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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the fiscal year ended July 31, 1997
or
[_] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the transition period from ________ to ________
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
Incorporation or Organization) Identification No.)
FOSTER PLAZA 7
661 ANDERSEN DRIVE
PITTSBURGH, PA 15220
(Address of Principal Executive Offices and Zip Code)
(412) 937-2300
(Registrant's Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
------------------- -------------------
Common Stock, $.01 par value New York Stock Exchange
Preferred Stock Purchase Rights, with
respect to Common Stock, par value
$.01 per share New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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
requirement 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 be contained, to the best of
registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [_]
Exhibit Index on Page 14 Page 1 of 79
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The aggregate market value of the registrant's voting stock held by non-
affiliates of the registrant at October 14, 1997, is $612,170,460.
The number of shares outstanding of the registrant's Common Stock at October 14,
1997, is 18,861,417.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Cable Design Technologies Corporation Proxy Statement for the
Annual Meeting of Stockholders to be held on December 9, 1997, (the "Proxy
Statement") are incorporated by reference into Part III.
Portions of the 1997 Cable Design Technologies Corporation Annual Report to
Stockholders (the "1997 Annual Report") are incorporated by reference into Parts
I, II and IV.
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CABLE DESIGN TECHNOLOGIES CORPORATION
Table of Contents
PART I Page
Item 1. Business........................................... 2
Item 2. Properties......................................... 8
Item 3. Legal Proceedings.................................. 9
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 4.1. Executive Officers of the Registrant............... 11
PART II
Item 5. Market for the Registrant's Common Stock
and Related Stockholder Matters.................... 12
Item 6. Selected Financial Data............................ 12
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations...... 12
Item 8. Financial Statements and Supplementary Data........ 12
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure............. 12
PART III
Item 10. Directors and Executive Officers of
the Registrant..................................... 13
Item 11. Executive Compensation............................. 13
Item 12. Security Ownership of Certain Beneficial
Owners and Management.............................. 13
Item 13. Certain Relationships and Related Transactions..... 13
PART IV
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K............................ 14
Signatures......................................... 18
<PAGE>
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
THIS REPORT INCLUDES AND INCORPORATES BY REFERENCE "FORWARD-LOOKING STATEMENTS"
WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT AND SECTION 21E OF THE
EXCHANGE ACT. ALL STATEMENTS OTHER THAN STATEMENTS OF HISTORICAL FACTS INCLUDED
OR INCORPORATED IN THIS REPORT MAY CONSTITUTE FORWARD-LOOKING STATEMENTS.
ALTHOUGH THE COMPANY BELIEVES THAT THE EXPECTATIONS REFLECTED IN SUCH FORWARD-
LOOKING STATEMENTS ARE REASONABLE, IT CAN GIVE NO ASSURANCE THAT SUCH
EXPECTATIONS WILL PROVE TO HAVE BEEN CORRECT. IMPORTANT FACTORS THAT COULD
CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THE COMPANY'S EXPECTATIONS
("CAUTIONARY STATEMENTS") ARE DISCLOSED IN THIS REPORT AND THE DOCUMENTS
INCORPORATED BY REFERENCE HEREIN, INCLUDING WITHOUT LIMITATION IN CONJUNCTION
WITH THE FORWARD-LOOKING STATEMENTS INCLUDED IN THIS REPORT AND UNDER "RISK
FACTORS." ALL SUBSEQUENT WRITTEN AND ORAL FORWARD-LOOKING STATEMENTS
ATTRIBUTABLE TO THE COMPANY OR PERSONS ACTING ON ITS BEHALF ARE EXPRESSLY
QUALIFIED IN THEIR ENTIRETY BY THE CAUTIONARY STATEMENTS.
PART I.
ITEM 1. BUSINESS
(a). GENERAL DESCRIPTION OF BUSINESS
Cable Design Technologies Corporation (the "Company", the "Registrant" or
"CDT") was incorporated on May 18, 1988 under the laws of the State of Delaware
with its principal office located at 661 Andersen Drive, Pittsburgh,
Pennsylvania 15220 (Telephone: 412-937-2300).
CDT is a designer and manufacturer of specialty electronic data transmission
cables and network structured wiring systems. CDT products include high
performance copper, fiber optic, and composite cable constructions, connectors
and component assemblies that are used in network, communications, computer
interconnect, wireless, commercial aviation, automotive, automation sound &
safety, and other applications.
The Company, as it exists today, was incorporated on May 18, 1988, but was
conceived in 1985 by its current President and Chief Executive Officer, Paul
Olson, together with other members of current management, shortly after
acquiring the West Penn Wire Corporation ("West Penn/CDT"). In 1988, the
Company underwent a recapitalization pursuant to which Golder, Thoma, Cressey
Fund II purchased a controlling interest in the Company. On July 14, 1988, the
Company acquired all of the outstanding capital stock of Cable Design
Technologies Inc. (formerly Intercole Inc.).
Acquisitions have been an important part of CDT's strategy. In March 1986,
the Company acquired Mohawk Wire & Cable Corporation ("Mohawk/CDT") , a cable
manufacturer with established relationships with companies involved in the early
stages of computer cable network development. In December 1988, the Company
purchased Montrose Products Company ("Montrose/CDT"), a specialty electronic
cable company with established relationships with IBM and other major purchasers
of computer interconnect products. In August 1990, the Company established CDT
International to respond to increasing demand for data transmission cable
products in international markets. In May 1991, the Company expanded its
international presence by purchasing Anglo-American Cables Ltd. ("Anglo/CDT"), a
European cable distributor. In March 1993, the Company established Phalo/CDT to
further increase its production capabilities and broaden its product line. In
May 1994, the Company
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acquired all the outstanding stock of Nya NEK Kabel AB ("NEK/CDT"), located near
Gothenburg, Sweden, to enter the sophisticated broadcast, CATV and antenna cable
markets and to expand network systems cable manufacturing capacity into Europe.
In June 1995, the Company purchased all of the operating assets of Manhattan
Electric Cable Corporation ("Manhattan/CDT") based in Rye, New York to enhance
sales of specialty electronic cables for industrial automation and robotic
applications. In August 1995, the Company purchased Cole-Flex Corporation of
West Babylon, New York to combine its sleeving and tubing capabilities with
Manhattan/CDT. In September 1995, the Company purchased the operating assets of
the Raydex Division of Volex Group, p.l.c. ("Raydex/CDT") (United Kingdom) to
provide additional international manufacturing capabilities of specialty and
high performance electronic cables for computer network systems,
telecommunications, aerospace, CATV, and industrial applications. Effective
February 2, 1996, the Company acquired the assets of Northern Telecom Limited's
("Nortel") communications cable and IBDN network structured wiring products
businesses ("NORDX/CDT") (Canada). On June 4, 1996, the Company acquired the
stock of Cekan A/S ("Cekan/CDT") (Denmark), a manufacturer of high performance,
telecommunications connectors. On July 25, 1996, the Company acquired, in
exchange for shares of its common stock, X-Mark Industries ("X-Mark/CDT")
(Washington, PA), a manufacturer of specialized metal enclosures for network
systems. On March 14, 1997 the Company acquired 51% of the outstanding stock of
Stronglink, Pty. Ltd. ("Stronglink/CDT") (Australia), to enhance international
distribution of network and specialty cables in the Australian marketplace. On
April 7, 1997, the Company acquired the assets of Dearborn Wire & Cable, L.P.
and its affiliates, Dearborn West, L.P. and Thermax Wire, L.P. (collectively,
"Dearborn/CDT"), a manufacturer of specialty electronic cables for
instrumentation and control, commercial aviation, automotive and marine
applications, and component assemblies for wireless applications.
Subsequently, in September 1997, the Company acquired all the outstanding stock
of Barcel Acquisition Corporation ("Barcel/CDT") of Irvine, California, a
manufacturer of high performance specialty cable for commercial and military
aviation applications.
(b). PRODUCTS
The markets served by the Company principally involve specialty cables and
network structured wiring components for computer local area networks ("LANS")
and wide area networks ("WANS"), communications, computer interconnect,
wireless, commercial aviation, automotive, automation sound & safety, and other
applications.
Network Structured Wiring - This product group encompasses the cables,
-------------------------
connectors, wiring racks and panels, outlets and interconnecting hardware to
complete the end-to-end network system requirements of LANS and WANS. Additional
capital expenditures and acquisitions over the last three years have greatly
increased the Company's capacity in this product area. Sales of network
structured wiring products were $253.4 million, $187.0 million, and $102.4
million in fiscal 1997, 1996, and 1995, respectively. Sales of these products
represented approximately 49%, 52% and 54% of the Company's total sales for the
fiscal years 1997, 1996 and 1995, respectively.
Automation Sound & Safety - Automation sound & safety encompasses three
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distinct applications for data and signal transmission cables. Automation
applications include climate control, premise video distribution and
sophisticated security and signal systems involving motion detection, electronic
card and video surveillance technologies. Sound includes voice activation,
evacuation and other similar systems and safety refers to certain attributes of
data transmission cable that improve the safety and performance of such cable
under hazardous conditions, particularly in buildings for advanced fire alarm
and safety systems.
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The Company's sales in this market were $71.4, $68.7, and $47.2 million in
fiscal 1997, 1996 and 1995, respectively. Sales of these products represented
14%, 19% and 25% of the Company's total sales in fiscal 1997, 1996 and 1995,
respectively.
Computer Interconnect - Computer interconnect refers to a family of data
---------------------
transmission cables used to internally connect components of computers,
telecommunication switching and related electronic equipment, and to externally
connect large and small computers to a variety of peripheral devices. Sales of
these products were $22.9, $18.8 and $22.9 million for fiscal 1997, 1996 and
1995, respectively. Sales of these products represented approximately 4%, 5%
and 12% of the Company's total sales for fiscal 1997, 1996 and 1995,
respectively.
Communications - Through the acquisition of NORDX/CDT in fiscal 1996, the
--------------
Company entered the market for outside communications, switchboard and equipment
cable. This product group is primarily manufactured by its NORCOM/CDT facility
in Kingston, Ontario, which is the largest communications cable operation in
Canada. Sales of this product group were $94.1 million for fiscal 1997, and
$49.4 million for the six month post-acquisition period in fiscal 1996, and
represented approximately 18% and 14% of the Company's total sales for
fiscal 1997 and 1996, respectively.
Other - The Company also manufactures products for a variety of other
-----
electronic wire and cable applications and markets, including instrumentation
and process control, commercial aviation and marine, automotive electronics,
broadcast, wireless component assemblies, CATV, microwave antenna, medical
electronics, electronic testing equipment, robotics, electronically controlled
factory equipment, copiers, home entertainment and appliances.
A business unrelated to the Company's core business manufactures precision
molds used by major tire manufacturers.
(c). RAW MATERIALS
The principal raw materials used by CDT are copper and insulating compounds.
Raw materials are purchased on a consolidated basis whenever possible to reduce
costs and improve supplier service levels. Copper is purchased from several
domestic suppliers. Price terms are generally producers' prices at time of
shipment. The Company generally does not engage in hedging transactions for the
purchase of copper. Currently, world stocks of and capacity for copper are
adequate to meet the Company's requirements. CDT purchases insulating compounds,
including Teflon/(R)/, from various suppliers. The inability of one of such
suppliers to supply such insulating material could have an adverse effect on
CDT's business until a replacement supplier is found or substitute materials are
approved for use. Other raw materials used by CDT include LEXAN/(R)/, optical
fiber, reels, tapes, textiles, chemicals and other materials. Currently,
supplies of these other raw materials are adequate to meet the Company's needs
and are expected to remain so for the foreseeable future.
(d). CUSTOMERS
The Company sells its products directly to original equipment manufacturers
(OEMs), regional Bell operating companies, certified system vendors, and
established distributors. The Company supports over 9,500 customers. No single
customer accounted for more than 10% of sales in fiscal 1997, 1996 or 1995,
except that sales to business units of Bell Canada Enterprises represented
approximately 11% of fiscal 1997 and 1996 sales.
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(e). COMPETITION
The specialty electronic data transmission cable market is highly competitive.
Although some of the Company's competitors are substantially larger and have
greater resources than the Company, management believes that it competes
successfully in its markets due to its experienced management team, large sales
force, established reputation, large number of customer approved specifications
and emphasis on quality.
The principal competitive factors in all product markets are availability,
customer support, distribution strength, price and product features. The
relative importance of each of these factors varies depending on the specific
product category. As products mature, competitive forces often tend to make the
products more of a commodity and subject to greater price competition.
In the market for computer network structured wiring products, the Company
competes with a large number of competitors, several of which are significantly
larger than the Company. The Company competes in the network structured wiring
market by adapting to shifting customer demand for new products, and in the case
of NORDX/CDT, by offering complete, certified network structured wiring systems.
Product price and engineering capabilities are principal factors which affect
competition in the computer interconnect market. In the automation sound &
safety market, the Company competes against a relatively large number of
companies, most of which are smaller in size than the Company. Product prices,
company reputation and product integrity are principal factors which affect
competition in the automation sound & safety market. In the markets for
communications, switchboard and equipment cable, price, reputation, production
quality and availability are principal competitive factors.
(f). BACKLOG
Backlog orders believed to be firm were $62.2 million at July 31, 1997,
compared to $45.6 million at July 31, 1996. The Company believes that
substantially all of the backlog is shippable within the next twelve months.
Generally, customers may cancel orders for standard cable products without
penalty upon thirty days notice.
(g). ENVIRONMENTAL MATTERS
The Company is subject to numerous federal, state, provincial, local and
foreign laws and regulations relating to the storage, handling, emission and
discharge of materials into the environment, including the United States
Comprehensive Environmental Response, Compensation and Liability Act (CERCLA),
the Clean Water Act, the Clean Air Act, the Emergency Planning and Community
Right-To-Know Act and the Resource Conservation and Recovery Act. Regulations of
particular significance to the Company include those pertaining to handling and
disposal of solid and hazardous waste, discharge of process wastewater and storm
water and release of hazardous chemicals. Although the Company believes it is in
substantial compliance with such laws and regulations, the Company may from time
to time not be in full compliance and may be subject to fines or other penalties
for noncompliance.
The Company does not currently anticipate any material adverse effect on its
business as a result of compliance with federal, state, provincial, local or
foreign environmental laws or regulations. However, some risk of environmental
liability and other costs is inherent in the nature of the Company's business,
and there can be no assurance that material environmental costs will not arise
in the future. Moreover, it is possible that future developments, such as
increasingly strict requirements of air emission control and other environmental
laws and enforcement
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policies thereunder, could lead to material costs of environmental compliance
and cleanup by the Company.
(h). EMPLOYEES
As of July 31, 1997, the Company had approximately 2,900 full time employees,
of which approximately 1,300 were represented by labor unions. The Company has
not experienced any work stoppages at its plants and believes its current
relations with its employees are good, however, there can be no assurance that
conflicts will not arise with unions or other employee groups or that such
conflicts would not have a material adverse effect on the Company's business.
(i). FOREIGN OPERATIONS
For information regarding the Company's foreign and domestic operations and
export sales, see Note #14, "Geographic Segments and Export Sales" as presented
in the Company's Notes to Consolidated Financial Statements.
(j). RESEARCH AND DEVELOPMENT
For information concerning expenditures on research and development
activities, see Note #2, "Significant Accounting Policies," as presented in the
Company's Notes to Consolidated Financial Statements.
(k). RISK FACTORS
Ability to Successfully Integrate Acquisitions. Although the Company has been
successful in integrating previous acquisitions, no assurance can be given that
it will continue to be successful in integrating future acquisitions. The
integration and consolidation of acquired businesses will require substantial
management, financial and other resources and may pose risks with respect to
production, customer service and market share. While the Company believes that
it has sufficient financial and management resources to accomplish such
integration, there can be no assurance in this regard or that the Company will
not experience difficulties with customers, personnel or others. In addition,
although the Company believes that its acquisitions will enhance the competitive
position and business prospects of the Company, there can be no assurance that
such benefits will be realized or that any combination will be successful.
Technological Obsolescence. Many of the markets that the Company serves are
characterized by rapid technological change. The Company believes that its
future success will depend in part upon its ability to enhance existing products
and to develop and manufacture new products that meet or anticipate such
changes. The failure to successfully introduce new or enhanced products on a
timely and cost-competitive basis could have a material adverse effect on the
Company's business.
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Fiber optic technology represents a potential substitute for copper-based
cable products. A significant decrease in the cost of fiber optic systems could
make such systems superior on a price performance basis to copper systems and
may have a material adverse effect on the Company's business. To date, fiber
optic cables have not significantly penetrated the markets served by the Company
due to the high relative cost required to interface electronic and light signals
and the high cost of fiber termination and connection. Although the Company is
a fiber optic cable supplier in niche, specialty markets, there can be no
assurance that the Company will have sufficient production capacity for fiber
optic cable products in order to adapt to a potential significant increase in
demand for fiber optic cable products.
Wireless network communications technology may represent a threat to both
copper and fiber optic-based systems by reducing the need for premise wiring.
The Company believes that the limited signal security and the relatively slow
transmission speeds of current wireless systems restrict the use of such systems
in many data communication markets. However, there can be no assurance that
future advances in wireless technology will not have a material adverse effect
on the Company's business.
Products have recently been introduced by other companies that electronically
expand cable bandwidth. The Company does not sell nor does it intend to sell
such products. By enhancing cable performance, these products allow expanded
data services without upgrading existing cable. These devices are being sold
primarily to telephone companies to enhance local loop and central office cable
performance, eliminating costly replacement of aerial and/or direct burial
telephone cable. The Company believes that the complexity these systems add to
the maintenance and repair of a communications network limits their
attractiveness to users and consequently limits their effect on the Company's
business. There can be no assurance, however, that potential advances in
electronic cable enhancement will not have a material adverse effect on the
Company's business.
