-----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, Pk73oJKCM2pyy3Cl5XmVnP3vSmJWAQAx8e/Pxu++y2WYMYgGpF6PqMs0OX0WRBWr dxWcwyzjAtadoiEECNPnhw== /in/edgar/work/0000950130-00-005672/0000950130-00-005672.txt : 20001030 0000950130-00-005672.hdr.sgml : 20001030 ACCESSION NUMBER: 0000950130-00-005672 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 20000731 FILED AS OF DATE: 20001027 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-K SEC ACT: SEC FILE NUMBER: 001-12561 FILM NUMBER: 747009 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-K 1 0001.txt FORM 10-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) [X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended July 31, 2000 or [ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from ________ to _________ Commission File No. 0-22724 CABLE DESIGN TECHNOLOGIES CORPORATION (Exact Name of Registrant as Specified in Its Charter) Delaware 36-3601505 (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) Foster Plaza 7 661 Andersen Drive Pittsburgh, PA 15220 (Address of Principal Executive Offices and Zip Code) (412) 937-2300 (Registrant's Telephone Number, Including Area Code) Securities registered pursuant to Section 12(b) of the Act: Name of Each Exchange Title of Each Class on Which Registered ------------------- ------------------- Common Stock, $.01 par value New York Stock Exchange Preferred Stock Purchase Rights, with respect to Common Stock, par value $.01 per share New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirement for the past 90 days. Yes [X] No [_] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of regulation S-K is not contained herein, and need not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] ________________________________________________________________________________ Exhibit Index on Page Page 1 of ---------- The aggregate market value of the registrant's voting stock held by non- affiliates of the registrant at October 16, 2000, is $905,925,832. The number of shares outstanding of the registrant's Common Stock at October 16, 2000, is 43,717,371. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Cable Design Technologies Corporation Proxy Statement for the Annual Meeting of Stockholders to be held on December 6, 2000, (the "Proxy Statement") are incorporated by reference into Part III. Portions of the 2000 Cable Design Technologies Corporation Annual Report to Stockholders (the "2000 Annual Report") are incorporated by reference into Parts I, II and IV. CABLE DESIGN TECHNOLOGIES CORPORATION Table of Contents
PART I Page Item 1. Business................................................ 2 Item 2. Properties.............................................. 9 Item 3. Legal Proceedings....................................... 10 Item 4. Submission of Matters to a Vote of Security Holders..... 10 Item 4.1. Executive Officers of the Registrant.................... 10 PART II Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters......................... 12 Item 6. Selected Financial Data................................. 12 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations........... 12 Item 7a. Quantitative and Qualitative Disclosures About Market Risk....................................... 12 Item 8. Financial Statements and Supplementary Data............. 12 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.................. 12 PART III Item 10. Directors and Executive Officers of the Registrant.......................................... 13 Item 11. Executive Compensation.................................. 13 Item 12. Security Ownership of Certain Beneficial Owners and Management................................... 13 Item 13. Certain Relationships and Related Transactions.......... 13 PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K................................. 14 Signatures.............................................. 18
PART I. ITEM 1. BUSINESS General We are a leading worldwide designer and manufacturer of high bandwidth network connectivity products, including gigabit and fiber optic network cables and connectors, network structured wiring components, assemblies, electronic and fiber optic passive and active components, and interconnect cables for computer and communication switching applications, and communication cable products used in local loop, central office, wireless and other applications, including assembly of products for the wireless marketplace. We also manufacture electronic cable products that are used in automation, process control and specialty applications. Our sales for the fiscal year ended July 31, 2000 ("fiscal 2000") were $797.8 million as compared to $684.0 million for the same period in fiscal 1999 ("fiscal 1999"), representing an increase of 17%, and our net income, excluding nonrecurring items, was $54.8 million for fiscal 2000 as compared to $42.9 million for fiscal 1999, representing an increase of 28%. Business Strategy We have achieved our current market position and success by emphasizing five primary strategies: (i) designing advanced network communication connectivity and specialty electronic cable products targeted at high growth sectors of the communications and electronics industries; (ii) broadening our product offerings, manufacturing capabilities, customer base and geographic penetration through strategic acquisitions; (iii) expanding internationally; (iv) consistently expanding and upgrading our manufacturing infrastructure; and (v) anticipating our customers' needs by providing the highest quality specialty products supported by outstanding service. Products. We focus on designing, developing and marketing technologically advanced network connectivity products, communication cable products used in local loop, central office and wireless applications, and specialty electronic connectivity products that are used in automation, process control and specialty applications. Examples of advanced network connectivity products include gigabit and fiber optic network cable and connectors, network structured wiring components, assemblies, electronic and fiber optic passive and active components, and interconnect cables for computer and communication switching applications. This strategy has enabled us to attain a leading position in the network and specialty electronic cable industries and avoid many price- sensitive, low technology sectors. This leading position has enabled us to establish strategic relationships with many customers. Strategic Acquisitions. We continually evaluate strategic acquisition opportunities to expand our innovative connective technology focus. We seek to acquire businesses that enable us to broaden our product offerings, access new sales channels that we can penetrate with our broadband and other products, enter new geographical areas where demand for faster communications is accelerating, obtain additional manufacturing capabilities and develop new customer relationships. Since 1984, we have made 19 acquisitions. These acquisitions have contributed to our significant growth in revenues and operating profit. We intend to continue to seek acquisitions that will broaden our product mix and international presence, including acquisitions in the fiber optic and passive network component 2 marketplaces. International Expansion. In fiscal 2000, 38% of our sales were in markets outside of the United States and 22% were outside of North America. We believe that the international markets represent a significant opportunity because many systems within these markets need to be upgraded in order to participate in high speed worldwide communications. We intend to continue to capitalize on the size and potential of the international markets by increasing sales of existing operations and establishing or acquiring additional manufacturing and sales capabilities in these markets. Manufacturing Infrastructure. We focus on consistently expanding and upgrading our manufacturing infrastructure in order to meet current and future product needs. During the last three fiscal years, we have invested over $96 million for plant and machinery. Capital projects included in such spending were: (i) the construction of a 300,000 square foot manufacturing and research facility in the Montreal, Quebec area; (ii) expansion of our optical fiber capacity; (iii) upgrade of our network cable facilities worldwide to equip them to manufacture high bandwidth network cables; (iv) opening a high bandwidth copper network cable facility in Connecticut; (v) expansion of our central office and switching capacity; (vi) expansion of the facility where we manufacture our high performance connectors; and (vii) completion of a state-of- the-art research and testing laboratory for commercial aviation cable products. Customer Service. We place a great emphasis on providing technical resources to solve customer problems and on R&D efforts to create solutions for our markets and customers. We seek highly qualified employees with significant industry experience and continually invest in R&D and testing resources. In addition, we maintain a synergistic network of internal communications that allows each of our business units to share ideas and innovations company wide. Customer sales support is a very important part of our business strategy. Each operating unit maintains a highly trained sales support staff and, for certain of our products, we maintain multiple warehouse locations to service customers with same-day or second-day delivery. Network Communication Segment Network Communication segment sales were $545.0 million, $446.6 million and $458.5 million for fiscal 2000, 1999 and 1998, respectively, and represented 68%, 65% and 70% of total revenues for fiscal 2000, 1999 and 1998, respectively. This segment encompasses connectivity products for the electronic transmission of data, voice, and multimedia over local and wide area networks and local loop communication infrastructures. The products include high performance fiber optic and twisted pair and coaxial copper cables and connectors, wiring racks and panels, outlets and interconnecting hardware for end-to-end network structured wiring systems, fiber optic assemblies and patch cords and communication cable products for outside communication and central office switchboard and equipment applications. In addition, through the recent acquisition of BoseLAN/CDT, we added active and passive fiber optic and electronic components to our product portfolio, including multiplexers, switches, media converters and Ethernet test equipment used in a wide array of voice, video and data connectivity applications. Local Area Network (LAN) Systems. LANs typically consist of one or more computers, peripheral devices, software and interconnecting cables, connectors and accessories. The interconnecting cables can be either copper, fiber or a composite cable including both copper and fiber. Due to the expense and increased difficulty of installing fiber cable as compared to copper cables and the cost of transmitters, 3 repeaters and other electronics required for a fiber optic system, fiber cables have generally been limited to riser applications and backbone parts of the network. Copper cables, while still used in riser and backbone applications, are predominate in premise wiring and horizontal portions of network systems. In addition, each network system, whether fiber or copper, includes a large number of other components, such as connectors, patch panels, outlets and racks. We manufacture and sell fiber optic, copper and composite cables, connectors, rack enclosures and cabinets, fiber optic splitters and couplers and other passive components used in LAN systems. Our connectors include our patented Optimax(TM) and Quick Connect(TM) fiber optic connectors and our industry leading high performance GigaFlex(TM) copper connector series. In addition, we offer "plug & play" fiber optic network systems. We are also one of a few companies that offers a fully integrated end-to-end warranted network cable system. The ability to offer a fully warranted end-to-end system is becoming an important marketing feature that differentiates us from many of our competitors. In addition, through our acquisition of BoseLAN/CDT in April, 2000, we added high performance passive and active fiber optic and electronic components to our product portfolio, including multiplexers, switches, media converters and Ethernet test equipment used in a wide array of voice, video and data connectivity applications. BoseLAN/CDT, a relatively small operation, adds diversity to our network product lines and a basis to grow our participation in the network component marketplace. We have invested heavily over the past few years to increase our gigabit network cable manufacturing capacity. Such investment has resulted in our ability to increase our percentage of gigabit network cables to 50% of category 5 and above network cable sales during fiscal 2000 from 30% of category 5 and above network cable sales during fiscal 1999. Interconnect and Central Office Products. Interconnect and central office products refers to transmission cables used inside computers and other electronic equipment, as well as to connect large and small computers to a variety of peripheral devices. We produce both fiber optic and copper cables for such uses and believe that we are one of the leaders in this market. The market is generally defined by the computer OEM specifications and often requires our engineers to work closely with component engineers during the product design and development process. We believe that our strengths in engineering and design, together with our historical relationships and reputation with OEM's, gives us an advantage in this market. Cellular Communication. We believe that the rapid growth of cellular or "wireless" applications presents a significant opportunity. Wireless communications rely on antenna towers, base station transmission and central office switching, with each application requiring high performance cable and other connectivity products. Greater traffic over cellular networks also requires greater switching capabilities and other electronic equipment, which drives demand for our interconnect products. We produce specialized cables used in these applications and provide assembly services for cellular products. Communications. We produce communication distribution cables that are used in the telecommunications industry to service business and residential customers in the local loop. Demands for new services and phone lines due to increased Internet, fax, telecommuting, DSL and other uses, growth of home offices and overdue maintenance of the existing copper local loop infrastructures drive this market. 4 Specialty Electronic Segment Specialty Electronic segment sales were $252.8 million, $237.4 million and $193.2 million for fiscal 2000, 1999 and 1998, respectively, and represented 32%, 35% and 30% of total revenues in fiscal 2000, 1999 and 1998, respectively. The Specialty Electronic segment includes highly engineered wire and cable products covering a broad range of specialized applications and niche markets, including commercial aviation and marine, automotive electronics, medical electronics, electronic testing equipment, robotics and electronically controlled factory equipment. Also included are cables for automation applications, such as climate control, premise video distribution and sophisticated security and signal systems involving motion detection, electronic card and video surveillance technologies, process control applications, such as remote signaling and electronic monitoring systems, sound applications, such as voice activation, evacuation and other similar systems, and safety applications, such as data transmission cable for advanced fire alarm and safety systems, including cable having improved safety and performance attributes under hazardous conditions. Included in the Specialty Electronic segment are non-cable manufacturing activities encompassing precision tire casting and sheet metal fabrication which are not material to our business. Raw Materials The principal raw materials we use are copper and insulating compounds. Raw materials are purchased on a consolidated basis whenever possible to reduce costs and improve supplier service levels. Copper is purchased from several suppliers. Price terms are generally producers' prices at time of shipment. We do not generally engage in hedging transactions for the purchase of copper. Currently, world stocks of and capacity for copper are adequate to meet our requirements. We purchase insulating compounds, including Teflon(R), from various suppliers and, while from time to time there have been shortages of such material, supplies are currently adequate to meet our needs. Certain of our products also require bulk uncabled optical fiber singles, which are currently purchased primarily from one supplier. The worldwide supply of bulk optical fiber and certain other fiber optic components, such as ferrules, is limited and we are currently working to increase our allocation of such fiber and components and find alternative sources for such fiber and components. Our failure to either increase such allocation or find alternative sources could limit the growth of our fiber optic operations. Other materials used include reels, tapes, textiles, chemicals and other materials. Currently, supplies of these other materials are adequate to meet our needs. Customers We sell our products directly or through established distributors to a variety of customers, including original equipment manufacturers, regional Bell operating companies, competitive local exchange carriers, and certified system vendors. We support over 10,000 customers. No single customer accounted for more than 10% of sales in fiscal 2000, 1999 or 1998. Competition The markets served by our products are competitive. Although some of our competitors are substantially larger and have greater resources than we do, we believe that we compete successfully in our markets due to our experienced management team, manufacturing expertise, breadth of product offerings and leading edge technology, large number of customer approved specifications, emphasis on quality and established reputation. In all of our markets we compete with a large number of competitors, 5 some of which are significantly larger than us. Backlog Backlog orders believed to be firm were $126.8 million at July 31, 2000, compared to $90.4 million at July 31, 1999. We believe that substantially all of the backlog is shippable within the next twelve months. Generally, customers may cancel orders for standard products without penalty upon thirty days notice. Research and Development We engage in research and development activities including new and existing product development. Research and development costs were $4.6 million, $5.5 million and $7.9 million in fiscal 2000, 1999 and 1998, respectively. The lower research and development expenses in fiscal 1999 were primarily the result of the discontinuance in July 1998 of the DynaTraX (TM) product line and related product development activities. Foreign Operations Information regarding the Company's foreign and domestic operations is set forth in Note 14, "Industry and Geographic Segment Information" as presented in the Company's Notes to Consolidated Financial Statements, and is incorporated herein by reference. Environmental Matters We are subject to numerous federal, state, provincial, local and foreign laws and regulations relating to the storage, handling, emission and discharge of materials into the environment, including the United States Comprehensive Environmental Response, Compensation and Liability Act, the Clean Water Act, the Clean Air Act, the Emergency Planning and Community Right-To-Know Act and the Resource Conservation and Recovery Act. Regulations of particular significance to us include those pertaining to handling and disposal of solid and hazardous waste, discharge of process wastewater and storm water and release of hazardous chemicals. Although we believe that we are in substantial compliance with such laws and regulations, we may from time to time not be in full compliance and may be subject to fines or other penalties for noncompliance. We do not currently anticipate any material adverse effect on our business as a result of compliance with federal, state, provincial, local or foreign environmental laws or regulations. However, some risk of environmental liability and other costs is inherent in the nature of our business, and there can be no assurance that material environmental costs will not arise in the future. Employees As of July 31, 2000, we had approximately 3,900 full-time employees and 850 workers under contract manufacturing arrangements in Mexico. Approximately 1,400 of the full-time employees are represented by labor unions. We have not experienced any material work stoppages at our plants and we believe that, in general, our current relations with our employees are good. Union contracts covering approximately 900 employees at various operating units are currently being negotiated or expire within the next twelve months, 6 including contracts relating to our Nordx/CDT operations in Montreal, Canada. There can be no assurance that conflicts will not arise with unions (whether in the context of contract negotiations or otherwise) or other employee groups or that such conflicts would not have a material adverse effect on our business. Risk Factors We may not be able to successfully identify, finance or integrate acquisitions. Growth through acquisitions is an important part of our strategy. We cannot assure you that we will be successful in identifying, financing and closing acquisitions at favorable prices and terms. Many of the areas in which we are looking to expand through acquisition have been characterized by high valuations. These acquisition opportunities may only be feasible if we obtain additional financing, and such financing may not be available on terms acceptable to us, or at all. Further, we cannot assure you that we will be successful in integrating any such acquisitions that are completed. Also, integration of any such acquisitions may require substantial management, financial and other resources and may pose risks with respect to production, customer service and market share of existing operations. Because we operate in markets that experience rapid technological change, certain of our products could become obsolete or marketplaces in which we sell could become more competitive. Many of the markets that we serve are characterized by rapid technological change. We believe that our future success will depend in part upon our ability to enhance existing products and to develop or acquire new products that meet or anticipate such changes. The failure to successfully introduce new or enhanced products on a timely and cost-competitive basis could have a material adverse effect on our business. At the same time, however, the introduction of new or enhanced products tends to have the effect of reducing the prices at which we can sell some of our existing product lines, which may harm our net sales and profitability. Many of our network cable products are subject to various industry standards. Many of such standards, particularly for newer high bandwidth cable products, are still being developed. In the event we are unable to meet such standards when adopted, or if the implementation of such standards was delayed, our business could be adversely affected. Fiber optic technology represents a substitute for copper based cable products. A significant decrease in the cost and complexity of installation of fiber optic systems, or increase in the cost of copper based systems, could make fiber optic systems superior on a price performance basis to copper systems and may have a material adverse effect on our business. Also, wireless technology, as it relates to premise network and communication systems, may represent a threat to both copper and fiber optic cable based systems by reducing the need for premise wiring. While we sell fiber optic cable and components and cable that is used in various wireless applications, if fiber optic systems or wireless technology were to significantly erode the markets for copper based systems or, in the case of wireless technology, fiber optic based systems, our sales of fiber optic and wireless products may not be sufficient to offset any decrease in sales or profitability of other products that may occur. Technological advances could require significant capital or other expenditures to manufacture new products or maintain market positions. Our failure to make such capital expenditures on a timely basis or our making capital expenditures in markets that fail to adequately develop could have an adverse effect on us. Further, as other manufacturers make capital expenditures to enable them to manufacture products similar to those manufactured by us, markets for such products may become more competitive resulting in decreases in sales and profits. 7 Price fluctuations or shortages of raw materials could adversely affect our operations. Copper is a principal raw material purchased by us, and our sales may be affected by the market price of copper. Significant fluctuations in the price of copper or other raw materials could have a negative effect on our business. We generally do not engage in hedging transactions for copper or other raw materials and we may not be able to pass on increases in the price of copper and other raw materials to our customers. We also purchase compounds, such as Teflon(R), from various suppliers. From time to time, the supply of such materials has been limited. The inability of suppliers to supply such raw materials could have a material adverse effect on our business until a replacement supplier is found or substitute materials are approved for use. In addition, we purchase bulk uncabled optical fiber singles which we further process and sell. The supply of such bulk fiber and certain other fiber components, such as ferrules, is currently limited. Our inability to obtain additional allocations of such fiber and other components and/or find additional suppliers of such fiber, could limit our growth in the fiber optic cable marketplace. Our business is subject to the economic and political risks of maintaining facilities and selling products in foreign countries. During fiscal 2000, 38% of our sales were in markets outside the United States. Our operations may be adversely affected by significant fluctuations in the value of the U.S. dollar against foreign currencies or by the enactment of exchange controls or foreign governmental or regulatory restrictions on the transfer of funds. Furthermore, our foreign operations are subject to risks inherent in maintaining operations abroad such as economic and political destabilization, international conflicts, restrictive actions by foreign governments, nationalizations and adverse foreign tax laws. Our markets are competitive. We are subject to competition from a substantial number of international and regional competitors, some of which have greater financial, engineering, manufacturing and other resources than we do. Our competitors can be expected to continue to improve the design and performance of their products and to introduce new products with competitive price and performance characteristics. Furthermore, maintaining our current technological advantages will require continued investment by us in engineering, research and development, marketing and customer service and support. There can be no assurance that we will have sufficient resources to continue to make such investments or that we will be successful in maintaining such advantages. Potential environmental, product, warranty or other liabilities could adversely impact our financial position. Risk of environmental, product and warranty liabilities, and other costs associated therewith, are inherent in the nature of our business. We cannot assure you that material environmental, product or warranty costs will not arise in the future. Losing the services of key personnel or adverse relations with employees could harm our business. Our continued success depends on the efforts and abilities of our executive officers and other key employees. The loss of any of our executive officers or other key employees could adversely affect our operations. We generally do not have employment contracts with our executive officers or other key employees. Our ability to attract and retain quality employees in all disciplines is important to our future success. See also "Business-Employees". Anti-takeover provisions could delay or prevent a change in control or adversely impact the price of our common stock. Provisions of our Rights Plan and our certificate of incorporation, and provisions of the Delaware General Corporation Law could each have the effect of deterring hostile takeovers or delaying, deterring or preventing a change in control of our company, including transactions in which stockholders might otherwise receive a premium for their shares over current market prices. 8 Disclosure Regarding Forward-Looking Statements This report includes and incorporates by reference "Forward-looking statements" within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. All statements other than statements of historical fact included or incorporated in this report may constitute forward-looking statements. Although the Company believes that the expectations reflected in such forward- looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. Important factors, including those described under "Risk Factors", could cause actual results to differ materially from the Company's expectations. All subsequent written and oral forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by the cautionary statements. ITEM 2. PROPERTIES The Company uses various owned or leased properties as manufacturing facilities, warehouses, and sales and administration offices. The Company believes that current facilities, together with planned expenditures for normal maintenance, capacity and technological improvements, will provide adequate production capacity to meet expected demand for its products. Listed below are the principal manufacturing, warehouse and sales facilities operated by the Company. Additionally, the Company also owns or leases approximately 263,000 square feet of other warehouse and sales facilities. Manufacturing facilities of approximately 106,000 and 43,000 square feet are operated on behalf of the Company in Nogales, Mexico and Tijuana, Mexico, respectively, by third parties pursuant to contract manufacturing arrangements.
