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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K/A-3
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED APRIL 30, 1995
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 1-9078
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THE ALPINE GROUP, INC.
(Exact name of registrant as specified in its charter)
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<S> <C>
DELAWARE 22-1620387
(State or other (I.R.S. Employer
jurisdiction of Identification No.)
incorporation or
organization)
1790 BROADWAY
NEW YORK, NEW YORK 10019-1412
(Address of principal (Zip code)
executive offices)
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Registrant's telephone number, including area code 212-757-3333
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Securities registered pursuant to Section 12(b) of the Act:
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<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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Common Stock, par value $.10 per share......................... American Stock Exchange
13 1/2% Senior Subordinated Debentures due 1996................ American 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. [ ]
At July 24, 1995, the registrant had 17,742,362 shares of common stock, par
value $.10 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 $74,946,134.
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PART I
ITEM 1. BUSINESS
GENERAL
The Alpine Group, Inc. (together with its subsidiaries, unless the context
otherwise requires, "Alpine") is a diversified industrial company principally
engaged in the manufacture and sale of copper wire and cable for the
telecommunications industry, specialty refractory products for the iron and
steel, aluminum and glass industries and data communications and other
electronic products for military and commercial applications. Alpine has
positioned itself as a major participant in these industries through a series of
strategic acquisitions. Alpine entered the copper wire and cable industry with
the acquisition (the "Superior Acquisition") in 1993 of Superior
Telecommunications Inc., formerly Superior TeleTec Inc. ("Superior"), which
Alpine believes is the fourth largest North American manufacturer of telephone
copper wire and cable products. In May 1995, Alpine became one of the two
largest North American manufacturers of telephone copper wire and cable products
with 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. (collectively, "Alcatel NA"). The aggregate
consideration paid for the Alcatel Business was $103.4 million. See footnote 6
to the consolidated financial statements. In December 1994, Alpine acquired (the
"Adience Acquisition") Adience, Inc. ("Adience"), one of the largest domestic
manufacturers and installers of specialty refractory products. The aggregate
consideration paid for Adience was $12.4 million, paid in cash and securities of
Alpine and a former subsidiary of Alpine. See footnote 6 to the consolidated
financial statements. Alpine entered the data communications and electronics
industry with its acquisition of DNE Technologies, Inc. ("DNE") in February
1992.
TELECOMMUNICATIONS WIRE AND CABLE. Copper telephone wire and cable products
remain the most widely used medium for transmission in the "local loop" portion
of the telephone network. The local loop is comprised of (i) the connection
between a home or business and the nearest telephone pole or other outside
location and (ii) the connection between the telephone pole or outside location
and the nearest telephone company switch, either at the telephone company's
central office or at a remote location. While the use of optical fiber
predominates in the market for intercity and interoffice cables, use of copper
wire in the local loop continues to satisfy the telephone and data transmission
needs of a substantial majority of homes and businesses at a lower cost to
install and maintain and without the additional power source and electronics
required by optical fiber applications.
Alpine manufactures a wide variety of copper telephone cable, outside
telephone wire and inside (or premises) wire products, ranging in size from a
single twisted pair wire to a 4,200 pair cable. These products are variously
configured for use in aerial, underground and on-premise applications. During
the fiscal year ended April 30, 1995, 76% of Alpine's pro forma net sales of
telephone wire and cable products were to six of the seven regional Bell
operating companies ("RBOCs") and the three major independent telephone
companies, primarily under long-term contracts. In addition to providing copper
wire and cable for use in the local loop, Alpine has recently developed
performance-enhanced copper wire products, including unshielded twisted pair
wire ("UTP") used inside buildings for high speed data communications in
computer networks. This product is currently experiencing higher growth and is
generally sold at higher margins than traditional copper wire and cable
products. During the fiscal year ended April 30, 1995, UTP sales of $2.6
represented 0.7% of Alpine's pro forma copper wire and cable sales.
As a result of the Alcatel Acquisition, Alpine's net sales of wire and cable
products for the fiscal year ended April 30, 1995 increased from $136.6 million
on an historical basis to $340.8 million on a pro forma basis. Based on the most
recently available data published by the U.S. Department of Commerce, Alpine
estimates that its pro forma share of the domestic production of copper
telephone cable and outside telephone wire was approximately 30% in 1993. Alpine
believes that its wire and cable business will benefit from the Alcatel
Acquisition through significant economies of scale, as well as through cost
savings from the reduction of certain freight, personnel and other costs. In
addition, Alpine's annual production capacity increased from 28 billion
conductor feet ("bcf") in one plant to 85 bcf in four plants. Alpine believes
that overcapacity in the industry, which has existed in recent years, has been
reduced as a result of the 1994
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closure of a large plant operated by a competitor and, more recently, as a
result of greater demand for copper wire and cable products. Alpine attributes
this greater demand in large part to (i) higher levels of spending on
maintenance by telephone companies to offset their reduced maintenance levels in
the early 1990s, (ii) demand for new telephone lines resulting from new
construction and (iii) demand for second telephone lines and lines dedicated to
facsimile machines and computer modems.
REFRACTORIES. Alpine is one of the largest U.S. manufacturers and
installers of specialty refractory products, which are used primarily by the
iron and steel industry, with pro forma net sales for this business of $100.9
million for the fiscal year ended April 30, 1995. Specialty refractory products
are consumable materials used as insulation on surfaces exposed to high
temperatures such as those generated by molten metals. Over the past year,
Alpine has provided refractory products and services to every integrated steel
producer in the United States and Canada and Alpine believes that it is the only
major U.S. manufacturer that provides a full range of refractory products and
installation services to the iron and steel industry. Alpine also manufactures
specialty refractory products for use in the production of aluminum and glass
and is one of the few rebuilders of coke ovens in the United States.
DATA COMMUNICATIONS AND ELECTRONICS. Alpine, through DNE, designs,
manufactures and tests data communications and other electronic products for the
military, government and commercial markets. Net sales for this business were
$27.9 million for the fiscal year ended April 30, 1995. Alpine is the largest
supplier to the U.S. military of data and voice multiplexers used in tactical
secure military applications. Multiplexers are communication devices that
combine several information carrying channels into one line, thereby permitting
simultaneous multiple voice and data communications over a single line. Alpine
also produces military avionic products, including switches, dimmers, relays and
other electrical controllers, various sensors and refueling amplifiers. Since
1993, Alpine has reduced its dependence on the military market primarily through
the development of contract manufacturing services for governmental (non-
military) and commercial customers. For the fiscal year ended April 30, 1995,
sales to customers other than the U.S. military accounted for 42.8% of the net
sales of this business.
Alpine believes that, although the copper telephone wire and cable and
refractory products industries are mature, ongoing alignment of productive
capacity with market demand, industry consolidation and Alpine's emphasis on
new, higher margin product offerings will provide Alpine with the opportunity to
strengthen its profitability, cash flow and competitive position. Alpine's
strategy in the copper wire and cable business is to continue to provide a full
line of its traditional copper wire and cable products to its present customers;
expand into performance-enhanced, higher growth and higher margin copper wire
products for sale to existing and new customers; and expand its international
marketing efforts. Alpine's strategy in the refractories business is to complete
the restructuring and rationalization of this business; expand the types of
products and services that it supplies to its existing customers; and expand its
marketing efforts in order to sell its products to new domestic and foreign
customers. Alpine's strategy in its data communications and electronics business
is to maintain its dominant position as a supplier to the military of
multiplexers used in tactical secure applications; continue to adapt its
products for commercial applications; and increase its contract manufacturing
business.
On June 14, 1995, Alpine distributed to its stockholders (the "PolyVision
Spin-Off") shares of common stock of its information display subsidiary,
PolyVision Corporation ("PolyVision") (American Stock Exchange: "PLI"). Alpine
currently owns approximately 19.0% of the outstanding PolyVision common stock
and 98% of its preferred stock. See "Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations" for a description of
certain transactions which may result in the reduction of Alpine's ownership of
PolyVision common stock. PolyVision manufactures and sells custom-designed and
engineered writing and projection surfaces, and is developing a proprietary
electrochemical display technology with characteristics to address applications
in markets such as flat-panel displays and certain packaging applications.
PolyVision had net sales of $37.5 million for the fiscal year ended April 30,
1995 on a pro forma basis. Prior to the PolyVision Spin-Off, two other Alpine
subsidiaries, Alpine PolyVision, Inc. ("APV") and Posterloid Corporation
("Posterloid"), were merged into subsidiaries of PolyVision (the "PolyVision
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Merger"). The PolyVision Merger and the PolyVision Spin-Off are collectively
referred to as the "PolyVision Transactions." For all periods presented herein,
APV and Posterloid are reflected as discontinued operations and PolyVision is
reflected as an asset held for disposition.
Alpine was incorporated in New Jersey on May 7, 1957 and reincorporated in
Delaware on February 3, 1987. Its principal executive offices are located at
1790 Broadway, New York, New York 10019-1417 and its telephone number is (212)
757-3333.
THE ADIENCE ACQUISITION
In December 1994, Alpine acquired Adience by purchasing approximately 83% of
the outstanding common stock, par value $.01 per share ("Adience Common Stock"),
of Adience (which, together with the approximately 4.9% previously owned by
Alpine, increased its ownership to approximately 87.9% of the outstanding
Adience Common Stock) from certain stockholders of Adience (the "Adience Selling
Stockholders"). The Adience Selling Stockholders received in consideration for
their shares of Adience Common Stock: (i) 82,267 shares of a new issue of 8%
Cumulative Convertible Preferred Stock, par value $1.00 per share, of Alpine
("Alpine 8% Preferred Stock"), which has an annual dividend of $4.00 per share
and an aggregate liquidation preference of $4.1 million and is convertible into
530,755 shares of Alpine Common Stock, and (ii) an aggregate of 170,615 shares
of PolyVision Common Stock. In July 1995, Adience was merged with a wholly-owned
subsidiary of Alpine, with the holders of the remaining 12% of Adience Common
Stock receiving an aggregate of $1.6 million in cash. In July 1995, Alpine also
purchased 89.8% of the Adience 11% Senior Secured Notes due 2002 (in the
principal amount of $45.0 million), for an aggregate of: (i) $35.3 million in
cash, (ii) 44,916 shares of Alpine 8% Preferred Stock, which has a liquidation
preference of $2.3 million and is convertible into 289,781 shares of Alpine
Common Stock, and (iii) $2,245,000 in value of PolyVision Common Stock (or, at
Alpine's option 8% Preferred stock). (See footnote 6 to the Consolidated
Financial Statements.)
THE ALCATEL ACQUISITION
In May 1995, Alpine acquired the Alcatel Business, for a purchase price of
$103.4 million (including $9.9 million which was paid in August 1995 and
approximately $0.5 million of acquisition expenses. (See footnote 6 to the
Consolidated Financial Statement.)
RECENT DEVELOPMENTS; THE REFINANCING
On July 21, 1995, Alpine completed the private offering of $153.0 principal
amount of its 12 1/4% Senior Secured Notes due 2003 (the "Notes") at an initial
price to investors of 91.737% of the principal amount thereof, with net proceeds
of approximately $134.3 million (the "Offering"). In connection with the
Offering, Alpine entered into a new bank credit agreement (the "New Credit
Agreement") with certain institutional lenders, under which Alpine may borrow up
to $85.0 million at any one time, if certain conditions are met. Loans under the
New Credit Agreement constitute senior debt guaranteed by certain of Alpine's
subsidiaries. The loans and guarantees under the New Credit Agreement are
secured primarily by the inventory and accounts receivable of Alpine and such
subsidiaries.
Alpine has used, or intends to use, the net proceeds of the Offering,
together with borrowings under the New Credit Agreement and a portion of its
cash reserves, in the following transactions (collectively, the "Refinancing"):
(1) On July 21, 1995, Superior repaid in full the $140.0 million aggregate
principal amount of notes (the "Alcatel Acquisition Notes") issued in May 1995
to certain institutional investors. The net proceeds of the Alcatel Acquisition
Notes ($135.4 million after the payment of certain fees and expenses) were used
as follows: (i) to pay $93.0 million in cash to Alcatel NA as part of the
purchase price for the Alcatel Acquisition; (ii) to repay borrowings under
Superior's bank credit agreement in full, which amounted to $21.9 million at
April 30, 1995 and $22.6 million at the time of repayment; (iii) to pay
acquisition expenses estimated at $0.5 million; and (iv) to pay the balance (an
estimated $19.3 million) to Superior for working capital and general corporate
purposes. Superior's existing bank credit agreement was terminated.
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(2) In connection with the Alcatel Acquisition, $10.3 million of the
purchase price was deferred. This deferred amount is subject to adjustment based
upon the completion of a closing balance sheet audit, does not bear interest and
is due on August 11, 1995. This amount will be paid on its due date as part of
the Refinancing.
(3) On July 21, 1995, Adience retired $44.1 million aggregate principal
amount of its 11% Senior Secured Notes due 2002 (the "Adience Senior Notes"),
plus accrued interest, for $36.8 million in cash (plus other non-cash
consideration) pursuant to a debt exchange agreement entered into in connection
with the Adience Acquisition in December 1994 (the "Debt Exchange Agreement")
with the holders of 89.8% of the Adience Senior Notes. The retired Adience
Senior Notes had an accreted value of $39.8 million at April 30, 1995. Adience
Senior Notes in the principal amount of $5.0 million (with an accreted value of
$4.6 million at April 30, 1995) remained outstanding after consummation of the
Offering.
(4) On July 21, 1995, Adience terminated its revolving credit facility (the
"Adience Credit Facility") and repaid all amounts outstanding thereunder, which
were $12.3 million at April 30, 1995 and were $10.1 million on July 21, 1995.
(5) Alpine acquired the 12.8% of Adience's common stock not owned by Alpine
pursuant to the merger on July 21, 1995 of a wholly-owned subsidiary of Alpine
into Adience. Alpine will pay the former Adience stockholders $1.6 million in
cash.
(6) In connection with Alpine's acquisition of DNE in February 1992, Alpine
issued a subordinated note to the seller (the "DNE Acquisition Note"). The DNE
Acquisition Note had a balance of $2.5 million at April 30, 1995 and will be
repaid as part of the Refinancing. If the DNE Acquisition Note is paid prior to
August 14, 1995, it may be repaid for $2.2 million.
(7) DNE will terminate its revolving credit facility (the "DNE Credit
Facility") and repay all amounts outstanding thereunder, which were $0.6 million
at April 30, 1995.
(8) On July 21, 1995, Alpine redeemed in full its 13.5% Senior Secured Notes
due January 5, 1996 (the "Alpine 13.5% Senior Notes"). The Alpine 13.5% Senior
Notes were issued in January 1995 in the aggregate principal amount of $21.0
million and, at April 30, 1995, had an accreted value of $20.8 million.
(9) On July 21, 1995, Alpine redeemed in full its 13.5% Senior Subordinated
Debentures due October 1, 1996 (the "Alpine 13.5% Debentures"). The Alpine 13.5%
Debentures were issued in 1986 and were in the aggregate principal amount of
$1.6 million.
(10) Alpine will repay other current indebtedness of $0.2 million.
(11) Alpine loaned $3.3 million to PolyVision to enable PolyVision to repay
all amounts due under its revolving credit facility and under its outstanding
equipment loan.
COPPER WIRE AND CABLE BUSINESS
COPPER TELEPHONE WIRE AND CABLE INDUSTRY
The telephone network in the United States is comprised of three major
distribution components: the distribution or local loop portion, the trunking
portion and the long distance portion. The local loop part of the telephone
network is comprised of (i) the connection between a home or business and the
nearest telephone pole or other outside location and (ii) the connection between
the telephone pole or outside location and the nearest telephone company switch,
either at the telephone company's central office or at a remote location. The
trunking portion of the network connects telephone central offices and remote
switch locations to each other and provides some intercity connections, while
the long distance portion of the telephone network also connects cities.
Historically, all three major components of the telephone network in the
United States were comprised of copper wire and cable products. The commercial
development of optical fiber and other new technologies for the distribution of
voice and data communications (including microwave, satellite and cellular
transmission technologies) have had an impact on the market for copper telephone
wire and cable. Optical fiber is currently the transmission medium of choice of
the telephone companies for trunking applications and in the
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long distance network. To a lesser degree, optical fiber has been deployed in
high-density feeder applications between telephone central offices or remote
locations and major distribution points, which has further reduced the total
market for copper telephone wire and cable. Copper telephone cable products are
used primarily by the telephone companies in the distribution or local loop part
of the telephone network, connecting the telephone pole or other location
outside a home or business to the nearest telephone company switch. Copper
telephone wire products are then used to connect an individual home or business
to the nearest telephone pole or other outside location.
The copper telephone wire and cable industry manufactures a variety of cable
products, which are used in direct burial or aerial applications, predominantly
in the local loop. The industry also manufactures several types of copper
telephone wire products, including: (i) outside service wire, which is also
referred to as telephone distribution wire, used in direct burial or aerial
applications mainly to connect a home or business to the nearest telephone pole
or other outside location and (ii) inside or premise wire used within a building
to connect various telephone devices to the telephone network.
The basic unit of virtually all copper telephone 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 telephone connection. Twisted pairs are
bundled together to form telephone wires and cables. In calculating bcf, the
length of each wire in a twisted pair is counted.
Based on the most recently available data published by the U.S. Department
of Commerce, Alpine estimates that domestic production of copper telephone cable
and outside service wire was $1.1 billion in 1993. A substantial majority of the
copper telephone cable and outside service wire sold in the United States is
purchased by the RBOCs and other domestic telephone companies. Prior to the
break-up of AT&T in 1984, it was the sole supplier of copper telephone wire and
cable products to its operating companies. However, after the break-up, the RBOC
market became open to all suppliers. An estimated 5% to 10% of industry sales
are in the export markets. Small amounts of these products are sold to the
military, other government agencies, construction companies and in the homeowner
market. Greater proportions of premises wire are sold to contractors and in the
homeowner market. It is estimated that the seven RBOCs (Ameritech Corporation,
Bell Atlantic Corporation, BellSouth Corporation, NYNEX Corporation, Pacific
Telesis Group, SBC Communications, Inc. (formerly Southwestern Bell) and U.S.
West, Inc.) purchase approximately 60% of the copper telephone cable and outside
service wire purchased by U.S. telephone companies, while three major
independent telephone holding companies (Alltel Corporation, GTE Corporation and
Sprint Corporation) purchase an additional 25%, and over 1,200 small local
telephone operating companies purchase the remainder.
Demand for copper telephone wire and cable is dependent on several factors,
including the rate at which new lines are installed in homes and businesses
("access lines"); the level of spending for highways, bridges and other parts of
the infrastructure, which often necessitates installation of new telephone
cables; and the level of general maintenance spending by telephone companies.
The installation of new access lines is in turn 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.
Alpine believes that overcapacity, which has existed in the industry in
recent years, has been reduced as a result of the 1994 closure of the Atlanta
manufacturing facility of AT&T and, more recently, as a result of increased
demand for copper telephone wire and cable products. Alpine attributes this
increased demand in large part to higher levels of spending on maintenance by
telephone companies to offset their reduced maintenance levels in the early
1990s and demand for new telephone lines associated with new construction and
second telephone lines and dedicated lines.
Copper telephone wire and cable currently provide virtually all local loop
service in the United States, and Alpine believes that these products will
continue to satisfy the telephone and data transmission needs of the substantial
majority of homes and businesses in the United States. Copper telephone wire and
cable products are simpler and less expensive to install and maintain than
optical fiber products. In addition, copper conducts electricity, while optical
fiber is nonconductive and requires a separate power source. As a
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result, copper wire connects directly to existing telephone devices (such as
telephones, facsimile machines and computer modems), while optical fiber
requires a device to convert the optical signals transmitted over the fiber to
the electrical signals required by a consumer's telephone devices.
Alpine believes that recent advances in data compression technologies, which
are increasing the throughput capability of the installed base of copper
telephone wire and cable, will minimize the need for the majority of the RBOCs
to make a significant investment in optical fiber in the local loop in the near
future. However, some telephone companies are exploring the provision of video
entertainment and other new services in addition to basic telephone services. As
a result, the telephone companies have been evaluating (and in isolated cases
installing on a test basis) alternative technologies for providing such
services, including coaxial and optical fiber cable applications. These and
other technologies have had, and will continue to have, an impact on the market
for copper telephone wire and cable. A relatively small decline in the level of
purchases of copper wire and cable by the RBOCs and other telephone companies
could have a disproportionately adverse effect on the copper wire and cable
industry, including Alpine.
ALPINE'S COPPER WIRE AND CABLE PRODUCTS
Alpine's copper telephone cable products range in size from small six-pair
cables to cables as large as 4,200 pairs and are further 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 telephone
cable products normally have metallic shields for electrical and mechanical
protection and electromagnetic shielding of the copper wires, as well as an
outer polyethylene jacket. Copper telephone cable represented approximately 75%
of Alpine's pro forma wire and cable net sales for fiscal 1995.
Alpine's outside service wire products range in size from a single twisted
pair to a six-pair product. Similar to copper cable products, outside service
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.
Outside service wire represented approximately 23% of Alpine's pro forma wire
and cable net sales for fiscal 1995.
Alpine's copper telephone wire for interior use, or premises wire, generally
ranges in size from a single twisted pair to a four-pair product. Premises wire
is used within buildings to connect telephone devices (telephones, facsimile
machines and computer modems) to the telephone network and, in commercial
buildings, to establish local area networks. All of Alpine's premises wire has
been listed by Underwriters' Laboratories, which is required by most local
building codes. Construction of premises wire differs from outside wire and
cable. For instance, premises wire must be flame retardant, but does not need to
be water resistant. Premises wire represented approximately 2% of Alpine's pro
forma wire and cable net sales for fiscal 1995.
NEW PRODUCTS
An important element of Alpine's strategy in its wire and cable business is
to expand into performance-enhanced, higher growth and higher margin
copper-based wire products for sales to existing and new customers and Alpine
has introduced a number of products. Alpine seeks to provide a full range of
products to its major customers in order to retain and increase its market
share.
UNSHIELDED TWISTED PAIR COPPER WIRE PRODUCTS. In July 1994, Alpine
commenced deliveries of its line of unshielded twisted-pair copper wire products
for high-speed data transmission (high-performance UTP). In recent years, there
has been a significant increase in demand for private data networks, and
particularly for networks that can operate at higher data rates than could
previously be achieved by traditional twisted-pair copper wire technology. Until
recently, the demand for high-speed data networks could only be met by
deployment of optical fiber, which along with a number of advantages, has
significant shortcomings, including the need for electronic components and more
difficult and costly installation and maintenance. UTP was first introduced in
the early 1990s as an alternative to optical fiber in data networking
applications.
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UTP combines the advantages of copper wire (less costly, easier maintenance and
installation and the ability to transmit both data and power) along with data
transmission rates of 100 megabits per second ("mbps") and higher, rates that
could previously be achieved only with fiber optic technology. While fiber optic
technology can now attain transmission rates well in excess of 100 mbps, Alpine
does not believe that there is a need for transmission rates of this magnitude
in most private data networks (other than trunking applications). Therefore,
Alpine believes that UTP's performance capabilities are sufficient to address a
substantial portion of the market for private data networks requiring high-speed
transmission rates.
There are a large number of manufacturers of UTP and competition for this
product is based on quality, price and product availability.
ADP NMS PRODUCTS. Aerial Drop Products ("ADP") are outside service wires
used to connect a home or business to an adjacent telephone pole. Typically,
such products have consisted of two copper clad steel conductors. ADP NMS
("Non-Metallic Support") wires are used for the same product application, with
fiberglass yarn instead of the steel conductor and twisted-pair copper wires
instead of the copper cladding. ADP NMS products were first shipped by Alpine to
its customers in August 1994. The use of multiple twisted-pair copper wires in
this application provides better transmission characteristics and permits the
use of one ADP NMS wire for the connection of multiple telephone lines to one
home or business, rather than the multiple ADP wires which were previously
required for this purpose. There are a number of competing suppliers of ADP NMS.
HYBRID PRODUCTS. Hybrid products combine the use of twisted-pair copper
wires with coaxial cable and were introduced by Alpine to its customers in April
1995. These hybrid products are available as either outside service wires or
telephone cables and offer coaxial cable's benefits of greater bandwidth and
higher data transmission rates for video together with copper wire's benefits of
low cost and the ability to provide a power source. This product is being
installed by some telephone companies as part of their ongoing installation of
underground telephone cables, even though the companies are not currently using
the new hybrid product for television transmissions.
RISER PRODUCTS. In April 1995, Alpine began supplying "risers," copper
wires used inside high-rise buildings or telephone company central offices to
provide each floor with vertical connections for telephone and data
transmissions. Alpine entered the market for riser products in order to provide
the full-range of copper wire and cable products utilized by its major
customers.
MARKETING AND DISTRIBUTION
During fiscal 1995, on a pro forma basis, 76% of Alpine's telephone wire and
cable net sales were to the RBOCs and major independent telephone companies, 5%
were sold outside the United States and Canada and the remaining 19% were sold
to other telephone companies in the United States and Canada, construction
companies and others. The comparable figures for fiscal 1994 were 73%, 10% and
17%, respectively.
Alpine sells to the RBOCs and other major independent telephone companies on
a direct basis through a sales force of five salespersons. The remainder of
Alpine's products is sold through distributors, original equipment manufacturers
and sales representatives and agents, including sales representatives in South
America. Alpine believes that there will be opportunities for international
expansion of its wire and cable business, as developing countries install and
upgrade existing telephone systems, although a number of countries, including
most European countries, have different technical specifications, tariffs and
other restrictions that limit importation of copper wire and cable products from
North America.
Alpine's sales to telephone companies are generally pursuant to multi-year
supply agreements in which the customer agrees to have Alpine 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 wire and
cable needs and manufacturers such as Alpine bid and quote prices based upon the
forecasted order amount, although customers are not obligated to purchase the
forecasted amount. Alpine currently has long-term agreements with respect to
certain of its wire and cable products with six of the seven RBOCs and with the
three major independent telephone companies. For fiscal 1995, on a pro forma
basis, sales to Sprint
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Corporation, BellSouth Corporation, GTE Corporation, and SBC Communications,
Inc. (formerly Southwestern Bell) accounted for 21.6%, 15.6%, 14.3% and 10.2% of
Alpine's net sales of wire and cable products, respectively. No other single
customer accounted for more than 10% of Alpine's wire and cable sales.
Additionally, as is customary in the industry, most of Alpine's sales to
customers other than large telephone companies are on the "spot" market on the
basis of short-term purchase orders.
MANUFACTURING PROCESS AND QUALITY CONTROL
Copper rod is the base component for most of Alpine's wire and cable
products. The manufacturing processes for these products require that the copper
rod be drawn and insulated. Alpine purchases copper rod of 5/16" diameter from
third-party suppliers. Alpine then "draws" the wire to one of four American wire
gauges (I.E., standard diameters or "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. Wire products are then typically insulated with plastic
compounds through an extrusion process. Alpine uses five primary types of
insulating material compounds: high density polyethylene, high density cellular,
flame retardant polyethylene, fluoropolymers and polyvinyl chloride. 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. Alpine purchases these
insulating compounds from a variety of suppliers.
Alpine's products also require that the wire be "twisted" so that two
insulated single conductors are combined to create a twisted pair. Alpine'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 (E.G., 25 or more) numbers
of pairs. Smaller numbers of pairs (E.G., fewer than 25) are not cabled, but are
sent directly for jacketing.
Once insulated, Alpine's copper and wire 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 or 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 Alpine 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 Alpine has not experienced any shortages of these raw
materials in the recent past. However, the production of UTP products is
dependent upon teflon, which is currently manufactured by only two producers and
is in short supply. As a result, Alpine has had to limit its production of UTP.
However, one of those producers has indicated that it intends to increase its
production capacity. From time to time, particular plastics have been difficult
to obtain, but in recent years none of these shortages has required Alpine to
limit production. The inability of Alpine to obtain sufficient quantities of raw
materials may adversely affect its operating results.
The cost of copper, the most significant raw material used by Alpine 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 Alpine'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 telephone wire and cable products until copper prices decline.
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As part of the Alcatel Acquisition, Alpine entered into an agreement with
Alcatel NA under which Alcatel NA's Montreal rod mill facility is supplying the
copper rod requirements of Alpine's Winnipeg plant at prevailing market prices.
This arrangement is subject to renegotiation or termination annually.
FOREIGN SALES
On a pro forma basis for the year ended April 30, 1995, foreign sales of
copper wire and cable totaled $28.7 million, or 8.3% of copper wire and cable
sales and 6.1% of total sales. On an historic basis for the year ended April 30,
1995, foreign sales totaled $4.0 million, or 2.5% of copper wire and cable sales
and 2.0% of total sales.
COMPETITION
The copper telephone wire and cable business is very competitive. Alpine has
three major domestic competitors in the copper telephone wire and cable
business: AT&T Network Cable Systems, Inc., a subsidiary of AT&T Corporation;
General Cable Corporation, a subsidiary of Wassall, plc; and Essex Group
Incorporated, a subsidiary of BCP/Essex Holding, Inc. The parent of each of
these competitors is a large company having significant financial resources.
Competition in this market is based primarily on price and, to a lesser degree,
on quality and service. Several RBOCs have adopted policies of limiting the
number of their suppliers and requiring that these suppliers provide additional
services. As a result, Alpine and other copper wire and cable producers
increasingly compete on the basis of service, as well as price.
BACKLOG
As of April 30, 1995, Alpine's wire and cable business backlog (on a pro
forma basis) was $46.4 million as compared to $27.0 million as of April 30,
1994. The backlog represents firm orders that are expected to be filled in the
upcoming fiscal year. Since Alpine generally operates on short lead times and
often ships wire and cable products directly from inventory to its customers,
Alpine does not believe that backlog is indicative of future financial
performance.
REFRACTORY PRODUCTS AND SERVICES
GENERAL
Alpine, through Adience, is one of the largest manufacturers and installers
of specialty refractory products in the United States. Refractory products are
consumable materials used as insulation on surfaces exposed to high
temperatures, such as those generated by molten metals. The manufacture,
installation and maintenance of specialty refractory products to the iron and
steel industry represented over 80% of the net sales of this business for fiscal
1995. Alpine is also among the leading manufacturers in the United States of
specialty refractory products for use in the production of glass and aluminum
and is one of the few rebuilders of coke ovens in the United States.
Adience was formed in 1985 and, through 1990, it acquired 12 largely
unrelated businesses. Many of these businesses were unprofitable and were
eventually sold. Construction of unnecessary production capacity and excessive
leverage and working capital levels, among other factors, led Adience to file a
prepackaged plan of reorganization under Chapter 11 of the United States
Bankruptcy Code in February 1993 (the "Reorganization").
The Reorganization adjusted, but did not fundamentally restructure,
Adience's operations or capital structure in a manner sufficient to assure
long-term profitability. In late 1993, Alpine acquired an equity interest in
Adience and in April 1994 the Chairman of the Board of Alpine and another
director of Alpine were elected to the Board of Directors of Adience and a new
management team was put into place. In December 1994, Alpine increased its
ownership to 87.2% of the outstanding common stock of Adience. Alpine and the
new Adience management team have substantially implemented a number of strategic
initiatives to improve the profitability of Alpine's refractory business,
including: (i) cost reduction programs involving the consolidation of
manufacturing and general and administrative operations, discontinuation of
unprofitable product lines and elimination of duplicative overhead; (ii)
improved marketing efforts to penetrate broader end-user and geographic markets;
(iii) new product development and (iv) realignment of the sales force. In
connection with the foregoing, Alpine has: (i) eliminated unprofitable products
from
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Adience's product line; (ii) increased the prices of a number of Adience's
products; (iii) entered into a contract to sell Adience's former corporate
headquarters and closed a plant in Ohio; and (iv) consolidated production at a
number of Adience's plants.
