<PAGE>
REGISTRATION NO. 001-09078
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OF THE SECURITIES EXCHANGE ACT OF
1934
FOR THE QUARTERLY PERIOD ENDED JANUARY 31, 1996
/ / 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
------------------------
THE ALPINE GROUP, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 22-1620387
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1790 BROADWAY 10019-1412
NEW YORK, NEW YORK (Zip code)
(Address of principal executive offices)
Registrant's telephone number, including area code 212-757-3333
------------------------
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days. Yes _X_ No ___
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES OF
COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE.
CLASS OUTSTANDING AT MARCH 1, 1996
- ---------------------------------------- --------------------------------------
Common Stock, $.10 Par Value 18,653,311
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- --------------------------------------------------------------------------------
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with the requirements of Form 10-Q and therefore do
not include all information and footnotes required by generally accepted
accounting principles. However, in the opinion of management, all adjustments
(which, except as disclosed elsewhere herein, consist only of normal recurring
accruals) necessary for a fair presentation of the results of operations for the
relevant periods have been made. Results for the interim periods are not
necessarily indicative of the results to be expected for the year.
2
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
JANUARY 31, 1996
(DOLLARS IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
APRIL 30,
1995
JANUARY 31, -----------
1996
-----------
(UNAUDITED)
<S> <C> <C>
Current assets:
Cash and cash equivalents............................................................. $ 3,108 $ 15,546
Marketable securities................................................................. 7,026 1,495
Accounts receivable (less allowance for doubtful accounts;
January, $740; April, $956).......................................................... 59,368 41,255
Inventories........................................................................... 65,589 35,242
Other current assets.................................................................. 6,569 5,347
----------- -----------
Total current assets................................................................ 141,660 98,885
Property, plant and equipment, net...................................................... 99,305 52,240
Long-term investments and other assets (Note 4)......................................... 33,490 16,941
Goodwill (less accumulated amortization; January, $4,085; April, $2,338)................ 83,088 65,712
----------- -----------
Total assets........................................................................ $ 357,543 $ 233,778
----------- -----------
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings................................................................. $ -- $ 33,135
Current portion of long-term debt..................................................... 1,799 2,022
Accounts payable...................................................................... 47,974 31,655
Accrued expenses...................................................................... 33,936 24,993
----------- -----------
Total current liabilities........................................................... 83,709 91,805
----------- -----------
Long-term debt, less current portion.................................................... 218,786 84,022
----------- -----------
Other long-term liabilities............................................................. 4,291 7,560
----------- -----------
Contingent purchase consideration....................................................... 1,828 5,733
----------- -----------
Stockholders' equity:
8% Cumulative convertible preferred stock at liquidation value........................ 9,832 11,823
9% Cumulative convertible preferred stock at liquidation value........................ 1,927 1,927
8.5% Cumulative convertible preferred stock at liquidation value...................... -- 3,500
Common stock, $.10 par value; authorized 25,000,000 shares; issued: October,
19,282,759 shares; April, 17,429,141 shares.......................................... 1,928 1,743
Capital in excess of par value........................................................ 120,971 103,114
Cumulative translation adjustment..................................................... (611) 144
Accumulated deficit................................................................... (81,427) (76,050)
----------- -----------
52,620 46,201
Less: shares of common stock held in treasury, at cost --
January, 629,448 shares; April, 233,290 shares.................................... (3,181) (1,229)
Receivable from stockholders....................................................... (510) (314)
----------- -----------
Total stockholders' equity......................................................... 48,929 44,658
----------- -----------
Total liabilities and stockholders' equity......................................... $ 357,543 $ 233,778
----------- -----------
----------- -----------
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
3
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JANUARY 31
----------------------
1996 1995
----------- ---------
<S> <C> <C>
Net sales................................................................................ $ 119,504 $ 45,900
Cost of goods sold....................................................................... 103,796 39,545
----------- ---------
Gross profit........................................................................... 15,708 6,355
Selling, general and administrative...................................................... 8,622 5,147
Amortization of goodwill................................................................. 660 368
----------- ---------
Operating income....................................................................... 6,426 840
Interest income.......................................................................... 832 34
Interest (expense)....................................................................... (6,765) (2,188)
Other (expense).......................................................................... (22) (640)
----------- ---------
Net income (loss) before income taxes.................................................. 471 (1,954)
Income tax expense....................................................................... 250 --
----------- ---------
Net income (loss)...................................................................... 221 (1,954)
Preferred stock dividends................................................................ 197 253
----------- ---------
Net income (loss) applicable to common stock........................................... $ 24 $ (2,207)
----------- ---------
----------- ---------
Net income (loss) per share of common stock.............................................. $ -- $ (0.12)
----------- ---------
----------- ---------
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
4
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
JANUARY 31
------------------------
1996 1995
----------- -----------
<S> <C> <C>
Net sales............................................................................... $ 384,540 $ 125,782
Cost of goods sold...................................................................... 335,981 108,464
----------- -----------
Gross profit.......................................................................... 48,559 17,318
Selling, general and administrative..................................................... 24,694 12,300
Amortization of goodwill................................................................ 1,975 879
----------- -----------
Operating income...................................................................... 21,890 4,139
Interest income......................................................................... 1,901 108
Interest (expense)...................................................................... (20,641) (4,213)
Other income (expense).................................................................. 105 (669)
----------- -----------
Income (loss) from continuing operations before income taxes.......................... 3,255 (635)
Income tax expense...................................................................... 699 232
----------- -----------
Income (loss) from continuing operations before extraordinary item.................... 2,556 (867)
(Loss) from discontinued operations..................................................... (2,213) (4,868)
----------- -----------
Income (loss) before extraordinary item............................................... 343 (5,735)
Extraordinary (loss) on early extinguishment of debt.................................... (4,856) --
----------- -----------
Net (loss)............................................................................ (4,513) (5,735)
Preferred stock dividends............................................................... 864 503
----------- -----------
Net (loss) applicable to common stock................................................. $ (5,377) $ (6,238)
----------- -----------
----------- -----------
Income (loss) per share of common stock:
Continuing operations................................................................. $ 0.10 $ (0.08)
Discontinued operations............................................................... (0.12) (0.27)
Extraordinary (loss) on early extinguishment of debt.................................. (0.27) --
----------- -----------
Net (loss) per share of common stock................................................ $ (0.30) $ (0.35)
----------- -----------
----------- -----------
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
5
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED JANUARY 31, 1996
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
9% 8%
CUMULATIVE CUMULATIVE
CONVERTIBLE CONVERTIBLE
COMMON STOCK CAPITAL PREFERRED STOCK PREFERRED STOCK
------------------------ IN EXCESS ------------------------ --------------------
SHARES AMOUNT OF PAR SHARES AMOUNT SHARES AMOUNT
----------- ----------- ----------- ----------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at April 30, 1995.............. 17,429,141 $ 1,743 $ 103,114 1,927 $ 1,927 236,480 $ 11,823
Compensation expense related to stock
options and grants.................... 111,452 11 314
Loans to stockholders..................
Dividends on preferred stock...........
Foreign currency translation...........
Conversion of convertible preferred
stock................................. 737,476 74 3,804
Conversion of convertible notes........ 51,483 5 245
Exercise of stock options.............. 33,919 3 88
Shares issued for directors' fees...... (18)
Purchase of treasury stock.............
Retirement of Adience 11% Senior Notes
(Note 5).............................. 44,900 2,245
Adience acquisition and debt exchange
reset (Note 5)........................ 919,288 92 4,945 (84,725) (4,236)
PolyVision merger and distribution
(Note 6).............................. 8,479
Net (loss) for the nine months ended
January 31, 1996......................
----------- ----------- ----------- ----------- ----------- --------- ---------
Balance at January 31, 1996............ 19,282,759 $ 1,928 $ 120,971 1,927 $ 1,927 196,655 $ 9,832
----------- ----------- ----------- ----------- ----------- --------- ---------
----------- ----------- ----------- ----------- ----------- --------- ---------
<CAPTION>
8.5%
CUMULATIVE
CONVERTIBLE
PREFERRED STOCK FOREIGN TREASURY STOCK
------------------------ ACCUMULATED CURRENCY ----------------------
SHARES AMOUNT DEFICIT TRANSLATION SHARES AMOUNT
----------- ----------- ------------- ------------- --------- -----------
<S> <C> <C>
Balance at April 30, 1995.............. 3,500 $ 3,500 $ (76,050) $ 144 (233,290) $ (1,229)
Compensation expense related to stock
options and grants....................
Loans to stockholders..................
Dividends on preferred stock........... (864)
Foreign currency translation........... (755)
Conversion of convertible preferred
stock................................. (3,500) (3,500)
Conversion of convertible notes........
Exercise of stock options..............
Shares issued for directors' fees...... 11,042 59
Purchase of treasury stock............. (407,200) (2,011)
Retirement of Adience 11% Senior Notes
(Note 5)..............................
Adience acquisition and debt exchange
reset (Note 5)........................
PolyVision merger and distribution
(Note 6)..............................
Net (loss) for the nine months ended
January 31, 1996...................... (4,513)
----------- ----------- ------------- ------ --------- -----------
Balance at January 31, 1996............ -- -- $ (81,427) $ (611) (629,448) $ (3,181)
----------- ----------- ------------- ------ --------- -----------
----------- ----------- ------------- ------ --------- -----------
<CAPTION>
RECEIVABLE
FROM
STOCKHOLDERS TOTAL
--------------- ---------
Balance at April 30, 1995.............. $ (314) $ 44,658
Compensation expense related to stock
options and grants.................... 325
Loans to stockholders.................. (196) (196)
Dividends on preferred stock........... (864)
Foreign currency translation........... (755)
Conversion of convertible preferred
stock................................. 378
Conversion of convertible notes........ 250
Exercise of stock options.............. 91
Shares issued for directors' fees...... 41
Purchase of treasury stock............. (2,011)
Retirement of Adience 11% Senior Notes
(Note 5).............................. 2,245
Adience acquisition and debt exchange
reset (Note 5)........................ 801
PolyVision merger and distribution
(Note 6).............................. 8,479
Net (loss) for the nine months ended
January 31, 1996...................... (4,513)
------ ---------
Balance at January 31, 1996............ $ (510) $ 48,929
------ ---------
------ ---------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
6
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
JANUARY 31
------------------------
1996 1995
------------ ----------
<S> <C> <C>
Cash flow from operating activities:
Income from continuing operations..................................................... $ 2,556 $ (867)
Adjustments to reconcile income to net cash provided by continuing operations:
Depreciation and amortization..................................................... 9,312 3,674
Accretion of debt discount and amortization of deferred financing................. 1,838 435
Compensation expense related to stock options and grants.......................... 284 407
Changes in assets and liabilities:
Accounts receivable............................................................... 9,519 (489)
Inventories....................................................................... 2,812 (3,739)
Prepaid expenses and other current assets......................................... (1,451) 1,054
Other assets...................................................................... 2,467 (209)
Accounts payable and accrued expenses............................................. (1,198) 3,623
Other............................................................................. 46 (242)
------------ ----------
Cash provided by continuing operating activities........................................ 26,185 3,647
------------ ----------
(Loss) from discontinued operations..................................................... (2,213) (4,868)
Adjustments to reconcile loss to net cash (used for) discontinued operations:
Depreciation and amortization....................................................... 179 548
Increase in net liabilities......................................................... -- 1,512
Other............................................................................... 770 206
------------ ----------
Cash (used for) discontinued operations................................................. (1,264) (2,602)
------------ ----------
Cash provided by operating activities................................................... 24,921 1,045
------------ ----------
Cash flow from investing activities:
Acquisitions, net of cash acquired.................................................... (103,409) 1,101
Investment in marketable securities................................................... (5,531) (16,227)
Capital expenditures for continuing operations........................................ (5,476) (1,500)
Capital expenditures for acquisition of BICC assets................................... (3,895) --
Capital expenditures for discontinued operations...................................... -- (229)
Loans to PolyVision Corporation....................................................... (5,185) --
Other................................................................................. 1,841 (571)
------------ ----------
Cash (used for) investing activities.................................................... (121,655) (17,426)
------------ ----------
------------ ----------
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
7
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
JANUARY 31
-------------------------
1996 1995
------------ -----------
<S> <C> <C>
Cash flow from financing activities:
Short-term borrowings (repayments)................................................... $ (21,000) $ 20,179
Borrowing under revolving credit facilities, net..................................... 29,122 1,675
Redemption of preferred stock........................................................ -- (287)
Dividends on preferred stock......................................................... (793) (103)
Capitalized financing costs.......................................................... (13,699) --
Purchase of treasury shares.......................................................... (1,952) (360)
Proceeds from exercise of stock options.............................................. 91 202
Repayments of long-term debt......................................................... (189,939) (3,178)
Long-term borrowings................................................................. 282,466 --
------------ -----------
Cash provided by financing activities.................................................. 84,296 18,128
------------ -----------
Net increase (decrease) in cash and cash equivalents................................... (12,438) 1,747
Cash and cash equivalents at beginning of period....................................... 15,546 2,507
------------ -----------
Cash and cash equivalents at end of period............................................. $ 3,108 $ 4,254
------------ -----------
Supplemental disclosures:
Taxes paid........................................................................... $ 433 $ 437
------------ -----------
Interest paid........................................................................ $ 18,395 $ 3,022
------------ -----------
Non-cash investing and financing activities:
Exchange of common stock for preferred stock:
Preferred stock acquired........................................................... $ 7,736 $ 250
------------ -----------
Dividends on preferred stock exchanged............................................. $ 451
------------
Common stock issued................................................................ $ 5,037
------------
Exchange of preferred stock for common stock:
Common stock acquired.............................................................. $ (8,000)
-----------
-----------
Preferred stock issued............................................................. $ 8,000
-----------
-----------
Preferred stock issued in connection with the retirement of Adience 11 1/2 Senior
Notes............................................................................... $ 2,245
------------
Conversion of notes.................................................................. $ 300
------------
Acquisition of business:
Assets, net of cash acquired....................................................... $ 126,127 $ 107,837
Preferred stock issued............................................................. -- (4,113)
Contingent consideration........................................................... -- (6,167)
Liabilities assumed................................................................ (22,718) (96,456)
------------ -----------
Net cash (paid) received........................................................... $ (103,409) $ 1,101
------------ -----------
------------ -----------
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
8
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 1996
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of
The Alpine Group, Inc. ("Alpine" or the "Company") reflect all adjustments
which, in the opinion of management, are necessary for a fair presentation of
the results of operations for the interim periods presented. These financial
statements should be read in conjunction with the summary of accounting policies
and the notes to the financial statements included in the Company's Annual
Report on Form 10-K for the year ended April 30, 1995.
