<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JULY 31, 1997
/ / 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 1-12261
------------------------
SUPERIOR TELECOM INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 58-2248978
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1790 BROADWAY 10019-1412
NEW YORK, NEW YORK (Zip code)
(Address of principal
executive offices)
</TABLE>
Registrant's telephone number, including area code 212-757-3333
------------------------
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 Days. Yes X No _
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES OF
COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE.
<TABLE>
<S> <C>
Class Outstanding at September 12,
- --------------------------- 1997
Common Stock, $.10 Par Value ------------------------------
12,928,982
</TABLE>
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<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with the requirements of Form 10-Q and, therefore,
do not include all information and footnotes required by generally accepted
accounting principles. However, in the opinion of management, all adjustments
(which, except as disclosed elsewhere herein, consist only of normal recurring
accruals) necessary for a fair presentation of the results of operations for the
relevant periods have been made. Results for the interim periods are not
necessarily indicative of the results to be expected for the year. These
financial statements should be read in conjunction with the summary of
significant accounting policies and the notes to the consolidated financial
statements included in the Company's Annual Report on Form 10-K for the year
ended April 30, 1997.
2
<PAGE>
SUPERIOR TELECOM INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
APRIL 30, JULY 31,
1997 1997
---------- -----------
<S> <C> <C>
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents.............................................................. $ 1,052 $ 881
Accounts receivable (less allowance for doubtful accounts of:
April, $174; July $179).............................................................. 48,099 57,406
Inventories............................................................................ 56,262 52,627
Other current assets................................................................... 4,554 4,897
---------- -----------
Total current assets............................................................... 109,967 115,811
Property, plant and equipment, net....................................................... 77,023 74,860
Long-term investments and other assets................................................... 4,666 4,381
Goodwill (less accumulated amortization:April, $4,826; July, $5,287)..................... 46,452 46,103
---------- -----------
Total assets..................................................................... $ 238,108 $ 241,155
---------- -----------
---------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable....................................................................... $ 43,594 $ 49,218
Accrued expenses....................................................................... 18,326 18,964
Current portion of long-term debt...................................................... 430 129
---------- -----------
Total current liabilities.......................................................... 62,350 68,311
Long-term debt, less current portion..................................................... 120,862 105,939
Other long-term liabilities.............................................................. 10,868 12,907
---------- -----------
Total liabilities................................................................ 194,080 187,157
---------- -----------
---------- -----------
Commitments and contingencies
Stockholders' equity:
Common stock, $.01 par value; authorized 25,000,000 shares; issued: April, 12,926,536
shares; July, 12,928,982 shares...................................................... 129 129
Capital in excess of par value......................................................... 27,340 27,383
Cumulative translation adjustment...................................................... (831) (632)
Retained earnings...................................................................... 17,390 27,118
---------- -----------
Total stockholders' equity......................................................... 44,028 53,998
---------- -----------
Total liabilities and stockholders' equity....................................... $ 238,108 $ 241,155
---------- -----------
---------- -----------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
<PAGE>
SUPERIOR TELECOM INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JULY 31,
----------------------
1996 1997
---------- ----------
<S> <C> <C>
(NOTE 1)
Net sales................................................................................. $ 123,824 $ 131,233
Cost of goods sold........................................................................ 105,447 106,891
---------- ----------
Gross profit............................................................................ 18,377 24,342
Selling, general and administrative expense............................................... 3,888 5,371
Amortization of goodwill.................................................................. 432 430
---------- ----------
Operating income........................................................................ 14,057 18,541
