                              | )          | **14,317** | ** ** | (8,712 | ) |
| **Income from  Continuing Operations Before Income Taxes**         | ** ** | **27,413**                           | ** **  | 8,046                               |       | **49,646** | ** ** | 15,140 |   |
|                                                               |       |                                 | ** **  |                                |       |   | ** ** |   |   |
| Income taxes                                                       | ** ** | **9,595**                            | ** **  | (371                                | )          | **17,377** | ** ** | 1,757 |   |
| **Income from  Continuing Operations**                             | ** ** | **17,818**                           | ** **  | 8,417                               |       | **32,269** | ** ** | 13,383 |   |
|                                                               |       |                                 | ** **  |                                |       |   | ** ** |   |   |
| **Discontinued  Operations,**  **net of  tax benefit**        | ** ** | **—**                           | ** **  | 788                                 |       | **—** | ** ** | 3,118 |   |
|                                                               |       |                                 | ** **  |                                |       |   | ** ** |   |   |
| **Net Income**                                                     | ** ** | **17,818**                           | ** **  | 7,629                               |       | **32,269** | ** ** | 10,265 |   |
|                                                               |       |                                 | ** **  |                                |       |   | ** ** |   |   |
| **Preferred Stock  Dividends**                                     | ** ** | **126**                              | ** **  | —                              |       | **560** | ** ** | — |   |
|                                                               |       |                                 | ** **  |                                |       |   | ** ** |   |   |
| **Net Income  Available to Common Shareholders**                   | ** ** | **$**                                | **17,692**  | ** **                          | $          | 7,629 |   | **$** | **31,709** | ** ** | $ | 10,265 |   |
|                                                               |       |                                 | ** **  |                                |       |   | ** ** |   |   |
| **Basic and Diluted  Income per Share from Continuing Operations** | ** ** | **$**                                | **0.11**    | ** **                          | $          | 0.09 |   | **$** | **0.20** | ** ** | $ | 0.14 |   |
| **Basic and Diluted  Net Income per Share**                        | ** ** | **$**                                | **0.11**    | ** **                          | $          | 0.08 |   | **$** | **0.20** | ** ** | $ | 0.10 |   |
|                                                               |       |                                 | ** **  |                                |       |   | ** ** |   |   |
| **Average Shares  Outstanding**                                    |       |                                 | ** **  |                                |       |   | ** ** |   |   |
| Basic                                                              | ** ** | **160,655**                          | ** **  | 98,330                              |       | **159,272** | ** ** | 98,315 |   |
| Diluted                                                            | ** ** | **180,703**                          | ** **  | 98,330                              |       | **159,965** | ** ** | 98,316 |   |

 

See Notes toConsolidated Financial Statements 

 

4

----

 

**ANDREWCORPORATION**

**CONSOLIDATEDSTATEMENTS OF CASH FLOWS (Unaudited)**

**(Dollarsin thousands)**

 
| ** **                                           | ** ** | **Nine Months Ended  June 30** | ** **  |
|------------------------------------------------------|------------|-------------------------------------|-------------|
| **2004**                                             | ** ** | **2003**                            |
|                                                 |       |                                | ** **  |   |   |
| **Cash Flows from  Operations**                      |       |                                | ** **  |   |   |
| Net Income                                           | ** ** | **$**                               | **32,269**  | ** ** | $ | 10,265 |   |
|                                                 |       |                                | ** **  |   |   |
| **Adjustments to Net  Income**                       |       |                                | ** **  |   |   |
| Depreciation                                         | ** ** | **48,169**                          | ** **  | 39,319 |   |
| Amortization                                         | ** ** | **28,855**                          | ** **  | 11,027 |   |
| Other                                                | ** ** | **(1,535**                          | **)**       | (9,398 | ) |
| **Restructuring and  Discontinued Operations**       |       |                                | ** **  |   |   |
| Restructuring costs                                  | ** ** | **(16,848**                         | **)**       | (9,649 | ) |
| Discontinued operations, net of taxes                | ** ** | **—**                          | ** **  | 4,354 |   |
| **Change in Operating  Assets / Liabilities**        |       |                                | ** **  |   |   |
| Accounts receivable                                  | ** ** | **(84,330**                         | **)**       | 40,523 |   |
| Inventories                                          | ** ** | **(94,425**                         | **)**       | (10,170 | ) |
| Other assets                                         | ** ** | **(10,278**                         | **)**       | 13,450 |   |
| Accounts payable and other liabilities               | ** ** | **98,228**                          | ** **  | (35,987 | ) |
| **Net Cash From  Operations**                        | ** ** | **105**                             | ** **  | 53,734 |   |
|                                                 |       |                                | ** **  |   |   |
| **Investing Activities**                             |       |                                | ** **  |   |   |
| Capital expenditures                                 | ** ** | **(57,675**                         | **)**       | (22,004 | ) |
| Acquisition of businesses, net of cash  acquired     | ** ** | **(23,227**                         | **)**       | (114 | ) |
| Settlement of pre-acquisition litigation             | ** ** | **(29,000**                         | **)**       | — |   |
| Investments                                          | ** ** | **(6,500**                          | **)**       | — |   |
| Proceeds from sale of businesses and  investments    | ** ** | **3,000**                           | ** **  | 7,286 |   |
| Proceeds from sale of property, plant and  equipment | ** ** | **4,578**                           | ** **  | 10,246 |   |
| **Net Cash Used for  Investing Activities**          | ** ** | **(108,824**                        | **)**       | (4,586 | ) |
|                                                 |       |                                | ** **  |   |   |
| **Financing  Activities**                            |       |                                | ** **  |   |   |
| Long-term debt payments, net                         | ** ** | **(17,775**                         | **)**       | (6,462 | ) |
| Notes payable proceeds (payments), net               | ** ** | **254**                             | ** **  | (56,190 | ) |
| Preferred stock dividends                            | ** ** | **(560**                            | **)**       | — |   |
| Payments to acquire treasury stock                   | ** ** | **(2,472**                          | **)**       | — |   |
| Stock purchase and option plans                      | ** ** | **2,901**                           | ** **  | 111 |   |
| **Net Cash Used for  Financing Activities**          | ** ** | **(17,652**                         | **)**       | (62,541 | ) |
|                                                 |       |                                | ** **  |   |   |
| **Effect of exchange  rate changes on cash**         | ** ** | **4,855**                           | ** **  | 6,823 |   |
|                                                 |       |                                | ** **  |   |   |
| **Decrease in Cash  and Equivalents for the Period** | ** ** | **(121,516**                        | **)**       | (6,570 | ) |
| **Cash and  Equivalents at Beginning of Period**     | ** ** | **286,269**                         | ** **  | 84,871 |   |
| **Cash and  Equivalents at End of Period**           | ** ** | **$**                               | **164,753** | ** ** | $ | 78,301 |   |

 

See Notes toConsolidated Financial Statements

 

5

----

 

**ANDREW CORPORATION**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

 

**NOTE 1.  BASIS OF PRESENTATION**

 

The accompanyingunaudited consolidated financial statements have been prepared in accordancewith U.S. generally accepted accounting principles for interim financialinformation and with the instructions to Form 10-Q and Rule 10-01 of Regulation

S-X.  Accordingly, they do not include all of theinformation and footnotes required by U.S. generally accepted accountingprinciples for complete financial statements. In the opinion of management, all adjustments (consisting of normalrecurring accruals) considered necessary for a fair presentation have beenincluded.  Operating results for thethree and nine month periods ended June 30, 2004 are not necessarilyindicative of the results that may be expected for the year endingSeptember 30, 2004.  For furtherinformation, refer to the consolidated financial statements and footnotesthereto included in the company’s annual report on Form 10-K for the year endedSeptember 30, 2003.

