<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 October 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
NEW YORK, NEW YORK 10019-1412
(Address of principal (Zip code)
executive offices)
</TABLE>
Registrant's telephone number, including area code 212-757-3333
------------------------
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 Days. Yes _X_ No ____
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES OF
COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE.
<TABLE>
<S> <C>
Class Outstanding at December 9, 1997
- --------------------------------------------- ---------------------------------------------
Common Stock, $.10 Par Value 16,997,201
</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, OCTOBER 31,
1997 1997
---------- -----------
<S> <C> <C>
(UNAUDITED)
<CAPTION>
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents.............................................................. $ 21,606 $ 14,437
Marketable securities.................................................................. 15,807 14,567
Accounts receivable (less allowance for doubtful accounts of: April, $2,631; October
$2,280).............................................................................. 119,506 129,446
Inventories............................................................................ 119,234 112,536
Other current assets................................................................... 17,321 17,483
---------- -----------
Total current assets................................................................. 293,474 288,469
Property, plant and equipment, net....................................................... 155,484 154,168
Long-term investments and other assets................................................... 32,388 31,270
Goodwill (less accumulated amortization: April, $8,036; October $10,147)................. 106,878 109,472
---------- -----------
Total assets......................................................................... $ 588,224 $ 583,379
---------- -----------
---------- -----------
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Accounts payable....................................................................... $ 85,906 $ 93,182
Accrued expenses....................................................................... 69,948 64,717
Current portion of long-term debt...................................................... 2,653 3,834
---------- -----------
Total current liabilities............................................................ 158,507 161,733
Long-term debt, less current portion..................................................... 308,171 282,595
Other long-term liabilities.............................................................. 45,026 46,889
Minority interest in subsidiary.......................................................... 22,094 32,189
---------- -----------
Total liabilities.................................................................... 533,798 523,406
---------- -----------
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; October 19,397,639 shares.................................................... 1,883 1,934
Capital in excess of par value......................................................... 113,459 117,425
Cumulative translation adjustment...................................................... (1,316) 700
Unrealized loss on securities available for sale, net of deferred tax.................. (716) (716)
Accumulated deficit.................................................................... (48,048) (38,869)
---------- -----------
67,189 81,401
Shares of common stock in treasury, at cost: April, 1,612,047 shares; October 2,360,632
shares................................................................................. (12,130) (20,563)
Receivable from stockholders............................................................. (633) (865)
---------- -----------
Total stockholders' equity............................................................. 54,426 59,973
---------- -----------
Total liabilities and stockholders' equity........................................... $ 588,224 $ 583,379
---------- -----------
---------- -----------
</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
OCTOBER 31,
----------------------
<S> <C> <C>
1996 1997
---------- ----------
Net sales................................................................................. $ 154,019 $ 218,958
Cost of goods sold........................................................................ 126,660 177,056
---------- ----------
Gross profit............................................................................ 27,359 41,902
Selling, general and administrative expense............................................... 11,210 16,772
Amortization of goodwill.................................................................. 764 1,043
---------- ----------
Operating income........................................................................ 15,385 24,087
Interest income........................................................................... 189 989
Interest (expense)........................................................................ (6,635) (7,218)
Gain on sale of subsidiary stock.......................................................... 80,397 --
Other income (expense), net............................................................... 54 24
---------- ----------
Income before income tax expense and minority interest.................................. 89,390 17,882
Provision for income taxes................................................................ (42,116) (7,055)
---------- ----------
Income before minority interest......................................................... 47,274 10,827
Minority interest in earnings of subsidiary............................................... (333) (5,241)
---------- ----------
Income before extraordinary (loss)...................................................... 46,941 5,586
Extraordinary (loss) on early extinguishment of debt...................................... (13,412) (832)
---------- ----------
Net income.............................................................................. 33,529 4,754
Preferred stock dividends................................................................. (234) (15)
Preferred stock redemption premium........................................................ (5,195) --
---------- ----------
Net income applicable to common stock................................................... $ 28,100 $ 4,739
---------- ----------
---------- ----------
Net income per share of common stock:
Income before extraordinary (loss)...................................................... $ 2.50 $ 0.30
