<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED OCTOBER 31, 1995 COMMISSION FILE NO. 33-3466-A
COMMUNICATION CABLE, INC.
(Exact Name of Registrant as Specified in its Charter)
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NORTH CAROLINA 56-1433144
(State or Other Jurisdiction (IRS Employer
of Incorporation of Organization) Identification No.)
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1378 CHARLESTON DRIVE
PO BOX 1757,
SANFORD, NORTH CAROLINA
(Address of Principal Executive Offices)
27331
(ZIP CODE)
REGISTRANT'S PHONE NUMBER, INCLUDING AREA CODE: (919) 775-7775
Securities Registered Pursuant to Section 12(g) of the Act:
COMMUNICATION CABLE, INC. COMMON STOCK
$1.00 PAR VALUE
(TITLE OF CLASS)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorpo-
rated by reference in Part III of this Form 10-K or any amendment to this Form
10-K. [X]
The aggregate market value of Registrant's voting stock held by
Non-affiliates of the Registrant on December 31, 1995 was $24,986,192.
The Registrant has only one class of Common Stock, par value $1.00,
outstanding. The number of shares of the Registrant's Common Stock outstanding
as of January 5, 1996, was 2,641,033 shares.
DOCUMENTS INCORPORATED BY REFERENCE
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DOCUMENT PART # OF 10-K
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Annual Report to Stockholders for the Year Ended October 31, 1995 II and IV
The Company's Proxy Statement for the 1996 Annual Meeting of Stockholders III
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FORM 10-K TABLE OF CONTENTS
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ITEM PAGE
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Part I
1. Business........................................................................................................ 3
2. Properties...................................................................................................... 6
3. Pending legal proceedings....................................................................................... 7
4. Submission of matters to a vote of security holders............................................................. 7
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Part II
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5. Market for the registrant's common stock and related stockholder matters........................................ 7
6. Selected financial data......................................................................................... 7
7. Management's discussion and analysis of financial condition and results of operations........................... 7
8. Financial statements and supplementary data..................................................................... 7
9. Changes in and disagreements with accountants on accounting and financial disclosure............................ 7
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Part III
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10. Directors and executive officers of registrant.................................................................. 7
11. Executive compensation.......................................................................................... 7
12. Security ownership of certain beneficial owners and management.................................................. 8
13. Certain relationships and related transactions.................................................................. 8
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Part IV
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14. Exhibits, financial statement schedules and reports on Form 8-K................................................. 8
15. Signatures...................................................................................................... II-1
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2
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PART I
ITEM 1. BUSINESS.
(a) GENERAL DESCRIPTION OF BUSINESS.
Communication Cable, Inc. (the "Registrant" or "Company" herein), was
incorporated on September 26, 1984, under the laws of the State of North
Carolina with its principal offices located at 1378 Charleston Drive, Sanford,
North Carolina 27330 (Telephone 919-775-7775).
The Company engineers, designs and manufactures a wide variety of low
voltage electronic cable. These products are marketed and sold to
electrical/electronic distribution, government agencies, original equipment
manufacturers, industrial, value added, end users and specialty distribution
customers. The Company manufactures commercial and military coaxial cable,
audio, control, computer and telecommunication products, traffic signal cables,
instrumentation and tray cables, coaxial and multi-conductor for plenum
applications, voice/data, network and special custom cable. These products are
used for data, voice, video communications, military and aerospace applications,
community access television, inside telephone systems, security and alarm
systems, satellite dish, computer audio and for sound systems. The Company is an
approved source to a number of leading industrial companies which have performed
extensive tests and procedures in evaluating the Company's products to approve
them for purchase. All of the Company's products which require approval have
Underwriters' Laboratories ("UL") and Canadian Standards Association ("CSA")
approval.
The Company currently operates four plants: the CCI division (located in
Siler City, North Carolina), the Intercomp division (located in Hayesville,
North Carolina), the Saxton division (located in Sanford, North Carolina), and
the Texarkana Wire and Cable division (located in Texarkana, Arkansas). The
Siler City plant was purchased in 1984 and the cable manufacturing equipment for
that plant was purchased from a bank that had repossessed it from a financially
distressed cable operation. The machinery was relocated to Siler City,
refurbished, modernized and put into production in 1985. In September, 1987, the
Company acquired the assets of the Intercomp division of Insilco Corporation,
which included the Hayesville plant. The Intercomp division produces electronic
cable complementary to the Company's existing product line. Because of the
previous familiarity of Company management with the Intercomp operation, the
Company was able to staff the plant immediately after the purchase with
management, supervisors and employees who were familiar with its policies and
procedures. In June, 1990, the Company acquired certain assets of Texarkana Wire
and Cable, Inc. This division manufactures wire and cable predominately for the
telephone industry. In these three acquisitions, the Company has been effective
in capitalizing on the customer base of the predecessor operations and it has
retained and expanded the business. The Company's Saxton division was started in
late 1989 and was in a start-up mode for the first three quarters of 1990, with
shipments of product starting in the fourth quarter of 1990. The Saxton division
is focused on products that meet the standards required for sale to U.S.
Government agencies and its subcontractors. On August 23, 1995, the Company sold
the assets of its Aerospace Systems division to Nortech Systems, Inc., with
headquarters in Wayzata, Minnesota. The Company had acquired certain assets of
the Aerospace Systems division of Teledyne Industries, Inc. on July 31, 1992.
(b) PRODUCTS AND END USERS.
The Company produces coaxial cable, multi-conductor cable and plenum cable.
The Company also produces satellite cable, which is a combination of one or more
coaxial and multi-conductor cables and a small power cable.
Coaxial cables are used primarily for the transmission of video signals.
Coaxial cables make up approximately 45% of the Company's sales and they are
made in a wide range of conductor types, sizes, jacket colors and materials.
Products include military-type RG cables, twinaxials, triaxials, video cables,
CATV cables and special application cables.
Multi-conductor cables have a wide range of applications in audio and data
transmission, computers, sound instrumentation, control and communications.
Multi-conductor cables make up approximately 35% of the Company's sales and are
made in a wide variety of conductor sizes, insulation materials, shielding
constructions and cabling configurations. The Company also combines coaxial
cables with multiple-gauge conductors to form special composite cables. Due to
the large size of the markets, the Company does not have a significant market
share in the multi-conductor market. The Company has targeted this market
segment for substantial growth.
Satellite cable is used to connect satellite dish antennas to television
receivers. Satellite cables typically consist of one or two coaxial cables to
carry the video signals, two multi-conductor cables to control the polarity of
the satellite dish and to control the actuator to move the dish, and a
low-voltage power cable to power the dish motor and the low-noise amplifier that
receives the signal. Satellite cable makes up approximately 6% of sales.
3
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Cables produced by the Company are used for a wide variety of purposes by
in excess of 500 industrial customers, many of which have performed extensive
tests and procedures to qualify the Company's products for purchase. The
Company's data and computer cables are employed in the computer manufacturing
process. They allow interfacing (the exchange of data) to occur between
mainframe computers and subassemblies, and they are also used to connect
individual components such as the keyboard, printer and modem. The cables can be
manufactured to technical specifications relating to the control of interference
and cross talk, dielectric strength, insulation resistance, frequency response
characteristics and many physical parameters.
The medical electronic cable manufactured by the Company is designed for
use in X-Ray equipment, scanning equipment, electrocardiogram devices and other
diagnostic and analytic medical equipment. Typically, medical cable is required
to transmit high frequency electronic signals from a sensing device to a
measuring and computation unit.
The instrumentation and control cables manufactured by the Company are
recommended for such uses as public address systems, balanced intercom systems,
remote control circuits, relay circuits, telemetering circuits, isolation
circuits and data control circuits. The Company maintains laboratory and testing
facilities in its four manufacturing plants. These areas are devoted to the
development of specialty cables, and also perform the functions of product
testing, UL and CSA evaluation, quality control and evaluation and statistical
process control functions. Additionally, the Saxton division has a laboratory
and testing facility capable of meeting the requirements of the U.S. Government
to produce QPL designated products.
Underwriters Laboratories is an independent laboratory which sets the
safety standards for various products, including wire and cable. All of the
Company's products that are subject to approval by Underwriters Laboratories
have been submitted and certified as UL approved. The Canadian Standards
Association performs the same functions for CSA approval.
(c) MARKETS AND METHODS OF DISTRIBUTION.
The Company sells its wire and cable to the computer, data processing,
telecommunications, medical electronics, security and industrial electronics
industries. A substantial portion of the Company's sales are to original
equipment manufacturers that incorporate the Company's wire and cable into a
finished product. The Company also sells standard electronic wire and cable
through independent distributors.
Sales to two customers in fiscal 1995 amounted to 15% of total sales (11%
and 4% on an individual basis) and sales to two customers for fiscal 1994 (one
of which was also a major customer in 1995) amounted to 15% of total sales (10%
and 5% on an individual basis). Management believes that the loss of either of
these customers would not have a material adverse effect upon the Company.
The Company employs three inside salespersons at the CCI and Saxton
divisions, four inside salespersons at the Intercomp division, two inside
salespersons at the Texarkana Wire and Cable division. Additionally, the Company
employs one corporate Vice President of Sales and Marketing, one National
Accounts Manager and two Regional Sales Managers. Approximately 25% of the
Company's sales are direct, with the remainder originating from the 23
independent sales representatives retained to service the primary geographic
sales territories of the United States. The Vice President of Sales and
Marketing coordinates all sales activities.
(d) RAW MATERIALS.
The company uses various raw materials in the manufacturing process of wire
and cable. The raw materials primarily used are copper, plastics, tapes, wooden
reels and cardboard boxes.
The types of copper purchased by the company are solid and stranded center
conductors and shielding copper braid. These types of copper may come in bare,
tin or silver plated copper and come in various gauge sizes. Also, the company
purchases 5/16" copper rod to be drawn down at Texarkana Wire and Cable
division. The company purchases various types of plastics. These include
polyethylene (PE), polyvinyl chloride (PVC) , non-contaminating PVC and
fluoropolymers (FEP), thermoplastic rubber (TPR), polyurethane and nylon. The
company purchases the following tapes: clear, aluminum, fusible and non-fusible.
The company uses wooden reels and cardboard boxes known as Fast Pac cartons to
package the finished product.
The company uses stocking programs and/or blanket orders to ensure raw
material availability.
Raw materials cost is 50%-60% of the total product cost. The most volatile
raw material with respect to price is copper. The company generally prices its
products using copper escalation/de-escalation. The actual sales price reflects
any changes that occur in the price of copper between the time of quotation and
shipment.
4
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Most of the raw materials contract pricing is negotiated out of the
corporate headquarters in Sanford. To obtain pricing leverage, the company uses
the total volume by all divisions and negotiates the lowest possible raw
material pricing.
(e) COMPETITION.
One large manufacturer dominates the electronic cable industry and numerous
other companies compete for the balance of the market. Most of these firms have
greater financial, technical and marketing resources than the Company. In
addition, many large volume commodity grade cables are manufactured overseas and
are sold at prices which the Company does not attempt to match.
The Company has demonstrated that it can compete effectively in a number of
the major domestic market areas, and management has no reason to believe that
the Company will not continue to do so in the future.
(f) WORKING CAPITAL.
Working capital on October 31, 1995, totaled $15,677,002. The Registrant
intends to use working capital to finance internal growth through expansion of
existing facilities, the purchase of machinery and equipment and for possible
future acquisitions.
(g) CUSTOMERS.
The Registrant is not dependent upon a single customer. However, for the
fiscal year ended October 31, 1995, two customers accounted for approximately
15% of total sales (see "c" above).
(h) BACKLOG ORDERS.
As of the end of its fiscal year ended October 31, 1995, the Registrant had
backlog orders of approximately $10,703,385, approximately 65% of which the
Company will fill in the Company's first quarter of 1996. The Registrant's
backlog as of October 31, 1994, was approximately $9,129,000.
(i) MATERIAL PATENTS, LICENSES, FRANCHISES AND CONCESSIONS.
The Registrant has no material patents, licenses, franchises or
concessions.
(j) RESEARCH AND DEVELOPMENT.
The Registrant maintains a laboratory and testing facilities within each of
its manufacturing divisions. Such laboratory testing facilities consist of 500
square feet at the CCI division, 550 square feet at the Intercomp division,
1,200 square feet at the Texarkana Wire and Cable division, and 1,000 square
feet at the Saxton division. The facilities are used for product testing, UL
evaluation, development of new cables, testing and quality control evaluations.
The Saxton division QPL laboratory and testing facility is used for QPL
evaluation in addition to the uses previously listed.
The Registrant employs the equivalent of four employees full time in
research and development. Research and development is undertaken by the Company
on both its own initiative and specific customer request. The Registrant spent
approximately the following amounts for research and development for its past
three fiscal years:
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YEAR ENDED AMOUNT
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October 31, 1993.................................................. $200,000
October 31, 1994.................................................. $220,000
October 31, 1995.................................................. $240,000
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The Registrant anticipates spending approximately $250,000 during the
current fiscal year, all of which was and will be Registrant approved. All
development costs are expensed as incurred.
(k) ENVIRONMENT.
Compliance with federal, state and local provisions which have been enacted
or adopted regulating the discharge of materials into the environment, or
otherwise relating to the protection of the environment, have had no material
effects upon the capital expenditures, earnings, and competitive position of the
Registrant. Due to the nature of its business, the Registrant does not
anticipate any material capital expenditures for environmental control
facilities for the remainder of its current fiscal year or for the succeeding
fiscal year.
5
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(l) EMPLOYEES.
As of October 31, 1995, the Registrant employed approximately 281 persons
and as of December 31, 1995, approximately 269 persons throughout its divisions.
The Company believes that its relationship with its employees is good.
(m) SEASONALITY.
The business of the Registrant is not seasonal, and no material portion of
the business of the Registrant is seasonal.
(n) FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS.
The Registrant had no foreign operations in fiscal 1995, and the financial
information for its domestic operations may be found in pages 8 through 16 of
the Registrant's 1995 Annual Report to the Stockholders. The Company is not
dependent on foreign sales, which were less than 5% of total sales during 1995.
(o) TENDER OFFER.
