<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
<TABLE>
<C> <S>
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
</TABLE>
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000
OR
<TABLE>
<C> <S>
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
</TABLE>
FOR THE TRANSITION PERIOD FROM ______________ TO ______________
COMMISSION FILE 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 (IRS Employer Identification No.)
incorporation or organization)
1790 BROADWAY 10019-1412
NEW YORK, NEW YORK (Zip code)
(Address of principal
executive offices)
</TABLE>
212-757-3333
Registrant's telephone number, including area code
------------------------
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES OF
COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE.
<TABLE>
<CAPTION>
CLASS OUTSTANDING AT MAY 5, 2000
- ------------------------------- -------------------------------
<S> <C>
Common Stock, $.10 Par Value 14,125,859
</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 Transition Report on Form 10-K for the
eight month period ended December 31, 1999.
2
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1999 2000
------------ -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 19,542 $ 8,281
Marketable securities..................................... 7,841 7,874
Accounts receivable (less allowance for doubtful accounts
of $3,193 and $3,006 at December 31, 1999 and March 31,
2000, respectively)..................................... 261,263 271,377
Inventories............................................... 313,571 320,942
Other current assets...................................... 42,262 41,912
---------- ----------
Total current assets.................................... 644,479 650,386
Property, plant and equipment, net.......................... 515,763 528,405
Long-term investments and other assets...................... 226,606 202,241
Goodwill (less accumulated amortization of $28,399 and
$33,620 at December 31, 1999 and March 31, 2000,
respectively)............................................. 796,781 791,494
---------- ----------
Total assets............................................ $2,183,629 $2,172,526
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings..................................... $ 140,369 $ 128,597
Current portion of long-term debt......................... 85,910 82,328
Accounts payable.......................................... 147,336 156,443
Accrued expenses.......................................... 100,843 89,682
---------- ----------
Total current liabilities............................... 474,458 457,050
Long-term debt, less current portion........................ 1,253,020 1,290,202
Minority interest in subsidiaries........................... 66,459 66,174
Other long-term liabilities................................. 160,750 151,565
---------- ----------
Total liabilities....................................... 1,954,687 1,964,991
---------- ----------
Subsidiary-obligated Mandatorily Redeemable Trust
Convertible Preferred Securities of Superior Trust I
holding solely convertible debentures of Superior, net of
discount.................................................. 133,959 134,193
Commitments and contingencies
Stockholders' equity:
9% cumulative convertible preferred stock at liquidation
value................................................... 427 427
Common stock, $.10 par value; 25,000,000 shares
authorized; 21,663,041 shares and 21,696,477 shares
issued at December 31, 1999 and March 31, 2000,
respectively............................................ 2,166 2,170
Capital in excess of par value............................ 158,268 158,567
Accumulated other comprehensive income (deficit).......... 451 (20,648)
Retained earnings......................................... 27,056 26,916
---------- ----------
188,368 167,432
Shares of common stock in treasury, at cost: December 31,
1999, 7,418,534 shares; March 31, 2000, 7,492,203
shares.................................................. (92,396) (93,121)
Receivable from stockholders................................ (989) (969)
---------- ----------
Total stockholders' equity................................ 94,983 73,342
---------- ----------
Total liabilities and stockholders' equity.............. $2,183,629 $2,172,526
========== ==========
</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
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------
1999 2000
-------- --------
<S> <C> <C>
Net sales................................................... $506,836 $495,892
Cost of goods sold.......................................... 406,646 410,270
-------- --------
Gross profit.............................................. 100,190 85,622
Selling, general and administrative expenses................ 43,851 40,326
Nonrecurring and unusual charges............................ 2,522 5,856
Amortization of goodwill.................................... 4,237 5,232
-------- --------
Operating income.......................................... 49,580 34,208
Interest expense............................................ (31,168) (33,296)
Other income, net........................................... 984 4,261
-------- --------
Income from continuing operations before income taxes,
distributions on preferred securities of subsidiary
trust, minority interest and equity in earnings of
affiliate............................................... 19,396 5,173
Provision for income taxes.................................. (9,069) (2,558)
-------- --------
Income from continuing operations before distributions on
preferred securities of subsidiary trust, minority
interest and equity in earnings of affiliate............ 10,327 2,615
Distributions on preferred securities of subsidiary trust... -- (3,762)
-------- --------
