<PAGE>
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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 October 31, 1997
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 12/5/97
----- ----------------------
Common Stock, $.01 Par Value 18,881,417
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<PAGE>
CABLE DESIGN TECHNOLOGIES CORPORATION
-------------------------------------
TABLE OF CONTENTS
-----------------
Page
----
PART I FINANCIAL INFORMATION
ITEM 1 Financial Statements................................. 3
Review Report of Independent Public Accountants for
the Three Months Ended October 31, 1997.............. 4
Cable Design Technologies Corporation and
Subsidiaries Condensed Consolidated Statements of
Income - Unaudited for the Three Months Ended
October 31, 1997 and 1996............................ 5
Cable Design Technologies Corporation and
Subsidiaries Condensed Consolidated Balance Sheets
as of October 31, 1997 (Unaudited), and July 31, 1997 6
Cable Design Technologies Corporation and
Subsidiaries Condensed Consolidated Statements of
Cash Flows - Unaudited for the Three Months
Ended October 31, 1997 and 1996...................... 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.................. 9
PART II OTHER INFORMATION
ITEM 1 Legal Proceedings.................................... 12
ITEM 2 Changes in Securities................................ 12
ITEM 3 Defaults upon Senior Securities...................... 12
ITEM 4 Submission of Matters to a Vote of Security Holders.. 12
ITEM 5 Other Information.................................... 12
ITEM 6 Exhibits and Reports on Form 8-K..................... 12
SIGNATURES ..................................................... 13
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
In the opinion of Cable Design Technologies Corporation's (the "Company")
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 period ended October 31,
1997, 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.
-3-
<PAGE>
Report of Independent Public Accountants
----------------------------------------
To the Board of Directors and Stockholders 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
October 31, 1997, and the related condensed consolidated statements of income
and cash flows for the three month periods ended October 31, 1997 and 1996.
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, 1997, and, in our report dated
September 9, 1997, 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, 1997 is fairly stated, in all
material respects, in relation to the balance sheet from which it has been
derived.
Pittsburgh, Pennsylvania, ARTHUR ANDERSEN LLP
November 20, 1997
-4-
<PAGE>
CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES
------------------------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED
-------------------------------------------------------
(Dollars in thousands, except per share data)
---------------------------------------------
Three Months Ended
October 31,
---------------------------
1997 1996
---------------------------
Net sales $ 162,144 $ 115,971
Cost of sales 115,068 81,266
---------------------------
Gross profit 47,076 34,705
Selling, general & administrative expenses 27,305 20,725
---------------------------
Income from operations 19,771 13,980
Interest expense, net 1,914 1,117
Other (income) expense (529) (45)
---------------------------
Income before income taxes 18,386 12,908
Income tax provision 6,936 4,770
---------------------------
Net income $ 11,450 $ 8,138
===========================
Per share data:
Weighted average number of
common shares and equivalents 20,857,115 20,535,433
Net income per common share $0.55 $0.40
===========================
The accompanying notes are an integral part of these statements.
-5-
<PAGE>
CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES
------------------------------------------------------
CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
(Dollars in thousands, except per share data)
---------------------------------------------
<TABLE>
<CAPTION>
As of As of
October 31, July 31,
1997 1997
------------- --------
(Unaudited)
ASSETS
- ------
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 6,843 $ 9,017
Accounts receivable, net of allowance for uncollectible amounts
of $5,089 and $4,665, respectively 119,100 112,051
Inventories 126,373 120,974
Other current assets 5,804 5,503
-------- --------
Total current assets 258,120 247,545
Property, plant and equipment, net 138,751 127,568
Goodwill, net 49,675 45,248
Other assets 8,893 9,138
-------- --------
Total assets $455,439 $429,499
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Liabilities:
Current liabilities $ 90,752 $ 85,520
Long-term debt, excluding current maturities 134,206 126,661
Other non-current liabilities 12,646 12,193
-------- --------
Total liabilities 237,604 224,374
-------- --------
Stockholders' equity:
Preferred stock, par value $.01 per share -
Authorized 1,000,000 shares, no shares issued --- ---
Common stock, par value $.01 per share -
Authorized 100,000,000 shares
issued and outstanding, 18,876,289 and 18,755,865
shares, respectively 189 188
Paid in capital 159,778 158,670
Deferred compensation (92) (87)
Retained earnings 59,669 48,219
Currency translation adjustment (1,709) (1,865)
-------- --------
Total stockholders' equity 217,835 205,125
-------- --------
Total liabilities and stockholders' equity $455,439 $429,499
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
-6-
<PAGE>
CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES
------------------------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
-----------------------------------------------------------
(Dollars in thousands)
----------------------
<TABLE>
<CAPTION>
Three months ended
October 31,
---------------------
1997 1996
-------- -------
<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 9,478 $ 2,018
-------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (13,628) (4,231)
Acquisition of businesses, including transaction costs, net of
cash acquired (9,007) ---
-------- -------
Net cash used by investing activities (22,635) (4,231)
-------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in revolving note borrowings 13,857 5,300
Funds provided by long-term debt 115 131
Funds used to reduce long-term debt (3,266) (3,604)
Net proceeds from exercise of stock options 177 424
-------- -------
Net cash provided by financing activities 10,883 2,251
EFFECT OF CURRENCY TRANSLATION ON CASH 100 (95)
-------- -------
Net decrease in cash (2,174) (57)
Cash and cash equivalents, beginning of period 9,017 16,097
-------- -------
Cash and cash equivalents, end of period $ 6,843 $16,040
======== =======
</TABLE>
The accompanying notes are an integral part of these statements.
