<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OF THE SECURITIES EXCHANGE ACT OF
1934
FOR THE QUARTERLY PERIOD ENDED JULY 31, 1997
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 1-9078
------------------------
THE ALPINE GROUP, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
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)
</TABLE>
Registrant's telephone number, including area code: 212-757-3333
------------------------
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days. Yes /X/ No ___
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES OF
COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE.
<TABLE>
<S> <C>
Class Outstanding at September 12,
- --------------------- 1997
Common Stock, $.10 Par ------------------------------
Value 16,800,217
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with the requirements of Form 10-Q and, therefore,
do not include all information and footnotes required by generally accepted
accounting principles. However, in the opinion of management, all adjustments
(which, except as disclosed elsewhere herein, consist only of normal recurring
accruals) necessary for a fair presentation of the results of operations for the
relevant periods have been made. Results for the interim periods are not
necessarily indicative of the results to be expected for the year. These
financial statements should be read in conjunction with the summary of
significant accounting policies and the notes to the consolidated financial
statements included in the Company's Annual Report on Form 10-K for the year
ended April 30, 1997.
2
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
APRIL 30, JULY 31,
1997 1997
---------- -----------
<S> <C> <C>
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents.............................................................. $ 21,606 $ 21,702
Marketable securities.................................................................. 15,807 16,157
Accounts receivable (less allowance for doubtful accounts of:
April, $2,631; July, $2,532)......................................................... 119,506 134,672
Inventories............................................................................ 119,234 116,368
Other current assets................................................................... 17,321 16,670
---------- -----------
Total current assets................................................................. 293,474 305,569
Property, plant, and equipment, net...................................................... 155,484 153,565
Long-term investments and other assets................................................... 32,388 33,760
Goodwill (less accumulated amortization; April, $8,036; July, $9,103).................... 106,878 108,881
---------- -----------
Total assets....................................................................... $ 588,224 $ 601,775
---------- -----------
---------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable....................................................................... $ 85,906 $ 101,333
Accrued expenses....................................................................... 69,948 70,640
Current portion of long-term debt...................................................... 2,653 1,751
---------- -----------
Total current liabilities............................................................ 158,507 173,724
Long-term debt, less current portion..................................................... 308,171 297,556
Other long-term liabilities.............................................................. 45,026 47,200
Minority interest in subsidiary.......................................................... 22,094 26,948
---------- -----------
Total liabilities.................................................................. 533,798 545,428
---------- -----------
Commitments and contingencies
Stockholders' equity:
9% cumulative convertible preferred stock at liquidation value......................... 1,927 927
Common stock, $.10 par value; authorized 25,000,000 shares; issued: April, 18,834,256
shares; July, 19,087,564 shares...................................................... 1,883 1,908
Capital in excess of par value......................................................... 113,459 115,555
Cumulative translation adjustment...................................................... (1,316) 352
Unrealized loss on securities available for sale, net of deferred tax.................. (716) (716)
Accumulated deficit.................................................................... (48,048) (43,608)
---------- -----------
67,189 74,418
Shares of common stock in treasury, at cost; April, 1,612,047 shares; July, 2,115,947
shares............................................................................... (12,130) (17,438)
Receivable from stockholders........................................................... (633) (633)
---------- -----------
Total stockholders' equity........................................................... 54,426 56,347
---------- -----------
Total liabilities and stockholders' equity......................................... $ 588,224 $ 601,775
---------- -----------
---------- -----------
</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
JULY 31,
----------------------
<S> <C> <C>
1996 1997
---------- ----------
Net sales................................................................................. $ 151,447 $ 221,070
Cost of goods sold........................................................................ 127,483 179,132
