<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 2000
Commission File No. 0-22724
CABLE DESIGN TECHNOLOGIES CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 36-3601505
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
Foster Plaza 7
661 Andersen Drive
Pittsburgh, PA 15220
(Address of principal executive offices)
(412) 937-2300
Registrant's telephone number, including area code
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No ___________
----------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at 6/6/00
----- ---------------------
Common Stock, $.01 Par Value 28,728,542
<PAGE>
CABLE DESIGN TECHNOLOGIES CORPORATION
-------------------------------------
TABLE OF CONTENTS
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<TABLE>
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Page
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<S> <C>
PART I FINANCIAL INFORMATION
Item 1 Financial Statements.......................................................... 3
Review Report of Independent Public Accountants for
the Three Months and Nine Months Ended April 30, 2000 and 1999................ 4
Condensed Consolidated Statements of
Income - Unaudited for the Three Months and Nine Months Ended
April 30, 2000 and 1999....................................................... 5
Condensed Consolidated Balance Sheets
as of April 30, 2000 (Unaudited) and July 31, 1999............................ 6
Condensed Consolidated Statements of
Cash Flows - Unaudited for the Nine Months
Ended April 30, 2000 and 1999................................................. 7
Notes to Condensed Consolidated
Financial Statements -Unaudited............................................... 8
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations........................................... 11
PART II OTHER INFORMATION
Item 1 Legal Proceedings............................................................. 15
Item 2 Changes in Securities......................................................... 15
Item 3 Defaults upon Senior Securities............................................... 15
Item 4 Submission of Matters to a Vote of Security Holders........................... 15
Item 5 Other Information............................................................. 15
Item 6 Exhibits and Reports on Form 8-K.............................................. 15
Signatures.............................................................................. 16
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
In the opinion of Cable Design Technologies Corporation's (the "Company")
management, the unaudited condensed consolidated financial statements included
in this filing on Form 10-Q reflect all adjustments which are considered
necessary for a fair presentation of financial information for the periods
presented.
REVIEW BY INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP has made a review, based upon procedures adopted by the
American Institute of Certified Public Accountants, of the unaudited condensed
consolidated financial statements as of and for the three month and nine month
periods ended April 30, 2000 and 1999, contained in this report. As stated on
page 4, Arthur Andersen LLP did not audit and accordingly does not express an
opinion on the unaudited consolidated financial statements; however as a result
of such review, they are not aware of any material modifications that should be
made to the financial statements referred to above for them to be in conformity
with generally accepted accounting principles.
3
<PAGE>
Report of Independent Public Accountants
To the Board of Directors and Stockholders of Cable Design Technologies
Corporation:
We have reviewed the accompanying condensed consolidated balance sheet of Cable
Design Technologies Corporation (a Delaware corporation) and Subsidiaries as of
April 30, 2000, and the related condensed consolidated statements of income for
the three month and nine month periods ended April 30, 2000 and 1999, and the
condensed consolidated statements of cash flows for the nine month periods ended
April 30, 2000 and 1999. These financial statements are the responsibility of
the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in
accordance with auditing standards generally accepted in the United States, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the financial statements referred to above for them to be in
conformity with accounting principles generally accepted in the United States.
We have previously audited, in accordance with auditing standards generally
accepted in the United States, the consolidated balance sheet of Cable Design
Technologies Corporation and Subsidiaries as of July 31, 1999, and, in our
report dated September 20, 1999, we expressed an unqualified opinion on that
statement. In our opinion, the information set forth in the accompanying
condensed consolidated balance sheet as of July 31, 1999, is fairly stated, in
all material respects, in relation to the balance sheet from which it has been
derived.
