<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 27, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 0-23070
AFC CABLE SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 95-1517994
(State or other jurisdiction of incorporation or organization) (I.R.S.Employer Identification No.)
50 KENNEDY PLAZA, SUITE 1250, PROVIDENCE, RHODE ISLAND 02903
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (401) 453-2000
</TABLE>
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 of the Registrant's Common Stock outstanding as of
the latest practicable date:
Class Outstanding as of August 7, 1998
----- --------------------------------
Common Stock, $.01 par value 12,740,968
Page 1 of 14 pages
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PART I - FINANCIAL INFORMATION
AFC CABLE SYSTEMS, INC.
Item 1. Financial Statements
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
June 27, December 31,
1998 1997
---- ----
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents .................................. $ 6,258 $ 2,803
Investments, marketable securities (Note 5) ................ 71,642 40,434
Accounts receivable, net of allowance for doubtful accounts
and sales allowances of $2,758 and $3,870, respectively . 38,934 32,127
Inventories:
Finished goods .......................................... 24,590 26,333
Work-in-process ......................................... 7,205 7,385
Raw materials ........................................... 6,360 6,219
--------- ----------
38,155 39,937
Current deferred taxes ..................................... 2,050 1,491
Other current assets ....................................... 1,921 1,439
--------- ----------
Total current assets ....................................... 158,960 118,231
Property, plant and equipment, at cost ....................... 44,207 37,346
Less accumulated depreciation ................................ 15,671 12,409
--------- ----------
Net property, plant and equipment ............................ 28,536 24,937
Goodwill, net of accumulated amortization of $567 and
$373, respectively ......................................... 21,940 16,497
Other long term assets, net .................................. 2,271 1,464
--------- ----------
Total assets ................................................. $211,707 $161,129
========= ==========
</TABLE>
Note: The balance sheet at December 31, 1997 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
See accompanying notes.
2
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AFC CABLE SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS--Continued
(In thousands, except share data)
<TABLE>
<CAPTION>
June 27, December 31,
1998 1997
---- ----
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt .......................... $ 1,033 $ 227
Revolving credit note payable .............................. 3,000 6,230
Accounts payable ........................................... 15,630 12,536
Accrued expenses:
Payroll and employee benefits ........................... 3,345 3,609
Other ................................................... 5,773 7,488
--------- ---------
Total accrued expenses .................................. 9,118 11,097
--------- ---------
Total current liabilities .................................... 28,781 30,090
Long-term debt ............................................... 5,682 3,893
Deferred income taxes ........................................ 1,718 1,570
Other long-term liabilities .................................. 3,018 2,441
Shareholders' equity:
Preferred stock, $.01 par value, 1,000,000 shares
authorized, none issued
Common stock, $.01 par value, 50,000,000 and 15,000,000
shares authorized, respectively, 12,740,968 and 11,397,854
shares issued and outstanding, respectively ............. 127 114
Paid-in capital ............................................ 116,913 79,110
Other (Note 7) ............................................. 1,082 1,021
Treasury stock, 14,137 shares and 6,411 shares,
respectively, at cost ................................... (364) (92)
Retained earnings .......................................... 54,750 42,982
--------- ---------
172,508 123,135
--------- ---------
Total liabilities and shareholders' equity ................... $211,707 $161,129
========= =========
</TABLE>
Note: The balance sheet at December 31, 1997 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
See accompanying notes.