---------- ----------
Gross profit............................................................................ 23,964 41,938
Selling, general and administrative expense............................................... 9,790 17,584
Amortization of goodwill.................................................................. 761 1,050
---------- ----------
Operating income........................................................................ 13,413 23,304
Interest income........................................................................... 152 566
Interest (expense)........................................................................ (6,974) (7,509)
Other income (expense), net............................................................... (59) 25
---------- ----------
Income before income tax expense and minority interest.................................. 6,532 16,386
Provision for income taxes................................................................ (2,286) (6,665)
---------- ----------
Income before minority interest......................................................... 4,246 9,721
Minority interest in earnings of subsidiary............................................... -- (4,854)
---------- ----------
Income before extraordinary (loss)...................................................... 4,246 4,867
Extraordinary (loss) on early extinguishment of debt...................................... -- (389)
---------- ----------
Net income.............................................................................. 4,246 4,478
Preferred stock dividends................................................................. (234) (38)
---------- ----------
Net income applicable to common stock................................................... $ 4,012 $ 4,440
---------- ----------
---------- ----------
Net income per share of common stock:
Income before extraordinary (loss)...................................................... $ 0.22 $ 0.26
Extraordinary (loss) on early extinguishment of debt.................................... -- (0.02)
---------- ----------
Net income per share of common stock.................................................... $ 0.22 $ 0.24
---------- ----------
---------- ----------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED JULY 31, 1997
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
9% CUMULATIVE UNREALIZED
CONVERTIBLE (LOSS) ON TREASURY
COMMON STOCK CAPITAL PREFERRED STOCK FOREIGN SECURITIES STOCK
----------------------- IN EXCESS -------------------- CURRENCY AVAILABLE ACCUMULATED -----------
SHARES OF PAR OF PAR SHARES AMOUNT TRANSLATION FOR SALE DEFICIT SHARES
------------ --------- ---------- --------- --------- ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at April
30, 1997......... 18,834,256 $ 1,883 $ 113,459 1,927 $ 1,927 $ (1,316) $ (716) $ (48,048) (1,612,047)
Conversion of
preferred
stock............ 126,582 13 987 (1,000) (1,000)
Exercise of stock
options.......... 117,695 11 608
Employee stock
purchase plan.... 9,031 1 60
Purchase of
treasury stock... (503,900)
Compensation
expense related
to stock options
and grants....... 441
Dividends on
preferred
stock............ (38)
Foreign currency
translation...... 1,668
Net income for the
three months
ended July 31,
1997............. 4,478
------------ --------- ---------- --------- --------- ----------- ----- ------------ -----------
Balance at July 31,
1997............. 19,087,564 $ 1,908 $ 115,555 927 $ 927 $ 352 $ (716) $ (43,608) (2,115,947)
------------ --------- ---------- --------- --------- ----------- ----- ------------ -----------
------------ --------- ---------- --------- --------- ----------- ----- ------------ -----------
<CAPTION>
RECEIVABLE
FROM
AMOUNT STOCKHOLDERS TOTAL
---------- ------------- ---------
<S> <C> <C> <C>
Balance at April
30, 1997......... $ (12,130) $ (633) $ 54,426
Conversion of
preferred
stock............ --
Exercise of stock
options.......... 619
Employee stock
purchase plan.... 61
Purchase of
treasury stock... (5,308) (5,308)
Compensation
expense related
to stock options
and grants....... 441
Dividends on
preferred
stock............ (38)
Foreign currency
translation...... 1,668
Net income for the
three months
ended July 31,
1997............. 4,478
---------- ----- ---------
Balance at July 31,
1997............. $ (17,438) $ (633) $ 56,347
---------- ----- ---------
---------- ----- ---------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
5
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JULY 31,
----------------------
1996 1997
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income.............................................................................. $ 4,246 $ 4,478
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization......................................................... 3,399 5,274
Amortization of deferred debt issuance costs and accretion of debt discount........... 648 551
Accretion of deferred gain............................................................ -- (16)
Extraordinary (loss) on early extinguishment of debt.................................. -- 389
Compensation expense related to stock options and grants.............................. 179 441
Minority interest in earnings of subsidiary........................................... -- 4,854
Other, net............................................................................ 25 62
Change in assets and liabilities:
Accounts receivable................................................................. 1,831 (15,499)
