<PAGE>
==============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 1998
Commission File No. 0-22724
CABLE DESIGN TECHNOLOGIES CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 36-3601505
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
Foster Plaza 7
661 Andersen Drive
Pittsburgh, PA 15220
(Address of principal executive offices)
(412) 937-2300
Registrant's telephone number, including area code
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
---------- ----------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at 5-28-98
----- ----------------------
Common Stock, $.01 Par Value 30,120,133
==============================================================================
<PAGE>
CABLE DESIGN TECHNOLOGIES CORPORATION
-------------------------------------
TABLE OF CONTENTS
-----------------
Page
----
PART I FINANCIAL INFORMATION
ITEM 1 Financial Statements...................................... 3
Review Report of Independent Public Accountants for
the Three Months and Nine Months Ended April 30, 1998..... 4
Cable Design Technologies Corporation and
Subsidiaries Condensed Consolidated Statements of
Income - Unaudited for the Three Months and Nine
Months Ended April 30, 1998 and 1997...................... 5
Cable Design Technologies Corporation and
Subsidiaries Condensed Consolidated Balance Sheets
as of April 30, 1998 (Unaudited), and July 31, 1997....... 6
Cable Design Technologies Corporation and
Subsidiaries Condensed Consolidated Statements of
Cash Flows - Unaudited for the Nine Months
Ended April 30, 1998 and 1997............................. 7
Cable Design Technologies Corporation and
Subsidiaries - Notes to Condensed Consolidated
Financial Statements (Unaudited).......................... 8
ITEM 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations....................... 10
PART II OTHER INFORMATION
ITEM 1 Legal Proceedings......................................... 14
ITEM 2 Changes in Securities..................................... 14
ITEM 3 Defaults upon Senior Securities........................... 14
ITEM 4 Submission of Matters to a Vote of Security Holders....... 14
ITEM 5 Other Information......................................... 14
ITEM 6 Exhibits and Reports on Form 8-K.......................... 14
SIGNATURES .......................................................... 15
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
In the opinion of Cable Design Technologies Corporation's (the "Company")
management, the unaudited consolidated financial statements included in this
filing on Form 10-Q reflect all adjustments which are considered necessary for a
fair presentation of financial information for the period presented.
REVIEW BY INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP has made a review, based upon procedures adopted by the
American Institute of Certified Public Accountants, of the unaudited
consolidated financial statements for the three month and nine month periods
ended April 30, 1998 and 1997, contained in this report. As stated on page 4,
Arthur Andersen LLP did not audit and accordingly does not express an opinion on
the unaudited consolidated financial statements; however as a result of such
review, they are not aware of any material modifications that should be made to
the financial statements referred to above for them to be in conformity with
generally accepted accounting principles.
-3-
<PAGE>
Report of Independent Public Accountants
To the Board of Directors and Stockholders of Cable Design Technologies
Corporation:
We have reviewed the accompanying condensed consolidated balance sheet of Cable
Design Technologies Corporation (a Delaware corporation) and Subsidiaries as of
April 30, 1998, and the related condensed consolidated statements of income for
the three and nine-month periods ended April 30, 1998 and 1997, and the
condensed consolidated statements of cash flows for the nine month periods ended
April 30, 1998 and 1997. These financial statements are the responsibility of
the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the financial statements referred to above for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Cable Design Technologies
Corporation and Subsidiaries as of July 31, 1997, and, in our report dated
September 9, 1997, we expressed an unqualified opinion on that statement. In
our opinion, the information set forth in the accompanying condensed
consolidated balance sheet as of July 31, 1997, is fairly stated, in all
material respects, in relation to the balance sheet from which it has been
derived.
Pittsburgh, Pennsylvania, Arthur Andersen LLP
May 21, 1998
-4-
<PAGE>
CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES
------------------------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED
-------------------------------------------------------
(Dollars in thousands, except per share data)
---------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
April 30, April 30,
---------------------------------------------------
1998 1997 1998 1997
---------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $167,647 $129,965 $485,429 $359,893
Cost of sales 119,763 91,308 345,302 251,269
---------------------------------------------------
Gross profit 47,884 38,657 140,127 108,624
Selling, general and administrative expenses 27,973 23,194 83,034 65,375
---------------------------------------------------
Income from operations 19,911 15,463 57,093 43,249
Interest expense, net 2,311 1,410 6,142 3,553
Other (income) expense 285 (576) (810) (436)
---------------------------------------------------
Income before income taxes 17,315 14,629 51,761 40,132
Income tax provision 6,657 5,438 19,727 14,863
---------------------------------------------------
Net income $ 10,658 $ 9,191 $ 32,034 $ 25,269
===================================================
Per share data:
Basic earnings per common share $ 0.37 $ 0.33 $ 1.12 $ 0.92
Diluted earnings per common share $ 0.34 $ 0.30 $ 1.02 $ 0.82
===================================================
</TABLE>
The accompanying notes are an integral part of these statements.
