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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
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/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED APRIL 30, 1997
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
FOR THE TRANSITION PERIOD FROM TO
</TABLE>
COMMISSION FILE NUMBER 1-12261
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SUPERIOR TELECOM INC.
(Exact name of registrant as specified in its charter)
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<CAPTION>
DELAWARE 58-2248978
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(State or other jurisdiction of incorporation (I.R.S. Employer Identification No.)
or organization)
<CAPTION>
1790 BROADWAY
NEW YORK, NEW YORK 10019-1412
<S> <C>
(Address of principal executive offices) (Zip code)
</TABLE>
Registrant's telephone number, including area code 212-757-3333
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Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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<S> <C>
Common Stock, par value $.01 per share.................. New York Stock Exchange
</TABLE>
Securities registered pursuant to Section 12(g) of the Act: None
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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 (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. /X/
At July 27, 1997, the registrant had 12,926,536 shares of common stock, par
value $.01 per share, outstanding, and the aggregate market value of the
outstanding shares of voting stock held by non-affiliates of the registrant on
such date was approximately $190.5 million based on the closing price of $29.575
per share of such common stock on such date.
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DOCUMENTS INCORPORATED BY REFERENCE
Proxy Statement for the Company's Annual Meeting of Stockholders in Part III of
this Form 10-K.
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PART I
ITEM. 1. BUSINESS
GENERAL
Superior TeleCom Inc. (together with its subsidiaries Superior
Telecommunications Inc. ("Superior") and DNE Systems, Inc. ("DNE"), unless the
context otherwise requires, the "Company") is a leading domestic manufacturer of
copper telecommunications wire and cable products for the local loop segment of
the telecommunications network. The Company also develops and manufactures data
communications and other electronic equipment, including multiplexers, for
defense, government and commercial applications.
All references herein to fiscal 1995, fiscal 1996 and fiscal 1997 mean the
years ended April 30, April 28 and April 30 of such years, respectively.
The Company was incorporated in Delaware in July 1996. Its principal
executive offices are located at 1790 Broadway, New York, New York 10019-1417
and its telephone number is (212) 757-3333.
REORGANIZATION AND PUBLIC OFFERING
The Company was incorporated in July 1996 as a wholly-owned subsidiary of
The Alpine Group, Inc. ("Alpine"). On October 2, 1996, Alpine completed a
reorganization (the "Reorganization") whereby all of the issued and outstanding
common stock of two of Alpine's wholly-owned subsidiaries, Superior and DNE,
were contributed to the Company. As part of the Reorganization, Alpine caused
Superior and DNE to declare dividends on their common stock in an aggregate
amount of $117.1 million. Superior also issued to Alpine 20,000 shares of its 6%
Cumulative Preferred Stock (the "Superior Preferred Stock").
Concurrently with the Reorganization, the Company entered into a new
revolving credit facility (the "Bank Credit Facility") under which it borrowed
$154.0 million with the proceeds used to repay the net amount of the
intercompany debt owed to Alpine ($87.9 million) and to pay to Alpine $63.8
million of the declared dividends. On October 17, 1996, the Company completed an
initial public offering (the "Offering") of 6,000,000 shares of its common stock
at $16.00 per share, the net proceeds of which were used to pay the remainder of
the declared dividends and to reduce the amount outstanding under the Bank
Credit Facility.
In November 1996, the underwriters of the Offering exercised their
overallotment option to purchase an additional 900,000 shares of common stock at
$16.00 per share. The Company used the net proceeds of approximately $13.3
million to repurchase 450,000 shares of its common stock for approximately $8.1
million, with the balance applied to reduce the amount outstanding under the
Bank Credit Facility. The repurchased shares of common stock were then
transferred to Alpine in exchange for $8.1 million in liquidation amount of the
Superior Preferred Stock. As a result of the Offering and the foregoing
exchange, Alpine's ownership interest in the Company declined to 50.1%.
In connection with the Reorganization, the Company entered into an agreement
(the "Services Agreement") with Alpine. Pursuant to the Services Agreement,
Alpine agreed to provide certain financial, audit and accounting, corporate
finance and strategic planning, legal, treasury, insurance and administrative
services to the Company in return for an annual fee in addition to reimbursement
of incidental costs and expenses incurred in connection with Alpine's provision
of such services. Such annual fee initially was set at the rate of $925,000 per
year. As of May 1, 1997, the Services Agreement was amended to increase such
annual fee to $2.7 million per year, which is estimated to reflect commercially
reasonable costs for the services provided.
BUSINESS OVERVIEW
The Company conducts its copper telecommunications wire and cable products
business through Superior. The Company has led a recent consolidation in the
copper telecommunications wire and cable industry by acquiring the U.S. and
Canadian copper telecommunications wire and cable business (the "Alcatel
Business") of Alcatel NA Cable Systems, Inc. and Alcatel Canada Wire, Inc.
(collectively, "Alcatel
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NA") in May 1995 and substantially all of the machinery, equipment and inventory
of the Vancouver, B.C. copper telecommunications wire and cable business of BICC
Phillips, Inc. in November 1995. Through these acquisitions, as well as through
internal capacity expansion, the Company increased its annual production
capacity from 28 billion conductor feet ("bcf") in one plant to an aggregate of
97 bcf in four geographically dispersed plants. The Company believes that it has
successfully integrated its acquired businesses, particularly by implementing
improved production techniques at each of its plants and reducing the cost
structure of its operations.
Due to the industry-wide consolidation that has occurred over the past three
years, total industry capacity has been reduced, the number of manufacturers has
declined and the size of those remaining has increased. As a result, the Company
has become a key supplier of copper wire and cable to six of the regional Bell
operating companies ("RBOCs") and to the two largest independent telephone
companies and believes that it will continue to be able to compete effectively
as its major customers consolidate their vendor base in order to stabilize their
sources of supply and ensure timely delivery of quality products on a consistent
basis. The Company estimates that its share of domestic copper telephone cable
and wire production was approximately 35% for fiscal 1997.
TELECOMMUNICATIONS WIRE AND CABLE
INDUSTRY OVERVIEW
Copper wire and cable are the most widely used medium for transmission in
the local loop portion of the telecommunications infrastructure. The Company
believes that copper will continue to be the transmission medium of choice in
the local loop due to factors such as: the installed base of copper cable in the
local loop, representing an investment of over $150 billion that must be
maintained by the RBOCs and other local telephone companies; the lower
installation and maintenance costs of copper compared to optical fiber and other
media; technological advancements that increase the bandwidth of the installed
local loop copper network, such as integrated services digital networks
("ISDN"), high-bit-rate digital subscriber lines ("HDSL") and asymmetric digital
subscriber lines ("ADSL"), which allow the continued use of copper as the
transmission medium for the expanded voice, data, video and multi-media uses
demanded by customers; the increasing demand for enhanced services, which,
because of technological advances, can be supported by a copper-based local
loop; and the increasing demand for multiple residential access lines.
Demand for copper telecommunications wire and cable is dependent on several
factors, including the rate at which new lines are installed in homes and
businesses; the level of spending for highways, bridges and other parts of the
infrastructure, which often necessitates installation of telecommunications
cable; and the level of general maintenance spending by telephone companies. The
installation of new access lines is, in turn, partially dependent on the level
of new construction and, increasingly in recent years, on demand for second
telephone lines and lines dedicated to facsimile machines and computer modems
which are used for, among other purposes, business communications and access to
the Internet.
A substantial majority of Superior's products sold in the United States are
purchased by the RBOCs and other domestic telephone companies. Prior to the
break-up of AT&T in 1984, AT&T was the sole supplier of copper
telecommunications wire and cable products to its operating companies. However,
after the break-up, the RBOC market became open to all suppliers. It is
estimated that the RBOCs purchase approximately 60% of the copper
telecommunications distribution wire and cable purchased by U.S. telephone
companies, while the two major independent telephone holding companies (GTE
Corporation and North Supply (Sprint) Corporation) purchase approximately 21%
and over 1,200 small local telephone operating companies purchase the remainder.
The Company believes it is well-positioned to take advantage of the rapid
changes in the telecommunications industry as the demand for voice, data and
video services over the local loop increases
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dramatically and new technologies and products are developed to enable the local
loop to satisfy that demand.
INSTALLED BASE. The local loop is the segment of the telecommunications
network that connects the customer's premises to the nearest telephone company
switching center or central office. It comprises approximately 160 million
residential and business access lines in the United States. The installed base
of copper wire and cable in the local loop represents an investment of over $150
billion that must be maintained by the RBOCs and other local telephone
companies. Although other media, such as fiber optic cable, are used for trunk
lines between central offices, substantially all local loop lines continue to be
copper-based. Local loop lines are continually maintained and replaced,
providing a steady demand for copper wire and cable.
LOWER INSTALLATION COSTS AND EASE OF REPAIR. The Company believes that in
the local loop, copper has significantly lower installation costs and is easier
to repair than other media primarily because it does not require an additional
power source and other electronics. Installation of fiber optic cable is both
capital and labor intensive, and deployment of fiber optic cable generally has
been limited to trunk and feeder lines and wide area loop configurations.
TECHNOLOGICAL ADVANCES. Copper dominance in the local loop continues to be
supported by technological advances that expand the use and bandwidth of the
installed local loop copper network. These advances include ISDN and digital
subscriber line ("DSL") technologies, including HDSL and ADSL. These
technologies permit telecommunications carriers, private network owners and
end-user consumers to employ the existing copper wire and cable infrastructure
for high speed and bandwidth-intensive applications.
ISDN is a set of digital transmission signaling protocols and interfaces
that provides end-to-end digital connectivity to support a wide range of
services. ISDN service over the existing copper local loop is rapidly expanding
due to the increased demand for digital telecommunications applications such as
remote office connectivity and Internet access. The Company believes that
globally-standardized ISDN service will become a widely-used vehicle for digital
network services, including Internet access, and that it will support the
continued dominance of copper wire and cable in the local loop.
Another technological advance is DSL technology. DSL technology, which
includes ADSL and HDSL, has increased the bandwidth capacity of copper wire and
cable products in the local loop through sophisticated multiplexing and
modulation techniques. DSL technology currently expands the bandwidth capacity
of twisted pair copper wire in the local loop from 1.5 million bits per second
("bps") (over a T-1 line) to over 6 million bps.
ADSL transmits interactive video and data services including video on
demand, on-line shopping, banking and other data services, as well as Internet
access, over the existing copper-based local loop, requiring substantially less
investment of capital and labor than alternatives such as installing fiber optic
or hybrid fiber optic/coaxial cable products in the local loop. ADSL is
asymmetric in that it is high bandwidth in one direction and lower bandwidth in
the other. This arrangement is primarily intended to support one way high
bandwidth applications, such as the provision of broadcast quality video into
the home. It is easily installed and portable, relatively inexpensive compared
to fiber optic or coaxial cable and can be deployed for an individual user
anywhere in the network in a short time period.
HDSL, as opposed to ADSL, derives its name from the high bandwidth that is
transmitted in both directions over twisted pair copper wire. HDSL provides
advanced digital voice, data and video services to local loop customers with a
high level of signal quality over the existing copper infrastructure while
doubling the distance a digital signal can travel without the need for
amplification or repeaters. In contrast to fiber optic cable applications, HDSL
uses a minimal amount of power on the remote end of the line, making the
traditional power supplied by copper telecommunications wire sufficient for its
use. In
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corporate campuses of office buildings, several satellite locations can be
linked with HDSL quickly and inexpensively using existing copper wire to produce
the equivalent of fiber optic quality transmission.
DEMAND FOR NEW SERVICES. Technological advances, regulatory developments
and increased competition among service providers have accelerated the demand
for and introduction of new bandwidth intensive telecommunication services.
These services include integrated voice and data, broadcast and conference
quality video, Internet and on-line data services access, high speed local area
network ("LAN") to LAN connectivity, collaborative network processing and other
specialized, bandwidth-intensive applications.
DEMAND FOR MULTIPLE RESIDENTIAL ACCESS LINES. An increasing number of U.S.
households are installing additional access lines for multiple telephone lines,
facsimile machines, access to the Internet, home offices and other purposes.
Additional access lines increase the demand for copper telecommunications wire
and cable in the local loop.
BUSINESS STRATEGY
The Company believes that the ongoing alignment of productive capacity with
market demand, technological developments that have enhanced the ability of
end-users to utilize the existing copper wire and cable telecommunications
infrastructure for high speed data, video and imaging transmissions, industry
consolidation and the Company's emphasis on new, higher margin products will
continue to strengthen the Company's competitive position, profitability and
cash flow.
The Company's strategy in the telecommunications products business is to (i)
respond to the current and changing needs of its customers' communications
networks and continue to expand its business in the local loop by continuing to
develop, manufacture and sell a full line of telecommunications wire and cable
products (including hybrid coaxial/copper and fiber/copper products); (ii)
expand its product lines to include transmission media such as data cable,
including expanded unshielded twisted pair ("UTP") product capabilities and
fiber optic cable for LAN applications; (iii) take advantage of strategic
acquisition opportunities in data cable, the local loop and its other markets;
and (iv) expand its international business through increased export sales and
the establishment of joint ventures, acquisitions or similar arrangements and
otherwise increase its presence in international markets.
PRODUCTS
Superior manufactures a wide variety of copper telecommunications wire and
cable products. Cable is the transmission medium in the part of the local loop
from a local telephone company's central office to a subscriber's property line,
whereas wire is the transmission media that begins at the subscriber's property
line and runs to the subscriber's access device, which may be either outside or
on-premises. The Company's products include distribution cable and wire and
premises wire products, ranging in size from a single twisted pair wire to a
4,200 pair cable. These products are variously configured for aerial and
underground use in the local loop and for on-premise applications.
The basic unit of virtually all copper telecommunications wires and cables
is the "twisted pair," a pair of insulated wires twisted around each other. Both
wires in the pair are used to complete the telecommunications connection.
Twisted pairs are bundled together to form telecommunications wires and cables.
Superior's copper telecommunications cable products range in size and are
differentiated by design variations, depending on where the cable is to be
installed. Cable products used for direct underground burial are designed to be
water resistant and are filled with compounds to prevent moisture from getting
into the cable structure. The individual copper wires in these cables utilize
either a solid polyethylene or polypropylene insulation or cellular polyethylene
covered with a solid polyethylene skin. Cable products used for underground duct
or aerial applications, where water penetration is not a major concern, are
designed with solid polyethylene insulation and no filling compound. The copper
telecommunications
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cable products normally have metallic shields for mechanical protection and
electromagnetic shielding of the copper wires as well as an outer polyethylene
jacket.