Certain reclassifications have been made to the January 31, 1995 financial
statements to conform with the January 31, 1996 presentation.
2. INVENTORIES
The components of inventories are:
<TABLE>
<CAPTION>
JANUARY 31, APRIL 30,
1996 1995
----------- ---------
(IN THOUSANDS)
<S> <C> <C>
Raw materials........................................................ $ 16,746 $ 11,969
Work in process...................................................... 15,121 8,716
Finished goods....................................................... 33,722 14,557
----------- ---------
$ 65,589 $ 35,242
----------- ---------
----------- ---------
</TABLE>
3. INCOME (LOSS) PER SHARE
For the nine months ended January 31, 1996 and 1995, the weighted average
numbers of shares outstanding used in computing income (loss) per share were
17,844,031 and 17,910,346, respectively.
4. LONG-TERM INVESTMENTS AND OTHER ASSETS
The components of long-term investments and other assets are:
<TABLE>
<CAPTION>
JANUARY 31, APRIL 30,
1996 1995
----------- ---------
(IN THOUSANDS)
<S> <C> <C>
Equity investments in PolyVision (Note 6)............................ $ 15,633 $ 11,202
Deferred financing charges........................................... 10,484 --
Other assets......................................................... 7,373 5,739
----------- ---------
$ 33,490 $ 16,941
----------- ---------
----------- ---------
</TABLE>
5. ACQUISITIONS
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 initially financed with the
proceeds of the sale by Superior Telecommunications Inc. ("Superior"), a
subsidiary of Alpine, of $140,000,000 aggregate principal amount of notes (the
"Alcatel Acquisition Notes") (see Note 7).
The Alcatel Acquisition has been accounted for using the purchase method,
and accordingly, the results of operations of the Alcatel Business are included
in the Company's consolidated results on a prospective basis from the date of
the acquisition. The purchase price for the Alcatel Acquisition (including
expenses) has been allocated to the estimated fair market value of the assets
and liabilities
9
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 1996
(UNAUDITED)
5. ACQUISITIONS (CONTINUED)
of the Alcatel Business as of the acquisition date. The excess of the purchase
price over the estimated fair market value of identifiable net assets acquired
resulted in goodwill of approximately $18,055,000 which is being amortized on a
straight line basis over 30 years.
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>
Acquisition cost.............................................................. $ 103,409
Less, historical book value of net assets at May 11, 1995..................... (80,909)
Write-up of property, plant, and equipment.................................... (4,945)
Accrual of Alcatel employee relocation and severance costs.................... 500
--------------
Acquisition goodwill.......................................................... $ 18,055
--------------
--------------
</TABLE>
The acquisition cost of $103,409,000 includes $102,909,000 paid in cash to
Alcatel NA, and acquisition expenses estimated at $500,000.
ADIENCE ACQUISITION
On December 21, 1994, Alpine acquired 82.3% of the outstanding common stock
of Adience, Inc. ("Adience") which, when combined with Adience common stock
previously purchased by Alpine, resulted in Alpine owning 87.2% of Adience's
outstanding common stock on such date (the "Adience Acquisition"). Initial
consideration paid in the Adience Acquisition consisted of 82,267 shares of
Alpine's 8% cumulative convertible senior preferred stock ("8% Preferred
Stock"), with a liquidation preference of $4,113,350, 170,615 shares of
PolyVision Corporation ("PolyVision") common stock and $2,558,000 in cash which
included expenses associated with the acquisition. On July 21, 1995, Alpine
acquired the remaining 12.8% of Adience common stock for $1,596,000 in cash.
The terms under which the aforementioned PolyVision common stock was
delivered by Alpine to the Adience stockholders included a valuation reset under
certain conditions. The valuation reset required Alpine to deliver additional
consideration in an amount equal to 170,615 (the number of PolyVision common
shares originally delivered), multiplied by the difference (the "Valuation
Difference"), if any, between $33.60 and the greater of: (1) the average closing
price for a share of PolyVision common stock on the 20 trading days preceding
August 1, 1995, and (2) $11.25 per share. The valuation reset is payable, at the
option of Alpine, in either 8% Preferred Stock, additional shares of PolyVision
common stock, or a combination of both.
During fiscal 1996, certain of the former Adience stockholders agreed to
exchange 39,825 shares of the 8% Preferred Stock received in the Adience
Acquisition and terminate the right to receive $1,919,000 in value under the
aforementioned valuation reset, in consideration for the issuance by Alpine of
491,204 shares of Alpine common stock and the delivery of 129,542 additional
shares of PolyVision common stock. The difference in the fair market value of
the consideration exchanged in this transaction was accounted for as a reduction
in the purchase price for Adience.
Also in connection with the Adience Acquisition, Alpine entered into a debt
exchange agreement with the holders of a majority of Adience's 11% Senior Notes.
The debt exchange agreement, which was completed on July 21, 1995, resulted in
Alpine retiring $44,089,000 aggregate principle amount of Adience's 11% Senior
Notes ($40,982,000 recorded amount) for $35,271,000 in cash, 44,906 shares of
10
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 1996
(UNAUDITED)
5. ACQUISITIONS (CONTINUED)
8% Preferred Stock with a liquidation preference of $2,245,000, and 66,801
shares of PolyVision common stock, subject to a valuation reset under certain
conditions. The valuation reset requires Alpine to deliver to the former Adience
note holders an amount equal to 66,801 multiplied by the Valuation Difference
(as defined above). On October 31, 1995, the former Adience note holders agreed
to exchange the 44,900 shares of 8% Preferred Stock received in the debt
exchange and terminate the right to receive $1,493,000 in value under the
valuation reset, in consideration for the issuance by Alpine of 428,084 shares
of Alpine common stock and the delivery of 121,929 additional shares of
PolyVision common stock. The difference between the recorded value of the
Adience 11% Senior Notes and the value of the exchange consideration paid or
issued by Alpine in the debt exchange has been recorded as a reduction in the
purchase price for Adience.
PRO FORMA FINANCIAL DATA.
Unaudited condensed pro forma results of operations for the nine month
period ended January 31, 1996 and 1995 which give effect to the Alcatel
Acquisition and the Adience Acquisition, as if both transactions had occurred on
May 1, 1994 are presented below. 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 results of operations.
<TABLE>
<CAPTION>
PRO FORMA
(UNAUDITED)
NINE MONTH PERIOD ENDED
JANUARY 31
------------------------
1996 1995
----------- -----------
(IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C>
Net sales..................................................................... $ 392,061 $ 338,389
Income (loss) from continuing operations before income taxes.................. 3,437 (7,264)
Income (loss) from continuing operations before extraordinary item............ 2,738 (7,496)
(Loss) from discontinued operations........................................... (2,213) (4,868)
Extraordinary (loss) on early retirement of debt.............................. (4,856) --
Net (loss).................................................................... (4,331) (12,364)
Income (loss) per share of common stock:
Continuing operations....................................................... $ 0.11 $ (0.46)
Discontinued operations..................................................... (0.12) (0.27)
Extraordinary (loss) on early extinguishment of debt........................ (0.27) --
Net (loss).................................................................. (0.29) (0.73)
</TABLE>
6. DISCONTINUED OPERATIONS
During fiscal 1995, Alpine management adopted a plan to distribute to
shareholders a substantial portion of the ownership of its information display
segment subsidiaries consisting of 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 78%-owned subsidiary of
Adience. Following the PolyVision Merger, Alpine owned 98% of PolyVision's
outstanding preferred stock with a liquidation preference of $25,000,000 and 94%
of PolyVision's outstanding common stock.
11
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 1996
(UNAUDITED)
6. DISCONTINUED OPERATIONS (CONTINUED)
As a result of the PolyVision Merger, Alpine's ownership of the outstanding
PolyVision common stock increased from 70% to 94%. In accordance with FASB
Technical Bulletin 85-5, this increase in equity ownership has been recorded as
the acquisition of a portion of PolyVision minority interest at its estimated
fair value. Because the minority interest was acquired by an Alpine subsidiary
issuing stock, the excess of the fair value of the minority interest acquired
over the book value of the interest given up in APV and Posterloid has been
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 used as
partial consideration in connection with the acquisition of Adience and the
retirement of the Adience 11% Senior Secured Notes, resulted in the ownership by
Alpine of less than 20% of the outstanding shares of PolyVision common stock.
Accordingly, Alpine is accounting for its remaining PolyVision investment at its
fair value as a security available for sale, which amount is included in
long-term investments and other assets in the accompanying balance sheet.
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.
The aforementioned transaction is a taxable transaction, and actual taxes
payable, if any, will depend on Alpine's tax position for fiscal 1996.
