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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 1996
Commission File No. 0-22724
CABLE DESIGN TECHNOLOGIES CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 36-3601505
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
Foster Plaza 7
661 Andersen Drive
Pittsburgh, PA 15220
(Address of principal executive offices)
(412) 937-2300
Registrant's telephone number, including area code
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
---------- -----------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at 5-1-96
----- ---------------------
Common Stock, $.01 Par Value 17,801,014
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CABLE DESIGN TECHNOLOGIES CORPORATION
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TABLE OF CONTENTS
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Page
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PART I FINANCIAL INFORMATION 3
ITEM 1 Financial Statements
Review Report of Independent Public Accountants for
the Three Months and Nine Months Ended April 30, 1996 4
Cable Design Technologies Corporation and
Subsidiaries Condensed Consolidated Statements of
Income - Unaudited for the Three Months and Nine Months Ended
April 30, 1996 and 1995 5
Cable Design Technologies Corporation and
Subsidiaries Condensed Consolidated Balance Sheets
as of April 30, 1996 (Unaudited), and July 31, 1995 6
Cable Design Technologies Corporation and
Subsidiaries Condensed Consolidated Statements of
Cash Flows - Unaudited for the Nine Months
Ended April 30, 1996 and 1995 7
Cable Design Technologies Corporation and
Subsidiaries - Notes to Condensed Consolidated
Financial Statements (Unaudited) 8
ITEM 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
PART II OTHER INFORMATION
ITEM 1 Legal Proceedings 13
ITEM 2 Changes in Securities 13
ITEM 3 Defaults upon Senior Securities 13
ITEM 4 Submission of Matters to a Vote of Security Holders 13
ITEM 5 Other Information 13
ITEM 6 Exhibits and Reports on Form 8-K 13
SIGNATURES 15
</TABLE>
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
In the opinion of the registrant's management, the unaudited consolidated
financial statements included in this filing on Form 10-Q reflect all
adjustments which are considered necessary for a fair presentation of financial
information for the period presented.
REVIEW BY INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP has made a review, based upon procedures adopted by the
American Institute of Certified Public Accountants, of the unaudited
consolidated financial statements for the three month and nine month period
ended April 30, 1996, contained in this report. As stated on page 4, Arthur
Andersen LLP did not audit and accordingly does not express an opinion on the
unaudited consolidated financial statements; however as a result of such review,
they are not aware of any material modifications that should be made to the
financial statements referred to above for them to be in conformity with
generally accepted accounting principles.
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Report of Independent Public Accountants
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To the Board of Directors and Shareholders of Cable Design Technologies
Corporation:
We have reviewed the accompanying condensed consolidated balance sheet of Cable
Design Technologies Corporation (a Delaware corporation) and Subsidiaries as of
April 30, 1996, and the related condensed consolidated statements of income for
the three and nine-month periods ended April 30, 1996 and 1995, and the
statements of cash flows for the nine month periods ended April 30, 1996 and
1995. These financial statements are the responsibility of the Company's
management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the financial statements referred to above for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Cable Design Technologies
Corporation and Subsidiaries as of July 31, 1995, and, in our report dated
September 15, 1995, we expressed an unqualified opinion on that statement. In
our opinion, the information set forth in the accompanying condensed
consolidated balance sheet as of July 31, 1995, is fairly stated, in all
material respects, in relation to the balance sheet from which it has been
derived.