OWNED OR APPROX. Location Use Leased Sq. Feet - ---------------------------------------------------------------------------------------------------------- Auburn, MA Manufacturing, Sales and Administration Owned 146,000 Auburn, MA Manufacturing and Warehousing Leased 57,000 Bagnacavallo, Italy Manufacturing, Sales and Administration Owned 126,000 Barberton, OH Manufacturing, Sales and Administration Owned 52,000 Chicago, IL Manufacturing Owned 18,000 Gjern, Denmark Manufacturing, Sales and Administration Owned 22,000 Gothenburg, Sweden Manufacturing, Sales and Administration Owned 108,000 Irvine, CA Manufacturing, Sales and Administration Leased 77,000 Kingston, Ontario Manufacturing Owned 500,000 Las Vegas, NV Warehouse Leased 44,000 Leominster, MA Manufacturing, Sales and Administration Owned 202,000 Leominster, MA Warehouse Leased 38,000 Littleborough, United Kingdom Manufacturing Owned 42,000 Longueuil, Quebec Manufacturing, Sales and Administration Leased 50,000 Lugo, Italy Manufacturing and Warehousing Leased 58,000 Manchester, CT Manufacturing Leased 55,000 Manchester, CT Manufacturing, Sales and Administration Leased 150,000 Memphis, TN Warehousing Owned 147,000 Montreal, Quebec Manufacturing, Sales and Administration Owned 300,000 Orebro, Sweden Manufacturing, Sales and Administration Leased 42,000 Skelmersdale, United Kingdom Manufacturing, Sales and Administration Owned 121,000
9 Wadsworth, OH Manufacturing, Sales and Administration Owned 45,000 Waynesburg, PA Manufacturing Owned 42,000 Washington, PA Manufacturing Leased 82,000 Washington, PA Manufacturing Owned 123,000 Washington, PA Manufacturing, Sales and Administration Owned 85,000 Washington, PA Warehousing Owned 79,000 Wheeling, IL Manufacturing, Sales and Administration Owned 110,000 Wheeling, IL Manufacturing, Sales and Administration Owned 80,000 Wipperfurth, Germany Manufacturing, Sales and Administration Owned 349,000
ITEM 3. LEGAL PROCEEDINGS The Company is a party to various legal proceedings and administrative actions, all of which are of an ordinary or routine nature incidental to the operations of the Company. In the opinion of the Company's management, such proceedings and actions should not, individually or in the aggregate, have a material adverse effect on the Company's results of operations or financial condition. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS During the fourth quarter of the fiscal year covered by this report no matter was submitted to a vote of security holders. ITEM 4.1. EXECUTIVE OFFICERS OF THE REGISTRANT Age Present Office and Experience - --- ----------------------------- 66 Paul M. Olson has been President and a director of the Company since 1985, and Chief Executive Officer of the Company since 1993. From 1972 to 1984 Mr. Olson was the President of Phalo Corporation, a wire and cable manufacturer, and directed sales and marketing at Phalo Corporation from 1967 to 1972. From 1963 to 1967, Mr. Olson was employed at General Electric and from 1960 to 1963, at General Cable, in wire and cable related sales and marketing positions. Mr. Olson has a Bachelor's Degree in Economics from Hobart College. 58 George C. Graeber has been Chief Operating Officer and a director of the Company since 1998. From 1992 to 1998, Mr. Graeber served in various other positions with the Company, including Executive Vice President of the Company and President of Montrose/CDT. From 1990 to 1992 Mr. Graeber was a Vice President and General Manager of the Energy division of Anixter International, Inc., a distributor of cable and communication equipment. Mr. Graeber also was the President of the Industrial Electronic division of Brintec Corp. and a Vice President of Brand Rex Cable. Mr. Graeber has a Master's Degree in Electrical Engineering from the University of Connecticut. 58 Michael A. Dudley has been an Executive Vice President of the Company and President of CDT International since 1991. From 1988 to 1991 he was the President of Superior Optics, a division of Superior Teletec, Inc., a manufacturer of communication cable. Mr. Dudley has a Doctorate Degree in Material Science from The National College of Rubber Technology in London, England. 10 50 Normand R. Bourque has been an Executive Vice President of the Company since 1996 and President and Chief Executive Officer of NORDX/CDT since its acquisition. Prior to the acquisition, Mr. Bourque was Vice President- Cable Group at Nortel from 1991 to 1995 and Vice President, Operations- Cable Group from 1989 to 1991. From 1985 to 1988, Mr. Bourque was Vice President and General Manager-Transmission Networks at Nortel, and prior to that, held a number of positions in general management and finance at Nortel. Mr. Bourque has a Bachelor's Degree in Business Administration from the Ecole des Hautes Etudes Commerciales in Montreal, Canada. 61 David R. Harden has been a Senior Vice President of CDT and President of West Penn/CDT since 1988. He founded West Penn Wire in 1971, and operated that company until 1984 when it was acquired by the Company. From 1984 until 1988 Mr. Harden was an Executive Vice President of West Penn/CDT. 39 Peter Sheehan has been an Executive Vice President of the Company since 1998. Mr. Sheehan joined the Company in 1995 in the area of international sales and marketing. Prior to joining the company Mr. Sheehan was Senior Vice President of Sales and Marketing of Berk-tek, a wire and cable company. Mr. Sheehan has a Bachelor's Degree from Boston College. 50 Kenneth O. Hale has been Vice President and Chief Financial Officer of the Company since 1987. Mr. Hale holds a Certified Public Accountant's certificate and an MBA in finance from the University of Missouri. 39 Charles B. Fromm was appointed Vice President and General Counsel of the Company in October 1997, and Secretary of the Company in 1999. Prior to joining the Company, Mr. Fromm was a Partner at Kirkland & Ellis, New York. Mr. Fromm has a Bachelor's Degree in Business Administration and a Juris Doctor Degree from the University of Michigan. 53 Ian Mack was appointed President of European Operations in August, 2000. Prior thereto, Mr. Mack was managing director of Brand Rex Limited, a division of BICC plc, a company based in the United Kingdom. 11 PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS As of October 16, 2000, there were 180 holders of record of the Company's Common Stock. Additional information required by this item is set forth under the heading "Directors, Officers, and Corporate Information" on page 41 of the 2000 Annual Report and is incorporated herein by reference. ITEM 6. SELECTED FINANCIAL DATA Information required by this item is set forth under the heading "Selected Historical Consolidated Financial Data" on page 40 of the 2000 Annual Report and is incorporated herein by reference. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management's Discussion and Analysis of Financial Condition and Results of Operations appears on pages 12 through 18 of the 2000 Annual Report and is incorporated herein by reference. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Information required by this item appears under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" on page 17 of the 2000 Annual Report and is incorporated herein by reference. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Information required by this item is set forth on pages 19 through 39 of the 2000 Annual Report and is incorporated herein by reference and filed electronically herewith as Exhibit 13.1. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None 12 PART III. ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT a. Information concerning the Registrant's directors is set forth in the Registrant's definitive proxy statement to be filed with the Securities and Exchange Commission on or before November 16, 2000. Such information is incorporated herein by reference. b. Information concerning executive officers of the Registrant is set forth in Item 4.1 of Part I at page 10 of this Report under the heading "Executive Officers of the Registrant". ITEM 11. EXECUTIVE COMPENSATION Information concerning executive officers of the Registrant is set forth in the Registrant's definitive proxy statement to be filed with the Securities and Exchange Commission on or before November 16, 2000. Such information is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Information concerning security ownership of certain beneficial owners and management is set forth in the Registrant's definitive proxy statement to be filed with the Securities and Exchange Commission on or before November 16, 2000. Such information is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Information concerning certain relationships and related transactions is set forth in the Registrant's definitive proxy statement to be filed with the Securities and Exchange Commission on or before November 16, 2000. Such information is incorporated herein by reference. 13 PART IV. ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) 1. The following documents are included in the 2000 Annual Report, pages 19 through 39, and are incorporated herein by reference: a. Report of Independent Public Accountants. b. Consolidated Statements of Income for the years ended July 31, 2000, 1999 and 1998. c Consolidated Balance Sheets as of July 31, 2000 and 1999. d. Consolidated Statements of Cash Flow for the years ended July 31, 2000, 1999 and 1998. e. Consolidated Statements of Stockholders' Equity for the years ended July 31, 2000, 1999 and 1998. f. Notes to Consolidated Financial Statements. 2. The following documents are filed as part of this report: a. Report of Independent Public Accountants on Supplemental Schedule. b. Schedule II Valuation and Qualifying Accounts for the three years ended July 31, 2000. c. List of Exhibits 3. List of Exhibits 3.1 - Amended and Restated Certificate of Incorporation of CDT as filed with the Secretary of State of Delaware on November 10, 1993, incorporated by reference to Exhibit 3.1 to CDT's Registration Statement on Form S-1 (File No. 33-69992), Certificate of Amendment of the Restated Certificate of Incorporation of CDT and Certificate of Designation, Preferences and Rights of Junior Participating Preferred Stock, Series A of CDT, as filed with the Secretary of State of Delaware on December 11, 1996 and incorporated by reference to CDT's Registration Statement on Form 8-A/A, as filed on December 23, 1996. 3.2 - By-Laws of CDT, as amended to date, incorporated by reference to Exhibit 3.2 to the Post-Effective Amendment No. 1 to CDT's Registration Statement on Form S-3 (File No. 333-00554), as filed on February 28, 1996. 4.1 - Form of certificate representing shares of the Common Stock of CDT. Incorporated by reference to Exhibit 4.1 to CDT's Registration Statement on Form S-1 (File No. 33-69992). 4.2 - Rights Agreement dated as of December 11, 1996, between Cable Design Technologies Corporation and The First National Bank of Boston, as Rights Agent, including the form of Certificate of Designation, Preferences and Rights of Junior Participating Preferred Stock, Series A attached thereto as Exhibit A, the form of Rights Certificate attached thereto as Exhibit B and the Summary of 14 Rights attached thereto as Exhibit C. Incorporated herein by reference to CDT's Registration Statement on Form 8-A, as filed on December 11, 1996. 10.1 - CDT Long-Term Performance Incentive Plan (adopted on September 23, 1993). Incorporated by reference to Exhibit 10.18 to CDT's Registration Statement on Form S-1 (File No. 33-69992). 10.2 - CDT Stock Option Plan. Incorporated by reference to Exhibit 4.3 to CDT's Registration Statement on Form S-8 as filed on December 22, 1993. 10.3 - Cable Design Technologies Corporation Management Stock Award Plan (adopted on September 23, 1993). Incorporated by reference to Exhibit 4.3 to CDT's Registration Statement on Form S-8, as filed on May 2, 1994. 10.4 - Description of CDT Bonus Plan. Incorporated by reference to Exhibit 10.20 to CDT's Registration Statement on Form S-1 (File No. 33-69992). 10.5 - Lease Agreement between Phalo and First Hartford Realty Corp., dated as of November 9, 1992. Incorporated by reference to Exhibit 10.23 to CDT's Registration Statement on Form S-1 (File No. 33-69992). 10.6 - Employment Agreement dated February 2, 1996, among CDT, NORDX/CDT and Normand Bourque. Incorporated by reference to Exhibit 10.17 to CDT's Report on Form 8-K as filed on February 20, 1996. 10.7 - Collective Labour Agreement dated June 10, 1996, between NORDX/CDT and Canadian Union of Communications Workers Unit 4. Incorporated by reference to Exhibit 10.19 to CDT's Annual Report on Form 10-K, as filed on October 29, 1996. 10.8 - Form of Change in Control Agreement between CDT and each of George C. Graeber, Kenneth O. Hale, Charles B. Fromm, Peter Sheehan, Michael A. Dudley and Ian Mack. Incorporated by reference to Exhibit 10.14 to CDT's Annual Report on Form 10-K, as filed on October 27, 1999. 10.9 - Change in Control Agreement dated June 11, 1999, between CDT and Paul M. Olson. Incorporated by reference to Exhibit 10.15 to CDT's Annual Report on Form 10-K, as filed on October 27, 1999. 10.10 - Cable Design Technologies Corporation 1999 Long-Term Performance Incentive Plan adopted April 19, 1999 and amended June 11, 1999. Incorporated by reference to Exhibit 10.16 to CDT's Annual Report on Form 10-K, as filed on October 27, 1999. 10.11 - Cable Design Technologies Corporation Employee Stock Purchase Plan. Incorporated by reference to Exhibit 4.3 to CDT's Registration Statement on Form S-8 (File No. 333-76351). 10.12 - Form of June 11, 1999 Stock Option Grant under the 1999 Long- Term 15 Performance Incentive Plan. Incorporated by reference to Exhibit 10.18 to CDT's Annual Report on Form 10-K, as filed on October 27, 1999. 10.13 - Form of April 23, 1999 Stock Option Grant. Incorporated by reference to Exhibit 10.19 to CDT's Annual Report on Form 10-K, as filed on October 27, 1999. 10.14 Amendment No. 1, dated March 7, 2000, to Cable Design Technologies Corporation Non-Employee Director Stock Plan.** 10.15 Amendment No. 2, dated July 13, 2000, to Cable Design Technologies Corporation 1999 Long-Term Performance Incentive Plan.** 10.16 Employment agreement dated August 1, 2000, among CDT, Noslo Ltd. and Ian Mack.** 13.1 - CDT 2000 Annual Report to Stockholders (to the extent incorporated herein by reference).** 21.1 - List of Subsidiaries of CDT.** 23.1 - Consent of Arthur Andersen LLP.** 27.1 - Financial Data Schedule.** 99.4 - Credit Agreement dated April 10, 1997, among the Company, The First National Bank of Boston, Banque Paribas, Chicago Branch, Paribas Bank of Canada, Bank of America Illinois, Bank of America Canada and other lenders party thereto. Incorporated by reference to CDT's Report on Form 10-Q, as filed on June 16, 1997. 99.5 - First Amendment to Credit Agreement dated July 31, 1998 (effective August 3, 1998) among CDT, BankBoston N.A., Paribas, Paribas Bank of Canada, Bank of America NT & SA, Bank of America Canada and other Lenders party thereto. Incorporated by reference to CDT's Report on Form 10-K as filed on October 29, 1998. 99.6 - Second Amendment to Credit Agreement dated July 31, 1998 (effective August 3, 1998) among CDT, BankBoston N.A., Paribas, Paribas Bank of Canada, Bank of America NT & SA, Bank of America Canada and other Lenders party thereto. Incorporated by reference to CDT's Report on Form 10-K as filed on October 29, 1998. 99.7 - Revolving Line of Credit Letter Agreement dated December 14, 1998, between CDT and ABN AMRO Bank N.V.. Incorporated by reference to CDT's Report on Form 10-Q as filed on March 16, 1999. 99.8 - Master Revolving Line of Credit Promissory Note issued by CDT in favor of ABN AMRO Bank N.V.. Incorporated by reference to CDT's Report on Form 10-Q as filed on March 16, 1999. 16 99.9 Modification to Revolving Line of Credit Letter Agreement and Other Loan Documents, dated December 13, 1999, between CDT and ABN AMRO Bank N.V.. Incorporated by reference to CDT's Report on Form 10-Q as filed on March 15, 2000. ** Filed Herein (b) Reports on Form 8-K None 17 Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereto duly authorized. Cable Design Technologies Corporation By:_____________________________________ October 26, 2000 Paul M. Olson President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. SIGNATURE TITLE DATE /s/ Bryan C. Cressey Chairman of the Board October 26, 2000 - ------------------------ Director Bryan C. Cressey /s/ Paul M. Olson Director, President, Chief October 26, 2000 - ------------------------ Executive Officer (Principal Paul M. Olson Executive Officer) /s/ George C. Graeber Director, Chief Operating October 26, 2000 - ------------------------ Officer George C. Graeber /s/ Kenneth O. Hale Vice President, Chief Financial October 26, 2000 - ------------------------ Officer (Principal Financial Kenneth O. Hale and Accounting Officer) /s/ Ferdinand Kuznik Director October 26, 2000 - ------------------------ Ferdinand Kuznik /s/ Michael F. O. Harris Director October 26, 2000 - ------------------------ Michael F. O. Harris /s/ Glenn Kalnasy Director October 26, 2000 - ------------------------ Glenn Kalnasy /s/ Richard C. Tuttle Director October 26, 2000 - ------------------------ Richard C. Tuttle /s/ Lance Balk Director October 26, 2000 - ------------------------ Lance Balk 18 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SUPPLEMENTAL SCHEDULE We have audited in accordance with auditing standards generally accepted in the United States, the consolidated financial statements included in Cable Design Technologies Corporation and Subsidiaries' annual report to stockholders incorporated by reference in this Form 10-K, and have issued our report thereon dated September 15, 2000. Our audits were made for the purpose of forming an opinion on those financial statements taken as a whole. The schedule listed in the accompanying index is the responsibility of the Company's management and is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. /s/ Arthur Andersen LLP Pittsburgh, Pennsylvania September 15, 2000 19 CABLE DESIGN TECHNOLOGIES CORPORATION SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED JULY 31, 2000, 1999 AND 1998
Additions to Reserve from Additions Balance at Acquisitions Charged to Beginning & Other Costs and Reduction from Balance at of Period Adjustments Expenses Reserve End of Period ------------- ---------------- ---------------- ---------------- --------------- (Dollars in thousands) Allowance for uncollectible accounts/sales returns: Year Ended July 31, 1998 $4,358 $(93) $1,367 $(1,637) $3,995 Year Ended July 31, 1999 $3,995 $172 $1,479 $ (720) $4,926 Year Ended July 31, 2000 $4,926 $ 13 $3,071 $(1,830) $6,180 Reserve for discontinuance of DynaTraX/TM/ product line and other restructuring activities: Year Ended July 31, 1998 $----- $--- $6,093 $(4,334) $1,759 Year Ended July 31, 1999 $1,759 $--- $ (264) $(1,247) $ 248 Year Ended July 31, 2000 $ 248 $--- $ (248) $------ $-----