REFRACTORY PRODUCTS AND SERVICES
Alpine manufactures a wide range of refractory products and specializes in
producing refractory materials that are custom designed for specific industrial
applications and customers. The principal products are monolithic (unformed)
refractory materials, slide gates, bottom pour refractories and bricks and
blocks. Alpine also provides installation and maintenance services for its
customers. Monolithic refractory materials are cement-like materials that are
mixed with water on the customer's premises and applied to surfaces exposed to
high temperatures. Slide gates and bottom pour refractories are pre-formed units
that allow the discharge of molten metal from the bottom of the furnace, rather
than from the top, resulting in reduced iron and steel impurities. Alpine
manufactures a wide range of bricks and blocks, which are used to line
industrial furnaces. Because of the high temperatures involved in the
manufacturing and movement of molten iron and other molten materials, the
equipment employed in such processes must utilize linings made of refractory
products, which deteriorate and must be repaired or replaced frequently. The
largest customer for Alpine's refractory products and services is the iron and
steel industry, followed by the glass, aluminum, cement and co-generation
industries.
Certain of Alpine's refractory products are used to line furnaces, troughs,
runways and other surfaces exposed to molten glass or the molten tin used in the
float glass method of production. All of these products are manufactured
according to customer specifications. In addition, certain of Alpine's
refractory products are distinguished by their resistance to corrosion.
Corrosion resistance is particularly important in the glass industry where,
unlike the steel industry, certain refractory products are designed to last for
up to 10 years.
The manufacturing process for specialty refractory products involves the
mixing and, in some cases, the kiln firing of various raw materials,
particularly fireclays and minerals such as bauxites and aluminas. Alpine
operates eight principal refractory plants located near major industrial centers
in the United States and Canada. Alpine designs its refractory products for
specific applications and customer needs.
Alpine also provides a variety of services, primarily to its iron and steel
customers: it installs refractory products manufactured by it and others; it
provides on-site maintenance of refractory products; and it rebuilds coke ovens
The ability to react quickly to customer requests for products or installation
and maintenance services is particularly important in the refractory industry
because of the extremely high cost of manufacturing downtime in the iron and
steel industry. Consequently, Alpine maintains refractory service facilities
located near its major customers in the United States and Canada. Each facility
has the equipment and skilled staff required for the installation and
maintenance of refractory products. Other personnel required for installation
projects are hired on an as-needed basis from readily available local union
labor pools and are employed by Alpine only for the duration of each job.
One of Alpine's strategic initiatives in the refractories business is to
extend sales of its refractory products and services into the steel making phase
of the integrated iron and steel mills. Currently, Alpine supplies its products
and services primarily to the iron making and handling area of an integrated
iron and steel mill. The steel ladle and continuous casting phases utilize
substantially greater amounts of refractory products than Alpine's traditional
area of focus and therefore represent a potential area for growth. To strengthen
Alpine's leadership position in the monolithic refractory business, Alpine is
also emphasizing the use of shotcrete technology in the installation of its
unformed refractory materials. This technology permits a lower cost and faster
installation of monolithic refractory materials in applications previously
dominated by brick refractories. Alpine is developing robotic application
equipment permitting the installation of refractories at higher temperatures
than currently possible, thereby resulting in less facility downtime.
MARKETING AND DISTRIBUTION
The iron and steel industry has historically been the major consumer of
Alpine's refractory products and services. For fiscal 1994 and 1995, direct
sales to the iron and steel industry accounted for 57% and 64%, respectively, of
refractory product net sales. Other customers for Alpine's specialty refractory
materials are
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the glass, aluminum, cement and cogeneration industries. Alpine also sells its
refractory products to other refractory contractors and buys refractory products
produced by other manufacturers in performing its contracting services.
Within the iron and steel industry, Alpine's principal customers have
traditionally been the largest companies in the industry. USX--US Steel Group,
Inc., Bethlehem Steel Corporation and LTV Steel Company, Inc. together accounted
for approximately 27% and 31% of the net sales of this business segment for
fiscal 1994 and 1995, respectively. USX--US Steel Group, Inc., alone accounted
for 10% and 13% of this business segment's net sales during fiscal 1994 and
1995, respectively. Each of the other companies accounted for less than 10% of
this business segment's net sales during such periods. Marketing of Alpine's
refractory products is conducted by a sales force working out of 15 sales
offices located in eight states.
RAW MATERIALS
In manufacturing its specialty refractory products, Alpine uses more than
100 different raw materials which come from a variety of sources, the majority
of which are obtained within the United States. Some of the more important raw
materials are alumina, bauxite, silicon carbide, calcium aluminate cements and
clays. The number of sources of supply varies with each raw material. Alpine
believes that it is not dependent in its manufacturing processes on any one
source of supply.
FOREIGN SALES
On a pro forma basis for the year ended April 30, 1995, foreign sales of
refractory products totaled $12.8 million, or 12.7% of refractory product sales
and 2.7% of total sales. Foreign sales of refractory products consisted solely
of sales by Alpine's Canadian plant. On an historic basis for the year ended
April 30, 1995, foreign sales of refractory products totaled $3.6 million, or
10.7% of refractory product sales and 1.8% of total sales.
COMPETITION
In the production of refractory materials, Alpine competes with a number of
companies, including North American Refractories Co., INDRESCO Inc., A.P. Green
Industries, Inc., National Refractories Co. and Premier Refractories &
Chemicals, Inc., some of which are larger than Alpine.
Alpine's primary competitors in the installation of refractory products are
in-house employees of iron and steel companies and also regional refractory
service contractors which, unlike Alpine, do not engage in the production of
such materials. Other major refractory producers typically contract with these
regional companies to install the product, or their customers install the
products themselves. Competition is based primarily on service, price and
product performance. Alpine believes that its ability to produce, install and
maintain its refractory products without dependence upon third parties
strengthens its competitive position.
BACKLOG
Alpine's refractory business operates on releases from blanket orders and,
therefore, does not have a significant amount of backlog orders, except in the
case of certain refractory products used by the glassmaking industry which had
$3.2 million and $6.5 million in backlog at April 30, 1994 and 1995,
respectively. Generally, customers place orders on the basis of their
short-range needs for which sales are made out of inventory or manufactured on a
just-in-time basis.
DATA COMMUNICATIONS AND OTHER ELECTRONIC PRODUCTS
Alpine designs, manufactures, tests and markets data communication and other
electronic products for the military, government and commercial sectors. Since
1993, Alpine has successfully reduced its dependence on the military market
through the development of products and services for non-military applications,
as well as contract manufacturing services for governmental (non-military) and
commercial customers.
MILITARY PRODUCTS
Products for the military market have traditionally represented most of
Alpine's sales of data communications and other electronic products and systems
and include data and voice multiplexers, communication products, electronic
avionics equipment and electronic printers.
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Alpine is the largest supplier to the U.S. military of data and voice
multiplexers used in tactical secure military applications. Multiplexers are
communication devices that can combine several individual information carrying
channels into one line, thereby permitting simultaneous multiple voice and data
communications over a single line. Alpine's military multiplexer product line
includes "TEMPEST" accredited multiplexers, cryptographic equipment and signal
terminating units used for voice and data communications, both in tactical
environments (field applications) and in secure office environments.
Alpine's avionic products include electrical controllers (switches, dimmers,
flashers and relays), aerial refueling amplifiers and various sensors (oil
temperature, liquid level and ice detection) which are used in military
aircraft. Alpine has contracts for the development of new ice detectors for the
F-18 aircraft, a dimmer for the new Comanche helicopter and an aerial refueling
amplifier for the proposed F-22 aircraft.
Alpine's electronic printer product line includes "TEMPEST" certified dot
matrix and drum printers which are used in both technical environments and
secure office environments. As a result of technological advances, demand for
these printers has declined and Alpine is de-emphasizing this business.
Alpine's products for the military market are sold on a direct basis to the
military or through government prime contractors and government agencies. Alpine
competes with a number of companies that provide electronic products and
components to the military, many of which are large companies or divisions of
large companies that have greater financial resources than Alpine. For fiscal
1995, sales to the military accounted for 56.9% of the net sales of this
business segment, of which sales of multiplexers accounted for 49.7%.
CONTRACT MANUFACTURING SERVICES
Alpine provides contract manufacturing and component performance testing
services to governmental (non-military) and commercial customers. Alpine is
currently providing contract manufacturing services to four OEMS. In addition to
traditional contract manufacturing services, Alpine was awarded a multi-year
contract from the National Aeronautics and Space Administration for the assembly
and testing of Hardware Interface Modules which are integrated with other
equipment to support the information processing of critical launch functions for
the space shuttle at the Kennedy Space Center. For fiscal 1995, contract
manufacturing and component testing services accounted for 37.9% of this
business segment.
COMMERCIAL APPLICATIONS
Consistent with its strategy to adapt its products for commercial
applications, Alpine has developed and begun marketing a data and voice
multiplexer product for the non-military market. While there is a large market
for commercial multiplexers, the market is highly competitive and is
characterized by rapid technological change and short product life cycles. There
are a large number of competitors in the commercial multiplexer market, many of
which have financial, manufacturing, development and marketing resources
substantially greater than Alpine. Alpine also provides multi-image equipment
software to the commercial and government (non-military) markets. For fiscal
1995, sales of products for commercial applications accounted for 5.2% of this
business segment.
BACKLOG
At April 30, 1995, Alpine's order backlog believed to be firm for its data
communication and electronic products and systems was $10.9 million, as compared
to approximately $11.1 million at April 30, 1994. Approximately 90% of the
backlog was expected to ship in the next 12 months. Approximately 46% of this
backlog is pursuant to contracts with the U.S. government or with government
prime contractors and, accordingly, is generally subject to renegotiation or
termination at the convenience of the government. With respect to government
contracts, it is Alpine's policy to enter into backlog only those contracts or
portions thereof which have actually been funded by the respective government
agency. Therefore, certain of Alpine's contracts have not been reflected in the
above backlog, including the remaining portion of an outstanding NASA contract.
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OTHER
Alpine currently owns approximately 19.0% of the outstanding PolyVision
common stock and 98% of the preferred stock of PolyVision. See "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations" for a description of certain transactions which may result in the
reduction of Alpine's ownership of PolyVision common stock. PolyVision
manufactures and markets menuboard display systems to the fast food and
convenience store industries, changeable magnetic signage used primarily by
banks, and writing, projection and other visual display surfaces (such as
chalkboards and markerboards) and cabinets and partitions for schools and
offices. PolyVision is also engaged in the research, development, licensing and
initial manufacturing and testing of a proprietary materials technology known as
PolyVision, with potential commercial applications in a wide range of consumer,
industrial, office and other host product applications that utilize or
incorporate flat panel display components and systems.
RESEARCH AND DEVELOPMENT
In response to the changing requirements of the telecommunications industry,
Alpine has focused its recent product development activities on 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 Alpine's telephone company customers and include
the development of composite cables that include copper twisted pair wire and
coaxial cable and optical fibers in a single cable construction. Alpine is
currently developing shielded twisted pair products and the retail packaging of
certain of its products for premise (I.E., in-home or in-office) use as well as
extensions of its UTP products, such as patch cords for use in connecting UTP
products within premises and 25-pair UTP cables for certain data transmission
applications. Alpine expects to continue to explore new product development
opportunities as the requirements of the telephone companies evolve.
Constant revisions to industry processes and chemistries require changes in
refractory products to meet customer demand. Alpine maintains research and
development facilities for improving existing refractory products and
installation methods and developing new products for existing and new markets.
In order to compete for contracts, DNE frequently invests its own funds on
research and development in order to determine the financial and practical
feasibility of manufacturing the products. DNE is also currently in the process
of developing a new multiplexer (under a development contract) for secure
communications for a U.S. government agency. Although Alpine currently holds
certain trademark licenses and patents, none is considered to be material to its
businesses.
Research and development expense during fiscal 1993, 1994 and 1995 amounted
to $2.0 million, $1.2 million, and $1.6 million, respectively.
EMPLOYEES
As of April 30, 1995, Alpine employed 2,380 people, including 1,400 in the
copper wire and cable business, 810 in the refractories business, 174 in the
data communications and electronics business and six at Alpine's executive
offices.
The number of individuals employed in the refractories business does not
reflect members of the building trades, who are hired by Alpine as required.
Approximately 600 persons employed in Alpine's specialty refractory business and
approximately 870 persons employed in Alpine's telecommunications wire and cable
business are represented by unions.
Alpine considers relations with its employees to be satisfactory.
ENVIRONMENTAL MATTERS
Alpine's manufacturing operations are subject to numerous federal, state and
local laws and regulations relating to the storage, handling, emission,
transportation and discharge of hazardous materials and waste products.
Compliance with these laws has not been a material cost to Alpine and has not
had a material effect upon its capital expenditures, earnings or competitive
position. Violation of such laws or regulations, even if inadvertent, could have
an adverse impact on the operations, business or financial results of Alpine.
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Operations of Alpine have resulted in releases of hazardous substances at
sites currently or formerly owned or operated by Alpine. Alpine is presently
involved in investigatory and remedial activities at certain sites under the
oversight of state governmental authorities, as described below.
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 is in the process of obtaining approval for a
remediation plan from the Texas Natural Resource Conservation Commission. Based
upon investigations performed to date, Alpine believes that the cost of this
remediation will not be in excess of $0.5 million. Pursuant to an agreement
between Superior and the former owner of the facility, Alpine 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, low
levels of volatile organic compounds were discovered in shallow groundwater.
Alpine has assumed responsibility for this contamination pursuant to an
indemnity granted to the purchaser of the facility. 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.
In accordance with the waiver, Alpine has until August 1997 to complete these
efforts. Although no assurances can be given, Alpine does not believe that the
cost to fulfill its obligations with respect to the contamination will be
material. Alpine has also assumed responsibility for and indemnified purchasers
against liabilities associated with contamination, if any, existing at other of
its former facilities. In particular, in connection with the sale of its former
East Windsor, Connecticut facility and pursuant to Connecticut property transfer
laws, Alpine was required by the Connecticut Department of Environmental
Protection ("CDEP") to develop a plan to investigate the existence of
contamination, if any, at that facility. Alpine has developed and submitted to
CDEP the required plan and is awaiting CDEP approval of the scope of its
proposed investigation. Based upon information available to date, Alpine does
not believe the costs associated with fulfilling its obligations with respect to
the East Windsor facility will have a material adverse effect on its operations,
business or financial results.
See "Item 3. Legal Proceedings" for a discussion of certain Superfund
litigation.
In February 1992, PolyVision 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, PolyVision and Adience signed a
consent order with the Ohio EPA and the Ohio Attorney General which required
PolyVision and Adience to pay to the State of Ohio a civil penalty of $0.2
million 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, PolyVision and
Adience filed a proposed amendment to the consent order which would allow
PolyVision 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 April 30, 1995, environmental accruals
amounted to $0.5 million, 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. Since 1991, Adience and PolyVision have together paid $1.3 million
(excluding the civil penalty) for the environmental cleanup related to the
Alliance facility. 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.
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Under the acquisition agreement pursuant to which PolyVision acquired the
Alliance facility from Adience, Adience represented and warranted that, except
as otherwise disclosed to PolyVision, no hazardous material had been stored or
disposed of on the property. No disclosure of storage or disposal of hazardous
material on the site was made. Accordingly, Adience is required to indemnify
PolyVision for any losses in excess of $0.3 million. PolyVision has notified
Adience that it is claiming the right to indemnification for all costs in excess
of $0.3 million incurred by PolyVision in this matter, and has received
assurance that Adience will honor such claim.
Certain Adience and PolyVision facilities contain areas which may have been
used for the disposal of waste materials generated by facility operations, some
of which may contain elements or compounds classified as hazardous under
environmental laws or which may otherwise cause environmental contamination. If
it is determined that past disposal practices have resulted in releases of
contaminants to soil or groundwater, remediation of such contamination may be
required. If substantial environmental contamination is found at any or all of
the Adience and PolyVision facilities, this could have a material adverse effect
on the operations, business and financial results of Alpine.
ITEM 2. PROPERTIES
Alpine conducts its operations primarily at the facilities set forth below:
<TABLE>
<CAPTION>
LOCATION SQUARE FOOTAGE LEASED/OWNED
- -------------------------------------------------------------------- -------------- ----------------------------
<S> <C> <C>
MANUFACTURING FACILITIES
TELECOMMUNICATIONS WIRE AND CABLE
Brownwood, Texas................................................ 310,000 Leased (expires 2013)
(five five-year renewals)
Winnipeg, Manitoba.............................................. 193,000 Owned
Elizabethtown, Kentucky......................................... 170,700 Owned
Tarboro, North Carolina......................................... 289,000 Owned
Depending on product mix, capacity in this segment ranges from 80 billion conductor feet (BCF) to 85 BCF. Each
facility is operating at utilization rates of between 90% and 95%. Facilities in this segment are suitable and
adequate for the business. Capital spending plans for the operations in this segment are primarily designed to
keep up with current technology and to increase capacity in existing product lines.
REFRACTORIES
Washington, Pennsylvania........................................ 201,881 Owned
Snow Shoe, Pennsylvania......................................... 162,080 Owned
South Webster, Ohio............................................. 131,154 Owned
Crown Point, Indiana............................................ 76,106 Owned
Altoona, Pennsylvania........................................... 47,160 Owned
Smithville, Ontario............................................. 46,900 Owned
Canon City, Colorado............................................ 35,626 Owned
Johnstown, Pennsylvania......................................... 27,000 Owned
Depending on product mix, capacity in this segment ranges from 350,000 to 400,000 tons of refractory products.
The facilities are operating at various utilization rates with an overall utilization of between 50% and 60%.
Facilities in this segment are adequate and suitable for the business. Capital spending plans are primarily
designed to modifying existing product lines.
DATA COMMUNICATIONS AND ELECTRONICS
Wallingford, Connecticut........................................ 155,000 Owned
DNE's facility is adequate and suitable for the businesses being conducted and operates at a utilization rate
of between 50% and 60%.
CORPORATE EXECUTIVE OFFICES
New York, New York.............................................. 5,375 Leased (expires 2002)
Atlanta, Georgia................................................ 20,000 Leased (expires 1996)
</TABLE>
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The facility in Wallingford, Connecticut is subject to a mortgage held by
the Connecticut Development Authority as security for a $5.3 million loan and
the wire and cable plants owned by Alpine are subject to mortgages.
ITEM 3. LEGAL PROCEEDINGS
On May 25, 1995, Alpine and 10 other parties were named as co-defendants in
a lawsuit filed by the State of New York in Federal district court relating to
the release of hazardous chemicals at, and their subsequent migration and threat
of migration from, the Wellsville-Andover Landfill, near Rochester, New York.
The State of New York alleges that Alpine, by virtue of its purchase of some
(but not all) of the assets of an entity that allegedly disposed of hazardous
substances, is liable as a corporate successor under the federal Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA" or "Superfund")
for the costs of remediation. The total remediation costs for the site have been
estimated by the New York Department of Environmental Conservation to
potentially be in excess of $14.0 million. This action is in an early stage and
no determination has yet been made as to either the reasonableness of New York's
claim and its cost estimates or as to Alpine's liability, if any, or its share
of such remediation costs. In addition, together with various parties, Alpine
has been named as a defendant in a lawsuit filed by the owners of property
adjacent to another landfill in the Rochester area seeking recovery for property
damage caused by and cleanup of alleged contamination emanating from that
landfill. The property owners allege that Alpine is liable under CERCLA and New
York law based upon its status as corporate successor to the aforementioned
entity, which also allegedly disposed of hazardous substances at this landfill.
This action is also in an early stage. No determination has yet been made as to
whether contamination is present at plaintiff's property or as to Alpine's share
of any liabilities. Alpine believes that it has defenses to these actions and it
has indemnification rights with respect to liabilities, if any, relating to
these matters from the seller of the assets, Panex Industries, Inc., which
through its successor, Panex Industries, Inc. Liquidating Trust, has elected to
control the defense of the action. Management believes that such Trust has
sufficient assets to meet its indemnification obligation. However, there can be
no assurance that an adverse outcome in these cases would not have a material
adverse effect on the operations, business and financial results of Alpine.
ASBESTOS LITIGATION. Adience's J.H. France unit, which was merged into
Adience in December 1991, has been named as a party in approximately 8,000
pending lawsuits filed in eight jurisdictions principally by employees and
former employees of certain customers of J.H. France, alleging in certain cases
that a single product, a plastic insulating cement manufactured more than 20
years ago by J.H. France, caused them to suffer from asbestosis related diseases
and in other cases alleging that products manufactured or sold by J.H. France,
caused silica related diseases. Such lawsuits typically involve multiple
defendants and seek monetary damages ranging from $20,000 to approximately $1.0
million 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.
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, not asbestosis, in such persons. The majority of such lawsuits
involve multiple defendants and seek unstated monetary damages ranging from
$20,000 each, which is the minimal jurisdictional requirement for personal
injury cases in a majority of such state courts, to $1.0 million each. Adience
and its insurance carriers have historically settled these lawsuits for an
average amount per case of less than the minimum amount stated. Virtually 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 initially denied coverage for these claims. 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
17
<PAGE>
closed cases, Adience anticipates, although no assurance can be given, that the
expected costs and liabilities in such pending cases will be adequately covered
by insurance and that the aggregate limits on the insurance policies in effect
exceed the 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.
In May 1995 Adience was named as one of 153 defendants in a class action
lawsuit brought in the circuit court of Cook County, Illinois, seeking unstated
monetary damages and alleging that products produced by Adience caused certain
of its employees, former employees and such persons' family members to suffer
from asbestos related diseases or an increased risk of developing such diseases.
The total number of claims has not yet been determined. Alpine has submitted a
motion to dismiss on the grounds that the plaintiff has not stated grounds for a
class action.
Two former officers of Adience have demanded arbitration in connection with
the termination by them of their employment with Adience. Such former officers
contend that the Adience Acquisition and alleged changes in their duties
entitled them to terminate their employment with Adience and receive settlements
under their employment agreements aggregating $0.9 million for both officers.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report through the solicitation of
proxies or otherwise.
PART II
ITEM 5. MARKET FOR REGISTRANT'S SECURITIES AND RELATED SECURITY HOLDER MATTERS
(a) Market Information
Alpine's Common Stock, $.10 par value (the "Alpine Common Stock"), is listed
on the American Stock Exchange (the "AMEX") under the symbol AGI. The following
table sets forth the range of high and low sales prices for Alpine Common Stock
on the AMEX for fiscal 1994 and 1995.
<TABLE>
<CAPTION>
HIGH LOW
--------- ---------
<S> <C> <C> <C>
Fiscal 1994 First Quarter................................................. $ 12 1/4 $8 1/2
Second Quarter................................................ 10 7/8 8 1/4
Third Quarter................................................. 9 3/8 6 5/8
Fourth Quarter................................................ 7 1/2 4 11/16
Fiscal 1995 First Quarter................................................. 7 5/8 4 3/8
Second Quarter................................................ 8 3/8 5 1/8
Third Quarter................................................. 6 4 1/8
Fourth Quarter................................................ 5 7/8 4 5/8
</TABLE>
(b) Holders
At July 24, 1995, 17,742,362 shares of Alpine Common Stock were issued and
outstanding, and there were approximately 8,000 record holders thereof.
(c) Dividends
Alpine has no recent history of paying dividends and does not intend to
declare dividends on the Alpine Common Stock in the foreseeable future. Certain
provisions of Alpine's debt instruments and of the Company's outstanding
preferred stock have the effect of currently prohibiting Alpine from paying cash
dividends.
18
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
HISTORICAL FINANCIAL DATA
ALPINE
Set forth below are certain selected historical consolidated financial data
of Alpine. This information should be read in conjunction with the Consolidated
Financial Statements of Alpine 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, 1995 are derived from the audited consolidated financial
statements of Alpine, which have been restated to reflect the results of
operations of APV and Posterloid as discontinued.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED APRIL 30, (1)
-----------------------------------------------------
1991 1992 1993 1994 1995
--------- --------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales................................................... $ 2,994 $ 6,786 $ 27,897 $ 68,510 $ 198,135
Cost of sales............................................... 1,807 4,239 15,915 56,250 169,125
--------- --------- --------- --------- ---------
Gross profit.............................................. 1,187 2,547 11,982 12,260 29,010
Selling, general and administrative expenses................ 3,144 4,808 10,482 12,168 20,487
Amortization of goodwill and other intangible charges....... 269 283 395 2,292 1,527
--------- --------- --------- --------- ---------
Operating income (loss)................................... (2,226) (2,544) 1,105 (2,200) 6,996
Interest income............................................. 356 484 209 242 345
Interest expense............................................ (3,026) (3,127) (2,301) (2,363) (8,197)
Other income (expense), net................................. (540) (604) (1,469) (506) 28
--------- --------- --------- --------- ---------
(Loss) from continuing operations before income taxes..... (5,436) (5,791) (2,456) (4,827) (828)
Provision for income taxes.................................. -- -- -- 68 348
--------- --------- --------- --------- ---------
(Loss) from continuing operations......................... (5,436) (5,791) (2,456) (4,895) (1,176)
Income (loss) from discontinued operations (2).............. 2,027 (3,082) (8,377) (25,236) (4,868)
--------- --------- --------- --------- ---------
(Loss) before extraordinary item.......................... (3,409) (8,873) (10,833) (30,131) (6,044)
Extraordinary item -- gain (loss) on early extinguishment of
debt (3)................................................... 1,423 888 (1,262) (47) --
--------- --------- --------- --------- ---------
Net (loss)................................................ $ (1,986) $ (7,985) $ (12,095) $ (30,178) $ (6,044)
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
(LOSS) PER SHARE OF COMMON STOCK:
Continuing operations..................................... $ (0.92) $ (0.78) $ (0.32) $ (0.38) $ (0.11)
Discontinued operations................................... 0.33 (0.42) (0.94) (1.78) (0.27)
Extraordinary item -- gain (loss) on early extinguishment
of debt.................................................. 0.24 .12 (0.14) -- --
--------- --------- --------- --------- ---------
$ (0.35) $ (1.08) $ (1.40) $ (2.16) $ (0.38)
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital............................................. $ 6,404 $ 9,745 $ 7,256 $ 24,594 $ 7,080
Total assets................................................ 26,326 34,312 27,998 113,796 233,778
Total debt.................................................. 18,781 19,817 13,637 43,745 119,179
Preferred stock............................................. 986 5,177 4,677 6,177 17,250
Total stockholders' equity.................................. 247 5,867 10,602 47,998 44,658
<FN>
- --------------------------
(1) Alpine's results of operations have been significantly impacted by
acquisitions in fiscal 1993, 1994 and 1995. On February 22, 1992, Alpine
acquired DNE for a cash purchase price of $7.1 million. On November 9,
1993, Alpine acquired Superior for $60.8 million in cash and common stock.
On December 21, 1994, Alpine acquired Adience for $12.4 million in a
combination of cash, Alpine 8% preferred stock and PolyVision common stock.
See "Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations."
(2) In November 1994, Alpine adopted a plan to dispose of its information
display segment consisting of APV and Posterloid. The results of operations
for this segment have been reflected as income (loss) from discontinued
operations for all periods presented. See Note 5 of Alpine's Consolidated
Financial Statements.
(3) The extraordinary gain (loss) recorded during the fiscal years ended April
1991, 1992, 1993 and 1994 is related to the early extinguishment of $3.5
million, $2.4 million, $6.0 million and $0.1 million, principal amount,
respectively, of Alpine's debt, principally Alpine's 13.5% senior
subordinated debentures due October 1, 1996.
</TABLE>
19
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Alpine is a diversified industrial company principally engaged in the
manufacture and sale of copper wire and cable for the telecommunications
industry, specialty refractory products for the iron and steel, glass, aluminum,
cement and co-generation industries and data communications and other electronic
products and systems for military, governmental and commercial applications.
Alpine entered the copper wire and cable business in 1993 with the Superior
Acquisition and significantly enlarged its presence in this business with the
Alcatel Acquisition in May 1995. Alpine entered the specialty refractory
business in 1994 with the Adience Acquisition. Alpine entered the data
communications and electronics industry with its acquisition of DNE in February
1992.
RESULTS OF OPERATIONS
To facilitate a meaningful comparison, this Management's Discussion and
Analysis of Financial Condition and Results of Operations focuses on pro forma
information for the periods covered, which management believes provides
comparability among historical periods. Period-to-period comparisons of Alpine's
historical financial information are less relevant to an understanding of Alpine
as it is presently constituted due to the significance of the Superior
Acquisition on November 11, 1993, the Adience Acquisition on December 21, 1994,
the Alcatel Acquisition on May 11, 1995, the completion on July 21, 1995 of the
Offering of $153.0 million principal amount of Notes, the entering into and
initial drawing under the New Credit Agreement and the Refinancing. See Item 1.
Business -- Recent Developments; the Refinancing.
As used herein the term "fiscal" refers to the 12-month fiscal period ended
on April 30 of the specified year, except in the case of the Alcatel Business in
which case the term refers to the 12-month fiscal period ended on March 31 of
the specified year. (Results of the Alcatel Business operations included herein
for the 12-month period ended March 31, 1995 do not materially differ from the
results for the 12-month period ended April 30, 1995.) Alpine reports separately
its results of operations for its three business segments: telecommunications
wire and cable; refractories; and data communications and electronic products.
Alpine's Pro Forma Condensed Combined Statement of Operations for fiscal
1995 presented below and the comparative data for fiscal 1993 and 1994, which
follows, have been prepared in a substantially consistent manner. Accordingly,
for convenience of presentation, the accompanying tables and period-to-period
comparisons of net sales, gross profit and other income statement items for the
periods presented refer to the pro forma amounts thereof. The pro forma data are
not necessarily indicative of the results that would have been achieved had such
acquisitions actually occurred on May 1, 1992, nor are they necessarily
indicative of Alpine's future results.
20
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
12 MONTHS ENDED APRIL 30, 1995 (ALPINE) AND MARCH 31, 1995 (ALCATEL BUSINESS)
<TABLE>
<CAPTION>
HISTORICAL ALCATEL PRO FORMA PRO FORMA
ALPINE ADIENCE (a) BUSINESS ADJUSTMENTS COMBINED
---------- ----------- ---------- --------------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net sales...................................... $ 198,135 $ 67,259 $ 204,178 $ 469,572
Cost of goods sold............................. 169,125 59,352 192,999 $ (1,591)(b) 414,528
(2,253)(c)
(250)(d)
(2,854)(e)
---------- ----------- ---------- --------------- -----------
Gross profit............................... 29,010 7,907 11,179 6,948 55,044
Selling, general and administrative............ 20,487 12,338 10,254 68(b) 31,883
(2,170)(c)
(9,094)(f)
Amortization of goodwill....................... 1,527 693 219(b) 3,041
602(e)
---------- ----------- ---------- --------------- -----------
Operating income (loss).................... 6,996 (5,124) 925 17,323 20,120
Interest income................................ 345 64 409
Interest expense............................... (8,197) (5,154) (1,965) (11,493)(g) (26,809)
Other income (expense), net.................... 28 364 392
---------- ----------- ---------- --------------- -----------
Income (loss) from continuing operations
before income taxes....................... (828) (9,850) (1,040) 5,830 (5,888)
Provision for income taxes..................... 348 -- (h) 348
---------- ----------- ---------- --------------- -----------
Income (loss) from continuing operations... (1,176) (9,850) (1,040) 5,830 (5,540)
Preferred stock dividends...................... 801 204(i) 264(i) 1,269
---------- ----------- ---------- --------------- -----------
Income (loss) attributable to common stock from
continuing operations......................... $ (1,977) $ (10,054) $ (1,040) $ 6,094 $ (6,809)
---------- ----------- ---------- --------------- -----------
---------- ----------- ---------- --------------- -----------
Income (loss) per share of common stock
from continuing operations (j)............ $ (0.11) $ (0.38 )
---------- -----------
---------- -----------
</TABLE>
See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial
Statements.