3
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AFC CABLE SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except share data)
<TABLE>
<CAPTION>
Quarter ended
-------------
<S> <C> <C>
June 27, June 28,
1998 1997
---- ----
Net sales ................................................... $69,466 $54,210
Cost of goods sold .......................................... 48,401 38,646
---------- ----------
Gross profit ................................................ 21,065 15,564
Selling, general and administrative expenses ................ 11,400 8,744
---------- ----------
Income from operations ...................................... 9,665 6,820
Other income (expense):
Interest expense .......................................... (255) (141)
Net investment and other income ........................... 875 454
---------- ----------
620 313
---------- ----------
Income before taxes ......................................... 10,285 7,133
Income taxes ................................................ 4,007 2,746
---------- ----------
Net income (Note 7) ......................................... $ 6,278 $ 4,387
========== ==========
Basic earnings per common share (Note 6) .................... $ .52 $ .41
========== ==========
Diluted earnings per common share (Note 6) .................. $ .50 $ .40
========== ==========
</TABLE>
See accompanying notes
4
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AFC CABLE SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except share data)
<TABLE>
<CAPTION>
Six months ended
----------------
<S> <C> <C>
June 27, June 28,
1998 1997
---- ----
Net sales ................................................... $134,752 $101,997
Cost of goods sold .......................................... 94,325 73,125
--------- ---------
Gross profit ................................................ 40,427 28,872
Selling, general and administrative expenses ................ 22,202 16,547
--------- ---------
Income from operations ...................................... 18,225 12,325
Other income (expense):
Interest expense .......................................... (388) (272)
Net investment and other income ........................... 1,454 704
--------- ---------
1,066 432
--------- ---------
Income before taxes ......................................... 19,291 12,757
Income taxes ................................................ 7,523 4,910
--------- ---------
Net income (Note 7) ......................................... $ 11,768 $ 7,847
========= =========
Basic earnings per common share (Note 6) .................... $ 1.00 $ .78
========= =========
Diluted earnings per common share (Note 6) .................. $ .96 $ .76
========= =========
</TABLE>
See accompanying notes
5
<PAGE>
AFC CABLE SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Six months ended
----------------
<S> <C> <C>
June 27, June 28,
1998 1997
---- ----
OPERATING ACTIVITIES
Net income ................................................... $ 11,768 $ 7,847
Adjustments to reconcile net income to cash provided
by operating activities:
Depreciation ............................................ 2,055 1,458
Amortization of intangibles ............................. 258 111
Net realized (gain) loss on available-for-sale securities (43) 16
Deferred income taxes ................................... (428) (314)
Provision for bad debts ................................. 121 66
Provision for sales allowances .......................... (1,169) (467)
Compensation expense for restricted stock
and compensatory options ............................. 38 45
Increase (decrease) in cash arising from changes
in assets and liabilities:
Accounts receivable ................................ (5,412) (4,412)
Inventories ........................................ 1,970 (11,084)
Other current assets ............................... (408) (29)
Other long-term assets ............................. (266) 405
Accounts payable ................................... 2,009 (1,196)
Accrued payroll and employee benefits .............. (264) (250)
Other accrued liabilities .......................... (1,149) 1,521
Long-term liabilities .............................. 577 689
-------- --------
Net cash provided by (used in) operating activities .......... 9,657 (5,594)
INVESTING ACTIVITIES
Acquisitions, including expenses, less cash acquired ......... (2,847) (13,992)
Capital expenditures ......................................... (5,045) (3,688)
Purchase of available-for-sale securities .................... (69,642) (20,830)
Proceeds from sale of available-for-sale securities .......... 38,463 14,403
-------- --------
Net cash used in investing activities ........................ (39,071) (24,107)
FINANCING ACTIVITIES
Net revolving line of credit borrowings (repayments) ......... (3,230) 1,450
Payments on long-term debt, including current portion ........ (105) (271)
Proceeds from issuance of common stock ....................... 36,476 28,025
Purchase of treasury stock ................................... (272) -
-------- --------
Net cash provided by financing activities .................... 32,869 29,204
-------- --------
Net increase (decrease) in cash and cash equivalents ......... 3,455 (497)
Cash and cash equivalents at beginning of period ............. 2,803 980
-------- --------
Cash and cash equivalents at end of period ................... $ 6,258 $ 483
======== ========
Supplemental schedule of cash flow information:
Cash paid during the period for interest ................... $ 206 $ 190
======== ========
Cash paid during the period for income taxes ............... $ 8,266 $ 4,773
======== ========
</TABLE>
See accompanying notes
6
<PAGE>
AFC CABLE SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 27, 1998
NOTE 1. BASIS OF PRESENTATION
The accompanying unaudited financial statements of AFC Cable Systems, Inc.
(the "Company" or "AFC") have been prepared in accordance with generally
accepted accounting principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for the
three and six month periods ended June 27, 1998 are not necessarily indicative
of the results that may be expected for the year ended December 31, 1998.
Certain prior year amounts have been reclassified to conform to current period
presentation. For further information, refer to the financial statements and
footnotes thereto included in the Company's annual report on Form 10-K for the
year ended December 31, 1997.
NOTE 2. INCOME TAXES
For the six month periods ended June 27, 1998 and June 28, 1997, the
Company's effective tax rates of approximately 39.0% and 38.5%, respectively,
were greater than the statutory rate due primarily to state income taxes.