Superior's distribution wire products range in size from a single twisted
pair to a six-pair product. Similar to copper cable products, distribution wire
products are designed for both direct burial and aerial applications and are
also manufactured in a variety of designs, including a number of different
metallic shield configurations and several different jacketing materials.
Superior's copper telecommunications wire for interior use, or premises
wire, generally ranges in size from a single twisted pair to a twenty-five pair
product. Premises wire is used within buildings to connect telecommunications
devices (telephones, facsimile machines and computer modems) to the
telecommunications network and in commercial buildings to establish LANs.
An important element of the Company's strategy in the wire and cable
business is to expand into performance-enhanced copper-based wire products that
provide opportunities for higher growth and higher margins than the Company's
current product lines. The Company will attempt to sell a broader range of wire
and cable products to its existing customers. As described below, the Company
has introduced and is in the process of introducing a number of new products in
this regard.
In fiscal 1995, Superior introduced a line of UTP copper wire products
designed for high-speed data transmission across private networks. UTP, which
was first introduced into the market in the early 1990s as an alternative to
fiber optic cable, has become the medium of choice for distribution applications
in private data network communications due to its (i) significant installation
and maintenance cost advantages over fiber optic cable and (ii) performance
capabilities, which are sufficient to address a substantial portion of the
market for private data networks requiring high-speed transmission rates.
The Company also has developed, or is in the process of developing, a number
of other new products, including (i) hybrid products combining twisted-pair
copper wires with coaxial or fiber optic cable for distribution service, (ii)
aerial drop non-metallic support products, which utilize fiberglass yarn and
twisted-pair copper wires for distribution service, (iii) riser products, which
are copper wires used inside high-rise buildings or telephone central offices
for vertical connections providing voice and data transmissions, and (iv) fiber
optic cables used for trunking and distribution applications in LANs. Sales to
date of these products have not been material.
MARKETING AND DISTRIBUTION
During fiscal 1997, 91.1% of Superior's net sales were to the RBOCs and the
two major independent telephone companies, 7.7% were sold primarily to other
telephone companies and construction companies in the United States and Canada
and the remaining 1.2% were sold outside the United States and Canada.
Superior sells to the RBOCs and the two major independent telephone
companies on a direct basis through a sales force of five salespersons. The
remainder of Superior's products are sold through distributors, original
equipment manufacturers and sales representatives and agents. The Company
believes that there will be opportunities for international expansion of its
wire and cable business, either through export sales or the establishment of
joint ventures or similar arrangements.
Superior's sales to telephone operating companies are generally pursuant to
multi-year supply agreements in which the customer agrees to have Superior
supply certain of the customer's wire or cable needs as the primary supplier
during the term of the agreement. Prior to awarding a contract, customers
forecast their needs and manufacturers, such as Superior, bid and quote prices
based upon the forecasted order amount, although customers are not obligated to
purchase the forecasted amount or any minimum amount. Superior currently has
multi-year agreements with respect to certain of its wire and cable products
with six of the seven RBOCs and with the two major independent telephone
companies. During fiscal 1997, sales to North Supply Corporation (Sprint), NYNEX
Corporation, Bell South Corporation, GTE Corporation and SBC Corporation
accounted for 19.2%, 17.2%, 15.5%, 14.4% and 14.3% of Superior's
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net sales, respectively. No other single customer accounted for more than 10% of
Superior's net sales. Additionally, as is customary in the industry, the
Company's sales to customers other than large telephone companies are primarily
on the "spot" market on the basis of short-term purchase orders. In recent years
these sales have declined as a proportion of total sales.
MANUFACTURING
Copper rod is the base component for most of Superior's wire and cable
products. The manufacturing processes for these products require that the copper
rod be drawn and insulated. Superior purchases copper rod of 5/16 diameter from
third-party suppliers. Superior then "draws" the wire to one of four American
wire gauges ("AWGs"). Wire drawing is the process of reducing the conductor
diameter by pulling the copper rod through a converging die until the specified
AWG is attained. Since the reduction is limited by the breaking strength of the
conductor, this operation is repeated several times internally within the
machine. As the wire becomes smaller, less pulling force is required. Therefore,
machines operating in specific size ranges are required. Take-up containers or
spools are generally large, allowing one person to operate several machines.
Individual copper wires are then typically insulated with plastic compounds
through an extrusion process. Extrusion involves the feeding, melting and
pumping of a compound through a die to shape it in final form as it is applied
to insulate the wire. Superior uses five primary types of insulating material
compounds: high density polyethylene, high density cellular polyethylene foam,
flame retardant polyethylene, fluoropolymers and polyvinyl chloride. Superior
purchases these insulating compounds from a variety of suppliers.
Superior's products also require that the wire be "twisted" so that two
insulated single conductors are combined to create a twisted pair. Superior's
products are often "cabled" or "stranded" so that multiple twisted pairs of
insulated wires are combined to form larger units of multiple pair cables.
Typically, cabling or stranding is done only on large (I.E., 25 or more) numbers
of pairs. Smaller numbers of pairs are not cabled, but are sent directly for
jacketing.
Once insulated, Superior's copper wire and cable products are "jacketed" or
covered through the application of filling, flooding and shielding compounds to
the insulated wire. Products to be installed underground are protected by
metallic shielding (E.G., aluminum and steel) for electrical and mechanical
isolation and by plastic compounds of polyvinyl chloride or polyethylene for
protection against water and other sources of corrosion and interference. After
the wire and cable products are fabricated, they are packaged and shipped either
directly to customers or to distributors.
RAW MATERIALS
The principal raw materials used by Superior in the manufacture of its wire
and cable products are copper, aluminum, bronze, steel and plastics such as
polyethylene and polyvinyl chloride. These raw materials are available from
several sources and Superior has not experienced any shortages in the recent
past.
The cost of copper, the most significant raw material used by Superior in
its wire and cable business, has been subject to considerable volatility over
the past several years. However, this volatility has not had, nor is it expected
to have, an impact on Superior's profitability due to customers' contractual
arrangements that provide for the pass-through of changes in copper costs
through price revisions. Nevertheless, sharp increases in the price of copper
can reduce demand if telephone companies decide to defer their purchases of
copper telecommunications wire and cable products until copper prices decline.
From time to time, particular plastics have been difficult to obtain but,
with the exception of teflon used for UTP production, which was in short supply
in 1996, none of these shortages has required Superior to limit production. The
inability of Superior to obtain sufficient quantities of raw materials could
adversely affect its operating results.
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FOREIGN SALES
The Company's copper telecommunications wire and cable business has a plant
in Winnipeg, Manitoba, that supplies both the Canadian and U.S. markets.
Superior's net export sales during fiscal 1997 to customers outside the United
States and Canada were $5.5 million, or 1.2% of net sales, of which the majority
were in Latin America.
COMPETITION
The copper telecommunications wire and cable business is very competitive.
Superior has three major domestic competitors in the copper telecommunications
wire and cable business: Cable Systems International, Inc., General Cable
Corporation, a public company and formerly a subsidiary of Wassall, plc; and
Essex International, Inc., a public company. Competition in this market is based
on price, service and quality. Because several RBOCs have adopted policies of
limiting the number of their suppliers and requiring that these suppliers
provide additional services, the degree of competition based on service is
increasing.
DATA COMMUNICATIONS AND ELECTRONICS
DNE designs and manufactures data communications equipment, integrated
access devices and other electronic equipment for defense, government and
commercial applications. It is the largest supplier to the U.S. defense forces
of data and voice multiplexers used in tactical secure military applications.
Multiplexers are integrated access devices that combine several
information-carrying channels into one line, thereby permitting simultaneous
multiple voice and data communications over a single line. DNE also produces
military avionic products, including switches, dimmers, relays and other
electronic controllers, sensors and aerial refueling amplifiers.
The Company has developed a commercial version of its multiplexer, which to
date has generated limited sales. However, the Company believes there are
certain limited niche applications for its commercial multiplexer product
whereby its design provides advantages over its competitors. In that regard, the
Company recently has been awarded a major multi-year supply agreement with a
multinational manufacturing company for commercial paging services.
The Company has reduced its dependence on the defense market in recent years
primarily by taking advantage of opportunities to manufacture equipment on a
contract basis. The Company provides contract manufacturing services for
subassembly equipment to original equipment manufacturers in the technology
industry and NASA. The Company expects to expand its contract manufacturing
services business for its existing commercial customers and to add additional
commercial customers in the future. In fiscal 1997, DNE's sales to customers
other than departments of the U.S. government accounted for 35.4% of DNE's
sales, compared to 33.6% in fiscal 1996 and 17.7% in fiscal 1995.
As discussed in Item 7. "Management's Discussion and Analysis of Financial
Condition and Results of Operations," DNE experienced a decline in revenues and
profitability in fiscal 1997, which has led to a recent restructuring of its
operations to reduce costs and focus development on new commercial product
initiatives.
RESEARCH AND DEVELOPMENT
In response to the changing requirements of the telecommunications industry,
Superior established, during the fourth quarter of fiscal 1997, a product
development center. This 29,150 square foot facility is located in Kennesaw,
Georgia (within 15 miles of Superior's corporate headquarters) and is dedicated
to defining and creating new wire and cable systems that meet the needs of the
evolving communications networks. Recent projects include the development of
single mode and multimode fiber optic cable
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products for use in trunking applications both in LANs as well as telephone
networks. Initial delivery of these products is expected in the latter part of
fiscal 1998.
Superior also has development projects underway for performance enhanced
copper-based wire products that are designed to meet the existing and future
needs of the telephone companies. Several of these projects have been undertaken
in conjunction with Superior's telephone company customers and include the
development of composite cables that incorporate copper twisted pair wire and
coaxial cable or optical fibers in a single cable construction. Superior is also
developing extensions of its UTP product line, such as patch cords for use in
connecting Superior products within premises and 25-pair UTP cables for certain
data transmission applications. The Company believes its ability to capitalize
on new product offerings will be enhanced by the establishment of its product
development center. Further, the Company intends to continue to explore and
exploit new product development opportunities to meet the needs of its
customers.
In order to compete for contracts, DNE frequently invests its own funds in
research and development in order to determine the financial and practical
feasibility of manufacturing products. DNE is currently in the process of
developing an integrated multiplexer with expanded capabilities from its
existing products for use in both the commercial and military markets.
Aggregate research and development expense of Superior and DNE during fiscal
1995, 1996 and 1997 amounted to $1.4 million, $1.4 million and $2.2 million,
respectively.
Although the Company holds certain trademarks, licenses and patents, none is
considered to be material to its business.
EMPLOYEES
As of April 30, 1997, the Company employed 1,608 people, including 1,478 in
the telecommunications wire and cable business and 130 in the data
communications and electronics business.
Approximately 405 persons employed at the Company's Winnipeg and
Elizabethtown plants are represented by unions.
The Company considers relations with its employees to be satisfactory.
ENVIRONMENTAL MATTERS
Superior's and DNE's manufacturing operations are subject to extensive and
evolving federal, foreign, state and local environmental and land use laws and
regulations relating to, among other things, the storage, handling, disposal,
emission, transportation and discharge of hazardous substances, materials and
waste products and often imposing stringent permitting requirements. Compliance
with these laws and regulations has not been material to the operations,
business or financial results of either company and has not had a material
effect upon their respective capital expenditures, earnings or competitive
position. However, violation of, or non-compliance with, such laws or
regulations, even if inadvertent, could result in an adverse impact on the
operations, business or financial results of the Company.
Operations of Superior and DNE have resulted in releases of hazardous
substances or wastes at sites currently or formerly owned or operated by such
companies. Superior and DNE are presently involved in investigatory and remedial
activities at two sites under the oversight of state governmental authorities,
as described below, neither of which is expected to have a material adverse
effect on the Company.
Soil and groundwater at Superior's Brownwood, Texas, facility has been found
to be contaminated with volatile organic compounds as a result of operations at
the facility which management believes occurred prior to Superior's acquisition
of the facility. Superior has developed and filed for approval with the Texas
Natural Resource Conservation Commission a remediation plan. Based upon work
completed and investigations performed to date, the Company believes that the
cost of this remediation will not be in
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excess of $0.5 million. Pursuant to an agreement between Superior and the former
owner of the facility, Superior has been reimbursed for approximately 85% of the
costs incurred to date in connection with the investigation and remediation of
this facility, and is entitled to reimbursement of future expenses at
percentages ranging from 85% to 25% (depending on the time at which such
expenses are incurred), subject to an aggregate expense reimbursement of not
less than 75%.
In connection with the sale of a facility in Woburn, Massachusetts formerly
owned by and currently under lease to DNE, (which conducts no operations at such
facility, but rather sub leases the facility to a third party) low levels of
volatile organic compounds were discovered in shallow groundwater. DNE has
assumed responsibility for this contamination pursuant to an indemnity granted
to the purchaser of the facility, which indemnity is in turn guaranteed by
Alpine. This facility has been designated as a non-priority site by the
Massachusetts Department of Environmental Protection ("MDEP") which granted a
waiver to Alpine allowing it to proceed with further investigation and, if
necessary, remediation of the groundwater contamination without MDEP oversight,
subject to certain conditions. Based on the results of a comprehensive site
investigation completed during May 1996, it appears that no remedial activities
are warranted, and the required filings with the MDEP have been made so
certifying.
ITEM 2. PROPERTIES
The Company conducts its principal operations at the facilities described
below:
<TABLE>
<CAPTION>
SQUARE
LOCATION PRODUCTS FOOTAGE LEASED/OWNED
- ------------------------------------- ------------------------------------- --------- ------------------------
<S> <C> <C> <C>
Brownwood, Texas..................... Telecommunications distribution wire 328,000 Leased (expires 2013)
and cable and premise wire (subject to five five-
year renewals)
Tarboro, North Carolina.............. Telecommunications distribution wire 295,000 Owned
and cable
Winnipeg, Manitoba................... Telecommunications distribution wire 190,000 Owned
and cable and premise wire
Elizabethtown, Kentucky.............. Telecommunications distribution cable 163,000 Owned
Kennesaw, Georgia.................... Telecommunications and premise wire 29,000 Leased (expires 2002)
and cable product development
Wallingford, Connecticut............. Data communications and electronics 65,000 Leased (expires 2007)
Atlanta, Georgia..................... Corporate offices 30,600 Leased (expires 2001)
</TABLE>
Depending on product mix, aggregate capacity in the Company's four
telecommunications wire and cable facilities currently ranges from 95--100 bcf.