 

**NOTE 2.  EARNINGS PER SHARE**

 

The following table sets forth the computation of basic and dilutedearnings per share (in thousands, except per share amounts):

 
| **BASIC EARNINGS PER SHARE**                                            | ** ** | **Three Months Ended  June 30** | ** ** | **Nine Months Ended  June 30** | ** ** |
|-------------------------------------------------------------------------|------------|--------------------------------------|------------|-------------------------------------|------------|
| **2004**                                                                | ** ** | **2003**                             | **2004**   | ** **                          | **2003**   |
|                                                                    |       |                                 |       |                                |       |   |   |   |   |
| Income from continuing operations                                       |       | $                                    | 17,818     |                                | $          | 8,417 |   | $ | 32,269 |   | $ | 13,383 |   |
| Preferred stock dividends                                               |       | 126                                  |       | —                              |       | 560 |   | — |   |
| **Income from  continuing operations available to common shareholders** |       | $                                    | 17,692     |                                | $          | 8,417 |   | $ | 31,709 |   | $ | 13,383 |   |
|                                                                    |       |                                 |       |                                |       |   |   |   |   |
| **Average basic  shares outstanding**                                   |       | 160,655                              |       | 98,330                              |       | 159,272 |   | 98,315 |   |
|                                                                    |       |                                 |       |                                |       |   |   |   |   |
| **Basic income from  continuing operations per share**                  |       | $                                    | 0.11       |                                | $          | 0.09 |   | $ | 0.20 |   | $ | 0.14 |   |
|                                                                    |       |                                 |       |                                |       |   |   |   |   |
| Net income                                                              |       | $                                    | 17,818     |                                | $          | 7,629 |   | $ | 32,269 |   | $ | 10,265 |   |
| Preferred stock dividends                                               |       | 126                                  |       | —                              |       | 560 |   | — |   |
| **Net income  available to common shareholders**                        |       | $                                    | 17,692     |                                | $          | 7,629 |   | $ | 31,709 |   | $ | 10,265 |   |
|                                                                    |       |                                 |       |                                |       |   |   |   |   |
| **Average basic  shares outstanding**                                   |       | 160,655                              |       | 98,330                              |       | 159,272 |   | 98,315 |   |
|                                                                    |       |                                 |       |                                |       |   |   |   |   |
| **Basic net income  per share**                                         |       | $                                    | 0.11       |                                | $          | 0.08 |   | $ | 0.20 |   | $ | 0.10 |   |

 

6

----

 
| **DILUTED EARNINGS PER SHARE**                                                                     | ** ** | **Three Months Ended  June 30** | ** ** | **Nine Months Ended  June 30** | ** ** |
|----------------------------------------------------------------------------------------------------|------------|--------------------------------------|------------|-------------------------------------|------------|
| **2004**                                                                                           | ** ** | **2003**                             | **2004**   | ** **                          | **2003**   |
| Income from continuing operations                                                                  |       | $                                    | 17,818     |                                | $          | 8,417 |   | $ | 32,269 |   | $ | 13,383 |   |
| Preferred stock dividends                                                                          |       | 126                                  |       | —                              |       | 560 |   | — |   |
| **Income from  continuing operations available to common shareholders**                            |       | 17,692                               |       | 8,417                               |       | 31,709 |   | 13,383 |   |
|                                                                                               |       |                                 |       |                                |       |   |   |   |   |
| Effect of dilutive securities:                                                                     |       |                                 |       |                                |       |   |   |   |   |
| Convertible notes                                                                                  |       | 1,381                                |       | —                              |       | — |   | — |   |
| Preferred stock dividends                                                                          |       | 126                                  |       | —                              |       | — |   | — |   |
| **Income from  continuing operations available to common shareholders after assumed  conversions** |       | $                                    | 19,199     |                                | $          | 8,417 |   | $ | 31,709 |   | $ | 13,383 |   |
|                                                                                               |       |                                 |       |                                |       |   |   |   |   |
| Average basic shares outstanding                                                                   |       | 160,655                              |       | 98,330                              |       | 159,272 |   | 98,315 |   |
| Effect of dilutive securities:                                                                     |       |                                 |       |                                |       |   |   |   |   |
| Options, warrants, and equivalents                                                                 |       | 1,013                                |       | —                              |       | 693 |   | 1 |   |
| Convertible notes                                                                                  |       | 17,532                               |       | —                              |       | — |   | — |   |
| Convertible preferred stock                                                                        |       | 1,503                                |       | —                              |       | — |   | — |   |
| **Average diluted  shares outstanding**                                                            |       | 180,703                              |       | 98,330                              |       | 159,965 |   | 98,316 |   |
|                                                                                               |       |                                 |       |                                |       |   |   |   |   |
| **Diluted income from  continuing operations per share**                                           |       | $                                    | 0.11       |                                | $          | 0.09 |   | $ | 0.20 |   | $ | 0.14 |   |
|                                                                                               |       |                                 |       |                                |       |   |   |   |   |
| Net income                                                                                         |       | $                                    | 17,818     |                                | $          | 7,629 |   | $ | 32,269 |   | $ | 10,265 |   |
| Preferred stock dividends                                                                          |       | 126                                  |       | —                              |       | 560 |   | — |   |
| **Net income  available to common shareholders**                                                   |       | 17,692                               |       | 7,629                               |       | 31,709 |   | 10,265 |   |
| Effect of dilutive securities:                                                                     |       |                                 |       |                                |       |   |   |   |   |
| Convertible notes                                                                                  |       | 1,381                                |       | —                              |       | — |   | — |   |
| Preferred stock dividends                                                                          |       | 126                                  |       | —                              |       | — |   | — |   |
| **Net income  available to common shareholders after assumed conversions**                         |       | $                                    | 19,199     |                                | $          | 7,629 |   | $ | 31,709 |   | $ | 10,265 |   |
|                                                                                               |       |                                 |       |                                |       |   |   |   |   |
| Average basic shares outstanding                                                                   |       | 160,655                              |       | 98,330                              |       | 159,272 |   | 98,315 |   |
| Effect of dilutive securities:                                                                     |       |                                 |       |                                |       |   |   |   |   |
| Options, warrants, and equivalents                                                                 |       | 1,013                                |       | —                              |       | 693 |   | 1 |   |
| Convertible notes                                                                                  |       | 17,532                               |       | —                              |       | — |   | — |   |
| Convertible preferred stock                                                                        |       | 1,503                                |       | —                              |       | — |   | — |   |
| **Average diluted  shares outstanding**                                                            |       | 180,703                              |       | 98,330                              |       | 159,965 |   | 98,316 |   |
|                                                                                               |       |                                 |       |                                |       |   |   |   |   |
| **Diluted net income  per share**                                                                  |       | $                                    | 0.11       |                                | $          | 0.08 |   | $ | 0.20 |   | $ | 0.10 |   |

 

7

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The company had 130,414 shares of convertible preferred stockoutstanding at June 30, 2004, which are convertible into 1,503,152 sharesof common stock.  These shares were notincluded in the computation of diluted earnings per share for the nine monthsended June 30, 2004 because including the weighted average of potentialshares outstanding and excluding the convertible preferred stock dividendswould have increased reported earnings per share.  There were no shares of convertible preferredstock outstanding at June 30, 2003.