Inventories......................................................................... 8,664 3,055
Other current and non current assets................................................ (1,309) (1,220)
Accounts payable and accrued expenses............................................... (14,377) 14,770
Other long-term liabilities......................................................... (529) (311)
---------- ----------
Cash provided by operating activities..................................................... 2,777 16,828
---------- ----------
Cash flows from investing activities:
Capital expenditures.................................................................... (2,317) (4,014)
Investment in marketable securities..................................................... (115) (350)
Advances to PolyVision Corporation...................................................... (315) (132)
Net proceeds from the sale of assets.................................................... -- 4,441
Other................................................................................... (175) --
---------- ----------
Cash used for investing activities........................................................ (2,922) (55)
---------- ----------
Cash flows from financing activities:
Borrowings (repayments) under revolving credit facilities, net.......................... 2,378 (2,761)
Long-term borrowings.................................................................... 95 --
Repayments of long-term borrowings...................................................... (1,114) (9,242)
Proceeds from exercise of stock options................................................. 153 619
Dividends on preferred stock............................................................ (234) (38)
Purchase of treasury shares............................................................. (400) (5,308)
Proceeds from employee stock purchase plan.............................................. -- 61
---------- ----------
Cash provided by (used for) financing activities.......................................... 878 (16,669)
---------- ----------
Effect of exchange rates on cash and cash equivalents..................................... -- (8)
Net increase in cash and cash equivalents................................................. 733 96
Cash and cash equivalents at beginning of period.......................................... 1,119 21,606
---------- ----------
Cash and cash equivalents at end of period................................................ $ 1,852 $ 21,702
---------- ----------
---------- ----------
Supplemental disclosures:
Cash paid for interest.................................................................. $ 11,370 $ 8,012
---------- ----------
---------- ----------
Cash paid for income taxes.............................................................. $ 745 $ 4,448
---------- ----------
---------- ----------
Non cash financing activity:
Exchange of preferred stock for common stock:
Common stock issued................................................................. $ 1,000
----------
Preferred stock redeemed............................................................ $ 1,000
----------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
6
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 1997
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
include the accounts of The Alpine Group, Inc. and its majority-owned
subsidiaries ("Alpine" or the "Company"). Certain reclassifications have been
made to the prior period presentation to conform to the current period
presentation.
2. INVENTORIES
The components of inventories are:
<TABLE>
<CAPTION>
APRIL 30, JULY 31,
1997 1997
---------- ----------
<S> <C> <C>
(IN THOUSANDS)
Raw materials......................................................... $ 32,894 $ 35,209
Work in process....................................................... 19,211 20,686
Finished goods........................................................ 67,129 60,473
---------- ----------
$ 119,234 $ 116,368
---------- ----------
---------- ----------
</TABLE>
3. NET INCOME PER SHARE
Net income per share is determined by dividing net income, as adjusted, by
the applicable weighted average number of common and common equivalent shares
outstanding. Stock options are considered to be common stock equivalents. Net
income is adjusted by deducting preferred stock dividends from net income. The
number of shares used in computing net income per share for the three months
ended July 31, 1996 and 1997 was 18,612,134 and 18,694,026, respectively.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
Alpine, through its subsidiaries, Superior TeleCom Inc. ("Superior TeleCom")
and Refraco Inc. ("Refraco"), operates in three industry segments. Superior
TeleCom, a 50.1% owned subsidiary, operates in the following industry segments:
(i) telecommunications distribution wire and cable products for the
telecommunications industry through its subsidiary, Superior Telecommunications
Inc. ("Superior"), and (ii) data communications and electronics products and
systems for defense, governmental and commercial applications through its
subsidiary, DNE Systems, Inc. ("DNE"). Refraco, a wholly owned subsidiary,
provides refractory products and services for the iron and steel, glass,
aluminum, cement and cogeneration industries. Refraco includes the operations of
its North American operations, BMI-France, acquired on December 21, 1994 and its
European operations, Refraco UK, acquired on April 15, 1997.