Price Fluctuations of Raw Materials. Copper is the principal raw material
purchased by the Company, and the Company's sales may be affected by the market
price of copper. The Company does not generally engage in hedging transactions
for copper. Although the Company has generally been able to pass on increases
in the price of copper to its customers, there can be no assurance that the
Company will be able to do so in the future. Additionally, significant
increases in the price of the Company's products due to increases in the cost of
copper could have a negative effect on demand for the Company's products.
Similarly, significant decreases in the price of copper over time could have a
material adverse effect on the Company's business.
Potential Unavailability of Raw Materials. The Company purchases insulating
compounds from various suppliers. The inability of one such supplier to supply
such raw materials could have a material adverse effect on the Company's
business until a replacement supplier is found or substitute materials are
approved for use. The Company's supplier of Teflon/(R)/ FEP is currently
operating at capacity and is unable to fully meet the Teflon/(R)/ FEP
requirements of the Company and the supplier's other customers. The supplier has
announced plans to expand its Teflon/(R)/ FEP production facilities. The Company
believes that the current tight supply of Teflon/(R)/ FEP will be mitigated by
mid 1998 if the supplier's production capacity is increased in
accordance with the supplier's announcement. There can be no assurance, however,
that the tight supply of Teflon/(R)/ FEP will be mitigated as anticipated.
Integrated Building Distribution Network ("IBDN") structured wiring plastic
components manufactured by NORDX/CDT require the use of LEXAN/(R)/ plastic. From
time to time in the past, there have been periods when LEXAN/(R)/ has been in
short supply. A future shortage of LEXAN/(R)/ could have a material adverse
effect on NORDX/CDT's IBDN business. See "Business -- Raw Materials."
Foreign Currency Fluctuations. The Company's operations may be adversely
affected by significant fluctuations in the value of the U.S. dollar against
certain foreign currencies or by the enactment of
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exchange controls or foreign governmental or regulatory restrictions on the
transfer of funds. The most significant foreign currencies for the Company, in
order of dollar equivalent net sales, during fiscal 1997 were the Canadian
dollar and the British pound.
Competition. The Company is subject to competition from a substantial number
of international and regional competitors, some of which have greater financial,
engineering, manufacturing and other resources than the Company. The Company's
competitors can be expected to continue to improve the design and performance of
their products and to introduce new products with competitive price and
performance characteristics. Although the Company believes that it has certain
technological and other advantages over its competitors, realizing and
maintaining such advantages will require continued investment by the Company in
engineering, research and development, marketing and customer service and
support. There can be no assurance that the Company will have sufficient
resources to continue to make such investments or that the Company will be
successful in maintaining such advantages. See "Business -- Competition."
Environmental Matters. The Company does not currently anticipate any material
adverse effect on its business as a result of compliance with federal, state,
provincial, local or foreign environmental laws or regulations or cleanup costs.
However, some risk of environmental liability and other costs is inherent in the
nature of the Company's business, and there can be no assurance that material
environmental costs will not arise in the future. Moreover, it is possible that
future developments, such as increasingly strict requirements of air emission
control and other environmental laws and enforcement policies thereunder, could
lead to material costs for environmental compliance and cleanup by the Company.
See "Business -- Environmental Matters."
ITEM 2. PROPERTIES
The Company uses various owned or leased properties as manufacturing
facilities, warehouses and sales office facilities. The Company believes that
current facilities, together with planned expenditures for normal maintenance,
capacity and technological improvements, will provide adequate production
capacity to meet expected demand for its products.
Listed below are the principal manufacturing, warehouse and sales facilities
operated by the Company. The Company also leases approximately
141,000 square feet of other warehouse and sales facilities. In addition,
facilities of approximately 81,000 and 40,000 square feet are operated on behalf
of the Company in Nogales, Mexico and Tijuana, Mexico, respectively, by third
parties pursuant to contract manufacturing arrangements.
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<TABLE>
<CAPTION>
OWNED OR APPROX
LOCATION USE LEASED .
SQ.
FEET
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<S> <C> <C> <C>
Auburn, MA Manufacturing, Sales and Administration Owned 146,000
Auburn, MA Warehousing Leased 22,000
Chicago, IL Manufacturing Owned 18,000
Gjern, Denmark Manufacturing, Sales and Administration Owned 18,000
Gothenburg, Sweden Manufacturing, Sales and Administration Owned 58,000
Houston, TX Warehousing Leased 22,000
Irvine, CA Manufacturing, Sales and Administration Leased 80,000
Kingston, Ontario Manufacturing Owned 525,000
Las Vegas, NV Warehousing Leased 44,000
Leominster, MA Manufacturing, Sales and Administration Leased 201,000
Littleborough, United Kingdom Manufacturing Owned 36,000
Manchester, CT Manufacturing Leased 55,000
Manchester, CT Manufacturing, Sales and Administration Leased 150,000
Montreal, Quebec Manufacturing Leased 465,000
Montreal, Quebec Administration and Sales Leased 35,000
Northridge, CA Warehousing, Sales and Administration Leased 16,000
Saybrook, CA Warehousing Leased 28,000
Skelmersdale, United Kingdom Manufacturing, Sales and Administration Leased 94,000
Wadsworth, OH Manufacturing, Sales and Administration Owned 39,000
Waynesburg, PA Manufacturing Owned 42,000
Washington, PA Manufacturing Leased 83,000
Washington, PA Manufacturing Owned 123,000
Washington, PA Sales and Administration Owned 26,000
Washington, PA Manufacturing, Sales and Administration Owned 84,000
Wheeling, IL Manufacturing, Sales and Administration Owned 110,000
Wheeling, IL Warehousing, Sales and Administration Leased 80,000
</TABLE>
ITEM 3. LEGAL PROCEEDINGS
The Company is a party to various legal proceedings and administrative
actions, all of which are of an ordinary or routine nature incidental to the
operations of the Company. In the opinion of the Company's management, such
proceedings and actions should not, individually or in the aggregate, have a
material adverse effect on the Company's results of operations or financial
condition.
On January 31, 1997, NORDX/CDT, one of the Company's subsidiaries, filed an
action against Siecor Corp. in the U.S. District Court for the District of
Delaware (case no. 97-52JJF) seeking a declaration that NORDX/CDT's "Tru-lite"
trademark and Optimax ST connector do not infringe a Siecor trademark and
patent. In response, on February 5, 1997, Siecor filed an action against the
Company and certain of its subsidiaries in the U.S. District Court for the
Northern District of Texas, Fort Worth Division (case no. 4-97CV-078) seeking
unspecified damages and injunctive relief for alleged patent and trademark
infringement. On May 23, 1997, NORDX/CDT's motion to transfer the Texas action
to the State of Delaware was granted. The Company believes it has valid defenses
to all of Siecor's claims and, if such a matter is not settled on a satisfactory
basis, intends to vigorously contest such claims. While it is not possible to
predict, with certainty, the outcome of any litigation, based upon the present
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information available, the Company does not believe that such litigation will
have a material adverse effect on its results of operation.
AT&T has asserted certain intellectual property claims against certain
intellectual property owned or used by NORDX/CDT. AT&T has claimed that both
NORDX/CDT's IBDN Copper Cable (Land Lines) and BIX (Category 5) Modular
Connectors are covered by U.S. patents currently held by AT&T. In addition,
AT&T has forwarded to Nortel a cease and desist letter objecting to NORDX/CDT's
use of the trademark Optimax. The Company does not believe that resolution of
such claims would have a material adverse effect on its results of operations.
Superior Modular Products, Inc. has offered NORDX/CDT a non-exclusive license
under a patent it contends applies to certain NORDX/CDT patch panels. The
matter is under negotiation and, at the present time, the Company does not
believe a resolution would have a material adverse effect on its results of
operations.
Berk-Tek, Inc. ("Berk-Tek") has offered the Company a non-exclusive license
under a patent it contends applies to certain cables sold by Mohawk/CDT. The
Company's special patent counsel has provided an opinion that the Company's
products do not infringe any valid claims, and, consequently, the offer has been
declined. Berk-Tek has filed an application to reissue the patent in
consideration of relevant prior art which has been identified by the Company and
others, and has re-offered a non-exclusive license. Currently, the probability
that Berk-Tek's application to reissue the patent will be granted cannot be
determined and, therefore, based upon the opinion of the Company's special
patent counsel, at this time, the Company does not believe a resolution of this
matter would have a material adverse effect on its results of operations.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of the fiscal year covered by this report no matter
was submitted to a vote of security holders.
ITEM 4.1. EXECUTIVE OFFICERS OF THE REGISTRANT
Age Present Office and Experience
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63 Paul M. Olson has been President and a director of the Company since 1985,
and Chief Executive Officer of the Company since 1993. From 1972 to 1984
Mr. Olson was the President of Phalo Corporation, a wire and cable
manufacturer, and directed sales and marketing at Phalo Corporation from
1967 to 1972. From 1963 to 1967, Mr. Olson was employed at General
Electric and from 1960 to 1963, at General Cable, in wire and cable related
sales and marketing positions.
55 George C. Graeber has been an Executive Vice President of the Company and
President of Montrose/CDT since 1994. From 1992 to 1994, Mr. Graeber was
Executive Vice President of the Company and President of Phalo/CDT. From
1990 to 1992 Mr. Graeber was a Vice President and General Manager at
Anixter Brothers, Inc., a private international distributor of cable and
communications equipment. From 1989 to 1990 Mr. Graeber was a consultant
for Manhattan Electric Cable, a wire and cable company. From 1983 to 1989
he was President and from 1979 to 1983 he was Vice President-General
Manager of Brand Rex Cable, a wire and cable company. Mr. Graeber has a
Masters degree in Electrical Engineering from the University of Connecticut
in 1968.
55 Michael A. Dudley has been an Executive Vice President of the Company and
President - CDT International since 1991. From 1988 to 1991 he was the
President of Superior Optics, a division of Superior Teletec, Inc., a
publicly traded company that manufactures communications cable. Mr. Dudley
has a doctorate degree in Material Science from The National College of
Rubber Technology in London, England.
47 Normand R. Bourque has been an Executive Vice President of the Company and
President and Chief Executive Officer of NORDX/CDT since its acquisition.
Prior to the acquisition, Mr. Bourque was Vice President-Cable Group at
Nortel from 1991 to 1995 and Vice President, Operations-Cable Group from
1989 to 1991. From 1985 to 1988, Mr. Bourque was Vice President and General
Manager-Transmission Networks at Nortel, and prior to that, held a number
of positions in general management and finance at Nortel. Mr. Bourque has a
Bachelor's Degree in Business Administration from the Ecole des Hautes
Etudes Commerciales in Montreal, Canada.
58 Dave R. Harden has been a Senior Vice President of the Company since 1988.
He founded West Penn Wire in 1971, and operated that company until 1984
when it was acquired by the Company. From 1984 until 1988 he was an
Executive Vice President of West Penn/CDT.
47 Kenneth O. Hale has been Vice President, Chief Financial Officer and
Secretary of the Company since 1987. Mr. Hale holds a Certified Public
Accountant's certificate and an MBA in finance from the University of
Missouri.
36 Charles B. Fromm was appointed Vice President and General Counsel of the
Company in October 1997. Prior thereto, Mr. Fromm was a Partner at
Kirkland & Ellis, New York.
-11-
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
As of October 14, 1997, there were 153 holders of record of the Company's
Common Stock.
Additional information required by this item is set forth under the heading
"Directors, Officers, and Corporate Information" on page 48 of the 1997 Annual
Report and is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
Information required by this item is set forth under the heading "Selected
Historical Consolidated Financial Data" on page 47 of the 1997 Annual Report and
is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results of
Operations appears on pages 14 through 22 of the 1997 Annual Report and is
incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Information required by this item is set forth on pages 23 through 46 of the
1997 Annual Report and is incorporated herein by reference and filed
electronically herewith as Exhibit 13.1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
-12-
<PAGE>
PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
a. Information concerning the Registrant's directors is set forth in the
Registrant's definitive proxy statement to be filed with the Securities and
Exchange Commission on or before November 7, 1997. Such information is
incorporated herein by reference.
b. Information concerning executive officers of the Registrant is set forth in
Item 4.1 of Part I at page 11 of this Report under the heading "Executive
Officers of the Registrant".
ITEM 11. EXECUTIVE COMPENSATION
Information concerning executive officers of the Registrant is set forth in
the Registrant's definitive proxy statement to be filed with the Securities
and Exchange Commission on or before November 7, 1997. Such information is
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information concerning security ownership of certain beneficial owners and
management is set forth in the Registrant's definitive proxy statement to
be filed with the Securities and Exchange Commission on or before November
7, 1997. Such information is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information concerning certain relationships and related transactions is
set forth in the Registrant's definitive proxy statement to be filed with
the Securities and Exchange Commission on or before November 7, 1997. Such
information is incorporated herein by reference.
-13-
<PAGE>
PART IV.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
1. The following documents are included in the 1997 Annual Report, pages 23
through 46, and are incorporated herein by reference:
a. Report of Independent Public Accountants.
b. Consolidated Statements of Income for the years ended July 31, 1997,
1996 and 1995.
c Consolidated Balance Sheets as of July 31, 1997 and 1996.
d. Consolidated Statements of Cash Flow for the years ended July 31,
1997, 1996 and 1995.
e. Consolidated Statements of Stockholders' Equity for the years ended
July 31, 1997, 1996 and 1995.
f. Notes to Consolidated Financial Statements.
2. The following documents are filed as part of this report:
a. Report of Independent Public Accountants on Schedules.
b. Schedule II Valuation and Qualifying Accounts for the three years
ended July 31, 1997.
c. List of Exhibits
3. List of Exhibits
2.1 - Asset Purchase Agreement, dated as of September 15, 1995, among
Broomco (915) Limited, Volex Group, p.l.c. and Cable Design
Technologies Corporation (with respect to Section 12 thereof
only). Incorporated by reference to Exhibit 2.1 to CDT's Report
on Form 8-K filed with the Commission on October 10, 1995.
2.2 - Asset Purchase Agreement by and among Cable Design Technologies
(CDT) Canada Inc., Cable Design Technologies Corporation and
Northern Telecom Limited, dated as of December 19, 1995.
Incorporated by reference to Exhibit 10.16 to CDT's Registration
Statement on Form S-3 (File No. 333-00554).
2.3 - Asset Purchase Agreement, dated March 31, 1997, between Cable
Design Technologies Inc., Dearborn/CDT, Inc., Dearborn West/CDT,
Inc., and Thermax/CDT, Inc. and Dearborn Wire and Cable L.P.,
Dearborn West L.P. and Thermax Wire L.P. Incorporated by
reference to Exhibit 10.1 to CDT's Report on Form 8-K, as filed
on April 22, 1997.
3.1 - Amended and Restated Certificate of Incorporation of CDT as filed
with the Secretary of State of Delaware on November 10, 1993,
incorporated by reference to Exhibit 3.1 to CDT's registration
statement on Form S-1 (File No. 33-69992), Certificate of
Amendment of the Restated Certificate of Incorporation of CDT and
Certificate of Designation, Preferences and Rights of Junior
Participating Preferred Stock, Series A of CDT, as filed with the
Secretary of State of Delaware
-14-
<PAGE>
on December 11, 1996 and incorporated by reference to CDT's
Registration Statement on Form 8-A/A, as filed on December 23,
1996.
3.2 - By-Laws of CDT, as amended to date, incorporated by reference to
Exhibit 3.2 to the Post-Effective Amendment No. 1 to CDT's
Registration Statement on Form S-3 (File No. 333-00554), as filed
on February 28, 1996.
4.1 - Form of certificate representing shares of the Common Stock of CDT.
Incorporated by reference to Exhibit 4.1 to CDT's Registration
Statement on Form S-1 (File No. 33-69992).
4.2 - Rights Agreement dated as of December 11, 1996, between Cable
Design Technologies Corporation and The First National Bank of
Boston, as Rights Agent, including the form of Certificate of
Designation, Preferences and Rights of Junior Participating
Preferred Stock, Series A attached thereto as Exhibit A, the form
of Rights Certificate attached thereto as Exhibit B and the Summary
of Rights attached thereto as Exhibit C. Incorporated herein by
reference to CDT's Registration Statement on Form 8-A, as filed on
December 11, 1996.
10.1 - CDT Long-Term Performance Incentive Plan (adopted on September 23,
1993). Incorporated by reference to Exhibit 10.18 to CDT's
Registration Statement on Form S-1 (File No. 33-69992).
10.2 - CDT Stock Option Plan. Incorporated by reference to Exhibit 4.3 to
CDT's Registration Statement on Form S-8 as filed on December 22,
1993.
10.3 - Cable Design Technologies Corporation Management Stock Award Plan
(adopted on September 23, 1993). Incorporated by reference to
Exhibit 4.3 to CDT's Registration Statement on Form S-8, as filed
on May 2, 1994.
10.4 - Description of CDT Bonus Plan. Incorporated by reference to Exhibit
10.20 to CDT's Registration Statement on Form S-1 (File No. 33-
69992).
10.5 - Lease Agreement between Phalo and First Hartford Realty Corp.,
dated as of November 9, 1992. Incorporated by reference to Exhibit
10.23 to CDT's Registration Statement on Form S-1 (File No. 33-
69992).
10.6 - Lease Agreement between Mohawk and 9 Mohawk Drive Realty Trust,
dated as of March 24, 1986. Incorporated by reference to Exhibit
10.24 to CDT's Registration Statement on Form S-1 (File No. 33-
69992).
10.7 - Consulting Agreement, dated as of July 14, 1988, and amendment
thereto, dated as of July 14, 1988, between Golder, Thoma, Cressey
& Rauner and CDT. Incorporated by reference to Exhibit 10.13 to
CDT's Annual Report on Form 10-K, as filed on October 31, 1994.
-15-
<PAGE>
10.8 - Consulting Agreement, dated as of July 14, 1988, and amendment
thereto, dated as of July 14, 1994, between Northern Investment
Ltd. Partnership II and CDT. Incorporated by reference to Exhibit
10.14 to CDT's Annual Report on Form 10-K, as filed on October 31,
1994.