Interest (expense)........................................................................ (4,258) (2,440)
Other income (expense), net............................................................... (53) 63
---------- ----------
Income before income taxes.............................................................. 9,746 16,164
Provision for income taxes................................................................ 3,778 6,436
---------- ----------
Net income.............................................................................. $ 5,968 $ 9,728
---------- ----------
---------- ----------
Net income per share of common stock.................................................... $ 0.74
----------
----------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
<PAGE>
SUPERIOR TELECOM INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED JULY 31, 1997
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
COMMON STOCK CAPITAL FOREIGN
------------------------- IN EXCESS CURRENCY RETAINED
SHARES AMOUNT OF PAR TRANSLATION EARNINGS TOTAL
------------ ----------- ----------- ------------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance at April 30, 1997............................ 12,926,536 $ 129 $ 27,340 $ (831) $ 17,390 $ 44,028
Foreign currency translation......................... 199 199
Employee stock purchase plan......................... 2,446 43 43
Net income for the three months ended July 31,
1997............................................... 9,728 9,728
------------ ----- ----------- ----- --------- ---------
Balance at July 31, 1997............................. 12,928,982 $ 129 $ 27,383 $ (632) $ 27,118 $ 53,998
------------ ----- ----------- ----- --------- ---------
------------ ----- ----------- ----- --------- ---------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
5
<PAGE>
SUPERIOR TELECOM INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JULY 31,
--------------------
1996 1997
--------- ---------
<S> <C> <C>
(NOTE 1)
Cash flows from operating activities:
Net income................................................................................. $ 5,968 $ 9,728
Adjustments to reconcile net income to cash provided by operations:
Depreciation and amortization............................................................ 2,251 2,425
Amortization of deferred financing costs................................................. 12 261
Accretion of deferred gain............................................................... -- (16)
Change in assets and liabilities:
Accounts receivable...................................................................... 466 (9,307)
Inventories.............................................................................. 9,989 3,635
Other current and noncurrent assets...................................................... 112 (319)
Accounts payable and accrued expenses.................................................... (6,573) 6,512
Other liabilities........................................................................ 67 183
Other, net............................................................................... -- 54
--------- ---------
Cash flows provided by operating activities.................................................. 12,292 13,156
--------- ---------
Cash flows from investing activities:
Capital expenditures....................................................................... (1,511) (2,521)
Net proceeds from sale of assets........................................................... -- 4,375
Other...................................................................................... (84) --
--------- ---------
Cash flows (used for) provided by investing activities....................................... (1,595) 1,854
--------- ---------
Cash flows from financing activities:
Repayments under revolving credit facilities, net.......................................... -- (11,359)
Repayments to Alpine, net.................................................................. (10,961) --
Repayments of long-term borrowings......................................................... (207) (3,865)
Other...................................................................................... 22 43
--------- ---------
Cash flows used for financing activities..................................................... (11,146) (15,181)
--------- ---------
Net decrease in cash and cash equivalents.................................................... (449) (171)
Cash and cash equivalents at beginning of period............................................. 588 1,052
--------- ---------
Cash and cash equivalents at end of period................................................... $ 139 $ 881
--------- ---------
Supplemental disclosures:
Cash paid for interest..................................................................... $ 4,258 $ 2,359
--------- ---------
--------- ---------
Cash paid for income taxes................................................................. $ 418 $ 4,235
--------- ---------
--------- ---------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
6
<PAGE>
SUPERIOR TELECOM INC. AND SUBSIDIARIES
NOTES TO CONDENSED FINANCIAL STATEMENTS
JULY 31, 1997
(UNAUDITED)
1. ORGANIZATION AND BASIS OF PRESENTATION
REORGANIZATION
Superior TeleCom Inc. ("Superior TeleCom" or the "Company") was incorporated
in July 1996 as a wholly owned subsidiary of The Alpine Group, Inc. ("Alpine").
