-----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, MMpVQk/GEBiCQnc92zZee4RAF6Os+fRBDOhNrpZtWdp93+ViqdHlacwYNxbY4eW3 R6SdoHzNMeZuZ5EQH7gkEA== 0000950130-97-004652.txt : 19971029 0000950130-97-004652.hdr.sgml : 19971029 ACCESSION NUMBER: 0000950130-97-004652 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19970731 FILED AS OF DATE: 19971028 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CABLE DESIGN TECHNOLOGIES CORP CENTRAL INDEX KEY: 0000913142 STANDARD INDUSTRIAL CLASSIFICATION: DRAWING AND INSULATING NONFERROUS WIRE [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: 97702052 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 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, 1997 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 will 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. [_] Exhibit Index on Page 14 Page 1 of 79 ---------- ---- ================================================================================ The aggregate market value of the registrant's voting stock held by non- affiliates of the registrant at October 14, 1997, is $612,170,460. The number of shares outstanding of the registrant's Common Stock at October 14, 1997, is 18,861,417. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Cable Design Technologies Corporation Proxy Statement for the Annual Meeting of Stockholders to be held on December 9, 1997, (the "Proxy Statement") are incorporated by reference into Part III. Portions of the 1997 Cable Design Technologies Corporation Annual Report to Stockholders (the "1997 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......................................... 8 Item 3. Legal Proceedings.................................. 9 Item 4. Submission of Matters to a Vote of Security Holders 11 Item 4.1. Executive Officers of the Registrant............... 11 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 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 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 FACTS 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 THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THE COMPANY'S EXPECTATIONS ("CAUTIONARY STATEMENTS") ARE DISCLOSED IN THIS REPORT AND THE DOCUMENTS INCORPORATED BY REFERENCE HEREIN, INCLUDING WITHOUT LIMITATION IN CONJUNCTION WITH THE FORWARD-LOOKING STATEMENTS INCLUDED IN THIS REPORT AND UNDER "RISK FACTORS." 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. PART I. ITEM 1. BUSINESS (a). GENERAL DESCRIPTION OF BUSINESS Cable Design Technologies Corporation (the "Company", the "Registrant" or "CDT") was incorporated on May 18, 1988 under the laws of the State of Delaware with its principal office located at 661 Andersen Drive, Pittsburgh, Pennsylvania 15220 (Telephone: 412-937-2300). CDT is a designer and manufacturer of specialty electronic data transmission cables and network structured wiring systems. CDT products include high performance copper, fiber optic, and composite cable constructions, connectors and component assemblies that are used in network, communications, computer interconnect, wireless, commercial aviation, automotive, automation sound & safety, and other applications. The Company, as it exists today, was incorporated on May 18, 1988, but was conceived in 1985 by its current President and Chief Executive Officer, Paul Olson, together with other members of current management, shortly after acquiring the West Penn Wire Corporation ("West Penn/CDT"). In 1988, the Company underwent a recapitalization pursuant to which Golder, Thoma, Cressey Fund II purchased a controlling interest in the Company. On July 14, 1988, the Company acquired all of the outstanding capital stock of Cable Design Technologies Inc. (formerly Intercole Inc.). Acquisitions have been an important part of CDT's strategy. In March 1986, the Company acquired Mohawk Wire & Cable Corporation ("Mohawk/CDT") , a cable manufacturer with established relationships with companies involved in the early stages of computer cable network development. In December 1988, the Company purchased Montrose Products Company ("Montrose/CDT"), a specialty electronic cable company with established relationships with IBM and other major purchasers of computer interconnect products. In August 1990, the Company established CDT International to respond to increasing demand for data transmission cable products in international markets. In May 1991, the Company expanded its international presence by purchasing Anglo-American Cables Ltd. ("Anglo/CDT"), a European cable distributor. In March 1993, the Company established Phalo/CDT to further increase its production capabilities and broaden its product line. In May 1994, the Company -2- acquired all the outstanding stock of Nya NEK Kabel AB ("NEK/CDT"), located near Gothenburg, Sweden, to enter the sophisticated broadcast, CATV and antenna cable markets and to expand network systems cable manufacturing capacity into Europe. In June 1995, the Company purchased all of the operating assets of Manhattan Electric Cable Corporation ("Manhattan/CDT") based in Rye, New York to enhance sales of specialty electronic cables for industrial automation and robotic applications. In August 1995, the Company purchased Cole-Flex Corporation of West Babylon, New York to combine its sleeving and tubing capabilities with Manhattan/CDT. In September 1995, the Company purchased the operating assets of the Raydex Division of Volex Group, p.l.c. ("Raydex/CDT") (United Kingdom) to provide additional international manufacturing capabilities of specialty and high performance electronic cables for computer network systems, telecommunications, aerospace, CATV, and industrial applications. Effective February 2, 1996, the Company acquired the assets of Northern Telecom Limited's ("Nortel") communications cable and IBDN network structured wiring products businesses ("NORDX/CDT") (Canada). On June 4, 1996, the Company acquired the stock of Cekan A/S ("Cekan/CDT") (Denmark), a manufacturer of high performance, telecommunications connectors. On July 25, 1996, the Company acquired, in exchange for shares of its common stock, X-Mark Industries ("X-Mark/CDT") (Washington, PA), a manufacturer of specialized metal enclosures for network systems. On March 14, 1997 the Company acquired 51% of the outstanding stock of Stronglink, Pty. Ltd. ("Stronglink/CDT") (Australia), to enhance international distribution of network and specialty cables in the Australian marketplace. On April 7, 1997, the Company acquired the assets of Dearborn Wire & Cable, L.P. and its affiliates, Dearborn West, L.P. and Thermax Wire, L.P. (collectively, "Dearborn/CDT"), a manufacturer of specialty electronic cables for instrumentation and control, commercial aviation, automotive and marine applications, and component assemblies for wireless applications. Subsequently, in September 1997, the Company acquired all the outstanding stock of Barcel Acquisition Corporation ("Barcel/CDT") of Irvine, California, a manufacturer of high performance specialty cable for commercial and military aviation applications. (b). PRODUCTS The markets served by the Company principally involve specialty cables and network structured wiring components for computer local area networks ("LANS") and wide area networks ("WANS"), communications, computer interconnect, wireless, commercial aviation, automotive, automation sound & safety, and other applications. Network Structured Wiring - This product group encompasses the cables, ------------------------- connectors, wiring racks and panels, outlets and interconnecting hardware to complete the end-to-end network system requirements of LANS and WANS. Additional capital expenditures and acquisitions over the last three years have greatly increased the Company's capacity in this product area. Sales of network structured wiring products were $253.4 million, $187.0 million, and $102.4 million in fiscal 1997, 1996, and 1995, respectively. Sales of these products represented approximately 49%, 52% and 54% of the Company's total sales for the fiscal years 1997, 1996 and 1995, respectively. Automation Sound & Safety - Automation sound & safety encompasses three ------------------------- distinct applications for data and signal transmission cables. Automation applications include climate control, premise video distribution and sophisticated security and signal systems involving motion detection, electronic card and video surveillance technologies. Sound includes voice activation, evacuation and other similar systems and safety refers to certain attributes of data transmission cable that improve the safety and performance of such cable under hazardous conditions, particularly in buildings for advanced fire alarm and safety systems. -3- The Company's sales in this market were $71.4, $68.7, and $47.2 million in fiscal 1997, 1996 and 1995, respectively. Sales of these products represented 14%, 19% and 25% of the Company's total sales in fiscal 1997, 1996 and 1995, respectively. Computer Interconnect - Computer interconnect refers to a family of data --------------------- transmission cables used to internally connect components of computers, telecommunication switching and related electronic equipment, and to externally connect large and small computers to a variety of peripheral devices. Sales of these products were $22.9, $18.8 and $22.9 million for fiscal 1997, 1996 and 1995, respectively. Sales of these products represented approximately 4%, 5% and 12% of the Company's total sales for fiscal 1997, 1996 and 1995, respectively. Communications - Through the acquisition of NORDX/CDT in fiscal 1996, the -------------- Company entered the market for outside communications, switchboard and equipment cable. This product group is primarily manufactured by its NORCOM/CDT facility in Kingston, Ontario, which is the largest communications cable operation in Canada. Sales of this product group were $94.1 million for fiscal 1997, and $49.4 million for the six month post-acquisition period in fiscal 1996, and represented approximately 18% and 14% of the Company's total sales for fiscal 1997 and 1996, respectively. Other - The Company also manufactures products for a variety of other ----- electronic wire and cable applications and markets, including instrumentation and process control, commercial aviation and marine, automotive electronics, broadcast, wireless component assemblies, CATV, microwave antenna, medical electronics, electronic testing equipment, robotics, electronically controlled factory equipment, copiers, home entertainment and appliances. A business unrelated to the Company's core business manufactures precision molds used by major tire manufacturers. (c). RAW MATERIALS The principal raw materials used by CDT 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 domestic suppliers. Price terms are generally producers' prices at time of shipment. The Company generally does not engage in hedging transactions for the purchase of copper. Currently, world stocks of and capacity for copper are adequate to meet the Company's requirements. CDT purchases insulating compounds, including Teflon/(R)/, from various suppliers. The inability of one of such suppliers to supply such insulating material could have an adverse effect on CDT's business until a replacement supplier is found or substitute materials are approved for use. Other raw materials used by CDT include LEXAN/(R)/, optical fiber, reels, tapes, textiles, chemicals and other materials. Currently, supplies of these other raw materials are adequate to meet the Company's needs and are expected to remain so for the foreseeable future. (d). CUSTOMERS The Company sells its products directly to original equipment manufacturers (OEMs), regional Bell operating companies, certified system vendors, and established distributors. The Company supports over 9,500 customers. No single customer accounted for more than 10% of sales in fiscal 1997, 1996 or 1995, except that sales to business units of Bell Canada Enterprises represented approximately 11% of fiscal 1997 and 1996 sales. -4- (e). COMPETITION The specialty electronic data transmission cable market is highly competitive. Although some of the Company's competitors are substantially larger and have greater resources than the Company, management believes that it competes successfully in its markets due to its experienced management team, large sales force, established reputation, large number of customer approved specifications and emphasis on quality. The principal competitive factors in all product markets are availability, customer support, distribution strength, price and product features. The relative importance of each of these factors varies depending on the specific product category. As products mature, competitive forces often tend to make the products more of a commodity and subject to greater price competition. In the market for computer network structured wiring products, the Company competes with a large number of competitors, several of which are significantly larger than the Company. The Company competes in the network structured wiring market by adapting to shifting customer demand for new products, and in the case of NORDX/CDT, by offering complete, certified network structured wiring systems. Product price and engineering capabilities are principal factors which affect competition in the computer interconnect market. In the automation sound & safety market, the Company competes against a relatively large number of companies, most of which are smaller in size than the Company. Product prices, company reputation and product integrity are principal factors which affect competition in the automation sound & safety market. In the markets for communications, switchboard and equipment cable, price, reputation, production quality and availability are principal competitive factors. (f). BACKLOG Backlog orders believed to be firm were $62.2 million at July 31, 1997, compared to $45.6 million at July 31, 1996. The Company believes that substantially all of the backlog is shippable within the next twelve months. Generally, customers may cancel orders for standard cable products without penalty upon thirty days notice. (g). ENVIRONMENTAL MATTERS The Company is 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 (CERCLA), 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 the Company 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 the Company believes it is in substantial compliance with such laws and regulations, the Company may from time to time not be in full compliance and may be subject to fines or other penalties for noncompliance. The Company does not currently anticipate any material adverse effect on its 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 the Company's business, and there can be no assurance that material environmental costs will not arise in the future. Moreover, it is possible that future developments, such as increasingly strict requirements of air emission control and other environmental laws and enforcement -5- policies thereunder, could lead to material costs of environmental compliance and cleanup by the Company. (h). EMPLOYEES As of July 31, 1997, the Company had approximately 2,900 full time employees, of which approximately 1,300 were represented by labor unions. The Company has not experienced any work stoppages at its plants and believes its current relations with its employees are good, however, there can be no assurance that conflicts will not arise with unions or other employee groups or that such conflicts would not have a material adverse effect on the Company's business. (i). FOREIGN OPERATIONS For information regarding the Company's foreign and domestic operations and export sales, see Note #14, "Geographic Segments and Export Sales" as presented in the Company's Notes to Consolidated Financial Statements. (j). RESEARCH AND DEVELOPMENT For information concerning expenditures on research and development activities, see Note #2, "Significant Accounting Policies," as presented in the Company's Notes to Consolidated Financial Statements. (k). RISK FACTORS Ability to Successfully Integrate Acquisitions. Although the Company has been successful in integrating previous acquisitions, no assurance can be given that it will continue to be successful in integrating future acquisitions. The integration and consolidation of acquired businesses will require substantial management, financial and other resources and may pose risks with respect to production, customer service and market share. While the Company believes that it has sufficient financial and management resources to accomplish such integration, there can be no assurance in this regard or that the Company will not experience difficulties with customers, personnel or others. In addition, although the Company believes that its acquisitions will enhance the competitive position and business prospects of the Company, there can be no assurance that such benefits will be realized or that any combination will be successful. Technological Obsolescence. Many of the markets that the Company serves are characterized by rapid technological change. The Company believes that its future success will depend in part upon its ability to enhance existing products and to develop and manufacture 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 the Company's business. -6- Fiber optic technology represents a potential substitute for copper-based cable products. A significant decrease in the cost of fiber optic systems could make such systems superior on a price performance basis to copper systems and may have a material adverse effect on the Company's business. To date, fiber optic cables have not significantly penetrated the markets served by the Company due to the high relative cost required to interface electronic and light signals and the high cost of fiber termination and connection. Although the Company is a fiber optic cable supplier in niche, specialty markets, there can be no assurance that the Company will have sufficient production capacity for fiber optic cable products in order to adapt to a potential significant increase in demand for fiber optic cable products. Wireless network communications technology may represent a threat to both copper and fiber optic-based systems by reducing the need for premise wiring. The Company believes that the limited signal security and the relatively slow transmission speeds of current wireless systems restrict the use of such systems in many data communication markets. However, there can be no assurance that future advances in wireless technology will not have a material adverse effect on the Company's business. Products have recently been introduced by other companies that electronically expand cable bandwidth. The Company does not sell nor does it intend to sell such products. By enhancing cable performance, these products allow expanded data services without upgrading existing cable. These devices are being sold primarily to telephone companies to enhance local loop and central office cable performance, eliminating costly replacement of aerial and/or direct burial telephone cable. The Company believes that the complexity these systems add to the maintenance and repair of a communications network limits their attractiveness to users and consequently limits their effect on the Company's business. There can be no assurance, however, that potential advances in electronic cable enhancement will not have a material adverse effect on the Company's business. Price Fluctuations of Raw Materials. Copper is the principal raw material purchased by the Company, and the Company's sales may be affected by the market price of copper. The Company does not generally engage in hedging transactions for copper. Although the Company has generally been able to pass on increases in the price of copper to its customers, there can be no assurance that the Company will be able to do so in the future. Additionally, significant increases in the price of the Company's products due to increases in the cost of copper could have a negative effect on demand for the Company's products. Similarly, significant decreases in the price of copper over time could have a material adverse effect on the Company's business. Potential Unavailability of Raw Materials. The Company purchases insulating compounds from various suppliers. The inability of one such supplier to supply such raw materials could have a material