<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 April 3, 1999
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 May 17, 1999
----- ------------------------------
Common Stock, $.01 par value 12,759,663
Page 1 of 14 pages
<PAGE>
PART I - FINANCIAL INFORMATION
AFC CABLE SYSTEMS, INC.
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
April 3, December 31,
1999 1998
---- ----
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ................................... $ 2,477 $ 2,968
Investments, marketable securities (Note 6) ................. 74,377 75,510
Accounts receivable, net of allowance for doubtful accounts
and sales allowances of $3,605 and $4,802, respectively .. 44,412 39,748
Inventories:
Finished goods ........................................... 25,833 26,314
Work-in-process .......................................... 9,077 7,386
Raw materials ............................................ 7,412 7,477
---------- ----------
42,322 41,177
Current deferred taxes ...................................... 1,988 2,335
Other current assets ........................................ 2,844 1,984
---------- ----------
Total current assets ........................................ 168,420 163,722
Property, plant and equipment, at cost ........................ 63,963 57,597
Less accumulated depreciation ................................. 17,903 16,459
--------- ----------
Net property, plant and equipment ............................. 46,060 41,138
Goodwill, net of accumulated amortization of $1,120 and
$886, respectively .......................................... 34,014 34,230
Other long term assets, net ................................... 2,297 2,457
--------- ----------
Total assets .................................................. $250,791 $241,547
========= ==========
</TABLE>
Note: The balance sheet at December 31, 1998 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
<PAGE>
AFC CABLE SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS--Continued
(In thousands, except share data)
<TABLE>
<CAPTION>
April 3, December 31,
1999 1998
---- ----
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt .......................... $ 2,426 $ 2,426
Revolving credit note payable .............................. 9,650 7,500
Accounts payable ........................................... 17,245 18,388
Accrued expenses:
Payroll and employee benefits ........................... 2,748 4,811
Other ................................................... 7,117 6,242
--------- ---------
Total accrued expenses .................................. 9,865 11,053
--------- ---------
Total current liabilities .................................... 39,186 39,367
Long-term debt ............................................... 13,638 11,098
Deferred income taxes ........................................ 1,763 1,720
Other long-term liabilities .................................. 3,229 3,231
Shareholders' equity:
Preferred stock, $.01 par value, 1,000,000 shares
authorized, none issued ................................. - -
Common stock, $.01 par value, 50,000,000 shares
authorized, 12,739,279 and 12,741,468 shares issued
and outstanding, respectively ........................... 127 127
Paid-in capital ............................................ 118,362 117,621
Accumulated other comprehensive income (Note 8) ............ 349 580
Treasury stock, 30,732 shares and 14,137 shares,
respectively, at cost ................................... (900) (364)
Retained earnings .......................................... 75,037 68,167
--------- ---------
192,975 186,131
--------- ---------
Total liabilities and shareholders' equity ................... $250,791 $241,547
========= =========
</TABLE>
Note: The balance sheet at December 31, 1998 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
<PAGE>
AFC CABLE SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except share data)
<TABLE>
<CAPTION>
Quarter ended
April 3, March 28,
1999 1998
---- ----
<S> <C> <C>
Net sales ................................................... $72,888 $65,286
Cost of goods sold .......................................... 49,504 45,924
--------- ---------
Gross profit ................................................ 23,384 19,362
Selling, general and administrative expenses ................ 12,862 10,802
--------- ---------
Income from operations ...................................... 10,522 8,560
Other income (expense):
Interest expense .......................................... (439) (133)
Net investment and other income ........................... 1,088 579
--------- ---------
649 446
--------- ---------
Income before taxes ........................................ 11,171 9,006
Income taxes ............................................... 4,301 3,516
--------- ---------
Net income (Note 8) ........................................ $ 6,870 $ 5,490
========= =========
Basic earnings per common share (Note 7) ................... $ .54 $ .48