 

The company’s convertible subordinated notes are, under certaincircumstances, convertible into 17,531,568 shares of the company’s commonstock.  These notes are convertible ifthe closing price of the company’s common stock exceeds 120% of the conversionprice of $13.69 for at least 20 trading days in the 30 consecutive trading daysending on the last trading day of the preceding fiscal quarter.  These shares were not included in thecomputation of diluted earnings per share for the nine months endedJune 30, 2004 because excluding the interest expense on the convertiblesubordinated notes and including the weighted average of potential sharesoutstanding would have increased reported earnings per share.  There were no convertible notes outstandingat June 30, 2003.

 

Options to purchase 3,766,481 shares of common stock, at exerciseprices ranging from $19.33 - $38.17 per share, were not included in thecomputation of diluted earnings per share for both the nine and three monthsending June 30, 2004, because the options’ exercise prices were greaterthan the average market price of the common shares.  Options to purchase 6,328,383 shares ofcommon stock, at prices ranging from $8.91 - $38.17 per share, were notincluded in the computation of diluted earnings per share for both the nine andthree months ending June 30, 2003, because the options’ exercise priceswere greater than the average market price of the common shares.

 

**NOTE 3.  INVENTORIES**

 

Inventories consisted of the following atJune 30, 2004 and September 30, 2003, net of reserves:

 
| **Dollars  in thousands** | ** ** | **June 30  2004** | ** **  | **September 30  2003** | ** ** |
|---------------------------|------------|------------------------|-------------|-----------------------------|------------|
| ** **                | ** ** | ** **             | ** **  | ** **                  | ** ** |
| Raw materials             |       | **$**                  | **114,154** |                        | $          | 84,054 |   |
| Work in process           |       | **116,943**            |        | 75,814                      |       |
| Finished goods            |       | **135,604**            |        | 87,882                      |       |
| Inventories               |       | **$**                  | **366,701** |                        | $          | 247,750 |   |

 

8

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**NOTE 4.  COMPREHENSIVE INCOME**

 

Statement of Financial Accounting Standards (SFAS) No. 130, *Reporting Comprehensive Income*, requiresthe company to report foreign currency translation adjustments and other itemsincluded in Accumulated Other Comprehensive Income (Loss), a component ofstockholders’ equity, as comprehensive income (loss).  For the nine months ended June 30, 2004and 2003, other comprehensive income is made up primarily of net incomeavailable to common shareholders and foreign currency translationadjustments.  Comprehensive income forthe periods ended June 30, 2004 and 2003 was as follows:

 
| ** **                                  | ** ** | **Three months ended  June 30** | ** ** | **Nine months ended  June 30** | ** ** |
|---------------------------------------------|------------|--------------------------------------|------------|-------------------------------------|------------|
| **Comprehensive Income (in thousands)**     | ** ** | **2004**                             | ** ** | **2003**                            | ** ** | **2004** | ** ** | **2003** | ** ** |
|                                        |       |                                 |       |                                |       |   |   |   |   |
| Net income available to common shareholders |       | $                                    | 17,692     |                                | $          | 7,629 |   | $ | 31,709 |   | $ | 10,265 |   |
| Foreign currency translation adjustments    |       | (5,655                               | )          | 8,986                               |       | 15,559 |   | 21,116 |   |
| Comprehensive Income                        |       | $                                    | 12,037     |                                | $          | 16,615 |   | $ | 47,268 |   | $ | 31,381 |   |

 

**NOTE 5.  ADOPTION OF NEWACCOUNTING POLICIES**

 

In June 2002, the FASB issued SFAS No. 146, *Accounting for Costs**Associated with Exit or Disposal Activities*.  The provisions of this statement wereeffective for exit or disposal activities initiated after December 31,2002.  The company’s currentrestructuring plan, initiated in September 2002, is being accounted forunder the previously existing accounting principles for restructuring,primarily Emerging Issues Task Force Issue 94-3.  The company accrued pre-tax charges of $44.0million, in fiscal years 2002 and 2003, when the company’s management approvedthe current restructuring plan.  If thecompany had accounted for this restructuring plan under SFAS No. 146, certaincosts included in this $44.0 million, such as employee termination benefits of$12.3 million and lease and contract cancellation costs of $10.3 million, wouldhave been recognized over the restructuring period as incurred and not accruedfor when the company’s management approved these plans.

 

In July 2004, the EITF proposed new rules under which contingentconvertible notes would be included in diluted earnings per share calculations,regardless of whether the conversion contingency has been met.  This contrasts with existing accountingrules, which allow companies to exclude contingent convertibles from thecalculation if the contingency has not been met.  The current proposal includes a requirementto restate prior period diluted earnings per share to reflect the dilutioneffect of contingent convertibles.  Thecompany has evaluated the impact of this proposal and believes that there wouldbe no impact on previously reported diluted earnings per share amounts.

 

9

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**NOTE 6.  RESTRUCTURING ANDINTEGRATION**

 

At June 30, 2004, the company had a restructuring reserve of  $11.5 million, comprised of $2.1 million forits restructuring plan and $9.4 million for its Allen Telecom acquisitionintegration plan.

 

The company initiated a restructuring plan in 2002 and accrued $44.0million of pre-tax charges for inventory provisions, employee terminationcosts, asset provisions, and lease and contract cancellation costs in 2002 and2003.  As part of this plan the companyhas consolidated its operations into fewer, more efficient facilities andopened two new manufacturing facilities in Mexico and the Czech Republic.  In the second quarter of 2004, the companyaccrued an additional $1.0 million of pre-tax restructuring charges comprisedof a $0.5 million provision for fixed asset disposals and $0.5 million foradditional lease cancellation costs.  Dueto changes in estimates for severance and lease termination costs, therestructuring reserve was increased by $1.1 million and reserves establishedunder this plan in 2002 for inventory disposals were reduced by $1.1million.  The company originallyestimated that 1,013 employees would receive severance benefits under thisplan, and to date has paid severance benefits to 1,112 employees.  The company has paid $0.4 million ofseverance to six employees in the third quarter of 2004, and $2.5 million ofseverance to 227 employees in the first nine months of 2004.  In addition, the company has paid $0.6million of lease cancellation and other costs in the third quarter of 2004 and$5.9 million for the first nine months of 2004. Cash payments, net of cash received on the sale of assets and inventoryunder this plan, were $0.6 million in the third quarter and $6.4 million forthe first nine months of 2004.