adverse effect on the Company's business until a replacement supplier is found or substitute materials are approved for use. The Company's supplier of Teflon/(R)/ FEP is currently operating at capacity and is unable to fully meet the Teflon/(R)/ FEP requirements of the Company and the supplier's other customers. The supplier has announced plans to expand its Teflon/(R)/ FEP production facilities. The Company believes that the current tight supply of Teflon/(R)/ FEP will be mitigated by mid 1998 if the supplier's production capacity is increased in accordance with the supplier's announcement. There can be no assurance, however, that the tight supply of Teflon/(R)/ FEP will be mitigated as anticipated. Integrated Building Distribution Network ("IBDN") structured wiring plastic components manufactured by NORDX/CDT require the use of LEXAN/(R)/ plastic. From time to time in the past, there have been periods when LEXAN/(R)/ has been in short supply. A future shortage of LEXAN/(R)/ could have a material adverse effect on NORDX/CDT's IBDN business. See "Business -- Raw Materials." Foreign Currency Fluctuations. The Company's operations may be adversely affected by significant fluctuations in the value of the U.S. dollar against certain foreign currencies or by the enactment of -7- exchange controls or foreign governmental or regulatory restrictions on the transfer of funds. The most significant foreign currencies for the Company, in order of dollar equivalent net sales, during fiscal 1997 were the Canadian dollar and the British pound. Competition. The Company is subject to competition from a substantial number of international and regional competitors, some of which have greater financial, engineering, manufacturing and other resources than the Company. The Company's 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. Although the Company believes that it has certain technological and other advantages over its competitors, realizing and maintaining such advantages will require continued investment by the Company in engineering, research and development, marketing and customer service and support. There can be no assurance that the Company will have sufficient resources to continue to make such investments or that the Company will be successful in maintaining such advantages. See "Business -- Competition." Environmental Matters. The Company does not currently anticipate any material adverse effect on its business as a result of compliance with federal, state, provincial, local or foreign environmental laws or regulations or cleanup costs. However, some risk of environmental liability and other costs is inherent in the nature of the Company's business, and there can be no assurance that material environmental costs will not arise in the future. Moreover, it is possible that future developments, such as increasingly strict requirements of air emission control and other environmental laws and enforcement policies thereunder, could lead to material costs for environmental compliance and cleanup by the Company. See "Business -- Environmental Matters." ITEM 2. PROPERTIES The Company uses various owned or leased properties as manufacturing facilities, warehouses and sales office facilities. 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. The Company also leases approximately 141,000 square feet of other warehouse and sales facilities. In addition, facilities of approximately 81,000 and 40,000 square feet are operated on behalf of the Company in Nogales, Mexico and Tijuana, Mexico, respectively, by third parties pursuant to contract manufacturing arrangements. -8-
OWNED OR APPROX LOCATION USE LEASED . SQ. FEET - ---------------------------------------------------------------------------------------------- Auburn, MA Manufacturing, Sales and Administration Owned 146,000 Auburn, MA Warehousing Leased 22,000 Chicago, IL Manufacturing Owned 18,000 Gjern, Denmark Manufacturing, Sales and Administration Owned 18,000 Gothenburg, Sweden Manufacturing, Sales and Administration Owned 58,000 Houston, TX Warehousing Leased 22,000 Irvine, CA Manufacturing, Sales and Administration Leased 80,000 Kingston, Ontario Manufacturing Owned 525,000 Las Vegas, NV Warehousing Leased 44,000 Leominster, MA Manufacturing, Sales and Administration Leased 201,000 Littleborough, United Kingdom Manufacturing Owned 36,000 Manchester, CT Manufacturing Leased 55,000 Manchester, CT Manufacturing, Sales and Administration Leased 150,000 Montreal, Quebec Manufacturing Leased 465,000 Montreal, Quebec Administration and Sales Leased 35,000 Northridge, CA Warehousing, Sales and Administration Leased 16,000 Saybrook, CA Warehousing Leased 28,000 Skelmersdale, United Kingdom Manufacturing, Sales and Administration Leased 94,000 Wadsworth, OH Manufacturing, Sales and Administration Owned 39,000 Waynesburg, PA Manufacturing Owned 42,000 Washington, PA Manufacturing Leased 83,000 Washington, PA Manufacturing Owned 123,000 Washington, PA Sales and Administration Owned 26,000 Washington, PA Manufacturing, Sales and Administration Owned 84,000 Wheeling, IL Manufacturing, Sales and Administration Owned 110,000 Wheeling, IL Warehousing, Sales and Administration Leased 80,000
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. On January 31, 1997, NORDX/CDT, one of the Company's subsidiaries, filed an action against Siecor Corp. in the U.S. District Court for the District of Delaware (case no. 97-52JJF) seeking a declaration that NORDX/CDT's "Tru-lite" trademark and Optimax ST connector do not infringe a Siecor trademark and patent. In response, on February 5, 1997, Siecor filed an action against the Company and certain of its subsidiaries in the U.S. District Court for the Northern District of Texas, Fort Worth Division (case no. 4-97CV-078) seeking unspecified damages and injunctive relief for alleged patent and trademark infringement. On May 23, 1997, NORDX/CDT's motion to transfer the Texas action to the State of Delaware was granted. The Company believes it has valid defenses to all of Siecor's claims and, if such a matter is not settled on a satisfactory basis, intends to vigorously contest such claims. While it is not possible to predict, with certainty, the outcome of any litigation, based upon the present -9- information available, the Company does not believe that such litigation will have a material adverse effect on its results of operation. AT&T has asserted certain intellectual property claims against certain intellectual property owned or used by NORDX/CDT. AT&T has claimed that both NORDX/CDT's IBDN Copper Cable (Land Lines) and BIX (Category 5) Modular Connectors are covered by U.S. patents currently held by AT&T. In addition, AT&T has forwarded to Nortel a cease and desist letter objecting to NORDX/CDT's use of the trademark Optimax. The Company does not believe that resolution of such claims would have a material adverse effect on its results of operations. Superior Modular Products, Inc. has offered NORDX/CDT a non-exclusive license under a patent it contends applies to certain NORDX/CDT patch panels. The matter is under negotiation and, at the present time, the Company does not believe a resolution would have a material adverse effect on its results of operations. Berk-Tek, Inc. ("Berk-Tek") has offered the Company a non-exclusive license under a patent it contends applies to certain cables sold by Mohawk/CDT. The Company's special patent counsel has provided an opinion that the Company's products do not infringe any valid claims, and, consequently, the offer has been declined. Berk-Tek has filed an application to reissue the patent in consideration of relevant prior art which has been identified by the Company and others, and has re-offered a non-exclusive license. Currently, the probability that Berk-Tek's application to reissue the patent will be granted cannot be determined and, therefore, based upon the opinion of the Company's special patent counsel, at this time, the Company does not believe a resolution of this matter would have a material adverse effect on its results of operations. -10- 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 - --- ----------------------------- 63 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. 55 George C. Graeber has been an Executive Vice President of the Company and President of Montrose/CDT since 1994. From 1992 to 1994, Mr. Graeber was Executive Vice President of the Company and President of Phalo/CDT. From 1990 to 1992 Mr. Graeber was a Vice President and General Manager at Anixter Brothers, Inc., a private international distributor of cable and communications equipment. From 1989 to 1990 Mr. Graeber was a consultant for Manhattan Electric Cable, a wire and cable company. From 1983 to 1989 he was President and from 1979 to 1983 he was Vice President-General Manager of Brand Rex Cable, a wire and cable company. Mr. Graeber has a Masters degree in Electrical Engineering from the University of Connecticut in 1968. 55 Michael A. Dudley has been an Executive Vice President of the Company and President - CDT International since 1991. From 1988 to 1991 he was the President of Superior Optics, a division of Superior Teletec, Inc., a publicly traded company that manufactures communications cable. Mr. Dudley has a doctorate degree in Material Science from The National College of Rubber Technology in London, England. 47 Normand R. Bourque has been an Executive Vice President of the Company 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. 58 Dave R. Harden has been a Senior Vice President of the Company 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 he was an Executive Vice President of West Penn/CDT. 47 Kenneth O. Hale has been Vice President, Chief Financial Officer and Secretary of the Company since 1987. Mr. Hale holds a Certified Public Accountant's certificate and an MBA in finance from the University of Missouri. 36 Charles B. Fromm was appointed Vice President and General Counsel of the Company in October 1997. Prior thereto, Mr. Fromm was a Partner at Kirkland & Ellis, New York. -11- PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS As of October 14, 1997, there were 153 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 48 of the 1997 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 47 of the 1997 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 14 through 22 of the 1997 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 23 through 46 of the 1997 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 7, 1997. 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 11 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 7, 1997. 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 7, 1997. 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 7, 1997. Such information is incorporated herein by reference. -13- PART IV. ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K 1. The following documents are included in the 1997 Annual Report, pages 23 through 46, and are incorporated herein by reference: a. Report of Independent Public Accountants. b. Consolidated Statements of Income for the years ended July 31, 1997, 1996 and 1995. c Consolidated Balance Sheets as of July 31, 1997 and 1996. d. Consolidated Statements of Cash Flow for the years ended July 31, 1997, 1996 and 1995. e. Consolidated Statements of Stockholders' Equity for the years ended July 31, 1997, 1996 and 1995. f. Notes to Consolidated Financial Statements. 2. The following documents are filed as part of this report: a. Report of Independent Public Accountants on Schedules. b. Schedule II Valuation and Qualifying Accounts for the three years ended July 31, 1997. c. List of Exhibits 3. List of Exhibits 2.1 - Asset Purchase Agreement, dated as of September 15, 1995, among Broomco (915) Limited, Volex Group, p.l.c. and Cable Design Technologies Corporation (with respect to Section 12 thereof only). Incorporated by reference to Exhibit 2.1 to CDT's Report on Form 8-K filed with the Commission on October 10, 1995. 2.2 - Asset Purchase Agreement by and among Cable Design Technologies (CDT) Canada Inc., Cable Design Technologies Corporation and Northern Telecom Limited, dated as of December 19, 1995. Incorporated by reference to Exhibit 10.16 to CDT's Registration Statement on Form S-3 (File No. 333-00554). 2.3 - Asset Purchase Agreement, dated March 31, 1997, between Cable Design Technologies Inc., Dearborn/CDT, Inc., Dearborn West/CDT, Inc., and Thermax/CDT, Inc. and Dearborn Wire and Cable L.P., Dearborn West L.P. and Thermax Wire L.P. Incorporated by reference to Exhibit 10.1 to CDT's Report on Form 8-K, as filed on April 22, 1997. 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 -14- 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 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 - Lease Agreement between Mohawk and 9 Mohawk Drive Realty Trust, dated as of March 24, 1986. Incorporated by reference to Exhibit 10.24 to CDT's Registration Statement on Form S-1 (File No. 33- 69992). 10.7 - Consulting Agreement, dated as of July 14, 1988, and amendment thereto, dated as of July 14, 1988, between Golder, Thoma, Cressey & Rauner and CDT. Incorporated by reference to Exhibit 10.13 to CDT's Annual Report on Form 10-K, as filed on October 31, 1994. -15- 10.8 - Consulting Agreement, dated as of July 14, 1988, and amendment thereto, dated as of July 14, 1994, between Northern Investment Ltd. Partnership II and CDT. Incorporated by reference to Exhibit 10.14 to CDT's Annual Report on Form 10-K, as filed on October 31, 1994. 10.9 - 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. 10.10 - 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. 10.11 - Lease Agreement between NORDX/CDT and Northern Telecom Limited dated February 2, 1996, governing the Lachine, Quebec facility. Incorporated by reference to Exhibit 10.20 to CDT's Annual Report on Form 10-K, as filed on October 29, 1996. 10.12 - 1996 Amendment of Lease between Mohawk and 9 Mohawk Drive Realty, dated as of September 3, 1996. Incorporated by reference to Exhibit 10.23 to CDT's Annual Report on Form 10-K, as filed on October 29, 1996. 10.13 - Registration Agreement among CDT, GTC Fund II, The Prudential Insurance Company of America and Pruco Life Insurance Company, dated as of July 14, 1988, as amended. Incorporated by reference to Exhibit 10.21 to CDT's Registration Statement on Form S-1 (File No. 33-69992). 11.1 - Computation of Earnings per Share.** 13.1 - CDT 1997 Annual Report to Stockholders, including financial statements, portions of which are incorporated herein by reference.** 21.1 - List of Subsidiaries of CDT.** 23.1 - Consent of Arthur Andersen LLP.** 27.1 - Financial Data Schedule.** 99.1 - Legal Charge, dated as of September 22, 1995, between Broomco (915) Limited, as Charger, and Volex Group, p.l.c. Incorporated by reference to Exhibit 99.1 to CDT's Report on Form 8-K filed with the Commission on October 10, 1995. -16- 99.2 - Agreement for the Granting of Leases, dated as of September 15, 1995, among Volex Group, p.l.c., Broomco (915) Limited and Cable Design Technologies Corporation. Incorporated by reference to Exhibit 99.2 to CDT's Report on Form 8-K filed on October 10, 1995. 99.3 - Lease of property known as land lying to the south of Railway Road, Skelmersdale, dated as of September 27, 1995, among Volex Group, p.l.c., Broomco (915) Limited and Cable Design Technologies Corporation. Incorporated by reference to Exhibit 99.4 to CDT's Report on Form 8-K filed on October 10, 1995. 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. ** Filed Herein (b) Reports on Form 8-k The Company filed a Form 8-K/A on June 10, 1997 (amending a Form 8-K filed with the Securities and Exchange Commission on April 22, 1997) related to the acquisition of Dearborn/CDT. -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:/s/ Paul M. Olson October 28, 1997 ------------------------------------- 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 28, 1997 - -------------------------- Director Bryan C. Cressey /s/ Paul M. Olson Director, President, Chief October 28, 1997 - -------------------------- Executive Officer (Principal Paul M. Olson Executive Officer) /s/ Kenneth O. Hale Vice President, Chief Financial October 28, 1997 - -------------------------- Officer, Secretary (Principal Kenneth O. Hale Financial and Principal Accounting Officer) /s/ Myron S. Gelbach, Jr. Director October 28, 1997 - -------------------------- Myron S. Gelbach, Jr. /s/ Michael F. O. Harris Director October 28, 1997 - -------------------------- Michael F. O. Harris /s/ Glenn Kalnasy Director October 28, 1997 - -------------------------- Glenn Kalnasy /s/ Richard C. Tuttle Director October 28, 1997 - -------------------------- Richard C. Tuttle -18- REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SUPPLEMENTAL SCHEDULE We have audited, in accordance with generally accepted auditing standards, the consolidated financial statements of Cable Design Technologies Corporation and Subsidiaries included in this Form 10-K, and have issued our report thereon dated September 9, 1997. Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedule listed in the accompanying index 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. Arthur Andersen LLP Pittsburgh, Pennsylvania September 9, 1997 CABLE DESIGN TECHNOLOGIES CORPORATION SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED JULY 31, 1997, 1996, 1995
ADDITIONS BALANCE BALANCE AT ADDITIONS TO CHARGED TO AT BEGINNING OF RESERVE FROM COSTS AND REDUCTION END OF DESCRIPTION PERIOD ACQUISITIONS EXPENSES FROM RESERVE PERIOD - ----------- ------------- --------------- ----------- --------------- --------- (Dollars in thousands) Allowance for uncollectible accounts/sales returns: Year Ended July 31, 1995 $1,056 $ -- $ 952 ($455) $1,553 Year Ended July 31, 1996 $1,553 $ 89 $1,542 ($524) $2,660 Year Ended July 31, 1997 $2,660 $1,132 $1,710 ($837) $4,665
-20- CABLE DESIGN TECHNOLOGIES CORPORATION INDEX TO EXHIBITS FILED HEREIN JULY 31, 1997 EXHIBIT NUMBER EXHIBIT PAGE 11.1 Computation of Earnings per Share 24 13.1 1997 Annual Report to Stockholders 25 21.1 List of Subsidiaries of Cable Design Technologies Corporation 77 23.1 Consent of Arthur Andersen LLP 78 27.1 Financial Data Schedule 79 -21- EX-11.1 2 COMPUTATION OF EARNINGS PER SHARE EXHIBIT 11.1 CABLE DESIGN TECHNOLOGIES CORPORATION COMPUTATION OF EARNINGS PER SHARE (THOUSANDS, EXCEPT PER SHARE AMOUNTS)
YEAR ENDED JULY 31, ------------------------------------- 1997 1996 1995 ----------- ----------- ----------- Primary: Income before extraordinary items $ 36,035 $ 15,881 $ 14,713 Extraordinary loss ---- (596) ---- ----------- ----------- ----------- Net income $ 36,035 $ 15,285 $ 14,713 =========== =========== =========== Average number of shares of common stock outstanding 18,398,435 15,977,339 14,582,915 Assumed exercise of stock options and warrants 2,193,420 2,649,453 2,499,635 ----------- ----------- ----------- Total shares 20,591,855 18,626,792 17,082,550 =========== =========== =========== Primary earnings before extraordinary items per common share $ 1.75 $ 0.85 $ 0.86 Primary loss from extraordinary items ---- (0.03) ---- ----------- ----------- ----------- Primary earnings per common share $ 1.75 $ 0.82 $ 0.86 YEAR ENDED JULY 31, ------------------------------------- 1997 1996 1995 ----------- ----------- ----------- Fully Diluted: Income before extraordinary items $ 36,035 $ 15,881 $ 14,713 Extraordinary loss ---- (596) ---- ----------- ----------- ----------- Net income $ 36,035 $ 15,285 $ 14,713 =========== =========== =========== Average number of shares of common stock outstanding 18,398,435 15,977,339 14,582,915 Assumed exercise of stock options and warrants 2,306,343 2,649,453 2,589,933 ----------- ----------- ----------- Total shares 20,704,778 18,626,792 17,172,848 =========== =========== =========== Fully Diluted earnings before extraordinary items per common share $ 1.74 $ 0.85 $ 0.86 Fully Diluted loss from extraordinary items ---- (0.03) ---- ----------- ----------- ----------- Fully Diluted earnings per common share $ 1.74 $ 0.82 $ 0.86