Pittsburgh, Pennsylvania, Arthur Andersen LLP
May 20, 1996
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CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES
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CONDENSED CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED
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(Dollars in thousands, except per share data)
---------------------------------------------
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<CAPTION>
Three Months Ended Nine Months Ended
April 30, April 30,
------------------------- ---------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales $ 112,222 $ 47,935 $ 244,519 $ 137,239
Cost of sales 77,278 32,329 166,898 92,698
----------- ----------- ----------- -----------
Gross Profit 34,944 15,606 77,621 44,541
Selling, general & administrative 21,636 8,111 43,213 23,999
Non-recurring charges 16,730 ---- 16,730 ----
----------- ----------- ----------- -----------
Income (loss) from operations (3,422) 7,495 17,678 20,542
Interest expense, net 1,682 1,309 4,309 3,818
Other (income) expense (3) 3 (5) (42)
----------- ----------- ----------- -----------
Income (loss) before income taxes and
extraordinary items (5,101) 6,183 13,374 16,766
Income tax provision (credit) (1,744) 2,473 5,645 6,706
----------- ----------- ----------- -----------
Income (loss) before extraordinary item (3,357) 3,710 7,729 10,060
Extraordinary item (net of tax):
Loss on early extinguishment
of debt (596) ---- (596) ----
----------- ----------- ----------- -----------
Net income (loss) $ (3,953) $ 3,710 $ 7,133 $ 10,060
=========== =========== =========== ===========
Per share data:
weighted average number of
common shares and equivalents 16,819,139 17,078,325 18,028,234 17,059,040
Income (loss) per common share
before extraordinary items ($0.20) $0.22 $ 0.43 $0.59
Extraordinary item (0.04) ---- (0.03) ----
----------- ----------- ----------- -----------
Net income per common share ($0.24) $0.22 $ 0.40 $0.59
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</TABLE>
The accompanying notes are an integral part of these statements.
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CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES
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CONDENSED CONSOLIDATED BALANCE SHEETS
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(Dollars in thousands, except per share data)
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<CAPTION>
As of As of
April 30, July 31,
1996 1995
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ASSETS (Unaudited)
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<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 18,081 $ 2,210
Accounts receivable, net of allowance for uncollectible amounts of
$1,889 and $1,553, respectively 96,845 32,925
Inventories 87,603 35,377
Other current assets 2,771 1,859
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Total current assets 205,300 72,371
Net property, plant and equipment 81,095 30,147
Other assets 18,763 14,488
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Total assets $305,158 $117,006
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LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Liabilities:
Current liabilities $ 80,725 $ 30,870
Long-term debt 63,580 52,696
Other noncurrent liabilites 5,802 1,575
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Total liabilities 150,107 85,141
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Stockholder's Equity:
Preferred stock, par value $.01 per share -
Authorized, 1,000,000 shares, no shares issued ---- ----
Common Stock, par value $.01 per share-
Authorized, 25,000,000 shares
Issued and outstanding, 17,830,768 and shares 14,615,855 respectively 178 146
Paid in capital 151,935 35,925
Deferred Compensation (251) (330)
Retained Earnings:
Retained earnings 55,981 48,848
Recapitalization distribution on July 14, 1988 (52,656) (52,656)
------------ ------------
Retained earnings (accumulated deficit) 3,325 (3,808)
Currency translation adjustment (136) (68)
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Total stockholders' equity 155,051 31,865
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Total liabilities and stockholders' equity $305,158 $117,006
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</TABLE>
The accompanying notes are an integral part of these statements.
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CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
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(Dollars in thousands)
----------------------
<TABLE>
<CAPTION>
Nine months ended
April 30,
-------------------
1996 1995
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<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 4,969 $ 7,703
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (10,748) (4,300)
Acquisition of businesses, including transaction costs (99,752) ----
Changes in other assets (212) (27)
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Net cash used by investing activities (110,712) (4,327)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease in restricted cash ---- 1,485
Funds provided by long-term debt 80,399 3,652
Funds used to reduce long-term debt (87,890) (5,582)
Net proceeds from issuance of common stock 115,840 88
Net change in revolving note borrowings 15,326 (4,744)
Payments for deferred financing fees (2,051) ----
--------- --------
Net cash provided (used) by financing activities 121,624 (5,101)
EFFECT OF CURRENCY TRANSLATION ON CASH (10) 20
--------- --------
Net increase (decrease) in cash 15,871 (1,705)
CASH and cash equivalents, beginning of period 2,210 2,242
--------- --------
CASH and cash equivalents, end of period $ 18,081 $ 537
========= ========
</TABLE>
The accompanying notes are an integral part of these statements
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CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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(Dollars in thousands, except per share data)
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1. BASIS OF PRESENTATION:
---------------------
The condensed consolidated financial statements presented herein are unaudited.