Pittsburgh, Pennsylvania, /s/ Arthur Andersen LLP
May 23, 2000
4
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CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES
------------------------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED
-------------------------------------------------------
(In thousands, except share and per share data)
-----------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
April 30, April 30,
--------------------------- --------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales $ 204,900 $ 165,611 $ 570,701 $ 500,131
Cost of sales 145,931 119,090 404,981 353,003
----------- ----------- ----------- -----------
Gross profit 58,969 46,521 165,720 147,128
Selling, general and administrative expenses 31,617 27,631 90,155 82,846
Research and development expenses 1,169 1,361 3,511 4,258
Nonrecurring (income) expense, net - (1,148) - 5,159
----------- ----------- ----------- -----------
Income from operations 26,183 18,677 72,054 54,865
Interest expense, net 3,003 3,424 8,973 9,842
Other (income) expense, net (92) 732 1,279 1,335
----------- ----------- ----------- -----------
Income before income taxes 23,272 14,521 61,802 43,688
Income tax provision 9,255 5,638 24,378 17,635
----------- ----------- ----------- -----------
Net income $ 14,017 $ 8,883 $ 37,424 $ 26,053
=========== =========== =========== ===========
Basic earnings per common share $ 0.49 $ 0.32 $ 1.32 $ 0.90
=========== =========== =========== ===========
Diluted earnings per common share $ 0.47 $ 0.31 $ 1.28 $ 0.89
=========== =========== =========== ===========
Weighted average common shares outstanding 28,522,951 28,149,704 28,322,139 28,995,909
=========== =========== =========== ===========
Weighted average common and common equivalent shares
outstanding 29,575,865 28,390,853 29,186,251 29,342,199
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
5
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CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES
------------------------------------------------------
CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
(In thousands, except share and per share data)
-----------------------------------------------
<TABLE>
<CAPTION>
As of As of
April 30, July 31,
2000 1999
------------ ------------
(unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 12,590 $ 11,424
Trade accounts receivable, net of allowance for uncollectible accounts of $5,028
and $4,926, respectively 141,053 130,936
Inventories 153,803 141,762
Other current assets 17,117 21,863
----------- -----------
Total current assets 324,563 305,985
Property, plant and equipment, net 201,996 201,586
Goodwill, net 74,550 76,584
Other assets, net 9,325 10,945
----------- -----------
Total assets $610,434 $595,100
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Liabilities:
Current liabilities $110,851 $142,221
Long-term debt, excluding current maturities 173,451 171,727
Other non-current liabilities 31,466 29,050
----------- -----------
Total liabilities 315,768 342,998
----------- -----------
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, 31,333,008
and 30,778,928 shares issued, respectively 313 308
Paid in capital 188,164 178,979
Common stock issuable, 15,386 and 22,679 shares, respectively 304 253
Retained earnings 165,670 128,246
Treasury stock, at cost, 2,623,452 shares (49,262) (49,262)
Accumulated other comprehensive deficit (10,523) (6,422)
----------- -----------
Total stockholders' equity 294,666 252,102
----------- -----------
Total liabilities and stockholders' equity $610,434 $595,100
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
6
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CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES
------------------------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
-----------------------------------------------------------
(In thousands)
--------------
<TABLE>
<CAPTION>
Nine Months Ended
April 30,
----------------------
2000 1999
-------- --------
<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 41,521 $ 39,097
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (13,486) (18,805)
Acquisition of businesses, including transaction costs,
net of cash acquired (8,414) (47,506)
-------- --------
Net cash used by investing activities (21,900) (66,311)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in revolving note borrowings (18,753) 64,246
Funds provided by long-term debt 1,195 11,290
Funds used to reduce long-term debt (9,554) (13,859)
Common stock issued or issuable 1,081 ---
Net proceeds from exercise of stock options and related tax benefits 8,160 9,737
Purchase of treasury stock --- (44,971)
-------- --------
Net cash (used) provided by financing activities (17,871) 26,443
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS (584) (123)
-------- --------
Net increase (decrease) in cash 1,166 (894)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 11,424 11,143
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 12,590 $ 10,249
======== ========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 9,370 $ 8,749
======== ========
Income taxes $ 22,108 $ 9,561
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
7
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CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES
------------------------------------------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
----------------------------------------------------------------
1. BASIS OF PRESENTATION
---------------------
The condensed consolidated financial statements presented herein are unaudited.