Extraordinary (loss) on early extinguishment of debt.................................... (0.72) (0.04)
Preferred stock redemption premium...................................................... (0.28) --
---------- ----------
Net income per share of common stock.................................................. $ 1.51 $ 0.25
---------- ----------
---------- ----------
</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>
SIX MONTHS ENDED
OCTOBER 31,
----------------------
1996 1997
---------- ----------
<S> <C> <C>
Net sales................................................................................. $ 305,466 $ 440,028
Cost of goods sold........................................................................ 254,143 356,188
---------- ----------
Gross profit............................................................................ 51,323 83,840
Selling, general and administrative expense............................................... 21,000 34,356
Amortization of goodwill.................................................................. 1,525 2,093
---------- ----------
Operating income........................................................................ 28,798 47,391
Interest income........................................................................... 341 1,555
Interest (expense)........................................................................ (13,609) (14,727)
Gain on sale of subsidiary stock.......................................................... 80,397 --
Other income (expense), net............................................................... (5) 49
---------- ----------
Income before income tax expense and minority interest.................................. 95,922 34,268
Provision for income taxes................................................................ (44,402) (13,720)
---------- ----------
Income before minority interest......................................................... 51,520 20,548
Minority interest in earnings of subsidiary............................................... (333) (10,095)
---------- ----------
Income before extraordinary (loss)...................................................... 51,187 10,453
Extraordinary (loss) on early extinguishment of debt...................................... (13,412) (1,221)
---------- ----------
Net income.............................................................................. 37,775 9,232
Preferred stock dividends................................................................. (468) (53)
Preferred stock redemption premium........................................................ (5,195) --
---------- ----------
Net income applicable to common stock................................................... $ 32,112 $ 9,179
---------- ----------
---------- ----------
Net income per share of common stock:
Income before extraordinary (loss)...................................................... $ 2.69 $ 0.56
Extraordinary (loss) on early extinguishment of debt.................................... (0.71) (0.07)
Preferred stock redemption premium...................................................... (0.28) --
---------- ----------
Net income per share of common stock.................................................. $ 1.70 $ 0.49
---------- ----------
---------- ----------
</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 SIX MONTHS ENDED OCTOBER 31, 1997
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
9% CUMULATIVE UNREALIZED
CONVERTIBLE (LOSS) ON
COMMON STOCK CAPITAL PREFERRED STOCK FOREIGN SECURITIES
----------------------- IN EXCESS ------------------------ CURRENCY AVAILABLE
SHARES AMOUNT OF PAR SHARES AMOUNT TRANSLATION FOR SALE
---------- ----------- ----------- ----------- ----------- ----------- -------------
<S> <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)
Conversion of preferred stock.... 126,582 13 987 (1,000) (1,000)
Exercise of stock options........ 378,863 36 1,937
Employee stock purchase plan..... 14,367 2 111
Purchase of treasury stock.......
Compensation expense related to
stock options and grants....... 43,571 -- 931
Dividends on preferred stock.....
Foreign currency translation..... 2,016
Loan to stockholders.............
Net income for the six months
ended October 31, 1997.........
---------- ----------- ----------- ----------- ----------- ----------- ------
Balance at October 31, 1997...... 19,397,639 $ 1,934 $ 117,425 927 $ 927 $ 700 $ (716)
---------- ----------- ----------- ----------- ----------- ----------- ------
---------- ----------- ----------- ----------- ----------- ----------- ------
<CAPTION>
TREASURY STOCK RECEIVABLE
ACCUMULATED -------------------- FROM
DEFICIT SHARES AMOUNT STOCKHOLDERS TOTAL
------------ --------- --------- --------------- ---------
<S> <C> <C> <C> <C> <C>
Balance at April 30, 1997........ $ (48,048) (1,612,047) $ (12,130) $ (633) $ 54,426
Conversion of preferred stock.... --
Exercise of stock options........ 1,973
Employee stock purchase plan..... 113
Purchase of treasury stock....... (748,585) (8,433) (8,433)
Compensation expense related to
stock options and grants....... 931
Dividends on preferred stock..... (53) (53)
Foreign currency translation..... 2,016
Loan to stockholders............. (232) (232)
Net income for the six months
ended October 31, 1997......... 9,232 9,232
------------ --------- --------- ------ ---------
Balance at October 31, 1997...... $ (38,869) (2,360,632) $ (20,563) $ (865) $ 59,973
------------ --------- --------- ------ ---------
------------ --------- --------- ------ ---------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
6
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
OCTOBER 31,
----------------------
<S> <C> <C>
1996 1997
---------- ----------
Cash flows from operating activities:
Net income before extraordinary item.................................................... $ 51,187 $ 10,453
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization......................................................... 6,868 10,648
Amortization of deferred debt issuance costs and accretion of debt discount........... 1,271 1,158
Compensation expense related to stock options and grants.............................. 1,633 931
Minority interest in earnings of subsidiary........................................... 333 10,095
Gain on sale of subsidiary stock, net of income taxes................................. (41,427) --
Provision for deferred taxes.......................................................... 9,651 10
Change in assets and liabilities:
Accounts receivable................................................................. (2,455) (10,717)