Certain information and footnote disclosures normally prepared in accordance
with generally accepted accounting principles have been either condensed or
omitted pursuant to the rules and regulations of the Securities and Exchange
Commission. Although the registrant believes that all adjustments
necessary for a fair presentation have been made, interim period results are not
necessarily indicative of the results of operations for a full year. As such,
these financial statements should be read in conjunction with the financial
statements and notes thereto included in the registrant's most recent form 10K
which was filed for the fiscal year ended July 31, 1995.
2. DEBT/CREDIT FACILITY:
--------------------
On September 18, 1995, the Company entered into a U.K. credit agreement (the
"Foreign Credit Agreement") to support the financing needs of its new and
existing subsidiaries located in the United Kingdom and Sweden. The Foreign
Credit Agreement is comprised of a sterling overdraft, multi currency short-term
cash advances, a multi currency letter of credit and a multi currency bank
guarantee demand facility in an aggregate amount of approximately $12.0 million.
Terms of the facility permit borrowings based on a percentage of certain
accounts receivable and inventory at applicable margins above the London Inter-
Bank Offering Rate ("LIBOR") interest rate as determined in accordance with the
terms of the Revolving Credit Facility dated May 13, 1994, among the Company and
its lenders.
On February 2, 1996, the Company entered into a new credit agreement (the "New
Credit Agreement"). The New Credit Agreement permits borrowings at applicable
margins above prime and LIBOR and is comprised of a $65.0 million term loan, a
$50.0 million revolver (the "U.S. Revolver"), a CDN $60.0 million Canadian term
loan, and a CDN $53.3 million Canadian revolver (the "Canadian Revolver"). The
New Credit Agreement includes a provision whereby the applicable margins over
prime or LIBOR are based on the attainment of certain performance factors. A
commitment fee of .375% to .50% will be accrued on the unused portion of the
U.S. Revolver and Canadian Revolver. Proceeds from the New Credit Agreement were
utilized to retire the debt outstanding under the previous credit agreement and
to purchase the net assets of Northern Telecom Limited's structured wiring and
copper wire and cable business ("Nordx/CDT").
3. EQUITY TRANSACTIONS:
-------------------
On February 28, 1996, the Company effected a public offering of 5,700,000 shares
(the "Offerings") of its common stock, of which 2,730,000 were sold by selling
stockholders and 2,970,000 were sold by the Company. The net proceeds received
by the Company from the Offerings were approximately $114.9 million based on the
public offering price of $40.50 per share. Approximately $94.8 million of the
net proceeds were used to repay certain indebtedness under the New Credit
Agreement, a substantial portion of which was incurred to finance the
acquisition of Nordx/CDT, and approximately $6.9 million of the net proceeds
were used to make the payment in connection with the vesting of outstanding
stock appreciation rights. The remaining net proceeds, to the extent not
already utilized, will be used for general corporate purposes, including
acquisitions.
4. BUSINESS ACQUISITION:
--------------------
On September 22, 1995, the Company purchased the operating assets of the Raydex
Cable division of Volex Group p.l.c. of Manchester, England ("Raydex/CDT"). The
acquisition was accounted for under the purchase method (APB16) with the assets
acquired and liabilities assumed as follows:
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Assets acquired $15,149
Liabilities assumed (4,950)
Notes and commitments (7,199)
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Net cash paid $ 3,000
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On February 2, 1996, the Company completed the acquistion of Nordx/CDT. The
acquisition was accounted for under the purchase method (APB16) and, subject to
certain final purchase adjustments, the assets acquired and liabilities assumed
as follows:
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Assets acquired $113,588
Liabilities assumed (27,451)
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Net cash paid $86,137
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The effect of pro forma adjustments related to the acquistion of Raydex/CDT and
Nordx/CDT, assuming the transactions had occurred on August 1, 1994, would be as
follows (These pro forma adjustments also include the effect of the Offerings.
