<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
<TABLE>
<S> <C>
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period Ended January 31, 1995
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934
</TABLE>
For the transition period from to
Commission File No. 1-9078
THE ALPINE GROUP, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 22-1620387
(State or other jurisdiction (IRS Employer
of Identification
incorporation or No.)
organization)
1790 Broadway, New York, NY 10019-1412
(Address of principal (Zip Code)
executive offices)
</TABLE>
Registrant's telephone number, including area code: (212) 757-3333
------------------------
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days.
Yes X No __
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
CLASS OUTSTANDING AT MARCH 17, 1995
Common Stock, $.10 Par Value 17,187,397
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The accompanying unaudited condensed financial statements have been prepared
in accordance with the requirements of Form 10-Q and therefore do not include
all information and footnotes necessary for a fair presentation of financial
position, results of operations, and cash flows in conformity with generally
accepted accounting principles.
In the opinion of management, all adjustments (which, except as disclosed
elsewhere herein, consist only of normal recurring accruals) necessary for a
fair presentation of the results of operations for the relevant periods have
been made. Results for the interim periods are not necessarily indicative of the
results to be expected for the year.
2
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLAR AMOUNTS IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
JANUARY 31, APRIL 30,
1995 1994
----------- ---------
(UNAUDITED)
<S> <C> <C>
Current assets:
Cash and cash equivalents................................................ $ 4,254 $ 2,507
Marketable securities.................................................... 18,121 1,972
Accounts receivable (less allowance for doubtful accounts --
January, $922; April, $68).............................................. 32,039 17,792
Inventories.............................................................. 36,098 22,502
Other current assets..................................................... 2,308 1,204
----------- ---------
Total current assets................................................... 92,820 45,977
Property, plant and equipment, net......................................... 53,073 31,674
Long-term investments and other assets (Note 4)............................ 14,719 2,447
Net noncurrent assets of discontinued operations........................... 3,686 3,755
Goodwill and other intangibles (less accumulated amortization --
January, $1,549; April, $557)............................................. 68,147 30,098
----------- ---------
TOTAL ASSETS........................................................... $ 232,445 $ 113,951
----------- ---------
----------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings.................................................... $ 32,673 $ --
Current portion of long-term debt........................................ 3,177 2,217
Accounts payable......................................................... 24,919 13,750
Accrued expenses......................................................... 24,151 5,416
Net current liabilities of discontinued operations....................... 1,736 155
----------- ---------
Total current liabilities.............................................. 86,656 21,538
Long-term debt, less current portion (Note 6).............................. 86,750 41,528
----------- ---------
Other long-term liabilities (Note 5)....................................... 7,333 2,887
----------- ---------
Contingent purchase consideration (Note 6)................................. 5,733 --
----------- ---------
Stockholders' equity:
8% Cumulative convertible preferred stock at liquidation value........... 11,823 --
9% Cumulative convertible preferred stock at liquidation value........... 2,427 2,677
8.5% Cumulative convertible preferred stock at liquidation value......... 3,500 3,500
Common stock, $.10 par value; authorized 25,000,000 shares;
issued: January, 17,187,397 shares; April, 18,073,512 shares............ 1,719 1,808
Capital in excess of par value............................................. 102,638 109,593
Accumulated deficit........................................................ (75,443 ) (69,205)
----------- ---------
46,664 48,373
Less shares held in treasury, at cost:
January, 72,190 shares; April, 14,511 shares............................. (377 ) (61)
Receivable from stockholder.............................................. (314 ) (314)
----------- ---------
Total stockholders' equity............................................. 45,973 47,998
----------- ---------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY............................... $ 232,445 $ 113,951
----------- ---------
----------- ---------
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
3
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JANUARY 31,
---------------------
1995 1994
--------- ----------
<S> <C> <C>
Net sales.............................................................................. $ 45,900 $ 22,016
Cost of goods sold..................................................................... 39,545 19,093
--------- ----------
Gross profit......................................................................... 6,355 2,923
Selling, general and administrative.................................................... 4,807 3,569
Research, development and engineering.................................................. 340 401
Amortization of goodwill and other intangibles......................................... 368 1,810
--------- ----------
Operating income (loss).............................................................. 840 (2,857)
Interest income........................................................................ 34 144
Interest (expense)..................................................................... (2,188) (775)
Other (expense)........................................................................ (640) (367)
--------- ----------
(Loss) from continuing operations before income taxes................................ (1,954) (3,855)
Income tax expense..................................................................... -- --
--------- ----------
(Loss) from continuing operations.................................................... (1,954) (3,855)
(Loss) from discontinued operations.................................................... (--) (23,370)
--------- ----------
Net (loss)........................................................................... (1,954) (27,225)
Preferred stock dividends.............................................................. 253 126
--------- ----------
(Loss) applicable to common stock.................................................... $ (2,207) $ (27,351)
--------- ----------
--------- ----------
(Loss) per share of common stock:
Continuing operations................................................................ $(0.12) $(0.23)
Discontinued operations.............................................................. -- (1.38)
--------- ----------
Net (loss) per share of common stock................................................... $(0.12) $(1.61)
--------- ----------
--------- ----------
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
4
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED)
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
JANUARY 31,
-----------------------
1995 1994
----------- ----------
<S> <C> <C>
Net sales............................................................................. $ 125,782 $ 34,494
Cost of goods sold.................................................................... 108,464 26,802
----------- ----------
Gross profit........................................................................ 17,318 7,692
Selling, general and administrative................................................... 11,285 7,552
Research, development and engineering................................................. 1,015 1,237
Amortization of goodwill and other intangibles........................................ 879 2,036
----------- ----------
Operating income (loss)............................................................. 4,139 (3,133)
Interest income....................................................................... 108 185
Interest (expense).................................................................... (4,213) (1,339)
Other (expense)....................................................................... (669) (415)
----------- ----------
(Loss) from continuing operations before income taxes............................... (635) (4,702)
Income tax expense.................................................................... 232 --
----------- ----------
(Loss) from continuing operations before extraordinary item......................... (867) (4,702)
(Loss) from discontinued operations................................................. (4,868) (24,290)
----------- ----------
(Loss) before extraordinary item.................................................... (5,735) (28,992)
Extraordinary item -- (loss) on early extinguishment of debt.......................... (--) (47)
----------- ----------
Net (loss).......................................................................... (5,735) (29,039)
Preferred stock dividends............................................................. 503 258
----------- ----------
(Loss) applicable to common stock................................................... $ (6,238) $ (29,297)
----------- ----------
----------- ----------
(Loss) per share of common stock:
Continuing operations............................................................... $(0.08) $(0.38)
Discontinued operations............................................................. (0.27) (1.77)
Extraordinary item -- (loss) on early extinguishment of debt........................ -- --
----------- ----------
Net (loss) per share of common stock.............................................. $(0.35) $(2.15)
----------- ----------
----------- ----------
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
5
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED JANUARY 31, 1995
(UNAUDITED)
(IN THOUSANDS EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
8%
CUMULATIVE
9% CUMULATIVE CONVERTIBLE
CONVERTIBLE PREFERRED
COMMON STOCK CAPITAL PREFERRED STOCK STOCK
----------------------- IN EXCESS ------------------------ ---------
SHARES AMOUNT OF PAR SHARES AMOUNT SHARES
---------- ----------- --------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance at April 30, 1994......................... 18,073,512 $ 1,808 $ 109,593 2,677 $ 2,677 --
---------- ----------- --------- ----- ----------- ---------
Compensation expense related to stock options and
grants........................................... 479
Dividends on preferred stock......................