On November 28, 1995, the Company received a written notice of the
intention of Kuhlman Corporation of Savannah, Georgia, through a North Carolina
subsidiary, Kuhlman Acquisition Corporation, to commence on November 29, 1995 a
tender offer to purchase any and all outstanding shares of the Company's common
stock at a price of $12.00 per share. The offer and withdrawal rights are to
expire at 12:00 midnight, New York City time, on Monday, January 22, 1996 unless
the offer is extended. On January 16, 1996, Kuhlman Corporation announced that
Kuhlman Acquisition Corporation would increase the purchase price from $12.00
per share to $13 1/16 per share and extend the offer and withdrawal rights to
expire at 5:00 p.m., New York time, on Wednesday, January 31, 1996. The Offer to
Purchase states that the purpose of the Offer is to enable Kuhlman Acquisition
Corporation to acquire control of the Company. It further states that, as soon
as practicable following the purchase of Shares pursuant to the Offer, Kuhlman
Acquisition Corporation intends to seek the maximum representation obtainable on
the Company's Board of Directors. At the request of Kuhlman, and in accordance
with the North Carolina Control Share Act, a special meeting of shareholders is
set for February 16, 1996, or such later date as may be required. On January 23,
1996, Kuhlman filed an amended tender offer extending the tender period from
January 31, 1996 to February 15, 1996 and increasing its tender offer for all
shares of common stock of the Company from $13 1/16 per share to $14.00 per
share, subject to the tender of at least a majority of the Company's common
stock and certain other conditions.
(p) PROPOSED MERGER.
On January 15, 1996, the Company signed a non-binding letter of intent to
merge with a subsidiary of Pentair, Inc., a publicly held holding company
located in Minneapolis, Minnesota, at a cash price of $13.00 per share for each
share of outstanding Company common stock. On January 20, 1996, the Company
signed an Agreement and Plan of Merger with Pentair, Inc. and a Pentair
subsidiary, providing for a merger of the Company with such subsidiary at a cash
price of $13.50 per share for each share of outstanding common stock. Pursuant
to the terms of the Merger Agreement, the Company granted to Pentair an option
to purchase up to 300,000 shares of the Company's common stock at $13.50,
exercisable until February 22, 1996. The Company will be required to pay Pentair
a $1,000,000 termination fee, plus expenses of up to $250,000, if the Company is
acquired by another party and under certain other circumstances. Consummation of
the merger is subject to Company shareholder approval and certain other
conditions.
ITEM 2. PROPERTIES.
The Company's principal offices are located in Sanford, North Carolina, and
occupy an office building totaling approximately 6,000 square feet, which the
Company owns.
Manufacturing facilities for the CCI division are located in Siler City,
North Carolina, on a 45 acre tract of industrially-zoned land owned by the
Company. The primary building contains 51,000 square feet, including 3,500
square feet of office space. In addition, there are two smaller buildings
containing a total of 12,000 square feet which are primarily used for storage
space.
The Intercomp division facilities at Hayesville include a 96,000 square
foot building including 5,000 square feet of office space. The plant is part of
a 12 acre parcel of industrially-zoned land in Hayesville, North Carolina owned
by the Company.
The Texarkana Wire and Cable division is located on a 20 acre site in an
industrial park in Texarkana, Arkansas and contains a 110,000 square foot
building that has 3,500 square feet of office space owned by the Company.
6
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The Saxton division located in Sanford, North Carolina, has a primary
building containing a total of 136,000 square feet, including 5,000 square feet
of office space, and an additional building containing 12,000 square feet. The
buildings are located on a 20 acre tract of industrially-zoned land owned by the
Company.
ITEM 3. PENDING LEGAL PROCEEDINGS.
There are no pending legal proceedings involving the Registrant required to
be described by Item 103 of Regulation S-K.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of stockholders, through the
solicitation of proxies or otherwise, during the fourth quarter of the fiscal
year ended October 31, 1995.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS.
The stock price and trading data on page 16 in the Registrant's 1995 Annual
Report to Stockholders are hereby incorporated by reference as parts of Item 5
of this Report. On October 31, 1995, there were approximately 1,300 record
holders of the Registrant's common stock, and as of December 31, 1995,
approximately the same number.
The Company has paid no cash dividends on its Common Stock and anticipated
capital requirements of the Company make it unlikely that any cash dividends
will be declared in the foreseeable future. The Company distributed a 3% stock
dividend on April 30, 1995, and expects to consider stock dividends in future
years.
ITEM 6. SELECTED FINANCIAL DATA.
The selected financial data for the years ended October 31, 1995, 1994,
1993, 1992, and 1991, on page 3 of the Registrant's 1995 Annual Report to
Stockholders, are hereby incorporated by reference as Item 6 of this Report.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Management's discussion and analysis beginning on page 4 in the
Registrant's 1995 Annual Report to Stockholders is hereby incorporated by
reference as Item 7 of this Report.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The Financial Statements and Independent Auditors' Report beginning on page
7 in the Registrant's 1995 Annual Report to Stockholders are hereby incorporated
by reference as Item 8 of this Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
The Registrant has not changed accountants within 24 months prior to the
date of its most recent financial statements. During that time, there have been
no disagreements between the Registrant and its accountants on any matter of
accounting principles or practices or financial statement disclosures.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT.
Information concerning the directors and persons to be nominated for
election as directors of the Registrant will be set forth in the Registrant's
Proxy Statement in connection with its Annual Meeting to be held on March 12,
1996, which Proxy Statement will be filed with the Commission within 120 days
after the end of the Registrant's last fiscal year, and is hereby incorporated
herein by reference.
Officers are elected annually by the Registrant's Board of Directors at the
first meeting of the Board of Directors held after each Annual Meeting of
Stockholders.
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ITEM 11. EXECUTIVE COMPENSATION.
Information concerning executive compensation will be set forth on page 7
of the Registrant's Proxy Statement dated January 26, 1996, with its Annual
Meeting to be held March 12, 1996, which Proxy Statement will be filed with the
Commission within 120 days after the end of the last fiscal year, and is hereby
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
(a)-(b) Information concerning security ownership of certain beneficial
owners and management will be set forth on page 12 in Registrant's Proxy
Statement in connection with its Annual Meeting to be held March 12, 1996, which
Proxy Statement will be filed with the Commission within 120 days after the end
of the last fiscal year, and is hereby incorporated herein by reference.
(c) Arrangements which may at a subsequent date result in a change in
control of the Registrant will be set forth on page 2 of the Registrant's Proxy
Statement dated and filed January 17, 1996, for a special meeting to be held on
February 16, 1996, and is hereby incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information concerning certain relationships and related transactions will
be set forth on pages 11 and 12 in the Registrant's Proxy Statement in
connection with its Annual Meeting to be held March 12, 1996, which Proxy
Statement will be filed with the Commission within 120 days after the end of the
last fiscal year, and is hereby incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) 1. Financial Statements.
The following Financial Statements of Registrant and Independent Auditors'
Report are included in the Company's Annual Report to Stockholders for the year
ended October 31, 1995, which are incorporated herein by reference:
Independent Auditors' Report
Balance Sheets -- October 31, 1995 and 1994
Statements of Earnings -- Years ended October 31, 1995, 1994 and 1993
Statements of Stockholders' Equity -- Years ended October 31, 1995, 1994
and 1993
Statements of Cash Flows -- Years ended October 31, 1995, 1994 and 1993
Notes to Financial Statements
2. Financial Statement schedules are included in Part IV of this Report:
Auditors' Report on schedules, located at sequential page F-1 of this Report.
Schedule VIII -- Valuation and qualifying accounts located at sequential
page S-1 of this Report.
Schedules not listed above have been omitted because they are either
inapplicable or the required information has been included in the Financial
Statements or the notes thereto.
(b) Report on Form 8-K:
There were no reports on Form 8-K for the three month period ended October
31, 1995.
(c) Exhibits:
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EXHIBIT NO.
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13.0 1995 Annual Report to Stockholders
23.0 Consent of Independent Auditors
99.0 Proxy Statement for 1996 Annual Meeting
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereto duly authorized.
COMMUNICATION CABLE, INC.
By: /s/ JAMES R. FORE
JAMES R. FORE, PRESIDENT DATE
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
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NAME TITLE DATE
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/s/ JAMES R. FORE President, Principal January 26, 1996
JAMES R. FORE Executive Officer and
Director
/s/ WILLIAM B. COOPER Secretary-Treasurer, January 26, 1996
WILLIAM B. COOPER Principal Financial Officer
and Principal Accounting
Officer
/s/ CHARLES L. WELLARD Director January 26, 1996
CHARLES L. WELLARD
/s/ BENJAMIN GREENE Director January 26, 1996
BENJAMIN GREENE
/s/ JOHN L. BITTER, JR. Director January 26, 1996
JOHN L. BITTER, JR.
/s/ GEORGE J. FALCONERO Director January 26, 1996
GEORGE J. FALCONERO
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INDEPENDENT AUDITORS' REPORT
THE BOARD OF DIRECTORS
COMMUNICATION CABLE, INC.:
Under the date of December 15, 1995, we reported on the balance sheets of
Communication Cable, Inc. as of October 31, 1995 and 1994, and the related
statements of earnings, stockholders' equity and cash flows for each of the
years in the three-year period ended October 31, 1995, as contained in the 1995
annual report to stockholders. These financial statements and our report thereon
are incorporated by reference in the annual report on Form 10-K for the year
1995. In connection with our audits of the aforementioned financial statements,
we also audited the related financial statement schedule as listed in the
accompanying index. This financial statement schedule is the responsibility of
the Company's management. Our responsibility is to express an opinion on this
financial statement schedule based on our audits.
In our opinion, such financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, presents fairly in
all material respects, the information set forth therein.
(Signature of KPMG Peat Marwick LLP)
KPMG PEAT MARWICK LLP
Raleigh, North Carolina
December 15, 1995
F-1
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COMMUNICATION CABLE, INC.
SCHEDULE VIII -- VALUATION AND QUALIFYING ACCOUNTS
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COLUMN A COLUMN B COLUMN C COLUMN D
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ACCOUNTS
BALANCE AT CHARGED TO CHARGED
OCTOBER 31, BAD DEBT OFF AS
DESCRIPTION 1994 EXPENSE UNCOLLECTIBLE
Allowance for doubtful accounts --
accounts receivable..................................................... $ 200,000 24,487 117,487
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COLUMN A COLUMN E
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BALANCE AT
OCTOBER 31,
DESCRIPTION 1995
Allowance for doubtful accounts --
accounts receivable..................................................... 107,000
</TABLE>
<TABLE>
<CAPTION>
ACCOUNTS
BALANCE AT CHARGED TO CHARGED
OCTOBER 31, BAD DEBT OFF AS
DESCRIPTION 1993 EXPENSE UNCOLLECTIBLE
<S> <C> <C> <C>
Allowance for doubtful accounts --
accounts receivable..................................................... $ 156,000 60,293 16,293
<CAPTION>
BALANCE AT
OCTOBER 31,
DESCRIPTION 1994
<S> <C>
Allowance for doubtful accounts --
accounts receivable..................................................... 200,000
</TABLE>
<TABLE>
<CAPTION>
ACCOUNTS
BALANCE AT CHARGED TO CHARGED
OCTOBER 31, BAD DEBT OFF AS
DESCRIPTION 1992 EXPENSE UNCOLLECTIBLE
<S> <C> <C> <C>
Allowance for doubtful accounts --
accounts receivable..................................................... $ 155,000 39,315 38,315
<CAPTION>
BALANCE AT
OCTOBER 31,
DESCRIPTION 1993
<S> <C>
Allowance for doubtful accounts --
accounts receivable..................................................... 156,000
</TABLE>
S-1
<PAGE>
HISTORY OF COMPANY
The Company engineers, designs and manufactures a wide variety of low voltage
electronic cable which are marketed to original equipment manufacturers and,
through local distributors, to a variety of end users. The Company manufactures
coaxial and multi-conductor cables which are used for data, voice and video
communications by the computer and data processing industries, the medical and
industrial electronics industries, the U.S. Government and U.S. Government
agencies, and for satellite and other telecommunications applications. The
Company is an approved cable source to a number of leading industrial companies
which have performed extensive tests and procedures in evaluating the Company's
products to qualify them for purchase.
The Company began significant production in 1986 and currently operates four
plants; the CCI division (located in Siler City, North Carolina), the Intercomp
division (located in Hayesville, North Carolina), the Saxton division (located
in Sanford, North Carolina), and the Texarkana division (located in Texarkana,
Arkansas). On August 23, 1995, the Company sold the assets of its Aerospace
Systems division (located in Fairmont, Minnesota) to Nortech Systems, Inc. To
varying degrees, certain principal officers of the Company have worked together
in the electronic cable industry prior to their association at the Company. This
prior experience included a number of years with another wire and cable
manufacturer which operated the Company's Hayesville plant until the plant was
acquired by the Company in 1987. Senior management's extensive experience in,
and knowledge of, the industry has enabled them to build the Company by
acquiring low cost, underutilized manufacturing assets, refurbishing those
assets to state-of-the-art condition, and housing them in efficient production
facilities. The Company intends to continue to expand its operations by making
acquisitions with compatible product lines and familiar customer bases.
While most of the company's product line conforms to standard specifications,
the Company also emphasizes the production of re-engineered and modified
standard cable and custom cable. Since custom cables are generally produced on
relatively short runs, the Company emphasizes flexibility of machine scheduling
and operation to accommodate short production times and deliveries. The Company
believes it is able to compete effectively because of its ability to provide
customer service through its policy of prompt response to customer requests and
rapid delivery of cable due to the flexibility of its production capacity and
the experience of its management and production employees.
The Company was organized as a North Carolina corporation on September 26,
1984. The Company's principal office is located at PO Box 1757, 1378 Charleston
Drive, Sanford, North Carolina 27330.