Inventories......................................................................... 17,388 6,166
Other current and non-current assets................................................ 2,417 (2,142)
Accounts payable and accrued expenses............................................... 12,783 2,711
Other long-term liabilities......................................................... (1,644) 971
---------- ----------
Cash provided by operating activities..................................................... 58,005 30,284
---------- ----------
Cash flows from investing activities:
Capital expenditures.................................................................... (5,213) (9,453)
Investment in marketable securities..................................................... (115) 1,240
Advances to PolyVision Corporation...................................................... (996) (138)
Net proceeds from the sale of assets.................................................... -- 5,028
Other................................................................................... (178) --
---------- ----------
Cash used for investing activities........................................................ (6,502) (3,323)
---------- ----------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
7
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
OCTOBER 31,
---------------------
<S> <C> <C>
1996 1997
---------- ---------
Cash flows from financing activities:
Short term obligation..................................................................... $ 24,243 $ --
Borrowings (repayments) under revolving credit facilities, net............................ 65,192 (10,893)
Repayments of long-term borrowings........................................................ (105,426) (16,494)
Proceeds from sale of stock of subsidiary, net of current income tax...................... 62,672 --
Proceeds from exercise of stock options................................................... 217 1,973
Redemption of preferred stock............................................................. (13,195) --
Purchase of treasury shares............................................................... (4,380) (8,433)
Capitalized financing costs............................................................... (4,050) --
Other..................................................................................... (468) (283)
---------- ---------
Cash provided by (used for) financing activities............................................ 24,805 (34,130)
---------- ---------
Net increase (decrease) in cash and cash equivalents........................................ 76,308 (7,169)
Cash and cash equivalents at beginning of period............................................ 1,119 21,606
---------- ---------
Cash and cash equivalents at end of period.................................................. $ 77,427 $ 14,437
---------- ---------
---------- ---------
Supplemental disclosures:
Cash paid for interest.................................................................... $ 14,375 $ 14,528
---------- ---------
---------- ---------
Cash paid for income taxes................................................................ $ 2,803 $ 19,086
---------- ---------
---------- ---------
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.
8
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1997
(UNAUDITED)
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, OCTOBER 31,
1997 1997
---------- -----------
<S> <C> <C>
Raw materials........................................................ $ 32,894 $ 31,869
Work in process...................................................... 19,211 18,890
Finished goods....................................................... 67,129 61,777
---------- -----------
$ 119,234 $ 112,536
---------- -----------
---------- -----------
</TABLE>
3. NET INCOME PER SHARE
Net income per share is determined by dividing net income available to
common shareholders by the applicable weighted average number of common and
common equivalent shares outstanding. Stock options are considered to be common
stock equivalents. The number of shares used in computing net income per share
for the three months ended October 31, 1996 and 1997 was 18,669,000 and
18,807,000, respectively. The number of shares used in computing net income per
share for the six months ended October 31, 1996 and 1997 was 18,887,000 and
18,689,000, respectively.
4. SALE OF SUBSIDIARY STOCK
On October 2, 1996, the Company completed a reorganization and refinancing
(the "Reorganization") of its wholly-owned subsidiaries Superior
Telecommunication Inc. ("Superior") and DNE Systems, Inc. ("DNE"). In connection
with the Reorganization, the Company (i) recapitalized Superior, resulting in
Superior issuing to Alpine 20,000 shares of 6% Cumulative Preferred Stock
("Superior Preferred Stock"), par value $1.00 per share, with a liquidation
preference of $1,000 per share, (ii) caused Superior and DNE to declare a
dividend to Alpine of $117.1 million, (iii) contributed all of the common stock
of both Superior and DNE to a newly-formed wholly-owned subsidiary, Superior
TeleCom Inc. ("Superior TeleCom") and (iv) caused Superior TeleCom to enter into
a revolving credit facility (the "Credit Facility"), the proceeds of which were
used to repay the intercompany debt then owed to Alpine and to pay $63.8 million
of the declared dividend.
On October 17, 1996, Superior TeleCom sold 6,000,000 shares of its common
stock through an initial public offering. Superior TeleCom used the net proceeds
of approximately $88.3 million to repay $34.4 million of the aforementioned
Credit Facility and to pay the remaining balance on the previously declared
dividend.
9
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 1997
(UNAUDITED)
4. SALE OF SUBSIDIARY STOCK (CONTINUED)
In November 1996, the underwriters of the initial public offering exercised
their overallotment option to purchase an additional 900,000 shares of Superior
TeleCom common stock. Superior TeleCom used the net proceeds of approximately
$13.3 million to repurchase 450,000 shares of its common stock for approximately
$8.1 million with the balance of such proceeds being used to reduce the amount
outstanding under the Credit Facility. The Superior TeleCom common stock
repurchased was then transferred to the Company in exchange for $8.1 million in
liquidation value of Superior Preferred Stock. As a result of the foregoing
transactions, the Company's ownership interest in Superior TeleCom declined to
50.1% and the Company recorded a gain on sale of subsidiary stock of $80.4
million ($41.4 million, or $2.22 per share, after provision for current and
deferred income taxes).