Conversion of convertible preferred stock......... 40,000 4 246 (250) (250)
Exercise of stock options......................... 73,885 7 199
Shares issued for Directors' fees................. 21
Purchase of treasury stock........................
Exchange of common stock for preferred stock...... (1,000,000) (100) (7,900) 160,000
Acquisition of Adience, Inc....................... 82,267
Repurchase of preferred stock..................... (5,787)
Net (loss) for the nine months ended January 31,
1995.............................................
---------- ----------- --------- ----- ----------- ---------
Balance at January 31, 1995....................... 17,187,397 $ 1,719 $ 102,638 2,427 $ 2,427 236,480
---------- ----------- --------- ----- ----------- ---------
<CAPTION>
8.5% CUMULATIVE
CONVERTIBLE
PREFERRED STOCK TREASURY STOCK
------------------------ ACCUMULATED ----------------------
AMOUNT SHARES AMOUNT DEFICIT SHARES AMOUNT
--------- ----------- ----------- ------------ --------- -----------
<S> <C> <C>
Balance at April 30, 1994......................... -- 3,500 $ 3,500 $ (69,205) (14,511) $ (61)
--------- ----- ----------- ------------ --------- -----------
Compensation expense related to stock options and
grants...........................................
Dividends on preferred stock...................... (503)
Conversion of convertible preferred stock.........
Exercise of stock options.........................
Shares issued for Directors' fees................. 10,221 43
Purchase of treasury stock........................ (67,900) (359)
Exchange of common stock for preferred stock...... 8,000
Acquisition of Adience, Inc....................... 4,113
Repurchase of preferred stock..................... (290)
Net (loss) for the nine months ended January 31,
1995............................................. (5,735)
--------- ----- ----------- ------------ --------- -----------
Balance at January 31, 1995....................... $ 11,823 3,500 $ 3,500 $ (75,443) (72,190) $ (377)
--------- ----- ----------- ------------ --------- -----------
<CAPTION>
RECEIVABLE
FROM STOCK-
HOLDER TOTAL
------------- ---------
Balance at April 30, 1994......................... $ (314) $ 47,998
------ ---------
Compensation expense related to stock options and
grants........................................... 479
Dividends on preferred stock...................... (503)
Conversion of convertible preferred stock......... 206
Exercise of stock options.........................
Shares issued for Directors' fees................. 64
Purchase of treasury stock........................ (359)
Exchange of common stock for preferred stock......
Acquisition of Adience, Inc....................... 4,113
Repurchase of preferred stock..................... (290)
Net (loss) for the nine months ended January 31,
1995............................................. (5,735)
------ ---------
Balance at January 31, 1995....................... $ (314) $ 45,973
------ ---------
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
6
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
JANUARY 31,
---------------------
1995 1994
--------- ----------
<S> <C> <C>
Cash flow from operating activities:
(Loss) from continuing operations....................................................... $ (867) $ (4,702)
Adjustments to reconcile (loss) to net cash provided by continuing operations:
Depreciation and amortization....................................................... 3,674 3,183
Accretion of debt discount and amortization of deferred financing................... 435 139
Inducement of debt conversion....................................................... -- 23
Compensation expense related to stock options and grants............................ 407 248
Changes in assets and liabilities:
Accounts receivable................................................................. (489) 1,283
Inventories......................................................................... (3,739) 2,747
Prepaid expenses and other current assets........................................... 1,054 32
Other assets........................................................................ (209) 198
Accounts payable and accrued expenses............................................... 3,623 (3,299)
Other............................................................................... (242) 275
--------- ----------
Cash provided by continuing operating activities.......................................... 3,647 127
--------- ----------
(Loss) from discontinued operations...................................................... (4,868) (24,290)
Adjustments to reconcile loss to net cash (used for) discontinued operations:
Depreciation and amortization......................................................... 548 876
Loss recognized on purchase of R&D and other related charges.......................... -- 21,322
Increase (decrease) in net liabilities................................................ 1,512 (803)
Other................................................................................. 206 710
--------- ----------
Cash (used for) discontinued operations................................................... (2,602) (2,185)
--------- ----------
Cash provided by (used for) operating activities.......................................... 1,045 (2,058)
--------- ----------
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
7
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
JANUARY 31,
--------------------
1995 1994
--------- ---------
<S> <C> <C>
Cash flow from investing activities:
Acquisitions, net of cash acquired........................................................ 1,101 (19,744)
Reduction of contingent purchase consideration............................................ (436) --
Investment in marketable securities....................................................... (16,227) 198
Capital expenditures on continuing operations............................................. (1,500) (1,206)
Capital expenditures on discontinued operations........................................... (229) (328)
Other..................................................................................... (135) --
--------- ---------
Cash (used for) investing activities........................................................ (17,426) (21,080)
--------- ---------
Cash flow from financing activities:
Short-term borrowings (repayments)........................................................ 20,179 (118)
Borrowing under revolving credit facilities, net.......................................... 1,675 7,233
Issuance of preferred stock, net.......................................................... -- 4,700
Redemption of preferred stock............................................................. (287) (253)
Dividends on preferred stock.............................................................. (103) (258)
Minority investment in discontinued operations............................................ -- 28
Purchase of treasury shares............................................................... (360) --
Proceeds from exercise of stock options................................................... 202 1,066
Term loan repayments on continuing operations............................................. (3,120) (2,875)
Term loan repayments on discontinued operations........................................... (58) (50)
Term loan borrowings by continuing operations............................................. -- 17,318
Term loan borrowings by discontinued operations........................................... -- 690