21
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF APRIL 30, 1995 (ALPINE) AND MAY 11, 1995 (ALCATEL BUSINESS)
<TABLE>
<CAPTION>
HISTORICAL
----------------------
ALCATEL PRO FORMA PRO FORMA
ALPINE BUSINESS ADJUSTMENTS COMBINED
---------- ---------- ---------------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and marketable securities........................... $ 17,041 $ 135,400(k) $ 1,367
(93,000)(k)
(10,255)(k)
(21,919)(k)
(500)(k)
134,300(l)
58,455(m)
(213,119)(n)
(1,596)(o)
(3,300)(p)
(140)(q)
Accounts receivable, net................................. 41,255 $ 29,177 70,432
Inventories, net......................................... 35,242 33,160 68,402
Other current assets..................................... 5,347 1,192 6,539
---------- ---------- ---------------- -----------
Total current assets................................... 98,885 63,529 (15,674) 146,740
Property, plant and equipment, net......................... 52,240 39,598 4,945(k) 96,783
Investment in and advances to PolyVision................... 11,202 1,332(p) 15,834
3,300(p)
Goodwill and other intangibles, net........................ 65,712 18,055(k) 85,363
1,596(o)
Long term investments and other assets..................... 5,739 6,058(l) 13,227
1,800(m)
(370)(q)
---------- ---------- ---------------- -----------
Total assets........................................... $ 233,778 $ 103,127 $ 21,042 $ 357,947
---------- ---------- ---------------- -----------
---------- ---------- ---------------- -----------
</TABLE>
See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial
Statements.
22
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET (CONTINUED)
AS OF APRIL 30, 1995 (ALPINE) AND MAY 11, 1995 (ALCATEL BUSINESS)
<TABLE>
<CAPTION>
HISTORICAL
----------------------
ALCATEL PRO FORMA PRO FORMA
ALPINE BUSINESS ADJUSTMENTS COMBINED
---------- ---------- ---------------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short term borrowings.................................... $ 20,790 $ (20,790)(n)
Revolving line of credit................................. 12,345 (12,345)(n)
Current portion of long-term debt........................ 2,022 (728)(n) $ 1,294
Accounts payable......................................... 31,655 $ 14,964 46,619
Accrued expenses......................................... 24,993 6,908 500(k) 32,401
---------- ---------- ---------------- -----------
Total current liabilities.............................. 91,805 21,872 (33,363) 80,314
Long-term debt, less current portion....................... 84,022 140,358(l) 218,886
60,255(m)
(21,919) (k)
140,000 (k)(n
(183,830)(n)
Other long-term obligations................................ 7,560 7,560
Adience Acquisition obligation............................. 5,733 (5,733)(p)
Stockholders' equity:
Preferred stock.......................................... 17,250 (3,500)(i) 15,495
(500)(i)
2,245(n)
Common stock............................................. 1,743 84(i) 1,827
Capital in excess of par value........................... 103,114 81,255 (81,255)(k) 107,030
3,916(i)
Gain on distribution of PolyVision interest.............. 1,332(p) 9,310
5,733(p)
2,245(p)
Cumulative translation adjustment........................ 144 144
Accumulated deficit...................................... (76,050) (5,026)(q) (81,076)
---------- ---------- ---------------- -----------
46,201 81,255 (74,726) 52,730
Less: Treasury stock....................................... (1,229) (1,229)
Receivable from stockholder............................ (314) (314)
---------- ---------- ---------------- -----------
Total stockholders' equity................................. 44,658 81,255 (74,726) 51,187
---------- ---------- ---------------- -----------
Total liabilities and stockholders' equity............. $ 233,778 $ 103,127 $ 21,042 $ 357,947
---------- ---------- ---------------- -----------
---------- ---------- ---------------- -----------
</TABLE>
See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial
Statements.
23
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(a) On December 21, 1994, Alpine completed the acquisition of 87.2% of the
outstanding capital stock of Adience. Adience's results of operations have been
consolidated with those of Alpine from that date. This column sets forth
Adience's historical results of operations, excluding PolyVision, for the period
from May 1, 1994 through December 20, 1994.
(b) Reflects the changes to Adience's historical depreciation and
amortization resulting from the allocation of Alpine's purchase price.
<TABLE>
<CAPTION>
MAY 1, 1994 TO DECEMBER
20, 1994
------------------------
HISTORICAL ADJUSTED CHANGE
----------- ----------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Cost of goods sold..................................................... $ 3,670 $ 2,079 $ (1,591)
Selling, general and administrative.................................... 180 248 68
Amortization of intangibles............................................ 948 1,167 219
</TABLE>
(c) Reflects the elimination of certain expenses incurred by Adience that
are either directly attributable to the Adience Acquisition or would not have
been incurred if the Adience Acquisition had taken place on May 1, 1994 as
follows:
<TABLE>
<CAPTION>
YEAR ENDED
APRIL 30,
1995
-------------
(IN
THOUSANDS)
<S> <C>
Cost of goods sold:
Inventory writedowns (1)............................................................... $ 2,253
------
------
Selling, general and administrative expense:
Directors' fees, public filing expenses and ESOP administrative fees (2)............... $ 722
Consulting fees (3).................................................................... 283
Executive salaries (4)................................................................. 226
Adience acquisition expenses (5)....................................................... 602
Relocation of Adience corporate headquarters (6)....................................... 337
------
$ 2,170
------
------
<FN>
- ------------------------
(1) At the time of the Adience Acquisition, Alpine management determined that
certain Adience product lines would be discontinued. Adience recorded a
charge to reduce the carrying value of the related inventory to its
realizable value on a liquidation basis.
(2) Adience's financial statements for the year ended April 30, 1995 included
$0.7 million of expenses related to the reporting and other expenses
incurred by Adience as a public company. Following the Adience Acquisition,
the directors of Adience who were not affiliated with Alpine resigned and
Adience ceased paying directors' fees. Also following the Adience
Acquisition, Adience's obligation to file reports with the Securities and
Exchange Commission terminated and Adience initiated the process of
terminating its ESOP.
(3) Reflects $0.3 million of consulting fees paid to a partnership in which two
Alpine officers had a majority interest. The consulting agreement was
terminated in connection with the Adience Acquisition.
(4) Reflects the elimination of the salaries of Adience executives who are no
longer employed by Adience to the extent that such executives will not be
replaced.
(5) Reflects the elimination of $0.6 million of legal, investment banking and
other third-party expenses incurred by Adience during the period from May
1, 1994 to December 20, 1994 in connection with the Adience Acquisition.
(6) Reflects the elimination of expenses associated with Adience's corporate
headquarters, which will be relocated to the offices of one of the
Adience's divisions in August 1995.
</TABLE>
24
<PAGE>
(d) Represents $0.3 million of savings resulting from a reduction in
headcount at the Alcatel Business' plants.
(e) Reflects the changes to historical depreciation expense and the
incremental amortization of intangibles resulting from the Alcatel Acquisition.
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
1995
------------------------
HISTORICAL ADJUSTED CHANGE
----------- ----------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Cost of good sold: depreciation........................................ $ 6,154 $ 3,300 $ (2,854)
Amortization of intangibles............................................ -- 602 602
</TABLE>
See Note (k) below.
(f) Reflects the elimination of selling, general and administrative expense
incurred by the Alcatel Business in the historical period, of which $5.9 million
represented management fees, an allocation of administrative charges previously
paid by the Alcatel Business to its affiliates, as well as employee costs which
will not be incurred subsequent to the Alcatel Acquisition. The decrease in
selling, general and administrative expense was offset by $1.2 million of
incremental expense in order to operate the business following the combination
of the Alcatel Business with Superior. The incremental expense was determined by
identifying the additional selling, general and administrative personnel that
Alpine required and the estimated costs associated with adding the personnel.
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
1995
------------------------
HISTORICAL ADJUSTED CHANGE
----------- ----------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Management fees........................................................ $ 4,868 -- $ (4,868)
Administrative fees.................................................... 1,064 -- (1,064)
Other selling general and administrative............................... 4,322 $ 1,160 (3,162)
----------- ----------- ---------
Total.............................................................. $ 10,254 $ 1,160 $ (9,094)
----------- ----------- ---------
----------- ----------- ---------
</TABLE>
(g) The adjustment to interest expense resulting from the Refinancing
described in Note (m) below is as follows:
<TABLE>
<CAPTION>
YEAR ENDED
APRIL 30,
1995
-------------
(IN
THOUSANDS)
<S> <C>
Interest on the Notes (at 12.25% per annum).............................................. $ 18,743
Amortization of original issue discount on the Notes..................................... 939
Interest on New Credit Agreement (assuming an 8.0% interest rate)........................ 4,000
Amortization of deferred financing costs................................................. 1,117
Less, historical interest on indebtedness assumed to be repaid:
With respect to Alpine and Adience..................................................... (11,341)
With respect to the Alcatel Business (for the year ended March 31, 1995)............... (1,965)
-------------
Total................................................................................ $ 11,493
-------------
-------------
</TABLE>
The adjustment to interest expense assumes that, during the fiscal year
ended April 30, 1995, (i) $153.0 million principal amount of Notes were
outstanding and (ii) the average amount outstanding under the New Credit
Agreement was $50.0 million at an interest rate of 8.0% per annum (which
approximates the current rate that would be applied to LIBOR advances
thereunder). Alpine believes that $50.0 million of borrowings under the New
Credit Agreement would have been adequate to satisfy its operating cash needs
during the year, including the payment 90 days after the closing of the Alcatel
Acquisition of the $10.3 million deferred obligation to Alcatel N.A. Deferred
financing costs are amortized over the terms of the related indebtedness.
25
<PAGE>
(h) There is no tax effect attributable to the Pro Forma Adjustments because
of Alpine's net operating loss carryforwards.
(i) Reflects an additional $0.3 million of preferred stock dividends, which
assumes that the following transactions had taken place on May 1, 1994: (1) the
issuance on January 5, 1995 of $8.0 million of Alpine 8% Preferred Stock in
exchange for 1,000,000 shares of Alpine Common Stock; (2) the exchange of all
$3.5 million of Alpine's outstanding 8.5% Cumulative Convertible Senior
Preferred Stock plus accrued dividends thereon for 737,476 shares of Alpine
Common Stock, which exchange will take place in July 1995; (3) the exchange in
May 1995 of $0.5 million of Alpine's 9% Cumulative Convertible Senior Preferred
Stock plus accrued dividends thereon for 100,000 shares of Alpine Common Stock;
and (4) the issuance of $2.2 million of Alpine 8% Preferred Stock in connection
with the redemption of the Adience Senior Notes.
Further reflects an additional $0.2 million of preferred stock dividends for
the period from May 1, 1994 through December 20, 1994, which assumes the
issuance of $4.1 million of Alpine's 8% Preferred Stock in connection with the
Adience Acquisition as if the Adience Acquisition had taken place on May 1,
1994.
(j) The pro forma loss per share of common stock is based upon 18,025,381
shares outstanding, which is the weighted average number of shares outstanding
during the year ended April 30, 1995, adjusted to give effect to the
transactions discussed in Note (i).
(k) On May 11, 1995, Alpine completed the Alcatel Acquisition, which was
financed with the net proceeds of the sale by Superior of the Alcatel
Acquisition Notes of $135.4 million. Of the net proceeds, $93.0 million was paid
in cash to Alcatel N.A., an estimated $0.5 million was applied to pay
transaction expenses and $22.6 million ($21.9 million recorded at April 30,
1995) was used to retire Superior's debt. The remaining proceeds of $19.3
million were available to Superior for working capital and general corporate
purposes. The following reflects the preliminary allocation of the purchase
price to the net assets of the Alcatel Business based upon the estimated fair
values of such assets:
<TABLE>
<CAPTION>
AMOUNT
-------------
(IN
THOUSANDS)
<S> <C>
Estimated acquisition cost............................................................... $ 103,755
Less, historical book value of net assets at May 11, 1995................................ (81,255)
Write-up of property, plant and equipment................................................ (4,945)
Accrual of Alcatel employee relocation and severance costs............................... 500
-------------
Acquisition goodwill (to be amortized over 30 years)..................................... $ 18,055
-------------
-------------
</TABLE>
The estimated acquisition cost of $103.8 million represents (i) $93.0
million paid in cash to Alcatel N.A., (ii) a deferred amount payable to Alcatel
N.A. in he amount of $10.3 million, which amount is subject to adjustment based
upon the completion of a closing balance sheet audit, and (iii) acquisition
expenses estimated at $0.5 million.
Relocation costs were determined by identifying those Alcatel employees who
were invited to remain with Superior subsequent to the Alcatel Acquisition and
would be required to relocate. A determination of the relocation costs for these
individuals was made. Severance costs were determined by identifying those
Alcatel individuals who Alpine did not retain once the Alcatel Acquisition was
completed.
(l) Represents Alpine's receipt of an estimated $134.3 million of net
proceeds, after expense aggregating $6.1 million, from the Offering of $153.0
million principal amount of the Notes at an initial issue price of $140.4
million.
(m) Represents Alpine's receipt of an estimated $58.5 million of net
proceeds from its initial borrowing under the New Credit Agreement (an initial
borrowing of $60.3 million reduced by an estimated $1.8 million of transaction
expenses). Alpine anticipates using cash flow generated after April 30, 1995 to
complete the Refinancing, including amounts necessary to pay the Alcatel
Acquisition deferred obligation in August 1995 (see Note (k)). Alpine estimates
that $50.0 million of borrowings under the New Credit Agreement will be required
to complete the Refinancing.
26
<PAGE>
(n) Reflects the payment (or, in the case of the DNE Acquisition Note and
the DNE Credit Facility, the assumed payment) of an aggregate of $213.1 million
to retire existing debt as part of the Refinancing, as follows.
<TABLE>
<CAPTION>
AT APRIL 30, 1995
-----------------------
CASH
RETIREMENT
BOOK VALUE COST
---------- -----------
(IN THOUSANDS)
<S> <C> <C>
Alcatel Acquisition Notes...................................................... $ 140,000 $ 140,000
Adience Senior Notes........................................................... 39,761 35,271
Adience Credit Facility........................................................ 12,345 12,345
DNE Acquisition Note........................................................... 2,469 2,175
DNE Credit Facility............................................................ 627 627
Alpine 13.5% Senior Notes...................................................... 20,790 21,000
Alpine 13.5% Debentures........................................................ 1,551 1,551
Other Alpine indebtedness...................................................... 150 150
---------- -----------
Total...................................................................... $ 217,693 $ 213,119
---------- -----------
---------- -----------
Short-term debt:
Short-term borrowings........................................................ $ 20,790
Revolving line of credit..................................................... 12,345
Current portion of long-term debt............................................ 728
----------
33,863
Long-term debt, less current portion........................................... 183,830
----------
Total...................................................................... $ 217,693
----------
----------
</TABLE>
Pursuant to the Debt Exchange Agreement, the holders of the Adience Senior
Notes retired $44.1 million principal amount of the Adience Senior Notes, having
a book value of $39.8 million at April 30, 1995, for $35.3 million in cash, $2.2
million in value of PolyVision common stock (see Note (p) below), and 44,916
shares of Alpine 8% Preferred Stock having a liquidation preference of $2.2
million.
(o) Reflects the payment of $1.6 million in cash to the holders of the
remaining 12.8% of Adience's common stock in connection with the acquisition of
such shares by Alpine.
(p) Reflects the effects of the PolyVision Transactions. Until the date of
the PolyVision Merger (May 24, 1995), 80.3% of the outstanding PolyVision common
stock was owned by Adience, and the remainder was publicly owned. Alpine owned
87.2% of the outstanding capital stock of Adience and, therefore Alpine's
effective ownership of PolyVision was 87.2% of 80%, or 70.0%. Also, until the
date of the PolyVision Merger, Alpine owned 98% of the outstanding capital stock
of APV and all of the outstanding capital stock of Posterloid. In Alpine's
historical financial statements, APV and Posterloid are reflected as
discontinued operations and PolyVision is reflected as an asset held for
disposal.
Following the PolyVision Merger, Alpine owned 98.0% of PolyVision's
outstanding preferred stock with a liquidation preference of $25.0 million and
94% of the outstanding PolyVision common stock. At April 30, 1995, the
PolyVision common stock had a negative book value of $12.6 million.
As a result of the PolyVision Merger, Alpine's ownership of the outstanding
PolyVision common stock increased from 70.0% to 94%. In accordance with FASB
Technical Bulletin 85-5, this increase in equity ownership was recorded as the
acquisition of a minority interest at its estimated fair value of $2.4 million.
Because the minority interest was acquired by an Alpine subsidiary issuing
stock, and because Alpine planned to distribute to its stockholders most of the
PolyVision common stock owned by it, $1.3 million, representing the excess of
the fair value of the minority interest acquired over the book value of the
interests given up in APV and Posterloid, was added directly to capital surplus.
27
<PAGE>
On June 14, 1995, Alpine distributed to its stockholders 73% of the
outstanding PolyVision common stock. This distribution, when combined with
shares of PolyVision common stock to be used as partial consideration in
connection with the Adience Acquisition and the retirement of the Adience Senior
Notes and prior to any further distribution as discussed below, will result in
the ownership by Alpine of approximately 19% of the outstanding shares of
PolyVision common stock. Accordingly, Alpine will account for its remaining
PolyVision common stock investment at its fair value as a security available for
sale following the PolyVision Spin-Off. Because the shares of PolyVision common
stock distributed had a negative book value, Alpine's stockholders' equity was
not reduced by the PolyVision Spin-Off.
As partial consideration for the Adience common stock it acquired on
December 21, 1994, Alpine agreed to give former Adience common stockholders
PolyVision common stock having an estimated value of $5.7 million. this $5.7
million obligation was reflected as a liability on the consolidated balance
sheet of Alpine as of April 30, 1995. Alpine is obligated to distribute
approximately 170,615 shares of PolyVision common stock to partially settle this
obligation. For purposes of these pro forma financial statements, the gain and
portion of the liability settled through the distribution of 170,615 shares of
PolyVision common stock has been estimated to be $2.0 million. To the extent
that the value of the 170,615 shares of PolyVision common stock delivered is
less than $5.7 million, Alpine is obligated to deliver to the former Adience
stockholders an amount equal to 170,615 shares of PolyVision common stock
multiplied by the difference between $33.60 and the greater of the average
closing price for PolyVision common stock on each of the 20 trading days
preceding August 1, 1995 and $11.25 per share. This amount will be payable at
the option of Alpine, in either Alpine 8% Preferred Stock or PolyVision common
stock, or a combination thereof. A gain credited to discontinued operations will
be recorded based on the actual trading price of the shares of PolyVision common
stock actually distributed.
As partial consideration for acquiring the Adience Senior Notes pursuant to
the Debt Exchange Agreement with certain of the holders, Alpine used
approximately $2.2 million of PolyVision common stock. Alpine is obligated to
distribute 66,792 shares of PolyVision common stock to partially settle this
obligation. To the extent that the value of the 66,792 shares of PolyVision
common stock delivered is less than $2.2 million, Alpine is obligated to deliver
either additional shares of Alpine 8% Preferred Stock or PolyVision common stock
or a combination thereof (calculated in the same manner as outlined above for
the Adience common stockholders). A gain in the same amount will be credited to
discontinued operations.
Pursuant to both the Adience Acquisition and Debt Exchange Agreement and
based upon the closing price of PolyVision common stock on July 14, 1995 of
$3.44 per share, Alpine would be required to deliver either $5.3 million in
Alpine 8% Preferred Stock or 1,542,455 shares of PolyVision common stock
(representing substantially all of Alpine's PolyVision shares), or a combination
thereof. These pro forma financial statements assume that Alpine's obligations
have been satisfied using PolyVision common stock; however, Alpine has not yet
determined how this obligation will be settled.
The PolyVision Spin-Off and the foregoing transactions will be taxable
events for Alpine. In these pro forma financial statements, no provision for
federal income taxes on taxable gains has been made because, if the transactions
had taken place during Alpine's fiscal year ended April 30, 1995, Alpine would
have had sufficient tax loss carryforwards to offset the taxable income. The
actual provision for income taxes provided on these gains will depend on
Alpine's tax position in 1996. There can be no assurance that the tax loss
carryforwards will be sufficient to offset 1996 income, including gains from the
aforementioned transactions.
In connection with the Refinancing, Alpine loaned $3.3 million to PolyVision
to enable PolyVision to repay all amounts due under its revolving credit
facility and under its outstanding equipment loan.
(q) In connection with the repayment of the Alcatel Acquisition Notes,
Superior's bank credit agreement and the Adience Credit Facility and the
redemption of Alpine's 13.5% Senior Notes and 13.5% Debentures, Alpine will
write off the unamortized deferred debt issuance costs associated with these
credit facilities and, as a result, will incur an extraordinary charge in the
first quarter of fiscal 1996. The extraordinary charge is estimated at $5.3
million and consists of $4.6 million of fees and expenses associated with the
Alcatal Acquisition Notes, $0.4 million fees and expenses associated with the
other credit facilities and $0.3 million associated with original issue discount
on the Alpine 13.5% Senior Notes.
28
<PAGE>
COMBINED SUPPLEMENTAL UNAUDITED PRO FORMA OPERATING DATA
<TABLE>
<CAPTION>
FISCAL YEARS ENDED APRIL 30,
----------------------------------------------------
1993 1994 1995
--------------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Net sales
Telecommunications wire and
cable...................... $ 351,523 $ 311,904 $ 340,756
Refractories................ 92,550 98,824 100,909
Data communications and
electronics................ 27,897 21,653 27,907
--------------- --------- ---------
Combined net sales........ $ 471,970 $ 432,381 $ 469,572
--------------- --------- ---------
--------------- --------- ---------
Gross profit
Telecommunications wire and
cable...................... $ 25,926(a) $ 34,091 $ 28,433
Refractories................ 14,147 15,443 18,390
Data communications and
electronics................ 11,997 8,252 8,221
--------------- --------- ---------
Combined gross profit..... $ 52,070 $ 57,786 $ 55,044
--------------- --------- ---------
--------------- --------- ---------
Gross margin
Telecommunications wire and
cable...................... 7.4%(a) 10.9% 8.3%
Refractories................ 15.3 15.6 18.2
Data communications and
electronics................ 42.9 38.1 29.5
Combined gross margin....... 11.0 13.4 11.7
Selling, general and
administrative
Telecommunications wire and
cable...................... $ 5,813 $ 5,249 $ 6,170
Refractories................ --(b) 16,578 15,977
Data communications and
electronics................ 7,558 6,574 6,511
Corporate................... 2,836 3,644 3,225
--------------- --------- ---------
Combined selling, general
and administrative....... $ --(b) $ 32,045 $ 31,883
--------------- --------- ---------
--------------- --------- ---------
Operating income
Telecommunications wire and
cable...................... $ 18,499(a) $ 27,228 $ 20,649
Refractories................ --(b) (2,562) 986
Data communications and
electronics................ 4,069 (75) 1,710
Corporate................... (2,964) (3,750) (3,225)
--------------- --------- ---------
Combined operating
income................... $ --(b) $ 20,841 $ 20,120
--------------- --------- ---------
--------------- --------- ---------
<FN>
- ------------------------
(a) Includes a $12.0 million restructuring charge incurred during fiscal 1993
for the shutdown of the Alcatel Business' manufacturing facility in
Fordyce, Arkansas and the relocation and consolidation of that operation
into its other U.S. manufacturing facilities.
(b) Adience items for 1993 reflect Adience's results for the 12-month period
ended June 30, 1993. Because Adience emerged from a prepackaged bankruptcy
in June 1993, comparable information prior to such date is not available
for selling, general and administrative expenses, operating income and
EBITDA.
</TABLE>
29
<PAGE>
SUPPLEMENTAL UNAUDITED PRO FORMA OPERATING DATA -- TELECOMMUNICATIONS WIRE AND
CABLE
The contracts under which Alpine's telecommunication wire and cable products
are sold provide for the pass-through of copper costs on specified terms.
Generally, the copper price component passed through in each contract for a
particular quarter is, based on the average COMEX copper price over the
three-month period ending at or before the beginning of that quarter. Each
month, Alpine estimates its product deliveries several months into the future
and enters into price commitments with its suppliers for a portion of its
estimated copper rod requirements for delivery on a forward basis. Alpine uses
these forward purchase commitments to minimize the differences between its raw
material copper costs charged to cost of sales and the pass-through pricing
charged to its customers.
The following table sets forth, for the periods indicated, certain combined
supplemental pro forma operating data for Alpine's telecommunications wire and
cable business.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED APRIL 30,
----------------------------------
1993(a) 1994(a) 1995(a)
---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Net sales
Superior................................................................... $ 122,671 $ 107,011 $ 136,578
Alcatel Business........................................................... 228,852 204,893 204,178
---------- ---------- ----------
Total.................................................................... $ 351,523 $ 311,904 $ 340,756
---------- ---------- ----------
---------- ---------- ----------
Gross profit
Superior................................................................... $ 14,220 $ 9,850 $ 14,150
Alcatel Business........................................................... 21,376 21,333 11,179
Restructuring charge -- Alcatel Business................................... (12,000) -- --
Pro forma adjustments (b).................................................. 2,330 2,908 3,104
---------- ---------- ----------
Total.................................................................... $ 25,926 $ 34,091 $ 28,433
---------- ---------- ----------
---------- ---------- ----------
Gross margin................................................................. 7.4% 10.9% 8.3%
Selling, general and administrative
Superior................................................................... $ 4,928 $ 4,214 $ 5,010
Alcatel Business........................................................... 12,597 13,692 10,254
Pro forma adjustments...................................................... (11,712) (12,657) (9,094)
---------- ---------- ----------
Total.................................................................... $ 5,813 $ 5,249 $ 6,170
---------- ---------- ----------
---------- ---------- ----------
Amortization of intangibles
Superior................................................................... $ 1,012 $ 1,012 $ 1,012
Alcatel Business........................................................... -- -- --
Pro forma adjustments (b).................................................. 602 602 602
---------- ---------- ----------
Total.................................................................... $ 1,614 $ 1,614 $ 1,614
---------- ---------- ----------
---------- ---------- ----------
Operating income
Superior................................................................... $ 8,280 $ 4,624 $ 8,128
Alcatel Business........................................................... 8,779 7,641 925
Restructuring charge -- Alcatel Business................................... (12,000) -- --
Pro forma adjustments (b).................................................. 13,440 14,963 11,596
---------- ---------- ----------
Total.................................................................... $ 18,499 $ 27,228 $ 20,649
---------- ---------- ----------
---------- ---------- ----------
<FN>
- ------------------------
(a) Represents results of Superior for the periods indicated and results of the
Alcatel Business for the 12 months ended December 31, 1992, and March 31,
1994 and 1995. Alpine prepared the Supplemental Pro Forma Operating Data
for the Alcatel Business on the basis of a fiscal year ended December 31,
1992, because the financial statements of the Alcatel Business historically
had been consolidated with those of Alcatel NA's other businesses and
financial data relating to the Alcatel Business were not available for the
12 months ended March 31, 1993.
(b) Reflects unaudited pro forma adjustments resulting from the Alcatel
Acquisition. These adjustments are described below and, for fiscal 1995, in
the Pro Forma Condensed Combined Financial Statements and the notes
thereto.
</TABLE>
30
<PAGE>
FISCAL 1995 COMPARED TO FISCAL 1994.
Superior's net sales during fiscal 1995 were $136.6 million, representing an
increase of $29.6 million, or 27.6%, as compared to net sales of $107.0 million
for fiscal 1994. Approximately $9.0 million of the increase was attributable to
the pass-through, in the form of increased selling prices, of higher copper
costs during fiscal 1995. The remaining $20.6 million increase in net sales was
due to increased volume in all of Superior's product lines. Net sales of
telephone wire and premise wire products increased to $64.1 million during
fiscal 1995 from $44.8 million (an increase of 41% after taking into account the
pass-through of higher copper costs). The majority of the increase in telephone
wire product sales was the result of additional long-term supply agreements
entered into during both fiscal years and included sales of recently introduced,
performance enhanced telephone wire products. The increase in premise wire
product sales was primarily due to increased sales of UTP products, first
introduced in September 1994.
In addition, sales of Superior's telephone cable products increased to $72.5
million from $62.2 million during fiscal 1994 (an increase of 7% after taking
into account the pass-through of higher copper costs). This increase was
primarily attributable to the impact of an award of a long-term supply agreement
from one of the RBOCs during fiscal 1994 and overall higher levels of demand for
telephone cable products during the latter half of fiscal 1995.
Net sales of the Alcatel Business during fiscal 1995 were $204.2 million,
essentially unchanged from $204.9 million during fiscal 1994. However, during
fiscal 1995, net sales included $18.0 million in additional billings for the
pass-through of higher copper costs and, therefore, adjusted for the impact of
higher copper prices, reflected a decline of 9.4%. This decline in net sales
resulted from a decrease in both sales volume and selling prices. The decrease
in sales volume, estimated at $10.0 million, was principally the result of the
loss of two major RBOC telephone cable supply agreements during the latter half
of fiscal 1994, as well as lower export sales. The Alcatel Business' allocation
under the two supply agreements was reallocated (pursuant to competitive bids)
to other industry participants as part of the RBOC's desire to further
concentrate their supplier relationships. Superior was an existing supplier to
one of these customers and was awarded a portion of the contract volume that the
Alcatel Business lost. The decline in the Alcatel Business' sales volume was
partially offset by spot market sales, sales under two supply agreements entered
into late in fiscal 1994 and in the third quarter of fiscal 1995, and sales to
two competitors for resale under their own name. Recent industry-wide capacity
reductions have resulted in an improvement in market pricing since the latter
half of fiscal 1995. Since the Alcatel Acquisition, Alpine has renegotiated
higher prices on certain of the Alcatel Business' supply agreements.
These new supply agreements entered into by Alcatel quoted lower sales
prices for telephone cable products, which contributed to $8.0 million of the
decrease in net sales during fiscal 1995 attributable to lower pricing (after
giving effect to the pass-through of copper costs). The generally weak spot
market conditions, which existed through the first half of fiscal 1995, also
contributed to this decrease in net sales. Telephone cable spot market pricing
improved significantly in the latter half of fiscal 1995 as a result of
increased industry-wide demand, together with capacity reductions by certain
industry participants.
Superior's gross profit was $14.2 million during fiscal 1995, an increase of
$4.3 million, or 43.7%, over gross profit of $9.9 million during fiscal 1994.