-7-
<PAGE>
CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES
------------------------------------------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
----------------------------------------------------------------
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 10-K which was
filed for the fiscal year ended July 31, 1997.
2. INVENTORIES
-----------
Inventories of the Company consist of the following:
October 31, July 31,
1997 1997
----------- -------------
(Dollars in thousands)
Raw materials $ 36,636 $ 34,424
Work-in-process 27,952 25,608
Finished goods 61,785 60,942
-------- --------
$126,373 $120,974
======== ========
3. EARNINGS PER SHARE
------------------
The Financial Accounting Standards Board issued Statement No. 128, "Earnings per
Share" (FAS 128) in February 1997. This statement is effective for financial
statements for both interim and annual periods ending after December 15, 1997.
Early adoption is not permitted. The pro forma information below presents the
effect on earnings per share as if FAS 128 had been adopted.
(Pro forma,
unaudited)
Three Months Ended
October 31,
----------------------
1997 1996
----------------------
Basic EPS:
Net income per common share $0.61 $0.45
Diluted EPS:
Net income per common share $0.55 $0.40
4. BUSINESS ACQUISITIONS
---------------------
On September 10, 1997, the Company acquired all the outstanding stock of Barcel
Acquisition Corporation, and its subsidiaries, based in Irvine, California. The
acquisition was accounted for using the purchase method under APB Opinion No.
16. The prior results are not material, therefore, pro forma financial
information is not presented.
5. SUBSEQUENT EVENT
----------------
On December 9, 1997, the Board of Directors approved a three for two stock split
in the form of a common stock dividend. The distribution will be made January 9,
1998 to stockholders of record December 30, 1997.
-8-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED OCTOBER 31, 1997 COMPARED TO
THREE MONTHS ENDED OCTOBER 31, 1996
Net Sales Net sales for the three months ended October 31, 1997 ("first
- ---------
quarter 1998") increased $46.1 million, or 39.8%, to $162.1 million compared to
$116.0 million for the three months ended October 31, 1996 ("first quarter
1997"). Net sales for the first quarter 1998 include the addition of $30.8
million of sales attributable to recently acquired businesses, primarily
Dearborn/CDT, Thermax/CDT and Barcel/CDT. Sales of network product systems
increased $5.5 million, or 8.9%, over the first quarter 1997, primarily due to
higher sales volume of network cable which offset lower average selling prices
compared to the first quarter 1997. Sales of communications cable increased $8.3
million, or 39.7%, due to continued strong demand for cable to support the
upgrade and expansion of the local-loop distribution capacity by telephone
companies to support Internet, facsimile and telecommuting needs. Sales of
automation sound & safety cable products increased $1.4 million, or 7.9%. A
factor contributing to this increase was the additional sales attributable to
the establishment of a west coast warehouse which became operational in October
1997. First quarter 1998 sales of other products, principally cable, increased
$30.7 million, primarily due to additional sales attributable to the recently
acquired businesses.
Gross Profit Gross profit for the first quarter 1998 increased $12.4 million,
- ------------
or 35.6%, to $47.1 million compared to $34.7 million for the first quarter 1997.
The increase in the gross profit from the other products category, principally
cable, accounted for approximately 74% of the overall increase in first quarter
1998 gross profit primarily due to the additional gross profit contributed by
the recently acquired businesses. The increase in the gross profit from
communications cable accounted for approximately 15% of the overall increase in
first quarter 1998 gross profit. The increase in the gross profit from network
systems products accounted for approximately 6% of the increase in first quarter
1998 gross profit.