Income (loss) from continuing operations before minority
interest and equity in earnings of affiliate............ 10,327 (1,147)
Minority interest in (earnings) loss of subsidiaries........ (7,314) 635
Equity in earnings (loss) of affiliate...................... (102) 382
-------- --------
Income (loss) from continuing operations.................. 2,911 (130)
Loss from discontinued operations, net of tax............... (1,267) --
-------- --------
Net income (loss)......................................... 1,644 (130)
Preferred stock dividends................................... (9) (10)
-------- --------
Net income (loss) applicable to common stock.............. $ 1,635 $ (140)
======== ========
Net income per share of common stock:
Basic:
Income (loss) from continuing operations................ $ 0.19 $ (0.01)
Loss from discontinued operations....................... (0.08) --
-------- --------
Net income (loss) per basic share of common stock..... $ 0.11 $ (0.01)
======== ========
Diluted:
Income (loss) from continuing operations................ $ 0.16 $ (0.01)
Loss from discontinued operations....................... (0.08) --
-------- --------
Net income (loss) per diluted share of common stock... $ 0.08 $ (0.01)
======== ========
Weighted average shares outstanding:
Basic..................................................... 15,477 15,008
======== ========
Diluted................................................... 16,744 15,008
======== ========
</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 MARCH 31, 2000
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
CAPITAL 9% CUMULATIVE ACCUMULATED
IN CONVERTIBLE OTHER
COMMON STOCK EXCESS PREFERRED STOCK COMPREHENSIVE
COMPREHENSIVE --------------------- OF PAR ------------------- RETAINED INCOME
LOSS SHARES AMOUNT VALUE SHARES AMOUNT EARNINGS (DEFICIT)
------------- ---------- -------- -------- -------- -------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1999... 21,663,041 $2,166 $158,268 427 $427 $27,056 $ 451
Exercise of stock options...... 17,500 2 88
Employee stock purchase plan... 10,736 1 118
Purchase of treasury stock.....
Compensation expense related to
stock options and grants..... 5,200 1 93
Dividends on preferred stock... (10)
Comprehensive loss:
Net loss..................... $ (130) (130)
Foreign currency translation
adjustment................. 618 618
Change in unrealized (losses)
on securities, net of
tax........................ (21,717) (21,717)
--------
Total comprehensive loss....... $(21,229)
======== ---------- ------ -------- --- ---- ------- --------
Balance at March 31, 2000...... 21,696,477 $2,170 $158,567 427 $427 $26,916 $(20,648)
========== ====== ======== === ==== ======= ========
<CAPTION>
RECEIVABLE
TREASURY STOCK FROM
--------------------- STOCK-
SHARES AMOUNT HOLDERS TOTAL
---------- -------- ---------- --------
<S> <C> <C> <C> <C>
Balance at December 31, 1999... (7,418,534) $(92,396) $(989) $94,983
Exercise of stock options...... 90
Employee stock purchase plan... 119
Purchase of treasury stock..... (124,000) (1,348) (1,348)
Compensation expense related to
stock options and grants..... 50,331 623 20 737
Dividends on preferred stock... (10)
Comprehensive loss:
Net loss..................... (130)
Foreign currency translation
adjustment................. 618
Change in unrealized (losses)
on securities, net of
tax........................ (21,717)
Total comprehensive loss.......
---------- -------- ----- -------
Balance at March 31, 2000...... (7,492,203) $(93,121) $(969) $73,342
========== ======== ===== =======
</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
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, 2000
-----------------------
1999 2000
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Income from continuing operations......................... $ 2,911 $ (130)
Adjustments to reconcile income from continuing
operations to net cash provided by operating
activities:
Depreciation and amortization....................... 13,400 15,450
Amortization of deferred debt issuance costs and
accretion of debt discount........................ 1,214 1,221
Compensation expense related to stock options and
grants............................................ 463 737
Provision (benefit) for deferred income taxes....... (36) 2,331
Minority interest in earnings (loss) of
subsidiaries...................................... 7,314 (635)
Equity in earnings (loss) of affiliates............. (102) (382)
Other, net.......................................... 2,489 444
Change in assets and liabilities, net of effects
from companies acquired:
Accounts receivable............................. (46,842) (8,812)
Inventories..................................... 860 (6,394)
Other current and non-current assets............ 25,108 (1,508)
Accounts payable and accrued expenses........... 17,836 529
Other long-term liabilities..................... -- (728)
-------- --------
Cash flows provided by continuing operations................ 24,615 2,123
Cash flows provided by discontinued operations.............. 9,675 --
-------- --------
Cash flows provided by operating activities................. 34,290 2,123
-------- --------
Cash flows from investing activities:
Capital expenditures...................................... (12,270) (20,549)
Customer loans............................................ -- (11,758)
Other..................................................... (289) (1,470)
-------- --------
Cash flows used for continuing operations................... (12,559) (33,777)
Cash flows used for discontinued operations................. -- --
-------- --------
Cash flows used for investing activities.................... (12,559) (33,777)
-------- --------
</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 (CONTINUED)
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-----------------------
