<PAGE>
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, 1998
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________
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The aggregate market value of the registrant's voting stock held by non-
affiliates of the registrant at October 5, 1998, is $267,620,853.
The number of shares outstanding of the registrant's Common Stock at October 5,
1998, is 29,715,378.
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, 1998, (the "Proxy
Statement") are incorporated by reference into Part III.
Portions of the 1998 Cable Design Technologies Corporation Annual Report to
Stockholders (the "1998 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....... 10
Item 4.1. Executive Officers of the Registrant...................... 10
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 7a. Quantitative and Qualitative Disclosures about
Market Risk............................................... 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
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PART I.
ITEM 1. BUSINESS
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, communication, computer
interconnect, wireless, commercial aviation, automotive, automation & process
control, 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 which had established relationships with companies involved in the
early stages of computer network development. In December 1988, the Company
purchased Montrose Products Company ("Montrose/CDT"), a specialty electronics
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 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 electronics cable 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 cable
for computer network systems, telecommunication, aerospace, CATV, and industrial
applications. On February 2, 1996, the Company acquired the assets of Northern
Telecom Limited's ("Nortel") communication 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, telecommunication connectors. On July 25, 1996, the Company
acquired, in exchange for shares of its common stock, X-Mark Industries ("X-
Mark/CDT") (Washington,
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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 cable 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 cable for
instrumentation and control, commercial aviation, automotive and marine
applications, and component assemblies for wireless applications. 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.
In March 1998, the Company acquired all the outstanding stock of (Orebro/CDT) of
Orebro, Sweden, a manufacturer of custom designed wire and cable for wireless
communication, robotics and other industries.
Subsequently, on August 3, 1998, the Company acquired 80% of HEW-Kabel Heinz
Eilentropp GmbH & Co. KG and related entities ("HEW-Kabel/CDT") located in
Wipperfurth, Germany, a manufacturer of specialty cable for process control,
robotics, transportation, medical and other specialty applications.
PRODUCTS
The Company's products are generally comprised of electronic copper and fiber
optic cable and network structured wiring components which are categorized into
two principal product groups, Network Communication and Specialty Electronics.
The markets served by the Company's products include computer local area
networks ("LANS") and wide area networks ("WANS"), communication, computer
interconnect, wireless, commercial aviation, automotive, automation & process
control, and other applications.
Network Communication Product Group:
- ------------------------------------
Network - This product line encompasses the cable and the components,
including connectors, wiring racks and panels, outlets and interconnecting
hardware, to complete the end-to-end network structured wiring 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 products were $270.7 million, $249.3 million and
$189.0 million in fiscal 1998, 1997 and 1996, respectively. Sales of these
products represented approximately 42%, 48% and 53% of the Company's total sales
for the fiscal years 1998, 1997 and 1996, respectively.
Communication - Through the acquisition of NORDX/CDT in fiscal 1996, the Company
entered the market for outside communication, switchboard and equipment cable.
This product group is primarily manufactured by the Company's NORCOM/CDT
facility in Kingston, Ontario, which is the largest communication cable
operation in Canada. Sales of communication products were $122.6 million for
fiscal 1998, $98.2 million for fiscal 1997, and $53.1 million for the six month
post-acquisition period in fiscal 1996, and represented approximately 19%, 19%
and 15% of the Company's total sales for fiscal 1998, 1997 and 1996,
respectively.
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Specialty Electronics Product Group:
- ------------------------------------
Automation & Process Control - The automation & process control product line
encompasses four 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. Process control applications include
remote signaling and electronic monitoring systems. Sound applications include
voice activation, evacuation and other similar systems. Safety applications
refer 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. The Company's sales for
this product line were $143.4 million, $106.0 million and $81.2 million in
fiscal 1998, 1997 and 1996, respectively. These products represented 22%, 21%
and 23% of the Company's total sales in fiscal 1998, 1997 and 1996,
respectively.
Specialty - Specialty products refers to a family of highly engineered wire and
cable products for a variety of specialized applications and niche markets,
including 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. Sales of these products
were $103.8 million, $51.4 million and $26.4 million for fiscal 1998, 1997 and
1996, respectively. Sales of these products represented approximately 16%, 10%
and 7% of the Company's total sales for fiscal July 31, 1998, 1997 and 1996,
respectively.
Non-Cable - Non-cable manufacturing activities unrelated to the Company's core
business include precision tire molds and sheet metal products. These products
represented less than 2% of the Company's total sales in each of the last three
fiscal years.
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 does not generally 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. 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.
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 1998, 1997 or 1996,
except that sales to business units of Bell Canada Enterprises represented
approximately 11% of fiscal 1997 and 1996 sales.
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COMPETITION
The markets served by the Company's products are 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, breadth of product offerings, large number of customer
approved specifications and emphasis on quality.
The principal competitive factors in all the markets for Network Communication
and Specialty Electronics products are availability, customer support, price and
product features. The relative importance of each of these factors varies
depending on the specific product category.
In the market for network structured wiring system 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
systems market by adapting to shifting customer demand for new products, and in
the case of NORDX/CDT, by offering complete, end to end certified network
structured wiring systems. In the markets for communication, switchboard and
equipment cable, price, reputation, production quality and availability are
principal competitive factors. In the automation & process control 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 & process control market. In the specialty products market,
production quality, engineering capabilities and price are principal competitive
factors.
BACKLOG
Backlog orders believed to be firm were $75.3 million at July 31, 1998,
compared to $62.2 million at July 31, 1997. 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.
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.
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EMPLOYEES
As of July 31, 1998, the Company had approximately 3,200 full time employees,
of which approximately 1,400 were represented by labor unions. The Company has
not experienced any material 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.
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.
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.
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.
Fiber optic technology represents a potential substitute for copper-based
cable products. A significant decrease in the cost of fiber optic systems or
increase in the cost of copper-based systems could make fiber optic 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
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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 technology may represent a threat to both copper and fiber optic-
based network and communication 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. 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 communication 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 and Availability 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.
The Company also purchases compounds, such as Teflon(R), from various
suppliers. From time to time, the supply of such materials has been limited. The
inability of suppliers 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. Although the Company has generally
been able to pass on increases in the price of copper and other raw materials 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 copper or
other raw materials could have a negative effect on demand for the Company's
products. Similarly, significant decreases in the price of copper, or excess
supplies of such other raw materials, over time could have a material adverse
effect on the Company's business.
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 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 1998 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
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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.
Year 2000 Compliance. The Company is in the process of completing a review of
the potential impact of the Year 2000 date processing issue on its information
technology ("IT") systems, non-IT systems, such as equipment and machinery
controlled by microcontrollers with embedded technology, and key suppliers and
customers. The Company has plans to modify or replace non-compliant IT systems
prior to the end of the calendar year 1999. While the Company's review of non-IT
systems and key suppliers and customers has not been completed, the Company has
not become aware of any materially adverse Year 2000 compliance issues relating
to such non-IT systems or key suppliers and customers. If, however, the Company,
its key suppliers and customers or other entities upon which the Company relies
(such as utility providers) fail to make necessary modifications, conversions
and contingency plans on a timely basis, the year 2000 issue could have a
material adverse effect on the Company's business, operations, cash flow and
financial condition.
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 fact 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.
ITEM 2. PROPERTIES
The Company uses various owned or leased properties as manufacturing
facilities, warehouses, and sales and administration offices. 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
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Company. Additionally, the Company also owns or leases approximately 316,000
square feet of other warehouse and sales facilities and facilities of
approximately 96,000 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.
<TABLE>
<CAPTION>
OWNED OR APPROX.
LOCATION USE LEASED SQ. FEET
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Auburn, MA Manufacturing, Sales and Administration Owned 146,000
Chicago, IL Manufacturing Owned 18,000
Gjern, Denmark Manufacturing, Sales and Administration Owned 18,000
Gothenburg, Sweden Manufacturing, Sales and Administration Owned 90,000
Irvine, CA Manufacturing, Sales and Administration Leased 77,000
Kingston, Ontario Manufacturing Owned 500,000
Leominster, MA Manufacturing, Sales and Administration Leased 202,000
Littleborough, United Kingdom Manufacturing Owned 42,000
Manchester, CT Manufacturing Leased 55,000
Manchester, CT Manufacturing, Sales and Administration Leased 150,000
Memphis, TN Warehousing Owned 147,000
Montreal, Quebec Manufacturing, Sales and Administration Owned 300,000
Orebro, Sweden Manufacturing, Sales and Administration Leased 35,000
Skelmersdale, United Kingdom Manufacturing, Sales and Administration Owned 121,000
Wadsworth, OH Manufacturing, Sales and Administration Owned 45,000
Waynesburg, PA Manufacturing Owned 42,000
Washington, PA Manufacturing Leased 82,000
Washington, PA Manufacturing Owned 123,000
Washington, PA Manufacturing, Sales and Administration Owned 85,000
Washington, PA Warehousing Owned 79,000
Wheeling, IL Manufacturing, Sales and Administration Owned 110,000
Wheeling, IL Manufacturing, Sales and Administration Owned 80,000
Wipperfurth, Germany Manufacturing, Sales and Administration Owned 309,000
</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.
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 with claims of
interest to the Company 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.
In December, 1997, the Company and certain of its subsidiaries were named in a
lawsuit filed by the
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Furon Company (Case No. 1:97CF 3292, United States District Court, N.D. Ohio).
In July, 1998, the Company, its subsidiaries and the Furon Company settled such
litigation on mutually satisfactory terms. The settlement will not have a
material adverse effect on the Company.
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
- --- -----------------------------
64 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. Mr. Olson has a Bachelor's Degree in
Economics from Hobart College.
56 George C. Graeber has been Chief Operating Officer and a director of the
Company since 1998. Mr. Graeber has also served as 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.,
an international distributor of cable and communication 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.
56 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 communication cable. Mr. Dudley
has a doctorate degree in Material Science from The National College of
Rubber Technology in London, England.
48 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.
59 Dave R. Harden has been a Senior Vice President of the Company since 1988.
He founded West
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Penn Wire in 1971, and operated that company until 1984 when it was
acquired by the Company. From 1984 until 1988 Mr. Harden was an Executive
Vice President of West Penn/CDT.
37 Peter Sheehan has been an Executive Vice President of the Company since
1998. Mr. Sheehan joined the Company in 1995 in the area of international
sales and marketing. Prior to joining the company Mr. Sheehan was Senior
Vice President of Sales and Marketing of Berk-tek, a wire and cable
company.
48 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.
37 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 5, 1998, there were 172 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 47 of the 1998 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 46 of the 1998 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 1998 Annual Report and is
incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Information required by this item appears under the heading "Management's
Discussion and Analysis of Financial Condition and Results of Operations" on
page 20 of the 1998 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 45 of the
1998 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 28, 1998. 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 10 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 28, 1998. 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 28,
1998. 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 28, 1998. 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 1998 Annual Report, pages 23
through 45, and are incorporated herein by reference:
a. Report of Independent Public Accountants.
b. Consolidated Statements of Income for the years ended July 31, 1998,
1997 and 1996.
c Consolidated Balance Sheets as of July 31, 1998 and 1997.
d. Consolidated Statements of Cash Flow for the years ended July 31, 1998,
1997 and 1996.
e. Consolidated Statements of Stockholders' Equity for the years ended July
31, 1998, 1997 and 1996.
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, 1998.
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
14
<PAGE>
Preferred Stock, Series A of CDT, as filed with the Secretary of
State of Delaware 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).
10.14 - Employment Agreement, dated as of November 1, 1997, between CDT and
Charles B. Fromm**
13.1 - CDT 1998 Annual Report to Stockholders (to the extent 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.
99.5**- First Amendment to Credit Agreement dated July 31, 1998 (effective
August 3, 1998) among CDT, BankBoston N.A., Paribas, Paribas Bank of
Canada, Bank of America NT & SA, Bank of America Canada and other
Lenders party thereto.
99.6**- Second Amendment to Credit Agreement dated July 31, 1998 (effective
August 3, 1998) among CDT, BankBoston N.A., Paribas, Paribas Bank of
Canada, Bank of America NT & SA, Bank of America Canada and other
Lenders party thereto.
** Filed Herein
(b) Reports on Form 8-k
None
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 29, 1998
------------------
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 29, 1998
- --------------------- Director
Bryan C. Cressey
/s/ Paul M. Olson Director, President, Chief October 29, 1998
- ------------------ Executive Officer (Principal
Paul M. Olson Executive Officer)
/s/ George C. Graeber Director, Chief Operating October 29, 1998
- --------------------- Officer
George C. Graeber
/s/ Kenneth O. Hale Vice President, Chief Financial October 29, 1998
- -------------------- Officer, Secretary (Principal
Kenneth O. Hale Financial and Accounting Officer)
/s/ Myron S. Gelbach, Jr. Director October 29, 1998
- --------------------------
Myron S. Gelbach, Jr.
/s/ Michael F. O. Harris Director October 29, 1998
- -------------------------
Michael F. O. Harris
/s/ Glenn Kalnasy Director October 29, 1998
- ------------------
Glenn Kalnasy
/s/ Richard C. Tuttle Director October 29, 1998
- ----------------------
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 included in Cable Design Technologies
Corporation and Subsidiaries' annual report to stockholders incorporated by
reference in this Form 10-K, and have issued our report thereon dated September
11, 1998. Our audits were made for the purpose of forming an opinion on those
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 11, 1998
19
<PAGE>
CABLE DESIGN TECHNOLOGIES CORPORATION
SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED JULY 31, 1998, 1997, 1996
<TABLE>
<CAPTION>
ADDITIONS TO
BALANCE RESERVE FROM ADDITIONS BALANCE
AT ACQUISITIONS CHARGED TO AT
BEGINNING & OTHER COSTS AND REDUCTION END OF
OF PERIOD ADJUSTMENTS EXPENSES FROM RESERVE PERIOD
----------- ------------ ----------- ------------- -----------
(Dollars in thousands)
Allowance for uncollectible
accounts/sales returns:
<S> <C> <C> <C> <C> <C>
Year Ended July 31, 1996 $1,553 $ 89 $1,542 $( 524) $2,660
Year Ended July 31, 1997 $2,660 $891 $1,644 $( 837) $4,358
Year Ended July 31, 1998 $4,358 $(93) $1,367 $(1,637) $3,995
Reserve for discontinuance of
DynaTraX(TM) product line and
other restructuring activities:
Year Ended July 31, 1998 $------ $------- $6,093 $(4,334) $1,759
</TABLE>
20
<PAGE>
CABLE DESIGN TECHNOLOGIES CORPORATION
INDEX TO EXHIBITS FILED HEREIN
JULY 31, 1998
EXHIBIT
NUMBER EXHIBIT
10.14 - Employment Agreement, dated as of November 1, 1997, between CDT and
Charles B. Fromm.
13.1 - CDT 1998 Annual Report to Stockholders (to the extent incorporated
herein by reference).
21.1 - List of Subsidiaries of CDT.
23.1 - Consent of Arthur Andersen LLP.
27.1 - Financial Data Schedule.
99.5 - First Amendment to Credit Agreement dated July 31, 1998 (effective
August 3, 1998) among CDT, BankBoston N.A., Paribas, Paribas Bank of
Canada, Bank of America NT & SA, Bank of America Canada and other
Lenders party thereto.
99.6 - Second Amendment to Credit Agreement dated July 31, 1998 (effective
August 3, 1998) among CDT, BankBoston N.A., Paribas, Paribas Bank of
Canada, Bank of America NT & SA, Bank of America Canada and other
Lenders party thereto.
21
<PAGE>
EXHIBIT 10.14
CABLE DESIGN TECHNOLOGIES CORPORATION
FOSTER PLAZA 7
661 ANDERSEN DRIVE
PITTSBURGH, PA 15220
November 1, 1997
Charles B. Fromm
25 Central Park West, 14-S
New York, NY 10023
Dear Charlie:
The Board of Directors (the "Board") of Cable Design Technologies
-----
Corporation (the "Company") considers the maintenance of a sound management to
-------
be essential to protecting and enhancing the best interests of the Company and
its stockholders. In this connection, the Company recognizes that the
possibility of a change in control may exist from time to time, and that this
possibility, and the uncertainty and questions it may raise among management,
may result in the departure or distraction of management personnel to the
detriment of the Company and its stockholders. Accordingly, the Board has
determined that appropriate steps should be taken to encourage the continued
attention and dedication of members of the Company's management, including
yourself, to their assigned duties without the distraction which may arise from
the possibility of a change in control of the Company.
This is not an employment contract nor does it alter your status as an
at-will employee of the Company. Just as you remain free to leave the employ of
the Company at any time, so too does the Company retain its right to terminate
your employment without notice, at any time, for any reason. However, the
Company believes that, both prior to and at the time a change in control is
anticipated or occurring, it is necessary to have your continued attention and
dedication to your assigned duties without distraction, and this Agreement is
intended as an inducement for your willingness to become an employee of the
Company (subject, however, to either party's right to terminate such employment
at any time). Therefore, should you still be an employee of the Company at such
time, the Company agrees that you shall receive the severance benefits
hereinafter set forth in the event your employment with the Company terminates
in contemplation of or subsequent to a "change in control" (as defined in
Section 2 hereof) under the circumstances described below.
As consideration for the severance benefits that you receive pursuant
to this Agreement, you agree to be bound by all of the terms of this Agreement,
including, without limitation, Section 8 hereof, which includes covenants by you
not to compete with the Company, not to solicit the Company's employees and not
to use or disclose Confidential Information (as hereinafter defined) of the
Company, as described in more detail in Section 8.
<PAGE>
1. Term of Agreement. This Agreement shall commence on the date
-----------------
hereof and shall continue in effect through November 1, 2002; provided, however,
that, if a change in control of the Company, as defined in Section 2 hereof,
shall have occurred during the term of this Agreement, then this Agreement shall
continue in effect until the later to occur of (i) the date twenty-four months
after the occurrence of change in control or (ii) the scheduled expiration of
this Agreement.