Certain information and footnote disclosures normally prepared in accordance
with generally accepted accounting principles have been either condensed or
omitted pursuant to the rules and regulations of the Securities and Exchange
Commission. Although the registrant believes that all adjustments necessary for
a fair presentation have been made, interim period results are not necessarily
indicative of the results of operations for a full year. As such, these
financial statements should be read in conjunction with the financial statements
and notes thereto included in the registrant's most recent Form 10-K which was
filed for the fiscal year ended July 31, 1999.
2. INVENTORIES
-----------
Inventories of the Company consist of the following:
April 30, July 31,
2000 1999
---------- ---------
(In thousands)
Raw materials $ 40,315 $ 36,851
Work-in-process 36,017 32,297
Finished goods 77,471 72,614
-------- --------
$153,803 $141,762
======== ========
3. EARNINGS PER SHARE
------------------
Basic earnings per common share are computed based on the weighted average
common shares outstanding. Diluted earnings per common share are computed based
on the weighted average common shares outstanding plus additional shares assumed
to be outstanding to reflect the dilutive effect of common stock equivalents.
The following table sets forth the computation of basic and diluted earnings per
share:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
April 30, April 30,
---------------------------- ------------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
(In thousands, except share and per share data)
<S> <C> <C> <C> <C>
Net income $ 14,017 $ 8,883 $ 37,424 $ 26,053
----------- ----------- ----------- -----------
Basic earnings per common share:
Weighted average common shares outstanding 28,522,951 28,149,704 28,322,139 28,995,909
Basic earnings per common share $ 0.49 $ 0.32 $ 1.32 $ 0.90
=========== =========== =========== ===========
Diluted earnings per common share:
Weighted average common shares outstanding 28,522,951 28,149,704 28,322,139 28,995,909
Shares issuable from assumed exercise of
dilutive stock options 1,052,914 241,149 864,112 346,290
----------- ----------- ----------- -----------
Weighted average common and common
equivalent shares outstanding 29,575,865 28,390,853 29,186,251 29,342,199
Diluted earnings per common share $ 0.47 $ 0.31 $ 1.28 $ 0.89
=========== =========== =========== ===========
</TABLE>
8
<PAGE>
Options to purchase 185,500 and 2,104,225 shares of common stock were
outstanding during the three month periods ended April 30, 2000 and 1999,
respectively, and options to purchase 100,000 and 1,906,850 shares of common
stock were outstanding during the nine month periods ended April 30, 2000 and
1999, respectively, but were not included in the computation of diluted earnings
per common share as the option's exercise price was greater than the average
market price of the common stock for the respective periods.
4. INDUSTRY SEGMENT INFORMATION
----------------------------
The Company's operations are organized into two business segments: the Network
Communication segment and the Specialty Electronic segment. Network
Communication encompasses connectivity products used within computer networks
and communication infrastructures for the electronic transmission of data,
voice, and multimedia. Products included in this segment are high performance
network cable, fiber optic cable and passive components, including connectors,
wiring racks and panels, and interconnecting hardware for end-to-end network
structured wiring systems, and communication cable products for local loop,
central office, wireless and other applications, including assembly of products
for the wireless marketplace. Effective with the first quarter of fiscal 2000,
the Company is reporting sales of computer interconnect and wireless
communication products in its Network Communication segment to more
appropriately reflect the markets to which these products are sold. Prior period
segment information has been restated to conform to the current year
presentation. The Specialty Electronic segment encompasses electronic data and
signal transmission cables for automation and process control applications as
well as specialized wire and cable products for niche markets, including
commercial aviation and automotive electronics.
The Company evaluates segment performance based on operating profit excluding
net nonrecurring items, after allocation of Corporate expenses.