--------- ---------
Cash provided by financing activities....................................................... 18,128 27,481
--------- ---------
Net increase (decrease) in cash and cash equivalents........................................ 1,747 4,343
Cash and cash equivalents at beginning of period............................................ 2,507 2,286
--------- ---------
Cash and cash equivalents at end of period.................................................. $ 4,254 $ 6,629
--------- ---------
--------- ---------
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
8
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
JANUARY 31,
-----------------------
1995 1994
----------- ----------
<S> <C> <C>
Supplemental disclosures:
Taxes paid............................................................................. $ 437
-----------
-----------
Interest paid.......................................................................... $ 3,022 $ 750
----------- ----------
----------- ----------
Non-cash investing and financing activities:
Exchange of preferred stock............................................................ $ 250 $ 2,000
----------- ----------
----------- ----------
Conversion of notes and exchange of debentures:
Conversion of notes.................................................................. $ 496
----------
----------
Exchange of debentures............................................................... $ 135
----------
----------
Acquisition of business:
Assets, net of cash acquired........................................................... $ 107,837 $ 93,018
Common stock issued.................................................................... -- (41,045)
Preferred stock issued................................................................. (4,113)
Contingent consideration............................................................... (6,167)
Liabilities assumed.................................................................... (96,456) (32,229)
----------- ----------
Net cash paid (received)............................................................... $ (1,101) $ 19,744
----------- ----------
----------- ----------
Exchange of common stock:
Common stock acquired in exchange for preferred stock issued........................... $ (8,000)
-----------
-----------
Preferred stock issued................................................................. $ 8,000
-----------
-----------
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
9
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 1995
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of
The Alpine Group, Inc. (the "Company") reflect all adjustments which, in the
opinion of management, are necessary for a fair presentation of the results of
operations for the interim periods presented. These financial statements should
be read in conjunction with the summary of accounting policies and the notes to
the financial statements included in the Company's Annual Report on Form 10-K
for the year ended April 30, 1994.
Certain reclassifications have been made to the January 31, 1994 financial
statements to conform with the January 31, 1995 presentation.
2. INVENTORIES
The components of inventories are:
<TABLE>
<CAPTION>
JANUARY 31, APRIL 30,
1995 1994
----------- ---------
(IN THOUSANDS)
<S> <C> <C>
Raw materials........................................................ $ 12,562 $ 5,947
Work in process...................................................... 7,564 5,580
Finished goods....................................................... 15,972 10,975
----------- ---------
$ 36,098 $ 22,502
----------- ---------
----------- ---------
</TABLE>
3. INCOME (LOSS) PER SHARE
For the nine months ended January 31, 1995 and 1994 the number of shares
used in computing income (loss) per share were 17,910,346 and 13,635,966,
respectively, based on the weighted average number of shares outstanding.
4. LONG-TERM INVESTMENTS AND OTHER ASSETS
The components of long-term investments and other assets are:
<TABLE>
<CAPTION>
JANUARY 31, APRIL 30,
1995 1994
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
Asset held for disposition (See Note 6)................................ $ 8,000 $ --
Assets held for sale................................................... 2,553 --
Other.................................................................. 4,166 2,447
----------- -----------
----------- -----------
$ 14,719 $ 2,447
----------- -----------
----------- -----------
</TABLE>
5. OTHER LONG-TERM LIABILITIES
The components of other long-term liabilities are:
<TABLE>
<CAPTION>
JANUARY 31, APRIL 30,
1995 1994
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
Payable to Information Display Technologies, Inc. ("IDT") (See Note
7).................................................................... $ 3,809 $ --
Payable to Former Stockholder of Adience, Inc.......................... 2,016 --
Other.................................................................. 1,508 2,887
----------- -----------
$ 7,333 $ 2,887
----------- -----------
----------- -----------
</TABLE>
10
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 1995
(UNAUDITED)
6. ACQUISITION OF ADIENCE
On December 21, 1994, the Company acquired from certain stockholders of
Adience, Inc. ("Adience") 82.3% of the outstanding capital stock. The Company,
which had previously purchased 4.9% of Adience's common stock, currently owns
87.2% of the outstanding common stock of Adience. Adience manufactures and
supplies refractory products and services to integrated steelmakers and other
industries.
Adience's 80%-owned subsidiary, Information Display Technology, Inc.
("IDT"), manufacturers and supplies information display systems, primarily
custom designed and engineered writing and projection surfaces for
institutional, healthcare and educational markets. IDT is listed on the American
Stock Exchange. The Company has entered into a merger agreement providing for
the merger of its Information Display Group, consisting of Alpine Polyvision
Inc. ("APV") and Posterloid Corporation ("Posterloid") with IDT. Upon completion
of the merger, the Company intends to distribute a majority of its holding to
stockholders (see Note 7).
Consideration paid for the Adience acquisition consisted of 82,267 shares of
a new series of 8% preferred stock of the Company, with a liquidation preference
of $50 per share (see Note 8) and 2,752,900 shares of IDT common stock to be
delivered to the selling stockholders of Adience as soon as practicable after
the consummation of the merger referred to above. Should the merger not occur by
May 31, 1995, the Company will be required to deliver, in lieu of shares of IDT
common shares, an additional 123,330 shares of 8% preferred stock of the
Company. However, should the merger be completed the value of the IDT stock
delivered by the Company to the Adience stockholders is subject to a
consideration reset. The consideration reset requires the Company to deliver to
the selling stockholders an amount equal to the 2,752,900 shares of IDT common
stock to be delivered multiplied by the difference, if any, between $2.24 and
the greater of the average closing price for IDT common stock on each of the 20
trading days preceding August 1, 1995 and $0.75 per share. The consideration
reset will be payable, at the option of the Company, in either 8% preferred
stock of the Company or IDT common stock, or a combination thereof. The deferred
consideration to be paid by the delivery of the aforementioned IDT shares has
been reflected as contingent purchase consideration.