The gross margin increased to 10.4% during fiscal 1995 from 9.2% during fiscal
1994 and, if adjusted to exclude the impact of the pass-through of higher copper
costs, would have been 11.0% during fiscal 1995. The improvement in gross margin
during fiscal 1995 was the result of: (i) the increase in, and the higher
proportion of, telephone and premise wire sales which typically generate higher
percentage margins than telephone cable sales; (ii) the increase in overall
demand for telephone cable products in the latter half of fiscal 1995 and the
reduction in industry-wide capacity resulting in an improvement in pricing on
products not subject to long-term supply agreements (approximately 20%); and
(iii) higher production volumes during such period which resulted in a
reduction, on a percentage basis, of the fixed cost component of cost of goods
sold.
The gross profit of the Alcatel Business declined from $21.3 million during
fiscal 1994 to $11.2 million during fiscal 1995. The gross margin declined from
10.4% to 5.5% for this period and, if adjusted to exclude the impact of the
pass-through of higher copper costs, would have been 7.5% during fiscal 1995.
The
31
<PAGE>
reduction in gross profit and gross margin during fiscal 1995 was the result of
the replacement of the RBOC telephone cable business lost (a portion of which
was awarded to Superior) in the latter half of 1994 with spot market sales and
business under new supply agreements during a period of extremely competitive
market pricing. If recent higher market prices continue, this will result in
near-term improvement in profit margins on the portion of product sales of the
Alcatel Business not subject to long-term supply agreements, and a gradual
improvement in profit margins on product sales subject to long-term supply
agreements as they expire.
Pro forma adjustments reducing cost of goods sold were $2.9 million during
fiscal 1994 and $3.1 million during fiscal 1995. These adjustments reflect: (i)
savings resulting from a reduction in headcount at the Alcatel Business' plants
and (ii) adjustments to the historical depreciation expense of the Alcatel
Business. See Notes (d) and (e) to the Unaudited Pro forma Condensed Combined
Financial Statements in Item 6 Selected Financial Data.
Selling, general and administrative expenses during fiscal 1995 on a
combined basis amounted to $6.2 million, compared to $5.2 million during fiscal
1994. Such pro forma selling, general and administrative expenses include
historical expenses for Superior's operations of $5.0 million during fiscal 1995
and $4.2 million during fiscal 1994. The historical selling, general and
administrative expenses for the Alcatel Business decreased to $10.3 million
during fiscal 1995 from $13.7 million during fiscal 1994 due to lower
allocations of management fees and administrative charges which represent
indirect expense allocations from the parent and other affiliates of the
previous owner of the Alcatel Business, which will not be incurred after the
Alcatel Acquisition. Pro forma adjustments to selling, general and
administrative expenses are included to reflect: (i) the elimination of
historical selling, general and administrative expenses of the Alcatel Business
and (ii) the inclusion of incremental selling, general and administrative
expenses estimated to be required by Superior to absorb the operations of the
Alcatel Business. See Note (c) to the Unaudited Pro Forma Condensed Combined
Statements of Operations.
Operating income during fiscal 1995 on a combined basis was $21.9 million,
or $7.0 million less than operating income of $28.9 million during fiscal 1994.
This decrease was the result of the factors discussed above.
FISCAL 1994 COMPARED TO FISCAL 1993.
During fiscal 1994, Superior's net sales declined by $15.7 million, or
12.8%, from $122.7 million during fiscal 1993. Approximately $5.0 million of the
decline was attributable to the pass-through, in the form of reduced selling
prices, of lower copper costs during fiscal 1994. Despite the overall sales
decline, sales of telephone wire products increased by $10.0 million, or 29%,
during fiscal 1994 to $44.8 million. This increase was caused by the award of a
long-term supply agreement from an RBOC during the early part of fiscal 1994 and
reflected the impact of Superior's strategy to concentrate production, sales,
marketing, and engineering resources towards telephone wire products, a market
that is somewhat less competitive and generates higher product margins than
telephone cable products. During fiscal 1994, sales of telephone cable products
declined by $25.6 million to $62.2 million. The loss of one significant
long-term supply agreement with a major independent telephone company, and
overall sluggish demand during fiscal 1994 for telephone cable sales, led to
this decline.
Net sales for the Alcatel Business during fiscal 1994 declined $24.0
million, or 10.5%, from sales of $228.9 million during fiscal 1993.
Approximately $11.0 million of this decline was attributable to the pass-
through, in the form of reduced selling prices, of lower copper costs during
fiscal 1994. The remainder of the decline in net sales was the result of the
loss of a major long-term supply agreement with an RBOC in the third quarter of
this period, offset in part by the impact of Hurricane Andrew, which resulted in
a significant short-term increase in net sales during the 12-month period ended
December 31, 1992.
During fiscal 1994, Superior's gross profit declined by $4.4 million to $9.9
million. The gross margin declined from 11.6% during fiscal 1993 to 9.2% during
fiscal 1994 (8.8% if adjusted for the impact of pass-through of lower copper
costs). The reduction in the gross margin during fiscal 1994 was the result of
the
32
<PAGE>
extremely competitive market for telephone cable products in the latter part of
fiscal 1993 and the early part of fiscal 1994, as well as lower production
volumes which resulted in higher fixed costs on a per unit of production basis.
Gross profit for the Alcatel Business was $21.3 million during 1994, a
decrease from $21.4 million (before restructuring charges) during the fiscal
12-month period ended December 31, 1992. During the fiscal 12-month period ended
December 31, 1992, a $12.0 million restructuring charge was incurred for the
shutdown of the Alcatel Business' Fordyce, Arkansas manufacturing facility and
the relocation and consolidation of these operations into its other U.S.
manufacturing facilities. Gross margin during fiscal 1994 was 10.4% (11.2%
adjusted for the pass-through of lower copper costs during such period), as
compared to 9.3% (before consideration of the $12.0 million restructuring
charge) for the fiscal 12-month period ended December 31, 1992. The increase in
gross margin during fiscal 1994 was primarily the result of improved
manufacturing and cost efficiencies upon completion of the aforementioned plant
consolidation. Pro forma adjustments reducing cost of goods sold were $2.3
million during fiscal 1993 and $2.9 million during fiscal 1994.
Selling, general and administrative expenses on a combined basis declined
$0.6 million, or 9.7%, to $5.2 million during fiscal 1994. This decline was the
result of staffing and other cost reductions at Superior in conjunction with
reduced level of sales and profit margins during fiscal 1994. As discussed in
the analysis of selling, general and administrative expenses for fiscal 1995,
expenses incurred by the Alcatel Business relate to allocations from affiliated
companies and personnel and other costs, which have been substantially
eliminated as a result of the Alcatel Acquisition.
Operating income during fiscal 1994 increased to $28.9 million from $20.2
million during the 12-month period ended December 30, 1992. Excluding the $12.0
million restructuring charge incurred during the fiscal 12-month period ended
December 31, 1992, operating income during fiscal 1994 would have declined $3.3
million as a result of the factors discussed above.
SUPPLEMENTAL UNAUDITED PRO FORMA OPERATING DATA -- REFRACTORIES
On February 22, 1993, prior to its acquisition by Alpine, Adience filed a
prepackaged plan of reorganization under Chapter 11 of the Bankruptcy Code,
which was consummated on June 30, 1993. Upon emerging from the Reorganization,
Adience adopted fresh start reporting in accordance with AICPA Statement of
Position 90-7.
The Supplemental Pro Forma Operating Data presented below represent time
periods both before and after the Reorganization and should therefore be
considered in the light of the effects of the Reorganization. As a result of the
Reorganization, comparative information prior to such date is not available for
selling, general and administrative expenses, amortization of intangibles and
operating income (loss).
<TABLE>
<CAPTION>
12 MONTH ENDED FISCAL YEAR ENDED
JUNE 30, APRIL 30,
------------------------ -------------------------
1993 1994 1994 1995
----------- ----------- ----------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Net sales............................................... $ 92,550 $ 99,985 $ 98,824 $ 100,909
Gross profit............................................ 14,147 14,980 15,443 18,390
Gross margin............................................ 15.3% 15.0% 15.6% 18.2%
Selling, general and administrative..................... 16,578 15,977
Amortization of intangibles............................. 1,427 1,427
Operating income (loss)................................. (2,562) 986
</TABLE>
FISCAL 1995 COMPARED TO FISCAL 1994.
Adience's net sales of refractory products and services during fiscal 1995
were $100.9 million, representing an increase of $2.1 million, or 2.1%, as
compared to net sales of $98.8 million during fiscal 1994. The increase was due
to increased sales of Alpine's specialty products and services, particularly
monolithic (unformed) refractories utilizing shotcrete technology, bottom pour
refractories and slidegates, as well as an
33
<PAGE>
increase in rebuilding services for coke ovens, partially offset by a decrease
in sales of maintenance services to the integrated iron and steel industry.
Sales of refractory bricks to the iron and steel industry declined due to the
discontinuation of numerous unprofitable product lines. Sales of block to the
flat plate glass industry remained essentially unchanged.
Adience's gross profit for fiscal 1995 was $18.4 million, representing an
increase of $2.9 million, or 19.1%, from gross profit of $15.4 million during
fiscal 1994. The gross margin increased to 18.2% during fiscal 1995, as compared
to 15.6% during fiscal 1994. The improvement in gross margin during fiscal 1995
was the result of the new management's efforts to (1) discontinue unprofitable
product lines, (2) increase product prices, (3) increase productivity through
headcount reductions, (4) consolidate operations and (5) continue to focus on
higher margin products such as monolithic and bottom pour refractories and
slidegates.
Selling, general and administrative expenses during fiscal 1995 were $16.0
million, as compared to $16.6 million during fiscal 1994, a decrease of 3.6% on
a pro forma basis. This decrease resulted from reductions in corporate overhead,
insurance expenses and public company expenses, partially offset by increased
personnel expenses in the sales, research and development and other areas.
12 MONTHS ENDED JUNE 30, 1994 COMPARED TO 12 MONTHS ENDED JUNE 30, 1993
Adience's net sales of refractory products and services during the 12 months
ended June 30, 1994 were $100.0 million, representing an increase of $7.4
million, or 8%, as compared to net sales of $92.6 million for the 12 months
ended June 30, 1993. Iron and steel producers generally operated at 90% of
capacity during the 12 months ended June 30, 1994, thus creating favorable
economic conditions for Adience. Sales and installation of monolithic
refractories and repair services increased $8.8 million during this period while
demand in the flat plate glass industry was depressed and resulted in a sales
decline of $1.5 million. Sales of brick products remained flat during this
period.
In addition, the 12 months ended June 30, 1993 included the Reorganization.
During the Reorganization, Adience operated under strict payment terms with many
of its suppliers, experienced higher costs and, because of a highly competitive
marketplace, was unable to pass on these higher costs to its customers or to
offer extended payment terms. As a result, sales opportunities were lost and
sales declined while customers were concerned with Adience's financial
stability.
Adience's gross profit for the 12-month period ended June 30, 1994 was $15.0
million, representing an increase of $0.8 million, or 5.9%, as compared to gross
profit of $14.1 million for the 12 month period ended June 30, 1993. The gross
margin percentage remained essentially unchanged during both periods.
SUPPLEMENTAL OPERATING DATA -- DATA COMMUNICATIONS AND ELECTRONICS
The following table sets forth for the periods indicated certain financial
data for Alpine's data communications and electronics business.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED APRIL 30,
-------------------------------------
1993 1994 1995
----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Net sales................................................................. $ 27,897 $ 21,653 $ 27,907
Gross profit.............................................................. 11,979 8,252 8,221
Gross margin.............................................................. 42.9% 38.1% 29.5%
Selling, general and administrative....................................... 7,558 6,574 6,511
Amortization of intangibles............................................... 267 1,753 --
Operating income (loss)................................................... 4,069 (75) 1,710
</TABLE>
FISCAL 1995 COMPARED TO FISCAL 1994
During fiscal 1995, net sales increased by $6.3 million, or 28.9%, to $27.9
million. The primary contributor to this increase was the growth in the contract
manufacturing business, net sales of which increased to $10.5 million during
fiscal 1995, from $1.9 million during fiscal 1994. The largest component of
34
<PAGE>
this increase was $7.0 million related to a new contract with the National
Aeronautics and Space Administration for Hardware Interface Modules, which
generated no sales during fiscal 1994. Net sales of products to the U.S.
military decreased from $18.6 million during fiscal 1994 to $15.9 million during
fiscal 1995, a 15.1% decrease. Sales of multiplexers increased $0.8 million
during fiscal 1995 to $7.9 million. Net sales of printers declined by $1.5
million during fiscal 1995 to $1.3 million. Alpine has decided to de-emphasize
this product line because it is reaching the end of its product life. Sales of
multiplexer upgrades and other products declined by $0.7 million during fiscal
1995.
During fiscal 1995, gross profit remained relatively unchanged at $8.2
million. Gross margin declined from 38.1% during fiscal 1994 to 29.5% during
fiscal 1995. A change in product mix from primarily higher margin military
products to a mix of both military products and lower margin contract
manufacturing services resulted in this decline.
Selling, general and administrative expenses declined from $6.6 million
during fiscal 1994 to $6.5 million during fiscal 1995, representing a decrease
of 1.0%. This decrease was the result of reductions in personnel and other
expenses.
Amortization of intangibles of $1.8 million during fiscal 1994 resulted
primarily from a non-recurring charge of $1.5 million related to the write-off
of intangible assets associated with Alpine's multi-image business, which was
not forecast to generate sufficient income to recover the carrying value of such
intangible asset. There was no amortization during fiscal 1995.
Operating income increased to $1.7 million during fiscal 1995 from an
operating loss of $0.1 million during fiscal 1994, as a result of the factors
discussed above.
FISCAL 1994 COMPARED TO FISCAL 1993
DNE's net sales during fiscal 1994 declined by $6.2 million, or 22.4%, from
$27.9 million during fiscal 1993 to $21.7 million during fiscal 1994.
The decline in fiscal 1994 net sales included a reduction of approximately
$6.0 million in the datacommunications business due primarily to the completion
of a large government requirements contract that accounted for $6.0 million in
sales during fiscal 1993. Also contributing to this decrease was the completion
during fiscal 1993 of a major development program for the U.S. Navy, which
contributed $0.8 million in sales.
DNE's printer and audio visual businesses also experienced a decline in net
sales of $2.3 million during fiscal 1994 to $3.8 million. Alpine decided to
de-emphasize these products because they were reaching the end of their
respective product lives.
Somewhat offsetting the reduction in sales during fiscal 1994 was an
increase in contract manufacturing business and sales of military avionic
products which had aggregate net sales of $8.4 million, an increase of $2.3
million.
Gross profit declined from $12.0 million during fiscal 1993 to $8.3 million
during fiscal 1994. The reduction in sales during fiscal 1994 was the primary
reason for the decline in gross profit. However, also contributing to the
reduction in gross profit was a decline in gross margin from 42.9% in fiscal
1993 to 38.1% in fiscal 1994. This reduction was primarily due to the addition
of lower margin contract manufacturing business during fiscal 1994 and lower
margins on its printer product line.
Selling, general and administrative expenses during fiscal 1994 were $6.6
million, as compared to $7.6 million for fiscal 1993, representing a decrease of
13.0%. The decline was primarily attributable to reductions in research and
development and amortization of non-cash compensation expense.
Amortization of intangibles was $0.3 million during fiscal 1993, as compared
to $1.8 million during fiscal 1994. This increase resulted from the
aforementioned non-recurring charge of $1.5 million during fiscal 1994.
Operating income decreased by $4.1 million during fiscal 1994 as a result of
the factors discussed above.
35
<PAGE>
SUPPLEMENTAL OPERATING DATA -- CORPORATE
<TABLE>
<CAPTION>
FISCAL YEAR ENDED APRIL 30,
-------------------------------
1993 1994 1995
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Selling, general and administrative...................................... $ 2,836 $ 3,644 $ 3,225
</TABLE>
Selling, general and administrative expenses decreased from $3.6 million in
fiscal 1994 to $3.2 million in fiscal 1995, a decrease of 11.5%, primarily as a
result of a reduction in consulting expenses and expenses associated with stock
option grants and restricted stock awards. Selling, general and administrative
expenses increased $0.8 million, or 28.5%, in fiscal 1994, primarily because of
the consulting, stock option and restricted stock expenses referred to above.
SUPPLEMENTAL COMMENTS ON ACTUAL RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, supplemental data
reflecting Alpine's actual results of operations.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED APRIL 30,
--------------------------------
1993 1994 1995
--------- --------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Net sales............................................................. $ 27,897 $ 68,510 $ 198,135
Gross profit.......................................................... 11,982 12,260 29,010
Gross margin.......................................................... 43.0% 17.9% 14.6%
Operating income (loss)............................................... 1,105 (2,200) 6,996
Interest expense...................................................... 2,301 2,363 8,197
(Loss) from continuing operations..................................... (2,456) (4,895) (1,176)
</TABLE>
The growth in net sales and gross profit in fiscal 1994 and 1995 reflected
the acquisition of Superior in November 1993 and the Adience Acquisition in
December 1994. The Superior Acquisition added $46.9 million and $4.0 million to
net sales and gross profit, respectively, during fiscal 1994 and $136.6 million
and $14.2 million to net sales and gross profit, respectively, during fiscal
1995, while the Adience Acquisition added $33.6 million and $6.6 million to net
sales and gross profit, respectively, during fiscal 1995.
Gross margin declined in fiscal 1994 and 1995, primarily as the result of
the inclusion of the operations of Superior and Adience, both of which operate
in relatively low gross margin industries, compared to the margins achieved by
DNE. In addition, DNE's margins declined from 42.9% during fiscal 1993 to 38.1%
during fiscal 1994 and to 29.5% during fiscal 1995. The decline in DNE's margins
resulted primarily from the increase in lower margin contract manufacturing
business, which has grown as a percentage of DNE's net sales from zero during
fiscal 1993 to 37.4% during fiscal 1995.
Interest expense increased slightly in fiscal 1994 and substantially in
fiscal 1995. In fiscal 1994, the acquisition of Superior added $1.2 million in
interest expense. This increase was mostly offset by a $1.2 million decrease in
corporate interest expense due to a reduction in long-term debt, primarily
through negotiated exchanges of debt for Alpine Common Stock. The acquisition of
Adience during fiscal 1995 and the inclusion of a full year of Superior
operations resulted in an increase in interest expense of $4.5 million, along
with a $1.2 million increase in corporate interest expense, accounted for
substantially all of this increase.
The loss from continuing operations for fiscal 1995 reflected losses
incurred at Adience of $2.2 million and the write-off of $0.2 million in
expenses incurred in connection with postponed placement of long-term debt.
DISCONTINUED OPERATIONS
As described in Note 5 to the Consolidated Financial Statements, Alpine
completed the merger of its subsidiaries, Alpine Polyvision, Inc. ("APV") and
Posterloid Corporation ("Posterloid") into PolyVision
36
<PAGE>
Corporation ("PolyVision") (formerly Information Display Technology, Inc.) and
on June 14, 1995 distributed 73% of the outstanding PolyVision common stock to
Alpine's stockholders. This distribution, when combined with shares of
PolyVision common stock to be used as partial consideration in connection with
the Adience Acquisition and the retirement of Adience 11% Senior Secured Notes
will reduce Alpine's investment in PolyVision common stock to less than 20%. As
a result of the distribution, the operations of APV and Posterloid have been
reported as discontinued operations in the historical Consolidated Financial
Statements.
For the year ended April 30, 1994 and 1995, losses from discontinued
operations were $25.2 million and $4.9 million, respectively, including a $3.0
million provision recorded in the quarter ended October 31, 1994 to reflect
estimated operating losses to be incurred through the date of the distribution
date of PolyVision common stock to Alpine's stockholders, and a non-cash charge
of $21.7 million recorded during the quarter ended January 31, 1994 related to
purchased R&D research and development charges of APV.
LIQUIDITY AND CAPITAL RESOURCES
The Superior Acquisition in November 1993, the Adience Acquisition in
December 1994 and the Alcatel Acquisition in May 1995, together with related
financing and equity transactions, the PolyVision Transactions and the other
transactions referred to in Alpine's Consolidated Financial Statements, have had
a major impact on Alpine's financial condition. Stockholders' equity has
increased from $10.6 million at April 30, 1993 to $44.7 million at April 30,
1995 and debt has increased from $13.6 million at April 30, 1993 to $247.5
million on a pro forma basis at April 30, 1995 (See Footnote 9 to the
Consolidated Financial Statements). The increase in equity resulted primarily
from the issuance of 4,500,000 shares of Alpine Common Stock in connection with
the Superior Acquisition, the receipt by Alpine of $5.0 million from a private
placement of preferred stock in November 1993 and the issuance of Alpine
preferred stock in connection with the Adience Acquisition. Stockholders' equity
includes $17.2 million of preferred stock, of which $4.0 million is subject to
conversion into Common Stock pursuant to two exchange agreements.
During fiscal 1995, Alpine used $1.0 million in cash flow from operations,
including $3.2, million provided by continuing operations, offset by $4.1
million used for discontinued operations. Cash used for investing activities of
$1.2 million included capital expenditures of $2.6 million, and net cash
provided of $0.8 million as a result of the Adience Acquisition. Cash provided
by financing activities of $15.2 million during the period included $20.7
million in additional borrowings (including short term borrowings and borrowings
under revolving credit facilities), partially offset by $3.5 million in term
loan repayments and $1.7 million for preferred stock dividends and open market
repurchases of Alpine Common Stock.
During the fiscal year ended April 30, 1994, the principal uses of cash
included approximately $22.4 million used for investing activities and
approximately $3.4 million used for operating activities, including $3.0 million
used for discontinued operations. The major component of cash used for investing
activities included approximately $19.2 million related to the acquisition of
Superior and $1.9 million used for capital expenditures. Cash used for
discontinued operations (operations of PolyVision, a former subsidiary of
Alpine; see footnote 5 to the consolidated financial statements) represented
primarily cash used in PolyVision's development efforts. Sources of cash
included $26.0 million from financing activities with major components being
$4.7 million in net cash proceeds from the issuance of preferred stock with the
balance relating primarily to debt financing in connection with the Superior
acquisition.
Alpine's principal subsidiaries maintained separate bank lines and other
credit facilities to finance their operations which, as more fully described
below, were terminated in conjunction with the Alcatel Acquisition and the
Refinancing.
At April 30, 1995 Superior had a bank and revolving credit facility
amounting to $33.4 million of which $21.9 million was outstanding. On May 11,
1995 Superior's bank credit facility and revolving credit facility were repaid
with the proceeds of the sale of $140.0 million principal amount of Alcatel
Acquisition Notes due in 1997. The net proceeds, after payment of the
aforementioned facilities, amounted to $112.8 million, of which $93.0 million
was used to finance the Alcatel Acquisition costs and the remainder, $19.8
million,
37
<PAGE>
was included in Superior's working capital. 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 $3.0 million credit facility of which $0.6 million was outstanding
at April 30, 1995, with an additional $2.4 million of undrawn collateral-based
availability. DNE is also indebted under a $5.3 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.
On July 26, 1995, Alpine completed its acquisition of all of the outstanding
common stock of Adience (see footnote 6 to the Consolidated Financial
Statements). Adience's principal debt structure includes a $14.0 million
revolving credit facility (maturing in September 1995), of which approximately
$12.3 million was outstanding at April 30, 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 Alpine and the holders of 90% (face value) of the Senior Notes
has been entered into whereby $44.1 million face value of the Senior Notes will
be exchanged for $35.3 million in cash, $2.3 million in value of PolyVision
Common Stock and 44,916 shares of 8% Cumulative Convertible Preferred Stock of
Alpine with a liquidation preference of $50 per share. If the exchange does not
occur prior to July 1, 1995, the agreement may be terminated by either Alpine 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.
Alpine's working capital generally increases during June, July and August,
largely because of higher summertime shipments to the RBOCs and its other
telephone company customers, and is generally at its lowest levels in December,
January and February. For fiscal 1996, Alpine estimates that the difference
between the highest and lowest levels of working capital will be in the range of
$10.0 million to $15.0 million. Alpine has initiated a working capital
management program designed to reduce Alcatel's historical working capital
levels (on a days outstanding basis) to levels comparable to that of Superior.
Alpine's pro forma capital expenditures totaled $8.4 million in fiscal 1995.
Alpine has budgeted approximately $7.5 million for capital expenditures in
fiscal 1996, including (i) approximately $6.0 million for its wire and cable
operations; (ii) approximately $2.6 million for its refractories business and
(iii) approximately $0.9 million for data communications and electronics.
In connection with the PolyVision Merger, Alpine entered into an agreement
with PolyVision on May 24, 1995, pursuant to which Alpine agreed to lend to
PolyVision from time to time prior to May 24, 1997 up to $5.0 million to be used
by PolyVision to fund its working capital needs. Borrowings under the agreement
will be unsecured and will bear interest at a market rate reflecting Alpine's
cost of funds. The principal balance outstanding will be due on May 24, 2005,
subject to mandatory prepayment of principal and interest, in whole or in part,
from the net cash proceeds of any public or private equity or debt financing by
PolyVision at any time before maturity. Alpine's obligation to lend such funds
to PolyVision is subject to a number of conditions, including review by Alpine
of the proposed use of such funds by PolyVision. Until May 24, 1996, Alpine has
additionally agreed to loan to PolyVision for working capital deficiencies an
amount not to exceed $2.5 million.
The terms of Alpine's 8% convertible senior preferred stock, 9% convertible
senior preferred stock and 9% convertible preferred stock provide for the annual
payment by Alpine of an aggregate of $1.3 million in dividends. The Agreement
contain restrictions on the ability of Alpine to pay dividends on its capital
stock.
On July 21, 1995, Alpine successfully completed an offering of $153.0
million face amount of 12.25% Senior Secured Notes and concurrently entered into
a $85.0 million loan and security agreement. The proceeds of the Notes and a
$40.0 million initial draw under the loan and security agreement were used to
38
<PAGE>
refinance substantially all of Alpine's existing long term debt. After giving
effect to such refinancing, Alpine's total debt due within one year is $11.3
million, of which $1.0 million represents the current portion of long-term debt
and $10.3 million represents a deferred payment obligation due Alcatel NA. In
connection with the Alcatel Acquisition this deferred obligation is payable,
without interest, on August 11, 1995.
Alpine will rely on cash flow from operations and borrowing under the New
Credit Agreement to meet its ongoing cash requirements. The New Credit Agreement
provides for borrowings of up to $85.0 million for general working capital needs
if certain conditions are met and is available to Alpine under a revolving
credit facility that does not reduce over its five-year term. Borrowings will be
guaranteed by Alpine's operating subsidiaries and a first priority security
interest will be granted in favor of the lenders in all inventories and accounts
receivable owned by these subsidiaries and certain other assets. At July 31,
1995, Alpine had $34.2 million outstanding under the New Credit Agreement
bearing interest at an average of 8.4%. The availability under the Alpine
Revolver as of July 31, 1995 was $35.0 million. Based on expected levels of
inventory and accounts receivable during fiscal 1996 and the collateral advance
rates, Alpine estimates that it could borrow up to $75 million under the New
Credit Agreement during 1996. The New Credit Agreement contains restrictions on
incurring additional indebtedness or liens and requires Alpine to maintain
certain minimum financial performance levels.
Alpine believes that, its cash flow from operations and amounts available
under the New Credit Agreement will be sufficient to fund its working capital
requirements, planned capital expenditures and debt service requirements for at
least the next 12 months.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Alpine's consolidated financial statements at April 30, 1994 and 1995 and
for each of the three years in the period ended April 30, 1995 and the report of
the independent accounts 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.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
The Board of Directors of Alpine consists of three classes of directors,
with terms expiring in successive years. Three current directors, Kenneth G.
Byers, Jr., Randolph Harrison and Ernest C. Janson, Jr., have been nominated for
reelection with terms to expire in 1997 and three current directors, Steven S.
Elbaum, James R. Kanely and Bragi F. Schut have been nominated for reelection
with terms to expire in 1998. The terms of the remaining two current directors,
John C. Jansing and Gene E. Lewis, expire in 1996.
<TABLE>
<CAPTION>
YEAR
FIRST ELECTED POSITION WITH ALPINE
NAME AGE DIRECTOR AND OTHER BUSINESS EXPERIENCE
- --------------------------- --- --------------- ----------------------------------------------------------------------
<S> <C> <C> <C>
Kenneth G. Byers, Jr....... 52 1993 President and sole shareholder of Byers Engineering Company, a
telecommunications technical services firm, for more than the past
five years. He served as a director of Superior TeleTec Inc. until its
merger with and into Alpine in November 1993.
Steven S. Elbaum........... 46 1980 Chairman of the Board of Directors and Chief Executive Officer of
Alpine since 1984. He is also a director of Brandon Systems, Inc.
Randolph Harrison.......... 63 1980 A private investor and consultant to Poten & Partners, Inc., an energy
and shipping industry consulting firm, where he was President prior to
1985.
</TABLE>
39
<PAGE>
<TABLE>
<CAPTION>
YEAR
FIRST ELECTED POSITION WITH ALPINE
NAME AGE DIRECTOR AND OTHER BUSINESS EXPERIENCE
- --------------------------- --- --------------- ----------------------------------------------------------------------
<S> <C> <C> <C>
John C. Jansing............ 69 1978 Chairman of The Independent Election Corporation of America, a
shareholder proxy tabulating firm, from 1976 to 1992 and currently a
director of Vestaur Securities, Inc. and fourteen Lord Abbett mutual
funds.
Ernest C. Janson, Jr....... 72 1987 A partner with Coopers & Lybrand, certified public accountants, until
his retirement in 1985.
James R. Kanely............ 54 1993 President and Chief Operating Officer of Alpine since November 1993.
Prior thereto he was Chairman of the Board, President and Chief
Executive Officer of Superior TeleTec Inc. until its merger with and
into Alpine in November 1993.
Gene E. Lewis.............. 67 1992 Chairman and Chief Executive Officer of Novecon Technologies, L.P.
since 1994, a consultant to various health care and venture capital
companies from 1989 to 1994. He is currently a director of EDITEK,
Inc., and American Drug Company.
Bragi F. Schut............. 54 1983 Executive Vice President of Alpine since 1986.
</TABLE>
BOARD AND COMMITTEE MEETINGS
During the fiscal year ended April 30, 1995, the Board held 5 meetings. Each
of the directors attended at least 75% of the meetings of the Board and meetings
of any committees of the Board on which he served that were held during the time
he served.
The Board of Directors has an Executive Committee and standing Compensation
and Audit Committees.
The present members of the Executive Committee are Messrs. Elbaum (who
serves as Chairman), Jansing, Kanely and Schut. The Executive Committee
exercises all authority of the Board of Directors in the management of Alpine,
subject to certain limitations imposed by the General Corporation Law of the
State of Delaware.
The present members of the Compensation Committee are Messrs. Harrison,
Jansing and Janson. The principal functions of the Compensation Committee are to
administer Alpine's 1987 Long-Term Equity Incentive Plan and 1984 Restricted
Stock Plan and, on behalf of the Board of Directors, to review current and
proposed employment arrangements with existing and prospective senior management
employees and to review and determine matters pertaining to base and incentive
compensation for the Chief Executive Officer and other senior management
employees. The Compensation Committee is advised periodically by Hewitt
Associates, a nationally recognized, independent compensation and benefits
consulting firm. During the fiscal year ended April 30, 1995, the Compensation
Committee had 2 meetings.