Each of these facilities is operating at utilization rates in excess of 90%.
These facilities are suitable and adequate for the businesses being conducted in
this segment. Capital spending plans for the operations in this segment are
primarily designed to keep up with current technology and increase capacity in
existing product lines, and for cost reduction initiatives.
The Company's data communications and electronics facility in Wallingford is
adequate and suitable for the businesses being conducted and operates at a
utilization rate of between 70% and 75%.
ITEM 3. LEGAL PROCEEDINGS
There are no threatened or pending litigations or proceedings that
management believes will have a material adverse effect on the financial
condition or liquidity of the Company.
9
<PAGE>
The Company and certain of its subsidiaries are defendants in lawsuits,
certain of which lawsuits are insured claims arising in the ordinary course of
the operations of the Company and such subsidiaries; and none of which
management believes will have a material adverse effect on the operations,
financial condition or liquidity of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company did not submit any matter to a vote of security holders during
the fourth quarter of the fiscal year ended April 30, 1997.
PART II
ITEM 5. MARKET FOR REGISTRANT'S SECURITIES AND RELATED SECURITY HOLDER MATTERS
(a) Market Information
The Company's Common Stock, $0.01 par value (the "Common Stock"), is listed
on the New York Stock Exchange (the "NYSE") under the symbol SUT. The following
table sets forth the high and low daily closing sales prices for the Common
Stock as reported on the NYSE for fiscal 1997 since October 11, 1996, when the
Common Stock was first traded on the NYSE.
<TABLE>
<CAPTION>
HIGH LOW
--------- ---------
<S> <C> <C>
Fiscal 1997
Second Quarter (October 11--October 31, 1996)..................................................... 17 3/4 16 1/8
Third Quarter..................................................................................... 25 7/8 17 1/4
Fourth Quarter.................................................................................... 25 1/8 19 3/4
</TABLE>
(b) Holders
The Company's transfer agent is American Stock Transfer & Trust Company, 40
Wall Street, New York, New York 10005.
At July 10, 1997, 12,926,536 shares of the Common Stock were issued and
outstanding and there were approximately 2,000 record holders thereof.
(c) Dividends.
The Company has not paid any dividends and does not currently intend to
declare dividends on the Common Stock in the foreseeable future. Any payment of
future dividends and the amounts thereof will be dependent upon the Company's
earnings, financial requirements and other factors, including contractual
obligations. Certain provisions of the Company's debt obligations have the
effect of currently restricting the Company's ability to pay dividends.
10
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
HISTORICAL FINANCIAL DATA
Set forth below are certain selected historical financial data of the
Company. The financial data includes the combined results of operations of
Superior and DNE on a prospective basis from the date such entities were
acquired by Alpine through April 30, 1996. With respect to Superior, such
acquisition by Alpine occurred in November 1993; thus, the results for Superior
are included for the six-month period ended May 1, 1994 and for the years ended
April 30, 1995, April 28, 1996 and April 30, 1997. In addition, the results of
operations of Superior for the years ended April 28, 1996 and April 30, 1997
include the operations of the Alcatel Business, which was acquired by Superior
on May 11, 1995. For the year ended April 30, 1997, the results of operations
reflect the combined results of Superior and DNE for the five-month period prior
to the Reorganization and their inclusion as subsidiaries of the Company
combined with the historical results of the Company for the seven-month period
ended April 30, 1997. This information should be read in conjunction with the
Consolidated Financial Statements of the Company and related notes thereto
appearing elsewhere herein and "Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations." The selected historical
consolidated financial data for, and as of the end of, each of the fiscal years
in the five-year period ended April 30, 1997 are derived from the audited
consolidated financial statements of the Company.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
--------------------------------------------------------
<S> <C> <C> <C> <C> <C>
APRIL 30, MAY 1, APRIL 30, APRIL 28, APRIL 30,
1993 1994 1995 1996 1997
--------- --------- ---------- ---------- ----------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATION DATA:
Net sales...................................................... $ 27,897 $ 68,510 $ 164,485 $ 410,413 $ 463,840
Cost of goods sold............................................. 15,915 56,250 142,114 362,854 384,271
--------- --------- ---------- ---------- ----------
Gross profit................................................. 11,982 12,260 22,371 47,559 79,569
Selling, general and administrative............................ 9,068 8,884 11,632 14,223 17,166
Amortization of goodwill....................................... 267 2,186 1,124 1,556 1,726
--------- --------- ---------- ---------- ----------
Operating income............................................. 2,647 1,190 9,615 31,780 60,677
Interest expense, net.......................................... (600) (1,742) (3,700) (17,006) (12,869)
Preferred stock dividends of subsidiary........................ -- -- -- -- (319)
Other income (expense)......................................... 70 (61) 231 55 (24)
--------- --------- ---------- ---------- ----------
Income (loss) from continuing operations before income taxes... 2,117 (613) 6,146 14,829 47,465
Provision for income taxes..................................... (462) (521) (2,240) (6,722) (18,989)
--------- --------- ---------- ---------- ----------
--------- --------- ---------- ---------- ----------
Income (loss) from continuing operations....................... 1,655 (1,134) 3,906 8,107 28,476
(Loss) from discontinued operations............................ -- (287) (176) -- --
--------- --------- ---------- ---------- ----------
Income (loss) before extraordinary (loss).................... 1,655 (1,421) 3,730 8,107 28,476
Extraordinary (loss) on early extinguishment of debt........... -- -- -- (2,645) --
--------- --------- ---------- ---------- ----------
Net income (loss)............................................ $ 1,655 $ (1,421) $ 3,730 $ 5,462 $ 28,476
--------- --------- ---------- ---------- ----------
--------- --------- ---------- ---------- ----------
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
APRIL 30, MAY 1, APRIL 30, APRIL 28, APRIL 30,
1993 1994 1995 1996 1997
----------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS)
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital............................................ $ 7,346 $ 23,558 $ 22,750 $ 58,726 $ 47,617
Total assets............................................... 18,500 115,338 120,127 244,065 238,108
Total debt, including intercompany......................... 8,342 39,095 37,067 125,760 122,089
Total stockholders' equity................................. 4,916 48,123 49,854 51,656 44,028
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
The Company is primarily engaged in the manufacture and sale of copper wire
and cable products for telecommunications applications. These operations are
conducted through the Company's Superior subsidiary and constitute in excess of
95% of consolidated revenues and operating income. The remainder of the
Company's operations are carried out through its other subsidiary, DNE, and
consist of the manufacture and sale of data communications and other electronic
products and systems for defense, governmental and commercial applications.
RESULTS OF OPERATIONS
To facilitate a meaningful comparison between periods, this Management's
Discussion and Analysis focuses on pro forma information for the periods
covered. Comparisons of the Company's historical financial results are less
relevant to an understanding of the Company due to the significance of the
Reorganization and Offering in October 1996 and the Alcatel acquisition on May
11, 1995. Accordingly, the information in the following table and the
period-to-period comparisons in this Management's Discussion and Analysis are
based on financial data and pro forma adjustments which reflect (i) the combined
historical results of operations of Superior and DNE prior to the Reorganization
and their inclusion as subsidiaries of the Company, (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 April 30, 1997 consolidated financial statements), as if such
transactions had occurred on May 1, 1994, and (iii) the historical results of
operations of the Alcatel Business prior to its acquisition by the Company on
May 11, 1995 (including pro forma adjustments related to depreciation,
amortization and selling, general and administrative expenses). The pro forma
adjustments noted above are more fully described in the footnotes accompanying
the following comparative table.
12
<PAGE>
COMBINED UNAUDITED PRO FORMA OPERATING DATA
<TABLE>
<CAPTION>
FISCAL YEAR ENDED APRIL, (1)
----------------------------------
<S> <C> <C> <C>
1995 1996 1997
---------- ---------- ----------
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Net sales (1)
Telecommunications wire and cable.......................................... $ 340,756 $ 391,758 $ 442,486
Data communications and electronics........................................ 27,907 26,176 21,354
---------- ---------- ----------
Combined net sales....................................................... 368,663 417,934 463,840
---------- ---------- ----------
---------- ---------- ----------
Gross profit (1)
Telecommunications wire and cable.......................................... $ 28,433 $ 40,267 $ 74,065
Data communications and electronics........................................ 8,221 7,887 5,504
---------- ---------- ----------
Combined gross profit.................................................... 36,654 48,154 79,569
---------- ---------- ----------
---------- ---------- ----------
Selling, general and administrative expense (1), (2)
Telecommunications wire and cable.......................................... $ 6,170 $ 8,408 $ 9,559
Data communications and electronics........................................ 6,511 5,848 5,948
Corporate (5).............................................................. 2,000 2,000 2,491
---------- ---------- ----------
Combined selling, general and administrative expense..................... 14,681 16,256 17,998
---------- ---------- ----------
---------- ---------- ----------
Amortization of goodwill (1)
Telecommunications wire and cable.......................................... $ 1,570 $ 1,570 $ 1,727
Data communications and electronics........................................ -- -- --
---------- ---------- ----------
Combined amortization of goodwill........................................ 1,570 1,570 1,727
---------- ---------- ----------
---------- ---------- ----------
Operating income
Telecommunications wire and cable.......................................... $ 20,693 $ 30,289 $ 62,779
Data communications and electronics........................................ 1,710 2,039 (444)
Corporate.................................................................. (2,000) (2,000) (2,491)
---------- ---------- ----------
Combined operating income................................................ 20,403 30,328 59,844
---------- ---------- ----------
---------- ---------- ----------
Operating income............................................................. $ 20,403 $ 30,328 $ 59,844
Interest expense (3)......................................................... (10,160) (10,160) ($ 9,887)
Preferred stock dividends of subsidiary (4).................................. (716) (716) (576)
Other income (expense)....................................................... 231 55 (25)
---------- ---------- ----------
Income from continuing operations before income taxes...................... 9,758 19,507 49,356
Provision for income taxes (5)............................................... (4,189) (8,088) (19,865)
---------- ---------- ----------
Income from continuing operations.......................................... $ 5,569 $ 11,419 $ 29,491
---------- ---------- ----------
---------- ---------- ----------
Income per share of common stock from continuing operations (6).............. $ 0.43 $ 0.88 $ 2.27
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
As a percentage of net sales
-------------------------------
<S> <C> <C> <C>
Supplemental Data:
Gross margin
Telecommunications wire and cable................................. 8.3% 10.3% 16.7%
Data communications and electronics............................... 29.5 30.1 25.8
Combined gross margin........................................... 9.9 11.5 17.2
Operating income margin
Telecommunications wire and cable................................. 6.1 7.7 14.2
Data communications and electronics............................. 6.1 7.8 (2.1)
Combined operating income margin............................ 5.5 7.3 12.9
</TABLE>
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>
UNAUDITED PRO FORMA OPERATING DATA
----------------------------------
<S> <C> <C> <C>
FISCAL YEAR ENDED APRIL,
----------------------------------
<CAPTION>
1995 1996 1997
---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Net sales.................................................................... $ 327,600 $ 357,400 $ 431,900
Gross profit................................................................. 28,443 40,267 74,065
Gross margin percentage...................................................... 8.7% 11.3% 17.1%
</TABLE>
- ------------------------
NOTES TO UNAUDITED PRO FORMA OPERATING DATA:
(1) For the year ended April 30, 1995, net sales, gross profit, selling, general
and administrative expenses and amortization of goodwill have been increased
by $204.2 million, $14.3 million, $1.2 million and $446,000, respectively,
to reflect the acquisition of the Alcatel Business as if the acquisition had
been completed on May 1, 1994. This acquisition was actually completed on
May 11, 1995. Similarly, for the year ended April 28, 1996, net sales, gross
profit, selling, general and administrative expenses and amortization of
goodwill have been increased by $7.5 million, $0.6 million, $33,000 and
$14,000, respectively, to reflect such acquisition as if it had been
completed on May 1, 1994.
(2) 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.
(3) Reflects the Company's estimated interest expense prior to the Offering
assuming that the balance outstanding under the Bank Credit Facility was
$110.0 million for the period from August 1, 1996 to the date of the
Offering and $115.0 million for all prior fiscal periods.
(4) For periods prior to the Offering, reflects dividends on $11.9 million (face
amount) of Superior Preferred Stock which remained outstanding subsequent to
the Reorganization, the Offering and the exercise of the underwriters'
overallotment option (see Note 1 to the April 30, 1997 consolidated
financial statements).
(5) Income tax expense for periods prior to the Offering has been adjusted to
reflect estimated tax expenses as if the Company had filed a separate
federal income tax return for all periods presented.
14
<PAGE>
(6) Income per share of Common Stock for periods prior to the Offering has been
calculated based upon 12,924,048 shares outstanding, which assumes
completion of the Offering and exercise of the underwriters' overallotment
option (see Note 1 to the April 30, 1997 consolidated financial statements).
SUPERIOR--RESULTS OF OPERATIONS
Superior achieved substantial growth in revenues and profitability in both
fiscal 1997 and fiscal 1996. This growth was attributable to increased unit
volume sales as well as improved market prices for its telecommunications wire
and cable products.
In fiscal 1997, Superior's net sales were $442.5 million representing an
increase of $50.7 million, or 12.9%, as compared to fiscal 1996 net sales of
$391.8 million. Comparative fiscal 1996 net sales reflected a similar trend,
increasing by 15.0% or $51.0 million as compared to fiscal 1995. The comparative
increase in fiscal 1997 and fiscal 1996 net sales adjusted to a constant copper
cost of $1.00 per pound was 20.8% and 9.1%, respectively, (see "Supplemental
Data" for Superior included elsewhere herein).
The increase in net sales in both fiscal 1997 and fiscal 1996 resulted from
a number of factors including (1) the increased demand in recent years for
copper wire and cable products due to both the growth in new copper-based
telephone access lines and increased maintenance spending by several of
Superior's major telephone company customers; (2) an increase in Superior's
market share in both fiscal 1996 and fiscal 1997 under new multi-year supply
agreements entered into during such periods; and (3) the impact of price
increases instituted during the latter half of fiscal 1996 on substantially all
of Superior's long term supply agreements (which supply agreements comprise in
excess of 90% of Superior's net sales). 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") from approximately 80
bcf in early fiscal 1995 to approximately 97 bcf at the end of fiscal year 1997.