This transaction has been combined as it occurred concurrently with the
acquisition of Nordx/CDT.):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
April 30, April 30,
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1996 1995 1996 1995
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<S> <C> <C> <C> <C>
Net Sales $112,222 $95,299 $350,082 $298,530
========= ========= ========= =========
Income Before
Extraordinary Items (3,053) 3,350 10,530 13,835
========= ========= ========= =========
Net Income (3,649) 3,350 9,934 13,164
========= ========= ========= =========
Net Income per
Common Share $ (0.21) $ 0.17 $ 0.50 $ 0.66
========= ========= ========= =========
</TABLE>
Excluding the effect of non-recurring and extraordinary charges, the pro forma
net income and Net Income per Common Share was as follows:
<TABLE>
<S> <C> <C> <C> <C>
Net Income $7,476 $3,350 $21,059 $13,164
========= ========= ========= =========
Net Income per
Common Share $ 0.37 $ 0.17 $ 1.04 $ 0.66
========= ========= ========= =========
</TABLE>
The pro forma financial information presented above does not purport to present
what the Company's results of operations would actually have been if the
acquisition of Raydex/CDT and Nordx/CDT had occurred on August 1, 1994, or to
project the Company's results of operations for any future period.
5. SUBSEQUENT EVENTS:
-----------------
On June 4, 1996, the Company completed the acquisition of CEKAN A/S, located in
Arhus, Denmark. CEKAN designs and manufactures high performance
telecommunications connectors, and approximately one half of its current annual
sales of $5.0 million are to Nordx/CDT.
6. WEIGHTED AVERAGE SHARES:
-----------------------
The earnings per share calculation for the three months ended April 30, 1996
excludes common stock equivalents. The inclusion of common stock equivalents
would be anti-dilutive.
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ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This discussion and analysis of the Company's results of operations and
financial condition should be read in conjunction with the Company's condensed
consolidated financial statements and the notes thereto. Certain statements in
this quarterly report on Form 10-Q are forward looking statements concerning the
future operations of the Company. Such statements are made pursuant to safe
harbor provisions of the Private Securities Litigation Reform Act of 1995, and
there are many important factors that could cause the actual results to differ
materially from those in the forward-looking statements.
RESULTS OF OPERATIONS
THREE MONTHS ENDED APRIL 30, 1996 COMPARED TO
THREE MONTHS ENDED APRIL 30, 1995
Net Sales Net sales for the three months ended April 30, 1996 ("third quarter
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1996") were $112.2 million compared to $47.9 million for the three months ended
April 30, 1995 ("third quarter 1995"). Third quarter 1996 sales include the
post-acquisition sales of Northern Telecom Limited's ("Nortel") structured
wiring and communications cable businesses ("Nordx/CDT") which was acquired on
February 2, 1996. Sales of network systems cable products increased $30.4
million over the third quarter 1995 primarily due to sales by Nordx/CDT. Sales
of Nordx/CDT's IBDN network structured wiring products, including network cable
and connectivity products, helped to mitigate the shortfall in shipments of
Teflon/(R)/ FEP plenum cable products experienced by the Company's domestic
operating units. During the third quarter 1996, a marketplace imbalance caused
by excessive inventories of Teflon/(R)/ FEP plenum cable products held by
distributors and installers resulted in a shortfall in sales of these products.