7. DEBT
Debt consists of the following:
<TABLE>
<CAPTION>
JANUARY 31, APRIL 30,
1996 1995
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
12.25% Senior Secured Notes due 2003 (face value $153,000,000)................ $ 140,799 $ --
$85.0 million revolving credit facility....................................... 59,200 --
13.5% Senior Secured Notes (face value $21,000,000)........................... -- 20,790
Adience 11% Senior Secured Notes due 2002 (face value of $4,989,000 and
$49,079,000 at January 31, 1996 and April 30, 1995, respectively)............ 4,662 44,386
Revolving credit loan -- Superior............................................. -- 16,533
Revolving credit loan -- Adience.............................................. -- 12,345
Revolving credit loan -- DNE.................................................. -- 627
Term loan..................................................................... -- 5,386
Mortgage loan................................................................. 5,047 5,297
Subordinated note............................................................. -- 2,469
Lease finance obligations..................................................... 5,885 5,967
Other......................................................................... 4,992 5,379
----------- -----------
Total debt................................................................ 220,585 119,179
Less: short-term borrowings and current portion............................... 1,799 35,157
----------- -----------
Long-term debt............................................................ $ 218,786 $ 84,022
----------- -----------
----------- -----------
</TABLE>
12
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 1996
(UNAUDITED)
7. DEBT (CONTINUED)
The aggregate maturities of long-term debt for the five years subsequent to
January 31, 1996 are as follows:
<TABLE>
<CAPTION>
AMOUNT
--------------
(IN THOUSANDS)
<S> <C>
1996................................................................ $ 1,799
1997................................................................ 2,410
1998................................................................ 740
1999................................................................ 606
2000................................................................ 59,706
</TABLE>
On July 21, 1995, Alpine completed a placement of $153,000,000 principal
amount of 12.25% Senior Secured Notes (the "Senior Notes") due 2003 at an issue
price of 91.737%, with interest payable semiannually on January 15 and July 15.
The Senior Notes are secured by a pledge of the capital stock of Superior and
Adience and are guaranteed by certain subsidiaries of Alpine. The Senior Notes
include certain customary covenants including, among other things, limitations
on indebtedness, investments, and payment of dividends on common stock.
In conjunction with the placement of the Senior Notes, Alpine entered into
an $85,000,000 revolving credit facility (the "Credit Facility") of which
$59,200,000 was outstanding at January 31, 1996. Interest on the Credit Facility
is payable monthly at a rate of LIBOR plus 2.25% or prime plus 0.375%.
Borrowings under the facility are subject to a borrowing base determined as a
percentage of eligible accounts receivable and inventory (as defined). As of
January 31, 1996, total borrowing availability amounted to approximately
$80,000,000. Loans under the Credit facility are guaranteed by Superior and
Adience and are secured by substantially all of Alpine's assets, other than
capital stock of its subsidiaries, real estate, and other fixed assets. Amounts
outstanding under the Credit Facility are due upon termination in July 2000. The
Credit Facility contains customary covenants including limitations on capital
expenditures, dividends, and additional borrowings, as well as certain financial
covenants related to net worth and operating cash flow.
Proceeds from the Senior Notes, borrowings under the Credit Facility, and a
portion of cash reserves were used to refinance a substantial portion of the
Company's debt, including repayment of the $140,000,000 Alcatel Acquisition
Notes (see Note 5). The Alcatel Acquisition Notes were issued on May 11, 1995,
and the proceeds were used to (1) pay the initial purchase price for the Alcatel
Acquisition ($93,000,000), (2) repay amounts outstanding under Superior's
revolving credit facility ($17,200,000) and its term loan ($5,400,000), (3) pay
fees and expenses amounting to $5,1000,000, with the balance of $19,300,000
being added to corporate cash reserves. The other major uses of the proceeds
from the Senior Notes and the Credit Facility included (i) repayment of
$21,000,000 face amount of the Company's 13.5% Senior Secured Notes, (ii)
$10,000,000 repayment of the balance outstanding under Adience's revolving
credit facility, and (iii) $35,271,000 used to retire $44,089,000 aggregate
principle amount of Adience's 11% Senior Notes (see Note 5).
As a result of the refinancing and the aforementioned redemption of
indebtedness, the Company recognized a $4,856,000 extraordinary loss on the
early extinguishment of debt during the nine months ended January 31, 1996
related principally to the write-off of deferred loan fees associated with the
various debt repayments.
13
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 1996
(UNAUDITED)
8. PREFERRED STOCK
On July 31, 1995, the Company issued 737,476 shares of Company common stock
in exchange for all the outstanding 8.5% Cumulative Convertible Preferred Stock
plus accrued dividends at a conversion price of $5.25 per share of common stock.
9. COMMITMENTS AND CONTINGENCIES
On May 25, 1994, Alpine and ten other parties were named as codefendants 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. 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, Panex Industries,
Inc. which through its successor, Panex Industries, Inc. Liquidating trust, has
elected to control the defense of this action. Management believes that such
trust has sufficient assets to meet its indemnification obligations.
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 the state of Ohio a civil penalty and to
remediate the site in accordance with specific 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 January 31, 1996, environmental accruals amounted to
$39,000, which represents management's estimate of the amounts remaining to be
incurred in this matter, including the costs of effecting the closure plan,
bonding and insurance costs, penalties, and legal and consultants' fees. If the
Ohio EPA does not accept the proposed amendment to the consent order, the cost
of the remediation may exceed the amounts currently accrued.
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.
14
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 1996
(UNAUDITED)
9. COMMITMENTS AND CONTINGENCIES (CONTINUED)
In May 1995, Adience was named as 1 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 and its counsel
are evaluating the validity of such claims and the scope of its potential
liabilities and defense costs.
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 not have a material adverse effect upon
Alpine's consolidated financial position, liquidity, or results of operations.
10. SUBSIDIARY GUARANTEES
On July 21, 1995, Alpine issued and sold $153,000,000 principal amount of
12.25% Senior Secured Notes (the "Senior Notes") (see Note 7). The Senior Notes
are fully and unconditionally guarranteed on a senior secured basis by Superior
Telecommunications Inc. and Adience Inc. (wholly owned subsidiaries of Alpine)
and Superior Cable Corp. (a wholly owned subsidiary of Superior
Telecommunications Inc.) The Adience subsidiary guarantee, however, are
subordinate in right of payment to $5.0 million of Adience's 11% Senior Notes
outstanding. The subsidiary guarantees rank pari passu in right of payment with
other senior debt of Alpine (including the Credit Facility) and other senior
debt of the subsidiary guarantors. The subsidiary guarantors have also
guaranteed the indebtedness outstanding under Alpine's Credit Facility (see Note
7). The Notes, however, 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 Credit Facility
or such other secured 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 included herein as exhibits. The following condensed
consolidating information presents condensed financial statements as of January
31, 1996 of (a) Alpine on a parent company basis with its investments in
subsidiaries accounted for under the equity method (Parent Company), (b) the
subsidiary guarantors, (c) the combined non-guarantors, and (d) Alpine on a
consolidated basis.
15
<PAGE>
THE ALPINE GROUP, INC.
CONDENSED CONSOLIDATING STATEMENT OF EARNINGS
FOR THE NINE MONTHS ENDED JANUARY 31, 1996
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SUBSIDIARY
PARENT SUBSIDIARY NON- ELIMINATING
COMPANY GUARANTORS GUARANTORS ENTRIES CONSOLIDATED
---------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Net sales........................................... $ 356,716 $ 27,824 $ 384,540
Cost of goods sold.................................. 316,253 19,728 335,981
---------- ----------- ----------- ----------- ------------
Gross profit...................................... 40,463 8,096 48,559
Selling, general & administrative................... $ 3,718 14,649 6,327 24,694
Amortization of goodwill............................ 1,975 1,975
---------- ----------- ----------- ----------- ------------
Operating income (loss)........................... (3,718) 23,839 1,769 21,890
Interest (expense), net............................. (12,841) (5,431) (468) (18,740)
Other income (expense).............................. 88 17 105
Intercompany interest income (expense).............. 12,481 (12,265) (216) --
---------- ----------- ----------- ----------- ------------
Income from continuing operations before income
tax.............................................. (3,990) 6,143 1,102 3,255
Equity in income from subsidiaries.................. 1,232 533 -- $ (1,765) --
---------- ----------- ----------- ----------- ------------
(2,758) 6,676 1,102 (1,765) 3,255
Income tax (expense) benefits....................... 3,364 (3,395) (668) -- (699)
---------- ----------- ----------- ----------- ------------
Income (loss) from continuing operations.......... 606 3,281 434 (1,765) 2,556
(Loss) from discontinued operations................. (2,213) -- -- -- (2,213)
---------- ----------- ----------- ----------- ------------
(1,607) 3,281 434 (1,765) 343
Extraordinary gain (loss) on early extinguishment of
debt............................................... (2,906) (2,261) 311 -- (4,856)
---------- ----------- ----------- ----------- ------------
$ (4,513) $ 1,020 $ 745 $ (1,765) $ (4,513)
---------- ----------- ----------- ----------- ------------
---------- ----------- ----------- ----------- ------------
</TABLE>
16
<PAGE>
THE ALPINE GROUP, INC.
CONDENSED CONSOLIDATING BALANCE SHEET
AS OF JANUARY 31, 1996
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SUBSIDIARY
PARENT SUBSIDIARY NON- ELIMINATING
COMPANY GUARANTORS GUARANTORS ENTRIES CONSOLIDATED
----------- ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Assets
Current assets.................................. $ 9,299 $ 113,470 $ 20,095 $ (1,204) $ 141,660
Property, plant and equipment, net.............. 149 94,750 4,406 -- 99,305
Goodwill, net................................... -- 87,670 -- (4,582) 83,088
Investment in, and net advances and loans to,
subsidiaries................................... 216,849 (134,108) (4,560) (78,181) --
Other non-current assets........................ 30,022 4,230 819 (1,581) 33,490
----------- ------------ ----------- ----------- ------------
Total assets.................................. $ 256,319 $ 166,012 $ 20,760 $ (85,548) $ 357,543
----------- ------------ ----------- ----------- ------------
----------- ------------ ----------- ----------- ------------
Liabilities and stockholders' equity
Current liabilities............................. $ 5,044 $ 72,172 $ 6,518 $ (25) $ 83,709
Long-term debt.................................. 200,518 12,659 5,609 -- 218,786
Other non-current liabilities................... 1,828 10,848 745 (7,302) 6,119
Equity.......................................... 48,929 70,333 7,888 (78,221) 48,929
----------- ------------ ----------- ----------- ------------
Total liabilities and stockholders' equity.... $ 256,319 $ 166,012 $ 20,760 $ (85,548) $ 357,543
----------- ------------ ----------- ----------- ------------
----------- ------------ ----------- ----------- ------------
</TABLE>
17
<PAGE>
THE ALPINE GROUP, INC.
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED JANUARY 31, 1996
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SUBSIDIARY
PARENT SUBSIDIARY NON- ELIMINATING
COMPANY GUARANTORS GUARANTORS ENTRIES CONSOLIDATED
------------ ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Cash flow from operating activities
Income (loss) from continuing operations............. $ 606 $ 3,281 $ 434 $ (1,765) $ 2,556
Adjustments to reconcile (loss) to net cash provided
by continuing operations:
Depreciation, amortization and other non-cash
charges........................................... 1,653 9,143 638 -- 11,434
Changes in assets and liabilities.................. 493 13,937 (2,235) -- 12,195
Cash used for discontinued operations.............. (1,264) -- -- -- (1,264)
------------ ------------ ----------- ----------- ------------
Cash provided by (used for) operations................. 1,488 26,361 (1,163) (1,765) 24,921
------------ ------------ ----------- ----------- ------------
Cash flow from investing activities:
Acquisition, net of cash............................. -- (103,409) -- -- (103,409)
Capital expenditures................................. (69) (4,967) (440) -- (5,476)
Capital expenditures on acquisition of BICC assets... -- (3,895) -- -- (3,895)
Investment in marketable securities.................. (5,531) -- -- -- (5,531)
Loans to PolyVision Corporation...................... (5,185) -- -- -- (5,185)
Other................................................ (1,350) 1,841 1,350 -- 1,841
------------ ------------ ----------- ----------- ------------
Cash provided by (used for) investing activities....... (12,135) (110,430) 910 -- (121,655)
------------ ------------ ----------- ----------- ------------
Cash flow from financing activities:
Repayments of long-term borrowings................... (1,701) (185,673) (2,565) -- (189,939)
Repayments of short-term borrowings.................. (21,000) -- -- -- (21,000)
Intercompany (advances) borrowings................... (165,511) 160,832 2,914 1,765
Borrowing (repayments) under revolving credit
facilities, net..................................... 59,200 (28,956) (1,122) -- 29,122
Long-term borrowings................................. 141,114 141,352 -- -- 282,466
Other................................................ (13,138) (3,215) -- -- (16,353)
------------ ------------ ----------- ----------- ------------
Cash provided by (used for) financing activities....... (1,036) 84,340 (773) 1,765 84,296
------------ ------------ ----------- ----------- ------------
Net increase (decrease) in cash and cash equivalents... (11,683) 271 (1,026) -- (12,438)
Cash and cash equivalents at the beginning of the
period................................................ 13,299 28 2,219 -- 15,546
------------ ------------ ----------- ----------- ------------
Cash and cash equivalents at the end of the period..... $ 1,616 $ 299 $ 1,193 $ -- $ 3,108
------------ ------------ ----------- ----------- ------------
------------ ------------ ----------- ----------- ------------
</TABLE>
18
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
LIQUIDITY AND CAPITAL RESOURCES
Alpine is a diversified industrial company 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
cogeneration 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 acquisition of
Superior and significantly enlarged its presence in this market with the Alcatel
Acquisition in May 1995. In December 1994 Alpine entered the specialty
refractory business with the Adience Acquisition (See Note 5 to the accompanying
Condensed Consolidated Financial Statements for a further description of the
Alcatel Acquisition and the Adience Acquisition).