2. Change in Control. No benefits shall be payable hereunder unless
-----------------
there shall have been a change in control of the Company, as set forth below,
and your employment by the Company shall have been terminated in accordance with
Section 3 below. For purposes of this Agreement, a "change in control" shall be
-----------------
deemed to have occurred if (A) any "person" or "group" (as such terms are used
in Section 13(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the Company
representing 20% or more of the combined voting power of the Company's then
outstanding securities (other than the Company, Golder, Thoma, Cressey, Rauner,
Inc. ("GTCR"), or an affiliate of GTCR, including, without limitation, Golder,
Thoma Cressey Fund II, or any employee benefit plan of the Company), (B) there
shall be consummated any consolidation, merger, reorganization or acquisition
involving the Company unless following such event (x) all or substantially all
of the individuals and entities who were the beneficial owners of the
outstanding voting securities of the Company immediately prior to such event
beneficially own, directly or indirectly, more than 80% of the combined voting
power of the then-outstanding voting securities entitled to vote generally in
the election of directors of the corporation resulting from such event in
substantially the same proportions as their ownership immediately prior to such
event and (y) the provisions of clause (A) above are not met and (z) at least
two-thirds of the members of the board of directors of the corporation resulting
from such event were members of the board of directors at the time of the
initial consideration of, or any action of the board relating to such event, (C)
any sale, lease, exchange or other transfer (in one transaction or a series of
related transactions) of all, or substantially all, of the assets of the
Company, (D) the stockholders of the Company approve any plan or proposal for
the liquidation or dissolution of the Company, or (E) as the result of, or in
connection with, any cash tender offer, exchange offer, merger or other business
combination, sale of assets, proxy or consent solicitation (other than by the
Board in connection with the election of directors at the Company's annual
shareholders' meeting), contested election or substantial stock accumulation (a
"Control Transaction"), the members of the Board immediately prior to the date
-------------------
the Company initiates, or is notified of, such Control Transaction (the
"Incumbent Board") shall thereafter cease to constitute at least a majority of
the Board; provided, however, that for purposes of this clause (D) any
individual becoming a director subsequent to the date hereof whose election, or
nomination for election by the Company's shareholders, was approved by a vote of
at least a majority of the directors then comprising the Incumbent Board shall
be considered as though such individual were a member of the Incumbent Board,
but excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a person other than the
Board.
-2-
<PAGE>
3. Termination of Employment Following Change in Control.
-----------------------------------------------------
(a) If at any time after the date hereof any of the events described
in Section 2 hereof constituting a change in control of the Company occurs and
in contemplation thereof, in connection therewith or within two years thereafter
(i) you involuntarily cease to be an employee of the Company for any reason
other than termination for good cause (as hereinafter defined), disability (as
hereinafter defined), or death or (ii) you terminate your employment with the
Company for good reason (as hereinafter defined), then (x) you shall be entitled
to the benefits provided in Section 4(a) hereof and (y) any unvested options
shall vest and you shall be entitled to exercise all vested options for a period
of 60 days following such termination. In the event of multiple changes of
control during the term of this Agreement, the foregoing two year period shall
re-start in the event of such subsequent change of control(s).
(b) For purposes of this Agreement: (i) "good cause" means (A) your
----------
conviction of any criminal violation involving dishonesty, fraud or breach of
trust with respect to the Company, or (B) your willful engagement in gross
misconduct in the performance of your duties that materially injures the
Company; (ii) you shall be "disabled" if, by reason of physical or mental
--------
disability, you become unable to perform your normal duties for more than 120
days in the aggregate (excluding infrequent and temporary absence due to
ordinary transitory illness) during any twelve-month period; and (iii) "good
----
reason" shall exist if, without your express written consent, (A) you are
- ------
assigned duties materially inconsistent with your position, duties,
responsibilities and status with the Company as of the time of the change in
control (excluding for purposes of establishing such "base" any adverse change
made in contemplation of such change of control), (B) the Company reduces your
annual base salary as in effect on the date hereof or as the same may be
increased from time to time, except pursuant to across-the-board salary
reductions similarly affecting all executives of the Company and its
subsidiaries and all executives of any person in control of the Company, (C) the
Company reduces your aggregate compensation and incentive and benefit package as
in effect at the time of the change in control (excluding for purposes of
establishing such "base" any adverse change made in contemplation of such change
of control), (D) the Company requires you regularly to perform your duties of
employment beyond a fifty-mile radius from the location of your employment as of
the time of the change in control (excluding for purposes of establishing such
"base" any adverse change made in contemplation of such change of control), (E)
the Company takes any other action which materially and adversely changes the
conditions or perquisites of your employment as in effect at the time of the
change in control, or (F) the Company fails to obtain a satisfactory agreement
from any successor to assume and agree to perform this Agreement, as
contemplated by Section 10(a) hereof.
(c) For purposes of this Agreement, any purported termination by the
Company or by you shall be communicated by written "Notice of Termination" to
---------------------
the other party hereto in accordance with Section 11 hereof. Such Notice of
Termination shall indicate the specific termination provision in this Agreement
(if any) relied upon and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of your employment.
"Date of Termination" shall mean the effective date specified in the Notice of
- --------------------
Termination as of which your employment terminates (which shall be not less than
thirty (30) days nor more than sixty (60) days after the date such Notice of
Termination is given).
-3-
<PAGE>
(d) The above provisions of this Section 3, and the provisions of
Section 4, shall be applicable after a change in control has occurred, but not
prior thereto (unless termination is in contemplation of or in connection with
such change of control).
4. Benefits Upon Termination.
-------------------------
(a) If your employment with the Company is terminated under
circumstances which entitle you to benefits under this Section 4(a), then the
amount of such benefits (which benefits shall be in addition to any other
benefits to which you are entitled other than by reason of this Agreement) shall
be equal to the sum of (i) unpaid salary with respect to any vacation days
accrued but not taken as of the Date of Termination; (ii) accrued but unpaid
salary and bonus through the Date of Termination; and (iii) an amount equal to
your highest annual base salary in effect at any time during the period
commencing three years preceding the date the change in control occurs and
ending on the date the change in control occurs.
(b) Notwithstanding paragraph (a) of this Section 4, if all or any
portion of the payments or benefits provided under this Section 4 either alone
or together with other payments or benefits which you receive or are then
entitled to receive from the Company and any of its subsidiaries, would
constitute a "parachute payment" within the meaning of Section 280G of the
Internal Revenue Code of 1986, as amended (the "Code"), such payments or
benefits provided to you under this Section 4 shall be reduced to the extent
necessary so that no portion thereof shall be subject to the excise tax imposed
by Section 4999 of the Code; but only if, by reason of such reduction, your net
after tax benefit shall exceed the net after tax benefit if such reduction were
not made. "Net after tax benefit" for purposes of this Section 4 shall mean the
---------------------
sum of (i) the total amount payable to you under this Section 4, plus (ii) all
other payments and benefits which you receive or are then entitled to receive
from the Company and any of its subsidiaries that would constitute a "parachute
payment" within the meaning of Section 28O6 of the Code, less (iii) the amount
of federal income taxes payable with respect to the payment and benefits
described in (i) and (ii) above calculated at the maximum marginal income tax
rate for each year in which such payments and benefits shall be paid to you
(based upon the rate in effect for such year as set forth in the Code at the
time of the first payment of the foregoing), less (iv) the amount of excise
taxes imposed with respect to the payments and benefits described in (i) and
(ii) above by Section 4999 of the Code.
(c) The cash payment obligation of the Company under paragraph (a)
above shall be paid to you in a lump sum within ten days of the Date of
Termination.
(d) Following any termination, the Company will indemnify you to the
fullest extent permitted under applicable laws against any claim, proceeding,
lawsuit, investigation or other action (collectively, an "Action") involving you
in connection with, or relating to, your employment with the Company or its
subsidiaries, and the Company will, to the fullest extent permitted under
applicable laws, advance to you such expenses incurred by you in connection with
the investigation and defense of any such Action.
-4-
<PAGE>
5. Default in Payment. Any payment not made within ten days after it
------------------
is due in accordance with this Agreement shall thereafter bear interest,
compounded annually, at the prime rate from time to time in effect at The First
National Bank of Boston.
6. No Assignment. No interest of you or your spouse or any other
-------------
beneficiary under this Agreement, or any right to receive payment hereunder,
shall be subject in any manner to sale, transfer, assignment, pledge,
attachment, garnishment, or other alienation or encumbrance of any kind, nor may
such interest or right to receive a payment or distribution be taken,
voluntarily or involuntarily, for the satisfaction of the obligations or debts
of, or other claims against, you or your spouse or other beneficiary, including
for alimony.
7. Unsecured Obligation. All rights of you and your spouse or their
--------------------
beneficiary under this Agreement shall at all times be entirely unfunded and no
provision shall at any time be made with respect to segregating any assets of
the Company or payment of any amounts due hereunder. Neither you nor your
spouse or other beneficiary shall have any interest in or rights against any
specific assets of the Company, and you and your spouse or other beneficiary
shall have only the rights of a general unsecured creditor of the Company.
8. Covenant Not to Compete; Non-Solicitation; Confidential
-------------------------------------------------------
Information.
-----------
(a) You hereby acknowledge that, in the course of your employment, you
will necessarily have access to become familiar with and, as an indispensable
part of your employment, use trade secrets, customer lists and detailed
customer-related information (some or all of which may constitute trade
secrets), business plans, financial and other proprietary and confidential
information (collectively "Confidential Information") concerning the Company and
------------------------
that such knowledge and familiarity was and will continue to be of special,
unique, and extraordinary value to the Company.
(b) You hereby agree that during the Noncompete Period (as defined
below), you will not directly or indirectly either for yourself or for any other
person or entity (whether as an owner, stockholder, consultant, agent, advisor,
partner (general or limited) or otherwise), individually or as part of a group,
own, operate, manage, control, participate in, consult with, render services
for, or in any manner engage in any business competing with any part of the
business presently engaged in by the Company that generates at least 20% of the
Company's operating profits within any geographical area (within or without the
United States) in which the Company engages in such business (or solicit any
person to engage in any of the foregoing activities). "Noncompete Period" shall
-----------------
mean the term of your employment and (i) in the event your employment with the
Company is terminated under circumstances which entitle you to benefits under
Section 4(a), the twelve months after the occurrence of a Change in Control; and
(ii) in the event your employment is terminated after the occurrence of a change
in control, but under circumstances which do not entitle you to benefits under
Section 4(a), the period ending on the later of (a) the date twelve months after
the occurrence of the change in control, and (b) the date your employment with
the Company is terminated. Nothing herein shall prohibit you from being a
passive owner of not more than 5%, in the aggregate, of the outstanding stock of
any class of a corporation which is publicly traded and which competes with the
business of the Company so long as you have no direct or indirect participation
in the management of such corporation. You acknowledge that there is no general
-5-
<PAGE>
geographical restriction contained in this paragraph due to the Company-wide
nature of your job responsibilities and that no lesser scope of the restriction
would adequately protect the Company's assets and other legitimate business
interests.
(c) During the Noncompete Period, you agree not to directly or
indirectly on your own behalf or for any other person or entity (i) induce or
attempt to induce any employee of the Company to leave the employ of the
Company, (ii) hire any person who is an employee of the Company as of or
immediately prior to the time of such hiring, or (iii) induce or attempt to
induce any manufacturers' representative, customer, supplier, licensee, agent or
other business relation of the Company to cease doing business with the Company.
(d) You agree that you will not reveal or disclose to any unauthorized
person, or take and use for your own account any Confidential Information
concerning the Company unless and to the extent that (i) the information was or
becomes available to you on a nonconfidential basis from a source which is not,
to your knowledge, bound by a confidentiality obligation to the Company, (ii)
you are required by a court of competent jurisdiction or otherwise compelled by
law to disclose such Confidential Information or (iii) such disclosure is made
by you in good faith in connection with your responsibilities and duties to the
Company and its subsidiaries. In the event that you are so required or
compelled to make such disclosure, you agree to cooperate with the Company to
preserve in full the confidentiality of all Confidential Information whose
disclosure is not required or compelled. Upon termination of employment, you
agree to promptly return to the Company all materials and all copies of
materials involving any Confidential Information in your possession or control.
You also agree to represent to the Company in writing that you have complied
with the provisions of this paragraph (d) upon termination of employment.
9. Effect on Other Plans, Agreements and Benefits. Except to the
----------------------------------------------
extent expressly set forth herein, any benefit or compensation to which you are
entitled under any agreement between you and the Company or any of its
subsidiaries or under any plan maintained by the Company or any of its
subsidiaries in which you participate or participated shall not be modified or
lessened in any way, but shall be payable according to the terms of the
applicable plan or agreement. The terms of this Agreement shall supersede any
existing agreement between you and the Company executed prior to the date hereof
to the extent any such agreement is inconsistent with the terms hereof.
Notwithstanding the above, any benefits received by you pursuant to this
Agreement shall be in lieu of any severance benefits to which you would
otherwise be entitled under any general severance policy maintained by the
Company for its management personnel.
10. Successors; Binding Agreement.
-----------------------------
(a) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. As used in this Agreement, "Company" shall mean Cable Design
Technologies Corporation and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise.
-6-
<PAGE>
(b) This Agreement shall inure to the benefit of and be enforceable by
your personal or legal representatives, executors, administrators, successors,
heirs, distributees, devisees and legatees. If you should die while any amount
would still be payable to you hereunder if you had continued to live, all such
amounts, unless otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to your devisee, legatee or other designee or if there
is no such designee, to your estate.
11. Notice. For the purposes of this Agreement, notices and all
------
other communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given when actually delivered or mailed by
United States registered mail, return receipt requested, postage prepaid,
addressed to the respective addresses set forth on the first page of this
Agreement, provided that all notices to the Company shall be directed to the
attention of the Board with a copy to the Secretary, or to such other address
for either party as it may have furnished to the other in writing in accordance
herewith, except that notice of change of address shall be effective only upon
receipt.
12. Miscellaneous. No provision of this Agreement may be modified,
-------------
waived or discharged unless such modification, waiver or discharge is agreed to
in writing and signed by you and a duly authorized officer of the Company. No
waiver by either party hereto at any time of any breach of or failure to comply
with any condition or provision of this Agreement by the other party hereto
shall be deemed to be a waiver of any similar or dissimilar provisions or
conditions at the same or any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not expressly set
forth in this Agreement.
13. Choice of Law. All questions concerning the construction,
-------------
validity and interpretation of this Agreement and any exhibits and schedules
hereto will be governed by the internal law, and not the law of conflicts of,
the State of Delaware.
14. Validity. The invalidity or unenforceability of any provision of
--------
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
15. Counterpart. This Agreement may be executed in several
-----------
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
16. Survival. The obligations of the parties under this Agreement
--------
all survive the term of this Agreement.
17. Enforcement. The Company agrees to reimburse you for all
-----------
expenses (including reasonable legal fees and expenses) incurred by you to
enforce any breach by the Company of the terms hereof.
* * * * *
-7-
<PAGE>
If this letter correctly sets forth our agreement on the subject
matter hereof, kindly sign and return to the Company this letter and the
enclosed copy of this letter which will then constitute our agreement on this
subject. We will return the copy of this letter to you.
Sincerely,
CABLE DESIGN TECHNOLOGIES
CORPORATION
By: /s/ Paul M. Olson
---------------------------------
President and Chief Executive Officer
Agreed to as of November 1, 1997.
/s/ Charles B. Fromm
- -----------------------------
Charles B. Fromm
-8-
<PAGE>
14
EXHIBIT 13.1
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 Company refined its principal product groups for the year ended July 31,
1998 ("fiscal 1998"). Results of operations for all periods presented are
discussed along the following product lines and groups: Network Communication
group, including network products and communication cable; and Specialty
Electronics group, including automation & process control and specialty cable
products.
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 THE YEAR ENDED JULY 31, 1998 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
(Dollars in thousands)
Sales $ 651,668 $ 516,996 $ 357,352
Cost of sales 460,059 362,060 245,533
Gross profit 191,609 154,936 111,819
Selling, general and administrative expenses 112,062 92,334 63,562
Non-recurring charges 6,093 -- 16,730
Income from operations 73,454 62,602 31,527
Income before extraordinary items 40,481 36,035 15,881
Net income $ 40,481 $ 36,035 $ 15,285
</TABLE>
Sales for fiscal 1998 increased 26.0% to $651.7 million and net income increased
23.3% to $44.4 million compared to the year ended July 31, 1997 ("fiscal 1997"),
excluding non-recurring charges incurred in fiscal 1998 of $3.9 million, net of
tax. Including non-recurring charges, net income for fiscal 1998 increased $4.5
million to $40.5 million.
Acquisition is an important part of CDT's growth strategy. Sales attributable to
recently acquired businesses accounted for $87.9 million of the increase in
fiscal 1998 sales and primarily benefited the Specialty Electronics group. Sales
attributable to the recently acquired businesses include incremental sales for
Dearborn/CDT (including Thermax/CDT) and Stronglink/CDT, which were acquired in
April 1997 and March 1997, respectively, and the post-acquisition operations for
Barcel/CDT and Orebro/CDT which were acquired in September 1997 and March 1998,
respectively. The acquisition of Dearborn/CDT broadened CDT's product offerings,
particularly through its wireless component assembly business and its
Thermax/CDT specialty commercial aircraft and electronic automotive cable
businesses. The acquisition of Barcel/CDT added additional high temperature
cable products for commercial aircraft applications and Orebro/CDT added custom
designed products for wireless communication and instrumentation and process
control, including cable for robotics applications.
Sales for the Network Communication group increased in fiscal 1998. A
substantial increase in sales for communication cable of 24.8% was the result of
strong demand from telephone companies driven by a need to upgrade their local
distribution infrastructure due to an expanded demand for telephone lines
resulting from increased Internet, fax, telecommuting, ISDN, and other usages,
and maintenance
<PAGE>
15
of the existing copper-based local loop infrastructures. Sales of network
products grew 8.6% in fiscal 1998. For network products, an increase in sales of
network cable more than offset a reduction, particularly in Western Europe, in
sales of structured wiring components. Increased demand and a shift to the
higher priced enhanced network cable (level 6 and 7) were primarily responsible
for the increase in network cable sales. Pricing for plenum category 5 cable
products improved during the first three quarters of fiscal 1998 compared to the
last quarter of fiscal 1997. However, competitive market conditions began to
reduce pricing and demand for plenum category 5 cable products during the fourth
quarter of fiscal 1998. In fiscal 1997, plenum category 5 pricing reached its
lowest point for the year in the fourth fiscal quarter as pricing generally
declined throughout the year.
International sales (outside of North America) were $106.2 million in fiscal
1998, including sales attributable to the recently acquired businesses, compared
to $104.7 million in fiscal 1997. Reduced sales in the United Kingdom and
Western Europe due to a strong British pound and U.S. dollar were offset by
increased sales in other geographic areas, including Latin America, Australia
and the Middle East.
In the fourth quarter of 1998, the Company's NORDX/CDT subsidiary incurred a
$3.9 million (net of tax) non-recurring charge related to the discontinuance of
its DynaTraX(TM) product line and other restructuring activities.