A summary of the consideration paid follows ($000's):
<TABLE>
<S> <C>
Common stock purchased for cash................................... $ 624
82,267 shares of 8% Cumulative convertible preferred stock........ 4,113
2,752,900 common shares of IDT with a............................. 6,167
guaranteed per share value of $2.24.............................. 1,500
---------
Expenses associated with the acquisition.......................... $ 12,404
---------
---------
</TABLE>
The Adience acquisition has been accounted for using the purchase method,
and accordingly, Adience's results of operations are included in the Company's
consolidated results on a prospective basis from the date of the acquisition.
The total purchase price for the acquisition (including expenses) amounted to
approximately $12.4 million and has been allocated to the fair market value of
Adience's assets and liabilities as of the acquisition date resulting in
goodwill of approximately $40.7 million. Goodwill is being amortized on a
straight line basis over 30 years.
Unaudited condensed pro forma results of operations which give effect to the
acquisition of Adience as if it had occurred on May 1, 1993 are presented below.
The pro forma results of operations for the nine months ended January 31, 1994
include the results of Adience for the nine month period from July 1, 1993
through March 31, 1994. Such period reflects the pro forma results of operations
11
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 1995
(UNAUDITED)
6. ACQUISITION OF ADIENCE (CONTINUED)
post emergence from Adience's prepackaged bankruptcy plan consummated on June
30, 1993. The pro forma amounts reflect acquisition related purchase accounting
adjustments, including adjustments to depreciation and amortization expense. The
pro forma financial information does not purport to be indicative of either the
results of operations that would have occurred had the acquisition taken place
at the beginning of the periods presented or of future results of operations.
The allocation of the purchase price for Adience reflected in the consolidated
financial statements and in the pro forma information is based on preliminary
appraisals and estimations. Accordingly, the final recording of the purchase can
be expected to differ from that reflected herein.
<TABLE>
<CAPTION>
PRO FORMA (UNAUDITED)
NINE MONTHS ENDED
JANUARY 31,
------------------------
1995 1994
----------- -----------
(IN THOUSANDS, EXCEPT
PER SHARE DATA)
<S> <C> <C>
Net Sales..................................................................... $ 193,041 $ 171,627
(Loss) from continuing operations before income taxes......................... (4,540) (13,548)
(Loss) from continuing operations............................................. (4,772) (13,548)
(Loss) from discontinued operations........................................... (4,868) (24,290)
Net (loss).................................................................... (10,640) (37,855)
(Loss) per share of common stock:
Continuing operations..................................................... (0.36) (0.80)
Discontinued operations................................................... (0.27) (1.37)
Net (loss)................................................................ $(0.63) $(2.17)
</TABLE>
Debt assumed or issued as a result of the acquisition of Adience and related
financing and included in the accompanying balance sheet as of January 31, 1995
consisted of the following ($000's):
<TABLE>
<S> <C>
Short term borrowings:
13.5% Senior Subordinated Notes (face value $21,000) (a).................. $ 20,711
Revolving credit loan (b)................................................. 11,962
---------
$ 32,673
---------
---------
Long term debt:
11% Senior Secured Notes due in 2002 (face value $49,079) (c)............. $ 45,370
Capital lease obligations................................................. 569
Other long-term liabilities............................................... 1,186
---------
47,125
Less: current maturities.................................................. 661
---------
$ 46,464
---------
---------
</TABLE>
(a) On January 6, 1995, the Company issued $21,000,000 face amount of
13.5% Subordinated Secured Notes ("Notes") due January 5, 1996. The Notes
are secured by the pledge of shares of APV 8% Preferred Stock owned by the
Company. The Notes were issued at a discount of 1.5% which will be accreted
as a charge to interest expense through maturity.
12
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 1995
(UNAUDITED)
6. ACQUISITION OF ADIENCE (CONTINUED)
(b) The revolving credit loan represents borrowings by Adience under a
credit facility. The facility remains in effect from year to year unless
terminated upon sixty days' written notice by either party prior to the renewal
date (June 30, 1995). The facility may not exceed $14 million or available
collateral (85% of eligible accounts receivable and 30%-50% of eligible
inventory). The loan is collateralized by Adience's accounts receivable,
inventory, fixed assets, intangible assets and common stock of IDT. In addition,
IDT has guaranteed the Adience line of credit and has pledged as collateral its
own accounts receivable inventory and equipment. Interest on the outstanding
balance is based on 2.5% over the prime rate. Letters of credit issued under the
facility totalled $200,000 at January 31, 1995, which reduced the availability
under the financing arrangement in a like amount.
(c) The 11% Senior Secured Notes ("Secured Notes") due in 2002 are
redeemable at the option of Adience after December 15, 1997 and pay interest
semi-annually on June 15 and December 15. The Secured Notes are secured by a
second lien on the assets of Adience, including the stock of IDT. The Secured
Notes include certain restrictive covenants which, among other things, limit the
sale of assets, restrict the payment of dividends and place limits on additional
indebtedness.
The aggregate maturities of Adience's long-term debt for the period through
April 30, 1995 and the five years thereafter are as follows ($000's):
<TABLE>
<CAPTION>
FISCAL YEAR AMOUNT
------------------------------------------------------------------------- ---------
<S> <C>
1995..................................................................... $ 173
1996..................................................................... 615
1997..................................................................... 510
1998..................................................................... 360
1999..................................................................... 93
2000..................................................................... 4
Thereafter............................................................... $ 49,079
</TABLE>
In connection with the acquisition, the Company incurred costs exploring
various financing alternatives related to the Adience indebtedness which
resulted in a charge to other income and expense of $484,000.
7. DISCONTINUED OPERATIONS
After consummation of the merger of APV and Posterloid with IDT, the Company
intends to distribute to its stockholders a substantial portion of its common
equity ownership of the Information Display Group, consisting of APV, Posterloid
and IDT (subject to the completion of the merger of IDT, APV and Posterloid), to
its stockholders. The distribution is expected to be completed in the next six
months. As a result of the planned distribution, the Company's consolidated
financial statements and notes thereto have been reclassified to reflect the
operations of APV and Posterloid as discontinued. The Company's investment in
IDT, which was acquired in connection with the acquisition of Adience, has been
included in long-term investments and other assets as an asset held for
disposition. It is also expected that, upon the merger of IDT, APV and
Posterloid, amounts owing from Adience to IDT which are included in other long
term liabilities will be offset by amounts owing from APV to the Company.