RESULTS OF OPERATIONS
The following table compares 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 months ended July 31, 1996 and 1997.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JULY 31,
----------------------
1996 1997
---------- ----------
<S> <C> <C>
(DOLLARS IN THOUSANDS)
Net sales:
Telecommunications wire and cable....................................................... $ 117,969 $ 126,720
Data communications and electronics..................................................... 5,855 4,513
Refractories............................................................................ 27,623 89,837
---------- ----------
Consolidated........................................................................ 151,447 221,070
---------- ----------
---------- ----------
Gross profit:
Telecommunications wire and cable....................................................... $ 16,859 $ 23,035
Data communications and electronics..................................................... 1,518 1,307
Refractories............................................................................ 5,587 17,596
---------- ----------
Consolidated........................................................................ 23,964 41,938
---------- ----------
---------- ----------
Selling, general and administrative expense:
Telecommunications wire and cable....................................................... $ 2,322 $ 3,151
Data communications and electronics..................................................... 1,566 1,371
Refractories............................................................................ 3,956 10,780
Corporate and other expenses............................................................ 1,946 2,282
---------- ----------
Consolidated........................................................................ 9,790 17,584
---------- ----------
---------- ----------
Amortization of goodwill:
Telecommunications wire and cable....................................................... $ 432 $ 430
Refractories............................................................................ 329 620
---------- ----------
Consolidated........................................................................ 761 1,050
---------- ----------
---------- ----------
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JULY 31,
----------------------
1996 1997
---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Operating income:
Telecommunications wire and cable....................................................... $ 14,105 $ 19,454
Data communications and electronics..................................................... (48) (64)
Refractories............................................................................ 1,302 6,196
Corporate and other expenses............................................................ (1,946) (2,282)
---------- ----------
Consolidated and other expenses..................................................... 13,413 23,304
---------- ----------
---------- ----------
Supplemental Data:
Gross profit percentage:
Telecommunications wire and cable..................................................... 14.3% 18.2%
Data communications and electronics................................................... 25.9 29.0
Refractories.......................................................................... 20.2 19.6
Consolidated........................................................................ 15.8 19.0
Operating income margin:
Telecommunications wire and cable....................................................... 12.0% 15.4%
Data communications and electronics..................................................... (0.8) (1.4)
Refractories............................................................................ 4.7 6.9
Combined operating income margin...................................................... 8.9 10.5
</TABLE>
SUPPLEMENTAL DATA FOR THE TELECOMMUNICATIONS WIRE AND CABLE SEGMENT:
Copper is a significant raw material component of Superior's finished
products. Fluctuations in the price of copper affect per unit product pricing
and related revenues. However, the cost of copper has not had a material impact
on Superior's profitability due to contractually mandated copper-based price
adjustments contained in Superior's customer sales contracts. The Company
believes that the following supplemental comparative data, which are based upon
a constant copper cost of $1.00 per pound for the indicated periods, provide
additional meaningful information concerning Superior's sales and its gross
profit percentage.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JULY 31,
----------------------
1996 1997
---------- ----------
<S> <C> <C>
(DOLLARS IN THOUSANDS)
Net sales................................................................................. $ 111,507 $ 123,344
Gross profit.............................................................................. 16,859 23,035
Gross profit percentage................................................................... 15.1% 18.7%
</TABLE>
TELECOMMUNICATIONS WIRE AND CABLE--RESULTS OF OPERATIONS
Superior's net sales for the quarter ended July 1997 were $126.7 million,
representing an increase of $8.8 million, or 7.4%, as compared to the same
period in the prior fiscal year. Adjusted to a constant copper cost of $1.00 per
pound, the comparative increase in net sales was $11.8 million, or 10.6% (see
"Supplemental Data for the Telecommunications Wire and Cable Segment" included
in the industry segment operating statement data). The increase in net sales for
the quarter ended July 1997 resulted primarily from increased demand for copper
wire and cable products due to the growth in new copper-based telephone access
lines and an increase in maintenance spending by several of Superior's major
telephone company customers. Also contributing to the growth in net sales was an
increase in shipments pursuant to a new multi-year supply agreement entered into
during the early portion of fiscal 1997. In
9
<PAGE>
order to keep pace with the growth in demand and increased market share,
Superior has increased its annual production capacity (measured in billions of
conductor feet or "bcf") to approximately 99 bcf and plans to continue to
increase its bcf production capacity as required to meet additional anticipated
demand and market share growth.