In August 1998, CDT purchased 80% of HEW-Kabel Heinz Eilentropp GmbH & Co. KG
and related entities ("HEW-Kabel/CDT"), a German manufacturer of specialty
electronic cable for extreme and hazardous applications in process control,
robotics, transportation and other industries. The acquisition of HEW-Kabel/CDT
furthers the Company's diversification of specialty interconnectivity product
offerings.
YEAR ENDED JULY 31, 1998 COMPARED WITH YEAR ENDED JULY 31, 1997
Sales increased by $134.7 million, or 26.0%, to a record $651.7 million for
fiscal 1998 compared to $517.0 million for fiscal 1997. The increase in fiscal
1998 includes the addition of $87.9 million of sales attributable to the
recently acquired businesses: Barcel/CDT, Orebro/CDT, and the incremental sales
of Dearborn/CDT and Stronglink/CDT for fiscal 1998.
The sales for the Network Communication group increased $45.8 million, or 13.2%,
to $393.3 million. Sales of network products increased $21.4 million, or 8.6%,
to $270.7 million. An increase in sales of network cable was primarily the
result of higher sales in the North American marketplace which were partially
offset by lower international sales resulting from reduced sales in Western
Europe, particularly the U.K., due to a very competitive environment. An
increase in sales of network cable was partially offset by reduced sales of
network structured wiring components, primarily as a result of lower sales in
Western Europe. A strong U.S. dollar and British pound contributed to the lower
sales in Western Europe. Sales of communication cable increased $24.4 million,
or 24.8%, to $122.6 million primarily as a result of continued demand from
telephone companies as they upgrade and expand their local distribution network
infrastructure. For communication cable, selling prices are generally adjusted
for changes in the price of copper and the Company estimates that on an adjusted
copper price basis versus a year ago, the growth in sales was approximately
29.5%.
<PAGE>
16
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Sales for the Specialty Electronics group increased $88.9 million, or 52.4%, to
$258.4 million. Sales of automation & process control products increased $37.3
million, or 35.2%, to $143.4 million and sales of specialty cable products
increased $52.5 million, or 102.2%, to $103.8 million. The Specialty Electronics
group benefited from the additional sales attributable to the recently acquired
businesses which contributed $35.4 million and $50.1 million to the increase in
sales for the automation & process control and specialty cable product lines,
respectively. Although selling prices are generally not contractually adjusted
for changes in the market price of copper for the Specialty Electronics group,
the Company believes that the significant decline in the market price of copper
during the year contributed to competitive pricing conditions during fiscal
1998, particularly for automation & process control products.
International sales increased $1.5 million, or 1.4%, to $106.2 million in fiscal
1998 compared to $104.7 million in fiscal 1997. The additional sales
attributable to the recently acquired businesses contributed $8.9 million to the
increase in international sales. Reduced sales in the United Kingdom and Western
Europe, primarily due to competitive market conditions, were partially offset by
increased sales in other geographic areas, including Latin America, Australia
and the Middle East.
Gross profit increased $36.7 million, or 23.7%, to $191.6 million in fiscal 1998
compared to $154.9 million for fiscal 1997. The gross profit contributed by the
recently acquired businesses accounted for $24.8 million of the increase in
total gross profit. The Network Communication group accounted for approximately
36% of the increase in total gross profit. The increase for this group was
primarily attributable to the higher sales of network cable, including a shift
to the higher priced enhanced network cable, an increase in the gross profit for
network structured wiring components due to an improved product mix, and higher
sales of communication cable. These increases were partially offset by the
unfavorable impact of the decline in the market price of copper during the year
on communication cable which is estimated to have reduced the gross profit by
approximately $2.5 million. The increase in gross profit for the Specialty
Electronics group accounted for approximately 64% of the increase in total gross
profit, primarily due to the additional gross profit attributable to the
recently acquired businesses.
The overall gross margin for fiscal 1998 was 29.4% compared to 30.0% for fiscal
1997. Factors contributing to the lower overall gross margin were the inclusion
of the recently acquired businesses which collectively have a relatively lower
gross margin, and the mix effect of higher sales of the relatively lower gross
margin communication cable. Additionally, the gross margin for communication
cable was negatively impacted as a result of the decline in the market price of
copper during the year and a slight decline in the gross margin for automation &
process control products was primarily due to competitive market conditions.
Selling, general and administrative expense ("SG&A") increased $19.7 million, or
21.4%, to $112.1 million for fiscal 1998 compared to $92.3 million for fiscal
1997. The increase in SG&A was primarily the result of an additional $11.6
million of SG&A attributable to the recently acquired businesses, as well as
increased commission and other direct sales expenses related to the increase in
sales, and increases in other SG&A to support the growth in sales. As a
percentage of sales, SG&A declined to 17.2% for fiscal 1998 from 17.9% for
fiscal 1997 primarily as a result of the lower average SG&A percentage of the
recently acquired businesses. Excluding the effect of acquisitions, SG&A as
percentage of sales for fiscal 1998 was relatively unchanged from fiscal 1997.
<PAGE>
17
A non-recurring charge of $6.1 million ($3.9 million net of tax) was recognized
in fiscal 1998 to provide for costs associated with NORDX/CDT's discontinuance
of its DynaTraX(TM) product line and other restructuring activities.
Income from operations increased $16.9 million, or 27.1%, to $79.5 million in
fiscal 1998, excluding non-recurring charges, compared to $62.6 million for
fiscal 1997. Including non-recurring charges, income from operations was $73.5
million for fiscal 1998. The operating margin, derived by dividing operating
income by sales, was 12.2%, excluding non-recurring charges, for fiscal 1998
compared to 12.1% for fiscal 1997.
Fiscal 1998 net income, excluding non-recurring charges, increased $8.4 million
to $44.4 million ($1.42 per diluted share) compared to fiscal 1997 net income of
$36.0 million ($1.17 per diluted share). Including non-recurring charges, net
income for fiscal 1998 increased $4.5 million to $40.5 million ($1.29 per
diluted share).
YEAR ENDED JULY 31, 1997 COMPARED WITH YEAR ENDED JULY 31, 1996
Sales increased by $159.6 million, or 44.7%, to $517.0 million for fiscal 1997
compared to $357.4 million for the year ended July 31, 1996 ("fiscal 1996"). The
increase in fiscal 1997 sales 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.
Sales for the Network Communication group increased $105.4 million, or 43.5%, to
$347.5 million. Sales of network products increased $60.3 million, or 31.9%, to
$249.3 million. The addition of $65.7 million of network systems products sales
attributable to recently acquired businesses as well as increased sales of
structured wiring components by NORDX/CDT for the comparable six month periods
ending July 31, 1997 and 1996, more than offset reduced sales of 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 cable to the European market as a result of the strong U.S.
dollar. Sales of communication cable increased $45.1 million, or 84.9%,
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 for the Specialty Electronics group increased $54.3 million, or 47.1%, to
$169.5 million. Sales for automation & process control products increased $24.8
million, or 30.5%, including $16.4 million of sales attributable to the recently
acquired businesses. Sales of specialty products increased $25.0 million, or
94.8% as a result of $19.0 million of sales attributable to the recently
acquired businesses and a 22.8% growth in sales by the Company's existing
operations, primarily sales of computer interconnect cable products for
mainframe computer, cellular, satellite based ground communication, and system
interface applications.
International sales increased $19.6 million, or 23.0%, to $104.7 million 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.
<PAGE>
18
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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. The Network Communication group accounted for
approximately 59% of the overall increase due to increases in gross profit for
both network products and communication cable. An 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
plenum Category 5 cable and decreased export sales to Europe. The increase in
gross profit from sales of communication cable 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 Specialty
Electronics group accounted for approximately 41% of the overall increase in
gross profit primarily due to the additional gross profit for Dearborn/ CDT as
well as an increase in gross profit for other businesses.
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 cable as a result of the more competitive price environment
for plenum Category 5 network cable which was partially offset by improved
margins for network passive components.
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%, including 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 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
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.
Fiscal 1997 net income increased $20.7 million to $36.0 million, or $1.17 per
diluted share, compared to net income of $15.3 million, or $0.55 per diluted
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 $0.95 per diluted share.
<PAGE>
19
LIQUIDITY AND CAPITAL RESOURCES
During fiscal 1998 operating working capital increased $18.8 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 ($12.6 million) and inventories
($12.3 million) which were partially offset by increases in accounts payable and
other accrued liabilities of $5.2 million. 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 $43.6
million of net cash from operating activities during fiscal 1998. The net cash
used by investing activities during fiscal 1998 of $68.3 million included $19.1
million for the acquisition of businesses and $49.2 million for capital
projects. Net cash provided by financing activities during fiscal 1998 of $26.8
million was primarily from debt sources and $4.3 million was expended for the
repurchase of the Company's common stock. The net increase in cash for fiscal
1998 was $2.1 million.
During fiscal 1998 and fiscal 1997, the Company expended $49.2 million and $26.7
million, respectively, for capital projects. The expenditures for fiscal 1998
were made to enlarge facilities, to increase manufacturing efficiencies and to
expand the Company's overall production capacity for new and existing product
lines, including capacity expansion for communication as well as networking,
aerospace, and high end coaxial cable products. The Company also made
expenditures for the construction of NORDX/CDT's new 300,000 square foot
manufacturing, administration and R & D facility, as well as expanded warehouse
facilities at other locations.
The Company amended its credit agreement dated April 10, 1997 (the "Credit
Agreement") on August 3, 1998 to, among other things, increase the borrowing
limit under its U.S. revolving credit facility, and to include a German loan
sub-facility. The Credit Agreement as amended is comprised of a $121.3 million
U.S. revolving facility, including a $50.0 million Deutschmark sub-facility, and
a CDN $115.0 million Canadian revolving facility. The Credit Agreement 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 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.
On July 31, 1998, the Company had approximately $47.1 million of availability
under the Credit Agreement and $0.3 million of availability under its foreign
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 August 3, 1998, the Company acquired 80% of HEW-Kabel/CDT. The purchase was
financed through borrowings under the Company's Credit Agreement.
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.
<PAGE>
20
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULT OF OPERATIONS
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 communication cable, 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 generally not
contractually 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.
INTEREST RATE SENSITIVITY
The table below provides information about the Company's financial instruments,
primarily debt obligations, that are sensitive to changes in interest rates. The
table presents principal cash flows and related weighted average interest rates
for debt obligations by expected maturity date and the currency in which the
instrument's cash flows are denominated. Weighted average variable interest
rates are based on the rates in effect at the reporting date for the respective
debt obligations. No assumptions have been made for future changes in such
variable rates. The fair value of fixed rate debt obligations as determined
under current market interest rate assumptions does not differ materially from
the carrying value as presented below. The information is provided in U.S.
dollar equivalents, which is the Company's reporting currency.
<TABLE>
<CAPTION>
EXPECTED MATURITY DATE
FOR PERIODS ENDING JULY 31,
----------------------------------------------
Demand There-
Type* Notes 1999 2000 2001 2002 2003 After Total
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
(U.S. dollar equivalents in
millions)
BALANCE
AVERAGE INTEREST RATE
Demand notes payable
British pound sterling VR $7.8 $ 7.8
8.8% 8.8%
Swedish krona VR $1.6 $ 1.6
5.4% 5.4%
Australian dollar VR $0.7 $ 0.7
5.8% 5.8%
Long-term debt
U.S. dollar FR $7.8 $1.1 $1.4 $0.1 $0.1 $1.1 $11.6
6.4% 7.8% 9.7% 8.5% 8.6% 8.6% 7.2%
British pound sterling FR $1.8 $ 1.8
7.5% 7.5%
U.S. dollar VR $66.0 $66.0
6.2% 6.2%
Canadian dollar VR $66.3 $66.3
5.4% 5.4%
</TABLE>
* VR-Variable interest rate
FR-Fixed interest rate
<PAGE>
21
NEW ACCOUNTING STANDARDS
The FASB issued Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income" ("SFAS No. 130") and Statement of Financial Accounting
Standards No. 131, "Disclosures about Segments of an Enterprise and Related
Information" ("SFAS No. 131") 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. 131
establishes standards for reporting information about operating segments. SFAS
No.'s 130 and 131 are effective for the Company's fiscal year ending July, 31,
1999. Adoption of these standards will not change the reported results of
operations or financial position of the Company, however compliance with the
provisions of these standards will add, expand and/or modify various disclosures
made in conjunction with the financial statements.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This statement establishes accounting and
reporting standards for derivative instruments and requires recognition in the
balance sheet of all derivative instruments as either assets or liabilities,
measured at fair value. SFAS No. 133 is effective for the Company's fiscal year
ending July 31, 2000. The Company does not believe the effect of adoption will
be material.
OTHER MATTERS
The Company has assessed the potential impact of the Year 2000 date processing
issue on its information technology ("IT") systems and has plans to modify or
replace non-compliant IT systems. The cost to maintain or modify IT systems is
expensed as incurred, while the cost of new hardware and software is capitalized
and amortized over the estimated useful life of the IT system. Many of the
Company's operating units have acquired, or plan to acquire, new IT systems in
order to improve functionality and provide additional system capabilities. As of
July 31, 1998, the Company has expended $1.9 million to replace or modify such
IT systems, and estimates an additional $1.0 million will be expended over the
next 12 months. Based on management's assessment, expenditures associated with
modifying or replacing existing IT systems to resolve the Year 2000 issue will
not have a material adverse effect on the Company's results of operations,
liquidity or capital resources.
Each division and subsidiary of the Company has undertaken or is in the process
of completing a review of the impact of the Year 2000 issue on their non-IT
systems and on key suppliers and customers. While all such reviews are not yet
completed, the Company has not become aware of any materially adverse Year 2000
compliance issues relating to its non-IT systems or key customers or suppliers.
As reviews of non-IT systems and third party compliance have not yet been
completed, the Company has not determined whether or not a contingency plan for
Year 2000 issues is necessary. There can be no assurance, however, that
inadequate Year 2000 compliance by third parties, non-compliance of systems or
other unanticipated effects will not cause business disruptions that may have an
adverse effect on the Company's operations.
<PAGE>
22
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD LOOKING STATEMENTS-UNDER THE PRIVATE SECURITIES LITIGATION ACT OF 1995
Certain of the statements in this annual report are forward-looking statements,
including, without limitation, statements regarding future financial results and
performance, Year 2000 compliance, accretiveness of acquisitions, growth
factors, cost savings and other beliefs, expectations or opinions of the Company
and its management. 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, 1998 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.
<PAGE>
23
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, 1998 and 1997, and the related consolidated statements of income,
stockholders' equity and cash flows for the three years in the period ended July
31, 1998. 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, 1998 and 1997, and the results of
their operations and their cash flows for each of the three years in the period
ended July 31, 1998 in conformity with generally accepted accounting principles.