 

A summary of the restructuring reserve activity is provided below (inthousands):

 
| **Restructuring Reserve Activity for the  nine months ending June 30, 2004** | ** ** | **Reserve  Balance  30-Sep-03** | ** ** | **2004  Accrual** | ** ** | **Reserve  Adjustments** | ** ** | **Charges for  Nine months  Ended  30-Jun-04** | ** ** | **Reserve  Balance  30-Jun-04** | ** ** |
|-----------------------------------------------------------------------------------|------------|---------------------------------|------------|-------------------|------------|--------------------------|------------|------------------------------------------------|------------|---------------------------------|------------|
|                                                                              |       |                            |       |              |       |                     |       |                                           |       |                            |       |
| Severance                                                                         |       | —                          |       | —            |       | $                        | 2,474      |                                           | $          | (2,474                          | )          | — |   |
| Lease cancellation and other costs                                                |       | 8,907                           |       | 500               |       | (1,401                   | )          | (5,879                                         | )          | 2,127                           |       |
| **Total Restructuring  Reserve Balance**                                          |       | $                               | 8,907      |              | $          | 500                      |       | $                                              | 1,073      |                            | $          | (8,353 | ) | $ | 2,127 |   |
|                                                                                   |            |                                 |            |                   |            |                          |            |                                                |            |                                 |            |  |  |  |  |  |

 

In 2003, as part of theAllen Telecom acquisition, the company accrued a restructuring reserve forcosts to integrate Allen’s operations with the company’s and to eliminateduplicate operations. An initial estimate of $29.9 million of integrationreserves comprised of a $16.2 million provision for inventory and fixed assetsand $13.7 million for employee termination, lease cancellation and othercosts.  During the first nine months of2004, the company adjusted this initial estimate and recorded an additional$9.6 million of integration reserves comprised of a $2.9 million provision forinventory and fixed assets and $6.7 million for employee termination, leasecancellation and other costs.  This $9.6million increase in estimated integration costs was accounted for as a decreasein assets acquired and an increase in liabilities assumed from AllenTelecom.  Due to changes in estimates forseverance and lease termination costs, the restructuring reserve was increasedin the third quarter by $1.6 million and reserves originally established underthis plan for inventory and fixed asset disposals were reduced $1.6million.  The company will finalize itsestimates of the integration costs associated with these plans in the fourthquarter of 2004, and any additional adjustments will be treated as a decreaseor increase in the net assets acquired from Allen Telecom.

 

Charges to the integration reserve for severance payments were $5.6million for 92 employees in the third quarter of 2004, and $7.5 million for 222employees in the first nine months of 2004.  Charges to the reserve for lease and othercontract costs were $1.3 million in the third quarter of 2004, and $2.9 millionin the first nine months of 2004.  Cashpayments, net of cash received on the sale of assets and inventory under thisplan, were $6.8 million in the third quarter and $10.4 million for the firstnine months of 2004.

 

A summary of the integration reserve activity is provided below (inthousands):

 
| **Integration Reserve Activity for the  nine months ending June 30, 2004** | ** ** | **Reserve  Balance  30-Sep-03** | ** ** | **2004  Accrual** | ** ** | **Reserve  Adjustments** | ** ** | **Charges for Nine months  ended  30-Jun-04** | ** ** | **Reserve  Balance  30-Jun-04** | ** ** |
|---------------------------------------------------------------------------------|------------|---------------------------------|------------|-------------------|------------|--------------------------|------------|-----------------------------------------------|------------|---------------------------------|------------|
| Severance                                                                       |       | $                               | 11,189     |              | $          | 3,851                    |       | $                                             | 64         |                            | $          | (7,452 | ) | $ | 7,652 |   |
| Lease cancellation and other costs                                              |       | 318                             |       | 2,865             |       | 1,526                    |       | (2,914                                        | )          | 1,795                           |       |
| **Total Integration  Reserve Balance**                                          |       | $                               | 11,507     |              | $          | 6,716                    |       | $                                             | 1,590      |                            | $          | (10,366 | ) | $ | 9,447 |   |

 

10

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For the nine months ending June 30, 2004 the company hasrecognized $4.2 million of restructuring expense. This consists of $2.6 millionfor the company’s restructuring plan made up of the second quarter accrual of$1.0 million mentioned above and $1.6 million for fixed assets and inventoryrelocation charges associated with the relocation of manufacturing operationsthat were expensed as incurred. The remaining $1.6 million relates to Allenintegration charges for Andrew employee severance and Andrew facilityintagration charges that could not be accrued as a part of purchase accounting.

 

#### **NOTE7.  STOCK-BASED COMPENSATION**

#### ** **

#### **The company accounts forstock-based compensation plans using the intrinsic value method described inAccounting Principles Board Opinion No. 25, *Accountingfor Stock Issued to Employees*, and related Interpretations.  All stock options granted by the company aregranted at market price and thus no compensation expense is recorded in thecompany’s results of operations.  UnderSFAS No. 148, *Accounting for Stock-BasedCompensation,* the company is required to report quarterly pro formanet income and earnings per share as if the company had accounted for its stockoption plans under the fair value method. The following table shows the company’s pro forma net income andearnings per share as if the company had recorded the fair value of stockoptions as compensation expense.**

#### ** **

| **(Dollars  in thousands, except per share amounts)**  | ** ** | **Three Months Ended  June 30** | ** ** | **Nine Months Ended  June 30** | ** ** |
|--------------------------------------------------------|------------|--------------------------------------|------------|-------------------------------------|------------|
| **2004**                                               | ** ** | **2003**                             | **2004**   | ** **                          | **2003**   |
| ** **                                             | ** ** | ** **                           | ** ** | ** **                          | ** ** | ** ** | ** ** | ** ** | ** ** |
| Reported net income available to common  shareholders  |       | $                                    | 17,692     |                                | $          | 7,629 |   | $ | 31,709 |   | $ | 10,265 |   |
|                                                   |       |                                 |       |                                |       |   |   |   |   |
| Less: Stock-based compensation, net of tax             |       | (1,750                               | )          | (1,821                              | )          | (5,361 | ) | (5,447 | ) |
|                                                   |       |                                 |       |                                |       |   |   |   |   |
| Pro forma net income available to common  shareholders |       | $                                    | 15,492     |                                | $          | 5,808 |   | $ | 26,348 |   | $ | 4,818 |   |
|                                                   |       |                                 |       |                                |       |   |   |   |   |
| Reported basic and diluted net income per  share       |       | $                                    | 0.11       |                                | $          | 0.08 |   | $ | 0.20 |   | $ | 0.10 |   |
|                                                   |       |                                 |       |                                |       |   |   |   |   |
| Pro forma basic and diluted net income per  share      |       | $                                    | 0.10       |                                | $          | 0.06 |   | $ | 0.17 |   | $ | 0.05 |   |

 

**NOTE 8. WARRANTY RESERVE**

 