10.9 - Employment Agreement dated February 2, 1996, among CDT, NORDX/CDT
and Normand Bourque. Incorporated by reference to Exhibit 10.17 to
CDT's Report on Form 8-K as filed on February 20, 1996.
10.10 - Collective Labour Agreement dated June 10, 1996, between NORDX/CDT
and Canadian Union of Communications Workers Unit 4. Incorporated
by reference to Exhibit 10.19 to CDT's Annual Report on Form 10-K,
as filed on October 29, 1996.
10.11 - Lease Agreement between NORDX/CDT and Northern Telecom Limited
dated February 2, 1996, governing the Lachine, Quebec facility.
Incorporated by reference to Exhibit 10.20 to CDT's Annual Report
on Form 10-K, as filed on October 29, 1996.
10.12 - 1996 Amendment of Lease between Mohawk and 9 Mohawk Drive Realty,
dated as of September 3, 1996. Incorporated by reference to
Exhibit 10.23 to CDT's Annual Report on Form 10-K, as filed on
October 29, 1996.
10.13 - Registration Agreement among CDT, GTC Fund II, The Prudential
Insurance Company of America and Pruco Life Insurance Company,
dated as of July 14, 1988, as amended. Incorporated by reference
to Exhibit 10.21 to CDT's Registration Statement on Form S-1 (File
No. 33-69992).
11.1 - Computation of Earnings per Share.**
13.1 - CDT 1997 Annual Report to Stockholders, including financial
statements, portions of which are incorporated herein by
reference.**
21.1 - List of Subsidiaries of CDT.**
23.1 - Consent of Arthur Andersen LLP.**
27.1 - Financial Data Schedule.**
99.1 - Legal Charge, dated as of September 22, 1995, between Broomco
(915) Limited, as Charger, and Volex Group, p.l.c. Incorporated by
reference to Exhibit 99.1 to CDT's Report on Form 8-K filed with
the Commission on October 10, 1995.
-16-
<PAGE>
99.2 - Agreement for the Granting of Leases, dated as of September 15,
1995, among Volex Group, p.l.c., Broomco (915) Limited and Cable
Design Technologies Corporation. Incorporated by reference to
Exhibit 99.2 to CDT's Report on Form 8-K filed on October 10,
1995.
99.3 - Lease of property known as land lying to the south of Railway
Road, Skelmersdale, dated as of September 27, 1995, among Volex
Group, p.l.c., Broomco (915) Limited and Cable Design Technologies
Corporation. Incorporated by reference to Exhibit 99.4 to CDT's
Report on Form 8-K filed on October 10, 1995.
99.4 - Credit Agreement dated April 10, 1997, among the Company, The
First National Bank of Boston, Banque Paribas, Chicago Branch,
Paribas Bank of Canada, Bank of America Illinois, Bank of America
Canada and other lenders party thereto. Incorporated by reference
to CDT's Report on Form 10-Q, as filed on June 16, 1997.
** Filed Herein
(b) Reports on Form 8-k
The Company filed a Form 8-K/A on June 10, 1997 (amending a Form
8-K filed with the Securities and Exchange Commission on April 22,
1997) related to the acquisition of Dearborn/CDT.
-17-
<PAGE>
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.
Cable Design Technologies Corporation
By:/s/ Paul M. Olson October 28, 1997
-------------------------------------
Paul M. Olson
President and Chief Executive Officer
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.
SIGNATURE TITLE DATE
/s/ Bryan C. Cressey Chairman of the Board October 28, 1997
- -------------------------- Director
Bryan C. Cressey
/s/ Paul M. Olson Director, President, Chief October 28, 1997
- -------------------------- Executive Officer (Principal
Paul M. Olson Executive Officer)
/s/ Kenneth O. Hale Vice President, Chief Financial October 28, 1997
- -------------------------- Officer, Secretary (Principal
Kenneth O. Hale Financial and Principal
Accounting Officer)
/s/ Myron S. Gelbach, Jr. Director October 28, 1997
- --------------------------
Myron S. Gelbach, Jr.
/s/ Michael F. O. Harris Director October 28, 1997
- --------------------------
Michael F. O. Harris
/s/ Glenn Kalnasy Director October 28, 1997
- --------------------------
Glenn Kalnasy
/s/ Richard C. Tuttle Director October 28, 1997
- --------------------------
Richard C. Tuttle
-18-
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON SUPPLEMENTAL SCHEDULE
We have audited, in accordance with generally accepted auditing standards, the
consolidated financial statements of Cable Design Technologies Corporation and
Subsidiaries included in this Form 10-K, and have issued our report thereon
dated September 9, 1997. Our audits were made for the purpose of forming an
opinion on the basic financial statements taken as a whole. The schedule listed
in the accompanying index is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
Arthur Andersen LLP
Pittsburgh, Pennsylvania
September 9, 1997
<PAGE>
CABLE DESIGN TECHNOLOGIES CORPORATION
SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED JULY 31, 1997, 1996, 1995
<TABLE>
<CAPTION>
ADDITIONS BALANCE
BALANCE AT ADDITIONS TO CHARGED TO AT
BEGINNING OF RESERVE FROM COSTS AND REDUCTION END OF
DESCRIPTION PERIOD ACQUISITIONS EXPENSES FROM RESERVE PERIOD
- ----------- ------------- --------------- ----------- --------------- ---------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Allowance for uncollectible
accounts/sales returns:
Year Ended July 31, 1995 $1,056 $ -- $ 952 ($455) $1,553
Year Ended July 31, 1996 $1,553 $ 89 $1,542 ($524) $2,660
Year Ended July 31, 1997 $2,660 $1,132 $1,710 ($837) $4,665
</TABLE>
-20-
<PAGE>
CABLE DESIGN TECHNOLOGIES CORPORATION
INDEX TO EXHIBITS FILED HEREIN
JULY 31, 1997
EXHIBIT
NUMBER EXHIBIT PAGE
11.1 Computation of Earnings per Share 24
13.1 1997 Annual Report to Stockholders 25
21.1 List of Subsidiaries of Cable Design Technologies
Corporation 77
23.1 Consent of Arthur Andersen LLP 78
27.1 Financial Data Schedule 79
-21-
<PAGE>
EXHIBIT 11.1
CABLE DESIGN TECHNOLOGIES CORPORATION
COMPUTATION OF EARNINGS PER SHARE
(THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
-------------------------------------
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Primary:
Income before extraordinary items $ 36,035 $ 15,881 $ 14,713
Extraordinary loss ---- (596) ----
----------- ----------- -----------
Net income $ 36,035 $ 15,285 $ 14,713
=========== =========== ===========
Average number of shares of common stock outstanding 18,398,435 15,977,339 14,582,915
Assumed exercise of stock options and warrants 2,193,420 2,649,453 2,499,635
----------- ----------- -----------
Total shares 20,591,855 18,626,792 17,082,550
=========== =========== ===========
Primary earnings before extraordinary items
per common share $ 1.75 $ 0.85 $ 0.86
Primary loss from extraordinary items ---- (0.03) ----
----------- ----------- -----------
Primary earnings per common share $ 1.75 $ 0.82 $ 0.86
YEAR ENDED JULY 31,
-------------------------------------
1997 1996 1995
----------- ----------- -----------
Fully Diluted:
Income before extraordinary items $ 36,035 $ 15,881 $ 14,713
Extraordinary loss ---- (596) ----
----------- ----------- -----------
Net income $ 36,035 $ 15,285 $ 14,713
=========== =========== ===========
Average number of shares of common stock outstanding 18,398,435 15,977,339 14,582,915
Assumed exercise of stock options and warrants 2,306,343 2,649,453 2,589,933
----------- ----------- -----------
Total shares 20,704,778 18,626,792 17,172,848
=========== =========== ===========
Fully Diluted earnings before extraordinary items
per common share $ 1.74 $ 0.85 $ 0.86
Fully Diluted loss from extraordinary items ---- (0.03) ----
----------- ----------- -----------
Fully Diluted earnings per common share $ 1.74 $ 0.82 $ 0.86
</TABLE>
<PAGE>
EXHIBIT 13.1
CDT [LOGO]
INNOVATIVE CONNECTIVE TECHNOLOGY
{Photo of the World}
CDT IS
GROWTH
WORLDWIDE
CABLE DESIGN TECHNOLOGIES ANNUAL REPORT 1997
[Photo of London Tower Bridge]
[Photo of Great Wall of China]
[Photo of the Kremlin]
[Photo of the Sydney Opera House]
<PAGE>
[Photo of communications cable]
COMPANY PROFILE
Cable Design Technologies is a leading designer and manufacturer of techno-
logically advanced electronic data transmission cables for network,
communications, computer interconnect, transportation, automation, sound and
safety applications and fiber optic solutions; and complete voice and data
wiring solutions, the DynaTraX(TM) automated electronic cross-connect switch,
and other components required to build high performance telecommunications
infrastructures.
TABLE OF CONTENTS
The Record Speaks for Itself 1
Letter to Stockholders 2
CDT is International 4
CDT is Networking 6
CDT is Specialty Products 8
CDT is Global 10
Financial Table of Contents 12
Financial Summary 13
Management's Discussion
and Analysis 14
Report of Independent
Public Accountants 23
Consolidated Financial
Statements 24
Selected Historical Consolidated Financial Data 47
Directors, Officers and
Corporate Information 48
Corporate Directory 49
<PAGE>
CDT [LOGO]
[THE FOLLOWING TABLES WERE REPRESENTED BY BAR CHARTS IN THE PRINTED MATERIALS]
<TABLE>
<CAPTION>
SALES OPERATING PROFIT*
DOLLARS IN MILLIONS DOLLARS IN MILLIONS
YEAR MILLIONS YEAR MILLIONS
<S> <C> <S> <C>
1993 $126.650 1993 $19.577
1994 145.389 1994 21.801
1995 188.941 1995 29.613
1996 357.352 1996* 48.257
1997 516.996 1997 62.602
</TABLE>
THE RECORD
SPEAKS FOR ITSELF
<TABLE>
<CAPTION>
NET INCOME* EARNINGS PER SHARE* TOTAL ASSETS
DOLLARS IN MILLIONS DOLLARS IN MILLIONS
YEAR MILLIONS YEAR YEAR MILLIONS
<S> <C> <S> <C> <S> <C>
1993* $ 6.416 1993* $0.44 1993 $ 83.749
1994* 10.138 1994* 0.65 1994 102.719
1995 14.713 1995 0.86 1995 118.976
1996* 26.410 1996* 1.42 1996 320.105
1997 36.035 1997 1.74 1997 429.499
<CAPTION>
STOCKHOLDERS' EQUITY
DOLLARS IN MILLIONS
YEAR MILLIONS
<S> <C>
1993 $(16.320)
1994 16.243
1995 31.865
1996 165.457
1997 205.125
</TABLE>
OVER THE PAST FIVE YEARS CDT'S COMPOUND ANNUAL GROWTH RATE IS:
34% SALES
28% OPERATING INCOME
51% NET INCOME
38% EARNINGS PER SHARE
* ADJUSTED TO EXCLUDE NON-RECURRING AND EXTRAORDINARY CHARGES
1
<PAGE>
DEAR FELLOW
STOCKHOLDERS
[Photo of the World]
"The record speaks for itself" -- it's not a phrase we take lightly. Since our
IPO in November 1993, CDT has demonstrated an enviable record of growth and
profitability. Today, we are clearly positioned as a global provider of
innovative connective technology with strong name recognition, excellent market
position and a leadership culture that rewards performance.
Worldwide demand for faster and more powerful communications links are
providing outstanding opportunities for CDT. Today, it's no longer enough to
lead the market. Successful players in our industry must now anticipate the
changes and challenges before others see them and create opportunities for
future growth. Without question, we have created an infrastructure to satisfy a
market that is moving at a blinding rate of speed.
Driving our success have been five discreet strategies:
o Growing our sales opportunities in international markets;
o Acquiring high-margin niche businesses to expand our innovative connective
technology focus;
o Consistently expanding and upgrading our manufacturing infrastructure;
o Developing new products to keep CDT on the cutting edge of technology
enhancements; and
o Anticipating our customers' needs by providing the highest quality
specialty products supported by outstanding service.
The success of these corporate initiatives is driven by the 3,000 CDT
employees worldwide who are committed to our vision of service and growth and
who are prepared to meet the technological challenges of the 21st century.
I'm extremely proud of CDT's 1997 financial performance.
In what proved to be an exceedingly challenging marketplace, we demonstrated
excellent growth. After experiencing sharp price increases through mid-fiscal
year 1996, the market for Teflon(R) plenum Category 5 network cable then
softened dramatically with a marked decrease in pricing through the end of
fiscal year 1997. Our employees did an outstanding job of overcoming these
mercurial market conditions which cost CDT the opportunity for considerable
operating profit. Net sales for the year ended July 31, 1997 rose 44.7% to a
record $517.0 million versus $357.4 million last year with the addition of sales
by CDT'S recently acquired Dearborn/CDT operations and a full year of sales from
NORDX/CDT acquired in February 1996. Net income jumped 36.4% to a record $36.0
million ($1.75 per share) versus $26.4 million ($1.42 per share) a year ago,
excluding non-recurring and extraordinary charges reported in fiscal 1996. To
put these results in perspective, our Company has achieved a five year compound
annual growth rate of 34% for sales, 28% for operating income, 51% for net
income and 38% for earnings per share. In fiscal 1997, $104.7 million or 20% of
our revenues were generated from outside North America -- and foreign sales are
climbing as we continue to penetrate Asia, Latin America, Australia and the
former Eastern bloc countries. At CDT we are pursuing international growth
opportunities through a combination of acquisition, expanded operations and
enhanced marketing worldwide.
Results for fiscal 1997 reflect increased sales in all five of CDT'S
business groups: Network structured wiring products rose 35.6% to $253.4
million; Communications/multimedia products grew 90.5% to $94.1 million;
Automation, sound and safety rose 3.9% to $71.4 million; Computer interconnect
increased 21.8% to $22.9 million; and finally, sales of
2
<PAGE>
- --------------------------------------------------------------------------------
[Photo of the world continued from page 2]
The success of these corporate initiatives is driven by the 3,000 CDT employees
worldwide who are committed to our vision of service and growth and who are
prepared to meet the technological challenges of the 21st century.
- --------------------------------------------------------------------------------
Other products rose 124.5% to $75.2 million, which includes the sales from our
newly acquired Dearborn/CDT operations.
Our ability to find and integrate synergistic acquisitions is one of the best in
our industry.
In April 1997 we purchased Dearborn/CDT and its Thermax/CDT operations for $77.5
million and followed up with the acquisition of Barcel/CDT in early September.
Dearborn/CDT provides an excellent strategic fit with our technologically-driven
business and greatly enhances the breadth and balance of CDT'S product lines,
especially in the fast growing markets for commercial aircraft and wireless
communications. To date, this acquisition has exceeded our expectations for both
sales and net income and is currently undergoing a major expansion at its
Nogales, Mexico manufacturing facility. Barcel/CDT is a leading manufacturer of
high temperature tape-wrapped insulation and high temperature extruded
insulation for the commercial aviation market. Its products are recognized
throughout the industry and will complement the specialty cable products
currently being manufactured at Thermax/CDT and Raydex/CDT. Our purchase in
fiscal year 1996 of NORCOM/CDT, a division of NORDX/CDT, has been another
success story. Sales at this Canadian communications cable facility were very
strong in the second half of fiscal 1997 as demand continued for additional
residential phone lines to support Internet, facsimile and telecommuting needs.
We anticipate continued strong sales of communications cable throughout fiscal
1998.
It is with considerable sadness that I report the passing of Bernard J.
Bannan, a Director of CDT and President and CEO of Binley, Inc. Mr. Bannan was
affiliated with our Company since the mid-1980s, and was instrumental in guiding
CDT to its current leadership position. As a unique advisor, his counsel and
friendship will be greatly missed.
We enter fiscal 1998 with a number of exciting initiatives.
First, we are committed to staying on the cutting edge of new product
development across all our business lines. Second, with the return in demand for
Teflon(R) plenum network cable, our investment in manufacturing, equipment and
facilities continues to be a top priority. Expansion is currently underway at
Thermax/CDT, NORCOM/CDT, Raydex/CDT and Cekan/CDT. Finally, we are continuing to
look aggressively, both domestically and overseas, for acquisitions to
complement our high-growth niche markets. Our new NORDX/CDT Canadian
manufacturing/administration/R&D facility is scheduled for completion in
February 1998 and we continue to work closely with the leading standards
organizations to keep us in the forefront of new product design and
certification. In short, we are excited about the opportunities in our business
and CDT'S strong position in its markets. To our stockholders, customers and
employees, I extend thanks for all you have done to make this past year so
successful.
/s/ Paul M. Olson
PAUL M. OLSON
President and CEO
October 13, 1997
3
<PAGE>
CDT IS
INTER
[Photo of Japanese Building]
4
<PAGE>
NATIONAL
CDT's international capabilities enable us to compete successfully in the global
marketplace. From the PacRim to Central Europe and South America, few electronic
enterprises, whether OEM or distributor, are beyond the reach and resources of
CDT. All's well with our world.
[Photo of cabling over a map]
- --------------------------------------------------------------------------------
[Photo of connector producing machinery]
You'll find CDT at work around the world. As a world leader in the design and
manufacture of connectivity products, it is no surprise to find us participating
in progressive transportation projects around the world. Business opportunities
in the PacRim represent tremendous potential for CDT as core infrastructure
programs are developed throughout Asia. Hong Kong's new airport at Chek Lap Kok
is one example. With a scheduled opening in 1998, this facility is designed to
carry 35 million passengers and three million tons of cargo a year. CDT'S
Category 5, zero halogen and fiber optic cables are also being installed at Hong
Kong's new Metro Rail project and in Singapore at Phase 2 and 3 of the new
Changi Airport project.
The potential for growth in CDT's international sales remains strong.