/s/ Arthur Andersen LLP
Pittsburgh, Pennsylvania
September 11, 1998
<PAGE>
24
Consolidated Statements Of Income
<TABLE>
<CAPTION>
YEAR ENDED JULY 31, 1998 1997 1996
- ---------------------------------------------------------------------------------------------------
(Dollars in thousands, except per share information)
<S> <C> <C> <C>
Sales $ 651,668 $ 516,996 $ 357,352
Cost of sales 460,059 362,060 245,533
--------------------------------------
Gross profit 191,609 154,936 111,819
Selling, general and administrative expenses 112,062 92,334 63,562
Non-recurring charges 6,093 -- 16,730
--------------------------------------
Income from operations 73,454 62,602 31,527
Interest expense, net 8,560 5,338 5,362
Other (income) expense, net (922) (58) 271
--------------------------------------
Income before income taxes and extraordinary items 65,816 57,322 25,894
Income tax provision 25,335 21,287 10,013
--------------------------------------
Income before extraordinary items 40,481 36,035 15,881
Extraordinary loss on the early extinguishment of debt -- -- (596)
--------------------------------------
Net income $ 40,481 $ 36,035 $ 15,285
--------------------------------------
INCOME PER SHARE OF COMMON STOCK:
BASIC:
Income before extraordinary items $ 1.40 $ 1.31 $ 0.66
Extraordinary loss -- -- (0.02)
--------------------------------------
Net income $ 1.40 $ 1.31 $ 0.64
--------------------------------------
DILUTED:
Income before extraordinary items $ 1.29 $ 1.17 $ 0.57
Extraordinary loss -- -- (0.02)
--------------------------------------
Net income $ 1.29 $ 1.17 $ 0.55
--------------------------------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
25
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JULY 31, 1998 1997
- -----------------------------------------------------------------------------------------------------------------------------------
(Dollars in thousands, except per share information)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 11,143 $ 9,017
Accounts receivable, net of allowance for uncollectible accounts of $3,995 and $4,358, respectively 117,265 109,262
Inventories 130,307 120,974
Prepaid expenses and other 10,116 6,189
Deferred income taxes 7,714 2,103
---------------------
Total current assets 276,545 247,545
---------------------
Property, plant and equipment, net 160,891 127,568
Intangible assets, net 6,735 7,819
Goodwill, net 57,656 45,248
Other assets 1,733 1,319
---------------------
Total assets $ 503,560 $ 429,499
=====================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable to banks $ 10,150 $ 5,618
Current maturities of long-term debt 9,593 4,588
Accounts payable 45,737 41,446
Accrued payroll and related benefits 15,596 13,466
Other accrued liabilities 20,793 20,402
---------------------
Total current liabilities 101,869 85,520
---------------------
Long-term debt 136,052 126,661
Other non-current liabilities 6,359 5,618
Deferred income taxes 14,382 6,575
---------------------
Total liabilities 258,662 224,374
---------------------
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,
30,660,472 and 18,755,865 shares issued, respectively 307 188
Paid-in capital 165,681 158,670
Retained earnings 88,605 48,219
Treasury stock, at cost, 200,000 shares at July 31, 1998 (4,291) -
Deferred compensation - (87)
Currency translation adjustment (5,394) (1,865)
Minimum pension liability (10) -
---------------------
Total stockholders' equity 244,898 205,125
---------------------
Total liabilities and stockholders' equity $ 503,560 $ 429,499
=====================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
26
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED JULY 31, 1998 1997 1996
- -------------------------------------------------------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net income $ 40,481 $ 36,035 $ 15,285
ADJUSTMENTS FOR NON-CASH ITEMS TO RECONCILE NET INCOME
TO CASH PROVIDED BY OPERATING ACTIVITIES:
Depreciation 11,079 8,034 4,523
Amortization 2,966 2,041 1,465
Extraordinary loss on the early extinguishment of debt - - 596
Write-off of acquired in-process research and development - - 9,826
Costs to discontinue DynaTraX(TM)and other restructuring 6,093 - -
Deferred income taxes 1,830 3,107 (2,550)
CHANGES IN ASSETS AND LIABILITIES NET OF EFFECTS OF BUSINESSES ACQUIRED:
Accounts receivable (12,627) (3,972) (27,972)
Inventories (12,262) (12,679) (13,037)
Prepaid expenses and other (274) (996) (90)
Accounts payable 5,181 316 5,255
Accrued payroll and related benefits (486) (674) 5,542
Other accrued liabilities 522 (570) 6,187
Other non-current assets and liabilities 1,117 263 (333)
------------------------------
Net cash provided by operating activities 43,620 30,905 4,697
------------------------------
CASH FLOW FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (49,248) (26,704) (15,898)
Acquisition of businesses, including transaction costs,
net of cash acquired (19,092) (72,445) (104,681)
------------------------------
Net cash used in investing activities (68,340) (99,149) (120,579)
------------------------------
CASH FLOW FROM FINANCING ACTIVITIES:
Net change in demand and revolving note borrowings 27,314 87,490 24,021
Funds provided by term debt 1,316 7,242 82,517
Funds used to reduce term debt (4,519) (39,166) (90,950)
Net proceeds from issuance of common stock 24 1,006 113,885
Net proceeds from exercise of stock options and
related tax benefits 6,966 4,762 2,406
Repurchase of common stock (4,291) - -
Payments of deferred financing fees - - (2,121)
------------------------------
Net cash provided by financing activities 26,810 61,334 129,758
------------------------------
Effect of currency translation on cash 36 (170) 11
------------------------------
Net increase (decrease) in cash 2,126 (7,080) 13,887
Cash, beginning of year 9,017 16,097 2,210
------------------------------
Cash, end of year $ 11,143 $ 9,017 $ 16,097
==============================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
27
Consolidated Statements Of Stockholders' Equity
<TABLE>
<CAPTION>
FOR THE YEARS ENDED JULY 31, 1998, 1997 AND 1996
- --------------------------------------------------------------------------------------------------------------------------------
(Dollars in thousands)
COMMON STOCK RETAINED
--------------------- EARNINGS
PAR PAID-IN (ACCUMULATED TREASURY DEFERRED
SHARES VALUE CAPITAL DEFICIT) STOCK COMPENSATION
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, JULY 31, 1995 9,743,903 $ 98 $ 35,973 $ (3,808) $ -- $ (330)
Net income -- -- -- 15,285 -- --
Exercise of options
and related tax benefits 255,100 3 2,406 -- -- --
Stock grants 2,250 -- 45 -- -- --
Deferred compensation -- -- -- -- -- 122
Stock split 4,871,934 48 -- (48) -- --
Stock offering 2,970,000 30 113,850 -- -- --
Pooling of interest 211,311 2 590 755 -- --
Currency translation
adjustments -- -- -- -- -- --
- --------------------------------------------------------------------------------------------------------------------------------
BALANCE, JULY 31, 1996 18,054,498 181 152,864 12,184 -- (208)
Net income -- -- -- 36,035 -- --
Exercise of options
and related tax benefits 649,637 6 4,762 -- -- --
Stock grants 1,512 -- 45 -- -- --
Deferred compensation -- -- -- -- -- 121
Stock issuance 50,218 1 999 -- -- --
Currency translation
adjustments -- -- -- -- -- --
- --------------------------------------------------------------------------------------------------------------------------------
BALANCE, JULY 31, 1997 18,755,865 188 158,670 48,219 -- (87)
Net income -- -- -- 40,481 -- --
Exercise of options
and related tax benefits 2,525,296 24 6,966 -- -- --
Stock grants 1,980 -- 45 -- -- --
Deferred compensation -- -- -- -- -- 87
Stock split 9,377,331 95 -- (95) -- --
Treasury share transactions (200,000) -- -- -- (4,291) --
Currency translation
adjustments -- -- -- -- -- --
Minimum pension liability -- -- -- -- -- --
----------------------------------------------------------------------------------------
BALANCE, JULY 31, 1998 30,460,472 $ 307 $ 165,681 $88,605 $ (4,291) $ --
========================================================================================
- --------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
CURRENCY MINIMUM TOTAL
TRANSLATION PENSION STOCKHOLDERS'
ADJUSTMENTS LIABILITY EQUITY
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BALANCE, JULY 31, 1995 $ (68) $ -- $ 31,865
Net income -- -- 15,285
Exercise of options
and related tax benefits -- -- 2,409
Stock grants -- -- 45
Deferred compensation -- -- 122
Stock split -- -- --
Stock offering -- -- 113,880
Pooling of interest -- -- 1,347
Currency translation
adjustments 504 -- 504
- -----------------------------------------------------------------------------------
BALANCE, JULY 31, 1996 436 -- 165,457
Net income -- -- 36,035
Exercise of options
and related tax benefits -- -- 4,768
Stock grants -- -- 45
Deferred compensation -- -- 121
Stock issuance -- -- 1,000
Currency translation
adjustments (2,301) -- (2,301)
- -----------------------------------------------------------------------------------
BALANCE, JULY 31, 1997 (1,865) -- 205,125
Net income -- -- 40,481
Exercise of options
and related tax benefits -- -- 6,990
Stock grants -- -- 45
Deferred compensation -- -- 87
Stock split -- -- --
Treasury share transactions -- -- (4,291)
Currency translation
adjustments (3,529) -- (3,529)
Minimum pension liability -- (10) (10)
--------------------------------------
BALANCE, JULY 31, 1998 $(5,394) $ (10) $244,898
======================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
28
Notes To Consolidated Financial Statements
NOTE 1. OPERATIONS
Cable Design Technologies Corporation is a leading designer and manufacturer of
technologically advanced electronic data transmission cable for network,
communication, 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 telecommunication infrastructures.
NOTE 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 Cable Design
Technologies Corporation and its majority owned subsidiaries ("the Company").
All material intercompany transactions and balances have been eliminated in
consolidation.
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.
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. 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.
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. Accumulated
amortization of goodwill was $5.9 million and $4.1 million at July 31, 1998 and
1997, respectively.
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.
<PAGE>
29
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.
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 material foreign subsidiaries are located
in countries with stable economies.
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 temporary
differences 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.
RESEARCH AND DEVELOPMENT
Research and development costs are charged to expense as incurred. Research and
development costs were approximately $7.4 million, $7.2 million, and $4.8
million for the years ended July 31, 1998, 1997 and 1996, 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.
STATEMENTS OF CASH FLOWS
Supplemental disclosure of cash flow information.
YEAR ENDED JULY 31, 1998 1997 1996
- -----------------------------------------------------------------------
(Dollars in thousands)
CASH PAID DURING THE YEAR FOR:
Interest, net $ 8,165 $ 5,308 $ 5,759
Income taxes $ 19,707 $ 16,649 $ 8,965
<PAGE>
30
Notes To Consolidated Financial Statements
IMPACT OF NEWLY ISSUED ACCOUNTING STANDARDS
The Financial Accounting Standards Board ("FASB") issued Statement of Financial
Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive Income" and SFAS
No. 131, "Disclosures about Segments of an Enterprise and Related Information"
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. 131 establishes standards for reporting
information about operating segments. SFAS No.'s 130 and 131 are effective for
the Company with the fiscal year beginning August 1, 1998. Adoption of these
standards will not change the reported results of operations or financial
position of the Company, however compliance with the provisions of these
standards will add, expand and/or modify various disclosures made in conjunction
with the financial statements.
The FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities", in June 1998. SFAS No. 133 establishes accounting and reporting
standards for derivative instruments and requires recognition of all derivatives
as either assets or liabilities, measured at fair value, in the balance sheet.
SFAS No. 133 is effective for the Company's fiscal year beginning August 1,
1999, and the Company does not believe adoption will have a material impact on
its financial position, results of operations or cash flows.
The Company has adopted SFAS No. 132, "Employers' Disclosures about Pensions and
Other Postretirement Benefits", effective July 31, 1998. SFAS No. 132 revises
and standardizes disclosure requirements for pension and other postretirement
benefit plans.
NOTE 3. STOCKHOLDERS' EQUITY
The Company effected a 3-for-2 stock split in the form of a common stock
dividend on December 29, 1995, and again on January 8, 1998. Prior period common
share information other than amounts displayed on the consolidated balance
sheets and statements of stockholders' equity have been adjusted to reflect the
effect of the splits.
On May 7, 1997, the Board of Directors approved a program under which up to $30
million of the Company's common stock may be repurchased on the open market or
in privately negotiated transactions. The Company repurchased 200,000 common
shares during fiscal 1998 under the program.
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-fifteen hundredth of a share of a new series of junior
participating preferred stock for an exercise price of $100.00. 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 "Acquirer"). If the Acquirer purchases 20% or more
of the total outstanding shares of the Company's common stock, or if the
Acquirer acquires the Company in a reverse merger, each Right (except those held
by the Acquirer) becomes a right to buy shares of the Company's common
<PAGE>
31
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 Acquirer) becomes a right to buy shares of the common
stock of the Acquirer 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.
On February 28, 1996, the Company effected a public offering of 8,550,000 shares
(the "Offering") of its common stock, of which 4,095,000 were sold by selling
stockholders and 4,455,000 were sold by the Company. The net proceeds received
by the Company from the Offering were approximately $113.9 million based on the
public offering price of $27.00 per share. Approximately $94.8 million 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 $6.9 million of the net proceeds were used to make
the payment in connection with the vesting of outstanding stock appreciation
rights.
NOTE 4. INVENTORIES
Inventories of the Company consist of the following:
July 31, 1998 1997
- -----------------------------------------------------------------------------
(Dollars in thousands)
Raw materials $ 40,089 $ 34,424
Work-in-process 27,485 25,608
Finished goods 62,733 60,942
-------------------------
$ 130,307 $ 120,974
=========================
NOTE 5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment of the Company
consist of the following:
July 31, 1998 1997
- -----------------------------------------------------------------------------
(Dollars in thousands)
ASSET (ASSET LIVES):
Land $ 8,945 $ 8,418
Buildings and improvements (10 - 40 years) 49,567 29,843
Machinery and equipment (3 - 15 years) 134,404 113,158
Furniture and fixtures (5 - 10 years) 8,481 6,727
-------------------------
Total 201,397 158,146
Less: accumulated depreciation (40,506) (30,578)
-------------------------
$ 160,891 $ 127,568
=========================
<PAGE>
32
Notes to Consolidated Financial Statements
NOTE 6. INTANGIBLE ASSETS
Intangible assets consist of patents, trademarks, loan origination fees and non-
compete agreements. Patents, trademarks and non-compete agreements are being
amortized over periods ranging from five to ten years. Loan origination fees are
amortized over the term of the related loan. Accumulated amortization for
intangible assets was $2.6 million and $1.6 million at July 31, 1998 and 1997,
respectively.
NOTE 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 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 London
Inter-Bank Offered Rate ("LIBOR"). The Australian Facility is a revolving demand
facility with maximum borrowings of approximately $0.7 million. The Foreign
Facilities are guaranteed by the Company. The Company had outstanding and
maximum borrowings of $10.2 million and $5.6 million under the Foreign
Facilities as of and for the years ended July 31, 1998 and 1997, respectively.
Weighted average outstanding borrowings were $9.2 million and $4.5 million, and
the effective interest rates were 7.70% and 6.63% for the years ended July 31,
1998 and 1997, respectively.
Long-term debt consists of the following:
July 31, 1998 1997
- -----------------------------------------------------------------------------
(Dollars in thousands)
U.S. revolver, due April 10, 2002, bears interest
at LIBOR plus 0.5%, or 6.156% at July 31, 1998 $ 66,000 $ 50,500
Canadian revolver, due April 10, 2002, bears interest
at LIBOR plus 0.5%, or 5.375% at July 31, 1998 66,330 65,585
Other indebtedness 13,315 15,164
--------------------
Total 145,645 131,249
Less: current portion 9,593 4,588
--------------------
$ 136,052 $ 126,661
====================
<PAGE>
33
On February 2, 1996, the Company entered into a credit agreement (the "Credit
Agreement"). 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 communication cable and IBDN network structured
wiring products businesses ("NORDX/CDT"). The Credit Agreement was subsequently
reconfigured as a result of the application of the proceeds from the February
28, 1996 Offering (see Note 3) against the outstanding debt.
The Credit Agreement, as revised on April 10, 1997, was 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 LIBOR are based on the attainment of certain
performance factors. A commitment fee of 0.15% to 0.375% 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.
On July 31, 1998 the Company had approximately $47.1 million of availability
under the U.S. and Canadian Revolver loans and $0.3 million of availability
under its Foreign Facilities.
On August 3, 1998, the Company amended the Credit Agreement to, among other
things, increase the borrowing limit under the U.S. Revolver to $121.3 million
and to include a $50.0 million Deutschmark sub-facility under the U.S. Revolver.
The scheduled aggregate annual principal payments of long-term debt as of July
31, 1998, are as follows:
YEAR ENDED: LONG-TERM DEBT
- ---------------------------------------------------------------------------
(Dollars in thousands)
1999 $ 9,593
2000 1,134
2001 1,363
2002 132,382
2003 50
Thereafter 1,123
----------
$ 145,645
==========
As a result of the February 1996 debt refinancing and the application of the net
proceeds of the Offering in fiscal 1996, the Company recognized $1.0 million
($0.6 million net of income tax) of extraordinary expense related to the early
extinguishment of debt.
NOTE 8. RETIREMENT AND OTHER EMPLOYEE BENEFITS
The Company and its subsidiaries have various defined contribution and defined
benefit plans covering substantially all of its employees. 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.
<PAGE>
34
Notes To Consolidated Financial Statements
DEFINED BENEFIT PLANS
The Company maintains defined benefit plans for one of its U.S. locations
(the "U.S. Plan") and for certain employees in Canada (the "Canadian
Plans").
The following sets forth the changes in benefit obligations and plan
assets, and reconciles amount recognized in the Company's consolidated
balance sheets:
<TABLE>
<CAPTION>
U.S. PLAN CANADIAN PLANS
YEAR ENDED JULY 31, 1998 1997 1998 1997
---------------------------------------------------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Benefit obligation at beginning of year $ 1,913 $ 1,801 $ 3,647 $ 1,610
Service cost 28 26 1,817 1,690
Interest cost 133 135 421 265
Loss (gain) 113 -- (182) --
Change in actuarial assumptions (84) 61 882 107
Benefits paid (119) (110) (150) (4)
Effect of currency translation -- -- (481) (21)
--------------------------------------------
Benefit obligation at end of year $ 1,984 $ 1,913 $ 5,954 $ 3,647
--------------------------------------------
Fair value of plan assets at beginning of year $ 2,395 $ 2,046 $ 1,944 $ --
Company contributions -- -- 1,335 1,855
Actual return on plan assets 220 460 314 109
Benefits paid (119) (111) (150) (4)
Effect of currency translation -- -- (257) (16)
--------------------------------------------
Fair value of plan assets at end of year $ 2,496 $ 2,395 $ 3,186 $ 1,944
--------------------------------------------
Funded status $ 512 $ 483 $ (2,768) $ (1,703)
Unrecognized net actuarial gain (loss) (31) (82) 792 94
Unrecognized prior service cost 60 69 -- --
--------------------------------------------
Prepaid benefit (accrued liability) $ 541 $ 470 $ (1,976) $ (1,609)
--------------------------------------------
Amounts recognized in the consolidated balance sheets consist of:
Prepaid benefit cost $ 541 $ 470 $ -- $ --
Accrued benefit liability -- -- (1,976) (1,609)
Additional minimum liability -- -- (10) --
Adjustment to retained earnings -- -- 10 --
--------------------------------------------
Net prepaid benefit (accrued liability) $ 541 $ 470 $ (1,976) $ (1,609)
--------------------------------------------
</TABLE>
Assets of the U.S. and Canadian plans are invested primarily in equity and
fixed income securities.
<PAGE>
35
The weighted-average assumptions as of the end of the periods were as follows:
<TABLE>
<CAPTION>
U.S. PLAN CANADIAN PLANS
YEAR ENDED JULY 31, 1998 1997 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Weighted average discount rate 7.00% 7.50% 6.30% 8.00%
Weighted average expected
long term rate of return 9.50% 9.50% 8.00% 8.00%
</TABLE>
The components of pension expense for fiscal 1998 and 1997 were as follows:
<TABLE>
<CAPTION>
U.S. PLAN CANADIAN PLANS
YEAR ENDED JULY 31, 1998 1997 1998 1997
- --------------------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Service cost $ 28 $ 26 $ 1,817 $ 1,690
Interest cost 133 135 421 265
Expected return on plan assets (220) (460) (198) (97)
One time adjustment -- -- (174) --
Net amortization (12) 268 9 --
-------------------------------------
Net periodic benefit expense (credit) $ (71) $ (31) $ 1,875 $ 1,858
-------------------------------------
</TABLE>
The Company also maintains defined contribution profit-sharing plans for
eligible employees. Certain contributions are made under the matching provision
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 $4.3 million, $3.2 million and $2.5 million for the
years ended July 31, 1998, 1997, and 1996 respectively.
NOTE 9 - POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
Certain of the Company's operations are covered by postretirement health and
life insurance benefits under unfunded plans.
The components that comprise the changes in the benefit obligation were as
follows:
<TABLE>
<CAPTION>
YEAR ENDED JULY 31, 1998 1997
- ---------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C>
Benefit obligation at beginning of year $ 4,110 $ 3,441
Service cost 218 202
Interest cost 335 293
Actuarial loss 23 191
Benefits paid -- --
Effect of currency translation (395) (17)
--------------------
Benefit obligation at end of year $ 4,291 $ 4,110
====================
</TABLE>
<PAGE>
36
Notes To Consolidated Financial Statements
Amounts recognized in the consolidated balance sheets consist of:
<TABLE>
<CAPTION>
JULY 31, 1998 1997
- ------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C>
Funded status $ (4,291) $ (4,110)
Unrecognized net loss 234 189
----------------------
Accrued postretirement benefit liability $ (4,057) $ (3,921)
======================
</TABLE>
Future benefits were estimated assuming medical costs would increase at
approximately an 8.25% annual rate for 1997, 6.50% for 1998 and then remain at a
4% annual growth rate thereafter and dental costs would increase at
approximately 4.75% for 1997, 4.25% for 1998 and 2.5% thereafter.