========= =========
Diluted earnings per common share (Note 7) ................. $ .53 $ .46
========= =========
</TABLE>
See accompanying notes
4
<PAGE>
AFC CABLE SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Quarter ended
April 3, March 28,
1999 1998
---- ----
<S> <C> <C>
OPERATING ACTIVITIES
Net income ................................................... $ 6,870 $ 5,490
Adjustments to reconcile net income to cash provided
by operating activities:
Depreciation ............................................ 1,444 1,025
Amortization of intangibles ............................. 234 103
Net realized (gain) loss on available-for-sale securities 5 (52)
Deferred income taxes ................................... 509 (113)
Provision for bad debts ................................. 133 57
Provision for sales allowances .......................... (1,330) (980)
Compensation expense for restricted stock
and compensatory options ............................. 19 19
Increase (decrease) in cash arising from changes
in assets and liabilities:
Accounts receivable ................................ (3,467) (4,723)
Inventories ........................................ (1,145) 2,356
Other current assets ............................... (860) (176)
Other long-term assets ............................. 233 (26)
Accounts payable ................................... 857 676
Accrued payroll and employee benefits .............. (2,063) (534)
Other accrued liabilities .......................... 875 2,634
Long-term liabilities .............................. (2) 100
--------- --------
Net cash provided by operating activities .................... 2,312 5,856
INVESTING ACTIVITIES
Acquisition expenses ......................................... (16) -
Capital expenditures ......................................... (6,366) (2,077)
Purchase of available-for-sale securities .................... (22,922) (9,056)
Proceeds from sale of available-for-sale securities .......... 23,606 10,659
--------- --------
Net cash used in investing activities ........................ (5,698) (474)
FINANCING ACTIVITIES
Net revolving line of credit borrowings (repayments) ......... 2,150 (1,230)
Net proceeds from long-term debt ............................. 950 -
Payments on long-term debt, including current portion ........ (410) (53)
Proceeds from issuance of common stock ....................... 741 193
Purchase of treasury stock ................................... (536) (272)
--------- ---------
Net cash provided by (used in) financing activities .......... 2,895 (1,362)
--------- ---------
Net increase (decrease) in cash and cash equivalents ......... (491) 4,020
Cash and cash equivalents at beginning of period ............. 2,968 2,803
--------- ---------
Cash and cash equivalents at end of period ................... $ 2,477 $ 6,823
========= =========
Supplemental schedule of cash flow information:
Cash paid during the period for interest ................... $ 322 $ 47
========= =========
Cash paid during the period for income taxes ............... $ 1,566 $ 1,333
========= =========
</TABLE>
See accompanying notes
5
<PAGE>
AFC CABLE SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
APRIL 3, 1999
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 months ended April 3, 1999 are not necessarily indicative of the results
that may be expected for the year ended December 31, 1999. 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, 1998.
NOTE 2. INCOME TAXES
For the quarters ended April 3, 1999 and March 28, 1998, the Company's
effective tax rates of approximately 38.5% and 39.0%, 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 April 3, 1999, there is an appeal
pending with the U.S. Court of Appeals for the First Circuit.
On March 12, 1998, a municipality named one of the Company's wholly-owned
subsidiaries in a suit seeking compensation for expenses allegedly incurred by
the municipality in connection with environmental contamination apparently
caused by the predecessor operator of the business. The Company believes that
any amounts recovered by the municipality and other costs and expenses
associated with this action are, subject to certain limitations, covered by
indemnification from the predecessor entity and its stockholders under the
related asset purchase agreement.
NOTE 4. GOODWILL
Goodwill consists of the excess cost over the fair value of the assets of
acquired businesses and is amortized on a straight-line basis over periods of 20
to 40 years. Accumulated amortization of goodwill totaled $1,120,000 at April 3,
1999 and $886,000 at December 31, 1998.
NOTE 5. FINANCING
Borrowings under the unsecured revolving line of credit were $9.65 million
at April 3, 1999. The weighted average interest rate on outstanding borrowings
under the line of credit as of April 3, 1999 was 6.324%. Total letter of credit
borrowings at April 3, 1999 under the line of credit were $1,121,485.