-5-
<PAGE>
CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES
------------------------------------------------------
CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
(Dollars in thousands, except per share data)
---------------------------------------------
<TABLE>
<CAPTION>
As of As of
April 30, July 31,
1998 1997
------------------------
(Unaudited)
ASSETS
- ------
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 7,422 $ 9,017
Accounts receivable, net of allowance for uncollectible
amounts of $4,867 and $4,665, respectively 117,294 109,262
Inventories 131,925 120,974
Other current assets 10,633 8,292
-----------------------
Total current assets 267,274 247,545
Property, plant and equipment, net 157,288 127,568
Goodwill, net 58,316 45,248
Other assets 9,070 9,138
-----------------------
Total assets $491,948 $429,499
=======================
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Liabilities:
Current liabilities $ 88,449 $ 85,520
Long-term debt, excluding current maturities 147,267 126,661
Other non-current liabilities 13,584 12,193
-----------------------
Total liabilities 249,300 224,374
-----------------------
Stockholders' equity:
Preferred stock, par value $.01 per share -
authorized 1,000,000 shares, no shares issued --- ---
Common stock, par value $.01 per share -
authorized 100,000,000 shares
issued and outstanding, 29,094,637 and 18,755,865 shares,
respectively 291 188
Paid in capital 164,755 158,670
Deferred compensation (11) (87)
Retained earnings 80,158 48,219
Currency translation adjustment (2,545) (1,865)
-----------------------
Total stockholders' equity 242,648 205,125
-----------------------
Total liabilities and stockholders' equity $491,948 $429,499
=======================
</TABLE>
The accompanying notes are an integral part of these statements.
-6-
<PAGE>
CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES
------------------------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
-----------------------------------------------------------
(Dollars in thousands)
----------------------
<TABLE>
<CAPTION>
Nine months ended
April 30,
---------------------
1998 1997
---------------------
<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 27,800 $ 8,471
---------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (38,481) (12,265)
Acquisition of businesses, including transaction costs,
net of cash acquired (18,905) (72,205)
---------------------
Net cash used by investing activities (57,386) (84,470)
---------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Funds provided by long-term debt 1,199 12,053
Funds used to reduce long-term debt (3,340) (38,016)
Net change in revolving note borrowings 25,230 95,661
Net proceeds from issuance of common stock 8 1,004
Net proceeds from exercise of stock options and related
tax benefits 4,806 1,696
---------------------
Net cash provided by financing activities 27,903 72,398
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND
CASH EQUIVALENTS 88 (124)
---------------------
Net decrease in cash (1,595) (3,725)
Cash and cash equivalents, beginning of period 9,017 16,097
---------------------
Cash and cash equivalents, end of period $ 7,422 $ 12,372
=====================
</TABLE>
The accompanying notes are an integral part of these statements.
-7-
<PAGE>
CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES
------------------------------------------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
----------------------------------------------------------------
1. BASIS OF PRESENTATION:
---------------------
The condensed consolidated financial statements presented herein are unaudited.
Certain information and footnote disclosures normally prepared in accordance
with generally accepted accounting principles have been either condensed or
omitted pursuant to the rules and regulations of the Securities and Exchange
Commission. Although the registrant believes that all adjustments necessary for
a fair presentation have been made, interim period results are not necessarily
indicative of the results of operations for a full year. As such, these
financial statements should be read in conjunction with the financial statements
and notes thereto included in the registrant's most recent Form 10-K which was
filed for the fiscal year ended July 31, 1997.
2. INVENTORIES
-----------
Inventories of the Company consist of the following:
<TABLE>
<CAPTION>
April 30, July 31,
1998 1997
----------------------
(Dollars in thousands)
<S> <C> <C>
Raw materials $ 42,265 $ 34,424
Work-in-process 25,316 25,608
Finished goods 64,344 60,942
----------------------
$131,925 $120,974
======================
</TABLE>
-8-
<PAGE>
3. EARNINGS PER SHARE
------------------
Basic earnings per common share are computed based on the weighted average
common shares outstanding. Diluted earnings per common share are computed based
on the weighted average common shares outstanding plus additional shares assumed
to be outstanding to reflect the dilutive effect of common stock equivalents.