EX-13.1 3 1997 ANNUAL REPORT EXHIBIT 13.1 CDT [LOGO] INNOVATIVE CONNECTIVE TECHNOLOGY {Photo of the World} CDT IS GROWTH WORLDWIDE CABLE DESIGN TECHNOLOGIES ANNUAL REPORT 1997 [Photo of London Tower Bridge] [Photo of Great Wall of China] [Photo of the Kremlin] [Photo of the Sydney Opera House] [Photo of communications cable] COMPANY PROFILE Cable Design Technologies is a leading designer and manufacturer of techno- logically advanced electronic data transmission cables for network, communications, computer interconnect, transportation, automation, sound and safety applications and fiber optic solutions; and complete voice and data wiring solutions, the DynaTraX(TM) automated electronic cross-connect switch, and other components required to build high performance telecommunications infrastructures. TABLE OF CONTENTS The Record Speaks for Itself 1 Letter to Stockholders 2 CDT is International 4 CDT is Networking 6 CDT is Specialty Products 8 CDT is Global 10 Financial Table of Contents 12 Financial Summary 13 Management's Discussion and Analysis 14 Report of Independent Public Accountants 23 Consolidated Financial Statements 24 Selected Historical Consolidated Financial Data 47 Directors, Officers and Corporate Information 48 Corporate Directory 49 CDT [LOGO] [THE FOLLOWING TABLES WERE REPRESENTED BY BAR CHARTS IN THE PRINTED MATERIALS]
SALES OPERATING PROFIT* DOLLARS IN MILLIONS DOLLARS IN MILLIONS YEAR MILLIONS YEAR MILLIONS 1993 $126.650 1993 $19.577 1994 145.389 1994 21.801 1995 188.941 1995 29.613 1996 357.352 1996* 48.257 1997 516.996 1997 62.602
THE RECORD SPEAKS FOR ITSELF
NET INCOME* EARNINGS PER SHARE* TOTAL ASSETS DOLLARS IN MILLIONS DOLLARS IN MILLIONS YEAR MILLIONS YEAR YEAR MILLIONS 1993* $ 6.416 1993* $0.44 1993 $ 83.749 1994* 10.138 1994* 0.65 1994 102.719 1995 14.713 1995 0.86 1995 118.976 1996* 26.410 1996* 1.42 1996 320.105 1997 36.035 1997 1.74 1997 429.499 STOCKHOLDERS' EQUITY DOLLARS IN MILLIONS YEAR MILLIONS 1993 $(16.320) 1994 16.243 1995 31.865 1996 165.457 1997 205.125
OVER THE PAST FIVE YEARS CDT'S COMPOUND ANNUAL GROWTH RATE IS: 34% SALES 28% OPERATING INCOME 51% NET INCOME 38% EARNINGS PER SHARE * ADJUSTED TO EXCLUDE NON-RECURRING AND EXTRAORDINARY CHARGES 1 DEAR FELLOW STOCKHOLDERS [Photo of the World] "The record speaks for itself" -- it's not a phrase we take lightly. Since our IPO in November 1993, CDT has demonstrated an enviable record of growth and profitability. Today, we are clearly positioned as a global provider of innovative connective technology with strong name recognition, excellent market position and a leadership culture that rewards performance. Worldwide demand for faster and more powerful communications links are providing outstanding opportunities for CDT. Today, it's no longer enough to lead the market. Successful players in our industry must now anticipate the changes and challenges before others see them and create opportunities for future growth. Without question, we have created an infrastructure to satisfy a market that is moving at a blinding rate of speed. Driving our success have been five discreet strategies: o Growing our sales opportunities in international markets; o Acquiring high-margin niche businesses to expand our innovative connective technology focus; o Consistently expanding and upgrading our manufacturing infrastructure; o Developing new products to keep CDT on the cutting edge of technology enhancements; and o Anticipating our customers' needs by providing the highest quality specialty products supported by outstanding service. The success of these corporate initiatives is driven by the 3,000 CDT employees worldwide who are committed to our vision of service and growth and who are prepared to meet the technological challenges of the 21st century. I'm extremely proud of CDT's 1997 financial performance. In what proved to be an exceedingly challenging marketplace, we demonstrated excellent growth. After experiencing sharp price increases through mid-fiscal year 1996, the market for Teflon(R) plenum Category 5 network cable then softened dramatically with a marked decrease in pricing through the end of fiscal year 1997. Our employees did an outstanding job of overcoming these mercurial market conditions which cost CDT the opportunity for considerable operating profit. Net sales for the year ended July 31, 1997 rose 44.7% to a record $517.0 million versus $357.4 million last year with the addition of sales by CDT'S recently acquired Dearborn/CDT operations and a full year of sales from NORDX/CDT acquired in February 1996. Net income jumped 36.4% to a record $36.0 million ($1.75 per share) versus $26.4 million ($1.42 per share) a year ago, excluding non-recurring and extraordinary charges reported in fiscal 1996. To put these results in perspective, our Company has achieved a five year compound annual growth rate of 34% for sales, 28% for operating income, 51% for net income and 38% for earnings per share. In fiscal 1997, $104.7 million or 20% of our revenues were generated from outside North America -- and foreign sales are climbing as we continue to penetrate Asia, Latin America, Australia and the former Eastern bloc countries. At CDT we are pursuing international growth opportunities through a combination of acquisition, expanded operations and enhanced marketing worldwide. Results for fiscal 1997 reflect increased sales in all five of CDT'S business groups: Network structured wiring products rose 35.6% to $253.4 million; Communications/multimedia products grew 90.5% to $94.1 million; Automation, sound and safety rose 3.9% to $71.4 million; Computer interconnect increased 21.8% to $22.9 million; and finally, sales of 2 - -------------------------------------------------------------------------------- [Photo of the world continued from page 2] The success of these corporate initiatives is driven by the 3,000 CDT employees worldwide who are committed to our vision of service and growth and who are prepared to meet the technological challenges of the 21st century. - -------------------------------------------------------------------------------- Other products rose 124.5% to $75.2 million, which includes the sales from our newly acquired Dearborn/CDT operations. Our ability to find and integrate synergistic acquisitions is one of the best in our industry. In April 1997 we purchased Dearborn/CDT and its Thermax/CDT operations for $77.5 million and followed up with the acquisition of Barcel/CDT in early September. Dearborn/CDT provides an excellent strategic fit with our technologically-driven business and greatly enhances the breadth and balance of CDT'S product lines, especially in the fast growing markets for commercial aircraft and wireless communications. To date, this acquisition has exceeded our expectations for both sales and net income and is currently undergoing a major expansion at its Nogales, Mexico manufacturing facility. Barcel/CDT is a leading manufacturer of high temperature tape-wrapped insulation and high temperature extruded insulation for the commercial aviation market. Its products are recognized throughout the industry and will complement the specialty cable products currently being manufactured at Thermax/CDT and Raydex/CDT. Our purchase in fiscal year 1996 of NORCOM/CDT, a division of NORDX/CDT, has been another success story. Sales at this Canadian communications cable facility were very strong in the second half of fiscal 1997 as demand continued for additional residential phone lines to support Internet, facsimile and telecommuting needs. We anticipate continued strong sales of communications cable throughout fiscal 1998. It is with considerable sadness that I report the passing of Bernard J. Bannan, a Director of CDT and President and CEO of Binley, Inc. Mr. Bannan was affiliated with our Company since the mid-1980s, and was instrumental in guiding CDT to its current leadership position. As a unique advisor, his counsel and friendship will be greatly missed. We enter fiscal 1998 with a number of exciting initiatives. First, we are committed to staying on the cutting edge of new product development across all our business lines. Second, with the return in demand for Teflon(R) plenum network cable, our investment in manufacturing, equipment and facilities continues to be a top priority. Expansion is currently underway at Thermax/CDT, NORCOM/CDT, Raydex/CDT and Cekan/CDT. Finally, we are continuing to look aggressively, both domestically and overseas, for acquisitions to complement our high-growth niche markets. Our new NORDX/CDT Canadian manufacturing/administration/R&D facility is scheduled for completion in February 1998 and we continue to work closely with the leading standards organizations to keep us in the forefront of new product design and certification. In short, we are excited about the opportunities in our business and CDT'S strong position in its markets. To our stockholders, customers and employees, I extend thanks for all you have done to make this past year so successful. /s/ Paul M. Olson PAUL M. OLSON President and CEO October 13, 1997 3 CDT IS INTER [Photo of Japanese Building] 4 NATIONAL CDT's international capabilities enable us to compete successfully in the global marketplace. From the PacRim to Central Europe and South America, few electronic enterprises, whether OEM or distributor, are beyond the reach and resources of CDT. All's well with our world. [Photo of cabling over a map] - -------------------------------------------------------------------------------- [Photo of connector producing machinery] You'll find CDT at work around the world. As a world leader in the design and manufacture of connectivity products, it is no surprise to find us participating in progressive transportation projects around the world. Business opportunities in the PacRim represent tremendous potential for CDT as core infrastructure programs are developed throughout Asia. Hong Kong's new airport at Chek Lap Kok is one example. With a scheduled opening in 1998, this facility is designed to carry 35 million passengers and three million tons of cargo a year. CDT'S Category 5, zero halogen and fiber optic cables are also being installed at Hong Kong's new Metro Rail project and in Singapore at Phase 2 and 3 of the new Changi Airport project. The potential for growth in CDT's international sales remains strong. Opportunities in Australia, Latin America, and the former Eastern bloc countries continue to be exploited as the rest of the world prepares for the oncoming link in high speed worldwide communications. CDT has been building an infrastructure of manufacturing and distribution strength to service the growing global marketplace. In fiscal 1997, 43% of our sales were outside the U.S. and 20% were outside North America. Our goal is to have 50% of our sales in international markets by the year 2000. [Photo of Desktop Globe of the Earth] CDT's ISO 9001 CERTIFICATION IS AN IMPORTANT SELLING POINT TO THE INTERNATIONAL MARKETS. 5 The Information Superhighway won't do you much good if you're stuck in cross-town traffic. With CDT, nothing stands between our customers and the opportunities of the Information Age. CDT IS NETWORKING [Photo of Spray of fiber optics] - -------------------------------------------------------------------------------- [Photo of Dynatrax(TM) installation in wiring closet] You'll find CDT network structured wiring products providing sophisticated end-to-end solutions to important communications problems. In fiscal 1997, network products accounted for 49% of CDT'S total sales -- and it remains one of our Company's fastest growing and profitable business groups. CDT is at the leading edge of a rapidly changing communications industry. To stay in front we are constantly expanding our capabilities and our product lines to accomodate the evolving requirements for the next generation of connectivity products including Level 6 and 7 network cable. From 400 megabits/s to 622 megabits/s to one gigabit/s -- in production, in technology, in quality control and customer support -- we're preparing to meet the needs of the next century. We are a leading resource for our industry. From a single building to a campus to a city network, across the nation and across the world, CDT technologies are already in place to lead the way into the 21st century. At a time when business is being reshaped by computer networking, instantaneous communications and electronic commerce, it's critical to build a robust internal infrastructure, such as NORDX/CDT'S IBDN structured cabling systems solutions. Today, CDT manufactures and markets a variety of different network products, including cables, connectors, wiring closet equipment, the DynaTraX(TM) high performance cross-connect switch and complete end-to-end Category 5 implementation that is certified and warranted. [Photo of Personal Computer] THE GROWTH OF MULTIMEDIA COMPUTING IS DRIVING THE DEMAND FOR GREATER COMMUNICATIONS SPEED. 6 [Photo of an educational institution in Montreal] 7 CDT IS SPECIALTY Most American-made commercial jets currently in service carry some Thermax/CDT or Barcel/CDT wire. In addition, our specialty products can be found on the Patriot missile, the Space Shuttle and the newest Sikorsky helicopter. [Photo of various cabling products] - -------------------------------------------------------------------------------- [Photo of person watching computer monitor] You'll find CDT specialty cables at work in the rapidly growing commercial aviation market. In the 1950s, Thermax/CDT was one of the pioneers of the use of PTFE Teflon(R) paste extruded insulated wire for the aerospace and aviation industries. A decade later, Barcel/CDT introduced high performance, tape-wrapped insulated specialty wire to the commercial aviation, military, and satellite/space industries. We have developed both traditional and specialty high temperature cables, including fire resistant varieties, to meet some of the most hazardous environments. Many applications for aviation, automotive and wireless require cable with exterior armor or "jacketing" materials that can endure exposure to chemicals, extreme temperatures and outside elements. CDT has developed coaxial and twinaxial cables utilizing high speed, low loss air spaced dielectrics for use in telecommunications and aerospace applications. Specialty cables from CDT are also found on the oxygen sensors for catalytic convertors of American-made automobiles and throughout the country on wireless switching stations and the components of cellular telephones. Our strong focus on developmental engineering and our ability to remain on the cutting edge of new product applications have given us a valued position in our industry. [Photo of football] END-TO-END, CDT'S FACILITIES WOULD FILL OVER 48 FOOTBALL FIELDS. 8 PRODUCTS [Photo of highways, city and airplane] 9 [Drawing of Map of Earth WITH CDT Locations highlighted] - -------------------------- ------------------- ----------------- IRVINE, CALIFORNIA MEXICO CITY, MEXICO KINGSTON, ONTARIO - -------------------------- ------------------- ----------------- - -------------------------- ------------------- ----------------- CHINO, CALIFORNIA NOGALES, MEXICO TORONTO, ONTARIO - -------------------------- ------------------- ----------------- - -------------------------- ------------------- ----------------- LOS ANGELES, CALIFORNIA TIJUANA, MEXICO MONTREAL, QUEBEC - -------------------------- ------------------- ----------------- - -------------------------- NORTHRIDGE, CALIFORNIA - -------------------------- - -------------------------- MANCHESTER, CONNECTICUT - -------------------------- - -------------------------- MIAMI, FLORIDA - -------------------------- - -------------------------- ATLANTA, GEORGIA - -------------------------- - -------------------------- CHICAGO, ILLINOIS - -------------------------- - -------------------------- WHEELING, ILLINOIS - -------------------------- - -------------------------- AUBURN, MASSACHUSETTS - -------------------------- - -------------------------- LEOMINSTER, MASSACHUSETTS - -------------------------- - -------------------------- WESTBORO, MASSACHUSETTS - -------------------------- - -------------------------- LAS VEGAS, NEVADA - -------------------------- - -------------------------- WHITESTONE, NEW YORK - -------------------------- - -------------------------- ICARD, NORTH CAROLINA - -------------------------- - -------------------------- WADSWORTH, OHIO - -------------------------- - -------------------------- PITTSBURGH, PENNSYLVANIA - -------------------------- - -------------------------- SHARON HILL, PENNSYLVANIA - -------------------------- - -------------------------- WASHINGTON, PENNSYLVANIA - -------------------------- - -------------------------- HOUSTON, TEXAS - -------------------------- - -------------------------- DALLAS, TEXAS - -------------------------- - -------------------------- SEATTLE, WASHINGTON - -------------------------- CDT IS GLOBAL Location of selected manufacturing facilities, warehousing operations, sales personnel, sales offices and administrative offices. 10 [Drawing of Map of Earth WITH CDT Locations highlighted] - ------------------ ------------------------- -------------------- GJERN, DENMARK BRACKNELL, UNITED KINGDOM BEIJING, CHINA - ------------------ ------------------------- -------------------- - ------------------ ------------------------- -------------------- ROSKILDE, DENMARK LEEDS, UNITED KINGDOM HONG KONG, CHINA - ------------------ ------------------------- -------------------- - ------------------ ------------------------- -------------------- WUPPERTAL, GERMANY LITTLEBOROUGH, SHANGHAI, CHINA UNITED KINGDOM - ------------------ ------------------------- -------------------- - ------------------ ------------------------- -------------------- CERNUSCO, ITALY LONDON, UNITED KINGDOM KUALA LUMPUR, MALAYSIA - ------------------ ------------------------- -------------------- - ------------------ ------------------------- -------------------- WARSAW, POLAND RINGWOOD, UNITED KINGDOM BRISBANE, AUSTRALIA - ------------------ ------------------------- -------------------- - ------------------ ------------------------- -------------------- MADRID, SPAIN SKELMERSDALE, MELBOURNE, AUSTRALIA UNITED KINGDOM - ------------------ ------------------------- -------------------- - ------------------ -------------------- KINNA, SWEDEN SYDNEY, AUSTRALIA - ------------------ -------------------- 11 FINANCIAL TABLE OF CONTENTS Financial Summary 13 Management's Discussion and Analysis 14 Report of Independent Public Accountants 23 Consolidated Financial Statements 24 Selected Historical Consolidated Finacial Data 47 Directors, Officers and Corporate Information 48 Corporate Directory 49 12 FINANCIAL SUMMARY (DOLLARS IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
INCOME STATEMENT DATA: 1997(1) 1996(1) - -------------------------------------------------------------------------------- Net sales $516,996 $357,352 - -------------------------------------------------------------------------------- Gross profit 154,936 111,819 Gross margin 30.0% 31.3% - -------------------------------------------------------------------------------- Operating profit 62,602 31,527 (2) Operating margin 12.1% 8.8%(2) - -------------------------------------------------------------------------------- Income before extraordinary items 36,035 15,881 Income per common share before extraordinary items $ 1.75 $ 0.85 - -------------------------------------------------------------------------------- Net income 36,035 15,285(3) Net income per common share $ 1.75 $ 0.82(3) - -------------------------------------------------------------------------------- BALANCE SHEET DATA: - -------------------------------------------------------------------------------- Total assets $429,499 $320,105 Current assets 247,545 208,456 Long-term debt (excluding current maturities) 126,661 71,384 Stockholders' equity 205,125 165,457 - --------------------------------------------------------------------------------
(1) Includes the post-acquisition results of businesses acquired during fiscal years 1997 and 1996. (2) Includes $16.7 million of non-recurring charges, see Note 19 to the Consolidated Financial Statements. Excluding these non-recurring charges, the operating margin was 13.5%. (3) Excluding non-recurring and extraordinary charges, net income and net income per common share for fiscal year 1996 would have been $26.4 million and $1.42, respectively. CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES 13 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS OVERVIEW 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 following table presents, for the periods indicated, the summary selected financial data from the Company's statements of income, and should be read in conjunction with the following discussion.