The results of operations of APV and Posterloid are presented in the
Consolidated Statement of Operations under the caption "(Loss) from Discontinued
Operations". The results presented below, include the historical results of APV
and Posterloid for the nine month periods ended January 31,
13
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 1995
(UNAUDITED)
7. DISCONTINUED OPERATIONS (CONTINUED)
1995 and 1994. Included in the 1995 nine month results is a $1.9 million
provision to reflect management's estimate of operating losses through the
dispostion date, largely in connection with research and development
expenditures at APV, expected to be incurred from January 31, 1995 to the
expected date of distribution. No gain or loss is expected to be recognized by
the Company as a result of the distribution.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
JANUARY 31,
---------------------
STATEMENT OF OPERATIONS 1995 1994
---------------------------------------------------------------------- --------- ----------
(IN THOUSANDS)
<S> <C> <C>
Net sales............................................................. $ 3,664 $ 4,138
Operating (loss)...................................................... (4,737) (20,450)
Net (loss)............................................................ (4,868) (24,290)
</TABLE>
The assets and liabilities of APV and Posterloid as of January 31, 1995 and
April 30, 1994, included in the Consolidated Balance Sheets as net assets
(liabilities) of discontinued operations are:
<TABLE>
<CAPTION>
JANUARY 31, APRIL 30,
1995 1994
----------- ---------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEETS
Cash.................................................................. $ 185 $ 23
Accounts receivable, net.............................................. 648 606
Inventories........................................................... 470 470
Prepaid expenses and other assets..................................... 613 604
Current portion of long-term debt..................................... (75) (70)
Accounts payable...................................................... (638) (740)
Estimated loss through expected date of disposition................... (1,914) (1,048)
Accrued expenses...................................................... (1,025) (1,048)
----------- ---------
Net current liabilities of discontinued operations................ $ (1,736) $ (155)
----------- ---------
----------- ---------
Property, plant and equipment , net................................... $ 1,832 $ 1,990
Long-term investments and other assets................................ 433 223
Goodwill, net......................................................... 4,162 4,271
Long-term debt........................................................ (1,801) (1,864)
Other long-term liabilities........................................... (940) (865)
----------- ---------
Net noncurrent assets of discontinued operations.................. $ 3,686 $ 3,755
----------- ---------
----------- ---------
</TABLE>
8. PREFERRED STOCK
On December 21, 1994, the Company issued 82,267 shares of a new series of 8%
Cumulative Convertible Senior Preferred Stock ("8% Preferred") in connection
with the acquisition of Adience. On January 6, 1995, the Company issued a
further 160,000 shares of 8% Preferred in exchange for 1,000,000 shares of the
Company's common stock. The 8% Preferred ranks senior to the 9% Cumulative
Convertible Preferred Stock but junior to the issued and outstanding 8 1/2%
Cumulative Convertible Senior Preferred Stock and 9% Cumulative Convertible
Senior Preferred Stock. Each share is convertible at any time into shares of
Company common stock at a conversion price of $7.75 (subject to customary
adjustment) and may be redeemed by the Company at $50 per share plus accrued
dividends, if any, at any time after the third anniversary of the date of
issuance. The 8% Preferred will be entitled to that number of votes per share
equal to the number of shares of Company common stock
14
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 1995
(UNAUDITED)
8. PREFERRED STOCK (CONTINUED)
into which the shares are initially convertible. In addition, holders of the 8%
Preferred are entitled to vote as a separate class in the event of a proposal to
(i) amend any of the principal terms of the 8% Preferred; (ii) authorize,
create, issue or sell any class of stock senior to, or on parity with, the 8%
Preferred as to dividends or liquidation preference; or (iii) merge into or
consolidate with, or sell all or substantially all of the assets of the Company
to, another entity. The holders of not less than 66 2/3% of the 8% Preferred
must approve any transaction that is subject to the class voting rights.
9. LEGAL PROCEEDINGS AND ENVIRONMENTAL
Together with various parties, the Company has been named as a defendant in
a lawsuit filed by the State of New York in Federal district court relating to
the release of hazardous chemicals at a landfill near Rochester, New York. New
York alleges that the Company, as a corporate successor to an entity which
allegedly disposed of hazardous substances, is liable for payment of costs and
expenses incurred or to be incurred by the State of New York for remediation.
The Company has filed a motion for summary judgement dismissing the case against
the Company. This action is in an early stage. Management believes that it has
strong defenses to this action and it has indemnification rights with respect to
liabilities, if any, relating to this matter from the seller of the assets.
However, there can be no assurance that an adverse outcome in this case would
not have a material adverse effect on the Company's consolidated financial
position or results of operations.
In February 1992, IDT was cited by the Ohio Environmental Protection Agency
(the "Ohio EPA") for violations of Ohio's hazardous waste regulations, including
speculative accumulation of waste (holding waste on-site beyond the legal time
limit) and illegal disposal of hazardous waste on the site of its Alliance, Ohio
facility.
In December 1993, IDT and Adience signed a consent order with the Ohio EPA
and the Ohio Attorney General which required IDT and Adience to pay to the State
of Ohio a civil penalty and to remediate the site in accordance with specified
cleanup goals. In addition, the consent order requires the payment of stipulated
penalties of up to $1,000 per day for failure to satisfy certain requirements of
the consent order including milestones in the closure plan. In October 1994, IDT
and Adience filed a proposed amendment to the consent order which would allow
IDT and Adience to establish risk-based cleanup goals, an approach which has
been approved by the Ohio EPA for other contaminated sites. If the Ohio EPA
approves this proposed amendment, use of this approach is expected to reduce the
extent and cost of remediation required at this site. The Ohio EPA has not yet
responded to this proposed amendment. At January 31, 1995, environmental
accruals amounted to $710,000 which represents management's estimate of the
amounts remaining to be incurred in this matter, including the costs of
effecting the closure plan, bonding and insurance costs, penalties and legal and
consultants' fees. If the Ohio EPA does not accept the proposed amendment to the
consent order, the cost of the remediation may exceed the amounts currently
accrued.