On February 5, 1999, the Company borrowed $950,000 from a commercial bank
6
<PAGE>
for the purpose of purchasing the Painesville, OH manufacturing facility
formerly leased by the Company for its Federal Hose Manufacturing operation. The
loan is for a term of fifteen years and is secured by a mortgage on the real
estate. Principal is payable in equal monthly installments plus interest
commencing March 1, 1999 and maturing on February 4, 2014. The loan will bear
interest at one half of one percent below the prime rate or, at the Company's
option, at a fixed annual rate equal to the LIBOR rate or a Cost of Funds rate
selected by the Company and approved by the lender. At April 3, 1999, the loan
bears an interest rate of 6.65%.
On March 1, 1999, the Company issued promissory notes for a total of $2.0
million in connection with contingent consideration in the acquisition of
Georgia Pipe Company. Principal is payable in full on March 1, 2001 along with
all accrued interest. The notes bear interest on a floating basis at a rate
equal to the prime rate. Interest is payable quarterly on the first day each of
June, September, December and March commencing June 1, 1999. At April 3, 1999,
the notes carried a rate of 7.75%.
NOTE 6. INVESTMENTS
The following is a summary of securities held by the Company. All
securities are classified as available-for-sale.
<TABLE>
<CAPTION>
Gross Estimated
Gross Unrealized Fair
Cost Unrealized Gains Losses Value
-------------- ----------------- ---------------- ---------------
<S> <C> <C> <C> <C>
(In Thousands)
APRIL 3, 1999
U.S. corporate debt .......... $19,083 $ 104 $ (560) $ 18,627
securities
U.S. treasury securities and
obligations of U.S.
Government agencies ..... 49,218 31 (501) 48,748
Equity securities ............ 6,013 1,251 (262) 7,002
------------- -------------- -------------- --------------
Total included in investments $ 74,314 $1,386 $ (1,323) $ 74,377
============= ============== ============== ==============
DECEMBER 31, 1998
U.S. corporate debt .......... $ 13,806 $ 117 $(442) $ 13,481
securities
U.S. treasury securities and
obligations of U.S.
Government agencies ..... 55,229 108 (187) 55,150
Equity securities ............ 6,002 1,193 (316) 6,879
------------- -------------- -------------- --------------
Total included in investments $ 75,037 $ 1,418 $(945) $ 75,510
============= ============== ============== ==============
</TABLE>
Expected maturities will differ from contractual maturities because the issuers
of the securities may have the right to prepay obligations without prepayment
penalties. Realized losses included in investment income amounted to $5,000 in
the quarter ended April 3, 1999.
7
<PAGE>
NOTE 7. 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. The following table sets forth the computation
of basic and diluted earnings per share for the three-month periods ended April
3, 1999 and March 28, 1998:
<TABLE>
<CAPTION>
Quarter ended
April 3, March 28,
1999 1998
------------- ---------------
<S> <C> <C>
Net income (in thousands) ........ $6,870 $5,490
Basic average shares ............. 12,718,728 11,363,563
Effect of dilutive securities:
Stock options and stock awards . 339,715 386,071
Stock warrants ................. - 91,830
------------ -------------
339,715 477,901
------------ -------------
Dilutive average shares ......... 13,058,443 11,841,464
============ =============
Basic earnings per share ........ $0.54 $0.48
============ =============
Diluted earnings per share ...... $0.53 $0.46
============ =============
</TABLE>
NOTE 8. 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 three month periods ended April 3, 1999 and March 28, 1998 are as
follows:
<TABLE>
<CAPTION>
Quarter ended
April 3, March 28,
(In thousands) 1999 1998
------------ ------------
<S> <C> <C>
Net income $6,870 $5,490
Unrealized gains (losses) on securities 231 (101)
============ ============
Comprehensive income $7,101 $5,389
============ ============
</TABLE>
8
<PAGE>
9. SEGMENT INFORMATION
The Company has thirteen business units which have separate management teams
and infrastructures that in most cases offer different products and services.
