-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FpcPpKxvvcbNd0XRfWkQVVPFMuSzflvQ3UbuxbFoWKtKh9saJer+nfvpDW+/txO9 kAmJORJEo0Y+ZcOvOZC6Jw== /in/edgar/work/20000613/0000950130-00-003376/0000950130-00-003376.txt : 20000919 0000950130-00-003376.hdr.sgml : 20000919 ACCESSION NUMBER: 0000950130-00-003376 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20000430 FILED AS OF DATE: 20000613 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CABLE DESIGN TECHNOLOGIES CORP CENTRAL INDEX KEY: 0000913142 STANDARD INDUSTRIAL CLASSIFICATION: [3357 ] IRS NUMBER: 363601505 STATE OF INCORPORATION: DE FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-12561 FILM NUMBER: 654151 BUSINESS ADDRESS: STREET 1: 661 ANDERSON DR STREET 2: FOSTER PLZ 7 CITY: PITTSBURGH STATE: PA ZIP: 15220 BUSINESS PHONE: 4129372300 MAIL ADDRESS: STREET 1: FOSTER PLAZA 7 STREET 2: 661 ANDERSEN DRIVE CITY: PITTSBURGH STATE: PA ZIP: 15220 10-Q 1 0001.txt FORM 10-Q 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 CABLE DESIGN TECHNOLOGIES CORPORATION ------------------------------------- TABLE OF CONTENTS -----------------
Page ---- PART I FINANCIAL INFORMATION Item 1 Financial Statements.......................................................... 3 Review Report of Independent Public Accountants for the Three Months and Nine Months Ended April 30, 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
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 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 CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES ------------------------------------------------------ CONDENSED CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED ------------------------------------------------------- (In thousands, except share and per share data) -----------------------------------------------
Three Months Ended Nine Months Ended April 30, April 30, --------------------------- -------------------------- 2000 1999 2000 1999 ----------- ----------- ----------- ----------- 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 =========== =========== =========== ===========
The accompanying notes are an integral part of these statements. 5 CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES ------------------------------------------------------ CONDENSED CONSOLIDATED BALANCE SHEETS ------------------------------------- (In thousands, except share and per share data) -----------------------------------------------
As of As of April 30, July 31, 2000 1999 ------------ ------------ (unaudited) 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 =========== ===========
The accompanying notes are an integral part of these statements. 6 CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES ------------------------------------------------------ CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED ----------------------------------------------------------- (In thousands) --------------
Nine Months Ended April 30, ---------------------- 2000 1999 -------- -------- 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 ======== ========
The accompanying notes are an integral part of these statements. 7 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:
Three Months Ended Nine Months Ended April 30, April 30, ---------------------------- ------------------------------ 2000 1999 2000 1999 ----------- ----------- ----------- ----------- (In thousands, except share and per share data) 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 =========== =========== =========== ===========
8 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:
Network Specialty Communication Electronic Segment Segment Total ----------------- ----------------- ----------------- Three Months Ended April 30, (In thousands) 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 Network Specialty Communication Electronic Segment Segment Total ----------------- ----------------- ----------------- Nine Months Ended April 30, (In thousands) 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
9 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 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 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 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 13 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. 14 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. 15 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 EX-15.1 2 0002.txt LETTER OF ARTHUR ANDERSEN EXHIBIT 15.1 May 23, 2000 To the Stockholders and Board of Directors of Cable Design Technologies Corporation: We are aware that Cable Design Technologies Corporation has incorporated by reference in its Registration Statements on Form S-3 (Registration No. 333- 00554); Form S-8 (Registration No. 333-80229); Form S-8 (Registration No. 333- 76351); Form S-8 (Registration No. 33-73272); Form S-8 (Registration No. 33- 78418); Form S-8 (Registration No. 333-2450); Form S-8 (Registration No. 333- 6743); and Form S-8 (Registration No. 333-17443) its Form 10-Q for the quarter ended April 30, 2000, which includes our report dated May 23, 2000, covering the unaudited interim financial statement information contained therein. Pursuant to Regulation C of the Securities Act of 1933 (the Act), that report is not considered a part of the registration statements prepared or certified by our firm or a report prepared or certified by our firm within the meaning of Sections 7 and 11 of the Act. /s/ Arthur Andersen LLP EX-27 3 0003.txt FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET AND STATEMENT OF INCOME AS OF APRIL 30, 2000 AND THE NINE MONTH PERIOD THEN ENDED AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS JUL-31-2000 JUL-31-1999 APR-30-2000 12,590 0 146,081 5,028 153,803 324,563 268,092 66,096 610,434 110,851 0 0 0 313 294,353 610,434 570,701 570,701 404,981 498,647 1,279 0 8,973 61,802 24,378 37,424 0 0 0 37,424 1.32 1.28
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