<PAGE>
FINANCIAL HIGHLIGHTS
1995 ANNUAL REPORT
(Amounts in thousands, except per share data and ratios)
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
OPERATING RESULTS
Net sales.............................................................................................. $56,256 52,376
Depreciation of property, plant and equipment and amortization of discounts............................ 1,205 1,109
Net earnings........................................................................................... 2,118 1,521
Cash provided by operations............................................................................ 3,285 82
Weighted average shares outstanding and common stock equivalents (a)................................... 2,632 2,657
Earnings per share (a)................................................................................. .80 .57
FINANCIAL CONDITION
Current assets......................................................................................... 20,812 18,961
Current liabilities.................................................................................... 5,135 4,660
Working capital........................................................................................ 15,677 14,301
Property, plant and equipment, net..................................................................... 6,781 8,450
Total assets........................................................................................... 28,063 27,899
Long-term debt, excluding current installments......................................................... 2,211 4,592
Stockholders' equity................................................................................... 20,193 18,017
OTHER STATISTICS:
Current ratio.......................................................................................... 4.05 4.07
Long-term debt to equity ratio......................................................................... .11 .25
Book value per share (a)............................................................................... $ 7.83 7.01
<CAPTION>
1993
<S> <C>
OPERATING RESULTS
Net sales.............................................................................................. 47,662
Depreciation of property, plant and equipment and amortization of discounts............................ 944
Net earnings........................................................................................... 1,737
Cash provided by operations............................................................................ 2,183
Weighted average shares outstanding and common stock equivalents (a)................................... 2,647
Earnings per share (a)................................................................................. .66
FINANCIAL CONDITION
Current assets......................................................................................... 17,507
Current liabilities.................................................................................... 4,145
Working capital........................................................................................ 13,362
Property, plant and equipment, net..................................................................... 8,259
Total assets........................................................................................... 26,234
Long-term debt, excluding current installments......................................................... 4,987
Stockholders' equity................................................................................... 16,384
OTHER STATISTICS:
Current ratio.......................................................................................... 4.22
Long-term debt to equity ratio......................................................................... .30
Book value per share (a)............................................................................... 6.42
</TABLE>
(a) All share and per share data have been adjusted for the 3% stock dividend
distributed April 30, 1995, the 8% stock dividend distributed April 30,
1994, and the 7% stock dividend distributed April 30, 1993.
<PAGE>
<TABLE>
<S> <C> <C>
TO OUR SHAREHOLDERS:
The year ended October 31, 1995 was a year of significant activities for
Communication Cable, including record sales and record net earnings. The goals
for your Company as set out by the Board of Directors in last year's Annual
Report have largely been met in 1995. Your Company has been able to strengthen
management areas, reduce inventory, has continued effective cost reduction and,
as evidenced by 1995 sales, expanded marketing programs.
Certain significant events for 1995 included the successful benefits
obtained by the position the Company has in the "information highway" markets
and the divestiture of the Aerospace Systems division which has provided your
Company with assets to re-deploy into its core business.
NEW HIGHS IN SALES AND NET EARNINGS
For the fiscal year ended October 31, 1995, SALES OF COMPARABLE FISCAL YEAR
END OPERATING DIVISIONS INCREASED 9.3% to $51.8 million from $47.4 million in
fiscal 1994. Sales of the Aerospace Systems division which was sold in August,
1995 were $4.5 million for fiscal year 1995 compared to $5.0 million for fiscal
year 1994.
NET EARNINGS INCREASED 54.9% to $2.1 million or $.80 per share compared to
$1.4 million or $.51 per share, before the cumulative effect of change in
accounting principle, in fiscal 1994. Net earnings for fiscal 1995 were aided by
the gain on the sale of Aerospace Systems division and the gain on the sale of
patent rights and machines related to the X-Spooler project.
MARKET DIRECTIONS, PRODUCT MIX
The Company has benefited from the strong demand for "data" transfer cabling
needs. Multi conductor and "Category cables" sales grew 18.1% in 1995 to $35.8
million, up from $30.3 million in fiscal 1994. We expect continued growth in the
types of cable needed to connect computer networks and to expand
telecommunications. Category five plenum product has been strong in fiscal 1995.
However, we have experienced a drop in demand for military-type cable and for
large satellite dish cable. Products that are expected to replace these cables
include coaxial cable and composite cable for the upgrading and expanding of
cable TV networks and the smaller satellite dishes.
LOOKING AHEAD
With the growing demand for the sharing of information, the related market
for cables is expected to remain strong.
Your management is optimistic about the future. With the continued support
of our employees, customers and shareholders, we look forward to a great year.
(Signature of James R. Fore)
James R. Fore
President & Chairman
2
<PAGE>
SELECTED FINANCIAL DATA
(Amounts in thousands, except share and per share data)
The following table presents selected financial data for the years ended October
31, 1995, 1994, 1993, 1992 and 1991.
<CAPTION>
</TABLE>
<TABLE>
<S> <C> <C>
1995 1994
OPERATING RESULTS:
Net sales.............................................................. $56,256 52,376
Cost of goods sold..................................................... 45,010 41,205
Selling, general and administrative expenses........................... 8,827 8,601
Other income (expense)................................................. 775 (242)
Income tax expense..................................................... 1,076 961
Net earnings before cumulative effect of change in accounting
principle............................................................ 2,118 1,367
Cumulative effect of change in accounting for income taxes............. 0 154
Net earnings........................................................... $ 2,118 1,521
FINANCIAL POSITION AT YEAR-END:
Total assets........................................................... 28,063 27,899
Long-term debt, including current installments......................... 2,621 5,009
Stockholders' equity................................................... 20,193 18,017
Working capital........................................................ 15,677 14,301
PER SHARE RESULTS:
Weighted average outstanding and common stock equivalents.............. 2,632,359 2,657,112
Net earnings........................................................... $ .80 .57
<CAPTION>
1993 1992 1991
OPERATING RESULTS:
Net sales.............................................................. 47,662 40,559 33,331
Cost of goods sold..................................................... 37,418 32,663 27,819
Selling, general and administrative expenses........................... 7,510 6,421 5,375
Other income (expense)................................................. 20 186 42
Income tax expense..................................................... 1,017 628 47
Net earnings before cumulative effect of change in accounting
principle............................................................ 1,737 1,033 132
Cumulative effect of change in accounting for income taxes............. 0 0 0
Net earnings........................................................... 1,737 1,033 132
FINANCIAL POSITION AT YEAR-END:
Total assets........................................................... 26,234 24,950 21,367
Long-term debt, including current installments......................... 5,396 5,726 4,081
Stockholders' equity................................................... 16,384 14,612 13,565
Working capital........................................................ 13,362 12,098 10,135
PER SHARE RESULTS:
Weighted average outstanding and common stock equivalents.............. 2,647,286 2,577,868 2,581,166
Net earnings........................................................... .66 .40 .05
</TABLE>
Management's discussion and analysis of financial condition and results of
operations should be read to fully understand the nature of the information
presented in the table above.
3
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The purpose of this discussion and analysis is to aid in the understanding and
evaluation of financial conditions and changes therein and results of operations
of the Company for the years ended October 31, 1995, 1994 and 1993. This
discussion and analysis is intended to complement the audited financial
statements and footnotes and other financial data appearing elsewhere in this
report, and should be read in conjunction therewith.
RESULTS OF OPERATIONS
1995 COMPARED TO 1994
Net sales for the year ended October 31, 1995, were $56,255,914 compared to
$52,375,673 for the year ended October 31, 1994, an increase of 7.4%. The
increase was primarily a result of increased demand for electronic wire,
including category cables for data transmission, and cable products for
commercial applications, particularly in the CATV market. Sales of large dish
satellite cable at the CCI division declined during Fiscal 1995. Governmental
related sales at the Company's Saxton division for wire and cable products
continued to decline during Fiscal 1995. Management is continuing its efforts to
reposition the Saxton division into viable commercial and industrial markets.
The Company's Aerospace Systems division was sold August 23, 1995 which resulted
in a 9.7% sales decrease from Fiscal 1994. The Intercomp and Texarkana divisions
experienced sales increases in 1995.
Selling, general and administrative expenses increased 2.6% from $8,600,575 for
the year ended October 31, 1994, to $8,827,300 for the year ended October 31,
1995. The increase is largely a result of variable expenses directly related to
the increase in products shipped, such as sales commissions.
Interest income increased to $248,165 for the year ended October 31, 1995, from
$183,264 for the year ended October 31, 1994, as a result of increased cash
reserves for a portion of the year.
On July 18, 1994, the Company entered into a Letter of Intent to Merge with
Kuhlman Corporation, and subsequently signed a Definitive Agreement to Merge on
September 21, 1994. Expenses related to the proposed merger totaled $279,085 for
Fiscal 1994 and $73,862 for Fiscal 1995. On January 10, 1995, the proposed
merger between the Company and Kuhlman was terminated.
Income taxes as a percentage of pretax income decreased to 33.7% for the year
ended October 31, 1995 from 41.3% for the year ended October 31, 1994. The
expenses related to the proposed merger with Kuhlman Corporation were
non-deductible in Fiscal 1994, however, because the merger was terminated in
1995, such expenses are deductible in Fiscal 1995.
Other income (expense) increased $1,017,094 primarily as a result of the sale of
assets of the Aerospace Systems division, resulting in a pretax gain of $375,136
and the sale of certain patent rights and machines related to the X-Spooler
project resulting in a pretax gain of $431,450. These sales are not expected to
have a material impact on future operating results of the Company.
Inventories decreased to $7,259,373 at October 31, 1995, from $9,148,240 at
October 31, 1994. Approximately one-half of the decrease is due to the sale of
the Aerospace Systems division during Fiscal 1995. The remaining decrease
primarily resulted from reduced inventory levels at the Saxton and Texarkana
divisions due to the Company pursuing an agresssive plan to reduce work in
process and finish goods inventory.
The surplus in retained earnings of $324,088 at October 31, 1995, compared to a
deficit of $1,196,437 at October 31, 1994, is a result of 1995 net earnings
partially offset by payment of a stock dividend in 1995. The balance in retained
earnings does not reflect the cumulative earning of the Company because of the
Company's past practice of paying annual stock dividends.
1994 COMPARED TO 1993
Net sales for the year ended October 31, 1994, were $52,375,673 compared to
$47,662,216 for the year ended October 31, 1993, an increase of 10%. The
increase was primarily a result of increased demand for electronic wire and
cable products for commercial applications, particularly in the CATV market.
Governmental related sales at the Company's Aerospace Systems division for
assembly products and its Saxton division for wire and cable products continued
to decline during Fiscal 1994.
Selling, general and administrative expenses increased from $7,510,430 for the
year ended October 31, 1993, to $8,600,575 for the year ended October 31, 1994.
The increase is largely a result of variable expenses directly
4
<PAGE>
related to the increase in products shipped, such as freight and sales
commissions.
Interest income increased to $183,264 for the year ended October 31, 1994, from
$127,404 for the year ended October 31, 1993, as a result of rising interest
rates combined with increased cash reserves for a portion of the year.
On July 18, 1994, the Company entered into a Letter of Intent to Merge with
Kuhlman Corporation, and subsequently signed a Definitive Agreement to Merge on
September 21, 1994. Expenses related to the proposed merger totaled $279,085 for
Fiscal 1994. On January 10, 1995, the proposed merger between the Company and
Kuhlman was terminated.
Income taxes as a percentage of pretax income increased to 41.3% for the year
ended October 31, 1994, from 36.9% for the year ended October 31, 1993, due to
the expenses related to the proposed merger with Kuhlman being non-deductible.
On November 1, 1993, the Company adopted SFAS 109, "Accounting for Income
Taxes", which required that deferred taxes be adjusted for the effects of
changes in the laws and rates. For the year ended October 31, 1994, the
cumulative effect of this change in accounting principle increased net earnings
by $154,157 or $.06 per share.
Accounts receivable increased to $7,724,352 for the year ended October 31, 1994,
compared to $6,733,486 for the year ended October 31, 1993, as a result of
fourth quarter 1994 sales of $14,556,932 compared to fourth quarter 1993 sales
of $11,931,234.
Inventories increased to $9,148,240 at October 31, 1994, from $7,208,549 October
31, 1993. Approximately half of the increase is due to the sharp rise in copper
prices during Fiscal 1994. The remaining increase primarily resulted from
increased stocking levels of certain products in order to meet market demand for
product and competitive pressures to have product immediately available for
shipment.
The deficit in retained earnings increased to $1,196,437 at October 31, 1994,
from $556,640 at October 31, 1993, as a result of the Company practice of paying
annual stock dividends. The balance does not reflect the cumulative earning of
the Company.
LIQUIDITY AND CAPITAL RESOURCES
At October 31, 1995, the Company had working capital of $15,677,002, compared to
$14,301,445 at October 31, 1994. Cash and cash equivalents at October 31, 1995
were $5,339,837 compared to $1,797,290 at October 31, 1994. Additionally, at
October 31, 1995, $2,500,000 was available to the Company under a financing
agreement with a bank. At October 31, 1995, the current ratio was 4.05 and the
long-term debt to equity ratio was .11, compared to 4.07 and .25, respectively
at October 31, 1994. It is the intention of the Company to maintain sufficient
liquid current assets (cash, cash equivalents, and accounts receivable) to fund
current liabilities as well as to provide sufficient working capital to act on
market improvements or acquisition opportunities. A key management objective
continues to be to support growth with internally generated funds as much as
possible. External sources have only been used to develop the long-term
objectives of the Company and not for current operating requirements or
obligations.
INFLATION
The Company's financial statements are prepared using a historical cost approach
and thus do not reflect the impact of inflation on the Company's financial
position and results of operations. Most of the impact of inflation results from
the capital intensive nature of the Company's business. If the Company's
property, plant and equipment were restated to reflect the change to current
prices, the depreciation expense associated with these assets would likewise
increase. This increase, however, would be minimal due to the low rate of
inflation during the Company's history.
Management has internal policies and controls in place to attempt to recognize
and act quickly on rising or falling raw material prices. By doing this, the
Company has historically been able to pass the majority of these increasing
costs to the customer or in the case of falling prices, gain a competitive
advantage in the marketplace. Also, the Company's inventory turnover results in
a minimal effect of inflation on cost of goods sold because the elapsed time
between the purchase of raw material and the manufacture of product and its
ultimate sale is short.
If inflation were to increase significantly in the future, the Company could be
exposed to higher interest costs since a portion of the Company's debt is tied
to the prime rate of interest.
For the year ended October 31, 1995 inflation had no material effect on the
Company.
5
<PAGE>
RECENT DEVELOPMENTS
On January 20, 1996, the Company signed an Agreement and Plan of Merger with
Pentair, Inc. and a Pentair subsidiary, providing for a merger of the Company
and such subsidiary at a cash price of $13.50 per share for each share of the
Company's outstanding common stock. Pursuant to the terms of the Merger
Agreement, the Company granted to Pentair an option to purchase up to 300,000
shares of common stock at $13.50, exercisable until February 22, 1996. The
Company will be required to pay Pentair a $1,000,000 termination fee, plus
expenses of up to $250,000, if the Company is acquired by another party and
under certain other circumstances. Consummation of the merger is subject to
shareholder approval and certain other conditions.