FOR FISCAL YEAR ENDED JULY 31, 1997 1996 1995 - -------------------------------------------------------------------------------- (DOLLARS IN THOUSANDS) Net sales $516,996 $357,352 $188,941 Cost of sales 362,060 245,533 125,777 Gross profit 154,936 111,819 63,164 Selling, general and administrative costs 92,334 63,562 33,551 Non-recurring charges -- 16,730 -- Income from operations 62,602 31,527 29,613 Income before extraordinary item 36,035 15,881 14,713 Net income $ 36,035 $ 15,285 $ 14,713
Overall, CDT had an outstanding year. Sales for the year ended July 31, 1997 ("fiscal 1997") increased 44.7% to $517.0 million and net income increased 36.4% compared to the year ended July 31, 1996 ("fiscal 1996"), excluding non-recurring and extraordinary charges reported in fiscal 1996 of $11.1 million, net of tax. Acquisition is an important part of CDT's strategy and the incremental sales attributable to businesses acquired in fiscal 1997 and 1996 accounted for $144.4 million of the increase in fiscal 1997 sales. The acquisition of Dearborn/CDT in April 1997 broadened CDT's product offerings. Since its acquisition, Dearborn/CDT's operations have continued to perform well, particularly its wireless component assembly business and its Thermax/CDT specialty commercial aircraft and electronic automotive cable business. In addition, other businesses that were acquired during fiscal 1996 continued to perform well and a full year of their operations are included in CDT's fiscal 1997 results. CDT's communications cable business, NORCOM/ CDT, which was acquired as part of the NORDX/CDT purchase in February 1996, benefitted in fiscal 1997 from the need for telephone companies to upgrade their local distribution infrastructure due to an expanded demand for phone lines as a result of increased Internet, fax, telecommuting, ISDN, and other usages. The passive components portion of NORDX/ CDT's IBDN network structured wiring system business (including cable connectors, wiring 14 CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS racks and panels, and fiber optic connectors) grew in fiscal 1997 as NORDX/CDT continued to build on its strategy of offering complete, fully certified end-to-end structured wiring systems for high performance networking and other applications. NORDX/CDT also continued to broaden its international sales and marketing capabilities for its IBDN network products outside of Canada, and its U.S. and Pacific Rim sales, particularly China, increased in fiscal 1997. Furthermore, increased sales by CDT's U.K. subsidiary, Raydex/CDT, also contributed to an overall increase in international sales. CDT's record fiscal 1997 results were achieved despite certain unfavorable market influences. For most of fiscal 1997 a very challenging market existed for Teflon(R) plenum Category 5 network cable products which began in the latter part of fiscal 1996 and resulted in more competitive pricing and a much lower profitability for this product group. During the latter part of fiscal 1997, the Company believes that growth in the demand for Category 5 network cables slowed as the market sorted out the migration to the higher performance Level 6 and Level 7 products. The extended performance Level 6 network cable is capable of carrying information at the rate of 100 to 622 megabits/s, and the Level 7 cable is capable of carrying information at the rate of 622 megabits/s to 1.0 gigabit/s. Over the first two months of CDT's new fiscal year 1998, the demand and pricing for Teflon(R) plenum Category 5 cable products have shown marked improvement, together with a continued increase in demand for the higher priced Level 6 and Level 7 cables. Also, an increase in the U.S. dollar against certain European currencies during fiscal 1997 reduced export sales, particularly of shielded network cables, to certain countries. In September 1997, CDT's search for strategic acquisitions to strengthen and broaden its product offerings resulted in the acquisition of Barcel Acquisition Corporation and its subsidiaries ("Barcel/CDT"). Headquartered in Irvine, CA, with 1996 sales of approximately $13 million, Barcel/CDT is a manufacturer of specialty high temperature cable products primarily for commercial aircraft applications. YEAR ENDED JULY 31, 1997 COMPARED WITH YEAR ENDED JULY 31, 1996 NET SALES Net sales increased by $159.6 million, or 44.7%, to a record $517.0 million for fiscal 1997 compared to $357.4 million for fiscal 1996. The increase in fiscal 1997 includes the addition of $144.4 million of sales attributable to the recently acquired businesses: Dearborn/CDT, Stronglink/CDT, the incremental sales of Cekan/CDT and X-Mark/CDT for fiscal 1997, and the incremental sales of NORDX/CDT for the first six months of fiscal 1997. The sales of network structured wiring products increased $66.4 million, or 35.6%. The addition of $67.8 million of network systems products sales attributable to recently acquired businesses as well as increased sales of IBDN network passive components by NORDX/CDT for the comparable six month periods ending July 31, 1997 and 1996, more than offset the lower CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES 15 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS sales of Teflon(R) plenum Category 5 network cable products due to the lower pricing experienced for much of the year as a result of the competitive pricing environment that began in the second half of fiscal 1996. The Company also experienced reduced export sales of shielded network cables to the European market as a result of the strong U.S. dollar. Sales of communications cable products increased $44.7 million, or 90.5%, primarily as a result of a full year of sales attributable to NORDX/CDT's NORCOM division acquired in February, 1996. However, sales increased 13.2% for the comparable six month periods ending July 31, 1997 and 1996, demonstrating continued demand from telephone companies as they upgrade and expand their local distribution network infrastructure. Sales of computer interconnect cable products increased $4.1 million, or 21.8%, due to increased sales of cables for mainframe computer, cellular, satellite based ground communication, and system interface applications. Sales of automation sound & safety cable products increased $2.7 million, or 3.9%. Sales of other products, principally cable, increased $41.7 million, or 124.5% primarily as a result of sales attributable to the recently acquired businesses and a 10% growth in sales by the Company's existing operations. International sales (outside of North America) increased $19.6 million, or 23%, to $104.7 in fiscal 1997 compared to $85.1 million in fiscal 1996 due to the additional sales attributable to the recently acquired businesses. The stronger U.S. dollar as compared to certain European currencies reduced export sales to Europe, particularly Germany. GROSS PROFIT Gross profit increased $43.1 million, or 38.6%, to $154.9 million in fiscal 1997 compared to $111.8 million for fiscal 1996. The gross profit contributed by the recently acquired businesses of Dearborn/CDT, Stronglink/CDT, the incremental gross profit of Cekan/CDT and X-Mark/CDT, and the incremental gross profit of NORDX/CDT for the six month period ended January 31, 1997 accounted for $42.4 million of the overall increase. Network systems products accounted for approximately 34% of the overall increase. The increase in the gross profit for network products was attributable to the additional gross profit of the recently acquired businesses and to an increase in gross profit for network passive components which were partially offset by reduced gross profit for network cable products as a result of the competitive price environment for Teflon(R) plenum Category 5 cables and decreased export sales to Europe. The increase in gross profit from the sales of communications cable products accounted for approximately 29% of the overall increase in gross profit and was attributable to the incremental sales for the first six months of fiscal 1997 for the NORCOM division of NORDX/CDT as well as higher sales and improved gross margin for the comparable six month periods ending July 31, 1997 and 1996. The gross profit from the sales of automation sound & safety and computer interconnect products accounted for approximately 6% and 3%, respectively, of the overall increase in gross profit. Other products, principally cable, accounted for approximately 28% of the overall increase in gross profit. The increase in gross profit for other products was primarily 16 CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS due to the additional gross profit for Dearborn/CDT as well as an increase in gross profit for other businesses, particularly Raydex/CDT. The overall gross margin for fiscal 1997 was 30.0% compared to 31.3% for fiscal 1996. The reduction in the overall gross margin was primarily due to the lower margin on network cables as a result of the more competitive price environment for Teflon(R) plenum Category 5 network cables which was partially offset by improved margins for network passive components and communications cables. SELLING, GENERAL AND ADMINISTRATIVE EXPENSE Selling, general and administrative expense ("SG&A") increased $28.8 million, or 45.3%, to $92.3 million for fiscal 1997 compared to $63.6 million for fiscal 1996. The increase in fiscal 1997 SG&A was primarily the result of the additional $25.5 million of SG&A related to the recently acquired businesses including the incremental SG&A of NORDX/CDT for the six month period ended January 31, 1997. Excluding the SG&A of the recently acquired businesses, the increase in SG&A was 5.0%, which includes additional investment to develop and expand worldwide selling and marketing capabilities. As a percentage of sales SG&A was 17.9% and 17.8% for fiscal years 1997 and 1996, respectively. INCOME FROM OPERATIONS Income from operations increased $14.3 million, or 29.7%, to $62.6 million compared to $48.3 million for fiscal 1996 (excluding non-recurring charges). Including non-recurring charges income from operations was $31.5 million for fiscal 1996. The operating margin, derived by dividing operating income by net sales, was 12.1% for fiscal 1997 compared to 13.5% for fiscal 1996 (excluding non-recurring charges). The lower operating margin for fiscal 1997 was primarily the result of the reduction in the gross margin discussed above. NET INCOME Fiscal 1997 net income increased $20.7 million to $36.0 million, or $1.75 per share, compared to net income of $15.3 million, or $0.82 per share for fiscal 1996. Excluding non-recurring and extraordinary charges incurred in fiscal 1996, net income increased $9.6 million, or 36.4%, over fiscal 1996 net income of $26.4 million, or $1.42 per share. YEAR ENDED JULY 31, 1996 COMPARED WITH YEAR ENDED JULY 31, 1995 NET SALES Net sales increased $168.4 million, or 89.1%, to $357.4 million for fiscal 1996 compared to $188.9 million for the year ended July 31, 1995 ("fiscal 1995"). The increase in fiscal 1996 net sales includes $143.1 million of post-acquisition sales by recently acquired businesses: Cekan/ CDT, X-Mark/CDT, NORDX/CDT, Raydex/CDT and Manhattan/CDT. Sales of network structured wiring products increased $83.8 million, or 82.0%, primarily as a result of the addition of the post-acquisition sales of these products by NORDX/CDT and other recently CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES 17 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS acquired businesses, as well as an increase in network cable products sales by the Company's existing operating units during the first half of fiscal 1996. A disruption in the Category 5 Teflon(R) plenum network cable market early in the third quarter of fiscal 1996 due to a build-up of distributor inventories of these products and a greater availability of Teflon(R) raw material resulted in reduced sales volume and lower selling prices for these products by the Company's existing operating units during the second half of fiscal 1996. The negative effect of the reduced sales of Category 5 Teflon(R) plenum network cables was partially offset by increased sales of fiber optic network cables and continued sales of non-plenum Category 5 network cables during the period. Sales of automation sound & safety cable products increased $21.5 million, or 45.6%, primarily as a result of the addition of the post-acquisition sales of these products by the recently acquired businesses, Raydex/CDT in the United Kingdom and Manhattan/CDT in the U.S., as well as a solid increase in sales by the Company's principal domestic manufacturing division for these products, West Penn/CDT. As a part of the Company's acquisition of NORDX/CDT, the Company acquired a new primary business group, communications cable products. NORDX/CDT's post-acquisition sales of communications cable products accounted for 29% of the Company's overall increase in net sales for fiscal 1996. Sales of computer interconnect cable products, which accounted for approximately 5% of fiscal 1996 overall sales, decreased $4.1 million in fiscal 1996 primarily as a result of lower sales of certain mid-range computer system interconnect cables which have been phased out by hardware designers in favor of Category 5 twisted pair and patch cable technology. International sales (outside of North America) increased $55.9 million, or 191.4%, to $85.1 million in fiscal 1996 compared to $29.2 million in fiscal 1995 due primarily to the addition of the post-acquisition international sales by the recently acquired businesses, Raydex/CDT and NORDX/CDT, as well as increased international sales by the Company's existing businesses. GROSS PROFIT Gross profit increased $48.7 million, or 77.0%, to $111.8 million in fiscal 1996 compared to $63.2 million for fiscal 1995. The increase in fiscal 1996 gross profit includes the post-acquisition gross profit generated by recently acquired businesses of $37.1 million. The gross profit from the sales of network structured wiring products accounted for approximately 62% of the increase in gross profit for fiscal 1996. Gross profit from the sales of communications cable products and automation sound & safety cable products represented approximately 25% and 10% of the overall increase in gross profit, respectively. The significant drop in the market prices of copper in June 1996 due primarily to the news of the alleged Sumitomo trading scandal resulted in a reduction in the selling prices for communications cable which negatively impacted earnings in the fourth fiscal quarter. The negative effect on gross profit because of the reduction in the selling prices for communications cable is temporary and should be neutralized when the higher cost copper raw material on hand for communications cable has been worked 18 CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS out of inventory. The gross margin for fiscal 1996 was 31.3% compared to a gross margin of 33.4% for fiscal 1995. The decrease in the gross margin for fiscal 1996 was due primarily to the comparatively lower gross margin of certain of the recently acquired businesses, primarily NORDX/CDT's communications cable business and Raydex/CDT's non-network cable products sales. SELLING, GENERAL AND ADMINISTRATIVE EXPENSE SG&A increased $30.0 million, or 89.4%, to $63.6 million, for fiscal 1996 compared to $33.6 million for fiscal 1995. The increase in fiscal 1996 SG&A was primarily the result of the addition of $25.9 million post-acquisition SG&A of the recently acquired businesses, principally NORDX/CDT. As a percentage of sales, SG&A of 17.8% for fiscal 1996 was unchanged as compared to 17.8% for fiscal 1995. NON-RECURRING CHARGES In connection with the NORDX/CDT acquisition, the Company engaged an independent appraisal firm to prepare a valuation of the assets acquired to serve as a basis for allocation of the purchase price. As a result of the valuation, the fair market value of acquired in-process research and development relating to the development of the DynaTraX(TM) automated network cross-connect switch was determined to be $9.8 million. In accordance with generally accepted accounting practices this amount was charged to operations upon the acquisition of NORDX/ CDT in the third quarter of fiscal year 1996. In addition, stock appreciation rights of $6.9 million vested upon the completion of the February 28, 1996 common stock offering ("Offering"). INCOME FROM OPERATIONS Income from operations excluding non-recurring charges for fiscal 1996 increased $18.6 million, or 63.0%, to $48.3 million compared to $29.6 million for fiscal 1995. Including non-recurring charges, income from operations for fiscal 1996 was $31.5 million. The operating margin for fiscal 1996, derived by dividing operating income excluding non-recurring charges by net sales, was 13.5% compared to 15.7% for fiscal 1995. The decrease in the operating margin in fiscal 1996 was due primarily to the comparatively lower gross margin of certain of the recently acquired businesses discussed above under Gross Profit. NET INCOME Fiscal 1996 net income was $15.3 million, or $0.82 per share, compared to net income of $14.7 million, or $0.86 per share, for fiscal 1995. Excluding the non-recurring charges (of $10.5 million, net of tax) discussed above under Non-Recurring Charges and an extraordinary charge (of $0.6 million, net of tax) due to the early extinguishment of debt in the third quarter of fiscal 1996, net income for fiscal 1996 was $26.4 million, or $1.42 per share. CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES 19 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS LIQUIDITY AND CAPITAL RESOURCES During fiscal 1997 operating working capital increased $18.6 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 increases in accounts receivable ($4.0 million) and inventories ($12.7 million) and a reduction in taxes payable ($1.9 million). The increase in inventories is partially due to stocking of a new west coast warehouse. The change in operating working capital excludes changes in cash and current maturities of long-term debt. After providing for the increase in working capital, the Company generated $30.9 million of net cash from operating activities during fiscal 1997. The net cash used by investing activities during fiscal 1997 of $99.1 million included $72.4 million for the acquisition of businesses (principally Dearborn/CDT) and $26.7 million for capital projects. Net cash provided by financing activities of $61.3 was primarily from debt sources. The net decrease in cash for fiscal 1997 was $7.1 million. During fiscal 1997 and fiscal 1996, the Company expended $26.7 million and $15.9 million, respectively, for capital projects. The expenditures for fiscal 1997 were made to increase manufacturing efficiencies and to expand the Company's overall production capacity of new and existing product lines, and included completion of a facility to manufacture enhanced network cable including Level 6 and Level 7 specialty cables, completion of an expanded state-of-the-art fiber optic facility, construction of a sales, training and administration facility, and commencement of construction of the 300,000 square foot NORDX/CDT manufacturing, administration and R & D facility. The Company expects to spend approximately $35 million for capital projects for the year ending July 31, 1998 without regard to potential acquisitions. Planned spending in fiscal 1998 includes completion of the NORDX/CDT manufacturing facility and investment in equipment and facilities for capacity expansion at various facilities, particularly Thermax/CDT, NORCOM/CDT, NORDX/CDT, Raydex/CDT, and Cekan/CDT. The Company revised its existing credit agreement (the "Credit Agreement") on April 10, 1997, to increase borrowing limits and reduce applicable interest rates. The Credit Agreement as revised is comprised of a $105.0 million revolver and a CDN $115.0 million Canadian revolver, and includes a provision whereby the applicable margins over prime or the London Inter-Bank Offered Rate are based on the attainment of certain performance factors. A commitment fee of .15% to .375% is applied to the unused portion of each revolver. In addition to the Credit Agreement, the Company maintains a foreign credit facility in the United Kingdom which provides for up to approximately $12 million of borrowings (the "U.K. Credit Facility"). On July 31, 1997, the Company had approximately $71.4 million of availability under the Credit Agreement and $4.3 million of availability under its U.K. Credit Facility. Based on the Company's current expectations for its business, management believes that its cash flow from operations and the available portion of its revolving credit facilities and foreign credit facility will provide it with sufficient liquidity to meet the current liquidity needs of the Company. On September 10, 1997, the Company acquired all the outstanding stock of Barcel/CDT. The purchase was financed through available borrowings under the Company's Credit Agreement. 