20 CABLE DESIGN TECHNOLOGIES CORPORATION INDEX TO EXHIBITS FILED HEREIN JULY 31, 2000 EXHIBIT NUMBER EXHIBIT 10.14 - Amendment No. 1, dated March 7, 2000, to Cable Design Technologies Corporation Non-Employee Director Stock Plan. 10.15 - Amendment No. 2, dated July 13, 2000, to Cable Design Technologies Corporation 1999 Long-Term Performance Incentive Plan. 10.16 - Employment agreement dated August 1, 2000, among CDT, Noslo Ltd. and Ian Mack. 13.1 - CDT 2000 Annual Report to Stockholders (to the extent incorporated herein by reference). 21.1 - List of Subsidiaries of CDT. 23.1 - Consent of Arthur Andersen LLP. 27.1 - Financial Data Schedule. 21 EX-10.14 2 0002.txt AMEND. NO.1 TO CABLE DESIGN NON-EMPLOYEE DIRECTOR Exhibit 10.14 Amendment No. 1 to Cable Design Technologies Corporation Non-Employee Director Stock Plan March 7, 2000 The following definition contained in Section 2 of the Plan are amended and restated as follows: (i) "Eligible Director" means any persent or future member of the Board of Directors who, on an Award Date, (i) is a member of the Board of Directors, (ii) is not an employee of the Company or any of its subsidiaries and (iii) who is not an officer, director or employee of, or who would not be deemed to share beneficial ownership of any shares of Common Stock held by, any stockholder of the Company that owns more than 5% of the issued and outstanding shares of Common Stock on such date. (k) "Market Value" on any date means the closing price of Common Stock on that date (or, if such date is not a trading date, on the next preceding date which was a trading date) on the New York Stock Exchange or such other exchange that constitutes the primary trading market for the Company's common stock, as subsequently reported in The Wall Street Journal. EX-10.15 3 0003.txt AMEND. #2 TO CABLE DESIGN 1999 LONG-TERM PERFORM. Exhibit 10.15 Amendment No. 2 to Cable Design Technologies Corporation 1999 Long-Term Performance Incentive Plan ("the Plan") July 13, 2000 1. Section 1 of the Plan is hereby amended to read in its entirety as follows: 1. Purpose. The purpose of the 1999 Long-Term Performance Incentive Plan (the "Plan") is to advance the interests of Cable Design Technologies Corporation, a Delaware Corporation (the "Company"), and its stockholders by providing incentives to certain key employees of the Company, independent, non-management directors of the Company (as determined by the Board of Directors) and other key individuals who perform services for the Company (each an "eligible grantee"), including those who contribute significantly to the strategic and long-term performance objectives and growth of the Company. 1. Section 3 of the Plan is hereby amended to read in its entirety as follows: 3. Participation. Consistent with the purposes of the Plan, the Board and the Committee shall each have the power (except as may be delegated as permitted herein) to select eligible grantees who may participate in the Plan and be granted Awards under the plan. Eligible individuals may be selected individually or by group or categories, as determined by the Committee in its discretion. 2. Section 5 of the Plan is hereby amended as follows: (a) References to "eligible employee," whether in the singular or plural, in Section 5 of the Plan shall be amended to refer to "eligible grantee" or "eligible grantees," as appropriate; and (b) The references in Section 5(b)(iii) to "employed by or otherwise performing services for" or "employment or performance of services" shall be amended to read "employed by, serving as a director for or otherwise performing services for" and "employment, serving as a director or performing services," respectively. EX-10.16 4 0004.txt EMPLOYMENT AGREEMENT Exhibit 10.16 EMPLOYMENT AGREEMENT THIS AGREEMENT is made as of August 1, 2000, between Noslo Ltd. (the "Company") and Ian Mack ("Employee"). The Company is a indirect, wholly-owned indirect -------- subsidiary of Cable Design Technologies Inc. ("CDT"). The Company together with CDT, any holding company of the Company or CDT and any subsidiary company of either the Company or any holding company of the Company or CDT (subsidiary and holding companies being as defined by section 736 of the Companies Act 1985 or any statutory modification or re-enactment thereof) and together with any company in which either the Company or its holding company or CDT is directly or indirectly beneficially interested in 20% or more of the relevant company's issued ordinary share capital shall be referred to as the "Group," and references to Group Company or Group Companies shall be construed accordingly. In consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Employment (a) The Company shall employ Employee, and Employee hereby accepts employment with the Company, upon the terms and conditions set forth in this Agreement for the period beginning on the date hereof and ending as provided in paragraph 4 hereof (the "Employment Period"). ----------------- References to "Employment" means the employment of the Employee under the terms of this agreement. (b) Employee warrants that by entering into this agreement he will not be in breach of any express or implied terms of any contract or of any other obligation binding upon him. 2. Position and Duties (a) During the Employment Period, Employee shall serve as a senior officer of the Company and shall render such administrative, engineering, sales, marketing and other managerial services (commensurate with Employee's experience and prior duties) to the Company and any other Group Company as the Board of Directors of the Company ("the Board") or the Company's chief executive officer may from time to time direct. (b) The Employee has no normal hours of work and shall work the hours necessary for the proper performance of his duties. The Employee shall devote his best efforts and his full business time and attention (except for permitted vacation periods and reasonable -1- periods of illness or other incapacity) to the business and affairs of the Company and the Group. Employee shall perform his duties and responsibilities to the best of his abilities in a diligent, trustworthy, businesslike and efficient manner. (c) The Employee shall comply with all lawful and reasonable requests, regulations, instructions and resolutions made by the board of directors and/or chief executive officer of the Company or CDT. (d) During the Employment Period the Employee will not (without the Company's written consent) be engaged or interested either directly or indirectly (through any member of his household or family) in any capacity in any trade, business or occupation whatsoever other than the business of the Company provided that the Employee shall not be prohibited from holding whether directly or indirectly up to 3% of the stock or shares of any class of any company listed on a recognised stock exchange or the Alternative Investment Market. 3. Base Salary; Benefits and Bonus (a) During the Employment Period, Employee's base salary shall be (Pounds)13,958 per month (gross) or such higher rate as the Company's Board of Directors may designate from time to time (the "Base ---- Salary"), which salary shall be payable in regular installments in accordance with the Company's general payroll practices. Payment shall be made directly into the Employee's bank account on a monthly basis (or, if the Company elects, more frequent basis). (b) Upon the signing of this Agreement, the Company shall pay to Employee an amount equal to (Pounds)13,958 (gross). The Company shall also pay to Employee a sign-on bonus in an aggregate amount equal to (Pounds)335,000 (gross). Such bonus shall be paid in eight equal quarterly installments on the last business day of each fiscal quarter of the Company, beginning with the fiscal quarter ended October 31, 2000, in each case subject to the condition that on the payment date Employee shall still be employed by the Company (provided that in the event of a termination without cause, such bonus shall be paid as contemplated in Section 4(b)). (c) The Company shall reimburse Employee for reasonable expenses wholly and necessarily incurred by him in the course of performing his duties under this Agreement -2- which are consistent with the Company's and CDT's policies in effect from time to time with respect to travel, entertainment and other business expenses, subject to the Company's and CDT's requirements with respect to reporting and documentation of such expenses. (d) In addition to the Base Salary, Employee will be entitled to participate in CDT's bonus plan generally applicable to other senior management employees (the "Bonus Plan") within the Groups. Full details of the up to date terms of the Bonus Plan are available from Charles Fromm, CDT's General Counsel. Employee's participation shall be currently at the 35% (of base salary) target level (representing a 0-70% of base salary bonus potential). The CDT senior management bonus is currently structured as follows: One-half of such potential bonus is based upon Employee's operating group's performance in relation to certain specified budget and financial targets and the other one-half of such potential bonus is based upon CDT's performance in relation to certain specified budget and financial targets. The target and bonus amounts would be determined by CDT's Board (or the Compensation Committee) on an annual basis. Targets for each CDT operating group are based upon the budgets developed annually by CDT's chief executive officer, and approved by CDT Board (or the Compensation Committee). Payments under the bonus plan are calculated and made quarterly so that, on a cumulative basis, 50% of the year-to- date bonus earned is distributed as of the end of each of the first three fiscal quarters of such year. Following the public release by CDT of its audited financial statements for the fiscal year, the remaining portion of any bonus is paid. Employees entitlement to bonus payments (if any) is dependent on Employee being in employment on the date on which payment is due. The "operating group" for which you are included will need to be better defined. The bonus arrangements applicable to Employee are discretionary and may be varied or withdrawn at any time by the Company. (e) Employee shall be entitled to receive benefits generally offered to CDT's UK employees subject to the rules applicable to the relevant benefit and subject to the Company's right to terminate employment for any reason in accordance with any provision of this agreement and provided that unless the rules of such benefit expressly state otherwise such benefits will cease on termination of employment. Such benefits include a company leased automobile (with a monthly lease expense to the company), employee being responsible for all tax and employee national insurance payable thereon. The provision and use of a company leased automobile shall be subject to CDT's normal policies which may be amended, withdrawn or replaced from time to time at the Company's discretion. Employee's initial leased car shall be his current BMW (the lease -3- of which shall be assumed by the Company) and after the expiration of such lease, the car provided would be in accordance with then existing company policies. (f) Employee will be issued options as of the date hereof to acquire 50,000 shares of Cable Design Technologies Corporation's Common Stock at a price of equal the closing price on August 1, 2000. The option grant will be subject to normal CDT terms and conditions, including 5 year vesting, and will be governed by a separate agreement in the form previously provided to you. (g) The salary, bonus and other benefits set forth in this Agreement shall be reduced by, and subject to, any applicable tax, national insurance and other required deductions. 4. Term (a) The Employment Period: (i) shall terminate upon Employee's, death or permanent disability or incapacity (as determined by the Board in its good faith judgment); (ii) may be terminated by the Company without notice at any time for Cause (as defined below); and (iii) may be terminated at any time without Cause upon either party providing to the other a minimum of six months written notice. (b) The Company may in its absolute discretion at any time after notice of termination shall have been given by either party lawfully terminate this agreement by notice in writing with immediate effect by paying to the Employee an amount equal to (i) his Base Salary for 12 months following such termination (or a pro rata proportion of it relative to the remaining part of the notice period) and (ii) any unpaid bonus contemplated under Section 3(b), which bonus shall be paid in a lump- sum subject in both cases to prior deduction of income tax and national insurance. In the event the Company terminates this agreement in accordance with the preceding sentence, the Employee's employment shall be deemed to have been terminated as of such date for purposes of the bonus contemplated in Section 3(b) and the options contemplated under Section 3(f). (c) If the Employment Period is terminated by the Company pursuant to clauses (a)(i) or (a)(ii) above, Employee shall be entitled to receive his Base Salary up to the date of -4- termination and amounts contemplated under Section 19(b), but the Company shall not be obliged to make any further payment to the Employee. (d) Except as set forth in clause (b)(ii) above, all of Employee's rights to fringe benefits and bonuses hereunder (if any) which accrue after the termination of the Employment Period shall cease upon such termination. (e) For purposes of this Agreement, "Cause" shall mean: ----- (i) a material breach of this Agreement by Employee or any other agreement between Employee and the Company or any Group Company; (ii) a material breach of Employee's duty of loyalty to the Company or any Group Company or any act of dishonesty or fraud with respect to the Company or any Group Company; (iii) any act or omission (whether or not that act or omission was carried out in the course of the employment hereunder) which, in the opinion of the Board has caused or is likely to cause material harm to the standing and reputation of the Company and/or any other Group Company; (iv) being disqualified from holding office as a director; (v) be adjudicated bankrupt or make any arrangement or composition with his creditors; (vi) being convicted of a criminal offense which in the reasonable opinion of the Board materially and/or adversely affects his ability to continue in office as an employee or officer of the Company (including bringing the Company into disrepute); (vii) refusing or failing to agree to accept employment on the terms and in the circumstances set out in clause 18 of this agreement; (viii) resigning from the office of director of the Company or any other Group Company; 5. Confidential Information -5- Employee acknowledges that the information, observations and data obtained by him while employed by the Company concerning the business or affairs of the Company and the Group together with the Company's (or any Group Company's) agents, customers, prospective customers or suppliers ("Confidential Information") are the property of the Company (or other ------------------------ appropriate Group Company). Therefore, Employee agrees that he shall not disclose to any unauthorized person or use for his own purposes any Confidential Information without the prior written consent of the Board, unless and to the extent that the aforementioned matters become generally known to and available for use by the public other than as a result of Employee's acts or omissions. Employee shall deliver to the Company at the termination of the Employment Period, or at any other time the Company may request, all memoranda, notes, plans, records, reports, computer tapes, printouts and software and other documents and data (and copies thereof) relating to the Confidential Information, Work Product (as defined below) or the business of the Company or any other Group Company which he may then possess or have under his control. 6. Designs and Inventions 6.1 All designs, inventions, programs discoveries or improvements conceived or made by the Employee during the course of or arising out of the Employment (whether alone or together with any other person or persons) and which concern or are applicable to products or articles manufactured or sold by or to services provided by the Company and/or any Group company ("Designs and Inventions") shall be the exclusive property of the Company. 6.2 Any Designs and Inventions shall be disclosed to the Company whether conceived apprehended or learned by the Employee during the course of or after the termination of the Employment. 6.3 The Employee shall at all times whether during the course of and after the termination of the Employment: 6.3.1 not without the prior written consent of the Company apply for any patent or design registration as the case may be either in the United Kingdom or in any other part of the world for any Designs and Inventions conceived or made by him; 6.3.2 if and whenever required by the Company to do so (and in such manner as the Company shall in its sole discretion decide) apply as a nominee of or jointly with -6- the Company for patent or design registration in the United Kingdom and as the Company may require any other part of the world for any Designs and Invention conceived or made by him and/or shall execute all such documents and do all such things as may be necessary effectively to obtain or vest all applications at any time and from time to time pending and all resulting patents and design registration when granted and all right title and interest to and in the same in the Company absolutely as sole beneficial owner or as the Company may require. 6.4 The Employee irrevocably appoints and authorises the Company to act as his attorney and agent for the purposes of executing and/or signing all or any such documents as may be required to give the Company (and/or its nominee and/or assignee) the full benefit of the provisions of this clause. 6.5 The Company shall pay all expenses in connection with any application for patent or design registration made by the Employee as nominee for or jointly with the Company pursuant to this clause. 6.6 The Company shall indemnify the Employee against all liabilities to third parties in connection with or arising out of all and any applications and all and any resulting patents and design registrations which may be granted if and to the extent that any such liabilities arise from the act or default of the Company. 6.7 It shall be presumed (but subject to proof to the contrary) that the subject matter of any application for a patent or design registration filed by the Employee or any assignee or agent of the Employee within 12 months after the termination of the Employment and relating to goods or services of a kind with which the Employee was concerned in the course of his duties is a Design or Invention made by the Employee during the currency of the Employment. 7. Non-Interference (a) The Employee acknowledges that the Company and the Group have invested and will continue to invest significant time and money to develop valuable, continuing relationships with existing and prospective customers of the Company and the Group and to develop products for sale by the Company and the Group. Therefore, for a period of one year after termination of the Employee's employment with the Company for any reason including termination with or without Cause (but not, for the avoidance of doubt, after termination by the Company in breach of the terms of this Agreement) the Employee shall not: -7- (i) solicit or attempt to solicit, directly or indirectly (which includes working in any capacity for another person, firm or company) either alone or with others, any existing customers of (x) the Company; or (y) any other Group Company for whom the Employee has carried out work, who were customers at the date of termination of the Employee's employment or at anytime during the period of 12 months immediately preceding the date of termination of the Employee's employment and with whom the Employee has had material contact or dealings, where such solicitation or attempted solicitation is for the purpose of inducing such customers to cease or refrain from doing business with the Company or the Group or to purchase, lease or utilize products or services which are competitive with, or are similar to, or which may be used as substitutes for any products or services offered or substantially under development by the Company or the Group at the date of termination of the Employee's employment; (ii) solicit or attempt to solicit, directly or indirectly (which includes working in any capacity for another person, firm or company) either alone or with others, any prospective customers of: (x) the Company; or (y) any other Group Company for whom the Employee has carried out work, with whom either the Employee or another employee for whom the Employee has management responsibility has at the date of termination of the Employee's employment or at any time during the period of 12 months immediately prior to the date of termination of the Employee's employment carried out negotiations on behalf of the Company or Group Company where such solicitation or attempted solicitation is for the purpose of inducing such prospective customer to refrain from doing business with the Company or the Group or to purchase, lease or utilize products or services which are competitive with, or are similar to, or which may be used as substitutes for any products or services offered by the Company or the Group; or -8- (iii) within the United Kingdom or within any other territory in Europe in which the Employee was based or with which he was materially concerned or for which he had management responsibility in any case at date of termination of the Employee's employment or at any time during the period of 12 months immediately prior to the date of termination of the Employee's employment manufacture, develop or sell, directly or indirectly (which includes working in any capacity for another person, firm or company) either alone or with others any products or services of the type sold or under development by either the Company or any other Group Company during the 12 months prior to the Employee's termination save that this clause shall be limited to those products or services which the Employee sold or developed (or was in charge of one or more employees who sold and developed those products or services) during the course of the Employee's employment at any time during the period of 12 months immediately prior to the termination of the Employee's employment. (b) The Employee acknowledges that the Company and the Group have devoted significant financial and other resources to train its employees and sales representatives, and that such employees and sales representatives have access to Confidential Information. Therefore, the Employee agrees that, for a period of one year after the termination of his employment with the Company for any reason, including termination with or without Cause (but not, for the avoidance of doubt after termination by the Company in breach of the terms of this Agreement), the Employee shall not: (i) induce or attempt to induce any employee of the Company or any Group Company engaged at the date of termination of the Employee's employment in a managerial, technical or sales capacity whom the Employee has had material contact with or management responsibility for at any time during the period of 12 months immediately prior to the date of termination of the Employee's employment to leave the employ of the Company or Group Company; (ii) in any way interfere with the relationship between the Company and any employee of the Company or Group Company, or (iii) hire directly or through another entity any person who is an employee of the Company or any Group Company engaged at the date of termination of the Employee's employment in a managerial technical or sales capacity whom the Employee has had material contact with or management responsibility for at any -9- time during the 12 months immediately prior to the date of termination of the Employee's employment with a view to using the skills or information held by such employee in connection with any business which is or intended to be competitive with the business carried out or substantially under development at the date of termination of the Employee's employment by the Company or any Group Company for whom the Employee has carried out work. (c) The Employee will not for a period of one year after the termination of his employment with the Company for any reason in accordance with the terms of this agreement with or without Cause, (but not, for the avoidance of doubt, after termination by the Company in breach of the terms of this Agreement): (i) induce or attempt to induce any: (a) customer; (b) supplier (including, without limitation, any outside manufacturer, engineer or designer); (c) licensee; (d) licensor; (e) franchisee; or (f) any other business relation not referred to at sub clauses (a), (b), (c), (d) and (e) above of the Company or any Group Company at the date of termination of the Employee's employment or at any time during the period of 12 months immediately prior to the date of termination of the Employee's employment and whom the Employee has had material contact with or management responsibility for at any time during the 12 months immediately prior to the date of termination of the Employee's employment to: (x) cease doing business with the Company, or the Group;or -10- (y) materially alter their terms of business with the Company or Group Company in a manner detrimental to the Company or Group Company ; (ii) in any way interfere with the relationship between the Company or any Group Company and any customer, supplier, licensee, licensor, franchisee or other business relation of the Company or Group Company; or (iii) make any negative or derogatory statements or communications concerning the Company or the Group, its officers, employees, directors, operations, products or other business affairs save as required by law or a protected disclosure under the Public Interest Disclosure Act 1998 made in an appropriate way to an appropriate person having regard to the provisions of that Act. 8. Enforcement Each restriction at paragraphs 5, 6 and 7 above is a separate and severable restriction. If, at the time of enforcement of paragraph 5, 6 or 7 of this Agreement, a court holds that any of the restrictions stated herein are unreasonable under circumstances but would be reasonable if part of such restriction were deleted then the parties agree that the restriction shall construed as if such unreasonable part of such restriction were deleted. Because the Employee's services are unique and because the Employee has access to Confidential Information and Work Product, the parties hereto agree that money damages would not be an adequate remedy for any breach of this Agreement. Therefore, in the event a breach or threatened breach of this Agreement, the Company or its successors or assigns may, in addition to other rights and remedies existing in their favour, apply to any court of competent jurisdiction for specific performance and/or injunctive or other relief in order to enforce, or prevent any violations of, the provisions hereof. 