On November 28, 1995, the Company received a written notice of the intention of
Kuhlman Corporation of Savannah, Georgia, through a North Carolina subsidiary,
Kuhlman Acquisition Corporation, to commence on November 29, 1995 a tender offer
to purchase any and all outstanding shares of the Company's common stock at a
price of $12.00 per share. The offer and withdrawal rights are to expire at
12:00 midnight, New York City time, on Monday, January 22, 1996 unless the offer
is extended. On January 16, 1996, Kuhlman Corporation announced that Kuhlman
Acquisition Corporation would increase the purchase price from $12.00 per share
to $13 1/16 per share and extend the offer and withdrawal rights to expire at
5:00 p.m., New York time, on Wednesday, January 31, 1996. The Offer to Purchase
states that the purpose of the Offer is to enable Kuhlman Acquisition
Corporation to acquire control of the Company. It further states that, as soon
as practicable following the purchase of Shares pursuant to the Offer, Kuhlman
Acquisition Corporation intends to seek the maximum representation obtainable on
the Company's Board of Directors. At the request of Kuhlman, and in accordance
with the North Carolina Control Share Act, a special meeting of shareholders is
set for February 16, 1996, or such later date as may be required for timing
purposes. On January 22, 1996, Kuhlman announced that it would increase the
purchase price in its tender offer from $13 1/16 per share to$14.00 per share,
net to the seller in cash. Kuhlman also announced that it would extend the
expiration time of the tender offer to 5:00 p.m., New York time, Thursday,
February 15, 1996.
NEW ACCOUNTING STANDARDS
In March 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 121, "Accounting for Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed of" ("SFAS No.
121"), which established accounting standards for the impairment of long-lived
assets, certain identifiable intangibles, and goodwill related to those assets
to be held and used and for those to be disposed of. This statement requires
that long-lived assets and certain intangibles be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying value may
not be recoverable. Adoption of SFAS No. 121 is required for fiscal years
beginning after December 15, 1995. The Company has not determined what effect,
if any, this statement will have on its financial statements.
In October 1995, the FASB issued Statement of Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation" ("SFAS No. 123"). The statement
defines a fair value method of accounting for an employee stock option or
similar equity instrument and encourages all entities to adopt that method of
accounting for all of their employee stock compensation plans. It also allows an
entity to continue to measure compensation cost for those plans using the
intrinsic value based method of accounting prescribed in Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25").
SFAS No. 123 requires that an employer's financial statements include certain
disclosures about stock-based compensation arrangements regardless of the method
used to account for them. Entities electing to remain with the accounting in APB
25 must make pro forma disclosures of net earnings and earnings per share, as if
the fair value based method of accounting defined in SFAS No. 123 had been
applied. The Company intends to continue with the accounting prescribed in APB
25.
6
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Communication Cable, Inc.:
We have audited the accompanying balance sheets of Communication Cable, Inc. as
of October 31, 1995 and 1994 and the related statements of earnings,
stockholders' equity, and cash flows for each of the years in the three-year
period ended October 31, 1995. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Communication Cable, Inc. as of
October 31, 1995 and 1994, and the results of its operations and its cash flows
for each of the years in the three-year period ended October 31, 1995, in
conformity with generally accepted accounting principles.
As discussed in Note 1(f) to the financial statements, the Company adopted the
provisions of the Financial Accounting Standards Board's Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes, as of November 1,
1993.
(Signature of KPMG Peat Marwick LLP)
Raleigh, North Carolina
December 15, 1995
7
<PAGE>
BALANCE SHEETS
October 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and interest-bearing deposits................................................................... $ 5,339,837 1,797,290
Accounts and notes receivable:
Trade, less allowance for doubtful accounts of $107,000 and $200,000 in 1995 and 1994,
respectively..................................................................................... 7,431,279 7,629,229
Other............................................................................................. 639,492 95,123
Total accounts and notes receivable, net.................................................. 8,070,771 7,724,352
Inventories.......................................................................................... 7,259,373 9,148,240
Prepaid expenses..................................................................................... 109,419 94,801
Deferred income taxes................................................................................ 32,952 196,495
Total current assets...................................................................... 20,812,352 18,961,178
PROPERTY, PLANT AND EQUIPMENT, NET..................................................................... 6,781,453 8,450,256
INVESTMENT IN SUBLEASE................................................................................. 330,311 350,933
OTHER.................................................................................................. 138,996 137,003
$28,063,112 27,899,370
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current installments of long-term debt............................................................... $ 409,234 417,072
Accounts payable, trade.............................................................................. 3,328,592 3,160,336
Accrued salaries, wages and bonuses.................................................................. 516,579 561,814
Accrued income taxes................................................................................. 262,133 88,025
Other accrued expenses............................................................................... 618,812 432,486
Total current liabilities................................................................. 5,135,350 4,659,733
LONG-TERM DEBT, EXCLUDING CURRENT INSTALLMENTS......................................................... 2,211,430 4,591,904
DEFERRED INCOME TAXES.................................................................................. 523,118 630,969
Total liabilities......................................................................... 7,869,898 9,882,606
STOCKHOLDERS' EQUITY:
Common stock......................................................................................... 2,577,425 2,494,839
Additional paid-in capital........................................................................... 17,308,396 16,750,853
Shareholder loan..................................................................................... (16,695) (32,491)
Retained earnings (deficit).......................................................................... 324,088 (1,196,437)
Total stockholders' equity................................................................ 20,193,214 18,016,764
$28,063,112 27,899,370
</TABLE>
See accompanying notes to financial statements.
8
<PAGE>
STATEMENTS OF EARNINGS
Years ended October 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
NET SALES................................................................................ $56,255,914 52,375,673 47,662,216
COST OF GOODS SOLD....................................................................... 45,010,171 41,204,980 37,417,594
Gross profit................................................................ 11,245,743 11,170,693 10,244,622
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES............................................. 8,827,300 8,600,575 7,510,430
Operating income............................................................ 2,418,443 2,570,118 2,734,192
OTHER INCOME (EXPENSE):
Interest expense....................................................................... (352,045) (349,567) (356,672)
Interest income........................................................................ 248,165 183,264 127,404
Engineering services................................................................... 136,500 152,011 214,360
Gain (loss) on sale of equipment....................................................... (14,307) 47,339 --
Gain on sale of Aerospace Systems division............................................. 375,136 -- --
Expenses related to terminated merger.................................................. (73,862) (279,085) --
Gain on sale of patent rights.......................................................... 431,450 -- --
Other.................................................................................. 24,260 4,241 34,338
Total other................................................................. 775,297 (241,797) 19,430
Earnings before income taxes................................................ 3,193,740 2,328,321 2,753,622
INCOME TAX EXPENSE....................................................................... 1,075,511 961,098 1,016,604
Net earnings before cumulative effect of change in accounting
principle.............................................................. 2,118,229 1,367,223 1,737,018
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING FOR INCOME TAXES............................... -- 154,157 --
Net earnings................................................................ $ 2,118,229 1,521,380 1,737,018
EARNINGS PER COMMON SHARE:
Before cumulative effect of change in accounting principle.................. $ .80 .51 .66
Cumulative effect of change in accounting principle......................... -- .06 --
Net earnings................................................................ $ .80 .57 .66
WEIGHTED AVERAGE NUMBER OF COMMON SHARES AND COMMON
SHARE EQUIVALENTS OUTSTANDING.......................................................... 2,632,359 2,657,112 2,647,286
</TABLE>
See accompanying notes to financial statements.
9
<PAGE>
STATEMENTS OF STOCKHOLDERS' EQUITY
Years ended October 31, 1995, 1994 and 1993
[CAPTION]
<TABLE>
<CAPTION>
Additional Retained Total
Common Stock paid-in Stockholder earnings stockholders'
Shares Amount capital loan (deficit) equity
<S> <C> <C> <C> <C> <C> <C>
Balance at October 31, 1992.................. 2,140,159 $ 2,140,159 12,846,898 (64,083) (310,755) 14,612,219
Stock dividend (7%).......................... 149,653 149,653 1,831,155 -- (1,982,903) (2,095)
Common stock issued.......................... 5,554 5,554 15,346 -- -- 20,900
Stockholder loan repayment................... -- -- -- 15,796 -- 15,796
Net earnings................................. -- -- -- -- 1,737,018 1,737,018
Balance at October 31, 1993.................. 2,295,366 2,295,366 14,693,399 (48,287) (556,640) 16,383,838
Stock dividend (8%).......................... 183,930 183,930 1,975,559 -- (2,161,177) (1,688)
Common stock issued.......................... 15,543 15,543 81,895 -- -- 97,438
Stockholder loan repayment................... -- -- -- 15,796 -- 15,796
Net earnings................................. -- -- -- -- 1,521,380 1,521,380
Balance at October 31, 1994.................. 2,494,839 2,494,839 16,750,853 (32,491) (1,196,437) 18,016,764
Stock dividend (3%).......................... 74,713 74,713 521,934 -- (597,704) (1,057)
Common stock issued.......................... 7,873 7,873 35,609 -- -- 43,482
Stockholder loan repayment................... -- -- -- 15,796 -- 15,796
Net earnings................................. -- -- -- -- 2,118,229 2,118,229
Balance at October 31, 1995.................. 2,577,425 $ 2,577,425 17,308,396 (16,695) 324,088 20,193,214
</TABLE>
See accompanying notes to financial statements.
10
<PAGE>
STATEMENTS OF CASH FLOWS
Years ended October 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings........................................................................... $ 2,118,229 1,521,380 1,737,018
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization....................................................... 1,184,642 1,087,391 920,286
Loss (gain) on sale of equipment.................................................... 14,307 (47,339) --
Gain on sale of Aerospace Systems division.......................................... (375,136) -- --
Gain on sale of patent rights....................................................... (431,450) -- --
Decrease in value of equipment held for resale...................................... -- 49,000 18,629
Amortization of notes payable discounts............................................. 20,426 21,982 23,478
Increase (decrease) in deferred income taxes........................................ 55,692 (145,679) 12,767
Decrease (increase) in accounts and notes receivable................................ (112,765) (972,448) 509,141
Decrease (increase) in inventories.................................................. 299,512 (1,939,691) (654,570)
Decrease (increase) in prepaid expenses............................................. (14,618) 1,623 (66,188)
Increase (decrease) in accounts payable, trade...................................... 168,256 582,796 (314,775)
Increase (decrease) in accrued expenses............................................. 359,800 (75,872) 6,306
Increase in other assets............................................................ (1,993) (901) (9,134)
Total adjustments............................................................ 1,166,673 (1,439,138) 445,940
Net cash provided by operating activities.................................... 3,284,902 82,242 2,182,958
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures................................................................... (473,094) (1,590,310) (1,365,748)
Collections on investment in sublease.................................................. 18,418 28,457 --
Net proceeds from sale of equipment.................................................... 17,332 202,000 --
Proceeds from sale of Aerospace Systems division....................................... 2,845,506 -- --
Proceeds from sale of patent rights.................................................... 200,000 -- --
Net cash provided (used) by investing activities............................. 2,608,162 (1,359,853) (1,365,748)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of debt...................................................................... (2,408,738) (408,721) (387,890)
Proceeds from issuance of debt......................................................... -- -- 34,436
Decrease in cash restricted for the purchase of property,
plant and equipment................................................................. -- 42,152 130,306
Proceeds from issuance of common stock and collections on stockholder loan............. 59,278 113,234 36,696
Cash portion of stock dividends for fractional shares.................................. (1,057) (1,688) (2,095)
Net cash used by financing activities........................................ (2,350,517) (255,023) (188,547)
Net increase (decrease) in cash.............................................. 3,542,547 (1,532,634) 628,663
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR........................................... 1,797,290 3,329,924 2,701,261
CASH AND CASH EQUIVALENTS AT END OF YEAR................................................. $ 5,339,837 1,797,290 3,329,924
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for interest................................................. $ 385,769 340,994 352,052
Cash paid during the year for income taxes............................................. $ 865,585 1,045,144 1,188,088
</TABLE>
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
During 1995, the Company sold patent rights and two machines with a net book
value of $67,150 for $200,000 in cash and a note receivable of $298,600.
During 1994, the Company subleased a building which was previously included in
property, plant and equipment under a capital lease. Gross payments receivable
at the inception of the sublease totaled $630,000.
During 1994 and 1993, the Company put into service in its production facilities
certain equipment which was being held for resale totaling $139,600, and
$226,000, respectively.
See accompanying notes to financial statements.
11
<PAGE>
NOTES TO FINANCIAL STATEMENTS
October 31, 1995, 1994 and 1993
(1) NATURE OF BUSINESS
Communication Cable, Inc. (the "Company") engineers, designs and manufactures
specialty electronic cables to customer specifications for use in computers,
data processing, telecommunications, medical electronic and the industrial
electronic industries.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) BASIS OF FINANCIAL STATEMENT PRESENTATION
The financial statements have been prepared in conformity with generally
accepted accounting principles. In preparing the financial statements,
management is required to make estimates and assumptions that affect the
reported amounts of assets and liabilities as of the date of the balance sheets
and income and expenses for the periods presented. Actual results could differ
significantly from those estimates.
(B) REVENUE RECOGNITION
The Company records sales revenue when goods are shipped to customers.
(C) ACCOUNTS RECEIVABLE
The Company establishes an allowance for doubtful receivables equal to the
estimated collection losses to be incurred. The estimated losses are based on
actual collection experience and management's opinion of the current status of
existing receivables. The Company's customers are widely dispersed throughout
the United States.
(D) INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined using
the first-in, first-out (FIFO) method.
(E) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. Depreciation is computed by
the straight-line method over the estimated useful lives of the assets.
(F) INCOME TAXES
In February 1992, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 109, Accounting for Income Taxes. Statement
109 requires a change from the deferred method of accounting for income taxes of
APB Opinion No. 11 to the asset and liability method of accounting for income
taxes. Under the asset and liability method of Statement 109, deferred tax
assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. Under Statement 109, the effect on deferred tax assets
and liabilities of a change in tax rates is recognized in income in the period
that includes the enactment date.