Opportunities in Australia, Latin America, and the former Eastern bloc countries
continue to be exploited as the rest of the world prepares for the oncoming link
in high speed worldwide communications. CDT has been building an infrastructure
of manufacturing and distribution strength to service the growing global
marketplace. In fiscal 1997, 43% of our sales were outside the U.S. and 20% were
outside North America. Our goal is to have 50% of our sales in international
markets by the year 2000.
[Photo of Desktop Globe of the Earth]
CDT's ISO 9001 CERTIFICATION IS AN IMPORTANT SELLING POINT TO THE INTERNATIONAL
MARKETS.
5
<PAGE>
The Information Superhighway won't do you much good if you're stuck in
cross-town traffic.
With CDT, nothing stands between our customers and the opportunities of the
Information Age.
CDT IS
NETWORKING
[Photo of Spray of fiber optics]
- --------------------------------------------------------------------------------
[Photo of Dynatrax(TM) installation in wiring closet]
You'll find CDT network structured wiring products providing sophisticated
end-to-end solutions to important communications problems. In fiscal 1997,
network products accounted for 49% of CDT'S total sales -- and it remains one of
our Company's fastest growing and profitable business groups. CDT is at the
leading edge of a rapidly changing communications industry. To stay in front we
are constantly expanding our capabilities and our product lines to accomodate
the evolving requirements for the next generation of connectivity products
including Level 6 and 7 network cable. From 400 megabits/s to 622 megabits/s to
one gigabit/s -- in production, in technology, in quality control and customer
support -- we're preparing to meet the needs of the next century.
We are a leading resource for our industry. From a single building to a
campus to a city network, across the nation and across the world, CDT
technologies are already in place to lead the way into the 21st century. At a
time when business is being reshaped by computer networking, instantaneous
communications and electronic commerce, it's critical to build a robust internal
infrastructure, such as NORDX/CDT'S IBDN structured cabling systems solutions.
Today, CDT manufactures and markets a variety of different network products,
including cables, connectors, wiring closet equipment, the DynaTraX(TM) high
performance cross-connect switch and complete end-to-end Category 5
implementation that is certified and warranted.
[Photo of Personal Computer]
THE GROWTH OF MULTIMEDIA COMPUTING IS DRIVING THE DEMAND FOR GREATER
COMMUNICATIONS SPEED.
6
<PAGE>
[Photo of an educational institution in Montreal]
7
<PAGE>
CDT IS SPECIALTY
Most American-made commercial jets currently in service carry some Thermax/CDT
or Barcel/CDT wire. In addition, our specialty products can be found on the
Patriot missile, the Space Shuttle and the newest Sikorsky helicopter.
[Photo of various cabling products]
- --------------------------------------------------------------------------------
[Photo of person watching computer monitor]
You'll find CDT specialty cables at work in the rapidly growing commercial
aviation market. In the 1950s, Thermax/CDT was one of the pioneers of the use of
PTFE Teflon(R) paste extruded insulated wire for the aerospace and aviation
industries. A decade later, Barcel/CDT introduced high performance, tape-wrapped
insulated specialty wire to the commercial aviation, military, and
satellite/space industries.
We have developed both traditional and specialty high temperature cables,
including fire resistant varieties, to meet some of the most hazardous
environments. Many applications for aviation, automotive and wireless require
cable with exterior armor or "jacketing" materials that can endure exposure to
chemicals, extreme temperatures and outside elements. CDT has developed coaxial
and twinaxial cables utilizing high speed, low loss air spaced dielectrics for
use in telecommunications and aerospace applications.
Specialty cables from CDT are also found on the oxygen sensors for
catalytic convertors of American-made automobiles and throughout the country on
wireless switching stations and the components of cellular telephones. Our
strong focus on developmental engineering and our ability to remain on the
cutting edge of new product applications have given us a valued position in our
industry.
[Photo of football]
END-TO-END, CDT'S FACILITIES WOULD FILL OVER 48 FOOTBALL FIELDS.
8
<PAGE>
PRODUCTS
[Photo of highways, city and airplane]
9
<PAGE>
[Drawing of Map of Earth WITH CDT Locations highlighted]
- -------------------------- ------------------- -----------------
IRVINE, CALIFORNIA MEXICO CITY, MEXICO KINGSTON, ONTARIO
- -------------------------- ------------------- -----------------
- -------------------------- ------------------- -----------------
CHINO, CALIFORNIA NOGALES, MEXICO TORONTO, ONTARIO
- -------------------------- ------------------- -----------------
- -------------------------- ------------------- -----------------
LOS ANGELES, CALIFORNIA TIJUANA, MEXICO MONTREAL, QUEBEC
- -------------------------- ------------------- -----------------
- --------------------------
NORTHRIDGE, CALIFORNIA
- --------------------------
- --------------------------
MANCHESTER, CONNECTICUT
- --------------------------
- --------------------------
MIAMI, FLORIDA
- --------------------------
- --------------------------
ATLANTA, GEORGIA
- --------------------------
- --------------------------
CHICAGO, ILLINOIS
- --------------------------
- --------------------------
WHEELING, ILLINOIS
- --------------------------
- --------------------------
AUBURN, MASSACHUSETTS
- --------------------------
- --------------------------
LEOMINSTER, MASSACHUSETTS
- --------------------------
- --------------------------
WESTBORO, MASSACHUSETTS
- --------------------------
- --------------------------
LAS VEGAS, NEVADA
- --------------------------
- --------------------------
WHITESTONE, NEW YORK
- --------------------------
- --------------------------
ICARD, NORTH CAROLINA
- --------------------------
- --------------------------
WADSWORTH, OHIO
- --------------------------
- --------------------------
PITTSBURGH, PENNSYLVANIA
- --------------------------
- --------------------------
SHARON HILL, PENNSYLVANIA
- --------------------------
- --------------------------
WASHINGTON, PENNSYLVANIA
- --------------------------
- --------------------------
HOUSTON, TEXAS
- --------------------------
- --------------------------
DALLAS, TEXAS
- --------------------------
- --------------------------
SEATTLE, WASHINGTON
- --------------------------
CDT IS
GLOBAL
Location of selected manufacturing facilities, warehousing operations, sales
personnel, sales offices and administrative offices.
10
<PAGE>
[Drawing of Map of Earth WITH CDT Locations highlighted]
- ------------------ ------------------------- --------------------
GJERN, DENMARK BRACKNELL, UNITED KINGDOM BEIJING, CHINA
- ------------------ ------------------------- --------------------
- ------------------ ------------------------- --------------------
ROSKILDE, DENMARK LEEDS, UNITED KINGDOM HONG KONG, CHINA
- ------------------ ------------------------- --------------------
- ------------------ ------------------------- --------------------
WUPPERTAL, GERMANY LITTLEBOROUGH, SHANGHAI, CHINA
UNITED KINGDOM
- ------------------ ------------------------- --------------------
- ------------------ ------------------------- --------------------
CERNUSCO, ITALY LONDON, UNITED KINGDOM KUALA LUMPUR,
MALAYSIA
- ------------------ ------------------------- --------------------
- ------------------ ------------------------- --------------------
WARSAW, POLAND RINGWOOD, UNITED KINGDOM BRISBANE, AUSTRALIA
- ------------------ ------------------------- --------------------
- ------------------ ------------------------- --------------------
MADRID, SPAIN SKELMERSDALE, MELBOURNE, AUSTRALIA
UNITED KINGDOM
- ------------------ ------------------------- --------------------
- ------------------ --------------------
KINNA, SWEDEN SYDNEY, AUSTRALIA
- ------------------ --------------------
11
<PAGE>
FINANCIAL TABLE OF CONTENTS
Financial Summary 13
Management's Discussion
and Analysis 14
Report of Independent
Public Accountants 23
Consolidated Financial
Statements 24
Selected Historical Consolidated
Finacial Data 47
Directors, Officers and
Corporate Information 48
Corporate Directory 49
12
<PAGE>
FINANCIAL SUMMARY
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
<TABLE>
<CAPTION>
INCOME STATEMENT DATA: 1997(1) 1996(1)
- --------------------------------------------------------------------------------
<S> <C> <C>
Net sales $516,996 $357,352
- --------------------------------------------------------------------------------
Gross profit 154,936 111,819
Gross margin 30.0% 31.3%
- --------------------------------------------------------------------------------
Operating profit 62,602 31,527 (2)
Operating margin 12.1% 8.8%(2)
- --------------------------------------------------------------------------------
Income before extraordinary items 36,035 15,881
Income per common share before extraordinary items $ 1.75 $ 0.85
- --------------------------------------------------------------------------------
Net income 36,035 15,285(3)
Net income per common share $ 1.75 $ 0.82(3)
- --------------------------------------------------------------------------------
BALANCE SHEET DATA:
- --------------------------------------------------------------------------------
Total assets $429,499 $320,105
Current assets 247,545 208,456
Long-term debt (excluding current maturities) 126,661 71,384
Stockholders' equity 205,125 165,457
- --------------------------------------------------------------------------------
</TABLE>
(1) Includes the post-acquisition results of businesses acquired during fiscal
years 1997 and 1996.
(2) Includes $16.7 million of non-recurring charges, see Note 19 to the
Consolidated Financial Statements. Excluding these non-recurring charges,
the operating margin was 13.5%.
(3) Excluding non-recurring and extraordinary charges, net income and net
income per common share for fiscal year 1996 would have been $26.4 million
and $1.42, respectively.
CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES 13
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
OVERVIEW
The following discussion of Cable Design Technologies Corporation's ("the
Company") consolidated historical results of operations and financial condition
should be read in conjunction with the Consolidated Financial Statements of the
Company and the Notes thereto included elsewhere in this report.
The following table presents, for the periods indicated, the summary selected
financial data from the Company's statements of income, and should be read in
conjunction with the following discussion.
<TABLE>
<CAPTION>
FOR FISCAL YEAR ENDED JULY 31, 1997 1996 1995
- --------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Net sales $516,996 $357,352 $188,941
Cost of sales 362,060 245,533 125,777
Gross profit 154,936 111,819 63,164
Selling, general and administrative costs 92,334 63,562 33,551
Non-recurring charges -- 16,730 --
Income from operations 62,602 31,527 29,613
Income before extraordinary item 36,035 15,881 14,713
Net income $ 36,035 $ 15,285 $ 14,713
</TABLE>
Overall, CDT had an outstanding year. Sales for the year ended July 31, 1997
("fiscal 1997") increased 44.7% to $517.0 million and net income increased 36.4%
compared to the year ended July 31, 1996 ("fiscal 1996"), excluding
non-recurring and extraordinary charges reported in fiscal 1996 of $11.1
million, net of tax.
Acquisition is an important part of CDT's strategy and the incremental sales
attributable to businesses acquired in fiscal 1997 and 1996 accounted for $144.4
million of the increase in fiscal 1997 sales. The acquisition of Dearborn/CDT in
April 1997 broadened CDT's product offerings. Since its acquisition,
Dearborn/CDT's operations have continued to perform well, particularly its
wireless component assembly business and its Thermax/CDT specialty commercial
aircraft and electronic automotive cable business. In addition, other businesses
that were acquired during fiscal 1996 continued to perform well and a full year
of their operations are included in CDT's fiscal 1997 results. CDT's
communications cable business, NORCOM/ CDT, which was acquired as part of the
NORDX/CDT purchase in February 1996, benefitted in fiscal 1997 from the need for
telephone companies to upgrade their local distribution infrastructure due to an
expanded demand for phone lines as a result of increased Internet, fax,
telecommuting, ISDN, and other usages. The passive components portion of NORDX/
CDT's IBDN network structured wiring system business (including cable
connectors, wiring
14 CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
racks and panels, and fiber optic connectors) grew in fiscal 1997 as NORDX/CDT
continued to build on its strategy of offering complete, fully certified
end-to-end structured wiring systems for high performance networking and other
applications. NORDX/CDT also continued to broaden its international sales and
marketing capabilities for its IBDN network products outside of Canada, and its
U.S. and Pacific Rim sales, particularly China, increased in fiscal 1997.
Furthermore, increased sales by CDT's U.K. subsidiary, Raydex/CDT, also
contributed to an overall increase in international sales.
CDT's record fiscal 1997 results were achieved despite certain unfavorable
market influences. For most of fiscal 1997 a very challenging market existed for
Teflon(R) plenum Category 5 network cable products which began in the latter
part of fiscal 1996 and resulted in more competitive pricing and a much lower
profitability for this product group. During the latter part of fiscal 1997, the
Company believes that growth in the demand for Category 5 network cables slowed
as the market sorted out the migration to the higher performance Level 6 and
Level 7 products. The extended performance Level 6 network cable is capable of
carrying information at the rate of 100 to 622 megabits/s, and the Level 7 cable
is capable of carrying information at the rate of 622 megabits/s to 1.0
gigabit/s. Over the first two months of CDT's new fiscal year 1998, the demand
and pricing for Teflon(R) plenum Category 5 cable products have shown marked
improvement, together with a continued increase in demand for the higher priced
Level 6 and Level 7 cables. Also, an increase in the U.S. dollar against certain
European currencies during fiscal 1997 reduced export sales, particularly of
shielded network cables, to certain countries.
In September 1997, CDT's search for strategic acquisitions to strengthen and
broaden its product offerings resulted in the acquisition of Barcel Acquisition
Corporation and its subsidiaries ("Barcel/CDT"). Headquartered in Irvine, CA,
with 1996 sales of approximately $13 million, Barcel/CDT is a manufacturer of
specialty high temperature cable products primarily for commercial aircraft
applications.
YEAR ENDED JULY 31, 1997 COMPARED WITH YEAR ENDED JULY 31, 1996
NET SALES
Net sales increased by $159.6 million, or 44.7%, to a record $517.0 million for
fiscal 1997 compared to $357.4 million for fiscal 1996. The increase in fiscal
1997 includes the addition of $144.4 million of sales attributable to the
recently acquired businesses: Dearborn/CDT, Stronglink/CDT, the incremental
sales of Cekan/CDT and X-Mark/CDT for fiscal 1997, and the incremental sales of
NORDX/CDT for the first six months of fiscal 1997.
The sales of network structured wiring products increased $66.4 million, or
35.6%. The addition of $67.8 million of network systems products sales
attributable to recently acquired businesses as well as increased sales of IBDN
network passive components by NORDX/CDT for the comparable six month periods
ending July 31, 1997 and 1996, more than offset the lower
CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES 15
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
sales of Teflon(R) plenum Category 5 network cable products due to the lower
pricing experienced for much of the year as a result of the competitive pricing
environment that began in the second half of fiscal 1996. The Company also
experienced reduced export sales of shielded network cables to the European
market as a result of the strong U.S. dollar. Sales of communications cable
products increased $44.7 million, or 90.5%, primarily as a result of a full year
of sales attributable to NORDX/CDT's NORCOM division acquired in February, 1996.
However, sales increased 13.2% for the comparable six month periods ending July
31, 1997 and 1996, demonstrating continued demand from telephone companies as
they upgrade and expand their local distribution network infrastructure. Sales
of computer interconnect cable products increased $4.1 million, or 21.8%, due to
increased sales of cables for mainframe computer, cellular, satellite based
ground communication, and system interface applications. Sales of automation
sound & safety cable products increased $2.7 million, or 3.9%. Sales of other
products, principally cable, increased $41.7 million, or 124.5% primarily as a
result of sales attributable to the recently acquired businesses and a 10%
growth in sales by the Company's existing operations.
International sales (outside of North America) increased $19.6 million, or 23%,
to $104.7 in fiscal 1997 compared to $85.1 million in fiscal 1996 due to the
additional sales attributable to the recently acquired businesses. The stronger
U.S. dollar as compared to certain European currencies reduced export sales to
Europe, particularly Germany.
GROSS PROFIT
Gross profit increased $43.1 million, or 38.6%, to $154.9 million in fiscal 1997
compared to $111.8 million for fiscal 1996. The gross profit contributed by the
recently acquired businesses of Dearborn/CDT, Stronglink/CDT, the incremental
gross profit of Cekan/CDT and X-Mark/CDT, and the incremental gross profit of
NORDX/CDT for the six month period ended January 31, 1997 accounted for $42.4
million of the overall increase. Network systems products accounted for
approximately 34% of the overall increase. The increase in the gross profit for
network products was attributable to the additional gross profit of the recently
acquired businesses and to an increase in gross profit for network passive
components which were partially offset by reduced gross profit for network cable
products as a result of the competitive price environment for Teflon(R) plenum
Category 5 cables and decreased export sales to Europe. The increase in gross
profit from the sales of communications cable products accounted for
approximately 29% of the overall increase in gross profit and was attributable
to the incremental sales for the first six months of fiscal 1997 for the NORCOM
division of NORDX/CDT as well as higher sales and improved gross margin for the
comparable six month periods ending July 31, 1997 and 1996. The gross profit
from the sales of automation sound & safety and computer interconnect products
accounted for approximately 6% and 3%, respectively, of the overall increase in
gross profit. Other products, principally cable, accounted for approximately 28%
of the overall increase in gross profit. The increase in gross profit for other
products was primarily
16 CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
due to the additional gross profit for Dearborn/CDT as well as an increase in
gross profit for other businesses, particularly Raydex/CDT. The overall gross
margin for fiscal 1997 was 30.0% compared to 31.3% for fiscal 1996. The
reduction in the overall gross margin was primarily due to the lower margin on
network cables as a result of the more competitive price environment for
Teflon(R) plenum Category 5 network cables which was partially offset by
improved margins for network passive components and communications cables.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE
Selling, general and administrative expense ("SG&A") increased $28.8 million, or
45.3%, to $92.3 million for fiscal 1997 compared to $63.6 million for fiscal
1996. The increase in fiscal 1997 SG&A was primarily the result of the
additional $25.5 million of SG&A related to the recently acquired businesses
including the incremental SG&A of NORDX/CDT for the six month period ended
January 31, 1997. Excluding the SG&A of the recently acquired businesses, the
increase in SG&A was 5.0%, which includes additional investment to develop and
expand worldwide selling and marketing capabilities. As a percentage of sales
SG&A was 17.9% and 17.8% for fiscal years 1997 and 1996, respectively.