RESULTS OF OPERATIONS
The Alcatel Acquisition and the Adience Acquisition were both accounted for
under the purchase method, with the results from these operations included in
Alpine's consolidated results on a prospective basis, from the date of their
respective acquisitions.
The following comparative table includes operating statement data for Alpine
on an industry segment basis. Such industry segment operating data is presented
on an historical reporting basis for the three month and nine month periods
ended January 31, 1996 and 1995. Further, due to the significance of the Alcatel
Acquisition and the Adience Acquisition on Alpine's results of operations, pro
forma operating data is included in the table to reflect such acquisitions as if
they occurred on May 1, 1994. Management believes that the pro forma
presentation provides meaningful comparability among reporting periods. The pro
forma data includes adjustments to depreciation and goodwill amortization to
reflect acquisition-related purchase accounting adjustments. The pro forma data
for the Alcatel Business and the Adience operations also includes pro forma
adjustments to reflect: (1) with respect to Adience, the elimination of certain
expenses incurred by Adience that were directly attributable to the acquisition
of Adience or would not have been incurred if the acquisition of Adience had
taken place on May 1, 1994 and; (2) with respect to the Alcatel Business,
reductions in manufacturing expenses and selling, general, and administrative
expenses incurred by the Alcatel Business which are not expected to recur or
have been eliminated. The pro forma adjustments described above are consistent
with those adjustments reflected in the "Unaudited Pro Forma Condensed Combined
Statements of Operations" for the 12 months ended April 30, 1995 included in
Item 7 in the Company's Annual Report on Form 10-K for the year ended April 30,
1995, as amended. The pro forma data is not necessarily indicative of the
results that would have been achieved had such acquisitions actually occurred on
May 1, 1994, nor is it necessarily indicative of Alpine's future results.
19
<PAGE>
The data presented in the table below reflects the Company's three business
segments: telecommunications wire and cable ("Superior"); refractories
("Adience"); and data communications and electronic products ("DNE").
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
JANUARY 31, THREE MONTHS ENDED NINE MONTHS ENDED NINE MONTHS ENDED
1996 JANUARY 31, 1995 JANUARY 31, 1996 JANUARY 31, 1995
------------- ---------------------- ---------------------- ----------------------
HISTORICAL HISTORICAL PROFORMA HISTORICAL PROFORMA HISTORICAL PROFORMA
------------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales:
Superior................... $ 84,445 $ 30,513 $ 77,244 $ 281,461 $ 288,982 $ 96,227 $ 241,589
Adience.................... 28,319 7,634 24,449 84,955 84,955 7,634 74,879
DNE........................ 6,740 7,753 7,753 18,124 18,124 21,921 21,921
------------- ---------- ---------- ---------- ---------- ---------- ----------
Consolidated............. $ 119,504 $ 45,900 $ 109,446 $ 384,540 $ 392,061 $ 125,782 $ 338,389
------------- ---------- ---------- ---------- ---------- ---------- ----------
------------- ---------- ---------- ---------- ---------- ---------- ----------
Gross profit:
Superior................... $ 8,964 $ 2,959 $ 5,509 $ 26,054 $ 26,649 $ 9,651 $ 18,719
Adience.................... 4,807 1,287 3,728 17,115 17,115 1,287 13,429
DNE........................ 1,937 2,109 2,109 5,390 5,390 6,380 6,380
------------- ---------- ---------- ---------- ---------- ---------- ----------
Consolidated............. $ 15,708 $ 6,355 $ 11,346 $ 48,559 $ 49,154 $ 17,318 $ 38,528
------------- ---------- ---------- ---------- ---------- ---------- ----------
------------- ---------- ---------- ---------- ---------- ---------- ----------
Gross margin percentage:
Superior................... 10.6% 9.7% 7.1% 9.3% 9.2% 10.0% 7.7%
Adience.................... 17.0% 16.9% 15.2% 20.1% 20.1% 16.9% 17.9%
DNE........................ 28.7% 27.2% 27.2% 29.7% 29.7% 29.1% 29.1%
------------- ---------- ---------- ---------- ---------- ---------- ----------
Consolidated............. 13.1% 13.8% 10.4% 12.6% 12.5% 13.8% 11.4%
------------- ---------- ---------- ---------- ---------- ---------- ----------
------------- ---------- ---------- ---------- ---------- ---------- ----------
Selling, general and
administrative expenses:
Superior................... $ 2,138 $ 1,250 $ 1,540 $ 5,743 $ 5,781 $ 3,676 $ 4,566
Adience.................... 3,521 1,572 3,900 10,805 10,805 1,572 11,808
DNE........................ 1,346 1,521 1,521 4,428 4,428 4,888 4,888
Corporate.................. 1,617 804 804 3,718 3,723 2,164 2,144
------------- ---------- ---------- ---------- ---------- ---------- ----------
Consolidated............. $ 8,622 $ 5,147 $ 7,765 $ 24,694 $ 24,737 $ 12,300 $ 23,406
------------- ---------- ---------- ---------- ---------- ---------- ----------
------------- ---------- ---------- ---------- ---------- ---------- ----------
Amortization of goodwill:
Superior................... $ 349 $ 255 $ 414 $ 1,041 $ 1,055 $ 755 $ 1,201
Adience.................... 311 113 312 934 934 113 935
DNE........................ -- -- -- -- -- -- --
Corporate.................. -- -- -- -- -- 11 11
------------- ---------- ---------- ---------- ---------- ---------- ----------
Consolidated............. $ 660 $ 368 $ 726 $ 1,975 $ 1,989 $ 879 $ 2,147
------------- ---------- ---------- ---------- ---------- ---------- ----------
------------- ---------- ---------- ---------- ---------- ---------- ----------
Operating income:
Superior................... $ 6,477 $ 1,454 $ 3,555 $ 19,270 $ 19,813 $ 5,220 $ 12,952
Adience.................... 975 (398) (484) 5,376 5,376 (398) 686
DNE........................ 591 588 588 962 962 1,492 1,492
Corporate.................. (1,617) (804) (804) (3,718) (3,723) (2,175) (2,155)
------------- ---------- ---------- ---------- ---------- ---------- ----------
Consolidated............. $ 6,426 $ 840 $ 2,855 $ 21,890 $ 22,428 $ 4,139 $ 12,975
------------- ---------- ---------- ---------- ---------- ---------- ----------
------------- ---------- ---------- ---------- ---------- ---------- ----------
</TABLE>
NET SALES
PRO FORMA BASIS
For the quarter ended January 31, 1996, net sales were $119.5 million or 9%
greater than pro forma net sales of $109.4 million recorded in the January 31,
1995 quarterly period. For the nine month period ended January 31, 1996, pro
forma net sales were $392.1 million, representing an increase of $53.7 million
(or 16%) over pro forma net sales of $338.4 million recorded in the January 31,
1995 nine month period.
On an industry segment basis, Superior's net sales of $84.4 million for the
January 1996 fiscal quarter increased $7.2 million (or 9%) over January 1995
quarterly pro forma net sales. On a nine month basis, Superior's pro forma net
sales of $289.0 million for the January 1996 nine month period
20
<PAGE>
were 20% (or $47.4 million) higher than pro forma net sales for the January 1995
nine month period. Approximately $1.5 million and $21.0 million, respectively,
of Superior's comparative increase in net sales for the January 1996 three month
and nine month periods was attributable to the pass through, in the form of
increased selling prices, of higher copper costs. The remainder of the
comparative increase, representing $5.7 million (7%) for the 1996 three month
period and $26.3 million (11%) for the 1996 nine month period, was the result of
non-copper based price increases instituted during fiscal 1996, increased demand
levels for telecommunications wire and cable products, and additional business
under new long term supply agreements with two regional Bell operating
companies.
It is important to note that Superior's business is typically impacted by a
seasonal slowdown in procurement by its major telephone company customers during
the January quarterly period. In the current fiscal year, January quarterly
revenues reflected this anticipated seasonal impact as net sales declined
approximately 15% (adjusted for the impact of copper cost pass through) as
compared to the preceding fiscal quarter ended October 31, 1995. The Company
expects Superior's revenues in the fourth quarter of fiscal 1996 (ended April
30) to increase to a level commensurate with the October 31, 1995 fiscal
quarter.
Adience's net sales for the January 1996 quarter were $28.3 million, or 16%
higher than January 1995 quarterly pro forma net sales of $24.4 million. For the
January 1996 nine month period, Adience's net sales were $85.0 million,
representing an increase of more than 13% over pro forma net sales of $74.9
million for the January 1995 nine month period. Approximately $3.0 million and
$5.0 million, respectively, of Adience's increased sales during the January 1996
three month and nine month periods was attributable to increased activities in
Adience's contracting services for rebuilding coke ovens. The remainder of the
comparative increase during the January 1996 fiscal periods resulted from
generally higher levels of sales (comparative increases year-to-date of 5%-15%)
in each of Adience's four other operating divisions.
DNE's net sales for the January 1996 quarter were $6.7 million as compared
to $7.8 million in the January 1995 quarterly period. DNE's net sales for the
January 1996 nine month period were $18.1 million as compared to $21.9 million
for the January 1995 nine month period. The comparative reduction in net sales
for both the three month and nine month periods of 1996 was due primarily to the
substantial completion during the year ended April 30, 1995 of a major contract
with NASA for the manufacture of hardware interface modules. The NASA contract
contributed revenues of $2.3 million and $5.6 million for the three month and
nine month periods of fiscal 1995. Partially offsetting this revenue reduction
was a comparative increase in revenues from DNE's commercial contract
manufacturing activities of $1.5 million and $2.3 million for the 1996 three
month and nine month periods, respectively.
HISTORICAL BASIS
On an historical basis, Alpine's comparative net sales grew from $45.9
million in the January 1995 quarter to $119.5 million in the January 1996
quarter, an increase of $73.6 million. For the nine month period, net sales
increased $258.8 million to $384.5 million for the nine months ended January 31,
1996. The comparative increase in net sales for the 1996 three month and nine
month periods was primarily attributable to the inclusion of the results of
operations of Adience and the Alcatel Business during substantially all of
fiscal 1996 and the increase in selling prices for Superior's telecommunications
wire and cable products during the January 1996 fiscal periods, offset somewhat
by the aforementioned reduction in DNE's net sales.
GROSS PROFIT
PRO FORMA BASIS
Gross profit for the January 31, 1996 fiscal quarter was $15.7 million,
representing an increase of $4.4 million (or 39%) over the January 1995
quarterly pro forma gross profit of $11.3 million. The gross margin percentage
increased to 13.1% for the January 1996 quarterly period as compared to
21
<PAGE>
10.4% (on a pro forma basis) for the January 1995 quarter. For the nine month
period ended January 31, 1996, pro forma gross profit was $49.2 million, or 28%
higher than the pro forma gross profit of $38.5 million recorded in the January
1995 nine month period. The pro forma gross margin increased from 11.4% in the
January 1995 nine month period to 12.5% in the January 1996 nine month period.