Superior intends to further increase its bcf production capability in fiscal
1998 as required to meet additional anticipated product demand and market share
growth (see "Financial Condition and Liquidity" for discussion of fiscal 1998
capital expenditure initiatives).
Along with the increase in revenues in fiscal 1997 and fiscal 1996, Superior
also achieved substantial growth in gross profit and a significant increase in
its gross margin percentage during such fiscal periods. In fiscal 1997, gross
profit increased $33.8 million, or 83.9%, to $74.1 million, as compared to
fiscal 1996 gross profit of $40.3 million. The comparative increase in gross
profit in fiscal 1996 was $11.8 million, or 41.6%, as compared to fiscal 1995.
The gross margin percentage for fiscal 1995, 1996 and 1997 based on (i) pro
forma net sales and (ii) net sales adjusted to constant copper price of $1.00
per pound (see "Supplemental Data" for Superior ) was as follows:
<TABLE>
<CAPTION>
GROSS MARGIN PERCENTAGE
BASED ON:
--------------------------
<S> <C> <C>
PRO FORMA ADJUSTED
NET SALES NET SALES
------------- -----------
Fiscal 1995................................................................................ 8.3% 8.7%
Fiscal 1996................................................................................ 10.3% 11.3%
Fiscal 1997................................................................................ 16.7% 17.1%
</TABLE>
Superior has generated sequentially improving gross margins for each fiscal
quarter during the past two fiscal years, beginning with the first quarter of
fiscal 1996 (which was the period in which the acquisition of the Alcatel
Business was completed). The increasing gross margin for the past two fiscal
years is attributable to a combination of factors, including (i) the
aforementioned price increases instituted primarily during the latter half of
fiscal 1996 on substantially all of Superior's existing customer contract
business; (ii) higher market prices on new long term supply agreement awards
entered into in fiscal 1996 and fiscal 1997; (iii) manufacturing cost reductions
resulting from the integration of the Alcatel Business and from capital
expenditure initiatives focused on production efficiencies; and (iv) improved
cost
15
<PAGE>
absorption resulting from higher sales volume. Market prices for the Company's
telephone wire and cable products stabilized during the latter half of fiscal
1997 and management does not foresee any material changes in market prices in
the near future. However, the Company plans to continue to invest in cost
reduction projects to further its improvement in gross margin in fiscal 1998 and
future years.
Selling, general and administrative expenses ("SG&A expenses") increased
from $6.2 million in fiscal 1995 to $8.4 million and $9.6 million in fiscal 1996
and fiscal 1997, respectively. The increase in SG&A expenses in fiscal 1996 and
fiscal 1997 was attributable to (i) costs associated with incremental sales and
marketing staff to support the increased level of sales activity, (ii) expansion
of administrative activities, particularly in the area of information systems,
to support the level of growth and the integration of the Alcatel Business
operations, and (iii) in fiscal 1997, the expansion of product development
activities, including establishment and staffing of a product development
facility in the fourth quarter of fiscal 1997.
Commensurate with the growth in net sales and gross profit, Superior's
operating income increased substantially in both fiscal 1997 and fiscal 1996.
Operating income in fiscal 1997 was $62.8 million, representing an increase of
107.3%, as compared to fiscal 1996 operating income of $30.3 million. The
comparative growth in fiscal 1996 operating income was $9.6 million or 46.4% as
compared to fiscal 1995. During this same period, operating income as a
percentage of net sales increased from 6.1% in fiscal 1995 to 7.7% and 14.2% in
fiscal 1996 and fiscal 1997, respectively.
DNE--RESULTS OF OPERATIONS
During fiscal 1997, DNE experienced declining sales and profitability
associated with a slowdown in government procurement of DNE's military and
electronic products and a decline in DNE's contract manufacturing activities
related to overall softness in the semi-conductor equipment manufacturing
sector. As a result, DNE's comparative net sales declined $4.8 million in fiscal
1997 and operating income decreased from $2.0 million in fiscal 1996 to an
operating loss of $0.4 million in fiscal 1997. In fiscal 1996, DNE's comparative
net sales declined by 6.2% as compared to fiscal 1995; however, as a result of
operating expense reductions, fiscal 1996 comparative operating income actually
increased by approximately $0.3 million as compared to fiscal 1995.
DNE has taken recent actions to reduce its manufacturing and general and
administrative overhead by approximately $2.0 million (on an annual basis). DNE
has also reallocated engineering resources toward developing enhancements to its
multiplexer product line to provide for broader product application
opportunities. The Company expects that government procurement activity levels
will improve in the future and that the trend of lower sales will be reduced or
reversed which, when coupled with the aforementioned overhead cost reductions,
should result in a near term improvement in DNE's profitability.
CONSOLIDATED RESULTS OF OPERATIONS
The growth in sales of Superior's telecommunications wire and cable products
gave rise to an overall comparative increase in consolidated net sales and
operating income in both fiscal 1997 and fiscal 1996. Fiscal 1997 consolidated
net sales were $463.8 million representing an increase over fiscal 1996 net
sales of 11.0%; whereas fiscal 1996 consolidated net sales of $417.9 million
represented an increase of 13.4% over fiscal 1995 net sales. Consolidated net
sales adjusted to a constant copper cost of $1.00 per pound (see "Supplemental
Data" for Superior) reflected a comparative increase of 20.8% and 9.1% in fiscal
1997 and fiscal 1996, respectively. The aforementioned increase in Superior's
net sales and gross profit gave rise to a consolidated increase in operating
income of 98% and 49% in fiscal 1997 and fiscal 1996, respectively.
Pro forma interest expense was $9.9 million for fiscal 1997, or $0.3 million
less than pro forma interest expense for fiscal 1996. As discussed in Note 3 to
the "Combined Unaudited Pro Forma Operating Data" included elsewhere herein, pro
forma interest expense for the periods prior to the Offering (prior to October
17, 1996) was based on (i) an assumed outstanding balance under the Company's
$150 million
16
<PAGE>
revolving credit facility of $110.0--115.0 million with interest calculated at
current prevailing interest rates and after giving effect to the amortization of
deferred loan fees and other bank fees associated with the credit facility, and
(ii) interest expense at contractual rates on other outstanding debt of the
Company with a principal balance of $9.6 million at April 30, 1997.
Consolidated income tax expense for the periods prior to the Offering was
calculated assuming that the Company filed a consolidated Federal tax return
(reflecting the combined operations of Superior and DNE). As a result,
consolidated pro forma income tax expense reflected an effective tax rate of
40.2%, 41.5%, and 42.9% for fiscal 1997, 1996 and 1995, respectively.
As a result of the substantial increase in consolidated operating income,
the Company recorded a significant increase in earnings and earnings per share
in both fiscal 1997 and fiscal 1996. Consolidated pro forma net income for
fiscal 1997 was $29.5 million (or $2.27 per share), representing an increase of
$18.1 million, or 158%, over pro forma net income of $11.4 million (or $0.88 per
share) for fiscal 1996. Consolidated pro forma net income in fiscal 1996
increased $5.8 million over fiscal 1995 pro forma net income of $5.6 million (or
$0.43 per share).
SUPPLEMENTAL COMMENTS ON HISTORICAL RESULTS OF OPERATIONS
During fiscal 1994 and 1996, the Company completed the acquisition of
Superior (November 10, 1993) and the Alcatel Business (May 11, 1995). These
acquisitions significantly increased the Company's net sales and its operating
income. The operations of each entity are included in the historical operating
results of the Company, on a prospective basis, from their respective
acquisition dates.
FISCAL 1996 COMPARED TO FISCAL 1995
In fiscal 1996 historical combined net sales increased 150% to $410.4
million as compared to $164.5 million in fiscal 1995. For this same period,
historical combined operating income increased 231% to $31.8 million in fiscal
1996 as compared to $9.6 million in fiscal 1995. The fiscal 1996 increase in net
sales and operating income was primarily attributable to the inclusion of the
Alcatel Business operations for substantially all of fiscal 1996.
Comparative historical combined interest expense increased by $13.7 million
to $17.4 million in fiscal 1996 as compared to $3.7 million in fiscal 1995. The
increase in interest expense in fiscal 1996 was the result of debt incurred as a
result of the completion of the acquisition of the Alcatel Business.
Historical combined income from continuing operations in fiscal 1996 was
$8.1 million, as compared to income from continuing operations in fiscal 1995 of
$3.9 million. The improvement in income from continuing operations in fiscal
1996 was primarily the result of fiscal 1996 operating income attributable to
the Alcatel Business operations, offset partially by higher acquisition-related
interest expense.
In fiscal 1996, the Company incurred a $2.6 million extraordinary loss for
the early extinguishment of certain debt associated with the acquisition of the
Alcatel Business.
FISCAL 1997 COMPARED TO FISCAL 1996
The pro forma impact of the acquisition of the Alcatel Business and the
Reorganization and Offering did not materially impact the net sales and
operating income in either fiscal 1996 or fiscal 1997. Accordingly, the trends
in historical combined net sales and operating income in fiscal 1997 as compared
to fiscal 1996 are consistent with management's discussion of the pro forma
results of operations for such periods included elsewhere herein.
Comparative historical combined interest expense in fiscal 1997 declined by
$4.4 million, to $12.9 million for fiscal 1997, with such decline resulting from
a reduction in outstanding debt and a reduction in
17
<PAGE>
interest rates associated with such debt, both of which were attributable to the
impact of the Reorganization, the Offering and associated debt refinancings.
Historical combined net income from continuing operations increased to $28.5
million in fiscal 1997, as compared to $8.1 million in fiscal 1996. This
increase resulted from the substantial increase in operating income combined
with a reduction in interest expense.
LIQUIDITY AND CAPITAL RESOURCES
For the seven-month period (subsequent to the Offering) ended April 30,
1997, the Company generated $25.8 million in cash flow from operating
activities, consisting of $24.7 million in income generated from operations (net
income plus non-cash charges) plus $1.1 million in cash flow generated from net
working capital changes. Cash used by investing activities amounted to $4.5
million, consisting primarily of capital expenditures, net of proceeds from
sales of assets. Cash used for financing activities amounted to $20.9 million,
the major components of which include dividends paid by Superior and DNE to
Alpine of $117.1 million, the repayment by Superior and DNE of $91.1 million in
intercompany loans due to Alpine, redemption of common stock and subsidiary
preferred stock with a liquidation value of $19.4 million, and partially offset
by $107.5 million in net proceeds from borrowings under the Bank Credit Facility
and $101.6 million in net proceeds from the Offering (See Note 1 to the
accompanying April 30, 1997 consolidated financial statements).
The Company's capital structure at April 30, 1997 consisted of $121.3
million in debt, $0.6 million in Superior Preferred Stock and $44.0 million in
total stockholders' equity. Included in the Company's debt balance is $111.7
million outstanding under the Company's $150.0 million Bank Credit Facility
entered into in conjunction with the Reorganization. Additional availability
under the Bank Credit Facility amounted to $38.3 million at April 30, 1997.
Obligations under the Bank 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 Bank
Credit Facility contains customary performance and financial covenants.
Over the next twelve months, the Company has annual principal debt service
commitments of approximately $0.4 million. Additionally, the Company expects to
invest approximately $9-$12 million in capital expenditures over the next
twelve-month period to facilitate (i) expansion of its product line to include
fiber, coaxial, and additional high performance and hybrid copper products, (ii)
expansion of its existing telephone product production capacity to meet growing
demand and increasing market share, and (iii) investment in identified cost
reduction projects. Except for such principal debt service and capital
commitments, the Company does not expect to incur other material commitments
over the next twelve-month period.
The Company's operations have typically generated substantial operating cash
flows. For the seven-month period ended April 30, 1997, the Company generated
$25.8 million in cash flows from operating activities, which is significantly
greater than amounts needed to meet its annual principal debt service and
projected capital commitment requirements. Management anticipates that the
Company 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 Bank Credit Facility
should be sufficient to cover such shortfall.
EXCEPT FOR THE HISTORICAL INFORMATION HEREIN, THE MATTERS DISCUSSED IN THIS
FORM 10-K 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'S MOST RECENT FILING WITH THE SECURITIES AND EXCHANGE COMMISSION.
18
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Company's consolidated financial statements as of April 30, 1997 and
1996 and for each of the three years in the period ended April 30, 1997 and the
report of the independent public accountants thereon and financial statement
schedules required under Regulation S-X are submitted herein as a separate
section following Item 14 of this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
19
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
The information required by this Item is incorporated herein by reference to
the Company's definitive Proxy Statement to be filed with the Securities and
Exchange Commission pursuant to Regulation 14A within 120 days after the end of
the fiscal year covered by this report (the "Company's Proxy Statement").
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated herein by reference to
the Company's Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is incorporated herein by reference to
the Company's Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is incorporated herein by reference to
the Company's Proxy Statement.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1), (a)(2) See the separate section of this report following Item 14 for
a list of financial statements and schedules filed herewith.
(a)(3) Exhibits as required by Item 601 of Regulation S-K are listed in Item
14(c) below.
(b) The Company did not file any Reports on Form 8-K during the fourth
quarter of fiscal 1997.