INCOME FROM OPERATIONS
Income from operations increased $14.3 million, or 29.7%, to $62.6 million
compared to $48.3 million for fiscal 1996 (excluding non-recurring charges).
Including non-recurring charges income from operations was $31.5 million for
fiscal 1996. The operating margin, derived by dividing operating income by net
sales, was 12.1% for fiscal 1997 compared to 13.5% for fiscal 1996 (excluding
non-recurring charges). The lower operating margin for fiscal 1997 was primarily
the result of the reduction in the gross margin discussed above.
NET INCOME
Fiscal 1997 net income increased $20.7 million to $36.0 million, or $1.75 per
share, compared to net income of $15.3 million, or $0.82 per share for fiscal
1996. Excluding non-recurring and extraordinary charges incurred in fiscal 1996,
net income increased $9.6 million, or 36.4%, over fiscal 1996 net income of
$26.4 million, or $1.42 per share.
YEAR ENDED JULY 31, 1996 COMPARED WITH YEAR ENDED JULY 31, 1995
NET SALES
Net sales increased $168.4 million, or 89.1%, to $357.4 million for fiscal 1996
compared to $188.9 million for the year ended July 31, 1995 ("fiscal 1995"). The
increase in fiscal 1996 net sales includes $143.1 million of post-acquisition
sales by recently acquired businesses: Cekan/ CDT, X-Mark/CDT, NORDX/CDT,
Raydex/CDT and Manhattan/CDT. Sales of network structured wiring products
increased $83.8 million, or 82.0%, primarily as a result of the addition of the
post-acquisition sales of these products by NORDX/CDT and other recently
CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES 17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
acquired businesses, as well as an increase in network cable products sales by
the Company's existing operating units during the first half of fiscal 1996. A
disruption in the Category 5 Teflon(R) plenum network cable market early in the
third quarter of fiscal 1996 due to a build-up of distributor inventories of
these products and a greater availability of Teflon(R) raw material resulted in
reduced sales volume and lower selling prices for these products by the
Company's existing operating units during the second half of fiscal 1996. The
negative effect of the reduced sales of Category 5 Teflon(R) plenum network
cables was partially offset by increased sales of fiber optic network cables and
continued sales of non-plenum Category 5 network cables during the period. Sales
of automation sound & safety cable products increased $21.5 million, or 45.6%,
primarily as a result of the addition of the post-acquisition sales of these
products by the recently acquired businesses, Raydex/CDT in the United Kingdom
and Manhattan/CDT in the U.S., as well as a solid increase in sales by the
Company's principal domestic manufacturing division for these products, West
Penn/CDT. As a part of the Company's acquisition of NORDX/CDT, the Company
acquired a new primary business group, communications cable products.
NORDX/CDT's post-acquisition sales of communications cable products accounted
for 29% of the Company's overall increase in net sales for fiscal 1996. Sales of
computer interconnect cable products, which accounted for approximately 5% of
fiscal 1996 overall sales, decreased $4.1 million in fiscal 1996 primarily as a
result of lower sales of certain mid-range computer system interconnect cables
which have been phased out by hardware designers in favor of Category 5 twisted
pair and patch cable technology. International sales (outside of North America)
increased $55.9 million, or 191.4%, to $85.1 million in fiscal 1996 compared to
$29.2 million in fiscal 1995 due primarily to the addition of the
post-acquisition international sales by the recently acquired businesses,
Raydex/CDT and NORDX/CDT, as well as increased international sales by the
Company's existing businesses.
GROSS PROFIT
Gross profit increased $48.7 million, or 77.0%, to $111.8 million in fiscal 1996
compared to $63.2 million for fiscal 1995. The increase in fiscal 1996 gross
profit includes the post-acquisition gross profit generated by recently acquired
businesses of $37.1 million. The gross profit from the sales of network
structured wiring products accounted for approximately 62% of the increase in
gross profit for fiscal 1996. Gross profit from the sales of communications
cable products and automation sound & safety cable products represented
approximately 25% and 10% of the overall increase in gross profit, respectively.
The significant drop in the market prices of copper in June 1996 due primarily
to the news of the alleged Sumitomo trading scandal resulted in a reduction in
the selling prices for communications cable which negatively impacted earnings
in the fourth fiscal quarter. The negative effect on gross profit because of the
reduction in the selling prices for communications cable is temporary and should
be neutralized when the higher cost copper raw material on hand for
communications cable has been worked
18 CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
out of inventory. The gross margin for fiscal 1996 was 31.3% compared to a gross
margin of 33.4% for fiscal 1995. The decrease in the gross margin for fiscal
1996 was due primarily to the comparatively lower gross margin of certain of the
recently acquired businesses, primarily NORDX/CDT's communications cable
business and Raydex/CDT's non-network cable products sales.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE
SG&A increased $30.0 million, or 89.4%, to $63.6 million, for fiscal 1996
compared to $33.6 million for fiscal 1995. The increase in fiscal 1996 SG&A was
primarily the result of the addition of $25.9 million post-acquisition SG&A of
the recently acquired businesses, principally NORDX/CDT. As a percentage of
sales, SG&A of 17.8% for fiscal 1996 was unchanged as compared to 17.8% for
fiscal 1995.
NON-RECURRING CHARGES
In connection with the NORDX/CDT acquisition, the Company engaged an independent
appraisal firm to prepare a valuation of the assets acquired to serve as a basis
for allocation of the purchase price. As a result of the valuation, the fair
market value of acquired in-process research and development relating to the
development of the DynaTraX(TM) automated network cross-connect switch was
determined to be $9.8 million. In accordance with generally accepted accounting
practices this amount was charged to operations upon the acquisition of NORDX/
CDT in the third quarter of fiscal year 1996. In addition, stock appreciation
rights of $6.9 million vested upon the completion of the February 28, 1996
common stock offering ("Offering").
INCOME FROM OPERATIONS
Income from operations excluding non-recurring charges for fiscal 1996 increased
$18.6 million, or 63.0%, to $48.3 million compared to $29.6 million for fiscal
1995. Including non-recurring charges, income from operations for fiscal 1996
was $31.5 million. The operating margin for fiscal 1996, derived by dividing
operating income excluding non-recurring charges by net sales, was 13.5%
compared to 15.7% for fiscal 1995. The decrease in the operating margin in
fiscal 1996 was due primarily to the comparatively lower gross margin of certain
of the recently acquired businesses discussed above under Gross Profit.
NET INCOME
Fiscal 1996 net income was $15.3 million, or $0.82 per share, compared to net
income of $14.7 million, or $0.86 per share, for fiscal 1995. Excluding the
non-recurring charges (of $10.5 million, net of tax) discussed above under
Non-Recurring Charges and an extraordinary charge (of $0.6 million, net of tax)
due to the early extinguishment of debt in the third quarter of fiscal 1996, net
income for fiscal 1996 was $26.4 million, or $1.42 per share.
CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES 19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
During fiscal 1997 operating working capital increased $18.6 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 ($4.0 million) and inventories ($12.7
million) and a reduction in taxes payable ($1.9 million). The increase in
inventories is partially due to stocking of a new west coast warehouse. The
change in operating working capital excludes changes in cash and current
maturities of long-term debt.
After providing for the increase in working capital, the Company generated $30.9
million of net cash from operating activities during fiscal 1997. The net cash
used by investing activities during fiscal 1997 of $99.1 million included $72.4
million for the acquisition of businesses (principally Dearborn/CDT) and $26.7
million for capital projects. Net cash provided by financing activities of $61.3
was primarily from debt sources. The net decrease in cash for fiscal 1997 was
$7.1 million.
During fiscal 1997 and fiscal 1996, the Company expended $26.7 million and $15.9
million, respectively, for capital projects. The expenditures for fiscal 1997
were made to increase manufacturing efficiencies and to expand the Company's
overall production capacity of new and existing product lines, and included
completion of a facility to manufacture enhanced network cable including Level 6
and Level 7 specialty cables, completion of an expanded state-of-the-art fiber
optic facility, construction of a sales, training and administration facility,
and commencement of construction of the 300,000 square foot NORDX/CDT
manufacturing, administration and R & D facility. The Company expects to spend
approximately $35 million for capital projects for the year ending July 31, 1998
without regard to potential acquisitions. Planned spending in fiscal 1998
includes completion of the NORDX/CDT manufacturing facility and investment in
equipment and facilities for capacity expansion at various facilities,
particularly Thermax/CDT, NORCOM/CDT, NORDX/CDT, Raydex/CDT, and Cekan/CDT.
The Company revised its existing credit agreement (the "Credit Agreement") on
April 10, 1997, to increase borrowing limits and reduce applicable interest
rates. The Credit Agreement as revised is comprised of a $105.0 million revolver
and a CDN $115.0 million Canadian revolver, and includes a provision whereby the
applicable margins over prime or the London Inter-Bank Offered Rate are based on
the attainment of certain performance factors. A commitment fee of .15% to .375%
is applied to the unused portion of each revolver. In addition to the Credit
Agreement, the Company maintains a foreign credit facility in the United Kingdom
which provides for up to approximately $12 million of borrowings (the "U.K.
Credit Facility"). On July 31, 1997, the Company had approximately $71.4 million
of availability under the Credit Agreement and $4.3 million of availability
under its U.K. Credit Facility.
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 September 10, 1997, the Company acquired all the outstanding stock of
Barcel/CDT. The purchase was financed through available borrowings under the
Company's Credit Agreement.
20 CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
EFFECTS OF INFLATION
The Company does not believe that inflation had a significant impact on the
Company's results of operations for the periods presented. On an ongoing basis,
the Company attempts to minimize any effects of inflation on its operating
results by controlling costs of operations and, whenever possible, seeking to
ensure that selling prices reflect increases in costs due to inflation.
NEW ACCOUNTING STANDARDS
The Financial Accounting Standards Board ("FASB") issued Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation," ("SFAS
No. 123") in October 1995. This statement establishes a "fair value based
method" of financial accounting and related reporting standards for stock-based
employee compensation plans. SFAS No. 123 is effective for fiscal 1997 and
provides for adoption in the income statement or through disclosure. The Company
has continued to account for its stock-based employee compensation plans under
APB Opinion No. 25, "Accounting for Stock Issued to Employees," as permitted by
SFAS No. 123, and has provided the required disclosure in the footnotes to the
fiscal 1997 Consolidated Financial Statements (see Note 10).
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 2 to the 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.
CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES 21
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
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 establishes 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
fiscal year ending July 31, 1999, and has not yet determined the impact of
adoption.
FORWARD LOOKING STATEMENTS -- UNDER THE PRIVATE SECURITIES
LITIGATION ACT OF 1995
Certain of the statements in this annual report are forward-looking statements.
The 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,
and other Securities and Exchange Commission filings. The information contained
herein represents management's best judgement 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.
22 CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO THE BOARD OF DIRECTORS OF CABLE DESIGN TECHNOLOGIES CORPORATION AND
SUBSIDIARIES
We have audited the accompanying consolidated balance sheets of Cable Design
Technologies Corporation (a Delaware corporation) and Subsidiaries as of July
31, 1997 and 1996, and the related consolidated statements of income,
stockholders' equity and cash flows for the three years in the period ended July
31, 1997. 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 Cable Design Technologies
Corporation and Subsidiaries as of July 31, 1997 and 1996, and the results of
their operations and their cash flows for each of the three years in the period
ended July 31, 1997 in conformity with generally accepted accounting principles.
/s/ Arthur Andersen LLP
PITTSBURGH, PENNSYLVANIA
September 9, 1997
CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES 23
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED JULY 31, 1997 1996 1995
- --------------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
<S> <C> <C> <C>
Net sales $ 516,996 $ 357,352 $ 188,941
Cost of sales 362,060 245,533 125,777
- --------------------------------------------------------------------------------------------
Gross profit 154,936 111,819 63,164
Selling, general and administrative expenses 92,334 63,562 33,551
Non-recurring charges -- 16,730 --
- --------------------------------------------------------------------------------------------
Income from operations 62,602 31,527 29,613
Interest expense, net 5,338 5,362 5,111
Other (income) expense, net (58) 271 (5)
- --------------------------------------------------------------------------------------------
Income before income taxes and extraordinary items 57,322 25,894 24,507
Income tax provision 21,287 10,013 9,794
- --------------------------------------------------------------------------------------------
Income before extraordinary items 36,035 15,881 14,713
Extraordinary loss on the early extinguishment of debt -- (596) --
- --------------------------------------------------------------------------------------------
Net income $ 36,035 $ 15,285 $ 14,713
============================================================================================
Income per share of common stock:
Primary:
Income before extraordinary items $ 1.75 $ 0.85 $ 0.86
Extraordinary loss -- (0.03) --
- --------------------------------------------------------------------------------------------
Net income $ 1.75 $ 0.82 $ 0.86
============================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
24 CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES
<PAGE>
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JULY 31, 1997 1996
- -----------------------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 9,017 $ 16,097
Accounts receivable, net of allowance for uncollectible accounts of
$4,665 and $2,660, respectively 112,051 96,490
Inventories 120,974 90,618
Prepaid expenses and other 3,400 1,965
Deferred income taxes 2,103 3,286
- -----------------------------------------------------------------------------------------------------
Total current assets 247,545 208,456
- -----------------------------------------------------------------------------------------------------
Property, plant and equipment, net 127,568 89,519
Intangible assets, net 7,819 4,321
Goodwill, net of accumulated amortization of $4,103 and $3,263, respectively 45,248 16,692
Other assets 1,319 1,117
- -----------------------------------------------------------------------------------------------------
Total assets $ 429,499 $ 320,105
=====================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable to banks $ 5,618 $ 1,684
Current maturities of long-term debt 4,588 7,536
Accounts payable 41,446 31,279
Accrued payroll and related benefits 13,466 11,689
Accrued taxes 2,048 6,346
Other accrued liabilities 18,354 15,832
- -----------------------------------------------------------------------------------------------------
Total current liabilities 85,520 74,366
- -----------------------------------------------------------------------------------------------------
Long-term debt 126,661 71,384
Other non-current liabilities 5,618 4,815
Deferred income taxes 6,575 4,083
- -----------------------------------------------------------------------------------------------------
Total liabilities 224,374 154,648
- -----------------------------------------------------------------------------------------------------
Contingencies (Note 16)
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 18,755,865 and 18,054,498 shares, respectively 188 181
Paid-in capital 158,670 152,864
Deferred compensation (87) (208)
Retained earnings:
Retained earnings 100,875 64,840
Recapitalization distribution on July 14, 1988 (52,656) (52,656)
- -----------------------------------------------------------------------------------------------------
Retained earnings 48,219 12,184
Currency translation adjustment (1,865) 436
- -----------------------------------------------------------------------------------------------------
Total stockholders' equity 205,125 165,457
- -----------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 429,499 $ 320,105
=====================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES 25
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED JULY 31, 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Cash flow from operating activities:
Net Income $ 36,035 $ 15,285 $ 14,713
Adjustments for non-cash items to reconcile net income to cash provided by
operating activities:
Depreciation 8,034 4,523 2,423
Amortization 2,041 1,465 1,392
Extraordinary loss on early extinguishment of debt -- 596 --
Acquired in-process research and development -- 9,826 --
Deferred income taxes 3,107 (2,550) (114)
Changes in assets and liabilities net of effects of business acquired:
Accounts receivable (3,972) (27,972) (6,460)
Inventories (12,679) (13,037) (2,855)
Prepaid expenses and other (996) (90) (264)
Accounts payable 316 5,255 2,479
Accrued payroll and related benefits (674) 5,542 1,411
Accrued taxes (1,918) 4,718 283
Other accrued liabilities 1,348 1,469 1,882
Other non-current assets and liabilities 263 (333) (9)
- -------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 30,905 4,697 14,881
- -------------------------------------------------------------------------------------------------------------------
Cash flow from investing activities:
Purchases of property, plant and equipment (26,704) (15,898) (5,686)
Acquisition of businesses, including transaction costs,
net of cash acquired (72,445) (104,681) (3,211)
- -------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (99,149) (120,579) (8,897)
- -------------------------------------------------------------------------------------------------------------------
Cash flow from financing activities:
Change in restricted cash -- -- 1,485
Net change in revolving note borrowings 87,490 24,021 (8,044)
Funds provided by long-term debt 7,242 82,517 7,612
Funds used to reduce long-term debt (39,166) (90,950) (7,238)
Net proceeds from issuance of common stock 1,006 113,885 1
Net proceeds from exercise of stock options and
related tax benefits 4,762 2,406 186
Payments of deferred financing fees -- (2,121) --
- -------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 61,334 129,758 (5,998)
- -------------------------------------------------------------------------------------------------------------------
Effect of currency translation of cash (170) 11 (18)
- -------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash (7,080) 13,887 (32)
Cash, beginning of year 16,097 2,210 2,242
- -------------------------------------------------------------------------------------------------------------------
Cash, end of year $ 9,017 $ 16,097 $ 2,210
===================================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
26 CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES
<PAGE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED JULY 31, 1997, 1996, AND 1995
- --------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
<TABLE>
<CAPTION>
Common Stock RETAINED
----------------------- EARNINGS CURRENCY TOTAL
SHARES PAR PAID-IN (ACCUMULATED TRANSLATION DEFERRED STOCKHOLDERS'
ISSUED VALUE CAPITAL DEFICIT) ADJUSTMENTS COMPENSATION EQUITY
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, JULY 31, 1994 9,709,776 $ 97 $ 35,787 $ (18,521) $ (625) $ (495) $ 16,243
Net income -- -- -- 14,713 -- -- 14,713
Exercise of options
and related tax benefits 34,127 1 186 -- -- -- 187
Amortization of deferred
compensation -- -- -- -- -- 165 165
Change in currency
translation adjustments -- -- -- -- 557 -- 557
- ------------------------------------------------------------------------------------------------------------------------------
BALANCE, JULY 31, 1995 9,743,903 98 35,973 (3,808) (68) (330) 31,865
Net income -- -- -- 15,285 -- -- 15,285
Exercise of options
and related tax benefits 255,100 3 2,406 -- -- -- 2,409
Stock grants 2,250 -- 45 -- -- -- 45
Amortization of deferred
compensation -- -- -- -- -- 122 122
Stock split 4,871,934 48 -- (48) -- -- --
Stock offering 2,970,000 30 113,850 -- -- -- 113,880
Pooling of interest 211,311 2 590 755 -- -- 1,347
Change in currency
translation adjustments -- -- -- -- 504 -- 504
- ------------------------------------------------------------------------------------------------------------------------------
BALANCE, JULY 31, 1996 18,054,498 181 152,864 12,184 436 (208) 165,457
Net income -- -- -- 36,035 -- -- 36,035
Exercise of options
and related tax benefits 649,637 6 4,762 -- -- -- 4,768
Stock grants 1,512 -- 45 -- -- -- 45
Amortization of deferred
compensation -- -- -- -- -- 121 121
Stock issuance 50,218 1 999 -- -- -- 1,000
Change in currency
translation adjustments -- -- -- -- (2,301) -- (2,301)
- ------------------------------------------------------------------------------------------------------------------------------
BALANCE, JULY 31, 1997 18,755,865 $ 188 $ 158,670 $ 48,219 $ (1,865) $ (87) $ 205,125
==============================================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES 27
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. OPERATIONS
Cable Design Technologies Corporation (the "Company") is a leading designer and
manufacturer of technologically advanced electronic data transmission cables and
passive components for network structured wiring, automation sound & safety,
computer interconnect, communications, wireless, automotive and aviation
applications.