While management expects this marketplace imbalance to move toward more normal
conditions during the fourth fiscal quarter 1996, the imbalance has resulted in
reduced gross margins for this product group. Sales of communications cables by
Nordx/CDT of $23.3 million represented approximately 36% of the third quarter
1996 increase in sales. Sales of automation, sound & safety cable products
increased $5.9 million, or 50.9%, over the third quarter 1995. Sales
attributable to the recently acquired Manhattan Electric Cable Company
("Manhattan/CDT") and the Raydex Cable Division of Volex Group p.l.c. of
Manchester, England ("Raydex/CDT") operations accounted for approximately 85% of
the increase in sales of automation, sound & safety products. Third quarter
1996 sales of other products, principally cable, increased $5.1 million
primarily due to sales by Raydex/CDT. With the acquisition of Nordx/CDT, third
quarter 1996 sales outside of the U.S. reached $56.2 million and comprised
approximately 50% of total sales.
Gross Profit Gross profit for the third quarter 1996 increased $19.3 million
- ------------
to $34.9 million compared to $15.6 million for the third quarter 1995.
Including the third quarter 1996 results of operations acquired in fiscal 1996,
the gross profit for each product application area exceeded that of the third
quarter 1995. The gross profit contributed by the recently acquired operations
accounted for approximately 87% of the third quarter 1996 increase in gross
profit. Network systems cable products, including Nordx/CDT's IBDN network
structured wiring products, accounted for approximately 64% of the increase in
third quarter 1996 gross profit. Automation, sound & safety cable products and
Nordx/CDT's communications cable products accounted for approximately 8% and 22%
of the increase in gross profit, respectively.
The gross margin for the third quarter 1996 was 31.1% compared to 32.6% for the
third quarter 1995. Relative to the Company's overall gross margin for the
third quarter 1995, the lower gross margins attributable to the recently
acquired Manhattan/CDT, Raydex/CDT and Nordx/CDT's communication cable
operations resulted in a reduced overall gross margin for the third quarter
1996.
Selling, General and Administrative Expense Selling, general and
- -------------------------------------------
administrative expense ("SG&A") for the third quarter 1996 was $21.6 million
compared to $8.1 million for the third quarter 1995. As a percent of sales,
SG&A was 19.2% for the third quarter 1996 versus 16.9% for the third quarter
1995. SG&A as a percent of sales increased for the third quarter 1996 primarily
as a result of the effect of the shortfall in sales of Teflon/(R)/ FEP plenum
cables, given a higher level of expense compared to this period last year, and
the addition of Nordx/CDT's SG&A which, relative to the Company's preacquisition
operations, represent a higher percentage of sales. Two factors contributing to
Nordx/CDT's higher SG&A percentage are the inclusion of costs incurred in
connection with its dedicated product research and development programs, such as
Dynatrax, and higher delivery expenses for its communications cable products.
Non-Recurring Charges In-process research and development costs of $9.8
- ---------------------
million purchased in connection with the acquisition of Nordx/CDT were
immediately charged to operations in accordance with generally accepted
accounting practices. In addition, outstanding stock appreciation rights of
$6.9 million vested upon the completion of the primary and secondary offerings
of the Company's common stock in February, 1996 (the "Offerings")
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Income from Operations Excluding non-recurring charges, income from operations
- ----------------------
for the third quarter 1996 was $13.3 million compared to income from operations
of $7.5 million for the third quarter 1995. Including non-recurring charges,
operating loss was ($3.4) million for the third quarter 1996. The operating
margin, derived by dividing operating income by net sales, was 11.9% (excluding
non-recurring charges) for the third quarter 1996 compared to 15.6% for the
third quarter 1995. The lower operating margin for the third quarter 1996 was
primarily the result of the inclusion of Nordx/CDT which, relative to CDT's
preacquisition operations, had a lower operating margin.
Net Income Including non-recurring charges and a $0.6 million extraordinary
- ----------
charge resulting from the early extinguishment of debt in connection with the
debt refinancing and the offerings related to the acquisition of Nordx/CDT, the
Company recorded a loss of ($4.0) million, or ($0.24) per share for the third
quarter 1996 compared to net income of $3.7 million, or $0.22 per share, for
the third quarter 1995. Excluding non-recurring and extraordinary charges, net
income was $7.2 million, or $0.37 per share.