20 CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 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. NEW ACCOUNTING STANDARDS The Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation," ("SFAS No. 123") in October 1995. This statement establishes a "fair value based method" of financial accounting and related reporting standards for stock-based employee compensation plans. SFAS No. 123 is effective for fiscal 1997 and provides for adoption in the income statement or through disclosure. The Company has continued to account for its stock-based employee compensation plans under APB Opinion No. 25, "Accounting for Stock Issued to Employees," as permitted by SFAS No. 123, and has provided the required disclosure in the footnotes to the fiscal 1997 Consolidated Financial Statements (see Note 10). In February 1997, the FASB issued Statement of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS No. 128"). SFAS No. 128 differs from current accounting guidance in that earnings per share is classified as basic earnings per share and diluted earnings per share, compared with primary earnings per share and fully diluted earnings per share under current standards. Basic earnings per share differs from primary earnings per share in that it includes only the weighted average common shares outstanding and does not include any dilutive securities in the calculation. Diluted earnings per share under the new standard differs in certain calculations from fully diluted earnings per share under the existing standards. Adoption of SFAS No. 128 is required for interim and annual periods ending after December 15, 1997. Early adoption is not permitted. See Note 2 to the Consolidated Financial Statements for the anticipated impact of adoption of SFAS No. 128 on reported earnings per share. In February 1997, the FASB issued Statement of Financial Accounting Standards No. 129, "Disclosure of Information about Capital Structure"("SFAS No. 129"). SFAS No. 129 consolidates previous standards for disclosing information about an entity's capital structure. Adoption of SFAS No. 129 is required for annual periods ending after December 15, 1997. The Company will adopt SFAS No. 129 in the fiscal year ending July 31, 1998, and does not believe that adoption will have a significant impact on the financial statements. The FASB issued Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income"("SFAS No. 130") in June 1997. SFAS No. 130 establishes reporting standards for a new statement of comprehensive income and its components to be included with the financial statements currently required. SFAS No. 130 is effective for fiscal years beginning after December 15, 1997. The Company will adopt SFAS No. 130 in the fiscal year ending July 31, 1999, and has not yet determined the impact of adoption. CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES 21 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS In June 1997, the FASB issued Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information" ("SFAS No. 131"). SFAS No. 131 establishes standards for reporting information about operating segments. SFAS No. 131 is effective for fiscal years beginning after December 15, 1997. The Company will adopt SFAS No. 131 in the fiscal year ending July 31, 1999, and has not yet determined the impact of adoption. FORWARD LOOKING STATEMENTS -- UNDER THE PRIVATE SECURITIES LITIGATION ACT OF 1995 Certain of the statements in this annual report are forward-looking statements. The 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 Prospectus, dated February 27, 1996, 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. 22 CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS 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, 1997 and 1996, and the related consolidated statements of income, stockholders' equity and cash flows for the three years in the period ended July 31, 1997. 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 generally accepted auditing standards. 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, 1997 and 1996, and the results of their operations and their cash flows for each of the three years in the period ended July 31, 1997 in conformity with generally accepted accounting principles. /s/ Arthur Andersen LLP PITTSBURGH, PENNSYLVANIA September 9, 1997 CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES 23 CONSOLIDATED STATEMENTS OF INCOME
YEAR ENDED JULY 31, 1997 1996 1995 - -------------------------------------------------------------------------------------------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE INFORMATION) Net sales $ 516,996 $ 357,352 $ 188,941 Cost of sales 362,060 245,533 125,777 - -------------------------------------------------------------------------------------------- Gross profit 154,936 111,819 63,164 Selling, general and administrative expenses 92,334 63,562 33,551 Non-recurring charges -- 16,730 -- - -------------------------------------------------------------------------------------------- Income from operations 62,602 31,527 29,613 Interest expense, net 5,338 5,362 5,111 Other (income) expense, net (58) 271 (5) - -------------------------------------------------------------------------------------------- Income before income taxes and extraordinary items 57,322 25,894 24,507 Income tax provision 21,287 10,013 9,794 - -------------------------------------------------------------------------------------------- Income before extraordinary items 36,035 15,881 14,713 Extraordinary loss on the early extinguishment of debt -- (596) -- - -------------------------------------------------------------------------------------------- Net income $ 36,035 $ 15,285 $ 14,713 ============================================================================================ Income per share of common stock: Primary: Income before extraordinary items $ 1.75 $ 0.85 $ 0.86 Extraordinary loss -- (0.03) -- - -------------------------------------------------------------------------------------------- Net income $ 1.75 $ 0.82 $ 0.86 ============================================================================================
The accompanying notes are an integral part of these consolidated financial statements. 24 CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
JULY 31, 1997 1996 - ----------------------------------------------------------------------------------------------------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE INFORMATION) ASSETS Current Assets: Cash and cash equivalents $ 9,017 $ 16,097 Accounts receivable, net of allowance for uncollectible accounts of $4,665 and $2,660, respectively 112,051 96,490 Inventories 120,974 90,618 Prepaid expenses and other 3,400 1,965 Deferred income taxes 2,103 3,286 - ----------------------------------------------------------------------------------------------------- Total current assets 247,545 208,456 - ----------------------------------------------------------------------------------------------------- Property, plant and equipment, net 127,568 89,519 Intangible assets, net 7,819 4,321 Goodwill, net of accumulated amortization of $4,103 and $3,263, respectively 45,248 16,692 Other assets 1,319 1,117 - ----------------------------------------------------------------------------------------------------- Total assets $ 429,499 $ 320,105 ===================================================================================================== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Notes payable to banks $ 5,618 $ 1,684 Current maturities of long-term debt 4,588 7,536 Accounts payable 41,446 31,279 Accrued payroll and related benefits 13,466 11,689 Accrued taxes 2,048 6,346 Other accrued liabilities 18,354 15,832 - ----------------------------------------------------------------------------------------------------- Total current liabilities 85,520 74,366 - ----------------------------------------------------------------------------------------------------- Long-term debt 126,661 71,384 Other non-current liabilities 5,618 4,815 Deferred income taxes 6,575 4,083 - ----------------------------------------------------------------------------------------------------- Total liabilities 224,374 154,648 - ----------------------------------------------------------------------------------------------------- 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, issued and outstanding 18,755,865 and 18,054,498 shares, respectively 188 181 Paid-in capital 158,670 152,864 Deferred compensation (87) (208) Retained earnings: Retained earnings 100,875 64,840 Recapitalization distribution on July 14, 1988 (52,656) (52,656) - ----------------------------------------------------------------------------------------------------- Retained earnings 48,219 12,184 Currency translation adjustment (1,865) 436 - ----------------------------------------------------------------------------------------------------- Total stockholders' equity 205,125 165,457 - ----------------------------------------------------------------------------------------------------- Total liabilities and stockholders' equity $ 429,499 $ 320,105 =====================================================================================================
The accompanying notes are an integral part of these consolidated financial statements. CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES 25 CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED JULY 31, 1997 1996 1995 - ------------------------------------------------------------------------------------------------------------------- (DOLLARS IN THOUSANDS) Cash flow from operating activities: Net Income $ 36,035 $ 15,285 $ 14,713 Adjustments for non-cash items to reconcile net income to cash provided by operating activities: Depreciation 8,034 4,523 2,423 Amortization 2,041 1,465 1,392 Extraordinary loss on early extinguishment of debt -- 596 -- Acquired in-process research and development -- 9,826 -- Deferred income taxes 3,107 (2,550) (114) Changes in assets and liabilities net of effects of business acquired: Accounts receivable (3,972) (27,972) (6,460) Inventories (12,679) (13,037) (2,855) Prepaid expenses and other (996) (90) (264) Accounts payable 316 5,255 2,479 Accrued payroll and related benefits (674) 5,542 1,411 Accrued taxes (1,918) 4,718 283 Other accrued liabilities 1,348 1,469 1,882 Other non-current assets and liabilities 263 (333) (9) - ------------------------------------------------------------------------------------------------------------------- Net cash provided by operating activities 30,905 4,697 14,881 - ------------------------------------------------------------------------------------------------------------------- Cash flow from investing activities: Purchases of property, plant and equipment (26,704) (15,898) (5,686) Acquisition of businesses, including transaction costs, net of cash acquired (72,445) (104,681) (3,211) - ------------------------------------------------------------------------------------------------------------------- Net cash used in investing activities (99,149) (120,579) (8,897) - ------------------------------------------------------------------------------------------------------------------- Cash flow from financing activities: Change in restricted cash -- -- 1,485 Net change in revolving note borrowings 87,490 24,021 (8,044) Funds provided by long-term debt 7,242 82,517 7,612 Funds used to reduce long-term debt (39,166) (90,950) (7,238) Net proceeds from issuance of common stock 1,006 113,885 1 Net proceeds from exercise of stock options and related tax benefits 4,762 2,406 186 Payments of deferred financing fees -- (2,121) -- - ------------------------------------------------------------------------------------------------------------------- Net cash provided by (used in) financing activities 61,334 129,758 (5,998) - ------------------------------------------------------------------------------------------------------------------- Effect of currency translation of cash (170) 11 (18) - ------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in cash (7,080) 13,887 (32) Cash, beginning of year 16,097 2,210 2,242 - ------------------------------------------------------------------------------------------------------------------- Cash, end of year $ 9,017 $ 16,097 $ 2,210 ===================================================================================================================
The accompanying notes are an integral part of these consolidated financial statements. 26 CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE YEARS ENDED JULY 31, 1997, 1996, AND 1995 - -------------------------------------------------------------------------------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
Common Stock RETAINED ----------------------- EARNINGS CURRENCY TOTAL SHARES PAR PAID-IN (ACCUMULATED TRANSLATION DEFERRED STOCKHOLDERS' ISSUED VALUE CAPITAL DEFICIT) ADJUSTMENTS COMPENSATION EQUITY - ------------------------------------------------------------------------------------------------------------------------------ BALANCE, JULY 31, 1994 9,709,776 $ 97 $ 35,787 $ (18,521) $ (625) $ (495) $ 16,243 Net income -- -- -- 14,713 -- -- 14,713 Exercise of options and related tax benefits 34,127 1 186 -- -- -- 187 Amortization of deferred compensation -- -- -- -- -- 165 165 Change in currency translation adjustments -- -- -- -- 557 -- 557 - ------------------------------------------------------------------------------------------------------------------------------ BALANCE, JULY 31, 1995 9,743,903 98 35,973 (3,808) (68) (330) 31,865 Net income -- -- -- 15,285 -- -- 15,285 Exercise of options and related tax benefits 255,100 3 2,406 -- -- -- 2,409 Stock grants 2,250 -- 45 -- -- -- 45 Amortization of deferred compensation -- -- -- -- -- 122 122 Stock split 4,871,934 48 -- (48) -- -- -- Stock offering 2,970,000 30 113,850 -- -- -- 113,880 Pooling of interest 211,311 2 590 755 -- -- 1,347 Change in currency translation adjustments -- -- -- -- 504 -- 504 - ------------------------------------------------------------------------------------------------------------------------------ BALANCE, JULY 31, 1996 18,054,498 181 152,864 12,184 436 (208) 165,457 Net income -- -- -- 36,035 -- -- 36,035 Exercise of options and related tax benefits 649,637 6 4,762 -- -- -- 4,768 Stock grants 1,512 -- 45 -- -- -- 45 Amortization of deferred compensation -- -- -- -- -- 121 121 Stock issuance 50,218 1 999 -- -- -- 1,000 Change in currency translation adjustments -- -- -- -- (2,301) -- (2,301) - ------------------------------------------------------------------------------------------------------------------------------ BALANCE, JULY 31, 1997 18,755,865 $ 188 $ 158,670 $ 48,219 $ (1,865) $ (87) $ 205,125 ==============================================================================================================================
The accompanying notes are an integral part of these consolidated financial statements. CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES 27 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. OPERATIONS Cable Design Technologies Corporation (the "Company") is a leading designer and manufacturer of technologically advanced electronic data transmission cables and passive components for network structured wiring, automation sound & safety, computer interconnect, communications, wireless, automotive and aviation applications. On July 14, 1988, the Company acquired all of the outstanding capital stock of Cable Design Technologies Inc. The controlling stockholders of Cable Design Technologies Inc. immediately prior to its acquisition by the Company were also the controlling stockholders of the Company; therefore, the accompanying consolidated financial statements have been prepared using Cable Design Technologies Inc.'s historical cost basis of accounting, and the consideration paid to stockholders of Cable Design Technologies Inc. of $52,656,000, was charged to stockholders' equity as a recapitalization distribution in a manner similar to a dividend distribution. 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 the Company and its subsidiaries. All material intercompany transactions and balances have been eliminated in consolidation. 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 included in operations. 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. Translation gains and losses are reported as a currency translation adjustment component of stockholders' equity. Although the acquisition of NORDX/CDT (see Note 13) resulted in a substantial increase in operations outside of the United States, the Company does not believe that its exposure to foreign currency fluctuations is significant for the following reasons: (i) United States export sales are denominated in United States dollars and (ii) the Company's foreign subsidiaries are located in countries with stable economies. 28 CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 2. SIGNIFICANT ACCOUNTING POLICIES CONTINUED 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. 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. 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 difference 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. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles 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. STATEMENTS OF CASH FLOWS Supplemental disclosure of cash flow information.