On July 14, 1988, the Company acquired all of the outstanding capital stock of
Cable Design Technologies Inc. The controlling stockholders of Cable Design
Technologies Inc. immediately prior to its acquisition by the Company were also
the controlling stockholders of the Company; therefore, the accompanying
consolidated financial statements have been prepared using Cable Design
Technologies Inc.'s historical cost basis of accounting, and the consideration
paid to stockholders of Cable Design Technologies Inc. of $52,656,000, was
charged to stockholders' equity as a recapitalization distribution in a manner
similar to a dividend distribution.
2. SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements reflect the application of the following
significant accounting policies:
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
its subsidiaries. All material intercompany transactions and balances have been
eliminated in consolidation.
INVENTORIES
Inventories are stated at the lower of first-in, first-out (FIFO) cost or
market. Inventory costs include material, labor and manufacturing overhead. The
Company's products contain significant amounts of certain raw materials, such as
copper and Teflon(R). The Company believes that adequate sources are available
for these commodities; however, any disruption of the supplies or significant
deviations in market prices could impact the Company's operations.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are carried on the cost basis. Provisions for
depreciation and amortization are computed using the straight-line method based
upon the estimated useful lives of the assets. Maintenance and repair costs are
charged to operations as incurred. Major replacements or betterments are
capitalized. Cost and accumulated depreciation of property sold or retired are
removed from the accounts and any resulting gain or loss is included in
operations.
TRANSLATION OF FOREIGN CURRENCY FINANCIAL STATEMENTS
The financial statements of foreign subsidiaries are translated using the
exchange rate in effect at year end for balance sheet accounts and the average
exchange rate in effect during the year for income and expense accounts.
Translation gains and losses are reported as a currency translation adjustment
component of stockholders' equity.
Although the acquisition of NORDX/CDT (see Note 13) resulted in a substantial
increase in operations outside of the United States, the Company does not
believe that its exposure to foreign currency fluctuations is significant for
the following reasons: (i) United States export sales are denominated in United
States dollars and (ii) the Company's foreign subsidiaries are located in
countries with stable economies.
28 CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. SIGNIFICANT ACCOUNTING POLICIES CONTINUED
GOODWILL
Goodwill represents the excess of the purchase price over the fair market value
of identifiable net assets acquired in connection with various business
acquisitions and combinations. Goodwill is being amortized using the
straight-line method over periods of between 20 to 40 years.
The Company continually evaluates the carrying value of goodwill on the basis of
whether goodwill is fully recoverable from estimated undiscounted net income,
before the effects of goodwill amortization, over the remaining amortization
period.
LOAN ORIGINATION FEES
In connection with the issuance of the Company's debt instruments, the Company
defers related credit acquisition costs. These costs are amortized using the
straight-line method over the life of the debt instruments.
INCOME TAXES
Income taxes are accounted for in accordance with the liability method, under
which deferred tax assets or liabilities are computed based on the difference
between the financial statement and income tax bases of assets and liabilities
using the enacted marginal tax rate. These differences are classified as current
or non-current based upon the classification of the related asset or liability.
For temporary differences that are not related to an asset or liability,
classification is based upon the expected reversal date of the temporary
difference.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
STATEMENTS OF CASH FLOWS
Supplemental disclosure of cash flow information.
<TABLE>
<CAPTION>
YEAR ENDED JULY 31, 1997 1996 1995
- ------------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Cash paid during the year for:
Interest, net $ 5,308 $ 5,759 $ 5,266
Income taxes $ 16,649 $ 8,965 $ 9,537
</TABLE>
RESEARCH AND DEVELOPMENT
Research and development costs are charged to expense as incurred. Research and
development costs incurred were approximately $7,154,000, $4,813,000, and
$1,815,000 for the years ended July 31, 1997, 1996 and 1995, respectively.
In connection with the acquisition of NORDX/CDT in February, 1996, $9.8 million
of the purchase price was allocated to in-process research and development costs
related to the DynaTraX(TM) high performance cross-connect switch based on an
independent appraisal of the assets acquired. These costs were immediately
charged to operations in accordance with generally accepted accounting practices
and are reflected in fiscal 1996 results.
CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES 29
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. SIGNIFICANT ACCOUNTING POLICIES CONTINUED
NEW ACCOUNTING STANDARDS
The Company has adopted Statement of Financial Accounting Standards No. 123
"Accounting For Stock-Based Compensation" ("SFAS No. 123"). As allowable under
SFAS No. 123, the Company has elected to disclose in the notes to the financial
statements the impact on net income and net income per share as if the fair
value based compensation cost had been recognized (see Note 10 ).
In February 1997, the Financial Accounting Standards Board 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. Had the Company applied SFAS No. 128 in fiscal 1997, basic
and diluted earnings per share would have been as follows:
<TABLE>
<CAPTION>
YEAR ENDED JULY 31, 1997 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Basic:
Income before extraordinary items $ 1.96 $ 0.99 $ 1.01
Extraordinary loss -- (0.03) --
- --------------------------------------------------------------------------------
Net income $ 1.96 $ 0.96 $ 1.01
Diluted:
Income before extraordinary items $ 1.75 $ 0.85 $ 0.86
Extraordinary loss -- (0.03) --
- --------------------------------------------------------------------------------
Net income $ 1.75 $ 0.82 $ 0.86
</TABLE>
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.
30 CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. SIGNIFICANT ACCOUNTING POLICIES CONTINUED
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 establishes 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
fiscal year ending July 31, 1999, and has not yet determined the impact of
adoption.
3. STOCKHOLDERS' EQUITY
On December 29, 1995, the Company effected a 3-for-2 stock split in the form of
a common stock dividend. Prior period share information presented in the
financial statements and related notes have been adjusted to reflect the effect
of the split.
On February 28, 1996, the Company effected a public offering of 5,700,000 shares
(the "Offering") 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 Offering were approximately $113,850,000 based on the
public offering price of $40.50 per share. Approximately $94,800,000 of the net
proceeds were used to repay certain indebtedness under the Credit Agreement, a
substantial portion of which was incurred to finance the acquisition of
NORDX/CDT, and approximately $6,900,000 of the net proceeds were used to make
the payment in connection with the vesting of outstanding stock appreciation
rights.
On December 10, 1996, the Board of Directors adopted a Rights Agreement ("Rights
Agreement"). Under the Rights Agreement, one Preferred Share Purchase Right
("Right") for each outstanding share of the Company's common stock was
distributed to stockholders of record on December 26, 1996. Each Right entitles
the holder to buy one-thousandth of a share of a new series of junior
participating preferred stock for an exercise price of $150.00. The Company has
designated 100,000 shares of the previously authorized $0.01 par value preferred
stock as junior participating preferred stock in connection with the Rights
Agreement. The Rights are exercisable only if a person or group (with certain
exceptions) acquires, or announces a tender offer to acquire, 20% or more of the
Company's common stock (the "Acquiror"). If the Acquiror purchases 20% or more
of the total outstanding shares of the Company's common stock, or if the
Acquiror acquires the Company in a reverse merger, each Right (except those held
by the Acquiror) becomes a right to buy shares of the Company's common stock
having a market value equal to two times the exercise price of the Right. If the
Company is acquired in a merger or other business combination, or 50% or more of
the Company's assets or earning power is sold or transferred, each Right (except
those held by the Acquiror) becomes a right to buy shares of the common stock of
the Acquiror having a market value of two times the exercise price. The Company
may exchange the Rights for shares of the Company's common stock on a one-to-one
basis at any time after a person or group has acquired 20% or more of the
outstanding stock. The Company is entitled to redeem the Rights at $0.01 per
Right (payable in cash or common stock of the Company, at the Company's option)
at any time before public disclosure that a 20% position has been acquired. The
Rights expire on December 11, 2006, unless previously redeemed or exercised.
CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES 31
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. STOCKHOLDERS' EQUITY CONTINUED
On May 7, 1997, the Board of Directors approved a program under which up to $30
million of the Company's stock may be repurchased on the open market or in
privately negotiated transactions, based on market conditions. No shares have
been repurchased under the program.
4. INVENTORIES
Inventories of the Company consist of the following:
<TABLE>
<CAPTION>
JULY 31, 1997 1996
- --------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Raw materials $ 34,424 $ 24,004
Work-in-process 25,608 21,981
Finished goods 60,942 44,633
- --------------------------------------------------------------------------------
$120,974 $ 90,618
================================================================================
</TABLE>
5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment of the Company consist of the following:
<TABLE>
<CAPTION>
JULY 31, 1997 1996
- -------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Asset (asset lives):
Land $ 8,418 $ 5,443
Buildings and improvements (10-40 years) 29,843 19,119
Machinery and equipment (3-15 years) 113,158 83,385
Furniture and fixtures (5-15 years) 6,727 4,472
- -------------------------------------------------------------------------------
TOTAL 158,146 112,419
Less: accumulated depreciation (30,578) (22,900)
- -------------------------------------------------------------------------------
$ 127,568 $ 89,519
===============================================================================
</TABLE>
6. INTANGIBLE ASSETS
Intangible assets of the Company consist of the following:
<TABLE>
<CAPTION>
JULY 31, 1997 1996
- --------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Asset (amortization period):
Patents, trademarks and other intangibles,
net of accumulated amortization of $412,000
and $260,000 respectively (5-10 years) $4,427 $ 297
Loan origination fees, net of accumulated
amortization of $506,000 and $362,000,
respectively (term of related loans) 1,601 1,785
Non-compete agreements, net of accumulated
amortization of $703,000 and $216,000,
respectively (5-7 years) 1,791 2,239
- --------------------------------------------------------------------------------
$7,819 $4,321
================================================================================
</TABLE>
32 CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. FINANCING ARRANGEMENTS
Notes payable to banks consist of borrowings by certain of the Company's foreign
subsidiaries under credit agreements entered into on September 18, 1995 (the
"European Credit Agreement") and on March 14, 1997 (the "Australian Facility")
(collectively, "the Foreign Facilities") to support the financing needs of its
new and existing subsidiaries located in the United Kingdom, Sweden and
Australia. The European Credit Agreement is comprised of a sterling overdraft
and 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
over the LIBOR interest rate. The Australian Facility is a bank revolving demand
facility with maximum borrowings of approximately $0.8 million. The Foreign
Facilities are guaranteed by the Company. The Company had outstanding and
maximum borrowings of $5,618,000 and $1,684,000 under the Foreign Facilities as
of and for the years ended July 31, 1997 and 1996, respectively. Weighted
average outstanding borrowings were $4,516,000 and $1,301,000, and the effective
interest rates were 6.63% and 9.29% for the years ended July 31, 1997 and 1996,
respectively.
Long-term debt consists of the following:
<TABLE>
<CAPTION>
JULY 31, 1997 1996
- --------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
U.S. revolver (with interest at LIBOR plus 0.5%, or
6.19%, at July 31, 1997) and due April 10, 2002 $ 50,500 $ --
Canadian revolver (with interest at LIBOR plus 0.5%, or
4.02%, at July 31, 1997) and due April 10, 2002 65,585 32,458
Canadian term loan -- 34,398
Other indebtedness 15,164 12,064
- --------------------------------------------------------------------------------
131,249 78,920
Less: current portion 4,588 7,536
- --------------------------------------------------------------------------------
$126,661 $ 71,384
================================================================================
</TABLE>
On February 2, 1996, the Company entered into a credit agreement (the "Credit
Agreement") which was subsequently reconfigured as a result of the proceeds
applied against debt resulting from the Offering (see Note 3) on February 28,
1996.
Proceeds from the 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 communications cable and IBDN network structured wiring
products businesses ("NORDX/CDT").
The Credit Agreement, as revised on April 10, 1997, is comprised of a $105.0
million revolver (the "U.S. Revolver") and a CDN $115.0 million revolver (the
"Canadian Revolver"). The Credit Agreement includes a provision whereby the
applicable margins over prime or the London Inter-Bank Offered Rate ("LIBOR")
are based on the attainment of certain performance factors. A commitment fee of
.15% to .375% is applied to the unused portion of each revolver. The terms of
the Credit Agreement contain various customary financial and non-financial
covenants including the maintenance of minimum consolidated net worth and
restrictions on payment of dividends. The Company is in compliance with all
applicable covenants.
CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES 33
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. FINANCING ARRANGEMENTS CONTINUED
On July 31, 1997 the Company had approximately $71.4 million of availability
under the U.S. and Canadian Revolver loans and $4.3 million of availability
under its Foreign Facilities.
The scheduled aggregate annual principal payments of long-term debt as of July
31, 1997, are as follows:
<TABLE>
<CAPTION>
YEAR ENDED: LONG-TERM DEBT
- --------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C>
1998 $ 4,588
1999 9,078
2000 212
2001 60
2002 116,174
Thereafter 1,137
- --------------------------------------------------------------------------------
$131,249
================================================================================
</TABLE>
As a result of the February 1996 debt refinancing and the net proceeds of the
Offering in fiscal 1996, the Company recognized $993,000 ($596,000 net of income
tax) of extraordinary expense related to the early extinguishment of debt.
8. RETIREMENT AND OTHER EMPLOYEE BENEFITS
The Company and its subsidiaries have various defined contribution and defined
benefit pension plans covering substantially all of its employees. In connection
with the acquisition of NORDX/CDT, the Company established certain new defined
benefit plans. Benefits provided under the Company's defined benefit pension
plans are primarily based on years of service and the employee's compensation.
The defined contribution plans provide benefits primarily based on compensation
levels.
DEFINED BENEFIT PLAN (U.S.)
For the U.S. defined benefit plan (the "U.S. Plan"), the Company's funding
policy is to annually contribute an amount based upon actuarial and economic
assumptions designed to achieve adequate funding of projected benefit
obligations. No contributions were made in fiscal 1997, 1996, and 1995. The
components of pension credit for fiscal 1997, 1996, and 1995 are as follows:
<TABLE>
<CAPTION>
YEAR ENDED JULY 31, 1997 1996 1995
- -------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Service cost for benefits earned during the year $ 26 $ 28 $ 23
Interest cost on projected benefit obligation 135 127 126
Less: actual return on assets (460) (347) (171)
Net amortization and deferral 268 185 3
- -------------------------------------------------------------------------------
Net periodic pension credit $ (31) $ (7) $ (19)
===============================================================================
</TABLE>
34 CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. RETIREMENT AND OTHER EMPLOYEE BENEFITS CONTINUED
The funded status of the U.S. Plan as of July 31, 1997 and 1996 was as follows:
<TABLE>
<CAPTION>
JULY 31, 1997 1996
- -------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested $ 1,858 $ 1,753
Non-vested 55 48
- -------------------------------------------------------------------------------
Accumulated benefit obligation $ 1,913 $ 1,801
===============================================================================
Projected benefit obligation $ 1,913 $ 1,801
Plan assets at fair value 2,395 2,073
- -------------------------------------------------------------------------------
Plan assets in excess of projected benefit obligation 482 272
Unrecognized net asset at transition (23) (64)
Unrecognized net loss 11 231
- -------------------------------------------------------------------------------
Prepaid pension costs $ 470 $ 439
===============================================================================
</TABLE>
The assumed discount rate used for the U.S. Plan and the expected rate of return
on plan assets were 7.5% and 9.5%, respectively, for all years presented.
DEFINED BENEFIT PLANS (CANADIAN)
For the Canadian defined benefit plans (the "Canadian Plans"), government
regulations require the Company to monthly fund contributions based upon
actuarial and economic assumptions designed to achieve adequate funding of
projected benefit obligations. The components of pension expense for fiscal 1997
and 1996 are as follows:
<TABLE>
<CAPTION>
YEAR ENDED JULY 31, 1997 1996
- --------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Service cost for benefits earned during the year $ 1,690 $ 696
Interest cost on projected benefit obligation 265 62
Less: return on assets (97) --
- --------------------------------------------------------------------------------
Net periodic pension expense $ 1,858 $ 758
================================================================================
</TABLE>
The funded status of the Canadian Plans as of July 31, 1997 and 1996, was as
follows:
<TABLE>
<CAPTION>
YEAR ENDED JULY 31, 1997 1996
- --------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested $ 1,610 $ 496
Non-vested 1,418 936
- --------------------------------------------------------------------------------
Accumulated benefit obligation $ 3,028 $ 1,432
================================================================================
Projected benefit obligation $ 3,647 $ 1,610
Plan assets at fair value 1,944 --
- --------------------------------------------------------------------------------
Projected benefit obligation in excess of plan assets 1,703 1,610
Less: unrecognized net loss (94) --
- --------------------------------------------------------------------------------
Projected benefit obligation in excess of plan assets
recognized in the consolidated balance sheets $ 1,609 $ 1,610
================================================================================
</TABLE>
CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES 35
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. RETIREMENT AND OTHER EMPLOYEE BENEFITS CONTINUED
The assumed discount rate was 8.0%; the assumed growth rate of compensation was
5.0%; and the expected rate of return on plan assets was 8.0%, for both years
presented.