The Company has no inter-segment revenues. Summarized financial information for
the Company's business segments is as follows:
<TABLE>
<CAPTION>
Network Specialty
Communication Electronic
Segment Segment Total
----------------- ----------------- -----------------
Three Months Ended April 30, (In thousands)
<S> <C> <C> <C>
Sales:
2000 $138,724 $66,176 $204,900
1999 $106,288 $59,323 $165,611
Segment Operating Profit:
2000 $ 15,226 $10,957 $ 26,183
1999 $ 9,597 $ 7,932 $ 17,529
<CAPTION>
Network Specialty
Communication Electronic
Segment Segment Total
----------------- ----------------- -----------------
Nine Months Ended April 30, (In thousands)
<S> <C> <C> <C>
Sales:
2000 $385,026 $185,675 $570,701
1999 $322,622 $177,509 $500,131
Segment Operating Profit:
2000 $ 42,627 $ 29,427 $ 72,054
1999 $ 34,144 $ 25,880 $ 60,024
</TABLE>
9
<PAGE>
5. OTHER COMPREHENSIVE INCOME
--------------------------
Comprehensive income is defined as all changes in stockholders' equity during a
period except those resulting from investment by or distribution to
stockholders. The Company's comprehensive income differs from net income due to
foreign currency translation adjustments. Comprehensive income was $10.7 million
and $7.7 million for the three months and $33.3 million and $25.8 million for
the nine months ended April 30, 2000 and 1999, respectively.
6. BUSINESS ACQUISITIONS
---------------------
On February 24, 2000, the Company purchased 85% of the outstanding stock of
Industria Tecnica Cavi ("ITC/CDT"), and entered into an agreement to purchase
the remaining 15% of the stock at a later date. ITC/CDT is an Italian
manufacturer of coaxial cable. The purchase of ITC/CDT was funded through
borrowings under the Company's primary credit facility.
On March 31, 2000, the Company acquired the outstanding stock of Hamilton USA
Inc. ("BoseLAN/CDT"), a Silicon Valley company located in Fremont, California.
BoseLAN/CDT is a developer of high performance electronic and fiber optic
components.
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Cable Design Technologies is a leading manufacturer of technologically advanced
connectivity products for the Network Communication and Specialty Electronic
marketplaces. Network Communication encompasses connectivity products used
within computer networks and communication infrastructures for the electronic
transmission of data, voice and multimedia. Products included in this segment
are high bandwidth network cable, fiber optic cable and passive components,
including connectors, wiring racks and panels, and interconnecting hardware for
end-to-end network structured wiring systems, and communication cable products
for local loop, central office, wireless and other applications, including
assembly of products for the wireless marketplace. The Specialty Electronic
segment encompasses electronic data and signal transmission cables for
automation and process control applications as well as specialized wire and
cable products for niche markets, including commercial aviation and automotive
electronics.
This discussion and analysis of the Company's financial condition and results of
operations should be read in conjunction with the Company's unaudited condensed
consolidated financial statements and the notes thereto.
Results of Operations
Third Fiscal Quarter Overview
Sales for the three months ended April 30, 2000 ("third quarter 2000") were
$204.9 million, an increase of 24% compared to the three months ended April 30,
1999 ("third quarter 1999"). Sales for the Network Communication segment
increased 31% to $138.7 million, and represented 68% of total revenue. The
increase in sales for this segment was led by 121% growth in sales of enhanced
gigabit network cables (Category 5e and Category 6), 73% growth in sales of
central office telecommunication products, 63% growth in sales of wireless
products and 51% growth in sales of computer interconnect products. Sales for
the Specialty Electronic segment were $66.2 million, an increase of 12% compared
to the third quarter 1999 primarily due to a 22% increase in sales of automation
and process control products. The operating margin was 12.8% for the third
quarter 2000 versus 10.6% for the third quarter 1999, excluding a nonrecurring
gain of $1.1 million ($0.7 million, net of tax) realized in the third quarter
1999. Net income for the third quarter 2000 increased $5.9 million, or 73%, to
$14.0 million ($0.47 per diluted share) compared to net income of $8.1 million
($0.29 per diluted share) for the third quarter 1999, excluding the nonrecurring
gain.