5. EXTRAORDINARY (LOSS) ON EARLY EXTINGUISHMENT OF DEBT
During the six months ended October 1997, the Company retired $7.0 million
face amount ($6.4 million recorded amount) of its 12.25% Senior Secured Notes
("Alpine Senior Notes") and $5.0 million face amount ($4.7 million recorded
amount) of its Adience 11% Senior Secured Notes. In connection with this early
extinguishment of debt, the Company recorded an after tax extraordinary charge
of $1.2 million, or $0.07 per share.
During fiscal 1997, the Company refinanced substantially all of its bank
debt and redeemed $86.6 million face amount ($80.1 million recorded amount) of
Alpine Senior Notes. In connection with the bank refinancing and Alpine Senior
Note redemption, the Company recorded an after tax extraordinary charge of $13.4
million, or $0.71 per share, on the early extinguishment of debt.
6. REDEMPTION OF PREFERRED STOCK
On October 31, 1996, the Company entered into an agreement to repurchase for
$13.2 million, 160,000 shares of the Company's 8% Cumulative Convertible Senior
Preferred Stock ("8% Preferred Stock"), with a carrying value of $8.0 million.
In accordance with generally accepted accounting principles, the repurchase
price paid in excess of the carrying value has been recorded as a redemption
premium and, therefore, as a reduction to net income attributable to common
stockholders.
7. SUBSEQUENT EVENT
On November 3, 1997, Refraco Inc., a wholly owned subsidiary of Alpine,
announced that it had a signed a letter of intent for the acquisition of the
refractories business of American Premier Holdings, Inc. The purchase price is
approximately $133 million, consisting of cash, the assumption of debt and a 15%
equity interest in Refraco Inc. The acquisition, if completed, will be accounted
for using the purchase method and, accordingly, the results of operations of the
acquired business will be included in the Company's consolidated results on a
prospective basis from the date of acquisition. Consummation of the transaction
is contingent upon the completion of documentation, due diligence and other
customary conditions.
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The Alpine Group, Inc. ("Alpine" or the "Company") through its subsidiaries,
Superior TeleCom ("Superior TeleCom") and Refraco Inc. ("Refraco"), operates in
three industry segments. Superior TeleCom, a 50.1% owned subsidiary of Alpine,
operates in the following industry segments: (i) telecommunications distribution
wire and cable products for the telecommunications industry through its
subsidiary of Alpine, 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 of Alpine, 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 month and six month periods ended
October 31, 1996 and 1997.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
OCTOBER 31, OCTOBER 31,
---------------------- ----------------------
<S> <C> <C> <C> <C>
1996 1997 1996 1997
---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
Net sales:
Telecommunications wire and cable.............................. $ 116,887 $ 131,394 $ 234,856 $ 258,114
Data communications and electronics............................ 6,039 7,818 11,894 12,331
Refractories................................................... 31,093 79,746 58,716 169,583
---------- ---------- ---------- ----------
Consolidated............................................... 154,019 218,958 305,466 440,028
Gross profit:
Telecommunications wire and cable.............................. $ 18,949 $ 22,976 $ 35,808 $ 46,011
Data communications and electronics............................ 1,636 2,366 3,154 3,673
Refractories................................................... 6,774 16,560 12,361 34,156
---------- ---------- ---------- ----------
Consolidated............................................... 27,359 41,902 51,323 83,840
Gross profit percentage:
Telecommunications wire and cable.............................. 16.2% 17.5% 15.3% 17.8%
Data communications and electronics............................ 27.1 30.3 26.5 29.8
Refractories................................................... 21.8 20.8 21.0 20.1
Consolidated............................................... 17.8 19.1 16.8 19.1
Selling, general and administrative expense:
Telecommunications wire and cable.............................. $ 2,745 $ 3,250 $ 5,067 $ 6,401
Data communications and electronics............................ 1,700 1,482 3,266 2,853
Refractories................................................... 3,763 9,873 7,719 20,653
Corporate and other expenses................................... 3,002 2,167 4,948 4,449
---------- ---------- ---------- ----------
Consolidated............................................... 11,210 16,772 21,000 34,356
Amortization of goodwill:
Telecommunications wire and cable.............................. $ 431 $ 430 $ 863 $ 860
Refractories................................................... 333 613 662 1,233
---------- ---------- ---------- ----------
Consolidated............................................... 764 1,043 1,525 2,093
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
OCTOBER 31, OCTOBER 31,
-------------------- --------------------
1996 1997 1996 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Operating income:
Telecommunications wire and cable................................... $ 15,773 $ 19,296 $ 29,878 $ 38,750
Data communications and electronics................................. (64) 884 (112) 820
Refractories........................................................ 2,678 6,074 3,980 12,270
Corporate and other expenses........................................ (3,002) (2,167) (4,948) (4,449)
--------- --------- --------- ---------