The Company also maintains defined contribution profit-sharing plans for all
eligible employees. Certain contributions are made under the matching provisions
of 401(k) plans, while the remainder are made at the discretion of the Company's
Board of Directors. Expenses incurred by the Company in connection with these
profit-sharing plans were $3,210,000, $2,450,000 and $1,737,000 for the years
ended July 31, 1997, 1996 and 1995, respectively. The Company also provides
performance based and discretionary incentive payments to senior management and
other key employees subject to the approval of the Compensation Committee of the
Board of Directors. Expenses incurred by the Company as a result of these
incentive payments were $5,492,000, $3,791,000 and $2,374,000 for the years
ended July 31, 1997, 1996 and 1995, respectively.
9. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
In connection with the acquisition of NORDX/CDT the Company assumed and
continues to provide certain postretirement health and life insurance benefits
under unfunded plans.
The components of expense in fiscal 1997 and 1996 were as follows:
<TABLE>
<CAPTION>
YEAR ENDED JULY 31, 1997 1996
- --------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Service cost of benefits earned during the period $202 $ 97
Interest cost on accumulated postretirement benefit obligation 293 132
- --------------------------------------------------------------------------------
Net postretirement benefit expense $495 $229
================================================================================
</TABLE>
The following sets forth the plans' funded status reconciled with the amount
recognized in the Company's Consolidated Balance Sheets:
<TABLE>
<CAPTION>
JULY 31, 1997 1996
- --------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Accumulated postretirement benefit obligation $ 4,110 $ 3,441
Plan assets at fair value -- --
- --------------------------------------------------------------------------------
Accumulated benefit obligation in excess of plan assets 4,110 3,441
Less: unrecognized net loss (189) --
- --------------------------------------------------------------------------------
Accrued postretirement benefit liability $ 3,921 $ 3,441
================================================================================
</TABLE>
Future benefit costs were estimated assuming medical costs would increase at
approximately a 10% annual rate for 1996, 8.25% for 1997, 6.50% for 1998 and
then remain at a 5% annual growth rate thereafter and dental costs would
increase at approximately 5.25% for 1996, 4.75% for 1997 and 4.25% thereafter.
Assuming a 1% increase in this annual trend, the accumulated postretirement
benefit obligation would have increased by $365,000 and $449,000 at July 31,
1997 and 1996, respectively and the postretirement benefit expense would have
increased by $58,000 and $37,000 for fiscal 1997 and 1996, respectively. The
weighted average discount rate used to estimate the accumulated postretirement
benefit obligation was 8.0%.
36 CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. STOCK BENEFIT PLANS
The Company maintains a Stock Purchase and Option Plan (the "Former Plan") which
was terminated as to future grants effective upon completion of the Company's
initial public offering on November 24, 1993 (the "Initial Public Offering"). As
of the grant termination date, 2,777,696 options had been granted under the
Former Plan to directors, executives and other key employees of the Company.
Options issued under the Former Plan have an exercise price equal to the fair
market value of the common stock on the date of grant (July 1988 through
September 1992) and expire on the earlier of ten years after date of grant or
ten days after termination of employment. Substantially all of the outstanding
options became fully vested as of the date of the Initial Public Offering.
A Long Term Performance Incentive Plan (the "Stock Option Plan") was adopted
September 23, 1993, and provides for the granting to employees and other key
individuals the following types of incentive stock awards: stock options, stock
appreciations rights, restricted stock, performance units, grants and other
types of awards. The Stock Option Plan is scheduled to terminate in ten years
from the date of adoption but may be extended another five years by the
Company's Board of Directors for the grant of awards other than incentive stock
options. Employee rights to grants pursuant to the Stock Option Plan are
forfeited if a recipient's employment terminates within a specified period
following the grant. An aggregate of 436,722 shares of common stock were
reserved for issuance pursuant to the Stock Option Plan. In fiscal 1996 and
fiscal 1995, non-qualified stock options of 270,600 and 150,000, respectively,
were granted to various employees. No awards were granted under the Stock Option
Plan in fiscal 1997. The terms of the stock options include ratable vesting over
five years and an exercise price equal to the fair market value of the stock at
the date of grant.
A Supplemental Long Term Performance Incentive Plan (the "Supplemental Plan")
was adopted in December 1995 and authorizes the grant of awards with respect to
1,200,000 shares of common stock. 750,000 shares are reserved for grants only to
new members of the Company's management who are employed in connection with
acquisitions by the Company. Under the Supplemental Plan, and in conjunction
with acquisitions, the Company granted 300,000 and 399,400 options under the
Supplemental Plan in fiscal 1997 and fiscal 1996, respectively. The terms of the
stock options include ratable vesting over five years and an exercise price
equal to the fair market value of the stock at the date of grant.
During fiscal 1997, 125,600 and 399,400 of the options previously issued under
the Stock Option Plan and Supplemental Plan, respectively, were amended. The
terms of the amended stock options include ratable vesting over five years and
an exercise price equal to the fair market value of the stock at the date of the
amendment. The amended options are reflected for disclosure purposes as a
cancelation and reissuance.
CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES 37
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. STOCK BENEFIT PLANS CONTINUED
The Company accounts for the Stock Option Plan and the Supplemental Plan under
APB Opinion No. 25, under which no compensation cost has been recognized. Had
compensation cost for these plans been determined consistent with SFAS No. 123,
the Company's net income and earnings per share on a pro forma basis would have
been as follows:
<TABLE>
<CAPTION>
YEAR ENDED JULY 31, 1997 1996
- ---------------------------------------------------------------------------
<S> <C> <C>
Net income: As reported $ 36,035 $ 15,285
Pro Forma $ 34,557 $ 14,722
Primary EPS: As reported $ 1.75 $ 0.82
Pro Forma $ 1.69 $ 0.79
</TABLE>
The SFAS No. 123 method of accounting is effective for options granted after
August 1, 1995. Therefore, the above pro forma net income does not reflect any
compensation cost that may have resulted if SFAS No. 123 had been applied to
options granted prior to August 1, 1995. Incentive stock awards are granted at
the discretion of the Company's Board of Directors, therefore, the type and
number of awards previously issued may not be indicative of those to be granted
in future periods. As a result, compensation cost as disclosed above may not be
representative of that to be expected in future years.
Certain information regarding stock options issued by the Company is summarized
below:
<TABLE>
<CAPTION>
YEAR ENDED JULY 31, 1997 1996 1995
- -----------------------------------------------------------------------------------------
WTD. WTD. WTD.
SHARES AVG. EX. SHARES AVG. EX. SHARES AVG. EX.
PRICE PRICE PRICE
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding,
beginning of year 3,278,327 $ 8.50 2,863,414 $ 1.55 2,770,605 $ 1.13
Granted/reissued 825,000 24.40 670,013 35.62 150,000 9.33
Exercised (649,637) 1.39 (255,100) 1.72 (57,191) 1.65
Canceled (525,000) 39.25 -- -- -- --
- -----------------------------------------------------------------------------------------
Outstanding,
end of year 2,928,690 $ 9.04 3,278,327 $ 8.50 2,863,414 $ 1.55
Exercisable
at end of year 1,887,906 $ 1.44 2,447,564 $ 1.13 2,634,076 $ 1.07
- -----------------------------------------------------------------------------------------
Weighted average
fair value of
options granted
since 8-1-95 $13.90 $ 17.03 N/A
</TABLE>
As of July 31, 1997, 1,821,971 of the 2,928,690 options outstanding have
exercise prices between $0.67 and $2.75, with a weighted average exercise price
of $1.03 and a weighted average remaining contractual life of 1.3 years. All of
these options are exercisable.
38 CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. STOCK BENEFIT PLANS CONTINUED
A total of 136,719 of the options outstanding have exercise prices between $4.58
and $9.33, with a weighted average exercise price of $8.95 and a weighted
average remaining contractual life of 7.1 years. Of these options 45,435 are
exercisable. The remaining 970,000 options have exercise prices between $18.75
and $27.63, with a weighted average exercise price of $24.11 and a weighted
average remaining contractual life of 9.0 years. Of these options 20,500 are
exercisable.
The fair value of each option grant is estimated as of the date of grant using
the Black-Scholes option pricing model with the following weighted average
assumptions used for grants in fiscal years ending July 31, 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
- ----------------------------------------------------------------------------------------------
STOCK OPTION SUPPLEMENTAL STOCK OPTION SUPPLEMENTAL
PLAN PLAN PLAN PLAN
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Risk-free interest rate 6.47% 6.54% 6.02% 5.59%
Expected dividend yield 0% 0% 0% 0%
Expected life 5 years 5 years 5 years 5 years
Expected volatility 59.0% 58.4% 50.6% 47.2%
</TABLE>
On May 1, 1994, the Company awarded 65,505 shares of common stock grants to
certain key employees under a management stock award plan for a nominal amount
per share. The fair market value of the Company's common stock on the award date
was $7.83 per share. These grants vest ratably over a four year period. The
aggregate market value of the shares of common stock granted under this plan is
considered unearned compensation at the time of grant and compensation is earned
ratably over the vesting period. At July 31, 1997, the Company had no additional
shares reserved for issuance under this particular plan.
In December 1995, the Company adopted the Non-Employee Director Stock Plan (the
"Non-Employee Plan"). The Non-Employee Plan provides that shares of common stock
having a fair market value of $15,000 be granted annually to each non-employee
director each August 1. There were 1,512 and 2,250 shares granted under the
Non-Employee Plan in fiscal 1997 and fiscal 1996, respectively. The Company
recognizes compensation cost for the Non-Employee Plan in accordance with SFAS
No. 123's requirements for non-employee stock based awards.
In fiscal 1992, the Company granted 184,940 stock appreciation rights ("SARs")
to an officer/stockholder. Each SAR entitled the holder to a payment equal to
the excess of the fair value of the SAR upon vesting over a base of $1.33 per
SAR. As a result of the Initial Public Offering and the Offering all SARs,
totaling 2,743 and 182,197, respectively, vested. The related expense recognized
and paid in fiscal 1994 and fiscal 1996 was $12,806 and $6,904,000,
respectively.
11. INCOME TAXES
The Company accounts for income taxes in accordance with SFAS No. 109. Except
for the effects of the reversal of net deductible temporary differences, the
Company is not aware of any factors which would cause any significant
differences between book and taxable income in future years. Although there can
be no assurances that the Company will generate any earnings or specific level
of continuing earnings in future periods, management believes that it is more
likely than not that the net deductible differences will reverse during periods
when the Company generates sufficient net taxable income.
CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES 39
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. INCOME TAXES CONTINUED
Income before income taxes and extraordinary items, as shown in the accompanying
consolidated statements of income, includes the following components:
<TABLE>
<CAPTION>
YEAR ENDED JULY 31, 1997 1996 1995
- --------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Domestic $35,031 $25,751 $23,750
Foreign 22,291 143 757
- --------------------------------------------------------------------------------
Income before income taxes and extraordinary items $57,322 $25,894 $24,507
================================================================================
</TABLE>
Taxes on income, as shown in the accompanying consolidated statements of income,
include the following components:
<TABLE>
<CAPTION>
YEAR ENDED JULY 31, 1997 1996 1995
- -------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Current provision:
Federal $ 11,980 $ 8,525 $ 7,518
State 2,652 2,261 2,154
Foreign 3,548 1,777 236
- -------------------------------------------------------------------------------------
Total current provision 18,180 12,563 9,908
Deferred provision (benefit), predominantly foreign 3,107 (2,550) (114)
- -------------------------------------------------------------------------------------
Income tax provision $ 21,287 $ 10,013 $ 9,794
=====================================================================================
</TABLE>
The effective rate differs from the statutory rate for the following reasons:
<TABLE>
<CAPTION>
YEAR ENDED JULY 31, 1997 1996 1995
- ---------------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Tax provision based on the U.S. federal statutory tax rate $ 20,063 $ 9,063 $ 8,577
State income taxes, net of federal income tax benefit 1,724 1,470 1,400
Amortization of excess cost over net assets acquired 201 186 117
Research and development tax credit (Canada) (870) (470) --
All other, net 169 (236) (300)
- ---------------------------------------------------------------------------------------------
Income tax provision $ 21,287 $ 10,013 $ 9,794
=============================================================================================
</TABLE>
40 CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. INCOME TAXES CONTINUED
As a result of acquisitions during fiscal 1996 net deferred tax liabilities of
$1,977,000 were recorded. Fiscal 1997 net deferred tax liabilities reflect
reclassifications of $646,000 as a result of finalization of purchase accounting
under APB 16. The components of the deferred tax assets and liabilities recorded
in the accompanying balance sheets at July 31, 1997 and 1996, were as follows:
<TABLE>
<CAPTION>
JULY 31, 1997 1996
- -------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Deferred tax assets
Reserves recorded for:
Accruals $ 685 $ 1,134
Postretirement and pension accruals 1,772 1,383
Insurance programs 429 597
Asset valuations 2,103 1,767
Uniform cost capitalization 1,188 410
Other 551 386
- -------------------------------------------------------------------------------
Total deferred tax assets $ 6,728 $ 5,677
===============================================================================
Deferred tax liabilities:
Excess of book basis over tax basis of fixed assets $(10,802) $ (6,221)
Other (224) (253)
- -------------------------------------------------------------------------------
Total deferred tax liabilities (11,026) (6,474)
- -------------------------------------------------------------------------------
Net deferred taxes before valuation allowance (4,298) (797)
Valuation allowance (foreign NOL) (174) --
- -------------------------------------------------------------------------------
Net deferred taxes $ (4,472) $ (797)
- -------------------------------------------------------------------------------
Reconciliation to the balance sheets-
Current portion of deferred taxes, net 2,103 3,286
Long-term deferred taxes, net (6,575) (4,083)
- -------------------------------------------------------------------------------
Net deferred taxes $ (4,472) $ (797)
===============================================================================
</TABLE>
12. NET INCOME PER SHARE OF COMMON STOCK
Primary net income per share of common stock is calculated by dividing net
income by the weighted average number of shares of common stock plus incremental
common stock equivalent shares (shares issuable upon exercise of options and
warrants). Incremental common stock equivalent shares are calculated for each
measurement period based on the treasury stock method. The repurchases are
assumed to be made at the average fair market value price per share of the
Company's common stock during the measurement period.
Fully diluted net income per share of common stock assumes similar conversions
as discussed above, except that the incremental weighted average common stock
equivalent shares based upon the treasury stock method are assumed to be
repurchased at the higher of the average market price per share during the
measurement period or the period end market value of the Company's common stock.
CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES 41
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. NET INCOME PER SHARE OF COMMON STOCK CONTINUED
The weighted average number of shares of common stock outstanding and common
stock equivalents were as follows:
<TABLE>
<CAPTION>
JULY 31, 1997 1996 1995
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Primary 20,591,855 18,626,792 17,082,550
Fully diluted 20,704,778 18,626,792 17,172,848
</TABLE>
13. BUSINESS ACQUISITIONS
On April 7, 1997, the Company purchased the operating assets of Dearborn Wire
and Cable L.P. and Subsidiaries ("Dearborn/CDT"). The acquisition was accounted
for using the purchase method under APB Opinion No. 16 ("APB 16") and, subject
to certain final purchase adjustments, the assets and liabilities assumed were
as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C>
Assets acquired $ 87,932
Liabilities assumed (13,837)
Notes issued (6,595)
- -------------------------------------------------------------------------------
Net cash paid $ 67,500
===============================================================================
</TABLE>
On February 2, 1996, the Company completed the acquisition of Northern Telecom
Ltd's communications cable and IBDN network structured wiring products
businesses ("NORDX/ CDT"). 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"). Both acquisitions were accounted for under
APB 16 and the assets and liabilities assumed were as follows:
<TABLE>
<CAPTION>
NORDX/CDT RAYDEX/CDT
- --------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Assets acquired $ 112,271 $ 15,149
Liabilities assumed (26,134) (4,950)
Notes issued -- (7,199)
- -------------------------------------------------------------------------------
Net cash paid $ 86,137 $ 3,000
===============================================================================
</TABLE>
The pro forma information presented below related to the transactions assumes
the acquisition of Dearborn/CDT had occurred on August 1, 1995 and the
acquisitions of NORDX/CDT and Raydex/CDT had occurred on August 1, 1994. The pro
forma information presented for fiscal 1995 and 1996 also includes the effect of
the Offering (see Note 3) which occurred concurrently with the acquisition of
NORDX/CDT, and excludes the effect of non-recurring and extraordinary charges
related to the acquisition of NORDX/CDT and the Offering.
<TABLE>
<CAPTION>
(PRO FORMA, UNAUDITED)
YEAR ENDED JULY 31, 1997 1996 1995
- --------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Net sales $577,531 $550,332 $387,532
Income before extraordinary items 38,336 32,173 20,073
Net income 38,336 32,173 20,073
Net income per common share $ 1.86 $ 1.58 $ 1.00
</TABLE>
42 CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. BUSINESS ACQUISITIONS CONTINUED
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 Dearborn/CDT had occurred on August 1, 1995 and the acquisitions
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.
On June 4, 1996, the Company acquired the outstanding stock of Cekan A/S, of
Gjern, Denmark. The acquisition was accounted for using the purchase method
under APB 16. The prior results are not material; therefore, pro forma financial
information is not presented.