1999 2000
-------- --------
<S> <C> <C>
Cash flows from financing activities:
Borrowings under revolving credit facilities, net......... $ 16,720 $ 46,014
Short-term borrowings, net................................ (9,525) (11,772)
Repayment of long-term borrowings......................... (14,098) (24,806)
Long-term borrowings...................................... 6,439 11,758
Proceeds from exercise of stock options................... -- 90
Purchase of treasury shares............................... (8,290) (1,348)
Subsidiary treasury stock purchases....................... (931) --
Dividends on subsidiary common stock...................... (1,255) --
Dividends on preferred stock.............................. (47) (10)
Other..................................................... (933) 467
-------- --------
Cash flows provided by continuing operations................ (11,920) 20,393
Cash flows provided by discontinued operations.............. (2,165) --
-------- --------
Cash flows provided by financing activities................. (14,085) 20,393
-------- --------
Cash flows provided by discontinued operations.............. 7,510 --
Net increase in discontinued operations cash and cash
equivalents............................................... (7,510) --
Net increase (decrease) in continuing operations cash and
cash equivalents.......................................... 136 (11,261)
Cash and cash equivalents at beginning of period............ 26,029 19,542
-------- --------
Cash and cash equivalents at end of period.................. $ 26,165 $ 8,281
======== ========
Supplemental disclosures:
Cash paid for interest.................................... $ 30,623 $ 32,587
======== ========
Cash paid for income taxes, net of refunds................ $ 2,347 $ 1,335
======== ========
Acquisition of Essex minority interest:
Net assets acquired including goodwill.................. $ 83,044
Minority interest in subsidiary......................... 50,246
--------
Issuance of Company-obligated Mandatorily Redeemable
Trust Convertible Preferred Securities of Superior
Trust I holding solely convertible debentures of
Superior (net of discount of $33.3 million)........... $133,290
========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
7
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
include the accounts of The Alpine Group, Inc. and its majority-owned subsidiary
(collectively, unless the context otherwise requires, "Alpine" or the
"Company"). Certain reclassifications have been made to the prior period
presentation to conform to the current period presentation.
Alpine's operations are carried out through Superior TeleCom Inc. (together
with its subsidiaries, unless the context otherwise requires, "Superior"), a
51.8% owned subsidiary, which manufactures wire and cable products for the
communications, original equipment manufacturer ("OEM") and electrical markets.
Alpine also holds a 48% common equity interest and $19.8 million of
convertible preferred stock in PolyVision Corporation, a global manufacturer of
visual communications and related products. Alpine currently accounts for its
investment in PolyVision under the equity method of accounting.
On August 6, 1999, Alpine sold its subsidiary, Premier Refractories
International Inc. ("Premier"), to Cookson Group plc. Accordingly, Premier has
been accounted for as a discontinued operation in the accompanying condensed
consolidated financial statements. The operating results of Premier for the
three month period ended March 31, 1999 have been segregated from the Company's
continuing operations and are reported as a separate line item on the statement
of operations as discontinued operations.
2. INVENTORIES
At December 31, 1999 and March 31, 2000, the components of inventories were
as follows:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1999 2000
------------ ---------
(IN THOUSANDS)
<S> <C> <C>
Raw materials......................................... $ 50,618 $ 52,106
Work in process....................................... 42,150 46,564
Finished goods........................................ 233,142 232,680
-------- --------
325,910 331,350
LIFO reserve.......................................... (12,339) (10,408)
-------- --------
$313,571 $320,942
======== ========
</TABLE>
Inventories valued using the LIFO method amounted to $167.3 million at
December 31, 1999 and $176.1 million at March 31, 2000, respectively.
8
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2000
(UNAUDITED)
3. COMPREHENSIVE INCOME
The components of comprehensive income for the three months ended March 31,
1999 and 2000 were as follows:
<TABLE>
<CAPTION>
1999 2000
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Net income (loss)......................................... $1,644 $ (130)
Foreign currency translation adjustment................... (106) 618
Change in unrealized (losses) on securities, net of tax... -- (21,717)
------ --------
Comprehensive income (loss)............................... $1,538 $(21,229)
====== ========
</TABLE>
4. ACQUISITIONS
On November 27, 1998, Superior completed a cash tender offer for 81% of the
outstanding common stock of Essex International Inc. ("Essex"), at an aggregate
cash tender value of $770 million. On March 31, 1999, Superior acquired the
remaining outstanding common stock of Essex through the issuance of
approximately $167 million (face amount) of 8 1/2% Subsidiary-obligated
Mandatorily Redeemable Trust Convertible Preferred Securities of Superior Trust
I holding solely convertible debentures of Superior. The sole assets of Superior
Trust I are the $171.8 million (principal amount) of convertible debentures of
Superior, which bear interest at an annual rate of 8 1/2%. The convertible
debentures mature on March 30, 2014.