Consolidated.................................................... 15,385 24,087 28,798 47,391
</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 SIX MONTHS ENDED
OCTOBER 31, OCTOBER 31,
---------------------- ----------------------
1996 1997 1996 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Net sales........................................................ $ 113,152 $ 126,467 $ 224,659 $ 249,809
Gross profit..................................................... 18,949 22,976 35,808 46,011
Gross profit percentage.......................................... 16.7% 18.2% 15.9% 18.4%
</TABLE>
TELECOMMUNICATIONS WIRE AND CABLE--RESULTS OF OPERATIONS
Superior's net sales for the quarter ended October 1997 were $131.4 million,
representing an increase of $14.5 million, or 12.4%, as compared to the same
period in the prior fiscal year. For the six month period ended October 1997,
Superior's net sales were $258.1 million, representing an increase of $23.3
million, or 9.9%, as compared to net sales of $234.9 million for the six months
ended October 1996. Adjusted to a constant copper cost of $1.00 per pound, the
comparative percentage increases in net sales for the three and six month
periods ended October 1997 were 11.8% and 11.2%, respectively (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 and
six months ended October 1997 resulted primarily from increased demand for
copper wire and cable products due to continuing growth in new copper-based
telephone access lines and an increase in maintenance spending by several of
Superior's major telephone company customers. The growth in access lines is
believed to be the result of increased demand for support of computer, facsimile
and internet connections. 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 order to keep pace with the growth
in demand and increased market share, Superior has been increasing its
production capacity and, more recently, supplementing its inventory requirements
with product purchased from other wire and cable manufacturers. The Company
expects to continue to increase its production capacity over the next 12 months,
to a level that will be sufficient to provide internally for anticipated product
demand levels.
Superior's gross profit increased by $4.0 million, or 21.3%, to $23.0
million for the quarter ended October 1997, as compared to the same period in
the prior fiscal year. For the six months ended October 1997, Superior's gross
profit was $46.0 million, representing an increase of $10.2 million, or
12
<PAGE>
TELECOMMUNICATIONS WIRE AND CABLE--RESULTS OF OPERATIONS (CONTINUED)
28.5%, as compared to the same period in the prior fiscal year. Superior's gross
profit percentage, based on actual net sales, was 17.5% for the quarter ended
October 1997 and 17.8% for the six months ended October 1997, as compared to
16.2% for the quarter ended October 1996 and 15.2% for the six months ended
October 1996. Adjusted to a constant copper cost of $1.00 per pound, the gross
profit percentage increased to 18.2% and 18.4%, respectively, for the quarter
and six months ended October 1997, as compared to 16.7% and 15.9%, respectively,
for the quarter and six months ended October 1996. The comparative increase in
Superior's gross profit percentage was attributable to a combination of factors,
including manufacturing cost reductions resulting from production efficiencies,
improved cost absorption resulting from higher sales volume, generally higher
comparative market prices and the impact of product and customer mix; offset to
some degree by lower product margins associated with the sale of product
purchased from other cable manufacturers.
Superior's SG&A expense for the quarter ended October 1997 was $3.3 million,
representing an increase of $0.5 million, or 18.4%, as compared to SG&A expense
of $2.7 million for the same period in the prior fiscal year. For the six month
period ended October 1997, Superior's SG&A expense was $6.4 million,
representing an increase of $1.3 million, or 26.3%, as compared to SG&A expense
of $5.1 million for the same period in the prior fiscal year. The increase in
SG&A expense for the quarter and six months ended October 1997 was attributable
primarily to costs associated with the incremental staff required to support the
increased level of sales activity and the expansion of product development
activities, including the establishment and staffing of a product development
facility during the fourth quarter of fiscal 1997.
Superior's operating income for the quarter ended October 1997 was $19.3
million, representing an increase of $3.5 million, or 22.3%, as compared to
operating income of $15.8 million for the same period in the prior fiscal year.
For the six month period ended October 1997, Superior's operating income was
$38.8 million, representing an increase of $8.9 million, or 29.7%, as compared
to operating income of $29.9 million for the same period in the prior fiscal
year. The substantial comparative increase in operating income resulted from
higher net sales and the improvement in gross profit percentage.
DNE--RESULTS OF OPERATIONS
For the quarter ended October 1997, DNE's net sales were $7.8 million,
representing an increase of $1.8 million, or 29.5%, as compared to the same
period in the prior fiscal year. For the six month period ended October 1997,
DNE's net sales were $12.3 million, representing an increase of $0.4 million, or
3.7%, as compared to the same period in the prior fiscal year. The current
period increase in net sales was the result of significant shipments under DNE's
first major commercial multiplexer project, along with an improvement in
government related revenues, partially offset by a decline in DNE's contract
manufacturing activities.