Adience's J.H. France unit has been named as a party in approximately 8,000
pending lawsuits principally by employees and former employees of certain
customers of J.H. France, alleging that a plastic insulating cement manufactured
more than 20 years ago by J.H. France, caused asbestosis or silicosis in such
persons. Such lawsuits typically involve multiple defendants and seek monetary
damages ranging from $20,000 each to $1,000,000 each. J.H. France and its
insurance carriers have historically settled these lawsuits typically for an
average amount per case of less than the minimum amount stated. Punitive damages
have also been claimed in some cases.
15
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 1995
(UNAUDITED)
9. LEGAL PROCEEDINGS AND ENVIRONMENTAL (CONTINUED)
In addition to the lawsuits against J.H. France, Adience has been named a
party in approximately 250 pending lawsuits filed in the States of Pennsylvania,
Ohio, Michigan and West Virginia, principally by employees and former employees
of certain customers of Adience alleging that products produced by Adience
caused silicosis, in such persons. The majority of such lawsuits involve
multiple defendants and seek unstated monetary damages ranging from $20,000 each
to $1,000,000 each. Adience and its insurance carriers have historically settled
these lawsuits for an average amount per case of less than the minimum amount
stated.
All such claims and all costs of defense for these cases are covered by
insurance. The insurance companies which had issued policies covering the J.H.
France cases had asserted that each insurance company was only responsible for a
pro rata share of the liability in these cases, based upon the number of years
for which the carriers provided coverage during the period of the exposure,
development and manifestation of each plaintiff's asbestosis of silicosis. In
June 1993, the Supreme Court of Pennsylvania held that the insurance policies
covering the claims in these J.H. France cases covered liabilities and defense
costs up to the amounts of the limits of the respective policies, without regard
to the period of time said policies were in effect. As a result of this judicial
determination and based upon Adience's experience in obtaining dismissals or
settlements in closed cases, Adience anticipates, although no assurance can be
given, that the expected costs and liabilities in all pending cases will be
adequately covered by insurance. Adience believes that the aggregate limits on
the insurance policies in effect exceed the potential liabilities and defense
costs which will be incurred in the 8,000 J.H. France cases and the other 250
cases, for which the scope of coverage has never been an issue.
10. RELATED PARTY TRANSACTIONS
In March 1994, Steib & Co. ("Steib"), a New York investment partnership in
which two Alpine officers have a majority interest, purchased 5.8% of Adience
common stock at a price 20% higher than paid by the Company for its purchase of
4.9% of Adience' common stock in December 1993. In January 1995 following
completion of the Company's purchase of a further 82.3% of Adience' common
stock, including the common stock owned by Steib, the Company reimbursed Steib
for cost incurred by Steib in connection with its investment in Adience common
stock. In connection with these transactions Steib agreed to terminate a 3 year
advisory agreement with Adience and voluntarily surrender options to purchase
7.2% of Adience at $1.25 per share.
16
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS -- FOR THE FISCAL PERIODS
ENDED JANUARY 31, 1995 AND 1994
INTRODUCTION
The Alpine Group, Inc. ("Alpine" or the "Company") is a holding company with
continuing operations conducted in the telecommunications cable and wire
industry through Superior TeleTec Inc. ("Superior"), the defense and commercial
electronics industry through DNE Technologies, Inc. ("DNE"), and the
refractories industry through Adience, Inc. ("Adience"). The Company acquired
Adience on December 21, 1994 and Superior on November 10, 1993. As a result of
these transactions, Adience's and Superior's operating results are included in
the consolidated operating results on a prospective basis from the respective
acquisition dates.
As described in Note 7 to the Consolidated Financial Statements and as
discussed under the "Discontinued Operations" caption herein, the operations of
the Company's information display segment, which includes Alpine PolyVision,
Inc. ("APV"), Posterloid Corporation ("Posterloid"), and Information Display
Technology, Inc. ("IDT"), a subsidiary of Adience, have been reclassified as
discontinued pursuant to a plan to distribute a substantial portion of the
ownership of these entities to the Company's stockholders.
17
<PAGE>
The following table summarizes, for the periods presented, the operating
results for each of Alpine's industry segments.
<TABLE>
<CAPTION>
NINE MONTHS ENDED THREE MONTHS ENDED
JANUARY 31, JANUARY 31,
---------------------- --------------------
1995 1994 1995 1994
----------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales
Superior........................................................ $ 96,227 $ 17,763 $ 30,513 $ 17,763
DNE............................................................. 21,921 16,731 7,753 4,253
Adience......................................................... 7,634 -- 7,634 --
----------- --------- --------- ---------
Consolidated.................................................. $ 125,782 $ 34,494 $ 45,900 $ 22,016
Gross profit
Superior........................................................ $ 9,651 $ 1,187 $ 2,959 $ 1,187
DNE............................................................. 6,380 6,505 2,109 1,736
Adience......................................................... 1,287 -- 1,287 --
----------- --------- --------- ---------
Consolidated.................................................. $ 17,318 $ 7,692 $ 6,355 $ 2,923
Gross margin percentage
Superior........................................................ 10.0% 6.7% 9.7% 6.7%
DNE............................................................. 29.1% 38.9% 27.2% 40.8%
Adience......................................................... 16.9% -- 16.9% --
----------- --------- --------- ---------
Consolidated.................................................. 13.8% 22.3% 13.8% 13.3%
Selling, general and administrative expenses
Superior........................................................ $ 3,676 $ 850 $ 1,250 $ 850
DNE............................................................. 3,873 4,021 1,181 1,096
Adience......................................................... 1,572 -- 1,572 --
Corporate....................................................... 2,144 2,681 804 1,623
----------- --------- --------- ---------
Consolidated.................................................. $ 11,285 $ 7,552 $ 4,807 $ 3,569
Research, development and engineering
DNE............................................................. $ 1,015 $ 1,237 $ 340 $ 401
----------- --------- --------- ---------
Amortization of goodwill and other intangible charges
Superior........................................................ $ 766 $ 188 $ 255 $ 188
DNE............................................................. -- 1,753 -- 1,591
Adience......................................................... 113 -- 113 --
Corporate....................................................... -- 95 -- 31
----------- --------- --------- ---------
Consolidated.................................................. $ 879 $ 2,036 $ 368 $ 1,810
Operating income (loss)
Superior........................................................ $ 5,113 $ 149 $ 1,428 $ 149
DNE............................................................. 1,492 (506) 588 (1,352)
Adience......................................................... (398) -- (398) --
Corporate....................................................... (2,068) (2,776) (778) (1,654)
----------- --------- --------- ---------
Consolidated.................................................. $ 4,139 $ (3,133) $ 840 $ (2,857)
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
1995 1994
---------------- --------------
<S> <C> <C>
Net Sales:
Nine Months......................................................... $ 125,782,000 $ 34,494,000
Quarter............................................................. 45,900,000 22,016,000
</TABLE>
For the nine months and quarter ended January 31, 1995 net sales increased
by $91.3 million and $23.9 million, respectively, as compared to the same
periods in fiscal 1994. The increase was primarily due to the inclusion of
Superior's sales which on an incremental basis were approximately $78.5 million
and $12.8 million greater than the prior year nine month and quarterly periods,
respectively. Superior's comparative sales increase for the January 1995
quarterly period included approximately $8.2 million of higher sales which was
due to the inclusion of Superior's results for only a portion of the January
1994 quarterly period and for the pass through in the form of increased sales
prices of higher copper costs. The remainder of Superior's comparative sales
increase for the quarter ended January 31, 1995 of $4.6 million was the result
of increased sales of telephone distribution, high performance and premise wire
products, and higher levels of demand for telephone cable products. In addition,
Adience contributed sales of $7.6 million from the date of its acquisition
(December 21, 1994) and DNE contributed revenues of $5.2 million, an increase of
31%, for the 1995 nine month period and $3.5 million, an increase of 82.3%, for
the quarter ended January 31, 1995. The increase in DNEs revenues resulted from
the expansion of its contract manufacturing activities.