NOTE 3. CONTINGENCIES
The Company is a defendant in certain claims that relate to matters that
occurred prior to present ownership. In accordance with the purchase and sale
agreement, the prior owner has indemnified the Company for such claims and,
accordingly, the matters are being defended by the prior owners and its
insurance companies. Management is of the opinion that these claims relate to
the prior owners and therefore will not have a material adverse effect on the
Company's financial position or results of operations.
Additionally, the Company is a party to one environmental matter not
covered by the indemnification. In this matter, a number of responsible parties
entered into a consent decree with the EPA in 1991 and subsequently, such
parties as plaintiffs have sought contribution from the Company, which was not
named as a responsible party by the EPA. The Company has admitted that a
predecessor of the business currently operated by the Company had disposed of a
de minimis amount of waste at the site. On December 17, 1996, the United States
District Court for the District of Massachusetts entered a judgment in favor of
the Company with respect to this claim. As of June 27, 1998, there is an appeal
pending with the U.S. Court of Appeals for the First Circuit.
NOTE 4. FINANCING AND LEASE
The Company has an unsecured revolving line of credit agreement with a
bank which provides for direct borrowings of up to $25.0 million, of which up to
$10.0 million is available, without the lender's prior consent, for business
acquisitions. The line of credit agreement also provides for letter of credit
borrowings of up to $3.0 million. A monthly fee based on the unused portion of
credit is payable under the agreement.
Borrowings under the line of credit are available at interest rates equal
to either the lender's base rate or the Eurodollar rate plus 0.5% to 1.25% for a
fixed period of one, two, three, six or twelve months. The Company has the
option of electing the applicable rate upon notification to the lender and as a
result, portions of the outstanding balance accrue interest at different rates.
The weighted average rate of outstanding borrowings under the revolving line of
credit was 6.1875% at June 27, 1998. Total letters of credit issued at June 27,
1998 were $1,121,000. The line of credit contains certain restrictive covenants,
including the requirement that the Company maintain minimum levels of tangible
capital funds and meet other specified ratio requirements.
During 1996, the Company was loaned the proceeds from the issuance of
$3.57 million in Industrial Revenue Bonds ("IRBs") by the Massachusetts
7
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Industrial Finance Agency for the purpose of acquiring and refurbishing a 99,000
square-foot manufacturing facility in New Bedford, Massachusetts, which secures
the IRBs. The IRBs mature on July 24, 2016 and carry an interest rate which is
adjustable on a weekly basis. This interest rate was approximately 3.65% for the
six months ended June 27, 1998. In addition, an annual fee of 1.0% of the amount
of an unsecured stand-by letter of credit is payable to the bank holding the
letter of credit and also acting as trustee under the terms of the IRB issuance.
The Company has the right to convert from the variable interest rate to a fixed
rate established at the time of conversion. The bonds are payable in nineteen
annual installments of $180,000 with a final payment of $150,000 due at
maturity, all funded through monthly payments of $15,000 to the trustee over the
twelve months preceding the installment due dates. At June 27, 1998, $3.0
million of the total was classified as long-term debt. The carrying value of the
bonds approximates market at June 27, 1998.
In addition to the IRBs, long-term debt at June 27, 1998 includes $758,000
which represents a mortgage on a facility owned by the Company. The mortgage
carries a fixed rate of 8% and matures on February 20, 2012. The carrying amount
approximates fair value at June 27, 1998.
During the second quarter of 1998, the Company incurred $2.6 million of
debt in connection with a product line acquisition. Payments on this debt will
be made in three annual installments beginning on May 15, 1999. At June 27,
1998, approximately $1.8 million of this debt was classified as long-term.
NOTE 5. INVESTMENTS
The following is a summary of securities held by the Company. All
securities are classified as available-for-sale.
<TABLE>
<CAPTION>
Gross Gross Estimated
Unrealized Unrealized Fair
Cost Gains Losses Value
---------- -------------- ------------- ------------
<S> <C> <C> <C> <C>
(In Thousands)
JUNE 27, 1998
U.S. corporate debt securities ..... $22,636 $ 435 $ (8) $23,063
U.S. treasury securities
and obligations of U.S.
Government agencies .............. 34,738 47 (36) 34,749
Equity securities .................. 12,917 1,166 (253) 13,830
------- ------- -------- -------
Total included in investments ...... $70,291 $ 1,648 $ (297) $71,642
======= ======= ======== =======
DECEMBER 31, 1997
U.S. corporate debt securities ..... $ 9,464 $ 329 $ (3) $ 9,790
U.S. treasury securities
and oligations of U.S.