The company offers warranties on most of its products. The specificterms and conditions of the warranties offered by the company vary dependingupon the product sold.  The companyestimates the costs that may be incurred under its warranty plans and records aliability in the amount of such estimated costs at the time product revenue isrecognized.  Factors that affect thecompany’s warranty liability include the number of units sold, the type ofproducts sold, historical and anticipated rates of warranty claims and cost perclaim.  The company periodically assessesthe adequacy of its recorded warranty liabilities and adjusts the amounts asnecessary.  The company reports warrantyreserves as a current liability, included in accrued expenses and otherliabilities. Changes in the company’s warranty reserve during the three andnine month periods ended June 30, 2004 and 2003, are as follows:

 
| **(dollars  in thousands):**                 | ** ** | **Three Months Ended  June 30** | ** ** | **Nine Months Ended  June 30** | ** ** |
|----------------------------------------------|------------|--------------------------------------|------------|-------------------------------------|------------|
| **2004**                                     | ** ** | **2003**                             | **2004**   | ** **                          | **2003**   |
| **Warranty reserve at  beginning of period** |       | **$**                                | **18,281** | ** **                          | $          | 9,851 |   | **$** | **12,470** | ** ** | $ | 9,932 |   |
| Accrual for warranties issued                |       | **3,319**                            | ** ** | 754                                 |       | **12,401** | ** ** | 2,163 |   |
| Warranty settlements made                    |       | **(1,602**                           | **)**      | (618                                | )          | **(5,944** | **)** | (2,108 | ) |
| Warranty adjustments                         |       | **—**                           | ** ** | —                              |       | **1,071** | ** ** | — |   |
| **Warranty reserve at  end of period**       |       | **$**                                | **19,998** | ** **                          | $          | 9,987 |   | **$** | **19,998** | ** ** | $ | 9,987 |   |

 

11

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**NOTE 9. ACQUISITION OF BUSINESSES**

 

In the first quarter of fiscal 2004, the company made two businessacquisitions.  The company acquiredselected assets of Channel Master LLC, a U.S. manufacturer of high volumeantenna and antenna related products for the consumer Direct BroadcastSatellite market. The company also purchased selected assets of Yantai FineCable Company, a Chinese manufacturer of products for telecommunications andbroadband cable TV infrastructure markets. The company paid a total of $22.0 million for these acquisitions. Apreliminary allocation of the purchase price resulted in $2.3 million ofgoodwill and $7.9 million of intangible assets.

 

On March 31, 2004, the company acquired selected assets of MTSWireless Components LLC, a supplier of cable accessories and steel componentswhich support the installation of wireless systems including antenna mounts andother equipment support solutions.  Totalpurchase consideration was $28.3 million, consisting primarily of 1,650,000shares of common stock, based on a three-day average price of $16.88 pershare.  A preliminary allocation of thepurchase price resulted in $12.7 million of goodwill and $1.4 million ofintangible assets.  Pro forma results ofoperations, assuming these acquisitions occurred at the beginning of theperiod, were not materially different from the reported results of operations.

 

**NOTE 10. SALE OF ASSETS**

 

In November 2003, the company sold selected assets from itsbroadcast manufacturing operations to Electronics Research. Inc. (ERI).  For these assets the company received $3.0million in cash and $5.8 million in promissory notes.  The company recognized a $4.5 million loss onthe disposal of these assets, including $4.0 million of goodwill allocated to these assets based on fair value.

 

12

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**NOTE 11. SETTLEMENT OF PRE-ACQUISTIONLITIGATION**

 

During the second quarter of 2004, the company reached a definitiveagreement with TruePosition, Inc. to settle patent infringement litigationfiled against Allen Telecom, Inc., prior to the acquisition of Allen by thecompany. As part of this settlement the company paid  $29.0 million in cash and has agreed to payan additional $6 million over the next three years, with a present value of$5.6 million.  In addition, the companyissued warrants to purchase one million shares of the company’s common stockthat have a four-year term and a $17.70 exercise price per share.  These warrants were valued at $8.5 million.The settlement was accounted for as an increase to the liabilities assumed inthe acquisition of Allen Telecom, resulting in a $43.1 million increase ingoodwill. The company and TruePosition agreed to cross-license geolocation-relatedpatents.  This agreement also gives thecompany the opportunity to provide certain geolocation products to TruePositionthrough October 2006.

 

**NOTE 12. DEBT COVENANTS**

 

Under the terms of the company’s $170.0 million revolving creditfacility, the company has agreed to meet various quarterly requirements.  The company was in compliance with all ofthese requirements as of June 30, 2004. The company must meet variousrequirements, including maintaining net worth, maintaining a ratio of earningsbefore interest, taxes, depreciation and amortization (EBITDA) to total debt,maintaining a fixed charges coverage ratio and limits on the amount of assetsthat the company can dispose of in a fiscal year.  These requirements may limit the amount ofborrowing under this credit agreement. Under the most restrictive of these requirements, the company waslimited to a maximum borrowing of $123.8 million at June 30, 2004.

 

### **NOTE 13.  DEFINED BENEFIT PLANS**

### ** **

The company has two defined benefitplans.  Approximately 600 current andformer employees of the company’s United Kingdom subsidiary, Andrew Ltd.,participate in a defined benefit plan. With the acquisition of Allen Telecom the company assumed the Allennoncontributory defined benefit plan that covers approximately 1,760 currentand former employees.  This plan wasfrozen after the completion of the Allen acquisition.

 

The components of net periodic pension costfor these plans for the three and nine month periods ended June 30,2004 and 2003, are as follows:

 
| **Dollars  in Thousands**                         | ** ** | **Three months ended  June 30** | ** ** | **Nine months ended  June 30** | ** ** |
|---------------------------------------------------|------------|--------------------------------------|------------|-------------------------------------|------------|
| **2004**                                          | ** ** | **2003**                             | **2004**   | ** **                          | **2003**   |
| Service costs                                     |       | **$**                                | **430**    | ** **                          | $          | 294 |   | **$** | **2,469** | ** ** | $ | 882 |   |
| Interest costs                                    |       | **1,501**                            | ** ** | 714                                 |       | **4,376** | ** ** | 2,140 |   |
| Return on plan assets                             |       | **(1,225**                           | **)**      | (491                                | )          | **(3,652** | **)** | (1,473 | ) |
| Amortization of unrecognized prior service  costs |       | **84**                               | ** ** | 10                                  |       | **156** | ** ** | 32 |   |
| Amortization of net loss                          |       | **291**                              | ** ** | 253                                 |       | **862** | ** ** | 759 |   |
| Net periodic pension cost                         |       | **$**                                | **1,081**  | ** **                          | $          | 780 |   | **$** | **4,211** | ** ** | $ | 2,340 |   |

 

13

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**ITEM 2****.****                                                     MANAGEMENT’SDISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS**

 

**SUMMARY**

 

For the nine months endingJune 30, 2004 sales increased 102% to $1,350.9 million, driven byincreased capital investment in wireless infrastructure and the impact of theJuly 2003 acquisition of Allen Telecom. Wireless infrastructure investment has increased significantly acrossall major geographic regions over the last nine months. On a year to datebasis, gross margins were 25.3%, down from 26.5% for the same period in 2003,primarily due to a change in product mix as a result of the Allen Telecomacquisition, start-up costs associated with new low cost manufacturingfacilities in Mexico and the Czech Republic, and the impact of new products inthe satellite and broadband cable areas. The company’s operating margins showed significant improvement as aresult of synergies created with the Allen acquisition and higher sales.  Operating income was $64.0 million or 4.7% ofsales for the first nine months of 2004, compared to $6.4 million or 1.0% ofsales in 2003. Operating income includes non–cash intangible amortization of$28.9 million and $11.0 million for the first nine months of 2004 and 2003,respectively. Net income available to common shareholders was $31.7 million or$0.20 per diluted share compared to $10.3 million or $0.10 per diluted share in2003.