NINE MONTHS ENDED APRIL 30, 1996 COMPARED TO
NINE MONTHS ENDED APRIL 30, 1995
Net Sales Net sales for the nine months ended April 30, 1996 ("first nine
- ---------
months 1996") were $244.5 million compared to $137.2 million for the nine months
ended April 30, 1995 ("first nine months 1995"). Sales for the first nine
months 1996 include the post-acquisition sales of Nordx/CDT which was acquired
on February 2, 1996. Sales of network systems cable products increased $56.7
million over the first nine months 1995 principally due to an increase in the
demand for Cat.5 Teflon/(R)/ FEP plenum cable products in the first half of this
year and the inclusion of Nordx/CDT's IBDN network structured wiring products
sales for the third quarter 1996. Sales of automation, sound & safety cable
products increased $17.4 million, or 52.7%, over the first nine months 1996.
Sales attributable to the recently acquired Manhattan/CDT and Raydex/CDT
operations accounted for approximately 79% of the increase in the sales of
automation, sound & safety products. Sales of communications cables by
Nordx/CDT of $23.3 million represented approximately 22% of the increase in
sales for the first nine months 1996. Sales of computer interconnect cable
products for the first nine months 1996 decreased $3.3 million, or 18.3%,
compared to the first nine months 1995 primarily as a result of lower sales of
mainframe cable products principally due to reduced sales of zero halogen cable
products. With the acquisition of Raydex/CDT and Nordx/CDT, sales outside the
U.S. accounted for approximately 37% of sales for the first nine months 1996
compared to approximately 17% the first nine months 1995.
Gross Profit Gross profit for the first nine months 1996 was $77.6 million
- ------------
compared to $44.5 million for the first nine months 1995. The gross profit
contributed by recently acquired operations accounted for approximately 59% of
the increase in gross profit for the first nine months 1996. Network systems
cable products, including third quarter 1996 sales of Nordx/CDT's IBDN network
structured wiring products, accounted for approximately 71% of the increase over
last year. Automation, sound & safety cable products and Nordx/CDT's
communications cable products accounted for approximately 12% and 13% of the
increase in gross profit, respectively.
The gross margin was 31.7% for the first nine months 1996 compared to 32.5% for
the first nine months 1995. Relative to the Company's overall gross margin for
the first nine months 1995, the lower gross margins attributable to the recently
acquired Manhattan/CDT, Raydex/CDT, and Nordx/CDT's communication cable
operations resulted in a reduced overall gross margin for the first nine months
1996.
Selling, General and Administrative Expense SG&A for the first nine months
- -------------------------------------------
1996 was $43.2 million compared to $24.0 million for the first nine months 1995.
As a percent of sales, SG&A was 17.7% for the first nine months 1996 compared to
17.5% for the first nine months 1995.
Non-recurring Charges During the third quarter 1996, non-recurring charges of
- ---------------------
$16.7 million were incurred in connection with the acquisition of Nordx/CDT and
the related Offerings.
Income from Operations Excluding non-recurring charges, income from operations
- ----------------------
for the first nine months 1996 was $34.4 million compared to $20.5 million for
the first nine months 1995. Including non-recurring charges, income from
operations was $17.7 million for the first nine months 1996. The operating
margin, derived by dividing operating income by net sales, was 14.1% (excluding
non-recurring charges) for the first nine months 1996, compared to 15.0% for the
first nine months 1995. The lower operating margin for the first nine months
1996 was primarily the result of the inclusion of the third quarter 1996
operating results of Nordx/CDT which, relative to the Company's preacquisition
operations, had a lower operating margin.
Net Income Including third quarter 1996 non-recurring charges and the
- ----------
extraordinary charge resulting from the early
-11-
<PAGE>
extinguishment of debt, net income was $7.1 million, or $0.40 per share for the
first nine months 1996 compared to net income of $10.1 million, or $0.59 per
share, for the first nine months 1995. Excluding non-recurring and
extraordinary charges, net income for the first nine months 1996 was $18.3
million, or $1.01 per share.