At the date of incorporation, the Company had no operations or material assets
or liabilities. On October 2, 1996, Alpine completed a reorganization (the
"Reorganization") whereby 100% of the common stock of two of Alpine's
subsidiaries, Superior Telecommunications Inc. ("Superior") and DNE Systems,
Inc. ("DNE") were contributed to the Company. Prior to the Reorganization and
pursuant to a recapitalization of Superior and DNE, Superior issued to Alpine
20,000 shares of 6% Cumulative Preferred Stock (the "Superior Preferred Stock"),
with a liquidation preference of $1,000 per share and Superior and DNE declared
a dividend payable to Alpine of $117.1 million. In conjunction with the
Reorganization, the Company borrowed $154.0 million under a new revolving credit
facility (the "Credit Facility"), the net proceeds of which were used to repay
the intercompany debt of $87.9 million owed by Superior and DNE to Alpine and to
pay to Alpine $63.8 million of the aforementioned dividend.
OFFERING
In October 1996, the Company sold 6,000,000 shares of its common stock (the
"Common Stock") through an initial public offering (the "Offering"). The Company
used the net proceeds of approximately $88.3 million to repay $34.4 million
under the Credit Facility and to pay to Alpine the remaining balance of the
aforementioned dividend declared by Superior and DNE.
In November 1996, the underwriters of the Offering exercised their
overallotment option to purchase an additional 900,000 shares of Common Stock.
The Company used the net proceeds of approximately $13.3 million to repurchase
450,000 shares of Common Stock for approximately $8.1 million, with the balance
applied to reduce the amount outstanding under the Credit Facility. The
repurchased shares of Common Stock were then transferred to Alpine in exchange
for $8.1 million in principal amount of the Superior Preferred Stock. On
February 12, 1997, Superior redeemed at face value an additional $11.3 million
principal amount of the Superior Preferred Stock. The remaining $0.6 million of
Superior Preferred Stock held by Alpine at April 30, 1997 and July 31, 1997 is
included in other long-term liabilities in the accompanying consolidated balance
sheets. After completion of these transactions, Alpine still retained voting
control over the Company; however, its ownership interest has been reduced to
50.1%.
BASIS OF PRESENTATION
These financial statements present the balance sheet of the Company at April
30, 1997 and July 31, 1997 and the related statements of operations,
stockholders' equity and cash flows for the three months ended July 31, 1997.
For comparative purposes, the combined statements of operations and cash flows
for the three months ended July 31, 1996 of the predecessor companies, Superior
and DNE, have been included herein.
7
<PAGE>
SUPERIOR TELECOM INC. AND SUBSIDIARIES
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
JULY 31, 1997
(UNAUDITED)
2. INVENTORIES
The components of inventories are:
<TABLE>
<CAPTION>
APRIL 30, JULY 31,
1997 1997
--------- ---------
<S> <C> <C>
(IN THOUSANDS)
Raw materials........................................................... $ 10,352 $ 11,239
Work in process......................................................... 10,556 10,083
Finished goods.......................................................... 35,354 31,305
--------- ---------
$ 56,262 $ 52,627
--------- ---------
--------- ---------
</TABLE>
3. NET INCOME PER SHARE
Net income per share is determined by dividing net income by the applicable
weighted average common and common equivalent shares outstanding. Stock options
are considered to be common stock equivalents The number of shares used in
computing net income per share for the three months ended July 31, 1997 was
13,198,557.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company, through its two subsidiaries, Superior Telecommunications Inc.
("Superior") and DNE Systems, Inc. ("DNE"), is engaged in the manufacture and
sale of (i) copper wire and cable for the telecommunications industry and (ii)
data communication and other electronic products and systems for defense,
governmental and commercial applications.
RESULTS OF OPERATIONS
PRESENTATION OF RESULTS OF OPERATIONS
The following comparative table includes unaudited operating statement data
for the Company on an industry segment basis. Such data is presented on an
historical basis for the three months ended July 31, 1997 and on a pro forma
basis for the three months ended July 31, 1996. Management believes the pro
forma data presented herein for the quarter ended July 31, 1996 provides
comparability among historical periods and facilitates an analysis of trends in
the Company's operations and profitability. Such pro forma data includes (i) the
combined historical results of operations of Superior and DNE prior to the
Reorganization and their inclusion as subsidiaries of the Company and (ii) pro
forma adjustments to selling, general and administrative expense, interest
expense and income tax expense to reflect the impact of the Reorganization and
the Offering (see Note 1 to the accompanying unaudited consolidated financial
statements), as if such transactions had occurred on May 1, 1996. Such pro forma
adjustments are more fully described in the footnotes accompanying the following
comparative table.