The business units have been aggregated into two reportable segments, Wire and
Cable and Modular Wiring and Components.
The Wire and Cable segment produces armored cable, flexible conduit,
specialty cable, electrical fittings, and connectors. These products are sold
mainly to electrical distributors in the domestic market through a network of
independent sales representatives. The Modular Wiring and Components segment
produces flexible and premise wiring systems and related electrical components
and lighting controls. These products are primarily sold to electrical
distributors in the domestic market through a network of independent sales
representatives, although some products are sold directly to the end user.
Not included in the Company's two reportable segments are business units
whose revenue consists of the manufacturing and distribution of plastic and
fabric hoses and the manufacturing of special processed metal. These business
units along with corporate investments are included within the "all other"
category in the tables below.
The accounting policies of the reportable segments are the same as those
described in the summary of significant accounting policies. The Company
evaluates performance based on income before taxes of the respective business
units.
Intersegment sales, which are immaterial, are made on a basis intended to
reflect the market value of products recognizing prevailing market prices and
have been eliminated from sales data reported below.
REPORTABLE SEGMENT DATA
<TABLE>
<CAPTION>
Modular
Wire and Wiring and All
Cable Components Other Total
--------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C>
QUARTER ENDED
APRIL 3, 1999
Net sales .............. $56,328 $11,645 $4,915 $72,888
Income before taxes .... 8,294 1,445 1,432 11,171
Segment assets ......... 126,485 31,246 93,060 250,791
Depreciation ........... 1,142 187 115 1,444
Capital expenditures ... 4,956 382 1,028 6,366
QUARTER ENDED
MARCH 28, 1998
Net sales .............. $48,778 $10,437 $6,071 $65,286
Income before taxes .... 6,511 1,336 1,159 9,006
Segment assets ......... 85,362 29,745 53,009 168,116
Depreciation ........... 798 146 81 1,025
Capital expenditures ... 1,564 369 144 2,077
</TABLE>
9
<PAGE>
NOTE 10. MERGER
On January 27, 1999, the Company entered into a definitive agreement
with Thomas & Betts Corporation ("T&B") whereby the Company would be acquired by
T&B in a stock-for-stock merger to be accounted for as a pooling of interests.
The merger agreement provides that each share of the Company's common stock
outstanding immediately prior to the merger, except for treasury stock or stock
owned by T&B (which immediately prior to the merger will be canceled and
retired) will, at the time of the merger, be converted into the right to receive
.83 shares of T&B common stock. The companies expect to complete the transaction
in the first half of 1999. Upon the consummation of the merger, the Company will
pay a contingent fee to its investment banker and recognize certain other
merger-related costs. During the quarter ended April 3, 1999, a joint
preliminary proxy statement was filed with the Securities and Exchange
Commission and the transaction passed review by the Federal Trade Commission
under the Hart-Scott-Rodino Act and is pending the filing of the definitive
proxy statement and approval by the shareholders of both companies.
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Comparative Results of Operations for the Three Months
Ended April 3, 1999 and March 28, 1998
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 1998.
MERGER
On January 27, 1999, the Company entered into an agreement with Thomas &
Betts Corporation ("T&B") whereby the Company would become, through a
stock-for-stock merger, a wholly-owned subsidiary of T&B. The transaction is
intended to be accounted for as a pooling of interests. The transaction is
subject to the approval of the shareholders of both companies.