Raw Material
Copper is the principal raw material component of many of the Company's cable
products and the Company's use of copper in proportion to its sales has
increased significantly since its acquisiton of Nordx/CDT's communications cable
business. As a result of this acquisition, the Company now has more contracts
with customers where the sale price of product is tied to the current market
price of copper. Fluctuations in the price of copper, which have recently been
significant, affect the value of the Company's inventory and may from time to
time affect the Company's revenues and earnings.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity and Capital Resources Based on the Company's current expectations
- -------------------------------
for its business, management believes that its cash flow from operations and the
available portion of its revolving credit facilities and foreign credit facility
will provide it with sufficient liquidity to meet the current liquidity needs of
the Company.
On February 2, 1996, the Company entered into a new U.S. and Canadian credit
agreement (the "New Credit Agreement"). The New Credit Agreement is comprised of
a $65.0 million term loan, a $50.0 million revolver loan (the "U.S. Revolver"),
a CDN$60.0 million Canadian term loan, and a CDN$53.3 million Canadian revolver
loan (the "Canadian Revolver"). The New Credit Agreement specifies interest at
varying margins over bank prime, London Inter-Bank Offering Rate, Eurodollar, or
bankers acceptances interest rates based on certain financial ratios. The
initial applicable margin of 1.75% was reduced to 1% after the completion of the
Offerings. A commitment fee of 3/8% to 1/2% will be accrued on the unused
portion of the U.S. Revolver and Canadian Revolver. The initial proceeds
provided by the New Credit Agreement were used to retire the debt outstanding
under the previous credit agreement and to purchase the net assets of Nordx/CDT.
As of February 2, 1996, the Company completed the acquisition of Nordx/CDT for
approximately $86 million.
On February 28, 1996, the Company effected the Offerings. The net proceeds
received by the Company from the Offerings were approximately $114.9 million
based on a public offering price of $40.50 per share. Approximately $94.8
million of the net proceeds were used to repay certain existing indebtedness
under the New Credit Agreement, a substantial portion of which was incurred to
finance the acquisition of Nordx/CDT. On April 30, 1996, the Company had
approximately $103.3 million of availability under the New Credit Agreement and
$5.4 million of availability under the Foreign Credit Agreement.
Working Capital During the first nine months 1996, operating working capital
- ---------------
increased $13.3 million, excluding increases resulting from the initial
recording of the working capital of acquired businesses. The change in
operating working capital was primarily the result of increases in accounts
receivable and inventories which were partially offset by increases in accounts
payable and other accrued liabilities. The change in operating working capital
excludes changes in cash and current maturities of long-term debt.
Cash Flow The Company generated $5.0 million of net cash from operating
- ---------
activities during the first nine months 1996. The net cash used by investing
activities of $110.7 million included $99.8 million for the acquisition of
businesses (principally Nordx/CDT and Raydex/CDT), and $10.7 million for capital
projects during the first nine months of 1996 to increase the production
capacity and efficiency of new and existing product lines, including: the
purchase of new production and testing equipment for a new facility at Phalo/CDT
to manufacture network cables that exceed Level 5 performance standards; the
construction of a new sales, training and administration facility and the
purchase of equipment for coaxial cable production at West Penn/CDT; the
purchase of additional production equipment for the recently acquired Raydex/CDT
and Nordx/CDT operations, and the expansion of NEK/CDT's (Sweden) production
facility and capacity. Net cash provided by financing activities of $121.6
million included $115.8 million from the issuance of common stock and $5.8
(net) million from debt sources. The net increase in cash for the first nine
months 1996 was $15.9 million.
Subsequent Event On June 4, 1996, the Company completed the acquisition of
- ----------------
CEKAN A/S, located in Arhus, Denmark. CEKAN designs and manufactures high
performance telecommunications connectors, and approximately one half of its
current sales of $5.0 million are to Nordx/CDT.