On an industry segment basis, Superior's gross margin increased during each
quarter of fiscal 1996, and reflected a substantial increase over the pro forma
gross margin in the comparative periods of fiscal 1995. During the January 1996
fiscal quarter, Superior's gross margin was 10.6%, as compared to a gross margin
of 8.9% and 8.4% for the two preceding quarters of fiscal 1996, ended October 31
and July 31, 1995, respectively. Superior's gross margin for the January 1996
quarterly and nine month periods of 10.6% and 9.2% also compares favorably to
the pro forma gross margin of 7.1% and 7.7% (7.2% if adjusted for the pass
through of higher copper costs) for the three month and nine month periods ended
January 1995. The increase in Superior's comparative pro forma gross margin for
the three month and nine month periods ended January 1996, as well as the
increase in gross margin for the January 1996 quarter as compared to the October
1995 and July 1995 quarters, resulted principally from the impact of price
increases instituted on a majority of Superior's long-term customer agreements,
which price increases are being phased in over varying periods through February
1996. In addition, higher production volumes associated with increased product
demand has resulted in improved absorption of fixed costs during the 1996 fiscal
periods.
Adience's gross margin was 17.0% for the January 1996 quarter as compared to
15.2% for the January 1995 quarter. For the nine month period, Adience's gross
margin increased from 17.9% in the January 1995 period to 20.1% in the January
1996 period. The comparative pro forma gross margin improvement in fiscal 1996
was due primarily to the elimination of unprofitable product lines and
manufacturer cost reductions in Adience's specialty block division, and a
proportional increase in revenues from Adience's coke oven rebuilding division
which generates higher gross margins as compared to Adience's other divisions.
DNE's gross margin of 28.7% and 29.7% for the January 1996 three month and
nine month periods, respectively, was comparable to DNE's 1995 gross margin of
27.2% and 29.1%, respectively.
HISTORICAL BASIS
On an historical basis, gross profit increased from $6.4 million during the
January 1995 quarter to $15.7 million during the January 1996 quarter,
representing an increase of $9.3 million, or 145%. During this same period, the
gross margin declined from 13.8% to 13.1%. For the nine month period ended
January, the gross profit in fiscal 1996 of $48.6 million represented an
increase of approximately $31.3 million over the fiscal 1995 gross profit of
$17.3 million. The gross margin for this same period declined from 13.8% to
12.6%. The comparative increase in gross profit during the three month and nine
month periods of 1996 was directly attributable to the inclusion of the Alcatel
Business and Adience during substantially all of the fiscal 1996 periods.
Similarly, the decline in gross margin was due to the inclusion of these
acquired operations which operate in relatively lower gross margin markets as
compared to DNE. In addition, the gross margin in the 1996 fiscal periods was
impacted by the aforementioned pass-through of higher copper costs, which
incrementally increases net sales but does not impact gross profit, resulting in
lower gross margins.
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES ("SG&A EXPENSES")
PRO FORMA BASIS
SG&A expenses increased by 11% to $8.6 million for the quarter ended January
31, 1996 as compared to pro forma SG&A expenses of $7.8 million for the quarter
ended January 31, 1995. For the January 1996 nine month period, pro forma SG&A
expenses were $24.7 million, representing an increase of 5.5% over 1995 nine
month pro forma SG&A expenses of $23.4 million. The major components of the
comparative change in pro forma SG&A expenses included the following: (1) a
comparative increase at Superior of $598,000 and $1.2 million for the three
month and nine month periods, respectively, representing primarily transitional
data processing charges associated with the
22
<PAGE>
Alcatel Acquisition and higher sales and marketing expenses associated with
Superior's increased revenues in fiscal 1996; (2) a comparative reduction at
Adience for the three month and nine month periods of $379,000 and $1.0 million,
respectively, due primarily to a reduction in corporate staffing and related
expenses; and (3) a comparative increase in corporate expenses of $813,000 and
$1.6 million for the three month and nine month periods, respectively, related
to recent transactional activities commensurate with the growth in consolidated
operations.
HISTORICAL BASIS
On an historical basis, SG&A expenses increased from $5.1 million in the
January 1995 quarter to $8.6 million in the January 1996 quarter. For the nine
month period, SG&A expenses increased from $12.3 million in the January 1995
period to $24.7 million in the January 1996 period. The principal cause of the
comparative increase in SG&A expenses for the January three month and nine month
periods was the inclusion of SG&A expenses for Adience's operations for the
entire fiscal 1996 periods, as well as increases at Superior and corporate,
reflecting Superior's acquisition of Alcatel and the growth in its operations,
and the overall increase in corporate activities.
OPERATING INCOME
PRO FORMA BASIS
On a pro forma basis, comparative operating income for the January 1996
quarter increased $3.5 million, or 125%, from $2.9 million during the January
1995 quarter to $6.4 million during the January 1996 quarter. For the nine month
period, pro forma operating income increased 73% from $13.0 million during the
January 1995 nine month period to $22.4 million during the January 1996 nine
month period.
On an industry segment basis, Superior's comparative pro forma operating
income reflected an increase of $2.9 million (82%) for the January 1996 three
month period and $6.9 million (53%) for the January 1996 nine month period. Such
increases were due to higher sales and higher gross margins (particularly during
the third fiscal quarter of 1996), offset somewhat by higher SG&A expenses.
Adience's comparative pro forma operating results improved from an operating
loss of $484,000 in the January 1995 quarter to $975,000 of operating income in
the January 1996 quarter (an improvement of $1.5 million). For the January nine
month period, Adience's pro forma operating income increased from $686,000 in
1995 to $5.4 million in 1996 (an increase of $4.7 million). Adience's improved
operating profit was attributable to higher sales, cost and overhead reductions,
and elimination of unprofitable product lines.
DNE's operating income in the January 1996 quarter was comparable to
operating income in the January 1995 quarter. However, for the nine month period
DNE's operating income declined by $530,000.
The aggregate increase in comparative pro forma operating income at Alpine's
operating subsidiaries for the January 1996 three month period of $4.4 million
(an increase of 120%) and for the January 1996 nine month period of $11.0
million (an increase of 73%) was partially offset by a comparative increase in
corporate expenses of $813,000 and $1.6 million for the January 1996 three month
and nine month periods, respectively.
HISTORICAL BASIS
On an historical basis, operating income increased from $840,000 for the
January 1995 quarter to $6.4 million for the January 1996 quarter, an increase
of $5.6 million. For the nine month period ended January 1996, comparative
operating income increased by $17.8 million to $21.9 million. The comparative
increase in operating income for the three month and nine month periods of 1996
was attributable to the inclusion of the operations of the Alcatel Business and
of Adience's operations in 1996 along with price increases in the wire and cable
operations, offset by a comparative reduction at DNE and a comparative increase
in corporate expenses.
23
<PAGE>
NET INTEREST EXPENSE
During the January 1996 quarter Alpine incurred interest expense of $6.8
million as compared to interest expense of $2.2 million in the January 1995
quarter. For the nine month period ended January 1996, interest expense was
$20.6 million as compared to $4.2 million for the 1995 January nine month
period. The increase in interest expense for the three month and nine month
periods of 1996 was due primarily to interest cost associated with debt assumed
in the Adience Acquisition and debt incurred in connection with the Alcatel
Acquisition. During the January 1996 fiscal three month and nine month periods,
Alpine recognized interest income of $832,000 and $1.9 million, respectively,
which represented investment and interest income generated from the Company's
investment in cash equivalents and marketable securities. The Company did not
realize any significant interest income during the comparable periods of fiscal
1995.
As described in Note 7, on July 21, 1995, Alpine refinanced a substantial
portion of its debt by the placement of $153 million of Senior Secured Notes due
2003 (net proceeds after discount, commissions and expenses amounted to $135
million) and by entering into an $85 million revolving credit facility (of which
$59.2 million was drawn at January 31, 1996). Management believes that the
refinancing, if reflected on a pro forma basis, would not have had a material
impact on net interest expense in the current fiscal year.
INCOME TAX EXPENSE
The Company did not incur any federal income tax expense for the January
1996 or 1995 fiscal periods. However, the Company did incur state income tax
expense and foreign tax expense (subject to the potential future benefit of
foreign tax credits) during such periods with such amounts reflected as income
tax expense.
DISCONTINUED OPERATIONS
As described in Note 6 to the Condensed Consolidated Financial Statements,
during the quarter ended July 31, 1995 the Company completed the merger of IDT
(a subsidiary of Adience) with its Alpine PolyVision, Inc. ("APV") and
Posterloid subsidiaries. Further, on June 14, 1995, the Company distributed a
substantial majority of its common equity ownership in the merged company
("PolyVision Corp.") to its stockholders, resulting in the Company's investment
in the common stock of PolyVision Corp. being less than 20%. As a result of the
distribution, the operations of APV and Posterloid have been reported as
discontinued operations.
Loss from discontinued operations for the nine month period ended January
31, 1996 amounted to $2.2 million which included, among other things, a one-time
$1.6 million charge related to certain contractual employee termination matters
associated with the aforementioned distribution of PolyVision Corp. For the nine
month period ended January 31, 1995, loss from discontinued operations amounted
to $4.9 million. Such charges in 1995 included the accrual of operating losses
expected to be incurred by APV and Posterloid from January 31, 1995 to the
anticipated date of the PolyVision Corp. distribution.
EXTRAORDINARY LOSS
During the nine months ended January 31, 1996, the Company incurred an
extraordinary loss from the extinguishment of debt of $5.1 million offset by an
extraordinary gain of $324,000. The extraordinary loss related primarily to the
write-off of unamortized deferred loan fees associated with debt that was repaid
in conjunction with the refinancing described in Note 7 to the Condensed
Consolidated Financial Statements. The extraordinary gain reflected the
discounted redemption in August 1995 of a $2.5 million subordinated note
payable.
LIQUIDITY AND CAPITAL RESOURCES
For the nine months ended January 31, 1996 Alpine generated $26.2 million in
cash flow from continuing operating activities, approximately $12.1 million of
which represented reductions in net
24
<PAGE>
working capital deployed, including a $9.5 million reduction in accounts
receivable. Partially offsetting cash flow from continuing operating activities
was $1.3 million of cash used for discontinued operations. Cash used for
investing activities of $121.7 million included $103.4 million used in
connection with the Alcatel Acquisition, $5.5 million invested in marketable
securities, $5.2 million loaned to PolyVision Corp., $3.9 million related to the
BICC capital asset purchase and $5.5 million in other capital expenditures. Cash
provided by financing activities of $84.3 million included net borrowings from
the sale of the Alcatel Acquisition Notes and the refinancing of a significant
portion of Alpine's debt (both of which are more fully described below),
partially offset by $13.7 million in capitalized financing costs related to the
Alcatel Acquisition Notes and the aforementioned refinancing, and $2.0 million
used for open market repurchases of Alpine common stock.
During the current fiscal year, Alpine completed the Alcatel Acquisition,
consummated a refinancing of a significant portion of its debt, and completed
the spin-off of a substantial portion of its ownership in PolyVision Corp. These
transactions have had a material impact on Alpine's financial condition and
liquidity.
The Alcatel Acquisition was completed on May 11, 1995, and included a
purchase price of $103.4 million which was paid in cash and was financed by the
issuance of the $140 million Alcatel Acquisition Notes, due in 1997 (see Notes 5
and 7 to the Condensed Consolidated Financial Statements).
On July 21, 1995, Alpine completed a refinancing which included the
placement of $153 million principal amount of Senior Secured Notes ("Senior
Notes") (net proceeds after discount and expenses amounted to $135 million) due
in 2003. The Company also entered into an $85.0 million revolving credit
facility ("Credit Facility") of which $59.2 million was outstanding at January
31, 1996. Proceeds from the Senior Notes and the Credit Facility along with a
portion of cash reserves were used (1) to redeem the Alcatel Acquisition Notes,
(2) to redeem at a discount $44.8 million in face amount of Adience's 11% Senior
Notes, (3) to repay $30.9 million in short-term borrowings, and (4) to redeem,
repay, or reduce other outstanding indebtedness of Alpine. At January 31, 1996,
Alpine's capital structure included $220.5 million of long-term debt (including
current maturities of $1.8 million) and stockholders' equity of $48.9 million
(including $11.8 million of convertible preferred stock). At January 31, 1996,
Alpine did not have any short-term borrowings.