The components of postretirement expense for fiscal 1998 and 1997 were as
follows:
<TABLE>
<CAPTION>
JULY 31, 1998 1997
- ------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C>
Service cost $ 218 $ 202
Interest cost 335 293
Net amortization 22 -
--------------------
Net postretirement benefit expense $ 575 $ 495
====================
</TABLE>
Assuming a 1% increase in this annual trend, the accumulated postretirement
benefit obligation would have increased by $369,000 and $365,000 at July 31,
1998 and 1997, respectively and the postretirement benefit expense would have
increased by approximately $51,000 and $58,000 for fiscal 1998 and 1997,
respectively. The weighted average discount rate used to estimate the
accumulated postretirement benefit obligation was 6.3%.
NOTE 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, 4,166,544 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 the 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. Substantially all of the options granted under the Former Plan were
exercised prior to July 31, 1998.
<PAGE>
37
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 stock options, stock appreciation rights, restricted stock,
performance units and other types of incentive 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 655,083 shares of
common stock were reserved for issuance pursuant to the Stock Option Plan. As of
July 31, 1998, 630,900 non-qualified stock options have been granted to various
employees under the Stock Option Plan. The terms of the stock options include
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
1,800,000 shares of common stock, of which 1,125,000 shares are to be reserved
for grants only to new members of the Company's management who are employed in
connection with acquisitions by the Company. As of July 31, 1998, 1,148,100
options have been granted under the Supplemental Plan, including 1,070,100
issued to employees of acquired companies. The terms of the stock options
include 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, 188,400 and 599,100 of the options previously issued under
the Stock Option Plan and Supplemental Plan (collectively "the Plans"),
respectively, were amended. The terms of the amended stock options include
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 in the
accompanying disclosures as a cancellation and reissuance.
Certain information regarding stock option transactions is summarized below:
<TABLE>
<CAPTION>
YEAR ENDED JULY 31, 1998 1997 1996
- -------------------------------------------------------------------------------------------------------------
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 4,393,035 $ 6.03 4,917,491 $ 5.67 4,295,121 $ 1.03
Granted/reissued 99,000 26.17 1,237,500 16.27 1,005,020 23.75
Exercised (2,525,296) 0.81 (974,456) 0.93 (382,650) 1.15
Canceled/forfeited (3,675) 18.42 (787,500) 26.17 -- --
---------------------------------------------------------------------------------------
Outstanding,
end of year 1,963,064 $ 13.74 4,393,035 $ 6.03 4,917,491 $ 5.67
Exercisable
at end of year 514,002 $ 6.84 2,831,859 $ 0.96 3,671,346 $ 0.75
---------------------------------------------------------------------------------------
Weighted average
fair value of
options granted $ 13.50 $ 9.27 $ 11.35
</TABLE>
<PAGE>
38
Notes To Consolidated Financial Statements
Information regarding stock options outstanding as of July 31,
1998 is summarized below:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
--------------------------------------- ----------------------
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
RANGE OF REMAINING EXERCISE EXERCISE
EXERCISE PRICES OPTIONS CONTRACTUAL LIFE PRICE OPTIONS PRICE
--------------- --------------------------------------- ----------------------
<S> <C> <C> <C> <C> <C>
$0.89 - $6.22 441,914 3.8 years $ 3.39 351,917 $ 2.67
$12.50 - $26.17 1,521,150 8.7 years $ 16.75 162,085 $ 15.90
</TABLE>
The Company accounts for the Plans in accordance with APB Opinion
No. 25, under which no compensation cost has been recognized for
option grants as the exercise price of the options equals the
fair market value of the underlying common stock at the date of
grant. The supplemental information presented below discloses pro
forma net income and net income per common share as if the
Company had determined the cost of stock options in accordance
with the fair value method under SFAS No. 123.
<TABLE>
<CAPTION>
YEAR ENDED JULY 31, 1998 1997 1996
---------------------------------------------------------------------
(Dollars in thousands, except per share data)
<S> <C> <C> <C>
Net income: As reported $ 40,481 $ 36,035 $ 15,285
Pro forma $ 38,550 $ 34,557 $ 14,722
Basic EPS: As reported $ 1.40 $ 1.31 $ 0.64
Pro forma $ 1.33 $ 1.25 $ 0.61
Diluted EPS: As reported $ 1.29 $ 1.17 $ 0.55
Pro forma $ 1.23 $ 1.12 $ 0.53
</TABLE>
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 for grants issued in 1998,
1997, and 1996, respectively: risk-free interest rates of 5.93%,
6.53% and 5.76%; expected volatility of 53.00%, 58.45% and
48.59%; expected life of 5 years for all options; and an expected
dividend yield of zero for all options. The Black-Scholes option
valuation model requires the use of highly subjective
assumptions, and was developed for use in valuing stock options
with significantly different characteristics from those issued
under the Plans. Therefore, management does not believe that the
model necessarily provides a reliable estimate of the fair value
of its employee stock options. Additionally, the SFAS No. 123
method of accounting is effective for options granted after
August 1, 1995, and 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.
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. Shares granted under the Non-Employee Plan were 1,980
in fiscal 1998, 2,268 in fiscal 1997 and 3,376 in fiscal 1996,
respectively. The Company recognizes compensation cost for the
Non-Employee Plan in accordance with SFAS No. 123.
<PAGE>
39
NOTE 11. INCOME TAXES
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.
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, 1998 1997 1996
- ----------------------------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C>
Domestic $ 49,084 $ 35,031 $ 25,751
Foreign 16,732 22,291 143
---------------------------------
Income before income taxes and extraordinary items $ 65,816 $ 57,322 $ 25,894
=================================
</TABLE>
Taxes on income, as shown in the accompanying consolidated statements of income,
include the following components:
<TABLE>
<CAPTION>
YEAR ENDED JULY 31, 1998 1997 1996
- -----------------------------------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C>
Current provision:
Federal $ 16,080 $ 11,980 $ 8,525
State 3,533 2,652 2,261
Foreign 3,892 3,548 1,777
-----------------------------------
Total current provision 23,505 18,180 12,563
Deferred provision (benefit), predominantly foreign 1,830 3,107 (2,550)
-----------------------------------
Income tax provision $ 25,335 $ 21,287 $ 10,013
===================================
</TABLE>
The effective rate differs from the statutory rate for the following reasons:
<TABLE>
<CAPTION>
YEAR ENDED JULY 31, 1998 1997 1996
- -----------------------------------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C>
Tax provision based on the U.S. federal statutory
tax rate $ 23,035 $ 20,063 $ 9,063
State income taxes, net of federal income tax benefit 2,296 1,724 1,470
Amortization of excess cost over net assets acquired 250 201 186
Research and development tax credit (Canada) (877) (870) (470)
All other, net 631 169 (236)
-----------------------------------
Income tax provision $ 25,335 $ 21,287 $ 10,013
===================================
</TABLE>
<PAGE>
40
Notes To Consolidated Financial Statements
The components of the deferred tax assets and liabilities
recorded in the accompanying balance sheets at July 31, 1998 and
1997, which include net deferred tax liabilities recorded in
connection with acquisitions and reflect reclassifications as a
result of finalization of purchase accounting under APB 16, were
as follows:
<TABLE>
<CAPTION>
JULY 31, 1998 1997
------------------------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C>
DEFERRED TAX ASSETS:
Reserves recorded for:
Accruals $ 1,944 $ 685
Postretirement and pension accruals 1,751 1,772
Asset valuations 5,204 2,103
Uniform cost capitalization 1,117 1,188
Other 902 980
------------------------
Total deferred tax assets $ 10,918 $ 6,728
------------------------
DEFERRED TAX LIABILITIES:
Excess of book basis over tax basis of fixed assets $ (16,648) $ (10,802)
Other (775) (224)
------------------------
Total deferred tax liabilities (17,423) (11,026)
------------------------
Net deferred taxes before valuation allowance (6,505) (4,298)
Valuation allowance (foreign NOL) (163) (174)
------------------------
Net deferred taxes $ (6,668) $ (4,472)
========================
Reconciliation to the balance sheets -
Current portion of deferred taxes, net $ 7,714 $ 2,103
Long-term deferred taxes, net (14,382) (6,575)
------------------------
Net deferred taxes $ (6,668) $ (4,472)
========================
</TABLE>
NOTE 12. NET INCOME PER SHARE OF COMMON STOCK
Basic net income per share of common stock is computed by
dividing net income by the weighted average number of shares of
common stock outstanding. Diluted net income per share of common
stock is computed based on the weighted average common shares
outstanding 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.
<PAGE>
41
The following table sets forth the computation of basic and diluted earnings per
share:
<TABLE>
<CAPTION>
JULY 31, 1998 1997 1996
- ---------------------------------------------------------------------------------------------------
(Dollars in thousands, except per share data)
<S> <C> <C> <C>
NUMERATOR:
Income before extraordinary items $ 40,481 $ 36,035 $ 15,881
Extraordinary loss -- -- (596)
--------------------------------------------
Net income $ 40,481 $ 36,035 $ 15,285
============================================
DENOMINATOR:
Denominator for basic earnings per share 29,000,494 27,597,653 23,966,009
Shares issuable from assumed conversion
of dilutive stock options 2,320,982 3,290,130 3,974,179
--------------------------------------------
Denominator for diluted earnings per share 31,321,476 30,887,783 27,940,188
INCOME PER SHARE OF COMMON STOCK:
Income before extraordinary items $ 1.40 $ 1.31 $ 0.66
Extraordinary loss -- -- (0.02)
--------------------------------------------
Net income $ 1.40 $ 1.31 $ 0.64
============================================
INCOME PER SHARE OF COMMON STOCK ASSUMING DILUTION:
Income before extraordinary items $ 1.29 $ 1.17 $ 0.57
Extraordinary loss -- -- (0.02)
--------------------------------------------
Net income $ 1.29 $ 1.17 $ 0.55
============================================
</TABLE>
NOTE 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 the assets
and liabilities assumed were as follows:
- --------------------------------------------------------------------------------
(Dollars in thousands)
Assets acquired $ 87,932
Liabilities assumed (13,837)
Notes issued (6,595)
-----------
Net cash paid $ 67,500
===========
<PAGE>
42
Notes To Consolidated Financial Statements
On February 2, 1996, the Company completed the acquisition of Northern Telecom
Ltd's communication 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 assumes the acquisitions of
Dearborn/CDT, NORDX/CDT and Raydex/CDT had occurred as of the beginning of each
period presented. The pro forma information presented for fiscal 1997 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
- ----------------------------------------------------------------------------
(Dollars in thousands, except per share data)
<S> <C> <C>
Net sales $ 577,531 $ 550,332
Income before extraordinary items 38,336 32,173
Net income 38,336 32,173
Net income per common share (diluted) $ 1.24 $ 1.05
</TABLE>
The pro forma financial information presented above does not purport to present
what the Company's results of operations would actually have been if the
acquisitions of Dearborn/CDT, NORDX/CDT and Raydex/CDT had occurred as of the
beginning of each period presented or to project the Company's results of
operations for any future period.
On March 17, 1998, the Company acquired the outstanding stock of Orebro Kabel AB
("Orebro/CDT") of Orebro, Sweden. Orebro/CDT is a manufacturer of custom
designed wire and cable for wireless communication, robotics and other
industries.
On September 10, 1997, the Company acquired the outstanding stock of Barcel
Acquisition Corporation, and its subsidiaries, ("Barcel/CDT") based in Irvine,
California. Barcel/CDT is a manufacturer of high performance specialty wire and
cable for the commercial aerospace, military and satellite industries.
On March 14, 1997, the Company acquired 51% of the outstanding stock of
Stronglink, Pty. Ltd. ("Stronglink/CDT") of Melbourne, Australia.
<PAGE>
43
On July 25, 1996, the Company purchased X-Mark Industries of Washington,
Pennsylvania in a pooling-of-interests transaction for 316,967 shares of the
Company's common stock.
On June 4, 1996, the Company acquired the outstanding stock of Cekan A/S, of
Gjern, Denmark.
The acquisitions of Barcel/CDT, Orebro/CDT, Stronglink/CDT and Cekan/CDT were
accounted for as purchases. The prior results of these acquisitions as well as
X-Mark/CDT are not material, therefore, pro forma financial information is not
presented.
For acquisitions accounted for as a purchase, the Company allocates the purchase
price based on the fair market value of the assets and liabilities acquired.
Allocations based on preliminary estimates of fair value are finalized within
one year of the purchase date.
NOTE 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 1998:
Revenues $ 588,769 $ 62,899 $ 651,668
Income from operations 68,638 4,816 73,454
Identifiable assets 434,731 68,829 503,560
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
</TABLE>
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, 1998 1997 1996
- -----------------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C>
EXPORT SALES:
Europe $ 13,768 $ 15,283 $ 19,877
Other 22,970 15,453 9,140
Total export sales* $ 36,738 $ 30,736 $ 29,017
</TABLE>
* Includes intercompany sales to the Company's U.K., Canadian and Swedish
subsidiaries of $10.9 million, $6.4 million and $3.7 million for the years
ended July 31, 1998, 1997 and 1996, respectively.
<PAGE>
44
Notes To Consolidated Financial Statements
NOTE 15. LEASE COMMITMENTS
Rental expense under noncancelable leases was approximately $5.4 million, $6.3
million and $3.7 million for the years ended July 31, 1998, 1997 and 1996,
respectively. Operating leases relate principally to manufacturing, warehouse
and office space. Minimum annual rents payable under noncancelable leases in
each of the next five years and thereafter are as follows:
<TABLE>
<CAPTION>
YEAR ENDED JULY 31, TOTAL
- ---------------------------------------------------------------------
(Dollars in thousands)
<S> <C>
1999 $ 4,697
2000 3,796
2001 2,824
2002 1,720
2003 1,216
Thereafter 1,920
-------------
$ 16,173
-------------
</TABLE>
NOTE 16. COMMITMENTS AND CONTINGENCIES
Certain claims have been asserted against the Company 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 or cash flows.
As of July 31, 1998, the Company had outstanding letters of credit of $0.9
million under its workers' compensation policy. The Company also maintains a
$1.2 million bond in connection with workers' compensation self-insurance in the
state of Massachusetts.
NOTE 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 1998, 1997, and 1996 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 $1.1 million,
$1.6 million and $1.8 million for the years ended July 31, 1998, 1997 and 1996,
respectively.
NOTE 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, 1998, 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.
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
<PAGE>
45
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.
NOTE 19. NON-RECURRING CHARGES
In connection with the fiscal 1996 acquisition of NORDX/CDT, 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).
In the fourth quarter of fiscal 1998, a non-recurring charge of $6.1 million was
incurred to provide for costs related to the discontinuance of the DynaTraX(TM)
product line and other restructuring activities at NORDX/CDT. These costs
primarily represent asset valuation provisions and employee separation costs.
The balance of non-recurring provisions and accruals at July 31, 1998 was $1.8
million.
NOTE 20. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Quarterly financial data are summarized as follows:
<TABLE>
<CAPTION>
FISCAL YEAR 1998 FIRST SECOND THIRD FOURTH
- ------------------------------------------------------------------------------------------------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C>
Sales $ 162,144 $ 155,638 $ 167,647 $ 166,239
Gross profit 47,076 45,167 47,884 51,482
Income from operations 19,771 17,411 19,911 16,361/1/
Net income 11,450 9,926 10,658 8,447/2/
Per share information:
Basic net income per common share $ 0.41 $ 0.35 $ 0.37 $ 0.28
Diluted net income per common share $ 0.37 $ 0.32 $ 0.34 $ 0.27/2/
</TABLE>
/1/ Includes $6.1 million of non-recurring charges (see Note 19).
/2/ Excluding non-recurring charges (see Note 19), net income was $12.4
million, or $0.40 per diluted share.
<TABLE>
<CAPTION>
FISCAL YEAR 1997
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
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:
Basic net income per common share $ 0.30 $ 0.29 $ 0.33 $ 0.38
Diluted net income per common share $ 0.26 $ 0.26 $ 0.30 $ 0.35
</TABLE>
NOTE 21. SUBSEQUENT EVENTS
On August 3, 1998, the Company acquired an 80% interest in HEW-Kabel Heinz
Eilentropp GmbH & Co. KG, and related entities, located in Wipperfurth, Germany.
On September 25, 1998, the Company acquired the assets of Network Essentials,
Inc. (d/b/a Red Hawk), located in Milpitas, California.
<PAGE>
46
Selected Historical Consolidated Financial Data
<TABLE>
<CAPTION>
FOR THE YEAR ENDED JULY 31, 1998 1997 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Sales $ 651,668 $ 516,996 $ 357,352 $ 188,941 $ 145,389
Income from operations 73,454/1/ 62,602 31,527/1/ 29,613 21,801
Income before
extraordinary items 40,481 36,035 15,881 14,713 10,138
Extraordinary loss on early
extinguishment of debt -- -- (596) -- (3,998)
Net income 40,481/2/ 36,035 15,285/2/ 14,713 6,140
NET INCOME PER SHARE OF COMMON STOCK:
Basic 1.40 1.31 0.64 0.67 0.32
Diluted 1.29/2/ 1.17 0.55/2/ 0.57 0.26/2/
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic 29,000 27,598 23,966 21,874 19,345
Diluted 31,321 30,888 27,940 25,623 23,225
As of July 31, 1998 1997 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------
BALANCE SHEET DATA:
Total assets $ 503,560 $ 429,499 $ 320,105 $ 118,976 $ 102,719
Long-term debt 136,052 126,661 71,384 52,696 63,828
</TABLE>
/1/ Includes $6.1 and $16.7 million of non-recurring charges in fiscal 1998
and 1996, respectively (see Note 19).
/2/ Excluding non-recurring and extraordinary charges (see Notes 7 and 19),
net income was $44.4 million and $26.4 million in fiscal 1998 and 1996,
respectively, and net income per diluted share was $1.42 in fiscal 1998,
$0.95 in fiscal 1996, and $0.44 in fiscal 1994.
<PAGE>
47
Directors, Officers And Corporate Information
DIRECTORS
Bryan C. Cressey*
Partner, Thoma Cressey
Equity Partners
Myron S. Gelbach Jr.