YEAR ENDED JULY 31, 1997 1996 1995 - ------------------------------------------------------------------------------------------ (DOLLARS IN THOUSANDS) Cash paid during the year for: Interest, net $ 5,308 $ 5,759 $ 5,266 Income taxes $ 16,649 $ 8,965 $ 9,537
RESEARCH AND DEVELOPMENT Research and development costs are charged to expense as incurred. Research and development costs incurred were approximately $7,154,000, $4,813,000, and $1,815,000 for the years ended July 31, 1997, 1996 and 1995, respectively. In connection with the acquisition of NORDX/CDT in February, 1996, $9.8 million of the purchase price was allocated to in-process research and development costs related to the DynaTraX(TM) high performance cross-connect switch based on an independent appraisal of the assets acquired. These costs were immediately charged to operations in accordance with generally accepted accounting practices and are reflected in fiscal 1996 results. CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES 29 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 2. SIGNIFICANT ACCOUNTING POLICIES CONTINUED NEW ACCOUNTING STANDARDS The Company has adopted Statement of Financial Accounting Standards No. 123 "Accounting For Stock-Based Compensation" ("SFAS No. 123"). As allowable under SFAS No. 123, the Company has elected to disclose in the notes to the financial statements the impact on net income and net income per share as if the fair value based compensation cost had been recognized (see Note 10 ). In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS No. 128"). SFAS No. 128 differs from current accounting guidance in that earnings per share is classified as basic earnings per share and diluted earnings per share, compared with primary earnings per share and fully diluted earnings per share under current standards. Basic earnings per share differs from primary earnings per share in that it includes only the weighted average common shares outstanding and does not include any dilutive securities in the calculation. Diluted earnings per share under the new standard differs in certain calculations from fully diluted earnings per share under the existing standards. Adoption of SFAS No. 128 is required for interim and annual periods ending after December 15, 1997. Had the Company applied SFAS No. 128 in fiscal 1997, basic and diluted earnings per share would have been as follows:
YEAR ENDED JULY 31, 1997 1996 1995 - -------------------------------------------------------------------------------- Basic: Income before extraordinary items $ 1.96 $ 0.99 $ 1.01 Extraordinary loss -- (0.03) -- - -------------------------------------------------------------------------------- Net income $ 1.96 $ 0.96 $ 1.01 Diluted: Income before extraordinary items $ 1.75 $ 0.85 $ 0.86 Extraordinary loss -- (0.03) -- - -------------------------------------------------------------------------------- Net income $ 1.75 $ 0.82 $ 0.86
In February 1997, the FASB issued Statement of Financial Accounting Standards No. 129, "Disclosure of Information about Capital Structure"("SFAS No. 129"). SFAS No. 129 consolidates previous standards for disclosing information about an entity's capital structure. Adoption of SFAS No. 129 is required for annual periods ending after December 15, 1997. The Company will adopt SFAS No. 129 in the fiscal year ending July 31, 1998, and does not believe that adoption will have a significant impact on the financial statements. The FASB issued Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income"("SFAS No. 130") in June 1997. SFAS No. 130 establishes reporting standards for a new statement of comprehensive income and its components to be included with the financial statements currently required. SFAS No. 130 is effective for fiscal years beginning after December 15, 1997. The Company will adopt SFAS No. 130 in the fiscal year ending July 31, 1999, and has not yet determined the impact of adoption. 30 CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 2. SIGNIFICANT ACCOUNTING POLICIES CONTINUED In June 1997, the FASB issued Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information"("SFAS No. 131"). SFAS No. 131 establishes standards for reporting information about operating segments. SFAS No. 131 is effective for fiscal years beginning after December 15, 1997. The Company will adopt SFAS No. 131 in the fiscal year ending July 31, 1999, and has not yet determined the impact of adoption. 3. STOCKHOLDERS' EQUITY On December 29, 1995, the Company effected a 3-for-2 stock split in the form of a common stock dividend. Prior period share information presented in the financial statements and related notes have been adjusted to reflect the effect of the split. On February 28, 1996, the Company effected a public offering of 5,700,000 shares (the "Offering") of its common stock, of which 2,730,000 were sold by selling stockholders and 2,970,000 were sold by the Company. The net proceeds received by the Company from the Offering were approximately $113,850,000 based on the public offering price of $40.50 per share. Approximately $94,800,000 of the net proceeds were used to repay certain indebtedness under the Credit Agreement, a substantial portion of which was incurred to finance the acquisition of NORDX/CDT, and approximately $6,900,000 of the net proceeds were used to make the payment in connection with the vesting of outstanding stock appreciation rights. 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-thousandth of a share of a new series of junior participating preferred stock for an exercise price of $150.00. 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 "Acquiror"). If the Acquiror purchases 20% or more of the total outstanding shares of the Company's common stock, or if the Acquiror acquires the Company in a reverse merger, each Right (except those held by the Acquiror) 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 Acquiror) becomes a right to buy shares of the common stock of the Acquiror 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. CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES 31 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 3. STOCKHOLDERS' EQUITY CONTINUED On May 7, 1997, the Board of Directors approved a program under which up to $30 million of the Company's stock may be repurchased on the open market or in privately negotiated transactions, based on market conditions. No shares have been repurchased under the program. 4. INVENTORIES Inventories of the Company consist of the following:
JULY 31, 1997 1996 - -------------------------------------------------------------------------------- (DOLLARS IN THOUSANDS) Raw materials $ 34,424 $ 24,004 Work-in-process 25,608 21,981 Finished goods 60,942 44,633 - -------------------------------------------------------------------------------- $120,974 $ 90,618 ================================================================================
5. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment of the Company consist of the following:
JULY 31, 1997 1996 - ------------------------------------------------------------------------------- (DOLLARS IN THOUSANDS) Asset (asset lives): Land $ 8,418 $ 5,443 Buildings and improvements (10-40 years) 29,843 19,119 Machinery and equipment (3-15 years) 113,158 83,385 Furniture and fixtures (5-15 years) 6,727 4,472 - ------------------------------------------------------------------------------- TOTAL 158,146 112,419 Less: accumulated depreciation (30,578) (22,900) - ------------------------------------------------------------------------------- $ 127,568 $ 89,519 ===============================================================================
6. INTANGIBLE ASSETS Intangible assets of the Company consist of the following:
JULY 31, 1997 1996 - -------------------------------------------------------------------------------- (DOLLARS IN THOUSANDS) Asset (amortization period): Patents, trademarks and other intangibles, net of accumulated amortization of $412,000 and $260,000 respectively (5-10 years) $4,427 $ 297 Loan origination fees, net of accumulated amortization of $506,000 and $362,000, respectively (term of related loans) 1,601 1,785 Non-compete agreements, net of accumulated amortization of $703,000 and $216,000, respectively (5-7 years) 1,791 2,239 - -------------------------------------------------------------------------------- $7,819 $4,321 ================================================================================
32 CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 7. FINANCING ARRANGEMENTS Notes payable to banks consist of 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 new and existing subsidiaries located in the United Kingdom, Sweden and Australia. The European Credit Agreement is comprised of a sterling overdraft and multi-currency bank guarantee demand facility in an aggregate amount of approximately $12.0 million. Terms of the facility permit borrowings based on a percentage of certain accounts receivable and inventory at applicable margins over the LIBOR interest rate. The Australian Facility is a bank revolving demand facility with maximum borrowings of approximately $0.8 million. The Foreign Facilities are guaranteed by the Company. The Company had outstanding and maximum borrowings of $5,618,000 and $1,684,000 under the Foreign Facilities as of and for the years ended July 31, 1997 and 1996, respectively. Weighted average outstanding borrowings were $4,516,000 and $1,301,000, and the effective interest rates were 6.63% and 9.29% for the years ended July 31, 1997 and 1996, respectively. Long-term debt consists of the following:
JULY 31, 1997 1996 - -------------------------------------------------------------------------------- (DOLLARS IN THOUSANDS) U.S. revolver (with interest at LIBOR plus 0.5%, or 6.19%, at July 31, 1997) and due April 10, 2002 $ 50,500 $ -- Canadian revolver (with interest at LIBOR plus 0.5%, or 4.02%, at July 31, 1997) and due April 10, 2002 65,585 32,458 Canadian term loan -- 34,398 Other indebtedness 15,164 12,064 - -------------------------------------------------------------------------------- 131,249 78,920 Less: current portion 4,588 7,536 - -------------------------------------------------------------------------------- $126,661 $ 71,384 ================================================================================
On February 2, 1996, the Company entered into a credit agreement (the "Credit Agreement") which was subsequently reconfigured as a result of the proceeds applied against debt resulting from the Offering (see Note 3) on February 28, 1996. Proceeds from the Credit Agreement were utilized to retire the debt outstanding under the previous credit agreement and to purchase the net assets of Northern Telecom Limited's communications cable and IBDN network structured wiring products businesses ("NORDX/CDT"). The Credit Agreement, as revised on April 10, 1997, is comprised of a $105.0 million revolver (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 prime or the London Inter-Bank Offered Rate ("LIBOR") are based on the attainment of certain performance factors. A commitment fee of .15% to .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. CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES 33 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 7. FINANCING ARRANGEMENTS CONTINUED On July 31, 1997 the Company had approximately $71.4 million of availability under the U.S. and Canadian Revolver loans and $4.3 million of availability under its Foreign Facilities. The scheduled aggregate annual principal payments of long-term debt as of July 31, 1997, are as follows:
YEAR ENDED: LONG-TERM DEBT - -------------------------------------------------------------------------------- (DOLLARS IN THOUSANDS) 1998 $ 4,588 1999 9,078 2000 212 2001 60 2002 116,174 Thereafter 1,137 - -------------------------------------------------------------------------------- $131,249 ================================================================================
As a result of the February 1996 debt refinancing and the net proceeds of the Offering in fiscal 1996, the Company recognized $993,000 ($596,000 net of income tax) of extraordinary expense related to the early extinguishment of debt. 8. RETIREMENT AND OTHER EMPLOYEE BENEFITS The Company and its subsidiaries have various defined contribution and defined benefit pension plans covering substantially all of its employees. In connection with the acquisition of NORDX/CDT, the Company established certain new defined benefit plans. 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 PLAN (U.S.) For the U.S. defined benefit plan (the "U.S. Plan"), the Company's funding policy is to annually contribute an amount based upon actuarial and economic assumptions designed to achieve adequate funding of projected benefit obligations. No contributions were made in fiscal 1997, 1996, and 1995. The components of pension credit for fiscal 1997, 1996, and 1995 are as follows:
YEAR ENDED JULY 31, 1997 1996 1995 - ------------------------------------------------------------------------------- (DOLLARS IN THOUSANDS) Service cost for benefits earned during the year $ 26 $ 28 $ 23 Interest cost on projected benefit obligation 135 127 126 Less: actual return on assets (460) (347) (171) Net amortization and deferral 268 185 3 - ------------------------------------------------------------------------------- Net periodic pension credit $ (31) $ (7) $ (19) ===============================================================================
34 CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 8. RETIREMENT AND OTHER EMPLOYEE BENEFITS CONTINUED The funded status of the U.S. Plan as of July 31, 1997 and 1996 was as follows:
JULY 31, 1997 1996 - ------------------------------------------------------------------------------- (DOLLARS IN THOUSANDS) Actuarial present value of benefit obligations: Vested $ 1,858 $ 1,753 Non-vested 55 48 - ------------------------------------------------------------------------------- Accumulated benefit obligation $ 1,913 $ 1,801 =============================================================================== Projected benefit obligation $ 1,913 $ 1,801 Plan assets at fair value 2,395 2,073 - ------------------------------------------------------------------------------- Plan assets in excess of projected benefit obligation 482 272 Unrecognized net asset at transition (23) (64) Unrecognized net loss 11 231 - ------------------------------------------------------------------------------- Prepaid pension costs $ 470 $ 439 ===============================================================================
The assumed discount rate used for the U.S. Plan and the expected rate of return on plan assets were 7.5% and 9.5%, respectively, for all years presented. DEFINED BENEFIT PLANS (CANADIAN) For the Canadian defined benefit plans (the "Canadian Plans"), government regulations require the Company to monthly fund contributions based upon actuarial and economic assumptions designed to achieve adequate funding of projected benefit obligations. The components of pension expense for fiscal 1997 and 1996 are as follows:
YEAR ENDED JULY 31, 1997 1996 - -------------------------------------------------------------------------------- (DOLLARS IN THOUSANDS) Service cost for benefits earned during the year $ 1,690 $ 696 Interest cost on projected benefit obligation 265 62 Less: return on assets (97) -- - -------------------------------------------------------------------------------- Net periodic pension expense $ 1,858 $ 758 ================================================================================
The funded status of the Canadian Plans as of July 31, 1997 and 1996, was as follows:
YEAR ENDED JULY 31, 1997 1996 - -------------------------------------------------------------------------------- (DOLLARS IN THOUSANDS) Actuarial present value of benefit obligations: Vested $ 1,610 $ 496 Non-vested 1,418 936 - -------------------------------------------------------------------------------- Accumulated benefit obligation $ 3,028 $ 1,432 ================================================================================ Projected benefit obligation $ 3,647 $ 1,610 Plan assets at fair value 1,944 -- - -------------------------------------------------------------------------------- Projected benefit obligation in excess of plan assets 1,703 1,610 Less: unrecognized net loss (94) -- - -------------------------------------------------------------------------------- Projected benefit obligation in excess of plan assets recognized in the consolidated balance sheets $ 1,609 $ 1,610 ================================================================================
CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES 35 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 8. RETIREMENT AND OTHER EMPLOYEE BENEFITS CONTINUED The assumed discount rate was 8.0%; the assumed growth rate of compensation was 5.0%; and the expected rate of return on plan assets was 8.0%, for both years presented. The Company also maintains defined contribution profit-sharing plans for all eligible employees. Certain contributions are made under the matching provisions 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 $3,210,000, $2,450,000 and $1,737,000 for the years ended July 31, 1997, 1996 and 1995, respectively. The Company also provides performance based and discretionary incentive payments to senior management and other key employees subject to the approval of the Compensation Committee of the Board of Directors. Expenses incurred by the Company as a result of these incentive payments were $5,492,000, $3,791,000 and $2,374,000 for the years ended July 31, 1997, 1996 and 1995, respectively. 9. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS In connection with the acquisition of NORDX/CDT the Company assumed and continues to provide certain postretirement health and life insurance benefits under unfunded plans. The components of expense in fiscal 1997 and 1996 were as follows:
YEAR ENDED JULY 31, 1997 1996 - -------------------------------------------------------------------------------- (DOLLARS IN THOUSANDS) Service cost of benefits earned during the period $202 $ 97 Interest cost on accumulated postretirement benefit obligation 293 132 - -------------------------------------------------------------------------------- Net postretirement benefit expense $495 $229 ================================================================================
The following sets forth the plans' funded status reconciled with the amount recognized in the Company's Consolidated Balance Sheets:
JULY 31, 1997 1996 - -------------------------------------------------------------------------------- (DOLLARS IN THOUSANDS) Accumulated postretirement benefit obligation $ 4,110 $ 3,441 Plan assets at fair value -- -- - -------------------------------------------------------------------------------- Accumulated benefit obligation in excess of plan assets 4,110 3,441 Less: unrecognized net loss (189) -- - -------------------------------------------------------------------------------- Accrued postretirement benefit liability $ 3,921 $ 3,441 ================================================================================
Future benefit costs were estimated assuming medical costs would increase at approximately a 10% annual rate for 1996, 8.25% for 1997, 6.50% for 1998 and then remain at a 5% annual growth rate thereafter and dental costs would increase at approximately 5.25% for 1996, 4.75% for 1997 and 4.25% thereafter. Assuming a 1% increase in this annual trend, the accumulated postretirement benefit obligation would have increased by $365,000 and $449,000 at July 31, 1997 and 1996, respectively and the postretirement benefit expense would have increased by $58,000 and $37,000 for fiscal 1997 and 1996, respectively. The weighted average discount rate used to estimate the accumulated postretirement benefit obligation was 8.0%. 36 CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 10. STOCK BENEFIT PLANS 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, 2,777,696 options had been granted under the Former Plan to directors, executives and other key employees of the Company. Options issued under the Former Plan have an exercise price equal to the fair market value of the common stock on the date of grant (July 1988 through September 1992) and expire on the earlier of ten years after date of grant 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. A Long Term Performance Incentive Plan (the "Stock Option Plan") was adopted September 23, 1993, and provides for the granting to employees and other key individuals the following types of incentive stock awards: stock options, stock appreciations rights, restricted stock, performance units, grants and other types of 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 436,722 shares of common stock were reserved for issuance pursuant to the Stock Option Plan. In fiscal 1996 and fiscal 1995, non-qualified stock options of 270,600 and 150,000, respectively, were granted to various employees. No awards were granted under the Stock Option Plan in fiscal 1997. The terms of the stock options include ratable vesting over five years and an exercise price equal to the fair market value of the stock at the date of grant. A Supplemental Long Term Performance Incentive Plan (the "Supplemental Plan") was adopted in December 1995 and authorizes the grant of awards with respect to 1,200,000 shares of common stock. 750,000 shares are reserved for grants only to new members of the Company's management who are employed in connection with acquisitions by the Company. Under the Supplemental Plan, and in conjunction with acquisitions, the Company granted 300,000 and 399,400 options under the Supplemental Plan in fiscal 1997 and fiscal 1996, respectively. The terms of the stock options include ratable vesting over five years and an exercise price equal to the fair market value of the stock at the date of grant. During fiscal 1997, 125,600 and 399,400 of the options previously issued under the Stock Option Plan and Supplemental Plan, respectively, were amended. The terms of the amended stock options include ratable vesting over five years and an exercise price equal to the fair market value of the stock at the date of the amendment. The amended options are reflected for disclosure purposes as a cancelation and reissuance. CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES 37 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 10. STOCK BENEFIT PLANS CONTINUED The Company accounts for the Stock Option Plan and the Supplemental Plan under APB Opinion No. 25, under which no compensation cost has been recognized. Had compensation cost for these plans been determined consistent with SFAS No. 123, the Company's net income and earnings per share on a pro forma basis would have been as follows:
YEAR ENDED JULY 31, 1997 1996 - --------------------------------------------------------------------------- Net income: As reported $ 36,035 $ 15,285 Pro Forma $ 34,557 $ 14,722 Primary EPS: As reported $ 1.75 $ 0.82 Pro Forma $ 1.69 $ 0.79
The SFAS No. 123 method of accounting is effective for options granted after August 1, 1995. Therefore, 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. As a result, compensation cost as disclosed above may not be representative of that to be expected in future years. Certain information regarding stock options issued by the Company is summarized below:
YEAR ENDED JULY 31, 1997 1996 1995 - ----------------------------------------------------------------------------------------- WTD. WTD. WTD. SHARES AVG. EX. SHARES AVG. EX. SHARES AVG. EX. PRICE PRICE PRICE - ----------------------------------------------------------------------------------------- Outstanding, beginning of year 3,278,327 $ 8.50 2,863,414 $ 1.55 2,770,605 $ 1.13 Granted/reissued 825,000 24.40 670,013 35.62 150,000 9.33 Exercised (649,637) 1.39 (255,100) 1.72 (57,191) 1.65 Canceled (525,000) 39.25 -- -- -- -- - ----------------------------------------------------------------------------------------- Outstanding, end of year 2,928,690 $ 9.04 3,278,327 $ 8.50 2,863,414 $ 1.55 Exercisable at end of year 1,887,906 $ 1.44 2,447,564 $ 1.13 2,634,076 $ 1.07 - ----------------------------------------------------------------------------------------- Weighted average fair value of options granted since 8-1-95 $13.90 $ 17.03 N/A
As of July 31, 1997, 1,821,971 of the 2,928,690 options outstanding have exercise prices between $0.67 and $2.75, with a weighted average exercise price of $1.03 and a weighted average remaining contractual life of 1.3 years. All of these options are exercisable. 38 CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 10. STOCK BENEFIT PLANS CONTINUED A total of 136,719 of the options outstanding have exercise prices between $4.58 and $9.33, with a weighted average exercise price of $8.95 and a weighted average remaining contractual life of 7.1 years. Of these options 45,435 are exercisable. The remaining 970,000 options have exercise prices between $18.75 and $27.63, with a weighted average exercise price of $24.11 and a weighted average remaining contractual life of 9.0 years. Of these options 20,500 are exercisable. 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 used for grants in fiscal years ending July 31, 1997 and 1996:
1997 1996 - ---------------------------------------------------------------------------------------------- STOCK OPTION SUPPLEMENTAL STOCK OPTION SUPPLEMENTAL PLAN PLAN PLAN PLAN - ---------------------------------------------------------------------------------------------- Risk-free interest rate 6.47% 6.54% 6.02% 5.59% Expected dividend yield 0% 0% 0% 0% Expected life 5 years 5 years 5 years 5 years Expected volatility 59.0% 58.4% 50.6% 47.2%
On May 1, 1994, the Company awarded 65,505 shares of common stock grants to certain key employees under a management stock award plan for a nominal amount per share. The fair market value of the Company's common stock on the award date was $7.83 per share. These grants vest ratably over a four year period. The aggregate market value of the shares of common stock granted under this plan is considered unearned compensation at the time of grant and compensation is earned ratably over the vesting period. At July 31, 1997, the Company had no additional shares reserved for issuance under this particular plan. 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. There were 1,512 and 2,250 shares granted under the Non-Employee Plan in fiscal 1997 and fiscal 1996, respectively. The Company recognizes compensation cost for the Non-Employee Plan in accordance with SFAS No. 123's requirements for non-employee stock based awards. In fiscal 1992, the Company granted 184,940 stock appreciation rights ("SARs") to an officer/stockholder. Each SAR entitled the holder to a payment equal to the excess of the fair value of the SAR upon vesting over a base of $1.33 per SAR. As a result of the Initial Public Offering and the Offering all SARs, totaling 2,743 and 182,197, respectively, vested. The related expense recognized and paid in fiscal 1994 and fiscal 1996 was $12,806 and $6,904,000, respectively. 11. INCOME TAXES The Company accounts for income taxes in accordance with SFAS No. 109. 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. CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES 39 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 11. INCOME TAXES CONTINUED Income before income taxes and extraordinary items, as shown in the accompanying consolidated statements of income, includes the following components:
YEAR ENDED JULY 31, 1997 1996 1995 - -------------------------------------------------------------------------------- (DOLLARS IN THOUSANDS) Domestic $35,031 $25,751 $23,750 Foreign 22,291 143 757 - -------------------------------------------------------------------------------- Income before income taxes and extraordinary items $57,322 $25,894 $24,507 ================================================================================
Taxes on income, as shown in the accompanying consolidated statements of income, include the following components:
YEAR ENDED JULY 31, 1997 1996 1995 - ------------------------------------------------------------------------------------- (DOLLARS IN THOUSANDS) Current provision: Federal $ 11,980 $ 8,525 $ 7,518 State 2,652 2,261 2,154 Foreign 3,548 1,777 236 - ------------------------------------------------------------------------------------- Total current provision 18,180 12,563 9,908 Deferred provision (benefit), predominantly foreign 3,107 (2,550) (114) - ------------------------------------------------------------------------------------- Income tax provision $ 21,287 $ 10,013 $ 9,794 =====================================================================================
The effective rate differs from the statutory rate for the following reasons:
YEAR ENDED JULY 31, 1997 1996 1995 - --------------------------------------------------------------------------------------------- (DOLLARS IN THOUSANDS) Tax provision based on the U.S. federal statutory tax rate $ 20,063 $ 9,063 $ 8,577 State income taxes, net of federal income tax benefit 1,724 1,470 1,400 Amortization of excess cost over net assets acquired 201 186 117 Research and development tax credit (Canada) (870) (470) -- All other, net 169 (236) (300) - --------------------------------------------------------------------------------------------- Income tax provision $ 21,287 $ 10,013 $ 9,794 =============================================================================================
40 CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 11. INCOME TAXES CONTINUED As a result of acquisitions during fiscal 1996 net deferred tax liabilities of $1,977,000 were recorded. Fiscal 1997 net deferred tax liabilities reflect reclassifications of $646,000 as a result of finalization of purchase accounting under APB 16. The components of the deferred tax assets and liabilities recorded in the accompanying balance sheets at July 31, 1997 and 1996, were as follows:
JULY 31, 1997 1996 - ------------------------------------------------------------------------------- (DOLLARS IN THOUSANDS) Deferred tax assets Reserves recorded for: Accruals $ 685 $ 1,134 Postretirement and pension accruals 1,772 1,383 Insurance programs 429 597 Asset valuations 2,103 1,767 Uniform cost capitalization 1,188 410 Other 551 386 - ------------------------------------------------------------------------------- Total deferred tax assets $ 6,728 $ 5,677 =============================================================================== Deferred tax liabilities: Excess of book basis over tax basis of fixed assets $(10,802) $ (6,221) Other (224) (253) - ------------------------------------------------------------------------------- Total deferred tax liabilities (11,026) (6,474) - ------------------------------------------------------------------------------- Net deferred taxes before valuation allowance (4,298) (797) Valuation allowance (foreign NOL) (174) -- - ------------------------------------------------------------------------------- Net deferred taxes $ (4,472) $ (797) - ------------------------------------------------------------------------------- Reconciliation to the balance sheets- Current portion of deferred taxes, net 2,103 3,286 Long-term deferred taxes, net (6,575) (4,083) - ------------------------------------------------------------------------------- Net deferred taxes $ (4,472) $ (797) ===============================================================================
12. NET INCOME PER SHARE OF COMMON STOCK Primary net income per share of common stock is calculated by dividing net income by the weighted average number of shares of common stock plus incremental common stock equivalent shares (shares issuable upon exercise of options and warrants). Incremental common stock equivalent shares are calculated for each measurement period based on the treasury stock method. The repurchases are assumed to be made at the average fair market value price per share of the Company's common stock during the measurement period. Fully diluted net income per share of common stock assumes similar conversions as discussed above, except that the incremental weighted average common stock equivalent shares based upon the treasury stock method are assumed to be repurchased at the higher of the average market price per share during the measurement period or the period end market value of the Company's common stock. CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES 41 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 12. NET INCOME PER SHARE OF COMMON STOCK CONTINUED The weighted average number of shares of common stock outstanding and common stock equivalents were as follows:
JULY 31, 1997 1996 1995 - ------------------------------------------------------------------------------------------ Primary 20,591,855 18,626,792 17,082,550 Fully diluted 20,704,778 18,626,792 17,172,848
13. BUSINESS ACQUISITIONS On April 7, 1997, the Company purchased the operating assets of Dearborn Wire and Cable L.P. and Subsidiaries ("Dearborn/CDT"). The acquisition was accounted for using the purchase method under APB Opinion No. 16 ("APB 16") and, subject to certain final purchase adjustments, the assets and liabilities assumed were as follows:
- ------------------------------------------------------------------------------- (DOLLARS IN THOUSANDS) Assets acquired $ 87,932 Liabilities assumed (13,837) Notes issued (6,595) - ------------------------------------------------------------------------------- Net cash paid $ 67,500 ===============================================================================
On February 2, 1996, the Company completed the acquisition of Northern Telecom Ltd's communications cable and IBDN network structured wiring products businesses ("NORDX/ CDT"). On September 22, 1995, the Company purchased the operating assets of the Raydex Cable division of Volex Group p.l.c. of Manchester, England ("Raydex/CDT"). Both acquisitions were accounted for under APB 16 and the assets and liabilities assumed were as follows:
NORDX/CDT RAYDEX/CDT - -------------------------------------------------------------------------------- (DOLLARS IN THOUSANDS) Assets acquired $ 112,271 $ 15,149 Liabilities assumed (26,134) (4,950) Notes issued -- (7,199) - ------------------------------------------------------------------------------- Net cash paid $ 86,137 $ 3,000 ===============================================================================
The pro forma information presented below related to the transactions assumes the acquisition of Dearborn/CDT had occurred on August 1, 1995 and the acquisitions of NORDX/CDT and Raydex/CDT had occurred on August 1, 1994. The pro forma information presented for fiscal 1995 and 1996 also includes the effect of the Offering (see Note 3) which occurred concurrently with the acquisition of NORDX/CDT, and excludes the effect of non-recurring and extraordinary charges related to the acquisition of NORDX/CDT and the Offering.