Superior's gross profit increased by $6.2 million, or 36.6%, to $23.0
million for the quarter ended July 1997 as compared to the same period in the
prior fiscal year. Superior's gross profit percentage, based on actual net
sales, was 18.2% for the quarter ended July 1997, as compared to 14.3% for the
quarter ended July 1996. Adjusted to a constant copper cost of $1.00 per pound,
the gross profit percentage increased to 18.7% for the quarter ended July 1997
compared to 15.1% for the quarter ended July 1996. The comparative increase in
Superior's gross profit percentage was attributable to a combination of factors,
including (i) manufacturing cost reductions resulting from production
efficiencies, (ii) improved cost absorption resulting from higher sales volume,
(iii) generally higher comparative market prices and (iv) the impact of product
and customer mix.
Superior's SG&A expense for the quarter ended July 1997 was $3.2 million,
representing an increase of $0.8 million, or 35.7%, as compared to SG&A expense
of $2.3 million for the same period in the prior fiscal year. The increase in
SG&A expense for the quarter ended July 1997 was attributable to costs
associated with the incremental staff required to support the increased level of
sales activity and the expansion of product development activities which
included the establishment and staffing of a product development facility during
the fourth quarter of fiscal 1997.
Superior's operating income for the quarter ended July 1997 was $19.5
million, representing an increase of $5.3 million, or 37.9%, as compared to the
same period in the prior fiscal year. The substantial comparative increase in
operating income resulted from higher net sales and the increase in the gross
profit percentage.
DNE--RESULTS OF OPERATIONS
During the quarter ended July 1997, DNE's net sales declined by $1.3
million, or 22.9%, as compared to the same period in the prior fiscal year. This
reduction in net sales was primarily attributable to a decline in DNE's contract
manufacturing activities, offset partially by an increase in government related
revenues. The decline in contract manufacturing activities resulted from an
overall softness in the semiconductor equipment manufacturing sector and the
comparative reduction in deliveries associated with a major commercial contract
which is now substantially complete.
As a result of the increased percentage of net sales attributable to higher
margin government related revenues, DNE's gross profit percentage increased to
29.0% during the quarter ended July 1997 as compared to 25.9% during the same
period in the prior fiscal year. Further, DNE successfully reduced comparative
SG&A expense by $0.2 million, or 12.5%, in the quarter ended July 1997,
representing the impact of a recent operational reorganization and cost
reduction initiatives. Due to the decline in net sales, partially offset by an
improvement in DNE's gross profit percentage and a reduction in SG&A expense,
DNE recorded an operating loss of $0.1 million in the quarter ended July 1997
which was comparable to its operating loss in the comparable quarter of the
prior fiscal year.
REFRACTORIES--RESULTS OF OPERATIONS
Refraco's net sales for the quarter ended July 1997 were $89.8 million,
representing an increase of $62.2 million, or 225.2%, as compared to the same
period in the prior fiscal year. The increase was due to the inclusion of the
recently acquired Refraco UK operations, which contributed net sales of $62.3
million for the quarter ended July 1997. Net sales for BMI-France for the
quarter ended July 1997 were $27.5 million which were comparable to net sales
for the same period in the prior fiscal year. On a comparative basis,
BMI-France's revenues from manufactured product and construction services to the
iron and steel
10
<PAGE>
industry increased by $1.3 million but were offset by a decline in the sale of
specialty refractory block to the plate glass industry and sales at the Canadian
operations of BMI-France.
Refraco's gross profits for the quarter ended July 1997 were $17.6 million,
representing an increase of $12.0 million, or 214.9%, as compared to the same
period in the prior fiscal year. The increase was attributable to the inclusion
of the operations of Refraco UK in the current fiscal quarter, which generated a
gross profit of $12.3 million, partially offset by a $0.3 million decline in
gross profit at BMI-France. The gross profit percentage for the quarter ended
July 1997 was 19.6% as compared to 20.2% for the same period in the prior fiscal
year. The decline in gross profit percentage resulted from a change in overall
product mix, resulting primarily from the inclusion of the Refraco UK
operations, as well as from the impact of competitive pricing pressures in the
iron and steel industry.