The following table sets forth the computation of basic and diluted earnings per
share:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
April 30, April 30,
---------------------------------------------------------------------
1998 1997 1998 1997
---------------------------------------------------------------------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C>
Net income $ 10,658 $ 9,191 $ 32,034 $ 25,269
--------------------------------------------------------------------
Basic earnings per common share:
Weighted average common shares 29,050,372 27,653,250 28,682,804 27,431,060
Basic earnings per common share $ 0.37 $ 0.33 $ 1.12 $ 0.92
====================================================================
Diluted earnings per common share:
Weighted average common shares 29,050,372 27,653,250 28,682,804 27,431,060
Shares issuable from assumed
conversion of dilutive stock options 2,391,085 3,131,000 2,785,115 3,366,673
====================================================================
Weighted average diluted common shares 31,441,457 30,784,250 31,467,919 30,797,733
Diluted earnings per common share $ 0.34 $ 0.30 $ 1.02 $ 0.82
====================================================================
</TABLE>
Options to purchase 802,500 and 787,500 shares of common stock were outstanding
during the three and nine month periods ended April 30, 1997, respectively, but
were not included in the computation of diluted EPS as the options exercise
price was greater than the average market price of the common stock for the
respective periods.
4. BUSINESS ACQUISITIONS
---------------------
On September 10, 1997, the Company acquired all the outstanding stock of Barcel
Acquisition Corporation, and its subsidiaries, based in Irvine, California.
On March 17, 1998, the Company acquired all the outstanding stock of Orebro
Kabel AB, headquartered in Orebro, Sweden.
These acquisitions were accounted for using the purchase method under APB
Opinion No. 16. Their prior results are not material, therefore, pro forma
financial information is not presented.
5. STOCK SPLIT
-----------
On January 9, 1998, the Company effected a three for two stock split in the form
of a common stock dividend. Prior period share information other than amounts
displayed on the balance sheets have been adjusted to reflect the effect of the
split.
-9-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Cable Design Technologies is a leading manufacturer of technologically advanced
electronic data transmission cables for network, communications, specialty
electronics, and automation and process control applications, including complete
voice and data wiring solutions, fiber optic connective solutions and other
components required to build high performance data and telecommunications
infrastructures.
The Company refined its existing business groups effective with the second
fiscal quarter ended January 31, 1998. Results of operations for all periods
presented are discussed along the following four principal lines of business:
Network Products group; Communications group; Automation & Process Control
group; and Specialty Electronic Cable group.
This discussion and analysis of the Company's financial condition and results of
operations should be read in conjunction with the Company's condensed
consolidated financial statements (unaudited) and the notes thereto.
RESULTS OF OPERATIONS
OVERVIEW
Sales for the three months ended April 30, 1998 ("third quarter 1998") increased
29.0% to $167.6 million compared to the three months ended April 30, 1997
("third quarter 1997"), and sales for the nine months ended April 30, 1998
("first nine months 1998") increased 34.9% to $485.4 million compared to the
nine months ended April 30, 1997 ("first nine months 1997"). Incremental sales
attributable to the recently acquired businesses accounted for approximately 60%
and 66% of the increase in revenues for the third quarter 1998 and first nine
months 1998, respectively. The recently acquired businesses include
Dearborn/CDT (including Thermax/CDT), Orebro/CDT, Barcel/CDT and Stronglink/CDT.
Results for the third quarter 1998 and the first nine months 1998 reflect
increased sales in each of the Company's four principal business groups,
resulting from the additional sales contributed by the Company's recent
acquisitions and internal sales growth, primarily in the Network Products and
the Communications groups. Sales outside of North America for the third quarter
1998 were $27.8 million compared to $26.3 million for the same period last year,
and for the first nine months 1998 were $79.1 million compared to $76.1 million
for the first nine months 1997, including the additional sales outside of North
America of the recently acquired businesses.
Net income for the third quarter 1998 increased 16.0% to $10.7 million ($0.34
per diluted share) and for the first nine months 1998 net income increased 26.8%
to $32.0 million ($1.02 per diluted share) compared to the same periods last
year.
THREE MONTHS ENDED APRIL 30, 1998 COMPARED TO
THREE MONTHS ENDED APRIL 30, 1997
Net Sales Net sales for the third quarter 1998 increased $37.7 million, or
- ---------
29.0%, to $167.6 million compared to $130.0 million for the third quarter 1997.