Independent Financial
Consultant
George C. Graeber
Chief Operating Officer,
Cable Design Technologies
Corporation
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
*Chairman of the Board of
Directors, Cable Design
Technologies Corporation
EXECUTIVE OFFICERS
Paul M. Olson
President and Chief
Executive Officer
George C. Graeber
Chief Operating Officer
Michael A. Dudley
Executive Vice President
President, CDT International
Normand R. Bourque
Executive Vice President
President, NORDX/CDT
Peter Sheehan
Executive Vice President
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
Wednesday, December 9, 1998
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 1998 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
(781) 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 1998
HIGH LOW
<S> <C> <C>
First 28 1/2 21 5/16
Second 30 15/16 23 11/16
Third 32 1/4 25 1/4
Fourth 26 5/8 19 13/16
FISCAL 1997
HIGH LOW
First 26 11/16 15
Second 23 1/2 17
Third 21 12 1/16
Fourth 23 1/16 10 15/16
</TABLE>
[LOGO APPEARS HERE]
<PAGE>
CABLE DESIGN TECHNOLOGIES CORPORATION
SUBSIDIARIES OF THE REGISTRANT
EXHIBIT 21.1
LIST OF SUBSIDIARIES OF CABLE DESIGN TECHNOLOGIES CORPORATION
<TABLE>
<S> <C>
Anglo-American Cables Limited (Incorporated - United Kingdom)
Barcel Acquisition Corp. (Incorporated - California)
Barcel Wire & Cable Corp. (Incorporated - California)
Cable Design Technologies, Inc. (Incorporated - State of Washington)
CDT International Holdings Inc. (Incorporated - Delaware)
Cekan/CDT A/S (Incorporated - Denmark)
Dearborn/CDT, Inc. (Incorporated - Delaware)
Eilentropp GmbH & Co. KG (German Partnership)
HEW-Kabel Heinz Eilentropp GmbH & Co. KG (German Partnership)
NEK Kabel AB (Incorporated - Sweden)
Network Essentials, Inc. (d/b/a Red Hawk) (Incorporated - California)
NORDX/CDT Australia Pty Limited (Incorporated - Australia)
NORDX/CDT Asia Limited (Incorporated - Hong Kong)
NORDX/CDT, Corp. (Incorporated - Delaware)
NORDX/CDT do Brasil Ltda (Incorporated - Brazil)
NORDX/CDT, Limited (Incorporated - United Kingdom)
NORDX/CDT, Inc. (Incorporated - Canada)
NORDX/CDT - IP Corp. (Incorporated - Delaware)
Noslo Limited (Incorporated - United Kingdom)
Orebro Kabel AB (Incorporated - Sweden)
Raydex/CDT Limited (Incorporated - United Kingdom)
Santa Fe Textiles, Inc. (Incorporated - California)
SKL, S.A.S. (Incorporated - France, joint venture)
Stronglink/CDT Pty. Ltd. (Incorporated - Australia, 51% ownership)
Thermax/CDT, Inc. (Incorporated - Delaware)
Wire Group International, Limited (Incorporated - United Kingdom)
XENO Verwaltungsgesellschaft mbH (Incorporated - Germany)
X-Mark/CDT Inc. (Incorporated - Pennsylvania)
</TABLE>
<PAGE>
CABLE DESIGN TECHNOLOGIES CORPORATION
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this Form 10-K of our report dated September 11, 1998, included in
Cable Design Technologies Corporation and Subsidiaries' annual report for the
year ended July 31, 1998. It should be noted that we have not audited any
financial statements of the Company subsequent to July 31, 1998 or performed any
audit procedures subsequent to the date of our report. We also consent to the
incorporation 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. 333-02450, 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 26, 1998
<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, 1998
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-START> AUG-01-1998
<PERIOD-END> JUL-31-1998
<CASH> 11,143
<SECURITIES> 0
<RECEIVABLES> 121,260
<ALLOWANCES> 3,995
<INVENTORY> 130,307
<CURRENT-ASSETS> 276,545
<PP&E> 201,397
<DEPRECIATION> 40,506
<TOTAL-ASSETS> 503,560
<CURRENT-LIABILITIES> 101,869
<BONDS> 0
0
0
<COMMON> 307
<OTHER-SE> 244,591
<TOTAL-LIABILITY-AND-EQUITY> 503,560
<SALES> 651,668
<TOTAL-REVENUES> 651,668
<CGS> 460,059
<TOTAL-COSTS> 578,214
<OTHER-EXPENSES> (922)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,560
<INCOME-PRETAX> 65,816
<INCOME-TAX> 25,335
<INCOME-CONTINUING> 40,481
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 40,481
<EPS-PRIMARY> 1.40
<EPS-DILUTED> 1.29
</TABLE>
<PAGE>
EXHIBIT 99.5
FIRST AMENDMENT TO CREDIT AGREEMENT
-----------------------------------
This First Amendment to Credit Agreement is made as of the 31st day of
July, 1998 by and among
Cable Design Technologies Corporation, a Delaware corporation, with its
executive offices at Foster Plaza 7, 661 Anderson Drive, Pittsburgh,
Pennsylvania (the "Parent"),
Cable Design Technologies Inc., a Washington corporation, with its
executive offices at Foster Plaza 7, 661 Anderson Drive, Pittsburgh,
Pennsylvania (the "US Borrower"),
Nordx/CDT, Inc., a corporation organized under the federal laws of Canada,
with its executive offices at Foster Plaza 7, 661 Anderson Drive,
Pittsburgh, Pennsylvania (the "CAN Borrower"),
The lenders and other financial institutions which are now or may hereafter
become a party to the Credit Agreement (the "Lenders"), and
BankBoston, N.A. (f/k/a The First National Bank of Boston), Paribas
(f/k/a Banque Paribas, Chicago Branch), Paribas Bank of Canada, Bank of
America NT & SA (f/k/a Bank of America Illinois), and Bank of America
Canada, as agents for the Lenders (in such capacity, the "Agents")
in consideration of the mutual covenants herein contained and benefits to be
derived herefrom.
WITNESSETH
----------
WHEREAS, the Parent, the US Borrower, the CAN Borrower, the Lenders and the
Agents have entered into a Credit Agreement dated as of April 10, 1997 (the
"Credit Agreement"); and
WHEREAS, the Parent, the US Borrower, the CAN Borrower, the Lenders and the
Agents desire to amend certain of the terms and conditions of the Credit
Agreement.
NOW THEREFORE, it is hereby agreed as follows:
1. Definitions: All capitalized terms used herein and not otherwise
-----------
defined shall have the same meaning herein as in the Credit Agreement.
2. Amendment to Section 1. The provisions of Section 1.1 of the Credit
----------------------
Agreement are hereby amended
a. by deleting the definition of "Acquired Person" and substituting the
following in its stead:
"Acquired Person" shall mean any Person (i) in which the Parent, the
---------------
US Borrower or the CAN Borrower is making an Investment, or (ii) any
portion of whose stock, securities, or ownership interests are being
acquired by the Parent, the US Borrower or the CAN Borrower in a
Permitted Acquisition, or (iii) all or substantially all of whose
assets are being acquired by the Parent, the US Borrower or the CAN
Borrower in a Permitted Acquisition, or, if the Permitted Acquisition
involves the acquisition of a division or operating unit of a Person,
<PAGE>
EXHIBIT 99.5
such division or unit, or (iv) with whom the Parent, the US Borrower
or the CAN Borrower merges or consolidates in a Permitted Acquisition.
b. by deleting the definition of "Cash Interest Expense" and substituting
the following in its stead:
"Cash Interest Expense" of a Person, for each of the most recent four
---------------------
consecutive fiscal quarter period, shall mean the aggregate amount of
cash required to be applied to Interest Expense by such Person during
such period less the amount of interest income actually received in
----
cash by such Person during such period (other than interest income
relating to intercompany Indebtedness which would be eliminated in a
consolidated income statement of the Parent and its Subsidiaries),
determined in accordance with GAAP.
c. by amending the definition of "Fixed Charge Ratio" by adding the
following clause immediately after the text of clause (c) and prior to
the word "to":
, minus (D) the amount of interest income actually received in cash by
such Person during such period
d. by deleting the definition of "Leverage Ratio" and substituting the
following in its stead:
"Leverage Ratio" for any Person, shall mean, at any time, the ratio
--------------
obtained by dividing (a) Adjusted Indebtedness (excluding intercompany
Indebtedness which would be eliminated in accordance with GAAP on a
consolidated balance sheet of the Parent and its Subsidiaries) less
----
cash and other cash equivalents on hand by (b) Pro Forma EBITDA on a
consolidated basis.
e. by deleting the definition of "Net Worth" and substituting the
following in its stead:
"Net Worth" shall mean, for any Person, at any time, the total of all
---------
assets of such Person and its Subsidiaries on a consolidated basis
minus (without duplication of deductions) the total of all liabilities
-----
of such Person and its Subsidiaries, on a consolidated basis, and
plus or minus, the net foreign currency translation adjustments
-------------
recorded in the retained earnings of such Person and its Subsidiaries
on a consolidated basis, all of the foregoing as appearing on such
Person's consolidated balance sheet prepared in accordance with GAAP.
f. by deleting the definition of "Permitted Indebtedness" in its
entirety.
g. by deleting the definition of "US Revolving Credit Facility
Commitment" in its entirety and substituting the following in its
stead:
"US Revolving Credit Facility Commitment" shall mean US$121,256,266.08
---------------------------------------
(subject to reduction as provided in Section 2.6(b) hereof).
3. Amendments to Section 7. The provisions of Section 7 of the Credit
-----------------------
Agreement are hereby amended as follows:
2
<PAGE>
EXHIBIT 99.5
a. The provisions of Section 7.1(f) and Section 7.1(g) of the Credit
Agreement are deleted in their entirety and the following substituted
in their stead:
(f) Liens securing Indebtedness and other obligations which, when
aggregated with the Liens described in Section 7.1(d) and 7.1(e) do
not exceed $25,000,000 at any one time outstanding.
b. The provisions of Section 7.2 of the Credit Agreement are deleted in
their entirety and the following substituted in their stead:
(S)7.2 Indebtedness. Create, incur, assume or suffer to exist,
------------
contingently or otherwise, any Indebtedness, if, as the result of the
incurrence or existence thereof, or after taking into consideration
the payments required to be made thereon on a pro forma basis, a
Default or Event of Default would arise hereunder (including, without
limitation, by virtue of a breach of the provisions of Section 6.15
hereof), provided that Indebtedness of the Parent, the US Borrower,
-------- ----
the CAN Borrower, the Domestic Subsidiaries and Subsidiaries of the
CAN Borrower, which is secured by Liens on any of their assets, may in
no event exceed $25,000,000.00 in the aggregate.
c. The provisions of Section 7.3 of the Credit Agreement are deleted in
their entirety and the following substituted in their stead:
(S)7.3 Investments. Lend or advance money or credit to any Person,
-----------
or invest in (by capital contribution, creation of Subsidiaries or
otherwise), or purchase or repurchase the stock or Indebtedness, or
all or a substantial part of the assets or properties of any Person,
or enter into any exchange of securities with any Person (each of the
foregoing, an "INVESTMENT"), or agree to do any of the foregoing, or
permit or suffer to permit any of its Subsidiaries to do so if, as the
result of the making of such Investment, or after taking into
consideration financial effects of such Investment on a pro forma
basis, a Default or Event of Default would arise hereunder (including,
without limitation, by virtue of a breach of the provisions of Section
6.15 hereof), provided that (a) loans made by the Borrower between
-------------
June 1, 1998 and May 31, 1999 to its executive officers on terms and
in amounts approved by the Parent's Board of Directors for the purpose
of assisting such officers in the exercise of stock options owned by
them, may in no event exceed the sum of $15,000,000.00 in the
aggregate; and (b) the amount of consideration paid for Permitted
Acquisitions in any fiscal year may not exceed the amounts set forth
in Section 7.13 hereof.
d. The provisions of Section 7.4 of the Credit Agreement are hereby
amended by changing the period at the end of clause (k) to a semi-
colon and adding the following new clause immediately after clause (k)
thereof:
and, (l) the sale of any product line and related assets of the
Dynatrax division of the CAN Borrower having a book value not in
excess of CD$7,500,000.00.
e. The provisions of Section 7.13 of the Credit Agreement are hereby
amended as follows:
3
<PAGE>
EXHIBIT 99.5
. By deleting clause (a)(iv) thereof.
. By deleting Section 7.13(a)(ii) in its entirety
and substituting the following in its stead:
(ii) Immediately after giving effect to the Acquisition, the aggregate
undrawn portions of the US Borrowing Limit and the CAN Borrowing Limit
shall be at least US$10,000,000; and
. By deleting Section 7.13(a)(v) in its entirety and
substituting the following in its stead:
(v) The aggregate consideration furnished in connection with Permitted
Acquisitions, howsoever classified, (whether as Indebtedness,
Investment or otherwise, but exclusive of the value of any common
equity of the Parent issued or delivered in connection therewith) for
all Acquisitions in any fiscal year shall not exceed US$75,000,000.00
in the aggregate.
4. Amendment to Schedules and Exhibits. (a) Schedule 1-a is hereby
------------------------------------
deleted in its entirety and a new Schedule 1-a in the form annexed hereto
substituted in its stead.
(b) Schedules 7.2(c) and 7.3(d) to the Credit Agreement are hereby
deleted in their entirety.
5. Conditions to Effectiveness. This First Amendment to Credit Agreement
---------------------------
shall not be effective until each of the following conditions precedent have
been fulfilled to the satisfaction of the Agents:
a. This First Amendment to Credit Agreement shall have been duly executed
and delivered by the Parent, the Borrowers, the Agents, and the
Lenders, and shall be in full force and effect. The Agents shall have
received a fully executed copy hereof and of each other document
required hereunder.
b. All action on the part of the Credit Parties necessary for the valid
execution, delivery and performance by the Credit Parties of this
First Amendment shall have been duly and effectively taken. The
Agents shall have received from each of the Credit Parties, true
copies of their respective certificates of the resolutions adopted by
their respective boards of directors authorizing the transactions
described herein, each certified by their respective secretaries of
the Credit Parties as of a recent date to be true and complete.
c. The US Borrower shall have executed new US Revolving Notes in favor of
the US Lenders to reflect the amended US Revolving Credit Facility
Commitment.
d. The Agents shall have received, for the pro rata accounts of the
Lenders, an amendment fee in an amount equal to 0.05% (i) of the US
Revolving Commitments for the US Lenders (as amended hereby) and (ii)
of the CAN Revolving Commitments for the CAN Lenders.
e. The Agents shall have received for their own account a structuring fee
in the
4
<PAGE>
EXHIBIT 99.5
amounts set forth in the Structuring Fee Letter of even date.
f. The Credit Parties shall have paid to the Agents all other fees and
expenses then due and owing pursuant to the Credit Agreement, as
modified hereby, including, without limitation, reasonable attorneys'
fees incurred by the Agents.
g. No Default or Event of Default shall have occurred and be continuing.
h. The Credit Parties shall have provided such additional instruments and
documents to the Agents as the Agents and their counsel may have
reasonably requested.
6. Miscellaneous.
-------------
a. Except as provided herein, all terms and conditions of the Credit
Agreement remain in full force and effect. The Credit Parties hereby
ratify, confirm, and reaffirm all of the representations, warranties
and covenants therein contained (except to the extent that such
representations and warranties expressly relate to an earlier date).
The Credit Parties further acknowledge and agree that none of them
have any offsets, defenses, or counterclaims against the Agents or the
Lenders under the Credit Agreement or the other loan documents and, to
the extent that the Credit Parties have, or ever had, any such
offsets, defenses, or counterclaims, the Credit Parties each hereby
waive and release the same.
b. The Credit Parties shall pay all costs and expenses incurred by the
Agents in connection with this Amendment, including, without
limitation, all reasonable attorneys' fees.
c. This First Amendment may be executed in several counterparts and by
each party on a separate counterpart, each of which when so executed
and delivered, each shall be an original, and all of which together
shall constitute one instrument.
d. This First Amendment expresses the entire understanding of the parties
with respect to the matters set forth herein and supersedes all prior
discussions or negotiations hereon.
IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to
be executed and their seals to be hereto affixed as the date first above
written.
"Parent"
CABLE DESIGN TECHNOLOGIES
CORPORATION
By:___________________________
Name:
Title:
"US Borrower"
CABLE DESIGN TECHNOLOGIES, INC.
5
<PAGE>
EXHIBIT 99.5
By:___________________________
Name:
Title:
"CAN Borrower"
NORDX/CDT, INC.
By:___________________________
Name:
Title:
"Lenders"
BANKBOSTON, N.A.
(US Lender)
By:___________________________
Name:
Title:
PARIBAS
(US Lender)
By:___________________________
Name:
Title:
By:___________________________
Name:
Title:
PARIBAS BANK OF CANADA
(CAN Lender)
By:___________________________
Name:
Title:
By:___________________________
Name:
Title:
6
<PAGE>
EXHIBIT 99.5
BANK OF AMERICA NT & SA
(US Lender)
By:___________________________
Name:
Title:
BANK OF AMERICA CANADA
(CAN Lender)
By:___________________________
Name:
Title:
MELLON BANK, N.A.
(US Lender)
By:___________________________
Name:
Title:
MELLON BANK CANADA
(CAN Lender)
By:___________________________
Name:
Title:
THE BANK OF NOVA SCOTIA
(US Lender)
By:___________________________
Name:
Title:
THE BANK OF NOVA SCOTIA
(CAN Lender)
By:___________________________
Name:
Title:
NATIONAL BANK OF CANADA
(CAN Lender)
By:_______________________
Name:
Title:
HARRIS TRUST AND SAVINGS BANK
7
<PAGE>
EXHIBIT 99.5
(US Lender)
By:___________________________
Name:
Title:
BANK OF MONTREAL
(CAN Lender)
By:___________________________
Name:
Title:
FLEET NATIONAL BANK
(US Lender)
By:___________________________
Name:
Title:
ABN-AMRO BANK
(US Lender)
By:___________________________
Name:
Title:
By:___________________________
Name:
Title:
"Agents"
BANKBOSTON, N.A.