20
<PAGE>
ITEM 14(C) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------------- -------------------------------------------------------------------------------------------------------
<C> <S>
2(a) Asset Purchase Agreement, dated as of March 17, 1995 by and among Alcatel NA Cable Systems, Inc.,
Alcatel Canada Wire, Inc. Superior Cable Corporation and Superior Teletec Inc. (the "Alcatel
Acquisition Agreement") (incorporated herein by reference to Exhibit 1 to the Current Report on Form
8-K of Alpine dated May 24, 1995)
2(b) Agreement Regarding Certain Employee Benefit Plans, amending the Alcatel Acquisition Agreement, dated
June 10, 1996 (incorporated herein by reference to Exhibit 2(b) to the Annual Report on Form 10-K of
Alpine for the year ended April 30, 1996 (the "1996 Alpine 10-K"))
2(c) Amendment dated May 11, 1995 to Asset Purchase Agreement by and among Alcatel NA Cable Systems, Inc.,
Alcatel Canada Wire, Inc., Superior Cable Corporation and Superior TeleTec Inc. (incorporated herein by
reference to Exhibit 2 to the Current Report on Form 8-K of Alpine dated May 24, 1995)
3(a) Certificate of Incorporation of the Company (incorporated herein by reference to Exhibit 3.2 to the
Registration Statement on Form S-1 (Registration No. 333-09933 of the Company, as filed with the
Commission on August 9, 1996 (as amended, the "S-1"))
3(b) Certificate of Amendment, dated July 12, 1996, to the Certificate of Incorporation of the Company
(incorporated herein by reference to Exhibit 3.2 to the S-1)
3(c) Certificate of Amendment, dated August 6, 1996, to the Certificate of Incorporation of the Company
(incorporated herein by reference to Exhibit 3.3 to the S-1)
3(d) By-laws of the Company (incorporated herein by reference to Exhibit 3.4 to the S-1)
10(a) 1996 Stock Option Plan (incorporated herein by reference to Exhibit 10.7 to the S-1)
10(b) Employee Stock Purchase Plan (incorporated herein by reference to Exhibit 10.1 to the S-1)
10(c) Stock Purchase Agreement, dated February 14, 1992, by and between Alpine and Dataproducts Corporation,
relating to the purchase of shares of capital stock of DNE (incorporated herein by reference to Exhibit
1 to the Current Report on Form 8-K of Alpine dated March 2, 1992 (the "March 1992 Alpine 8-K"))
10(d) Loan Agreement, dated as of February 13, 1992, by and among Alpine, DNE and the Connecticut Development
Authority (incorporated herein by reference to Exhibit 3 to the March 1992 Alpine 8-K)
10(e) Agreement and Plan of Merger by and between Alpine and Superior TeleTec Inc., dated as of June 17, 1993
and amended on September 24, 1993 (incorporated herein by reference to Exhibit 2 to Form S-4
(Registration No. 33-9978) of Alpine, as filed with the Commission on October 5, 1993)
10(f) Lease Agreement by and between ALP(TX) QRS 11-28, Inc., and Superior TeleTec Transmission Products,
Inc., dated as of December 16, 1993 (incorporated herein by reference to Exhibit (i) to the Quarterly
Report on Form 10-Q of Alpine for the Quarter ended January 31, 1994)
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------------- -------------------------------------------------------------------------------------------------------
<C> <S>
10(g) First Amendment to Lease Agreement, dated as of May 10, 1995, by and between ALP (TX) QRS 11-28, Inc.
and Superior TeleTec Inc. (incorporated herein by reference to Exhibit 10(o) to the Annual Report on
Form 10-K of Alpine for the year ended April 30, 1995 (the "1995 Alpine 10-K"))
10(h) Second Amendment to Lease Agreement, dated as of July 21, 1995, by and between ALP(TX) QRS H-28, Inc.
and Superior Telecommunications Inc. (incorporated herein by reference to Exhibit 10(x) to the 1995
Alpine 10-K)
10(i) Third Amendment to Lease Agreement, dated as of October 2, 1996, by and between ALP (TX) QRS 11-28,
Inc. and Superior (incorporated herein by reference to Exhibit 10.8 to the S-1)
10(j) [First Amendment], dated as of October 2, 1996, to Guaranty and Surety Agreement among the Company,
Alpine and ALP (TX) QRS 11-28, Inc. (incorporated herein by reference to Exhibit 10.12 to the S-1)
10(k) Note Purchase Agreement by and among Alpine, Superior TeleTec, Inc., Superior Cable Corporation and
Nomura International Trust Company (incorporated herein by reference to Exhibit 3 to Alpine's Current
Report on Form 8-K dated May 24, 1995)
10(l) Purchase Agreement, dated as of July 14, 1995, by and among Alpine, Adience, Inc., Superior, Superior
Cable Corporation, Merrill Lynch & Co., Nomura Securities International, Inc. and First Albany
Corporation (incorporated herein by reference to Exhibit 10(p) to the 1995 Alpine 10-K)
10(m) Employment Agreement, dated April 26, 1996, between Superior and Justin F. Deedy, Jr. (incorporated
herein by reference to Exhibit 10.3 to the S-1)
10(n) Employment Agreement, dated as of October 17, 1996, between the Company and Steven S. Elbaum
(incorporated herein by reference to Exhibit 10(14) to the Quarterly Report on Form 10-Q of the Company
for the Quarter ended January 31, 1997)
10(o) Letter Agreement between the Company and Alpine, dated October 8, 1996, relating to a capital
contribution by Alpine to the Company (incorporated herein by reference to Exhibit 10.2 to the S-1)
10(p) Letter Agreement between the Company and Alpine, dated October 2, 1996, relating to tax indemnification
(incorporated herein by reference to Exhibit 10.5 to the S-1)
10(q) Tax Allocation Agreement among Alpine, the Company and its subsidiaries, dated as of October 2, 1996
(incorporated herein by reference to Exhibit 10.9 to the S-1)
10(r) Exchange Agreement between the Company and Alpine, dated October 2, 1996 (incorporated herein by
reference to Exhibit 10.10 to the S-1)
10(s) Services Agreement, dated October 2, 1996, between the Company and Alpine (incorporated herein by
reference to Exhibit 10.4 to the S-1)
10(t)* Amendment No. 1, dated as of May 1, 1997, to the Services Agreement
10(u) Revolving Credit Agreement among the Company, each domestic subsidiary of the Company, certain lending
institutions and Bankers Trust Company, dated as of October 2, 1996 (incorporated herein by reference
to Exhibit 10.6 to the S-1)
10(v) Registration Rights Agreement, dated October 2, 1996, between the Company and Alpine (incorporated
herein by reference to Exhibit 10.11 to the S-1)
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------------- -------------------------------------------------------------------------------------------------------
<C> <S>
21* List of Subsidiaries
23(a)* Consent of Arthur Andersen LLP
27* Financial Data Schedule
</TABLE>
- ------------------------
* Filed herewith.
23
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
AUDITED FINANCIAL STATEMENTS:
Report of independent public accountants................................................................... F-2
Combined balance sheet of Superior Telecommunications Inc. and subsidiary and DNE Systems, Inc. and
subsidiaries as of April 28, 1996 and consolidated balance sheet of Superior TeleCom Inc. and
subsidiaries as of April 30, 1997........................................................................ F-3
Combined statements of operations of Superior Telecommunications Inc. and subsidiary and DNE Systems, Inc.
and subsidiaries for the years ended April 30, 1995 and April 28, 1996 and for the five months ended
October 1, 1996 and consolidated statement of operations of Superior TeleCom Inc. and subsidiaries for
the seven months ended April 30, 1997.................................................................... F-4
Combined statements of stockholder's equity of Superior Telecommunications Inc. and subsidiary and DNE
Systems, Inc. and subsidiaries for the years ended April 30, 1995 and April 28, 1996 and for the five
months ended October 1, 1996 and consolidated statement of stockholders' equity of Superior TeleCom Inc.
and subsidiaries for the seven months ended April 30, 1997............................................... F-5
Combined statements of cash flows of Superior Telecommunications Inc. and subsidiary and DNE Systems, Inc.
and subsidiaries for the years ended April 30, 1995 and April 28, 1996 and for the five months ended
October 1, 1996 and consolidated statement of cash flows of Superior TeleCom Inc. and subsidiaries for
the seven months ended April 30, 1997.................................................................... F-6
Notes to financial statements.............................................................................. F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors and Stockholders of
Superior TeleCom Inc.:
We have audited the accompanying combined balance sheet of Superior
Telecommunications Inc. and subsidiary and DNE Systems, Inc. and subsidiaries
(collectively referred to as the "Companies" as contributed to Superior TeleCom
Inc. in connection with the Reorganization as discussed in Note 1) as of April
28, 1996 and the related combined statements of operations, stockholder's equity
and cash flows for the two years in the period ended April 28, 1996 and the five
months ended October 1, 1996. We have also audited the consolidated balance
sheet of Superior TeleCom Inc. as of April 30, 1997 and the related consolidated
statements of operations, stockholders' equity and cash flows for the seven
months then ended. These financial statements are the responsibility of the
Companies' management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Companies as of April
28, 1996 and April 30, 1997 and the results of their operations and their cash
flows for each of the two years in the period ended April 28, 1996, the five
months ended October 1, 1996 and the seven months ended April 30, 1997 in
conformity with generally accepted accounting principles.
Arthur Andersen LLP
Atlanta, Georgia
June 13, 1997
F-2
<PAGE>
SUPERIOR TELECOM INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
APRIL 28, APRIL 30,
1996 1997
---------- ----------
<S> <C> <C>
(NOTE 1)
ASSETS
Current assets:
Cash and cash equivalents............................................................... $ 351 $ 1,052
Accounts receivable (less allowance for doubtful accounts of $166 in 1996 and $174 in
1997)................................................................................. 53,689 48,099
Inventories............................................................................. 57,726 56,262
Other current assets.................................................................... 6,142 4,554
---------- ----------
Total current assets.................................................................. 117,908 109,967
Property, plant and equipment, net........................................................ 76,528 77,023
Long-term investments and other assets.................................................... 1,215 4,666
Goodwill, net............................................................................. 48,414 46,452
---------- ----------
Total assets.......................................................................... $ 244,065 $ 238,108
---------- ----------
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable........................................................................ $ 46,253 $ 43,594
Accrued expenses........................................................................ 12,445 17,529
Current portion of long-term debt....................................................... 484 430
Due to Alpine........................................................................... -- 797
---------- ----------
Total current liabilities............................................................. 59,182 62,350
Long-term debt, less current portion...................................................... 11,540 120,862
Other long-term liabilities............................................................... 7,951 10,868
Due to Alpine and affiliate............................................................... 113,736 --
---------- ----------
Total liabilities..................................................................... 192,409 194,080
---------- ----------
Commitments and contingencies
Stockholders' equity:
Common stock, Superior TeleCom Inc., $.01 par value; authorized 25,000,000 shares;
issued 12,926,536 shares.............................................................. -- 129
Common stock, April 1996; Superior Telecommunications Inc. and DNE Systems, Inc......... 1 --
Capital in excess of par value.......................................................... 42,254 27,340
Cumulative translation adjustment....................................................... (214) (831)
Retained earnings....................................................................... 9,615 17,390
---------- ----------
Total stockholders' equity............................................................ 51,656 44,028
---------- ----------
Total liabilities and stockholders' equity.......................................... $ 244,065 $ 238,108
---------- ----------
---------- ----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
SUPERIOR TELECOM INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED FIVE SEVEN
---------------------- MONTHS MONTHS
ENDED ENDED
APRIL 30, APRIL 28, OCTOBER 1, APRIL 30,
1995 1996 1996 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
(NOTE 1) (NOTE 1) (NOTE 1) (NOTE 1)
Net sales........................................................ $ 164,485 $ 410,413 $ 211,025 $ 252,815
Cost of goods sold............................................... 142,114 362,854 178,224 206,047
---------- ---------- ---------- ----------
Gross profit................................................... 22,371 47,559 32,801 46,768
Selling, general and administrative.............................. 11,632 14,223 6,591 10,575
Amortization of goodwill......................................... 1,124 1,556 721 1,005
---------- ---------- ---------- ----------
Operating income............................................... 9,615 31,780 25,489 35,188
Interest income.................................................. -- 349 -- 38
Interest expense................................................. (3,700) (17,355) (6,973) (5,934)
Preferred stock dividends of subsidiary.......................... -- -- -- (319)
Other income (expense), net...................................... 231 55 (62) 38
---------- ---------- ---------- ----------
Income from continuing operations before income taxes.......... 6,146 14,829 18,454 29,011
Provision for income taxes....................................... (2,240) (6,722) (7,368) (11,621)
---------- ---------- ---------- ----------
Income from continuing operations.............................. 3,906 8,107 11,086 17,390
(Loss) from discontinued operations.............................. (176) -- -- --
---------- ---------- ---------- ----------
Income before extraordinary (loss)............................. 3,730 8,107 11,086 17,390
Extraordinary (loss) on early extinguishment of debt............. -- (2,645) -- --
---------- ---------- ---------- ----------
Net income..................................................... $ 3,730 $ 5,462 $ 11,086 $ 17,390
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Net income per share of common stock............................. $ 1.39
----------
----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
SUPERIOR TELECOM INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
FOR THE YEARS ENDED APRIL 30, 1995 AND APRIL 28, 1996, FIVE MONTHS ENDED OCTOBER
1, 1996 AND SEVEN MONTHS ENDED APRIL 30, 1997
<TABLE>
<CAPTION>
SUPERIOR SUPERIOR
DNE TELECOMMUNICATIONS TELECOM
SYSTEMS, INC. INC. INC. CAPITAL
COMMON STOCK COMMON STOCK COMMON STOCK IN EXESS
------------------------ ---------------------------- ----------------------- OF PAR
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT VALUE
----------- ----------- --------------- ----------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at May 1, 1994......... 750 $ 1 1,000 $ -- -- $ -- $ 47,700
DNE dividend................... (2,000)
Net income for the year ended
April 30, 1995...............
----- ----- ------ --- ---------- ----- ---------
Balance at April 30, 1995.. 750 1 1,000 -- -- -- 45,700
Contribution from Alpine....... 100
Transfer of Posterloid to
Alpine....................... (3,546)
Foreign currency translation...
Net income for the year ended
April 28, 1996...............
----- ----- ------ --- ---------- ----- ---------
Balance at April 28, 1996.. 750 1 1,000 -- -- -- 42,254
6% Cumulative Preferred Stock,
$1,000 liquidation
preference, issued by
Superior Telecommunications
Inc.......................... (20,000)
Foreign currency translation...
Net income for the five months
ended October 1, 1996........
----- ----- ------ --- ---------- ----- ---------
Balance at October 1,
1996......................... 750 1 1,000 -- -- -- 22,254
October 2, 1996 Reorganization
(see Note 1)................. (750) (1) (1,000) -- 6,024,048 60 20,599
Dividends paid on common
stock........................ (117,129)
Initial public offering of
common stock................. 6,900,000 69 101,573
Purchase of treasury stock.....
Exchange of treasury stock for
preferred stock of
subsidiary...................
Employee stock purchase plan... 2,488 43
Foreign currency translation...
Net income for the seven months
ended April 30, 1997.........