Net sales for the third quarter 1998 include additional sales of $22.5 million
attributable to the recently acquired businesses. Network Products group sales
increased $10.2 million, or 16.6%, over the third quarter 1997. The increase in
Network Products group sales resulted from a 22.6% increase in sales of network
cable products. Sales of network cable products to the North American
marketplace increased 28%, reflecting higher sales volume, an improvement in
average selling price for plenum category 5 cables, and a favorable product mix
as compared to the third quarter 1997. The sales of network structured wiring
components was unchanged from the third quarter 1997. Although sales of network
structured wiring components to the North American marketplace increased, such
increase was partially offset by lower sales to the western European
marketplace. Communications group sales increased 20.6% over the third quarter
1997, due to increased demand for cable by telephone companies to expand their
distribution network capacity to support increased Internet, fax, telecommuting,
and other telephony usages. Third quarter 1998 sales of Automation & Process
Control group products and of Specialty Electronic Cable group products
increased 32.8% and 100.3%, respectively, primarily due to the additional sales
contributed by the recent acquisitions.
Sales outside of North America for the third quarter 1998 increased to $27.8
million compared to $26.3 million for
-10-
<PAGE>
the third quarter 1997, including the additional sales outside of North America
of the recently acquired businesses. Sales outside of North America for the
third quarter 1998 reflect reduced sales in the United Kingdom and Western
Europe by the Company's United Kingdom based manufacturing and distribution
operations due to continued competitive market conditions and a stronger British
pound. Including sales attributable to the recently acquired businesses,
increased international sales in other geographic regions, primarily Latin
America and Australia, offset the lower sales in the United Kingdom and Western
Europe.
Gross Profit Gross profit for the third quarter 1998 increased $9.2 million,
- ------------
or 23.9%, to $47.9 million compared to $38.7 million for the third quarter 1997.
Gross profit for the third quarter 1998 includes $6.0 million of additional
gross profit attributable to the recently acquired businesses which primarily
benefited the gross profit for the Automation & Process Control and Specialty
Electronic Cable groups. Other factors contributing to the increase in gross
profit were increased sales for the Network Products and the Communications
groups which were partially offset by a lower gross profit for the Automation &
Process Control group. The lower gross profit for the Automation & Process
Control group, excluding the effect of acquisitions, was the result of higher
material costs and competitive price pressure, primarily at one domestic
division. A factor contributing to the higher material cost for this division
was higher priced copper, purchased several months ago, which impacted the third
quarter 1998 gross profit.
The gross margin for the third quarter 1998 was 28.6% compared to 29.7% for the
third quarter 1997. The primary factors contributing to the lower gross margin
were the decrease in the margin for the Automation & Process Control group, the
mix effect of higher sales for the relatively lower margin Communications group,
and the inclusion of the additional sales from the recently acquired businesses,
which collectively have a lower gross margin than the Company's previous gross
margin percentage. Additionally, the move of NORDX/CDT's IBDN structured wiring
operations to a new facility in Montreal, completed in the third quarter 1998,
temporarily constrained capacity, and the gross margin for the Network Products
group would have been greater except for the need for NORDX/CDT to outsource
cable from both external and intercompany sources.
Selling, General and Administrative Expense Selling, general and
- -------------------------------------------
administrative expense ("SG&A") for the third quarter 1998 was $28.0 million
compared to $23.2 million for the third quarter 1997. The increase in SG&A is
primarily attributable to the additional SG&A of the recently acquired
businesses and, at certain of the other business units, increased commission and
other direct sales expenses due to the increased sales, and increases in
personnel and other selling expenses in order to support continued sales growth.
As a percent of sales, SG&A decreased to 16.7% for the third quarter 1998
compared to 17.8% for the third quarter 1997. The decrease in SG&A as a percent
of sales for the third quarter 1998 was primarily the result of the lower
average SG&A percentage of the recently acquired businesses and, for the balance
of the Company, a lower percentage growth in SG&A expense compared to the
growth in sales.
Income from Operations Income from operations for the third quarter 1998
- ----------------------
increased 28.8% to $19.9 million compared to $15.5 million for the third quarter
1997. The operating margin, derived by dividing operating income by net sales,
was unchanged at 11.9% for both the third quarter 1998 and the third quarter
1997.
Net Income Net income increased 16.0% to $10.7 million ($0.34 per diluted
- ----------
share) compared to net income of $9.2 million ($0.30 per diluted share) for the
third quarter 1997. Net income for the third quarter 1998 reflects an increase
in interest expense of approximately $0.5 million, net of tax, compared to the
third quarter 1997, primarily due to increased borrowings to fund acquisitions
and capital projects. Additionally, net income reflects approximately $0.2
million , net of tax, of foreign currency transaction losses versus gains of
$0.3 million, net of tax, a year ago.