The Company adopted Statement 109 as of November 1, 1993. The cumulative effect
of this change in accounting for income taxes of $154,157 is determined as of
November 1, 1993, and is reported separately in the statement of earnings for
the year ended October 31, 1994. Prior years' financial statements have not been
restated.
(G) EARNINGS PER SHARE
Earnings per share are based on the weighted average number of common shares and
common equivalent shares outstanding during each period (2,632,359, 2,657,112
and 2,647,286 shares for the years ended October 31, 1995, 1994 and 1993,
respectively). Common equivalent shares, which consist of stock options, have
been included in the weighted average number of shares considered outstanding
(when the effect of doing so is dilutive) based on the treasury stock method.
All share and per share data have been restated to reflect a 3% stock dividend
distributed April 30, 1995, a 8% stock dividend distributed April 30, 1994, and
a 7% stock dividend distributed April 30, 1993.
(H) STATEMENTS OF CASH FLOWS
For purposes of the statements of cash flows, the Company considers all
short-term investments with a maturity, at date of purchase, of three months or
less to be cash equivalents.
(I) EMPLOYEE BENEFIT PLAN
The Company has a profit sharing and tax-qualified savings plan which was
established pursuant to Section 401(K) of the Internal Revenue Code. It is the
Company's policy to recognize plan costs as they accrue. Costs associated with
the plan were immaterial for the years ended October 31, 1995, 1994 and 1993.
12
<PAGE>
(3) CASH AND CASH EQUIVALENTS
Cash and cash equivalents are stated at cost, which approximates market, and
consist of the following:
<TABLE>
<CAPTION>
October 31, 1995
Interest Maturity
Rate Date Amount
<S> <C> <C> <C>
Money market accounts...... 2.5%-4% Daily $ 199,649
Eurobond fund.............. 5.35% Daily 4,140,188
Industrial Development Put
Bond..................... Various Weekly 1,000,000
$5,339,837
</TABLE>
<TABLE>
<CAPTION>
October 31, 1994
Interest Maturity
Rate Date Amount
<S> <C> <C> <C>
Money market accounts...... 2.5%-3% Daily $ 191,436
Eurobond fund.............. 4.75% Daily 579,103
Government securities
bonds.................... 4.10% Daily 26,751
Industrial Development Put
Bond..................... Various Weekly 1,000,000
$1,797,290
</TABLE>
(4) INVENTORIES
The components of inventories are as follows:
<TABLE>
<CAPTION>
October 31,
1995 1994
<S> <C> <C>
Raw materials and supplies.............. $3,330,499 3,541,882
Work-in-process......................... 2,382,158 3,574,501
Finished goods.......................... 1,546,716 2,031,857
$7,259,373 9,148,240
</TABLE>
(5) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
Estimated October 31,
Useful Lives (Years) 1995 1994
<S> <C> <C> <C>
Land............. -- $ 140,000 170,000
Buildings........ 30-39 3,461,307 4,003,886
Machinery and
equipment...... 3-12 8,113,199 8,274,753
Furniture and
fixtures....... 3-7 229,389 205,101
Vehicles......... 5-7 78,759 92,966
12,022,654 12,746,706
Less accumulated
depreciation... 5,241,201 4,296,450
$ 6,781,453 8,450,256
</TABLE>
During 1995, the Company sold the fixed assets and inventory of the Aerospace
Systems division for a cash price of $2,845,506, resulting in a gain before
income taxes of $375,136.
(6) INVESTMENT IN SUBLEASE
During 1994, the Company sublet a building and accounted for the transaction as
a direct financing sublease. The following is a summary of the investment in
sublease:
<TABLE>
<CAPTION>
October 31,
1995 1994
<S> <C> <C>
Total lease payments receivable........... $520,000 $580,000
Less unearned income...................... 169,067 210,649
Net investment in sublease................ 350,933 369,351
Less amounts classified as current........ 20,622 18,418
Non-current portion of investment in
sublease................................ $330,311 $350,933
</TABLE>
Future minimum payments to be received under the direct financing sublease for
each of the five ensuing years ending October 31 are as follows:
<TABLE>
<S> <C>
1996................................................. $ 60,000
1997................................................. 60,000
1998................................................. 60,000
1999................................................. 60,000
2000................................................. 280,000
$520,000
</TABLE>
Interest income from investment in sublease was $41,231 in Fiscal 1995 and
$28,603 in Fiscal 1994.
13
<PAGE>
(7) LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
October 31, 1995 October 31, 1994
Unamortized Unamortized
Principal Discount Net Principal Discount
<S> <C> <C> <C> <C> <C>
Industrial Revenue Bond issued by the Chatham County
Industrial Facilities and Pollution Control Financing
Authority payable in monthly installments of $9,321
through 2000. Interest is payable monthly at a rate of
80% of the prime rate (Prime rate at October 31, 1995
was 8.75%) (a)......................................... $ 456,752 -- 456,752 568,609 --
Industrial Revenue Bond issued by the North Carolina
Industrial Facilities and Pollution Control Financing
Authority payable in $50,000 increments per year
through 2008. Interest is payable quarterly at a rate
of 4.7% (a)............................................ 650,000 -- 650,000 700,000 --
Note issued in connection with acquisition of property
and plant, due in 1998 (discount is based on imputed
interest rate of 10.375%).............................. 188,750 45,563 143,187 203,750 65,989
Industrial Revenue Bond issued by the City of Texarkana,
Arkansas Industrial Development Authority payable in
various annual maturities ranging from
$200,000-$260,000 through 2000. Interest is payable
monthly at rates of 6.6% to 7.0% (a)................... 1,116,667 -- 1,116,667 1,300,417 --
Capital lease payable in quarterly payments of $12,500
with a balloon payment $100,000 in 2000. (imputed
interest rate of 12%).................................. 234,416 -- 234,416 275,953 --
Capital lease payable in monthly payments of $662 through
1998. (imputed interest rate of 6%) The lease is
secured by equipment with a book value of $23,367...... 19,642 -- 19,642 26,236 --
Note issued in connection with acquisition of property
and plant. Paid in full upon sale of Aerospace Systems
division............................................... -- -- -- 2,000,000 --
2,666,227 45,563 2,620,664 5,074,965 65,989
Less current installments................................ 409,234 -- 409,234 417,072 --
$2,256,993 45,563 2,211,430 4,657,893 65,989
<CAPTION>
Net
<S> <C>
Industrial Revenue Bond issued by the Chatham County
Industrial Facilities and Pollution Control Financing
Authority payable in monthly installments of $9,321
through 2000. Interest is payable monthly at a rate of
80% of the prime rate (Prime rate at October 31, 1995
was 8.75%) (a)......................................... 568,609
Industrial Revenue Bond issued by the North Carolina
Industrial Facilities and Pollution Control Financing
Authority payable in $50,000 increments per year
through 2008. Interest is payable quarterly at a rate
of 4.7% (a)............................................ 700,000
Note issued in connection with acquisition of property
and plant, due in 1998 (discount is based on imputed
interest rate of 10.375%).............................. 137,761
Industrial Revenue Bond issued by the City of Texarkana,
Arkansas Industrial Development Authority payable in
various annual maturities ranging from
$200,000-$260,000 through 2000. Interest is payable
monthly at rates of 6.6% to 7.0% (a)................... 1,300,417
Capital lease payable in quarterly payments of $12,500
with a balloon payment $100,000 in 2000. (imputed
interest rate of 12%).................................. 275,953
Capital lease payable in monthly payments of $662 through
1998. (imputed interest rate of 6%) The lease is
secured by equipment with a book value of $23,367...... 26,236
Note issued in connection with acquisition of property
and plant. Paid in full upon sale of Aerospace Systems
division............................................... 2,000,000
5,008,976
Less current installments................................ 417,072
4,591,904
</TABLE>
(a) The proceeds of the Industrial Revenue Bonds ("IRBs") were restricted for
the acquisition, construction and installation of the Company's manufacturing
plants. The debt is secured by land, buildings, improvements, machinery and
equipment. Provisions of the IRB agreements contain various loan covenants
including prohibition against paying cash dividends or redeeming shares of the
Company's stock. At October 31, 1995 the Company was either in compliance with
or had obtained waivers for all covenants.
(b) At October 31, 1995, the Company had a $2,500,000 unused line of credit
available at prime minus .25%.
(c) Maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
Note Capital
Year ending October 31, IRBs Payable Leases Total
<S> <C> <C> <C> <C>
1996.................... 364,357 15,000 29,877 409,234
1997.................... 379,357 15,000 33,177 427,534
1998.................... 394,357 158,750 34,184 587,291
1999.................... 409,357 -- 32,612 441,969
2000.................... 275,992 -- 124,207 400,199
Thereafter.............. 400,000 -- -- 400,000
$2,223,420 188,750 254,057 2,666,227
</TABLE>
14
<PAGE>
(8) FEDERAL AND STATE INCOME TAXES
The components of income tax expense for the years ended October 31, 1995, 1994
and 1993 consisted of the following:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Current:
Federal..................... $ 907,722 854,151 901,073
State....................... 112,097 98,469 102,764
1,019,819 952,620 1,003,837
Deferred:
Federal..................... 50,296 7,144 11,410
State....................... 5,396 1,334 1,357
55,692 8,478 12,767
Income tax expense............ $1,075,511 961,098 1,016,604
</TABLE>
The components of net deferred tax assets and net deferred tax liabilities are
as follows:
<TABLE>
<CAPTION>
October 31,
1995 1994
<S> <C> <C>
Deferred tax assets:
Inventories, principally due to
additional costs inventoried for tax
purposes............................... $ 75,539 86,917
Accounts receivable, principally due to
allowance for doubtful accounts........ 39,205 73,747
Tax income in excess of book income on
long-term contracts.................... -- 24,198
Accrued expenses......................... 19,238 31,743
Total gross deferred tax assets........ 133,982 216,605
Less valuation allowance................. -- --
Net deferred tax assets................ 133,982 216,605
Deferred tax liabilities:
Property, plant and equipment,
principally due to differences in
depreciation........................... 523,118 630,969
Installment sale......................... 85,005 --
Prepaid expenses......................... 16,025 20,110
Total gross deferred tax liabilities... 624,148 651,079
Net deferred tax liability............. $490,166 434,474
</TABLE>
There have been no valuation allowances recorded for the years ended October 31,
1995 and 1994, because the tax benefits of deductible temporary differences can
be realized by offsetting the tax effects of taxable temporary differences for
which a deferred tax liability has been recognized.
Deferred income tax expense in 1993 primarily related to tax depreciation in
excess of book depreciation.
The actual income tax expense for the years ended October 31, 1995, 1994 and
1993 differs from the "expected" amount (computed by applying the statutory
federal income tax rate of 34% to the earnings before income taxes and
cumulative effect of a change in accounting principle) as follows:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Computed "expected" tax expense........ 34.0 % 34.0 % 34.0 %
Increase (decrease) in income taxes
resulting from:
State income taxes, net of federal
tax benefit........................ 2.4 2.8 2.5
Expenses related to terminated
merger............................. (3.0 ) 4.1 --
Other................................ .3 .4 .4
33.7 % 41.3 % 36.9 %
</TABLE>
(9) COMMON STOCK AND STOCK OPTIONS
The Company has authorized 10,000,000 shares of $1 par value common stock.
Options for up to 1,336,678 shares of common stock have been made available
under the Company's stock option plans for directors and employees. The options
are exercisable for a maximum of ten years from the grant date at an exercise
price of not less than the fair market value of the common stock as of the date
of the grant of the option. The options that have been granted and are
exercisable at October 31, 1995 have a price range of $1.78 to $11.97 and if
exercised would generate proceeds of approximately $2,321,713. The average price
of options exercised in 1995 was $5.52.
A summary of stock options is as follows:
<TABLE>
<S> <C>
Exercisable at October 31, 1993....................... 225,869
Stock dividend adjustment............................. 18,805
Granted............................................... 15,000
Exercised............................................. (15,543)
Forfeited............................................. (3,564)
Exercisable at October 31, 1994....................... 240,567
Stock dividend adjustment............................. 9,179
Granted............................................... 68,500
Exercised............................................. (7,873)
Forfeited............................................. (7,296)
Exercisable at October 31, 1995....................... 303,077
</TABLE>
On February 25, 1991 the President of the Company borrowed $79,879 from the
Company to exercise stock options. The loan is evidenced by an unsecured
five-year promissory note of that date, payable in five equal annual
installments plus interest at the applicable federal rate as published by the
Internal Revenue Service beginning December 31, 1991.
15
<PAGE>
(10) SALES TO MAJOR CUSTOMERS
During 1995, net sales to a single customer amounted to 11% of the Company's net
sales. In 1994, net sales to the same customer amounted to 10% of the Company's
net sales. In 1993, no single customer accounted for 10% or more of the
Company's net sales.
(11) QUARTERLY INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
Three months Fiscal 1995
ended 1/31/95 4/30/95 7/31/95 10/31/95
<S> <C> <C> <C> <C>
Net sales........... $12,754,209 14,138,344 14,566,134 14,797,227
Gross profit........ 2,573,125 2,784,313 2,720,934 3,167,371
Net earnings........ 238,149 337,068 544,800 998,212
Earnings per
share............. .09 .13 .21 .38
</TABLE>
The quarter ended July 31, 1995 included the sale of certain patent rights which
increased net earnings by $217,719 and earnings per share by $.08.
The quarter ended October 31, 1995 included other income from engineering
services of $136,500 which increased after tax net earnings by $85,856 and
earnings per share by $.03. Also, the quarter ended October 31, 1995 included
the sale of the Aerospace Systems division which increased net earnings by
$235,953 and earnings per share by $.09.
<TABLE>
<CAPTION>
Three months Fiscal 1994
ended 1/31/94 4/30/94 7/31/94 10/31/94
<S> <C> <C> <C> <C>
Net sales........... $12,105,626 12,267,232 13,445,883 14,556,932
Gross profit........ 2,761,365 2,639,963 2,829,746 2,939,619
Net earnings........ 581,954 430,277 399,066 110,083
Earnings per
share............. .23 .16 .15 .04
</TABLE>
The quarter ended April 30, 1994 included other income from engineering services
of $152,011 which increased after tax net earnings by $95,612 and earnings per
share by $.04.