<TABLE>
<CAPTION>
1995 1994
-------------- -------------
<S> <C> <C>
Gross Profit:
Nine Months............................................................ $ 17,318,000 $ 7,692,000
Quarter................................................................ 6,355,000 2,923,000
Gross Margin Percentage:
Nine Months............................................................ 13.8% 22.3%
Quarter................................................................ 13.8% 13.3%
</TABLE>
For the nine months and quarter ended January 31, 1995 gross profit
increased by $9.6 million and $3.4 million, respectively. The increase was due
primarily to the inclusion of Superior's and Adience's operations. Superior
generated a gross profit for the nine months and quarter ended January 31, 1995
of $9.7 million and $3.0 million, respectively, as compared to $1.2 million for
each of the corresponding periods in fiscal 1994 (which included approximately
2.5 months of Superior's operating results). Superior's gross margin percentage
for the nine months and quarter ended January 31, 1995 was 10.0% and 9.7%,
respectively as compared to 6.7% for each of the corresponding periods in fiscal
1994. The comparative improvement in Superior's gross profit percentage resulted
from improved product mix, more efficient production due to higher manufacturing
levels, and the stabilization of market prices. Adience generated a gross profit
of $1.3 million during the quarter ended January 31, 1995 at a gross margin
percentage of 16.9%. For the nine month and quarter ended January 31, 1995,
DNE's comparative gross margin percentage declined to 29.1% (from 38.9%) and to
27.2% (from 40.8%), respectively. The decline in DNE's gross margin percentage
was caused by the increase in contract manufacturing revenues which typically
generate lower gross margins as compared to DNE's other product lines.
<TABLE>
<CAPTION>
1995 1994
-------------- -------------
<S> <C> <C>
Selling General and Administrative Expense ("SG&A Expense"):
Nine Months............................................................ $ 11,285,000 $ 7,552,000
Quarter................................................................ 4,807,000 3,569,000
</TABLE>
The comparative increase in SG&A expense for the 1995 nine month and
quarterly periods was due primarily to the inclusion of Superior's and Adience's
operations which included incremental SG&A expense of approximately $2.8 million
($400,000 for the 1995 quarterly period) and $1.6 million, respectively.
Partially offsetting the increased SG&A expense associated with the acquisition
19
<PAGE>
and operations of Superior and Adience, was a comparative reduction in corporate
SG&A expense of $537,000 and $819,000 for the 1995 nine month and quarterly
periods, respectively, which was due to certain non-recurring reorganization and
retirement obligation accruals recorded during the January 1994 quarterly
period.
<TABLE>
<CAPTION>
1995 1994
------------- --------------
<S> <C> <C>
Operating Income (Loss):
Nine Months............................................................ $ 4,139,000 $ (3,133,000)
Quarter................................................................ 840,000 (2,857,000)
</TABLE>
The improvement in operating results for both the nine months and quarter
ended January 31, 1995, as compared to the same period in fiscal 1994, resulted
from a number of factors, including an increase in incremental contribution from
Superior (a comparative increase of approximately $5.0 million for the 1995 nine
month period and approximately $1.3 million for the 1995 quarterly period) and
the impact of an approximate $1.5 million write off of an intangible asset and
approximately $900,000 in other non-recurring charges for reorganization and
other reserves recorded during the January 1994 quarterly period.
<TABLE>
<CAPTION>
1995 1994
------------- -------------
<S> <C> <C>
Interest Expense:
Nine Months............................................................. $ 4,213,000 $ 1,339,000
Quarter................................................................. 2,188,000 775,000
</TABLE>
The increase in interest expense for the nine month and quarter ended
January 31, 1995 of $2.9 million and $1.4 million, respectively, as compared to
the same periods in fiscal 1994 was due to incremental interest expense
associated with the Superior and Adience acquisitions and the impact of $21.0
million of short term borrowings incurred at the corporate level in January
1995.
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Other Expense:
Nine Months................................................................. $ 669,000 $ 415,000
Quarter..................................................................... 640,000 367,000
</TABLE>
The comparative increase in other expenses for the nine months and quarter
ended January 31, 1995, is largely due to the write off of expenses incurred in
connection with a long term debt placement transaction pending during the
quarter ended January 31, 1995. The company anticipates a superceding financial
transaction in fiscal 1996. Other expense during each of the corresponding
periods in fiscal 1994 resulted primarily from valuation reserves for certain
real estate classified in long-term investments.
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Income Tax Expense:
Nine Months................................................................. $ 232,000 --
Quarter..................................................................... -- --
</TABLE>
The Company did not incur any Federal income tax expense (benefit) during
the nine month and quarterly periods ended January 31, 1995 or 1994 due to
existing net operating loss carryforwards for the nine months ended January 31,
1995. Tax expense is for state income tax.
DISCONTINUED OPERATIONS
As described in Note 5 to the Condensed Consolidated Financial Statements,
the Company intends to merge IDT (a subsidiary of Adience) with APV and
Posterloid. Subsequent to the merger the Company plans to distribute a
substantial majority of its investment in the merged company
20
<PAGE>
("PolyVision Corp.") to its stockholders. This distribution is intended to
reduce the Company's investment in the common stock of PolyVision Corp to less
than 20%. As a result of the planned distribution, the operations of APV and
Posterloid have been reported as discontinued operations in the historical
Consolidated Financial Statements.