NINE MONTHS ENDED APRIL 30, 1998 COMPARED TO
NINE MONTHS ENDED APRIL 30, 1997
Net Sales Net sales for the first nine months ended April 30, 1998 increased
- ---------
34.9% to $485.4 million compared to $359.9 million for the nine months ended
April 30, 1997. Sales for the first nine months 1998 include the addition of
$83.1 million of sales attributable to the recently acquired businesses.
Although sales for the Network Products group increased 16.6% for the third
quarter 1998, lower pricing for plenum category 5 network cables and lower sales
of connector products for the first six months 1998 resulted in an overall sales
increase for the Network Products group of 9.8% for the first nine months 1998.
Sales for the Communications group increased 38.9% over
-11-
<PAGE>
the first nine months 1997 due to increased demand for cable by telephone
companies to expand their distribution network capacity to support increased
Internet, fax, telecommuting, and other telephony usages . The increases in
sales for the Automation & Process Control and for the Specialty Electronic
Cable groups for the first nine months 1998 of $36.8 million and $46.5 million,
respectively, were primarily due to the additional sales attributable to the
recently acquired businesses.
Gross Profit Gross profit for the first nine months 1998 increased $31.5
- ------------
million, or 29.0%, to $140.1 million compared to $108.6 million for the first
nine months 1997. The gross profit attributable to the recently acquired
businesses accounted for $23.1 million of the overall increase in gross profit
for the first nine months 1998. Other factors contributing to the increase in
gross profit were increases in gross profit for the Communications and the
Network Products groups as a result of the increase in sales for these groups.
The gross margin was 28.9% for the first nine months 1998 compared to 30.2% for
the first nine months 1997. Factors contributing to the reduction in gross
margin were the inclusion of the additional sales from the recently acquired
businesses which, in the aggregate, have a lower gross margin relative to the
Company's historical operations, the mix effect of higher sales for the
relatively lower margin Communications group, and the lower gross margin
percentages for the Automation & Process Control and Network Products groups.
Selling, General and Administrative Expense SG&A for the first nine months
- -------------------------------------------
1998 increased $17.7 million to $83.0 million compared to $65.4 million for the
first nine months 1997. The increase in SG&A for the first nine months 1998 is
primarily attributable to the additional SG&A of the recently acquired
businesses.
As a percent of sales, SG&A was 17.1% for the first nine months 1998 compared to
18.2% for the first nine months 1997. The decrease in SG&A as a percent of sales
for the first nine months 1998 was primarily the result of the lower average
SG&A percentage of the recently acquired businesses.
Income from Operations Income from operations for the first nine months 1998
- ----------------------
was $57.1 million compared to $43.2 million for the first nine months 1997. The
operating margin, derived by dividing operating income by net sales, was 11.8%
for the first nine months 1998 compared to 12.0% for the first nine months 1997.
Net Income Net income for the first nine months 1998 increased 26.8% to $32.0
- ----------
million, or $1.02 per diluted share, compared to net income of $25.3 million, or
$0.82 per diluted share, for the first nine months 1997.
FINANCIAL CONDITION
Liquidity and Capital Resources The Company's credit agreement, dated April 10,
- -------------------------------
1997, is comprised of a $105.0 million revolver and a CDN $115.0 million
Canadian revolver. The Company also maintains a foreign credit facility in the
United Kingdom which provides for up to approximately $12.5 million of
borrowings. At April 30, 1998, the Company had outstanding borrowings of
approximately $136.0 million and $8.1 million under the credit agreement and
foreign credit facility, respectively.
Based on the Company's current expectations for its business, management
believes that its cash flow from operations and the available portion of its
revolving credit facilities and foreign credit facilities will provide it with
sufficient liquidity to meet the current liquidity needs of the Company.
Working Capital During the first nine months 1998, operating working capital
- ---------------
increased $15.5 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 inventories of $7.8 million and
in accounts receivable of $6.9 million. The change in operating working capital
excludes changes in cash and current maturities of long-term debt.
Cash Flow The Company generated $27.8 million of net cash from operating
- ---------
activities during the first nine months 1998. Net cash used by investing
activities of $57.4 million included $18.9 million for the acquisition of
businesses and $38.5 million for capital projects including expenditures for a
new facility for the IBDN structured wiring operations at NORDX/CDT and for the
construction and expansion of manufacturing and warehouse facilities at
Raydex/CDT, Thermax/CDT and West Penn/CDT. Net cash provided by financing
activities of $27.9 million included $4.8 million from the exercise of stock
options and $23.1 million from debt sources (net).