The acquisition of Essex was accounted for using the purchase method and,
accordingly, the results of operations of Essex have been included in the
consolidated financial statements on a prospective basis from the dates of
acquisition. The purchase price was allocated based upon assessments of the fair
values of assets and liabilities at the dates of acquisition, which included
accruals for planned consolidations, overhead rationalization and loss
contingencies. The excess of the purchase price over the net assets acquired is
being amortized on a straight-line basis over 40 years.
PRO FORMA FINANCIAL DATA
Unaudited condensed pro forma results of operations for the three months
ended March 31, 1999, which give effect to the March 31, 1999 acquisition of the
remaining 19% of the outstanding common stock of Essex as if it had occurred on
January 1, 1999, are presented below. The pro forma amounts reflect
acquisition-related purchase accounting adjustments, including adjustments to
depreciation and amortization expense and certain other adjustments, together
with related income tax effects. The pro forma financial information does not
purport to be indicative of either the results of operations that would have
occurred if the transaction had taken place at the beginning of the period
presented or of the future results of operations.
9
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2000
(UNAUDITED)
4. ACQUISITIONS (CONTINUED)
PRO FORMA FINANCIAL DATA (CONTINUED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, 1999
---------------------
(IN THOUSANDS, EXCEPT
PER SHARE DATA)
<S> <C>
Net sales................................................. $506,836
Income from continuing operations before income taxes,
distribution on preferred securities of subsidiary
trust, and minority interest............................ 14,850
Income from continuing operations......................... 2,228
Loss from discontinued operations......................... (1,267)
Net income applicable to common stock..................... 952
Net income per diluted share of common stock:
Income from continuing operations....................... $ 0.12
Loss from discontinued operations....................... (0.08)
--------
Net income per diluted share of common stock.......... $ 0.04
========
</TABLE>
5. RESTRUCTURING ACCRUAL
ESSEX
Since the completion of the acquisition of Essex, the Company has been
involved in the consolidation and integration of manufacturing, corporate and
distribution functions of Essex into Superior. As a result, Superior initially
accrued as part of the Essex Acquisition purchase price a $29.7 million
provision, which included $11.8 million of employee termination and relocation
costs, $11.9 million of facility consolidation costs, $4.4 million of management
information system project termination costs, and $1.6 million of other exit
costs. During 1999, Superior revised its estimate and, as a result, increased
the provision for employee termination and relocation costs, facility
consolidation costs, and other exit costs by $6.1 million, $0.2 million and
$1.3 million, respectively, and decreased the provision for management
information system project termination costs by $1.4 million. The net increase
to the accrual of $6.2 million was reflected as an increase in goodwill. As of
March 31, 2000, $16.4 million, $5.9 million, $3.0 million and $1.8 million have
been incurred and paid related to employee termination and relocation costs,
facility consolidation costs, management information system project termination
costs and other exit costs, respectively. The provision for employee termination
and relocation costs was primarily associated with selling, general and
administrative functions within Essex. The provision for facility consolidation
costs included both manufacturing and distribution facility rationalization and
the related costs associated with employee severance. The restructuring resulted
in the severance of approximately 1,100 employees. All significant aspects of
the plan are expected to be completed by June 2000.
10
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2000
(UNAUDITED)
5. RESTRUCTURING ACCRUAL (CONTINUED)
SUPERIOR ISRAEL
During 1999, Superior's 51% owned Israeli subsidiary, Superior Cables
Limited ("Superior Israel"), recorded a $1.3 million restructuring charge, which
included a provision for the consolidation of manufacturing facilities. As of
March 31, 2000, approximately $0.8 million has been incurred and paid. The
restructuring actions will result in the elimination of approximately 35
positions, most of which are manufacturing related employees. All aspects of the
restructuring plan are expected to be completed during the year 2000.
6. EARNINGS PER SHARE
The computation of basic and diluted earnings per share for the three months
ended March 31, 1999 and 2000 is as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
-----------------------------------------------------------------
1999 2000
------------------------------- -------------------------------
NET PER SHARE NET PER SHARE
INCOME SHARES AMOUNT INCOME SHARES AMOUNT
-------- -------- --------- -------- -------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
Income (loss) from continuing
operations.............................. $2,911 $ (130)
Less: preferred stock dividends........... (9) (10)
------ ------
Basic earnings (loss) per common share
from continuing operations.............. 2,902 15,477 $0.19 (140) 15,008 $(0.01)
===== ======
Dilutive impact of stock options, warrants
and grants.............................. -- 1,217 -- --
Dilution in subsidiary and affiliate
earnings from common stock
equivalents............................. (230) -- (2) --
Assumed conversion of preferred stock..... 9 50 -- --
------ ------ ------ ------
Diluted earnings (loss) per common share
from continuing operations.............. $2,681 16,744 $0.16 $ (142) 15,008 $(0.01)
====== ====== ===== ====== ====== ======
</TABLE>
The Company has excluded from the diluted earnings per share calculation the
assumed conversion of the Trust Convertible Preferred Securities and 503,000
potential common stock equivalents from stock options, warrants and grants as
the impact would be anti-dilutive.