RESULTS OF OPERATIONS
NET SALES. Net sales for the quarter ended April 3, 1999 increased $7.6
million, or 11.6%, to $72.9 million from $65.3 million for the quarter ended
March 28, 1998. Net sales for the Wire and Cable Segment increased by $7.5
million, or 15.4%, to $56.3 million for the quarter ended April 3, 1999 from
$48.8 million for the quarter ended March 28, 1998. The increase was
attributable primarily to sales by Spiraduct and Georgia Pipe, which were
acquired in May and October of 1998, respectively, and to higher sales of the
Company's line of fittings and connectors. Net sales for the Modular Wiring and
Components segment increased by $1.2 million, or 11.5%, to $11.6 million for the
quarter ended April 3, 1999 from $10.4 million for the quarter ended March 28,
1998. This increase is attributable to higher sales of modular wiring systems,
photo controls and other lighting products, and electronic interfaces and
connectors for the computer industry. Net sales of other products decreased $1.2
million, or 19.7%, to $4.9 million for the quarter ended April 3, 1999 from $6.1
million for the quarter ended March 28, 1998. This decrease is attributable
mainly to the slow-down in the oil drilling industry in which the Company's
specialty coated metals products are used. Resulting excess capacity in the
Company's specialty coated metals operation, however, was used for internal
manufacturing requirements in the Wire and Cable segment.
GROSS PROFIT. Gross profit for the quarter ended April 3, 1999 increased
$4.0 million, or 20.6%, to $23.4 million from $19.4 million for the quarter
ended March 28, 1998. Gross margin increased to 32.1% for the quarter ended
April 3, 1999 from 29.7% for the quarter ended March 28, 1998. The increased
gross margin is attributable to (i) improved operating efficiencies, (ii) more
efficient material utilization resulting from improved manufacturing processes,
(iii) increased sales of the Company's higher margin specialty application
cables, modular wiring systems and electronic interface products and (iv)
favorable margins on products sold by Georgia Pipe Company.
INCOME FROM OPERATIONS. Income from operations for the quarter ended April
3, 1999 increased $1.9 million, or 22.1%, to $10.5 million from $8.6 million for
the quarter ended March 28, 1998. Income from operations as a percentage of net
sales increased to 14.4% for the quarter ended April 3, 1999 from 13.1% for the
quarter ended March 28, 1998. This increase resulted from improved gross margin,
partially offset by an increase in freight costs and sales agent commissions,
compensation expense and advertising expense.
NET INCOME. Net income for the quarter ended April 3, 1999 increased $1.4
million, or 25.5%, to $6.9 million from $5.5 million for the quarter ended March
28, 1998. Net income as a percentage of net sales increased to 9.4% for the
quarter ended April 3, 1999 from 8.4% for the quarter ended March 28, 1998. This
increase was primarily due to increased income from operations, increased
investment income and a lower effective tax rate.
INTEREST EXPENSE. Interest expense for the quarter ended April 3, 1999
increased to $439,000 from $133,000 for the quarter ended March 28, 1998. This
increase is attributable to (i) an increase in average borrowings under the
Company's revolving line of credit resulting from increased accounts receivable
and inventories and decreased accounts payable and accrued payroll and employee
benefits and (ii) higher long-term debt resulting from 1998 acquisitions.
11
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operations totaled $2.3 million for the quarter ended April
3, 1999 and was mainly attributable to increased profitability partially offset
by an increase in accounts receivable resulting from higher sales, increased
inventories and decreased accrued payroll and employee benefits . Working
capital on April 3, 1999 was $129.2 million and the ratio of current assets to
current liabilities was 4.30 to 1.00 compared to 4.16 to 1.00 at December 31,
1998.
The Company believes that existing cash and marketable securities, cash
generated from operations 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.
YEAR 2000
The Company has identified four areas of the business on which the year 2000
("Y2K") issue will have an impact. The company's work on the Y2K compliance
initiative began in 1997 with the assessment process which defined the following
four Y2K impact areas: computer systems and hardware, manufacturing support
processes, plant facility HVAC systems and manufactured products.
The risk assessment and exposure analysis was completed in 1997 and each of
the four areas was ranked as high, medium or low. The only high-risk area
identified was computer systems and hardware. As a result, the Company is
replacing its existing computer infrastructure with an Enterprise Resource
Planning ("ERP") information system. The software and computer hardware has been
installed and implementation configuration is in process with an anticipated
production date in the third quarter 1999. Additional software systems are
presently being upgraded to a Y2K compliant version of the currently operational
software. These systems were substantially compliant in the first quarter of
1999.