DNE's gross profit percentage increased to 30.3% for the quarter ended
October 1997 and to 29.8% for the six months ended October 1997, as compared to
27.1% and 26.5% for the three and six month periods ended October 1996,
respectively. The increase in gross profit percentage was attributable to the
higher margin associated with the aforementioned commercial multiplexer sales
and the increase in higher margin government related revenues.
DNE reduced SG&A expense by $0.2 million, or 12.8%, in the October 1997
quarter and by $0.4 million, or 12.6%, in the October 1997 six month period, as
compared to the same periods in the prior fiscal year. Such reductions were
attributable to an operational reorganization and cost reduction initiatives.
As a result of the increase in net sales and gross profit percentage and the
reduction in SG&A expense, DNE generated operating income of $0.9 million during
the quarter ended October 1997 and
13
<PAGE>
DNE--RESULTS OF OPERATIONS (CONTINUED)
$0.8 million for the six months ended October 1997 which was an improvement over
DNE's approximately break even operating income in the same periods of the prior
fiscal year.
REFRACTORIES--RESULTS OF OPERATIONS
Refraco's net sales for the quarter ended October 1997 were $79.7 million,
representing an increase of $48.7 million, or 156%, as compared to the same
period in the prior fiscal year. Refraco's net sales for the six months ended
October 1997 were $169.6 million, representing an increase of $110.9 million, or
189%, as compared to the same period in the prior fiscal year. The increase in
net sales was due to the inclusion of the recently acquired Refraco UK
operations, which contributed net sales of $53.4 million and $115.7 million,
respectively, for the quarter and six months ended October 1997. Net sales for
BMI-France for the quarter and six months ended October 1997 were $26.3 million
and $53.9 million, respectively, representing a decline of 15.3% and 8.3%,
respectively, as compared to the same periods in the prior fiscal year. On a
comparative basis, the reduction in BMI-France net sales was the result of lower
sales of specialty refractory block to the plate glass industry due to both an
industry slow down and a recently settled strike at one of the Company's
manufacturing facilities, as well as a reduction in coke oven construction
services primarily at the Company's Furnco division. Activity at the Furnco
division is expected to increase over the next six months, such that revenues
for the entire fiscal year are anticipated to equal or exceed prior year levels.
Refraco's gross profit for the quarter ended October 1997 was $16.6 million,
representing an increase of $9.8 million, or 144%, as compared to the same
period in the prior fiscal year. Refraco's gross profit for the six months ended
October 1997 was $34.2 million, representing an increase of $21.8 million, or
176%, as compared to the same period in the prior fiscal year. The increase in
gross profit was attributable to the inclusion of the operations of Refraco UK
in the current fiscal quarter and six months ended October 1997, which generated
a gross profit of $11.8 million and $24.1 million, respectively, partially
offset by a decline in gross profit at BMI-France of $2.0 million and $2.3
million for the quarter and six months ended October 1997, respectively. The
combined gross profit percentage for the quarter and six months ended October
1997 was 20.8% and 20.1%, respectively, as compared to 21.8% and 21.0%,
respectively, for the same periods 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 October 1997 was $9.9 million,
representing an increase of $6.1 million, as compared to the same period in the
prior fiscal year. Refraco's SG&A expense for the six months ended October 1997
was $20.7 million, representing an increase of $12.9 million, as compared to the
same period in the prior fiscal year. The increase in SG&A expense was
attributable primarily to the inclusion of the Refraco UK operations in the
current fiscal periods.
Refraco's operating income for the quarter ended October 1997 was $6.1
million, representing an increase of $3.4 million, or 127%, as compared to the
same period in the prior fiscal year. Refraco's operating income for the six
months ended October 1997 was $12.3 million, representing an increase of $8.3
million, or 208%, as compared to the same period in the prior fiscal year. The
increase in operating income resulted from the inclusion of $5.2 million and
$10.0 million in operating income from the Refraco UK operations for the quarter
and six months ended October 1997, respectively. On a comparative basis,
operating income for the BMI-France operations declined by $2.3 million and $2.6
million, respectively, for the quarter and six months ended October 1997, with
such decline being the result of lower revenues, coupled with the impact of
competitive pricing pressures.
14
<PAGE>
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 $64.9 million, or 42.2%, for the quarter ended October
1997 and by $134.6 million, or 44.1%, for the six months ended October 1997. The
increase in net sales and an increase in the telecommunications wire and cable
products' gross profit percentage, gave rise to a consolidated comparative
increase in gross profit of $14.5 million, or 53.2%, for the quarter ended
October 1997 and of $32.5 million, or 63.4%, for the six months ended October
1997.