-12-
<PAGE>
Recent Developments The Company has authorized the offering for sale of the
- -------------------
DynaTrax(TM) electronic cross-connect switch business. Upon completion of a
sale, the Company estimates a positive benefit to operating profit in excess of
$1.0 million per quarter, excluding any gain or loss which may be realized upon
sale.
FLUCTUATION IN COPPER PRICE
The cost of copper in inventories (including finished goods) reflects purchases
over various periods of time ranging from one to several months for each of the
Company's individual operating units. For the Communications group,
profitability is generally not significantly affected by volatility of copper
prices as changes in copper prices are generally passed along to customers,
however, differences in the timing of selling price adjustments do occur and may
impact near term results. For other product groups, although selling prices are
not generally adjusted to directly reflect changes in copper prices, the relief
of copper costs from inventory for those operating units having longer inventory
cycles may affect profitability from one period to the next following periods of
significant movement in the cost of copper. The Company does not engage in
activities to hedge the underlying value of its copper inventory.
TEFLON(R) SUPPLY
The supply of Teflon(R), a raw material in certain of the Company's products,
continues to be constrained due to an industry wide shortage. The Company's
primary supplier of Teflon(R) has announced that additional capacity provided by
a new production facility should alleviate the shortage during the first six
months of the Company's fiscal year ending July 31, 1999. However, if the
shortage continues it may affect the Company's ability to meet demand for
certain products.
NEW ACCOUNTING STANDARDS
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.
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.
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.
In February 1998, the FASB issued Statement of Financial Accounting Standards
No. 132, "Employees' Disclosures about Pensions and Other Post Retirement
Benefits" ("SFAS No. 132"). SFAS No. 132 revises and standardizes disclosure
requirements for pension and other post retirement benefit plans. SFAS No. 132
is effective for fiscal years beginning after December 15, 1997. Management does
not anticipate that adoption of SFAS No. 132 will have a significant impact on
its financial disclosures.
YEAR 2000 ISSUES
The Company has assessed the impact of the Year 2000 issue on its information
systems, and has incurred and expects to continue to incur expenditures over the
next 15 months to address this issue. Maintenance or modification costs are
expensed as incurred, while the costs of new software are capitalized and
amortized over the software's useful life. Many of the Company's operating
units have acquired, or plan to acquire, new computer hardware and software
systems in order to improve functionality and provide additional capabilities.
Based on management's assessment, expenditures associated with modifying
existing information systems for Year 2000 compliance will not have a material
effect upon the Company's results of operations or liquidity and capital
resources. Many of the Company's suppliers and customers, many of which are
located in Europe and other foreign countries, rely significantly on computer
systems. The Company does not monitor such third parties' Year 2000 compliance
procedures. There can be no assurance that inadequate Year 2000 compliance by
third parties will not
-13-
<PAGE>
cause business disruptions which may have an adverse effect on the Company's
operations.
FORWARD-LOOKING STATEMENTS
Certain statements in this quarterly report are forward-looking statements,
including, without limitation, statements regarding future financial results and
performance, and the Company's or management's beliefs, expectations or
opinions. These statements are subject to various risks and uncertainties, many
of which are outside the control of the Company, including the level of market
demand for the Company's products, competitive pressures, the ability to achieve
reductions in operating costs and to continue to integrate acquisitions, price
fluctuations of raw materials and the potential unavailability thereof, foreign
currency fluctuations, technological obsolescence, environmental matters and
other specific factors discussed in the Company's Annual Report on Form 10-K for
the year ended July 31, 1997, and other Securities and Exchange Commission
filings. The information contained herein represents management's best judgment
as of the date hereof based on information currently available; however, the
Company does not intend to update this information to reflect developments or
information obtained after the date hereof and disclaims any legal obligation to
the contrary.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On March 12, 1998, Siecor Corporation and NORDX/CDT, Inc. settled their
litigation relating to various trademark and patent issues on mutually
satisfactory terms. The action in the U.S. District Court for the District of
Delaware was dismissed on March 17, 1998. As part of the settlement, the
parties released each other for any liabilities based on any acts of
infringement of the patent and trademark in suit. Siecor also granted
NORDX/CDT, Inc. a non-exclusive patent license and a supply agreement. The
settlement will not have a material adverse effect on the Company.
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
--------
15.1 Letter of Arthur Andersen LLP regarding unaudited interim
financial statement information
27.1 Financial data
27.2 Restated financial data schedule for the years ending July
31, 1997, 1996 and 1995.
27.3 Restated financial data schedule for the three month period
ended October 31, 1996.
27.4 Restated financial data schedule for the six month period
ended January 31, 1997.
27.5 Restated financial data schedule for the nine month period
ended April 30, 1997.