Refraco's SG&A expense for the quarter ended July 1997 was $10.8 million,
representing an increase of $6.8 million as compared to $4.0 million for the
same period in the prior fiscal year. The increase was wholly attributable to
the inclusion of SG&A expense from the Refraco UK operations for the quarter
ended July 1997.
Refraco's operating income for the quarter ended July 1997 was $6.2 million,
representing an increase of $4.9 million, or 375.9%, as compared to $1.3 million
for the same period in the prior fiscal year. The increase in operating income
resulted from the inclusion of $5.2 million in operating income from the Refraco
UK operations for the July 1997 quarter. On a comparative basis, operating
income for the BMI-France operations declined by $0.3 million for the July 1997
quarterly period.
CONSOLIDATED RESULTS OF OPERATIONS
The acquisition of Refraco UK and the growth in sales of Superior's
telecommunications wire and cable products resulted in comparative consolidated
net sales increasing by $69.6 million, or 46.0%, for the quarter ended July
1997. The increase in net sales, along with an associated increase in the
telecommunications wire and cable products' gross profit percentage, gave rise
to a consolidated comparative increase in gross profit of $18.0 million, or
75.0%, for the quarter ended July 1997 as compared to the quarter ended July
1996.
Consolidated SG&A expense for the quarter ended July 1997 was $17.6 million
representing an increase of $7.8 million, or 79.6%, compared to the same period
in the prior fiscal year. The increase in SG&A expense resulted primarily from
the inclusion of Refraco UK's SG&A expense of $6.8 million for the quarter ended
July 1997.
Consolidated operating income for the quarter ended July 1997 was $23.3
million, representing an increase of $9.9 million, or 73.7%, as compared to the
same period in the prior fiscal year. Operating income increased as a result of
the contribution from the Refraco UK operations and from the growth in net sales
and gross profit in Superior's telecommunications wire and cable operations.
Consolidated interest expense for the quarter ended July 1997 was $7.5
million, representing an increase of $0.5 million, or 7.7%, as compared to
consolidated interest expense of $7.0 million for the same period in the prior
fiscal year. The increase in consolidated interest expense reflects the net
increase in consolidated debt resulting from the Refraco UK acquisition offset
by a reduction in borrowing cost resulting from the Reorganization (see Note 5
to the consolidated financial statements included in the April 30, 1997 Annual
Report on Form 10-K) and associated refinancing of substantially all of the
Company's outstanding debt at lower effective interest rates during the second
and third quarters of fiscal 1997.
For the quarter ended July 1997, the provision for income taxes was $6.7
million as compared to a provision for income taxes of $2.3 million for the same
period in the prior fiscal year. The effective tax rate for the quarter ended
July 1997 was 40.7% which compares with an effective tax rate 35.0% for the
quarter ended July 1996. The lower effective tax rate for the quarter ended July
1996 was due to the availability of
11
<PAGE>
certain limited tax loss carryforwards to offset U.S. Federal and state income
tax liabilities during the July 1996 quarterly period.
As a result of the sale of a 49.9% interest in the common stock of Superior
TeleCom (see Note 5 to the consolidated financial statements included in the
April 30, 1997 Annual Report on Form 10-K), a minority interest charge of $4.9
million was recorded for the quarter ended July 1997 representing the minority
stockholders' interest in Superior TeleCom's net income for the quarter ended
July 31, 1997.
Net income attributable to common stock before extraordinary (loss) was $4.8
million, or $0.26 per share for the quarter ended July 1997 as compared to $4.2
million, or $0.22 per share for the same period in the prior fiscal year. The
comparative increase in net income was due to the significant increase in
operating income, offset by higher incremental tax rates and the aforementioned
minority interest charge.