Three Months Ended April 30, 2000 Compared to
Three Months Ended April 30, 1999
Sales for the third quarter 2000 increased $39.3 million, or 24%, to $204.9
million compared to $165.6 million for the third quarter 1999. Network
Communication segment sales increased $32.4 million, or 31%, to $138.7 million
for the third quarter 2000 compared to $106.3 million for the third quarter
1999, and Specialty Electronic segment sales increased $6.9 million, or 12%, to
$66.2 million for the third quarter 2000 compared to $59.3 million for the third
quarter 1999. For the Network Communication segment, sales of gigabit network
cables increased 121% over the same period last year as a result of growth in
demand for higher bandwidth within premise network systems. The increased
demand for gigabit network cables was partially offset by a 27% decline in sales
of the lower performance rated Category 5 network cable and, compared to the
third quarter 1999, lower average selling prices in the U.S. marketplace for
Category 5 and 5e network cables. Sales of central office telecommunication and
computer interconnect cable products increased 73% and 51%, respectively, over
the same period last year. The increase in demand for both central office and
computer interconnect cable products was driven by growth of competitive local
exchange carriers, Internet service providers and application service providers
within the telecommunication industry. Sales of wireless cable and assembly
services increased 63% over the third quarter 1999 as providers of wireless
services and products expand their product offerings. To a lesser degree, sales
growth in other product lines contributed to the increase in Network
Communication segment sales, including 30% sales growth for fiber optic
products, 25% for outside plant communication cable, and 30% for network
components (excluding components used in fiber optic applications). The increase
in sales for the Specialty Electronic segment was primarily due to an increase
in sales of automation and process control products, which was partially offset
by lower sales of specialty cable primarily to the aviation marketplace. Sales
outside of North America were $45.8 million for the third quarter 2000, an
increase of 21% compared to sales of $37.8 million for the third quarter 1999.
The increase in international sales was primarily due to higher sales of
computer interconnect cable products in Western Europe and network and wireless
products in the Pacific Rim.
11
<PAGE>
The gross margin for the third quarter 2000 was 28.8% compared to 28.1% for the
third quarter 1999. The increase in the gross margin was the result of an
improved gross margin for the Specialty Electronic segment which was partially
offset by a slight decrease in the Network Communication segment gross margin.
The increase in the gross margin for the Specialty Electronic segment was
primarily a result of a higher margin for automation and process control
products due to favorable product mix and volume efficiencies. The lower
Network Communication segment gross margin was primarily due to a lower margin
for communication products attributable to outside plant communication cable
which was partially offset by an improved margin for network products. The
lower outside plant cable margin was due to competitive pricing and a shift in
mix resulting from an increase in sales of outside plant cable sold in the U.S.
marketplace. The increase in the network products gross margin was primarily
attributable to an improved margin for computer interconnect products as a
result of a better product mix and volume efficiencies.
Selling, general and administrative expense ("SG&A") for the third quarter 2000
was $31.6 million compared to $27.6 million for the third quarter 1999. The
increase in SG&A was primarily due to higher sales volume and performance
related expenses. As a percentage of sales, SG&A for the third quarter 2000
declined to 15.4% compared to 16.7% for the third quarter 1999 due to a lower
percentage growth in SG&A as compared to the growth in sales.
Income from operations for the third quarter 2000 increased $8.7 million, or
49%, to $26.2 million compared to $17.5 million for the third quarter 1999,
excluding a nonrecurring gain in the third quarter 1999 recognized on the sale
of certain assets. The operating margin increased to 12.8% for the third
quarter 2000 compared to 10.6% for the third quarter 1999, excluding the
nonrecurring gain.
Interest expense decreased $0.4 million to $3.0 million for the third quarter
2000 compared to $3.4 million for the third quarter 1999 and was primarily due
to the lower average balance of debt outstanding. The effective tax rate was
39.8% for the third quarter 2000 compared to 39.1% for the third quarter 1999,
excluding the nonrecurring gain.
Net income for the third quarter 2000 increased $5.9 million, or 73%, to $14.0
million ($0.47 per diluted share) compared to net income of $8.1 million ($0.29
per diluted share) for the third quarter 1999, excluding the nonrecurring gain.
Reported net income for the third quarter 1999 was $8.9 million ($0.31 per
diluted share).