27.6 Restated financial data schedule for the three month period
ended October 31, 1997.
(b) Form 8-K's:
None
-14-
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CABLE DESIGN TECHNOLOGIES CORPORATION
/s/ Paul M. Olson
-------------------------------------
June 12, 1998 Paul M. Olson
President and Chief Executive Officer
/s/ Kenneth O. Hale
-------------------------------------
June 12, 1998 Kenneth O. Hale
Vice President, Chief Financial Officer and Secretary
-15-
<PAGE>
EXHIBIT 15.1
May 21, 1998
To the Stockholders and Board of Directors of
Cable Design Technologies Corporation:
We are aware that Cable Design Technologies Corporation has incorporated by
reference in its Registration Statements on Form S-3 (Registration No. 333-
00554); Form S-8 (Registration No. 33-73272); Form S-8 (Registration No. 33-
78418); Form S-8 (Registration No. 333-2450); Form S-8 (Registration No. 333-
6743); and Form S-8 (Registration No. 333-17443) its Form 10-Q for the quarter
ended April 30, 1998, which includes our report dated May 21, 1998, covering the
unaudited interim financial statement information contained therein. Pursuant to
Regulation C of the Securities Act of 1933 (the Act), that report is not
considered a part of the registration statements prepared or certified by our
firm or a report prepared or certified by our firm within the meaning of
Sections 7 and 11 of the Act.
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Unaudited Condensed Consolidated Balance Sheet and Statement of Income as of
April 30, 1998 and the nine month period then ended and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-START> AUG-01-1997
<PERIOD-END> APR-30-1998
<CASH> 7,422
<SECURITIES> 0
<RECEIVABLES> 122,161
<ALLOWANCES> 4,867
<INVENTORY> 131,925
<CURRENT-ASSETS> 267,274
<PP&E> 198,704
<DEPRECIATION> 41,416
<TOTAL-ASSETS> 491,948
<CURRENT-LIABILITIES> 88,449
<BONDS> 0
0
0
<COMMON> 291
<OTHER-SE> 242,357
<TOTAL-LIABILITY-AND-EQUITY> 491,948
<SALES> 485,429
<TOTAL-REVENUES> 485,429
<CGS> 345,302
<TOTAL-COSTS> 428,336
<OTHER-EXPENSES> (810)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,142
<INCOME-PRETAX> 51,761
<INCOME-TAX> 19,727
<INCOME-CONTINUING> 32,034
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 32,034
<EPS-PRIMARY> 1.12
<EPS-DILUTED> 1.02
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Financial Statements as of July 31, 1997 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1000
<S> <C> <C> <C>
<PERIOD-TYPE> YEAR YEAR YEAR
<FISCAL-YEAR-END> JUL-31-1997 JUL-31-1996 JUL-31-1995
<PERIOD-START> AUG-01-1996 AUG-01-1995 AUG-01-1994
<PERIOD-END> JUL-31-1997 JUL-31-1996 JUL-31-1995
<CASH> 9,017 16,097 2,210
<SECURITIES> 0 0 0
<RECEIVABLES> 113,927 95,096 34,274
<ALLOWANCES> 4,665 2,660 1,553
<INVENTORY> 120,974 90,618 35,377
<CURRENT-ASSETS> 247,545 208,456 74,341
<PP&E> 158,146 112,419 45,791
<DEPRECIATION> 30,578 22,900 15,644
<TOTAL-ASSETS> 429,499 320,105 118,976
<CURRENT-LIABILITIES> 85,520 74,366 30,870
<BONDS> 0 0 0
0 0 0
0 0 0
<COMMON> 188 181 98
<OTHER-SE> 204,937 165,276 31,767
<TOTAL-LIABILITY-AND-EQUITY> 429,499 320,105 118,976
<SALES> 516,996 357,352 188,941
<TOTAL-REVENUES> 516,996 357,352 188,941
<CGS> 362,060 245,533 125,777
<TOTAL-COSTS> 454,394 325,825 159,328
<OTHER-EXPENSES> (58) 271 (5)
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 5,338 5,362 5,111
<INCOME-PRETAX> 57,322 25,894 24,507
<INCOME-TAX> 21,287 10,013 9,794
<INCOME-CONTINUING> 36,035 15,881 14,713
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 596 0
<CHANGES> 0 0 0
<NET-INCOME> 36,035 15,285 14,713
<EPS-PRIMARY> 1.31 0.64 0.67
<EPS-DILUTED> 1.17 0.55 0.57