----- ----- ------ --- ---------- ----- ---------
Balance at April 30, 1997...... -- $ -- -- $ -- 12,926,536 $ 129 $ 27,340
----- ----- ------ --- ---------- ----- ---------
----- ----- ------ --- ---------- ----- ---------
<CAPTION>
TREASURY
FOREIGN STOCK
CURRENCY RETAINED ----------------------
TRANSLATION EARNINGS SHARES AMOUNT TOTAL
------------- ----------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Balance at May 1, 1994......... $ -- $ 423 -- $ -- $ 48,124
DNE dividend................... (2,000)
Net income for the year ended
April 30, 1995............... 3,730 3,730
------ ----------- --------- ----------- ---------
Balance at April 30, 1995.. -- 4,153 -- -- 49,854
Contribution from Alpine....... 100
Transfer of Posterloid to
Alpine....................... (3,546)
Foreign currency translation... (214) (214)
Net income for the year ended
April 28, 1996............... 5,462 5,462
------ ----------- --------- ----------- ---------
Balance at April 28, 1996.. (214) 9,615 -- -- 51,656
6% Cumulative Preferred Stock,
$1,000 liquidation
preference, issued by
Superior Telecommunications
Inc.......................... (20,000)
Foreign currency translation... 111 111
Net income for the five months
ended October 1, 1996........ 11,086 11,086
------ ----------- --------- ----------- ---------
Balance at October 1,
1996......................... (103) 20,701 -- -- 42,853
October 2, 1996 Reorganization
(see Note 1)................. 103 (20,701) -- -- 60
Dividends paid on common
stock........................ (117,129)
Initial public offering of
common stock................. 101,642
Purchase of treasury stock..... (450,000) (8,055) (8,055)
Exchange of treasury stock for
preferred stock of
subsidiary................... 450,000 8,055 8,055
Employee stock purchase plan... 43
Foreign currency translation... (831) (831)
Net income for the seven months
ended April 30, 1997......... 17,390 17,390
------ ----------- --------- ----------- ---------
Balance at April 30, 1997...... $ (831) $ 17,390 -- $ -- $ 44,028
------ ----------- --------- ----------- ---------
------ ----------- --------- ----------- ---------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
SUPERIOR TELECOM INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED FIVE MONTHS SEVEN MONTHS
---------------------- ENDED ENDED
APRIL 30, APRIL 28, OCTOBER 1, APRIL 30,
1995 1996 1996 1997
----------- --------- ----------- -------------
<S> <C> <C> <C> <C>
(NOTE 1) (NOTE 1) (NOTE 1) (NOTE 1)
Cash flows from operating activities:
Income before extraordinary loss......................................... $ 3,730 $ 8,107 $ 11,086 $ 17,390
Adjustments to reconcile net income before extraordinary loss to cash
provided by operations:
Depreciation and amortization.......................................... 4,586 8,451 3,700 5,595
Amortization of deferred financing costs............................... 253 360 20 589
Provision for deferred taxes........................................... 90 (1,300) 342 1,077
Change in assets and liabilities, net of effects from acquisition of
business:
Accounts receivable.................................................. (5,480) (2,709) (2,434) 8,024
Inventories.......................................................... (3,303) 742 19,218 (17,754)
Other current and noncurrent assets.................................. (145) 808 512 731
Accounts payable and accrued expenses................................ 7,713 11,309 (7,048) 9,473
Other, net........................................................... -- 1,470 (310) 682
----------- --------- ----------- -------------
Cash flows provided by operating activities................................ 7,444 27,238 25,086 25,807
----------- --------- ----------- -------------
----------- --------- ----------- -------------
Cash flows from investing activities:
Acquisitions, net of cash acquired....................................... -- (103,409) -- --
Capital expenditures..................................................... (1,782) (4,339) (2,745) (7,062)
Acquisition of BICC assets............................................... -- (5,447) -- --
Net proceeds from sale of assets......................................... -- -- -- 2,534
Other.................................................................... 43 1,419 35 --
----------- --------- ----------- -------------
Cash flows used for investing activities................................... (1,739) (111,776) (2,710) (4,528)
----------- --------- ----------- -------------
----------- --------- ----------- -------------
Cash flows from financing activities:
Net proceeds from sale of common stock................................... -- -- -- 101,642
Borrowings (repayments) under revolving credit facilities, net........... (1,181) (17,623) -- 111,657
Debt issuance costs...................................................... -- (3,365) -- (4,122)
Borrowings from (repayments to) Alpine, net.............................. 141 112,571 (21,875) (91,064)
Dividends paid to Alpine................................................. (2,000) -- -- (117,129)
Repayments of long-term borrowings....................................... (3,439) (148,237) (218) (2,171)
Purchase of treasury stock............................................... -- -- -- (8,055)
Redemption of subsidiary preferred stock................................. -- -- -- (11,300)
Long-term borrowings, net................................................ -- 141,170 -- --
Other.................................................................... 370 100 -- (319)
----------- --------- ----------- -------------
Cash flows (used for) provided by financing activities..................... (6,109) 84,616 (22,093) (20,861)
----------- --------- ----------- -------------
Net (decrease) increase in cash and cash equivalents....................... (404) 78 283 418
Cash and cash equivalents at beginning of period........................... 677 273 351 634
----------- --------- ----------- -------------
Cash and cash equivalents at end of period................................. $ 273 $ 351 $ 634 $ 1,052
----------- --------- ----------- -------------
----------- --------- ----------- -------------
Supplemental disclosures:
Cash paid for interest................................................... $ 4,709 $ 18,620 $ 7,610 $ 5,086
----------- --------- ----------- -------------
----------- --------- ----------- -------------
Cash paid for income taxes............................................... $ 228 $ 237 $ 569 $ 13,251
----------- --------- ----------- -------------
----------- --------- ----------- -------------
Non-cash investing and financing activities:
Exchange of common stock for subsidiary preferred stock:
Preferred stock acquired $ (8,055)
-------------
-------------
Treasury stock issued.................................................. $ 8,055
-------------
-------------
Acquisition of business:
Assets, net of cash acquired........................................... $ 126,127
Liabilities assumed.................................................... (22,718)
---------
Net cash paid........................................................ $ 103,409
---------
---------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
SUPERIOR TELECOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 in exchange for 6,024,048 shares of
the Company's common stock at $.01 par value. 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"),
par value $1.00 per share, 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") (see Note 6), the net
proceeds of which were used to repay the net amount of intercompany debt owed by
Superior and DNE to Alpine of $87.9 million 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") at $16.00
per share. 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 at
$16.00 per share. 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 is included in other long-term liabilities in the accompanying consolidated
balance sheets. After giving effect to the exercise of the overallotment option
and the subsequent repurchase and exchange of the Company Common Stock, Alpine
retained voting control over the Company, however, its ownership interest was
reduced to 50.1%.
DESCRIPTION OF BUSINESS
Superior TeleCom manufactures and sells telecommunications wire and cable
products through its subsidiary Superior and data communications and electronics
products and systems through its subsidiary DNE. Superior is a major
manufacturer of copper telecommunications wire and cable products for the local
loop segment of the telecommunications network. DNE develops and manufactures
data communications and other equipment, including multiplexers for defense,
government and commercial applications and provides contract manufacturing
services to the electronics industry.
F-7
<PAGE>
SUPERIOR TELECOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
BASIS OF PRESENTATION
These financial statements present the balance sheet of the Company at April
30, 1997 and the related statement of operations, stockholders' equity and cash
flows for the seven month period from October 2, 1996 (the date of the
Reorganization) through April 30, 1997. For comparative purposes, the combined
financial statements of the predecessor companies, Superior and DNE, have also
been included herein for periods prior to the Reorganization. These financial
statements consist of the combined balance sheet of Superior and DNE at April
28, 1996 and the combined statements of operations, stockholder's equity and
cash flows of Superior and DNE for the twelve months ended April 30, 1995 and
April 28, 1996 and the five month period from May 1, 1996 through October 1,
1996. For purposes of fiscal 1997 financial statement disclosures, the combined
five month period ended October 1, 1996 and the consolidated seven month period
ended April 30, 1997 have been aggregated for comparative purposes. All
significant intercompany accounts and transactions have been eliminated.
CASH AND CASH EQUIVALENTS
All highly liquid investments purchased with a maturity at acquisition of 90
days or less are considered to be cash equivalents.
INVENTORIES
Inventories are stated at the lower of cost or market, using the first-in,
first-out (FIFO) method.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost, less accumulated
depreciation and amortization. Depreciation and amortization are provided over
the estimated useful lives of the assets using the straight-line method.
Leasehold improvements are amortized over the lesser of the estimated useful
lives of the assets or the lease terms. The estimated lives are as follows:
<TABLE>
<S> <C>
5-30
Buildings and improvements....................... years
3-12
Machinery and equipment.......................... years
</TABLE>
Maintenance and repairs are charged to expense as incurred. Long term
improvements are capitalized as additions to property, plant and equipment. Upon
retirement, or other disposal, the asset cost and related accumulated
depreciation are removed from the accounts and the net amount, less any
proceeds, is charged or credited to income.
GOODWILL
The excess of the purchase price over the net identifiable assets of
businesses acquired is amortized ratably over periods not exceeding 30 years.
Accumulated amortization of goodwill at April 28, 1996 and April 30, 1997 was
$3.1 million and $4.8 million, respectively. Alpine periodically reviews
goodwill to assess recoverability from future operations using undiscounted cash
flows, in accordance with the provisions of Statement of Financial Accounting
Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of." Impairments would be recognized in
operating results if a permanent diminution in value occurred.
F-8
<PAGE>
SUPERIOR TELECOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
STOCK BASED COMPENSATION
In October 1995, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 123, "Accounting for Stock-Based Compensation." The statement defines a
fair value based method of accounting for employee stock options. Companies may
elect, however, to adopt SFAS No. 123 through a pro forma disclosure option,
while continuing to apply the intrinsic value based method of accounting
prescribed by Accounting Principles Board ("APB") Opinion No. 25, "Accounting
for Stock Issued to Employees." Under the disclosure option, companies must make
pro forma disclosures of net income and earnings per share as if the fair value
method of accounting prescribed by SFAS No. 123 had been applied.
Under the SFAS No. 123 fair value method, compensation expense is measured
at the grant date based on the value of the award and is recognized over the
service (or vesting) period. Under the intrinsic value based method,
compensation expense is recognized only to the extent of the excess, if any, of
the quoted market price of the stock at grant date over the amount an employee
must pay to acquire the stock.
The Company has elected to use the intrinsic value based method of
compensation expense recognition under its stock option plan and to provide the
required pro forma information required under SFAS No. 123 related to stock
option grants.
FOREIGN CURRENCY TRANSLATION
The financial position and results of operations of Superior TeleCom's
foreign subsidiary are measured using local currency as the functional currency.
Assets and liabilities of operations denominated in foreign currencies are
translated into U.S. dollars at exchange rates in effect at fiscal year-end. The
resulting translation gains and losses are charged directly to cumulative
translation adjustment, a component of stockholders' equity, net of income tax
expense, and are not included in net income until realized through sale or
liquidation of the investment. Revenues and expenses are translated at average
exchange rates prevailing during the fiscal year. Foreign currency exchange
gains and losses incurred on foreign currency transactions are included in
income as they occur.
INCOME PER SHARE
Income per share of common stock for the seven months ended April 30, 1997
is computed based on the weighted average number of common and common equivalent
shares outstanding for the period, subsequent to the Reorganization.
CONCENTRATION OF CREDIT RISK
Superior's revenues constitute 95% of total revenues for fiscal 1997. During
fiscal 1995, 1996 and 1997 sales to the six regional Bell operating companies
and the two major independent telephone companies represented 77%, 88% and 91%
respectively, of Superior's net sales. At April 28, 1996 and April 30, 1997,
accounts receivable from these customers amounted to $41.9 million and $43.0
million, respectively.
INCOME TAXES
Effective with the completion of the Offering, the Company is required to
file a separate consolidated U.S. federal income tax return. Prior to the
Offering, Superior and DNE filed a consolidated U.S. federal income tax return
with Alpine and its other subsidiaries. However, income taxes for periods prior
to the
F-9
<PAGE>
SUPERIOR TELECOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Offering have been provided in the respective combined statements of operations
as if Superior and DNE were separate taxable entities and filed separate U.S.
federal income tax returns.
USE OF ESTIMATES
Superior TeleCom's consolidated financial statements are prepared in
accordance with generally accepted accounting principles, which require
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
RECLASSIFICATIONS
Certain reclassifications have been made to the 1995 and 1996 combined
financial statements to conform with the 1997 presentation.
2. INVENTORIES
At April 28, 1996 and April 30, 1997, inventories consist of the following:
<TABLE>
<CAPTION>
1996 1997
--------- ---------
<S> <C> <C>
(IN THOUSANDS)
Raw materials........................................................... $ 11,086 $ 10,352
Work in process......................................................... 13,216 10,556
Finished goods.......................................................... 33,424 35,354
--------- ---------
$ 57,726 $ 56,262
--------- ---------
--------- ---------
</TABLE>
3. PROPERTY, PLANT AND EQUIPMENT
At April 28, 1996 and April 30, 1997, property, plant and equipment consists
of the following:
<TABLE>
<CAPTION>
1996 1997
--------- ---------
<S> <C> <C>
(IN THOUSANDS)
Land.................................................................... $ 2,965 $ 3,065
Buildings and improvements.............................................. 18,678 19,024
Machinery and equipment................................................. 67,276 74,342
--------- ---------
88,919 96,431
Less accumulated depreciation........................................... 12,391 19,408
--------- ---------
$ 76,528 $ 77,023
--------- ---------
--------- ---------
</TABLE>
Depreciation expense for the fiscal years 1995, 1996 and 1997 was $3.5
million, $6.7 million and $7.6 million, respectively.
F-10
<PAGE>
SUPERIOR TELECOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. ALCATEL ACQUISITION
On May 11, 1995 Superior completed the acquisition (the "Alcatel
Acquisition") of the U.S. and Canadian copper wire and cable business (the
"Alcatel Business") of Alcatel NA Cable Systems, Inc. and Alcatel Canada Wire,
Inc. for $103.4 million.
The Alcatel Acquisition was accounted for using the purchase method, and
accordingly, the results of operations of the Alcatel Business are included in
the Company's consolidated results on a prospective basis from the date of the
acquisition. The purchase price was allocated based on estimated fair values of
assets and liabilities at the date of acquisition. The excess of the purchase
price over the fair value of the net assets acquired was $17.2 million and is
being amortized on a straight line basis over 30 years.