Government agencies .............. 24,713 55 (2) 24,766
Equity securities .................. 4,894 1,096 (112) 5,878
------- ------- -------- -------
Total included in investments ...... $39,071 $ 1,480 $ (117) $40,434
======= ======= ======== =======
</TABLE>
8
<PAGE>
The cost and fair market value of debt securities at June 27, 1998 and December
31, 1997, by contractual maturities, are shown below:
<TABLE>
<CAPTION>
AVAILABLE-FOR-SALE
<S> <C> <C>
Fair Market
Cost Value
--------------- -----------------
JUNE 27, 1998 ($ in thousands)
Debt securities:
Maturing in one year or less ..................... $24,206 $24,594
Maturing between one year and five years ......... 30,273 30,268
Maturing after five years ........................ 2,895 2,950
--------------- -----------------
57,374 57,812
Equity securities .................................. 12,917 13,830
--------------- -----------------
Total investments .................................. $70,291 $71,642
=============== =================
DECEMBER 31, 1997
Debt securities:
Maturing in one year or less ..................... $15,031 $15,296
Maturing between one year and five years ......... 17,931 17,983
Maturing after five years ........................ 1,215 1,277
----------------------------------
34,177 34,556
Equity securities .................................. 4,894 5,878
----------------------------------
Total investments .................................. $39,071 $40,434
==================================
</TABLE>
Expected maturities will differ from contractual maturities because the
issuers of the securities may have the right to prepay obligations without
prepayment penalties. Net realized gains included in investment income amounted
to $43,000 in the six months ended June 27, 1998.
NOTE 6. EARNINGS PER SHARE
The Company adopted Financial Accounting Standards Board Statement No. 128,
"Earnings Per Share" ("FAS 128"), in 1997. FAS 128 requires the presentation of
"basic earnings per share" and "diluted earnings per share." Basic earnings per
share represents net income divided by the weighted average number of shares of
Common Stock outstanding during the year. Diluted earnings per share represents
net income divided by weighted average shares outstanding adjusted for the
dilutive effect of the assumed exercise of outstanding options and warrants.
Share and earnings per share amounts for all periods have been presented, and
where appropriate, restated to conform to the requirements of FAS 128. The
following table sets forth the computation of basic and diluted earnings per
share for the three and six month periods ended June 27, 1998 and June 28, 1997:
9
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<TABLE>
<CAPTION>
Quarter ended Six months ended
------------- ----------------
June 27, June 28, June 27, June 28,
1998 1997 1998 1997
-------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C>
Net income (in thousands) $6,278 $4,387 $11,768 $7,847
Basic average shares 12,060,875 10,761,312 11,712,219 10,011,069
Effect of dilutive securities:
Stock options and stock
awards 462,018 248,562 424,044 190,821
Stock warrants 10,406 82,872 51,118 105,591
-------------- --------------- --------------- ---------------
472,424 331,434 475,162 296,412
Dilutive average shares 12,533,299 11,092,746 12,187,381 10,307,481
============== =============== =============== ===============
Basic earnings per common share $0.52 $0.41 $1.00 $0.78
============== =============== =============== ===============
Diluted earnings per common share $0.50 $0.40 $0.96 $0.76
============== =============== =============== ===============
</TABLE>
NOTE 7. COMPREHENSIVE INCOME
As of January 1, 1998, the Company adopted Financial Accounting Standards
Board Statement No. 130, "Reporting Comprehensive Income" ("FAS 130"). FAS 130
establishes new rules for the reporting and display of comprehensive income and
its components. The adoption of FAS 130, however, had no impact on the Company's
net income or shareholders' equity. FAS 130 requires unrealized gains or losses
on the Company's available-for-sale securities, which prior to adoption was
reported separately in shareholders' equity, to be included in other
comprehensive income. The components of comprehensive income, net of related
tax, for the six month periods ended June 27, 1998 and June 28, 1997 are as
follows:
Six months ended
June 27, June 28,
(In thousands) 1998 1997
------------ ------------
Net income ................................ $11,768 $7,847
Unrealized gains (losses) on securities ... 61 311
============ ============
Comprehensive income ...................... $11,829 $8,158
============ ============
NOTE 8. STOCK SPLIT
On September 16, 1997, the Company's Board of Directors authorized a
five-for-four split of the Common Stock effected in the form of a 25 percent
stock dividend distributed on October 20, 1997, to shareholders of record on
October 6, 1997. Shareholders' equity was adjusted by reclassifying from
retained earnings to common stock the par value of the additional shares arising
from the split. All references in the prior year to number of shares, per share
amounts and prices of the Common Stock have been restated to present the effect
of the stock split.