(12) SUBSEQUENT EVENTS (UNAUDITED)
On January 20, 1996, the Company signed an Agreement and Plan of Merger with
Pentair, Inc. providing for a merger of the Company at a cash price of $13.50
per share of outstanding common stock. Pursuant to the terms of the Merger
Agreement, the Company granted to Pentair an option to purchase up to 300,000
shares of the Company's common stock at $13.50 per share, exercisable until
February 22, 1996. The Company will be required to pay Pentair a $1,000,000
termination fee, plus expenses of up to $250,000, if the Company is acquired by
another party and under certain other circumstances. Consummation of the merger
is subject to shareholder approval and certain other conditions. On January 22,
1996, Kulhman Corporation announced in a press release that it would increase
the purchase price in its previously announced tender offer from $13.062 to
$14.00 per share.
MARKET INFORMATION
The Common Stock trades on the NASDAQ National Market System under the symbol
CABL. The following table sets forth the high and low sale prices for the
indicated periods, all as reported by NASDAQ.
<TABLE>
<CAPTION>
FISCAL YEAR HIGH LOW
<S> <C> <C>
1994
First quarter...................................................................... $ 13 1/4 10 1/4
Second quarter..................................................................... 13 10 1/4
Third quarter...................................................................... 14 1/4 8 3/4
Fourth quarter..................................................................... 15 3/8 13
1995
First quarter...................................................................... $ 10 1/4 7 1/2
Second quarter..................................................................... 8 1/4 7 1/2
Third quarter...................................................................... 11 9
Fourth quarter..................................................................... 10 1/4 9 1/4
</TABLE>
16
<PAGE>
CORPORATE OFFICERS AND DIRECTORS
<TABLE>
<S> <C>
James R. Fore Chairman, President, Director
William B. Cooper Vice President of Finance, Secretary,
Treasurer, Director
William P. Cullen Vice President of Sales & Marketing
Steve B. Payne Vice President of Manufacturing,
Intercomp Division
Henry H. Lawton Vice President of Manufacturing,
CCI Division
Charles L. Wellard Director
John L. Bitter, Jr. Director
Benjamin Greene Director
George J. Falconero Director
</TABLE>
COMMITTEES OF THE BOARD OF DIRECTORS
<TABLE>
<S> <C>
EXECUTIVE COMMITTEE SPECIAL FACILITIES COMMITTEE
Benjamin Greene, Chairman William B. Cooper, Chairman
John L. Bitter, Jr. James R. Fore
George J. Falconero Charles L. Wellard
Charles L. Wellard
AUDIT COMMITTEE STOCK OPTIONS COMMITTEE
George J. Falconero, Chairman George J. Falconero, Chairman
Charles L. Wellard John L. Bitter, Jr.
Benjamin Greene James R. Fore
Charles L. Wellard
<CAPTION>
NOMINATING COMMITTEE
John L. Bitter, Jr., Chairman
George J. Falconero
Benjamin Greene
PENSION COMMITTEE
George J. Falconero, Chairman
James R. Fore
Benjamin Greene
</TABLE>
<TABLE>
<S> <C>
TRANSFER AGENT Wachovia Bank of North Carolina, NA
Winston-Salem, NC
GENERAL COUNSEL L. Bruce McDaniel, Esquire
McDaniel & Anderson
AUDITORS KPMG Peat Marwick LLP
NASDAQ Trading Symbol CABL
10-K REPORT AVAILABLE The Form 10-K Annual Report filed with the
Securities and Exchange Commission provides
additional financial data and further
information on business and properties,
officers, and directors. It is available
without charge upon request to the Corporate
Secretary, Communication Cable, Inc., P.O.
Box 1757, Sanford, NC 27330.
THE ANNUAL MEETING OF STOCKHOLDERS OF
COMMUNICATION CABLE, INC. WILL BE HELD AT
9:30 A.M. ON MONDAY, MARCH 12, 1996, AT THE
COMPANY HEADQUARTERS IN SANFORD, NORTH
CAROLINA. STOCKHOLDERS OF RECORD AS OF
DECEMBER 31, 1995, WILL BE ENTITLED TO VOTE
AT THIS MEETING.
</TABLE>
<PAGE>
EXHIBIT 23.0
INDEPENDENT AUDITORS' CONSENT
THE BOARD OF DIRECTORS
COMMUNICATION CABLE, INC.:
We consent to incorporation by reference in the Registration Statement (No.
33-58199) on Form S-8 of Communication Cable, Inc. of our reports dated December
15, 1995 relating to the balance sheets of Communication Cable, Inc. as of
October 31, 1995 and 1994, and the related statements of earnings, stockholders'
equity, and cash flows for each of the years in the three-year period ended
October 31, 1995, and the related financial statement schedule, which reports
appear or are incorporated by reference in the October 31, 1995 annual report on
Form 10-K of Communication Cable, Inc.
KPMG PEAT MARWICK LLP
Raleigh, North Carolina
January 25, 1996
<PAGE>
<PAGE>
COMMUNICATION CABLE, INC.
1378 Charleston Drive
Post Office Box 1757
Sanford, North Carolina 27330
NOTICE OF 1996 ANNUAL MEETING OF STOCKHOLDERS
To the Stockholders of Communication Cable, Inc.
Notice is hereby given that the Annual Meeting of the Stockholders of
Communication Cable, Inc. will be held at the Company's Headquarters, Sanford,
North Carolina on Tuesday, March 12, 1996, 9:30 a.m., Eastern Standard Time, for
the following purposes:
1. To elect six directors to serve until the next annual meeting of
stockholders and thereafter until their successors are elected and qualify.
2. To consider and vote on the extension of option grant date of Incentive
Stock Option Plan.
3. To transact such other business as may properly come before the meeting
and any adjournment thereof. The Board of Directors has fixed the close of
business on December 31, 1995, as the record date for the determination of
stockholders entitled to notice of and to vote at, the meeting or at any
adjournment or adjournments hereof. The transfer books will not be closed.
Your attention is directed to the accompanying Proxy Statement.
By Order of the Board of Directors
(Signature of William B. Cooper)
WILLIAM B. COOPER
SECRETARY-TREASURER
1378 Charleston Drive
Post Office Box 1757
Sanford, NC 27330
January 29, 1996
IT IS IMPORTANT THAT ALL STOCKHOLDERS BE REPRESENTED AT THE ANNUAL MEETING.
STOCKHOLDERS WHO ARE UNABLE TO ATTEND THE MEETING IN PERSON SHOULD SIGN, DATE
AND RETURN THE ENCLOSED FORM OF PROXY, WHICH WILL BE USED AT THE ANNUAL MEETING.
A STAMPED ENVELOPE IS ENCLOSED HEREWITH FOR THAT PURPOSE.
<PAGE>
COMMUNICATION CABLE, INC.
PROXY STATEMENT
The enclosed proxy is solicited by the Board of Directors of Communication
Cable, Inc. (the Company) for use at the 1996 Annual Meeting of Stockholders to
be held at the Company Headquarters, Sanford, North Carolina at 9:30 a.m. on
Tuesday, March 12, 1996, and at any adjournment of such meeting. The approximate
date on which this statement and enclosed proxy are to be mailed to stockholders
is February 13, 1996.
At the close of business on December 31, 1995, the record date of this
annual meeting, there were outstanding 2,584,096 shares of common stock of the
Company, each of which is entitled to one vote on each matter submitted to the
stockholders. Only stockholders of record at the close of business on the record
date are entitled to notice of and to vote at this meeting or any adjournment
thereof.
VOTING PROCEDURE
Shares cannot be voted at the meeting unless the owner of record at the
close of business on December 31, 1995, the record date for this annual meeting,
is present to vote in person or is represented by valid proxy. The enclosed
proxy is a means by which a stockholder may authorize the voting of his shares
at the annual meeting. All shares represented by valid proxies received by the
Secretary of the Company prior to the time they are voted will be as specified
by the stockholder. If the stockholder does not specify how the shares are to be
voted, they will be voted: (1) FOR the election of six directors; (2) FOR the
adoption of the extension of option grant date of Incentive Stock Option Plan. A
proxy may be revoked by the stockholder at any time prior to the time it is
voted, upon the delivery of written notice to the Secretary of the Company, or
by attending the meeting and electing to vote in person.
PROXY SOLICITATION
Proxies will be solicited by mail. The cost of the solicitation will be
borne by the Company. The Company will mail the proxies from lists provided by
the transfer agent. In addition to solicitation by mail, certain officers and
employees of the Company may solicit proxies by telephone, by telegraph, and or
by personal contact. These persons will receive no compensation other than their
regular salaries but will be reimbursed for any expenses incurred.
1
<PAGE>
VOTING SECURITIES AND PRINCIPAL STOCKHOLDERS
Each share of common stock is entitled to one vote on all matters, other
than the election of directors. The affirmative vote of a plurality of the votes
cast is required to elect directors. In accordance with the Company's Articles
of Incorporation and under present laws of the State of North Carolina, in which
the Company is incorporated, stockholders do not have cumulative voting rights.
On February 4, 1986, the Company's Articles of Incorporation were amended
to add the following provisions governing increased voting requirements for
certain transactions:
1. The affirmative vote of 80% of outstanding capital stock is
required to merge or consolidate the Company, or convey all or
substantially all of its assets, or dissolve or liquidate the
Company.
2. Upon the merger or consolidation of the Company, or the sale, lease
or conveyance of all or substantially all of the assets of the
Company, without the approval of the Board of Directors, common
stockholders have the right during the one-year period after the
effective date of any such actions, to exchange their stock for any
acquiring company's promissory notes payable in 30 days and bearing
interest at the rate of 12% per annum in the principal amount of
200% of the higher of: (a) the market value of the stock as of the
effective date of the corporate action; or (b) the book value of
such stock as of the end of the month immediately preceding such
corporate action.
On July 1, 1990, the North Carolina Shareholder Protection Act became
effective. That Act applies to publicly held North Carolina corporations. Under
that Act, a 95% or more favorable vote is required for certain mergers or other
business combinations if the other entity involved owns more than 20% of the
voting shares of the corporation. Exempted from such Act are the transactions
where minimum pricing and stock values are involved and certain other
requirements are met.
On July 1, 1990, the North Carolina Control Share Acquisition Act became
effective. That Act applies to publicly held North Carolina corporations.
Briefly and generally, that Act provides that an entity that acquired "control
shares" may not vote those shares unless a majority of all disinterested
shareholders grants voting rights to such shares. An entity acquires control
shares whenever it acquires shares that would bring its voting power in the
corporation to one of three thresholds: 20%, 33 1/3%, or 50%. The disinterested
shareholders decide whether to accord shares at the corporation's next
shareholders' meeting, unless the acquiror requests management to hold a special
meeting of shareholders for such purpose and files a statement divulging certain
information about itself and its intended plans. If such a meeting is requested,
it must be held within 50 days of such request. If the disinterested
shareholders reinstate voting rights to the control shares and the acquiror owns
a majority of all shares, any minority shareholder may dissent and receive the
"fair value" for his shares (not less than the highest price paid by the
acquiror for any control shares).
Since the Company is publicly held, it is subject to both of these two
North Carolina Acts.
The foregoing may make it more difficult for another company or group of
persons to acquire control of the Company.
As of January 16, 1996, the only stockholders known by management of the
Company to own of record or beneficially as much as 5% of the Company's
outstanding common stock were as set out in the section captioned "Shares Owned
by Directors and Officers", herein.
This is the only class of outstanding voting securities of the Company.
Also as of January 16, 1996, all officers and directors of the Company owned of
record and beneficially 465,042 shares of common stock of the
2
<PAGE>
Company, or approximately 16.5% of the outstanding common stock, as set out in
the section captioned "Shares Owned by Directors and Officers."
It is the understanding of management that all officers and directors
intend to vote for the election of the directors nominated and for the renewal
of Incentive Stock Option Plan.
PURPOSES OF THE MEETING
1. ELECTION OF DIRECTORS
Six directors are to be elected at the meeting for a term of one year and
until their successors shall be elected and qualified. Thus, the term of the
officers may continue until a successor is elected. It is intended that votes be
cast pursuant to the enclosed proxy for the six nominees named in the tabulation
set forth below, all of whom are now members of the Board of Directors. In the
event that any of the nominees should be unable or unwilling to serve as a
director, it is intended that the proxy will be voted for such person, if any,
as shall be designated by the Board of Directors. However, the management of the
Company has no reason to believe that any nominee is unwilling to serve as a
director. The name of, and certain information with respect to, the persons
nominated for election as directors, all of whom are the current directors of
the Company, are as follows:
<TABLE>
<CAPTION>
YEAR FIRST BECAME
NAME AGE DIRECTOR OR OFFICER POSITION WITH COMPANY
<S> <C> <C> <C>
James R. Fore 56 1984 President and Chairman, Board
Communication Cable, Inc. of Directors
P.O. Box 1757
Sanford, NC 27331
Charles L. Wellard 71 1984 Director
195 Hearthstone Road
Pinehurst, NC 28374
William B. Cooper 44 1988 Vice President of Finance,
8409 Belgium Drive Chief Financial Officer,
Raleigh, NC 27606 Secretary, Treasurer, Director
John L. Bitter, Jr. 63 1987 Director
Interstate/Johnson Lane Corp.
945 East Paces Ferry Road
Atlanta, GA 30326
Benjamin Greene 63 1988 Director
Dearborn Wire & Cable, Inc.
250 West Carpenter Ave.
Wheeling, IL 80090
George J. Falconero 46 1989 Director
Maillie, Falconiero & Company
P.O. Box 680
Oaks, PA 19456
</TABLE>
The term of office of each person elected will be until the next annual
meeting, on the second Tuesday in March, 1997, or March 11, 1997.
James R. Fore received a B.S. degree in Engineering from North Carolina
State University in 1961, and a B.S. degree in Business Administration from the
University of North Carolina in 1966. From 1975 to January,
3
<PAGE>
1982, he served in various capacities with Intercomp Wire and Cable Co., a
manufacturer of electrical wire and cables, a subsidiary of Insilco Corporation
("Insilco") and member of the Computer Circuitry Group ("CCG") of Insilco
subsidiaries, which were engaged in the manufacture of electronic and electrical
components and sub-assemblies for the computer industry. From 1978 to June,
1980, Mr. Fore served as Vice President, and from June, 1980 until January,
1982, as President of Intercomp Wire and Cable Co. From February, 1982 to
September, 1984, he served as Executive Vice President of CCG, responsible for
coordinating the operations of CCG. Mr. Fore, a Company founder, was elected
President and a director of the Company upon its organization in September,
1984. In 1992, Mr. Fore was nominated for Entrepreneur of the Year. He was named
North Carolina Small Business Person of the Year in 1994 and presented the Order
of the Long Leaf Pine by the Governor of North Carolina. In April, 1995, Mr.