The pro forma impact on results of operations, giving effect to the Alcatel
Acquisition as if it occurred on May 1, 1995, is not materially different from
the results of operations as reported for the year ended April 28, 1996.
5. ACCRUED EXPENSES
At April 28, 1996 and April 30, 1997, accrued expenses consist of the
following:
<TABLE>
<CAPTION>
1996 1997
--------- ---------
<S> <C> <C>
(IN THOUSANDS)
Accrued wages, salaries and employee benefits........................... $ 6,823 $ 7,191
Other accrued expenses.................................................. 5,622 10,338
--------- ---------
$ 12,445 $ 17,529
--------- ---------
--------- ---------
</TABLE>
6. DEBT
At April 28, 1996 and April 30, 1997, long-term debt consists of the
following:
<TABLE>
<CAPTION>
1996 1997
--------- ----------
<S> <C> <C>
(IN THOUSANDS)
Credit facility(a)..................................................... $ -- $ 111,657
Lease finance obligations(b)........................................... 5,853 5,801
Mortgage loan(c)....................................................... 4,996 3,834
Other.................................................................. 1,175 --
--------- ----------
Total debt....................................................... 12,024 121,292
Less current portion of long-term debt................................. 484 430
--------- ----------
$ 11,540 $ 120,862
--------- ----------
--------- ----------
</TABLE>
At April 30, 1997, the fair value of Superior TeleCom's debt, based on the
quoted market prices for the same or similar issues or on the current rates
offered to the Company for debt of the same remaining maturities, approximates
its recorded value.
F-11
<PAGE>
SUPERIOR TELECOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. DEBT (CONTINUED)
The aggregate principal maturities of long-term debt for the five years
subsequent to April 30, 1997 are as follows:
<TABLE>
<CAPTION>
FISCAL YEAR AMOUNT
- ----------------------------------------------------------- -------------
<S> <C>
<CAPTION>
(IN
THOUSANDS)
<S> <C>
1998....................................................... $ 430
1999....................................................... 461
2000....................................................... 496
2001....................................................... 12,190
2002....................................................... 102,646
Thereafter................................................. 5,069
-------------
$ 121,292
-------------
-------------
</TABLE>
(a) Interest on the Credit Facility (see Note 1) is payable quarterly
based on the base rate (prime) plus 0.5% or the Eurodollar rate plus 1.50%.
The variable components of these rates are subject to periodic adjustment
after October 1997 based on the ratio of debt to cash flow (as defined). The
Credit Facility has a five-year term with a total commitment of $150.0
million, which is reduced by $25.0 million in October 1999 and October 2000.
Loans under the Credit Facility are guaranteed by the Company's domestic
subsidiaries and are secured by substantially all of the assets of the
Company and by the stock of each of the Company's domestic subsidiaries.
(b) The lease finance obligations result from the sale/leaseback of two
properties which, because of the Company's continuing involvement in the
form of repurchase options, have been recorded using the finance method. The
lease finance obligations at April 30, 1997 consist of (a) $5.0 million
related to the sale/leaseback of a Superior manufacturing facility and (b)
$801,000 related to the sale/ leaseback of a manufacturing facility
previously owned by DNE. The term of the Superior leaseback is 20 years,
with five additional option terms (at Superior's election) of five years
each. Superior has a one time option to repurchase the property during the
eleventh year of the lease. Superior's annual lease payments are $630,000,
subject to adjustment. The term of the DNE leaseback is nine years, and
annual lease payments are approximately $178,000, subject to adjustment. DNE
has an option to repurchase the property during the fourth and fifth years
of the lease term.
(c) The mortgage loan is payable by DNE to the Connecticut Development
Authority. The loan was repaid in full in June 1997.
In fiscal 1996, Superior incurred a charge of $2.6 million for the early
extinguishment of debt related to the refinancing of certain debt incurred for
the Alcatel Acquisition.
7. INCOME PER SHARE
Net income per share was 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 was 12,472,326 for the seven months ended April
30, 1997.
In February 1997, the FASB issued SFAS No. 128, "Earnings Per Share," which
specifies the computation, presentation and disclosure requirements for earnings
per share ("EPS"). SFAS No. 128
F-12
<PAGE>
SUPERIOR TELECOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. INCOME PER SHARE (CONTINUED)
revises the current EPS methodology, retroactively, and will be effective for
the Company beginning with its quarter ended January 31, 1998. Had SFAS No. 128
been implemented as of April 30, 1997, the reported EPS as of April 30, 1997
would not be materially different.
8. STOCK BASED COMPENSATION PLANS
In conjunction with the Reorganization on October 2, 1996, the Company
established the Superior TeleCom Inc. 1996 Stock Option Plan (the "Plan") which
has 1,250,000 shares of common stock reserved for issuance. There were 502,250
shares of common stock available under the Plan for granting of options at April
30, 1997. Participation in the Plan is limited generally to key employees and
directors of the Company. The Plan provides for grants of incentive and
non-incentive stock options. Under the Plan, options are not exercisable in the
first year nor after ten years from the date of grant.
On October 10, 1996, the Company established the Superior TeleCom Employee
Stock Purchase Plan ("ESPP") which allows eligible employees the right to
purchase common stock of the Company on a quarterly basis at the lower of 85% of
the fair market value on the day immediately prior to the first day of a
calendar quarter or on the last day of a calendar quarter. There are 250,000
shares of Superior TeleCom common stock reserved under the ESPP, of which 2,488
were issued to employees during fiscal 1997.
Statement No. 123, "Accounting for Stock-Based Compensation" was recently
issued by the FASB and, if fully adopted, changes the method for recognition of
cost on plans similar to those of the Company. In accordance with the provisions
of SFAS No. 123, the Company has elected to continue to apply APB Opinion No. 25
in accounting for its stock-based compensation plans (including options issued
under the Plan and the ESPP). Had the Company elected to recognize compensation
expense based on the fair value at the grant date for awards under its
stock-based compensation plans as prescribed by SFAS No. 123, Superior TeleCom's
net income and net income per share of common stock for the seven months ended
April 30, 1997 would approximate the pro forma amounts below:
<TABLE>
<CAPTION>
AS REPORTED PRO FORMA
----------- -----------
<S> <C> <C>
(IN THOUSANDS,
EXCEPT PER SHARE DATA)
Net income...................................... $ 17,390 $ 16,281
----------- -----------
----------- -----------
Net income per share of common stock............ $ 1.39 $ 1.32
----------- -----------
----------- -----------
</TABLE>
F-13
<PAGE>
SUPERIOR TELECOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. STOCK BASED COMPENSATION PLANS (CONTINUED)
The effects of applying SFAS No. 123 in the pro forma disclosure are not
necessarily indicative of future amounts since the estimated fair value of
common stock options is amortized to expense over the vesting period and
additional options may be granted in future years. The fair value for these
options was estimated at the date of grant using the Black-Scholes
option-pricing model with the following weighted-average assumptions for fiscal
1997: dividend yield of 0%, expected volatility of 44%,risk-free interest rate
of 6.42%, and expected life of 5 years. The weighted average per share fair
value of options granted during fiscal 1997 was $7.69.
The Black-Sholes option-pricing model was developed for use in estimating
the fair value of traded options which have no vesting restrictions and are
fully transferable. In addition, option valuation models require the input of
highly subjective assumptions including the expected stock price volatility.
Because the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.
The following table summarizes stock option activity for fiscal 1997:
<TABLE>
<CAPTION>
WEIGHTED-
AVERAGE
SHARES EXERCISE
OUTSTANDING PRICE
----------- -------------
<S> <C> <C>
Outstanding at April 28, 1996.................................... -- $ --
Exercised...................................................... -- --
Canceled....................................................... -- --
Granted........................................................ 747,750 16.06
----------- ------
Outstanding at April 30, 1997.................................... 747,750 $ 16.06
----------- ------
----------- ------
</TABLE>
Information with respect to stock-based compensation plan stock options
outstanding at April 30, 1997 is as follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
- ------------------------------------------------------------
<C> <C> <S> <C>
WEIGHTED-
NUMBER AVERAGE WEIGHTED-
OUTSTANDING REMAINING AVERAGE
EXERCISE AT APRIL 30, CONTRACTUAL EXERCISE
PRICES 1997 LIFE PRICE
- --------- --------------- ------------------- -----------
$ 16.00 710,000 9.46years $ 16.00
$ 17.25 37,750 9.66 17.25
-------
747,750 9.47 $ 16.06
-------
-------
</TABLE>
No options granted are exercisable as of April 30, 1997.
9. POSTRETIREMENT HEALTH CARE BENEFITS
Superior provides for postretirement employee health care benefits for
certain employees. The policy provides each employee and spouse, upon reaching
normal or early retirement and upon achieving certain minimum service
requirements, a fixed monthly benefit for the purchase of Superior-sponsored
health care
F-14
<PAGE>
SUPERIOR TELECOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. POSTRETIREMENT HEALTH CARE BENEFITS (CONTINUED)
insurance. The amount of the fixed monthly benefit will not be increased in the
future, notwithstanding medical-based inflation cost increases.
The accumulated postretirement health care benefit obligation, which is
included in long-term liabilities in the accompanying balance sheets, consisted
of the following at April 28, 1996 and April 30, 1997:
<TABLE>
<CAPTION>
1996 1997
--------- ---------
<S> <C> <C>
(IN THOUSANDS)
Retirees................................................................... $ 427 $ 327
Fully eligible active plan participants.................................... 284 306
Other active plan participants............................................. 571 632
--------- ---------
1,282 1,265
Unrealized net gain from past experience
and change in assumptions................................................ 211 178
--------- ---------
$ 1,493 $ 1,443
--------- ---------
--------- ---------
</TABLE>
Net periodic postretirement benefit cost includes the following components
for fiscal years 1995, 1996 and 1997:
<TABLE>
<CAPTION>
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
(IN THOUSANDS)
Service cost for benefits earned...................................... $ 45 $ 45 $ 43
Interest cost on accumulated
postretirement benefit obligation................................... 118 117 96
--------- --------- ---------
$ 163 $ 162 $ 139
--------- --------- ---------
--------- --------- ---------
</TABLE>
An increase in the health care cost trend assumptions would not change the
annual expense or obligation amounts as the employer cost is effectively capped.
The weighted-average discount rate used in determining the accumulated
postretirement benefit obligation was 8.0% for fiscal 1995 and 7.75 % for fiscal
1996 and 1997.
10. DEFINED CONTRIBUTION RETIREMENT PLANS
The Company sponsors several defined contribution plans covering
substantially all U.S. employees. The plans provide for limited company matching
of participants' contributions. The Company's contributions during fiscal 1995,
1996 and 1997 were $396,000, $403,000 and $485,000, respectively.
11. DEFINED BENEFIT RETIREMENT PLANS
Certain employees of Superior participate in defined benefit retirement
plans. These plans generally provide for payment of benefits, commencing at
retirement between the ages of 55 and 65, based on the employee's length of
service and earnings.
Superior sponsors a defined benefit pension plan for employees of its
Canadian manufacturing facility. Benefits under the plan are based on length of
service. Plan assets at April 28, 1996 and April 30,
F-15
<PAGE>
SUPERIOR TELECOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. DEFINED BENEFIT RETIREMENT PLANS (CONTINUED)
1997 totaled $2.3 million and $2.8 million, respectively, and projected benefit
obligations for service to date for the plan totaled $2.3 million and $2.6
million at April 28, 1996 and April 30, 1997, respectively. Net periodic pension
costs are not material to the consolidated financial statements.
The actuarial present value of the projected benefit obligation at April 28,
1996 and April 30, 1997 was determined using a weighted average discount rate of
8.0%. The expected long-term rate of return on plan assets was 8.0% at April 28,
1996 and April 30, 1997. Plan assets are invested in cash, short-term
investments, equities and fixed income instruments.
12. INCOME TAXES
For U.S. federal income tax purposes, Superior's and DNE's combined taxable
income for fiscal 1995 and 1996 and for the five months ended October 1, 1996
(the date of the Reorganization) was included as part of the Alpine consolidated
U.S. federal return. Superior and DNE did file separate state income tax returns
during such periods. For financial reporting purposes, Superior and DNE's
provision for income taxes was determined on a stand-alone basis, as if they
filed a separate U.S. federal return, with any current U.S. federal income taxes
due being reflected as a payable to Alpine. The Company began to file a separate
consolidated U.S. federal income tax return for the seven months ended April 30,
1997.
The Company's provision for income tax expense (benefit) for fiscal years
1995, 1996 and 1997 is as follows:
<TABLE>
<CAPTION>
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
(IN THOUSANDS)
Current:
Federal....................................................... $ 1,830 $ 7,131 $ 15,121
State......................................................... 320 891 2,128
Foreign....................................................... -- -- 321
--------- --------- ---------
2,150 8,022 17,570
--------- --------- ---------
Deferred:
Federal....................................................... 78 (1,160) 72
State......................................................... 12 (140) 4
Foreign....................................................... -- -- 1,343
--------- --------- ---------
90 (1,300) 1,419
--------- --------- ---------
$ 2,240 $ 6,722 $ 18,989
--------- --------- ---------
--------- --------- ---------
</TABLE>
F-16
<PAGE>
SUPERIOR TELECOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
12. INCOME TAXES (CONTINUED)
The provision for income taxes differs from the amount computed by applying
the U.S. federal income tax rate of 35% for fiscal years 1995, 1996 and 1997
because of the effect of the following items:
<TABLE>
<CAPTION>
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
(IN THOUSANDS)
Continuing operations:
Expected income tax expense at U.S. federal statutory tax
rate........................................................ $ 2,089 $ 5,042 $ 16,613
Non deductible goodwill amortization.......................... 382 382 382
State income tax expense, net of U.S. federal tax benefit..... 219 496 1,386
Taxes on foreign income at rates which differs from the U.S.
federal statutory tax rate.................................. -- -- 343
Other, net.................................................... (450) 802 265
--------- --------- ---------
Provision for income taxes from continuing operations........... $ 2,240 $ 6,722 $ 18,989
--------- --------- ---------
--------- --------- ---------
</TABLE>
The Company accounts for income taxes under an asset and liability approach
that requires the recognition of deferred tax assets and liabilities for the
expected future tax impact of temporary differences arising from assets and
liabilities whose tax basis are different from financial statement amounts. A
valuation allowance is established if it is more likely than not that all or a
portion of deferred tax assets will not be realized. Realization of the future
tax benefits of deferred tax assets is dependent on the Company's ability to
generate taxable income within the carryforward period and the periods in which
net temporary differences reverse. Although no assurance can be given that
sufficient taxable income will be generated to offset the reversal of certain
temporary differences, the Company believes that it is more likely than not that
all of the net deferred tax assets at April 30, 1997 will be realized.