<TABLE>
<CAPTION>
THREE MONTHS ENDED JULY
31,
------------------------
<S> <C> <C>
1996 1997
----------- -----------
<CAPTION>
(PRO FORMA) (HISTORICAL)
<S> <C> <C>
Net sales:
Telecommunications wire and cable.............................. $ 117,969 $ 126,720
Data communications and electronics............................ 5,855 4,513
----------- -----------
Consolidated............................................... 123,824 131,233
Gross profit:
Telecommunications wire and cable.............................. $ 16,859 $ 23,035
Data communications and electronics............................ 1,518 1,307
----------- -----------
Consolidated............................................... 18,377 24,342
Gross profit percentage:
Telecommunications wire and cable.............................. 14.3% 18.2%
Data communications and electronics............................ 25.9% 29.0%
----------- -----------
Consolidated............................................... 14.8% 18.5%
Selling, general and administrative expense:
Telecommunications wire and cable.............................. $ 2,322 $ 3,151
Data communications and electronics............................ 1,566 1,371
Corporate (1).................................................. 500 849
----------- -----------
Consolidated............................................... 4,388 5,371
Amortization of goodwill:
Telecommunications wire and cable.............................. 432 430
----------- -----------
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED JULY
31,
------------------------
1996 1997
----------- -----------
(PRO FORMA) (HISTORICAL)
<S> <C> <C>
Operating income (loss):
Telecommunications wire and cable.............................. $ 14,105 $ 19,454
Data communications and electronics............................ (48) (64)
Corporate...................................................... (500) (849)
----------- -----------
Consolidated............................................... 13,557 18,541
Interest expense, net(2)......................................... (2,540) (2,431)
Minority interest(3)............................................. (179) (9)
Other income (expense), net...................................... (53) 63
----------- -----------
Income before income taxes................................. 10,785 16,164
Provision for income taxes(4).................................... (4,385) (6,436)
Net income................................................. $ 6,400 $ 9,728
----------- -----------
----------- -----------
Net income per share of common stock(5).......................... $ 0.50 $ 0.74
----------- -----------
----------- -----------
</TABLE>
NOTES TO UNAUDITED PRO FORMA OPERATING DATA FOR THE THREE MONTHS ENDED JULY 31,
1996:
(1) Reflects estimated additional general and administrative expenses associated
with the Company's status as an independent public company of $2.0 million
on an annualized basis prior to the Offering.
(2) Reflects the Company's estimated interest expense prior to the Offering
assuming a balance outstanding under the Credit Facility of $115.0 million.
(3) Reflects dividends on $11.9 million (face amount) of Superior Preferred
Stock outstanding subsequent to the Reorganization and Offering (see Note 1
to the accompanying unaudited consolidated financial statements).
(4) Income tax expense has been adjusted for periods prior to the Offering to
reflect estimated tax expense as if the Company had filed a separate federal
income tax return.
(5) Income per share of Common Stock has been calculated based upon 12,924,048
shares outstanding, which assumes completion of the Offering (see Note 1 to
the accompanying unaudited consolidated financial statements).
SUPPLEMENTAL DATA FOR THE SUPERIOR TELECOMMUNICATIONS WIRE AND CABLE SEGMENT:
Copper is a significant raw material component of Superior's finished
products. Fluctuations in the price of copper affect per unit product pricing
and related revenues. However, the cost of copper has not had a material impact
on Superior's profitability due to contractually mandated copper-based price
adjustments contained in Superior's customer sales contracts. The Company
believes that the following supplemental comparative data, which is based upon a
constant copper cost of $1.00 per pound for the indicated periods provides
additional meaningful information concerning Superior's sales and its gross
margin percentage.