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Unaudited Condensed Consolidated Balance Sheet and Statement of Income as of
October 31, 1996 and the three month period then ended and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-31-1997
<PERIOD-START> AUG-01-1996
<PERIOD-END> OCT-31-1996
<CASH> 16,040
<SECURITIES> 0
<RECEIVABLES> 98,527
<ALLOWANCES> 2,623
<INVENTORY> 92,497
<CURRENT-ASSETS> 216,176
<PP&E> 117,806
<DEPRECIATION> 24,792
<TOTAL-ASSETS> 331,199
<CURRENT-LIABILITIES> 68,830
<BONDS> 0
0
0
<COMMON> 182
<OTHER-SE> 175,776
<TOTAL-LIABILITY-AND-EQUITY> 331,199
<SALES> 115,971
<TOTAL-REVENUES> 115,971
<CGS> 81,266
<TOTAL-COSTS> 101,991
<OTHER-EXPENSES> (45)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,117
<INCOME-PRETAX> 12,908
<INCOME-TAX> 4,770
<INCOME-CONTINUING> 8,138
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,138
<EPS-PRIMARY> 0.30
<EPS-DILUTED> 0.26
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Unaudited Condensed Consolidated Balance Sheet and Statement of Income as of
January 31, 1997 and the six month period then ended and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUL-31-1997
<PERIOD-START> AUG-01-1996
<PERIOD-END> JAN-31-1997
<CASH> 14,268
<SECURITIES> 0
<RECEIVABLES> 91,708
<ALLOWANCES> 2,794
<INVENTORY> 104,334
<CURRENT-ASSETS> 218,546
<PP&E> 121,078
<DEPRECIATION> 26,721
<TOTAL-ASSETS> 334,514
<CURRENT-LIABILITIES> 65,161
<BONDS> 0
0
0
<COMMON> 184
<OTHER-SE> 182,468
<TOTAL-LIABILITY-AND-EQUITY> 334,514
<SALES> 229,928
<TOTAL-REVENUES> 229,928
<CGS> 159,961
<TOTAL-COSTS> 202,142
<OTHER-EXPENSES> 140
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,143
<INCOME-PRETAX> 25,503
<INCOME-TAX> 9,425
<INCOME-CONTINUING> 16,078
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,078
<EPS-PRIMARY> 0.59
<EPS-DILUTED> 0.52
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Unaudited Condensed Consolidated Balance Sheet and Statement of Income as of
April 30, 1997 and the nine month period then ended and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUL-31-1997
<PERIOD-START> AUG-01-1996
<PERIOD-END> APR-30-1997
<CASH> 12,372
<SECURITIES> 0
<RECEIVABLES> 108,071
<ALLOWANCES> 3,623
<INVENTORY> 127,954
<CURRENT-ASSETS> 253,992
<PP&E> 133,341
<DEPRECIATION> 28,822
<TOTAL-ASSETS> 421,737
<CURRENT-LIABILITIES> 80,504
<BONDS> 0
0
0
<COMMON> 186
<OTHER-SE> 191,272
<TOTAL-LIABILITY-AND-EQUITY> 421,737
<SALES> 359,893
<TOTAL-REVENUES> 359,893
<CGS> 251,269
<TOTAL-COSTS> 316,644
<OTHER-EXPENSES> (436)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,553
<INCOME-PRETAX> 40,132
<INCOME-TAX> 14,863
<INCOME-CONTINUING> 25,269
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 25,269
<EPS-PRIMARY> 0.92
<EPS-DILUTED> 0.82
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Unaudited Condensed Consolidated Balance Sheet and Statement of Income as of
October 31, 1997 and the three month period then ended and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-START> AUG-01-1997
<PERIOD-END> OCT-31-1997
<CASH> 6,843
<SECURITIES> 0
<RECEIVABLES> 120,251
<ALLOWANCES> 5,089
<INVENTORY> 126,373
<CURRENT-ASSETS> 258,120
<PP&E> 175,154
<DEPRECIATION> 36,403
<TOTAL-ASSETS> 455,439
<CURRENT-LIABILITIES> 90,752
<BONDS> 0
0
0
<COMMON> 189
<OTHER-SE> 217,646
<TOTAL-LIABILITY-AND-EQUITY> 455,439
<SALES> 162,144
<TOTAL-REVENUES> 162,144
<CGS> 115,068
<TOTAL-COSTS> 142,373
<OTHER-EXPENSES> (529)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,914
<INCOME-PRETAX> 18,386
<INCOME-TAX> 6,936
<INCOME-CONTINUING> 11,450
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,450
<EPS-PRIMARY> 0.41
<EPS-DILUTED> 0.37
</TABLE>