Nine Months Ended April 30, 2000 Compared to
Nine Months Ended April 30, 1999
Sales for the nine months ended April 30, 2000 ("first nine months 2000")
increased $70.6 million, or 14%, to $570.7 million compared to $500.1 million
for the nine months ended April 30, 1999 ("first nine months 1999"). Network
Communication segment sales increased 19% to $385.0 million for the first nine
months 2000 compared to sales of $322.6 million for the first nine months 1999,
and Specialty Electronic segment sales increased 5% to $185.7 million compared
to sales of $177.5 million for the same period last year. The growth in Network
Communication segment sales was led by increased sales of gigabit network cables
resulting from demand for higher bandwidth premise network systems, which more
than offset a decline in sales of the lower performance rated Category 5 network
cable and, compared to the same period last year, lower average selling prices
in the U.S. marketplace for Category 5 and gigabit network cables. Increased
sales of central office and computer interconnect telecommunication cables, as
well as wireless cable and assembly services also contributed significantly to
the growth in Network Communication segment sales. Growth of competitive local
exchange carriers, Internet service providers and application service providers
within the telecommunication industry has driven an increase in demand for
central office and computer interconnect cables. Sales of wireless cable and
assembly services to providers of wireless services and products have increased
as a result of strong demand for cellular communications. Also, sales of fiber
optic products for the first nine months 2000 increased due primarily to an
increase in sales of single mode fiber optic cable. The increase in sales for
the Specialty Electronic segment was primarily due to an increase in sales of
automation and process control products, which was partially offset by a decline
in sales to the aviation marketplace. Sales outside of North America were $128.5
million for the first nine months 2000, an increase of 10% compared to sales of
$117.0 million for the first nine months 1999. The increase in international
sales was primarily due to higher sales of computer interconnect and central
office cable products in Western Europe and network products in the Pacific Rim.
The gross margin for the first nine months 2000 was 29.0% compared to 29.4% for
the first nine months 1999. The slight decrease in the gross margin was the
result of a lower gross margin for the Network Communication segment, which was
partially offset by an improved margin for the Specialty Electronic segment.
The lower Network Communication segment gross margin was primarily due to a
lower margin for communication products attributable to outside plant cable.
The lower outside plant cable margin was due to competitive pricing and a shift
in mix resulting from an increase in sales of outside plant cable sold in the
12
<PAGE>
U.S. marketplace. The improved gross margin for the Specialty Electronic
segment was primarily due to a higher margin for automation and process control
products due to favorable product mix and volume efficiencies.
SG&A for the first nine months 2000 increased $7.4 million to $90.2 million
compared to $82.8 million for the first nine months 1999. The increase in SG&A
was primarily due to higher sales volume and performance related sales expenses.
As a percentage of sales, SG&A for the first nine months 2000 declined to 15.8%
compared to 16.6% for the first nine months 1999, as the percentage growth in
sales exceeded the growth in SG&A. First nine months 2000 research and
development expense decreased $0.8 million to $3.5 million compared to $4.3
million for the first nine months 1999.
Income from operations for the first nine months 2000 increased $12.1 million,
or 20%, to $72.1 million compared to $60.0 million for the same period last
year, excluding net nonrecurring expense incurred in the first nine months 1999.
Net nonrecurring expense for the first nine months 1999 included a $1.1 million
gain realized on the sale of assets related to a discontinued product line, and
a charge of $6.3 million incurred in connection with the December 1998 Share
Purchase Plan. The operating margin increased to 12.6% for the first nine
months 2000 compared to 12.0% for the first nine months 1999, excluding the
prior year net nonrecurring expense.
Interest expense decreased $0.8 million to $9.0 million for the first nine
months 2000 compared to $9.8 million for the first nine months 1999 and was
primarily due to a lower average balance of debt outstanding. The effective tax
rate was 39.4% for the first nine months 2000 compared to 39.6% for the first
nine months 1999, excluding the net nonrecurring expense.
Net income for the first nine months 2000 increased $7.9 million, or 27%, to
$37.4 million ($1.28 per diluted share) compared to net income of $29.5 million
($1.01 per diluted share) for the first nine months 1999, excluding net
nonrecurring expense. Reported net income after net nonrecurring expense for
the first nine months 1999 was $26.1 million ($0.89 per diluted share).
Financial Condition
Liquidity and Capital Resources
-------------------------------
During the first nine months 2000, operating working capital increased $14.4
million. The change in operating working capital was primarily the result of
increases in inventories of $11.2 million and accounts receivable of $7.6
million, which were partially offset by an increase in accounts payable and
other accrued liabilities of $5.6 million. The change in operating working
capital excludes changes in cash and cash equivalents and current maturities of
long-term debt.