7. NONRECURRING AND UNUSUAL CHARGES
The Company incurred nonrecurring and unusual charges of $5.9 million and
$2.5 million for the quarters ended March 31, 2000 and 1999, respectively. The
nonrecurring and unusual charges in the current quarter related principally to
the planned close down of plants and consolidation of production capacity in
Superior's building wire (Electrical) operations. Such costs included relocation
of equipment, training of new employees and production inefficiencies associated
with the consolidation. Nonrecurring
11
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2000
(UNAUDITED)
7. NONRECURRING AND UNUSUAL CHARGES (CONTINUED)
and unusual charges in the prior year March quarter related principally to
corporate and other restructuring activities associated with Superior's
acquisition of Essex.
8. BUSINESS SEGMENTS
The Company's reportable segments are strategic businesses that offer
different products and services to different customers. These include Superior's
communications, OEM and electrical segments. The communications segment includes
(i) outside plant wire and cable for voice and data transmission in the local
loop portion of the telecommunications infrastructure and (ii) datacom or
premise wire and cable for use within homes and offices for local area networks,
Internet connectivity and other applications. The OEM segment includes magnet
wire, automotive wire and related products. The electrical segment includes
building and industrial wire and cable.
The Company evaluates segment performance based on a number of factors, with
operating income being the most critical. Intersegment sales are generally
recorded at cost, are not significant and, therefore, have been eliminated
below.
12
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2000
(UNAUDITED)
8. BUSINESS SEGMENTS (CONTINUED)
Operating results for each of the Company's three reportable segments are
presented below. Corporate and other items shown below are provided to reconcile
to the Company's condensed consolidated statements of operations and balance
sheets.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
-------------------
1999 2000
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Net sales:
Communications........................................ $194,063 $198,407
OEM................................................... 164,661 171,802
Electrical............................................ 148,112 125,683
-------- --------
$506,836 $495,892
======== ========
Operating income:
Communications........................................ $ 34,179 $ 28,417
OEM................................................... 20,636 22,800
Electrical............................................ 9,711 1,018
Corporate and other................................... (8,187) (6,939)
Amortization of goodwill.............................. (4,237) (5,232)
Nonrecurring and unusual charges...................... (2,522) (5,856)
-------- --------
$ 49,580 $ 34,208
======== ========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1999 2000
------------ ----------
<S> <C> <C>
Total assets:
Communications.................................... $ 510,537 $ 517,654
OEM............................................... 307,908 298,684
Electrical........................................ 289,349 302,434
Corporate and other (including goodwill).......... 1,075,835 1,053,754
---------- ----------
$2,183,629 $2,172,526
========== ==========
</TABLE>
13
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
The Alpine Group, Inc. (together with its subsidiaries, unless the context
otherwise requires, "Alpine" or the "Company") is an industrial holding company
with investments in three industrial manufacturing companies.
SUPERIOR TELECOM INC.
Alpine holds a 51.8% common equity interest in its consolidated subsidiary,
Superior TeleCom Inc. (together with its subsidiaries, unless the context
otherwise requires, "Superior"), whose balance sheet accounts and results of
operations are consolidated with the financial statements of Alpine.
Superior manufactures a portfolio of wire and cable products grouped into
the following primary industry segments: (i) communications, (ii) original
equipment manufacturer ("OEM") and (iii) electrical. The Communications Group
includes communications wire and cable products sold to telephone companies,
distributors and systems integrators, principally in North America. In addition,
included within the Communications Group is Superior's 51% owned Israeli
subsidiary, Superior Cables Limited ("Superior Israel"), which manufactures a
range of wire and cable products in Israel, including communications cable,
power cable and other industrial and electronic wire and cable products. The OEM
Group includes magnet wire and accessory products for motors, transformers and
electrical controls sold primarily to OEMs, as well as automotive and specialty
wiring assemblies for automobiles and trucks. The Electrical Group includes
building and industrial wire for applications in commercial and residential
construction and industrial facilities. Industry segment financial data for
Superior's principal industry segments is included in Note 8 to the accompanying
condensed consolidated financial statements.
Copper is one of the principal raw materials used in Superior's wire and
cable product manufacturing. Fluctuations in the price of copper do affect per
unit product pricing and related revenues. However, the cost of copper has not
had a material impact on profitability as Superior, in most cases, has the
ability to adjust prices billed for its products to properly match the copper
cost component of its inventory shipped.