F-17
<PAGE>
SUPERIOR TELECOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
12. INCOME TAXES (CONTINUED)
Items that result in deferred tax assets and liabilities at April 28, 1996
and April 30, 1997 are as follows:
<TABLE>
<CAPTION>
1996 1997
--------- ---------
<S> <C> <C>
(IN THOUSANDS)
Deferred tax assets:
Sale/leaseback........................................................... $ 1,735 $ 1,930
Accruals not currently deductible for tax................................ 2,162 2,201
Inventory reserves....................................................... 1,634 2,730
Net operating loss carryforwards......................................... 550 --
Other.................................................................... 400 171
--------- ---------
Total deferred tax assets.............................................. 6,481 7,032
Less valuation allowance................................................... (963) (1,100)
--------- ---------
Net deferred tax assets................................................ 5,518 5,932
--------- ---------
Deferred tax liabilities:
Depreciation and amortization............................................ 8,753 10,683
Other.................................................................... 400 591
--------- ---------
Total deferred tax liabilities......................................... 9,153 11,274
--------- ---------
Net deferred income tax liability...................................... $ 3,635 $ 5,342
--------- ---------
--------- ---------
</TABLE>
13. COMMITMENTS AND CONTINGENCIES
Total rent expense under cancelable and non-cancelable operating leases was
$555,000, $668,000 and $880,000 for the years ended April 30, 1995, April 28,
1996 and April 30, 1997, respectively.
At April 30, 1997, future minimum lease payments under non-cancelable
operating leases are as follows:
<TABLE>
<CAPTION>
REAL AND
FISCAL YEAR: PERSONAL PROPERTY
- -------------------------------------------------------- -----------------
<S> <C>
<CAPTION>
(IN THOUSANDS)
<S> <C>
1998.................................................... $ 775
1999.................................................... 747
2000.................................................... 727
2001.................................................... 634
2002.................................................... 146
Thereafter.............................................. 235
------
$ 3,264
------
------
</TABLE>
Approximately 27% of Superior TeleCom's total labor force is covered by
collective bargaining agreements.
The Company is self-insured for workers' compensation, general liability and
auto liability up to predetermined deductible levels above which third party
insurance applies. The Company accrues for
F-18
<PAGE>
SUPERIOR TELECOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. COMMITMENTS AND CONTINGENCIES (CONTINUED)
claim exposures which are probable of occurrence and can be reasonably
estimated; and does not deem its deductible exposure to be a material risk.
The Company is subject to routine lawsuits incidental to its business. In
the opinion of management, based on its examination of such matters and
discussions with counsel, the ultimate resolution of all pending or threatened
litigation, claims and assessments will have no material adverse affect upon the
Company's financial position, liquidity or results of operations.
Certain executives of the Company have employment contracts which generally
provide minimum base salaries, cash bonuses based on the Company's achievement
of certain performance objectives, stock options and restricted stock grants of
Alpine, and certain retirement and other employee benefits. Further, in the
event of termination or voluntary resignation for "good reason" accompanied by a
change in control of Alpine, as defined, such employment agreements provide for
severance payments not in excess of two times annual cash compensation and
bonus, and the continuation for stipulated periods of other benefits, as
defined.
14. RELATED PARTY TRANSACTIONS
In connection with the Reorganization, the Company entered into an agreement
(the "Services Agreement") with Alpine. Pursuant to the Services Agreement,
Alpine agreed to provide certain financial, audit and accounting, corporate
finance and strategic planning, legal, treasury, insurance and administrative
services to Superior TeleCom in return for an annual fee in addition to
reimbursement of incidental costs and expenses incurred in connection with
Alpine's provision of such services. Such annual fee initially was set at the
rate of $925,000 per year. Under the Services Agreement, Superior TeleCom paid
Alpine $623,000 during the seven month period ended April 30, 1997. As of May 1,
1997, the Services Agreement was amended to increase such annual fee to $2.7
million per year, which is estimated to reflect commercially reasonable costs
for the services provided.
The balance due to Alpine reflected in current liabilities in the
accompanying consolidated balance sheet at April 30, 1997 primarily represents
amounts due under the tax sharing agreement in place prior to the Reorganization
(see Note 12). The balance due to Alpine and affiliate at April 28, 1996
primarily represents intercompany debt due to Alpine under credit facilities in
place prior to the Reorganization (see Note 1), as well as, amounts due under
the aforementioned tax sharing agreement.
F-19
<PAGE>
SUPERIOR TELECOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
15. SEGMENT INFORMATION
The Company conducts business in two segments: telecommunications wire and
cable products (through Superior, acquired in November 1993, and the Alcatel
Business, acquired in May 1995), and data communications and electronics
(through DNE).
The following provides financial information about each business segment:
<TABLE>
<CAPTION>
YEAR ENDED APRIL
----------------------------------
<S> <C> <C> <C>
1995 1996 1997
---------- ---------- ----------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C> <C>
Net sales(a):
Telecommunications wire and cable...................... $ 136,578 $ 384,237 $ 442,486
Data communications and electronics.................... 27,907 26,176 21,354
---------- ---------- ----------
$ 164,485 $ 410,413 $ 463,840
---------- ---------- ----------
---------- ---------- ----------
Operating income (loss):
Telecommunications wire and cable...................... $ 8,016 $ 29,741 $ 62,779
Data communications and electronics.................... 1,599 2,039 (444)
Corporate.............................................. -- -- (1,658)
---------- ---------- ----------
$ 9,615 $ 31,780 $ 60,677
---------- ---------- ----------
---------- ---------- ----------
Identifiable assets at year-end:
Telecommunications wire and cable...................... $ 98,497 $ 226,045 $ 225,286
Data communications and electronics.................... 16,836 18,020 14,425
Corporate.............................................. -- -- (1,603)
---------- ---------- ----------
$ 115,333 $ 244,065 $ 238,108
---------- ---------- ----------
---------- ---------- ----------
Depreciation and amortization expense:
Telecommunications wire and cable...................... $ 3,714 $ 7,719 $ 8,595
Data communications and electronics.................... 872 732 700
---------- ---------- ----------
$ 4,586 $ 8,451 $ 9,295
---------- ---------- ----------
---------- ---------- ----------
Capital expenditures:
Telecommunications wire and cable(b)................... $ 1,388 $ 9,337 $ 9,294
Data communications and electronics.................... 394 449 513
---------- ---------- ----------
$ 1,782 $ 9,786 $ 9,807
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
(a) (i) Two customers in the telecommunications wire and cable segment
accounted for 30% and 16%, of net sales in fiscal 1995; five
customers accounted for 22%, 17%, 16%, 13% and 13% of net sales
in fiscal 1996; and five customers accounted for 19%, 17%, 16%,
14% and 14% of net sales in fiscal 1997.
(ii) The data communications and electronics segment has historically
been dependent on government funding of programs in which it
participates. Significant changes in the levels of funding for
such programs could have a material adverse effect on the segment.
Sales to agencies of the U.S. government were 82.3%, 66.4% and
64.6 % of net sales of this segment for fiscal 1995, 1996 and
1997, respectively.
(b) During fiscal 1996, Superior acquired certain Canadian assets of
BICC Phillips, Inc. for $5.4 million, which is reflected in
capital expenditures.
F-20
<PAGE>
SUPERIOR TELECOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
16. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
The following quarterly financial information represents the operating
results of Superior and DNE through October 1, 1996 (the date of Reorganization)
combined with the consolidated operating results of the Company for the seven
months ended April 30, 1997 (see Note 1). Net income per share of common stock
is provided for the two full quarters, subsequent to the Reorganization, ended
January 31, 1997 and April 30, 1997.
<TABLE>
<CAPTION>
FISCAL 1996 QUARTER ENDED
-----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
JULY 31 OCTOBER 31 JANUARY 31 APRIL 28 YEAR
--------- ----------- ----------- ---------- ----------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net sales............................................ $ 99,324 $ 109,076 $ 91,185 $ 110,828 $ 410,413
Gross profit......................................... 9,503 11,040 10,901 16,115 47,559
Operating income..................................... 5,830 7,262 7,020 11,668 31,780
Income before extraordinary item..................... 1,674 1,571 1,617 3,245 8,107
Income (loss) from extraordinary item................ (2,811) 166 -- -- (2,645)
--------- ----------- ----------- ---------- ----------
Net income (loss).................................... $ (1,137) $ 1,737 $ 1,617 $ 3,245 $ 5,462
--------- ----------- ----------- ---------- ----------
--------- ----------- ----------- ---------- ----------
</TABLE>
<TABLE>
<CAPTION>
FISCAL 1997 QUARTER ENDED
------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
JULY 31 OCTOBER 31 JANUARY 31 APRIL 30 YEAR
---------- ----------- ----------- ---------- ----------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net sales........................................... $ 123,824 $ 122,926 $ 97,391 $ 119,699 $ 463,840
Gross profit........................................ 18,377 20,585 17,427 23,180 79,569
Operating income.................................... 14,057 15,651 12,947 18,022 60,677
---------- ----------- ----------- ---------- ----------
Net income.......................................... $ 5,968 $ 6,947 $ 6,132 $ 9,429 $ 28,476
---------- ----------- ----------- ---------- ----------
---------- ----------- ----------- ---------- ----------
Net income per share of common stock................ $ 0.47 $ 0.72
----------- ----------
----------- ----------
</TABLE>
F-21
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 of 15(d) 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.
Dated: July 29, 1997
SUPERIOR TELECOM INC.
BY: /S/ STEVEN S. ELBAUM
-----------------------------------------
Steven S. Elbaum
Chairman of the Board, President
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
Chairman of the Board,
/s/ STEVEN S. ELBAUM President, Chief
- ------------------------------ Executive Officer and July 29, 1997
Steven S. Elbaum Director (principal
executive officer)
Chief Financial Officer and
/s/ DAVID S. ALDRIDGE Treasurer (principal
- ------------------------------ financial and accounting July 29, 1997
David S. Aldridge officer)
/s/ EUGENE P. CONNELL Director
- ------------------------------ July 29, 1997
Eugene P. Connell
/s/ ROBERT J. LEVENSON Director
- ------------------------------ July 29, 1997
Robert J. Levenson
/s/ CHARLES Y.C. TSE Director
- ------------------------------ July 29, 1997
Charles Y.c. Tse
/s/ BRAGI F. SCHUT Director
- ------------------------------ July 29, 1997
Bragi F. Schut
24
<PAGE>
EXHIBIT 10(T)
[SUPERIOR TELECOM LETTERHEAD]
As of May 1, 1997
The Alpine Group, Inc.
1790 Broadway, Suite 1500
New York, New York 10019-1412
RE: SERVICES AGREEMENT DATED AS OF OCTOBER 2, 1996 BY AND BETWEEN THE ALPINE
GROUP, INC. AND SUPERIOR TELECOM INC. (THE "AGREEMENT")
This will confirm our agreement in modification of the captioned Agreement
as follows:
1. Section 3(b) of the Agreement is hereby amended by deleting the
dollar amount of "$925,000" and replacing it with the dollar amount of
"$2,717,000".
2. Section 4(a) of the Agreement is hereby amended by deleting the
first sentence thereof and inserting the following: "a. Effective from and
after May 1, 1997 in respect of the twelve month period immediately
succeeding such date, Superior shall pay Alpine the fee provided for under
Section 3(b) quarterly in advance effective May 1, 1997."
The amendments provided for herein have been approved by the Audit Committee
of the Board of Directors of Superior Telecom Inc.
As modified hereby, the Agreement is hereby expressly ratified and
confirmed.
If the foregoing conforms with your understanding of the agreement reached
between us, kindly execute a copy of this letter so indicating.
Very truly yours,
SUPERIOR TELECOM INC.
By: /s/ STEVEN S. ELBAUM
-----------------------------------------
Steven S. Elbaum
Its: President and
Chief Executive Officer
Agreed to as of the
date first
herein above set forth
THE ALPINE GROUP, INC.
/s/ BRAGI F. SCHUT
-----------------------------------------
By: Bragi F. Schut
Executive Vice President
Its:
<PAGE>
EXHIBIT 21
<TABLE>
<CAPTION>
JURISDICTION
OF
SUBSIDIARY ORGANIZATION
- ------------------------------------------------------------------------------------------------ ----------------
<S> <C>
Superior Telecommunications, Inc. .............................................................. Georgia
Superior Cable Corporation...................................................................... Ontario
DNE Systems, Inc. .............................................................................. Delaware
DNE Technologies, Inc. ......................................................................... Delaware
DNE Manufacturing and Service Company........................................................... Delaware
</TABLE>
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our report dated June 13, 1997 included in this Form 10-K, into Superior TeleCom
Inc.'s previously filed Registration Statement File No. 333-16705.
Arthur Andersen LLP
Atlanta, Georgia
July 24, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> US
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> APR-30-1997
<PERIOD-START> MAY-01-1996
<PERIOD-END> APR-30-1997
<EXCHANGE-RATE> 1
<CASH> 1,052
<SECURITIES> 0
<RECEIVABLES> 48,273
<ALLOWANCES> 174
<INVENTORY> 56,262
<CURRENT-ASSETS> 109,967
<PP&E> 96,431
<DEPRECIATION> 19,4088
<TOTAL-ASSETS> 238,108
<CURRENT-LIABILITIES> 62,350
<BONDS> 0
0
0
<COMMON> 129
<OTHER-SE> 43,899
<TOTAL-LIABILITY-AND-EQUITY> 238,108
<SALES> 463,840
<TOTAL-REVENUES> 463,840
<CGS> 384,271
<TOTAL-COSTS> 384,271
<OTHER-EXPENSES> 24
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,907
<INCOME-PRETAX> 47,465
<INCOME-TAX> 18,989
<INCOME-CONTINUING> 28,476
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 28,476
<EPS-PRIMARY> 1.39<F1>
<EPS-DILUTED> 1.39<F1>
<FN>
<F1>Represents the net income per share since the
Reorganization on October 2, 1996.
</FN>
</TABLE>