9. Employee's Representations The Employee here by represents and warrants to the Company that: (a) the negotiation, execution, delivery and performance of this Agreement by the Employee have not, do not and shall not conflict with, breach, violate or cause a default under any contract, agreement, instrument, order, judgment or decree to which the Employee is a party or by which he is bound or any duty to any person (including former employers) regarding any secret, confidential or proprietary information or any technology, engineering designs, devices, inventions, physical or chemical processes, discoveries of any kind ("Technologies"); -11- (b) the Employee is not a party to or bound by any employment agreement, non compete agreement or confidentiality agreement with any other person or entity, except for an agreement with __ dated, __ 2000, a true and complete copy of which has been provided to the Company; and (c) upon the execution and delivery of this Agreement by the Company, this Agreement shall be the valid and binding obligation of the Employee, enforceable in accordance with its terms. 10. Survival Paragraphs 5 through 18 shall survive and continue in full force in accordance with their terms notwithstanding any termination of the Employment Period. 11. Severability Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or any other jurisdiction, but this Agreement shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein. 12. Counterparts This Agreement may be executed in separate counterparts, each of which is deemed to be an original and all of which taken together constitute one and the same agreement. 13. Successors and Assigns This Agreement is intended to bind and inure to the benefit of and be enforceable by the Employee, the Company and their respective heirs, successors and assigns, except that the Employee may not assign his rights or delegate his obligations hereunder without the prior written consent of the Company. -12- 14. Amendment and Waiver The provisions of this Agreement may be amended or waived only with the prior written consent of the Company and the Employee, and no course of conduct or failure or delay in enforcing the provisions of this Agreement shall affect the validity, binding effect or enforceability of this Agreement. 15. Disciplinary, Grievance and Suspension The Employee should refer any grievance he may have about his employment or about any disciplinary decision relating to him to the Board in writing. The reference will be dealt with by a majority present at a Board meeting whose decision shall be final. The Company shall have the right to suspend the Employee from his duties on such terms and conditions as the Company shall determine save that the Company shall be required to continue to pay the Salary and provide all other contractual benefits to the Employee during any period of suspension. The Company shall not be required to give any reason for exercising its right under this clause. There are no special disciplinary rules affecting the Employee. Any disciplinary matters will be dealt with by the Board. 16. Amalgamation Reconstruction, Transfer If the Company is wound up for the purposes of reconstruction or amalgamation the Employee shall not as a result or by reason of any termination of the employment hereunder or the redefinition of his duties within the Company or the Group arising or resulting or from any reorganisation of the Group have any claim against the Company for damages for termination of the Appointment or otherwise so long as he shall be offered employment with any concern or undertaking resulting from such reconstruction or amalgamation on terms and conditions no less favourable to the Employee than the terms contained in this agreement. If the Employee shall at any time have been offered but shall have unreasonably refused or failed to agree to the transfer of this agreement by way of novation to a company which has acquired or agreed to acquire the whole or substantially the whole of the undertaking and assets or not less than fifty per cent of the equity share capital of the Company the Employee shall have -13- no claim against the Company by reason of the termination of the Appointment by the Company on one month's notice to the Employee given within one month of such offer. 17. Appointment as a Director. The appointment of the Employee as a director of the Company or any Group Company does not amount to a term of employment and the Company reserves the right to remove any such directorship at any time for any reason. Where the Company exercises this right, this shall not amount to a breach of this agreement and shall not give rise to a claim for damages or compensation. 18. Following Notice of Termination (a) Upon notice to terminate the Appointment being given by either party to the other then at any time after that notice has been given by the Company or the Employee, if requested by the Company: (i) The Employee shall upon the request of the Company resign from all (if any) offices held by him in the Company or any Group company and all (if any) trusteeships held by him of any pension scheme or any trust established or subscribed to/by the Company and any Group company and in the event of his failure to do so the Company is hereby irrevocably authorised to appoint some person in his name and on his behalf to sign on behalf of the Employee all documents and do all things necessary to constitute and give effect to such resignation; (ii) the Employee shall immediately return to the Company all correspondence, documents, papers, memoranda, notes, records such as may be contained in magnetic media or other forms of computer storage, videos, tapes (whether or not prepared or produced by him) and any copies thereof charge and credit cards and all other property (including any car) belonging to the Company which may be in the Employee's possession or under his control; (iii) the Employee shall if requested send to the Company Secretary a signed statement confirming that he has complied with sub- clause a (ii) above (b) The Employee shall not at any time after the termination of the Appointment represent himself as being in any way connected with or interested in the Business of the Company or the Group Company. -14- (c) Upon notice to terminate the Appointment being given by the Company or the Employee then at any time after such notice is given by the Company or the Employee if requested by the Company the Employee will: (i) immediately return to the Company all documentation including any copies articles or property in his possession custody or control belonging to the Company or any Group company; (ii) immediately return to the Company all documentation or articles which contain records of confidential information concerning the company or any Group company; (iii) not during the notice period contact or deal with customers suppliers or employees of the Company or any Group company (iv) not unless otherwise requested during the notice period enter onto the premises of the Company or any Group Company without the prior written consent of the Board PROVIDED THAT during the notice period the Company will continue to pay and/or make available the Salary and other contractual benefits under this agreement. (d) In the event that the Company exercises its rights under clause 19(c) then the period spent between the Company exercising such rights and the expiry of the notice period shall be set off against and reduce the restrictive periods set out in clauses 7(a) (b) and (c) of this agreement. (j) The Company shall have no duty to provide the Employee with work during any notice period for termination and the Employee shall not commence any employment with any third party during such period.. 19. Miscellaneous And Employment Rights Act Particulars (a) It is intended that the Employee's office will be located in , Scotland area, although Employee acknowledges that he will be required to travel to, and spend substantial time at, various facilities and operations of the Group, and travel to customers of the Group, including those located outside the United Kingdom, as necessary for the proper performance of his duties. (b) The Company's holiday year runs from August 1 to July 31 each year. In addition to normal bank and public holidays the Employee is entitled to working days paid holiday -15- during each holiday year to be taken at such time as the board of directors of the Company may from time to time approve paid at the rate of Base Salary. Holiday entitlement is inclusive of statutory holiday under the Working Time Regulations 1998. Untaken holiday in any year may not be carried forward to any following holiday year and will be forfeit without payment in lieu. In the year in which the Employee's employment begins or terminates the Employee shall be entitled to a pro rata proportion of annual holiday entitlement. On termination the Employee shall be entitled to be paid at the rate of Base Salary in lieu of any accrued but untaken holiday entitlement and shall repay the Company in respect of any holiday taken in excess of accrued holiday entitlement and the Company is authorized to deduct such amount from any salary or other sums due to the Employee in connection with his employment or its termination. The Company reserves the right to require any untaken holiday to be taken during any notice period for termination. The provisions of this clause replace regulations 15(1) to 15(4) inclusive of the Working Time Regulations 1998. (c) In the event of absence due to sickness or injury the Employee must comply with any procedures laid down by the Company from time to time regarding reporting such absence and providing medical and self certificates in respect of such absence and shall be subject to the sick pay policies generally applicable to other U.K. employees of the Group. (d) There are no pension provisions applicable to this employment. (e) There are no collective agreements in force which affect the terms and conditions of the employment. (f) The Employees period of continuous employment with the Company commenced on August 1, 2000. No previous employment shall count towards the Employee's continuous employment. (g) The Company is authorized to deduct any sums due to the Company from the Employee from salary or any other sums due to the Employee during or on termination of his employment. (h) This agreement is in substitution for all previous contracts of service between the Company and the Employee (if any) and any such agreements shall be deemed to have been terminated by mutual consent as from the date on which the Appointment commenced. (i) This agreement shall be construed in accordance with English law; -16- SIGNED as a deed by IAN MACK in the ) presence of: ) Witness Signature: Full Name: Address: Occupation: EXECUTED as a deed by NOSLO LTD. ) Acting by two directors or one director ) and the secretary ) Director Director/Secretary -17- EX-13.1 5 0005.txt CDT 2000 ANNUAL REPORT TO STOCKHOLDERS Exhibit 13.1 Management's Discussion and Analysis of Financial Condition and Results of Operations Cable Design Technologies Corporation and Subsidiaries Results of Operations The following discussion of Cable Design Technologies Corporation's ("the Company") consolidated historical results of operations and financial condition should be read in conjunction with the Consolidated Financial Statements of the Company and the Notes thereto included elsewhere in this report. The Company effected a three for two stock split in the form of a common stock dividend in August 2000. Common share information stated herein reflect the effect of the split. 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 and interconnect cables, 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 cable products for automation and process control applications as well as specialized wire and cable products for niche markets, including commercial aviation and automotive electronics. Overview Sales for the year ended July 31, 2000 ("fiscal 2000") increased 17%, to a record $797.8 million, compared to sales of $684.0 million for the year ended July 31, 1999 ("fiscal 1999"). Sales for the Network Communication segment increased 22% to $545.0 million, and represented 68% of total company revenue. The increase in sales for this segment was led by 100% growth in sales of enhanced gigabit network cables (Category 5e and Category 6), 53% growth in sales of central office communication products, 37% growth in sales of wireless cable and assembly services, 35% growth in sales of computer interconnect products, and 27% growth in fiber optic connectivity products. Sales for the Specialty Electronic segment were $252.8 million, an increase of 6% over the prior year, primarily due to a 16% increase in sales of automation and process control products. The operating margin for fiscal 2000 improved to 12.9% compared to 12.5% for fiscal 1999, excluding net nonrecurring items in both years. Excluding net nonrecurring items in both years, earnings per diluted share for fiscal 2000 increased 27% to $1.24 compared to $0.98 for fiscal 1999. The following table presents, for the periods indicated, summary selected financial data from the Company's consolidated statements of income, and should be read in conjunction with the following discussion.
- ------------------------------------------------------------------------------------------------------------------- For the Year Ended July 31, 2000 1999 1998 - ------------------------------------------------------------------------------------------------------------------- (Dollars in thousands) Sales $ 797,824 $ 683,999 $ 651,668 Gross profit 233,845 204,530 193,901 Selling, general and administrative expenses 126,064 113,610 106,491 Research and development expenses 4,626 5,450 7,863 Income from operations before nonrecurring items 103,155 85,470 79,547 Nonrecurring (income) expense (189) 4,895 6,093 Income from operations 103,344 80,575 73,454 Net income excluding nonrecurring items $ 54,799 $ 42,930 $ 44,426 Net income $ 54,920 $ 39,641 $ 40,481
12 Management's Discussion and Analysis of Financial Condition and Results of Operations Cable Design Technologies Corporation and Subsidiaries Year Ended 31, 2000 Compared with Year Ended July 31, 1999 Sales increased $113.8 million, or 17%, to a record $797.8 million for fiscal 2000 compared to $684.0 million for fiscal 1999. Sales for the Network Communication segment grew 22%, to $545.0 million, and sales for the Specialty Electronic segment increased $15.4 million, or 6%, to $252.8 million. The growth in sales for the Network Communication segment was lead by a 100% increase in sales of enhanced gigabit network cables as a result of growth in demand for higher bandwidth within premise network systems. The increased demand for these higher margin gigabit network cables was partially offset by a 14% decline in sales of the lower performance rated Category 5 network cable and, compared to fiscal 1999, lower average selling prices in the U.S. marketplace for Category 5 and 5e network cables. Sales of central office communication and computer interconnect cable products increased 53% and 35%, respectively, over fiscal 1999. The increase in demand for both central office and computer interconnect cable products was driven by the growth of competitive local exchange carriers, Internet service providers and application service providers within the telecommunication industry. Sales of wireless cable and assembly services grew 37% as a result of strong demand for cellular communications. Sales growth in other product lines also contributed to the increase in Network Communication segment sales, including growth of 27% for fiber optic connectivity products and 16% for network components (excluding components used in fiber optic applications). Excluding acquisitions, growth in the Specialty Electronic segment was primarily due to a 13% increase in sales of automation and process control products, which was partially offset by a 17% decline in sales of specialty cable for the aerospace and transportation marketplaces. Sales attributable to acquired businesses accounted for $6.1 million of the increase in sales for this segment. Sales outside of North America increased $23.3 million, or 15%, to $178.6 million in fiscal 2000 compared to $155.3 million in fiscal 1999. The increase in international sales was primarily due to higher sales of computer interconnect, wireless cable and assembly services, and central office cable products in Western Europe and network products in the Pacific Rim. Gross profit increased $29.3 million, or 14%, to $233.8 million in fiscal 2000 compared to $204.5 million for fiscal 1999. Growth in gross profit for both the Network Communication and Specialty Electronic segments was primarily due to the 17% increase in sales, which was partially offset by a slightly lower gross margin percentage. The overall gross margin for fiscal 2000 was 29.3% compared to 29.9% for fiscal 1999. The decrease in the gross margin was due to a lower margin for the Network Communication segment, which was partially offset by an improvement in the gross margin for the Specialty Electronic segment. The lower Network Communication segment gross margin was primarily due to a lower margin for outside plant communication cable used in local distribution applications. Factors contributing to the lower outside plant cable margin were competitive pricing, particularly in the U.S. marketplace, and increased labor and manufacturing costs. The improved gross margin for the Specialty Electronic segment was due to an improved margin for automation and process control products due primarily to favorable product mix and volume efficiencies. Selling, general and administrative expenses ("SG&A") increased $12.5 million, or 11%, to $126.1 million for fiscal 2000 compared to $113.6 million for fiscal 1999. The increase in SG&A was primarily due to higher sales volume and performance related expenses. SG&A for fiscal 2000 also includes an additional $1.4 million provision against accounts receivable due to uncertainty regarding the financial reporting and condition of a customer. SG&A as a percentage of sales decreased to 15.8% for fiscal 2000 compared to 16.6% for fiscal 1999, as the percentage growth in sales exceeded the growth in SG&A. Research and development expenses decreased $0.9 million to $4.6 million compared to $5.5 million in fiscal 1999. Nonrecurring income of $0.2 million ($0.1 million net of tax) was recognized in fiscal 2000. In fiscal 1999, net nonrecurring expense of $4.9 million ($3.3 million net of tax) included a charge of $6.3 million incurred in connection with the purchase of 2.4 million shares of the Company's common stock acquired by key employees through the exercise of incentive stock options pursuant to a share purchase plan previously adopted by the Board of Directors (the "Share Purchase Plan"), and $1.4 million of income which was primarily the result of the sale of assets related to a previously discontinued product line. 13 Management's Discussion and Analysis of Financial Condition and Results of Operations Cable Design Technologies Corporation and Subsidiaries Income from operations, excluding net nonrecurring items in both years, increased $17.7 million, or 21%, to $103.2 million in fiscal 2000 compared to $85.5 million for fiscal 1999, and the operating margin was 12.9% for fiscal 2000 compared to 12.5% for fiscal 1999. Including net nonrecurring items, income from operations was $103.3 million for fiscal 2000 compared to $80.6 million for fiscal 1999. Interest expense for fiscal 2000 decreased $1.5 million to $11.8 million compared to $13.3 million for fiscal 1999. The decrease was primarily due to the lower average balance of debt outstanding. The Company reduced outstanding debt by $52.4 million during fiscal 2000. The effective tax rate for fiscal 2000 decreased to 39.1% compared to 40.3% for fiscal 1999, primarily due to the fact that approximately $0.9 million of the fiscal 1999 net nonrecurring charge was non-deductible for income tax purposes. Excluding net nonrecurring items in both years, the effective tax rate decreased to 39.1% compared to 39.8% for fiscal 1999. Excluding net nonrecurring items in both years, fiscal 2000 earnings per share increased 27% to $1.24 per diluted share on net income of $54.8 million, compared to $0.98 per diluted share for fiscal 1999 on net income of $42.9 million. Including net nonrecurring items, earnings per share increased to $1.25 per diluted share on net income of $54.9 million compared to $0.91 per diluted share on net income of $39.6 million for fiscal 1999. Year Ended July 31, 1999 Compared with Year Ended July 31, 1998 Sales increased $32.3 million, or 5%, to $684.0 million for fiscal 1999 compared to $651.7 million for the year ended July 31, 1998 ("fiscal 1998"). The increase in fiscal 1999 includes $56.8 million of sales attributable to acquired businesses, primarily HEW-Kabel/CDT. Sales for the Network Communication segment were $446.6 million for fiscal 1999 compared to $458.5 million for fiscal 1998. Excluding the unfavorable effects of foreign currency translation and of the change in the price of copper on sales of communication cable, there was no change in sales for this segment. Communication cable selling prices are generally adjusted for changes in the market price of copper. Reduced demand in the U.S. marketplace for outside plant communication cable and for plenum Category 5 network cable and competitive pricing pressure on Category 5 and 5e network cables were partially offset by increased demand for computer interconnect and wireless cable and assembly services. Additionally, the product mix improved as the result of an 83% increase in sales of the higher priced Category 5e and 6 cables. Fiscal 1999 sales for the Specialty Electronic segment increased $44.3 million, or 23%, to $237.4 million. Sales attributable to acquired businesses accounted for $50.6 million of the increase in sales for this segment. The Company believes that the significant decline in the market price of copper during fiscal 1999 contributed to lower pricing conditions for this segment, particularly for automation & process control products, which contributed to the lack of sales growth for this segment, excluding acquisitions. Sales outside of North America increased $49.1 million, or 46%, to $155.3 million in fiscal 1999 compared to $106.2 million in fiscal 1998. Sales attributable to acquired businesses accounted for $50.7 million of the increase in international sales. Excluding acquisitions, international sales were unfavorably affected by the sluggish economy in the United Kingdom and economic turmoil in Russia and Latin America. Gross profit increased $10.6 million, or 5%, to $204.5 million in fiscal 1999 compared to $193.9 million for fiscal 1998. Growth in gross profit for the Specialty Electronic segment, primarily due to acquired businesses, offset a modest decline in the gross profit for the Network Communication segment. For the Network Communication segment, an improved sales mix for network cable products, resulting from an 83% increase in sales of the higher margin enhanced network cable products, and less product outsourcing partially offset the unfavorable effects of lower sales of Category 5 network cable and outside plant communication cable as well as the lower pricing for Category 5 and 5e network cable products. 