Fore was presented with the Charles D. Scott Distinguished Career Award from the
New England Wire & Cable Club.
Charles L. Wellard received a B.S. degree in Engineering from Massachusetts
Institute of Technology in 1945, and M.S. degree in Electrical Engineering from
Carnegie Institute of Technology in 1947. From 1948 to 1958, Mr. Wellard was
employed as Director of Engineering for the International Resistance Company, a
manufacturer of electronic components, particularly resistors, and from 1958 to
1961, he was employed as Technical Director of Clifton Precision Products
Company, a manufacturer of high precision miniature rotating components and
navigational computers for aircraft. In 1961, Mr. Wellard founded American
Components, Inc., a manufacturer of electronic components including resistors,
capacitors, wire and cable and wire and cable assemblies, and served as its
President and Chairman until 1968. American Components was acquired by Insilco
Corporation in 1968, and from 1968 to August, 1984, he served as President and
Chairman of CCG. He holds more than a dozen U.S. patents, has written numerous
technical articles which have been published in leading scientific journals and
is the author of two books concerning electrical engineering subjects. Mr.
Wellard was elected Vice President and a director of the Company upon its
organization in September, 1984.
William B. Cooper, a Certified Public Accountant, received a B.S. degree
from North Carolina State University in 1975. He worked in public accounting
until 1982, when he became Assistant Controller of CCG, a position he held until
1985. From 1985 through September, 1988, Mr. Cooper held the position of
Controller of the Instrument Society of America. In October, 1988, Mr. Cooper
joined the Company as controller and was appointed Secretary-Treasurer in
December, 1988. Mr. Cooper was appointed Vice President of Finance and elected
by the Board of Directors as a Director on December 17, 1992.
John L. Bitter, Jr. received a B.S. in geology from the University of
Arizona in 1958. Prior to 1984 he was a vice president in the corporate finance
department of E. F. Hutton and also was a partner of New York Securities Co. In
1984, he became an officer in the corporate finance department of Johnson, Lane,
Space, Smith & Co. in Atlanta, Georgia. On October 14, 1988 Interstate
Securities Corporation merged with Johnson, Lane, Space, Smith & Co., Inc. to
form Interstate/Johnson Lane Corporation, where he currently serves as a Senior
Vice President. He was elected as a member of the Board of Directors on December
7, 1987.
Benjamin Greene received a B.A. in Arts and Finance in 1955 from Colorado
College, Colorado Springs, Colorado. He was co-founder of Dearborn Wire & Cable,
in Wheeling, IL in 1962, and has served as president since that date. He was
elected as a member of the Board of Directors on March 18, 1988. In 1992, Mr.
Greene received the Charles D. Scott Distinguished Career Award given by the New
England Wire & Cable Club for demonstrating outstanding professional acumen
along with personal attributes of an exceptional degree. In 1994, Mr. Greene was
inducted into the Entrepreneurship Hall of Fame, sponsored by the University of
Illinois at Chicago.
4
<PAGE>
George J. Falconero received a B.B.A. in Accounting in 1971 from Temple
University. He is a Certified Public Accountant in the state of Pennsylvania.
Mr. Falconero joined the regional public accounting firm of Maillie, Falconero &
Company in 1970 and has served as an Executive Partner since 1985. He was
elected as a member of the Board of Directors on March 14, 1989.
BOARD MEETINGS AND COMMITTEES
The following Board Committees are operative and a brief explanation of the
functions of each committee is as follows:
The Audit Committee: consisting of Messrs. Falconero, Wellard and Greene.
The functions of the committee are to: (a) recommend independent public
accountants for appointment by the Board as auditors of the books and records of
the Company, (b) review the scope of the audits made by the independent
auditors, (c) review reports submitted by the independent auditors and the
adequacy of the Company's system of internal accounting controls and take such
action in respect thereto as the committee deems appropriate to assure that the
interests of the Company are adequately protected, (d) review and approve
non-audit services performed by the independent auditors, (e) review the
independence of the independent auditors, and (f) monitor compliance with the
Company's policies concerning conflicts of interest and business conduct.
The Nominating Committee: consisting of Messrs. Bitter, Greene and
Falconero. The functions of the committee are to: (a) receive recommendations
for nominations of directors from all sources and (b) make recommendations to
the Board regarding selection criteria for Board members, nominees for directors
to fill vacancies and nominees for election as directors at the annual meeting
of stockholders. The Nominating Committee will review stockholders' suggestions
as to nominees for directorships that are submitted in writing to the Nominating
Committee, at the address of the Company's principal offices, not less than 45
days in advance of the date of the Company's proxy statement released to the
stockholders in connection with the previous year's annual meeting of
stockholders.
Executive Committee: Reviews management salaries, employment of management
and compensation plans.
Special Facilities Committee: Plans for acquisition of new equipment to
produce improved products economically.
Stock Options Committee: Selects personnel for stock options and
administers the stock option programs.
Pension Committee: Reviews employee pension benefits and administers the
pension programs.
Special Committee: consisting of Messrs. Falconero, Bitter and Greene.
Established January 12, 1995, for the purpose of evaluating the proposed merger
with Pentair Corporation, having the full authority of the Board of Directors in
evaluating and considering such merger proposal, and to recommend final action
on the proposed merger to the Board of Directors.
During 1995, the Board of Directors held thirteen meetings. No director
attended less than 75% of the aggregate of the total number of Board meetings
and the total number of Board committees on which he served, during the periods
that he served.
2. PROPOSAL TO ADOPT THE EXTENSION OF OPTION GRANT DATE OF INCENTIVE STOCK
OPTION PLAN
The Directors have proposed for the consideration of the shareholders the
extension of the option grant date of Incentive Stock Option Plan, as discussed
below.
5
<PAGE>
The second sentence of Paragraph 7, DURATION AND TERMINATION OF THE PLAN,
of the Incentive Stock Option Plan (the "Plan") which became effective February
27, 1986 states that "No option shall be granted subsequent to February 26,
1996, or subsequent to any earlier date as of which the Plan is terminated
pursuant to paragraph 6". If approved by the shareholders, the Plan would be
amended to extend the date that options can be granted to February 26, 2001.
The purpose of the Plan is to advance the interests of the Company by
assuring continuance of services of key employees and by attracting able
executives to employment with the Company.
If approved by the shareholders, the extension of option grant date of the
Plan would become effective upon approval. The Board of Directors recommends a
vote FOR the adoption of the extension of option grant date of Incentive Stock
Option Plan.
3. OTHER MATTERS
The Audit Committee will review recommendations of management and Directors
regarding the appointment of certified public accountants to audit the books of
the Company for the year ending October 31, 1996. The Board of Directors will
consider the appointment at the March 1996 or June 1996 meeting. The Board of
Directors selected KPMG Peat Marwick LLP as auditors to the Company for the year
ended October 31, 1995. KPMG Peat Marwick LLP, independent certified public
accountants, have audited the Company's financial statements for the past ten
years. A representative of KPMG Peat Marwick LLP is expected to be present at
the Annual Meeting.
The management of the Company knows of no other matters that may come
before the annual meeting. If other matters properly come before the meeting, it
is the intention of the persons acting under the enclosed form of proxy to vote
the shares represented by said proxies, with respect to such matters, in
accordance with their best judgment.
REMUNERATION AND RELATED MATTERS
EXECUTIVE COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Executive Committee of the Board of Directors establishes the
compensation for all officers of the Company. The Company's compensation program
is informal and rather simple consisting principally of salary, bonus and from
time to time an award of incentive stock options.
Compensation is not directly related to the market performance of the
Company's stock. Stock prices are not only reflective of earnings but are
influenced by additional factors as interest rates, comments and recommendations
of security analysts, institutional trading and market maker's activities. Also,
the major raw material component in the Company's product, copper, is subject to
significant price volatility from time to time. Management cannot manage these
outside influences. The primary factor in setting the CEO's compensation, as
well as all of the Company's officers' compensation, is how the employee's
performance compares to the objectives set by the Board. Short-term and
long-term objectives cover a combination of financial and operational matters.
The Executive Committee's compensation program objectives are to provide a
competitive compensation program in order to attract, motivate, reward and
retain qualified personnel for positions of substantial responsibility. The
Company has no long-term incentive plans or stock appreciation rights.
Benjamin Greene, Chairman
6
<PAGE>
DIRECTORS' COMPENSATION
Effective January 1, 1995, outside directors of the Company are compensated
at a rate of $1,000 plus expenses per actual meeting attended during the year.
Mr. Wellard received $75 per hour consulting fees for all board related
activities in addition to his expenses. Consulting agreement with Mr. Wellard
ended December 31, 1994. Also, see Option Grants to Directors, discussed
hereinafter.
The following table sets forth the total annual compensation paid or
accrued by the Company to or for the account of each of the executive officers
of the Company whose total cash compensation for the year ended October 31,
1995, exceeded $100,000 for the years ended October 31, 1995, 1994 and 1993,
respectively.
I. SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
AWARDS
ANNUAL COMPENSATION RESTRICTED PAYOUTS ALL
OTHER ANNUAL STOCK LTIP OTHER
NAME AND SALARY BONUS COMPENSATION AWARD OPTIONS PAYOUT COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) ($) ($) (#) ($) ($)(1)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
James R. Fore 1995 187,250 110,000 6,000 -0- 2,655
CEO, President, Chairman, 1994 176,026 95,000 -0- -0- -0- 2,717
Director 1993 156,666 91,500 -0- -0- -0- -0- 3,000 -0- 2,660
Charles L. Wellard 1995 -0- -0- -0- 6,000 -0- 45,145
Director 1994 -0- 45,000 -0- -0- -0- 114,150
1993 -0- 47,365 -0- -0- -0- -0- 3,000 -0- 94,730
William B. Cooper 1995 90,305 48,000 -0- 6,000 -0- 2,213
VP of Finance, Secretary- 1994 86,358 33,000 -0- -0- -0- 1,794
Treasurer, Director 1993 80,082 25,800 -0- -0- -0- -0- 3,000 -0- 1,600
William P. Cullen 1995 93,450 17,000 -0- 5,000 -0- 1,767
VP of Sales and Marketing 1994 89,370 17,000 -0- -0- -0- 1,714
1993 85,334 17,800 -0- -0- -0- -0- 3,000 -0- 1,636
</TABLE>
(1) All other compensation: The totals in this column reflect the Company
contributions under the 401(k) Retirement Benefit Plan for Mr. Fore, Mr.
Cooper and Mr. Cullen. Also includes consulting fees paid to Mr. Wellard.
7
<PAGE>
II. OPTION GRANTS TABLE
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
POTENTIAL
REALIZABLE VALUE
AT ASSUMED ANNUAL
RATES OF STOCK
% OF TOTAL PRICE
OPTIONS APPRECIATION FOR
OPTIONS GRANTED TO EXERCISE OR OPTION
GRANTED EMPLOYEES IN BASE PRICE EXPIRATION OPTION TERM(1)
NAME # FISCAL YEAR ($/SH) DATE 5%($) 10%($)
<S> <C> <C> <C> <C> <C> <C>
James R. Fore 6,000 8.8% 9.350 03/13/00 9,000 26,040
CEO, President
Chairman, Director
Charles L. Wellard 6,000 8.8% 9.350 03/13/00 9,000 26,040
Director
William B. Cooper 6,000 8.8% 9.350 03/13/05 27,000 76,200
VP of Finance,
Secretary-Treasurer,
Director
William P. Cullen 5,000 7.3% 9.350 03/13/05 22,500 63,500
VP Sales &
Marketing
</TABLE>
(1) The potential realizable value portion of the table illustrates value before
income taxes that might be realized upon exercise of the options immediately
prior to the expiration of their term, assuming the specified compounded
rates of appreciation on the Company's Common Stock from the date of grant
to the expiration date. These numbers do not take into account provisions of
certain options providing for termination of the option following
termination of employment and non-transferability. The hypothetical
potential appreciation shown in these columns reflects the required
calculations at annual rates or 5% and 10% set by the SEC, and is not
intended to represent either historical appreciation or anticipated future
appreciation of the Company's Common Stock price.
8
<PAGE>
III. OPTION EXERCISES AND YEAR-END VALUE TABLE
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR, AND FY-END OPTION VALUE
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS OPTIONS
SHARES ACQUIRED AT FY-END (#) AT FY-END ($)
ON EXERCISE VALUE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (#) ($) UNEXERCISABLE UNEXERCISABLE(1)
<S> <C> <C> <C> <C>
James R. Fore -0- -0- 47,475/-0- 107,835/-0-
CEO, President, Chairman, Director
Charles L. Wellard -0- -0- 47,475/-0- 107,835/-0-
Executive Vice President, Director
William B. Cooper -0- -0- 24,061/-0- 47,911/-0-
VP of Finance, Secretary-Treasurer,
Director
William P. Cullen -0- -0- 20,677/-0- 35,076/-0-
VP of Sales and Marketing
</TABLE>
(1) Closing price of the common stock of the Company at October 31, 1995, was
$9.375.
IV. COMMON STOCK PERFORMANCE
As part of the executive compensation information presented in this Proxy
Statement, the Securities and Exchange Commission requires a five-year
comparison of stock performance for the Company with stock performance of a
broad equity market index and either a peer company or, if a peer company is not
available, a published industry index. The Company's common stock is traded on
the NASDAQ National Market System and one appropriate comparison is with the
NASDAQ Total Return Index for U.S. Companies. Because there is no similar single
"peer company" in the NASDAQ system with which to compare stock performance, the
second comparison selected is with the NASDAQ Electronic Components Index.
Executive compensation has not previously been tied to stock performance, but
this certainly can be a factor used by the Executive Committee and by management
in the future in determining such compensation.