<TABLE>
<CAPTION>
THREE MONTHS ENDED JULY
31,
--------------------------
<S> <C> <C>
1996 1997
------------ ------------
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Net sales................................................... $ 111,507 $ 123,344
Gross profit................................................ 16,859 23,035
Gross profit percentage..................................... 15.1% 18.7%
</TABLE>
10
<PAGE>
SUPERIOR--RESULTS OF OPERATIONS
Superior's net sales for the quarter ended July 1997 were $126.7 million,
representing an increase of $8.8 million, or 7.4%, as compared to the same
period in the prior fiscal year. Adjusted to a constant copper cost of $1.00 per
pound, the comparative increase in net sales was $11.8 million, or 10.6% (see
"Supplemental Data for the Superior Telecommunications Wire and Cable Segment"
included in the industry segment operating statement data). The increase in net
sales for the quarter ended July 1997 resulted primarily from increased demand
for copper wire and cable products due to continuing growth in new copper-based
telephone access lines and an increase in maintenance spending by several of
Superior's major telephone company customers. Also contributing to the growth in
net sales was an increase in shipments pursuant to a new multi-year supply
agreement entered into during the early portion of fiscal 1997. In order to keep
pace with the growth in demand and increased market share, Superior has
increased its annual production capacity (measured in billions of conductor feet
or "bcf") to approximately 99 bcf and plans to continue to increase its bcf
production capacity as required to meet additional anticipated demand and market
share growth.
Superior's gross profit increased by $6.2 million, or 36.6%, to $23.0
million for the quarter ended July 1997 as compared to the same period in the
prior fiscal year. Superior's gross profit percentage, based on actual net
sales, was 18.2% for the quarter ended July 1997, as compared to 14.3% for the
quarter ended July 1996. Adjusted to a constant copper cost of $1.00 per pound,
the gross profit percentage increased to 18.7% for the quarter ended July 1997
compared to 15.1% for the quarter ended July 1996. The comparative increase in
Superior's gross profit percentage was attributable to a combination of factors,
including (i) manufacturing cost reductions resulting from production
efficiencies, (ii) improved cost absorption resulting from higher sales volume,
(iii) generally higher comparative market prices and (iv) the impact of product
and customer mix.
Superior's SG&A expense for the quarter ended July 1997 was $3.2 million,
representing an increase of $0.8 million, or 35.7%, as compared to SG&A expense
of $2.3 million for the same period in the prior fiscal year. The increase in
SG&A expense for the quarter ended July 1997 was attributable to costs
associated with the incremental staff required to support the increased level of
sales activity and the expansion of product development activities which
included the establishment and staffing of a product development facility during
the fourth quarter of fiscal 1997.
Superior's operating income for the quarter ended July 1997 was $19.5
million, representing an increase of $5.3 million, or 37.9%, as compared to the
quarter ended July 1996. The substantial comparative increase in operating
income resulted from higher net sales and the improvement in gross profit
percentage.
DNE--RESULTS OF OPERATIONS
During the quarter ended July 1997, DNE net sales declined by $1.3 million,
or 22.9%, as compared to the corresponding period of fiscal 1997. This reduction
in net sales was primarily attributable to a decline in DNE's contract
manufacturing activities, offset partially by an increase in government related
revenues. The decline in contract manufacturing activities resulted from an
overall softness in the semiconductor equipment manufacturing sector and the
comparative reduction in deliveries associated with a major commercial contract
which is now substantially complete.
As a result of the increased percentage of net sales attributable to higher
margin government related revenues, DNE's gross margin increased to 29.0% during
the quarter ended July 1997, as compared to 25.9% during the quarter ended July
1996. Further, DNE successfully reduced comparative SG&A expenses by $0.2
million, or 12.5%, in the quarter ended July 1997, representing the impact of a
recent operational reorganization and cost reduction initiatives. Due to the
decline in net sales, partially offset by an improvement in DNE's gross profit
percentage and a reduction in SG&A expense, DNE recorded an
11
<PAGE>
operating loss of $0.1 million in the quarter ended July 1997 which was
comparable to its operating loss in the comparative quarter of the prior fiscal
year.