Project expenditures to date total approximately $2.0 million which includes
the purchase of new mainframe computer hardware, ERP application software and
consulting services. These costs have been funded through operating cash flows
and most have been capitalized. The Company expects to incur an additional $1.5
million of incremental costs throughout the 1999 fiscal year. This will cover
hardware platforms, personnel costs related to software configuration,
conversion and training of the workforce. Management feels that replacing the
Company's information system addresses the majority of the Company's Y2K
computer issues, reducing the likelihood that a contingency plan will be
necessary. In addition, management will implement a company-wide program to
strictly control and limit changes to major information technology ("IT")
systems during the second half of 1999 to reduce potential additional exposures
and to concentrate IT resources on integration testing and other Y2K-related
efforts.
The three remaining areas, manufacturing support processes, plant facility
HVAC systems and manufactured products have been assessed and remediation for
these areas is scheduled for completion by the middle of the 1999 fiscal year
without significant incremental costs. Based upon progress to date, the Company
currently does not anticipate the need to develop an extensive contingency plan
for these areas.
The Company's largest suppliers and customers are in their certification
process to validate that they will be Y2K compliant before the end of calendar
year 1999. A supplier survey is scheduled for completion by the first half of
calendar year 1999. Alternative suppliers will be identified for those suppliers
not expected to be compliant by the end of 1999. The Company's financial
institutions are currently being surveyed and the Company anticipates that they
are Y2K compliant, or will be before the end of the calendar year 1999.
The Company believes its Y2K program is adequate to detect year 2000
compliance issues, and that it has the necessary resources to remedy them.
However, the Y2K problem has many aspects and potential consequences, some of
which are not reasonably foreseeable. The Company could be adversely impacted by
the Y2K issue if suppliers, customers and other businesses do not address this
issue successfully. There can be no assurance that unforeseen circumstances will
not arise.
12
<PAGE>
PART II - OTHER INFORMATION
AFC CABLE SYSTEMS, INC.
ITEM 1. LEGAL PROCEEDINGS.
None
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None
ITEM 5. OTHER INFORMATION.
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
Exhibit 2. Agreement and Plan of Merger dated January 27, 1999 by
and between AFC Cable Systems, Inc., TB Acquisition Corp. and Thomas &
Betts Corporation (incorporated herein by reference to Exhibit 2.1
of the current report on Form 8-K filed by AFC Cable Systems, Inc. on
February 2, 1999, File No. 000-23070).
Exhibit 27. Financial Data Schedule.
(b) Current Report on Form 8-K filed with the Commission on February 2, 1999.
Under Item 5 of Form 8-K, AFC Cable Systems, Inc. reported the merger
agreement between AFC Cable Systems, Inc. and Thomas & Betts Corporation
entered into on January 27, 1999.
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: May 17, 1999
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
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> APR-03-1999
<CASH> 2,477
<SECURITIES> 74,377
<RECEIVABLES> 48,017
<ALLOWANCES> 3,605
<INVENTORY> 42,322
<CURRENT-ASSETS> 168,420
<PP&E> 63,963
<DEPRECIATION> 17,903
<TOTAL-ASSETS> 250,791
<CURRENT-LIABILITIES> 39,186
<BONDS> 0
0
0
<COMMON> 127
<OTHER-SE> 192,848
<TOTAL-LIABILITY-AND-EQUITY> 250,791
<SALES> 72,888
<TOTAL-REVENUES> 72,888
<CGS> 49,504
<TOTAL-COSTS> 49,504
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 133
<INTEREST-EXPENSE> 439
<INCOME-PRETAX> 11,171
<INCOME-TAX> 4,301
<INCOME-CONTINUING> 6,870
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,870
<EPS-PRIMARY> .54
<EPS-DILUTED> .53
</TABLE>