For the nine month period ended January 31, 1995 and 1994 losses from
discontinued operations were $4.9 million and $29.3 million, respectively,
including a $1.9 million provision recorded in the quarter ended October 31,
1994 to reflect estimated operating losses to be incurred through the
distribution date, and a non-cash charge of $21.7 million recorded during the
1994 nine month period related to purchased R&D charges of APV.
FINANCIAL CONDITION AND LIQUIDITY
During the nine months ended January 31, 1995, the Company generated $1.0
million in cash flow from operations, including $3.6 million provided by
continuing operations, offset by $2.6 million used for discontinued operations.
Cash used for investing activities of $17.4 million included capital
expenditures of $1.7 million, an increase in marketable securities of $16.2
million and net cash provided of $1.1 million as a result of the Adience
acquisition. Cash provided by financing activities of $18.1 million during the
January 1995 nine month period included $21.9 million in additional borrowings
(including short term borrowings and borrowings under revolving credit
facilities), partially offset by $3.1 million in term loan repayments and
$463,000 for preferred stock dividends and open market repurchases of Company
common stock.
The Company's three principal operating subsidiaries (Superior, DNE and
Adience) maintain separate bank lines and credit facilities which are used to
fund the respective operating subsidiary's operations and commitments.
Superior's bank credit facility at January 31, 1995, consisted of a $5.8
million term loan (including annual principal amortization of $1.6 million) and
a $28.0 million revolving credit facility (of which $19.3 million was
outstanding at January 31, 1995). As of January 31, 1995, Superior had
approximately $4.0 million of undrawn collateral-based availability. Superior
has historically generated cash flow exceeding its debt service and capital
expenditure requirements and it is anticipated that this will continue into the
foreseeable future.
DNE has a $4.0 million revolving credit facility of which $1.0 million was
outstanding at January 31, 1995, with an additional $1.6 million of undrawn
collateral based availability. DNE is also indebted under a $5.4 million
mortgage loan (with annual principal payments of $186,000) and under a $2.5
million subordinated note, due in eight equal semi-annual installments from
August 1995 through February 1999. DNE has historically generated operating cash
flow exceeding its debt service and capital expenditure requirements and it is
anticipated that this will continue into the foreseeable future.
As of December 21, 1994, the Company acquired 82.3% of the outstanding
common stock of Adience. Adience's principal debt structure includes a $14.0
million revolving credit facility (maturing in June 1995), of which
approximately $11.9 million was outstanding at January 31, 1995, with
approximately $1.0 million of undrawn collateral-based availability, and a $49.1
million face value ($45.4 million recorded amount) of outstanding 11% Senior
Secured Notes ("Senior Notes") which includes semi-annual interest payments and
is due in 2002. An agreement between the Company and 90% (face value) of the
Senior Notes has been reached whereby $44.1 million face value of the Senior
Notes can be exchanged for $35.3 million in cash, 1,002,341 common shares of IDT
and 44,912 shares of 8% Cumulative Convertible Preferred Stock of the Company
with a liquidation preference of $50 per share. If the exchange does not occur
prior to March 31, 1995, the Agreement may be terminated by either the Company
or the Senior Note holders. Adience is currently in the process of a
restructuring which is expected to result in reduced operating costs and
improved profitability. It is anticipated that upon the completion of such
restructuring Adience will generate sufficient cash flow from operations to
service its debt and meet its other ongoing commitments. The cost of the
restructuring is
21
<PAGE>
expected to approximate $3.0 million with such funds being supplied from
Adience's existing cash and credit availability and from corporate cash
resources, to the extent of any shortfall. The Company currently has not
guaranteed any of Adience's debt or any of its other commitments.
In addition to debt owed at the subsidiary level, as of January 31, 1995,
the Company had $2.7 million in debt due June 1996 and $21 million of short-term
Notes due January 1996. The Company intends to complete a long-term financing
during 1995 to consolidate and refinance its overall capital structure including
short-term notes. Should the long-term financing not be completed, the Company
believes it can extend the maturity of the $21 million short term notes. As of
January 1995, certain bank restrictions were removed which will allow the
Company's Superior subsidiary to distribute to the Company, a majority of its
excess cash flow (after debt service) resulting in additional corporate
liquidity.
As discussed in Note 7, the Company intends to merge its APV and Posterloid
subsidiaries with IDT and distribute to its stockholders a substantial portion
of its common equity ownership interest in the combined entity ("PolyVision
Corp."). This transaction, including the distribution, is expected to be
concluded in the next six months. Through the date of the distribution, cash
requirements relating to the merged entity including the APV development
activities are expected to approximate $3.0-$5.0 million. It is further expected
that such cash contribution if made by the Company will offset a payable
currently owing from Adience to IDT. The Company will not have any commitment to
fund the ongoing operations of PolyVision Corp. after the distribution.
The Company intends to pursue a long-term financing in 1995 to provide for a
redemption at a discount of Adience's 11% Senior Secured Notes, to refinance the
$21.0 million corporate short-term note, as well as for other purposes as deemed
appropriate. Notwithstanding the successful completion of the aforementioned
long-term financing, the Company believes its projected capital resources
including availability under existing credit facilities and cash reserves,
combined with existing operating cash flow resources will be adequate to fund
the next twelve months of the Company's operating and capital commitments.
22
<PAGE>
PART II. OTHER INFORMATION
ITEM 3. DEFAULTS ON SENIOR SECURITIES.
(a) None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits: None
(b) Reports of Form 8-K.
(i) On January 5, 1995 the Company filed a Current Report on Form 8-K
with the Commission reporting the acquisition of Adience, Inc. On
March 6, 1995 the Company filed an amendment to the aforesaid Form
8-K to include proforma financial statements.
23
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE ALPINE GROUP, INC.
(Registrant)
By: _______/s/_DAVID S. ALDRIDGE______
David S. Aldridge
CHIEF FINANCIAL OFFICER
Date: March 17, 1995
24