The present members of the Audit Committee are Messrs. Byers, Janson and
Lewis. The Audit Committee's principal functions are to review Alpine's annual
and periodic financial statements, to examine and consider matters relating to
the administration and audit of Alpine's accounts and its financial affairs, to
recommend the employment of outside auditors and to meet with Alpine's personnel
as it deems appropriate to carry out its functions. The Audit Committee met
twice during the fiscal year ended April 30, 1995.
40
<PAGE>
EXECUTIVE OFFICERS
Set forth below is certain information regarding the executive officers of
Alpine.
<TABLE>
<CAPTION>
NAME AGE POSITION WITH ALPINE
- --------------------------- --- --------------------------------------------------------------------------------
<S> <C> <C>
Steven S. Elbaum........... 46 Chairman of the Board of Directors and Chief Executive Officer since 1984
James R. Kanely............ 54 President and Chief Operating Officer since November 1993. Prior thereto he was
Chairman of the Board, President and Chief Executive Officer of Superior TeleTec
Inc. until its merger with and into Alpine in November 1993.
Bragi F. Schut............. 54 Executive Vice President since 1986
David S. Aldridge.......... 41 Chief Financial Officer since November 1993 and Treasurer since January 1994.
Prior thereto he was Chief Financial Officer of Superior TeleTec Inc. until its
merger with and into Alpine in November 1993.
Alan J. Nickerson.......... 45 Senior Vice President from November 1993 until June 1995, Chief Financial
Officer from 1990 to November 1993, Treasurer from 1990 to January 1994 and
Chief Financial Officer of Alpine's former Industrial Products and Services
Group prior to 1990.
</TABLE>
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Based solely on a review of the reports and representations furnished to
Alpine during the last fiscal year, Alpine believes that each of the persons
required to file reports under Section 16(a) of the Securities Exchange Act of
1934 (the "Exchange Act") is in compliance with all applicable filing
requirements except that Steven S. Elbaum, Bragi F. Schut and Randolph Harrison
each failed to file on a timely basis one required report with respect to one
transaction during the 1995 fiscal year.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth certain information with respect to
compensation awarded to, earned by or paid during each of Alpine's three fiscal
years ended April 30, 1995 to Alpine's Chief Executive Officer and to each of
the most highly compensated executive officers of Alpine other than the Chief
Executive Officer. No stock options were granted to Alpine's executive officers
during the fiscal year ended April 30, 1995.
41
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION (1) COMPENSATION AWARDS
--------------------------------- --------------------
NAME AND FISCAL RESTRICTED OPTION
PRINCIPAL POSITION YEAR SALARY BONUS STOCK (3) SHARES OTHER (4)
- ----------------------- ----------- --------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Steven S. Elbaum 1995 $ 275,000 $ 175,000(2) -- -- $ 7,370
Chairman and Chief 1994 256,785 125,000 $1,350,000 30,000 6,560
Executive Officer 1993 200,483 107,640 -- 80,000 --
James R. Kanely (5) 1995 252,684 150,000 -- -- 64,475
President and Chief 1994 116,081 57,292 270,000 100,000 45,079
Operating Officer
Bragi F. Schut 1995 172,000 75,000(2) -- -- 29,115
Executive Vice 1994 165,532 60,000 250,000 15,000 15,772
President
and Secretary 1993 144,965 55,000 -- 50,000 3,349
David S. Aldridge (5) 1995 153,718 60,000(2) -- -- 55,883
Chief Financial 1994 69,927 30,000 342,500 50,000 4,133
Officer
Alan J. Nickerson (6) 1995 151,000 52,851 -- -- 4,620
Senior Vice President 1994 144,752 40,000 275,000 60,000 5,048
1993 125,655 37,564 -- 50,000 2,876
- ------------------------------
</TABLE>
<TABLE>
<S> <C>
(1) The aggregate dollar value of all perquisites and other personal benefits,
securities or property awarded to, earned by or paid to any of the named
individuals did not exceed the lesser of $50,000 or 10% of the total
annual salary and bonus set forth for such individual during any of the
last three fiscal years.
(2) Fiscal 1995 bonus amounts included in the above table represent 50 percent
of the bonus amount approved by the Compensation Committee in respect to
fiscal 1995. The balance of the approved bonus was paid in fiscal 1996
upon completion of Alpine's acquisition of the US and Canadian copper wire
and cable business of Alcatel N.A. Cable Systems, Inc. and Alcatel Canada
Wire, Inc.
(3) The dollar value set forth is based on the closing price per share for the
Common Stock on the respective dates of grant, $10.00 per share on
September 8, 1993, $9.00 per share on November 10, 1993 and $7.00 per
share on April 12, 1994. The aggregate number of shares of restricted
stock held by each of the named individuals at April 30, 1995 (all of
which were granted during the 1994 fiscal year), the value of those
holdings and the vesting schedule for continued service are as set forth
below. The number of shares set forth for Messrs. Elbaum, Aldridge and
Nickerson includes 24,847 shares, 8,342 shares and 5,324 shares,
respectively, that have been granted subject to approval by the
stockholders of an amendment to Alpine's 1984 Restricted Stock Plan.
</TABLE>
<TABLE>
<CAPTION>
STEVEN S. JAMES R. BRAGI F. DAVID S. ALAN J.
ELBAUM KANELY SCHUT ALDRIDGE NICKERSON
----------- ----------- --------- --------- -----------
<S> <C> <C> <C> <C> <C>
Number of shares 150,000 30,000 25,000 41,786 30,714
Value at April 30, 1995 $ 731,250 $ 146,250 $ 121,875 $ 203,707 $ 149,730
Number of shares vesting in
1995 35,000 7,500 6,250 9,607 7,143
1996 35,000 7,500 6,250 9,607 7,143
1997 35,000 7,500 6,250 9,607 7,143
1998 10,000 -- -- 3,357 2,142
1999 -- -- -- -- --
</TABLE>
<TABLE>
<S> <C>
(4) The amounts set forth include (i) matching contributions made by Alpine
under defined contribution plans of its subsidiaries, (ii) amounts accrued
under an unfunded, nonqualified defined benefit plan for the payment of
future annuities to Messrs. Kanely and Aldridge ($59,555 and $10,258,
respectively) and (iii), with respect to Messrs. Kanely and Schut, the net
present value of the vested portion ($61,317 and $33,398, respectively) of
an annuity Alpine has agreed to pay to each individual in fifteen equal
annual installments ($34,700 and $18,900, respectively) starting when each
individual reaches the age of 60 (iv) with respect to Messers Kanely and
Aldridge ($22,653.95 and $39,305.20 respectively), a payment pursuant to
their employment agreements for federal tax consequences upon vesting of
certain restricted stock grants.
(5) The amounts set forth do not include amounts awarded to, earned by or paid
to Messrs. Kanely and Aldridge as executives of Superior TeleTec Inc.
prior to its merger with and into Alpine on November 10, 1993.
(6) Alan J. Nickerson served as a Senior Vice President until June 1995.
</TABLE>
42
<PAGE>
AGGREGATED OPTION EXERCISES AND YEAR-END OPTION VALUES
The following table presents information for the individuals named above as
to the exercise of stock options during the fiscal year ended April 30, 1995 and
the number of shares underlying, and the value of, unexercised options
outstanding at April 30, 1995:
<TABLE>
<CAPTION>
EXERCISES DURING THE FISCAL
YEAR NUMBER OF SHARES
---------------------------- UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
VALUE OPTIONS IN-THE- MONEY OPTIONS (2)
NUMBER OF REALIZED -------------------------- --------------------------
NAME SHARES ACQUIRED (1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------------- --------------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Steven S. Elbaum........... 33,333 $ 74,999 385,000 15,000 $ 489,250 --
James R. Kanely............ -- -- 73,035 75,000 $ 42,991 --
Bragi F. Schut............. -- -- 147,500 7,500 $ 147,250 --
David S. Aldridge.......... -- -- 42,060 37,500 $ 26,456 --
Alan J. Nickerson (3)...... -- -- 206,800 5,000 $ 206,800 --
<FN>
- ------------------------
(1) Based on a closing price of $5.25 on December 5, 1994, the date of
exercise, on the American Stock Exchange.
(2) Based on a closing price of $4.875 on April 28, 1995 on the American Stock
Exchange.
(3) Alan J. Nickerson served as Senior Vice President until June 1995.
</TABLE>
COMPENSATION OF DIRECTORS
Directors who are not employees of Alpine or otherwise compensated by Alpine
are entitled to be paid an annual retainer fee of $20,000 per year, together
with expenses of attendance, plus $1,000 for each meeting of a committee of the
Board attended. Non-employee directors with at least five years of service also
receive, upon reaching age 70 and termination of service to Alpine, a retirement
benefit of $10,000 per year for 15 years. At each director's election,
directors' fees may be payable in shares of Common Stock (based upon the fair
market value of the Common Stock at the beginning of each fiscal year).
Directors' fees may also be deferred, at the election of each director, pursuant
to the Directors' Deferred Compensation Plan and (i) be paid in cash with
interest at the prime rate or (ii) be paid in stock based on stock units
accumulated under the plan. At April 30, 1994, Alpine had aggregate accrued
directors' fees of $55,000, which will be satisfied in shares of the Common
Stock.
EMPLOYMENT AGREEMENTS
Alpine has employment agreements with each of its executive officers.
Pursuant to the agreements, Mr. Elbaum serves as Chairman and Chief Executive
Officer at an annual salary of $275,000, Mr. Kanely serves as President and
Chief Operating Officer at an annual salary of $250,000, Mr. Schut serves as
Executive Vice President at an annual salary of $172,000, Mr. Aldridge serves as
Chief Financial Officer at an annual salary of $150,000 and Mr. Nickerson served
until June 1995 as Senior Vice President at an annual salary of $150,000. The
agreements also provide for an annual bonus based upon Alpine's achieving
certain performance objectives (which bonus will in no event be less than
$125,000 per year for the first two contract years with respect to Mr. Kanely),
the one-time grant of stock options and restricted stock, the agreement by
Alpine to pay Messrs. Kanely and Schut the fifteen-year annuity described in
footnote 4 to the Summary Compensation Table, the indemnification from any
income taxes arising from the vesting of the restricted stock and certain other
benefits, including medical, dental and other insurance benefits. The agreements
with Messrs. Elbaum, Kanely and Schut also provide that they will serve on the
Board of Directors of Alpine.
Each employment agreement is for a term ending upon the occurrence of any of
the following events: (i) notification by the executive or Alpine to the other
that it desires to terminate the employment agreement, (ii) the death or
disability of the executive, (iii) termination by Alpine for "cause" and (iv)
termination by the executive for "good reason." "Good reason" includes a change
of control of Alpine (defined to mean the acquisition by a person or entity of
20% of Alpine's voting stock) followed by a change of the executive's
responsibilities or a termination by Alpine of the executive's employment.
Generally in the event an executive terminates his employment for "good reason,"
he is entitled to receive a severance payment equal
43
<PAGE>
to one and a half to three times his annual salary and bonus for the prior year.
In the event of termination of employment under other circumstances, each
executive is entitled to varying benefits described in the employment
agreements.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
INTRODUCTION
The Compensation Committee is made up of independent outside directors who
are neither officers nor employees of Alpine or its subsidiaries. The principal
functions of the Compensation Committee are to administer Alpine's 1987
Long-Term Equity Incentive Plan and 1984 Restricted Stock Plan and, on behalf of
the Board of Directors, to review current and proposed employment arrangements
with existing and prospective senior management employees and to review and
determine matters pertaining to base and incentive compensation for the Chief
Executive Officer and other senior management employees. In the exercise of its
functions, the Compensation Committee is advised periodically by Hewitt
Associates, a nationally recognized, independent compensation and benefits
consulting firm.
EXECUTIVE COMPENSATION POLICY
The executive compensation policy is designed to attract and retain highly
qualified executive officers, to recognize superior performance and to create a
strong link between Alpine performance and executive compensation. Total
compensation is intended to be competitive with that paid to highly-qualified
executives of companies with a strong entrepreneurially oriented business
philosophy and practice more likely to be found in the venture capital and
investment banking industry than in traditional manufacturing companies.
There are three components of executive compensation: (i) base salary and
employee benefits applicable to all employees; (ii) annual cash incentive
awards; and (iii) long-term incentive awards. Annual incentive awards are
intended to link executive pay with performance in areas key to Alpine's
short-term operating objectives and successes. Long-term incentive awards are
intended to reward the creation of stockholder value and consist of stock
options under the 1987 Long-Term Equity Incentive Program and restricted stock
grants under the 1984 Restricted Stock Plan. It is the intent of the executive
compensation policy to foster the success of Alpine's business strategy and
ultimately to drive the creation of stockholder value.
1995 COMPENSATION FOR THE CHIEF EXECUTIVE OFFICER AND OTHER EXECUTIVE OFFICERS
During the 1995 fiscal year, the executive officers of Alpine, including the
Chief Executive Officer, received a base salary in accordance with their
existing employment agreements. In determining the compensation under these
existing agreements, the Compensation Committee had considered (i) data from
outside studies and proxy materials regarding compensation of executive officers
at comparable companies, (ii) the input of other directors regarding individual
performance of each executive officer and (iii) advice from Hewitt Associates.
In determining the cash bonus paid after the completion of the 1995 fiscal
year to each executive officer, including the Chief Executive Officer, the
Compensation Committee considered the input of other directors regarding
individual performance of each executive officer and the qualitative and
quantitative measures of Alpine performance, including (i) the increase in
annualized revenues, operation income and improvement in cash flow, (ii) the
acquisition of Adience, (iii) the strengthening of Alpine's balance sheet and
liquidity, (iv) the acquisition of the US and Canadian copper wire and cable
business of Alcatel NA Cable Systems, Inc. and Alcatel Canada Wire, Inc., (v)
the decline in the market price per share of the Common Stock and (vi) the
restructuring of Alpine resulting from the merger of Alpine's information
display group subsidiaries with a subsidiary of Adience and the subsequent
distribution of 70% of the common stock of the surviving entity (PolyVision
Inc.) to stockholders of Alpine. The Compensation Committee's consideration of
such factors was subjective and informal.
The foregoing report is submitted by members of the Compensation Committee.
Randolph Harrison, Chairman
Ernest C. Janson, Jr.
John C. Jansing
44
<PAGE>
PERFORMANCE GRAPH
The following graph compares the yearly percentage change in the cumulative
total stockholder return on the Common Stock for each of Alpine's last five
fiscal years with the cumulative total return (assuming reinvestment of
dividends) of (i) the American Stock Exchange market value index and (ii) a peer
group with market capitalization similar to that of Alpine. Alpine compares its
stockholder return on the Common Stock with that of issuers with similar market
capitalizations, because it cannot reasonably identify a peer group engaged in
the same lines of business as Alpine. The returns of each of the peer issuers
are weighted on a market capitalization basis at the time of each registered
data point.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN* OF
THE ALPINE GROUP, INC., AMEX MARKET VALUE INDEX AND PEER GROUP
[GRAPH]
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
----------------------------------------------------------------
4/90 4/91 4/92 4/93 4/94 4/95
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
THE ALPINE GROUP, INC............................................. $ 100 $ 167 $ 305 $ 443 $ 238 $ 186
AMEX MARKET VALUE INDEX........................................... 100 105 114 123 127 139
PEER GROUP........................................................ 100 101 109 111 128 103
<FN>
- ------------------------
* $100 INVESTED ON 4/30/90 IN STOCK OR INDEX-INCLUDING REINVESTMENT OF DIVI-
DENDS. FISCAL YEAR ENDING APRIL 30.
</TABLE>
45
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
<TABLE>
<CAPTION>
8% PREFERRED STOCK
COMMON STOCK 9% PREFERRED STOCK
------------------------- ----------------------- -------------------------
NAME AND ADDRESS OF BENEFICIAL NUMBER OF PERCENT OF NUMBER OF PERCENT OF NUMBER OF PERCENT OF
OWNER SHARES CLASS SHARES CLASS SHARES CLASS
- ----------------------------------- ----------- ------------ --------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Steven S. Elbaum .................. 1,591,214(1) 9.0% -- -- 99 *
1790 Broadway
New York, NY 10019-1412
Hermes Imperial Investments, 1,424,231 8.0 % -- -- 160,000 56.9 %
L.P. ..............................
237 Park Avenue
Ninth Floor
New York, NY 10017
Herbert T. Kerr ................... -- -- -- -- 35,905 12.8 %
Pamtom Farm
Vaughn Road
Hudson Falls, NY 12839
Financial Strategic Portfolios, -- -- 1,000 57.1 % -- --
Inc. ..............................
Technology Portfolio
7800 E. Union Avenue
Denver, CO 80237
Connecticut Innovations, Inc ...... -- -- 500 22.6 % -- --
845 Brook Street
Rocky Hill, CT 06067
Patrick W. Allender ............... -- -- 250 14.3 % -- --
5 Holly Leaf Court
Bethesda, MD 20817
The Oregon Equity Fund ............ -- -- -- -- -- --
c/o Froley, Revy Investment Co.,
Inc.
10900 Wilshire Boulevard
Los Angeles, CA 90024-6594
Kenneth G. Byers, Jr............... 526,963 (2) 3.0 % -- -- -- --
Ernest C. Janson, Jr............... 26,000 *
Randolph Harrison.................. 55,877 * -- -- -- --
Bragi F. Schut..................... 475,886 (3) 2.6 % -- -- -- --
James R. Kanely.................... 346,111 (4) 1.9 % -- -- -- --
John C. Jansing.................... 196,333 (5) 1.1 % -- -- -- --
Gene E. Lewis...................... 39,366 (6) * -- -- 99 *
David S. Aldridge.................. 120,898 (7) * -- -- -- --
All directors and executive 3,378,651 (8) 19.0 % -- -- 99 *
officers as a group................
<FN>
- ------------------------------
* Less than one percent
(1) Includes (i) 385,000 shares issuable upon exercise of certain stock
options, (ii) 1,262 shares owned by Mr. Elbaum's wife as custodian for
their minor son and (iii) 24,847 shares of restricted stock granted subject
to approval by the stockholders of the amendment to Alpine's 1984
Restricted Stock Plan.
(2) Includes 361 shares held by Mr. Byers' wife, with respect to which shares
Mr. Byers disclaims beneficial ownership.
(3) Includes (i) 147,500 shares issuable upon exercise of certain stock
options, (ii) 11,316 shares currently issuable upon conversion of Alpine's
Convertible Senior Subordinated Notes held by Mr. Schut, (iii) 950 shares
owned by Mr. Schut's wife and (iv) 2,303 shares owned by Mr. Schut as
custodian for his minor son.
(4) Includes 73,035 shares issuable upon exercise of certain stock options.
(5) Includes 25,000 shares issuable upon exercise of certain stock options.
(6) Includes 35,500 shares issuable upon exercise of certain stock options.
(7) Includes (i) 42,060 shares issuable upon exercise of certain stock options
and (ii) 8,342 shares of restricted stock granted subject to approval by
the stockholders of the amendment to Alpine's 1984 Restricted Stock Plan.
</TABLE>
46
<PAGE>
<TABLE>
<S> <C>
(8) Includes (i) 883,005 shares issuable upon exercise of certain stock
options, (ii) 11,316 shares currently issuable upon conversion of Alpine's
Convertible Senior Subordinated Notes, (iii) 3,926 shares with respect to
which the officers and directors disclaim beneficial ownership and (iv)
38,513 shares of restricted stock granted subject to approval by the
stockholders of the amendment to Alpine's 1984 Restricted Stock Plan.
</TABLE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Effective as of April 21, 1994, Adience, which became a subsidiary of Alpine
in December 1994, entered into an advisory agreement (the "Advisory Agreement")
with Steib & Company ("Steib"), a New York general partnership in which Steven
S. Elbaum and Bragi F. Schut, officers and directors of Alpine, are general
partners and hold a majority interest. Pursuant to the Advisory Agreement, Steib
provided business, financial and strategic advice and planning, and, where
necessary, personnel to implement the same, in connection with, among other
things, mergers and acquisitions, dispositions, financings and refinancings.
Adience agreed to pay Steib a fixed monthly fee of $20,000 in consideration of
such services. The nature and type of services performed by Steib under the
Advisory Agreement were subject to the approval and supervision of the Board of
Directors, the Chairman of the Board and the President of Adience. In addition
to the fixed monthly fee, Adience granted to Steib stock options to purchase an
aggregate of 1,275,000 shares of common stock of Adience at an exercise price of
$1.25 per share, which options were to vest and required exercise annually in
equal amounts over a three-year period beginning on April 21, 1995.
In March 1994, Steib purchased 5.8% of the outstanding shares of common
stock of Adience at a price 20% higher than that paid by Alpine for its purchase
of 4.9% of the outstanding shares of common stock of Adience in December 1993.
In January 1995, following the completion of Alpine's purchase of a further
82.3% of the outstanding shares of common stock of Adience, including the shares
of common stock of Adience owned by Steib, Alpine reimbursed Steib in the amount
of $923,000 for costs incurred by Steib in connection with its investment in
common stock of Adience. In connection with these transactions, Adience
terminated the Advisory Agreement with Steib and surrendered the options to
purchase common stock of Adience described above. Adience paid Steib $247,000
pursuant to the terms of the Advisory Agreement.
As of April 30, 1995, Steven S. Elbaum, Chairman and Chief Executive Officer
of Alpine, owed Alpine approximately $314,000 consisting primarily of the
remaining balance of a $373,000 loan made by Alpine to finance Mr. Elbaum's
exercise of employee stock options. The indebtedness, which remained outstanding
at April 30, 1995, bears interest at the prime rate plus one half percentage
point (as to $300,000) and the prime rate (as to $14,000).
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 1995.
ITEM 14(C) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------- -------------------------------------------------------------------------------------------------------
<S> <C>
2(a) Asset Purchase Agreement, dated as of March 17, 1995 by and among Alatel NA Cable Systems, Inc.,
Alcatel Canada Wire, Inc. Superior Cable Corporation and Superior Teletec Inc. (incorporated herein by
reference to Exhibit 1 to the Current Report on Form 8-K of Alpine dated May 24, 1995)
2(b) 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)
</TABLE>
47
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------- -------------------------------------------------------------------------------------------------------
<S> <C>
2(c) Agreement and Plan of Merger, dated as of December 21, 1994, as amended, by and among Information
Display Technology, Inc., IDT PolyVision Acquisition Corp., IDT Posterloid Acquisition Corp., The
Alpine Group, Inc., Alpine/PolyVision, Inc. and Posterloid Corporation (incorporated herein by
reference to Exhibit 2 to Amendment No. 1 to Alpine's Statement on Schedule 13D relating to its
beneficial ownership of equity securities of Information Display Technology, Inc. dated December 28,
1994)
2(d) Amendment to the Agreement and Plan of Merger, dated as of December 21, 1994, by and among Information
Display Technology, Inc., IDT PolyVision Acquisition Corp., IDT Posterloid Acquisition Corp., The
Alpine Group, Inc., Alpine/PolyVision, Inc. and Posterloid Corporation (incorporated herein by
reference to Exhibit 1 to Amendment No. 2 to Alpine's Statement on Schedule 13D relating to its
beneficial ownership of equity securities of Information Display Technology Inc. dated May 5, 1995)
2(e) Amended and Restated Stock Purchase Agreement, dated as of October 11, 1994, by and among The Alpine
Group, Inc. and certain stockholders of Adience, Inc. ("Adience") as listed therein, as amended
(incorporated herein by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K dated
January 5, 1995)
3(a)* Certificate of Incorporation of Alpine.
3(b) Amendment to the Certificate of Incorporation of Alpine (incorporated herein by reference to Exhibit
3(aa) of Post-Effective Amendment No. 1 to the Registration Statement on Form S-3 (Registration No.
33-53434) of Alpine, as filed with the Commission on May 12, 1993)
3(c) Certificate of the Powers, Designations, Preferences and Rights of the 9% Cumulative Convertible
Preferred Stock of Alpine (incorporated herein by reference to Exhibit 1 to the Quarterly Report on
Form 10-Q of Alpine for the quarter ended January 31, 1989)
3(d) Certificate of the Powers, Designations, Preferences and Rights of the 9% Cumulative Convertible Senior
Preferred Stock of Alpine (incorporated herein by reference to Exhibit 3(c) to the Annual Report on
Form 10-K of Alpine for the fiscal year ended April 30, 1992 ("1992 10-K"))
3(e) Certificate of the Powers, Designations, Preferences and Rights of the 8.5% Cumulative Convertible
Senior Preferred Stock of Alpine (incorporated herein by reference to Exhibit 3(e) to the Annual Report
on Form 10-K of Alpine for the fiscal year ended April 30, 1994)
3(f)* Certificate of the Powers, Designations, Preferences and Rights of the 8% Cumulative Convertible Senior
Preferred Stock of the Company
3(g)* By-laws of Alpine
4(a) Indenture, dated as of October 1, 1986, between Alpine and Manufacturers Hanover Trust Company
("MHTC"), as trustee, relating to the 13 1/2% Senior Subordinated Debentures due 1996 of the Company
(incorporated herein by reference to Exhibit 4 to Amendment No. 2 to the Registration Statement on Form
S-1 (Registration No. 33-7709) of Alpine, as filed with the Commission on October 3, 1986)
4(b)* First Supplemental Indenture to the above Indenture, dated as of February 3, 1989, between Alpine and
MHTC, as trustee
4(c)* Second Supplemental Indenture to the above Indenture, dated as of October 31, 1989, between Alpine and
MHTC, as trustee
4(d)* Indenture, dated as of October 31, 1989, between Alpine and IBJ Schroder Bank & Trust Company ("IBJ"),
as trustee, relating to the Convertible Secured Senior Subordinated Notes due July 31, 1996, of Alpine
</TABLE>
48
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------- -------------------------------------------------------------------------------------------------------
<S> <C>
4(e) First Supplemental Indenture to the above Indenture, dated as of March 28, 1991, between Alpine and
IBJ, as trustee (incorporated herein by reference to Exhibit 4 to the Current Report on Form 8-K of
Alpine dated April 10, 1991 (the "April 1991 8-K"))
4(f) Second Supplemental Indenture to the above Indenture, dated as of April 10, 1992, between Alpine and
IBJ, as trustee (incorporated herein by reference to Exhibit 4(f) to the 1992 10-K)
4(g) Indenture, dated as of June 30, 1993, between Adience, Inc. ("Adience") and IBJ, as trustee
(incorporated herein by reference to Registration Statement No. 33-72024 of Adience, Inc.)
10(a) Amended and Restated 1984 Restricted Stock Plan of Alpine (incorporated herein by reference to Exhibit
10.5 to Form S-4 (Registration No. 33-9978) of Alpine, as filed with the Commission on October 5, 1993
(the "S-4 Registration Statement")
10(b) Amended and Restated 1987 Long Term Equity Incentive Plan of Alpine (incorporated herein by reference
to Exhibit 10.4 to the S-4 Registration Statement)
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 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 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 the S-4
Registration Statement)
10(f) Exchange Agreement, dated June 17, 1993 by and among Alpine, PV Partners, Suez Ventures, EUROC, and
Samuel Montagu Finance (incorporated herein by reference to Exhibit 10.1 to the S-4 Registration
Statement)
10(g) Development Agreement between Connecticut Innovations Incorporated and Alpine/ PolyVision, Inc., dated
as of December 9, 1992 (incorporated herein by reference to Exhibit 10(z) to the Annual Report on Form
10-K of Alpine for the fiscal year ended April 30, 1993 (the "1993 10-K"))
10(h) Loan Agreement between Connecticut Development Authority and Alpine/PolyVision, Inc., dated as of
December 9, 1992 (incorporated herein by reference to Exhibit 10(aa) to the 1993 10-K)
10(i) Master Credit Agreement, dated October 19, 1993 and amended on November 10, 1993, by and among Superior
TeleTec Transmission Products Inc., as borrower, Alpine, as guarantor, Bank of Boston Connecticut and
Creditanstalt-Bankverein, as the banks, and Bank of Boston Connecticut, as the agent (incorporated
herein by reference to Exhibit 10(a) to the Current Report on Form 8-K of Alpine dated November 24,
1993)
10(j) 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)
10(k)* Amended and Restated Debt Exchange Agreement, dated as of October 11, 1994, among Alpine and certain
debtholders of Adience as listed therein (as amended through April 14, 1995)
10(l) 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(m)* Letter Agreement, dated May 24, 1995, by and between Alpine and PolyVision Corporation ("PolyVision")
relating to $5,000,000 credit commitment
</TABLE>
49
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------- -------------------------------------------------------------------------------------------------------
<S> <C>
10(n)* Letter Agreement, dated May 24, 1995, by and between Alpine and PolyVision relating to $2,500,000
credit commitment
10(o)* First Amendment to Lease Agreement, dated as of May 10, 1995, by and between ALP (TX) QRS 11-28, Inc.
and Superior Teletec Inc.
10(p)* Purchase Agreement, dated as of July 14, 1995, by and among Alpine, Adience, Superior
Telecommunications Inc., Superior Cable Corporation, Merrill Lynch & Co., Nomura Securities
International, Inc. and First Albany Corporation.
10(q)* Employment Agreement, dated as of September 8, 1993, by and between Alpine and Steven S. Elbaum
10(r)* Amendment to Employment Agreement, dated as of September 8, 1993, by and between Alpine and Steven S.
Elbaum
10(s)* Employment Agreement, dated as of September 8, 1993, by and between Alpine and Bragi F. Schut
10(t)* Amendment to Employment Agreement, dated as of September 8, 1993, by and between Alpine and Bragi F.
Schut
10(u)* Employment Agreement, dated as of November 10, 1993, by and between Alpine and David S. Aldridge
10(v)* Employment Agreement, dated as of November 10, 1993, by and between Alpine and James R. Kanely
10(w)* Employment Agreement, dated as of November 10, 1993, by and between Alpine and Justin F. Deedy, Jr.
10(x)* Second Amendment to Lease Agreement, dated as of July 21, 1995, by and between ALP(TX) QRS H-28, Inc.
and Superior Telecommunications Inc.
10(y)* Loan and Security Agreement, dated as of July 21, 1995, by and between Alpine, Shawmut Capital
Corporation, Nationsbank of Georgia, N.A., and Creditanstalt Corporation Finance, Inc.
10(z)* Amendment to Employment Agreement, dated as of November 10, 1993, by and between Alpine and Justin F.
Deedy, Jr.
10(aa)* Amendment to Employment Agreement, dated as of November 10, 1993, by and between Alpine and David S.
Aldridge.
10(bb)* Amendment dated as of June 30, 1995, to Amended and Restated Debt Exchange Agreement dated as of
October 11, 1984, among Alpine and certain debtholders of Adience, as listed therein.
10(cc)* Supplemental Indenture, dated as of July 21, 1995, to Indenture by and between Adience and IBJ dated as
of June 30, 1985
10(dd)* Amendment to the Employment Agreement, dated as of November 10, 1993, by and between Alpine and James
R. Kanely
10(ee)* Indenture, dated as of July 15, 1995, by and among Alpine, Adience, Superior Telecommunications Inc.,
Superior Cable Corporation and Marine Midland Bank ("Marine Midland"), as trustee.
10(ff)* Pledge Agreement, dated as of July 21, 1995, by and between Alpine and Marine Midland.