POLYVISION CORPORATION
Alpine holds a 48% common equity interest and $19.8 million of convertible
preferred stock in its unconsolidated affiliate, PolyVision Corporation
("PolyVision"), a global manufacturer of visual communications and related
products for the education/office markets, menus and merchandising boards for
food service and banking institutions, and high performance wall systems used in
the education, transportation and select architectural markets.
Alpine currently accounts for its investment in PolyVision under the equity
method of accounting resulting in recognition of Alpine's proportionate share of
PolyVision's earnings as a one-line item within the statement of operations.
DISCONTINUED OPERATIONS/COOKSON GROUP PLC
On August 6, 1999, Alpine completed the sale of its subsidiary, Premier
Refractories International Inc. ("Premier"), to Cookson Group plc ("Cookson").
The historical net operating results of Premier have been classified as
discontinued operations within the 1999 consolidated financial statements.
The sale of Premier was effected through the merger of Premier with a
wholly-owned subsidiary of Cookson. In connection with the transaction, Cookson
assumed all of Premier's existing indebtedness, issued to Alpine approximately
32.3 million ordinary shares of Cookson and paid to Alpine $15.6 million in
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cash. Immediately prior to the sale of Premier, Alpine acquired the 16.6%
minority equity interest in Premier for approximately $31.1 million in cash.
Alpine's current ownership of Cookson ordinary shares approximates 4%, with
such investment accounted for as an available for sale investment with
unrealized holding gains and losses reflected as a component of other
comprehensive income. Dividends paid on the Cookson ordinary shares are
recognized as other income in the statement of operations.
RESULTS OF OPERATIONS--THREE MONTH PERIOD ENDED MARCH 31, 2000 AS COMPARED TO
THE THREE MONTH PERIOD ENDED MARCH 31, 1999
Sales for the quarter ended March 31, 2000 were $495.9 million, a decline of
2.2% as compared to sales of $506.8 million for the quarter ended March 31,
1999. Adjusted for a constant cost of copper, the comparative sales decline in
the March 2000 quarter was approximately 8.5%, due principally to lower sales in
Superior's Electrical Group.
Sales for Superior's Communications Group in the March 31, 2000 quarter were
$198.4 million, or an increase of 2.2% over sales for the corresponding quarter
of the prior year. Adjusted to a constant cost of copper, Communications Group
sales were flat with the prior year March quarter. Within the Communications
Group product lines, sales in the March 2000 quarter of broadband products
(which include fiber optic, copper premise, and composite cables) increased by
more than $10 million or 54% on a comparative basis. Sales growth in this
product line is attributable to strong industry demand trends as well as market
share gains attributable to recent capacity additions, new product introductions
and focused marketing and sales initiatives. In April 2000, Superior completed a
further capacity expansion for its broadband products (principally fiber optic
cable) and anticipates, subject to the availability of optical fiber from its
principal suppliers, continued comparative growth in this segment. Offsetting
the higher sales of broadband products was a comparative reduction in sales in
the March 2000 quarter of outside plant (OSP) cables to the major telephone
companies. This comparative reduction in sales was the result of unusually
strong seasonally adjusted sales of OSP cables in the prior year March quarter,
prior to an industry-wide downturn in the second half of 1999. During the
current year March quarter, Superior actually experienced a strengthening of OSP
sales, with such sales increasing approximately 23.4% as compared to the
immediately preceding quarter ended December 31, 1999.
Sales for Superior's OEM Group were $171.8 million for the quarter ended
March 31, 2000, an increase of 4.3% as compared to the March 31, 1999 quarter.
Sales of magnet wire, the OEM Group's principal product line, increased 4.4% on
a copper adjusted basis as compared to the corresponding quarter of the prior
year reflecting continuing growing demand from Superior's major OEM customers.
Growth in magnet wire sales was partially offset by lower sales of automotive
products, reflecting a 1999 rationalization of unprofitable products and
customer accounts.
Sales for Superior's Electrical Group were $125.7 million for the March 31,
2000 quarter, representing a decline of 15.1% (24.8% on a copper-adjusted basis)
as compared to sales of $148.1 million for the quarter ended March 31, 1999.
During the current quarter, Superior intentionally reduced its order and
shipment volumes to support pricing levels that were severely depressed for
substantially all of 1999 and in the early portion of 2000. While pricing and
shipment volume levels did improve in the latter stages of the quarter, sales
volume, on a copper pounds shipped basis, was down 22.2% as compared to the
prior year March quarter.