12
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
For the quarter ended July 1997, the Company generated $16.8 million in cash
flow from operating activities consisting of $16.0 million in cash flow
generated from operations (net income plus non-cash charges) plus $0.8 million
in cash flow provided by net working capital changes. Cash used for investing
activities amounted to $(0.1) million which primarily included $4.0 million in
capital expenditures offset by $4.4 million in net proceeds from the sale of
assets. Cash used for financing activities amounted to $16.7 million, consisting
of $12.0 million in repayments of long-term debt and revolving credit loans and
$5.3 million used for repurchases of the Company's common stock.
The Company had $37.9 million in cash and marketable securities on a
consolidated basis at July 31, 1997. Of such amount $29.2 million was maintained
by the Company with the balance held principally by Refraco and Superior
TeleCom.
In addition to the cash and marketable securities discussed above, the
Company also holds approximately 6,470,000 shares (representing 50.1% common
share ownership) of Superior TeleCom (NYSE: SUT); which investment, based on the
closing price on the New York Stock Exchange on September 10, 1997, had a market
value of approximately $250.7 million and a consolidated carrying value as
recorded by the Company (net of minority interest) of $27.1 million. The
Superior TeleCom common stock owned by Alpine, with a fair market value of $60.0
million, is pledged as collateral to secure certain debt of the Company's
Refraco subsidiary.
As of July 31, 1997, Superior TeleCom had a cash balance of $0.9 million and
approximately $49.7 million in excess funds availability under its revolving
credit facility. Superior TeleCom's principal debt service commitments over the
next 12 months amount to $0.1 million and management anticipates that capital
expenditures of $9 to $12 million will be required over such period. Superior
TeleCom has typically generated substantial cash flows from operating
activities. Management anticipates that Superior TeleCom will be able to
generate sufficient cash flows from operating activities to meet its principal
debt service and capital expenditures annual commitments. However, should any
shortfall arise due to working capital fluctuations or other factors, funds
available under the revolving credit facility should be sufficient to cover any
such shortfall.
As of July 31, 1997, Refraco had $20.8 million in excess funds availability
under its revolving credit facility and an additional $7.8 million in cash and
cash equivalents. Refraco's principal debt service commitments for the next
twelve months amount to $1.6 million and expected capital expenditures over the
next twelve months are expected to approximate $10 to $15 million, of which
approximately $6.0 million consist of specifically identified cost reduction
initiatives and environmental and safety related costs, none of which are of a
recurring nature. The Company anticipates that Refraco will generate sufficient
cash flows from its operating activities to meet its annual principal debt
service and capital expenditures commitments. However, should any shortfall
arise due to working capital fluctuations or other factors, funds available
under the revolving credit facility should be sufficient to cover any such
shortfall.
The balance of the Company's operations consist of the corporate activities
of Alpine. At July 31, 1997, Alpine had $19.4 million recorded amount ($21.1
million face amount) of debt of which the Company has committed to redeem $7.0
million (face amount) in September 1997. For the next twelve months, Alpine
expects to fund its corporate activities (which includes approximately $5.0
million in estimated corporate overhead expenses and $1.7 million in interest
expense) from allowable management fees payable by its subsidiaries to Alpine
and from interest income, with any shortfall funded from Alpine's cash, cash
equivalents and marketable securities.
- ------------------------
Except for the historical information herein, the matters discussed in this
Form 10-Q include forward-looking statements that may involve a number of risks
and uncertainties. Actual results may vary significantly based on a number of
factors, including, market acceptance of new products and continuing product
demand, the impact of competitive products and pricing and, changing economic
conditions, including changes in short term interest rates, fluctuations in
foreign currency exchange rates and other risk factors detailed in the Company's
most recent annual report and other filings with the Securities and Exchange
Commission.
13
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27--Financial Data Schedule
(b) Reports on Form 8-K
None
14
<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.
<TABLE>
<S> <C> <C>
THE ALPINE GROUP, INC.
By: /s/ DAVID S. ALDRIDGE
-----------------------------------------
David S. Aldridge
Date: September 12, 1997 CHIEF FINANCIAL OFFICER
</TABLE>
15
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<PAGE>
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