12* Computation of ratio of earnings to fixed charges.
21* List of Subsidiaries
23(a)** Consent of Arthur Andersen LLP
27* Financial Data Schedule
<FN>
- ------------------------
* Previously filed.
** Filed herewith.
</TABLE>
50
<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.
THE ALPINE GROUP, INC.
Dated: November 20, 1995 By: /s/ STEVEN S. ELBAUM
-----------------------------------
Steven S. Elbaum
Chairman of the Board and
Chief Executive Officer
51
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
ALPINE
<S> <C>
AUDITED CONSOLIDATED FINANCIAL STATEMENTS:
Report of independent public accountants............................................. 54
Consolidated balance sheets at April 30, 1994 and 1995............................... 55
Consolidated statements of operations for the years ended
April 30, 1993, 1994 and 1995...................................................... 56
Consolidated statements of stockholders' equity for the three years ended April 30,
1993, 1994 and 1995................................................................. 57
Consolidated statements of cash flows for the years ended April 30, 1993, 1994 and
1995................................................................................ 60
Notes to consolidated financial statements........................................... 62
SCHEDULE
Schedule I -- Condensed Financial Information of Registrant (Parent Company)......... 87
</TABLE>
52
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To The Alpine Group, Inc.:
We have audited the accompanying consolidated balance sheets of The Alpine
Group, Inc. ("Alpine") (a Delaware corporation) and subsidiaries as of April 30,
1994 and 1995, and the related consolidated statements of operations,
stockholders' equity and cash flows for each of the three years in the period
ended April 30, 1995. These consolidated financial statements and the financial
statement schedule referred to below are the responsibility of Alpine's
management. Our responsibility is to express an opinion on these consolidated
financial statements and the financial statement schedule 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 consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
The Alpine Group, Inc. and subsidiaries as of April 30, 1994 and 1995, and the
results of their operations and their cash flows for each of the three years in
the period ended April 30, 1995 in conformity with generally accepted accounting
principles.
Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the index of
financial statements is presented for the purposes of complying with the
Securities and Exchange Commission's rules and are not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
Arthur Andersen LLP
New York, New York
June 16, 1995 (except with respect
to the matter discussed in Note 20,
as to which the date is July 21, 1995)
53
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
APRIL 30,
----------------------
1994 1995
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Current Assets:
Cash and cash equivalents............................................................... $ 2,507 $ 15,546
Marketable securities................................................................... 1,972 1,495
Accounts receivable (less allowance for doubtful accounts of
$68,000 in 1994 and $956,000 in 1995).................................................. 17,792 41,255
Inventories............................................................................. 22,502 35,242
Other current assets.................................................................... 1,204 5,347
---------- ----------
Total current assets.................................................................. 45,977 98,885
Property, plant and equipment, net........................................................ 31,674 52,240
Long-term investments and other assets.................................................... 6,047 16,941
Goodwill and other intangibles, net....................................................... 30,098 65,712
---------- ----------
Total assets........................................................................ $ 113,796 $ 233,778
---------- ----------
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Short-term borrowings................................................................... $ -- $ 33,135
Current portion of long-term debt....................................................... 2,217 2,022
Accounts payable........................................................................ 13,750 31,655
Accrued expenses........................................................................ 5,416 24,993
---------- ----------
Total current liabilities............................................................. 21,383 91,805
---------- ----------
Long-term debt, less current portion...................................................... 41,528 84,022
---------- ----------
Other long-term liabilities............................................................... 2,887 7,560
---------- ----------
Adience acquisition obligation............................................................ -- 5,733
---------- ----------
Commitments and contingencies
Stockholders' equity:
8% Cumulative convertible preferred stock at liquidation value.......................... -- 11,823
9% Cumulative convertible preferred stock at liquidation value.......................... 2,677 1,927
8.5% Cumulative convertible preferred stock at liquidation value........................ 3,500 3,500
Common stock, $.10 par value; authorized 25,000,000 shares, issued: 1994, 18,073,512
shares; 1995, 17,429,141 shares........................................................ 1,808 1,743
Capital in excess of par value.......................................................... 109,593 103,114
Cumulative translation adjustment....................................................... -- 144
Accumulated deficit..................................................................... (69,205) (76,050)
---------- ----------
48,373 46,201
Less: shares of common stock in treasury, at cost:
1994, 14,511 shares; 1995, 233,290 shares........................................... (61) (1,229)
Receivable from stockholder........................................................... (314) (314)
---------- ----------
Total stockholders' equity............................................................ 47,998 44,658
---------- ----------
Total liabilities and stockholders' equity.......................................... $ 113,796 $ 233,778
---------- ----------
---------- ----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
54
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
----------------------------------
1993 1994 1995
---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE
DATA)
<S> <C> <C> <C>
Net sales..................................................................... $ 27,897 $ 68,510 $ 198,135
Cost of goods sold............................................................ 15,915 56,250 169,125
---------- ---------- ----------
Gross profit................................................................ 11,982 12,260 29,010
Selling, general and administrative........................................... 10,482 12,168 20,487
Amortization of goodwill and other intangible charges......................... 395 2,292 1,527
---------- ---------- ----------
Operating income (loss)..................................................... 1,105 (2,200) 6,996
Interest income............................................................... 209 242 345
Interest expense.............................................................. (2,301) (2,363) (8,197)
Other income (expense), net................................................... (1,469) (506) 28
---------- ---------- ----------
(Loss) from continuing operations before income taxes....................... (2,456) (4,827) (828)
Provision for income taxes.................................................... -- 68 348
---------- ---------- ----------
(Loss) from continuing operations........................................... (2,456) (4,895) (1,176)
(Loss) from discontinued operations........................................... (8,377) (25,236) (4,868)
---------- ---------- ----------
(Loss) before extraordinary item............................................ (10,833) (30,131) (6,044)
Extraordinary item -- (loss) on early extinguishment of debt.................. (1,262) (47) --
---------- ---------- ----------
Net (loss).................................................................. (12,095) (30,178) (6,044)
Preferred stock dividends..................................................... 454 414 801
---------- ---------- ----------
(Loss) applicable to common stock............................................. $ (12,549) $ (30,592) $ (6,845)
---------- ---------- ----------
---------- ---------- ----------
(Loss) per share of common stock:
Continuing operations....................................................... $ (0.32) $ (0.38) $ (0.11)
Discontinued operations..................................................... (0.94) (1.78) (0.27)
Extraordinary item -- (loss) on early extinguishment of debt................ (0.14) -- --
---------- ---------- ----------
Net (loss) per share of common stock...................................... $ (1.40) $ (2.16) $ (0.38)
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
55
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE THREE YEARS ENDED APRIL 30, 1995
<TABLE>
<CAPTION>
9% CUMULATIVE
CAPITAL CONVERTIBLE
COMMON STOCK IN PREFERRED STOCK
------------------- EXCESS -------------------- ACCUMULATED
SHARES AMOUNT OF PAR SHARES AMOUNT DEFICIT
---------- ------ -------- -------- -------- -------------
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
Balance at April 30, 1992......................... 8,496,712 $ 850 $26,722 5,177 $ 5,177 $ (26,064)
Compensation expense related to stock options..... 1,393
Dividends on preferred stock...................... (454)
Shares issued for directors' fees................. 10
Receivable from stockholder.......................
Issuance of stock in subsidiary................... 1,776
Shares issued in connection with the
Reorganization of European Display Technologies
Joint Venture.................................... 178,572 17 1,234
Shares issued in connection with the early
extinguishment of debt........................... 787,212 79 7,162
Shares issued pursuant to employment agreements... (54)
Issuance of 9% cumulative convertible preferred
stock............................................ 2,500 2,500
Acquisition of American Menu Display, Inc......... 34,801 4 331
Exercise of stock options......................... 55,000 5 141
Conversion of convertible notes................... 525,872 53 2,002
Conversion of convertible preferred stock......... 357,753 36 2,964 (3,000) (3,000)
Shares issued in connection with the early
extinguishment of debt........................... 280
Net (loss) for the year ended April 30, 1993...... (12,095)
---------- ------ -------- -------- -------- -------------
Balance at April 30, 1993......................... 10,435,922 $1,044 $43,961 4,677 $ 4,677 $ (38,613)
---------- ------ -------- -------- -------- -------------
<CAPTION>
TREASURY STOCK RECEIVABLE
-------------------- FROM
SHARES AMOUNT STOCKHOLDERS TOTAL
-------- -------- -------------- ---------
<S> <C> <C> <C> <C>
Balance at April 30, 1992......................... (96,514) $ (409) $(409) $ 5,867
Compensation expense related to stock options..... 1,393
Dividends on preferred stock...................... (454)
Shares issued for directors' fees................. 7,787 32 42
Receivable from stockholder....................... 95 95
Issuance of stock in subsidiary................... 1,776
Shares issued in connection with the
Reorganization of European Display Technologies
Joint Venture.................................... 1,251
Shares issued in connection with the early
extinguishment of debt........................... 7,241
Shares issued pursuant to employment agreements... 12,500 54
Issuance of 9% cumulative convertible preferred
stock............................................ 2,500
Acquisition of American Menu Display, Inc......... 335
Exercise of stock options......................... 146
Conversion of convertible notes................... 2,055
Conversion of convertible preferred stock.........
Shares issued in connection with the early
extinguishment of debt........................... 40,000 170 450
Net (loss) for the year ended April 30, 1993...... (12,095)
-------- -------- ----- ---------
Balance at April 30, 1993......................... (36,227) $ (153) $(314) $ 10,602
-------- -------- ----- ---------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
56
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY -- (CONTINUED)
FOR THE THREE YEARS ENDED APRIL 30, 1995
<TABLE>
<CAPTION>
9% CUMULATIVE 8.5% CUMULATIVE
CONVERTIBLE CONVERTIBLE
COMMON STOCK CAPITAL PREFERRED STOCK PREFERRED STOCK
-------------------- IN EXCESS -------------------- -------------------- ACCUMULATED
SHARES AMOUNT OF PAR SHARES AMOUNT SHARES AMOUNT DEFICIT
-------- -------- ----------- -------- -------- -------- -------- -------------
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at April 30, 1993..... 10,435,922 $ 1,044 $43,961 4,677 $ 4,677 -- -- $(38,613)
Compensation expense related
to stock options............. 72
Compensation expense related
to restricted stock grants... 347
Dividends on preferred
stock........................ (414)
Issuance of stock in
subsidiary................... 27
Shares issued pursuant to
employment agreements........ 4,974 48
Exercise of stock options..... 298,905 30 966
Exercise of warrant........... 50,000 5 145
Conversion of convertible
notes........................ 82,403 8 308
Issuance of 8.5% cumulative
convertible preferred
stock........................ (300) 5,000 5,000
Conversion of convertible
preferred stock.............. 553,884 55 3,445 (2,000) (2,000) (1,500) (1,500)
Shares issued in connection
with the early extinguishment
of debt...................... 15,715 2 179
Shares issued for directors'
fees......................... (10)
Acquisition of Alpine
PolyVision, Inc. minority
interest..................... 2,164,099 217 19,260
Acquisition of Superior
Telecommunications, Inc...... 4,467,610 447 41,145
Net (loss) for the year ended
April 30, 1994............... (30,178)
-------- -------- ----------- -------- -------- -------- -------- -------------
Balance at April 30, 1994..... 18,073,512 $ 1,808 $109,593 2,677 $ 2,677 3,500 $ 3,500 $(69,205)
-------- -------- ----------- -------- -------- -------- -------- -------------
<CAPTION>
TREASURY STOCK RECEIVABLE
-------------------- FROM
SHARES AMOUNT STOCKHOLDER TOTAL
-------- -------- ------------- ---------
<S> <C> <C> <C> <C>
Balance at April 30, 1993..... (36,227) $ (153) $ (314) $ 10,602
Compensation expense related
to stock options............. 72
Compensation expense related
to restricted stock grants... 347
Dividends on preferred
stock........................ (414)
Issuance of stock in
subsidiary................... 27
Shares issued pursuant to
employment agreements........ 48
Exercise of stock options..... 996
Exercise of warrant........... 150
Conversion of convertible
notes........................ 316
Issuance of 8.5% cumulative
convertible preferred
stock........................ 4,700
Conversion of convertible
preferred stock..............
Shares issued in connection
with the early extinguishment
of debt...................... 181
Shares issued for directors'
fees......................... 21,716 92 82
Acquisition of Alpine
PolyVision, Inc. minority
interest..................... 19,477
Acquisition of Superior
Telecommunications, Inc...... 41,592
Net (loss) for the year ended
April 30, 1994............... (30,178)
-------- -------- ----- ---------
Balance at April 30, 1994..... (14,511) $ (61) $ (314) $ 47,998
-------- -------- ----- ---------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
57
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY -- (CONTINUED)
FOR THE THREE YEARS ENDED APRIL 30, 1995
<TABLE>
<CAPTION>
9% CUMULATIVE 8% CUMULATIVE 8.5% CUMULATIVE
CONVERTIBLE CONVERTIBLE CONVERTIBLE
PREFERRED STOCK PREFERRED PREFERRED STOCK
COMMON STOCK CAPITAL STOCK
--------------------- IN EXCESS ----------------- -------------------- -----------------
SHARES AMOUNT OF PAR SHARES AMOUNT SHARES AMOUNT SHARES
----------- -------- --------- ------- ------- --------- -------- ------
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at April 30, 1994..... 18,073,512 $ 1,808 $109,593 2,677 $2,677 -- -- 3,500
Compensation expense related
to stock options and
grants....................... 114,579 11 377
Dividends on preferred
stock........................
Foreign currency
translation..................
Conversion of convertible
preferred stock.............. 140,000 14 736 (750) (750)
Conversion of convertible
notes........................ 7,165 1 40
Exercise of stock options..... 93,885 9 247
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 8,000
Acquisition of Adience,
Inc.......................... 82,267 4,113
Repurchase of preferred
stock........................ (5,787) (290)
Net (loss) for the year ended
April 30, 1995...............
----------- -------- --------- ------- ------- --------- -------- -------
Balance at April 30, 1995..... 17,429,141 $ 1,743 $103,114 1,927 $1,927 236,480 $ 11,823 3,500
----------- -------- --------- ------- ------- --------- -------- -------
----------- -------- --------- ------- ------- --------- -------- -------
<CAPTION>
FOREIGN TREASURY STOCK RECEIVABLE
ACCUMULATED CURRENCY -------------------- FROM
AMOUNT DEFICIT TRANSLATION SHARES AMOUNT STOCKHOLDER TOTAL
-------- ------------- ------------- --------- -------- ------------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at April 30, 1994..... $ 3,500 $ (69,205) -- (14,511) $(61) $ (314 ) $ 47,998
Compensation expense related
to stock options and
grants....................... 388
Dividends on preferred
stock........................ (801) (801)
Foreign currency
translation.................. 144 144
Conversion of convertible
preferred stock..............
Conversion of convertible
notes........................ 41
Exercise of stock options..... 256
Shares issued for directors'
fees......................... 10,221 43 64
Purchase of treasury stock.... (229,000) (1,211) (1,211)
Exchange of common stock for
preferred stock..............
Acquisition of Adience,
Inc.......................... 4,113
Repurchase of preferred
stock........................ (290)
Net (loss) for the year ended
April 30, 1995............... (6,044) (6,044)
-------- ------------- ------------- --------- -------- ------ --------
Balance at April 30, 1995..... $3,500 $ (76,050) $ 144 (233,290) $(1,229) $ (314) $ 44,658
-------- ------------- ------------- --------- -------- ------ --------
-------- ------------- ------------- --------- -------- ------ --------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
58
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
--------------------------------
1993 1994 1995
--------- ---------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities:
(Loss) from continuing operations............................................. $ (2,456) $ (4,895) $ (1,176)
Adjustments to reconcile (loss) to net cash provided by (used for) operations:
Depreciation and amortization............................................... 960 4,425 6,169
Amortization of deferred financing and accretion of debt discount........... 313 232 885
Inducement charges for debt conversions..................................... 419 23 --
Compensation expense related to stock options and grants.................... 870 497 388
Other, net.................................................................. 1,233 628 30
Change in assets and liabilities, net of effects from companies acquired:
Accounts receivable......................................................... 646 (3,409) (8,001)
Inventories................................................................. (181) 2,157 (3,164)
Other current assets........................................................ (55) 31 (659)
Other assets................................................................ (59) (95) (2,126)
Accounts payable and accrued expenses....................................... 668 (219) 11,123
Other long-term liabilities................................................. (10) 224 (288)
--------- ---------- ---------
Cash provided by (used for) continuing operations............................. 2,348 (401) 3,181
--------- ---------- ---------
(Loss) from discontinued operations........................................... (8,377) (25,236) (4,868)
Depreciation and amortization................................................. 728 1,032 746
Loss recognized on purchase of R&D and other related charges.................. 2,847 21,312 --
Increase (decrease) in net assets............................................. 943 (74) (11)
--------- ---------- ---------
Cash (used for) discontinued operations....................................... (3,859) (2,966) (4,133)
--------- ---------- ---------
Cash (used for) operating activities.......................................... (1,511) (3,367) (952)
--------- ---------- ---------
Cash flows from investing activities:
(Purchases) sales of long-term investments, net............................... (3,034) -- 566
Capital expenditures for continuing operations................................ (422) (1,565) (2,275)
Capital expenditures for discontinued operations.............................. (1,946) (397) (360)
Acquisitions, net of cash acquired............................................ (273) (19,197) 802
(Investment in) proceeds from sale of marketable securities................... 51 (1,268) 477
Restricted cash............................................................... 1,750 -- --
Other......................................................................... -- -- (442)
--------- ---------- ---------
Cash (used for) investing activities.......................................... (3,874) (22,427) (1,232)
--------- ---------- ---------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
59
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
----------------------------------
1993 1994 1995
---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from financing activities:
Short-term borrowings (repayments).......................................... $ (3,816) $ (118) $ 20,685
Borrowings under revolving credit facilities, net........................... -- 7,271 (1,530)
Term loan and lease finance borrowings of continuing operations............. -- 17,034 636
Term loan borrowings of discontinued operations............................. 1,611 690 --
Term loan repayments of continuing operations............................... (613) (3,771) (3,408)
Term loan repayments of discontinued operations............................. (8) (54) (70)
Proceeds from exercise of stock options..................................... 146 1,072 256
Minority investments in subsidiaries........................................ 112 27 --
Issuance of preferred stock, net............................................ 2,500 4,278 --
Dividends on preferred stock................................................ (454) (414) (505)
Purchase of treasury shares................................................. -- -- (1,211)
Other....................................................................... -- -- 370
---------- ---------- ----------
Cash provided by (used for) financing activities.............................. (522) 26,015 15,223
---------- ---------- ----------
Net increase (decrease) in cash and cash equivalents.......................... (5,907) 221 13,039
Cash and cash equivalents at beginning of year................................ 8,193 2,286 2,507
---------- ---------- ----------
Cash and cash equivalents at end of year...................................... $ 2,286 $ 2,507 $ 15,546
---------- ---------- ----------
---------- ---------- ----------
Supplemental Disclosures:
Interest paid............................................................... $ 1,782 $ 1,579 $ 5,615
---------- ---------- ----------
---------- ---------- ----------
Noncash investing and financing activities:
Exchange and conversion of preferred stock.................................. $ 3,000 $ 3,500 $ 140
---------- ---------- ----------
---------- ---------- ----------
Shares issued in connection with the acquisition of a minority
interest in Alpine PolyVision, Inc......................................... $ 19,477
----------
----------
Shares issued in connection with the purchase of the R&D partnership
interest in European Display Technologies, ("EDT")......................... $ 1,251
----------
----------
Shares of Alpine PolyVision, Inc. issued in connection with the purchase of
the R&D partnership interest in EDT........................................ $ 1,664
----------
----------
Preferred stock issued in exchange for common stock......................... $ 8,000
----------
----------
Acquisition of businesses:
Assets, net of cash acquired.............................................. $ 93,018 $ 107,837
Common stock issued....................................................... (41,592)
Preferred stock issued.................................................... (4,113)
Contingent consideration.................................................. (5,733)
Liabilities assumed....................................................... (32,229) (98,793)
---------- ----------
Net cash paid (received).................................................. $ 19,197 $ (802)
---------- ----------
---------- ----------
Conversion of notes and exchange of debentures:
Conversions and retirements of debt....................................... $ 7,340 $ 625 $ 38
---------- ---------- ----------
---------- ---------- ----------
Fair value of common stock issued......................................... $ 8,876 $ 674 $ 41
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
60
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
The Alpine Group, Inc. and all its subsidiaries (collectively, "Alpine," unless
the context otherwise requires). All significant intercompany accounts and
transactions have been eliminated.
CONTRACT REVENUE RECOGNITION
Revenues related to long-term contracts are recognized by the percentage of
completion method measured on the basis of costs incurred to estimated total
costs which approximates contract performance to date. The estimated sales value
of completed performance under certain government fixed-priced engineering
contracts in process is recognized pursuant to achievement of certain
contractual milestones which approximates the percentage of completion, cost to
cost method. Provisions for losses on uncompleted contracts are made if it is
determined that a contract will ultimately result in a loss.
CASH AND CASH EQUIVALENTS
Alpine considers all highly liquid investments purchased with a maturity at
acquisition of 90 days or less to be cash equivalents.
INVENTORIES
Inventories, other than inventoried costs relating to long-term contracts,
are stated at the lower of cost or market, using the first-in, first-out (FIFO)
or average cost method. Inventoried costs relating to long-term contracts and
programs are stated at actual production cost, including factory overhead,
initial tooling and other related nonrecurring costs, reduced by the cost of
revenue recognized and units delivered or milestones completed. The costs
attributed to units delivered under long-term contracts and programs are based
on the average cost per unit of production. Included in the accompanying
consolidated balance sheet are inventories relating to contracts and programs
having production cycles longer than one year.
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. The
estimated lives are as follows:
<TABLE>
<S> <C>
Building and improvements............................. 5-32 years
Machinery and equipment............................... 2-12 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 AND OTHER INTANGIBLES
The excess of the purchase price over the net identifiable assets of
businesses acquired by Alpine is amortized ratably over periods not exceeding 30
years. Accumulated amortization of goodwill intangibles at April 30, 1994 and
1995 was $557,000 and $2,338,000 respectively. Alpine periodically reviews
goodwill and other intangibles to assess recoverability from future operations
using undiscounted cash flows, in accordance with the provisions of Statement of
Financial Accounting Standards 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. The adoption of this statement had no effect on Alpine's consolidated
financial position or results of operations as of or for the year ended April
30, 1995. During fiscal 1994, Alpine expensed $1,511,000 of unamortized
intangible assets relating to a product line which was not forecasted to
generate sufficient income to recover the carrying value of such intangible
asset. The intangible assets' original estimated life was ten years of which six
years had expired.
61
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
DEFERRED FINANCING COSTS
The costs incurred in connection with certain of Alpine's debt financings
are included in the consolidated balance sheet in long-term investments and
other assets and are being amortized through the relevant maturity dates of
Alpine's outstanding debt.
FOREIGN CURRENCY TRANSLATION
The financial position and results of operations of Alpine's foreign
subsidiaries 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 year-end, while
revenues and expenses are translated at average exchange rates prevailing during
the year. The resulting translation gains and losses are charged directly to
cumulative translation adjustment, a component of stockholders' equity, and are
not included in net income until realized through sale or liquidation of the
investment. Foreign exchange gains and losses incurred on foreign currency
transactions are included in net income.
CONCENTRATIONS OF CREDIT RISK
Alpine, through Superior Telecommunications Inc. ("Superior"), formerly
Superior TeleTec Inc., is principally engaged in the telecommunications wire and
cable business and, through Adience, Inc. ("Adience"), in the refractory
products business, primarily for the iron and steel, glass and aluminum
industries.
During fiscal 1994 and 1995, sales to the seven regional Bell operating
companies and two major independent telephone companies represented 74% and 78%,
respectively, of Superior's net sales. At April 30, 1994 and 1995, accounts
receivable from these customers were $11,131,000 and $13,993,000, respectively.
At April 30, 1995, Adience accounts receivable from customers in the iron
and steel industry were $10,739,000.
RECLASSIFICATIONS
Certain reclassifications have been made to the 1993 and 1994 consolidated
financial statements to conform with the 1995 presentation.
2. MARKETABLE SECURITIES
In 1994, Alpine adopted the provisions of Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and Equity
Securities," which requires certain investments to be recorded at fair value or
amortized cost, as appropriate. In accordance with this statement, Alpine has
classified its investments in marketable securities as trading securities which
are reported at fair value. The adoption of this statement did not have a
material impact on Alpine's consolidated financial position or results of
operations for the year ended April 30, 1994. Prior to fiscal 1994, Alpine's
investments in marketable securities were carried at the lower of cost or
market.
3. INVENTORIES
The components of inventories are as follows:
<TABLE>
<CAPTION>
1994 1995
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Raw materials.............................................. $ 5,947 $ 11,969
Work in process............................................ 5,580 8,716
Finished goods............................................. 10,975 14,557
--------- ---------
$ 22,502 $ 35,242
--------- ---------
--------- ---------
</TABLE>
62
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment, net, consists of the following:
<TABLE>
<CAPTION>
1994 1995
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Land....................................................... $ 1,123 $ 2,547
Building and improvements.................................. 9,206 16,853
Machinery and equipment.................................... 23,893 39,774
--------- ---------
34,222 59,174
Less: accumulated depreciation........................... 2,548 6,934
--------- ---------
$ 31,674 $ 52,240
--------- ---------
--------- ---------
</TABLE>
Depreciation expense related to property, plant and equipment for the years
ended April 30, 1993, 1994 and 1995 was $565,000, $2,133,000 and $4,642,000,
respectively.
5. DISCONTINUED OPERATIONS
In November 1994, Alpine management adopted a plan to dispose of its
information display segment consisting of its interest in Alpine PolyVision,
Inc. ("APV") and Posterloid Corporation ("Posterloid"). In May 1995, APV and
Posterloid were merged (the "PolyVision Merger") into PolyVision Corporation
("PolyVision") (formerly Information Display Technology, Inc.), a subsidiary of
Adience (see Note 6).
Until the date of the PolyVision Merger, 80.3% of the outstanding PolyVision
common stock was owned by Adience, and the remainder was publicly owned. Alpine
owned 87.2% of the outstanding capital stock of Adience; therefore Alpine's
effective ownership of PolyVision was 87.2% of 80%, or 70.0%. Also, until the
date of the PolyVision Merger, Alpine owned 98% of the outstanding capital stock
of APV and all of the outstanding capital stock of Posterloid.
Following the PolyVision Merger, Alpine owned 98% of PolyVision's
outstanding preferred stock with a liquidation preference of $25,000,000 and 94%
of the outstanding PolyVision common stock. At April 30, 1995, the PolyVision
common stock had a negative book value of $12,641,000.
As a result of the PolyVision Merger, Alpine's ownership of the outstanding
PolyVision common stock increased from 70.0% to 94%. In accordance with FASB
Technical Bulletin 85-5, this increase in equity ownership will be recorded in
fiscal 1996 as the acquisition of a minority interest at its estimated fair
value of $2,418,000. Because the minority interest was acquired by an Alpine
subsidiary issuing stock, and because Alpine subsequently distributed to its
stockholders most of the PolyVision common stock owned by it, the excess,
estimated to be $1,332,000, of the fair value of the minority interest acquired
over the book value of the interests given up in APV and Posterloid, will be
added directly to capital surplus.
On June 14, 1995, Alpine distributed to its stockholders 73% of the
outstanding PolyVision common stock (the "PolyVision Spin-Off"). This
distribution, when combined with shares of PolyVision common stock to be used as
partial consideration in connection with the Adience Acquisition and the
retirement of the Adience 11% Senior Secured Notes due 2002 (the "Adience Senior
Notes") (see Notes 6 and 9), will result in the ownership by Alpine of less than
20% of the outstanding shares of PolyVision common stock. Accordingly, Alpine
will account for its remaining PolyVision common stock investment at its fair
value as a security available for sale following the PolyVision Spin-Off.
Because the shares of PolyVision common stock to be distributed have a negative
book value, Alpine's stockholders' equity will not be reduced by the PolyVision
Spin-Off. The aforementioned transaction is a taxable transaction and actual
taxes payable, if any, will depend on Alpine's 1996 tax position.
63
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. DISCONTINUED OPERATIONS (CONTINUED)
The combined historical results of APV and Posterloid for the years ended
April 30, 1993, 1994 and 1995 are as follows:
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
--------------------------------
STATEMENT OF OPERATIONS 1993 1994 1995
--------- ---------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Net sales.............................................................. $ 4,211 $ 5,108 $ 4,918
Operating (loss)....................................................... (8,318) (25,416) (4,696)
Net (loss)............................................................. (8,377) (25,236) (4,868)
</TABLE>
At October 31, 1994, Alpine recorded a $3,000,000 pretax provision to
reflect management's estimate of operating losses through the disposition date,
largely in connection with research and development expenditures at APV. The
fiscal 1995 net loss includes a benefit for income taxes of $122,000.
The net assets of APV and Posterloid as of April 30, 1994 and 1995, have
been included in the consolidated balance sheets in long-term investments and
other assets (see Note 7).
6. ACQUISITIONS
ADIENCE
On December 21, 1994, Alpine acquired from certain stockholders of Adience
82.3% of its outstanding common stock (the "Adience Acquisition"). At April 30,
1995, Alpine, which had previously purchased 4.9% of Adience's common stock,
owned 87.2% of Adience's outstanding common stock.
Consideration paid in the Adience Acquisition consisted of 82,267 shares of
a new series of Alpine's 8% cumulative convertible senior preferred stock ("8%
Preferred Stock") with a liquidation preference of $50 per share (see Note 17)
and 170,615 shares of post-merger PolyVision common stock. The PolyVision stock
delivered by Alpine to the Adience stockholders is subject to a consideration
reset. The consideration reset requires Alpine to deliver to the selling
stockholders an amount equal to the 170,615 shares of PolyVision common stock
multiplied by the difference, if any, between $33.60 and the greater of the
average closing price for PolyVision common stock on each of the 20 trading days
preceding August 1, 1995 and $11.25 per share. The consideration reset will be
payable, at the option of Alpine, in either 8% Preferred Stock or PolyVision
common stock, or a combination thereof. Accordingly, the estimated deferred
consideration has been reflected in the accompanying consolidated balance sheet
as a noncurrent liability, "Adience Acquisition obligation," of approximately
$5,733,000 (170,615 shares multiplied by $33.60 per share) at April 30, 1995.
A summary of the consideration paid and estimated to be paid for the Adience
Acquisition is as follows:
<TABLE>
<CAPTION>
AMOUNT
-------------
(IN
THOUSANDS)
<S> <C>
Common stock purchased for cash................................................ $ 1,058
82,267 shares of 8% Preferred Stock............................................ 4,113
Adience Acquisition obligation................................................. 5,733
Expenses associated with the acquisition....................................... 1,500
-------------
$ 12,404
-------------
-------------
</TABLE>
The Adience Acquisition has been accounted for using the purchase method
and, accordingly, Adience's results of operations have been included in Alpine's
consolidated results on a prospective basis from the date of the acquisition.
The estimated purchase price for the Adience Acquisition (including expenses)
has been allocated to the fair market value of Adience's assets and liabilities
as of the Adience
64
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. ACQUISITIONS (CONTINUED)
Acquisition date based on preliminary assumptions and is subject to revision.