9
<PAGE>
COMPARISON OF FIVE YEAR CUMULATIVE RETURN
AMONG COMMUNICATION CABLE, INC.,
NASDAQ TOTAL RETURN INDEX FOR U.S. COMPANIES
AND NASDAQ ELECTRONIC COMPONENTS INDEX
(The Comparison Graph appears here with the following plot points:)
1990 1991 1992 1993 1994 1995
Communication Cable, Inc. 100 98.6 83.9 153.4 184.5 120.8
NASDAQ Total Return Index For
U.S. Companies 100 169.2 190.8 245.8 247.2 332.6
NASDAQ Electronic Components Index 100 144.3 202.4 345.9 382.0 769.1
This graph assumes $100 invested on October 31, 1990 in Communication
Cable, Inc. Common Stock, NASDAQ Total Return Index for U.S. Companies and
NASDAQ Electronic Components Index.
401(K) RETIREMENT BENEFIT PLAN
The Company maintains a savings plan qualified under Section 401(k) of the
Internal Revenue Code of 1986 for the benefit of all active U.S. employees.
Employees may elect to defer from Federal income tax up to 15% of their total
compensation up to the annual statutory maximum, which is $9,240 for calendar
year 1995. The Company matches up to 4% of an employee's compensation at the
rate of 25 cents on each dollar of contribution. In addition, the Executive
Committee may recommend that the Board of Directors make additional
discretionary contributions each year based on the Company meeting certain
objectives.
INCENTIVE STOCK OPTION PLAN
An Incentive Stock Option Plan (the "Plan") was adopted by the stockholders
of the Company on February 28, 1986. The Plan is intended to qualify under the
Internal Revenue Code of 1954, as amended, for favorable tax treatment to the
optionees in connection with the exercise and sale of their options. Options
covering up to 1,050,709 shares of common stock are available for grant pursuant
to the Plan. The Plan is
10
<PAGE>
administered by the Board of Directors of the Company. The options granted
pursuant to the Plan are exercisable for a period of a maximum of 10 years from
the date of grant for non-affiliates, (less than 10% shareholders on the date of
grant), and a maximum of 5 years for affiliates, (10% or more shareholders on
the date of grant). The exercise price for each share of common stock subject to
the options shall be not less than 110% of the fair market value of the common
stock as of the date of the grant of the option. No person may be granted
options in any calendar year for shares with an aggregate fair market value,
determined at the time of the grant, in excess of One Hundred Thousand Dollars
($100,000), plus limited carry-over amounts. All options are nontransferable,
except by will or the laws of descent and distribution upon the death of the
holder. The Stock Options Committee of the Board of Directors selects deserving
key employees for awards and the number of options to be awarded. There is no
specific performance formula or measure for a grant of options. No options can
be granted pursuant to this plan after February 26, 1996.
DIRECTORS STOCK OPTION PLAN
A Directors Stock Option Plan (the "Plan") was adopted by the stockholders
of the Company on June 30, 1988. The Plan is intended to qualify under the
Internal Revenue Code of 1954, as amended, for favorable tax treatment to the
optionees in connection with the exercise and sale of their options. Options
covering up to 79,969 shares of common stock are available for grant, and have
been granted, pursuant to the Plan. The Plan is administered by the Board of
Directors of the Company. The options granted pursuant to the Plan are
exercisable for a period of a maximum of 5 years from the date of grant. The
exercise price for each share of common stock subject to the options shall be
not less than 100% (110% if director owned greater than 10% of the Company's
common stock immediately before the grant) of the fair market value of the
common stock as of the date of the grant of the option. No person may be granted
options in any calendar year for shares with an aggregate fair market value,
determined at the time of the grant, in excess of One Hundred Thousand Dollars
($100,000), plus limited carry-over amounts. All options are nontransferable,
except by will or the laws of descent and distribution upon the death of the
holder. No options can be granted pursuant to this plan after March 17, 1993.
1995 OUTSIDE DIRECTORS STOCK OPTION PLAN
A 1995 Outside Directors Stock Option Plan (the "Plan") was adopted by the
stockholders of the Company on March 13, 1995. The Plan is intended to qualify
under the Internal Revenue Code of 1954, as amended, for favorable tax treatment
to the optionees in connection with the exercise and sale of their options.
Options covering up to 206,000 shares of common stock are available for grant
pursuant to the Plan. The Plan is administered by the Board of Directors of the
Company. The options granted pursuant to the Plan are exercisable for a period
of a maximum of 5 years from the date of grant. The exercise price for each
share of common stock subject to the options shall be not less than 100% (110%
if director owned greater than 10% of the Company's common stock immediately
before the grant) of the fair market value of the common stock as of the date of
the grant of the option. No person may be granted options in any calendar year
for shares with an aggregate fair market value, determined at the time of the
grant, in excess of One Hundred Thousand Dollars ($100,000), plus limited
carry-over amounts. All options are nontransferable, except by will or the laws
of descent and distribution upon the death of the holder. No options can be
granted pursuant to this plan after March 12, 2000.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On February 25, 1991 James R. Fore, President and a director of the Company
borrowed $79,879 from the Company to exercise stock options. The loan is
evidenced by an unsecured five-year promissory note of
11
<PAGE>
that date, payable in five equal annual installments plus interest at the
applicable federal rate as published by the Internal Revenue Service beginning
December 31, 1991. As of December 31, 1995, the outstanding principal balance
was $16,695.
On November 20, 1995, Mr. James R. Fore, President and CEO of the Company,
entered into an agreement with Kuhlman Corporation, by the terms of which
Kuhlman Corporation would acquire all of Mr. Fore's Company stock at $12.00 per
share, entering into an Employment Agreement on the same date providing for Mr.
Fore's employment with Kuhlman for up to three years following Kuhlman's
acquisition of the Company. Kuhlman exercised such option on January 2, 1996, so
that as of January 5, 1996, Kuhlman owned 315,703 shares, approximately 12% of
the outstanding stock of the Company.
During the registrant's fiscal years ended October 31, 1995 and 1994, the
registrant sold to Dearborn Wire & Cable Company of Wheeling, Illinois, cable
representing sales of $238,420 and $215,845, respectively. Mr. Benjamin Greene
is a director of the registrant and as of January 16, 1996 the owner of 4,633
shares of the registrant's common stock, or 0.18% of the registrant's
outstanding stock of 2,641,033 shares. As of January 16, 1996, Mr. Greene also
has the right to acquire upon the exercise of currently exercisable options
18,042 shares of the registrant's common stock. Mr. Greene is the President of
Dearborn Wire & Cable of Wheeling, Illinois, a limited partnership of which he
has a 20% ownership interest. Management of the registrant is of the opinion
that these sales were made on an arms-length basis and at competitive prices.
Moreover, such sales prices are believed to be in line with comparable prices
for comparable products in the areas involved.
SHARES OWNED BY DIRECTORS AND OFFICERS
The table below shows as of January 16, 1996, the shares of common stock
beneficially owned by each of the nominees and continuing directors of the
Company and all nominees, directors, and officers as a group. These totals
include shares over which the nominee, director or officer has voting or
investment power (or has the right to acquire such power within 60 days after
January 31, 1996), even though he may have no beneficial interest in the shares.
<TABLE>
<CAPTION>
PERCENTAGE OF
NAME NUMBER OF SHARES (1) CLASS
<S> <C> <C>
James R. Fore 0(2) 0
Charles L. Wellard 315,971 11.8%
Kuhlman Acquisition Corp.
3 Skidaway Village Square
Savannah, GA 31411 315,703(2) 12.0%
Dimensional Fund Advisors, Inc.
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401 129,361 5.0%
John L. Bitter, Jr. 29,880 *
George J. Falconero 22,878 *
Benjamin Greene 22,675 *
William B. Cooper 24,061 *
William C. Cullen 16,995 *
Steve B. Payne 24,809 *
Henry H. Lawton 7,773 *
All directors and executive officers
(Totaling 9 persons) 465,042 16.5%
</TABLE>
* Less than one percent
12
<PAGE>
(1) Includes certain Shares that certain persons have the right to acquire upon
the exercise of currently exercisable options: Charles L. Wellard, 47,475;
John L. Bitter, Jr., 18,042; George J. Falconero, 21,130;
Benjamin Green, 18,042; William B. Cooper, 24,061; William P. Cullen,
16,995; Steve B. Payne,
24,809; Henry H. Lawton, 7,773.
(2) In the first week of January 1996, Kuhlman Acquisition Corp. exercised its
option under its Stock Option Agreement with Mr. Fore and thereby acquired
all 315,603 Shares theretofore owned by him.
(3) Each respective individual's shares included in note (1) were deemed to be
outstanding as of January 16, 1996 for the purpose of computing the
percentage applicable to the person owning such shares but were not deemed
to be outstanding for the purpose of computing the percent of class owned by
any other person. The total number of shares included in note (1) were
deemed to be outstanding for the purpose of computing the percent of class
for all directors and executive officers as a group.
DEADLINE FOR STOCKHOLDER PROPOSALS -- 1997 MEETING
A proposal that a stockholder intends to present at the 1997 meeting can be
considered for inclusion in the proxy materials for that meeting only if
received by the Company at its principal office before November 15, 1996.
If the date of the 1997 meeting is advanced more than 30 days or delayed by
more than 90 calendar days from March 11, 1997, the Company shall inform the
stockholders of the change.
ANNUAL REPORT
The Annual Report of the Company for the past fiscal year ended October 31,
1995, containing financial statements, is being mailed to stockholders with this
proxy statement. The financial statements contained in the Annual Report are not
incorporated herein by reference.
OTHER MATTERS
Management is not aware of any matters to be presented for action at the
meeting other than as described herein. If any other matters properly come
before the meeting, or any adjournment thereof, the person or persons voting the
proxies will vote them in accordance with his or their best judgment.
By Order of the Board of Directors.
(Signature of William B. Cooper)
WILLIAM B. COOPER
SECRETARY-TREASURER
1378 Charleston Drive
Post Office Box 1757
Sanford, NC 27330
January 29, 1996
PLEASE SIGN AND DATE THE ENCLOSED PROXY AND MAIL PROMPTLY IN THE ACCOMPANYING
ENVELOPE.
13
****************************************************************************
APPENDIX
<PAGE>
PROXY COMMUNICATION CABLE, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned, hereby appoints James R. Fore, and William B. Cooper, as
Proxies, each with the power to appoint his substitute, and hereby authorizes
them to represent and to vote, as designated below, all the shares of common
stock of Communication Cable held on record by the undersigned on December 31,
1995 at the annual meeting of shareholders to be held on March 12, 1996 or any
adjournment thereof.
<TABLE>
<CAPTION>
PROPOSAL 1. ELECTION OF DIRECTORS -- 1
YEAR TERM FOR AGAINST ABSTAIN FOR AGAINST
<S> <C> <C> <C> <C> <C> <C>
James R. Fore [ ] [ ] [ ] John L. Bitter, Jr. [ ] [ ]
Charles L. Wellard [ ] [ ] [ ] Benjamin Greene [ ] [ ]
William B. Cooper [ ] [ ] [ ] George J. Falconero [ ] [ ]
<CAPTION>
PROPOSAL 1. ELECTION OF DIRECTORS -- 1
YEAR TERM ABSTAIN
<S> <C>
James R. Fore [ ]
Charles L. Wellard
William B. Cooper
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
PROPOSAL 2. ADOPTION OF THE EXTENSION
OF OPTION GRANT FOR AGAINST ABSTAIN
DATE OF INCENTIVE STOCK OPTION PLANS [ ] [ ] [ ]
PROPOSAL 3. OTHER MATTERS [ ] [ ] [ ]
</TABLE>
In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting. This proxy when properly
executed will be voted in the manner directed herein by the undersigned
stockholder.
If no direction is made, this proxy will be voted for Proposal 1 and 2.
Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign. When signing as attorney, as executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
[ ] Wish to attend and vote shares at meeting.
<TABLE>
<S> <C>
Dated:
SIGNATURE
SIGNATURE IF HELD JOINTLY
</TABLE>
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE
<PAGE>
PLEASE READ THE FOLLOWING INSTRUCTIONS BEFORE EXECUTING YOUR VOTING INSTRUCTIONS
ON THE FRONT OF THIS FORM.
(Bullet)Review the Notice of Meeting and Proxy Statement, in particular the
explanation of the proposals to be voted upon. The Board of Directors recommends
a vote for the election of directors listed and a vote for the adoption of the
extension of option grant date of Incentive Stock Option Plan. The shares
represented hereby will be voted as indicated or for any proposals for which no
change is indicated.
(Bullet)VOTING FOR ELECTION OF DIRECTORS: Indicate your choice by marking an
[X] in the appropriate box. To withhold authority for any individual nominee
mark an [X] in the abstain block to the right of the nominee's name.
(Bullet)VOTING ON PROPOSALS: You can vote each proposal individually by
marking an [X] in the appropriate block.
(Bullet)If your shares are held by a bank, you must return your voting
instructions for your shares to be represented at the meeting. Banks do not vote
discretionarily; only as instructed.
(Bullet)If you wish to attend and vote your shares at the meeting, mark an
[X] in the appropriate block and sign and return the form. If you wish to
authorize another person to vote your shares at the meeting, print your
representative's name and address in the area below. A legal proxy will be
issued to you or your authorized representative. Please note: If a legal proxy
is issued, your shares will not be represented at the meeting, unless you or
your representative attends the meeting.
(Bullet)Note: If the address shown is incorrect, notify your broker/bank
directly.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
1995 ANNUAL REPORT TO SHAREHOLDERS AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-START> NOV-01-1994
<PERIOD-END> OCT-31-1995
<CASH> 5,339,837
<SECURITIES> 0
<RECEIVABLES> 7,538,279
<ALLOWANCES> 107,000
<INVENTORY> 7,259,373
<CURRENT-ASSETS> 20,812,352
<PP&E> 12,022,654
<DEPRECIATION> 5,241,201
<TOTAL-ASSETS> 28,063,112
<CURRENT-LIABILITIES> 5,135,350
<BONDS> 2,211,430
0
0
<COMMON> 2,577,425
<OTHER-SE> 17,615,789
<TOTAL-LIABILITY-AND-EQUITY> 28,063,112
<SALES> 56,255,914
<TOTAL-REVENUES> 56,255,914
<CGS> 45,010,171
<TOTAL-COSTS> 53,837,471
<OTHER-EXPENSES> 1,127,342
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 352,045
<INCOME-PRETAX> 3,193,740
<INCOME-TAX> 1,075,511
<INCOME-CONTINUING> 2,118,229
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,118,229
<EPS-PRIMARY> .80
<EPS-DILUTED> .80
</TABLE>