The gross margin for the first quarter 1998 was 29.0% compared to 29.9% for the
first quarter 1997. The lower gross margin primarily reflects the lower average
selling prices for Teflon/(R)/ plenum category 5 network cables in the first
quarter 1998 compared to the first quarter 1997.
Selling, General and Administrative Expense Selling, general and
- -------------------------------------------
administrative expense ("SG&A") for the first quarter 1998 was $27.3 million
compared to $20.7 million for the first quarter 1997. The increase in SG&A is
primarily attributable to the additional SG&A of the recently acquired
businesses. As a percent of sales, SG&A for the first quarter 1998 was 16.8%
compared to 17.9% for the first quarter 1997. The decrease in SG&A as a percent
of sales for the first quarter 1998 was primarily the result of the lower
average SG&A percentage of the recently acquired businesses.
Income from Operations Income from operations for the first quarter 1998
- ----------------------
increased $5.8 million, or 41.4%, to $19.8 million compared to $14.0 million for
the first quarter 1997. The operating margin, derived by dividing operating
income by net sales, was 12.2% for the first quarter 1998 compared to 12.1% for
the first quarter 1997. The slightly improved operating margin resulted from the
lower SG&A as a percent of sales, which was partially offset by the reduction in
the gross margin percentage discussed above.
Net Income Net income for the first quarter 1998 increased $3.3 million, or
- ----------
40.7% to $11.5 million ($0.55 per share) compared to net income of $8.1 million
($0.40 per share) for the first quarter 1997. Net income for the first quarter
1998 reflects approximately $0.3 million (net of tax) of foreign currency
transaction gains.
FINANCIAL CONDITION
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
facilities will provide it with sufficient liquidity to meet its current
liquidity needs.
-9-
<PAGE>
Working Capital During the first quarter 1998, operating working capital
- ---------------
increased $6.1 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 ($5.4
million) and inventories ($3.1 million), offset by an increase in accounts
payable and other accrued liabilities, including income taxes payable, ($2.6
million). The change in operating working capital excludes changes in cash and
cash equivalents and current maturities of long-term debt.
Cash Flow After providing for the increase in working capital, the Company
- ---------
generated $9.5 million of net cash from operating activities during the first
quarter 1998. Net cash used by investing activities of $22.6 million included
$9.0 million for the acquisition of Barcel Wire and Cable Corp. and $13.6
million for capital projects, including expenditures for construction and
expansion of manufacturing and warehousing facilities at NORDX/CDT, Raydex/CDT,
NEK/CDT, and West Penn/CDT. Net cash provided by financing activities of $10.9
million included $10.7 million from debt sources.
NEW ACCOUNTING STANDARDS
In February 1997, the FASB issued Statement of Financial Accounting Standards
No. 128, "Earnings per Share" ("SFAS No. 128"). SFAS No. 128 differs from
current accounting guidance in that earnings per share is classified as basic
earnings per share and diluted earnings per share, compared with primary
earnings per share and fully diluted earnings per share under current standards.
Basic earnings per share differs from primary earnings per share in that it
includes only the weighted average common shares outstanding and does not
include any dilutive securities in the calculation. Diluted earnings per share
under the new standard differs in certain calculations from fully diluted
earnings per share under the existing standards. Adoption of SFAS No. 128 is
required for interim and annual periods ending after December 15, 1997. Early
adoption is not permitted. See Note 3 to the Condensed Consolidated Financial
Statements for the anticipated impact of adoption of SFAS No. 128 on reported
earnings per share.
In February 1997, the FASB issued Statement of Financial Accounting Standards
No. 129, "Disclosure of Information about Capital Structure" ("SFAS No. 129").
SFAS No. 129 consolidates previous standards for disclosing information about an
entity's capital structure. Adoption of SFAS No. 129 is required for annual
periods ending after December 15, 1997. The Company will adopt SFAS No. 129 in
the fiscal year ending July 31, 1998, and does not believe that adoption will
have a significant impact on the financial statements.
The FASB issued Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income" ("SFAS No. 130") in June 1997. SFAS No. 130 establishes
reporting standards for a new statement of comprehensive income and its
components to be included with the financial statements currently required.
SFAS No. 130 is effective for fiscal years beginning after December 15, 1997.
The Company will adopt SFAS No. 130 in the fiscal year ending July 31, 1999, and
has not yet determined the impact of adoption.
In June 1997, the FASB issued Statement of Financial Accounting Standards No.
131, "Disclosures about Segments of an Enterprise and Related Information"
("SFAS No. 131"). SFAS No. 131 established standards for reporting information
about operating segments. SFAS No. 131 is effective for fiscal years beginning
after December 15, 1997. The Company will adopt SFAS No. 131 in the fiscalyear
ending July 31, 1999, and has not yet determined the impact of adoption.