By:___________________________
Name:
Title:
PARIBAS
By:___________________________
Name:
Title:
By:___________________________
Name:
Title:
8
<PAGE>
EXHIBIT 99.5
PARIBAS BANK OF CANADA
By:___________________________
Name:
Title:
By:___________________________
Name:
Title:
BANK OF AMERICA NT & SA
By:___________________________
Name:
Title:
BANK OF AMERICA CANADA
By:___________________________
Name:
Title:
9
<PAGE>
EXHIBIT 99.6
SECOND AMENDMENT TO CREDIT AGREEMENT
------------------------------------
This Second Amendment to Credit Agreement is made as of the 31st day of
July, 1998 by and among
Cable Design Technologies Corporation, a Delaware corporation, with its
executive offices at Foster Plaza 7, 661 Anderson Drive, Pittsburgh,
Pennsylvania (the "Parent"),
Cable Design Technologies Inc., a Washington corporation, with its
executive offices at Foster Plaza 7, 661 Anderson Drive, Pittsburgh,
Pennsylvania (the "US Borrower"),
Nordx/CDT, Inc., a corporation organized under the federal laws of Canada,
with its executive offices at Foster Plaza 7, 661 Anderson Drive,
Pittsburgh, Pennsylvania (the "CAN Borrower"),
The lenders and other financial institutions which are now or may hereafter
become a party to the Credit Agreement (the "Lenders"), and
BankBoston, N.A. (f/k/a The First National Bank of Boston), Paribas
(f/k/a Banque Paribas, Chicago Branch), Paribas Bank of Canada, Bank of
America NT & SA (f/k/a Bank of America Illinois), and Bank of America
Canada, as agents for the Lenders (in such capacity, the "Agents")
in consideration of the mutual covenants herein contained and benefits to be
derived herefrom.
WITNESSETH
----------
WHEREAS, the Parent, the US Borrower, the CAN Borrower, the Lenders and the
Agents have entered into a Credit Agreement dated as of April 10, 1997, as
amended by a First Amendment to Credit Agreement dated July 31, 1998 (the
"Credit Agreement"); and
WHEREAS, the Parent has requested that the Lenders establish a sub-facility
under the Credit Agreement pursuant to which a German Subsidiary of the Parent
may obtain loans and advances in connection with a Permitted Acquisition and for
working capital purposes.
NOW THEREFORE, it is hereby agreed as follows:
1. Definitions: All capitalized terms used herein and not otherwise
-----------
defined shall have the same meaning herein as in the Credit Agreement.
2. Amendment to Section 1. The provisions of Section 1.1 of the Credit
----------------------
Agreement are hereby amended
a. by adding the words ", or the Bankruptcy Act (Konkursordnung) or the
Judicial Composition Proceedings Act (Vergleichsordnung), as now or
hereafter in effect or any successor thereto" at the end of the
definition of "Bankruptcy Code."
b. by deleting the definition of "Borrower" and substituting the
following in its stead:
<PAGE>
EXHIBIT 99.6
"Borrower" shall mean individually and collectively, the US Borrower,
--------
the CAN Borrower, and the GER Borrower.
c. by amending the definition of "Business Day" by
(i) inserting the words "and with respect to transactions
relating to the GER Borrower, Frankfurt, Germany are
authorized or required to close" at the end of clause (a) of
such definition; and
(ii) inserting the words "and also excluding therefrom any days
on which commercial banks are not open for dealings in
Deutschmark deposits in the Frankfurt (Germany) interbank
market" at the end of clause (b) of such definition.
d. by amending the definition of "Eurodollar Advance" by inserting the
words, "DM Eurodollar Rate" after the words "Adjusted Eurodollar Rate"
in the second line thereof.
e. by amending the definition of "Governmental Body" by inserting the
words ", Germany" after the words "United States" in the first line
thereof.
f. by amending the definition of "Guarantors" by
(i) deleting the words "both" in clause (A) thereof, and
(ii) adding the words ", the GER Lender Debt" after the words "US
Lender Debt" in clause (A) thereof, and
(iii) adding the words " and the GER Lender Debt" after the words
"CAN Lender Debt" in clause (B) thereof.
g. by amending the definition of "Interest Period", by adding the words,
"the GER Borrower" after the words "the US Borrower" on lines 7 and 13
thereof.
h. by amending the definition of "Lender Debt" by adding the words ", the
GER Lender Debt" after the words "the CAN Lender Debt".
i. by amending the definition of "Loans" by adding the words ", DM Loans"
after the words "the US Revolving Loan".
<PAGE>
EXHIBIT 99.6
j. by amending the definition of "Revolving Loan(s)" by adding the words
", the DM Loans" after the words "the US Revolving Loans".
k. by amending the definition of "Revolving Credit Facility Commitments"
by adding the words "the GER Revolving Commitment" after the words
"the US Revolving Credit Facility Commitment".
l. By adding the following new definitions:
"Deutschmarks" or "DM" shall mean Deutschmarks in lawful currency of
------------ --
the Federal Republic of Germany.
"DM Base Rate" shall mean a fluctuating interest rate per annum
------------
(calculated on the basis of actual days elapsed over a 365 day year)
as shall be in effect from time to time, which rate shall be equal to
the annual rate of interest announced from time to time by the DM
Lending Office of the GER Fronting Bank as its "base rate" for loans
denominated in Deutschmarks.
"DM Commitment" as to any US Lender shall mean the amounts and
-------------
percentages of DM Loans set forth in Schedule 1-a hereto for such
Lender (as such amount may be reduced from time to time in accordance
with the terms hereof).
"DM Equivalent" means, on any date of determination, with respect to
-------------
an amount denominated in Deutschmarks, such amount of Deutschmarks,
and with respect to an amount denominated in US dollars, the amount of
Deutschmarks which could be purchased with that amount of US dollars
at the spot rate of exchange quoted by the GER Fronting Bank in the
Frankfurt Foreign Exchange Market at or about 11:00 a.m. (Frankfurt
time) on the date of determination for the purchase of Deutschmarks
with US dollars.
"DM Eurodollar Rate" shall mean, for any Interest Period for any
------------------
Eurodollar Advance with respect to a DM Loan, the rate of interest per
annum (calculated on the basis of actual days elapsed over a 360-day
year) equal to the offered quotation to the GER Fronting Bank in the
Frankfurt interbank market for Deutschmark deposits of amounts and in
funds comparable to the principal amount of such DM Eurodollar Advance
requested by the GER Borrower for which the DM Eurodollar Rate is
being determined with maturities comparable to the Interest Period for
which such DM
3
<PAGE>
EXHIBIT 99.6
Eurocurrency Rate will apply as of approximately 11:00 A.M. (Frankfurt
time) two Business Days prior to the commencement of such Interest
Period, subject, however, to the provisions of Section 2 hereof.
"DM Lending Office" means a branch of the GER Fronting Bank,
-----------------
designated by the GER Fronting Bank.
"DM Loans" has the meaning set forth in Section 2.4A(a).
--------
"GER Borrower" shall mean XENO Verwaltungsesellschaft mbH, a wholly
------------
owned Subsidiary of the Parent.
"GER Fronting Bank" shall mean Paribas, Zweigniederlassung.
-----------------
"GER Lender Debt" shall mean and include all DM Loans and all other
---------------
Indebtedness owing at any time by the GER Borrower to the GER Fronting
Bank or the US Lenders (including, without limitation, all principal,
interest, fees, indemnities, costs, charges and other amounts, owing
under any Loan Documents) arising or in connection with this Agreement
or any other Loan Documents, in each instance, whether absolute or
contingent, secured or unsecured, due or not, arising by operations of
law or otherwise, and all interest and other charges thereon,
including, without limitation, post-petition interest, at the
applicable rates provided in the Loan Documents, whether or not such
interest is an allowable claim in a bankruptcy proceeding under the
Bankruptcy Code, or otherwise, involving the GER Borrower or any of
its Subsidiaries.
"GER Revolving Commitment": The DM Equivalent of US$50,000,000.
------------------------
3. Amendments to Section 2. (a) The provisions of Section 2.2 of the
-----------------------
Credit Agreement are hereby amended by adding the words "minus the aggregate
unpaid principal amount of the DM Loans" immediately prior to the words "(the US
Borrowing Limit)".
(b) The provisions of Section 2 of the Credit Agreement are hereby
amended by adding the following new sections:
2.4A. DM Loans (a) Subject to the terms and conditions herein set
--------
forth, at any time and from time to time before the Maturity Date, the
GER Fronting Bank, on
4
<PAGE>
EXHIBIT 99.6
behalf of the US Lenders, shall make such loans in Deutschmarks, to
the GER Borrower, as the GER Borrower may request (each a "DM LOAN"
and collectively, the "DM LOANS"), provided that after giving effect
-------------
thereto, the DM Equivalent of such DM Loans, together with all
outstanding (i) US Revolving Loans shall not exceed the US Revolving
Credit Facility Commitment minus (ii) the US Letter of Credit Usage;
and provided further that after giving effect thereto the DM
-------- -------
Equivalent of such DM Loans shall not exceed the GER Revolving
Commitment.
(b) The GER Borrower shall furnish the GER Fronting Bank's DM Lending
Office with written notice no later than 10:00 AM (Frankfurt time) and
otherwise at the times and otherwise in accordance with the provisions
of Section 2.14 hereof of each DM Loan requested hereunder; provided
--------
that, subject to any limitations contained herein with respect to the
----
maximum amount of any Eurodollar Advance, each request for a DM Loan
shall be in a minimum aggregate amount of the DM Equivalent of
US$1,000,000.00 or an integral multiple of the DM Equivalent of
US$250,000.00 in excess thereof. The proceeds of each DM Loan shall
be made available to the GER Borrower by the GER Fronting Bank at the
offices of the GER Fronting Bank.
(c) Each DM Loan shall be either a Base Rate Advance (based upon the
DM Base Rate) or a Eurodollar Advance, or a combination thereof, as
the GER Borrower shall request, subject to and in accordance with the
terms of this Agreement.
(d) The GER Borrower shall have the right at any time and from time to
time upon one (1) Business Day's prior written notice to the US
Administrative Agent and the GER Fronting Bank to reduce by the DM
Equivalent of US$5,000,000.00 or an integral multiple of the DM
Equivalent of US$1,000,000.00, or terminate entirely, the unborrowed
portion of the GER Revolving Commitment, whereupon the obligations of
the GER Fronting Bank shall be so reduced or terminated. No reduction
or termination of the GER Revolving Commitment may be reinstated.
(c) The provisions of Section 2.8(a) of the Credit Agreement are
hereby amended as follows:
5
<PAGE>
EXHIBIT 99.6
.By deleting the words "Each Borrower" in the first line thereof and by
substituting the words "The US Borrower and the CAN Borrower each" in its
stead.
.By adding the words ", and (z) the aggregate outstanding principal amount
of the DM Loans" to clause (A) of Section 2.8(a)(i) immediately after
subclauses (x) and (y).
(d) The provisions of Section 2.9(a) of the Credit Agreement are
hereby amended by adding the following after the first sentence thereof:
The GER Borrower shall pay interest on all Eurodollar Advances to the
GER Fronting Bank for the benefit of the US Lenders at the aggregate
of the DM Eurodollar Rate for the Interest Period in effect, plus the
Applicable Margin for Eurodollar Advances.
(e) The provisions of Sections 2.9(b) of the Credit Agreement are
hereby amended by adding the following after the first sentence thereof:
The GER Borrower shall pay interest on all Base Rate Advances to the
GER Fronting Bank for the benefit of the US Lenders at the aggregate
of the DM Base Rate in effect from time to time, plus the Applicable
Margin for Base Rate Advances.
(f) The provisions of Sections 2.9(e) of the Credit Agreement are
hereby amended as follows:
. by adding the words "and the GER Fronting Bank" after the words
"Administrative Agent" in the second line thereof; and
. by adding the words "the DM Eurodollar Rate" after the words "Adjusted
Eurodollar Rate" in the third line thereof.
(g) The provisions of Section 2.9 (f) of the Credit Agreement are
hereby deleted in their entirety and the following substituted in their stead:
CHANGES IN BASE RATE, DM BASE RATE OR REFERENCE RATE. After each
change in the Base Rate, the DM Base Rate or the Reference Rate, the
applicable Administrative Agent or the GER Fronting Bank shall
promptly notify the applicable Borrower and the applicable Lenders by
telephone (confirmed promptly in writing) or in writing of the date of
such change and the new Base Rate, DM Base Rate or Reference Rate, as
applicable; provided, however, that the failure of an Administrative
Agent or
6
<PAGE>
EXHIBIT 99.6
the GER Fronting Bank to so notify a Borrower or any Lender shall not
affect the effectiveness of such change.
(h) The provisions of Section 2.10(a) of the Credit Agreement are
hereby amended by adding the words "plus the then aggregate outstanding
principal balance of DM Loans" after the words "Letter of Credit Usage"
appearing in line 3 thereof.
(i) The provisions of Section 2.10 of the Credit Agreement are hereby
amended by adding the following subparagraph and relettering existing
subparagraph (c) as applicable:
(c) If at any time the DM Equivalent of the then aggregate outstanding
principal amount of the DM Loans shall exceed the GER Revolving
Commitment at such time, or, if the DM Equivalent of such DM Loans,
together with all US Revolving Loans exceeds (i) the US Revolving
Credit Facility Commitment minus (ii) the US Letter of Credit Usage,
the GER Borrower shall promptly (and in no event later than three
Business Days) eliminate such excess by paying an amount equal to such
excess until the sooner to occur of (x) the elimination in full of
such excess, and (y) the DM Loans are paid in full.
(j) The provisions of Section 2.11 of the Credit Agreement are hereby
amended as follows:
. by adding the words ",and with respect to DM Loans, the GER Fronting Bank
and the US Administrative Agent" after the words "Administrative Agent" in
the third and sixth lines thereof; and
. by adding the words "and the DM Equivalent of US$500,000 or an integral
multiple of US$250,000 in excess thereof with respect to the GER Borrower"
after the words "CAN Borrower" in the thirteenth line thereof; and
. by adding the words "or DM Loans" after the words "Can Revolving Loans" in
the fifteenth line thereof.
(k) The provisions of Section 2.15 of the Credit Agreement are amended
as follows:
. by adding the words "or Frankfurt time" after the words "Chicago
time" in the twentieth line on page 39 of the Credit Agreement,
in the seventh line of Section 2.15(b) thereof and in the sixth
line of Section 2.15(c) thereof;
7
<PAGE>
EXHIBIT 99.6
. by adding the words ",and with respect to DM Loans, the GER
Fronting Bank and the US Administrative Agent" after the words
"Administrative Agent" in the twenty-fourth line on page 39 of
the Credit Agreement, in the fifth line of Section 2.15(b)
thereof and in the third line of Section 2.15(c) thereof;
. by adding the following sentence to Section 2.15(d):
All references to dollar amounts for purposes of this Section
2.15 shall refer to the DM Equivalent for the GER Borrower.
(l) The provisions of Section 2.17 of the Credit Agreement are hereby
amended as follows:
. by adding the words "or Frankfurt time" after the words "Chicago
time" in the third line of Section 2.17(a);
. by adding the word "Germany" after the words "the United States
of America" in the fifth line of Section 2.17(a);
. by adding the words " or the GER Fronting Bank" after the words
"Administrative Agent" in the sixth line, in the thirtieth line
and in the thirty-seventh line of Section 2.17(a), and after the
words "Administrative Agent" in the second line, in the
eighteenth line, in the twenty-seventh line, and in the fortieth
line of Section 2.17(f), and after the words "US Lender" in the
twenty-third line of Section 2.17(a);
. by adding the words ", the GER Borrower, after the words "the US
Borrower" on the twentieth line of Section 2.17(a), the second
line of Section 2.17(c), and the twenty-second and twenty-seventh
lines of Section 2.17(f);
by adding the words "and the GER Borrower shall indemnify the GER
Fronting Bank and any affected US Lender" after the words "the
affected CAN Lender" in the forty-first line of Section 2.17(a);
by adding the following at the end of Section
8
<PAGE>
EXHIBIT 99.6
2.17(b)(i):
Each US Lender that is not a resident of Germany for
purposes of the German tax law shall submit to the GER
Borrower, the GER Fronting Bank and the US Administrative
Agent a certificate acceptable in form to the GER Borrower
and the GER Fronting Bank certifying that such US Lender is
entitled to a complete exemption from withholding on all
amounts to be received by such US Lender pursuant to this
Agreement.
by adding the words ",the GER Lender Debt" after the words "the
US Lender Debt" on the last line of Section 2.17(c);
by adding the following at the end of Section 2.17(c):
Notwithstanding any other provision of this Agreement, if an
event occurs which prevents any US Lender which is not a
resident of Germany from delivering to the GER Borrower, the
GER Fronting Bank or the US Administrative Agent any
certificate that such US Lender is requested to submit
pursuant to Section 2.17(b)(i), or which requires such US
Lender to withdraw or cancel any such certificate, or if any
such certificate becomes ineffective or inaccurate, such US
Lender shall promptly notify the GER Borrower, the GER
Fronting Bank and the US Administrative Agent of such fact,
whereupon the provisions of Section 2.17(a) hereof shall
apply.
by adding the words "and the GER Borrower shall indemnify the GER
Fronting Bank and each US Lender" after the words "the Agents" in
the third line of Section 2.17(d); and
by adding the words "and as collateral security for the GER
Lender Debt, the GER Borrower grants to the GER Fronting Bank a
security interest in" immediately prior to clause (x) in Section
2.17(f).
(m) The provisions of Section 2.19 of the Credit Agreement are hereby
amended as follows:
9
<PAGE>
EXHIBIT 99.6
. by adding the words "or the GER Fronting Bank" after the word "Lender"
throughout that Section; and
. by adding the words " and the GER Borrower shall pay the GER Fronting Bank
and any such US Lender" after the words "such CAN Lender" in the thirty-
sixth line thereof.
(n) The provisions of Section 2.21 of the Credit Agreement are hereby
amended as follows:
. by adding the words "or the GER Fronting Bank" after the words
"Administrative Agent" in the fourth, thirteenth and twentieth lines of
Section 2.21(a) and after the word "Lenders" in the tenth line of Section
2.21(a) and after the words "Administrative Agent" in the first, eighth and
fifteenth lines of Section 2.21(b);
. by adding the words "or, with respect to the GER Borrower, Deutschmark
deposits are not generally available in the Frankfurt interbank market"
after the words "London (England, U.K.) interbank market" in the seventh
and eighth lines of Section 2.21(a);
. by adding the words " or Deutschmark deposits" after the words "dollar
deposits" in the eighth line of Section 2.21(a); and
. by adding the words "or the Frankfurt interbank market" after the words
"London (England, U.K.) interbank market" in the fifth and seventh lines
of Section 2.21(b).
(o) The provisions of Sections 2.22 of the Credit Agreement are hereby
amended as follows:
. by adding the words "and the GER Borrower hereby agrees to indemnify the
GER Fronting Bank and each US Lender" after the words "CAN Lender" in the
third line thereof; and
. by adding the words "and the GER Fronting Bank" after the word "Lender"
in the fourth and twenty-eighth lines thereof.