The excess of the estimated purchase price over the estimated fair market value
of identifiable net assets acquired resulted in goodwill of approximately
$36,975,000, which is being amortized on a straight line basis over 30 years.
Prior to the Adience Acquisition, Adience experienced losses from continuing
operations (before reorganization items) both pre- and post-emergence under
Chapter 11. Management has formulated and is implementing a strategic plan with
the following objectives: streamline manufacturing operations, eliminate
duplicative costs, discontinue unprofitable product lines, improve marketing
efforts, develop and introduce new products and generate sufficient cash from
operations, financing or other sources to meet its ongoing obligations over a
sustained period. In addition, in conjunction with the acquisition of Adience by
Alpine, Alpine has committed to provide Adience up to $3,000,000 through
December 31, 1995, to achieve its strategic plan. There can be no assurance
however, that such activities will achieve the intended improvement in results
of operations or financial position.
SUPERIOR
On November 9, 1993, Alpine's stockholders approved an Agreement and Plan of
Merger pursuant to which Superior merged into a subsidiary of Alpine. Alpine
paid approximately $19,200,000 in cash (including approximately $2,200,000 in
merger-related expenses), issued 4,467,610 shares of its common stock (subject
to adjustments for redemption of fractional shares) and assumed existing
Superior stock options as consideration for the merger.
The merger was accounted for using the purchase method and, accordingly,
Superior's results of operations have been included in Alpine's consolidated
results on a prospective basis from the date of the merger. The total purchase
price for acquiring Superior (including merger related expenses) amounted to
approximately $60,800,000 and has been allocated to the fair market value of
Superior's assets and liabilities as of the merger date resulting in goodwill of
approximately $29,300,000. 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 and Superior as if both transactions had occurred on May
1, 1993 are presented below. The pro forma results of operations for the year
ended April 30, 1994 include the results of Adience for the 12-month period
ended June 30, 1994. Such period reflects the pro forma results of operations
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 acquisitions taken place
at the beginning of the periods presented or of future
65
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. ACQUISITIONS (CONTINUED)
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)
----------------------
1994 1995
---------- ----------
(IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C>
Net sales.................................................................... $ 228,930 $ 265,394
(Loss) from continuing operations before income taxes........................ (15,120) (4,951)
(Loss) from continuing operations before extraordinary item.................. (14,509) (5,299)
(Loss) from discontinued operations.......................................... (25,236) (4,868)
Net (loss)................................................................... (39,792) (10,167)
(Loss) per share of common stock:
Continuing operations...................................................... (1.08) (0.35)
Discontinued operations.................................................... (1.78) (0.27)
Extraordinary item -- (loss) on early extinguishment of debt............... -- --
Net (loss)................................................................. (2.86) (0.62)
</TABLE>
SUBSEQUENT EVENT -- ALCATEL ACQUISITION
On May 11, 1995, Alpine 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. (collectively, "Alcatel NA"), which was financed with the proceeds of the
sale by Superior of $140,000,000 aggregate principal amount of notes (the
"Alcatel Acquisition Notes") (see Note 9(a)). The following reflects the
preliminary allocation of the purchase price of the net assets of the Alcatel
Business based upon the estimated fair values of such assets:
<TABLE>
<CAPTION>
AMOUNT
-------------
(IN
THOUSANDS)
<S> <C>
Estimated acquisition cost..................................................... $ 103,755
Less, historical book value of net assets at May 11, 1995...................... (81,255)
Write-up of property, plant and equipment...................................... (4,945)
Accrual of Alcatel employee relocation and severance costs..................... 500
-------------
Acquisition goodwill (to be amortized over 30 years)........................... $ 18,055
-------------
-------------
</TABLE>
The estimated acquisition cost of $103,755,000 represents (i) $93,000,000
paid in cash to Alcatel NA, (ii) a deferred amount payable to Alcatel NA on
August 11, 1995 in the amount of $10,255,000, which amount is subject to
adjustment based upon the completion of a closing balance sheet audit, and (iii)
acquisition expenses estimated at $500,000.
66
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. LONG-TERM INVESTMENTS AND OTHER ASSETS
Long-term investments and other assets consist of the following:
<TABLE>
<CAPTION>
1994 1995
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Investment in PolyVision (a).......................................... $ 3,600 $ 11,202
Investment in real estate (b)......................................... 1,033 908
Other assets.......................................................... 1,414 4,831
--------- ---------
$ 6,047 $ 16,941
--------- ---------
--------- ---------
<FN>
- ------------------------
(a) Reflects the investment in PolyVision, including the net assets of APV and
Posterloid (see Note 5).
After the PolyVision Merger, Alpine's investment in PolyVision consisted of
$25,000,000 face amount of PolyVision 8% preferred stock and PolyVision
common stock. Following the PolyVision Spin-Off on June 14, 1995, Alpine
owned 1,706,836 (20.6%) shares of PolyVision issued and outstanding common
stock. PolyVision's common stock closed at $3.75 on June 16, 1995. Alpine
expects to further reduce its holding by using 170,615 shares of PolyVision
common stock as partial consideration for the Adience Acquisition
obligation (see Note 6), and by using 66,802 shares of PolyVision common
stock as partial consideration for the retirement of Adience Senior Notes
(see Note 9(e)). Alpine may use additional shares of PolyVision common
stock in connection with one or both of the aforementioned transactions.
In connection with the PolyVision Merger, Alpine entered into an agreement
with PolyVision pursuant to which Alpine agreed to lend to PolyVision from
time to time prior to May 24, 1997, up to $5,000,000 to be used by
PolyVision to fund its working capital needs. Borrowings under the
agreement will be unsecured and will bear interest at a market rate
reflecting Alpine's cost of funds (approximately 11.8% at April 30, 1995).
The principal balance outstanding will be due on May 24, 2005, subject to
mandatory prepayment of principal and interest, in whole or in part, from
the net cash proceeds of any public or private equity or debt financing by
PolyVision at any time before maturity. Alpine's obligation to lend such
funds to PolyVision is subject to a number of conditions, including review
by Alpine of the proposed use of such funds by PolyVision. Until May 24,
1996, Alpine has additionally agreed to fund PolyVision's working capital
deficiencies in an amount not to exceed $2,500,000.
(b) During fiscal 1993, Alpine was obliged to purchase for $2,320,000 a
manufacturing facility operated by a former subsidiary of Alpine. During
fiscal 1993 and 1994, Alpine recorded a charge of $820,000 and $200,000,
respectively, to adjust the property to its estimated net realizable value.
During fiscal 1994, Alpine sold the property subject to a nine-year
leaseback and an option to repurchase (see Note 9(i)). The sale/leaseback
was accounted for as a financing transaction with the property continuing
to be recorded as an asset at its depreciated value.
</TABLE>
8. ACCRUED EXPENSES
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
1994 1995
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Accrued wages, salaries and employee benefits......................... $ 2,891 $ 5,172
Accrued insurance..................................................... 142 5,673
Other accrued expenses................................................ 2,383 14,148
--------- ---------
$ 5,416 $ 24,993
--------- ---------
--------- ---------
</TABLE>
67
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. DEBT
Debt consists of the following:
<TABLE>
<CAPTION>
1995
AS ADJUSTED
FOR THE
ALCATEL
1994 1995 ACQUISITION (a)
--------- --------- --------------
(IN THOUSANDS)
<S> <C> <C> <C>
Variable Rate Senior Secured Guaranteed Extendible Revolving Notes, Series A
(a)........................................................................ $ -- $ -- $ 85,000
11% Senior Secured Guaranteed Extendible Notes, Series B (a)................ -- -- 55,000
Alcatel Acquisition obligation (a).......................................... -- -- 10,255
13.5% Senior Secured Notes (face value $21,000,000) (b)..................... -- 20,790 20,790
13.5% Senior Subordinated Debentures (c).................................... 1,551 1,551 1,551
10% Convertible Senior Subordinated Notes ($1,141,000 and $1,104,000 face
value at April 30, 1994 and 1995, respectively) (d)........................ 759 860 860
Adience 11% Senior Secured Notes due in 2002 (face value $49,079,000) (e)... -- 44,386 44,386
Revolving credit loans (f).................................................. 18,567 29,505 12,972
Term loan (f)............................................................... 7,700 5,386 --
Mortgage loan (g)........................................................... 5,474 5,297 5,297
Subordinated note (h)....................................................... 2,954 2,469 2,469
Lease finance obligations (i)............................................... 6,063 5,967 5,967
Other....................................................................... 677 2,968 2,968
--------- --------- --------------
Total debt................................................................ 43,745 119,179 247,515
Less: Short-term borrowings and current portion........................... 2,217 35,157 45,412
--------- --------- --------------
Long-term debt....................................................... $ 41,528 $ 84,022 $ 202,103
--------- --------- --------------
--------- --------- --------------
</TABLE>
The fair value of Alpine's debt is estimated based on the quoted market
prices for the same or similar issues or on the current rates offered to Alpine
for debt of the same remaining maturities. At April 30, 1995, the fair value of
Alpine's debt, as adjusted for the Alcatel Acquisition, is estimated to be
$252,222,000.
The aggregate maturities of long-term debt for the five years subsequent to
April 30, 1995, as adjusted for the Alcatel Acquisition, are as follows:
<TABLE>
<CAPTION>
FISCAL YEAR
- --------------------------------------------------------------------- AMOUNT
-------------
(IN
THOUSANDS)
<S> <C>
1996................................................................. $ 45,412
1997................................................................. 4,752
1998................................................................. 141,420
1999................................................................. 1,137
2000................................................................. 503
</TABLE>
(a) In connection with the Alcatel Acquisition (see Note 6), Superior
sold $140,000,000 aggregate principal amount of Alcatel Acquisition Notes.
Two series of these Alcatel Acquisition Notes were issued: $85,000,000 of
Variable Rate Senior Secured Guaranteed Extendible Revolving Notes, Series
A, due 1997 (the "Series A Senior Notes") and $55,000,000 aggregate
principal amount of 11% Senior Secured Guaranteed Extendible Notes, Series
B, due 1997 (the "Series B Senior Notes"). The Series A and B Senior Notes
are guaranteed by Alpine and certain of its subsidiaries. The Alcatel
Acquisition Notes will mature on the second anniversary of their issuance,
except that the maturity date may be
68
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. DEBT (CONTINUED)
extended up to two times for a period of six months per extension at the
option of Superior. The Series A Senior Notes bear interest equal to the
prime rate plus 1.5% per annum prior to any extension. The Series B Senior
Notes bear interest at the rate of 11% per annum during the first six months
following their issuance, increasing by 0.5% for each succeeding six-month
period. During any extension period, the interest rate on the Series A
Senior Notes will be the prime rate plus 3% and the interest rate on the
Series B Senior Notes will be 14%. The Alcatel Acquisition Notes are secured
by substantially all of the assets of Superior and the Alcatel Business. The
proceeds of $140,000,000, net of an estimated $4,600,000 in transaction
expenses, was used as follows, (1) $93,000,000 was paid in cash to Alcatel
NA, (2) an estimated $500,000 was paid in Alcatel Acquisition-related
transaction expenses, and (3) $22,572,000 ($21,919,000 outstanding at April
30, 1995) was used to retire Superior debt. The remaining proceeds of
$19,328,000 were available to Superior for working capital and general
corporate purposes. The Alcatel Acquisition obligation represents the
estimated final acquisition payment and is subject to adjustment based upon
the completion of a closing balance sheet audit (see Note 6).
(b) On January 6, 1995, Alpine issued $21,000,000 face amount of 13.5%
Senior Secured Notes due January 5, 1996 (the "Alpine 13.5% Senior Notes") .
The Alpine 13.5% Senior Notes are secured by the pledge of shares of
PolyVision preferred stock owned by the Company. The Alpine 13.5% Senior
Notes were issued at a discount of 1.5%, which will be accreted as a charge
to interest expense through maturity.
(c) The 13.5% Senior Subordinated Debentures due October 1, 1996 (the
"Alpine 13.5% Debentures") pay interest semi-annually on April 1 and October
1 of each year. Alpine may redeem the Debentures at a stipulated redemption
price which includes applicable prepayment premiums. During fiscal 1994,
Alpine exchanged $135,000 of the Alpine 13.5% Debentures plus related
accrued interest for 15,715 shares of Alpine common stock. During fiscal
1993, Alpine exchanged $6,010,000 of the Alpine 13.5% Debentures plus
related accrued interest for 787,212 shares of Alpine common stock. These
transactions resulted in an extraordinary loss of $1,262,000 and $47,000 in
fiscal 1993 and 1994, respectively.
(d) The Convertible Senior Subordinated Notes due July 31, 1996 pay
interest semi-annually on January 31 and July 31 of each year and are
convertible into Alpine common stock through July 31, 1996 at a conversion
price of $6.23 per share. The original issue discount is added to the
recorded amount through maturity utilizing the effective interest method.
During fiscal 1995, holders of $29,500 recorded amount ($37,750 face amount)
exchanged such notes for 7,165 shares of Alpine common stock. During fiscal
1994, holders of $498,000 recorded amount ($833,750 face amount) exchanged
such notes for 133,886 shares of Alpine common stock. During fiscal 1993,
holders of $1,330,000 recorded amount of Notes ($3,002,500 face amount)
exchanged such notes for 525,872 shares of Alpine common stock. Certain of
the conversions occurred at prices below the stated conversion price
resulting in a charge to other expense of $419,000 and $23,000 in fiscal
1993 and 1994, respectively.
(e) The Adience 11% Senior Notes are redeemable at the option of Adience
after December 15, 1997 and pay interest semi-annually on June 15 and
December 15. The Adience Senior Notes are secured by a second lien (to the
Adience credit facility -- see (f) below) on the assets of Adience,
including the stock of PolyVision currently owned by Adience.
In connection with the Adience Acquisition in December 1994 (see Note
6), Alpine entered into a debt exchange agreement with the holders of 89.8%
of the Adience Senior Notes whereby Alpine has an agreement to retire
$44,089,000 aggregate principal amount ($39,761,000 recorded amount) of the
Adience Senior Notes for $35,271,000 in cash, $2,245,000 in value of
PolyVision common stock (or,
69
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. DEBT (CONTINUED)
at Alpine's option, 8% Preferred Stock) and 44,916 shares of 8% Preferred
Stock having a liquidation preference of $2,245,000, which is convertible
into approximately 289,780 shares of Alpine common stock.
(f) As more fully described below, the revolving credit loans represent
borrowings by Superior, DNE Systems, Inc. ("DNE"), formerly DNE
Technologies, Inc., and Adience under credit facilities obtained by each
entity.
The Superior credit facility includes: (i) a $28,000,000 revolving
credit facility (subject to collateral availability) bearing interest at
LIBOR plus 2.75% or prime plus 1%, and (ii) a term loan with an outstanding
balance of $5,386,000 at April 30, 1995. Both the revolving credit facility
and the term loan were repaid by Superior from the proceeds of the Alcatel
Acquisition Notes (see (a) above).
The Adience credit facility may not exceed $14,000,000 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 PolyVision
owned by Adience. In addition, PolyVision 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 $179,000 at
April 30, 1995, which reduced the availability under the financing
arrangement in a like amount. The facility terminates on September 30, 1995.
DNE has a bank credit agreement which provides for a revolving
facility of up to $3,500,000. Borrowings bear interest at prime plus 1.5%
and are collateralized by the accounts receivable and inventory of DNE. The
facility expires in June 1996.
(g) The mortgage loan was made to DNE by the Connecticut Development
Authority ("CDA"). The loan is guaranteed by Alpine and collateralized by
DNE's real estate, machinery and equipment. The loan is payable March 2002
and is subject to a 20-year amortization schedule. The interest rate is
7.25% through February 28, 1999 and the higher of 7.25% or the yield on U.S.
Treasury securities with the same maturity thereafter.
(h) The subordinated note is payable to the previous owner of DNE and
bears interest at prime plus 1.5% (not less than 7% or more than 11% per
annum). Through February 1994, 100% of the interest was accrued and added to
the principal. From February 1994 to February 1995, 60% of the interest was
accrued and added to principal. Thereafter, interest is payable
semi-annually commencing in August 1995. Principal and deferred interest are
required to be paid in eight equal semi-annual installments commencing
August 1995.
(i) The lease finance obligations result from the sale/leaseback of two
properties during fiscal 1994 which, because of Alpine's continuing
involvement in the form of repurchase options, have been recorded under the
finance method. The lease finance obligations at April 30, 1995 consist of:
(a) $5,000,000 related to the sale/leaseback of Superior's manufacturing
facility and (b) $967,000 related to the sale/leaseback of a manufacturing
facility owned by DNE and sublet to a third party manufacturer.
The Superior sale/leaseback transaction included a sales price of
$5,000,000 and net cash proceeds (after fees and expenses) of $4,500,000.
The term of the leaseback is twenty 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 term at the
greater of the property's Fair Market Value (as defined in the lease) or
$5,000,000 plus related ancillary costs. Annual lease payments are
approximately $520,000, and are subject to adjustments based on changes in
short-term interest
70
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. DEBT (CONTINUED)
rates (monthly) and increases in the consumer price index (on a triannual
basis). Until the repurchase option expires or is exercised, all lease
payments will be reflected as interest expense. The related asset, which is
being depreciated over its estimated useful life, has a net carrying value
of $7,174,000 as of April 30, 1995 and is classified as property, plant and
equipment in the consolidated balance sheet.
The DNE sale/leaseback transaction included a sales price of
$1,300,000 and a lease term of nine years. Alpine has an option to
repurchase the property during the fourth and fifth years of the lease term
for $1,300,000 plus ancillary costs; however, the lessor may elect to
terminate the lease in lieu of accepting such repurchase offer. Annual lease
payments are $169,000 and are subject to annual adjustments based on
increases in the consumer price index. As of April 30, 1995, remaining total
lease payments amounted to $1,253,000, of which $968,000 will be applied
against principal and $285,000 will be recorded as interest expense. The
related asset, which is being depreciated over the term of the lease and has
a net carrying value of $908,000 as of April 30, 1995, is classified in
long-term investments and other assets in the consolidated balance sheet.
This property is being sublet under a lease agreement which provides for
annual lease payments of $225,000 and expires in 1996.
Alpine's indentures and credit agreements contain covenants which, among
other matters, restrict or limit the ability of Alpine and its subsidiaries to
pay dividends and incur indebtedness. Additionally, existing loan covenants,
including those relating to the Alcatel Acquisition Notes, contain certain
provisions which limit the amount of funds available for transfer to Alpine from
its subsidiaries without the consent of certain lenders. At April 30, 1995,
approximately $14.7 million was available for dividend payments under the most
restrictive of these covenants. Alpine and its subsidiaries must also maintain
certain ratios regarding working capital, interest coverage, debt service,
leverage and net worth, among other restrictions.
10. (LOSS) PER SHARE
(Loss) per share is derived by dividing the net (loss) plus preferred stock
dividends ($454,000, $414,000 and $801,000 in fiscal 1993, 1994 and 1995,
respectively) by the weighted average number of shares of common stock
outstanding during the year. The inclusion of common stock equivalents in the
calculation of earnings per share would be anti-dilutive in each of the fiscal
years presented. For the years ended April 30, 1993, 1994 and 1995 the number of
shares used in computing (loss) per share was 8,944,270, 14,156,143 and
17,857,905, respectively.
11. STOCK OPTIONS AND RESTRICTED STOCK PLAN
Under Alpine's 1987 Long-Term Equity Incentive Plan (the "Plan") 2,000,000
shares of common stock are reserved for issuance. There were 1,054,000 and
1,065,000 shares of common stock available under the Plan for granting of
options at April 30, 1994 and 1995, respectively. Participation in the Plan is
limited generally to key employees and directors of Alpine. The Plan provides
for grants of incentive and non-incentive stock options. In addition to options,
the Plan permits the grant of stock appreciation rights (SARs) and phantom stock
units (Units). Under the Plan, options are not exercisable in the first year nor
after ten years from the date of grant and no option may be granted after
December 31, 1996. Where the exercise price of stock options granted under the
Plan is less than the market value of Alpine common stock at the date of grant,
non-cash compensation expense is recorded based on the difference between the
exercise price and market value. This non-cash charge is amortized over the
vesting period of the options and is included in selling, general and
administrative expense.
During fiscal 1994, Alpine exchanged options to purchase 482 shares of
common stock of a subsidiary for options to purchase 150,000 shares of Alpine
common stock at an exercise price of $3.00 per share.
During fiscal 1994, in conjunction with the merger of Superior (see Note 6),
Alpine assumed Superior's obligations with respect to options issued and
outstanding prior to the merger, resulting in the conversion of Superior options
into options to purchase 268,853 shares of Alpine common stock.
71
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. STOCK OPTIONS AND RESTRICTED STOCK PLAN (CONTINUED)
During fiscal 1993, Alpine issued 35,500 options to a director of Alpine
pursuant to an agreement whereby the director provided consulting services to a
subsidiary, as well as 126,000 options to key employees and 70,000 options in
connection with certain acquisitions. The option grants resulted in a non-cash
compensation charge of $348,000 in fiscal 1993.
Alpine's 1977 Non-Qualified Stock Option Plan expired according to its terms
on December 31, 1986. Outstanding options granted thereunder expire ten years
from the date of grant.
The following table summarizes stock option activity for fiscal 1994 and
1995:
<TABLE>
<CAPTION>
SHARES PRICE RANGE
----------- --------------
<S> <C> <C>
Outstanding at April 30, 1993............................................. 1,545,333 $ 1.00-$ 9.88
Exercised............................................................... (311,405) $ 1.00-$ 8.82
Granted................................................................. 516,500 $ 3.00-$12.00
Superior options assumed................................................ 268,853 $ 2.88-$ 8.63
Cancelled............................................................... (98,000) $ 7.50-$10.75
-----------
Outstanding at April 30, 1994............................................. 1,921,281 $ 2.50-$12.00
Exercised............................................................... (193,885) $ 1.75-$ 6.77
Cancelled............................................................... (11,500) $ 6.60-$10.75
-----------
Outstanding at April 30, 1995............................................. 1,715,896 $ 2.50-$12.00
-----------
-----------
</TABLE>
At April 30, 1995, 1,373,081 options were exercisable which expire between
February 1997 and April 2004. The average exercise price for all outstanding
options at April 30, 1995 was $5.77 per share.
Alpine also has a Restricted Stock Plan under which a maximum of 350,000
shares of Alpine common stock have been reserved for issuance. At April 30,
1995, there are no shares available for issuance. During fiscal 1995, non-cash
compensation expense of $388,000 was recorded representing the market value of
Alpine common stock amortized over the applicable vesting period related to the
grants.
12. POSTRETIREMENT HEALTH CARE BENEFITS
Superior provides 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
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 sheet, consisted
of the following at April 30, 1994 and 1995:
<TABLE>
<CAPTION>
1994 1995
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Retirees............................................................................. $ 708 $ 733
Fully eligible active plan participants.............................................. 171 164
Other active plan participants....................................................... 504 596
--------- ---------
$ 1,383 $ 1,493
--------- ---------
--------- ---------
</TABLE>
72
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
12. POSTRETIREMENT HEALTH CARE BENEFITS (CONTINUED)
Net periodic postretirement benefit cost includes the following components
for 1994 and 1995:
<TABLE>
<CAPTION>
1994 1995
----- ---------
(IN THOUSANDS)
<S> <C> <C>
Service cost for benefits earned..................................................... $ 24 $ 45
Interest cost on accumulated postretirement benefit obligation....................... 37 118
--- ---------
$ 61 $ 163
--- ---------
--- ---------
</TABLE>
An increase in the health care cost trend assumptions would not change the
annual exposure or obligation amounts as the employer cost is effectively
capped.
The weighted-average discount rate used in determining the accumulated
postretirement benefit obligation was 6.5% and 8% for fiscal 1994 and 1995,
respectively.
13. EMPLOYEE BENEFIT PLANS
Alpine maintains three 401(k) payroll matching programs, one each for the
employees of Superior and Adience and one for the employees of DNE and Alpine.
The 401(k) plans match between 15% and 50% of employee contributions up to 6%-8%
of annual salary. Alpine's contributions during fiscal 1993, 1994, and 1995 were
$181,000, $240,000 and $516,000, respectively.
14. INCOME TAXES
The provision for taxes on income from continuing operations is comprised of
the following:
<TABLE>
<CAPTION>
1993 1994 1995
------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Federal
Deferred...................................................................... $ -- $ -- $ 122
State
Current....................................................................... -- 20 316
Deferred...................................................................... -- 48 (148)
Foreign......................................................................... -- -- 58
------ ------ ------
$ -- $ 68 $ 348
------ ------ ------
------ ------ ------
</TABLE>
73
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
14. INCOME TAXES (CONTINUED)
A reconciliation of Alpine's loss from continuing operations before income
taxes for financial statement purposes to its Federal taxable loss from
continuing operations for the years ended April 30, 1993, 1994 and 1995 is as
follows:
<TABLE>
<CAPTION>
1993 1994 1995
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Loss from continuing operations before income taxes for financial
statement purposes..................................................... $ (2,456) $ (4,827) $ (828)
--------- --------- ---------
Differences between loss from continuing operations before income taxes
for financial statement purposes and taxable loss:
Permanent differences:
Amortization of goodwill and other intangible charges............... 395 2,292 1,527
Net income of foreign subsidiary.................................... -- -- (114)
Other, net.......................................................... 283 (310) 141
Net changes in temporary differences:
Stock options and stock grants...................................... 725 421 320
Real estate valuation and related provisions........................ 748 (1,682) (530)
Sale/leaseback...................................................... -- (1,914) (10)
Amortization of intangibles......................................... -- 765 (83)
Depreciation........................................................ (111) 450 1,097
Inventory reserves.................................................. 152 33 (2,604)
Other items, net.................................................... (57) (228) (227)
--------- --------- ---------
Net differences......................................................... 2,135 (173) (483)
--------- --------- ---------
Taxable loss from continuing operations................................. $ (321) $ (5,000) $ (1,311)
--------- --------- ---------
--------- --------- ---------
</TABLE>
At April 30, 1995, Alpine had unused net operating loss carryforwards of
approximately $20,120,000 that can be used to offset future taxable income.
These loss carryforwards do not include the Adience pre-acquisition loss
carryforwards discussed below. Alpine has unused capital loss carryforwards of
approximately $3,530,000 that may be used to offset future capital gains through
April 30, 1996. The net operating loss carryforwards expire in various amounts
from fiscal year 1997 to 2010 as follows
<TABLE>
<CAPTION>
OPERATING LOSS
--------------
(IN THOUSANDS)
<S> <C>
1997...................................................... $ 2,781
1998...................................................... 354
2003...................................................... 871
2004...................................................... 3,177
2005...................................................... 465
2006...................................................... 4
2007...................................................... 3,038
2008...................................................... --
2009...................................................... 5,379
2010...................................................... 4,051
-------
$ 20,120
-------
-------
</TABLE>
Alpine has entered into certain transactions that have resulted in ownership
changes under Section 382 of the Internal Revenue Code of 1986 and, thus, on the
imposition of annual limitations on the amount of
74
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
14. INCOME TAXES (CONTINUED)
future taxable income which may be offset by Alpine's prechange net operating
loss carryforward. The unused portion of the annual limitations for any year may
be carried forward to increase the annual limitation in succeeding years.
As further discussed in Note 6, Alpine acquired Adience on December 21,
1994. Accordingly, as of that date, Adience was included in Alpine's
consolidated Federal tax return. At December 21, 1994, Adience had net operating
loss carryforwards aggregating approximately $19,650,000. Such carryforwards are
available to offset Alpine's future consolidated taxable income subject to the
imposition of an annual limitation on the amount of taxable income of Alpine
which may be offset by net operating loss carryforwards of Adience that were
generated prior to December 20, 1994.
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes," requires the recognition of deferred tax assets and liabilities for both
the expected future tax impact of temporary differences arising from assets and
liabilities whose tax basis are different from financial statement amounts, and
for the expected future tax benefit to be derived from tax loss carryforwards.
The statement also requires that a valuation allowance be 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 is dependent on Alpine's
ability to generate taxable income within the carryforward period and the
periods in which net temporary differences reverse. No assurance can be given
that sufficient taxable income will be generated for utilization of the net
operating loss carryforwards and reversal of temporary differences.
Items that result in deferred tax assets (liabilities) and the related
valuation allowance at April 30, 1994 and 1995 are as follows:
<TABLE>
<CAPTION>
1994 1995
--------- ----------
(IN THOUSANDS)
<S> <C> <C>
Inventory reserves................................................................ $ 1,282 $ 1,198
Sale/leaseback.................................................................... 1,716 1,923
Accruals not currently deductible for tax......................................... 1,690 6,103
Compensation expense related to unexercised stock options and stock grants........ 1,072 1,218
Tax net operating loss carryforwards.............................................. 6,164 17,195
Tax capital loss carryforwards.................................................... 3,604 1,200
Alternative minimum tax credit carryforwards...................................... -- 419
Foreign tax credit carryforwards.................................................. -- 275
Depreciation...................................................................... (8,803) (13,376)
Other............................................................................. 199 780
--------- ----------
6,924 16,935
Less: Valuation allowance......................................................... (7,562) (17,536)
--------- ----------
$ (638) $ (601)
--------- ----------
--------- ----------
</TABLE>
The deferred tax liability of $638,000 and $601,000 at April 30, 1994 and
1995, respectively, relates to the state tax impact of certain temporary
differences and is included in other long-term liabilities in the accompanying
consolidated balance sheet.
Alpine's tax returns for years subsequent to 1980 have not been reviewed by
the Internal Revenue Service (the "IRS"). Availability of the net operating loss
and capital loss carryforwards might be challenged by the IRS upon examination
of such returns which could affect the availability of such carryforwards
75
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
14. INCOME TAXES (CONTINUED)
incurred-prior or subsequent to the change in ownership or both. Alpine
believes, however, that the IRS challenges that would limit the utilization of
net operating loss carryforwards will not have a material adverse effect on
Alpine's financial position.
15. COMMITMENTS AND CONTINGENCIES
Total rent expense under cancelable and non-cancelable operating leases was
$354,000, $483,000 and $1,356,000 for the years ended April 30, 1993, 1994 and
1995, respectively.
At April 30, 1995, future minimum lease payments under non-cancelable
operating leases are as follows:
<TABLE>
<CAPTION>
FISCAL YEAR
- ----------------------------------- REAL AND PERSONAL
PROPERTY
-------------------
(IN THOUSANDS)
<S> <C>
1996............................... $ 500
1997............................... 248
1998............................... 154
1999............................... 136
2000............................... 136
Thereafter......................... 215
--------
$ 1,389
--------
--------
</TABLE>
Together with various parties, Alpine 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. The State
of New York alleges that Alpine, by virtue of its purchase of some (but not all)
of the assets of an entity that allegedly disposed of hazardous substances, is
liable as a corporate successor under the federal Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA" or "Superfund") for the costs
of remediation.The total remediation costs for the site have been estimated by
the New York Department of Environmental Conservation to potentially be in
excess of $14,000,000. Alpine has filed a motion for summary judgment dismissing
the case against Alpine. This action is in an early stage, and no determination
has yet been made as to either the reasonableness of New York's claim and its
cost estimates or as to Alpine's liability, if any, or its share of such
remediation costs. Although there can be no assurance that an adverse outcome in
this case would not have a material adverse effect on Alpine's consolidated
financial position or results of operations, 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.