The Company generated $41.5 million of net cash from operating activities during
the first nine months 2000, after providing for the $14.4 million increase in
operating working capital. The net cash used by investing activities of $21.9
million included $13.5 million for investments in capital projects and $8.4
million for the acquisition of businesses. Net cash used by financing
activities of $17.9 million included $27.1 million used to reduce outstanding
debt partially offset by $9.2 million received primarily from the exercise of
stock options and related tax benefits.
The Company's primary credit agreement (the "Credit Agreement") consists of a
$121.3 million U.S. revolving facility and a CDN $115.0 million Canadian
revolving facility equivalent to approximately $77.7 million. The U.S.
revolving facility includes a $50.0 million Deutschmark sub-facility. The
Company also maintains a bank credit facility in the United Kingdom equivalent
to approximately $11.7 million (the "Foreign Facility"). As of April 30, 2000,
the Company had availability of $27.6 million and $3.8 million under the Credit
Agreement and Foreign Facility, respectively. The Company also has a 364-day,
unsecured bank revolving credit agreement (the "364-day Facility") with a
maximum principal amount of $15 million, which expires December 10, 2000. As of
April 30, 2000, there were no amounts outstanding under the 364-day Facility.
Based on an analysis of current expectations for its business, management
believes that the Company's cash flow from operations and funds available under
its credit agreements will provide it with sufficient liquidity to meet its
current liquidity needs.
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 operations. For certain communication cable products, profitability
is generally not significantly affected by volatility of copper prices as
selling prices are generally adjusted for changes in the market price of copper,
however, differences in the timing of selling price adjustments do occur and may
impact near term results. For other products, although selling prices are not
generally adjusted to directly reflect changes in copper prices, the relief of
copper costs from inventory for those operations having longer inventory cycles
may affect profitability from one period to the next following
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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.
New Accounting Standards
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS No. 133"). 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. This statement has been amended by Statement of
Financial Accounting Standards No. 137, "Accounting for Derivative Instruments
and Hedging Activities-Deferral of the effective date of SFAS No. 133" ("SFAS
No. 137"). This statement is effective for the Company's fiscal year ending
July 31, 2001. The Company does not believe the adoption of SFAS No. 133 will
have a material effect on the Company's results of operations, financial
position or cash flows.
Forward-looking Statements -- Under the Private Securities Litigation Act of
1995
Certain statements in this quarterly report are forward-looking statements,
including, without limitation, statements regarding future financial results and
performance, and the Company's or management's beliefs, expectations or
opinions. These statements are subject to various risks and uncertainties, many
of which are outside the control of the Company, including the level of market
demand for the Company's products, competitive pressures, the ability to achieve
reductions in operating costs and to continue to integrate acquisitions, price
fluctuations of raw materials and the potential unavailability thereof, foreign
currency fluctuations, technological obsolescence, environmental matters and
other specific factors discussed in the Company's Annual Report on Form 10-K for
the year ended July 31, 1999, and other Securities and Exchange Commission
filings. The information contained herein represents management's best judgment
as of the date hereof based on information currently available; however, the
Company does not intend to update this information to reflect developments or
information obtained after the date hereof and disclaims any legal obligation to
the contrary.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
None.
Item 3. Defaults upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
At the Company's Board of Directors June 6, 2000 meeting the Board,
noting a trend for longer "window" periods for trading of Company
securities by "insiders", expanded the internal trading period
generally applicable to directors and certain designated executive
officers.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
15.1 Letter of Arthur Andersen LLP regarding unaudited interim
financial statement information.
27.1 Financial data schedule.
(b) Reports on Form 8-K:
None.
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SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CABLE DESIGN TECHNOLOGIES CORPORATION
/s/ Paul M. Olson
----------------------------------
June 13, 2000 Paul M. Olson
President and Chief Executive Officer
/s/ Kenneth O. Hale
----------------------------------
June 13, 2000 Kenneth O. Hale
Vice President and Chief Financial Officer
16