 

**RESULTSOF OPERATIONS**

 

Third quarter sales were $493.0 million, up 131% from $213.7 million inthe year ago quarter and June year to date sales increased 102% to $1,350.9million.  This increase in sales wasprimarily due to continued improvement in wireless infrastructure marketdemand, the acquisition of Allen Telecom in the fourth quarter of fiscal 2003,and the introduction of new products in the satellite and broadband cableareas.  Andrew’s sales momentum remainedstrong and improved sequentially in the third quarter as Andrew continued tobenefit from overall growth in wireless infrastructure investment.  Third quarter sales grew in all of thecompany’s major geographic regions compared to last year.  The table below shows Andrew’s sales by majorgeographic regions.

 
| ** **                       | ** ** | **Three months ended**  | ** **              | **Change** | ** **              | **Nine months ended** | ** ** | **Change** | ** ** |
|----------------------------------|------------|-------------------------|-------------------------|------------|-------------------------|-----------------------|------------|------------|------------|
| **June 30,  2004**          | ** ** | **June 30,  2003** | **June 30,  2004** | ** ** | **June 30,  2003** |
| **Americas**                     |       | $                       | 287.1                   |       | $                       | 117.0                 |       | 145        | %          | $ | 769.7 |   | $ | 365.2 |   | 111 | % |
| ** **                       |       |                    |                    |       |                    |                  |       |       |       |   |   |   |   |
| **Europe/ Middle East  /Africa** |       | 133.4                   |                    | 58.5       |                    | 128                   | %          | 390.7      |       | 180.4 |   | 117 | % |
| ** **                       |       |                    |                    |       |                    |                  |       |       |       |   |   |   |   |
| **Asia Pacific**                 |       | 72.5                    |                    | 38.2       |                    | 90                    | %          | 190.5      |       | 124.0 |   | 54 | % |
| **Total**                        |       | **$**                   | **493.0**               | ** ** | **$**                   | **213.7**             | ** ** | **131**    | **%**      | **$** | **1,350.9** | ** ** | **$** | **669.6** | ** ** | **102** | **%** |

 

Due to the significant change in product mix that resulted from theAllen acquisition and the substantial improvement in the wirelessinfrastructure market, Andrew believes that sequential quarter trends providemore insight on sales trends than year-over-year comparisons. The table belowshow’s Andrew’s sales by major geographic regions for the last three quarters.

 
| ** **                        | ** ** | **Three months ended**   | ** ** |
|-----------------------------------|------------|--------------------------|------------|
| **June 30,  2004**           | ** ** | **March 31,  2004** | ** ** | **December 31,  2003** |
| **Americas**                      |       | $                        | 287.1      |   | $ | 253.7 |   | $ | 228.9 |   |
| ** **                        |       |                     |       |   |   |   |   |
| **Europe/ Middle East  / Africa** |       | 133.4                    |       | 133.2 |   | 124.1 |   |
| ** **                        |       |                     |       |   |   |   |   |
| **Asia Pacific**                  |       | 72.5                     |       | 60.2 |   | 57.8 |   |
| **Total**                         |       | **$**                    | **493.0**  | ** ** | **$** | **447.1** | ** ** | **$** | **410.8** | ** ** |

 

14

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Sales in the Americas were up 13% sequentially, driven by continuedproduct demand in the broadband satellite market and wireless infrastructuresales in Latin America.  North Americanwireless infrastructure sales increased slightly, driven by sales to OEMs andpartially offset by decreased operator spending due to the impact of operatorconsolidation.  Sales in Europe, MiddleEast and Africa were up slightly from the prior quarter as operators continueto expand traditional networks to meet increasing capacity demands, as well ascontinued movement towards EDGE and UMTS networks.  Sales in the Asia Pacific region increased20% sequentially, driven by wireless infrastructure build-outs in China andIndia.

 

The companyexperienced sequential growth across most major product groups.  Antenna Product sales increased as a resultof coverage requirements for network expansion and demand for certain newproduct lines within the broadband satellite market.  Base Station Subsystems sales increased as aresult of OEMs continuing to support increased operator capital expendituresfor network upgrades and expansion. Cable Products sales increased as a resultof network expansions, particularly in China and India, and due to theacquisition of MTS Wireless Components in March 2004.  Wireless Innovations sales increased slightlyover the prior quarter due to increased need for coverage solutions.  Network Solutions sales decreased modestly ona sequential basis due to the timing of geolocation hardwareinstallations.  Compared to 2003, all ofthe company’s product groups increased for both the third quarter and for thefirst nine months of 2004 due to overall strengthening of the wireless marketas well as the impact of the Allen Telecom acquisition.

 

In the third quarter of 2004, the company’s gross margin was 25.9%compared to 24.7% in the prior quarter and 25.6% in the year ago quarter.  Gross margin showed improvement as Andrewmade continued progress on relocating certain product lines within the AntennaGroup to new manufacturing facilities in Mexico and the Czech Republic.  The company also saw improved margins on itsnew broadband satellite products as start-up manufacturing variances werereduced.  Cable margins were down in thethird quarter as a result of product mix due to an increase in sales of lowermargin, smaller diameter cable. On a year to date basis, gross margin was 25.3%in 2004, compared to 26.5% in 2003.  Thisdecrease in gross margin percentage was primarily due to the change in productmix that resulted from the Allen Telecom acquisition.  Other factors that contributed to theyear-over-year decline in the gross margin rate were the entry into new marketsand the associated lower margin products such as the satellite broadbandproducts and broadband cable products, continued but moderating pricingpressure and start-up costs associated with the company’s two new manufacturingfacilities.

 

Research and development expenses were $29.3million or 5.9% of sales in the third quarter, compared to $28.5 million or6.4% of sales in the prior quarter and $18.9 million or 8.9% of sales in theyear ago quarter.  Research anddevelopment expenses continued to increase due to higher levels of spending tosupport the introduction of new products for in-building coverage and BaseStation Subsystems.   On a year to datebasis, research and development expenses increased to $83.4 million compared to$58.5 million in 2003, due primarily to the Allen acquisition.

 

Sales and administrative expenses were $56.9million or 11.5% of sales in the third quarter, compared to $52.7 million or11.8% of sales in the prior quarter and $32.8 million or 15.4% of sales in theyear ago quarter.  Sales andadministrative expenses increased primarily due to a higher level of sales,planned expenditures for the global deployment of IT systems and additionalincentive compensation.  Sales andadministrative expenses declined as a percentage of sales, due to higher salesand the benefits from our on-going cost savings and merger integrationprograms.  On a year to date basis, salesand administrative expenses were $162.0 million or 12.0% of sales in 2004,compared to $100.9 million or 15.1% of sales for the first nine months of2003.  As a result of the Allen Telecomacquisition, sales and administrative expenses increased in total, but werelower as a percentage of sales.

 

Intangible amortization was $9.6 million in the third quarter, comparedto $9.9 million in the prior quarter and $3.7 million in the third quarter of2003.  On a year to date basis,intangible amortization increased to $28.9 million in 2004, from $11.0 millionin 2003.  This increase was due almostentirely to intangible assets acquired from Allen Telecom.  It is anticipated that total intangibleamortization will be approximately $39 million in fiscal 2004 and decline toapproximately $22 million in fiscal 2005.