In February 1992, PolyVision 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 manufacturing facility. In December 1993, PolyVision and Adience
signed a consent order with the Ohio EPA and the Ohio Attorney General which
required PolyVision 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, PolyVision and
Adience filed a proposed amendment to the consent order which would allow
PolyVision 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 April 30, 1995, environmental accruals
amounted to $498,000,
76
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
15. COMMITMENTS AND CONTINGENCIES (CONTINUED)
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.
Under the acquisition agreement pursuant to which PolyVision acquired the
Alliance facility from Adience, Adience represented and warranted that, except
as otherwise disclosed to PolyVision, no hazardous material had been stored or
disposed of on the property. No disclosure of storage or disposal of hazardous
material on the site was made. Accordingly, Adience is required to indemnify
PolyVision for any losses in excess of $250,000, PolyVision has notified Adience
that it is claiming the right to indemnification for all costs in excess of
$250,000 incurred by PolyVision in this matter and has received assurance that
Adience will honor such claim.
Adience was recently named as one of many defendants in a class action
lawsuit brought in the circuit court of Cook County, Illinois, seeking unstated
monetary damages and alleging that products produced by Adience caused certain
of its employees, former employees, and such persons' family members to suffer
from asbestos-related diseases or an increased risk of developing such diseases.
Because the complaint was served upon Adience in late May 1995, Alpine and its
counsel have not yet had the opportunity to evaluate fully the validity of such
claims or the scope of its potential liabilities and defense costs.
Alpine has employment agreements with each of its executive officers.
Pursuant to the agreements, Mr. Elbaum serves as Chairman and Chief Executive
Officer at an annual salary of $275,000, Mr. Kanely serves as President and
Chief Operation Officer at an annual salary of $250,000, Mr. Schut serves as
Executive Vice President an annual salary of $172,000, Mr. Aldridge serves as
Chief Financial Officer at an annual salary of $150,000 and Mr. Nickerson served
until June 1995 as Senior Vice President at an annual salary of $150,000. The
agreements also provide for an annual bonus based upon Alpine's achieving
certain performance objectives (which bonus will in no event be less than
$125,000 per year for the first two contract years with respect to Mr. Kanely),
the one-time grant of stock options and restricted stock, the agreement by
Alpine to pay Messrs. Kanely and Schut the 15-year annuity described in footnote
4 to the Summary Compensation Table, the indemnification from any income taxes
arising from the vesting of the restricted stock and certain other benefits,
including medical, dental and other insurance benefits. The agreements with
Messrs. Elbaum, Kanely and Schut also provide that they will serve on the Board
of Directors of Alpine.
Each employment agreement is for a term ending upon the occurrence of any of
the following events: (i) notification by the executive or Alpine to the other
that it desires to terminate the employment agreement; (ii) the death or
disability of the executive; (iii) termination by Alpine for "cause;" and (iv)
termination by the executive for "good reason." "Good reason" includes a change
of control of Alpine (defined to mean the acquisition by a person or entity of
20% of Alpine's voting stock) followed by a change of the executive's
responsibilities or a termination by Alpine of the executive's employment. In
the event an executive terminates his employment for "good reason," he is
entitled to receive a severance payment equal to two times (three times with
respect to Mr. Elbaum and one and one-half times with respect to Mr. Aldridge)
his annual bonus and salary for the prior year. In the event of termination of
employment under other circumstances, each executive is entitled to varying
benefits described in the employment agreements.
Alpine is subject to other legal proceedings and claims which have primarily
arisen in the ordinary course of business and have not been finally adjudicated.
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 materially adverse effect upon
Alpine's consolidated financial position, liquidity or results of operations.
77
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
16. RELATED PARTY TRANSACTIONS
In March 1994, Steib & Company, ("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 Alpine for its purchase of 4.9%
of Adience common stock in December 1993. In January 1995, following completion
of Alpine's purchase of a further 82.3% of Adience common stock, including the
common stock owned by Steib, Alpine reimbursed Steib for costs incurred by Steib
in connection with its investment in Adience common stock. In connection with
these transactions, Steib agreed to terminate a three-year advisory agreement
with Adience and voluntarily surrender options to purchase 7.2% of Adience at
$1.25 per share.
Prior to fiscal 1994, certain of the executive officers and directors of
Alpine held direct and indirect ownership interests in APV. As a result of an
exchange transaction, the equity ownership in APV was converted into Alpine
common stock or options to acquire common stock. Pursuant to the exchange
transaction, an investment company in which Alpine's Chairman and Chief
Executive Officer was the managing general partner, received 907,504 shares of
Alpine common stock, and two officers of Alpine received an aggregate 687,554
shares of Alpine common stock and 50,000 options to purchase Alpine common stock
for $3.00 per share, all in exchange for their respective APV ownership
interest.
During fiscal 1988, Alpine loaned certain officers $463,000 relating to the
exercise of stock options of which $163,000 has been repaid. The unpaid balance,
which is deducted from stockholders' equity and is repayable in Alpine common
stock, bears interest at prime plus 0.5% and is payable in July 1995.
17. PREFERRED STOCK
Alpine has authorized 500,000 shares of preferred stock with a par value of
$1.00 per share. The preferred stock may be issued at the discretion of the
Board of Directors in one or more series with differing terms, limitations and
rights.
At April 30, 1995 Alpine has outstanding 236,480 shares of 8% Preferred
Stock, 3,500 shares of 8.5% Cumulative Convertible Senior Preferred Stock ("8.5%
Preferred Stock"), 1,750 shares of 9% Cumulative Convertible Senior Preferred
Stock ("9% Senior Preferred Stock") and 177 shares of 9% Cumulative Convertible
Preferred Stock ("9% Preferred Stock"). The 8% Preferred Stock has a liquidation
value of $50 per share while each of the other series has a liquidation value of
$1,000 per share. During fiscal 1995, 750 shares of 9% Preferred Stock plus
accrued dividends were converted through negotiated conversions for 140,000
shares of Alpine common stock. During fiscal 1994, 1,500 shares of the 8.5%
Preferred Stock and 2,000 shares of the 9% Senior Preferred Stock plus accrued
dividends were converted through negotiated conversions into 553,884 shares of
Alpine common stock. During fiscal 1993, 3,000 shares of 9% Senior Preferred
Stock plus accrued dividends were converted through negotiated conversions into
357,753 shares of Alpine common stock.
The 8.5% Preferred Stock is senior in ranking to Alpine's common stock, 9%
Senior Preferred Stock and 9% Preferred Stock. During fiscal 1995, Alpine
entered into an agreement whereby the outstanding 8.5% Preferred Stock plus
accrued dividends shall be converted into 737,476 shares of Alpine common stock
on July 31, 1995 at a conversion price of $5.25 per share of common stock.
The 9% Senior Preferred Stock is senior in ranking to holders of Alpine's
common stock, 8% Preferred Stock and the 9% Preferred Stock. Each share is
convertible at any time into shares of Alpine common stock at a conversion price
of $10 per share, subject to customary adjustments. Alpine may redeem the stock,
in whole or in part, at a price equal to the liquidation value (i) during the
period commencing three years from and ending on the seventh year after the date
of issuance, if for any 30 trading days within a period of 45 consecutive
trading days ending five (5) days prior to the date of the notice of such
redemption, the market price of Alpine's common stock equals or exceeds one
hundred forty percent (140%) of the conversion price, or (ii) subsequent to the
seventh year after issuance of the preferred stock.
78
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
17. PREFERRED STOCK (CONTINUED)
On December 21, 1994, Alpine issued 82,267 shares of the 8% Preferred Stock
in connection with the acquisition of Adience. On January 6, 1995, Alpine issued
a further 160,000 shares of 8% Preferred Stock in exchange for 1,000,000 shares
of Alpine's common stock. The 8% Preferred Stock ranks senior to the 9%
Preferred Stock but junior to the issued and outstanding 8.5% Preferred Stock
and 9% Senior Preferred Stock. Each share is convertible at any time into shares
of Alpine common stock at a conversion price of $7.75 (subject to customary
adjustment) and may be redeemed by Alpine at $50 per share plus accrued
dividends, if any, at any time after the third anniversary of the date of
issuance. Alpine reached an agreement with the holders of the 160,000 shares of
8% Preferred Stock issued in the January 6, 1995 exchange that after February
27, 1995, each such holder may exchange the 8% Preferred Stock for shares of
Alpine common stock at an amount equal to the liquidation preference divided by
115% of the average trading price of Alpine common stock for the twenty days
prior to February 28, 1996, provided that such exchange price will not be less
than $3.25 per share nor greater than $8.25 per share.
The 8.5% Preferred Stock carries 99 votes per share, the 9% senior Preferred
Stock carries 100 votes per share and the 8% Preferred Stock are entitled to
vote that number of shares into which the shares are initially convertible. Each
of the 8.5% Preferred Stock, the 8% Preferred Stock and the 9% Senior Preferred
Stock vote as a single class with Alpine's common stock on all matters submitted
to stockholders. In addition, holders of the 8.5% Preferred Stock and the 9%
Senior Preferred Stock are entitled to vote as a separate class in the event of
any proposal to (i) amend any of the principal terms of the 8.5% Preferred Stock
or the 9% Senior Preferred Stock; (ii) authorize, create, issue or sell any
class of stock senior to or on a parity with the 8.5% Preferred Stock or the 9%
Senior Preferred Stock as to dividends or liquidation preference; or (iii) merge
into or consolidate with, or sell all or substantially all of the assets of
Alpine to another entity. The holders of not less than 66 2/3% of the 8.5%
Preferred Stock, 8% Preferred Stock and the 9% Senior Preferred Stock must
approve any transaction subject to the class voting rights.
The 9% Preferred Stock is convertible into 83 1/3 shares of common stock,
subject to customary adjustments. Alpine may redeem the stock at any time, in
whole or in part at a price equal to the liquidation value per share.
18. SEGMENT INFORMATION
Alpine conducts business in three segments: telecommunications wire and
cable products (through Superior, acquired in November 1993, and the Alcatel
Business, acquired in May 1995); refractories (through Adience, acquired in
December 1994); and data communications and electronics (through DNE, acquired
in February, 1992).
The following provides information about each business segment:
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
--------------------------------
1993 1994 1995
--------- --------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Net sales (a):
Telecommunications wire and cable............................................. $ -- $ 46,857 $ 136,578
Refractories.................................................................. -- -- 33,650
Data communications and electronics........................................... 27,897 21,653 27,907
--------- --------- ----------
$ 27,897 $ 68,510 $ 198,135
--------- --------- ----------
--------- --------- ----------
</TABLE>
79
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
18. SEGMENT INFORMATION (CONTINUED)
<TABLE>
<S> <C> <C> <C>
Operating income (loss):
Telecommunications wire and cable............................................. $ -- $ 1,625 $ 8,128
Refractories.................................................................. -- -- 383
Data communications and electronics........................................... 4,069 (75) 1,710
Corporate..................................................................... (2,964) (3,750) (3,225)
--------- --------- ----------
$ 1,105 $ (2,200) $ 6,996
--------- --------- ----------
--------- --------- ----------
Identifiable assets at year end:
Telecommunications wire and cable............................................. $ -- $ 89,687 $ 98,785
Refractories.................................................................. -- -- 104,300
Data communications and electronics........................................... 18,500 15,340 16,820
Corporate (b)................................................................. 9,498 8,769 13,873
--------- --------- ----------
$ 27,998 $ 113,796 $ 233,778
--------- --------- ----------
--------- --------- ----------
Depreciation and amortization expense:
Telecommunications wire and cable............................................. $ -- $ 1,562 $ 3,570
Refractories.................................................................. -- -- 1,670
Data communications and electronics........................................... 778 2,697 872
Corporate..................................................................... 182 166 57
--------- --------- ----------
$ 960 $ 4,425 $ 6,169
--------- --------- ----------
--------- --------- ----------
Capital expenditures:
Telecommunications wire and cable............................................. $ -- $ 420 $ 1,388
Refractories.................................................................. -- -- 426
Data communications and electronics........................................... 422 1,140 394
Corporate..................................................................... -- 5 67
--------- --------- ----------
$ 422 $ 1,565 $ 2,275
--------- --------- ----------
--------- --------- ----------
<FN>
- ------------------------
(a) (i) Two customers accounted for 26% and 14% of net sales in fiscal 1994
and 30% and 16% of sales in fiscal 1995 in the telecommunications wire and
cable segment.
(ii) Three customers accounted for 31% of net sales in the refractories
segment, of which one accounted for 13%.
(iii) 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
materially adverse effect on the segment. Sales to agencies of the U.S.
government were 92.9%, 86.4% and 82.3% of net sales of this segment for
fiscal 1993, 1994 and 1995, respectively.
(b) Includes investment in PolyVision and net assets of APV and Posterloid.
</TABLE>
80
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
19. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
FISCAL 1994 QUARTER ENDED
------------------------------------------------------------------
JULY 31 OCTOBER 31 JANUARY 31 APRIL 30 YEAR
---------- ------------ -------------- ---------- --------
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE)
<S> <C> <C> <C> <C> <C>
Net sales............................................. $ 6,308 $ 6,170 $ 22,016 $ 34,016 $ 68,510
Gross profit.......................................... 2,689 2,080 2,923 4,568 12,260
Operating income (loss)............................... 225 (501) (2,857)(b) 933 (2,200)
(Loss) from continuing operations..................... (96) (751) (3,855) (193) (4,895)
(Loss) from discontinued operations................... (81) (839) (23,370)(c) (946) (25,236)
Extraordinary item--(loss) on early extinguishment of
debt................................................. (47) -- -- -- (47)
---------- ------------ -------------- ---------- --------
Net (loss).......................................... $ (224) $ (1,590) $ (27,225) $ (1,139) $(30,178)
---------- ------------ -------------- ---------- --------
---------- ------------ -------------- ---------- --------
Loss per share of common stock:
Continuing operations............................... $ (0.02) $ (0.08) $ (0.23) $ (0.02) $ (0.38)
Discontinued operations............................. (0.01) (0.08) (1.38) (0.05) (1.78)
Extraordinary item -- (loss) on early extinguishment
of debt............................................ -- -- -- -- --
---------- ------------ -------------- ---------- --------
Net (loss).......................................... $ (0.03) $ (0.16) $ (1.61) $ (0.07) $ (2.16)
---------- ------------ -------------- ---------- --------
---------- ------------ -------------- ---------- --------
</TABLE>
<TABLE>
<CAPTION>
FISCAL 1995 QUARTER ENDED
----------------------------------------------------------------
JULY 31 OCTOBER 31 JANUARY 31 APRIL 30 YEAR
---------- ------------ ------------ ---------- --------
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE)
<S> <C> <C> <C> <C> <C>
Net sales............................................. $ 39,330 $ 40,552 $ 45,900 $ 72,353 $198,135
Gross profit.......................................... 5,685 5,278 6,355 11,692 29,010
Operating income...................................... 1,888 1,411 840 2,857 6,996
(Loss) from continuing operations..................... 838 249 (1,954) (309) (1,176)
(Loss) from discontinued operations................... (826) (4,042)(a) -- -- (4,868)
---------- ------------ ------------ ---------- --------
Net income (loss)................................... $ 12 $ (3,793) $ (1,954) $ (309) $ (6,044)
---------- ------------ ------------ ---------- --------
---------- ------------ ------------ ---------- --------
Income (loss) per share of common stock:
Continuing operations............................... $ 0.04 $ 0.01 $ (0.12) $ (0.04) $ (0.11)
Discontinued operations............................. (0.05) (0.22) -- -- (0.27)
---------- ------------ ------------ ---------- --------
Net (loss).......................................... $ (0.01) $ (0.21) $ (0.12) $ (0.04) $ (0.38)
---------- ------------ ------------ ---------- --------
---------- ------------ ------------ ---------- --------
<FN>
- ------------------------
(a) Includes a $3,000,000 pretax provision for estimated losses through the
disposition date.
(b) Includes a non-recurring charge of $1,511,000 representing unamortized
intangible costs relating to a product line which was not forecast to
generate sufficient income to recover the carrying value of such intangible
asset.
(c) Includes a non-cash charge of $21,687,000 related to the acquisition of
substantially all of APV's minority equity ownership interest.
</TABLE>
81
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
20. SUBSIDIARY GUARANTEES
On July 21, 1995, Alpine issued and sold $153,000,000 principal amount of
12.25% Senior Secured Notes (the "Notes") (see footnote 7). The Notes are
unconditionally guaranteed on a senior unsecured basis by three of Alpine's
subsidiaries, Superior Telecommunications Inc., Superior Cable Corp. and
Adience, Inc., except that the subsidiary guarantee given by Adience is
subordinated in right of payment to $5,000,000 of Adience Senior Notes
outstanding. Additionally, if Adience Canada or a member of the DNE group
guarantees any debt of Alpine or certain of its subsidiaries, Adience Canada or
such member of the DNE group will also be required to issue a subsidiary
guarantee. The subsidiary guarantees rank, pari passu in right of payment with
other senior debt of Alpine and the subsidiary guarantors. The subsidiary
guarantors have also guaranteed the indebtedness outstanding under Alpine's
Credit Facility (see footnote 7). The Notes are effectively subordinated to the
loans and subsidiary guarantees under the Credit Facility and to other secured
debt of Alpine and the subsidiary guarantors to the extent of the assets
securing such debt.
There are no contractual restrictions on the ability of the subsidiaries to
make distributions to Alpine to service indebtedness, including interest
payments on the Notes. Separate financial statements and related disclosures for
the subsidiaries are omitted as they are not material to an investor; however,
the following condensed consolidating information presents condensed financial
statements as of April 30, 1995 of (a) Alpine on a parent company basis with its
investments in subsidiaries accounted for on the equity method (Parent Company),
(b) the subsidiary guarantors, (c) the combined non-guarantors, and (d) Alpine
on a consolidated basis.
Such information has been presented for fiscal 1995 only, as it is the only
year that any of the subsidiary guarantors were owned by Alpine for a full
fiscal year (see footnote 6).
82
<PAGE>
THE ALPINE GROUP, INC.
CONDENSED CONSOLIDATING STATEMENT OF EARNINGS
FOR THE YEAR ENDED APRIL 30, 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SUBSIDIARY
PARENT SUBSIDIARY NON- ELIMINATING
COMPANY GUARANTORS GUARANTORS ENTRIES CONSOLIDATED
----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Net sales......................................... $ 166,561 $ 31,574 $ 198,135
Cost of goods sold................................ 146,670 22,455 169,125
----------- ----------- ----------- ----------- ------------
Gross profit.................................. 19,891 9,119 29,010
Selling, general & administrative expenses........ $ 2,992 10,233 7,262 20,487
Amortization of goodwill.......................... 1,527 1,527
----------- ----------- ----------- ----------- ------------
Operating income (loss)....................... (2,992) 8,131 1,857 6,996
Interest (expense), net........................... (1,316) (5,714) (822) (7,852)
Other income (expense)............................ (531) 328 231 28
Allocated charges................................. 111 (111)
----------- ----------- ----------- ----------- ------------
Income from continuing operations before
income tax................................... (4,728) 2,745 1,155 (828)
Equity in income (loss) from subsidiaries......... (3,266) 107 $ 3,159
----------- ----------- ----------- ----------- ------------
(7,994) 2,852 1,155 3,159 (828)
Income tax expense (benefit)...................... (1,950) 2,217 81 348
----------- ----------- ----------- ----------- ------------
Income (loss) from continuing operations...... (6,044) 635 1,074 3,159 (1,176)
(Loss) from discontinued operations............... (4,868) (4,868)
----------- ----------- ----------- ----------- ------------
$ (6,044) $ 635 $ (3,794) $ 3,159 $ (6,044)
----------- ----------- ----------- ----------- ------------
----------- ----------- ----------- ----------- ------------
</TABLE>
83
<PAGE>
THE ALPINE GROUP, INC.
CONDENSED CONSOLIDATING BALANCE SHEET
FOR THE YEAR ENDED APRIL 30, 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SUBSIDIARY
PARENT SUBSIDIARY NON- ELIMINATING
COMPANY GUARANTORS GUARANTORS ENTRIES CONSOLIDATED
----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Assets
Current assets.................................. $ 15,006 $ 67,045 $ 18,022 $ (1,188) $ 98,885
Property, plant and equipment, net.............. 114 47,544 4,582 52,240
Goodwill, net................................... 70,100 (4,388) 65,712
Investment in and advances to subsidiaries...... 59,556 4,972 (64,528)
Other non-current assets........................ 2,738 18,687 (2,903) (1,581) 16,941
----------- ----------- ----------- ----------- ------------
Total assets.................................. $ 77,414 $ 203,376 $ 24,673 $ (71,685) $ 233,778
----------- ----------- ----------- ----------- ------------
----------- ----------- ----------- ----------- ------------
Liabilities and stockholders' equity
Current liabilities............................. $ 24,489 $ 59,547 $ 7,793 $ (24) $ 91,805
Long-term debt.................................. 2,534 73,023 8,465 84,022
Other non-current liabilities................... 5,733 14,190 651 (7,281) 13,293
Equity.......................................... 44,658 56,616 7,764 (64,380) 44,658
----------- ----------- ----------- ----------- ------------
Total liabilities and stockholders' equity.... $ 77,414 $ 203,376 $ 24,673 $ (71,685) $ 233,778
----------- ----------- ----------- ----------- ------------
----------- ----------- ----------- ----------- ------------
</TABLE>
84
<PAGE>
THE ALPINE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED APRIL 30, 1995
<TABLE>
<CAPTION>
SUBSIDIARY
PARENT SUBSIDIARY NON- ELIMINATING
COMPANY GUARANTORS GUARANTORS ENTRIES CONSOLIDATED
----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Cash flows from operations
Income (loss) from continuing operations........... $ (6,044) $ 635 $ 1,074 $ 3,159 $ (1,176)
Adjustments to reconcile (loss) to net cash
provided by continuing operations
Depreciation, amortization and other non-cash
charges........................................... 647 5,857 938 7,442
Changes in assets and liabilities.................. (986) (2,854) 755 (3,085)
Cash used for discontinued operations.............. (4,133) (4,133)
----------- ----------- ----------- ----------- ------------
Cash flows from (used by) operations................. (6,383) 3,638 (1,366) 3,159 (952)
Cash flow from investing activities
Acquisition, net of cash........................... (2,424) 3,226 802
Capital expenditures............................... (67) (1,768) (440) (2,275)
Other.............................................. 2,777 (2,536) 241
----------- ----------- ----------- ----------- ------------
Cash flows provided by (used for) investing
activities.......................................... 286 (1,078) (440) (1,232)
Cash flow from financing activities
Repayments of long-term borrowings................. (2,263) (1,215) (3,478)
Short-term borrowings.............................. 20,685 20,685
Intercompany transactions.......................... (1,647) 557 4,249 3,159
Borrowings (repayments) under revolving credit
facilities, net................................... (2,157) 627 (1,530)
Other.............................................. (1,472) 928 90 (454)
----------- ----------- ----------- ----------- ------------
Cash flows provided by (used for) financing.......... 17,566 (2,935) 3,751 (3,159) 15,223
Net increase (decrease) in cash and cash
equivalents......................................... 11,469 (375) 1,945 13,039
Cash and cash equivalents at the beginning of the
period.............................................. 1,830 4 673 2,507
----------- ----------- ----------- ----------- ------------
Cash and cash equivalents at the end of the period... $ 13,299 $ (371) $ 2,618 $ $ 15,546
----------- ----------- ----------- ----------- ------------
----------- ----------- ----------- ----------- ------------
</TABLE>
85
<PAGE>
SCHEDULE I
THE ALPINE GROUP, INC.
(PARENT COMPANY)
CONDENSED BALANCE SHEET
<TABLE>
<CAPTION>
APRIL 30,
----------------------
1994 1995
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents............................................................... $ 1,830 $ 13,299
Marketable securities................................................................... 1,972 1,495
Other current assets.................................................................... 93 212
---------- ----------
Total current assets.................................................................. 3,895 15,006
Advances to subsidiaries................................................................ 2,602 7,503
Investment in consolidated subsidiaries................................................. 44,592 52,053
Property, plant and equipment, net...................................................... 72 114
Long-term investments and other assets.................................................. 1,234 2,738
---------- ----------
TOTAL ASSETS.......................................................................... $ 52,395 $ 77,414
---------- ----------
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Short-term borrowings................................................................... $ -- $ 20,790
Current portion of long-term debt....................................................... 150 150
Accounts payable........................................................................ 269 744
Accrued expenses........................................................................ 1,545 2,805
---------- ----------
Total current liabilities............................................................. 1,964 24,489
---------- ----------
Long-term debt, less current portion...................................................... 2,433 2,534
---------- ----------
Adience acquisition obligation............................................................ -- 5,733
Stockholders' equity:
8% Cumulative Convertible Preferred Stock at liquidation value.......................... -- 11,823
9% Cumulative Convertible Preferred Stock at liquidation value.......................... 2,677 1,927
8.5% Cumulative Convertible Preferred Stock at liquidation value........................ 3,500 3,500
Common stock, $.10 par value; authorized 25,000,000 shares; issued: 1994, 18,073,512
shares; 1995, 17,429,141 shares........................................................ 1,808 1,743
Cumulative translation adjustment....................................................... -- 144
Capital in excess of par value.......................................................... 109,593 103,114
Accumulated deficit..................................................................... (69,205) (76,050)
---------- ----------
48,373 46,201
Less shares in treasury, at cost:
1994, 14,511 shares; 1995, 233,290 shares............................................... (61) (1,229)
Receivable from stockholder............................................................. (314) (314)
---------- ----------
Total stockholders' equity............................................................ 47,998 44,658
---------- ----------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY.................................................. $ 52,395 $ 77,414
---------- ----------
---------- ----------
</TABLE>
86
<PAGE>
SCHEDULE I
(CONTINUED)
THE ALPINE GROUP, INC.
(PARENT COMPANY)
CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
---------------------------------
1993 1994 1995
---------- ---------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Revenues:
Interest income............................................................... $ 174 $ 105 $ 345
Corporate charges............................................................. 1,440 360 111
---------- ---------- ---------
1,614 465 456
---------- ---------- ---------
Expenses:
General and administrative.................................................... 2,964 3,750 2,992
Interest expense.............................................................. 1,666 484 1,661
Other expense................................................................. 1,539 445 531
---------- ---------- ---------
6,169 4,679 5,184
---------- ---------- ---------
(4,555) (4,214) (4,728)
Equity in net (loss) of subsidiaries before extraordinary item (a).............. (6,278) (25,917) (1,316)
---------- ---------- ---------
(Loss) before extraordinary item................................................ (10,833) (30,131) (6,044)
Extraordinary item:
(Loss) gain on early extinguishment of debt................................... (1,262) (47) --
---------- ---------- ---------
Net (loss).................................................................... $ (12,095) $ (30,178) $ (6,044)
---------- ---------- ---------
---------- ---------- ---------
<FN>
- ------------------------
(a) Equity in net (loss) of subsidiaries before extraordinary item includes
losses from discontinued operations of $8.4 million, $25.2 million and $4.9
million in fiscal 1993, 1994 and 1995, respectively. (See footnote 5.)
</TABLE>
87
<PAGE>
SCHEDULE I
(CONTINUED)
THE ALPINE GROUP, INC.
(PARENT COMPANY)
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
--------------------------------
1993 1994 1995
--------- ---------- ---------
<S> <C> <C> <C>
(IN THOUSANDS)
Cash provided by (used for) operating activities:............................... $ (221) $ (2,566) $ (6,383)
--------- ---------- ---------
Cash flows from investing activities:
Repayments of long-term investments........................................... (2,023) -- --
Capital expenditures.......................................................... -- (5) (67)
Acquisitions, net of cash acquired............................................ -- (17,000) (2,424)
Investment in/sale of subsidiaries............................................ -- 773 --
Proceeds from (investment in) marketable securities........................... 51 (1,268) 477
Dividends received from subsidiaries.......................................... -- 17,610 2,000
Restricted cash............................................................... 1,750 -- --
Proceeds from sale of property................................................ -- -- 300
--------- ---------- ---------
Cash (used for) provided by investing activities................................ (222) 110 286
--------- ---------- ---------
Cash flows from financing activities:
Short-term borrowings (repayments)............................................ (3,816) (118) 20,685
Long-term borrowings.......................................................... 433 123 --
Repayments of long-term borrowings............................................ (457) -- --
Dividends on preferred stock.................................................. (454) (414) (505)
Proceeds from stock options exercised......................................... 146 1,072 256
Changes in intercompany accounts.............................................. (5,359) (1,809) (1,659)
Issuance of preferred stock (net)............................................. 2,500 4,700 --
Purchase of treasury shares................................................... -- -- (1,211)
--------- ---------- ---------
Cash provided by (used for) financing activities................................ (7,007) 3,554 17,566
--------- ---------- ---------
Net increase (decrease) in cash and cash equivalents............................ (7,450) 1,098 11,469
Cash and cash equivalents at beginning of year.................................. 8,182 732 1,830
--------- ---------- ---------
Cash and cash equivalents at end of year........................................ $ 732 $ 1,830 $ 13,299
--------- ---------- ---------
--------- ---------- ---------
Supplemental cash flow disclosures:
Interest paid................................................................. $ 1,345 $ 376 $ 1,287
--------- ---------- ---------
--------- ---------- ---------
</TABLE>
88
<PAGE>
SCHEDULE I
(CONTINUED)
THE ALPINE GROUP, INC.
(PARENT COMPANY)
APPENDIX A
<TABLE>
<CAPTION>
APRIL 30,
--------------------
1994 1995
--------- ---------
<S> <C> <C>
(IN THOUSANDS)
Long-Term Debt:
Long-term debt consists of:
13 1/2% Senior Subordinated Notes due October 1, 1996 (a).................................... $ 1,551 $ 1,551
10% Convertible Senior Subordinated Notes due July 31, 1996 ($1,141,000 and $1,104,000 face
amount at April 30, 1994 and 1995, respectively) (a)........................................ 759 860
Other........................................................................................ 273 273
--------- ---------
2,583 2,684
Less, current portion.......................................................................... 150 150
--------- ---------
$ 2,433 $ 2,534
--------- ---------
--------- ---------
<FN>
- ------------------------
(a) See Note 10 to Consolidated Financial Statements
</TABLE>
Minimum current maturities of long-term debt outstanding as of April 30,
1995, are as follows:
<TABLE>
<CAPTION>
FISCAL YEAR AMOUNT
- -------------------------------------------------- ---------
<S> <C>
1995.............................................. 150
1996.............................................. 2,692
1997.............................................. --
1998.............................................. --
</TABLE>
89
<PAGE>
EXHIBIT 23(A)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our report dated June 16, 1995 (except with respect to Note 20 as to which the
date is July 21, 1995) included in this Form 10-K, into The Alpine Group, Inc.'s
previously filed Registration Statements on Forms S-8 (File Nos. 2-70015 and
33-62544) and on Forms S-3 (File Nos. 33-30246 and 33-53434). It should be noted
that we have performed no audit procedures subsequent to June 16, 1995, the date
of our report, except with respect to Note 20 as to which the date is July 21,
1995. Furthermore, we have not audited any financial statements of The Alpine
Group, Inc. as of any date or for any period subsequent to April 30, 1995.
Arthur Andersen LLP
New York, New York
November 20, 1995