CONSOLIDATED RESULTS OF OPERATIONS
The growth in sales of Superior's telecommunications wire and cable products
during the quarter ended July 1997 resulted in comparative consolidated net
sales increasing by 6.0% to $131.2 million (adjusted to a constant copper cost
of $1.00 per pound this comparative increase in net sales amounted to $10.5
million, or 8.9%) as compared to net sales for the quarter ended July 1996. The
increase in net sales along with an increase in gross profit percentage, gave
rise to a consolidated increase in gross profit of $6.0 million, or 32.5%, for
the quarter ended July 1997 as compared to the corresponding period in the prior
fiscal year.
Consolidated SG&A expense for the quarter ended July 1997 was $5.4 million,
reflecting an increase of $1.0 million, or 22.4%, as compared to pro forma SG&A
expense for the quarter ended July 1996. The increase was attributable to a $0.8
million increase in SG&A expense at Superior and a $0.3 million increase in
corporate SG&A expense resulting primarily from an increase in amounts charged
to the Company for certain corporate services pursuant to a Services Agreement
with Alpine.
Consolidated operating income increased 36.8% to $18.5 million for the
quarter ended July 1997 as compared to pro forma operating income for the
quarter ended July 1996. The increase resulted from an increase in consolidated
gross profit, partially offset by the aforementioned increase in consolidated
SG&A expense.
Consolidated interest expense for the quarter ended July 1997 was $2.4
million, or $0.1 million less than pro forma interest expense for the comparable
period of fiscal 1996. The average balance outstanding under the Company's
Credit Facility for the quarter ended July 1997 was $106.0 million, as compared
to $115.0 million for the quarter ended July 31, 1996 (see Note 2 to the
"unaudited pro forma operating data" included elsewhere herein).
Pro forma consolidated income tax expense for the quarter ended July 31,
1996 was calculated assuming that the Company filed a combined U.S. Federal tax
return, reflecting the combined operations of Superior and DNE (see Note 4 to
the "unaudited pro forma operating data" included elsewhere herein). As a
result, consolidated income tax expense reflects an effective tax rate of 39.8%
for the quarter ended July 1997 and 40.7% for the quarter ended July 1996.
Consolidated net income for the quarter ended July 1997 was $9.7 million, or
$0.74 per share, representing an increase of $3.3 million, or 52%, over pro
forma net income of $6.4 million, or $0.50 per share for the quarter ended July
1996. This increase in net income was primarily the result of the increase in
operating income which is more fully described above.
SUPPLEMENTAL COMMENTS ON COMPARATIVE ACTUAL RESULTS OF OPERATIONS
The following includes a supplemental discussion addressing the comparison
of actual results for the Company for the three months ended July 31, 1997 as
compared to actual (rather than pro forma) results of the combined operations of
Superior and DNE for the three months ended July 31, 1996 (see Note 1 to the
accompanying condensed consolidated financial statements).
The historical financial information for net sales, gross profit, selling,
general and administrative expense and operating income for the three month
periods ended July 31, 1996 and 1997 as presented in the Condensed Consolidated
Statement of Operations included in the accompanying financial statements are
the same as the data presented in the "unaudited pro forma operating data"
included elsewhere herein, except for the pro forma adjustment explained in Note
(1) to such pro forma operating data. Accordingly, the comparative changes and
trends for the actual and historical combined amounts referred
12
<PAGE>
to above have been addressed in the discussion accompanying the pro forma
operating data included elsewhere herein.
Comparative historical interest expense declined by $1.8 million to $2.4
million for the quarter ended July 1997. The decline resulted from a reduction
in outstanding debt and a reduction in interest rates associated with such debt,
both of which were attributable to the impact of the Reorganization, Offering
and associated debt refinancings.