Consolidated SG&A expense for the quarter ended October 1997 was $16.8
million, representing an increase of $5.6 million, or 49.6%, compared to the
same period in the prior fiscal year. Consolidated SG&A expense for the six
months ended October 1997 was $34.4 million, representing an increase of $13.4
million, or 63.6%, compared to the same period in the prior fiscal year. The
increase in consolidated SG&A expense resulted primarily from the inclusion of
Refraco UK's operations for the current fiscal period along with higher SG&A
expense in Superior's operations, offset partially by a reduction in corporate
SG&A expenses, which reduction was attributable to a lower level of charges for
non cash compensation expense related to variable accounting for certain stock
options.
Consolidated operating income for the quarter ended October 1997 was $24.1
million, representing an increase of $8.7 million, or 56.6%, as compared to the
same period in the prior fiscal year. Consolidated operating income for the six
months ended October 1997 was $47.4 million, representing an increase of $18.6
million, or 64.6%, 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 October 1997 was $7.2
million, representing an increase of $0.6 million, or 8.8%, as compared to
consolidated interest expense of $6.6 million for the same period in the prior
fiscal year. Consolidated interest expense for the six months ended October 1997
was $14.7 million, representing an increase of $1.1 million, or 8.2%, as
compared to consolidated interest expense of $13.6 million for the same period
in the prior fiscal year. The increase in consolidated interest expense
reflected 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 and six months ended October 1997, the provision for income
taxes was $7.1 million and $13.7 million, respectively, as compared to a
provision for income taxes of $42.1 million and $44.4 million, respectively, for
the same periods in the prior fiscal year. Included in the provision for income
taxes for the quarter and six months ended October 1996 was $39.0 million
related to the non recurring gain on sale of subsidiary stock. The effective tax
rates for the quarter and six months ended October 1997 were 39.5% and 40.0%,
respectively, which compares with effective tax rates, excluding income taxes
associated with the aforementioned non recurring gain, of 35.0% for the three
and six months ended October 1996. The lower effective tax rate in the prior
fiscal year period was due to the availability of certain limited tax loss
carryforwards to offset U.S. Federal and state income tax liabilities during
such periods.
As a result of the October 1996 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), minority interest
charges of $5.2 million and $10.1 million were recorded for the three and six
months ended October 1997, respectively, as compared to $0.3 million in the same
periods in the prior fiscal year, with such charge representing the minority
stockholders' interest in Superior TeleCom's net income for the respective
periods.
15
<PAGE>
CONSOLIDATED RESULTS OF OPERATIONS (CONTINUED)
Net income attributable to common stock before extraordinary (loss) was $5.6
million, or $0.30 per share, for the quarter ended October 1997, as compared to
net income attributable to common stock before extraordinary (loss) and before
the after tax non-recurring gain on sale of subsidiary stock, of $5.2 million,
or $0.28 per share, for the prior year quarterly period. For the six months
ended October 1997, net income attributable to common stock before extraordinary
(loss) was $10.4 million, or $0.56 per share, as compared to net income
attributable to common stock before extraordinary (loss) and before the after
tax non-recurring gain on sale of subsidiary stock, of $9.3 million, or $0.49
per share, for the prior year six month period. 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.
GAIN ON SALE OF SUBSIDIARY STOCK
In fiscal 1997, the Company completed the sale of 6,900,000 shares of common
stock (amounting to 49.9% of the outstanding shares) of its Superior TeleCom
subsidiary (see Note 4 to the accompanying Condensed Consolidated Financial
Statements), with such sale resulting in a pre-tax gain of $80.4 million that
was recorded as non-operating income. Current and deferred income tax expense
related to this transaction of $39.0 million has been included in the Company's
provision for income taxes. Thus, on an after tax basis, the net gain on sale of
subsidiary stock amounted to $41.4 million, or $2.22 per share, for the quarter
ended October 31, 1996.
EXTRAORDINARY ITEM
During the quarter and six months ended October 1997, the Company incurred
an extraordinary (loss) of $0.8 million and $1.2 million, respectively, on the
early extinguishment of debt. During the quarter ended October 1996, the Company
incurred an extraordinary loss of $13.4 million on the early extinguishment of
debt. The extraordinary loss during the October 1997 and 1996 fiscal periods
related to the early retirement of debt (see note 5 to the accompanying
Condensed Consolidated Financial Statements and note 10 to the Company's Annual
Report on Form 10-K for the year ended April 30, 1997).