On July 25, 1996, the Company purchased X-Mark Industries of Washington,
Pennsylvania in a pooling-of-interest transaction for 211,311 shares of the
Company's common stock. The transaction is not material to the consolidated
financial statements and accordingly, prior period financial statements have not
been restated.
On March 14, 1997, the Company acquired 51% of the outstanding stock of
Stronglink, Pty. Ltd., of Melbourne, Australia. The prior results are not
material, therefore, pro forma financial information is not presented.
Under APB 16, the Company makes a preliminary allocation of the purchase price
and has up to one year to finalize purchase adjustments related to its
acquisitions.
14. GEOGRAPHIC SEGMENTS AND EXPORT SALES
The following summarizes the revenues and income generated by, and the
identifiable assets of, the Company's businesses located predominantly in each
geographic segment:
<TABLE>
<CAPTION>
NORTH AMERICA EUROPE CONSOLIDATED
- ------------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Segment Data:
Year ended 1997:
Revenues $ 453,984 $ 63,012 $ 516,996
Income from operations 58,298 4,304 62,602
Identifiable assets 377,767 51,732 429,499
Year ended 1996:
Revenues 308,254 49,098 357,352
Income from operations 29,017 2,510 31,527
Identifiable assets 270,028 50,077 320,105
Year ended 1995:
Revenues 174,822 14,119 188,941
Income from operations 28,230 1,383 29,613
Identifiable assets 102,381 16,595 118,976
</TABLE>
CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES 43
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14. GEOGRAPHIC SEGMENTS AND EXPORT SALES CONTINUED
The breakdown of total export sales (sales of products manufactured in the
United States and sold to customers outside of the United States) by
geographical location was:
<TABLE>
<CAPTION>
YEAR ENDED JULY 31, 1997 1996 1995
- ------------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Export Sales:
Europe* $ 15,283 $ 19,877 $ 13,631
Other* 15,453 9,140 6,965
Total export sales* $ 30,736 $ 29,017 $ 20,596
</TABLE>
* Includes intercompany sales to the Company's U.K., Canadian and Swedish
subsidiaries of $6,357,000, $3,674,000 and $3,262,000 for the years ended July
31, 1997, 1996 and 1995, respectively.
15. LEASE COMMITMENTS
Rental expense under all leases was approximately $6,313,000, $3,721,000 and
$1,642,000 for the years ended July 31, 1997, 1996 and 1995, respectively.
Operating leases relate principally to manufacturing, warehouse, office space
and various manufacturing and office equipment. Minimum annual rent payable
under noncancelable leases in each of the next five years and thereafter are as
follows:
<TABLE>
<CAPTION>
YEAR ENDING JULY 31, TOTAL
- --------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C>
1998 $ 5,464
1999 3,325
2000 2,509
2001 1,494
2002 955
Thereafter 2,162
- --------------------------------------------------------------------------------
$ 15,909
================================================================================
</TABLE>
16. COMMITMENTS AND CONTINGENCIES
Certain claims have been asserted against the Company in connection with
industrial accidents which are being administered by the Company's insurance
carriers. Other claims have been asserted in connection with patent and
trademark matters. In management's opinion, any liability that might be incurred
in connection with these claims would not have a material effect upon the
Company's financial position or results of operations.
As of July 31, 1997, the Company had outstanding letters of credit of $929,000
under its workers' compensation policy. The Company also maintains a $1,300,000
bond in connection with workers' compensation self-insurance in the state of
Massachusetts.
44 CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
17. RELATED PARTY TRANSACTIONS
The Company has an agreement to pay management fees of $12,500 per quarter to
each of two beneficial stockholders. Selling, general and administrative
expenses include $100,000 in 1997, 1996, and 1995 for fees paid under this
agreement.
In the normal course of business the Company enters into transactions for the
purchase of materials, equipment and services with entities that are affiliated
with or owned by an officer/ stockholder. Such transactions totaled $1,616,000,
$1,840,370 and $1,729,000 for the years ended July 31, 1997, 1996 and 1995,
respectively.
18. NATURE OF BUSINESS AND DISCLOSURES ABOUT FAIR VALUE
OF FINANCIAL INSTRUMENTS
Concentrations of credit risk with respect to trade receivables are limited due
to the Company's wide variety of customers and the many markets into which the
Company's products are sold, as well as the many different geographic areas in
which such customers and markets are located. As a result, at July 31, 1997, the
Company does not believe it has any significant concentrations of credit risk. A
group of customers under common control accounted for 11% of sales for both
fiscal 1997 and 1996, and accounted for 15% of accounts receivable at July 31,
1996. No single customer accounted for more than 10% of sales for fiscal 1995.
The fair values and carrying amounts of the Company's financial instruments,
primarily accounts receivable and debt, are approximately equivalent. The debt
instruments bear interest at floating rates which are based upon market rates or
fixed rates which approximate market rates. All other financial instruments are
classified as current and will be utilized within the next operating cycle.
19. NON-RECURRING CHARGES
In connection with the NORDX/CDT acquisition, the Company engaged an independent
appraisal firm to prepare a valuation of the assets acquired to serve as a basis
for allocation of the purchase price. As a result of the valuation, the fair
market value of the acquired in-process research and development of the
DynaTraX(TM) automated network cross-connect switch was determined to be $9.8
million. In accordance with generally accepted accounting practices this amount
was charged to operations upon the acquisition of NORDX/CDT in the third quarter
of fiscal year 1996. In addition, stock appreciation rights of $6.9 million
vested and were paid upon the completion of the Offering (see Note 3).
CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES 45
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
20.QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Quarterly financial data are summarized as follows:
<TABLE>
<CAPTION>
FISCAL YEAR 1997 FIRST SECOND THIRD FOURTH
- -----------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Net sales $ 115,971 $ 113,957 $ 129,965 $ 157,103
Gross profit 34,705 35,262 38,657 46,312
Income from operations 13,980 13,806 15,463 19,353
Net income 8,138 7,940 9,191 10,766
Per share information:
Net income per common share $ 0.40 $ 0.39 $ 0.45 $ 0.52
FISCAL YEAR 1996
- -----------------------------------------------------------------------------------------
Net sales $ 65,054 $ 67,243 $ 112,222 $ 112,833
Gross profit 20,951 21,726 34,944 34,198
Income from operations 10,755 10,345 (3,422)(1) 13,849
Net income before extraordinary items 5,708 5,378 (3,357)(2) 8,152
Net income 5,708 5,378 (3,953)(3) 8,152
Per share information:
Income per common share before
extraordinary items $ 0.33 $ 0.31 $ (0.20)(2) $ 0.40
Net income per common share $ 0.33 $ 0.31 $ (0.24)(3) $ 0.40
</TABLE>
(1) Includes $16.7 million of non-recurring charges (see Note 19).
(2) Excluding non-recurring charges of $16.7 million (see Note 19), net income
before extraordinary items was $7.2 million, or $0.37 per share.
(3) Excluding non-recurring and extraordinary charges (see Notes 7 and 19), net
income was $7.2 million, or $0.37 per share.
21. SUBSEQUENT EVENTS
On September 10, 1997, the Company acquired all the outstanding stock of Barcel
Acquisition Corporation, and its subsidiaries, based in Irvine, California.
46 CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES
<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
FOR THE FISCAL YEAR ENDED JULY 31, 1997 1996 1995 1994 1993
- --------------------------------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Income Statement Data:
Net sales $ 516,996 $ 357,352 $ 188,941 $ 145,389 $ 126,650
Income from operations 62,602 31,527(2) 29,613 21,801 19,577
Income before
extraordinary items 36,035 15,881 14,713 10,138 6,026(1)
Extraordinary item
(net of tax):
Loss on early
extinguishment of debt -- (596) -- (3,998) --
Net income 36,035 15,285(3) 14,713 6,140 6,026
Net income per share
of common stock:
Primary 1.75 0.82(3) 0.86 0.40 0.45
Fully diluted 1.74 0.82(3) 0.86 0.40 0.41
Weighted average number
of shares of stock outstanding:
Primary 20,592 18,627 17,083 15,483 13,488
Fully diluted 20,705 18,627 17,173 15,537 14,586
AS OF JULY 31, 1997 1996 1995 1994 1993
- --------------------------------------------------------------------------------------------------------------
Balance Sheet Data:
Total assets $ 429,499 $ 320,105 $ 118,976 $ 102,719 $ 83,749
Long-term debt 126,661 71,384 52,696 63,828 77,472
</TABLE>
(1) Includes a non-recurring charge of $650,000 related to an acquisition of a
European manufacturer which was not consummated.
(2) Includes $16.7 million of non-recurring charges (see Note 19).
(3) Excluding non-recurring and extraordinary charges (see Notes 7 and 19), net
income would have been $26.4 million, or $1.42 per share.
CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES 47
<PAGE>
DIRECTORS, OFFICERS AND CORPORATE INFORMATION
DIRECTORS
BERNARD J. BANNAN*
President and Chief Executive Officer,
Binley, Inc.
BRYAN C. CRESSEY**
Partner, Golder, Thoma, Cressey, Rauner, Inc.
MYRON S. GELBACH JR.
Independent Financial Consultant
MICHAEL F. O. HARRIS
Managing Director, The Northern Group
GLENN KALNASY
Managing Director, The Northern Group
PAUL M. OLSON
President and Chief Executive Officer,
Cable Design Technologies Corporation
RICHARD C. TUTTLE
Principal, Prospect Partners
* Deceased
** Chairman of the Board of Directors
Cable Design Technologies Corporation
EXECUTIVE OFFICERS
PAUL M. OLSON
President and Chief Executive Officer
GEORGE C. GRAEBER
Executive Vice President
President, Montrose/CDT
MICHAEL A. DUDLEY
Executive Vice President
President, CDT International
NORMAND R. BOURQUE
Executive Vice President
President, NORDX/CDT
DAVID R. HARDEN
Senior Vice President
President, West Penn/CDT
KENNETH O. HALE
Vice President
Chief Financial Officer
and Secretary
CHARLES B. FROMM
Vice President
General Counsel
ANNUAL MEETING
Tuesday, December 9, 1997
10:00 A.M. (Eastern Time)
Pittsburgh Hilton and Towers
Gateway Center
600 Commonwealth Place
Pittsburgh, Pennsylvania 15222
A copy of the Company's annual report to the Securities and Exchange Commission
on Form 10-K for fiscal 1997 is available without charge to stockholders upon
written request to Investor Relations at the Company's headquarters.
STOCK TRANSFER AGENT
& REGISTRAR
Questions regarding stock certificates, replacement of lost certificates,
address changes, account consolidation and transfer procedures should be
addressed to:
BANKBOSTON, N.A.
c/o Boston EquiServe
Limited Partnership
P.O. Box 8040
Boston, Massachusetts 02266-8040
(617) 575-3120
Allow three weeks for a reply.
INQUIRIES
Cable Design Technologies Corporation welcomes questions and comments from its
stockholders, potential investors, financial professionals, institutional
investors and security analysts. Interested parties should contact Investor
Relations at the Company's headquarters by telephone at (412) 937-2300.
CDT maintains a Web site on the Internet at http://www.cdtc.com
COMMON STOCK
The Company's common stock is listed on the New York Stock Exchange under the
ticker symbol "CDT."
The following table sets forth the high and low sales price per share of the
common stock during the fiscal periods indicated. The Company did not pay cash
dividends on the common stock during the periods set forth.
<TABLE>
<CAPTION>
FISCAL 1997 FISCAL 1996
- --------------------------------------------------------------------------------
HIGH LOW HIGH LOW
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
First 40 22 1/2 22 14 7/8
Second 35 1/4 25 1/2 44 21 1/8
Third 31 1/2 18 1/8 51 30
Fourth 34 5/8 16 3/8 49 1/4 24 1/4
</TABLE>
CDT [LOGO]
-----------
NYSE [LOGO]
48 CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES
<PAGE>
CORPORATE DIRECTORY
HEADQUARTERS
ADMIRAL/CDT*
Foster Plaza 7 931 Seville Road
661 Andersen Drive P.O. Box 1003
Pittsburgh, PA 15220 Wadsworth, OH 44281
Telephone: (412) 937-2300 (330) 336-7651
Fax: (412) 937-9690
Internet: www.cdtc.com Barcel/CDT, Inc.
2851 Alton Avenue
CDT INTERNATIONAL* Irvine, CA 92714
Zeal Court (714) 863-0300
Moorfield Road
Yeadon Leeds LS19 7BN MANHATTAN/CDT*
United Kingdom 203 Progress Drive
44-1132-509659 Manchester, CT 06040
(860) 643-3457
WEST PENN/CDT*
P.O. Box 762 RAYDEX/CDT LTD.
2833 West Chestnut Street Gladden Place, West Gillibrands
Washington, PA 15301 Skelmersdale, Lancashire WN8 9SX
(412) 222-7060 United Kingdom
44-1695-733061
MOHAWK/CDT*
9 Mohawk Drive NORDX/CDT, INC.
Leominster, MA 01453 105 Marcel-Laurin Boulevard
(508) 537-9961 Saint Laurent, Quebec, Canada H4N 2M3
(514) 639-2345
MONTROSE/CDT*
28 Sword Street CEKAN/CDT A/S
Auburn Industrial Park Videh0jvej 4
Auburn, MA 01501 DK-8883 Gjern
(508) 791-3161 Denmark
45-86-87-52-99
PHALO/CDT*
90 Progress Drive X-MARK/CDT, INC.
Manchester, CT 06040 2001 N. Main Street
(860) 649-6620 Washington, PA 15301
(412) 228-7373
ANGLO/CDT
(Anglo-American Cables Ltd.) DEARBORN/CDT, INC.
Moorfield Industrial Estate 250 West Carpenter Avenue
Moorfield Road, Zeal Court Wheeling, IL 60090
Yeadon Leeds LS19 7BN (847) 459-1000
United Kingdom
44-1132-507726 THERMAX/CDT, INC.
19-02 Whitestone Expressway
NEK/CDT Whitestone, NY 11357
(NEK KABEL AB) (718) 746-7800
Skene Skog Ind-omr, Box 208
S-511 22 Kinna STRONGLINK/CDT PTY. LTD.
Sweden 53 Murphy Street
46-320-14260 Richmond, VIC 3121
Australia
61-3-9427-7133
* A DIVISION OF CABLE DESIGN
TECHNOLOGIES INC.
<PAGE>
CDT [LOGO]
CABLE DESIGN TECHNOLOGIES CORPORATION
HEADQUARTERS
Foster Plaza 7, 661 Andersen Drive
Pittsburgh, PA 15220
Telephone (412) 937-2300
Fax (412) 937-9690
1242-AR-97
<PAGE>
EXHIBIT 21.1
CABLE DESIGN TECHNOLOGIES CORPORATION
SUBSIDIARIES OF THE REGISTRANT
LIST OF SUBSIDIARIES OF CABLE DESIGN TECHNOLOGIES CORPORATION
Anglo-American Cables Limited (Incorporated - United Kingdom)
Cable Design Technologies, Inc. (Incorporated - State of Washington)
CDT International Holdings Inc. (Incorporated - Delaware)
Cekan/CDT A/S (Incorporated - Denmark)
NEK Kabel AB (Incorporated - Sweden)
NORDX/CDT Asia Limited (Incorporated - Hong Kong)
NORDX/CDT, Corp. (Incorporated - Delaware)
NORDX/CDT, Limited (Incorporated - United Kingdom)
NORDX/CDT, Inc. (Incorporated - Canada)
NORDX/CDT - IP Corp. (Incorporated - Delaware)
Noslo Limited (Incorporated - United Kingdom)
Raydex/CDT Limited (Incorporated - United Kingdom)
Wire Group International, Limited (Incorporated - United Kingdom)
X-Mark/CDT Inc. (Incorporated - Pennsylvania)
Dearborn/CDT, Inc. (Incorporated - Delaware)
Thermax/CDT, Inc. (Incorporated - Delaware)
Barcel Wire & Cable Corp. (Incorporated - California)
Barcel Acquisition Corp. (Incorporated - California)
Santa Fe Textiles, Inc. (Incorporated - California)
Stronglink/CDT Pty. Ltd. (Incorporated - Australia, 51% ownership)
SKL, S.A.S. (Incorporated - France, joint venture)
<PAGE>
EXHIBIT 23.1
CABLE DESIGN TECHNOLOGIES CORPORATION
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANT
As independent public accountants, we hereby consent to the incorporation by
reference in this Form 10-K of our reports dated September 9, 1997, included in
Cable Design Technologies Corporation and Subsidiaries' annual report for the
year ended July 31, 1997, and of our reports, included or incorporated by
reference in this Form 10-K, into the Company's previously filed Form S-8
Registration Statements File No. 33-78418, File No. 33-73272, File No. 333-2450,
File No. 333-06743, and File No. 333-17443 and Form S-3 Registration Statement
File No. 333-00554.
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania
October 28, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Financial Statements for the year ended July 31,1997 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1997
<PERIOD-START> AUG-01-1996
<PERIOD-END> JUL-31-1997
<CASH> 9,017
<SECURITIES> 0
<RECEIVABLES> 116,716
<ALLOWANCES> 4,665
<INVENTORY> 120,974
<CURRENT-ASSETS> 247,545
<PP&E> 158,146
<DEPRECIATION> 30,578
<TOTAL-ASSETS> 429,499
<CURRENT-LIABILITIES> 85,520
<BONDS> 0
0
0
<COMMON> 188
<OTHER-SE> 204,937
<TOTAL-LIABILITY-AND-EQUITY> 429,499
<SALES> 516,996
<TOTAL-REVENUES> 516,996
<CGS> 362,060
<TOTAL-COSTS> 454,394
<OTHER-EXPENSES> (58)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,338
<INCOME-PRETAX> 57,322
<INCOME-TAX> 21,287
<INCOME-CONTINUING> 36,035
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 36,035
<EPS-PRIMARY> $1.75
<EPS-DILUTED> $1.74
</TABLE>