-12-
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
(i) Asset Purchase Agreement, dated as of December 19, 1995 by
and among Cable Design Technologies (CDT) Canada Inc., Cable
Design Technologies Corporation and Northern Telecom
Limited. Incorporated by reference to Exhibit 10.16 of the
Company's Registration Statement on Form S-3, Registration
No. 333-00554, as filed with the SEC on January 23, 1996 and
amended by Amendment No. 1, as filed February 6, 1996 and by
Post-Effective Amendment No. 1 as filed February 28, 1996.
(ii) Credit Agreement dated February 2, 1996 among the Company,
The First National Bank of Boston, Banque Paribas, Chicago
Branch, Bank of America Illinois, Bank of America Canada and
other lenders party thereto. Incorporated by reference to
Exhibit 10.16 to the Company's Report on Form 8-K, as filed
on February 20, 1996.
(iii)Employment Agreement dated February 2, 1996 among CDT,
Nordx/CDT and Normand Bourque. Incorporated by reference to
Exhibit 10.17 to the Company's Report on Form 8-K, as filed
on February 20, 1996.
(b) Reports on Form 8-K:
(i) The Company filed a Form 8-K related to the acquisition of
NORDX/CDT on February 20, 1996 and included the following
financial statements:
Audited
-------
(a) Statement of Net Assets Sold as of December 31, 1993 and
1994.
(b) Statement of Revenues and Direct Costs and Expenses for
the Years Ended December 31, 1992, 1993 and 1994.
Unaudited
---------
(a) Statements of Revenues and Direct Costs and Expenses for
the nine months ended September 30, 1994 and 1995.
-13-
<PAGE>
(b) Statements of Net Assets Sold at September 30, 1995.
(c) Statements of Cash Flows for the nine months ended
September 30, 1994 and 1995.
Pro Forma
---------
(a) Pro forma Condensed Consolidated Balance Sheet as of
October 31, 1995.
(b) Pro forma Condensed Consolidated Income Statement for
the year ended July 31, 1995.
(c) Pro forma Condensed Consolidated Income Statement for
the three months ended October 31, 1994.
(d) Pro forma Condensed Consolidated Income Statement for
the three months ended October 31, 1995.
-14-
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CABLE DESIGN TECHNOLOGIES CORPORATION
June 14, 1996 /s/ Kenneth O. Hale
-------------------------------
Kenneth O. Hale
Vice President, Chief Financial Officer and Secretary
-15-
<PAGE>
ARTHUR ANDERSEN LLP
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of
Cable Design Technologies Corporation:
We have reviewed the accompanying condensed consolidated balance sheet of Cable
Design Technologies Corporation (a Delaware corporation) and Subsidiaries as of
April 30, 1996, and the related condensed consolidated statements of income for
the three and nine-month periods ended April 30, 1996 and 1995, and the
statements of cash flows for the nine-month periods ended April 30, 1996 and
1995. These financial statements are the responsibility of the Company's
management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the financial statements referred to above for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Cable Design Technologies
Corporation and Subsidiaries as of July 31, 1995, and, in our report dated
September 15, 1995, we expressed an unqualified opinion on that statement. In
our opinion, the information set forth in the accompanying condensed
consolidated balance sheet as of July 31, 1995, is fairly stated, in all
material respects, in relation to the balance sheet from which it has been
derived.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania,
May 20, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
unaudited Condensed Consolidated Balance Sheets and Statements of Income
as of April 30, 1996 and the nine month period then ended and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-START> AUG-01-1995
<PERIOD-END> APR-01-1996
<CASH> 18,081
<SECURITIES> 0
<RECEIVABLES> 96,845
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<INVENTORY> 87,603
<CURRENT-ASSETS> 205,300
<PP&E> 81,095
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<TOTAL-ASSETS> 305,158
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0
0
<COMMON> 178
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<TOTAL-LIABILITY-AND-EQUITY> 305,158
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<TOTAL-COSTS> 226,841
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<EPS-PRIMARY> .40
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