Gross profit for the current quarter was $85.6 million, a decline of 14.5%
as compared to gross profit of $100.2 million for the quarter ended March 31,
1999. The gross margin percentage in the current quarter was 17.3%, a decline on
a copper-adjusted basis of 130 basis points as compared to the prior year March
quarter. The decline in gross profit and gross margin percentage was principally
attributable to Superior's Electrical Group, where lower sales and higher per
unit production costs negatively impacted the gross profit. Per unit production
costs were adversely affected by lower production levels for the
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current quarter and the resulting negative impact of fixed cost absorption on
per unit costs. To a lesser degree, the comparative gross profit and gross
margin percentage was impacted by a decline in Superior's Communications Group,
which included lower margins from export sales at Superior Israel (due to
strengthening local currency relative to the Euro and other major currencies)
and certain other product mix factors impacting comparative profitability in the
remainder of the Communications Group.
Selling, general and administrative expense ("SG&A expense") for the
March 31, 2000 quarter was $40.3 million, a decline of 8.0% as compared to SG&A
expense of $43.9 million for the March 31, 1999 quarter. The comparative decline
in SG&A expense was the result of corporate restructurings and overhead expense
reductions at Superior initiated principally in the second quarter of 1999 and
associated with Superior's acquisition of Essex International Inc. ("Essex").
Superior incurred nonrecurring and unusual charges of $5.9 million and
$2.5 million for the quarters ended March 31, 2000 and 1999, respectively. The
nonrecurring and unusual charges in the current quarter related principally to
the previously announced close down of plants, consolidation of production
capacity and related costs in Superior's building wire (Electrical) operations.
Nonrecurring and unusual charges in the prior year March quarter related
principally to corporate and other restructuring activities associated with
Superior's acquisition of Essex.
Operating income for the March 31, 2000 quarter was $34.2 million. Before
nonrecurring charges and goodwill amortization, operating income was
$45.3 million, a decline of $11.0 million or 19.6% as compared to the March 31,
1999 quarter. The decline in operating income was principally attributable to
lower gross profit in Superior's Electrical Group and, to a lesser degree, its
Communication Group, partially offset by a 10.5% expansion in operating income
in Superior's OEM segment as well as lower SG&A expense.
Interest expense for the quarter ended March 31, 2000 was $33.3 million, an
increase of $2.1 million as compared to the prior year March quarter, with such
increase being attributable to higher short term (LIBOR) rates in the current
quarter.
Other income for the quarter ended March 31, 2000 was $4.3 million which
included $2.7 million in dividend income from the Company's common equity
investment in Cookson.
For the quarter ended March 31, 2000, Superior incurred a charge of
$3.8 million for distributions (dividends) on preferred securities of Superior
Trust I. These preferred securities were issued in connection with the
acquisition of the remaining 19% common equity ownership of Essex which was
completed on March 31, 1999. Accordingly, there were no such distributions
during the quarter ended March 31, 1999.
For the quarter ended March 31, 2000, the Company recorded a credit of
$0.6 million related principally to the common equity minority interest
component of losses incurred by Superior Israel.
Equity in earnings of affiliate of $0.4 million for the quarter ended
March 31, 2000 relates principally to dividend income accrued on Alpine's
preferred equity investment in PolyVision.
Income before nonrecurring and unusual charges for the quarter ended
March 31, 2000 was $1.7 million or $0.11 per diluted share as compared to $0.20
per diluted share for the quarter ended March 31, 1999. The current period
decline in per share earnings was principally attributable to lower operating
income in Superior's Electrical Group and, to a lesser degree, the net impact in
the current quarter of charges for dividends paid on the Superior Trust I
preferred securities. Net loss per diluted share (after nonrecurring and unusual
charges) for the March 31, 2000 quarter was $0.01 as compared to net income per
diluted share of $0.08 (after nonrecurring and unusual charges and discontinued
operations) for the March 31, 1999 quarter.
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LIQUIDITY AND CAPITAL RESOURCES
GENERAL
For the quarter ended March 31, 2000, the Company generated $2.1 million in
cash flow from continuing operating activities, consisting of $19.0 million in
income generated from operations (net income plus non-cash charges) reduced by
$16.9 million in cash flow used by net working capital changes. Cash used for
investing activities amounted to $33.8 million, consisting principally of
capital expenditures and pre-arranged long-term loans ("Israel Customer Loans")
made to one of Superior Israel's principal customers. Cash provided by financing
activities amounted to $20.4 million. The major components were a net increase
of borrowings of Superior Israel of $16.0 million (including $11.8 million
related to Superior Israel Customer Loans), other debt increases of
$5.2 million, and treasury stock repurchases of $1.3 million.
SUPERIOR TELECOM
Superior finances its operating activities and other capital requirements
(principally capital expenditures) from operating cash flow and funding
availability under Superior TeleCom's $1.15 billion credit agreement (the
"Superior Credit Agreement") and Superior Israel's $93.0 million credit facility
(the "Israel Credit Agreement"). Total undrawn funding availability under the
Superior Credit Agreement and the Israel Credit Agreement amounted to
$131.6 million and $4.8 million, respectively, at March 31, 2000.