With respect to debt maturities, the refinancing eliminated $30.9 million of
short-term borrowings due within the next 12 months and redeemed entirely the
Alcatel Acquisition Notes which were due in 1997. This debt was replaced with
the Senior Notes and the Credit Facility, neither of which have any principal
payment requirements until their respective maturities (2000 with respect to the
Credit Facility and 2003 with respect to the Senior Notes). Debt remaining after
the refinancing, other than the Senior Notes and the Credit Facility amounted to
$20.6 million at January 31, 1996, with required principal payments in the next
12 months of $1.8 million and aggregate required principal payments over the
next 5 years of $6.1 million.
Alpine believes the aforementioned refinancing has had a positive impact on
its financial condition and liquidity by substantially lengthening the
maturities on its debt while creating liquidity through funds availability under
its Credit Facility.
With respect to liquidity, Alpine currently has excess consolidated
availability under its Credit Facility (based on eligible accounts receivable
and inventory) of approximately $16.2 million as of February 29, 1996 which,
when combined with cash and marketable securities, results in total current cash
and credit availability of approximately $26.3 million. While the Credit
Facility does include sublimit restrictions on outstanding borrowings allocated
to Alpine's principal subsidiaries (Superior, Adience, and DNE), such sublimits
are not expected to negatively impact, over the next 12 months or in future
years, the liquidity of Superior, Adience, or DNE. There are also no
restrictions on utilizing borrowings under the Credit Facility to pay interest
on the Senior Notes or any of the Company's other debt so long as the Company is
in compliance with its related loan covenants.
25
<PAGE>
With respect to commitments, the Company projects that cash interest expense
over the next 12 months will approximate $24-$25 million which, when combined
with principal repayment requirements, will result in total annual debt service
requirements (principal and interest) of approximately $27 million. Further, the
Company also expects to invest, on an annual recurring basis, approximately
$6-$9 million in capital expenditures. Such recurring capital expenditure levels
exclude the December 1, 1995 acquisition by Superior of certain capital
equipment in conjunction with an asset purchase of BICC Phillips, Inc.'s
Canadian copper telecommunications wire and cable business. The purchase price
for this capital equipment amounted to approximately $4.0 million and will
replace approximately $1.0 million in planned capital expenditures. Accordingly,
the Company expects its total capital commitments and debt service requirements
over the next 12 months to approximate $32-$35 million.
The Company intends to fund its capital expenditure and debt service
commitments from funds generated from operations. The Company has experienced a
significant growth in its operating cash flow during fiscal 1996 due to (1) the
impact of the Alcatel Acquisition, (2) improvements in Adience's operating
results, and (3) subject to certain commitments discussed below, the elimination
of the negative cash flow impact of funding development expenses associated with
the Company's APV activities which was included in the aforementioned PolyVision
Spin-Off. During the nine month period ended January 31, 1996, the Company
generated earnings before interest, taxes, depreciation, and amortization
("EBITDA") of $31.5 million ($32.1 million on a pro forma basis, assuming the
Alcatel Acquisition occurred as of May 1, 1995). At this level of operations,
which includes Superior's typical seasonal slowdown period of December and
January, the Company would expect to generate in excess of $40 million of EBITDA
in each of fiscal 1996 and 1997.
Since the Company does not expect to incur any material income tax expense
over the next twelve months due to its level of noncash charges and existing tax
loss carryforwards, substantially all of the EBITDA generated should be
available to service the aforementioned capital expenditures and debt service
commitments. Accordingly, the Company expects to be able to fund all of its
anticipated operating commitments on an annual basis from internally generated
cash flow without using existing cash reserves or excess availability under the
Credit Facility, except to fund seasonal working capital fluctuations.
In connection with the PolyVision Merger, Alpine entered into an arrangement
pursuant to which Alpine agreed to lend to PolyVision Corp., from time to time
prior to May 24, 1997, up to $5.0 million to be used by PolyVision Corp. to fund
its working capital needs. Borrowings under the agreement are unsecured and bear
interest at a market rate. The principal balance outstanding is due on May 24,
2005, subject to mandatory prepayment of principal and interest from the net
cash proceeds of any public or private equity offering or debt financing
completed by PolyVision Corp. at any time prior to maturity. Alpine's obligation
to lend such funds to PolyVision Corp. is subject to a number of conditions,
including review by Alpine of the proposed use of such funds by PolyVision Corp.
As of January 31, 1996, Alpine had advanced approximately $2.8 million to
PolyVision Corp. under this arrangement. In addition to the $5.0 million
commitment, Alpine has also agreed to make advances to PolyVision Corp. under a
short-term loan for working capital deficiencies in an amount not to exceed $2.5
million. This short-term loan is due in May 1996. As of January 31, 1996, $2.4
million was outstanding under this loan with remaining commitment for funding
under these loans amounting to less than $2.5 million. The Company believes its
existing cash and credit availability will be sufficient to fund this remaining
commitment without materially affecting the Company's overall liquidity.
26
<PAGE>
PART II. OTHER INFORMATION
ITEM 3. DEFAULTS ON SENIOR SECURITIES.
(a) None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
EXHIBIT 27 -- FINANCIAL DATA SCHEDULE.
EXHIBIT 28 -- Alpine is herewith filing as exhibits the following financial
statements relating to Alpine's subsidiaries, Superior and Adience, each of the
which has guaranteed Alpine's 12 1/2% Senior Secured Notes due 2003, and the
stock of each of such subsidiaries has been pledged to secure such Notes:
ADIENCE, INC.
Unaudited Consolidated Financial Statements:
Consolidated balance sheets at January 31, 1996 and April 30, 1995
Consolidated statements of operations for the three months and nine months
ended January 31, 1996 and 1995
Consolidated statement of shareholder's equity for the nine months ended
January 31, 1996 and 1995
Consolidated statements of cash flows for the nine months ended January 31,
1996 and 1995
Notes to consolidated financial statements
SUPERIOR TELECOMMUNICATIONS INC. (FORMERLY SUPERIOR TELETEC INC.)
Unaudited Consolidated Financial Statements:
Condensed consolidated balance sheets at January 29, 1995 and April 30,
1995
Condensed statements of operations and retained earnings for the three
months and nine months ended January 28, 1996 and January 29, 1995
Condensed consolidated statements of cash flows for the nine months ended
January 28, 1996 and January 29, 1995
Notes to consolidated financial statements
(b) Reports on Form 8-K.
None
27
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE ALPINE GROUP, INC.
Date: March 15, 1996 By: /s/ DAVID S. ALDRIDGE
-----------------------------------------
David S. Aldridge
CHIEF FINANCIAL OFFICER
28
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> APR-30-1996
<PERIOD-START> MAY-01-1995
<PERIOD-END> JAN-31-1996
<CASH> 3,108
<SECURITIES> 7,026
<RECEIVABLES> 60,108
<ALLOWANCES> 740
<INVENTORY> 65,589
<CURRENT-ASSETS> 141,660
<PP&E> 113,162
<DEPRECIATION> 13,857
<TOTAL-ASSETS> 357,543
<CURRENT-LIABILITIES> 83,709
<BONDS> 159,588
0
11,759
<COMMON> 1,928
<OTHER-SE> 35,253
<TOTAL-LIABILITY-AND-EQUITY> 357,543
<SALES> 384,540
<TOTAL-REVENUES> 384,540
<CGS> 335,981
<TOTAL-COSTS> 26,669
<OTHER-EXPENSES> 105
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 20,641
<INCOME-PRETAX> 3,255
<INCOME-TAX> 699
<INCOME-CONTINUING> 2,556
<DISCONTINUED> 2,213
<EXTRAORDINARY> 4,856
<CHANGES> 0
<NET-INCOME> 4,513
<EPS-PRIMARY> (0.30)
<EPS-DILUTED> (0.30)
</TABLE>
<PAGE>
SUPERIOR TELECOMMUNICATIONS INC. AND SUBSIDIARY
(A WHOLLY-OWNED SUBSIDIARY
OF THE ALPINE GROUP, INC.)
UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
JANUARY 28, 1996
<PAGE>
SUPERIOR TELECOMMUNICATIONS INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
APRIL 30,
1995
JANUARY 28, ---------
1996
-----------
(UNAUDITED)
<S> <C> <C>
Current assets:
Cash................................................................................... $ 11 $ 4
Accounts receivable (less allowance for doubtful accounts;
January, $62; April, $40)............................................................. 37,607 18,268
Inventories............................................................................ 47,478 19,665
Other current assets................................................................... 2,637 1,041
----------- ---------
Total current assets................................................................. 87,733 38,978
Property, plant and equipment (less accumulated depreciation: January, $8,235; April,
$3,713)................................................................................. 72,917 26,132
Goodwill (less accumulated amortization: January, $2,598; April, $1,557)................. 48,668 32,161
Due from parent.......................................................................... 23,403 --
Other long-term assets................................................................... 575 1,017
----------- ---------
Total assets....................................................................... $ 233,296 $ 98,288
----------- ---------
----------- ---------
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Current portion of long-term debt...................................................... $ -- $ 1,600
Accounts payable....................................................................... 35,929 16,281
Accrued expenses and other liabilities................................................. 10,500 3,640
----------- ---------
Total current liabilities............................................................ 46,429 21,521
----------- ---------
Notes payable to parent.................................................................. 125,841 --
----------- ---------
Notes payable to affiliate............................................................... 1,995 --
----------- ---------
Long-term debt, less current portion..................................................... 6,352 25,320
----------- ---------
Deferred income taxes.................................................................... 5,693 5,693
----------- ---------
Other long-term liabilities.............................................................. 1,493 1,493
----------- ---------
Stockholder's equity:
Common stock, $.01 par value; authorized 10,000 shares; issued 1,000 shares............ -- --
Additional paid-in capital............................................................. 41,144 41,144
Foreign currency translation........................................................... (698) --
Retained earnings...................................................................... 5,047 3,117
----------- ---------
Total stockholder's equity........................................................... 45,493 44,261
----------- ---------
Total liabilities and stockholder's equity......................................... $ 233,296 $ 98,288
----------- ---------
----------- ---------
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
1
<PAGE>
SUPERIOR TELECOMMUNICATIONS INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------
JANUARY 28, JANUARY 29,
1996 1995
----------- -----------
<S> <C> <C>
Net sales.............................................................................. $ 84,445 $ 30,513
Cost of goods sold..................................................................... 75,481 27,554
----------- -----------
Gross profit......................................................................... 8,964 2,959
Selling, general, and administrative expense........................................... 2,138 1,250
Amortization of goodwill............................................................... 349 281
----------- -----------
Operating income..................................................................... 6,477 1,428
Interest expense, net.................................................................. 4,041 752
----------- -----------
Income before income taxes........................................................... 2,436 676
Income tax expense..................................................................... 1,016 289
----------- -----------
Net income......................................................................... $ 1,420 $ 387
----------- -----------
----------- -----------
Net income per share of common stock............................................... $ 1,420.00 $ 387.00
----------- -----------
----------- -----------
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
2
<PAGE>
SUPERIOR TELECOMMUNICATIONS INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-------------------------
JANUARY 28, JANUARY 29,
1996 1995
------------ -----------
<S> <C> <C>