NOTE 9. STOCK OFFERING
On May 19, 1998, the Company completed the issuance of 875,000 shares of
Common Stock at a price of $33.75 per share. An option to purchase an additional
225,000 shares was granted by the Company to the underwriters to cover
over-allotments. This option was exercised in full on May 19, 1998.
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Comparative Results of Operations for the Three and Six Months
Ended June 27, 1998 and June 28, 1997
This report contains certain forward-looking statements within the meaning
of section 21E of the Securities Exchange Act of 1934, as amended. These
statements include, among others, statements relating to future events or the
future financial performance of the Company. Such statements are only
expectations and actual events or results may differ materially. Factors which
could cause actual results to differ materially from those indicated in such
forward-looking statements are set forth in "Factors That May Affect Future
Performance" in the Company's Annual Report on Form 10-K for the year 1997.
RESULTS OF OPERATIONS
NET SALES. Net sales for the quarter ended June 27, 1998 increased $15.3
million, or 28.2%, to $69.5 million from $54.2 million for the quarter ended
June 28, 1997. Net sales for the six months ended June 27, 1998 increased $32.8
million, or 32.2%, to $134.8 million from $102.0 million for the six months
ended June 28, 1997. Net sales for the Wire and Cable Division increased by
$13.9 million, or 32.0%, to $57.4 million for the quarter ended June 27, 1998
from $43.5 million for the quarter ended June 28, 1997. For the six months ended
June 27, 1998, net sales for the Wire and Cable Division increased $28.2
million, or 33.7%, to $112.0 million from $83.8 million for the six months ended
June 28, 1997. These increases are attributable primarily to higher sales of the
Company's traditional armored cable and flexible conduit products, specialty
application cables, fittings and connectors, and specialty coated metals
products. Also contributing to these increases were the sales of Madison and
Federal Hose, which were acquired in April and November of 1997, respectively.
Net sales for the America Cable Systems Division, which includes sales by ALR
and B&B, increased $1.4 million, or 13.3%, to $11.9 million for the quarter
ended June 27, 1998 from $10.5 million for the quarter ended June 28, 1997.
Sales for this division increased $4.6 million, or 25.8%, to $22.4 million for
the six months ended June 27, 1998 from $17.8 million for the six months ended
June 28, 1997. These increases are attributable to higher sales of modular
wiring systems as well as sales by ALR and B&B, which were acquired at the end
of January 1997.
GROSS PROFIT. Gross profit for the quarter ended June 27, 1998 increased
$5.5 million, or 35.3%, to $21.1 million from $15.6 million for the quarter
ended June 28, 1997. Gross profit for the six months ended June 27, 1998
increased $11.4 million, or 39.8%, to $40.4 million from $28.9 million for the
six months ended June 28, 1997. Gross margin increased to 30.3% for the quarter
ended June 27, 1998 from 28.7% for the quarter ended June 28, 1997. Gross margin
for the six months ended June 27, 1998 increased to 30.0% from 28.3% for the six
months ended June 28, 1997. This increase is attributable to (i) improved
operating efficiencies and the benefits of increased output, (ii) more efficient
material utilization resulting from improved manufacturing processes, (iii)
increased sales of the Company's higher margin specialty application cables, and
(iv) higher margins on certain of the products sold by the companies acquired in
1997.
INCOME FROM OPERATIONS. Income from operations for the quarter ended June
27, 1998 increased $2.9 million, or 42.6%, to $9.7 million from $6.8 million for
the quarter ended June 28, 1997. Income from operations for the six months ended
June 27, 1998 increased $5.9 million, or 48%, to $18.2 million from $12.3
million for the six months ended June 28, 1997. Income from operations as a
percentage of net sales increased to 13.9% for the quarter ended June 27, 1998
from 12.6% for the quarter ended June 28, 1997. For the six months ended June
27, 1998 income from operations as a percentage of net sales increased to 13.5%
from 12.1% for the six months ended June 28, 1997. These increases resulted from
improved gross margin, but was partially offset by an increase in compensation
expense, increases in freight costs and sales agent commissions, which generally
rise in proportion with net sales and a higher ratio to sales of selling,
general and administrative expenses in the companies acquired in 1997.