In addition to financing provided by Superior's credit facilities, Superior
has financing availability under a receivable securitization program providing
for up to $160.0 million in short-term financing (subject to the level of
contractually defined eligible receivables) through the issuance of secured
commercial paper. The receivable securitization program expires on November 30,
2000, although it may be extended for successive one-year periods, subject to
agreement. At March 31, 2000, $128.6 million was outstanding under this program.
Superior's principal debt service commitments for the next 12 months amount
to $82.2 million and capital expenditures are expected to approximate
$65.0-$70.0 million. Management anticipates that Superior will generate in
excess of $100 million in cash flows from its operating activities over the next
twelve months subject to fluctuations resulting from operating performance and
working capital changes. Superior believes that operating cash flows plus excess
funds available under Superior's credit facilities will be sufficient to fund
its aforementioned debt service obligations and its estimated capital
expenditure levels.
ALPINE CORPORATE
As of March 31, 2000, Alpine had corporate cash, cash equivalents and
marketable securities (excluding its investments in Superior, PolyVision and
Cookson) of approximately $8.9 million. Alpine also owns approximately
10.5 million common shares (representing 51.8% common share ownership) of
Superior (NYSE:SUT) with a market value on May 5, 2000 of approximately
$125.0 million and a consolidated carrying value as recorded by the Company (net
of minority interest) of approximately $59.0 million. Additionally, at May 5,
2000, Alpine's investments in Cookson ordinary shares (FTSE: CKSN.L) and
PolyVision common stock and preferred stock amounted to $110.0 million and
$40.0 million, respectively.
Alpine's primary commitments over the next twelve month period include
funding of corporate overhead expenses and interest payments on approximately
$89.0 million in Alpine corporate debt. Total annual funding for Alpine
corporate overhead and interest expense is expected to approximate
$13-$14 million.
In November 1999, the Company refinanced and expanded its existing corporate
credit facility. The revised credit facility provides for borrowings up to
$100 million, of which $76.1 million was drawn as of
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March 31, 2000. The Company has pledged substantially all of its common share
and ordinary share ownership in Superior and Cookson, respectively, as security
for this credit facility.
For the next 12 month period, Alpine expects to fund its aforementioned
annual commitments from allowable management fees payable by Superior to Alpine,
cash dividends from Cookson and from interest income, with any shortfall funded
from availability under the aforementioned corporate credit facility or from
existing corporate cash, cash equivalents and marketable securities reserves.
YEAR 2000 UPDATE
The Company did not experience any significant disruptions in its business
operations as a result of the Year 2000 problem. The Year 2000 problem was
defined as the potential system and mechanical failures or miscalculations
resulting from the inability of computer programs to recognize dates after
December 31, 1999. Most computer programs had been written using two digits
(rather than four) to define the applicable year.
In fiscal 1997, the Company established project teams to identify and
resolve Year 2000 problems. The teams' processes included (i) the readiness
assessment of service providers, major vendors and internal operating systems
and applications; (ii) the upgrade or remediation of non-compliant items
identified; and (iii) the testing and implementation of the upgraded or
remediated items.
The Company incurred approximately $6.0 million of costs related to the Year
2000 project. The costs associated with code modification and testing
(approximately $5.0 million) were expensed as incurred. The personal computer
and purchased software upgrades (approximately $1.0 million) were incurred in
the ordinary course of business and capitalized.
The Company does not anticipate any future disruptions in its business
related to the Year 2000 problem.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's exposure to market risk primarily relates to interest rates on
long-term debt. There have been no material changes in market risk since
December 31, 1999.
- ------------------------
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, BUT NOT LIMITED TO, RISKS IN PRODUCT AND TECHNOLOGY
DEVELOPMENT, MARKET ACCEPTANCE OF NEW PRODUCTS AND CONTINUING PRODUCT DEMAND,
PREDICTION AND TIMING OF CUSTOMER ORDERS, THE IMPACT OF COMPETITIVE PRODUCTS AND
PRICING, CHANGING ECONOMIC CONDITIONS, INCLUDING CHANGES IN SHORT-TERM INTEREST
RATES AND FOREIGN EXCHANGE RATES, AND OTHER RISK FACTORS DETAILED IN THE
COMPANY'S MOST RECENT FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION.
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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.
- ------------------------
* Filed herewith
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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.
Date: May 15, 2000 By: /s/ DAVID S. ALDRIDGE
-----------------------------------------
David S. Aldridge
CHIEF FINANCIAL OFFICER AND TREASURER
(duly authorized officer and principal
financial
and accounting officer)
</TABLE>
20
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