(p) The provisions of Sections 2.23 of the Credit Agreement are hereby
amended as follows:
. by adding the words "and/or the GER Fronting Bank" after the word
"Lender" throughout the Section, after the words "Administrative Agent" in
the twenty-ninth line thereof, and after the words "CAN Lenders" in the
thirty-first line thereof; and
10
<PAGE>
EXHIBIT 99.6
. by adding the words ",or the GER Borrower" after the words "US Borrower"
twenty-sixth line thereof;
(q) The provisions of Sections 2.24 of the Credit Agreement are hereby
amended as follows:
. by adding the words, "and with respect to DM Loans, at the DM Lending
Office" after the words "head office" in the sixth line thereof;
. by adding the words "and the GER Fronting Bank" after the words
"Administrative Agent" in the tenth line thereof; and
. by adding the words ",Frankfurt time" after the words "Chicago time" in
the last line thereof.
(r) The Credit Agreement is hereby amended by adding the following new
section:
(S)2.25 European Economic and Monetary Union. Notwithstanding
-------------------------------------
anything to the contrary herein contained, with respect to the
introduction of the EURO as the legal currency of the Federal
Republic of Germany pursuant to laws and regulations implementing
the European Economic and Monetary Union ("EMU"), the GER
Fronting Bank will notify the GER Borrower of the official
conversion rate between Deutschmarks and EURO, of the relevant
Telerate page for the DM Eurodollar Rate for EURO and of the date
as from which all references herein to Deutschmarks and the legal
currency of the Federal Republic of Germany shall be references
to EURO as such official conversion. The GER Fronting Bank and
the GER Borrower confirm that all other terms and conditions
hereof shall continue to be in full force and effect in
accordance with the laws and regulations implementing the EMU.
4. Amendments to Section 3. The provisions of Section 3 of the Credit
-----------------------
Agreement are hereby amended so as to be inapplicable to the GER Borrower, it
being agreed that no Letters of Credit will be issued for, or on behalf of, the
GER Borrower.
5. Amendments to Section 7. The provisions of Section 7 of the Credit
-----------------------
Agreement are hereby amended as follows:
a. The provisions of Section 7.1 of the Credit Agreement are hereby
amended so as to be inapplicable to the GER Borrower.
11
<PAGE>
EXHIBIT 99.6
b. The provisions of Section 7.13(a)(v) of the Credit Agreement are
hereby amended by adding the following the following at the end
thereof:
,provided that the Acquisition of the GER Borrower shall not be
-------------
included in the calculation of the foregoing limitation for the
fiscal year in which such Acquisition occurs.
6. Amendments to Section 10. The provisions of Section 10 of the Credit
------------------------
Agreement are hereby made by adding the following new section:
(c) Proceeds of the DM Loans shall be used to acquire at least a
majority interest of one or more companies whose headquarters and
principal assets are located in Germany and to pay other expenditures
in connection therewith, for working capital and other ordinary course
business purposes of the GER Borrower and its Subsidiaries
7. Amendments to Section 11. The provisions of Section 11 of the Credit
------------------------
Agreement are hereby amended as follows:
. by adding the words "or (3) the GER Lender Debt" in clause (B) on page 97
of the Credit Agreement immediately following the words "the US Lender
Debt" in each instance;
. by adding the words " and with respect to the GER Lender Debt, fifty-one
percent (51%) in interest of the US Lenders" after the words "as
applicable" in the fifth line of clause (B) on page 97 of the Credit
Agreement;
. by amending Section 11.2(b) by adding the words "Except as otherwise
provided herein with respect to the DM Equivalent," at the beginning of
Section 11.2(b);
. by adding a new paragraph (c) to Section 11.5 as follows:
(c) After the occurrence of an Event of Default and
acceleration of the GER Lender Debt, the proceeds realized from
the GER Borrower and its Subsidiaries and collections from each
Guaranty of the GER Lender Debt shall be applied by the GER
Fronting Bank and the Agents to payment of the GER Lender Debt in
the following order, unless the US Lenders otherwise agree in
writing or a court of competent jurisdiction shall otherwise
direct,
12
<PAGE>
EXHIBIT 99.6
to the extent permitted by applicable law:
(i) FIRST, to payment of all costs and expenses of the Agents,
the GER Fronting Bank and the US Lenders incurred in connection
with the preservation, collection and enforcement of the GER
Lender Debt or any Guaranties thereof;
(ii) SECOND, to the GER Fronting Bank to reimburse such GER
Fronting Bank for amounts due under any Hedge Agreements to the
extent such Hedge Agreements constitute GER Lender Debt and (B)
to payment of that portion of the GER Lender Debt constituting
accrued and unpaid interest and fees and indemnities payable
under Section 2 hereof, until such interest, fees and indemnities
shall be paid in full;
(iii) THIRD, to payment of the principal of the GER Lender Debt
until such principal of the GER Lender Debt shall be paid in
full;
(iv) FOURTH, to the payment of all other GER Lender Debt,
until such other GER Lender Debt shall be paid in full;
(v) FIFTH, the balance, if any, after all of the GER Lender Debt
has been satisfied, shall be deposited by the GER Fronting Bank
and Agents in an operating account of the GER Borrower designated
by the GER Borrower, or paid over to such other Person or Persons
as may be required by law.
8. Amendments to Section 12. The provisions of Section 12 of the Credit
------------------------
Agreement are hereby amended as follows:
. by amending the provisions of Section 12.2 as follows:
(a) by adding the following proviso:
provided, however, that in addition to the foregoing
requirements, no such amendment, modification or waiver
shall, without the consent of the GER Fronting Bank,
change any of the rights or obligations of the GER
Fronting Bank under the Loan Documents;
(b) by amending the third proviso by adding the words "or
the GER Lender Debt" after the
13
<PAGE>
EXHIBIT 99.6
words "US Revolving Loans" in the fourth line thereof and
after the words "US Lender Debt" in the fifth, sixth and
seventh lines thereto; and
(c) by adding the words "or the GER Revolving Commitment"
after the words "US Revolving Commitment" in clause (iii) on
Page 105 of the Credit Agreement.
. .by amending Section 12.3 by adding the following at the end thereof:
,provided, however, that the Loan Documents which the GER
Fronting Bank may require to be executed by the GER Borrower
(other than this Agreement) shall, in any event, be governed
by and construed in accordance with the laws of the Federal
Republic of Germany.
. by amending Section 12.4 by adding the words "or the GER Fronting Bank"
after the words "the Agents" in the tenth line thereof;
. by adding the following at the end of Section 12.6 thereof:
and further provided that the obligations of the GER
-------------
Borrower shall be limited to any such charges which become
payable on account of the GER Lender Debt only.
. by adding the following new paragraph to Section 12.10 and relettering
existing paragraph (c) thereto:
(c) Each of the Credit Parties on the GER Lender Debt hereby
grants to the GER Fronting Bank, each US Lender and the
Agents a continuing Lien for all GER Lender Debt upon any
and all monies, securities and other property of such Credit
Party and the proceeds thereof, now or hereafter held or
received by, or in transit to, such GER Fronting Bank, US
Lender or the Agents from or for such Credit Party, whether
for safekeeping, custody, pledge, transmission, collection
or otherwise, and also upon any and all deposits (general or
special) and credits of such Credit Party with, and any and
all claims of such Credit Party against, the GER Fronting
Bank, any US Lender or the Agents, at any time existing.
14
<PAGE>
EXHIBIT 99.6
. by adding the words "or the GER Lender Debt" to Section 12.10(d) (formerly
12.10(c)) after the words "CAN Lender Debt" appearing in lines 6 and 7
thereof.
. by adding the words ", and with respect to the GER Borrower, in Frankfurt
AM Main, Federal Republic of Germany" after the words "Province of Ontario"
in the fourth line thereof.
. by amending the provisions of Section 12.13(k) by
(a) renumbering existing clause (iii) and adding a new
clause (iii) which shall read as follows:
(iii) all GER Lender Debt of the Credit Parties to the
GER Fronting Bank and the US Lenders under this
Agreement rank pari passu in all respects with each
other,
(b) by adding the words "or the GER Borrower" after the
words "or CAN Borrower" on line 11 thereof.
. By adding the following new Section:
(S)12.13A. The GER Fronting Bank. (a) The GER Fronting
---------------------
Bank is acting as agent for the Agents and accordingly,
shall take such action with respect to the GER Lender Debt
solely as the Agents may instruct. Without limiting the
foregoing, the GER Fronting Bank may not sell or assign the
GER Lender Debt without the prior written consent of the
Agents, and may not take any action under Section 11 of the
Credit Agreement except in accordance with the direction of
the Agents.
(b) The GER Fronting Bank shall promptly distribute all
payments of interest, and subject to the provisions of
Section 12.13A(c) principal and other amounts (no less
frequently than weekly), on account of the GER Lender Debt
to the US Administrative Agent for distribution to the US
Lenders. Such payments shall be made in Deutschmarks and
(i) with respect to interest calculated at the DM
Eurodollar Rate, shall be based upon the DM Equivalent at
the time of the establishment of the applicable DM
Eurodollar Rate, and (ii) with respect to any
15
<PAGE>
EXHIBIT 99.6
other payments based upon the DM Equivalent at the time of
receipt of such payment.
(c) The GER Fronting Bank will initially fund all DM
Loans, and accordingly, shall be entitled to retain all
principal payments on account thereof until the US Lenders
actually fund their undivided interest and participation in
such DM Loans in accordance with the provisions of this
Section 12.13A. Immediately upon the making of any such DM
Loan, each US Lender shall be deemed to have irrevocably and
unconditionally purchased and received an undivided interest
and unfunded participation in such DM Loan in an amount
equal to its DM Commitment. At any time and from time to
time, after the occurrence, and during the continuance, of
any Event of Default, the GER Fronting Bank may require the
US Lenders to fund its DM Commitment percentage of the
principal balance of the outstanding DM Loans (up to the
amount of its DM Commitment) by making payment to the GER
Fronting Bank in Deutschmarks, based upon the then DM
Equivalent. The GER Fronting Bank shall thereafter continue
to act on behalf of the US Lenders (subject to the direction
of the Agents) and all payments on account of the GER Lender
Debt shall thereafter be distributed to the US
Administrative Agent in accordance with the provisions of
Section 12.13A(b) hereof.
(d) Each US Lender agrees to indemnify the GER Fronting Bank
(to the extent not reimbursed by the Credit Parties and
without limiting the obligation of the Credit Parties to do
so), ratably according to such US Lender's aggregate DM
Commitment percentage set forth opposite its name on
Schedule 1-a hereto from and against any and all
liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements
of any kind whatsoever which may at any time be imposed on,
incurred by or asserted against the GER Fronting Bank in any
way relating to or arising out of the Loan Documents, any
instruments or documents relating to the transactions
contemplated hereby or thereby or any action taken or
omitted by the GER Fronting Bank under or in connection with
any of the foregoing;
16
<PAGE>
EXHIBIT 99.6
provided, that no US Lender shall be liable for the payment
of any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting from the GER Fronting
Bank's gross negligence or willful misconduct.
. By amending the provisions of Section 12.15 as follows:
(a) By adding the following sentence at the end of
subparagraph (d) thereof:
The Agents shall maintain a record identifying the
Lenders.
(b) By adding the words "and its GER Revolving Credit
Commitment" after the words "US Revolving Credit Commitment"
in the second line thereof.
. By amending the provisions of Section 12.21 by adding the words "and with
respect to the GER Lender Debt only, the GER Borrower hereby agrees to
indemnify and hold harmless the Agents, the GER Fronting Bank and the
Lenders and their respective Affiliates, directors, officers, agents,
representatives, counsel and employees and each other Person, if any
controlling them or any of their Affiliates" immediately before the words
"(each of the foregoing, an "Indemnified Party") on the fourth line on Page
122 of the Credit Agreement
. By amending the provisions of Section 12.22 by adding the words "or the
GER Lender Debt" at the end thereof.
. By adding the following new Section:
(S)12.22A. Limitation of GER Borrower Liability.
------------------------------------
Notwithstanding anything to the contrary herein contained,
the liability of the GER Borrower hereunder and under any
other Loan Documents shall be limited to the GER Lender Debt
and the GER Borrower shall have no liability whatsoever
under the Loan Documents evidencing the US Lender Debt or
the CAN Lender Debt.
9. Amendment to Schedules and Exhibits. Schedule 1-a is hereby deleted
------------------------------------
in its entirety and a new Schedule 1-a in the form annexed hereto substituted in
its stead.
17
<PAGE>
EXHIBIT 99.6
10. Conditions to Effectiveness. This Second Amendment to Credit
---------------------------
Agreement shall not be effective until each of the following conditions
precedent have been fulfilled to the satisfaction of the Agents:
a. This Second Amendment to Credit Agreement shall have been duly
executed and delivered by the Parent, the Borrower, the Agents, and
the Lenders, and shall be in full force and effect. The Agents shall
have received a fully executed copy hereof and of each other document
required hereunder.
b. All action on the part of the Credit Parties necessary for the valid
execution, delivery and performance by the Credit Parties of this
Second Amendment shall have been duly and effectively taken. The
Agents shall have received from each of the Credit Parties, true
copies of their respective certificates of the resolutions adopted by
their respective boards of directors authorizing the transactions
described herein, each certified by their respective secretaries of
the Credit Parties as of a recent date to be true and complete.
c. The GER Borrower shall have executed and delivered such documents as
the Agents and the GER Fronting Bank may reasonably require.
d. The applicable Guarantors shall have executed such documents as the
Agents and the GER Fronting Bank may reasonably require in order to
guaranty the GER Lender Debt.
e. The GER Borrower shall have furnished the GER Fronting Bank with all
documents to open an account for the DM Loans as may be reasonably
required by the GER Fronting Bank.
f. The Agents shall have received opinions of counsel to each of the
Credit Parties satisfactory to the Agents and the Agent's counsel.
g. The GER Fronting Bank shall have received for its own account a
fronting fee in the amounts set forth in the Fee Letter of even date.
h. The Credit Parties shall have paid to the Agents all other fees and
expenses then due and owing pursuant to the Credit Agreement, as
modified hereby, including, without limitation, reasonable attorneys'
fees incurred by the Agents.
i. No Default or Event of Default shall have occurred and be continuing.
18
<PAGE>
EXHIBIT 99.6
j. The Credit Parties shall have provided such additional instruments and
documents to the Agents as the Agents and their counsel may have
reasonably requested.
k. The Agents, the Lenders and the GER Fronting Bank shall have executed
an Amended and Restated Intercreditor Agreement satisfactory in form
and substance to each of them.
Borrower shall have no obligation to satisfy the foregoing conditions
precedent, provided that if such conditions precedent are not satisfied on
or prior to September 30, 1998, this Second Amendment shall be void and of
no effect.
11. Miscellaneous.
-------------
a. Except as provided herein, all terms and conditions of the Credit
Agreement remain in full force and effect. The Credit Parties hereby
ratify, confirm, and reaffirm all of the representations, warranties
and covenants therein contained (except to the extent that such
representations and warranties expressly relate to an earlier date).
The Credit Parties further acknowledge and agree that none of them
have any offsets, defenses, or counterclaims against the Agents or the
Lenders under the Credit Agreement or the other loan documents and, to
the extent that the Credit Parties have, or ever had, any such
offsets, defenses, or counterclaims, the Credit Parties each hereby
waive and release the same.
b. The Credit Parties shall pay all costs and expenses incurred by the
Agents in connection with this Amendment, including, without
limitation, all reasonable attorneys' fees.
c. This Second Amendment may be executed in several counterparts and by
each party on a separate counterpart, each of which when so executed
and delivered, each shall be an original, and all of which together
shall constitute one instrument.
d. This Second Amendment expresses the entire understanding of the
parties with respect to the matters set forth herein and supersedes
all prior discussions or negotiations hereon.
IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment to
be executed and their seals to be hereto affixed as the date first above
written.
19
<PAGE>
EXHIBIT 99.6
"Parent"
CABLE DESIGN TECHNOLOGIES
CORPORATION
By:___________________________
Name:
Title:
"US Borrower"
CABLE DESIGN TECHNOLOGIES, INC.
By:___________________________
Name:
Title:
"CAN Borrower"
NORDX/CDT, INC.
By:___________________________
Name:
Title:
"GER Borrower"
XENO VERWALTUNGSESELLSCHAFT mbH
By:___________________________
Name:
Title:
"Lenders"
BANKBOSTON, N.A.
(US Lender)
By:___________________________
Name:
Title:
PARIBAS
(US Lender)
By:___________________________
Name:
Title:
By:___________________________
20
<PAGE>
EXHIBIT 99.6
Name:
Title:
PARIBAS BANK OF CANADA
(CAN Lender)
By:___________________________
Name:
Title:
By:___________________________
Name:
Title:
BANK OF AMERICA NT & SA
(US Lender)
By:___________________________
Name:
Title:
BANK OF AMERICA CANADA
(CAN Lender)
By:___________________________
Name:
Title:
MELLON BANK, N.A.
(US Lender)
By:___________________________
Name:
Title:
MELLON BANK CANADA
(CAN Lender)
By:___________________________
Name:
Title:
THE BANK OF NOVA SCOTIA
(US Lender)
By:___________________________
Name:
Title:
THE BANK OF NOVA SCOTIA
(CAN Lender)
21
<PAGE>
EXHIBIT 99.6
By:___________________________
Name:
Title:
NATIONAL BANK OF CANADA
(CAN Lender)
By:_______________________
Name:
Title:
HARRIS TRUST AND SAVINGS BANK
(US Lender)
By:___________________________
Name:
Title:
BANK OF MONTREAL
(CAN Lender)
By:___________________________
Name:
Title:
22
<PAGE>
EXHIBIT 99.6
FLEET NATIONAL BANK
(US Lender)
By:___________________________
Name:
Title:
ABN-AMRO BANK
(US Lender)
By:___________________________
Name:
Title:
By:___________________________
Name:
Title:
"Agents"
BANKBOSTON, N.A.
By:___________________________
Name:
Title:
PARIBAS
By:___________________________
Name:
Title:
By:___________________________
Name:
Title:
PARIBAS BANK OF CANADA
By:___________________________
Name:
Title:
By:___________________________
Name:
Title:
23
<PAGE>
EXHIBIT 99.6
BANK OF AMERICA NT & SA
By:___________________________
Name:
Title:
BANK OF AMERICA CANADA
By:___________________________
Name:
Title:
"GER Fronting Bank"
PARIBAS, ZWEIGNIEDERLASSUNG
By:___________________________
Name:
Title:
24