14 Management's Discussion and Analysis of Financial Condition and Results of Operations Cable Design Technologies Corporation and Subsidiaries The overall gross margin for fiscal 1999 of 29.9% improved slightly compared to 29.8% for fiscal 1998. A slight improvement in the gross margin for the Network Communication segment was partially offset by a reduction in the gross margin for the Specialty Electronic segment. Factors contributing to the improvement in the gross margin for the Network Communication segment were, for network cable products, better product mix due to 83% higher sales of enhanced Category 5e and 6 network cable products and lower sales of Category 5 network cable, less product outsourcing and lower product costs. These improvements were partially offset by a lower gross margin on wireless products due to product mix. The lower Specialty Electronic segment gross margin was primarily due to the inclusion of the comparatively lower gross margins of acquired businesses which was partially offset by a higher gross margin for automation and process control cables primarily due to lower copper material costs. SG&A increased $7.1 million, or 7%, to $113.6 million for fiscal 1999 compared to $106.5 million for fiscal 1998. Excluding an additional $9.0 million of SG&A attributable to acquired businesses, SG&A decreased $1.9 million. The lower SG&A was primarily the result of significantly lower expenses due to the discontinuance of the DynaTraX(TM) product line and other restructuring activities implemented in July 1998 and the favorable effect of foreign currency translation, which more than offset increases in certain other SG&A expenses. SG&A as a percentage of sales was 16.6% for fiscal 1999 compared to 16.3% for fiscal 1998. Research and development expense decreased $2.4 million to $5.5 million compared to $7.9 million in fiscal 1998, primarily as a result of the discontinuance of the DynaTraX(TM) product line. Net nonrecurring charges of $4.9 million ($3.3 million net of tax) were recognized in fiscal 1999. A charge of $6.3 million was incurred in the second fiscal quarter in connection with the purchase of 2.4 million shares of the Company's common stock acquired by key employees through the exercise of incentive stock options pursuant to the Share Purchase Plan. As a result of the purchase of such shares, the Company obtained a cash benefit of approximately $12.8 million realized through the reduction of income taxes payable. Also in fiscal 1999, nonrecurring income of $1.4 million was recognized which was primarily due to the sale of assets related to the previously discontinued DynaTraX(TM) product line. Fiscal 1998 nonrecurring charges of $6.1 million ($3.9 million net of tax) represented a provision for costs associated with the discontinuance of the DynaTraX(TM) product line and other restructuring activities. Income from operations, excluding net nonrecurring charges in both years, increased $6.0 million, or 7%, to $85.5 million in fiscal 1999 compared to $79.5 million for fiscal 1998, and the operating margin was 12.5% for fiscal 1999 compared to 12.2% for fiscal 1998. Including net nonrecurring charges, income from operations was $80.6 million for fiscal 1999 compared to $73.5 million for fiscal 1998. Interest expense for fiscal 1999 increased $4.7 million to $13.3 million compared to $8.6 million for fiscal 1998. The increase was primarily the result of the higher average balance of debt outstanding due to the acquisition of HEW- Kabel/CDT in August 1998 and the purchase of 3.6 million shares of the Company's common stock during the first six months of fiscal 1999. The effective tax rate for fiscal 1999 increased to 40.3% compared to 38.5% for fiscal 1998, partially due to the fact that approximately $0.9 million of the second quarter nonrecurring charge was non-deductible for income tax purposes. Excluding net nonrecurring expense in fiscal 1999, the increase in the effective tax rate to 39.8% compared to 38.5% for fiscal 1998 was primarily the result of lower Canadian tax credits for research and development and a change in the tax rate mix among domestic and foreign statutory entities primarily due to the inclusion of the recently acquired German subsidiary, HEW-Kabel/CDT. Excluding net nonrecurring charges in both years, fiscal 1999 earnings per share increased 3% to $0.98 per diluted share on net income of $42.9 million, compared to $0.95 per diluted share for fiscal 1998 on net income of $44.4 million. Including net nonrecurring charges, earnings per share increased to $0.91 per diluted share on net income of $39.6 million compared to $0.86 per diluted share on net income of $40.5 million for fiscal 1998. 15 Management's Discussion and Analysis of Financial Condition and Results of Operations Cable Design Technologies Corporation and Subsidiaries Liquidity and Capital Resources During fiscal 2000 operating working capital increased $6.2 million, excluding increases resulting from the initial recording of the working capital of acquired businesses. The change in operating working capital was primarily the result of an increase in accounts receivable of $12.9 million, which was partially offset by an increase in accounts payable of $8.5 million. The change in operating working capital excludes changes in cash and current maturities of long-term debt. During fiscal 2000 the Company generated $75.7 million of net cash from operating activities after providing for the increase in working capital. Net cash used by investing activities during fiscal 2000 of $30.4 million included $22.0 million for capital projects and $8.3 million for the acquisition of businesses. Net cash used by financing activities during fiscal 2000 was $39.6 million, including $52.4 million of cash used to reduce debt and $11.2 million of cash received from the exercise of stock options. The net increase in cash for fiscal 2000 was $5.0 million. During fiscal 2000 and fiscal 1999, the Company expended $22.0 million and $25.3 million, respectively, for capital projects. Expenditures were primarily invested in additional equipment to expand capacity for Network Communication products, including the purchase of equipment to expand manufacturing capacity for enhanced bandwidth networking products and, in fiscal 1999, the expansion of the Company's primary communication cable production facility. The Company's primary credit agreement ("Credit Agreement") is comprised of a $121.3 million U.S. revolving facility, (including a $50.0 million Deutschmark sub-facility), and a CDN $115.0 million Canadian revolving facility. In addition to the Credit Agreement, the Company has a 364-day, unsecured bank revolving credit agreement (the "Revolving Facility") with a maximum principal amount of $15 million, and a foreign credit facility in the United Kingdom (the "European Credit Agreement") which provides for up to approximately $11.2 million of borrowings. The Credit Agreement, Revolving Facility and European Credit Agreement include provisions whereby the applicable margins over the prime rate and the base rate, as defined, respectively, or the London Inter-Bank Offered Rate ("LIBOR") are based on the attainment of certain performance factors. The Revolving Facility expires December 12, 2000. The Credit Agreement and Revolving Facility contain customary financial and non-financial covenants, except the Revolving Facility is limited by the terms of the Credit Agreement. On July 31, 2000, the Company had availability of approximately $47.1 million under the Credit Agreement, $15.0 million under the Revolving Facility and $5.3 million under the European Credit Agreement. Based on the Company's current expectations for its business, management believes that its cash flow from operations and the available portion of its credit facilities will provide it with sufficient liquidity to meet the current liquidity needs of the Company. General During the last several months, there has existed a constrained market supply of single mode fiber optic glass conductor and of ferrules used in fiber optic connectors which is expected to continue into fiscal 2001. The Company's inability to obtain additional allocations, and/or to find additional suppliers, of these components could limit the growth of products containing these materials. The Company anticipates moderate price increases on certain raw materials to occur during the first six months of fiscal 2001. The Company will incur in the first quarter of fiscal 2001 additional ongoing SG&A expense associated with the recently established European and Fiber Optic management groups. The Company's principal customer for wireless assembly services shifted its business to an overseas contract manufacturer in the last month of fiscal 2000. Sales to this customer averaged approximately $8.5 million per quarter during fiscal 2000. Effects of Inflation The Company does not believe that inflation had a significant impact on the Company's results of operations for the periods presented. On an ongoing basis, the Company attempts to minimize any effects of inflation on its operating results by controlling costs of operations and, whenever possible, seeking to ensure that selling prices reflect increases in costs due to inflation. 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 16 Management's Discussion and Analysis of Financial Condition and Results of Operations Cable Design Technologies Corporation and Subsidiaries 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 periods of significant movement in the cost of copper. The Company does not engage in activities to hedge the underlying value of its copper inventory. Interest Rate Sensitivity The table below provides information about the Company's financial instruments, primarily debt obligations, that are sensitive to changes in interest rates. The table presents principal cash flows and related weighted average interest rates for debt obligations by expected maturity date and the currency in which the instrument's cash flows are denominated. Weighted average variable interest rates are based on the rates in effect at the reporting date for the respective debt obligations. No assumptions have been made for future changes in such variable rates. The fair value of fixed rate debt obligations as determined under current market interest rate assumptions does not differ materially from the carrying value as presented below. The information is provided in U.S. dollar equivalents, which is the Company's reporting currency.
- ----------------------------------------------------------------------------------------------------------------------------------- Expected Maturity Date For Periods Ending July 31, - ----------------------------------------------------------------------------------------------------------------------------------- Demand There- Type* Notes 2001 2002 2003 2004 2005 After Total - ----------------------------------------------------------------------------------------------------------------------------------- (U.S. dollar equivalents in millions) Balance/Average Interest Rate Demand notes payable British pound VR $4.1/6.6% $ 4.1/6.6% Swedish krona VR $1.4/4.9% $ 1.4/4.9% Australian dollar VR $0.3/7.1% $ 0.3/7.1% Long-term debt U.S. dollar FR $1.7/9.2% $ 0.1/9.2% $0.0/8.2% $0.0/7.9% $0.0/4.0% $0.1/4.0% $ 1.9/9.0% Deutschmark FR $1.5/5.4% $ 1.0/5.4% $0.6/5.4% $0.4/5.4% $0.4/5.4% $0.9/5.4% $ 4.8/5.4% Italian Lira FR $0.4/6.8% $ 0.4/6.8% $0.3/6.8% $0.2/6.8% $0.2/6.8% $0.2/6.8% $ 1.7/6.8% U.S. dollar VR $47.0/7.1% $47.0/7.1% Canadian dollar VR $66.6/6.3% $66.6/6.3% Deutschmark VR $33.8/4.9% $33.8/4.9% Italian Lira VR $0.1/5.7% $ 0.8/3.8% $0.1/5.7% $0.1/5.7% $0.1/5.7% $0.0/5.7% $ 1.2/4.5%
* VR-Variable interest rate; FR-Fixed interest rate 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. Additionally, SFAS No. 133 requires that changes in a derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. This statement is effective for the Company's fiscal year ending July 31, 2001. The Company adopted SFAS No. 133 on August 1, 2000, and such adoption had no impact on the financial statements or results of operations of the Company. In December 1999, the Securities and Exchange Commission ("SEC") released Staff Accounting Bulletin No. 101, "Revenue Recognition" ("SAB No. 101"), to provide guidance on the recognition, presentation and disclosure of revenue in financial statements. SAB No. 101 explains the SEC staff's general framework for revenue recognition. SAB No. 101 does not change existing accounting pronouncements on revenue recognition, but rather clarifies the SEC's position on pre-existing rules. SAB No. 101 did not have a significant impact on the Company's financial position or results of operations at July 31, 2000. 17 Management's Discussion and Analysis of Financial Condition and Results of Operations Cable Design Technologies Corporation and Subsidiaries Year 2000 Update The Company completed all Year 2000 compliance remediation believed necessary with respect to its internal information systems ("IT systems") and non- information systems ("non-IT systems"), such as manufacturing equipment and control devices, prior to January 1, 2000. The cost of remediation activities, which included the replacement of certain IT systems to improve functionality and provide additional system capabilities, totaled approximately $4.0 million. Management of the Company believes that its Year 2000 plan and related expenditures incurred have successfully eliminated potential problems associated with the Year 2000 issue, as the Company has not experienced any significant IT or non-IT systems interruptions as a result of the Year 2000 date change. Additionally, the Company is not aware of any significant third parties on which it relies that have experienced material Year 2000 related problems. The Company does not anticipate any future disruptions related to Year 2000 issues, however it cannot guarantee that IT and non-IT systems will not undergo disruptions or generate Year 2000 related errors in the future. Additionally, if future third party disruptions occur there could be a material adverse effect on the Company's business, results of operations or financial condition. Introduction of the Euro Currency The European Economic Monetary Union's ("EEMU") common currency, the Euro, was implemented effective January 1, 1999, at which time fixed exchange rates were established between the legacy currencies of the participating countries and the Euro. During the transition period, which extends through June 30, 2002, transactions may be conducted in either the Euro or the legacy currencies. The Company has subsidiaries in the United Kingdom, Sweden, Denmark, Italy and Germany which have customers and suppliers in participating EEMU countries. These subsidiaries currently have the ability to support transactions in both the Euro and their respective legacy currencies. The Company's Italian and German subsidiaries are the only subsidiaries domiciled in participating EEMU countries. The Company is currently evaluating Euro conversion compliance for its Italian and German subsidiaries, for which conversion to the Euro as the functional currency is required to be phased in prior to January 1, 2002. At this time, costs to address conversion are not expected to be significant. The EEMU's introduction of the Euro may potentially have economic and business implications, such as changes in product pricing and currency exchange risks, for businesses within the EEMU as well as for businesses outside the EEMU that do business with companies within the EEMU. The nature and extent of such effects, whether beneficial or adverse, are unknown at this time. However, the Company does not believe that such effects will have a material impact on its consolidated results of operations or financial condition, although there can be no assurance that unanticipated effects will not have an adverse impact on the Company's future results of operations. Forward Looking Statements -- Under the Private Securities Litigation Act of 1995 Certain of the statements in this annual report are forward-looking statements, including, without limitation, statements regarding future financial results and performance, growth factors, cost savings and other beliefs, expectations or opinions of the Company and its management. These statements are subject to various risks and uncertainties, many of which are outside the control of the Company, including the level of market demand for the Company's products, competitive pressures, the ability to achieve reductions in operating costs and to continue to integrate acquisitions, price fluctuations of raw materials and the potential unavailability thereof, foreign currency fluctuations, technological obsolescence, environmental matters and other specific factors discussed in the Company's Annual Report on Form 10-K for the year ended July 31, 2000 and other Securities and Exchange Commission filings. The information contained herein represents management's best judgement as of the date hereof based on information currently available; however, the Company does not intend to update this information to reflect developments or information obtained after the date hereof and disclaims any legal obligation to the contrary. 18 Report of Independent Public Accountants Cable Design Technologies Corporation and Subsidiaries To the Board of Directors of Cable Design Technologies Corporation and Subsidiaries: We have audited the accompanying consolidated balance sheets of Cable Design Technologies Corporation (a Delaware corporation) and Subsidiaries as of July 31, 2000 and 1999, and the related consolidated statements of income, stockholders' equity and cash flows for each of the three years in the period ended July 31, 2000. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Cable Design Technologies Corporation and Subsidiaries as of July 31, 2000 and 1999, and the results of their operations and their cash flows for each of the three years in the period ended July 31, 2000, in conformity with accounting principles generally accepted in the United States. /s/ Arthur Andersen LLP Pittsburgh, Pennsylvania September 15, 2000 19 Consolidated Statements of Income Cable Design Technologies Corporation and Subsidiaries
- ----------------------------------------------------------------------------------------------------------------- Year Ended July 31, 2000 1999 1998 - ----------------------------------------------------------------------------------------------------------------- (Dollars in thousands, except per share information) Sales $797,824 $683,999 $651,668 Cost of sales 563,979 479,469 457,767 -------- -------- -------- Gross profit 233,845 204,530 193,901 Selling, general and administrative expenses 126,064 113,610 106,491 Research and development expenses 4,626 5,450 7,863 Nonrecurring (income) expense, net (189) 4,895 6,093 -------- -------- -------- Income from operations 103,344 80,575 73,454 Interest expense, net 11,770 13,346 8,560 Minority interest in earnings (losses) of subsidiaries, net 986 883 25 Other expense (income), net 377 (18) (947) -------- -------- -------- Income before income taxes 90,211 66,364 65,816 Income tax provision 35,291 26,723 25,335 -------- -------- -------- Net income $ 54,920 $ 39,641 $ 40,481 ======== ======== ======== Per Share Data Basic earnings per common share $ 1.29 $ 0.92 $ 0.93 ======== ======== ======== Diluted earnings per common share $ 1.25 $ 0.91 $ 0.86 ======== ======== ======== Weighted average common shares outstanding 42,665 43,176 43,501 ======== ======== ======== Diluted weighted average common shares outstanding 44,086 43,693 46,982 ======== ======== ========