 

Interest expense was $3.5 million in thethird quarter, compared to $0.7 million in the third quarter of the prioryear.  On a year to date basis, interestexpense was $11.4 million in 2004, compared to $2.6 million in 2003.  The increase in interest expense was due tothe $240.0 million of convertible notes issued in August 2003 and the$45.2 million of senior notes assumed in the Allen Telecom acquisition.  Interest income increased both in the quarterand on a year to date basis due to higher cash and short-term investmentbalances.

 

Included in the results for the nine months ended June 30, 2004are two non-recurring transactions.  Inthe second quarter of 2004, the company recognized a net gain of $1.4 millionon several real estate transactions, principally due to the sale of a facilityin

 

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Australia.  In the first quarterof 2004, Andrew recognized a $4.5 million loss on the sale of selectedbroadcast assets to Electronics Research Inc. (ERI).  Included in this loss is an allocation of$4.0 million of goodwill that was attributed to the fair value of theseassets.  Included in the results for 2003is a gain of $9.4 million that the company recognized in the third quarter forthe sale of unimproved land at the company’s Orland Park, Illinois facility.

 

Other (income) expense was expense of $0.9 million in the third quarterof 2004, compared to income of $0.5 million in the second quarter of 2004, andincome of $0.4 million in the third quarter of 2003.  On a year to date basis, other expense wasexpense of $2.2 million in 2004 and income of $1.2 million in 2003.  Other (income) expense is mainly driven byforeign exchange gains and losses.

 

The company’s effective tax rate for 2004 was 35% compared to 30% in2003.  The increase in the effective taxrate is due to an increase in U.S. taxable income, principally as a result ofthe Allen Telecom acquisition.

 

Included in the first nine months of 2003 is a loss for discontinuedoperations of $3.1 million, due to operating losses from the company’s wirelessaccessory and equipment shelter businesses that were discontinued in 2003.

 

# **LIQUIDITY**

# ** **

The company has maintained its strong balancesheet and reduced its outstanding debt by $17.5 million during the first ninemonths of 2004.  Cash and cashequivalents were $164.8 million at June 30, 2004, compared to $200.9million at March 31, 2004 and $286.3 million at September 30, 2003.  Working capital was $621.2 million atJune 30, 2004, up slightly from $615.5 million at September 30, 2003.

 

In the third quarter of 2004, the company filed a universal S-3 shelfregistration that allows Andrew to publicly issue up to $750.0 million of debtor equity.  This shelf registration givesthe company the flexibility to take advantage of strategic initiatives andother favorable long-term opportunities that will build shareholder value.  The company has a revolving credit facilitythat at June 30, 2004 had no outstanding borrowings and allowed thecompany to borrow up to $123.8 million (see Note 12 of the Notes toConsolidated Financial Statements). Management believes that the company’s strong working capital position,ability to generate cash flow from operations, and its ability to borrow underits revolving credit agreement will allow the company to meet its normaloperating cash flow needs, for the foreseeable future.

 

In the first nine months of 2004, the companygenerated $0.1 million of cash from operations. Cash flow from operations was driven by net income of $32.3 million,$75.5 million of non-cash charges primarily for depreciation and amortization,cash restructuring costs of $16.8 million and a net change in operating assetsand liabilities that resulted in a $90.8 million decrease in cash flow.  Increased sales resulted in an increase inaccounts receivable, reducing cash flow by $84.3 million.  Days sales in billed receivables (DSO)decreased to 76 days at June 30, 2004, compared to 77 days atMarch 31, 2004 and 80 days at September 30, 2003.  DSO has continued to decrease as a result ofa higher percentage of the company’s sales occurring in North America, whichgenerally carry shorter payment terms than international sales.  The company continued to increase inventorylevels to meet the significant increase in demand, resulting in a $94.4 millionyear to date decrease in cash flow.  Theincrease in inventory resulted in higher accounts payable balances, whichincreased year to date cash flow by $98.2 million.  Netted in the increase in accounts payable andother liabilities is a $7.5 million payment made in the first quarter to thepension plan assumed in the Allen Telecom acquisition.

 

In the first nine months of 2004, the company used $108.8 million forinvesting activities, including $57.7 million of capital expenditures.  These expenditures included investments inthe company’s new facilities in Reynosa, Mexico and Brno, Czech Republic andinvestments associated with the Allen integration and SAP implementations. ** **Inthe first quarter, the company spent $23.2 million on two asset acquisitions,acquiring selected assets of Yantai Fine Cable and Channel Master LLC (see Note9 of the Notes to Consolidated Financial Statements).  In the second quarter the company paid $29.0million to settle patent infringement litigation with TruePosition Inc. as partof litigation brought against Allen Telecom prior to the acquisition by thecompany.

 

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In the first quarter of 2004, the company invested $6.5 million in AndesIndustries, a manufacturer of high-performance optical equipment and otherproducts for broadband cable networks. This investment was in the form of a convertible interest-bearing notethat allows the company to convert this note into an equity interest in AndesIndustries.  The company received $3.0million in cash as part of the sale of selected assets of its broadcast antennabusiness to ERI (see Note 10 of the Notes to Consolidated FinancialStatements).  The company received $4.6million from the sale of various other assets, primarily in connection with thesale of a facility in Australia.

 

The company used net cash of $17.7 million for financing activitiesduring the first nine months of 2004, primarily due to a $17.5 millionreduction in debt, $2.5 million used to repurchase 225,000 shares of commonstock, $2.9 million received from the exercise of stock options and $0.6million of dividends paid to preferred shareholders.  The company reduced its long-term debt by$17.8 million primarily due to principal payments of $10.8 million on seniornotes and the payment of $6.5 million of debt held by the company’s Italiansubsidiary.

 

**SAFEHARBOR FOR FORWARD-LOOKING STATEMENTS**

 

We have made forward-looking statements in this Form 10-Q under“Management’s Discussion and Analysis of Financial Condition and Results ofOperations” and in the “Notes to Consolidated Financial Statements.”  In addition, our representatives ormanagement may make other written or oral statements that constituteforward-looking statements. Forward-looking statements are based on management’s beliefs andassumptions and on information currently available to them. These statementsoften contain words like believe, expect, anticipate, intend, contemplate,seek, plan, estimate or similar expressions. We make these statements under the protection afforded them bySection 21E of the Securities Exchange Act of 1934.

 

Forward-looking statements involve risks, uncertainties andassumptions, including those discussed in this report.  We operate in a continually changing businessenvironment, and new risk factors emerge from time to time. We cannot predictthose risk factors, nor can we assess the impact, if any, of those risk factorson our business or the extent to which any factors may cause actual results todiffer materially from those projected in any forward-looking statements.  Forward-looking statements do not guaranteefuture performance, and you should not put undue reliance on them.

 

While Andrew Corporation’s management is optimistic about the company’slong-term prospects, one should consider the risks and uncertainties inevaluating its growth outlook.  Factorsthat may cause actual results to differ from expected results include thecompany’s ability to integrate acquisitions and to realize the synergies andcost savings anticipated from these transactions, the effects of competitiveproducts and pricing, economic and political conditions that may impactcustomers’ ability to fund purchases of our products and services, the company’sability to achieve the cost savings anticipated from cost reduction programs,fluctuations in international exchange rates, the timing of cash payments andreceipts, end use demands for wireless communication services, the loss of oneor more significant customers and other business factors. For a more completediscussion of these and other risks, uncertainties and assumptions that mayaffect us, see the company’s annual report on Form 10-K for the fiscal yearended September 30, 2003.