Net sales............................................................................. $ 281,461 $ 96,227
Cost of goods sold.................................................................... 255,407 86,576
------------ -----------
Gross profit........................................................................ 26,054 9,651
Selling, general, and administrative expense.......................................... 5,743 3,696
Amortization of goodwill.............................................................. 1,041 842
------------ -----------
Operating income.................................................................... 19,270 5,113
Interest expense, net................................................................. 11,842 2,141
------------ -----------
Income before income taxes and extraordinary item................................... 7,428 2,972
Income tax expense.................................................................... 3,395 1,304
------------ -----------
Income before extraordinary item.................................................... 4,033 1,668
Extraordinary (loss) on early extinguishment of debt (net of income tax impact of
$1,195).............................................................................. 2,103 --
------------ -----------
Net income.......................................................................... 1,930 1,668
Retained earnings at beginning of period............................................ 3,117 196
------------ -----------
Retained earnings at end of period.................................................. $ 5,047 $ 1,864
------------ -----------
------------ -----------
Income per share of common stock:
Income before extraordinary item.................................................... $ 4,033.00 $ 1,668.00
Extraordinary (loss) on early extinguishment of debt................................ (2,103.00) --
------------ -----------
Net income per share of common stock................................................ $ 1,930.00 $ 1,668.00
------------ -----------
------------ -----------
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
3
<PAGE>
SUPERIOR TELECOMMUNICATIONS INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-------------------------
JANUARY 28, JANUARY 29,
1996 1995
------------ -----------
<S> <C> <C>
Cash flows from operating activities:
Net income before extraordinary item................................................. $ 4,033 $ 1,668
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization...................................................... 5,726 2,775
Amortization of deferred financing costs........................................... 333 216
Change in assets and liabilities:
Accounts receivable................................................................ 9,777 1,301
Inventories........................................................................ 5,223 (3,328)
Other current assets............................................................... (573) (178)
Accounts payable................................................................... 4,169 426
Accrued expenses and other liabilities............................................. 94 (69)
------------ -----------
Cash provided by operating activities.................................................. 28,782 2,811
------------ -----------
Cash flow from investing activities:
Acquisitions, net of cash acquired................................................... (103,409) --
Capital expenditures................................................................. (2,561) (1,139)
Capital expenditures on BICC assets.................................................. (3,895) --
Other................................................................................ 135 (138)
------------ -----------
Cash (used for) investing activities................................................... (109,730) (1,277)
------------ -----------
Cash flow from financing activities:
Borrowings (repayments) under revolving credit facilities, net....................... (16,522) 630
Borrowings (advances) from/to Parent................................................. 104,726 (250)
Long-term borrowings................................................................. 141,352 --
Repayments of long-term borrowings................................................... (145,386) (1,914)
Capitalized financing costs.......................................................... (3,215) --
------------ -----------
Cash provided by (used for) financing activities....................................... 80,955 (1,534)
------------ -----------
Net increase in cash and cash equivalents.......................................... 7 --
Cash at beginning of period............................................................ 4 4
------------ -----------
Cash at end of period.................................................................. $ 11 $ 4
------------ -----------
------------ -----------
Supplemental disclosures:
Cash interest paid or charged by Parent during the period............................ $ 12,252 $ 2,124
------------ -----------
------------ -----------
Cash paid during the period for income taxes......................................... $ -- $ 437
------------ -----------
------------ -----------
Non-cash investing and financing activities:
Acquisition of business:
Assets, net of cash acquired....................................................... $ 126,127
Liabilities assumed................................................................ (22,718)
------------
Net cash paid.................................................................... $ (103,409)
------------
------------
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
4
<PAGE>
SUPERIOR TELECOMMUNICATIONS INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 28, 1996
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of
Superior Telecommunications Inc. (the "Company") reflect all adjustments which,
in the opinion of management, are necessary for a fair presentation of the
results of operations for the interim periods presented. The Company is a wholly
owned subsidiary of The Alpine Group, Inc. ("Alpine"). These financial
statements should be read in conjunction with the summary of accounting policies
and the notes to the financial statements included in the Companys financial
statements for the year ended April 30, 1995.
2. INVENTORIES
The components of inventories are:
<TABLE>
<CAPTION>
JANUARY 28, APRIL 30,
1996 1995
----------- ---------
(IN THOUSANDS)
<S> <C> <C>
Raw material......................................................... $ 9,808 $ 6,879
Work in process...................................................... 9,763 4,325
Finished goods....................................................... 27,907 8,461
----------- ---------
$ 47,478 $ 19,665
----------- ---------
----------- ---------
</TABLE>
3. ALCATEL ACQUISITION
On May 11, 1995, the Company 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"). In connection with the acquisition, the
Company sold $140,000,000 aggregate principal amount of notes (the "Alcatel
Acquisition Notes"). 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 (in thousands):
<TABLE>
<S> <C>
Estimated acquisition cost....................................... $ 103,409
Less: historical book value of net assets at May 11, 1995........ (80,909)
Write-up of property, plant and equipment........................ (4,945)
Accrual of Alcatel employee relocation and severance costs....... 500
---------
Acquisition goodwill............................................. $ 18,055
---------
---------
</TABLE>
The estimated acquisition cost of $103,409,000 included $102,909,000 paid in
cash to Alcatel NA and acquisition expenses estimated at $500,000.
The Alcatel Acquisition has been accounted for using the purchase method,
and, accordingly, the results of operations of the Alcatel Business are included
in the Companys results on a prospective basis from the date of acquisition.
Unaudited condensed pro forma results of operations for the nine months ended
January 28, 1996 and January 29, 1995 which give effect to the Alcatel
acquisition as if
5
<PAGE>
SUPERIOR TELECOMMUNICATIONS INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JANUARY 28, 1996
(UNAUDITED)
3. ALCATEL ACQUISITION (CONTINUED)
the transaction occurred on May 1, 1994 are presented below. The pro forma
amounts reflect acquisition related purchase accounting adjustments, including
adjustments to depreciation and amortization expense. The pro forma financial
information does not purport to be indicative of either the results of
operations that would have occurred had the acquisition taken place at the
beginning of the periods or of future results of operations.
<TABLE>
<CAPTION>
PRO FORMA
------------------------
(UNAUDITED)
NINE MONTHS ENDED
------------------------
JANUARY 28, JANUARY 29,
1996 1995
----------- -----------
(IN THOUSANDS, EXCEPT
PER SHARE DATA)
<S> <C> <C>
Net sales.................................................................... $ 288,982 $ 241,589
Income before income tax expense and extraordinary item...................... 7,610 937
Income before extraordinary item............................................. 4,215 563
Net income................................................................. 2,122 563
Income per share of common stock:
Income before extraordinary item........................................... $ 4,215.00 $ 563.00
Net income................................................................. 2,122.00 563.00
</TABLE>
4. DEBT
Debt consists of the following:
<TABLE>
<CAPTION>
JANUARY 28, APRIL 30,
1996 1995
----------- ---------
(IN THOUSANDS)
<S> <C> <C>
Lease finance obligation....................................................... $ 5,000 $ 5,000
Promissory note................................................................ 1,352
Revolving credit loan.......................................................... -- 16,533
Term loan...................................................................... -- 5,387
----------- ---------
Total debt................................................................... 6,352 26,920
Less: Current portion........................................................ -- 1,600
----------- ---------
Long-term debt............................................................... $ 6,352 $ 25,320
----------- ---------
----------- ---------
</TABLE>
On May 11, 1995, the Company issued the Alcatel Acquisition Notes (see Note
3), with the proceeds used to (1) pay the initial purchase price for the Alcatel
Acquisition, (2) repay amounts outstanding under the Companys revolving credit
facility and its term loan and, (3) pay fees and expenses amounting to $5.1
million, with the balance being added to Company cash reserves.
On July 21, 1995, Alpine completed the placement of $153 million of 12.25%
Senior Secured Notes (the "Alpine Notes") and entered into an $85 million
revolving credit facility (the "Credit Facility"). A portion of the proceeds
from the Alpine Notes and the Credit Facility were advanced by Alpine to the
Company and used to redeem the Alcatel Acquisition Notes. The Alpine Notes are
guaranteed by the Company and Adience, Inc. ("Adience"), another Alpine
subsidiary, and are secured by a pledge of the capital stock of the Company and
Adience. The Credit Facility which allows Alpine to make additional revolving
credit loans to the Company to fund its working capital needs (see Note 5) is
guaranteed by the Company.
6
<PAGE>
SUPERIOR TELECOMMUNICATIONS INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JANUARY 28, 1996
(UNAUDITED)
4. DEBT (CONTINUED)
As a result of the aforementioned redemption of the Alcatel Acquisition
Notes, the Company recognized a $3.3 million extraordinary loss on the early
extinguishment of debt during the nine months ended January 28, 1996.
5. RELATED COMPANY TRANSACTIONS
As a result of funds advanced by Alpine to the Company in connection with
the redemption of the Alcatel Acquisition Notes (see Note 4), the Company is
indebted to Alpine under notes payable amounting to $125.9 million at January
28, 1996.
Such notes payable to Alpine include:
(1) an $88.9 million promissory note due in 2003 (subject to certain
mandatory prepayment requirements), with interest payable semiannually at an
annual rate of 14%; and
(2) $37.0 million in borrowings under a revolving credit facility
between Alpine and the Company due in 2000, with interest payable monthly at
prime plus 0.375% or LIBOR plus 2.25%. Borrowings from Alpine by the Company
under the revolving credit facility are subject to a borrowing base
determined as a percentage of eligible accounts receivable and inventory (as
defined). The revolving credit facility is secured by a pledge of the
Company's accounts receivable and inventory.
Total interest expense charged by Alpine to the Company under the
aforementioned promissory note and revolving credit facility amounted to
approximately $8.4 million and $3.8 million for the three month and nine month
periods ended January 28, 1996, respectively.
In November 1995, the Company entered into a note agreement whereby
Adience's Canadian subsidiary advanced $2.0 million to Superior Cable
Corporation, the Company's Canadian subsidiary. The advance bears interest at 8%
and is payable on demand.
Alpine allocates insurance expenses to the Company based on projected
payrolls, property values and forecasted losses. Such allocated costs totaled
$417,404 and $695,673 for the three and nine month periods ended January 28,
1996.
7
<PAGE>
ADIENCE, INC.
(A WHOLLY-OWNED SUBSIDIARY
OF THE ALPINE GROUP, INC.)
UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
JANUARY 31, 1996
<PAGE>
ADIENCE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
JANUARY 31, APRIL 30,
1996 1995
----------- -----------
(UNAUDITED) (AUDITED)
<S> <C> <C>
Current Assets:
Cash and cash equivalents............................................................. $ 1,367 $ 1,974
Accounts receivable (less allowance for doubtful accounts;
January, $650; April, $897).......................................................... 15,649 17,983
Inventories........................................................................... 11,609 9,547
Other current assets.................................................................. 4,572 6,188
----------- -----------
Total current assets................................................................ 33,197 35,692
----------- -----------
Net assets of discontinued operations................................................... -- 8,030
Property, plant and equipment:
Land.................................................................................. 1,425 1,425
Buildings............................................................................. 7,656 7,198
Machinery and equipment............................................................... 16,330 14,517
----------- -----------
25,411 23,140
Less allowance for depreciation....................................................... 2,883 1,058
----------- -----------
22,528 22,082
Note receivable from affiliate.......................................................... 1,992 --
Goodwill (net of accumulated amortization; January, $1,449; April, $515)................ 38,025 38,163
Other assets............................................................................ 1,511 2,080
----------- -----------
Total assets........................................................................ $ 97,253 $ 106,047
----------- -----------
----------- -----------
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Revolving lines of credit............................................................. $ -- $ 14,387
Current portion of long-term debt..................................................... 702 714
Accounts payable and other............................................................ 7,531 8,722
Accrued expenses and other liabilities................................................ 18,734 18,929
Due to parent......................................................................... 1,375 --
----------- -----------
Total current liabilities........................................................... 28,342 42,752
----------- -----------
Notes payable to parent................................................................. 57,108 --
Payable to affiliate.................................................................... -- 3,583
Long-term debt (less current portion)................................................... 6,307 47,213
Deferred income taxes................................................................... 1,773 1,759
Other long-term liabilities............................................................. 1,461 1,880
Shareholder's equity:
Common stock, $.01 par value; authorized 20,000,000 shares; issued 10,100,000
shares............................................................................... 101 101
Additional paid-in capital............................................................ 5,364 12,303
Foreign currency translation.......................................................... 86 144
Accumulated deficit................................................................... (3,289) (3,688)
----------- -----------
Total shareholder's equity.......................................................... 2,262 8,860
----------- -----------
Total liabilities and shareholder's equity.......................................... $ 97,253 $ 106,047
----------- -----------
----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements
1
<PAGE>
ADIENCE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE THREE FOR THE PERIOD
MONTHS ENDED DECEMBER 22, 1994
JANUARY 31, TO JANUARY 31,
1996 1995
--------------- ------------------
<S> <C> <C>
Sales....................................................................... $ 28,319 $ 7,634
Cost of goods sold.......................................................... 23,512 6,347
--------------- -------
Gross profit.............................................................. 4,807 1,287
Selling, general and administrative......................................... 3,521 1,572
Amortization of goodwill.................................................... 311 113
--------------- -------
Operating income (loss)................................................... 975 (398)
Interest income............................................................. 71 36
Interest (expense).......................................................... (2,050) (816)
--------------- -------
Net (loss) before income taxes............................................ (1,004) (1,178)
Income taxes................................................................ 93 6
--------------- -------
Net loss.................................................................. $ (1,097) $ (1,184)
--------------- -------
--------------- -------
Net (loss) per share of common share...................................... $ (0.11) $ (0.12)
--------------- -------
--------------- -------
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
ADIENCE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE NINE FOR THE PERIOD
MONTHS ENDED DECEMBER 22, 1994
JANUARY 31, TO JANUARY 31,
1996 1995
--------------- ------------------
<S> <C> <C>
Sales....................................................................... $ 84,955 $ 7,634
Cost of goods sold.......................................................... 67,840 6,347
--------------- -------
Gross profit.............................................................. 17,115 1,287
Selling, general and administrative......................................... 10,805 1,572
Amortization of goodwill.................................................... 934 113
--------------- -------
Operating income (loss)................................................... 5,376 (398)
Interest income............................................................. 386 36
Interest (expense).......................................................... (6,298) (816)
--------------- -------
(Loss) before income taxes and extraordinary item......................... (536) (1,178)
Income taxes................................................................ 411 6
--------------- -------
Loss before extraordinary item............................................ (947) (1,184)
Extraordinary (loss) on early extinguishment of debt........................ (158) --
--------------- -------
Net loss.................................................................. $ (1,105) $ (1,184)
--------------- -------
--------------- -------
(Loss) per common share:
(Loss) from operations before extraordinary item.......................... $ (0.09) $ (0.12)
Extraordinary (loss) on early extinguishment of debt...................... (0.02) --
--------------- -------
Net (loss) per common share............................................... $ (0.11) $ (0.12)
--------------- -------
--------------- -------
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
ADIENCE, INC.
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDER'S EQUITY
FOR THE NINE MONTHS ENDED JANUARY 31, 1996
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONAL RETAINED FOREIGN TOTAL
COMMON PAID-IN EARNINGS CURRENCY SHAREHOLDERS'
STOCK CAPITAL (DEFICIT) TRANSLATION EQUITY
----------- ----------- --------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Balance at April 30, 1995........................... $ 101 $ 12,303 $ (3,688) $ 144 $ 8,860
Purchase accounting adjustment...................... (2,750) (2,750)
Alpine acquisition of minority interest............. 1,596 1,504 3,100
Dividend to The Alpine Group, Inc................... (5,785) (5,785)
Net income (loss)................................... (1,105) (1,105)
Foreign currency translation adjustment............. (58) (58)
----- ----------- --------- ----- -------------
Balance at January 31, 1996......................... $ 101 $ 5,364 $ (3,289) $ 86 $ 2,262
----- ----------- --------- ----- -------------
----- ----------- --------- ----- -------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
ADIENCE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 1996
UNAUDITED
1. ACQUISITION BY THE ALPINE GROUP, INC.
On December 21, 1994, The Alpine Group, Inc. ("Alpine") acquired from
certain stockholders of Adience, Inc. ("Adience") 82.3% of its outstanding
common stock (the "Adience Acquisition"), which when combined with Adience
common stock previously purchased, resulted, in Alpine owning 87.2% of Adience's
outstanding common stock on such date. On July 21, 1995, Alpine acquired the
remaining 12.8% of Adience's common stock.
The Adience Acquisition was 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 Acquisition date. The excess of the estimated purchase price
over the estimated fair market value of identifiable net assets acquired is
being amortized on a straight line basis over 30 years.
2. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of
Adience reflect all adjustments which, in the opinion of management, are
necessary for a fair presentation of the results of operations for the interim
periods presented. These financial statements should be read in conjunction with
the summary of significant accounting policies and the notes to the financial
statements included in the Adience's audited financial statements for the year
ended April 30, 1995.
3. INVENTORIES
The components of inventories are:
<TABLE>
<CAPTION>
JANUARY 31, APRIL 30,
1996 1995
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
Raw materials.......................................................... $ 4,039 $ 3,037
Work in process........................................................ 1,933 1,488
Finished goods......................................................... 5,637 5,022
----------- -----------
$ 11,609 $ 9,547
----------- -----------
----------- -----------
</TABLE>
4. DISCONTINUED OPERATIONS
As of December 21, 1994 Alpine and Information Display Technology, Inc.
("IDT"), formerly a majority-owned subsidiary of Adience, entered into an
Agreement and Plan of Merger, which provided for the merger of Alpine's
information display group (a business segment of Alpine), comprised of Alpine
PolyVision, Inc. ("APV") and Posterloid Corporation ("Posterloid"), with and
into two separate wholly-owned subsidiaries of IDT formed for the purpose of
acquiring APV and Posterloid. To effectuate the merger, the Company's equity
interest in IDT was distributed to Alpine as a dividend in kind. In addition,
the balance of the amounts due IDT (classified in the April 30, 1995 balance
sheet as "Payable to Affiliate") was assigned to Alpine. Further, the balance
sheet at April 30, 1995 reflects the net assets of IDT as "Net assets of
discontinued operations."
5. LINES OF CREDIT
On July 21, 1995, Alpine repaid the balance outstanding under the Adience
revolving credit facility (see Note 6). As a result of the termination fees
associated with repayment of the Adience revolving credit facility an
extraordinary loss on the early extinguishment of debt of $158,000 was recorded.
5
<PAGE>
ADIENCE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 1996
UNAUDITED
6. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
JANUARY 31, APRIL 30,
1996 1995
----------- ---------
(IN THOUSANDS)
<S> <C> <C>
11% Senior Secured Notes due 2002........................................................ $ 4,989 $ 49,079
Capital lease obligations................................................................ 838 621
Notes payable with monthly installments of principal and interest of $22 through December
1997, interest at 10%................................................................... 432 587
Industrial Development Authority Note with monthly installments of principal and interest
of $2 through February 2010, interest at 2%............................................. 327 343
Machinery and Equipment Loan Fund Note with monthly installments of principal and
interest of $4 through February 2002, interest at 2%.................................... 321 361
Other (interest ranges from 10% to 13%).................................................. 429 519
----------- ---------
Total Debt......................................................................... 7,336 51,510
Less: current portion.................................................................... 702 714
----------- ---------
6,634 50,796
Discount on 11% Senior Secured Notes..................................................... 327 3,583
----------- ---------
Long-Term debt..................................................................... $ 6,307 $ 47,213
----------- ---------
----------- ---------
</TABLE>
The Senior Secured Notes have an annual interest rate of 11% and were issued
under an indenture agreement dated as of June 30, 1993. The Senior Secured Notes
are redeemable at the option of Adience after December 15, 1997. The Senior
Secured Notes are not guaranteed by Adience's subsidiary, Adience Canada Inc.
The Secured Notes are secured by a lien on all Adience's assets. Adience, on a
consolidated basis, has certain restrictive covenants which are customary for
such financings including, among other things, limitations on additional
indebtedness, limitations on asset sales and restrictions on the payment of
dividends.
On July 21, 1995, Alpine completed the placement of $153 million of 12.25%
Senior Secured Notes (the "Alpine Notes") and entered into an $85 million
revolving credit facility (the "Credit Facility"). A portion of the proceeds
from the Alpine Notes and Credit Facility were used to redeem, at a discount,
approximately 90% of the $49 million face amount of Senior Secured Notes and
repay the balance outstanding under Adience's revolving credit facility. The
Alpine Notes are guaranteed by Adience and Superior Telecommunications, Inc.
("Superior"), another Alpine subsidiary, and are secured by a pledge of the
capital stock of Adience and Superior. The Credit Facility, which allows Alpine
to make additional revolving credit loans to Adience to fund its working capital
needs (see Note 8), is guaranteed by Adience.
7. COMMITMENTS AND CONTINGENCIES
In February 1992, PolyVision (formerly IDT) was cited by the Ohio
Environmental Protection Agency (the "Ohio EPA") for violations of Ohio's
hazardous waste regulations, including speculative accumulation of waste
(holding waste on-site beyond the legal time limit) and illegal disposal of
hazardous waste on the site of its Alliance, Ohio 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
6
<PAGE>
ADIENCE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 1996
UNAUDITED
7. COMMITMENTS AND CONTINGENCIES (CONTINUED)
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 propose amendment, use of this approach is expected to reduce the
extent and cost of remediation required at this site. The Ohio EPA has not yet
responded to this proposed amendment. At January 31, 1996, environmental
accruals amounted to $39,000 which represents management's estimate of the
amounts remaining to be incurred in this matter, including the costs of
effecting the closure plan, bonding and insurance costs, penalties and legal and
consultants' fees. If the Ohio EPA does not accept the proposed amendment to the
consent order, the cost of the remediation may exceed the amounts currently
accrued.
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 is 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.
Alpine and its counsel are evaluating the validity of such claims and the scope
of its potential liabilities and defense costs.
Adience 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 not have a material adverse effect upon
Adience's consolidated financial position, liquidity or results of operations.
8. RELATED COMPANY TRANSACTIONS
Adience has performed in the past, and to a degree still performs, certain
management and administrative services for PolyVision. These services include
the use of Adience's management information system, the preparation of all
federal and state tax returns, cash management together with daily and monthly
reporting to the companies' primary lender, the administration of insurance and
workers' compensation programs, legal and employee benefit services and the
preparation of salaried payrolls. The fee paid by PolyVision for these services
is at the current rate of $300,000 per year.
As a result of funds advanced by Alpine to Adience in conjunction with its
debt restructuring (see Note 6), and additional funds provided by Alpine under a
revolving credit facility, the Company is indebted to Alpine under notes payable
amounting to $56.3 million at January 31, 1996. Such notes payable to Alpine
include:
(1) $52.5 million in promissory notes due in 2003 (subject to certain
mandatory prepayment requirements), with interest payable semiannually at
annual rates of between 11% and 14%; and
7
<PAGE>
ADIENCE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 1996
UNAUDITED
8. RELATED COMPANY TRANSACTIONS (CONTINUED)
(2) $4.4 million in borrowings under a $15 million revolving credit
facility between Alpine and Adience due in 2000, with interest payable
monthly at prime plus 0.375% or LIBOR plus 2.25%. Borrowings from Alpine by
Adience under the revolving credit facility are subject to a borrowing base
determined as a percentage eligible accounts receivable and inventory (as
defined). The revolving credit facility is secured by a pledge of Adience's
accounts receivable and inventory.
Total interest expense charged by Alpine to Adience under the aforementioned
promissory notes and revolving credit facility amounted to approximately $1.8
million and $3.9 million for the three months and nine months ended January 31,
1996, respectively.
In November 1995, Adience entered into a note agreement whereby Adience's
Canadian subsidiary advanced $2.0 million to Superior Cable Corporation, a
Canadian subsidiary of Superior. The advance bears interest at 8% and is
repayable on demand.
Alpine allocates insurance expenses based on projected payrolls, property
values and forecasted losses. Such allocated costs totaled $392,000 and $634,000
for the three and nine months ended January 31, 1996, and are reflected in the
Company's results of operations.
8