The accompanying notes are an integral part of these consolidated financial statements. 20 Consolidated Balance Sheets Cable Design Technologies Corporation and Subsidiaries
- -------------------------------------------------------------------------------------------------------------------------- July 31, 2000 1999 - -------------------------------------------------------------------------------------------------------------------------- (Dollars in thousands, except per share information) Assets Current assets: Cash and cash equivalents $ 16,454 $ 11,424 Trade accounts receivable, net of allowance for uncollectible accounts of $6,180 and $4,926, respectively 145,717 130,936 Inventories 145,015 141,762 Prepaid expenses and other 7,140 10,937 Deferred income taxes 11,834 10,926 --------- ---------- Total current assets 326,160 305,985 Property, plant and equipment, net 205,880 201,586 Intangible assets, net 6,253 8,409 Goodwill, net 74,539 76,584 Other assets 2,521 2,536 ---------- ---------- Total assets $ 615,353 $ 595,100 ========== ========== Liabilities and Stockholders' Equity Current liabilities: Notes payable to banks $ 5,776 $ 33,109 Current maturities of long-term debt 3,692 13,831 Accounts payable 47,996 38,452 Accrued payroll and related benefits 24,264 21,127 Accrued taxes 6,069 10,474 Other accrued liabilities 21,653 25,228 ---------- ---------- Total current liabilities 109,450 142,221 Long-term debt 153,336 171,727 Minority interest in subsidiaries 3,615 2,451 Other non-current liabilities 9,002 7,990 Deferred income taxes 23,406 18,609 ---------- ---------- Total liabilities 298,809 342,998 ---------- ---------- Contingencies (Note 16) Stockholders' equity: Preferred stock, par value $.01 per share -- authorized 1,000,000 shares, no shares issued -- -- Common stock, par value $.01 per share -- authorized 100,000,000 shares, 47,362,880 and 46,168,392 shares issued, respectively 316 308 Paid-in capital 192,956 178,979 Common stock issuable, 19,573 and 34,019 shares, respectively 367 253 Retained earnings 183,166 128,246 Treasury stock, at cost, 3,867,528 and 3,935,178 shares, respectively (48,415) (49,262) Accumulated other comprehensive income (deficit) (11,846) (6,422) ---------- ---------- Total stockholders' equity 316,544 252,102 ---------- ---------- Total liabilities and stockholders' equity $ 615,353 $ 595,100 ========== ==========
The accompanying notes are an integral part of these consolidated financial statements. 21 Consolidated Statements of Cash Flows Cable Design Technologies Corporation and Subsidiaries
- -------------------------------------------------------------------------------------------------------------------------- Year Ended July 31, 2000 1999 1998 - -------------------------------------------------------------------------------------------------------------------------- (Dollars in thousands) Cash Flow from Operating Activities: Net income $ 54,920 $ 39,641 $ 40,481 Adjustments for Non-cash Items to Reconcile Net Income to Cash Provided by Operating Activities: Depreciation 17,088 14,823 11,079 Amortization 4,361 4,007 2,966 Costs to discontinue DynaTraX(TM) and other restructuring -- -- 6,093 Deferred income taxes 3,308 827 1,830 Tax benefit of option exercises 2,147 12,743 4,949 Stock option compensation expense 68 -- -- Changes in Assets and Liabilities Net of Effects of Businesses Acquired: Accounts receivable (12,902) (7,644) (12,627) Inventories (2,967) (1,511) (12,262) Other current assets 3,632 2,131 (2,141) Accounts payable 8,494 (9,914) 5,181 Accrued payroll and related benefits 3,326 1,547 (486) Accrued taxes (4,711) 6,148 983 Other accrued liabilities (2,228) 2,277 1,406 Other non-current assets and liabilities 1,155 2,452 1,117 -------- -------- -------- Net cash provided by operating activities 75,691 67,527 48,569 -------- -------- -------- Cash Flow from Investing Activities: Purchases of property, plant and equipment (22,028) (25,262) (49,248) Acquisition of businesses, including transaction costs, net of cash acquired (8,331) (49,091) (19,092) -------- -------- -------- Net cash used in investing activities (30,359) (74,353) (68,340) -------- -------- -------- Cash Flow from Financing Activities: Net change in demand and revolving note borrowings (39,345) 54,323 27,314 Funds provided by term debt 1,246 12,506 1,316 Funds used to reduce term debt (14,261) (15,152) (4,519) Common shares issued or issuable 1,484 283 24 Proceeds from exercise of stock options 11,247 211 2,017 Repurchase of common stock -- (44,971) (4,291) -------- -------- -------- Net cash (used) provided by financing activities (39,629) 7,200 21,861 -------- -------- -------- Effect of currency translation on cash (673) (93) 36 -------- -------- -------- Net increase in cash 5,030 281 2,126 Cash, beginning of year 11,424 11,143 9,017 -------- -------- -------- Cash, end of year $ 16,454 $ 11,424 $ 11,143 ======== ======== ========
The accompanying notes are an integral part of these consolidated financial statements. 22 Consolidated Statements of Stockholders' Equity Cable Design Technologies Corporation and Subsidiaries
Common Stock -------------------- Common Par Paid-in Stock Retained Treasury Deferred (Dollars in thousands) Shares Value Capital Issuable Earnings Stock Compensation - ----------------------------------------------------------------------------------------------------------------------------------- Balance, July 31, 1997 42,199,794 $ 188 $158,670 $ -- $ 48,219 $ -- $ (87) Net income -- -- -- -- 40,481 -- -- Currency translation adjustments -- -- -- -- -- -- -- Minimum pension liability -- -- -- -- -- -- -- Comprehensive income Exercise of options and related tax benefits 3,787,944 24 6,966 -- -- -- -- Stock grants 2,970 -- 45 -- -- -- -- Deferred compensation -- -- -- -- -- -- 87 Stock split -- 95 -- -- (95) -- -- Purchase of 300,000 shares treasury stock -- -- -- -- -- (4,291) -- - ----------------------------------------------------------------------------------------------------------------------------------- Balance, July 31, 1998 45,990,708 307 165,681 -- 88,605 (4,291) -- Net income -- -- -- -- 39,641 -- -- Currency translation adjustments -- -- -- -- -- -- -- Minimum pension liability -- -- -- -- -- -- -- Comprehensive income Exercise of options and related tax benefits 137,325 1 12,953 -- -- -- Stock grants 2,142 -- 30 -- -- -- -- Stock issuance 38,217 -- 315 -- -- -- -- Purchase of 3,635,178 shares treasury stock -- -- -- -- -- (44,971) -- Employee stock purchase plan, 34,019 shares issuable -- -- -- 253 -- -- -- - ----------------------------------------------------------------------------------------------------------------------------------- Balance, July 31, 1999 46,168,392 308 178,979 253 128,246 (49,262) -- Net income -- -- -- -- 54,920 -- -- Currency translation adjustments -- -- -- -- -- -- -- Comprehensive income Exercise of options and related tax benefits 1,064,913 7 12,606 -- -- -- -- Stock grants 2,490 -- 30 -- -- -- -- Issuance of 67,650 shares treasury stock -- -- (66) -- -- 847 -- Employee stock purchase plan shares issued 127,085 1 1,339 (253) -- -- -- Employee stock purchase plan, 19,573 shares issuable -- -- -- 367 -- -- -- Stock option compensation expense -- -- 68 -- -- -- -- - ----------------------------------------------------------------------------------------------------------------------------------- Balance, July 31, 2000 47,362,880 $ 316 $192,956 $ 367 $183,166 $(48,415) $ -- Accumulated Other Total Comprehensive Stockholders' Income/(Deficit) Equity - ----------------------------------------------------------------------------------- Balance, July 31, 1997 $ (1,865) $205,125 Net income -- 40,481 Currency translation adjustments (3,529) (3,529) Minimum pension liability (10) (10) Comprehensive income 36,942 Exercise of options and related tax benefits -- 6,990 Stock grants -- 45 Deferred compensation -- 87 Stock split -- -- Purchase of 300,000 shares treasury stock -- (4,291) - ----------------------------------------------------------------------------------- Balance, July 31, 1998 (5,404) 244,898 Net income -- 39,641 Currency translation adjustments (1,028) (1,028) Minimum pension liability 10 10 Comprehensive income 38,623 Exercise of options and related tax benefits -- 12,954 Stock grants -- 30 Stock issuance -- 315 Purchase of 3,635,178 shares treasury stock -- (44,971) Employee stock purchase plan, 34,019 shares issuable -- 253 - ----------------------------------------------------------------------------------- Balance, July 31, 1999 (6,422) 252,102 Net income -- 54,920 Currency translation adjustments (5,424) (5,424) Comprehensive income 49,496 Exercise of options and related tax benefits -- 12,613 Stock grants -- 30 Issuance of 67,650 shares treasury stock -- 781 Employee stock purchase plan shares issued -- 1,087 Employee stock purchase plan, 19,573 shares issuable -- 367 Stock option compensation expense -- 68 - ----------------------------------------------------------------------------------- Balance, July 31, 2000 $(11,846) $316,544
The accompanying notes are an integral part of these consolidated financial statements. 23 Notes to consolidated Financial Statements cable Design Technologies Corporation and Subsidiaries Note 1. Operations Cable Design Technologies Corporation ("CDT" or "the Company") is a leading designer and manufacturer of high bandwidth network connectivity products, fiber optic cable and connectors, assemblies, components, computer interconnect cables for communication switching applications, and communication cable products used in local loop, central office and wireless applications. CDT also manufactures electronic cable products that are used in automation and process control and specialty applications. Note 2. Significant Accounting Policies The consolidated financial statements reflect the application of the following significant accounting policies: Principles of Consolidation The consolidated financial statements include the accounts of Cable Design Technologies Corporation and its majority owned subsidiaries. All material intercompany transactions and balances have been eliminated in consolidation. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Inventories Inventories are stated at the lower of first-in, first-out (FIFO) cost or market. Inventory costs include material, labor and manufacturing overhead. The Company's products contain significant amounts of certain raw materials, such as copper and Teflon(R). The Company believes that adequate sources are available for these commodities; however, any disruption of the supplies or significant deviations in market prices could impact the Company's operations. Property, Plant and Equipment Property, plant and equipment are carried on the cost basis. Provisions for depreciation and amortization are computed using the straight-line method based upon the estimated useful lives of the assets. Maintenance and repair costs are charged to operations as incurred. Major replacements or betterments are capitalized. Cost and accumulated depreciation of property sold or retired are removed from the accounts and any resulting gain or loss is recognized in the current period statement of income. Goodwill Goodwill represents the excess of the purchase price over the fair market value of identifiable net assets acquired in connection with various business acquisitions and combinations. Goodwill is being amortized using the straight- line method over periods of between 20 to 40 years. Accumulated amortization of goodwill was $10.4 million and $8.2 million at July 31, 2000 and 1999, respectively. The Company continually evaluates the carrying value of goodwill on the basis of whether goodwill is fully recoverable from estimated undiscounted net income, before the effects of goodwill amortization, over the remaining amortization period. Loan Origination Fees In connection with the issuance of the Company's debt instruments, the Company defers related credit acquisition costs. These costs are amortized using the straight-line method over the life of the debt instruments. 24 Notes to Consolidated Financial Statements Cable Design Technologies Corporation and Subsidiaries Translation of Foreign Currency Financial Statements The financial statements of foreign subsidiaries are translated using the exchange rate in effect at year end for balance sheet accounts and the average exchange rate in effect during the year for income and expense accounts. Unrealized gains or losses arising from translation are charged or credited directly to accumulated other comprehensive income/(deficit), a component of stockholders' equity. Gains and losses on foreign currency transactions are included in income as they occur. Income Taxes Income taxes are accounted for in accordance with the liability method, under which deferred tax assets or liabilities are computed based on the temporary differences between the financial statement and income tax bases of assets and liabilities using the enacted marginal tax rate. These differences are classified as current or non-current based upon the classification of the related asset or liability. For temporary differences that are not related to an asset or liability, classification is based upon the expected reversal date of the temporary difference. Reclassifications Certain reclassifications have been made to the prior year statements to conform with the current year presentation. Statements of Cash Flows Supplemental disclosure of cash flow information.
- ------------------------------------------------------------------------------- Year Ended July 31, 2000 1999 1998 - ------------------------------------------------------------------------------- (Dollars in thousands) Cash paid during the year for: Interest $12,772 $12,014 $ 8,165 Income taxes $30,992 $10,055 $19,707
Impact of Newly Issued Accounting Standards Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities" was issued in June 1998. SFAS No. 133 establishes accounting and reporting standards for derivative instruments and requires recognition of all derivatives as either assets or liabilities, measured at fair value, in the balance sheet. This statement is effective for the Company's fiscal year ending July 31, 2000. The Company adopted SFAS No. 133 on August 1, 2000, and such adoption had no impact on the financial statements or results of operations of the Company. In December 1999, the Securities and Exchange Commission ("SEC") released Staff Accounting Bulletin No. 101, "Revenue Recognition" ("SAB No. 101"), to provide guidance on the recognition, presentation and disclosure of revenue in financial statements. SAB No. 101 explains the SEC staff's general framework for revenue recognition. SAB No. 101 does not change existing accounting pronouncements on revenue recognition, but rather clarifies the SEC's position on pre-existing rules. SAB No. 101 did not have a significant impact on the Company's financial position or results of operations at July 31, 2000. Note 3. Stockholders' Equity Prior period common share information has been adjusted to reflect the effect of a 3-for-2 stock split in the form of a common stock dividend on August 22, 2000. On May 7, 1997, the Board of Directors approved a program under which up to $30 million of the Company's common stock may be repurchased on the open market or in privately negotiated transactions. The Company repurchased 1,241,100 and 300,000 common shares during fiscal 1999 and 1998, respectively, under this program. Additionally, on December 1, 1998, the Board of Directors approved the purchase of up to 2,850,000 shares of the Company's common stock held by certain key employees. The stock was acquired by the employees more than six months previously upon the exercise of certain incentive stock options granted primarily in 1988 and 1989 and expiring in 1998 and 1999. During fiscal 1999 the Company repurchased 2,394,078 common shares from such employees (See Note 19). 25 Notes to Consolidated Financial Statements Cable Design Technologies Corporation and Subsidiaries On December 10, 1996, the Board of Directors adopted a Rights Agreement ("Rights Agreement"). Under the Rights Agreement, one Preferred Share Purchase Right ("Right") for each outstanding share of the Company's common stock was distributed to stockholders of record on December 26, 1996. Each Right entitles the holder to buy one-two thousand two hundred fiftieth of a share of a new series of junior participating preferred stock for an exercise price of $66.67. The Company has designated 100,000 shares of the previously authorized $0.01 par value preferred stock as junior participating preferred stock in connection with the Rights Agreement. The Rights are exercisable only if a person or group (with certain exceptions) acquires, or announces a tender offer to acquire, 20% or more of the Company's common stock (the "Acquirer"). If the Acquirer purchases 20% or more of the total outstanding shares of the Company's common stock, or if the Acquirer acquires the Company in a reverse merger, each Right (except those held by the Acquirer) becomes a right to buy shares of the Company's common stock having a market value equal to two times the exercise price of the Right. If the Company is acquired in a merger or other business combination, or 50% or more of the Company's assets or earning power is sold or transferred, each Right (except those held by the Acquirer) becomes a right to buy shares of the common stock of the Acquirer having a market value of two times the exercise price. The Company may exchange the Rights for shares of the Company's common stock on a one-to-one basis at any time after a person or group has acquired 20% or more of the outstanding stock. The Company is entitled to redeem the Rights at $0.01 per Right (payable in cash or common stock of the Company, at the Company's option) at any time before public disclosure that a 20% position has been acquired. The Rights expire on December 11, 2006, unless previously redeemed or exercised. Note 4. Inventories Inventories of the Company consist of the following: - --------------------------------------------------------------------------- July 31, 2000 1999 - --------------------------------------------------------------------------- (Dollars in thousands) Raw materials $ 40,779 $ 36,851 Work-in-process 35,268 32,297 Finished goods 68,968 72,614 ---------- ---------- Total inventories $ 145,015 $ 141,762 ========== ==========
Note 5. Property, Plant and Equipment Property, plant and equipment of the Company consist of the following:
- --------------------------------------------------------------------------- July 31, 2000 1999 - --------------------------------------------------------------------------- (Dollars in thousands) Asset (Asset lives): Land $ 10,946 $ 10,812 Buildings and improvements (10 - 40 years) 65,248 64,412 Machinery and equipment (3 - 15 years) 186,711 168,563 Furniture and fixtures (5 - 10 years) 12,876 11,866 ---------- ---------- Total 275,781 255,653 Less: accumulated depreciation (69,901) (54,067) ---------- ---------- Net property, plant and equipment $ 205,880 $ 201,586 ========== ==========
Note 6. Intangible Assets Intangible assets consist of patents, trademarks, loan origination fees and non- compete agreements. Patents, trademarks and non-compete agreements are being amortized over periods ranging from five to ten years. Loan origination fees are amortized over the term of the related loan. Accumulated amortization for intangible assets was $5.5 million and $4.2 million at July 31, 2000 and 1999, respectively. 26 Notes to Consolidated Financial Statements Cable Design Technologies Corporation and Subsidiaries Note 7. Financing Arrangements Notes payable to banks consist of an unsecured, 364 day revolving credit agreement (the "Revolving Facility"), and borrowings by certain of the Company's foreign subsidiaries under credit agreements entered into on September 18, 1995 (the "European Credit Agreement") and on March 14, 1997 (the "Australian Facility") (collectively, "the Foreign Facilities") to support the financing needs of its subsidiaries located in the United Kingdom, Sweden and Australia. The Revolving Facility provides for maximum borrowings of $15 million. Outstanding borrowings bear floating interest rates of either the London Inter- Bank Offered Rate ("LIBOR") plus the applicable margin or the base rate, as defined, at the Company's election. The applicable margin over LIBOR ranges from 1.2% to 2.2% and is determined based on the attainment of specified leverage ratios. A facility fee of .30% is payable quarterly on the maximum facility amount. The Revolving Facility contains customary financial and non-financial covenants, except as limited by the terms of the Company's primary credit agreement. As of July 31, 2000, there were no amounts outstanding under the Revolving Facility. The Company had outstanding borrowings of $23.0 million as of July 31, 1999, and maximum borrowings of $23.0 and $28.5 million under the Revolving Facility for the years ended July 31, 2000 and 1999, respectively. Weighted average outstanding borrowings were $6.3 million and $24.6 million, and the effective interest rates were 6.2% and 5.9% for the years ended July 31, 2000 and 1999, respectively. The European Credit Agreement is comprised of a sterling overdraft and multi- currency demand facility in an aggregate amount of approximately $11.2 million. Terms of the facility permit borrowings based on a percentage of certain accounts receivable and inventory at applicable margins over LIBOR. The Australian Facility is a revolving demand facility with maximum availability of approximately $0.6 million. The Foreign Facilities are guaranteed by the Company. The Company had outstanding borrowings of $5.8 million and $10.1 million and maximum borrowings of $10.4 and $11.3 million under the Foreign Facilities as of and for the years ended July 31, 2000 and 1999, respectively. Weighted average outstanding borrowings were $8.3 million and $10.5 million, and the effective interest rates were 6.1% and 7.1% for the years ended July 31, 2000 and 1999, respectively. Long-term debt consists of the following:
- ---------------------------------------------------------------------------------------------------- July 31, 2000 1999 - ---------------------------------------------------------------------------------------------------- (Dollars in thousands) U.S. revolver, due April 10, 2002, bears interest at LIBOR plus 0.50%, or approximately 7.1% at July 31, 2000 $ 47,000 $ 66,500 Deutschmark sub-facility, due April 10, 2002, bears interest at LIBOR plus 0.50%, or approximately 4.9% at July 31, 2000 33,790 23,306 Canadian revolver, due April 10, 2002, bears interest at LIBOR plus 0.50%, or approximately 6.3% at July 31, 2000 66,568 73,628 Other indebtedness 9,670 22,124 ---------- ---------- 157,028 185,558 Less: current portion 3,692 13,831 ---------- ---------- Total long-term debt $ 153,336 $ 171,727 ========== ==========
The Company's primary credit agreement, (the "Credit Agreement"), as amended, is comprised of a $121.3 million U.S. revolving facility, including a $50.0 million Deutschmark sub-facility (the "U.S. Revolver"), and a CDN $115.0 million revolver (the "Canadian Revolver"). The Credit Agreement includes a provision whereby the applicable margins over the prime rate or LIBOR are based on the attainment of certain performance factors. A commitment fee of 0.15% to 0.375% is applied to the unused portion of each revolver. The terms of the Credit Agreement contain various customary financial and non-financial covenants including the maintenance of minimum consolidated net worth and restrictions on payment of dividends. The Company is in compliance with all applicable covenants. 27 Notes to Consolidated Financial Statements Cable Design Technologies Corporation and Subsidiaries On July 31, 2000 the Company had approximately $47.1 million of availability under the Credit Agreement, $15.0 million of availability under the Revolving Facility, and $5.7 million of availability under its Foreign Facilities. The scheduled aggregate annual principal payments of long-term debt as of July 31, 2000, are as follows:
- -------------------------------------------------------------------------------- Year Ended July 31, Long-term Debt - -------------------------------------------------------------------------------- (Dollars in thousands) 2001 $ 3,692 2002 149,626 2003 1,008 2004 741 2005 707 Thereafter 1,254 -------- Total $157,028 ========
Note 8. Retirement and Other Employee Benefits The Company and its subsidiaries have various defined contribution and defined benefit plans covering substantially all of its employees. Benefits provided under the Company's defined benefit pension plans are primarily based on years of service and the employee's compensation. The defined contribution plans provide benefits primarily based on compensation levels. Defined Benefit Plans The Company maintains defined benefit plans for one of its U.S. locations (the "U.S. Plan") and for certain employees in Canada (the "Canadian Plans"). The following sets forth the changes in benefit obligations and plan assets, and reconciles amounts recognized in the Company's consolidated balance sheets:
- ------------------------------------------------------------------------------------------------------------------ U.S. Plan Canadian Plans - ----------------------------------------------------------------------------------------------------------------- Year Ended July 31, 2000 1999 2000 1999 - ----------------------------------------------------------------------------------------------------------------- (Dollars in thousands) Benefit obligation at beginning of year $ 1,979 $ 1,984 $ 7,679 $ 5,954 Service cost 48 47 2,064 2,131 Interest cost 142 130 666 507 Plan amendments 93 -- 2,618 -- Loss (gain) 29 (60) 458 (845) Benefits paid (132) (122) (127) (94) Effect of currency translation -- -- 38 26 -------- -------- -------- -------- Benefit obligation at end of year $ 2,159 $ 1,979 $ 13,396 $ 7,679 -------- -------- -------- -------- Fair value of plan assets at beginning of year $ 2,589 $ 2,496 $ 4,678 $ 3,186 Company contributions -- -- 2,206 1,342 Actual return on plan assets 277 215 1,148 196 Benefits paid (132) (122) (102) (61) Effect of currency translation -- -- 25 15 -------- -------- -------- -------- Fair value of plan assets at end of year $ 2,734 $ 2,589 $ 7,955 $ 4,678 -------- -------- -------- -------- Funded status $ 575 $ 610 $ (5,441) $ (3,001) Unrecognized net actuarial gain (loss) (72) (56) 2,304 (37) Unrecognized prior service cost 127 50 -- -- -------- -------- -------- -------- Net prepaid benefit (accrued liability) $ 630 $ 604 $ (3,137) $ (3,038) -------- -------- -------- --------
28 Notes to Consolidated Financial Statements Cable Design Technologies Corporation and Subsidiaries Amounts recognized in the consolidated balance sheets consist of:
- ----------------------------------------------------------------------------------------------------------------- U.S. Plan Canadian Plans - ----------------------------------------------------------------------------------------------------------------- July, 31, 2000 2000 1999 2000 1999 - ----------------------------------------------------------------------------------------------------------------- (Dollars in thousands) Prepaid benefit cost $ 630 $ 604 $ -- $ -- Accrued benefit liability -- -- (3,137) (3,038) ------- ------- ------- ------- Net prepaid benefit (accrued liability) $ 630 $ 604 $(3,137) $(3,038) ======= ======= ======= =======
Assets of the U.S. and Canadian plans are invested primarily in equity and fixed income securities. The weighted average assumptions as of the end of the periods were as follows:
- --------------------------------------------------------------------------------------------------------------------------------- U.S. Plan Canadian Plans - --------------------------------------------------------------------------------------------------------------------------------- July 31, 2000 1999 1998 2000 1999 1998 - --------------------------------------------------------------------------------------------------------------------------------- Weighted average discount rate 7.00% 7.00% 7.00% 7.00% 6.75% 6.30% Weighted average expected long term rate of return 8.50% 8.50% 9.50% 8.00% 8.00% 8.00%
The components of pension expense for fiscal 2000, 1999, and 1998 were as follows:
- ----------------------------------------------------------------------------------------------------------------------------------- U.S. Plan Canadian Plans - ----------------------------------------------------------------------------------------------------------------------------------- Year Ended July 31, 2000 1999 1998 2000 1999 1998 - ----------------------------------------------------------------------------------------------------------------------------------- (Dollars in thousands) Service cost $ 48 $ 47 $ 28 $2,064 $2,131 $1,817 Interest cost 142 130 133 666 507 421 Expected return on plan assets (213) (231) (220) (467) (307) (198) One time adjustment -- -- -- -- -- (174) Net amortization (3) (9) (12) 28 97 9 ------ ------ ------ ------ ------ ------ Net periodic benefit expense (credit) $ (26) $ (63) $ (71) $2,291 $2,428 $1,875 ====== ====== ====== ====== ====== ======
Defined Contribution Plans The Company also maintains defined contribution and profit-sharing plans for eligible employees. Certain contributions are made under the matching provision of 401(k) plans, while the remainder are made at the discretion of the Company's Board of Directors. Expenses incurred by the Company in connection with these profit-sharing plans were $5.3 million, $3.8 million and $4.3 million for the years ended July 31, 2000, 1999, and 1998, respectively. 29 Notes to Consolidated Financial Statements Cable Design Technologies Corporation and Subsidiaries Note 9. Postretirement Benefits Other Than Pensions Certain of the Company's operations are covered by postretirement health and life insurance benefits under unfunded plans. The components that comprise the changes in the benefit obligation were as follows:
- ------------------------------------------------------------------------------------------------------------ Year Ended July 31, 2000 1999 - ------------------------------------------------------------------------------------------------------------ (Dollars in thousands) Benefit obligation at beginning of year $ 6,053 $ 4,291 Service cost 278 270 Interest cost 436 362 Actuarial (gain) loss (217) 1,125 Benefits paid (29) (16) Effect of currency translation 73 21 ------- ------- Benefit obligation at end of year $ 6,594 $ 6,053 ======= =======
Amounts recognized in the consolidated balance sheets consist of:
- ------------------------------------------------------------------------------------------------------------ July 31, 2000 1999 - ------------------------------------------------------------------------------------------------------------ (Dollars in thousands) Funded status $(6,594) $(6,053) Unrecognized net loss 976 1,320 ------- ------- Accrued postretirement benefit liability $(5,618) $(4,733) ======= =======
The components of postretirement expense for fiscal 2000, 1999, and 1998 were as follows:
- ------------------------------------------------------------------------------------------------------------ Year Ended July 31, 2000 1999 1998 - ------------------------------------------------------------------------------------------------------------ (Dollars in thousands) Service cost $ 278 $ 270 $ 218 Interest cost 436 362 335 Net amortization 149 43 22 ------- ------- ------- Net postretirement benefit expense $ 863 $ 675 $ 575 ======= ======= =======
Future benefits were estimated assuming medical costs would increase at approximately an 8.00% annual rate for 2001, decreasing gradually to 4.00% in year 2005 and thereafter, and dental costs would increase at approximately 4.00% for 2001 and thereafter. Assuming a 1.00% increase in this annual trend, the accumulated postretirement benefit obligation would have increased by $793,000 and $732,000 at July 31, 2000 and 1999, respectively and the postretirement benefit expense would have increased by approximately $98,000, $96,000 and $51,000 for fiscal 2000, 1999 and 1998, respectively. The weighted average discount rate used to estimate the accumulated postretirement benefit obligation was 7.00% and 6.75% for the years ended July 31, 2000 and 1999, respectively. 30 Notes to Consolidated Financial Statements Cable Design Technologies Corporation and Subsidiaries Note 10. Stock Benefit Plans During fiscal 1999 the Company established the CDT Employee Stock Purchase Plan (the "ESPP") which provides eligible employees the right to purchase common stock of the Company on a quarterly basis at the lower of 85% of the common stock's fair market value on the first business day of a fiscal quarter or on the last business day of a fiscal quarter. There are 750,000 shares of common stock reserved for issuance under the ESPP. As of July 31, 2000, 603,342 shares of common stock remain available for issuance under the ESPP. In December 1995, the Company adopted the Non-Employee Director Stock Plan (the "Non-Employee Plan"). The Non-Employee Plan provides that shares of common stock having a fair market value of $15,000 be granted annually to each non-employee director each August 1. Shares granted under the Non-Employee Plan were 2,490 in fiscal 2000, 2,142 in fiscal 1999 and 2,970 in fiscal 1998. The Company maintains a Stock Purchase and Option Plan (the "Former Plan") which was terminated as to future grants effective upon completion of the Company's initial public offering on November 24, 1993 (the "Initial Public Offering"). As of the grant termination date, 6,249,816 options had been granted under the Former Plan to directors, executives and other key employees of the Company. Options issued under the Former Plan expire on the earlier of ten years after the date of grant (July 1988 through September 1992) or ten days after termination of employment. Substantially all of the outstanding options became fully vested as of the date of the Initial Public Offering. Substantially all of the options granted under the Former Plan were exercised prior to July 31, 1998. A Long Term Performance Incentive Plan (the "Stock Option Plan") was adopted in September 1993 and provides for the granting to employees and other key individuals stock options, stock appreciation rights, restricted stock, performance units and other types of incentive awards. The Stock Option Plan is scheduled to terminate in ten years from the date of adoption but may be extended another five years by the Company's Board of Directors for the grant of awards other than incentive stock options. Employee rights to grants pursuant to the Stock Option Plan are forfeited if a recipient's employment terminates within a specified period following the grant. An aggregate of 982,625 shares of common stock were reserved for issuance pursuant to the Stock Option Plan, and 63,102 remained available for issuance as of July 31, 2000. A Supplemental Long Term Performance Incentive Plan (the "Supplemental Plan") was adopted in December 1995 and authorizes the grant of awards with respect to 2,700,000 shares of common stock, of which 1,687,500 shares are to be reserved for grants only to new members of the Company's management who are employed in connection with acquisitions by the Company. As of July 31, 2000, 324,683 shares of common stock remain available for grant under the Supplemental Plan, including 13,433 available for issuance to employees of acquired companies. A Long Term Performance Incentive Plan (the "1999 Plan") was adopted in April 1999 and amended in June 1999 and authorizes the grant of various types of incentive awards with respect to 2,260,500 shares of the Company's common stock. As of July 31, 2000, 31,230 shares remain available for issuance under the 1999 Plan. The terms of stock options issued under the Former Plan, Stock Option Plan, Supplemental Plan and 1999 Plan (collectively "the Option Plans") include vesting over periods ranging from three to five years and an exercise price equal to the fair market value of the stock at the date of grant. 31 Notes to Consolidated Financial Statements Cable Design Technologies Corporation and Subsidiaries Certain information regarding stock option transactions is summarized below:
- ------------------------------------------------------------------------------------------------------------------------------- Year Ended July 31, 2000 1999 1998 - ------------------------------------------------------------------------------------------------------------------------------- Weighted Weighted Weighted Average Average Average Exercise Exercise Exercise Shares Price Shares Price Shares Price - ------------------------------------------------------------------------------------------------------------------------------- Outstanding, beginning of year 5,454,068 $ 10.73 2,944,596 $ 9.16 6,589,553 $ 4.02 Granted/reissued 262,500 20.63 2,768,400 11.83 148,500 17.45 Exercised (1,132,563) 9.93 (137,325) 1.54 (3,787,944) 0.54 Canceled/forfeited (48,165) 9.63 (121,603) 8.05 (5,513) 12.28 ---------------------- ---------------------- ---------------------- Outstanding, end of year 4,535,840 $ 11.51 5,454,068 $ 10.73 2,944,596 $ 9.16 Exercisable at end of year 1,299,764 $ 9.66 1,182,150 $ 7.93 771,003 $ 4.56 ---------------------- ---------------------- ---------------------- Weighted average fair value of options granted $ 11.77 $ 3.70 $ 9.00
Information regarding stock options outstanding as of July 31, 2000 is summarized below:
- ------------------------------------------------------------------------------------------------------------------------------- Options Outstanding Options Exercisable - ------------------------------------------------------------------------------------------------------------------------------- Weighted Weighted Weighted Average Average Average Remaining Exercise Exercise Range of Exercise Prices Options Contractual Life Price Options Price - ------------------------------------------------------------------------------------------------------------------------------- $ 1.22 - $ 4.14 295,377 2.4 years $ 2.40 295,377 $ 2.40 $ 8.13 - $12.28 2,362,932 7.8 years $ 9.85 502,665 $ 9.53 $13.83 - $21.79 1,877,531 8.8 years $15.03 501,722 $14.05
The Company accounts for the Option Plans and the ESPP in accordance with APB Opinion No. 25, "Accounting for Stock Issued to Employees" under which no compensation cost has been recognized. The supplemental information presented below discloses pro forma net income and net income per common share as if the Company had determined the cost of stock options in accordance with the fair value method under SFAS No. 123, "Accounting for Stock-Based Compensation".
- ------------------------------------------------------------------------------------------------------------------------------- Year Ended July 31, 2000 1999 1998 - ------------------------------------------------------------------------------------------------------------------------------- (Dollars in thousands, except per share data) Net income: As reported $54,920 $39,641 $40,481 Pro forma $51,023 $37,649 $38,550 Basic EPS: As reported $ 1.29 $ 0.92 $ 0.93 Pro forma $ 1.20 $ 0.87 $ 0.89 Diluted EPS: As reported $ 1.25 $ 0.91 $ 0.86 Pro forma $ 1.18 $ 0.86 $ 0.82
32 Notes to Consolidated Financial Statements Cable Design Technologies Corporation and Subsidiaries The fair value of each option grant is estimated as of the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions for grants issued in 2000, 1999, and 1998, respectively: risk-free interest rates of 6.36%, 5.87% and 5.93%; expected volatility of 59.0%, 58.5% and 53.0%; expected life of 5 years for all options; and an expected dividend yield of zero for all options. The Black-Scholes option valuation model was developed for use in valuing stock options with significantly different characteristics from those issued under the Option Plans, therefore, the model may not necessarily provide a reliable estimate of the fair value of the Company's employee stock options. Additionally, the SFAS No. 123 method of accounting is effective for options granted after August 1, 1995, and the above pro forma net income does not reflect any compensation cost that may have resulted if SFAS No. 123 had been applied to options granted prior to August 1, 1995. Incentive stock awards are granted at the discretion of the Company's Board of Directors, therefore, the type and number of awards previously issued may not be indicative of those to be granted in future periods. Note 11. Income Taxes Except for the effects of the reversal of net deductible temporary differences, the Company is not aware of any factors which would cause any significant differences between book and taxable income in future years. Although there can be no assurances that the Company will generate any earnings or specific level of continuing earnings in future periods, management believes that it is more likely than not that the net deductible differences will reverse during periods when the Company generates sufficient net taxable income. Income before income taxes, as shown in the accompanying consolidated statements of income, includes the following components:
- ----------------------------------------------------------------------------- Year Ended July 31, 2000 1999 1998 - ----------------------------------------------------------------------------- (Dollars in thousands) Domestic $54,914 $35,133 $49,084 Foreign 35,297 31,231 16,732 ------- ------- ------- Income before income taxes $90,211 $66,364 $65,816 ======= ======= =======
Taxes on income, as shown in the accompanying consolidated statements of income, include the following components:
- ----------------------------------------------------------------------------- Year Ended July 31, 2000 1999 1998 - ----------------------------------------------------------------------------- (Dollars in thousands) Current provision: Federal $16,154 $13,893 $16,080 State 3,541 2,381 3,533 Foreign 12,279 9,622 3,892 ------- ------- ------- Total current provision 31,974 25,896 23,505 Deferred provision (benefit): Domestic 2,607 (1,353) 153 Foreign 710 2,180 1,677 ------- ------- ------- Total deferred provision 3,317 827 1,830 ------- ------- ------- Income tax provision $35,291 $26,723 $25,335 ======= ======= =======
33 Notes to Consolidated Financial Statements Cable Design Technologies Corporation and Subsidiaries The effective rate differs from the statutory rate for the following reasons:
- ----------------------------------------------------------------------------------------------------------- Year Ended July 31, 2000 1999 1998 - ----------------------------------------------------------------------------------------------------------- (Dollars in thousands) Tax provision based on the U.S. federal statutory tax rate $31,574 $23,227 $23,035 State income taxes, net of federal income tax benefit 2,302 1,548 2,296 Research and development tax credit (Canada) (224) (302) (877) Foreign tax rates different from U.S. federal statutory rate 857 1,127 586 Permanent items 584 829 169 All other, net 198 294 126 ------- ------- ------- Income tax provision $35,291 $26,723 $25,335 ======= ======= =======
The components of the deferred tax assets and liabilities recorded in the accompanying consolidated balance sheets at July 31, 2000 and 1999, which include net deferred tax liabilities recorded in connection with acquisitions and reflect reclassifications as a result of finalization of purchase accounting under APB 16, were as follows:
- ----------------------------------------------------------------------------------------------------------- July 31, 2000 1999 - ----------------------------------------------------------------------------------------------------------- (Dollars in thousands) Deferred Tax Assets: Accruals $ 4,989 $ 5,222 Postretirement and pension accruals 2,822 2,246 Asset valuations 6,624 4,979 Uniform cost capitalization 1,050 1,167 Other 180 1,322 -------- -------- Total deferred tax assets $ 15,665 $ 14,936 -------- -------- Deferred Tax Liabilities: Excess of book basis over tax basis of fixed assets $(27,164) $(22,042) Other (73) (360) -------- -------- Total deferred tax liabilities (27,237) (22,402) -------- -------- Net deferred taxes before valuation allowance (11,572) (7,466) Valuation allowance (foreign NOL) -- (217) -------- -------- Net deferred tax liability $(11,572) $ (7,683) ======== ======== Reconciliation to the consolidated balance sheets - Current deferred tax asset, net $ 11,834 $ 10,926 Non-current deferred tax liability, net (23,406) (18,609) -------- -------- Net deferred tax liability $(11,572) $ (7,683) ======== ========