 

##### **ITEM3**.  QUANTITATIVEAND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

##### ** **

See Item 7a of the company’s Annual Report on Form 10-K for the year ended September 30, 2003.  With the exception of copper purchase commitments there has been no material change from the end of the previous fiscal year through June 30, 2004.

 

The company uses various metals in the production of its products.Copper, which is used to manufacture coaxial cable, is the most significant ofthese metals.  As a result, the companyis exposed to fluctuations in the price of copper.  In order to reduce this exposure, the companyhas entered into contracts with various suppliers to purchase copper. AtSeptember 30, 2003 the company had contracts to purchase 38.2 millionpounds of copper for $29.5 million. Based on current market conditions the company has reduced the amount ofcopper under contract to 33.0 million pounds for $31.7 million at June 30,2004.

 

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##### **ITEM4**.  CONTROLS ANDPROCEDURES

##### ** **

Evaluation of Disclosure Controls and Procedures:

 

As of June 30, 2004, the company’s management,including its Chief Executive Officer and Chief Financial Officer, havereviewed and evaluated the effectiveness of the company’s disclosure controlsand procedures pursuant to Rule 13a-15(b) of the Securities Exchange Act of1934.  Based on that review and evaluation, the Chief Executive Officerand Chief Financial Officer have concluded that the company’s disclosurecontrols and procedures are adequate and effective and that no changes arerequired at this time.

 

Changes in Internal Controls:

 

In connection with the evaluation by management,including its Chief Executive Officer and Chief Financial Officer, of thecompany’s internal control over reporting, pursuant to Exchange Act Rule13a-15(d), no changes during the quarter ended June 30, 2004 wereidentified that have materially affected, or are reasonably likely tomaterially affect, the company’s internal control over financial reporting.

 

**PART II****—OTHER INFORMATION**

 

**ITEM1.   LEGAL PROCEEDINGS**

 

On December 12,2003, Antel Holding, Ltd. (Antel) a subsidiary of Group Menetap, Ltd., filed aNotice of Arbitration and Statement of Claim with the American ArbitrationAssociation. The claim relates to the purchase by Antel of the company’sinterest in certain Russian ventures pursuant to a Share Purchase and SaleAgreement dated November 5, 2001. The Statement of Claim asserts that the company breached warranties andrepresentations in connection with the sale and that Antel was thereby damagedin an amount to be proven up to the indemnification limit of $40 million. Thisclaim is scheduled for hearing in March 2005.  The company believes that the Claim iswithout merit and intends to defend the matter vigorously.

 

The company is also aparty to various other legal proceedings, lawsuits and other claims arising inthe ordinary course of its business.  Thecompany does not believe that such other litigation, if adversely determined,would have a material effect on the company’s business, financial position,results of operations or cash flow.

 

### **ITEM 2. CHANGES IN SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASE OF EQUITYSECURITIES**

### ** **

Since 1997, the company’s Board of Directors has authorized the companyto repurchase up to 30.0 million common shares. As of June 30, 2004 the company has repurchased approximately 17.0million shares under this plan.  Theserepurchases may be made on the open market or in negotiated transactions andthe timing and amount of shares repurchased will be determined by the company’smanagement.  Included in the 17.0 millionshares repurchased are 225,000 shares repurchased in the first quarter of 2004for $2.5 million.  No shares were repurchasedduring the second or third quarters of 2004.

 

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### **ITEM 6**.  EXHIBITS AND REPORTS ON FORM 8-K

### ** **

| **Exhibit  No.** | ** ** | **Description**                                                                             |
|------------------|------------|---------------------------------------------------------------------------------------------|
|             |       |                                                                                        |
| 10.1*            |       | Andrew Corporation  Executive Severance Benefit Plan                                        |
|             |       |                                                                                        |
| 10.2*            |       | Executive Severance Benefit Plan Agreement with Ralph Faison                                |
|             |       |                                                                                        |
| 10.3*            |       | Executive Severance Benefit Plan Agreement with Marty Kittrell                              |
|             |       |                                                                                        |
| 10.4*            |       | Executive Severance Benefit Plan Agreement with Dan Hartnett                                |
|             |       |                                                                                        |
| 10.5*            |       | Executive Severance Benefit Plan Agreement with Jeff Gittelman                              |
|             |       |                                                                                        |
| 10.6*            |       | Executive Severance Benefit Plan Agreement with John DeSana                                 |
|             |       |                                                                                        |
| 10.7*            |       | Executive Severance Benefit Plan Agreement with Paul Cox                                    |
|             |       |                                                                                        |
| 10.8*            |       | Executive Severance Benefit Plan Agreement with Jim Petelle                                 |
|             |       |                                                                                        |
| 10.9*            |       | Executive Severance Benefit Plan Agreement with Mark Olson                                  |
|             |       |                                                                                        |
| 10.10*           |       | Executive Severance Benefit Plan Agreement with Greg Maruszak                               |
|             |       |                                                                                        |
| 10.11*           |       | Executive Severance Benefit Plan Agreement with Fred Lietz                                  |
|             |       |                                                                                        |
| 10.12*           |       | Executive Severance Benefit Plan Agreement with J.C. Huang                                  |
|             |       |                                                                                        |
| 10.13*           |       | Executive Severance Benefit Plan Agreement with John Dickson                                |
|             |       |                                                                                        |
| 10.14*           |       | Executive Severance Benefit Plan Agreement with Robert Hudzik                               |
|             |       |                                                                                        |
| 10.15*           |       | Executive Severance Benefit Plan Agreement with Jim LePorte                                 |
|             |       |                                                                                        |
| 10.16*           |       | Executive Severance Benefit Plan Agreement with Roger Manka                                 |
|             |       |                                                                                        |
| 10.17*           |       | Executive Severance Benefit Plan Agreement with Mickey Miller                               |
|             |       |                                                                                        |
| 10.18*           |       | Executive Severance Benefit Plan Agreement with Karen Quinn-Quintin                         |
|             |       |                                                                                        |
| 31               |       | Rule 13a-14(a) Certification of  Chief Executive and Chief Financial Officers               |
|             |       |                                                                                        |
| 32               |       | 18 U.S.C. Section 1350  Certifications of Chief Executive and Chief Financial Officers |

 

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*Indicates compensatory plan

 

**(b) Reports on Form 8-K**

On May 3, 2004, the company furnished, under Items 7 and 12 of Form8-K, a press release regarding financial results for the quarter ended March 31,2004, as well as a transcript of the conference call presentation that followedthe press release.

 

On April 6, 2004, the company furnished, under items 7 and 12 ofForm 8-K, a press release announcing that results for the second quarter offiscal 2004 were estimated to significantly exceed previously providedguidance.

 

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**SIGNATURE**

 

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 theundersigned thereunto duly authorized.

 

 
| Date   | August 12,  2004 |   | By:    |   /s/                                           | Marty R. Kittrell |   |
|--------|-----------------------|--------|--------|-----------------------------------------------------------|-------------------|--------|
|   |                  |   |   |                                                      |
|   |                  |   |   | Marty R. Kittrell                                         |
|   |                  |   |   | Chief Financial Officer                                   |
|   |                  |   |   | (Duly Authorized Officer and Principal Financial Officer) |

 

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