YEAR 2000 ISSUES
The Company has assessed and continues to assess the impact of the Year 2000
issue on its information systems, and expects to incur expenditures over the
next 12 to 24 months to address this issue. Maintenance or modification costs
will be expensed as incurred, while the costs of new software will be
capitalized and amortized over the software's useful life.
-10-
<PAGE>
FORWARD-LOOKING STATEMENTS -- Under the Private Securities Litigation Act of
1995
Certain statements in this quarterly report are forward-looking statements.
These statements are subject to various risks and uncertainties, many of which
are outside the control of the Company, including the level of market demand for
the Company's products, competitive pressures, the ability to achieve reductions
in operating costs and to continue to integrate acquisitions, price fluctuations
of raw materials and the potential unavailability thereof, foreign currency
fluctuations, technological obsolescence, environmental matters and other
specific factors discussed in the Company's Prospectus dated February 27, 1996,
the Annual Report on Form 10-K for the Corporation's year ended July 31, 1997
and other Securities and Exchange Commission filings. The information contained
herein represents management's best judgment as of the date hereof based on
information currently available; however, the Company does not intend to update
this information to reflect developments or information obtained after the date
hereof and disclaims any legal obligation to the contrary.
-11-
<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:
11.1 Computation of per share earnings.
15.1 Letter of Arthur Andersen LLP regarding unaudited interim
financial statement information.
27.1 Financial data schedule.
(b) Reports on Form 8-K:
None.
-12-
<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
/s/ Paul M. Olson
----------------------------------------
December 12, 1997 Paul M. Olson
President and Chief Executive Officer
/s/ Kenneth O. Hale
----------------------------------------
December 12, 1997 Kenneth O. Hale
Vice President, Chief Financial Officer and Secretary
-13-
<PAGE>
EXHIBIT 11.1
Cable Design Technologies Corporation
Computation of Earnings per Share
(In thousands, except share and per share data]
<TABLE>
<CAPTION>
Quarter Ended October 31,
1997 1996
Primary:
<S> <C> <C>
Net Income $11,450 $8,138
Weighted average number of shares of common stock outstanding 18,797,742 18,166,356
Assumed exercise of stock options 2,059,373 2,369,077
------------------------
Total shares 20,857,115 20,535,433
Primary earnings per common share $0.55 $0.40
Quarter Ended October 31,
1997 1996
Fully diluted:
<S> <C> <C>
Net Income $11,450 $8,138
Weighted average number of shares of comon stock outstanding 18,797,742 18,166,356
Assumed exercise of stock options 2,096,068 2,369,077
------------------------
Total shares 20,893,810 20,535,433
Fully diluted earnings per common share $0.55 $0.40
</TABLE>
<PAGE>
EXHIBIT 15.1
November 20, 1997
To the Stockholders and Board Directors of
Cable Design Technologies Corporation:
We are aware that Cable Design Technologies Corporation has incorporated by
reference in its Registration Statements on Form S-3 (Registration No.
333-00554); Form S-8 (Registration No. 33-73272); Form S-8 (Registration No.
33-78418); Form S-8 (Registration No. 333-2450); Form S-8 (Registration No.
333-6743); and Form S-8 (Registration No. 333-17443) its Form 10-Q for the
quarter ended October 31, 1997, which includes our report dated November 20,
1997, covering the unaudited interim financial statement information contained
therein. Pursuant to Regulation C of the Securities Act of 1933 (the Act), that
report is not considered a part of the registration statements prepared or
certified by our firm or a report prepared or certified by our firm within the
meaning of Sections 7 and 11 of the Act.
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-START> AUG-01-1997
<PERIOD-END> OCT-31-1997
<CASH> 6,843
<SECURITIES> 0
<RECEIVABLES> 124,189
<ALLOWANCES> 5,089
<INVENTORY> 126,373
<CURRENT-ASSETS> 258,120
<PP&E> 175,154
<DEPRECIATION> 36,403
<TOTAL-ASSETS> 455,439
<CURRENT-LIABILITIES> 90,752
<BONDS> 0
0
0
<COMMON> 189
<OTHER-SE> 217,646
<TOTAL-LIABILITY-AND-EQUITY> 455,439
<SALES> 162,144
<TOTAL-REVENUES> 162,144
<CGS> 115,068
<TOTAL-COSTS> 142,373
<OTHER-EXPENSES> (529)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,914
<INCOME-PRETAX> 18,386
<INCOME-TAX> 6,936
<INCOME-CONTINUING> 11,450
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,450
<EPS-PRIMARY> 0.55
<EPS-DILUTED> 0.55
</TABLE>