16
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
For the six months ended October 31, 1997, the Company generated $30.3
million in cash flow from operating activities consisting of $33.3 million in
cash flow generated from operations (net income plus non-cash charges), less
$3.0 million in cash flow used for net working capital changes. The major
working capital changes included a $10.7 million increase in accounts
receivable, offset by a $6.6 million reduction in inventories. Cash used for
investing activities amounted to $3.3 million, consisting principally of $9.5
million in capital expenditures, offset by $5.0 million in net proceeds from the
sale of assets. Cash used for financing activities amounted to $34.0 million,
consisting of $17.2 million in repayments of long-term debt, largely as a result
of the redemption of $11.1 million recorded amount ($12.0 million face amount)
of Senior Notes, $10.9 million in repayments of revolving credit loans and $8.4
million used for repurchases of Company common stock.
The Company had $29.0 million in cash and marketable securities on a
consolidated basis at October 31, 1997. Of such amount, $18.6 million was
maintained by the Company, with the balance held 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% of the
outstanding shares) of Superior TeleCom (NYSE: SUT); which investment, based on
the closing price on the New York Stock Exchange on December 3, 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 $32.2 million. 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 October 31, 1997, Superior TeleCom had a cash balance of $4.5 million
and approximately $64.0 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 $10 to $15 million will be required over such period. Superior
TeleCom has typically generated substantial cash flows from operating
activities. Management anticipates that the Company will be able to generate
sufficient cash flows from operating activities to meet its 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 October 31, 1997, Refraco had $12.4 million in excess funds
availability under its revolving credit facility and an additional $5.9 million
in cash and cash equivalents. Refraco's principal debt service commitments for
the next 12 months amount to $3.7 million and capital expenditures over the next
twelve months are expected to approximate $8 to $10 million. 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 October 31, 1997, Alpine had $13.9 million recorded amount ($15.0
million face amount) of debt, none of which is repayable during the next 12
months. For the next 12 months, Alpine expects to fund its corporate activities
(which include approximately $5.0 million in estimated corporate overhead
expenses and $1.8 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.
17
<PAGE>
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
The Annual Meeting of Stockholders of the Company was held on September 24,
1997, for the purpose of: (i) electing three directors; (ii) ratifying the
selection of auditors for the current fiscal year; (iii) ratifying the adoption
by the Board of Directors of the Company's 1997 Stock Option Plan and (iv)
ratifying the adoption by the Board of Directors of an amendment to the
Company's Employee Stock Purchase Plan. Proxies were solicited by management
pursuant to Regulation 14A under the Securities Exchange Act of 1934. There was
no solicitation in opposition to management's proposals and nominees; and all
such proposals were adopted and nominees elected.
(a) With respect to the re-election of three directors of the Company, the
common stock and preferred stock votes cast for each director and the percentage
of those shares of the combined classes of stock voted were as follows:
<TABLE>
<CAPTION>
COMMON STOCK PREFERRED STOCK PERCENTAGE
-------------- ----------------- -------------
<S> <C> <C> <C>
Mr. Kenneth G. Byers, Jr............................................. 15,126,708 1,000 99.4%
Mr. Randolph Harrison................................................ 15,126,698 1,000 99.4%
Mr. Ernest C. Janson, Jr............................................. 15,126,688 1,000 99.4%
</TABLE>
In addition to the above, directors whose term of office continued after the
meeting were Messrs. Steven S. Elbaum, John C. Jansing, James R. Kanely, Gene E.
Lewis and Bragi F. Schut.
(b) With respect to the election of Arthur Andersen LLP as the Company's
auditors, 15,170,247 shares of Common Stock and 1,000 shares of Preferred Stock
were voted in favor and 88,281 shares of Common Stock and no shares of Preferred
Stock were voted against ratification; the affirmative vote representing 99.7%
of the shares of the combined classes of stock voted.
(c) With respect to the ratification of the adoption by the Board of
Directors of the Company's 1997 Stock Option Plan, 8,450,876 shares of Common
Stock and no shares of Preferred Stock were voted in favor and 695,806 shares of
Common Stock and 1,000 shares of Preferred Stock were voted against
ratification; the affirmative vote representing 55.1% of the shares of the
combined classes of stock voted.
(d) With respect to the ratification of the adoption by the Board of
Directors of an amendment to the Company's Employee Stock Purchase Plan,
14,667,070 shares of Common Stock and 1,000 shares of Preferred Stock were voted
in favor and 276,656 shares of Common Stock and no shares of Preferred Stock
were voted against ratification; the affirmative vote representing 96.4% of the
shares of the combined classes of stock voted.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27--FINANCIAL DATA SCHEDULE
(b) Reports on Form 8-K
None.
18
<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.
(Registrant)
Date: December 12, 1997 By: /s/ DAVID S. ALDRIDGE
------------------------------------------
David S. Aldridge
CHIEF FINANCIAL OFFICER
</TABLE>
19
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<PAGE>
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<PERIOD-END> OCT-31-1997
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0
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