(PRO FORMA, UNAUDITED) YEAR ENDED JULY 31, 1997 1996 1995 - -------------------------------------------------------------------------------- (DOLLARS IN THOUSANDS) Net sales $577,531 $550,332 $387,532 Income before extraordinary items 38,336 32,173 20,073 Net income 38,336 32,173 20,073 Net income per common share $ 1.86 $ 1.58 $ 1.00
42 CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 13. BUSINESS ACQUISITIONS CONTINUED The pro forma financial information presented above does not purport to present what the Company's results of operations would actually have been if the acquisition of Dearborn/CDT had occurred on August 1, 1995 and the acquisitions of Raydex/CDT and NORDX/CDT had occurred on August 1, 1994, or to project the Company's results of operations for any future period. On June 4, 1996, the Company acquired the outstanding stock of Cekan A/S, of Gjern, Denmark. The acquisition was accounted for using the purchase method under APB 16. The prior results are not material; therefore, pro forma financial information is not presented. On July 25, 1996, the Company purchased X-Mark Industries of Washington, Pennsylvania in a pooling-of-interest transaction for 211,311 shares of the Company's common stock. The transaction is not material to the consolidated financial statements and accordingly, prior period financial statements have not been restated. On March 14, 1997, the Company acquired 51% of the outstanding stock of Stronglink, Pty. Ltd., of Melbourne, Australia. The prior results are not material, therefore, pro forma financial information is not presented. Under APB 16, the Company makes a preliminary allocation of the purchase price and has up to one year to finalize purchase adjustments related to its acquisitions. 14. GEOGRAPHIC SEGMENTS AND EXPORT SALES The following summarizes the revenues and income generated by, and the identifiable assets of, the Company's businesses located predominantly in each geographic segment:
NORTH AMERICA EUROPE CONSOLIDATED - ------------------------------------------------------------------------------------------ (DOLLARS IN THOUSANDS) Segment Data: Year ended 1997: Revenues $ 453,984 $ 63,012 $ 516,996 Income from operations 58,298 4,304 62,602 Identifiable assets 377,767 51,732 429,499 Year ended 1996: Revenues 308,254 49,098 357,352 Income from operations 29,017 2,510 31,527 Identifiable assets 270,028 50,077 320,105 Year ended 1995: Revenues 174,822 14,119 188,941 Income from operations 28,230 1,383 29,613 Identifiable assets 102,381 16,595 118,976
CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES 43 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 14. GEOGRAPHIC SEGMENTS AND EXPORT SALES CONTINUED The breakdown of total export sales (sales of products manufactured in the United States and sold to customers outside of the United States) by geographical location was:
YEAR ENDED JULY 31, 1997 1996 1995 - ------------------------------------------------------------------------------------------ (DOLLARS IN THOUSANDS) Export Sales: Europe* $ 15,283 $ 19,877 $ 13,631 Other* 15,453 9,140 6,965 Total export sales* $ 30,736 $ 29,017 $ 20,596
* Includes intercompany sales to the Company's U.K., Canadian and Swedish subsidiaries of $6,357,000, $3,674,000 and $3,262,000 for the years ended July 31, 1997, 1996 and 1995, respectively. 15. LEASE COMMITMENTS Rental expense under all leases was approximately $6,313,000, $3,721,000 and $1,642,000 for the years ended July 31, 1997, 1996 and 1995, respectively. Operating leases relate principally to manufacturing, warehouse, office space and various manufacturing and office equipment. Minimum annual rent payable under noncancelable leases in each of the next five years and thereafter are as follows:
YEAR ENDING JULY 31, TOTAL - -------------------------------------------------------------------------------- (DOLLARS IN THOUSANDS) 1998 $ 5,464 1999 3,325 2000 2,509 2001 1,494 2002 955 Thereafter 2,162 - -------------------------------------------------------------------------------- $ 15,909 ================================================================================
16. COMMITMENTS AND CONTINGENCIES Certain claims have been asserted against the Company in connection with industrial accidents which are being administered by the Company's insurance carriers. Other claims have been asserted 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. As of July 31, 1997, the Company had outstanding letters of credit of $929,000 under its workers' compensation policy. The Company also maintains a $1,300,000 bond in connection with workers' compensation self-insurance in the state of Massachusetts. 44 CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 17. RELATED PARTY TRANSACTIONS The Company has an agreement to pay management fees of $12,500 per quarter to each of two beneficial stockholders. Selling, general and administrative expenses include $100,000 in 1997, 1996, and 1995 for fees paid under this agreement. 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 $1,616,000, $1,840,370 and $1,729,000 for the years ended July 31, 1997, 1996 and 1995, respectively. 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, 1997, the Company does not believe it has any significant concentrations of credit risk. A group of customers under common control accounted for 11% of sales for both fiscal 1997 and 1996, and accounted for 15% of accounts receivable at July 31, 1996. No single customer accounted for more than 10% of sales for fiscal 1995. 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. 19. NON-RECURRING CHARGES In connection with the NORDX/CDT acquisition, the Company engaged an independent appraisal firm to prepare a valuation of the assets acquired to serve as a basis for allocation of the purchase price. As a result of the valuation, the fair market value of the acquired in-process research and development of the DynaTraX(TM) automated network cross-connect switch was determined to be $9.8 million. In accordance with generally accepted accounting practices this amount was charged to operations upon the acquisition of NORDX/CDT in the third quarter of fiscal year 1996. In addition, stock appreciation rights of $6.9 million vested and were paid upon the completion of the Offering (see Note 3). CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES 45 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 20.QUARTERLY FINANCIAL INFORMATION (UNAUDITED) Quarterly financial data are summarized as follows:
FISCAL YEAR 1997 FIRST SECOND THIRD FOURTH - ----------------------------------------------------------------------------------------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) Net sales $ 115,971 $ 113,957 $ 129,965 $ 157,103 Gross profit 34,705 35,262 38,657 46,312 Income from operations 13,980 13,806 15,463 19,353 Net income 8,138 7,940 9,191 10,766 Per share information: Net income per common share $ 0.40 $ 0.39 $ 0.45 $ 0.52 FISCAL YEAR 1996 - ----------------------------------------------------------------------------------------- Net sales $ 65,054 $ 67,243 $ 112,222 $ 112,833 Gross profit 20,951 21,726 34,944 34,198 Income from operations 10,755 10,345 (3,422)(1) 13,849 Net income before extraordinary items 5,708 5,378 (3,357)(2) 8,152 Net income 5,708 5,378 (3,953)(3) 8,152 Per share information: Income per common share before extraordinary items $ 0.33 $ 0.31 $ (0.20)(2) $ 0.40 Net income per common share $ 0.33 $ 0.31 $ (0.24)(3) $ 0.40
(1) Includes $16.7 million of non-recurring charges (see Note 19). (2) Excluding non-recurring charges of $16.7 million (see Note 19), net income before extraordinary items was $7.2 million, or $0.37 per share. (3) Excluding non-recurring and extraordinary charges (see Notes 7 and 19), net income was $7.2 million, or $0.37 per share. 21. SUBSEQUENT EVENTS On September 10, 1997, the Company acquired all the outstanding stock of Barcel Acquisition Corporation, and its subsidiaries, based in Irvine, California. 46 CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
FOR THE FISCAL YEAR ENDED JULY 31, 1997 1996 1995 1994 1993 - -------------------------------------------------------------------------------------------------------------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) Income Statement Data: Net sales $ 516,996 $ 357,352 $ 188,941 $ 145,389 $ 126,650 Income from operations 62,602 31,527(2) 29,613 21,801 19,577 Income before extraordinary items 36,035 15,881 14,713 10,138 6,026(1) Extraordinary item (net of tax): Loss on early extinguishment of debt -- (596) -- (3,998) -- Net income 36,035 15,285(3) 14,713 6,140 6,026 Net income per share of common stock: Primary 1.75 0.82(3) 0.86 0.40 0.45 Fully diluted 1.74 0.82(3) 0.86 0.40 0.41 Weighted average number of shares of stock outstanding: Primary 20,592 18,627 17,083 15,483 13,488 Fully diluted 20,705 18,627 17,173 15,537 14,586 AS OF JULY 31, 1997 1996 1995 1994 1993 - -------------------------------------------------------------------------------------------------------------- Balance Sheet Data: Total assets $ 429,499 $ 320,105 $ 118,976 $ 102,719 $ 83,749 Long-term debt 126,661 71,384 52,696 63,828 77,472
(1) Includes a non-recurring charge of $650,000 related to an acquisition of a European manufacturer which was not consummated. (2) Includes $16.7 million of non-recurring charges (see Note 19). (3) Excluding non-recurring and extraordinary charges (see Notes 7 and 19), net income would have been $26.4 million, or $1.42 per share. CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES 47 DIRECTORS, OFFICERS AND CORPORATE INFORMATION DIRECTORS BERNARD J. BANNAN* President and Chief Executive Officer, Binley, Inc. BRYAN C. CRESSEY** Partner, Golder, Thoma, Cressey, Rauner, Inc. MYRON S. GELBACH JR. Independent Financial Consultant MICHAEL F. O. HARRIS Managing Director, The Northern Group GLENN KALNASY Managing Director, The Northern Group PAUL M. OLSON President and Chief Executive Officer, Cable Design Technologies Corporation RICHARD C. TUTTLE Principal, Prospect Partners * Deceased ** Chairman of the Board of Directors Cable Design Technologies Corporation EXECUTIVE OFFICERS PAUL M. OLSON President and Chief Executive Officer GEORGE C. GRAEBER Executive Vice President President, Montrose/CDT MICHAEL A. DUDLEY Executive Vice President President, CDT International NORMAND R. BOURQUE Executive Vice President President, NORDX/CDT DAVID R. HARDEN Senior Vice President President, West Penn/CDT KENNETH O. HALE Vice President Chief Financial Officer and Secretary CHARLES B. FROMM Vice President General Counsel ANNUAL MEETING Tuesday, December 9, 1997 10:00 A.M. (Eastern Time) Pittsburgh Hilton and Towers Gateway Center 600 Commonwealth Place Pittsburgh, Pennsylvania 15222 A copy of the Company's annual report to the Securities and Exchange Commission on Form 10-K for fiscal 1997 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: BANKBOSTON, N.A. c/o Boston EquiServe Limited Partnership P.O. Box 8040 Boston, Massachusetts 02266-8040 (617) 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 fiscal periods indicated. The Company did not pay cash dividends on the common stock during the periods set forth.
FISCAL 1997 FISCAL 1996 - -------------------------------------------------------------------------------- HIGH LOW HIGH LOW - -------------------------------------------------------------------------------- First 40 22 1/2 22 14 7/8 Second 35 1/4 25 1/2 44 21 1/8 Third 31 1/2 18 1/8 51 30 Fourth 34 5/8 16 3/8 49 1/4 24 1/4
CDT [LOGO] ----------- NYSE [LOGO] 48 CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES CORPORATE DIRECTORY HEADQUARTERS ADMIRAL/CDT* Foster Plaza 7 931 Seville Road 661 Andersen Drive P.O. Box 1003 Pittsburgh, PA 15220 Wadsworth, OH 44281 Telephone: (412) 937-2300 (330) 336-7651 Fax: (412) 937-9690 Internet: www.cdtc.com Barcel/CDT, Inc. 2851 Alton Avenue CDT INTERNATIONAL* Irvine, CA 92714 Zeal Court (714) 863-0300 Moorfield Road Yeadon Leeds LS19 7BN MANHATTAN/CDT* United Kingdom 203 Progress Drive 44-1132-509659 Manchester, CT 06040 (860) 643-3457 WEST PENN/CDT* P.O. Box 762 RAYDEX/CDT LTD. 2833 West Chestnut Street Gladden Place, West Gillibrands Washington, PA 15301 Skelmersdale, Lancashire WN8 9SX (412) 222-7060 United Kingdom 44-1695-733061 MOHAWK/CDT* 9 Mohawk Drive NORDX/CDT, INC. Leominster, MA 01453 105 Marcel-Laurin Boulevard (508) 537-9961 Saint Laurent, Quebec, Canada H4N 2M3 (514) 639-2345 MONTROSE/CDT* 28 Sword Street CEKAN/CDT A/S Auburn Industrial Park Videh0jvej 4 Auburn, MA 01501 DK-8883 Gjern (508) 791-3161 Denmark 45-86-87-52-99 PHALO/CDT* 90 Progress Drive X-MARK/CDT, INC. Manchester, CT 06040 2001 N. Main Street (860) 649-6620 Washington, PA 15301 (412) 228-7373 ANGLO/CDT (Anglo-American Cables Ltd.) DEARBORN/CDT, INC. Moorfield Industrial Estate 250 West Carpenter Avenue Moorfield Road, Zeal Court Wheeling, IL 60090 Yeadon Leeds LS19 7BN (847) 459-1000 United Kingdom 44-1132-507726 THERMAX/CDT, INC. 19-02 Whitestone Expressway NEK/CDT Whitestone, NY 11357 (NEK KABEL AB) (718) 746-7800 Skene Skog Ind-omr, Box 208 S-511 22 Kinna STRONGLINK/CDT PTY. LTD. Sweden 53 Murphy Street 46-320-14260 Richmond, VIC 3121 Australia 61-3-9427-7133 * A DIVISION OF CABLE DESIGN TECHNOLOGIES INC. CDT [LOGO] CABLE DESIGN TECHNOLOGIES CORPORATION HEADQUARTERS Foster Plaza 7, 661 Andersen Drive Pittsburgh, PA 15220 Telephone (412) 937-2300 Fax (412) 937-9690 1242-AR-97 EX-21.1 4 LIST OF SUBSIDIARIES EXHIBIT 21.1 CABLE DESIGN TECHNOLOGIES CORPORATION SUBSIDIARIES OF THE REGISTRANT LIST OF SUBSIDIARIES OF CABLE DESIGN TECHNOLOGIES CORPORATION Anglo-American Cables Limited (Incorporated - United Kingdom) Cable Design Technologies, Inc. (Incorporated - State of Washington) CDT International Holdings Inc. (Incorporated - Delaware) Cekan/CDT A/S (Incorporated - Denmark) NEK Kabel AB (Incorporated - Sweden) NORDX/CDT Asia Limited (Incorporated - Hong Kong) NORDX/CDT, Corp. (Incorporated - Delaware) NORDX/CDT, Limited (Incorporated - United Kingdom) NORDX/CDT, Inc. (Incorporated - Canada) NORDX/CDT - IP Corp. (Incorporated - Delaware) Noslo Limited (Incorporated - United Kingdom) Raydex/CDT Limited (Incorporated - United Kingdom) Wire Group International, Limited (Incorporated - United Kingdom) X-Mark/CDT Inc. (Incorporated - Pennsylvania) Dearborn/CDT, Inc. (Incorporated - Delaware) Thermax/CDT, Inc. (Incorporated - Delaware) Barcel Wire & Cable Corp. (Incorporated - California) Barcel Acquisition Corp. (Incorporated - California) Santa Fe Textiles, Inc. (Incorporated - California) Stronglink/CDT Pty. Ltd. (Incorporated - Australia, 51% ownership) SKL, S.A.S. (Incorporated - France, joint venture) EX-23.1 5 CONSENT OF ARTHUR ANDERSEN LLP EXHIBIT 23.1 CABLE DESIGN TECHNOLOGIES CORPORATION CONSENT OF INDEPENDENT PUBLIC ACCOUNTANT As independent public accountants, we hereby consent to the incorporation by reference in this Form 10-K of our reports dated September 9, 1997, included in Cable Design Technologies Corporation and Subsidiaries' annual report for the year ended July 31, 1997, and of our reports, included or incorporated by reference in this Form 10-K, into the Company's previously filed Form S-8 Registration Statements File No. 33-78418, File No. 33-73272, File No. 333-2450, File No. 333-06743, and File No. 333-17443 and Form S-3 Registration Statement File No. 333-00554. ARTHUR ANDERSEN LLP Pittsburgh, Pennsylvania October 28, 1997 EX-27 6 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the Consolidated Financial Statements for the year ended July 31,1997 and is qualified in its entirety by reference to such financial statements. 1,000 YEAR JUL-31-1997 AUG-01-1996 JUL-31-1997 9,017 0 116,716 4,665 120,974 247,545 158,146 30,578 429,499 85,520 0 0 0 188 204,937 429,499 516,996 516,996 362,060 454,394 (58) 0 5,338 57,322 21,287 36,035 0 0 0 36,035 $1.75 $1.74
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