34 Notes to Consolidated Financial Statements Cable Design Technologies Corporation and Subsidiaries Note 12. Net Income Per Share of Common Stock Basic net income per share of common stock is computed by dividing net income by the weighted average number of shares of common stock outstanding. Diluted net income per share of common stock is computed based on the weighted average common shares outstanding plus incremental common stock equivalent shares (shares issuable upon exercise of options). Incremental common stock equivalent shares are calculated for each measurement period based on the treasury stock method, under which the repurchases are assumed to be made at the average fair market value price per share of the Company's common stock during the period. The following table sets forth the computation of basic and diluted earnings per share:
- -------------------------------------------------------------------------------------------------------------------- Year Ended July 31, 2000 1999 1998 - -------------------------------------------------------------------------------------------------------------------- (Dollars in thousands, except per share data) Numerator: Net income $ 54,920 $ 39,641 $ 40,481 Denominator: Denominator for basic earnings per share 42,665,123 43,175,804 43,500,741 Shares issuable from assumed conversion of dilutive stock options 1,421,076 517,012 3,481,473 ----------- ----------- ----------- Denominator for diluted earnings per share 44,086,199 43,692,816 46,982,214 Basic earnings per common share $ 1.29 $ 0.92 $ 0.93 Diluted earnings per common share $ 1.25 $ 0.91 $ 0.86
Options to purchase 247,500 and 2,843,963 shares of common stock were outstanding during fiscal 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. Note 13. Acquisitions On August 3, 1998, the Company acquired an 80% interest in HEW-Kabel Heinz Eilentropp GmbH & Co. KG, and related entities, ("HEW/CDT") located in Wipperfurth, Germany. The acquisition was accounted for using the purchase method under APB Opinion No. 16 and the assets and liabilities assumed were as follows:
- -------------------------------------------------------------------------------------------------------------------- HEW/CDT - -------------------------------------------------------------------------------------------------------------------- (Dollars in thousands) Assets acquired, net of cash $ 67,458 Liabilities assumed (22,980) Notes issued (10,307) -------- Net cash paid $ 34,171 ========
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. On February 24, 2000, the Company purchased 85% of the outstanding stock of Industria Tecnica Cavi S.R.L. ("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. 35 Notes to Consolidated Financial Statements Cable Design Technologies Corporation and Subsidiaries On March 12, 1999 the Company acquired the outstanding stock of the Tennecast Company ("Tennecast/CDT") of Barberton, Ohio, a manufacturer of precision aluminum tire castings and computer designed and machined mold models utilized for tire castings. On September 25, 1998, the Company acquired the assets of Network Essentials, Inc., ("Red Hawk/CDT") based in Milpitas, California, a provider of fiber optic products for voice, video and data networks. On March 17, 1998, the Company acquired the outstanding stock of Orebro Kabel AB ("Orebro/CDT") of Orebro, Sweden. Orebro/CDT is a manufacturer of custom designed wire and cable for wireless communication, robotics and other industries. On September 10, 1997, the Company acquired the outstanding stock of Barcel Acquisition Corporation, and its subsidiaries, ("Barcel/CDT") based in Irvine, California. Barcel/CDT is a manufacturer of high performance specialty wire and cable for the commercial aerospace, military and satellite industries. The acquisitions of BoseLAN/CDT, ITC/CDT, Tennecast/CDT, Red Hawk/CDT, Barcel/CDT, and Orebro/CDT were accounted for under the purchase method of accounting. Under the purchase method, the Company allocates the purchase price based on the estimated fair market value of the assets and liabilities acquired. Note 14. Industry and Geographic Segment Information The Company's operations are organized into two business segments: the Network Communication segment and the Specialty Electronic segment. The Network Communication segment 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, passive and active 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 cable products that are used in automation and process control applications as well as specialized wire and cable products for niche markets, including commercial aviation and automotive electronics. The accounting policies of the reportable segments are the same as those described in "Significant Accounting Policies" (Note 2). The Company evaluates segment performance based on operating profit excluding nonrecurring income and expense, after allocation of Corporate expenses. Corporate assets, which primarily consist of cash, deferred income taxes and other deferred costs, are immaterial and are allocated to the operating segments. 36 Notes to Consolidated Financial Statements Cable Design Technologies Corporation and Subsidiaries The Company has no inter-segment revenues. Summarized financial information for the Company's operating segments for the years ended July 31, is as follows:
- -------------------------------------------------------------------------------------------------- Network Specialty Communication Electronic Segment Segment Total - -------------------------------------------------------------------------------------------------- (Dollars in thousands) Sales: 2000 $545,021 $252,803 $797,824 1999 446,580 237,419 683,999 1998 458,506 193,162 651,668 Depreciation and amortization expense: 2000 13,697 7,752 21,449 1999 11,535 7,295 18,830 1998 9,812 4,233 14,045 Segment operating profit: 2000 62,191 40,964 103,155 1999 50,264 35,206 85,470 1998 55,121 24,426 79,547 Total assets: 2000 376,966 238,387 615,353 1999 359,910 235,190 595,100 1998 335,824 169,603 505,427 Capital expenditures: 2000 16,003 6,025 22,028 1999 18,943 6,319 25,262 1998 37,132 12,116 49,248
The following summarizes external sales to customers and long-lived assets located in the Company's country of domicile and certain foreign countries: - -------------------------------------------------------------------------------------------------- July 31, 2000 1999 1998 - -------------------------------------------------------------------------------------------------- (Dollars in thousands) Sales: United States $497,319 $410,744 $426,337 Canada 121,882 117,994 119,087 Other 178,623 155,261 106,244 -------- -------- -------- Total $797,824 $683,999 $651,668 ======== ======== ======== Long-lived assets: United States $ 77,832 $ 75,304 $ 71,519 Canada 74,160 71,815 64,927 Germany 27,086 30,677 -- Other 29,323 26,326 26,178 -------- -------- -------- Total $208,401 $204,122 $162,624 ======== ======== ========
37 Notes to Consolidated Financial Statements Cable Design Technologies Corporation and Subsidiaries Note 15. Lease Commitments Rental expense under noncancelable leases was approximately $5.3 million, $5.0 million and $5.4 million for the years ended July 31, 2000, 1999 and 1998, respectively. Operating leases relate principally to manufacturing, warehouse and office space. Minimum annual rents payable under noncancelable leases in each of the next five years and thereafter are as follows:
- ----------------------------------------------------------------------------- Year Ended July 31, Total - ----------------------------------------------------------------------------- (Dollars in thousands) 2001 $ 5,516 2002 4,206 2003 3,469 2004 2,380 2005 1,536 Thereafter 637 ------- Total future minimum lease payments $17,744 =======
Note 16. Commitments and Contingencies Certain claims have been asserted against the Company in connection with patent and trademark matters. In management's opinion, any liability that might be incurred in connection with these claims would not have a material effect upon the Company's financial position, or results of operations or cash flows. As of July 31, 2000, the Company had outstanding letters of credit of $3.1 million in connection with the purchase of ITC/CDT (see Note 13), and $0.8 million under its workers' compensation policy. The Company also maintains a $1.2 million bond in connection with workers' compensation self-insurance in the state of Massachusetts. Note 17. Related Party Transactions In the normal course of business the Company enters into transactions for the purchase of materials, equipment and services with entities that are affiliated with or owned by an officer/stockholder. Such transactions totaled $0.9 million, $1.2 million and $1.1 million for the years ended July 31, 2000, 1999 and 1998, respectively. During fiscal 1999 and 1998 the Company had an agreement to pay management fees to each of two beneficial stockholders. Selling, general and administrative expenses include $100,000 in 1999 and 1998 for fees paid under this agreement. Note 18. Nature of Business and Disclosures About Fair Value of Financial Instruments Concentrations of credit risk with respect to trade receivables are limited due to the Company's wide variety of customers and the many markets into which the Company's products are sold, as well as the many different geographic areas in which such customers and markets are located. As a result, at July 31, 2000, the Company does not believe it has any significant concentrations of credit risk. The fair values and carrying amounts of the Company's financial instruments, primarily accounts receivable and debt, are approximately equivalent. The debt instruments bear interest at floating rates which are based upon market rates or fixed rates which approximate market rates. All other financial instruments are classified as current and will be utilized within the next operating cycle. 38 Notes to Consolidated Financial Statements Cable Design Technologies Corporation and Subsidiaries Note 19. Nonrecurring Income and Expense During fiscal 1999, the Company purchased 2,394,078 shares of common stock held by certain key employees. The stock was acquired by the employees more than six months previously upon the exercise of incentive stock options granted primarily in 1988 and 1989 and expiring in 1998 and 1999. In connection with the purchase of this stock, the Company incurred a $6.3 million nonrecurring charge representing incentive payments which were made to partially compensate the employees for the difference between the income tax rates for ordinary income and for long term capital gains. As a result of this transaction, the Company received a cash benefit of approximately $12.8 million realized through the reduction of income taxes payable. Also in fiscal 1999, the Company realized a nonrecurring gain of $1.1 million on the sale of certain assets related to the discontinued DynaTraX(TM) product line. A nonrecurring charge of $6.1 million was incurred in fiscal 1998 to provide for costs related to the discontinuance of the DynaTraX(TM) product line and other restructuring activities at NORDX/CDT. These costs primarily represented asset valuation provisions and employee separation costs. The Company recognized $0.2 million and $0.3 million of nonrecurring income in fiscal 2000 and 1999, respectively, upon revision of estimates of the remaining costs to be incurred in connection with these activities. As of July 31, 2000, no amounts remain to be paid. Note 20. Quarterly Financial Information (unaudited) Quarterly financial data are summarized as follows:
- ---------------------------------------------------------------------------------------------------------------------- Fiscal Year 2000 First Second Third Fourth - ---------------------------------------------------------------------------------------------------------------------- (Dollars in thousands, except per share data) Sales $187,622 $178,179 $204,900 $227,123 Gross profit 56,286 50,465 58,969 68,125 Income from operations 25,150 20,721 26,183 31,290/1/ Net income 12,984 10,423 14,017 17,496/2/ Per share information: Basic earnings per common share $ 0.31 $ 0.25 $ 0.33 $ 0.40 Diluted earnings per common share $ 0.30 $ 0.24 $ 0.32 $ 0.39/2/
/1/ Includes $0.2 million of nonrecurring income (see Note 19). /2/ Excluding nonrecurring income (see Note 19), net income was $17.4 million, or $0.39 per diluted share.
- ---------------------------------------------------------------------------------------------------------------------- Fiscal Year 1999 First Second Third Fourth - ---------------------------------------------------------------------------------------------------------------------- (Dollars in thousands, except per share data) Sales $173,624 $160,896 $165,611 $183,868 Gross profit 53,741 46,866 46,521 57,402 Income from operations 24,070 12,118/1/ 18,677/1/ 25,710/1/ Net income 12,364 4,806/2/ 8,883/2/ 13,588/2/ Per share information: Basic earnings per common share $ 0.27 $ 0.11 $ 0.21 $ 0.32 Diluted earnings per common share $ 0.27 $ 0.11/2/ $ 0.21/2/ $ 0.32/2/
/1/ Includes $6.3 million of nonrecurring expense, $1.1 million of nonrecurring income, and $0.3 million of nonrecurring income in the second, third and fourth quarters, respectively (see Note 19). /2/ Excluding nonrecurring items (see Note 19), net income was $9.0 million, or $0.21 per diluted share, $8.1 million, or $0.19 per diluted share and $13.4 million, or $0.31 per diluted share for the second, third and fourth quarters, respectively. 39 Selected Historical Consolidated Financial Data Cable Design Technologies Corporation and Subsidiaries
- -------------------------------------------------------------------------------------------------------------------------------- For the Year Ended July 31, 2000 1999 1998 1997 1996 - -------------------------------------------------------------------------------------------------------------------------------- (In thousands, except per share data) Income Statement Data: Sales $797,824 $683,999 $651,668 $516,996 $357,352 Income from operations 103,344/1/ 80,575/2/ 73,454/2/ 62,602 31,527/2/ Income before extraordinary items 54,920 39,641 40,481 36,035 15,881 Extraordinary loss on early extinguishment of debt -- -- -- -- (596) Net income 54,920/3/ 39,641/3/ 40,481/3/ 36,035 15,285/3/ Net Income Per Share of Common Stock: Basic 1.29 0.92 0.93 0.87 0.43 Diluted 1.25/3/ 0.91/3/ 0.86/3/ 0.78 0.36/3/ Weighted Average Shares Outstanding: Basic 42,665 43,176 43,501 41,397 35,949 Diluted 44,086 43,693 46,982 46,332 41,910 - -------------------------------------------------------------------------------------------------------------------------------- As of July 31, 2000 1999 1998 1997 1996 - -------------------------------------------------------------------------------------------------------------------------------- Balance Sheet Data: Total assets $615,353 $595,100 $505,427 $429,499 $320,105 Long-term debt 153,336 171,727 136,052 126,661 71,384
/1/ Includes $0.2 million of nonrecurring income in fiscal 2000. /2/ Includes $4.9, $6.1 and $16.7 million of nonrecurring charges in fiscal 1999, 1998 and 1996, respectively. /3/ Excluding nonrecurring and extraordinary items, net income was $54.8, $42.9, $44.4 and $26.4 million in fiscal 2000, 1999, 1998 and 1996, respectively, and net income per diluted share was $1.24, $0.98, $0.95 and $0.63 in fiscal 2000, 1999, 1998 and 1996, respectively. 40 Directors, Officers and Corporate Information Cable Design Technologies Corporation and Subsidiaries Directors Lance Balk Partner, Kirkland & Ellis Bryan C. Cressey* Partner, Thoma Cressey Equity Partners George C. Graeber Chief Operating Officer, Cable Design Technologies Corporation Michael F. O. Harris Managing Director, The Northern Group Glenn Kalnasy Managing Director, The Northern Group Ferdinand Kuznik President of Motorola Europe, Middle East and Africa Paul M. Olson President and Chief Executive Officer, Cable Design Technologies Corporation Richard C. Tuttle Principal, Prospect Partners *Chairman of the Board of Directors, Cable Design Technologies Corporation Director Emeritus Myron S. Gelbach Jr. Independent Financial Consultant Executive and Corporate Officers Paul M. Olson President and Chief Executive Officer George C. Graeber Chief Operating Officer Michael A. Dudley Executive Vice President President, CDT International Normand R. Bourque Executive Vice President President, NORDX/CDT Peter Sheehan Executive Vice President Ian Mack Group President, Europe David R. Harden Senior Vice President President, West Penn/CDT Kenneth O. Hale Vice President Chief Financial Officer Charles B. Fromm Vice President General Counsel and Secretary Annual Meeting Wednesday, December 6, 2000 10:00 A.M. (Eastern Time) DoubleTree Hotel Pittsburgh 1000 Penn Avenue Pittsburgh, Pennsylvania 15222 A copy of the Company's annual report to the Securities and Exchange Commission on Form 10-K for fiscal 2000 is available without charge to stockholders upon written request to Investor Relations at the Company's headquarters. Stock Transfer Agent & Registrar Questions regarding stock certificates, replacement of lost certificates, address changes, account consolidation and transfer procedures should be addressed to: Fleet National Bank c/o EquiServe Limited Partnership P.O. Box 8040 Boston, Massachusetts 02266 (781) 575-3120 Allow three weeks for a reply. Inquiries Cable Design Technologies Corporation welcomes questions and comments from its stockholders, potential investors, financial professionals, institutional investors and security analysts. Interested parties should contact Investor Relations at the Company's headquarters by telephone at (412) 937-2300. CDT maintains a Web site on the Internet at http://www.cdtc.com Common Stock The Company's common stock is listed on the New York Stock Exchange under the ticker symbol "CDT." The following table sets forth the high and low sales price per share of the common stock during the applicable fiscal quarters indicated. The Company did not pay cash dividends on the common stock during the periods set forth.
Fiscal 2000 - ----------------------------------------------------------------------------- High Low - ----------------------------------------------------------------------------- First 15 15/16 11 1/16 Second 18 11/16 13 3/16 Third 22 7/8 15 3/8 Fourth 25 13/16 17 1/2 Fiscal 1999 - ----------------------------------------------------------------------------- High Low - ----------------------------------------------------------------------------- First 14 1/16 6 3/8 Second 16 9/16 11 Third 12 11/16 7 5/16 Fourth 12 15/16 8 3/8
41 EX-21.1 6 0006.txt LIST OF SUBSIDIARIES Exhibit 21.1 CABLE DESIGN TECHNOLOGIES CORPORATION SUBSIDIARIES OF THE REGISTRANT Anglo-American Cables Limited (Incorporated - United Kingdom) Barcel Wire & Cable Corp. (Incorporated - California) Cable Design Technologies, Inc. (Incorporated - State of Washington) CDT (Deutschland) GMBH (Incorporated - Germany) CDT International Holdings Inc. (Incorporated - Delaware) CDT Italia, S.R.L. (Incorporated - Italy) Industria Tecnica Cavi S.R.L. (Incorporated - Italy, 85% ownership) Cekan/CDT A/S (Incorporated - Denmark) Dearborn/CDT, Inc. (Incorporated - Delaware) Hamilton USA, Inc. (d/b/a BoseLAN/CDT) (Incorporated - California) HEW-Kabel/CDT GmbH & Co. KG (German Partnership, 80% ownership) HEW-Kabel/CDT Verwaltungs GMBH (Incorporated - Germany) HEW Skandinaviska AB (Incorporated - Sweden) NEK Kabel AB (Incorporated - Sweden) Network Essentials, Inc. (d/b/a Red Hawk/CDT) (Incorporated - Delaware) NORDX/CDT Australia Pty Limited (Incorporated - Australia) NORDX/CDT Asia Limited (Incorporated - Hong Kong) NORDX/CDT, Corp. (Incorporated - Delaware) NORDX/CDT do Brasil Ltda (Incorporated - Brazil) NORDX/CDT, Limited (Incorporated - United Kingdom) NORDX/CDT, Inc. (Incorporated - Canada) NORDX/CDT - IP Corp. (Incorporated - Delaware) NorLAN/CDT, Inc. (Incorporated - Canada) Noslo Limited (Incorporated - United Kingdom) Orebro Kabel AB (Incorporated - Sweden) Raydex/CDT Limited (Incorporated - United Kingdom) SKL, S.A.S. (Incorporated - France, joint venture) Stronglink/CDT Pty. Ltd. (Incorporated - Australia, 76% ownership) Tennecast Company (Incorporated - Ohio) Thermax/CDT, Inc. (Incorporated - Delaware) Wire Group International, Limited (Incorporated - United Kingdom) X-Mark/CDT Inc. (Incorporated - Pennsylvania)
EX-23.1 7 0007.txt CONSENT OF ARTHUR ANDERSEN LLP Exhibit 23.1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANT As independent public accountants, we hereby consent to the incorporation by reference in this Form 10-K of our report dated September 15, 2000, included in Cable Design Technologies Corporation and Subsidiaries' annual report for the year ended July 31, 2000. It should be noted that we have not audited any financial statements of the Company subsequent to July 31, 2000 or performed any audit procedures subsequent to the date of our report. We also consent to the incorporation of our reports, incorporated by reference in this Form 10-K, into the Company's previously filed Form S-8 Registration Statements File No. 333- 80229, File No. 333-76351, File No. 33-78418, File No. 33-73272, File No. 333- 02450, File No. 333-06743, and File No. 333-17443 and Form S-3 Registration Statement File No. 333-00554. /s/ ARTHUR ANDERSEN LLP Pittsburgh, Pennsylvania October 25, 2000 EX-27.1 8 0008.txt FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED JULY 31, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 YEAR JUL-31-2000 AUG-01-1999 JUL-31-2000 16,454 0 151,897 6,180 145,015 326,160 275,781 69,901 615,353 109,450 0 0 0 316 316,228 615,353 797,824 797,824 563,979 694,480 1,363 0 11,770 90,211 35,291 54,920 0 0 0 54,920 1.29 1.25
-----END PRIVACY-ENHANCED MESSAGE-----