Historical net income increased to $9.7 million for the quarter ended July
1997 as compared to $6.0 million for the quarter ended July 1996. This increase
resulted from the substantial increase in operating income more fully discussed
elsewhere herein combined with the aforementioned reduction in interest expense.
13
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
For the quarter ended July 1997, the Company generated $13.2 million in cash
flow from operating activities, consisting of $12.4 million in income generated
from operations (net income plus non-cash charges) plus $0.8 million in cash
flow generated from net working capital changes. Working capital changes
consisted principally of a $3.6 million reduction in inventories, a $6.5 million
increase in accounts payable and accrued expenses offset by a $9.3 million
increase in accounts receivable. Cash provided by investing activities amounted
to $1.9 million, consisting principally of $4.4 million in net proceeds
associated with the sale of a building owned by DNE, offset by $2.5 million in
capital expenditures. Cash used for financing activities amounted to $15.2
million consisting principally of the repayment of debt.
The Company's capital structure at July 31, 1997 consisted of $106.1 million
in debt and $54.0 million in total stockholders' equity. Included in the
Company's debt balance is $100.3 million outstanding under the Company's $150.0
million Credit Facility. Additional availability under the Credit Facility
amounted to $49.7 million at July 31, 1997 . Obligations under the Credit
Facility are guaranteed by each of the Company's domestic subsidiaries and are
secured by substantially all of the assets of the Company and by the stock of
each domestic subsidiary. The Credit Facility contains customary performance and
financial covenants.
Over the next 12 months, the Company has annual principal debt service
commitments of approximately $0.1 million and expected capital expenditures of
approximately $9 to $12 million. The Company does not expect to incur other
material commitments over this period.
Superior TeleCom's operations have typically generated substantial operating
cash flow, as indicated by the $13.2 million in cash flow from operating
activities generated during the quarter ended July 31, 1997. Management
anticipates that Superior TeleCom will continue to generate more than adequate
cash flows from operating activities to meet the Company's annual commitments.
However, should any shortfall arise due to working capital fluctuations or other
factors, the Company believes that cash and funds available under the Credit
Facility should be sufficient to cover such shortfall.
- ------------------------
Except for the historical information herein, the matters discussed in this
Form 10-Q include forward-looking statements that may involve a number of risks
and uncertainties. Actual results may vary significantly based on a number of
factors, including, but not limited to, risks in product and technology
development, market acceptance of new products and continuing product demand,
the impact of competitive products and pricing, and changing economic
conditions, including changes in short term interest rates and other risk
factors detailed in the Company" most recent filings with the Securities and
Exchange Commission.
14
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 27--Financial Data Schedule
(b) Reports on Form 8-K
None
15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SUPERIOR TELECOM INC.
<TABLE>
<S> <C>
Date: September 12, 1997 By: /s/ David S. Aldridge
-------------------------------
David S. Aldridge
Chief Financial Officer
</TABLE>
16
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-30-1997
<PERIOD-START> MAY-01-1997
<PERIOD-END> JUL-31-1997
<CASH> 881
<SECURITIES> 0
<RECEIVABLES> 57,585
<ALLOWANCES> 179
<INVENTORY> 52,627
<CURRENT-ASSETS> 115,811
<PP&E> 95,175
<DEPRECIATION> 20,315
<TOTAL-ASSETS> 241,155
<CURRENT-LIABILITIES> 68,311
<BONDS> 0
0
0
<COMMON> 129
<OTHER-SE> 53,869
<TOTAL-LIABILITY-AND-EQUITY> 241,155
<SALES> 131,233
<TOTAL-REVENUES> 131,233
<CGS> 106,891
<TOTAL-COSTS> 106,891
<OTHER-EXPENSES> (63)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,440
<INCOME-PRETAX> 16,164
<INCOME-TAX> 6,436
<INCOME-CONTINUING> 9,728
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,728
<EPS-PRIMARY> 0.74
<EPS-DILUTED> 0.74
</TABLE>