NET INCOME. Net income for the quarter ended June 27, 1998 increased $1.9
million, or 43.2%, to $6.3 million from $4.4 million for the quarter ended June
28, 1997. Net income for the six months ended June 27, 1998 increased $4.0
million, or 51.3%, to $11.8 million from $7.8 million for the six months ended
June 28, 1997. Net income as a percentage of net sales increased to 9.1% for the
quarter ended June 27, 1998 from 8.1% for the quarter ended June 28, 1997. For
the six months ended June 27, 1998 net income as a percentage of net sales
increased to 8.8% from 7.7% for the six months ended June 28, 1997. These
increases were primarily due to increased income from operations and, to a
11
<PAGE>
lesser extent, investment income, partially offset by a .5% higher effective tax
rate which was due to a higher marginal income tax rate for the first quarter
and first six months of 1998.
INTEREST EXPENSE. Interest expense for the quarter ended June 27, 1998
increased to $255,000 from $141,000 for the quarter ended June 28, 1997.
Interest expense for the six months ended June 27, 1998 increased to $388,000
from $272,000 for the six months ended June 28, 1997
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operations totaled $9.7 million for the six months ended
June 27, 1998 and was mainly attributable to increased profitability, decreased
levels of inventories and increased accounts payable partially offset by an
increase in accounts receivable resulting from higher sales. Working capital on
June 27, 1998 was $130.2 million and the ratio of current assets to current
liabilities was 5.52 to 1.00 compared to 3.93 to 1.00 at December 31, 1997.
The excess proceeds from the April 23, 1997 and May 19, 1998 public
offerings of the Company's Common Stock described in Note 9 to the financial
statements are included in the Company's portfolio of marketable securities at
June 27, 1998. The Company believes that funds generated from operations,
proceeds from the 1997 and 1998 sales of Common Stock and available borrowings
under its revolving line of credit will be sufficient to meet its on-going
working capital and capital expenditure requirements for the foreseeable future.
12
<PAGE>
PART II - OTHER INFORMATION
AFC CABLE SYSTEMS, INC.
ITEM 1. LEGAL PROCEEDINGS.
None
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
During the quarter ended June 27, 1998 a total of 31,479 shares of Common
Stock were issued pursuant to earnout provisions of purchase and sale agreements
for ALR and B&B as well as for the purchase of a product line in May 1998. The
number of shares in the case of the earnouts was determined by dividing the
dollar amount of the earnouts by an average closing market price of the Common
Stock of $36.80. The number of shares issued in the product line acquisition was
determined by reference to the purchase and sale agreement and had a market
value of $518,438 on the date of issue. The shares of Common Stock were issued
in reliance upon Section 4(2) of the Securities Act of 1933.
On April 13, 1998 88,518 shares of Common Stock were issued pursuant to the
cashless exercise, by Sutro & Company Incorporated, of a warrant.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Annual Meeting of stockholders of the Company was held on May 27, 1998
(the "Annual Meeting"). Proxies for the Annual Meeting were solicited pursuant
to Regulation 14 under the Securities Act of 1933, as amended. At the Annual
Meeting:
(i) Messrs. Robert R. Wheeler and Anthony J. Santoro were elected Class II
directors of the Company for a term of three years. A total of 10,449,582
shares of Common Stock were represented at the Annual Meeting by proxy. Mr.
Wheeler received 10,274,859 votes and 174,723 votes were withheld from Mr.
Wheeler. Mr. Santoro received 10,255,874 votes and 193,708 votes were
withheld from Mr. Santoro.
(ii) The stockholders of the Company approved the adoption of the Company's 1998
Equity Incentive Plan (the "Plan"). With respect to the Plan, 5,228,181
shares were voted in favor, 4,313,536 shares were voted against, 26,282
shares were abstained and 881,583 shares were not voted.
(iii)The stockholders of the Company approved an amendment to the Restated
Certificate of Incorporation (the "Amendment") to increase the number of
shares of authorized Common Stock from 15,000,000 to 50,000,000. With
respect to the Amendment, 6,684,603 shares were voted in favor, 3,761,254
shares were voted against and 3,725 shares were abstained.
ITEM 5. OTHER INFORMATION.
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
None
(b) No reports on Form 8-K were filed during the quarter ended June 27, 1998.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
Date: August 7, 1998
AFC CABLE SYSTEMS, INC.
By:/s/Ralph R. Papitto
--------------------
Ralph R. Papitto
Chairman of the Board and
Chief Executive Officer
By:/s/Raymond H. Keller
--------------------
Raymond H. Keller
Vice President and
Chief Financial Officer
14
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